Mark Arnold Clayton v Melanie Ann Clayton Hc Rot

• Jurisdiction: New Zealand
• Judge: Rodney Hansen J
• Judgment Date: 22 February 2013
• Neutral Citation: [2013] NZHC 301
• Docket Number: CIV-2011-463-000808
• Court: High Court
• Date: 22 February 2013

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

[2013] NZHC 301

CIV-2011-463-000808

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

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).

Counsel:

R Harley for First Appellant

CR Carruthers QC for Second to Seventh Appellants

JH Hunter and J Hosking for Respondent

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 that Mrs Clayton is entitled to share equally in the net assets of trusts to which property had been transferred.

• (f) Refusing to make an award in relation to one of the trusts known as the Claymark Trust.

Factual background

3 Mr and Mrs Clayton began a de facto relationship in 1986 and married in 1989. They have two children, Stacey, born in 1990 and Anna, born in 1994. They separated in December 2006 after a marriage which, to use the words of Judge Munro, was punctuated by a number of brief separations. The marriage was dissolved in 2009.

4 The parties met when Mrs Clayton worked in the office of a joinery business built up by Mr Clayton's father. Mr Clayton had earlier established his own business, Rotorua Timber Supplies and, in 1984, incorporated Claymark Industries Limited, adopting the name under which he would develop a major sawmilling business. He purchased a sawmill business at Katikati in 1991 and, about the same time, purchased his father's joinery business. The businesses were owned and run by a number of companies, the shares in which were either owned by Mr Clayton personally or through Clayton Holdings Limited, of which he was the sole shareholder.

5 During the marriage a number of trusts were established. Some were set up for business purposes — to facilitate a restructuring of business assets and, on the advice of a tax expert, to reduce income tax liability. Others followed advice to address the risk to the business that would be posed by a marriage breakdown. Further trusts were established after separation to hold assets acquired by Mr Clayton.

Pre-nuptial agreement

6 Mr and Mrs Clayton entered into the pre-nuptial agreement some six weeks before they married in November 1989. The agreement relevantly provided:

Whereas Mark and Melanie intend to marry in the near future and whereas they wish to settle matters between them that relate to the property owned by Melanie and Mark and that may become owned by either or both of them during the course of their marriage, now therefore this deed witnesses as follows:

• 1. This is an agreement in contemplation of marriage pursuant to section 21 of the Matrimonial Property Act 1976. In respect of matrimonial property, all property that would be matrimonial property pursuant to the Matrimonial Property Act 1976 but for this agreement and is in full and final settlement of all claims pursuant to that Act for (sic) at common law or at equity or whosoever.

• 2. Mark and Melanie shall own as their separate property notwithstanding the marriage the property that they now own and the proceeds and profits from that property and in particular Mark shall have as his separate property:

  • (a) His home at Banksia Place, Rotorua;

  • (b) His motor vehicles;

  • (c) All shares that he may have in private and public companies;

  • (d) All his businesses and business assets.

  The home at Banksia Place shall remain as his separate property notwithstanding that it shall be used as the matrimonial home and any care [sic] that he may own shall remain his separate property, notwithstanding that it may be used as the family car, and family chattels that he may own shall remain his separate property, notwithstanding that they are used as family chattels by Mark and Melanie.

• 3. The proceeds of any sale of Mark's property that is separate property shall continue to be separate property and any item purchased with those sale proceeds shall likewise be separate property, notwithstanding its character or nature, or that it otherwise be matrimonial property pursuant to the Matrimonial Property Act 1976.

• 4. …

• 5. If the marriage between Mark and Melanie shall end in dissolution, then Melanie shall be paid the following monies by Mark and no other, for the monies are in full and final settlement of any claim by her for this settlement in terms of paragraph 1 of this agreement.

  • 1. If the separation upon which the dissolution is founded shall occur in the first year of their marriage, he shall pay the sum of $10,000.

  • 2. If the separation upon which the dissolution is founded shall occur in the second year of their marriage, he shall pay the sum of $20,000.

  • 3. If the separation upon which the dissolution is founded shall occur in the third or any subsequent year, he shall pay the sum of $30,000.

7 Clause 4 is omitted as it relates to property bought by the parties together. There is no property in that category.

8 Mrs Clayton sought to have the agreement set aside on three grounds:

• (a) Lack of compliance with the necessary formalities by Mr Clayton;

• (b) Uncertainty of subject matter; and

• (c) Giving effect to the agreement would cause serious injustice in terms of s 21J of the Act.

9 Judge Munro described Mr Clayton's position as somewhat ambiguous. On the one hand, he opposed the application to set aside the agreement and had paid the $30,000 payable under subparagraph 3 of cl 5. However, he conceded in evidence that the agreement was unfair and proposed the equal division of the former matrimonial home, family chattels, his ASB Bank account, his current account in Clayton Holdings Limited and advances to one of his companies and three trusts.

10 Judge Munro, describing Mr Clayton's position as “puzzling and contradictory”, found that the agreement should be set aside. She said:

[35] … The only conclusion I can draw is that Mr Clayton seeks to have a variation of the s 21 agreement enforced by the Court after removing from the compass of the agreement items which he considers should be treated as relationship property. I have not been provided with any authority for this approach and neither am I aware of any. I can find no justification for adopting Mr Clayton's approach. In my view, the agreement must either be upheld in its entirety, varied by consent, or set aside. In this case, there is an acknowledgement by Mr Clayton that the agreement has become unfair. He does not seek to uphold it in its entirety. There is no consent to vary it on his terms. It must therefore be set aside. I do not consider it necessary to make findings regarding the grounds put forward by Mrs Clayton. Accordingly, the agreement dated 23 November 1989 is set aside upon the grounds as set out in s...