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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Drummond

Details

AGLC: Drummond [2023] NZHC 847
Case: [2023] NZHC 847
Decision Date: 19 April 2023

CaseChat Overview and Summary

The High Court of New Zealand was presented with an application by the trustees of the Umukuri Trust, Andrew Owen Desmond Drummond, Julie Maree Drummond, and Drummond Trustee (2022) Limited, seeking approval of a deed of variation dated 23 February 2023 under sections 122-124 of the Trusts Act 2019. The trust was established by Shirley Joy Drummond on 20 December 1989, with the aim of facilitating Andrew and Julie Drummond to start farming independently. The discretionary beneficiaries of the Trust include Andrew and Julie Drummond, their children, grandchildren, great-grandchildren, Andrew Drummond's father, spouses and partners, and charitable entities. The final beneficiaries are Matthew and Jessica Drummond.

The court was required to determine whether the proposed deed of variation was necessary to reflect the enactment of the Trusts Act 2019, the family circumstances, and contributions to the Trust property, as well as to protect against the increased risk of relationship property claims from spouses or partners. The court also had to consider whether the variation would have an adverse effect on the interests of the minor, unborn, or future beneficiaries, and whether it was consistent with the intentions of the settlor.

In granting the application, the court found that the variation was necessary to address the enactment of the Trust Act and to reflect family circumstances and contributions to the Trust property. The court was satisfied that the variation was required to protect against the increased risk of relationship property claims from spouses or partners. The court further found that the position of Mr. Drummond's descendants would remain essentially unchanged under the Deed, and that the exercise of the power to add or remove discretionary beneficiaries did not represent a material detriment to the minor, future, or unborn beneficiaries. The court concluded that the variation was broadly consistent with the intentions of the settlor as the changes would 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. The court also found that none of the minor, unborn, or future beneficiaries had a vested interest in the Trust assets which would prevent an order being made.

The court granted leave for the proceeding to be commenced by way of originating application, dispensed with service on the beneficiaries of the Trust, and approved the deed of variation on behalf of the minor, unborn, and future beneficiaries under section 124 of the Trusts Act 2019.

Orders