Porteous v McDowall

[2019] NZHC 2874

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2019-425-114

[2019] NZHC 2874

IN THE MATTER

of the Trustee Act 1956

AND

IN THE MATTER

of an application for vesting orders

BETWEEN

CAROLYN MARGARET PORTEOUS and

ROSS WILSON McDOWALL in respect of the F W and O M McDowall Family Trust No 2

and

VERONICA McDOWALL in respect of the Gordon F McDowall Family Trust Applicants

AND

FLEMING WILSON McDOWALL

Respondent

Hearing:

4 November 2019

(By way of telephone conference)

Counsel:

B J Nettleton for Applicants

Judgment:

6 November 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

[1]    Fleming Wilson McDowall (“Fleming”) is a trustee of the F W and O M McDowall Family Trust No 2 and the Gordon F McDowall Family Trust.

PORTEOUS v McDOWALL [2019] NZHC 2874 [6 November 2019]

[2]    Unfortunately, Fleming has lost capacity and this application seeks to have Fleming removed as a trustee because of that incapacity and to have the property of each Trust vested in the remaining respective trustees.

[3]Applications such as this require a number of steps to be addressed as follows:

(a)leave to use the originating application procedure;

(b)dispensing with the need for Fleming to have a litigation guardian;

(c)otherwise dispensing with service;

(d)whether the threshold for an order removing the trustee has been met; and

(e)the vesting order itself.

[4]    Before turning to the above steps, I refer to the medical evidence confirming that Fleming has lost capacity. Dr Philip White has signed a Health Practitioner’s Certificate (dated 12 March 2019) confirming that Fleming is not wholly competent to manage his own affairs and that Fleming’s mental incapacity is due to a health condition that is likely to continue indefinitely.

[5]    Fleming is therefore unable to fulfil his obligations as trustee and with the property owned by the F W and O M McDowall Family Trust No 2 having been sold, the trustees need to regularise the situation.

Originating application procedure

[6]    It is now established practice that applications of this kind may be commenced by way of originating application. Leave is required because this procedure cannot be used as of right under the High Court Rules 2016. It is nonetheless in the interests of justice that this procedure be used and I grant leave accordingly.

Litigation guardian

[7]    As Fleming is incapacitated under r 4.30 of the High Court Rules 2016, Fleming requires a litigation guardian unless the Court directs otherwise.

[8]    I am satisfied that in this case it is not necessary to appoint a litigation guardian. Such would serve no real purpose given the essentially administrative nature of this application. By characterising the application in that way, I do not minimise the importance of the application or the need for such applications to be carefully considered and supported by medical evidence, but once it is clear a trustee has lost capacity, action must be taken to allow the Trust to operate as intended.

[9]    Accordingly, there is an order dispensing with the appointment of a litigation guardian.

Service

[10]   Similarly, there is no need for any party to be served. As I have said, the application is necessary to allow the Trusts to function again.

[11]   Accordingly, there is an order dispensing with the need for the application to be served in relation to both the F W and O M McDowall Family Trust No 2 and the Gordon F McDowall Family Trust.

Removal of trustees

[12]   Under the F W and O M McDowall Family Trust No 2, Fleming was one of the settlors along with Olive Margaret McDowall, his late wife.

[13]   The power to remove trustees under that Trust was exercisable by the settlors. Accordingly, the power is not available in this case.

[14]   The Trust Deed for the Gordon F McDowall Family Trust is in an older format and does not contain a power to remove trustees.

[15]   I am satisfied in terms of the language of s 51(1) of the Trustee Act 1956 that it is “inexpedient, difficult, or impracticable” to appoint a new trustee in substitution for Fleming without the assistance of the Court in relation to the Gordon F McDowall Family Trust.

[16]   In respect of the F W and O M McDowall Family Trust No 2, a replacement trustee is sought for Fleming. Ross Wilson McDowall has not been appointed a trustee under a Deed entered into in September 2018. I say that as the Deed of Appointment dated 12 September 2018 appoints Ross McDowall on the retirement of Fleming but the Deed does not record that Fleming is retiring. Accordingly, the s 51 jurisdiction can be invoked in respect of the F W and O M McDowell Family Trust No 2 as Ross McDowall is not yet a trustee as his appointment is only triggered by Fleming’s retirement. Until then the Deed is ineffective to make him a trustee.

[17]   I am satisfied that it is in the best interests of the Trust to remove Fleming as trustee of the F W and O M McDowall Family Trust No 2 and appoint Ross Wilson McDowall in his place and there is an order under s 51 of the Trustee Act 1956 accordingly.

[18]   That leaves Carolyn Margaret Porteous and Ross Wilson McDowall as the trustees of the F W and O M McDowall Family Trust No 2.

[19]   I record that while Olive Margaret McDowall remains on the title of the property owned by the trustees of the F W and O M McDowall Family Trust No 2, counsel advises that no order is required in respect of her.

[20]   At this point, I adjourn the application as regards the Gordon F McDowall Family Trust. The removal of Fleming in respect of that Trust would leave Veronica McDowall as sole trustee and it is my preference not to create a situation where there is a sole trustee who is also a beneficiary. Counsel are going to consider the possibility of alternate trustees.

[21]   While I am satisfied that an order is required in relation to the Gordon F McDowall Family Trust, that order will await the identity of a new trustee.

Vesting order

[22]   That leaves the need for a vesting order in respect of the F W and O M McDowall Family Trust No 2. Given the removal of Fleming as trustee of that Trust, it follows that a vesting order is required.

[23]Accordingly, there is a vesting order as follows:

That the property at 117 MacKenzie Street, Winton legal description Lot 1 Deposited Plan 312223, Identifier 48094, Southland Registry, vest in CAROLYN MARGARET PORTEOUS and ROSS WILSON McDOWALL as

trustees of the F W and O M McDOWALL FAMILY TRUST NO 2.

[24]   The balance of the application is adjourned.   Once counsel have identified    a further trustee for the Gordon F McDowall Family Trust, a memorandum confirming that consent may be filed and the file referred to me to consider further orders.

Associate Judge Lester

Solicitors:
French Burt Partners, Invercargill