Jones v Collings
[2015] NZHC 3002
•30 November 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-003253 [2015] NZHC 3002
IN THE MATTER of Section 64A of the Trustee Act 1956 AND IN THE MATTER
of Section 7 of the Perpetuities Act 1964
AND IN THE MATTER
of the grandchildren of GEORGE WINSTONE TRUST
BETWEEN
CLAIR BERYL MACPHERSON JONES, ROBERT ARTHUR WINSTONE AND GEORGE ANTHONY WINSTONE AS TRUSTEES
Plaintiffs
AND
MARGARET ELIZABETH COLLINGS, PAULINE MARY HOOK,
JENNIFER RUTH HOOK, NICHOLAS BRIAN HOOK,
HENRY MACDONALD WINSTONE, ALEXANDER GEORGE WINSTONE, PHILIPPA NATALIE HOOD, KATHERINE ROSE SOLOMON, CLAIR ELIZABETH SOLOMON, ALISON CLARE WARREN,
ROBERT IAN WARREN,
cont … /2
Hearing: 6 August 2015 (memorandum, 24 August 2015) Appearances:
P D McKenzie QC for Plaintiffs
No appearance for or on behalf of Defendants
N Evans for Minor and Unborn BeneficiariesJudgment:
30 November 2015
JUDGMENT OF HINTON J
This judgment is delivered by me on 30 November 2015 at 5 pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
JONES & ORS AS TRUSTEES v COLLINGS & ORS, [2015] NZHC 3002 [30 November 2015]
ROBYN MARY WINSTONE, GEOFFREY MILTON BARBER, ROWAN JANE BARBER,
PAUL WINSTONE BARBER, JOHN CHANDLER WINSTONE, ANNEMARIE HELEN WINSTONE, CATHERINE JEAN TRENEMAN, REBECCA JANE WINSTONE,
MAX COLIN FARQUHARSON, RAYWIN MARY RAU (previously RAEWYN MARY VOYCE), VANESSA JANE VOYCE, GARETH REX DYSON,
MARION PHYLLIS O’KANE TRACY JENNIFER DYSON, JANDENE SUE DYSON,
CLAIR BERYL MACPHERSON JONES, RORY MACPHERSON JONES,
ANGUS MACPHERSON JONES, PETER ROSS WINSTONE, DAVID PETER WINSTONE, GRETA FELICITY MASLIN, JOHN VIVIAN WINSTONE,
PENELOPE JEAN EATON, HANNAH ROSE CAUNES (nee EATON),
JAIMEE HOPE HART, JESSICA KATE DRAPER, REBEKAH PENELOPE EATON, ANGELA HOPE WINSTONE, KEITH WARREN WINSTONE, SALLY ANNE MCDERMAID, ANDREA JEAN FOSTER, NAOMI BARBARA ARNET,
WARREN SCOTT WINSTONE, BRENT MARTIN V WINSTONE, DANIEL TIMOTHY WINSTONE, ROBERT ARTHUR WINSTONE, JULIA HOPE BUUTVELD, ANDREW ROBERT WINSTONE, GEORGE ANTHONY WINSTONE, MARK RICHARDSON WINSTONE, SONYA JOANNE DOUDS, MATTHEW PAUL WINSTONE, LAUREN MAREE WINSTONE, RUEBEN SEBASTIAN MICHELL
WINSTONE,
IAN RAY CARR, ROBERT JAMES CARR, HILDA ELIZABETH CARR,
JENNIFER KATHERINE CARR, BRYAN JOSEPH CARR, LESTER FRANK CARR
as beneficiaries
Defendants
Introduction
[1] This case is all about the Grandchildren of George Winstone Trust. It was settled in 1948 with the princely sum of £3,000. At the date of the hearing, the trust fund was $1,916,283. All relevant parties want to bring forward the vesting of a substantial part of the Trust. The Court’s consent is needed on behalf of two minor children and any future unborn descendants of George Winstone’s grandchildren.
Procedural background
[2] The proceeding by statement of claim is under s 64A of the Trustee Act 1956 and is brought pursuant to Part 18 of the High Court Rules.
[3] The proceeding is uncontested. It has been brought by the plaintiff trustees of the Trust at the unanimous request and consent of all sixty-one sui juris beneficiaries and with the consent and agreement of the trustees.
[4] Mr McKenzie QC on behalf of the trustees seeks this Court’s consent on behalf of two minor and any unborn beneficiaries to a proposal to vest and terminate the Trust in respect of 44 adult beneficiaries (where the class of great grandchildren is closed) and, where the class of beneficiaries (including the two minor beneficiaries) is still open, for the Trust to continue for those 17 beneficiaries. As matters stand this would result in at least 78 per cent of the trust beneficiaries being paid out their interests in the trust.
[5] On 17 December 2014 this Court directed that a copy of the statement of claim, the affidavit of Clair Beryl MacPherson Jones (“Mrs Jones”) and directions order be served on all beneficiaries under the deed of settlement. These are the people also named as defendants in the statement of claim. All these parties were served as deposed to in the further affidavit of Mrs Jones dated 10 March 2014.
