Keesing v Coop
[2022] NZHC 631
•31 March 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-2
[2022] NZHC 631
UNDER the Trusts Act 2019, Land Transfer Act 2017, inherent jurisdiction of the High Court, and all amendments thereto IN THE MATTER
of FRANK POOL FAMILY TRUST, of
Wellsford, North Auckland
AND IN THE MATTER
of an application to prevent lapse of caveat on land title NA126C/45, legal description: fee simple – 1/3 share – Lot 12 – Deposited Plan 85113 – leasehold – flat 3 – deposited Plan 197086 (29B Wi Apo Place, Wellsford, North Auckland
BETWEEN
MICHAEL DOUGLAS KEESING as
protector and trustee of the FRANK POOL FAMILY TRUST
Plaintiff
AND
BARBARA ANNE COOP
First Defendant
Continued …
Hearing: 30 March 2022 Appearances:
Plaintiff in person
J Armstrong and J Daly for the Defendants
Judgment:
31 March 2022
JUDGMENT OF GAULT J
This judgment was delivered by me on 31 March 2022 at 9:00 am pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
KEESING v COOP [2022] NZHC 631 [31 March 2022]
Continued …
AND CRAIG PETER DAVIE-MARTIN
Second Defendant
PETER ATHOL HONOUR
Third Defendant
[1] Mr Keesing applies to sustain a caveat over a residential property in Wellsford (the property).1
[2]The three defendants are the registered proprietors of the property.
[3] Following an interim order, and the application was heard yesterday. There is urgency given a sale and purchase agreement relating to the property with settlement due today.
Factual background
[4] Mr Frank Pool and his late wife purchased the property in 2005. Following her death in 2008, Mr Pool became the sole registered proprietor.
[5]Mr Keesing was a cousin and friend of Mr Pool’s.
[6] On 5 June 2014 Mr Pool settled the Frank Pool Family Trust (the Trust). Mr Pool and the three defendants were the original trustees. Mr Pool and Ms Coop, the first defendant and a daughter of Mr Pool, were also primary beneficiaries.
[7] There is a factual dispute as to the correct version of the trust deed. Mr Keesing claims he has the correct original version, which names him as protector of the Trust. The defendants say they have the correct version, which names the four original trustees as protectors. Mr Keesing says this is a fraudulent document.
[8]In July 2014 Mr Pool transferred the property to the original trustees.
[9] In March 2021 Mr Pool moved from the property into a resthome. Ms Coop arranged for the property to be tenanted. The property was tenanted from May 2021 until September 2021.
[10] Mr Keesing says that he was concerned about Ms Coop’s conduct, and as protector removed her as a trustee on 11 June 2021. He says he also removed Mr Honour, the third defendant and Mr Pool’s son in law, as a trustee the same day.
1 NA126C/45.
[11]Mr Pool died on 29 June 2021.
[12] On 15 July 2021 Mr Keesing commenced a proceeding in this Court naming Mr Davie-Martin, the second defendant and Mr Pool’s nephew, as defendant and seeking financial information relating to the Trust (CIV-2021-404-1308).
[13] Mr Keesing says he removed Mr Davie-Martin as a trustee on 29 July 2021. As a result, Mr Keesing says there were no trustees of the Trust.
[14] On 13 August 2021 Mr Keesing signed a notice of discontinuance against the defendant in CIV-2021-404-1308. However, on 16 August 2021 he signed an interlocutory application in that proceeding seeking an order that New Zealand Public Trust (Public Trust) be appointed sole trustee. Both documents were received by the Court on 18 August 2021.
[15] On 24 August 2021 Fitzgerald J directed that proceeding be served on each of the former trustees.
[16]On 3 September 2021 Mr Keesing lodged the caveat.2
[17] Ms Coop arranged for Mike Pero Real Estate to market the property for sale. On 19 October 2021 the defendants entered into a sale and purchase agreement to sell the property for $690,000 with a settlement date of 13 January 2022 or earlier by mutual agreement. An early settlement date of 10 December 2021 was agreed. Subsequently, the parties agreed to a new settlement date of 31 March 2022.
