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Trust Busting – Commercial/Business Risk (Brkic v White [2021] NZCA 670) - Mortlock McCormack Law | Property and Commercial Law | Christchurch, New Zealand
Trust Busting – Commercial/Business Risk (Brkic v White [2021] NZCA 670) - Mortlock McCormack Law | Property and Commercial Law | Christchurch, New Zealand
Trust Busting – Commercial/Business Risk (Brkic v White [2021] NZCA 670) - Mortlock McCormack Law | Property and Commercial Law | Christchurch, New Zealand
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Trust Busting – Commercial/Business Risk (Brkic v White [2021] NZCA 670)

March 2022 Andrew Logan , Jamie Stanton

The 2016 Supreme Court case of Clayton v Clayton found that a person’s “bundle of rights” in a trust (e.g. being a trustee, appointor, beneficiary and having powers to say remove other beneficiaries) could be considered an asset in that individual’s hands for relationship property purposes, and the trust’s assets could be exposed to a relationship property claim by a disaffected ex-partner in the event of a relationship breakdown.

The enduring question over subsequent years has been the extent, if any, to which a Clayton type argument could apply to a business risk claim (say by a business creditor) against a person holding a Clayton type bundle of rights in a trust.

The Court of Appeal has now provided some guidance on that point in Brkic v White. The Court clarified that the Clayton decision reflected the underlying relationship property law (“social legislation”) context of that case. This warranted a more flexible approach in trying to achieve a fair and just result for relationship property purposes.

However, in Brkic the Court’s approach was more traditional and conservative, firmly rejecting a Clayton type claim against a trust’s assets in a “commercial” law claim made under a guarantee given by a trustee personally.

So while assets in trust may still be subject to a Clayton type relationship property claim the Courts do not appear inclined to extend such claims into the commercial or business sphere. For the present time a family trust continues to offer creditor and business protection benefits, provided the trust is properly managed.

As always, we are here to assist and answer any trust or commercial questions you have, contact Andrew Logan, Partner (021 222 4646 /andrew@mmlaw.co.nz) or
Jamie Stanton, Associate (03 343 8588 / jamie@mmlaw.co.nz).