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Bentley [2017] NZHC 1937 (15 August 2017)

Last Updated: 19 September 2017

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2016-419-000214

CIV-2016-419-000327 [2017] NZHC 1937

_{JUDGMENT OF COURTNEY J}

This judgment was delivered by Justice Courtney on 15 August 2017 at 3.00 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

_{Date............................}

BENTLEY [2017] NZHC 1937 [15 August 2017]

[1] In CIV-2016-419-214 Ian David Bentley and Wayne Keith Startup have applied to be removed as executors of the estate of Roy Wilson (the removal application). The opposition to that application has recently been withdrawn.

[2] In CIV-2016-419-327 BBT Law Trustees Limited (BBT) and Wayne Keith Startup have applied to be discharged as trustees of the Roy Wilson Trust and the Roy Wilson No 2 Trust (the discharge application). That application is not opposed. Following a telephone conference with counsel on 7 June 2017 I issued a minute indicating that I would make the orders sought once counsel had confirmed the identity of the proposed new trustee(s), which counsel did by memorandum dated 4

August 2017.

Background

[3] Mr Bentley and Mr Startup, in their capacity as executors, obtained Probate and made distributions, including to the beneficiaries of RWT and RW2T in the form of forgiveness of debt. They are now facing proceedings, known as “the Goldman proceedings” in CIV-2014-419-231, in which the Goldman plaintiffs allege that the estate holds certain shares on trust for them.

[4] Mr Bentley and Mr Startup are concerned that the Goldman plaintiffs may apply to have the distributions made to RWT and RW2T repaid to meet any liability the estate may have. They perceive a consequent risk to themselves personally. Moreover, Mr Bentley has acted as solicitor to both the estate and to Mr Wilson before his death, which creates the potential for a separate conflict between him and Mr Startup. Mr Bentley and Mr Startup applied to be removed as executors on the basis of this perceived conflict. The Goldman plaintiffs have, until recently, opposed the application.

[5] This Court directed that the removal application be served on the beneficiaries of the estate, which include RWT and RW2T. Mr Startup and Mr Bentley (as the director of BBT) consider that accepting service of and dealing with the removal applications on behalf of the RWT and RW2T would represent a breach of their obligations as trustees. They accordingly applied to be discharged as trustees.

[6] The application by the executors to be removed is brought under s 21 of the

Administration Act 1969 which relevantly provides that:

... where it becomes expedient to discharge or remove an administrator, the Court may discharge or remove that administrator and may if it thinks fit appoint any person to be administrator in his or her place, on such terms and conditions in all respects as the Court thinks fit.

[7] The principles to be applied in dealing with an application under s 21 are well settled as being:¹

(a) The starting point is the Court’s duty to see estates properly

administered and trusts properly executed.

(b) This jurisdiction involves a large discretion which is heavily fact dependent.

(c) The wishes of the testator/settlor (evidenced by the appointment of a particular executor or trustee) are to be given consideration, but ultimately the question is as to what is expedient in the interests of the beneficiaries.

(d) Expedience is a lower threshold than necessity, and imports considerations of suitability, practicality and efficiency. Misconduct, breach of trust, dishonesty or unfitness need not be established.

(e) Hostility as between administrators/trustees and beneficiaries is not of itself a reason for removal, but hostility will assume relevance if and when it risks prejudicing the interests of beneficiaries.

[8] The basis for the plaintiffs’ opposition to Messrs Bentley and Startup being

removed as executors was set out in the memorandum of their counsel dated 25 July

2016. Their main concern was the risk that their claim against the estate would be prejudiced by Mr Bentley being removed because: (1) a new executor will not have control over the late Mr Wilson’s files and will not be party to the proceeding, thereby necessitating non-party discovery with its increased costs (2) since the executors had not obtained an order under s 66(3) of the Evidence Act 2006 the position regarding the late Mr Wilson’s privilege vis-à-vis the plaintiffs is not clear (3) if Mr Startup alone was removed there would be no conflict between executors

_{and Mr Bentley’s intimate knowledge of the estate would assist in the orderly}

¹ Tod v Tod [2015] NZCA 501 at [22] citing Farquhar v Numms [2013] NZHC 1670 at [13];

Frickleton v Frickleton [2016] NZCA 408 at [29]–[33].

disposition of the matters in the proceeding (4) removing Messrs Bentley and Startup as executors could affect their status in the proceeding.

