Re Darlow
[2021] NZHC 2184
•24 August 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-603
[2021] NZHC 2184
UNDER Sections 124 and 133 of theTrusts Act 2019 and Part 18 of the High Court Rules 2016 IN THE MATTER OF
The Hugh Green Trust and the Hugh Green Property Trust
BETWEEN
CHRISTOPHER ROBERT DARLOW, DAVID HARDING RANDELL, JOHN
PATRICK GREEN, FRANCES KATHLEEN GREEN AND CATHERINE MAREE
GREEN as trustees of the Hugh Green Trust First PlaintiffsAND
CHRISTOPHER ROBERT DARLOW, DAVID HARDING RANDELL, JOHN
PATRICK GREEN, FRANCES KATHLEEN GREEN AND CATHERINE MAREE
GREEN as trustees of the Hugh Green Property Trust
Second Plaintiffs
Hearing: 12 July 2021 Appearances:
M D Arthur and T F Cleary for the Plaintiffs D J Chisholm QC for Moira Ellen Green
M D O’Brien QC, T P Mullins and A W McDonald for grandchildren via John Green and via Gerard Green
A H Waalkens QC for Eamonn Paul Green, (on instructions from P McKendrick and N J Cahill for Frances Kathleen Green and grandchildren via Frances Green)
S J Mills QC, T P Mullins and A W McDonald for the unknown, unborn and minor beneficiaries
R B Lange and J D Ryan for John Patrick Green A J Bell for Gerard Joseph Buckley Green
Judgment:
24 August 2021
Reissued:
9 September 2021
RE HUGH GREEN TRUSTS [2021] NZHC 2184 [24 August 2021]
JUDGMENT OF MUIR J
This judgment was delivered by me on Tuesday 24 August 2021 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:………………………….
This judgment was recalled and reissued on 9 September 2021 ( see Addendum)
Counsel/Solicitors:
Chapman Tripp, Auckland
D J Chisholm QC, Barrister, Auckland M D O’Brien QC, Barrister, Auckland Lee Salmon Long, Auckland
A H Waalkens QC, Auckland Glaister Ennor, Auckland
S J Mills QC, Auckland Simpson Grierson, Auckland McVeagh Fleming, Albany
Claymore Partners, Auckland
Introduction
[1] The spirit of philanthropy is no better demonstrated in New Zealand than by the Green family. From humble Irish immigrant beginnings, the late Hugh Green and his surviving wife Moira built a property development and investment empire of very substantial value, while remaining dedicated to supporting the community in which they lived on a “hand up not a hand out” basis.1 They instilled in their children and grandchildren the same personal and civic values. Their charitable vehicle, the Hugh Green Foundation (“the Foundation”), has made bequests in the tens of millions of dollars. Their daughter Maryanne has likewise established a charitable foundation, the Hugo Foundation, on which an additional $75 million was settled as part of a family agreement in 2017.
[2] Now Moira, the children (excluding Maryanne) and grandchildren (excluding Maryanne’s daughter Alice)2 join in an application to the Court which is likely to see some hundreds of millions of dollars which would otherwise devolve on family members pass to the Foundation. In so doing the family wishes to ensure that, for generations to come, the philanthropic legacy of Hugh and Moira can be generously maintained.
[3]This Court has the pleasure of giving its sanction to these arrangements.
[4] I record at the outset my gratitude to all counsel, and particularly to counsel for the trustees Mr Arthur and Mr Cleary and counsel for the unknown, unborn and minor beneficiaries Mr Mills QC, Mr Mullins and Mr McDonald for their very comprehensive written and oral submissions which have greatly assisted in the preparation of this judgment.
What is sought
[5] The trustees of the Hugh Green Trust (“HGT”) and the Hugh Green Property Trust (“HGPT”) seek orders under:
1 The description comes from Moira’s affidavit in support of the application.
2 Neither of whom remain beneficiaries of the relevant trusts.
(a)s 133 of the Trusts Act 2019 (“the Act”) directing that the trustees of the HGT and HGPT be permitted to take the actions they have already resolved to take (albeit conditional on the Court’s approval), in order to restructure the trusts; and
(b)s 124 of the Act approving the variation of the HGT deed on behalf of unborn and future and/or unknown beneficiaries.
[6] The proposed orders will enable the trustees effectively to fold the HGPT into the HGT while simultaneously varying the HGT’s definition of beneficiaries and final distribution provisions so that on the closing date:
(a)75 per cent of the HGT’s then ownership interest in the Hugh Green Group (“the Group”) will be distributed to the Foundation, creating the lasting charitable legacy previously referred to; and
(b)25 per cent of the HGT’s then ownership interest in the Group and the balance of the HGT’s assets will be distributed to Hugh and Moira Green’s grandchildren on a per stirpes basis.
[7]I will refer to these combined actions as “the restructure”.
[8] The trustees expect the restructure will provide significant benefits to the family of Hugh and Moira Green (excluding the separately provided for Maryanne and Alice). These benefits include:
(a)simplifying the overall trust structure;
(b)establishing an eventual cornerstone shareholder in the Group enabling it to better make long term strategic decisions which, over time, can be expected to increase significantly the overall assets available for distribution, both before and at the closing date;
(c)ensuring the branches of the family are adequately provided for in a more equitable manner than is presently the case thereby promoting intergenerational harmony; and
(d)promoting Hugh and Moira’s philanthropic objectives by ensuring sufficiently generous provision to the Foundation for it to continue with its charitable work to the benefit of all New Zealanders for generations to come.
[9] Without orders under ss 133 and 124 the restructure cannot proceed. Understandably given the genuinely momentous nature of the decisions, the trustees wish only to proceed with the Court’s imprimatur. Moreover, orders under s 124(3) are necessary because the HGT trustees can only vary the HGT with the consent of all beneficiaries. While all known beneficiaries of the HGT have given their consent, it is remotely possible that there could be future grandchildren who will automatically become beneficiaries of the trust. The HGT trustees therefore require the Court to consent on behalf of these unknown future beneficiaries in order to vary the trust.
