J R BROAD AND J A BROAD V J P M BROAD, S E MACLEAN, R A BELL AND P M OLDS HC WN CIV 2009-435-91

J R BROAD AND J A BROAD V J P M BROAD, S E MACLEAN, R A BELL AND P M OLDS HC WN CIV 2009-435-91 28 August 2009IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2009-435-91UNDER the Trustee Act 1956, section 64A IN THE MATTER OF the Fernyhurst Trust BETWEEN J R BROAD AND J A BROAD Plaintiffs AND J P M BROAD, S E MACLEAN, R A BELL AND P M OLDS Defendants Hearing: 28 August 2009 Counsel: I R Millard QC for Plaintiffs No Appearance for Defendants L Theron (appointed to represent underage or unborn beneficiaries) Judgment: 28 August 2009JUDGMENT OF SIMON FRANCE J[1] The trustees of the Fernyhurst Trust wish to vary the terms of the Trust Deed. The principal asset of the trust is a farm on which there is considerable forest planting. Most of the forestry blocks are significantly away from being of harvestable age. [2] A problem arises because the Trust is due to terminate on 1 August next year, having been created in 1973. Changes in taxation law subsequent to the Trust being created mean that should the Trust terminate next year, there will be considerable disadvantage. Mr Millard QC summarises it this way:11. The problem that arises is that if the Fernyhurst Trust vests according to its terms there is a deemed sale of its assets (including trees, plant and equipment, stock and buildings). Such sale is at valuation. Any "profit" on this deemed sale of the trees and anydepreciation recovered on the equipment and buildings is then taxable. This is even although there is no actual sale and, importantly, no sale proceeds out of which to pay the tax.[3] The reason for involvement of the Court is that there are minors and contingent beneficiaries who are unable to consent. All the beneficiaries who are of adult age have consented. The Court is asked to consent on behalf of those beneficiaries who cannot in law do so. The power is contained in s 64A of the Trustee Act 1956. The relevant persons are: a) the children or grandchildren of John Reeves Broad who are either under the age of consent, or not yet born; b) potentially a widow, contingent however on a particular person first marrying. [4] Ms Theron was appointed to represent the interests of these people. The Court has been much assisted by her input, as well as the clear presentation of the issues by Mr Millard. [5] The relevant principles have been summarised by Winkelman J inEwington v Schultz, HC Auckland, CIV 2008-404-6596, 5 May 2009, and more fully by Miller J in Re Byrne, HC Wellington, CIV 2003-485-16, 25 May 2004. I adopt those and see no need to repeat them. [6] Ms Theron advises the Court that, in her view, the amendment is in the interests of those on behalf of whom the Court is asked to consent. I agree, and indeed there really is no possible contrary view. [7] The situation is almost identical to that which arose in The Manawa Trust case, Dalziell v Dalziell (2008) 27 FRNZ 276. Mallon J there consented, and I do likewise. The change will benefit all who have an interest in the Trust. The operative tax law was not in effect at the time the Trust was created, and there is no reason to consider the change would be inconsistent with the Trust's purposes.[8] Accordingly I make the order sought in the Statement of Claim, namely:(a) An order from the Court under section 64A approving, on behalf of all minors and unborn children and widows (being persons unknown) who are or could be beneficiaries of the Fernyhurst Trust, the alteration of the meaning of the term "the date of distribution" as appearing in clause 2 of the Fernyhurst Trust to "the 28 th day of September 2053 or such earlier date as the Trustees in their absolute discretion determine"._________________________ Simon France JSolicitors: I R Millard QC, PO Box 1530, Wellington, i_millard@xtra.co.nz L Theron, Barrister, PO Box 1530, Wellington, email: liesle.theron@chambers.co.nz