Hamilton Family Trust
[2024] NZHC 3893
•18 December 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2024-485-618
[2024] NZHC 3893
UNDER Part 19 of the High Court Rules 2016 and
ss 122, 124, and 125 of the Trusts Act 2019 and the inherent jurisdiction of the High Court to supervise the administration of
trusts
IN THE MATTER OF
The T J & H M Hamilton Family Trust
BY
TREVOR JAMES HAMILTON, HARRIET MECHELINA HAMILTON and JAMES
GREGORY EDEN as trustees of the T J & H M HAMILTON FAMILY TRUST
Applicants
On the Papers Counsel:
G F Kelly and K H Lawrence for the Applicants L M McKeown as Counsel Assisting
Judgment:
18 December 2024
JUDGMENT OF GWYN J
(Orders approving variation of trust deed)
[1] The applicants, Trevor James Hamilton, Harriet Mechelina Hamilton and James Gregory Eden (as trustees of the T J & H M Hamilton Family Trust (Trust)) have applied under the inherent jurisdiction of the Court, and ss 122, 124 and 125 of the Trusts Act 2019 (Act), for orders:
(a)approving a Deed of Variation on behalf of minor, future and unascertained beneficiaries of the Trust;
RE THE HAMILTON FAMILY TRUST [2024] NZHC 3893 [18 December 2024]
(b)waiving any requirement that certain companies and trusts associated with the beneficiaries of the Trust consent to the Deed of Variation;
(c)confirming that the applicants (as trustees) may sign a new Restated Trust Deed which incorporates the Deed of Variation with the existing terms of the Trust; and
(d)that the applicants’ costs in respect of this application be paid from the Trust on a solicitor-client basis.
Background
[2] The Trust was set up by deed on 15 April 1993. It has become wealthy, largely because of a 99.8 per cent shareholding in T. H. Enterprises Ltd, the holding company for a wider group of dairy farming and support companies, with total assets exceeding
$100 million.
[3] The settlors depose that they set up the Trust to provide for their family, but they believe the current Trust structure is no longer suitable for that purpose. However the Trust Deed does not provide for the Trustees to vary the terms of the Trust. They now apply to the Court to vary the Trust Deed.
[4] The applicants’ 1 October 2024 without notice interlocutory application for leave to commence proceedings by way of originating application and for directions as to service and conduct of the proceeding was considered by Associate Judge Skelton on 8 October 2024. The Associate Judge granted leave to commence the proceeding by way of originating application under pt 19 of the High Court Rules 2016, and directed that service on any of the beneficiaries of the Trust be dispensed with, on the basis that all adult beneficiaries have consented to the Deed of Variation.
[5] The Associate Judge appointed Lisa McKeown as counsel to represent the interests of the minor, future, and unascertained beneficiaries and the companies and
trusts in respect of which waiver of service was sought, and otherwise to assist the Court.1
[6] Ms McKeown has filed a memorandum of 22 November 2024, in which she advises her view that the orders sought by the trustees are appropriate in the circumstances and do not prejudice the interests she represents. Counsel recommends that the Court approve the Deed of Variation and approve the Restated Trust Deed.
[7] By memorandum of 25 November 2024, counsel for the applicants request that, in light of Counsel Assisting’s conclusions, the Court consider the application on the papers.
[8] The application came before me as Duty Judge to consider. I have had regard to the detailed memorandum filed by the applicants in support of the application (dated 1 October 2024), an affidavit of Trevor James Hamilton, one of the settlors of the Trust and a trustee of the Trust, the memorandum from Counsel Assisting and the applicants’ memorandum of 25 November 2024.
Restated Trust Deed, incorporating the Deed of Variation
[9]The applicants advise that the Deed of Variation is intended to:
(a)Address the enactment of the Trust Act 2019;
(b)Modernise the terms of the Trust and ensure that the structure remains robust as a vehicle to manage intergenerational wealth for many years to come; and
(c)Protect against the increased risk of claims from spouses on separation (or otherwise).
