Morris v Goldstein
[2013] NZHC 1939
•2 August 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2013-404-000770 [2013] NZHC 1939
UNDER the Trustee Act 1956
AND
IN THE MATTER of an application under Section 51 to appoint a new Trustee to a Testamentary Trust arising out of the estate of the late Moses (Moe) Richler (deceased)
BETWEEN SHARON LEE RICHLER MORRIS Applicant
ANDEDWARD VICTOR and YOINE GOLDSTEIN
First Respondents
SIMARA DELILAH ROSE (formerly
RICHLER)
Second Respondent
CARTER ATMORE TRUSTEES NO.7
LIMITED
Third Respondents
Hearing: On the papers
Judgment: 2 August 2013
JUDGMENT OF ANDREWS J [Applications concerning testamentary trust]
Solicitors/Counsel:
Jennifer G Connell & Associates, Auckland
Carter Atmore Law, Auckland – Ivan McIntosh
MORRIS v VICTOR & ORS [2013] NZHC 1939 [2 August 2013]
Introduction
[1] The applicant (Ms Morris) has applied for an order appointing Carter Atmore Trustees No.7 Limited (“Carter Atmore”) as trustee of a testamentary trust, in substitution for herself. After issues were raised as to the applicable law, Ms Morris has applied for further orders. In order to decide whether the order should be granted, it is necessary to consider the relevant provisions of New Zealand law and that of Quebec, Canada.
Background
[2] The proceeding concerns a testamentary trust established by the late Moses Richler, who died on 20 December 2004. Mr Richler was domiciled in Quebec. Mr Richler left a Will dated 18 September 2003. In clause 1 of the Will, Mr Richler said (as relevant to his proceeding):
... I desire my Will to be construed and to take effect according to the laws of the Province of Quebec.
[3] Pursuant to clause 9 of the Will, the residue of Mr Richler’s estate:
... shall be divided into three (3) equal portions, and one such portion shall be set aside for my daughter Sharon Lee RICHLER MORRIS ..., a second such portion shall be set aside for my daughter Vivian RICHLER ..., and the third such portion shall be set aside for my granddaughter Simara RICHLER ...
[4] Clause 9 went on to provide for a testamentary trust in respect of Simara
Richler’s share (“the Trust”) as follows:
(c) As to the portion of my granddaughter, Simara RICHLER, the same shall be remitted, in trust, to my daughter, Sharon Lee RICHLER MORRIS as Trustee thereof, and she shall invest the same and shall pay the net revenue and income derive therefrom to my said granddaughter, annually, quarterly, monthly, weekly or otherwise, the whole in the absolute discretion of my said daughter, Sharon Lee RICHLER MORRIS. In the event that my said daughter, Sharon Lee RICHLER MORRIS is unable to act as Trustee thereof, or becomes incapable, or refused to act, or dies, or resigns said function, she shall automatically be replaced [by] Yoine GOLDSTEIN, Advocate, and Edward VICTOR FCA, as joint Trustees for this particular trust.
Upon the twentieth anniversary of the date of my death, the capital of the said portion or the balance thereof then remaining shall be turned over in
absolute ownership to my said granddaughter Simara. If the however, she has predeceased me, or dies before receiving the said capital, leaving no children in the first degree, her surviving, born of lawful marriage, then the said capital or the balance thereof shall be turned over in equal proportions to Sharon Lee RICHLER and Kidawa Lysa MORRIS, her step-sister, to share and share alike. If, however, the said Simara RICHLER, predeceases me or dies before receiving the said capital, the whole as aforementioned, leaving children in the first degree, her surviving, born of lawful marriage, then said children in the first degree shall receive the said capital or the balance thereof then remaining as they each attained the full age of eighteen (18) years respectively.
Notwithstanding anything in this my Will contained should any emergency or necessity arise for any cause or reason at the sole discretion of my Liquidators hereinafter named, my said Liquidators in their sole discretion are hereby authorized to encroach upon the capital of the said rest, residue and remainder of my Estate and Succession and pay for any such necessity or emergency from the same.
[5] By clause 11 of the Will, Yoine Goldstein, advocate, and Edward Victor, chartered accountant, both of Montreal, were appointed joint liquidators. I understand that under Quebec law, liquidators have the same function as executors under New Zealand law.
