Morris v Worthington
[2017] NZHC 3182
•18 December 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-1555 [2017] NZHC 3182
BETWEEN STEPHEN WILLIAM MORRIS, LISA
MAREE BRADY AND NORWOOD TRUSTEES LIMITED
as Trustees of the Maureen Morris Family
Trust
AND
ROBIN ERNEST WORTHINGTON First Defendant
THE OCCUPANTS of 62 John Rymer
Place, Kohimarama
Hearing: 30 November 2017 Appearances:
Mr G H Brant for Plaintiffs
Mr A F Grant for DefendantsJudgment:
18 December 2017
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
18.12.17 at 3.30 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
MORRIS & ORS v WORTHINGTON & ORS [2017] NZHC 3182 [18 December 2017]
Introduction
[1] This case concerns a trust which was settled by the late Mrs Worthington
(formerly Morris).
[2] The plaintiffs allege that they are the trustees of the trust and as such are entitled to claim possession of the property which the trust owned at Kohimarama (the Trust property). They seek orders for recovery of the Trust property and that the first defendant and any other occupiers vacate the Trust property.
Summary judgment principles
[3] The plaintiffs apply for summary judgment under r 12.2(1) of the High Court
Rules:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[4] The onus of proof is on the plaintiffs. They must prove on the balance of probabilities that the defendants have no arguable defence.
[5] As the Court of Appeal phrased it, there must be no real question to be tried.1 It further commented:
[26] … The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable … In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it …
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
Summary of background from plaintiffs’ submissions
[6] The following statement of background, which is taken from the submissions which Mr Brant filed on behalf of the plaintiffs, is not, in any important respect, disputed by the defendants.
18. The first defendant is the widower of the late Maureen Worthington (formerly
Morris).
19. Maureen Worthington’s first husband, William Frederick Morris, died on 2
August 1996. The first named plaintiff is the natural son and eldest child of Maureen Worthington and William Frederick Morris and the second named plaintiff is the adopted daughter of Maureen Worthington and William Frederick Morris. Maureen Morris and William Frederick Morris had another daughter Maureen Elizabeth Morris who has Down Syndrome and is mildly autistic and resides at the Hohepa Residential Facility in Clive, Hawke’s Bay.
20. The first defendant and Maureen Worthington were married on 30 September
2001. The first and second named plaintiffs were adults at the time.
21. The [trust] had a property at Mangawai Heads and a property at Coates Ave
Orakei.
22. Maureen Worthington was left with cash assets upon William Frederick
Morris’ death and was in a comfortable financial position.
23.Upon the death of Maureen Worthington on 26 February 2015, there were no cash assets and the Mangawai Heads property had been sold to cover bank debt guaranteed by the [trust]. The property at 62 John Rymer Place had been put at risk and the first and second named plaintiffs and their families advanced money to the [trust] to prevent it from being sold by mortgagee sale. Maureen Worthington died at work which distressed the first and the second named plaintiffs.
24.The reason for the decline in fortunes of late Maureen Worthington and the [trust] appears to be a failed business venture called Enviro Wash (New Zealand) Limited which the first defendant was involved with. The [trust] had borrowed funds to support Enviro Wash.
Maureen Worthington’s wishes
25. Maureen Worthington’s will, dated 26 November 2002, expressed the
following wish:
I express the wish without creating a binding trust that the trustees of the MAUREEN MORRIS FAMILY TRUST ("the trustees") permit my husband Robin to reside in any dwelling house or occupy any land owned by the trustees, he paying all rent, rates, taxes, insurances and all other
expenses and outgoings usually paid from income, including repairs to any building which he is occupying, upon such terms as the trustees shall think fit pursuant to the terms of the Deed of Trust dated 29 November 1999.
26. The subsequent deed dated 11 September 2006 states, regarding the [trust]’s
dwelling house:
ROBIN ERNEST WORTHINGTON shall only be entitled as a beneficiary to the use and enjoyment of the Trust's assets for a period of two years after the death of Maureen Worthington ("the entitlement period”).
On the expiration of the entitlement period ROBIN ERNEST WORTHINGTON's entitlement to the use and enjoyment of the Trust's asset shall cease.
The entitlement period shall not arise if ROBIN ERNEST WORTHINGTON and MAUREEN WORTHINGTON are no longer married or are living separately and further shall be deemed not to arise if the Trustees of the Trust Deed do not hold a residential property in which MAUREEN WORTHINGTON and ROBIN ERNEST WORTHINGTON are residing together.
