B R O K E NT

UP BEFORE THE BE A K, PUNCHS A LM A N ACK 18 82 / GE T T Y

Issues

COURTS ARE HANDLING AN

UNPRECEDENTED NUMBER OF LAWSUITS
OVER FAMILY TRUSTS AS PARENTS
DIE AND SIBLINGS AND SPOUSES GO
TO BATTLE OVER MONEY AND POWER.
DONNA CHISHOLM REPORTS.
DONNA CHISHOLMIS NORTH & SOUTHS EDITOR-AT-LARGE.

54 | NORTH & SOUTH | JANUARY 2015

he most devastating witness

was dead. But, as in life, he still
had his say.
It was 3.50pm on day two of Green v
Green in Aucklands High Court, the
opening stanzas of a lengthy court battle
over the family trust of businessman
and philanthropist Hugh Green. Green
died in July 2012, leaving a $400-500
million fortune and his children already
at war over who should control it.

Here, in the last days of winter 2014,

the Irish patriarch came briefly alive
again as his gravelly Donegal accent
still thick despite his 60 years in New
Zealand boomed around courtroom
eight.
It was a taped interview recorded for
his memoirs two years before he died.
In it, he spoke of his elder daughter,
Maryanne. I have always been very
close to Maryanne, very close to her,

because shes the same way as me in

business.
She adores you, obviously, says the
interviewer, Paul Little. Oh aye, shes
very fond of me. Me and her get on
well, never have an argument. We can
talk one another round to anything.
But it was Maryanne who brought
the case to court against her brother,
sister and a family lawyer in an action
the rest of the family believes would
NORTH & SOUTH | JANUARY 2015 | 55

Family patriarch Hugh Green.

have Hugh spinning in his urn. The

tape was part of the evidence she
hopes will prove that she, better than
anyone else in her family, knew what
her dying dad really wanted.
Her efforts look likely to have fractured the family forever. The two sides
havent spoken to each other in years,
and look away pointedly when their
paths cross outside court. Inside the
courtroom, Maryanne and her husband,
pilot Mark Owens, sit as far from the rest
of the Green family as the gallery allows.
Hugh would be very upset Maryanne
has not respected his wishes and has
taken the family to court, his widow,
Moira, who married Hugh in 1955 at
the age of 18, tersely told the court later.
He always said family should stick together and what went on in the family
should not be repeated to outsiders.
Now, thanks to more than four weeks
of hearings, outsiders know in sad
detail the claims and counter-claims
revealing the depth of dysfunction in
one of the countrys richest families a
festering feud that was never revealed
publicly when Hugh Green was alive.
Maryanne claims she was ousted as a
trustee of the Hugh Green Trust and
replaced with her siblings John and
Frances and lawyer Michael Fisher
when Hugh was terminally ill and
lacked the capacity to make such decisions or that if he had capacity, he
was unduly influenced by John and
Fisher. Maryanne says that such is the
hostility of the trustees towards her,
and the scheming they undertook to
56 | NORTH & SOUTH | JANUARY 2015

Maryanne Green launched a civil claim after her fathers

death contesting the appointment of three trustees.

get rid of her, they are unable to treat

her and her daughter fairly as beneficiaries of the trust.
She believes John is not of sufficiently
good character to be a trustee. The
court heard how her relationship with
her father broke down when he gave
John increasing responsibility in the
trust and the business.
Expecting them to work well together as trustees and directors was a
vain hope, said Maryannes lawyer,
Vanessa Bruton. When John became
a trustee, Hugh was committing the
trust to dysfunction and disharmony.
But Stuart Grieve, QC, one of a heavyweight legal defence team, opened his
rigorous cross-examination of Maryanne by saying, I suggest to you that
this case, as far as youre concerned, is
about power and control of the Hugh
Green Group business, isnt it?
No, she replied. I say its about the
wider trust issues.
Maryanne denied Grieves suggestion
she aimed to take over her late fathers
role in the business. Hugh was the
entrepreneur and the money maker,
and I was the guardian and the keeper.
Basically the watcher, the caretaker,
the guardian of his trust and business,
and that has always been my talk for
the 25 years Ive been there.
Her mistrust of John stemmed from
some questionable business practices
in his cattle dealing many years before
practices he admitted werent commercially appropriate, but which his
father was aware of and untroubled by.

