Ruby v Ruby
[2022] NZHC 282
•25 February 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-000148
[2022] NZHC 282
UNDER the Trusts Act 2019 and the Inherent Jurisdiction of the High Court IN THE MATTER
of the A Ruby Trust, A Ruby Trust (No 2) and Z Ruby Trust
BETWEEN
MOLLY RUBY
Applicant
AND
EILEEN RUBY, A B, C D, E F in their
capacity as trustees of the A Ruby Trust First Respondents
AND
A B and ZOE RUBY in their capacity as trustees of the A Ruby (No 2) Trust Second Respondents
AND
ZOE RUBY and E F in their capacity as trustees of the Z Trust
Third Respondents
CIV-2021-485-000432 UNDER
Section 133 of the Trusts Act 2019
IN THE MATTER
of an application for a blessing order under s 133 of the Trusts Act 2019
BY
ZOE RUBY, in her capacity as trustee of the Z Ruby Trust and the A Ruby (No 2) Trust
AND
E F in her capacity as trustee of the Z Ruby Trust
AND
GH LIMITED in its capacity as trustee of the A Ruby (No 2) Trust
Applicants
MOLLY RUBY v EILEEN RUBY, A B, C D, E F in their capacity as trustees of the A Ruby Trust [2022] NZHC 282 [17 February 2022]
Hearing: 17 February 2022 Appearances:
A S Butler, G F Kelly and J A Tocher for the Applicant (proceeding -148
R J B Fowler QC for the First Respondent – (proceeding -148)
N L Walker and N J Fenton for the Second and Third Respondents (proceeding -148)
N L Walker and N J Fenton for the Applicants (proceeding -432)Decision:
17 February 2022
Reasons for Judgment:
25 February 2022
(REDACTED) REASONS FOR JUDGMENT OF GENDALL J
NOTE: This is a fully redacted Reasons for Judgment in these proceedings — all names, places and identifying details have been changed and in this redacted version are imaginary and fictitious
This judgment was delivered by me on … at … Pursuant to Rule 11.5 of the High Court Rules Registrar/Deputy Registrar
Date
Introduction
[1]These proceedings concern the administration of three family trusts being:
(a)The A Ruby Trust of which Eileen Ruby (Eileen), A B, C D and E F are the named trustees;
(b)the A Ruby (No 2) Trust, of which Zoe Ruby (Zoe) is one of the trustees; and
(c)the Z Ruby Trust, of which Zoe and E F are trustees; (together, the “Ruby Trusts”).
[2] Two separate applications were before this Court in these substantive proceedings;
(a)the first proceeding (CIV-2021-485-148) represented an application by Molly Ruby (Molly) a beneficiary of the Ruby Trusts, for review by this Court of the decision making of the trustees of the Ruby Trusts in relation to a property at [Clarkville].
(b)the second proceeding (CIV-2021-485-432) represented an application by the trustees of the A Ruby (No 2) Trust and the Z Ruby Trust for this Court’s blessing of their proposed decision to sell a property owned by the Trusts at [Wildtown].
[3] Some time ago a two-day hearing of these two applications was scheduled to take place in this Court on 15 and 16 February 2021.
[4] All parties were present for the commencement of that hearing on 15 February 2021. At the outset detailed discussions and negotiations between all parties to the proceedings took place. Ultimately, on 17 February 2022 this resulted in a full and final settlement of issues relating to the A Ruby Trust, the A Ruby (No 2) Trust, the
Z Ruby Trust and the PQ Charitable Foundation Deed. To record this settlement a Deed of Family Arrangement was entered into hetween all parties.
[5] Pursuant to cl 3.10 of that Deed of Family Arrangement all parties to the proceedings by way of an oral application sought the approval of this Court to three proposed variations to the Trust Deed of the A Ruby Trust, (a trust established by Deed almost 40 years ago in the 1980s). Those proposed variations to the A Ruby Trust were seen by the parties as critical to achieving the settlement they had reached and to conclude the terms of the Deed of Family Arrangement. All parties, together with their counsel, confirmed their consent to those variations and urged this Court to make the variation orders sought. They maintained the variation orders were in the interests of all affected parties and the wider Ruby family to settle what had been a long-running and difficult family dispute.
