Thompson v Thompson and Others

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeStevens J
Judgment Date08 Apr 2014
Neutral Citation[2014] NZCA 117
Docket NumberCA701/2013 CA711/2013

[2014] NZCA 117

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Randerson, Stevens and Miller JJ

CA701/2013 CA711/2013

Between
Michael Leith Thompson
Appellant
and
Christine Hamilton Thompson
First Respondent

and

Michael Leith Thompson, Dean Alan Ellwood and Bruce Kenneth Dell as Trustees of The M L Thompson Family Trust
Second Respondents
Counsel:

Lady D A Chambers QC for Appellant

A E Hinton QC and S Ambler for First Respondent

V T M Bruton and P Brown for Second Respondents (excused from appearance)

Appeal from a High Court decision which held an $8 million restraint of trade payment made to the appellant after the parties separated was the appellant's separate property but that the first respondent was entitled to a share under s9(4) Property (Relationships) Act 1976 (“PRA”) (just in the circumstances to treat separate property as relationship property) — parties had established Nutra-Life Health & Fitness (NZ) Ltd and its holding company which were owned by the second respondent Trust — whether the restraint of trade was for business goodwill or the personal goodwill of the appellant — whether there was a connection between the restraint of trade payment and efforts made during the marriage by the first respondent so that part of the payment became relationship property under s9(4) PRA — whether an extension of a stay of enforcement of consent orders between the parties as to the division of assets should have been granted.

Held: The sale agreement included IP assets and goodwill. The latter was defined to include the goodwill and trading reputation of the business. The sale agreement said nothing about the concept of “principal's goodwill” nor had it purported to transfer the personal knowledge and experience of Mr T to the business. It could not do so as personal attributes were unassignable. The goodwill transferred was all expressly goodwill which was attached to the business. In a matrimonial property context, concepts of property of different types should be given their conventional commercial meaning.

There was no sound analytical basis for characterising Mr T's personal contacts and industry experience as being in a separate or different class from either business goodwill or personal attributes: they were the one or the other. If the former, they were sold as part of the business. If the latter, they were not assignable as an asset of the business, and so had no value to it.

Either way they did not comprise relationship property. The payment was consideration for the loss of Mr T's future business opportunities along with the other burdensome commercial obligations he had undertaken as part of the sale. Whether any aspect of the (personal) goodwill secured by a restraint of trade covenant ought to “attach” to the business for relationship property purposes depended on the facts.

The payment was Mr T's own separate property. Accordingly there was no basis for a conclusion that part of the business goodwill resided in Mr T was relationship property under s8(e) PRA. There was no reason to conclude that the sale of the business goodwill through payment for the restraint of trade covenant represented the proceeds of any disposition of relationship property under s8(1) PRA. Mr T's skills and abilities were not property under s2 PRA (interpretation – property includes: real and personal property: estate or interest in any real personal property; any other right or interest). While Mrs T looking after the children and a home had enabled Mr T to develop his skills and abilities to an extent he could not otherwise have done, the payment was not compensation for the time in which those skills were developed. The skills, abilities and performance of Mr T were what would have been used by him, following a clean break, to have enabled him in the future to earn a living and embark on new and different entrepreneurial ventures. The restraint of trade was a forward-looking restriction.

There had been no basis upon which a stay should have been issued. The findings of the HC in the first stay judgment, (that Mr T had the ability to make a payment to Mrs T if he were required to do so as a result of the appeal), and that Mrs T could make arrangements to pay the sum required under the consent orders, were decisive. The consent orders had been in place since prior to the hearing in the FC. Mr T had succeeded both in the FC and HC. There was no reason why he should be barred from the benefit of his judgment or the fruits of the consent orders.

Mr T's appeal was allowed and Mrs T cross-appeal was dismissed. The stay of execution granted in the HC was discharged.

JUDGMENT OF THE COURT

A The appeal is allowed and the cross-appeal is dismissed.

B The decision of the Family Court is reinstated with the result that the payment of the sum of $8 million to the appellant is to be treated as the separate property of the appellant.

C The application for leave to adduce further evidence on appeal is dismissed.

