IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-425-000094 [2015] NZHC 1004

UNDER	the Trustee Act 1956

IN THE MATTER	of an application under section 64A to vary a Trust Deed

Grant Hylton HENSMAN
Sharyn Kathleen HENSMAN and Bruce Herbert ROBERTSON, as the trustees of the Santa Fe Trust Applicants

Hearing:	11 May 2015	

Appearances:	
J S Fairclough for Applicants	

Judgment:	
11 May 2015	

ORAL JUDGMENT OF DUNNINGHAM J

[1]       This is an application under s 64A of the Trustee Act 1956 to remedy defects in   the   Trust   known   as   the   Sante   Fe   Trust.      The   trust   was   settled   on
13 December 2000   and   the   application   is   brought   by   the   three   trustees; Grant Hylton Hensman, Sharyn Kathleen Hensman and Bruce Herbert Robertson.

[2]       The  trust  deed  provides  for  two  classes  of  beneficiaries, the  first  being income beneficiaries and the second class being capital beneficiaries.   The beneficiaries are common to both classes and all beneficial interests are at the discretion of the trustees.

The   beneficiaries   in   respect   of   each   class   are   Grant   Hylton   Hensman, Sharyn Kathleen Hensman, Rebekah Meddy Hensman, Kathleen Olivia Hensman,

HENSMAN [2015] NZHC 1004 [11 May 2015]

Sarah Joy Hensman (now known as Sarah Joy Lawrence) and the children and grandchildren of any of the named beneficiaries.  Rebekah and Kathleen are the children of Grant and Sharyn Hensman and Sarah is the child of Grant Hensman from a previous marriage.   The trust deed provides a final distribution date of
31 March 2016, but the trust can be vested earlier at the discretion of the trustees. Grant and Sharyn Hensman hold power of appointment.  The trust was settled by Grant and Sharyn’s then solicitor, Eric John Thomson, although in effect he was only a nominal settlor.

[3]       There are two issues with the trust deed.  The first issue is that the latest date at which the trust vests and distribution must take place is 31 March 2016 and the trust deed does not include a defined perpetuity period.

[4]       The second issue concerns the power of appointment.  The trust deed does not specify whether the appointors, Grant and Sharyn Hensman, must exercise their power of appointment jointly or severally, and in addition there is no reference as to what is to occur with regard to the exercise of those powers if either, or both, of the appointors die, or become incapable of exercising that power.

[5]       The variations sought are to overcome these difficulties which arose through either oversight or omission.

The proposed variations to the Trust

[6]       The applicant trustees seek to amend the definition of the date of distribution in the third schedule to the trust deed by deleting the words:

The 31st March 2016 or such earlier date as the Trustees by Deed determine

and replacing it with:

the   day   upon   which   the   period   of   80   years   from   the   date   of
13 December 2000 expires; or

Such other day as the Trustees may by Deed appoint provided that the trust period does not breach the Perpetuity Period as it is defined in this Deed.

[7]       They then seek to insert a definition of the perpetuity period into the third schedule of the trust deed after the definition of the date of distribution.  That definition is to read:

Perpetuity period:  The day upon which the period of 80 years from the date of 13 December 2000 expires, or such other period as the trustees may by Deed appoint if they consider it necessary or desirable for the purpose of avoiding any breach of the rule against perpetuities as it may apply from time to time in New Zealand.

[8]       They also seek to renumber the current clause 8 of the trust deed as clause 8.1 and amend the first line of clause 8.1 by deleting the words:

The Appointer shall be that person referred to in the schedule and shall have the following powers:

and replacing them with:

The Appointers, acting jointly during their lifetimes, shall be that person referred to in the schedule and shall have the following powers.

[9]       They seek to add a new clause 8.2 which reads:

(a)        Either of the Appointers may by deed or Will and on such terms and conditions  as  the  Appointor  thinks  fit,  transfer  the  Appointor’s powers under clause 8.1 to any other person.

(b)       If an Appointor dies, subject to the terms of any transfer of the Appointor’s powers under clause 8.1 those powers shall, from the date of the Appointor’s death, be exercisable by the Trustees.

(c)        If an Appointor has lost the legal capacity to act, the Appointor’s powers under clause 8.1 shall be exercisable by the Appointor’s attorney,  or  attorneys,  under  an  enduring  power  of  attorney  in relation to property, or, if no enduring power of attorney is in place, by the Trustees.