[6]The variations sought to the A Ruby Trust were:
(a)First to alter the power to appoint and remove trustees of the trust;
(b)secondly, to add a power to give effect to a bespoke distribution mechanism outlined in the Deed of Family Arrangement and agreed between all parties; and
(c)thirdly, to remove certain redundant classes of beneficiaries from the trust.
[7] In support of the variation application on 17 February 2022, I received and carefully considered both written and oral submissions in support of the application from counsel for all parties. Having done that, I was satisfied that the specific variation orders sought were appropriate. On 17 February 2022 those orders were made. The orders specifically varied the terms of the A Ruby Trust Deed as follows:
(a)Paragraph 11 of the Trust Deed which contains the power of appointment of new trustees is revoked and replaced with the following as a new paragraph 11;
“the Trustees shall have the power to appoint a new Trustee (or Trustees)”.
(b)the Trust Deed is further varied by the addition of a new cl 10A, which reads as follows:
“Notwithstanding any other power or provision in this Deed, the Trustees shall, and shall only, distribute capital of the Trust Fund in accordance with cl 3.9 of the Deed of Family Arrangement, (a Deed involving all parties to the litigation in CIV-2021-485-148 and CIV- 2021-485-432) executed on 16 February 2022”.
(c)In the Trust Deed, cls 1(d)(iv),(v),(vi) and (vii) are deleted:
and the words:
“ … and the said Walter Ruby and June Smith”
are removed and deleted from cl 1(e) of the Trust Deed.
[8] In making those orders varying the A Ruby Trust I did so on the basis of this Court’s inherent jurisdiction and the provisions of the Trust Act 2019 (the Act). At the request of counsel, a full suppression order was also made.
[9] I indicated too that my detailed reasons for this decision would follow. I now give those reasons.
Some background facts
[10] Zoe and her late husband, Arthur Ruby (Arthur), were married in (the 1950s). They had two children, Molly born in [the 1960s] and Eileen born in [the 1960s]. In [the 1970s] they purchased the Clarkeville property and in [the 1990s] the Wildtown property.
[11] As I have noted, [in the 1980s] they settled the A Ruby Trust. In [the late 1980s] they also settled the A Ruby (No 2) Trust and the Z Ruby Trust. The purpose of settling these trusts was to hold and manage Zoe and Arthur’s assets.
[12] The A Ruby Trust, the subject of the present application before me … [owns] a family business. Its original trustees were Arthur and his solicitor at the time. The present trustees of the A Ruby Trust are Eileen, A B …, C D …, and E F … ..
[13] The beneficiaries of the A Ruby Trust are named as Zoe, Molly, Eileen, Eileen’s husband, Bruce, Molly’s children, Mary and Michael, and as purely discretionary beneficiaries, Arthur’s siblings, Walter Ruby and June Smith and their respective spouses and any children Walter and June may have (as nephews and nieces of Arthur and Zoe) and the spouses or children (if any) of those nephews and nieces.
[14] Approximately eight years ago, Zoe and Arthur signed a memorandum of wishes which set out their (non-binding) wishes as to how the various trust (and non- trust) assets should be used to benefit Zoe and Arthur during their lifetimes and, after both had passed away, distributed generally between Molly and Eileen. Among other things the memorandum proposed that ultimately the Clarkeville property was to be left to Eileen and the Wildtown property to Molly.
[15] Arthur died about 7 years ago. Zoe is now in her eighties and appears to be in good health.
[16] Since around 2014, it seems relationships within the family have substantially deteriorated. In particular, family members have been unable to agree on the management of the Clarkeville and Wildtown properties despite many discussions and family meetings in particular throughout 2019 and 2020. These disagreements blossomed into the present claims before this Court outlined in proceeding -148 issued on 29 March 2021 and proceeding -432 issued on 9 August 2021.
[17] The two-day hearing for both of these proceedings effectively commenced on 15 February 2022 and culminated in the conditional settlement being reached with all parties to the proceedings completing the Deed of Family Arrangement. A discontinuance of each proceeding is to follow.
Reasons for the Trust Deed variations sought
[18] Again, I note there are three variations to the A Ruby Trust Deed proposed before the Court. The first is a variation to the power of appointment for trustees; the second is a variation to the ultimate distribution mechanism for the Trust; and the third is to vary and remove certain discretionary beneficiaries of the Trust said to be redundant.
