Mackintosh v Thomas

[2016] NZHC 3141

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2016-409-171 [2016] NZHC 3141

IN THE MATTER

of the Estate of the late NORMAN DEAN

THOMAS (Deceased)

BETWEEN

JOHN BOWDEN MACKINTOSH AND MATTHEW CHADLOW HALL AS EXECUTORS AND TRUSTEES OF THE ESTATE OF NORMAL DEAN THOMAS Applicants

AND

PHILIP DEAN THOMAS, ALISON MARGARET SYME, MARK WREFORD REED AND SIMON THOMAS REED AND ELEANOR MARY MARR Respondents

Hearing:	19 December 2016
Counsel:	C A McVeigh QC and G Brodie for Applicants H A Evans and D R Weatherley for Philip Thomas S K Valdez for Alison Syme J W A Johnson and H T Shaw for Mark and Simon Reed K W Clay for Eleanor Marr
Judgment:	19 December 2016

(ORAL) JUDGMENT (NO. 2) OF HEATH J

Solicitors:

Meares Williams, Christchurch

Wynn Williams, Christchurch Russell Moon & Fail, Christchurch Young Hunter, Christchurch Counsel:

C McVeigh QC, Christchurch

G M Brodie, Christchurch

K W Clay, Christchurch

R Fowler QC, Wellington

MACKINTOSH v THOMAS [2016] NZHC 3141 [19 December 2016]

Background

[1]      The late Norman Dean Thomas died at the age of 86 years, owning or having interests in 11 separate farms in the vicinity of Christchurch.  In addition to the farm properties, the late Mr Thomas had significant interests in livestock, plant and equipment and some investments and cash.  Under his last Will, Ms Eleanor Marr, Ms Alison Syme and Mr Simon Reed were appointed as executors and trustees.

[2]      On 1 October 2013, a Court order was made by consent removing those persons as executors and trustees and replacing them with two professional trustees, Mr Mackintosh, a solicitor from Christchurch, and Mr Hall, a chartered accountant from Ashburton.   A series of orders were made by Associate Judge Osborne that protected both the former and new trustees by way of indemnity out of Trust assets.

[3]      On 20 September 2015, a number of the family of the late Mr Thomas with claims against his estate attended a mediation before the Hon Robert Fisher QC.  I am told that the trustees attended the first part of that mediation but by the time agreement had been reached as to the outcome they were no longer present.

[4]      A document entitled “Mediation Heads of Agreement” was executed on 20

September 2015 by all of those present.  It was intended that they apply to the Court to give effect to their agreement by varying the terms of the Trust created by the Will.  That has not been done and difficulties have arisen in relation to the execution of the trust.

[5]      Earlier this year, the trustees applied for various orders to put the estate in funds, in order that they might take steps to sell one of the properties to complete administration of the estate.   That application came before me on 28 September

2016.    Following  discussions  among  counsel  during  the  course  of  that  day,  an interim agreement was reached for a sum of $550,000 to be paid to the trustees on or before 21 October 2016.1    That sum was duly paid.   It had been hoped that a full resolution of outstanding issues could be reached once the trustees were in funds.

That, however, has not proved possible.

1      Mackintosh v Thomas [2016] NZHC 2313 at para [6].

[6]      With  the  imminence  of  the  legal  vacation,  the  trustees  have  applied  for directions to enable them to sell a particular property, known as the Mays Block. The original trustees of the estate are the registered proprietors of that land, to the extent of one half.  Mr Philip Thomas is the registered proprietor in respect of the other half.  He has also lodged a caveat against the one half interest owned by the trustees.  That is claimed on the basis of a constructive trust for contributions to the land.  Mr Evans, for Mr Thomas, explained to me that reliance is placed on the Court

of Appeal’s decision in Lankow v Rose2 in that regard.  An order that the caveat not

lapse was made on 24 April 2012 by Associate Judge Matthews.3

[7]      I  do  not  propose  to  go  into  the  factual  detail  surrounding  the  present application.   Having regard to the way in which argument progressed, I can deal briefly with some of the legal points and explain why I propose to make an order to assist in the resolution of all involved in the trust.  By referring to all involved in the trust, I include for present purposes, those who have claimed against the estate and who signed the Heads of Agreement in September 2015.   They are not all beneficiaries shown in the Will.

