Drummond

[2023] NZHC 847

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2023-442-000011

[2023] NZHC 847

UNDER

Sections 122 – 124 of the Trusts Act 2019

IN THE MATTER OF

the UMUKURI TRUST

BETWEEN

ANDREW OWEN DESMOND DRUMMOND,

JULIE MAREE DRUMMOND and DRUMMOND TRUSTEE (2022) LIMITED

Applicants

Hearing:	[On the Papers]
Appearances:	K H Lawrence for Applicants
Judgment:	19 April 2023

JUDGMENT OF EDWARDS J

This judgment was delivered by me on 19 April 2023 at 4.00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:
Greg Kelly Law Ltd, Wellington

Re Application by Drummond [2023] NZHC 847 [19 April 2023]

[1]    The applicants are the trustees of the Umukuri Trust (Trust). They apply under s 124 of the Trust Act 2019 for the Court’s  approval of a deed of variation dated    23 February 2023. Directions as to service, representation and the conduct of the proceeding are sought in addition.

Background

[2]    The  background  to  the  application  is  set  out  in  the  affidavit  of   Andrew Drummond sworn on behalf of all trustees.

[3]    The Trust was settled by Mr Drummond’s mother, Shirley Joy Drummond, on 20 December 1989. This was to facilitate Mr Drummond and his wife, Julie, to start farming independently of Mr Drummond’s parents. The Trust assets have been built up by Andrew and Julie Drummond over the years.

[4]    The discretionary beneficiaries of the Trust are Andrew and Julie Drummond, their children, Matthew and Jessica Drummond, grandchildren and great- grandchildren and Andrew Drummond’s father. Spouses and partners, including future spouses and partners of Mr Drummond and his children, and charitable entities are also included as discretionary beneficiaries.

[5]The final beneficiaries of the Trust are Matthew and Jessica Drummond.

[6]    Matthew Drummond has no spouse or partner but has one son who is 10 years old. Matthew Drummond lives and farms the Trust land.

[7]    Jessica Drummond, and her partner also live on the farm. They have two children aged two years and a few months respectively.

[8]    The trustees and affected adult beneficiaries have signed a deed of variation dated 23 February 2023 (Deed). The core provisions of the Deed are summarised by Mr Drummond as follows:

(a)Stipulates priorities of discretionary beneficiaries;

(b)Removes spouses and partners as beneficiaries of the trust (except for Julie);

(c)Removes Owen as a beneficiary (who has consented to that change);

(d)Vests the power of appointment and removal of trustees, which is currently held by me, in me and Julie jointly;

(e)Adds a power to appoint and remove discretionary beneficiaries;

(f)Adds a power to vary the trust deed; and

(g)Comprehensively updates the trust deed in light of modern drafting practice and the Trusts Act 2019.

[9]    The only current beneficiaries who will be removed from the class of discretionary    beneficiaries    are    Mr Drummond’s    father,    Owen,     and Jessica Drummond’s partner. Both have signed the Deed and consent to their removal.

Service, representation and conduct of proceeding

[10]   Leave to bring the application under Part 19 of the High Court Rules 2016 is sought. The application has the consent of all adult beneficiaries and there are no factual issues in dispute. It is in the interests of justice to secure the expeditious and inexpensive determination of the application without unnecessary cost or complexity. It is appropriate for leave to be granted.

[11]   I have considered the affidavit and the proposed Deed. I am satisfied that any adverse effect of the proposed variation will not affect the interests of the minor, unborn or future beneficiaries of the Trust to such an extent to require the appointment of counsel to represent their interests.

[12]   As there no other parties affected by the application who have not already provided their written consent to the variation, directions dispensing with service of the application are appropriate.

Approval of the deed of variation under s 124 of the Trust Act 2019

[13]   Section 124 of the Trust Act empowers the Court to approve termination, variation or resettlement of a trust on behalf of any person who lacks capacity, or who may acquire a beneficial interest at a future date. Section 124(4) of the Trust Act sets out the factors that the Court must consider in determining whether to approve a proposed variation or resettlement. Section 125(5) prohibits the Court from making

an order if its effect would be to reduce or remove any vested interest in the trust property. Principles relevant to the application of s 124 were set out in Re Macalister.1

[14]   I am satisfied that the variation is necessary to address the enactment of the Trust Act and together reflect family circumstances and contributions to the Trust property. In addition, the variation is required to protect against the increased risk of relationship property claims from spouses or partners.

[15]   The position of Mr Drummond’s descendants will remain essentially unchanged under the Deed. I do not consider the power to add or remove discretionary beneficiaries represents a material detriment to the minor, future, or unborn beneficiaries. The exercise of that power is subject to the usual constraints, and it does not permit the removal of final beneficiaries or affect their interests.

[16]   Finally, I am satisfied that the variation is broadly consistent with the intentions of the settlor as the changes will allow the Trust to continue to provide for Andrew and Julie’s family while safeguarding the capital value of the assets held in the Trust.

[17]   None of the minor, unborn or future beneficiaries have a vested interest in the Trust assets which would prevent an order being made.

[18]   Having regard to the matters set out in s 124 of the Trusts Act, I am satisfied that the substantive application should be granted.

Result

[19]I make the following orders:

(a)Leave is granted for the proceeding to be commenced by way of originating application;

(b)Service on the beneficiaries of the Trust is dispensed with;

1      Re Macalister [2021] NZHC 3572 at [23].

(c)The application to approve the deed of variation on behalf of the minor, unborn and future beneficiaries is granted under s 124 of the Trust Act 2019.

Edwards J