Waters v Waters

[2021] NZHC 1832

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2020-470-27

[2021] NZHC 1832

IN THE MATTER OF

the Trustee Act 1956, sections 51 and 64

IN THE MATTER OF

THE J.W. AND E.T. WATERS FAMILY TRUST

BETWEEN

JAMES WILLIAM WATERS

Plaintiff

AND

MARK LEWIS WATERS

First Defendant

WILLIAM DAVID WATERS

Second Defendant

On papers

Counsel:

K J Catran for plaintiff

P M Hunter for first defendant
M P Ward-Johnson for second defendant

Judgment:

20 July 2021

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 20 July 2021 at 12.30pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:

Cooney Lees Morgan, Tauranga for plaintiff Simpson Western, Auckland for first defendant

Chris Rejthar & Associates, Tauranga for second defendant

WATERS v WATERS [2021] NZHC 1832 [20 July 2021]

[1]    The plaintiff (Jim), together with his late wife Elena Tuira Waters (Wira), were the settlors and initial trustees of the J.W. and E.T. Waters Family Trust set up by a deed of trust dated 31 May 2000 (the Trust). Wira died on 21 July 2019.

[2]    Following Jim and Wira’s retirement as trustees on 24 November 2011, their sons William David Waters (Willie) and Mark Lewis Waters (Mark) were appointed as trustees. The discretionary beneficiaries of the Trust are:

(a)the settlors;

(b)the final beneficiaries: Willie, Mark, and their sister Reina Christine Harry, who lives in California;

(c)any children of the final beneficiaries;

(d)any wife, husband, widow or widower of a final beneficiary or a grandchild of the settlors, not for profit association or organisation whose funds are applied to community or philanthropic or similar purposes;

(e)any other person related to the settlors by blood, marriage or adoption;

(f)the trustees of any superannuation fund, or trust, of which any of the beneficiaries are beneficiaries or members, and any company in which any of the beneficiaries holds at least a 50 per cent interest;

(g)any charitable, educational or religious organisation declared by the trustees in writing to be a beneficiary (none has been appointed).

[3]    The settlors had the power of appointment of trustees during their lifetime, but there is no power of removal of trustees. The minimum number of trustees is two, unless a corporate trustee is appointed as a sole trustee. The trustees are required to act unanimously and have full discretion to distribute trust income or capital to any beneficiary during the term of the Trust. The date of final distribution of the Trust is 80 years from the date of execution of the trust deed.

[4]The principal assets of the Trust are:

(a)land established as a kiwifruit orchard by the settlors at Matapihi (Record of Title SA69B/988) (the land), together with a residence, associated orchard buildings and other infrastructure and fixtures, plant and equipment, and a Zespri licence, together having a book value as at 31 March 2018 of approximately $545,000;

(b)an investment portfolio of shares and fixed interest assets valued as at March 2018 at approximately $477,000.

Application for orders validating trust transactions

[5]    By error or inadvertence, the Trust’s accountant was not advised of the appointment in 2011 of Willie and Mark as replacement trustees in lieu of their parents. As a result of the error, the Trust accounts and transactions and resolutions from 2011 were all prepared in the names of, and signed by, Jim and Wira as trustees instead of Willie and Mark.

[6]Mark has objected to some of the transactions as being illegal and “fraudulent”.

[7]    The transactions involved are all within the normal operation of the Trust business, or within the discretionary powers of trustees under the trust deed, and would have been unexceptionable if the settlors had remained as trustees.

[8]    All parties involved in the transactions have relied on the validity of the transactions, and the Trust’s business and the interests of beneficiaries involved would be severely and unreasonably disrupted if the transactions were to be invalidated.

Replacement of trustees

[9]    Willie and Mark have been in dispute for some time and are unable to agree or carry out their responsibilities as trustees. As a result, they are unable to function as trustees or deal with the Trust’s property.

[10]   Jim has recently been diagnosed as suffering from dementia to the extent that he is mentally incapable. He sues by a guardian ad litem, Willie, appointed by the Court on 15 March 2021.1 He wishes to replace the trustees with an independent trustee corporation so the Trust can be operated despite the family disputes and for the benefit of all beneficiaries, but is unable to do so.

[11]   Perpetual Trust Limited (Perpetual), a professional corporate trustee company under the Trustee Act 1956, has agreed to accept appointment as sole trustee.

Relief sought

[12]Jim seeks:

(a)an order authorising the bringing of this proceeding as under Part 18 of the High Court Rules 2016;

(b)an order validating all transactions carried out by the Trust under the apparent authority of the settlors acting in the roles of “trustees” from the date of their retirement and the appointment of Willie and Mark as trustees on 24 November 2011 to date;

(c)an order removing Willie and Mark as trustees of the Trust;

(d)an order appointing Perpetual Trust Limited as sole trustee of the Trust and vesting the assets of the Trust in Perpetual; and

(e)such further orders as may be required to implement the above orders or as may appear to the Court to be just.

[13]   Mark now consents to the order for the removal and replacement of the trustees and will abide the decision of the Court on the validation application. The matter has been referred to me for determination on the papers.

1      Waters v Waters HC Tauranga CIV-2020-470-27, 15 March 2021 (Minute of Gardiner AJ).

Directions to Registrar-General of Lands to record change of ownership

[14]   The relief sought includes an order directing the Registrar-General of Lands to record the change of ownership brought about by the making of the vesting order sought. The Registrar-General has not been served with the proceeding and the Court would not issue such a direction without notice. But, in any event, such an order is not necessary to achieve Jim’s purposes. The Court is aware that the Registrar-General routinely accepts Court orders vesting properly identified land in trustees as sufficient proof of ownership to record appropriate changes to certificates of title. Indeed, many applications are made to this Court because the Registrar-General has required trustees in similar circumstances to apply for a vesting order. I decline that relief, therefore, but I will refer explicitly to the land in the vesting orders.

Orders

[15]By consent, I make the following orders:

(a)The proceeding is to be brought under Part 18 of the High Court Rules 2016.

(b)Mark Lewis Waters and William David Waters are removed as trustees of the J.W. and E.T. Waters Family Trust.

(c)Perpetual Trust Limited is appointed as sole trustee of the Trust. The land comprised in Record of Title SA69B/988 and the other assets of the Trust are vested in Perpetual, subject to the terms of the trust deed.

[16]   Without opposition, I order that the transactions carried out by the Trust under the apparent authority of the settlors acting in the roles of “trustees” from the date of their retirement and the appointment of Willie and Mark as trustees on 24 November 2011 are validated and approved.

[17]   Any party shall have leave to apply for such further orders as may be required to implement the orders at [15] and [16] or as may appear to the Court to be just in the circumstances.

Costs

[18]There are no issues as to costs.

Toogood J