Bartlett v Kirkpatrick
[2024] NZHC 1923
•12 July 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2020-409-48
[2024] NZHC 1923
BETWEEN MICHAEL ROBERT BARTLETT
Plaintiff
AND
BRADLEY FRANCIS KIRKPATRICK and JOHN LESLIE PURVIS
First Defendants
AND
JOHN LESLIE PURVIS and RONALD WAYNE SKEWS
Second Defendants
AND
BRADLEY FRANCIS KIRKPATRICK
Third Defendant
AND
BRADLEY FRANCIS KIRKPATRICK and JOHN LESLIE PURVIS
Fourth and Subsequent Defendants
(cont. over page)
Hearing: 1 July 2024 Appearances:
T R J Jeffcott and P M Learmonth for the Plaintiff M J Wallace for the First Defendants
M K Prendergast for the Second Defendants
G K Riach for the Third, Fourth and Subsequent Defendants
T R J Jeffcott as agent for Mr Phillips, litigation guardian for the plaintiff’s infant childrenJudgment:
12 July 2024
JUDGMENT OF HARLAND J
BARTLETT v KIRKPATRICK [2024] NZHC 1923 [12 July 2024]
CIV-2020-409-261 BETWEEN
RONALD WAYNE SKEWS
PlaintiffAND
MICHAEL BARTLETT
First Defendant
WENDY ISOBEL SKEWS
Second Defendant
SUZANNE NGAIRE SCHOLES
Third Defendant
AMANDA JANE PATERSON
Fourth Defendant
PAMELA IRENE BOWDEN
Fifth Defendant
BRADLEY FRANCIS KIRKPATRICK
Sixth Defendant
PETER GOSKAR SCHOLES
Seventh Defendant
[1] This judgment concerns the proceedings issued by Michael Bartlett (the plaintiff) against his brother Bradley Kirkpatrick (the third defendant), and three family trusts. At the heart of the proceedings is the plaintiff’s contention that he was wrongfully removed as a discretionary beneficiary from his grandmother and father’s family trusts, the Laura Kirkpatrick Family Trust and Gary Kirkpatrick Family Trust respectively. The family trusts concerned are represented in these proceedings by their trustees, who are the first and second defendants. As is evident from the pleadings, the two brothers, over the years, have become estranged and the removal of the plaintiff as a discretionary beneficiary from the two trusts is alleged to have occurred at a time when their father’s cognitive faculties were in decline. Their father was a trustee of both the first and second defendants trusts at the time.
[2] Commendably, the parties have settled the proceedings which were set down for a three-week trial commencing 5 August 2024. The parties have entered into a settlement deed, which is conditional upon the Court making orders approving the
terms of settlement and variations of two of the trust deeds, which are required as part of that settlement.
[3] In support of the orders sought approving the settlement and variation of two of the trust deeds, counsel for the parties to the proceeding, including counsel appointed as a litigation guardian for the plaintiff’s young children and the solicitor who is the executor of the plaintiff and third defendant’s late father’s purported last Will, signed and presented a joint memorandum to the Court and an agreed bundle of documents. In addition, I heard from counsel at a short hearing convened for the purpose of explaining the basis of the settlement to the Court and the orders sought.
[4] I have decided to grant the orders sought as contained in the draft order attached to counsels’ memorandum. This judgment outlines the basis for my conclusion that it is appropriate for such orders to be made.
Background
[5] As signalled above, the two trust deeds, which will require variations, are the plaintiff and third defendant’s grandmother’s and father’s family trusts, which are represented in the proceedings by the trustees who are the first and second defendants respectively. I intend to refer to the trusts as the LK Family Trust and the GK Family Trust.
The LK Family Trust
[6] Laura Kirkpatrick (Laura) was the grandmother of the plaintiff and third defendant and the mother of their father Gary Kirkpatrick (Gary). The LK Family Trust was created by a deed of trust on 1 November 1994. The discretionary beneficiaries include her son Gary and his spouse or widow, Gary’s children, who are the plaintiff and third defendant, and their spouses, and Gary’s grandchildren or more remote issue and the spouse widow or widower of any his grandchildren or more remote issue.
