Matheson v Clare Matheson Trust Limited
[2018] NZHC 1941
•31 July 2018
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000141 [2018] NZHC 1941
UNDER the Declaratory Judgments Act 1908 IN THE MATTER OF
Clare Matheson Trust
BETWEEN
BERNADETTE MARGARET MATHESON
Plaintiff
AND
CLARE MATHESON TRUST LIMITED
Defendant
Hearing: 23 July 2018 Appearances:
K W Clay for Plaintiff
A D McBeath for Clare Matheson
J W A Johnson for Defendant (appearance excused)
J M Stringer for Carmel Howley and Angela Sullivan (Beneficiaries)Judgment:
31 July 2018
JUDGMENT OF NICHOLAS DAVIDSON J
A.INTRODUCTION
[1] This is an application by the plaintiff, Mrs Bernadette Matheson, the settlor and beneficiary of the Clare Matheson Trust (“the Trust”), established under a Deed of Trust dated 31 August 1999 (“Trust Deed”). Mrs Matheson wants to replace the
MATHESON v CLARE MATHESON TRUST LIMITED [2018] NZHC 1941 [31 July 2018]
defendant and current trustee company and appoint Francis Owen Kelly and James Martin Kelly, her brothers, as trustees.
[2] The Trust was established mainly for the benefit of Clare Bernadette Matheson (“Clare”), Mrs Matheson’s daughter, who at 48 years of age has disabilities which require care and medication. Clare lives with Mrs Matheson.
[3] The intended “new trustees”, Mrs Matheson’s brothers, consent to their appointment, but the defendant did not sign the Deed of Retirement and Appointment of New Trustee when asked to do so, because there was some disagreement between it and Mrs Matheson, and concerns as to the use of Trust funds, but it no longer opposes what Mrs Matheson seeks, as described below. However, there remain issues of concern about the needs of Clare, the limited Trust funds, and their prudent application and investment. There is a history of disagreement which concerns the Court, and results include the terms of this Judgment which will keep these issues under close watch by the Court.
[4]Mrs Matheson seeks:
1.A declaration under the Declaratory Judgments Act 1908 that:
(a) The effect of the Deed of Trust is that the plaintiff has the personal power:
(i)To remove the defendant as the trustee of the Clare Matheson Trust and to appoint Francis Owen Kelly and James Martin Kelly as trustees of the Clare Matheson Trust as recorded in the Deed of Retirement and Appointment of New Trustee.
(ii)That the assets (namely the cash fund held by the defendant) and documents of the Clare Matheson Trust are to be transferred to Francis Owen Kelly and James Martin Kelly as trustees.
2.Costs.
[5] An affidavit dated 18 May 2018 sworn by Ms McNabb for the defendant trustee company (trustee of the Clare Matheson Trust), confirms that it (now) does not oppose the application and abides the Judgment of the Court. However, there is opposition to the orders sought, by Clare’s sisters.
B. BACKGROUND
[6] Ms Stringer is counsel for two beneficiaries, Clare’s sisters, Carmel Howley (“Carmel”) and Angela Sullivan (“Angela”), and they oppose Mrs Matheson’s use of her power of appointment under the Trust Deed saying that it is being exercised for “an improper purpose”, and in breach of fiduciary obligation.
[7] Mr Clay, for Mrs Matheson, seeks declarations on the basis that Mrs Matheson clearly has the power to remove and appoint trustees, and if so, the cash fund and documents held in trust by the defendant should be transferred to the new trustees.
[8] Mr McBeath, on behalf of Clare, says that she has full confidence in her mother, and confidence in the “new trustees”, and her housing and care is satisfactory to her.
[9] The defendant does not oppose, and abides the judgment, but reserves its position as to costs.
[10] The attempt to serve Clare’s brother, John, has been unsuccessful as on the evidence, he rejects service. I direct that service on John Matheson is dispensed with.
