Sadlier

[2019] NZHC 1140

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2018-419-367

[2019] NZHC 1140

IN THE MATTER

of the Trustee Act 1956

BETWEEN

MATTHEW JOHN SADLIER, KEITH

BARCLAY OSBORNE AND NWM TRUST MANAGEMENT LIMITED AS

TRUSTEES OF THE CORNERSTONE PREPAID FUNERAL TRUST

Applicants

Hearing:	7 May 2019
Appearances:	G M Spry for Applicants
Judgment:	23 May 2019

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 23 May 2019 at 3:00 pm Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Norris Ward McKinnon, Hamilton

SADLIER & ORS AS TRUSTEES OF THE CORNERSTONE PREPAID FUNERAL TRUST [2019] NZHC 1140 [23 May 2019]

Introduction

[1]                  The applicants are the trustees (the Trustees) of the Cornerstone Prepaid Funeral Trust (the Trust). The Trust was established by deed (the Trust Deed) on 1 July 2002 by Seddon Park Funeral Home Limited (Seddon Park), and Osbornes Funeral Home Limited (First Osbornes), to receive prepayments from customers of those two companies for future funeral services (the prepaid funeral scheme).

[2]                  In 2016 Osbornes sold their funeral services business to an unrelated party, Osbornes Funeral Directors Limited (New Osbornes). The terms of the sale to New Osbornes included the purchaser agreeing to meet the existing contractual obligations First Osbornes had to its prepaid funeral customers to provide future funeral services. The Trustees now seek amendments to the Trust Deed to enable Seddon Park and New Osbornes (collectively the Funeral Companies) to continue to carry out their obligations to provide future funeral services to prepaid customers.

[3]                  However, the terms of the Trust do not confer power on the trustees to vary the Trust Deed or provide for the introduction or substitution of a new company into the existing prepaid funeral scheme, and the proposed amendments to the Trust Deed are for the purpose of enabling that to occur and also to expand the powers of the trustees to make further and future amendments to the Trust Deed pursuant to s 64A of the Trustee Act 1956 to deal with future circumstances.

[4]                  The Trustees apply for approval of amendments to the Trust Deed as set out and contained in a draft Deed of Variation of Trust (the Variation Deed), which will confer power on the Trustees to substitute First Osbornes with New Osbornes which will thereafter discharge the obligations of First Osbornes to its prepaid funeral customers, and to all or any new prepaid funeral customers of New Osbornes. The Trustees are also concerned about the future management of the Trust and in particular in regard to any further changes that may become necessary if either of the current funeral businesses are sold .

[5]                  The Trustees apply by Originating Application for orders approving variations to the Trust Deed. In a Minute issued on 20 February 2019, van Boheman J granted the Trustees leave to commence the application by way of originating application.

[6]                  The Trustees also applied for an order that service on any other party be dispensed with. In support of the application, the Trustees said that there were no identifiable beneficiaries of the Trust and the only other potentially interested parties are the approximately 200 prepaid funeral customers who have existing contractual arrangements with the Funeral Companies. The Trustees say that it is the Funeral Companies which have a contractual relationship with their prepaid funeral customers, and that there is no direct relationship between the Trust and the prepaid funeral customers.

[7]                  Van Boheman J declined the Trustees application for an order dispensing with service on any other person, and directed that service be effected on New Osbornes and its director Mr Richard Fullard. Van Boheman J did not order service on any other party, and directed that once the proceeding had been served on Mr Fullard and New Osbornes, the application should be set down as a formal proof hearing. He said:

[10]   Despite the name of the Trust Deed name – The Cornerstone Prepaid Funeral Trust Deed – it is not entirely clear that the Trust Deed establishes a trust, at least in the period prior to the date of distribution when any residual income held by the Trustees is to be distributed. No settlor is identified. No beneficiaries are identified as such in the Trust Deed. In the affidavit accompanying the application it is stated that the beneficiaries are the charitable trusts and other charitable organisations to which any balance of income held by the Trustees is to be paid following the settlement of accounts with customers of the Companies. But because they are not identified as beneficiaries until the date of distribution, at present, such funds as the Trust holds are not held on behalf of any identifiable beneficiaries.

