Avison v McFarlane
[2014] NZHC 1889
•12 August 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-1260 [2014] NZHC 1889
BETWEEN NGAIRE JANE ELIZABETH AVISON
Plaintiff
AND
WAYNE JAMES MCFARLANE and NGAIRE JANE ELIZABETH AVISON and DAVID WILLIAM BUTLER
First Defendants
WAYNE JAMES MCFARLANE and NGAIRE JANE ELIZABETH AVISON and DAVID WILLIAM BUTLER Second Defendants
WAYNE JAMES MCFARLANE Third Defendant
DAVID WILLIAM BUTLER Fourth Defendant
Hearing: 22 May 2014 Appearances:
J C Gwilliam for Plaintiff
R J B Fowler QC for the First, Second and Third DefendantJudgment:
12 August 2014
JUDGMENT OF ASSOCIATE JUDGE SMITH
Introduction
[1] The plaintiff (Ms Avison) and the third defendant (Mr McFarlane) began living together in a de facto relationship in 1996. They married in November 2006, but separated a little under five years later, in October 2011. There were no children
of the relationship.
NGAIRE JANE ELIZABETH AVISON v WAYNE JAMES MCFARLANE and NGAIRE JANE ELIZABETH AVISON and DAVID WILLIAM BUTLER [2014] NZHC 1889 [12 August 2014]
[2] Relationship property proceedings between Ms Avison and Mr McFarlane are pending in the Family Court.
[3] While they were living together, Ms Avison and Mr McFarlane established two family trusts, the Avian Trust and the Oasis Trust. Both were trustees of the two trusts. The other trustee (of both trusts) is Mr David Butler, a Lower Hutt solicitor. Initially, claims were brought against Mr Butler by Ms Avison, but those claims have now been discontinued.
[4] In the present proceeding, Ms Avison seeks certain orders in respect of the assets of the Avian Trust and the Oasis Trust. The orders sought include declarations identifying the assets of each of the two trusts, and orders for specific performance by the trustees of their obligations under a clause, which appears in identical terms in each of the two trust deeds, which was triggered by notice given by Ms Avison following her separation from Mr McFarlane. The clause required the trustees to re-settle one half of the trust assets on a new trust nominated by the party giving the notice – in this case, Ms Avison.
[5] Ms Avison applies for summary judgment on her declaration and specific performance claims.
[6] There is no opposition to the relief sought by Ms Avison in respect of the Oasis Trust, except in respect of Ms Avison’s claim for costs. Mr Fowler confirmed that orders can be made by consent in respect of the claims for declaratory relief and specific performance in respect of that trust.
Background
[7] When Ms Avison and Mr McFarlane began living together, they lived in a property owned by Mr McFarlane at 33 Avian Road, Upper Hutt (the home). Mr McFarlane also owned two adjoining sections, at 29 and 31 Avian Road (respectively, “No. 29” and “No. 31”). No. 29 and No. 31 were primarily used for grazing stock.
[8] The home had been owned by Mr McFarlane and a former partner. The interest of that partner was bought out by Mr McFarlane and Ms Avison, Ms Avison purchasing a one quarter share of the property. A property deed recording the arrangements between Ms Avison and Mr McFarlane was executed on 19 September
1997. Ms Avison and Mr McFarlane each received independent legal advice before signing the property deed, and their respective solicitors each certified on the property deed that he had given his client independent legal advice and explained to him or her the effect and implications of the agreement.
[9] The Avian Trust was settled by deed of trust dated 18 September 2002. The settlors were Ms Avison and Mr McFarlane. Discretionary beneficiaries named in the trust deed include Ms Avison and Mr McFarlane, and any children, grandchildren and great-grandchildren of Mr McFarlane, and any nieces and nephews, great-nieces and nephews, and great-great-nieces and nephews of Ms Avison.
[10] The Avian Trust deed provided that, on the date of distribution, the trustees were to stand possessed of the trust fund and income thereon upon trust for such of Mr McFarlane’s two daughters and Ms Avison’s nephew and two nieces, as shall be living at the date of distribution, and if more than one as tenants in common in equal shares. There was provision for substitution of issue in the event of one or more of those beneficiaries dying before the distribution date leaving a surviving child or children. Any such child or children would take (and if more than one as tenants in common in equal shares), the share that his or her or their parent would have taken if he or she had survived to the distribution date.
[11] The trustees were required by the Avian Trust deed to act unanimously in the exercise of their powers under the deed.
