PORTEOUS v McDOWALL [2019] NZHC 2874

PORTEOUS v McDOWALL [2019] NZHC 2874 [6 November 2019]IN THE HIGH COURT OF NEW ZEALANDINVERCARGILL REGISTRYI TE KŌTI MATUA O AOTEAROAWAIHŌPAI ROHECIV-2019-425-114[2019] NZHC 2874IN THE MATTER of the Trustee Act 1956ANDIN THE MATTER of an application for vesting ordersBETWEEN CAROLYN MARGARET PORTEOUS andROSS WILSON McDOWALL in respect ofthe F W and O M McDowall Family TrustNo 2andVERONICA McDOWALL in respect of theGordon F McDowall Family TrustApplicantsAND FLEMING WILSON McDOWALLRespondentHearing: 4 November 2019(By way of telephone conference)Counsel: B J Nettleton for ApplicantsJudgment: 6 November 2019JUDGMENT OF ASSOCIATE JUDGE LESTER[1] Fleming Wilson McDowall ("Fleming") is a trustee of the F W and O MMcDowall Family Trust No 2 and the Gordon F McDowall Family Trust.[2] Unfortunately, Fleming has lost capacity and this application seeks to haveFleming removed as a trustee because of that incapacity and to have the property ofeach Trust vested in the remaining respective trustees.[3] Applications such as this require a number of steps to be addressed as follows:(a) leave to use the originating application procedure;(b) dispensing with the need for Fleming to have a litigation guardian;(c) otherwise dispensing with service;(d) whether the threshold for an order removing the trustee has been met;and(e) the vesting order itself.[4] Before turning to the above steps, I refer to the medical evidence confirmingthat Fleming has lost capacity. Dr Philip White has signed a Health Practitioner'sCertificate (dated 12 March 2019) confirming that Fleming is not wholly competentto manage his own affairs and that Fleming's mental incapacity is due to a healthcondition that is likely to continue indefinitely.[5] Fleming is therefore unable to fulfil his obligations as trustee and with theproperty owned by the F W and O M McDowall Family Trust No 2 having been sold,the trustees need to regularise the situation.Originating application procedure[6] It is now established practice that applications of this kind may be commencedby way of originating application. Leave is required because this procedure cannot beused as of right under the High Court Rules 2016. It is nonetheless in the interests ofjustice that this procedure be used and I grant leave accordingly.Litigation guardian[7] As Fleming is incapacitated under r 4.30 of the High Court Rules 2016,Fleming requires a litigation guardian unless the Court directs otherwise.[8] I am satisfied that in this case it is not necessary to appoint a litigation guardian.Such would serve no real purpose given the essentially administrative nature of thisapplication. By characterising the application in that way, I do not minimise theimportance of the application or the need for such applications to be carefullyconsidered and supported by medical evidence, but once it is clear a trustee has lostcapacity, action must be taken to allow the Trust to operate as intended.[9] Accordingly, there is an order dispensing with the appointment of a litigationguardian.Service[10] Similarly, there is no need for any party to be served. As I have said, theapplication is necessary to allow the Trusts to function again.[11] Accordingly, there is an order dispensing with the need for the application tobe served in relation to both the F W and O M McDowall Family Trust No 2 and theGordon F McDowall Family Trust.Removal of trustees[12] Under the F W and O M McDowall Family Trust No 2, Fleming was one ofthe settlors along with Olive Margaret McDowall, his late wife.[13] The power to remove trustees under that Trust was exercisable by the settlors.Accordingly, the power is not available in this case.[14] The Trust Deed for the Gordon F McDowall Family Trust is in an older formatand does not contain a power to remove trustees.[15] I am satisfied in terms of the language of s 51(1) of the Trustee Act 1956 thatit is "inexpedient, difficult, or impracticable" to appoint a new trustee in substitutionfor Fleming without the assistance of the Court in relation to the Gordon F McDowallFamily Trust.[16] In respect of the F W and O M McDowall Family Trust No 2, a replacementtrustee is sought for Fleming. Ross Wilson McDowall has not been appointed a trusteeunder a Deed entered into in September 2018. I say that as the Deed of Appointmentdated 12 September 2018 appoints Ross McDowall on the retirement of Fleming butthe Deed does not record that Fleming is retiring. Accordingly, the s 51 jurisdictioncan be invoked in respect of the F W and O M McDowell Family Trust No 2 as RossMcDowall is not yet a trustee as his appointment is only triggered by Fleming'sretirement. Until then the Deed is ineffective to make him a trustee.[17] I am satisfied that it is in the best interests of the Trust to remove Fleming astrustee of the F W and O M McDowall Family Trust No 2 and appoint Ross WilsonMcDowall in his place and there is an order under s 51 of the Trustee Act 1956accordingly.[18] That leaves Carolyn Margaret Porteous and Ross Wilson McDowall as thetrustees of the F W and O M McDowall Family Trust No 2.[19] I record that while Olive Margaret McDowall remains on the title of theproperty owned by the trustees of the F W and O M McDowall Family Trust No 2,counsel advises that no order is required in respect of her.[20] At this point, I adjourn the application as regards the Gordon F McDowallFamily Trust. The removal of Fleming in respect of that Trust would leave VeronicaMcDowall as sole trustee and it is my preference not to create a situation where thereis a sole trustee who is also a beneficiary. Counsel are going to consider the possibilityof alternate trustees.[21] While I am satisfied that an order is required in relation to the Gordon FMcDowall Family Trust, that order will await the identity of a new trustee.Vesting order[22] That leaves the need for a vesting order in respect of the F W and O MMcDowall Family Trust No 2. Given the removal of Fleming as trustee of that Trust,it follows that a vesting order is required.[23] Accordingly, there is a vesting order as follows:That the property at 117 MacKenzie Street, Winton legal description Lot 1Deposited Plan 312223, Identifier 48094, Southland Registry, vest inCAROLYN MARGARET PORTEOUS and ROSS WILSON McDOWALL astrustees of the F W and O M McDOWALL FAMILY TRUST NO 2.[24] The balance of the application is adjourned. Once counsel have identifieda further trustee for the Gordon F McDowall Family Trust, a memorandum confirmingthat consent may be filed and the file referred to me to consider further orders.________________________________Associate Judge LesterSolicitors:French Burt Partners, Invercargill