It was alleged that the trustee had knowingly profited from the deal when they should not have
The High Court has granted preservation orders concerning the net proceeds of the sale of a property covered by a family trust, which had been allegedly transferred improperly.
In Jones v Bassett [2023] NZHC 2926, the applicant, Darren Jones, applied, without notice, for preservation orders concerning the net proceeds of the sale of a property covered by a family trust. He claimed he had reason to believe that the property had been improperly transferred from the family trust.
The dispute’s origins trace back to 1996 when Graeme and Anne Jones settled their Loburn property into the DG and AB Jones Family Trust. In 2018, Graeme and Anne, as trustees, sold their shares in the property to one of their daughters, Tracey and her partner, Paul Warburton. Graeme died in 2020, leaving Anne as the sole trustee.
In 2021, another of the Jones’ daughters, Teressa, was appointed a new trustee alongside Anne. Ten days after her appointment, the trustees, Tracey and Paul, agreed to sell the property to Teressa and her husband for $600,000. Teressa and her husband then sold a portion of the property to an unrelated third party.
The sale had raised concerns among beneficiaries who questioned the circumstances and transparency of the deal. They had sought updates and assurances from Teressa and her husband regarding the sale of the property by the trustees, the subdivision of the property, and the subsequent sale of a portion of the property to a third party, but their requests have gone unanswered.
Darren Jones, in his affidavit, expresses several concerns, including the timing of the sale, the lack of independent advice, uncertainty about the purchase price fairness, and the absence of responses to inquiries. Darren pointed out that Teressa and her husband bought the property from the trust ten days after Teressa became a trustee and when their mother was starting to show “signs of fragility”. Darren claimed that it was unclear if their mother knew what she was doing when she signed the documents relating to the sale.
Darren also alleged that Teressa did not obtain a property valuation, either in her role as trustee or as purchaser. While no formal statement of claim has been filed, Darren said he intended to allege that Teressa had breached her obligations as trustee in that she and her husband had knowingly profited from the deal when they should not have. He said he might also seek removal from the trust or ask the court to review her actions.
Darren also believed there might be a claim for undue influence concerning the circumstances in which their mother agreed to sell the land to Teressa.
Darren Jones, through his lawyer, has been attempting to obtain information from Teressa since 2021 with limited success. The strained relationship between Jones and Teressa added to the urgency of the matter, as he feared funds may be dissipated without proper accountability.
The High Court accepted the application without notice due to the time-sensitive nature of the issue. The court noted that the application for preservation orders was made under High Court Rules requiring the existence of a fund, the right to which is in question in the litigation. The court acknowledged the existence of a fund subject to potential litigation and cited grounds for believing that Teressa may have breached her duties. While not strictly an interim injunction, the preservation order aims to prevent the transfer of proceeds for a short-medium period to allow clarity on the raised concerns.
The court balanced the applicants’ interests against potential prejudice to the respondents, granting the respondents the opportunity to seek to set aside the preservation order on notice if proper grounds were presented. Accordingly, the court issues an order precluding the trustees from transferring, directing or otherwise dealing with any proceeds from the sale of the property without the court’s approval.
Source: thelawyermag.com
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