Bond v Platun
[2016] NZHC 3038
•14 December 2016
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2015-404-000628
[2016] NZHC 3038
BETWEEN RICHARD PAUL BOND
Plaintiff
AND
JANET EUGENIA PLATUN
Defendant
Hearing: 21 and 22 March 2016
Memoranda 12 April 2016 - 26 July 2016
Appearances:
R Harrington for the Plaintiff The Defendant in Person
Judgment:
14 December 2016
JUDGMENT OF HINTON J
This judgment was delivered by me on 14 December 2016 at 9.30 am pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Counsel:
R Harrington, Barrister, Auckland
Party:
Copy for Defendant
BOND v PLATUN [2016] NZHC 3038 [14 December 2016]
[1] Following the tragic death of Theresa Platun, a trust was settled to benefit her de facto partner and her seven-day-old child, Athena. Theresa’s partner (the plaintiff) and Theresa’s sister (the defendant) are the trustees. The plaintiff is now seeking to remove the defendant as trustee. As a lesser alternative, the plaintiff has applied for both trustees to be removed, and an independent trustee appointed.
[2] The key issues are whether the defendant has not acted impartially and/or the defendant has taken an inflexible position on retention of capital and/or the management of the trust is dysfunctional, such that the Court should exercise its discretion under s 51(1) of the Trustee Act 1956.
[3] This case has taken an unusual course because, with my encouragement, the parties tried to resolve the dispute after the hearing, in the hope that the additional issue of access to Athena could also be resolved. This led to a series of memoranda over some months and several judicial telephone conferences. Ultimately, no resolution was reached. As I advised the parties at the outset, I have not taken any of these post-trial matters into account.
The law
[4] Cases such as this turn very significantly on the facts. However, it is important to understand the legal framework so that the facts can be viewed through it.
[5] The plaintiff relies on s 51 of the Trustee Act 1956 and the inherent jurisdiction of the Court to supervise trusts.
[6] The Court has jurisdiction under s 51 of the Trustee Act 1956 to appoint and substitute trustees, which includes the power to remove by substitution. That section relevantly provides:
51 Power of court to appoint new trustees
(1) The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
(2) In particular and without prejudice to the generality of the foregoing provision, the court may make an order appointing a new trustee in substitution for a trustee who—
(a)has been held by the court to have misconducted himself in the administration of the trust; or
(b)is convicted of a crime involving dishonesty as defined by section 2 of the Crimes Act 1961; or
(c)is a mentally disordered person within the meaning of the Mental Health (Compulsory Assessment and Treatment) Act 1992, or whose estate or any part thereof is subject to a property order made under the Protection of Personal and Property Rights Act 1988; or
(d)is a bankrupt; or
(e)is a corporation which has ceased to carry on business, or is in liquidation, or has been dissolved.
[7] The Court also has an inherent jurisdiction to remove trustees as part of its general jurisdiction to supervise the administration of trusts.
[8] The jurisdiction to remove trustees is ancillary to the principal duty of the Court to see that the trusts are properly executed.1
[9] When exercising its jurisdiction to remove trustees, the Court is guided by the welfare of the beneficiaries. As the Privy Council stated in Letterstedt v Broers:2
In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries. Probably it is not possible to lay down any more definite rule in a matter so essentially dependent on details often of great nicety. But they proceed to look carefully into the circumstances of the case.
[10] As well as the welfare of the beneficiaries, the security of trust property and the satisfactory execution of trusts are recognised as guiding principles in the exercise of the Court’s jurisdiction. Dixon J stated in Miller v Cameron:3
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court
1 Letterstedt v Broers (1884) 9 App Cas 371 (PC).
2 At 387.
3 Miller v Cameron [1936] HCA 13 at 580-581.
forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorise the Court to act, the delicate question whether it should act and proceed to remove the trustee is one upon which the decision of a primary Judge is entitled to especial weight.
[11] The Court of Appeal recognised in Mendelssohn v Centrepoint Community Growth Trust, that the settlor’s intentions, neutrality between beneficiaries and promotion of the purposes of the trust, are also relevant circumstances.4
[12] In considering whether a trustee should be removed, it is not necessary to establish that there has been a breach of trust,5 but equally, establishing a breach of trust will not necessarily be sufficient to justify the removal of a trustee. Nor will a trustee be removed simply because of a position of conflict between duty and interest. Whether or not a position of conflict will justify removal depends on the nature of the conflict and the other circumstances of the case.6
[13] As to incompatibility between trustees and beneficiaries, the Court of Appeal in Kain v Hutton said:7
… mere incompatibility between trustees and beneficiaries is not enough … Any incompatibility must be at such a level that the proper administration of the trust is seriously adversely affected and it has become difficult for a trustee to act in the interests of the beneficiary …
[14]The same principle must apply to incompatibility between trustees themselves.
[15] Each or any of conflict of interest, misconduct on the part of a trustee, or hostility between trustees and beneficiaries, can be reasons for removing a trustee, but whether removal is appropriate in a particular case will depend on whether any of those factors are present to a sufficient extent to undermine the satisfactory execution of the trust for the welfare of the beneficiaries.8
4 Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 (CA) at [97].
