Banicevich v Gunson Ca55/05

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Banicevich v Gunson

Court of Appeal Wellington CA 55/05
15 November; 13 December 2005
Chambers, Goddard and Rodney Hansen JJ

Supreme Court of New Zealand [2006] NZSC 24
4 April 2006
Elias CJ, Blanchard and Anderson JJ

Trusts and trustees – Application for directions – Extent of Court’s jurisdiction to authorise trustees to change terms of trust under will – Whether bach

properties could be subdivided from farm property – Whether trust as set up impractical to administer – Whether suggested changes consented to by all interested persons – Whether decision to subdivide properly to be made by board of farm-owning company or by trustees – Family Protection Act 1955 – Trustee Act 1956, ss 64, and 66.

The testator, Ivan Banicevich (Ivan), had four children: Lloyd, Jocelyn, Yvette, and Donna. Lloyd, who was killed in an accident in 1990, had two sons, Cameron and Dene, the appellants.
Ivan incorporated a company and transferred his farm property to the company. Cameron and Dene were in their twenties when Ivan made his will in
1998. Ivan died the following year. In his will, Ivan provided that his grandsons be given the opportunity to buy the farm as soon as the younger of them, Dene, turned 25. He also provided that his three daughters should be able to continue using two old baches situated on the farm next to the water’s edge. He had considered the possibility of subdividing the bach properties off from the farm,
but his lawyer thought there might be difficulty getting local authority approval.
He therefore gave each of his daughters the right to occupy the baches during
her lifetime, and the option granted to Cameron and Dene was made conditional upon their recognising their aunts’ rights.
A dispute arose between the daughters and the grandsons about the
exercise of those rights. Jocelyn, as one of the trustees of the estate, decided to bring a claim against the estate under the Family Protection Act 1955 so that she could acquire all the shares in the company and then give the two baches to her sisters. An application was also brought by the trustees for directions under s 64 of the Trustee Act 1956 “as to whether or not to subdivide the three
beach front sections from the farm property”.
The claim and application were heard together in the High Court. The family protection claim failed, but the High Court made an order authorising the trustees to seek the subdivision. Cameron and Dene appealed, arguing that the Court had no jurisdiction to make such an order.

Held: 1 Section 64 of the Trustee Act 1956 did not confer jurisdiction to authorise the trustees to seek the subdivision and thus make what would amount to a fundamental change to Ivan’s will. The will was workable as it stood. It had not been shown that the trust as set up was impractical or difficult

to administer. Rather, all that had been established was that the daughters would 5 have preferred that their father had given them a different property interest from

that which he did. Further, the suggested alteration had not been consented to by Cameron and Dene, who were beneficiaries and “persons . . . interested” for the purposes of s 64. Although the degree of enhancement of the daughters’

rights was lessened under the trustees’ fall-back application, there none the less 10 remained a significant enhancement. It too, therefore, amounted to a fundamental change to Ivan’s will and crossed the boundary into a rewriting of

the trust (see paras [53], [58], [62], [64]).

Re Smith (deceased) [1975] 1 NZLR 495 referred to.

2 The board of directors of the company was also constrained by the 15 provisions of Ivan’s will. The trustees were the holders of the A shares in the company, but held them under the trusts imposed by the will. They were accordingly bound to carry out Ivan’s wishes (see paras [69], [70]).

Result: Appeal allowed.

Other cases mentioned in judgment 20

Craven’s Estate, Re [1937] Ch 431; [1937] 3 All ER 33.

Greenwood, Re [1988] 1 NZLR 197. Neagle v Rimmington [2002] 3 NZLR 826. Philips New Zealand Ltd, Re [1997] 1 NZLR 93.

Appeal 25

This was an appeal by Cameron Banicevich and Dene Banicevich, from the

judgment of Simon France J, reported at [2005] NZFLR 596, ordering that Craig Wesley Gunson and Jocelyn Mary Imms, the first respondents, as trustees of the estate of Vjerkoslav Ivan Banicevich, subdivide a farm property for the

benefit of the second respondents, Jocelyn Mary Imms, Yvette Banicevich, and 30

Donna Doe.

M C Black for Cameron and Dene Banicevich.
S P Bryers for the trustees.
A G Stuart for Jocelyn Imms in her personal capacity.
P J Shamy for Yvette Banicevich and Donna Doe. 35

Cur adv vult

The judgment of the Court was delivered by
CHAMBERS J.

Table of contents

Para no 40

The problems family baches can cause [1] Issues on the appeal [14] The extent of jurisdiction under s 64 of the Trustee Act 1956 [20] What the will provides [23]

Table of contents

Para no

The problem with the will, from the daughters’ perspective [29] Simon France J’s reasons [33]

The law as to s 64 and its application in this case [37] The trustees’ fall-back argument [59] Is the trustees’ application misconceived? [67] Result [72]

The problems family baches can cause

[1] Ivan Banicevich’s father bought a farm at Clarks Bay, Te Kopuru, in Northland in about 1941. He farmed the land and, in due course, handed the farm on to Ivan.
[2] Ivan married Mary Tier in 1949. They had four children, Lloyd, Jocelyn (now Jocelyn Imms, the first-named second respondent), Yvette
(the second-named second respondent) and Donna (now Donna Doe, the third-named second respondent). All the children were born and brought up on the family farm. In these reasons, we shall refer to members of the family by their first names for ease of understanding. We mean, of course, no disrespect to the family by adopting this method of reference.
[3] In 1971, Ivan incorporated a company, Sail Point Farms Ltd. Ivan transferred the farm to Sail Point. At some point Sail Point acquired another farm nearby as a run-off property. The family call that “the beef block”. We shall refer to the two properties as “the farm”. Ivan controlled the company and continued to run the farm. By this stage, his son Lloyd was helping him.
[4] Over the 1970s and 1980s, Lloyd took over more and more work on the farm, while Ivan eased off. But then in August 1990 Lloyd was tragically killed in an accident on the farm.
[5] In 1996 Mary died. Ivan died just over two years later, in January 1999. The previous October he had made a new will. The executors of that will were
his daughter Jocelyn, Shirley McFarlane and Basil Finlayson. Subsequently Ms McFarlane and Mr Finlayson resigned as executors and trustees and were replaced by Craig Gunson. Jocelyn Imms and Mr Gunson are the current trustees of Ivan’s estate and are the first respondents in this appeal.
[6] We pass over the details of Ivan’s will at this stage. For the purposes of
this overview, what matters is what Ivan was trying to achieve by his will. His primary aim was to keep the farm in the family. Lloyd left two sons, Cameron and Dene. They were both in their twenties when Ivan made his 1998 will. Ivan wanted to give those grandsons the opportunity to buy the farm as soon as the younger of them, Dene, turned 25. That was due to occur on 20 July 2003.
Because the farm was owned by Sail Point, the opportunity to acquire the farm had to be achieved by providing in the will for the trustees to offer Cameron and Dene an option to purchase Ivan’s shares. The company was so structured that the holder of Ivan’s shares controls the company and thereby controls the farm, its principal asset.
[7] A second wish that Ivan had was that his three daughters should be able to continue using two old baches situated on the farm next to the water’s edge. Since they left home they have returned for holidays and made use of the baches. Ivan, in the course of giving will instructions to his lawyer, considered the possibility of subdividing them off from the farm, but his lawyer thought

there might be difficulties in getting local authority approval. So in the end what was done was to give each of them the right to occupy the baches during her lifetime and the option granted to Cameron and Dene was made conditional upon their recognising their aunts’ right to occupy the baches during their lifetimes. 5 [8] It is these two baches which have caused such a problem within the Banicevich family. A massive family dispute has arisen between Cameron and Dene and their mother, Lloyd’s widow, on the one hand, and Ivan’s three daughters on the other. Cameron and Dene have been reluctant to acknowledge

the provision in the will purporting to confer on the daughters their life interests 10 in the baches. The daughters on the other hand have not been at all keen on the prospect of effectively having Cameron and Dene as their “landlords” when

they use the baches. There have been a number of other disputes as well, but they are not material to what we have to decide.

Jocelyn decided to bring a claim against the estate under the Family 15

Protection Act 1955. She wanted to acquire all the shares in Sail Point. She

intended, if successful, to give the two baches to her sisters. This family protection claim was strongly opposed by Cameron and Dene and their mother. [10] Jocelyn was keen to have the farm subdivided so that the baches and

some of the land around them could have their own titles, separate from the 20 farm title. She promoted this idea in her capacity as a trustee of Ivan’s estate. Cameron and Dene strongly opposed the idea of a subdivision. In the end, the trustees decided they needed to apply to the High Court for directions. The application originally covered a number of matters, particularly as to the validity of certain provisions in the will. The trustees also sought a direction 25 under s 64 of the Trustee Act 1956 “as to whether or not to subdivide the three beach front sections from the farm property situated at Clarks Bay, Te Kopuru”.

[11] Jocelyn’s family protection claim and the trustees’ application for directions were heard together in February this year. Simon France J delivered

his judgment on 11 March ([2005] NZFLR 596). Jocelyn’s claim under the 30

Family Protection Act failed. With the consent of all the parties, all the disputed

provisions of the will were declared to be valid. There is no appeal against either of those findings, which accordingly have not been in issue before us. [12] On the trustees’ application for directions “as to whether or

not to subdivide the three beach front sections from the farm property”, 35

Simon France J found at para [87] as follows:

“(b)The trustees are authorised to exercise their powers under the ‘A’ shares to seek a subdivision of three sections for the benefit of the three beneficiaries. The beneficiaries consent to this happening.
I direct that the trustees should ensure that any further sale of the 40 subdivided lots should be subject to a right of pre-emption allowing the farm owner an opportunity to buy back the section in the general terms as recorded in paragraph 76 of the judgment. However, the trustees are free to vary the wording of
that condition as they think appropriate. I also direct that the 45 trustees should have regard to the imposition of covenants on the
titles to the subdivided lots to ensure reasonable protection of the farming activities.”

[13] It is against that order that Cameron and Dene have appealed.

Issues on the appeal
[14] There are four issues on this appeal.
[15] The first issue is whether Cameron and Dene are right when they argue

that the High Court had no jurisdiction to make the subdivision order, as we shall term the order made at para [87](b) of the High Court judgment.
[16] Secondly, if there is jurisdiction, was it an appropriate order?
[17] During the hearing a third issue emerged. The trustees, as a fall-back argument, suggested alternative directions, which they submitted overcame
both the jurisdictional arguments Mr Black had raised on behalf of Cameron and Dene and also a number of practical difficulties which had been demonstrated to arise from the subdivision order.
[18] The fourth issue is one raised by Mr Stuart, for Jocelyn in her personal capacity. Mr Stuart submitted that the trustees’ application was misconceived
as the decision whether or not to apply for subdivisional approval was not a matter for the trustees, but rather was a matter for Sail Point’s board, Sail Point being the owner of the land. This argument is not intended to help Cameron and Dene’s interests. Rather, the point of the argument is that Sail Point’s board should be completely unconstrained in what it does with its land.
[19] We shall deal with these issues in turn.

The extent of jurisdiction under s 64 of the Trustee Act 1956
[20] The trustees’ application was brought under ss 64 and 66 of the
Trustee Act:
64. Power of Court to authorise dealings with trust property and

variations of trust – (1) Subject to any contrary intention expressed in the instrument (if any) creating the trust, where in the opinion of the Court any sale, lease, mortgage, surrender, release, or other disposition, or any purchase, investment, acquisition, retention, expenditure, or other transaction is expedient in the management or administration of any
property vested in a trustee, or would be in the best interests of the persons beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the same without the assistance of the Court, or the same cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the
Court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the Court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as
to the incidence thereof between capital and income:
Provided that, notwithstanding anything to the contrary in the
instrument (if any) creating the trust, the Court, in proceedings in which all trustees and persons who are or may be interested are parties or are represented or consent to the order, may make such an order and may give
such directions as it thinks fit to the trustee in respect of the exercise of any power conferred by the order.

66. Right of trustee to apply to Court for directions – (1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power of discretion vested
in the trustee. 5

Section 66 needs no further consideration, as it was accepted by all parties that what the trustees wanted to do can be justified, if at all, only under s 64. The powers of the High Court under s 66 are circumscribed: Butler (ed), Equity and Trusts in New Zealand (2003), para 5.2.3(8) and Neagle v Rimmington [2002] 3 NZLR 826 at paras [22] – [34]. 10 [22] Mr Black submitted that s 64 did not confer jurisdiction for a fundamental rewriting of Ivan’s will. We shall evaluate Mr Black’s argument

in four steps. First, we shall set out what the will provided and place that in its appropriate factual context. Secondly, we shall state what are said to be the difficulties produced by the will. Thirdly, we shall set out Simon France J’s 15 reasons for making the subdivision order. Fourthly, we shall set out what we consider the applicable law to be and assess the High Court judgment in light

of the legal position.

What the will provides

Essentially Ivan left his entire estate to his three daughters equally. 20
The principal asset of the estate was Ivan’s shares in Sail Point. There

were at the date of Ivan’s death and are now 100 “A” shares and 211,900 “B” shares in Sail Point. At the time of his death, Ivan owned all the A shares and one-third of the B shares. Lloyd’s widow, Susan, owned one-third of the

B shares, and Lloyd’s estate owned the other third. The fact that two-thirds of 25 the B shares were owned by Lloyd’s family reflected Ivan’s wish to pass the

farm down his male line. It was and is the A shares which confer right of control over the company. That arises from the fact that B shareholders have no right to receive notice of or to be present at or to vote at any general meeting

of the company. B shareholders have no right to appoint a director. The 30

A shareholders control the company as they have the right to appoint and

remove directors. The sole benefit attaching to the B shares is the right to rank equally with the A shares on any distribution of capital or on a winding up. [25] Under his will, Ivan gave Cameron and Dene the first option of

purchasing his shares at fair market value. If they exercised the option, they 35 would acquire control of the company (through the A shares). On any winding

up, however, they would receive barely more than a third of the capital of the company, as the B shares would in that event swamp the A.

