New Zealand Guardian Trust Company Limited (t/a Perpetual Guardian)
[2020] NZHC 1982
•7 August 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-2098
[2020] NZHC 1982
UNDER Part 18 of the High Court Rules IN THE MATTER OF
The Trustee Act 1956
IN THE MATTER OF
The Christina Heath Family Trust and The Douglas Heath Family Trust
BETWEEN
THE NEW ZEALAND GUARDIAN
TRUST COMPANY LIMITED (trading as PERPETUAL GUARDIAN) as former Trustee of The Christina Heath Family Trust and The Douglas Heath Family Trust
AND
PERPETUAL TRUST LIMITED (trading as
PERPETUAL GUARDIAN) as replacement Trustee of The Christina Heath Family Trust and The Douglas Heath Family Trust APPLICANT
Hearing: 2 June 2020 Appearances:
M E Sullivan for the Applicants
M I S Phillipps for Christopher Heath and Gregory Heath Philip Heath in person
Judgment:
7 August 2020
JUDGMENT OF POWELL J
This judgment was delivered by me on 7 August 2020 at 3.30 pm pursuant to R 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
In the matter of The New Zealand Guardian Trust Company Ltd (trading as Perpetual Guardian) [2020] NZHC 1982
[1] The Perpetual Trust Limited (trading as Perpetual Guardian) (“Perpetual Guardian”) is the trustee of two mirror trusts, the Douglas Heath Family Trust and The Christina Heath Family Trust (“the Trusts”).1 Perpetual Guardian, together with the New Zealand Guardian Trust Company, the former trustee of the Trusts, (also trading as Perpetual Guardian) seeks a range of orders to enable it to bring the administration of the Trusts to an end. In particular it seeks orders pursuant to s 66 of the Trustee Act 1956 to enable it to distribute the Trusts’ funds to the beneficiaries (Gregory Heath (“Greg”), Philip Heath (“Philip”) and Christopher Heath (“Chris”), the three children of the settlors), dispose of the remaining chattels it holds, and to wind up the Trusts.
[2] While there is no formal opposition to the course of action proposed it is clear the application is necessary as a result of broader concerns raised by Philip with regard to the conduct of the applicants in the course of administering the Trusts. Perpetual Guardian also seeks approval for an adjustment to the distribution proposed by Perpetual Guardian in favour of Greg and Chris in recognition of previous benefits received by Philip from the Trusts, as well as to recognise costs imposed by Philip on the Trusts as a result of various steps he has taken.
[3]The issues to be determined are therefore:
(a)Should the monies held by the Trusts be distributed?
(b)Should there be any adjustment in favour of Greg and Chris?
(c)What should happen to the chattels held by the Trusts?
(d)Should the Trusts be wound up?
1 The Perpetual Trust Ltd was substituted for the New Zealand Guardian Trust by order of Lang J in May 2020 following his decision in Re The New Zealand Guardian Trust Company Ltd [2019] NZHC 2548.
Background
[4] The Douglas Heath Family Trust was settled by Douglas Heath by way of Trust Deed dated 22 March 1999. Douglas died in May 2002.
[5] The Christina Heath Family Trust was settled by Christina Heath (“Christina”) by way of Trust Deed dated 22 March 1999. Christina died in November 2016.
[6] The Trusts are mirror family discretionary trusts with each Settlor establishing a trust for the benefit of the other, their children and family. The relevant terms of the trusts are identical. There is no memorandum of wishes.
[7]The discretionary beneficiaries of the Trusts are:
(a)The three named beneficiaries: Greg, Philip and Chris;
(b)Any grandchild of Douglas and Christina Heath. Chris has one child, Anna Heath;
(c)The spouses of the children. Chris and Greg are married. Philip is single;
(d)Any other natural person who is related to the Settlors or either of them by blood, marriage or adoption of any degree and of any kind and whether now living or hereafter born. It is understood that there may be an uncle of the named beneficiaries living in Auckland.
[8] The final beneficiaries of the Trusts are the discretionary beneficiaries to the extent that they are living at the date of distribution.
[9] The Trusts’ funds originally comprised the Settlors’ family home at 43 Campbell Road, Greenlane, Auckland (“the Campbell Road property”) and a holiday home at 1801 East Coast Road, Hauraki Gulf (“the East Coast Road property”). Each trust held a half share.
