Re Merona Trustees Ltd

• Jurisdiction: New Zealand
• Judge: Dunningham J
• Judgment Date: 16 September 2022
• Neutral Citation: [2022] NZHC 1971
• Docket Number: CIV-2021-409-345
• Court: High Court

UNDER Section 133 Trusts Act 2019

IN THE MATTER of an application for declarations relating to the M & R Cooper No. 2 Trust

Between

Merona Trustees Limited and Hamish Patrick Bennett, as trustees of the M & R Cooper No. 2 Trust

Plaintiff

[2022] NZHC 1971

Dunningham J

CIV-2021-409-345

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA

ŌTAUTAHI ROHE

Trusts — application by trustees for directions — meaning of “the children of the settlors” — principles applying to the interpretation of trust deeds — relevance of subsequent conduct as an aid of interpretation — relevance test — Trusts Act 2019

Appearances:

D Kalderimis and K H Lawrence for Plaintiff

P Brown for M Dasilva

J V Ormsby and K Wood for R Moody

G Jones for S Cooper

Copy To:

P Brown, Barrister, Auckland

J V Ormsby, Barrister, Christchurch

G Jones, Barrister, Christchurch

JUDGMENT OF Dunningham J

This judgment was delivered by me on 10 August 2022 at 2.30 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Introduction

1 This is a case about what the words “the children of the settlors” mean in a trust deed. Do they mean:

• (a) the natural children of the settlors (who are husband and wife);

• (b) the settlors' natural children, plus the natural child of the wife whom the settlors raised together; or

• (c) the settlors' natural children, plus any natural child of either one of them, whether or not that child was raised as their own?

2 The meaning of those seemingly plain words is hotly contested by the parties, has been the subject of multiple legal opinions, and will have significant financial consequences for some of the parties depending on how they are interpreted.

3 To resolve this dispute, the trustees have applied to the Court under s 133 Trusts Act 2019 for direction as to how this and related clauses of the trust deed are to be interpreted.

Factual background

4 Mervyn Cooper (Merv) and Sylvia Cooper (Rona) were married in 1958.

5 Rona had two children from a prior marriage, being Robert Cooper (Rob), born 10 February 1949, and Ray Moody (Ray), born 21 July 1950. Rona's first husband abandoned her when the children were very young. At the time there was no domestic purposes benefit, and Rona was unable to keep her children. Rob was sent to live with Rona's mother, and Ray was sent to live with Rona's favourite aunt, Edna Moody, and her husband, Maurice.

6 After Rona married Merv, Rob went to live with them. He was about 10 years old at the time. Rob kept his father's surname, McLean, while he was growing up, but he changed his last name to Cooper by deed poll as an adult. However, he did not know about the existence of his brother Ray. Rona never told her children about Ray, nor had any contact with him as he grew up. It is uncertain whether this was because she was told she must sever contact with him if her aunt took over his care, or because was simply too painful for her to do so.

7 Merv and Rona also had two children together, Lilly Cooper (Lilly), and Amanda Cooper, who is now known as Miffy Dasilva (Miffy). Rob, Lilly and Miffy were raised by Merv and Rona as a family unit, and the girls were never told that Rob had a different father.

8 Although Ray was raised by Edna and Maurice and took the surname Moody, he was not adopted by them, nor were they made his legal guardians. At no time during his childhood did Ray know that they were not his parents. It was not until 1971, by which time Edna had passed away and Ray was planning to marry his now wife Helen, that he learnt Maurice was not his father. This was because Maurice told him that when he married, he would need to use the name “Raymond Alan McLean”, presumably because that was the name on his birth certificate. However, even then he was not given information regarding who his real parents were or why he was raised by Edna and Maurice.

9 It was not until 1982, when Ray was about 32 years old, that he learnt Rona was his birth mother and that he had a brother, Rob. This revelation came about because friends of Helen's parents, one of whom was related to Merv, told Helen's mother that Rona had given Ray away when he was little and that he had a brother, Rob. This information was passed on to Ray and Helen. Helen then made contact with Rob's wife, Suzanne (Sue), and asked whether Rob might like to meet Ray. That proposal was initially rejected. However, around 10 years later Sue contacted Helen and Ray, seeking a meeting, but at that stage Ray was more ambivalent about doing so and it was not followed up on.

