Oldfield v Oldfield
[2020] NZHC 1401
•22 June 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV 2018-419-000261
[2020] NZHC 1401
UNDER the Property (Relationships) Act 1976 and the Family Proceedings Act s 182 and the Companies Act 1993 IN THE MATTER
of an application under Section 51 of the Trustee Act 1956
BETWEEN
DOROTHY ANN OLDFIELD
Plaintiff
AND
KENNETH DAVID OLDFIELD
First Defendant
THE NEW ZEALAND GUARDIAN
TRUST COMPANY LIMITED as trustee of THE DAVID OLDFIELD FAMILY TRUST
Second Defendant
DEMOLITION TRADERS LIMITED
Third DefendantPERPETUAL TRUST LTD as trustee of
THE DAVID OLDFIELD FAMILY TRUSTFourth Defendant
Hearing: 6 March, 2020, 17 March 2020, 21 April 2020 Appearances:
A Grant for Plaintiff
P Morgan QC and Z Mora for First Defendant V Bruton QC for Second Defendant
Judgment:
22 June 2020
JUDGMENT OF DUFFY J
This judgment is delivered by me on 22 June 2020 at 11:30am pursuant to r 11.5 of the High Court Rules.
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Registrar / Deputy Registrar
OLDFIELD v OLDFIELD [2020] NZHC 1401 [22 June 2020]
[1] The key issues for determination in the recent hearing before me in March 2020 are: (a) should an advisory trustee be appointed and if so who should that be;
(b) compensation for legal fees paid by Mr and Mrs Oldfield; (c) whether an equalisation of legal fee distributions should be made; (d) whether independence payments for Mr and Mrs Oldfield should be made.
[2] The trust deed requires modification; however, this is something that can be done as a final step in completing this proceeding.
Appointment of advisory trustee
[3] Mr Oldfield favours the appointment of an advisory trustee who is a professional person with no connections to the Oldfield family.
[4] Mrs Oldfield favours the appointment of an advisory trustee and for her son John Oldfield to assume this role.
[5] The appointment of an advisory trustee was recognised in principle in the judgment I delivered on 13 January 2020 (the January judgment).1 At the time of delivery Mr Oldfield was seeking such appointment. Mrs Oldfield did not oppose the idea and the Guardian Trust supported the idea.
[6] However, when the hearing before me resumed I learned that Perpetual Trust Limited (Perpetual) which has now assumed the role of sole trustee no longer supports the appointment of an advisory trustee.2 The change of stance has largely been brought about through concerns that the finances of the David Oldfield Family Trust (DOFT) would be unnecessarily reduced by the costs of an advisory trustee. Further, since the January judgment, which confirmed the appointment of Perpetual’s predecessor Guardian Trust as sole trustee of a single trust rather than the two mirror trusts sought by Mr Oldfield, the trustee (either in the form of Guardian Trust or Perpetual) has been
1 See Oldfield v Oldfield [2020] NZHC 8 at [63].
2 See Re The New Zealand Guardian Trust Company Limited [2019] NZHC 2548 in which Lang J made orders allowing for Perpetual to assume the trusteeship role of private clients/trusts for which New Zealand Guardian Trust (Guardian Trust) formerly held this role; those clients included the David Oldfield Family Trust.
able to manage the trust assets with a far greater degree of confidence than it had when acting under the appointment order made by van Bohemen J.3
[7] An important task to be undertaken by the trustee is the appointment of new directors to Demolition Traders Limited (DTL). Perpetual considers it has this task in hand and can effectively perform it without input from an advisory trustee. At the hearing I was advised that Perpetual’s resources to locate suitable candidates for appointment as directors are extensive and equal to, if not better than, those that would be available to a professional person appointed as advisory trustee.
[8] Growing concerns that the DOFT will earn less income from DTL in the future mean additional costs need to be avoided wherever possible. Such concerns coupled with the change of stance by the sole trustee constitute material changes of circumstances, which alter the context in which appointment of an advisory trustee is to be considered. Accordingly, I find the question of whether to appoint an advisory trustee now warrants revisiting.
[9] An advisory trustee in the form of a professional person is going to charge the DOFT for his or her services. While the sole trustee (then Guardian Trust) considered it would be assisted by the presence of an advisory trustee, this was a factor that supported Mr Oldfield’s request for an advisory trustee. However, now the sole trustee (Perpetual) has expressed concern about the cost of an advisory trustee and it is confident that it can perform its task as sole trustee unassisted by the services of an advisory trustee, I now see less need for an advisory trustee, and am concerned about how the costs of appointing a professional to this role may impact adversely on the DOFT.
