Murrell v Hamilton

Bad administration of trust was discussed in Official Assignee v Wilson , and it was held that failure to administer is nothing more than a breach of trust. This does not constitute a sham trust. Failure to administer argument was also discussed in Murrell v Hamilton [2014]

Discussion on Murrell v Hamilton

Ms Murrell and Mr Hamilton started their de facto relationship in February 2002 and the relationship lasted for about seven years. The couple moved into a house in Arrowtown, which was being built by Mr Hamilton’s building company. The property was owned by Mr Hamilton’s family trust, W E Hamilton Family Trust. The trustees include Mr Hamilton and his solicitor Mr Mirkin and discretionary beneficiaries include Mr Hamilton and his children. Ms Murrell did a certain amount of work on the property and helped make it a home. In 2007, the couple moved to Dunedin and separated shortly after that. In March 2009, the property was sold with net profit of approximately $250,000.

Issues

After separation, Ms Murrell sought for compensation for her contribution in the property in Arrowtown. In the High Court, the judge agreed that:
“Ms Murrell made contributions to the property and that she did so in circumstances where she hold a reasonable expectation that she enjoyed an interest in the property. Further, it would be unconscionable of a reasonable person in Mr Hamilton’s shoes to deny the existence of such interest”
However, Mr Hamilton is only one trustee of the trust and the property was owned by the trust. They found that the other trustee, Mr Mirkin had not created an expectation in Ms Murrell of an interest in the property. Thus, Ms Murrell’s claim failed.
She was not satisfied with this decision and brought the case to Court of Appeal.

Court of Appeal decision

The judge agreed with High Court that Ms Murrell made contributions to the property and it would be unconscionable for Mr Hamilton to deny her interest in the property. The court, then, looked at the trust as the plaintiff claimed that this trust was sham. They claimed that Mr Mirkin, the second trustee of the trust, did not know much about the trust, except for the house in Arrowtown was in construction at the time. They also found that the trust was badly administrated. Although, Mr Mirkin was a solicitor and an independent trustee for many of Hamilton family’s trust, his involvement in W E Hamilton Family Trust was very minimal. He left Mr Hamilton to make any decisions he wanted on his behalf. Thus the court ruled that:
“Mr Mirkin allowed Mr Hamilton to bind the trustees to contracts relating to the construction of the house… So Mr Hamilton’s actions were treated as the actions of both trustees, or at least as actions binding on both trustees vis-à-vis the contract counterparties. In that unusual factual situation, we consider it would be unconscionable for the trustees to deny Ms Murrell’s claim based on the expectation stimulated by Mr Hamilton on behalf of the Trust”.
Thus, the Judge held that Ms Murrell had contributed 15% on the construction of the house in Arrowtown and she would be compensated for her contribution from the net profit from the sale and rental income of the house.
The court mentioned despite the shortcoming of its administration trust was not sham.
Although, the trust was a genuine trust with clear purpose and independent trustees, it was still vulnerable against relationship property claims. The court decision, clearly set aside relationship property matter away from commercial transactions.