Clayton v Clayton
[2014] NZHC 135
•12 February 2014
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CIV2013-463-000428 [2014] NZHC 135
BETWEEN MELANIE ANN CLAYTON Judgment Creditor
ANDMARK ARNOLD CLAYTON Judgment Debtor
CIV 2011-485-000808
BETWEEN MARK ARNOLD CLAYTON First Appellant
MARK ARNOLD CLAYTON Second Appellant
BRYAN WILLIAM CHESHIRE and
MARK ARNOLD CLAYTON Third Appellants
ANDMELANIE ANN CLAYTON Respondent
Hearing: 12 February 2014
Appearances: J R Hosking for Melanie Ann Clayton
R P Harley for Mark Arnold Clayton
Judgment: 12 February 2014
ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
M A CLAYTON v M A CLAYTON [2014] NZHC 135 [12 February 2014]
[1] The proceeding in CIV 2013-463-428 concerns Mr Clayton’s application to
set aside the bankruptcy notice.
[2] The proceeding in CIV 2011-485-808 concerns Mr Clayton’s application for
a stay while his appeal to the Court of Appeal is determined.
Application to set aside bankruptcy notice
[3] The bankruptcy notice claimed payment of $42,602 as the amount unpaid on a costs judgment of the Rotorua High Court on 25 June 2013.
[4] Mr Clayton says that he has paid a sum of $30,000 by a pre marriage arrangement which he has set off against the amount due under the costs judgment.
[5] Mr Clayton says he paid the balance due of $12,602 on 13 August 2013. He claims the debt has been paid.
Application for stay
[6] On 22 February 2013 Rodney Hansen J issued his judgment on appeals by Mr Clayton and other entities of his against aspects of the decision of Judge Munro in the Family Court at Rotorua. Rodney Hansen J upheld Judge Munro’s decision to set aside a pre nuptial agreement and Her Honour’s conclusion that Mrs Clayton was entitled to a half share of the increase in value of Mr Clayton’s business assets, and as well Judge Munro’s findings in relation to certain trusts.
[7] Rodney Hansen J delivered his costs judgment on 25 June 2013 and fixed costs of $42,602 payable by Mr Clayton.
[8] Both Mr Clayton and Mrs Clayton have filed appeals to the Court of Appeal against aspects of the judgment of Rodney Hansen J.
[9] On 12 August 2013 Mr Clayton filed an application for orders: (a) As to satisfaction of the judgment as to costs.
(b) Granting stay of enforcement of judgment as to costs.
[10] The focus of the applications is that Mr Clayton claims that about four years ago he paid $30,000 pursuant to the terms of a pre nuptial agreement and therefore that he is entitled to set this amount off against what he was ordered by Rodney Hansen J to pay by way of costs. Judge Munroe and Hansen J both held that the pre nuptial agreement was invalid. For Mr Clayton it is claimed the sum of $30,000 is to be applied in part payment of the costs award. His position is that he has not appealed the judgment of Hansen J insofar as it held the pre nuptial agreement was invalid. It follows, says Mr Clayton that he accepts the pre nuptial agreement was invalid, and therefore the $30,000 he paid should be returned to him. Because it has been retained by Mrs Clayton, he requests it be applied in part payment of the costs award.
Issues
[11] They are:
(a) Whether Mr Clayton has paid or satisfied his obligations to pay the costs judgment.
(b) If not, whether Mr Clayton’s obligations to pay those ought to be
stayed pending disposal of the appeals to the Court of Appeal.
[12] In the outcome of a consideration of those issues it will become clearer whether the bankruptcy proceeding has any further utility.
Claim of a payment of $30,000
[13] Before Mr and Mrs Clayton were married in 1989 they executed a pre marriage agreement which provided inter alia that if their marriage dissolved after two years Mr Clayton would pay to Mrs Clayton the sum of $30,000 in full and final settlement of any matrimonial property claims she may have.
[14] Mr Clayton says he paid Mrs Clayton the amount of $30,000 on 27 May 2009 pursuant to the pre marriage agreement. Mr Clayton said the payment was not an interim distribution of relationship property.
[15] A letter from Mr Clayton’s solicitors dated 6 August 2013 (i.e. prior to the issue of the bankruptcy notice) made it clear that Mr Clayton considered he was entitled to offset this payment against his liability to pay the costs award.
[16] Mrs Clayton acknowledged having received that sum when payment was made directly to her then counsel Ms Hollings QC. Mrs Clayton says:
In all correspondence and court documents the $30,000 is counted as the share of relationship property that I have already been paid. The balance of relationship property is a matter for dispute which is before the Court and the subject of an appeal to the Court of Appeal. I do not understand on what basis Mark can claim to have pre-paid in 2009 a costs award made in 2013.
[17] Mr and Mrs Clayton were separated in 2006. The marriage was dissolved in
2009. At about that time Mr Clayton made a payment to Mrs Clayton as he considered was required pursuant to the terms of the pre nuptial agreement. Clearly it was Mr Clayton’s view that the payment was all that was required to satisfy Mrs Clayton’s relationship property claims.
[18] Two years later Judge Munro considered the pre nuptial agreement ought to be set aside. On appeal Rodney Hansen J upheld that decision.
