Inthayung v Heimsath Alexander Trustee Limited
[2023] NZHC 1240
•25 May 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000830
[2023] NZHC 1240
BETWEEN MALIWAN INTHAYUNG
Applicant
AND
HEIMSATH ALEXANDER TRUSTEE
LIMITED and LEX TRUSTEE COMPANY
LIMITED as Trustees of the DW CORRICK TRUST
First RespondentsOFFICIAL ASSIGNEE as Executor of the ESTATE OF DAVID WAYNE CORRICK
Second Respondent
Hearing: 22 May 2023 Appearances:
P Napier and R Wang for the Applicant
M Russell and R Bingham for the first named First Respondent A Cupples for the second named First Respondent
No appearance for the Second Respondent
No appearance for the Bank of New Zealand (Interested Party)Judgment:
25 May 2023
FURTHER REDACTED JUDGMENT OF GORDON J
This judgment was delivered by me on 25 May 2023 at 3 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
K3 Legal Ltd, Auckland Wotton Kearney, Auckland Kennedys, Auckland
INTHAYUNG v HEIMSATH ALEXANDER TRUSTEE LTD [2023] NZHC 1240 [25 May 2023]
[1] By the first part of her application the applicant, Maliwan Inthayung, seeks orders removing trustees and appointing new trustees of the trust set up by her now deceased husband in the following terms:
(a)that Heimsath Alexander Trustee Ltd (Heimsath Alexander Trustee) and LEX Trustee Company Ltd (LEX Trustee) be removed as trustees of the DW Corrick Trust (the Trust); and
(b)that Mark Graeme Kirkland of Dunedin and Helen Marie Edwards of Auckland be appointed as trustees of the Trust.
[2] Heimsath Alexander Trustee and LEX Trustee (together, the current trustees) have agreed to be removed and Mr Kirkland and Ms Edwards (together, the proposed trustees) have consented to be appointed as trustees of the Trust.
[3] It might then be asked why the Court’s assistance is required. It was required because there was disagreement between Ms Inthayung and Heimsath Alexander Trustee over what, if any, conditions the Court might impose if the Court were to make the orders sought. I use the word “was” advisedly, as during the course of the hearing, an agreement was reached between counsel as to a condition to be imposed in the event the Court determined that orders should be made as sought.
Background
[4] Ms Inthayung is the widow of the late David Corrick who died on 9 November 2021. Ms Inthayung and Mr Corrick commenced a relationship in late 2006. In 2007, Ms Inthayung moved in with Mr Corrick into what became the family home in Auckland.
[5] Ms Inthayung and Mr Corrick had two children together. The first, G, was born on 28 August 2016. He is now aged 6 years. The second, J, was born on 23 August 2018. He is currently aged 4 years.1
1 Ms Inthayung also made an application to be appointed as litigation guardian for her two children. In his minute of 10 May 2023, Campbell J stated he was satisfied that Ms Inthayung had the same interest in the proceeding as her two children and that she would adequately represent their
[6] By Deed dated 5 November 2008, Mr Corrick created the Trust. The trustees were Mr Corrick and Knight Coldicutt Trustees Ltd.
[7] On 9 June 2010 Knight Coldicutt Trustees Ltd was replaced by Heimsath Alexander Trustee, a trustee company operated by the legal firm of Heimsath Alexander.
[8] The definition of beneficiary under the Trust in the Trust Deed is wide. However, the first three categories of beneficiary are:
(a)the settlors;
(b)any child of the settlors hereafter born to or adopted by the settlors prior to the vesting day; and
(c)any grandchild or more remote issue of the settlors.
[9] Ms Inthayung was added as a beneficiary of the Trust by Mr Corrick’s last will dated 29 January 2021 pursuant to cl 25 of the Trust Deed.
[10] As well, the will gave the residuary of Mr Corrick’s estate, after paying debts, to the Trust.
[11] Mr Corrick executed other documents on 29 January 2021 including a Memorandum of Wishes for the trustees in the administration of the Trust following his death. In the Memorandum of Wishes Mr Corrick recorded the following wishes:
(a)that the trustees administer the Trust in the way that he had done when he was a trustee;
(b)that his business Reveal International Ltd (Reveal) continue to trade and operate on a business as usual basis with the Trust continuing to be the dominant owner of Reveal;
interests. Justice Campbell considered it was therefore unnecessary to appoint Ms Inthayung as litigation guardian for them.
