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Beneficiaries, Beneficiary rights, Relationship Property, s. 182, Trustees, Trusts, Variation

Get the court right

Claims against trusts are on the increase the reasons for which are various and relate, in part to the number of trusts in existence in New Zealand and in part to a growing appreciation and awareness as to what options a disgruntled beneficiary, settlor, trustee or creditor might have.

One area that has produced much fruit of recent times has been the largely overlooked s.182 of the Family Proceedings Act.

Section 182 confers power on the Family Court to inquire into, and make orders, as to arrangements between the parties as to the payment of maintenance or relating to the property of the parties or either of them, or any ante-nuptial or post-nuptial settlement made on the parties.  In essence, s 182 empowers the Court to order variations of trust as the Court thinks fit following the end of a relationship that is linked to the settlement(s) onto the trust in question.  Provided that the parties’ marriage or civil union has been dissolved.

The fact that s 182 can only have application following the dissolution of a marriage or civil union (and therefore cannot have application to de facto relationships) has been a controversial matter.  See the Law Commission Review of the Law of Trusts: A New Trusts Act for New Zealand at pp 239 – 242. 

However, where s 182 can have application, it is important to appreciate that the sole originating jurisdiction is the Family Court and not the High Court.

This means that unless proceedings are commenced in the Family Court and then transferred to the High Court, the High Court does not have the jurisdiction to hear a s 182 application.  Further, the High Court’s inherent jurisdiction with respect to trusts does not empower it to hear a s 182 claim in the first instance: Marshall v Bourneville.

This is a technical, but important point to consider where multiple claims against a trust are contemplated.

Transferring proceedings

Transferring proceedings from the High Court to the Family Court aso takes careful consideration, especially where there are matters that relate to trustees who cannot be a party to Family Court proceedings, for example arguments relating to debts called up by trustees.  See Krzanic v Sullivan.

 

References:

  • Marshall v Bourneville [2014] NZHC 2334
  • Family Proceedings Act 1980, s.182
  • Krzanic v Sullivan [2014] NZHC 2765
  • District Courts Act 1947, s 46

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