Wells v Marshall

[2023] NZHC 136

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2022-412-118

[2023] NZHC 136

UNDER

pt 19 of the High Court Rules 2016 and s 52 of the Trustee Act 1956

IN THE MATTER

of the D B Wells Family Trust

BETWEEN

DAPHNE BRONWYN WELLS AND LUCAS & LUCAS TRUSTEES NO 2 LIMITED

Applicants

AND

GRAEME BRUCE MARSHALL

Respondent

Hearing:

On the papers

Appearances:

J C Callander for Applicants

No appearance by or for Respondent

Judgment:

9 February 2023

JUDGMENT OF MANDER J

[1]                  On 11 June 2020, the applicant Daphne Bronwyn Wells, a trustee of the D B Wells Family Trust (the Trust), removed the respondent, Graeme Marshall, as a trustee pursuant to a power reserved to her under the deed of that Trust.

[2]                  The Trust owns a property situated at 23 Edna Street, Ocean View, Dunedin (the Property). A copy of the Deed of Removal and land transfer forms relating to the ownership of the Property were forwarded to Mr Marshall’s lawyer on 11 June 2022. Mr Marshall has not challenged the validity of his removal as a trustee, but neither has he attended to the execution of the relevant documentation necessary to vest the

WELLS v MARSHALL [2023] NZHC 136 [9 February 2023]

Property in the remaining trustees. This state of affairs is said to have impeded the proper administration of the Trust.

[3]                  The remaining trustees have now brought proceedings to vest the Property solely in themselves as the continuing trustees of the Trust.

Background

[4]                  The Trust was established by  deed  dated  18 April  2005.  Its  settlor  was Ms Wells’ mother, and the beneficiaries are herself, her four adult children and her three grandchildren. The original trustees were Ms Wells, her then de facto partner, Mr Marshall, and Cook Allan Gibson Trustee Company Ltd. In 2005, Ms Wells sold her property at 24A Gladstone Road to the Trust for $440,000. The Trust’s purchase of this property was recorded as a debt back to her. In 2022, the original trustee company retired as a trustee and was replaced by the other applicant, Lucas & Lucas Trustees No 2 Ltd.

[5]                  In 2011, the Trust sold Gladstone Road and purchased 23 Edna Street. To facilitate that purchase and restructure other debt, loans were taken out with the ASB Bank. This debt was secured by way of a mortgage against the Property. As noted, no formal objection has been raised by Mr Marshall in respect of his removal as a trustee, but he has not attended to the signing of the land transfer forms. Towards the end of Mrs Wells’ relationship with Mr Marshall, their relationship became difficult and they did not separate on the best terms. She believes Mr Marshall is being obstructive by not signing the forms.

[6]                  Mrs Wells advises that the economic downturn has affected her business. She is a self-employed business coach, and her adverse circumstances have resulted in an inability to meet loan repayments for over a year now. The arrears stand at approximately $22,000 and continue to accrue. Debt collection steps by the ASB Bank are imminent. However, the bank is aware of these proceedings, and Ms Wells believes that once it receives a copy of the vesting order it will look to complete a restructuring application. Any such application, however, cannot be processed without the vesting order being granted, and it is possible the property may need to be sold in order to repay the outstanding loans. For completeness, I record that the bank has

confirmed that Mr Marshall’s liability as a former trustee is limited to the Trust’s assets, and he is not personally liable.

Procedural steps

[7]                  The applicants were granted leave to make their application for a vesting order by way of originating application under pt 19 High Court Rules 2016 by Associate Judge Paulsen.1 Orders were also made directing service of the application on the respondent and the adult beneficiaries of the Trust, namely Ms Wells’ children. Service on the only other potentially interested persons, being the children of the adult beneficiaries (the grandchildren), was dispensed with because their interests are closely aligned to those of their parents. An application to dispense with the appointment of a litigation guardian for the grandchildren was also held to be appropriate as the matter was considered routine and administrative in nature and the interests of the grandchildren appropriately represented by their parents.

[8]                  Mr Marshall, and any other person who may have wished to have been heard on the application, were directed to file and serve any notice of opposition or appearance within 15 working days of being served. Associate Judge Paulsen directed that should no documents be filed or served, then arrangements could be made to have the matter referred to a Judge to be dealt with on the papers. The matter has now been placed before me in my capacity as Duty Judge. Service was effected on Mrs Wells’ children and Mr Marshall in November 2022. No steps have been taken by them to oppose the application for a vesting order.

Proceeding under the old Act

[9]                  The Trusts Act 2019 came into force on 31 January 2021. Clause 2 of sch 1 of the Act provides:

Except as provided in this Act (and in clauses 3, 4, 5, 6(2), 8, and 11 of this schedule in particular), this Act applies to all express trusts, whether created before, on, or after the commencement date.

[10]However, cl 11 relevantly provides:

1      Wells v Marshall HC Christchurch CIV-2022-412-118, 10 November 2022.

11       Transitional provision for transfer of trust property

(1)This clause applies if—

(a)a trustee resigns or is removed before the commencement date; and

(b)on the commencement date, the divesting and vesting of trust property as a result of the resignation or removal has not taken effect.

(2)The divesting and vesting of trust property, and the satisfaction of any requirements to which the divesting and vesting are subject, must be completed as if this Act had not commenced.

[11]              Mr Marshall was removed as a trustee prior to the commencement date of the new Act. However, the divesting and vesting of the Property has not yet taken effect. It follows, therefore, that the applicants must proceed to seek a vesting order under the prior legislation — in this case under s 52(1)(h) of the Trustees Act 1956. That provision provides:

Subject to the provisions of subsections 2 and 3, and any of the following cases, namely ... 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 ... the court may make an order (in this Act called a vesting order) vesting the land or interest therein in any such person and any such manner and for any such estate or interest as the court may direct, or releasing or disposing of the contingent right to such person as the court may direct.

(emphasis added)

Making of order

[12]              The term expedient has been held to import considerations of “suitability, practicality and efficiency”.2 I accept the applicants’ submission that Mr Marshall was validly removed pursuant to the power available to Mrs Wells under the Trust deed, and it is suitable, practical and efficient in the circumstances, and in the absence of any opposition, to issue a vesting order to give practical effect to his removal and to accurately reflect the ownership of the Property. The granting of a vesting order is appropriate and necessary for the due administration of the Trust. Accordingly, I make the following order:

2      Crick v McIlraith [2012] NZHC 1290 at [18].

(a)The Property situated at 23 Edna Street, Dunedin, referred to in Identifier OT322/67, is vested in Daphne Bronwyn Wells and Lucas & Lucas Trustees No 2 Ltd as trustees of the D B Wells Family Trust.

[13]No order is made as to costs.

Solicitors:

Lucas & Lucas Limited, Dunedin