[18] On or about 6 December 2021, after Ms Coop found out there was a caveat on the title, the defendants’ solicitors applied to LINZ to lapse the caveat.
[19]On 5 January 2022 Mr Keesing filed this proceeding to sustain the caveat.3
2 Caveat 12233312.1.
3 Mr Keesing said that LINZ have accepted that he did not receive notice of the application to lapse until 24 December 2021 and therefore that the caveat had not lapsed before he filed this application.
[20] Mr Keesing says that he appointed himself a trustee of the Trust on 14 February 2022.
[21] On 7 March 2022 Mr Keesing filed in CIV-2021-404-1308 an interlocutory application without notice for interim orders freezing all of the assets of the Trust. The only subsequent minute I have seen in that proceeding addresses service issues.4 It appears the freezing order application has not been pursued or determined. The circumstances did not warrant a without notice application and it would not have been appropriate to determine it on a without notice basis.
[22] There have been ongoing difficulties with service in both proceedings. Mr Keesing is self-represented and appears to have no email/internet.
Applicable legal principles
[23] The applicable legal principles which govern the application to sustain the caveat are well established:5
(a)The onus is on Mr Keesing to demonstrate that he holds an interest in the land that is sufficient to support the caveat, but he need not establish that definitively.
(b)It is enough if he puts forward a reasonably arguable case to support the interest claimed.
(c)The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is a patently clear that the caveat cannot be maintained – either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists.
4 Minute of Hinton J dated 14 March 2022.
5 Philpott v Noble Investments Ltd [2015] NZCA 342 at [26].
(d)When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interests would not be prejudiced by removal.
Caveatable interest
[24] It is common ground that on this application I cannot determine the disputed factual question as to the correct version of the trust deed. Accordingly, Mr Keesing did not ultimately pursue his application for leave to cross-examine Mrs Cox, the Justice of the Peace who had witnessed the execution of the version relied on by the defendants.
[25]Mr Keesing has made clear that he is not a beneficiary of the Trust.
[26] Although Mr Keesing’s caveat describes his caveatable interest as an estate or interest as beneficiary of a constructive trust between Michael Douglas Kessing and Barbara Ann Coop, Craig Peter Davie-Martin and Peter Athol Honour, registered proprietors, Mr Keesing has clarified that he claims a caveatable interest on the basis of his capacity as protector, and more recently as trustee.
[27] Given that Mr Keesing does not claim to have been a trustee when he lodged the caveat on 3 September 2021, the key question is whether Mr Keesing’s claimed role as protector of the Trust gives rise to a caveatable interest.
[28] Section 138 of the Land Transfer Act 2017 (the Act) prescribes the limited bases on which a person may lodge a caveat against dealings with land. Section 138(1) provides:
138 Caveats against dealings with land
(1)A person may lodge a caveat against dealings with an estate or interest in land (a caveat against dealings) on the basis that the person—
(a)claims an estate or interest in the land, whether capable of registration or not; or
(b)has a beneficial estate or interest in the land under an express, implied, resulting, or constructive trust; or
(c)is transferring the estate or interest in the land to another person to be held on trust; or
(d)is the registered owner of the estate or interest in the land and—
(i)has an interest that is distinct from that of registered owner; or
(ii)establishes to the satisfaction of the Registrar that at the time the caveat is lodged there is a risk that the estate or interest may be lost through fraud.
[29] It is notable that apart from a claimed legal or beneficial interest in the land, the section provides that “transferring the estate or interest in the land to another person to be held on trust” is a basis for a caveatable interest.6 That refers to the settlor of a trust. But that appears to be the only exception to the general position that a caveat must be based on a legal or beneficial interest in the land.
