Cooper v Pinney

• Jurisdiction: New Zealand
• Court: Supreme Court
• Judge: Winkelmann CJ,Kós J
• Judgment Date: 20 December 2024
• Neutral Citation: [2024] NZSC 181
• Docket Number: SC 32/2023

Between

Raewyn Phyllis Cooper

Appellant

and

Marcus Robert William Pinney

Respondent

and

Jennifer Jane Pinney and Phillip John Smith as trustees of The MRW Pinney Family Trust

Interested Parties

[2024] NZSC 181

Court: Winkelmann CJ, Glazebrook, Ellen France, Williams and Kós JJ

SC 32/2023

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI O AOTEAROA

Family, Trusts — appeal against a decision which held the respondent's power of appointment under a Trust did not meet the definition of “property” under the Property (Relationships) Act 1976 — rights and powers as property — relevance of Tikanga — Trustee Act 1956

Counsel:

P G Watts KC, S J Zindel and I T K T R F Hikaka for Appellant

S N van Bohemen and R L Powell for Respondent

A S Butler KC, N L Walker and J A Tocher for the Trustees of the MRW Pinney Family Trust as Interested Parties

• A The appeal is dismissed.

• B Costs are reserved.

The appeal was dismissed.

JUDGMENT OF THE COURT

REASONS

(Given by Winkelmann CJ and Kós J)

Table of Contents

	Para No
Introduction	[1]
Narrative	[4]
The MRW Pinney Family Trust	[20]
Decision of this Court in Clayton v Clayton	[31]
Relevant facts	[33]
Definition of “property” under the PRA	[34]
Application to the VRPT deed	[37]
Family Court decision in this appeal	[46]
High Court decision	[49]
Court of Appeal decision	[54]
Miller J's dissent	[55]
Majority reasoning	[64]
What relevance does the Trusts Act 2019 have in this appeal?	[67]
Submissions	[68]
Discussion	[74]
Were Mr Pinney's rights and powers “property” for PRA purposes?	[77]
Submissions	[78]
The meaning of “property” under the PRA	[90]
Judicial oversight of trusts	[95]
Clayton contrasted: the MRWT powers are not so extensive or unconstrained as to constitute Mr Pinney's property	[100]
(a) The deeds distinguished	[102]
(b) The trustee appointment power remains fiduciary and constrained	[104]
(i) The proper purpose rule	[106]
(ii) Fiduciary constraints	[111]
(c) The remaining trustee powers likewise are fiduciary and constrained	[116]
(d) Mr Pinney's powers are not his property for PRA purposes	[125]
Does tikanga alter this analysis?	[127]
Costs	[129]
Result	[130]

Introduction

1 At issue in this appeal is what rights or powers in respect of assets in a family trust can properly be treated as “property” rights or interests falling within the ambit of the Property (Relationships) Act 1976 (the PRA).

2 The respondent, Mr Pinney, was a settlor of the trust in question. He is one of a number of discretionary beneficiaries under the trust, and also holds the power of appointment of trustees. The central proposition for the appellant, Ms Cooper — Mr Pinney's former partner — is that his rights and powers under the trust give him effective control of the trust assets, so that those rights and powers should be treated as property for the purposes of the PRA.

3 Addressing this appeal involves consideration of the breadth and application of the principles established in this Court's decision in Clayton v Clayton [Vaughan Road Property Trust], and the potential impact of the Trusts Act 2019 (the 2019 Act) on the duties and rights in this area. 1

Narrative

4 The factual narrative giving rise to these issues is largely uncontroversial. The summary that follows is largely drawn from the judgment of Miller J in the Court of Appeal. 2

5 Mr Pinney and Ms Cooper began their de facto relationship (for the purposes of the PRA) in about September or October 2004. They separated in April 2014. During the relationship they had two children, born in 2007 and 2009.

6 Throughout the relationship Ms Cooper worked alongside Mr Pinney on a farm held in a family trust, the MRW Pinney Family Trust (the MRWT). The farm and the trust are the focus of this appeal.

7 To understand the history and purpose of the creation of the MRWT we must go back to the creation of an earlier family trust, the Pinney Trust.

8 Mr Pinney's father, Bernard Pinney, established the Pinney Trust in 1977. The beneficiaries were Bernard's children and remoter issue (meaning future generations). Mr Pinney was an infant at the time. By April 2004 the trustees were

Bernard's wife Jennifer (Mr Pinney's mother), Lindsay McIntyre (an accountant) and John Acland (a farmer)

9 The Pinney Trust provided support to Mr Pinney and a previous partner of his when, in 2000, they established a farming partnership — buying land at Te Taho to lease to the partnership, and providing stock and plant at favourable prices.

