Burmester v Burmester

[2018] NZHC 2352

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-000485

[2018] NZHC 2352

BETWEEN

PETER BURMESTER

Appellant

AND

BEVERLEY JOY BURMESTER

First Respondent

ANNELIESE BURMESTER and SARAH BURMESTER

Second Respondents

Hearing:

3 August 2018 and 30 August 2018

Appearances:

No appearance by Anneliese Burmester

D A T Chambers QC for the first respondent P E Dacre QC as counsel to assist the Court

Judgment:

7 September 2018

JUDGMENT OF KATZ J

(Contempt of Court Application)

This judgment was delivered by me on 7 September 2018 at 11.00 am Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:           Dyer Whitechurch, Auckland

Counsel:            D A T Chambers QC, Bankside Chambers, Auckland Copies to:  Anneliese Burmester

P E Dacre QC, Auckland

BURMESTER v BURMESTER [2018] NZHC 2352 [7 September 2018]

Introduction

[1]    Beverley Burmester applies to have her daughter, Anneliese Burmester, held in contempt of court for failing to comply with an order of this Court requiring Anneliese to appoint her mother as sole agent of a partnership known as the ABS Partnership.

[2]    Although Anneliese elected not to attend either of the Court hearings held in relation to the contempt application, she did file documents opposing the application in which she set out her arguments as to why the Court should not hold her in contempt of court. Her father, Peter Burmester, has also filed documents in support of Anneliese’s position. In addition, I appointed Paul Dacre QC as counsel to assist the Court, to provide advice and legal assistance to Anneliese, if she wished. Although Anneliese has not (yet) availed herself of that opportunity, Mr Dacre has nevertheless provided helpful assistance to the Court.

Background

[3]    Mrs Burmester and her former husband, Peter Burmester, separated on 29 June 2011, following an almost 21-year marriage. Unfortunately, resolution of the parties’ relationship property issues proved to be extremely bitter and protracted, involving multiple (largely unsuccessful) appeals by Mr Burmester to this Court on interlocutory issues, as well as repeated adjournment applications. One of the couple’s two daughters (Sarah) has aligned herself with her mother, while the other daughter (Anneliese) has aligned herself with her father. Both daughters are now young adults.

[4]    On 15 March 2017, Judge Burns delivered the Family Court’s substantive judgment in the relationship property proceedings. He decided in Mrs Burmester’s favour on most  key issues.1  Mr Burmester  appealed that decision to  this Court.  Mrs Burmester filed a cross-appeal. The cross-appeal sought orders broadly aimed at facilitating enforcement of the Family Court’s substantive orders, including, in particular, orders made in relation to the operation of the ABS partnership.

1      Burmester v Burmester [2017] NZFC 1817.

[5]    Anneliese and Sarah were parties to the proceedings in the Family Court, and were also joined as respondents to the appeal. They both elected, however, not to actively participate in the proceedings.

[6]    The  ABS  Partnership  is  a  German   partnership   established   between Mrs Burmester, Sarah and Anneliese, when the family was living in Germany, for  the purposes of managing the rental of a property in Germany that each of them owned one floor of. Mrs Burmester’s evidence in the Family Court was that Anneliese (at the instigation of her father) had taken steps to prevent the business-like operation of the partnership, putting the partners’ assets at risk. Mrs Burmester accordingly sought an order from the Family Court terminating the partnership, on the basis that it is completely dysfunctional.

[7]    Judge Burns declined to dissolve the partnership, but instead made various orders in relation to its ongoing operation. He directed that the management of the partnership affairs be solely vested in and controlled by Mrs Burmester, subject to the requirement that she strictly adhere to various orders that were essentially directed to the proper management of the partnership and the preservation of its assets.

[8]    In her cross-appeal from the Family Court decision, Mrs Burmester sought more specific orders to the same general effect as those made by Judge Burns, on the basis that the orders made in the Family Court had been ineffective, given Anneliese’s intransigence and lack of co-operation (which Mrs Burmester believed was due to her being under the complete control of her father). In particular, operating the partnership bank account in Germany requires the signatures of all three partners. That bank account is used to pay outgoings such as tax, rates and maintenance. Anneliese had refused to sign an authority to the bank that would allow Mrs Burmester to access the German bank account independently. Nor would she co-operate in authorising the payment of the required outgoings.

