Pollock v Pollock
[2020] NZHC 648
•25 March 2020
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV 2016-470-000195
[2020] NZHC 648
BETWEEN NATHAN CHARLES POLLOCK and LETITIA JANE POLLOCK
PlaintiffsAND
CHERYL LINDA POLLOCK
First Defendant
AND
CHERYL LINDA POLLOCK and PETER
EDMOND WASHER as executors, trustees and administrators of the Estate of R D Pollock
Second Defendants
AND
CHERYL LINDA POLLOCK and CLM
TRUSTEES as trustees of the Judea Valley Trust
Third DefendantsContinued overleaf…
Hearing: 6-24 May 2019 Appearances:
G C McArthur for Letitia Pollock
D Fraundorfer and P Allan for Steven Pollock
P J Morgan QC and M Jepson for Cheryl Pollock S Scott for CLM Trustees
K J Catran for Executors of Estate of R D Pollock S Beattie for children of Cheryl PollockJudgment:
25 March 2020
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 25 March 2020 at 2.00pm
Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
POLLOCK v POLLOCK [2020] NZHC 648 [25 March 2020]
Continued from previous page…
CIV 2017-470-000060
BETWEEN STEPHEN REX POLLOCK
Plaintiff
AND
CHERYL LINDA POLLOCK and PETER
EDMOND WASHER as executors, trustees and administrators of the Estate of R D Pollock
First DefendantsAND
CHERYL LINDA POLLOCK
Second Defendant
AND
CHERYL LINDA POLLOCK and CLM
TRUSTEES as trustees of the Judea Valley Trust
Third Defendants
CIV 2017-470-000026
BETWEEN NATHAN CHARLES POLLOCK and LETITIA JANE POLLOCK
PlaintiffsAND
CHERYL LINDA POLLOCK and PETER
EDMOND WASHER as executors, trustees and administrators of the Estate of R D Pollock
First Defendants & Ors
Solicitors:
Holland Beckett Law, Tauranga Neverman Bennett, Hamilton Rejthar Stuart Law, Tauranga
Cooney Lees Morgan, Tauranga
TABLE OF CONTENTS
Para No.
Introduction 1
Letitia’s claims 18
First proceeding – Family Protection Act 1955 18
Second proceeding – Trustee Act 1956 and Administration Act 1969 19
Steven’s claims 22
Order under Family Protection Act – first cause of action 23
Order under Law Reform (Testamentary Promises) Act – second cause of action
24
Remedial constructive trust because of undue influence – third cause of action
26
Unjust enrichment – fourth cause of action 27
Breach of fiduciary duty – fifth cause of action 29
Issues in the proceeding 31
Rex Pollock’s life and career and the arrangements he made for his family 33
First Pollock family formed 33
Todd and Pollock formed 34
Pauline found to have schizophrenia; Steven and Nathan start at Todd and
Pollock 36
JVT settled; Rex and Pauline settle relationship property; Rex makes will 40
Rex and Cheryl start a relationship, marry and make new wills 43
Letitia has issues at home; starts work at Todd and Pollock 46
Steven leaves Todd and Pollock 49
Rex and Cheryl set up mirror trusts 51
Steven returns to Todd and Pollock then leaves; Wayne starts at Todd andPollock 54
Todd and Pollock restructured 57
Rex writes new will and sets out his wishes for JVT and Caribbean Trust 58Todd and Pollock sold; Rex and Cheryl retire; Wayne moves to Auckland 64
Resettlement of Judea Valley Trust and related arrangements 67Pollock & Sons formed; Steven rejoins the family business with Wayne and Thomas 76
Rex transfers 50 per cent of TP Group to Cheryl; Rex and Cheryl make new
wills 80
Pollock crane clan comeback featured in Truck & Driver magazine 86
Rex and Cheryl again make new wills and related arrangements 88
Mossie Boyz Trust established 92Nathan removed as final and discretionary beneficiary from JVT 95
Pollock & Sons grows; Cassandra starts at the company; Wayne made a
director 96
Steven leaves Pollock & Sons 98Steven removed as beneficiary of JVT / Caribbean Trust; Pollock name protected 107
Rex diagnosed with mesothelioma, has surgery and starts chemotherapy 109 Discussion about possible removal of Letitia as beneficiary under the JVT 115 Rex’s cancer treatment found not to be working 116
Rex records events endured with Steven 117
Rex / Cheryl gifts shares in TP Group to JVT; start of discussion about
transferring Pollock & Sons shares 121
Rex’s new chemotherapy treatment begins 124
Rex goes big on cranes 126Rex records funeral wishes and asks Cheryl to contact doctor 37
Rex becomes hospice out-patient but still travels 129
Rex transfers shares in Pollock & Sons to Cheryl; makes last will 132
Rex’s last months 144Where was Letitia in all of this 149
Events after Rex died 156
Has Rex breached his moral duty to provide proper maintenance and support for Letitia and Steven so that provision should be made for them under the
Family Protection Act? 169
Nature of claim under Family Protection Act 169
Letitia’s claim 176
Steven’s claim 187
Did Rex make promises to Steven that if he worked for the business he would inherit it and, if so, do those promises support a disposition under the Law Reform (Testamentary Promises) Act? 194
Did Cheryl exercise undue influence over Rex? 214
Applicable principles on undue influence 216
Were Rex and Cheryl in a relationship of trust and confidence? 220
Conclusions on whether the relationship was one of trust and confidence 231
Did Cheryl exercise undue influence with over Rex respect to the particular
transactions? 246
Steven’s deletion as a beneficiary from the JVT and Caribbean Trust 246Transfer of TP Group shares to JVT 256
Transfer of Pollock & Sons shares to Cheryl 262
Appointment of Cheryl as appointer under clause 13 of JVT and Caribbean Trust 268
Steven’s exclusion from the estate 272
Do Cheryl’s appointments as executor and trustee under Rex’s will and as a
trustee of the JVT result in conflicts of interest or an unconscionable bargain?277
Are the transfers of the shares in TP Group to the JVT and of the shares in
Pollock & Sons to Cheryl void as unconscionable bargains? 284
Were the beneficiaries of the JVT and Cheryl unjustly enriched? 288
Did the trustees of the JVT breach fiduciary duties owed to Steven and did CLM Trustees breach their duties as professional trustees, and did Cheryl and CLM Trustees breach duties they owed under ss 13F and 13C
respectively of the Trustee Act, when Steven was removed as a beneficiary under the JVT? 292
Does Steven’s removal as a final beneficiary mean his children are not
discretionary beneficiaries? 307
Did Cheryl and CLM Trustees breach duties owed under ss 13F and 13C of the Trustee Act? 311
Should the trustees of the JVT be removed and replaced with an independent trustee? 313
Consequence of findings and general observation 327
Result 331
Costs 332
Postscript 335
Introduction
[1] These proceedings challenge the arrangements Rex Pollock put in place before he died for the disposal of the assets he built up over the course of his career as a prominent Tauranga business person.
[2] Rex died in Tauranga in February 2015 after battling for a year with mesothelioma, a cancer associated with exposure to asbestos as he had been when he was a builder in the early years of his working life. During his career, Rex was also a property developer and a road haulage operator. Most significantly, he developed a sizeable crane hire business that operated in Tauranga, Hamilton and Auckland. Cranes were Rex’s passion and his personal measure of success. His other passion was speedway, of which he was a major sponsor.
[3] Rex’s funeral procession was an entourage of cranes and heavy haulage trucks from his company, Pollock & Sons Crane Hire Ltd (Pollock & Sons), decked out in the company’s signage and company colours of ‘Pollock orange’ and red. One vehicle bore Rex’s coffin, also painted in the company colours. Police held back the traffic as the procession made its way to the Baypark Arena where Rex had spent many hours at the local speedway.
[4] Over 1,000 people came to Baypark to farewell one of Bay of Plenty’s most successful and respected business leaders. Rex’s family and many friends paid tribute to him. A video recalling his achievements was played.
[5] The funeral was organised in accordance with Rex’s instructions with the assistance of his second wife, Cheryl Pollock, whom he had married in September 1995. It was attended by Cheryl and her three children from her first marriage, Wayne, Thomas and Cassandra Slater, all of whom worked for Pollock & Sons.
[6] Notable absentees were Rex’s two sons from his first marriage which had ended in 1991: Steven Pollock, who had had a major falling out with Rex some 15 months before Rex died, and Nathan Pollock, who had parted ways with his father even earlier. Letitia Pollock, Rex’s daughter from his first marriage, was the only member of Rex’s first family present.
[7] Rex’s estate contained no significant assets. In his last will dated 27 November 2014, Rex gave all his personal chattels and bank accounts to Cheryl. Rex gave the remainder of his estate upon trust to his trustees and executors, Cheryl and Peter Washer, who had been Rex’s solicitor for many years, to pay all debts, duty, executorship and administration expenses, and directed that they pay the balance of his estate to the trustees of the Judea Valley Trust (JVT) which he had established in May 2017. The JVT was the successor to an earlier Judea Valley Trust established in 1992 following the end of Rex’s first marriage to Pauline Pollock.
[8] On 15 April 2014, before making his last will, Rex had gifted to the JVT his 50 per cent shareholding in TP Group Ltd, the company holding the proceeds of the sale of Rex’s earlier businesses. That 50 per cent shareholding was valued at
$5,500,000. On the same date, Cheryl gifted to the JVT her 50 per cent shareholding in TP Group so that JVT now holds 100 per cent of the shares in TP Group. Following Rex’s death, Cheryl is the sole director of TP Group.
[9] On 27 November 2014, the same day he made his last will, Rex transferred his 50 per cent shareholding in Pollock & Sons, valued at $78,000, to Cheryl who became the sole shareholder of that company. Following Rex’s death, Cheryl and Wayne, her oldest son, are the directors of Pollock & Sons.
[10] In his will, Rex appointed Cheryl to exercise the powers under clause 13 of the deed establishing the JVT to appoint new trustees of the JVT. He also appointed Cheryl to exercise the same powers under clause 13 of the deed establishing the Caribbean Trust, another trust he had established as part of his property management and estate planning arrangements.
[11] Following Rex’s death, Cheryl and CLM Trustees Ltd, were the sole trustees of both the JVT and the Caribbean Trust. They remain the sole trustees of the JVT. The Caribbean Trust has been wound up.
[12] CLM Trustees is operated by Cooney Lees Morgan, the law firm that had provided legal advice to Rex over the years. Mr Washer was a partner of the firm and a director of CLM Trustees until his retirement.
[13] Cheryl, the Slater children, and Letitia are final and discretionary beneficiaries of the JVT. Steven and Nathan had also been final and discretionary beneficiaries of the JVT but were removed by Rex in the year before he died. They were also removed as final and discretionary beneficiaries of the Caribbean Trust.
[14] Rex’s grandchildren and step grandchildren are also discretionary beneficiaries of the JVT. An ancillary issue that arose in the proceedings is whether the children of Steven and Nathan remain discretionary beneficiaries following their fathers’ removals.
[15] In a final memorandum of wishes to the trustees of the JVT, Rex recommended that upon the death of both himself and Cheryl the trustees should consider whether the JVT should be wound up and that if it were wound up, all of its assets should be paid out to Cheryl’s children, notwithstanding Letitia’s status as a final beneficiary. The memorandum of wishes also reduced the inter vivos distribution that should go to Letitia and her children if Cheryl chose to sell the property in which Letitia and her children had been living. Cheryl sold that property within months of Rex’s death.
[16] As a result of these dispositions and arrangements, Steven and Nathan have been excluded from any share in their father’s inheritance. Letitia is a beneficiary of the JVT but says that whether she receives anything is dependent on Cheryl, with whom Letitia has had an uneasy relationship and who, she believes, turned Rex against her. For those reasons, Letitia considers that her chances of obtaining any substantial benefit from the JVT are slim.
[17] The Pollock children brought three sets of proceedings challenging Rex’s dispositions and arrangements. Two proceedings were brought by Nathan and Letitia and one by Steven. The proceedings were heard together in the High Court in Tauranga in May 2019. By the time of the hearing, however, Nathan had withdrawn from the proceedings and took no part in them. As a consequence, only Letitia and Steven remain as plaintiffs.