5 Hunter v Hunter [1938] NZLR 520 (CA) at 529.
6 Wales v Wales [2013] VSC 569 at [43].
7 Kain v Hutton [2007] NZCA 199, [2007] 3 NZLR 349 at [267].
8 Green v Green [2015] NZHC 1218 at [606].
Relevant history
[16] The plaintiff, Mr Bond, was the partner of Theresa Platun, who died on 4 July 2003.
[17] Theresa was born in the United Kingdom. She moved to New Zealand to live with Mr Bond in 2000.
[18]On 27 June 2003, Theresa gave birth to their child, Athena.
[19] Theresa died seven days later, in a tragic car accident. She was on her way to feed Athena, who was born prematurely and was still in hospital.
[20] The defendant, Ms Janet Platun, is Theresa’s sister. Ms Platun lives in the United Kingdom.
[21] Ms Platun was planning to come to New Zealand for the birth. Instead, she spent three months in New Zealand helping Mr Bond with Athena, immediately following her sister’s death.
[22] Theresa was the sole registered proprietor of a house in Waimauku. She and Mr Bond were living there. It appeared that only a small deposit had been paid. When Theresa died, the life insurance proceeds repaid the mortgage.
[23] In 2004, Mr Bond and Ms Platun agreed that the Waimauku house should go into trust for Mr Bond and Athena. Family Protection Act proceedings were filed in the name of Ms Platun, as Athena’s guardian ad litem, apparently to facilitate the transfer without (then) gifting issues.
[24] During 2004, Mr Bond and Athena spent three months in the United Kingdom with Ms Platun.
[25] The proceedings were settled by consent order, concurrent with which, the Theresa Platun Trust (the Platun Trust) was established by deed dated 26 May 2005.
[26]Mr Bond and Ms Platun are the trustees of the Platun Trust.
[27]The beneficiaries are Mr Bond and Athena. Athena is now aged 13.
[28]The deed relevantly provides:
(a)The initial trust fund comprised the house in Waimauku.
(b)Athena is a “class A” beneficiary (any individual allocation may be greater than 50 per cent and no less than 50 per cent of the total trust fund is to be distributed to her).
(c)Mr Bond is a “class B” beneficiary (on no occasion is more than 50 per cent of money or property to be allocated to him).
(d)The trustees have broad discretion to apply the whole or any part of the trust fund for the maintenance, education or advancement or otherwise, for the benefit in life of the beneficiaries; and to invest and deal with trust property.
(e)The trustees may apply capital or income to a beneficiary.
(f)Any discretion exercised by the trustees must be by unanimous resolution.
[29] Mr Bond and Athena remained in the Waimauku house for three-and-a-half years after Theresa died.
[30] On 1 November 2006, Mr Bond emailed Ms Platun to advise that he and Athena were moving into a house owned by Ms Angela Storey (with whom Ms Platun knew he had formed a relationship). He said he had decided to rent out the Waimauku house.
[31] On 2 November 2006, Ms Platun pointed out to Mr Bond that renting the house out was not a decision he could make on his own. She said she had a few conditions
before agreeing to rental, including that half of the rent should go directly into a bank account for Athena and remain there until adulthood, and the other half go to Mr Bond. Ms Platun said they needed to have a trustee meeting and to minute the details. She suggested this be done when Mr Bond was in the United Kingdom. He was due there in December 2006.
[32] Mr Bond replied, answering her queries regarding likely rental and length of tenancy. He agreed to her rent-sharing proposal, and said he would like the cost of his and Athena’s trip to the United Kingdom covered by the rental.
[33] Mr Bond and Athena then visited Ms Platun in the United Kingdom in December 2006.
[34] On 27 December 2006, trustee resolutions were signed, agreeing to rental of the Waimauku house; the proposed 50:50 rental split; and to the cost of Mr Bond and Athena’s trip to the United Kingdom being paid by the Platun Trust.
[35] Mr Bond and Ms Storey remain in a relationship. They had a child together, Madeleine, who was born in October 2007 and is now aged nine.
[36]In 2007, Ms Platun spent three months in New Zealand.
[37] Ms Platun continued to visit New Zealand annually, spending time with Athena, and seeing the family on each occasion.
[38]The rental arrangement continued, without any apparent issue, for some years.
[39] The parties clearly had a good relationship throughout this time. For example, on 28 January 2010, Ms Storey emailed Ms Platun about the trust accounts, going into some detail and referring to some confusion that she had experienced over the accounts, which she had discussed with the accountant. She asked Ms Platun to read the documents, and let her know if she was happy to sign, before the accounts were posted. Three days later, Ms Platun replied:
Hi Ange
Thanks for taking the time to write to me, clarifying the trust accounts. I’ll have a good look at it all and get back to you as soon as I can.
Thanks again so much for having us and making us welcome. We were sorry that we didn't say goodbye to you and Maddie properly before we left. We've been describing Maddie’s body slams to everyone, we think she’s great! And it’s lovely to see that Athena and Maddie are so close.
Please let Athena know I'm thinking of her as she starts her new school. I’ll give her a call at the weekend.
