Scott v Chamley

[2025] NZHC 499

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-001047

[2025] NZHC 499

UNDER

the Trusts Act 2019 and the High Court’s

inherent supervisory jurisdiction in relation to trusts

IN THE MATTER

of removal of trustees and appointment of replacement trustees of the W J Scott Family Trust

BETWEEN

BRIAN GEORGE SCOTT

Applicant

AND

JAMES CLIFFORD CHAMLEY

First Respondent

WILSON McKAY TRUSTEE COMPANY (271181) LTD

Second Respondent

Hearing:

13 November 2024

(Further memoranda filed: 14 November 2024, 15 November
2024 and 18 November 2024)

Counsel:

I T F Hikaka and M C Grant for Applicant A F Grant for Respondents

Judgment:

14 March 2025

JUDGMENT OF BREWER J

This judgment was delivered by me on 14 March 2025 at 11 am pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Russell McVeagh (Wellington) for Applicant Gaze Burt (Auckland) for Respondents

SCOTT v CHAMLEY [2025] NZHC 499 [14 March 2025]

Introduction

[1]There is a trust known as the W J Scott Family Trust (the trust).

[2]                The applicant, Mr Brian Scott, seeks orders that the trustees be removed and that replacement trustees be appointed.1

[3]                One of the trustees, the first respondent, died after the hearing of the application. The second respondent is now the sole trustee.

[4]                It is not disputed that the second respondent should be removed and replaced as trustee. The dispute is over who should be the new trustee or trustees.

[5]                I am satisfied that the second respondent should be removed and replaced as a trustee. I will not go through the history of the trust’s administration which bears on this issue. It is unnecessary. The applicant has the support of the beneficiaries and the second respondent, a trustee company, does not oppose the application.

The dispute

[6]The applicant seeks the appointment of three replacement trustees:

(a)himself;

(b)W J Scott Trustees Ltd, as a vehicle through which a Mr Sam Bassett would exercise the powers of a trustee; and

(c)Ms Kathryn Roberts, who would exercise the powers of a trustee through  a  vehicle  to  be  incorporated,  the  proposed  name   is  WJS Independent Trustee Ltd.

[7]                Mr Bassett and Ms Roberts are independent of the beneficiaries and are professionally qualified to be trustees.

1      The applicant relies on ss 112 and 114 of the Trusts Act 2019 and/or the Court’s inherent jurisdiction.

[8]                The first respondent and the second respondent, as trustees, resolved to appoint a single replacement trustee: Perpetual Guardian. The second respondent advocates that I should appoint Perpetual Guardian as the sole replacement trustee.

[9]There are two reasons for the second respondent’s position:

(a)the settlor of the trust, in a letter dated 11 May 1988, expressed a preference for “the Guardian Trust” (today, Perpetual Guardian) “or some other suitable body” to be the trustee if the initial trustees considered that to be “necessary or desirable at some future time”; and

(b)the appointment of the applicant, a resident of California, as a trustee could expose the assets of the trust to the Californian tax regime.

Discussion

[10]            I will be brief. This is not to deprecate the efforts of Mr Hikaka and Mr Grant, who both went to pains to provide affidavits and then full submissions canvassing the Trusts Act 2019 and the common law principles underpinning it. I can be brief because the issues have been made clear and my view is that they call for a practical resolution.

[11]            First, I agree with Mr Grant that the wishes of a settlor for the future administration of a trust should be taken into account. In this case, I do not give the settlor’s wishes particular weight. That is because I do not think that the settlor was expressing a firm preference. In his letter of 11 May 1988 (to the first respondent), he said:

While I have provided for a family trust to continue until the death of my [niece’s] and [nephew’s] children on further reflection I would now like to make the trust a continuing one in perpetuity, giving you and Mick Andrews the right to appoint your successors and if considered necessary or desirable at some future time to empower the trustees to hand over the administration to the Guardian Trust or some similar suitable body.

…

The properties involved really need somebody [parttime] to attend to [tenants’] complaints, also maintenance etc. I suggest Mr James Carrigan of 97 Stanley Point Road, could be a suitable person and would also make a suitable trustee as well.

[12]            Second, I agree with both counsel that if the applicant is appointed as a trustee, there is a risk that the assets of the trust may be subject to the tax regime of California, which is more onerous than that of New Zealand. On the materials before me, I cannot assess the extent of the risk.