The term "the Trust Assets" shall extend only to residential property and shall not extend to financial assets of the Trust.
That this deed is to be construed as an addition to the deed dated 26
November 2002 under which ROBIN ERNEST WORTHINGTON was appointed a beneficiary of the Trust and shall be read together with it.
27.The first and second named plaintiffs, as the children of Maureen Worthington, took the view that Maureen Worthington wanted the first defendant to live at the 62 John Rymer Place property for two years after Maureen Worthington’s death. This was also the first defendant’s wish.
28.The first and second plaintiffs took the view that the first defendant would remain in occupation of the 62 John Rymer Place property and the trustees would meet the insurance, rates and the like and no rental was payable.
29. The first and second named plaintiffs wanted to honour their mother’s wish.
[7] In addition to settling the trust, Mrs Worthington was also a trustee of the trust together with a solicitor’s trustee company, Norwood Trustees Limited. Mrs Worthington died in 2015. Upon her death, the number of trustees of the trust fell below the number which the trust deed called for, namely two.
[8] While the plaintiffs were amenable to the first defendant remaining in occupation of the house at Kohimarama, this could not be achieved without an introduction of funds to pay maintenance, rates and the like. The first defendant did
not have any significant funds of his own. He is retired and is aged approximately 80 years. The financial circumstances of the trust and the estate of Mrs Worthington, I find, were poor. Several months after Mrs Worthington’s death, the funeral account had still not been paid and there was a requirement for maintenance on the house. In addition, the rates on the house had to be paid. The trust did not have the wherewithal to pay these amounts and nor did the first defendant.
[9] The first plaintiff appears to have made significant efforts to get the financial affairs of the trust onto a sustainable footing. He appreciated that it would be necessary for money to be borrowed from a bank in order to fund the liabilities that were outstanding and to provide for the future. The only trustee of the trust, being a solicitors’ nominee company, was obviously not in a position to provide funding. Enquiries that the first plaintiff, and the solicitor for the trust and the estate of the late Mrs Worthington had made, indicated that trading banks might possibly be persuaded to provide funding, but they would in all probability require guarantees from the trustees.
[10] The first plaintiff was not unwilling to provide a guarantee but it is his evidence, which is not the subject of dispute, and which is in any event inherently believable, that he was not prepared to provide a guarantee for the trust unless he was a trustee. Otherwise, he would be providing a guarantee of the liability of a trust over which he had no control. His sister, the second plaintiff, did not consider that because of her financial circumstances she was in a position to become a trustee of the trust and provide a guarantee to raise money.
[11] I find that the plaintiffs and the solicitor decided that the best way of progressing matters was to arrange for the first defendant to relinquish his power of appointment of trustees and to transfer that power to the second plaintiff. In this way, it was expected that the first and second plaintiffs, or either of them, would be able to take up trusteeships of the trust. Obviously, as well, there would be no risk of further appointments being made that were outside their control.
[12] In due course, the solicitor prepared a deed which was designed to achieve this effect. It was signed by the first defendant, as it was required to be. The circumstances
in which the first defendant signed that deed are controversial and will need to be discussed further subsequently in this judgment.
[13] In 2016, the time for the departure of the first defendant from the matrimonial home was looming, with the two year period concluding at the beginning of 2017. However, the first defendant was not prepared to vacate possession of the property. His view was that he needed some additional time. He was involved in a business and that was not yet providing him with the income that he hoped to achieve which would enable him to make his own arrangements for his future living requirements. He stayed on in the house together with his grandsons.
The arrangements for the appointment of trustees
[14] The arrangements which Mrs Worthington entered into included a provision in the trust deed at cl 11 to the following effect:
The power of appointing a new Trustee or Trustees shall be vested in MAUREEN MORRIS during her lifetime and after her death in the person(s) duly given the power of appointment under her Will, and should there be none, in the administrators or the executors of her Will and if in the winding up of her estate there shall be no such administrator executor or trustee able or willing to act then in the person or persons in whom the said power is vested by the Trustee Act 1956 or any statutory modification thereof for the time being in force.
[15] Mr Worthington signed a deed on 1 May 2015 (the 1 May Deed) in terms of which he did two things. The deed relevantly provided as follows:
2. Assignment of Powers
The Appointor irrevocably assigns to the Appointee from the Prescribed Date, the powers of appointment and declaration contained in clause 11 of the Trust Deed. Such assignment shall include the power for the Appointee to assign his her or their interest in the said powers of appointment declaration and consent to such person or persons as the Appointees may by deed appoint but if at any time after the death of the surviving Appointee there shall be no such person able and willing to act then the person or persons in whom the said statutory power is vested by the Trustee Act 1956 or any statutory modification thereof for the time being in force.
