Clayton v Clayton

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeEllen France,Randerson,White JJ
Judgment Date26 Feb 2015
Neutral Citation[2015] NZCA 30
Docket NumberCA438/2013 CA474/2013

[2015] NZCA 30

In The Court Of Appeal Of New Zealand

Court:

Ellen France, Randerson and White JJ

CA438/2013

CA473/2013

CA474/2013

Between
Melanie Ann Clayton
Appellant
and
Mark Arnold Clayton
First Respondent
Bryan William Cheshire and Mark Arnold Clayton (As Trustees of the Claymark Trust)
Second Respondents
And Between
McGloskey Nominees Limited (As Trustee of the Denarau Resort Trust)
First Appellant
Deborah Joan Vaughan (As Trustee of the Sophia No 7 Trust)
Second Appellant
Chelmsford Holdings Limited (As Trustee of the Chelmsford Trust)
Third Appellant
Bryan William Cheshire (As Trustee of the Lighter Quay 5B Trust)
Fourth Appellant
and
Melanie Ann Clayton
Respondent
And Between
Mark Arnold Clayton
Appellant
Mark Arnold Clayton (As Trustee of the Vaughan Road Property TRust)
Second Appellant
Bryan William Cheshire and Mark Arnold Clayton (As Trustees of the Stacey Clayton Education Trust and the Anna Clayton Education Trust)
Third Appellants
and
Melanie Ann Clayton
Respondent
Counsel:

D A T Chambers QC and J R Hosking for Appellant in CA438/2013, Respondent in CA473/2013 and Respondent in CA474/2013

C R Carruthers QC for Second Respondents in CA438/2013, Appellants in CA473/2013 and Second and Third Appellants in CA474/2013

R P Harley for First Respondent in CA438/2013 and First Appellant in CA474/2013

JUDGMENT OF THE COURT
  • A Leave is granted for this Court to consider the additional question (c) in relation to the Vaughan Road Property Trust in CA474/2013.

  • B The questions are answered as follows:

    • 1 Vaughan Road Property Trust (CA474/2013)

      • (a) Did the Courts below err in finding that the Vaughan Road Property Trust was illusory?

        Answer: Yes, but Mr Clayton's right to exercise his general power of appointment under cl 7.1 of the trust deed was “relationship property.”

      • (b) Did the Courts below err in finding the Vaughan Road Property Trust was not a sham?

        Answer: No.

      • (c) Is Mrs Clayton entitled to a compensation order under s 44C of the Property (Relationships) Act 1976 in relation to dispositions made to the Vaughan Road Property Trust?

        Answer: It is unnecessary to answer this question.

    • 2 Education Trusts (CA474/2013)

      • (a) Was there any disposition of property by Mr Clayton to the trustees of either of the Stacey Clayton Education Trust and the Anna Clayton Education Trust so as to support orders made under s 44 of the Property (Relationships) Act?

        Answer: Yes.

      • (b) If there were dispositions made for the purpose of land acquired by the Stacey Clayton Education Trust and the Anna Clayton Education Trust with the intention of defeating Mrs Clayton's claim, does s 44(2) of the Property (Relationships) Act authorise the court to order that Mrs Clayton is entitled to half the net equity of the Stacey Clayton Education Trust and the Anna Clayton Education Trust?

        Answer: Yes.

    • 3 Claymark Trust (CA438/2013)

      • (a) Is Mrs Clayton entitled to a compensation order under s 44C of the Property (Relationships) Act in relation to dispositions made to the Claymark Trust?

        Answer: No.

      • (b) Is Mrs Clayton entitled to provision from the assets of the Claymark Trust or to a variation of that Trust, applying s 182 of the Family Proceedings Act 1980?

        Answer: No.

    • 4 The Post-Separation Trusts (CA473/2013)

      Can the Court be satisfied in terms of s 44 of the Property (Relationships) Act that there has been a disposition of property to any of the trustees of the Denarau Resort Trust, Sophia No 7 Trust, Chelmsford Trust or the Lighter Quay 5B Trust by Mr Clayton in order to defeat Mrs Clayton's claim under the Act where those Trusts have been settled after the date of separation and where s 9(4) of the Property (Relationships) Act applies?

      Answer: Yes in respect of the Denarau Resort Trust and the Sophia No 7 Trust. Yes in respect of Mr Clayton's personal loan to the Chelmsford Trust. No in respect of the VRPT's loan to the Chelmsford Trust. No in respect of the Lighter Quay No 5 Trust.

    • 5 Valuation of business interests (CA474/2013)

      Did the Courts below err in finding that, for the purpose of calculating the value of business interests, an EBITDA of $6,700,000 and a multiple of 6.25 per cent should be adopted?

