Bennett v Blackley
[2015] NZHC 1322
•12 June 2015
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2014-488-101 [2015] NZHC 1322
UNDER the Companies Act 1993 IN THE MATTER OF
the liquidators of COUNTRY LAND LIMITED (In Liquidation)
BETWEEN
STEPHEN KIM BENNETT AND
TIMOTHY JOHN HOYLE Plaintiffs
AND
AMANDA JUDITH BLACKLEY Defendant
Hearing: 14 April 2015 Appearances:
D James for the Plaintiffs
W Peters with J Welson for DefendantLady Chambers QC for David C Blackley (s 42 claimant) No appearance for WWP Trustees 2011 Ltd
Judgment:
12 June 2015
JUDGMENT OF ASSOCIATE JUDGE BELL
This judgment was delivered by me on 12 June 2015 at 11:00am
Pursuant to Rule 11.5 of the High Court Rules
………………………………………….
Registrar/Deputy Registrar
Solicitors:
Palmer Macauley (David James) Kerikeri, for the Liquidators
Wayne Peters Lawyers, Whangarei, for Mrs A J Blackley
Copy for:
Lady Chambers QC, Auckland, for Mr David C Blackley
BENNETT AND HOYLE v BLACKLEY [2015] NZHC 1322 [12 June 2015]
[1] The plaintiffs, liquidators of Country Land Limited obtained a judgment against Mrs Blackley on 29 September 2014 for $185,297. To enforce the judgment they filed a sale order on 20 November 2014. Mrs Blackley is the registered proprietor of four properties which might be sold to realise funds to pay the plaintiffs’ judgment. The properties are subject to caveats and notices of claim lodged by third parties. The liquidators have applied for them to be removed to allow the sheriff to sell the properties.
[2] The liquidators would prefer to have a property at 90 Tahunatapu Road, Parua Bay, Whangarei, sold as it is the most valuable and is likely to produce sufficient funds to clear prior interests and to meet the judgment. Mrs Blackley would prefer properties at Russell Road, Whangarei, and Rangitane Road, Kerikeri, to be sold first to pay off the judgment. Mr Blackley opposes execution against any of the properties. He has lodged notices of claim of interest under s 42 of the Property (Relationships) Act 1976 against all of the properties. He claims priority and says that all the properties are required to satisfy his claims under that act. As a fallback position, he says that if any property is to be sold it should be the Tahunatapu Road property. Further, on any sale, he should be paid from the proceeds an amount equal to that used to meet Mrs Blackley’s liabilities.
[3] There is also a property at Ohauiti, Tauranga, but no one proposes that it be sold. It is accepted that on any forced sale, a surplus would not be available after meeting a mortgage registered against the title.
[4] All parties agree that any sale by the sheriff should be by auction.
[5] The primary contest is between the liquidators enforcing their judgment and Mr Blackley, relying on his property relationship rights which are protected by s 42 notices lodged against each of the properties.
[6] The liquidators have lodged charging orders against the title of each property. It is not disputed that, as holders of charging orders, they have standing to apply for
the removal of prior caveats and s 42 notices.1
1 Gill Construction Co Ltd v Morgan (2009) 10 NZCPR 317 (HC).
The properties
[7] Mrs Blackley is the sole registered proprietor of each property.
90 Tahunatapu Road, Whangarei
[8] The property was originally owned by the trustees of the Blackley Children’s
Trust but was transferred into Mrs Blackley’s sole name in September 2011. It is a
4ha block, formerly used as the Blackley family home but, since Mr and Mrs Blackley separated, it has been rented out with Mrs Blackley receiving the income. In February 2012 a registered valuer put its current market value at $1,275,000 inclusive of GST. It is subject to a notice of claim of interest of Mr Blackley lodged in March 2012, a caveat by Mr Blackley lodged on 25 May 2012, a caveat by WWP Trustees (2011) Ltd lodged in August 2014, and the liquidators’ charging order.
