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 [2009] NZHC 698 (11 June 2009)

IN THE HIGH COURT OF NEW ZEALAND
HAMILTON REGISTRY
                                                                       CIV-2009-419-000470



              BETWEEN                         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 2009



              RESERVED JUDGMENT OF RONALD YOUNG J



  
         In accordance with r11.5 I direct the Registrar to endorse this judgment
               with the delivery time of 10.00
a.m. on the 12th 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 Arrangement


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 2009
reflecting
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 J



Solicitors:
R A Craven, Allen Needham & Co, PO Box 12, Morrinsville, email: [e-mail]