Key v Funnell

[2017] NZHC 481

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2017-454-0016 [2017] NZHC 481

IN THE MATTER

of the Trustee Act 1956

BETWEEN

JOHN WILLIAM KEY AND NORMAN LIND

Applicants

AND

ALWYN RAYNA FUNNELL Respondent

Hearing:	On the papers
Appearances:	G Mason for the Applicants
Judgment:	16 March 2017

JUDGMENT OF CULL J

This judgment was delivered by me on 16 March 2017 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

Counsel:

G Mason, Palmerston North.

KEY AND LIND v FUNNELL [2017] NZHC 481 [16 March 2017]

[1]      The applicants have filed an originating application without notice for orders:

(a)       appointing the applicants as new trustees of the Funnell Family Trust

(the Trust) in substitution for the respondent; and

(b)vesting the title to the property at 12 Woodland Grove, Feilding in the applicants, pursuant to s 52 Trustee Act 1956.

[2]      The applicants have also filed an interlocutory application without notice for orders to commence this proceeding by way of originating application; dispensing with service on, and representation of, the defendant; and an order that the other beneficiaries of the Trust not be served with the proceedings.

Background

[3]      A deed of trust dated 19 September 1996 established the Trust.  The trustees were  John  William  Key  (one  of  the  applicants),  Dereck Braeburn Funnell  (the deceased)  and  Alwyn  Rayna  Funnell  (Mrs  Funnell,  the  respondent).     Both Mrs Funnell and the applicant, John Key, have been trustees of the Trust since it was originally settled.

[4]      Mrs Funnell has suffered deteriorating health and on 3 September 2013 she was  certified  as  having  mental  incapacity for  the  Enduring Powers  of Attorney (EPOAs).

[5]      Proceedings were issued by two of Mrs Funnell’s children in the Family

Court, challenging the validity or otherwise, of the EPOAs signed by Mrs Funnell on

16 April 2013.

[6]      Dr Duncan is an experienced forensic psychiatrist with a speciality in the psychiatry of old  age  and  has  held  the position  as  a  psychogeriatrician  for the Wairarapa District Health Board for the past 20 years.  He did a medical examination of Mrs Funnell under s 76 of the Protection of Personal and Property Rights Act

1988 (the PPPR Act) and concluded that there was clinical evidence of her having a significant degree of cognitive impairment at the time the EPOA’s were established.

[7]      Judge Black of the Family Court in Palmerston North gave an oral judgment, recording that Dr Duncan’s report raised “real doubt” as to Mrs Funnell’s capacity to give the EPOAs at the time they were signed.1   With the consent of the parties, Judge Black made the following findings:

(1)the EPOAs signed by the respondent on 16 April 2013 are declared not to be EPOA pursuant to s 102(1)(a) of the PPPR Act.

(2)the respondent lacked capacity as defined in the PPPR Act to manage her personal care and welfare and to manage her property affairs. Personal orders were made in relation to Mrs Funnell’s care.

[8]      Among the other orders that were made, Judge Black recorded the parties’ agreement that the present applicants should be appointed as replacement trustees, noting that this would require an application to the High Court.

[9]      The  Judge  also  recorded  that  the  parties  agreed  to  cooperate  in  that application and consent to that appointment.  They also agreed that the costs of the application should be borne in the first instance by the estate of the deceased.

[10]     From  those  assessments  and  the  Family  Court  decision,  it  is  clear  that Mrs Funnell no longer understands the consequences of any decisions she might make and is mentally incapacitated, as described by Dr Duncan.   In addition, it is sadly evident that she will not recover from this present state of health.

Power of appointment of trustees

[11]     The power of appointment of new trustees is contained in cl 4 of the Trust Deed.  The power of appointment of new trustees was given to Mr and Mrs Funnell and after the death of the survivor of either of them, the power resided in the

administrator or the executors of the will of the survivor.  Where there is no such

1      Funnell v Funnell [2015] NZFC 8015.

administrator able and willing to act, after the death of the survivor of either Mr or

Mrs Funnell, then the statutory powers in the Trustee Act 1956 apply.

