Powell v Powell
[2014] NZHC 2096
•2 September 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-001371 [2014] NZHC 2096
BETWEEN JOHN WILLIAM POWELL
Plaintiff
AND
DANIEL JOHN POWELL Defendant
AND
CHARLOTTE TERESA GAVIN (NEE POWELL)
Interested Party
Hearing: 11 August 2014 Appearances:
J V Ormsby and C L Webber for Plaintiff S M Grieve and S A Woods for Defendant J Moss for Interested Party
Judgment:
2 September 2014
JUDGMENT OF DUNNINGHAM J
[1] In a written judgment issued on 14 March 2014, I ordered the removal of the plaintiff, John Powell, as a trustee of the Daniel Powell Family Trust. I did not order the removal of the defendant, Daniel Powell, as a trustee.
[2] I relied on a number of factors in reaching my decision:
(a) John and Daniel could no longer work together as trustees;
(b)the various criticisms of Daniel’s conduct and his business skills were either not sustained, or were not, in my assessment, matters that would prevent him from carrying out his duties as trustee responsibly,
when working with another independent professional trustee;
POWELL v POWELL [2014] NZHC 2096 [2 September 2014]
(c) the apparent intention of the settlor was to allow the child after whom the trust was made, to manage the trust’s assets for the benefit of the beneficiaries, which included that child’s family;
(d)the principle that the Court not intervene by removing trustees except to the extent necessary in order to ensure the proper administration of the Trust for the benefit of the beneficiaries.
[3] I also referred to the effect of clause 13.4 of the Trust Deed which provided for a minimum of two continuing trustees. I did not avert to the provisions of s 48 of the Trustee Act 1956 which allows a single corporate trustee to be appointed notwithstanding the provisions of the Trust Deed. That was in error.
[4] Because that erroneous assumption was relevant to my decision, the appeal was allowed and the proceeding was remitted back to the High Court for reconsideration.
What is the issue for determination?
[5] The sole issue for determination is whether, in light of the provisions of s 48 which allow a single corporate trustee to be appointed in place of the minimum of two trustees required by the trust deed, my findings should alter.
[6] A hearing was convened to hear submissions on that issue. The arguments raised on behalf of John were:
(a) Was the principle of “minimum intervention” relevant in the present
case?
(b) Did the Court, as a result of the error, adopt the wrong starting point? (c) Should the “fresh evidence” justify revisiting the decision and
confirming the appointment of a single corporate trustee?
[7] Counsel for Charlotte supported John’s arguments, and also argued that the appointment of a single corporate trustee was required to resolve the issue of inter-family conflict and prevent future deadlock.
[8] I discuss these issues in the following paragraphs.
Was the principle of “minimum intervention” relevant in this case?
[9] The plaintiff submitted that the Court had wrongly applied what he described as the “principle of minimum intervention” to the case and that this had contributed to it beginning with an erroneous starting point.
[10] The principle referred to is the principle enunciated in Clifton v Clifton,1
which is that:2
Courts are reluctant to remove trustees if other avenues can be found to remedy the perceived risk. This is particularly so in the case of a father where the beneficiaries of his trust are his infant children, both present and future.
[11] Expressed another way, if removal of one trustee is sufficient to discharge the Court’s supervisory jurisdiction to ensure trusts are properly administered, then that is all that should be done. There is no need to go further and remove both, whether it is to salve the feelings of both trustees, or for any other reason. While I accept the present case is not identical to Clifton, because the class of beneficiaries go beyond Daniel’s own family, the important issue is whether enough has been done to address the perceived risk. I have found it has.
[12] More importantly, I do not consider this issue is relevant to the present question. As already stated, if both trustees had needed to be removed to discharge the obligation to ensure the trust was properly administered, then that would have been done. All that s 48 does is allow an alternative option to the option of appointing two independent trustees, if both trustees were discharged, and that is the appointment of a single corporate trustee.
Whether the Court, as a result of the error, adopted the wrong starting point?
[13] The plaintiff argues that the Court “began with the starting point that two trustees needed to be in office, that the two current trustees could not remain in office together, and therefore the issue was which trustee should be removed and replaced with a corporate trustee?”
[14] That is incorrect. It was clear that the option of removing both trustees was considered3 and, if thought necessary, they could be replaced with two independent trustees (whether individuals or corporate trustees).
[15] The plaintiff then submitted that the correct starting point was whether or not: (a) in light of the conduct of both trustees;
(b) the lack of understanding of trustee roles; and
(c) the contribution of both to the deadlock prevailing,
the proper administration of the trust in the interests of the beneficiaries as a whole would be best served by the appointment of a single independent trustee.
[16] I do not accept that that is the correct starting point either. There are assumptions in that restatement of the starting point that are inconsistent with either my factual findings, or the options open to the Court.
[17] I have looked at, and assessed the conduct of the trustees over the past few years. My conclusions were, in essence, that many of the accusations of conflict and mismanagement by Daniel in his capacity as trustee were not sustained on the evidence and it was unsurprising, given the accusations made, that the two trustees were in a state of deadlock.
[18] In the circumstances as I found them to be, I had a range of options to consider, which included removing one or both trustees and appointing, in their
stead, independent replacement trustees. No firm proposal was put before me as to whether those should be individual trustees or a corporate trustee. However, the plaintiff now appears to prefer a corporate trustee and such a trustee will generally only consent to be appointed as sole trustee.
[19] I have, throughout, kept in mind the interests of all the beneficiaries, but I resist the introduction of the word “best” into the starting point as articulated by the plaintiff. That suggests that, even if I find a solution which I am satisfied will “see that the trusts are properly executed”,4 if there is an even “better” option, then I must adopt that. I do not accept that is the correct test. As long as the Court has intervened sufficiently to ensure the proper administration of the trust, that is all that is required.
