Miller v Cregten
[2020] NZHC 1262
•9 June 2020
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2017-488-137
[2020] NZHC 1262
IN THE MATTER of the Miller Family Trust UNDER
Section 68 of the Trustee Act 1956
BETWEEN
KEVIN MARTIN MILLER and
CHANTELLE KIMBERLEY STEVENSON
PlaintiffsAND
JOHN JOSEPH CREGTEN and
ADRIENNE MARY STONE as trustees of the MILLER FAMILY TRUST
Defendants
Hearing: 5 June 2020 Appearances:
A L Kula for the plaintiffs
C J R Baird for the defendants P J Magee for Beryl Miller
D M Shanahan as litigation guardian for minors
Judgment:
9 June 2020
Reissued:
10 June 2020
JUDGMENT OF PALMER J
This judgment was delivered by me on Tuesday 9 June 2020 at 11.00am.
Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Counsel/Solicitors:
C J R Baird, Barrister, Auckland Carson Fox Legal, Auckland
Henderson Reeves Connell Rishworth, Whangārei Thomson Wilson, Whangārei
MILLER v CREGTEN [2020] NZHC 1262 [9 June 2020]
Summary
[1] The primary beneficiaries of a trust have agreed with the trustees on settlement of these proceedings. In general, the settlement involves the distribution of some funds to all three primary beneficiaries, the resettlement of a third of the trust funds on a new trust in favour of one primary beneficiary and her children, and the retirement of the current trustees in favour of the Public Trust. I approve the proposed settlement on the basis that it is implemented very promptly. I consider the value to some of the discretionary beneficiaries of being removed from a long-running dispute outweighs any potential but speculative financial detriment to them. I also recommend that the Public Trust, as the new trustee, should consider whether and how to exercise its discretion to settle new trusts on, or distribute the existing trust funds to, the remaining primary beneficiaries, as a matter of urgency.
What happened?
The people and the MFT
[2] On 25 May 1999, Mr Thomas (Tam) Miller settled a discretionary trust, the Miller Family Trust (MFT). The primary beneficiaries, other than Tam and his wife Mrs Trissie (Triss) Miller, were their son, Mr Kevin Miller, and Kevin’s two daughters, Ms Beryl Miller and Mrs Chantelle Stevenson.1 The children of Beryl and Chantelle are also discretionary beneficiaries. Triss and Tam were trustees until their deaths in July 2011 and August 2013 respectively. The other original trustee who is still a trustee is Mr John Cregten, whose parents were close friends of Triss and Tam. Mr Cregten was also executor of both estates. Since late 2015, Ms Adrienne Stone has also been a trustee.
[3] Tam made two memoranda of his wishes in relation to the MFT, in 1999 and in April 2013.2 Each memorandum states it is intended for guidance of the trustees but has no legal effect and “is not intended in any way to fetter the discretionary powers vested in you under the Deed”.3 Among other things, Tam stated in each memorandum that:
1 Given the family context, and to avoid confusion with common last names, I use first names.
2 Exhibits JC5 and JC6 to affidavit of John Cregten of 27 May 2020 [Cregten].
3 Clause 1, 1999 Memorandum and cl 4, 2013 Memorandum.
(a)Subject to his needs and Triss’ needs being fully provided for, the trustees should provide primarily for Kevin, Beryl and Chantelle equally and ensure that they are always housed and provided with the opportunity for further education.4
(b)One of the general wishes recorded in both memoranda was that, “if a beneficiary is married, in order to protect the beneficiary from the possibility of a matrimonial property claim in the event of a breakdown of his or her marriage, you should take into consideration the stability of the marriage and the purpose to which a distribution would be applied in deciding whether to make the distribution” to a trust, by way of a loan, or outright to the beneficiary.5
(c)The MFT should not be wound up until Tam and Triss died. But, as an alternative to winding up the trust, the trustees should consider resettling the MFT fund equally upon trusts for Kevin, Beryl and Chantelle.6
[4] An additional clause in the 2013 memorandum of wishes recorded Tam’s wish that Kevin, Beryl and Chantelle be adequately housed and, if the MFT were resettled, that each of them have the right to occupy their residences.7
[5] From his impression of Tam’s wishes, and from the memoranda of wishes, Mr Cregten understood the MFT assets should be strictly limited to the stated beneficiaries and should not be available to their partners.8
Disputes and proposed settlement
[6] Relationships have been fractious between some family members and between family members and trustees. Kevin’s evidence is that he and Tam had a difficult
