McKean v McKean

[2017] NZHC 2212

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2017-412-000089 [2017] NZHC 2212

UNDER

the Trustee Act 1956

IN THE MATTER

of the McKean Family Trust

BETWEEN

GARY DAVID MCKEAN AND COOK ALLAN GIBSON TRUSTEE COMPANY LIMITED

Applicants

AND

PAMELA BLYTHE MCKEAN Respondent

Hearing:	On the papers
Counsel:	R J M Sim for the Applicants
Judgment:	13 September 2017

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

as to vesting orders and service

Introduction

[1]      The respondent, Pamela McKean, and her late husband, Robbie McKean, were trustees of the McKean Family Trust (the Trust), alongside Cook Allan Gibson Trustee Company Limited (Cook Allan). Cook Allan has replaced Mrs McKean with Gary McKean as a trustee due to her mental incapacity. The applicants now apply for an  order  vesting  in  the  current  trustees  48  Auskerry  Street,  Palmerston  (the Property).

[2]      The applicants seek  permission to commence this proceeding by way of originating application and orders that service of the application be dispensed with.

MCKEAN v MCKEAN [2017] NZHC 2212 [13 September 2017]

Background

[3]      The Trust was settled in October 1999 by William Illingworth, a good friend of Mr and Mrs McKean. He appointed them both as trustees and gave the two of them jointly, or the survivor of them, the power to appoint new trustees. They subsequently appointed Cook Allan as a trustee. The beneficiaries of the Trust are Mr and Mrs McKean, their children, and their grandchildren.

[4]      Mr McKean died in August 2015.

[5]      Mrs McKean was diagnosed with dementia. In August 2017, her doctor, Dr Andrew McLeod, assessed her. He certified that she is completely unable to make any decisions about property or her personal care and welfare. He certified that her condition is likely to continue indefinitely.

[6]      Cook Allan was advised that as Mr McKean was dead and Mrs McKean was incapable of acting, the power to appoint new trustees passed to it. Therefore, by deed dated 1 September 2017 (the Deed), Cook Allan appointed Gary McKean, son of Mr and Mrs McKean, as a trustee in place of Mrs McKean. This power was exercised according to s 43 of the Trustee Act 1956 (the Act) and cl 13 of the Trust Deed. The Deed vests the Trust’s property in Cook Allan and Gary McKean (the Current Trustees).

[7]      Mrs McKean is incapable of authorising the transfer of the Property. The

Current Trustees therefore apply to the Court to make vesting orders.

Leave to commence by way of originating application

Originating application

[8]      Rules 19.2 to 19.4 High Court Rules 2016 deal with proceedings which can be commenced by way of originating application.   The current application is not among them.  The applicants are therefore not entitled to commence this proceeding by originating application as of right. However, the Court may, in the interests of

justice, permit such a proceeding to be commenced by originating application.1   The applicants have sought leave as required by r 19.5.

[9]      In Jones v H W Broe Ltd, McGechan J considered an application for leave to use the originating application procedure on an ex parte basis.2  Without explicitly parsing “the interests  of justice”,  his  Honour discussed  the rationale underlying r 19.5 as follows:3

The … originating application procedure was designed as a genuine exception,  and  as  an  expedient  for  cases  where  there  was  in reality no opposing party, avoiding clumsy and unnecessary use of a full statement of claim and notice of proceeding. It was not intended for routine use in cases where there was another likely party with contrary interests.

[10]     The interests of justice support the granting of leave. This application merits the expediency afforded by the r 19.5 exception.

Service

[11]     I turn to the issue of whether service should be dispensed with. Having regard to the evidence of Dr McLeod and Gary McKean, I am satisfied that this is an appropriate case for service to be dispensed with.  Mrs McKean’s mental incapacity is such that she would not be able to rationally understand the nature or purpose of the proceedings, or to meaningfully participate in them.

[12]     Associate Judge Bell concluded in Docherty v Docherty that service would serve “no useful purpose.”4    I too am of that opinion in this case.  In reliance upon the inherent jurisdiction of the Court to regulate its own process and proceedings, an

order will be made dispensing with service.5

1      High Court Rules, r 19.5(1).

2      Jones v H W Broe Ltd (1989) 5 PRNZ 206 (HC).

3      At 207. I note that McGechan J’s comments were made in the context of an earlier version of the

High Court Rules, referring to rr 239 and 458D. His Honour’s observations remain pertinent, however, to the present iteration of the Rules. As with its precursor, the safeguard of r 19.5 “was not intended to make the exception the rule”.

4      Docherty v Docherty [2013] NZHC 1885 at [33]; cited with approval in Grazier v Grazier

[2014] NZHC 3058 at [14].

5      See IH Jacob “The Inherent Jurisdiction of the Court” (1970) Current Legal Problems 23 at 32 -

40.