[6] No defendant has filed any statement of defence or notice seeking to be heard.
[7] The Court appointed Mr Evans as counsel to represent the two minor beneficiaries and any unborn beneficiaries.
[8] The sui juris beneficiaries, on the basis of the rule in Saunders v Vautier, are giving their consent and agreement to the Trust being varied.1 However, in the present situation all beneficial interests must agree and this Court’s consent on behalf of minor and any contingent, unborn beneficiaries is required.
Factual background – Trust
[9] The Grandchildren of George Winstone Trust was established by George Winstone (“the Settlor”), on 8 October 1948. He settled three thousand pounds (£3,000) on the trustees, primarily for the benefit of his grandchildren, with provision for “remoter issue” of such grandchildren. The trust deed specifically excludes children of the Settlor as beneficiaries. The trust deed also requires any beneficiary to be born in lawful wedlock.
[10] The settlement on the Trust was apparently used to take up shares in Winstone Limited, a company which the Settlor’s father had founded in 1869, and of which the Settlor was a director.
[11] Winstone Limited was one of the better-known names in the New Zealand business world. A principal reason for establishment of the Trust was to hold the shares in Winstone Limited as a means of keeping family control over that company shareholding. In choosing trustees, clause 10 of the trust deed requires that, as far as possible, trustees shall be male descendants of the Settlor and directors of Winstone Limited.
[12] One of the primary reasons for the existence of the Trust, to hold shares in Winstone Limited, has sadly long since passed. The company was sold on the Brierley Investments Limited takeover in 1986.
[13] The Trust fund is now just under $2 million and is invested in liquid assets.
1 Saunders v Vautier (1841) 4 Beav 113, 41 ER 482.
[14] The Trust names 17 grandchildren living at the date of settlement in 1948 and provides that after the death of the Settlor, providing they have reached majority, the trust income is to be divided per stirpes among the living grandchildren of the Settlor and in the event of a grandchild dying leaving children, then the “remoter issue” of that grandchild receive their share of income.
[15] Clause 5 of the trust deed provides that on the death of the last to die of the named grandchildren, the trust fund is to be distributed per stirpes equally between all surviving grandchildren and, where grandchildren have died leaving issue, that grandchild’s share is to go to the remoter issue of that grandchild.
[16] The youngest of the grandchildren of the Settlor named in the trust deed is Mrs Jones, a trustee of the Trust, and the deponent of the key affidavits. Mrs Jones was present in Court for the hearing of this matter. She is 67 years old. If in theory Mrs Jones were the last to die of the named grandchildren and lived to be 97, it would be 30 years before any capital distribution.
[17] Of the 17 grandchildren named in the deed, 12 are still alive. Subsequent to the date of settlement of the Trust, five further grandchildren were born to the Settlor, all of whom are alive. Therefore out of the total of 22 grandchildren, 17 grandchildren are still living. Of the living grandchildren, nine are females and eight are males. There are 44 great grandchildren born in lawful wedlock; there are four lawfully adopted children (the parents of one of them later married) and one other child.
[18] All of the nine female grandchildren are aged 55 years or older. Of the eight male grandchildren, four have advised that for medical reasons they are incapable of having children.
Proposal
[19] The trustees’ position is that the class of grandchildren is closed. The class of the majority of great grandchildren is also closed. The proposal by the sui juris beneficiaries and agreed to by the trustees is that where the class of beneficiaries is closed, that is where:
(a) a grandchild being a female is at least 55 years of age, or
(b)being a male is medically shown to be incapable of fathering a child or children, or
(c) the grandchild has died leaving children,
then the life tenant’s interest in income of those grandchildren be capitalised and paid out to them on the basis of the tables in the Estate and Gift Duties Act 1968 and that the remainderman interest of that life tenant be paid to that person’s children equally, subject to provision for those great grandchildren’s children (being the unborn, contingent, great, great grandchildren of the Settlor) who may be regarded by this Court as the “remoter issue” in terms of the trust deed.
[20] The effect of the proposal is to bring forward in time the vesting of the Trust, rather than waiting however many years it may be for the last of the named grandchildren to die.
[21] To calculate distributions under the proposal the estimated duration of the Trust has been based on the age of the youngest of the named grandchildren and the life expectancy tables contained in the Estate and Gift Duties Act.
[22] The proposal would result in at least 78 per cent of the trust beneficiaries being paid out their interests in the trust fund.
[23] Where the class of beneficiaries is not closed, that is where the grandchild is a male and is capable of fathering a further child or children, then it is proposed that the Trust continue with leave being given to such beneficiaries to apply to the Court for a grandchild’s life tenant interest to be capitalised on proof of being incapable of fathering a further child or children.
[24] The Court’s consent to the proposal is sought on behalf of the two minors (Brian Carr and Timothy Winstone, children of male grandchildren) and any future, unborn remoter issue of grandchildren of the Settlor.
Applicable law – Saunders v Vautier and s 64A Trustee Act 1956
[25] The application is based on the extended application of the rule in Saunders v Vautier at common law and on the Court’s power under s 64A of the Trustee Act to consent to a proposed variation to a trust, provided the variation is not to the detriment of those beneficiaries on whose behalf the Court gives that consent.
[26] The beneficiaries representing the entire beneficial interest of a relevant trust may agree to bring the trust to an end:2
Now it is trite law that the persons who between them hold the entirety of the beneficial interests in any particular trust fund are as a body entitled to direct the trustees how that trust fund is to be dealt with …
[27] The rule in Saunders v Vautier cannot be used to change the trust instrument without the trustees’ consent.3 In the present case the trustees have given their agreement and have consented to continue as trustees of the varied trust.
[28] The effect of an order under s 64A of the Trustee Act is to make good by act of the Court any want of capacity to enter into a binding arrangement of any beneficiary not capable of binding themselves and of any unborn beneficiary.
[29] Manning v Manning4 is a more recent example where the sui juris beneficiaries had agreed on the basis of the rule in Saunders v Vautier to a variation of the trust and this Court consented to a proposed variation of trust on behalf of minor beneficiaries.
[30] Under s 64A of the Trustee Act, without limiting any other powers of the Court, the Court may, if it thinks fit, authorise arrangements that vary or revoke a trust or enlarge trustees’ powers of managing or administering any trust property on behalf of:
(a) Any person having a vested or contingent interest who by reason of infancy or other incapacity is incapable of assenting; or
2 Stephenson v Barclays Bank [1975] 1 All ER 625 at 637.
3 Re Brockbank [1948] Ch 206; Stephenson v Barclays Bank [1975] 1 All ER 625 at 637.
4 Manning v Manning (2009) 27 FRNZ 586 (HC).
(b)Any person (whether ascertained or not) who may become a future beneficiary; or
(c) Any unborn or unknown person; or
(d)Any person with a discretionary interest under a protective trust where the interest of the principal beneficiary has not failed or been determined.
[31] The Court cannot approve an arrangement on behalf of a person falling in categories (a)-(c), if it is to their detriment. In determining this, the Court may have regard to all benefits which may accrue to that person directly or indirectly in consequence of the arrangement, including “the welfare and honour of the family to which the person belongs”.5
[32] Section 64A was considered comprehensively in Re Estate of Byrne.6
Mr McKenzie QC submitted that this case was particularly helpful, and I agree. The main points arising from Re Estate of Byrne are:
(a) The Court’s role under the section is not to make orders varying or revoking trusts but to approve the arrangement on behalf of those not legally able to do so for themselves by standing in the shoes of the beneficiary on whose behalf it is acting.
(b)“Revoking any trusts” can encompass both the termination of the existing trusts and the revocation of the existing trusts and their substitution by new trusts.7
(c) The arrangement may be proposed by whoever brings the matter to court. The arrangement is commonly proposed by the trustee or
trustees but it is not limited to them.
5 Trustee Act, s 64A(1).
6 Re Estate of Byrne HC Wellington CIV-2003-485-167, 25 May 2004.
7 Citing Re Greenwood [1988] 1 NZLR 197 (HC) at 211.
(d)When considering the arrangement the court starts by recognising that under the rule in Saunders v Vautier, beneficiaries who are sui juris and together absolutely entitled to the trust property, have the right to defeat the settlor’s intention by varying or revoking the trust.8 The Court’s jurisdiction is a statutory extension to that rule.9
(e) The Court may therefore approve an arrangement that is contrary to an express prohibition in the will or trust deed. It would not do so lightly, but the Court approaches the matter from the perspective of those on whose behalf it is giving consent. It does not stand in for the settlor or testator.
(f) The Court has a very wide discretion, but it is exercised in the interests of the person or class on whose behalf it is asked to consent. The Court should ask whether the person on whose behalf it is consenting would, if of full capacity and properly advised, have been likely to have approved the arrangement on their own behalf, except the Court may not consent to an arrangement that is detrimental to
that person. (The Court declined to follow Re Bryant10 where the
Court stated that it is entitled to look at the arrangement as a whole, and not merely at the limited interest of the beneficiary on whose behalf the Court has a duty to consider it).
(g)The Court adopts the perspective of a properly advised and reasonable beneficiary and takes a wide approach to the benefits and detriments of an arrangement as a whole, including indirect and intangible benefits and detriments. It is then necessary for the Court to weigh up the competing detriments and benefits accruing to the person on whose behalf the Court is considering the matter.
(h)The arrangement is approached by the Court in a practical and businesslike way including taking into account the total advantages
8 Re Weston’s Settlement [1969] 1 Ch 223 (CA).
9 Goulding v James [1997] 2 All ER 239 (CA) at 247.
10 Re Bryant [1964] NZLR 846 (SC) at 848.
that the various parties will obtain and their bargaining strength. It follows that the Court’s inquiry does not end once it is shown that the arrangement is not detrimental to minor and unborn beneficiaries. The Court has to also consider whether the arrangement adequately reflects the strength of their bargaining position.