[9]    In  a   decision   dated   2   February   2018   (“Judgment”),2   I   dismissed   Mr Burmester’s appeal and allowed Mrs Burmester’s cross-appeal in part. I made an order (which I will refer to as “the Partnership Order”) stating that:3

I order that Anneliese Burmester and Sarah Burmester do all things necessary within 14 days of this judgment to appoint Mrs Burmester as the sole agent for the partnership, both in regard to the operation of the ABS Partnership bank account and in regard to dealing with all authorities in Germany.

[10]   I stated in the Judgment that this order was to support and facilitate the enforcement of Judge Burns’ orders in relation to the affairs of the partnership.4 I noted that Anneliese was a party to the Family Court proceedings, and the High Court appeal, and was bound by Judge Burns’ order, as well as any further orders of this Court.5 I declined to make a pre-emptive order (as sought by Ms Chambers) that Anneliese would be in contempt of court if she failed to comply with the Partnership Order, but noted that “any failure by Anneliese to comply with the [Partnership Order and Judge Burns’ orders] will likely constitute contempt of Court and could ultimately result in penalties (including fines or imprisonment) being imposed”.6

[11]   Mrs Burmester now seeks to have Anneliese held in contempt for failing to comply with the Partnership Order.

The law of contempt

[12]   Failure to comply with a lawfully made court order constitutes contempt of court.7 This form of contempt arises from the court’s inherent jurisdiction, rather than statute. Before a person can be held in contempt of court, based on breach of court orders, the applicant must establish beyond reasonable doubt that:8

(a)the terms of the order were clear and unambiguous;

2      Burmester v Burmester [2018] NZHC 47, [2018] NZFLR 206.

3      At [143(b)].

4 At [128].

5 At [128].

6 At [129].

7      See Siemer v Solicitor-General [2013] NZSC 68, [2013] 3 NZLR 441.

8      Mike Pero (New Zealand Ltd) v Krishna [2018] NZHC 40 at [40]–[41]. See also Soljan v Spencer [1984] 1 NZLR 618 (CA); Horowhenua 11 (Lake) Part Reservation Trust v Taueki [2017] NZHC 4, [2017] NZAR 221 at [3]; Official Assignee v Mathiesen [2018] NZHC 843, [2018] NZAR 623 at [14].

(b)the respondent had knowledge and proper notice of the terms of the order;

(c)the respondent had acted in breach of that order; and

(d)the respondent's conduct was deliberate in the sense that he or she deliberately or wilfully acted in a manner that breached the order. Deliberate conduct can be contempt notwithstanding a lack of intent to breach.9

Is Anneliese in contempt of court?

[13] I am satisfied that the four elements set out at [12] above are met in this case. The terms of the Partnership Order are clear and unambiguous. Anneliese has been given every opportunity to comply with the order, but has failed to do so. Mrs Burmester’s solicitors provided Anneliese with a copy of the Judgment. They have also written to her on several occasions requesting her to sign documents to enable Mrs Burmester to act as agent of the ABS Partnership. She has declined to do so. It is clear from the documents that Anneliese has filed in response to the contempt application that her conduct was deliberate. Anneliese acknowledges that she deliberately ignored the Partnership Order, because she believes that it is a “miscarriage of justice”.

[14]   It is of note that the grammar and vocabulary used in the documents filed by Anneliese closely mirrors the language used in documents filed by Mr Burmester in the substantive proceedings. Further, a  number  of  the  allegations  made  about  Mrs Burmester mirror allegations that Mr Burmester has previously made in the relationship property proceedings. This strongly supports the inference that the relevant documents were actually drafted by Mr Burmester, not Anneliese. Anneliese has, however, sworn or signed the documents in her name. In addition, Mr Burmester has filed two memoranda in his own name in support of Anneliese’s opposition to the order sought.