[10] Mr Hamilton’s evidence is that he and Mrs Hamilton intended for the Trust to provide for their descendants over a number of generations, as part of their succession
1 The appointment was made pursuant to r 4.27(b) of the High Court Rules 2016.
planning.2 The Trustees submit that, if consent were provided by the Court on behalf of the minor, future, and unascertained beneficiaries, the Trust will be able to endure for longer, with robust independence requirements, providing greater potential future asset planning advantages, as well as creditor and relationship property protection for future generations.
[11]In summary, the Deed of Variation:
(a)Extends the life of the Trust from 80 to 125 years;
(b)Modifies the provisions relating to the discretionary beneficiaries of the Trust, including:
(i)Adding later generations of Trevor and Harriet’s descendants as discretionary beneficiaries of the Trust;
(ii)Removing spouses as discretionary beneficiaries, removing certain companies as discretionary beneficiaries, and modifying the definition of trusts which may qualify as discretionary beneficiaries; and
(iii)Stipulating the priorities of discretionary beneficiaries so that each generation is prioritised in descending order;
(c)Clarifies that if any of Trevor and Harriet’s grandchildren (who are contingent final beneficiaries in the case of the death of a parent) die before the date of distribution, their children will also receive a gift- over in their stead;
(d)Modernises the Settlors’ powers, including:
(i)Including a power to remove as well as appoint trustees;
2 I refer to Mr and Mrs Hamilton as Trevor and Harriet, as do many of the documents submitted to the Court. I intend no disrespect in doing so.
(ii)Including a power to remove as well as appoint discretionary beneficiaries; and
(iii)Providing that on the death or incapacity of either of Trevor or Harriet, those powers can only be exercised with the independent trustee, and for those powers to pass to the independent trustee alone on the death or incapacity of both of Trevor and Harriet;
(e)Includes a power to vary the trust deed so that the trustees can respond to future changes in the law, or otherwise as needed;
(f)Includes specific requirements for an independent trustee with a particular corporate structure, and which is not associated with any of the beneficiaries of the Trust; and
(g)Comprehensively updates the trust deed to reflect modern drafting practice and the Trusts Act 2019, including:
(i)Addressing the default duties contained in the Trusts Act 2019, and clarifying where these have been modified or excluded;
(ii)Modern trustee appointment, retirement, and removal provisions;
(iii)Allowing for modern investment practices; and
(iv)Modernising the trustee limitation of liability and indemnity clauses in light of the Trusts Act 2019.
Discussion
[12] Under s 122 of the Act the trustees of a trust may agree to the variation or resettlement of a trust, on such terms as they see fit, provided that every beneficiary consents to the variation, the trustees receive a request to vary the terms of the trust
from each beneficiary, and the Court has made an order under s 124 approving the variation of terms or resettlement on behalf of the beneficiaries listed in s 124(2) of the Act. These are any beneficiary who lacks capacity;3 a person who may acquire a beneficial interest in the future;4 a future person who may acquire a beneficial interest.5 The trustees must agree to the proposal.
[13] The minor, future, and unascertained beneficiaries in this case are Trevor and Harriet’s minor and future grandchildren, future spouses of their children and grandchildren, and future companies and trusts associated with the beneficiaries.
Application of s 124
[14] Section 124(4) sets out the factors the Court must take into account in deciding whether to approve a variation:
124Power of court to approve termination, variation, or resettlement of trust
(1)The court may, on behalf of any of the beneficiaries described in subsection (2) who has an interest in the property of a trust, approve the termination, variation, or resettlement of the trust.
(2)The beneficiaries are—
(a)a beneficiary who lacks capacity:
(b)a person who may acquire a beneficial interest at a future date or on the happening of a future event or on becoming a member of a certain class of persons:
(c)a future person who may acquire a beneficial interest.
(3)An application for an order of approval may be made by—
(a)the trustees or any one of them:
(b)any person with a beneficial interest in the trust property.
(4)On an application for an order of approval, the court must take into account each of the following factors:
(a)the nature of any person’s interest in the trust property and the effect of the proposed order on that interest:
3 Section 124(2)(a).
4 Section 124(2)(b).
5 Section 124(2)(c).
(b)the benefit or detriment that may result to any person with an interest in the trust property if the court makes or refuses to make the proposed order:
(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.