Letitia’s claims
First proceeding – Family Protection Act 1955
[18] Letitia’s first proceeding is against Cheryl and Mr Washer as executors and trustees under Rex’s will. In this proceeding she seeks an order under the Family Protection Act 1955 for provision from Rex’s estate. Mr McArthur, Letitia’s counsel, acknowledges that Rex’s estate is essentially bare and that Letitia’s prospects of recovering anything meaningful under the Family Protection Act proceeding are contingent on Letitia’s success under the second proceeding she has brought.
Second proceeding – Trustee Act 1956 and Administration Act 1969
[19] The second proceeding is brought under the Trustee Act 1956 and the Administration Act 1969 against Cheryl in her personal capacity, Cheryl and Mr Washer as executors and trustees under Rex’s will, and Cheryl and CLM Trustees as trustees of the JVT.
[20] In this proceeding, Letitia alleges that Cheryl exercised undue influence over Rex throughout their marriage and especially following his diagnosis with cancer in January 2014. Letitia says, in particular, that:
(a)Cheryl exercised undue influence over Rex in relation to his gifting his 50 per cent shareholding in Pollock & Sons to Cheryl and in relation to his gifting his 50 per cent shareholding in TP Group to the JVT (first and second causes of action);
(b)Cheryl exercised undue influence over Rex and obtained an unconscionable bargain which resulted in a conflict of interest with respect to her positions as an executor and trustee of Rex’s estate and as a trustee of the JVT; (third and fourth causes of action);
(c)The gifts of the shares in Pollock & Sons to Cheryl and of the shares in TP Group to the JVT are void as unconscionable bargains (sixth and eighth causes of action);
(d)Because of the situation between the parties –which I infer to mean the situation between Letitia on the one hand and Cheryl and others associated with Cheryl such as CLM Trustees on the other hand – it is appropriate that an independent trustee be appointed to replace the trustees of the JVT.1
[21] In addition to the award sought under the Family Protection Act, Letitia seeks orders declaring the gifts of shares in the JVT and Pollock & Sons void and rescinding those gifts; removing Cheryl as administrator of Rex’s estate and appointing an independent administrator; and removing Cheryl and CLM Trustees as trustees of the JVT appointing an independent trustee.
Steven’s claims
[22] Steven’s proceeding is brought under the Family Protection Act, the Law Reform (Testamentary Promises) Act 1949, the Administration Act and Part 18 of the High Court Rules 2016. He pleads five causes of action: the first two against Cheryl and Mr Washer as trustees and executors of Rex’s estate; the other three against Cheryl personally and against Cheryl and CLM Trustees as trustees of the JVT.
Order under Family Protection Act – first cause of action
[23] Like Letitia, Steven seeks an order under the Family Protection Act against Cheryl and Mr Washer as executors and trustees of Rex’s estate. Steven says Rex failed to recognise his moral duty to Steven, having regard to the years Steven dedicated to the family businesses and to promises Rex made to Steven.
Order under Law Reform (Testamentary Promises) Act – second cause of action
[24] Steven says Rex promised him that if he worked for the family business he would inherit it and would become a director and shareholder of Rex’s companies and
1 The fifth cause of action, which was brought in the name only of Nathan Pollock, was abandoned after Nathan’s withdrawal from the proceeding. In his closing submissions, Mr McArthur informed the Court that Letitia had abandoned her claim under the seventh cause of action which challenged the transfer of assets from the first JVT to the second JVT.
that these promises provide an appropriate basis for the Court to make an order to compensate Steven from Rex’s estate.
[25] Mr Fraundorfer, Steven’s counsel, also acknowledges that because Rex’s estate is essentially bare, Steven’s prospects of recovering anything meaningful under the Family Protection Act and Law Reform (Testamentary Promises) Act causes of action are contingent on Steven’s success under his other causes of action.
Remedial constructive trust because of undue influence – third cause of action
[26] Steven says that on the basis of his relationship with Rex, he had an entitlement to Rex’s estate or a reasonable expectation that he would benefit from Rex’s estate. He says he was excluded from the estate because of the undue influence exercised by Cheryl, who - together with her children - stood to benefit materially from Steven’s exclusion. For these reasons, Steven says Cheryl and the trustees of the JVT hold Steven’s entitlement to Rex’s estate on constructive trust for Steven’s benefit or, in the alternative, that Steven’s reasonable expectation to share in Rex’s assets has been materially altered to Steven’s detriment because of Cheryl’s influence over Rex.
Unjust enrichment – fourth cause of action
[27] Steven says his work at Rex’s original company, Todd and Pollock Ltd contributed to the increased value of the shares in Todd and Pollock, and the related companies Rex established and subsequently sold, and thus to the value of TP Group and have benefitted the JVT. Steven also says his work at Pollock & Sons contributed to the value of the shares of that company and benefitted Cheryl.
[28] Steven says that Cheryl was aware of Rex’s promise that Steven would inherit and become a shareholder of Todd and Pollock and a shareholder and director of Pollock & Sons and took active steps to ensure that Steven did not receive the benefit of the promise and that it is unjust for Cheryl and the JVT to retain the benefits they received at Steven’s expense.
Breach of fiduciary duty – fifth cause of action
[29] Steven says that the trustees of the JVT owed fiduciary duties to Steven as a final and discretionary beneficiary of the JVT and that CLM Trustees also had professional obligations as a trustee company to protect the interests of the beneficiaries of the JVT and the assets of the Trust. Steven says the trustees breached that duty and that CLM Trustees breached their professional obligations when they removed him as a final and discretionary beneficiary of the JVT, that Cheryl and CLM Trustees breached fiduciary duties owed to Steven and breached duties owed under ss 13F and 13C of the Trustee Act, and that Steven has suffered loss as a consequence of those breaches.
[30] In addition to the relief sought under the Family Protection Act and Law Reform (Testamentary Promises) Act causes of action, Steven seeks orders declaring his removal as a beneficiary of the JVT and Caribbean Trust void and rescinding his removal; declaring the gifts of shares in the JVT and Pollock & Sons void and rescinding those gifts or, in the alternative, damages; declaring that Cheryl and CLM Trustees breached fiduciary duties owed to Steven and breached duties owed under ss 13F and 13C of the Trustee Act; the removal of Cheryl as a trustee of the JVT and the appointment of an independent trustee.
Issues in the proceeding
[31]The issues to which the pleadings and submissions of counsel give rise are:
(a)Do Letitia and Steven have claims under the Family Protection Act; that is, has Rex breached his moral duty to provide proper maintenance and support for Letitia and Steven?
(b)Did Rex make promises to Steven that if he worked for the business he would inherit it and, if so, do those promises support a disposition under the Law Reform (Testamentary Promises) Act?
(c)Did Cheryl exercise undue influence over Rex in relation to:
(i)Steven’s removal as a beneficiary under the JVT and the
Caribbean Trust?
(ii)The transfer of Rex’s shares in TP Group to the JVT?
(iii)The transfer of Rex’s shares in Pollock & Sons to Cheryl?
(iv)Cheryl’s appointment as appointer under the JVT and Caribbean Trust deeds?
(v)Steven’s exclusion from Rex’s estate such that:
1. Cheryl and the other trustees of the JVT hold Steven’s
entitlement to the estate on constructive trust for Steven?
2. Steven’s reasonable expectation to share in Rex’s assets has been materially altered to Steven’s detriment because of Cheryl’s influence over Rex?
(vi)Cheryl’s appointment as executor and trustee under Rex’s will and trustee of the JVT such that Cheryl was in a conflict of interest and secured an unconscionable bargain from the transfers of the TP Group shares to the JVT and the Pollock & Sons shares to Cheryl?
(d)Are the transfers of the shares in the TP Group to the JVT and of the shares in Pollock & Sons to Cheryl void as unconscionable bargains?
(e)If Rex made promises to Steven that if he worked for the business he would inherit, did Cheryl prevent Steven receiving the benefit of the promises so that Cheryl and the JVT have been unjustly enriched?
(f)Did the trustees of the JVT breach fiduciary duties owed to Steven and did CLM Trustees breach their duties as professional trustees, and did Cheryl and CLM Trustees breach duties they owed under ss 13F and 13C respectively of the Trustee Act when Steven was removed as a beneficiary under the JVT and the Caribbean Trust?
(g)Should Cheryl and CLM Trustees be removed as trustees of the JVT and an independent trustee appointed?
[32] To answer those questions, it is necessary to recall the essential facts of Rex’s life and business career, Steven’s involvement in Rex’s companies, the steps Rex took to provide for his children and their children and for Cheryl and her children after his death and, in that connection, Rex’s relationship with Letitia. Because the focus of the allegations concerns Rex’s health and his ability to make informed and independent decisions in the last year of his life when he was suffering from and being treated for mesothelioma, this account covers those matters in some detail.
Rex Pollock’s life and career and the arrangements he made for his family
First Pollock family formed
[33] Rex married Pauline Pollock in 1969. Steven was born the following year (1970); Nathan was born two years later (1972); Letitia was born some five years after that (1977). Letitia learned much later in life that she had been adopted.
Todd and Pollock formed
[34] In September 1972, Rex and Allan Todd, with whom Rex had been in partnership since the 1960s, set up Todd and Pollock Builders Ltd. Over time, the business expanded beyond its building base into a range of other activities including scaffolding, joinery, haulage and cranes.
[35] In 1985, Allan Todd retired and Rex bought Allan’s shares in Todd and Pollock. Pursuant to a relationship property agreement, 50 per cent of the shares in Todd and Pollock were transferred to Pauline.
Pauline found to have schizophrenia; Steven and Nathan start at Todd and Pollock
[36] In 1986, Pauline was diagnosed with schizophrenia and depression. Her condition worsened and the marriage became increasingly difficult for Rex. By 1992, Pauline and Rex had separated and Steven had left school and had left home.
[37] After their parents separated, Nathan and Letitia lived with their father in the family home at Miriana Street, Maungatapu, Tauranga, although at some stage Nathan went to live with Pauline.
[38] Steven started work at Todd and Pollock in his teenage years – initially during the school holidays but on a full-time basis as soon as he turned 15. He began by driving smaller trucks but he moved on to larger trucks and cranes as soon as he obtained his heavy vehicle licence. He also started driving for his father’s sponsored speedway team and achieved considerable success and came coming third at the New Zealand championships in 1994.
[39] Nathan started working for Todd and Pollock on a full-time basis around 1990. He did not stay long. It appears he did not share his father’s work ethic. Rex was also concerned that Nathan used drugs. Nathan left for Australia in about 2000 and has had limited contact with his father since.
JVT settled; Rex and Pauline settle relationship property; Rex makes will
[40] In May 1992, Rex’s mother, Elizabeth Rowe, settled the original Judea Valley Trust. The trustees were Peter Simmonds, Rex’s then accountant, and Michael Cooney, Rex’s then solicitor. The final beneficiaries were Rex, Steven, Nathan and Letitia. The discretionary beneficiaries included the final beneficiaries, and any child or spouse of the final beneficiaries.
[41] In December 1992, Rex and Pauline executed a relationship property agreement under which, among other things, Pauline agreed to resign as a director of Todd and Pollock and to transfer all her shares in the company to Rex. According to a note Mr Simmonds prepared on 26 November 1992, Pauline’s half share in Todd and Pollock was valued at $550,000. Under the agreement, Rex kept the family home at Miriana Street.
[42] On 24 November 1993, Rex made a will. He appointed Steven, Mr Simmonds and Mr Washer executors and trustees and bequeathed his entire estate to them to hold on trust. He directed that, after the usual deductions for debts and funeral expenses, the executors and trustees were to hold his residuary estate on trust in equal shares for his children until they reached the age of 30. That would have included the shares in Todd and Pollock and any proceeds of the sale of those shares.
Rex and Cheryl start a relationship, marry and make new wills
[43] At about the time Rex was formalising his separation from Pauline, he began a relationship with Cheryl who had started work in the office at Todd and Pollock in 1991. He started spending nights at Cheryl’s house and on some occasions took Letitia with him. On other nights, Letitia stayed with her mother. At some point around 1993, Cheryl and her three children moved into Rex’s Mariana Street home. Letitia was sent to boarding school. Cheryl says this was because Pauline could not look after her and Letitia was a difficult child. At Rex’s direction, and notwithstanding Cheryl’s reservations, Cheryl’s children were also sent to boarding school because of Cheryl’s heavy work-load and long hours at the business.
