Erceg v Erceg

JurisdictionNew Zealand
CourtSupreme Court
JudgeElias CJ,William Young,Glazebrook,Arnold,O'Regan JJ
Judgment Date08 March 2017
Neutral Citation[2017] NZSC 28
Date08 March 2017
Docket NumberSC 17/2016

[2017] NZSC 28

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Elias CJ, William Young, Glazebrook, Arnold and O'Regan JJ

SC 17/2016

BETWEEN
Ivan Vladimir Joseph Erceg
Appellant
and
Lynette Therese Erceg and Darryl Edward Gregory As Trustees Of Acorn Foundation Trust
First Respondents
Lynette Therese Erceg and Darryl Edward Gregory As Trustees Of Independent Group Trust
Second Respondents
Counsel:

C R Carruthers QC and R B Hucker for Appellant

G M Coumbe QC and F C Monteiro for Respondents

Appeal against a Court of Appeal (“CA”) decision which upheld a High Court (“HC”) finding that the appellant's interest as a final beneficiary of two trusts and his right to seek information about the trusts in his capacity as a discretionary beneficiary amounted to property for the purposes of s101 Insolvency Act 2006 (“IA”) (status of bankrupt's property on adjudication) and therefore vested in the Official Assignee (“OA”) on the appellant's bankruptcy — the CA also found that the HC had been correct to exercise discretion against ordering disclosure of any trust documents to the appellant but overturned the HC finding that the appellant did not have standing due to his bankruptcy — the appellant was a discretionary beneficiary and final beneficiary of two trusts which were settled by his brother — he had sought disclosure of confidential information about operation of the trusts, the business transactions they had entered into, the identity of the beneficiaries, what beneficiaries had received by way of distributions from each trust and the trustees' reasons for decisions they had made — whether the Court's role was limited to reviewing the trustees' discretion — whether disclosure should be ordered — whether the bankruptcy of a discretionary beneficiary meant they lacked standing.

The issues were: whether the Court's role was limited to reviewing the trustees' discretion; whether disclosure should be ordered; and whether the bankruptcy of a discretionary beneficiary meant they lacked standing.

Held: The Court's jurisdiction on an application for the exercise of the supervisory jurisdiction was not limited to the grounds of review of a discretionary decision by the trustees. The Court must exercise its jurisdiction as a court of equity, exercising its own judgment as to whether disclosure ought to be made at all and, if so, to what extent and on what conditions. The supervisory jurisdiction was an inherent jurisdiction of the Court. It was complementary to the Court's statutory jurisdiction under the Trustee Act 1956.

I was both a discretionary beneficiary and a final beneficiary of the trusts. The Court approached the question of jurisdiction from the point of view of a discretionary beneficiary who had a mere expectation in relation to the assets of the trust, rather than any fixed or contingent proprietary interest. That was because recent case law made it clear that the jurisdiction of the Court to require the provision of trust information to a beneficiary was not dependent on the beneficiary having a proprietary interest. I did not therefore need to rely on his status as final beneficiary to pursue his claim.

The underlying principle in deciding whether disclosure would be made would be identifying the course of action which was most consistent with the proper administration of the trust and the interests of the beneficiaries, not just the beneficiary requesting disclosure.

The matters that needed to be evaluated in relation to an application for disclosure of trust documents included the following: the documents that were sought; the context for the request and the objective of the beneficiary in making the request; the nature of the interests held by the beneficiary seeking access; whether there were issues of personal or commercial confidentiality; whether there was any practical difficulty in providing the information; whether the documents sought disclosed the trustee's reasons for decisions made by the trustees; the likely impact on the trustee and the other beneficiaries if disclosure was made; the likely impact on the settlor and third parties if disclosure was made; whether disclosure could be made while still protecting confidentiality and whether safeguards could be imposed on the use of the trust documentation. The nature of the beneficiary's interest would also be significant.

I was a discretionary beneficiary, he had no entitlement to distributions from either trust, his entitlement was limited to being considered as a possible recipient of such a distribution. He was one of a class (among a number of classes) of primary discretionary beneficiaries. Confidentiality considerations had significant weight. There did not appear to be any practical difficulty in providing the majority of the information requested. There was a real risk of potential for harassment of beneficiaries to whom dispositions had been made. Disclosure to counsel may provide an assurance of confidentiality but it would place counsel in a difficult position of advising I without being able to disclose the basis for the advice.

A primary discretionary beneficiary would normally have a good case for disclosure of the trust deed and financial statements relating to the trust. I's conduct gave genuine reason for concern as to what he would do with the information if he received it. As he was bankrupt at the time distributions were made, he could not have expected a distribution to be made, given that it would essentially have benefited his creditors rather than himself. Disclosure should not be ordered.

The bankruptcy of a discretionary beneficiary did not affect their capacity to seek disclosure of trust information from the trustees or the Court. They still remained a discretionary beneficiary if declared bankrupt. “Standing” in the sense of a proper basis for bringing a claim to Court did not arise. They did not need a “right” to claim, in any proprietary sense. The status of discretionary beneficiary sufficed.

