Taylor v Taylor

[2021] NZHC 992

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-236

[2021] NZHC 992

UNDER

Part 18 of the High Court Rules and the Trustee Act 1956

IN THE MATTER OF

of an application of JACKIE MARIE TAYLOR AND FRANKLIN LAW

TRUSTEE (TAYLOR) LIMITED as trustees of the TAYLOR FAMILY TRUST

BETWEEN

JACKIE MARIE TAYLOR AND FRANKLIN LAW TRUSTEE (TAYLOR)

LIMITED as trustees of the TAYLOR FAMILY TRUST

Plaintiffs

AND

BRETT OWEN TAYLOR

Defendant

Hearing:

29 April 2021

Further telephone conference held 5 May 2021

Appearances:

E J Taia for Defendant

No appearance for or by the Defendant

Judgment:

5 May 2021

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 5 May 2021 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

Solicitors:           Franklin Law, Auckland

TAYLOR v TAYLOR [2021] NZHC 992 [5 May 2021]

[1]                  The plaintiffs, Ms Taylor and Franklin Law Trustee (Taylor) Ltd (“FLTL”), and the defendant, Mr Taylor, are the trustees of the Taylor Family Trust (“trust”).

[2]The plaintiffs seek orders:1

(a)removing Mr Taylor as a trustee of the trust; and

(b)vesting a residential property in Tuakau in FLTL (“Tuakau property”).

[3]                  I set out the background to the application below but in short the plaintiffs contend that Mr Taylor has failed, and is failing, to fulfil his duties as a trustee and that, as a result, it is in the interests of the beneficiaries to remove him. Ms Taylor would herself then retire as a trustee, leaving FLTL as the sole trustee of the trust.

[4]                  The plaintiffs filed this application in February 2021, supported by affidavit evidence from Ms Taylor and Ms Kelly Jones. Ms Jones is a partner in Franklin Law and a director of FLTL. The sole shareholder of FLTL is Franklin Law Trustee Ltd.

[5]                  Attempts to serve the application, evidence, and other documents on Mr Taylor personally have been unsuccessful, due to his ill-health. On 22 March 2021, Gordon J made an order for substituted service on Holland Beckett Law (“HBL”). HBL is acting, or has previously acted, for Mr Taylor. The plaintiffs served the documents in accordance with the Judge’s orders. The documents served included Gordon J’s minute recording the date on which the application would be heard. Mr Taylor has not taken any steps. Having had the benefit of comprehensive oral and written submissions from Mr Taia, counsel for the plaintiffs, and for the reasons set out below, I am satisfied that I should determine the application without further delay.

Background

[6]                  The trust was settled in October 2016. The discretionary beneficiaries of the trust are Mr Taylor, Ms Taylor, Ms Taylor’s children, and other persons or entities not

1      Originating Application for Orders dated 12 February 2021.

particularly relevant at present. The final beneficiaries are Ms Taylor’s children, and their children or remoter descendants.

[7]                  Mr and Ms Taylor, married at the time the trust was settled, separated in early 2019.

Assets and liabilities

[8]                  The trustees are the registered proprietors of the Tuakau property. That property, and debts that Mr Taylor and Ms Taylor each owe to the trustees, are the trust’s only assets of consequence.

[9]                  The trustees (in their capacity as such) are heavily indebted to third parties. As of 14 December 2020, the trustees owed $391,755.79 to the BNZ. The trustees’ arrears to the bank at that date were modest, but only as a result of advances of $44,698.55 from Ms Taylor’s parents to the trustees, or possibly to Ms Taylor herself, and from her to the trustees. The payments due to the BNZ have only been kept up to date as a result of these advances.

[10]The BNZ’s debt is secured against the Tuakau property.

[11]              The trustees are also indebted to Ms Taylor’s parents. Aside from the funds advanced referred to above, the trustees owe Ms Taylor’s parents $620,000. Interest is accruing on this debt and a demand for repayment of debt has been made.

[12]There are also arrears, albeit modest, of rates and to the insurance company.

[13]              Ms Taylor and Ms Jones believe the trustees must sell the Tuakau property, so as to repay the debts to which I have referred, failing which the BNZ will conduct a mortgagee sale. In her affidavit, Ms Jones states that she considers the orderly “wind up” of the trust’s affairs is required. Plainly also there will need to be some resolution of Mr Taylor and Ms Taylor’s personal indebtedness to the trust.

Removal

[14]              The Court will exercise its power to remove a trustee if satisfied it is necessary to do so in the interests of the beneficiaries of the trust and difficult or impracticable to do so without the assistance of the Court. On the evidence before me, I am satisfied the threshold is met. Mr Taylor has been consulted regarding the conduct of trust affairs but has failed to respond. As the terms of the trust deed require the trustees to act unanimously, I  am  satisfied there is,  and  will continue to be,  an  impasse if  Mr Taylor remains as a trustee. That is critical because addressing the trust’s liabilities is now urgent.

Orders

[15]              The first order sought is that I should remove Mr Taylor as a trustee of the trust. If that order is made, Ms Taylor will retire as a trustee. Ms Taylor is willing that I should make the orders sought conditional on her retirement and I shall do so.

[16]              That will leave FLTL as the sole trustee of the trust. There are two points to note on that score.

[17]              First, the terms of the trust deed do not require more than one trustee and, in a telephone conference with me this morning, Ms Jones confirmed that the steps required from hereon are fairly straightforward so that there is no need for a second (independent) trustee, at least at present.

[18]              Secondly, the current  directors  of  FLTL  are  Ms  Jones,  Ms  Taylor  and Mr Taylor. In her affidavit, Ms Taylor states she will also resign as a director of FLTL. In the telephone conference I referred to above, Ms Jones stated that Franklin Law Trustee Ltd, as the sole shareholder of FLTL, would remove Mr Taylor from office if he does not resign of his own volition.

[19]              These steps would bring about a situation in which FLTL is able to manage the affairs of the trust without the involvement of the Taylors.

[20]              Lastly, any trustee must be impartial and act in the best interests of all beneficiaries, and in this case those beneficiaries include Mr Taylor. Again, Ms Jones assured me this morning that there will be no issue on that score and she is well aware of her obligations. I add that there appear to be unresolved issues between the Taylors under the Property (Relationships) Act 1976, so whatever is done now may be scrutinised in that context.

Result

[21]I make orders the following orders.

[22]              First, pursuant to s 112 of the Trusts Act 2019, I remove Brett Owen Taylor as a trustee of the Taylor Family Trust. This order is conditional on Jackie Marie Taylor retiring as a trustee of the same trust, and on her resigning as a director of Franklin Law Trustee (Taylor) Ltd.

[23]              Secondly, and conditional on the same matters, I make an order pursuant to   s 116 of the Trusts Act 2019 vesting Lot 1, Deposited Plan 382857, being all the land comprised and described in Identifier 330973 in Franklin Law Trustee (Taylor) Ltd.

[24]              I reserve leave to apply, including on any issue to costs if they are not to be costs in the winding up of the trust.

[25]              Lastly, I direct the case officer to send a copy of this judgment to Holland Beckett Law, and to Gowing & Co (solicitors of Tauranga and Whakatane respectively and who have acted for Mr Taylor on occasion). I would be grateful if they could forward a copy of this judgment to Mr Taylor.

Peters J