V K F M v F R S FC Tau
IN THE FAMILY COURT AT TAURANGA
Under “Property (Relationships) Act 1976”
D Hurd for Applicant
A Hinton QC for Respondent
No Publication Of This Proceeding Is Permitted Under S 35A Of The Poperty (Relationships) Act 1976, Except With The Leave Of The Court Thatheard The Proceedings, And With The Exception Of Publications Of Bona Fide Professional Or Technical Nature.
RESERVED JUDGMENT OF JUDGE J P GEOGHEGAN
The parties in these proceedings were married in 1977. They separated in August 2003. There are four children of the marriage who were aged between 19 and 26 at the date of this hearing.
On 27 June 2002, just over a year before the parties' separation, they entered into a relationship property agreement intended to divide various items of property between them. One year later on 27 June 2003 they entered into a further agreement which was intended to vary the earlier relationship property agreement. The reasons for the agreements and the input of each party into the agreements were the subject of significant evidence during the course of the hearing and will be referred to later in this judgment. The issue for determination in these proceedings however, is whether or not the Court should declare the agreements void in accordance with s 21(f) of the Property (Relationships) Act 1976 or alternatively whether the Court should set aside the agreements pursuant to s 21(j) of the Act.
During the course of their marriage the parties had been very successful in business. They developed an expertise in the establishment and development of retirement villages. It is the development of one particular village, the Avenues Retirement Resort Limited (“the Avenues”) which provided the principal motivation for the agreement which the parties entered into and which Ms Maunder now seeks to set aside.
In 1987 the parties purchased land on which they subsequently erected a retirement village known as the Omokoroa Country Estate Retirement Village. The village is owned and operated by a company formed by the parties and known as Omokoroa Country Estate Limited.
Over subsequent years the parties bought and sold a significant amount of property. Included in that property was a number of properties situated at Wallace Road, Te Puna. Between 1994 and 1998 the parties purchased properties at 84, 116, 118 and 122 Wallace Road, Te Puna all of which form a property known to all as “Felbridge”. This property, which is accepted by all as being an extremely attractive property of very considerable value, is of great significance to the parties. It was clear from the evidence of the parties that they were born very attached to the property and shared a mutual wish to ensure that it could be handed down to their children. At the time the parties' agreement was entered into it was being operated as the family home and was owned by mirror trusts formed by each party.
Between 1995 and 1998 the parties purchased, developed and sold a retirement village known as the Bayswater Retirement Village. That project provided the parties with significant income and capital gain.
In 1997 the parties purchased property in central Tauranga for the purposes of establishing and developing a further retirement village to be known as “The Avenues”. The purchase of the land and development of the village itself was undertaken by a company incorporated specifically for that purpose, and known as The Avenues Retirement Resort Ltd. Building work commenced on the Avenues complex of 77 Apartments in June 1999. That project was completed in September 2000.
In the interim the parties had also been involved in purchases of various other properties.
At the times the parties entered into the first agreement the properties owned either by the parties personally or by family trusts or by companies formed by the parties consisted of the Wallace Road properties, sections of land at Omokoroa, a kitchen factory at Loop Road, 500 shares each in the Omokoroa Country Estate Limited, a section at 20 Norris Street, Tauranga, 1000 shares in The Avenues Retirement Resort Ltd, a section of land adjacent to the Avenues, a property situated at 28 Norris Street, Tauranga and significant shareholder loans owed to them by various companies that they had formed.
It appears clear that both parties were capable business people with different but complementary skills. Mr Sanderson could be described as a “big picture” person able to detect business and property development opportunities. Ms Maunder was a “details” person who would attend to significant administrative matters. It is clear from the evidence that as the parties' developments grew more ambitious the level of business risk increased accordingly, and that Ms Maunder became more uncomfortable with that level of risk; a level of discomfort which eventually caused her to seek legal advice in respect of her concerns.
In the latter part of 2000 with the Avenues development reaching completion the parties were under significant financial pressures created by the level of debt servicing required through development of the project. A GST payment of some $1,500,000 was imminent and Ms Maunder was becoming increasingly concerned over the parties' financial position given that the parties' bankers had security over three lots of the Wallace Road properties and that, at least in her view, there was a danger that these properties would be lost. It was abundantly clear from the evidence before the Court that Ms Maunder regarded the protection of those properties as a matter of very considerable priority.
The parties had for some years been advised in respect of business and personal matters by their solicitor, Mr Abernethy. Mr Abernethy had not only a close professional relationship with the parties but also a personal relationship with them. Ms Maunder approached Mr Abernethy to discuss her mounting concerns and of her wish to ensure that Felbridge, which was so dear to both parties, could be protected in the event that the parties' financial position became untenable. Ms Maunder was advised by Mr Abernethy that she should enter into what Ms Maunder referred to as a “S 21 agreement”. Ms Maunder took no further steps regarding that matter until approximately March 2002 after, according to her evidence, she had discussed the parties' financial position with Mr Sanderson but had not received any satisfactory resolution of the matter. At that stage Ms Maunder still held very real and genuine concerns that Mr Sanderson had over-reached himself on the Avenues project and that as a result he had placed the parties other assets in a position of considerable jeopardy.
In an affidavit sworn on 1 July 2005 Ms Maunder set out her objectives in seeking Mr Abernethy's advice. She stated at paragraph 14 of that affidavit that:
My objective in seeking Mr Abernethy's advice was to safeguard the financial security of me and the children. It was driven by my grave concern that, as a result of our involvement in the various business enterprises and Fraser's high-risk approach to them, I and the children would find ourselves at some point losing everything. This concern was magnified by serious strains in our relationship. My hope was that if I could achieve security for me and the children, Fraser and I would be able to work through our relationship difficulties.
While recognising Mr Sanderson's strengths in identifying business opportunities, Ms Maunder regarded Mr Sanderson as something of a gambler in respect of those opportunities in the sense that at least from her perspective he had an over-inflated view of potential profits and would constantly become engaged in new projects without existing projects being finished. Ms Maunder complained that “time and time again” she was pressured into taking on what were, in her assessment, unwise projects with the result that the parties lost money or barely came out even. Ms Maunder's evidence portrayed a sense on her part of increasing and very significant concern that Mr Sanderson's conduct in this regard, which at least from her perspective, had the clear and present potential to place the parties' considerable wealth in danger.
The Avenues was, at least as far as Ms Maunder was concerned, the catalyst for her desire to enter into an agreement with Mr Sanderson which would alleviate her concerns.
In her evidence Ms Maunder referred to a number of projects that the parties were involved in around the time the land for the Avenues development was purchased in 1997. The purchase was financed to the extent of $400,000 by mortgaging the residential property at 122 Wallace Road. Ms Maunder expressed the view that the development was proceeded with, contrary to her wishes, and to her advice to her husband. Subsequent to the purchase of the Avenues land the parties were required to sell a retirement village known as Bayswater Village to Metlifecare. From Ms Maunder's perspective the reason for that was because Mr Sanderson had insisted on building homes at the retirement village without presales which led to a position where they were holding 13 homes in stock when the parties had out laid the full building costs of those homes. Accordingly the Bayswater Village was sold. There were also other difficulties which attached to it but they do not need to be referred to here.
In June 1999 the parties purchased two penthouse apartments at an apartment building in Mt Maunganui for $1.275 million. Those apartments were sold in June 2000 for $1.25 million because of funds required for the Avenues project.
Also in 1999 the parties undertook the relocation of three townhouses from the Avenues site to a site at Gate Pa. It was the evidence of Ms Maunder that Mr Sanderson became bored with the project...
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