[30] The role of protector is not common in New Zealand trusts,7 but is more common in some offshore trusts. Both versions of the trust deed contain the following relevant provisions relating to the role of the protector:8
31.Protector’s Entitlement to Notice of Exercise of Powers, Minutes, Profit and Loss Accounts and Balance Sheet
31.1After the death of the Settlor, or his, her or their earlier mental incapacity, the Trustees, to enable the Protector to properly exercise his, her or their powers shall:
31.1.1Before exercising any of the following powers give no less than two days’ notice in writing to the Protector of their intention to do so by personal delivery or e-mail or facsimile:
31.1.1.1clause 39 – application of income and capital;
31.1.1.2clause 42 and 43 – payment to other trusts and creation of Sub Trusts;
31.1.1.3clause 26 – additions to and exclusions of Beneficiaries;
31.1.1.4clause 44 – alterations to Trust;
31.1.1.5clause 33 – the early winding up of the Trust;
6 Section 138(1)(c).
7 The term does not appear in the Trusts Act 2019.
8 Including, unusually, footnotes with legal commentary. I have omitted and marked with square brackets wording that differs between the two versions.
31.1.1.6clause 47 – transfer of trusts to another country; and
31.1.1.7clauses […] of the Third Schedule – borrowing/guarantees/lending[…].
31.1.2Promptly supply to the Protector copies of the minutes of all Trustees’ meetings, a copy of each profit and loss account and balance sheet and such other information as the Protector shall request.
32.Protector’s Duties
32.1All disputes between the Trustees, Independent Trustees, Custodian Trustees, Advisory Trustees, or Investment Managers shall be referred to the Protector for determination.
32.2If there is more than one Protector then a unanimous decision shall be required in respect of each and every decision.
32.3If the Trustees, Independent Trustees, Custodian Trustees, Advisory Trustees, or Investment Managers involved in such dispute, as the case may be, are all Protectors all such disputes shall be resolved by the Court in the area where the Trust was established.
32.4The decision of the Protector or the Court on such disputes shall be binding on the Trustees, Independent Trustees, Custodian Trustees, Advisory Trustees, or Investment Managers involved in such dispute.
[…]
33.Duties of the Protector following the death or mental incapacity of the Settlor
33.1The Settlor, as a matter of common sense, and in order to avoid any long term disagreements between the Beneficiaries, and recognising that the final decision on such matters rests with the Trustees, requests that the Protector following the death or mental incapacity of the Settlor:
33.1.1To distribute copies of the then current Memorandum of Wishes prepared in respect of this Trust to the Trustees (or those who are appointed as Trustees following the death or mental incapacity of the Settlor).
33.1.2Hold a meeting with the Trustees of the Trust (or those who are appointed as Trustees following the death or mental incapacity of the Settlor) in order to:
33.1.2.1Advise the Trustees of the wishes expressed in such Memorandum of Wishes (which do not form part of this Trust Deed and are not legally binding on the Trustees).
33.1.2.2Ascertain whether there are any potential differences of opinion between the Trustees, and
33.1.2.3Use the powers given to him, her or them by this Trust Deed to resolve any such differences.
33.1.3Convene a meeting of the Trustees and of the Primary Beneficiaries of the Trust (if any of them are then living) or of the Secondary Beneficiaries (after the death of the Primary Beneficiaries), in order to:
33.1.3.1Advise such Beneficiaries of the wishes expressed in such Memorandum of Wishes.
33.1.3.2Advise them that the Memorandum of Wishes does not form part of this Trust Deed and is not legally binding on the Trustees.
33.1.3.3Enable the Trustees to explain to the Beneficiaries their current intentions in relation to the assets and income of the Trust Fund.
33.1.3.4Explain to such Beneficiaries the benefits of having a trust established for their own benefit and the wishes (if any) expressed in the Memorandum of Wishes as to the resettlement of payments to such trusts.
33.1.3.5Ascertain whether there are any potential differences of opinion between the Trustees and such Beneficiaries.
33.1.3.6Assist in the resolution of any such differences (it being the Settlor’s desire that all such differences be resolved where possible by discussion between the Trustees and such Beneficiaries, and if that is not successful by the mediation of the Protector).
33.2In the event of a Protector becoming mentally incapable or being placed in receivership or liquidation, he or she or it shall cease to be a Protector from the date of his or her or it’s mental incapacity, receivership or liquidation.
