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McGregor v McGregor

McGregor v McGregor

Case [2024] NZHC 3823 13 December 2024

Breach of Trust

Constructive Trust

Equitable Estoppel

Resettlement of Trusts

Blessing Orders

Discretionary Beneficiaries

Trusts & Equity

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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…

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 McGregor v McGregor

Details

AGLC: McGregor v McGregor [2024] NZHC 3823
Case: [2024] NZHC 3823
Decision Date: 13 December 2024

CaseChat Overview and Summary

The High Court of New Zealand, Christchurch Registry, considered a case involving a trust dispute between Rachel Jane McGregor and her brother Hamish Gordon McGregor, both trustees of the Gregorlach Trust. The trust was established by their late father, Gordon McGregor, and includes their children as beneficiaries. The dispute arose from the deteriorating relationship between Rachel and Hamish, leading to Rachel's application to have Hamish removed as trustee. However, the parties reached a settlement whereby each of the minor grandchildren would receive $30,000, and the balance of the trust fund would be resettled equally between Rachel and Hamish's trusts. The trustees sought a Blessing Order from the Court to validate this settlement under the Trusts Act 2019.

The legal issues the court had to address were whether the trustees had the power to make the proposed distributions, whether a reasonable body of trustees could have arrived at the same decision, and whether there was a conflict of interest that would vitiate the trustees' decision. The court had to ensure the trustees' decision was justified but not place insurmountable hurdles in their way. The trustees sought the Court's blessing on the settlement to validate the distribution of the trust assets.

The court found that the trustees had indeed made the decision to distribute the trust assets as per the settlement. It was a decision that a reasonable body of trustees could make, given the dysfunctional nature of the trust. The court also noted that the broad conflict of interest clause in the trust deed permitted the trustees to act despite any conflicts. The settlement provided for the minor beneficiaries to be treated equally with Kaylee, the adult beneficiary. The court accepted the endorsement of the settlement by the counsel appointed for the minor beneficiaries, finding no reason to second-guess their assessment. However, the court required amendments to Hamish's trust deed to ensure there were at least two appointors, with one being independent of Hamish, to prevent him from having unfettered control over the trust assets.

The court granted the Blessing Order on a consent basis, subject to the amendment of Hamish's trust deed to include the requirement of at least two appointors, one of whom must be independent. The final orders included the resettlement of the trust fund, with specific provisions for the appointment of trustees and the management of the trust to ensure the protection of the beneficiaries' interests.

Orders