GEORGINA KAIN, GEORGE CHARLES KAIN, GEORGE HARRY COUPER KAIN and GEORGE MICHAEL KAIN Appellants
AND
PUBLIC TRUST First Respondent
MARY HUTTON, MARNIE COUPIE FORCER KAIN, JACK KAIN, MOLLY KAIN, RACHEL KAIN, STANLEY KAIN, WOLSEY KAIN, GEORGE COUPER MCHARDY KAIN, ASTA KAIN, MADELINE KAIN, GEORGE PAVEY KAIN, MICHAEL KAIN, RUPERT KAIN, SAMUEL KAIN, GEORGIA HUMPHREY, CONSTANCE HUTTON and HARRIET HUTTON Second Respondents
MARNIE COUPIE FORCER KAIN, JACK KAIN, MOLLY KAIN, RACHEL KAIN, STANLEY KAIN, WOLSEY KAIN, GEORGE COUPER MCHARDY KAIN, ASTA KAIN, MADELINE KAIN, GEORGE PAVEY KAIN, MICHAEL KAIN, RUPERT KAIN, SAMUEL KAIN, GEORGIA HUMPHREY, CONSTANCE HUTTON, HARRIET HUTTON, DAVID WHYTE, KIRSTY MARGUERITE COUPER MASTERSON and ELIZABETH DIANE COUPER FRENDIN Third Respondents
CA316/2021
BETWEEN
JACK KAIN, MOLLY KAIN, RACHEL KAIN, STANLEY KAIN, WOLSEY KAIN, GEORGE COUPER MCHARDY KAIN, ASTA KAIN, MADELINE KAIN, GEORGE PAVEY KAIN, MICHAEL KAIN, RUPERT KAIN, SAMUEL KAIN and MARNIE COUPIE FORCER KAIN Appellants
AND
PUBLIC TRUST First Respondent
GEORGINA KAIN, GEORGE CHARLES KAIN, GEORGE HARRY COUPER KAIN, GEORGE MICHAEL KAIN, MARY HUTTON, GEORGIA HUMPHREY, CONSTANCE HUTTON and HARRIET HUTTON Second Respondents
GEORGIA HUMPHREY, CONSTANCE HUTTON, HARRIET HUTTON, DAVID WHYTE, KIRSTY MARGUERITE COUPER MASTERSON and ELIZABETH DIANE COUPER FRENDIN Third Respondents
Hearing:
6 October 2021
Court:
French, Venning and Cull JJ
Counsel:
J W A Johnson and W L Porter for Appellants/Kain Siblings B D Gray QC and A G Holden for Public Trust T C Weston QC, A V Foote and G J D Mander for Mary Hutton J F Anderson QC for Hutton Grandchildren D A T Chambers QC and S R C Barber for Kain Grandchildren
Judgment:
16 December 2021 at 9 am
JUDGMENT OF THE COURT
AThe appeal is dismissed insofar as it relates to the directions at [108](b), [108](c), [109](d) and [134](b).
BThe appeal is allowed in relation to the directions at [134](a). The direction at [134](a) is set aside and replaced with the direction that:
Public Trust is entitled to take into account the wishes and subsequent wishes of the settlor, Tom Couper, and to enable it to do so, it is necessary for Public Trust to read and understand those wishes. However Public Trust can only take account of the wishes and subsequent wishes to the extent they are not inconsistent with the terms and purposes of the trust.
C Cost are reserved. Public Trust is to file submissions within 15 working days. The Hutton interests are to file submissions 10 working days thereafter. The Kain interests are to file submissions 10 working days thereafter. Public Trust can file a reply in five working days. The memoranda are to be limited to five pages in each case. The Court will then deal with costs on the papers.
Factual background The Trust deeds The directions sought in the High Court The High Court judgment
The general directions The…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Kain v Public Trust [2021] NZCA 685
Case
[2021] NZCA 685
Decision Date
CaseChat Overview and Summary
In Kain v Public Trust, the court addressed a dispute concerning the management and distribution of assets held in the Waitaha Trust and the Middle Road Block Trust. The trust assets, which include a significant farm in Hawke’s Bay and a block of land in Havelock North, were part of a larger interconnected web of trusts established by Ernest and Helen Couper, their children, and associated entities. The case involved numerous beneficiaries from the Kain and Whyte families, and the dispute centred on the interpretation and effect of a deed signed in 1997, which addressed unequal assistance provided from the family’s interests and sought to ensure equitable treatment of the beneficiaries.
The central legal issue was the interpretation and effect of the "Equality Clause" in the 1997 deed, which aimed to address and rectify unequal assistance provided from the family’s interests. The court was required to determine whether the clause imposed any binding obligations on the parties and whether it influenced the discretion of the trustee, Public Trust, in distributing the trust assets. Another significant issue was the court’s role in overseeing the ongoing process of untangling the complex web of financial transactions and liabilities among the various entities within the Couper-Kain Group.
