Spence v Spence

[2016] NZHC 2472

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2013-419-297 [2016] NZHC 2472

BETWEEN

FRANCIS RAYMOND MELVILLE

SPENCE Plaintiff

AND

MURRAY ALICK SPENCE AND DONNA MAREE SPENCE AND ALISON RAEWYN MORRISON First Defendants

FOSTER AND MILROY TRUSTEE COMPANY LIMITED

Second Defendant

Hearing:	17 October 2016
Appearances:	D J Taylor for the Plaintiff No appearances for the Defendants
Judgment:	17 October 2016

ORAL JUDGMENT OF MUIR J

Counsel/Solicitors:

D J Taylor, Barrister, Hamilton

S Scott, Bogers Scott Shortland, Hamilton

SPENCE v SPENCE [2016] NZHC 2472 [17 October 2016]

[1]      Francis Raymond Melville Spence (Frank) seeks orders for the appointment of a new trustee to the Fulansis Trust. That application is unopposed.

[2]      The background, briefly, is that in 1976 Frank’s father, Murray, formed what was then known as the Murray Spence Family Trust but which has since changed its name to the Fulansis Trust.   He was not a beneficiary of that trust but his wife, children and grandchildren were.  It is said that he ran that trust almost as the alter ego of himself and that he provided information on a need to know basis.   Mr Taylor’s memorandum suggests that he did not think people in fact needed to know very much.

[3]      After a lengthy marriage Murray separated from his former wife Raewyn.  It is  said  that  he used the assets  of the  Fulansis Trust  to  finance his  relationship property settlement and that this involved:

(a)       new borrowings of up to $600,000;

(b)      payment of $300,000 to Murray from the new borrowing; and

(c)       a loan of $69,100 to the so called FIS Trust, a related trust which owned a farm. This loan is apparently unsecured.

[4]      Mr Taylor submits on behalf of Frank that the accountant for the Fulansis Trust  was  under  the  mistaken  impression  that  Murray  was  a  Trust  beneficiary because he appeared in the accounts of the Trust as having a current account.  It is said that this ostensible current account was for approximately $18,000 less than the

$300,000 that was paid to him.   Mr Taylor submits that this erroneous thinking explains the unorthodox arrangements at the time.

[5]      Unhappy with all of that, Frank began this proceeding in 2013 to restore the financial position of the Fulansis Trust and to remove the first defendants as trustees. During the course of that proceeding Murray appointed Foster and Milroy Trustee Company Limited as a further trustee of the Trust and this party was subsequently joined in the proceedings.

[6]      Later, in May 2015, each of the non-corporate trustees, being Murray and daughters Donna and Alison, resigned as trustees leaving only Foster and Milroy Trustee Company Limited.

[7]      Mr Taylor confirms that the Foster and Milroy Trustee Company Limited has, for  an  extended  period,  indicated  that  it  also  should  be  replaced  as  a  trustee. However, given that it was the sole trustee it was inappropriate for it to resign its appointment.  Mr Taylor advises that party abides the decision of the Court.  It has taken no steps in the proceedings.

[8]      In the interim, all of the properties owned by the Trust have been sold.  There is the suggestion that at least one of these sales may have been at an under valuation. Such sale was to daughter Alison Morrison, the third named first defendant.

[9]      Each of Donna, and Murray’s third daughter Helen Smith (who is not a trustee), consent to the orders that are sought.  Those orders are for the appointment of Mr Clive B Cleland QSM, FCA FAMINZ as trustee.  Mr Cleland is in my view a demonstrably appropriate appointment.   He is a chartered accountant.   He was formerly a partner in KPMG Peat Marwick and predecessor firms.  He was indeed the past managing partner of that firm and he has been on the past NZ national executive of KPMG.  He has an extensive curriculum vitae which speaks not only to his longstanding professional competence but his commitment to the wider community.   He is, among other things, the past national president of the Cancer Society of New Zealand and is an RNZAF liaison officer for the Waikato.

[10]     The jurisdiction of the High Court to remove and replace a trustee is both an inherent and a statutory one.  In practice, resort to the inherent jurisdiction is unusual and only occurs where for some reason the statutory jurisdiction is inadequate for the task.  The inherent jurisdiction will not be exercised in a way which is inconsistent with the statutory jurisdiction.

[11]     The statutory jurisdiction is provided for in s 51(1) of the Trustee Act 1956 which provides:

(1)       The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable to  do  so  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.

[12]     It  has long been  established that in  exercising  either the inherent or the statutory jurisdiction, the primary objective with regard to an application for the removal of a trustee is the welfare of beneficiaries.  Mr Taylor refers to the decision of Letterstedt v Broers which despite its relative antiquity still properly defines the

law in terms:1

In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principal … that their main guide must be the welfare of the beneficiaries. Probably it is not possible to lay down any more definite rule in a matter so essentially dependent on details often of great nicety …

[13]     Having reviewed the affidavit evidence I am satisfied that it is in the interests of all beneficiaries of the Trust that an independent appointment be made.   I am fortified in that conclusion by the fact that there is no opposition by any party. Without deciding the point, there is sufficient information in the affidavits to indicate that there may have been misapplication of trust property by Murray and that these matters are appropriately investigated by an independent party with the interests of all beneficiaries in mind.

[14]     Accordingly I order that:

(a)      Clive Basil Cleland of Hamilton, Chartered Accountant, be appointed as the sole trustee of the Fulansis Trust until further order of the Court.

[15]     The plaintiff’s statement of claim seeks further relief in the following terms.

(b)Vesting in Clive Basil Cleland as trustee of the Fulansis Trust the following assets:

1      Letterstedt v Broers (1884) 9 APP Cas 371 (PC).

(i)       The funds of the Fulansis Trust held in the trust account of

Foster and Milroy, Solicitors, Hamilton;

(ii)      All Fonterra shares in the name of Murray Spence;

(iii)     Any monies owing to the Fulansis Trust by the F.I.S Trust

(c)      An indemnity for the costs of and incidental to this proceeding from and including 7 December 2015.

[16]     In respect of those applications I make the following points:

(a)      Mr Cleland having been appointed as the sole trustee of the Fulansis Trust, all monies held to the account of the Trust, whether in Foster and Milroy, Solicitors, or otherwise now vests in him as trustee.

(b)I am not, on the information available prepared to make any order in relation to Fonterra shares in the name of Murray.  It is said that the shares held by him were inherited from an aunt on the basis that they be assets of the Trust but I do not have before me sufficient primary documents for me to be satisfied in that respect.   The status of any Fonterra shares held by Murray is a proper matter for inquiry by the newly appointed Trustee.  I reserve to him liberty to apply for further orders in the present proceedings should he identify Fonterra shares in Murray’s name which Murray declines to acknowledge are held on the Trust’s behalf and/or if Fonterra is not prepared within its own administrative process, to effect a registration in favour of the Trust.

(c)      In respect of monies allegedly owing to the Fulansis Trust by the FIS Trust, this is in a similar category.   I am not currently adequately appraised of the terms upon which such an advance was made.  It may be that some prior demand is necessary or some period appropriately allowed for repayment.   Again that is a matter for Mr Cleland to

investigate and I likewise reserve leave to him to apply further should that be necessary.

(d)Frank has  incurred  significant  costs  in  bringing  these proceedings with a view to restoring the position of the Trust.   In my view his reasonable costs are appropriately met from the Trust assets and I order accordingly.    In the event any issue arises as to the appropriateness of particular accounts, I again reserve Mr Cleland

liberty to apply to this Court.

Muir J