9      Carpet Barn-Hamilton-Ltd v Jobe [2017] NZHC 2920 at [13].

[15]   The primary reasons Anneliese has advanced as to why she should not be found in contempt of court are:

(a)The Partnership Order is not legally binding, as it is not yet final.

(b)Mrs Burmester has stolen from Mr Burmester and Anneliese is therefore fearful that if she signs the required documents her mother will transfer money from the ABS Partnership bank account into her own pocket.

(c)Anneliese has, in the past, offered to administer the ABS Partnership jointly with her mother and sister, but Mrs Burmester has rejected that proposal.

(d)Any prejudice suffered by Mrs Burmester as a result of Anneliese’s non-compliance with the order is minor.

(e)The Partnership Order is now moot in any event, as Mrs Burmester has dissolved the partnership by letter dated 25 June 2018.

[16]I will address each argument in turn.

Argument 1: The Partnership Order is not legally binding, as it is not yet final.

[17]   Mr Burmester advances the argument, on behalf of Anneliese, that the Partnership Order is not legally binding on her because it is not yet final. Although Anneliese did not seek to appeal the Partnership Order, Mr Burmester sought leave from this Court to appeal the entirety of the Judgment to the Court of Appeal. That application was declined.10 In his memorandum, Mr Burmester indicates that he has since filed an application for leave to appeal directly with the Court of Appeal, and is awaiting the outcome of that application. Until his appeal rights are exhausted, he submits, the Partnership Order is not binding on Anneliese.

10     Burmester v Burmester [2018] NZHC 822.

[18]   Mr Burmester relies on the decision of the Supreme Court in Siemer v Solicitor- General.11 That case does not, however, support Anneliese’s position. The Supreme Court in Siemer v Solicitor-General stated that:12

Provided the court had power to make an order of its kind, a court order is binding and conclusive unless and until it is set aside on appeal or for other reason lawfully quashed. Collateral attacks on such orders are not permitted. Neither the parties, nor other persons subject to an order, are permitted to arrange their affairs in accordance with their perceptions of its flaws, including any individual views they may have concerning the validity of the order. The position is the same whether the order has been made in the High Court or in the District Court.

(Emphasis added)

[19]   Unless and until the Partnership Order is set aside on appeal, or otherwise lawfully quashed, Anneliese is obliged to comply with it.

Argument 2: If Anneliese complies with the Partnership Order, Mrs Burmester may steal partnership funds.

[20]   Anneliese’s alleged fear that Mrs Burmester may steal partnership funds does not provide her with any legal justification for refusing to comply with the Partnership Order.

[21]   In any event, I note that Mrs Burmester’s authority in relation to the affairs of the ABS Partnership have been tightly circumscribed by the judgments of both the Family Court and this Court. For example, Judge Burns’ orders state that:13

(a)        I vest and direct that the management of the partnership affairs is to be solely vested and controlled by Mrs Burmester on the basis that she strictly keeps to the Court orders that are made herein;

(b)        that she attends to receiving the income of the partnership and attends to paying all outgoings as legally required of her by the German tax authorities and the outgoings with respect to the property and building;

(c)        that she attends to and endeavours to resolve the dispute with the other owner of the floor;

(d)        that she pays any professional fees or costs incurred in the operation of the partnership and she is authorised to engage a qualified lawyer or

11     Siemer v Solicitor-General, above n 7.

12 At [191].

13     Burmester v Burmester, above n 1, at [73].

accountant in Germany to act as her agent to operate the partnership and to receive income and to account to the members of the partnership;

(e)        that she is to keep proper accounts and to file any tax returns and accounts as required;

(f ) that the net income after of all outgoings and reasonable costs and expenses including tax liability is to be divided as to one third Anneliese Burmester, one third to Sarah Burmester, one sixth to Mr Burmester and one sixth to Mrs Burmester. The issue of the final termination of the partnership and determination of their interest to the partnership will have to be decided by the German Family Court when the underlying real estate is resolved. At that stage dissolving of the partnership can be considered. Mrs Burmester is to account and provide copies of accounts at least on an annual basis but preferably more frequently to her two daughters and to Mr Burmester.

