In his nineties and long retired from his housebuilding firm Reidbuilt Homes, Ross Reid sued son Barry alleging $1.7 million handed over in 2009 was not a gift and had to be repaid. Justice Gordon ruled it was a gift.
The High Court was taken through a long history of family dealings involving a Reid family trust, the Hallmark Trust, and the former family home on Verbena Road in Birkdale on Auckland’s North Shore, known locally as ‘the Castle’.
In 2007, $2.2 million was distributed from the Hallmark Trust following sale of its main asset, a commercial building. This money was paid into a bank account in the sole name of Ross Reid. He was neither a trustee nor a beneficiary of the Trust. The funds were later shifted into bank accounts in the joint names of himself and his wife (who was a beneficiary of the trust). When his wife died in 2008, Ross Reid assumed ownership of the balance of the joint account by survivorship: some $1.75 million. These funds were at the centre of High Court litigation. Ross Reid said they had been transferred into an ABN AMRO Craigs share trading account, nominally in the name of son Barry, but he remained the beneficial owner. Barry said the $1.7 million transfer was a gift but he had agreed to allow his father acess the account: trading shares, borrowing some of the money to buy real estate, and taking an agreed regular allowance.
Family dynamics had been complicated by the 2008 death of Ross Reid’s wife. Ross Reid is executor of her estate. He is not a beneficiary. Son Barry is the residuary beneficiary. Daughter Dee-Ann received from her mother’s estate household effects, jewellery and a right to live at the Castle. She chose not to live there; she had her own home. Barry and his wife came to live at the Castle with Ross Reid. Barry then became owner of the Castle, according to the terms of his mother’s will. By family agreement, $800,000 was paid out of the Craigs share trading account to Dee-Ann as compensation for the small bequest she had received under her mother’s will. Other withdrawals from the Craigs account were used to buy two apartments in Queensland for Ross Reid and to settle the purchase of apartments in the Eclipse development in Auckland central business district. Both Ross Reid and son Barry had previously bought off the plan and were committed to settling these purchases at a later date.
Evidence was given that Barry later became concerned about the way his father was operating the Craigs account. There was concern about amounts being taken in excess of an agreed allowance. There was the unexpected appearance of a mortgage on title to the Castle. It was registered whilst Ross Reid was on the title as executor of his late wife’s estate. It proved to be a default mortgage registered when Ross Reid did not make payments due on his Eclipse apartment purchase. In May 2010, Barry blocked his father’s access to the Craigs trading account. His father sued to recover his claimed $1.7 million.
Justice Gordon ruled Ross Reid’s claim the $1.7 miilion was not a gift lacked credibility. Ross Reid said the Craigs account was nominally in Barry’s name so his son could sign share transfers on his behalf whilst he was in Australia; there was no need for this to be done. He said the deal was designed to defeat any possible reimposition of death duty taxes; that is only effective if it was a gift made prior to death. He had signed documents acknowledging drawings from the Craigs account were a debt owed his son Barry; this was inconsistent with any claim the original transfer was not a gift. When Ross Reid decided to sell one of the Queensland apartments because it was ‘not paying its way’, he acknowledged in an email that this would assist in loan repayments; confirming the original $1.7 million funds transfer was a gift.
Reid v. Castleton-Reid – High Court (24.04.18)
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