(5)The court must not make an order of approval if its effect would be to reduce or remove any vested interest in the trust property.
(6)An order of approval binds the person on whose behalf it is made and takes effect without any further step.
[15] In her memorandum, Counsel Assisting discusses the principles relevant to the exercise of the Court’s powers under s 124, which were summarised in Gavin v Gavin:6
(a)The power to approve a variation is discretionary.
(b)The Court may, on behalf of any beneficiary described in s 124(2) who has an interest in the property of a trust, consider any proposal to terminate, vary or resettle a trust.
(c)The Court's discretion is to be exercised with reference to the factors identified in s 124(4), including the intentions of the settlor, to the extent these can be ascertained.
(d)The Court can approve a scheme which conflicts with the intentions of the settlor but should not do so lightly.
(e)The Court considers the trust provisions afresh if circumstances have arisen which were not foreseen or may not have been foreseeable at the time the trust was established.
(f)The Court is able to approve an arrangement to the detriment of any person on whose behalf the Court is giving consent, provided the effect of the orders would not reduce or remove a vested interest in the trust property.
6 Gavin v Gavin [2021] NZHC 550 at [15]; adopted in Re Macalister [2021] NZHC 3572 at [23].
(g)The Court is to take a wide approach to benefits and detriments and arrangements and must consider the arrangements as a whole in a practical and business-like way. Indirect and intangible benefits and detriments are relevant, including the welfare and honour of the family.
(h)Difficulties may be met by amendments to the proposal or covenants by persons benefitting to make good losses to the disadvantage of other beneficiaries.
(i)An order approving a proposed variation may be conditional.
[16] As Ms McKeown notes, the Court does not need to be satisfied that there is no detriment to the affected beneficiaries, but must weigh the benefits and detriments (including indirect and intangible) alongside the arrangements as a whole.
[17] The Court must not make an order of approval if its effect would be to reduce or remove a vested interest in the Trust property. Counsel Assisting advises that no interests have vested in the Trust property.
Application of s 124 to minor and unborn/future grandchildren
[18] Counsel Assisting has referred the Court to several cases in which the Court has approved a variation on behalf of minor, unborn and future beneficiaries.7
[19] Trevor and Harriet have six minor grandchildren who are under 18 and therefore lack capacity. As Ms McKeown notes, it is reasonable to assume there is a prospect of further grandchildren being born.
[20] The minor grandchildren and any unborn/future grandchildren would remain beneficiaries of the Trust under the Deed of Variation. The Deed does introduce an order of priority which the trustees are asked to take account of when exercising their powers. That order of priority is the settlors, as primary discretionary beneficiaries;
7 Talijancich v Talijancich [2021] NZHC 753; and Re Drummond [2023] NZHC 847.
the settlors’ children, as secondary discretionary beneficiaries; and the grandchildren, as the tertiary discretionary beneficiaries.
[21] In the view of Counsel Assisting, the introduction of an order of priority is not a material detriment to the grandchildren because:
(a)the order of priority is not binding on the trustees, but Trevor says he and Harriet are likely to have regard to it in any event;
(b)children of the grandchildren (great-grandchildren) are added as beneficiaries, which may be of indirect benefit to the grandchildren; and
(c)all of the minor grandchildren are children of beneficiaries who have themselves consented. That is a factor viewed favourably in other cases.8 While there is no evidence to confirm that the minor grandchildren’s interests were taken into account by their parents when consenting to the Deed of Variation, as Counsel Assisting notes, nor is there any suggestion of estrangement or dispute.
[22] I agree with Counsel’s assessment that the benefits of the Deed of Variation to this class of beneficiaries outweigh the detriments.
Application of s 124 to future spouses
[23] The Trust Deed presently includes as beneficiaries any future spouses, widows or widowers of Trevor and Harriet, their children and grandchildren. The Deed of Variation removes all future spouses as beneficiaries.
[24] Counsel Assisting advises that, while the removal of future spouses is prima facie to their detriment, the Court might conclude that this detriment is outweighed by the advantages of the proposed variation and the interests of the family as a whole (including to protect against relationship property claims).
