Trustee Powers in Relationship Property: Insights from Cooper v Pinney

The Supreme Court's decision in Cooper v Pinney [2024] NZSC 181 has significantly clarified the application of the Property (Relationships) Act 1976 (PRA) concerning trustee powers within family trusts. This ruling delineates the boundaries established by the earlier landmark case, Clayton v Clayton [2016] NZSC 29, and provides essential guidance on how trust structures impact relationship property disputes.​

Background

Raewyn Phyllis Cooper and Marcus Robert William Pinney were in a de facto relationship 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 under the PRA.

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, 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.​

Conclusion

The Cooper v Pinney 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 essential to regularly review trust structures with a specialist trust lawyer to ensure they provide the intended protection.

Note: This article is based on the Supreme Court's decision in Cooper v Pinney [2024] NZSC 181 and related legal analyses.