[44] Rex and Cheryl married on 29 September 1995. A few days later, on 2 October 1995, Rex made a new will. This will had been prepared in anticipation of his marriage to Cheryl, whom the will described as Rex’s fiancée and to whom Rex gave most of his chattels and the right to occupy his residence during her lifetime or until she entered a new relationship. In this will, Rex again gave the balance of his estate on trust to his executors and trustees who were again Steven, Mr Simmonds and Mr Washer. However, in this will, the executors and trustees were directed to pay the income of one quarter of the residuary estate to Cheryl until her death or until she entered a new relationship, at which point the capital and income of that quarter share were to go to the trustees of the original Judea Valley Trust. The will directed that the remaining three quarters of the residuary estate be paid to the trustees of the JVT. The will made no direct provision for the Pollock children.
[45] On 22 July 1996, Rex and Cheryl entered into a relationship property agreement in which they identified items of property that were to remain their separate property. In Rex’s case, his separate property was the Miriana Street residence, his shareholding in Todd and Pollock and any loan advances made to the JVT.
Letitia has issues at home; starts work at Todd and Pollock
[46] Letitia did not enjoy boarding school and left in 1995 to return to the family home. She went to the local college until she left school and started full-time work at Todd and Pollock where she had previously worked during school holidays since the
age of 10. However, Letitia left home again after about six months. It appears that Letitia did not live again with Rex and Cheryl.
[47] Letitia did not stay long at Todd and Pollock. Cheryl says there was not really a job for Letitia at Todd and Pollock and that she and Rex arranged for Letitia to get a job at a print shop because Letitia had expressed an interest in graphic design. Letitia says she was doing useful work at Todd and Pollock and that the print shop job was no more skilled than that she had been doing at Todd and Pollock.
[48] Letitia did not work again at Todd and Pollock or at Pollock & Sons after it was established.
Steven leaves Todd and Pollock
[49] In February 1999, Steven separated from his then wife, Jan-Maree, whom he had married in February 1992, and left Todd and Pollock. Rex had learned that Steven had been having an affair with a woman working in the Todd and Pollock office. Steven initially denied the affair but later acknowledged it when told by Rex that Steven’s involvement with the woman was apparent from the company’s phone records, which Cheryl had scrutinised. Steven says Cheryl gave Rex an ultimatum that either Steven had to go or she would. Cheryl says Rex fired Steven after he had made disparaging remarks about her after she had challenged Steven on his behaviour. In any event, it is apparent that Rex told Steven to leave the company and Steven did so. A short time later, Rex learned that the woman with whom Steven had been having an affair had been stealing money from the company. Whether or not Steven knew of the theft, the episode caused considerable unhappiness within the family.
[50] After leaving Todd and Pollock, Steven set up his own haulage company, Kiwi Haulage Tauranga Ltd. However, the company got into financial difficulty and was wound up in 2003.
Rex and Cheryl set up mirror trusts
[51] On 6 August 1999, Cheryl settled the Monarch Butterfly Trust. The trustees were Cheryl and Mr Washer. The final beneficiaries were Cheryl and her children.
The discretionary beneficiaries were the final beneficiaries and any children or any spouse of the final beneficiaries, and Rex.
[52] On 21 September 2000, Rex settled the Caribbean Trust. The trustees were Rex, Cheryl and Mr Simmonds. The final beneficiaries were Rex and his children. The discretionary beneficiaries were the final beneficiaries and any children or any spouse of the final beneficiaries, and Cheryl.
[53] Clause 13 of each of the trust deeds provided that Cheryl, in the case of the Monarch Butterfly Trust, and Rex, in the case of the Caribbean Trust, had the power to appoint new trustees. Clause 32 of the Caribbean Trust Deed provided that the trustees could, subject to the written consent of the person with the power to appoint trustees, add or delete any final or discretionary beneficiary.
Steven returns to Todd and Pollock then leaves; Wayne starts at Todd and Pollock
[54] Sometime in 2001, Rex told Steven he wanted him back at Todd and Pollock. Steven was happy to return to the company, which had been going through a considerable period of expansion, particularly in its haulage and cranes divisions. Steven’s new wife, Andrea, managed matters at Kiwi Haulage while Steven went back to Todd and Pollock. Steven was given the title of Operations Manager and had responsibility for dispatching and fielding inquiries in relation to the company’s trucks and cranes. Steven says that during this period he played a major part in the company’s continued expansion.
[55] However, Steven left Todd and Pollock again after about a year. Steven admitted in cross examination that the cause of his leaving the second time was his addiction to methamphetamine. Steven moved to Auckland with Andrea, who was pregnant at the time. Steven did not have further contact with Rex and Cheryl for a number of years.
[56] Towards the end of 2002, Wayne Slater started work at Todd and Pollock after encouragement from Rex. Wayne started as a labourer but, once he had obtained the necessary licences, drove the company’s vehicles including its cranes. In 2004, he was moved into the office and became crane dispatcher.
Todd and Pollock restructured
[57] At about the time Steven left the company for a second time, Todd and Pollock was restructured and separate companies were established for its separate divisions: Todd and Pollock Builders Ltd, Todd and Pollock Scaffold Hire Ltd, Todd and Pollock Haulage Ltd and Todd and Pollock Crane Hire Ltd. The companies were owned 100 per cent by Todd and Pollock Group Ltd.
Rex writes new will and sets out his wishes for JVT and Caribbean Trust
[58] On 11 December 2002, Rex made a new will. In the will, he appointed Cheryl and Mr Washer his executors and trustees and gave all his shareholding in the Todd and Pollock companies and the proceeds of any sale of such shareholding to Cheryl as to 80 per cent and to the trustees of the JVT as to 20 per cent. He also directed that his residuary estate be paid to the trustees of the JVT. The will made no specific provision for any of Rex’s children or step-children.
[59] Also on 11 December 2002, Rex made memoranda of wishes to guide the trustees of the JVT and the Caribbean Trust in the event of his death.
[60] In the JVT memorandum, Rex recorded that the trust was set up for himself and members of his family. He asked his trustees to take into account Cheryl’s wishes in respect of the sale of the Todd and Pollock Group shares and said that if the shares were sold he wished the trustees to give consideration to making a capital distribution to each of his children. He also recorded his view that the capital of the Trust should be maintained and expressed the wish that the trustees give consideration to dividing the Trust income equally between Cheryl and his three children.
[61] In the Caribbean Trust memorandum, Rex recorded that the trust was set up for himself, his children and Cheryl. He directed that the Trust’s half share in a residential unit in the Beaumont Apartments, into which Rex and Cheryl moved, be transferred to the Monarch Butterfly trust, that Cheryl should receive the income derived from the remaining assets during her lifetime, and that the assets should be sold and the proceeds divided equally among his children following Cheryl’s death.
[62] In June 2005, Rex, Cheryl and CLM Trustees were appointed trustees of the JVT to replace retiring trustees.
[63] Rex made two further memoranda of wishes in October 2005. The memoranda were similar to those he made on 11 December 2002 except that:
(a)In the JVT memorandum, Rex specifically directed the trustees to exercise caution in distributing funds to his three children and to consider the needs of his grandchildren;
(b)In the Caribbean Trust memorandum, Rex directed that following Cheryl’s death the trustees should use their discretion in dividing the assets between his children and grandchildren.
Todd and Pollock sold; Rex and Cheryl retire; Wayne moves to Auckland
[64] In February 2006, Rex sold the Todd and Pollock operating companies – Todd and Pollock Scaffold Hire, Todd and Pollock Haulage and Todd and Pollock Crane Hire – to New Zealand Crane Hire Limited for approximately $18,000,000. (Todd and Pollock Builders had already been sold.) The proceeds of the sale, after repayment of outstanding debt of $12,000,000, were held in Todd and Pollock Group, renamed TP Group, which also held various property assets. At the time of the sale, Rex was the sole director and shareholder of TP Group.2
[65] Upon the sale of his businesses, Rex also entered into a restraint of trade under which he undertook not to engage in any competing commercial activity for a period of two years. Cheryl says that during that period she and Rex were effectively in retirement. They bought an expensive boat and lived on it several months of the year.
[66] Wayne Slater initially stayed with the former Todd and Pollock operation under its new management but resigned after the trucks division was sold. He then moved to Auckland and started managing a crane fleet for Auckland Construction Ltd.
2 The financial statements for the TP Group for 2007 show that Rex was the only shareholder and held 300,000 shares in TP Group as at 31 March 2007.
Resettlement of Judea Valley Trust and related arrangements
[67] On 31 July 2007, Rex executed a number of documents rearranging his affairs. A notable feature of the new arrangements was that they provided for the Slater children as well as the Pollock children.
[68] Rex, as settlor, established the new JVT with himself, Cheryl and CLM Trustees as its trustees. As trustees of the old JVT, they then resettled the property of the old JVT into the new JVT. The final beneficiaries of the new JVT were Steven, Nathan and Letitia (i.e. the final beneficiaries of the old JVT) and Wayne, Thomas and Cassandra Slater. The discretionary beneficiaries of the new JVT were the final beneficiaries, any child or remoter issue of the final beneficiaries, Rex and Cheryl.
[69] Clause 13 of the new JVT was similar in effect to clause 13 of the Caribbean Trust deed. It provided that Rex and any person he nominated by will had the power to appoint new trustees. Like clause 32 of the Caribbean Trust Deed, clause 32 of the new JVT deed provided that the trustees could, subject to the written consent of the person with the power to appoint trustees, add or delete any final or discretionary beneficiary.
[70] Rex and Cheryl and Kelvin Lellman, as the trustees of the Caribbean Trust, appointed Wayne, Thomas and Cassandra Slater as both final beneficiaries and discretionary beneficiaries of that trust in addition to Steven, Nathan and Letitia who, with Rex, had been the original final beneficiaries. (At some later point CLM Trustees replaced Mr Lellman as the third trustee of the Caribbean Trust.)
[71]Rex and Cheryl also executed new wills. Under his will, Rex:
(a)Appointed Cheryl and Mr Washer as his executors and trustees and, in the event Cheryl predeceased him, appointed Wayne, Steven and Mr Washer as his executors and trustees;
(b)Gave upon trust, his shareholding in TP Group 50 per cent to the Monarch Butterfly Trust and 50 per cent to the Caribbean Trust;
(c)Appointed Cheryl to be his replacement appointer under clause 13 of the JVT deed and clause 13 of the Caribbean Trust deed;
(d)Following payment of debts and funeral expenses, gave the remainder of his estate upon trust to the trustees of the JVT.
[72] In her will, Cheryl appointed Rex and Mr Washer as her executors and trustees and, in the event Rex predeceased her, appointed Wayne, Steven and Mr Washer as her executors and trustees. Apart from specific bequests concerning her chattels, Cheryl left the remainder of her estate on trust to the trustees of the Monarch Butterfly Trust.
[73] Rex also made new memoranda of wishes for the trustees of the JVT and Caribbean Trusts in the event of his death. In the JVT memorandum, Rex recorded that the trust was set up for himself, Cheryl and members of his family and Cheryl’s family. He made the following specific directions to be followed upon his death:
(a)$1,000,000 was to be paid to Steven;
(b)$250,000 was to be paid to each of the three Slater children;
(c)$250,000 was to be paid to Nathan but this sum was to go into a trust under which Nathan would receive interest only from the investment of trust funds and upon Nathan’s death the trust was to pass to Nathan’s two children;
(d)A property at Seventeenth Avenue, Tauranga (then occupied by Letitia) was to go to a trust set up for Letitia and her daughter Natasha.
[74] Rex also expressed the wish that the trustees give consideration to paying income from the Trust to Cheryl and other beneficiaries as the trustees saw fit but again specifically directed the trustees to exercise caution in distributing funds to “my three children” and to consider the needs of his grandchildren.
[75] In the Caribbean Trust memorandum, Rex recorded that the Trust was being established principally for himself and Cheryl. He directed that in the event of his death, his half share in the two Kingsview Apartments – in one of which he and Cheryl now resided – was to pass to the Monarch Butterfly Trust and that the balance of the Trust’s assets were to be held for the benefit of Cheryl who could distribute an amount to her three children and Rex’s three children at her discretion. However, he also directed that if the Trust was wound up after the death of himself and Cheryl, the assets were to be divided equally between Steven and the three Slater children.