[6] Ms Morris lives in New Zealand. Mr Richler’s granddaughter, Simara Richler (now Simara Delilah Rose) (Ms Rose) lives in California. In accordance with clause 9 of the Will, the liquidators paid Ms Rose’s one-third share of the residue to Ms Morris, as trustee.
[7] Ms Morris was (and remains) in poor health, and was unwilling to be appointed trustee of the Trust. However, in November 2012 Messrs Goldstein and Victor advised that they were not prepared to accept appointment as trustees. I understand that notwithstanding that clause 9 of the Will provides that they will “automatically” replace Ms Morris as trustee if she “becomes incapable, or refuses to act, or dies, or resigns said function”, under Quebec law they cannot be compelled to accept appointment.
[8] In an affidavit sworn on 7 February 2013, Ms Morris stated that Ms Rose’s share of the residue was approximately US$600,000 and was expected to yield a return of approximately US$3,500 a month, before tax. A “Portfolio Performance
Summary” dated 15 January 2013, annexed to Ms Morris’s affidavit, records an
opening capital balance of NZ$842,759.71.
[9] Ms Rose initially received payments derived from the Trust’s income. However, she requested additional payments. The Trust capital could not generate sufficient income to meet the payments requested. On 19 June 2008, a “Deed of Arrangement relating to the Simara Richler Trust” (“the Deed of Arrangement”) was entered into by Ms Morris, Ms Rose, and the default beneficiaries (Ms Morris and Kidawa Lysa Korris), in which they agreed to an investment strategy for the Trust property, and acknowledged that the monthly payment sought by Ms Rose (at that time, US$3,000 a month) could not be met without resorting to capital, leading to the Trust capital being diminished, or exhausted.
[10] The Deed of Arrangement provided, at clause 8:
The parties agree that the administration of the Trust shall be governed by the laws of New Zealand and that this deed shall be construed in accordance with and governed by the law of New Zealand and the parties submit to the jurisdiction of the court of New Zealand.
[11] Ms Rose has since then requested greater payments from the Trust. The Portfolio Performance Summary referred to earlier records withdrawals of capital totalling NZ$361,162.81 as at 31 December 2012. The value of the Trust capital as at that date was NZ$481,036.38.
[12] It is clear that there is friction between Ms Morris and Ms Rose. Ms Rose continues to assert that the payments she receives from the Trust are not sufficient to meet her reasonable needs. Ms Morris is unwell, and for that reason, and because of the friction between herself and Ms Rose, wishes to retire as trustee of the Trust. That has led to Ms Morris’ application for an order appointing Carter Atmore trustee of the Trust.
[13] By a joint memorandum of counsel for Ms Morris, Ms Rose, and Carter Atmore, filed with the application, it was submitted that there were no parties opposing the appointment of Carter Atmore as trustee of the Trust in place of Ms
Morris.1 It was also submitted that to make such an order “is in practical terms the only method of obtaining a speedy resolution as to the trusteeship which is desired by all parties”.
Procedural history
[14] The application came before Associate Judge Bell (on the papers) on 19
February 2013. In a Minute issued on that day his Honour expressed uncertainty as to whether New Zealand law or Quebec law applies to the Trust. At [19] of his Minute, his Honour said:2
[a] If the trust continues to be governed by Quebec law, then a Quebec court, not a New Zealand court, may be the appropriate court to appoint a replacement trustee. The powers under the Trustee Act
1956 to appoint replacement trustees apply to trusts governed by New Zealand law, not trusts governed by foreign law. If a New Zealand court is to exercise the powers of a Quebec court, some basis for doing so needs to be established.
[b] If the trust is governed by New Zealand law, the appointment of a new trustee may not be necessary, as [Ms Rose] could simply demand payment of the entire trust fund under the rule in Saunders v Vautier.3
[c] If [Ms Morris] does wish to continue with the present application, it will be necessary to consider [Ms Rose’s] children, including her unborn children, and also whether the court should approve the deed of arrangement under s 64A of the Trustee Act.
