Booth v Booth
[2019] NZHC 2424
•25 September 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2018-485-949
[2019] NZHC 2424
BETWEEN TANIA BOOTH
Plaintiff
AND
JASON BOOTH
First defendant
RAY CHARLES BOOTH
Second defendantANN BOOTH
Third defendant
Hearing: 12 August 2019 Appearances:
J Delany for plaintiff/respondent
J Maassen for first defendant/applicant
A Isac QC and G Richards for second and third defendants/applicantsJudgment:
25 September 2019
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
TABLE OF CONTENTS
Introduction 1
Background 3
Proceedings 11
Matters for determination 21
The plaintiff’s claim 23
BOOTH v BOOTH [2019] NZHC 2424 [25 September 2019]
The first defendant’s application for summary judgment 31
Summary judgment principles 31
Section 182(1) of the Family Proceedings Act 34
A nuptial settlement – Jason’s case 37
A nuptial settlement – Tania’s case 47
A nuptial settlement – existence of a settlement 52
A nuptial settlement – nuptial character 58
The Court’s discretion 61
The second and third defendant’s application for an order dismissing the claim 75
Result 79
Costs 81
Introduction
[1] At the heart of this case is an issue as to the scope of s 182(1) of the Family Proceedings Act 1980.
[2] Before addressing that issue, it is necessary first to describe the factual background and the procedural path that this and two related proceedings have taken to date.
Background
[3] The Booth family have been farming at Opiki, just south of Palmerston North, for three generations. By 2011 Mr Ray Booth (Mr Booth) and Mrs Ann Booth (Mrs Booth), the second generation of the family on the farm and the second and third defendants, were considering their future. They had concluded that it was time to hand over the farm to the next generation and retire. They contemplated doing so in Taupo. Mr and Mrs Booth have two children, Mr Jason Booth (Jason), the first defendant, and a daughter who does not feature in this litigation. Of the two, it was Jason who was interested in carrying on the family farming business. At this time, Jason was married to Mrs Tania Booth (Tania), the plaintiff. Jason and Tania were living on the farm with their own family, and already heavily involved in its operation.
[4] No doubt following discussions over some time, the family decided to embark upon a restructuring of its farming business. The overarching objective of this restructuring was the handing over of the farm from one generation to the next.
[5] With that objective in mind, the family sought advice from a Manawatu firm of solicitors then known as Wadham Goodman, and in particular the senior commercial partner, Mr Mark Wadham, and the accountant who provided the farming business with accounting services, Mr Peter Savage. It appears to have been agreed from an early stage that Mr Wadham would act for Mr and Mrs Booth in relation to the restructuring, and another partner in the firm, Mrs Melanie Sargent, also a senior commercial practitioner, would act for Jason and Tania. Provided of course that there is fully informed consent from both parties, and not more than negligible risk of the firm being unable to fulfil its obligations to both parties, such an arrangement is orthodox and unobjectionable. Mr Savage, for his part, was to provide accounting support as the details of the restructuring were resolved.
[6] As to the restructuring itself, for present purposes, it is only necessary to record that it included the incorporation of a company by the name of Poplar Road Farms Ltd, in which Jason and Tania were each to have a 50 per cent shareholding and become directors, and the transfer of the farm property to that company.
[7] Everyone understood that, whatever the details of the arrangements, they would give rise to a substantial debt owed to Mr Booth (who owned the land) by Poplar Road Farms.
[8] Once the restructuring was finalised, Mr Wadham acting for Mr and Mrs Booth and Mrs Sargent acting for Jason, Tania and Poplar Road Farms arranged for this indebtedness to be recorded in the form of a deed. Mr Savage originally calculated the debt owed to Mr Booth by the company at $1,150,251.99.
[9] A deed was prepared. It was dated 1 November 2011. The parties were of course Mr Booth, who was described as the “Creditor”, and Poplar Road Farms, which was described as the “Debtor”. Mr Booth executed the deed in his own right. Jason and Tania executed it in their capacities as the company’s directors. There were
two recitals. Recital A provided that Mr Booth had advanced $1,150,251.99 to Poplar Road Farms. Recital B provided he had done so to assist the company to purchase the farm. The operative provisions were as follows:
1.THAT the said sum of $1,150,251.99 has been advanced by the Creditor to the Debtor repayable “upon demand” which means upon demand being made by notice in writing signed by the person entitled to make the demand, or any agent or client or servant of such person, served upon the person upon whom the demand is to be made, either personally or by posting the same in a duly registered letter addressed to such person at their usual or last known place of abode in New Zealand.
