Kathleen Blakeborough Trustees Limited v Blakeborough-Kirk
[2023] NZHC 3495
•4 December 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2019-419-000276
[2023] NZHC 3495
UNDER the Trustee Act 1956 IN THE MATTER
of the W & H Blakeborough Trust
BETWEEN
KATHLEEN BLAKEBOROUGH TRUSTEES LIMITED and W & H
BLAKEBOROUGH TRUSTEES LIMITED
PlaintiffsAND
LINDA MARY GARVIN BLAKEBOROUGH-KIRK
Defendant
JOHN PETER BLAKEBOROUGH
First Third PartyKATHLEEN ANN DALLIAM BLAKEBOROUGH
Second Third PartyBRUCE WILLIAM BLAKEBOROUGH
Third Third Party
Hearing: 27 November 2023 Appearances:
K Bond for the Plaintiffs
J Chamley for Mr Bruce Blakeborough (via VMR)
Judgment:
4 December 2023
JUDGMENT OF HARVEY J
This judgment is delivered by me on 4 December 2023 at 4 pm pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
BLAKEBOROUGH v BLAKEBOROUGH-KIRK [2023] NZHC 3495 [4 December 2023]
Introduction
[1] The trustees of the W & H Blakeborough Trust apply for directions that they may resettle the remaining trust funds into a new trust. The funds are the result of the sale of the trust’s property at 393 Great South Road under the directions of the Court earlier in these proceedings.
[2] The defendant, Linda Blakeborough-Kirk,1 resided in the property prior to its sale. She is a final beneficiary of the trust. A memorandum of wishes executed by the settlors stated that upon the settlors’ deaths, the property should be transferred to Linda but the trustees should use their common sense to ensure that Linda’s share of the estate is protected from possible matrimonial or financial problems.
[3] The resettlement proposed is the establishment of a new trust for the benefit of Linda, her children and grandchildren with a professional, independent trustee.2 The remaining beneficiaries have not formally opposed this approach. Linda opposed on the basis she should be paid the proceeds directly. Her defence was struck out for non- compliance and the case now proceeds by way of formal proof.
[4] The principal issues for determination are whether the trustees have the power to resettle the trust as they propose, and if so, whether the Court should consent.
Background
[5] The settlors of the W & H Blakeborough Trust were William Blakeborough and Hilda Blakeborough, both now deceased.3 They are the parents of Ada Steverson, Patricia Ann McKnight (deceased), Bruce Blakeborough, John and Linda. Along with Patricia’s children, Nicola Rowen and Diedre Patchett, the surviving children are the effective final beneficiaries of the trust.
[6] The plaintiffs are the trustees and the controlling minds of those companies are John and Kathleen Blakeborough.
1 Hereafter referred to as Linda.
2 Perpetual Trustee Limited have consented to being appointed as trustee of the new trust.
3 Hereafter William and Hilda.
[7]The trustees sought directions under the Trustee Act 1956 seeking approval for:
(a)the sale of the trust’s sole asset, a house property at 393 Great South Road, Papatoetoe, Auckland which was then occupied by Linda;
(b)the satisfaction of the trust’s debts and costs of sale, and these proceedings out of the sale proceeds; and
(c)the division of the remaining balance of the proceeds amongst the beneficiaries of the trust in the manner proposed by the trustees.
[8] On 15 February and 1 March 2021, Muir J issued the first two directions following an initial hearing where Linda was represented and a second hearing where she was both represented and present and addressed the Court. Muir J declined to issue the last direction regarding distribution of the net proceeds amongst the trust beneficiaries because he considered that would be inconsistent with a memorandum of wishes signed by the trust settlors.
[9] Muir J then issued directions approving the sale of the property and repayment of associated debt with effectively an interim distribution that the trustees pay Linda
$1,000 weekly. This was to allow her to secure temporary accommodation pending agreement or further court orders regarding a distribution and winding up of the trust.
[10] On 16 May 2021, the property was sold with the net proceeds of $1,009,363.38 paid into a solicitors’ trust account. This fund has been used to pay Linda’s $1,000 weekly payment as well as other expenses including medical, storage, moving, vehicle and legal costs associated with the trust and these proceedings (for both the trustees and Linda, to the extent there was residual liability beyond legal aid) and to satisfy a judgment obtained by former tenants of the property against Linda. According to counsel as at 23 November 2023, the balance held is $728,904.23.