Background
[10] The two trusts at the centre of this proceeding were set up by Hugh between 30 and 60 years ago. I annex as Schedule A a table summarising the key distribution provisions and compare these to what is intended by the restructure.
The HGT
[11] The HGT was settled on 7 June 1968. Hugh’s friend and long-term business partner, Bernard McCahill, was the settlor.3 Green & McCahill Contractors Ltd (“Green & McCahill”) had been established in 1958 as the vehicle for their joint enterprise. It quickly became one of New Zealand’s pre-eminent contracting companies and provided the seed wealth for Hugh’s later and varied business activities. The HGT was established to protect the assets that Green & McCahill generated for the benefit of the family while also providing for charitable donations.
3 Mr McCahill died on 16 August 2013.
[12] The HGT still has many years to run, although the exact closing date is uncertain. This is because it is specified as 21 years after the death of the last survivor of Moira and Hugh’s children. These children (four plus Maryanne) are now between 57 and 65 years old.
[13] During the HGT’s term, the HGT trustees are permitted to make distributions to the discretionary beneficiaries who are Moira, Hugh and Moira’s children (excluding Maryanne) and their grandchildren (excluding Alice). Up until 2012 when Hugh died, the HGT also permitted distributions to charities. But that is no longer the case because charitable giving is channelled through the Foundation.
[14] On the closing date and up to three months thereafter, the HGT trustees can decide to distribute its assets to any or all of the discretionary beneficiaries. However, if no such determination is made within three months, then the assets are split equally between the grandchildren of Hugh and Moira who are 21 years old and living at the time. Excluding Alice, there are 10 grandchildren aged between 19 and 32.
[15] The HGT trustees do not have the power to add or exclude beneficiaries or otherwise amend the deed.4 This omission means that unless the Court approves the proposed variation, the HGT will continue to operate in its present form, possibly for another 40 to 50 years, and as was envisaged in 1968.
The HGPT
[16] Hugh settled the HGPT on 20 March 1989. Simultaneously, a mirror trust, the Moira Green Property Trust (“MGPT”) was also settled. The HGPT and the MGPT were established to hold additional portions of the family’s burgeoning asset base, which by the time of Hugh’s death in 2012 was very substantial. Shortly after his death the MGPT was resettled into the HGPT.
[17] The HGPT deed originally provided that Hugh and Moira’s children were the discretionary and final beneficiaries, with the grandchildren being contingent final beneficiaries. However, the HGPT deed gave the trustees the power to vary the deed
4 Otherwise than if required to do so by all of the beneficiaries who hold all of the beneficial interest in the trust property (see Trusts Act 2019, s 122).
including by adding or excluding beneficiaries. So, after several iterations, the HGPT deed now provides that the discretionary beneficiaries are Moira, Hugh and Moira’s children (excluding Maryanne) and grandchildren (excluding Alice), Moira’s sister Eithne Murphe (although she has since disclaimed her interest) and “any charity”. The HGPT also provides that the final beneficiaries are Hugh and Moira’s children (excluding Maryanne) who are living at the vesting date or, if the child has died, then that child’s issue takes the share that would have gone to the deceased child. If all of Hugh and Moira’s children and their issue have died then the HGPT trustees can distribute the trust fund to “any charity they decide to”. The vesting date for the HGPT is 20 March 2069 unless the trustees set an earlier date.
The Hugh Green Foundation
[18] In 1998 Hugh and Moira established the Hugh Green Charitable Trust which was later renamed the Foundation. This then became the primary vehicle for the family’s philanthropic activities. The Foundation is a registered charity under the Charities Act 2005 and a registered charitable trust board under the Charitable Trusts Act 1957. It therefore exists in perpetuity.
[19] Although the Foundation did have minority stakes in several of the Group’s companies, that structure was changed in 2020 at which point it exited all its direct shareholdings except in respect of Greerton Holdings Limited (“Greerton”). The exit was achieved by a share buy-back which resulted in the Foundation becoming a lender to the Group on arms’ length terms.
Issues not contemplated at the time of settlement of the respective trusts
[20] Moira deposes that the hundreds of millions of dollars of wealth which has accumulated in the trusts by virtue of their ownership of Group assets was simply never contemplated by Hugh and her when the trusts were established.
[21] Likewise they did not at that time contemplate the existence of the Foundation. Until its formation their charitable giving had been conducted through the HGT on an essentially ad hoc basis. But over time their giving became more organised, focused
and professionally managed. The Foundation was the ultimate culmination of this process.
[22] Moira also deposes that right up until the time of Hugh’s death, there was little thought given by them to the practical implications of the vesting arrangements contained in the HGT and HGPT trust deeds.
[23] As Mr Arthur points out in his submissions in favour of the application, had they done so Hugh and Moira would have realised that:
(a)The HGT and HGPT deeds treat family beneficiaries differently upon vesting. The HGT deed provides that the living grandchildren receive equal shares while the HGPT deed provides that four children will receive equal shares on a per stirpes basis. Within the HGT there is therefore the potential for inequality “down the family line” based on which grandchildren are living at the vesting date. However, as Moira deposes, Hugh was clear that he “wanted equality” among the family beneficiaries.
(b)As the independent trustees, experienced Auckland solicitor Mr Christopher Darlow and Price Waterhouse Cooper’s former partner Mr David Randell depose, having a range of individual family shareholders and no controlling shareholder would likely result in the Group having to wind down its assets for distribution in due course. By contrast, Hugh’s intention, set out in a letter to the HGT trustees in 2010 was that “the business was to continue”.
(c)On closing, the wealth of the HGT and the HGPT would go entirely to family beneficiaries and none would go to the Foundation, contrary to Hugh’s intention that “a fair bit of it go to charity”.
