Strang v Strang

[2016] NZHC 2203

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2016-425-000094 [2016] NZHC 2203

UNDER	the Trustee Act 1956
IN THE MATTER	of an application for a Vesting Order
BETWEEN	NORMA HELENE STRANG AND RUSSELL THOMAS SMITH Plaintiffs
AND	MURRAY VERNON STRANG Defendant

Hearing:	On the papers
Appearances:	S N McKenzie for the Plaintiffs
Judgment:	16 September 2016

JUDGMENT OF ASSOCIATE JUDGE OSBORNE AS TO VESTING ORDERS AND SERVICE

Introduction

[1]      The plaintiffs, Norma Strang and Russell Smith, as current trustees of the Strang   Family   Trust   (the   Trust)   seek   an   order,   along   with   various   other administrative orders, vesting in them a residential property at 129 Panton Street, Invercargill (the property) owned by the Trust.  These orders are sought because the defendant, Murray Strang, in whose name an interest in the property is currently registered, has been removed as a trustee of the Trust as a result of his becoming mentally incapable of exercising his powers and fulfilling his duties.  For simplicity

the parties will be referred to by first name.

STRANG v STRANG [2016] NZHC 2203 [16 September 2016]

[2]      Norma  and  Murray  are  married.    Together  they  settled  the  Trust  on  19

February 2002.   Norma, Murray and Russell were named as trustees of the Trust. The final beneficiaries of the Trust are any children of Norma and Murray and the discretionary beneficiaries are the children, any of their children, and Norma and Murray themselves.

[3]      Murray suffers from dementia.   He currently resides in Clare House Rest Home.  On 12 July 2016 his mental state had deteriorated to such an extent that his enduring power of attorney was invoked.  Norma is appointed as Murray’s attorney for his personal care and welfare and personal property matters.

[4]      On 22 August 2016, due to Murray no longer having mental capacity to carry out his obligations as trustee Norma exercised her power under the terms of the trust deed to remove him as a trustee of the Trust.

[5]      The Trust has subsequently entered into an agreement for sale and purchase of the property.  Settlement is currently pending.  As Murray is no longer mentally capable he is unable to sign the required legal documentation to transfer the property on settlement date.  Nor is he able to sign an authority and instruction form to have the  property  registered  in  the  names  of  the  remaining  trustees  only.     Land Information New Zealand has also made it clear that an attorney under an enduring power of attorney cannot sign an authority and instruction form on behalf of a trustee who has lost capacity.

[6]      The plaintiffs have therefore been required to come to court and apply for an order to have the property solely vested in their names.   I will return to the consideration of the vesting order in a moment, but firstly I will deal with some administrative matters.

[7]      The  plaintiffs  have  commenced  this  proceeding  under  pt  18  High  Court Rules.   Rule 18.4  provides  that  to  commence  a proceeding  under this  part  the plaintiffs must file a statement of claim accompanied by an application for directions as to service and representation under r 18.7.  This application must be supported by the necessary information to enable the court to decide what persons are interested in or may be adversely impacted by the relief sought along with a memorandum of

counsel stating why the directions are sought.1

[8]      The plaintiffs have sought the following orders in their application:

(a)      the application and the relief sought by the statement of claim be dealt

with on the basis of the plaintiffs’ evidence on the papers;

(b)      no directions be made with regard to the defendant’s representation by

a litigation guardian or other representative;2

(c)      service on the defendant of this application and all other documents filed in the proceeding by the plaintiffs be dispensed with; and

(d)      no other person is required to be served with these proceedings. [9]   I deal with each of these in turn.

Mode of evidence and proceeding

[10]     The plaintiffs have sought an order that the proceedings be dealt with on the

basis of the plaintiffs’ affidavit evidence.  Given the nature of these proceedings and

the findings I make below, I consider that such an order is appropriate.

1      High Court Rules, r 18.7(3) and (5).

2      Implicit in this order is that Murray is incapacitated in terms of r 4.29 High Court Rules.

[11]     The plaintiffs have sought that no directions be made with regard to the defendant’s representation by a litigation guardian.   However, if Murray is an incapacitated person under the High Court Rules he is required to have a litigation guardian unless the court orders otherwise.  I will therefore proceed on the basis that the order sought is that the requirement that Murray has a litigation guardian is dispensed with.

[12]     Rule 4.29 High Court Rules provides as follows:

incapacitated person means a person who by reason of physical, intellectual, or mental impairment, whether temporary or permanent, is—

(a)       not capable of understanding the issues on which his or her decision would be required as a litigant conducting proceedings; or

(b)      unable to give sufficient instructions to issue, defend, or compromise proceedings

[13]     Dr Malcolm McKerchar, Murray’s general practitioner for the last 20 years, has provided evidence on the matter.  On 5 July 2016 Dr McKerchar visited Murray in the dementia unit at Clare House.   He deposes that when he entered the room Murray recognised him but did not know his name.  He attempted to engage Murray further but found it difficult to do so.  In Dr McKerchar’s opinion Murray’s mental capacity  had  significantly  reduced  to  the  point  where  he  was  not  capable  of managing his own affairs in relation to property or personal care and welfare.

