McKeefry & ors as Trustees of the Scanpower Customer Trust

[2022] NZHC 3102

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2022-454-000015

[2022] NZHC 3102

IN THE MATTER

Of an application for an order for the variation of a deed of trust

BY

MYLES JOHN MCKEEFRY, TANIA ROWENA BOWIE, KEITH ROWLAND CAMMOCK, JAMES EDWARD CRISPIN

and MELANIE POULTON as the trustees of the SCANPOWER CUSTOMER TRUST, of

Dannevirke Applicants

Hearing:	On the papers
Appearances:	D I Sheppard for Applicants
Judgment:	24 November 2022

JUDGMENT OF GRICE J

(Variation to Trust deed)

[1]                 This is an application by the trustees of Scanpower Customer Trust (the Trust) for an order that the definition of “Customers” in the trust deed (the Trust Deed) be replaced to achieve the intended purpose of the Trust, which was that benefits in the form of dividends would be distributed to the customers of Scanpower Ltd (the Company).

MCKEEFRY & ORS as trustees of SCANPOWER CUSTOMER TRUST [2022] NZHC 3102 [24 November 2022]

[2]                 The application has been served on the relevant electricity retailers.1 Nine of those have provided written consent to the application. Two retailers have acknowledged receipt of the proceedings but have not taken any other steps and two that had been served have not responded at all.2

Background

[3]                 Mr Myles McKeefry, a trustee of the Trust, provided an affidavit in support of the application.3 He said:

1)The Trust was established by the Trust Deed, dated 30 April 1993.

2)The principal object and purpose of the Trust Deed was to allow trustees to receive and distribute dividends to or for the benefit of consumers. The benefit is to be provided to the customers of the Company within the geographical area served.

3)It was previously clear that the “Customers” were the ultimate consumers of electricity (the end-point users). However, legislative changes that occurred during the privatisation of nationalised enterprise in the 1990s, specifically the introduction of the Electricity Industry Reform Act 1998 (the Act), altered the intended meaning of “Customers” in the Trust Deed.

4)The consequence of these changes was that the retailers of the Company who distribute electricity have displaced the end-point users as the beneficiary class. This is inconsistent with the Act, which mandated the separation of “electricity lines” and “electricity supply”.

[4]                 Therefore, to uphold the intended purpose of the Trust and comply with the separation of electricity lines and electricity supply mandated in the Act, the trustees

1      A direction to serve the proceedings on the 15 distribution retailers was made by minute on 2 May 2022: Minute of Palmer J, 2 May 2022.

2      Minute of Mallon J, 18 July 2022.

3      Affidavit of Myles John McKeefry, 2 February 2022.

considered that the definition of “Customers” in cl 1.1 of the Trust Deed should be amended and seek an order of the Court to that effect.

[5]                 The matter has been advanced as an originating application under pt 19 of the High Court Rules 2016. The class of lawful beneficiaries of the Trust, being the ultimate consumers of electricity, number in the thousands, and obtaining consent of each of them was impractical. However, their retailers were served.

Amendment of the Trust Deed

[6]                 The trustees seek orders from the High Court to amend the definition of “Customers” in the Trust Deed to the effect and intent that the general objects and purposes of the Trust are upheld.

[7]The issues in this case are: the effect of the present definition of “Customer”

/“the Customers”; whether this is consistent with the purpose of the Trust Deed; and whether this Court has the power to order the amendment of the definition if it is presently not consistent with the purposes of the Trust Deed. These issues are resolved by reference to the provisions of the Trust Deed itself.

[8]                 Clause 15 of the Trust Deed provides that the definition of “Customers” and “the Customers” in cl 1.1 of the Trust Deed may not be altered or amended except by a Court of competent jurisdiction. This allows this Court to alter or amend the definition where appropriate.

[9]                 The present definition under the Trust Deed of “Customer” and “the Customers” is as follows:

… persons who at any appropriate date or dates designated by the Original Trustees from time to time are primarily liable as account holders with the Settlor for the payment of any amount in respect of connection to or use of the Company’s distribution network.

[10]             The “Customers” were defined at the time of execution of the Trust Deed. Legislative provisions, however, have since led to some ambiguity and uncertainty as to whether the original definition in the Trust Deed retains its intended meaning. In particular, the mandated separation between “electricity lines” and “electricity

supply”, pursuant to the Act, likely changed the meaning of the word “Customers” in the Trust Deed. The consequence of this is that the retailers of the Company who distribute electricity have displaced the end-point users and become the beneficiary class. This is inconsistent with the intended purpose of the Trust Deed and does not comply with the separation of electricity lines and electricity supply required by the Act.

[11]             In Sherry v Attorney-General, Harrison J considered the Auckland Electricity Consumer Trust deed, similar to the Trust Deed in this case, and granted the trustees’ application to amend the Trust Deed to comply with or reflect the scheme of the trust.4 His Honour did so by way of directions pursuant to s 66 of the Trustee Act 1956.5 The Court referred to the provisions of the Electricity Industry Reform Act 1998, imposing a requirement to separate ownership of electricity lines from ownership of electricity retail and generation businesses.6 In that case, the relevant directions for amendment of the trust deed were granted to reflect the scheme of the trust, for the benefit of the customers within the geographical region of, in that case, the former service area of the Auckland Electricity Power Board. This was physically delineated by the outer boundaries of the three Auckland territorial authorities.7

[12]             The purpose of the present Trust is set out at cl 3. It is intended to benefit customers of the Company within the geographical area served from time to time by the settlor’s energy distribution network. As there is now, due to various legislative provisions, a risk that the retailers will fall within the definition of “Customers”, it is appropriate that the Court approve amendment of the Trust Deed as sought by the trustees.

[13]             Accordingly, the Court is entitled to make an order varying the Trust Deed to align it with the purposes of the Trust and the best interests of the “Customers” as originally intended. This was the approach taken in Taranaki Electricity Trust v Bennett.8 In that case, the Court noted that this type of court approval had no statutory

4      Sherry v Attorney-General HC Tāmaki Makaurau | Auckland M517-SDO2, 21 Hune | June 2002 at [33].

5 At [34].

6      At [9(e)].

7 At [3].

8      Taranaki Electricity Trust v Bennett HC Ngāmotu | New Plymouth CP7/01, 31 Hurae | July 2002.

basis but arose from the terms of the Trust Deed. The Court was required to consider the basis upon which it might approve such a variation. It held that the Court need only consider whether the proposed variation was lawful, proposed in good faith and not unreasonable.9

[14]             In this case, the purpose of the Trust Deed is apparent from its face. The retailers who are to be excluded from the definition of “Customers” have either consented to the variation or taken no steps. The variation is lawful, in that it is provided for in the Trust Deed.

[15]               Mr McKeefry says that a resolution has been passed by the trustees and the variation is sought in order to clarify the definition of “Customers”. I am satisfied the suggested amendment has been proposed in good faith. The variation is not unreasonable in the circumstances.

[16]             Accordingly, the application to vary the Trust Deed to replace the definition of “Customer” and “the Customers” in terms of the application is granted.

Grice J

Solicitors:

Fitzherbert Rowe, Palmerston North

9 At [34].