(c)that Ms Inthayung and their two children G and J take priority over the needs of any other beneficiary of the Trust;
(d)that while G and J are minors, sufficient funds from the Trust be utilised so that Ms Inthayung and the two children are fully supported to enable them to continue enjoying the lifestyle they enjoyed with Mr Corrick when he was alive; and
(e)Ms Inthayung and the two children be allowed to continue living in the family home.
[12] On 15 November 2021, the day of Mr Corrick’s funeral, Paul Vlasic and Lynda Smart of Rodgers Reidy (NZ) Ltd were appointed as liquidators of Reveal and related companies.
[13] The appointment of liquidators was by Special Resolution of the trustees and shareholders of the Reveal Group. Ms Inthayung says not only was she not aware that liquidators had been appointed for the Reveal companies, but she says she was also never approached at any time prior to their appointment to discuss her financial needs or those of her two children.
[14] However, Ms Inthayung acknowledges that she was aware that Reveal had liquidity issues before her husband’s death, but says no one had explained to her the extent of the deterioration such that the company had to be immediately liquidated without delay and without notice to her.
[15] She says she still does not know the extent of the assets of Reveal that have been sold and whether any of the items sold were her husband’s personal possessions. She says she does not understand how the many assets had disappeared without there being any apparent benefit to the Trust.
[16] On 14 March 2023, Sanderson Weir Ltd, solicitors for the Bank of New Zealand (BNZ), served Property Law Act Notices (PLA Notices) on Ms Inthayung
demanding payment of $86,034.46 to remedy the default on the loan secured over the family home.
[17] Ms Inthayung says she does not have the money to repay that sum to the BNZ before the PLA Notices expire on 22 May 2023, which Ms Inthayung says means that there is a real risk she will lose the family home. Ms Inthayung further says that the trustees have informed her that the Trust does not have the funds to repay the BNZ.
[18] As a consequence of the expiry date of the PLA Notices being imminent, this application was brought on as a matter of urgency. However, at the hearing Mr Napier, counsel for Ms Inthayung, advised the Court that the BNZ had agreed to extend the date in the PLA Notices by one month to 22 June 2023.
[19] Ms Inthayung asks the Court to grant her application for the removal of Heimsath Alexander Trustee and LEX Trustee as she says she does not have any confidence in them to act in her best interests and the bests interests of her two children, as requested in her husband’s Memorandum of Wishes and also as beneficiaries of the Trust. She says they have not kept her informed or explained to her how it has come to be that there was no apparent value in the estate or the Trust.
[20] The position of Heimsath Alexander Trustee was that it will abide the decision of the Court, but it asked the Court to make orders as to conditions of retirement. However, in part because of the extension of the date of the PLA Notices, Mr Napier, and Ms Russell for Heimsath Alexander Trustee were able to agree on a single condition to be imposed by the Court.
[21] LEX Trustee abides the decision of the Court on the conditions sought by Heimsath Alexander Trustee. At the hearing, Ms Cupples for LEX Trustee accepted the condition agreed between Mr Napier and Ms Russell.
[22] The Official Assignee is the administrator of the estate of Mr Corrick. Ms Inthayung’s originating application had a second part, namely it sought an order for the removal of the Official Assignee and for the proposed trustees to be appointed as executors and trustees of Mr Corrick’s estate. That second part of the application
is to be heard following the Court’s decision on removal and replacement of the trustees of the Trust. The Official Assignee did not seek to be heard on this part of the application.
[23] The BNZ, by letter from its solicitors to Mr Napier dated 15 May 2023, advised that “it does not intend to file a notice of opposition to this application, has a neutral stance to the proceeding and will abide by the decision of the Court”.
[24] Returning to the position of Heimsath Alexander Trustee, John Heimsath has sworn an affidavit in which he sets out the position of Heimsath Alexander Trustee. Mr Heimsath says that his law firm, Heimsath Alexander, acted as Mr Corrick’s lawyer for a number of years. Mr Heimsath says that since Mr Corrick’s death in 2021 the current trustees have taken steps in the best interests of the beneficiaries, principally Ms Inthayung and the two children, to maintain them as best the trustees could.
[25] Mr Heimsath says unfortunately, at the time of Mr Corrick’s death, Mr Corrick’s affairs were in very bad shape financially. He says Mr Corrick’s company was performing badly and was in fact insolvent. Mr Corrick had borrowed heavily against the family home.