[7] Under the cl 11 of the LK Family Trust deed, the trustees may appoint, in their discretion, any of the capital and/or income of the Trust fund to one or more of the
discretionary beneficiaries prior to the vesting day. The vesting day is any time up to 80 years from 1 November 1994, the latter being the date of the deed of trust referred to above. If no such appointment is made, then the default beneficiaries on vesting day are the plaintiff and third defendant in equal shares or their issue if either of them die before then.
[8] Apart from the plaintiff, the current beneficiaries of the LK Family Trust are the plaintiff’s wife and their two children (currently 11 and 7 years of age), and the third defendant and his three children (currently 19, 18 and 15 years of age).
[9] The capital and income of the LK Family Trust fund has been derived from assets that were originally established by Gary via a successful business, operated through the vehicle of a company, Romano’s Food Group Ltd (Romano’s). The assets of the LK Family Trust include real property which is leased to Romano’s, 25.1 per cent of the shares in Romano’s and advances that have been made to Romano’s over the years.
[10] For the year ending 31 March 2023, the book value of the net assets of the LK Family Trust was approximately $8.46 million, but it is accepted that the market value of the real property is less than its stated book value.
The GK Family Trust
[11] Laura was also the settlor of the GK Family Trust which was created by a deed of trust dated 18 December 2001.
[12] There are three classes of beneficiaries under the GK Family Trust— discretionary and final beneficiaries as well as an income beneficiary:
(a) The discretionary beneficiaries include any of the final beneficiaries, Gary and his wife, Gary’s children (the plaintiff and third defendant), grandchildren or remoter issue, and any spouse and any widow or widower of any of these beneficiaries.
(b) The final beneficiaries are Gary’s spouse at the vesting day and any of his children or grandchildren born or adopted prior to the vesting day. The vesting day is any time up to 80 years from 18 December 2001.
(c) The income beneficiary is Gary’s surviving partner. Clause 24 of the trust deed provides that the settlor’s wish is that the trustees should, so far as is possible, make provision for her to enable her to maintain a reasonable standard of living during her lifetime.
[13] Apart from the plaintiff, the current discretionary beneficiaries and final beneficiaries of the GK Family Trust are the same as the current beneficiaries of the LK Family Trust.
[14] Clause 24 states the capital of the GK Trust is to ultimately pass in approximately equal shares to the plaintiff or third defendant or their issue.
[15] The GK Family Trust’s primary asset is a half-share in the property in which Gary and his partner resided at the date of his death. The market value of the property in January 2024 was estimated to be between $1.9–2.0 million. The remaining half- share is owned by Gary’s partner.
[16] The GK Trust has no income-earning assets and Gary’s partner has been residing in the property referred to in the preceding paragraph rent-free, but she has been paying various outgoings in relation to it. The trustees of the GK Family Trust reimburse her for these. The LK Family Trust has made advances to the trustees of the GK Family Trust to enable them to pay for these and other outgoings. Part of the settlement proposes that the third defendant assumes liability for the obligations of the GK Family Trust.
[17] For the year ended 31 March 2023, the financial statements for the GK Family Trust record that it comprises net liabilities of approximately $126,000.
The proceedings
[18] In June 2013, Gary was assessed by a psychiatrist who diagnosed him as most likely suffering from the early stages of dementia. During this time, he signed deeds which excluded the plaintiff as a discretionary beneficiary of the LK and GK Family Trusts and he executed a new Will, largely disentitling the plaintiff from his estate. The plaintiff was not aware that he had been excluded as a discretionary beneficiary of the LK and GK Family Trusts until after Gary’s death.
[19] Proceedings were issued by the plaintiff, largely, but not only, based on his father’s lack of capacity at the time the deeds excluding him as a discretionary beneficiary under the LK and GK Family Trusts were made. Among other things, he sought orders that he be reinstated as a discretionary beneficiary of the Trusts.
[20] The parties agreed to mediate the issues in dispute between them and several meetings were scheduled for this to occur. As outlined above, it was agreed that counsel appointed to act for the plaintiff’s children as litigation guardians in these proceedings and counsel for the executor of Gary’s last Will should be present at these meetings.