[24] Towards the end of his life Hugh made it clear he wanted to see a significant proportion of the HGT and HGPT’s assets go to the Foundation while ensuring that his children and grandchildren were adequately provided for. While he never specified
the exact amount, he talked in terms of his children receiving $5 million each and the Foundation $50 million “as soon as possible” with that hopefully increasing to $100 million. Even a person with his business acumen could not have predicted the exponential growth in the value of the Group’s assets since his death—to the extent that these figures now represent a fraction only of the Group’s total assets. Moira confirms that Hugh was always “more interested in making distributions to charities than to our children and grandchildren” despite his love and affection for them. He recognised the burden and demotivating influence of extreme intergenerational wealth.
[25] That is confirmed in Hugh’s own memoir Hugh Green: The Story of an Irish Emigrant Who Never Left Home:5
Inheriting a fortune can be as much of a burden as a blessing, which is another reason why the Hugh Green Charitable Trust is good for everyone—it means they won’t have to worry about that burden.
There’s no greedy children in the Green family because there’s no greedy parents. They’ve been taught thrift and generosity and that what matters really is things you can’t buy, like your faith and your family and peace of mind. There’s nothing I want to spend money on for myself. I wouldn’t mind spending money on having my 50-year-old slippers fixed if I could find someone to do it.
The restructure in detail
[26] The restructure is intended to address these issues by folding the HGPT into the HGT and making the latter fit for purpose in the interests of the Group and the trust’s beneficiaries. It also addresses, in a conspicuously generous way, Hugh, Moira and the wider family’s philanthropic objectives.
[27] To that end the HGT adult beneficiaries, HGPT adult beneficiaries, HGT trustees and HGPT trustees entered into a Deed of Family Arrangement (“DOFA”) (and associated Deed of Variation relating to the HGT and Deed of Appointment and Exclusion relating to the HGPT) with the following effect:
(a)Amalgamating the HGPT and HGT by:
5 Hugh Green Hugh Green: The Story of an Irish Emigrant Who Never Left Home (Hugh Green, New Zealand, 2011) at 205. A photo of his beloved slippers appears at page 211.
(i)adding the HGT and the Foundation as additional discretionary beneficiaries of the HGPT;
(ii)excluding all charities, other than the Foundation, as discretionary beneficiaries of the HGPT;
(iii)adding the Foundation as a discretionary and final beneficiary of the HGT;
(iv)adding great-grandchildren and further issue (excluding any grandchildren or further issue of Maryanne) as contingent discretionary beneficiaries and contingent final beneficiaries of the HGT;
(v)distributing the HGPT’s assets to the HGT apart from the HGPT shareholding in Greerton which will continue (with future receipts from that shareholding to be distributed to the HGT and the Foundation); and
(vi)following completion of Greerton’s proposed activities, winding up the HGPT and distributing any residual assets to the HGT.
(b)Amending the closing date of the HGT to 20 March 2069 (or such earlier date as the HGT trustees may in their absolute and uncontrolled discretion determine).
(c)Providing that on vesting of the HGT:
(i)75 per cent of the HGT’s then ownership interest in the Group will be distributed to the Foundation or, if the Foundation should cease to exist or cease to operate as a registered charity, then to such other charitable organisation or body within New Zealand as has similar objects to the Foundation;
(ii)the balance of the HGT’s assets will be distributed in equal shares to such of the grandchildren who are living at the closing date provided that:
1. if any such grandchild dies before the closing date, leaving a child or children living at the closing date, then that child or those children will take equally what his/her or their parent would otherwise have taken;
2. if any of such last mentioned child or children dies before the closing date leaving a child or children living at the closing date then that child or those children will take equally what his/her or their parent would otherwise have taken; and
3. if the closing date is brought forward, then any of the grandchildren (or their issue or remoter issue) entitled to a distribution on closing who has duly established an inheritance trust may, at their discretion, direct that such distribution instead be passed to that inheritance trust.
(iii)if the trusts in (ii) above all fail, then the balance of the HGT’s assets shall pass to the Foundation or if the Foundation should have ceased to exist, or ceased to operate as a registered charity, then to such other charitable organisation or body within New Zealand as has similar objects to the Foundation.
[28] These proposed changes address the issues discussed in [20]–[25] above in the following ways:
(a)By providing that the Foundation will receive 75 per cent of the then Group’s assets at the eventual closing date, it will become the eventual cornerstone shareholder in the Group. The increased certainty which this brings over future control will, in the opinion of the independent
trustees, give the Group’s directors confidence to make strategic long term investment decisions, calculated to best promote ongoing asset growth.
(b)By making the Foundation a final beneficiary of the HGT it will become a substantial and perpetual source of charitable giving for generations to come in accordance with Hugh, Moira and the wider family’s intentions.
(c)By effectively amalgamating the HGPT and HGT, the inconsistencies which currently exist in potential treatment of family members will be removed. In particular it will ensure a more equitable final distribution whereby each family branch (excluding Maryanne’s) shares equally, whether or not any one or more of the grandchildren have earlier died. Again, this is precisely what Hugh wanted.
The s 133 “blessing” application
Introduction
[29]The trustees seek orders confirming as a proper exercise of their powers:
(a)The decisions of the HGPT trustees to enter into the DOFA and Deed of Appointment and Exclusion and otherwise implement the restructure.
(b)The decisions of the HGT trustees to enter into the DOFA and Deed of Variation and otherwise implement the restructure.
Legal principles
[30] No cases appear to have been decided under s 133 of the Trusts Act 2019 to date but the provision is in substantially similar terms to its predecessor, s 66 of the Trustees Act 1956. As such, existing case law continues to inform the interpretation of s 133.
[31] Previous authorities have identified four situations where directions will be given:6
(a)Category 1—where the issue is whether some proposed course of action is within the trustees’ power.
