Re Macalister

[2021] NZHC 3572

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV 2021-485-526

[2021] NZHC 3572

UNDER

Parts 18 and 19 of the High Court Rules and the Trusts Act 2019

IN THE MATTER OF

the Robert Lachlan Macalister Trust

BETWEEN

GRAEME MACDONALD MACALISTER, ANDREW CHARLES MACALISTER and ROBERT BLAIR MACALISTER as

trustees of the Robert Lachlan Macalister Trust

Applicants

On the papers
Counsel:	J A Tocher for Applicants
Judgment:	20 December 2021

JUDGMENT OF MALLON J

Introduction

[1]    The applicants are the trustees of the Robert Lachlan Macalister Trust (RLM Trust). They seek orders adding a clause to the trust deed, directing the trustees to sell the RLM Trust property (the Blackwood Bay property), directing the distribution of the sale proceeds, and directing the distribution of the RLM Trust residue. These orders are sought in accordance with a Deed of Settlement dated 2 August 2021 that brought an end to litigation between some of the beneficiaries and the former trustees of the RLM Trust.

RE MACALISTER [2021] NZHC 3572 [20 December 2021]

Background

[2]    The Blackwood Bay property is in the Marlborough Sounds. It was acquired in about 1920 by Sir Robert Lachlan Macalister. He bequeathed the Property to his two sons, Alister and Ian, with the express wish that the Property be maintained for the benefit of future generations of the Macalister family.

[3]    Alister (second generation) and his wife Shirley had five sons, John, Richard, Philip, Andrew and Robert (third generation). The adult grandchildren of Alistair are (fourth generation): Monique, Robert and Stuart (children of Richard); Jamie, Scott and Andrew (children of Philip) and Louis (son of Andrew). The minor grandchildren of Alistair (also fourth generation) are: Vincent and Leila (children of Andrew); and Jack and George (children of Robert). John has no children.

[4]    Ian (second generation) and his wife June had three children, Janet, Graeme, and Donald. There are no grandchildren.

[5]    The RLM Trust was settled  by  Shirley  and  June by  Deed  of Trust  dated  7 December 2011. The original trustees were Richard, Andrew and Graeme. The Blackwood Bay property was transferred to the Trust with the intention that it be retained and maintained for the benefit and enjoyment of all lineal descendants of Sir Robert.

[6]    In 2020 a dispute arose arising out of a proposed sale of the Blackwood Bay property to Richard. Philip, supported by John, brought proceedings against the trustees concerning the proposed sale. John brought a related proceeding for the removal of Andrew as trustee.

[7]    The proceedings were scheduled for hearing beginning 2 August 2021. The hearing did not commence because the parties were in settlement discussions. The discussions were fruitful and the Deed of Settlement was entered into later that day. It was executed by all the adult beneficiaries of the RLM Trust over the next few days.

[8]The settlement:

(a)enabled Richard to purchase the Blackwood Bay property with other members of the family receiving a share of the sale proceeds and, in some cases, monetary compensation for their loss of enjoyment of the property;

(b)provided that Robert would replace Richard as a trustee. The three trustees would therefore be Robert, Andrew and Graeme (the new trustees); and

(c)provided for the residue of the RLM Trust to be distributed equally amongst the third generation beneficiaries.

[9]    More specifically as to (a), the Deed of Settlement provided for the Blackwood Bay property to be purchased by Richard for $2 million. The trust would pay half of the proceeds to Janet, Graeme and Donald ($333,333.33 each) and the other half to Andrew, John, Philip and Robert ($250,000 each). That is, the proceeds would be paid only to the third generation. The intention was to enable each family unit to secure its own holiday home. In addition, Richard was to make an ex gratia payment of

$1.5 million to Philip, John, Robert and Andrew. The intention of this ex gratia payment was to provide recompense for the loss of future use of the Blackwood Bay, both personally and inter-generationally. The ex gratia payment was to be divided unequally between Philip, John, Robert and Andrew, recognising the different levels of loss experienced as between them based on their use of the property.