[9] It is unnecessary to consider these grounds because, in a joint memorandum of counsel dated 4 August 2017 the plaintiffs indicated that, provided an appropriate replacement could be identified to administer the estate the plaintiffs would withdraw their opposition and that the Public Trust had confirmed that it would act upon a court order being made.

[10] Subject to the plaintiffs’ confirmation that they did not intend to pursue their opposition, Messrs Bentley and Startup sought to have the executor applications determined on the papers and the scheduled hearing on 17 August 2017 vacated. On

14 August 2017 counsel for the plaintiffs filed a memorandum confirming that the plaintiffs withdrew their opposition to the removal application subject to an order being made replacing the executors with the Public Trust.

[11] Counsel also advised that following such an order being made the plaintiffs intended to seek a new parties order to the effect that the applicants would continue as parties in their personal capacities as former executors and trustees. That indication does not affect the applications before me.

[12] I am satisfied that it is expedient to remove the current executors and to appoint the Public Trust in their place. I am satisfied that Mr Bentley and Mr Startup face a conflict of interest which will prevent the claim against the estate being properly managed. It is not practical or desirable to have executors of an estate placed in this position.

The application to discharge the trustees

[13] In the usual course a trustee may retire by giving notice to his or her co- trustees (if any) and to any person with the power to appoint new trustees.² In this case, however, the power of appointment under both RWT and RW2T is held by Mr Bentley and Mr Startup themselves, in their capacity as executors of Mr Wilson’s estate. Understandably, they do not consider it to be appropriate to exercise the

_{power of appointment.}

² Trustee Act 1956, s 46(1).

[14] The application to be discharged has been brought under ss 46 and 51 of the Trustee Act 1956. Section 46 appears not to have been applied often and counsel did not provide a memorandum addressing the issues that arise. Section 46 provides:

(1) Where any trustee is desirous of being discharged from his trust he shall be entitled to retire therefrom on passing his accounts before the Registrar, and giving notice of his retirement to his co-trustees (if any), and to such other person (if any) as is empowered to appoint new trustees.

(2) If such co-trustees, or such other person, as aforesaid empowered to appoint new trustees, or any of them, refuse or neglect to appoint a new trustee or to consent to such appointment in place of the trustee so retiring, or if the retiring trustee is the sole trustee having power to appoint a new trustee, but the exercise of that power is impracticable or difficult without the assistance of the Court, it shall be lawful for the retiring trustee to apply to the Court for the appointment of a new trustee in his place.

(3) The Court may, upon any such application, make an order appointing some proper person as trustee in place of the trustee so desirous of being discharged from his trust, and direct any accounts and inquiries to be made, and make an order discharging the trustee from the trust and from all liability in respect thereof, and may make such order as to costs or otherwise as it thinks fit, and may exercise any of the powers contained in Part 5 of this Act; and the person who upon the making of the order becomes trustee shall have the same rights and powers as he would have had if appointed by judgment in an action duly instituted.

[(4) If the court, on an application under subsection (2) by a trustee other than a supervisor, appoints Public Trust as the replacement trustee, Public Trust must accept the appointment.]

[(5) In subsection (4), supervisor means a person appointed as a supervisor within the meaning of section 6(1) of the Financial Markets Conduct Act 2013.]

[15] A trustee may only apply to the court for assistance in the circumstances set out at s 46(2) i.e. where either the co-trustees have refused or neglected to appoint a new trustee or to consent to such appointment or the remaining trustee is the sole trustee having power to appoint and the exercise of that power is impracticable or difficult without the assistance of the Court. Neither is the position here. In my view s 46 does not respond to the present case.

[16] The application is made, alternatively, under s 51 of the Trustee Act which allow the Court to appoint a new trustee:

whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court....