(b)Category 2—where the issue is whether the proposed cause of action is a proper exercise of the trustees’ powers and there is no real doubt about the trustees’ powers, but the decision is “momentous in nature”.
(c)Category 3—where the trustees have to surrender their discretion due to being deadlocked or having a conflict of interest.
(d)Category 4—where the trustees have acted and those acts are claimed to be outside their power or in proper exercise of their power.
[32] In this case, the application proceeds on the basis that the proposed decision- making is “truly momentous” in that it involves transferring the HGPT’s interests in the Group to the HGT and then altering how assets, worth in the hundreds of millions of dollars, will be distributed on the HGT’s closing date.
[33] In deciding whether to make the directions sought, the court asks three questions:7
(a)Have the trustees in fact formed the opinion which the court is asked to confirm?
(b)If so, is the opinion one which a reasonable body of trustees, properly instructed as to the proper meaning of any relevant provisions of the trust deed, could properly have arrived at?
6 See Re Honoris Trust [2017] NZHC 2957, [2018] 3 NZLR 160.
7 The Public Trustee v Cooper [2001] WTLR 901 (Ch) at 925 as cited in Re Honoris Trust, above n 6, at [56].
(c)Is the opinion vitiated by any conflict of interest under which any of the trustees might have been labouring?
[34] In considering these three matters the court carefully examines the evidence to ensure the trustees are truly entitled to make the decision and take the steps they have taken or propose to take.8
Amendment of the HGPT trust deed and distribution of assets to the HGT—the trustees’ position
[35] The trustees submit that these decisions are truly momentous in that they essentially provide for distribution of all of the trust’s assets to a newly appointed beneficiary—the HGT. They say, however, that this characterisation needs to be kept in perspective as the distribution is not ultimately to the exclusion of the other beneficiaries of the HGPT because the beneficiaries of the two trusts will be aligned.
[36] The trustees confirm that the relevant decisions have been made. They refer to:
(a)the DOFA dated 8 April 2021 whereby the trustees and adult beneficiaries of both trusts agreed to take various actions; and
(b)the Deed of Appointment and Exclusion dated 8 April 2021 whereby the HGPT trustees amended the beneficiaries of the HGPT.
[37] They say that these decisions are reasonably open to them in that cl 12 of the HGPT trust deed empowers the trustees:
(i)to add any person persons class or classes of person Charity Charities or class or classes of Charities (other than any of the Precluded Persons) to the class of beneficiaries.
(ii)to exclude any person persons class or classes of person Charity Charities or class or classes of Charities from the class of beneficiaries.
8 Re Honoris Trust, above n 6, at [55].
[38] They say that relying on these provisions, they resolved to add the HGT and Foundation as discretionary beneficiaries while removing the overly broad and, in the circumstances, obsolete reference to “any Charity”. They point out that the beneficiary class “any Charity” was added in May 2010 to enable the HGPT trustees to make distributions to the Foundation which from 2012 onwards became the recipient of HGPT charitable giving to the exclusion of any other charity.
[39] I note that to the extent any potential argument might exist that exclusion of “Charity, Charities or class or classes of Charities” precludes the exclusion of all charities, that is met by the simultaneous addition of the Foundation, a registered charity, as a beneficiary.
[40] As to distributions to the HGT, the trustees submit that once it is added as a beneficiary cl 5 of the HGPT deed entitles them to distribute the trust fund accordingly. This provides that the HGPT trustees may:
… pay apply or transfer the whole or any part of the capital of the Trust Fund to or for the benefit of such of the beneficiaries as may then be living or such one or more of them to the exclusion of the others...
[41] Clause 5 also provides that the proportion and manner of the distribution will be “as the Trustees shall think fit”, underscoring the discretionary nature of the power.
[42] I agree that the decision to distribute the HGPT’s assets (that is its interests in the Group) is accordingly within the HGPT trustees’ powers.
[43] The trustees accept that while immediate distributions of capital to newly added beneficiaries often raise questions about the validity of the exercise of a power,9 here the distribution is to another trust and does not exclude the other beneficiaries of the HGPT because both trusts will be aligned once the HGT deed is varied.10 The HGT’s discretionary beneficiaries include Moira, Hugh and Moira’s children (excluding Maryanne) and the grandchildren (excluding Alice). These persons are also discretionary beneficiaries under the HGPT.11 Although the HGPT trustees do
9 Re Honoris Trust, above n 6, at [64].
10 They note that cl 6 also provides that the trustees may distribute to a trust to which “any of the beneficiaries are entitled either absolutely or contingently”.
11 The grandchildren are likewise final and contingent final beneficiaries under the respective trusts.
not (given their decision to amend the beneficiaries of the HGPT), rely on the power in cl 6 to distribute to a trust to which any beneficiary is entitled, they say this provision reinforces that the decision is a proper exercise of their powers.
[44] Finally, the trustees argue that there is no conflict of interest. They point to the fact that the trustees, family beneficiaries and the Foundation have each secured independent legal advice and on that basis have agreed to the changes. I have heard from all relevant counsel confirming this position.
Variation of the terms of the HGT deed—the trustees’ position
[45] Again the trustees submit that their decision is momentous in that it will substantially alter the final distribution provisions of the HGT. Not only will there be per stirpes sharing introduced for grandchildren and their issue but at the closing date the Foundation will receive 75 per cent of the then interest in the Group.
[46] They confirm that the relevant decisions have been taken by virtue of the DOFA and the Deed of Variation dated 8 April 2021 entered into between the HGT trustees and HGT adult beneficiaries.
[47] In terms of whether the decisions are reasonably open to the HGT trustees they work progressively through the proposed changes.
[48] As to variation of beneficiaries they say that the Deed of Variation will amend the definition of beneficiaries in cl 1 of the HGT deed to include the great- grandchildren and remoter issue of Hugh on a per stirpes basis. They say this addresses the previously identified anomalies.