[10] Mr Oldfield contends there is a clear need for an advisory trustee who is independent of Perpetual. However, other than arguing that two heads are better than one Mr Oldfield has provided no solid reason to support this contention. Whilst initially attracted to this idea (in the January judgment) I now reject it.
3 Oldfield v Oldfield [2019] NZHC 492.
[11] Like the Guardian Trust, Perpetual is a Trustee Company within the meaning of s 2 of the Trustee Companies Act 1967. It is subject to the provisions of that Act and the Trustee Companies Management Act 1975. The argument two heads are better than one can hold up for individuals, but when it is made in respect of a statutory trust company it carries much less force. Initially, I had thought an advisory trustee in the form of a local professional person may have something to contribute and might have been able to assist with identifying suitable persons to replace DTL’s directors. However, in an affidavit Margot Pienaar, the former client manager for Guardian Trust and now the client manager for Perpetual, has described the process that Perpetual is undertaking to identify suitable candidates and appointees. Her evidence informs me that Perpetual has the experience and resources to perform this task appropriately.4 Perpetual’s substitution for Guardian Trust will create no specific issues for the DOFT because both Guardian Trust and Perpetual are effectively owned by the one parent company and I am told the day-to-day work relating to the DOFT will remain with the same persons.5 Thus, I cannot now see how a professional person as advisory trustee will be an essential contribution to the operation of the DOFT.
[12] Mrs Oldfield wants her son John Oldfield to be appointed as an advisory trustee. He will not charge for his services, so the concern about additional costs that Mr Oldfield’s proposal triggered is not relevant here. She considers the DOFT would benefit from a family member being an advisory trustee. However, John Oldfield’s appointment is opposed by Mr Oldfield.
[13] When John Oldfield was suggested as a possible trustee of the DOFT by Mrs Oldfield, van Bohemen J rejected this idea. Whilst an advisory trustee does not have the same degree of control as a trustee, an advisory trustee is nevertheless in a position of influence. I consider the fractures between members of this family to be such that it is preferable if the operation of the DOFT is carried out by persons independent of the Oldfield family. Since the appointment of the Guardian Trust the presence of one neutral trustee has worked very well and much has been achieved for the benefit of the DOFT and its beneficiaries. I would not want to see the prospect of
4 Margot Pienaar has been the person responsible for the day-to-day operation of the DOFT since the appointment of the Guardian trust as trustee. She retains this position since Perpetual took over the role of trustee.
5 See Re The New Zealand Guardian Trust Company Limited [2019] NZHC 2548 at [3].
future benefits from this appointment placed at risk through the controversial inclusion of a family member, even in the more minor role of advisory trustee.
[14] To date the appointment of Guardian Trust and now Perpetual appears to have allowed the DOFT to operate smoothly and effectively. Since those appointments the necessary sale of trust assets has happened, and a family home purchased for Mrs Oldfield. Advances from DOFT funds have been made to Mr and Mrs Oldfield and these have enabled them to pay debts they owe. I do not want a controversial appointment to the role of advisory trustee to hinder the good progress that has been made since the orders made by van Bohemen J and the orders I have made either by consent or in the January judgment.
[15] In an affidavit sworn on 20 February 2020 Mrs Oldfield sets out several reasons to support John Oldfield’s appointment. I have carefully considered those reasons, however, I am not persuaded by them. I acknowledge that John Oldfield’s business experience and his knowledge of the family business carried on by DTL mean he can contribute in an advisory capacity to Perpetual’s exercise of its role as trustee. However, he can contribute in that way just as readily through his role as a beneficiary of the DOFT. In this regard Perpetual has advised that it attempts to consult all beneficiaries before making significant decisions affecting the DOFT. It says it can seek advice and will be doing so from John Oldfield in his role as a beneficiary of the DOFT. Thus, advisory input from John Oldfield will be available to Perpetual whether he is an advisory trustee or not.
[16] I acknowledge the DOFT deed provides for the appointment of an advisory trustee, but that was in circumstances where the appointment of a statutory trust company like Guardian Trust and Perpetual was not contemplated. Whilst there may be a time in the future when circumstances then prevailing warrant the appointment of an advisory trustee, I do not see that being so now.
