Nyhoff v Atkins
[2021] NZHC 2238
•27 August 2021
IN THE HIGH COURT OF NEW ZEALAND GISBORNE REGISTRY
I TE KŌTI MATUA O AOTEAROA TŪRANGANUI-A-KIWA ROHE
CIV-2020-416-12
[2021] NZHC 2238
UNDER the Trustee Act 1956 BETWEEN
MARK NYHOFF
Plaintiff
AND
KIRITEA ATKINS
Defendant
KIRITEA ATKINS AND MARK NYHOFF
as trustees of the Pakiri Family Trust
On the Papers Counsel:
J D Allen for the Plaintiff
N A Farrands for the Defendant
Judgment:
27 August 2021
JUDGMENT OF GWYN J
[1] The plaintiff, Mr Mark Nyhoff, and the defendant, Ms Kiritea Atkins, are the trustees of the Pakiri Family Trust (the Family Trust).
[2] Mr Nyhoff seeks orders removing Ms Atkins as a trustee of the Family Trust, and appointing a trustee company in her place.
[3] Mr Nyhoff also seeks, in the alternative, review of Ms Atkins’ decision in relation to a property owned by the Family Trust, and the making of consequential orders.
NYHOFF v ATKINS [2021] NZHC 2238 [27 August 2021]
Background
[4] Mr Nyhoff and Ms Atkins were in a de facto relationship from 2008 to September 2018. During that relationship they settled the Family Trust. The only asset of the Family Trust is a property at 406 Matokitoki Valley Road, where the couple lived in the later stages of their relationship.
[5] After the breakdown of the parties’ relationship, relationship property proceedings were heard in the Family Court at Gisborne,1 and subsequently appealed by Mr Nyhoff to the High Court (the appeal).
[6] The parties arrived at a settlement of the appeal, which was recorded in a joint memorandum of counsel on 17 February 2021 and noted in a minute of Ellis J on the same date.
[7] One of the terms of that settlement was that Ms Atkins consented to being removed as a trustee and beneficiary of the Pakiri Business Trust.
[8] On 3 June 2021, Mr Nyhoff sought, in addition, the removal of Ms Atkins as a trustee of the Family Trust. Ms Atkins opposed the application, on the basis that she did not consent to that in the settlement of the appeal, although she had consented to being removed from the Pakiri Business Trust.
[9] By memorandum of 9 August 2021, counsel for Ms Atkins advised that, although she would prefer to remain as a trustee of the Family Trust, the costs of opposing the application precluded her from doing so and she would therefore consent to the orders sought.
[10] Accordingly, on 16 August 2021, Mallon J directed that the application be determined on the papers, on an undefended basis. Justice Mallon also directed that Mr Nyhoff was to file a memorandum of counsel setting out the facts and the law that support the orders sought by 23 August 2021.
1 Nyhoff v Atlkins [2020] NZFC 4180.
Originating application
[11] On the eve of the file being put before me, Mr Nyhoff filed an interlocutory application without notice to commence the proceeding by way of originating application. Although dated 20 August 2021, the originating application was received by the Court on 23 August 2021. It appears from the memorandum of counsel for Ms Atkins that the application was received by her also on the afternoon of 23 August 2021.
[12] The accompanying memorandum of counsel for Mr Nyhoff sets out the grounds on which the orders in the application are sought. It also seeks that the costs of the proceedings, including for the originating application, be paid from the proceeds of sale of the Family Trust property.
[13] The application for leave to commence the originating application is opposed by Ms Atkins. By memorandum of 24 August 2021, Ms Atkins’ counsel notes the application of 3 June 2021 that was served on Ms Atkins was an interlocutory application filed in this appeal. It was not an originating application and made no reference to being an originating application. Ms Atkins consented to the application in the form it was sought on 3 June 2021. That application did not seek costs, and Ms Atkins opposes an award of costs.2
[14] It is not clear from the originating application or the accompanying memorandum of counsel why leave is being sought to file an originating application at this point; nor is it clear how the originating application is intended to relate to the existing interlocutory application dated 3 June 2021, which is the application that Mallon J directed be heard on an undefended basis.