[9] Mr Blackley’s caveat claims “a beneficial interest in the land contained in the above certificate of title as cestui que trust of which the registered proprietor, Amanda Judith Blackley, is trustee.” The WWP Trustees (2011) Ltd’s caveat claims “as mortgagee pursuant to a memorandum of mortgage dated 25 July 2014 between the caveator as mortgagee and Amanda Judith Blackley, the registered proprietor, as mortgagor”.
72 Russell Road, Whangarei
[10] This is a residential property with a house on a cross-lease title in suburban Whangarei. Mrs Blackley took title in 2006 and has remained owner ever since. It is subject to Mr Blackley’s notice of claim and the liquidators’ charging order. In September 2012, a registered valuer gave it a current market value of $180,000 inclusive of GST.
219 Rangitane Road, Kerikeri
[11] This is a bare section of about 4,000m2. It is subject to Mr Blackley’s s 42 notice and caveat. Mr and Mrs Blackley took title as co-owners in 1994. It was transferred into Mrs Blackley’s sole name in September 2011. In September 2012 a
registered valuer assessed its current market value at $140,000 inclusive of GST. There is no evidence of the property’s current market value.
Ohauiti, Tauranga
[12] Mrs Blackley bought the property at Ohauiti, Tauranga, in May 2012. She used $160,000, withdrawn from Country Land Ltd, to buy the property. It is subject to a mortgage to the Bank of New Zealand, a s 42 notice by Mr Blackley and the liquidators’ charging order.
[13] Mrs Blackley does not presently live in any of the properties.
[14] In addition to the 2012 registered valuations of the Northland properties, the parties have offered their own opinions as to the values of the properties, but they are not qualified to give valuation evidence. I have insufficient information to understand how the property markets have moved since 2012. I take judicial notice that on any forced sale by auction under a sale order, there is every chance that the property will sell for less than what might be obtained on an arms-length negotiated sale between a willing buyer and seller.
[15] The liquidators have applied to remove the notices of claim and caveats lodged against the Tahunatapu Road, Russell Road and Ohauiti properties, but not the Rangitane Road property.
Facts
[16] Some background history is necessary to understand the relationship property
issues. Mr and Mrs Blackley’s relationship goes back to 1982. They married in
1990. They have six children of their marriage. At the outset they lived in Mount Maunganui, but moved to Whangarei in about 2003. They separated in about January 2012. The children have stayed with Mr Blackley. Mrs Blackley moved back to Tauranga. Mrs Blackley has mental health problems which Mr Blackley made much of in his affidavit.
[17] For Mrs Blackley, Mr Peters submits that most of the couple’s wealth during their relationship was accumulated through trusts and companies. From this and other proceedings involving the Blackleys which I have dealt with, I am aware of the following companies associated with Mr or Mrs Blackley: Country Land Ltd, Parua Bay Farms Ltd, White Pine Holdings Ltd, New Zealand Pine Corporation Ltd, Waimea Consultancy Ltd and Pinecorp Forestry (No.7) Ltd. Country Land Ltd and Parua Bay Farms Ltd carried on business as dry stock farmers on adjoining blocks at Pullin Road in the Whangarei district. White Pine Holdings Ltd, New Zealand Pine Corporation Ltd and Waimea Consultancy Ltd, all under Mr Blackley’s control, advanced funds to Country Land Ltd.
[18] In September 2011, Mr Blackley made over certain assets into the sole name of Mrs Blackley. There was no consideration for these unilateral transfers. They were not made under a relationship property agreement. His explanation is that he did it to save the marriage. The transfers were:
(a) He transferred all but one of his shares in Country Land Ltd to Mrs Blackley so that she owned all the shares but his. He also resigned as director and appointed her sole director of Country Land Ltd.
(b) He transferred his half interest in Rangitane Road to her.
(c) He arranged for the Tahunatapu Road property, held by a trustee under a bare trust for him, to be transferred into Mrs Blackley’s name.
[19] As a move to save the marriage, it did not work. They separated in early
2012. Shortly afterwards, Mr Blackley lodged his s 42 notices against the Northland properties. He also lodged a notice of claim against the Tauranga property after it was purchased by Mrs Blackley. Mrs Blackley challenged the notices of claim lodged against the Northland properties, contending that these assets were her separate property.