10 Both the relationship and the farming partnership failed. In evidence before the Court, one of the trustees of the Pinney Trust attributed the business failure to Mr Pinney's inability to control his expenditure.

11 The Pinney Trust advanced further funds to clear Mr Pinney's overdraft and other liabilities and to enable the partnership to be wound up and the farm business to continue. By 2004, the Pinney Trust's advances to Mr Pinney totalled $673,000.

12 On 2 June 2005, the trustees resolved to distribute the Pinney Trust's assets into separate trusts for Mr Pinney and his brother. That was some nine or so months after the de facto relationship between Mr Pinney and Ms Cooper began.

13 On 10 June 2005, Mr McIntyre wrote to Mr Pinney offering advice that he should adopt an ownership structure to receive those assets that ensured any assets transferred from the Pinney Trust would be regarded as his separate property for relationship property purposes. Mr McIntyre wrote that:

The principal issue in terms of structure is to maintain the assets transferred from the Pinney Trust, and any other future inheritance from your mother and father's estate as separate property under the Property Relationships Act 1976.

14 The MRWT deed was executed on 27 January 2006. We set out more details about the terms of the MRWT deed later in this judgment. 3 The MRWT was initially settled with a payment of $20, but over time the following assets were distributed to it by the Pinney Trust: 4

In the High Court, Clark J found that the total amount resettled on the MRWT was $1,652,991, taking the land at its market valuation. 5

• (a) The land and buildings at Te Taho. There was a current market valuation of $1,100,000, but the property was transferred at its book value of $469,669.

• (b) Advances to Mr Pinney of $334,428 (representing among other things livestock and plant, a bank overdraft and Mr Pinney's overdrawn current account). As a result, Mr Pinney owed the MRWT the amounts previously due to the Pinney Trust.

• (c) An investment asset of $2,091 and cash of $216,472.

15 A company, Te Taho Deer Park Ltd, was also formed to operate the business that Mr Pinney now managed with Ms Cooper. The shareholders were the trustees of the MRWT (98 shares) and Mr Pinney and Ms Cooper (one share each). Livestock and plant, previously Mr Pinney's separate property, were taken over by that company. It assumed a liability to Mr Pinney, reflected in his current account, and Mr Pinney was now separately indebted to the MRWT for advances received from the Pinney Trust in order to purchase those items in the first place. Clark J found that some of the debts owed by Mr Pinney to the MRWT were subsequently forgiven, though these transactions were not documented. 6

16 Ms Cooper admits that she signed paperwork establishing the company but maintains that she took no legal advice and was not told that she had only a one per cent interest in it. She says that until 2011 she believed that she had a half share of the business, including everything purchased through the farm account. She says in addition to raising children she worked on the farm and in the hunting and farmstay businesses, never receiving a salary. She says that on separation Mr Pinney resisted disclosure of accounts and other information about the company. Mr Pinney denied

these allegations and said that Ms Cooper always knew both that she had no interest in the land and that the MRWT trustees owned 98 per cent of the company

17 In the Family Court, Judge Grace resolved this conflict in favour of Ms Cooper. 7 He found that it seemed she was not aware of “the true nature of the transactions in setting up the company”, observing that her signature appeared on no documents and there was no evidence that anyone told her the company was assuming debt at the outset. 8 Mr Pinney was the sole director and his was the only name to appear in the shareholder accounts. 9 She had “no say” in how the company was operated, with Mr Pinney retaining “total control”. 10 The Judge also found that “[s]omewhere along the way” all chattels and any equipment not owned by the company had been transferred to the MRWT though there were no documents to evidence this. 11

18 Following its establishment, the MRWT made the investments necessary to establish a bed and breakfast operation which the trustees of the Pinney Trust had previously refused to support. This involved renovations to the farm property. The business was not a success; the company traded at increasing annual losses and indebtedness to the bank grew. Clark J recorded that sometime in 2011 Ms Cooper learned that she had only a one per cent interest in the company and asked Mr Pinney to “fair it up”. 12 His refusal to accede to this request seems to have contributed to the parties' separation in April 2014.

19 The value of the farm at the date of separation was $1,860,000. At the date of hearing in the Family Court, 20 November 2018, it had fallen to $1,545,000. 13 As at June 2014, Mr Pinney had a current account balance of $32,390 with the MRWT, which has been treated as the separation date balance.

The MRW Pinney Family Trust

20 We...