Forgan v Lee - [2025] NZHC 2310

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2025-409-175

[2025] NZHC 2310

UNDER the Trusts Act 2019 and in the Court’s inherent jurisdiction

IN THE MATTER

of the Blackwood Bay Trust and the Snowden Trust

BETWEEN

REBECCA LUCY FORGAN

Plaintiff

AND

ARTHUR MATHEWSON LEE and

ROBYN ANDREA LEE (as trustees of the Blackwood Bay Trust)
First Defendant

AND

ARTHUR MATHEWSON LEE and

ROBYN ANDREA LEE (as trustees of the Snowden Trust)

Second Defendants

Hearing: 6 August 2025

Appearance:

J M McGuigan and J I Taylor for Plaintiff

Judgment:

6 August 2025

ORAL JUDGMENT OF OSBORNE J

Introduction

[1] This case concerns two family trusts of which the settlor’s wife and their son are the trustees. As trustees, they have had the duties set out in pt 3 of the Trusts Act 2019 and (before its operation) under the Trustee Act 1956 and in equity.

FORGAN v LEE [2025] NZHC 2310 [6 August 2025]

[2] Regrettably, the two trusts have not been administered in accordance with the trustees’ duties. There have been serious breaches of duties on the part of one of the trustees, in particular through failure to avoid his conflict of interest and through exercising powers for his own benefit in relation to one of the trusts. In relation to both trusts, there have been breaches by both trustees of their duty to act for the benefit of the beneficiaries. Substantial losses for the trusts, through those breaches, appear inevitable.

[3] By this proceeding a beneficiary of the trust seeks the removal of the trustees from the trusts and the appointment of a professional trustee as trustee.

[4]The plaintiff’s claims are before me for formal proof.

[5] Comprehensive evidence has been filed. The need for the orders sought is manifest.

Blackwood Bay Trust

[6] The Blackwood Bay Trust was settled by David Lee by deed on 19 April 1973. David Lee is now aged 84 and has been diagnosed with early stage dementia. The current trustees of the Blackwood Bay Trust are David’s wife, Robyn Lee, and their son Arthur Lee.

[7] The trust is a traditional family trust and its beneficiaries include David’s and Robyn’s daughter (Arthur’s sister), Rebecca Forgan, who is the plaintiff. The trust remains a discretionary trust. On final distribution the assets will be held equally for Rebecca and Arthur on a hotchpot basis.

[8] The Blackwood Bay Trust has owned, since December 2003, a property at Blackwood Bay in the Marlborough Sounds.

Snowden Trust

[9] The Snowden Trust was settled by David and Robyn Lee by deed on 3 May 2016. The current trustees are Robyn and Arthur Lee. The Snowden Trust is a

traditional family trust. Rebecca Forgan is one of the discretionary beneficiaries and, on final distribution, the assets will similarly be held equally for Rebecca and Arthur.

[10] At the time this proceeding was commenced, the Snowden Trust owned two properties, being:

(a)Wai-iti Terrace, Christchurch (the residence in which David and Robyn…

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 Forgan v Lee

Details

AGLC: Forgan v Lee [2025] NZHC 2310
Case: [2025] NZHC 2310
Decision Date: 6 August 2025

CaseChat Overview and Summary

The case of Forgan v Lee involves a dispute concerning the administration of two family trusts: the Blackwood Bay Trust and the Snowden Trust. Rebecca Lucy Forgan, a beneficiary of these trusts, has brought proceedings against Arthur Mathewson Lee and Robyn Andrea Lee, who are the trustees of the trusts. The central issue in this case is the alleged mismanagement of the trusts by the trustees, which has resulted in substantial financial losses and potential dissipation of trust assets. Forgan seeks the removal of the trustees and the appointment of professional trustees to manage the trusts more effectively.

The court was required to decide whether the trustees had breached their fiduciary duties and whether their removal was necessary to protect the interests of the beneficiaries. The court considered the trustees' actions, including their failure to avoid conflicts of interest, their mismanagement of trust assets, and their refusal to provide necessary information to beneficiaries. The evidence presented by Forgan demonstrated that the trustees had used trust assets to secure personal and business debts, had failed to act in the best interests of the beneficiaries, and had engaged in conduct that endangered the trustees' home and the financial stability of the trusts.

In its reasoning, the court noted that the trustees had acted in a self-interested manner and had breached their fiduciary duties by using trust assets as security for personal and company borrowing. The trustees' actions had caused significant financial losses and had endangered the home of the settlor, who is vulnerable. The court found that it was expedient in the interests of the beneficiaries to remove the trustees and appoint professional trustees to take control of the trust assets and to preserve as much equity in the trusts as possible.

The court ordered that Arthur Mathewson Lee and Robyn Andrea Lee be removed as trustees of both the Blackwood Bay Trust and the Snowden Trust. Covisory Trust No.2 Limited was appointed as the new trustee for both trusts. The court also ordered that Public Trust be paid its reasonable costs and disbursements from the assets of the Snowden Trust, while reserving the plaintiff's costs for further consideration by the new trustee. The court denied the defendants' attempt to address the court on the issue of costs, as they had been debarred from defending the proceeding due to their failure to comply with court orders.

Orders