Heylen v Keene
[2018] NZHC 2203
•24 August 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-001378
[2018] NZHC 2203
UNDER Section 66 of the Trustee Act 1956 and the inherent jurisdiction of the High Court IN THE MATTER
Of the estate of JOZEF PAUL MARIA JOHANNES HEYLEN
BETWEEN
INGMAR PAUL HEYLEN
Applicant
AND
BRIAN PAUL KEENE and DOUGLAS KIM FISHER
Respondents
Hearing: 16 August 2018 Appearances:
T Molloy for the Applicant
W Patterson and P Ahern for the Respondents A Ross QC for the named beneficiaries
Judgment:
24 August 2018
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Friday, 24 August 2018 at 3:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Spencer Legal, Aukland
Morrison Kent, Auckland Vincent Carmine, Auckland
Counsel: T Molloy, Auckland
B Patterson, Auckland A Ross QC, Auckland
HEYLEN v KEENE [2018] NZHC 2203 [24 August 2018]
Introduction
[1] Jozef Paul Maria Johannes Heylen (Mr Paul Heylen) died in Belgium on 21 July 2015. The High Court at Wellington granted probate of his will on 4 September 2015. One of the executors is Mr Heylen’s son, Ingmar Paul Heylen (Mr Ingmar Heylen). Mr Ingmar Heylen is also one of the named beneficiaries in the will. The other two executors are Brian Paul Keene, a New Zealand lawyer, and Douglas Kim Fisher, a New Zealand accountant. They are not beneficiaries.
[2] All actual or potential beneficiaries, including Mr Ingmar Heylen, signed a document dated 15 February 2018 (“the amended direction”) directing the executors to terminate the trusts established by Mr Paul Heylen’s will and distribute his estate in accordance with the rule in Saunders v Vautier.1 Mr Keene and Mr Fisher are, however, reluctant to implement the directions without the protection of a Court order. Mr Ingmar Heylen therefore applies for a direction from the Court that the executors are required to distribute the estate in accordance with the amended direction signed by all actual or potential beneficiaries.
Factual background
[3] After making directions for the distribution of his non-fixed assets and payment of his debts, funeral and graveyard expenses and duties payable on his estate, cl 7 of Mr Paul Heylen’s will directed the executors to divide his residuary estate into 200 shares and to distribute those shares as follows:
(a)Twenty shares to Barbara Noel Dawson and 120 shares to Mr Paul Heylen’s two children, being the applicant, Mr Ingmar Heylen, and his sister, Elke Anna Heylen (Ms Elke Heylen).
(b)Sixty shares to any person who had been travelling with, and assisting him on a daily basis, and was in the employ of his companies, Heylen International and imadi Psycho-Scope, for a period of not less than three years immediately prior to the date of his death (cl 7(d)(ii)).
1 Saunders v Vautier (1841) 4 Beav 115, 49 ER 282 (Ch).
(c)If the trusts of any share or shares should fail, then the share or shares which fail should be added to the other shares in the proportion which those shares bore to each other.
[4] Clause 8 of the will gave the executors an absolute discretion to decide whether or not a person had travelled with and assisted Mr Paul Heylen on a daily basis for a period of not less than three years immediately prior to the date of his death. The clause did not, however, give a similar discretion to the executors to determine whether that person was also in the employ of both Heylen International and imadi Psycho- Scope during the relevant periods.
[5] It is agreed by all parties that the only person that could possibly satisfy the criteria in cl 7(d)(ii) is Mr Paul Heylen’s former personal assistant, Marleen van Borm, a Belgian resident.
[6] By letter dated 22 January 2016, the estate’s lawyers, Morrison Kent, advised the executors that Ms van Borm qualified as the unnamed beneficiary in terms of cl 7(d)(ii). As a consequence of this advice, the executors, including Mr Ingmar Heylen, signed a resolution dated 9 May 2016 resolving that Ms van Borm qualified as the unnamed beneficiary. The resolution referred to Morrison Kent’s legal advice on the issue.