[49] Next, the Deed of Variation sets a fixed closing date. It is 20 March 2069 or such earlier date as the HGT trustees in their discretion determine. This would not have been possible before the new Trusts Act which among other things abolished the rule against perpetuities and substituted a 125 year time limit from the date of settlement. The new proposed vesting date is comfortably within that limit.
[50] The Deed of Variation also amends and replaces the final distribution provisions in cl 3 of the HGT deed to provide for 75 per cent of the HGT’s then ownership interest in the Group to be distributed to the Foundation and 25 per cent to Hugh and Moira’s grandchildren on a per stirpes basis. The trustees submit that this properly recognises the multiple objectives previously identified.
[51] They point out that all known beneficiaries of the HGT have consented to these changes and that likewise the children of Hugh and Moira have confirmed that it is not their intention to have any further grandchildren.12
[52] Nevertheless, they acknowledge that there exists a theoretical class of unknown or future beneficiaries of the HGT—grandchildren not as yet identified including further issue of the children. As to unidentified grandchildren currently living, they point out that during earlier litigation involving Maryanne’s claims, there was significant publicity about the wealth of the family and its affairs. No formerly unidentified grandchildren came forward as a result of that process. The children confirm that to the best of their knowledge there are none.
[53] The trustees submit that provided the Court consents to the variation of the HGT deed on behalf of the unknown or future beneficiaries, it is reasonably open for them to make the decisions identified. They say also that because of the consent of all the known beneficiaries they were entitled to enter into the Deed of Variation under s 122 of the Act which, in turn, enshrines the rule in Saunders v Vautier.13
[54] Finally, the trustees submit that there is again no vitiating conflict of interest as confirmed by the agreement of the family beneficiaries.
The s 124 application—consent to variation of HGT trust deed
Introduction
[55] The trustees seek an order under s 124 of the Act approving a variation of the HGT deed on behalf of unknown, unborn or minor beneficiaries of the HGT. The
12 One child aged 57 has no children and does not intend to.
13 Saunders v Vautier (1841) CR & PH 240, 41 ER 482 (Ch).
necessity for this order arises from the fact that, unlike the HGPT deed, the HGT deed does not include any express authority for the HGT trustees to vary the deed. Therefore they can only do so through the vehicle of s 122, in turn invoking the provisions of s 124.
[56]Section 122 provides:
122Variation or resettlement of trust by unanimous consent of beneficiaries
(1)A trustee may do either of the following on being required to do so by all of the beneficiaries who together hold all of the beneficial interest in the trust property, if the conditions set out in subsection (2) are satisfied:
(a)vary the terms of the trust:
(b)consent to the resettlement of the trust.
(2)The conditions for an action in subsection (1) are that—
(a)every beneficiary consents to requiring the variation or resettlement; and
(b)the trustee receives a request to vary the terms of the trust or resettle the trust from or on behalf of each beneficiary; and
(c)if any of the beneficiaries is a beneficiary described in section 124(2), the court has made an order under section 124 approving the variation of terms or resettlement on behalf of that beneficiary; and
(d)the trustee has agreed to the proposal.
(3)In this section and in sections 124 and 125, variation includes a change to the scope or nature of the powers of the trustee.
[57] Here there is the remote possibility that there could be unknown or future beneficiaries, namely grandchildren who are in the future conceived, or adopted, or who are not otherwise yet identified. Such beneficiaries would come within the ambit of s 124(2) in that they would be persons who may acquire a beneficial interest in the future, or on becoming a member of a certain class of persons or being a “future person who may acquire a beneficial interest”. As such the HGT trustees require the court’s consent under s 124 on behalf of these unknown or future beneficiaries, if the trust deed is to be amended in the manner contemplated.
Legal principles
[58] Section 124(1) empowers the court to consent to the variation of a trust on behalf of minor, unborn and unascertained beneficiaries. In assessing whether consent is appropriate, the Court must have regard to matters set out in s 124(4) being:
(a)the nature of any person’s interest in the trust property and the effect of the proposed order on that interest;
(b)the benefit or detriment that may result to any person with an interest in the trust property if the Court makes or refuses to make the proposed order; and
(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.14
[59] Section 124(5) precludes an order if its effect would be to reduce or remove any vested interest in the property but is not relevant for present circumstances.
[60] In Gavin v Gavin, Mander J summarised the guiding principles in terms of any application under s 124 as follows:15
(a)The power to approve a variation is discretionary.
(b)The court may, on behalf of any beneficiary described in s 124(2) who has an interest in the property of a trust, consider any proposal to terminate, vary or resettle a trust.
(c)The court’s discretion is to be exercised with reference to the factors identified in s 124(4), including the intentions of the settlor, to the extent these can be ascertained.
(d)The court can approve a scheme which conflicts with the intentions of the settlor but should not do so lightly.
14 In the present case, Mr McCahill’s death in 2013 makes it impossible to ascertain his intentions in respect of the proposed variations. However, although Mr McCahill was nominally the settlor it was Hugh and Moira who drove the trust’s asset accumulation. Moreover, I am satisfied that had Mr McCahill been alive his intentions would have mirrored precisely those of his close friend Hugh.
15 Gavin v Gavin [2021] NZHC 550 at [15].
(e)The court considers the trust provisions afresh if circumstances have arisen which were not foreseen or may not have been foreseeable at the time the trust was established.
(f)The court is able to approve an arrangement to the detriment of any person on whose behalf the court is giving consent, provided the effect of the orders would not reduce or remove a vested interest in the trust property.
(g)The court is to take a wide approach to benefits and detriments and arrangements and must consider the arrangements as a whole in a practical and business-like way. Indirect and intangible benefits and detriments are relevant, including the welfare and honour of the family.
(h)Difficulties may be met by amendments to the proposal or covenants by persons benefitting to make good losses to the disadvantage of other beneficiaries.
(i)An order approving a proposed variation may be conditional.
