The common Kiwi practice of transferring the family home into a trust and then carrying on as if no trust ever existed came back to bite for the Queenin family. Parents Bert and Diana were forced into court by son and fellow trustee Aaron questioning their conduct of the Trust and their motives for dissolving it when they decided in 2022 to bring their family trust to an end.
The High Court confirmed Aaron’s removal as trustee but ordered the Queenin Family Trust was not to be dissolved without court approval.
Their family trust was established in late 2007. Parents Bert and Diana later transferred three Auckland properties they owned into the Trust: their Titirangi home, a rental in Kelston, and a family bach at Clarks Beach.
Named as beneficiaries were Bert & Diana, plus their three sons.
Evidence was given that trust formalities were never complied with subsequently; there was a complete absence of trustee resolutions otherwise required to record and approve trust transactions.
It was enactment of the Trusts Act 2019 and greater compliance costs then imposed on family trusts that led Bert & Diana to bring the family trust to an end.
Their intention was signalled to fellow trustee, son Aaron. He indicated no objection, but asked about ‘the big picture moving forward.’
Couching his motives as that of competent trustee seeking to be kept fully informed, he asked for detailed accounting information relating to trust assets from the Trust’s inception some fifteen years previously.
Justice Powell was to later suggest Aaron’s motives were less than pure, indicating Aaron’s express concerns about Trusts Act compliance were motivated by a personal interest as beneficiary.
The High Court was told Bert & Diana had their lawyer draft documents to bring the family trust to an end with all trust assets returned to them. As a trustee resolution, all trustees needed to sign.
Aaron proved to be unavailable at a lawyer’s appointment set for signature. He said he was not told of the appointment. His later efforts to attend for signature ‘out of office hours’ bore no fruit.
He challenged steps taken by his parents to remove him as trustee. He learnt his parents had removed all free cash from the Trust’s bank account and banked the proceeds into their personal joint account. This movement of trust assets was done without the required unanimous trustee approval, he complained.
Justice Powell ruled Bert & Diana as trustees properly exercised a power in the trust deed to remove Aaron as fellow trustee. They had acted honestly and in good faith.
In the context of a small family trust such as the Queenin Family Trust, it is to be expected that Bert & Diana might wish to have all assets returned to them, Justice Powell said. They provided all the capital. Fellow beneficiaries had not contributed capital.
The effect of Justice Powell’s ruling that the Trust not be wound up without court approval will force family members to reach some measure of agreement before final distribution of trust assets.
re Queenin Family Trust – High Court (2.05.24)
24.113