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Directions, Removal of trustees, Trustee Act, Trustees, Trusts

Pick your battles

In Butterfield v Sundberg the applicant seeks directions under s 66 of the Trustee Act 1956 to be commenced by way of originating application pursuant to Part 19 of the High Court Rules to allow the final distribution of the trust estate’s modest assets.  The grounds for the application are set out at [15] as follows:

“Here, it is said, four matters support the applicant’s contention that the interests of justice require the granting of leave to commence this proceeding by originating application. These are:

(a) the meagre size of the Estate;
(b) the need to efficiently wind up the Estate;
(c) the long history of issues arising between the parties (which the applicant considers irrelevant and does not intend to respond to);
(d) viva voce evidence will not be required, and the giving of evidence by affidavit under Part 19 is appropriate.”

The application was unsuccessful.

As noted at [17] although the court has allowed applications under s 66 to be brought by way of originating application, “this is the exception and not the norm.  In Public Trust v Kain, Venning J noted the “strong inference” is that applications for directions under s 66 will be brought under Part 18.5 In Jones v O’Keeffe, the Court of Appeal said:

The originating procedure under pt 19 is normally limited to cases where particularised pleadings and interlocutory steps such as discovery are not necessary for the proper determination of issues. It is not appropriate where factual issues are in dispute.

In the recent case of FFP Trustee (NZ) Ltd v Peng an application for directions was brought under the Trustee Act 1956 by way of originating application.  However, in that case, this was by consent of all of the parties.

As noted at [20] to [22]:

[20] It is now well recognised that Part 19 is a procedure generally used for cases where it is not necessary to have full pleadings and interlocutory steps for the proper determination of the issues. It is designed to be a speedier and less expensive mechanism than Part 18, although the Part 18 procedure is still more efficient and confined than a general proceeding.

[21] In Solar Bright Ltd v Martin, Solar Bright sought declarations pursuant to s 141 of the Companies Act 1993 and leave to bring the proceeding under Part 19, rather than by way of ordinary proceeding. Osborne J relied upon Hong Kong & Shanghai Bank Corporation Ltd v Erceg, in which Asher J stated:

… [t]he type of proceeding suited to the originating application procedure is a straightforward application not requiring detailed pleadings or interlocutory orders … [It] is not well suited to the determination of substantive rights involving the application of common law doctrines as distinct from statutory tests. It is not well suited to cases involving multiple parties, and cases where there is the possibility of crossclaims or counterclaims.

[22] Osborne J said in Solar Bright Ltd:

What Erceg and the other cases indicate is that resort to r 19.5 is to be exceptional rather than so common place that it becomes the rule that leave is granted. The cases recognise, as the rule itself stipulates, that it is the interests of justice which this Court must apply as the overarching test. The interests of justice mean that the Court must secure the just, speedy, and inexpensive determination of this proceeding in its consideration of a r 19.3 application.

The crux of the matter was that High Court proceedings were filed over $15,000, and so whatever procedure adopted the High Court was not a cost effective forum.  The fact that there were contested issues of fact meant that part 19 was not appropriate as although the financial sum in question was modest the more significant issue was, as noted at [29] that:

“The s 66 jurisdiction is intended to provide private advice to trustees not resolve contested disputes between them. If trustees cannot agree on a course of action, then an application under s 66 is not the appropriate course and consideration needs to be given to other steps such as the removal of trustees and appointment of new trustees.”

References:

  • Butterfield v Sundberg [2020] NZHC 1052
  • High Court Rules, part 19
  • Public Trust v Kain [2018] NZHC 1547
  • Jones v O’Keeffe [2019] NZCA 222
  • FFP Trustee (NZ) Ltd v Peng [2019] NZHC 3301
  • Chris Kelly, Greg Kelly and JME Garrow Garrow and Kelly Law of Trusts and Trustees (7th ed, LexisNexis, Wellington, 2017) at [24.34];
  • Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882

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