The court held that the Equality Clause in the 1997 deed did not impose any binding obligations on the parties but rather reflected a mutual agreement to work towards equitable treatment of the beneficiaries. The clause was seen as an aspirational statement rather than a contractual commitment, and it did not restrict the trustee’s discretion in distributing the trust assets. The court also emphasised the importance of completing the task of untangling the financial transactions, which was necessary for accurately determining the assets available for distribution and for providing transparency to the beneficiaries. The court underscored its supervisory role in ensuring that the trustee managed the trusts in accordance with the terms of the trust deeds and the law.
In conclusion, the court confirmed that the trustee, Public Trust, had a broad discretion in distributing the assets of the Waitaha Trust and the Middle Road Block Trust, subject to the terms of the trust deeds. The Equality Clause was not binding but served as a guiding principle for the trustee in exercising its discretion. The court also stressed the necessity of completing the financial untangling process to ensure accurate and transparent distribution of the trust assets.
Orders
Orders of the court
Full text does not contain this section.
Background
Background to the litigation
We take the factual background from the summary in the judgment:[5][5]Judgment under appeal, above n 3 (footnotes omitted).[4] From about 1920, Ernest and Helen Couper owned farmland in Hawke’s Bay. They had two children, Janet Kain and WAX Couper, who was known as Tom Couper. Before Ernest’s death in 1976 and Helen’s death in 1989, the couple had acquired significant farming interests that were inherited or gifted to Tom and Janet. [5] Janet married George Thomas Kain. She died in 1986 and her husband died in 2017. They had six children, of whom Michael, Harry, Georgina and Charles (the Kain siblings) are the first four first defendants. A fourth son, Tom Kain, died in 2013. Another daughter, Mary Hutton, is the fifth named first defendant. The sixth to 18th named first defendants are the children of the Kain siblings and the deceased Tom Kain (the Kain grandchildren). The 19th to 21st named first defendants are Mary Hutton's children (the Hutton grandchildren). The first defendants are all beneficiaries of the Waitaha Trust. [6] The Kain grandchildren are the first to 13th named second defendants, the Hutton grandchildren the 14th to 16th named second defendants, and the children of Tom Couper’s cousin (the Whyte children) are the 17th to 19th second defendants. They are all beneficiaries of the Middle Road Block Trust. Neither the Kain siblings nor Mary Hutton are beneficiaries of that Trust. Tom Couper married in 1986 but divorced without issue in 2003. He died in 2019. [7] Between 1951 and 1989, 15 trusts were established by Ernest and Helen Couper, Janet Kain and Tom Couper to settle farming assets in respect of the family’s greater Hawke’s Bay interests. Those trusts and the estates of Ernest Couper and Janet Kain, together with associated companies, formed an interconnected web of trusts, companies and assets that became known as the Couper-Kain Group. The beneficiaries of the trusts and estates that comprise this Group are differently constituted but, for the purposes of this application, include or included some or all of the Kain siblings, Mary Hutton, the Kain grandchildren and the Hutton grandchildren. [8] Around 1981, the Couper Farming Partnership was formed. This was the first of a series of parent entities that were used by Tom Couper to manage the farming operations of the various entities that comprised the Couper-Kain Group. These entities were conducted in an interdependent way and run essentially as a partnership. This operating structure necessitated a profit sharing system, and resulted in a complex network of inter-entity advances and liabilities that were largely recognised by book entries which were carried through to the annual financial statements for each entity. The management of the various entities in this way reflected Tom Couper’s intention at the time “to accumulate farming assets for the benefit of the family as a whole”. [9] Over the years, as the farming operation generally prospered, the assets of the Couper-Kain Group were used by Tom Couper to facilitate external borrowings that allowed him to purchase additional land, which in the main was settled on new trusts. By this means, the asset base of the Couper-Kain Group grew. The extent to which these assets were derived from the original wealth of Ernest and Helen Couper, or resulted from the industry of Tom Couper, is an ongoing source of dispute between the beneficiaries. Throughout this period, the Kain siblings, Mary Hutton and Tom Kain, from time to time received assistance to varying degrees from the trusts within the Couper-Kain Group. [10] In 1994, Tom Kain approached Tom Couper for assistance to obtain a loan for his and Charles Kain’s company, Apple Fields Ltd. Westpac advanced $1 million to Tom Kain, which was secured by a guarantee provided by Tom Couper and George Thomas Kain (Janet’s widower) as trustees of the ED Couper Estate and the Kain Trust, which were both Couper-Kain Group entities. The guarantee was supported by a registered first mortgage over Waipuna Station, which was a property owned by the two trusts in equal shares. The loan from Westpac was required to be refinanced in November 1997. For reasons that are much disputed — “[w]ildly different perceptions exist concerning the Waipuna loan saga” — the refinancing exercise did not proceed and the events that followed became a source of deep division within the family.