Willis v Waddell
[2022] NZHC 3248
•6 December 2022
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE
CIV-2021-416-20
[2022] NZHC 3248
UNDER the Declaratory Judgments Act 1908 IN THE MATTER OF
an application for an Order Determining Beneficiaries of a Trust
BETWEEN
WILLIAM DONALD WILLIS
Applicant
AND
CHRISTINE ANNE WADDELL and NGAPUKE STN TRUSTEE CO LIMITED
as trustees of the Willis Family Trust Respondents
Hearing: 20 June 2022 Counsel:
N Weatherhead for the Applicant D M Kerr for the Respondents
G C Kohler KC for Michael Willis
Judgment:
6 December 2022
JUDGMENT OF PALMER J
Solicitors:
G C Kohler KC
Wilson, Barber & Co, Gisborne Sainsbury, Logan & Williams, Napier
WILLIS v WADDELL [2022] NZHC 3248 [6 December 2022]
Summary
[1] In September 1953, William Arthur Willis (Bill) and Hine Mataera i Te Rangi White (Marie) had a child, William Donald Willis (William).1 In July 1956, Bill married Margaret Willis (Peg). They had two children, Christene Waddell and Michael Willis. In 1997, Bill and Peg established the Willis Family Trust (the Trust). Clause 2(e) of the Deed provides that the final beneficiaries are “children and grandchildren of the said [Bill] and [Peg] as may be living at the Vesting Day”. Vesting day is 80 years from establishment of the Trust or on the death of both Christene and Michael, whichever comes first. Clause 2(g) provide that the discretionary beneficiaries were “[t]he children of the said [Bill] and [Peg]; namely [Christene] and [Michael]”. William applies for a declaration that he is a discretionary and final beneficiary of the Trust.
[2] The naming of the discretionary beneficiaries of the Trust and other wording of the Deed indicates that William is not intended to be a beneficiary. That is the plain meaning of the text of the Trust deed (the Deed). The evidence is that Bill knew about William when the Trust was established and that Peg had met him and his daughter, though it is not entirely clear whether Peg knew of the relationship. Christene thinks she did not. Neither Bill nor Peg told the trustees they appointed about William. The solicitor, who was the settlor of the Trust, and the protector of the Trust did not know about William. That context does not suggest any gloss should be put on the plain meaning of the Deed. I dismiss the application.
What happened?
Who is who
[3] On 17 September 1953, William was born to Hine Mataera i Te Rangi White and Bill. They did not marry. William was brought up by his mother and his grandmother.
[4] In July 1956, Bill married Peg. Bill and Peg had two children, Christene Waddell and Michael Willis.
1 Given the common surnames, I refer to those involved by their first name. I mean no disrespect.
The Trust
[5] Bill and Peg built up their assets over the years, using Peg’s inheritance and acquiring a leasehold to a farm, Ngapuke Station. After Bill developed some health problems in 1989, Christene and her husband were employed to manage Ngapuke Station. Bill and Peg purchased and moved to a lifestyle block. Around 1992, Bill and Peg bought the freehold land for Ngapuke Station and helped finance Michael in purchasing his own orchard.
[6] On 22 January 1997, Bill and Peg established the Trust. The settlor was a Gisborne solicitor, Mr Wayne Callaghan. Bill and Peg were the sole trustees and jointly had the power to add and remove discretionary beneficiaries and to appoint and remove trustees. Provision was made for a protector, Mr Raymond Kennedy, who was a farmer and legal executive in Mr Callaghan’s office at the time.
[7] A block of land at Waerenga-a-Hika was transferred into the Trust in 1997. The Trust bought an adjacent block in 2000. On 22 January 2008, Bill signed a memorandum of wishes saying that the Trust should not be wound up for at least 20 years after the death of himself and Peg. Then, in 2013, Bill’s health deteriorated. In October of that year, Ngapuke Farm was transferred into the Trust, and Bill and Peg appointed Christine and Mr Urry’s trustee company, Ngapuke Stn Trustee Co Ltd, as additional trustees. Bill and Peg also executed new wills and gave Christene power of attorney.
[8]Clauses 2 and 3 of the Deed provide, relevantly:
2.IN this Deed the following terms where the context admits shall have the following meanings:
(c) “THE VESTING DAY” shall mean that date which shall be eighty (80) years from the date hereof OR on the death of both MICHAEL GEORGE WILLIS and CHRISTENE ANNE
WADDELL whichever comes first but the overall Vesting Day shall be at the sole discretion of the Trustees.
…
(e) “THE FINAL BENEFICIARIES” shall mean such of the children and grandchildren of the said WILLIAM ARTHUR
WILLIS and MARGARET MARY WILLIS as may be living at the Vesting Day.
(f) “CHILDREN” AND “GRANDCHILDREN” shall include the children and grandchildren by adoption as well as natural born children and grandchildren.
(g) “THE DISCRETIONARY BENEFICIARIES” shall mean: -
(i)the children of the said WILLIAM ARTHUR
WILLIS and MARGARET MARY WILLIS; namely CHRISTENE ANNE WADDELL AND MICHAEL GEORGE WILLIS.
(ii)the grandchildren of the said WILLIAM ARTHUR
WILLIS and MARGARET MARY WILLIS;
(iii)any other person or persons or charities as the said WILLIAM ARTHUR WILLIS and MARGARET MARY WILLIS shall before the Vesting Day either revocably or irrevocably appoint by Deed …
3. THE said WILLIAM ARTHUR WILLIS and MARGARET
MARY WILLIS at any time during the trust period by deed revocable or irrevocable declare that the Discretionary Beneficiaries shall cease to include any person.
[9]Clause 15 provides, relevantly:
15. ON the Vesting Day the Trustees shall stand possessed of such of the capital and income of the Trust fund as may then remain UPON THE
FOLLOWING TRUSTS:
(a)For such of the final beneficiaries as shall then be living and if more than one in equal shares as tenants in common absolutely PROVIDED
HOWEVER that in case any of the final beneficiaries shall die before the Vesting Day leaving a child or children or remoter issue him or her surviving or born after his or her death who shall be living on the Vesting Day such issue shall stand in the place of such deceased final beneficiaries and take per stirpes and equally between them if more than one the share of the trust fund which such deceased final beneficiary would have taken had he or she been living on the Vesting Day.
[10] Peg died on 20 September 2014. Bill died on 9 March 2018. Bill made provision for Michael and Christene and his grandchildren in his will and left the residue of the estate to the Trust. The value of the estate was $1.18 million. He did not provide for William in his will. William filed a claim under the Family Protection Act 1955, which was settled. $450,000 was paid to William, $325,000 to each of
Christene and Michael and $10,000 to each of the eight grandchildren (including William’s children).2
[11] In 2017 and 2018, the Trust bought properties in the Manawatu and sold the two blocks at Waerenga-a-Hika. In 2019, the Trust purchased a property in Hawkes Bay where Christene and her husband moved, and Ngapuke Station was sold.
[12] In July 2020, Christene and Mr Urry added new discretionary beneficiaries to the Trust and amended the vesting date. The assets of the Trust were distributed to a new trust, the Willis Farming Trust, settled by Christene. Christene and Michael are the primary discretionary beneficiaries. Michael has filed proceedings that seek declarations that the distribution was invalid, the assets should be transferred back and the trustees removed.
William’s claim
[13] William’s evidence is that he had limited contact with his father growing up but, on occasion, Bill gave his mother financial support. He describes how he and his daughter reconnected with Bill during the 1990s and Peg was generally present when they visited Bill. His daughter corroborates that and describes how she began visiting her grandfather on her own in 2010, increasing her visits after Peg’s death because she knew Bill was on his own.
[14] The evidence before me is that William’s relationship with Bill was not commonly known. Mr Urry says he first heard William’s name after Bill’s funeral. Mr Kennedy was not aware of William’s existence. Christene’s evidence is that she did not discover William’s existence until 2013 and that was by accident. Her father never told her of William. Her evidence is that when she asked him, after Peg’s death, whether William and his daughter were his son and granddaughter, Bill responded “no”. Christene believes Peg did not know about William.
[15] William applies under the Declaratory Judgments Act 1908 for a declaration that he is both a discretionary and final beneficiary of the Trust under the Deed. The
2 Willis v Waddell [2020] NZFC 2743 at [5].
trustees, Christene and the Trustee company, oppose the application. Michael abides the Court’s decision.
Relevant law of trust beneficiaries
[16] Mr Weatherhead, for William, points to cases in 18th and 19th century England such as Lugar v Haman, that put a primacy on precise grammar in interpreting the drafting of trust deeds.3 They interpret references to “children of A and B” to refer to children of A because “of” was not used in relation to B. Mr Weatherhead also identified cases in the early 20th century that have taken a more relaxed view of that interpretive issue, depending on the context.4
[17] The interpretation of trust deeds in New Zealand in the 21st century examines the meaning the document would convey to a reasonable person having all the background knowledge that would reasonably have been available to the parties in the circumstances when the trust deed was entered into. The substantive propositions of interpretation were helpfully summarised in Congregational Christian Church of Samoa (Westmere) Trust Board v Tilaima out of the judgment in Inglis v Dunedin Diocesan Trust Board:5
(a)The purpose of a Trust must be derived from its deed.
(b)Where there is no express intention, extrinsic evidence is admissible.
(c)Factors to consider include the language of the deed, its nature and the circumstances both of its execution and at the present time.
(d)The Court’s role is interpretation, not creation.
(e)Past practice based on error cannot justify breach of trust.
[18] The starting point is the settlor’s intention, ascertained from the terms of the deed. The intention of the real settlor may be relevant.6 The circumstances of the
3 See, for example Lugar v Harman (1786) 29 ER 1151 at 1152; Hawes v Hawes [1880] 14 Ch D 614 at 618; Peacock v Stockford (1853) 43 ER 30 at 32; and In Re Featherstone’s Trusts (1882) 22 Ch D 111 at 114.
4 In Re Walbran [1906] 1 Ch 64 at 65; In Re Harper [1914]1 Ch 70 at 73; and In Re Lewis’s Will Trusts [1937] 1 All ER 556 at 558.
5 Congregational Christian Church of Samoa (Westmere) Trust Board v Tilaima HC Auckland CIV 2008-404-001893, 20 December 2011 at [25], citing Inglis v Dunedin Diocesan Trust [2011] NZAR 1 (HC) at [29]–[33].
6 Lynton Tucker and others Lewin on Trusts (20th ed, Thompson Reuters, London, 2020) at [7-011].
family and the assets can also be relevant to a family trust.7 Mr Kerr, for the respondents, observes that the authors of the Laws of New Zealand consider the strict rule, as in Lugar v Harman, is only applied when it accords with the context and intention, not when they require a different construction.8 He points to In Re Lewis’s Will Trusts and Martin v Hamilton-Byrne where courts interpreted “the children of A and B” to mean the children only of both A and of B, and not other children of one of them.9
Submissions
[19] Mr Weatherhead, for William, submits it is not difficult to exclude a child by name, who might otherwise come within the meaning of “children” in a family trust deed. Clause 2(e) is clear, precise and unambiguous that the final beneficiaries are Bill’s children, William, Christene and Michael as well as Peg herself. Bill was well read and careful with words. To depart from the prima facie construction consistent with the grammar of the Deed, in order to insert additional words, would require clear and unequivocal context and circumstances. The naming of Christene and Michael in cl 2(g) may have been an afterthought, possibly to give them some priority in consideration while they are alive. The trustees’ interpretation excludes both Bill and Peg as beneficiaries. It would not be unusual to exclude William but include Peg. To impute to Bill an intention to exclude his eldest son would be capricious, which would run counter to the sort of man he was.
[20] Mr Kerr, for the trustees, submits that the plain and natural meaning of cl 2(e) includes all those people who are a child or grandchild of both Bill and Peg. The interpretation that it includes Bill’s children and Peg herself is strained and contrived, ignores the documentary and factual context and is at odds with the applicable authorities. Clause 2(c) confirms that. Clause 15(a) also supports the exclusion of Peg as a final beneficiary as its effect would be that her share of the trust fund would be distributed to her grandchildren. And as Bill had not told Peg or the settlor or the
7 At [7-011].
8 William Patterson and Andrew Tipping (ed) The Laws of New Zealand – Wills: Identification of Donees (online ed, LexisNexis) at [308].
9 In Re Lewis’s Will Trusts, above n 4; and Martin v Hamilton-Byrne Martin v Hamilton-Byrne SC
Victoria (FC) 1984 No. 3894, 24 Sept 1986.
protector or his co-trustees about William, there could not have been a common intention for Bill to be a final beneficiary. For the same reasons, cl 2(g)(i) does not refer to Peg personally, which is confirmed by cl 2(g)(ii) because otherwise Peg would not need to be referred to in both. The reference to Christene and Michael by name is conclusive confirmation of Bill’s intention. And there is no logical basis for a lack of alignment between the two classes of beneficiary.
Was William a beneficiary?
[21] The words of a trust deed, like a contract, are interpreted according to the meaning they would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties at the time it was settled.10 Extrinsic evidence is admissible, though the scope for that depends on the context.11
[22] Here, the words of cl 2(e) of the Deed provide that the final beneficiaries are “children and grandchildren of the said [Bill] and [Peg] as may be living at the Vesting Day”. That may mean that the final beneficiaries are the children and grandchildren of both Bill and Peg together or the children and grandchildren of each of Bill and Peg. Mr Weatherhead contends for an alternative interpretation, that the reference is to the children of Bill and to Peg herself. I do not consider that is a natural interpretation of the words.
[23] Neither do I consider that the use of grammar in the English language in New Zealand in 1997 was so precise, even in legal drafting, that the omission of a second “of” before Margaret’s name makes a difference to the intended meaning. The older English authorities have limited relevance at the end of the twentieth century in New Zealand.
[24] Clause 2(g)(i) is helpful in providing that the discretionary beneficiaries were “[t]he children of the said [Bill] and [Peg]; namely [Christene] and [Michael]”. This
10 Powell v Powell [2015] NZAR 1886 at [51]–[55], citing Manukau City Council v Lawson [2001] 1 NZLR 599 (HC) at [13] and Bethell v Bethell [2014] NZCA 442, [2015] NZAR 1620 at [38].
11 Firm PI 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand [2014] NZSC 147, [2015] 1 NZLR 432 at [62].
makes explicit who the children were envisaged to be: Christene and Michael but not William. There is no reason to think that the children of Bill and Peg for the purposes of cl 2(g)(i) were envisaged to be different from the children of Bill and Peg for the purposes of cl 2(e). If that was intended, the drafter could have been expected to similarly specify, and distinguish, the children in cl 2(e). The failure to do so is close to determinative of the intent of the settler or trustees in formulating the Deed.
[25] There is nothing in the rest of the Deed which suggests William was intended to be a beneficiary. But cl 2(c) specifies the vesting day to the date of the death of both Michael and Christene. If William or Peg were intended to be a final beneficiary, it would be expected that the vesting day would depend on their death too. It is difficult to envisage Peg being expected to be living at the vesting day. And cl 15(a) does not make much sense if Peg were a final beneficiary. I conclude that the plain meaning of the text of the Deed is that William was not intended to be a final or discretionary beneficiary.
[26] The evidence is clear that Bill knew about William. The evidence of William and his daughter suggests Peg met with William and his daughter in the 1990s, before the Trust was established. There may be an available inference that Peg knew of William’s relationship with Bill, though that is not entirely clear. But the evidence is that Mr Kennedy, the settlor and protector of the Trust, did not know about William’s relationship to Bill. Nor were the additional trustees, Christene and Mr Urry’s company, ever made aware of that relationship. That context does not suggest any gloss should be put on plain meaning of the Deed.
Result
[27] The application is dismissed. If any issues of costs arise and cannot be resolved between the parties, memoranda may be filed within 10 working days of this judgment.
Palmer J
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