[20] On 30 May 2012 the Family Court at Whangarei upheld the notices of claim, holding that Mr Blackley had an arguable case that they were relationship property.2
[21] The Family Court Judge apparently anticipated that Mr Blackley would then file an application for a division of relationship property.3 But that did not happen. Later in the year Mrs Blackley instead began a property relationship application. Progress in the property relationship proceeding in the Family Court has been desultory, although I was advised that progress has quickened in recent months. The parties have filed assets and liabilities affidavits. The Family Court declined an
application to remove the proceeding into this court. The parties are apparently presently trying to resolve discovery matters.
[22] There have been other proceedings.
(a) Country Land Ltd sued Mr Blackley and Parua Bay Farms Ltd in conversion and trespass to goods for removing livestock and equipment without consent. After Country Land Ltd went into liquidation, the liquidators discontinued the proceeding.
(b)White Pine Holdings Ltd, New Zealand Pine Corporation Ltd and Waimea Consultancy Ltd, all under the control of Mr Blackley, successfully sued Country Land Ltd in the Tauranga High Court to recover funds advanced.4 White Pine Holdings Ltd’s claim was for
$310,000; New Zealand Pine Corporation Ltd’s for $611,030; and
Waimea Consultancy Ltd’s for $325,463.
(c) As well as applying for summary judgment, those companies issued statutory demands against Country Land Ltd for the same debts at the
same time. Mrs Blackley applied under s 290 of the Companies Act
2 Country Land Ltd v Blackley, HC Whangarei CIV-2012-488-173; see Country Land Ltd v
Blackley [2012] NZHC 898.
3 Paragraph [32] of the Family Court’s decision of 30 May 2012
4 White Pine Holdings Ltd v Country Land Ltd [2012] NZHC 2964.
to set the demands aside, but after the applications were transferred from Napier to Whangarei the demands were withdrawn.5
(d)On behalf of Country Land Ltd, Mrs Blackley sold equipment and livestock to a Mr Child. Mr Blackley tried to take that livestock off Mr Child. That led to Mr Child taking proceedings against Mr Blackley.6
(e) As judgment creditors, Waimea Consultancy Ltd, New Zealand Pine Corporation and White Pine Holdings Ltd enforced their rights against Country Land Ltd. It went into administration and then into liquidation.
(f) The liquidators found that Mrs Blackley had taken $160,000 out of the company as a drawing. She used those funds in part-payment for the Ohauiti property. The liquidators brought this proceeding to obtain repayment of the advance from Mrs Blackley. She did not resist judgment.
[23] The liquidators say that this has been a time-consuming liquidation with very high fees and expenses. Those are understood to be more than the judgment against Mrs Blackley. Country Land Ltd is insolvent. Creditors will not be paid in full.
Mr Blackley’s contentions
[24] Mr Blackley does not oppose the sale of the properties as such. His case is that none of the properties should be used to meet the claims of Mrs Blackley’s post- separation creditors. He has priority because he lodged his notices of claim before WWP Trustees (2011) Ltd lodged its caveat and before the liquidators lodged their charging orders. The properties are required to meet his relationship property claim. Once his claim is satisfied, there will be nothing left to meet the claims of
Mrs Blackley’s post-separation creditors.
5 White Pine Holdings Ltd v Blackley HC Tauranga CIV-2012-441-4233.
6 Child v Blackley and Parua Bay Farms Ltd HC Whangarei CIV-2013-488-140; see Child v
Blackley [2013]NZHC 490.
[25] He says that the only relevant items of relationship property are the shares in Country Land Ltd (which have no value), the Ohauiti property (which apparently has no equity) and the three Northland properties (which he believes to be worth around
$1,120,000). That pool is not to be divided equally between him and Mrs Blackley. On his case he can claim against her under s 18C of the Property (Relationships) Act for post-separation diminution in value attributable to her deliberate actions. He says that the fall in value attributable to her alone is in the order of $1,430,000. Accordingly, there will be no relationship property available for Mrs Blackley. He will take the lot.
Principles on applications to remove s 42 notices
[26] Any proposal to remove Mr Blackley’s notices of claim has to recognise these matters:
(a) His claim that the titles subject to his s 42 notices are arguably relationship property cannot be reviewed in this application.