[10]   The Deed of Settlement provided that the new trustees were to apply to the High Court for approval of these arrangements. It also provided that the adult beneficiaries would support the trustee’s application.

Procedure

[11]   Leave was sought to bring the application as an originating application. This was on the basis that it was likely to be unopposed, there were no factual issues in dispute and it was in the interests of justice to secure a just, speedy and inexpensive determination without unnecessary cost and complexity. It is appropriate to grant leave for those reasons and it is granted accordingly.

[12]   The trustees have served the application on all the adult beneficiaries. As at 20 September 2021 (when the application was filed), of the 12 adult beneficiaries other than the three trustees, nine had confirmed that they did not oppose the application. By 16 November 2021, two further adult beneficiaries confirmed they did not oppose the application. In a minute on that date, the Court directed that the application would be considered as unopposed unless the remaining adult beneficiary, Philip, filed and served a notice of opposition by 29 November 2021, as the Court was satisfied that Philip had been given “ample opportunity” to confirm his position. No notice of opposition was filed and served in that time frame.

[13]   The minor beneficiaries have not been served. Andrew’s minor children have provided their views to him and do not wish to have a litigation guardian appointed to represent their interests. Robert has explained to the Court that he does not wish to embroil his children in the matter and why that is, and that he will look after their interests. I accept what they each say about this and do not consider it is necessary that a litigation guardian be appointed to represent their interests.

[14]The application is therefore being considered on an unopposed basis.

Variation to the Trust Deed

[15]   The Deed of Settlement provides for two capital distributions to be made to a subset of beneficiaries: one being the distribution of the proceeds from the sale of the Blackwood Bay property to Richard in accordance with cl 4.2 of the Deed of Settlement; and the other being a distribution of the residue of the Trust in accordance with cl 7.1 of the Deed of Settlement, with a view to winding up the Trust.

[16]Clause 5 of the Deed of Trust currently provides:

5.  Capital

5.1.  At any time before the Date of Distribution the Trustees may by revocable or irrevocable deed appoint that from the date of the deed, or such other date specified in the deed for that purpose, the Date of Distribution shall be a date earlier than the date first specified in the definition of Date of Distribution in clause 3.1. As long as they do not make an irrevocable appointment, the Trustees may exercise this power more than once.

5.2.   On the Date of Distribution the Trustees shall hold the balance of the capital of the Trust Fund then remaining on trust to pay or apply it to the residuary beneficiaries living at that date:

[17]   The Date of Distribution is defined in cl 3.1 of the Trust Deed as “31 March 2090 or such earlier date as the Trustees may by deed appoint under clause 5.1”.

[18]   The trustees obtained legal advice on the interpretation of cl 5 of the Trust Deed. The advice was that:

(a)The term “residuary beneficiaries living at that date” in cl 5.2 meant “those of the discretionary beneficiaries who are living on the date of distribution”;

(b)While there was no power to pay out the capital or income prior to the date of distribution as defined in the Trust Deed, there was a power to bring forward the date of distribution (by the trustees signing a deed specifying an earlier date).

(c)On the date of distribution, the trustees must divide all of the money equally among the living residuary beneficiaries and this appeared to mean each living child, grandchild and great-grandchild (and so on) of the late Sir Robert is entitled to an equal share.

[19]   The trustees accepted that advice. This means that cl 5.2 does not provide a mechanism by which the two capital distributions contemplated by the Deed of Settlement can be made. Neither distribution goes beyond the third generation and the distribution of the sale proceeds is not equal (although equal between the two sides of the family, Richard does not obtain a distribution of the proceeds and the remaining third generation members of this side of the family each receive a one-eighth share of the proceeds, and the other side of the family each receive a one-sixth share of the proceeds).

[20]   In order to effect the capital distributions agreed under the Deed of Settlement, the trustees suggest a new clause be added:

5.3 The Trustees may distribute all or any portion of the capital of the Trust Fund in accordance with the Deed of Settlement dated 2 August 2021.

