Landsborough Trustee Services no 10 Limited v Houghton
[2023] NZHC 2683
•26 September 2023
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2023-409-000380
[2023] NZHC 2683
BETWEEN LANDSBOROUGH TRUSTEE SERVICES NO 10 LIMITED
PlaintiffAND
IAN BRADLEY HOUGHTON
First Defendant
AND
RICHARD BERNARDUS MARIA MENTINK
Second Defendant
AND
ALIDA THEODORA MARIA CRAMPTON
Third Defendant
AND
ALIDA MARY CRAMPTON, VANNESSA MARGARET FELIX,
LETICIA CORRINA CRAMPTON and COREY WILLIAM JULES CRAMPTON
Fourth DefendantsAND
SOPHIE MARYANNE JAMES MENTINK, JENNA MARIE EMILY MENTINK and KYLIE ANNE THEA BROCKET
Fifth Defendants
Hearing: 4 September 2023 Appearances:
J A Ormsby for the Plaintiff
No appearance for the Defendants
Judgment:
26 September 2023
JUDGMENT OF HARLAND J
LANDSBOROUGH TRUSTEE SERVICES NO 10 LTD v HOUGHTON [2023] NZHC 2683 [26 September
2023]
[1] All parties to this proceeding seek orders by consent effectively approving a Deed of Family Arrangement and Settlement terminating the Monique Mentink Family Trust. This includes obtaining the consent of the High Court under s 124 of the Trusts Act 2019 (the Act) to the arrangements made on behalf of the minor, unborn and future beneficiaries to that deed.
[2] There is an interlocutory application seeking orders to dispense with formal service on the first to fifth defendants and on the minor grand nieces and nephews of Monique Mentink.
[3] When the proceeding was called before me in the Duty Judge List, I indicated that I would be making the orders sought but that I would set out my reasons in writing, which I now do.
Background
[4] By deed dated 14 October 2009, Monique Cynthia Maria Mentink (Monique) established the Monique Mentink Family Trust (Trust). Monique had no children of her own but had two siblings, Richard Bernardus Maria Mentink (Richard) and Alida Theodora Maria Crampton (Alida). Richard is the second defendant and the Alida is the third defendant in these proceedings.
[5] The fourth defendants, Vannessa Margaret Felix, Leticia Corrina Crampton and Corey William Jules Crampton, are Alida’s children and the fifth defendants, Sophie Maryanne James Mentink, Jenna Marie Emily Mentink and Kylie Anne Thea Brocket, are Richard’s children. They are referred to in this judgment as the Crampton and Mentink children. They are also Monique’s nieces and nephews.
[6] The Trust was established to benefit Monique’s nieces and nephews, and they were the final discretionary beneficiaries when the Trust was settled. After its establishment and by deed dated 23 April 2010, Monique added her de facto partner, Ian Bradley Houghton (Ian), the first defendant, as a discretionary beneficiary to receive benefits during his lifetime.
[7]Monique died on 14 January 2015.
[8] The Mentink and Crampton children and Ian all want the Trust to be distributed between them and terminated. Richard and Alida support this course of action.
[9] The plaintiff is an independent professional trustee company of Cameron & Co., a firm of barristers and solicitors in Christchurch. It is the Trustee of the Trust (Trustee).
[10] The Trustee has independently considered the proposal for distribution and termination and considers it to reflect a proper exercise of its powers. It has agreed to the proposal on the condition that the Court consent on behalf of the minor, unborn or future beneficiaries under s 124 of the Act and that it approve the proposal under s 133 of the Act.
[11] The parties have recorded their agreement in a Deed of Family Arrangement and Settlement which was concluded on 28 March 2023. The joint memorandum of counsel records that this agreement was reached against the background of the potential for significant dispute between the parties as well as correspondence that has been exchanged over some years. All counsel consider it is in the interests of all parties that these matters be resolved.