Maryanne Green is also applying to

recall the grant of probate for the will
her father made in April 2012 less
than three months before he died
claiming it is invalid because he lacked
capacity or was unduly influenced. In
the will, Green restated his appointment of John and Frances, and Michael
Fisher, as trustees.
The defence says Hugh Green was
determined to see John take a key role
after his death and had no option but
to remove Maryanne when she opposed his wishes. It says despite her
having the title of CEO of the Hugh
Green Group, she was little more than
an office manager, having left school
where she admits she struggled with
no qualifications.
Justice Helen Winkelmann heard the
closing submissions in late November
and has reserved her decision.

lthough the size of the Green fortune makes this case unusual,
battles over control of trusts or attempts
to claw back the assets held in them are
increasingly common in our family and
civil courts.
High-profile Queens Counsel Lady
Deborah Chambers, who in an interview with this magazine five years ago
predicted an avalanche of family trust
litigation, says numbers of cases are on
the rise. She estimates around one in
five cases now before the family and
civil courts involves trusts. Theres
hardly a person that walks in my door
who hasnt got a trust.

The Green family in 2006 (from left): Maryanne, her brother Gerard, mother Moira,
father Hugh, brother Eamonn, sister Frances and brother John.

What were seeing, legal experts say, is

the result of a bubble of new trusts set
up around 20 years ago by the middle
classes rather than the very wealthy to
protect themselves from relationship
property claims and rest-home charges.
Its estimated the country has more than
400,000 family trusts one of the highest rates per head in the world. I think a
lot of people unnecessarily have trusts
and it comes back to bite them in the
bum, Chambers says.
Wellington trust lawyer Chris Kelly
says trusts were a huge growth industry in the 1980s and 90s but problems
related to them are only now starting
to come to light. They werent a problem when the people who set them up
were in their 40s, 50s and 60s. But
now theyre into their 80s; trustees are
getting old. Some will be losing their
mental capacity. And a lot of the old
trusts didnt say what would happen if
they lost capacity.
As people get elderly, sometimes
they start playing favourites within
the family or get a bit cranky. They
start doing things they wouldnt have
done when they were younger.
According to Kelly, its common to
see family dynamics change, leading
(like the Greens) to a battle for control
over trusts, or challenges to trustee
decisions.
In a similar case in October, the High
Court ruled in a long-running family
trust fight over an 11ha farm, which
had been in the family of 87-year-old
Whenuapai farmer Lois Harre since

IF THE TRUSTEE
IS NOT REALLY
ACCOUNTABLE TO
ANYONE, ITS NOT
REALLY A TRUST.
1960. Harre had established the trust in
1989 after her late brothers family was
stung for a terrific lot of death duties.
In 2007, she appointed her daughter
Lynette Clark and a solicitor, Colin
Lucas, as trustees. Her husband, who
was also a trustee, died in 2012.
Before he died, the family began to
discuss what should become of the land
and a decision was made to sell it, but
disagreement grew over how. Harre
wanted part of the land to stay in the
family and didnt want it auctioned,
while her son Rod, a builder, was interested in subdividing. As the dispute
escalated, Harre removed Lucas, and
later Clark, as trustees and appointed
her son and herself.
Clark and Lucas challenged the validity of those appointments, saying
the Harres had ulterior and improper
motives towards the land. They lost,
with the judge vesting the property
with the Harres.
If there hadnt been a trust, Lois Harre
told North & South, the court case
wouldnt have happened. I wish I had
never formed it in the first place. I was
a lot younger and more naive, but boy
I have learnt now. You just go along with
it when you dont really understand the

