Unaware they were beneficiaries of their father’s family trust, estranged children of the late Jack Enright were entitled to a share of Dunstan Burn, a 10,000 hectare central Otago sheep station, the Court of Appeal ruled. Jack acted in breach of trust by unilaterally favouring one son, Tony.
The JJ Enright Trust was established in 1974. Jack Enright’s six children were named as beneficiaries. The Trust deed required net income in each tax year to be distributed according to the unanimous decision of the trustees, failing that it was to be appropriated each year equally between Jack’s six children. The Court of Appeal was told these rules were not followed over the subsequent forty years. Net income was retained by the Trust; separate beneficiary accounts were not established to record individual beneficiary’s undrawn income. Jack treated Trust assets as his own. Trust assets were used in 1988 as part of a ten year project to subdivide properties at Wye Creek on Lake Wakatipu. Subdivision profits were used to complete purchase of a St Bathan’s farm: Two Mile Station. This was then merged with neighbouring Dunstan Burn Station to create a landholding of more than 10,000 hectares which now runs sheep along with some cattle and deer.
After Jack’s death in 2014, five of his disinherited children came to question how sibling Tony came to own all their father’s assets. Only then did they learn details of the 1974 JJ Enright Trust.
The Court of Appeal ruled Jack had been in breach of trust by failing to comply with trust deed requirements for allocation of income. Unallocated beneficiary income was represented by Trust assets. Jack’s children were entitled to trace their income entitlements through cash from the Wye Creek subdivision to the Two Mile purchase and its subsequent incorporation into Dunstan Burn. The five estranged children were entitled to a forty-three per cent share of that land purchased as Two Mile Station, the court calculated.
Enright v. Enright – Court of Appeal (29.10.20)
20.169