2.PENDING repayment of the advance or any part thereof interest on the advance or so much of it as shall from time to time remain owing will be payable by the Debtor to the Creditor at a rate to be decided between them from time to time or if no rate is agreed then at the Government Stock rate then prevailing in New Zealand calculated from the date of advance with annual rests and payable on the 31st day of March in each year (“the interest payment date”).
3.NO such interest shall be payable pursuant to preceding clause 2 unless demanded by notice in writing by the Creditor from the Debtor on or before each interest payment date.
4.THIS deed shall constitute an agreement to mortgage and in the event that the Creditor requires security the Debtor will provide in favour of the Creditor a subsequent registered mortgage over the land in Certificate of Title WN469/53 and WN469/51. The intention of this clause is to create a caveatable interest in favour of the Creditor.
[10] The restructured family farming business appears to have continued without incident between November 2011 and October 2016, when Jason and Tania separated. Their separation precipitated a relationship property dispute. This in turn has led to a considerable amount of expensive litigation, much, no doubt, to the family’s financial detriment.
Proceedings
[11] In July 2017, Jason commenced proceedings against Tania in the Family Court at Palmerston North seeking orders under the Property (Relationships) Act 1976.
[12] Very early in the life of this proceeding it seems to have become apparent that there was an issue as to the accuracy or otherwise of the amount of the debt recorded in the 1 November 2011 deed as owing to Mr Booth by Poplar Road Farms.
[13] In July 2018, Mr Booth commenced proceedings against Poplar Road Farms, Jason and Tania in this Court for the rectification of the deed and in particular the amount of the debt recorded in the same.
[14] In those circumstances, the Family Court, on Jason’s application, made an order transferring the relationship property proceeding to this Court.
[15] In December 2018, Tania commenced this proceeding in which she seeks relief pursuant to s 182(1) of the Family Proceedings Act.
[16]Jason and Tania’s marriage was dissolved on 4 December 2018.
[17] The same day, all three proceedings were before the Court at a case management conference. Following that conference, I ordered that the rectification proceeding, which (for reasons it is unnecessary to go into here) was to be undefended, be set down for a formal proof hearing.
[18] The rectification proceeding was the subject of a formal proof hearing before Clark J on 26 February 2019.
[19] Her Honour delivered a judgment on 12 April 2019. The outcome is captured in two paragraphs:1
[47]The deed of debt dated 1 November 2011 is rectified so that the amount owing is recorded as $1,579,134.94.
[48]A declaration is made that [Poplar Road Farms] owes [Mr Booth] the sum of $1,579,134.94 on the terms in the deed of debt.
[20]That is where matters stand.
Matters for determination
[21]Before the Court for determination are two interlocutory applications:
1 Booth v Poplar Road Farms Ltd [2019] NZHC 807.
(a)an opposed application by Jason for summary judgment pursuant to r 12.2 of the High Court Rules 2016; and
(b)an opposed application by Mr and Mrs Booth for an order pursuant to r 15.1(1) striking out the claim on the basis that Tania’s statement of claim discloses no tenable cause of action or constitutes an abuse of process, or alternatively removing Mr and Mrs Booth as parties to the proceeding pursuant to r 4.56(1) on the basis that their presence is unnecessary for the determination of the claim.
[22]I will address those applications in the order I have summarised them.
The plaintiff’s claim
[23] However, a useful starting point in relation to both applications is an analysis of the claim.
[24] The statement of claim is dated 4 December 2018. The opening paragraphs (1–7) introduce the parties and refer to the existence of the relationship property proceeding and the rectification proceeding.
[25] Paragraph 8 focusses on the 1 November 2011 deed. In this paragraph, Tania says that, although the deed records a loan between Mr Booth and Poplar Road Farms, she “had an expectation that the loan would not be required to be repaid to [Mr Booth], and she would receive the full benefit of the wider family business restructuring arrangements between all the parties that took place in 2011”.
[26] In paragraph 9, Tania says that her “expectation that the loan would not have to be repaid results from her understanding that the loan was to be gifted and that [Mr Booth] did not require it to be repaid”.
[27] That, really, is the sum total of the pleaded case because paragraphs 10–15 are simply a narrative description of what occurred following Jason and Tania’s separation. In these paragraphs, Tania says that if Mr Booth is entitled to recover the amount of the debt — either the original amount recorded in the 1 November 2011
deed or any rectified amount — her expectation as earlier described will be thwarted. Inferentially at least, she says that this would affect Jason and her differentially, and have a detrimental impact on their three children on account of the fact that she has day-to-day care of them.
