Claydon v Symonds

[2012] NZHC 2501

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-000891 [2012] NZHC 2501

IN THE MATTER OF     JOHN FRANCIS ALFRED CLAYDON ESTATE

BETWEEN  DARREN JOHN CLAYDON Plaintiff

ANDCAROL LINDA SYMONDS ELIZABETH ROBYN DRABBLE Defendants

Hearing:         20 September 2012

Appearances: A G Whitcombe for Applicant

O T Alpers for Defendants

Judgment:      20 September 2012

ORAL JUDGMENT OF FOGARTY J

[1]      This is an application by Darren Claydon for the trustees of the estate of his father to be removed and replaced by the Public Trust.  The assets of the trust stand at present at approximately $190,000.

[2]      The applicant, Darren Claydon, is the only child of his father, John.   His father and mother separated soon after he was born and Darren had little contact with his father until shortly before his father died from cancer.  His father’s will appointed two persons as his executors, Carol Symonds and Elizabeth Drabble, who were friends of John but also well qualified to be trustees.

[3]      After  making  provision  for  the  payment  of  his  debts  and  administration expenses the will provided for the residue of the estate to be divided into seven parts:

three of the shares being one share each to go to a friend, Beverley Lawson, to

CLAYDON V SYMONDS HC CHCH CIV-2012-409-000891 [20 September 2012]

Elizabeth Drabble, one of the trustees, and to her husband Brian Drabble.  The will then provided to hold the four shares on the following discretionary trust:

1         To invest the trust fund as if they were beneficially entitled to it;

2To apply the income and capital of the trust fund for the benefit of such of my son, Darren John Claydon and his children (if any) as my trustees think fit;

3         To add any undistributed income to the capital of the trust fund;

4On the death of my son at such earlier time as my trustees in their discretion think fit, to end the trust by distributing the trust fund amongst such of my said son and his children then living as my trustees think fit.

5My trustees may exercise their discretionary powers when and how they think fit and shall not be under any obligation to make payments to or for the benefit of all my said son and his children nor to ensure equality among those who are benefitted.

[4]      It then provides a further instruction to the trustees:

(e)       If any of the gifts set out above fails, it should be added pro-rata to the gifts which do not.

This last clause is uncertain as to meaning.  It would certainly apply if, for example, on the death of the testator, Brian Drabble had died, and it would make provision for the specific shares to then be adjusted pro rata.

[5]      It was submitted by Mr Whitcombe for Darren that the consequence of this clause (e) is that there was a possibility that one of the trustees, Elizabeth Drabble, might become a beneficiary.    It is not necessary in this judgment to determine whether that is right or wrong.  There is no doubt at the present time that Darren is in good health.  He is in his late thirties.  I am quite satisfied from the evidence that the trustees are proceeding on the basis that he and any children he may have are the

intended beneficiaries of the will after provision of the specific shares to John’s three

friends, Beverley, Elizabeth and Brian.

[6]      Mr Darren Clayton, the applicant, is a sickness beneficiary.  He lives on the West Coast with his mother in his mother’s house.  He pays board to his mother.  As a beneficiary he has to be careful as to any other income or benefits that he has received.  He clearly does not want to disturb receipt of the benefit.  Nor is it in the trustees’ interests for that benefit to be disturbed.

[7]      The amount of money in the trust of $190,000 is a good sum, but it is not a particularly large sum.  The trustees clearly have to anticipate that Darren, who is in good health – I have received no evidence to the contrary – will live to a good age and may or may not have children.  But, in the nature of things, the older he gets in some ways the more his needs may be.  There may be unexpected dental care, for example.  So the setting of the trust, it seems to me, requires the trustees to take a long term view, and to endeavour to keep capital intact and, if need be, hold some income back to accrue capital, but also to, insofar as they can, each year improve Darren’s living conditions by some income distribution.

[8]      I do not want it to be thought that I have said anything in the way of a direction to the trustees.  I am essentially confirming what I have seen of their policy to date; and saying that they are taking the right course in taking a long term view of the trust and of Darren’s needs.

[9]      The relationship between Darren and the trustees has broken down.  This is partly because Darren wanted a large sum of money (about $10,000) to purchase lathes and other equipment, which the trustees refused. And partly because although they agreed to fund him to take a Polytechnic course and paid the money over he did not take the course.  The funds were not refunded.  They were used, it appears, for dental expenses.  At one point the trustees were proposing to increase the amount of distributions.  They paid the sum of $2600 to Darren, who responded by saying that this was disturbing or complicating his benefit.

[10]     There then began some suggestions by Darren that they should be removed, that he would take proceedings in the Family Court and there have been no further distributions to Darren since then, that time being 2011.