Love from very chilly London Jx
[40] Mr Bond says that, in about December 2010, he first raised with Ms Platun, the idea of selling the Waimauku house, and that he then raised it again in December 2011.
[41] Ms Platun says that it was December 2011 when Mr Bond raised the possibility of a sale. She was in New Zealand at the time. She says they then agreed to rent the house out for another 12 months, with a view to selling it in 2013. I accept, based on a subsequent email, that whether it was first raised in December 2010 or December 2011, the parties did agree to defer a sale until 2013. I also note that the main reason put up for selling, was to provide funds for Athena to attend private school, which was not to be until 2014, quite some time after December 2011.
[42] It seems that in the conversation in December 2011, Mr Bond proposed that, if sold, the sale proceeds would be split 50:50 between himself and Athena. There was a dispute over Ms Platun’s response. I find, based on the subsequent emails, Ms Platun suggested that Athena’s education cost would then need to be funded out of Mr Bond’s share.
[43] Despite the agreement to continue renting until December 2012, on 7 February 2012, Ms Storey emailed Ms Platun saying they had obtained three appraisals on the Waimauku house. She said: “We are in favour of giving the current tenants notice and looking at putting the property on the market in the next 6 months.” The median of the agents’ price recommendation was about $630,000. Ms Storey proposed that the sale proceeds should be divided 50:50, and that Athena’s education costs should be funded out of Athena’s share. She said the plan was for Athena to start at Strathallan at age 11 (2014) and then to attend private school for seven years, presumably starting in Year 7.
[44] It seems that Mr Bond told Ms Platun he was requesting a 50 per cent capital distribution, at least in part so that he might be in a position to provide Madeleine with private school education, equal to what was proposed for Athena. In evidence, Mr Bond said his own income was quite modest. Without the trust, private school education was not an option.
[45] From February 2012, Ms Storey took over virtually all communication on Mr Bond’s part, which was not the case previously.
[46] On 17 February 2012, Ms Platun suggested a “compromise” whereby (assuming there was $620,000 from the sale) $200,000 would be held for Athena;
$200,000 placed into an education fund for Athena; $200,000 placed into an account for Mr Bond to provide for Madeleine’s education; and $20,000 into a flight fund for annual visits. Ms Platun said if they could not agree to that solution, then her preference was to not sell the house.
[47] On 19 February 2012, Ms Storey emailed Ms Platun, again suggesting that the proceeds of sale of the Waimauku house be distributed 50:50 between Mr Bond and Athena, and that Mr Bond would contribute up to $100,000 from his share towards Athena’s education. In this email, Ms Storey said: “We feel that the Trust in its current structure does not work for either party. Obviously you would prefer to have Athena as sole beneficiary of the Trust.”
[48] On 28 February 2012, Ms Platun wrote that the email correspondence was not conducive to finding a satisfactory agreement. She said the decision regarding whether to sell was too important to rush. She pointed out that they had agreed to rent the house out for 12 months from December 2011, and she requested a formal trustee meeting with Mr Bond when she was over next.
[49] In February/March 2012, Mr Bond and Ms Storey met with Jeremy Goodwin, the lawyer who drafted the trust deed. Mr Goodwin then contacted Ms Platun. Ms Platun was unhappy about this process, given Mr Goodwin had acted for them both in settling the Platun Trust.
[50] On 26 April 2012, Ms Platun wrote that she was thinking of coming to New Zealand in October 2012, or January 2013, probably the latter. On 7 May 2012, she emailed that it would possibly be the end of November or beginning of December.
[51] On 24 May 2012, a lawyer engaged by Mr Bond, Ms Hawkins of Blackwood Hawkins Law, wrote to Ms Platun. She began by acknowledging that Ms Platun had always been a wonderful aunt to Athena. She requested consent to the Waimauku house being placed on the market, with a view to its being sold before Christmas 2013, recording that Mr Bond intended to send Athena to private school in 2014. Ms Hawkins stated that a sale would be necessary to cover Athena’s private school fees, but also to make a distribution to Mr Bond so he could provide for himself and the family.
[52] On 8 June 2012, Ms Platun emailed Ms Hawkins, stating Mr Bond was already aware that she was in principle prepared to sell the house, but that “as trustees we need to find mutual agreement of distribution of funds”. She referred to the trust lawyer’s suggestion that there be a mediation, and said that she had put her travel plans forward to November 2012. She said she had no doubt that if they both compromised, they would be able to agree.
[53] On 26 June 2012, Ms Hawkins wrote back to Ms Platun, saying that distribution did not need to be agreed before the house was listed for sale, and unless a sale was agreed (within stipulated timeframes), application would be made to the High Court to have both trustees removed. She suggested that the trust fund could be divided equally between Mr Bond and Athena, with Mr Bond thereafter being liable for half of Athena’s ongoing education costs.
[54] On 10 August 2012, Mr Rogers, the lawyer previously engaged by Ms Platun on the 2005 trust settlement, replied (at some length) that Ms Platun was concerned to maintain a balance between Mr Bond’s interests and Athena’s, and to protect her sister’s memory. He explained why Ms Platun would not agree to Mr Bond’s proposal, and said Ms Platun would not agree to a sale until the trustees had agreed on distribution. He suggested alternative funding arrangements to a sale, and emphasised that Ms Platun did not want to waste money on legal processes.