[22]   If Mrs Burmester was to act in breach of those orders, by “stealing” money from the partnership bank accounts, she herself would be in contempt of court and at risk of being fined or imprisoned. In addition, Anneliese would be able to bring civil proceedings against Mrs Burmester to recover any funds unlawfully taken.

Argument 3: Anneliese has, in the past, offered to administer the ABS Partnership jointly with her mother and sister, but Mrs Burmester has rejected that proposal.

[23]   Again, this cannot justify Anneliese’s refusal to comply with the Partnership Order. In any event, this submission is contrary to Judge Burns’ conclusion that Anneliese was the one who was failing to co-operate in managing the affairs of the partnership. It was for that reason that he made the orders relating to the partnership that I have set out above.

Argument 4: Any prejudice suffered by Mrs Burmester as a result of Anneliese’s non-compliance with the order is minor.

[24]   Anneliese’s views as to the extent of prejudice caused by her failure to comply with the Partnership Order cannot excuse her failure to comply with a clear court order.

[25]   This issue may, however, be relevant to the issue of penalty. As van Bohemen J observed in Mike Pero (New Zealand) Ltd v Krishna, “the fact of a breach itself is not sufficient to warrant a penalty. The circumstances of the breach are critical in

determining whether or not there should be a penalty and, if so, the nature of the penalty”.14 He further stated that:15

…I consider that when deciding applications for contempt based on a breach of court orders, New Zealand courts should also have regard to the nature and gravity of any breach and the proportionality of the breach in relation to the prejudice to the applicant, the seriousness of any penalty and the demands on court time.

Argument 5: The Partnership Order is now moot in any event, as Mrs Burmester has dissolved the ABS Partnership by letter dated 25 June 2018.

[26]    Anneliese’s final argument, and her most substantive one, is that the Partnership Order is now moot in any event, as Mrs Burmester has dissolved the ABS Partnership by letter dated 25 June 2018. In that letter, Mrs Burmester served Anneliese with a notice of termination of the partnership. Mrs Burmester further states in an affidavit, dated 30 July 2018, that, despite the dissolution of the partnership, the cooperation of all partners is still required to administer the winding up of the partnership and its affairs. This includes authority over the ABS bank account with a German bank, instruction of a German tax attorney to file returns and resolve the partners tax liabilities, and engagement of an accountant to deal with the final “wash up” of partnership liabilities and distribution of the surplus.

[27]   I note at the outset that even if the Partnership Order is now moot, that does not absolve Anneliese from her previous failures to comply with the order when requested to do so in February and April 2018, prior to Mrs Burmester’s letter of 25 June 2018.

[28]   In any event, I have not been persuaded that the Partnership Order is now moot. If the written (but unsigned) partnership agreement relied on by Mr Burmester is valid, then six months’ notice of dissolution must be given and the partnership is currently still on foot. If the written partnership agreement is not valid, and New Zealand law applies to the partnership,16 then dissolution of the partnership is governed by the Partnership Act 1908 (“Act”).

14     Mike Pero (New Zealand) Ltd v Krishna, above n 8, at [60].

15 At [75].

16     In the absence of any evidence of German law relating to the dissolution of partnerships, I proceed on the basis that New Zealand law applies.

[29]   Under s 35 of the Act, a partnership, if entered into for an undefined time,17 can be dissolved by any partner giving notice to the other(s) of their intention to dissolve the partnership. The partnership, subject to any agreement between the partners, is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is mentioned, as from the date of the communication of the notice.18 That is not the end of the matter, however. As observed by the learned authors of Laws of New Zealand:19

…[A]fter dissolution, the partnership subsists merely for the purpose of completing pending transactions, winding up the business, and adjusting the rights of the partners. For these purposes, and these only, the authority, rights and obligations of the partners continue, hence they must not embark on any entirely new transactions.