[15] His Honour also noted that the Court would need to know more about
Canadian law.4
[16] Subsequent to Associate Judge Bell’s Minute, the Court has received a legal memorandum as to Quebec law as applicable to the Trust. The memorandum was provided by Mr Goldstein’s firm in Montreal, and is addressed to the solicitors for
Ms Rose. Further, the applicant now seeks the following orders:
1 It is evident that Carter Atmore is connected with the solicitors for Ms Rose and Carter Atmore, Carter Atmore Law.
2 Morris v Victor HC Auckland CIV-2013-404-77, 19 February 2013 at [19].
3 Saunders v Vautier (1841) 4 Beav 115, 41 ER 482.
4 Morris v Victor, above n 2, at [21].
(a) An order under s 64A of the Trustee Act 1956 to sanction the Deed of
Arrangement;
(b) An order severing the administration of the Trust and providing for
New Zealand law to govern the administration of the Trust; (c) An order appointing Carter Atmore trustee of the Trust; and
(d) An order vesting the Trust property in the new trustee, Carter Atmore.
A joint memorandum of counsel for Ms Morris and for Ms Rose and Carter Atmore supports the application. Counsel also filed draft Orders.
Issues to be determined
[17] In order to decide whether this Court can make the orders sought, it is necessary to consider the following:
(a) Is the Trust governed by Quebec law or New Zealand law?
(b)If the Trust is governed by Quebec law, does the New Zealand Court have jurisdiction to deal with the application?
(c) If the New Zealand Court has jurisdiction, is it the appropriate forum to deal with the application?
(d)If New Zealand is the appropriate forum, should the Court make the orders sought?
What law applies to the Trust?
[18] As is clear from clause 1 of the Will, Mr Richler’s intention and desire was
that the Will is to be construed and to take effect in accordance with the laws of
Quebec. In his memorandum, Mr Goldstein concluded that:5
5 Memorandum addressed to Mr McIntosh of Carter Atmore Law, 16 April 2013 at 3.1.
According to Quebec law, where the act that created the Trust contains an implicit choice of law which adopts the law of a specific state, the Trust is to be governed by that law. That choice of law is paramount where the act that created the Trust contains a choice of law and the proximity of the Trust to another country is not germane to the question of the Trust’s applicable law. Therefore, even though the Trust’s property is located in New Zealand, the current trustee is located in New Zealand, the beneficiary is located in California and the Trust is currently being administered in New Zealand, Quebec law dictates that the law applicable to the Trust is that of Quebec, since it can be inferred with sufficient certainty that Quebec law was at least implicitly chosen for the Trust and was in fact chosen explicity for the Will.
[19] In reaching that conclusion Mr Goldstein referred to the judgment of the Quebec Superior Court in Bell v Molson, in which it was held that a testamentary trust was to be construed and governed according to the laws of Quebec.6 Mr Goldstein noted that the facts in Bell v Molson were “not so different from” those in the present case. Mr Goldstein also noted that the wording of the Will in creating the Trust was “the common and classical wording of a Trust created under Quebec law
and reuses some vocabulary used by the Quebec legislator in the Civil Code of
Quebec”.7
[20] In their joint memorandum of counsel, counsel for the present parties do not challenge Mr Goldstein’s conclusion. Accordingly, it is apparent that all parties accept that Quebec law applies to the Trust.
Does the New Zealand Court have jurisdiction?
[21] As the Court of Appeal said in Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd, “the jurisdiction of domestic courts is essentially territorial in nature”.8 The Court went on to observe that the Court does not lightly assume jurisdiction over foreign parties.9 In New Zealand, jurisdiction depends on service. If a defendant (or in this case, respondent) is properly served with New Zealand proceedings, the Court
has jurisdiction to hear and determine the case.10
6 Bell v Molson 2008 QCCS 992.
7 Mr Goldstein’s memorandum, above n 5, at 4.1(l).
8 Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR at [27].
9 At [27].
10 See Cockburn v Kinzie Industries Inc (1988) 1 PRNZ 243 (HC) at 245 and 246, and McLachlan, Angelo and Finlayson “High Court Rules Committee Reform of the High Court Rules Cross- Border Disputes Sub-Committee note on proposed draft rules 6.28(5) and 6.29(1)” (Wellington,
11 April 2008) at 1.
[22] In the present case, the first respondents (Messrs Goldstein and Victor) and the second respondent (Ms Rose) are resident overseas. Service on them was considered and dealt with by Associate Judge Bell. He said:11
Service on the second and third respondents is not required as they have consented to the orders sought.
Service on the first respondents is not required. They have already shown that they have no desire to be appointed replacement trustees. The orders sought are directed at achieving just that. Accordingly, I direct that they need not be served.