Appointment variation
[19] Clause 8 in the Deed of Family Arrangement makes provision for a series of changes to be made generally to the trustees of the A Ruby Family Trust. These matters are seen as important by all parties in securing a settlement here as it is said they address matters of significant distrust within the family by introducing an independent trustee.
[20] Under its Trust Deed the current power of appointment for trustees of the A Ruby Trust is held jointly by the executors of the estate of the late Arthur Ruby. Those current executors are Zoe, C D and A B. A B is over 80 years old and was previously a trustee of the A Ruby Trust, but it seems he retired [a year or two ago]. As I understand it, he is not a party to the Deed of Family Arrangement.
[21] The view of all parties here is that it would be more straightforward and secure for the power of appointment to be vested in the trustees of the A Ruby Trust, all of whom are parties to the Deed of Family Arrangement. Future exercise of that power would be constrained by cl 8.5 of the Deed of Family Arrangement which reads as follows:
“Future appointments and related matters
8.5 [Zoe and C D] agree that their powers of appointment of trustees in respect of the A Ruby Trust and the A Ruby No 2 Trust will only ever be used to appoint an independent trustee, and that the mechanism in cl 8.3 will be used for all future appointments”.
Distribution variation
[22] Clause 3.9 of the Deed of Family Arrangement provides for a bespoke distribution mechanism, the essence of which is designed to achieve certainty and parity between the different interest groups within the Ruby family. The parties say this clause is important to the settlement in the Deed of Family Arrangement as it substantially determines the future course of the A Ruby Trust. This trust would be the main asset-owning entity remaining in the family generally following implementation of the other provisions in the Deed of Family Arrangement.
[23]That cl 3.9 of the Deed of Family Arrangement states:
3.9 The trustees of the A Ruby Trust, having each considered and exercised their powers, hereby agree that all future distributions, other than those contemplated in this Deed, will be made in the following proportions:
(a)Group 1:
50 per cent to Molly (or, in the event of her death prior to that distribution, to [her children Mary and Michael]in equal shares, or the survivor of them);
(b)Group 2:
40 per cent to Eileen (or, in the event of her death prior to the distribution, to the … Retirement Trust settled in … 2021, to [her husband, Bruce], or to any other entity nominated by Bruce); and
(c)Group 3:
10 per cent to Zoe if she is alive at the time of any distribution (otherwise, this 10 per cent will be to Group 2 above).
[24] The parties indicated to the Court that there are two interlocking reasons why they view the distribution variation here as necessary:
(a)First, the mechanism in this cl 3.9 of the Deed of Family Arrangement could be viewed as a fetter on the trustees’ discretion. Section 33 of the Trusts Act 2019 (the Act) establishes the default duty on a trustee not to “bind or commit trustees to a future exercise or non-exercise of a discretion”. As a default duty, that obligation can be altered by the
express terms of the Trust Deed. The distribution variation would achieve that. It would also give comfort to any future trustees that they would not be acting unlawfully in making distributions in accordance with cl 3.9 of the Deed of Family Arrangement.
(b)Secondly, there are several other powers in the Trust Deed that allow for distributions to be made to beneficiaries. Permitting the trustees to exercise those other powers without reference to the mechanism in cl 3.9 of the Deed of Family Arrangement would undermine the certainty and parity achieved by the mechanism.
Beneficiary variation
[25] The context for the beneficiary variation is that the A Ruby Trust, which was established over 40 years ago, includes classes of beneficiaries that are not provided for under the distribution mechanism in cl 3.9 of the Deed of Family Arrangement. None of those beneficiaries have been parties to these proceedings nor have any of them been served. They are not parties to the Deed of Family Arrangement.
[26] The beneficiaries that the parties seek to remove by this variation provision are as follows:
(a)Walter Ruby (Arthur’s younger brother);
(b)June Smith (Arthur’s older sister);
(c)any wife or widow of Walter Ruby;
(d)any husband or widower of June Smith;
(e)any children of Walter Ruby and June Smith (Arthur’s nieces and nephews);
(f)any wife or widow or husband or widower or children of any children of Walter Ruby and June Smith;
(g)any charitable trust purpose or institution; and
(h)any wife or widow or husband or widower or children of the children of the Ruby children (ie any spouse or child of Mary or Michael).