(b)Because of his notices, his relationship property claim takes priority over the claims of subsequent creditors.
[27] The Family Court upheld Mr Blackley’s s 42 notices for the Tahunatapu Road, Russell Road, and Rangitane Road properties against Mrs Blackley’s opposition, on the basis that Mr Blackley had an arguable case that those properties were relationship property. There was no appeal from the decision of the Family Court. No-one has proposed that I should take a different view. The Family Court’s decision binds Mrs Blackley as a matter of issue estoppel. The liquidators’ recourse against the property is also subject to Mr Blackley’s notices of claim as upheld by the Family Court. Their charging orders are subject to existing interests including
the potential interest claimed by Mr Blackley in his s 42 notices.7
[28] As to priority, while s 20A of the Property (Relationships) Act provides that secured and unsecured creditors have the same rights against a property owned by a
7 Firth Concrete Industries Ltd v Duncan [1973] 1 NZLR 188 (SC).
spouse as if the Act had not been passed, that is subject to the qualification, “except as otherwise expressly provided in this Act”8 Section 42 is one case where the act expressly provides otherwise.9 For present purposes, Price v Price provides helpful guidance.10 A wife’s notice of claim under s 42 was held to take priority over the interests of a mortgagee that had made advances after the wife’s s 42 notice. That
approach upholds the purposes of a s 42 notice, being a stop sign on the title to prevent a spouse’s relationship property claim from being defeated, and also to ensure that claims are not defeated by dispositions generally. Here, Mr Blackley says that his relationship property claim should not be eroded by debts Mrs Blackley incurred after separation.
[29] Given these factors, the question is how the court should exercise its discretion on an application by those lower ranking creditors. The case law shows differences in approach. One is to apply the same approach in removing notices of claim as the courts apply when removing caveats.11 The other approach recognises that interests protected by notices of claim are different from interests protected by caveat. Thorp J stated the differences in Rusden v Rusden:12
Apart from the fact that the latter must have existing and not merely potential validity, the rights or expectations of persons entitled to give notices of claim may in a number of other respects be less certain and defined than is the case with interests which would support a caveat. Although there is at the centre of the Matrimonial Property legislation a presumption of equal sharing of matrimonial property, there remain large areas in which both the definition of the quantum of interest and the form which such interest shall take have to be assessed on the basis of criteria which are not susceptible to any precise or mathematical calculation.
[30] Because of these differences, the court applies a “reasonable requirements”
test, as formulated by Thorp J in Rusden:13
In my view the basic question for determination by the Court in considering applications for removal of notices of claim must be whether or not the continuance of registration of the notice in question is reasonably required to protect rights of the claimant under the Matrimonial Property Act 1976.
8 See Property (Relationships) Act 1976 s 20A(1) and (3)(b).
9 Gregan v Gregan [1983] NZLR 555 (CA).
10 Price v Price [1995] 3 NZLR 249.
11 See Hayball v Lewis [1996] 1 NZLR 717.
12 Rusden v Rusden (1980) 3 MPC 157.
13 At 159.
[31] The reasonable requirements approach has been followed a number of times, including in O’Farrell v Official Assignee14 and Church v Church, a Full Court decision which reviewed a number of authorities.15
[32] The difference is that on the caveat analogy approach, the court does not examine the merits of the case of the party that has lodged the notice. In Hayball v Lewis, Greig J said:16
With respect I do not agree that the basic question is whether the continuance of the registration is reasonably required to protect the right in a case such as this, where the sole question was the removal of the right and the determination of the interests in real terms or otherwise remains to be resolved. The question, I think, must be whether there is a valid ground for lodging it or that valid ground no longer exists. The latter is not to be decided merely by considering whether the notice remains and continues as a reasonable requirement for the protection of the interest because that begs the question which remains to be resolved on the substantive hearing of the matrimonial property dispute. The learned Judge in the Court below in this case applied the wrong test and was thus led into a consideration of questions as to the merits of the dispute between the parties and the likely resolution of that rather than the substance and validity of the claim to the interests in the property.