[7] On 9 September 2016, Ms Yvette Mylemans, who was appointed by cl 4 of the will as Mr Paul Heylen’s advisory trustee in respect of his will and estate, advised the executors that Mr Paul Heylen had told her that Ms van Borm was never employed by Heylen International and that Mr Paul Heylen believed it was “essential and necessary” that she had this information as it “could be very important after his death”. Ms Mylemans advised the executors that as a consequence it was her view that Ms van Borm did not satisfy the requirements of cl 7(d)(ii) of the will and did not qualify as a beneficiary.
[8] As a consequence of Ms Mylemans’ advice, the estate’s lawyers, Morrison Kent, revised their opinion and advised the executors that they were now unable to provide definitive advice on whether Ms van Borm qualified as the unnamed
beneficiary. The position was said to be uncertain. It was in this context that the named beneficiaries, being Ms Dawson and Mr Paul Heylen’s two children, entered into negotiations with Ms van Borm to resolve the question of her status as the unnamed beneficiary. Ms van Borm was advised throughout the negotiations by Belgian legal counsel, Mr Sven Eggermont.
[9] On 7 April 2017, Mr Eggermont advised the estate’s lawyers that his client, Ms van Borm, had decided to sign a deed of arrangement with the named beneficiaries. Mr Eggermont recorded that Ms van Borm believed she had been adequately advised. He said she agreed to the terms of the deed and hoped the executors would accept and respect her choice.
[10] A short time later the named beneficiaries and Ms van Borm entered into a deed of arrangement dated 10 April 2017 (“the deed”). The deed directed the executors to immediately make a partial distribution of EUR 1.4 million to the named beneficiaries and to then distribute the balance of the estate to the named beneficiaries, but only after the executors had received confirmation from Ms van Borm that she had received a payment of EUR 700,000 from the named beneficiaries.
[11] The deed recorded the reasons that the parties had reached agreement as follows:
L.Marleen’s status as the unnamed beneficiary under clause 7(d)(ii) of the Will is an issue in terms of whether she meets the requirements recorded in that clause.
M.Marleen agrees to leave the question regarding qualification under clause 7(d)(ii) unanswered, making it unnecessary to answer the said question given the fact that she hereby agrees to waive all and any rights, title, or interest (beneficial or otherwise) that she may have in the estate. In consideration for such agreement, Ingmar, Elke and Barbara agree to make a gift of funds totalling 700,000 Euro to Marleen in recognition of her care and support for Paul.
N.The parties have recorded the terms of their agreement in this deed to avoid the need for protracted and expensive litigation, and intending that this deed operates as a direction to the Executors in order to conclude the administration of Paul’s estate in a timely and cost effective manner in accordance with the wishes of all interested parties.
[12] On 10 May 2017, the estate’s lawyers advised Mr Ingmar Heylen that the two New Zealand executors, Mr Keene and Mr Fisher, had significant concerns with the deed. In a subsequent letter dated 18 May 2017, Morrison Kent stated that in the circumstances where the executors were being requested to act in a manner which was directly contrary to the terms of the will and without any proper protection for doing so, it would be untenable for them not to seek the sanction of the Court before proceeding further.
[13] It was in these circumstances that the third executor, Mr Ingmar Heylen, commenced these proceedings on 26 June 2017 seeking directions from the Court. The two New Zealand executors are named as respondents to the proceedings.
[14] In late January 2018, the respondents advised the applicant that they did not consider the deed to be a binding direction in accordance with the rule in Saunders v Vautier. However, they advised that if a new direction was prepared that simply required the executors to transfer the entire estate to the named beneficiaries, then this would resolve their concerns with the deed.
[15] In a joint memorandum dated 31 January 2018 and filed in Court, the respondents confirmed this position:
6.In order to resolve the Respondents’ concerns, the Named Beneficiaries intend to provide amended directions to the executors. The amended directions will supersede the directions contained in the Deed. They will require the executors to transfer the entire estate to the Named Beneficiaries. The Named Beneficiaries will then make a payment of Euro 700,000 to Marleen. Marleen will need to agree to the amended directions being implemented rather than the Deed.
7.The Respondents have indicated that, if they receive an amended direction on the terms set about above, then (and subject only to addressing likely minor related matters), they accept that a Court direction under s 66 of the Trustee Act should be made requiring them, along with the Applicant, to distribute the trust estate in accordance with the amended direction. The directions hearing on 5 February 2018 can then proceed on an agreed basis.
