Harre v Clark

• Jurisdiction: New Zealand
• Judge: Brewer J
• Judgment Date: 16 October 2014
• Neutral Citation: [2014] NZHC 2533
• Docket Number: CIV-2013-404-4304
• Court: High Court
• Date: 16 October 2014

BETWEEN

Lois Violet Harre

First Plaintiff

Roderick Mccrae Harre

Second Plaintiff

and

Lynette Joy Clark

First Defendant

Colin James Lucas

Second Defendant

[2014] NZHC 2533

CIV-2013-404-4304

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application by plaintiffs for an order vesting farm land in their names as trustees for a family trust — counter claim by defendants seeking declarations that the plaintiffs' appointment was invalid and void due to co conflict of interest together with directions as to the management of the sale of the land and distribution of the proceeds — family trust owned land — family agreed to sell land — settlor disagreed with selling the land at auction and wished two of the beneficiaries to have the opportunity to purchase the land — removed current trustees and appointed as trustees herself and one of the beneficiaries who wished to purchase the land — whether she had exercised her powers of appointment and removal for an improper purpose

counsel

TM Molloy for Plaintiffs

AE Ferguson and FC Monteiro for Defendants

JUDGMENT OF Brewer J

Introduction

1 Mrs Lois Harre established a Family Trust in 1989. Its sole asset is a 29 acre rural property at Whenuapai. Mrs Harre has the power to appoint trustees. In 2007, Mrs Harre exercised that power to appoint her daughter, Mrs Lynette Clark, and a solicitor, Mr Colin Lucas, as trustees. Mrs Harre's husband was also a trustee at the time, but he passed away in 2012 and was not replaced.

2 The Trust's land is a remnant of a farm which has been in Mrs Harre's family since 1860. Mrs Harre lives on an adjoining property which she owned in common with her late husband. Mrs Harre has a life interest in her husband's estate and, on her death, his estate will pass to the trustees of the Trust.

3 Mrs Harre, now in her 80s, has been associated with the Trust's land all her life. She and her husband farmed it for many years. Since Mr Harre died, Mrs Harre has continued to run cattle there. The land is not, and never has been, a viable economic unit. It has too small an area. Mrs Harre subsidises the cost of running the farming operation and the Trust has never derived an income from it.

4 The beneficiaries of the Trust are Mrs Harre's children, grandchildren, and their spouses. Its purpose is to provide for their “personal support benefit maintenance education or advancement in life”.

5 Mrs Harre and her husband had five children, four of whom are still alive. They are Mrs Lynette Clark, Mrs Elaine Grant, Mr Roderick Harre, and Ms Andrea Harre. The fifth child, Mr Warren Harre, died in 2003. He is survived by his three children and their mother.

6 Until recent years, the Trust slumbered. Mrs Harre and her husband farmed the land and looked after it as they always had. The Trust has not furthered its purpose because it has had no funds to do so.

7 As Mr Harre neared the end of his life, the Harre family began to discuss what should become of the land. I infer that they did so, as is so often the case with families where family land is held in Trust, without particular regard to the legal position of the Trust. A family meeting was held on 28 November 2009. There was a general feeling that the land should be sold. This meeting marks the beginning of the process of escalating disagreement which has led to this litigation.

8 Mrs Lynette Clark, as a trustee, took the lead in advancing the sale of the land. In her affidavit, Mrs Clark describes herself as a business manager. I infer she is a good one. Her approach to selling the land was efficient and businesslike. She identified options for the method of sale. She kept her siblings informed and recorded her efforts. She involved her fellow trustee, Mr Lucas.

9 There were, however, different views as to how the land should be sold. This slowed the process. Mrs Harre, as she made clear in her evidence, did not want the land auctioned. Mr Roderick Harre was interested in options for subdivision. He also wanted to see whether he could acquire some or all of the land, possibly with his sister, Ms Andrea Harre. Mrs Harre, who would naturally like to see at least part of the land stay in the family, would be pleased if that happened.

10 Nevertheless, and after taking account of the various viewpoints, Mrs Clark and Mr Lucas, as trustees, scheduled an auction of the property for 17 March 2012. Mr Roderick Harre made it known he opposed this. On 13 March 2012, there was a meeting between him and the trustees. Mr Roderick Harre asked for time for him and his sister, Ms Andrea Harre, to put forward a purchase proposal. The trustees cancelled the auction.

