McCartney v Cox
[2012] NZHC 1369
•19 June 2012
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-454-918 [2012] NZHC 1369
UNDER the Trustee Act 1956
IN THE MATTER OF an Application for Order to Sell Trust
Property
BETWEEN CHER MCCARTNEY Plaintiff
ANDTIMOTHY JOHN COX First Defendant
ANDCHER MCCARTNEY, TIMOTHY JOHN COX AND ADRIAN KENNETH PORTER Second Defendants
Hearing: 14 May 2012
Counsel: M R Duston for Plaintiff
No appearance for First Defendant
Judgment: 19 June 2012
In accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 10:30am on the 19th June 2012.
JUDGMENT OF WILLIAMS J
CHER MCCARTNEY V TIMOTHY JOHN COX HC WN CIV-2011-454-918 [19 June 2012]
[1] Cher McCartney was in a relationship with Timothy Cox from January 2000. They had two children. They settled a trust in December 2005 to hold a bare section of land in Levin, upon which they (then) proposed to build. They separated on
6 October 2008 without having commenced building.
[2] The discretionary beneficiaries of the trust are Mr Cox and Ms McCartney together with their two children. The trustees are Mr Cox, Ms McCartney and Adrian Porter.
[3] The section is now valued at $160,000. It carries a mortgage valued at nearly
$74,000 and, as I will explain below, there is an unsecured debt owed by the trust to
Ms McCartney’s parents in the sum of nearly $24,000.
[4] Following separation, Mr Cox has refused to participate in the administration of the trust property. Indeed he does not appear to have had any ongoing involvement with his children either. A Deed of Retirement of Mr Cox as trustee, and a Separation and Relationship Property Agreement were prepared and, I am told, its contents were initially agreed. But Mr Cox has since refused to execute them.
[5] An order for substituted service of these proceedings was made with service on Mr Cox being by way of public notice in the Dominion Post on Wednesday,
22 February 2012. It is understood that Mr Cox remains in the country. Ms McCartney has had occasional and terse telephone contact with Mr Cox, but the situation is essentially that he refuses to be contacted and refuses to engage (either in respect of the administration of the trust property, with his family) or these proceedings.
[6] Ms McCartney wants Mr Cox removed as a trustee and the trust to sell the section and use the proceeds to contribute to the purchase of a modest home for herself and the children. Mr Adrian Porter, the third independent trustee, supports these steps. He is not well pleased with Mr Cox’s apparent abdication of his responsibilities to the trust and particularly to the children.
[7] An obvious obstacle to this outcome is to be found in clause 14 of the Trust Deed. It provides that if Ms McCartney and Mr Cox separate, the trust asset is to be split with one half to vest in a trust to be established by Mr Cox, and the other half to remain with Ms McCartney. They are each (along with the children) to be discretionary beneficiaries of their separate trusts. This process is required unless “the trustees resolve otherwise”.
[8] Mr Duston advises that the parties originally resolved not to resettle the trust but the documentation affecting the same was not executed by Mr Cox.
[9] In the absence of direct evidence of a resolution overriding clause 14, I do not consider that it is appropriate to deal with any aspect of Ms McCartney’s application save that relating to removal of trustees.
[10] Section 51 of the Trustee Act relates to appointment of new trustees. It provides as follows:
51 Power to Court to appoint new trustees
(1) The Court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the Court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
(2) In particular and without prejudice to the generality of the foregoing provision, the Court may make an order appointing a new trustee in substitution for a trustee who–
(a) has been held by the Court to have misconducted himself in the administration of the trust; or
(b) is convicted, whether summarily or on indictment, of a crime involving dishonesty as defined by section 2 of the Crimes Act 1961; or
(c) is a mentally disordered person within the meaning of the
Mental Health (Compulsory Assessment and Treatment) Act
1992, or whose estate or any part thereof is subject to a property order made under the Protection of Personal and
Property Rights Act 1988; or
(d) is a bankrupt; or
(e) is a corporation which has ceased to carry on business, or is in liquidation, or has been dissolved.
[11] Clifton v Clifton[1] was a similar case to this. The remaining trustees wanted one of their number removed. In that case, Paterson J referred to the decision of Dixon J in Miller v Cameron[2] who outlined the applicable principles for the exercise of this broad discretion in the following way:
[1] CIV-2004-404-4185 HC Auckland 12 October 2004.
[2] (1936) 54 CLR 572.
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trust and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford grounds upon which the jurisdiction may be exercised. But in a case where enough appears to authorise the court to act, the delicate question of whether it should act and proceed to remove the trustee is one upon which the decision of a primary judge is entitled to especial weight. (emphasis added)
[12] In this case, it is clear that the trust is effectively hamstrung by Mr Cox’s absence and the only way for it to make any decisions at all is to have him removed. This is the sort of situation where in accordance with the principles in Miller, such a step is in order. In this case Mr Cox’s refusal to engage with the trust or respond to these proceedings must disqualify him from continuing involvement.
[13] In this sense, Mr Cox has misconducted himself in the administration of the trust in terms of s 51(2)(a).
[14] In light of Mr Cox’s obvious ongoing contingent interest in the trust asset, counsel indicated that Ms McCartney would consent to an order removing both her and Mr Cox with a substitution by Cullinane Steele Trustees (2011) Limited as an independent professional trustee to administer the asset alongside the remaining independent trustee, Mr Porter. The deed requires that there be a minimum of two trustees. Cullinane Steele Trustees have confirmed a willingness to take up the role.
[15] This seems, in the circumstances, to be an appropriate way forward.
[16] It will be for the independent trustees to decide whether they support Ms McCartney’s plan in light of its benefit to the children. It will be for them to consider the appropriate means by which Mr Cox’s contingent interest in the trust is to be protected in light of clause 14.
[17] There will be an order removing both Mr Cox and Ms McCartney as trustees, and a further order appointing Cullinane Steele Trustees (2011) Limited in their place.
[18] Leave is reserved to apply for further directions if necessary. Costs are reserved.
Williams J