[16] Thereafter, the respondents and the named beneficiaries (but not Ms van Borm) settled the terms of a new beneficiary direction (“the direction”) and filed a further joint memorandum dated 2 February 2018 in Court that attached a copy of the
direction. The respondents were at all times aware that Ms van Borm would be signing the direction. The joint memorandum (signed on behalf of the respondents) recorded that:
3.The Respondents have confirmed that if they receive a signed copy of the attached beneficiary direction, then they will have no basis to oppose a direction under s 66 of the Trustee Act 1956 that they distribute the estate in accordance with it.
[17] Subsequently, Ms van Borm’s Belgian counsel, Mr Eggermont, advised the parties that his client required paragraph 6 of the direction to be amended before she would sign it. That paragraph contained an indemnity to the executors from each of the named beneficiaries and Ms van Borm. Mr Eggermont advised the parties that Ms van Borm did not wish to provide an indemnity to the executors.
[18] The named beneficiaries therefore amended the direction to remove Ms van Borm’s indemnity (“the amended direction”). However, the named beneficiaries’ indemnity to the respondents remained. The named beneficiaries and Ms van Borm have since signed the amended direction, which has been filed with the Court and provided to the respondents. It differs from the previously agreed direction, only in so far as Ms van Borm’s indemnity has been removed from paragraph 6.
The Rule in Saunders v Vautier
[19] In Saunders v Vautier a testator bequeathed certain Eastern India stock to executors upon trust to accumulate the interest and dividends due thereon until Daniel Wright Vautier turned 25 and then to pay or transfer the principal of the stock together with the accumulated interest and dividends to Mr Vautier absolutely.2 Mr Vautier turned 21 in March 1841 and sought the transfer of the East India stock to him, four years early.
[20] The Court held that the legacy to Mr Vautier had vested and ordered the transfer. Lord Langdale stated:
Where a legacy is directed to accumulate for a certain period, or where the payment is postponed, the legatee, if he has an absolute indefeasible interest
2 Saunders v Vautier (1841) 4 Beav 115, 49 ER 282 (Ch).
in the legacy, is not bound to wait until the expiration of that period, but may require payment the moment he is competent to give a valid discharge.
[21] The rule in Saunders v Vautier has subsequently been developed and applied consistently. The parties accept the general principle that where beneficiaries of a trust are all adults with full legal competence and are in agreement, they can act together to require the trustees to terminate the trust and transfer the trust’s property to them to distribute as they see fit. The rule may also be used to transfer to a legally capable adult beneficiary of a fixed share of the trust property his or her share, provided the trust property is in a form that will allow the transfer of that share to him or her. However, this aspect of the rule does not apply if the beneficiaries’ interest is not an absolute or vested one.
[22] In Stephenson (Inspector of Taxes) v Barclays Bank Trust Co Ltd, Walton J summarised the main principles of the rule as follows:3
(a)In a case where the persons who between them hold the entirety of the beneficial interests in any particular trust fund are all sui juris and acting together, (“the beneficial interest holders”) they are entitled to direct the trustees how the trust fund may be dealt with.
(b)This does not mean, however, that they can at one and the same time override the pre-existing trusts and keep them in existence. Thus, in Re Brockbank itself the beneficial interest holders were entitled to override the pre-existing trusts by, for example, directing the trustees to transfer the trust fund to X and Y, whether X and Y were the trustees of some other trust or not, but they were not entitled to direct the existing trustees to appoint their own nominee as a new trustee of the existing trust.4 By doing so they would pursuing inconsistent rights.
(c)Nor are the beneficial interest holders entitled to direct the trustees as to the particular investment they should make of the trust fund. This follows for the same reason as the above. Moreover, it appears that
3 Stephenson (Inspect of Taxes) v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 (Ch) at 889.
4 Re Brockbank, Ward v Bates [1948] Ch 206 (Ch).
once the beneficial interest holders have determined to end the trust they are not entitled, unless by agreement, to the further services of the trustees. Those trustees can of course be compelled to hand over the entire trust assets to any person or persons selected by the beneficiaries against a proper discharge, but they cannot be compelled, unless they are in fact willing to comply with the directions, to do anything else with the trust fund which they are not, in fact, willing to do.