3. Disclaimer of Appointment
The Appointor disclaims and releases the power of appointment of trustees given under the provisions of Maureen’s Will,
4. Acceptance of Powers
The Appointee accepts the assignment of the said powers of appointment and on the terms set out in this deed and agrees to be bound by the provisions of the Deed.
[16] There is no dispute that Mr Worthington signed this document.
[17] Equipped with the power that she had purportedly acquired by the 1 May Deed, the second plaintiff on 7 May 2015 purported as the appointor to appoint herself and her brother, the first plaintiff, as trustees under the trust. It is by that route the plaintiffs claim to have got themselves into a position where they could bring the present proceedings in which they seek an order for vacant possession of the Trust property.
[18] The plaintiffs assert in their summary judgment proceedings that by a deed which Mrs Worthington executed on 11 September 2005, Mr Worthington was entitled to occupy the trust property for a period of two years from the date of her death. That period of time expired in February 2017, Mrs Worthington having passed away on 26 February 2015.
[19] The first defendant, however, while not apparently contesting the duration of the period in which he was entitled to occupy the house has expired, has filed a notice of opposition to the summary judgment proceedings which the plaintiffs have brought in seeking possession of the Trust property. The grounds of opposition are stated in the following terms:
3. …
(b) On 1 May the plaintiff Lisa Bray presented the first defendant with a Deed to sign (“Deed”). He understood it was a Deed by which he would exercise his power of appointment to appoint her as a trustee of the Trust. In fact, it was a Deed by which he purported to assign his power to appoint and remove trustees to Lisa Brady. The Deed is of no legal effect and the first defendant relies on the doctrine of non est factum. The first defendant will rely on (among other things) the following facts and matters:
(i) The Deed was prepared by the director of Norwood Trustees Limited whom the first defendant regarded as his own legal advisor.
(ii) There had been a prior discussion in which it was agreed that the director would, in his capacity as a solicitor, prepare a Deed for the first defendant to execute, in which he would appoint Lisa Brady as a second trustee.
(iii) The first defendant was 78 years old or so at the time he executed the document.
(iv) The first defendant is not a lawyer and, to the knowledge of Lisa Brady he received no legal advice on the document that she gave him that day to sign.
(v) Lisa Brady is the first defendant’s step-daughter and he trusted her to provide him with a Deed by which he would appoint her as a trustee in place of her late Mother.
(vi) Prior to the execution of the Deed on 1 May there had been no discussion with the first defendant by which he would relinquish his power to appoint and remove trustees and he had no reason to suspect that the document that he was asked by Mrs Brady to sign that day would purport to achieve that objective.
(vii) The director of Norwood Trustees Limited made no attempt to communicate with the first defendant and inform him of the fact that the Deed that was to be given to him to execute would purportedly strip him of his power to appoint and remove trustees or to arrange to have to be given legal advice.
(c) In the first alternative to (b), the first defendant contends that the Deed was an unconscionable dealing and is of no legal effect. He relies upon the particulars set out in paragraph 3 (b) above.
(d) In the second alternative to (b) the purported assignment of the power to appoint and remove trustees was of no legal effect since as a a matter of law, it is not and was not legally permissible to assign those powers. Accordingly, the purported exercise by Mrs Brady of the power to appoint herself and Mr Morris as trustees was of no legal effect.
(e) In the third alternative to (b) Mrs Brady misrepresented the nature of the Deed, with intent to mislead the first defendant and he has suffered damage as a consequence. He ought to be restored to the position he was in before this wrong was done to him, so that the Deed is of no effect.
(f) In the fourth alternative to (b) the first defendant mistook the nature and effect of the Deed, to the knowledge of Mrs Brady, so he is entitled to relief under the Contractual Mistakes Act
1977.
(g) The power to appoint and remove trustees is a fiduciary power and it could not be released by the first defendant.
[20] The contention of the plaintiffs is that the plaintiffs have been properly appointed as executors because, although the first defendant was given the power of appointment by way of testamentary disposition, he disclaimed that power through the
1 May Deed by stating that he “disclaims and releases the power of appointment of trustees”. In summary form, the argument which Mr Grant put forward for the defendants was that the 1 May Deed purported to both assign the power and to disclaim it.
[21] There are, however, other matters set out in the notice of opposition excerpted above which may mean that the 1 May Deed which the plaintiffs rely on was not effective.
Assignment of the power to appoint trustees?
