ALBRECHTSEN v ALBRECHTSEN [2014] NZHC 872

ALBRECHTSEN v ALBRECHTSEN [2014] NZHC 872 [30 April 2014]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYCIV-2013-470-499[2014] NZHC 872UNDER the Trustee Act 1956BETWEEN BARRY NEIL ALBRECHTSEN as trusteeof the BN & DM Albrechtsen FamilyTrustPlaintiffAND DIANNE MARIE ALBRECHTSENFirst DefendantELIZABETH MARY LAMBERTSecond DefendantHearing: 28 and 30 April 2014Appearances: A H Brown for plaintiffFirst and second defendants in personJudgment: 30 April 2014JUDGMENT OF LANG J[on application to remove trustee]This judgment was delivered by me on 30 April 2014 at 3.30 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] This proceeding concerns a trust known as the B M & D N Albrechtsen Family Trust ("the Trust"). The current trustees are Mr Barry Albrechtsen, his former wife Ms Dianne Albrechtsen, and an advisory trustee, Bailey Ingham Trustees Limited. The Trust's only asset is an undivided one-third share that it holds in a residential property situated at Mount Maunganui ("the property"). Trusts associated with Mr Albrechtsen's two brothers also each own a one-third interest inthe property.[2] The proceeding is now before the Court to deal with a range of issues. These relate both to the Trust and the property. Before proceeding further, it is appropriate to briefly record the background giving rise to today's hearing.Background[3] The property has been used for many years as a holiday home by the families associated with the three trusts that own it. There is no formal agreement between the owners as to how rights of occupation are to be exercised. Instead, the three families have dealt with that issue through informal discussion and agreement on an apparently ad hoc basis.[4] Mr and Mrs Albrechtsen separated in July 2007. At that point Mrs Albrechtsen moved into the property with the consent of the remaining owners. She resided there until June 2008, when she moved into other rented accommodation.[5] On 24 December 2012, Mrs Albrechtsen resumed occupation of the property without the consent of the other owners. This prompted Mr Albrechtsen to file the present proceeding, in which he sought inter alia an injunction requiring Mrs Albrechtsen to vacate the property. Mr Albrechtsen also sought an order removing Mrs Albrechtsen as a trustee of the Trust, and an order appointing the Public Trustee to replace her as a trustee. Mr Albrechtsen also sought an order removing the power vested in Mrs Albrechtsen under the trust deed to remove and appoint trustees.[6] Mr Albrechtsen's application for an injunction was ultimately resolved on 20 September 2013, when counsel for both parties signed and filed a consent memorandum under which Mrs Albrechtsen agreed to vacate the property on 1 November 2013. In consideration for Mrs Albrechtsen vacating the property, Mr Albrechtsen agreed to pay her the sum of $25,000. Woodhouse J made orders in terms of the consent memorandum on 20 September 2013.[7] Mrs Albrechtsen subsequently had second thoughts about the arrangement, and she ultimately refused to obey the consent orders requiring her to vacate the property on 1 November 2013. As a result, counsel for Mr Albrechtsen sealed the orders made by Woodhouse J, and then obtained a warrant for possession of the property. The Sheriff executed that warrant on or about 21 November 2013 by physically removing Mrs Albrechtsen from the property. Mrs Albrechtsen has not lived in the property since that date.[8] On 27 November 2013, Mrs Albrechtsen exercised the powers vested in her under the trust deed to appoint the second respondent, Ms Lambert, as a trustee of the Trust. There is no dispute that Ms Lambert is currently an undischarged bankrupt. This prompted Mr Albrechtsen to amend the pleadings so as to seek declarations relating to the validity and effect of Ms Lambert's appointment as atrustee.[9] On 19 December 2013, Mrs Albrechtsen filed an application seeking an order setting aside the consent orders made by Woodhouse J on 20 September 2013. Mrs Albrechtsen then purported to file a further application on 18 February 2014 seeking an order permitting her to resume occupation of the property.The issues[10] The following issues require determination:(a) Who should be the trustees of the Trust?(b) Should the consent orders made on 20 September 2013 be set aside?Who should be the trustees of the Trust?[11] The trust deed requires the trustees to act unanimously in managing the affairs of the Trust. Mr and Mrs Albrechtsen have realistically agreed there is no prospect that they will be able to abide by this requirement in the future. For that reason, they agreed during the hearing that it was appropriate for the Court to make an order removing all existing trustees, and replacing them with an independent trustee.