In the Matter Of the Estate of the late Adam Miller Begg An Application By Castle Trustees Limited

[2024] NZHC 3950

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2024-485-826

[2024] NZHC 3950

UNDER

Sections 121-124 of the Trusts Act 2019

AND UNDER

Part 19 of the High Court Rules

IN THE MATTER OF

the Estate of the late ADAM MILLER BEGG

AN APPLICATION BY

CASTLE TRUSTEES LIMITED

Applicant

Hearing:	On the papers
Appearances:	K H Lawrence and K Zhu for Applicant
Judgment:	19 December 2024

JUDGMENT OF BOLDT J

[1]                 This is an application under s 124 of the Trusts Act 2019 (the Act). The adult beneficiaries of a testamentary trust have asked the trustee to terminate the trust and distribute the property it holds. All have signed a deed of termination.

[2]                 The application arises because there are also 14 contingent beneficiaries, all of them minors. The adult beneficiaries, through the trustee, ask the Court to approve the termination and distribution of the trust on behalf of the contingent beneficiaries.

Background

[3]                 Adam Miller Begg (Adam) died in 1996, leaving three daughters, a son and a substantial estate. His will made a number of specific bequests, including provision

CASTLE TRUSTEES LIMITED [2024] NZHC 3950 [19 DECEMBER 2024]

for his widow and a lump sum payment for each of his children. It also established a trust for his residuary estate.

[4]                 Between them, Adam’s children had nine children of their own. Subject to what happens if any of them predecease Adam’s children, the will envisaged the grandchildren would be the ultimate beneficiaries of the residuary estate.

[5]                 The will provided that the residuary estate should be used to generate an income for Adam’s children throughout their lives. It also provided that upon the death of each child, that child’s share of the residuary estate should pass absolutely, and in equal shares, to Adam’s grandchildren. For example, when Adam’s son William died in 2019, a quarter of the residuary estate passed, in equal shares, to the grandchildren. When the next of Adam’s children dies, a third of the remaining estate will be distributed to the grandchildren, and so on.

[6]                 The trust is designed to terminate upon the death of the last of Adam’s children, by which time the residuary estate will have been fully distributed to the grandchildren.

[7]                 Adam’s surviving children and the nine grandchildren now wish to terminate the trust and divide the remaining residuary estate into twelve equal shares. They no longer wish to meet the fees associated with the trust, and have decided, among themselves, that it would be in everyone’s interests if they were to share the residuary estate now. Adam’s three daughters, who are aged in their 60s, are content to take a discount on the value of their remaining life interest. The grandchildren, who are aged between 30 and 42, will receive the certainty of an immediate lump sum payment.

[8]                 The proposal is a sensible one, and s 121 of the Act provides that if all the beneficiaries of the trust consent, termination must follow.

[9]                 There is one complication. The will provides that if any of the grandchildren predecease one or more of Adam’s children, and leave children of their own, that grandchild’s remaining interest will pass to his or her children (Adam’s great- grandchildren). As a result, the great-grandchildren, including any who are yet to be

born,  are  contingent   beneficiaries   of the  trust.    There are currently 14 great- grandchildren, all minors.

[10]             The application to terminate and distribute the trust is brought by Castle Trustees Ltd (Castle), as trustee of the estate. In the first instance, Castle applies without notice for a direction that service of the proceedings on the children and grandchildren is sufficient. Castle submits the interests of the great-grandchildren will be adequately protected by service of the application on the relevant grandchild.

[11]             Alternatively, Castle proposes the Court appoint counsel to represent the interests of the great-grandchildren. Termination and distribution of the estate in accordance with the deed will extinguish their contingent interest, albeit an interest that will crystallise only if any of Adam’s grandchildren predecease one or more of his surviving children.

Service

[12]             Castle submits, and I agree, that the interests of the great-grandchildren will be adequately protected by service on the grandchildren. I can foresee no situation in which the (slightly) divergent interests as between grandchildren and great-grandchildren will cause the Court to approach the question of termination and distribution differently.

Substantive application

[13]             That conclusion also resolves the substantive application. Section 124(4) of the Act provides:

(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:

(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.

[14]               I agree the interests of the grandchildren and great-grandchildren are broadly aligned. If any of the grandchildren die young, the interests of the respective great-grandchildren will be protected by the provision their parents will no doubt make for them. The deed of termination includes a provision which stipulates that if any of the grandchildren decide that their share of the estate should be paid into a trust, then their children must also be beneficiaries, and Castle must be satisfied with the terms of that trust.

[15]             In Re Davies, Grau J was faced with a similar situation, albeit in the case of a family trust which was far less harmonious than Adam’s testamentary trust.1 Justice Grau was asked to approve a settlement under s 124 on behalf of minor and unborn discretionary beneficiaries. In that case, as in this one, the settlors intended the discretionary beneficiaries would benefit only if an older beneficiary died before distribution. Justice Grau noted the interests of the minor or unborn discretionary beneficiaries could “be protected through their parent’s or grandparent’s share”.2

[16]             I am satisfied the great-grandchildren will suffer no material detriment if the trust is terminated as proposed. They would only be entitled to an interest in Adam’s estate if they were to lose a parent relatively young; it is highly likely that most, if not all, would receive nothing from the estate if the trust were to run its course. Indeed, early termination is likely to be to their advantage. Their parents will receive their share of Adam’s estate far sooner than they otherwise would, producing a corresponding advantage to all members of the grandchildren’s families. There is no reason to doubt that their long-term interests will be well protected by their parents.

[17]             Those conclusions determine the application. I am satisfied it will be in the interests of all beneficiaries, including the contingent beneficiaries, if the trust is terminated and distributed in accordance with the deed of termination.

1      Re Davies [2024] NZHC 2998.

2 At [50].

Conclusion

[18]             Castle’s application is granted. I approve the deed of termination and distribution dated 15 November 2024 on behalf of the minor, future, and unascertained contingent beneficiaries of the estate of the late Adam Miller Begg.

[19]             The costs Castle has incurred in bringing this application are to be paid from the estate on a solicitor and client basis.

Boldt J

Solicitors:
Greg Kelly Trust Law, Wellington for Applicant