Jaspers v Greenwood
[2012] NZHC 2422
•19 September 2012
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2012-485-1772 [2012] NZHC 2422
UNDER The Trustee Act 1956
IN THE MATTER OF The Jaspers Family Trust
BETWEEN ALISTAIR CHARLES GEORGE JASPERS
Applicant
ANDJOHN PAUL GREENWOOD First Respondent
ANDMALCOLM FREDERICK THOMAS JASPERS
Second Respondent
Hearing: 13 September 2012
Counsel: R C Laurenson for Applicant
P S J Withnall for First Respondent
G L Turkington for Second Respondent
Judgment: 19 September 2012
JUDGMENT OF THE HON JUSTICE KÓS
[1] In the pleasant uplands north of the settlement of Martinborough are two farms, Tawaha and The Cutting. For the last 35 years or so they have been farmed by Mr Thomas Jaspers. In more recent years one of his sons, Mr Malcolm Jaspers, has farmed with him. The two farms have been run as a single block.
[2] The farms are owned by the Jaspers Family Trust. The beneficiaries of the trust are Mr Thomas Jaspers’ sons Malcolm (born 1970) and Alastair (born 1971).
JASPERS v GREENWOOD & JASPERS HC WN CIV 2012-485-1772 [19 September 2012]
Now Mr Thomas Jaspers has become infirm. He can no longer farm. Nor could he continue to act as a trustee.
A dispute
[3] Mr Thomas Jaspers and his fellow trustee, a Mr Bourke, applied to the Court under s 66 of the Trustee Act 1956 (the Act) for directions as to early distribution of the trust to Malcolm and Alastair. The then trustees could not agree amongst themselves as to how the property should be distributed. Nor could the two beneficiaries, the brothers, agree. Mr Thomas Jaspers, it seems, wished some sort of preference over both farms in favour of Malcolm. The other trustee, Mr Bourke, favoured a split with Tawaha (worth perhaps $5 million) going to Malcolm and The Cutting (worth perhaps $3 million) to Alastair. There was also disagreement as to what action should be taken to even out the distribution in favour of Alastair.
[4] Other related proceedings followed. There was an application to remove the trustees. An application by Malcolm to restrain Alastair’s access to the farm property. An application by Alastair regarding the farm partnership between the brothers. And an application by Alastair claiming that the s 66 application had triggered certain provisions of the trust deed.
A settlement
[5] A three day hearing was allocated, before Simon France J, starting on 23
April 2012. But the parties reached settlement on the second day.
[6] The settlement covered all proceedings. Consent orders were made by Simon
France J on 24 April 2012 in these terms:
By consent, and pursuant to s 66 of the Trustee Act 1956, I order:
1. The properties referred to in the above proceedings known as “Tawaha”
and “The Cutting” are to be sold forthwith.
2. John Greenwood, Solicitor, Wellington be appointed as Trustee of the Jaspers Family Trust, to replace the existing Trustees for the purposes of the sale and distribution of the Trust assets.
3. Following the sale of the Trust assets, the net proceeds of the sale are to be divided equally between Malcolm Jaspers and Alastair Jaspers and the Trust wound up forthwith.
4. The remaining assets of the Trust are to be sold and/or distributed equally, after current accounts, once finalised by John Greenwood, have been paid and all liabilities met.
5. The farming partnership between Malcolm Jaspers and Alastair Jaspers is to be wound up, the assets sold and/or distributed equally between the partners as soon as practicable after the settlement of the sale of either of the farm properties, with any disagreements to be referred to arbitration, any such arbitrator to be appointed by John Greenwood.
6. John Greenwood shall have a power to appoint agents including an accountant and real estate agent in the course of overseeing the sale of the properties and other assets of the Trust, and in relation to the winding up of the Partnership.
7. No issue as to costs between the parties, Mr Johnston’s costs to be paid
by the Trust, together with Mr Chisnall’s costs.
[7] Mr Greenwood set about his business as new trustee. On 9 May 2012 he advised that he would be proceeding to sell the two farms immediately and without delay. He had taken advice from two farm property consultants. He proposed to accept their advice that the best possible price would be obtained by separate sales of the two farms. He was seeking proposals from real estate agents. He would await recommendations from the agents as to which mode of sale was best. But three in particular commended themselves at that point: auction, expressions of interest and closed tender.
