//
you're reading...
Indmenity, Removal of trustees, Trustee liability, Trustee retirement, Trustees, Trusts, Trusts Bill

Exit stage left

Oldfield v Oldfield relates to the trust consequences of a marriage breakup.  Specifically, who should be the trustees when the settlors, who are also trustees, can no longer work together.

Mrs Oldfield wishes to see Mr Oldfield removed as a trustee.  Mr Oldfield’s view is that it is not appropriate to replace the trustees, rather the disposal of trust assets should be decided in the context of Mrs Oldfield’s applications under the Property (Relationships) Act 1976 and the Family Proceedings Act 1980.

The issue for the Court was whether to remove on or both the of the Oldfields and whether to appoint a new trustee, and if so who.

Section 51(1) of the Trustee Act provides:

The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.

As noted at [37] “the case for Mr Oldfield’s removal is made out on two bases, even without getting into the detail of the accusations made in the various affidavits. The first is that the trust is deadlocked, as Mr Oldfield acknowledges himself, and the deadlock arises from Mr Oldfield’s refusal to have trustee meetings with Mrs Oldfield or to make any decisions about the disposition of trust assets. Accordingly, Mr Oldfield is frustrating the purposes of the Trust and failing in his responsibilities to the other beneficiaries. That is so, regardless of the fact that Mr Oldfield is one of the primary beneficiaries. Mrs Oldfield is no less a primary beneficiary than Mr Oldfield and her interests as a beneficiary are being denied by the deadlock, however Mr Oldfield seeks to justify his behaviour.”

The court was satisfied that there had been a fundamental breakdown of trust between Mr Oldfield and Mrs Oldfield and that accordingly, both should be removed as trustees.

However, the next question for the court was who can and should be appointed as a replacement trustee.

Mrs Oldfield’s counsel argued that this should be considered under s 43 of the Trustee Act 1956, notwithstanding that the application was argued under s 51 of the Trustee Act.

Section 43(1) provides that where a trustee is dead or is unable, unwilling, unfit or incapable of acting as trustee:

… the person nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust, or if there is no such person or no such person able and willing to act, then the surviving or continuing trustees for the time being, or the personal representatives of the last surviving or continuing trustee, may by deed appoint a person or persons (whether or not being the person or persons exercising the power) to be a trustee or trustees in the place of the first-mentioned trustee.

Section 43(2)(c) provides that on the appointment of a trustee:

… it shall not be obligatory … to fill up the original number of trustees where more than 2 trustees were originally appointed; but, except where only 1 trustee was originally appointed, a trustee shall not be discharged under this section unless there will be either a trustee corporation or at least 2 individuals to act as trustees to perform the trust.

With respect to whether s 43 applies, see [48] to

[48] Mr Grant submits that the effect of s 43(2)(c) is that, in order to ensure that Mr and Mrs Oldfield do not retain any residual liabilities as trustees once they are removed, the Court must appoint either a trustee corporation, as that term is defined in s 2 of the Trustee Act, or two individuals, being human beings, as trustees but cannot appoint a corporate trustee because a corporate trustee is neither a trustee corporation nor an individual.10 Mr Grant notes that s 48 of the Trustee Act specifically provides for the Court to appoint a trustee corporation as sole trustee of any trust unless the trust deed forbids such an appointment.

[49] In support of his argument, Mr Grant refers to Jasmine Trustees Ltd v Wells, a decision of Mann J in the Chancery Division of the High Court of England and Wales, where it was held, in interpreting s 37(1)(c) of the United Kingdom’s Trustee Act 1925 which is drafted in almost identical terms to s 43(2)(c), that “individuals” must mean natural persons and cannot include corporate bodies.11 Mr Grant finds this point to be of considerable interest.

