Lothar Herzog’s family trust specified that on his death assets were to be split between his two daughters: Silke and Sonja. This equal division could be overridden by his subsequent written instructions as settlor of the Trust. Sonja failed in a challenge to her father’s directive to the trustee that all go to Silke; his clear express power as settlor to later favour one beneficiary was not open to dispute.
At time of Lothar’s 2021 death, Sonja was expecting to receive half the value of their Hastings family home held in her father’s family trust.
Unbeknown to her, Lothar had transferred the property to her sibling Silke six months prior to death, with arrangements that he remain in occupation paying all outgoings and a peppercorn rental. He left a letter with his solicitor, to be given to Sonja on his death, explaining why she was not receiving any share of trust assets.
In the High Court, Sonja argued reserve powers retained by her father as settlor could not be used in a capricious manner. It was a breach of fiduciary duty owed to named beneficiaries to cut her out, she said.
Justice Lang ruled Lothar was required to act in good faith and in accordance with purposes of the Trust when exercising these reserve powers. But the welfare or best interests of named beneficiaries was not an express purpose set out in the trust deed. It is not for the Court to override decisions made to favour one beneficiary over another, he ruled.
The High Court was told Lothar’s letter delivered posthumously to Sonja highlighted as reasons a number of crude comments she made about him at the time of separation from his wife and also at a time when there was a dispute about repayment terms for a loan he made to Sonja for purchase of a Foxton property.
Evidence was given of Sonja having a turbulent relationship with her father since adolescence. She moved out of the family home to live with a family friend before finishing secondary school.
The bulk of Lothar’s personal assets were left by will to Silke. Sonja inherited his Mercedes motor vehicle, some listed shares and his stamp collection.
Barrett v. Osborne – High Court (1.07.24)
24.168