The Supreme Court has confirmed that fiduciary duties exist between parent and minor child and those will only extend into the child's adulthood in unique circumstances. In other words, parents of adult children generally owe no continuing fiduciary duties to their adult children.
On 28 November 2024, the Supreme Court released a much anticipated judgment in A, B and C v D and E Limited as Trustees of the Z Trust [2024] NZSC 161. Commentators had argued that this decision had the potential to fundamentally reshape succession law. While the Supreme Court agreed with the Court of Appeal and the High Court that there had been shocking and terrible child abuse by the father (now deceased), and expressed genuine sympathy for the (now) adult children, the Court did not agree on the remedy available to the children.
As children, the appellants experienced physical, emotional and (in the case of the daughter) sexual abuse at the hands of their father, Robert (fictitious names used). They left home as teenagers and had little to do with Robert in the 30 or so years before his death. On Robert's death, they discovered that the bulk of his estate, previously bequeathed to them, had been transferred into a trust in the years before he died. This was for the primary purpose of preventing Robert's family from chasing his assets (Robert's own words). The beneficiaries of the trust were a friend of Robert's and the friend's family. The legal questions on appeal were whether Robert owed the appellants fiduciary duties at the time of transferring his assets into the trust and, if he did, whether these were breached when he did so.
The Supreme Court agreed with the majority of the Court of Appeal, finding that no fiduciary duties continued into adulthood. Before reaching this conclusion, however, it traversed the law in New Zealand about the fiduciary relationship between parent and child. The Court found that Robert undoubtedly owed his minor children a fiduciary duty not to abuse them, because abuse constitutes a grievous breach of the relationship of trust and confidence between parent and child.
The appeal turned on whether Robert still owed those duties at the time of transferring his assets. The starting point will always be the current nature of the relationship. Is the relationship inherently fiduciary in nature? Is it a relationship of trust and confidence, where the beneficiary necessarily must give up some control over their own affairs, and as a result, is vulnerable to the decisions of the fiduciary? The vulnerability of the beneficiary must be a natural result of the fiduciary relationship. The appellants' vulnerability, although resulting from Robert's past actions, was not the result of an existing fiduciary relationship. Vulnerability on its own cannot create a fiduciary relationship where one does not already exist. In other words, the Courts will not impose fiduciary duties in order to create an equitable remedy for vulnerable people. This would be to artificially construct a fiduciary relationship and "read equity backwards".
Not only was Robert not required to deal with his personal assets for the appellants' benefit, but he also had no duty to make provision for them from his overall wealth. Whatever moral claim the appellants had to Robert's assets, he did not hold his property as a fiduciary. Robert was therefore free to dispose of his assets as he pleased.
The appellants could have brought claims in tort regarding the pre-1974 abuse, which occurred before the commencement of the accident compensation scheme. However, these claims were, for understandable reasons, not brought and have long since been time-barred. The Court also noted this case provided a compelling example of why anti-avoidance provisions (also known as fraudulent conveyances), similar to those included in the Property Law Act, should be considered for inclusion in the Family Protection Act (if Parliament decides to retain the Family Protection Act or a similar regime). Despite these points, the Supreme Court was not willing to construct a fiduciary relationship for the purpose of providing an equitable remedy. To do so would be to rework the fundamental concepts of fiduciary relationships, creating unacceptable uncertainty in the law.
You can read the case here.
This article was co-authored by Bridie McKinnon (partner), Julia Gabrielle (partner), Jacey McGrath (senior associate) and Anna Schoonees (solicitor).