[61] Section 124 differs from the old s 64A of the Trustee Act 1956 to the extent that under the predecessor section, the court could not approve variations that were detrimental to the beneficiaries’ interests. Under the new Act benefits and detriments are factors to be taken into account alongside the nature of the interest and the settlor’s intentions.
[62] Despite the changes, however, authorities under the former s 64A provide useful guidance in a case such as this to the extent they emphasise:
(a)In considering the proposed arrangement the court can take into account the nature of the beneficiary’s interest including whether it is contingent or uncertain16 and/or whether it is indirect.17
(b)It can also take into account the extent of the beneficiary’s interest including in context of the overall size of the trust or estate. Where the trust or estate is very large, the potential for an arrangement to dilute the estate may be less relevant if the beneficiary remains entitled to
16 Green v Green [2017] NZHC 1044 at [29]; and Clarkson v Brady [2013] NZHC 437, (2013) 3 NZTR 23-027 at [34].
17 See, for example, Graham as Executor of the Will of John Bernard Byrne v Butler HC Wellington CIV-2003-485-167, 25 May 2004 involving great-grandchildren whose parents were only entitled to be considered for discretionary payments of income from the estate for their education.
receive or be considered to receive substantial amounts of trust property.18
(c)A proposal to add new beneficiaries in a way which dilutes or reduces in practical terms the likelihood of the beneficiary receiving a distribution or distributions will not necessarily be to that beneficiary’s detriment if the arrangement overall will promote family harmony,19 or create conditions which enable prosperity over the longer term in ways that will benefit that beneficiary.20
The trustees’ position
[63] The trustees submit that the case is a clear one for this Court to exercise its jurisdiction to consent to the variation. They say that any future grandchild of Hugh and Moira’s would be both a discretionary and final beneficiary of the HGT but that whether they actually received any distributions would depend on the decisions of the trustees during the term of the HGT and the trustees’ election not to distribute the trust fund to any one or more identified beneficiaries within three months of the closing date.
[64] As to benefits and detriments, they submit that the variation will impact on the future beneficiaries in three principal ways:
(a)by substituting for the current “last one standing” provisions, a per stirpes distribution to the grandchildren and (potentially) remoter issue;
(b)by removing the discretion given to the HGT trustees to distribute in an alternate manner on closing. By contrast there will be certainty around the share that each grandchild will receive on the closing date; and
18 De Bernardo v De Bernardo (2010) 3 NZTR 20-011 (HC) at [13]; and Green, above n 16, at [22]–[23].
19 De Bernardo, above n 18 ,at [13]; and Brown v Hallet [2016] NZHC 2861 at [17].
20 See Clarkson, above n 16; and Shanks v Shanks (2010) 3 NZTR 20-021 (HC) (where a charity was added as a beneficiary in order to further the family’s ethos of charitable giving).
(c)the Foundation will be added as a discretionary and final beneficiary and receive 75 per cent of the then interest in the Group.
[65] While the trustees acknowledge that the last of these changes appears detrimental to any minor, unknown, or unborn grandchildren, they submit that the changes should be seen in light of the restructure as a whole. In particular they identify:
(a)The likely increase in the value of the HGT’s assets as a result of the certainties which the restructure will bring to overall Group planning. They refer in this respect to the evidence of Messrs Darlow and Randell that current arrangements discourage reinvestment of cashflow and support a gradual winding down of the Group’s assets. Although this may result in greater cash for distribution in the short to medium term, they depose that it will likely lead to a materially diminished asset pool in the longer term. By contrast, the restructure will provide an eventual cornerstone shareholding for the Group which will encourage and enable the directors to make long term decisions best calculated to realise value over time. The trustees therefore submit that while a 75 per cent distribution to the Foundation nominally appears to be against the interests of any minor, unknown, or unborn grandchildren, the pool available for all distributions is likely to be significantly larger.
(b)Even if there was a reduction in the total assets distributed to each grandchild at the closing date that may actually be to their benefit. The trustees echo the sentiments of Moira (and the late Hugh) that excessive wealth can in fact be a burden by undermining incentives in later generations.
(c)The proposed changes significantly enhance family unity by abandoning the last one standing provisions and substituting per stirpes distribution.
[66] Finally, the trustees refer to the extent to which the proposed arrangements meet Hugh and Moira’s intentions, in particular to create a continuing charitable legacy from their combined lives’ work.
The position of unknown, unborn and minor beneficiaries of the trusts
[67] By direction of Moore J dated 28 April 2021, Mr Mills QC was appointed to represent the interests of the unknown, unborn and minor beneficiaries. In so doing his Honour noted Mr Mills is “an extremely experienced and competent counsel” and one who, as a result of his appearance in earlier litigation involving the trusts, was familiar with the relevant issues.
[68] Mr Mullins was similarly appointed. He was described by his Honour as already having had some involvement through his engagement with the grandchildren and great-grandchildren and being well placed to represent and consider their interests. As indicated I am most grateful to the comprehensive and carefully considered submissions filed by Mr Mills and Mr Mullins.
[69] They point out that the Court’s power to consent on behalf of unknown, unborn and minor beneficiaries is only invoked in relation to the HGT and not the HGPT (for which s 133 directions are sought). They note that all known beneficiaries of the HGT have requisite capacity and have given informed consent and that in the circumstances any chance of future grandchildren (let alone unknown grandchildren) is “glancing”.
[70] Responsibly, however, they take the view that they should consider the effects of the restructure on all classes of unknown, unborn and minor beneficiaries of both the HGT and HGPT. In respect of the HGPT, that brief essentially involves consideration of the implications of the restructure on the great-grandchildren and great-great-grandchildren who, as a result of the per stirpes distributions in that trust, have the status of contingent final beneficiaries. At the moment there are seven great- grandchildren aged between three months and four years. It is highly likely that there
will be many more.21 Prior to the vesting date there could be dozens of great-great- grandchildren, all with the contingent final interest identified.22
[71] Because one effect of the restructure will be to fully distribute the HGPT’s assets to the HGT, counsel adopts the position that the Court ought to consider the potential impacts on those within these wider classes who cannot speak for themselves and consent to the restructure. I support that position.