The clause which granted the option reads as follows:
“5.1 I     direct     my     trustees     to     give      my     grandsons     CAMERON   40
BANICEVICH and DENE BANICEVICH or either of them the
option to purchase all shares held by me in the company SAIL POINT FARMS LIMITED (‘my shares’) forming part of my estate at the first point of time (‘the option date’) when
(1) I have died and   45 (2) My grandsons the said CAMERON BANICEVICH and DENE
BANICEVICH have both reached the age of 25 or either of them has died under that age and the survivor has reached the age of
25 years.
The option will be given as soon as practicable after the option date,   50 on these terms and conditions:

(1) The option is personal to my said grandsons CAMERON BANICEVICH and DENE BANICEVICH or either of them and cannot be exercised by anyone else.
(2) The purchase price for my said shares will be their fair market

value at the option date. The fair market value will be assessed by a Chartered Accountant appointed by my trustees and the assessment will be binding on my beneficiaries.
(3) The option is subject to my daughters any or nay of them [sic]
having the exclusive licence or right at any time to occupy the
baches formerly owned by Matich and Silich and situated on the beach front of the farm property for their lifetimes together with road access to the said baches. Should the purchaser or purchasers of my shares sell the said farm property at any time then they shall obtain from any purchaser a licence on the same terms.
(4) Once the fair market value of my shares has been assessed my trustees will notify my grandsons in writing of the purchase price. My grandsons must then notify my trustees in writing whether they or either of them exercises or rejects the option to purchase my farm land. They must do this within three (3) months from

the date of my trustees’ written notice of the purchase price for my shares.
(5) If my grandsons do not notify my trustee in writing of their exercise or rejection of the option to purchase my shares within the set times, they will be taken to have rejected the option.
(6) My trustees may give the option on such terms and conditions which my trustees think reasonable.”

[27] The will then went on to provide what would happen if both Cameron and Dene died before the option date or rejected the option. As a matter of fact, both Cameron and Dene were still alive at the option date. Although, for

reasons we shall shortly explain, the option has not yet been offered to them, both have indicated that, when it is offered, they intend to accept it. Both are keen to acquire the estate’s shares in Sail Point and intend to use that corporate vehicle for the purpose of carrying on business as farmers on the family land. [28] The scheme of the will is that, if Cameron and Dene exercise the option
to buy the shares, the proceeds of sale will then track to Ivan’s daughters, as the residuary beneficiaries of his estate.

The problem with the will, from the daughters’ perspective
[29] In the event that Cameron and Dene exercise the option, Ivan’s daughters end up with mere rights to occupy the two baches. They do not much

like that prospect, especially given that the land (including the baches) would be owned by a company under Cameron and Dene’s control.
[30] It was the distrust of Cameron and Dene which led the daughters and the trustees of the estate to look for a solution which would better protect the daughters’ rights to the baches. The trustees hatched a plan to subdivide four
sections on the beach front. Each daughter would get one of them. One of them would get a bare section, as there were only two baches. The fourth section was to go to Lloyd’s widow. This scheme was strongly opposed not only by Cameron and Dene but also by their mother and their father’s estate.

Subsequently, a revised subdivisional plan was prepared. This provided for only three sections, which were all much smaller than in the original plan. There was no proposal now to provide one for Lloyd’s widow. This plan too was opposed. It was that opposition which led to the trustees’ application

for directions. 5 [32] At the time of the hearing before Simon France J, it is clear that it was envisaged that the girls would be given a section each if the proposed subdivision order were made.

Simon France J’s reasons

Simon France J considered that family relations were now such that it 10 would be undesirable for the daughters’ interests to be mere life interests.

He also did not consider that the proposed subdivision would pose “any real threat” to the working of the farm (para [76]).

Mr Black had raised a number of points of concern about the

subdivision, to all of which His Honour found an answer. Mr Black pointed to 15 the uncertainties concerning any requirements the council might impose. But Simon France J thought that the only likely requirements were “an esplanade reserve and a sealed roadway”, and these, he thought, would not have any significant impact for the farm (para [77](c)). He accepted that there was “the possibility of future disputes between the farm owners and the subdivision 20 owners stemming from adjacent incompatible uses”, but he did not think that

that possibility was “of sufficient likelihood or immediacy to particularly tell against the proposal” (para [77](d)).

Mr Black submitted in the High Court at para [78] that “there was a

significant difference in a life interest, on the one hand, and a freehold title, on 25 the other”. Simon France J did consider that “a legitimate concern”, but he thought the answer to that was a condition that the farm owner should have

a right of preemption should any of the daughters seek to sell their section

(para [79]).

Overall, His Honour seems to have accepted the trustees’ argument that 30 the proposed subdivision was in accordance with Ivan’s true wishes (paras [71]

and [83]). That view (as to Ivan’s true wishes) came from an affidavit sworn by Peter Pegg, Ivan’s solicitor and the person responsible for drafting the will. Mr Pegg said that he saw Ivan on 23 October 1998, a week before he executed

his will. Mr Pegg remembered that Ivan’s concern at the time was that “there 35 should be provision in the will for his daughters to have a beach section each”.

Mr Pegg said that he explained to Ivan that that would have involved a subdivision and that the council might not approve a subdivision or it might be impractical. It was Mr Pegg who apparently suggested a licence to occupy instead, advice which Ivan accepted. 40

The law as to s 64 and its application in this case

Notwithstanding His Honour’s acceptance of Mr Pegg’s evidence to the effect that Ivan had originally wanted a subdivision, the Judge none the less found at para [63], correctly, that “subdivision of three sections of land to

create freehold titles is inconsistent with the intent of the will” as it was in the 45 end expressed. Accordingly, it was the Judge’s view that what the trustees wanted to do was possible, if at all, only under the proviso to s 64(1). No one disputed that position before us.

