Trust
and confidence placed in her close friend by a Northland woman when setting up
a family trust proved misplaced when her erstwhile friend Donna Marie Torrey acting
as trustee later grabbed the lion’s share of the trust assets. The High Court ordered $106,000 be repaid to
the family trust.
The High Court was told Pam Lee set up
the PD Lee Trust in 2005, naming close friend Ms Torrey as one of the
trustees. After marrying, Ms Torrey is now
known as Ms Folwell. Named as
discretionary beneficiaries are one of Ms Lee’s two sons, Matthew, and two of
her closest friends, one being Ms Folwell.
Ms Lee died in June 2007, leaving a modest estate. Her Ruawai home had been owned by the PD Lee
Trust. It was sold about six months
before her death, leaving over $165,000 sitting in the Trust’s bank account
accruing interest at about $860 a month.
While Ms Folwell was named as a trustee
when the Trust was set up, she in fact resigned from the position about 18
months before Ms Lee died. Her motives for
resigning were not clear, but in a letter to the Trust’s solicitors she said
she wanted to be removed “ as [she] wasn’t getting nothing out of it at all”. A different attitude was apparent after Ms
Lee died. The will recorded that Ms
Folwell inherited Ms Lee’s power to appoint trustees to the PD Lee Trust. Within six months, Ms Folwell had herself and
her husband William Farmer Folwell installed as trustees. One month later, nearly all the money was
gone from the Trust’s bank account.
Following legal action by son Matthew, Ms
Folwell and her husband were ordered to repay $106,553 to the Trust together
with interest that would have accrued on
the money if not taken. The Public Trust was appointed trustee in
their place.
Justice Faire said the PD Lee Trust is a
trust with discretionary beneficiaries.
There are no directions in the trust document as to how the trustees are
to exercise their discretion in favour of one beneficiary or another. There was no evidence to indicate that Ms Lee
intended Ms Folwell to benefit more favourably than the other two named
discretionary beneficiaries. Trustees
must exercise their duties honestly and in good faith, he said.
Justice Faire said this was not a case of
trustees being honest but careless; the trustees displayed no moral concern for
other beneficiaries of the Trust. They
had acted in bad faith, he said. They
pocketed half the Trust’s assets for themselves. Some payments were made direct to Ms Folwell’s
husband even though he is not a named beneficiary of the Trust. A total of $26,100 was lost in an advance-fee
fraud when Trust money was sent to the United Kingdom. Ms Folwell sent the money off-shore responding
to an email telling her she was entitled to an inheritance from some distant
relative of her previous husband. There
was no inheritance.
Justice Faire said Ms Folwell and her
husband did not keep proper accounts as trustees, or file tax returns for the
Trust. They did not keep a record of the
distributions thay made to themselves or how that money was ultimately spent.
Lee
v. Torrey – High Court (4.09.15)
15.102