[72] Taking all these various constituencies into account Mr Mills and Mr Mullins conclude that:
(a)they cannot see any basis for objecting to consent being granted to vary the HGT on behalf of the (theoretical) unknown, unborn and minor beneficiaries of that trust; and
(b)it is within the trustees’ powers to effect the changes for which the Court’s blessing is sought under s 133 and the effects on the interests of unknown, unborn and minor beneficiaries of the HGPT “present no reasonable basis to oppose the directions”.
[73] Drilling deeper, they submit that the restructure should be analysed in terms of two interconnecting limbs:
(a)First, the amalgamation of the trusts and alignment of the beneficiary classes with final vesting being split at the grandchild level and with later generations, down to the great-great-grandchildren level, stepping into their parents’ shoes. They say this:
(i)removes an anomalous (and disagreeable to the current beneficiaries) last one standing provision in the HGT;
(ii)creates greater equality between the families;
21 Four of the grandchildren have not yet had children. Four have one child only at this stage.
22 Significantly, the great-grandchildren and great-great-grandchildren are not discretionary beneficiaries of the HGPT, only contingent final beneficiaries.
(iii)improves the later generations’ discretionary access to the trusts’ assets by making them contingent discretionary beneficiaries compared with only having a contingent final share of the HGPT; and
(iv)provides a degree of comfort that distributions will in fact be made to them (and prior parents/grandparents) during the aligned term of the HGT as restructured, compared with having to await closing and otherwise relying on distributions to the relevant grandparent being voluntarily passed on down their family line.
(b)Second, the alignment of the closing dates and provision for 75 per cent of the main asset of the trusts to vest in the family’s charitable vehicle:
(i)represents on its face significant dilution of the final interest; but
(ii)recognises Hugh and Moira’s wishes in a manner supported by the adult beneficiaries who have given consent; and
(iii)reflects a strategy for the trusts that is considered to be beneficial for the long term growth of the assets so that the dilution can be expected to be offset at least in part—a strategy supported and promoted by those managing the Group business.
[74] Mr Mills and Mr Mullins submit that the first limb is of overall benefit to the unknown, unborn and minor beneficiaries taking into account their improved access to distributions, status as beneficiaries and family cohesion and that this is reinforced by inquiries they have made of the grandchildren who are the parents (and potential grandparents) of those beneficiaries.
[75] They accept that the second limb involves a more difficult calculus given the dilution, at least on paper, of the minor and future contingent final beneficiaries’
interests but emphasise that the two limbs are interdependent so that the benefits of the first are not available without the quid pro quo of the second. They submit that although there could be a spectrum of potential re-arrangements to achieve similar sorts of outcomes, balancing the inherent uncertainty of the status of the generations which follow the grandchildren and their relatively limited rights (and risks) against the benefits of the restructure, there can be “no reasonable objection” to the proposal that is now before the Court.
Discussion
[76] I can be relatively brief in this respect. The quality of the submissions by both the trustees and counsel for the unknown, unborn and minor beneficiaries, the unanimity of their position, the strong endorsement of all adult beneficiaries and the unified intergenerational commitment to Hugh and Moira’s charitable vision all encourage me to believe that the orders sought are ones appropriate for this Court to make.
[77] I address first the position of the unknown, unborn and minor grandchildren of Hugh. In this respect the starting point is necessarily the unlikelihood of any such beneficiaries. As indicated, each of Hugh’s children have given their assurances that it is highly unlikely that there are any unknown grandchildren or that any further grandchildren will be born or adopted. Their age profile supports the value of that assurance. However, were there to be any such persons, their interest in the HGT and the HGPT would be significant. Under the HGT they would be entitled to receive potentially substantial assets in equal shares with other grandchildren living at the closing date, with the very real possibility that some of the existing grandchildren would have by that point died. They would also be discretionary and contingent final beneficiaries of the HGPT.
[78] I agree with Mr Mills that although the potential to outlive other grandchildren and take a greater proportion of the HGT is lost to an unborn/unknown grandchild through the restructure, the potential benefit to their descendants by addition as contingent beneficiaries needs to be taken into account. The greater equality among the family lines is a beneficial aspect of the proposal and one which, for reasons of
family unity, needs to be emphasised. In addition, all the known grandchildren support the move towards greater equality among the family lines.
[79] I am satisfied that from the perspective of the unknown, unborn and minor grandchildren the Court’s consent under s 124 and “blessing” under s 133 is appropriate. As Mr Mills acknowledges, the restructure:
(a)promotes family harmony—exemplified by the unanimous approval of known beneficiaries down to the grandchild generation;
(b)provides, through the non-binding but formal framework contained in the DOFA, greater certainty of distributions to the grandchildren;
(c)facilitates the efficient running of the Group over time, as confirmed by Messrs Darlow and Randell;
(d)relates to a very large estate of which grandchildren remain discretionary beneficiaries and final beneficiaries entitled to receive 25 per cent of what is likely to be a very valuable asset at closing;
(e)aligns with the intentions of Hugh and Moira; and
(f)makes more likely the possibility that the Group will continue beyond the perpetuity periods of the trusts (which currently do not align) and be able to provide ongoing benefits to the Green family.
[80] I accept, as does Mr Mills, that the restructure could have been formulated in other ways, some of which may have been more beneficial to the unknown, unborn and minor grandchildren. For example, the distribution policy could have been entrenched in the varied HGT trust deed rather than adopted as a non-binding resolution. That said, however, the trustees were not obliged by the deeds to provide even the level of certainty that they have now. The status quo is that no discretionary beneficiary has any right to call for any distributions during the life of either of the trusts nor expectation that there would necessarily be any residual assets available to be distributed to them on the vesting date.