[15] Rules 19.2, 19.3 and 19.4 of the High Court Rules 2016 provide for specific circumstances in which the originating application procedure must or may be used. This application is made pursuant to ss 112, 114, 126 and 127 of the Trusts Act 2019 and is not within rr 19.2-19.4.
2 By memorandum of counsel dated 9 August 2021.
[16] Rule 19.5 allows the Court to permit the use of an originating application to commence proceedings in addition to those specified in rr 19.2-19.4, if it is in the interests of justice to do so. The interests of justice mean that the Court must secure the just, speedy, and inexpensive determination of the proceeding in considering an application under r 19.5. As the Court said in Solar Bright:3
… resort to r 19.5 is to be exceptional rather than so common place that it becomes the rule that leave is granted. … it is the interests of justice which this Court must apply as the overarching test.
[17] In the absence of any explanation as to why leave has been sought to proceed by way of originating application, and how it is intended that the originating application relates (if at all) to the 3 June 2021 application, I conclude that it is not in the interests of justice to grant leave for a proceeding to be commenced by originating application. I decline leave accordingly.
This application
[18]I turn now to the 3 June 2021 application.
[19] The application is made pursuant to ss 112, 114, 126 and 127 of the Trusts Act 2019 (the Act). That application seeks two orders:
(a)removing Ms Atkins as a trustee of the Family Trust; and
(b)appointing BGL Trustee 2012 Limited as a trustee of the Family Trust.
[20]The application also seeks, in the alternative, that:
(a)The Court review Ms Atkins’ decision to not sign the agreement to sell the Matokitoki Valley Road property to the Morrells; and
(b)If the Court finds that the refusal to sign that agreement was not reasonable, orders:
3 Solar Bright Lmtd v Martin [2019] NZHC 300 at [18] and [26].
(i)as are necessary to sell Matokitoki Valley Road; and
(ii)to divide the balance of the proceeds of sale equally between Mr Nyhoff and Ms Atkins.
[21]The application is supported by two affidavits:
(a)affidavit of Mark Nyhoff, dated 27 April 2021; and
(b)affidavit of David Egan, dated 28 April 2021.
[22] Mr Nyhoff’s affidavit explains that during the time he was in a de facto relationship with Ms Atkins they settled the Pakiri Family Trust. Pursuant to the Deed of Trust dated 9 May 2018, Mr Nyhoff and Ms Atkins are the only trustees. They are also the beneficiaries of the Family Trust. Mr Nyhoff’s evidence is that he and Ms Atkins agreed that the Court could treat the Family Trust as if it were relationship property and make orders as to its classification and division.
[23] Mr Nyhoff deposes that the only asset of the Family Trust is the Matokitoki Valley Road property, where the couple lived in the later stages of their relationship. After they separated, Ms Atkins had sole use of the Matokitoki Valley Road property. Mr Nyhoff says that the Matokitoki Valley Road property is the subject of a mortgage with ASB, securing lending of over $900,000. He says that after the relationship ended the loan repayments to ASB continued to be made from a business that Mr Nyhoff and Ms Atkins had established during the relationship. Ms Atkins was not working in the business after the separation.
[24] Mr Nyhoff notes that in the settlement of his appeal against the Family Court judgment in the relationship property proceeding, Ellis J observed that the Matokitoki Valley Road property was to be the subject of an “imminent sale” and the proceeds of sale were to be divided equally between Mr Nyhoff and Ms Atkins.4 At that time, the Court was informed that there were active negotiations with a prospective buyer of the property, the Morrells.
4 Minute of Ellis J of 17 February 2021, at [5].
[25] Mr Nyhoff also deposes that, at the time he swore his affidavit on 27 April 2021, ASB had advised him that the loan repayments had not been made and the loan was now in default, with arrears
[26] Mr Egan is a real estate agent engaged by Mr Nyhoff and Ms Atkins to market the Matokitoki Valley Road property. In his affidavit, Mr Egan discusses a conditional contract for purchase of the property entered into by the Morrells, but records that (as at the time of swearing his affidavit on 28 April 2021) the contract had not been signed by Ms Atkins, and an evaluation of the house the Morrells had sought to conduct (for finance purposes) had not taken place because the sale agreement had not been signed by Ms Atkins.
