Lyttle v Casey
[2014] NZHC 3142
•10 December 2014
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE COURT/LEGISLATION/RESTRICTIONS-ON-PUBLICATIONS.
ALSO NOTE: NAMES USED IN THIS JUDGMENT ARE ANONYMISED.
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2013-485-9080
CIV-2013-485-10154
CIV-2013-485-10459 [2014] NZHC 3142
BETWEEN ELAINE LYTTLE
Applicant
AND
ERIC CASEY Respondent
Hearing: 30-31 October 2014 Counsel:
E Lyttle in person
D D Vincent for Respondent
B S Yeoman as amicusJudgment:
10 December 2014
JUDGMENT OF WILLIAMS J
Introduction
[1] Eric Casey and Elaine Lyttle began a relationship in March 2001. It lasted nine years, ending in January 2010. At that stage, Mr Casey already owned a residential property (Thompson St). Together, the couple purchased a second,
investment property (Telford Tce) on 13 September 2001.
LYTTLE v CASEY [2014] NZHC 3142 [10 December 2014]
[2] On 8 March 2004, the parties agreed that both properties be vested in the Eric Casey Family Trust. The settlors of the trust were Mr Casey and Ms Lyttle. They took a debt back for the amount of their respective unequal contributions but followed a (then) standard debt forgiveness programme of $54,000 a year, being
$27,000 from each.
[3] At the end of the relationship, there remained substantial unforgiven debt
($745,000 owed to Mr Casey and $305,000 to Ms Lyttle).
[4] This case is mostly about the relationship property treatment of that debt.
[5] But the relationship ended in acrimony and the parties are in bitter dispute about other issues of less monetary value, but great emotional value. Ms Lyttle says that Mr Casey has administered the trust to his own benefit and to her disadvantage. She says that the trust promised to pay her an accommodation allowance after she was forced to leave Thompson St in July 2013. Mr Casey in reply says Ms Lyttle owes the trust rent for the three and a half year period during which she occupied Thompson St without payment.
[6] There is also a dispute about chattels that Ms Lyttle says went missing after a fire at Thompson St. And finally there are a number of unrelated matters that Ms Lyttle raised either in her pleadings or in the hearing before me. I will deal with those matters briefly and last.
[7] The matter comes before me in the following form:
(a) an appeal by Mr Casey against the judgment of Judge Ullrich QC concluding that the unequal debts owed by the trust to the parties is relationship property to be shared equally;
(b)an appeal by Ms Lyttle against a separate decision of Judge Ullrich awarding certain chattels claimed by Mr Casey (including the former couple’s dog) to Mr Casey;
(c) an application under the Trustee Act 1956 by Ms Lyttle seeking the removal of Mr Casey as a trustee, damages for breach of trust or fiduciary duty, indemnity for wrongful expenditure, account of the administration of the trust including unauthorised expenditure, and the revisiting, rescinding, variation or clarification of separate decisions of Collins J and Associate Judge Gendall (as he then was) with respect to the sale of the trusts’ properties.
[8] A number of the matters I deal with in this judgment are not within the four corners of the proceedings before me. For the sake of finality however, I have decided that it is best to address them if possible. As will be seen, there are however some matters raised by Ms Lyttle that I simply cannot address.
[9] I finally note that Ms Lyttle appeared on her own behalf. In the Family Court, Judge Ullrich appointed an amicus to assist the Court in light of Ms Lyttle’s mental or emotional state. She is afflicted with chronic alcoholism. For that, and no doubt other reasons, she found it difficult to manage and present her case in a concise and organised way in the Family Court. I also found it necessary to appoint amicus to assist me in this Court for the same reasons.
Summary of the facts
The properties
[10] Mr Casey and Ms Lyttle formed a relationship in March 2001. He was a public servant and she a lawyer. Mr Casey at that stage already owned Thompson St. He had purchased it in 1993. In September 2001, six months after their relationship began, the couple jointly purchased Telford Tce. That purchase was secured by mortgages against both properties. Telford Tce was divided into flats and managed as an investment rental property.
[11] The couple then spent some time renovating Thompson St intending to make it their home. They moved in some time in 2003. The relationship ended in January
2010. Mr Casey moved out of Thompson St, but Ms Lyttle remained resident there until 2 July 2013. By then Mr Casey had obtained orders from Collins J directing
that both Telford Tce and Thompson St be sold.1 Orders had also been granted by Associate Judge Gendall giving possession of Thompson St to Mr Casey to allow the sale to proceed.
