McGregor v McGregor
[2024] NZHC 3823
•13 December 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2024-409-130
[2024] NZHC 3823
UNDER The Trusts Act 2019 IN THE MATTER
of the Gregorlach Trust
BETWEEN
RACHEL JANE McGREGOR
Plaintiff
AND
HAMISH GORDON McGREGOR
Defendant
Hearing: (On the papers) Appearances:
B R D Burke for Plaintiff M Wallace for Defendant
H Evans for Infant and Unborn Beneficiaries
Judgment:
13 December 2024
JUDGMENT OF ASSOCIATE JUDGE LESTER
McGREGOR v McGREGOR [2024] NZHC 3823 [13 December 2024]
[1] The plaintiff, Rachel McGregor (Rachel) and her brother, Hamish McGregor (Hamish), the defendant, are two of three trustees of the Gregorlach Trust (the Trust) settled by their late father, Gordon McGregor, in October 2023. The third trustee is a professional trustee being Kendons Trust Services Limited (Kendons).
[2] Rachel and Hamish’s children are also beneficiaries of the Trust. Rachel has two children and Hamish has three children — two of whom are minors. Hamish’s third child, Kaylee, is now 24 years old.
[3] The assets in the Trust were left to it by Gordon. Gordon’s Will of 9 November 2006 (made before the birth of the minor beneficiaries) provided a specific gift to Rachel of $40,000 and a specific gift of $20,000 to both Hamish and Kaylee. Gordon gave the residue of his estate to the Trust with a direction that if the Trust did not exist at that date then Hamish and Rachel would receive the residue in equal shares with a gift over to their respective children. Gordon’s executors held Kaylee’s gift on trust during her minority and paid her not quite $30,000 in October 2021 representing the original $20,000 together with interest.
[4] Accordingly, but for the Trust having been settled, Rachel and Hamish would have received the residue in their father’s estate, after the gift to Kaylee.
[5] The relationship between Rachel and Hamish has broken down. Rachel commenced this proceeding to have Hamish removed as trustee. The parties, however, have reached a settlement of the issues between them. Mr Evans was appointed to represent the interests of the minor and unborn beneficiaries.
[6] The settlement reached sees each of the minor grandchildren receiving $30,000 each to be paid to their Kiwisaver account — the same amount received by Kaylee in 2021. After an adjustment in Rachel’s favour, costs, tax and so on, the balance is to be resettled equally into two for Rachel and Hamish’s trusts.
[7] The terms of the Trust contained an express power to resettle all or any part of the trust fund on a trust which is for the benefit of any discretionary beneficiary provided the resettlement does not transgress the rule against perpetuities.
[8] Consistent with the broad power of resettlement already noted, the trustees of the Trust may pay all or any part of the capital and/or income to the Trust to or for any one or more of the discretionary beneficiaries then living.
[9]Rachel and Hamish having reached this resolution, apply for a Blessing Order.
[10] Under that Trust, the final beneficiaries are Hamish and Rachel, the discretionary beneficiaries include Hamish and Rachel and “any child or remoter issue of any final beneficiary.” The Settlor had the power during his lifetime to add further discretionary beneficiaries. He did not do so.
[11] Accordingly, the Court in considering the application for a Blessing Order needs to have regard to the interests of Rachel and Hamish and their children both minor and unborn.
Blessing Orders
[12]Section 133 of the Trusts Act 2019 (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.
[13] In Chambers v S R Hamilton Corporate Trustee Ltd which concerned the predecessor to s 133 of the Act (s 66 of the Trustee Act 1956), the Court of Appeal noted there are four types of applications that trustees may make namely, whether any action was within the trustees’ powers, a request for a Blessing Order of a momentous
decision, the surrender of trustees’ discretion, or where they are in doubt and are challenged to their actions.1
[14] The trustees here seek a Blessing Order as the payments proposed represent the entire Trust fund and is therefore a momentous decision. A trustee acting under any direction of the Court pursuant to s 133 of the Act is protected by s 134 and must be treated as having discharged the trustees’ duties.
[15] The trustees are not in doubt as to their power to make distributions but seek the Court bless the terms of the settlement.
[16] In Re PV Trust Services Ltd, Fitzgerald J outlined the three-step process for considering an application for a Blessing Order as follows:2
(a)first, have the trustees in fact formed the opinion which the Court has been asked to bless;
(b)second, is the opinion formed one which a reasonable body of trustees properly instructed as to the proper meaning of any relevant provisions of the trust deed could probably have arrived; and
(c)third, is the opinion vitiated by any conflict of interest under which any of the trustees might have been labouring.