[11]  Neither the Companies nor the customers are named as beneficiaries. Yet, during the lifetime of the Trust, both the Companies and the Customers appear to hold a beneficial interest in the funds that are held by the Trust. Both receive money from the trustees, the Companies as payment for the funeral service, and the Customers as return payments where the cost of the funeral service is less than the prepaid amount. However, key aspects of the arrangements to which the Trust relates – notably the payment of funeral expenses at prices set outside the Trust – are governed by separate contracts between the Companies and the Customers.

[12]  The question that arises, therefore is whether the Trust Deed does in fact establish a trust or whether it really sets out a series of contractual arrangements between the Trustees and the Companies and between the Trustees and the Customers and, if the latter, whether a genuine trust only arises at the date of distribution.

[13]    These are matters on which the Court needs to hear submissions, including reference to relevant authorities, in order to satisfy itself that the whole of the matters provided for in the Trust Deed relate to a genuine trust

and that the Court does have the power, whether under the Trustee Act 1956 or in the exercise of its inherent jurisdiction, to make variations to the Trust Deed that are sought in the application.

[8]                  Mr Fullard had already sworn an affidavit on behalf of New Osbornes advising that the Company supports the Trustees’ application and consents to the orders sought.1 On behalf of New Osbornes, Mr Fullard undertakes to carry out the prepaid funeral arrangements entered into by First Osbornes.

[9]                  The applicants have also supported their application with a joint affidavit sworn by or on behalf of all three Trustees setting out the background regarding the establishment of the Trust, its purpose, how it operates, and why the Trust Deed requires variation.

Background

The Deed

[10]              The Trust was established by the original two funeral companies (Seddon Park and First Osbornes), by deed dated 1 July 2002. The parties to the Deed were Seddon Park and First Osbornes (collectively termed “the companies” in the Deed), of the first part, and Keith Osborne, Lynda Thomas, and NWM Trust Management Limited, of the other part. Lynda Thomas retired as a trustee on 18 July 2007, and Matthew Sadlier was appointed in her place. A deed of retirement and appointment (the Retirement Deed) recorded the change of trustees.2

[11]The Trust Deed contains the following explanatory recitals:

Whereas

A.The companies will enter into contracts with customers or with others to provide future funeral services for customers in consideration of the customer depositing an agreed prepayment amount (“the prepayment”) with the trustees. This agreed prepayment amount to be an agreed amount fixed for each customer.

1      Mr Fullard’s affidavit although sworn on 5 September 2018, prior to the filing of the proceeding, was not filed along with the other supporting affidavit, and accordingly was not before van Boheman J when he issued his Minute on 20 February 2019.

2      Deed of Retirement and Appointment of New Trustee of the Cornerstone Pre-Paid Funeral Trust, 18 July 2007.

B.The trustees have agreed to receive prepayments from customers or from others on behalf of customers and to hold such prepayments and the income therefrom respectively upon the trusts hereinafter declared for the purposes of meeting the price of the funeral services to be supplied by the companies at some future date.

C.It is intended that any escalation in the actual price of the provision of the agreed funeral services when required in excess of the prepayment paid by the customer shall be paid to the companies from the accumulated income of the total of all prepayments received and held by the trustees, but for the avoidance of doubt it is hereby declared that:-

(i)the trustees shall be under no liability to the companies if there is at any time insufficient accumulated income to meet any such escalation in actual cost;

(ii)in no circumstances shall a customer or the personal representatives of a customer be required to pay to the companies or the trustees any more than the price stated in the agreement between the company and the customer for the funeral services agreed to be provided in the agreement. Should the customer or their representatives require a variation from the funeral services as specified in the agreement the company shall have the right to charge the estate of the customer an additional price for these variations.

(iii)the trustees shall be under no liability personal or otherwise to provide funeral services for these variations.

[12]              The operative provisions of the Deed commence by stipulating the basis upon which the Trustees will receive and hold money received from the funeral companies. The first two paragraphs provide:

1.The trustees will receive from a customer (or from others on behalf of customers) a prepayment being a contracted amount for the provision of future funeral services as detailed in the contract between the customer and the companies with such prepayment being held by the trustees upon the trusts hereinafter declared.

2.The trustees will hold the prepayment received from the customer until:-

(a)the trustees receive a certified copy of the death certificate of the customer and an invoice addressed to the estate of the customer for the funeral services provided by the companies pursuant to the companies’ agreement with the customer; or

(b)the trustees receive instructions in writing from the customer requesting repayment of the prepayment to the customer pursuant to the agreement between the companies and the customer. On such repayment to the customer the trustees shall advise the company concerned that it is released from its obligation to provide funeral services to that customer and the customer shall be given notice by the company that the company’s contracted obligations to the customer are at an end.