[12] Clause 8.12 of the Avian Trust deed contained the following provision:
8.12 Separation of settlors
Should the settlors at any time separate either may, by notice in writing (“the Notice”) require the Trustees to resettle half of the assets of this trust at the date of the Notice on a separate trust established by the Settlors giving
notice. The Trustees shall upon receipt of the Notice attend to the resettlement as soon as reasonably practicable and in such manner and with such assets as they in their sole discretion deem appropriate. The other Settlors shall be deemed by operation of this clause to be the sole Appointer of this trust from the date that resettlement is effected.
[13] “The Appointor” was defined in the Avian Trust deed as Mr McFarlane and Ms Avison jointly while both were living. The Appointer was given the statutory power of appointing new trustees. Where (as in this case) there were two persons named as the Appointor the trust deed empowered them, by unanimous decision, to appoint as discretionary beneficiaries under the deed any person, provided the additional discretionary beneficiaries were persons for whom the joint appointors had natural love and affection. Ms Avison and Mr McFarlane were also empowered as Appointor to declare that the discretionary beneficiaries should cease to include
any person.1
[14] The home was sold to the Avian Trust in September 2002 for $170,000. That price was to be satisfied by the trustees of the Avian Trust delivering to Mr McFarlane and Ms Avison an acknowledgment of debt for the full amount of the purchase price. The parties did not obtain independent legal advice on entering into this transaction, and no certificates similar to those which had been included on the property deed were endorsed on the agreement for sale and purchase of the home.
[15] No. 29 and No. 31 were also sold to the Avian Trust. These transactions both occurred in October 2005, and were effected by agreements for sale and purchase, both dated 21 October 2005. The purchase price for No. 29 was $54,000, and the purchase price for No. 31 was $94,000. The purchase prices were to be satisfied by the trustees delivering to Mr McFarlane signed acknowledgments of debt for the full amounts of the purchase prices.
[16] On settlement of the sale of the home to the Avian Trust, the trustees provided separate acknowledgments of debt to Mr McFarlane and Ms Avison, each in the sum of $85,000. On settlement of the sales of No. 29 and No. 31, the trustees provided
an acknowledgment of debt to Mr McFarlane in the total sum of $148,000.
1 Clause 8.10 of the Avian Trust Deed.
[17] Gifting programmes were entered into by Mr McFarlane and Ms Avison, under which various sums were forgiven by each, up to $27,000 in each year. As at
21 October 2005, Mr McFarlane and Ms Avison had each forgiven a total of
$85,000, thus satisfying the debt owed to them by the trustees of the Avian Trust on the sale of the home.
[18] In respect of the debts owed by the trustees of the Avian Trust to Mr MacFarlane on the sales of No. 29 and No. 31, Mr McFarlane continued an annual gifting programme up to the time the parties separated in October 2011. It is common ground that all of the debt owed by the trustees of the Avian Trust to Mr McFarlane on the sales of No. 29 and No. 31 has been forgiven, apart from a sum of approximately $17,000 which remains owing by the trustees of the Avian Trust to Mr McFarlane.
[19] The Oasis Trust was established by Mr McFarlane and Ms Avison by deed dated 18 September 2002. The deed is expressed in similar terms to the Avian Trust deed, and includes the identical cl 8.12 which is set out at para [12] of this judgment.
[20] The Oasis trust was set up when Mr McFarlane and Ms Avison bought an investment property at Blue Mountains Road, Silverstream. That property has since been sold, and I was advised at the hearing that the sole asset of the Oasis trust is a sum of approximately $100,000 held in an account with the ANZ bank.
[21] The separation in October 2011 brought into play cl 8.12 of the Avian and Oasis Trust deeds. On 20 September 2013, Ms Avison gave formal notice to the trustees of each of the trusts, requiring the trustees to resettle one half of the assets of the trust on a separate trust to be established by her, details of which would be provided in due course.
[22] The solicitors acting for the Avian Trust acknowledged receipt of Ms Avison’s notice, but advised that they had received notice from Mr McFarlane’s daughters claiming that they had an interest in No. 29 and No. 31. A letter from one of Mr McFarlane’s daughters, Janaya, was forwarded to Ms Avison’s lawyers. It provided as follows:
These sections were purchased by my father [Mr McFarlane] for myself and my sister. While he never transferred them to us there was a definite understanding that the properties were ours and he was holding them as Trustee on our behalf. I understand that my father transferred the properties into a trust but only to take them out of his personal name in case he ever had financial problems. Even though he held them as trustee for us, it was apparently thought it would provide us additional protection by transferring them to a trust.