[33] For Mr Blackley, it was submitted that the Court of Appeal’s decision in SM v ASB Bank Ltd had determined the matter in favour of the caveat approach. The Court of Appeal said:17
The principles applying to applications for removal of caveats under s 143 of the LTA are well-established. The onus is on the caveator to show that he or she has a reasonably arguable case for the interest claimed. Even if a reasonably arguable case to sustain the relevant interest is established, the court may nevertheless make an order for removal where it was satisfied that the caveator can have no reasonable expectation of obtaining a benefit from the continuance of the caveat or if the caveator’s interest can be reasonably accommodated in some other way. It is not in dispute that these principles apply equally to an application to remove a notice of claim of interest under the PRA.
[34] It appears from that passage that whether the caveat analogy approach should be followed was not contested. The court was not invited to choose between the different approaches. It did not cite Rusden or any of the decisions that followed it,
and it did not give reasons for rejecting the Rusden approach. On the facts in that
14 O’Farrell v Official Assignee (1981) 5 MPC 108.
15 Church v Church [1999] NZFLR 500.
16 Hayball v Lewis above n 11, at 722.
17 SM v ASB Bank Ltd [2012] NZCA 103, [2012] NZFLR 641 at [35] (footnotes omitted).
case, the notice would not have been upheld, no matter which approach was applied. The prior registered mortgagee was always going to prevail.
[35] For this case, it may be possible to reconcile the two approaches. The question is whether Mr Blackley can use his priority to bar those who lodged caveats and charging orders after him from any resort to the properties at all. Under the “reasonable requirements” test, it is open to the court to examine Mr Blackley’s claim to see whether he requires recourse to the entire equity in the properties. The Court of Appeal’s formulation of the discretion in SM v ASB Bank, founded on its
earlier decision in Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd,18
recognises that a caveat may be properly removed if the caveator’s interest can be reasonably accommodated in some other way. Similarly, if a s 42 claimant’s interest can also be reasonably accommodated, even if the notice is removed, removal may be in order. On that caveat analogy approach, it is open to the court to assess the arguable limits of the interest asserted without determining the substantive merits of the relationship property dispute. On an application to remove notices of claim, this court cannot decide the final division of relationship property, as that is within the exclusive jurisdiction of the Family Court under s 22 of the Property (Relationships) Act.
The liquidators’ equity argument
[36] The liquidators ran a “clean hands” argument, saying that Mr Blackley’s conduct had led to burgeoning liquidation costs and had caused Country Land Ltd to default to creditors. This was alleged to make it inequitable for Mr Blackley to assert priority. The reliance on such “equity” is a misreading of the authorities cited, Firth Concrete Industries Ltd v Duncan and Gill Construction Co Ltd v Morgan, which acknowledge that the holder of a charging order takes subject to existing equities. But that does not mean that the holder of a prior interest is to be subordinated because of disentitling “unclean hands” conduct. I accept that priority might be lost because of waiver, acquiescence or estoppel, but in this case there is no basis for saying that Mr Blackley has lost priority because he has led lower-ranking interests to believe that he would allow them to stand ahead of him.
[37] Mr Blackley’s conduct in relation to Country Land Ltd is material to his complaints that Mrs Blackley ran down the value of the company, but that is a relationship property issue and is considered under that head. It does not give a standalone ground in equity to ignore his priority.
[38] I also note another irrelevant consideration: the effects of dismissing the liquidators’ application. If Mr Blackley is right that all the equity in the properties is required to meet his relationship property entitlements, it does not matter that others may go without. That is the cost of ranking lower than Mr Blackley. The consequence of the liquidators being unable to enforce their judgment by the sales order is that they may apply to have Mrs Blackley bankrupted. That may be very convenient for Mr Blackley, as he will only have to deal with the Official Assignee in resolving relationship property matters. But that prospect cannot influence the decision on the liquidators’ application.
Can Mr Blackley’s interest be reasonably accommodated on removing his
notices?
[39] Is it then reasonably arguable for Mr Blackley that he needs resort to the entire equity in all the properties to satisfy his relationship property claim? His argument means that Mrs Blackley is not entitled to anything from the Tauranga, Tahunatapu, Russell Road and Rangitane Road properties because they are the only relationship assets and he is entitled to them entirely. I do not find that assertion plausible in the light of the following considerations.