law. She says when death duties were

abolished in 1992, just three years after
the trust was formed, the reason for
setting it up disappeared but no thought
was given to dismantling it. At that
stage we were cruising along and the
family was great.
But now, the family rift is probably
permanent. Thats it, finished. It just
got out of hand, ridiculous. But you
cant see into the future.
While the Harres won their case
against claims of improper motives,
Otago University professor of law
Nicola Peart one of a think-tank of
advisers to the Law Commission during
its recent review of trusts says whats
now being looked at more closely in a
variety of ways are the powers people
who settle trusts retain for themselves.
In one long-running relationship
property dispute involving a trust set
up by Rotorua timber businessman
Mark Clayton, the High Court ruled
the trust hed established was illusory
a real Claytons trust because he was
sole trustee and also a beneficiary, and
he had the power to distribute all the
trust assets to himself. The Court of
Appeal heard Claytons appeal in July,
and a judgment is awaited.
If he loses, its likely the property held
in the trust thought to be worth around
$28 million will be reclassified as
relationship property, allowing his wife
of 17 years to take half. Melanie Clayton
had signed a pre-nuptial agreement
saying she would accept just $30,000 as
a payout after her marriage rather than
a 50-50 split. The court had earlier set
that aside as being a serious injustice.
He probably thought he had a trust,
says Kelly, of Mark Clayton. But when
you looked at it, underneath it there was
Mr Clayton as trustee for Mr Clayton
and he could pay Mr Clayton any time
he wanted to and no one else could complain. As the judge said, if the trustee is
not really accountable to anyone, its not
really a trust.

n several recent cases, says Peart,

the courts have been asked to decide
whether trustees have properly exercised their powers.
In September, Dunedin woman
Bronwyn Penson challenged her removal as a beneficiary of a trust set up by
her late mother, Sylvia Jack, who died
in 2012. Penson said her mother had
NORTH & SOUTH | JANUARY 2015 | 57

removedher simply because she didnt

like her any more and this was a breach
of fiduciary duty, but the associate judge
threw out the case. Peart says he took
the view that trustees had the power to
add and remove beneficiaries and if
youre appointing your children as beneficiaries, youre doing that because you
have affection for them and when you
no longer have affection for them you
should be entitled to remove them.
However, Peart has serious concerns
about the decision. I dont think it
was a case to throw out.
The decisions of parents who cut
children they dont like out of wills can
be challenged after their death through
their moral duty obligations under
the Family Proceedings Act, but the
act is of no use to children removed as
beneficiaries in a trust structure. So if
you really want to hammer your kids,
you can put all your assets into trust,
leaving none in your estate, and theyll
have precious little hope of seeing any
of your money.
However, in numerous other ways,
property transferred into trusts to qualify for rest-home subsidies or university student allowances is increasingly
under threat. Peart says the Ministry of
Social Development is now going back
very aggressively into trust histories
to see if people applying for subsidies
have disposed of their assets into trusts.
While you can now avoid gift duties
by putting entire assets into a trust at
once, you still wont escape your obligations for rest-home fees. To qualify
for a subsidy under the Social Security
Act, you can gift your assets to a trust
only at the rate of $6000 a year for the
previous five years, and $27,000 a year
per couple before that. But outside
that, Peart says, the ministry is now
likely to regard excess dispositions as
still your property, and deny a benefit.
Quite simply, the state cant afford to
look after people whove got plenty of
wealth sitting in trust.
She says the biggest problem remains
with attitudes despite transferring
ownership of their property to a trust
and its beneficiaries, people continue
to treat it as their own.
Chambers agrees. People still think
a trust is like a cupboard that they can
put the asset into and open any time
they like to pull it out again.
But Kelly says judges are now begin58 | NORTH & SOUTH | JANUARY 2015

Otago University professor of law

Nicola Peart says whats now being
looked at more closely are the
powers people who settle trusts
retain for themselves.

ning to overrule trustees decisions.

