Young v Young

[2020] NZHC 2569

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2020-425-057

[2020] NZHC 2569

UNDER

the Trustee Act 1956

IN THE MATTER

of an originating application

BETWEEN

JULIA MAREE YOUNG and MITCHELL LACHLAN YOUNG

Applicants

AND

LACHLAN BRUCE YOUNG and DAVID

JOHN GRAY, as trustees of the MODERATE TRUST

Respondents

Hearing:	Determined on the papers
Counsel:	J W J Graham for Applicants
Judgment:	1 October 2020

JUDGMENT OF ASSOCIATE JUDGE LESTER

(in respect of application for leave to utilise originating application procedure)

This judgment was delivered by me on 1 October 2020 at 11am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 1 October 2020

YOUNG v YOUNG [2020] NZHC 2569 [1 October 2020]

[1]    The applicants, Julia Maree Young and Mitchell Lachlan Young, seek leave to use the originating application procedure for a proceeding in which they seek the removal of the respondents as trustees of the Moderate Trust and the appointment of an independent trustee in their place.

[2]    The applicants are the children of the first named  respondent,  Lachlan  Bruce Young. David John Gray, of Gore, is a solicitor trustee.

[3]    The Moderate Trust was settled in March 2000. The initial trustees were Lachlan Young and his wife, the applicants’ mother, Natalie Young. Unfortunately, Natalie died less than two years after the Moderate Trust was created. In 2009, Lachlan married Patricia Young.

[4]    At the heart of the proposed proceeding is the relationship between the Moderate Trust and a separate trust, the L&P Trust, of which the applicants are not beneficiaries. The reference to L&P is presumably to Lachlan and Patricia.

[5]    The applicants complain they have been provided with insufficient or incomplete information regarding the financial affairs of the Moderate Trust, but from the information they have received, they have identified there is an advance of over

$570,000 made by the Moderate Trust to the L&P Trust. Title searches show the L&P Trust has acquired four properties. The applicants are concerned that funds of the Moderate Trust, which could have used to build its asset portfolio, were diverted to the L&P Trust.

[6]    The applicants do not have details of the L&P Trust but it is a reasonable inference from the contents of the affidavit of Ms Young, in support of the substantive application, that Lachlan Young is a trustee of the L&P Trust. Accordingly, the situation has the appearance of Lachlan Young being in a conflict of interest situation where funds have been advanced from one Trust of which he is a trustee and beneficiary, to another trust in which it is assumed he is a trustee and beneficiary.

[7]    The evidence in support of these concerns includes the transcript of a family meeting held earlier this year. Ms Julia Young, with everyone’s consent, made a voice

recording of the meeting. The transcript of that meeting attended by Lachlan Young suggests he agreed everything that had gone into the L&P Trust using funds from the Moderate Trust would be transferred back to the Moderate Trust, including commercial properties purchased by the L&P Trust with funds from the Moderate Trust.

[8]    Unfortunately, Ms Julia Young considers her father has “backflipped” from the action points agreed at the family meeting.

[9]    It is clear from Ms Young’s affidavit that the relationship between the applicants and their father and the professional trustee have broken down.

[10]   The  intent  of  having  an  independent  trustee  appointed  is  to  complete    a reconciliation of Trust assets diverted by way of interest free advances  to  the  L&P Trust – in effect the taking of an account.

Use of the originating application procedure

[11]   An application for leave to use the originating application procedure is necessary as an application to remove trustees is not one of the matters that can be commenced as of right under pt 19 of the High Court Rules 2016.

[12]   The sole criteria for the granting of leave under r 19.5 of the High Court Rules is that leave is to be granted if it is in the interests of justice to do so. The interests of justice means that the Court must secure the just, speedy and inexpensive determination of the proceeding when considering an application under r 19.5.1

[13]The Court considers:

(i)whether the exchange of statements of claim and defence are needed to better define the issues between the parties;

1      Solar Bright Ltd v Martin [2019] NZHC 300 at [18] and [26].

(ii)whether interlocutory procedures are needed to resolve issues such as discovery;

(iii)whether the application is straightforward, such as whether the application is a statutory  test  or  whether  it  is  likely  to  involve  the application of common law principles or require expert evidence or cross-examination;

(iv)whether the application involves multiple parties or cross-claims.

[14]   It is common for applications to remove a trustee who has lost capacity and for a replacement trustee to be appointed, to be made by way of originating application.2 However, the Court of Appeal observed in Jones v O’Keefe that applications under the Trustee Act are generally required to be brought under pt 18 and the originating application procedure is not appropriate where factual issues are in dispute.3

[15]   At the heart of the applicants’ submission, as to why the originating application procedure is appropriate, is the proposition that here there is no room to suggest there will be significant factual disputes. The accounts the applicants have obtained confirm the existence of advances by the Moderate Trust to the L&P Trust. At its most basic, the applicants say the relief they seek is justified by the undisputed existence of the advances and the conflict of interest such creates for Lachlan. I agree.

[16]   Lachlan has no incentive to properly investigate the circumstances of advances that may have been made in breach of trust where he may be responsible for such breach to his benefit, as an assumed beneficiary of the L&P Trust.

[17]   I do not consider the exchange of a statement of claim and statement of defence are required to better define the issues between the parties. Nor do I anticipate interlocutory procedures, such as discovery, will be needed to resolve issues. The rules concerning trustee’s duties and when conflicts of interest arise are well settled. Nor will this case involve multiple parties.

2      Andrew Becks (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR19.5.03(i)].

3      Jones v O’Keefe [2019] NZCA 222, (2019) 24 PRNZ 529 at [51] and [52].

[18]   Accordingly, I consider it appropriate that there be leave pursuant to HR19.5 of the High Court Rules for the applicants to bring their proceeding by way of an originating application.

[19]   The applicants seek directions as to service, seeking that the proceedings be served on the respondents, which is appropriate, and upon  their  sibling,  Livia  Jayne Young, and I direct accordingly.

Associate Judge Lester

Solicitors:

Chapman Tripp, Auckland

Copy to counsel: K Davenport QC and A Cameron, Auckland