[40] Mr and Mrs Blackley’s de facto relationship and marriage ran for 30 years. The starting point is that the relationship property must be divided equally.19
Mr Blackley does not dispute equal division. It would be remarkable for a spouse or partner in a 30 year relationship to receive nothing out of the relationship property.
[41] Mr Blackley contends that the four properties and the valueless shares in Country Land Ltd are the only relationship property. His conduct, however, belies his assertion. If he had made over to Mrs Blackley the entire relationship property and then found to his dismay that Mrs Blackley had left him without any relationship
property on separation, he would have pursued his property relationship rights promptly. He did after all act decisively in seizing livestock and equipment from Country Land Ltd and in having companies under his control pursue that company for loans that had not been called up while he was director and had control. In upholding his s 42 notices, the Family Court anticipated that he would issue proceedings promptly. He did not. Mrs Blackley began a property relationship claim against him instead. It was common ground that, until recently, progress in that property relationship proceeding has been slow. Mr Blackley’s delay in the property relationship proceeding throws into question his claim to have been deprived of all relationship assets.
[42] Since separation, he has continued his farming operation through Parua Bay Farms Ltd. He has apparently been able to support himself through other business interests and from assets under his control. He has not shown that they are not relationship property.
[43] As well as downplaying the extent of relationship property, Mr Blackley says that he is entitled to all of it by reason of adjustments to be made after equal division by reason of post-separation matters. Again, it is unusual in a marriage of this length for post-separation adjustments to eliminate entirely one partner’s interest in the relationship pool.
[44] Mr Blackley’s argument for denying Mrs Blackley any interest in the relationship property is that he is entitled to compensation for dissipation of relationship property under s 18C of the Property (Relationship) Act:
18CCompensation for dissipation of relationship property after separation
(1) In this section, relevant period has the same meaning as in section
18B.
(2) If, during the relevant period, the relationship property has been materially diminished in value by the deliberate action or inaction of one spouse or partner (party B), the Court may, for the purposes of compensating the other spouse or partner (party A),—
(a) order party B to pay party A a sum of money:
(b) order party B to transfer to party A any property, whether the property is relationship property or separate property.
(3) In proceedings commenced after the death of one of the spouses or partners, this section is modified by section 86.
[45] It is important to recognise what has to be proved under s 18C. In GFM v
JAM the Court of Appeal said:20
With one exception, we consider this part of the High Court judgment to be comprehensive and accurate.
The exception relates to the Judge’s endorsement of the High Court’s interpretation of s 18C(2) in Hutt v Hodge and PGO v MAB. If those two cases held that s 18C(2) did not require that the relevant party (party B) acted with the deliberate intention of diminishing the value of the relationship property, and did materially diminish its value, then we disagree. The word “deliberate” in s 18C(2) must surely necessitate that party B acted or failed to act intending to diminish the value of relationship property. We do not consider the word “deliberate” refers simply to party B’s action or inaction. Where, prior to division of relationship property, a party continues to deal with that property with no intention to diminish its value, it would be unjust that s 18C operate to penalise that party. That result would not accord with the ss 1M and 1N aim of a just division of relationship property.
The purpose of s 18C(2) is to give the court a discretion to compensate a party whose spouse or partner has deliberately diminished the value of relationship property by actions or inaction during the period between separation and first instance hearing. The actions or inaction must be deliberate and must be done with the intention of diminishing the value of the relevant property for s 18C(2) to become operative.
[46] In refusing leave to appeal, the Supreme Court expressly upheld that part of
the Court of Appeal’s decision.21
[47] I consider in relation to each asset whether Mr Blackley has an arguable case for deliberate reduction in value under this test.