[20] The plaintiff then sought to revisit arguments which had already been run in the previous hearing, including the risk of future deadlock, the alleged lack of knowledge of the Trust Deed and Daniel’s lack of sympathy with his sister Charlotte who is, along with her family, a beneficiary of the trust.
[21] I do not resile from my findings on these matters. I held that many of the allegations against Daniel were unfounded, or had no bearing on his ability to manage the trust and the trust property for the interests of the beneficiaries. I do not think that any past laxity in the administration of the trust (which was generally done with the approval of John, the other trustee), will continue, particularly given the focus these proceedings have placed on the Trust Deed’s requirements. Daniel is a capable businessman, and someone whom I consider will take pride in administering the trust well, along with an independent trustee, and out of the shadow of his father.
[22] I have also had regard to the fact that such decisions are discretionary, and very fact dependent. For example, in Burrows v Rental Space Ltd,5 there were allegations of misconduct in the administration of the trust and that a state of hostility existed between the trustees. That led to an application to remove all the trustees of a trust and appoint an independent trustee corporation in their stead.
[23] The Court found:
(a) there was an historic shortcoming in the trust’s accounts which had
been remedied;
(b) the trustees had failed to hold sufficient meetings;
(c) the trustees had excluded one trustee from some of the decision making;
(d) there was a historic issue of conflict of interest; and
(e) there had been hostility between the trustees.
However, the Court was satisfied that, given the admissions of errors and the commitment to introduce better practices for the administration of the trust property, there was no need to remove trustees, either under s 51, or the Court’s inherent jurisdiction.6
[24] In other words, past errors in administration of the trust are not determinative of the outcome of the application for removal. The Court must be forward looking and assess the likelihood of those concerns continuing on to the future. That is what I have done.
Does the fresh evidence justify revisiting the decision and confirming the appointment of a corporate trustee?
[25] I allowed both parties to present further “updating’ evidence on their inquiries
as to suitable independent trustees to replace either, or both, existing trustees.
[26] John has made inquiries of the managing solicitor employed by the Public Trust, Richard Calvert. Mr Calvert provides a short affidavit, which attaches correspondence with the plaintiff’s lawyer and confirms that “if the Public Trust was appointed it would only consent to appointment as sole trustee”. He notes that “in
addition, with the major active asset being Kensal Investments Limited which employs Daniel as executive and director, Public Trust is not confident of being able to effectively add to the performance of the company without being seen to be in conflict with either of the parties”. It is not clear who he is referring to when he refers to “either of the parties” and if he is referring to John as a “party”, his views do not appear to me to be relevant once he is no longer a trustee. The real issue is whether the trust will be administered for the benefit of the beneficiaries.
[27] In any event the fact that the Public Trust would only accept appointment as a sole trustee was brought to the Court’s attention during the hearing, and confirmation of that advice does not add any fresh perspective on the issue.
[28] Daniel also provided an updating affidavit simply confirming that he has met with two solicitors, and with a retired accountant, and they were all open to taking on the role. Obviously the inquiries could go no further than that while an appeal is pending.
[29] I do not find the further fresh evidence brings any concerns to light that were not apparent when the substantive hearing occurred or which needs to be taken into account in my decision on whether to remove one or both trustees.
Is a single corporate trustee required to resolve the issue of conflict and prevent future deadlock?
[30] Again, the submissions from Charlotte’s counsel sought to revisit the factual findings in the first decision. Her concern was that any request to Daniel as trustee, or any decision made by Daniel as trustee, concerning Charlotte and her children and grandchildren as beneficiaries, would revive the inter-family conflict. I do not agree. While the relationship between Daniel and Charlotte will never be warm, I am satisfied that Daniel appreciates his obligations towards her as beneficiary. More importantly, there was no evidence that there is any animosity held by him towards her children. Indeed, I am satisfied that the reverse is true, and if the children were in circumstances where it was appropriate for the Daniel Powell Family Trust to make a distribution to meet their needs, then that would be done.
[31] It should also be remembered that Daniel and his children are beneficiaries of the Charlotte Powell Family Trust and this element of reciprocity is a further factor which satisfies me that Daniel will consider the interests of all the beneficiaries in his role as trustee.
[32] It is obvious that to date, both Daniel and Charlotte have considered the trusts in their names as “their” trusts. However, they are now both appraised of the correct legal position. That said, I remain of the view that the settlor’s intentions in settling the trust property in these two trusts was as set out at paras [12]-[14] of my
14 March decision. Each trust was that child’s inheritance, and they were entrusted with responsibility for management of that trust’s assets to allow them to provide for their respective families both now and in the future.
Conclusion
[33] In summary, I have considered the possibility and desirability of removing both trustees. For the reasons set out in my earlier decision, I remain of the view that it is only necessary to remove John to ensure the proper administration of the trust.
[34] It matters not whether the replacement trustee is an independent professional individual or a corporate trustee, although I acknowledge that corporate trustees such as the Public Trust will only normally accept a sole appointment. I do not see that as an issue bearing on my decision. A professional solicitor or accountant, with experience as a trustee, is envisaged to replace John by the terms of the Trust Deed, and such an appointment would achieve the purpose of ensuring the proper
administration of the trust.7
[35] Accordingly, the ability to appoint a single corporate trustee instead of two independent trustees does not change my findings on what is required to ensure the proper administration of the trust.
[36] I therefore confirm my decision to order the removal of John Powell as a trustee, to be replaced by an independent professional trustee (whether an individual or corporate trustee). I do not order the removal and replacement of Daniel Powell as a trustee.
Solicitors:
Wynn Williams, Christchurch Duncan Cotterill, Christchurch J Moss, Barrister, Christchurch
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