[10] Following the death of the settlors and a request from Chris and Greg (living in Napier and London), both properties were sold, in December 2018 and January 2018 respectively. The chattels from each of the properties were placed in storage by Perpetual Guardian. Chris and Greg have collected their personal chattels. Philip has not collected any of the remaining chattels, but has made allegations of theft against Perpetual Guardian.
[11] In or around April 2018 Perpetual Guardian resolved to distribute on an equal basis, $200,000 each to Greg, Philip and Chris. Greg and Chris received the distribution at this time, but it was not until after the hearing before me that Philip provided a bank account to enable his share to be paid to him in July 2020.
[12] As at 12 May 2020, the total portfolio market value (cash and investment position) of each trust was as follows:
(a)Douglas Heath Family Trust - $525,331.46; and
(b)Christina Heath Family Trust - $545,942.13.
Issue One – should the Trust monies be distributed?
[13] As noted above there is no formal opposition to an order that the balance of the Trusts’ monies be distributed, and indeed that course is actively supported by both Greg and Chris. Philip, has however consistently taken issue with the sale of the Trusts’ properties. The Campbell Road property was in fact Philip’s home until he was evicted following proceedings brought by Perpetual Guardian in the Tenancy Tribunal and as the only beneficiary residing in Auckland he was also the primary user of the East Coast Road property until it was sold. From that starting point Philip desires Perpetual Guardian to re-purchase both the Campbell Road and East Coast Road properties with the Trusts’ monies which he describes as “restitution”. This would enable him to resume living in the Campbell Road property, and the chattels, currently in storage, to be relocated back into the properties.
[14] As I explained to Philip at the hearing, the Trusts decisions to sell the properties are not before the Court, nor has there been any application for the properties to be re-
purchased, nor, as Philip concedes, is there sufficient money to repurchase the properties even if they were currently for sale.
[15] Given this position it is difficult to see that there is any alternative but to distribute the Trusts’ assets to the final beneficiaries. There is clearly no utility for Perpetual Guardian to continue to hold the Trusts’ monies in perpetuity. As a result, and in the absence of opposition or relevant matter raised to preclude such an order being made, I conclude that distribution is appropriate.
[16] Whether the Trusts’ assets should be distributed equally or whether an adjustment should be made from Philip’s share in favour of Greg and Chris, is considered in the next section.
Issue Two – should there be any adjustment made in favour of Greg and Chris?
[17] Perpetual Guardian have proposed an adjustment in favour of Greg and Chris to take account of both the benefit Philip has received from his previous occupation of the Campbell Road property and to reflect a proportion of the costs incurred by the Trustee dealing with the Tenancy Tribunal proceedings to evict Philip from the Campbell Road property and responding to a complaint made by Philip to the Financial Services Complaints Ltd (“FSCL”). In particular Perpetual Guardian proposes a total adjustment of $68,500 so that Philip accounts for:
(a)One third of the market rental of the Campbell Road property for the approximately 19 months (80 weeks) he was in occupation after Christina’s death in November 2016 until 15 June 2018, a total of
$16,000.2 The 1/3 figure is intended to reflect Philip’s contribution to maintenance undertaken to the Campbell Road property, and taking into account his own 1/3 share of the property.
(b)A proportion of the costs of Perpetual Guardian dealing with Philip’s continuing occupation of and refusal to vacate the Campbell Road property ($37,700 in legal costs and $11-15,000 in trustee costs, being
2 Based on market rental of $600 per week.
a total of $48,700-$52,700 with a midpoint of $50,000) being 75 per cent of $50,000 or $37,500.
(c)A proportion of his complaint to FSCL on the basis that the complaint was arguably not reasonably made and/or was designed to extend Philip’s occupation of the Campbell Road property and/or to intimidate the Trustee, being 25 per cent of $40,0003 or $15,000 to “strike a fair balance”.
[18] Greg and Chris broadly support the approach proposed by Perpetual Guardian but argue that a total adjustment of $167,578.09 is appropriate on the basis:
(a)The period in respect of which Philip should account for rental should be extended to include the period after Christina was placed in a care facility in 2008 through to Philip’s eviction in June 2018;4
(b)There is no principled basis for any reduction from the actual costs incurred to evict Philip from the Campbell Road property ($50,000); and
(c)The adjustment in respect of the FSCL complaint should reflect a 2/3rds recovery akin to scale costs, a sum of $26,666.
