Failure to tidy up family transactions prior to 2015 death of patriarch Leo Tillemans saw son and daughter fighting over ownership of a Tauwhare property, near Hamilton.
Son Michael said sale of Tauwhare by their father to sister Suzanne at below market price subsequently left their father’s estate insolvent, unable to pay debts he owed his family trust.
At heart was Michael’s annoyance that the earlier deal favouring his sister was described by their father as ‘equalising’ matters between his two children. Michael disputes that any financial benefits he received during his father’s lifetime matched the $700,000 benefit gained by sister buying Tauwhare at an undervalue.
The High Court was told their father sold Tauwhare to Suzanne’s family trust in early 2015 for one million dollars, immediately forgiving $700,000 otherwise payable. The remaining $300,000 was left as a loan due to Leo, secured as a mortgage over Tauwhare, with interest at 4.5 per cent.
In essence, this was an early bequest; patriarch Leo died months later.
Prior to his death, Leo controlled a separate family trust in which he was settlor, co-trustee, and also a beneficiary. On his death, son Michael came to control this trust.
Leo had borrowed from this trust; the amount unclear, on limited financial records available.
Trust financial statements prepared just prior to his death recorded Leo as owing his Trust some $774,000 while at the same time recording an apparent gift from Leo to the Trust of $130,000.
In the High Court, Michael argued their father’s sale of Tauwhare for $700,000 less than its value left his estate insolvent, unable to repay the $774,000 owed their father’s family trust.
Michael asked this earlier sale of Tauwhare by Leo be reversed under the Property Law Act as a ‘disposition’ intended to defeat Leo’s own family trust as an estate creditor. If successful, Tauwhare would become an estate asset, with its value available for distribution to beneficiaries of Leo’s estate.
Justice Tahana pointed out the entire problem could have been forestalled with a little professional foresight. Before Leo’s death: his family trust could have been wound up; or any money he owed his family trust could have been written off, treated as a distribution to Leo as a beneficiary of his own trust.
Left to rule on the legal position as it is, rather than as it might have been, Justice Tahana declined to overturn Leo’s Tauwhare sale to Suzanne’s family trust.
In the context of a family transaction, the sale sought to implement Leo’s testamentary wishes, she ruled. It was not a case of a debtor plotting to hide assets from a creditor.
Suzanne was given some three months to refinance the $300,000 mortgage, with accelerated repayment of principal and accrued interest to be made across to her late father’s estate.
It is for Leo’s family trust, now controlled by son Michael, to recover from his late father’s estate whatever amount he owed his family trust.
Leo Tillemans Family Trust v. Tillemans Familie Trust – High Court (19.12.24)
25.054