8 Re Power [2024] NZHC 3449; and Re Macalister, above n 6.
[25] In Re Jury the Court acknowledged that “modern practice is to exclude spouses and partners from inter-generational family trusts to ensure the assets are protected for lineal descendants and not vulnerable to relationship property claims”.9 Similarly, in Re Drummond, the Court approved a variation on the basis it was required to protect against the increased risk of relationship property claims form spouses or partners.10
[26] I accept that the detriment to future spouses, widows or widowers is outweighed by the protection the variation affords to the rest of the family.
Section 125
[27] Section 125 of the Act is also relevant. It gives the Court power to waive the s 122 requirement that a beneficiary consent to the variation. On an application for waiver the Court must take into account the same factors as listed in s 124(4). Section 125 provides:
125Power of court to waive requirement of consent to termination, variation, or resettlement of trust
(1)The court may waive the requirement that a beneficiary consent to the termination of a trust under section 121 or the variation or resettlement of a trust under section 122.
(2)An application for an order of waiver of consent may be made by—
(a)the trustees or any one of them:
(b)any person with a beneficial interest in the trust property.
(3)On an application for an order of waiver of consent, the court must take into account each of the following factors:
(a)the nature of any person’s interest in the trust property and the effect of the proposed order on that interest:
(b)the benefit or detriment that may result to any person with an interest in the trust property if the court makes or refuses to make the proposed order:
(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.
(4)The court must not make an order of waiver of consent if its effect would be to reduce or remove any vested interest in the trust property.
9 Re Jury [2022] NZHC 568 at [23].
10 Re Drummond, above n 7.
(5)An order of waiver of consent binds the person on whose behalf it is made and takes effect without any further step.
[28]In Re Davies the Court said:11
The power of waiver under s 125 was included on the Law Commission’s recommendation so the Court could ensure beneficiaries with negligible or remote interests would not stand in the way of other beneficiaries with more significant interests.
Application of s 125 to the beneficiary trusts
[29]Under the Trust Deed, the beneficiaries include:
the Trustees of any settlement which includes for the time being among its objects (contingent or otherwise) any children or grandchildren of the Settlors in being or born before the date of distribution.
[30] Trevor’s evidence is that there are at least five trusts which would fall within this class.
[31] These trusts remain discretionary beneficiaries under the Deed of Variation. Trusts linked to more remote descendants are also added. This inclusion is consistent with the settlors’ intention that the Trust property be available to their descendants for generations to come. It is also consistent with extending the life of the Trust from 80 to 125 years.
[32] Counsel Assisting expresses the view that, given the difficulty of identifying qualifying trusts, it would be impractical and disproportionate (if not impossible) to identify and seek their consent. However, the qualifying trusts are all linked to children and grandchildren and the adult children and grandchildren have themselves all consented to the Deed of Variation.
[33] I accept that it is appropriate for the Court to waive the requirement that the qualifying trusts consent to the variation.
11 Re Davies [2024] NZHC 2998 at [50], citing Te Aka Matua o Te Ture | Law Commission Review of the Law of Trusts: A New Trusts Act for New Zealand (NZLC R130, 2013) at [10.14]. See also Re Tau [2023] NZHC 2544 at [26].
Application of s 125 to the beneficiary companies
[34] The Trust Deed presently includes as beneficiaries “any company in which any children or grandchildren of the Settlors in being or born before the date of distribution directly or indirectly hold or beneficially own not less than 50 per centum of the issued share capita.” Trevor’s evidence is that there are likely a number of companies that fall into this category, but that it would be difficult to ascertain the exact number of companies, as shares may be held by trusts.
[35] The Deed of Variation removes these companies as beneficiaries. As Counsel Assisting notes, this is prima facie a significant detriment to the companies.
[36] Trevor deposes that the trustees have never made distributions to qualifying companies and, in his view, the provision is redundant.
[37] Counsel Assisting concludes that, given the uncertainty about which companies qualify, it would be impractical and disproportionate (if not impossible) to identify and seek their consent. Counsel notes though that the companies are also linked to children and grandchildren, all of whom have consented to the Deed of Variation.