Pollock & Sons formed; Steven rejoins the family business with Wayne and Thomas
[76] In mid to late 2007, Wayne arranged for Rex and Cheryl to have dinner with Steven in Auckland in an effort to get the family back together. Whether at that dinner or on some other occasion, Rex proposed that Steven, Wayne and Thomas return to Tauranga and join him in establishing a new company to be called Pollock & Sons. Rex and Cheryl returned to Auckland a few weeks later and either stayed with or spent time with Steven and Andrea. Steven says during that second visit Rex promised him that he would be made a director and shareholder of Pollock & Sons after working at the company for five years.
[77] Pollock & Sons was incorporated on 7 March 2008. Rex and Cheryl each held 50 per cent of the A and B class shares in the company and were the directors of the company. Cheryl says she and Rex put their own money into the company.
[78] As agreed in the discussions in Auckland, Wayne and Steven returned to Tauranga and, with Thomas, started work at Pollock & Sons. Steven stayed with Rex and Cheryl for five months until Andrea and their children moved down from Auckland later in 2008. Steven and his family then moved into a house that the JVT had bought for them. Cheryl says the rental was deliberately set below commercial rates to enable Steven and his wife to save.
[79] As at Todd and Pollock, Rex was in charge at Pollock & Sons but worked closely with Cheryl who, in the early days of the new company, managed the office. Cheryl says she and Rex were initially uncomfortable about having Steven back to work with them but says Steven had assured them he had been drug-free for some
time. Rex made it clear that everyone was to work hard and there was to be no shirking. Cheryl agrees that Steven and everyone else did work hard in the early days and that it was Rex’s and her intention to coach the three boys on how to operate the company and that if it became successful they would step back and let the boys run it. However, she denies there were promises of directorships or shareholding.
Rex transfers 50 per cent of TP Group to Cheryl; Rex and Cheryl make new wills
[80] At some point, probably in the first part of 2009, Rex transferred 50 per cent of his shares in TP Group to Cheryl.3
[81] On 4 June 2009, Rex and Cheryl executed new wills and Rex made a number of related arrangements. Rex’s new will was similar to the will he made on 31 July 2007 and again appointed Cheryl as appointer under clauses 13 of the JVT and Caribbean Trust deeds. However, this will did not make any specific provision for Rex’s shares in TP Group. Rather, it provided that the balance of Rex’s estate would be given on trust to the trustees of the JVT.
[82] By contrast, Cheryl’s will provided that upon her death her shares in TP Group were to be gifted to the trustees of the JVT and that the balance of her estate was to be gifted to the trustees of the Monarch Butterfly Trust. Rex and Cheryl again appointed each other plus Mr Washer to be their executors and trustees and, in the event one of them predeceased the will maker, appointed Wayne, Steven and Mr Washer as their executors and trustees.
[83] Rex also made a new memorandum of wishes for the trustees of the JVT. Rex recorded that he regarded it as important that the capital of the trust fund be maintained but not to the extent of developing a large resource of capital that denied the beneficiaries adequate access to trust funds at a time and age when such funds would be of most use to them and their families. In this memorandum, Rex made no directions for cash to be given to any of the Pollock or Slater children but directed that upon his death:
3 There was no evidence to establish when Cheryl became a shareholder in TP Group but it is apparent from the will Cheryl executed on 4 June 2009 that by then she held shares in the company.
(a)A property at 2/748 Cameron Road, Tauranga (then occupied by Letitia and her family) was to go free of indebtedness to a trust set up for Letitia and her children and should be kept available to Letitia for her lifetime and made available upon her death to her children in equal shares.
(b)Rex’s shares in Pollock & Sons and a property at Kawerau were to be transferred to the Mossie Boyz Trust, a trust to be set up for Steven, Wayne and Thomas.
(c)Specified properties and one-third shares in his launch ‘Reflections’ were each to go to trusts to be set up for Steven, Wayne and Thomas.
[84] The memorandum concerning the Caribbean Trust was essentially the same as that made on 31 July 2007.
[85] Rex also executed a separate memorandum of wishes in which he stated that he had not made any provision in his will or his trusts for Nathan because of Nathan’s lack of contribution to the family, his very limited contact with Rex and his lifestyle, “particularly his use of drugs”.
Pollock crane clan comeback featured in Truck & Driver magazine
[86] At some point in 2012, Truck & Driver magazine ran a feature story, titled “Crane clan’s comeback” on the origins and growth of Pollock & Sons. Rex, Cheryl, Wayne, Steven and Thomas were all interviewed and were quoted in the article. Aspects of the article are relevant to claims made in these proceedings and the defendants’ responses:
(a)The opening paragraph refers to Rex and Cheryl selling up their old business and then “financing their three sons into a clean-sheet operation”;
(b)Rex is quoted as saying:
When the boys expressed their interest in getting into the business, we thought they’d be better to earn it than inherit.
(c)Cheryl is quoted as saying:
So we gave them five years to prove that they had it in them to do it. They made their point within three years – and we’ve given them two years now before we hand over full control.
And, towards the end of the article:
Children who inherit their parents’ company without the right coaching can go wrong. Better they work their way in, under supervision. Four years ago we said they had to keep their feet on the ground and their mouths shut. They’ve definitely put in the hard yards now and are demonstrating their abilities to the full.
Rex and I are proud of what the boys have achieved and are comfortable we made the right decision in giving them this opportunity.
(d)The body of the article refers to the size of the challenge Steven faced, his love of cranes and of his chasing work. It also says that Steven’s concept of thinking outside the square to find work had paid dividends for the company and gave an example of the efficient deployment of a second-hand vehicle acquired in the early days of Pollock & Sons, thereby providing steady extra income in the critical first months of the company’s operation.
[87] Steven says the article supports his claim that Rex had promised him he could take over Pollock & Sons after five years and that this meant being a director and shareholder. He also says the article supports his claim to have been important to the growth of the company through his ability to attract new clients. Cheryl says that handing over control of the company meant letting the boys take over the management of the company but not ownership, which was to stay with Rex and her until they died. She accepts that taking control also meant becoming a director of the company but only when Rex and she were satisfied that each of the boys were up to the task.
Rex and Cheryl again make new wills and related arrangements
[88] On 7 February 2012, Rex and Cheryl made new wills and related arrangements. Rex’s will was the same in all significant respects to that he made on 4 June 2009. It again appointed Cheryl as appointer under clauses 13 of the JVT and Caribbean Trust deeds. Again, it made no specific provision for his children or for the disposal of his shares in TP Group or Rex’s shares in Pollock & Sons but provided for the remainder of Rex’s estate to be paid to the trustees of the JVT. However, this will removed Steven as default executor and trustee if Cheryl predeceased Rex. Rather, the alternate trustees and executors were Wayne Slater, Mr Washer and Kathleen Ross.
[89] Cheryl’s will gifted her shares in TP Group and Pollock & Sons to the trustees of the JVT and left the remainder of her estate to the Monarch Butterfly Trust. As in Rex’s will, Cheryl’s will removed Steven as a default executor and trustee if Rex predeceased Cheryl and appointed Wayne Slater, Mr Washer and Kathleen Ross as the alternate trustees and executors.
[90] In a memorandum of wishes concerning the JVT, Rex repeated the importance of maintaining the capital of the Trust fund but not to the extent of denying beneficiaries access to funds when of most use to them and their families. He also repeated the wish stated in the 4 June 2009 memorandum that the property at 2/748 Cameron Road should go to a trust set up for Letitia and her children and directed other dispositions of property to go to trusts for Steven, Wayne and Thomas – although the properties to go to Steven differed from those in the memorandum of 4 June 2009. The memorandum also directed that Rex’s shares in Pollock & Sons were to go to the Mossie Boyz Trust.
[91] The memorandum concerning the Caribbean Trust that Rex made on 7 February 2012 was essentially the same as that made on 31 July 2007.
Mossie Boyz Trust established
[92] On 7 February 2012, the same day as Rex and Cheryl made new wills, Rex and Cheryl also executed a trust deed establishing the Mossie Boyz Trust. The trustees were Wayne, Steven, Thomas and Mr Washer. Rex and Cheryl had the power to
appoint trustees. The final beneficiaries were Wayne as to 40 per cent, Steven as to 33 per cent and Thomas as to 27 per cent. The discretionary beneficiaries were the final beneficiaries. Clause 29 provided that the trustees could, subject to the written consent of the person with the power to appoint trustees, add or delete any final or discretionary beneficiary.
[93] Steven says the establishment of this trust shows Rex intended that the shares in Pollock & Sons would go to the boys through the Mossie Boyz Trust once they had proved themselves capable of taking over management of the company. Cheryl says management and ownership of the company were distinct and that while Rex and she intended that the boys would eventually own the company, that was only after she and Rex had both died, even if management had passed to the boys earlier.
[94] In the event, no assets were ever transferred to this trust which was replaced by a trust of the same name established on 27 November 2014.
Nathan removed as final and discretionary beneficiary from JVT
[95] By deed dated 30 July 2012, Rex, Cheryl and CLM Trustees, as trustees of the JVT, deleted Nathan as a final and discretionary beneficiary of the JVT in accordance with clause 32 of the JVT trust deed. The deed recorded that Rex had consented to this deletion.
Pollock & Sons grows; Cassandra starts at the company; Wayne made a director
[96] Pollock & Sons proved to be very successful and grew more quickly and larger than initially anticipated. Over time, more of the day to day management of the company passed to Wayne, Steven and Thomas but Rex stayed closely involved. After the first four years, Cheryl came less frequently to the office but was involved in all major decisions affecting the future of the company. Cassandra started work at the company in 2012, initially as a “girl Friday” but eventually she became Administration Manager.
[97] On 9 September 2013, Rex and Cheryl advised the three boys at a meeting that Wayne was to be made a director. Cheryl conveyed the news to the three boys and
told them that this would mean a lot more work for Wayne and that Steven and Thomas needed to respect Wayne’s senior position and needed to get up to speed before being considered for directorship.
Steven leaves Pollock & Sons
[98] Steven says he was extremely disappointed at Wayne’s being made a director while he was not. He felt victimised and ridiculed when Cheryl told him that was the way things were going to be, whether he liked it or not, and disheartened about his future with his father’s business. It is apparent, however, that Steven was having difficulties even before Wayne’s appointment.
[99] Steven acknowledged in cross examination that by early 2013 he was often late for work and by 4 pm in the afternoon would show signs of despair. He had separated from his second wife whom he had learnt had been planning on leaving him. He also admits that as 2013 progressed, he became anxious and moody and was not coping at work. He acknowledges that he had been having trouble keeping up with the paper work because he was not computer literate. Cheryl says she organised computer training to try to help Steven. Kelly Archer, who took over day to day office management from Cheryl, says Cheryl would often pick on Steven and tell him his work was not good enough.
[100] Steven’s medical records confirm that on 4 September 2013 he was feeling depressed, was not sleeping well and was feeling distressed about work and family issues. However, he declined his father’s offer to provide him a house because the house offered was not up to the same standard as the one in which he had been living with his wife and family.
[101] On 7 October 2013, Steven was admitted to Tauranga Hospital with a groin infection. Rex visited Steven in hospital to see when he could return to work. Steven was discharged on 9 October 2013 and returned to work soon afterwards but left again a few days later. Steven says his health was fragile and he was not able to perform his normal duties.
[102] While Steven was still away from work, Rex visited him at the house where Steven was staying. Steven says Rex told him Cheryl had given him an ultimatum to choose between Steven or Cheryl and had told Rex to stay away from their apartment until he had sorted out what was happening. Steven says Rex slept in his car over the period. Cheryl denies giving an ultimatum but agrees she told Rex he needed to sort out the mess because of the impact it was having on the business. She says Rex stayed on his boat one night because he was angry and had been drinking but that they met up the next day and things between them returned to normal.
[103] Steven says that during the visit the Rex asked him if he was coming back to work and he had replied that he did not think he could handle carrying on as he had been doing and had asked to be given a less demanding role. Steven says Rex did not respond to that request and told Steven needed to get back to work but first he had to apologise to Cheryl and make things right with her. Steven did not do that.