I contributed to the purchase. My quad bike was sold and the proceeds used to make a payment on the sections.
I understand the trust is to be wound up or resettled and on behalf of me and my sister I put the trustees on notice that the section should be transferred to us immediately.
[23] Janaya provided a copy of her driver’s licence with her letter. The date of
birth on the licence shows that she is now aged in her early thirties.
[24] Ms Avison then settled a new trust of her own, styled “The Peony Rose Trust”. Following the establishment of this trust, her solicitors wrote to the trustees’ solicitors enclosing draft deeds of resettlement for both the Avian and Oasis Trusts, requesting execution by the trustees. The response, made by the trustees’ solicitors on 7 November 2013, referred to the dispute between Mr McFarlane’s daughters and Ms Avison as to the basis on which No. 29 and No. 31 are held by the Avian Trust. The letter, having expressed the expectation that Mr McFarlane would agree with his daughters, advised that Mr Butler, the independent trustee, did not wish to take a position in the dispute, and even if he did, any decision of the trustees would have to be unanimous. The trustees’ solicitors took the view that directions would have to be sought from the High Court.
[25] The existence of the trust claimed by Mr McFarlane’s daughters is denied by Ms Avison. In her evidence, she stated that the trustees of the Avian Trust had never been asked to pass a resolution to the effect that No. 29 or No. 31was held in some form of sub-trust for Mr McFarlane’s daughters, and nor was she ever advised at the time the two sections were settled into the Avian Trust that they were subject to claims by Mr McFarlane’s daughters. She alleged that, during their marriage, Mr McFarlane had suggested that he and Ms Avison build a house on the sections for them to live in, and put the home on the market. She stated that Mr McFarlane was
also happy for her to pay rates on No. 29 and No. 31. She disputed that Mr McFarlane’s daughters had contributed financially to the purchase of No. 29 and No. 31. She produced copies of historical searches of the certificates of title to the home, No. 29, and No. 31, noting that when the three pieces of property were acquired by Mr McFarlane (and/or his then partner), Janaya would only have been aged about 6 or 7. She asserted that the quad bike referred to by Janaya in her letter was in fact owned by Mr McFarlane, who allowed his children to use it.
[26] Ms Avison stated that Mr McFarlane’s relationship with his children was at times fraught. He would “blow hot and cold” in regard to them, and often said to Ms Avison that he wanted his daughters excluded as beneficiaries of both the Avian Trust and the Oasis Trust.
[27] In his evidence, Mr McFarlane said that No. 29 and No. 31 were always talked about as his daughters’ sections. He said that he had no recollection of the clause in the Avian Trust deed under which the assets of the Trust would be divided equally ever being drawn to his attention. He said that there was no intention to make those sections effectively relationship property. He stated that, as his daughters were named as beneficiaries in the Avian Trust, he assumed that the declared trust in favour of his daughters would simply carry on with the Avian Trust. Mr McFarlane denied that Ms Avison made any contribution from her own resources to No. 29 or No. 31. He said that the small amount that remained owing on the sections when their relationship commenced was met by the sale of a quad bike belonging to one of his daughters and from his separate property. As for the payment of rates on No. 29 and No. 31, Mr McFarlane said that the rates were paid from his drawings from his business: the drawings were paid into Ms Avison’s personal account, and she paid the rates from that account.
[28] Mr McFarlane produced a copy of an email dated 14 August 2013 from
Mr Butler. In the email, Mr Butler stated:
As an independent trustee my position must remain neutral but I confirm the intention has always been that the sections would be for the benefit of your daughters.
[29] Mr McFarlane said that when he and Ms Avison first separated, they met with their accountant Karen Marshall to sort out their finances before they went to see their respective lawyers. His evidence was that Ms Avison acknowledged at the meeting with the accountant that she had no interest in No. 29 or No. 31. Mr McFarlane produced a spreadsheet prepared by the accountant setting out a proposed property split between Ms Avison and Mr McFarlane. The spreadsheet contained the note “Avian Trust – the Sections. This is to be treated as Wayne’s pre- relationship property and not included.”