[21]   The trustees seek my approval to this variation. They submit that the Deed of Settlement contemplated the variation and the proposed clause captures the essence of the Deed of Settlement. They submit the clause is both broad enough to enable the two capital distributions to be made and sufficiently circumscribed to fit within the limits of the consent provide by the signatories. They  also  submit  that,  as  the RLM Trust will shortly be wound up, no concerns arise about the ongoing utility of the variation.

[22]   Section 122 of the Trusts Act 2019 allows trustees to vary the terms of a trust where all of the beneficiaries consent to the variation. Section 124 of the Act provides the Court with the power to approve a variation on behalf of certain beneficiaries, including a beneficiary who lacks capacity.1 There are mandatory considerations for the Court to take into account when exercising this power:2

(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:

(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.

[23]   The s 124 power to approve a variation is intended to relax the previous position under s 64A of the Trustee Act 1956, which limited the ability of the Court to approve a variation that would be detrimental to the beneficiary on whose behalf approval was sought.3 The principles for the exercise of the Court’s power under s 124 were summarised recently as:4

(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.

1      Section 124(5) does not apply because all the beneficiaries are discretionary beneficiaries only.

2      Section 124(4).

3      Gavin v Gavin [2021] NZNC 550 at [13]-[14].

4 At [15].

(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.

(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.

[24]   The adult beneficiaries have consented to the proposed variation through entering into the Deed of Settlement and by consenting to or not opposing the application to this Court. The minor beneficiaries (Vincent, Leila, Jack and George) have not directly consented to the Deed of Settlement or the application but their interests are represented by their parents (Andrew and Robert respectively).

[25]   The trustees submit that it is appropriate to approve the variation on behalf of the minor beneficiaries for the following reasons:

(a)Each of the beneficiaries is a discretionary beneficiary only and so orders would not reduce or remove a vested interest in the trust property.

(b)The Deed of Trust did not contemplate the litigation that arose nor provide flexibility to carry out the comprise arrived at in the Deed of Settlement.

(c)Indirectly, each minor beneficiary benefits from the greater distributions that would be made to their respective fathers, particularly as the aim of the distributions is to enable each family unit to fund their own alternative holiday home future. In addition, the Deed of Settlement has endeavoured to reach a fair compromise of the competing interests for the whole family and resolving the litigation through the settlement is important for family harmony.

(d)The settlement involves the payment of monetary sums that are interconnected and critical to the compromise contained in the Deed of Settlement. If the capital distributions cannot be made, the Deed of Settlement will unravel.

[26]   I agree with those matters and they address the mandatory considerations under s 124. I would add that the respective fathers of the minor beneficiaries have made it clear that they have their children’s best interests in mind. I would also add that the capital distributions enable the sale of the Blackwood Bay property to Richard to go ahead. That sale keeps the property in the Macalister family (albeit a subset of the wider Macalister family), and enables Richard to maintain it without any complications that may arise from it being subject to the RLM Trust, which is broadly consistent with Sir Robert’s wish for future generations of the Macalister family to enjoy it. I conclude that the proposed variation should be approved on behalf of the minor beneficiaries.

Directions

[27]   Section 133 of the Trusts Act provides that a Court has the power to give any direction it thinks fit to trustees. Aside from modernising the language, this section does not substantively differ from the former s 66.5 One of the categories where directions may be sought is where the trustees are making a “momentous” decision and “wish to obtain the blessing of the court for the action on which they have resolved

5      Law Commission Review of the Law of Trusts: A Trusts Act for New Zealand (NZLC R130, 2013) at [12.3]–[12.8].

and which is within their power”.6 An “obvious” example is a “decision by the trustees to sell a family estate or to sell a controlling holding in a family company”.7 Where the trustees seek a “blessing order” of this kind, the Court’s role is to ensure that the trustees can properly form the view that they have reached. It is not the Court’s role to say how it would have exercised the discretion.8

[28]   The trustees seek the Court’s blessing in relation to the decision to sell the Blackwood Bay property and to make the capital distributions discussed above. The trustees have the power to sell the Property pursuant to cl 12.1 of the Deed of Trust. That provides the trustees with “the same powers as if the Trustees were the absolute owners of and beneficially entitled to the Trust Fund”. The Trust Fund definition includes “all property which may in the future be received or acquired by the Trustees”. The legal advice obtained by the trustees is that the trustees “have all the powers of an absolute owner of the property and may therefore sell it – see clause 12.1”.