(c)Where the customer has died and a funeral is conducted other than by one of the companies, the executor(s) or administrator(s) of the customer’s estate may request in writing repayment of the prepayment to the customer’s estate.

(d)The end of the perpetuity period or the earlier determination by the trustees of the trusts of this deed. On such termination of the trust the customer prepayments held are to be repaid to the customer together with an allocation at the discretion of the trustees from the accumulated interest held on prepayments remaining at the determination of the trust. Where a customer accepts such repayment the customer shall release the companies from their obligation to provide funeral services to that customer. If, however, the customer wishes to retain the benefit of the agreement between the customer and the companies for the provision of funeral services the prepayment and allocation of income shall be paid to the companies for the provision of those services.

[13]The Deed further provides:

14.For the avoidance of doubt it is declared that the trustees do not hold any prepayments paid by the customers or interest thereon for the benefit of the companies.

[14]              The Deed stipulates that the invoice for funeral services referred to in paragraph 2(a) shall be for the actual price of the funeral services provided pursuant to the contract between the customer and the funeral company. The Deed then provides that upon receipt of both the death certificate and the invoice for funeral services, the trustees will pay the funeral company the prepayment sum paid by the customer pursuant to the customer’s agreement with the funeral company. The Deed further provides that in the event that the amount charged by the funeral company for the customer’s funeral is in excess of the prepaid amount, the further amount “which is in excess of the prepayment paid by the customer shall be paid by the trustees from the total of accumulated net income earned on all prepayments held by the trustees from time to time.”

[15]              The accumulated interest derived from the funeral prepayments held by the Trustees is described in the Deed and known as “the accumulated capital fund.” The Deed provides for situations where the accumulated capital fund is insufficient to meet any payment required to be made to meet the excess of a funeral invoice over a customer’s prepaid amount. The trustees have the power to either charge the amount against the following year’s income derived from the accumulated capital fund, or require the funeral company to reduce its invoice to a level which matches the amount available in the accumulated capital fund.

[16]              The Deed stipulates that the prepayments received by the trustees shall be paid into a bank account held by the trustees and may be invested on interest bearing deposit on call or on term with any bank registered under Part V of the Reserve Bank of New Zealand Act 1989 (RBNZ Act). The Deed further stipulates that the trustees shall have no power to invest all or any part of the “trust funds” with any person, company or institution other than a bank registered under the RBNZ Act.

[17]Clause 9 of the Deed provides:

No customer shall be entitled to interest on the prepayment paid by the customer, nor have any right or entitlement in any way to any interest earned on or other income of the prepayment held by the trustees from time to time and all interest and income shall be held and applied according to clause 11 of this deed.

[18]              The Deed also makes specific provision for the trustees’ holding and management of the accumulated capital fund. Clause 11 provides:

11.The trustees shall hold as an accumulated capital fund the income earned from investment of the prepayments held by the trustees (including income derived from income) on the following trusts in the order of priority set out hereunder:-

(a)Such income shall be trustees income and the trustees shall pay out of such income the tax thereon.

(b)To pay any costs of the administration of the trusts of this deed unless otherwise determined by the trustees.

(c)To pay the balance of the invoiced price from the companies (for the particular services stated in the agreement between the company concerned and the customer) where this price is in excess of the prepayment originally paid by the customer.

(The prepayment originally paid by the customer is applied by the trustees in accordance with clause 4 of this trust deed).

(d)At the end of the perpetuity period of this deed, or if and when the trustees resolve earlier to determine the trusts of this deed, any balance held in the accumulated capital fund of the trust shall be applied by the trustees as follows:-

(i)To pay to the account of any customer (by way of addition to the prepayment paid by the customer) for whom the companies have still to provide funeral services pursuant to an existing agreement such sum as the trustees on advice from the companies as to the then costs of providing funeral services specified by the customer in his or her contract, as the trustees in their discretion decide is sufficient to meet the cost of providing those funeral services at that date (pro rata if necessary) and the trustees shall not be required to justify or account to the customer for their decision or for the basis of it; and after payments are made pursuant to this paragraph.