[19] In response Philip was unable to see why any adjustment at all was required. In Philip’s view all three of the brothers were able to use the properties in accordance with the objects of the Trusts, and that his attempts to stop the Trustee selling the Campbell Road property through opposing his eviction and more generally challenging Perpetual Guardian’s administration of the Trusts through the FSCL complaint was appropriate and justified.
3 $20,000 in legal costs and $18,500-$20,000 in trustee costs being a range of $38,500 - $40,000.
4 Based on a 1/3 recovery this would mean a total adjustment for rental of $90,912.09.
A rental adjustment?
[20] Having considered the submissions made by the parties it is difficult to see on what basis there should not be an adjustment for rental in respect of the Campbell Road property for the period after Christina’s death until Philip’s eviction in 2008. There is no dispute that Philip occupied the Campbell Road property during this period, and, as he did not at any stage pay rental, thereby obtained a benefit from the Trusts that did not otherwise accrue to Greg and Chris.
[21] I am likewise satisfied that the amount proposed by Perpetual Guardian for the period is appropriate. There has been no challenge to the evidence with regard to an appropriate market rental, and the 2/3rd deduction to allow for Philip’s own share (1/3rd) and for any maintenance and/or improvements Philip carried out to the Campbell Road property also cannot be challenged. On the latter issue I note that while Philip orally advised of considerable maintenance carried out to the Campbell Road property for which he has never previously sought payment, there is in fact no evidence before the Court as to exactly what Philip may have spent or undertaken with regard to maintenance on the Campbell Road property. In the absence of any detail to support Philip’s assertions I am therefore satisfied that the allowance of 1/3rd of the notional rental adequately reflects any contribution that he has made.
[22] The situation is different with regard to the period prior to Christina’s death. It is accepted by all parties that Christina had, in effect, a life interest in the Campbell Road property, and that until she became ill and was placed in care in 2008, Philip lived with her, with her permission. Even after Christina had gone into care the source of Philip’s right to occupy remained Christina rather than the trust deed and in those circumstances it is difficult to see how the Trusts could in effect seek to charge Philip retrospectively for a benefit it did not provide, noting also that as Philip was at the time the only one of Christina’s sons who was living in Auckland, and primarily responsible for providing her with support including bringing her back home as he was able. I therefore conclude that no additional adjustment for the period between 2008 and 2016 is appropriate.
Adjustments for expenses?
[23] As noted the adjustments proposed by Perpetual Guardian are linked to Philip’s occupation of the Campbell Road property after Christina’s death. Quite clearly after Christina passed away Philip had no ongoing right to remain in occupation of the Campbell Road property and therefore had no basis to oppose his eviction once the Trustee required him to vacate the premises. Given that position, there seems little doubt that Philip’s complaint to FSCL was a collateral strategy to prevent the eviction, noting in particular, that the complaint was made after Philip was requested to leave the Campbell Road property and the complaint identified specific issues with Perpetual Guardian’s actions requiring Philip Heath to begin to “evacuate the Trusts’ premises” and to sell both the Campbell Road and East Coast Bays Road properties.
[24] In the circumstances, I am satisfied that the Trustee would not have incurred the costs of either the eviction and or in responding to the FSCL complaint had it not been for Philip’s actions, and that an adjustment is warranted in respect of both issues.
[25] With regard to the quantum of that adjustment, and in the absence of any contrary figures, I accept Perpetual Guardian’s estimate of the costs incurred and agree with Mr Phillipps on behalf of Greg and Chris that there is no basis for any reduction other than that required to recognise Philip’s own share in the Trusts’ assets. On the contrary it is appropriate that Greg and Chris be given an adjustment equivalent to 2/3 of the total estimated costs of the eviction and response to the FSCL complaint to reflect the diminution of value of the Trusts’ assets caused directly by Philip Heath’s actions, a total of $60,000, or $30,000 each.
[26] The total adjustment in favour of Greg and Chris in respect of the rental and costs issues is therefore $76,000 or $38,000 each.
Issue Three – what should happen to the chattels held by the Trusts?
[27] As the background section has made clear, the chattels previously situated in the Campbell Road and East Coast Bays Road properties have been kept in storage since the properties were sold. As neither Greg nor Chris claim any of the items remaining in storage, Perpetual Guardian seeks directions as to what should occur if
Philip continues to decline to take any action or otherwise does not wish to take all of the chattels remaining.