[28] During the course of the hearing, I pressed Mr Delany for clarification as to the basis of Tania’s claim. In responding, he relied not only on the statement of claim but also on Tania’s most recent affidavit dated 9 August 2019 in reply to the defendants’ evidence in support of their applications. In the end, Mr Delany said that the case was that, as part of the restructuring, it was agreed between the parties that, so long as Jason and Tania stayed together, Mr Booth would not demand repayment of the debt, and would ultimately forgive it, either during his lifetime or by will, with the result that Jason and Tania would benefit by the amount of the debt via the corresponding increase in the value of the shares in Poplar Road Farms, but that, as a result of Jason and Tania’s separation and the dissolution of their marriage, she stood to be deprived of half of that value. Those are my words rather than Mr Delany’s, but accurately describe the way in which Tania’s case was developed.
[29] The prayer for relief in the statement of claim seeks an order “… under s 182[(1) of the Family Proceedings Act 1980] in relation to the outcome of any successful claim by [Mr Booth] and [Mrs Booth] in the [rectification proceeding] to the extent that it no longer benefits [Tania] or [her and Jason’s] children”.
[30] The relief sought is expressed rather obscurely, but I am taking it that Tania is seeking an order under s 182(1) of the Family Proceedings Act that alleviates any alleged unfairness resulting from the dissolution of the marriage.
The first defendant’s application for summary judgment
Summary judgment principles
[31]Rule 12.2(2) of the High Court Rules 2016 provides:
The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[32] The established principles in relation to summary judgment were summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd:2
[26]The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[27]Under r 141A the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.
[33] Thus, in the case of an application for summary judgment by a defendant, the onus is on the defendant to satisfy the Court — so that it is left with no real doubt or uncertainty — that the plaintiff’s claim cannot succeed, or, put another way, that there is no issue worthy of trial.
Section 182(1) of the Family Proceedings Act
[34]Section 182(1) of the Family Proceedings Act provides:
(1) On, orwithin a reasonable time after, the making of an order under Part 4 of this Act or a final decree under Part 2 or Part 4 of the Matrimonial Proceedings Act 1963, the Family Court may inquire into the existence of any agreement between the parties to the marriage or civil union for the payment of maintenance or relating to the property of the parties or either of them, or any ante-nuptial or post-nuptial settlement made on the parties, and may make such orders with reference to the application of the whole or any part of any property settled or the variation of the terms of any such agreement or settlement, either for the benefit of the children of the marriage or civil union or of the parties to the marriage or civil union or either of them, as the court thinks fit.
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.
[35] The provision addresses two types of transactions: agreements between the parties to a marriage or civil union relating to their existing property or maintenance; and nuptial settlements on the parties.
[36] It is not suggested in this case that there is anything in the nature of an agreement between Jason and Tania relating to their existing property or maintenance. Tania’s claim is based on the contention that the restructuring involved or included a nuptial settlement.
A nuptial settlement – Jason’s case
[37]Mr Maassen referred me to the leading cases relating to s 182(1): Ward v Ward3
and Clayton v Clayton.4
[38] In the latter case, the Supreme Court confirmed that any analysis under s 182(1) involves a two-stage test, the first issue being whether the transaction constitutes an (agreement or) nuptial settlement, and the second issue being whether, and if so in what manner, the Court’s discretion under the provision should be exercised. In relation to the first of those issues, under the heading “What is a nuptial settlement?”, the Supreme Court said:
[31]As noted above, in Ward this Court did not deal with the issue of whether there was a nuptial settlement in that case. In the leave judgment, this Court said that it “declined to give leave on the ground of whether what occurred in this case was a settlement within the meaning of s 182 because we are of the view that the decision of the Court of Appeal on this point is undoubtedly correct”.
[32]The Court of Appeal in Ward emphasised that there “should be a generous approach to the interpretation of the term ‘settlement’”. The Court said that this was the traditional approach, giving as an example the case of Blood v Blood where it was said:
Those words [nuptial settlement] are extremely wide, and I am anxious that they should not, by any construction the Court may put upon them, be narrowed in any way. To narrow them would be undesirable for this reason: the various circumstances which come before the Court, and for which this section is brought into operation, are so diverse that it is to my mind extremely important that, so far as possible, the court should have power to deal with all the case that come
3 Ward v Ward [2009] NZCA 139, [2009] 3 NZLR 336.
4 Clayton v Clayton [2016] NZSC 30, [2016] 1 NZLR 590.
before it, and, in dealing with them, to meet the justice of the case. I, therefore, do not desire to see any narrow interpretation placed upon the words of the section.
