A
no-holds-barred family dispute has broken out over the McLaren family’s
Marlborough mussel farm with the High Court reversing actions by son Bruce who
had removed his parents as beneficiaries of a trust controlling farm operations.
The McLaren family started
mussel farming in the late 1970s. After
nearly thirty year’s operation the business was restructured into two separate
family trusts: operating assets into the BDM Trust and capital assets to the
MFT Trust. David and Mary McLaren were
appointed trustees of each Trust along with their only son Bruce.
Evidence was given that
son Bruce fell out with his parents after hearing of their plans to sell off
farming assets owned by the MFT Trust.
He retaliated by exercising a power of appointment granted him in the BDM
Trust, removing his parents as discretionary beneficiaries of the BDM Trust and
appointing two new trustees. This
increased the number of trustees to five ensuring a 3-2 voting split in Bruce’s
favour if the new appointments voted with him against his parents as
trustees.
Justice Dobson said
this is a sorry tale of what can occur when a family adopts an inappropriate
form of trust deed without adequate advice or sufficient understanding of the
legal effect of its terms. Parents David
and Mary McLaren had established the business but sold operating assets to a
Trust giving son Bruce control through his power as an appointer.
Justice Dobson reversed
the decision to remove parents David and Mary as beneficiaries. He said son Bruce did not have unfettered
power to decide who should be removed; the appointer’s power was governed by
some basic fiduciary duties. Circumstances
in which the BDM Trust was established meant Bruce could only remove his
parents as beneficiaries after acting in good faith bearing in mind the purposes
of the Trust. The likely inference is
that Bruce was nominated as appointer to enable the business to keep operating
after his parents retired or on their death, he said. Given the shared aspirations of Bruce and his
parents it was an expropriation of trust property to remove his parents as
beneficiaries leaving Bruce and his immediate family as the only beneficiaries. It was not a reasonable exercise of trustee
powers when removing his parents and this was disproportionately punitive, he
said.
Bruce’s appointment of
two extra trustees to the BDM Trust was not overturned.
McLaren
v. McLaren – High Court (15.02.17)
17.016