IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE	
CIV-2020-485-000100
[2020] NZHC 693	

UNDER	the Trustee Act 1956	
BETWEEN	VAUGHN RHYS TILLEY
First Plaintiff

KAREN GARRICK
Second Plaintiff	
AND	VICKI JUNE TILLEY
First Defendant

LORRAINE BRADSHAW
Second Defendant	

Hearing:	3 April 2020 by Teleconference	
Counsel:	G Manktelow for the Plaintiffs
R J Buchanan for the Defendants	
Judgment:	3 April 2020	

JUDGMENT OF DOOGUE J

Introduction

[1]	Today I have convened an urgent interlocutory hearing to consider the extension of a freezing order made by Thomas J on 25 March 2020. That order is to expire at 4.00 pm today.

[2]	The plaintiffs and the first defendant Vicki June Tilley are all discretionary beneficiaries of the Jack and June Tilley Trust (the Trust).

TILLEY v TILLEY [2020] NZHC 693 [3 April 2020]

[3]	Vicki June Tilley is a co-trustee of the trust together with Lorraine Janet Bradshaw and Yvonne Tebbutt.

[4]	The Trust was set up for the benefit of Jack and June Tilley during their lifetimes and on the death of the survivor the Trust was to be realised and distributed in equal shares among their surviving children.

[5]	Jack Tilley died some time ago and his wife and survivor June Tilley died last year on 19 December 2019.

[6]	On 23 March 2020 the trustees entered into an agreement with third parties to sell a residential property owned by the trust and situated at 73 Walter Road, Lowry Bay, Wellington (the property) to them.

[7]	The plaintiffs seek an order freezing the sale proceeds of the property.

Factual background

[8]	In 2019, proceedings were brought by Gail Tilley, one of the beneficiaries of the trust, against the defendant Vicki June Tilley in the Family Court seeking that a Kevin Bignell be appointed as June Tilley’s property manager amidst trenchant allegations (vehemently denied) that Vicki Tilley was abusing the power given to her by an Enduring Power of Attorney to manage both the personal and property affairs of her mother. Without acknowledging any justification for those proceedings being brought, Vicki Tilley consented to the application to have Kevin Bignell appointed as June Tilley’s property manager.

[9]	In respect of those proceedings, the only material I have received and reviewed is an affidavit of Vicki Tilley dated 24 June 2019.

[10]	In that affidavit, Vicki Tilley advises the Court that the property needed to be sold in order to release funds to enable June Tilley’s rest home costs and expenses to be paid. The Trustees rely on that affidavit as providing notice to the plaintiffs – first of the fact of an impending sale to the property and secondly of the legitimate purpose

behind such sale. They say that is conclusive of the interlocutory proceedings because that affidavit proves the legitimacy of all actions taken by the trustees.

[11]	The plaintiffs filed proceedings in this Court on 24 February 2020 seeking an order removing the defendants as trustees of the trust and appointing Trafalgar Trustee Ltd as trustee in their place and for an order that costs in the proceeding be against the defendants personally or paid by the trust.

[12]	The proceedings were brought on scant factual material which can be demonstrated by referring to the affidavit of Gail Tilley dated 24 February 2020 at [11]:
Unfortunately, family relationships as such that I and my co-plaintiffs on whose behalf I make this affidavit simply do not trust my sister, Vicki Jane Tilley to carry out the terms of the trust deed and the wishes of my parents and not to prefer those who own interests against those of the plaintiffs (their siblings). We believe that it would be appropriate for our sister, Vicki June Tilley to be removed as trustee and an independent professional person to be appointed to carry out the terms of the trust deed.

