Deadlock?

In Jongeneel v Schaake Powell J traverses the parameters of deadlock that would support the Court exercising powers to remove existing trustees and appoint a replacement trustee pursuant to sections 112 and 114 of the Trusts Act 2019,

By way of background Ms Jongeneel and Mr Schaake settled the J A G and A J Schaake Family Trust (the Trust) in happier times. The trust owns the former family home in respect of which Ms Jongeneel has an occupation order, a beach house and a shareholding in a company that owns a commercial property that Mr Schaake operates a business. The Trust has no liquid assets.

As set out at [7] and [8]:

There is no dispute that sections 112 and 114 of the Trusts Act give the Court power to remove the existing trustees and appoint replacement trustees.

That said, a change of trustees must be in the best interest of the Trust’s beneficiaries. As noted at [12]:

It is not enough that there is incompatibility between trustees and beneficiaries. As also noted in Green v Green:

In finding that any application to remove the trustees was premature Powell J noted that:

• there was no evidence of any trust income that could pay for the maintenance Ms Jongeneel has requested
• there were no proposals identified upon which the trustees were deadlocked
• only a single maintenance issue ventilated was a failure of the underfloor heating system. However, there was no evidence put forward to approve maintenance or to approve a heating system.

Pointedly, as stated by Powell J at [19]:

The court found limited sympathy for Ms Jongeneel not having access to the Trust owned beach house in circumstance where she has exclusive occupation of another Trust owned property.

The decision in Jongeneel v Schaake highlights some of the practical realities of trust owned assets that rely on non-trust streams of income to meet all costs and expenses.

The subsequent decision on costs ordered Ms Jongeneel to pay costs on a 2B basis, which amounted to $19,359 plus disbursements to Mr Schaake. Whether or not Ms Jongeneel could be indemnified from the Trust was not decided. However, as noted at [11] to [13]:

References

• Jongeneel v Schaake [2023] NZHC 3568
• Green v Green [2015] NZHC 1218
• Jongeneel v Schaake [Costs] [2024] NZHC 3198
• McCallum Jnr v McCallum [2021] NZCA 237