[29]   The question for the Court is therefore whether selling the Blackwood Bay property is a proper exercise of the trustees’ powers. The trustees submit that it is because it is required by the Deed of Settlement, which is signed by all adult beneficiaries. The trustees acknowledge that the decision is particularly momentous for the RLM Trust. The Blackwood Bay property is the trust’s primary asset and its ownership and management were the principal purpose of the trust.

[30]   The trustees submit that circumstances have changed since the RLM Trust was settled. The decision to sell the Blackwood Bay property is coincident with the decision to wind up the RLM Trust that is provided for in cl 7.2 of the Deed of Settlement. Selling the property therefore arises in the context of a decision by the adult beneficiaries to agree to bring the trust to an end. That in turn was part of the decision by them to enter into the Deed of Settlement and bring the litigation to an end.

6      Public Trustee v Cooper [2001] WTLR 901 (Ch) at 922-944; referred to in Re Honoris Trust

[2017] NZHC 2957, [2018] 3 NZLR 160 at [42].

7      Cooper, above, at 922-944.

8      Re Honoris Trust, above n 6, at [56]-[58].

[31]   The trustees note the following matters of which the Court should be aware in making a blessing order:

(a)The settlors’ wishes were the retention and maintenance of the Blackwood Bay property for future generations of the family in the foreseeable future. However, the litigation and the necessity of the sale for its maintenance, the fact it will remain in the family with Robert, the power in the Deed of Trust deed to bring forward the date of distribution, and the agreement of all the living adult beneficiaries all support departing from this wish that the property be retained.

(b)Because Richard, a former trustee, is purchasing the Blackwood Bay property, self-dealing or impropriety concerns could arise. However, the Deed of Settlement provides specifically for this, a new sale and purchase agreement has been agreed (replacing the one that led to the litigation), and Richard has been replaced as trustee. Further, the purchase price of $2 million was based on a market valuation from June 2020, but the Deed of Settlement reflects that the beneficiaries were content with that price without the need to update the valuation. Lastly, Alistair’s side of the family received a substantial ex gratia payment from Richard as part of the intertwined settlement arrangements.

[32]   I am satisfied that the sale of the Blackwood Bay property and the capital distributions are proper and lawful. The trustees could properly form the views which they have reached in this respect for the reasons they have explained. The proposed actions are a result of a carefully negotiated compromise, intended to be fair to all. They are necessary to restore some measure of family harmony, are unopposed, and the adult beneficiaries have given their approval via entering into the Deed of Settlement. The property is being sold to a Macalister and other Macalisters will receive financial payments intended to be fair to everyone.

Result

[33]Accordingly, I order:

(a)The addition of a cl 5.3 (as set out below) to the Deed of Trust of the RLM Trust is approved on behalf of Vincent Omar Macalister; Leila May Macalister; Jack Edward Macalister; and George Patrick Macalister:

5.3 The Trustees may distribute all or any portion of the capital of the Trust Fund in accordance with the Deed of Settlement dated 2 August 2021.

(b)The trustees of the RLM Trust are directed to:

(i)sell the RLM Trust property located at Blackwood Bay, and identified as Part Lot 8 and Lot 9-11 Deposit Plan 1071, to Richard FitzGerald Macalister on the terms stipulated in cl 4.1 of the Deed of Settlement dated 2 August 2021;

(ii)distribute the proceeds of the above sale in the manner stipulated in cl 4.2 of the Deed of Settlement dated 2 August 2021; and

(iii)distribute the residue of the RLM Trust in the manner stipulated in cl 7.1 of the Deed of Settlement dated 2 August 2021.

[34]   The costs of this application are to be met from the funds of the RLM Trust. This has been agreed to in the Deed of Settlement. It was reasonable of the trustees to bring this application given the circumstances and because they were required to do so by the Deed of Settlement.

Mallon J