(d)        If an Appointor has transferred the Appointor’s powers under clause
8.1 to another person, and that person dies, or has lost legal capacity to act, those powers shall, subject to the terms of the transfer be
exercisable:

(i)	by the Appointor who originally held those powers if that
Appointor is then living; or

(ii)	if that Appointor is not then living, by the Trustees.

[10]     Mr Hensman’s affidavit explains the circumstances in which the trust was set up some 14 years ago.  In brief, the purpose of the trust was to hold shares in a business enterprise with which the Hensmans were involved.  This business had a long term contract extending initially for some 13 years beyond the life of the trust as provided for by its final distribution date.   No reason can be identified for the specified vesting date that was incorporated into the deed, except that it occurred by way of error.  Mr Thomson, the solicitor acting at the time for Mr and Mrs Hensman in relation to the establishment of the trust deposes that it appears to have been a mistake and that at the time he was aware that the trust was being established to hold shares in Scope Resources Limited (Scope) which had a long term contract with the Queenstown Lakes District Council and that the common intention when the trust was established was that it would remain in place for at least the term of the land fill contract and that it was the common intention that the trust would have the usual
80 year life.

[11]     In the course of preparing the application to extend the final date on which the trust was to vest (if not vesting earlier) and when distribution must take place, the issue with regard to the way the power of appointment was drafted was picked up and it was felt that this matter should also be put beyond argument at the same time.

Views of the affected parties

[12]     Obviously the applicants as trustees bringing this claim consent to the relief they are seeking.  Two of the children, Sarah and Rebekah have attained a majority. Kathleen is a minor and Sarah has two children who are minors and of course, in addition, there are the potential unborn beneficiaries who will meet the class definitions under the trust deed.

[13]     Ms Merrin Gill was appointed to represent Kathleen Hensman and Sarah’s two children, Rome and Rosie Lawrence, as well as unborn beneficiaries of the trust. She has provided a memorandum to the Court where she concludes that:

Having regard to the nature of the interests of the minor or unborn beneficiaries I believe the interests of those beneficiaries would not be prejudicially   affected   by   the   final   distribution  date   being   varied   in

accordance with the application.   The interests of those beneficiaries is a contingent interest which is not affected by the vesting date being deferred.

[14]	Ms Gill also discussed the claim with the two adult children and provided them with legal advice. They have provided their consents with this application.

[15]	Relief under s 64A

[16]	The relief is sought under s 64A of the Trustee Act 1956.  Section 64A states:

(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.

[17]     A common circumstance in which a remedy under s 64A is sought is where there is a mistake in the trust documents that needs to be rectified.

[18]     Here I am satisfied that there is a mistake in the trust deed by specifying a final distribution date of 31 March 2016.   Clearly, it was not the intention of the parties to do this given the purpose of the trust which was to acquire the shares in Scope which, under its contractual arrangements with the local authority, was going to continue well beyond that distribution date.  Mr Thompson was a nominal settlor only.   The real assets of the trust, the shares in Scope, were settled by Mr and Mrs Hensman on the trust.

[19]     Further supporting the proposition that this final vesting and distribution date could never have been intended, is the classes of beneficiaries specified in the trust, those beneficiaries incorporating four generations.

[20]     Having regard to the principles that guide decisions under s 64A and noting that all adult beneficiaries consent, this Court stands in the shoes of those unable to give consent.   In this case, Kathleen Hensman, Rome and Rosie Lawrence and of course, the unborn beneficiaries are those who are unable to give consent.

[21]     I accept that this is a case where there cannot be any detriment in the changes proposed to extend the life of the trust.  In fact, the reverse is true in that not to do so will cause detriment to beneficiaries not yet born who would be deprived of consideration by the trustees in the event of the trust vesting and being distributed next year.

[22]     In relation to the changes sought, with regard to the power of appointment, there will be no change to the appointors and that the power will still remain with Mr and Mrs Hensman.  Rather the changes proposed are to clarify any uncertainty as to how those powers might be exercised and therefore those changes are beneficial changes which will avoid future difficulties in this regard.

[23]     I also note that the High Court has inherent jurisdiction to effect changes to the trust where the modifications are of  an administrative nature, rather than a change to beneficial interest. I accept that the variations to the power of appointment and how that is to be exercised are of an administrative nature.

[24]     Accordingly, I order that the variations sought in the statement of claim and set out at paragraphs [6] to [9] of this decision are to be made to the terms of the Sante Fe Trust.  I also order, as sought, that the costs of representation of the minor and unborn beneficiaries are borne by the applicants in their trustee capacity.

Solicitors:
Cavell Leitch Law, Christchurch