Locker v Browning
[2018] NZHC 1127
•18 May 2018
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE
CIV-2018-485-000347
[2018] NZHC 1127
UNDER the Trustee Act 1956 IN THE MATTER OF
an application for vesting orders and an order varying the Trust Deed of the
Elaine Browning Family Trust
BETWEEN
MARK HARRY LOCKER, MAVIS JEAN SIMS AND TIMOTHY RONALD
LOCKER
ApplicantsAND
ELAINE JOAN BROWNING
Respondent
Hearing: On the papers Counsel:
L Jensen-McCloy for Applicants
Judgment:
18 May 2018
JUDGMENT OF COOKE J
[1] The applicants are the trustees of the Elaine Browning Family Trust (the Trust), which was settled by the respondent on 1 March 1995. They have applied for orders vesting property owned by the former trustees in the present trustees, including a property at 1 Marine Parade, Ōtaki, and for orders that the Deed of Trust be varied. They also apply for orders to commence these proceedings by originating application and for directions as to service and representation. A series of affidavits have been filed by the applicants in support of the application, together with a memorandum of counsel providing reasoned submissions in support of the applications.
LOCKER v BROWNING [2018] NZHC 1127 [18 May 2018]
[2] I am satisfied that this proceeding is appropriately bought as an originating application, that service on the respondent or any other party is not required, and that for the reasons addressed below there is no need for the appointment of a litigation guardian. Those applications are accordingly granted.
[3] As a matter of substance, the applications are made because Mrs Browning has advanced dementia and is no longer able to make decisions in relation to the property. Although steps have been taken to replace her as trustee, and one of her daughters holds an enduring power of attorney, it is necessary for orders to be made under s 52 of the Trustee Act 1956 (the Act) in order to vest title to land owned by the Trust in the new trustee, as the appointment of a replacement trustee does not have that automatic effect.
Factual background
[4] Affidavits were filed by three of the respondents’ children, Timothy Locker, Mark Locker and Rachel McKee, and from a friend of the respondent, Jean Sims. Messrs Timothy and Mark Locker and Mrs Sims are the present trustees of the Trust.
[5] Mrs Browning settled the Trust on 1 March 1995 pursuant to a Trust Deed. She was a trustee along with her son, Mark. Mrs Sims was later appointed trustee on 21 October 1997. The Trust’s assets include:
(a)an occupation licence for Flat 5B of the Grosvenor Apartments (19 Cottleville Terrace, Thorndon) together with 8,400 shares in Grosvenor Flats Ltd; and
(b)a property at 1 Marine Parade, Ōtaki contained in Certificate of Title WNC4/1063.
[6] Prior to owning the apartment, the Trust owned previous residential properties occupied by Mrs Browning. The primary beneficiaries of the Trust are Mrs Browning’s three children, but there are wider eligible beneficiaries. All of the current trustees and the primary beneficiaries have filed affidavits indicating they consent to the orders sought being made.
[7] Mrs Browning is 82 years of age. In 1997, she appointed her daughter Rachel under an enduring power of attorney for property, and for personal care and welfare.
[8] Mr Timothy Locker explains in his affidavit that from about 2013 the family noticed that Mrs Browning’s health appeared to be deteriorating in terms of her memory and cognitive function. He explains that for the two years prior to her moving into residential care she had carers visiting her at her apartment to assist her, but ultimately she has moved into a rest home at Te Hopai Home and Hospital in Newtown on 27 November 2017.
[9] The position is now that Mrs Browning has advanced dementia. Certificates by a health practitioner to certify mental incapacity for the purposes of an enduring power of attorney (in relation to personal care and welfare, and in relation to property) dated 26 February 2018 were provided by Dr Andrea Crichton. Dr Crichton certifies that Mrs Browning has Alzheimer’s disease/dementia with progressive deterioration, and that she is unable to make decisions around personal care and welfare or financial management.
[10] The certifications by Dr Crichton, together with the affidavit evidence of Mrs Browning’s children and Mrs Sims, satisfies me that she is no longer capable of making decisions affecting her property or her welfare.
[11] Under the Trust Deed the power of appointment of new trustees is vested in Mrs Browning as the settlor. Pursuant to s 43(1)(f) of the Act, Mr Mark Locker and Mrs Sims appointed Mr Timothy Locker as a trustee in place of Mrs Browning by deed dated 14 March 2018.
[12] Unfortunately, the exercise of the power to appoint replacement trustees coupled with the existence of the enduring power of attorney is inadequate to deal with the current situation without the involvement of the Court. An enduring power of attorney does not operate with respect to a person’s role as a trustee of a Trust.1 Section 43 of the Act contemplates a situation where the person with the power to appoint new trustees can no longer so act. It provides:
1 See Godfrey v McCormick [2017] NZHC 420, [2017] 3 NZLR 198.
43 Power of appointing new trustees
(1)Where a trustee (whether original or substituted, and whether appointed by the Court or otherwise)—
…
(e)is unfit to act therein; or
(f)is incapable of so acting; or
…
the person nominated for the purpose of appointing new trustees by the instrument (if any) creating the 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, or the personal representatives of the last surviving or continuing trustee, may by deed appoint a person or persons (whether or not being the person or persons exercising the power) to be a trustee or trustees in the place of the first-mentioned trustee.
[13] But such a change in a trustee does not automatically alter what is recorded on the certificate of title, which will still have the person unable to act as trustee recorded. Counsel described this as a recognised anomaly of the Act.