[12] The joint memorandum of counsel referred to Ms Sophie Mentink (the first named fifth defendant) being a lawyer and choosing not to engage counsel. It had been anticipated Ms Mentink would sign the joint memorandum of counsel however it has subsequently transpired that Mr Lang, counsel for the second and fifth respondents has confirmed that Ms Sophie Mentink authorised him to sign as counsel on her behalf. This instruction was referred to in the additional memorandum of counsel dated 2 August 2023.
The Trust
[13] The Trust is a discretionary trust. At the time the Trust was settled, the discretionary beneficiaries were:
(a) Monique (as Settlor);
(b) the final beneficiaries comprising the Crampton and Mentink children;
(c) Richard and Alida;
(d) Monique’s parents;
(e) Any children of the Crampton and Mentink children;
(f) Any trust which includes among its beneficiaries, any beneficiary of the Trust;
(g) Any association, club, institution, society, organisation or trust not carried on for the private profit of any person whose funds are applied wholly or principally to any civic, community, charitable, philanthropic, religious, benevolent or cultural purpose, whether within New Zealand or elsewhere; and
(h) Any person appointed as a beneficiary by Monique.
[14] As both discretionary final beneficiaries of the Trust, the Crampton and Mentink children have expectancies and contingent determinable interests in the Trust fund.
[15] In 2006, Monique entered into a de facto relationship with Ian. Ian was not originally a beneficiary of the Trust. Monique decided that she wanted to make some provision for Ian through her Trust. By deed dated 23 April 2010, after commencement of their de facto relationship, Monique exercised her power as settlor to add Ian as a discretionary beneficiary. Ian and Monique married in September 2014.
Memorandum of Wishes – 2010
[16] At the time Ian was added as a discretionary beneficiary, Monique executed a memorandum of wishes in relation to the Trust. Monique desired for the trustees of the Trust:
(a) to act in her best interests;
(b) to consider the reasonable needs and requirements of Ian once she had passed;
(c) to allow Ian to reside in 79 Waimea Terrace, Beckenham, or any residential property usually occupied by Monique as long as it was his wish and to retain the home as long as the trustees considered it appropriate;
(d) to pay each of the Crampton children $50,000.00 on attaining the age of 30 years;
(e) to pay each of the Mentink children $30,000.00 on attaining the age of 30 years;
(f) to not terminate the Trust before the survivor of Monique and Ian dies but to consider termination once the Crampton and Mentink children attained the age of 40 years; and
(g) to treat the Crampton and Mentink children equally on termination of the trust.
[17] Sometime between 2010 and 2014, Monique had a disagreement with her brother Richard. The reasons for the disagreement were not disclosed to the Trustee by Monique at the time.
Memorandum of Wishes – 2014
[18] In 2014, Monique learned that she had terminal cancer and decided to revisit her Trust in light of her disagreement with Richard.
[19] On 27 August 2014, shortly before Monique’s death, she provided a new memorandum of wishes. This memorandum of wishes:
(a) removed Monique’s wish to provide specific payments to the Mentink children on attaining the age of 30 years old; and
(b) adjusted her wishes in relation to termination so that clause 6 of the memorandum of wishes expressed her wish for the trustees to consider termination when the nieces and nephews “detailed above” attained the age of 40 years. This indicated Monique’s desire to reference and benefit only the Crampton children because only the Crampton children had been
referenced above and the Mentink children had been removed from the memorandum of wishes.
[20] At around this time, Monique commenced the construction of a new home at 2 Aglaia Place, Christchurch. She and Ian intended to live in this home but it was not completed at the time of her death. Considerable Trust capital was required to complete the construction, which occurred after Monique’s death. As a result, most of the capital of the Trust is comprised in the home.
[21]Ian currently resides in the home and has entered into a new relationship.
Termination of the Trust
[22] I have read the affidavit of Rebecca Jenkins filed in support of this application. It outlines, but sensitively so, that there have been competing positions advanced by the respective parties as to how they ought to be treated under the Trust Deed. It is also clear that the Trustee has managed to propose a solution that has eventually resulted in the Deed of Family Arrangement and settlement which the Court is asked to approve.