[55] There was further detailed correspondence between the lawyers over the next few months.
[56] Ms Platun came to New Zealand on 2 December 2012. On 29 November 2012, Mr Rogers wrote to Ms Hawkins, advising that Ms Platun had been told by Mr Bond that they were too busy for her to see Athena, although on every other trip, they had brought her to the airport and taken her out of school for part of the time. He also recorded on 30 November 2012, that Ms Platun spoke on the phone to Athena every one or two weeks and never discussed trust matters in Athena’s presence. He asked that Mr Bond reconsider his “decision to restrict access”.
[57] In December 2012, a mediation was held, with Mr Lewis Grant as the mediator. Agreement was reached as to all issues, with resolutions to be drawn by Mr Grant and signed subsequently.
[58] On 12 February 2013, Mr Grant emailed the trustee minutes. Ms Storey requested a number of changes. There was then correspondence over the suggested changes. One of the proposed changes (surprisingly), was that Athena might not start private school until Year 9 (2016). Ms Platun said, in that case, she would wish to delay sale.
[59] Between 11 April and 15 April 2013, both Mr Bond and Ms Platun signed the minutes recording the mediated resolutions, which included:
(a)that the Waimauku house be sold, but that agents had advised it would be better to wait until the following spring;
(b)following sale, two-sixths of the sale proceeds (expected to be about
$200,000) would be distributed to Mr Bond, “free from the trusts of the deed”;
(c)one-sixth (about $100,000) would be held as a reserved capital fund for Mr Bond, subject to its being available in the interim for investment and use as part of Athena’s education fund;
(d)three-sixths would be retained upon the trusts of the deed;
(e)Athena would start at Strathallan in February 2014 (Year 7);
(f)the education fund was to be invested and used to fund, by income, and if necessary by capital, no more than $20,000 of educational expenses annually (the rationale for this was stated as being to preserve at least three-sixths of the capital to provide for Athena generally, after she had completed her tertiary education);
(g)the trustees retained a discretion to allocate additional income towards Athena’s education, if the trustees were comfortable that the fund was growing faster than inflation; and
(h)subject to various agreements to underwrite Athena’s fees, the trustees would make a further distribution to Mr Bond of the one-sixth of the fund, either when Athena turned 18 or when she was 21.
[60] Between April and July 2013, there was a fair amount of activity. The trustees gave the tenants notice; agreed to work to be carried out on the house; appointed Harcourts as an agent; agreed to a sale by auction and a reserve price; and arranged a loan from ANZ in order to pay legal fees from the mediation. Necessarily, much of this was handled by Mr Bond and Ms Storey, with Ms Storey continuing to engage in correspondence with Ms Platun, including some testy emails from Ms Storey over arranging the bank loan. Some of the delay over documenting the loan was due to documents going missing en route to Ms Platun.
[61] On 21 July 2013, the Waimauku house was sold for $705,000, with settlement on 28 August 2013.
[62] On 2 October 2013, the trust’s accountant, Ms Holmes, wrote to Mr Bond and Ms Platun enclosing draft financial statements as at 31 August 2013, and advising that the balance available, after legal and accounting fees, was $589,725. Ms Holmes recorded that Mr Bond’s distribution was $196,575. (He apparently owed the trust
$25,071, so the cash payable was $171,504.) The total cost of the mediation had been approximately $65,000.
[63] It seems Ms Platun approved the calculations and Mr Bond’s distribution was paid out on about 15 October 2013.
[64] On 14 November 2013, the trustees engaged Stuart & Carlyon, to prepare a financial plan. The initial meeting was with Ms Storey and Mr Bond. On 17 November 2013, Ms Platun met Ms Carlyon and emailed Mr Bond as to whether they would need to take out $20,000 “between now and February” for Athena’s first year of education. Ms Storey replied, saying there had been recent changes.
[65] On 18 November 2013, Ms Storey emailed Ms Platun, advising that Athena had been assessed by an educational psychologist and St Kentigern’s College was recommended. Athena had been accepted to start Year 7 in 2014. She requested an increase in annual drawings from $20,000 to $25,000.
[66] On 24 November 2013, Ms Platun responded. She said she was really glad that they had found a school that would suit Athena. She said she wanted to stick to the agreements made. She added: “As agreed in mediation, if the trust performs well over a number of years, there is scope to draw out more than $20,000. I would be happy to review this. …”
[67]There was ongoing correspondence regarding the proposed increase from
$20,000 to $25,000 per annum, and the way in which that would be paid. Ms Platun was opposed to the increase and wanted the $20,000 paid (as agreed) in one lump sum, before Christmas, rather than in instalments over the following year. This latter point arose out of miscommunication.
[68] There was then correspondence between the parties and Stuart & Carlyon, over an appropriate investment plan that might generate higher income. Ms Carlyon pointed out on 12 December 2013, that to generate $25,000, the trust would need to earn a minimum of 8.25 per cent net. On 16 December 2013, Ms Storey suggested holding off on the letter of engagement of Stuart & Carlyon.
[69] On 18 February 2014, Stuart & Carlyon drew up a revised plan and advised against adopting a higher risk plan.