[27] Ms Atkins has not filed any evidence in response. Counsel for Ms Atkins advises that the delays in the sale of the Matokitoki Valley Road property have been due to Ms Atkins’ ill-health and her desire, as a beneficiary of the Family Trust, to purchase the property if possible. However, she has not been able to obtain funding to support an offer to purchase, and she recognises that the property needs to be sold.
[28] Through her counsel, Ms Atkins expresses a concern that the trustees ensure that the best possible price is obtained for the Matokitoki Valley Road property, and she proposes that it would be prudent to obtain a current valuation before the trustees consider entering into any sale and purchase agreement.
[29] Counsel for Mr Nyhoff confirms that Ms Atkins has proposed a valuer and Mr Nyhoff has instructed counsel that he will, as a trustee, obtain a registered valuation to ensure the best possible price is obtained for the beneficiaries of the trust.
Discussion
[30] The Court will exercise its power to remove a trustee if satisfied it is necessary to do so in the interests of the beneficiaries of the trust and difficult or impracticable to do so without the assistance of the Court.5
5 Trusts Act 2019, s 112. See, for example, Taylor v Taylor [2021] NZHC 992.
[31] On the evidence before me I am satisfied the threshold is met. Ms Atkins has now, albeit reluctantly, consented to the making of the order, but for completeness I have also had regard to the history of the matter prior to her consent, as set out in the affidavits of Mr Nyhoff and Mr Egan, and as advised by Ms Atkins’ counsel.
[32] The terms of the Family Trust Deed require the trustees to act unanimously.6 I am satisfied that there has been, and might in the future be, an impasse if Ms Atkins remains a trustee of the Family Trust. That is not unusual in the context of the end of a relationship, but it is important because it appears that addressing the Family Trust’s liabilities, to ASB, is now a matter of some urgency.
[33] The Family Trust Deed also requires that there must at all times be at least two trustees. Any removal of a trustee will be ineffective unless and until there are at least two trustees holding office.7 Mr Nyhoff has sought the appointment of BGL Trustee 2012 Limited, a trustee company incorporated by the parties’ accountant, once Ms Atkins is removed as trustee. I am satisfied that is appropriate.
[34] I note that any trustee must be impartial and act in the best interests of all beneficiaries. In this case, those beneficiaries are both Mr Nyhoff and Ms Atkins. I note that counsel for Mr Nyhoff has assured the Court of Mr Nyhoff’s intention that the trustees will obtain a current registered valuation of the Matokitoki Valley Road property, as requested by Ms Atkins, to ensure that the best possible price is obtained for the beneficiaries on the sale of the property.
[35] Because of the conclusions I have reached, it has not been necessary for me to consider the alternative orders sought by the applicant pursuant to ss 126 and 127 of the Trusts Act.
Orders
[36]I make the following orders.
6 Trust Deed, cl 18.1.
7 Trust Deed, cl 16.5.
(a)First, pursuant to s 112 of the Trusts Act 2019, I remove Kiritea Atkins as a trustee of the Pakiri Family Trust.
(b)Second, pursuant to s 114 of the Trusts Act 2019, I appoint BGL Trustee 2012 Limited as a trustee of the Pakiri Family Trust.
Costs
[37] Last, I address the issue of costs. As I have already noted, the memorandum of counsel accompanying the application for leave to commence an originating application includes a claim for costs, although costs had not been previously sought on this application and were not part of what Ms Atkins had agreed to.
[38] I observe that it is not on the face of it unreasonable for Mr Nyhoff to seek the costs of this application to remove and appoint a trustee, and for these costs to be paid from the proceeds of sale of the Family Trust property on a schedule 2B basis. However, in light of my conclusion about the originating application,8 it is not reasonable to seek costs in relation to the originating application. I reserve leave to apply on the issue of costs.
Gwyn J
Solicitors:
Woodward Chrisp, Gisborne Morrison Kent, Auckland
8 At [17] above.
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