McLaren v McLaren - [2017] NZHC 161

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2015-442-044 [2017] NZHC 161

UNDER
the Trustee Act 1956, the inherent

jurisdiction of the Court and Part 18 of the
High Court Rules

IN THE MATTER OF

a discretionary inter vivos family trust called the BDM Trust established by deed dated 2 March 1999

BETWEEN

DAVID MUIR MCLAREN and LENORE MARY MCLAREN (in their capacities as trustees and beneficiaries of the BDM Trust)

Plaintiffs

AND

BRUCE MUIR MCLAREN, DAVID MUIR MCLAREN AND LENORE MARY MCLAREN, MARK PHILIP BROWN, TIMOTHY HOWARD ALEXANDER SPEAR AND BUXTON NOMINEES 2015 LIMITED (all in their capacity as trustees of the BDM Trust) First Defendants

BRUCE MUIR MCLAREN (in his capacity as appointor of the BDM Trust) Second Defendant

Hearing: 10-13 October 2016

Counsel:

M G Locke for plaintiffs, and second and third-named first defendants

J C Ironside for first-named first defendant, and second defendant

No appearance for fourth-named first defendant
A B Darroch for fifth and sixth-named first defendants

Judgment:

15 February 2017

RESERVED JUDGMENT OF DOBSON J

MCLAREN v MCLAREN [2017] NZHC 161 [15 February 2017]

Contents

The factual context ............................................................................................................................ [2] The parents’ claims ......................................................................................................................... [25] Claimed constraints on the appointor’s powers ........................................................................... [27] Factors relevant to any fiduciary obligations on Bruce ............................................................... [50]
Removal of parents as beneficiaries ............................................................................................. [57] Appointment of additional trustees ............................................................................................... [70] Deficiency in manner of appointment?......................................................................................... [78]

Claims for removal of trustees ....................................................................................................... [81] Set aside the BDM Trust? ............................................................................................................... [84] Outcome ........................................................................................................................................... [89] Additional concerns ........................................................................................................................ [90] Costs ................................................................................................................................................. [99]

[1] This is a sorry tale of what can occur when a family adopts an inappropriate form of trust deed without adequate advice or sufficient understanding of the legal effect of its terms. In this case, a son who was given a power of appointment has, following a falling out with his parents, used that power to remove them as beneficiaries of the trust and to appoint additional trustees, thus neutralising his parents’ ability to dictate the outcome on trust resolutions. The essential issue is whether equity or the provisions of the Trustee Act 1956 can come to the parents’ aid to prevent their exclusion as beneficiaries or their relative loss of control as trustees and, if so, whether such relief is appropriate.

The factual context

[2] The McLaren family has a long-standing interest in mussel farms. David McLaren is a marine engineer and Mary had run a florist shop. David and Mary are the plaintiffs (referred to jointly as the parents, or separately as David or Mary). They started investing in mussel farming in about 1979 and persisted through an initial period in which the business ran at a loss. All three of their children (Bruce

and his two older sisters) helped their parents by working on the mussel farms during the weekends and school holidays.

[3] Bruce left high school in 1986. From about 1993, he had his own mussel lines to work, worked on the McLaren family mussel farms and also worked for other…

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.

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Details

Case: [2017] NZHC 161
Decision Date: 15 February 2017

CaseChat Overview and Summary

The McLaren v McLaren case involved the BDM Trust, established by David and Mary McLaren and their son Bruce to protect their assets and provide for succession. The trust deed allowed Bruce, as the appointor, to appoint new trustees and remove beneficiaries. After a falling out with his parents, Bruce used his powers to remove them as beneficiaries and appoint new trustees. The parents sought to reverse Bruce's actions and remove the new trustees, arguing that Bruce's conduct breached his fiduciary obligations.

The court found that Bruce owed certain fiduciary obligations to his parents, including acting responsibly, with due diligence and prudence, and avoiding irrelevant or improper factors. However, the court did not find that Bruce's decision to remove his parents as beneficiaries was in breach of these limited fiduciary obligations, as the parents' exclusion was a disproportionate response to their proposal to sell the mussel farming assets.

The court also found that Bruce's appointment of additional trustees was reasonably open to him in the circumstances, as the new trustees were acting independently and in the interests of all beneficiaries. The court dismissed the parents' claims to remove the new trustees and replace them with the Public Trust.

The court reinstated the parents as beneficiaries of the BDM Trust but did not set aside the trust itself. The court encouraged the parties to seek an overall settlement and avoid further litigation. The court awarded costs to the new trustees and the parents, to be paid from the BDM Trust fund.

Orders