34.Power to Appoint Trustees
34.1The Protector, may exercise the following powers:
34.1.1To appoint new Trustees of all or any of the Trusts hereof, but not any Precluded Person.9
34.1.2To appoint himself herself or themselves or any of themselves to be a Trustee.
9 Hardaker v Moorehouse (1884) 26 Ch D 417. It is not necessary for the person nominated to appoint new trustees to be a trustee or a beneficiary.
35.Protector’s Power to Remove Trustees
35.1At any time if he, she or they in their sole discretion consider it to be for the benefit of the Primary Beneficiaries during their lifetime, and for the benefit of the Secondary Beneficiaries after the death of the Primary Beneficiaries, the Protector may remove any Trustee (but not the Settlor, […] from his her or their office or offices.
35.1.1The power of removal shall be exercised by way of notice in writing to be given to such outgoing Trustee.
35.1.2Such notice in writing shall be deemed to have been given and shall be effective immediately upon personal delivery to the outgoing Trustee or seven (7) days after posting by […] to his her or their last known postal address recorded on the Trust’s Address Register, as the case may be.
35.1.3The Protector is not required to give any reason to any person (other than the Court if the exercise of his, her or their discretion is the [sic] challenged by Court action).
35.2Power of attorney granted by removed Trustee
35.2.1In the event of a Trustee retiring or being deemed to have retired under clause 21 or being removed the removed trustee hereby irrevocably appoints the Protector to be his or her attorney to act for him or her in his or her name and on his or her behalf in all matters necessary to vest the title to the assets subject to the trusts of this Trust in the names of the Continuing Trustees and/or any New Trustees) at such Attorney’s absolute discretion.
36.Exercise of Protector’s Discretions
36.1The Protector must act honestly and in good faith for the benefit of the Primary Beneficiaries during their lifetime, and for the benefit of the Secondary Beneficiaries after the death of the Primary Beneficiaries.10
36.2Every power vested in the Protector shall be exercisable at his her or their absolute discretion.
36.3Subject always to any express provision to the contrary contained herein every discretion vested in the Protector by this Trust Deed is absolute.
36.4The Protector must except as otherwise provided in this Trust Deed and permitted by law:
36.4.1Not delegate his, her or their discretion.
10 Armitage v Nurse [1997] 2 All ER 705 at 713 per Millett LJ.
36.4.2Not place fetters on his, her or their discretion.
36.4.3Consider whether his, her or their discretion should be exercised.
36.4.4Not act for his, her or their own benefit in his, her or their capacity as Protector, or for the benefit of any third person.
37.Protector’s Liability
37.1The Protector shall have no responsibility to make inquiries as to whether there has been a breach of the provisions of this Trust Deed.
37.2No Protector shall be liable for any loss unless such loss shall be caused by his, her or their actual fraud,11 it being the Trustees [sic] role to ensure that no such loss occurs and not the Protector’s role.
[31] These trust deed provisions do not indicate that the protector has any legal or beneficial interest in trust property. Nor do the terms relied on by Mr Keesing in his version of the trust deed – he referred particularly to clauses 32.5 and 32.6 in his version, which give the protector the power to veto any decision made by any trustee(s) that the protector determines to be unlawful and/or might place the trust fund/assets at risk of loss or harm, and the power to commence proceedings on behalf of the Trust.
[32] Given the terms of s 138(1) of the Act and the role of the protector in the trust deed, I consider that the protector of the Trust (whether it is Mr Keesing or the defendants) does not have a caveatable interest in the property. The protector has no legal or beneficial interest in trust assets such as the property and does not fall within another limb of s 138(1).
[33] A person outside the scope of s 138 who seeks to restrain dealings in land must seek some other form of interim relief, such as an interim injunction or freezing order. Such applications require an undertaking as to damages (at least absent exceptional circumstances). Mr Keesing does not appear to have filed an undertaking as to damages when he applied for a freezing order in CIV-2021-404-1308.
