Re McCullough

[2019] NZHC 1999

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-411

[2019] NZHC 1999

IN THE MATTER OF

The Land Transfer Act 1952

AND

BETWEEN

JOSEPHINE MARY McCULLOUGH, BRIDGET MARIE McCULLOUGH, SIMON JOSEPH McCULLOUGH, JOHN ANTHONY CALLAGHAN and AMO

TRUSTEES LIMITED as trustees of The McCullough Family Trust

Applicants

Hearing:	(On the Papers)
Counsel:	B J Callaghan for the Applicants
Judgment:	15 August 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 15 August 2019 at 12.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 15 August 2019

Re McCULLOUGH [2019] NZHC 1999 [15 August 2019]

[1]                 This is a without notice application for orders under s 133 of the Land Transfer Act 1952 for an order removing the words “no survivorship” from two certificates of title held by the applicant trustees.

[2]                 The applicants are the current trustees of The McCullough Family Trust (“the Trust”). The Trust, which was created by a Trust Deed dated 4 May 1999, originally had  four  trustees,  two  of  whom  remain  current  trustees  namely  Josephine Mary McCullough and John Anthony Callaghan. Mr Callaghan is a solicitor. The other two original trustees were Thomas Nightengale McCullough who died in 2006 and Ross Allan Morgan. Mr Morgan has not been a trustee for some time.

[3]                 Of the present trustees, Bridget and Simon are the children of Josephine and the late Thomas. AMO Trustees Ltd is a trustee company used by a Christchurch chartered accountant as a trustee. Accordingly, there is now one additional trustee from  those  originally  named  when  the  Trust  was  created.   The  Trust  requires  a minimum of two trustees.

[4]                 The trustees hold four properties. Two of the properties have no restrictions on dealing, that is they do not contain the notation on the certificate of title as being held subject to the “no survivorship” tag.

[5]                 Of the two properties which contain the “no survivorship” tag, the present registered proprietors are Josephine McCullough, John Callaghan and the previous trustee, Ross Morgan.

[6]                 The applicants wish to complete the vesting of those two properties into the names of the five present trustees and to remove the “no survivorship” notation.

[7]                 The application was first considered by Associate Judge Osborne (as he then was) where His Honour referred to Re Bayly.1 In that case the Court was not prepared to delete the “no survivorship” notation, in part because there were no previous decisions of the Court available for guidance as to taking that step. When this matter

1      Re Bayly (1985) 2 NZCPR 363 (HC).

came before Associate Judge Osborne he sought that counsel file a memorandum dealing with the relevant authorities since Re Bayly was determined in 1985.

[8]                 Mr Brendan Callaghan for the applicants has filed a memorandum referring to the decision of Fogarty J in Sell v Registrar-General of Land.2 His Honour discussed the effect of the  “no survivorship” notation.   Counsel also referred to  Re Brown,    a decision of Whata J.3 In that decision the trustees, faced with a “no survivorship” notation, wished to sell land and wind up a trust.

[9]                 Whata J had issued a Minute requesting information relating to the number of beneficiaries, whether any beneficiaries were minors, what consultation there had been with beneficiaries about the winding up of the trust and the views generally of the beneficiaries on the proposed transaction.

[10]             That case is accordingly different from the present one where it is not proposed to wind up the Trust.

[11]             Counsel however advises that the trustees do wish to sell one of the properties subject to the “no survivorship” clause and purchase a replacement property as part of dealing with relationship property issues between Simon and his former partner.

[12]Fogarty J in Sell confirms:4

The function of the “no survivorship” notation is to alert persons dealing with the Land Registry to the fact that the registered proprietors are trustees.

[13]             In Sell, the trustees wished to sell one of the properties subject to a “no survivorship” notation. Referring to Whata J’s decision in Re Brown, Fogarty J said:5

Having been satisfied that there were no problems interfering with the interests of the primary beneficiaries of the trust, [Whata J] made the order as moved.

2      Sell v Registrar-General of Land [2013] NZHC 1219, [2013] 3 NZLR 431.

3      Re Brown [2012] NZHC 2081.

4      Sell v Registrar-General of Land, above n 2, at [37].

5 At [30].

[14]In Denniston v Hudson, the Court said:6

As the function of the Court is to protect persons beneficially interested under a trust, the Court must make itself acquainted with the rights of the beneficiaries in relation to the proposed transfer or other dealing.

[15]             The proposed dealing in this case is to regularise the identity of the registered proprietors of the Trust land through confirming the applicants as the present trustees as the registered proprietors of the two properties in issue and the removal of the   “no survivorship” notation.

[16]             The Trust is a family trust. Three of the trustees, Josephine, Bridget and Simon are beneficiaries. Both Bridget and Simon have minor children who are also beneficiaries. There are no other living beneficiaries.

[17]             This is not a case where the trustees are asking the Court to sanction the proposed sale. In Sell, Fogarty J said:7

… where, as here, there is no change in the registered proprietors, and the registered proprietors are simply exercising express power of sale, an argument justifying the need for the sanction of the Court to the exercise of the power of sale entails asking the Court to judge in some way the merit of the sale.

[18]             At the same time, it is clear from Re Bayly that the “no survivorship” notation will not be removed if such would have adverse consequences for present or future beneficiaries.

[19]             The efficacy  of  the  use  of  the  “no  survivorship”  notation  as  a  means  of protecting beneficiaries can be summed up by the fact that the ability to add such a notation is not continued under the Land Transfer Act 2017. It is for that reason that this application is dealt with under the Land Transfer Act 1952.

[20]             The great majority of family trusts function perfectly well without the presence of a “no survivorship” notation. In other words, the protection of beneficiaries is not as a general rule seen as turning on the presence of the notation.

6      Denniston v Hudson [1940] NZLR 255 (SC) at 258.

7      Sell v Registrar-General of Land, above n 2, at [33].

[21]             Mr Brendan Callaghan confirmed the “no survivorship” notation was placed on the certificate of titles in issue as a matter of standard practice at the time within his firm. Accordingly, there is no suggestion that there is any particular circumstance in this case which led to the solicitor who established the Trust thinking the “no survivorship” notation was required to protect the beneficiaries.

[22]             Whilst the surviving settlor of the Trust has the power to remove and appoint trustees, there must nonetheless be a minimum of two trustees. Of course, there are five trustees at present, including two professional trustees, but even assuming they were removed no individual can take over the Trust.

[23]             The function of the “no survivorship” notation is to alert persons dealing with the Land Registry to the fact that the registered proprietors are trustees. Given the makeup of the present trustees, that the properties are held on trust will be obvious to anyone who reads the certificate of title.

[24]             In the  circumstances  of  this  case,  I  am  satisfied  that  the  presence  of  the “no survivorship” notation is not necessary for the protection of the beneficiaries. The vesting order also sought is not controversial.

[25]             Accordingly, there is an order vesting the properties at 90 Hinau Street, Christchurch (Identifier CB42A/1151, being Lot 2 Deposited Plan 7098 and Flat 1 Deposited Plan 72938 and Support Pillar with Flat 1 Deposited Plan 72938, Canterbury Land Registry) and at 107 Rugby Street, Christchurch (Identifier 656588, being Lot 4 Deposited Plan 475940, Canterbury Land Registry) in the names of Josephine Mary McCullough, Bridget Marie McCullough, Simon Joseph McCullough, John Anthony Callaghan and AMO Trustees Limited as trustees of The McCullough Family Trust. There is an order that the words “no survivorship” be removed from the same.

Associate Judge Lester

Solicitors:

McGillivray Callaghan & Co., Christchurch