[30]   Section 41 of the Act provides for the continuing authority of partners to bind the partners so for as may be necessary to wind up the affairs of the partnership. Section 42 sets out the right of partners as to the application of partnership property on the dissolution of a partnership. Even if the firm’s business is to be wound up, the former partners keep their authority to bind the firm, at least for the limited purpose of winding it up and completing its unfinished transactions.20 The duty of good faith requires the former partners to continue to act equitably towards each other in the winding up of the affairs of the partnership, in a way that is fair to all concerned.21

[31]   Subject to any agreement to the contrary, all partners have the power to act, even without the consent of the others, provided what they do is what is “necessary to wind up the affairs of the partnership [or] complete transactions begun but unfinished at the time of dissolution”.22 When they do, they are entitled to be indemnified for

17   See Stephen Graw An Outline of the Law of Partnership (4th ed, Thomson Reuters, Sydney, 2011) at 217 and 218 for a discussion regarding whether an agreement has been made for an undefined time. See also Keith L Fletcher The Law of Partnership in Australia and New Zealand (8th ed, LBC Information Services, Sydney, 2001) at 214.

18     Partnership Act 1908, s 35(2).

19     Robert Smellie (ed) Laws of New Zealand —Partnership and Joint Ventures (online ed, Lexis Nexis) at [187].

20     See Stephen Graw, above n 17, at 270.

21     Clark v Libra Developments Ltd [2011] NZCA 493, (2011) 9 NZBLC 103,378 at [55]–[56]; See also Sew Hoy v Sew Hoy [2001] 1 NZLR 391 (CA) at [36]–[41].

22     Stephen Graw, above n 17, at 271. See also Queensland Southern Barramundi v Ough Properties Pty Ltd [2000] 2 Qd R 172 (SC).

any payments made on the firm’s behalf and for any interest they pay on moneys they borrow to discharge firm liabilities.23

[32]   The difficulty that arises in this case, however, is that Mrs Burmester is not able to act unilaterally to wind up the affairs of the partnership, because the partnership bank account requires the signatures of all three partners. Further, she is not able to unilaterally finalise the partnership’s tax affairs. She needs authority from the other two partners to do so. Accordingly, the Partnership Order is still necessary, to facilitate the orderly winding up of the partnership.

[33]   I accept Ms Chamber’s submission that if Anneliese fails to comply with the Partnership Order the partnership will continue in a state of limbo and its orderly winding up will be thwarted. Without Anneliese's compliance, the partnership will continue to incur tax penalties and will be unable to attend properly to its liabilities.

Conclusion

[34]   I am satisfied, beyond reasonable doubt, that Anneliese is in contempt of court. I accept Mr Dacre’s submission, however, that Anneliese should be given a final opportunity to purge her contempt by signing the required documents, before the issue of penalty is considered. Although Mrs Burmester seeks an order of committal to prison, that is not the only penalty available to the Court. Other available options include the imposition of a fine, community service or (particularly if Anneliese purges her contempt) no penalty at all.

[35]   Ms Chambers sought an order that Anneliese to be arrested and brought before the Court. Under r 17.84 of the High Court Rules, a person may be arrested if they do not comply with an original court order with which they have been served. Leave of the Court is required before issuing an arrest order.24 Mr Dacre submitted that Anneliese should be given a final opportunity to appear voluntarily and that any order for arrest that is issued should lie in Court until the next hearing date, and only be

23     Stephen Graw, above n 17, at 271. See also Bartels v Behm (1990) 19 NSWLR 257 (CA).

24     High Court Rules 2016, r 17.9(1).

executed in the event that Anneliese fails to attend Court on that date. I am satisfied that that is the appropriate course in the circumstances.

Result

[36]   I hold Anneliese Burmester in contempt of Court for deliberately failing to comply with the Partnership Order made at [143] of the Judgment.

[37]   A further hearing will be held at 10.00 am on Friday 12 October 2018 to determine the next steps, including determination of an appropriate penalty.

[38]   I direct that a warrant issue for the arrest of Anneliese Burmester. That warrant is to lie in Court, however, until 10.00 am on Friday 12 October 2018. If Anneliese purges her contempt prior to that time (by signing the required documents), or attends Court voluntarily at 10.00 am on Friday 12 October 2018, the arrest warrant will be cancelled. If neither of those events occur, the warrant is to be executed.

[39]   I will hear submissions from the parties on the issue of costs at the hearing on 12 October 2018.

Katz J