//
you're reading...
Administration Act, Beneficiaries, Directions, Indmenity, Trustees

Barring further claims

It is not uncommon for trustees to seek a release from beneficiaries prior to the final distribution of trust assets.   However, where beneficiaries are reluctant or unwilling a trustee may quite properly be concerned to protect the trustee’s position in the event of a subsequent claim. The avenues to address such a consideration were canvased in Cochrane v Bettley with the court arriving at the pragmatic solution of an order barring further claims.  Walker J sets out the background and the reasoning of the court as follows at [1] to [5]:

[1] The court-appointed administrator of an Estate and trustees of a Family Trust wish to finally distribute the residue of the Estate and Trust proceeds to the defendant to bring their administration of both to an end. The defendant is one of three beneficiaries. He has resisted providing any form of release to the executors and trustees or approving the final accounts of the Estate because of his dissatisfaction over the administration. The issues are historical grievances in respect of which the defendant is at odds with his two brothers who are the other final beneficiaries of the Estate and Trust.

[2] The plaintiffs come to the Court to resolve the impasse. The statement of claim is framed as an application seeking directions under Part 18 of the High Court Rules 2016. It makes no express mention of s 66 of the Trustee Act 1956 (the Act), but it is common ground that the orders are sought under s 66. They seek orders sanctioning distribution in accordance with the presented accounts to enable both the Estate and Trust to be wound up. They also seek the Court’s imprimatur to deduct the costs of these proceedings against the defendant’s share of the residue of the Estate and Trust.

The Pleading

[3] The statement of claim also sought orders that the first plaintiff is entitled to a deed of release releasing him from the administration of the Estate and that the trustees be indemnified against all acts and omissions pursuant to the Deed of Trust. These orders were not pursued in their pleaded form. The plaintiffs conceded at the outset of the hearing that it is “unlikely” a beneficiary can be forced to execute a deed of release and/or indemnity before funds are released to them.

[4] The defendant agrees that both the Estate and the Trust need to be finally distributed and the first plaintiff and the trustees need to be released from their duties. However, he takes issue with being “forced to sign documents that [he] is not comfortable with to achieve all that, and, in particular, before [he] is paid what is rightfully [his].” He objects to being required to bear the costs of the application to the 1 The first plaintiff was appointed administrator by a consent order made by Bell AJ on 2 May 2016.Court, which he characterises as unnecessary. His counsel, Ms Farquhar, argues that the concession made at the outset of the hearing changes the complexion of the dispute and shores up his position as to who should bear the costs.

[5] The plaintiffs’ concession, combined with the defendant’s confirmation that he elected not to make a claim against the executor and trustee for pragmatic reasons, led me to query if there was a simple way through the impasse. The plaintiffs’ concern was the risk of distributing all funds and winding up the Trust and Estate and then facing a claim without security. A trustee has immunity when he or she complies with directions made by the Court under s 66, but this does not directly protect the trustee in respect of antecedent acts or omissions. Thus, the directions sought by the plaintiffs, as framed, could not achieve what was a reasonable objective in all the circumstances.

[6] At the request of the Court, Ms Farquhar took instructions as to whether the defendant would oppose an order under s 75 of the Act barring him from taking proceedings against the executor and trustees though it had not been specifically pleaded.2 Ms Farquhar advised the Court that the defendant would not oppose such an order. This helpfully disposed of the issues around release and indemnity of the trustees and executor. The Court records its gratitude to counsel and the defendant for this sensible position.

Walker J then went on to consider, at some length, how the costs of the proceedings should be fairly met and what discount should be accorded for the agreement to a s 75 order being made further highlighting the impact costs can have with respect to the final outcome of any litigation and what this means in reality in the context of what is essentially family litigation.

Cochrane v Bettley was heard prior to the Trusts Act coming into full force and effect.  The corollary provision to s 75 of the Trustee Act 1956 in the Trusts Act is s 135 (Trustee may apply to court to bar claims).

References

  • Cochrane v Bettley [2020] NZHC 2092

Discussion

One thought on “Barring further claims

  1. Hi
    I can not find any data on this case
    Cochrane v Bettley [2020] NZHC 2092
    May you please forward me the judgment of Walker J

    Posted by Bruce Sutton | April 30, 2021, 3:29 am

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Categories

%d bloggers like this: