Sandford v Lambert
[2012] NZHC 3487
•18 December 2012
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2012-419-388 [2013] NZHC 3487
BETWEEN RACHEL ALLANA SANDFORD Plaintiff
ANDPHILIP JOHN LAMBERT Defendant
Hearing: 25 October 2012
Appearances: C M Earl for Plaintiff
M J Wenley for Defendant
Judgment: 18 December 2012
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 18 December 2012 at 3.30 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Harkness Henry, Hamilton: [email protected]
Willis Toomey Robinson, Hamilton: [email protected]
Counsel: C M Earl, Hamilton: [email protected]
SANDFORD v LAMBERT HC HAM CIV-2012-419-388 [18 December 2012]
Introduction
[1] This is an application by the plaintiff (“Ms Sandford”) for orders in respect of the PJ & RA Lambert Family Trust (“trust”). The orders sought are as follows:
1PURSUANT TO SECTION 51 OF THE TRUSTEE ACT 1956 AN ORDER Removing PHILIP JOHN LAMBERT as Trustee of the PJ & RA Lambert Family Trust; and
2 AN ORDER VARYING the Trust as follows:
a. Directing that the sole trustee of the PJ & RA Lambert Family Trust is to be RACHEL ALLANA SANDFORD (formerly Lambert).
b. Approving the date of distribution to the date of the Order in this proceeding
3AN ORDER authorising the payment of all costs and expenses of and incidental to this application out of the property of the Trust.
[2] When this matter came before me I heard evidence from Ms Sandford. The
Defendant, Mr Lambert, was not called as a witness.
[3] For the reasons given below I do not propose to make the orders sought in
1 and 2 of [1] above. Instead I propose to appoint the Public Trust as sole trustee and remove both Ms Sandford and Mr Lambert as trustees of the trust.
Section 51 Trustee Act 1956
[4] Section 51 of the Trustee Act 1956 (“the Act”) reads as follows:
51 Power of Court to appoint new trustees
(1) 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.
(2) In particular and without prejudice to the generality of the foregoing provision, the Court may make an order appointing a new trustee in substitution for a trustee who—
(a) Has been held by the Court to have misconducted himself in the administration of the trust; or
(b) Is convicted, whether summarily or on indictment, of a crime involving dishonesty as defined by section 2 of the Crimes Act 1961; or
(c) Is a mentally disordered person within the meaning of the
Mental Health (Compulsory Assessment and Treatment) Act
1992, or whose estate or any part thereof is subject to a property order made under the Protection of Personal and Property Rights Act 1988; or
(d) Is a bankrupt; or
(e) Is a corporation which has ceased to carry on business, or is in liquidation, or has been dissolved.
...
Principles
[5] Counsel for Ms Sandford referred me to several authorities addressing the principles which guide the Court in the exercise of the powers conferred by s 51 of the Act. These included: Mendelssohn v Centrepoint Community Trust;1 re Mathews (No 2);2 Re CP Clifton Childrens Trust, Clifton v Clifton;3 Miller v Cameron;4 and
Williams v Williams.5
[6] Three principles appear from these decisions that are particularly relevant to determination of this application.6 These are, first, that in exercising the powers conferred by s 51, the Court is to give considerable weight to, but is not bound by, the express or implied intentions of the settlor(s). The second is that there must be neutrality between beneficiaries. The third is that the powers are to be exercised to
promote the purposes of the trust.
1 Mendelssohn v Centrepoint Community Trust [1999] 2 NZLR 88 (CA) at 97.
2 Re Mathews (No 2) (1913) 15 GLR 565 (SC).
3 Re CP Clifton Children’s Trust, Clifton v Clifton HC Auckland CIV-2004-404-4185, 5 November
2004.
4 Miller v Cameron (1936) 54 CLR 572 (HCA) at 580.
5 Williams v Williams HC Christchurch, CRI-2006-409-002948, 9 May 2007.6 See, for instance: Mendelssohn v Centrepoint Community Trust [1999] 2 NZLR 88 (CA) at 97, line
48.