[38] Counsel Assisting’s conclusion is that it would be appropriate for the Court to waive their consent on the basis it is unlikely they would receive a distribution or benefit from the Trust. I accept counsel’s assessment.
Other, general changes
[39] Many of the changes proposed are aimed at modernising the Trust Deed and take account of the enactment of the Trusts Act 2019 and matters which could not have been reasonably anticipated when the Trust was established in 1993. As Counsel Assisting notes, the beneficiaries as a whole should benefit from that modernisation.
Power to remove discretionary beneficiaries
[40] The Deed of Variation gives the Appointor12 power to remove discretionary beneficiaries.
[41] The inclusion of this removal power is consistent with current trust drafting practice. It provides greater flexibility for trustees to respond to unexpected circumstances, minimising the need for further resort to the Court.
[42] The applicants and Counsel Assisting have identified this change as one which might be viewed as to the detriment of the beneficiaries represented by Counsel Assisting, as it puts them at risk of removal. However, as Counsel notes, that risk is shared by all of the discretionary beneficiaries and there are constraints on the power. The power to remove discretionary beneficiaries would be held by the appointor, which in the first instance will be Trevor and Harriet jointly, and will devolve to the survivor, together with the independent trustee. That power must be exercised subject to fiduciary obligations,13 and does not extend to removing final beneficiaries (contingent or otherwise). The independent (corporate) trustee must meet minimum government requirements including at least two directors participating in each decision (or, alternatively, a statutory trustee).
[43] Trevor’s evidence is that he and Harriet do not have any reason to expect that the power to remove discretionary beneficiaries will be used, but if required, it would be used in the interests of the wider family.
[44] In Re Goubitz,14 and Re Drummond,15 the Court considered those constraints to be sufficient in the circumstances.
[45] In addition, as Counsel Assisting notes, the removal power does not extend to removing final beneficiaries. The trustees are required to hold the Trust fund (to the extent it is not otherwise being paid or applied in accordance with the Deed) for the
12 Initially Mr and Mrs Hamilton as the settlors.
13 McLaren v McLaren [2017] NZHC 161 at [64]–[65].
14 Re Dagmar Giradet Family Trust [2024] NZHC 2201 [Re Goubitz] at [16].
15 Re Drummond, above n 7, at [15].
children of Trevor and Harriet’s marriage, with provision for a gift over to the next generations.
Power to add future generations
[46] It is also appropriate that future generations be added as beneficiaries. This is consistent with the settlors’ intention, the proposed extension of the life of the Trust from 80 to 125 years, and the significant wealth of the Trust.
Payment of trustees’ costs
[47] The applicants are seeking that their costs for the present application be paid from the trust on a solicitor-client (indemnity) basis. As the memorandum filed on behalf of the applicants notes:16
The application has been brought by the trustees reasonably and in good faith and an order is sought confirming that all costs are payable from the trust fund in accordance with their statutory right (and other rights) to indemnity.17
[48]Ms McKeown’s memorandum does not directly address this issue.
[49] I accept that it is appropriate that the trustees be reimbursed for the costs of this application from the trust property, on a solicitor-client (indemnity) basis, pursuant to s 81 of the Act.18
Orders
[50] Having regard to the submissions made on behalf of the applicants and to Counsel Assisting’s comprehensive memorandum, I am satisfied that the Court can grant the application and I make the following orders:
(a)The Deed of Variation dated 31 August 2024 is approved under s 124 of the Trusts Act 2019.
16 Memorandum of counsel for the applicants dated 1 October 2024 at [65].
17 Trusts Act 2019, s 81.
18 See for example Wyllie v Firmin [2024] NZCA 291 at [29]-[31] and Re Goubitz, above n 14, at [35].
(b)The requirement that certain companies and trusts consent to the variation is waived under s 125 of the Trusts Act.
(c)The applicants may sign a Restated Trust Deed to incorporate the Deed of Variation.
(d)The applicants are entitled to payment of their costs of this application on a solicitor-client (indemnity) basis.
Gwyn J
Solicitors:
Greg Kelly Trust Law, Wellington Duncan Cotterill, Wellington
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