Service
[11] On 4 September 2019 Powell J directed that service of the statement of claim could be effected on beneficiaries for whom the plaintiffs did not have contact details
by way of service on their immediate parent or sibling. On 21 September 2022, Peters J made an order as to service of the amended statement of claim. Between 21 and 30 September 2022, all interested parties were served with the amended statement of claim and with the service order advising that they had 20 working days to file a defence to the claim.4
[12] As at 31 October 2022, which was the last date for any of the interested parties to file a statement of defence, no statement of defence or appearances from any interested party had been filed or served on the plaintiffs. Linda was subsequently granted leave to file a statement of defence out of time. She did so on 25 November 2022, along with a counterclaim. This was eventually struck out.5
Trustees’ submissions
[13] Mr Bond submitted that Linda has insisted on payment of the full trust fund directly to her but the trustees consider that inappropriate. The trustees have instead proposed that the trust fund be resettled on a new trust for the benefit of Linda, her children and her grandchildren. The trustees therefore seek the Court’s blessing of the trustees’ decision to resettle the trust fund.
[14] Counsel contended that the orders sought in the amended statement of claim should be made for four principal reasons. First, the relationship between the trustees and Linda has broken down. This has caused conflict and expense which is eroding
the trust’s value. Secondly, only Linda out of the affected parties has formally opposed the making of the orders sought. Thirdly, the proposed decisions by the trustees are within their powers and are in accordance with the memorandum of wishes. Fourthly, the trustees consider that Linda’s proposal that the trust fund be paid directly to her is not prudent or in accordance with the memorandum of wishes, which exhorted the trustees to use their common sense at the time of distribution. This
4 Affidavits of service have been filed by Stephen Anthony West dated 7 October 2022, John Blakeborough dated 15 November 2022 and Payton Renee Lisa Smith dated 15 November 2022.
5 An unless order was made on 11 October 2023 striking out the defendant’s defence and counterclaim if an affidavit of documents was not filed: Re W & H Blakeborough Trust CIV-2019-419-276, 11 October 2023 (Minute of van Bohemen J). Linda’s non-compliance was confirmed by my minute of 15 November 2023 and the matter set down for formal proof.
included considering distributing assets to trusts to avoid Linda’s future matrimonial
or financial problems.
Legal principles
[15]Rule 15.9 provides:
Formal proof for other claims
(1) This rule applies if, or to the extent that, the defendant does not file a statement of defence within the number of working days required by the notice of proceeding, and the plaintiff seeks judgment by default for other than a liquidated demand.
(2) The proceeding must be listed for formal proof and no notice is required to be given to the defendant.
(3) After a proceeding is listed for a formal proof hearing, no statement of defence may be filed without the leave of a Judge granted on the ground that there will or may be a miscarriage of justice if judgment by default is entered, and on such terms as to time or otherwise as the Judge thinks just.
(4) The plaintiff must, before or at the formal proof hearing, file affidavit evidence establishing, to a Judge's satisfaction, each cause of action relied on and, if damages are sought, providing sufficient information to enable the Judge to calculate and fix the damages.
(5) If the Judge before or at the formal proof hearing considers that any deponent of an affidavit filed under subclause (4) should attend to give additional evidence, the Judge may direct accordingly and adjourn the hearing for that purpose
[16] Formal proof does not involve the immediate entry of judgment by default.6 The plaintiff must establish the cause(s) of action to the Judge’s satisfaction.7 The level at which the Judge is required to satisfy themselves as to the plaintiff’s evidence is the same as it would be if the proceeding had gone to trial.8
[17] Section 66 of the Trust Act 1956 is the applicable statutory provision regarding directions, notwithstanding the enactment of the Trusts Act 2019.9 It provides:
6 Ferreira v Stockinger [2015] NZHC 291 at [33].
7 At [34].
8 At [35].
9 This is because the statement of claim was filed on 23 October 2019, prior to the Trusts Act 2019 coming into force.
66 Right of trustee to apply to court for directions
(1) Any trustee may apply to the court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power of discretion vested in the trustee.
(2) Every such application shall be served upon, and the hearing may be attended by, all persons interested in the application or such of them as the court thinks expedient.
Do the trustees have the power to resettle the trust?
[18] There can be no dispute that the trustees have the power to settle the trust’s debts from the trust fund; it is provided for in cl 6.2 of the trust deed.