Tahunatapu Road property
[48] Mr Blackley says that Mrs Blackley let inappropriate tenants, who caused damage, into the property. The property has suffered damage (the carpet had to be
removed because of damage), leaks have gone unrepaired, and there has been other
20 GFM v JAM [2013] NZCA 660, [2014] NZFLR 418 at [36]-[38] (footnotes omitted).
21 GFM v JAM [2014] NZSC 32, [2014] NZFLR 599 at [4].
related damage. He notes that Mrs Blackley says that she does not have the funds to attend to repairs or maintenance. His criticism goes to arguable mismanagement of the property and a failure to maintain it, but his evidence does not show arguable deliberate diminution of value. Further, the absence of admissible evidence as to current market value makes it difficult to know to what extent any loss in value is attributable to her actions, or to external factors such as movements in the market.
Russell Road property
[49] Mr Blackley says that the Russell Road property was purchased for $220,000 but that a post-separation valuation showed it to be worth $180,000. It is speculative whether the difference in value is attributable to changes in the market or to actions by Mrs Blackley under s 18C. There is no evidence to support allegations of wilful diminution of value.
Rangitane Road property
[50] As this is a bare, unencumbered section, Mr Blackley does not and cannot allege any conduct under s 18C by Mrs Blackley which has reduced the value of the property.
Ohauiti property
[51] Mr Blackley says that the absence of any equity in the Ohauiti property on a forced sale is evidence of dissipation by Mrs Blackley. That is speculative. There is no evidence of deliberate diminution of value.
Country Land Ltd
[52] Mr Blackley alleges that Mrs Blackley ran the company into the ground. His criticism may have some merit, given that the liquidators have successfully obtained judgment against Mrs Blackley for funds she withdrew. To the extent that she withdrew $160,000 from the company which she is unable to repay she has reduced value. But Mr Blackley has not taken into account his own conduct towards the company. As I recall from case management conferences in Country Land Ltd v
Blackley, it was undisputed that Mr Blackley removed livestock from Country Land Ltd without the consent of the company.22 As director, he had approved financial statements showing the livestock owned by the company. Nevertheless he alleged that they were not company property but belonged to another entity. Mrs Blackley’s sale of livestock needs to be understood in the light of Mr Blackley’s actions.
[53] Similarly, his own actions, removing livestock and in arranging for companies under his control to call up loans, were deliberate and calculated to reduce the value of shares in the company. The allegations that Mrs Blackley deliberately ran down the value of the company do not stand up well in the light of Mr Blackley’s own value-eroding conduct. At this stage it is speculative to suggest that Mrs Blackley alone is responsible for the decline of Country Land Ltd. It is more likely that they both contributed.
[54] Mr Blackley devoted some time in his evidence to describing Mrs Blackley’s mental health problems. It is relevant in so far as it explains his own conduct in making over relationship property to her in September 2011. It may also provide some evidence as to conduct by Mrs Blackley under s 18C. Even allowing for that, I regard Mr Blackley’s assertions that Mrs Blackley deliberately reduced the value of relationship property to such an extent as to use up all her equity, and without actively reducing value himself, as not reasonably arguable. No doubt, in the bitterness of break-up, many separating spouses and partners hope that the other will receive nothing. Mr Blackley’s case is no higher than that wishful thinking. At this stage his allegations of deliberate dissipation by Mrs Buckley do not require consideration in the exercise of the discretion.
[55] In the hearing there were guesses as to the current values of assets, unsupported by current evidence. Mr Blackley calculated the value of relationship property at $1,120,000, assuming that Tahunatapu was worth $800,000 and there was no value in the shares or Ohauiti. That assumed a significant drop in value since the 2012 valuations. On those values and putting aside the possibility of other relationship assets, Mrs Blackley has sufficient equity in her share of the assets
identified so far to meet her liability to the liquidators. Accordingly Mr Blackley’s
22 Country Land Ltd v Blackley, above n 2.
interest can be adequately protected on a sale by holding the proceeds, except the amounts required to meet the costs of sale and the liquidators’ judgment.
Mr Blackley’s caveat on Tahunatapu
[56] For Mr Blackley it was accepted that his interests were adequately protected by his notices of claim and it was not necessary to keep his caveat. It could be removed immediately. That concession was made on the assumption that the tests for removing a caveat and a notice of claim were the same. As I have held that in this case the Rusden approach and the caveat analogy approach give the same result, there is no prejudice to Mr Blackley in that assumption.
