Wallace v Naknok - [2012] NZHC 382

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-007077 [2012] NZHC 382

IN THE MATTER OF an application under the Trustee Act 1956

BETWEEN STEWARD WILLIAM WALLACE Plaintiff

ANDAPHISARA NAKNOK Defendant

Hearing: 23 February 2011

Counsel: MIS Phillipps for Plaintiff
No appearance for Defendant

Judgment: 9 March 2012

I direct the Registrar to endorse this judgment with a delivery time of 4.30pm on the
9th day of March 2012.

RESERVED JUDGMENT OF MACKENZIE J

[1] This is an application under the Trustee Act 1956 (the Act) seeking the removal of the defendant as trustee of The Torbay S and B Trust. No steps have been taken by the defendant in the proceedings.

[2] The background is that the trust was created by the plaintiff as settlor under a deed of trust dated 23 October 2006. Mr Wallace was sole trustee. He is also a discretionary beneficiary and the final beneficiary under the trust. The trust deed conferred on Mr Wallace the power of appointment of new trustees. There is no power of removal in the trust deed. The trust was formed after Mr Wallace had separated from his previous wife and his share of the relationship property was
settled into the trust.

WALLACE V NAKNOK HC AK CIV-2011-404-007077 [9 March 2012]

[3] On a trip to Thailand in 2006, he met Ms Naknok and they married on

7 May 2007. In August 2007, Ms Naknok was appointed a second trustee of the trust. Shortly afterwards, the trust purchased a property in St Luke’s, which became the matrimonial home. At the same time, Mr Wallace retired as trustee, leaving Ms Naknok as the sole trustee. In January 2008, Mr Wallace reappointed himself a trustee so that there were, and are now, two trustees, Mr Wallace and Ms Naknok.

[4] No transfer of the land to the new trustees was registered following the reappointment of Mr Wallace as a trustee. The St Luke’s property remains registered in the sole name of Ms Naknok.

[5] The parties separated in November 2010. Mr Wallace lodged a caveat against dealings on the land in December 2010. He also, through his solicitors, sought the cooperation of Ms Naknok in resigning as trustee of the trust and transferring the title to Mr Wallace’s name as sole trustee. There was no response to that correspondence. These proceedings were issued in November 2011 and served on Ms Naknok. She has taken no steps.

[6] The application for removal is brought under s 51 of the Trustee Act 1956. That section is not applicable in this case. Section 51 confers power on the Court to appoint new trustees, not to remove a trustee. An appointment may be made in substitution for an existing trustee, but that is not what is sought here.

[7] The Court does have an inherent jurisdiction to remove a trustee. The relevant power is summarised in Garrow v Kelly on Trusts in these terms:[1]

The Court has inherent jurisdiction to remove a trustee if the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Wallace v Naknok

Details

AGLC: Wallace v Naknok [2012] NZHC 382
Case: [2012] NZHC 382
Decision Date: 9 March 2012

CaseChat Overview and Summary

In the High Court of New Zealand, Auckland Registry, the plaintiff, Steward William Wallace, sought the removal of the defendant, Aphisara Naknok, as a trustee of The Torbay S and B Trust. The trust was created by the plaintiff as settlor under a deed of trust dated 23 October 2006. The plaintiff was the sole trustee at first but appointed Ms Naknok as a second trustee in August 2007. The trust purchased a property in St Luke’s, which became the matrimonial home. At the same time, Mr Wallace retired as trustee, leaving Ms Naknok as the sole trustee. In January 2008, Mr Wallace reappointed himself a trustee, so there are now two trustees, Mr Wallace and Ms Naknok. The parties separated in November 2010. Mr Wallace lodged a caveat against dealings on the land in December 2010. He also sought the cooperation of Ms Naknok in resigning as trustee and transferring the title to Mr Wallace’s name as sole trustee. There was no response to that correspondence.

The plaintiff’s application for removal is brought under s 51 of the Trustee Act 1956. However, that section is not applicable in this case. Section 51 confers power on the Court to appoint new trustees, not to remove a trustee. The Court does have an inherent jurisdiction to remove a trustee if the welfare of the beneficiaries and of the trust property requires this. The relevant power is summarised in Garrow v Kelly on Trusts in these terms: The Court has inherent jurisdiction to remove a trustee if the welfare of the beneficiaries and of the trust property requires this. That is, when the Court considers that allowing the trustee to continue in office would prevent the proper execution of the trust. That jurisdiction to remove a trustee is ancillary to the Court’s principal duty to see that a trust is properly executed. The main guide is the welfare of the beneficiaries.

The Court considered that in this case, there are no circumstances which justify the exercise of that inherent jurisdiction. There is no evidence of misconduct on the part of Ms Naknok. The most that can be said against her is that she has failed to respond to a request that she resign as a trustee. She was not bound to accede to that request. The Court did not consider that a failure to respond to it can be regarded as a dereliction of her duty as a trustee. She remains registered as sole proprietor of the St Luke’s property (over which Mr Wallace has lodged a caveat). There is, however, no evidence that Mr Wallace ever asked Ms Naknok to sign a transfer to both trustees. She cannot be said to be in dereliction of her duty as a trustee in that regard. There is no evidence of any mistake or neglect of duty in any other respect. The Court found that the grounds for the exercise of the Court’s inherent jurisdiction had not been made out. The relief sought was refused.

Orders