[33] A wide range of proposed variations have been approved by the Court. These include the addition of children of existing beneficiaries,11 and consenting on behalf of minor beneficiaries to the proposed sale of Maori freehold land subject to the Te Ture Whenua Maori Act 1993.12
[34] Also there have been a number of cases, similar to the facts of this one, where the Courts have accelerated interests in a trust or enabled the majority to be paid out, protecting those who remain. Re Bryant is one example of this.13
Perpetuities Act 1964
[35] Section 7 of the Perpetuities Act 1964 provides presumptions and evidence as to future parenthood. Section 7(1) provides that the section applies:
… whenever it becomes relevant to inquire whether any person is or at any relevant date was or will be capable of having a child, if—
(a) the inquiry is necessary for the purpose of determining the rights of any person to put an end to a trust or accumulation or to accelerate the vesting in possession of any interest ….
[36] Section 7(2) provides that where this section applies:
… there shall be a presumption, rebuttable by sufficient evidence to the contrary tendered at the time at which the matter falls for decision, but not subsequently, that—
(a) a woman who has attained the age of 55 years is incapable of having a child and will not subsequently have a child; and ….
[37] Section 7(3) provides that:
Where this section applies, evidence that a male or female of any age is or at a relevant date was or will be incapable of having a child shall be admissible
11 Ewington v Schulz HC Auckland CIV-2008-404-6596, 5 May 2009.
12 Manning v Manning, above n 4.
13 Re Bryant, above n 10.
in proceedings in order to establish that incapacity, and the court may accept any such evidence of a high degree of improbability of having a child as it thinks proper as establishing the incapacity.
[38] The nine female grandchildren are aged 55 years or over.
[39] Four of the male grandchildren have supplied medical evidence that they are incapable of having a child. In respect of these grandchildren and their children, that group of beneficiaries is closed. The relevant medical details are on the Court file. I note that Mark Winstone’s medical evidence was somewhat qualified but I have been supplied with further information from Mr Winstone including a letter forwarded to the Court on 24 August 2015 (inadvertently not provided to me until some weeks later). The total information supplied enables me to accept that this male beneficiary can properly be placed in the category of persons not capable of having further issue.
[40] There are four male grandchildren medically capable of having a child. While the youngest of these is aged 58, the possibility exists that they may have further children and so the class per stirpes in respect of those male grandchildren is still open.
[41] Mr McKenzie submitted that this Court’s consent to the proposal is sought on behalf of the two minor beneficiaries (Brian Carr and Timothy Winstone) and any future unborn beneficiaries who are or who would be children or grandchildren of these four male grandchildren. However, it seems to me that consent is required for all unborn potential beneficiaries. I come back to this.
Special classes of children of grandchildren
[42] The position of five children of grandchildren of the Settlor requires consideration to assess whether from the perspective of the unborn or minor beneficiaries, these people should be included or not.
[43] Clauses 4 and 5 of the deed of settlement limited the class of beneficiaries entitled to income and/or capital to “the then living descendants born in lawful wedlock of the Settlor other than children of the Settlor”. Of the five people referred to:
(a) Four were lawfully adopted. It is contended that one of the four adopted children is deemed to be born in lawful wedlock and entitled to take under the deed of settlement by virtue of the Legitimation Act
1939, which applied at the relevant time, and the other three are not entitled to take.
(b)There is one child, a descendant of the Settlor, who was not born in lawful wedlock, and not adopted within the greater Winstone family. The submissions refer to the fact that the family has no contact with this person, but that does not seem to be material.
[44] It is necessary to consider the relevant legislation and law in relation to the position of these five people.
Three adopted children of grandchildren
[45] There are three adopted children of the grandchildren, who have been lawfully adopted, but are not descendants of the Settlor. They are:
(a) Ross Ian Collings (Ross) (date of birth 11 May 1962), adopted by
Margaret Elizabeth Collings (nee Winstone);
(b)Gregg Murray Collings (Gregg) (date of birth 12 June 1964) adopted by Margaret Elizabeth Collings (nee Winstone); and
(c) Kirk Malyon Dyson (Kirk) (date of birth 18 February 1974) adopted
by Marion O’Kane (nee Farquharson).
[46] There is no express provision in the deed of settlement to include adopted children. Rather, the deed expresses a contrary intention in clauses 4 and 5, which provide that beneficiaries as to income and/or capital must be “living descendants born in lawful wedlock of the Settlor”. The word descendant when used in a will or
trust “simply means anyone descended from a particular person. Collateral relations are therefore excluded.”14
[47] Further, the Adoption Act 1955 does not apply. Section 16(2) of the Adoption Act provides that upon an adoption order being made, the adopted child shall be deemed to become the child of the adoptive parent, as if the child had been born to that parent in lawful wedlock. However, the section:15
… shall not apply for the purposes of any deed, instrument, will, or intestacy, or affect any vested or contingent right of the adopted child or any other person under any deed, instrument, will, or intestacy, where the adoption order is made after the date of the deed or instrument or after the date of the death of the testator or intestate, as the case may be, unless in the case of a deed, instrument, or will, express provision is made to that effect.