11 On 18 March 2012, Mrs Harre exercised her power of appointment under the Trust Deed. In a letter to the trustees, she advised them that, as of 18 March 2012, she appointed herself and Mr Roderick Harre as trustees. At the same time, she removed Mr Lucas as a trustee. The Trust Deed permits Mrs Harre to appoint herself as a trustee. 1

12 At first, Mr Lucas and Mrs Clark accepted the removal of Mr Lucas as a trustee. The necessary documents were signed by all parties. However, Mrs Clark was not at all happy with the appointment of Mrs Harre and Mr Roderick Harre as

trustees. On 1 December 2012, there was a meeting between Mrs Harre, Mr Roderick Harre and Mrs Clark to discuss the affairs of the Trust. The meeting had been requested by Mr Roderick Harre who had prepared an agenda. However, Mrs Clark made it clear that she did not regard this as a meeting of trustees

13 On Christmas Eve of 2012, Mrs Clark's solicitor wrote to Mrs Harre's solicitors asserting that the exercise by Mrs Harre of her power to remove Mr Lucas as a trustee was invalid. Matters escalated and on 13 May 2013 Mrs Harre exercised her power of appointment by removing Mrs Clark as a trustee. By this point, Mrs Clark's position was that neither Mrs Harre nor Mr Roderick Harre were trustees because the exercise of the power of appointment was invalid due to conflict of interest. On 29 August 2013, Mr Lucas put on record that he did not accept his removal as a trustee. Mrs Harre and Mr Roderick Harre commenced this case on 25 September 2013.

14 The dispute is about who should control the sale of the Trust's land. Mrs Harre and Mr Roderick Harre say they should be the ones to do that because:

• (a) They are the validly appointed trustees; and

• (b) They will take whatever steps are necessary, including investigating fully the prospects of subdividing the land, to achieve the greatest return for the Trust.

15 Mrs Clark and Mr Lucas say they should control the sale because:

• (a) Mrs Harre and Mr Roderick Harre have ulterior and improper motives towards the land. These are, first, that Mrs Harre does not actually want the land to be sold at all because she wants to carry on using it as she always has; and, second, that she and Mr Roderick Harre want to transfer the land to Mr Roderick Harre, and, possibly, Ms Andrea Harre, at below market value so as to keep it in the family.

• (b) Consequently, the exercise by Mrs Harre of her power of appointment to remove Mr Lucas as a trustee and to appoint herself and Mr Roderick Harre as trustees is invalid.

The proceedings

16 Mrs Harre and Mr Roderick Harre claim an order vesting the land in their names. 2 Currently, it is in the names of Mrs Harre's late husband, Mrs Clark and Mr Lucas.

17 Mrs Clark and Mr Lucas counterclaim by seeking declarations that:

• (a) They remain as trustees (because Mrs Harre's exercise of her power to remove them was “invalid and void”);

• (b) Alternatively, a professional independent trustee be appointed; and

• (c) “As long as [Mr Roderick Harre] intends to acquire the Trust property [Mrs Harre and Mr Roderick Harre] cannot be trustees …”.

18 Mrs Clark and Mr Lucas also seek directions as to the management of the sale of the land and how the proceeds should be distributed. This is predicated on the Court finding them to be trustees either because they remain so under the Trust Deed or in some derivative capacity: 3

• (a) the trust property is to be sold;

• (b) sale of the trust property is to be by way of tender process;

• (c) the tender process will be managed by the defendants as trustees;

• (d) in the alternative, the tender process will be managed by a professional independent trustee to be appointed by the Court;

• (e) the beneficiaries of the Harre Trust may participate in the tender process in the same way and to the same extent as all other third party participants in the tender process;

• (f) the sale proceeds shall be distributed equally among the beneficiaries of the Harre Trust, namely Lynette Joy Clark, Elaine Rhonda Grant, Roderick McCrae Harre, Andrea Elizabeth Flora Harre and Warren Lloyd McCrae Harre (as to the share of Warren Harre, the proceeds will be distributed equally amongst his children);

• (g) within 20 working days of the date of final distribution of the sale proceeds to beneficiaries, the trustees shall resolve to wind up the Harre Trust; and

• (h) the defendants are released and discharged from all present and future liabilities, actions, suits, proceedings, expenses, costs, penalties or demands whatsoever for which they or one of them may be liable and which arise out of acts or omissions on their respective parts in the course of the above sale and distribution processes and the administration generally of the Lois Violet Harre Trust.

19 Finally, Mrs Clark, as a beneficiary of the Trust, applies as a backstop measure for similar orders: 4

• (a) the trust property is to be sold;

• (b) sale of the trust property is to be by way of tender process;

• (c) the tender process will be managed by the defendants as trustees;

• (d) in the alternative, the tender process will be...