[12] On 1 July 2013, the bailiff gave Ms Lyttle 24 hours to leave Thompson St. On 2 July (within that 24 hour period) the property was extensively damaged by fire. Ms Lyttle then left. Mr Casey has been negotiating with the insurers of Thompson St over coverage of the loss. I understand the insurers accept liability.
The documentation
[13] I return now to the background to the formation of the Eric Casey Family Trust in 2004 and in particular to the relevant documentary history. The trust deed was obviously prepared from some kind of informal precedent or template document. Ms Lyttle’s evidence was that a lawyer friend of theirs by the name of John Thompson drafted the deed. Mr Casey says Mr Thompson provided the template but did not produce the final draft, Ms Lyttle did. In any event, the deed was executed on 8 March 2004. The settlors were Mr Casey and Ms Lyttle. They are also named as trustees together with their friend, Ronald Hughes.
[14] Mr Casey and Ms Lyttle are also named as “primary discretionary beneficiaries” in the deed. In their role as trustees, they are given broad discretion to apply the income of that trust to any beneficiary, but the deed provides that the primary discretionary beneficiaries must take priority.
[15] Alongside the trust deed, Mr Casey, Ms Lyttle and Mr Hughes executed a series of ancillary documents dated the same date. The lead document contained a list of trustees’ resolutions. The documents that followed, gave effect to these resolutions. According to the resolutions document, the trustees resolved to purchase Thompson St from Mr Casey for $440,000. They further resolved “to accept the settlor’s gift of $27,000 forgiveness of debt.” Clause 2.4 provided:
The trustees resolve to allow the settlor and his partner, Elaine Lyttle, as beneficiaries of the trust, to have free use of the trust property so purchased
1 Casey v Lyttle [2012] NZHC 2592.
subject to them maintaining the property and meeting the cost of all the rates, insurance (sic).
[16] I have quoted that clause in full because it will become important later in respect of the claim against Ms Lyttle for occupation rental.
[17] A resolution to purchase Telford Tce was also adopted by the trustees with the purchase price being $880,000. Again there was an acceptance of “the settlor Elaine Lyttle’s gift of $27,000 forgiveness of debt.”
[18] Appropriate deeds of acknowledgment of debt were then executed in the sum of $440,000 in favour of Mr Casey for the Thompson St property, and in the sum of
$880,000 in favour of both Mr Casey and Ms Lyttle (equally) for the Telford Tce property. Rudimentary agreements for sale and purchase of the properties were then executed together with vendors’ initial deeds of debt forgiveness (for $27,000) in respect of each property.
[19] It was uncontroversial that the debt forgiveness programme was considered necessary as a result of the gift duty regime that applied at the time. This regime was abolished in 2011. As a general pattern, annual debt forgiveness programmes would continue until the debts were entirely forgiven in the period prior to 2011.
[20] As I have said, by the time the case came before Judge Ullrich in the Family Court, the debt owed by the trust to Mr Casey was $745,000, while the debt owed to Ms Lyttle was $305,000.
Contemporaneous legal advice
[21] It is necessary to pause here to address the factual background to the question of whether Ms Lyttle and Mr Casey received formal legal advice at the time of entry into these arrangements. It is necessary to do so because s 21F of the Property (Relationships) Act 1976 requires any ‘contracting out’ agreement in respect of relationship property to be preceded by independent legal advice, so this is an issue in the case. Judge Ullrich found that no such advice had been given.
[22] Toward the end of 2003, Mr Casey contacted a consultant solicitor at the office of Mike Garnham Solicitors, in order to obtain legal assistance with respect to the trust. There is a dispute about the nature and timing of that assistance. The solicitor did not give evidence in the Family Court and filed no affidavit in this Court. However, although it was not available to the Family Court, the solicitor’s file was provided to me. It was agreed that I should consider its contents and parties made submissions in respect of the file accordingly.
[23] A computer generated historical billing narration printed out by Mike
Garnham Solicitors on 22 November 2013 shows there was an introductory
24 minute attendance by a solicitor on 17 December 2003 with the parties. There is no corresponding file note detailing what was discussed at that meeting. The next recorded attendance is three months later on 26 March 2004, some time after the trust documents were executed.
[24] The file contained a narration in an invoice from Mike Garnham Solicitors dated 10 June 2004 indicates that a solicitor did attend to (inter alia):
… finalising all trust documentation and transfer of properties in Thompson
St and Telford Tce to the trust …
during the period up to 10 June.