[17] The present choices of persons to appoint as an advisory trustee carry with them either the potential to impose unnecessary costs on the DOFT or the prospect of being a potential complication for the smooth running of the DOFT’s affairs. On the other hand, no-one has complained about the conduct of either Guardian Trust or
Perpetual as sole trustee, nor is there scope to do so. Accordingly, I am now persuaded that no advisory trustee should be appointed. There is no-one in my view who is suitable to take on this role without being either an undue cost to the DOFT or a risk of further disputes between beneficiaries.
Payment of parties’ legal costs by DOFT
[18] The parties did not oppose the legal costs of each being paid from the DOFT funds. I consider it is appropriate that the DOFT pay for those costs. The costs come to $108,463.25 for Mr Oldfield’s legal costs and $310,516.39 for Mrs Oldfield’s legal costs. I direct the DOFT should pay those costs from the trust funds.
Payment of equalisation sum
[19] Mr Oldfield’s legal costs are significantly lower than those of Mrs Oldfield. This has prompted Mr Oldfield to seek an equalisation payment.
[20] Since the hearing Perpetual has filed memoranda which informs the Court that the financial health of the DOFT is not as good as initially thought. DTL is the source of the DOFT’s income and DTL has no expectation of paying dividends in the future. Ms Pienaar has sworn an affidavit in which she deposes that the regular monthly dividend payment from DTL to the trust of $50,000 may not continue. In recent times, she says those payments have become sporadic. One of DTL’s present directors Mr Qualtrough has advised her that on 28 February 2020 the directors approved a final dividend for the year of $150,000 of that $50,000 had been paid and $100,000 was to be paid by 31 March 2020. After that there could be no certainty of future dividend payments. Mr Qualtrough has also advised that the land and buildings from which DTL operates (being owned by the DOFT) is likely to require expenditure for upkeep which is estimated to be about $220,000. This advice has led Perpetual to submit a buffer of not less than $480,000 should be maintained, given what Perpetual perceives to be an uncertain business environment. Otherwise Perpetual is neutral on the question of an equalisation payment.
[21] Since then Ms Bruton QC, counsel for Perpetual, has filed a memorandum advising that since the Covid-19 level four lock down DTL will make no dividend payments for the first six months of the financial year commencing 1 April 2020 and that target sales will reduce by about $1million in this financial year, which she describes as an optimistic target.
[22] Obviously, the difficulties the DOFT experienced before the appointment of the Guardian Trust as trustee and the impact these had on the management of DTL, in particular the delay of the appointment of new directors, have adversely impacted on DTL. Then there is the general economic situation, the adverse local impact on business of the Covid-19 lockdown and the ongoing economic uncertainties caused by this pandemic. Payment of an equalisation sum will be a drain on the DOFT’s funds at a time when it needs to maintain capital reserves.
[23] Mr Oldfield’s counsel, Mr Morgan QC, has filed submissions setting out his analysis of the available cash funds. He concludes that the DOFT as at 31 March 2020 should have funds of about $1,099,256.32. So once the $480,000 is maintained as working capital there should be sufficient surplus funds for the Court to order the payments sought by Mr Oldfield. But at the same time Mr Morgan concedes later in his submissions that that it is becoming increasingly apparent that cash independence payments for Mr and Mrs Oldfield from the trust “will be very challenging”. This is not consistent with his earlier submissions. Accordingly, I do not find Mr Morgan’s calculations to be reliable or helpful. It is not clear to me whether they account for all the expenditure the DOFT currently faces. Further, Ms Pienaar’s affidavit outlining the uncertainty about future DTL dividends, which are the DOFT’s only source of income for the DOFT, leaves me to think that the buffer of $480,000 may be insufficient, particularly given the current economic uncertainties, and that for the moment no trust funds should be expended where there is a choice not to do so.
[24] Moreover, I can see no principled basis for an equalisation payment. It is often the case in litigation that one party’s costs exceed the other. Typically, a plaintiff’s costs will exceed a defendant’s costs. Whilst it is usual for a trust to fund the costs of litigation where disputed matters arise, I am not familiar with the idea that where one party has spent less on legal costs than another it should as part of the general
reimbursement of legal costs receive an additional payment in the form of an equalisation payment. The purpose of such payment has nothing to do with actual costs incurred. Whilst it may ostensibly appear to treat to beneficiaries the same by giving them the same distribution in substance it does not; instead one receives funds to clear a debt owed to a third party whereas the other receives a windfall benefit to spend as he or she chooses.
