Walker v Restieaux
[2015] NZHC 1875
•10 August 2015
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2015-412-31 [2015] NZHC 1875
BETWEEN JEFFREY BERNARD WALKER
First Plaintiff
ALEXANDER JAMES RESTIEAUX and ANN ELIZABETH RESTIEAUX and CARGILL TRUSTEES LIMITED as Trustees of the Beacon Downs Trust Second Plaintiffs
AND
AINSLEY FAY RESTIEAUX, NADINE ANN TOMLINSON, GRANT PETER RESTIEAUX AND STEPHEN ALEXANDER RESTIEAUX
Defendants
Hearing: 10 August 2015
(On the papers)
Counsel:
D Robinson for Plaintiffs
G Mirkin as Court appointed Counsel for any discretionary or unascertained beneficiaries (other than Defendants)
Judgment:
10 August 2015
JUDGMENT OF DAVIDSON J
Background
[1] This is an application for the rectification of an express trust due to a mistaken use of a term in the Trust Deed. The Trust Deed in question is for the Beacon Downs Trust (the Trust), dated 16 March 2003.
[2] Alexander James Restieaux and Ann Elizabeth Restieaux farm the property at
Beacon Downs Farm, the property settled on trust. Mr Restieaux was originally the sole registered proprietor of the property. On 9 February 1983 he sold an undivided
WALKER & ORS v RESTIEAUX & ORS [2015] NZHC 1875 [10 August 2015]
half share of the property to the A J Restieaux Family Trust, a trust settled by deed on that same day. The property was later transferred to a partnership comprising Mr Restieaux and the A J Restieaux Family Trust in equal shares. This was known as the A J Restieaux and Trust Partnership.
[3] The property was held under this arrangement until 2003. After speaking to Mr Restieaux’s sister, Judith Restieaux (a solicitor), Mr and Mrs Restieaux made the decision that they would prefer a holding structure which would allow both to fully participate in the assets. At the time, Judith Restieaux practised in partnership with a Jeffrey Walker, the settlor of the Trust.
[4] Upon settlement of the Trust, the property was sold to the Trustees of the Beacon Downs Trust by the partners in the A J Restieaux and Trust Partnership pursuant to an Agreement for Sale and Purchase of Real Estate dated 28 March 2003. The purchase was funded by money advanced jointly by the A J Restieaux Family Trust and Mr Restieaux. The Trust Deed for this trust is the subject of these proceedings.
The Trust Deed
[5] The Trust Deed describes the parties as:
PARTIES
1. JEFFREY BERNARD WALKER of Invercargill, Solicitor (“the
Settlor”).
2. ALEXANDER JAMES RESTIEAUX of Wairuna, Farmer (“the
First Trustee”).
3. ANN ELIZABETH RESTIEAUX of Wairuna, Farmer (“the
Second Trustee”).
3. CARGILL TRUSTEES LIMITED at Invercargill (“the Third
Trustee”).
[6] The named beneficiaries of the trust are provided in cl 4:
4. BENEFICIARIES
4.1 The Beneficiaries Are All Or Any Of:
a. ALEXANDER JAMES RESTIEAUX.
b. ANN ELIZABETH RESTIEAUX.
c. The Final Beneficiaries.
d. Any children including any adopted or stepchildren of a
Final Beneficiary
…
[7] The Final Beneficiaries are defined as “the children of Alexander James
Restieaux and Ann Elizabeth Restieaux”.
[8] Of most importance to the current proceeding is cl 14. It provides:
14. PERSONS NOT TO BENEFIT
14.1 Each of the following persons are specifically excluded from being a
Beneficiary under clause 4:
a. The Settlor;
b. A person claiming under or in right of the Settlor;
c. A “notional settlor”;
d. A person claiming under or in right of a “notional settlor”;
An interest includes anything that may benefit that person financially whether as an employee or shareholder or both.
e.The Trustees of any trust that has or may have a person excluded by a., b., c. and d. inclusive of this clause as a Beneficiary or potential Beneficiary where the terms of the Trust would or could result in any such person obtaining a benefit directly or indirectly from this trust contrary to this clause.
The issue
[9] Mr and Mrs Restieaux are concerned that, while they are named as beneficiaries under cl 4.1(a) and (b), and Mr Walker is named as the settlor of the trust, they may be regarded as the “notional settlor” and excluded from benefitting under cl 14.1(c). This is because Mr and Mrs Restieaux gave instructions for the Trust to be settled.
[10] Clause 14.1(c) is said not to reflect the intention behind the settling of the Trust which was to provide for asset planning, and that Mr and Mrs Restieaux be able to participate in the trust as discretionary beneficiaries.
[11] By their first cause of action, the plaintiffs seek an order that cl 14 be rectified by substituting the following clause:
14. PERSONS NOT TO BENEFIT
14.1In relation to the Settlor, no part of the capital or income of the Trust Fund may under any circumstances be paid or lent to or applied for the benefit of the Settlor and none of the provisions of this deed shall operate for the direct or indirect benefit of the Settlor.
[12] The plaintiffs seek any other order as the Court deems just to give effect to the rectified Trust Deed.
[13] By their second cause of action, the plaintiffs seek an order for relief pursuant to s 73 of the Trustee Act 1956 excluding them from liability for distributions made to either Mr or Mrs Restieaux or for permitting them to make drawings from the Trust property if they were at law not entitled to benefit. It is submitted that in making any such distributions they acted honestly and reasonably, and ought to fairly be excused for any breach of trust.
First cause of action – rectification
[14] The plaintiffs seek an order that the Trust Deed be rectified to express their intention on settling the Trust. The object of such a claim is to “bring the document which was expressed and intended to be in pursuance of a prior agreement into harmony with that prior agreement”.1 It is not the transaction itself which is to be
rectified, rather the terms in which the transaction is expressed in the document.2
1 Lovell and Christmas Ltd v Wall [1911-13] All ER Rep Ext 1630 (CA) at 1634.
[15] The document which the parties are seeking to rectify is a Trust Deed, settled on a voluntary basis. Rectification of such a document took place in the case of Re Butlin’s Settlement Trust.3
Re Butlin’s Settlement Trust
[16] Re Butlin’s Settlement Trust was a case heard by Brightman J in Chancery. The action was brought by a settlor seeking rectification of a voluntary settlement made 28 years previous, by inserting a power for a majority of the trustees to make decisions binding the minority. It was found that this was clearly the original intention of the transaction, of which everyone was aware.
[17] However, the clause which was originally intended to confer such a power, drafted by junior and leading counsel, was later held by Goff J to apply only to cases specified in a sub-clause and did not apply more generally. Instead of appealing that decision, the settlor sought rectification of the trust document.
[18] Brightman J found that the court did have the power to rectify a settled trust despite settlement being voluntary:4
I turn now to the law. There is, in my judgment, no doubt that the court has power to rectify a settlement notwithstanding that it is a voluntary settlement and not the result of a bargain, such as an ante-nuptial marriage settlement…
Furthermore, rectification is available not only in a case where particular words have been added, omitted or wrongly written as the result of careless copying or the like. It is also available where the words of the document were purposely used but it was mistakenly considered that they bore a different meaning from their correct meaning as a matter of true construction. In such a case, which is the present case, the court will rectify the wording of the document so that it expresses the true intention.
So far, therefore the plaintiff has surmounted possible problems; the settlement can be rectified though voluntary, and it can be rectified notwithstanding that the mistake arose, not in omitting, or using, words intended, or not intended, to be included, but in ascribing the wrong interpretation to words intended to be used.
[19] Brightman J went on to find that rectification is a discretionary remedy and articulated the following principles:5
3 Re Butlin’s Settlement Trusts [1976] Ch 251 (Ch).
(a) a settlor may seek rectification by proving that the settlement does not express his true intention, or the true intention of himself and any party with whom he has bargained, such as a spouse in the case of an ante-nuptial settlement;
(b)it is not essential for him to prove that the settlement fails to express the true intention of the trustees if they have not bargained; but
(c) the court may in its discretion decline to rectify a settlement against a protesting trustee who objects to rectification.
[20] With the relevant principles identified in Re Butlin’s, it is necessary to consider how they have been applied by the new Zealand courts.
Treatment by New Zealand Courts
[21] Re Butlin’s has typically had positive treatment in the New Zealand Courts. In the case of Kain v Hutton, the Supreme Court cited Re Butlin’s for the proposition that, “A misdescription of a power which has otherwise been validly exercised is capable of remedy, if necessary, by an ordinary rectification suit.”6 However, it was not applied as the case involved trustees purporting to exercise a power which they did not in fact or in law possess.
[22] Of greater relevance is Re Hindle, where the settlor’s relatives benefited under the trust, which was clear was never the intention of the trust.7 The settlor was the instructed solicitor. Mr and Mrs Hindle were granted leave to apply by originating application for an order rectifying the trust deed. The mistake appeared to have arisen from use of a precedent document which was not carefully reviewed. Courtney J had no hesitation in granting an order for rectification of the trust deed, citing Re Butlin’s in doing so.
[23] In Re Wilkinson’s Trust, an ambiguity arose in a deed of trust as to whether
“the remainder of the one-fifth part goes to the grand-nieces and grand-nephews of
5 At 262.
6 Kain v Hutton [2008] NZSC 61, [2008] 3 NZLR 589 at [60].
7 Re Hindle [2012] NZHC 903.
the deceased niece or nephew or to the grand-nieces and grand-nephews of Mrs
Cameron.”8 In terms of rectification of a voluntary settlement, Quilliam J held:9
Here again counsel were in agreement and I need only say that the power of the Court to rectify extends to cases of voluntary settlements: Re Butlin’s Settlement Trusts [1976] Ch 251 at pp 261 – 262.
[24] The New Zealand Courts have readily and consistently accepted Re Butlin’s to apply in New Zealand. The question then becomes one of whether the discretionary remedy should be applied to the case at hand.
Application of principle to the case at hand
[25] The issue arises if Mr and Mrs Restieaux are being considered “notional settlors” under cl 14.1(c) of the Trust Deed and thus excluded as beneficiaries.
[26] It is for the plaintiffs to prove that the Trust Deed does not express the true intention of settlement. That intention included that Mr and Mrs Restieaux should benefit under the Trust.
[27] The starting point to determine the intention of settlement must be the Trust Deed. Mr and Mrs Restieaux are the first named beneficiaries under cl 4, in itself a strong indication that the intention was that they were to be beneficiaries under the Trust. Secondly, Mr Walker is the named settlor of the trust. Clause 14 was clearly intended to exclude Mr Walker, or the relatives of Mr Walker, from benefitting in any way under the trust. However, “notional settlors” were also to be excluded, which may well encompass Mr and Mrs Restieaux.
[28] It is helpful to look to the affidavits of the parties involved in settling the trust. Judith Restieaux is the sister of Mr Restieaux and was the solicitor who drafted the Trust Deed. In her affidavit she stated:
6.I confirm that it was the intention of Alexander and Ann Restieaux that they would participate in the Beacon Downs Trust as Discretionary Beneficiaries, and that it was not intended that there be any restriction on their right to participate as beneficiaries.
8 Re Wilkinson’s Trust HC Dunedin A78/85, 18 November 1986 at 3.
9 At 3 – 7.
7.The practice adopted within my former firm was that my partner, Jeff Walker, would act as settlor in any trust that was to be settled on instructions from my clients, and vice versa.
8.I have been referred to the inconsistency between clause 4 and clause 14.1(c).
9.I confirm that clause 14.1(c) is in error. There was no intention for them to be excluded by virtue of them being “Notional Settlors” in a sense that they gave the instructions that resulted in the Beacon Downs Trust being settled.
10.I confirm that the order sought is appropriate to rectify the terms of the Trust.
[29] Although Mr Walker did not take instruction from Mr or Mrs Restieaux, he confirms that the practice within the firm was to act as settlors in trusts established for each others’ clients and that is what happened here. He confirms that the orders sought are appropriate and that as a director of the third named Second Plaintiff, he gives consent.
[30] On this evidence, it seems clear that the Trust Deed was not intended to exclude Mr and Mrs Restieaux as beneficiaries. The true intention must have been that they were both able to benefit and participate in the trust as cl 4 suggests. This is confirmed by the affidavits of the solicitors acting on the matter.
[31] The question then turns to whether the court should exercise its discretion to decline to rectify the Trust Deed. To answer this, I turn to the positions of the Trustees and the other beneficiaries.
[32] For the Trustees, Mr and Mrs Restieaux have consented to rectification of the
Trust Deed, as has Mr Walker on behalf of Cargill Trustees Limited.
[33] The Final Beneficiaries (the defendants) are the children of Mr and Mrs Restieaux, namely Grant Peter Restieaux, Nadine Ann Tomlinson, Ainsley Far Restieaux and Stephen Alexander Restieaux. Each has consented to the orders sought in the statement of claim.
[34] Finally, Mr Geoffrey Mirkin was appointed to act on behalf of the discretionary and unascertained beneficiaries except for the defendants. In his report he states:
19.Given the factual background to this matter, noting the specific reference in clause 4.1(a) and (b) identifying Alexander and Ann Restieaux as beneficiaries, and the explanation for the terms of clause 14.1 noted in the affidavit of Judith Restieaux, Counsel cannot conceive of any basis upon which there could be any justifiable objection to the orders sought by any persons for whom Counsel has been appointed to represent and who have not filed consents.
20.On the basis that the error is obvious, Counsel consents to the making of the orders sought on behalf of those parties he is appointed to represent.
[35] All relevant parties having consented to the rectification of Trust Deed, I can see no reason to exercise my discretion to decline to do so.
[36] I hereby grant the order to rectify cl 14 of the Trust Deed on the terms sought, set out above at [11].
Second cause of action – relief from liability
[37] Because there is a risk that Mr and Mrs Restieaux were excluded from benefitting under the Trust Deed, the plaintiffs seek relief from liability from making certain distributions to them, or permitting them to make drawings, from the Trust property.
[38] The law on relief of trustees from personal liability is set out at s 73 of the
Trustee Act 1956:
73 Power to relieve trustee from personal liability
If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed the breach, then the court may relieve him either wholly or partly from personal liability for the same.
[39] It follows from my finding in the first cause of action that any relief required should be granted. The trustees, at the time any distributions were made, were labouring under the impression, through no fault of their own, that Mr and Mrs Restieaux were beneficiaries of the trust and were entitled to make such distributions. At all times they acted honestly and it was not unreasonable for them to have considered Mr and Mrs Restieaux to have been beneficiaries. Nor was it unreasonable for them not to seek directions as they were not in doubt about their entitlement to act as they did.
[40] Having granted the order of rectification above, there is a question whether any liability arises for the distributions that were made, given that the trustees are now entitled to make any such distributions. However, in case of any liability arising, I grant an order relieving the plaintiffs wholly from personal liability for distributions made to Mr and Mrs Restieaux, or for drawings made by them, up to the date of rectification.
Costs
[41] Costs incidental to this proceeding are to be paid from the assets of the Trust on an indemnity basis.10
……………………………………
Davidson J
Solicitors:
Gallaway Cook Allan, Dunedin. Wilkonson Rodgers Lawyers, Dunedin.
10 Re Buckton [1907] 2 Ch 406 (Ch).
2