Reaney v Reaney
[2021] NZHC 784
•14 April 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-0578
[2021] NZHC 784
UNDER Part 18 of the High Court Rules 2016 IN THE MATTER
of the Anthony Reaney Family Trust settled by a trust deed dated on or about 18 November 2009
BETWEEN
JENNIFER MOIRA REANEY and DIANE JEANETTE MULCOCK
Plaintiffs
AND
ANTHONY JOHN BRIAN REANEY
Defendant
Hearing: On the papers Counsel:
D M Connor for the plaintiffs
Judgment:
14 April 2021
JUDGMENT OF JAGOSE J
[Redacted]
This judgment was delivered by me on 14 April 2021 at 10.00am.
Pursuant to Rule 11.5 of the High Court Rules.
…………………………
Registrar/Deputy Registrar
Counsel/Solicitors:
D M Connor, Barrister, Auckland Castle Brown, Auckland
REANEY v REANEY [2021] NZHC 784 [14 April 2021]
[1] As duty judge, I have the plaintiffs’ 7 April 2021 without notice interlocutory application for an order appointing a receiver to trust property — presently, a 62 per cent interest in land at [Redacted] Auckland’s Pukekohe — and ancillary orders as to representation and service.
[2] The application is brought in a proceeding seeking the defendant’s (“Anthony”) removal as trustee. The plaintiffs are Anthony’s wife (“Jennifer”) and mother (“Diane”). The land’s other owners are Anthony’s brother and his wife, Jason and Florence Reaney, now resident in the United Kingdom. Given the commonality (but not universality) of surnames, I mean no disrespect in referring to the parties by their first names.
Background
[3] On marrying in early 1998, Anthony and Jennifer lived in a rental property on the land. When they were unable financially to accept an offer to buy the land, Jason and Florence purchased it instead, from whom Anthony and Jennifer continued to rent.
[4] In December 2009, the trust acquired its original half-share interest in the land from Jason and Florence, partially funded by them and Diane, who own the balance of the land in separate shares broadly reflecting that funding. Anthony and Jennifer and their twin children (now aged 20) are the trust’s discretionary beneficiaries (any residue falling to the children or their surviving children). Its initial trustees were Anthony and Diane; Jennifer later joined them as an additional trustee. Diane maintains the trust’s records, which largely are of pass-through financing from Anthony’s and Jennifer’s bank accounts.
[5] Under a property sharing agreement between the owners, Anthony and Jennifer and their children had exclusive occupation of the original dwelling on the land; and Diane, exclusive occupation of temporary accommodation to be constructed on the land (as occurred). The trust’s contribution of additional capital for additions and improvements to the original dwelling resulted in the owners’ agreement the trust
owned a 62 per cent share; Jason and Florence, 24 per cent; and Diane, 14 per cent. The property secures the trust’s bank borrowing.
[6]The relationship between Anthony and Jennifer progressively broke down.
[Redacted].
[7] [Redacted]. Despite ultimately having appointed (together with Jennifer and Diane, jointly as trustees) an agent to list the property for sale, Anthony refused to consent to the property’s sale. Instead, he is said to have sought to condition his consent with a requirement for resumption of the couple’s relationship at another property to be acquired by them; alternatively, to have refused to countenance the property’s sale at all. Jennifer and Diane procured Anthony’s uncle (and Diane’s brother), Brian Sexton, to attempt to intercede with Anthony, to obtain his agreement to sell the property. Brian was not successful, finding Anthony defensive, resistant, and “very detached from reality”.
[8] Jennifer and Diane therefore have brought this proceeding, contending Anthony “has become incapable of performing his duties as a trustee of the trust”, and seeking his removal. By reason of Jennifer’s and Diane’s inability alone to continue to meet the property’s outgoings, and Diane’s expiring (but renewable) right to occupy alternative age-related accommodation in Hamilton, they additionally urgently seek without notice appointment of a receiver to the trust’s interest in the property, to “sign and enforce” any agreement for the property’s sale and purchase at “the best price reasonably available at the time and exceeding [a formal valuation]”. Jason and Florence, for each of whom Diane has power of attorney, have indicated their support for the property’s sale on such terms (and for appointment of a receiver to the trust’s share of the property). Apprehending Anthony may not be able to act in his own best interests on the proceeding, Jennifer and Diane also seek appointment of a litigation guardian, in the first instance, to report to the Court on his incapacity (if any).
Appointing a receiver
[9] Under s 138 of the Trusts Act 2019, I may, on application by “an interested person” or on my own motion, appoint a receiver to administer a trust if satisfied such appointment is (a) reasonably necessary in the circumstances of the trust; and (b) just
and equitable.1 In doing so, having regard to the terms of the trust and the interests of justice, I must determine the scope of the receiver’s powers, the duration of the receivership and other matters.2 To the extent “a receiver has a power in relation to a trust, the trustee of the trust cannot exercise that power for the duration of the receivership.”3 My inherent jurisdiction to supervise and intervene in the administration of a trust is not affected by the Act, except to the extent it provides otherwise. Nonetheless, I must have regard to the Act’s purpose and principles when exercising my inherent jurisdiction.4
[10] I have not been able to identify any judicial commentary on s 138, which came into force only this year. The present application does not expressly refer to it, but relies on my inherent jurisdiction. The section’s new and explicit provision suggests such receivers’ appointment may not now be as much “a matter of last resort” as formerly was the case.5 In proposing the section’s ‘clarification’, the Law Commission noted:6
… this has the potential to be a very useful process; the receiver can take charge of the fund, deal with and if necessary realise some assets, conduct a managed distribution, and if appropriate, hand back the fund to the trustees.
