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Re Setter

Re Setter

Case [2021] NZHC 1603 10 June 2021

Trust Deed Variation

Beneficiary Appointment

Administrative Provision

Inherent Jurisdiction

Trusts & Equity

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IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2021-441-6

[2021] NZHC 1603

UNDER Part 18 of the High Court Rules 2016 and the Trusts Act 2019

IN THE MATTER OF

an application without notice for directions as to service and representation

IN THE MATTER OF

an application to the Court for authorisation to vary a trust deed

BETWEEN

ALISTAIR JAMES SETTER, PATRICK MARCUS PEACOCK, KAREN ELIZABETH MIDDELBERG, ELIZABETH CLEMENT JANE GRAY TOSWILL, CALLUM LEICESTER GRAY, CATERINE ANNE AVERY, AND GEORGE HUGH WILLIAMS AS TRUSTEES OF CENTRAL HAWKES BAY CONSUMERS POWER TRUST

Applicants

Hearing: On the Papers

Counsel:

H J P Wilson and J Bell-Connell for Applicants G Kelly for Beneficiaries

Judgment:

10 June 2021

Reasons:

1 July 2021

REASONS JUDGMENT OF ISAC J

Background

[1] The applicants are the trustees of the Central Hawke’s Bay Consumers Power Trust (the Trust). They have applied to vary the Trust Deed under s 130 of the Trusts

SETTER [2021] NZHC 1603 [10 June 2021]

Act 2019 (the Act) so that, in the future, all seven of the trustees will be appointed by the beneficiaries of the Trust. That is not currently the case for three of the trustees.

[2] As trustees, the applicants hold and own the shares in Centralines Ltd (Centralines), an electricity distribution company in Central Hawke’s Bay. The Centralines network has over $54m worth of assets, is 1,700 km in length, and supplies approximately 8,500 connection points.

[3] The Trust was established by the Trust Deed dated 10 March 1993, which was amended on 11 December 1998.

[4] The beneficiaries of the Trust are electricity consumers; those ultimately liable for the payment of any amount in respect of connection to or use of Centralines’ distribution network.

[5] Centralines is regulated by pt 4 of the Commerce Act 1986 (the Act). It must comply with the default price-quality paths (DPP) set by the Commerce Commission.1 The trustees say the cost to Centralines in ensuring compliance with DPP regulation is significant, comparative to the small numbers of consumers it has.

[6] Consumer-owned electricity distribution companies are exempt from DPP regulation under s 54G(2) of the Act. Under s 54D of the Act, a consumer owned electricity distribution company must have its trustees elected by consumers.

[7] The Trust is not currently ‘consumer owned’ because, as noted, three of its seven trustees are not elected by consumers. Instead, they are appointed by the Mayor of the Central Hawke’s Bay District Council, the Central Hawke’s Bay District Council, and the Manager of the largest consumer of electricity supplied by Centralines.

1 Mr Setter says this involves keeping revenues below Commission-set limits, meeting certain reliability and quality standards, and disclosing audited information showing how Centralines intends to comply with the limits, and how it has actually complied with the limits over the regulatory period.

Application

[8] Against that backdrop, the trustees have applied to vary the Trust Deed so that all seven of the trustees will…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Setter

Details

AGLC: Re Setter [2021] NZHC 1603
Case: [2021] NZHC 1603
Decision Date: 10 June 2021

CaseChat Overview and Summary

The case of Re Setter involved an application by the trustees of the Central Hawke’s Bay Consumers Power Trust to vary the Trust Deed so that all trustees would be elected by beneficiaries. The applicants sought to alter the appointment process for three trustees to comply with the definition of a ‘consumer-owned’ electricity distribution company under the Commerce Act 1986. The central legal issue was whether the application to vary the Trust Deed fell within the scope of s 130 of the Trusts Act 2019 or if it required the use of the Court’s inherent jurisdiction.

The Court considered that while s 130 of the Trusts Act 2019 permitted variations to trustees' powers for the proper management or administration of trust property, it did not extend to altering the beneficiaries’ power of appointment of trustees. The proposed changes sought to expand the beneficiaries’ power of appointment, which appeared to be beyond the scope of s 130. The Court noted that the boundary between purely administrative changes and more substantive alterations was not clearly defined in the Act, raising questions about the appropriate statutory jurisdiction for such variations.

Ultimately, the Court concluded that the inherent jurisdiction permitted the variation sought, consistent with the approach in Clifton v Clifton. The inherent jurisdiction allowed the Court to modify administrative provisions without altering the trust itself, as the variation sought did not involve a change to the beneficial interests under the trust. The Court confirmed the variation of the trust deed as proposed and reserved leave for any unresolved matters.

Orders