Candida Trust

[2024] NZHC 976

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2024-485-173

[2024] NZHC 976

IN THE MATTER

of the CANDIDA TRUST

UNDER

Part 19 of the High Court Rules 2016

AND

UNDER

Sections 122–125 of the Trusts Act 2019 and the inherent jurisdiction of the High Court to supervise the administration of trusts

BETWEEN

RAYMOND GOUBITZ and CANDIDA TRUSTEE COMPANY LIMITED

Applicants

Hearing:	On the papers
Counsel:	K H Lawrence and A S Cavanaugh for Applicants
Judgment:	29 April 2024

JUDGMENT OF RADICH J

[1]                  The applicants, who are the trustees of the Candida Trust (the Trust), seek an order under s 125 of the Trusts Act 2019 waiving the requirement that remote relatives of the settlor  provide  their  consent  to  a  deed  of  variation  of  the  Trust  dated  12 December 2023.

[2]                  Orders are sought, in addition, under the inherent jurisdiction of the Court confirming that the grandchildren of the settlor are not required to consent to the deed

RE CANDIDA TRUST [2024] NZHC 976 [29 April 2024]

of variation or, in the alternative, an order under s 125 of the Trusts Act waiving their consent.

[3]                  Finally, a direction is sought under the inherent jurisdiction of the Court confirming that the applicants as trustees may sign a new restated Trust deed incorporating the deed of variation and that they may use this as their operating document.

[4]                  The orders are sought because, as matters stand, the Trust will vest well before the settlor had intended it to which will cause significant adverse tax consequences.

Directions for service, representation and conduct of proceeding

[5]                  In my minute of 26 March 2024, I made orders, on the applicants’ without notice interlocutory application, granting leave for the proceeding to be commenced by originating application and dispensing with service of the application and supporting documents on beneficiaries of the Trust.

Background

[6]                  The Trust was settled by  Klaus  Girardet  by  deed  dated  15  April  1980. Mr Girardet died in 2022 and was survived by his wife, Dagmar Anja Lily Girardet.

[7]                  Mr and Mrs Girardet had three children together, being Stephanie Katja Bertha Girardet (Stephanie), Antonia Barbara Elisabeth Girardet (Antonia) and Sibilla Anja Beate Girardet (Sibilla). The Trust will vest on the death of Mrs Girardet. It is sufficiently clear from  the  evidence  that  that  was  not  the  settlor’s  intention.  Mrs Girardet was born on 28 May 1938 and is now 85 years old.

[8]                  The Trust holds significant assets including shares in Candida Stationery Ltd and Candida Office Park Ltd, a property holding company. If the Trust vests, there will be significant adverse tax consequences. As Mr Pavis, the company’s accountant, explains in his evidence, depreciation accumulated by the Trust amounting to over

$3,300,000 would become payable, despite there being no sale of assets, which would be a significant burden for the Trust and its beneficiaries.

The beneficiaries of the Trust

[9]Mrs Girardet is a life tenant, or income beneficiary, of the Trust.

[10]              Stephanie, Antonia and Sibilla are discretionary and final beneficiaries of the Trust.

[11]The Trust deed provides that, on the vesting date:

(a)Stephanie, Antonia and Sibilla, as discretionary beneficiaries, will receive the Trust fund equally if they have turned 30;

(b)if any of Stephanie, Antonia and Sibilla die before turning 30, then their children who reach the age of 20 will benefit instead;

(c)if any of Stephanie, Antonia and Sibilla die before turning 30 and do not leave children who reach the age of 20, then the surviving discretionary beneficiaries (or children inheriting in their stead) will receive the share instead; and

(d)if none of Stephanie, Antonia and Sibilla are living on the vesting date, then the trust fund will revert to Mr Girardet or, if he is not living, his brothers and sisters and, if they are not living, his nieces and nephews (together, “Mr Girardet’s remote relatives”).

[12]              Stephanie, Antonia and Sibilla have all reached the age of 30. Accordingly, it is clear that their children will not benefit from, and are not beneficiaries of, the Trust.

