Stratford v Moses
[2022] NZHC 2191
•30 August 2022
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
I TE KŌTI MATUA O AOTEAROA TE TIHI-O-MARU ROHE
CIV-2021-476-40
[2022] NZHC 2191
UNDER the Trusts Act 2019 IN THE MATTER
of the Stratford Investment Trust
BETWEEN
BRIAN GEORGE STRATFORD
Plaintiff
AND
JULIET MOSES, DAVID VANCE AND LYNN STRATFORD, AS TRUSTEES OF THE STRATFORD INVESTMENT TRUST
First Defendants
JULIET MOSES
Second DefendantLYNN STRATFORD
Third Defendant
Hearing: (Dealt with on the papers) Counsel:
D A T Chambers QC and M M S Gray for Plaintiff
P J Hunt and D P Turnbull for First-named First Defendant and Second Defendant
J W A Johnson, J I Taylor for Third-Named First Defendant and Third Defendant – Lynn Stratford
J P Bell-Connell for David Vance
I T K T R F Hikaka for Haidee Stratford and Amanda Johnston Andrea Sutherland – Self RepresentedJudgment:
30 August 2022
JUDGMENT OF EATON J
(In Relation to an Application Under s 133 Trusts Act 2019 and Associated Procedural Orders)
STRATFORD v MOSES [2022] NZHC 2191 [30 August 2022]
Background
[1] The background to this proceeding is set out in my judgment of 22 June 2022, where I recorded this proceeding is the result of the separation of Brian and Lynn Stratford after 44 years of marriage and of running successful farming operations together.1 As at the time of my judgment, in which I declined Brian’s application for interim relief, the parties had not achieved a division of their relationship property assets or the assets in the Stratford Investment Trust and the Stratford Family Trust (the Trusts) settled by them.
[2] Lynn and Brian have now reached an agreement in relation to the separation of their relationship property and also as to the re-distribution of assets held in the Trusts. As those Trusts were for the benefit of Lynn, Brian, their children and grandchildren, Lynn and Brian’s three daughters have been involved in that process. Lynn and Brian’s grandchildren, who are all minors, have not been represented in that process other than informally through their parents’ involvement.
[3] With Brian and Lynn having reached an agreement endorsed by their daughters, the substantive order the parties now seek is pursuant to s 133 of the Trusts Act 2019 (the Act), which provides:
133 Trustee may apply to court for directions
(1)A trustee may apply to the court for directions about—
(a)the trust property; or
(b)the exercise of any power or performance of any function by the trustee.
(2)The application must be served, in accordance with the rules of court, on each person interested in the application or any of them as the court thinks fit.
(3)On an application under this section, the court may give any direction it thinks fit.
(4)This section does not restrict the availability of alternative proceedings within the court’s jurisdiction, including a declaration interpreting the terms of the trust.
1 Stratford v Moses [2022] NZHC 1463.
[4] The order is sought to give the Court’s blessing to the trustees’ proposed decision.2 The Court’s blessing is sought because giving effect to the settlement will see the Trusts fully distributed and replaced by new Trusts yet to be created.
[5]One of the situations where a trustee might seek the Court’s blessing is where:3
[T]here is no real doubt as to the nature of the trustees’ powers and the trustees have decided how they want to exercise them but, because the decision is particularly momentous, the trustees wish to obtain the blessing of the court for the action on which they have resolved and which is within their powers.
[6] Unfortunately, the separation of Brian and Lynn has had wider family implications resulting in something of a split in the family. Brian and Lynn have three adult children, Amanda, Haidee and Andrea.
[7] Upon the settlement being given effect to, new Trusts will be created for Brian and Lynn. Brian’s Trust will receive 42 per cent of the parties’ wealth and his Trust will be for the benefit of himself, Andrea and her children only. The agreement is clear that Brian’s Trust will not be for the benefit of Amanda, Haidee and their children. Lynn’s Trust, which will receive 58 per cent of the wealth, will be for her benefit and for the benefit of Amanda, Haidee and their children, but not for Andrea and her children. I have assumed the unequal division of the assets is in part to reflect the fact that Lynn’s Trust is for the benefit of two of Brian and Lynn’s children and that Brian’s Trust is for the benefit of only one of their children.