Opposition to orders sought
[11] On the face of the Trust Deed, there appear no reasons why Mrs Matheson should not exercise her power to remove and appoint new trustees as she seeks. There is no suggestion that the proposed trustees are unsuitable in the sense they are unfit, although Ms Stringer, for Carmel and Angela, does question their “suitability” based
on their mature ages and experience, but at law the proposed new trustees are otherwise acceptable. However, Ms Stringer submits that there is a concerning history of trust administration and the Court should not take the corporate trustee’s stance of abiding this judgment as indicative of its perspective of the application before the Court.
[12] Carmel and Angela say that they have an arguable case to oppose the declarations sought, which should be declined and proceed to trial. However, this opposition is not a matter of jurisdiction because the declarations may be made.
[13] There is a technical issue. Clause 11.1 of the Trust Deed provides for the power of appointment of a new trustee or trustees vested in the settlor, Mrs Matheson, “during his lifetime and after his death”, and Ms Stringer says Mr Matheson appointed Carmel trustee by codicil to his Will and that demonstrates uncertainty as to who was intended to hold the power for the Trust. I do not regard this as a problem. The trusteeship has evolved and there is no basis to challenge Mrs Matheson’s power of appointment.
[14] There is otherwise no contest that the Trust should be administered with priority given to Clare and her needs, but Ms Stringer says that the power of appointment is fiduciary in nature, as is the power to remove a trustee and in exercise of that power it must be recognised that a trustee has the obligation to act in the best interests of the beneficiaries, having regard to the terms of the Trust Deed.1
[15] Ms Stringer submits that the evidence is that Mrs Matheson is putting her needs ahead of the other beneficiaries and wants “to have access to those funds with impunity and without redress to the trustees or the beneficiaries”, whereas a corporate trustee is “independent of the family”.
[16] There is indeed a history of division between Carmel and Mrs Matheson, after Carmel was appointed as a trustee. Mrs Matheson purported to remove Carmel and appoint Mrs Matheson’s elder brother Francis. However, in the end Carmel signed a Deed of Retirement and Appointment of New Trustee in 2015, said to have been a compromise made by Carmel on the understanding no further trustee changes would
1 See for example, Cowan v Scargill [1984] 2 All ER 750.
be made contrary to the best interests of the Trust. It is in that setting that Mrs Matheson is understood by Carmel to have a fiduciary duty when seeking to use the power of appointment to act in the best interests of the Trust and all its beneficiaries. For Carmel and Angela, it is submitted that Mrs Matheson is “shopping for trustees” who will give her a free hand in the conduct of the Trust, and access to the Trust funds. There is concern about use of Trust funds for “unnecessary” medical interventions for Clare, and that is submitted to raise a question about Mrs Matheson’s conduct, and fiduciary decision making. In particular, while the proposed new trustees are in their 70s and 80s, there is no reason to suggest that they are unable to perform the trustee functions required, but the concern is expressed that they are likely to be influenced by Mrs Matheson’s wishes, and given their age, there will be a need for further appointment at some stage.
[17] As the primary purpose of the Trust is to house and provide support for Mrs Matheson and Clare, the long-term needs of Clare must be at the forefront of the financial and other decision making of the Trust. While the corporate trustee has the experience and competence to address these imperatives, Ms Stringer submits it is not appropriate to rely on the Court’s power to oversee, control, and if necessary direct the trustees’ actions, which would be required if the trustees are appointed.
[18] The Trust funds are modest, approximately $400,000.00, and the Trust is vulnerable to legal costs, as well as the needs of Mrs Matheson and Clare, so a precautionary approach to trusteeship is urged by Ms Stringer.
[19] In essence, Ms Stringer says that this proceeding is the precursor to the nomination of a third set of trustees in less than seven years, and that evidence before the Court should be reviewed at a full hearing rather than by a summary judgment application. There is a concern that if Mrs Matheson is required to provide information about the Trust, or is challenged about her intentions to use the Trust funds, she will change trustees.
[20] The supervisory jurisdiction of the Court is undoubted and Ms Stringer refers to authority:2
2 New Zealand Trusts and Asset Planning Guide (loose-leaf, CCH New Zealand Ltd), at [140-050].
The court has an inherent power to appoint and remove trustees on the basis that this is part of its duty to ensure that a trust is properly executed. In the exercise of this jurisdiction, the court’s principal concern is the interests of the beneficiaries and the trust property, rather than whether the trustee has committed a breach of trust (Hunter v Hunter [1938] NZLR 520).