[13]	The rationale for bringing this interlocutory application is set out at [3] of Gail Tilley’s second affidavit dated 23 March 2020:
I again confirm my belief that there is a risk of dissipation of the trust’s assets by the defendants for inter alia the following reasons:
i.	The defendants have without explanation made arrangements to set up the property physically for sale.
ii.	The defendants have a personal animosity against the plaintiffs and have failed to explain their intentions concerning the trust when asked by the plaintiffs.
iii.	The defendants have placed the property on the market for sale without informing the rest of the family as evidenced by the Harcourts’ listing annexed hereto and marked with the letter “B”.
iv.	The defendant Lorraine Bradshaw is a former bankrupt as evidence by the notification annexed hereto and marked with the letter “C”.
v.	The defendant Vicki Tilley was taking financial advantage of her position as attorney of my later mother, Lorna June Tilley forcing the family to apply to the Family Court to remove her as attorney which application was successful albeit that it was not in the end opposed.
vi.	The defendant Vicki Tilley has informed members of the family that she is determined that none of us will benefit from the family trust.

[14]	The effect of the freezing order made by Thomas J prohibits the sale of the property from proceeding.

[15]	The parties are agreed that the sale of the property should proceed and that the sale proceeds of $882,500.00 shall be paid into the trust account of Buchanan Gray, Lawyers Wellington who shall retain the net sale proceeds and not disburse those net proceeds except in accordance with either an agreement made between all of the parties to the proceeding (CIV-2020-485-100) or in accordance with further order of this Court.

Respective cases

[16]	The parties are however at odds about the extent of the sale proceeds that ought to be preserved by the freezing order. The plaintiffs are as the evidence demonstrates deeply suspicious of the defendants’ motives and any financial claims they make against the proceeds as trustees or in a personal capacity. The defendants reject outright that they have done anything they were not authorised to do as trustees.

[17]	Whilst the defendants wanted me to summarily dismiss the claims made by the plaintiffs based on the 24 June 2019 affidavit of Vicki Tilley, I cannot responsibly do so. I do not have the full matrix of countervailing evidence. The fact that Vicki Tilley did consent to her removal as property manager is not proof of her having conceded she should have been removed. However, it is demonstrative of serious concerns having been resolved to the satisfaction of the Family Court by the appointment of an independent party. The plaintiffs seek a similar resolution in the primary proceeding before this Court.

[18]	It may be that when the Court has had an opportunity to consider all of the evidence and determine the primary proceeding the plaintiffs cannot justify the removal of the trustees and that a substantial award of costs is made against them. But at this stage there remain substantial allegations of mismanagement of the trust and potential self-dealing.

[19]	The parties are agreed that from the $882,500.00 the following legitimate payments ought to be deducted: Buchanan Gray’s conveyancing costs, the real estate agents’ commissions and reasonable marketing expenses.

[20]	They do not however agree to the following deductions sought by the trustees:

i.	Mr Buchanan’s legal fees associated with the primary proceeding and this interlocutory application (quantification unknown at this time);

ii.	All reasonable expenses incurred by Vicki Tilley and/or her partner Murray Thessman relating to work undertaken on rendering the property ready for sale (a minimum of $30,000.00 odd); and

iii.	Outstanding rest home fees (approximately $60,000).

[21]	Having regard to the Trust Deed and such material as is before the Court in these difficult circumstances where all parties and the Court have been constrained by communication impediments, I consider that the payment of the rest home fees on the production of invoices from the rest home should be deduced from the sale proceeds and I so order.

[22]	The issue of whether the Trustees’ costs associated with these proceedings ought to be compensated from the sale proceeds will obviously be a matter determined by the Judge who deals with the primary proceedings. The costs associated with the interlocutory application likewise will be determined at that time having regard to the necessary credibility findings that will need to be made and the final outcome of the allegations of self-dealing.

[23]	Given that I am unable to determine on the face of the evidence before me where costs will lie, it is important that I do not unduly prejudice either party in the freezing order that I intend to make.

[24]	It is arguable on the material before me that the trustees’ actions have been legitimate and whilst keeping the beneficiaries formally notified of their recent actions would have been preferable – they have not and never have had an intention to

dissipate the trust’s assets in their favour. Thus, they may be entitled to trust assets to fund their defence. It would be unfair to them if they were precluded from access to funds to enable them to mount their defence in those circumstances.