[27] The Court has been told that both Walter Ruby and June Smith have now died. Each had four children of whom one has since died. The remaining seven children are cousins of Eileen and Molly. Of the seven, at least three (and possibly five), are married. Six of the seven have children. There are approximately 15 grandchildren of Walter Ruby and June Smith in total.
[28] As I have noted the A Ruby Trust was settled in the 1980s and it is now nearly 40 years old. The age of the Trust is relevant here for two reasons. First, I accept it was settled at a time when it was common to include broad classes of beneficiary, particularly by way of discretionary beneficiaries. Secondly, since it was settled the nature of the core family that the A Ruby Trust has in reality provided for has evolved. Eileen, Arthur’s daughter, has a husband, Bruce, and Molly also a daughter of Arthur has two children, Mary and Michael. Those children are Arthur’s grandchildren. Arthur’s siblings and his nieces and nephews were included as discretionary beneficiaries in the A Ruby Trust most likely to benefit in the absence of Arthur’s own children (and his grandchildren if born) surviving him and Zoe. Those children, Molly and Eileen, and the grandchildren, Mary and Michael, have survived Arthur.
[29] Importantly, the nieces and nephews of Arthur and their associated beneficiaries do not have vested interests in the property of the A Ruby Trust. As I understand it, they have also never benefited from that Trust nor even been informed of its existence.
[30] The continued presence of those parties as discretionary beneficiaries, counsel says raises potential complications for the trustees of the A Ruby Trust in one respect. This is the requirement in s 51 of the Act whereby the trustees are required to provide basic trust information to those beneficiaries. They could also be obliged to provide other more detailed requested information pursuant to the presumption in s 52 that Trust information be provided. Given that none of these beneficiaries have benefited
in the past and would not now be capable of benefiting from the A Ruby Trust (as a consequence of the distribution variation) it is claimed the provision of information would only be the cause of unnecessary delay and expense for the trustees and to the detriment of the parties who are the principal beneficiaries of the A Ruby Trust.
[31] The same rationale applies to the charitable trusts noted at [26](g) above, and to potential spouses or children of Mary or Michael noted at [26](h) above, (of which there are currently none as I understand it). The view of all parties to these proceedings is that, given some classes of beneficiary are to be removed, it would be appropriate and tidier to remove those classes of beneficiary noted in this paragraph at the same time. No objection from any parties to this proceeding to what is proposed has been raised and, indeed, they have unanimously agreed to the proposed variation.
Jurisdiction and the merits
[32] I turn now to the issues of jurisdiction to make the variations proposed and the merits and the necessity of doing so here.
[33] On this, all the present parties in these proceedings and their counsel contend and agree that this Court has the jurisdiction to make the proposed variations either pursuant to the relevant powers in the Act or pursuant to this Court’s inherent jurisdiction.
[34] I turn first to the statutory powers. The starting point on this is s 122 which empowers trustees to vary the terms of a Trust Deed by unanimous consent enacting the role in Saunders v Vautier.1 The Court may supplement that consent with the powers in s 124 which permit the Court to provide consent on behalf of incapacitated, minor or future beneficiaries, and in s 125 which permit the Court to waive the requirement that any beneficiary consent to a variation under s 122.
[35] This Court has also recently confirmed the breadth of its inherent jurisdiction to vary a Trust in the decision of Isac J in Re Setter:2
1 Saunders v Vautier (1841) (Cr and Ph 240, 41 ER 482).
2 Re Setter [2021] NZHC 1603, at [36](b).
“The view of the limits of the inherent jurisdiction expressed in Chapman v Chapman may no longer be good law. That is because underpinning their Lordships’ judgments was the rejection of “any suggestion that the Court has an inherent jurisdiction to alter a man’s will because it thinks it beneficial”. Yet Parliament when enacting s 130 expressly empowered the Court to approve variations which the Court considers “desirable” for the proper management or administration of the trust property. Implicit in Parliament’s approach is a rejection of the underlying premise in Chapman v Chapman, that is, that a Court cannot vary a trust where it would be beneficial to do so. If the inherent jurisdiction takes its lead from the Court’s statutory jurisdiction, it seems a more coherent approach under the 2019 Act may be to avoid strained constructions of the statutory language regarding variations to trusts and to look to the inherent jurisdiction in appropriate cases to fill any gaps left by Parliament (to the extent any such evolution of the inherent jurisdiction is consistent with the statute).”
