SWL Trustee Company Limited v Marshall

[2015] NZHC 132

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-002144 [2015] NZHC 132

BETWEEN

SWL TRUSTEE COMPANY LIMITED

Plaintiff

AND

IAIN RALPH MARSHALL and VIKTORIYA PAVLOVNA MARSHALL Defendants

Hearing:	9 February 2015
Appearances:	David Hoskin and Scott Gazley for the Plaintiff No appearance for the Defendants
Judgment:	11 February 2015

RESERVED JUDGMENT OF MOORE J

This judgment was delivered by  on 11 February 2015 at 12:00pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Date:

SWL TRUSTEE COMPANY LIMITED v MARSHALL & ANOR [2015] NZHC 132 [11 February 2015]

Introduction

[1]      The plaintiff company, SWL Trustee Company Limited (“SWL”) offers professional trustee services to its clients’ trusts.   It does so through the law firm, Steindle Williams Legal Limited.

[2]      Its clients were the defendants, Iain and Victoria Marshall (“Mr and Mrs Marshall”).    Mr and  Mrs  Marshall,  together with  SWL,  are the  trustees  of the Marshall Family Trust (“the Trust”).   The Trust owns six residential properties in Auckland which are the subject of various litigation.

[3]      Until relatively recently SWL has been acting for Mr and Mrs Marshall in some of these proceedings but encountered difficulties in obtaining instructions.  An order was made in this Court in February 2013 granting leave for SWL to withdraw as solicitors on the record.

[4]      SWL has also given notice to Mr and Mrs Marshall to withdraw as a trustee in accordance with the powers contained in the deed to do so.

[5]      However, SWL seeks to further regularise and formalise its withdrawal as a trustee by seeking orders from this Court under s 46 of the Trustee Act 1956 (“the Act”) that it be discharged as a trustee of the Trust and further seeking a vesting order under s 52(1)(g) requiring the Registrar-General of Land to remove SWL as registered proprietor from the titles of the six properties thereby vesting the titles solely in Mr and Mrs Marshall’s names as trustees.   In order to give effect to this order SWL also seeks an order authorising the Registrar to execute such written authority and documents as are necessary and required by the Registrar-General of Land to give effect to the transfer of title to the properties from the plaintiff and Mr and Mrs Marshall to Mr and Mrs Marshall solely as registered proprietors.

Formal proof

[6]      These proceedings were filed on 26 August 2014.   The defendants were served on 22 September 2014 in terms of a without notice order for directions as to service and substituted service by Associate Judge Doogue on 16 September 2014.

[7]      The statement of defence was due to be filed by 28 October 2014.   No defence has been filed and there has been no communication from either defendant since mid-2013.

[8]      In the absence of a defence this matter proceeded before me by way of formal proof.

The background

[9]      The Trust was created by deed on 2 December 2004.  SWL was involved in the legal work necessary to establish the Trust.

[10]     Under  the  deed  three  trustees  were  appointed.    They  were  Mr  and  Mrs

Marshall and Ronald Dennis Surridge.

[11]     The following year SWL received instructions from Mr and Mrs Marshall that Mr Surridge was to be retired as trustee and replaced by SWL as the new trustee. A deed of retirement and appointment of trustees reflecting this change was executed on 10 August 2005.

[12]     Since the Trust was established it has acquired six residential properties, the details of which are set out below:

CT	Owner	Legal Description
1	127869	Iain Ralph Marshall, SWL Trustee Company Limited, Viktoriya Pavlovna Marshall	Unit  B5L  and Accessory  Unit 14, S14 Deposited Plan 331094
2	127898	Iain Ralph Marshall, SWL Trustee Company Limited, Viktoriya Pavlovna Marshall	Unit  B8F  and Accessory  Unit 26, S26 Deposited Plan 331094
3	127912	Iain Ralph Marshall, SWL Trustee Company Limited, Viktoriya Pavlovna Marshall	Unit  B9I  and  Accessory  Unit 137,   S137    Deposited    Plan 331094
4	356965	Iain Ralph Marshall, SWL Trustee Company Limited, Viktoriya Pavlovna Marshall	Unit  613  and  Accessory  Unit 160 Deposited Plan 389269
5	356973	Iain Ralph Marshall, SWL Trustee Company Limited, Viktoriya Pavlovna Marshall	Unit  706  and  Accessory  Unit 192 Deposited Plan 389269

CT	Owner	Legal Description
6	356974	Iain Ralph Marshall, SWL Trustee Company Limited, Viktoriya Pavlovna Marshall	Unit  707  and  Accessory  Unit 193 Deposited Plan 389269

[13]     The registered proprietors of these properties are the trustees, namely Mr and

Mrs Marshall and SWL.

