Melanie Ann Clayton v Mark Arnold Clayton

JurisdictionNew Zealand
CourtSupreme Court
JudgeGlazebrook J,Elias CJ
Judgment Date23 March 2016
Neutral Citation[2015] NZSC 30
Date23 March 2016
Docket NumberSC 38/2015

[2015] NZSC 30

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Elias CJ, William Young, Glazebrook, Arnold and O'Regan JJ

SC 38/2015

BETWEEN
Melanie Ann Clayton
Appellant
and
Mark Arnold Clayton
First Respondent
Mark Arnold Clayton and Bryan William Cheshire as Trustees of the Claymark Trust
Second Respondents
Counsel:

D A T Chambers QC and J R Hosking for Applicant

Appeal from a Court of Appeal decision which held a trust was not a nuptial settlement and therefore that no order under 182 Family Proceedings Act 1980 (“FPA”) (Court may make orders as to settled property) or s44C Property (Relationships) Act 1976 (“PRA”) (compensation for property disposed of to trust) should be made as the trust was created for business purposes, the appellant had no expectation of acquiring an interest in business assets and there was a pre-nuptial agreement specifically excluding the appellant from claiming a share in her husband's business interests — whether the trust was a nuptial settlement — whether there should have been orders made with regard to the trust under s182 FPA and s44C PRA — definition of “settlement”.

The issues were: whether the trust was a nuptial settlement; and whether there should have been orders made with regard to the trust under s182 FPA and s44C PRA.

Held: There was a two-stage process under s182 FPA. The first was to determine whether the trust was a nuptial settlement. The second was to assess whether and, if so, in what manner the Court's discretion under s182 FPA should be exercised. The courts below seem at least partially to have used the approach adopted in Ward v Ward [2010] 2 NZLR 31 to decide that the trust was not a nuptial settlement. Ward was only concerned with the second stage relating to the exercise of the discretion and not with whether the trust in that case was a nuptial settlement. The fact that the courts below had used the approach in Ward meant they had wrongly conflated the two stages of the process under s182 FPA. There was thus an error of law or principle.

In Ward, the Supreme Court (“SC”) had not dealt with the issue of whether there was a nuptial settlement in that case. In the leave judgment, the SC declined to give leave on the ground of whether what occurred was a settlement within the meaning of s182 FPA because the decision of the CA on that point was correct. The CA in Ward v Ward [2009] 3 NZLR 336 emphasised that there should be a generous approach to the interpretation of the term “settlement”. The CA in Ward said that to come within the term “settlement” as used in s182 FPA, any arrangement must make some form of continuing provision for both or either of the parties to a marriage in their capacity as spouses, with or without provision for their children. It was also made clear that discretionary family trusts could be settlements for the purposes of s182 FPA.

The requirement that the settlement be for both or either of the parties “in their capacity as spouses” meant only that there must be a connection or proximity between the settlement and the marriage. Where there was a family trust (whether discretionary or otherwise) set up during the currency of a marriage with either or both parties to the marriage as beneficiaries, there would almost inevitably be that connection. A settlement did not cease to be a nuptial settlement because other parties may benefit from it. The fact that the children of a marriage may benefit had been seen as a strong indication of a nuptial trust. The exercise of deciding whether a settlement was a nuptial settlement was, where the settlement was in written form, primarily one of construction of the settlement documentation. That documentation would be construed in accordance with ordinary principles, while remembering that a generous approach to the issue of whether a settlement was a nuptial settlement was required.

The trust was a conventional discretionary family trust. There was a clear connection between the marriage and the settlement. It was settled during the marriage and just after the birth of the couple's second child. Mr C was a beneficiary of the trust and the other primary beneficiaries were identified by their relationship to him (including marital). Mrs C, as his wife, and now former wife, was a beneficiary of the trust. The final beneficiaries were Mr C's children. Mrs C benefited from the trust during the marriage. The trust was a nuptial settlement.

One of the purposes of the trust was taking assets out of the circle of bank guarantees related to the business. It seemed the separation of property from the risks associated with business assets must have the purpose of protecting assets for the family. Properties may have been purchased by the trust to keep them separate from the bank guarantees and for resource consent purposes, but they were nevertheless income producing. Even if that had not been the case, however, the trust would still would have been a nuptial settlement because of the clear connection between the marriage and the settlement.