4 Clause 3, 1999 Memorandum and cls 5 and 6, 2013 Memorandum.
5 Clause 8(c), 1999 Memorandum and cl 10(c), 2013 Memorandum.
6 Clause 9, 1999 Memorandum and cl 11, 2013 Memorandum.
7 Clause 6, 2013 Memorandum.
8 Cregten at [53].
relationship, particularly when he married Katie in 1997 who is Māori.9 Kevin’s evidence is that he was struggling financially, on a fixed income, in poor health and was disappointed Tam left only $5,000 to him with the residual going to the MFT.10 Chantelle’s evidence goes through a number of disputes she had with the trustees about their refusal to deploy trust funds in ways she considered would best support her and her family.11
[7] In 2016, the trustees proposed resettlement of the MFT into three new trusts with some funds set aside for minor beneficiaries. Beryl agreed but Kevin and Chantelle did not. They were renting houses, had financial difficulties and wanted more direct access to the funds. They also wanted their spouses to be included as beneficiaries. The trustees determined to proceed anyway. On 29 November 2017, Kevin and Chantelle initiated proceedings.
[8] Sensibly, the parties negotiated a resolution of the dispute. On 27 August 2018, the trustees signed a resolution recording their decision to partially resettle approximately one third of the MFT assets on a new trust for the benefit of Beryl and her children (including the house in which they reside), allocate $200,000 to the primary beneficiaries, retire as trustees of the MFT and appoint the Public Trust as sole trustee instead.12 On 19 December 2018, a deed of settlement of the proceeding was signed on that basis. The resolution and the settlement deed each provide the decisions are conditional upon the Court’s approval.13
[9] In March 2019 the High Court appointed Mr Shanahan as litigation guardian of the children of Beryl and Chantelle. Mr Shanahan reported by memorandum on 9 July 2019. He considers there is “a measure of detriment to Beryl’s children and/or future grandchildren” but that is outweighed by the benefits of bringing an end to difficult disputes about the MFT.14 He considers the detriment to Chantelle’s children of Kevin’s and Chantelle’s shares of the trust funds being distributed to Kevin and
9 Affidavit of Kevin Miller, 14 November 2017, at [13]-[14].
10 At [38]-[41].
11 Affidavit of Chantelle Stevenson, 16 November 2017.
12 Exhibit JC2 to Cregten.
13 Exhibit JC1 to Cregten.
14 Memorandum of David Shanahan as litigation guardian for minor beneficiaries, 9 July 2019, at [45].
Chantelle “may be significantly greater” and identifies options for addressing that as being: setting up a trust akin to that to be established for Beryl and her children; or provision by the MFT for Kevin and Chantelle to acquire houses and retain the assets for the benefit of Chantelle’s children and future beneficiaries.15
[10]Mr Cregten has provided an affidavit of the trustees’ views:
(a)They consider that Mr Shanahan’s report contains relevant considerations but does not change their view that the proposed settlement is the best way forward.16
(b)They understand that minor discretionary beneficiaries might be exposed to poor choices by their beneficiary parents but do not consider that is something the trustees can control.17
(c)They say they have always wanted to resettle the MFT onto three trusts, in accordance with Tam’s wishes, but Kevin and Chantelle did not agree.18 They tried to achieve something similar to Mr Shanahan’s proposed options in their initial resettlement plan but that was not agreed by Kevin and Chantelle unless their spouses were also beneficiaries, which the trustees consider would be “totally opposite to what Tam and Triss were very concerned during their lifetimes to ensure would not occur in the future”.19
(d)They consider continuation of the litigation would be pointless, would not resolve the need to resettle the MFT and would create a significant cost that would be detrimental to all beneficiaries.20 Their “strong view” is that the negotiated outcome is the best they can do in the circumstances.21
