Jongeneel v Schaake
[2023] NZHC 3568
•7 December 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2022-419-303
[2023] NZHC 3568
UNDER The Trusts Act 2019 IN THE MATTER
of the JAG & AJ Schaake Family Trust
BETWEEN
AMANDA JULIE JONGENEEL
Plaintiff
AND
JACK ALLAN GEORGE SCHAAKE
First Defendant
AND
KIM SCOTT THOMPSON
Second Defendant
Hearing: 17 October 2023 Appearances:
Z T Mora for the Plaintiff
D M O’Neill and F O’Back for the First Defendant
No appearance by or on behalf of the Second DefendantJudgment:
7 December 2023
JUDGMENT OF POWELL J
This judgment was delivered by me on 7 December 2023 at 4.00 pm pursuant to
r 11.5 of the High Court Rules
…………………..
Registrar/Deputy Registrar
Counsel/solicitors: McCaw Lewis, Hamilton D M O’Neill, Hamilton
North End Law, Hamilton P J Morgan KC, Hamilton Nielsen Law, Hamilton
AMANDA JULIE JONGENEEL v JACK ALLAN GEORGE SCHAAKE [2023] NZHC 3568 [7 December 2023]
[1] The parties are the trustees of the J A G and A J Schaake Family Trust (“the trust”).
[2] Pursuant to a deed of trust (“the deed”) the trust was established on 15 May 2014. At that time the plaintiff, Amanda Jongeneel, and the first defendant, Jack Schaake, had been in relationship for some three years and married for two. They, together with Mr Schaake and Ms Jongeneel’s accountant, the second defendant Kim Thompson, were appointed as and remain the three trustees of the trust.
[3] Clause 12.6 of the deed requires trustees to act unanimously in exercising “all powers and discretions”.
[4]There is no dispute that the Trust owns two properties:
(a)The former family home at Horotiu (“the Horotiu property”); and
(b)A beach house at Langs Beach (“the Langs Beach property”).
[5] The trust also owns 28 of the 100 shares in Schaake Holdings Limited, a company established to hold a commercial property from which Mr Schaake’s company operates.
[6] Ms Jongeneel and Mr Schaake separated in June 2021. Relevantly, Ms Jongeneel subsequently obtained an occupation order in respect of the Horotiu property where she currently resides. Mr Schaake continues to use the Langs Beach property and by changing the locks has effectively precluded Ms Jongeneel’s use of that property.
[7] Ms Jongeneel contends that as a result of the breakdown in the relationship between her and Mr Schaake, the trust is deadlocked. Necessary maintenance of the Horotiu property is therefore not being carried out and as noted, Ms Jongeneel is excluded from the Langs Beach property. As a result Ms Jongeneel has applied under ss 112 and 114 of the Trusts Act 2019 (“the Act”) for orders removing the trustees and replacing them with a single professional trustee.
[8] The application is opposed by Mr Schaake. He disputes the trustees are deadlocked and that on the contrary there has been no issue put before the trustees requiring consideration. Moreover, Mr Schaake contends that the trust has no money or source of funding and it therefore has no resources to undertake maintenance on any of its property. As a result Mr O’Neill submits on behalf of Mr Schaake that Ms Jongeneel’s application is premature at best and should be dismissed.
[9]Ms Thompson abides the decision of the Court.
Legislative Framework
[10] There is no dispute that ss 112 and 114 of the Act give the Court power to remove the existing trustees and replace them, including with a professional trustee. The sections provide:
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.
…
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.
[11] In terms of incompatibility between trustees and beneficiaries, the High Court in Green v Green noted:1
[605] …Any incompatibility must be at such a level that the proper administration of the trust is seriously adversely affected and it has become difficult for a trustee to act in the interests of the beneficiary…
[606] …whether removal is appropriate in a particular case will depend on whether…factors are present to a sufficient extent to undermine the satisfactory execution of the trust for the welfare of the beneficiaries.
[12] Green v Green further noted that the Court will look to “the welfare if the beneficiaries, the security of trust property, and the satisfactory execution of the trusts” as guiding principles for exercising the Court’s jurisdiction.2
Discussion
[13] Having considered the affidavit evidence provided by each of the trustees, I accept Mr O’Neill’s submissions that Ms Jongeneel’s application is premature and there is currently no basis for removing the trustees.
[14] As Mr Schaake and Ms Thompson have asserted, there is no evidence before me to show the trust has any income. In the absence of income the trust has no ability to pay for maintenance to either of the trust properties or otherwise make distributions to any discretionary beneficiaries at this point.
[15] Moreover, there is no particular proposal that Mr Mora could identify upon which the trustees were deadlocked, other than Mr Schaake’s refusal to let Ms Jongeneel have access to the Langs Beach property.
[16] In particular while Ms Jongeneel has, on a number of occasions, requested the trust to reimburse her for repairs and maintenance undertaken and to meet “all repairs and maintenance” in the future, the only “maintenance” identified by Ms Jongeneel said to be outstanding on the Horotiu property at the present time is:
The underfloor gas central heating system has entirely failed and requires replacement.
