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Beneficiaries, Deed of Trust, General

And

The H J Bourke Family Trust (the Trust) vested in May 2019. The question for the Court was whether the following clause include the grandchildren with the children on a final distribution.

“AFTER the expiration of the settlement period to stand possessed of the trust fund (including the said accumulations if any) being so much of the trust fund as has not previously been paid applied or appropriated pursuant to the foregoing provisions of this deed UPON TRUST for such of the children of the marriage of the said HENRY JOHN BOURKE and MARY LOUISE BOURKE and the children of the children of the marriage of the said HENRY JOHN BOURKE and MARY LOUISE BOURKE living at the expiration of the settlement period in a course of distribution in equal shares according to the stocks and not the number of individuals and if there are more persons than one under any one stock then for those persons in equal shares AND if there are no such children or grandchildren entitled to take under this deed then to stand possessed of the trust fund (including the said accumulations if any) being so much thereof as has not previously been paid applied or appropriated pursuant to the foregoing provisions of this deed UPON TRUST for JAMES DANIEL BOURKE, MARY ELIZABETH BENNET, MARGARET RITA LUND, ANNE MONTGOMERY BENNETT, THOMAS ALISTER
BENNETT and HENRIETTA MARY BOURKE as tenants in common in
equal shares.”

On a first reading, it would appear that the grandchildren form part of the class of the final beneficiaries. However, consideration must be given to the use of the word “stocks,” which was up-held to mean that the ultimate distribution was per stirpes not per capita.

Importantly, the constructions of trusts (and wills) “… should be approached in the same manner as the construction of contracts.” See [14]. as noted in Powell v Powell:

[53] Moreover, in ascertaining the settlor’s intentions, the Court is guided
by the words of the trust deed and the context in which the trust was created. This Court’s decision in Boat Park Ltd v Hutchinson, adopting what was said by Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society, emphasised the necessity of a contextual approach to the interpretation of contractual provisions. Such an approach has also been applied to the construction of trust deeds in Manukau City Council v Lawson and Gailey v Gordon. In the former, having referred to Boat Park Ltd v Hutchinson, Paterson J said:


The meaning to be ascertained is that which the trust deed would
convey to a reasonable man having all the background knowledge
which would reasonably have been available to the parties in the
situation in which they were at the time the trust deed was entered
into.


[54] O’Regan J adopted that approach in Gailey v Gordon, but it does not appear to have been previously endorsed in this Court in relation to the
construction of deeds of trust. We consider that it should be applied to such
deeds. The adoption of a contextual approach to interpretation in the present context may be seen as part of a wider recognition of the relevance of context to the construction of documents. This is reflected in cases such as Marley v Rawlings, in which the United Kingdom Supreme Court held that the same approach to construction should be taken with wills as would apply in a commercial contract, notwithstanding the fact that a will is made by a single party. Having referred to the principles for construction of contracts, Lord Neuberger observed:

[20] When it comes to interpreting wills, it seems to me that the approach should be the same. Whether the document in question is a commercial contract or a will, the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context. …

Helpfully, as noted at [17] in Edge v Burke “.. the use of the term per stirpes or its English equivalent “by stocks is generally understood to exclude
members of a more remote generation from taking in competition with their parents, without the need for any express provision to that effect.

Interestingly the trust in question had a 40 year trust period, rather than the more commonly used 80 years. On this basis it was, argued that this was an indication that the settlor intended that the settlor intended to benefit the grandchildren. This argument was not accepted.

It was also argued (see [24]) “… that the use of the conjunction and between the reference in cl 2 to the “children of the marriage of the settlor” and the “children of the children of the marriage of the settlor” and contends that this reference to children and grandchildren indicates that both were intended to benefit from the Trust.

It was noted by the court that a “… division per stirpes is generally understood to include the prohibition on members of a younger generation competing with their parents. So, when a settlor directs a division per stirpes this means that, unless there is explicit language to the contrary, the settlor intended a division that fully accords with this rule.” See [26].

Consideration was also given to the memorandum of wishes, which was silent with respect to the grandchildren. Editor’s note: this would only be relevant to discretionary distributions.

The finding of the court was that as long as all of the settlor’s children were alive, the trust fund should be divided equally between them to the exclusion of grandchildren.

References:

  • Edge v Bourke [2020] NZHC 1185

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