[33]The Court of Appeal in Ward went on to say that to come within the term “settlement” as used in s 182, any arrangement must be one that “makes some form of continuing provision for both or either of the parties to a marriage in their capacity as spouses, with or without provision for their children”. …
[34]We agree with the analysis of the Court of Appeal in Ward. We add that we see the requirement that the settlement be for both or either of the parties “in their capacity as spouses” as meaning only that there must be a connection or proximity between the settlement and the marriage. Where there is a family trust (whether discretionary or otherwise) set up during the currency of a marriage with either or both parties to the marriage as beneficiaries, there will almost inevitably be that connection. As Lord Penzance said in Worsley v Worsley:
The Court would have a great difficulty in saying that any deed which is a settlement of property, made after marriage, and on the parties to the marriage, is not a post-nuptial settlement.
[35]An exception may be where the trust is set up by a third party and there are substantial other beneficiaries apart from the parties to the marriage and their children. The other view may be that, as long as the trust has the relevant connection to the marriage and one or both parties are beneficiaries, the trust will be a nuptial settlement. But we do not need to decide this point. In this case the trust was set up by Mr Clayton during the marriage and there were no substantial other beneficiaries.
[36]The test may be more difficult to meet where there is a settlement made before marriage and a future spouse is named as a possible beneficiary but, at the time of settlement, there is no particular spouse in contemplation. One view may be that once a marriage has taken place and the spouse identified, then there will be the necessary connection with the marriage. Even if that is not the case, however, it may be that each disposition of property to such a trust after marriage could constitute a post nuptial settlement.
[37]A settlement does not cease to be a nuptial settlement because other parties may benefit from it. Indeed, the fact that the children of a marriage may benefit has been seen as a strong indication of a nuptial trust. It has been held that a settlement does not cease to be nuptial because a spouse by a later marriage might benefit. The same can be said where children of any future marriage could benefit. It has even been held that the fact that a settlement is expressed to terminate on divorce is irrelevant.
[38]Finally, we comment that the exercise of deciding whether a settlement is a nuptial settlement is, where the settlement is in written form, primarily one of construction of the settlement documentation. This documentation would be construed in accordance with ordinary
principles, while remembering that a generous approach to the issue of whether a settlement is a nuptial settlement is required.
(Footnotes omitted.)
[39] Mr Maassen’s primary submission was that Tania’s case that the restructuring of the family farming business involved or included a settlement — nuptial or otherwise — could not succeed.
[40] He submitted that the 1 November 2011 deed was the very antithesis of a disposition in favour of Jason and Tania (or Poplar Road Farms), being the formal record of a debt owed to Mr Booth by the company.
[41]Mr Maassen reviewed the affidavit evidence in all three proceedings.
[42] He referred first to the narrative evidence of Mr Booth, Jason, Mr Wadham and Mr Savage, all of which was to the effect that the debt owed to Mr Booth by Poplar Road Farms was intended by all concerned to be a bona fide debt and that Mr Booth made no commitment to Jason, Tania or Poplar Road Farms as to its forgiveness.
[43] He referred also to what he submitted was the key contemporaneous documentation: the agreement for sale and purchase of the farm as between Mr Booth and Poplar Road Farms dated 27 October 2011 for $4,213,000, cl 15 of which expressly contemplated any residual debt being the subject of a formal acknowledgement of debt between those parties; the resolution of Poplar Road Farms also dated 27 October 2011, signed by Jason and Tania as directors, to enter into a deed of acknowledgement of the company’s debt to Mr Booth; and the 1 November 2011 deed itself.
[44] Mr Maassen also referred me to an email dated 15 August 2011 from Mr Savage to Mr Andrew Wood, the manager of The National Bank’s Palmerston North branch with which the farming operation banked, and an email dated 22 June 2017 from Tania to Mr Savage. The former, he submitted, showed that Tania always knew the debt was designed to protect Mr and Mrs Booth’s assets in the event Jason and Tania’s relationship failed. The latter, he said, showed that Tania knew the debt
was repayable. I do not accept that either email is conclusive as to those points. Be that as it may, they do not appear to me to be of real significance because, on Tania’s case, she would not necessarily contest either point.