The appeal was dismissed.

  • A The appeal is dismissed.

  • B The appellant must pay to the respondents costs of $25,000 plus reasonable disbursements (to be fixed by the Registrar in the absence of agreement between the parties). We certify for two counsel.

JUDGMENT OF THE COURT
REASONS

(Given by O'Regan J)

Table of Contents

Para No.

The issue

[1]

Background

[2]

What does the appellant seek?

[9]

Is the Court's role limited to reviewing the trustees' discretion?

[14]

What is the jurisdiction to require disclosure?

[20]

Schmidt v Rosewood Trust Ltd

[22]

Foreman v Kingstone

[35]

Court of Appeal decision in the present case

[42]

Erceg 1

[49]

The supervisory jurisdiction

[50]

Appellate standard

[63]

The present application

[71]

Documents that are sought

[72]

The context for the request and the objective of the beneficiary making the request

[74]

The nature of the interest held by the appellant

[83]

Personal or commercial confidentiality

[87]

Practical difficulty

[92]

Disclosure of reasons

[93]

Impact on other beneficiaries if disclosure is made

[94]

Impact on settlor and third party

[95]

Protecting confidentiality

[96]

Safeguards on use of the documentation

[97]

Our approach

[98]

Standing

[104]

Result

[113]

Costs

[114]

Schedule: Documents sought by the appellant

The issue
1

This appeal raises for consideration the approach the courts should take to an application by a beneficiary for an order directing trustees to disclose to the beneficiary information relating to a trust.

Background
2

The appellant, Ivan Erceg, was a discretionary beneficiary and final beneficiary of two trusts, the Acorn Foundation Trust and the Independent Group Trust. The trusts were settled by the appellant's brother, Michael Erceg, in 2004 and 2002 respectively. Michael Erceg died in a helicopter crash in 2005. Shares in Independent Liquor (NZ) Limited (ILNZ), a successful business associated with Michael Erceg, were transferred to the trusts prior to Michael Erceg's death.

3

The trustees sold the trusts' shareholding in ILNZ in December 2006. Both trusts were wound up in December 2010. At the time, the appellant was an undischarged bankrupt, having been adjudicated bankrupt on 2 February 2010. The appellant was discharged from bankruptcy on 12 May 2014, but his bankruptcy has not, as yet, been annulled.

4

Mr Gregory, a trustee of both trusts, gave evidence about the appellant's status as a beneficiary of each of the trusts. Mr Gregory's evidence was that the appellant was not a named beneficiary of either trust. He was one of a class (among a number of classes) of primary discretionary beneficiaries specified in the trust deed for the Acorn Foundation Trust. He was also one of a class (among a number of classes) of secondary discretionary beneficiaries specified in the trust deed for the Independent Group Trust. He was also one of a class of final beneficiaries specified in the trust deeds for both trusts.

5

In September 2014, the appellant filed a statement of claim in the High Court seeking a declaration that he was a beneficiary of the trusts and an order requiring the trustees to provide him copies of certain documents relating to the trusts. As the trustees admitted the appellant was a beneficiary of those trusts, that aspect of the case fell away and the sole focus of the case became the appellant's attempt to obtain copies of the trust documents.

6

The appellant sought summary judgment against the trustees and the trustees sought summary judgment against the appellant or, alternatively, an order striking out of his statement of claim. The applications were heard together by Courtney J who dismissed the appellant's application and entered summary judgment in favour of the...

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8 cases
  • Lambie Trustee Ltd v Prudence Anne Addleman
    • New Zealand
    • Supreme Court
    • 1 June 2021
    ...Trustee Ltd extended to broader conceptions of confidentiality, a general invocation of disclosure principles adopted by this Court in Erceg v Erceg 7 and an attempt to rely on the Trusts Act 2019, which came into full effect on 30 January this year (that is, after the hearing of the appeal......
  • Justitiae Trustee Company Ltd v NZF Nominees Ltd
    • New Zealand
    • High Court
    • 30 March 2021
    ...there is no relevant statutory power. 50 Mr Gray submits the statements in the judgment of O'Regan J in the Supreme Court decision of Erceg v Erceg, help inform the Court's approach to the interpretation of the statutory provisions in the Act. The judgment contains the following: 16 [18] We......
  • Mccallum Jnr v Mccallum and Others as Trustees of The Mccallum Family Trust
    • New Zealand
    • Court of Appeal
    • 8 June 2021
    ...We will start with Mr Butler's last point: the standard of review. 60 That submission is answered by the decision of the Supreme Court in Erceg v Erceg which makes clear that the exercise of the supervisory jurisdiction, whether based on inherent or statutory jurisdiction, is an ordinary di......
  • Lambie Trustee Limited v Prudence Anne Addleman
    • New Zealand
    • Supreme Court
    • 1 June 2021
    ...the appeal under the following headings: (a) The factual background. (b) What advice is subject to the disclosure order? Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR See below at [65]–[68]. See below at [65]. (c) General principles as to disclosure by a trustee of trustee information to bene......
  • Request a trial to view additional results

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