No reworking of fiduciary arrangements

The Supreme Court has held that notwithstanding the fact that “The appellants were abused in a most shocking way by their father when they were children…” that “The imposition of fiduciary obligations based on peculiar vulnerability alone, untied from the analysis of, or even need for, a subsisting relationship, is inconsistent with the relationship-based analysis contemplated in Chirnside v Fay.”

As stated at [76]:

The appellants argue that, because of his earlier abuse of them, the appellants remained vulnerable to Robert throughout their adulthood, and he abused that vulnerability and breached his fiduciary duties when transferring his assets into the Trust. This is a reformulation of the concept of a fiduciary relationship. As set out above, it was the power and control existing within the relationship which entitled (or, as we have said, required) the appellants as children to repose trust and confidence in Robert, and which justified the imposition of fiduciary duties. But on the appellants’ model, perhaps encouraged by a misunderstanding of the third characteristic in Frame v Smith, it is the vulnerability which creates the fiduciary relationship. On this analysis there need be no ongoing relationship which imposes obligations of loyalty; instead, the imposition of a fiduciary relationship, and the duties that come with that, is justified on the basis of past wrongs. This is, as La Forest J cautioned against in Lac Minerals Ltd, to read equity backwards, and it does not represent the law in New Zealand. Fiduciary duties cannot be imposed as a remedial response to wrongdoing. In other words, a fiduciary relationship cannot be reverse engineered into a situation to provide the court with a remedial response.

Editor’s note: Vicki Ammundsen Trust Law Limited acted for the appellants in A v D.

For further background see Media Release, 2 to 1 and Breach of Parental Duties

Vicki Ammundsen will discuss the Supreme Court decision in a current trust issues webinar on 2 December 2024.

References

• A v D [2024] NZSC 161
• A v D [2021] NZHC 2997, [2021] NZFLR 772 (Gwyn J) [HC judgment].
• D v A [2022] NZCA 430, [2022] 3 NZLR 566 (Kós P, Gilbert and Collins JJ) [CA judgment].
• A v D [2022] NZSC 151
• Chirnside v Fay [2006] NZSC 68