[13]     I also conclude that there are no other persons who should be served with the proceedings as persons who are “interested in, or may be adversely affected by, the relief sought” by the applicant.6   In Wethey v Wethey, Nation J considered this issue in circumstances where an original trustee had been incapacitated by Alzheimer’s, and the continuing trustees sought vesting orders following his removal and replacement as a trustee.7   Nation J dispensed with service on a beneficiary residing in the United States who had vehemently opposed the appointment of new trustees and sought to be appointed in lieu of one of the new trustees.  His Honour held:8

The orders sought merely give effect to the appointments of trustees which have already been made. The information available does not suggest there is likely to be any challenge to those appointments or that such a challenge would be successful. The vesting of title in the presently appointed trustees will not change any of the beneficiaries' rights in respect of the appointments which have already been made. Nor will the vesting orders sought affect the obligations which the trustees have to all beneficiaries or the rights or entitlements  which beneficiaries  have  in respect  of the trustees  or Trust property.

[14]     Given that the current application is for an administrative step enabling the Trust to continue operating, this step would not in itself adversely impact upon any beneficiaries of the Trust.  As in the finding in Wethey v Wethey, I am satisfied that there is no need to serve the beneficiaries of the Trust or any other person. The applicants have informed Gail Pate, Gary McKean’s sister, about the appointment of Gary McKean as trustee and she indicated that she supported that. This matter may be dealt with on a without notice basis.

[15]     I am also satisfied that this application and the relief sought can be dealt with on the basis of the papers before the Court.

Litigation guardian not required

[16]     The applicants have not sought an order that Mrs McKean does not need to be represented by a litigation guardian. However, given the nature of the case and the way  these  matters  are  typically  dealt  with,  I  will  consider  whether  a  litigation

guardian is necessary.

6      High Court Rules, r 18.7(3).

7      Wethey v Wethey [2015] NZHC 493.

8 At [19].

[17]     Rule 4.29 High Court Rules provides as follows:

incapacitated person means a person who by reason of physical, intellectual, or mental impairment, whether temporary or permanent, is—

(a)       not capable of understanding the issues on which his or her decision would be required as a litigant conducting proceedings; or

(b)      unable to give sufficient instructions to issue, defend, or compromise proceedings

[18]     Given  Mrs  McKean’s  incapacitated status,  r 4.30  requires  her to  have  a litigation guardian unless the court orders otherwise. One of the applicants is Mrs McKean’s son. It appears that the applicants are bringing this application in the belief that it is in Mrs McKean’s best interests.

[19]     The facts in this case are similar to those in Docherty v Docherty. There the plaintiffs also sought a vesting order following the removal of the defendant as a trustee.   The evidence established that the defendant was an incapacitated person under the High Court Rules.  In deciding that a litigation guardian was not necessary, Associate Judge Bell concluded:

[27]      While recognising that the  Court should  be  cautious  in  ordering otherwise under r 4.30, I accept that this is one of those cases where the Court should do so. On its substantive merits the plaintiffs have a very straightforward case. I find on the basis of the evidence of Dr Boyd that Mr Docherty is quite incapable of acting as a trustee. Any suggestion that he could somehow perform some useful purpose by remaining as trustee can be dismissed out of hand. Given his inability to act as a trustee, the proper response is that he cease to be a trustee. This is an entirely appropriate case for removal.

[28]      Mr Riechelmann, the potential litigation guardian, accepts that there could not be a sensible basis for contending that Mr Docherty could remain as trustee. Once it is accepted that Mr Docherty was properly removed as trustee then the vesting order follows as night follows day. There cannot be any sensible basis for an argument that even though he has been removed as trustee, he should still be shown as a registered proprietor of trust assets.

[20]     I am satisfied that the applicants are acting in Mrs McKean’s best interest. She is unable to carry out her role as a trustee. The purpose of the proceeding is to vest the Property in the Current Trustees so that they can carry out the actions they judge  to  be  best  for the beneficiaries,  which  includes  Mrs  McKean.   Although caution is required when ordering that the need for a litigation guardian is dispensed

with, in the circumstances a litigation guardian could serve no useful purpose.  I will therefore order accordingly.

Vesting of land

[21]     Section 52(1)(b)(i) of the Act provides the Court with the power to vest land in any such person that it may direct where a trustee entitled to or possessed of any land or interest therein, either solely or jointly with any other person, is under a disability.

[22]      I consider that Mrs McKean is under a mental disability due to the effects of her dementia. Mrs McKean is registered as a proprietor of the Property in her role as a trustee. However she has been replaced as trustee by Gary McKean. Given the need to ensure the Current Trustees can deal with the Property in accordance with their duties, I am satisfied that the vesting order sought is appropriate.

Orders

[23]     I order:

(a)      The applicants may commence this proceeding by way of a without notice originating application;

(b)      Service of this proceeding is dispensed with;

(c)      The respondent does not require a litigation guardian;

(d)48 Auskerry Streeet, Palmerston, being all the land contained in the Certificate of Title OT9C/812, Part Section 8 Block XXC Town of Palmerston,  is  vested  in  Cook  Allan  Gibson  Trustee  Company Limited and Gary David McKean; and

(e)      No order is made as to costs.

Associate Judge Matthews

Solicitors:

Gallaway Cook Allan, Dunedin.