[12] The proposed trustee is Holland Beckett (Albrechtsen) Trustee Limited. This is a trustee company operated by the law firm Holland Beckett. During the hearing Mr Thompson, a partner of Holland Beckett, helpfully confirmed that the proposed trustee is prepared to accept appointment to act as trustee in place of the existing trustees. The new trustee will be responsible for negotiating with the remainingowners of the property regarding the future use and disposition of the Trust's interestin the property. It will also be responsible for determining how any sale proceeds areto be distributed to the discretionary and / or final beneficiaries named in the trustdeed.[13] Mr Albrechtsen has agreed to fund the activities of the new trustee until suchtime as it is in funds. Mr Albrechtsen would then be reimbursed in respect of alltrustees' costs he has met up to that point.[14] It is important that neither party uses their power to appoint new trustees so as to upset the arrangement that they have now agreed to put in place. The Court has an inherent supervisory jurisdiction to ensure that the terms of a trust are properly carried out. Recent examples of cases in which the Court has removed trustees using this jurisdiction are Clifton v Clifton,1 Davidson v Israel,2 and Mudgway v Slack.3 As Allan J explained in Morris v Sumpter,4 the inherent supervisory jurisdiction isderived from the Court's powers in equity to supervise trusts for the welfare of1 Clifton v Clifton HC Auckland CIV-2004-404-4185, 5 November 2004.2 Davidson v Israel [2012] NZHC 631.3 Mudgway v Slack HC Auckland CIV-2010-404-2058, 26 July 2010.4 Morris v Sumpter HC Auckland CIV-2004-404-3060 6 April 2005 at [52].beneficiaries. In Miller v Cameron, Dixon J explained the rationale for the jurisdiction as follows: 5The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trust and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorise the court to act, the delicate question of whether it should act and proceed to remove the trustee is one upon which the decision of a primary judge is entitled to especial weight.[15] In the present case it is not necessary to exercise this particular power, because the anticipated conduct of the new trustee is not in question. Rather, the problem relates to the manner in which Mr and Mrs Albrechtsen may attempt to exercise their powers of appointment so as to upset the arrangement they have now agreed to put in place for the management of the Trust's affairs.[16] A similar issue arose in both Clifton and Mudgway. In those cases the Court had concluded that it should remove the existing trustee, but recognised that thatperson could effectively sidestep the Court's order by exercising the power under the trust deed to remove and appoint trustees. In each case, the Court went on to make a further order vesting the power to appoint trustees in the new trustee. Paterson J explained the rationale for taking this step in Clifton as follows:[43] The court's inherent jurisdiction to alter trusts has been restricted bythe House of Lords decision in Chapman v Chapman,6 as applied in Re Ebbett.7 However, what is sought here is not, in my view, a variation of the trust. As noted above, it is a variation of an administrative provision and not an alteration of the trust itself. This trust was sanctioned by this court to protect infant beneficiaries. In my view, the court must have a supervisory jurisdiction to modify an administrative provision which has been shown can be used in a manner which may be to the detriment of the infant beneficiaries. The court, in its inherent jurisdiction, should intervene to modify that administrative provision so that the interests of the infant beneficiaries cannot be readily jeopardised. In the circumstances, I intend to5 Miller v Cameron (1936) 54 CLR 572 at 580.6 Chapman v Chapman [1954] AC 429.7 Re Ebbett [1974] 1 NZLR 392.use the inherent jurisdiction of this court to modify this administrative provision.[17] I propose to take the same approach in the present case. I will therefore make an order removing the power to remove and appoint trustees from Mr and Mrs Albrechtsen, and vesting that power in the new trustee.Application to set aside the consent orders made on 20 September 2013[18] Ms Albrechtsen maintains that she had a potential defence to the Trust'sapplication based on s 63 of the Land Transfer Act 1952. This provides as follows:63 Registered proprietor protected against ejectment(1) No action for possession, or other action for the recovery of any land, shall lie or be sustained against the registered proprietor under the provisions of this Act for the estate or interest in respect of which he is so registered, except in any