[11] As part of the effort to refinance the Westpac loan, a deed of arrangement was signed in June 1997 between Charles and Tom Kain as indemnifiers, and the four other Kain children as beneficiaries (the 1997 deed). The terms of the deed relevantly provided: BACKGROUND … B. The Westpac Loan Facility has not been repaid with the Guarantee being released and the Mortgage discharged as envisaged pursuant to the Deed of Indemnity. The Parties now wish to record the basis upon which the Waipuna Property can continue to be used as security by the Indemnifiers.… 7. UNEQUAL ASSISTANCE 7.1 The Parties to this Deed agree that there has been unequal assistance provided from the family’s South Canterbury and Hawke’s Bay interests. The parties agree to work toward ascertaining a fair statement over the amounts received by each party and working towards a position which will ensure, in so far as practicable, that all parties are or will be treated equally. [the Equality Clause]… 9. FURTHER ACTS 9.1 Each party shall sign and deliver any documents and undertake any acts, matters and things which are reasonably required or requested by the other party to carry out and give effect to the intent and purpose of this Deed.[12] As a consequence of events relating to the Waipuna loan and Tom Couper’s subsequent purchase of the Westpac debt, the relationship between Tom Couper and the Kain siblings broke down. In 2000, the Kain siblings and Tom Kain filed proceedings against Tom Couper and the other trustees of trusts in the Couper-Kain Group. The Kain siblings sought various remedies, including replacement of the trustees with an independent professional trustee and the distribution of some of the trusts. Numerous issues arose in that litigation, including the status and effect of the 1997 deed, in particular and relevantly the “Equality Clause”, and a proposal to unwind or unpick the book entry transactions between the various entities in the Couper-Kain Group. [13] Following the judgment of Panckhurst J in December 2004, Public Trust was appointed sole trustee of the trusts and estates in the Couper‑Kain Group, including the Waitaha and Middle Road Block Trusts. [The existing trustees were removed, not for breach of trust, but as they and the beneficiaries were “out of sympathy”.[6]] The litigation also approved the implementation of the proposal to unravel the advances and liabilities between the Couper-Kain entities recorded in the 1996 to 2005 current accounts. This process would allocate assets and a share of partnership profits to each entity and settle the current account balances of the beneficiaries. It requires the restatement of the 1997—2006 financial statements for each of the entities in the Couper-Kain Group. As a result, the opening balances for the 2006 year will not be available until the whole of the unwind exercise has been completed. This task is ongoing and may still take some years to complete. [14] The two trusts in respect of which Public Trust seeks directions are the Waitaha Trust and the Middle Road Block Trust. Waitaha Trust[15] The Waitaha Trust was settled by Tom Couper in June 1974. Its primary asset is its 100 per cent shareholding in Waitaha Holding Co Ltd which owns Waitaha Station in northern Hawke’s Bay and is leased back to the Trust. Its land and livestock have an approximate value of some $10 million. [16] Public Trust has a discretion in respect of both income and capital distributions to the beneficiaries, being the children and grandchildren of Tom Couper (of which there are none) and the children and grandchildren of Janet Kain. In default of the trustee’s discretion being exercised, the income and capital beneficiaries are the same children and grandchildren who are alive at the date of distribution as tenants in common in equal shares. The date of distribution for Waitaha Trust is 13 June 2023 but Public Trust may by deed appoint an earlier date of distribution. Middle Road Block Trust[17] Tom Couper settled Middle Road Block Trust in March 1981. Its principal asset is a block of land in Havelock North, known as Middle Road Block. It has an approximate value of between $2 and $3 million. [18] The discretionary income beneficiaries of the Trust are the children of Tom Couper (of which there are none), the grandchildren of Janet Kain, and the children of Alister Couper Whyte. The discretionary capital beneficiaries are the children of Tom Couper (of which there are none) and the grandchildren of Janet Kain. In default of the trustee’s discretion, the income beneficiaries are the children of Tom Couper (of which there are none), the grandchildren of Janet Kain, and the children of Alister Couper Whyte who are alive at the date of distribution as tenants in common in equal shares. The capital beneficiaries in default of the trustees exercising their discretion are the children of Tom Couper (of which there are none) and the grandchildren of Janet Kain who are alive at the date of distribution as tenants in common in equal shares. The date of distribution is 16 March 2031, but Public Trust has a discretion to by deed appoint an earlier date of distribution.