[14]     The  same  trustees  were  also  the  registered  proprietors  of  a  residential property in Howick.   This was sold in 2009 but is now the subject of a weathertightness claim in which Mr and Mrs Marshall and SWL are named, with others, as defendants.

[15]     The  properties  marked  2  to  6  in  the  table  above  have  a  registered  first mortgage to the ANZ Bank.  A default notice was served on SWL in respect of that mortgage in October 2013.

[16]     Furthermore, the body corporate which administers three of the properties (marked 4, 5 and 6 in the above table) has, through its solicitors, advised there are outstanding levies owing to the body corporate by the trustees and that a statutory demand may be issued to SWL without further notice.

[17]     Additionally, a different body corporate administers the other three properties (marked 1, 2 and 3 in the above table).  In July 2013 an order was obtained by the body corporate in the Tenancy Tribunal for the payment of outstanding body corporate levies as well as interest and costs amounting to over $47,000.  Demand has been made of SWL, as registered proprietor, for the payment of that amount.

[18]     SWL has been acting for Mr and Mrs Marshall in relation to the conduct of the various litigation in which the Trust has been embroiled.

[19]   Considerable difficulties have been encountered by SWL in obtaining instructions.  Correspondence has gone unanswered.  It seems likely that Mr and Mrs Marshall have left the jurisdiction.   A process server employed by SWL has attempted, on numerous occasions, to serve papers on Mr and Mrs Marshall but

those attempts have proved fruitless.   It appears that the last correspondence with Mr and Mrs Marshall was from Mrs Marshall in March 2013 when, from a United Kingdom email address, she said she and her husband were overseas where the latter was receiving medical treatment.  She emphasised to SWL that they were not to send any further correspondence to their Auckland address and that she had also written to the Court.

[20]     SWL was granted leave by this Court to withdraw as solicitors for Mr and Mrs Marshall.  Subsequently this Court received advice from Mr Marshall as to his new email address.   More particularly, in the Court’s case management minute,1

Associate Judge Bell observed that it was assumed that Mr and Mrs Marshall were no longer actively defending the proceedings but if that assumption was wrong they should make contact with the Court for a telephone conference to be arranged.  No contact from Mr and Mrs Marshall was received.

[21]     In September 2013 SWL gave notice to Mr and Mrs Marshall that it was retiring as a trustee of the Trust in terms of clause 10.6 of the trust deed.

[22]     By reason of that notice Mr Hoskin, for SWL, submits that while, at law, SWL is now no longer a trustee of the Trust, for the avoidance of doubt, it seeks an order from the Court formally discharging it as a trustee.  Despite the notice, SWL remains recorded as a registered proprietor of the listed properties and, as such, nominally liable.  Mr Hoskin describes the steps of obtaining the orders sought as a course necessary to avoid doubt.

[23]     He further submits that if the Court sees fit to discharge the plaintiff as a trustee it is not necessary for a replacement trustee to be appointed because:

(a)       the defendants will both remain trustees of the Trust;

(b)any third trustee appointed by the Court is likely to struggle to obtain instructions given the difficulties faced by SWL which is not in the

best interests of the Trust.

1      Leng v Marshall (Case Management Telephone Conference Minute of Associate Judge R M Bell)

HC Auckland CIV-2012-404-768, 16 May 2013.

Discharge of trustee

[24]     The power of the Court to discharge a trustee is to be found in s 46 of the Act. [25]   Under s 46 the Court may:

(a)       appoint a replacement trustee;

(b)      direct that accounts and enquiries be made;

(c)       discharge the retiring trustee from the trust and from all liability in respect of it;

(d)      make an order as to costs or otherwise as the Court thinks fit; or

(e)       exercise any of the powers given to the Court under Part 5 of the Act. [26]    These powers include the power to make a vesting order and also the power

to relieve the retiring trustee from personal liability for any breach of trust which the retiring trustee may have committed as trustee.

Vesting order

[27]     SWL also seeks a vesting order in terms of s 52 of the Act. [28]        More specifically SWL seeks a vesting order that:

(a)       SWL be  removed  by  the  Registrar-General  of  Land  as  registered proprietor from the title of the properties; and

(b)the properties vest  solely in  the defendants  as  continuing trustees subject to any existing registered mortgages and interests.

[29]     Property may vest in the new or continuing trustees without a transfer or assignment where there is a vesting order in the High Court under the Act or under the Court’s inherent equitable jurisdiction.2

[30]     A vesting order may be defined as:3

(a)       an order of the High Court;

(b)      which has the effect of passing legal title interest in any property;

(c)       as  if  the  title  had  been  transferred  in  the  appropriate  manner  by whoever was previously shown as the legal owner.