[8] One of the practical issues, as it concerns the grandchildren of Brian and Lynn, is the value of the assets being divided. In broad terms, the net assets that will go to Lynn’s Trust are worth approximately $29.6 million and the assets Brian’s Trust will receive total to approximately $21.4 million.
[9] While I am not told whether any of the grandchildren have any particular health needs or the like, and nor am I told anything about the financial position of the grandchildren’s parents, the short point is that in each Trust there are very substantial
2 Re PV Trust Services [2017] NZHC 2957, [2018] 3 NZLR 160.
3 At [42], citing Public Trustee v Cooper [2001] WTLR 901 (Ch) at 922–924.
assets that will be available to meet the needs of Lynn and Brian’s children and grandchildren.
[10] Accordingly, while all grandchildren go from being beneficiaries in the two Trusts that held the total value of assets, to beneficiaries only of Trusts holding the division of the assets in the manner I have referred to, this is not a case where that division might prejudice the interests of a beneficiary with special needs.
[11] I have been provided with copies of the Trust deeds for Brian and Lynn’s new Trusts in draft form only, although I am told the drafts are essentially in their final form. As the drafts stand, each of the Trusts will have an independent trustee. At the moment, both Trusts have an independent trustee.
The procedural orders sought
[12] The parties wish to utilise the existing proceeding for their s 133 application. To do so, a number of parties need to be added to the proceeding.
[13]The following orders are sought:
(a)Joinder of Lynn Marie Stratford, Brian George Stratford and Juliet Anna Moses as trustees of the Stratford Family Trust;
(b)Joinder of Amanda Kirsty Johnston, Haidee Maree Stratford and Andrea Lynn Sutherland as adult beneficiaries of the Trusts (Adult Beneficiaries); and
(c)The joinder of the children of the Adult Beneficiaries (Minor Beneficiaries).
[14]The Minor Beneficiaries are:
(a)Amanda’s children Alice Johnston, William Johnston and Jonty Johnston;
(b)Haidee’s children Hudson Stratford-Bevins and Flynn Stratford-Bevins; and
(c)Andrea’s children Hunter Morrow, Oliver Morrow, and George Sutherland.
[15] Joinder is sought pursuant to r 4.56 of the High Court Rules 2016 (the Rules). I am satisfied the joinder of all those sought to be joined is necessary to permit the Court to adjudicate on and settle all questions involved in this proceeding. This proceeding is now focused on the application under s 133 of the Act.
[16] Accordingly, an order is made joining the parties, as set out at [13] and [14] above, to this proceeding.
Representative orders
[17] An order is sought that the Adult Beneficiaries represent the interests of their respective children in this proceeding.
[18] Neither directions as to service or in relation to representation have been made. Counsel submit the proposed settlement adequately accounts for the interests of the Minor Beneficiaries of the Trusts.
[19] Given the comments I have already made, I agree. The family have reached a settlement where all concerned have been mindful of the grandchildren’s interests. In a real sense, the Minor Beneficiaries’ parents have already taken on the role they now seek to be appointed to.
[20] In all the circumstances, I am satisfied it is appropriate there be an order the Adult Beneficiaries represent the interests of their respective children in this proceeding.
[21] An order is also sought abridging the time for the hearing of the application in relation to the joinder of parties and the making of representative orders. To the extent that such an order is necessary, an order is made.
Substantive orders
[22]The substantive orders sought are:
(a)directing the trustees of the Stratford Investment Trust and the Stratford Family Trust to enter into the Deed of Family Arrangement filed with the Court on 19 August 2022.
(b)approving the Adult Beneficiaries’ entry into the Deed of Family Arrangement and recording their consent to the proposed settlement;
(c)approving the Adult Beneficiaries entry into the Deed of Family Arrangement on behalf of the Minor Beneficiaries;
(d)directing the trustees to enter into any transactions which may be necessary to give effect to the settlement contemplated by the Deed of Family Arrangement; and
(e)directing that access to the Court file for this proceeding shall not be granted without first having heard from the parties.
[23] The parties have since confirmed the orders in the second and third directions set out above at [22] are no longer sought.4 That is appropriate. I do not consider it is necessary for there to be orders approving the decisions of the Adult Beneficiaries. The Court can record their consent to the proposed settlement, but the Adult Beneficiaries are able to make their own assessment as to whether they enter the Deed of Family Arrangement.
[24] The first and fourth directions set out above at [22] are squarely within s 133 of the Act. The following factors are in favour of the Court endorsing the trustees’ decision:
4 By joint consent memorandum filed 30 August 2022.
(a)The division proposed is essentially an equal division between what has unfortunately become a split in the family unit.
(b)The assets held in the Trusts are such that the division will not leave any particular beneficiary prejudiced from the shift from being a beneficiary of the two existing Trusts to a beneficiary of only one of the new Trusts.
(c)The division will end an expensive and complicated litigation, the continuation of which will only further damage the family.
(d)The division takes into account the interests of all beneficiaries.
[25] What is clear from the leading authority, Re PV Trust Services, is that the Court should not simply rubber stamp s 133 applications.5 Three matters are important to consider:
(a)whether the trustees have in fact formed the opinion which the Court has been asked to bless;
(b)whether the opinion is one at which a reasonable body of trustees could properly have arrived; and
(c)whether the opinion is vitiated by any conflict of interest.
[26] While Lynn and Brian are trustees of the Stratford Family Trust and Lynn is trustee of the Stratford Investment Trust, both Trusts have an independent trustee.
[27] I am satisfied the trustees have themselves reached the opinion which the Court is asked to bless.
5 Re PV Trust Services, above n 2, at [56], citing Public Trustee v Cooper, above n 3.
[28] I am also satisfied that the trustees’ opinion is one a reasonable body of trustees could properly have arrived at. The factors I have outlined above at [24] are consistent with that.
[29] As to whether the conclusion reached is vitiated by any conflict of interest, it has to be recognised that there is a conflict between Brian and Lynn, as well as a conflict within the family. However, given the essentially equal division of assets between the divided family, I am satisfied that any conflict that did exist is not such as to prevent the Court making the order sought under s 133 of the Act. It will not be uncommon that the Court is asked to make orders under s 133 in the context of family disputes. Again, it will not be uncommon that some of the trustees involved may be beneficiaries.
[30] However, at the end of the day, as counsel note, there is a general consensus as between the trustees and the beneficiaries. This is significant because as was observed in Re PV Trust Services, the Court will employ a careful scrutiny when considering whether to bless a trustee’s proposed decision, particularly because:6
[O]ne consequence of authorising the trustees to exercise a power is to deprive the beneficiaries of any opportunity of alleging that it constitutes a breach of trust and seeking compensation for any loss which may flow from that wrong.
[31] I accept counsel’s submission that in a situation where the trustees and beneficiaries are in agreement about a proposed course of action, the above consideration bears comparatively less weight.
Orders
[32] In addition to the orders in relation to joinder, timing of the hearing and representation already made, the substantive orders set out at [22](a),(d) and (e) above are made.
6 Re PV Trust Services, above n 2, at [57], quoting Richard v Mackay [2008] WTLR 1667 (Ch) at 1671.
[33] The parties have asked the Court to deal with this application with urgency. Given the orders made “blessing” the trustees’ proposed actions, such orders implicitly endorse the Adult Beneficiaries actions.
[34] I further record that the parties seek the orders I have made by consent and are all agreeing to enter the Deed of Family Arrangement following the making of these orders.
...................................................
Eaton J
Solicitors:
Tavendale and Partners, Christchurch McElroys
Wynn Williams, Christchurch Dentons Kensington Swan Lee Salmon Long
Copy to:
Lady Deborah Chambers QC, Barrister, Auckland Jeremy Johnson, Barrister, Christchurch
Andrea Sutherland
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