The judgments of Judge Munro and Justice Rodney Harrison
[19] On 2 December 2011 Judge Munro made directions for the filing of submissions in respect of costs arising upon her judgment. Although submissions in respect of costs were made in response to those directions Judge Munro declined to address costs until after the appeals had been completed. Following the decision of Rodney Hansen J in relation to costs Judge Munro decided to deal with the costs position arising out of the Family Court judgment. The parties have now filed further submissions in respect of those costs. A decision in respect of those costs is currently being considered.
[20] By letter from his solicitor Mr Clayton gave notice on 7 August 2013 that he intended to pay $12,602. At that time his claim of a set off was also given.
[21] The bankruptcy notice was issued by the High Court on 8 August 2013. Mrs
Clayton received the sum of $12,602 into her bank account on 9 August 2013.
Considerations
[22] Mr Clayton’s payment of $30,000 was intended by him to satisfy his relationship property obligations. It is now claimed it was not intended as a payment on account of those obligations. Support for this conclusion is drawn from the fact that two Judges now agree that the pre nuptial agreement be set aside.
[23] It is clear, as Ms Hosking submits that the payment has been taken into account in various calculations provided by Mr Clayton to the Court including that of his forensic accountant. Furthermore those calculations are ongoing in some respects, and in the outcome of the Court of Appeal judgment, may be subject yet further to recalculation.
[24] Clearly the payment was made for the purpose of settling relationship property obligations. It is in that context that the payment is properly categorised for it is in that context it will affect final calculations of relationship property claims.
[25] Mr Clayton says he is entitled to offset the payment of $30,000 four years earlier in consideration of a costs judgment made against him.
[26] Mr Clayton is not entitled to an order as to satisfaction of the judgment. Neither Mrs Clayton nor the Court accepts judgment has been satisfied.
[27] Mr Clayton relies on HCL 17.29 for the grant of a stay of enforcement on the ground that a substantial miscarriage of justice would likely occur if the cost judgment would have been enforced whilst the appeal remains to be determined.
[28] Each party has its own view about the appeal outcome, and indeed
concerning Judge Munro’s anticipated costs judgment.
[29] It appears clear that Mr Clayton is unable to pay the costs of the judgment. Notwithstanding the possibility of a reversal of findings on appeal, there is nothing in this case to suggest Mrs Clayton should be deprived of her opportunity to enforce a costs award in her favour.
[30] Assertions of miscarriage of justice affecting Mr Clayton’s position are unsupported. Mr Clayton’s part payment of the costs judgment was received after the bankruptcy notice issued. The bankruptcy notice specified the amount in the judgment and that amount was outstanding at the time Mrs Clayton applied for it. The fact that Mr Clayton made a payment prior to being served with the bankruptcy notice does not invalidate the notice itself.
[31] Mr Clayton’s position is akin to raising a cross claim. Cross claims are properly advanced in situations where they could not have been put forward in the proceeding to which the order relates. But, Mr Clayton did have an opportunity upon the issue of costs dealt with by Rodney Harrison J to claim then, as indeed he does now, that he has paid $30,000 on account of any liability for costs.
[32] The Court’s view is that the submission of Ms Hosking is correct when she says that the $30,000 may in the future form part of a judgment owed by Mrs Clayton to Mr Clayton but it does not give rise to a debt presently owing by her to him, either now or in the future, and upon which he can lay any claim of a cross claim.
[33] An act of bankruptcy is committed if the requirements of s 17(1) are satisfied. Those include the requirement that the bankruptcy notice is to be satisfied within a time limit. That time limit is extended by HCR 24.10 to a time when the application to set aside is determined. As Ms Hosking submits that is when the debtor needs to satisfy the Court that he or she has a counterclaim.
[34] Mr Clayton cannot show that he has a counterclaim today. Therefore his application to set aside the bankruptcy notice must fail.
Conclusion
[35] Both of Mr Clayton’s applications are dismissed.
[36] After hearing submissions from counsel the Court accepted this was an appropriate case to award 2B costs against Mr Clayton, together with a 50 per cent uplift. The Court considers there is some force to Ms Hosking’s submissions that his purpose in these applications is to cause as much expense as he can in frustrating recourse to sensible outcomes.
[37] Having reviewed Ms Hosking’s calculations the Court accepts that Mr Clayton be ordered to pay costs in the sum of $19,387, together with usual disbursements.
Other orders
[38] There is an order that Mr Clayton has until 4:00pm, Friday, 14 February 2014 to comply with the bankruptcy notice served on him, by the payment of $30,000 in cleared funds to Mrs Clayton’s solicitors.
[39] It is clear that in the event Mr Clayton does not meet payment, that Mrs Clayton will file an application for his adjudication as a bankrupt. Accordingly, and should it be necessary, the Court schedules a one day fixture in Rotorua on 12 March
2014 for the purpose of hearing the adjudication application. If that application is to be opposed then the Court will on 12 March 2014 hear submissions on his behalf.
[40] The Court is advised that Mr Clayton is travelling overseas on Saturday, 15
February 2014 for a period of 28 days. The Court considers there is sufficient time before his departure for him to consult with his lawyers if it is his purpose to oppose any adjudication application.
[41] To avoid any difficulties in affecting service of any adjudication application, the Court directs that service of any adjudication application can be affected by personal delivery of same to the offices of Mr David Quigg, solicitor, Wellington.
[42] Any submissions for a hearing on 12 March 2014 are directed to be filed and
served no later than 7 March 2014.
Associate Judge Christiansen
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