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Savage v Paul [2020] NZHC 364 (4 March 2020)

Last Updated: 13 March 2020

JUDGMENT OF GWYN J

This judgment was delivered by me on 04 March 2020 at 3.00pm Pursuant to Rule 11.5 of the High Court Rules

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Registrar/Deputy Registrar

Solicitors:

D G Law, Auckland

SAVAGE v PAUL [2020] NZHC 364 [3 March 2020]

Procedural history

[1] The history of this matter is comprehensively set out in the Minute of Fitzgerald J dated 24 October 2019 and I do not repeat it here.

[2] When the matter came before her, Fitzgerald J was not prepared to determine the application for leave to commence the proceeding by way of an originating application under Part 19 of the High Court Rules 2016 on a without notice basis. Her Honour directed that it should proceed on notice and made directions for service.

[3] Subsequently Associate Judge Andrew was satisfied that appropriate service of the proceedings had been effected. He granted leave to apply for orders as sought in the substantive application by way of originating application under r 19.5 of the High Court Rules.¹ The Judge referred the question of the substantive relief sought to a Judge of the High Court for determination, expressing doubt as to whether, as an Associate Judge, he had jurisdiction to grant the substantive relief.

Orders sought

[4] I have considered the substantive application on the papers. The application seeks orders:

(a) for the removal of Beverley Marina Paul as a trustee of the Nerehana Whanau Trust (NWT);

(b) for the appointment of Gary Tuteiti Paul as a new trustee of the NWT under s 51 of the Trustee Act 1956;

(c) vesting the land described in Certificate of Title SA35A/506 (the property) in the applicants, namely Molly Te Aue Savage, Tracey Walters, Daniella Tereu and Gary Tuteiti Paul, as joint tenants;²

¹ Minute of Associate Judge PJ Andrew, 20 February 2020.

2. The original application sought that the land be vested in the applicants as tenants in common. After I had considered the application counsel for the applicants advised this was an error and that the application should have sought that the property be vested in the applicants as joint tenants and sought to amend the application accordingly. I allowed the amendment pursuant to r 1.9 of the High Court Rules.
   • (d) any ancillary orders necessary to vest the property in the current and newly appointed trustees of the NWT; and

(e) that the costs of and incidental to these proceedings be met by the trustees of the NWT.

[5] In addition to the Originating Application and the Memorandum of Counsel in Support, I have before me the following affidavits in support of the application:

(a) Affidavit of Tracey Walters. Ms Walters is one of the trustees of the NWT and the second named applicant. Her affidavit is given on behalf of all the trustee applicants.

(b) Affidavit of Gary Tuteiti Paul, one of the final beneficiaries under the NWT and the proposed new trustee.

(c) Affidavit of Peter Joffre Paul, one of the final beneficiaries under the NWT.

(d) Affidavit of Tewhata Nelson Paul, one of the final beneficiaries under the NWT.

(e) Affidavit of Andrew William Paul, one of the preferred beneficiaries under the NWT and the proposed purchaser of the property.

[6] Ms Walters’ affidavit sets out the history of the matter. All of the other deponents give their support for the orders sought.

[7] The applicants, together with the second respondent, Beverley, are the current trustees of the NWT. The second respondent, Leonard, is Beverley’s son.

Background

[8] Ms Tracey Walters’ affidavit contains a comprehensive background to the NWT and the acquisition and subsequent holding of the property. As the affidavit sets
out, it was originally intended that the trustees of the NWT would purchase the property. It was the place where they had all grown up and they wanted to own it, for sentimental reasons.

[9] At that stage (in 2011) none of the trustees was in a position to obtain a loan to purchase the property. Leonard was earning a high wage at the time and was in a position to qualify for a loan. Accordingly it was decided that Leonard would procced to obtain a bank loan and purchase the property.

[10] On 11 May 2011 a Deed of Trust (the Property Deed) was entered into between Leonard as the Trustee and the NWT trustees as beneficiaries. The key provisions of the Property Deed were:

(a) Leonard was to hold the property on trust for the preferred and final beneficiaries of the NWT;

(b) the property was to be registered in Leonard’s name;

(c) until the property was transferred to the NWT trustees, Leonard was to deal with the property as the trustees required;

(d) the NWT trustees were to provide the funds for the purchase of the property and for all outgoings on the property;

(e) nothing in the Property Deed entitled Leonard to beneficial ownership of the property; and

(f) Leonard was to transfer the property, at the cost of the trustees, as and when the trustees requested him to do so.

[11] The intention of the trustees was that after two years they would be in a position to transfer the registered ownership of the property back to the NWT and then sell it to either Andrew or Beverley Paul and continue to assist family members to own their own homes.
[12] On or about 20 May 2011 Kiwibank Limited granted mortgage finance to Leonard and the property was purchased and registered in his name.

[13] There was a tenancy agreement put in place for the property, between Andrew and Beverley on the one hand and the trustees on the other. Under the agreement Andrew and Beverley shared equally the rent and any expenses associated with the property, with the rent payable to the NWT. The NWT made the mortgage payments.

[14] In or about January 2012 Beverley stopped paying her share of the rent and other payments and left the property. Her whereabouts was not known. Andrew continued making all of the payments by himself.

[15] Attempts to contact Beverley to discuss the rent arrears led to a hui on 25 June 2012, with Beverley, Andrew, Tracey and three kaumātua. No resolution was reached at the meeting and Tracey has not seen Beverley since. She does not know where she lives.

[16] On 1 March 2017 the trustees placed a caveat on the title of the property to protect the NWT’s interests.

[17] On 26 August 2017 another hui was called by Beverley and Leonard, but neither attended. At the hui the trustees resolved to reduce the number of trustees of the NWT from seven to four. The other trustees wanted Beverley to resign, because she was not active as a trustee and they did not know her whereabouts. A letter of resignation was prepared for her, but because the trustees do not know how to contact her, she has not received or signed it. As a consequence Beverley remains a signatory on the NWT’s bank account with Kiwibank.

[18] Andrew and his wife are now living at the property and the trustees want to sell it to Andrew. Andrew confirms that he has lived at the property for the entire time the NWT has had the property in a trust.
[19] Leonard has never lived at the property and has never contributed to the mortgage or other payments associated with the property. He did take out a $5,000 loan, secured on the property, which he has not repaid.

[20] On 9 July 2019 Leonard wrote to the trustees, saying he wanted to negotiate an “exit plan” and agree a payment to him for establishing the loan to buy the property.

[21] On 1 August 2018 the NWT’s lawyers wrote to Leonard enclosing a Notice of Instructions (pursuant to cls 2.3 and 8 of the Property Deed) and an agreement for sale and purchase of the property between Leonard and Andrew, with the proceeds of the sale to be payable to the NWT.

[22] Subsequently Tracey personally delivered the Notice of Instructions and a Resolution of the Trustees, which recorded their intention to transfer the property to Andrew for $130,000, to Leonard’s last-known address.

[23] The NWT trustees have been unable to locate Beverley or Leonard. Tracey states that Leonard appears to be on the run from the Police. It seems that he has given the property as his bail address.³

[24] On 16 October 2019 Leonard and Beverley both turned up at the property and confronted Andrew and his wife. Beverley caused some damage to the property. The Police dealt with the matter.

[25] Other than her appearance at the property on 16 October 2019, the trustees have not seen Beverley and do not know her location. She has had no involvement with the NWT since 2012.

Outcome

[26] It is clear from the background set out above that at the time of purchase of the property it was intended by all parties, including Leonard and Beverley, that the property would be beneficially owned by the trustees of the NWT and that Leonard

³ Andrew confirms that is his understanding in his affidavit.

would have no beneficial interest in it. The subsequent conduct of the parties (other than Leonard unilaterally securing a $5,000 loan against the property and giving the property as his bail address) is entirely consistent with that intention.

[27] It is also clear that Beverley has not been available or willing to carry out her duties as trustee of the NWT since 2012.

[28] The factual basis on which the application has been made has not been disputed by Beverley, the trustee whose removal is sought, or by Leonard, despite (substituted) service having occurred.

Removal and appointment of trustee

[29] I have concluded that it is appropriate to exercise the Court’s power under s 51 of the Trustee Act 1956 (the Act). The circumstances of this case come within s 51(1) in that it is expedient to appoint a new trustee, and it is inexpedient, difficult or impracticable for the trustees to do so without the assistance of the Court, and to make an order appointing a new trustee in substitution.⁴ Although the situation in this case is not captured by any of s 51(2)(a)–(e), those specific grounds do not limit the generality of the Court’s discretion under s 51(1).⁵

Vesting order

[30] As to the order sought under s 52 vesting the property in the applicants, this is a case that comes within s 52(1)(h) of the Act, being a case “where land or any interest therein is vested in a trustee whether by way of mortgage or otherwise, and it appears to the Court to be expedient” to make an order vesting the land or interest in any such person in any such manner and for any such estate or interest as the Court may direct.⁶

Orders

[31] I grant the following orders:

4. “Expedient” sets a lower threshold than “necessary”: R v Leitch [1998] 1 NZLR 420 (CA), at 428– 429.
5. See Chris Kelly and Greg Kelly Garrow and Kelly Law of Trusts and Trustees (7th ed, LexisNexis, Wellington 2013) at [16.98].

⁶ See Hood v Burnes (HC Hamilton CP 53/00, 12 December 2000).

(a) Beverley Marina Paul is removed as a trustee of the Nerehana Whanau Trust;

(b) Gary Tuteiti Paul is appointed as a new trustee in substitution;

(c) the land described in Certificate of Title SA35A/506 is vested in the applicants, namely Molly Te Aue Savage, Tracey Walters, Daniella Tereu and Gary Tuteiti Paul as joint tenants;

(d) the costs of and incidental to these proceedings are to be met by the trustees of the Nerehana Whanau Trust.

[32] The trustees, being the current and newly appointed trustees of the Nerehana Whanau Trust, have leave to return to this Court to seek ancillary orders if any are necessary to vest the property in the Nerehana Whanau Trust.








Gwyn J