A ‘trust-busting’ claim saw the Supreme Court rule family trusts are immune from relationship property claims where a spouse establishing the trust does not have sole control over decisions to distribute trust assets.
Farming assets near Whataroa in South Westland held by MRW Pinney Trust remained intact following an unsuccessful claim by former spouse Raewyn Cooper to share in Trust assets as relationship property.
She claimed her previous de facto spouse Marcus Pinney held such control over the family trust that the assets were in essence his own, liable to be split 50/50 following their 2014 separation.
The two lived together for a decade.
With Marcus, she jointly ran a farm and tourism hospitality business at Te Taho.
The Supreme Court was told that while she initially thought she was part-owner of the business, it was after learning that she held only a one per cent stake in a company owning Trust business assets that her relationship with Marcus soured.
After separating, she sued for half share of the approximately $1.8 million business, claiming the business was relationship property.
She is not a beneficiary of the MRW Pinney Trust; deliberately so, the court was told.
The Trust was established following the failure of Marcus’ earlier relationship and after he and Raewyn started living together.
Trust assets came from a separate family trust, established by his father.
In 2016, the Supreme Court ruled in a landmark case, known as Clayton v. Clayton, that where one spouse has effective control of all trust decisions, those trust assets became relationship property.
The court ruled this case was different.
While Marcus is both a trustee and beneficiary of the MRW Pinney Trust, there are constraints on how he may act, the court ruled.
Marcus could be a trustee, but there has to be a minimum of two trustees at all times. Trustees must act unanimously.
Marcus is unable to take sole control of trust decisions.
He is a discretionary beneficiary. Potentially, all trust assets could be distributed to him personally.
Any decision to make distributions requires all trustees to take into account the situation of all beneficiaries, the court said. Distribution decisions could be challenged if made in bad faith, for an improper motive, or after inadequate deliberation.
Powers given Marcus by the trust deed are sufficiently limited that these powers do not amount to a relationship asset, the court ruled.
Cooper v. Pinney – Supreme Court (20.12.24)
25.057