[21] Unfortunately, for various reasons, the mediation meetings did not occur as scheduled. However, counsel themselves effectively negotiated the settlement which is now before the Court for consideration.
The proposed settlement
These proceedings - CIV-2020-409-48
[22] As part of the settlement, the trustees of both the LK and GK Family Trusts have agreed to resolve to make capital distributions to the plaintiff as a discretionary beneficiary. To do this, the Court must first make a declaration that the plaintiff is restored as a discretionary beneficiary of both Trusts. The parties agree that, if the Court makes the declaration sought, the trustees will resolve to make a distribution to him comprising a total amount of $1.125 million which will be paid in instalments
over a 12-month period. It is agreed that the cash payments to the plaintiff will, in part, be used to fund his children’s education.
[23] As well, the parties agree that the plaintiff will receive the GK Family Trust’s half-share interest in the property in which GK’s partner currently resides and in respect of which she owns the remaining half interest. The trustees of the GK Family Trust agree to resolve to transfer this interest to the plaintiff as part of the settlement of these proceedings.
[24] Following the mechanics of the settlement occurring (the payment of cash and the transfer of the half-interest in the property occupied by Gary’s partner), it is agreed that the LK and GK Family Trust deeds should be varied to remove the plaintiff, his children and more remote issue as beneficiaries from them. The Court’s approval is sought for this to occur.
Probate proceeding – CIV-2020-409-261
[25] In June 2020, Mr Skews, as executor of Gary’s Will, filed a proceeding seeking probate in solemn form either the 2014 Will (the last Will) or an earlier Will dated 27 March 1986 with a codicil to that Will mandated 24 March 1998 (the first Will).
[26] The application was opposed by the plaintiff on the basis, among other things, that Gary lacked capacity when making his last Will. The other six named defendants in that proceeding did not oppose or otherwise engage with the application.
[27] As part of the settlement proposal, it has been agreed that the parties will not bring proceedings against any other person or third party not currently a party to either the Trust or probate proceedings. Mr Skews will seek to propound the first Will.
[28]The net effect of Mr Skews’ position is that:
(a) he is the named executor under the first and last Wills and he will seek probate in common form for the first Will; and
(b) the parties agree to consent to this application on the basis that costs lie where they fall.
[29] Counsel do not anticipate that the recategorisation of the application from solemn to common form in the probate proceeding will cause any material prejudice to the other named defendants. This is because the named defendants are either parties to the settlement deed (the plaintiff and third defendant), are aware of the settlement deed (Gary’s partner) or did not file any opposition or notice of appearance in response to the original application (being Gary’s two sisters, his stepdaughter and brother-in- law).
Overall settlement
[30] The settlement reached takes into account the nature of the plaintiff’s interests in the LK and GK Family Trusts as a discretionary beneficiary, as well as the interests of his children. The settlement also means the plaintiff and his family will receive a financial benefit now rather than at the vesting days, which could be some years away.
Should the Court approve the proposed settlement?
Jurisdiction for approval of the settlement
[31] The Trusts Act 2019 (the Act) applies. Section 3(c) outlines that one of the purposes of the Act is to restate and reform New Zealand trust law by providing for mechanisms to resolve trust related disputes, while s 3(d) notes a separate purpose of making the law of trusts more accessible.
[32]Section 4 of the Act sets out the principles that apply. It provides:
4 Principles
Every person or court performing a function or duty or exercising a power under this Act must have regard to the following principles:
(a)a trust should be administered in a way that is consistent with its terms and objectives:
(b)a trust should be administered in a way that avoids unnecessary cost and complexity.
[33] The Act must be interpreted in a way that promotes its purposes and principles,1 but the inherent jurisdiction of the court to supervise and intervene in the administration of a trust is not affected by the Act except to the extent that the Act provides otherwise.2 A court must have regard to the purpose and principles of the Act when exercising its inherent jurisdiction.3
[34] In s 6 of the Act, an overview is provided as a guide to the general scheme and effect of the Act. Among other things, s 6(10) identifies that the provisions contained in pt 7 of the Act relate to the powers that the Court has in relation to trusts and enables alternative dispute resolution (ADR). Subsection 10 further identifies that the provisions in pt 7 provide for ADR processes to be used to resolve internal and external trust disputes.