[36] I am satisfied these views expressed by Isac J do represent a modern and proper understanding of the Court’s inherent jurisdiction to supervise trusts. I am satisfied too that this to some extent follows also from the comments of Mander J recently in Gavin v Gavin3 which I refer to below relating to the principles the Court is to apply in exercising its discretion to approve a variation of trust in terms of s 124 of the Act.
Appointment variation
[37] The jurisdiction to consider and approve the appointment variation here in my view can be sourced in the inherent jurisdiction of this Court or in s 130 of the Act. Section 130 provides the Court with the power to “vary or extend the powers of the trustees” if the Court considers the variation “necessary or desirable for the proper management or administration of the trust property”.
[38] In the decision of this Court referred to above Re Setter, Isac J varied a power of appointment under the inherent jurisdiction. In doing so he considered that s 130 was unavailable on the facts of that case because the variation proposed to give the power of appointment to beneficiaries. For that reason the Court found s 130 (which concerns the powers of trustees) to be inapplicable.4 In doing so however his Honour recorded his view that, in relation to trustees, s 130 enacts a broad power of variation which includes the ability to vary a power of appointment:5
3 Gavin v Gavin [2021] NZHC 550, at [15].
4 Re Setter, above 2 at [28].
5 At [36](a).
“First, it seems the previously expansive view of s 64 as permitting variations to trust deeds has been accepted in the broader statutory power conferred on the Court in s 130, but only insofar as a proposed variation relates to trustee powers. Other variations of trust deeds would not prima facie appear to be contemplated by the statutory language, and would fall to be considered either under ss 122–125, or the inherent jurisdiction.
[39] The power sought in the present case is one to the trustees, so the problem that arose in Re Setter in my view is of no concern here. The appointment of trustees as I see it prima facie relates to the “administration of the trust property” and I accept the reasons advanced before me by counsel for the parties that this variation in all the circumstances here is both necessary and desirable. An order for the appointment variation is to follow.
Distribution variation
[40] Turning now to the distribution variation, the jurisdiction to approve this in my view is able to be sourced from either the Court’s inherent jurisdiction or from ss 122, 124 and 125 of the Act.
[41] It is fair to say however that in considering these two options, the statutory mechanism under the Act is a more complicated one. This is because it involves:
(a)the parties to the Deed of Family Arrangement providing consent to the variation pursuant to s 122;
(b)the Court providing consent to the variation on behalf of the potential future beneficiaries, namely any spouse or child of Mary or Michael and any charitable trust purpose or institution; and
(c)the Court waiving the requirement for the nieces and nephews and discretionary beneficiaries relating to them consenting to the variation.
[42] In turning to consider s 124, a helpful recent authority on this provision is contained in Gavin v Gavin6 where Mander J at [15] summarised the principles that the Court should apply in exercising its discretion to approve a variation of trust:
(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;
(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 benefiting to make good losses to the disadvantage of other beneficiaries; and
(i) an order approving a proposed variation may be conditional.
[43] Helpfully, Mander J in his judgment also identified that s 124 was designed to be a deliberate relaxation of 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. Recently Mallon J in this Court has also confirmed (in the context of facilitating the settlement of family trust litigation) that it is appropriate for the Court to exercise its powers under s 124 in this broader way.7