(d)The rights of the beneficial holders are always subject to the rights of the trustees to be fully protected against such matters as duty, taxes, costs or other outgoings; for example, the rent under a lease which the trustees have properly accepted as part of the trust property.
Respondents’ position
[23] The respondents do not oppose the application for directions, but raise three matters which they believe they are properly required to bring to the Court’s attention.
[24] First, the amended direction is not given by all beneficiaries, but by the named beneficiaries and Ms van Borm, although Ms van Borm’s status is said to remain unresolved. If there is agreement that her position should remain uncertain, an issue arises as to whether she can join in the giving of a binding direction in accordance with Saunders v Vautier. The respondents submit that the proper course for the parties should they wish to bring the amended direction within the rule in Saunders v Vautier is either to agree that Ms van Borm is a beneficiary, in which case she joins others in giving the direction as a beneficiary, or she waives all rights to the estate, leaving it with the three remaining beneficiaries to provide the direction.
[25] Second, notwithstanding a direction by Ms van Borm to the executors pursuant to the amended direction that they should act contrary to the terms of the will, she is refusing to indemnify them for so acting.
[26] Third, it is evident from the joint memorandum filed that the named beneficiaries and Ms van Borm intend, once they acquire the assets of the estate pursuant to the amended direction, to then give effect to the deed of arrangement, in
consequence of which both the respondents and the Court are on notice that the amended direction will be utilised to enable that outcome.
Discussion
[27] As to the first matter drawn to the Court’s attention by the respondents, the Court is not asked to determine whether Ms van Borm is the unnamed beneficiary in terms of cl 7(d)(ii) of Mr Paul Heylen’s will. Nor is it required to do so. I am of the view that if Ms van Borm is a beneficiary, she was right to sign the amended direction dated 15 February 2018. If she is not a beneficiary, her signature is superfluous and does not invalidate the document. It is still of full force and effect having been signed by all beneficiaries.
[28] The amended direction clearly falls within the rule in Saunders v Vautier. The executors are directed by all possible beneficiaries to transfer all trust funds to their agent. Nothing more. The Court is not expanding the potential scope of the rule in Saunders v Vautier by determining that the amended direction falls within its scope.
[29] As to the second matter, the refusal of Ms van Borm to indemnify the executors, the respondents do not oppose the directions sought unless an indemnity is provided. Their position is that the refusal of Ms van Borm to offer an indemnity is a relevant matter for the Court to be concerned about because the amended direction directs the executors to act contrary to the terms of the will and because she has had no New Zealand representation. However, if the Court considers that an indemnity is not required from her, the respondents will accept that.
[30] It is unclear why the respondents say that the amended direction directs the executors to act contrary to the terms of the will. The operative part of the amended direction is as follows:
3. The Executors are to take all reasonable steps necessary to transfer, or cause to be transferred (either by way of actual transfer or transfer of control), all estate assets including cash, bank accounts, shares, records, directorships, to Vince Carmine, solicitor, Auckland, in his position as nominee for the Interested Parties, in particular, the Executors are to take the following steps …
There are then listed eight particular steps which the executors are to take to implement the transfer of all estate assets. The interested parties are said to be Mr Ingmar Heylen, Ms Elke Heylen, Ms Dawson and Ms van Borm.
[31] Mr Paul Heylen’s will provides very clear directions as to the realisation of the estate assets and distribution to the beneficiaries. It effectively requires that all assets be disposed of leaving only cash for distribution. The will provides for a discretionary period (18 months following Mr Paul Heylen’s death) and upon its conclusion (“the distribution date”), being 21 January 2017, the executors, having disposed of the assets of the estate as directed in the will, are to divide the resulting cash for distribution to Mr Ingmar Heylen, Ms Elke Heylen, Ms Dawson and a fourth person identified by cl. 7(d)(ii) of the will.
[32] I do not consider the amended direction directs the executors to act contrary to the terms of the will. It merely brings the trust/s created by the will to an end.