(ii)To pay the balance to any other trust or organisation or organisations having exclusively charitable purposes and recognized by the Commissioner of Inland Revenue at that time as charitable trusts or organisations.

(e)The powers and provisions relating to investment of prepayments stated in clause 8 shall be applicable mutatis mutandis to investment of the accumulated capital fund.

[19]              The Deed also contains provision for the trustees to establish another trust should they decide that the interests of the prepaid funeral customers and the funeral companies would be better served by a new substitute trust. The power to establish a substitute trust is subject to further provisions that stipulate the principal objective of a substitute trust must be to hold funds to meet the funeral costs of the prepaid funeral customers of the funeral companies, and the terms of the substitute trust will not contradict the terms of the original Trust.

[20]              The Deed states that the perpetuity period “of this deed shall be the period of 79 years from the date of this deed.”

Operation of the Trust

[21]              The customers of the funeral companies enter into a written customer agreement with the company, whereby they purchase funeral services to be provided

upon their death by the company. The Seddon Park funeral service agreement is entitled: The Cornerstone Pre Paid Funeral Trust Funeral Service Agreement (the Seddon Park Agreement).

[22]The Seddon Park Agreement relevantly provides as follows:

In consideration of payment to be made to the Company, by The Cornerstone Prepaid Funeral Trust for the funeral services hereinafter described, at the standard charges by the Company at the time the services are actually provided, the Company hereby agrees upon the death of the Customer to provide funeral services as described from the Company’s Chapel, or any Chapel, Church, or Residence within the Hamilton City Boundary, to the specified Cemetery or Crematorium mentioned in this plan.

The price shall be as follows:

The sum of($) to be paid as a pre-payment amount to The Cornerstone Prepaid Funeral Trust, to be held and applied by the trustees upon the terms of the Trust Deed.

Any balance between the prepayment amount and the price charged by the Company, is to be paid by The Cornerstone Prepaid [Funeral] Trust, from accumulated interest on all prepayment amounts. Should there be any shortfall the Company is to reduce its charge accordingly.

…

The Cornerstone Prepaid Funeral Trust

All monies received in respect of the prepaid funerals are not received or held by or for the Company, but by an independently administered Trust, namely The Cornerstone Prepaid Funeral Trust. The sole purpose of the Trust is to provide the funds required to meet the funeral charges in respect of funerals provided under the Company’s Prepaid Funeral Service Agreements.

A copy of the Trust Deed and the names of the trustees are available on request.

[23]              The schedule of funeral costs which is attached to the Seddon Park Agreement, describes the several optional funeral or cremation services and their associated fees as, “Inflation-Proofed”, and directs customers: “Please make cheques payable to the Cornerstone Pre Paid Funeral Trust … .”

[24]              The customer’s prepayment money is either paid directly to the Trust or if to the Companies, passed on by the Company to the Trustees to be held in accordance with the Deed until the funeral services have been provided and the company has invoiced the Trust for the cost of its customer’s funeral. Should the invoiced funeral

cost be less than the prepayment amount, the Trustees refund the difference to the deceased customer’s estate. Should the invoiced funeral cost be more than the prepaid amount, the difference is paid by the Trustees from the income earned from the investment of the prepayments with the bank. The Trustees explain in their affidavit that this arrangement is intended to inflation-proof the cost of the funerals for the Companies, while involving no increased cost to the customer. At the end of the perpetuity period of the Trust, the Trustees are required to distribute any unused accumulated income to the residuary beneficiaries, being “any other trust or organisation … having exclusively charitable purposes and recognised by the Commissioner of Inland Revenue at that time as charitable trusts or organisations.”

[25]              The Trustees say that the beneficiaries of the Trust are therefore not selected or nominated by the trustees of the Trust until the date of final distribution at the end of the term of the trust.

[26]              The prepayment amounts received by the Trustees, from either the Funeral Companies or their customers, since the establishment of the Trust, have been paid by the Trustees into a bank account held at the ANZ Bank. The 31 March 2018 Financial Statements of the Trust prepared by PricewaterhouseCoopers (PwC) report total Trust assets of $1,488,148. That sum is comprised of ANZ term deposits of $1,347,916, and current assets of $140, 232, which include just over $100,000 in an ANZ bank call account. The prepaid funeral amounts are described and treated as non-current liabilities and total $1,223,106. The Trust’s profit and loss financial statement records that in the year ending 31 March 2018, the Trust earned interest income of $39,388 compared to $63,545 in the year ending 31 March 2017. After deduction of expenses the Trust suffered an operating loss of $19,721, compared to the operating profit of

$24,314 in the previous financial year.