[23] Although the defendants may have had different views about matters, Ian and the Crampton and Mentink children all want the Trust to be terminated. They do not want to wait until Ian dies or for the youngest of Monique’s nieces and nephews to attain the age of 40 years.
[24] The joint memorandum also outlines that the Crampton and Mentink children are all at a stage of life or have family circumstances that mean that it would benefit them and their families to proceed with the distribution and termination of the Trust now.
[25] Richard and Alida do not seek any benefits from the Trust. They, likewise, support the distribution to their children and agree that the Trust ought to be terminated.
Deed of Family Arrangement and settlement
[26] The Deed of Family Arrangement was annexed to Ms Jenkins’ affidavit. The key provisions of relevance to this proceeding are that:
(a) it is conditional on the Trustee applying to the High Court and obtaining approval of all matters set out in the Deed of Family Arrangement (paragraph 1 of the Deed of Family Arrangement).
(b) Upon receipt of a sealed court order approving the Deed of Family Arrangement and the arrangements within it:
i.Within 25 working days, the Trust will sell, and Ian will purchase Aglaia Place for the sum of $2.2 million including GST.1 Ian and the Trustee agree to complete the purchase on standard ADLS terms (but without any warranties being provided by the Trustee because Ian has been residing in Aglaia Place) and to execute all necessary documents to give effect to the sale and purchase including registration of any change to the record of title;
ii.Ian will pay the sum of $1,050,000.00 to the Trust in respect of the purchase of Aglaia Place and the Trustee will advance the sum of
$1,150,000.00 by way of an on demand loan from the Trust to Ian, in order to complete the sale and purchase;
iii.Upon completion of the purchase, the Trustee will exercise its powers and discretions under the Trust Deed to forgive the loan by way of capital distribution;
iv.Within 5 working days following completion of the transaction in (b)(i) to (iii) above, the Trustee will exercise its powers and discretions under the Trust Deed to make a capital distribution of
$150,000.00 to the (is this a cap?) Mentink children jointly;
1 The value of the property was based on a market valuation that assessed the value of it at $2.2 million.
v.Within 5 working days following completion of the transactions in (b)(i) to (iii) above, the Trustee will exercise its powers and discretions under the Trust Deed to make a capital distribution of
$225,000.00 to each of the Crampton children ($900,000.00 in total); and
vi. Ian will pay the Mentink children’s legal costs. (Clause 3 (a) to (f) of the Deed of Family Arrangement)
(c) Following completion of the transactions set out in paragraph 3 of the Deed of Family Arrangement as outlined in (b) above, the Trustee will:
i.First, seek to promptly attend to all other administration necessary to terminate the Trust and shall meet all expenses, costs, tax, fees (including legal fees), charges and other obligations of the Trust and Trustee, including but not limited to any general Trust matters, carrying out the obligations in this deed, making this application and obtaining approval and orders from the High Court and terminating the Trust; and
ii.Secondly, exercise its powers and discretions to distribute any remaining trust funds equally between the Crampton children and terminate the Trust.
(Clause 4 of the Deed of Family Arrangement)
(d) The parties further agreed that:
i.The transactions and associated resolutions and exercise of powers and discretions as contemplated by paragraphs 3 and 4 of the Deed of Family Arrangement are fair, reasonable and proper exercises of the Trustee’s powers and discretions;
ii.They do not and will not challenge them on the basis they are made with their full consent and blessing;
iii.The Trustee is not in breach of any Trustee, fiduciary, or other duty whatsoever in connection with the Deed of Family Arrangement or any of the transactions contemplated therein; and
iv.They will have no recourse to the Trustee, or against any other beneficiary of the Trust, in relation to the Trust or any matters arising in relation to the Deed of Family Arrangement.
