A summary of a recent case highlighting the need for trustees to think about their decisions:
Clement v Lucas  NZHC 3278 [21 December 2017]
Clement v Lucas is a recent New Zealand High Court case where the main legal issue under consideration was whether the Trustees’ decision was void due to a flawed decision-making process and failure to consider relevant considerations.
The case involved a distribution of farm assets under a family Trust Deed established in 1999 (“the Deed”). The Deed was largely standard-form document and had no unusual provisions. The Settlors, Mr and Mrs Clement intended to use the Trust to “even the ledger” by making provision for the transfer of assets to their three children cognisant of the various asset transfers to their children during their lifetime. This intention was evident in the various Memoranda of Wishes and correspondence between the Settlors and the Trustees during the Settlors’ lifetime.
On vesting date and under the Deed, the two Trustees, Colin Lucas, solicitor, and Sam Bennett, accountant, as independent trustees purported to distribute the Trust assets equally amongst the three beneficiaries of the Trust, notwithstanding that Keith Clement, one of the beneficiaries had previously received a sizeable asset transfer (“the Trustees’ Decision”). Brian Clement, one of the beneficiaries challenged the Trustees’ Decision on the basis that the Trustees acted in bad faith by:
The Court held that the Trustees should have had regard to the fact that one of the purposes of the Trust was to “even the ledger” as between the siblings and in that regard they should have taken pre-Trust distributions into account and in failing to do so they breached their duty as Trustees.
Subsequently, the Courts set aside the Trustees’ Decision, sent them back to the drawing board with some non-binding guidance to aid their decision-making.
The Take Home
As professional Trustees making decisions pertaining to the Trust, we must note the following:
 Clement v Lucas  NZHC 3278 [21 December 2017].
Author: Khyati Shah (Perpetual Guardian), Peer reviewed: Richard Broad (Perpetual Guardian)