[38] Before Simon France J, there was much discussion as to whether “all trustees and persons who are or may be interested are parties or are represented or consent to the order”, as required by the proviso to s 64(1). In particular, there was concern that Sail Point was not a party. Simon France J

did not consider that was a problem for the reasons he gave at paras [64] – [66].
We agree with him that Sail Point did not need to be a party, particularly in
circumstances where the A shareholders were represented and where they had effective control of the company.
[39] The essence of this appeal is whether the High Court has jurisdiction,
either under s 64(1) itself or under that subsection’s proviso, to make an order of the kind made here, so fundamentally altering the provisions of the will and the entitlements of beneficiaries under it. The question of jurisdiction was a point touched on only lightly in the High Court judgment. Having determined that the subdivision proposal had merit, particularly if accompanied by what
His Honour described as “the option back”, His Honour turned to consider jurisdiction. On this topic, His Honour said at para [84]:

“The authorities emphasise that s 64 is designed to allow the Court to authorise trustees to act so as to better manage or administer the estate; the danger is that this may shade into ‘rewriting of the substantive trusts

more than of a step in the management or administration of the estate’ – Re Smith [1975] 1 NZLR 495, 497. In that particular case, unlike here, all the beneficiaries under the trust were not consenting to the variation and this was a factor which influenced Cooke J.”
[40] That was all the Judge said on this topic, other than a brief reference to
Baragwanath J’s decision in Re Philips New Zealand Ltd [1997] 1 NZLR 93, a decision to which we shall return. Although Simon France J did not expressly so state, it is presumably to be inferred from what he said at para [84] that he did consider the subdivision proposal to be for the better management or administration of Ivan’s estate.
[41] In fact, the power under s 64 is not limited to cases where a “transaction” (which may include a variation of trust) is “expedient in the management or administration of any property vested in a trustee”. As the section itself shows, and as was emphasised in Re Greenwood [1988]
1 NZLR 197 at p 207, the s 64 power is also available if the transaction
“would be in the best interests of the persons beneficially interested under the trust”.
[42] It is fundamental, however, that the power can be exercised only if the proposed transaction for which Court sanction is sought is expedient for the trust as a whole. As Farwell J said in Re Craven’s Estate [1937] Ch 431
at p 436, the Court should not sanction the transaction, however expedient it may be for one beneficiary, if it is inexpedient from the point of view of the others.
[43] It is also clear that the proviso to s 64(1), while it permits in certain circumstances an order overriding a contrary intention expressed “in the
instrument (if any) creating the trust”, is still constrained by the other requirements of the main part of subs (1). That is to say, an order can be made under the proviso only if it is shown to be expedient in the management or administration of trust property or if it is shown that it would be in the best interests of everyone beneficially interested under the trust.

Mr Black submitted that what the trustees proposed here was much more than mere “management or administration” of property vested in the trustees. What the trustees wanted to do was postpone when the option had to be offered to Cameron and Dene. Further, the assets underlying the shares

which Cameron and Dene would be offered were to be altered, with part of the 5 beach front being removed from the parcel of land. The daughters were to receive at no cost freehold titles to beachfront sections instead of a mere right

to occupy the two old baches during their lifetimes. As Mr Black submitted, under the will the daughters did not even obtain exclusive occupation rights,

as, there being three daughters but only two baches, they would obviously 10 have to work out among themselves when each was to exercise their rights

of occupation.

Mr Black submitted that, under the will, once the girls all died or indicated that they no longer wished to occupy a bach, the baches would simply

revert for company use. Under Simon France J’s order, however, the daughters 15 get something substantially different, and indeed much better. They would get

a fee simple title – and without having to pay for it. They would be able to develop the baches as they saw fit. The option back was no real answer, as the company would in due course have to buy the properties back (instead of the baches reverting for company use at no cost). And, of course, there might be a 20 third home on the third section in due course.

We consider that Mr Black’s submissions on this topic are correct. What the trustees proposed and what Simon France J approved goes beyond what is permissible under s 64(1). This significant change to the will is more than mere management or administration. And while it may well be in the best interests of 25 the daughters, it is arguably not in the best interests of Cameron and Dene, who

are “persons . . . interested” in terms of the proviso to s 64(1). (Simon France J correctly acknowledged that at para [64] of his judgment.) We have no doubt that the trustees’ proposal here crosses the boundary to which Cooke J referred

in Re Smith (deceased) [1975] 1 NZLR 495. What the trustees have proposed 30 definitely “[savours] of a rewriting of the substantive trusts more than of a step

in the management or administration of the estate” (Re Smith at pp 497 – 498). [47] The inevitable result of pursuing the possibility of subdivision is further interference with Cameron and Dene’s option to buy the shares. The option should have been offered to them back in 2003. It was not, and we can 35 understand why not: Jocelyn at that time was pursuing a Family Protection Act claim, and as well there were disputes as to the validity of parts of the will. But

those matters are now resolved: prima facie, the trustees should be promptly offering the option to Cameron and Dene. It may be many months, or even years, before we know whether subdivisional approval will be given. Is the 40 putting of the option to be further delayed until the outcome of the subdivisional application is known? We asked the respondents’ counsel what
was to happen if the Kaipara District Council declined the subdivision application: were the trustees (or Sail Point) to be given time to pursue an appeal to the Environment Court? What if approval were granted but on 45 conditions which the trustees (or Sail Point) considered unduly onerous? Should they be given time to appeal those conditions?