[14] In order to effect a change in the certificate of title, s 52 of the Act can be applied, however. It provides:
52 Vesting orders of land
(1)Subject to the provisions of subsections (2) and (3), in any of the following cases, namely—
(a)where the court appoints or has appointed a trustee of any land or interest therein, or where a trustee of any land or interest therein has been appointed out of court under any statutory or express power:
(b)where a trustee entitled to or possessed of any land or interest therein, whether by way of mortgage or otherwise, or entitled to a contingent right therein, either solely or jointly with any other person—
(i)is under disability; or
…
the Court may make an order (in this Act called a vesting order) vesting the land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct, or
releasing or disposing of the contingent right to such person as the court may direct.
(2)Where any such order is consequential on the appointment of a trustee, the land or interest therein shall be vested for such estate as the Court may direct in the persons who on the appointment are the trustees.
…
[15] I accept that this section applies, and allows the removal of Mrs Browning from the title and replacement of her with the replacement trustee, Mr Timothy Locker.
[16] Orders of this kind are sought from this Court reasonably regularly. As the Wellington Duty Judge, I have dealt with two such applications this week. There is accordingly significant cost to those who must seek such orders, and to the Crown, arising from the anomaly referred to by counsel. The Law Commission recommended specific reform in this area, and the matter is currently subject to a remedial provision in the Trusts Bill 2017 currently before Parliament (cls 108, 109).2
[17] The originating application sought broader orders – namely that all the property owned by the former trustees, including (but not limited to) the Ōtaki property, be vested in the present trustees. I do not see why it is necessary for the Court to make that broader order. The scope of the order required of the Court is identified by the need to obtain an order under s 52.
[18] An area of uncertainty arose as a consequence of the telephone conference I had with counsel referred to below. In that conference counsel indicated that the order in the originating application was framed in broader terms so that it captured Mrs Browning’s interest in the occupation licence and the 8,400 shares associated with the Grosvenor Apartments. As far as I can tell, however, Mrs Browning is not registered on a certificate of title in connection with this interest, and accordingly an order is not required under s 52.3 If I am wrong about that, and an s 52 order is required in relation to this interest, I reserve leave for the applicants to apply for an order under s 52 to cover that registered interest. Any such application should identify what entry there is on the certificate of title that needs to be changed.
2 See Law Commission Review of the Law of Trusts (NZLC R130, 2013) at 34-35.
3 Instead, these interested transferred to the new trustees upon appointment by operation of s 47 of the Act (and cl 4 of the deed dated 14 March 2018).
Variation of the Trust Deed
[19] The applicants also sought an order varying the terms of the Trust Deed. In effect, they wish to change the Trust Deed to avoid the need to approach the Court if this kind of scenario develops again – namely if trustees became incapacitated. There is no clause in the Trust Deed permitting variation. Reliance was placed on the inherent jurisdiction to make an order varying a Trust Deed and the decision of this Court in Clarke v Duffy where such jurisdiction was exercised.4
[20] I was unsure whether such an order was really needed in the present situation, and convened a telephone conference with counsel on 16 May 2018 to discuss the position. Following that telephone discussion counsel filed a memorandum clarifying the position, and seeking a slightly different variation to the Trust Deed. The variation contemplated that the remaining trustees would have the authority to act on behalf of a trustee who had become incapable, essentially for the purposes of vesting land in the new trustee.
[21] Having considered the matter further, I have decided that I should not make such an order, particularly on an originating application addressed on the papers. First, there is no pressing need for that order. In addition, there may be some doubt as to whether clauses of the kind suggested by the applicants are effective. I note that commentators have suggested that this kind of clause may be one way of dealing with the situation.5 But it may involve similar difficulties to those that have led to the determination that enduring powers of attorney do not operate in relation to a person’s functions as a trustee. Section 31 of the Act contemplates a trustee delegating his or her duties as trustee only for certain listed reasons. These includes physical infirmity, but not mental incapacity. It might be argued that such a clause in the Trust Deed is accordingly ineffective.
[22] In any event the area is now the subject to a specific proposal for reform in the Trusts Bill 2017. I also note that the Law Commission identified concerns with the technique contemplated by the proposed variation of the Trust Deed and that an
4 Clarke v Duffy [2017] NZHC 2025.
5 See Greg Kelly “Trusts” (paper presented to NZLS CLE Ltd Elder Law Intensive, May 2014) at 107.
alternative solution is proposed in the Trusts Bill 2017.6 So I do not think I should make the order given these uncertainties, particularly on an application to be determined on the papers, and given that there does not seem to be a need for pressing orders to be made. For those reasons, I decline to make that order. I will, however, generally reserve leave to the applicants to apply for further orders.
Formal orders
[23] I make an order under s 52 of the Act that the interest in land in Certificate of Title WNC4/1063 in relation to 1 Marine Parade, Ōtaki be vested in Mark Harry Locker, Mavis Jean Sims and Timothy Ronald Locker.
[24] I further direct that the applicants have leave to apply with respect to any further orders required under s 52 if they affect any registered interests relating to the Grosvenor Apartment at 19 Cottleville Terrace. I decline the application to vary the Trust. I have also made the procedural orders recorded at the outset of this judgment.
[25]I generally reserve leave to the applicants to further apply.
Cooke J
Solicitors:
Webb Farry, Dunedin for Applicants
6 Law Commission Review of the Law of Trust: Preferred Approach (NZLC IP31, 2012) at 132.
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