[8] On 17 May 2012 Mr Greenwood wrote to the beneficiaries advising that he was appointing Property Brokers Limited as the agents. Advice taken from real estate agents, a stock agent and farming consultants now confirmed that sale should be postponed to spring to achieve the best possible price.
A new proposal
[9] On 14 June 2012 the solicitor for Mr Alastair Jaspers wrote to Mr Greenwood. The letter advised that his client was “adamant” that he wished to purchase The Cutting, and was prepared to pay $2,740,000 – half way between two
recent valuations. The proposal was urged on the basis that it would provide certainty as to sale and save some $80,000 commission and marketing costs.
[10] On 21 June 2012 Mr Greenwood wrote back. He had consulted Mr Malcolm Jaspers. It was a possibility that Malcolm himself would wish to acquire The Cutting. Mr Greenwood said:
In fairness then both brothers have the ability to acquire both farms or to acquire one or other of the farms. I do not believe in the face of the Court order that I am able to exercise a discretion in favour of one brother only.
A new application
[11] On 21 August 2012 Mr Alastair Jaspers applied by way of originating application for orders:
1.2In the nature of a direction to the first respondent as trustee of the Jaspers Family Trust or a review of a decision of the first respondent as the trustee of the Jaspers Family Trust with a direction then to follow so to:
(a) Allow the applicant and the second respondent the same or equal opportunity now to purchase the Trust properties known as Tawaha and The Cutting or one of them in exercise of the trustee’s power and duty ordered by the Court on 24 April 2012 to sell the Trust properties, Tawaha and The Cutting forthwith and before the properties or either of them are placed by the trustee on the open market; and with
(b) Appropriate ancillary orders to implement the order in (a)
above.
These orders are sought under s 68 of the Trustee Act 1956.
[12] In an affidavit filed in support, Mr Alastair Jaspers acknowledged that the settlement agreement that had been reached was set out fully in the orders quoted in [6] above. He said:
I wish to buy The Cutting and I am prepare (sic) to pay the full market price for it. I do not seek to obtain any price advantage whatsoever in order to acquire The Cutting.
My first preference is to do this by buying it at an agreed market valuation arrived at by independent valuations of the property. This would have considerable benefit to the Trust and the Trust assets because it would not
involve the Trust or the Trustees any expense of the marketing and sale of the property and of incurring a real estate agent’s commission.
...
My second preference is, if the property is to be placed on the market, for the Trustee to allow me to have the opportunity to better the best offer otherwise received.
I note, however, that by the time the application came to be heard, all parties accepted that a tender process in which either brother would have the opportunity to better a third party bid would not work. It was accepted that to do so would deflate bidding by a third party.
[13] Mr Malcolm Jaspers opposes the application. In his affidavit he says that the settlement assumed sale on the open market, and that he intends to tender for both properties. He also believes that the level of interest in the properties is such that a premium over current valuation would be obtained. (That view is challenged by a valuer’s evidence obtained by Mr Alastair Jaspers, but I am in no position to form a final view on that.) Mr Malcolm Jaspers goes on to say:
I am at a complete loss to understand the present application. Both of us agreed that the properties were to be unconditionally sold. That is what the Court order says. Spring is the best time to sell. There is a danger that this window will be missed as a result of the present application.
[14] Mr Greenwood has also sworn an affidavit. And he has taken an active position in the hearing, without objection, also opposing the application. He states he believes the terms and circumstances of his appointment to sell the trust assets “forthwith” contemplate a sale on the open market. Property Brokers Limited had been appointed agents and were presently collating the material needed to begin marketing both properties. Mr Greenwood goes on to say:
The order sought by Alastair proposes an intermediate step by which Tawaha and The Cutting are offered first for sale to Alastair and Malcolm before they are placed on the market. Such an off-market step is not contemplated on my understanding of the consent orders made by Simon France J. If such an intermediate off-market step had been intended by the parties, in my experience I would have expected the parties to have ensured it was reflected in the terms of settlement and the consent orders made by Simon France J.
Accordingly, I do not consider I am able to depart from the terms of my appointment and let Tawaha and The Cutting be sold to Alastair and/or Malcolm in an off-market transaction prior to sale on the open market.
[15] Other points noted by Mr Greenwood are:
(a) That Mr Malcolm Jaspers opposes the order sought by his brother (which meant Mr Greenwood considered he had no discretion to depart from the consent orders).
