In the first 20 years since it was established, New Zealand’s highest appellate court, the Supreme Court, has considered 18 cases relating to issues of family law,¹ just less than one for each year of its operation.  In the last four months, however, from late 2024 to March 2025, the Court has released a further four decisions relating to family law issues.  They relate to trusts, fiduciary relationships and the Property (Relationships) Act 1973 (PRA).  This article briefly summarises each of these recent decisions.

A, B and C v D and E Ltd (as trustees of Z Trust)[2]

The “Alphabet Case” involved claims by the non-beneficiary adult children of the settlor of a trust against the assets of the trusts for equitable compensation for significant harm caused to them by the settlor. The claimants all suffered physical and sexual abuse at the hands of their father, the settlor, throughout their childhoods. They had not laid criminal complaints or brought civil claims against him during his lifetime. His will made no provision for any of them. His estate held only nominal assets because he had settled most of his assets on the Z Trust during his lifetime. Family Protection Act 1980 claims were therefore uneconomic. The primary beneficiaries of the Z Trust were the adult children of a friend of the settlor.

The issue being considered by the Court was whether the settlor owed fiduciary duties to his adult children when he transferred his assets to the Z Trust and, if so, whether he breached those duties, entitling the claimants to equitable relief.

The Supreme Court affirmed the grounds as to when fiduciary duties arise from Chirnside v Fay.³ It confirmed that the categories of fiduciary relationships are not closed, but that the focus is to be on the nature of the relationship in question.  It held that the intermittent contact between the adult children and their father did not give rise to the requisite control or authority for a finding of a fiduciary relationship.  It confirmed that there is a fiduciary relationship between a minor child and parent but when they become adults, provided they do not need additional support and care from a parent as a result of a disability, the relationship is no longer fiduciary.  The claimants accordingly were not entitled to any equitable relief against the trust.  Commenters have expressed some discomfort with the decision, in that equity failed to provide a remedy to assist claimants who were very clearly wronged.⁴ 

Legler v Formannoij[5]

The second case concerned whether the power to appoint and remove trustees of a family trust had been exercised for an improper purpose when it was exercised by one of the settlors⁶ and trustees to appoint a sole corporate trustee of which she was sole director and shareholder.  The trust had originally had three trustees but one had died and the other retired.

Some of the discretionary beneficiaries claimed that this exercise of the power to appoint trustees was for an improper purpose as the appointor intended to benefit herself at the expense of other discretionary beneficiaries. The majority held that an intention to self-benefit had not been proved on the facts and so did not embark on an analysis of the legal questions as to the scope of the improper purposes doctrine.

The Chief Justice dissented. She interpreted the trust deed as not allowing the appointment of a company exclusively controlled by a trustee/beneficiary.  This had not been argued by the parties who had accepted the deed allowed this.  The Judge relied on the fiduciary nature of the power of appointment requiring it to discourage duties and the terms of the trust deed designed to ensure independence.  In the alternative she held that the appointment was to enable self-benefit.

Cooper v Pinney[7]

The third decision also related to the powers held in relation to a family trust.  The legal issue was whether those powers were “property” for the purposes of the PRA. 

The parties had been in a de facto relationship of about 10 years.  Mr Cooper was the settlor of a family trust which held a farm.  The farm had been settled on the trust during the first two years of the parties’ de facto relationship.  The parties formed a company to operate the farm with the trust owing 98 per cent of the shares and Mr Pinney and Ms Cooper holding the other 1% each.

Mr Pinney was a settlor of the trust. The final beneficiaries were Mr Pinney’s children and grandchildren, and the discretionary beneficiaries were the final beneficiaries and Mr Pinney. Mr Pinney alone held the power to appoint and remove trustees. There was always more than one trustee and Mr Pinney was no longer a trustee at the time of the trial.  The trust deed required at least two trustees and decisions required unanimity.  The trustees had the power to resettle any part of the trust deed for any discretionary beneficiary to the exclusion of others. 

The case involved a consideration of the breadth of a previous Supreme Court decision, Clayton v Clayton [Vaughan Road Property Trust], in which the Court held that a bundle of rights and powers in a family trust was “property” under the PRA as they were not constrained by fiduciary obligations.  The Court distinguished Clayton, in particular because, unlike in that case, the trust deed before them required at least two trustees, unanimity in decision making, did not exclude fiduciary constraints and did not permit removal of all beneficiaries except Mr Pinney.

The Court considered that the power to appoint and remove trustees was constrained by both the proper purchase rule and fiduciary duties and the remaining trustee powers were also fiduciary and constrained.  Mr Pinney’s powers were accordingly not property under the PRA.

Alalääkkölä v Palmer[8]

The fourth and final decision also concerned whether certain rights constituted “property” under the PRA.  In this case, it was copyrights in artwork.  The parties had separated after a relationship of 20 years.  The High Court had determined that a just division of property would be equal division.  Ms Alalääkkölä was an artist and had a stock of unsold paintings created during the relationship.  These paintings were undisputedly relationship property.  The question for determination was whether copyright in the paintings was also relationship property.

The Court set out that copyright⁹ is a property right that exists in original works of certain description including artistic works.  It vests in the author and subsists for a period of 50 years after the author’s death. It confers exclusive rights to show the work to the public, copy it and sell copies. It can be assigned or sold. In addition to these economic rights, there are also moral rights, including the right to be identified as the author, to object to derogatory treatment of the work and the right not to have works falsely attributed. The moral rights remain with the author even if the economic rights are assigned or sold. 

The Court held that copyright is property under the PRA.  The economic and moral rights are distinct under the Copyright Act, with the former being ‘property’ under the PRA and the latter not.  The copyright in the artworks therefore fell to be valued for the purposes of the parties’ relationship property division.  The Court determined that the division should be in such a manner to protect Ms Alalääkkölä’s control over unpublished works.  Some works were to be valued on the basis that they would not be published or sold, some on the basis that they would remain the only copy and some on the assumption that the works would be sold and copyrights exploited.

More to come?

Property values have soared in New Zealand over the past half-century. This rise has made many individuals and families wealthy, raising the financial stakes of domestic disputes. As a result, more claims are now valuable enough to justify litigation. Succession and relationship property law have each undergone Law Commission review, which has recommended reforms, but neither have made it onto the legislative agenda.   Social attitudes continue to shift, with families forming and fracturing in increasingly complex ways, yet the statutes governing these relationships are dated and ill-suited to the blended households common today. These combined pressures are likely to push a growing number of family law disputes to the highest levels of New Zealand’s courts, such that we can expect to see more decisions in these areas at the highest levels going forward.

Endnotes

¹ Mark Henaghan, Family Law and the Supreme Court of New Zealand: A 20-Year Affair, Lexis Nexis NZ Ltd, Wellington 2024.

² [2024] NZSC 161.  “The Alphabet Case”.

³ (2006) NZSC 68, [2007] 1 NZLR 433.

⁴ Dr Juliet Chevalier-Watts, The “Alphabet Case”: A, B and C v D and E Ltd (as trustees of Z Trust) [2024] NZSC 161.

⁵ [2024] NZSC 173.

⁶ The Judgment does not expressly set out who the settlers were but the property settled on the trust was owned by Mr Legler.  His wife Ms Formannoij had rights in the property which were given up when the trust was established.

⁷ [2024] NZSC 181.

⁸ [2025] NZSC 9.

⁹ Established under the Copyright Act 1994.