[25] There is also a handwritten note on the file dated 30 March 2004. It seems to be addressed to the solicitor. It asks him to “look over the documents and add what is necessary”. The note seems to be from Ms Lyttle. It leaves a DDI phone number to contact the writer if necessary, so it cannot be a note from someone within the solicitor’s office. The note is not in the solicitor’s handwriting but the solicitor has written Ms Lyttle’s name below that written request. At least, I assume the recording of the name is in the solicitor’s handwriting because that writing is consistent with much of the other handwriting on the file. It is not clear what documents this note is referring to. If the date set out on all of the 8 March documentation is to be believed, the note is not referring to those documents because they, on their face, were completed and executed 22 days earlier.
[26] It could relate instead to the formal transfer documents, or perhaps to IRD documentation. The transfers themselves were not however effected until July and August 2004. It is at least possible therefore that the trust documents were amended and executed following advice from the solicitor and then backdated. There is no way of knowing now which scenario is correct.
Trust administration and property sale
[27] In practical terms, the trust was administered by Mr Casey. Ms Lyttle was not engaged in the day-to-day business of the trust at all. For example, in Mr Casey’s affidavit of 20 October 2014, he says:2
Since the beginning of 2001, I have kept hand-written accounts for the Property, as well all of the receipts and invoices relating to expenditure for the Property.
I have used an accountant to prepare end of year accounts based on the written records that I have kept.
Before Elaine and I separated, Elaine was quite unwell with her alcoholism. I took care of the Trust matters, including ensuring end of year accounts were prepared, based on receipts and bank records which I maintained. Elaine simply did not engage with me on those issues and during the relationship I did what was necessary to ensure our properties were properly maintained and operated.
After we separated, I simply kept doing what I had always done with the properties. Elaine was living at Thompson Street, so I left the maintenance of the property to her and ensured that Telford Terrace continued to be maintained to the appropriate standard, tenants issues addressed and tax returns and the like filed.
[28] Ms Lyttle does not deny her relative inactivity as a trustee. The most I can garner from the evidence is that the trust’s bank statements were being sent to Thompson St and therefore were available to Ms Lyttle.
[29] Mr Hughes, the third trustee, seems to have had no involvement in the trust administration either. Indeed he now actively refuses to become involved in the trust in light of the conflict between Ms Lyttle and Mr Casey. I note as an aside that both
parties agree he should now be removed.
2 At [4]-[7].
[30] As I have said, the relationship ended in January 2010. Ms Lyttle remained resident in Thompson St and Mr Casey moved out. Mr Casey says Ms Lyttle’s alcoholism was causative of the break down in their relationship and has much to do with the (freely admitted) fact that he has not consulted her in her capacity as a trustee over any of the trust’s affairs since January 2010.
[31] Mr Casey filed the relationship property proceedings in the Family Court in November 2010. Ms Lyttle was still in Thompson St at the time, but Mr Casey wanted to sell the property and then use his share of the proceeds to buy Telford Tce for himself and wind up the trust.
[32] In 2012, Mr Casey made an application to the High Court for directions under the Trustee Act. Collins J found that it was in the best interests of the trust that both properties be sold and that the parties’ relationship property issues be resolved.3
The Judge ordered:
(a) that Thompson St be sold as soon as reasonably possible but
Ms Lyttle also be given a reasonable period to vacate;
(b)that the trustees take such steps as they consider “prudent and necessary” to prepare Thompson St for sale; and
(c) that Mr Casey purchase Telford Tce at the highest of either the median or mean of three independent valuations.
[33] Collins J also ordered that costs of the application were to be paid from the proceeds of sale of Thompson St.
[34] Despite this, Ms Lyttle refused to leave Thompson St and in April 2013
Mr Casey applied for orders by way of summary judgment that she be evicted. These were granted by Associate Judge Gendall on 4 June 2013. The Judge also
awarded indemnity costs against Ms Lyttle.4
3 Casey v Lyttle above n 1.
4 Casey v Lyttle HC Wellington CIV-2013-485-654, 4 June 2013.
[35] Ms Lyttle did not appear to defend the summary judgment application. She says she never received notice of it. She was however notified of the result.
[36] On 1 July 2013, the bailiff gave her 24 hours to leave Thompson St. The next day, on 2 July, a fire broke out at the property. It caused extensive damage. The property was insured and the claim was accepted in August 2013.
[37] On 22 October 2013, Judge Ullrich issued a judgment in respect of a series of chattels claimed by Mr Casey as his separate property. Ms Lyttle did not attend that fixture either. Orders were made declaring 19 items to be Mr Casey’ separate property. Interim orders in his favour were made in respect of a number of other items he claimed were his inherited property. The remainder was available for Ms Lyttle to claim if she wished.