[17] The first pre-requisite, expediency, does not have a particularly high threshold; in R v Leitch Richardson P described it (in the criminal context) as setting a lower threshold than necessity³ and in the context of estate administration Associate Judge Osborne considered that “expedient” connoted “suitability, practicality and efficiency”.⁴

[18] As to the second pre-requisite, “that it is inexpedient, difficult or impracticable to do so without the assistance of the court” is, I see no need to find other words to express the meaning of the ones used. It is for the Judge to assess whether the circumstances fall within the ambit of the words. In Attorney-General v Ngati Karewa and Ngati Tahinga Trust Randerson J thought that, as an example, the requirement would be satisfied if the power to appoint new trustees was unlikely to be exercised fairly and objectively, having regard to the interests of all the

beneficiaries.⁵

[19] In exercising the power to remove trustees the over-arching consideration is the welfare of the beneficiaries. In Letterstedt v Broers the Privy Council identified the welfare of the beneficiaries as their “main guide” in exercising the “delicate” jurisdiction of removing trustees.⁶ I note, too, Winkelmann J’s comments in Green v Green that whether or not a position of conflict would justify removal depended on the nature of the conflict and the other circumstances of the case:⁷

What is apparent therefore, is that each or any of the existence of conflicts of interest, misconduct on the part of the trustee, incompatibility or hostility between trustees and beneficiaries can be reasons for removing a trustee but whether removal is appropriate in a particular case will depend on whether any of those factors are present to a sufficient extent to undermine the satisfactory execution of the trust for the welfare of the beneficiaries.

[20] In the Goldman proceedings it is alleged that Mr Bentley and Mr Startup were both put on notice of the Goldman claim and, as such, owed fiduciary duties to the Goldman plaintiffs. It is alleged that if the Wilson estate has been fully administered then Mr Bentley and Mr Startup will have acted in breach of those

_{fiduciary duties and, if the estate does not have sufficient assets to meet claims being}

³ _{R v Leitch (1997) 15 CRNZ 321 (CA) at 11.}

⁴ _{Crick v McIlraith [2012] 1290 at [18].}

⁵ _{Attorney-General v Ngati Karewa and Ngati Tahinga Trust (2001) 1 NZTR 11-012 (HC) at [68]}

⁶ _{Letterstedt v Broers (1884) 9 App CAS 371 (PC) at 387.}

⁷ Green v Green [2015] NZHC 1218 at [598]–[607], citing Wales v Wales [2013] VSC 569 at [43].

made by the Goldman plaintiffs they will be personally liable. There plainly exists a conflict between BBT and Mr Startup as trustees of RWT and RW2T and the obligations that Mr Bentley and Mr Startup have as executors of the estate. It is not feasible to suggest that they can discharge their obligations to both the estate and the beneficiaries of RWT and RW2T. This is all the more so because of the potential for their personal exposure.

[21] In addition to these problems, Mr Bentley and Mr Startup have been separately represented in their respective defence of the Goldman proceedings because of the risk of a conflict arising from the possibility of Mr Startup claiming against Mr Bentley or his firm in relation to advice given on the administration of the estate.

[22] In these circumstances the Court should assist. Recognising that the removal of trustees and appointment of new trustees is not a matter to be undertaken lightly, I am nevertheless satisfied that the difficulties facing the current trustees make it expedient to appoint new trustees in their place and that it is impracticable to do so without the assistance of the Court.

[23] Counsel have agreed that the Public Trust would be an appropriate appointment and that the Public Trust has confirmed that it will act upon an order being made. I therefore make an order that BBT and Mr Startup are discharged as trustees of the RWT and RW2T and the Public Trustee is substituted as the sole trustee.

Result

[24] The removal application is granted. I order that:

(a) Ian David Bentley and Wayne Keith Startup be removed as executors of the estate of Roy Wilson;

(b) The Public Trust is appointed as sole executor of the estate of Roy

Wilson.

[25] The discharge application is granted. I order that:

(a) BBT Law Trustees Ltd and Wayne Keith Startup are discharged as trustees of the Roy Wilson Trust and the Roy Wilson No 2 Trust;

(b) The Public Trust is appointed sole trustee of each trust.

_{[26] Costs are reserved.}

P Courtney J