By: Mathew Francis, Rebecca Scott, James Dymock and Alison Cupples

Perpetual Trust Ltd v Cooke [2026] NZCA 349

Background

Mrs Cooke died in March 2017. Her two adult children (Mr Cooke and Mrs Panhuis) were the original executors of the estate and trustees of the testamentary trusts established by her will. The estate’s main assets were two properties, one in Orewa and one in Wellsford. After a breakdown between the trustees in relation to the sale of the Orewa property, the New Zealand High Court appointed Perpetual Guardian as an independent administrator and trustee. Mr Cooke was ordered to vacate the Orewa property which was sold. He occupied the Wellsford property on the basis he had a life interest. However, Perpetual Guardian considered Mr Cooke was not meeting his obligations as a life tenant and applied to the High Court to evict him and sell the property. Mr Cooke opposed the application and brought a counterclaim against Perpetual Guardian alleging breach of trust.

The High Court upheld many of Mr Cooke’s claims but did not award any damages in his favour as he failed to prove loss. The High Court allowed him to reoccupy the Wellsford property on certain conditions. The High Court disallowed Perpetual Guardian’s claim for its trustee indemnity to cover its costs and expenses incurred in relation to management of the properties. Perpetual Guardian appealed.

Non-intervention and trustee discretion

A central, overarching issue for the appeal was whether the High Court judge applied the correct legal standard when reviewing Perpetual Guardian’s various actions and decisions. The Court of Appeal confirmed the foundational “principle of non-intervention” in trustee decisions on the basis the settlor entrusts the discretionary power to the trustee and not to the court. The court’s role is strictly supervisory rather than appellate. This means the court will not examine the underlying merits of a trustee decision or substitute its own judgment for that of the trustee, simply because it might have reached a different conclusion.

Rather, the court should focus on examining how the decision was reached, not whether it would have reached the same result. This is supported by the statutory standard of review and its process in ss 126-127 of the Trusts Act. The Court of Appeal concluded a court should only interfere with a discretionary trustee decision if the trustee has: acted outside the scope of their powers or misinterpreted the trust deed; acted in bad faith or for an improper motive; engaged in “inadequate deliberation” (e.g. failing to take into account relevant considerations); or reached a decision that is perverse or irrational.

Trustee duty of care and inadequate deliberation

In relation to s29 of the Trusts Act which requires a trustee to exercise reasonable care and skill, the court noted this is not a vehicle for undertaking a “back door ‘merits’ review of discretionary trustee decisions.”  That is, a beneficiary who disagrees with a trustee’s decision cannot reframe the challenge as a breach of s29 merely because a “reasonable” trustee might have decided differently. This has implications for how PI claims are framed against professional trustees: the decision to sell a property, for example, is not reviewable, but the process of sale is (e.g. valuation, price, marketing, timing).

Further, while the s29 standard is heightened if the trustee has special business, financial, or trust administration knowledge and experience, it can likewise only be applied to how trustee powers and discretions are exercised, and not whether a trustee chooses to exercise its discretion. The court also affirmed the protective value of trustees obtaining and following professional advice (such as property valuations), noting that a discretionary decision will not be set aside for inadequate deliberation if the trustee took and followed advice from competent professional advisers.

The Court of Appeal allowed the appeal in part. Perpetual Guardian were entitled to recover some costs and expenses. However, the court found inadequate deliberation by Perpetual Guardian when it failed to give sufficient weight to Mrs Cooke’s intent as the settlor (to provide Mr Cooke a home for life) and consider reasonable alternatives to eviction of Mr Cooke. Even though there was a breach of trust, Mr Cooke failed to establish his loss, so no damages were awarded against Perpetual Guardian.