      Answer: No.

  • C The issue of the appropriate order to be made under s 44 of the Property (Relationships) Act in respect of the Chelmsford Trust is remitted to the High Court for determination in light of this judgment.

  • D Issues of quantum are remitted to the High Court for determination in light of this judgment.

  • E By consent, order D in the sealed High Court judgment is deleted.

  • F The appellants in CA473/2013 and CA474/2013 must pay to the respondent in those appeals 75 per cent of the costs in respect of all the appeals for a complex appeal on a Band B basis with usual disbursements. We certify for second counsel.

REASONS OF THE COURT

Table of Contents

Para No

Introduction

[1]

Factual background

[6]

Ownership of property during the marriage

[7]

Mr Clayton's business interests

[8]

The trusts settled during the marriage

[11]

The post-separation trusts

[13]

Financial significance of issues

[15]

Family Court decision

[17]

High Court decision

[19]

The Vaughan Road Property Trust (VRPT)

The 1999 settlement of the VRPT

[22]

The trust deed

[25]

The Family Court findings

[26]

The High Court findings

[28]

The appeal and cross-appeal

[32]

Further submissions

[35]

Analysis

[45]

A sham trust?

[57]

An illusory trust?

[71]

Mr Clayton's power of appointment

[86]

The answers to the questions

[115]

The Education Trusts

The settlement of the two education trusts in 2004

[117]

The assets of the trusts

[121]

Mrs Clayton's claim

[126]

The Family Court findings

[127]

The High Court findings

[128]

The appeal

[130]

Were there any dispositions?

[136]

Were the dispositions made to defeat Mrs Clayton's rights?

[142]

Should there be any order under s 44(2)?

[144]

The answers to the questions

[147]

Claymark Trust

The settlement of the Claymark Trust

[148]

The trust assets

[151]

Mrs Clayton's claims

[152]

(a) Claim under s 44C of the PRA

[153]

The Family Court findings

[154]

The High Court findings

[155]

The appeal

[156]

Discussion

[160]

(b) Claim under s 182 of the FPA

[165]

The Family Court findings

[166]

The High Court findings

[167]

The appeal

[171]

Discussion

[176]

The answers to the questions

[178]

The Post-Separation Trusts

The four trusts

[179]

Mrs Clayton's claims

[180]

A preliminary point

[181]

(a) The Denarau Resort Trust

[188]

The Family Court decision

[192]

The High Court decision

[193]

The appeal

[194]

Discussion

[196]

(b) The Sophia No 7 Trust

[200]

The Family Court decision

[203]

The High Court decision

[204]

The appeal

[205]

Discussion

[209]

(c) The Chelmsford Trust

[214]

The Family Court decision

[219]

The High Court decision

[220]

The appeal

[221]

Discussion

[223]

(d) The Lighter Quay 5B Trust

[229]

The Family Court decision

[233]

The High Court decision

[234]

The appeal

[235]

Discussion

[237]

The answer to the question

[239]

Valuation of business interests

[240]

The EBITDA figure

[246]

The calculation of the multiple

[262]

The answer to the question

[274]

Result

[275]

Costs

[276]

Introduction
1

This appeal concerns nine relationship property questions arising from judgments of the Family Court and the High Court. 1 Leave to appeal to this Court has been granted by the High Court and this Court. 2

2

The first eight questions relate to various trusts established by the first respondent in CA438/2013, Mr Clayton, both during his marriage to the appellant in CA438/2013, Mrs Clayton, and after their separation. The answers to these questions determine whether the assets of the trusts are Mr Clayton's separate property as he claims or relationship property as Mrs Clayton claims in which case she will be entitled to half the value of their net equity.

3

The ninth question relates to the valuation of Mr Clayton's business interests held by his companies and trusts. The parties are in agreement as to the appropriate valuation method, but disagree on two aspects of its application.

4

In the Courts below there were other issues in dispute, but there is now agreement that:

  • (a) An ante-nuptial agreement set aside by the Family Court and the High Court should remain set aside. 3

  • (b) Mr Clayton is entitled to $500,000 as his separate property.

  • (c) Mrs Clayton is entitled to half of the property correctly classified as relationship property.

  • (d) The assets are to be valued as at 31 March 2011.

  • (e) The fair market value of Mr Clayton's business interests is to be determined by the capitalisation of earnings methodology.

  • (f) Issues of quantum are to be remitted to the High Court for determination.

5

We refer briefly to the factual background and the decisions in the Courts below before considering the nine questions. We address the submissions for the parties and the legal issues in the context of considering the nine questions.

Factual background
6

Mr and Mrs Clayton separated in...

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