(b)His concern that the uncertainty inherent in the proposal advanced by Alastair meant that there would be further disputes particularly in light of the history of extensive litigation between the brothers. As Mr Greenwood put it, “in these circumstances I see resort to an independent valuer agreed by the parties to fix the price for an off- market sale is fraught with further problems”.
Issues
[16] Mr Alastair Jaspers’ application gives rise to three issues:
(a) Issue 1: Does s 68 of the Trustee Act 1956 apply at all? (b) Issue 2: What extent of review does s 68 permit?
(c) Issue 3: Is there a reviewable error by the trustee?
Issue 1: Does s 68 of the Trustee Act 1956 apply at all?
[17] There are two fundamental sources of jurisdiction to review trustees’ acts at the instance of a dissatisfied beneficiary. The first is the Court’s general equitable jurisdiction to review and restrain trustees, to ensure they conform to their fiduciary obligations.[1] Foremost in Equity’s armoury is the remedy of injunction. But on
[1] Butler (ed.) Equity and Trusts in New Zealand (2 ed, Thompson Reuters, Wellington, 2009) at
146; Garrow and Kelly Law of Trusts and Trustees (6 ed, LexisNexis, Wellington, 2005) at 739.
behalf of Mr Alastair Jaspers, Mr Richard Laurenson does not invoke the equitable
jurisdiction. He relies instead on the second source of jurisdiction, s 68 of the
Trustee Act 1956. That provides as follows:
(1) Any person who is beneficially interested in any trust property, and who is aggrieved by any act or omission or decision of a trustee in the exercise of any power conferred by this Act, or who has reasonable grounds to anticipate any such act or omission or decision of a trustee by which he will be aggrieved, may apply to the court to review the act or omission or decision or to give directions in respect of the anticipated act or omission or decision; and the court may require the trustee to appear before it, and to substantiate and uphold the grounds of the act or omission or decision that is being reviewed, and may make such order in the premises as the circumstances of the case may require:
provided that no such order shall—
(a) disturb any distribution of the trust property made without breach of trust before the trustee became aware of the making of the application to the court:
(b) affect any right acquired by any person in good faith and for valuable consideration.
(2) Where any such application is made, the court may,—
(a) if any question of fact is involved, direct how the question shall be determined:
(b) if the court is being asked to make an order that may prejudicially affect the rights of any person who is not a party to the proceedings, direct that any such person shall be made a party to the proceedings.
[18] Section 68 enables review of trustees’ actions (or anticipated actions) only where those actions involve the exercise of a power conferred by a provision of the Act.[2] Where the relevant power derives from the trust deed, s 68 does not apply.[3]
Where the source of trustee powers is concurrent as between Act and deed, s 68 will still apply.[4]
[2] Neagle v Rimmington [2002] 3 NZLR 826 (HC).
[3] Ibid, at [36].
[4] Re Havill [1968] NZLR 217 (HC); Garrow and Kelly Law of Trusts and Trustees (6 ed, LexisNexis, Wellington, 2005) at 740 – 741.
[19] Mr Laurenson argues that in this case the power of sale is at least concurrent, deriving from the statutory sale power in s 14 of the Act, along with the sale powers
in the deed and the orders made by Simon France J. I regard that argument as
unrealistic in the context of this case. In my view the source of the trustee’s power to sell was neither the deed nor s 14, but the orders of Simon France J. Those arose originally from the exercise of the Court’s own power under s 66 to give directions to trustees. The orders go beyond s 66 directions in scope. But, more importantly, they derive ultimately from consent of the parties to the proceedings. By those orders the new trustee is not so much empowered to sell as directed to do so. Not selling is not an option. He is empowered generally as to how best to go about that, and empowered specifically as to the appointment of real estate and other agents for that purpose. It is artificial in these circumstances to say that in selling the property the trustee is exercising a power under s 14. He is instead exercising a mandatory duty imposed by the consent orders, and discretionary powers as to method deriving from the same source. I would not regard any part of these powers as arising under s
14. No concurrent source exists.
[20] Section 68 does not therefore apply in this case. In case however I am wrong in that view, I will consider the next issue.
Issue 2: What extent of review does s 68 permit?
[21] Section 68 is an exceptional statutory mechanism enabling challenge to trustee decisions. Section 66, the directions power, is confined to trustee-only applications. Section 68 is also limited: only beneficiaries interested in the trust property may apply. It therefore excludes discretionary beneficiaries, who enjoy a
mere expectation only.[5] And, as we have seen, it applies only where the source of
power at least in part derives from the Act.
