No smoking gun

Bundz v Anderson is a costs decision of Associate Judge Lester.  The background of the matter, relates to a claim that was brought pursuant to the High Court’s inherent jurisdiction relating to an error made by one trustee of the LC Craighead Family Trust (the Trust), who mistakenly believed that a property in Timaru (the Timaru property) was owned by him personally when in fact it was owned by the Trust.  As a result of that error the trustees resolved to bring forward the Trust’s vesting day and wind up the Trust due to the mistaken belief that there were no remaining assets held for the Trust.

The Trust’s final beneficiary once appraised of advice that the Trust’s vesting day had been brought forward sought to have the Timaru property transferred to him.   The matter then proceeded on the basis set out at [8] to [12] of the judgment as follows:

[8] Mr Paine, in his reply of  15 November 2021,  seized  on  the  advice  from Mr Arnet that the vesting date of the Trust had been brought forward, but at the same time ignored that this had not been intended by the trustees, and was an error. Mr Paine referred to instructions from Kodie to require that the Trust asset be transferred to him in accordance with the Trust Deed.

[9] In my view, calling for the transfer of the Trust property was an unrealistic position to adopt when, at the heart of the trustees’ decision to bring forward the vesting date was an error, it seemed the Trust had a debt back to Mrs Craighead’s estate — or at least there was an issue in that regard to be resolved.

[10] In December 2021, Mr Paine wrote to Arnet Law noting there had been no response to his call for the transfer of the Trust asset and that a caveat had been lodged against the property. Mr Paine again referred to the Trust’s vesting date being accelerated but did not refer to the fact that it was due to an error.

[11] Nothing then happened until July 2022 when Mr Paine asked the solicitors acting for Mr Anderson if they were authorised to accept service of these proceedings. These proceedings were filed on 8 July 2022.

[12] The proceedings sought various orders, including removing the defendants as trustees and appointing Perpetual Trust Ltd as replacement trustee.

Notwithstanding the trustees’ initial error, the court was satisfied that the trustees should be indemnified for their costs from the Trust.  As noted at [16]:

“The existence of the error as to the status of the property was acknowledged on its behalf early on through its solicitors, along with it being made clear that the vesting date was brought forward due to the error in relation to the property. It was also acknowledged that there remained issues between the Trust and the transferor of the property, that is, the debt back. When the proceedings were issued, HG Law did not oppose the application that it be replaced as trustee.”

The final beneficiary’s counsel’s insistence that the Timaru property should be transferred to the final beneficiary notwithstanding the error, and the delay in filing proceedings was an issue with respect to costs. As stated at [18]:

“… The trustees becoming aware of the true position were not obliged to act as if the mistake represented a truly informed decision, and immediately distribute the property to [the final beneficiary] as demanded by [his counsel] as if they had intended to wind up the Trust.”

Ultimately, the matter was resolved by agreement, with orders being made by consent whereby the former trustees agreed to be removed as trustees and replaced with a professional trustee. None of the other orders sought by the final beneficiary (including vesting the property in him) were made.

The trustees were fully indemnified for their costs from the Trust (with no personal liability) whereas the final beneficiary was only ordered costs on a 2B basis.

To keep up-dated regarding issues with winding up trusts join Vicki Ammundsen on 17 June 2025 (or following on demand) in Trust Series 2025 – Winding up a Trust.

References

• Bundz v Anderson [2025] NZHC 887