[30] The accountant, Karen Marshall, also gave evidence. Ms Marshall said that Ms Avison took over the administration role for Mr McFarlane’s business in the early 2000’s, and from 1 April 2004, the business was operated as a partnership between Mr McFarlane and Ms Avison. From around that time, all of Ms Marshall’s meetings were either with Ms Avison or with Ms Avison and Mr McFarlane together. She confirmed that in September 2002 she discussed with Ms Avison and Mr McFarlane setting up a trust to protect the assets given that they were both self- employed and there were inherent risks in the building industry of customers not paying for their work.
[31] Ms Marshall confirmed in her evidence that Mr McFarlane had always stated that No. 29 and No. 31 had been purchased as an inheritance for his daughters. She said that Mr McFarlane “was quite clear the sections were something that would go to his daughters on his death”. Ms Marshall said that that had been her understanding of the parties’ intentions for many years, and Ms Avison never dissented from that understanding.
[32] Ms Avison accepted in her reply affidavit that, when they first got together, Mr McFarlane did say that the house and sections were to be left to his daughters. However her evidence was that things changed as their relationship progressed, and by the time No. 29 and No. 31 were transferred to the Avian Trust in October 2005 she understood that the home, No. 29 and No. 31 were all relationship property. In respect of Ms Marshall’s evidence that Ms Avison “never dissented in any way” from the proposition that No. 29 and No. 31 were to go to Mr McFarlane’s daughters on his death, Ms Avison stated that she could not recall Mr McFarlane asserting that
to be the position at the meeting with Ms Marshall, but that in any event any non- dissent by her merely reflected the fact that she and Mr McFarlane were together at that time. Ms Avison said that she did not know on what basis Mr Butler could have said that Mr McFarlane’s “intention had always been” that the sections would be for the benefit of Mr McFarlane’s daughters. She accepted that that might have been Mr McFarlane’s intention initially, but referred to various “fallings out” which later occurred between Mr McFarlane and his daughters.
Summary judgment principles
[33] The principles to be applied in considering an application for summary judgment have been clearly established through decisions of the Court of Appeal.2
[34] In considering the plaintiff’s application I apply the following general
principles, which apply to all applications by a plaintiff for summary judgment:
(1)The plaintiff must satisfy the Court that the defendant has no arguable defence to the claim brought against it. The issue is whether there is a real question to be tried.
(2)It is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise. Issues of law, even though they may be complex, can, however, be determined in an application for summary judgment.
(3)Although the Court should adopt a robust approach, nevertheless summary judgment may be inappropriate where the ultimate determination turns on a judgment that can only properly be reached after a full hearing of all the evidence.
[35] Counsel were agreed that in appropriate cases summary judgment may be entered on a plaintiffs claim for a declaration,3 or for specific performance.4 Also,
2 Pemberton v Chappell [1987] 1 NZLR 1; Grant v New Zealand Motor Corporation Ltd [1989] 1
NZLR 8; Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298;
and Krukziener v Hanover Finance Ltd [2008] 19 PRNZ 162.
3 See for example Towers v R & W Hellaby Ltd [1987] 3 NZCLC 100,064 (HC).
the fact that the relief sought is discretionary is not a ground for refusing summary judgment if the Court is able to determine that the discretion should be exercised in the plaintiff’s favour. 5
The Defences
[36] Mr McFarlane raises two defences:
(1)That the transfer of No. 29 and No. 31 to the Avian Trust was impressed with a trust in favour of Mr McFarlane’s daughters (be that a sub-trust, an implied trust, or a constructive trust), such that No. 29 and No. 31 were always held in trust for the two daughters.
(2)That the transfer of No. 29 and No. 31, and/or the subsequent gifting programme undertaken by Mr McFarlane, was invalid for non- compliance with s 21F of the Property (Relationships) Act 1976 (the Act).
[37] Section 21F of the Act provides as follows:
21F Agreement void unless complies with certain requirements
(1) Subject to section 21H, an agreement entered into under section 21 or section 21A or section 21B is void unless the requirements set out in subsections (2) to (5) are complied with.
(2) The agreement must be in writing and signed by both parties.
(3) Each party to the agreement must have independent legal advice before signing the agreement.
(4) The signature of each party to the agreement must be witnessed by a lawyer.
(5) The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.
[38] Under s 21 of the Act, spouses, civil union partners, or de facto partners may, for the purpose of contracting out of the provisions of the Act, make any agreement
4 Lawson v Hartshorn HC Christchurch CIV-2007-409-3055, 8 May 2008.
5 Australian Guarantee Corporation (New Zealand) v Wyness [1987] 2 NZLR 326 (CA).
they think fit with respect to the status, ownership and division of their property
(including future property).
