Borthwick
[2023] NZHC 3685
•14 December 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2023-485-747
[2023] NZHC 3685
UNDER the Trusts Act 2019 and the Inherent Jurisdiction of the High Court IN THE MATTER
of the Te Whanga Farm Trust, the Pukimuke Trust and the Te Whanga Trust
BETWEEN
ROBIN GAY BORTHWICK AND GUY COLDHAM WILLIAMS
First Applicants
AND
AND
ROBIN GAY BORTHWICK, GUY
BENNETT SARGENT AND GRAEME ALBERT BAYLISS
Second ApplicantsROBIN GAY BORTHWICK, PATRICK ANDREW BORTHWICK, GUY BENNETT SARGENT AND GRAEME ALBERT BAYLISS
Third Applicants
Hearing: On the papers Appearances:
A S Butler KC, E M S Cox and D Viatos for Applicants V T M Bruton KC, N L Walker and M C Grant for
Belinda Murray
Judgment:
14 December 2023
JUDGMENT OF LA HOOD J
Re BORTHWICK [2023] NZHC 3685 [14 December 2023]
Introduction
[1] The trustees of the Borthwick Trusts apply for blessing orders of the Court to enter into a deed of settlement and vary the trusts to give effect to a settlement agreement. The orders sought are necessary to resolve a dispute between the trustees and Belinda Murray, a discretionary beneficiary of a trust among the Borthwick Trusts. The applicants are trustees of the Borthwick Trusts and apply for the orders jointly with Belinda.
Background of the Borthwick Trusts and how they came to be
[2] The Borthwick Trusts are comprised of the Te Whanga Farm Trust, the Pukimuke Trust and the Te Whanga Trust. The purpose of the Borthwick Trusts has been to act as a vehicle for holding the family’s agricultural assets and supporting its operations. The Te Whanga Farm Trust, for example, has held the majority of the family’s assets for about six decades.
[3] The Te Whanga Farm Trust was settled by Patrick John Borthwick for the benefit of his sons and wife in December 1968. In August 1970, Patrick John’s son, Robin John Borthwick settled Waitui Trust. That trust has now been wound up. In September 1988, Patrick John appointed the whole of the residue of the capital and income of the Te Whanga Trust to Robin John and Patrick John’s remoter issue. In June 2001, Robin John and his wife, Robin Gay settled the Pukimuke Trust, identifying four classes of beneficiaries: class A being Robin John and Robin Gay; class B being their children, Patrick Andrew and Belinda; class C being any children or grandchildren of Patrick Andrew and Belinda; and class D being the trustees of Te Whanga Farm Trust. In November 2015, Robin John and Robin Gay settled the Te Whanga Trust in anticipation of a restructure of the assets in December 2015.
[4] The restructure involved Te Whanga Farm Trust selling all of its assets to the Te Whanga Trust. The purchase price was approximately $12 million. The Pukimuke Trust sold two blocks of land to the Te Whanga Trust for approximately $800,000. Some liabilities associated with the Te Whanga Farm and Pukimuke trusts were also transferred to the Te Whanga Trust. The Te Whanga Farm Trust was then wound up.
[5] In 2019 the trustees of the Pukimuke Trust formed their intentions as to the distribution of the trust assets on the passing of Robin Gay (when it occurs). Belinda was not happy with those intentions. In 2022, through solicitors, Belinda raised a claim against the trustees of the Te Whanga Farm Trust, the Pukimuke Trust and the Te Whanga Trust challenging the legality of the 2015 restructure and the intended distribution.
The orders sought to give effect to the settlement
[6] Following mediation, the parties have come to a settlement agreement to resolve the dispute. It is that settlement agreement that they ask the Court give effect to through granting the orders sought. The settlement involves two aspects. Belinda (or her nominee) will receive the transfer of substantial land assets. In turn, Belinda and her children will be removed as beneficiaries.
[7] The benefit Belinda (or her nominee) will receive is the transfer of two blocks of land, free of charges and liabilities, amounting to 368 hectares of grazing hill country, valued at about $5.7 million. The land will come with no obligation, with Belinda being free to farm, lease, subdivide or sell the land. Belinda will also be discharged from any of the Borthwick Trusts’ liabilities and any financial support obligations relating to Robin Gay.
[8] The benefit to the remaining beneficiaries includes retaining the farming assets within the same entity, and increasing the likelihood of the on-going viability of the farming operation. The settlement preserves the ability of Te Whanga Trust’s trustees to service and organise the debts associated with trust assets. The proposal maintains the ability of Borthwick Trust to continue financially supporting Robin Gay. And, the farming operation continues to remain in the Borthwick family name with certainty of ownership.
[9] The nature of the benefits is not financial alone. The settlement agreement brings to an end a dispute which has been the source of significant family tension since 2019. Varying the trusts in the manner sought will allow the family to move past the dispute and begin to rebuild relationships.