[35] Because the proposed settlement includes child beneficiaries who, as a matter of law, lack capacity, any settlement agreed on behalf of these beneficiaries must be approved by the Court.4
[36] Although in this case there may be some dispute that whether the settlement achieved was in fact an ADR process under the Court, out of an abundance of caution, the parties consider that the Court’s approval of the settlement should be obtained.
[37] The definition of ADR under s 142 of the Act includes, but is not confined to, mediation or arbitration.5 I am sympathetic to the view that it does not exclude other ADR processes designed to facilitate the resolution of a matter.6 I am satisfied in this case that the negotiations undertaken were designed to facilitate the resolution of the proceedings in an alternative way, namely alternative to a resolution through a court hearing process. However, if I am wrong about this, I agree with counsel that the Court’s approval of the settlement deed can occur under the Court’s inherent
1 Trusts Act 2019, s 7(1)(a).
2 Section 8(1).
3 Section 8(2).
4 Section 144(1).
5 Addleman v Lambie Trustee Ltd [2024] NZHC 1790 at [25].
6 Nicola Peart (ed) Family Law–Family Property "ADR Process" (online ed, Thomson Reuters) at TU142.01.01
jurisdiction to supervise trusts, which as s 8 requires must nonetheless occur considering the purposes and principles of the Act.
The proposed variations to the Trust deeds
Section 122 of the Act provides:
122 Variation or resettlement of trust by unanimous consent of beneficiaries
(1) A trustee may do either of the following on being required to do so by all of the beneficiaries who together hold all of the beneficial interest in the trust property, if the conditions set out in subsection (2) are satisfied:
(a)vary the terms of the trust:
(b)consent to the resettlement of the trust.
(2) The conditions for an action in subsection (1) are that—
(a)every beneficiary consents to requiring the variation or resettlement; and
(b)the trustee receives a request to vary the terms of the trust or resettle the trust from or on behalf of each beneficiary; and
(c)if any of the beneficiaries is a beneficiary described in section 124(2), the court has made an order under section 124 approving the variation of terms or resettlement on behalf of that beneficiary; and
(d)the trustee has agreed to the proposal.
(3) In this section and in sections 124 and 125, variation includes a change to the scope or nature of the powers of the trustee.
[39] Section 125 of the Act enables the Court to waive a requirement that a beneficiary consent to the variation of a trust under s 122. It provides:
125 Power of court to waive requirement of consent to termination, variation, or resettlement of trust
(1) The court may waive the requirement that a beneficiary consent to the termination of a trust under section 121 or the variation or resettlement of a trust under section 122.
(2) An application for an order of waiver of consent may be made by—
(a)the trustees or any one of them:
(b)any person with a beneficial interest in the trust property.
(3) On an application for an order of waiver of consent, the court must take into account each of the following factors:
(a)the nature of any person’s interest in the trust property and the effect of the proposed order on that interest:
(b)the benefit or detriment that may result to any person with an interest in the trust property if the court makes or refuses to make the proposed order:
(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.
(4) The court must not make an order of waiver of consent if its effect would be to reduce or remove any vested interest in the trust property.
(5) An order of waiver of consent binds the person on whose behalf it is made and takes effect without any further step.
Adult beneficiaries’ consent
[40] In this case, apart from the plaintiff, the adult discretionary beneficiaries of the LK Family Trust are the plaintiff’s wife and the third defendant. The plaintiff’s wife and third defendant are also adult discretionary and final beneficiaries of the GK Family Trust. The plaintiff, third defendant and plaintiff’s wife have all signed the settlement deed which records their consent and request to vary the LK Family Trust deed and the GK Family Trust deed in terms of the draft orders provided to the Court. The trustees of the LK Family Trust and GK Family Trust have also agreed with this proposal.