[48] As stated in the affidavit of Mrs Jones it is proposed and agreed to by all the sui juris beneficiaries that the intention of the Settlor be respected and that Ross, Gregg and Kirk, not coming within the terms of the trust deed and not covered by the Adoption Act, should not be regarded as beneficiaries under the trust.
[49] I agree that this is the correct approach.
[50] Mrs Jones also included in this respect a further child whose parents subsequently married. This child has since been recognised as being a beneficiary under the deed. The position of this child is covered in the paragraphs that follow.
Child legitimated by subsequent marriage
[51] Section 4(1) of the Status of Children Act 1969 which came into force on
1 January 1970 provides:
All instruments executed before the commencement of this Act shall be governed by the enactments and the rules of construction and law which would have applied to them if this Act had not been passed.
[52] The trust deed was executed before 1 January 1970 and the Legitimation Act
1939 applied when the deed was executed.
[53] Under s 3 of the Legitimation Act, every illegitimate person whose parents have intermarried is deemed to have been legitimated from birth and under s 4 of the Legitimation Act that person and every person claiming through or under a legitimated person is entitled to the same estates, rights and interests as if that person were born in wedlock.
[54] Apart from s 3 of the Legitimation Act, a child born out of wedlock, by reason of s 4 of the Status of Children Act, is not entitled to take under an instrument entered into in 1948 before the passing of the 1969 Act.
[55] The position is covered in relation to wills in Laws of New Zealand.16 The same principles would apply to other trust instruments. The case of Re Hepworth,17 there referred to, has no application to the present facts and does not affect the right of a legitimated child to take in the present circumstances.
[56] There is one great grand-child, named in the affidavit of Mrs Jones, whose parents subsequently married and who is, by reason of the above statutory provisions, a beneficiary under the trust deed. This child (now adult) has been included among the beneficiaries under the proposal and the proceeding has been served on this person.
[57] Again, I consider the inclusion of that person was appropriate.
Child of a grandchild not born in lawful wedlock
[58] In the present case clauses 4 and 5 of the 1948 deed of settlement expressly restrict the settlement to “descendants born in lawful wedlock” and therefore exclude the one descendant referred to earlier, that person being a descendant of the Settlor but not born in lawful wedlock and not adopted within the greater Winstone family.
[59] The position of this person is not assisted by the provisions of the Legitimation Act as already discussed. An instrument dating from before the commencement of that Act would need to be given effect.
[60] The Deed of Family Arrangement signed by the trustees and the sui juris beneficiaries has been entered into on the basis that the definition of beneficiary in the 1948 deed of settlement remains unaltered.
[61] Details of the name and particulars of the great-grandchild not born in lawful wedlock are not known to the other members of the Winstone family and Mrs Jones’ affidavit has been redacted for the purpose of service. The name of this person is contained in the unredacted form of Mrs Jones’ affidavit.
[62] It has been proposed and agreed to by all the sui juris beneficiaries that the intention of the Settlor be respected and that this further person, not coming within the terms of the trust deed, not be regarded as a beneficiary under the trust.
[63] I note here that the Court in making its order for directions as to service in this case accepted the position put in the memorandum of counsel as to directions for service and directed that service be made on all beneficiaries under the deed of settlement as named in Appendix 1 but did not require service on persons not beneficiaries, i.e. the three adopted children and the further person not coming within the terms of the trust deed.
[64] In short, the position of the trustees is that these four people should not be
included as “beneficiaries”. To do so, would be to rewrite the trust deed. [65] I agree with the trustees’ position.
The meaning of “remoter issue” in present trust deed
[66] Clause 4 of the trust deed provides in relation to the trust income:
distribute the current year’s income of the Trust Fund amongst all then living descendants … in such manner that the same shall be divisible per stirpes among the grandchildren of the Settlor and remoter issue of such grandchildren of the Settlor as may have died leaving issue.
[67] In relation to distribution of the trust fund on termination, clause 5 of the trust deed provides:
… the Trust Fund shall be distributed amongst the then surviving descendants … in such manner that the same shall be divisible per stirpes among the grandchildren of the Settlor and remoter issue of such of the grandchildren of the Settlor as shall have died leaving issue.
[68] A legal issue is whether the words “remoter issue” refer to the children of the grandchildren, i.e. the Settlor’s great-grandchildren or whether further generations are intended to be included among the possible beneficiaries.