1 Green v Green [2015] NZHC 1218 at [605], citing Kain v Hutton [2007] NZCA 199.
2 Parsons v SWL Trustee Co Ltd, above n 10, at [45]
[17] There is indeed no evidence that Ms Jongeneel has sought approval for any of the maintenance that she herself has undertaken, nor indeed that there has been any attempt to seek approval for the heating system in the absence of any information as to what such a proposal may entail.
[18] There is accordingly no detail before the Court as to what ongoing maintenance is required, but on the face of it there does not appear to be anything that is immediately necessary to preserve any of the properties. Despite that on behalf of Ms Jongeneel Mr Mora submitted that in the absence of resources this meant that the trustees should be considering whether to sell the properties/assets to fund the maintenance and/or distributions but again, no such proposal has in fact been put to the trustees for consideration. In any event, the sale of the Horotiu property would inevitably conflict with Ms Jongeneel’s application to remain in that property pursuant to the application order, given that the application order expires upon the sale of that property. Likewise, not only does there appear to have been no suggestion that the Langs Beach property should be sold, it is directly contrary to Ms Jongeneel’s request to be able to use that property at the present time.
[19] More broadly it is clear that in making the application Ms Jongeneel has conflated the management of the trust and the duties and responsibilities of the trustees with the wider resolution of property issues between her and Mr Schaake. As noted, in the absence of resources there is nothing for the trustees to make decisions on at the present time, whether with regard to maintenance of either property or distributions to beneficiaries, and there has otherwise been no other proposal to sell assets for either purpose put before the trustees for determination. Instead Ms Jongeneel’s proposal, contained in a letter from her solicitors to solicitors for Mr Schaake, dated 14 September 2022, stated as follows:
If there is a desire to narrow the issues, the Family Trust appears capable of relatively simple resolution with the nett assets being split on a 50/50 basis between our clients.
This could be achieved either by way of a re-settlement, or the appropriate distribution being made to our client, who would then step down as a trustee and forgo any further beneficiary rights.
You will appreciate that as part of this process our client should have the ability to purchase a new home to immediately move into upon the sale of
694B Horotiu Road, Te Kowhai, Hamilton 3288 (the Family Home) (if sale is necessary). Therefore, an appropriate distribution or bridging finance arrangement would be necessary pending the sale of the Family Home.
Please confirm whether your client agrees to determining the Family Trust on this basis and a joint approach can then be made to Kim Thompson.
As is evidence from the pending Court application, we will otherwise seek the removal of all trustees with an independent trustee being appointed. This will invariably result in a forensic review of the Family Trust’s operations and finances from settlement to date. Please provide the details of the trust that owns the shares in Protection Product Distributors Limited so that we can inform the Court for the purposes of the directions as to service.
[20] While the proposal purports to be seeking a decision of the trustees, it is in fact clear that the issues raised by the proposal are far wider. First one of the options proposed settlement of the trust which is clearly beyond the powers of the trustees but something that could be agreed as between the set laws [check]. The latter otherwise suggests a distribution of funds “pending the sale of the [Horotiu property]. The letter is silent as to where the distribution is meant to come from in the absence of the sale of the property or indeed how the trust could arrange to service bridging finance. In any event the proposal clearly goes beyond the occupation order which provides the basis for Ms Jongeneel to occupy the Horotiu property. That order allows Ms Jongeneel to occupy the Horotiu property, but does not require the trust to provide an alternate property in the event she decides to leave. Such matters may be relevant to an ultimate wider settlement of matters between Ms Jongeneel and Mr Schaake but do not represent an issue on which the trustees are deadlocked on such that an order under ss 112/114 of the Act is necessary.
[21] Likewise, while Mr Schaake has declined to allow Ms Jongeneel use of the family bach, in the circumstances where Ms Jongeneel is in fulltime occupation of one of the two property assets of the trust it is difficult to see that this would amount to a deadlock that requires the trustees to be removed.
[22] Overall, this is not a case, where, following the break up of a relationship one of the beneficiaries has been excluded from the management of or benefit from a trust,3 or that a dispute between trustees has put the assets of a trust at risk.4
3 CF Various cases.
4 Cite cases.
[23] Taking these various matters together I decline to make the orders sought by Ms Jongeneel. While it is therefore appropriate to dismiss the proceedings, further proceedings would be able to be brought in the event the trustees become deadlocked on a substantive issue in the future.
Decision
[24]The proceedings are dismissed.
[25] Mr Schaake is entitled to costs from Ms Jongeneel on the dismissal of her proceedings. My preliminary view is that costs should be paid on a 2B basis. In the event the quantum of costs cannot be agreed between the parties within four weeks of the date of this judgment, Mr Schaake will have a further two weeks to file submissions detailing the costs sought and Ms Jongeneel, a further two weeks to file submissions in opposition. I will then determine costs on the papers.
Powell J