In terms of the earlier case law, the purpose of the exercise of the discretion under s182 FPA was to remedy the consequences of the failure of the premise of a continuing marriage. The comparison was undertaken not at a fixed point but was a general comparison between the position under the settlement had the marriage continued and the position that pertained after the dissolution. That was not backward looking to the time of settlement. It was forward looking, comparing the position under the settlement assuming a continuing marriage against the current position under a dissolved marriage. Section 182(3) FPA provided that the court, in exercising its discretion, may take into account other relevant factors as well as the circumstances of the parties and any change in circumstances. Among the relevant factors identified in Ward were the terms of the settlement and how the trustees were exercising, or were likely to exercise, their powers in the changed circumstances.

Section 44 PRA (dispositions maybe set aside) and s44C PRA should not be seen as Parliament's chosen remedies for dealing with trusts in the context of relationship breakdowns. The legislative history made it very plain that it was a conscious choice to retain s182 FPA when s44C PRA was introduced. Section 182 FPA had different historical origins and a different purpose from the PRA. It was associated with dissolution of marriages and it dealt with nuptial settlements, which by definition, were not the property of the couple. The principles of the PRA did not underpin s182 FPA.

The trust had been set up by Mr C and all the assets of the trust were acquired during the marriage. The concentration on expectations (and particularly expectations assuming a separation) were misplaced. Further, need was not a prerequisite for the Court's jurisdiction under s182 FPA. Given the decision on s182 FPA, it was not necessary to deal with the submission on s44C PRA.

The parties had settled the proceedings. As the appeal was fully argued and the issues involved were of wider public interest, it was appropriate to issue a judgment.

Mrs C's appeal relating to the Claymark trust and s182 FPA was allowed. As the matter had settled, no orders were made with regard to that trust.

JUDGMENT OF THE COURT
  • A The appeal is allowed

  • B There is no order of costs.

REASONS

(Given by Glazebrook J)

Table of Contents

Para No

Introduction

[1]

Section 182

[4]

Factual Background

[7]

Claymark Trust

[7]

Trust assets

[13]

Trust financing

[16]

Distributions from the Trust

[19]

Decisions below

[21]

Family Court

[21]

High Court

[24]

Court of Appeal

[26]

Preliminary Point

[27]

Nuptial settlement

[31]

What is a nuptial settlement?

[31]

Is the Claymark Trust a nuptial settlement?

[39]

Discretion

[43]

This Court's decision in Ward

[44]

Factors to be considered

[57]

Effect of ss 44 and 44C

[61]

Did the courts below apply the proper approach?

[69]

Should the discretion have been exercised?

[75]

Summary

[85]

Nuptial trust

[85]

Discretion

[89]

Other issues

[91]

Result

[93]

Introduction
1

Mr and Mrs Clayton began a de facto relationship in 1986. They married in 1989, separated in December 2006 and the marriage was dissolved in 2009. They have two adult daughters. The Court of Appeal dealt with various appeals by Mr and Mrs Clayton and associated parties with regard to various trust and relationship property issues arising out of the marriage breakdown. 1

2

On 18 June 2015, leave to appeal from part of that judgment was granted by this Court to both Mr Clayton and Mrs Clayton. 2 The appeal by Mr Clayton has been dealt with in a judgment to be released on the same date as this judgment. 3

3

This judgment deals with the appeal by Mrs Clayton and concerns two issues: first, whether, as regards the Claymark Trust (the Trust), the Court of Appeal was correct in its interpretation and application of s 182 of the Family Proceedings Act 1980; and secondly, whether the Court of Appeal was correct not to make an order under s 44C of the Property (Relationships) Act 1976.

Section 182
4

The first issue is whether there should have been an order made with regard to the Trust under s 182 of the Family Proceedings Act 1980. That section provides:

182 Court may make orders as to settled property, etc
  • (1) On, or within a...

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1 cases
  • Mccarthy v Mcmanamon
    • New Zealand
    • High Court
    • 26 Febrero 2021
    ...albeit not conclusive indicator of meaning.70 65 66 67 68 69 70 Family Proceedings Act 1980, pt 4. Clayton v Clayton (Claymark Trust) [2015] NZSC 30 [“Claymark Trust”] at At [31]–[36]. At [38]. Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]. At [6......

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