Named as residual beneficiary, together with her brother, in two family trusts set up by their father, Rebecca Forgan discovered brother Arthur Lee had improperly mortgaged trust assets as security for his struggling clothing company, cutting her adrift. She had the High Court remove her brother and her mother as trustees, with her legal costs of $126,500 paid out of trust assets.
The court was told there looks to be a net cash balance left of some $800,000 after trust assets were sold off to avert two mortgagee sales, repaying loans made to Mr Lee’s business. A property on Blackwood Bay in the Marlborough Sounds is a further trust asset.
Arthur Lee owns Christchurch clothing company Thermatech Ltd.
The High Court was told of sister Rebecca being kept in the dark about trust activities.
Their father set up the Blackwood Trust in 1973. It came to own a Christchurch property on Wai-iti Terrace, where their parents lived, plus another property on Fendalton Road occupied by Arthur and his family.
A second family trust was established in 2016.
With their father diagnosed as having early onset dementia, the two trusts came to be controlled by Arthur and their mother Robyn.
Evidence was given that Rebecca belatedly learnt that trust assets were being used to prop up Arthur’s Thermatech. Trust cash was used to pay company debts. Trust assets were mortgaged as security for company loans.
Court orders for full disclosure of trust transactions were ignored.
Failure to make disclosure led the High Court to bar the two trustees from defending legal action taken to remove them. After a formal proof hearing, Arthur and his mother were replaced by professional trustee, Covisory Trust Services.
The court was told both trust properties were sold at auction ahead of threatened mortgagee sales: Wai-iti Terrace for $1.1 million; Fendalton Road for $2.8 million.
Rebecca can likely lay claim to final cash balances eventually held by both trusts.
Terms of the family trusts state that on final distribution assets are to be held equally for Rebecca and her brother ‘on a hotchpot basis;’ meaning final distribution must take into account any financial benefit each has previously received from trust assets.
Forgan v. Lee – High Court (6.08.25 & 24.10.25)
25.223