[38] On 15 November 2013, her Honour issued her judgment in relation to the relationship property status of the Thompson St and Telford Tce debts already mentioned. In that judgment she also made findings in respect of the relationship property status of the parties’ superannuation policies, some vehicles and the dog, Zeus.
Issues
[39] To reiterate therefore, the issues I will address in this judgment are as follows:
(a) Did the parties contract out of the Property (Relationships) Act (the PRA) on 8 March 2004 in relation to the debt owed by the trust to each of them?
(b)Did Mr Casey administer the trust after separation in a manner that was in breach of his legal obligations to Ms Lyttle as a beneficiary?
(c) Must Ms Lyttle pay an occupation rent to the trust for her occupation of Thompson St for the period 1 February 2010 to 2 July 2013?
(d)Must the trust pay Ms Lyttle an alternative accommodation allowance from 2 July 2013 to the present?
(e) Should orders be made in respect of the chattels not dealt with by
Judge Ullrich? (f) Other issues.
Did the parties contract out of the Property (Relationships) Act?
The judgment
[40] Judge Ullrich found that the parties had not contracted out of the PRA. In the Family Court, Mr Casey argued that “the whole set up with trust and acknowledgment of debts was to quantify exactly what each was owed from the trust should they separate.”5 The learned Judge disagreed. She said:6
If the sole purpose of the documentation was to preserve a separate property element for the applicant, then the approach should have been to enter into a contracting out agreement under s 21. That would have achieved his objective without any confusion.
[41] In the Judge’s view, the documentation showed a different intention:7
The loan structure referenced the legal ownership of the Thompson St property and the Telford Tce property at the time of the transfer to the trust. The differing amounts of the loans reflected the valuations of the properties prior to the renovations to the Thompson St property. By this means the payment of gift duty was avoided. The clear intention of both parties was to share equally and the property transferred to the trust.
[42] The learned Judge also rejected an argument under s 13 of the PRA that, due to extraordinary circumstances, the debt should not be treated as relationship property but should instead be divided unequally. The Judge said:8
Although the applicant had owned the Thompson St property prior to the relationship, the parties together had renovated the property and increased its value during their relationship and prior to the drawing up of the trust deed and the loan documents.
5 Casey v Lyttle [2013] NZFC 9109 at [90].
6 At [127].
7 At [137].
8 At [128].
The legislation
[43] The PRA provides for the equal division of relationship property as that property is defined in s 8. There are exceptions to that default setting, one of which is set out in Part 6 relating to contracting out of the Act. Section 21 provides as follows:
21 Spouses or partners may contract out of this Act
(1) Spouses, civil union partners, or de facto partners, or any 2 persons in contemplation of entering into a marriage, civil union, or de facto relationship, may, for the purpose of contracting out of the provisions of this Act, make any agreement they think fit with respect to the status, ownership, and division of their property (including future property).
(2) An agreement made under this section may relate to the status, ownership, and division of property in either or both of the following circumstances:
(a) during the joint lives of the spouses or partners:
(b) when one of the spouses or partners dies. (3) This section is subject to section 47.
(my emphasis)
[44] Thus, the parties to a relationship may make any agreement whose purpose is to contract out of the PRA. There are stringent compliance requirements however. Section 21F contains those requirements:
21F Agreement void unless complies with certain agreements
(1) Subject to section 21H, an agreement entered into under section 21 or section 21A or section 21B is void unless the requirements set out in subsections (2) to (5) are complied with.
(2) The agreement must be in writing and signed by both parties.
(3) Each party to the agreement must have independent legal advice before signing the agreement.
(4) The signature of each party to the agreement must be witnessed by a lawyer.
(5) The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.
[45] There must be independent legal advice to each party and, no doubt to underscore that, the agreement must be witnessed by a lawyer. Along with witnessing the agreement, such lawyer must certify that he or she had explained the effect of the agreement to the signing party.
[46] Section 21H allows the Court to avoid strict compliance with s 21F, but the
Court may only do that–
… if it is satisfied that the non-compliance has not materially prejudiced the interests of any party to the agreement.
[47] In addition to s 21H, there is a further exception provision relevant to this case. It does not relate to contracting out, but rather to exceptional factual circumstances. Section 13 of the PRA provides:
(1) If the court considers that there are extraordinary circumstances that make equal sharing of property or money under section 11 or section
11A or section 11B or section 12 repugnant to justice, the share of each spouse or partner in that property or money is to be determined
in accordance with the contribution of each spouse to the marriage or of each civil union partner to the civil union or of each de facto
partner to the de facto relationship.
(2) This section is subject to sections 14 to 17A.