[104] Wayne was also in contact with Steven and proposed that Steven take on a lesser role such as driving cranes. Wayne says Steven’s response was that if he had to drive cranes he would leave, and that Wayne told him that in that case he should leave. Wayne says Steven then made various demands, including a demand for $20,000 which Steven said he was owed. There was talk of legal action and Steven threatened to set up in competition to Pollock & Sons. At Wayne’s urging, Rex agreed to pay the amount Steven demanded.
[105] On 29 October 2013, Steven voluntarily undertook a drug test which returned a negative result.
[106] On 30 October 2013, Steven and Rex both signed a letter prepared by Cheryl that recorded Steven’s resignation from Pollock & Sons and the terms of Steven’s final payout. On the same date, Cheryl wrote an email from Rex and herself to Mr Washer noting that Steven was not in a good space, had left Pollock & Sons and was threatening to start up in opposition. The email said Steven was drug free but could be heading in the same direction health-wise as his mother and that while they were not sure of the problem, Steven was definitely mentally unstable. The email asked
Mr Washer to protect the names Pollock Crane Hire Ltd and Pollock Cranes Ltd and to take a number of other steps.
Steven removed as beneficiary of JVT / Caribbean Trust; Pollock name protected
[107]On 11 November 2013:
(a)Rex, Cheryl and CLM Trustees, as trustees of the JVT and Caribbean Trust, signed deeds deleting Steven as a final and discretionary beneficiary of those two trusts. They also signed a deed deleting Nathan as a final and discretionary beneficiary of the Caribbean Trust.
(b)Rex, Cheryl and CLM Trustees signed a deed purporting to remove Steven as a final and discretionary beneficiary of the Mossie Boyz Trust. However, since they were not the trustees of the Mossie Boyz Trust that deed had no effect.
(c)Rex signed a memorandum to his trustees stating that he had not made any provision for Steven in his will or his trusts because Steven no longer wished to work in the company’s business “… despite my several attempts to rehabilitate him following his lifestyle choices including use of drugs.”
(d)Rex signed new memoranda of wishes in relation to the JVT and Caribbean Trust:
(i)The JVT memorandum repeated the importance of maintaining the capital of the trust fund but not to the extent of denying funds to beneficiaries when they would be of most use to them and their families. It repeated Rex’s wish that 2/748 Cameron Road go to a trust set up for Letitia and her children but proposed no other dispositions of land. It also provided that upon the deaths of Rex and Cheryl, all their shares in Pollock & Sons should go to the Mossie Boyz Trust set up for Wayne as to 60 per cent and Thomas as to 40 per cent.
(ii)The Caribbean Trust memorandum directed that Rex’s half share in the Kingsview Apartments should pass to the Monarch Butterfly Trust and, in the event Cheryl predeceased Rex, to a trust set up for Cassandra’s children. It again provided that the balance of the Trust’s assets were to be held for the benefit of Cheryl who could distribute an amount to her three children and Rex’s “three children” at her discretion, but directed that if the Trust was wound up after the death of himself and Cheryl, the assets were to be divided equally between the three Slater children.
[108] On 20 November 2014, Cooney Lees and Morgan registered Pollock Crane Hire Ltd, Pollock Crane Services Ltd and Pollock Cranes Ltd with the Companies Office having previously obtained Companies Office approval for those names. The purpose of these registrations was to prevent Steven’s use of the Pollock name in any new crane operation he might establish.
Rex diagnosed with mesothelioma, has surgery and starts chemotherapy
[109] On 3 January 2014, Rex was admitted to Tauranga Hospital after becoming unwell during a trip to Fiji over the New Year period. Tests suggested malignant mesothelioma. This diagnosis was confirmed on 15 January 2014 by Dr Richard Sullivan, a lung/thoracic specialist at Auckland City Hospital. Dr Sullivan explained to Rex that mesothelioma was a non-curable illness with a median survival rate of seven months if left untreated, but that treatment could prolong life by months and occasionally by several years. Rex agreed to the treatment proposed by Dr Sullivan.
[110] On 20 January 2014, Mr Washer wrote an email to Tim Cooney, Rex’s then accountant, advising that in the light of Rex’s health and family issues Mr Washer had discussed with Rex and Cheryl their gifting their shares in TP Group to the JVT at that time. The email said Rex and Cheryl wished to proceed, subject to any issues Mr Cooney might identify. Mr Cooney replied by letter dated 24 January 2014 in which he canvassed a number of tax and other issues. The letter did not raise any concerns about the proposed gifts.
[111] On 23 January 2013, Rex had surgery to prevent fluid building up around his lungs.
[112] On 29 January 2014, Steven sent a letter to his father letting Rex know that he would like to hear from Rex, saying he was aware there were areas in his life that had disappointed Rex and things he had said and done that had caused unnecessary grief and pain for which he was sorry. The letter recorded Steven’s home and mobile phone numbers and said Steven looked forward to hearing from Rex soon. Rex did not reply.
[113] On 15 February 2014, Rex underwent his first cycle of chemotherapy. He had a second cycle three weeks later. Dr Sullivan reported that Rex tolerated the chemotherapy “much as one would expect” apart from fatigue around days 3 and 4 and became a bit grumpy and agitated. Rex had a third cycle of chemotherapy in March 2014.
[114] Through this period, Rex would still go to Pollock & Sons most days. Despite Rex’s health situation, Pollock & Sons shifted into a new headquarters in Marsh Street, Tauranga in March 2014.
Discussion about possible removal of Letitia as beneficiary under the JVT
[115] In March 2014, Cheryl and Mr Cooney exchanged emails over the arrangements that Rex wanted to put in place. Mr Cooney raised a question about whether Letitia could contest any final distribution of JVT assets if there was not a reasonable distribution of those assets. Cheryl wrote back that it might simplify matters if Letitia was removed as a beneficiary of the JVT. It appears, however that the exchange arose out of a misunderstanding on the part of Mr Cooney who had not appreciated that the trust deed of the old JVT no longer applied and that under the new JVT there was a larger number of beneficiaries than just Rex and Letitia, even after the removal of Steven and Nathan. In any event, nothing came of the suggestion.
Rex’s cancer treatment found not to be working
[116] On 3 April 2014, Rex underwent a CT scan to assess progress with his cancer and treatment prior to the planned fourth cycle of chemotherapy. The scan revealed
that the cancer had not responded to treatment and had grown. Rex agreed to an alternative course of chemotherapy which, he was warned, could have more severe side effects.
Rex records events endured with Steven
[117] On 14 or 15 April 2014, Rex signed a document headed “Record Of Events I have endured with my son Steven Rex Pollock”.4 The document recorded that Rex had financially backed Steven’s love of motorsport by purchasing cars, sponsoring Steven, paying for costs and wages to attend events, and that Rex had also paid for overseas trips for Steven and his first wife and had twice provided funds ($15,000 and
$20,000) to assist Steven and his first wife into two homes.
[118]Among other things, the document also recorded:
(a)Steven’s affair in 1999, the disparaging remarks he is said to have made to Cheryl at the time, and his leaving Todd and Pollock the first time;
(b)Rex’s reconciliation with Steven and Steven’s return to Todd and Pollock until he left a second time after being found to be taking “amphetamines”;
(c)Claims that Steven had engaged in various inappropriate behaviours regarding the sale of a car owned by Rex, the use of a Todd and Pollock order book, and leaving unpaid debts to Todd and Pollock and others when he left Todd and Pollock the second time;
(d)The efforts Rex and Cheryl had made to assist Steven and his second wife to settle in Tauranga and Steven’s refusal to accept the house Rex offered to him after his second marriage had fallen through, and asserted that Steven had told Rex and Cheryl he was waiting for them to die so he could have his share of their money;
4 The document was dated 14 April 2014, but it may have been executed on 15 April 2014, the same day Rex and Cheryl signed the documents transferring their shares in TP Group to the JVT.
(e)The decline in Steven’s performance at work over 2013; his absences from work in October 2013 and that Steven had “suggested” he would terminate his employment if paid out $20,000;
(f)Steven persuading his son, Daniel, to also stop working at Pollock & Sons after Steven had left;
(g)The impact Steven’s third departure had had on Rex who linked the stress caused by these events directly with his diagnosis of mesothelioma;
(h)Efforts Steven was said to have made to set up in competition with Pollock & Sons; and
(i)The deterioration of the relationship between Rex and Cheryl and Steven’s children which they attributed to Steven poisoning his children against them.
[119] The document concluded that Steven’s “journey’s in life” had cost a lot to Rex who had given him financial support and many opportunities yet Steven had never been there for Rex in his hard or bad times, and that because of the heartache, stress and Steven’s selfish ways, Rex’s wishes were that Steven receive nothing from Rex’s estate or trusts “because in the past he has had plenty and got nothing to show for it.”
[120] Mr Washer says this document was prepared at his suggestion against the possibility that Steven may seek to challenge Rex’s will. As noted, Rex had already removed Steven as a beneficiary under the JVT and Caribbean Trusts in November 2013.
Rex / Cheryl gifts shares in TP Group to JVT; start of discussion about transferring Pollock & Sons shares
[121] Following valuation of the shares, on 15 April 2014 Rex and Cheryl each executed deeds gifting their shares (150,000 in each case) in TP Group to the trustees of the JVT. For accounting purposes, the deeds were dated 1 April 2014. The deeds
recorded that the parties acknowledged that the shares had a present value of $37 per share and that the total value of each parcel of shares was $5,500,000.
[122] On 17 April 2014, Mr Cooney emailed Cheryl with comments on the possible implications of selling the shares in Pollock & Sons to the JVT. He suggested a sale of 52 per cent of the shares, with the balance to follow once accounting and taxation issues have been clarified. Cheryl’s reply noted that Rex’s health has taken a negative turn and that Rex was about to start a new harsher chemotherapy drug.
[123] In a letter dated 22 April 2014 to Mr Cooney, Mr Washer confirmed that Mr Cooney was to consider the value of the shares in Pollock & Sons with a view to Rex and Cheryl transferring their respective shareholdings in that company to the JVT.
Rex’s new chemotherapy treatment begins
[124] On 24 April 2014, Rex underwent the first round of the new chemotherapy which, as Dr Sullivan explained in evidence, consisted of two rounds of infusions in a three-week cycle. A further cycle commenced three weeks later. Following a CT scan on 16 May 2014 that showed the cancer had stabilised, further cycles were administered in late May 2014, mid-June and mid-July 2014. Dr Sullivan reported at the time of the fourth cycle that Rex was troubled by accumulative fatigue and had less energy, which caused some degree of frustration. Rex had his final chemotherapy treatment in late July 2014. A further CT scan on 31 July 2014 showed the disease was stable.
[125] By this time, Rex was taking a number of medications to assist in managing pain, including Gabapentin, Diclofenac sodium, Tramadol, Paracetamol and m-Eslon (morphine). Rex had also stopped driving and relied on Cheryl to get around, although he also started using a mobility scooter on which would take himself to Pollock & Sons. Even so, Rex was well enough to go to the New Zealand Crane Conference in Queenstown in July 2014 and on holiday to Fiji in August 2014.
Rex goes big on cranes
[126] Between September and November 2014, Pollock & Sons embarked on a considerable upgrade and expansion of its fleet of cranes. Rex placed orders for six new cranes with a total combined value of over $4,200,000, and, according to the eulogy that Cheryl wrote for his funeral, gave instructions to Cheryl, the Slater children and the management team on how the crane business was to operate in the future.
[127] These purchases contrasted with the more normal pattern where Pollock & Sons acquired or replaced one crane every year. Robert Carden, a director of the company from which Rex ordered the cranes, says it was apparent to him from his discussions with Rex that Rex wanted the upgrade done while he was around as his input was necessary. The final order was placed on 30 November 2014.
Rex records funeral wishes and asks Cheryl to contact doctor
[128] On 30 September 2014, Rex signed a memorandum recording his wishes upon his passing. He asked Cheryl to organise his funeral arrangements as they had discussed and specified who were to be his pallbearers. The pallbearers included Wayne and Thomas Slater but none of the Pollock children.