Background
[7] Ms Sandford and Mr Lambert were married but their marriage was dissolved in May 2007.
[8] Ms Sandford and Mr Lambert settled the trust by Deed of Trust (“trust deed”)
dated 19 March 2004. The trust is a discretionary trust.
[9] Ms Sandford and Mr Lambert are each trustees of the trust. A third trustee, a chartered accountant, resigned as a trustee in November 2006. There is no suggestion that the third trustee was not entitled to resign.
[10] Ms Sandford and Mr Lambert have continued as trustees but have not been able to agree on who might be appointed as a third trustee. The power to appoint a new trustee is vested in Ms Sandford and Mr Lambert together.7 It is common ground that Ms Sandford and Mr Lambert are unable to agree on matters concerning the management and administration of the trust.
Purposes for which the trust was established
[11] The principal purposes for which the trust was established are set out in the recitals to the trust deed and are as follows:
D. The Settlors intend that this trust has been established with the principal purposes of:
1.Providing for the care and comfort of the beneficiaries as set out hereunder with the widest possible range of benefits.
2.Preserving the family assets for the family of the settlors and providing for the future management of those assets.
3.Preserving such assets from claims unforeseen at the present time that may arise in the future.
4.So organising the affairs of the settlors so that the assets of the settlors upon their death may be retained for the ultimate benefit of the remaining beneficiaries and to protect those assets from being available to creditors of the beneficiaries.
5.Any other purpose that the trustees may think fit, taking into consideration the purposes, terms and conditions of this deed.
Beneficiaries
[12] The classes of Beneficiaries and of Discretionary Beneficiaries are defined as follows:
1.1.2Beneficiary means any of the discretionary Beneficiaries and Beneficiaries means, as the context requires, any or all of the Discretionary Beneficiaries.
1.1.3Discretionary Beneficiaries means the persons identified or referred to as follows:
1.The Settlors being the said PHILIP JOHN LAMBERT and the said RACHEL ALLANA LAMBERT.
2. The children of the Settlors.
3. The grandchildren of the Settlors.
4.Any Trust in respect of which any of the abovenamed discretionary beneficiaries are beneficiaries or discretionary beneficiaries, provided that the date of distribution of such trust does not extend beyond the Distribution Date referred to herein.
[13] Ms Sandford and Mr Lambert have five children, aged between 14 and 22 years of age.
Provisions of trust deed as to the appointment of new trustees, the number of trustees and as to the nature of trustee decisions
[14] The provisions of the trust deed that are relevant to the manner of appointment of new trustees, the number of trustees and as to the nature of trustee decisions are as follows:
6.1 Power to Appoint New Trustees
6.1.1The power (including the statutory power) of appointment of new trustees shall be vested in PHILIP JOHN LAMBERT and RACHEL ALLANA LAMBERT while they are alive;
6.1.2If one of them shall die then such power shall vest in the executor of the Will of the one who has died and the survivor of them. On the death of the survivor of them, such
power shall vest in the executors of the Will of PHILIP JOHN LAMBERT and RACHEL ALLANA LAMBERT;
6.1.3If for any reason none of the foregoing persons are able or willing to exercise this power (or the executor can not be found) that this power shall be vested in the Trustees of this family trust and failing this in the person or persons in whom the statutory power of appointment is vested by the Trustee Act 1956 and in default in the children of the said PHILIP JOHN LAMBERT and RACHEL ALLANA LAMBERT.
...
6.5 Number of Trustees
The number of Trustees shall at all times be at least a number equal to one person more than the number of Trustee Settlors except for as long as a duly incorporated company, which is independent of and not controlled by the Settlor, is the sole Trustee.
6.6 Trustee Decisions
While there is more than one Trustee, the decision of the Trustees on any matter arising out of or about the trusts created by this deed must be unanimous and if not recorded by resolution in the trustee’s minute book shall not be invalid because such resolution is not so recorded.