[48] Respondents’ counsel suggested that the option could perhaps be put now on an assumption that the subdivision would be approved, with appropriate adjustments later to the value of the shares (and the purchase price of the option) if the subdivision was not ultimately approved or proceeded with.

But that carries its own difficulties.
[49] Indeed, as an exercise we tried to draft what orders and directions would be required if we concluded that there was jurisdiction to approve the trustees proceeding with a subdivision. (It was accepted by all counsel that, even if Simon France J’s judgment were to be upheld, many more orders and
directions were required by way of rewriting the will and working out how the trustees were to proceed.) The details do not matter, but what we can say is that the directions required took more than two A4 pages, and were even then far from complete. At several points in those draft orders and directions we had to provide in our draft that, if certain events were to come to pass, “then, in the
absence of agreement of all the parties, the first respondents must apply to the High Court, in the context of the present High Court proceeding, for further orders or directions”. In short, the seeming simplicity of Simon France J’s subdivision order understates the further orders and directions which would be required if the trustees were to be permitted to pursue the subdivision option.
[50] We also raised with the respondents’ counsel why the daughters were being given the sections at no cost. How could Sail Point’s director justify giving away company assets to people who are not even shareholders of the company?
[51] The respondents’ counsel considered this and in the end advised that
they accepted that the daughters could not simply be given the sections but instead would have to pay for them, the price being “fair market value as at
23 July 2003”. We shall discuss this further in the next section of the judgment where we deal with the trustees’ fall-back argument as developed in the course of the oral hearing.
[52] In summary, therefore, we consider that the proposed subdivision meets neither criterion of s 64(1).
[53] We believe that our view is consistent with the two cases to which Simon France J referred and with the principal case relied upon by the respondents. First, Re Smith. In our view, Cooke J’s approach in that case
strongly supports Mr Black’s submissions here. In that case, Cooke J refused to make an order under s 64, not primarily because counsel for infant and unborn beneficiaries opposed it, but, rather, because what was proposed was contrary to the testator’s intention that the farms be settled. Cooke J considered that to permit the trustees to sell one of them, even subject to covenants
discussed in the judgment, savoured of a rewriting of the substantive trusts which His Honour considered impermissible under s 64. In any event, Re Smith cannot be distinguished on the ground referred to by Simon France J at para [84] (quoted above at para [39]), as it cannot be said here that all the beneficiaries under the trust consented to the variation. Cameron and Dene are
clearly “persons . . . interested” for the purposes of s 64, and they certainly do not consent to the proposed variation of trust.
[54] Re Philips New Zealand Ltd is an interesting case, though far removed on the facts from the present. In that case, Baragwanath J was prepared, pursuant to s 64(1), to amend a superannuation trust deed. It required
amendment in light of changes to “government fiscal policy”, which made it desirable that the scheme be converted from a defined benefits scheme to a

defined contribution scheme (see p 95). Baragwanath J made it quite clear at p 95 that he considered it appropriate to make use of s 64(1) only because of “the fact of informed unanimous consent” from the relevant members of the scheme.

Finally, we refer again to Re Greenwood. This was not in fact a case 5 under s 64, although Tipping J did make reference to s 64 at p 208:

“The power to approve a sale granted by s 64 is not however limited only to a case of expediency in the management or administration of any property vested in a trustee. The power arises additionally where, in the opinion of the Court, such a sale would be in the best interests of the 10 persons beneficially interested under the trust. In such a case, power of sale being absent, the Court may by order confer such a power upon the trustees. As I have said that power may be exercised notwithstanding anything to the contrary in the instrument creating the trust. That can only
be done in proceedings in which all trustees and persons who are or may 15 be interested are parties or are represented or consent.”

We agree with that paragraph, but consider that the case differs significantly from the present. What was proposed in that case did not involve an alteration of any beneficiaries’ interests. The trustees had applied under

s 64A for approval to sell a property in which the testator’s widow had a life 20 interest, so that they could buy an alternative, more suitable property for her. If

an alternative property were purchased, it was envisaged that the widow would have the same life interest in that alternative property, with that property passing on her death to those ultimately entitled to the property under the testator’s will. All living persons with an interest under the will consented to the 25 proposed variation of trust. But there were unborn beneficiaries, which is why Court approval under s 64A was required. As it turned out, counsel appointed to represent the unborn beneficiaries also considered the trustees’ proposal to be beneficial to the interests they represented. Tipping J observed at pp 204 – 205:

“This then is a case where there is either consent or no opposition, on 30 behalf of the relevant interests, to the proposal that Teviotdale be sold and
the proceeds of sale held beneficially upon the same trusts as those which pertained to the Teviotdale estate itself. I must nevertheless satisfy myself that the proposal is a proper one and that jurisdiction exists to give my
approval in terms of s 64A.” 35

Tipping J decided that he did have jurisdiction to make an order under s 64A and that authorising the trustees to sell the property was appropriate. The case does not assist the respondents here as there was not in that case any change to the interests that any beneficiary was to take; all that was happening

was one property was being substituted for another. Further, everyone with an 40 interest in the matter thought that the Court sanction of the sale was in their

own and the trust’s best interests.