[28] In response Philip has advised the Court that he has no home to receive the chattels that are held in storage and he remains of the view that the chattels should continue to be stored at Perpetual Guardian’s expense until the properties have been restored to the Trusts. However, as has been previously noted, this is neither a practical option, nor one before the Court for determination. In those circumstances it is difficult to see on what basis it can make sense for the Trusts to continue paying for the indefinite storage of the chattels if they are not to be ultimately claimed by either Greg, Philip or Chris.
[29] As I discussed with Philip at the hearing the most practical option is to direct Perpetual Guardian to continue to get the Trusts to pay for storage for a further finite period in order to give Philip a chance to consider which, if any of the chattels, he wishes to take. If at the end of the period there are chattels remaining in storage Philip will then have the option of taking responsibility for the storage costs himself, but if at that time he declines to do so, Perpetual Guardian will then be free to dispose of the chattels as it sees fit.
[30] Having had the opportunity to consider the issue further since the hearing I am satisfied that this remains the most practical option. Noting the time that has elapsed since the hearing, I consider the following process should be adopted:
(a)Perpetual Guardian are to continue responsibility for the storage of the chattels until 30 October 2020, unless the chattels are removed by Philip in the meantime or Philip otherwise advises Perpetual Guardian in writing he no longer wishes to claim any of the chattels held in storage.
(b)In the event that Philip wishes to take possession of the chattels, but is unable to uplift them prior to 30 October 2020 he is, prior to 30 October 2020, to make arrangements with Perpetual Guardian to take responsibility for the ongoing storage from 31 October 2020.
(c)In the event that Philip advises that he no longer wishes to claim any of the chattels remaining in storage or has otherwise not made arrangements to take responsibility for the chattels from 31 October 2020, Perpetual Guardian will be entitled to dispose of the remaining chattels on such conditions as it sees fit.
Issue Four – should the Trusts be wound up?
[31] As with the other orders there is in fact no formal opposition to the Trusts being wound up as per Perpetual Guardian’s proposal. It will be apparent that once the Trusts’ monies have been distributed and the chattels disposed of in accordance with the process set out in the preceding section there will be no reason for the Trusts to thereafter remain in existence. As a result, the only practical outcome is to confirm that the Trusts should be wound up as soon as possible after 30 October 2020 once the Trusts’ assets have been distributed.
Decision
[32] For the reasons set out above I therefore order Perpetual Guardian as Trustee of the Douglas Heath Family Trust and Christina Heath Family Trust:
(a)to distribute, sell or otherwise dispose of the chattels, using the following process:
(i)Perpetual Guardian are to continue responsibility for the storage of the chattels until 30 October 2020, unless the chattels are removed by Philip in the meantime or Philip otherwise advises Perpetual Guardian in writing he no longer wishes to claim any of the chattels held in storage.
(ii)in the event that Philip wishes to take possession of the chattels, but is unable to uplift them prior to 30 October 2020 he is, prior to 30 October 2020, to make arrangements with Perpetual Guardian to take responsibility for the ongoing storage from 31 October 2020.
(iii)in the event that Philip advises that he no longer wishes to claim any of the chattels remaining in storage or has otherwise not made arrangements to take responsibility for the chattels from 31 October 2020, Perpetual Guardian will be entitled to dispose of the remaining chattels on such conditions as it sees fit.
(b)after paying all debts, liabilities and expenses of the Trusts, to distribute the remaining income and capital of the Trusts to Chris, Greg and Philip, taking into account Philip’s adjustment in the amount of
$76,000, in the following shares:
(i)distribute Philip’s adjustment in equal shares to Chris and Greg being an amount in recognition of the benefits received by Philip and/or costs incurred by the Trust as a result of Philip’s conduct.
(ii)distribute the remaining trust funds equally between Chris, Greg and Philip, subject to Chris and Greg’s spouses and children confirming to the trustee that they do not seek a separate interest to their husband or parent.
(c)to be indemnified by and out of the Trust Funds in respect of the Trustee’s costs and legal costs, and the named beneficiaries shall also be indemnified by and out of the Trust Funds in respect of legal advice and legal costs incurred in relation to the High Court proceeding; and to
(d)wind up the Trusts upon the completion of [32] (a)-(b) above.
[33] Leave is reserved for Perpetual Guardian to apply for any orders necessary to give effect to this judgment.
Powell J
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