Legal Research
Cases
Legler v Formannou

Legler v Formannou

Case [2022] NZCA 607 7 December 2022

Type to search within this case.

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA359/2021
[2022] NZCA 607

BETWEEN	LI KARI LEGLER, LAILA SUN LEGLER KLAUI AND KEN LEGLER Appellants
AND	MARIA GUILLAUMINA CORNELIA JOHANNA FORMANNOIJ First Respondent KAAHU TRUSTEE LIMITED Second Respondent

Hearing:	16 February 2022
Court:	Brown, Brewer and Cull JJ
Counsel:	D R Bigio KC and J W H Little for Appellants J D McBride and R C Woods for Respondents
Judgment:	7 December 2022 at 10.30 am

JUDGMENT OF THE COURT

A The appeal is dismissed.

BThe appellants must pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS

Brown and Brewer JJ [1]
Cull J (dissenting) [43]

BROWN AND BREWER JJ

(Given by Brown J)

Table of Contents

Para No

Introduction  [1]
Factual background  [3]
      Ricco Legler and his family  [3]
      The Horowai Family Trust  [4]
      The Kaahu Trust  [6]
      Changes in the trusteeship of Kaahu  [8]
The High Court judgment  [12]
The scope of the appeal  [16]
Was Maria’s purpose in the appointment of KTL improper?             [29]
Result  [41]

Introduction

As the sole remaining trustee of the Kaahu Trust (Kaahu) the first respondent (Maria) appointed the second respondent, Kaahu Trustee Ltd (KTL), as the sole trustee in her place. Maria is the sole director of KTL and, together with a company controlled by her solicitors, she owns all the shares in KTL. The appellants’ challenge to Maria’s appointment of KTL as the sole trustee of Kaahu was dismissed in the High Court.[1]
[1]Legler v Formannoij [2021] NZHC 1271, (2021) 5 NZTR 31-006 [High Court judgment].
On appeal the appellants contend that Maria’s appointment of KTL as trustee was void as a fraud on her power of appointment, it being for the purpose of evading limits on self-dealing in the Kaahu trust deed and to benefit herself. They seek an order appointing an independent trustee in place of KTL.

Factual background

Ricco Legler and his family

The appellants, Li, Ken and Laila Legler, are the children of Ricco Legler from his first marriage. Ricco married his second wife, Maria, in 2009 following a 20-year relationship. Ricco’s father, a successful European businessman, died in 2002 leaving Ricco a significant inheritance which ultimately led to the creation of two family trusts, the Horowai Family Trust (Horowai) in 2007 and Kaahu in 2008.

The Horowai Family Trust

Horowai was established by a Deed of Declaration of Trust dated 2 March 2007 by its sole trustee, Horowai Trustee Co Ltd (HTL).[2] The appellants and Ricco were the final beneficiaries. The discretionary beneficiaries included the final beneficiaries, Maria and any trust a beneficiary of which was also a beneficiary of Horowai. On 30 May 2014 HTL removed Ricco as a beneficiary.
[2]Its directors are Li and Laila Legler.
Horowai’s assets include a 214 hectare block of forested land at Purerua Road, Kerikeri, an adjacent 21 hectare block of farm land and a fund of at least $3…

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.

Continue reading Legler v Formannou

Details

AGLC: Legler v Formannou [2022] NZCA 607
Case: [2022] NZCA 607
Decision Date: 7 December 2022 at 10.30 am

CaseChat Overview and Summary

The Court of Appeal of New Zealand heard an appeal in the case of Legler v Formannou, where the appellants, Li, Ken, and Laila Legler, challenged the appointment of Kaahu Trustee Ltd (KTL) as the sole trustee of the Kaahu Trust by Maria Formannou, the sole remaining trustee. The appellants argued that Maria's appointment of KTL as the trustee was void as a fraud on her power of appointment, intended to evade limits on self-dealing in the trust deed and to benefit herself. The Court of Appeal dismissed the appeal and found that Maria's appointment of KTL as trustee was not for an improper purpose.

Maria Formannou, as the sole remaining trustee of the Kaahu Trust, appointed KTL as the sole trustee in her place. Maria is the sole director of KTL and, together with a company controlled by her solicitors, owns all the shares in KTL. The appellants' challenge to Maria's appointment of KTL as the trustee of Kaahu was dismissed in the High Court. On appeal, the appellants sought an order appointing an independent trustee in place of KTL.

The Court of Appeal found that the sole issue on this appeal was whether Maria's appointment of KTL (of which she was the sole director) was for an improper purpose. The Court noted that the appellants had not pleaded an alternative (and logically prior) cause of action to the effect that the appointment of KTL was ultra vires. The Court also observed that an ultra vires argument would not have availed the appellants, as the terms of the trust deed allowed for the appointment of a corporate trustee solely controlled by a beneficiary.

The Court of Appeal considered the evidence and found that Maria was not motivated by an improper purpose when she appointed KTL as the sole trustee of Kaahu. The Court noted that Maria had acted on legal advice and had understood and accepted her fiduciary responsibilities as a trustee. The Court also found that subsequent decisions made by Maria with the benefit of such advice, to remove the appellants as beneficiaries, should not be taken into account in the determination of Maria's subjective motivation at the date of the exercise of the power of appointment.

In conclusion, the Court of Appeal dismissed the appeal and found that Maria's appointment of KTL as trustee was not for an improper purpose. The appellants were ordered to pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements.

Orders