10 As luck would have it, about six weeks later, Helen and Ray were taking clients out to a Japanese restaurant in Christchurch. They were seated opposite a couple, and Helen immediately saw a resemblance between the husband and Ray which she pointed out to Ray. They approached the couple, introduced themselves, and found out the couple was his brother, Rob, and Rob's wife, Sue. As Ray says, it was a very successful meeting. They agreed to have a further meeting a few weeks later at the Sign of the Takahe. Again, the meeting went well. Rob seemed excited to have reconnected with Ray, and Ray finally had family in his life and a sibling whom he was similar to. Further meetings were arranged, setting in train a good relationship between the two brothers which lasted nearly 20 years until they had a falling out at the end of a canal boat holiday in France in 2010.

11 It was not until several months after Rob and Ray met that Rob told Rona that this had happened. This was a huge shock to Rona, who by then was in her early sixties, and she was quite upset at the time. It took Rona some time to come around to actually meeting with Ray, but this eventually occurred in around 1993, at her instigation. Ray says from their first meeting, his relationship with his mother blossomed as they got to know one and other. They lived close to each other and they also both had homes in Akaroa which meant he could visit his mother and Rob on a regular basis. Ray says that, for a period of just under 20 years, they enjoyed many events with Rona, Merv and the rest of the family, including most Christmases. Joint Christmases eventually stopped after 2010 when there was a falling out between Lilly and Miffy, and the size of the extended family was becoming unmanageable.

The M & R Cooper No. 2 Trust

12 Merv and Rona settled the M & R Cooper Trust (the No. 1 Trust) in 1986. The beneficiaries of The No. 1 Trust included “the children of the said Mervyn Nathaniel Cooper of Christchurch, Company Director and Sylvia Rona Lorraine Cooper, his wife born before the date of distribution”. This family trust owned the land and buildings in Riccarton where Merv established the Kauri Lodge Retirement Village. The Trust sold those assets in 2008, and the sale proceeds of approximately $3,500,000 were retained in the Trust.

13 The Hempleman Trust was settled on 27 April 2002. It owned holiday homes for the family on Hempleman Drive, Akaroa.

14 In September 2008, the trustees received legal advice which recommended transferring the assets from the No. 1 Trust to the Hempleman Trust, noting the beneficiaries were ostensibly the same in both trusts, and the Hempleman Trust Deed was a more modern, flexible trust deed than that for the No. 1 Trust. The assets of the No. 1 Trust were subsequently resettled on the Hempleman Trust, and it was renamed The M and R Cooper No. 2 Trust (the No. 2 Trust) in November 2008. It is this trust deed which gives rise to the interpretation issue which has been referred to this Court.

15 Soon after the resettlement, Merv and Rona signed a memorandum of guidance which set out their wishes for the administration and management of the No. 2 Trust. Those wishes involved making equal distributions of income to “such of our three children Robert William Cooper, Lilly Jessica Cooper and Amanda Jane Cooper-Davies as continue to survive us” as well as smaller distributions to the children and grandchildren of those three children.

16 In late 2009, Merv and Rona went to their lawyers to prepare Rona's will. At this meeting, Rona told her lawyer about Ray and described him as her “birth son”. In her will, Rona left a gift of $50,000 to each of Rob, Lilly and Miffy whom she referred to as “my children”. She also left $50,000 to Ray, referring to him as her “birth son”.

17 Alongside her will, she left a letter to Ray. It read as follows:

Dear Ray

Ray, not especially, to single you out, with this letter, but because of the way times were when you were a baby I have told you I just did not have the means or the way to keep you with me.

I did what I thought was the best and if I had to, I would do the same today, as

I was sure this was the best way for my baby. I will not mention the pain and tears still come at times, but you have grown into a fine man and even though

I cannot take the credit for bringing you up, I am proud of you.

I would ask that you be compatible with the family and content with the money

I have left you. I am sure you will be. And I leave you to enjoy the rest of your life with your beautiful family. God Bless you, Ray.

With Love, your Mother.

18 Rona died on 11 February 2013.

19 In early 2016, at the instigation of Mr Hamish Bennett, a family friend who had agreed to be a trustee, a review of the No. 2 Trust structure was sought from the law firm, Duncan Cotterill. That advice was provided on 22 April 2016 and raised, for the first time, doubt as to whether Rob fell within the definition of discretionary beneficiaries as one of “the children of the settlors”. This was expressed as a “preliminary view”, but was described as “retrievable” as Rob could be appointed as an additional discretionary beneficiary under the general variation powers in the trust deed.

20 A second opinion was sought from the law firm, Harmans. In...