On 20 December 2024, Supreme Court of New Zealand delivered a long awaited decision in the case of Cooper v Pinney, addressing the extent to which powers held by a trustee over a family trust can constitute "property" under the Property (Relationships) Act 1976 (PRA). The case has been making its way through the courts since 2018. The decision clarifies the application of the landmark Clayton v Clayton case and provides further guidance on how trust structures impact relationship property disputes.
Background
Raewyn Phyllis Cooper, the appellant, was in a de facto relationship with Marcus Robert William Pinney from 2004 to 2014. During their relationship, they worked together on a farm held in the MRW Pinney Family Trust (MRWT). The central issue before the Supreme Court was whether Mr Pinney’s powers as a trustee and discretionary beneficiary under the MRWT should be treated as "property" for the purposes of relationship property division.
Key Issue
Ms Cooper argued that Mr Pinney exercised effective control over the trust assets and that his rights and powers should therefore be considered "property" under the PRA. She relied on the Supreme Court’s earlier decision in Clayton v Clayton [2016] NZSC 29, which held that extensive control over trust assets could amount to a property interest.
Supreme Court’s Decision
The Court dismissed Ms Cooper’s appeal, finding that while Mr Pinney had significant powers within the MRWT, they were constrained by fiduciary duties and did not amount to a general power of appointment akin to outright ownership. The key points from the judgment include:
- Fiduciary Nature of Trustee Powers: The Court emphasized that the power to appoint and remove trustees remains a fiduciary power that must be exercised in the best interests of all beneficiaries.
- Comparison with Clayton v Clayton: Unlike the trust deed in Clayton, the MRWT deed did not grant Mr Pinney absolute discretion to benefit himself at the exclusion of others. The trust required at least two trustees to act unanimously, providing a safeguard against unilateral control.
- Distinction Between Discretionary Beneficiaries and Property Owners: The Court reaffirmed that a discretionary beneficiary does not have a proprietary interest in the trust assets until a distribution is made in their favour.
Implications for Trusts and Relationship Property
This decision provides clarity for those using trusts in the context of asset protection and estate planning. It confirms that while trust structures can be scrutinized in relationship property disputes, the existence of proper fiduciary duties and independent trustees can help preserve the integrity of the trust.
For individuals in relationships where assets are held in trust, this case highlights the importance of clear trust governance and documentation. Ensuring that trusts are not structured in a way that grants a single person unchecked control may be crucial in protecting assets from future claims.
Why this matters for you
The decision reaffirms that trusts remain a legitimate tool for asset management and protection, provided they are properly structured and administered. This case underscores the balance courts must strike between recognizing valid trust arrangements and preventing them from being used to circumvent relationship property laws.
For those concerned about the implications of trusts in their personal or business affairs, seeking legal advice early can help ensure that trust structures align with both legal requirements and personal objectives. It is no longer (and has not been for a while) enough to just have a trust to protect your interests. Every trust structure needs to be carefully considered and regularly reviewed by a specialist trust lawyer to ensure that you will get the protection you have set up the trust for.
If you have any questions about how this decision might affect your estate planning or relationship property matters, feel free to contact PK Law for expert guidance.