Submissions for the applicant trustees

[27]              Ms Spry for the applicants has addressed each of the issues identified by van Boheman J in his Minute of 20 February 2019.

[28]              Ms Spry submits that although no party is named or expressly identified as being the settlor of the Trust, such is not necessary in order to create a valid trust. She

submits that the settlor is the person who creates the trust, in this case the two companies named in the Deed. Counsel says that it was the two companies which caused the Trust to be created, and it is at their direction that customer prepayments are placed with the Trustees, and the accumulated income earned from the prepayments is the Trust fund.

[29]              Ms Spry submits that the Trust is valid and was properly established by the two companies. She submits that the three required certainties for the establishment of a valid trust, namely: intention, subject matter, and objects, are all present in relation to the Trust.

[30]              She submits that the intention of the two funeral companies to create a trust is clearly evident in the present case, both from their conduct and the content of the documents created to evidence the existence of a trust. Counsel notes that the Deed provides a mechanism for the accumulated capital to be held by the Trustees for a specified person or object.

[31]              As regards certainty of subject matter of the Trust, Ms Spry submits that the trust fund is the accumulated income created from the investment of the funeral prepayments made by customers of the funeral companies, and which she submits is held by the Trustees on behalf of the funeral companies. Counsel submits that the property comprising the trust fund is expressly defined and designated in the Deed and is readily capable of being ascertained. Ms Spry further submits that the Deed specifically provides the extent of the beneficial interest of each beneficiary.

[32]              Turning to the requirement of certainty of objects, Ms Spry submits that the terms of the Deed sets out how the beneficiaries are to be ascertained and provides for the trustees, at the end of the perpetuity period, to pay any prepayment customers who have not been provided with funeral services, a sum that would meet the then cost of a funeral service as provided by the funeral companies. The Deed further provides that at the end of the perpetuity period, should there be any surplus balance of funds in the Trust after payments to those prepaid customers who have not been provided with funeral services, the Trustees are to pay that balance to a trust or organisation recognised as having charitable status by the Commissioner of Inland Revenue.

[33]              Ms Spry therefore submits that the Trust is a valid trust, and that the variations to the Deed are in each case required to confer power on the Trustees to continue to operate the Trust in accordance with the original intention of the funeral companies when the Trust was established in 2002.

Discussion

Is the Trust validly established?

[34]              It is clear from the terms and provisions of the Deed that from the outset it was intended to create and establish a trust. The Deed stipulates that the prepayment money received from customers as advance payment for funeral services is to be held by the Trustees on trust for the purpose of meeting the cost of funeral services to be provided by the Funeral Companies at a future date. The Trustees’ obligations relate to both the prepayment monies received, and to the income derived from the investment of the prepayment monies in accordance with the provisions of the Deed.

[35]              The subject matter of the Trust is clearly identifiable as being the prepayment monies received and to the income derived from the Trustees’ investment of the prepayment monies in accordance with the provisions of the Deed.

[36]              The objects of the trust are clearly expressed in the Deed as requiring the Trustees to hold the prepayment money received and to apply it to meeting the invoiced funeral costs of the customer following the provision of funeral services for that customer, as invoiced by the company with which the customer had an agreement for the provision of future funeral services. In the event that prepaid funerals have not been required to be paid for as at the termination date of the Trust, the Deed provides that the Trustees are to return the prepayment to the customer, together with an allocation of the accumulated interest held by the Trustees.

[37]              The interest derived from investment of the prepayment money is also to be held by the Trustees on trust and either used to make up any difference between the amount of a customer’s prepayment and the actual invoiced cost of that customer’s funeral, or to be distributed in accordance with Clause 11 at the end of the perpetuity period. Any and all unused income derived from investment of the prepayment money

is to be accumulated by the Trustees and held by them on trust to meet the difference of any future funeral invoices for prepaid customers, and where a funeral has not been provided to a customer making a prepayment, used for making an allocation of the accumulated interest to the customer.

[38]              The payment for goods or services which are to be provided in the future, will generally result in the payer being a creditor of the party who has agreed to provide the goods or services in the future. However, where the prepayment is made on express or implied terms that the prepayment will be held on trust, the prepayment money is to be held by the trustee for the party making the payment.