[22] It was the submission of Mr Grant for the defendants that a person who holds a power to appoint trustees cannot assign it. Mr Grant supported that argument by referring to the fact that the conferral of such a power is reflective of personal confidence that the donor has in the person whom he or she chooses for purposes of exercising the power. The importance of the power coupled with the fact that it is very likely to be a matter on which the donor would have personal preferences that might differ from those of an assignee of the power, means that the entitlement to appoint trustees ought not to be viewed as capable of assignment.
[23] Mr Brant for the plaintiffs did not dissent from the main proposition that such a power could not be assigned.
[24] In any case, that does seem to be a sound argument and ought to be accepted.
What, if any, effect did the deed of 1 May 2015 have?
[25] The next point that Mr Grant made was that effect could not be given to the 1
May Deed because its contents were internally inconsistent and contradictory. Specifically, it was his argument that it was not possible for the first defendant both
to purport to assign the powers of appointment and at the same time disclaim and release them.
[26] The logical problem that is presented by the 1 May Deed has two elements to it. The first is that a party who has disclaimed the powers to which he or she is entitled under a deed never actually acquires them. That is the significance of a disclaimer as contrasted with an assignment or surrender of such a power. A person who has disclaimed therefore had nothing to assign, even assuming that it is theoretically possible to assign the type of power which is in question in this case. The second part of the problem is that a party who has assigned a power of the kind in question here cannot necessarily follow that action by relinquishing the power. It is too late to do so. In Bence v Gilpin, the point was made with some emphasis:2
A disclaimer, to be worth anything, must be an act whereby one entitled to an estate immediately and before dealing with it renounces it; whereby, in effect, he says “I will not be the owner of this property”. But for a person who has already possessed himself of an estate and acted as its owner, to come and say “I will not be its owner”, is really a contradiction in terms and I think the attempt to escape a fine by such means must be unsuccessful.
[27] While the assignee takes the power subject to any equities that arose prior to the date of the assignment, it would not in the ordinary course of events be possible to defeat the entitlement of the assignee unless the assignment was limited in some way, such as requiring an assignment back to the assignor or something similar. In the absence of argument establishing that it is possible to affect an assignment on such terms, I would not be prepared to accept that the assignment under consideration in this case was of such a nature. The terms of the assignment in this case seem to be absolute.
[28] Logically, therefore, the most likely result of execution of the 1 May Deed of assignment and disclaimer was that, subject to an argument to be mentioned shortly, the first defendant disclaimed any entitlement to the power of appointment so that even if it was open to him to assign it to another party such as the plaintiffs, any such power of assignment could not have survived the disclaimer.
[29] The position which the first defendant took was that a party can only disclaim a power of the present kind by renouncing it up until the point immediately before he deals with it. The submissions which Mr Brant made was as follows:
77. …
The acceptance of a power of appointment has been viewed by authority in terms of a property right which requires ‘dealing’ or taking possession. It has been stated:
… a disclaimer is simply a refusal to accept an interest which has been conveyed to the disclaiming party, it has been consistently held that no disclaimer is possible after the interest has been accepted. In Bence v Gilpin (1868) L.R Ex 76, 81 the Court held:
A disclaimer, to be worth anything, must be an act whereby one entitled to
an estate immediately, before dealing with it renounces it; whereby, in effect, he says "I will not be the owner of this property". But for a person who has already possessed himself of an estate and acted as its owner, to
come and say "I will not be its owner", is really a contradiction in terms.
And
English Courts have usually refused to attribute significance to the particular form of words used by the disclaiming or renouncing party: e.g. in Nicholson v Wordsworth (1818), 2 Swans, 363 (L.C.) a “release was treated as a disclaimer, and in ReSchar, [1950] 2 All E.R. 1060 (Ch.D.) a “disclaimer” was treated as a release.
[30] I accept that for the purposes of this application, the approach just outlined is the correct one.
[31] But it is also clear that there are restrictions on the entitlement that the owner of a power of appointment has to disclaim under it. In Cossit v Minister of National Revenue, the court considered the conduct of the donee of the power.3 The Court affirmed with approval the principle:4
The donee need not accept the gift … but unless by the will the duty of doing some act to show his election is put upon him, his acceptance of the gift is presumed, and the property vests in him unless and until he disclaims …
3 Cossitt v Minister of National Revenue [1949] DLR 705 (ECC) at 710.
[32] Having referred to that authority, the Court continued:
What happened here, was that the appellant waited for 3 years before he disclaimed, and then he only did so to avoid the payment of tax, disclosed by the assessment which was made at that time. The question then, I think, is this. Did the appellant accept or exercise the power at any time before the disclaimer was executed, or, knowing of the power and having done nothing for 3 years, has the appellant by acquiescence excepted the power?