[33] The respondents appear to believe that it is clear that Ms van Borm is the unnamed beneficiary identified by cl 7(d)(ii) of the will, notwithstanding the advice from the estate’s lawyers that the position is uncertain. They also appear to have reached their own conclusions about the tax status in Belgium of any money received by Ms van Borm, whether it be a distribution to a beneficiary or a gift from the named beneficiaries. On the basis of those views, they appear to believe that Ms van Borm would receive more if her status as the unnamed beneficiary identified in cl 7(d)(ii) was confirmed, yet they have not asked the Court to do that.
[34] The respondents’ concern about the position of Ms van Borm is misplaced. The respondents point out that Ms van Borm has not been represented by competent New Zealand counsel who would be in a position to advise her how a New Zealand Court may interpret the terms of a New Zealand will. Ms van Borm is, however, well aware of the respondents’ views, but has sensibly chosen to reach an accommodation with the named beneficiaries. She has been represented by Belgian counsel throughout and has received her own tax advice, a copy of which she has supplied to the respondents.
[35] In any event, the executors have joint and several indemnities from the three named beneficiaries “for all and any acts carried out by them in relation to and consequence on and in furtherance of giving effect to this direction.”
[36] In my view, that the executors are not entitled to require an indemnity from Ms van Borm as a condition of complying with the amended direction in circumstances where the executors are already seeking the protection of a Court order. As explained in Lewin on Trusts:5
A trustee, upon making final distribution of the trust fund and thus depriving himself of the security previously afforded to him by his retention of the trust property, naturally and reasonably wishes to procure for himself the maximum security against future litigation. In practice, it is common for a trustee to seek a release under seal. But a trustee has, in general, no right to insist upon a release…
In particular circumstances, a release may be required. A trustee who is asked to depart from the strict terms of the trust may demand a release but only from the consequences of complying with the request, not generally; and it may be that he can insist on a release only if he makes that the price of complying with the request, not after having complied with it …
…
Where a trustee pays money under the direction of the court he is indemnified by the order itself and is not entitled to any release from the parties.
[37] As to the third matter which the executors believe they are properly required to bring to the Court’s attention, I am of the view that the Court is not required to consider whether or not the original deed of arrangement complied with the rule in Saunders v Vautier. The fact that after all estate assets are transferred to Mr Carmine as nominee for the interested parties pursuant to the amended direction, the named beneficiaries and Ms van Borm will proceed to implement the accommodation reached between them is immaterial. Again, the respondents appear to be proceeding on a misplaced concern about the position of Ms van Borm.
[38] The respondents also appear to be concerned about their own position as a result of advice received from Laga, a law firm in Belgium. In particular, they point to potential prosecution and possible personal exposure to the payment of tax avoided
5 Lynton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (19th ed, Sweet & Maxwell, London, 2015) at [26-104]-[26-107].
and interest/penalties if they assisted giving effect to the terms of the original deed of arrangement. Again, their concern is misplaced. The advice from Laga proceeded on the basis of limited documentation and significant assumptions. It also postulated every conceivable position, however unlikely. There is no risk to the executors in implementing the amended direction pursuant to a court order.
Conclusion
[39] The amended direction is a sensible and reasonable compromise between the named beneficiaries and Ms van Borm in circumstances where there remains some uncertainty about Ms van Borm’s position as the unnamed beneficiary under cl 7(d)(ii) of Mr Paul Heylen’s will. Ms van Borm has chosen not to take part in these proceedings. I am, however, satisfied that she is well aware of the respondents’ concerns, but wishes to avoid protracted and expensive litigation. She has received legal and tax advice throughout the negotiations and expressed the wish 18 months ago that the respondents should respect her choice. I hope that the estate can now be wound up relatively quickly and economically. The delays and costs to date have been regrettable.
[40] There will be an order in terms of s 66 of the Trustee Act 1956 that the applicant and respondents, as executors and trustees of the estate of the late Jozef Paul Maria Johannes Heylen (the deceased), are required to distribute the estate in accordance with the amended direction dated 15 February 2018 that has been executed by all parties with an actual or potential interest in the deceased’s estate.
[41] If the parties cannot agree costs, memoranda from the parties are to be filed by 30 September 2018. A costs judgment will then be issued on the papers.
Woolford J
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