6 Gavin v Gavin, above n 3.
7 Re Macalister [2021] NZHC 3572, at [23]–[26]
[44] Turning now to the context of the case before me, the represented parties here emphasised that the distribution variation was of significant benefit to all the beneficiaries who are signatories to the Deed of Family Arrangement. I accept that is the case. It provides them all with certainty and parity and was crucial I am told in facilitating the settlement of what was a longstanding and very bitter family dispute. I accept that this benefit outweighed any detriment to what must be seen as distant discretionary beneficiaries who only ever enjoyed a vague hope of benefiting from the A Ruby Trust, and in the circumstances they were effectively in all respects redundant. As I see it in the present circumstances, in reality they never had any real hope of benefiting under the Trust because the immediate and direct family of Arthur Ruby, being his children and grandchildren, have survived and are to benefit in line with both his and Zoe’s expressed wishes in their memorandum of wishes and also in line with the fact that those direct family members had vested interests under the trust. It is noted too that the nephews and nieces and other distant beneficiaries affected here, have always been (and remain) unaware of the trust’s existence and the fact they were named originally as discretionary beneficiaries. There is one additional and important factor here as I see it. This is the fact that at one level, the distribution variation can also properly be said to benefit the entire Ruby family including the remote beneficiaries in the sense that all parties will enjoy the overall benefits to the welfare and honour of the family that will arise from the hard-fought settlement of these proceedings, and the mending of relationships likely to occur once (as here) these underlying disputes within the family have been resolved. All this is of particular importance to the Court’s exercise of its inherent jurisdiction to vary the distribution provision with the bespoke mechanism in cl 3.9 of the Deed of Family Arrangement, but it also has relevance to the statutory variation mechanism I am considering here.
[45] Turning now to s 125, it is my understanding that to date there are no authorities which provide a detailed discussion of the principles relating to this section.
[46] Notwithstanding this, it is useful to look to the key provisions of this section. Section 125(4) provides a similar limitation to that applying under s 124, namely that the Court cannot waive consent if the effect would be to reduce or remove any vested interest in the Trust property. No such issue arises here. All the parties involved are only discretionary beneficiaries who do not have a vested interest in the Trust.
[47]Addressing s 125(3), this sets out three mandatory considerations for the Court:
(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 is to make or refuse 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.
[48] In addressing these s 125(3) considerations, I am satisfied each supports approval of the distribution variation sought here for the following reasons:
(a)the remote beneficiaries who will not benefit from the variation hold only discretionary interests in the trust property. The effect of the proposed order will be minimal given these beneficiaries I am told have not previously benefited, nor even expected to benefit from the trust property here;
(b)while any detriment suffered by those remote beneficiaries in any event may be seen as only minor, the benefit of the variation to the entire Ruby family including its immediate members is significant. Clearly it facilitates the settlement of what was an extremely difficult family dispute and enables all parties, including the core Ruby family members, to get on with their lives. Conversely the detriment to those core beneficiaries if this Court refuses to make the proposed variation order I accept is substantial. First, they would be deprived of the certainty and parity that the distribution variation provides and secondly, it is highly likely that ongoing acrimony and disquiet between all members of the family would flourish; and
(c)the intentions of the settlors and creators of the Trust, Arthur and indeed his widow Zoe, also in my view clearly support the distribution variation. This is because it is evident the primary beneficiaries of this trust were to be those who will also benefit from the Deed of Family Arrangement — namely Zoe, Eileen and Molly (and also
Mary, Michael and Bruce). The intentions of the settlors in this respect are clearly articulated in the memorandum of wishes completed by Arthur and Zoe. What they expressed there is effectively being facilitated with the assistance of this variation.
[49] On this aspect, it is useful also to consider s 4 of the Act. This obliges a Court when “performing a function or duty or exercising a power under this Act” to “have regard to” the principle that “a trust should be administered in a way that avoids unnecessary cost and complexity”. This broad principle in my view assists the general argument that, under the present circumstances prevailing for all immediate and more distant members of the Ruby family, at the very least the use of the Court’s inherent jurisdiction to approve this variation is appropriate here. An order for that distribution variation is to follow.
Beneficiary variation
[50] The jurisdiction for beneficiary variation, I am satisfied, is broadly the same as that which applies for the distribution variation. This rests with the inherent jurisdiction of this Court or alternatively a combination of ss 122, 124 and 125 of the Act. Many of the reasons I have noted above relating to the distribution variation also, as I see it, support the view that this Court has jurisdiction to remove and should in the circumstances here remove distant beneficiaries who are purely discretionary beneficiaries from the Trust Deed.