Traditionally, courts didnt like interfering and took the view to let them get
on with it; thats what theyre appointed for. Now were starting to see judges
saying, well, maybe sometimes we have
to intervene when theyve gone wrong
and made capricious decisions.
In October, the High Court at Christchurch ruled trustees had made the
wrong call when distributing $250,000
to the three siblings of Rangiora market
gardener Phillip Masters, but not to him,
on the basis they thought he had already
benefited through a property purchase.
The judge held that Masters hadnt got
what the trustees thought he had.
And in 2013, the court removed two
of four trustees, widow Colleen Thurston and lawyer Jeremy Goodwin, from
an Auckland trust after it became deadlocked and unable to make decisions.
The court held Goodwin was so
closely aligned to Thurstons interests
he could not act impartially towards
the other beneficiaries her stepson
and his three sons. The court found
Thurston acted without the trustees
approval by spending $875,000 on renovations to the property she lived in, a
trust asset of which she had sole use.

Probably the commonest of all trust

disputes, though, involve relationship
property. Many trusts are set up by a
husband and wife, who are both trustees. But when the relationship breaks
down and the trust requires decisions
to be unanimous, there is often a stalemate. Courts commonly remove both
and appoint an independent trustee.
Even when an independent trustee
someone who isnt a beneficiary is
involved from the start, it isnt always
straightforward, either. Quite often
the professionals responsible for settling trusts are effectively on one persons side or the other, says Auckland
family law specialist Anne Hinton, QC.
As in the Thurston case, theyre not
independent in the true sense how
can they be? Often they have acted for
years for one of the spouses and theyll
know the other one.
Hinton says husbands and wives almost never have independent legal
advice when theyre forming a trust.
They have no idea that on a separation, all the rules around family homes
wont apply, there will not be just a
straightforward 50-50 split and that
they may need to bring two or three
sets of proceedings.
But she says a lot of the more modern trusts, particularly those drawn up
by specialists in the field, are spelling
out what should happen on a separation, including provision for a trust to
be split into two.
The Law Commission has recommended the courts should have the
power to order trustees to pay a specified sum or transfer property of the trust
to compensate a partner whose rights
have been defeated by relationship
property being transferred into a trust.
However, the lawyers we spoke to say a
change in trust law can only do so much,
and the Property Relationships Act itself
needs a complete overhaul.
Its a real dogs breakfast, says Chambers bluntly. She believes the law does
not look after survivors well, particularly with the requirement that the surviving spouse choose whether to agree to
the terms of the will, or to take 50 per
cent of the relationship property.
Its old-fashioned. If you get 50 per
cent of the property and the rest goes to
your kids, how fair is that, given you and
your husband owned the money? The
will is okay if the deceased has done one

that looks after you, but then you can

face Family Protection Act claims.
She says while there needs to be some
protection for the children, weve gone
completely overboard. What I see all the
time is that estates are frozen, they cant
even get at the resources and effectively
everyone is encouraged to litigate in
case there is a breach of moral duty.
Kelly says personal wreckage despite a
win is always likely when cases end up
in court rather than being resolved
through mediation. These sorts of feuds
can last for generations.
I think people who feel theyve been
cut out of a trust, whether a spouse or a
family member, its that personal
wounding thats as much a part of it as
anything that you would do this to
me. You cant ever compensate for that.
Believing you can go to court and you
will win and feel really vindicated is
naive. It doesnt work like that in the real
world. Courts make decisions in the end
that probably no one is entirely happy
with. Family disputes always occur and
they always will. Thats the nature of
families. Some judges, you feel they
want the family at the end to sit around
holding hands and singing Kumbaya.
Well, thats not going to happen.