[45] Focussing on Tania’s evidence, Mr Maassen submitted that her expectations, as described in her statement of claim and affidavit evidence, could not assist her case in relation to the first issue identified in Clayton v Clayton, that is to say, whether there was a settlement, because an applicant’s expectations are not relevant to that issue. Such expectations go only to the exercise of the discretion.
[46] As to Tania’s evidence to the effect that, provided Jason and she remained together, it was agreed there would be no demand for the repayment of the debt, Mr Maassen submitted this was incredible having regard to the contradictory evidence and the contemporaneous documentation.
A nuptial settlement – Tania’s case
[47] On Tania’s behalf, Mr Delany emphasised that the Supreme Court in Clayton v Clayton had confirmed earlier authorities to the effect that a generous approach should be taken to the interpretation of s 182(1) in relation to what constitutes a settlement. He referred in particular to the Court of Appeal’s judgment in Ward v Ward where the Court said a nuptial settlement is:5
… any arrangement … which, at the date of the hearing, makes some form of continuing provision for either or both of the parties to a marriage in their capacity as spouses, with or without provision for their children.
[48] He referred me to those aspects of Tania’s evidence in which she said that from the outset the discussions within the family as to the restructuring had proceeded on the basis that Mr (and Mrs) Booth would not demand repayment of the debt reflected in the 1 November 2011 deed while Jason and she remained together, and that, because it would be forgiven, Jason and she (and their children) would ultimately receive the value of the debt (through their ownership of the shares in the company).
5 Ward v Ward, above n 3, at [27].
[49] Mr Delany submitted that Tania’s evidence was supported by other independent aspects of the evidence. In this regard, he too referred to Mr Savage’s email dated 15 August 2011 in which Mr Savage spoke of any debt ultimately due to Mr and Mrs Booth by Jason and Tania as “non-repayable”. He also emphasised that Poplar Road Farms’ financial statements contained no reference to the debt prior to Jason and Tania’s separation.
[50] Mr Delany’s submission was that this case was “a classic example” of a situation in which s 182(1) was engaged. He acknowledged that he could not point to any case in which a debt between a creditor and a debtor had been treated as a settlement by the former on the latter for the purposes of s 182(1), but he submitted that Tania’s claim was founded on the alleged collateral agreement not to demand repayment of the debt unless and until Jason and she separated, rather than the debt itself, and that the judgment of the Family Division of the High Court of England and Wales in Hashem v Shayif was a useful comparison.6 There, the Court concluded that an arrangement whereby a corporate entity connected with the husband granted the wife a licence to occupy a property owned by it constituted a nuptial settlement, not of the property itself but of the wife’s rights as a licensee.
[51] Mr Delany submitted that the arrangements in this case “… for the provision of funding by the parents encapsulated in the Deed of Debt were part of inter family arrangements that were going to provide continuing benefits for [Jason and Tania] while their marriage continued”.
A nuptial settlement – existence of a settlement
[52] From that summary of the competing arguments in relation to the issue of whether or not the arrangements here involved or included a settlement, it will be obvious that there is a mismatch between the submissions advanced on behalf of Jason and Tania. On Jason’s behalf, Mr Maassen’s focus was on the 1 November 2011 deed and he contended that a formal record of indebtedness as between creditor and debtor cannot amount to a settlement as that term is used in s 182(1). On its face, that proposition appears unanswerable. But it does not necessarily meet Tania’s case.
6 Hashem v Shayif [2008] EWHC 2380 (Fam), [2009] 1 FLR 115.
Mr Delany’s submission on Tania’s behalf focussed on the restructuring as a whole and on her contention that those arrangements involved or included a collateral agreement that, so long as Jason and she remained together, they would receive the value of the debt when it was forgiven.
[53] Although he did not put it in these terms, Mr Delany might have submitted that the existence of the debt was in fact a necessary component of Tania’s case. Had the parties not recognised and provided for this debt, the arrangement would have involved a gift by Mr Booth to Poplar Road Farms and there would be no case.7 It is precisely because the residual indebtedness was recognised as such that Tania advances the case as she does under s 182(1) of the Family Proceedings Act. Her case is, as already described, that there was a collateral agreement between the parties that Mr Booth would not demand repayment of the debt while Jason and she remained together. On that basis, Mr Delany submitted that Tania’s case was not inconsistent with Jason and her having executed the deed of debt (and the earlier documentation) or with Clark J’s 12 April 2019 judgment in the rectification proceeding.