[48] Thus if there are extraordinary circumstances making equal sharing “repugnant to justice”, then the Court must allocate the property or money in dispute according to the parties’ respective contributions.
Submissions
[49] Mr Vincent, for Mr Casey, submitted that the parties’ intention in adopting the unequal debt structure that they did was to record and quantify their uneven contributions to the trust. This meant Mr Casey and Ms Lyttle must have agreed not to divide the debt equally and that this, by definition, constituted a contracting out agreement under s 21. In addition, he submitted that the couple had legal advice and that even if that advice was limited (or if on the facts it is found there was no advice at all), it should not be forgotten that Ms Lyttle is a solicitor who knew what she was doing. In the alternative it was argued that the agreement should be validated under s 21H even if the formal requirements of s 21F were not met.
[50] Finally, it was argued that s 13 is engaged in any event because there are exceptional circumstances here. Mr Casey brought this house to the relationship and his contribution far outweighed Ms Lyttle’s both in terms of value brought to their relationship and in terms of the hard work he did in administering the trust and
dealing with insurance issues following the fire. Ms Lyttle, he said, contributed very little, and in fact, made administering the trust more and more difficult as her alcoholism took over her attitude to Mr Casey and the trust property.
Discussion
[51] I agree with Judge Ullrich that the deed of acknowledgment of debt, seen properly in context, cannot be considered to be a document prepared “for the purpose of contracting out of the provisions of” the PRA.
[52] First, it does not expressly purport to be such an agreement. The parties’ differing contributions were, I accept, reflected in the deeds of recognition. But, as the Judge pointed out, they merely showed the different values of the properties prior to renovations at Thompson St. The terms of the trust deed make it perfectly clear that both parties intended to share equally in due course in the property transferred to the trust. If there was a recognition of difference, it was, by the parties own admission, a temporary recognition only.
[53] In situations such as these, the courts will not lightly infer an intention to depart from the default position under the PRA.9 The surrounding circumstances of the case must be sufficiently clear for the courts to conclude with confidence that it was the parties’ intention, with the PRA in their minds, to redistribute benefits that would otherwise be shared equally.
[54] In this case, there is simply no such intention to be found in the context or surrounding documentation. The fact that debts are recorded as unequal is not irrelevant but it cannot overcome the equally clear intention of the parties to forgive that inequality so as to arrive at equality as quickly as the gift duty regime allowed. I conclude accordingly that there was no intention in the parties, expressed or implied, to effect a contracting out of the Act through this documentation.
[55] Even if that is wrong, the agreement is void under s 21F because on any view of the facts, the parties did not receive independent legal advice and the agreement
9 Robert Fisher (ed) Fisher on Matrimonial Property (looseleaf ed, LexisNexis) at [5.66]; see also
Western v Western (1981) 4 MPC 212 (HC).
was not witnessed by their respective independent legal advisors. Nor is there any certificate to the effect that the affect of arrangements would be to produce an unequalled distribution on separation.
[56] The reason for this position is of course that the parties did not intend that this should be a contracting out agreement in the first place. It had not entered their minds.
[57] I was then invited to make rectifying orders under s 21H, but in my view s 21H does not apply. Section 21H rectifies an agreement rendered void by s 21F. Section 21F only applies to s 21 agreements. I have already concluded that this is not a s 21 agreement. It follows that the rectification provisions cannot apply to this agreement. But I would not have rectified anyway. The underlying intention of the parties was to bring their unequal contributions to a position of equality as quickly as possible without financial penalty. Treating the acknowledgement of debt as a contracting out agreement is inconsistent with that intention.
[58] Finally, Mr Vincent pointed to s 13. The test in s 13 has been described as a “stringent” one. Circumstances must be extraordinary and the result under the PRA’s default rules must fit the description “repugnant to justice”.10
[59] Though it was Mr Casey who brought the Thompson St property to the relationship, the Judge rightly pointed to the fact that the renovations were undertaken jointly, that Ms Lyttle’s evidence was that she contributed $100,000 of her own funds and that she had spent time and effort on all of the assets they accumulated together. It is true also that Ms Lyttle has been unco-operative to the point of obstruction and that her affliction has made the task of administering the trust, a task performed by Mr Casey, more difficult than it needed to be. I still do not consider that the circumstances so extraordinary that equal shares would be repugnant to justice.
[60] The appeal is dismissed accordingly.
Breach of trust?
[61] Ms Lyttle applies to remove Mr Casey as a trustee. She claims he has acted in his own interests in the manner of his administration of the trust.