of the following cases, that is to say:(a) The case of a mortgagee as against a mortgagor in default:(b) The case of a lessor as against a lessee in default:(c) The case of a person deprived of any land by fraud, as against the person registered as proprietor of that land through fraud, or as against a person deriving otherwise than as a transferee bona fide for value from or through a person so registered through fraud:(2) In any case other than as aforesaid, the production of the register or of a certified copy thereof shall be held in every Court of law or equity to be an absolute bar and estoppel to any such action against the registered proprietor or lessee of the land the subject of the action, any rule of law or equity to the contrary notwithstanding.[19] Mrs Albrechtsen points out that she is one of the registered proprietors of the property. As a result, s 63 prohibited the Court from making an order requiring her to deliver up vacant possession of the property.[20] I do not propose to consider the merits of this argument. I observe only that Mrs Albrechtsen is but one of nine registered proprietors. In addition, she is a registered proprietor solely in her capacity as trustee. As such, she is required to act in the interests of all of the beneficiaries of the Trust. Clause 14.1 of the trust deedalso provides that no trustee who is also a beneficiary shall exercise any power or discretion vested in the trustees in his or her favour. For that reason, Mrs Albrechtsen cannot take any step as a trustee that would be to her benefit and not to the benefit of all the remaining beneficiaries. If Mrs Albrechtsen sought to invoke s 63 to enable her to reside at the property without the consent of the remaining trustees, she would arguably not be acting in a manner that was to the benefit of all the beneficiaries.[21] I see a more fundamental problem arising out of the fact that the consent order has now been sealed and executed. As a result, the judgment has been perfected and carried into effect. Although I did not hear argument on the point, I consider it likely that this would prevent the Court from now setting aside the orders Woodhouse J made on 20 September 2013.[22] It is of course open to a party to a judgment to obtain an order setting the judgment aside on the basis that it was procured by fraud.8 This would require Mrs Albrechtsen to file a new proceeding in which she particularised the allegedly fraudulent basis upon which the judgment was obtained. Mrs Albrechtsen does not, however, contend that the consent orders were made as a result of fraud by Mr Albrechtsen or by any other party. She argues only that her former counsel failed to advise her of a possible defence to Mr Albrechtsen's application seeking an orderthat she vacate the property. She says that this resulted in her authorising her counsel to sign the consent memorandum in circumstances where she would not have done so if she had known the true situation.[23] Even if jurisdiction existed to set the judgment aside, I would not have exercised my discretion in favour of Mrs Albrechtsen. As she confirmed during the hearing, her motivation in pursuing this application is to obtain a more equitable relationship property settlement with Mr Albrechtsen. That motivation is plainly for the sole benefit of Mrs Albrechtsen, and not for the benefit of the beneficiaries of the Trust as a whole. It would therefore not be appropriate to make the order that Mrs Albrechtsen seeks.8 Sulco Ltd v E & S Redit and Co Ltd [1959] NZLR 41 (SC) at 71; Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804 at [31].Result: Orders[24] I make an order under s 51(1) of the Trustee Act 1956 appointing Holland Beckett (Albrechtsen) Trustee Limited as sole trustee of the Trust in substitution for the existing trustees. In exercise of the inherent jurisdiction of the Court, I make a further order vesting the power to remove and appoint trustees solely in the new trustee.[25] I make an order under s 52(1)(a) of the Trustee Act 1956 vesting in Holland Beckett (Albrechtsen) Trustee Limited the Trust's one-third interest in the property described as SA65B/681 being Lot 2 on Deposited Plan South Auckland 85866.[26] The application by Mrs Albrechtsen for an order setting aside the consent orders made by Woodhouse J on 20 September 2013 is dismissed.Costs[27] Counsel for Mr Albrechtsen has today filed a memorandum seeking increased and / or indemnity costs against Mrs Albrechtsen. In the alternative, she seeks anorder that her client's costs be paid by the Trust when funds become available.[28] Mrs Albrechtsen has filed a memorandum in which she submits that costs should lie where they fall.[29] I will deal with the issue of costs in a separate judgment.Lang J