[13]            Third, the beneficiaries, all adults, are aware of the risk and still support the appointment of the applicant as a trustee.

[14]            Under these circumstances, I see utility in a beneficiary, who has the informed support of the other beneficiaries, being appointed as a trustee to exercise the powers and perform the duties of that office in conjunction with two other independent and professional trustees.

[15]            I do not weigh the settlor’s wishes, as set out in his letter of 11 May 1988, so heavily as to cause me to reach a different view.

Decision

[16]The application is granted. I make the following orders:

(a)The second respondent is removed as a trustee of the trust.

(b)The following are appointed as replacement trustees:

(i)the applicant;

(ii)W  J  Scott  Trustees  Ltd  (as   a   vehicle   through   which  Mr Sam Bassett will perform the role of trustee); and

(iii)a limited liability company to be incorporated as a vehicle through which Ms Kathryn Roberts will perform the role of trustee.

[17]            I make no order for the removal as trustee of the first respondent since I am advised he is now deceased.

[18]            The date of appointment of the applicant and W J Scott Trustees Ltd as trustees will be the date of this Judgment.

[19]            The date of  appointment  of  the  company  to  be  used  as  a  vehicle  for  Ms Kathryn Roberts as a trustee will be the later of the date of this Judgment or the date of its incorporation.

Costs

[20]            Procedural complexity is seldom absent from litigation involving trusts. This case is no exception.

[21]            Initially, the respondents filed a notice of appearance abiding the decision of the Court but advising that:

… they wish to inform the Court of various facts and matters that are relevant to the application so that it is properly informed before it makes a decision on the four proposed orders.

[22]            In the same document, the respondents presaged an application by them pursuant to s 133 of the Trusts Act for directions “concerning the appointment of the Applicant and W J Scott Family Trustees Ltd as Trustees of the Trust”.

[23]On 2 September 2024, as Duty Judge, Venning J said:

[5]        As discussed with Mr Grant during the call of the matter in the duty Judge list, I do not consider s 133 of the Act to be applicable to the present situation. The concerns the existing trustees have as to the suitability of the proposed replacement trustees can be addressed in the context of Mr Scott’s current application, which includes an application under s 114 of the Act.

[6]        I understand that Mr Grant’s concern on behalf of the existing trustees is the issue of costs. The trustees are concerned that their costs should be borne by the Trust estate rather than them personally, particularly as this is not “hostile litigation”.

[7]        As I indicated to counsel during the course of the hearing, on the current information before the Court it seems the current trustees are acting reasonably and appropriately in agreeing to resign and by raising the issues they wish to raise before the Court. For that reason their costs of putting information before the Court to enable it to deal with the application in a proper and informed manner should appropriately be borne by the Trust. On that basis, there is no need for the additional costs of a separate application by

them under s 133 of the Act. The proper concerns can be dealt with in the context of further evidence in the current application.

[24]            It is submitted for the applicant that the respondents’ position transmogrified from providing information to engaging in hostilities. Accordingly, it is submitted that the respondents should pay costs and not be indemnified by the trust.

[25]            I do not find that this is a case where the respondents, as trustees, should pay costs personally. I accept that they participated to an extent that went beyond merely providing the Court with information. But they did abide the Court’s decision on their removal and indeed acquiesced in it. And the material they put before the Court at the hearing as to who would be suitable replacement trustees was germane.

[26]            I make an order that the actual and reasonable costs of all the parties be borne by the trust.

[27]            A further matter raised by Mr Grant in the final paragraph of his submissions is:

The removal of the Trustees should take place with them being given an indemnity. The parties have had correspondence over the wording of an appropriate indemnity and the proposed wording that is set out below is thought to be acceptable. It is submitted that a direction should be made that either the incoming Trustee(s) or the Court should provide the current Trustees with an indemnity in the form below on their retirement:

“The New Trustee irrevocably indemnifies the Retiring Trustees out of, and to the extent of, the Trust Fund for all liabilities and expenses incurred prior to the date of this deed by the Retiring Trustees in accordance with the entitlements to indemnification that are available to a trustee under clause 9 of the Trust Deed and sections 41 and 81 of the Trusts Act 2019”.

[28]            I decline to make this order. In my view, the law is clear and the order would be otiose.

Brewer J