Gift, or held on trust? A $1.5 million balance in son Barry’s share trading account was held on trust and Ross Reid, now aged 97, was entitled to demand payment, the Court of Appeal ruled. Ross Reid funded the Craigs share trading account with $1.7 million cash advanced in 2009. Son Barry Castleton-Reid says he also has claims for payment out of the account; his personal assets have been mixed into the Craigs account.
Ross Reid jointly owned Reidbuilt Homes. He was bankrupted in 1999 and again in 2003. Four years later, he had a $1.8 million capital distribution from a family trust, the Hallmark Trust, paid into his personal bank account. Ross Reid was neither a trustee nor a beneficiary of Hallmark. These trust funds were later transferred into a Kiwibank account jointly held with his spouse, who was a beneficiary. She died in 2008. The joint bank account became Ross Reid’s sole property, by survivorship.
The court was told son Barry was the primary beneficiary of his late mother’s estate, receiving real estate then valued at $2.8 million plus listed shares in Air NZ and Auckland Airport then worth some $470,000. In April 2009, Ross Reid transferred $1.7 million out of his Kiwibank account into a Craigs share trading account opened in the name of son Barry. Barry was told this was ‘his inheritance’. By family agreement, $800,000 was paid out of the Craigs account to sister Dee-Ann as compensation for the small bequest she received from her mother’s estate. Evidence was given of Ross Reid trading shares through the Craigs account and of account funds being used to buy apartments, for both father and son.
Twelve months after the Craigs account was opened, Barry closed the account, claiming the closing balance of $1.55 million was his absolutely. Ross Reid said this now leaves him with no assets and superannuation as his only income. The Court of Appeal said there was no intention in 2009 to make a gift of $1.7 million; it was intended son Barry would inherit the balance of the Craigs account on Ross Reid’s death. Meanwhile son Barry holds funds in the Craigs account on trust for his father, the court ruled.
There is insufficient evidence to support a claim that the initial $1.7 million payment amounted to a gift, the court ruled. Email messages from Ross Reid to his son stating the money ‘would be yours’ or ‘are to be yours’ are future focused and not consistent with an immediate gift, the court said. The word ‘gift’ was not used in the 2009 discussions; the arrangement was described as ‘an inheritance’.
The case was referred back to the High Court to determine how the Craigs closing balance of $1.55 million is to be divided between father and son. Son Barry received $333,000 from the account to buy a central Auckland apartment; father Ross sold Barry’s Air NZ and Auckland Airport shares with proceeds paid into the Craigs account. Who bears the cost of the $800,000 compensation paid to Dee-Ann is yet to be decided.
Reid v. Castelton-Reid – Court of Appeal (20.08.19)
19.162