[19]As to resettlement, cl 10.1 provides:
10.1 Until the Date of Distribution the Trustees with the written consent of the person or persons who for the time being have the power of appointment set out in Clause 15 have power to declare by way of resettlement such trusts (together with any conditions, limitations and provisions to be carried out at the discretion of the Trustees) for the advancement or benefit of any of the Beneficiaries and in respect of the whole or any part or parts of the income or capital of the Trust Fund that has not then been irrevocably paid or applied under the provisions of this deed in favour of any Beneficiary as the Trustees in their absolute discretion think fit.
[20] The date of distribution is 19 July 2081. Linda, her children and her grandchildren, being the proposed beneficiaries of the new trust, are all beneficiaries of the Trust under cl 4 of the trust deed. According to William Blakeborough’s will, the power in cl 15 was given to John Blakeborough.
[21] I accept that the trustees are empowered to take the action they propose. The more relevant question is whether the Court should give its “blessing” to their proposals.
Should the Court direct resettlement of the trust into a new trust?
Other beneficiaries
[22] John’s affidavit discloses that some beneficiaries expect or would like some distribution from the sale proceeds of the property. There was an initial resolution of
the trustees dated 21 October 2019 which proposed to distribute the sale proceeds less Linda’s “current account” to a number of other beneficiaries. However, the memorandum of wishes records the stated intention that the property be transferred to Linda. Muir J recorded that the proposed distribution was inconsistent with the memorandum of wishes,10 which has led to the present proposal.
[23] The settlors envisioned that Linda would be entitled to the property. The other beneficiaries received distributions under Hilda’s and William’s wills about 13 years ago. I consider it appropriate, as did Muir J, that the sale proceeds be applied in a manner that benefits Linda rather than the other beneficiaries.
Financial difficulties
[24] Linda’s preference is that the proceeds be paid out directly to her rather than settled into a new trust. It is evident from the material before the Court that she has struggled with the trust arrangement.
[25] There is certainly a case for the funds to be paid out. It was envisioned in the memorandum of wishes and the wills that the house would be transferred to Linda. Had that happened, she would have been free to liquidate it and keep the proceeds.
[26] On the other hand, the memorandum of wishes also indicates that the trustees should use their discretion to stop the house from becoming subject to matrimonial or financial issues.
[27] The material before the Court suggests that Linda may struggle to prudently manage and invest the trust funds were they distributed directly to her. For instance she has requested unrealistic distributions from the trust, caused difficulties with providers of temporary accommodation and failed to upkeep the property prior to its sale.
[28] Management by professional independent trustees will provide oversight and guidance to ensure Linda is properly supported by the trust fund on an ongoing basis.
10 Re W & H Blakeborough Trust CIV-2019-419-276, 15 February 2021.
Although, inevitably, professional trustee’s fees will diminish the proceeds to a degree, in my view, it is still preferrable to a lump sum payment.
Relationship between trustees and Linda
[29] I have reviewed the material filed for this proceeding which includes a number of emails between Linda and John Blakeborough.11 This includes Linda repeatedly accusing John/the trustees of “stealing” her inheritance. It is clear that the relationship has broken down and would make further trust business difficult to carry out. I also accept the submission that for practical reasons it is better to resettle the trust rather than replace the existing trustees with professional independent trustees.
Conclusion
[30] On the basis of the above findings, I am satisfied that the course proposed by the trustees is an appropriate one.
Decision
[31] I direct under s 66 of the Trustee Act 1956 that, after settling all debts of the Trust, the plaintiffs resettle the Trust Fund on the new trust on the terms annexed to the Amended Statement of Claim and with the following modifications:
(a)The Trustee will be Perpetual Trust Limited;
(b)The Name of the Trust will be “Linda Blakeborough Family Trust”;
(c)The Discretionary Beneficiaries will be:
(i)Linda;
(ii)Linda’s children;
(iii)Linda’s grandchildren;
11 John is the controlling mind of one of two the corporate trustees.
(iv)Any other person or persons or charity or charities (or the trustee or trustees of any other trust or trusts) appointed by the Protector by Deed (revocable or irrevocable) but excluding any employee of Perpetual Trust Limited.
(d)The Final Beneficiaries will be Linda’s children.
(e)The Protector will be Perpetual Trust Limited.
(f)The date of distribution is 19 July 2081.
Harvey J
Counsel / Solicitors:
Philip Morgan QC, Hamilton
Braun Bond & Lomas Limited, Hamilton
Thorne Thorne White & Clarke-Walker, Auckland
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