[17] It is clear that the Court is not a rubber stamp for such decisions and it must be satisfied the trustees are indeed justified in proceeding in accordance with their decision but the Court should not place insurmountable hurdles in the way of the trustees.3
[18] As one would expect, much depends on the circumstances and in some cases the decision may be straightforward and in others, difficult.
1 Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882 at [23] and [24].
2 Re PV Trust Services Ltd [2017] NZHC 2957, [2018] 3 NZLR 160 at [56].
3 Turvey v Vance [2022] NZHC 1167 at [25].
[19] The proposed trust deed of a new trust for Hamish is produced to the Court and I will say more about that below. Rachel has an existing trust she proposes receives her share.
[20] The Blessing Orders are sought on a consent basis. Mr Evans, while not filing a separate report, has signed the joint memorandum.
[21] Kaylee is the only adult beneficiary other than Rachel and Hamish. Kaylee was served with this proceeding and has taken no steps.
[22] As to the three considerations Re PV Trust Services Ltd, I am satisfied all three considerations are met here. The trustees have in fact made the decision to make the distributions for which they seek a Blessing Order. Essentially, the settlement is to allow Rachel and Hamish to go their separate ways. That is a decision that a reasonable body of trustees could make. The process of re-settlement essentially divides the assets equally between Rachel and Hamish’s trusts, each of which retains their children as beneficiaries. A dysfunctional trust is not in the interests of the beneficiaries.
[23] Less straightforward is the question of whether there is any conflict of interest. However, the Trust Deed contains a broad conflict of interest clause permitting the trustees to act notwithstanding that the interests or duty of a particular trustee in any particular matter may conflict with his or her duty to the Trust fund or to a discretionary beneficiary. Again, Rachel and Hamish are the final beneficiaries of the Trust. They intend that the intent of their father’s Trust continue, albeit in new trusts. With the broad conflict of interest provision in Gordon’s Trust, I am satisfied that whatever conflict exists, it does not vitiate the trustees’ decision.
[24] As far as the minor children are concerned, I am content that the decision to make provision for them, in effect equalising their position with Kaylee’s position, is one which a reasonable body of trustees properly instructed as to the proper meaning of the relevant provisions of the Trust could properly have arrived at. While there is no principle of equality of treatment of discretionary beneficiaries, it is one that is hard to argue with in most cases. I am not told of there being particular differences in need
between Rachel and Hamish, although given Hamish’s history of financial difficulties it might be thought that his children were in greater need, but such is not developed in the evidence. Given counsel appointed for the minor beneficiaries is content to endorse the settlement, I see no reason to second-guess his assessment.
[25] The Trust required there to be a minimum of two trustees. The late Gordon McGregor was the sole appointor.
The Trust proposed to take Rachel’s share
[26] Rachel’s trust was settled in 2006. The final beneficiaries of that trust are her children and Rachel. I am not told who the current appointor is. Only one appointor is contemplated. The appointor named in the original Trust Deed of the Trust is Rachel’s late mother, Jennifer. After the death of Jennifer, Gordon was to become the appointor.
Hamish’s trust
[27] Hamish’s trust is newly created — the Trust Deed being dated 8 November 2024.
[28] While the Trust Deed as drawn refers to two appointors — Hamish and a trust company of his solicitors — there is no requirement in the Trust Deed for there to be two appointors. Upon an appointor resigning, they may appoint a replacement but they are not obliged to. The Trust Deed contemplates there may be one appointor at any time. However, certain powers of the appointor are expressed to be exercised jointly and unanimously, and it is not clear whether those powers which include the appointment of additional trustees, the power to remove trustees, or the addition of beneficiaries, can only be exercised if there are two appointors.
[29] Before the Blessing Order takes effect, Hamish’s Trust Deed is to be amended to provide there must at all times be two appointors, one of whom must be an independent appointor.
[30] The reason for that is that if Hamish is the sole appointor, he will have the ability to control the trust assets essentially without limitation. Given Hamish’s historical financial issues, that is not a state of affairs that the Court can bless.
[31] I recognise that I am not seeking there be two appointors in respect of Rachel’s trust. The fact is that Rachel has not had the history of financial difficulties that Hamish has had.
[32] Accordingly, and notwithstanding that the orders are sought by consent and endorsed by the independent trustee, before the order sought can be made the Trust Deed of the Trust to take Hamish’s share is to be amended to provide there must be a minimum of two appointors, with one to be independent of Hamish and also that one of the trustees is independent of Hamish.
[33] Once those requirements are met, I see no reason not to grant the order on a consent basis.
Associate Judge Lester
Solicitors:
Harmans Lawyers, Christchurch D’Arcy Thomson Law, Christchurch
Copy to counsel:
M Wallace, Barrister, Christchurch
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