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Cases, Contracting with trustees, Trustees, Trusts

Contracting with trustees, all of the trustees

The facts ma’am, nothing but the facts.  When the facts relate to a contract with trustees, the proposition becomes the trustees ma’am – nothing less than all the trustees.

Trusts are not legal entities.  Regardless I commonly see contracts between the A Trust and another contracting party.  This is a dangerous practice because how is the other contracting party to know whether all of the trustees have signed – and that there is in fact a binding agreement?

In the context of a contract for the sale and purchase of land, the stakes are generally higher and thus the need to ensure all parties are identified and that all parties have consented to the agreement.  Where one contracting party is trustees, unless there is clear evidence to the contrary – all trustees must sign an agreement.  If all trustees do not, a valid agreement cannot be concluded.  See McMorland, Sale of Land:

“Where either the vendor or the purchaser is a “trust”, the parties to the contract must be the trustees of the trust, the trust itself not being a legal person. The trustees of a trust are subject to their unanimity (all trustees must act in unanimous agreement) and non-delegation (a trustee may not delegate his or her powers or duties to a co trustee or to a stranger) principles, and each trustee must sign the agreement in the absence of a power for fewer to do so conferred by the trust deed, or under s 31 of the Trustee Act 1956.”

The requirement to round up all the trustees can be tiresome.  However, when dealing with trustees, one way or another this must be achieved.  Unless or until it is, no deal can be concluded. It is not possible to bulldoze ahead such that this requirement can be circumvented.

Consider the case of WT Trustee Company Limited v Cato.   WT Trustee Company Limited (WT) was committed to the purchase of a property in Waiheke being sold by the trustees of the G S Lawrie Trust.  Two of the trustees (husband and wife) signed an agreement for sale and purchase following some reasonably intensive negotiating.  The third trustee, who had agreed to the property being sold, but not to the particular sale in question, was unavailable the weekend the contract was signed by the husband and wife.  After being later apprised of the agreement the third trustee refused to co-sign being dissatisfied with the price.  While his co-trustees may have been a bit miffed with him over that, it was his right, and one could even say, his obligation if he did not believe the best interests of all of the beneficiaries was being served.

However, WT, was even more miffed.  The day after the agreement was signed by WT, WT lodged a caveat on the title, and it was that, which led to the matter coming before the courts.  When the trustees owners sought to have the caveat lapse, WT argued unsuccessfully that it not lapse.

The matter was disposed of simply on the basis that absent a binding agreement, there was no basis upon which a caveat could be sustained.

The case is a useful reminder that while transacting with trustees can have the feeling at times of herding cats;  you take you contracting parties as you find them.  Until all  have signed (absent clear confirmation of a permitted delegation or permissible majority decision-making) there is no contract.

Also see Burt v Henry.  In that caseMr Burt as purchaser sought unsuccessfully to maintain a caveat against land held by Mr Henry (a professional trustee) and Mr Taylor as trustees. Mr Burt alleged a binding agreement for sale and purchase. However, only Mr Taylor had signed the agreement. AJ Faire, as he then was noted that:

[19] The plaintiff’s case is based on the evidence of Mr Burt and, in particular, the following passage:

“It is about this time, the 4th of August 2006 that I was assured by Simone that the second-named defendant Clark Howard Taylor had the authority to bind both vendors and that Allan Henry’s signature was only required as a formality because he was also a trustee of the trust which owned the land.”

This statement raises one further important aspect of trust ownership that is often misunderstood both by trustees and others.  All trustees are of equal standing.  There is no special capacity of “professional trustee”.  These trustees are trustees, no more, and no less.  They are not rubber stamp trustees and are treated as such at their own peril, or the peril of those who ascribe such views.

References:

 

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Discussion

2 thoughts on “Contracting with trustees, all of the trustees

  1. In a time when its not hard to find problems with trustees and their procedures, its nice to hear a positive story about an independent trustee who’s prepared to do the job of a trustee.

    Posted by Lindsay Pope | July 1, 2014, 3:11 pm

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