Freeth v Kokich
[2018] NZHC 1067
•16 May 2018
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI TERENGA PARĀOA ROHE
CIV-2018-488-30
[2018] NZHC 1067
UNDER the Trustee Act 1956 and Part 19 of the High Court Rules 2016 BETWEEN
GERDA FREETH, JOHN DE BOER AND
GB TRUSTEES LIMITED as trustees of the Ebenezar I Family Trust
ApplicantAND
MIRIAM KOKICH
Defendant
Hearing: 16 May 2018 Appearances:
N Hartwell for the Applicant
No appearance by or on behalf of the Defendant
Judgment:
16 May 2018
ORAL JUDGMENT OF GORDON J
Solicitors: WRMK Lawyers, Whangarei Copy To: M Kokich
FREETH v KOKICH [2018] NZHC 1067 [16 May 2018]
[1] This is an originating application by the trustees of the Ebenezar 1 Family Trust (the trust) for orders in relation to the distribution of funds and directing the winding up of the trust.
[2]The hearing proceeded by way of formal proof.
Grounds of application
[3] The grounds on which the orders are sought as set out in the application dated 9 April 2018 are as follows:
Distribution
(a)The Trust Deed provides for the distribution as sought by the trustees;
(b)The respondent is a discretionary beneficiary;
(c)The respondent has, despite request, refused to indemnify the trustees in relation to the distribution;
(d)The distribution is expedient in the management or administration of the property vested in the trustees;
(e)The distribution is in the best interests of the beneficiaries of the Trust;
Winding up
(f)Following final distribution, the Trust will have no assets;
(g)The winding up of the Trust is required for the expedient management or administration of the Trust;
(h)The winding up of the Trust is in the best interests of the Trust’s beneficiaries;
(i)As set out in the affidavit of Ean Brown filed contemporaneously with this application.
Respondent’s position
[4] The application was listed for first call on 10 May 2018. The Court received an email from the respondent, Miriam Kokich, on 8 May 2018 in which she advised that she was not represented and would not be attending on 10 May 2018. Ms Kokich further records in her email the following:
Therefore the application to the court for a winding up of the Ebenezer [sic] Trust is somewhat of a nonsense because of the lack of inclusiveness of all
assets already distributed, in the most part to the trustees. As one of the children I would have thought that I would have been entitled to disclosure of all assets, however I have never been made a party to the relevant information.
I have advised the above information, not as a defendant, rather as a brief explanation as to why I do not think the proceedings have a sound basis and do not contain comprehensive information relevant to the rulings sought. I do not consider myself a defendant. If the Ebenezer [sic] Trust is to be wound up I have no say in that, so whether or not I am in opposition is not relevant.
The law
[5] The applicants rely on ss 64 and 66 of the Trustee Act 1956. Section 66(1) provides that any trustee may apply to the Court for directions concerning any property subject to a trust, or in respect of the management or administration of any such trust property, or in respect of the exercise of any power or discretion vested in the trustee.
[6] Section 64 sets out the powers of the Court to authorise dealings with trust property. That section provides in part:
64 Power of court to authorise dealings with trust property
(1) Subject to any contrary intention expressed in the instrument (if any) creating the trust, where in the opinion of the court any sale, lease, mortgage, surrender, release, or other disposition, or any purchase, investment, acquisition, retention, expenditure, or other transaction is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the same without the assistance of the court, or the same cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income:
provided that, notwithstanding anything to the contrary in the instrument (if any) creating the trust, the court, in proceedings in which all trustees and persons who are or may be interested are parties or are represented or consent to the order, may make such an order and may give such directions as it thinks fit to the trustee in respect of the exercise of any power conferred by the order.
…
(Emphasis added)
Affidavit of Ean Innes Brown
[7] There is an affidavit of Ean Innes Brown, a director of the trustee company GB Trustees Limited, one of the trustees of the trust, sworn 9 April 2018 in support of the application. Mr Brown deposes that the trustees intend to distribute the assets of the trust, a sum of $80,105.46, less itemised legal and accounting fees (the trust funds), equally between the eight discretionary beneficiaries listed at cl 1(b) of the Deed of Trust Ebenezar 1 Family Trust (the trust deed). I refer to the trust deed below. Mr Brown deposes that following the distribution there will be no assets remaining in the trust and it will cease to exist. Accordingly, the trust will then be wound up by the trustees.
[8] Mr Brown refers to, and annexes copies of, correspondence from the applicants’ solicitors to Ms Kokich in person and to solicitors acting on her behalf. As well as annexing the covering letters sending the relevant information to Ms Kokich and/or her solicitors, Mr Brown deposes that all relevant information has been provided to Ms Kokich.
[9] Mr Brown deposes that the trustees are concerned that Ms Kokich will bring a claim against the trust regardless of how the distribution is made. They therefore sought an indemnity from her but she has refused to sign, hence this application to the Court.