D The stay of execution granted in the High Court is discharged.

E All questions of costs in the High Court and the Family Court are to be determined in those Courts in the light of the judgment of this Court.

F Costs in this Court are reserved on the terms set out in [94].

G In relation to the application by the second respondents for costs, there will be no order for costs.

REASONS OF THE COURT

(Given by Stevens J)

Table of Contents

Para No

An $8 million payment – separate or relationship property?

[1]

Some further background

[8]

The agreement for sale and purchase

[11]

The restraint of trade covenant

[18]

The value of the business and assets

[23]

First issue – relationship or separate property?

[30]

Family Court decision

[30]

High Court judgment

[32]

Submissions for Mrs Thompson on appeal

[35]

Our analysis

[38]

Second issue – relationship property under s 9(4)?

[62]

Family Court decision

[62]

High Court judgment

[63]

Submissions of the parties

[66]

Our analysis

[69]

Third issue – further evidence on appeal?

[83]

Fourth issue – discharge of stay of execution?

[86]

Result and costs

[92]

An $8 million payment – separate or relationship property?
1

Following the dissolution of their marriage in 2005, the appellant, Mr Thompson, and his wife Mrs Thompson, the first respondent, agreed on the division of their considerable assets. These included the family home, a holiday home, various chattels, and the proceeds of the sale of a business, Nutra-Life Health & Fitness (NZ) Ltd (Nutra-Life) and its holding company, Health Foods International Ltd (HFI), which had some 10 years earlier been transferred to the M L Thompson Family Trust (the MLT Trust). The second respondents are the trustees of that Trust. The parties were unable to agree on their respective entitlement to a payment of $8 million, made to Mr Thompson by the purchasers of the Nutra-Life business under a restraint of trade covenant entered into in December 2006, over four years after the parties first separated in 2002.

2

Mrs Thompson's claim to half of the $8 million payment was first determined in the Family Court. Judge Rogers concluded that payment was separate property under s 9(4)(a) of the Property (Relationships) Act 1976 (the Act), and there was no basis upon which it was just to treat any portion of the payment as relationship property. 1 Mrs Thompson appealed to the High Court.

3

Andrews J agreed that the payment was the separate property of Mr Thompson. 2 The Judge then exercised her discretion under s 9(4) of the Act to treat part of the restraint of trade payment to Mr Thompson as relationship property. 3 She considered that there was some connection between the restraint of trade payment and efforts made during the marriage, however, the evidence before the Court was insufficient to allow her to apportion the payment between the amount pertaining to Mr Thompson's business performance during the relationship, and the amount compensating Mr Thompson's for the loss of his future earnings. 4 The Judge held, if the parties failed to reach agreement on apportionment, additional evidence would be required at a further hearing.

4

Mr Thompson appeals this finding under s 9(4) on the basis that Andrews J erred in the exercise of her discretion, and wrongly allowed further evidence to be admitted. Mrs Thompson cross-appeals against the finding the restraint of trade payment was Mr Thompson's separate property.

5

Immediately prior to the Family Court hearing, the parties had negotiated a series of consent orders in respect of the division of their assets. 5 These determined who would own which assets, and included an adjustment payment to be made to Mr Thompson. In August 2013, Andrews J granted a stay of enforcement of these consent orders, to expire 48 hours after the issue of her substantive judgment. 6 Following delivery of the substantive judgment, the Judge granted an extension of the stay of execution pending further order of the Court. 7

6

Mr Thompson appeals against these decisions granting a stay of execution on the basis that the High Court did not have jurisdiction to grant a stay or, in the alternative, the Judge was in error in granting the stay.

7

The issues for determination on appeal are as follows:

  • (a) Is the $8 million payment relationship or separate property?

  • (b) Should any portion of that payment be treated as relationship property under s 9(4) of the Act?

  • (c) Should leave be granted to either the appellant or the first respondent to adduce further evidence on appeal?

  • (d) Should the stay of execution be discharged?

Some further background
8

The background facts are not in dispute. The following summary draws on the outline in the High Court judgment. Mr and Mrs Thompson married in 1971. They had five children (now all adults)...

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3 cases
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