Powers of appropriation and Date of Distribution
[15] Pending distribution, the trustees have power to appropriate income and capital for the maintenance, education, advancement or in any other way, for the benefit of one or more of the discretionary beneficiaries and to transfer any money or investments to the parents or guardians of any discretionary beneficiary who is a minor.8
[16] The Distribution Date is defined in the trust deed as:
1.1.4 Distribution Date means the earlier of:
1.1.4.1The date eighty (80) years less one day from the date that this deed is executed; or
1.1.4.2Any earlier date that the Trustees may elect by resolution pursuant to clause 9.1.
Trust assets
[17] The sole asset of the trust is the proceeds of sale of what was the family home. Ms Sandford and Mr Lambert settled the home on the trust in March 2004. The trustees sold the property by private treaty in 2007, but with the clear risk of a mortgagee sale in the absence of such a sale. The net proceeds of sale, being approximately $137,000, have been held on trust since.
Orders sought
[18] the orders that Ms Sandford seeks, as set out in her brief of evidence, are intended to achieve her preferred course, which is as follows:9
20.12... Having regard to the size of the Estate and the time since separation and the house sale it is my view that this matter (because of the size of the Trust property) should be resolved as follows:
(i) that the trust fund should be vested in me as the sole Trustee; (ii) my costs in bringing this application be paid.
(iii) that I am authorised to pay on behalf of Philip the costs owed to me of $10,550.48 plus interest since 19th June 2009.
(iv) a refund to me of $10,000 for the costs of orthodontic work for Hayden and Jordan which I have paid.
(v) the balance should be provided to me as a consideration of meeting the financial costs of raising the children over the past
7 years (with only a minimum contribution of $5,000 from
Philip over that period of time).
21.In all of the circumstances I ask the Court to make an Order removing Philip as Trustee of the Trust and allowing the Trust to be distributed essentially to me to meet the needs of the children.
[19] Given the decision that I have reached, it is not necessary for me to explain the background to much of [20.12], nor to set out the allegations that Mr Lambert has made in response.
[20] Mr Lambert has filed a statement of defence to Ms Sandford’s proceedings. Counsel for Mr Lambert acknowledged that he and Ms Sandford are “deadlocked” and have different views as to the application of trust funds.
[21] Mr Lambert objects to Ms Sandford remaining as a trustee because he submits that she cannot be considered impartial. Mr Lambert is a beneficiary of the trust and a trustee has a duty to be impartial and even-handed in considering the interests of beneficiaries.
[22] Accordingly, and although he did not make any cross application, at the hearing Mr Lambert proposed that I exercise the powers vested in the Court by s 51(1) of the Act to appoint the Public Trust as a trustee of the trust, whether as an independent trustee or as sole trustee. Counsel for Mr Lambert made available to me the written consent of the Public Trust to either course.
[23] It was apparent at the hearing that the suggestion of the appointment of the Public Trust was not a new one and had been considered by the parties prior to the hearing. In her evidence, Ms Sandford said she was opposed to the appointment of the Public Trust because she does not consider that the trust should have to bear that expense. Counsel for Ms Sandford submitted that the appointment of the Public Trust would further diminish trust funds. Not only would there be the cost of administration but Ms Sandford anticipates that it would be difficult, and therefore costly, to obtain Mr Lambert’s agreement to any proposed course of action.
Decision
[24] Ms Sandford seeks her appointment as sole trustee pursuant to s 51. There are three obstacles to that proposal.
[25] The first is that I consider the powers under s 51(1) can only be exercised if the Court is to appoint a new trustee.
[26] The second is that the settlors did not contemplate that one of them would be the sole trustee, as can be seen from cl 6.5 of the trust deed.
[27] The third is that, for reasons given below, I have reservations as to whether Ms Sandford, or Mr Lambert for that matter, is able to be relied upon to be impartial in the administration of the trust. A trustee must give fair, impartial and even-handed
consideration to the interests of all beneficiaries, and in this case those beneficiaries include each of Ms Sandford and Mr Lambert.