[69] In Re Berkett,18 Young J was required to rule on the meaning of the word “issue” in ss 78 and 79 of the Administration Act 1969. He held that “issue” can be construed as either “children” or “all descendants” but that the primary meaning of the word is descendants generally. In that case he held that the word “issue” encompassed not only children of uncles and aunts but also further issue, such that first cousins once and twice removed were covered. Young J referred with approval
to the earlier judgment of Re Rundell (deceased)19 in which all the authorities were
discussed. In Re Rundell Thomas J rejected the rule from the old English case of Sibley v Perry that “issue” was restricted to “children” of the parent. The Judge held that there was no presumption as to the meaning of the word “issue”. He stated:20
Such a rule has no place in the modern approach to the interpretation of wills. What matters today is the intention of the testator and, in the absence of extrinsic evidence, that is to be gathered from the language of the will read as a whole without the intrusion of presumptions of prima facie meanings that may, when taken too literally – and too seriously – operate to frustrate the testator’s intentions.
[70] However, Thomas J, followed by Young J in Re Berkett, proceeded to put forward his own “ordinary meaning” of the word “issue”. He said:21
Rather, I accept that the ordinary meaning of the word is “descendants”, that is progeny including but also going beyond the first generation, but that is not to give the word “issue” a prima facie meaning as a matter of law nor involve the rebuttal of a presumption.
[71] The context may, however, require the word “issue” to carry a more limited
meaning. Theobald on Wills states with reference to the relevant case law that “there
18 Re Berkett HC Christchurch, M621/97, 7 May 1998.
19 Re Rundell (1990) 6 FRNZ 437 (HC).
20 At 441.
21 At 442.
is no mechanical rule of construction” and the court must construe the will by
reading it as a whole in the light of the surrounding circumstances.22
[72] Mr McKenzie argued that in the deed of settlement in the present case there are a number of indications that the Settlor’s intention was to benefit grandchildren with further provision for their children in the event of their death but not to otherwise include remoter issue in the gift. He pointed to the following:
(a) The general description of the settlement in clause 1 provides that:
this settlement … is made … in consideration of the natural love and affection of the Settlor for his grandchildren above-named and for divers other good causes and consideration.
(b)The Settlor did not postpone vesting for the full perpetuity period (i.e. 21 years after the death of the last surviving grandchild alive at the date of the settlement), which he could have done had his intention been to postpone distribution beyond children of his grandchildren and into the next generation.
(c) Clause 4 provides that:
… income arising from the Trust Fund down to the day on which the last survivor of the afore-named grandchildren of the Settlor (who are then specifically restated) shall die shall be received and held by the trustees upon trust that they shall … distribute the current year’s income … per stirpes among the grandchildren of the settlor and remoter issue of such of the grandchildren of the settlor as may have died leaving issue. (emphasis added)
Mr McKenzie says that the emphasised words indicate that the intent is to benefit grandchildren and it is only in the event of death of a grandchild “leaving issue” that the grandchild’s issue are to take by substitution per stirpes. He submits that the words “remoter issue” describes the same group of persons who later in the same clause are
referred to as “issue”.
22 John Martyn and Others Theobald on Wills (17th ed, Sweet and Maxwell, United Kingdom,
2010) at [25-013].
(d)Clause 5, in regard to the trust fund at final termination, provides that it is to be distributed “per stirpes among the grandchildren [still living (those born after the date of settlement)] and remoter issue of such grandchildren who have died leaving issue”. Again he submits this would logically mean that the children of those grandchildren are essentially the same group as the “remoter issue”.
[73] I agree entirely that the grandchildren were primarily in focus as benefitting from the Settlor’s generosity. This is clear from the name of the Trust and from the fact that great-grandchildren only benefitted if their parent had died. I have some sympathy for the trustees’ argument that the line should stop at great-grandchildren. However, in my view the words “remoter issue” in this trust deed refer not just to the children of the grandchildren but include further generations among the possible beneficiaries, with the ultimate generation only taking if each of the people directly in line above them had died at the date of distribution.
[74] First, I agree with the approach of Thomas J and Young J that the word “issue” generally means descendants and is not limited to children. That likely meaning is reinforced in the present trust deed by the opening words of the operative part of clause 4 referring to “distribute … amongst all the then living descendants
…” and clause 5 referring to “distribution among the then surviving descendants”, which language Mr McKenzie overlooked in his submissions. In addition, even if “issue” meant children in clauses 4 and 5, “remoter issue” would have to be read as going beyond that, or the drafter would have just repeated the word “issue”.
[75] If the language were interpreted otherwise, then if at termination date a grandchild had died and their children had died but their children’s children were surviving, they would not take. That does not seem to me to be consistent with the Settlor’s intention, reading the deed as a whole and particularly clauses 4 and 5. The intention was to benefit the grandchildren or their remoter issue “per stirpes” which means per branch of family.
[76] Mr Evans submitted that “remoter issue” would be “relatives that are more than one generation away, i.e. grandchildren and subsequent generations.” He
subsequently seemed to limit his submissions to great-grandchildren and great-great grandchildren, whereas presumably some of the unborn potential beneficiaries in the time up to the actual termination date could be another generation again.
Benefit or detriment to minor or unborn beneficiaries
[77] The potential problem with the proposal, particularly given my finding as to the greater range of potential unborn beneficiaries, is that distributions may be made to people who die before the date of distribution in terms of the deed. That could disadvantage their descendants, if they die leaving descendants, or disadvantage people in the ongoing trust if the recipient of the distribution dies leaving no living descendants, because the ongoing trust fund should have been larger.
[78] This problem does not arise vis-à-vis the sui juris (of full age) beneficiaries because they have all consented to the proposal.
[79] The Court needs to address this issue in connection with the minor and unborn potential beneficiaries.
[80] Mr McKenzie pointed out that in a number of cases, the courts have been prepared to accept arrangements designed to provide some financial compensation for unborn beneficiaries who may possibly be disadvantaged and arrangements of these kinds (or one of them) could be of assistance in the present case. He said these could include:
(a) A covenant on the part of the grandchildren who are seeking an acceleration of the distribution date, that funds will be set aside (or a security created over a home to secure payment) to cover a possible future liability to their grandchildren in the event of both the grandchild and the grandchild’s children failing to survive until the
death of the last of the grandchildren named in the trust deed.23
23 See Re Aitken’s Trust [1964] NZLR 838 (SC) at 845.
(b)Taking out life insurance to cover this contingency.24 I am advised that term life cover is relatively inexpensive and Group Life insurance (as used in employer/employee superannuation schemes) is even less expensive. Under such schemes medical requirements are less or largely minimal because it is a group of lives being insured.
(c) An undertaking to leave property of the required value by will to children and in the event of their not surviving to grandchildren.25
[81] With regard to the life insurance option and to provide an indication to the Court, the trustees sought quotations from several life insurance companies. I am advised that the only life insurance company to provide a Group Life Insurance Quotation was American International Assurance Company Limited. Details of that quotation are attached to the affidavit of Mrs Jones at Appendix 4.
[82] The share in the trust fund is approximately or slightly more than $100,000 per stirpes. I am not sure if this is before or after legal and other costs. I am advised that after allowance is made for the capitalisation of a grandchild’s life interest in income, the interest in remainder will be approximately $50,000 or considerably less should the remainder interest be divided among several great-grandchildren. The insurance quotation is based on minimum sums insured of $50,000 per life-insured beneficiary. American International Assurance Company Limited provided a quote for a premium per annum of $3,627.87 for a Group Life insurance policy covering
30 lives insured for sums of $50,000 each. This premium level is reviewed every three months. A current and interestingly lower premium of $2,525 per annum was provided to me at the hearing. It will require recalculation as it does not include the further legitimated beneficiary. This will not change the premium materially. The policy and the premium may require further change as a result of the views I express. However, it seems clear the premium will be modest, which reflects a low level of
risk of disadvantage to unborn beneficiaries.
24 See Garrow and Kelly Law of Trusts and Trustees (7th ed, LexisNexis, Wellington, 2013) at
[26.85], [26.86], referring to Re Bryant, above n 10.
25 Black v Black [2013] NZHC 3306 at [25] to [27].
[83] The purpose of the life insurance in its current form is that in the event of the premature death of a great-grandchild who had received a remainder interest under the proposal, the life insurance proceeds, held by the trustees of the present settlement, but under a separate declaration of trust, would be applied:
(a) First, to the child or children of the life insured (great, great-grandchildren of the Settlor) or if the child or children are minors, to the guardian of that child or children until aged 20 years and if more than one in equal shares.
(b)Second, if there shall be no such child or children of the life insured, then to the sibling or siblings of the life insured and if more than one in equal shares, with provision for substitution, should a sibling die leaving children, and
(c) Third, if there shall be no such sibling or siblings, or child or children of siblings of the life insured, to be distributed as if the life insured had died intestate in accordance with section 77 of the Administration Act 1969.
[84] My view, as also argued by Mr Evans, is that the life insurance option would be required. I do not think it appropriate to rely solely on covenants or undertakings as these can fall short for reasons which cannot be predicted, even by those giving them. This is particularly so where there are more than two generations involved. I am satisfied as also appeared to be accepted by Mr Evans that cover of $50,000 is reasonable to address the amount a contingent beneficiary might receive in terms of remainder interest. I am concerned as to whether insurance is not required in terms of the capitalised income payments as well. I was not addressed on this by either counsel and I can see the position is more difficult and a claim by unborn beneficiaries is even less likely. I return to the matter of the extent of cover required.
[85] In the exercise of its discretion under s 64A of the Trustee Act, the Court may not approve an arrangement if the arrangement is to the detriment of the persons on whose behalf the Court is giving consent, in the present case the two minor
beneficiaries and the contingent class of unborn great, great-grandchildren of the Settlor. More than that, the Court needs to be satisfied in a practical way, that the people it is representing, would be likely to consent if they were in a position to do so.