(Clause 5 of the Deed of Family Arrangement)
(e) They are also agreed that the provisions of the Deed of Family Arrangement are in full and final settlement of all disputes relating to the Trust, its administration, the exercise of dispositive powers, and the actions or inactions of the Trustee (Clause 8 of the Deed of Family Arrangement)
[27] In fulfilment of the Deed of Family Arrangement, the Trustee has now brought this proceeding under s 133 of the Act seeking the approval of the Deed of Family Arrangement as well as invoking its power under s 124 of the Act to consent to it on behalf of the minor, unborn and future beneficiaries.
Should the Court approve the Deed of Family Arrangement?
[28]Section 133 of the Act provides:
133 Trustee may apply to court for directions
(1) A trustee may apply to the court for directions about—
(a)the trust property; or
(b)the exercise of any power or performance of any function by the trustee.
(2) The application must be served, in accordance with the rules of court, on each person interested in the application or any of them as the court thinks fit.
(3) On an application under this section, the court may give any direction it thinks fit.
(4) This section does not restrict the availability of alternative proceedings within the court’s jurisdiction, including a declaration interpreting the terms of the trust.
[29] Section 134 provides protection to trustees, while acting under direction of the Court.
[30] I am satisfied that, in this case, it is appropriate for the trustees to seek the Court’s approval because the distribution of the entire Trust fund and termination of the Trust is clearly a momentous decision.2 I am also satisfied that the Trustee has the ability to do this under the powers conferred on it in the Trust Deed.
[31]By way of completeness, I now set out relevant clauses from the Trust Deed:
(a) “Trustees” are defined as “the trustee or trustees for the time being of the Trust, whether original, additional or substituted”. With the death of Monique, the trustee is the sole Trustee and is authorised to act. The Trust Deed contains no minimum number of trustees and in fact contemplates the ability to appoint a corporation to act solely as trustee.
(b) Clause 6.1 (a) provides that:
The Trustees may at any time:
(a) pay or apply all or any part of the capital of the Trust Fund to or for such one or more of the Discretionary Beneficiaries who are then living or in existence as the Trustees in their absolute and uncontrolled discretion think fit;
(c) The Trustee also has an express power of resettlement under clause 8.1 of the Trust Deed to resettle the Trust fund “upon the trustees of any trust (whether in New Zealand or elsewhere) which includes for the time being among its beneficiaries (contingent or otherwise) any one or more of the Discretionary Beneficiaries then living or in existence.
(d) Clause 10 allows the Trustee to hold the Trust fund on the Vesting Day “for such of the Discretionary Beneficiaries or such one or more of them to the exclusion of the other or others of them in such shares as the Trustees
2 Re PV Trust Services Ltd [2017] NZHC 2957, [2018[ 3 NZLR 160 at [42]-[54].
may by deed appoint on or before Vesting Day. Vesting Day is defined in Clause 2 as:
(a) the day upon which the period of eighty years from the date of this deed expires…
(b) Such earlier day or earlier days as the Trustees may from time to time by deed or deeds appoint.
[32] In this case, as the joint memorandum advises, the initial distributions contemplated by the Deed of Family Arrangement require the Trustee to exercise its powers under cl 6.1(a) of the Trust Deed in favour of Ian in respect of the forgiveness of the debt to enable him to purchase the property at Aglaia Place and in favour of the Mentink and Crampton children in respect of the capital sums.
[33] The Deed of Family Arrangement then requires the Trustee to take all necessary steps to meet any Trust liabilities and wind up the Trust. I agree with counsel that this can be achieved through either cl 6.1(a) or by advancing the vesting date and appointing the remaining capital to the Crampton children as set out in the Deed.
