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Fiduciary duties, Relationship Property, Termination, Trusts, Trusts Act 2019

Social vs commercial

The decision in Brkic v White considers whether Ms White has an interest in land that is “tantamount to ownership of the land”, such that the appellants can obtain a charging order that will enable the land to be sold to meet a debt owed by Ms White and her co-trustee of a separate trust. The first respondents are the trustees of the Awhitu Trust who maintain that the land in question is owned by the trustees of that trust.

By way of background:

The primary argument is that the terms of the Awhitu Trust are such that Ms White retains such broad powers to control the Awhitu Trust and its property that she should be treated as the legal and beneficial owner of the property owned by the Awhitu Trust. It was argued that Ms White retained powers in respect of the Awhitu Trust that were “virtually identical” with those retained by Mr Clayton with respect to the Vaughan Road Property Trust (See The Supreme Court Writes Back)

These were set out in Bkric v White as follows:

In the High Court decision as stated at [11] and [12]:

Woolford J was satisfied that the Awhitu Trust was not an objective nullity and was a properly functioning trust.

In the Court of Appeal the argument for the applicant can be summarised as:

The first respondents argued that the submissions for the applicants overlooked the no self-benefit clause in the trust deed and that in Clayton the Court did not consider whether the trust powers gave Mr Clayton a direct interest in the underlying assets of the Trust.

Editor’s note: Rather, in Clayton, the Court identified the rights Mr Clayton had as property rights (for the purposes of the Property (Relationships) Act 1976 (the value of which was equated to the value of the trust’s assets). See [38] in Brkic v White.

Consideration was given to the fiduciary nature of powers of appointment of trustee. As set out at [29] to [32]:

In conclusion, while not determining the point regarding whether powers of appointment are fiduciary, the Court of Appeal found that the restrictions of the no self-benefit clause could not be avoided stating at [35]:

Also see How afraid should we be of Clayton?

A second argument related to whether the Awhitu Trust, was defeasible (by virtue of Ms White having a power of revocation, which was not confirmed) or an objective nullity. In this regard the Court of Appeal noted the steps required for a creditor to step into the shoes of a person with a power of revocation and that there was no short cut available to circumvent such a process.

The decision in Brkic v White is important as it demonstrates the importance of self-benefit restrictions, which are echoed in the Trusts Act 2019 at section 31 unless modified or excluded:

Also to be considered is the dichotomy between commercial and relationship considerations and if there is more water to flow under this bridge.

References:

  • Brkic v White [2021] NZCA 670
  • White v Brkic [2021] NZHC 919
  • Clayton v Clayton [2016] NZSC 29
  • New Zealand Maori Council v Foulkes  [2015] NZCA 552
  • Goldie v Campbell [2017] NZHC 1692

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