[70] By 5 March 2014, an investment plan had been agreed and signed off by the trustees.
[71] On 8 April 2014, Ms Platun emailed that she would agree to increase the drawings to $25,000 per annum on conditions, including that Mr Bond would forego his $100,000 still in the trust if necessary to preserve Athena’s capital, and that the trustees would not request any further increase in the “$25,000 (2% inflation-linked)”, under any circumstances.
[72] There was ongoing communication between April and July 2014, over whether Mr Grant should be involved further, and also over payment of various accounts (which was agreed). Ms Platun was against involving Mr Grant because of cost. Also the mediated resolutions had recorded that he would be involved further, if there was disagreement over surplus income, which was not the case.
[73] On 23 June 2014, Ms Platun asked Mr Bond why, when they had signed off on the Stuart & Carlyon plan, the money had not been transferred to implement that plan. Mr Bond replied that he would not do so while the additional education payment was not agreed. Ms Storey requested from Ms Platun the signed 2014 accounts. Ms Platun requested that the agreed investment plan first be implemented.
[74] It seems that the trust accounts were subsequently signed and filed, as Mr Bond accepted in evidence that accounts had always been filed on time. The agreed investment plan has, however, still not been implemented.
[75] On 21 November 2014, Ms Hawkins wrote to Ms Platun, stating that there was a level of mistrust and dysfunction, and suggesting that both trustees resign. She proposed that an independent corporate trustee or two independent individual trustees be appointed. She noted the alternative of court action.
[76] On 2 December 2014, Ms Platun wrote to Ms Hawkins, saying that she continued to offer fair and reasonable solutions and suggestions to Mr Bond’s request for an increase in annual drawings. She asked that, if Mr Bond was going to pursue the matter to Court, she could receive $1,000 to engage a lawyer.
[77] On 19 December 2014, Ms Hawkins declined the request for $1,000 and said proceedings would be filed.
[78] In January 2015, Ms Platun wrote to Ms Holmes asking if anything was required of her to file the trust accounts. Ms Holmes replied that she believed she had the information needed. On 30 March 2015, Ms Holmes sent out the accounts, apologising that they were due the next day.
[79]On 21 April 2015, this proceeding was served on Ms Platun.
[80] On 30 September 2015, Associate Judge Sargisson minuted that legal costs for both sides would be funded from the Platun Trust, up to $10,000, and that Ms Platun’s airfares would be paid by the trust.
[81] On 19 October 2015, Ms Platun advised the Court that she had consulted with a range of New Zealand barristers who had estimated legal costs of between $30,000 and $40,000.
[82] On 30 November 2015, Associate Judge Sargisson minuted that it was for Ms Platun to decide when, and if, she will instruct counsel, and that the Judge did not propose to direct her to do so.
[83]On 8 December 2015, Ms Platun instructed solicitors.
[84] On 23 December 2015, Ms Platun received accounts from Ms Holmes, for the year ending 2015, which recorded that Ms Storey’s trust had loaned $6,900 to the Platun Trust and that $23,922 had been paid towards Athena’s educational costs. In reply, Ms Platun queried these and other points. Ms Holmes explained the position.
[85] The March 2015 accounts showed that the trust net surplus income was $2,678, well below the education payment.
[86] The trust fund was shown as still sitting in Blackwood Hawkins’ trust account, presumably on bank deposit.
[87] On 2 February 2016, Ms Platun suggested through her solicitors, on an open basis, that either Mr Bond resign, or both trustees resign and appoint an independent trustee company. Not long afterwards, having used up the $10,000, Ms Platun ended her legal representation.
[88] On 9 February 2016, Mr Bond, through his solicitors, accepted the offer for an independent trustee to be sole trustee, subject to a number of prior “practicalities”, including that the actual amount of school fees “currently $25,000” would be paid from the fund and agreement as to risk returns. The parties were unable to agree on these practicalities, including resolutions outlining wishes for the incoming trustee.
Ms Platun’s position
[89] Ms Platun’s position at the hearing was that she wished to remain a trustee, and that it was an important way for her to stay true to her sister’s legacy and to stay close to Athena. She disputes all of the allegations made against her.
The case for Mr Bond
[90] Mr Bond says that Ms Platun has failed to act impartially towards him, demonstrated inter alia by the following:
(a)Ms Platun’s request (in about December 2011) that any distribution paid to Mr Bond should be applied to Athena’s education.
(b)Ms Platun’s statement, in evidence, that it was agreed when the Platun Trust was set up, that there would be discretion to use all or part of Mr Bond’s share if necessary for Athena’s education, which she then recanted.
(c)Ms Platun’s “refusal” to agree to sell the Waimauku house unless her “compromise” position as set out in her email of 17 February 2012 was agreed.
(d)Ms Platun’s “palpable resentment” at Mr Bond’s entitlement from the trust, including several references in this proceeding to the fact that she had received payment of only very minor expenses, while Mr Bond has received a very substantial distribution; her statements in evidence that Mr Bond and Ms Storey want to get as much money out as possible to meet short-term needs and that Mr Bond wanted as much of his share of the capital as she would agree.