Rex becomes hospice out-patient but still travels
[129] On 9 October 2014, Rex and Cheryl met with Dr Murray Hunt, Medical Director of the Waipuna Hospice. Dr Hunt’s report of that date records that Rex was increasingly symptomatic with leading symptoms of pain, low energy, fatigue and intermittent breathlessness. The report said Rex’s energy was dwindling but he was still attending his workplace for a few hours each day but noted that Cheryl had said Rex came home exhausted and she wondered if it was time for him to relinquish his work commitments. The report says that Rex asked whether he should embark on another course of chemotherapy but records that, while Rex was probably still well enough for further chemotherapy, Dr Hunt doubted the overall gains that would be obtained. Dr Hunt increased various dosages of Rex’s medication.
[130] On 23 October 2014, Rex saw Dr Sullivan whose report recorded that although a further CT scan in late September 2014 showed that Rex’s disease was predominantly stable, it was clear that Rex’s pain had become progressively worse and that Rex was on an increased dosage of morphine which was giving him a reasonable quality of life. The report noted that Rex and Dr Sullivan had discussed the possibility of further chemotherapy and records that, in Dr Sullivan’s opinion, the chances of further chemotherapy being beneficial for Rex were “extremely small”. The report says they spent most of the conversation discussing Rex’s fears, motivations and priorities, trying to get him into a head space where he could be confident about making decisions about work and life.
[131] Despite the worsening of Rex’s condition, Rex and Cheryl went to Australia in October 2014 to watch a Bledisloe Cup match, and again in early November 2014 to watch the Melbourne Cup. Rex and Cheryl also continued to spend weekends at their beach house at Whangamata.
Rex transfers shares in Pollock & Sons to Cheryl; makes last will
[132] On 12 November 2014, Cheryl sent an email to Mr Washer asking to meet the following day because “Rex has had a change of plan regarding his will, The Trust and our Power of Attorneys”. At the meeting the following day, Rex and Cheryl handed over a paper headed “13th November, 2014 – Instructions provided by Rex and Cheryl Pollock”. Beneath the heading was a line stating: “Rex and Cheryl are trying to prevent legal challenges by family members and unnecessary legal fees in the future.” The paper addressed proposed changes to Rex and Cheryl’s enduring powers of attorney, adding Cassandra to the Mossie Boyz Trust and the distribution of shares among Wayne, Thomas and Cassandra, asked questions about the JVT and suggested a change to Rex’s memorandum of wishes in relation to 2/748 Cameron Road under which, if Cheryl sold the property, Letitia would receive a deposit of $100,000 to be invested towards another suitable dwelling for Letitia and her children.
[133]Among the questions asked about the JVT were:
If anything happens to Rex, does Cheryl have full solo authority of JVT like Rex does now?
Peter Washer remains there as an advisor to Cheryl only?
[134] On 17 November 2014, Mr Washer sent an email with advice following the meeting on 13 November 2014. Included in the advice, which was copied to Mr Cooney, were the following paragraphs:
2.We confirm our previous advice that family members can contest the Will under the Family Protection Act and bring a claim for provision from a person’s estate. We confirm it is therefore helpful for assets to be held in a Trust rather than in personal names as such assets in personal names form part of an estate following death.
6.With respect to Pollock & Sons Crane Hire Limited, we note the shares are held as to 250 shares by Rex and 250 shares by Cheryl. Our suggestion is that Rex transfers his 250 shares to Cheryl now. [Mr Cooney], please advise if there are any tax consequences in completing this transfer now and if we proceed, please advise the value of the shares for the purpose of specifying the consideration in the Transfer and gift.
[135] On 18 November 2014, Cheryl called the Waipuna Hospice to report that Rex was experiencing shortness of breath in the afternoon and to ask if he could have an oxygen cylinder – for which she was referred to Rex’s general practitioner. Nonetheless, despite Rex’s increased breathing difficulties, he insisted on going to Rotorua by truck later in the month to take part in a heavy haulage drive being undertaken by Pollock & Sons.
[136] By letter dated 19 November 2014, Mr Cooney commented on the taxation implications of transferring Rex’s shares in Pollock & Sons to Cheryl. Mr Cooney noted that as at 31 March 2014, the company owed Rex and Cheryl $2,161,000 and the TP Group $5,025,000.
[137] On 27 November 2014, Rex gifted his shares in Pollock & Sons to Cheryl. The Deed of Gift recorded that the A shares had a value of $39,000 and the B shares had a value of $29,000. On the same day, Rex and Cheryl assigned to Cheryl the debt of
$2,609,000 owed to them by Pollock & Sons. As a result, neither the shares in Pollock & Sons nor the debt owned by Pollock & Sons formed part of Rex’s estate.
[138] On 27 November 2014, Rex also made his final will and final memoranda of wishes concerning the JVT and Caribbean Trust. In his will, Rex appointed Cheryl
and Mr Washer his executors and trustees, gave all his chattels and bank accounts to Cheryl, made Cheryl the appointer under clauses 13 of the JVT and Caribbean Trust deeds, and gave the remainder of estate to his trustees to transfer to the trustees of the JVT after payment of debts, duty, executorship and administration expenses.
[139] The final JVT memorandum repeated the importance of maintaining the capital of the Trust fund, but not to the extent of denying beneficiaries access to funds when of most use to them and their families. The memorandum, however, had a simplified direction in the event of Rex’s death: the trustees were to give consideration to paying income from the Trust to Cheryl and other named beneficiaries as the trustees saw fit.
[140] The memorandum no longer directed that 2/748 Cameron Road should go to a trust fund but directed that Letitia and her natural children should have full use and occupation of the property during Letitia’s lifetime and were to be responsible for rates, outgoings and maintenance of the property which was not to be sold. The memorandum added that in the event of Rex’s death and of Cheryl wishing to sell the property, a deposit of $100,000 was to be invested towards another suitable dwelling for Letitia and her natural children. Cheryl says that change was made at Rex’s direction and that Rex wanted Letitia to start being responsible and to have a mortgage.
[141] The memorandum went on to provide that upon the death of Cheryl and Rex, all the shares in Pollock & Sons were to be transferred to a newly constituted Mossie Boyz Trust that had been set up for Wayne as to 60 per cent, Thomas as to 20 per cent and Cassandra as to 20 per cent. Lastly, the memorandum directed that upon the death of Rex and Cheryl, the trustees of the JVT should consider whether the Trust should continue or be wound up and, if the Trust were wound up, directed that the assets should be divided 60 per cent for Wayne, 20 per cent for Thomas and 20 per cent for Cassandra as tenants in common or, in the event of their deaths, to their natural children to be held in nominated trusts.
[142] The final Caribbean Trust memorandum was very similar to that Rex made on 11 November 2013. The significant difference for present purposes was that, apart from the Trust’s half-share in the Kingsview apartments, the Trust assets were to be held for the benefit of Cheryl who could request the trustees to distribute assets as she
thinks fit. There was longer any reference to possible distributions to the Pollock children. As in the November 2013 memorandum, upon any winding up of the Trust, the assets were to be equally divided among Wayne, Thomas and Cassandra.
[281] With that history, I cannot conclude that Cheryl’s appointment as executor and trustee of the will or her appointment as trustee of the JVT and appointer under clause 13 of the JVT Deed were the result of undue influence by Cheryl. Those appointments were the result of estate planning decisions made by Rex over a number of years.
Those decisions predate by a considerable period the decisions to transfer the shares in TP Group by gift rather than through Rex’s estate and to transfer the shares in Pollock & Sons to Cheryl, which are the real focus of Letitia’s complaint.
[282] Nor can I conclude that those decisions of appointment resulted in a conflict of interest with respect to Cheryl’s positions as executor and trustee of Rex’s estate or unconscionable bargains or gains on the part of the JVT or Cheryl.
[283] Mr McArthur frames Letitia’s claim of unconscionable bargain on the basis that Rex was at a special disadvantage with regard to Cheryl and she unconscionably took advantage of Rex in securing the appointments. In reality, that is another way of saying Cheryl exercised undue influence over Rex in securing those appointments, which claim I have already rejected because of the history of Rex’s succession of wills and memoranda of wishes.
Are the transfers of the shares in TP Group to the JVT and of the shares in Pollock & Sons to Cheryl void as unconscionable bargains?
[284] Letitia’s claim of unconscionable bargain is made on the basis that Rex was at a special disadvantage with regard to Cheryl. Mr McArthur submits that Cheryl either actively extorted the benefit secured by the transfers of the shares or passively accepted the benefit of those transactions in circumstances when, in all good conscience, she should not have accepted such benefit.
[285] The allegation of extortion is another way of saying Cheryl exercised undue influence over Rex with regard to the share transfers, which I have already rejected. The argument of passive acceptance is based on the premise that Cheryl, in her capacity as trustee of the JVT, with respect to the TP Group shares, and in her personal capacity, with respect to the Pollock & Sons shares, received benefits that she would not otherwise have received and that her receipt was to Letitia’s detriment. The evidence does not support those allegations.
[286] It is clear that it was Rex’s long-standing intention that the shares in TP Group would go to the JVT. If the shares had not been transferred by gift before Rex died, they would have transferred by way of his estate upon his death. Cheryl as trustee of
the JVT received exactly what Rex had intended for a number of years. It cannot be said therefore, that she passively accepted a benefit that she would not otherwise have received or that Cheryl’s receipt of those shares was to Letitia’s detriment. As a beneficiary of the JVT, Letitia’s contingent interest in the shares is the same either way.
[287] As to the shares in Pollock & Sons, it is apparent from Rex’s memorandum of wishes of February 2012 that Rex intended his shares to go eventually to the Mossie Boyz Trust where they would be held on trust, first for Wayne, Steven, and Thomas and then for Wayne, Thomas and Cassandra. In making those directions, Rex was making clear his wish that the shares should go to those family members who were working at Pollock & Sons. Whether Steven is right that the shares were to go to the Mossie Boyz Trust after the boys took over the management of Pollock & Sons and before Rex and Cheryl had died, or whether Cheryl is right that the shares would go to the Mossie Boyz Trust only after the deaths of both Rex and Cheryl, under either scenario Letitia would not have been a recipient of those shares. Accordingly, the transfer of the shares to Cheryl cannot be said to have been to Letitia’s detriment.
Were the beneficiaries of the JVT and Cheryl unjustly enriched?
[288] Steven’s claim of unjust enrichment is premised on non-performance of the promise that Steven would inherit the business from Rex. I have already rejected that argument in my discussion of Steven’s claim under the Law Reform (Testamentary Promises) Act. In his submissions, however, Mr Fraundorfer looked past the promise and focused on whether Cheryl and the other beneficiaries of the JVT had been unjustly enriched by the transfer of the shares in the TP Group to the JVT and from the transfer of the shares in Pollock & Sons to Cheryl.
[289] Mr Fraundorfer acknowledges that the doctrine of unjust enrichment is broad and its boundaries are ill-defined but submits that:
… at its core, unjust enrichment arises in circumstances where a defendant has been enriched by the receipt of a benefit that is gained at a plaintiff’s expense in circumstances which make retaining the benefit unconscionable.
[290] It is not necessary for the purposes of this decision to enter into the debate over the boundaries of unjust enrichment or even whether such a cause of action exists, although I note that Palmer J in a recent decision has drawn a distinction between unjust enrichment and unconscionability and said that the former focuses more on defects in a plaintiff’s consent to a transaction, entitling restitution, rather than on the quality of the defendant’s conscience or conduct in retaining resulting enrichment.20 I am satisfied that Steven’s claim under this heading cannot succeed even on the basis of the law as argued by Mr Fraundofer.
[291] Mr Fraundorfer says Steven’s claim is based on the enrichment that the defendants enjoyed as a result of Steven’s underpaid labour at Todd and Pollock and Pollock & Sons. I have already discussed this aspect of Steven’s case in relation to his claim under the Law Reform (Testamentary Promises) Act. For the reasons set out in my discussion of that claim, I do not accept that Steven enriched Todd and Pollock and thus the TP Group and therefore the JVT as the transferee of Rex’s shares in TP Group. I also do not accept that Steven enriched Pollock & Sons in a way that would sustain a claim for unjust enrichment. The evidence does not support the claim.
Did the trustees of the JVT breach fiduciary duties owed to Steven and did CLM Trustees breach their duties as professional trustees, and did Cheryl and CLM Trustees breach duties they owed under ss 13F and 13C respectively of the Trustee Act, when Steven was removed as a beneficiary under the JVT?
