Paleae v Paleae
[2017] NZHC 2007
•22 August 2017
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2017-404-000193
[2017] NZHC 2007
UNDER the Trustee Act 1956 BETWEEN
TINA KRISTINA PALEAE AND ANATASIA SIAUINI AS TRUSTEES OF THE PALEAE NUMBER 2 FAMILY TRUST
Plaintiffs
AND
MOANA PALEAE, TIANA PALEAE, IOANE PALEAE AND TINA PALEAE AS TRUSTEES OF THE PALEAE FAMILY TRUST
Defendants
Hearing: 16 August 2017 Appearances:
O Woodroffe for Plaintiffs
No appearance for Defendants
Judgment:
22 August 2017
INTERIM JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie On 22 August 2017 at 11.30am
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors:
Woodroffe Lawyers, Auckland
PALEAE v PALEAE [2017] NZHC 2007 [22 August 2017]
Introduction
[1] The plaintiffs – Tina Kristina Paleae (“Kristina”) and Anatasia Siauini (“Ann”) – seek an order appointing them as substitute trustees of the Paleae Family Trust under s 51 of the Trustee Act 1956. In the alternative, they seek an order vesting the legal interest of the fourth named defendant – Tina Paleae (“Tina”) – in a property in Auckland into the names of the other three defendants as trustees of the Paleae Family Trust.
[2] The proceedings were served on the first to third named defendants – Moana Paleae (“Moana”), Tiana Paleae (“Tiana”) and Ioane Paleae (“Ioane”) on 17 February 2017. An affidavit of service has been filed.
[3] Tina lives in Australia. The plaintiffs attempted to serve her, but were unable to do so. An order for substituted service was made by Associate Judge Christiansen on March 2017. Service has been effected on Tina pursuant to that order, and there is an affidavit to that effect on the Court file.
[4]None of the defendants have taken any steps in the proceeding.
[5]This matter has proceeded by way of formal proof.
Introduction
[6] Kristina and Ann are trustees of a trust known as the Paleae Number Two Family Trust.
[7] In 1999, Kristina and Ann purchased a property in Bernard Street, Mt Wellington. They jointly paid the deposit and the balance of the purchase price was secured by way of mortgage. They lived in the property with their parents, Mr and Mrs Paleae senior.
[8] In 2005, Kristina and Ann refinanced the Bernard Street property. In order to obtain approval to the refinancing, Ann’s husband – Lefifi Siauini (“Lefifi”) – and Kristina and Ann’s brother, Iese Paleae (“Iese”) became joint owners of the property.
[9] Also in 2005, three of the defendants, Moana, Tiana and Tina migrated from Samoa to New Zealand. They came to live in the Bernard Street property. The other defendant, Ioane, also came to live in the property in about June 2006.
[10] The plaintiffs and the defendants were cousins. In about 2006/2007, the defendants were adopted by Mr and Mrs Paleae senior.
[11] By August 2007, it had become clear that the Bernard Street property was overcrowded. The decision was made within the family that an additional property should be purchased. The family found a new property in Plumley Crescent, Mangere.
[12] To fund the purchase, Kristina, Ann, Lefifi and Iese raised a loan over the Bernard Street property. They also needed to raise a mortgage over the Plumley Crescent property. The defendants were working at the time, and the only way the family could purchase the second property was if they were named as its owners, and they met the mortgage commitments. It was decided that a trust would be established– the Paleae Family Trust – and a trust deed was entered into on 29 August 2007. Each of the defendants – Moana, Tiana, Tina and Ioane – was named as a trustee. The beneficiaries were Mr and Mrs Paleae senior, their children and the children’s children.
[13] The Plumley Crescent property was purchased and registered in the names of the defendants. They owned it as trustees of the Paleae Family Trust.
[14] It was agreed that Kristina, Ann and their respective families would live at the Plumley Crescent property and be responsible for the mortgage repayments and outgoings on that property. The defendants were to live at the Bernard Street property and be responsible for the mortgage repayments and outgoings on that property.
[15] This agreement notwithstanding, the defendants remained in the Plumley Crescent property from August 2007 until February 2008. In February 2008, they
told Kristina, Ann and Mr and Mrs Paleae senior that they wanted to go their separate ways.
[16] A lawyer was instructed to disentangle the family arrangements. A further trust was set up – the Paleae Number Two Family Trust. Kristina and Ann were appointed as trustees of this new trust, and, in May 2008, it was resolved to resettle both the Plumley Crescent property and the Bernard Street property on the Paleae Number Two Family Trust. A deed of resettlement was prepared and signed by all of the parties. In addition, individual client authorities and instructions for an electronic transaction were signed by the defendants. However, it was not lodged because difficulties arose with the mortgagees and in trying to refinance the properties.
[17] Since 2008, both Kristina and Ann and their families have been paying all of the mortgage repayments and other outgoings for both properties. None of the defendants has taken any responsibility for the properties, and there has been little contact between the parties.
[18] From time to time, Kristina and Ann and their families have had difficulty meeting the mortgage payments and they have fallen into arrears. None of the defendants has taken any steps to remedy these arrears. Kristina and Ann have sought to refinance the properties. Refinancing has been approved, but the defendants have refused to sign the required documentation.
