Mark Arnold Clayton v Melanie Ann Clayton Hc Rot

JurisdictionNew Zealand
CourtHigh Court
JudgeRodney Hansen J
Judgment Date22 February 2013
Neutral Citation[2013] NZHC 301
Docket NumberCIV-2011-463-000808
Date22 February 2013

[2013] NZHC 301

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV-2011-463-000808

BETWEEN
Mark Arnold Clayton
First Appellant

And

Mcgloskey Nominees Limited
Second Appellant

And

Chelmsford Holdings Limited
Third Appellant

And

Deborah Joan Vaughan
Fourth Appellant

And

New Zealand Trustee Services Limited
Fifth Appellant

And

Mark Arnold Clayton
Sixth Appellant

And

Bryan William Cheshire And Mark Arnold Clayton
Seventh Appellant
and
Melanie Ann Clayton
Respondent
Counsel:

R Harley for First Appellant

CR Carruthers QC for Second to Seventh Appellants

JH Hunter and J Hosking for Respondent

Appeal from a Family Court decision setting aside a pre-nuptial agreement under s21J Property (Relationships) Act 1976 (Court may set agreement aside if would cause serious injustice) and finding respondent was entitled to share equally in increase in value of appellant's business assets and assets of trusts appellant had transferred property to — cross-appeal against decision refusal to make an award in relation to one of the trusts — 20 years marriage with assets worth $3 million — agreement made in 1989 and entitled respondent to $30,000 — FC set value of family home at the separation date to take account of the respondent's post-separation contributions to the increase in value — whether s2G PRA (date at which value of property to be determined) could be used to adjust for post-separation contributions by one party — whether respondent was entitled to a half interest in the increase in value of appellant's separate property under s9A PRA (when separate property becomes relationship property) — whether trusts were illusory and dispositions were made with intent to defeat the respondent's interests pursuant to s44 PRA (dispositions may be set aside).

The issues were: whether the agreement should have been set aside; whether s2G PRA could be used to adjust for post-separation contributions by one party; whether Mrs C was entitled to a half interest in the increase in value of appellant's separate property under s9A PRA (when separate property becomes relationship property); whether the Vaughan Trust was illusory and whether Mrs C was entitled to a share of assets in the CIT either pursuant to s44C PRA (compensation for property disposed of to trust) or s182 Family Proceedings Act 1980 (Court may make orders as to settled property).

Held: Giving effect to the agreement would cause serious injustice. If the agreement were allowed to stand, the consequence would be that, after twenty years of marriage, to which Mrs C had made a full contribution and bore and raised two children, she would be entitled to no more than $30,000. She would have no claim to the matrimonial home or family chattels or to other non-business assets in Mr C's name which had a value in excess of $3 million. Having regard to the time that had elapsed and the substantial assets which had been accumulated, it had undoubtedly become unfair or unreasonable. The FC had been right to set it aside.

The enactment of s18B (post separation contributions) and s18C (post separation dissipation) meant there was less need to depart from the default position of a hearing date value under s2G ( Burgess v Beaven). That was certainly the case here where the remedy of a change to the date of valuation was not effective to do justice to the parties. There was no evidence of the cost or valuation of Mrs C's post-separation contributions. Effectively, the credit given to Mrs C by the change of valuation date was arbitrary and unsupported by the evidence. There was an issue as to correct valuation and it might also be relevant to consider evidence adduced for the purpose of the appeal of the recent sale of the property for $735,000. There was insufficient information to enable a final determination to be made on appeal. The issue was remitted to the FC to be reheard.

Mr C had, directly and indirectly, diverted income into the business. As part of the restructuring undertaken for tax purposes and matrimonial asset protection, salary and dividends were credited to Mr C and led to his acquiring shares in Claymark Holdings Limited with a value of $7m. The requirements of s9A(1) PRA had been met by the application of relationship property routinely in the course of the marriage. The increase in value of Mr C's separate property should be shared equally.

The terms “sham” and “illusory” could not be used interchangeably. A trust would be a sham where there was an intention to have an expressed trust in appearance only. There was nothing to suggest a sham. The issue of whether a trust was illusory required consideration of whether in light of the provisions of the trust deed, Mr C retained such control that the proper construction was that he did not intend to give or part with control over the property sufficient to constitute a trust ( FMA v Hotchin).

Mr C had retained powers tantamount to ownership of trust property. Mr C became the sole trustee and was a discretionary beneficiary. The trust deed contained powers to pay income to make capital distributions to beneficiaries. There was also a clause allowing a trustee who was a beneficiary to exercise any power or discretion in his or her favour. Many of the powers were identical or not materially different to those in Hotchin except that the trust deeds in that case prohibited self-dealing, which meant that they were not illusory. This trust deed provided an appearance of separation, but the reality was that if he chose to, Mr C was able to deal with trust property just as he would if the trust had never been created. That led inexorably to the conclusion that the trust was illusory.

In respect of the other trusts (except for the Claymark Trust), dispositions appeared to have been made with the intention of defeating Mrs C's claim. Mr C argued that Mrs C had not been excluded and was in fact a beneficiary during the marriage, as she came within the definition of a relative of Mr C. This could not be accepted. Unless the context clearly required otherwise, the term “relative” could not be construed as covering singular relationships such as those of spouse and child. If there had been an intention to benefit Mrs C, she would have been identified by name or as Mr C's spouse, as she was in the Vaughan Road Property Trust for example. There was no rational explanation for the omission of Mrs C as a beneficiary during the marriage.

