Public Trust v Lu

[2018] NZHC 130

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2017-425-000080 [2018] NZHC 130

IN THE MATTER

AND

of the Declaratory Judgments Act 2008

IN THE MATTER

of a certain Trust known as the
Ozprey Trust

BETWEEN

THE PUBLIC TRUST Plaintiff

AND

FIONA LU Defendant

Hearing:	9 February 2018
Appearances:	RJR Eagles for Applicant JNP Young for Respondent
Judgment:	14 February 2018

JUDGMENT OF LANG J [by formal proof]

This judgment was delivered by me on14 February 2018 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

THE PUBLIC TRUST v LU [2018] NZHC 130 [14 February 2018]

Introduction

[1]      This proceeding concerns the Ozprey Trust, established by deed by John

Robert Beckenridge (John) on 1 July 2013.

[2]      The respondent, Fiona Lu (Fiona), met John overseas in 2006 and came to New Zealand to live with him in December 2007.  They married later the same month but the marriage encountered difficulties and they separated in or about August 2013. Fiona had a son, Mike (Zhao) Beckenridge, who was four years old when Fiona came to New Zealand. Fiona continued to care for Mike on a day-to-day basis after she and John separated.

[3]      In March 2015, John uplifted Mike from school. He did so in contravention of parenting orders made in the Family Court.   Despite a widespread police search, neither John nor Mike has since been located.  They are presumed to have died in a motor vehicle that was found in the sea off the South Otago coast shortly after John and Mike disappeared,  but there is no  conclusive evidence  to  confirm  that this occurred.

The Ozprey Trust

[4]      The Ozprey Trust is a discretionary trust. John settled the Trust property upon himself and Ulf Roger Henricson as trustees.   The trust deed named John as the primary beneficiary of the trust whilst Mike was named as both a discretionary beneficiary and the final beneficiary.  Fiona is also a discretionary beneficiary in her capacity as John’s spouse.

[5]      On 6 July 2015 the Public Trust was appointed to represent John in his capacity as trustee in other proceedings Fiona has issued in this Court under CIV 2015 425 55. The Public Trust issued the present proceeding after it subsequently obtained two documents relating to the affairs of the trust.

[6]      The first is a deed dated 26 February 2015 that was executed solely by John. The operative clause of this document purports to exclude Mike as a beneficiary of the trust pursuant to the (trustees’) powers under clause 12 of the trust deed.  Clause 12

empowers the trustees at any time, by deed, to declare that a person is excluded as a beneficiary for such period as the trustees may decide. This deed is the subject of the present proceeding.

[7]      The Public Trust also obtained a second deed dated 26 February 2015, again executed only by John.  Under this deed John purported to appoint three persons as new beneficiaries of the trust using an express power vested in him under clause 4.1j of the deed of trust. This empowered John to add other beneficiaries by deed or by his will. The Public Trust recognises the effectiveness of this deed and seeks no orders in relation to it.

This proceeding

[8]      The Public Trust seeks a declaration as to the legal status and effect of the deed dated 26 February 2015 under which John purported to exclude Mike as a beneficiary. It complied with the Court’s direction that Fiona and Mr Henricson be served with the proceeding.   Fiona has filed a statement of defence in which she admits all the allegations contained in the statement of claim.  Mr Henricson has taken no steps.

[9]       When the proceeding was called on 9 February 2018 before Associate Judge Osborne, his Honour initially advised counsel that he would determine the application on the papers.  The Associate Judge subsequently concluded that orders could not be made by consent in the absence of consent by Mr Henricson.  He therefore referred the proceeding to me so that it could be determined by way of formal proof based on the evidence filed to date.

Decision

[10]     It seems clear that the deed purporting to exclude Mike as a beneficiary was drafted and signed on an erroneous basis.  It refers to John executing the document as settlor pursuant to the power contained in clause 14 of the trust deed.  That power, however, is vested not in the settlor but in the trustees. Clause 12.1 is in the following terms:

12.1     The Trustees may at any time, by deed, declare:

a.that a person is excluded as a Beneficiary for a period decided by the Trustees, but

b.        without prejudice to the accrued beneficial settlement (if any)

of that person at the date of the deed.

As from the date of the deed the rights of the person will be modified accordingly.

[11]     Furthermore, Clause 11.1 provides:

11.1When a discretion is conferred on the Trustees by this deed, the discretion must be exercised or ratified by resolution recorded in the Trustees’ minutes and signed by all of the Trustees.

[12]     Clauses 11.1 and 12.1 reflect the long established common law principle that trustees must make decisions affecting a trust unanimously.  In the present case only one trustee executed the deed, and there is no evidence of any resolution of trustees as required by Clause 11.1. The deed therefore breaches the requirements of both Clauses

11.1 and 12.1.  In this respect the position is clearly different to that relating to the other deed under which John added three new beneficiaries.  That deed was valid because John had the express power under clause 4.1j to add new beneficiaries by deed.

[13]     The present trustees take the view that the deed is invalid and of no effect because of the breaches identified above.  The material facts are admitted by Fiona and her counsel has filed a memorandum confirming that Fiona supports the position taken by the trustees.

[14]     I consider the position to be clear. The breaches mean that the deed purporting to exclude Mike as a beneficiary is invalid and of no legal effect. I therefore make the following declarations:

(a)       The deed dated 26 February 2015 is legally ineffective;

(b)Mike remains a discretionary beneficiary and the final beneficiary of the Ozprey Trust;

(c)       The Public Trust is entitled to recover from the assets of Ozprey Trust its reasonable solicitor/client costs and disbursements incurred in this

proceeding.

Lang J

Solicitors:
Eagles Eagles & Redpath, Invercargill
Preston Russell Law, Invercargill