[41] The only other adult beneficiary is Gary’s partner who is the income beneficiary of the GK Family Trust. On 8 February 2023, this Court directed that she was to be served with the pleadings, initial disclosure and the minute recording that direction from the Court in case she wished to take steps to protect her interests. In accordance with the Court’s direction made on 8 February 2023, the joint memorandum seeking orders filed in this Court advised that the solicitors for the plaintiff sent these documents to Gary’s partner on 31 March 2023. She has not taken any formal steps in the proceeding and, although invited to attend the proposed mediation, did not wish to be involved.
[42] The joint memorandum also outlines that, more recently, counsel for the third and fourth defendants wrote to Gary’s partner on 19 March 2024 advising her of the
settlement in principle and seeking her consent to the third defendant assuming personal liability for the payment of outgoings under the settlement agreement with the trustees of the GK Family Trust. The joint memorandum further advises that Gary’s partner is now legally represented and has agreed to the proposal through her counsel. A deed of variation and novation of settlement agreement, dated 17 May 2024, was included in the agreed bundle of documents that accompanied the joint memorandum. I have read and considered this agreement in reaching my decision.
[43] The second defendant intends to wind up the Trust once their share in the property has been transferred to the plaintiff, or his nominee, as the main asset of that Trust will no longer exist. As outlined in the joint memorandum, it is intended that Gary’s partner will not be adversely affected by the proposed variations to the GK Family Trust deed as she will continue to receive reimbursement for the outgoings on the property under the settlement agreement which are being funded by the trustees of the LK Family Trust.
[44] Further, the signatories to the joint memorandum submit that, as cl 24 of the GK Family Trust deed only provides for the trustees to make provision to Gary’s partner from the income “as far as is possible”, she does not have a vested interest in the Trust property. Accordingly, it is sought that the Court waive the requirement for Gary’s partner to consent to the proposed variations to the GK Family Trust deed under s 125 of the Act.
[45] I am satisfied that it is appropriate to waive the requirement for Gary’s partner to consent to the variation of the GK Family Trust. She is provided for in the settlement and I agree she will not be adversely affected by the proposed variations, as the settlement deed records that she will continue to receive reimbursement for the outgoings on the property, which will be funded by the third defendant. Under the deed of settlement, should the third defendant fail to comply with these obligations, Gary’s partner is indemnified by the LK Family Trust, a family trust with significant assets. The fact that she does not have a vested interest in the trust property is also a relevant consideration.
Minor beneficiaries’ interests
[46] In relation to the minor beneficiaries, the plaintiff’s children and the third defendant’s children, a litigation guardian was appointed for the former, and the third defendant was appointed to represent the latter, for the proposed mediation. I accept that, given that both representatives have signed the settlement deed, there is no need for counsel to be separately appointed to represent the third defendant’s minor children’s interests. I also agree with counsel that nothing appears to be gained by appointing counsel to represent the interests of unborn beneficiaries given the degree of uncertainty involved as to whether they are likely to receive any distribution from the Trusts.
[47]Section 124 of the Act provides:
124 Power of court to approve termination, variation, or resettlement of trust
(1) The court may, on behalf of any of the beneficiaries described in subsection (2) who has an interest in the property of a trust, approve the termination, variation, or resettlement of the trust.
(2) The beneficiaries are—
(a)a beneficiary who lacks capacity:
(b)a person who may acquire a beneficial interest at a future date or on the happening of a future event or on becoming a member of a certain class of persons:
(c)a future person who may acquire a beneficial interest.
(3) An application for an order of approval may be made by—
(a)the trustees or any one of them:
(b)any person with a beneficial interest in the trust property.
(4) On an application for an order of approval, the court must take into account each of the following factors:
(a)the nature of any person’s interest in the trust property and the effect of the proposed order on that interest:
(b)the benefit or detriment that may result to any person with an interest in the trust property if the court makes or refuses to make the proposed order:
(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.
(5) The court must not make an order of approval if its effect would be to reduce or remove any vested interest in the trust property.
(6) An order of approval binds the person on whose behalf it is made and takes effect without any further step.