[86] In determining whether there is any detriment I am entitled to take into account any direct or indirect benefit to the beneficiary from the variation, including the welfare and honour of the beneficiary’s family.26 In this respect the wording of s 64A gives the New Zealand courts a wider discretion and “freer hand” than the courts under the corresponding English provision.27
[87] New Zealand courts have exercised the s 64A jurisdiction in a broad way in a number of cases. “Indirect and intangible” benefits can be balanced against any possible financial detriment to the beneficiary on whose behalf the Court is approving: Re Byrne.28
[88] The cases have emphasised the width of court discretion.
[89] If the proposal proceeds, then at least 78 per cent of the trust fund will be paid out to the beneficiaries. This would reduce the funds under management from
$1,916,283 as at August 2015 to approximately $363,000. If the trustees continue to use the present investment adviser (Saturn Portfolio Management Ltd) Saturn has advised that the fund management fee as a percentage of funds invested would remain unaltered, so the reduction in funds under management should have little or no material difference for the minor or unborn beneficiaries. The fee is also set at a discounted level.
[90] I note that Mrs Jones is one of the consultants at Saturn, the conflict obviously having been clearly disclosed and this arrangement seems to operate to the
Trust’s benefit, which will no doubt continue to be the case.
26 Re Bryant, above n 10, at 848.
27 Re Smith [1975] 1 NZLR 495 (SC) at 498 per Cooke J.
28 Re Estate of Byrne, above n 6.
[91] One of the male grandchildren, Lester Frank Carr, while capable of having children, in fact has no children. He was born on 23 February 1956, after the date of settlement. He falls into the non-closed class of beneficiaries and does not benefit until he has proven he is incapable of fathering a child. If he were to still fall into that category and die before the death of the last to die of the named grandchildren beneficiaries, then his interest in the trust would increase the remaining trust fund. If the proposal to bring forward the vesting for most of the beneficiaries receives this Court’s approval, those beneficiaries’ interests in the ongoing trust fund will cease. This will reduce the numbers entitled to share in any possible increase in the trust fund and will benefit any minor and unborn beneficiaries accordingly.
[92] Hence Mr McKenzie submits that there may even be an advantage to the minor and unborn beneficiaries from this proposal.
[93] He submits that in any event he is unaware of any detriment to the two minor and any unborn beneficiaries arising from the proposal, if steps are taken as set out above to protect their interests.
[94] I agree.
Result
[95] Subject to a satisfactory life insurance policy being taken out that covers any potential loss to all unborn beneficiaries, I am prepared to approve the proposed variation in the present case on behalf of the minor and unborn beneficiaries. I summarise the key factors below:
(a) The settlement was intended to principally benefit grandchildren and on capital distribution, grandchildren alive at that date, with provision should they have died for substitution by their children.
(b)The commercial reasons which motivated the Settlor in setting up the trust and tying up shares in the company (Winstone Limited, a company founded by the Settlor’s father), for this length of time, have long ceased to apply.
(c) The trust fund is not large relative to the number of beneficiaries.
Relatively small amounts of income are distributed given the number of participants and the relevant capital will pass to the various beneficiaries. It is relatively expensive and unproductive to tie up the sum of $1.916 million for a further lengthy period.
(d)The descendants of present grandchildren will benefit in a broad sense through their respective families which at least in part gives effect to the Settlor’s direction as to per stirpes settlement.
(e) It is likely very few unborn descendants would suffer financial detriment from the proposal.
(f) These people can be properly protected by the insurance arrangements described, such that there should be no financial detriment.
(g) Putting myself in their shoes I would agree to the proposal.
[96] Before I can make an order approving the proposed variation of the deed of settlement as provided in the Deed of Family Arrangement on behalf of the two minor and any future unborn beneficiaries, I need to be confident that the interests of all unborn potential beneficiaries (not stopping at great great-grandchildren) are covered by the insurance arrangements. I need to receive further submissions in this regard. mI note also for example that Appendices I and II of the draft deed are to be replaced with Appendix II of the affidavit of Mrs Jones dated 10 December 2014. There will be other adaptations required. I consider I should approve the final deed.
[97] I note that the statement of claim seeks an order that, where in the future a grandchild of the Settlor currently in the open class of beneficiaries becomes closed by virtue of the death of that grandchild, or that grandchild becomes medically incapable of fathering a child or children, and that all beneficiaries being issue born in lawful wedlock of that grandchild are aged at least 20 years, then that per stirpes interest in the Trust be brought to an end as provided in the Deed of Family Arrangement. I question whether that is an order I can make where my jurisdiction
is limited to consenting on behalf of minor and unborn beneficiaries. I invite a further submission in that regard, which can be tendered along with the final deed.
[98] I order that all health details are to be marked on the Court file as strictly confidential.
[99] I order that the cost of this proceeding is to be met from the Trust fund.
[100] Leave is also reserved for any party to apply for further orders or directions on five working days notice.
Hinton J
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