[62] The evidence upon which she relies is an alleged exponential increase in both the amount of money expended on trust property and the frequency of such expenditure since their relationship ended in January 2010. She handed up to me in Court a handwritten list of payments which she said demonstrated that something
‘suspicious’ was going on.11 The summary alleges that between 2005 and 2009 trust
expenditure on property averaged in the vicinity of $1,800 to $2,000 per year. But in
2010 the year the couple separated, that sum increased to $21,000; in 2011 $12,600;
in 2012 $10,000; in 2013 nearly $13,000 and so forth.
[63] Ms Lyttle also questioned expenditure on Telford Tce (the property Mr Casey wants ultimately to purchase for himself). On 7 November, $574 was spent on a towel rail, and September 2011 $745 was spent on mending a bath. She questioned other expenditure – painting Telford Tce in 2010 for nearly $21,000 and the obtaining of a seismic report for $3,400.
[64] Ms Lyttle was particularly suspicious of rounded figures that Mr Casey had withdrawn or paid from the trust account. She noted that Mr Casey had said he wanted to move into one of the flats at Telford Tce and she suspects (she put it no higher than that) that he is applying trust funds to that flat in order to ready it for himself.
[65] Mr Casey admits that he has singlehandedly administered the trust since the separation. He says that during their relationship, Ms Lyttle never showed much interest in the day-to-day administration of the trust and in fact he has always been the active trustee. He has kept handwritten records since the trust’s inception and used an accountant to prepare end of year accounts based on those figures. He says that he carried on those duties after separation just as he had always done. He filed a detailed affidavit accounting for the trust’s expenditure. He admits however a
technical breach of trust – that is he has not consulted the obstructive Ms Lyttle or the unwilling Mr Hughes on any of his spending. But he says, the expenditure was necessary, always for the benefit of the trust, always accounted for, and if he did not undertake this work, it would not have been done at all.
[66] I find that Ms Lyttle has not made out her case for breach of trust. She has significant suspicions, but no real evidence. In fact in Court she accepted that her primary complaint is that Mr Casey had not consulted her as a fellow trustee, and she accepted that there may well be perfectly legitimate explanations for the transactions about which she is suspicious, but she has not heard them. This is not a sound basis upon which to found a case in breach of trust.
[67] I do accept that Mr Casey has been in technical breach of trust by behaving unilaterally. But I also accept that he had no choice and that the trust would have become moribund if he had not grasped the nettle in the way he did. Thus, the breach is technical only and the consequences of such breach have been positive for Ms Lyttle as a beneficiary.12
[68] Ms Lyttle’s application under the Trustee Act is dismissed accordingly.
“Occupation rent” from 1 February 2010 to 2 July 2013?
[69] Mr Casey moved out of Thompson St in late January 2010. He submits that Ms Lyttle should have paid an occupation rent from that date until July 2013 when the house was damaged by fire and rendered uninhabitable. Had Ms Lyttle also moved out of Thompson St, Mr Casey says he would have received rental of $700 per week, based on a rental valuation he obtained in 2012. He says Ms Lyttle derived a material benefit from her extended stay at Thompson St and should account for it.
[70] Clause 4 of the deed provides that the trustees may “with respect to all or any part of the net income of the trust fund” determine–
12 To the extent any expenditure occurred after Collins J made his orders on 15 October 2012, Mr Casey is protected by s 69 of the Trustee Act as a trustee acting under the direction of the Court.
To apply that net income for the personal support, maintenance, comfort, education, advancement in life or in any other way for the benefit of any discretionary beneficiary …
[71] As I said, under the deed, the primary beneficiaries take priority.
[72] It was no doubt pursuant to this clause that the trustees resolved on 8 March
2004 that Mr Casey and Ms Lyttle were to have “free use” of Thompson St subject to
them maintaining the property and meeting the cost of all the rates.
[73] Ms Lyttle’s evidence was that Mr Casey had told her to stay in Thompson St after separation due to depressed rental market conditions making it difficult to obtain a decent rental. There is no evidence that the trustees unanimously agreed to rescind the resolution (unanimity is a requirement of cl 22.2, and of the general law).
[74] Perhaps it might be argued that the judgment of Collins J on 15 October 2012 necessarily rescinded the 8 March 2004 resolution by operation of law. One of the orders he made was as follows:
I order that 51 Thompson St be sold as soon as is reasonably possible. Ms Lyttle is to be given a reasonable period of time to vacate that property.
[75] A reasonable period of time from that point to vacate might be a month. I
propose to follow that course.