n many ways, the legal battle over

Hugh Greens legacy is an ironic final
twist to his life story. Though he built an
enormous fortune, he was also one of the
countrys most generous philanthropists,
giving away millions of dollars through
his charitable trust. He rarely spent
money on himself, famously getting
wife Moira to darn his socks. The final
picture in his memoir shows a tattered
pair of slippers, with the caption, Two
of my oldest friends and there is plenty
of life left in them yet.
He also remarked in the book that he
wasnt too fussed about the car he drove,
either. Mark, Maryannes husband, got
me a Mercedes to test-drive for a weekend when I was looking for a new vehicle. It was all right. How much does it
cost? I asked him. About $200,000.
And what about the Falcon Im already
driving? About $50,000. So wouldnt it
be better to have four of them?
Were not big on show at the Hugh
Green Group.
But in court last winter, everything
was on show and he was no longer
there to run it. 
+

DUTY OF TRUST

T
A BEGINNERS GUIDE

So, youre thinking

about setting up a
trust. Is it worth it?

he experts say if youre

simply trying to avoid your
legitimate obligations for resthome care, your kids university
allowances, creditors closing in on
you, or taxes, then you shouldnt
do it because the problems can be
worse than the solutions. But,
there remain advantages.
Wellington lawyer Chris Kelly:
If you want to set up a business
and youre worried youll lose
your home, putting the house in
trust so its safe from creditors
is a good reason. And if you
really want to cut someone
out of your will and make it
bulletproof, the best advice is
to think about a trust because
its harder to overturn. But you
should do it on the bluebird
day, when theres nothing on
the horizon, no spouse who
might object, and no creditors.
What doesnt work is leaving
it until its too late. But if you
have relatively modest assets and
dont want to spend the money to
run the trust properly, then you
get badly administered trusts.
Auckland lawyer Lady Deborah
Chambers, QC: If you trotted
in and said, I have a couple of
hundred million dollars worth
of property and Ive just fallen
in love with a hunky spunk
who wants to move in, Id say
you should think seriously
about a section 21 agreement
[pre-nup] and creating a trust
to put your property into,
benefiting everyone you like,
but not the hunk. If the property
goes into a trust before the
relationship starts, its very
hard to get at it under the
Property Relationships Act.

rustees are often unclear on

their legal duties, according
to a Law Commission review.
In August 2013, the commission
released a wide-ranging list of
recommendations to revamp the nearly
60-year-old Trustee Act, saying the
legislation was outdated and convoluted.
Otago law professor Nicola Peart, one
of a team of advisers to the commission,
says the recommendations are practical
and sensible and would make the
operation of trusts more effective and
more cost-effective. One of the key areas
has been trying to clarify for trustees
exactly what their duties are. A lot of
trustees dont know what they should be
doing, and what their obligations are.
The commissions report recommends
every trust has six mandatory duties:
To be familiar with the terms of the trust
To act in accordance with
the terms of the trust
To act honestly and in good faith
To act for the benefit of the beneficiaries
or to further the purpose of the trust
To exercise stewardship over the
trust property for the beneficiaries
or purpose of the trust
To exercise powers for a proper purpose.
The commission says current provisions
restrict and confine the powers of
trustees, and the legislation should be
rewritten to say what they expressly
can do, rather than what they cant.
It also recommends that trusts
need not apply to the court to make
straightforward changes to trustees,
or to be able to vest property titles in
the name of new trustees when former
trustees are removed or incapacitated.
But how quickly the recommendations
spur any government action is moot.
The lawyers we spoke to said further
change could take many years.
Wellington lawyer Chris Kelly
believes that despite the expense
and unnecessary litigation involved
with the current laws, theres
little political appetite to act. My
suspicion is that politicians dont
think its sexy enough, he says.
For more on the Law Commissions
recommended changes to trusts,
read Review of the Law of Trusts
at www.lawcom.govt.nz.
NORTH & SOUTH | JANUARY 2015 | 59