[23] Notwithstanding that service on Ms Rose was said to be not required, counsel for her has participated in the application and, in particular, signed the joint memorandum concerning the orders sought by Ms Morris. In the circumstances, although there has not been formal service, I am satisfied that Ms Rose is both aware of the application, and consents to the orders sought being made by this Court. Regarding the first respondents, Messrs Goldstein and Victor, I have reached the same conclusion as did Associate Judge Bell: by their actions they have shown clearly that they do not wish to be appointed replacement trustees, and that they do not oppose an order being made by this Court appointing a replacement trustee other than themselves.
[24] Accordingly, I am satisfied that this Court has jurisdiction to deal with the application.
Is the New Zealand Court the appropriate forum to deal with the application?
[25] In Wing Hung, the Court of Appeal said:12
In considering whether another forum is more appropriate, the Court looks for the forum with which the proceeding has the most real and substantial connection. Relevant factors include issues of convenience or expense, availability of witnesses, the law governing the relevant transaction and the places where the parties resided or carried on business.
We accept that other relevant considerations also bear on the issue of appropriate forum. These include the cautious approach already discussed to the subjection of foreigners to the jurisdiction of a New Zealand court; whether other related proceedings are pending elsewhere, whether the New
11 Morris v Victor, above n 2, at [22](b) and (c).
12 Wing Hung Printing Co Ltd v v Saito Offshore Pty Ltd, above n 8, at [45]-[46].
Zealand court would provide the most effective relief or whether a foreign court is in a better position to do so; whether the overseas defendants will suffer an unfair disadvantage if a New Zealand court assumes jurisdiction; and any choice of jurisdiction previously agreed by the parties.
[26] In this case, the applicant, Ms Morris, and the third respondent, Carter Atmore, are in New Zealand. The solicitors for Ms Morris, Ms Rose, and Carter Atmore are all in New Zealand. The Trust’s assets are managed in New Zealand, and the Deed of Arrangement expressly provides that the administration of the Trust is to be governed by the laws of New Zealand and that the deed is to be construed in accordance with and governed by the law of New Zealand. The only factor which might point to the New Zealand court not being the appropriate forum is that the Will and the Trust are either expressly or implicitly governed by Quebec law.
[27] Taking all of the above factors into account, I am satisfied that the New Zealand court is the “forum with which the proceeding has the most real and substantial connection” and is, therefore, the appropriate forum. With the assistance of Mr Goldstein’s memorandum as to the relevant Quebec law, the law of Quebec can be applied.
Should the orders sought be made?
Application to sever administration of the Trust
[28] It is convenient to deal first with Ms Morris’s application for an order severing the administration of the Trust and providing for New Zealand law to govern the administration of the Trust. In his memorandum, Mr Goldstein concluded that under Quebec law, Carter Atmore could not be appointed trustee of the Trust. He referred to Art 1274 of the Civil Code of Quebec which provides that “any natural person having the full exercise of his civil rights, and any legal person authorised by law, may act as a trustee”. Mr Goldstein went on to note that the only legal persons “authorized by law” under Art 1274 are trust companies constituted in Quebec or in Canada pursuant to the “Act respecting trust companies and savings
companies”,13 and holding a licence delivered by the Quebec Financial Markets
Authority. As Carter Atmore is a legal person constituted outside of Canada, it cannot, in principle, be appointed a trustee of a Trust under Quebec law.
[29] However, Mr Goldstein went on to note that in certain cases, under Quebec law, the applicable law governing a specific aspect of a Trust (such as its administration) may be replaced by the law of another State. Mr Goldstein referred to Art 3108 of the Quebec Civil Code which provides that the law governing a Trust may determine “whether that law or the law governing a severable aspect of the Trust may be replaced by the law of another country and, if so, the conditions of replacement”. Mr Goldstein also referred to Art 1294 of the Quebec Civil Code as being an example where the law governing a severable aspect of a Trust can be changed where “new measures would allow a more faithful compliance with [the settlor’s] intent or favour the fulfilment of the Trust”.
[30] Mr Goldstein said:14
(h) It will be up to the Court to decide whether the following factors constitute sufficient obstacles that may affect the achievement of the trust, render it impossible or if the original intent of the settlor would not be met, if no change pertaining to the law applicable to the administration of the trust is made:
(i) [Ms Morris], current trustee, lives in New Zealand; (ii) The trust is being administered in New Zealand; (iii) The assets of the trust are located in New Zealand; (iv) [Ms Morris] wishes to retire as trustee;
(v) Mr Goldstein and Mr Victor cannot be compelled, under Quebec law, to accept a trusteeship. Moreover, the Will does not compel them to act as trustees and expressly states what to do in case they refuse to act as trustees.