[76] I order therefore that Ms Lyttle should pay the trust an occupation rent of
$700 per week from 15 November 2012 until 2 July 2013, the date of the fire. That sum is to be deducted from Ms Lyttle’s final share of the trust’s properties once liquidated.
Should the trust pay Ms Lyttle an accommodation allowance from 2 July 2013 to now?
[77] Ms Lyttle referred to the passage in Collins J’s judgment dealing with the
application by Mr Casey in 2012. Collins J said:
[9] Mr Casey asks me to ratify the following proposals:
(1) That Ms Lyttle vacate Thompson St on reasonable notice.
(2) That Thompson St be placed on the market to sell and sold at a value and on such terms and conditions as are agreed by the parties, or failing agreement, as decided by the independent trustee, Mr Hughes.
(3) That the trust undertakes such work on the property as it considers necessary prior to sale and, failing agreement between the trustees as to the nature and cost of the work undertaken, as decided by Ronald Hughes.
[10] Mr Casey’ proposals include accommodating Ms Lyttle at the Telford
Tce property or at another suitable address.
(my emphasis)
[78] Ms Lyttle says this constituted an offer to facilitate her rehousing and that
Mr Casey is required to make good on that offer.
[79] At the hearing, Mr Vincent for Mr Casey confirmed that these proposals were made but they were made in the context of without prejudice negotiations prior to the hearing before Collins J. They were roundly rejected by Ms Lyttle, he submitted. As such, Mr Vincent says they were not (or could not properly have been) relied upon by Collins J in 2012, or by me now.
[80] I agree with Mr Vincent. Mr Casey would have been bound by his proposals if they were accepted, but they were not. Once Ms Lyttle rejected Mr Casey’s proposals to reaccommodate her, saying that she was perfectly happy at Thompson St, that had, in fairness, to be the end of the matter. Ms Lyttle confirmed in Court before me that she did communicate to Mr Casey that she preferred to stay in Thompson St and would not be moving out.
[81] I conclude therefore that the trust is not liable to pay Ms Lyttle an alternative accommodation allowance because she declined the offer and refused to co-operate.
Remaining chattels dispute
[82] This is Ms Lyttle’s appeal against Judge Ullrich’s decisions on relationship property. There were a number of specific items Ms Lyttle sought as her separate property which had already been awarded to Mr Casey, and others she accused
Mr Casey of stealing. She provided no evidence at the hearing and agreed to provide the necessary particulars post-hearing.
[83] After the hearing, Ms Lyttle considered her position and spoke with Mr Yeoman. In the end she decided to abandon her appeal in this respect. She said:13
Due to the fact Ms Lyttle is unlikely to ever be able to recover any of the items Mr Casey has taken from the house since 2010 or any of the items Mr Casey has been awarded by the Family Court Ms Lyttle is no longer seeking to appeal the decision of the Family Court in respect of the chattels awarded to Mr Casey as either his separate or inherited property.
[84] Instead Ms Lyttle challenged various aspects of the insurance claim. That matter is not before me in any form and I decline to deal with it. Once the claim is finally determined, Ms Lyttle will need to file proceedings against the insurer if she wishes to pursue these issues.
Peripheral issues arising at the hearing
[85] The following sets out certain peripheral issues raised by Ms Lyttle in the hearing before me and the reasons why I cannot determine them in these proceedings.
Summary judgment of Associate Judge Gendall
[86] Ms Lyttle sought to revisit Associate Judge Gendall’s decision to grant summary judgment in favour of Mr Casey in June 2013 because she was not present at the hearing and could not defend herself. She says she was not there because she never received the notice of application, and could not therefore prepare a defence.
[87] I do not know if this is true, but I do not need to find the answer. Rule 12.14 of the High Court Rules provides:
A judgment given against a party who does not appear at the hearing of an application for judgment under rule 12.2 or 12.3 may be set aside or varied by the court on any terms it thinks just if it appears to the court that there has been or may have been a miscarriage of justice.
[88] Ms Lyttle has made no such application, and until she does her case can go no further. She also wishes to appeal the indemnity costs of about $10,000 that were awarded against her. Those costs would be dealt with on an application to set aside, but if Ms Lyttle considers that the summary judgment is a fait accompli then I cannot deal with it. Her recourse on the costs issue alone is to the Court of Appeal.14
Costs in Collins J hearing
[89] Ms Lyttle does not dispute the fact that Mr Casey’s costs were paid from the trust fund in his 2012 Trustee Act application. She says that Mr Vincent’s estimate of costs at that hearing was around $15,000 but in fact the costs paid were some
$9,000 more and were thus excessive.
