Peers

[2023] NZHC 2120

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-349

[2023] NZHC 2120

UNDER

the Trusts Act 2019

IN THE MATTER

of an application to vary the Onslow Trust

BETWEEN

MICHAEL JOHN PEERS and KATHERINE ALLISON PEERS

Applicants

Hearing:	(On the papers)
Counsel:	C D Trewin for Applicants
Judgment:	9 August 2023

JUDGMENT OF OSBORNE J

This judgment was delivered by me on 9 August 2023 at 3.45 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

RE PEERS [2023] NZHC 2120 [9 August 2023]

[1]        The trustees of a family trust apply for an order approving the variation of the trust.

[2]        They have previously been granted leave to commence the proceedings by way of an originating application. All adult beneficiaries have consented to the proposed variation. The Court has dispensed with service on any other person.

The Onslow Trust

[3]The Onslow Trust was settled by deed on 9 December 1992.

[4]Under the terms of the trust deed, the Trust will vest on 22 November 2024.

[5]        The Trust is one of two partners in a partnership established in June 2006. Under the terms of the partnership deed, that partnership will dissolve on the vesting date of either of the partner trusts.

[6]        Should the Onslow Trust vest on 22 November 2024 and the partnership be consequentially dissolved, there will be an estimated tax liability for the Onslow Trust in the financial year ending 31 March 2025 of $252,665.

[7]        Michael and Katherine Peers, the applicants in this proceeding, are the trustees of the Onslow Trust. They have taken tax advice from Mark Lodder, the tax national leader of BDO New Zealand. He has provided an affidavit in this proceeding as an expert. He explains his calculation of the potential tax liability ($252,665) and how it would arise from recovered depreciation. He has identified the postponement of the date of distribution of the Onslow Trust as the best option available to the Trust to mitigate the impending tax liability.

The interests of beneficiaries

[8]        The scheme of the Trusts Act, in Part 6, is that beneficiaries who together hold all of the beneficial interest in the trust property may permit the trustee to vary the terms of the trust or to resettle the trust. Section 122 of the Act provides for that

situation and sets out the conditions for any such variation or resettlement by the trustee.

[9]        Here all the adult beneficiaries have, in terms of s 122(2) of the Act, consented to requiring the variation and have requested the trustees to vary the terms of the Trust on their behalf.

[10]      The Court’s power to approve a variation (or termination or resettlement) of a trust in other situations is provided for in s 124. Section 124 provides:

124Power of court to approve termination, variation, or resettlement of trust

(1)The court may, on behalf of any of the beneficiaries described in subsection (2) who has an interest in the property of a trust, approve the termination, variation, or resettlement of the trust.

(2)The beneficiaries are—

(a)a beneficiary who lacks capacity:

(b)a person who may acquire a beneficial interest at a future date or on the happening of a future event or on becoming a member of a certain class of persons:

(c)a future person who may acquire a beneficial interest.

(3)An application for an order of approval may be made by—

(a)the trustees or any one of them:

(b)any person with a beneficial interest in the trust property.

(4)On an application for an order of approval, the court must take into account each of the following factors:

(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 makes or refuses to make the proposed order:

(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.

(5)The court must not make an order of approval if its effect would be to reduce or remove any vested interest in the trust property.

(6)An order of approval binds the person on whose behalf it is made and takes effect without any further step.

[11]      Here the trust deed makes provision for distribution of the Trust fund not only to the applicants and their two children but also, if either of those children has died at or before the date of distribution leaving a child or children, then also to those grandchildren.

[12]      There are accordingly, in terms of s 124(2)(c) of the Act, “future persons who may acquire a beneficial interest”.

Factors to be taken into account

[13]Under s 124(4) of the Act the court must take into account three factors.

The nature of the interests and the potential benefit or detriment

[14]      Unborn grandchildren, in the event their parent dies before the date of distribution, will take stirpitally the shares of their parent beneficiary.

[15]Should the Trust vest, the family would be disadvantaged by the tax payable.

[16]      The same situation arose in Re Jury Family Trusts.1 There, as I now find here, through the extension of the life of the trust there was no detriment to the persons on whose behalf the Court was giving approval.

Settlors’ intention

[17]The father of Michael Peers, namely Warwick Peers, settled the Onslow Trust.

[18]      Michael Peers has provided an affidavit in relation to the Trust, the identity of the beneficiaries, the assets of the Trust and the benefit to the Trust of the proposed variation.

1      Re Jury Family Trusts [2022] NZHC 568.

[19]      Other than identifying the fact his father, Warwick, was the settlor, there is no reference in his evidence to the settlor. It is not practicable on the evidence to ascertain any specific intentions the settlor may have had.

[20]      That said, the trust deed established a traditional New Zealand family trust for the benefit of four family members expressly identified, being the two applicants and their two children (both now adult). Grandchildren yet to be born would come into their entitlements only in the event their parents predeceased them before the date of distribution.

[21]      It can reasonably be inferred that the settlor’s intention was to benefit the applicants and their next two generations through an efficient structure which could see trust assets protected and grown for the benefit of the family.

Conclusion

[22]      I find the benefit of the proposed variation for the family for whom the Trust was set up, including both the named beneficiaries and the potential beneficiaries, is established for the reasons identified in Mr Lodder’s evidence.

[23]      I am satisfied it is in the interests of unborn children that the variation be approved under s 124 of the Act.

Order

[24]      I approve, on behalf of future persons who may acquire a beneficial interest in the Onslow Trust, the variation of the Trust to extend the date of distribution under  cl 2.3 of the trust deed dated 9 December 1992 to 8 December 2117.

[25]      I order the trustees may all do such things as may be considered necessary to give effect to this approval or which may be considered necessary, advisable or expedient in connection with, or incidental to, this approval.

Osborne J

Solicitors:

Cunningham Taylor Law, Christchurch