Philip Rangitaawa Trust [2014] NZHC 2571 (21 October 2014)

Last Updated: 3 November 2014

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2014-485-10002 [2014] NZHC 2571

IN THE MATTER OF	the Philip Rangitaawa Trust
BETWEEN	GIBSON SHEAT TRUSTEES LIMITED and JOHN WILLIAM RANGITAAWA Plaintiffs

Hearing:	15 October 2014
Counsel:	G F Kelly for plaintiffs J H Rennie for minor and unborn beneficiaries
Judgment:	21 October 2014

_{JUDGMENT OF DOBSON J}

Introduction

[1] This is an application for rectification of the Philip Rangitaawa Trust (the Trust) to include one nephew of the settlor, Ruruwhenua Rangitaawa, as a beneficiary, on the basis that he was mistakenly omitted from the trust deed. There is clear evidence that the settlor intended to include all his nieces and nephews.

[2] There is no statutory jurisdiction under the Trustee Act 1956 (the Act) to rectify the terms of a trust deed. There is, however, jurisdiction in s 64A of the Act for the Court to approve a variation of the terms of a trust and the jurisprudence on that section provides an appropriate analogy in the present case.

[3] The application for rectification is brought on the basis that the Court’s inherent jurisdiction extends to making orders of the type sought. The beneficiaries who were minors, and others who might be joined to the class, were unlikely to wish to take advantage of the mistake to exclude their cousin. The rectification would disadvantage

_{existing beneficiaries to a small extent, but the amount was minimal and not worth the}

IN RE PHILIP RANGITAAWA TRUST [2014] NZHC 2571 [21 October 2014]

potential disharmony in the family if rectification did not occur. Ms Rennie, who has been appointed as counsel for the minor and unborn beneficiaries of the Trust, is satisfied that the intention of the Trust is clear, in that Ruruwhenua was omitted by mistake, and in those circumstances the rectification is in the interests of those beneficiaries she was appointed to represent.

[4] By way of a minute issued on 6 October 2014, I dispensed with the requirement for a hearing and instead convened a telephone conference with counsel to review the merits of the application. Ms Rennie did not oppose the application. Her presence enabled her to be heard on whether the orders sought are in the welfare and best interests of the minor and unborn beneficiaries. Prior to the conference, she had filed a memorandum setting out the reasons for her submission that a rectification would disadvantage the beneficiaries who are minors to a small extent, but excluding one of their cousins would risk disharmony and was not worth the minor financial disadvantage that would follow.

[5] Philip Rangitaawa settled the Trust on 1 April 1999. The beneficiaries of the

Trust are:

• Mr Rangitaawa (who died on 10 March 2013);

• Mr Rangitaawa’s mother (who died on 1 December 2006);

• Mr Rangitaawa’s nieces and nephews;

• any of the children of those nieces and nephews; and

• any future nephews and nieces of Mr Rangitaawa or children of those nephews and nieces.

[6] The trustees of the Trust are Gibson Sheat Trustees Ltd and John William

Rangitaawa (the Trustees).

[7] It is apparent from the trust deed and the affidavit evidence of John Rangitaawa that Mr Rangitaawa intended to provide for all of his nephews and nieces equally and

that the omission of Ruruwhenua Rangitaawa was a mistake. The memorandum of wishes, dated 22 October 2004, records under the heading “Background”:

The settlor wishes that after his death all his nieces and nephews benefit equally from the Trust.

[8] Clause 2 of the memorandum of wishes records:

Subject to [the Trust providing for the settlor’s interest throughout his life] I want to provide primarily for my nieces and nephews limited to the natural born children of any of my brothers, so far as possible I wish to maintain equality between them.

[9] Clause 4 records:

On my death you should distribute the trust fund to such of my nieces and nephews equally.

[10] John Rangitaawa’s affidavit states:

Philip and I drew up the list of nieces and nephews together. The omission of Ruru as a beneficiary was simply an omission or oversight. It was not a deliberate act on either of our parts to exclude Ruru.

Analysis

[11] Under s 64A of Act, the Court can approve a variation of a trust on behalf of any unborn or unknown person provided that the arrangement is not to his or her detriment. In determining whether an arrangement is detrimental, the Court:

... may have regard to all benefits which may accrue to the unknown or unborn person directly or indirectly in consequence of the arrangement, including the welfare and honour of the family to which the unknown or unborn person belongs.

[12] Using s 64A as an analogy for the present application, its purpose is to put the Court into the shoes of the minor and unborn beneficiaries of the trust who are incapable of assessing the variation.¹ It is the agreed consensus of all of the beneficiaries, rather than the Court, that operates to vary a trust.

[13] The question of whether a variation (as would result from rectification) is in the interests of the minor and unborn beneficiaries included in the trust deed requires a wide

approach to the benefits and detriments of the variation. As Miller J stated in Graham v

Butler:²

It is not simply a matter of actuarial calculation. The arrangement must be considered as a whole. Indirect and intangible benefits and detriments are relevant, including the welfare and honour of the family. I observe that such considerations introduce a risk that the Court will be asked to authorise an arrangement that, while economic in nature, is economically disadvantageous to beneficiaries who are minors. As Cooke J cautioned in Re Smith [1975] 1 NZLR 495 at 500, appeals to family harmony could hardly carry the day against financial disadvantages. Minor or unborn beneficiaries on whose behalf the Court is asked to consent are scarcely likely to have contributed to any present disharmony. That said, it may be obvious that the existing trusts are likely to cause tension among reasonable people now or in the future, or that they are otherwise harmful to family welfare, and that may be taken into account. The question for the Court remains whether the arrangement is in the interests of the person on whose behalf the Court is asked to approve it. In reaching its decision the Court will examine the arrangement from the perspective of a beneficiary who is properly advised and reasonable.

[14] I am satisfied that the rectification sought is in the interests of the minor and unborn beneficiaries of the trust deed. The financial effect of rectification on the current beneficiaries is minor and rectification accords with the clearly expressed intentions of the settlor.

[15] It is appropriate to invoke the Court’s inherent jurisdiction to make the orders sought. If there were any doubt about the existence of such jurisdiction, then an application in amended form seeking a variation to the same effect in reliance on s 64A of the Act would be determined on parallel reasoning.

Costs

[16] The Trustees seek an order for costs. It is appropriate that these costs are borne by the trust.

Dobson J

Solicitors:

Greg Kelly Law Ltd, Wellington for plaintiffs

McWilliam Rennie, Wellington for minor and unborn beneficiaries