The trust deed
[10] Mr Brown annexes a copy of the trust deed to his affidavit. The settlor was Meindert de Boer.
[11]Clause 1 of the trust deed is as follows:
1. UNTIL the date for distribution hereinafter provided to pay apply or appropriate the whole or any portion of the capital or income of the trust as the Trustees shall in their uncontrolled discretion think fit in discharge of such debts and obligations of the trust fund or of the Trustees as may exist from time to time and for or towards the personal use support benefit maintenance education or advancement of life of such of the following as may from time to time be living and of any one or more to the exclusion of the other or others as the Trustees in their sole and uncontrolled discretion shall think proper:
(a)GERDA de BOER the wife of the Settlor.
(b)GERDA FREETH, HYLKJE de BOER-DOYLE, HARRY WARNER de BOER, NICHOLAS de BOER, JOHN de BOER, MARGARET THOMAS, MENNO de BOER and MIRIAM PETHERS the children of the Settlor.
(c)The grandchildren of the Settlor.
(d)Spouses of grandchildren of the Settlor.
(e)Such purposes as are for the time being charitable according to the law of New Zealand and the Trustees may in their discretion determine which charitable purposes shall benefit hereunder.
AND IT IS HEREBY DECLARED that the Trustees may pay and apply the whole or any part of the said income or capital to the guardian guardians parent or parents of any of the said beneficiaries who are for the time being minors without seeing to the application thereof.
AND IT IS FURTHER DECLARED that the Trustees shall have power without prejudice to the power of payment application and appropriation aforesaid to accumulate the whole or any portion of the said income for any period not exceeding 80 years from the date hereof.
[12]The provision in the trust deed regarding the date of distribution is as follows:
3. THE date of distribution shall be at the expiration of eighty (80) years from the date hereof of such earlier date as the Trustees may in their absolute and uncontrolled discretion decide to fix AND IT IS HEREBY DECLARED that for the purposes of this instrument the perpetuity period is eighty (80) years.
[13] Mr Brown also annexes to his affidavit a Deed of Capital Distribution and Winding Up. The deed records that the assets of the trust will be distributed to seven of the eight named beneficiaries in cl 1(b) of the trust deed. Menno de Boer is not named in the Deed of Capital Distribution and Winding Up. Having regard to that discrepancy, the Court sought evidence on the issue. Mr Brown filed a further affidavit dated 10 May 2018 in which he deposes that Menno de Boer died on 15 September 2015.
[14] In his affidavit of 10 May 2018, Mr Brown also addressed two other matters on which the Court sought clarification. The trust deed names Margaret Thomas in cl 1(b), whereas the Deed of Capital Distribution and Winding Up refers to Margaret de Boer and Margaret Jobsis. Mr Brown deposes that they are one and the same person.
[15] Similarly, the trust deed names Miriam Pethers in cl 1(b), whereas the Deed of Capital Distribution and Winding Up refers to Miriam Kokich. Mr Brown deposes that they are one and the same person.
[16] Mr Brown deposes in his 9 April 2018 affidavit that all of the trust beneficiaries, except Ms Kokich, have confirmed execution of the Deed of Capital Distribution and Winding Up.
Conclusion
[17] I am satisfied that, contrary to the assertion in Ms Kokich’s email to the Court referred to in [4] above, the trustees, through their solicitors, have disclosed details of all of the trust assets to Ms Kokich. I am further satisfied that the trustees have made proper disclosure to the Court in support of this application.
[18] I am satisfied, on the basis of Mr Brown’s evidence, that the proposed distribution is expedient in the management or administration of the property vested in the trustees. I am further satisfied that such distribution would be in the best interests of the persons beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the distribution without the assistance of the Court. I am also satisfied there is no contrary intention in the trust deed regarding distribution.
[19] I am satisfied, on the basis of Mr Brown’s evidence, that following the proposed final distribution the trust will have no assets. The winding up of the trust is therefore required for the expedient management or administration of the trust. I am further satisfied that the winding up of the trust is in the best interests of the trust’s beneficiaries, but it is inexpedient or difficult or impracticable to effect the winding up without the assistance of the Court. I am also satisfied that there is no contrary intention in the trust deed regarding winding up.
Orders
[20]I make the following orders:
(a)I direct that the trustees distribute the trust funds in accordance with the trust deed, namely equal distribution between the surviving children of the settlor of the trust, namely Gerda Freeth, Hylkje de Boer-Doyle, Harry Warner de Boer, Nicholas de Boer, John de Boer, Margaret Thomas (also known as Margaret de Boer and Margaret Jobsis), and Miriam Pethers (also known as Miriam Kokich); and
(b)I direct that the trust be wound up.
Costs
[21] The applicants seek costs. I consider it is appropriate to make an order for costs. It was not unreasonable for the trustees to seek an indemnity from the beneficiaries. It was similarly not unreasonable for the trustees to bring this application, Ms Kokich having refused to sign the indemnity. Costs are awarded on a 2B basis.
Gordon J
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