[21] In Clifton v Clifton, the Court confirmed that its primary consideration when considering the removal of a trustee is the welfare of beneficiaries.3 Ms Stringer says the evidence in this case suggests the power of appointment is not being used to promote the welfare of the beneficiaries but to promote the self-interest of Mrs Matheson. This would be an exhaustive and deliberating issue to take to full trial as Ms Stringer submits should be the case.
[22] However, the Court may intervene in the administration of trusts where it is considered appropriate. Ms Stringer cites the New Zealand Trusts and Asset Planning Guide, that in exercising its discretion whether to remove a trustee or administrator, the Court should be guided by five essential principles:4
·The court’s duty to see estates properly administered and trusts properly executed.
·The wishes of the testator/settlor appointing that particular executor or trustee were to be given considerable weight.
·The welfare of the beneficiaries was the “litmis” test.
·Hostility between administrators/trustees and beneficiaries was not a reason for removal unless it risked prejudicing the interests of the beneficiaries.
·The court would consider the circumstances in a macroscopic not microscopic fashion.
[23] On a related front, Ms Stringer submits that Carmel and Angela have tried to support Mrs Matheson and Clare, working with the corporate trustee, including the possible top-up of funds to allow the purchase of a residence at Nazareth House, but Mrs Matheson decided not to commit to that. The Trust was formed to principally provide for Clare, and Carmel says she has no expectation of entitlement and only wants to ensure Clare’s needs are met. It seems inevitable that Clare’s siblings would
3 Clifton v Clifton (2004) 1 NZTR 14-018 (HC).
4 New Zealand Trusts and Asset Planning Guide, above n 2, at [140-150] (emphasis added).
need to assist financially in the purchase of a property, to the extent that the Trust funds are inadequate.
[24] Ms Stringer asked that costs be ordered on an indemnity basis against Mrs Matheson as her application for summary judgment is said to be inappropriate.
C. THE DEFENDANT TRUST COMPANY
[25] I have read the evidence of Ms McNabb, a director of the defendant trust company wholly owned by Touchstone, who has deposed on behalf of the defendant and Touchstone. I recognise that some aspects of her evidence may be challenged. However, the affidavit provides background to the defendant’s involvement. It describes her understanding of a breakdown in the relationship between Mrs Matheson and Carmel, and Mrs Matheson purporting to remove Carmel as a trustee, but in the end, there was agreement that Carmel would resign and appoint the Trust as the sole independent trustee.
[26] Ms McNabb says that it was Mrs Matheson’s view that the Trust should provide funds for her to do what she thought was best for Clare and herself, but there was an issue whether Mrs Matheson was acting in the best interests of the beneficiaries or in pursuit of her personal wishes, and those issues go beyond that, to the protection of the Trust assets. There is reference to Mrs Matheson attempting to enter into sale and purchase agreements without notifying the Trust beforehand, but expecting the Trust to fund the purchase.
[27] This information is extensive, and I am struck by the detail and particularity of Ms McNabb’s knowledge of the immediate Trust history, which demonstrates a high level of competence and knowledge, and various issues facing the Trust. The matters raised are of concern to the Court, and remain so, notwithstanding this Judgment, and the new trustees will need to be highly alert to the matters raised by Ms McNabb. They must exercise their powers as trustees for the purposes of the Trust. They must protect the Trust assets. They are not trustees to do the will of any party, including Mrs Matheson. I say this because the path forward for this Trust must be marked with care, as the prospect of a true waste of the Trust assets on unnecessary dispute is obvious. That must not happen.
D. DISCUSSION
[28] While there are shadows of concern, there is no basis to impede Mrs Matheson in her appointment of the new trustees and the Court should make the order sought, and by this judgment will do so. There are some very real reservations held by the Court, which must be recognised by the new trustees, and Mrs Matheson.
[29] All the family have the interests of Clare very much at heart. Her needs are properly catered for, but the prudent use of the Trust funds, limited as they are, will require very careful consideration by any trustee. Touchstone is recognised by the Court as having undertaken its stewardship with skill and prudence. It is not to be judged, and it is not a question for this judgment, whether it offers a better quality of service than the proposed new trustees who will inevitably require professional advice, some of which Touchstone has been able to provide within its own ranks given its very experienced principals.