[292] Steven’s amended statement of claim dated 29 March 2019 distinguishes between the alleged breach of fiduciary duties and the alleged breach of professional obligations by CLM Trustees. Mr Fraundorfer’s submissions, however, address both questions under the heading breach of fiduciary duty.
[293] The first question under this issue is whether the trustees owed a fiduciary duty to Steven when they removed him as a discretionary and final beneficiary. Mr Fraundorfer says that this is a developing area of law with the Courts becoming “more progressive”. He says that there is no clear test for whether to recognise such a duty and that the inquiry is simply whether equity recognises a party as entitled to
20 Enright v Enright [2019] NZHC 1124 at [140].
rely on the other party not to act in a way contrary to that first party’s interests. In support of that proposition he cites the Court of Appeal’s decision in Jay v Jay.21
[294] Jay v Jay involved abuse of an 11-year old child by a close family member 20 years older than the child. The Court of Appeal found that no fiduciary relationship arose in the circumstances of that case. However, referring to the Supreme Court’s decision in Chirnside v Fay,22 the Court of Appeal reaffirmed that the key feature in the imposition of a fiduciary duty is the entitlement of one party to place trust and confidence in the other, and that the inquiry is whether equity recognises a party as entitled to rely on the other party not to act in a way contrary to that first party’s interests. The Court of Appeal cautioned, however, that the imposition of fiduciary obligations by equity in novel situations should not lightly be assumed.23
[295] The closest authority on point to which counsel referred was the decision of Dobson J in McLaren v McLaren where a son, who had been given the power of appointment under a trust established by his parents for the purposes of asset protection in the context of a mussel farming operation, had used the powers of appointer under the trust to remove his parents as beneficiaries under the trust.24 In considering whether the son had fiduciary responsibilities when exercising the powers of appointer, Dobson J reviewed the authorities, including Clayton v Clayton,25 Chirnside v Fay and Jay v Jay. He also referred to Penson v Forbes,26 a decision to which Mr Morgan and Mr Scott refer. In that case, Associate Judge Osborne said, in the context of a successful application to strike out a proceeding which alleged a failure by trustees to act even-handedly between beneficiaries, that to impose on trustees a concept of even-handedness when the power they have been given, if exercised, will inherently discriminate against those who would cease to be beneficiaries, would limit the scope of that power in a manner not intended by the settlor.27
21 Jay v Jay [2014] NZCZ 445, [2015] NZAR 861.
22 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433.
23 Jay v Jay, above n 21 at [65].
24 McLaren v McLaren [2017] NZHC 161.
25 Clayton v Clayton (Vaughan Road Property Trust) [2016] NZSC 29, [2016] 1 NZLR 551.
26 Penson v Forbes [2014] NZHC 2160.
27 McLaren v McLaren, above n 24 at [39].
[296] Dobson J was not persuaded that the rationale for the Court of Appeal and Supreme Court decisions in Clayton, which involved a claim that Mr Clayton’s interests in a particular trust brought the trust’s assets within the definitions of “property” and thus “relationship property” for the purposes of the Property (Relationships) Act 1976, was directly analogous to the assessment whether the son owed fiduciary obligations when exercising the power of appointer. However, Dobson J observed that the Supreme Court in Clayton had held that Mr Clayton’s powers under the trust deed were so extensive that he was not constrained by any fiduciary duty. He said that the essence of the Supreme Court’s reasoning was that, in the context of a relationship property dispute, the appointor could exercise a power of appointment in a personal sense, rather than as a component of duties as a trustee, and was not fixed with fiduciary obligations in respect of that power. Dobson J also observed that it was relevant to the reasoning in the Clayton judgments that the appointer in Clayton was also the settlor – which was not the situation before him.28
[297]Dobson J then stated that the decision in Clayton:29
… leaves open the question whether respect for the unconstrained nature of a power vested in an appointor should also apply where there is no meaningful identity of interests between the settlor and the appointor. Further, that starting position does not exclude the prospect of factual circumstances arising in a particular relationship where circumstances of vulnerability of a beneficiary and the nature of the reliance placed on the appointor may justify the imposition of fiduciary obligations of an appropriate extent.
[298] Dobson J decided that the circumstances of the trust in the case before him, where the parents had provided a substantial portion of the assets transferred to the trust and had expected to have a say in the administration of the trust and were vulnerable to removal as beneficiaries by the son, gave rise to a relationship of trust and confidence in the son’s position as appointor and that certain basic fiduciary obligations could be imputed to the son in the exercise of the appointor’s power to remove his parents as discretionary beneficiaries.30
[299] Mr Fraundorfer’s submits that the facts of the present case are sufficiently analogous to those in McLaren as to recognise an equivalent fiduciary duty. I do not
28 At [32], [36]-[38].
29 At [38].
30 At [56] - [63].
agree. While both involve the use of a power of appointment to remove beneficiaries, there are significant differences between the two cases, particularly with respect to the matters Dobson J identified as relevant to his decision to recognise a fiduciary duty in McLaren. First, Rex was the settlor of the new JVT as well as the appointer and one of the trustees. His situation, therefore, is more analogous to that of Mr Clayton whom the Supreme Court recognised was unconstrained by fiduciary responsibilities in exercising his powers under the trust deed in that case. Secondly, at the time of Steven’s removal, the principal assets transferred to the JVT were assets built up by Rex and then Rex and Cheryl together and transferred to the first JVT. There is no evidence that Steven contributed at all to the assets of the JVT which, at that time, did not include the shares in TP Group and thus the value gained from the sale of Todd and Pollock. Thirdly, Steven could never have had an expectation to have a say in the administration of the JVT. The JVT was a vehicle established by Rex, funded by Rex and, in conjunction with the other trustees, operated by Rex. I do not accept, therefore, that there is any close analogy between the present case and McLaren, and I decline to hold that the trustees owed fiduciary duties to Steven when exercising the power to remove him as a beneficiary.
[300] Even if I had found that the trustees had limited fiduciary responsibilities of the kind found by Dobson J in McLaren, I do not consider that the trustees breached those duties. Dobson J held that the son in that case was obliged to act responsibly, with an appropriate level of diligence and prudence, to avoid taking into account irrelevant, improper or irrational factors, and not to act in bad faith or for an improper motive. He held on the facts of that case that the son’s actions in removing his parents had been disproportionate and therefore irrational.31
[301] I do not accept the removal of Steven was similarly disproportionate or irrational. Mr Fraundorfer says Steven made a substantial contribution to the JVT’s assets. There is no evidence to support that submission. As noted above, at the time of Steven’s removal the shares in TP Group had not been transferred to the JVT. Even if Steven’s claim to have contributed to the wealth of Todd and Pollock was correct, which I have already held not to have been established, that wealth was not in the JVT
31 At [68].
at the time of Steven’s removal. It appears from the Financial Reports for the JVT to the year ending 31 March 2007 that the assets of the JVT at that time were principally commercial and residential properties. There is no evidence Steven made any contribution to those assets.
[302] Nor do I accept that the reasons for Steven’s removal were irrational or disproportionate in the sense found by Dobson J in McLaren. As discussed already, I consider that the motivating factors in Rex’s decision to remove Steven were Steven letting Rex down for a third time, turning away from Rex’s business for a third time and the threat to use the Pollock name in competition with Pollock & Sons. Whether those considerations justified Rex’s decision, it cannot be said that the decision was disproportionate to the point of irrationality, that is, of being perverse, arbitrary or capricious.
[303] Mr Fraundorfer refers to other considerations that he says warrant the recognition of a fiduciary duty, including that Mr Washer was acting in a conflict of interest, that Mr Washer had made an error in preparing a deed to remove Steven from the Mossie Boyz Trust when Steven was a trustee of that Trust, that Mr Washer’s roles as trustee and legal adviser were blurred, that Mr Washer was not aware of Steven’s mental health issues and that Steven’s removal as a final beneficiary from the JVT would also mean the removal of Steven’s children as beneficiaries.
[304] Most of the issues raised about Mr Washer’s performance are without substance. The claimed conflict of interest in relation to a property transaction that Steven did not pursue and which had no bearing on the issues relating to Rex’s will and trusts, was minor and technical if it existed at all. The error over the Mossie Boyz Trust was a mistake that had no legal consequences since the Trust had no assets. Mr Washer did not have a duty to enquire about Steven’s mental health if he had no reason to suspect it was an issue.
[305] As to the blurring of the roles, I agree that there is an issue about whether a legal adviser who carries out instructions for the other trustees as clients can be said to be truly independent, particularly when, as in Mr Washer’s case, they have been the clients’ legal adviser for many years. It was apparent from Mr Washer’s evidence that
he saw his role as being principally to ensure that Rex and Cheryl were aware of the formal legal consequences of their proposed actions rather than as providing a separate and independent view on the merits of the proposals. It is also clear from the questions posed in the paper Rex and Cheryl handed to Mr Washer on 13 November 2013 that they saw Mr Washer’s role primarily as an adviser who took their instructions rather than an independent trustee with a responsibility to form his own view. It is for these reasons that I do not ascribe particular weight to the involvement of an independent trustee in the various transactions under discussion.
[306] However, I do not accept that the fact that Mr Washer may have approached the decision from the perspective of Rex’s lawyer invalidates the decisions made. Nor do I accept that that means the trustees were all fixed with fiduciary obligations of the kind found in McLaren or, if such obligations were to arise, would have amounted to a breach of the limited duties identified by Dobson J in McLaren.
Does Steven’s removal as a final beneficiary mean his children are not discretionary beneficiaries?
[307] Whether removal of Steven as a final beneficiary of the JVT meant that Steven’s children were removed as discretionary trustees of the JVT generated some debate among counsel although it is not raised directly on the pleadings. The issue does not require a decision by the Court except to the extent that it bears on the question of whether the trustees owed and breached a fiduciary duty to Steven when they removed him as a beneficiary. I have already held that the trustees did not owe such a duty to Steven.
[308] Mr Fraundorfer says that as a matter of simple construction, because clause 1(g)(ii) of the JVT Deed defines “Discretionary Beneficiaries” as meaning “any child or children or remoter issue of the Final Beneficiaries”, it follows that Steven’s children ceased being discretionary beneficiaries when Steven was removed as a final beneficiary. He also says that if the trustees had not intended the removal of Steven also to mean the removal of his children, they should have made that clear at the time in the deed of removal. He also notes that in 2015, in response to questions from Steven’s solicitors about the position of Steven’s children as beneficiaries under Rex’s
trusts, Mr Washer did not assert that Steven’s children were beneficiaries of the JVT or the Caribbean Trust.
[309] Mr Morgan and Mr Scott, as well as Mr Washer from the witness box, say that “any child or remoter issue” of a final beneficiary are a class of beneficiary that clause
32.1 of the Trust Deed does not permit the deletion of a class of beneficiary. They also say that the removal of Steven as a final beneficiary on 11 November 2013 was specific to him and limited only to him. Therefore, the children of Steven who were alive on 11 November 2013 were already discretionary beneficiaries and remain discretionary beneficiaries.
[310] The issue is not straightforward. It seems evident that insufficient thought was given to question in November 2013. I agree with Mr Fraundorfer that the trustees should have made their intentions clear in the deed of removal of 13 November 2014. Be that as it may, I conclude that if the trustees, through their counsel, say that Steven’s children have not been removed as discretionary beneficiaries, then they are obliged to treat them as discretionary beneficiaries and give due regard to their interests when considering distributions from the trust and to any requests for distributions that Steven’s children may make and I order accordingly.
Did Cheryl and CLM Trustees breach duties owed under ss 13F and 13C of the Trustee Act?
[311] Steven’s claims that Cheryl and CLM Trustees breached duties under ss 13C and 13F of the Trustee Act do not bear scrutiny. Section 13F does not impose any separate duty on trustees but provides that any rules and principles of law that impose a duty on a trustee exercising a power of investment remain in force. Section 13C is relevant only to situations where a professional trustee is exercising a power of investment. It requires a professional trustee, when exercising a power of investment, to exercise the care, diligence and skill that a prudent professional trustee would exercise in managing the affairs of others. Cheryl is not a professional trustee and neither she nor CLM Trustees were exercising powers of investment when they removed Steven as a beneficiary of the JVT.