[51] The view taken in authorities like Chapman v Chapman that the Court’s inherent jurisdiction here is confined by the terms of the relevant trusts legislation, given that the House of Lords decided this case nearly 70 years ago, is purely a product of its time. At that time in the mid-1950s, modern discretionary family trusts were not possible and did not exist. It is understandable that courts at that time were cautious not to permit the extinguishment of vested beneficial interests by the courts. That same concern is reflected in ss 124(5) and 125(4) of the Act. I accept that this Court’s inherent jurisdiction cannot be used to remove a vested interest, but in this case that issue simply does not arise.
[52] I find too that the beneficiary variation is consistent with the principles outlined by Mander J in Gavin v Gavin and with the mandatory considerations in s 125(3) of the Act to this end:
(a)The variation benefits the beneficiaries as a whole in terms of promoting the welfare and honour of the entire Ruby family by bringing to an end the present long-running and acrimonious family disputes;
(b)The variation is consistent with the intentions of the settlors that the nieces and nephews were to benefit in a contingency that is no longer relevant now that Arthur Ruby has died, Eileen has married and Molly has children;
(c)It causes no real detriment to the removed beneficiaries who, in any event, are unable to benefit from the A Ruby Trust in light of cl 3.9 of the Deed of Family Arrangement and who never had a real hope to benefit from the Trust in any event.
[53] I am satisfied it is also consistent with the principles of the Act, namely the principle that “a trust should be administered in a way that is consistent with its terms and objectives” (emphasis added) and that “a trust should be administered in a way that avoids unnecessary cost and complexity”.8 A distinction is properly drawn between a trust’s terms and a trust’s objectives. Section 4(a) of the Act emphasises that the Court ought to have regard not just to the words of a Trust Deed but also to its underlying objectives or purpose. Those objectives are to be derived not just from the words of the Trust Deed themselves (given that the word “objectives” must have some meaning and is not simply to be redundant), but from the underlying factual matrix and context of the Trust.
[54] In this case the context is of a family trust established when the first- generation beneficiaries, being Arthur and Zoe, had by [the early 1980s] started to accumulate wealth and they had children who had just finished their schooling. The trust itself
8 Section 4 of the Act.
was designed to hold that wealth and give the family a vehicle that would be flexible as the family evolved over time. I acknowledge it is proper to accept that this flex and evolution would have been contemplated by the settlor and Arthur and Zoe at the time. More importantly s 4(a) also authorises the Court to have regard to what the objectives of the Trust are today as they have evolved. As I see the position that is simply what is occurring here.
[55] Some support for this view can be taken from the decision of Woolford J in FFP Trustee (NZ) Limited v Low.9 In that case a blessing order was given for restructuring of a trust noting (with apparent approval) the submission that waiver of consent for opposing parties claiming a beneficial interest would likely be permitted under s 125 where the proposed restructure was “in the best interests of all parties”.
[56] In this case I am satisfied the beneficiary variation, like the other trust variations referred to above, is in the best interests of all parties here, and at the least in the exercise by this Court of its inherent jurisdiction should be approved.
[57] Lastly, I note as an aside and for completeness that, had the A Ruby Trust contained a Power of Variation (as most modern trust deeds do), this Court clearly could take the view that the three variations for which Court approval has been sought here could not be considered in any sense an attack on the substratum of the trust. Those variations require Court approval here largely because the Trust Deed for the A Ruby Trust is of an era where powers of variation in a trust deed were not common. I am satisfied too the variations sought here are generally somewhat typical of the variations undertaken in cases such as the present to resolve extreme disputes which develop involving family trusts.
[58] For all these reasons the variation orders made in my judgment of 17 February 2022 and as outlined at para [7] above were made.
[59] As I noted at the outset this is a fully redacted version of the Reasons for Judgment which I had issued in these proceedings (at the request of counsel and all parties) with full suppression orders on 25 February 2022. The parties and counsel
9 FFP Trustee (NZ) Ltd v Low [2021] NZHC 3507, at [51]–[53].
accepted and I confirm that this fully redacted version will not be the subject of any suppression order and will be available for search.
[60] An order is now made however, that for confidentiality reasons, the High Court files CIV-2021-485-0148 and CIV-2021-485-0432 relating to these proceedings are sealed, and will only be available for search by the direct parties to these proceedings and except as otherwise may be approved by a Judge of this Court.
Gendall J
Solicitors:
Greg Kelly Law Limited Succeed Legal Limited Russell McVeagh
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3
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