While understanding “there is already the ability for the court to appoint a receiver in respect of trust property under its inherent jurisdiction”, the Law Commission observed “this jurisdiction is rarely used; this may in part stem from a lack of awareness or understanding that this option is available.”7
[11] Submitters to the Law Commission commented the legislative mechanism “would make the ability to appoint a receiver more accessible and modern, to deal
1 Trusts Act 2019, s 138(2).
2 Section 138(4).
3 Section 138(5).
4 Section 8.
5 Lockhart Trustee Services No 56 Ltd v Ryan (as Trustee of the Lothbury Trust) [2020] NZHC 1823 at [34], citing Re Tisco Holdings (NZ) Ltd (1995) 8 PRNZ 698 (HC) at 700–702.
6 Law Commission Review of the Law of Trusts: Preferred Approach (NZLC IP31, 2012) [Law Commission Paper] at [8.69].
7 Law Commission Paper, above n 6, at [8.70]. The Law Commission later acknowledged “a recent example from the High Court in Bank of New Zealand v Rowley [[2012] NZHC 3540]”: Law Commission Review of the Law of Trusts Report (NZLC R130, 2013) [Law Commission Report] at [16.30].
with a wider range of issues”.8 In response to the New Zealand Law Society’s submission to limit the range of applicants to creditors, the Law Commission said:9
[T]he jurisdiction to appoint a receiver is broader than that for companies. It may be used when there is a risk to the trust property or there is a problem with a trustee or trustees, especially on a temporary basis. Accordingly it could be useful to permit applications by a trustee or beneficiary rather than confining it only to creditors.
The Act does not specify who may be an “interested” applicant for receivers’ appointment. It is possible it means to exclude applications from discretionary beneficiaries, being without “a fixed, vested, or contingent interest in the trust property”.10 But the applicants here are Anthony’s fellow trustees, although the application is not expressly brought in that capacity.
Discussion
[12]The circumstances of the trust are:
(a)it was established for the benefit of discretionary beneficiaries, Anthony having power to determine membership of that class (initially, as said, Anthony, Jennifer and their children);
(b)its only asset is its share in the property, the whole of which secures Anthony and Jennifer’s borrowing from the bank, presently in the amount of some $290,000;
(c)the property was sought to be acquired by third parties in mid-February 2021, at what appears to be a heavily-negotiated price materially exceeding its formal valuation; and
(d)after Anthony’s refusal to sign the sale documentation, the property was (and remains) withdrawn from sale.
[13] I accept the non-trust owners of the property wish its sale. I also accept the majority of trustees wish its sale. But trustees must act unanimously.11 Here, that
8 Law Commission Report, above n 7, at [16.31].
9 At [16.33].
10 Trusts Act, s 9 definition of “discretionary beneficiary”.
11 Section 38.
requires Anthony’s consent, which presently is not forthcoming. Although reasons are essayed for the irrationality or perversity of his refusal, the evidence to support them is slight. I have no medical evidence Anthony is unfit to act, whether as trustee or otherwise in his own capacity. The evidence does not go so far as incontrovertibly to establish he is in breach of his duties as trustee. I have no evidence from him. (For those reasons, I consider appointment of a litigation guardian for Anthony — as sought for ancillary order, in the first instance from public funds — presently is premature.)
[14] In that deadlock, beyond Jennifer’s wish to sever her financial ties with Anthony, evidence for receivers’ appointment is Jennifer alone now is responsible for the property’s mortgage repayments and other expenses, and she and Diane “are not in a financial position to continue living here for much longer”. Diane notes she has needed financial assistance for legal expenses and “[a] bank foreclosure would be the worst possible outcome for everybody”. There is no other evidence of Jennifer’s or Diane’s financial circumstances. And there is no evidence of any arrears, or of any prospective creditor indicating its intention to pursue remedies against the property.
[15] As a result, on the evidence presently before me, I would not be satisfied receivers’ appointment was “reasonably necessary”.
[16] The application is brought without notice to Anthony. I may determine an application can properly be dealt with without notice only if I am satisfied, here, requiring Jennifer and Diane to proceed on notice would cause undue delay or prejudice to them, or the interests of justice require the application to be determined without serving notice of it.12
[17] For the reasons previously discussed — and in the context of the delisted property’s withdrawn February 2021 sale, albeit said to attract continued interest from prospective buyers — I cannot identify any undue delay or prejudice caused by proceeding on notice. I acknowledge the giving of notice may found further dispute between Anthony and Jennifer. But I cannot identify any prejudice at all, and delay is inevitable by reason of the need to consider receivers’ appointment. Further delay is not made undue by reason of notice. The interests of justice require the reasonable
12 High Court Rules 2016, r 7.46(3).
necessity of receivers’ appointment be examined on notice to Anthony. That particularly is the case as appointment here is to secure sale of the trust’s only asset, rendering the substantive relief sought moot.
Result
[18] I am not satisfied the application can properly be dealt with without notice. I therefore:
(a)direct the proceeding (including the application, and this judgment) be served on Anthony;
(b)adjourn the application’s determination until the application has been served on Anthony, to be advised to the registry; and
(c)direct the registry to call the application in the first available duty judge’s civil list after advice of service on Anthony, for timetabling directions leading to an expedited hearing.
— Jagose J
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