(vi) Quebec law, which governs the trust, does not allow for a
New Zealand company to be appointed as trustee.
(i) Therefore, the High Court of New Zealand may decide that to favour the fulfilment of the trust and to better meet ... Mr Richler’s intention in light of the new circumstances, the administration of the trust should be severed and governed by New Zealand law to allow for a New Zealand company to be appointed and act as trustee.
(j) In our opinion, the circumstances concerning the place of the administration of the trust are sufficient in themselves for the High Court to conclude that New Zealand law should govern the administration of the trust or, at least, the appointment of the trustee.
[31] Again, counsel for Ms Morris, Ms Rose, and Carter Atmore took no issue with Mr Goldstein’s advice. In fact, the orders sought are in accordance with Mr Goldstein’s comments. I am satisfied that in the circumstances set out above, it would favour the fulfilment of the Trust, and better meet Mr Richler’s intentions, if the administration aspect of the Trust is severed, and is governed by New Zealand law. I order accordingly, in terms of Order 2 of the draft Orders filed.
Application to appoint Carter Atmore trustee of the Trust
[32] As noted earlier, the current trustee, Ms Morris, wishes to retire as trustee, on account of her ill health. The original trustees, Mr Goldstein and Mr Victor, do not wish to be appointed trustees. Carter Atmore has consented to be appointed trustee of the Trust.
[33] Under s 51 of the Trustee Act 1956, the Court may appoint a new trustee (either in substitution for or in addition to any existing trustee), whenever it is expedient to do so and it is inexpedient, difficult or impracticable to do so without the assistance of the Court.
[34] In this case, I am satisfied that, in light of the circumstances already referred to, it is expedient to appoint Carter Atmore trustee of the Trust, and it is inexpedient, difficult, and impracticable to do so without the assistance of the Court.
[35] Accordingly, I order that Carter Atmore be appointed trustee of the Trust, in substitution for Ms Morris, in terms of Order 3 of the draft Orders filed. I note the Deed of Retirement of Trustee, Release and Indemnity executed by Ms Morris, Ms Rose, and Carter Atmore dated 28 November 2012, which was annexed to Ms Morris’s affidavit.
Application for order sanctioning the Deed of Arrangement
[36] Counsel for both the applicant and Ms Rose and Carter Atmore submitted that it would be prudent to seek an order sanctioning the Deed of Arrangement.
[37] Under s 64A of the Trustee Act, the Court may give approval to any arrangement which varies or revokes a Trust. Such approval is given on behalf of any person who has, directly or indirectly, an interest under the Trust but because of infancy or other incapacity is incapable of assenting, or any person (whether ascertained or not) who may become so entitled; or any unborn or unknown person; or any person in respect of a discretionary interest under protective trusts.
[38] In this respect, it was noted by Associate Judge Bell that the Deed of Arrangement appeared to have been made without regard to the interests of any unborn children of Ms Rose.
[39] In that respect, an affidavit by Ms Rose, dated 2 May 2013, has been filed in Court. Ms Rose states that she has never in her life desired to give birth to a child of her own, and that there is, taking all factors into consideration, no chance of her leaving children, “in the first degree, born of lawful marriage”.15 In their joint memorandum, counsel submit that Ms Rose is now approximately 40 years old, and given the sentiments appearing from her affidavit, the potential for her to have children diminishes with the passing of each year, and it is reasonable to conclude that no children as defined by the Trust will be forthcoming. Against the remote
eventuality that Ms Rose does have a “child of the first degree born, born of lawful marriage”, counsel submit that it would be open for the Deed of Arrangement to be reviewed if and when that occurred.
[40] I am satisfied that it is appropriate to make an order sanctioning the Deed of
Arrangement, in terms of Order 1 of the draft Orders filed.
15 This is a reference to the wording of cl 9(c) of Mr Richler’s Will, relating to the share of the residue to be held in trust for Ms Rose.
Application for an order vesting property
[41] All that remains is to make the final order sought, which was that the Trust property be vested in Carter Atmore. Such an order follows from the orders previously made. An order is made accordingly, in terms of Order 4 of the draft Orders filed.
Result
[42] Orders are made in terms of orders 1, 2, 3, and 4 of the draft Order submitted with the joint memorandum of counsel.
[43] No order was sought in relation to costs.
Andrews J
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