[13]              Mr Girardet’s remote relatives are contingent beneficiaries of the Trust in the event that the Trust vests and, at that date, none of Stephanie, Antonia and Sibilla are living.

The 2013 deed of variation

[14]              Purportedly, the Trust was varied by a deed dated 16 July 2013. The 2013 deed of variation was signed by Mr Girardet, Mrs Girardet, Stephanie, Antonia and Sibilla.

It sought to vary the terms of the Trust by unanimous agreement of all of the beneficiaries. Among other things:

(a)it purported to extend the vesting date of the Trust to the death of the last of Mrs Girardet, Stephanie, Antonia and Sibilla; and

(b)it purported to vest the power  to  appoint  and  remove  trustees  in Mr Girardet, on his death in Mrs Girardet, and on her death in Stephanie, Antonia and Sibilla.

[15]              However, the 2013 deed of variation was not signed by Mr Girardet’s remote relatives – the contingent final beneficiaries. Therefore, it was not effective.

[16]              This has caused a pressing issue because, as a result, the vesting date remains the death of Mrs Girardet.

The 12 December 2023 deed of variation

[17]              The trustees, Mrs Girardet, Stephanie, Antonia and Sibilla, have signed a deed of variation dated 12 December 2023 pursuant to s 122 of the Trusts Act. It is intended to extend the vesting date of the Trust, to reflect the wishes of Mr Girardet that his descendants would benefit from the Trust, safeguard the Trust for the benefit of future generations and to modernise the terms of the Trust.

[18]              The 2023 deed of variation will not take effect unless or until the High Court waives the requirement for Mr Girardet’s remote relatives to consent to the variation under s 125 of the Trusts Act.

1. By way of summary, the 2023 deed of variation:

(a)extends the life of the Trust to 125 years;

(b)includes the descendants of Stephanie, Antonia and Sibilla as additional discretionary beneficiaries and provides for the priority of those discretionary beneficiaries;

(c)removes Mr Girardet’s remote relatives as contingent final beneficiaries;

(d)vests the power to appoint and remove trustees in Mrs Girardet and, on her death, in Stephanie, Antonia and Sibilla;

(e)includes a power for the trustees to appoint and remove discretionary beneficiaries and a power to vary the Trust deed; and

(f)updates the Trust deed to reflect modern drafting practice and the provisions of the Trusts Act 2019 through the inclusion of provisions relating for example to default duties, trustee retirement, appointment and removal and independence in trustee decision-making where it is contemplated that a trustee will receive a benefit from the Trust.

[20]              If the requirement for other consents is waived, it will take immediate effect under s 122 of the Trusts Act as a variation by unanimous agreement of the beneficiaries.

[21]              While the changes are numerous, trust drafting practice has evolved considerably during the 40 years since the Trust was settled.1

Waiver of the requirement that Mr Girardet’s remote relatives provide their consent to the December 2023 deed of variation

[22]              Under s 125 of the Trusts Act, the Court may waive the requirement that any particular beneficiary or class of beneficiaries consent to a proposed variation. Their consent is otherwise required under s 122.

[23]Under s 125, the Court must take into account the following factors:

1      See, for example, Re Drummond [2023] NZHC 847 where a similarly extensive deed of variation was approved on behalf of minors and unborn beneficiaries under s 124 of the Trusts Act 2019 in recognition, amongst other things, of the benefits in updating the trust deed in light of modern drafting practice and the Trusts Act.

(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.

[24]              The power of waiver in s 125 was included on the Law Commission’s recommendation so that the Court could ensure that beneficiaries with “interests of a remote or negligible nature” would not stand in the way of variations which were “desired by beneficiaries with far more significant interests”.2

[25]              The interests of Mr Girardet’s remote relatives are particularly limited. They are contingent final beneficiaries only in the event that the Trust vests but none of Stephanie, Antonia and Sibilla are living at that date. Given Mrs Girardet’s advanced years it seems unlikely that that contingency would be realised.

[26]              Accordingly, the detriment to Mr Girardet’s remote relatives is limited. However, if the waiver is granted, the benefit to Mrs Girardet, Stephanie, Antonia and Sibilla are significant.

