Re Hetrick

[2017] NZHC 472

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-001191 [2017] NZHC 472

Under the

Application pursuant to section 52 of the

Trustee Act 1956 by vesting order

In the matter of

The Marshall Family Trust

JOHN PHILIP HETRICK Applicant

Hearing:	On the papers
Counsel:	A L Worrill for the Applicant
Judgment:	16 March 2017

JUDGMENT OF NATION J

Introduction

[1]      On 8 March 2002, Vivienne Jewel Marshall (Mrs Marshall) and her husband Murray Flint Marshall (Mr Marshall) settled a Trust appointing themselves and Mr Hetrick as trustees.   The Trustees held a three-quarter share in a property at 75A Wychbury Street, Christchurch.  Mr Marshall has died and Mrs Marshall now lacks capacity to carry out her role as trustee.

[2]      The applicant, John Hetrick, as the remaining trustee, initiated proceedings to have the title to the interest of the Marshall Family Trust (the Trust) in the property at 75A Wychbury Street, Christchurch, vested in him.   He also sought an order allowing him to proceed by way of a without notice originating application.

[3]      The person holding title to the remaining one-quarter share in 75A Wychbury

Street is a daughter of Mr and Mrs Marshall, Susan Marion Marshall.   Another

Re Marshall Family Trust & Hetrick [2017] NZHC 472 [16 March 2017]

daughter, Anne Louise Marshall, is attorney for her mother under an Enduring Power of Attorney (EPA).

[4]      The discretionary beneficiaries of the Trust are now Mrs Marshall, the four children of Mr and Mrs Marshall and their children or remoter issue, and partners or spouses of discretionary beneficiaries.

Procedural requirements

[5]      It is appropriate for these proceedings to be brought by way of originating application.  Leave is granted accordingly.

[6]      I am satisfied that, having regard to the medical evidence of Dr Winter, it is appropriate in this case for service on Mrs Marshall to be dispensed with.   In Dr Winter’s professional opinion, Mrs Marshall has very limited cognitive function and does not have the capacity to make any decisions concerning aspects of her personal care, either related to health or financial matters.

[7]      I am satisfied that service on Mrs Marshall would serve “no useful purpose”. In reliance upon the inherent jurisdiction of the Court to regulate its own process and proceedings, an order will be made dispensing with service on her.1

[8]      I am also satisfied that there is no need for this application to be served on the beneficiaries of the Trust.  The application is being made to formally recognise the identity of those who are now to act as trustees and their right to hold title to the Trust’s property.   The rights of the beneficiaries under the trust deed will not be affected.

The appointment of a new trustee

[9]      In a minute issued on 12 December 2016, I noted that:

[4]       Clause  8.1  of  the  trust  deed  requires  that  there  be  at  least  two trustees.  Counsel for the applicant has suggested there is no need to appoint an  additional  trustee  because  Mr  and  Mrs  Marshall’s  daughter,  Susan

1      See IH Jacob “The Inherent Jurisdiction of the Court” (1970) Current Legal Problems 23 at 32-

40.

Marshall, holds an enduring power of attorney in relation to the property from her mother and will be able to appoint a trustee to replace her mother. An ordinary enduring power of attorney as to property in the form granted by Mrs Vivienne Marshall empowered her daughter to deal with Mrs Marshall’s property, not to exercise powers which she had as a trustee or settlor of the Marshall Family Trust.  Associate Judge Osborne’s decision in Strang v Strang confirms that LINZ has made clear that an authority under an EPA cannot sign an authority and instruction form on behalf of a trustee who has lost capacity.

[5]       Under the trust deed, the power of appointment of a new trustee was vested in Mr and Mrs Marshall or the survivor of them during their lifetimes or, after the death of the survivor, any person specified in the will of the survivor as having that power.

[6]       Counsel for the applicant needs to consider how a new trustee could be appointed and who that should be.  It may be that the Court will have to be asked to appoint an appropriate person with the agreement of all of Mr and Mrs Marshall’s children.

[10]     In reply, counsel for the applicant submitted that the power of appointment held  by  Mrs  Marshall  under  clause  9.1  of  the  Trust  deed  was  Mrs  Marshall’s personal property and therefore Anne Marshall is empowered to exercise that power as her attorney.  Counsel for the applicant further submitted that s 2 of the Protection of Personal and Property Rights Act 1988 (PPPR Act) defines property as including “any right or power exercisable in respect of any property”.  Counsel submitted that there is a distinction between property rights or interests held by a person as trustee of a trust and rights or powers that are not property rights but are powers held under a  trust  deed  that  are  personal  to  the  power  holder,  in  particular  a  power  of appointment under a trust deed.

