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Beddoe Order, Trusts Act, Trusts Act 2019

Application of the beneficiary lens

Re Darlow (in the Estate of Janette Diana Moleta) relates to an originating application for directions pursuant to s 133 of the Trusts Act 2019. The applicant Mr Darlow is the executor of the estate of Janette Moleta (the Estate). He seeks a direction that “… following the conclusion of an appropriate advertising campaign, he may sell, for the best price offered, a property owned by the Estate
situated at 21A Balfour Road, Parnell, Auckland (the Parnell property)”

The background of the matter is concern that the Parnell property will sell for less than its apparent value. There is an imperative to sell ton of the Estate properties to meet payments required pursuant to successful Family Protection Act claims against the Estate.

Orders pursuant to s 133 enable a trustee to take steps without fear of adverse costs or losses being imputed back to the trustee. However, as noted by Peters J at [19]:

One consequence of making a direction under s 133 is to deprive the beneficiary of any opportunity of alleging that the trustee’s actions constituted a breach of trust and seeking compensation for any loss thereby suffered. Hence the need for caution.

There are four circumstances where a Court can give direction to a trustee pursuant to s 133 of the Trusts Act. These are:

(a) if the trustee is unsure of whether a proposed course of action is within his or her powers

(b) where the issue is whether the proposed course of action is a proper exercise of the trustees’ powers where there is no real doubt as to the nature of the trustees’ powers and the trustees have decided how they want to exercise them but, because the decision is particularly momentous, the trustees wish to obtain the blessing of the court for the action on which they have resolved and which is within their powers.

(c)  where a trustee wishes to surrender the trustee’s discretion. There the court will only accept a surrender of discretion for a good reason, for example because the trustees are deadlocked (but honestly deadlocked, so that the question cannot be resolved by removing one trustee rather than another), or because the trustees are disabled as a result of a conflict of interest, and

(d) where trustees have actually taken action, and that action is attacked as being either outside their powers or an improper exercise of their powers.

The relevant category in Re Darlow was the second. With respect to this Peters J referred to the following passage from Richard v Mackay:

Where, however, the transaction is proposed to be carried out by the trustees in exercise of their own discretion, entirely out of court, the trustees retaining their discretion and merely seeking the authorisation of the court for their own protection, then in my judgement the question that the court asks itself is quite different. It is concerned to ensure that the proposed exercise of the trustees’ power is lawful and within the power and that it does not infringe the trustees’ duty to act as ordinary, reasonable and prudent trustees might act, but it requires only to be satisfied that the trustees can properly form the view that the proposed transaction is for the benefit of beneficiaries or the trust estate.

In the case in hand the order was not granted as notwithstanding that the trustee had the power to sell the Parnell Property, Peters J had concerns as to whether the decision was truly momentous and further that the proposed orders were too open-ended and could allow a sale at any price.

References:

  • Re Darlow [2022] NZHC 1763
  • Re PV Trust Services Limited [2017] NZHC 2957
  • Public Trustee v Cooper [2001] WTLR 901 (Ch)
  • Gailey v Gordon [2003] 2 NZLR 192 (HC);
  • Richard v Mackay [2008] WTLR 1667
  • Jones v Firkin-Flood [2008] EWHC 2417 (Ch)
  • Cotton v Brudenell-Bruce [2014] EWCA Civ 1312, [2015] WTLR 39
  • Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882
  • Covic v Barbarich [2021] NZHC 2159
  • Re Darlow [2021] NZHC 2184
  • Re Macalister [2021] NZHC 3572
  • Re Saint John’s College Trust Board [2022] NZHC 259
  • Macnamara v Macnamara [2022] NZHC 547
  • Turvey v Vance [2022] NZHC 1167

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