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Court of Appeal of New Zealand |
Last Updated: 2 September 2018
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BETWEEN |
MAHENDRA SINGH, GEOFFREY HUGH BOURCHIER AND DARSAN SINGH AS TRUSTEES OF THE SHEAN SINGH FAMILY TRUST Appellants |
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AND |
GABRIEL SEBASTIAN ASH Respondent |
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Hearing: |
20 June 2018 |
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Court: |
Winkelmann, Simon France and Wylie JJ |
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Counsel: |
S R Morris and G J Angus for Appellants R J Thompson and L W Dixon for Respondent |
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Judgment: |
14 August 2018 at 12.30 pm |
JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by Simon France
J)
Introduction
[1] The appellants are trustees of the Shean Singh Family Trust (the Trust). The trustees are defendants in litigation filed by Gabriel Ash, a son of Shean Singh and one of the Trust’s beneficiaries. The proceedings seek many declarations about the management of the Trust, but of concern here is a declaration that a 1996 variation of the Trust deed is invalid and of no effect.
[2] The variation changed who were the final beneficiaries, added a discretionary beneficiary and changed how the assets were to be distributed on vesting. Gabriel Ash’s position is considerably less advantageous under the variation than it would be if the Trust deed remained as initially drafted.
[3] The initial deed gives no power to add or remove beneficiaries. The trustees therefore accept that on its face the variation is invalid. However, the trustees seek rectification to provide for a power of variation. Notwithstanding this defence, Associate Judge Bell granted Gabriel Ash’s application for summary judgment in relation to the invalidity of the variation.[1] The trustees appeal.
Facts
[4] We adopt the Associate Judge’s summary of the relevant facts:
[2] Dhirendra Singh, more commonly known as Shean Singh, was a lawyer practising in Dominion Road, Auckland. He married twice. Gabriel and his sister Olivia are children of the first marriage. Shean and his first wife separated in March 1993. He bought her out. Among the assets, he took on the division of property were commercial premises in Dominion Road, Mt Eden, where he carried on his practice, and a block of land at Redvale.
[3] The Shean Singh Family Trust was established by a deed dated 23 December 1993. Shean, the architect of the trust, designed it and drafted the deed. The settlor, Shean’s brother, Mahendra, is a medical practitioner living in Queensland. He is the nominal settlor. Shean established the trust for himself and his children. Mahendra and Mr Bourchier, Shean’s accountant, are the trustees. The vesting date is 23 December 2019, 26 years after the date of the deed. The final beneficiaries are Gabriel, Olivia and any other children of Shean born before the vesting date. The discretionary beneficiaries are Shean, the final beneficiaries, any child, children or grandchildren of the final beneficiaries, and any charitable object or institution in New Zealand. The deed makes no provision for any wife or de facto partner of Shean. Under the deed the trustees shall hold the capital and income of the trust on trust for Shean and in any event of his death for such of the final beneficiaries as shall be living and, if more than one, in equal shares. The trustees have powers to distribute to discretionary beneficiaries. The deed allows the trustees to resettle the trust fund. The settlor may appoint additional trustees. There is no express provision in the trust deed for beneficiaries to be added or removed.
[4] Shean settled the Dominion Road and Redvale properties on the trust. At the time of the deed Gabriel and Olivia were still children.
[5] Darsan Singh is Shean’s second wife. They married in August 1994. There are two children of that marriage, Christopher Singh (born in August 1995) and Elizabeth Singh (born in April of 1997).
[6] On 23 August 1996, the settlor and the trustees made a deed varying the Shean Singh Family Trust. They deleted the definition of “final beneficiaries” and inserted another defining them as Shean, Darsan, any children born to Shean and Darsan before the vesting date, Gabriel and Olivia. Darsan was made a discretionary beneficiary. The vesting clause was deleted and replaced with one providing that the trust fund was to be held for Shean and in the event of his death for one half of the funds to go to Darsan and the other half to go to the final beneficiaries in equal shares. Under these changes, Darsan will take 60 per cent of the trust assets on the vesting date. Gabriel and Shean’s other children will each take only ten per cent.
...
[8] On 24 May 2015 Shean tragically died in a boating accident. All his children were over the age of 18 when he died. Shortly after Shean’s death, Darsan was appointed a further trustee of the trust. This was said to be for administrative reasons. She is also the sole executor of his will under a grant of probate of 24 June 2015.
High Court judgment
[5] The Associate Judge correctly identified that a rectification claim in relation to a voluntary settlement has a different focus from contractual rectification.[2] In the latter attention is placed on common intent whereas with a voluntary settlement the focus is on the settlor’s intent.