15 At [46]-[48].
16 Cregten at [58].
17 Cregten at [60].
18 Cregten at [62].
19 Cregten at [68].
20 Cregten at [61].
21 Cregten at [69].
Relevant law of trusts
[11] The High Court has inherent supervisory jurisdiction over trusts, to protect the interests of beneficiaries, ensure the adherence to trust deeds and preserve trust property. Section 66 of the Trustee Act 1956 (the Act) also provides that a trustee may apply to court for directions concerning any trust property or the exercise of any power or discretion of the trustee. Kós J, in the High Court, characterised this provision as “a robust, parallel source of jurisdiction to resolve any substantial question of law concerning the meaning or administration of a trust”.22 As long as the relief sought does not involve resolution of disputed issues of fact and care is taken that those with a legitimate interest in the outcome are represented, the existence of a dispute is not fatal to the exercise of the jurisdiction.23
[12] In Chambers v SR Hamilton Corporate Trustee Ltd, the Court of Appeal identified four distinct categories of adjudication by the Court on a course of action proposed or taken by trustees.24 The trustees here invoke the second of these, where “the trustees are essentially seeking the blessing of the court for an action that they have resolved is within their powers, but is particularly momentous”.25
[13] Section 64A of the Trustee Act 1956 empowers the Court “if it thinks fit” to approve any arrangement varying or revoking trusts on behalf of a number of persons including, in s 64A(1)(d) “any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined”. There is a proviso requiring the Court not to approve an arrangement to the detriment of the person, having regard “to all benefits which may accrue to him directly or indirectly in consequence of the arrangement, including the welfare and honour of the family to which he belongs”.
22 New Zealand Maori Council v Foulkes [2014] NZHC 1777, [2015] NZAR 1441.
23 At [47]–[49].
24 Chambers v SR Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882 at [24] citing Public Trustee v Cooper [2001] WTLR 901 (Ch) at 923-924, which cited a well-known but unreported English chamber’s judgment by Robert Walker J. See Re Honoris Trust [2017] NZHC 2957, [2018] 3 NZLR 160 at [42].
25 At [24](b).
[14] In Clucas, Chisholm J held he had jurisdiction in principle under s 64A to approve an arrangement that resettled trust property on five new trusts.26 In Re Byrne,
Miller J stated that: 27
[T]he Court is to take a wide approach to benefits and detriments of an arrangement. It is not simply a matter of actuarial calculation. The arrangement must be considered as a whole. Indirect and intangible benefits and detriments are relevant, including the welfare and honour of the family. I observe that such considerations introduce a risk that the Court will be asked to authorise an arrangement that, while economic in nature, is economically disadvantageous to minors. As Cooke J cautioned, appeals to family harmony could hardly carry the day against financial disadvantages. Minor or unborn beneficiaries on whose behalf the Court is asked to consent are scarcely likely to have contributed to any present disharmony. That said, it may be obvious that the existing trusts are likely to cause tension among reasonable people now or in the future, or that they are otherwise harmful to family welfare, and that may be taken into account. The question for the Court remains whether the arrangement is in the interests of the person on whose behalf the Court is asked to approve it. In reaching its decision the Court will examine the arrangement from the perspective of a beneficiary who is property advised and reasonable.
[15] Similarly, Muir J in Green v Green approved a proposed settlement which would have the effect of reducing the funds available for distribution to grandchildren.28 He observed that reaching finality in the long running disputes there went “directly to the families’ welfare and honour” and should be taken into account “as a counterweight to any perceived detriment to the minor hypothetical or future beneficiaries”.29
[16] Section 69 of the Act deems trustees acting under the direction of the Court to have discharged their duty (with certain exceptions for fraud, wilful concealment or misrepresentation).
Submissions
[17] Mr Baird, for the trustees, submits it is within the trustees’ absolute discretionary power to partially resettle the MFT assets as proposed, subject only to approval by the Court in respect of the minor beneficiaries under s 64A of the Trustee
26 Clucas v Trustees of T E Clucas Family Trust HC Christchurch, M1/95, 5 May 1998, at 8-9.
27 Re Byrne HC Wellington, CIV 2003-485-167, 25 May 2004 at [28] (footnotes omitted).
28 Green v Green [2017] NZHC 1044.
29 At [28].
Act 1956. He submits the trustees have consistently sought to honour Tam’s wishes and the terms of the trust deed. But they are sick of all this and want out. They are not prepared to agree to the variations proposed by Kevin and Chantelle which they consider are contrary to the clear wishes of Tam regarding spouses not being beneficiaries and final distributions not being made. The trustees consider those variations can be taken up with the Public Trust. The trustees do not want to be involved in the variations and want the protection of s 69 of the Act. They are concerned that cl 13 of the Trust Deed might mean a distribution to Kevin or Chantelle is not possible as it might led to social welfare payments being disallowed. Otherwise, Mr Baird identifies advantages and disadvantages of the settlement proposal for Beryl’s children. He submits, on the balance of probabilities, they would probably agree to the proposed settlement and, accordingly, I should approve it.