[54] Although Tania’s case is not very adroitly pleaded, if her evidence as to the terms of the arrangements were to be accepted, then, adopting a liberal approach to the notion of a settlement under s 182(1), and recognising that there are cases in which arrangements well short of an express trust, or anything that looks like a trust, have been found to constitute settlements, the view I take is that it would not be appropriate summarily to dismiss the possibility of a court concluding that those arrangements involved or included a disposition that “makes some form of continuing provision for both or either of the parties to a marriage in their capacity as spouses, with or without provision for their children”.8 The arrangements were arguably continuing in nature because they depended upon the on-going commitment of Mr Booth not to call in the loan, and the on-going anticipation that one day the loan would be forgiven, potentially in parts over a period of time.
7 An absolute disposition, such as a gift, cannot be a nuptial settlement: Ward v Ward, above n 3, at [25]–[27].
8 Clayton v Clayton, above n 4, at [33].
[55] Of course, Tania would face difficulties in advancing such a case. Although such arrangements are not uncommon within families, the formal documents here contain no suggestion of any such agreement, and her evidence will be contradicted by Mr Booth, Jason and others.
[56] However, assessing the evidence — both what the various deponents say and the contemporaneous material — the view I have reached is that Jason cannot establish to the necessary degree of certitude that Tania’s contention that the arrangements involved or included a settlement cannot succeed or that there is no issue worthy of trial. In relation to this point, in response to Mr Delaney saying that he wanted the opportunity to cross-examine Mr Booth and Jason, Mr Maassen asked, rhetorically: “To what end?” The answer is to challenge their evidence that there was no agreement of the sort propounded by Tania.
[57] The aspects of the evidence that have influenced me in reaching the conclusion I have in relation to this aspect of the case are as follows:
(a)All parties accept that the restructuring of the family’s farming business was always going to give rise to a debt owed to Mr Booth by Jason and Tania, or any entity they set up to acquire the farming land.
(b)For a number of reasons, it was necessary to address this in the formal documentation. The only reason referred to in argument was the avoidance of gift duty. But there are others. In the end, however, all concerned seem to have accepted that the debt was a bona fide one.
(c)Whilst I do not view Mr Savage’s email of 15 August 2011, sent several months before the details of the arrangement were finalised, as decisive, I think it is fair to conclude that his email at least indicates that the question of forgiveness of the debt was a matter within the parties’ contemplation.
(d)In my view, it is significant that the financial statements prepared for Poplar Road Farms from the outset right through until Jason and Tania’s
separation — so between November 2011 and October 2016 —make no reference to the debt. Whilst there may be another explanation for this, it suggests that within the family the assumption was that repayment of the debt was not contemplated. Neither Mr Booth nor Jason offer any explanation for this in their evidence.
(e)It seems to me also to be significant that within a very short time of Jason and Tania separating, there was a flurry of activity to introduce the loan into Poplar Road Farms’ financial statements, and also to review the quantum of the loan and seek rectification of that.
(f)I have given full consideration to the narrative description of events contained in the evidence of Mr Booth and Jason in particular, as supported by the affidavits of Mr Wadham and Mr Savage. It is by no means a criticism of Mr Booth and Jason to say that it would be surprising if their evidence was other than it was. In relation to the evidence of Mr Wadham and Mr Savage, it seems doubtful that they were intimately involved in the family discussions about what might ultimately be done with the debt.
(g)Likewise, I have given full consideration to Tania’s evidence and note, as Mr Maassen pointed out, that she has described in more than one way what took place. On the other hand, she has offered examples of dealings between the family and third parties (such as Mr Wood) in which the forgiveness of the debt was referred to.
A nuptial settlement – nuptial character
[58] Neither Mr Maassen nor Mr Delany focussed on the question of whether any arrangement was of a nuptial character, although this was a point taken by Mr Isac on behalf of Mr and Mrs Booth.
[59] The Supreme Court in Ward v Ward said that the essential test for a nuptial settlement is whether it was “premised on the continuance of the marriage”.9 The Supreme Court in Clayton v Clayton endorsed that approach, adding that in order to be of a nuptial character any settlement must make some form of continuing provision for one or either or both of the parties to a marriage or civil union “in their capacity as spouses”, which they explained meant that there must be “a connection or proximity between the settlement and the marriage or civil union”.10
[60] On Tania’s case, the alleged settlement was expressly contingent on the continuation of their marriage. That, in my view, could render it nuptial in character. The fact the debt was owed by Poplar Road Farms, and not Tania and Jason personally, would not detract from the reality of the transaction, if Tania could prove it at trial. There have been other cases where transactions conducted through corporate entities have been recognised as nuptial in character.11 Nor does the fact Mr Booth would be the person providing the benefit under the settlement prevent it from being nuptial in character. The Supreme Court has made it clear that the focus is on whether there is sufficient connection to the marriage and not on the identity of the settlor.12 In any event, it is common for nuptial settlements to involve dispositions by parents or other family members.