[5] Kain v Hutton [2008] 3 NZLR 589 (SC) at [25].
[22] Section 68 does not confer upon the High Court the role of general court of appeal from trustees’ decisions. The relevant beneficiary grievance must involve the exercise (or intended exercise) of a trustee power in a manner that is ultra vires,
vitiable on the basis of relevance of considerations or bad faith, or unreasonable in a
Wednesbury sense.[6] In other words, the ordinary means of review of the exercise of a statutory power.
[6] See e.g. Waitara Leaseholder Association Inc v New Plymouth District Council HC New Plymouth CIV 2004-443-162, 4 November 2005 at [35]–[36] (reversed on other grounds: [2007] NZCA 80).
[23] Mr Laurenson argued that a lesser threshold for intervention exists under s 68 than under the Court’s general equitable jurisdiction. Also, that the onus reverses. He cites in support the decision of Doogue J in Rossiter v Wrigley.[7]That case is not however authority generally for the proposition that, on a s 68 application, the onus lies on the defendant trustees to justify their actions. Rossiter proceeded on that basis because prior orders to that effect had been made by the Court, without opposition, and an application to review those orders was then dismissed by consent. Absent such orders, which do not here exist, s 68(1) does not alter the ordinary
incidence of the onus lying on the applicant for review under s 68. Although there is a delphic reference in Doogue J’s reasons that might suggest otherwise, it is plainly obiter in context and one I would respectfully disagree with. It would turn the High Court into an appellate court from trustees’ decisions where founded on exercise of a statutory power.
[7] Rossiter v Wrigley HC Hamilton A105/80, 3 July 1989.
[24] Rossiter is discussed in an article by Professor C E F Rickett, now of the University of Melbourne.[8] Professor Rickett clearly shares my reservations as to whether, ordinarily, s 68 might displace the usual onus. That single point aside, there is with respect no doubt that the ultimate decision in Rossiter was absolutely correct. There the defendant trustees, while honest, failed utterly to consider basic necessary relevant information. They had thereby effectively bankrupted the estate. On any view they had acted unreasonably. (Doogue J reserved his decision on that point because the prior orders meant that the defendants had to, but could not, justify their
actions.)
[8] Rickett Review of a Trustees Act, Omission or Decision under s 68 of the Trustee Act 1956 [1998] NZRLR 69. See also discussion on this question in Law Commission Review of Law of Trusts: Court Jurisdiction, Trading Trusts and Other Issues (NZLC, IP 28, 2011) at [1.31]– [1.33]. The Law Commission is now expected to report on this issue in November 2012.
[25] It follows in my view that s 68 does not alter the ordinary incidence of the onus on an applicant challenging a trustee’s decision (or proposed decision). Such applicant must establish that the trustee has acted (or is proposing to act) ultra vires, in a manner vitiable on the basis of relevance or bad faith, or otherwise unreasonably in a Wednesbury sense.
Issue 3: Is there a reviewable error by the trustee?
[26] Having set the standard for review, I turn now to the challenge to Mr Greenwood’s actions. It is necessary to be clear here as to what exactly Mr Greenwood has done, what he is proposing be done, and the extent to which any of that may be challenged.
[27] First, no challenge lies to Mr Greenwood’s decision (or exercise of duty) to sell. That is not a matter in respect of which he has any discretion at all. It is a duty imposed by the consent orders, and there is no suggestion that he is not carrying it out. At an earlier stage, Mr Alastair Jaspers seemed to be complaining through his solicitor that Mr Greenwood was not acting quickly enough. But that complaint was not pursued. There is no doubt that Mr Greenwood had the power under the consent orders to balance his express duty to sell “forthwith” with his implied duty to do so prudently, in the best interests of beneficiaries. The balance between those duties has resulted in Mr Greenwood deciding to defer sale to spring. There is no challenge made to that decision. Nor in my view could there be.
[28] Secondly, the evidence shows that Mr Greenwood has not yet decided the exact mechanism for sale. As already noted, that process is still being determined in conjunction with the real estate agents. What is plain, however, is that Mr Greenwood intends sale on the open market. It is the exact mechanism for that sale that has not yet been determined. As to mechanism, the only decision made by Mr Greenwood has been rejection of the various proposals advanced by Mr Alastair Jaspers for sale off-market. When Mr Greenwood does decide upon the precise form of sale mechanism, he will be entitled to consider what course is most prudent, in the best interests of the beneficiaries. In doing so he may indeed bear in mind the association between the two beneficiaries and the land, and the fact that a closed
tender mechanism may put them at risk of losing the land to a stranger in a way that public auction may not. That is a particular concern of Mr Alastair Jaspers, although Mr Malcolm Jaspers seems phlegmatic about that:
In short, we tender if we want to, and take the consequences. The market will determine the price and whatever the result, I can be satisfied of a fair return to me and my family.