[18] Ms Kula, for Kevin and Chantelle, submits the proposed settlement reflects a position reached after protracted efforts involving significant concessions by all parties. She submits the major point of contention by Kevin and Chantelle with the trustee’s three-trust proposal was that it would exclude their spouses which would not reflect their circumstances and could be unrealistic in practice. She advises they just want their own houses and are not averse to having them by way of trust. She acknowledges Mr Shanahan’s concern for Chantelle’s children and advises Kevin and Chantelle are willing to vary the settlement to form a trust for the benefit of Chantelle and her children, to effectively mirror that of Beryl, and have Kevin’s share distributed directly to him. They would be willing to discuss and vary this but the trustees and Beryl have refused to engage in any discussion and, at the hearing, Mr Baird said they would not agree. Given that, Ms Kula submits settlement in accordance with the Deed is more beneficial to all minor beneficiaries than protracted litigation which is detrimental for all. Kevin and Chantelle support the proposed settlement.
[19] Mr Magee, for Beryl, acknowledges the potential for detriment to her children but endorses Mr Shanahan’s view that any detriment would be outweighed by bringing the disputes to an end. She has had no dysfunction with the trustees but considers there is a huge benefit to her and her family being separate from all of the difficulties with the MFT. Mr Magee submits Beryl has put in place an additional layer of protection by using professional trustees and independent trustee in her trust. He seeks
orders that the terms of the settlement agreement, as they apply to Beryl, should be approved. He submits they are pragmatic and sensible.
[20] Mr Shanahan, litigation guardian for Chantelle’s and Beryl’s children, submits that Beryl’s position is consistent with Green v Green. He submits this is a case where considerations about the value of resolving long-running disputes should be taken into account.
Should I approve the proposed re-settlement?
[21] I consider the proposed settlement is fair to the beneficiaries. There is a clear and appreciable value to Beryl and her children to being removed from the long- running disputes about the MFT. I acknowledge there is a risk they would not share in a potentially larger fund if Kevin’s “share” of the funds remains in the MFT because he dies before it is distributed to him. But the chances of that happening are difficult to assess. I also offer some observations below that may mitigate the risk of that occurring. Taking a wide approach to the arrangement, I consider the value to Beryl’s children of being removed from the long-running dispute outweighs the potential but speculative financial detriment to Beryl’s children of the proposed settlement. Accordingly, I do not consider the proposed settlement is an arrangement to the detriment of Beryl’s children, or anyone else, which triggers the proviso to s 64A. I approve the proposed settlement on the basis that it is implemented very promptly.
[22] As I raised with counsel, on the basis of the evidence before me I do have some concern about whether the current trustees have held rather too rigidly to their understanding of Tam’s wishes regarding the trust. I have no reason to think they acted other than in good faith. But Tam’s memoranda of wishes are, explicitly, not binding on the trustees. They are legally required to exercise their discretion in the interests of the beneficiaries of the trust according to the trust deed. And the memoranda do not state that the trust funds are not to be distributed to the primary beneficiaries. The clause regarding protection of beneficiaries from matrimonial property claims requires only that trustees “consider the stability of the marriage and the purpose to which a distribution would be applied” in making a distribution which, it is explicitly envisaged, could be outright to a beneficiary. Winding up the MFT and resettling the
fund upon trusts for each of the three primary beneficiaries are also explicitly identified as options for the trustees.
[23] It is clear that the current trustees are not prepared to consider the options favoured by Kevin and Chantelle. And they will shortly retire in implementing the settlement, as is appropriate. It will be for the Public Trust, as independent professional trustee, to consider whether and how to exercise the discretion to settle new trusts on Kevin and Chantelle or to distribute trust funds to them. In doing so, it will need to consider whether or not cl 13 of the Trust Deed poses the problem that Mr Baird suggests. It will also need to consider the risks to the interests of Chantelle’s children by further distributions, which Mr Shanahan has identified, and the potential options he identifies for mitigating those risks. I recommend that the Public Trust considers whether and how to exercise its discretion as a matter of urgency, in order to avoid the potential for unfairness of the current settlement to Beryl and her children, compared with Chantelle and her children, as identified above.
Palmer J
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