Queenin decision spells out the importance of a settlor’s intentions for a trust

The sections in the Trusts Act directing judges and trustees to give appropriate recognition to the intentions of the settlors of trusts are taking some time to permeate through the trust community

In Queenin v Queenin and Another [2024] NZHC 1035, the parents of three children settled their home, a holiday house and an investment property on a trust.

The parents and one of their sons were its trustees.

Following the changes brought about by the Trusts Act 2019, the parents thought it appropriate to disband the trust and take back its assets for themselves.

The son trustee objected, wanting some of the trust funds for himself. He wrote:

I am happy for the Trust to be dissolved, as long as the assets are distributed fairly to all beneficiaries within the family

The judge held that the son’s reference to “all beneficiaries” was code for himself [33, 70].

The son refused to sign resolutions and the parents refused to meet with him, presumably knowing he would not co-operate in their intention to take back the trust assets for themselves.

Faced with his opposition, the parents removed him as a trustee.

The son responded by applying to the High Court to set aside the resolution removing him as a trustee and by asking the court to review the parents’ actions.

Powell J had no sympathy for the son.

He held that “the Trust’s assets represent the capital accumulated by [the parents]” and the parents had chosen to put the family home and other assets in the Trust “in order to protect those assets and as a mechanism to ultimately pass their assets to the family once they themselves no longer require them”.

He said, “there is nothing to suggest that [the son]” has contributed any wealth whatsoever to the trust [54]; and “it is difficult to see that it would ever be fair and equitable to remove [the parents] from the control of the Trust’s assets” [60].

Powell J held that the parents’ decision to remove the son as a trustee had been made in good faith and the decision was appropriate.

Settlors’ intentions

Powell J’s decision has been criticised on the grounds that once the family assets were settled on the trust, the parents lost all right to ownership of the assets and their rights were subservient to the rights of the beneficiaries as a whole.

That form of reasoning has to confront all of the sections in the Trusts Act 2019 which say that judges and trustees must give proper consideration to the intentions of settlors when they created their trusts.

I refer to s 4(a), s 121, s 126(b), s 27, s 45(h), s 59(1)(a), s 94, s 124(4)(c) and s 125(3)(c).

Almost certainly, the parents envisaged that subject to any unforeseen circumstances to the contrary, and having created the assets themselves without any contribution from their three children, they would be able to benefit from them while they were alive, to the extent that they wanted to.

The many sections in the Trusts Act directing judges and trustees to give appropriate recognition to the intentions of the settlors of trusts are taking some time to permeate through the trust community.

But the principle, which appears at least nine times in the Trusts Act and which should prevail, is that trustees and the courts are to give proper recognition to the intentions that settlors have for their trusts. The Queenin decision is a good illustration of the successful application of that principle.

Anthony Grant is an Auckland barrister and trustee specialising in trusts and estates.