Trust beneficiary rights arise from trust law, not contract law. Verena Ryan was entitled to her day in court arguing the effect of a family trust owning ‘Lothbury,’ a multi-million dollar property on Orakei Road in Auckland suburb Remuera. The High Court dismissed claims by estranged spouse Stuart Lobb that the trust deed required any disputes first go to arbitration.
They separated in 2016, after sixteen years marriage. Verena claims half share of family trust assets. Stuart argues contributions to the family trust should be taken into account. They were joint owners of Lothbury when transferred to their family trust in 2005 at a value of $1.1 million. Stuart says it is financial contributions to the original 2003 purchase of Lothbury which count. Verena’s then contributions were negligible, he says. The trust deed contains an arbitration clause. It states any dispute about the trust deed must be referred to an arbitrator ‘to avoid family disagreements and any consequential family ill will.’ Negotiations over a possible arbitration have come to nothing. Stuart claims they have yet to sort out what is in dispute. He protested Verena’s going to court.
Associate judge Smith ruled the dispute was between the two as beneficiaries. An arbitration clause in a family trust did not bind them as beneficiaries. Verena’s application for a court hearing on trust deed interpretation could proceed at a date to be fixed, he ruled.
Ryan v. Lobb – High Court (20.11.20)
20.184
Post-judgment note: In February 2021, the Trusts Act 2019 comes into effect. It provides a mechanism for arbitration of trust disputes. For family trusts with multiple discretionary beneficiaries, the courts must approve arbitration settlements affecting rights of minors and children yet to be born.