Kea Trust Co Ltd v Pugachev - [2015] NZHC 2412

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2015-404-1753 [2015] NZHC 2412

BETWEEN
KEA TRUST CO LTD, FINETREE CO

LTD, BRAMERTON CO LTD AND BLUERING CO LTD

Applicants

AND

SERGEI VIKTOROVICH PUGACHEV, ALEXANDRA TOLSTOY AND VICTOR SERGEYOVICH PUGACHEV

First Respondents

MARU LTD, HAPORI LTD, AROTAU LTD and MIHARO LTD

Second Respondents

Hearing: 28 September 2015

Counsel:

R B Stewart QC and W K Blennerhassett for Applicants
I M Gault and K M Venning for First Respondent
J Billington QC and G R Nicholson for Second Respondents

Judgment:

2 October 2015

JUDGMENT (NO. 3) OF HEATH J

This judgment was delivered by me on 2 October 2015 at 3.00pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar

Solicitors:
Kensington Swan, Auckland Bell Gully, Auckland MinterEllisonRudd Watts, Auckland Counsel:
R B Stewart QC, Auckland
J Billington QC, Auckland

KEA TRUST CO LTD v PUGACHEV [2015] NZHC 2412 [2 October 2015]

CONTENTS

The application  [1]
Background  [7] The Chancery Court proceedings  [12] Was the removal of the original trustees valid?
(i)       The Declarations of Trust  [18]
(ii)      The removal instruments  [26] (iii)     The original trustees’ concerns  [27] (iv)     Analysis  [39] Costs  [54] Result  [55]

The application

[1] The original trustees1 of the London Residence Trust, the Kea Three Trust, the Wiltshire Residence Trust, the Riviera Trust and the Green Trust (the New Zealand Trusts) seek directions from this Court under s 66 of the Trustee Act 1956.

[2] The first respondents are three of the beneficiaries of the New Zealand Trusts; Mr Sergei Pugachev, his wife Ms Alexandra Tolstoy, and his adult son, Mr Victor Pugachev. Together, I refer to them as the “Pugachev interests”. The second respondents are the replacement trustees.2 The original trustees seek directions to determine whether or not they have been validly removed as trustees of the New Zealand Trusts and whether they are required to transfer assets of each of them to the replacement trustees.

[3] An order is also sought to authorise the original trustees to deduct, from assets of the New Zealand Trusts, fees and expenses that they have incurred, both in promoting the present application and responding to orders made by the High Court of Justice of England and Wales (the Chancery Court) in a freezing order proceeding in that jurisdiction.3

[4] Directions have not been sought about whether the replacement trustees have been validly appointed. I proceed on the agreed position that, if the original trustees
were validly removed, the replacement trustees were validly appointed.

1      Defined in para [8] below.
2      Defined in para [9] below.
3      The Chancery Court proceeding is described in paras [12]–[16] below.

[5] Although they have brought the current application, the original trustees abide the decision of the Court. By the time the application came on for hearing, a measure of agreement had been reached between the original trustees and the respondents. While I am prepared to act on the agreement reached in relation to costs, I take the view that…

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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Details

Case: [2015] NZHC 2412
Decision Date: 2 October 2015

CaseChat Overview and Summary

The Kea Trust Co Ltd and other original trustees of various New Zealand trusts sought directions from the New Zealand High Court on the validity of their removal as trustees. The Pugachev interests, being beneficiaries of the trusts, opposed the application. The original trustees sought a determination on whether they were validly removed and whether they were required to transfer the assets of the trusts to the replacement trustees. The original trustees also sought an order to authorise them to deduct fees and expenses from the trust assets. The court had to decide if the Protector's power to remove trustees was fiduciary in nature and whether it was exercised for proper purposes. The court found that the Protector's power to remove trustees was not fiduciary in nature and that the power was exercised for proper purposes. The court directed that the original trustees were validly removed and that they were not removed for an improper purpose or in breach of any fiduciary obligation. The court also directed that the original trustees shall transfer the assets of the New Zealand trusts to the replacement trustees once the Chancery Court has made an order varying the worldwide freezing order. The court further directed that all costs and disbursements incurred by the original trustees in respect of these proceedings and those before the Chancery Court shall be paid out of moneys held by Kea on behalf of the London Residence Trust.

Orders