Estate of Redgate

[2014] NZHC 651

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2014-419-000095 [2014] NZHC 651

UNDER	Trustee Act 1956
IN THE MATTER	of the estate of KELVIN ERNEST REDGATE
AND
IN THE MATTER	of an application by MAREE CAROL SHORTT

Hearing:	2 April 2014
Appearances:	K A McDonald for the Applicant
Judgment:	2 April 2014

JUDGMENT OF GILBERT J

This judgment is delivered by me on 2 April 2014 at 4.30pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

ESTATE K E REDGATE [2014] NZHC 651 [2 April 2014]

[1]      This is an application pursuant to s 64A of the Trustee Act 1956 for an order approving on behalf of Loren Shanae Redgate a proposed Deed of Family Arrangement varying trust provisions created by the Will of the late Kelvin Ernest Redgate.  The Court’s approval is sought on behalf of Loren because she is currently

16 years of age.

[2]      Kelvin Redgate died at Hamilton on 19 December 2012 leaving a Will dated

17 December 2012.  Probate of this Will was granted on 14 March 2013.  In terms of his Will Mr Redgate’s partner, Maree Carol Shortt, with whom he had been in a relationship  since  1983,  was  given  a  life  interest  in  a  14 hectare  farmlet  at

115 Thompson Road, Ohaupo.  Mr Redgate provided in his Will that the farmlet was to pass to his six children as the residuary beneficiaries following Ms Shortt’s death or if the trustees determined that she was no longer living permanently on the land.

[3]      Ms Shortt is 48 years old.  The farmlet is in poor condition.  The house is run down, the land has not been fertilised or grazed for some time and is now infested with weeds, and the fences are in need of repair.  The property does not currently produce any income and neither the estate nor Ms Shortt has the financial means to restore the property to a proper condition.

[4]      Following Mr Redgate’s death, the four older children, being the children of Mr Redgate’s first marriage, indicated that they intended to make a claim against the estate under the Family Protection Act 1955 and/or the Testamentary Promises Act

1949.  Apart from Loren, all beneficiaries are of full age and capacity.  They have now reached a settlement of all outstanding issues and have entered into a Deed of Family Arrangement the effect of which would be to vary the Trusts established under the Will. The operative provisions of this deed are as follows:

3.1Subject to the Court’s approval in terms of Section 12 of the Minors’ Contracts Act 1969, with effect from the date of this Deed, the trusts as directed in the Will shall be modified as follows.

3.1.1    Clause 5 of the Will, will read:

(a)       My house and land comprising 14.1430 hectares more or less at 115

Thompson Road, Ohaupo, (Thompson Road.) will be sold by my

Trustees.

(b)       The  proceeds  of  sale  of Thompson  Road,  will  be  distributed  as follows:-

(i)        $85,000.00 to each of my children, Bronwyn, Brett, Sheryl, Stuart, Shea and Loren.

(ii)      The balance of the proceeds of sale to my partner, Maree.

(c)       If any of my children die before the distribution of the $85,000.00 referred to in this clause, and they leave a child or children living, then that child or children will take equally the share which his/her or their parent would otherwise have taken.

3.1.2    Clause 3 of the Will, will read-

(a)       I give the ring found by Maree in the house, my father-in-law’s war medals (if they can be found), the Redgate family Bible, (if this can be found) and any personal items belonging to them to my children, Bronwyn, Brett, Sheryl and Stuart for them to decide who is to retain those items.   All other household furniture and household effects (including motor vehicles) which I own at my death I give to my partner, Maree.

3.1.3    Clause 6 of the Will, will be replaced by the following clause 6: (a) I direct my Trustees to hold the rest of my Estate on these Trusts:-

(i)      To pay my debts and funeral expenses, my Trustee’s administration expenses and any death duty payable on my Estate.

(ii)      To transfer the residue (my residuary Estate) to my partner, Maree.

…

4.1The children each acknowledge that, in agreeing to the modification of  the  trusts  directed  in  the  Will,  they  are  disclaiming  any entitlement or interest they may have had in trusts in the Will and in Kelvin’s Estate.

4.2The Children further acknowledge that, in agreeing to the terms set out in this Deed, they will receive their entitlement under this Deed and not any interest they had under the Will.

…

6.1The distribution of gifts in 3.1.1 and 3.1.2 to Bronwyn, Brett, Sheryl and Stuart shall take place on the date of settlement of the sale of the farmlet  and  will  be  made  to  the  Trust Account  of  Norris Ward McKinnon.

[5]      The Court may not make an order under s 64A approving an arrangement on

behalf of a person if the arrangement is to that person’s detriment.  In determining

whether the arrangement is to the person’s detriment, the Court may have regard to all the benefits that may accrue to the person directly or indirectly in consequence of the arrangement, including the welfare and honour of the family.

[6]      The current rating valuation for the farmlet is $880,000, including land value of $670,000.  That valuation was effective as at 1 August 2011.  A property appraisal report prepared by a local real estate agent indicates a likely selling price for the property in the range of $750,000 to $800,000. The property is unencumbered.

[7]      Under the terms of the Will, Loren and the other residuary beneficiaries will not receive any value from the farmlet until Ms Shortt dies or sooner ceases living at the property.  Given that Ms Shortt is only 48, this means that Loren cannot expect to receive any benefit from the property under the Will for many years.  I have not been provided with any actuarial or other assessment of the value of the life interest but it clearly has considerable value.

[8]      Under the proposed Deed of Family Arrangement the farmlet will be sold immediately.   Upon settlement of the sale $85,000 will be paid to  each of the children, including Loren.  The proposal is that her share be held by the trustees and executors of the estate for her benefit and distributed to her when she turns 20 together with any accrued interest or capital gain.

[9]      I am satisfied that the proposed arrangement is not to Loren’s detriment. Looking at it overall, I consider that it is likely to confer a significant benefit on her. It will mean that she will receive her entitlement from the estate much sooner than would otherwise be the case,  possibly more than 30  years earlier.     Under the proposed arrangement the six residuary beneficiaries will each receive $85,000, a total  of  $510,000.   Assuming  the  farmlet  sells  for  $800,000,  at  the  top  of  the indicated range, the balance of $290,000 will be paid to Ms Shortt in discharge of her entitlement to the life interest.  This is likely to be less than the value of the life interest, having regard to its potential duration.  On that basis the proposed payment to the residuary beneficiaries, including Loren, is favourable to them.  The proposed arrangement also had the benefit for Loren that it will resolve the threatened Family Protection  and/or  Testamentary  Promises  claims  that  the  older  four  residuary

beneficiaries have threatened to pursue.  Those claims have the potential to diminish the share available to Loren and to erode the value of the estate through costs.  Quite apart from these financial benefits, I consider that it would be in Loren’s interests for any such claims to be resolved amicably by the family rather than through the Court’s processes.

[10]     For these reasons I consider that it is appropriate to make an order pursuant to s 64A of the Act approving the proposed Deed of Family Arrangement as attached to Ms Shortt’s affidavit sworn on 11 March 2014 and filed in this proceeding.  Such approval is given on the basis that Loren’s share of the proceeds of any sale of the property are to be held on trust for her by the trustees and executors of Mr Redgate’s Will until she turns 20 at which time the funds are to be distributed to her together

with any accrued interest or capital gain.  I make an order accordingly.

M A Gilbert J