For these reasons, we consider that s 64 does not confer jurisdiction to make such a fundamental change to Ivan’s will. The will is workable as it stands. It has not been shown that the trust as currently set up is inexpedient or 45 difficult or impracticable to manage or administer: rather, all that has happened

is that the daughters would prefer that their father had given them a different property interest from that which he did give. Further, while the suggested alteration to the trust may be very beneficial to Ivan’s daughters, Cameron and

Dene may legitimately consider that it is not in their interests. 50

The trustees’ fall-back argument
[59] During the course of discussion between Bench and Bar, the respondents’ counsel recognised that there were some major difficulties with what they had asked Simon France J to order. The trustees, without abandoning

their original application for directions or Simon France J’s decision, put forward, as a fall-back argument, alternative directions with which they said they would be content. Mr Bryers, for the trustees, suggested an order along the following lines:

“ORDER authorising the trustees to vary the condition of the option in

para 5.1 of the will by:
(a) Deleting the condition set out in para 5.1(3). (b) Substituting a condition that
(i)The option is subject to the grantees of the option exercising their powers as holders of the A shares in the company to
procure the company to obtain approval to subdivide the farm property in accordance with plan and to offer for sale the subdivided sections to the deceased’s daughters at fair market value as at 23 July 2003.
(ii) In the event that the company is unable to obtain such
subdivision approval the grantees of the option will grant the deceased’s daughters the exclusive licence or right at any time to occupy the baches formerly owned by Matich and Silich and situated on the beach front of the farm property for their lifetimes together with road access to the said baches.
Should the purchaser or purchasers of my shares sell the said farm property at any time then they shall obtain from any purchaser a licence on the same terms.”

[60] Mr Shamy, for Yvette and Donna, indicated that his clients would be content with Mr Bryers’ alternative formulation. Mr Stuart also indicated that,

if his principal argument failed, then his client, Jocelyn, would also accept
Mr Bryers’ alternative formulation.
[61] The alternative order does overcome some of the problems which arise under the subdivision order. For a start, the option could be offered immediately, as the obligation to promote the subdivision would fall on
Cameron and Dene rather than the trustees. Further, Ivan’s daughters would have to pay for the freehold sections.
[62] But, in the end, we consider that the fall-back application, like the subdivision order itself, crosses the boundary to which Cooke J referred.
[63] Cameron and Dene are still being offered something quite different from
that which Ivan left them. Ivan required them to give their aunts the right to occupy the two baches during their lifetimes. The fall-back application requires them to do something quite different, namely, pursue an application for subdivision which they do not wish to pursue.
[64] The alternative application still does not get over the fundamental
problems dogging the original application. First, it still has not been shown what is unworkable about cl 5.1 of the will as drafted. It is quite possible to draft an option in terms of cl 5.1, particularly given the additional powers to flesh out details conferred by cl 5.1(6). The only reason that is not being pursued is that the daughters prefer to be given something different from what
Ivan did give them. But that is not sufficient to confer jurisdiction under

s 64(1). The fall-back application, like the subdivision order, still confers enhanced beneficial rights on the daughters at the expense of Cameron and Dene. We accept that the degree of enhancement of the daughters’ rights is lessened under the fall-back application compared with the subdivision order,

but there none the less remains a significant enhancement. 5

For these reasons, we decline to make the proposed order on the fall-back application.
We also observe that, had we considered the fall-back option available, many more directions would have been required from the Court. We have already observed that the seeming simplicity of Simon France J’s subdivision 10 order understates the further orders and directions which would be required if

the trustees were to be permitted to pursue that order (see para [49] above). The same comment holds true with respect to the proposed order under the fall-back application. We do not need to specify the further matters that we would have needed to direct upon, as we are satisfied that there are fundamental objections 15 to the fall-back application, just as there are for the subdivision order which has

been made.

Is the trustees’ application misconceived?

We now turn to consider briefly Mr Stuart’s argument. This was that the trustees’ application for directions was misconceived as the decision whether or 20 not to subdivide the farm was a matter for Sail Point, not them. Sail Point’s board was not constrained by the will in the decisions it made.
We have found that the trustees’ application was misconceived, but our reasons for so holding are not those advanced by Mr Stuart. We think it is important that we explain why Mr Stuart’s submission was wrong. We would 25 not want the daughters to think they could circumvent this decision by getting

the company’s director, now Mr Gunson, to take over the subdivision proposal. [69] It is correct, as Mr Stuart submitted, that any decision whether or not to subdivide Sail Point’s land was and is a matter for Sail Point’s board. But it is

not correct to say that Sail Point’s board is unconstrained by the provisions of 30

Ivan’s will. Ultimately, the A shareholders control the company, as they have

power to remove any director with whose performance they are unhappy. If the director (whether Jocelyn or Mr Gunson) deviated from a path acceptable to the A shareholders, he or she could expect removal from his or her position.

