Four years after Yvonne and Patrick Fogarty set up their family trust, Yvonne exercised her powers as trustee to remove daughter Karen’s children as beneficiaries. Then after later resigning as trustee she joined with her two other children Daniel and Tracey in a bid to challenge their father’s continued use of trust property.
The Fogarty Family Trust was established in 1998 when Yvonne and Patrick purchased a 1,300 hectare property at Porangahau in Hawkes Bay. Later to surface, was Yvonne’s complaint that there had been insufficient recognition given for her father’s contribution towards the $310,000 purchase price. Her father contributed over a third of the price, she says. This level of contribution is disputed by husband Patrick, the High Court was told.
Family dynamics in the Fogarty household were not straightforward. Daughter Karen was adopted out at birth. Karen described it as an open adoption, having ongoing contact with the wider Fogarty family from her teenage years. Yvonne says later contact was limited.
Divisions within the family were apparent when Yvonne as trustee removed Karen’s children as family trust discretionary beneficiaries in May 2002. Karen, as a named final beneficiary alongside her two siblings, could not be removed unilaterally by Yvonne as trustee.
Income for the Fogarty Family Trust came from renting out Porangahau. From 2016, the property was leased to a second trust controlled by father Patrick.
Three years later, Yvonne and two of her children, Daniel and Tracey, were in court claiming the rent was too low. Yvonne had resigned as trustee back in 2005, five years after she and Patrick had separated.
An out-of-court settlement saw agreement for payment of increased rentals and protocols to grant permission for extended family to hunt across the property.
The High Court was told Patrick subsequently looked to end family wrangling with his purchase of Porangahau from the Trust and the sale proceeds divided equally between Karen, Daniel and Tracey as the three-named trust final beneficiaries.
In October 2021, he offered to pay $2.4 million. Little headway was made. Yvonne claimed the price was too low. She challenged plans for a three-way equal split.
Fogarty Family Trust trustees made a Trusts Act application to the High Court seeking approval for both the $2.4 million sale and their decision to divide sale proceeds equally. Failing approval, trustees asked the High Court to appoint the Public Trust as replacement trustee.
Justice Palmer approved the trustees’ proposal.
Yvonne provided no evidence the offered price was below market. There was nothing in the personal circumstances of the three children suggesting anything other than an equal split was appropriate.
Justice Palmer further ruled the three children were entitled to recover their separate legal costs from the Trust, as were the current trustees. Their parents have to pay their own personal legal costs, with no recovery from the Trust. As individuals standing outside the Trust they did not need to get involved in the trustees’ High Court application, he said.
re Fogarty Family Trust – High Court (29.04.24)
24.108