IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE	
CIV-2018-463-91
[2018] NZHC 2720	

IN THE MATTER	of the G. R. Reid Family Trust	
UNDER	Part 19 of the High Court Rules, the Trustee Act 1956 and the inherent jurisdiction of the High Court	
BETWEEN	HAMERTONS TRUSTEE SERVICES LIMITED and FOCUS TRUSTEE
COMPANY LIMITED

Applicants	

Hearing:	On the papers	
Counsel:	A A M Kershaw for applicants	
Judgment:	19 October 2018	

JUDGMENT OF KATZ J

This judgment was delivered by me on 19 October 2018 at 3.00 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:	Hamertons Lawyers Limited, Whakatane

HAMERTONS TRUSTEE SERVICES LIMITED and FOCUS TRUSTEE COMPANY LIMITED [2018] NZHC
2720 [19 October 2018]

Introduction

[1]	The applicants, Hamertons Trustee Services Ltd and Focus Trustee Company Ltd, seek orders removing George Reid as trustee of the G R Reid Family Trust and vesting title in the property of the G R Reid Family Trust in the continuing trustees. In addition, the applicants seek associated orders that service of the proceedings on Mr Reid be dispensed with, and leave to commence the proceeding by way of an originating application.

Background

[2]	Mr Reid settled the G  R  Reid  Family Trust  (“the Trust”)  by  deed  dated 17 February 1977. The Trust owns an undivided one-half share in a property in Whakatane (being the land contained in Certificate of Title SA 26D/1174 and Certificate of Title SA 26D/1180) as well as other assets.

[3]	The discretionary beneficiary of the Trust during Mr Reid’s lifetime is his wife, Mrs Reid. After his death, the discretionary beneficiaries are Mrs Reid and Mr Reid’s children. The final beneficiaries are the children of Mr Reid, with a gift over to their children in the event a child has died prior to vesting day.

[4]	The current trustees of the Trust are Mr Reid, Hamertons Trustee Services Ltd and Focus Trustee Company Ltd. The power of appointment is vested in Mr Reid during his lifetime. Mr Reid is currently in poor health and suffers from dementia. On 6 October 2017, Dr McKevitt examined Mr Reid and found that he lacked the capacity to comprehend or make decisions about his own welfare. That incapacity was due to dementia. More recently, on 13 August 2018, Dr March wrote a report recording that Mr Reid suffers from dementia, Parkinson’s and fragility. He considered Mr Reid totally lacks competence to manage his own affairs. There is no power of removal of trustees in the Trust Deed.

[5]	Mrs Reid has confirmed in a memorandum of consent, dated 23 August 2018, that she consents to the orders sought in the application.

Should leave be granted to commence the proceedings by way of originating application?

[6]	The current proceeding is not of a kind that can be commenced by way of originating application as of right pursuant to rr 19.2 to 19.4 of the High Court Rules 2016. However, the Court may, in the interests of justice, permit any proceeding not mentioned in rules 19.2 to 19.4 to be commenced by originating application. Such permission may be sought without notice.1 I am satisfied that it is appropriate that this proceeding proceed by way of originating application.2

Should orders dispensing with service of the proceedings on Mr Reid and the beneficiaries of the Trust be made?

[7]	Having considered the medical evidence relating to Mr Reid’s capacity, I am satisfied that service on Mr Reid should be dispensed with. Mr Reid’s mental incapacity is such that he would not be able to rationally understand the nature or purpose of the proceedings, or to meaningfully participate in them.3 As has been found in a number of similar cases, service on Mr Reid would serve “no useful purpose”.4

[8]	I am also satisfied that there is no need for the application to be served on the beneficiaries of the Trust. The orders sought are purely administrative in nature. They do not involve the appointment of a new trustee. Rather, the existing trustees will simply continue to administer the Trust, save for Mr Reid, who is now incapacitated and unable to act. The rights of the beneficiaries under the Trust Deed will not be affected.

[9]	I further note that Mrs Reid, who is the sole discretionary beneficiary during Mr Reid’s lifetime, consents to the application.

1	High Court Rules 2016, r 19.5.
2	See McKean v McKean [2017] NZHC 2212, (2017) 4 NZTR 27-019 at [10]; Re Hetrick [2017]
NZHC 472, (2017) 4 NZTR 27-006 at [5].
3	See Re Hetrick, above n 2, at [6].
4	Docherty v Docherty [2013] NZHC 1885, cited with approval in Grazier v Grazier [2014] NZHC 3058 at [14]; McKean v McKean, above n 2, at [12].

Should Mr Reid be removed as a trustee and the Trust’s property be vested in the remaining Trustees?

[10]	The Court may make an order removing a trustee under its inherent jurisdiction. Section 51 of the Trustee Act 1956 is also potentially relevant, but it does not authorise the removal of a trustee without substitution.5 Substitution is not necessary in this case, however, as there are two continuing trustees. The Trust deed does not require three or more trustees and I note that there were only two trustees at the time of the Trust’s inception. I am accordingly satisfied that it is appropriate to rely on the Court’s inherent jurisdiction simply to remove Mr Reid as a trustee, rather than also order substitution of a new trustee.

[11]	Section 52(1) of the Trustee Act permits the vesting of land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct. Section 52(1)(b)(i) permits this where a trustee entitled to or possessed of land, either solely or jointly with another person, is under disability.6

[12]	It is clear that Mr Reid is unable to act as a trustee, given his mental condition. It is appropriate to recognise this by removing him as a trustee and vesting the relevant trust property in the remaining trustees. No beneficiaries’ rights will be affected by doing so. I accordingly make the removal and vesting orders sought by the applicants, as set out in their application of 23 August 2018.

Result

[13]	I order that:

(a)	Leave is granted to bring the proceedings by way of originating application.

(b)	Service of the proceedings on George Rennie Reid and the beneficiaries of the G R Reid Family Trust is not required.

5	See Anderson v Anderson [2013] NZHC 1767, (2013) 3 NZTR 23-008.
6	Trustee Act 1956, s 2(2) provides that “For the purposes of this Act a person shall be deemed to be under a disability while he is not of full age or full mental capacity.”

(c)	George Rennie Reid is removed as trustee of the G R Reid Family Trust (constituted by deed dated 17 February 1979).

(d)		The interest of the G R Reid Family Trust in the property at 30 McCoy Road, RD 2, Whakatane more particularly described as:

(i)	An estate in fee simple as to a one-half share in Allotment 696 Parish of Waimana being the land comprised in certificate of Title SA 26D/1174; and

(ii)	An estate in fee simple as to a one-half share in Allotment 694 Parish of Waimana being the land comprised in certificate of title SA 26D/1180

currently registered in the names of George Rennie Reid, Hammertons Trustee Services Limited and Focus Trustee Company Limited, now vests in Hammertons Trustee Services Limited and Focus Trustee Company Limited, as continuing trustees.

Katz J