[30] At the hearing on 23 July 2018, concerns set out above were expressed to the parties, and the need to avoid dispute and cost to the Trust, detrimental to Clare, and indirectly to Mrs Matheson, Carmel and Angela. The Court for these reasons is prepared to exercise in a more active way its supervisory oversight and here stewardship of the trustees. The trustees still have to make decisions, and must do so having regard to the purposes of the Trust, the primary need for care of Clare, and careful application and investment of Trust funds. Clare’s interests, and Mrs Matheson’s own interests, which are so linked, must be brought to account. For example, the prospect of Trust funds having to be topped up by Carmel and Angela is in evidence and there must be goodwill in the decision making between Mrs Matheson, the trustees and Carmel and Angela.
[31] A good deal of expense, which the Trust simply cannot afford, would be involved in getting legal advice, which will still be required, but it should not involve conflict which will lead to a significant depletion of Trust funds. This is a real risk. For that reason, I am prepared to exercise the Court’s supervisory jurisdiction over the next few months, until the end of 2018, if the trustees or any other party requires the
Court to settle or direct a step where the trustees have difficulty in reaching a decision, principally in relation to housing, but in any other issue of moment in the trusteeship.
[32] By a simple memorandum, the trustees may put any concerns to the Court, and either by teleconference or at a relatively informal morning hearing I or another Judge will consider the matter. This seems to be a better course than the parties proceeding to a full hearing of this application, rather than determination by summary judgment which is in any event available, given the costs and uncertainty of the outcome in its effect on the family.
[33] I realise this does not meet the outcome sought by Carmel and Angela, but I consider there has to be some reality brought to this sensitive position. Jurisdictionally I can see no reason on the evidence before me why Mrs Matheson should not have the orders which she seeks. However, the Court’s scrutiny will remain upon the trustees and their administration, in an attempt to provide some reassurance to all parties, who are all concerned for Clare, and for Mrs Matheson.
E. CONCLUSION AND DISPOSITION
[34] To meet the concerns recorded in this Judgment, I make declarations sought and further orders as follows:
1.A declaration under the Declaratory Judgments Act 1908 that:
(a)The effect of the Deed of Trust is that the plaintiff has the personal power:
(i)To remove the defendant as the trustee of the Clare Matheson Trust and to appoint Francis Owen Kelly and James Martin Kelly as trustees of the Clare Matheson Trust as recorded in the Deed of Retirement and Appointment of New Trustee.
(ii)That the assets (namely the cash fund held by the defendant) and documents of the Clare Matheson Trust
are to be transferred to Francis Owen Kelly and James Martin Kelly as trustees.
2.The new trustees on formal appointment will report to the Court within 30 days of appointment, or such time as the Court allows on application, as to:
(i)The latest set of financial statements for the Trust.
(ii)The proposed acquisition of interest in property whether under freehold, leasehold or under licence.
(iii)The investment strategy adopted by the trustees.
(iv)Income and other benefits available for the support of Clare, and the extent to which those available are adequate for all her needs, medical and personal.
(v)Where there is any contest or disagreement as to the course proposed by the new trustees.
The intent of the orders is to achieve an efficient, cost effective and litigation free administration for the sake of Clare and the beneficiaries as a whole.
3.The memorandum of the trustees should be served on Carmel and Angela.
4.The Court will address the memorandum and any memorandum in reply filed within 14 days of service of the trustees’ memorandum. The Court will then convene a teleconference with the parties, should that be thought necessary.
5.Leave is reserved generally for such application as is necessary to reflect the intent of this Judgment.
6.Costs are reserved. Parties may file brief memoranda but the Court will not likely address these pending the report from the trustees.
……………………………………..
Nicholas Davidson J
Solicitors:
Helmore Ayers, Christchurch Wynn Williams, Auckland
Saunders Robinson Brown, Christchurch Macfarlane Dougal Stringer, Christchurch
Copy to counsel:
K W Clay, Barrister, Christchurch
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