The Court’s discretion
[61] That brings me to the second issue identified by the Supreme Court in Clayton v Clayton, namely, whether, having regard to all relevant circumstances, the Court could exercise its discretion under s 182(1) of the Family Proceedings Act and make an order as sought by Tania.
[62]In Ward v Ward, the Supreme Court described the purpose of s 182 as follows:13
[15]Both ante and post-nuptial settlements had one fundamental thing in common. They both envisaged and were premised on the continuance
9 Ward v Ward [2009] NZSC 125, [2010] 2 NZLR 31 at [20].
10 Clayton v Clayton, above n 4, at [86].
11 See Hashem v Shayif, above n 6; and DR v GR (Financial Remedy: Variation of Overseas Trust)
[2013] EWHC 1196 (Fam), [2013] 2 FLR 1534.
12 See generally Brookers Family Law – Family Procedure (online ed, Thomson Reuters) at [FP182.06(2)(b)], citing Clayton v Clayton, above n 4, at [35].
13 Ward v Ward, above n 9.
of the marriage. If that premise ceased to apply, a fundamental change in circumstances came about. Parliament recognised that injustices could arise as a consequence and it was desirable to empower the Court to review the settlement on dissolution of the marriage. …
[63]In Clayton v Clayton, the Supreme Court summarised what was said in
Ward v Ward:
[44] In Ward, this Court made the following comments as to the premise underlying s 182 and the courts’ role. It said that both ante and post- nuptial settlements are premised on a continuing marriage. If that premise ceases to apply, Parliament recognised that injustices could arise. Section 182 empowers the courts to review the settlement and make orders to remedy the consequences of the failure of the premise on which the settlement was made — that is, continuation of the marriage. One of the purposes of s 182 is to prevent one party benefitting unfairly from the settlement at the expense of the other in the changed circumstances.
[64]The Supreme Court then observed:14
Nuptial settlements are premised on the continuation of the marriage or civil union. The purpose of s 182 is to empower the courts to review a settlement and make orders to remedy the consequences of the failure of the premise on which the settlement was made.
[65] In short, the discretion under s 182(1) exists to remedy injustices resulting from changes in circumstances that arise from the failure of the premise upon which the nuptial settlement was based. Typically, all parties assume the marriage will continue, or at least do not turn their minds to what would occur in the event of divorce. As a consequence, when divorce occurs the nuptial settlement no longer fulfils the purpose contemplated by the parties.
[66] Here, on Tania’s case, the alleged collateral contract included a condition that Tania and Jason would only receive the benefit of the forgiveness of the debt so long as they remained married. That being so, there has been no failure of the premise on which the nuptial settlement was made. That premise expressly anticipated that both Jason and Tania could only rely on receiving the anticipated benefit — the value of the loan — for the duration of their marriage. That premise remained constant throughout the intervening period between the settlement and divorce. There are no
14 Clayton v Clayton, above n 4, at [60] (emphasis added).
changed circumstances, and therefore no injustice to remedy. Accordingly, in my judgement, there is no realistic possibility of the Court exercising its discretion to vary the nuptial settlement for Tania’s benefit. For that reason, even if Tania could establish a nuptial settlement at trial, her claim could not succeed.
[67] It is the particular facts of this case that lead to that outcome. Had Mr and Mrs Booth settled an express trust on Jason and Tania, either identifying the beneficiaries as Jason and “any spouse” or with an express term to the effect that if Jason and Tania’s marriage were dissolved Tania would cease to be a beneficiary, it might have been open to the Court to exercise its discretion to vary the nuptial settlement.
[68]In Ward v Ward, the Supreme Court said:15
[25] Based on the foregoing discussion we consider the proper way to address whether an order should be made under s 182 is to identify all relevant expectations which the parties, and in particular the applicant party, had of the settlement at the time it was made. Those expectations should then be compared with the expectations which the parties, and in particular the applicant party, have of the settlement in the changed circumstances brought about by the dissolution. The court’s task is to assess how best in the changed circumstances the reasonable expectations the applicant had of the settlement should now be fulfilled. If the dissolution has not affected the implementation of the applicant’s previous expectations, there will be no call for an order.