(e)Her references to the assets of the trust, as if they came from Theresa alone, which was driving her position.
[91] As to the claim that Ms Platun has taken an inflexible position regarding retention of capital, Ms Harrington submits that Ms Platun “single-mindedly pursued the principle that as much as possible of [Athena’s] education should be paid from income and as little as possible from capital so that the capital would be preserved”. Ms Harrington submits that sending Athena to St Kentigern’s which “both trustees have agreed best meets her needs”, may not allow that ideal outcome. She points out that it is contemplated by the trust deed that the trustees can apply the whole or any part of the trust fund for the maintenance, education or advancement of the beneficiaries.
[92] In terms of trust dysfunction, Ms Harrington submits, in addition to the above matters, that since the end of 2011, the decisions of the trustees have been fraught with difficulty, such that the interests of the beneficiaries are compromised. She refers, for example, to long delay and difficulty over achieving sale of the Waimauku house and distribution of the sale funds; disagreement over many other issues; delays over annual accounts and significant costs having been incurred in getting decisions made. Ms Harrington says that Ms Platun has an “intractable mindset” and, in general, is very difficult to deal with. Ms Harrington submits that the failure of Ms Platun to agree to Mr Bond’s request “to fund schooling fees (estimated at $25,000 per annum)”, without
imposing a condition that no further increase would be requested, was simply the last straw.
Decision
General observations
[93] I have taken the facts broadly as they appear from the documents. The parties gave evidence, but it was mainly as to their interpretation or view of what happened. In fact, the documents substantially speak for themselves.
[94] I found, as I said during the trial, both of the trustees to be honest people who are well-intentioned. I consider they are both concerned to do the right thing by the trust. Ms Platun is very earnest and a bit pedantic in her approach. She seems to have got various ideas in her head at different points, and got a bit stuck on them. However, she is clearly not unshakeable and she is not necessarily “wrong”.
[95] Mr Bond is quite mild-mannered. I had the impression that Ms Storey was calling the shots, as is reasonably apparent from the correspondence. While Ms Platun is at times too rigid, Mr Bond/Ms Storey seem to take the approach that she must agree with their proposals, which is not necessarily so. Ms Storey, in particular, has become very impatient with Ms Platun.
Failure to act impartially?
[96] I turn to the contention that Ms Platun has failed to act impartially towards Mr Bond.
[97] The first point in this regard, is that the trustees are not directed to treat the beneficiaries equally. They have a duty to consider the interests of each. The trust deed provides that Athena is to receive not less than 50 per cent. There is no similar minimum stipulation for Mr Bond.
[98] Initially, the capital was tied up in the house that was being used by both beneficiaries, so they benefited equally.
[99] Once the house was rented out, it was agreed that the rent be divided equally, so the beneficiaries continued to benefit equally.
[100] The parties probably had not contemplated a sale of the house, or any capital distribution, until Athena was somewhat older, though they were free to agree to do so, if there was need.
[101] When Mr Bond proposed that the house be sold, and a 50 per cent distribution made to himself, Ms Platun would have been taken aback. This was effectively a severance of the trust. It seems she was open to Mr Bond receiving 50 per cent, but she wanted him to then fund Athena’s education costs, so that the other 50 per cent would be preserved for Athena. I agree that was somewhat over-preferring Athena. However, I consider Mr Bond’s proposal was arguably somewhat over-preferring himself, and in any event, was a matter for the trustees’ discretion, not an entitlement. More importantly still, Ms Platun’s proposal was just part of an ongoing discussion. It is not possible to extract and rely on one email in a long course of correspondence. The facts have to be viewed as a whole.
[102] Similarly, Ms Platun’s email of 17 February 2012, was not a “refusal” to sell the Waimauku house. It was a firm statement of preference. By the end of that same month, she had suggested the parties needed to meet.
[103] These were significant decisions for this trust and of significant impact in terms of true capital preservation, particularly vis-a-vis Athena’s “share”. There was no urgency. It was entirely reasonable that the parties debate it.
[104] Importantly, it was then agreed that there be a mediation, and at the mediation, the parties agreed, very fairly, on a substantial capital distribution to Mr Bond, (two- sixths of the fund), “free from the trusts of the deed”. There was no obligation to do so. They also agreed on a scheme going forward, whereby Mr Bond stood to
potentially receive a further one-sixth share, (or part thereof, depending on financial performance), either when Athena turned 18 or when she turned 21.
[105] It cannot be said that the mediated resolutions showed a lack of impartiality towards Mr Bond, on the part of Ms Platun.
[106] Since the mediation, there has been no request from Mr Bond for a further distribution, or other consideration as a beneficiary, of which I am aware.
[107] Any allegation of lack of impartiality up to the date of the mediation (which I do not consider to have been material in any event), was spent by the mediated resolutions.
[108] There is a lack of any relevant evidence in support of such an allegation, since the mediation.