[27]              The intentions of Mr Girardet, as settlor, can be discerned in part from the terms of the original Trust deed. In cl 10 it was provided that it was his wish that the trustees should, in the exercise of their powers, make provision for his immediate family. They are the only people referred to as individuals he expected to receive a benefit.

[28]              Moreover, Raymond Goubitz (one of the trustees) and Mrs Girardet have both confirmed in affidavit evidence that they understood that Mr Girardet’s siblings and children were only ever expected to benefit in the event that his immediate family did

2      Law Commission, Review of the Law of Trusts: A New Trusts Act for New Zealand (NZLC R130, 2013) at [10.14].

not survive and  that  the  position  of  the  remote  relatives  became  outdated  as  Mr Girardet’s daughters grew up and had families of their own.3 As Mrs Girardet has said, she does not recall him talking about his siblings or their children benefiting. He was focused only on his own family and ensuring that his children and their children were looked after.   Mrs Girardet has said that, when the possibility of consulting   Mr Girardet’s extended family in Germany about  varying  the  Trust  was  raised, Mr Girardet was adamant that they were not to be involved. He did not think that would be appropriate since the Trust was established for his immediate family.

[29]              The Court has exercised its powers under s 125 in a number of cases to waive the interests of beneficiaries in circumstances that are similar to those here.4 Like here, the cases enabled variations of trusts in the interests of beneficiaries with significant interests and without the need for involvement on the part of those whose interests were remote and, essentially, redundant.

[30]              Accordingly, I see it as appropriate that the requirement that Mr Girardet’s remote relatives’ consent to the 2023 deed of variation should be waived.

Consent of Mr Girardet’s grandchildren

[31]              Stephanie has two children, Antonia has no children and Sibilla has three children. Stephanie and Sibilla’s children are all over the age of 18.

[32]              While there are some imperfections in the drafting of the original deed, it is sufficiently clear that Stephanie and Sibilla’s children are no longer contingent final beneficiaries of the Trust as Stephanie and Sibilla have in each case reached the age of 30.

3      The applicants observe that the affirmation of Mrs Girardet is defective in a minor respect in the sense that she crossed out “swear” and elected to “affirm” but without the affidavit recording that she “solemnly and sincerely affirmed. I am content to amend that defect under r 1.9 of the High Court Rules 2016.

4      For example, Ruby v Ruby [2022] NZHC 282, Re Jury [2022] NZHC 568, Re Tau [2023] NZHC 2544 and Talijancich v Talijancich [2021] NZHC 753.

[33]              Accordingly, it is appropriate for the Court to confirm that the grandchildren of Mr Girardet are not required to consent to the deed of variation. Waiver will in fact be in their best interests.

Restated Trust deed

[34]              On the basis of the orders the Court will make, the deed of variation will take effect. A direction under the Court’s inherent jurisdiction confirming that the applicants as trustees may sign a new restated Trust deed which incorporates the terms of the December 2023 deed of variation, and to use this as their operating document from here, is appropriate in the circumstances.5

Costs

[35]              Because the application has been brought by the trustees reasonably and in good faith, an order is appropriate to confirm that all costs relating to this proceeding are payable from the Trust fund in accordance with their rights under s 81 of the Trusts Act to an indemnity.

Orders

[36]I make the following orders and directions:

(a)an order under s 125 of the Trusts Act 2019 waiving the requirement that the brothers, sisters, nieces and nephews of the settlor of the Candida Trust provide their consent to the deed of variation dated    12 December 2023;

(b)an order under the inherent jurisdiction of the Court confirming that the grandchildren of the settlor are not required to consent to the deed of variation dated 12 December 2023;

(c)a direction under the inherent jurisdiction of the Court confirming that the applicants as trustees may sign a new restated trust deed

5      The Court is empowered to act effectively in the supervision and management of trusts: Clarke v Karaitiana [2011] NZCA 154 at [38].

incorporating the deed of variation and that they may use the new restated trust deed as their operating document; and

(d)an order that the applicants’ costs relating to this proceeding be paid from the Candida Trust on a solicitor-client basis.

Radich J

Solicitors:

Greg Kelly, Trust Law, Wellington