First Defence – No. 29 and No. 31 subject to a trust in favour of
Mr McFarlane’s daughters
[39] In his submissions, Mr Fowler submitted that the transfer of No. 29 and No.
31 to the Avian Trust was impressed with a “sub-trust, an implied trust, or a constructive trust” in favour of Mr McFarlane’s two daughters. Pressed further at the hearing, he submitted that the particular categorisation of the trust does not matter to the result, but if a categorisation is required the trust relied upon should be regarded as an “institutional” constructive trust. He did not suggest that any such trust arose after the transfer of No. 29 and No. 31 to the Avian Trust.
[40] It was common ground between counsel that a constructive trust can be imposed over the assets of an express trust.6 The question in this case is whether it is reasonably arguable that a constructive trust in favour of Mr McFarlane’s daughters did exist at the times of the transfers of No. 29 and No. 31 to the Avian Trust.
[41] In Marshall v Bourneville, the Court of Appeal held that to establish a constructive trust claim to an equitable interest in a property a party must show:
(1) Contributions, direct or indirect, to the property in question
(2) The expectation of an interest in the property
(3) That such expectation is a reasonable one
(4)That the defendant should reasonably expect to yield the claimant an interest
[42] Further, the claimant must have contributed in more than a minor way to the acquisition, preservation or enhancement of the property of the other party. A
6 See for example Prime v Hardie [2003] NZFLR 481 (HC) at [30]; Glass v Hughey [2003] NZFLR 865 (HC); C v C [2013] NZFLR 534 (HC); and Marshall v Bourneville [2013] NZCA
271, [2013] 3 NZLR 766 (CA) at [39].
constructive trust may still be imposed if the parties have no actual common intention as to how the property was to be shared.7
[43] Mr Fowler submitted that the evidence points towards an awareness and acceptance on the part of all three trustees of the reasonable expectation of Mr McFarlane’s daughters that they would hold an interest in No. 29 and No. 31. Alternatively, Mr Fowler submitted that there is ample room for the imposition of a constructive trust over the express trust constituted by the Avian Trust deed (relying on C v C).
[44] On the issue of contributions by the daughters to No. 29 and No. 31, Mr Fowler submitted first that proof of contributions is unnecessary, and will rarely be available where the beneficiaries are minors, but if he is wrong in that there is in any event evidence of contributions sufficient in this case to meet the “arguable defence” threshold.
[45] Is there a seriously arguable case that, when Mr McFarlane transferred No 29 and No 31 to the Avian Trust the sections were already impressed with a constructive trust in favour of his two daughters? The evidence in support of the contention is very thin, but in the end I have come to the view that the issue is not suitable for resolution on the present application for summary judgment.
[46] On the authorities, it seems to me that proof of direct or indirect contributions by the beneficiary, being contributions in more than a minor way, is an essential element of an institutional constructive trust. I note that if all that were required to establish an institutional constructive trust were an expectation of an interest by the beneficiary, and that that expectation was reasonable, there would be little to differentiate such an institutional constructive trust from an express oral trust. And an express trust made in respect of land would not have been enforceable unless it was manifested and proved by “some writing signed by some person who is able to
declare such trust”.8 There is no evidence of any such writing in this case.
7 Marshall v Bourneville, above n 6, at [27].
8 Property Law Act 1952, s 49A(2).
[47] There is nothing in the evidence to suggest that Mr McFarlane’s daughter Carrie made any contribution to either No 29 or No 31. And the only contribution said to have been made by Janaya was the proceeds of sale of a quad bike allegedly owned by her. In her first affidavit, Ms Avison challenged Janaya’s claim that she owned a quad bike which had been sold to make a payment on one of the sections. In his affidavit in opposition, Mr McFarlane provided no particulars of how or when his daughter acquired the quad bike, or how much it was sold for. He said only that there was a “small amount” still owing on the two sections when Mr McFarlane and Ms Avison commenced living together (in 1996), and that that “small amount” was paid off from a combination of Mr McFarlane’s separate property and the proceeds of sale of the quad bike. There was no affidavit provided by either of Mr McFarlane’s daughters, and Ms Marshall deposed only to her understanding that Mr McFarlane had purchased the sections “as an inheritance for his daughters”.