[14]     Dr  McKerchar’s  evidence  demonstrates  that  Murray  is  an  incapacitated person in terms of r 4.29.  He is no longer capable of managing his own affairs.  He would not be capable of understanding the proceedings and there are also obvious difficulties in engaging with Murray so he would not be able to give sufficient instructions.   Given the length of time Dr McKerchar has been Murray’s general practitioner I am satisfied that he was in a position where he would have had all the necessary information to make his assessment.  I am therefore confident that Murray is an incapacitated person as defined in r 4.29.

[15]     Given Murray’s incapacitated status, r 4.30 requires him to have a litigation guardian unless the court orders otherwise.   The primary ground put forward in support of an order that a litigation guardian is not required is that such an appointment would serve no useful purpose.  The relief sought by the plaintiffs is limited to the vesting order and does not otherwise impact on Murray’s interests. All that is occurring is that trust property is being solely vested in the continuing trustees so they can properly fulfil their duties.

[16]     Counsel has submitted that the facts in  this case are similar to  those  in Docherty  v  Docherty.3      In  that  case  the  plaintiffs  also  sought  a  vesting  order following the removal of the defendant as a trustee.  The evidence established that the defendant was an incapacitated person under the High Court Rules.  In deciding that a litigation guardian was not necessary, Associate Judge Bell concluded:

[27]      While recognising that the  Court should  be  cautious  in  ordering otherwise under r 4.30, I accept that this is one of those cases where the Court should do so. On its substantive merits the plaintiffs have a very straightforward case. I find on the basis of the evidence of Dr Boyd that Mr Docherty is quite incapable of acting as a trustee. Any suggestion that he could somehow perform some useful purpose by remaining as trustee can be dismissed out of hand. Given his inability to act as a trustee, the proper response is that he cease to be a trustee. This is an entirely appropriate case for removal.

[28]      Mr Riechelmann, the potential litigation guardian, accepts that there could not be a sensible basis for contending that Mr Docherty could remain as trustee. Once it is accepted that Mr Docherty was properly removed as trustee then the vesting order follows as night follows day. There cannot be any sensible basis for an argument that even though he has been removed as trustee, he should still be shown as a registered proprietor of trust assets.

[17]     The facts of this case are similar.  Murray has been properly removed as a trustee and there is evidence before the court proving that he would not be able to carry out his duties as a trustee.  Where that is the case, there is no reason why the property should not be vesting in the remaining trustees of the trust so that they can continue to carry out their duties.  In those circumstances a litigation guardian is not required.  Although caution is always required before making such an order, once a

trustee is properly removed and there is evidence showing that they have been

3      Docherty v Docherty [2013] NZHC 1885.

properly removed, a vesting order follows as night follows day.  There is no sensible basis for opposition.

[18]     Norma exercised her power under the terms of the trust deed to remove Murray as a trustee.  The reason for this was his mental incapacity.  I consider that there can be no sensible argument that, notwithstanding Murray’s proper removal as a trustee, he should remain the legal owner of the property.   I therefore make an order dispensing with the requirement for a litigation guardian.

Service be dispensed

[19]     The plaintiffs have requested that service on the defendant as well as any other person is dispensed with in this case.  Given my findings as to Murray’s mental capacity such an order is uncontroversial.  In terms of any other persons that may be affected, Fiona Turton, Philippa Evans and a minor are discretionary beneficiaries of the Trust.  The first two have each signed a memorandum of consent and Fiona has signed on behalf of the minor as she is her legal guardian.   They consent to the application for the vesting order.   Norma (one of the plaintiffs) is the only other beneficiary of the Trust.

[20]     I therefore consider it appropriate to make an order dispensing with service on Murray as well as on any other person.

Vesting orders

[21]     Section 52(1)(b)(i) of the Act provides the Court with the power to vest land in any such person that it may direct where a trustee entitled to or possessed of any land or interest therein, either solely or jointly with any other person, is under a disability.

[22]     Murray is possessed of an interest in a property belonging to the Trust.  He has, however, been removed from his position as a trustee.  The plaintiffs seek that the property be vesting in themselves as the remaining trustees.  Given the need to

ensure they can deal with the property in accordance with their duties, I am satisfied that the vesting orders sought is appropriate.

[23]     An order will be made vesting the property in Norma and Russell.

Orders

[24]     I direct:

(a)      the application and the relief sought by the statement of claim be dealt with on the basis of the plaintiffs’ evidence on the papers;

(b)Murray Vernon Strang is an incapacitated person for the purpose of the proceedings pursuant to r 4.29 High Court Rules;

(c)      Murray Vernon Strang does not require a litigation guardian;

(d)service  on  Murray Vernon  Strang  along  with  any other  person  is dispensed with; and

(e)      the interest of Murray Vernon Strang in the property at 129 Panton Street, Invercargill being Lot 9 Block V Deposited Plan 241 contained in Computer Freehold Register SL10C/498 is vested in Norma Helene Strang and Russell Thomas Smith.

Associate Judge Osborne

Solicitors:

Preston Russell Law, Invercargill