[26] Mr Heimsath says that as a trustee he was concerned to ensure Mr Corrick’s children were provided for as best as possible out of the assets of the Trust. However, certain decisions had to be taken given the state of Mr Corrick’s financial affairs. Mr Heimsath says the trustees consulted Ms Inthayung and/or various legal advisers in respect of any major decisions and kept her advised of matters pertaining to the Trust.
[27] Mr Heimsath says he is aware that Ms Inthayung is clearly not happy with the services of the current trustees. Mr Heimsath denies her allegations that the current trustees have not administered the Trust so as to try and ensure her maintenance and that of the two children and that the current trustees are not acting in the best interests of her and the children. Mr Heimsath says it is disappointing to him that Ms Inthayung does not think that the current trustees have acted in her best interests and the best
interests of the children because he says the current trustees have worked hard in the difficult circumstances to navigate the situation as best as possible.
[28] Mr Heimsath says while he feels an obligation to carry out Mr Corrick’s wishes, and in particular to protect the financial future of Mr Corrick’s children, he does not oppose the replacement of Heimsath Alexander Trustee as trustee.
The law
[29]Section 112 of the Trusts Act 2019 (the Act) provides:
112 Court may make order for removal
Whenever it is necessary or desirable to remove a trustee and it is difficult or impracticable to do so without the assistance of the court, the court may make an order removing a trustee.
[30]Section 114(1) of the Act provides:
114 Court may appoint or replace trustee
(1)Whenever it is necessary or desirable to appoint a new trustee and it is difficult or impracticable to do so without the assistance of the court, the court may make an order appointing a new trustee.
(2)However, this section does not empower the court to appoint an executor or administrator.
(3)If the court proposes to appoint Public Trust as the replacement trustee, the court must, before making the appointment, give Public Trust an opportunity to be heard on the matter.
(4)If the court (except on application by a supervisor within the meaning of section 6(1) of the Financial Markets Conduct Act 2013) appoints Public Trust as the replacement trustee, Public Trust—
(a)must accept the appointment; and
(b)may charge fees for acting as trustee.
[31]In Percy v Percy Doogue J stated that:2
[64] The Court has jurisdiction to remove a trustee where friction of personalities or honest differences of opinion make it difficult for a trustee to act in the interests of the beneficiary, even where there has been no misconduct on the part of the trustee. …
2 Percy v Percy [2020] NZHC 828.
[32]More recently in K v K3 Gwyn J after referring to s 112 of the Act said:
[99] The Court may exercise its discretion to remove a trustee whenever it is “necessary or desirable” to do so. Section 51 of the Trustee Act 1956 previously gave the Court the power to replace a trustee whenever it was “inexpedient, difficult or impracticable to do so without the assistance of the court”. Westlaw commentary suggests that “desirable” in s 112 does not import a lower threshold and the courts will continue to assess an application for removal on the basis of whether it would be to the advantage, advisable, prudent or expedient for the proper execution of the trust and the beneficiaries as a whole to remove a trustee.
[100]In Miller v Cameron, Dixon J said:
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgement based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised.
[101]I agree that remains an appropriate formulation of the test I must apply.
[33]I follow the same approach.
Discussion
[34] The application is made on the basis that it is desirable (as opposed to necessary) to replace the current trustees with Mr Kirkland and Ms Edwards, the proposed trustees, by removing the current trustees under s 112 of the Act and appointing Mr Kirkland and Ms Edwards under s 114. Mr Napier says that Ms Inthayung has not been able to achieve agreement with the current trustees to retire and therefore it is difficult and/or impracticable to do so without the assistance of the Court.
[35] Mr Napier notes that Ms Inthayung has lost trust and confidence in the current trustees. He says she and her young sons are the only real people who are beneficiaries
3 K v K [2022] NZHC 3123 (footnotes omitted).
(as opposed to charitable organisations) and their care and security is to be the primary concern of the Trust pursuant to Mr Corrick’s Memorandum of Wishes.
[36] Mr Napier submits it is desirable that Ms Inthayung have trust and confidence in the trustees. Mr Napier notes that Ms Inthayung has put a Notice of Claim of Interest under s 42(1) of the Property (Relationships) Act 1976 on the family home. However, in her second affidavit Ms Inthayung says she will remove the Notice of Claim if the proposed trustees advise her that the family home needs to be sold and she will not oppose its sale. Mr Napier says this will allow the sale of the property in an orderly fashion not by way of a mortgagee sale (which would normally mean that a property is sold at a discount).