[48] Even on a summary judgment application such as this, Mr McFarlane was obliged to give “reasonable particulars” of the matters which he claims ought to be put in issue.9 Clearly, any contributions his daughters may have made to No 29 and No 31 was fundamental to the success or otherwise of the constructive trust argument, and the details of ownership of the quad bike, what it was sold for, and how the proceeds of sale were applied were all matters which must have been within
Mr McFarlane’s knowledge. Yet he elected not to provide those particulars.
[49] In the circumstances just described it initially appeared to me that Mr McFarlane had not produced sufficient to reach the “arguable defence” threshold. However I do not consider it appropriate to enter summary judgment on Ms Avison’s claims insofar as they relate to No. 29 and No. 31 in circumstances where the relief
sought would, if granted, effectively deprive Mr McFarlane’s two daughters of the
9 In Pemberton v Chappell as per Somers J at [3]:
If a defence is not evident on the plaintiff ’s pleading I am of the opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matter which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff ’s right to have his case proceed to judgment without tendentious delay and a defendant’s right to put forward a real defence.
right to be heard on their claims to a beneficial interest in the sections. Janaya’s letter to the trustees of the Avian Trust clearly asserted an entitlement to an immediate transfer of No. 29 and No. 31 to herself and her sister, and that claim is arguably not inconsistent with Mr Butler’s statement in his 14 August 2013 email (to which no admissibility objection was made) that “the intention has always been that the sections would be for the benefit of [Mr McFarlane’s] daughters”.
[50] As the evidence presently stands, I do not consider that Mr McFarlane has produced sufficient to show an arguable case that his daughters contributed in more than a minor way to the acquisition, preservation or enhancement of No. 29 or No. 31, such as would support a claim to a beneficial interest in the sections under an institutional constructive trust.
[51] However I think there is enough in the evidence that it would be wrong to deprive the daughters, who appear be adult and sui juris, of the right to be heard on their claims. Their interests may have been adequately represented by their father at the hearing, but that is not a conclusion the court can reach without the daughters at least being given the opportunity to be heard. In my view they should be joined as defendants in the proceeding, and for that reason it is not appropriate to dismiss the constructive trust defence at summary judgment stage.
Second Defence – non-compliance with s 21F of the Act
[52] The essence of Mr McFarlane’s argument is that, if No. 29 and No. 31 had not been transferred to the Avian Trust, they would have remained his separate property under the Act. The result of the transfers of the two sections into the Avian Trust, combined with the subsequent gifting programme, has been that one half of the value of the two sections will be made available to the new trust established by Ms Avison. Mr McFarlane’s evidence was that he believed that, as his daughters were named beneficiaries of the Avian Trust, the clear trust in favour of his daughters would simply carry on with the Avian Trust. Mr Gwilliam submitted that the most that can be said for Mr McFarlane in those circumstances is that he misunderstood the legal position at the time he transferred the sections into the Avian Trust. If that is arguably so, there would at least be some “mischief” of the general kind s 21F of
the Act was designed to put right. The question is whether there was any relevant agreement to which s 21F could apply.
[53] In my view, s 21 of the Act (and therefore s 21F) can have no application to the agreements under which Mr McFarlane transferred No 29 and No 31 to the trustees of the Avian Trust. Those particular agreements were not made between spouses or de facto partners – the trustees of the Avian Trust were third parties, and s 21 of the Act appears to contemplate only agreements made (for the relevant purpose) between spouses, civil union partners, or de facto partners. Nor did the agreements transferring the two sections to the Avian Trust cause Mr McFarlane any loss. There is nothing in the evidence to suggest that the sections were transferred at less than their true values, and Mr McFarlane obtained in exchange debts owed to him by the Avian Trust which were presumably of equal value to the value of the sections themselves. Mr McFarlane’s real loss, if there was any, came when he made his annual gifts to the Avian Trust.
[54] The individual gifts made by Mr McFarlane to the trust do not appear to me to be agreements to which s 21 and 21F of the Act could apply either. First, the gifts appear to have been essentially unilateral acts by Mr McFarlane. And if any agreement was involved, it was not made between spouses, civil union partners or de facto partners – although Ms Avison and Mr McFarlane were both trustees, I do not believe that the trustees as a group could come within the expression “spouses, civil union partners or de facto partners”.