[34] Having considered the joint memorandum and the affidavit of Ms Jenkins, I conclude that it is appropriate for the Deed of Family Arrangement to be approved because:
(a) Monique was clear that this Trust was to be established for the benefit of her nieces and nephews. In addition, once Ian was added as a beneficiary, Monique was clear that the Trustee was to ensure that his needs were met and that he benefited from the Trust during his lifetime;
(b) The Trustee wishes to exercise its powers to distribute the Trust fund in accordance with the united wishes of these beneficiaries;
(c) The parties are all adults and able to make their own informed decisions. All are independently represented and Sophie Mentink is a lawyer. All have consented to these orders being made; and
(d) The Trustee has the powers under the Trust Deed to appoint the capital of the Trust fund in the manner contemplated under the Deed of Family Arrangement and to terminate the Trust.
Should the Court consent to the Deed of Family Arrangement on behalf of minor, unborn and future beneficiaries?
[35]Section 124 of the Act provides:
124 Power of court to approve termination, variation, or resettlement of trust
(1) The court may, on behalf of any of the beneficiaries described in subsection (2) who has an interest in the property of a trust, approve the termination, variation, or resettlement of the trust.
(2) The beneficiaries are—
(a)a beneficiary who lacks capacity:
(b)a person who may acquire a beneficial interest at a future date or on the happening of a future event or on becoming a member of a certain class of persons:
(c)a future person who may acquire a beneficial interest.
(3) An application for an order of approval may be made by—
(a)the trustees or any one of them:
(b)any person with a beneficial interest in the trust property.
(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.
(5) The court must not make an order of approval if its effect would be to reduce or remove any vested interest in the trust property.
(6) An order of approval binds the person on whose behalf it is made and takes effect without any further step.
[36] The Mentink and Crampton children have 10 minor children, being the following grand nieces and nephews:
(a) Levi Moses Peter Crampton, born 25 October 2013;
(b) Hudson James Brocket, born 13 June 2014;
(c) Isla Ruby Brocket, born 20 August 2015;
(d) Marley Alexis Felix, born 13 May 2018;
(e) Archer Stirling Salt, born 3 January 2019;
(f) Aria Monique Felix, born 30 July 2020;
(g) Esmeralda Sara Marriott, born 1 March 2021;
(h) Stella Jane Salt, born 1 April 2021;
(i) Demi Thea Peggy Crampton, born 15 July 2021; and
(j) Harvey Richard Salt, born 30 October 2022.
[37]The Mentink and Crampton children may have more children in the future.
[38] The joint memorandum of counsel outlines that the Mentink and Crampton children have confirmed that they consider their children and/or future children will benefit through the provision made for their parents at this stage of life.
[39] Counsel for the plaintiff and defendants do not consider it necessary for the grand nieces and nephews to be served or represented. The joint memorandum sets out the reasons advanced which counsel consider support the Court providing consent on behalf of the minor or unborn beneficiaries because:
(a) It is Monique’s nephew and nieces that are the takers in default. All that is effectively occurring is that the Trust is making a distribution to Ian and then appointing the remaining capital to the takers in default in a manner agreed to by them and which the Trustee independently considers appropriate;
(b) Monique’s wishes are highly relevant to the exercise of Trustee discretions. Monique expressed the wish that Ian be provided for during his lifetime and that the Trust fund then be distributed to her nieces and nephew;
(c) The Trustee has considered the interests of the grand nieces and grand nephews. It does not intend to distribute any part of the Trust fund of the Trust to them. It considers its powers ought to be exercised to benefit Ian, the Crampton and Mentink children as intended by Monique. It further considers that a settlement of the potential dispute between the parents as the primary beneficiaries is in the best interests of the children and that the Deed of Family Arrangement should become unconditional;
(d) The addition of the grand nieces and grand nephews who comprise minors or unborn grand nieces and grand nephews is unnecessary. The parents have confirmed that their children will benefit through the provision to them. They are part of growing families that have existing needs or are at a stage in life where these funds will help them to provide in the future; and
(e) It is the interests of the Mentink family as a whole, including grand nieces and grand nephews and relationships between siblings, cousins, uncles and aunts that this potentially significant dispute be settled and resolved without delay, expense or distress.