[31]     A vesting order has the same effect as if the trustee had been:4

(a)       an ascertained an existing person of full age and full mental capacity;

and

(b)had executed a conveyance or release to the effect intended by the order.

[32]     A vesting order may be required if the property needs to be transferred by the person required to sign the transfer who cannot do so or refuses.5

[33]     In any of the situations listed in s 52(1), the Court has the power to make an order vesting land in the name of any person, in any manner as the Court sees fit. Equally this Court may release or dispose of any contingent right to land in favour of

anyone the Court may think fit.6

2      Garrow & Kelly Law of Trusts and Trustees (7th ed, Wellington, LexisNexis NZ,2013) at 18.16.

3      At 18.16(a)-(c).

4      Section 57 of the Act.

5      At 18.17 and 18.18.

6      At 18.19.

[34]     The situations listed in s 52(1) relevantly include:

(a)      where  a  trustee  (who  holds  land)  wilfully  refuses  or  neglects  to transfer the land or release the right and 28 days has passed since the written demand was made by one of those entitled;7 and

(b)where land or any interest therein is vested in a trustee whether by way of  mortgage  or  otherwise  and  it  appears  to  the  Court  to  be expedient.8

[35]     SWL made  written  demand  on  or  about  28  February 2014  that  Mr  and Mrs Marshall transfer the land to them personally and to remove SWL as a registered proprietor.

[36]     The 28 days notice period expired on 28 March 2014 without a response from

Mr and Mrs Marshall.

[37]     SWL was  entitled  to  request  the  defendants’ release  because  it  was  the

registered proprietor of the properties and had retired as a trustee in terms of clause

10.6 of the Trust deed.

Discussion

[38]     SWL is faced with obligations as a registered proprietor and the risks of being drawn into proceedings for monies owed on the properties where the defaults giving  rise  to  liability  do  not  relate  to  acts  or  omissions  for  which  SWL  is responsible.

[39]     I agree with Mr Hoskin’s submission that this places SWL in an invidious

position given it is no longer a trustee of the Trust and has been unable to obtain instructions from Mr and Mrs Marshall for some time.

7      Section 51(g) of the Act.

8      Section 51(h) of the Act.

[40]     I also agree that there is no benefit to any party to continue the status quo and it is both expedient and proper to remove SWL as a trustee in order that the Trust may be administered under the sole trusteeship of Mr and Mrs Marshall.

[41]     For these reasons I am satisfied the order to discharge SWL as a trustee and the vesting order should be made.

Order authorising Registrar to execute documents to give effect to the vesting order

[42]     SWL seeks a further and related order authorising the Registrar of this Court to execute such written authority and documents as are necessary and required by the Registrar-General of Land (Land Information New Zealand) to permit the transfer of title to the properties from that of SWL and Mr and Mrs Marshall to Mr and Mrs Marshall solely as registered proprietors.

[43]     Such an order is necessary to give effect to the vesting order I propose to make under s 57.

[44]     In the circumstances I can see no legal or practical impediment to such a course and thus make the order sought.

Result/orders

[45]     The following orders are made in favour of SWL:

(a)       an order pursuant to s 46 that SWL is discharged as trustee of the

Trust;

(b)a vesting order pursuant to s 52(1)(g) providing that SWL be removed by the Registrar-General of Land as registered proprietor from the title of the properties described at [9] of this judgment;

(c)      an order authorising the Registrar of this Court to execute such written authority and documents as are necessary and required by the Registrar-General of Land (Land Information New Zealand) to permit

and give effect to the transfer of title to the said properties from that of

SWL and Mr and Mrs Marshall to Mr and Mrs Marshall solely as joint registered proprietors.

Costs

[46]     SWL seeks the costs of and incidental to these proceedings.  The trust deed provides  an  indemnity  from  Mr  and  Mrs  Marshall,  as  settlors,  to  SWL  as professional trustees.  Mr Hoskin submits that this indemnity extends to cover the costs incurred by SWL in the present proceedings being a loss suffered as a consequence of it acting as a professional trustee of the Trust.

[47]     However, in argument before me, Mr Hoskin did not press for indemnity costs and accepted that, in all the circumstances, an award of costs under the 2B scale would be appropriate.

[48]     Accordingly I order that SWL is entitled to costs on a 2B basis together with disbursements as fixed by the Registrar of this Court.

Moore J

Solicitors:

Mr Hoskin, Auckland