[81] As to the unknown, unborn and minor great-grandchildren of Hugh, the starting point is that their interests are much more limited than those of their parents. They are not currently discretionary beneficiaries of either of the trusts and not final beneficiaries of the HGT. Their interest is limited to that of contingent final beneficiaries in the HGPT if their ancestors have all died.
[82] Under the restructure their interests are expanded significantly in terms of access to distributions during the life of the HGT. They become contingent discretionary and final beneficiaries of that trust.
[83] Like the grandchildren, however, their former contingent interest in the assets of the HGPT (which will be transferred to the HGT) is diluted by the addition of the Foundation which takes 75 per cent of the Group on closing. However, the counterfactual is necessarily their position under current settings. Were the restructure not to proceed it is possible the trustees could, using their powers under the deeds, make distributions during the life of the trusts to achieve a similar allocation of the assets to that now proposed. In addition, the status quo does not guarantee any particular distribution of trust assets to the great-grandchildren as the HGPT could be fully distributed by the closing date (which may itself be brought forward).
[84] So the category of unknown, unborn and minor great-grandchildren benefits from:
(a)a formal expansion of their interests;
(b)the real and practical value of now being contingent discretionary beneficiaries of the HGT; and
(c)the addition of rights as contingent final beneficiaries of the assets of the HGT.
[85] In assessing the value to be attributed to their inclusion as discretionary beneficiaries I have regard to the distribution policy which provides practical guidelines to the exercise of the trustees’ powers. While this policy states the great-
grandchildren only receive discretionary distributions on the death of their parent on the Green side, this still represents a significant improvement on current arrangements, particularly in respect of the HGT.
[86] In respect of great-great-grandchildren, their current interest is restricted to a remote contingent interest in the assets of the HGPT on vesting. Like the great- grandchildren, the restructure provides for their interests to be extended to the assets of the HGT. In addition, great-great-grandchildren will be entitled to discretionary distributions during the lifetime of the HGT contingent on their parent and grandparent dying, but remoter issue will not.23
[87] Although I accept that their contingent interest is also diminished by the inclusion of the Foundation as a 75 per cent final beneficiary, any great-great- grandchild born prior to 2069 will likely be relatively young and the chances of all the descendants of Hugh “up the line” having predeceased them by the closing date are very low. As such it is a remote interest. The great-great-grandchildren can also be reasonably expected to enjoy some of the benefits from their parents and grandparents’ receipt of assets through the life of the HGT as restructured.
Conclusion
[88] For these reasons I conclude that orders are appropriately made in the terms sought.
[89] I congratulate the family, through its several generations, on the degree of unity they have achieved in promoting the wishes of Hugh and Moira Green.
Result
[90]I make:
23 On closing the most remote descendants to receive distributions are the great-great-grandchildren on a last one standing basis. This differs from the “remoter issue” vesting provision in the HGPT, which appears to carry on through surviving descendants. So theoretically great-great-great- grandchildren who came into existence prior to 2069 and all of whose ancestors “up the line” had predeceased them could be prejudiced by the restructure. But this is a highly theoretical class and Mr Mills persuades me the remote prospect such person might exist needs to be balanced against the reasonable expectation that they would have had benefits from their parents and grandparents’ receipt of assets through the life of the HGT as restructured.
(a)orders under s 133 of the Trusts Act 2019 directing that:
(i)the HGT trustees’ decisions to enter into the Deed of Family Arrangement and the Deed of Variation and otherwise implement the restructure are proper exercises of their powers under the HGT; and
(ii)the HGPT trustees’ decisions to enter into the Deed of Family Arrangement and the Deed of Appointment and Exclusion and otherwise implement the restructure are proper exercises of their powers under the HGPT deed.
(b)an order under s 124 of the Trusts Act 2019 approving the variation of the HGT deed by the Deed of Variation on behalf of all unborn and future natural or adopted grandchildren of Hugh Green (excluding any child of Maryanne Green).
[91]No order as to costs sought by any party.
[92] I note the orders of Moore J dated 28 April 2021 restricting access to the court file until further order of the Court. No additional order is necessary at this point.
Muir J
Addendum
[93] I note that this judgment was first issued on 24 August 2021. However, as requested by counsel at the conclusion of the hearing, this was initially on a basis that it was not published beyond the parties. Counsel made that request mindful of any confidentiality issues which may need addressing before wider publication. In the event, only one request was made in this respect – that in the list of appearances on the front of the judgment the grandchildren be identified not by name, but by
association with their parent of Green origin. I was happy to accept that suggestion taking into account the fact that some of the grandchildren are still quite young and wish their privacy preserved. At the same time counsel also helpfully suggested three very minor factual corrections to the judgment as originally issued. I am grateful for having had these drawn these to my attention and have made the suggested amendments accordingly. I reissued the judgment on Thursday 9 September 2021.
SCHEDULE A
Table Comparing the Beneficiaries of the HGT and HGPT
Beneficiaries
HGT (current
HGPT (current)
HGT (if amended)
Moira Green Discretionary Discretionary Discretionary Children * Discretionary Discretionary Final (with the grandchildren and
remoter issue taking per stirpes).
Discretionary Grandchildren * Discretionary
Final (those living at vesting date who have attained 21 years—in equal shares).
Vesting date 21 years after death of final child.
Discretionary
Contingent Final
Discretionary Final (with the great-
grandchildren or great-great-
grandchildren issue taking per stirpes).
Remoter issue * (great-
grandchildren, or great-great- grandchildren).
Contingent Final as above. Contingent Discretionary (if a grandchild dies during the term of the trust, their
children or grandchildren become discretionary beneficiaries)
Contingent Final – as above.
Any Charity Discretionary
Contingent Final.
Hugh Green Foundation Discretionary (included by the reference to “Any Charity”). Discretionary Final. Eithne Murphy Discretionary (Disclaimed).
8
6
1