[48] Section 124 was considered by the High Court in Gavin v Gavin.7 At [15], the Court set out the principles to be considered when deciding whether or not to consent to an arrangement on behalf of minors, unborn and unascertained beneficiaries who were not able to consent themselves, which I respectfully adopt. They are as follows:
[15] …
(a)The power to approve a variation is discretionary.
(b)The court may, on behalf of any beneficiary described in s 124(2) who has an interest in the property of a trust, consider any proposal to terminate, vary or resettle a trust.
(c)The court’s discretion is to be exercised with reference to the factors identified in s 124(4), including the intentions of the settlor, to the extent these can be ascertained.
(d)The court can approve a scheme which conflicts with the intentions of the settlor but should not do so lightly.
(e)The court considers the trust provisions afresh if circumstances have arisen which were not foreseen or may not have been foreseeable at the time the trust was established.
(f)The court is able to approve an arrangement to the detriment of any person on whose behalf the court is giving consent, provided the effect of the orders would not reduce or remove a vested interest in the trust property.
(g)The court is to take a wide approach to benefits and detriments and arrangements and must consider the arrangements as a whole in a practical and business-like way. Indirect and intangible benefits and detriments are relevant, including the welfare and honour of the family.
(h)Difficulties may be met by amendments to the proposal or covenants by persons benefitting to make good losses to the disadvantage of other beneficiaries.
(i)An order approving a proposed variation may be conditional.
7 Gavin v Gavin [2021] NZHC 550, (2021) 33 FRNZ 197.
[49] Further, as counsel in this case observed and as is included in the joint memorandum, the Court in Gavin v Gavin ultimately approved a variation to the Trusts which included the removal of a beneficiary, his children and remoter issue as part of a settlement of a lengthy proceeding and, as well, all adult beneficiaries consented to the proposal.8
[50] Counsel also referred to other cases where settlements have been approved which include variations to trusts to give effect to disputes between beneficiaries and trustees.9 These cases involve similar themes in which the Court’s powers under the Act have been used to settle long-standing family disputes, with the consent of parties. In Ruby v Ruby the Court noted that s 124 of the Act was designed as a deliberate relaxation of the previous position under the Trustee Act 1956, that limited the ability of the Court to approve a validation that would be detrimental to the beneficiary on whose behalf approval was sought.10
[51] I first address the benefit or detriment to the interests of the minor and future beneficiaries that could result from either making or refusing to make the orders sought. As outlined above, the first and third defendants’ children are discretionary beneficiaries of both Trusts. They also have contingent interests in the Trusts if their parents die and there are any remaining assets that have not been distributed to beneficiaries prior to the vesting days. The vesting day for the LK Family Trust could not eventuate until 2074 and, in relation to the GK Family Trust, could be 2081. Having said that, in relation to the GK Family Trust, as I have also outlined above, upon distribution of their share of the property to the plaintiff or his nominee, the trustees intend to wind up that Trust. I conclude that the children do not have a vested interest in either Trust that prevents the Court from making an order under s 124(5) of the Act.
[52] The plaintiff’s children, as discretionary beneficiaries of the LK Family Trust, only have the right to be considered in respect of any distributions by the trustees. However, they are intended to benefit from the distribution of the settlement sum to
8 Gavin v Gavin, above n 7, at [54].
9 Re Macalister [2021] NZHC 3572; Ruby v Ruby [2022] NZHC 282; Landsborough Trustee Services No 10 Ltd v Haughton [2023] NZHC 2683; Re Borthwick [2023] NZHC 3685 at [14].
10 Ruby v Ruby, above n 9, at [43], citing Re Macalister, above n 9, at [23]–[26].
the plaintiff because part of the settlement funds are intended to assist with their future education. The plaintiff intends to nominate a family trust to receive the half-share of the property in respect of which the deceased’s former partner owns the remaining half-share.
[53] The third defendant’s children are also discretionary beneficiaries and they will continue to be the beneficiaries of the LK Family Trust. Although they will not receive any benefit from the GK Family Trust, if no order is made then, as counsel submit, the trustees cannot realistically consider making any distribution to them until the deceased’s partner decides to sell her half-share in the property.