[39]In Re Kayford, Megarry J said:3

In Re Nanwa Gold Mines Ltd the money was sent on the faith of a promise to keep it in a separate account, but there is nothing in that case or in any other authority that I know of to suggest that this is essential. I feel no doubt that here a trust was created. From the outset the advice (which was accepted) was to establish a trust account at the bank. The whole purpose of what was done was to ensure that the moneys remained in the beneficial ownership of those who sent them, and a trust is the obvious means of achieving this. No doubt the general rule is that if you send money to a company for goods which are not delivered, you are merely a creditor of the company unless a trust has been created. The sender may create a trust by using appropriate words when he sends the money (though I wonder how many do this, even if they are equity lawyers), or the company may do it by taking suitable steps on or before receiving the money. If either is done, the obligations in respect of the money are transformed from contract to property, from debt to trust. Payment into a separate bank account is a useful (though by no means conclusive) indication of an intention to create a trust, but of course there is nothing to prevent the company from binding itself by a trust even if there are no effective banking arrangements.

[footnote omitted]

[40]              Here the terms of the Funeral Service Agreement entered into by customers of Seddon Park, expressly stipulated that the prepayment money would be paid to and held by an independently administered trust which was named and identified as being the Cornerstone Prepaid Funeral Trust.

[41]              The Funeral Service Agreement expressly states that the prepayment money is not received or held by or for the funeral company which has agreed to provide future

3      Re Kayford Ltd [1975] 1 All ER 604 at 607.

funeral services to the prepaying customer. The Deed itself states that for the avoidance of doubt it is “declared that the trustees do not hold any prepayments paid by the customers or interest thereon for the benefit of the companies.” Furthermore, the Deed expressly stipulates that the prepayment money and the accumulated capital derived from investment of the prepayment money, is to be held on trust by the Trustees upon the trusts declared in the Deed.

[42]              The primary beneficiaries of the Trust are the customers who have made prepayments and their deceased estates following their deaths. The actual funeral costs of those customers, including any increase of the funeral cost over the amount prepaid, are to be met by the Trust. Where no funeral service has been provided as at the date of termination of the Trust, the prepayment money and an allocation of the accumulated interest is to be paid to them. The beneficiaries can in each case be identified as being those persons who have entered into funeral service agreements with the Companies and who have made prepayments to the Trustees in accordance with the terms of the funeral service agreements.

[43]              The residuary beneficiaries are identifiable as being organisations or trusts recognised by the Commissioner of Inland Revenue as having charitable status.

[44]              I am satisfied that the three certainties are present here, and that the Trust was validly established. The terms of the Trust are expressly set out in the Deed and the intention to create a trust for the holding of prepayment money and the income derived from its investment is evident from both the Deed and the funeral service agreement entered into by the Funeral Companies and their prepaying customers.

The proposed amendments to the Deed

[45]The applicants apply for variation of the Trust in several respects.

Defining the term “companies”

[46]              Firstly, the applicants seek approval for variation of the Deed by amendment of the definition of the term “companies”. At present “companies” where it appears in the Deed refers specifically and exclusively to Seddon Park and First Osborne.

There is no mechanism provided for in the Deed that would enable the Trustees to deal with the situation which has arisen here, where one of those two companies has been sold to a new entity. Nor is there any mechanism for the Trustees to deal with a situation where one of the companies offering prepaid funeral services was wound up. The proposed amendment is intended to provide the Trustees with the power to introduce new companies as participants in the activities of the Trust where it is intended that they will take over existing obligations to customers who have made funeral prepayments, or to deal with circumstances where a participating company which has obligations to prepaid customers for providing funeral services, is sold or wound up.

[47]              The proposed variation of the Deed by the inclusion of a new clause setting out a definition of the term, “companies” to include any other companies appointed by the Trustees by deed to be companies contracted by customers to provide funeral services for customers in accordance with the terms of the Deed, is an appropriate and effective means by which the Trustee can deal with the consequences of a sale of one or other of the Funeral Companies, and where the purchaser is to take over responsibility for providing the future funeral services for which prepayments have been received. The proposed clause provides for the Trustees to include new companies as participants under the terms of the Trust, and to determine that former companies have ceased to be regarded as companies for the purposes of the Deed.

Removing “on account of invoiced price”

[48]              The application also seeks approval of amendment to clause 4 of the Deed by removal of the words: “on account of the invoiced price”. This amendment is sought as those words are superfluous. Clause 4 of the Deed provides:

Upon receipt of proof of death of the customer and the invoice for funeral services referred to in clause 2(a) the trustees will pay to the company concerned on account of the invoiced price the prepayment paid by the customer pursuant to the customer’s agreement with the company.

[49]              The words “on account of the invoiced price”, do not materially add to the meaning of clause 4. It appears that the phrase “on account” is intended to refer to the Trustees’ payment to the funeral company of the prepayment sum, as being “on

account” because of the likelihood that the actual invoiced funeral cost will be greater than the prepayment sum which will, in most cases, have been based on the Funeral Company’s prices as applicable years earlier.

Variation of clauses 12, 12(a), and 12 (b) – substitute trust and – resettlement on new trusts

[50]              The deed of trust currently provides for the Trustees to resettle the whole of the assets of the Trust on to one substitute trust of which at least one trustee must be a trustee of the existing trust. The proposed variation of clauses 12(a) and 12(b) provides for the Trustees to settle the assets of the Trust on to one or more substitute trusts, and will provide for the Trustees to have discretion as to whom they appoint as trustees of the substitute trust. The proposed variation will allow for future changes of the Funeral Companies and will give the Trustees greater flexibility in dealing with new situations as a result of change of ownership of the Funeral Companies.

Variation of clause 15 – duration of the Trust and the perpetuity period

[51]              The deed provides for the Trust to expire 79 years from the date of the Deed. The proposed variation provides for any change to the law of New Zealand permitting a longer period to be specified as the perpetuity period should such change in the law occur in the future.

Variation of clause 17 (a) – Number of trustees

[52]              The Deed presently provides for there to be at least three trustees, one of whom must be a director of Seddon Park and one a director of First Osbornes. The proposed variation would require there to be at least two trustees, one of which must be a person independent of the Funeral Companies. This proposed variation reflects the proposed changes to the definition of “companies” and the requirement for an independent trustee is proposed as an additional protection for the Trust and is consistent with how the Trust has been administered to date. The company appointed trustees are to be known as “the remaining trustees” and they may be directors of the Funeral Companies, although there is no requirement for a director from each of the companies to be appointed as a trustee.

Variation of clause 17 (c) – Power to appoint and remove trustees

[53]              The proposed variation of cl 17(c) confers the power of appointment and removing trustees upon the remaining trustee or trustees who shall be required to consult with the companies when appointing or removing a trustee.

Decision

[54]              All of the proposed variations are in my view consistent with the purpose and objective of the Trust and they will enable the Trustees to deal with the present situation whereby one of the original Funeral Companies has been sold and the purchaser company has taken an assignment and become responsible for discharging the contractual responsibilities of the original company to provide funeral services to pre-paying customers. Should that situation arise in the future, those variations to the Trust Deed will enable the Trustees to deal with such a matter by removing a funeral company and substituting it with a new funeral company to otherwise continue to discharge the contractual obligations to pre-paying funeral customers.

[55]              The other proposed variations are in each case reasonable and explicable as being an appropriate means of conferring power upon the Trustees to resettle the existing Trust on to a new substitute trust or trusts, provided that the purposes and objectives of any new trust or trusts are consistent with those of the existing trust.

[56]              The proposed variation of the number of trustees and the power to appoint or remove trustees is an appropriate means by which the ongoing administration of the Trust by means of an independent trustee and trustees appointed by the participating company will ensure orderly and appropriate ongoing administration.

Result

[57]              Section 64A(1) of the Trustee Act 1956 confers a power on the court to approve any arrangement, by whomsoever proposed, varying a trust, or enlarging the powers of the trustees to manage or administer any property subject to the trust.

[58]              I am satisfied that the proposed variations to the Trust Deed are a proper and appropriate means of enlarging the powers of the trustees of the Trust so as to enable them to conduct the management and administration of the Trust consistently with its

purpose and objects, and with increased flexibility, enabling them to deal with present and possible future changes to the funeral companies involved in the provision of prepaid funeral services in accordance with the terms of the Trust and Deed.

[59]              For these reasons I approve each and all of the proposed variations and amendments to the Deed, being particularly set out in the “Deed of Variation of Trust” annexed as exhibit D to the Trustees’ joint affidavit filed in support of the present application.

Paul Davison J