Analysis

[8]      Mr McVeigh, for the trustees, relied initially on ss 64 and 66 of the Trustee

Act 1956 to base their claim. They provide:

64 Power of court to authorise dealings with trust property

(1) Subject to any contrary intention expressed in the instrument (if any) creating the trust, where in the opinion of the court any sale, lease, mortgage, surrender, release, or other disposition, or any purchase, investment, acquisition, retention, expenditure, or other transaction is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the same without the assistance of the court, or the same cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if

2      Lankow v Rose [1995] 1 NZLR 277 (CA).

3      Thomas v Thomas HC Christchurch CIV-2011-409-2514 (Associate Judge Matthews).  The late Mr Thomas was alive when the caveat was lodged and the application before Judge Matthews was determined.

any) as the court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income:

provided that, notwithstanding anything to the contrary in the instrument (if any) creating the trust, the court, in proceedings in which all trustees and persons  who  are  or  may  be  interested  are  parties  or  are  represented  or consent to the order, may make such an order and may give such directions as it thinks fit to the trustee in respect of the exercise of any power conferred by the order.

(2) [Repealed]

(3) The court may from time to time rescind or vary any order made under this section, or may make any new or further order:

provided that no such rescission or variation of any order shall affect any act or thing done in reliance on the order before the person doing the act or thing became aware of the application to the court to rescind or vary the order.

(4) An application to the court  under  this section may be  made  by the trustees, or by any of them, or by any person beneficially interested under the trust.

66 Right of trustee to apply to court for directions

(1) Any trustee may apply to the court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power of discretion vested in the trustee.

(2) Every such application shall be served upon, and the hearing may be attended by, all persons interested in the application or such of them as the court thinks expedient.

[9]      It was submitted that the circumstances in which the property needed to be sold came within the terms of s 64 and that there was jurisdiction within either s 64 or s 66 for the Court to direct Mr Thomas to withdraw his caveat in the event that a sale of the property were ordered.   As to the latter point, Mr McVeigh relied on observations  made  by  Somers  J,  in  the  Court  of Appeal,  in  Holt  v  Anchorage

Management Ltd:4

Mr Young submitted that if a trustee has the power to sell or encumber the trust asset the law of trusts governs his powers and obligations and that the caveat procedure is not intended to provide beneficiaries with a power of veto. I think this general proposition must be right for in such a case the caveator's  interest  is  subject  to  the  effect  of  the  lawful  exercise  of  the trustee’s powers. But the submission that as a consequence the order for removal of the caveat should be upheld is not warranted by this premise. The

4      Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA), at 119.

existence of powers of sale, mortgage or management does not prevent the registration of a caveat which will protect the caveator against a collusive or improper sale: see Re Bielfeld (1894) 12 NZLR 596. As Williams J there remarked, where the caveat interferes with the rights or powers of the trustee he has his remedy. Thus the trustee may apply to the Court for appropriate orders as to sale, mortgage or other dealing and, in the administration of the trust, the Court may require the caveator to consent. If et matter arises under s 145 by the trustee's application to register an instrument the Court may decline to make an order preserving the caveat but may authorise a further caveat under s 148 following the registration if that is appropriate.

[10]     Mr Johnson, for Mr Mark Reed and Mr Simon Reed, contested jurisdiction to make such an order contending that the pre-requisites to s 64 had not been met.  In particular, he submitted that the property was not one vested fully in the trustees. That, he contended, was sufficient to deny jurisdiction.   Mr Johnson relied on a decision of the Court of Appeal of New South Wales, in Re Dion Investments Pty Ltd,5 to support that position. That decision concerned an equivalent provision in the Trustee Act 1925 (NSW), in which the jurisdictional point appears to have been resolved adversely to the trustees.

[11]     In a situation where it is necessary to give judgment urgently, I do no more than refer to the particular jurisdictional submission in case it may assume significance later.  For present purposes, I leave it to one side as I prefer to base my decision on the Court’s power to order division of property as between co-owners. That jurisdiction is conferred by s 339(1) of the Property Law Act 2007.  Section 339 provides:

339 Court may order division of property

(1) A court  may  make,  in  respect  of  property  owned  by  co-owners,  an order—

(a)       for the sale of the property and the division of the proceeds among the co-owners; or

(b)       for  the  division  of  the  property  in  kind  among  the  co- owners; or

(c)       requiring 1 or more co-owners to purchase the share in the property  of  1  or  more  other  co-owners  at  a  fair  and reasonable price.