[54] I infer it will be some time before there are likely to be any future beneficiaries given the ages of the plaintiff’s and third defendant’s children, but I also take into account that the future beneficiaries’ interest is contingent and uncertain.
[55] I conclude that the benefits of the settlement to the minor discretionary beneficiaries outweigh any detriment to them. I also conclude that the interests of any future beneficiaries, given the nature of their interests and the time before any such interests may arise, to be so far away and uncertain that they need not be given much weight in this analysis. While the benefit to them is not as distant or unlikely as was the case in Ruby v Ruby, it is of sufficient uncertainty to conclude that the potential for them to benefit sometime in the future does not outweigh the justice considerations that arise now.11 I further note that the plaintiff and third defendant’s respective or proposed family trusts may also provide for any future beneficiaries’ interests as discretionary beneficiaries.
The settlor’s intentions
[56] I also need to consider the settlor’s intentions if it is practicable to ascertain them. In this regard, I note that the assets of both Trusts, while settled by Gary’s mother, were originally sourced from him or provided as a result of his efforts.
11 Noting in Ruby v Ruby, above n 9, at [44], that the discretionary beneficiaries “never had any real hope of benefitting under the Trust”.
[57] I accept that the LK and GK Family Trusts reveal an intention for the plaintiff and third defendant to ultimately benefit from the assets of those Trusts in equal shares. However, it is also clear that there is considerable value to the plaintiff and his family to receive a distribution at this stage rather than having to rely on the trustees’ discretion to make a distribution to them prior to the Trusts being wound up.
[58] Equally, I accept there is value to the third defendant and his family to give up any future entitlement to the assets of the GK Family Trust in exchange for remaining as beneficiaries of the LK Family Trust.
Other issues
[59] There is also the issue of litigation risk and the potential damage that continuing with the litigation is likely to have on the family relationships involved in this case. While the basis of the proceedings was borne out of a disagreement between two brothers, the fact that both, together with others, have been able to achieve a settlement bodes well for an improved relationship in the future. Certainly, it will remove the need for continued dispute about assets in which both may have had a contingent interest.
Conclusion
[60] In these circumstances, and given the matters I have outlined above, I am satisfied that it is appropriate to make orders approving the settlement deed and the variations to the LK and GK Family Trust deed as outlined in the draft orders attached to the joint memorandum of counsel.
[61] I have referred to the probate proceeding so far as it relates to the proposed settlement. There is no need to make any further orders, nor indeed is it desirable to do so at this time. Nonetheless, the settlement proposes a way in which these proceedings are to be resolved and that is what should occur. A copy of this judgment will need to be considered in relation to that proceeding.
[62] For clarity, I note that cl 9 of the settlement states the plaintiff in the probate proceeding shall seek to propound the first Will and seek probate in common form.
As well, the parties have agreed to consent to that application on the basis that costs, in respect of that proceeding, lie where they fall. Paragraph 57 of the joint memorandum confirms that view.
Result
[63] In proceeding CIV-2020-409-48, I approve the terms of the deed of settlement signed by the parties. I make the following orders:
(a) Michael Robert Bartlett (formerly known as Michael Robert Kirkpatrick) is declared to be a discretionary beneficiary of the LK Family Trust and the GK Family Trust;
(b) the trustees of the LK Family Trust shall, within 20 working days of this Order, resolve to distribute to Michael Bartlett capital of the LK Family Trust in the settlement sum of $1,125,000 on the terms set out in the Deed of Settlement;
(c) the trustees of the GK Family Trust shall, within 20 working days of this Order, procure the transfer to Michael Bartlett or his nominated family trust, of one-half share of the property situated at 7 Harts Creek Lane, Northwood, Christchurch on the terms set out in the Settlement Deed;
(d) with effect from 12.01 am on the day after the distribution date in the Deed of Settlement, the LK Family Trust Deed of Trust dated 1 November 1994 is varied to:
(i)delete from cl 1.2 the following words:
“the child or children of Gary Francis Kirkpatrick, namely Bradley Francis Kirkpatrick born on the 1st day of October 1973 and Michael Robert Kirkpatrick born on the 25th day of December 1978;
any person who is the spouse or widow of any of them the said Bradley Francis Kirkpatrick or Michael Robert Kirkpatrick while remaining the spouse or widow as the case may be of their of them;
any grandchild or more remote issue of Gary Francis Kirkpatrick;
any spouse, widow or widower of any grandchild or more remote issue of Gary Francis Kirkpatrick;”
(ii)and replacing them with:
“Bradley Francis Kirkpatrick born on the 1st day of October 1973;
any spouse or widow of the said Bradley Francis Kirkpatrick while remaining the spouse or widow as the case may be of Bradley Francis Kirkpatrick as the case may be;
any child or grandchild of Bradley Francis Kirkpatrick;”
(iii)delete from cl 11 the following words: “Trusts on vesting day
On the Vesting Day the Trustees shall stand possessed of such of the capital and income of the Trust Fund as may then remain upon trust for the Discretionary Beneficiaries, whether for all of them or one or more of them to the exclusion of another or others, as are living on the Vesting Day; and if more than one in such shares and proportions as the Trustees may in writing (revocable or irrevocable) at any time on or before the Vesting Day appoint and in default of and subject to any such appointment which has not been revoked before the Vesting Day for such of the sons of the said Gary Francis Kirkpatrick as shall be living and if more than one in equal shares as tenants in common absolutely provided however that in case any son of the said Gary Francis Kirkpatrick shall die before Vesting Day leaving issue who shall be living on Vesting Day such issue shall stand in the place of each deceased son and take per stirpes and equally between them if more than one share the share of the Trust Fund which the deceased son would have taken had he been living on the Vesting Day.”
(iv)and replacing them with: “Trusts on vesting day
On the Vesting Day the Trustees shall stand possessed of such of the capital and income of the Trust Fund as may then remain upon trust for the Discretionary Beneficiaries, whether for all of them or one or more of them to the exclusion of another or others, as are living on the Vesting Day; and if more than one in such shares and proportions as the Trustees may in writing (revocable or irrevocable) at any time on or before the Vesting Day appoint and in default of and subject to any such appointment which has not been revoked before the Vesting Day for Bradley Francis Kirkpatrick if he is living on the Vesting Day provided that if the said Bradley Francis Kirkpatrick is not living on the Vesting Day then for that child or those children and if more than one as tenants in common in equal shares. Should any child of the said Bradley Francis Kirkpatrick have died before their father and before the vesting day but is survived by their own child or children then that child or those children shall take and if more than one as tenants in common in equal shares, the share that his, her or their parent would have received had they been living at the Vesting Day.”
(e) with effect from 12.01 am on the day after the property transfer date in the Deed of Settlement, the GK Family Trust Deed of Trust dated 18 December 2001 is varied to:
(i)delete from cl 1.1 the words:
“Final Beneficiaries” the Spouse of the Appointor as at the Vesting Day (and excluding any other Spouse) and any child or grandchild of the Appointor born or adopted prior to the Vesting Day.”
(ii)and replacing them with:
““Final Beneficiaries” means Bradley Francis Kirkpatrick and any child or grandchild of Bradley Francis Kirkpatrick born or adopted prior to the Vesting Day.”
(iii)delete from cl 24(b) the words:
“Ensure that except in so far as the same is paid or applied for provisions as above, special needs or purposes of the capital of the trust shall ultimately pass in approximately equal shares to the children of the Appointor namely Bradley Francis Kirkpatrick and Michael Robert Kirkpatrick or their issue per stirpes.”
(iv)and replacing them with:
“Ensure that except in so far as the same is paid or applied for provisions as above, special needs or purposes of the capital of the trust shall ultimately pass to Bradley Francis Kirkpatrick or and any child or grandchild of Bradley Francis Kirkpatrick.”
(f) costs in the Trust proceeding lie where they fall except for the reasonable costs of Mr Michael Phillips as litigation guardian of Annabel and Conrad which are to be met by the trustees of the LK Family Trust.
Harland J
Solicitors:
Stace Hammond, Auckland Young Hunter, Christchurch Hatherly Loughman, Christchurch Harmans Lawyers, Christchurch Tavendale Partners, Christchurch.
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