[11]     The argument for removal of the trustees was advanced by Mr Whitcombe.  It was premised on the basis that the trustees have the same moral duty to Darren as his father had.  Mr Whitcombe relying for the presence of the moral duty on a judgment in this court of Re Hardie.[1]   In that case it was held the testator could not discharge his moral duty by nominating the sons as beneficiaries of the family trust as they had no enforceable rights to either the assets or income of the trust.  The context of that case was an application for additional relief under the Family Protection Act.  There is no application here.

[1] Re Hardie [2002] NZFLR 229

[12]     There is no doubt that Darren’s father, John, did the right thing by providing for his son in this trust.  There is some evidence that he was concerned that John would not have the ability to handle an outright gift, and that was the reason for a discretionary trust.

[13]     The analysis of the trustees’ duty in terms of inheriting the moral duty of a father is in my respectful opinion not quite right.  We are looking at a situation where the terms of the will were clearly instructed by John before he died in order to give effect to a sense of responsibility he had to Darren and to look after Darren.  Upon his death the duties of the trustees are as fiduciaries, not as persons discharging the father’s moral duty to his son.   They are duties to administer the trust funds and dispose of the trust funds in terms of the will for the benefit of the beneficiaries.

[14]     After   the  provision   for  the   three  specific  beneficiaries   the  principal beneficiary is clearly Darren.  He is a discretionary beneficiary.  In that sense under the terms of the will the capital has not vested in him.  He cannot, for example, call for a winding up of the trust, as the beneficiaries include any children he may have. But it is plain that the intent of the instrument is that the estate funds will be used to his benefit in the discretion of the trustees during his life and also for his children, if

he has them.   This involves, as I have indicated before, taking into account the

possibility that he will have children, but at some future time.  But I do not, and have not, analysed the case in terms of adopting or imposing onto the trustees the moral duty  of  the  father.    I  am  treating  as  having  been  transformed  into  fiduciary obligations by the trustees according to the terms of the will.

[15]     This  court,  the  High  Court  of  inherent  jurisdiction,  has  an  overriding jurisdiction to look after and protect trusts.  In that context it does have the power at common law and under the Trustee Act 1956 to remove trustees.     It is a power which is only reluctantly exercised.  It requires a compelling argument.  I have seen no breach of trust in the life of this trust by the trustees.  What I am seeing is an unfortunate break down in the relationship between the trustees and Darren and a loss of confidence by Darren in the trustees.

[16]     Darren, you are in Court today.  I can only urge on you to have confidence in the trustees.   It is my professional opinion that you are in good hands.   That the trustees are making reliable decisions because they do not know, as you do not know, what lies ahead.  It is prudent for the trustees to preserve capital as much as possible so they will be in a position to meet what might be quite special requirements that you might have, for some unknown reason, at some time in the future.   And, of course, you may have children, and then their needs have to be considered.  So it is my judgment that you are in good hands, and I am not going to remove the trustees.

[17]     The other good  fortune that  you have is that  Mr Alpers is not charging anything  like  the  fees  that  could  be  charged.    The  estate  is  being  run  very responsibly, in my view, and it is a sensible suggestion by Mr Alpers that you communicate with the trustees directly by email and only when you and the trustees cannot reach an agreement you might involve Mr Alpers.   You want to keep the professional costs down on this.   These proceedings themselves are going to be a charge on the estate and that will take funds out of the estate.

[18]     There is little more that I can say.  I do comment upon the proposition, just because it was raised and it was part of Mr Alpers’ argument, that there is no jurisdiction of this Court to give any directions to the trustees because of clause 7.4

of the will.  Clause 7.4 of the will provides that no application can be made under s 68 of the Trustee Act for any directions.

[19]     I am inclined to the view that that clause is contrary to public policy because of the inherent jurisdiction and responsibility of this Court to safeguard trusts.  And, even if it were effective in stopping an application under the Trustee Act, it would not stop the Court exercising its powers under the law of equity to give directions to a trustee.

[20]     I am  satisfied,  however,  on  the  facts,  that  this  is  not  a  case  where  any directions are required.  Rather, the most that I can do is what I have done, which is urge on you, Darren, that you find some way of renewing your confidence in the trustees, and essentially in the judgment of your father naming persons he could trust to look after you.  I think from what I have seen that his judgment was sound.

[21]     That completes my judgment.  There is no issue of costs arising as Darren is legally aided.  I would also say, however, Mr Whitcombe, that I think you did the right thing bringing this matter to Court.  I realise that it is going to be a drain on trust assets but I think this issue had to be brought to a head and resolved in this way.

[22]     I thank both you and Mr Alpers for the responsible way in which you have been trying to look after this trust.

Solicitors:

Alpers & Co, Christchurch,  [email protected]

Whitcombe Guinness & Kitchingham, Greymouth,  [email protected]