[11]     Counsel therefore argues that an attorney who holds an EPA can exercise a power of appointment held by the donor.

[12]     In the recent judgment of Godfrey v McCormick, I held that the attorney under an EPO does not have the ability to act for an incapacitated trustee in relation to the exercise of trustee powers, rights or obligations as a trustee.2

[13]     The reasoning for that conclusion also applies to the power which a settlor or other named person has to appoint new trustees under a trust deed.  Section 97A(2)

of the PPPR Act provides that the “paramount consideration of the attorney is to use the donor’s property in the promotion and protection of the donor’s best interests”. As with a trustee exercising trustee powers, a person who has the power of appointment under a trust deed must at all times have the best interests of the beneficiaries in mind.   The Court has long held that the power of appointment is

subject to fiduciary duties.  For example, in Carmine v Ritchie, Gilbert J held:3

The power to appoint new trustees is generally acknowledged to be a fiduciary power even though it may not have been conferred on trustees or the holder of any other office.   Equally, a power to remove a trustee and replace him with a new trustee is almost always considered to be a fiduciary power  to  be  exercised  in  the  best  interests  of  the  beneficiaries. This  is because the subject matter of the power is the office of the trustee which lies at the core of the trust and carries fundamental and onerous obligations to act in the best interests of the beneficiaries as a whole.

[14]     For this reason and the reasons discussed in Godfrey v McCormick, the PPPR Act must be read as not extending to an attorney the power to act for a person in relation to their power of appointment of new trustees under a trust deed.   This power cannot be considered as a personal property right of the person who has granted the EPA because associated with the power are the fiduciary duties owed to the beneficiaries.

[15]     Counsel for the applicant indicated that, if I was not willing to accept that an attorney under an EPA could exercise a power of appointment of new trustees, the application should be amended to seek the appointment of Anne Louise Marshall (a daughter of Mr and Mrs Marshall and referred to in the trust deed as Anne Louise McClimont) as a trustee in place of her mother.  With her appointment, it would also be necessary to vary the application for vesting orders so that the Trust’s property is vested in the names of both continuing trustees.

[16]     Given the conclusion I have reached as to an EPA not extending to the power of appointment, it is appropriate to make such amendments.

[17]     Section 51 of the Trustee Act sets out the powers of the Court to appoint new trustees.  Section 51(1) states that:

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.

[18]     On reading the affidavit of Mr Hetrick, including the certificate of Dr Mark Winter, I am satisfied that Mrs Marshall no longer has the capacity to act as a trustee. The trust deed requires the appointment of a new trustee.  When Mrs Marshall had capacity, she entrusted Anne Marshall with the rights, powers and obligations of an EPA.  I am satisfied it is appropriate to appoint Anne Louise Marshall as a trustee in substitution for her mother.

Vesting order

[19]     Under s 52(1)(b)(i) of the Trustee Act, the Court may vest land in trustees where a trustee entitled to or possessed of any land or interest therein, either solely or jointly with any other person, is under a disability.  Section 52(3) clarifies that, in such a scenario of joint entitlement, the land, interest or right shall be vested in the other person who remains entitled, either alone or with any other person the Court appoints.

[20]     Given the need to ensure the current trustees can deal with the property in accordance with the trust deed, a vesting order is appropriate.

Order

[21]     I make the following orders:

(a)  notice of the proceedings is dispensed with and the proceedings are to be dealt with on the papers without a hearing;

(b)  Vivienne Jewel Marshall is removed as trustee from the Marshall Family Trust.   In substitution, Anne Louise Marshall, of Christchurch, is appointed as a trustee of the Marshall Family Trust established by deed dated 8 March 2002, jointly with John Philip Hetrick; and

(c)  recognising  that  Murray  Flint  Marshall  has  died,  the  three-quarter interest in the property at 75A Wychbury Street, Christchurch, previously held in the names of Murray Flint Marshall, Vivienne Jewel Marshall and John Philip Hetrick, is now to vest in John Philip Hetrick and Anne Louise Marshall.  That three-quarter interest is more particularly a three- quarter share in a half-share of the fee-simple estate in Lot 4 Deposited Plan  3746,  and  the  leasehold  estate  under  LA141870-3  to  Flat  2

DP67312  contained  on  Certificate  of  Title  identifier  CB39B/1129,

Canterbury.

Costs

[22]     The applicant has not sought costs.  I make no order.

Solicitors:

Cavell Leitch, Christchurch.