[10]Under the proposal, the application seeks:
(a)leave to commence these proceedings by way of originating application under pt 19 of the High Court Rules 2016;
(b)service on the beneficiaries of the Borthwick Trusts to be dispensed with under r 7.23 of the High Court Rules;
(c)blessing of the trustees’ decision to enter into the settlement deed of 13 November 2023 between the applicants and Belinda under s 133 of the Trusts Act 2019;
(d)blessing of the Te Whanga Trust’s trustees to transfer to Belinda (or her nominee) the two blocks of land known as Waitui and Pukemuki under s 133 of the Trusts Act;
(e)approval on behalf of the minor, unborn and future beneficiaries of the Borthwick Trusts of the following variations under s 122 and 124 of the Trusts Act:
(i)excluding Belinda and her children permanently as the beneficiaries of Pukimuke Trust;
(ii)appointing Belinda a discretionary beneficiary of the Te Whanga Trust for the sole purpose of receiving the land transfer and then excluding her as a discretionary beneficiary immediately after the transfer;
(iii)that Belinda, her children or her grandchildren cannot receive any of the Borthwick Trust property in a final distribution; and
(f)an order that the names and identifying details of the parties and properties be redacted in any publicly available publication of the Court’s reasons.
Applicable legal principles
[11] Section 124 of the Trusts Act empowers the Court to approve a variation of a trust on behalf of any beneficiaries who lack capacity; who may acquire a beneficial interest at a future date; and future persons who may be beneficiaries. The provision requires the Court to take into account 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; and
(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.
[12] It is the Court’s supervisory capacity that is called upon under s 124.1 The principles to be applied in this capacity have been summarised as follows:2
(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.
1 Talijancich v Talijancich [2021] NZHC 753 at [13].
2 Gavin v Gavin [2021] NZHC 550 at [15]. See also McKnight v Craig [2010] 3 NZLR 860 (HC) at [7]–[8]; Re MacAlister [2021] NZHC 3572
(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.
[13] The above comes into play under s 122 of the Trusts Act, which is an expanded encapsulation of the rule in Saunders v Vautier.3 The provision allows for beneficiaries of a trust to vary the terms of the trust where there is unanimous consent in the following terms:
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
3 Saunders v Vautier (1841) 41 ER 282; and see Law Commission Review of the Law of Trusts: Preferred Approach (NZLC IP31, November 2012).
(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.
[14] In relation to the orders sought here to enter into the settlement agreement and the transactions to give effect to it, s 133 applies. Section 133 of the Trusts Act provides that a Court has the power to give any direction it thinks fit to trustees. One of the categories where directions may be sought is where the trustees are making a “momentous” decision and “wish to obtain the blessing of the court for the action on which they have resolved and which is within their power”.4 For example, relevantly, a decision by the trustees to sell a family estate or to sell a controlling holding in a family company. Where the trustees seek a blessing order of this kind, the Court’s role is to ensure that the trustees can properly form the view that they have reached. It is not the Court’s role to say how it would have exercised the discretion.5
Decision
[15] The application is brought with the consent of all adult beneficiaries; there are no contested questions of fact; the proceedings are straight forward and the orders are being sought by consent. It is in the interests of justice to secure the expeditious and inexpensive determination of the application without the unnecessary cost or complexity that would come with full pleadings, discovery and the like. Belinda has confirmed support for the application in her affidavit. I grant leave to bring the application under pt 19 of the High Court Rules.
[16] For similar reasons, I consider service requirements can be dispensed with. All adult parties affected by the application have provided written consent to the proposal and there is no opposition to the proposal. One minor beneficiary has provided her
4 Public Trustee v Cooper [2001] WTLR 901 (Ch) at 922-944; referred to in Re Honoris Trust
[2017] NZHC 2957, [2018] 3 NZLR 160 at [42].
5 Re Honoris Trust, above n 4, at [56]-[58].
views through her father and does not wish for a litigation guardian to be appointed on her behalf. I agree that the minor beneficiary’s interests are not affected to the extent to require appointment of counsel. In these circumstances, I consider it is in the interests of justice for service requirements to be dispensed with.
[17] As to the orders varying the trusts as proposed, I am satisfied that the proposal is a proper exercise of the trustees’ powers and required to bring the dispute to an end. As noted above, all adult beneficiaries have expressed support for the proposal; there is no opposition to it; there is no vested indefeasible interest in the Borthwick Trusts held by the minor, unborn or future beneficiaries that would prevent the variation from being made. I have had regard to the nature of the interests the parties currently enjoy in the property of the Borthwick Trusts and the effect on those interests if the orders were to be made. As outlined above, in [7]-[9], all parties are set to benefit from the settlement being given effect to, which includes the benefit of avoiding costly and time-consuming litigation. Not only will that benefit be financial in nature, but also to be considered are the intangible benefits of bringing a tense family dispute to an end and the certainty that settlement will bring. The variations are consistent with the settlor’s intentions to maintain the farming operation in the Borthwick family name.
Result
[18] Leave is granted for the proceeding to be commenced by way of originating application. Service requirements are dispensed with. The orders sought at [1](a)-(e) of the originating application are made.
La Hood J
Solicitors:
Gibson Sheat, Wellington Russell McVeagh, Wellington
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