[28] Accordingly, I do not propose to make the order pursuant to s 51(1) that
Ms Sandford seeks.
[29] Given that, the issue becomes whether it is expedient to appoint a new trustee or trustees and whether it is inexpedient, difficult, or impracticable to do so without the assistance of the Court.
[30] I am satisfied as to both matters. The two current trustees are unable to agree on matters concerning the management and administration of the trust, including who should be appointed a third trustee.
[31] As to whom I should appoint, I have already referred to the fact that the Public Trust consents to its appointment. The Public Trust is experienced in the administration of trusts and is independent of the parties.
[32] As counsel for Mr Lambert submitted, cl 6.5 of the trust deed contemplates that a “duly incorporated company” independent of the settlors might be appointed as a trustee, and indeed as sole trustee. The Public Trust is not a “duly incorporated company” but a statutory corporation.10 I do not consider that determinative. Clause
6.2.4 of the trust deed contemplates that a corporation might be appointed as a
trustee, as follows:
6.2 Extent of Powers to Appoint New or Additional Trustees
The person or persons having power to appoint new Trustees shall also have power:
...
6.2.4to appoint either individuals or corporations or both, whether resident or incorporated in or outside New Zealand, as additional or substituted Trustees. ...
10 Public Trust Act 2001, s 3.
[33] Also, and as I have said, whilst the Court must give considerable weight to the intentions of the settlor(s), it is not bound by those wishes and may depart from them if good cause is shown.11
[34] I accept Ms Sandford’s submission that there will be expense if the Public Trust is appointed. However, I do not consider there is any prospect of avoiding that expense in this case. Any independent trustee or trustees would inevitably charge for their services. That said, all concerned must bear in mind the need to avoid any unnecessary cost to the trust.
[35] I am also satisfied that the Public Trust should be appointed in substitution for each of Ms Sandford and Mr Lambert, so that the Public Trust will be the sole trustee.
[36] The trust deed requires that decisions of the trustees must be unanimous.12 I consider there is little prospect of unanimity if Ms Sandford and Mr Lambert remain as trustees, even with the appointment of a third and independent trustee.
[37] I have considered whether I might retain one of the present trustees and appoint the Public Trust or some other party in substitution for the other.
[38] Counsel for Mr Lambert submits that such would be inconsistent with the settlors’ intentions. Counsel submits that cl 6.5 requires that there be at least three trustees (absent the appointment of a duly incorporated company independent of either settlor as sole trustee). This submission is made on the basis that the trust has two settlors and that cl 6.5 requires that the number of trustees be at least one more than the number of settlors.
[39] In my view, that construction of cl 6.5 is not correct. I consider the clause is to be construed so as to require one more trustee than the number of settlors who are
trustees at any given time.
11 Mendelssohn v Centrepoint Community Trust [1999] 2 NZLR 88 (CA) at 97.
12 Deed of Trust of the PJ and RA Lambert Family Trust dated 19 March 2004, cl 6.6.
[40] Whatever the position may be, however, and as I have already said, a trustee has a duty to act impartially and even-handedly in the execution of the trust. I do not consider that either of the present trustees can be expected to meet their obligations in that regard.
[41] Taking all of these matters into account, and having regard to the principles to which I referred in [6] above, I make an order pursuant to s 51(1) of the Act appointing the Public Trust as trustee of the trust, in substitution for the present trustees of the trust, namely Ms Sandford and Mr Lambert.
[42] The other relief sought by Ms Sandford was an order that the date of distribution be varied or that the Court approve such variation. Whether it is appropriate to vary the date of distribution will be a matter for the new trustee to consider in light of all relevant facts. Accordingly, I decline to make the order sought.
[43] Ms Sandford has applied for costs out of the trust fund. Given the decision that has been reached, I consider both parties’ costs should be met from the trust fund. I allow the parties their costs on a 2B basis, together with disbursements as fixed by the Registrar.
..................................................................
M Peters J
0
1
1