[25] Mr Morgan has not referred me to an authority that would provide a principled basis for making an equalisation payment. Indeed, such payment seems to me to be contrary to general principle, because it entails a payment to one beneficiary relevant to legal costs despite the payment being in excess of the legal costs that beneficiary has incurred. Rather than being a payment of costs incurred it would give Mr Oldfield a windfall payment simply because Mrs Oldfield has spent more on her legal costs than he did. I have doubts that such a payment is appropriate in principle, and I am certain that here, given the financial concerns identified by Perpetual no such payment should be ordered.
Independence payments
[26] Independence payments of $250,000 each for Mr and Mrs Oldfield are sought. Perpetual advises that Mr and Mrs Oldfield have now received payment for the sale of their shares in DTL to Perpetual. Each has received a cash payment of $133,000. Perpetual submits that there is no need for independence payments to Mr and Mrs Oldfield because they will achieve independence through the sale price for their shares and through the DOFT paying their legal costs. The latter means they do not have to use the sale price proceeds to pay debt.
[27] Mr Oldfield accepts that an independence payment may be challenging for the DOFT and now suggests that instead ownership of the house he occupies, which is presently held by the DOFT, should be transferred to him. I do not propose to order the transfer of trust assets to beneficiaries. That would require me to consider how Mrs Oldfield should be treated and how the other beneficiaries would be affected. At present Mr Oldfield has a home to live in free of charge as does Mrs Oldfield. To
order the transfer of a significant trust asset to him would make a material change to the trust’s assets.
[28] Mrs Oldfield had sought an independence payment, but no longer does now she has seen the affidavit evidence of Ms Pienaar.
[29] I consider it would be wrong to order cash independence payments now. In the January judgment, I expressed some sympathy with the predicament of Mr and Mrs Oldfield since they ceased to be able to work together as trustees.6 On the other hand, it would be futile if not dangerous to consider ordering cash independence payments when the financial circumstances of the DOFT are uncertain, and the current economic times are generally uncertain. Both Mr and Mrs Oldfield appear to recognise this. It also needs to be remembered that they now have each received
$133,000 and they face no significant financial demands. Thus, their personal financial circumstances have improved since delivery of the January judgment.
[30] As beneficiaries Mr and Mrs Oldfield are entitled to request cash payments from the DOFT. I consider that is now the best option for them to obtain such payments. Accordingly, I propose to make no orders for independence payments.
Future legal costs
[31] Mr Oldfield seeks to have future legal costs met by the DOFT. Neither Perpetual or Mrs Oldfield agree with that approach. I consider future costs should be dealt with on a case by case basis.
[32] The orders made herein that the DOFT pay outstanding legal costs or reimburse each of them for legal costs they have paid to date mean there is no need for the Court to address costs awards relevant to the January judgment or the judgment of van Bohemen J.
[33] Leave is reserved to address this issue further by memoranda should a need to do so arise.
6 See Oldfield v Oldfield [2020] NZHC at [65].
Modification of trust deed
[34] The parties have filed submissions on modification of the DOFT deed. Insofar as they are agreed on certain modifications they should file memoranda outlining the extent of the agreement. Areas of dispute should also be identified. At the hearing the parties mentioned changing the name of the DOFT. That is something that can also be addressed in the context of modifying the trust deed.
Result
[35]No order is made for the appointment of an advisory trustee.
[36]Perpetual is to pay from the funds of the DOFT Mrs Oldfield’s legal costs of
$310,516.39 and Mr Oldfield’s legal costs of $108,463.25.
[37]No equalisation payment is ordered to be paid to Mr Oldfield.
[38]No independence payments are ordered for to either Mr or Mrs Oldfield.
[39] Future legal costs are to be determined on a case by case basis. Leave is reserved to the parties to return to Court on this subject should the need to do so arise.
[40] Modification of the DOFT is to be determined later once all other matters are resolved.
[41]The parties have leave to file memoranda on costs for the March 2020 hearing.
Duffy J
Solicitors/Counsel:
Neverman Bennett, Hamilton McCaw Lewis, Hamilton
Norris Ward McKinnon, Hamilton Grayson Clements Ltd, Hamilton
Anthony Grant Barrister, Auckland Philip Morgan QC, Hamilton
Vanessa Bruton QC, Auckland
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