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A family spat involving millions of dollars in retail properties, a vineyard and a motel has a man claiming his uncle is using family trust funds unfairly to benefit his own side of the family.
The dispute between the Smith and Woodward families of Hawke's Bay has resulted in a judge finding there may be some truth to the nephew's claims but wants to hear more evidence from a forensic accountant.
Details of the dispute are set out in a court judgment.
The dispute is between Ashley Woodward and his uncle Jon Smith, his aunt Shelley-Lou Smith and cousin Jon Smith Jr as trustees of two family trusts with a substantial property portfolio.
Mr Smith and Mr Woodward's mother Elaine were the children of the late Arthur and Coral Smith, who owned several London properties before emigrating to New Zealand in 1965.
Arthur Smith established the APLJ Smith Trust in 1980, with the children and grandchildren as beneficiaries. In the mid-eighties he established two further trusts; Hawkhurst Trust for the Smiths and Wanstead Trust for Ashley Woodward.
The APLJ Trust hold assets of about $5.6 million, including shares in numerous properties in Hastings, Havelock North and Napier, as well as Hawkhurst Vineyard and half of the Townlodge Motel in Hastings.
Mr Smith and Mrs Woodward are trustees of the Wanstead Trust, which has assets of about $1.5m and about $500,000 in cash. Its beneficiaries are Ashley Woodward and his three children.
The relationship between Mr Smith and Mrs Woodward has soured badly. Mr Smith claims he had always tried to act prudently and rationally as a trustee and had moved funds between trusts and various partnerships on an interest-free basis and without security.
Mrs Woodward claims her brother would not let her have anything to do with several of the partnerships in which the Wanstead Trust had interests, despite her role as co-trustee of the Wanstead Trust.
She says he controls the bank accounts without her consent and they cannot work together because the rift between them is too great.
Her son, Mr Woodward, said the trust's affairs had become "paralysed due to the ongoing dispute" and applied to the High Court to have his uncle removed as a trustee.
He says his uncle is "engaging in a wealth shifting exercise from the Wanstead Trust to the Smith Family".
The Smith family, which is not a beneficiary of the Wanstead Trust, is borrowing the Wanstead Trust's share of income, on interest free and unsecured terms.
He provided the court evidence of eight transactions totalling $1.4m from Wanstead Trust or its interests into Smith family interests since 2008. Mr Smith denies there was any wealth shifting.
In the judgment last month, Justice Jill Mallon said there were a series of conflicts between Mr Smith's interests and his duty as a trustee of Wanstead but left for trial whether this was permissible and expressed doubts as to whether Mr Smith's conflicts would be upheld as lawful.
Justice Mallon said it was unlikely that Arthur Smith would have set up a trust for the Woodward side of the family and then have funds gifted from it to the Smith side.
However, she reserved those questions for a full trial. She also dismissed the application to remove Mr Smith as a trustee reserving that question for a full hearing but said the parties should "give serious consideration" to changing the trustees, observing it seemed less than likely that Jon Smith should remain a trustee "when the beneficiaries no longer trust him".
SMITH LEGACY: THE FAMILY STORY SO FAR
Arthur and Coral Smith emigrated from England in 1965.
They had a son, Jon, and a daughter, Elaine.
Arthur, a former merchant navy man and a police officer, had invested wisely and owned various properties in London. He established the APLJ Trust in 1980 with his wife and children and grandchildren as beneficiaries.
In the mid-1980s he formed two more trusts - Hawkhurst Trust for Jon Smith's family and the Wanstead Trust for Elaine's (by then a Woodward) family.
Jon Smith was made trustee on both trusts. Mrs Woodward is only a trustee of Wanstead.
Before Arthur Smith died in 2001 he made his son sole executor of his estate and a trustee of the APLJ Trust. Mrs Woodward claimed her father was not in a fit capacity to do so and had been under undue influence. She argued this unsuccessfully in the High Court.
Jon Smith has appointed his wife and son as trustees of the APLJ Trust.
The APLJ Trust has funds of around $5.6 million, including numerous retail properties in central Hastings and Napier, half the Townlodge Motel in Hastings (which is half owned by Jon Smith) and 28.8 per cent of the Hawkhurst Vineyard (which is half owned by Jon Smith).
Wanstead Trust has around $1.5m in capital with interests in some of the same properties, and further cash equivalent assets of about $500,000 .
Mrs Woodward's son Ashley, a beneficiary of the Wanstead Trust and the APLJ Trust, claims his uncle Jon Smith has distributed funds from both trusts into Smith Family interests. He applied to have his uncle removed as trustee and for an inquiry into the losses from both trusts.
Justice Jill Mallon has declined to remove Mr Smith as a trustee at this stage, ruling the case has to go to a full hearing, but said there were questions over whether he should remain a trustee.
- © Fairfax NZ News