[109] The other points Mr Bond relies on in this regard, including certain statements made by Ms Platun in evidence, I do not consider to be relevant. I view Ms Platun’s comparison of payments she has received from the trust for expenses, to the payments made to Mr Bond, more as attempts by Ms Platun to stand up for herself in the face of significant criticism. Her statement about the original agreement/intention of the trust, I view more as an incorrect statement under the pressure of giving evidence. Points such as this, are not evidence of lack of impartiality towards a beneficiary, or in the administration of trust affairs. If they are, they are clearly insufficient. Further, it is true that there is no financial or other gain to Ms Platun whatsoever out of this trust. I am sure that, in fact, she is significantly out of pocket in her attempts to do what she sees as the right thing by the trust.
[110] I do not consider Ms Platun has exhibited a lack of impartiality towards Mr Bond that could possibly justify her removal as a trustee.
Inflexible view as to retention of capital?
[111] I agree that Ms Platun did want as much as possible of the private school fees paid from income, so that the capital could be preserved.
[112] Even before that, when the proposal to sell the house arose, Ms Platun was concerned about a sale and wanted, at a minimum, to have distributions agreed beforehand. I consider that was reasonable. There was nothing axiomatic about Mr Bond’s receiving a substantial capital sum.
[113] Nonetheless, the trustees did agree at the mediation, to convert the house to cash, and to distribute a substantial capital sum to Mr Bond. This was not the mark of a trustee who was adopting an inflexible view as to retention of capital.
[114] Further still, the mediated resolutions reflected the trustees’ decision regarding the balance between preserving the (reduced) capital and meeting short-term needs, at least for a reasonable period to follow. They agreed to pay $20,000 per annum for school fees and not more, unless inflation allowed. At that time, a conservative return on the remaining capital (about $380,000) was very unlikely to cover the running costs of the trust, and provide $20,000 per annum, after tax. This is demonstrated by what has happened since.
[115] It is true that the mediated resolutions did not close the door on further agreement to pay more still out of capital. It must always be open for trustees to review previous decisions. But it could well have been understood by Ms Platun, given the wording of the resolutions and the fact they were drawn by a trust expert, that there was no obligation to reconsider the $20,000 sum, except in the circumstances identified in the resolutions.
[116] Further, while flatly opposed to the increase to $25,000 to begin with, Ms Platun did nonetheless exchange proposals over it. When I explained to Ms Platun during the hearing, the need to still be open to reconsideration, and to further reduction of capital, she was receptive to it.
[117] I do not consider it can be said that Ms Platun adopted an inflexible approach to retention of capital, particularly in light of the mediated resolutions, and the fact
they were mediated through a trust law expert. The mediated resolutions were addressing the very issue of the balance between capital and income: how much (if anything) to distribute to Mr Bond and how much to apply to expensive private school education.
[118] I note that, in closing submissions, Ms Platun indicated she would agree that the $25,000 education payment need not be capped, and that it may be increased in extraordinary circumstances. I do not take this into account, but it may be helpful for the parties to further the discussion.
Trust dysfunction?
[119] In opening submissions, Ms Harrington accepted that, until 2012, the management of the trust was relatively uneventful. She says this was largely because the trust had little to do.
[120] I do not agree. In particular, there were the issues around the move by Mr Bond and Athena out of the Waimauku house in late 2006, and its rental. Mr Bond initially (wrongly) treated the rental issue as a decision solely for himself. Ms Platun correctly pointed out it was not. Nonetheless, that decision and process flowed quickly and smoothly. As I understand it, there were also changes of tenancy that would have had to be agreed.
[121] Since 2012, the trustees have managed, albeit through a mediation, to agree to sell the Waimauku house in 2013, and to make a substantial distribution to Mr Bond from the consequent cash fund. They also agreed to make significant annual distributions to fund Athena’s education costs. The parties were able to take all steps to complete the sale. They have since both signed-off annual accounts, consulted with financial advisers and agreed on a financial plan.
[122] Mr Bond says that each of these decisions was “fraught with difficulty, such that the interests of the beneficiaries and the proper administration of the trust has been jeopardised”.
[123] I agree that there obviously were difficulties, but I do not agree that they went to the extent submitted.
[124] At the beginning of the difficult period (about December 2011), I consider that Mr Bond and Ms Platun agreed to another year of renting out the Waimauku house, and that agreement was then revisited by Ms Storey. That does not promote a ready “re-negotiation”, particularly in someone like Ms Platun, who has a tendency to be black and white.
[125] Since February 2012, Ms Storey seems to have largely taken over from Mr Bond, though she is not of course a trustee. It seems to me that has not helped the communication process. (I accept, however, that Ms Storey has carried the burden, no doubt very capably, of a fair part of the trust administration.)
[126] The decision to sell the Waimauku house was not an easy one. Over the long term, the New Zealand property market has been such that property investment returns have tended to exceed the return on other investments that might be considered suitable for trustees such as these parties. There were alternatives, such as continuing to rent out the house, but paying the full rental towards Athena’s education costs, and also borrowing against the house to some extent. If it was burdensome to Mr Bond to manage the rental, then an agent could have been engaged to do so. Another alternative would have been for the Platun Trust to co-own Ms Storey and Mr Bond’s accommodation, freeing up 50 per cent of the fund, but still preserving and growing the balance.
[127] However, just as Ms Platun was reluctant to agree to a sale, Ms Storey/Mr Bond were insistent that a sale was the only option.
