Mckay v Beattie

JurisdictionNew Zealand
CourtHigh Court
JudgeOSBORNE,Associate Judge Osborne
Judgment Date20 June 2016
Neutral Citation[2016] NZHC 1332
Docket NumberCIV-2016-409-455

[2016] NZHC 1332

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

Judges:

Associate Judge Osborne

CIV-2016-409-455

Under the Trustee Act 1956

In The Matter of the JC Beattie Family Trust

BETWEEN
Alan Bevin Mckay And Suzanne Isobel Gordon
Plaintiffs
and
Alan Colvin Beattie
Defendant
Appearances:

G Clarke for the Plaintiffs

Application for orders vesting property and dispensing with service — the plaintiffs also applied for orders that: the defendant did not need to be represented by a litigation guardian; the notice of proceeding be dispensed with; evidence be by way of affidavit; and the proceeding be dealt with on the papers — the plaintiffs were the current trustees of a family trust — the defendant was a former trustee and was the registered owner of a half share in a house and shares in a family company — the trustee had been replaced by a new trustee as he was mentally incapable of exercising his powers and duties as a trustee — the evidence was that he would not have the ability to understand the current proceedings if he was served with them — whether there would be any purpose in serving the proceedings on the defendant — whether any other person should be served with the proceedings — whether a notice of proceeding could be dispensed with — whether the defendant's share of the property could be vested in the new trustee in accordance with s 52 (Vesting orders of land) and s59 (Vesting orders as to stock and things in action) Trustee Act 1956.

The issues were: whether there would be any purpose in serving the proceedings on Mr B; whether any other person should be served with the proceedings; whether a notice of proceeding could be dispensed with; whether Mr B's share of the property could be vested in the new trustee in accordance with s 52 and s59 TA.

Held: Given a doctor's conclusion that Mr B would not have the ability to understand the current proceedings if he was served with them and there would be no purpose in serving the proceedings on him, this was an appropriate case for service to be dispensed with. Mr B would not be able to rationally understand the nature or purpose of the proceedings or to meaningfully participate in them. Service would serve “no useful purpose” (Docherty v Docherty). In reliance on the inherent jurisdiction of the Court to regulate its own process and proceedings, an order will be made dispensing with service.

Mr B was an incapacitated person as defined under r4.29 High Court Rules (HCR). Rule 4.30 provided that an incapacitated person had to have a litigation guardian as his or her representative in any proceeding, unless the court otherwise ordered.

The Court had to proceed cautiously before granting an order that Mr B need not have a litigation guardian as his representative in this proceeding. That said, it was appropriate in this case to grant such an order. Mr B was properly removed as trustee. It followed as a matter of course that a vesting order should be granted in favour of the replacement trustee, G.

In circumstances where service was dispensed with, the defendant was incapacitated and there was to be an order that no litigation guardian was required, there was no good reason to require a notice of proceedings. Accordingly, an order was made pursuant to r 5.24(b)(iii).

This proceeding was essentially an administrative step to enable the Trust property to be vested in the current trustees. This step did not in itself adversely impact upon any beneficiaries of the Trust. In any event, M had deposed that the adult discretionary beneficiaries. (Mr and Mrs B's three children) agreed between them on the appointment of G as a replacement trustee for their father.

Therefore, it was declared that there were no other persons who should be issued with the proceedings as persons who were “interested in, or may be adversely affected by, the relief sought” by the plaintiffs (r 18.7(3) HCR). This matter could be dealt with on a without notice basis.

It was appropriate that the evidence in this proceeding be given by way of affidavit and the relief sought be dealt with on the basis of the papers before the court.

Section 52(1)(b)(i) TA provided the Court with the power to vest land in any such person that it may direct where a trustee entitled to or possessed of any land or interest therein, either solely or jointly with any other person, was under a disability. Section 52(3) clarified that in the circumstances of joint entitlement, the land, interest or right was to be vested in the other person who remained entitled, either alone or with any other person the Court appointed.

M was already the sole registered proprietor over a half share in the property. The other half share was jointly registered to M and Mr B. The current claim was properly supported by evidence. Given the need to ensure the current trustees could deal with the property in accordance with the trust deed, the vesting order sought was appropriate. An order was made vesting Mr B's interest in the half share to the property in G.