Jocelyn and Mr Gunson are now the holders of the A shares, which they hold 35 under the trusts imposed by Ivan’s will. They are accordingly bound to carry

out Ivan’s wishes, as set out in the will. Those wishes included Cameron and Dene being offered a chance to buy the farm and the girls being given the right to occupy the baches for their lifetimes.

If Mr Gunson were now to attempt to take steps to proceed with the 40 subdivision, Ivan’s trustees would be bound to rein him in, if necessary dismissing him. The board of Sail Point did not and does not have carte blanche

to do whatever it likes; at least indirectly, it is constrained by the necessity to carry out Ivan’s wishes.

We should add that there is no evidence before us to suggest that 45

Mr Gunson, in his capacity as director, has any intention of proceeding with

the subdivision. The only reason we have mentioned this topic at all is to refute Mr Stuart’s suggestion that Sail Point’s board can act in total disregard of Ivan’s will.

Result
[72] This means that the trustees must desist from pursing the subdivision application, in the absence of Cameron and Dene’s consent. It is highly unlikely that Mr Gunson, as director of Sail Point, would attempt to pursue the

subdivision application in light of this judgment; were he to do so, however, the trustees would be duty bound to restrain him, in order to fulfil the trusts under which they are operating by virtue of Ivan’s will.
[73] The trustees’ duty now is to prepare an option in terms of cl 5.1 of the will. Under subcl (6), they have power to devise reasonable “terms and
conditions”. It is possible that further Court assistance may be required in that regard, but we hope that with good sense on all sides that can be avoided. The trustees, when preparing the terms of the option, should think carefully about what Cameron and Dene, in the event the option is exercised, will be required to commit to so far as the terms of the daughters’ licence are
concerned. As the licence is to be provided by the company, the option will have to require Cameron and Dene to procure the company to provide the licence to the daughters.
[74] Although we have found in Cameron and Dene’s favour, we do observe that it is unfortunate that the parties were not able to work out among
themselves a mutually acceptable arrangement, particularly in circumstances where it appears that Ivan would have liked to give his daughters their own sections and where it now appears likely that the council would approve a subdivision under which that could occur. We are also mindful of the fact that the life interests may give rise to problems in the future.
[75] We hope that the parties will be able to determine costs for themselves.
If they cannot, memoranda should be filed.

Appeal allowed.

Solicitors for Cameron and Dene Banicevich: Hammonds (Dargaville). Solicitors for the trustees: Pegg Ayton Gordon (Dargaville).

Solicitors for Jocelyn Imms in her personal capacity: Webster Malcolm & Kilpatrick (Warkworth).
Solicitors for Yvette Banicevich and Donna Doe: Raymond Donnelly & Co
(Christchurch).

35

Application for leave to appeal
Jocelyn Imms applied for leave to appeal to the Supreme Court.

A G Stuart for Jocelyn Imms in her personal capacity.

S P Bryers for the trustees.
M C Black for Cameron and Dene Banicevich.

JUDGMENT OF THE COURT. [Paragraphs [1] – [3] are omitted.]
[4] The circumstances of this case are very unusual. Their singularity leaves no room, in our opinion, for the applicant to contend that the appeal involves a
45matter of general or public importance or a matter of general commercial significance. Nor are we persuaded that a substantial miscarriage of justice may have occurred, or may occur unless the appeal is heard. The dismissal of the Family Protection Act 1955 claims undermines that ground.

The conclusions expressed in the previous paragraph must lead to the dismissal of this application. As well, however, the applicant would have insurmountable jurisdictional hurdles. Section 64(1) [of the Trustee Act 1956] allows the Court to make orders of the type mentioned herein only where such transaction is expedient in the management or administration of trust property 5 or would be in the best interests of the persons beneficially interested under the trust. The relevant property is not the farm itself but the A shares and one-third

of the B shares in the family company which holds title to the property. The trustees’ obligations under the will are to sell those shares, either to the second respondents in terms of the option, or to other purchasers if the option is not 10 taken up. There is plainly ample power for the trustees to discharge that obligation without intervention by the Court. And, as the Court of Appeal noted, such intervention must be for the purposes of management or administration of the shares or such as would be in the best interests of the beneficiaries. It would be difficult indeed for the applicant to show relevant 15 necessity or expediency to rewrite the will in the way suggested by

the applicant.

Leave to appeal refused. Reported by: Carolyn Heaton, Barrister

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Banicevich v Gunson Ca55/05 [2005] NZCA 437

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[2005] NZCA 437

13 December 2005