If the advice Mr Greenwood receives is that closed tender is the preferable course, then unless both brothers agree to public auction, he will be perfectly entitled to take the closed tender route. The consent orders contain no explicit protection of continued occupation of, or association with, the land.
[29] Thirdly, turning to the decision that Mr Greenwood has made – to reject Mr Alastair Jaspers’ various proposals – in my view Mr Alastair Jaspers’ complaints cannot possibly reach the standard required for review. I agree with Mr Paul Withnall’s submissions on this subject, made on the trustee’s behalf. The off-market options advanced are not ones for which provision was made in the consent orders. Provision could have been made, but was not. Mr Greenwood is entitled to consider Mr Alastair Jaspers’ proposals, but he is not bound to adopt them unless no reasonable trustee in the circumstances could conclude that any other course was prudent. Plainly that is not the case here. The consent orders do not expressly refer to the trustee obtaining the best price for the trust property. But that is implicit. The trustee’s role is effectively one of liquidator of the trust assets (with equal distribution of the proceeds to the two brothers). Express provision is made for the retention of real estate agents. Implicitly, also, the consent orders anticipate sale on the open market. As I have already said, no mechanism to protect continued occupation of, or association with, the land is built into the orders.
[30] The mechanisms proposed by Mr Alastair Jaspers are inexplicit. The first proposal (made in the letter, at [9]) was for sale at a fixed price between valuations. The second (in the affidavit in support of this application, at [12]) was for sale at an agreed market valuation – which presumably required agreement by the trustee and all parties to the litigation. Alternatively, for an opportunity to better the best offer received on the open market (probably by auction – a mechanism Mr Greenwood has not yet rejected). Then at the hearing a closed tender between the two brothers only,
subject to a reserve “established by independent market valuation” (whether agreed or not is not clear), was advanced. That was then subject to a further iteration later in the hearing, being an auction between the brothers alone.
[31] The two advantages in these proposals pointed to by Mr Alastair Jaspers are the opportunity to trump a stranger’s bid (which opportunity auction would in any case preserve) and the avoidance of commission and marketing costs (which in the case of The Cutting might be some $80,000 or so). Against that is evidence that The Cutting may be worth as much as $3 million. Mr Alastair Jaspers’ own evidence (and expert evidence) is that farm prices in the South Wairarapa are currently variable and unstable. Mr Greenwood is plainly entitled to conclude that an open market process, with competition not confined to the two brothers, is the best way to determine value and fetch the best price.
[32] In all these circumstances the evolving proposals made by Mr Alastair Jaspers are not so compelling as to make their rejection per se unreasonable. Nor is there any evidence whatsoever that Mr Greenwood has failed to take into account these proposals, and their advantages and disadvantages. It is not suggested that he has acted in any way ultra vires, arbitrarily or in bad faith. In rejecting the proposals, Mr Greenwood has not committed a reviewable error.
[33] What Mr Alastair Jaspers is really seeking is a variation of the consent orders. These were designed to bring an end to the litigation between the parties. Such variation would require agreement. Agreement is not present here.
Conclusion
[34] In this judgment I have held:
(a) Section 68, on which the applicant relies, does not apply here. The relevant source of the trustee’s power (or rather duty) to sell is not statutory.
(b)Section 68 in any event reposes the onus on the applicant beneficiary to show that a trustee has acted (or is proposing to act) ultra vires, in a manner vitiable on the basis of relevance or bad faith, or otherwise unreasonably in a Wednesbury sense.
(c) The decision of the trustee here, in preferring open market sale (despite its associated costs) over off-market sale as between the two beneficiaries, was plainly open to him to make and was not
unreasonable in a Wednesbury sense.
Result
[35] Mr Alastair Jaspers’ application is dismissed.
[36] Parties opposing the application are entitled to costs. If not agreed, I will receive memoranda.
Stephen Kós J
Solicitors:
Sievwrights, Wellington for Applicant
Greenwood Roche Chisnall, Wellington for First RespondentHughes Robertson, Wellington for Second Respondent
8
1
0