The evidence of the appellant was that he had not at any time exercised the power and that he had not at any time any intention of so doing, and I accept his evidence as to this.
[33] After considering some additional matters, the judgment continues:5
I reach the conclusion that the appellant did not exercise the power nor did he intend to do so, nor did he by acquiescence accept the power.
[34] The next issue is to consider the effect on the factual context of this case that follows from the adoption of the above principles. Specifically, did the circumstances leading up to the execution of the 1 May Deed amount to acquiescence of a kind which would prevent the first defendant from subsequently attempting to disclaim the power by the execution of the deed.
[35] There is no doubting in this case that the donee of the power was aware that he possessed it. Further, one month after the death of one of the trustees, the first defendant wrote to the solicitors for the trust, Carter Atmore Law, recording the fact that he was appointed to nominate a new trustee under the trust deed. The context in which he wrote that letter demonstrates that he appreciated that Mrs Worthington had been a trustee of the trust and that now that she was deceased, it would be necessary to appoint another trustee. His actions came close to, but did not reach, the point of actually exercising the power to appoint.
[36] It is correct that the first defendant then took some steps to have the solicitors take the necessary action to appoint the second plaintiff as a new trustee of the trust.
[37] When he wrote to the solicitors he did not tell them that his wish was to alter the position whereby he had the power of appointment of trustees. He claims that his
instructions to the solicitors were that he wished to appoint the second plaintiff as a trustee. According to his account of matters, though, his intention was thwarted because the lawyers drew up a different type of deed, one which transferred the power of appointment away from him to the second plaintiff.
[38] At the point where he wrote the letter to the solicitors, though, it seems to me at least arguable that the first defendant was affirming that he was going to exercise the power and “act as its owner”, which is the position described in Bence v Gilpin in the passage quoted above. When he wrote the letter that he did, it again seems arguable to me that the first defendant was making it clear that he was putting into action the authority which he had obtained. The fact that, as matters turned out, his wishes as stated in the letter of 6 March 2015 were not carried into effect is not the decisive point. Looking at it another way, the first defendant would have been contradicting the position that he took in that letter if, immediately after he had said that, he was disclaiming the power that was conferred upon him under the will.
[39] Therefore, even if it could be established that the 1 May Deed amounted to a disclaimer, it might have come too late.
Further matters as to the effect of the 1 May Deed
[40] There was considerable discussion at the hearing before me about the effect of the legal document that the defendants signed on 1 May 2015. These points were mainly concerned with an alternative basis upon which the first defendant sought to negate the effect of the document by claiming that he had available to him affirmative defences such as non est factum and unconscionable bargain. However, if the position is that by the time that he signed the 1 May Deed, it was too late for him to disclaim his position as nominator of trustees under the power, then it is not relevant to the outcome of the present proceeding to consider those arguments further.
[41] In my judgment, it is not necessary to consider those matters because at least for the purposes of summary judgment, there is an arguable defence available to the defendant. The court on hearing this application needs to be cautious that it does not seek to carry out the functions of the trial court. The latter includes considering all the circumstances in the context of the case around whether the actions of the first
defendant had taken matters to the point where it was too late for him to disclaim the power of appointment.
[42] One final matter which needs to be mentioned is that even if the first defendant had had a change of heart and actually did intend to hand over the power of appointment, that is not a matter which will alter the outcome of this application. The court will consider the circumstances and if having done so, it concludes that the first defendant affirmed his position as appointor when he gave instructions to the lawyers, any change of heart subsequently may have come too late. The requirements of clarity about who from time to time is exercising a power of appointment like the one in this case mean that it is not open to the donee to hedge his bets. This is not a matter in which the personal wishes of the donee can be seen as trumping the requirements of consistency without which there can be no certainty as to who has the power of appointment.
[43] There is, in other words, an argument of substance about the effect of the 1
May Deed.
[44] One consequence of the conclusions that I have reached is that it also arguable that the default power expressed in cl 11 of the will (which means that if there is no person who has been appointed to exercise the power after the death of the testatrix, then such power vests in the trustees and executors) is not engaged.
Result
[45] For these reasons, the application for summary judgment must be dismissed. The parties should confer on the question of costs and, if they are unable to agree, are to file memoranda not exceeding four pages on each side within 10 working days of
the date of this judgment.
J.P. Doogue
Associate Judge
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