[25]	The plaintiffs too will need funds to pursue their claims and if successful may be able to recover from the trustees and/or Vicki Tilley’s share of the distribution. If unsuccessful they can be recovered from their share of the distribution.

[26]	As far as the expenses incurred in relation to readying the property for sale is concerned, I refer to [33] of Vicki Tilley’s affidavit of 3 April 2020:

Annexed hereto marked “VJT11” is a spreadsheet which I have prepared which sets out the expenses which my partner Murray Thessman and I have incurred purchasing materials for the house in order to make it presentable to the market. The spread sheet was prepared at very short notice and may need to be added to or changed once I have collected all of the invoices and receipts from where they have been stored. Unfortunately, due to the lockdown, I have been unable to retrieve and I will produce them as soon as I can. The amount involved in $3,298.96 (including GST). In addition, the trustees agreed to employ Murray to undertake the labour based on a rate of $60.00 per hour plus GST. Murray is in the process of producing an invoice for the work he carried out. The details of his time and labour cost are set out on the last page of the spreadsheet. The trustees were expecting to reimburse us for the cost of materials and to pay Murray for his labour from out of the proceeds from the sale of the house.

[27]	A conservative estimate having regard to the difficulties Vicki Tilley has had in assembling the relevant documentation at such short notice is approximately
$30,000.00. That is not an inconsiderable sum having regard to the amount of proceeds that are likely to be available for distribution to the beneficiaries. It needs to be properly accounted for before it would be fair to sanction the payments in these circumstances, particularly where the payments will be paid not to a truly independent party at arm’s length to one of the trustee’s partners.

[28]	I have considered whether there is a serious issue to be tried and consider that there may very well be. I have also considered where the balance of convenience lies, and it is with both parties for different reasons and I have in the circumstances attempted to apply overall justice to the matter in the orders I am about to make.

[29]	I consider it is just for Mr Buchanan to be paid for his reasonable costs to defend the claims on behalf of the trustees now. Who is ultimately responsible for them, the Trust or the defendants, will be a matter for the trial Judge. In the event they are to be met by the defendants in their personal capacity they shall be deducted from Vicki Tilley’s share of the estate.

[30]	Likewise, should the plaintiffs ultimately be unsuccessful, any costs awarded against them can be met by deduction from their share of the distribution.

[31]	As to the alleged personal expenses of Vicki Tilley and work undertaken by Mr Murray Thessman – proper invoices and receipts can be produced for consideration by the plaintiffs. If there is agreement such costs are legitimate these can be paid. If there is no agreement, then application may be made to the Court to vary the freezing order to allow for payment on the production of relevant documentation that establishes their bona fides i.e. evidence of comparable costs by arm’s length contractors.

Result

[32]	The application for an order freezing the sale proceeds of 73 Walter Road, Lowry Bay, Wellington, in the sum of $882,500.00 is granted.

[33]	The order restrains the defendants from disposing or dealing with or diminishing the value of the proceeds.

[34]	The freezing order does not prohibit the defendants from:

i.	Paying the conveyancing costs (including the agents’ commission and reasonable marketing expenses) and legal fees and disbursements associated with the sale of 73 Walter Road; Lowry Bay, Wellington, and

ii.	Paying any outstanding rest home fees incurred for the care of June Tilley.

iii.	Meeting the legal fees and disbursements of Mr Buchanan in the costs of the proceedings brought against the defendants in their capacity as Trustees of the Trust.

[35]	In the event that the parties agree on reasonable costs expended by the trustees to ready the property for sale, they may also be deducted from the proceeds of sale.

[36]	Any party may apply to vary or discharge the order on five days’ notice.

Doogue J

Solicitors:
Ms Greally, Lower Hutt
Mr Mankeltow, Lower Hutt
Buchanan Gray, Wellington