[6] Five matters led the Associate Judge to conclude the rectification defence was not plausible. These five matters proceeded on the basis that the relevant intention was that of Shean. This was because he was the person who settled the trust with the assets that enabled it to conduct its business and fulfil its purpose.[3] The correctness of that proposition was not challenged on appeal and in the absence of argument we are content to proceed on that basis. Any dispute concerning it can be raised at trial. The five matters are:
- (a) The inherent improbability that a lawyer drawing a deed for a trust for his own family would make a mistake in recording his own intentions.
- (b) The nature of the error. Shean had provided for his children and not their mother. It is likely he turned his attention to whether he could change the class of beneficiaries.
- (c) The centrality of Shean’s intentions and the difficulty of proving them now he was dead.
- (d) The lack of probative value of Shean’s actions in 1996 when he varied the deed as if a power to vary existed.
- (e) Clear deficits in the clause proposed to be included by way of rectification.
Decision
[7] The test for summary judgment is well settled. The onus is on the applicant to satisfy the court that there is no arguable defence to the claim.[4] We are satisfied the Associate Judge’s decision here is incorrect for reasons we can briefly state.
[8] The key aspect is the settlor’s actions in 1996 when he initiated the variation to the Trust deed. Unless Shean Singh did this knowing there was no such power, and furthermore thereafter conducted his affairs for nearly 20 years on this basis, the inference is available that he wrongly believed the Trust deed had such a power. Further, the independent trustee who was involved from the outset has sworn that Shean Singh and all those involved believed at the time the Trust was set up that there was a power to vary.
[9] We consider this evidence was sufficient to resist the claim for summary judgment. It provides an arguable basis for the rectification claim. The point does not need to be put more highly than that. Further, we do not agree it can be assumed a lawyer will not make a mistake in relation to a personal deed he or she drafted. It depends on many things — the lawyer’s familiarity with the area of law and the quality of the precedent being used to name but two. Also lawyers, like everyone, make mistakes. This was not a compelling reason on which to base summary judgment.
[10] The difficulty of proving Shean Singh’s intentions will make the trustees’ task more difficult, but it is not impossible such as to render the rectification argument untenable. As it happens, two persons present at the time and involved in the establishment of the Trust — the two remaining original trustees — are available to give evidence. The reliability of their evidence on the point is clearly a matter for trial.
[11] Finally, we observe that deficiencies in the wording of the proposed clause, and we agree there are some, do not support an argument that there is no tenable claim to rectification. They are matters capable of correction. The scope of any clause to be inserted will reflect what the court finds the settlor’s intention to have been. The terms of a “power to vary” clause in a trust deed such as this are not likely to be difficult to determine.
[12] The respondent’s argument centred on the high hurdle the trustees would face at trial to make good on the rectification claim. It is submitted the evidence of the trustees is vague and contradictory, and will inevitably fall short of constituting “clear and unambiguous” evidence of the settlor’s intention.[5]
[13] It is not appropriate on a matter such as this for the appellate court to comment with any firmness about the strength of the evidence. That is for the trial process. However, we take a different view from the respondent and the Associate Judge on the potential probative value of the settlor’s variation activity in 1996. Coupled with the evidence of the remaining trustees, we consider there is ample for the matter to proceed to trial. For the reasons set out above, we allow the appeal.
Further evidence
[14] The trustees sought to file further evidence on appeal to provide a fuller basis for the rectification claim, and also to answer some of the points made in the judgment under appeal. Admission of the evidence is opposed. Because we consider the evidence is unnecessary, we decline the application.
Costs
[15] The appellants had initially filed an appeal against the High Court costs order.[6] This was abandoned. However, the respondent had filed a cross-appeal which was pursued. Given that the judgment in favour of the respondent has now been reversed, the respondent's cost appeal necessarily fails.
Result
[16] The application for leave to adduce further evidence is declined.
[17] The appeal is allowed. The order for summary judgment granting a declaration that a 1996 variation to the Trust deed is invalid, is set aside.
[18] The respondent’s cross-appeal against the High Court costs order is dismissed.
[19] The respondent in this Court must pay the appellants’ costs for a standard appeal on a band A basis, together with the usual disbursements. These costs are not to be met by the Trust but by the respondent in his personal capacity.
[20] As the appellants have been successful on their appeal, the order for costs in the High Court is set aside and to be determined by that Court following final disposition of the proceeding.
Solicitors:
Morris Legal, Auckland
for Appellants
Patterson Hopkins, Auckland for Respondent
[1] Ash v Singh [2017] NZHC 2909.
[2] At [26]–[28].
[3] Commissioner of Inland Revenue v Dick [2002] NZCA 275; [2003] 1 NZLR 741 (CA) at [68].
[4] Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1 (CA) at 3; and Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
[5] Thompson v Bradley [2016] NZHC 922 at [44], citing Westland Savings Bank v Hancock [1987]2 NZLR 21 (HC).
[6] Ash v Singh [2018] NZHC 224.
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