[55] But it does seem to me to be reasonably arguable for Mr McFarlane that there was some understanding or agreement between Ms Avison and himself which led to his decision to transfer the two sections into the Avian Trust and to subsequently embark on gifting programmes to ensure the Avian Trust would receive the full value of the two sections. First, Ms Avison was clearly well aware of what Mr McFarlane was doing: she was one of the purchasers of No. 29 and No. 31 in her capacity as a trustee of the Avian Trust, and it appears that she participated in the relevant discussions with Karen Marshall. Secondly, she and Mr McFarlane had previously carried out a very similar ownership restructuring in respect of the home. In all of those circumstances, it may be arguable for Mr McFarlane that there was an oral
agreement between him and Ms Avison under which it was agreed that Mr McFarlane would transfer No 29. and No. 31 into the Avian Trust and subsequently carry out the gifting programmes. The question of whether there was or was not such an agreement is not in my view suitable for determination on this summary judgment application.
[56] Assuming that there was such an agreement, made in 2005 when the two sections were transferred, the agreement was arguably an agreement made between Ms Avison and Mr McFarlane as de facto partners, with respect to the ownership of Mr McFarlane’s property.
[57] The next question is whether any such agreement could be said to have been made for the purpose of contracting out of the provisions of the Act, within the meaning of s 21. Mr Fowler submitted that the agreement certainly had that effect, and that that is enough to satisfy the “purpose” requirement of s 21.
[58] Mr Fowler was not able to refer me to any authority holding that, where an agreement made between de facto partners or spouses has had a particular effect on the status, ownership or division of one of the partner’s property, it is to be regarded as having been made for that purpose. Nor did counsel cite any authority to the effect that a spouse or partner making an agreement under s 21 has to be aware that he or she is contracting out of the provisions of the Act in making the agreement.
[59] In the absence of any reference to specific authority on the point, I cannot rule out this defence as inarguable. First, it seems to me that ss 21 and 21F could be rendered ineffective in many cases if contracting spouses or partners were required to fully understand “the provisions of the Act”, and whether what they were agreeing to would or would not produce a different result from what a court would order under the Act. The very fact that s 21F requires that the agreement will be void unless it is in writing and preceded by the giving of independent legal advice seems to me to presuppose that some parties for whom s 21F was intended to be available will not have been aware that, in making the agreement with their spouse or partner, they have in fact given away rights they would otherwise have had under the Act.
[60] It also seems to me to be reasonably arguable that a spouse or de facto partner entering into an agreement which has the effect of contracting out of that partner’s rights under the Act should be regarded as having been made for that purpose. At least it is an argument which I do not believe can or should be resolved against Mr McFarlane at summary judgment stage, without the benefit of a full examination of exactly what was agreed between him and Ms Avison before the sections were transferred into the Avian Trust.
[61] For the foregoing reasons, I find that the second defence raised by Mr McFarlane is reasonably arguable. The summary judgment application will be dismissed on that account, insofar as it seeks orders in respect of No 29 and No 31.
Orders
[62] I make the following orders:
(1)By consent, I declare that the assets of the Oasis Trust available for resettlement in terms of cl 8.12 of the Oasis Trust Deed consist of funds (approximately $100,000) held in the name of the Oasis Trust in an account with the ANZ Bank.
(2)By consent, I make an order for specific performance against the second defendants as trustees of the Oasis Trust, requiring them to resettle one half of the assets of the Oasis Trust (or their monetary equivalent) on the Peony Rose Trust.
(3)The summary judgment application is refused insofar as it seeks a declaration that the assets of the Avian Trust available for resettlement in terms of cl 8.12 of the Avian Trust deed include No.
29 and No. 31.
(4)Subject to order number 5 below, the application for specific performance against the first defendants as trustees of the Avian Trust requiring them to resettle one half of the assets of the Avian
Trust (or their monetary equivalent) on the Peony Rose Trust is refused.
(5)Counsel may file memoranda on the question whether, in the light of the findings in this decision, it is appropriate to make a declaration that the home is an asset of the Avian Trust available for resettlement in terms of cl 8.12 of the Avian Trust deed, and whether (if such a declaration is considered appropriate), any orders by way of specific performance are appropriate in respect of the home. Any such memorandum Ms Avison may wish to file is to be filed within 14 days of the date of this judgment. Mr McFarlane may file a memorandum in reply within 14 days of his receipt of Ms Avison’s memorandum.
(6) The costs of the application are reserved.
Associate Judge Smith
Solicitors:
J C Gwilliam for Plaintiff
Grigg & Le Page for First, Second and Third DefendantsKensington Swan for Fourth Defendant
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