Section 59 TA was very similar to s52. It provided that where a trustee entitled, alone or jointly with another person to stock or to a thing in action, and the trustee was under a disability, the court could make an order vesting the right to transfer or call for a transfer of stock in any person as the court might appoint. Section 59(3) clarified that where the right was entitled jointly with any other person, the right was to be vested in that person either alone or jointly with any other person whom the court might appoint.

The shares were jointly held by M and Mr B. Again the current claim was properly supported by evidence. G had already been appointed as a trustee of the Trust. In order for her, and M, to be able to properly perform their roles as trustees of the shares, it was necessary that they have legal ownership. An order would also be made vesting Mr B's right to transfer his interest in the shares to G.

A trustee was entitled to be reimbursed for expenses incurred in carrying out the trust. This included litigation costs. As such it was appropriate that the trustees recovered their expenses out of the trust property.

JUDGMENT OF ASSOCIATE JUDGE OSBORNE as to vesting orders and service
Introduction
1

The plaintiffs, Alan McKay and Suzanne Gordon, as current trustees of the JC Beattie Family Trust (the Trust) seek an order vesting the following trust property currently held by Alan Beattie, the defendant:

  • (a) title to a half share in the property at 2/135 Johnson Road, Christchurch (the property) jointly held by Mr McKay and the defendant; and

  • (b) 4,499 shares in Beatties Service Station Ltd (the shares) held jointly by Mr McKay and Mr Beattie.

2

These orders are sought because Mr Beattie, a retired trustee of the Trust and in whose name the property and the shares are currently jointly registered, is mentally incapable of exercising his powers and duties as a trustee.

Background
3

On 21 January 2002 Janice Beattie, the wife of Mr Beattie, settled the Trust. 1 Mr Beattie and Mr McKay were named as trustees. The named discretionary beneficiaries of the Trust are Mr Beattie, the three children of Mrs and Mrs Beattie and any grandchild or more remote issue of the settlor. On the same date a second trust was created named the AC Beattie Family Trust whereby Mr Beattie was the settlor and appointer and the trustees where Mrs Beattie and Mr McKay. However, given Mrs Beattie's passing in 2012, Mr McKay is now the sole trustee of that trust.

4

The trustees of each trust were joint legal owners of the following trust property:

  • (a) the property; and

  • (b) the shares.

5

Upon the death of Mrs Beattie, the half share in the property jointly held by her and Mr McKay transferred to Mr McKay as the sole remaining trustee, as did her interest in the shares. The other half share of the property remained jointly owned by Mr Beattie and Mr McKay as trustees of the Trust, as did the 4,499 shares.

6

Mr Beattie continued living in the property after Mrs Beattie's passing. Sadly however, due to his deteriorating mental and physical health it became apparent that he was no longer able to care for himself and in or around January 2015 he moved into the Ballarat Care Home.

7

Dr Nigel Gilchrist, a specialist in internal medicine, assessed Mr Beattie on 1 April 2016 and concluded:

  • (a) Mr Beattie lacks mental capacity to carry out the role of Trustee including decision making relating to property and to instruct others including solicitors in regard to his Trust property.

  • (b) Mr Beattie is an incapacitated person as defined under r 4.29 High Court Rules.

  • (c) Mr Beattie would not have the ability to understand High Court proceedings for the vesting of Trust property into the new Trustee if he was served with them and there would be no purpose in serving the proceedings on him.

8

Due to Mr Beattie no longer having mental capacity to carry out his obligations as a trustee he was removed as a trustee and replaced by his niece, Suzanne Gordon, pursuant to s 43 of the Trustee Act 1956 (the Act). The reason for Mr Beattie's removal as a trustee was that it became apparent to his three children that the property, which was now empty but continued to accrue rates and insurance costs, needed to be sold and the money reinvested with a view to the income being used to meet any of Mr Beattie's needs and also the needs of the other discretionary beneficiaries. In order to achieve this, the half share in the property which Mr Beattie still holds needs to be vested in Ms Gordon. 2

9

In order for the plaintiffs to deal with the...

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