Mckay v Beattie

• Jurisdiction: New Zealand
• Judge: OSBORNE
• Judgment Date: 20 June 2016
• Neutral Citation: [2016] NZHC 1332
• Docket Number: CIV-2016-409-455
• Court: High Court
• Date: 20 June 2016

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

[2016] NZHC 1332

Judges:

Associate Judge Osborne

CIV-2016-409-455

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

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former trustee and was the registered owner of a half share in a house and shares in a family company — the trustee had been replaced by a new trustee as he was mentally incapable of exercising his powers and duties as a trustee — the evidence was that he would not have the ability to understand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.

Appearances:

G Clarke for the Plaintiffs

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 property, they require a vesting order under s 52 of the Act, transferring the title into the name of Ms Gordon, so that the registered proprietors as to the one half share owned by the Trust will be Mr McKay and Ms Gordon. An order is also sought under s 59 of the Act vesting in Mr McKay the right to transfer Mr Beattie's interest in 4,499 shares in Beatties Service Station Ltd to Ms Gordon.

10 Before dealing with the matter of the vesting orders themselves, there are some administrative matters I must first deal with.

Administrative matters

The relevant rule

11 Rule 18.4 High Court Rules provides that a proceeding commenced under pt 18 must be:

• (a) commenced by statement of claim; and

• (b) accompanied by an application for directions as to service and representation under r 18.7

12 The plaintiffs have commenced under this part as opposed to pt 19, and as such have filed the appropriate application. The plaintiffs apply for orders that:

Service

• (a) the defendant not be served with these proceedings;

• (b) the defendant does not need to be represented by a litigation guardian or other representative;

• (c) the notice of proceeding be dispensed with;

• (d) no other person need be served with the proceedings;

• (e) evidence be by way of affidavit; and

• (f) the proceeding be dealt with on the papers.

13 The primary grounds upon which the orders dispensing with service are sought, are:

• (a) there is no purpose in serving Mr Beattie with the proceedings because he lacks any mental capacity to understand the nature of the proceeding and could not make any decisions with regard to it; and

• (b) Mr Beattie has been validly removed as trustee because of his mental incapacity so there can be no basis to oppose his interest in the property as trustee vesting in the replacement trustee.

14 Given Dr Gilchrist's conclusion that Mr Beattie 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, I am satisfied that this is an appropriate case for service to be dispensed with. Mr Beattie's mental state is such that he 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”. 3 In reliance on the inherent jurisdiction of the Court to regulate its own process and proceedings, an order will be made dispensing with service. 4

Litigation guardian

15 The primary grounds upon which an order that a litigation guardian for Mr Beattie need not be appointed, are that:

• (a) to provide Mr Beattie with a litigation guardian would serve no purpose; and

• (b) the orders sought are limited to vesting orders to give effect to the lawful change of trustees and do not otherwise impact on Mr Beattie's wellbeing or interests which might exist.

16 Mr Beattie is an incapacitated person as defined under r 4.29 High Court Rules. Rule 4.30 provides that an incapacitated person must have a litigation guardian as his...