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constructive trusts, Testamentary trusts

Expectation denied

Expectations, great or otherwise are tricky to enforce.  When a person who had expectations in respect of an estate is disappointed there are various options for challenge open to the disappointed party.  However, each has thresholds that need to be satisfied.

Consider the case of Blumenthal v Stewart.  Mr Blumenthal was the son of Mr Mathieson’s partner of some 22 years Ms Blumenthal.  He was not a step-son by law.  Consequently, regardless of how close or parent and son like the relationship might have been he did not meet the class of persons who can claim under s 4 the Family Protection Act 1955 for provision from the will of a deceased who has failed to meet a statutorily imposed moral duty.

Next stop the Law Reform (Testamentary Promises) Act 1949.  For the purposes of Mr Blumenthal’s claim  the relevant requirements were (as noted at [8] in Blumenthal v Stewart :

(a) an express or implied promise by MrMathieson to make testamentary provision for MrBlumenthal

(b) services by MrBlumenthal during MrMathieson’s lifetime

(c) a nexus between these two requirements in the sense that the promise by MrMathieson must be at least in part motivated by the services done by MrBlumenthal, and

(d) the promised provision has not been made.

While it was accepted that promises had been made the court was not satisfied that the required nexus between the promises and alleged services was made out.  In a family context qualifying services must be something more that the normal incidents of family support.  This claim also failed and that decision was upheld by the Court of Appeal.

Next stop, constructive trust.  This claim was also rejected on the basis that any contributions made by Mr Blumenthal were offset by the benefits he received in the use of the property.

It was accepted that Mr Blumenthal’s expectations were reasonable.  However, as the expectations did not flow from any contribution Mr Blumenthal made, there was no remedy available to meet these expectations.

Clearly kindness had been extended, but that does not create a remedy either.  Of note regarding the constructive trust argument is discussion of the independent trustee’s abdication of all responsibilities bar annual gifting.  In this regard the Court of Appeal noted as follows:

[55] The final aspect of the constructive trust appeal concerned the issue of whether Mr Stewart had abdicated his functions as trustee. This topic arises because the property in question is itself the subject of an express trust. As was discussed in Vervoort, difficulties can arise in these circumstances for a claimant because of the rules that trustee functions cannot be delegated and trustees must act unanimously. It was not suggested here that Mr Stewart was a knowing party to creating any expectation on Mr Blumenthal’s part to an interest in the property. Accordingly it could be argued that it would not be reasonable to require him as the legal owner to yield an interest to MrBlumenthal.

[56] The Court in Vervoort overcame this difficulty by ruling the normal trustee principles “…must bend to the practical realities when one trustee is in absolute control of all trust activities and the other trustees have effectively abdicated their responsibilities”.

[57] MrMorten contends that such a situation applied here. MrMathieson was in absolute control and MrStewart had abdicated his responsibilities. JusticeEllis disagreed on the facts. Given our other conclusions on the other matters, it is unnecessary to explore the topic further but again we record we are not persuaded the Judge erred.

It will be of interest when the Court of Appeal finds itself persuaded to explore this topic further.  Trustees who watch from the side-line should think about getting a little closer to the ball.

References:

  • Blumenthal v Stewart [2017] NZCA 181
  • Vervoort v Forrest[2016] NZCA 375
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