N P SMITH v S C PENNEY and D M SIMUNOVICH [2013] NZHC 1981

N P SMITH v S C PENNEY and D M SIMUNOVICH [2013] NZHC 1981 [8 August 2013]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2013-404-003064[2013] NZHC 1981BETWEEN NIGEL PHILIP SMITH as trustee of theMARIA CHARLES FAMILY TRUSTPlaintiffAND STEPHEN CHARLES PENNEY astrustee of the MARIA CHARLESFAMILY TRUSTFirst DefendantAND DONNA MARIA SIMUNOVICH astrustee of the MARIA CHARLESFAMILY TRUSTSecond DefendantHearing: 7 August 2013Appearances: M Heard/F Whyte for the PlaintiffNo appearance for the First DefendantS McCabe for Second DefendantJudgment: 8 August 2013JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSENThis judgment was delivered by me on08.08.13 at 11:30am, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] This matter was called before me in the summary judgment list.[2] It is an unusual proceeding of its kind for call in the summary judgment list. The plaintiff and the two defendants are all trustees of the Maria Charles Family Trust (the Trust). The defendants are discretionary and final beneficiaries of the trust. The decisions of the trustees may be made by the majority if not unanimous.[3] The defendants were married but they separated in July 2008. They entered into a matrimonial property agreement dated 28 September 2011 by which the trust was to be resettled into two new trusts, one settled by the first defendant and the other by the second defendant.[4] The defendants cannot agree as to how the matrimonial property agreement should be implemented. The trust has not been resettled in terms contemplated by that agreement.[5] The trust is obliged to file financial accounts with the Commissioner of Inland Revenue but this has not been possible due to the disagreement between the defendants. They have refused to attend trustee meetings.[6] The plaintiff seeks that all trustees be removed and replaced with two independent trustees.[7] There is clear evidence that the first defendant continues to deal with trust property as if it is his own. The trust owns industrial and residential properties. The first defendant has acted without the trust's authority to arrange tenancies and toreceive the income personally from those.[8] The plaintiff says the first defendant has refused to account to the trust for the money received as rental from the properties. The plaintiff seeks orders requiring all rental income to be paid into the trust, for the first defendant to provide all records concerning the leasing of the properties in question, and requiring the firstdefendant's compliance with decisions of the trustees in accordance with the trust deed.[9] The plaintiff also seeks an order for a declaration that he has acted reasonably as a trustee in bringing these proceedings; and for orders for replacement trustees to be appointed.[10] Counsel concedes these latter two orders are not appropriate for summary judgment. Those matters are to be deferred for consideration at 9:00am on 10 September 2013 if there is no opposition to those orders at that time.[11] The second defendant consents to the orders for summary judgment sought by the plaintiff against the first defendant. She is prepared to resign and will provide appropriate authority to take effect from the time the substituted trustees have been appointed.[12] Substituted service of the proceeding was effected in terms authorized by the Court, on 11 July 2013.[13] The Court has considered the memoranda, and the submissions filed insupport of the plaintiff's application. Generally these seek the first defendant'scompliance with his duties as a trustee and in particular to pay income from properties to the trust for the benefit of the beneficiaries, and to maintain proper records of account.[14] Upon the plaintiff's summary judgment application there will be ordersaccordingly in terms of paragraph 33 of counsels' synopsis of submissions dated 5 August 2013, namely:a) The first defendant is to pay into the trust all rental income from the properties and any other income from trust property that he has received to the account of Maria Charles Family Trust held at [ ].b) The first defendant is to deliver up to the plaintiff and second defendant all records concerning the leasing of the properties and any other trust property that he has taken steps to lease.c) The first defendant is to refer to all trustees of the Trust all decisions to be made on dealing with Trust property, comply with directions made by the trustees in accordance with the trust deed, and not purport to make decisions on dealings with trust property in his sole discretion.[15] The evidence is clear that the first defendant has been receiving and not accounting for trust income. Indeed the evidence records that this has been done by him he knowing that he should not in fact do it. In particular the Court refers to pp 180 and 181 of the exhibit attached to the affidavit of the plaintiff dated 4 June 2013.[16] If the first defendant believes he is entitled to reimbursement for monies he has spent on the rental properties in question, then he can make a claim for those in appropriate form to the trust.[17] The Court directs that costs on today's hearing are to be fixed as sought inparagraph 62 of the plaintiff's submissions on an indemnity basis against the firstdefendant. The Court also agrees that the first defendant is to pay the seconddefendant's costs on an indemnity basis.[18] As previously noted the matter is to be called again at 9:00am on 10 September 2013 and for which purpose the following orders are made by the consent of the plaintiff and the second defendant:a) That the remaining matters be dealt with under Part 18.b) That there be timetable orders in terms of paragraph 61 of counsel'ssubmissions, namely:i) Any statement of defence is to be filed and served within one week of the date of delivery of judgment to this application.ii) Any further affidavits for the plaintiff are to be filed within a further one week.iii) Affidavits for the defendants are to be filed within a furtherone week.iv) Any reply affidavits are to be filed within a further one week.[19] If the first defendant files a defence and affidavits in opposition then counsel will request the Court on 10 September 2013 to schedule a two day hearing. If no defence has been filed then counsel estimate one hour hearing time only be required.Associate Judge Christiansen