[69] There, the Supreme Court focused on the expectations of the parties at the time of settlement. On that analysis, an express trust that contemplates and provides for the rights of the parties upon divorce could not be said to have failed because the outcome merely reflects the expectations of the parties at the time of settlement.
[70]However, in Clayton v Clayton, the Supreme Court said:16
[53] In terms of the earlier case law, the purpose of the exercise of the discretion is to remedy the consequences of the failure of the premise of a continuing marriage. The comparison is undertaken not at a fixed point but is a general comparison between the position under the settlement had the marriage continued and the position that pertains after the dissolution. This is not backward looking to the time of
15 Ward v Ward above n 3 at [25].
16 Clayton v Clayton, above n 4, at [53].
settlement. It is forward looking, comparing the position under the settlement assuming a continuing marriage against the current position under a dissolved marriage.
[71] Accordingly, the premise of the nuptial settlement must be considered at the date of the dissolution of the marriage. In the express trust example, the parties could, during the intervening period between settlement and divorce, act inconsistently with the initial expectation of the settlor that the spouse would cease to benefit in the event of a divorce, if for instance, one or either party transferred his or her separate assets to the trust, or if relationship property were transferred to the trust, then an injustice could arise upon divorce despite the initial expectations of the settlor.
[72] That issue does not arise in this case, there being no evidence of a change in the terms of the alleged collateral contract at any stage.
[73] As Mr Maassen submitted, there is simply no prospect of a court granting relief to Tania because there was:
… no injustice between the spouses arising from the Deed continuing to have effect based on the analysis in Clayton v Clayton. Tania’s perception of an injustice is that one day Jason will have the debt forgiven. That is not a consequence of the expectations of a settlement failing as a result of the end of a relationship. It is the consequence of:
(a)Ray having control over his own property;
(b)Ray deciding in all likelihood to benefit his son and grandchildren in the manner he wants.
That is not unjust. It is the usual management of human affairs.
[74] For those reasons, I am satisfied to the necessary standard that Tania’s claim under s 182(1) cannot succeed. I also record, for the sake of completeness, that I have considered whether Tania’s case could be formulated on the basis of a collateral contract not conditional upon Tania and Jason remaining together. There is even less evidence available to support this contention. That aside, I am satisfied such an arrangement would not be nuptial in character, meaning such a claim could not succeed. In any event, were that Tania’s case, there would be no need to vary the agreement and Tania could simply seek a conventional contractual remedy.
The second and third defendant’s application for an order dismissing the claim
[75]Rule 15.1(1) provides:
(1)The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
(d)is otherwise an abuse of the process of the court.
[76] Mr and Mrs Booth seek an order striking out the whole of Tania’s claim on the basis that the statement of claim does not disclose a tenable cause of action against them under s 182(1) of the Family Proceedings Act (and is an abuse of the Court’s process in that it is an attempt to relitigate an issue that has been the subject of a final judicial determination, being the April 2019 judgment of Clark J).
[77] Having regard to the above discussion of Jason’s application for summary judgment, it is unnecessary to lengthen this judgment with a full discussion of Mr and Mrs Booth’s challenge to the claim.
[78] To the extent that an application pursuant to r 15.1(1)(a) is focussed on the pleadings, I accept Mr Isac’s submission that Tania’s pleading as it currently stands does not capture accurately the essential basis for her claim and does not disclose a tenable cause of action. There is of course ample authority for the proposition that a court will be slow to strike out a claim on the basis of infelicitous pleading if it appears that the pleading could be amended so as to articulate a tenable case. However, in this case, I have taken Tania’s case as Mr Delany has advanced it — notwithstanding that this goes well beyond the pleading — and concluded that it cannot succeed.
Result
[79] The first defendant is entitled to summary judgment in the terms sought in his notice of application.
[80] The second and third defendants are entitled to an order striking out the claim against them on the basis that the pleading discloses no arguable claim.
Costs
[81]Costs are reserved.
[82] If counsel cannot resolve these, as I would expect them to do, then they may come back to the Court by memoranda in the usual way.
Associate Judge Johnston
Solicitors:
Chapman Tong Law, Wellington for plaintiff
Wadham Partners, Palmerston North for first defendant Le Pine & Co, Taupo for second and third defendants
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