5      Re Dion Investments Pty Ltd [2014] NSWCA 367.

(2) An order under subsection (1) (and any related order under subsection

(4)) may be made—

(a)      despite anything to the contrary in the Land Transfer Act

1952; but

(b)      only if it does not contravene section 340(1); and

(c)      only  on  an  application  made  and  served  in  the  manner required by or under section 341; and

(d)      only after having regard to the matters specified in section

342.

(3) Before determining whether to make an order under this section, the court may order the property to be valued and may direct how the cost of the valuation is to be borne.

(4) A court making an order under subsection (1) may, in addition, make a further order specified in section 343.

(5) Unless the court orders otherwise, every co-owner of the property (whether a  party to the  proceeding or  not) is bound  by an  order under subsection (1) (and by any related order under subsection (4)).

(6) An order under subsection (1)(b) (and any related order under subsection

(4)) may be registered as an instrument under—

(a)      the Land Transfer Act 1952; or

(b)      the Deeds Registration Act 1908; or

(c)      the Crown Minerals Act 1991.

[12]     There is no doubt that the trustees (on the one hand) and Mr Thomas (on the other) are co-owners of the relevant property.  There is jurisdiction for the Court to make orders for the sale of such a property and the division of the proceeds among co-owners, for the division of the property in kind among co-owners, or requiring one or more co-owners to purchase the share in the property of one or other at a fair and reasonable price.

[13]     Having canvassed the practicalities of the current case with counsel, I am satisfied that an order should be made to require Mr Thomas to purchase the one half share that the trustees hold in that property at a fair and reasonable, price to be fixed in accordance with s 339(1)(c).

[14]     I propose to fix a date by which sale must be completed.  I am also going to direct that a judicial settlement conference be held at an earlier time, at which stage I hope that all of those involved will be able to find a sensible mechanism to resolve outstanding differences. The problems have emerged, it seems to me, from what was on the face of it a sensible agreement into which the beneficiaries entered in September 2015, which did not give sufficient consideration to the mechanisms by which it would be implemented; in particular, as to the way in which money would need  to  be obtained  to carry out  the various  steps  involved  in the purchase of particular properties.

[15]     The Heads of Agreement records that the parties agreed that Mr Thomas would obtain full title to the property in issue.  So, the order that I make is consistent with the views expressed by all beneficiaries when they signed that agreement.

[16]     As a preliminary issue, the title to the property remains in the names of the original trustees who were removed by the order of 1 October 2013.6   As a result, it will be necessary to make an order that the one-half interest of the trustees be conveyed into the names of the present trustees.  That should be done promptly and before any further steps are taken.

[17]     While the orders I shall make do not resolve all issues, I am hopeful that a judicial settlement conference will yield such a result.  Otherwise, it appears that the beneficiaries and the trustees are destined for a considerable period of litigation which will be ruinous to all.

Result

[18]     For those reasons, I make the following orders:

(a)      Ms Syme, Ms Marr and Mr Simon Reed shall deliver to the solicitors for the present trustees on or before 20 January 2017, a duly signed and witnessed authority and instruction form addressed to Meares

Williams, in their capacity as solicitors for the trustees, authorising the

6      See paras [1] and [2] above.

registration of the transfer of the estate’s half share in Identifier CB42B/421 (Canterbury Registry) to the present trustees, in their capacity as trustees of the estate, and a duly signed land transfer tax statement pursuant to ss 156B and 156C of the Land Transfer Act

1952.

(b)Mr Philip Thomas shall purchase the one half share of the trustees in that property for a fair and reasonable price to be fixed.  In the event that settlement is not reached at the judicial settlement conference, the parties shall co-operate in obtaining an up-to-date valuation of the property for settlement purposes no later than 10 February 2017.

(c)       The sale of the property shall be completed by 4.00pm on 3 March

2017.

[19]     Leave to apply is reserved.

[20]     I direct a judicial settlement conference for this proceeding to begin at 9am on 1 February 2017 before Associate Judge Osborne.   Counsel shall file and exchange, no later than two working days prior to that conference, a summary of the stance to be taken by each in relation to the matters in dispute and the way in which the Heads of Agreement of September 2015 can be implemented.   The settlement conference will also address the substantive issues raised in CIV-2012-409-754.

[21]     I reserve questions of costs.

P R Heath J