[37] In this case, replacement is not sought on the basis of wrongdoing. However, it is apparent to the Court that there are differences of view between Ms Inthayung and the trustees with regard to what Ms Inthayung considers is in the best interests of the beneficiaries. Given those circumstances and the fact that the current trustees do not oppose their removal as trustees, I consider it is desirable to make the orders as sought.
Conditions
[38] As at the commencement of the hearing, the differences between Ms Inthayung and the trustees, particularly Heimsath Alexander Trustee, were in relation to any conditions the Court might impose on the making of the orders sought.
[39] The position of the BNZ, regarding its requirements for a change of trustees, was expressed in an email from the solicitors for the BNZ dated 15 May 2023 to counsel for the first respondents as follows:
In terms of requirements for a change of trustees, the transfer can occur subject to the mortgage and subject to the PLA issued under it. I will seek instructions on what “onboarding” requirements are for the new trustee at the Bank.
[40] In a further email from counsel for the BNZ to counsel for the first respondents dated 18 May 2023, it was stated:
The Bank have advised that the request for a change in trustees would go through their consent team in the usual way. I expect that a security deed
would be prepared and the transfer would occur subject to the existing mortgage.
Until the parties are in a position to make the request, I can’t provide any further detail …
[41] Without the pressure of an expiry date of 22 May 2023 for the PLA Notices and with further time for anticipated documentation to be prepared, counsel were in agreement as to the wording of a condition if the Court were minded to make the orders sought. That condition reads as follows:
That upon becoming trustees of the DW Corrick Trust, Mark Graeme Kirkland of Dunedin and Helen Marie Edwards of Auckland, will use reasonable endeavours to obtain both the release of Heimsath Alexander Trustee Ltd and LEX Trustee Company Ltd from any liability under mortgage instrument [redacted], its facility and three housing loans (using identifiers: [redacted]) and the transfer of the property at [redacted] from Heimsath Alexander Trustee Ltd and LEX Trustee Company Ltd to Mark Graeme Kirkland and Helen Marie Edwards by 22 June 2023.
Result
[42] The first part of Ms Inthayung’s application is granted. I make the following orders:
(a)Heimsath Alexander Trustee Ltd and LEX Trustee Company Ltd are removed as trustees of the DW Corrick Trust; and
(b)Mark Graeme Kirkland of Dunedin and Helen Marie Edwards of Auckland are appointed as trustees of the DW Corrick Trust.
[43]The above two orders are made on the condition that:
(a)Upon becoming trustees of the DW Corrick Trust, Mark Graeme Kirkland of Dunedin and Helen Marie Edwards of Auckland, will use reasonable endeavours to obtain both the release of Heimsath Alexander Trustee Ltd and LEX Trustee Company Ltd from any liability under mortgage instrument [redacted], its facility and three housing loans (using identifiers: [redacted]) and the transfer of the property at [redacted] from Heimsath Alexander Trustee Ltd and LEX
Trustee Company Ltd to Mark Graeme Kirkland and Helen Marie Edwards by 22 June 2023.
[44] The parties have leave to apply if any issues arise in the implementation of the above condition.
Costs
[45] At the hearing I expressed a preliminary view that this might be a case where costs would lie where they fall. Although all the conditions sought by Heimsath Alexander Trustee were not imposed, that came about in part by the extension of the date in the PLA Notices which was advised only at the hearing by Mr Napier. Further, although the first part of the condition agreed to by counsel was based on a condition proposed by Ms Inthayung, the second part was added to the condition by agreement between counsel at the hearing.
[46] However, Mr Napier nevertheless said that Ms Inthayung wished to apply for costs against Heimsath Alexander Trustee. Costs will not be sought against LEX Trustee Company Ltd. In that event I make the following timetable orders:
(a)Ms Inthayung is to file and serve a memorandum on costs within 10 working days of this judgment; and
(b)Heimsath Alexander Trustee is to file and serve its memorandum on costs within 10 working days of service of Ms Inthayung’s memorandum.
[47] Costs memoranda should not exceed four pages (excluding any attachments). I will determine costs on the papers.
Gordon J