Seaward v Baxter

[2017] NZHC 2719

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2017-409-885 [2017] NZHC 2719

BETWEEN

LOIS MARGARET SEAWARD AND

JANET ROSE KELLY Plaintiffs

AND

BRIAN BAXTER Defendant

Hearing:

7 November 2017

(On the papers)

Counsel:

C Light for the Plaintiffs

Judgment:

7 November 2017

JUDGMENT OF MANDER J

[1]      The plaintiffs, Mrs Lois Seaward and Mrs Janet Kelly, as the attorneys of the defendant, Mr Brian Baxter, have made application to remove Mr Baxter as a trustee and to vest land in the remaining trustee, Mr Michael Toomey.   There is an accompanying application seeking permission to commence the proceeding by originating application and to dispense with service on the defendant.

[2]      Mr Baxter’s wife, Elizabeth, died on 15 March 2014.   Mrs Baxter’s will provided that the residue of her estate was to be transferred to Mr Baxter unless he predeceased her. Mr Baxter and Mr Toomey, a solicitor and partner of a Christchurch law firm, were appointed as executors and administrators of Mrs Baxter’s estate.

[3]      A property at 158 Port Hills Road (the property) was owned by Mr and

Mrs Baxter as tenants in common in equal shares.  The half interest that Elizabeth

SEAWARD v BAXTER [2017] NZHC 2719 [7 November 2017]

owned was transmitted to Mr Baxter and Mr Toomey as executors. However, for some reason which Mr Toomey is not able to recall, it remained in the names of the executors and trustees and was not transferred to Mr Baxter.

[4]      Ms Seaward and Ms Kelly have been neighbours of Mr Baxter for some

24 years.  Mr Baxter has no immediate family in New Zealand, having immigrated from England in 1966. The couple’s only child, Duncan, predeceased them. The only surviving relative in Australasia is a granddaughter, Tamsin, who is now 21.  Duncan separated from Tamsin’s mother, and she together with their daughter moved to

Melbourne.  It is believed that is where she now lives.

[5]      In early August 2017, Mr Toomey prepared enduring powers of attorney for Mr Baxter in relation to property and personal care and welfare.  Because Mr Baxter had no immediate family in New Zealand that could take on the role of attorneys under an enduring power of attorney, his longstanding neighbours and friends, Mrs Seaward and Mrs Kelly, accepted appointment.  Mr Toomey has deposed that at the time Mr Baxter executed the enduring powers of attorney he was satisfied that Mr Baxter still had the capacity to understand the documents he was signing and the potential risks and consequences of so doing.

[6]      Around that time, Mr Baxter was admitted into the respite care unit of the hospital wing of a local retirement village.   Mr Baxter suffers from irreversible dementia which has now deteriorated to such an extent that on 6 September he was moved into the dementia unit of the hospital.

[7]      On 30 August, Dr Gerald Johnstone certified Mr Baxter as mentally incapable

in relation to property because he was not wholly competent to manage his own affairs in relation to his property.  Mr Baxter’s dementia progressed to the extent he is no longer able to understand the nature and appropriate management of his property, and completely lacks insight into his impairment.  Dr Johnstone recommended that the enduring powers of attorney for property be activated, and I have sighted a certificate attesting to Mr Baxter’s mental incapacity.

[8]      Because Mr Baxter was no longer able to live at home, the attorneys put the property on the market. At that time, Ms Seaward and Ms Kelly were not aware that as attorneys they could not exercise his powers as a trustee.1  Ms Seaward has deposed that the net sale proceeds will be deposited into Mr Baxter’s bank account for his benefit, and the funds used to pay for his rest home care.

[9]      In October 2017, Mr Toomey attended on Mr Baxter for the purpose of explaining the proposed auction of the property and discussing with Mr Baxter his wife’s estate, the executorship, and that he was a residuary beneficiary. It was apparent to Mr Toomey that Mr Baxter’s mental capacity had rapidly deteriorated since early August and that he was unable to understand the nature of the transaction and provide him with necessary instructions.

[10]     Accordingly,  Mrs  Seaward  and  Mrs  Kelly  do  not  in  their  capacity  as

Mr Baxter’s attorneys have the ability to act for him in relation to his obligations, rights and powers as a trustee.   Mr Baxter does not have the capacity to sign an authority and instruction form.  It is these combined circumstances which present an obstacle to any transfer of the property and have given rise to the current applications.

[11]     The applications are sought to be made without notice to Mr Baxter.  Because of his dementia, he would not understand the nature of the proceeding and there would be no purpose in serving the proceeding on him.  The proceeding does not impact on Mr Baxter’s substantive rights and is only brought to enable the property in which he has the sole beneficial interest to be sold for his benefit.  The sale proceeds are to be held in his bank account for the purpose of paying for his rest home care.

[12]     The situation is akin to that addressed by Nation J in Re Godfrey Family Trust.2

In that case, this Court held that an enduring power of attorney cannot provide the attorney with the power to exercise the powers of a trustee.  The correct approach is to apply to the Court for an order removing the trustee who because of his or her mental

incapacity is unable to fulfil their duties as a trustee.

1      Re Godfrey Family Trust [2017] NZHC 420, [2017] 3 NZLR 198, (2017) 4 NZTR 27-005, [2017] NZFLR 209.

2      Re Godfrey Family Trust, above n 1.

[13]     Having  read  the  supporting  affidavits  and  counsel’s  memorandum,  I  am satisfied the applications are brought to ensure the trust is properly executed.   I consider it appropriate that Mr Baxter be removed as a trustee in favour of Mr Toomey remaining as the sole trustee, and that the property vest solely in his name in that capacity.3

[14]     Accordingly, I make the following orders:

(a)      permitting the proceeding to be commenced by originating application under r 19.5 of the High Court Rules;

(b)dispensing of the service of the application for directions and the originating application on the defendant, Brian Baxter, under rr 19.10 and 7.22 of the High Court Rules;

(c)       removing Brian Baxter as a trustee of the estate of the late Elizabeth

Grace Baxter;

(d)vesting a half share in the property at 158 Port Hills Road, Heathcote Valley, Christchurch, being Lot 14 Deposited Plan 47767, identifier CB27F/307, held by Brian Baxter and Michael Francis Toomey as trustees of the estate, in the name of Michael Francis Toomey as the continuing trustee of the estate.

Solicitors:

Young Hunter, Christchurch

3      Trustee Act 1956, s 52(1)(b)(i).