[90] I do not have jurisdiction to revisit Collins J’s costs decision in that application. Once again Ms Lyttle’s option is to lodge an appeal in the Court of Appeal.
Zeus (the dog)
[91] Zeus has sadly passed away since Judge Ullrich’s finding that he should be in Mr Casey’s care. Ms Lyttle seeks an inquiry into Mr Casey’s care of Zeus and the circumstances of his death, possession of Zeus’ ashes (if there are any) and damages. These are not issues for me for the following reasons.
[92] First, this subject matter cannot properly be dealt with as part of an application for directions under the Trustee Act. Zeus was not trust property. Secondly, Ms Lyttle has abandoned her relationship property appeal, and so the position up until Zeus’ death is that he was lawfully under the care of Mr Casey. Finally, this Court does not have the jurisdiction to order general inquiries about anything without a proper procedural foundation.
Breach of privacy
[93] Ms Lyttle also wishes to sue Mr Casey for a breach of her privacy in making public her medical records. Mr Vincent tells me the records were on the file in the Family Court for the purpose of appointing an amicus, and have remained there since. He denies having used them against Ms Lyttle, as she alleges he has done.
[94] This proceeding is inappropriate to deal with such an issue. If Ms Lyttle has a complaint then it must be made in the first instance to the Privacy Commissioner.
Matters disposed of by way of consent
[95] There were two other matters the parties agreed during the hearing to resolve. These were that Mr Hughes should be removed as a trustee, and that the costs Ms Lyttle incurred in the 2012 Collins J matter should be paid from the trust’s funds now, because they were not at the time. I make these orders accordingly.
Winding up the trust – where to from here?
[96] Both parties agree that the trust must be wound up as soon as possible in order for Mr Casey and Ms Lyttle finally to cut ties with each other and move on with their lives. They of course disagree on the manner in which that should happen. Each wishes to remove the other as a trustee, and take charge of the winding up him or herself. In my view that is not the right course of action. This trust requires clear and neutral leadership to bring matters to a conclusion, preferably someone with background knowledge of the trust and the extent of the acrimony between the two remaining trustees.
[97] That person is Mr Yeoman. I remove all three current trustees pursuant to s 66 of the Trustee Act because to leave Ms Lyttle and Mr Casey in place as responsible trustees is to ensure that acrimony and conflict continue.
[98] At the hearing Mr Yeoman agreed that, should the Court decide the best option for the trust is to appoint one responsible trustee alongside two advisory trustees, he would take on the position of responsible trustee. I appoint him accordingly under s 51 of the Trustee Act, with both Mr Casey and Ms Lyttle to act
as advisory trustees in accordance with s 49 of that Act, until the trust is wound up. I stress that the effect of this is to remove final decision-making power from Ms Lyttle and Mr Casey and to place that responsibility with Mr Yeoman. He must of course consult with his advisory trustees as necessary. I mean no disrespect to Mr Casey’s ongoing efforts as active trustee for over a decade. He has worked hard to protect and enhance the trust’s assets. But the time has come to move the trust on from its current difficulties.
[99] I make the following orders:
(a) Mr Yeoman is appointed sole responsible trustee with the task of selling the trust properties and winding up the Eric Casey Family Trust.
(b) Mr Yeoman’s reasonable costs are to be met from the trust’s funds.
(c) Mr Hughes is removed as a trustee by consent.
(d)Mr Casey and Ms Lyttle are removed as responsible trustees but are appointed as advisory trustees.
(e) Ms Lyttle is to pay the trust an occupation rent of $700 per week (from 15 November 2012 to 2 July 2013), to be deducted from her final share of the trust’s assets upon liquidation.
(f) As responsible trustee, Mr Yeoman is to:
(i)as soon as possible and in consultation with the advisory trustees, take steps to prepare the Thompson St property for sale;
(ii)provide Mr Casey with the option to purchase the Telford Tce property at the highest of either the median or mean of three valuations in relation to that property;
(iii) divide the net remainder equally between Mr Casey and Ms
Lyttle, except where this judgment provides otherwise; and
(iv) terminate the trust.
(g) The costs Ms Lyttle incurred in the 2012 proceeding before Collins J
are to be reimbursed by the trust.
(h)The costs of this litigation are to be met by the trust. Leave is reserved to the parties to file memoranda on costs if that is necessary.
[100] Mr Yeoman has leave of the Court to apply for any further directions should he require it.
Williams J
Solicitors:
Thomas Dewar Sziranyi Letts, Solicitors, Lower Hutt
B S Yeoman Limited, Solicitor, Lower Hutt cc: E Lyttle, Wellington
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