[50] The relevance of this argument is that Mrs Oldfield proposes that the New Zealand Guardian Trust (NZGT), which is a “trustee corporation”, should be appointed as trustee to replace Mr and Mrs Oldfield, whereas Mr Oldfield proposes that if there is to be a sole trustee, Norris Ward McKinnon Trustees Ltd, a corporate trustee, should be appointed. A privately established corporate trustee is not a “trustee corporation”. Mr Grant says that if the Court were to appoint Norris Ward McKinnon Trustees to be the sole trustee of the Trust in place of Mr and Mrs Oldfield and Mr Stewart, there would be a risk, in terms of s 43(2)(c), that Mr and Mrs Oldfield and Mr Stewart would be held liable for the consequences of future decisions taken by the corporate trustee in their absence, similar to findings that were made in Jasmine.

[51] Mr Morgan says s 43 has no relevance to the Court’s powers to appoint a replacement trustee which he says, are set out in s 51 of the Trustee Act and are unconstrained by s 43. He says s 43 is limited to applications by persons nominated in a trust deed to appoint new trustees, or if there is no such person able or willing to act, the surviving or continuing trustees, or the personal representative of the last surviving or continuing trustee. He also says s 43 provides that in such situations, the appointment of the new trustees is by deed, and does not deal with appointments by order of the Courts.

For the background to the position with respect to Jasmine see Two trustees go down to the Woods … one is discharged one is not

Although not deciding the point Van Bohemen J, expressed the view at [53] that:

“… on its face, s 43 is limited to the circumstances set out in s 43(1) – appointments of new trustees by private persons by way of deed. Further support for that view can be derived from the fact that s 45, which deals with the retirement of trustees and contains the same limitation as in s 43(2(c), is also concerned with appointments made by deed and not by court order. In addition, s 46, which deals with situations where a trustee wishes to retire but is unable to secure the agreement of the persons with powers to appoint new trustees, gives the Court the broad power to appoint a “proper person” to replace the retiring trustee, and that power is not subject to the limitation in s 43(2)(c).”

Perhaps regrettably, given the current level of interest in whether the reasoning of Jasmine has application in New Zealand, Van Bohemen J decided that the facts of the case did not require a ruling on this matter and Perpetual Guardian was appointed as the sole trustee of the trust in place of Mr and Mrs Oldfield (the third trustee having indicated that he no longer wished to be a trustee).

That said, the reasoning in the case may be of significant interest and highlights the need when looking at the retirement or removal of trustees, to consider whether this is being done in accordance with the terms of the deed of trust, under the Trustee Act or with the assistance of the court.   The following paragraphs provide some guidance:

[53] I agree with Mr Morgan that, on its face, s 43 is limited to the circumstances set out in s 43(1) – appointments of new trustees by private persons by way of deed. Further support for that view can be derived from the fact that s 45, which deals with the retirement of trustees and contains the same limitation as in s 43(2(c), is also concerned with appointments made by deed and not by court order. In addition, s 46, which deals with situations where a trustee wishes to retire but is unable to secure the agreement of the persons with powers to appoint new trustees, gives the Court the broad power to appoint a “proper person” to replace the retiring trustee, and that power is not subject to the limitation in s 43(2)(c).

[54] However, the circumstances of this case do not require me to rule on this question or to pronounce on whether Jasmine should be followed in New Zealand. On the facts of this case, I see no good reason not to appoint NZGT as the sole trustee in place as proposed by Mrs Oldfield. Mr Morgan said that Mr Oldfield had not proposed Norris Ward McKinnon Trustees instead of NZGT out of bloody-mindedness but because they are a local firm. I do not consider that to be an adequate reason for preferring Norris Ward McKinnon Trustees to NZGT which, operating under the name Perpetual Guardian, has offices in Hamilton as well as in other parts of New Zealand. NZGT, like Norris Ward McKinnon Trustees, has also confirmed its willingness to be appointed as trustee.

[55] When faced with two equally good choices, I see no reason not to prefer the course proposed by the applicant. Accordingly, I have decided that NZGT should be appointed trustee in place of Mr Oldfield and Mrs Oldfield who, as discussed above are to be removed, and Mr Stewart, who wishes to resign. It follows that if Mr Grant is right that s 43 does apply and that Jasmine should be followed in New Zealand, both points on which I specifically make no findings, the appointment of NZGT as trustee is consistent with that position.

References:

Discussion

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Categories

%d bloggers like this: