MURRAY JOHN FINLAY LUXTON V KEITH OLIVER DIPROSE AND MURRAY JOHN FINLAY LUXTON AS TRUSTEES OF THE M J F AND M E LUXTON FAMILY TRUST HC HAM CIV-2009-419-000470

MURRAY JOHN FINLAY LUXTON V KEITH OLIVER DIPROSE AND MURRAY JOHN FINLAY LUXTON AS TRUSTEES OF THE M J F AND M E LUXTON FAMILY TRUST HC HAM CIV-2009-419- 000470 11 June 2009IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV-2009-419-000470BETWEEN MURRAY JOHN FINLAY LUXTON Plaintiff AND KEITH OLIVER DIPROSE AND MURRAY JOHN FINLAY LUXTON AS TRUSTEES OF THE M J F AND M E LUXTON FAMILY TRUST Defendants Hearing: 10 June 2009 Counsel: R A Craven for plaintiff and defendants Judgment: 11 June 2009RESERVED JUDGMENT OF RONALD YOUNG JIn accordance with r11.5 I direct the Registrar to endorse this judgment with the delivery time of 10.00 a.m. on the 12 th day of June 2009.[1] Mr and Mrs Luxton ("the settlors") established the M J F and M E Luxton Family Trust ("the Trust") in May 1984. Mrs Luxton died in 1994 and Mr Diprose took over as trustee together with Mr Luxton. The Trust term was for 25 years. The trustees want to extend that term by variation of the Trust to 80 years, the maximum term allowed under the Trustee Act 1956 ("the Act"). [2] The settlors had three children born in 1973, 1975 and 1977, and now three grandchildren born in 2005, 2006 and 2007, with a further grandchild due any day. The trustees and the children (after independent legal advice) all agree with the proposed variation of the Trust and have signed a Deed of Family Arrangementreflecting the variation, but subject to this Court's approval under s 64A of the Act. That section provides as follows:64A Power of Court to authorise variations of trust(1) Without limiting any other powers of the Court, it is hereby declared that where any property is held on trusts arising under any will, settlement, or other disposition, or on the intestacy or partial intestacy of any person, or under any order of the Court, the Court may if it thinks fit by order approve on behalf of— (a) Any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting; or (b) Any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class, as the case may be, if the said date had fallen or the said event had happened at the date of the application to the Court; or (c) Any unborn or unknown person; or (d) Any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined— any arrangement (by whomsoever proposed, and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts: Provided that, except by virtue of paragraph (d) of this subsection, the Court shall not approve an arrangement on behalf of any person if the arrangement is to his detriment; and in determining whether any such arrangement is to the detriment of any person the Court may have regard to all benefits which may accrue to him directly or indirectly in consequence of the arrangement, including the welfare and honour of the family to which he belongs: Provided also that this subsection shall not apply to any trust affecting property settled by any Act other than the [[Administration Act 1969]]. (2) Any rearrangement approved by the Court under subsection (1) of this section shall be binding on all persons on whose behalf it is so approved, and thereafter the trusts as so rearranged shall take effect accordingly.(3) In this section—Discretionary interest means an interest arising under the trust specified in paragraph (b) of subsection (1) of section 42 of this Act or any like trust:Principal beneficiary has the same meaning as in the said subsection (1):Protective trusts means the trusts specified in paragraphs (a) and (b) of the said subsection (1) or any like trusts.[3] The Court's function faced with such an application is as Tipping J said in Re Greenwood [1988] 1 NZLR 197 at 211:The purpose of s 64A is in my view to put the Court into the shoes of a beneficiary who is, by reason of infancy or other incapacity, incapable of assenting to the variation, revocation or enlargement of powers proposed. Similarly the Court is put in the shoes of unborn and unknown persons. The Court, as one part of its consideration of the application, should ask itself whether, if the person on whose behalf it is acting had been alive and of full capacity and properly advised, that person would have been likely to have approved the arrangement on his or her own behalf and with or without conditions or amendment to the scheme.[4] I agree with and adopt that approach in this case. As the Trust currently stands, it was due to end in May 2009, but the Trust has been extended by order of Judge Faire to 31 July 2009 to allow this application to be heard and resolved. [5] The Trust owns property with a value in excess of $400,000. Currently, the Trust may, at the discretion of the trustees, benefit the children and grandchildren of the settlors. Should the Trust come to an end in July 2009 then, pursuant to clause B(1), the trustees may allocate the trust funds to one or more of the living children and/or grandchildren of the settlors. If no such allocation is made, then under clause B(2) the children of the settlors living at the end of the Trust will take the Trust property in equal shares. If any child of the settlors is not living at the end of the Trust, then that child's children (if any) take their parent's share. [6] Section 64A requires the Court to place itself in the position of, in this case, the infant grandchildren, born and unborn. The Court must then consider whether to approve the proposed arrangement. It is not to do so if the arrangement is to the detriment of any person that it has responsibility for in terms of s 64A (ss(1)).[7] As to the living grandchildren, by extending the Trust's existence, they may lose the immediate possibility that the trustees could exercise their discretion in favour of a capital distribution to them when the Trust ends in July 2009 (clause B(1)). This distribution would advantage the existing grandchildren over the yet to be born grandchildren by making an actual distribution limited to the living grandchildren. A later distribution, if the life of the Trust was extended, based on the same approach would potentially give a smaller amount per grandchild, assuming further grandchildren are born in the meantime. [8] I note in this case, however, the trustees have made it clear that they do not propose to make such a distribution should the Trust end in July 2009. In those circumstances the only beneficiaries would be the three adult children. Self- evidently, the existing grandchildren could thereby benefit through their parents, however, such a possibility is essentially speculative. With an extension, some grandchildren presently may die in the interim. Those grandchildren may be worse off financially. Those grandchildren to be born will all be advantaged by the extension to 80 years, given they could then benefit from the Trust when they cannot currently do so. [9] I do not consider the proposed variation will cause detriment to any of the infant beneficiaries or those unborn grandchildren. Although the existing grandchildren could possibly suffer some financial loss, this is remote and must be balanced overall against other factors. It seems very unlikely the trustees, if the Trust is to expire in July 2009, will nominate grandchildren as beneficiaries of the Trust property on its expiry. On the other hand, the existing grandchildren will continue to be eligible for benefits under a continuing trust. Further, it is clearly inequitable within the context of a family trust to advantage the grandchildren that are older simply because they are older. This would be contrary to the welfare and honour of the family and cannot have been what was intended or desired. The welfare and honour of the family is clearly best reflected in all grandchildren and children potentially benefiting equally from this Trust. I therefore make the orders sought by the plaintiff applicant.[10] I give my consent pursuant to s 64A of the Trustee Act on behalf of the infant and unborn beneficiaries to the variation of the Trust extending the Trust period to eighty years. ___________________________ Ronald Young JSolicitors: R A Craven, Allen Needham & Co, PO Box 12, Morrinsville, email: bob@anco.co.nz