Caveat by WWP Trustees 2011 Ltd on Tahunatapu
[57] The interest protected under the caveat is an unregistered mortgage in favour of an unidentified litigation funder, who has met Mrs Blackley’s legal fees after separation. The amount lent is said to be in the order of $150,000. Mr Peters said that the funder is not a client of his practice. The caveat was lodged after Mr Blackley’s caveat and s 42 notice but before the liquidators’ charging orders.
Although served, WWP Trustees 2011 Ltd has taken no part in the application.23
[58] Because Mr Blackley’s interest ranks ahead of the litigation funder, repayment of the funds advanced can come only out of Mrs Blackley’s share of relationship property. Even accepting Mr Blackley’s own assessment of the values of the properties and again setting aside any possibility of further relationship property, Mrs Blackley’s share of relationship property is sufficient to meet the current debt to the litigation funder – even if the liquidators are paid first. As with Mr Blackley, the interest under the caveat can be adequately protected by freezing the proceeds of sale, except for the costs of sale and payment of the judgment.
Which property to sell?
[59] For Mrs Blackley, Mr Peters resisted the sale of Tahunatapu, although the liquidators and Mr Blackley preferred the latter. As the judgment debtor in default, Mrs Blackley is hardly in a position to dictate which property should be sold first. Mr Peters submitted that costs of sale, land agents’ commission in particular, in selling the smaller properties would be less than on a sale of Tahunatapu. There was no evidence as to the relative costs of sale.
[60] A sale by the sheriff under a sale order is a more involved task than a consensual sale of land. Selling one property will take time and effort, let alone two. All the circumstances point to the sale of assets both to divide relationship property and to meet the claims of creditors. Mr Blackley does not seek vesting of any specific asset. In these circumstances Tahunatapu should be sold as the start in realising assets. That will free up funds for distribution to creditors and to Mr Blackley.
Mr Blackley’s proposal for an interim distribution of relationship property
[61] Mr Blackley proposes that from the proceeds of sale he should be paid a sum equal to however much is paid to Mrs Blackley’s creditors. While the court can order the removal of a s 42 notice on conditions, this court cannot make property relationship division orders in this application. That is because the Family Court has exclusive jurisdiction to decide the division of relationship property.24 The Family Court has declined to transfer the property relationship proceeding to this court and accordingly retains that exclusive jurisdiction. Any interim distribution orders, such
as those sought by Mr Blackley, will need to be made in the Family Court.
Outcome
[62] Mr Blackley’s interest in obtaining a division of relationship property ranks ahead of WWP Trustees 2011 Ltd and the liquidators. But protecting his interest does not mean that properties owned by Mrs Blackley cannot be sold. Mr Blackley
has not shown an arguable case to be entitled to the entire equity in all the relationship assets in her name. Mrs Blackley’s share is large enough to meet the claims of her creditors. The sale order should take effect, while making sure that, after the liquidators are paid, the proceeds of sale are held to await orders for division of relationship property in the Family Court. Tahunatapu should be sold.
[63] I make these orders:
(a) Caveat 9071267.1 lodged by Mr Blackley against identifier
NA11C/1227 is to be removed forthwith;
(b) Caveat 9779179.1 lodged by WWP Trustees 2011 Ltd, notice of claim
9008485.1 and the liquidators’ charging orders are to be removed from NA11C/1227 upon a memorandum of transfer for the sale of the Tahunatapu property by the sheriff under the sale order being presented for registration or the equivalent e-dealing taking effect.
(c) Tahunatapu will be sold by auction by land agents instructed by the sheriff.
(d)From the proceeds of sale of Tahunatapu, the liquidators’ lawyers, who will carry out the conveyancing for the sheriff, will pay the costs of sale, including the liquidators’ legal fees on the sale and any land agent’s commission, but will hold the balance in their trust account pending agreement of the parties, including WWP Trustees 2011 Ltd, or order of this court or the Family Court.
(e) Leave to apply further is reserved.
[64] I invite the parties to confer as to costs. If they cannot agree, memoranda may be filed.
Associate Judge R M Bell
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