[312] My conclusion, therefore, is that the trustees of the JVT did not owe Steven a fiduciary duty when they removed him as a final and discretionary beneficiary under the JVT and, even if they were a limited duty, they did not breach that duty. Nor did they breach any duties owed under ss 13F and 13C of the Trustee Act.
Should the trustees of the JVT be removed and replaced with an independent trustee?
[313] Letitia seeks the removal of both Cheryl and CLM Trustees as trustees of the JVT and their replacement with an independent trustee. Cheryl’s removal, in particular, was the principal focus of Mr McArthur’s closing submissions. Steven had also sought Cheryl’s removal but only as a remedy for the alleged breach of fiduciary duty by the trustees over Steven’s removal as a beneficiary, which claim I have not upheld.
[314] For Letitia, Mr McArthur says Cheryl will not approach her duties as trustee in a truly honest fashion and would be unlikely to give Letitia truly fair consideration in relation to a distribution and that it is more likely that she would favour her own children. Mr McArthur refers to the likely impact on Cheryl of the litigation commenced by Pauline and continued by Steven and Nathan and the separate proceedings then brought Nathan and Letitia and then Steven. He says these proceedings will have been at great financial cost to Cheryl and have involved allegations that will have exacerbated the existing hostility between Cheryl and Letitia. Mr McArthur also points to the sale of the property at 2/748 Cameron Road within months of Rex’s death and without consultation with Letitia, which Mr McArthur submits shows that Cheryl has acted wilfully against Letitia’s interests and is likely do so in relation to any requests for a distribution from the JVT.
[315] With respect to the position of the trustees generally, Mr McArthur notes Letitia’s request for a distribution and the response from Cooney Lees Morgan which Mr McArthur submits was carefully crafted to cover the JVT from attack while not honestly considering Letitia’s request. He also points to Rex’s final memorandum of wishes to the JVT of 27 November 2014 and the significant change made in this document, as compared with its predecessors, with regard to provision for Letitia.
[316] For Cheryl, Mr Morgan notes that Letitia’s allegations regarding the sale of the Cameron Road property are not in her statement of claim and that Letitia barely gave evidence on this topic. He submits that the rest of Letitia’s evidence about her relationship with Cheryl is insufficient by a wide margin to warrant Cheryl’s removal as a trustee. He says Letitia’s complaints about Cheryl’s behaviour in the 1990s are nothing more than historical in the difficult relationship between step-mother and step- daughter, when Letitia was a teenager whose behaviour frustrated her father. He says the other allegations of an unhappy relationship between Cheryl and Letitia, such as the claims that Cheryl did not like Rex seeing Letitia and prevented her from seeing Rex during Rex’s last year of life, are not borne out by the facts. He also submits that the Court should be very reluctant to remove Cheryl given that the bulk of the JVT’s assets had been built by Rex and Cheryl in their 25-year relationship and it was Rex’s wish that she should have the benefit and privilege of administering the Trust, particularly where there is an independent trustee.
[317]Section 51(1) of the Trustee Act provides:
The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
[318] As the Court of Appeal said in Kain v Hutton, the inherent jurisdiction is derived from the Court’s general supervisory powers in equity relating to the supervision of trusts for the welfare of beneficiaries.32 In a subsequent decision in the same proceeding, the Court of Appeal said that decisions to replace trustees would be based on a large and varied number of considerations which must, when combined, show that it is detrimental to the welfare of the beneficiaries for the trustee to continue in office, that merely showing breaches of trust would not necessarily be sufficient to justify the removal, and that to justify such removal, any incompatibility between trustee and beneficiary would have to be at such a level that the proper administration of the trust was seriously affected and it had become difficult for a trustee to act in the interests of the beneficiary.33 That decision, as well as other authorities such as the
32 Kain v Hutton [2002] BCL 813 (CA) at [18].
33 Kain v Hutton [2007] NZCA 199, [2007] 3 NZLR 349 at [266]-[267].
Privy Council’s decision Letterstedt v Broers,34 show that in assessing whether a trustee’s conduct warrants his or her removal, the Court must consider the effect of the trustee’s conduct on the execution of his or her responsibilities as trustee, rather than on the conduct of the trustee.
[319] As already discussed, the relationship between Cheryl and Letitia has never been close or easy. However, all of that goes to the nature of the personal relationship between Letitia and Cheryl. It does not, of itself, go to Cheryl’s conduct in the execution of her responsibilities as trustee of the JVT. The Court was informed that, to the date of the hearing, the trustees of the JVT have not made distributions to any of the beneficiaries. It appears, therefore, that with one exception, the trustees have not had occasion to consider their responsibilities towards Letitia.
[320] The exception was Letitia’s request for a disposition in 2017. In response to that request Cooney Lees Morgan, on behalf of the trustees, wrote a letter that in breadth and detail of the responses demanded of Letitia, seems to have been designed to discourage Letitia from pursing her request – which was its effect. Because that letter was written in the context of unresolved litigation, I do not give it significant weight. I note, however, that outside the litigation context such a deliberately difficult response to a legitimate request from a beneficiary might invite criticism.
[321] Mr Fraundorfer sought to make something of the fact that Cheryl and CLM Trustees, as trustees of the Caribbean Trust, gave little attention to the interests of Steven’s children as beneficiaries under that trust when deciding to wind up that trust and distribute its assets to Cheryl’s Monarch Butterfly Trust. The same point might be made even more strongly with respect to Letitia and her children. However, the trust’s only significant assets were Rex’s half shares in the Kingsview apartments, one of which is Cheryl’s home. The other half shares in the apartments are held by the Monarch Butterfly Trust. The decisions to transfer the other half shares in the apartments to the same trust and wind up the Caribbean Trust are understandable and are also consistent with Rex’s memoranda of Wishes of November 2013 and
34 Letterstedt v Broers (1884) 9 AC 371.
November 2014. They provide no guidance on how Cheryl is likely to discharge her duties as trustee under the JVT.
[322] When there has been no real engagement between trustees and beneficiaries in those capacities, it is difficult to reach a conclusion that a trustee’s conduct as trustee warrants the trustee’s removal, even if the trustee’s relationship with a beneficiary is uneasy and distant. I recognise that Letitia’s circumstances are not dissimilar to the plaintiffs in Re Hardie, where Harrison J recognised the unsatisfactory situation of brothers who were beneficiaries under a trust established by their father where two of the brothers were dependent, as beneficiaries, were dependent on the good will of a third brother who was both beneficiary and trustee.35 But Harrison J was able to remedy the difficulty in that case without considering the removal of the trustee. The remedy used by Harrison J, which was an order that provision be made to the claimant brothers under the Family Protection Act, is not available to me because of the way Rex disposed of his assets. Nonetheless, I do not consider it appropriate at this stage to try to remedy Letitia’s prospective concerns about how Cheryl will discharge her responsibilities as trustee by requiring Cheryl’s removal as trustee.
[323] Another difficulty in the context of this case is that there is a close connection between the JVT and the ongoing operation of Pollock & Sons of which Cheryl is a director and the sole shareholder. The JVT now holds the shares of TP Group which has been, and, as far the Court is aware, remains the major funder of Pollock & Sons.36 It is also plain from Rex’s decisions and memoranda of wishes that he saw the close relationship between the JVT and Pollock & Sons continuing, at least as long as he and Cheryl were alive.
[324] In these circumstances, it would be difficult, as well as at odds with Rex’s clear intent, to replace Cheryl and CLM Trustees with an independent trustee who would have little knowledge of the business to which the JVT has been and will remain closely connected. For these reasons, I do not consider it appropriate at this stage to remove Cheryl or CLM Trustees and replace them with an independent trustee.
35 Re Hardie, above n11 at [37].
36 The financial statements of TP Group for the year ending 31 March 2017, which are the most recent accounts in evidence, show an advance to Pollock & Sons of $5,500,000.
[325] This conclusion does not mean Cheryl and CLM Trustees have an unfettered discretion in deciding how distributions from the JVT are to be made. It is not for the Court to direct the trustees of the JVT how they determine any future application by Letitia for a distribution from the trust. However, it is appropriate to note that provision of $100,000 as a deposit towards a purchase of a property may not be regarded as a sufficient response to such an application, having regard to:
(a)The clear guidance in successive memoranda of wishes made by Rex that the JVT was set up for himself and for his children, and then, from the resettlement of the new JVT, for Cheryl and her children;
(b)The fact that Letitia, as one of Rex’s children from his first marriage, has been a final and discretionary beneficiary under the JVT from the establishment of the first JVT;
(c)The clear statements in successive memoranda of wishes made by Rex, including the last memorandum made on 27 November 2014, that while it was important that the capital of the trust fund be maintained, that should not be to the extent of denying beneficiaries access to funds when of most use to them and their families;
(d)The finding of this Court that Letitia did not receive the financial and emotional support from her father that she had a right to expect;
(e)The position taken by Cheryl’s counsel and counsel for CLM Trustees throughout the hearing that Rex made provision for Letitia by way of his trusts rather than his will.
[326] If Letitia considers she is not given appropriate consideration in any application for a distribution, she has options under the Trustee Act, including ss 51 and 67. From 30 January 2021 she will also have remedies available under the Trusts Act 2019.
Consequence of findings and general observation
[327] Because Letitia and Steven have not succeeded in their efforts to set aside the transfers of Rex’s shares in TP Group to the JVT or the transfer of the shares in Pollock & Sons to Cheryl, there are no funds in Rex’s estate from which I may make awards under the Family Protection Act 1955.
[328] Underlying the claims brought by Letitia and Steven based on undue influence, constructive trust, unconscionable bargain and unjust enrichment is the complaint that the transfers of the shares in TP Group to the JVT and the shares in Pollock & Sons to Cheryl by gift rather than through Rex’s estate have prevented the value of those shares being available to satisfy their claims under Family Protection Act. Their frustration and disappointment are understandable and the fact that Rex chose this mechanism to transfer the shares in order to frustrate such a claim by his daughter in particular, to whom he did not pay significant regard during his life, may reflect poorly on the reputation of a man who was well-known in the Tauranga community.
[329] However, that choice was not unlawful and does not mean that Cheryl as trustee and Cheryl personally are recipients of benefits that the JVT and Cheryl should not otherwise have received. The JVT received what it was always intended it should receive – the value of Rex’s accumulated wealth as contained in the shares of TP Group. Cheryl received the shares in Pollock & Sons as Rex intended on the understanding they would pass on to the next generation by way of the Mossie Boyz Trust.
[330] Because the transfers were made by gift rather than through Rex’s estate, the Court is not able to reduce the value of the transfers by ordering awards to Letitia and Steven under the Family Protection Act. That may seem unjust. However, it would be pushing the boundaries of trust law as it has developed in New Zealand to hold that transfers of assets to a trust can be set aside to enable satisfaction of claims under the Family Protection Act and that was not the basis on which the claims for Letitia and Steven were advanced.
Result
[331]For all the above reasons:
(a)I dismiss Letitia Pollock’s claims under the Trustee Act 1956 and the Administration Act 1969;
(b)I dismiss Steven Pollock’s claims under Law Reform (Testamentary Promises) Act 1949, the Administration Act 1969 and Part 18 of the High Court Rules 2016;
(c)I find that Letitia Pollock and Steven Pollock have made out their claims for provision to be made for them under the Family Protection Act 1955 from the estate of Rex Pollock but I am unable to make any awards in their favour because there are no assets in the estate.
Costs
[332] The respondents are entitled to costs against Steven Pollock on a 2B basis. Because Letitia Pollock is legally aided, in accordance with s 45(2) of the Legal Services Act 2011, the Court would have to be satisfied that there are exceptional circumstances before ordering costs against her.
[333] If the parties are unable to agree costs, the respondents may apply by memoranda of no more than five pages filed and served by 30 April 2020. The plaintiffs may reply by memoranda of no more than five pages filed and served by 28 May 2020.
[334] These timeframes are deliberately generous to take account of the disruptions likely to be encountered as a result of the COVID-19 emergency. Because of the uncertain length of that emergency, the parties have leave to apply if they require further time.
G J van Bohemen J
Postscript
[335] I regret the length of time it has taken to produce this judgment and apologise to the parties and their counsel for the delay.
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