Section 44(1) PRA only referred to a “disposition of property”. Such property might be relationship property but it did not have to be. That said, a disposition of separate property or property vested in a trust was unlikely to be made in order to defeat a claim except as part of a transaction which had that outcome. The difficultly was in establishing what the outcome was in respect of at least one trust. Further, the order that Mrs C share equally in the net assets of that trust might not be an effective remedy as the trust's borrowings exceeded its assets.

The key issue in respect of the dispositions was not the status of the property but whether the disposition was made in order to defeat Mrs C's claim. The most reliable guide to the purpose of a course of action was its likely or achieved outcome. This was not clear in all cases. An order under s44 was therefore not justified and might not in any event be an effective remedy. The best course was for the FC to reconsider the issues in respect of the trusts after receiving further evidence.

The establishment of the Claymark Trust had been for legitimate purposes and was not a nuptial settlement in terms of s182 FPA. Due to the agreement she had signed which had specifically excluded her from sharing in any of Mr C's business interests, Mrs C would not have had an expectation of benefitting under the trust had the marriage not been dissolved. There was no evidence of relationship property having been disposed of to the trust. This was fatal to the claim under s44C PRA. Mrs C's cross-appeal failed.

Case remitted to FC.

JUDGMENT OF Rodney Hansen J

TABLE OF CONTENTS

Introduction

[1]

Factual background

[3]

Pre-nuptial agreement Mtd

[6]

Valuation of former matrimonial home

[15]

Relationship property under sections 9A( 1) and (2)

[23]

Valuation issues

[45]

EBITDA

[49]

Multiple

[55]

Appeal by trustees

[65]

Vaughan Road Property Trust

[68]

Discussion

[78]

Remaining trusts – setting aside dispositions

[92]

Stacey Clayton Education Trust (SCET) and Anna Clayton Education Trust (ACET)

[93]

Denarau Resort Trust

[103]

Sophia No 7 Trust

[111]

Chelmford Trust

[118]

Lighter Quay 5B Trust

[125]

Cross-appeal

[129]

Section 182 claim

[137]

Section 44C

[144]

Summary

[150]

Result

[152]

Introduction
1

The first appellant (Mr Clayton) is the former husband of the respondent (Mrs Clayton). The remaining appellants hold property in trust in which Mrs Clayton claims an interest under the Property (Relationships) Act 1976 (the Act). The appellants appeal against aspects of the decision of Judge Munro in the Family Court at Rotorua. She was asked to determine a range of issues arising under the Act. For her part, Mrs Clayton cross-appeals against Judge Munro's refusal to make an award in relation to one of the trusts.

2

In summary, the issues requiring determination are whether the Judge erred in:

  • (a) Setting aside a pre-nuptial agreement made by the parties.

  • (b) Fixing the value of the matrimonial home.

  • (c) Finding that Mrs Clayton is entitled to share equally in the increase in value of Mr Clayton's business assets.

  • (d) Fixing the value of Mr Clayton's business interests.

  • (e) Finding...

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8 cases
  • Clayton v Clayton
    • New Zealand
    • Court of Appeal
    • 26 February 2015
    ...of Appeal (Civil) Rules 2005. 194 1 MAC v MAC FC Rotorua FAM-2007-063-652 , 2 December 2011 [Family Court judgment]; Clayton v Clayton [2013] NZHC 301, [2013] 3 NZLR 236 [High Court 2 Clayton v Clayton [2013] NZHC 1529 ; Clayton v Clayton [2013] NZCA 633 [Court of Appeal leave judgment]; an......
  • Mark Arnold Clayton v Melanie Ann Clayton
    • New Zealand
    • Supreme Court
    • 23 March 2016
    ...Act 1976. 6 MAC v MAC FC Rotorua FAM-2007-063-652 , 2 December 2011 (Judge Munro) [ Clayton (FC)] at [35]. 7 Clayton v Clayton [2013] NZHC 301 , [2013] 3 NZLR 236 (Rodney Hansen J) [ Clayton (HC)] at 8 Clayton (FC) , above n 6, at [74]. 9 Rodney Hansen J summarised the Family Court decis......
  • Melanie Ann Clayton v Mark Arnold Clayton
    • New Zealand
    • Supreme Court
    • 23 March 2016
    ...appeal. 14 See MAC v MAC FAMC Rotorua FAM-2007-063-652, 2 December 2011 (Judge Munro) [ Clayton (Fam)] at [71]; and Clayton v Clayton [2013] NZHC 301, [2013] 3 NZLR 236 (Rodney Hansen J) [ Clayton (HC)] at [143]. Mr Clayton has significant sawmilling and timber processing interests. The bus......
  • Hirstich v The Family Court At Manukau Hc Ak
    • New Zealand
    • High Court
    • 3 May 2013
    ...of Social Welfare v Stewart [1990] l NZLR 697 (SC) at 701, cited in Zaoui v Attorney-General, above n 12. 14 At [8]. 15Stiassny v Seimer [2013] NZHC 301. 16 There might of course come a point where the interests of justice require that another Judge be appointed so as to bring a fresh mind ......
  • Request a trial to view additional results
1 firm's commentaries
  • Clayton v Clayton: nipping the Illusory Trust in the bud
    • New Zealand
    • Mondaq New Zealand
    • 9 September 2015
    ...Court judgment") at [72]. 5The Court of Appeal decision at [26(a)]. 6The Court of Appeal decision at [26(c)]. 7Clayton v Clayton [2013] NZHC 301, [2013] 3 NZLR 235 (the "High Court decision"). 8Armitage v Nurse [1998] Ch 241 (CA). 9The Court of Appeal decision at [31] and the......

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