11 Armitage v Nurse [1997] 2 All ER 705. An identical clause was held to be effective in protecting the trustee from liability for acts of negligence, including gross negligence.
Residual discretion
[34] Even where a caveator has a reasonably arguable case, the Court has a residual discretion to remove or allow a caveat to lapse.12 As indicated, the discretion must be exercised on a cautious basis.
[35] In the event that I determined that Mr Keesing had a caveatable interest, Mr Armstrong for the defendants advised that he was authorised to give an undertaking to hold the (net) proceeds of sale on trust.
[36] Mr Keesing does not consent to the caveat lapsing on the basis that the net proceeds would be held on trust pending determination of the substantive dispute so that the current sale can proceed. But he said he is happy for Public Trust to step in and get on with a prompt sale, and that he is not trying to be obstructive.
[37] Mr Keesing complains that he has not seen any proper process, particularly registered valuations in relation to the proposed sale, and that he has serious concerns including that the sale is not for the best price. In particular, he said that he has been advised by Public Trust that trustees need to follow proper process, and that he has advice that a better price, $100,000 higher, could be obtained.
[38] While no registered valuations have been provided and both sides bear some responsibility for the lack of dialogue, the evidence indicates that the property was marketed by a licensed real estate agent and there is no suggestion that the purchaser is other than arms-length. Moreover, Mr Keesing has filed no evidence substantiating his concern that the sale is at an undervalue. His statements at the hearing were not addressed in any of his four substantive affidavits in support. Nor is there any evidence from a market expert. The concern is speculative.
[39] As Mr Armstrong submitted, if the sale proceeds and it transpires that the defendants sold the property at an undervalue, or without authority having been removed as trustees, they would be exposed to liability to the beneficiaries.
12 Philpott v Noble Investments Ltd [2015] NZCA 342 at [26]; Pacific Homes Ltd v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656. See generally, N R Campbell Hinde McMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at 10.020(c).
[40] Mr Armstrong also submitted that if the sale cannot proceed, the registered proprietor vendors would be exposed to a claim by the purchaser (and may seek indemnity from the trust fund). He also submitted that the property market has plateaued or is declining. That is speculative too. But if correct, as he submitted, the beneficiaries are more likely to suffer if the sale cannot proceed.
[41] Mr Armstrong indicated the defendants oppose the appointment of Public Trust simply for cost reasons. According to Mr Keesing, the property is the primary and most valuable asset of the Trust. So this is not a high value trust despite the unusual form of trust deed.
[42] For these reasons and in the absence of an undertaking as to damages, even if I had determined that Mr Keesing had a caveatable interest in the land,13 I would have been satisfied on the evidence that the sale should be allowed to proceed and that Mr Keesing’s legitimate interests (on behalf of the beneficiaries) would not be prejudiced if the caveat lapses on condition that the net proceeds of sale of the property be held in the solicitors’ trust account pending determination of CIV-2021-404-1308.
[43] I also record that in the unusual circumstances of this case, even if I had determined that Mr Keesing had a caveatable interest in the land, and if I were not satisfied that Mr Keesing’s interests would not be prejudice by removal, I would have made any order sustaining the caveat (or any freezing order) conditional on the provision of an undertaking as to damages by 1:00 pm today.
Result
[44] The application to sustain caveat 12233312.1 is dismissed. The interim order is discharged.
[45] The defendants are entitled to costs, which ordinarily follow the event including in a caveat proceeding irrespective of the separate and ongoing substantive proceeding.14 If costs cannot be agreed, I will receive memoranda not exceeding three pages within 15 working days and determine the costs on the papers.
13 As protector or trustee.
14 PHI Construction Ltd v Thompson [2021] NZHC 706 at [4].
[46] The parties are also to file memoranda (ideally a joint memorandum) within 15 working days proposing timetable orders to progress of the substantive dispute (CIV-2021-404-1308), including for early determination of the factual issue as to the correct version of the trust deed.
Gault J
Parties / Solicitors:
The Plaintiff
Mr J Armstrong and Ms J Daley, Armstrong Murray, Auckland
2
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