[12]     Clause 10 of the Trust Deed provides that whether by death, resignation or inability to act, the person authorised by cl 4 shall take such steps as shall be necessary to fill any vacancy, so that the trustees of the Trust shall at no time be less than  two  in  number.     Applying  those  powers  to  the  present  circumstances, Mrs Funnell is the survivor of her husband, but she is still alive, so the remaining powers within cl 4 do not apply.

[13]     Section 43(1) of the Trustee Act 1956 provides that where a trustee is unfit to act in that capacity or is incapable of so acting:

… the person nominated for the purpose of appointing new trustees by the instrument (if any) creating a trust, or if there is no such person or no such person able and willing to act, then the surviving or continuing trustees for the time being … may by deed appoint a person or persons … to be a trustee or trustees in the place of the first-mentioned trustee.

[14]     In his judgment in the Family Court, Judge Black recorded that the parties to the proceedings agreed to the two following causes of action:

(1)that John Key or Norman Lind or both of them should apply for letters of administration in relation to Mr Funnell’s estate, with the intent that Mr Key acts in the administration of the estate; and

(2) that the applicants should be appointed as replacement trustees to the

Trust, which owns the property at Woodford Grove, Feilding.

[15]     The applicants have sworn an affidavit, annexing the application without notice for letters of administration by Mr Lind, who has applied to be the executor of the deceased’s estate.

[16]     I  am  satisfied  that  it  is  appropriate  that  the  applicants  are  appointed  as trustees of the Trust, given that there is no other person with an interest in the subject matter and with capacity, who is opposed to the orders for appointment.   The beneficiaries of the Trust consent to the orders sought.

Vesting orders

[17]     The  applicants  seek  a  further  order  that  the  title  to  the  property  at  12

Woodland Grove, Feilding2  be vested in the applicants as trustees of the Trust in substitution for Mrs Funnell.

[18]     Section 52 the Trustee Act 1956 provides that the Court may make an order vesting the land or interest in such other person as the Court may direct, where a trustee entitled to possession of any land is under a disability.

[19]     12 Woodland Grove, Feilding is the property of the Trust and the registered proprietors of that property are Mr and Mrs Funnell.  The beneficiaries of the Trust, with the exception of Mrs Funnell, consent to the vesting orders being made and I make those orders below.

Directions as to service and representation

[20]     In addition, the applicants have filed an interlocutory application without notice for leave to commence proceedings by way of originating application and seek orders dispensing service of the proceedings on Mrs Funnell and on the other beneficiaries of the Trust.   They are also seeking that no direction be made with regard to the representation of Mrs Funnell and that no litigation guardian be appointed for her, as being unnecessary in the circumstances.

[21]   All orders sought by the applicants have been agreed to by the other beneficiaries of the Trust, namely the children of the deceased.

[22]     Under all these circumstances, I am satisfied that neither Mrs Funnell nor any of the beneficiaries need to be given notice in this particular proceeding.  Leave to dispense with service of the application and supporting material on both Mrs Funnell

or on any other person is granted.

2      Being lot 20 on DP 65058 Identifier WN34A/75 (Wellington Land Registration District)

[23]     I  am  also  satisfied  that  leave  to  commence  this  proceeding  by  way  of originating application is appropriate here and the leave sought in that regard is now granted.

Orders

[24]     I now give the following directions:

(a)       Leave to commence this proceeding by way of originating application is granted.

(b)Service of this proceeding is not required to be made on Mrs Funnell or on the other beneficiaries of the Funnell Family Trust.

(c)       No  direction  is  required  with  regard  to  the  representation  of

Mrs Funnell and in accordance with r 4.30(1) of the High Court Rules

2016,  Mrs  Funnell  does  not  require  a  litigation  guardian  for  this proceeding.

(d)The applicants, John Key and Norman Lind, are appointed as trustees of the Funnell Family Trust in substitution for the respondent.

(e)       The  property  at  12  Woodland  Grove,  Feilding  is  vested  in  the applicants as trustees of the Funnell Family Trust.

Cull J