Orders sought
[19] The primary order sought by Ms Woodroffe, appearing for Kristina and Ann, was an order under s 51 of the Trustee Act. It provides as follows:
51 Power of court to appoint new trustees
(1)The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
(2)In particular and without prejudice to the generality of the foregoing provision, the court may make an order appointing a new trustee in substitution for a trustee who—
(a)has been held by the court to have misconducted himself in the administration of the trust; or
(b)is convicted of a crime involving dishonesty as defined by section 2 of the Crimes Act 1961; or
(c)is a mentally disordered person within the meaning of the Mental Health (Compulsory Assessment and Treatment) Act 1992, or whose estate or any part thereof is subject to a property order made under the Protection of Personal and Property Rights Act 1988; or
(d)is a bankrupt; or
(e)is a corporation which has ceased to carry on business, or is in liquidation, or has been dissolved.
…
[20] Kristina and Ann both have standing to bring this application. They have a beneficial interest in the property subject to the trust at issue in this proceeding.1
[21] Before the discretion vested in the Court by s 51 can be exercised, the Court must find that it is “expedient to appoint a new trustee or trustees”. It then must find that it is inexpedient, difficult or impracticable to do so without the assistance of the Court.2
[22]The word “expedient” means:3
… conducive to, or fit or proper or suitable having regard to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee.
1 Trustee Act 1956, s 67(1).
2 Trustee Act, s 51. See also Attorney-General v Ngati Karewa and Ngati Tahinga Trust HC Auckland M2073/99, 5 November 2001 at [23].
3 Re Roberts (1983) 70 FLR 158 at 162, cited with approval in Re The CP Clifton Children’s Trust
HC Auckland CIV-2004-404-4185, 5 November 2004 at [33].
[23] In my view, it is expedient to appoint new trustees in this case. The defendants expressed their desire not to be involved in the Paleae Family Trust when they signed the deed of settlement. Further, the defendants have failed in their duties as trustees by failing to take steps to protect the trust property, for example, by failing to pay outgoings on the property.
[24] It is also, in my judgment, inexpedient, difficult or impractical to appoint new trustees, without the assistance of the Court. There is a power to appoint new trustees contained in the trust deed – clause 14. That power, however, is vested in one of the defendants – Ioane. Ioane and the other defendants have failed to respond to multiple requests to finalise the resettlement of the trust property. This failure has hindered the efforts of Kristina and Ann to refinance the properties, and thus to preserve them. It also appears that one of the existing trustees – Tina – has demanded money in exchange for her cooperation, despite earlier agreeing to the resettlement.
[25]The next issue is – who should be appointed to be the new trustees?
[26] I am satisfied that it is appropriate to appoint Kristina and Ann as trustees of the Paleae Family Trust. The Court’s task in appointing a new trustee under s 51 is to appoint the person or persons best suited to administer the trust in the circumstances prevailing.4 Kristina and Ann have, by necessity, and as the result of the defaults of the defendants, stepped in to administer the trust property. It is clear from the papers filed that the plaintiffs are best placed to administer the trust, in the interests of all beneficiaries, including the defendants.
[27] The power to appoint a new trustee in substitution for an existing trustee indirectly gives the Court jurisdiction to remove a trustee. The statutory power to remove by substitution should be exercised only in cases where it is expedient to do so and there is no dispute as to the facts.5 The power does not give the Court jurisdiction to remove a trustee against his or her will if that trustee is willing and able to continue.
4 Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 (CA) at 97.
5 Henderson v Henderson [1940] 1 Ch 764; Sapio v Carter [1959] NZLR 848 (SC).
[28] Subject to the difficulty I mention below, here I am satisfied that it would be appropriate to appoint Kristina and Ann as new trustees, in substitution for the existing trustees, Moana, Tiana, Ioane and Tina. There is no dispute as to the relevant facts. None of the existing trustees have taken any steps to challenge the present application or to dispute the facts deposed to by Kristina. There is nothing to suggest that any of the existing trustees wishes to continue as a trustee or is willing and able to do so.
[29] The Court also has an inherent jurisdiction to remove a trustee, which is ancillary to the Court’s principal duty to see that a trust is properly executed. In considering whether or not to exercise that jurisdiction, the Court would have regard to the welfare of the beneficiaries.6 Here, I would be prepared to exercise my inherent jurisdiction to remove the existing trustees. The trust property is potentially at risk if they are not removed, and Kristina and Ann are unable to refinance the properties.
[30] There is, however, a difficulty. The trust deed provides – clause 14.2 – that there are to be no fewer than four trustees. If I appoint Kristina and Ann as new trustees in substitution for Moana, Tiana, Ioane and Tina, the trust deed will be breached.
[31] Accordingly, while I consider it appropriate to order that the plaintiffs, Tina Kristina Paleae and Anatasia Siauini, be appointed as new trustees of the Paleae Family Trust, in substitution for the existing trustees – namely, Moana Paleae, Tiana Paleae, Ioane Paleae and Tina Paleae, I am not prepared to take that step unless the minimum number of trustees required by clause 14.2 is maintained.
[32] Much the same difficulty arises in terms of the alternative relief sought by Kristina and Ann. Any order vesting the legal interest of Tina in the property into the names of Moana, Tiana and Ioane as ongoing trustees of the Paleae Family Trust would also run foul of clause 14.2.
6 Hunter v Hunter [1938] NZLR 520 (CA).
[33] I invite counsel for the plaintiffs to file a memorandum advising how she proposes that this matter should be resolved.
[34] Counsel should note that I am out of the country from 26 August 2017 to 23 September 2017. I am prepared to deal with the matter on short notice if a memorandum can be filed this week.
Wylie J