[40] I have considered other recent cases where the Court has considered similar applications under s 124 of the Act.
[41] In Gavin v Gavin, the Court approved a proposal to vary five trusts.3 The proposal was reached against a background of a long-running family dispute, involving mediation and a settlement, and the variations can be summarised broadly as ending the two sides of the family’s involvement in each other’s trusts. All adult beneficiaries consented to the proposal, but the Court’s approval was required under s 124 on behalf on the minor and unborn children of the trusts. Bringing the family
3 Gavin v Gavin [2021] NZHC 550.
dispute to end was “an important consideration” as it could have otherwise continued into the future and affected the younger generations.4 As well, the variations did not offend against the settlor’s intentions or the purposes of the trusts. Ultimately, Mander J considered there to be no vested interests that would otherwise prevent the Court from consenting to the variations sought.
[42] Another case that came before the Hight Court is Ruby v Ruby.5 This case similarly involved a deed of family arrangement, wherein the agreed upon variations to a number of family trusts concerned the power of appointment for trustees, a variation to the distribution mechanism, and to remove particular redundant classes of beneficiaries from the trust. All adult beneficiaries agreed on the proposed variations, as did independent counsel for the minors and unborn children. Gendall J found the variations benefitted the beneficiaries as a whole by bringing the family dispute to an end, was consistent with the settlors’ intention and caused no real detriment to the removed beneficiaries. The position of the minors and unborn grandchildren of the trust were either unaffected or enhanced. Accordingly, the variation orders were made.
[43] Re Macalister involved an application by the trustees seeking orders for variations to a trust settled with the purpose of providing for future generations.6 The variations were sought in accordance with a deed of settlement which ended litigation between former trustees and some of the beneficiaries after a dispute arose out of a proposed sale of trust property. Mallon J approved the proposed variation on behalf of the minor beneficiaries for reasons including family harmony, that the minor beneficiaries would benefit from the greater distributions made to their respective fathers who had their children’s best interests in mind, and that the sale of the property in question kept it within the family which in turn was consistent with the settlor’s intention that future generations enjoy it.
[44] Although these cases involved the variation rather than the termination of a trust as is the case here, the principles similarly apply.
4 At [51].
5 Ruby v Ruby [2022] NZHC 282
6 Re Macalister [2021] NZHC 3572.
[45] I am satisfied, on the basis of the legal principles that apply and on the evidence before me, that it is appropriate to grant the applications as sought and to also grant the interlocutory applications in relation to service.
Result
[46]I make the following interlocutory orders:
(a) Formal service of the proceeding on the first to fifth defendants is dispensed with on the basis that the first to fifth defendants have:
i.signed a Deed of Family Arrangement and Settlement dated 28 March 2023 which requires this application be made and the orders in this application sought; and
ii.counsel for each of the parties has signed the accompanying joint memorandum of counsel.
(b) Service on the minor grand nieces and nephews of Monique Mentink be dispensed with for the reasons set out in the joint memorandum of counsel and the affidavit of Ms Rebecca Maria Jenkins.
[47]I make the following substantive orders:
(a) Pursuant to s 124 of the Trusts Act 2019, the Court consents on behalf of the minor, unborn and future beneficiaries to the Deed of Family Arrangement and Settlement, executed by the plaintiff and the first to fifth defendants on or before 28 March 2023, and the arrangements contained therein, including the exercise of Trustee powers and the termination of the Monique Mentink Family Trust;
(b) The Deed of Family Arrangement and Settlement, executed by the plaintiff and the first to fifth defendants on or before 28 March 2023, and the arrangements contained therein, including the exercise of Trustee powers and the termination of the Monique Mentink Family Trust are approved by the Court pursuant to s 133 of the Trusts Act; and
(c) The parties will meet their own costs but, for the avoidance of doubt, the Trustee shall be entitled to its indemnity for costs unless otherwise provided for in the Deed of Family Arrangement.
Harland J
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