[128] Despite Ms Hawkins’ view to the contrary, it was not unreasonable, particularly in circumstances where there was no urgency, for Ms Platun to have taken time to think about the decision and to request that there be agreement first as to allocation of the proceeds.
[129] In any event, the parties agreed to go to a mediation. Ms Harrington suggests that Ms Platun was to blame for this, and for the costs incurred. But the idea did not come from Ms Platun. Mr Bond had already involved his own lawyers and had consulted Mr Goodwin. I conclude from the correspondence that it was Mr Goodwin who suggested the mediation. Ms Platun was wanting to just meet as trustees, but she took up the mediation proposal. Further, it seems, again from the correspondence, that Ms Platun suggested the parties be unrepresented, and that was not agreed to by Mr Bond.
[130] The mediation was very expensive. It cost a staggering $65,000. The parties agreed to take that course. Neither of them would have reasonably foreseen costs, remotely to the order rendered. But to the extent anyone is to be blamed for the costs, it would be Mr Bond, not Ms Platun.
[131] The trustees reached full agreement at the mediation, on a number of important points: in fact, all of the points required to enable the trust to move forward. These resolutions were then implemented. The implementation process was not smooth, but it was all managed. The disagreements were only of a relatively minor nature. It could not have been said that the trust was dysfunctional.
[132] Only seven months after the mediated resolutions had been agreed and signed, and one month after Mr Bond had received his distribution, Ms Storey wrote to Ms Platun advising that Athena would be attending St Kentigern’s and requesting an increase in annual drawings from $20,000 to $25,000. As will be apparent from my description of the resolutions, this was contrary to the resolutions that the parties had formally agreed, after considerable effort and cost.
[133] When the increase was not agreed, or not agreed on terms acceptable to Mr Bond, the proceedings were issued. It does not seem to me to be at all reasonable that Ms Platun be removed as a trustee, in essence for declining to agree to vary a resolution that had been so difficult to achieve not long beforehand. The mediated resolutions were themselves very substantially along the lines that Ms Storey/Mr Bond then wanted. Mr Bond had just received a very substantial
distribution. He could have funded the extra $5,000 himself and revisited the issue later. He could have approached the school for a partial subsidy.
[134] It is significant that, before proceedings were issued, and after a series of communications between the parties, they managed to agree to an investment plan, which Mr Bond has not implemented.
[135] As to alleged delays on Ms Platun’s part, on the whole, it seemed to me that Ms Platun was timely with her correspondence and attendances. When she requested time, it was in circumstances where there was no urgency, such that the request was reasonable.
[136] Although much was made at the hearing over difficulties and delays in preparation and filing of accounts, it did not seem to me that there were particular difficulties, other than Ms Storey becoming exasperated from time to time by Ms Platun wishing to take time to properly review them. As Mr Bond acknowledged, all accounts were filed on time. Ms Holmes accepted that, although she gave evidence as to a number of defaults on Ms Platun’s part, she had not raised any of them with Ms Platun beforehand.
[137] I accept that the trust is currently somewhat dysfunctional, but not such that the interests of the beneficiaries and the proper administration of the trust are adversely affected.
[138] Furthermore, I do not consider the reason for any current dysfunctionality can be fairly laid at Ms Platun’s door. I accept she has played a part in it, as is invariably the case. I accept that she has at times been a bit difficult and appeared somewhat inflexible. But the main reason for dysfunctionality, is Mr Bond’s (and Ms Storey’s) resorting to lawyers and in this instance to a Court proceeding, basically over the issue of increasing the $20,000 annual education payment to $25,000. Other than that, there had only been niggly issues since the December 2012 mediation, which had itself resolved all substantial issues.
[139] The other material current problem with the function of the trust, can also be laid at Mr Bond’s door, namely his refusal to implement the agreed investment plan.
Conclusion
[140] For the reasons stated, I do not consider Ms Platun should be removed on account of impartiality, inflexibility over retention of capital, or trust dysfunction. I do not consider these allegations are made out, certainly not to the extent that would be required for purposes of s 51.
[141] I am also mindful of the tragic circumstances from which this trust stems, and Ms Platun’s longstanding commitment to the Platun Trust and to Athena.
[142] I repeat that I was impressed with both Mr Bond and Ms Platun in the witness box. They came across as decent, honest people. I am sure Ms Storey is the same.
[143] Ms Platun is clearly prepared to continue to run the trust with Mr Bond. My impression is that she likes both Mr Bond and Ms Storey, despite what has happened.
[144] My impression is that Mr Bond may not be prepared to have dealings with Ms Platun. I hope that is wrong. If it is correct, then he has the option of resigning, and someone can be appointed in his stead.
[145] If Mr Bond is to continue, he needs to get on and implement the investment plan, or if it is now redundant, the trustees need to agree a new one. The only other issue that is outstanding seems to be the question of whether to alter the agreed education payment, which I believe the parties can resolve over time. It might be helpful for them to speak briefly (individually or together) to Mr Grant.
[146]I dismiss the application.
[147] I am unsure whether there are outstanding issues as to costs or disbursements, following on from earlier directions by Associate Judge Sargisson. If there are, the parties should file memoranda by 31 January 2017.
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Hinton J
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