Our German Desk
In Rawson v Prescott [2024] NZHC 1919, the High Court addressed a dispute involving trust property and a relationship property agreement. Mr RR, trustee of the GR Family Trust, sought summary judgment [1] to evict Ms P, the widow of Mr GR, from a trust owned property where she has resided for the past 12 years.
By way of background:
- The GR Family Trust (Trust) was established in March 2004.
- In October 2004, the Trust purchased a property in Auckland (Property).
- In October 2010, Mr GR began a de facto relationship with Ms P.
- In March 2013, Mr GR made a will and memorandum of wishes (2013 Memorandum).
- In April 2013, Mr GR and Ms P entered into a relationship property agreement.
- In November 2013, Mr GR and Ms P got married.
- In 2016, Mr GR made a new will and memorandum of wishes.
- In 2022, Mr GR died unexpectedly.
The 2013 Memorandum states that on Mr GR’s death, Mr GR’s wish is that Ms P is appointed as a beneficiary of the Trust and will have the right to reside in the Property for life or until she enters a relationship in the nature of marriage.
Ordinarily, although trustees are entitled to consider a memorandum of wishes, they are not legally bound to do so. However, the agreement Mr GR and Ms P entered into contracting out of the Property (Relationships) Act 1976 referred to the 2013 Memorandum in a clause headed “Protection of Ms P”. This clause provided that on his death Mr GR’s separate property:
“shall be applied in such manner as shall benefit and protect Ms P generally in accordance with the provisions for her protection set out in the attached Will dated 15 March 2013 and the Memorandum of Wishes dated 15 March 2013.”
The key issue, therefore, was whether Mr RR, as trustee of the Trust, was bound to the terms of the relationship property agreement.
The High Court found it arguable that Mr RR failed to consider the memorandum of wishes as a relevant consideration and as a result, he may be prevented from seeking an order for vacant possession of the Property. Accordingly, Mr RR’s application for a summary judgment was unsuccessful.
This case demonstrates the care that must be given to relationship property agreements particularly where trust property is involved. We recommend that additional steps are taken, and further documentation is put in place to ensure that the parties to such agreements are adequately protected, and the trustees are aware of and consent to the arrangements.
If you have any questions about the trusts, relationship property, or this judgment, or would like to put a relationship property agreement in place, please get in touch with our Private Wealth Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
[1] A summary judgment is a procedure which allows the Court to give a judgment without a full trial if the Court is satisfied that the defendant has no defence to the claim. In other words, there is no real question that needs to be tried by a Court.
