Clayton v Clayton
[2015] NZHC 838
•28 April 2015
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CIV-2011-463-000808 [2015] NZHC 838
BETWEEN MARK ARNOLD CLAYTON
First Appellant
MCGLOSKEY NOMINEES Second Appellant
CHELMSFORD HOLDINGS Third Appellant
DEBORAH JOAN VAUGHAN Fourth Appellant
NEW ZEALAND TRUSTEE SERVICES LIMITED
Fifth Appellant
MARK ARNOLD CLAYTON Sixth Appellant
BRYAN WILLIAM CHESHIRE and MARK ARNOLD CLAYTON Seventh Appellant
AND
MELANIE ANNE CLAYTON Respondent
Hearing: 17 April 2015 Appearances:
M J McCartney and K E Sullivan for Appellant
J R Hosking for RespondentJudgment:
28 April 2015
JUDGMENT OF COURTNEY J [Application to vary restraining orders]
This judgment was delivered by Justice Courtney
on 28 April 2015 at 4.00 pm pursuant to R 11.5 of the High Court Rules
Registrar / Deputy Registrar
Date…………………………
CLAYTON v CLAYTON [2015] NZHC 838 [28 April 2015]
Introduction
[1] Mrs and Mrs Clayton are engaged in long-standing litigation over relationship property. The object of the litigation is the Claymark business, which comprises many companies and trusts. Mrs Clayton asserts that the business is relationship property in which she is entitled to share. The legal fees incurred by the parties have been very high and there is still some way to go; Mr Clayton has applied for leave to appeal the recent Court of Appeal decision and, regardless of the outcome of that application, there are valuation issues that are yet to be determined in this Court.
[2] Restraining orders, initially obtained by Mrs Clayton in July 2014 and later varied by consent, prevent Mr Clayton from receiving more than $350,000 from the Claymark group. He claims that he cannot meet his current outstanding and ongoing legal expenses from this and has applied to vary the restraining orders so as to access
funds for this purpose.1
[3] Subject to one aspect, Mrs Clayton opposes the application. She asserts that Mr Clayton ought to be able to meet his legal expenses from his own resources and that if Mr Clayton is permitted to access any funds it should be only on the basis that she has access to an equivalent amount.
[4] The parties in Mrs Clayton’s original application for restraining orders included those named as second to seventh appellants, none of whom were served with this application or were before the Court. However, I accept the explanation given by Ms McCartney QC, for Mr Clayton, that these parties, who are associated with Mr Clayton, are not affected by this application. Nor was the group’s lender, the ASB, represented. However, the terms of the group’s borrowing permits payments from group assets for the purposes of meeting Mr Clayton’s legal costs in this proceeding. Moreover, that aspect can be addressed by making any order
subject to the specific consent of the ASB.
1 As initially framed the application sought a number of other variations but it proved unnecessary to pursue those and the application was argued on the more limited basis described.
Background
[5] In June 2014 Mrs Clayton obtained an order for spousal maintenance under which Mr Clayton was required to pay her $10,000 per month towards her legal and accounting expenses and a separate amount towards her living expenses pending determination of the relationship property litigation. By agreement those sums have been and will continue to be paid from the Vaughan Road Property Trust (VRPT), which holds Claymark’s land and building.
[6] On 18 September 2014 Judge Munro made consent orders restraining the companies and trusts forming part of the Claymark group and otherwise associated with Mr Clayton from making payments and other dispositions other than in the ordinary course of business. In particular, they restrained any company or trust associated with Mr Clayton from engaging in any transaction that would result in a reduction in the net equity of specified trusts, including the VRPT.
[7] Specific exceptions permitted mortgage loans, rates, insurance, and costs awards in the relationship proceedings to be paid from the VRPT. It was, however, a specific term that there would be no payments whatsoever made for Mr Clayton’s benefit without the express written consent of Mrs Clayton’s financial adviser or by order of the Court.
The application to vary the restraining orders
The variations sought
[8] The restraining orders include the following order 2(b)(viii):
There shall be no further payments by any Trust other than as provided in this order and there shall be no payments whatsoever made for Mark’s benefit (such being outside of the ordinary course of business and outside the scope of (vi) and (vii) above) without the express written consent of Melanie’s financial adviser, Brendan Lyne, or by order of the Court. Such consent shall not be unreasonably withheld.
(emphasis added)
[9] Mr Clayton seeks to vary that order by inserting the words “save for legal and accounting costs incurred by Mark for the purpose of litigation” immediately after the bracketed section. If that variation is permitted, Mr Clayton seeks an order allowing him specific funding to meet his legal expenses.
[10] At the commencement of the hearing Mr Clayton sought $409,000 to meet his current outstanding legal fees and ongoing payments of $10,000 per month. He would also agree to a one-off payment of $109,668.08 to Mrs Clayton so that she could meet her current outstanding legal fees. Mr Clayton proposed that these payments be allowed to be made from any appropriate Claymark entity as cash flow permitted and, in the event that cash flow did not permit the entire amount to be paid, payments would be made to him and Mrs Clayton on a pro-rata basis.
[11] A partial agreement was reached during the course of the hearing: in respect of legal fees currently owed by each of Mr and Mrs Clayton (subject to cash flow and the ASB’s consent), Clayton Holdings Ltd would declare and pay a dividend to Mr Clayton of $220,000 which would be credited to his current account and paid, in the first instance, to Tompkins Wake (Mr Clayton’s solicitors), on the condition that Tompkins Wake undertakes to pay half of that amount ($110,000) to Anderson Creagh Lai (Mrs Clayton’s solicitors) by way of an interim distribution of relationship property to Mrs Clayton.
[12] This left for determination the question whether the orders should be varied to allow further payment to Mr Clayton of:
(a) $90,000 so that Mr Clayton would have received the same as Mrs
Clayton since July 2014. Mrs Clayton did not agree to this;
(b) $209,000 to meet the balance of Mr Clayton’s outstanding legal fees.
Mr Clayton sought an order that this be paid either by declaration of a dividend in Clayton Holdings Ltd or by a one-off increase in Mr Clayton’s salary so that he would receive an increase in his gross salary sufficient to return a net of $209,000. Mrs Clayton did not
agree to this but would agree to a dividend being declared and shared equally;
(c) $10,000 each month so that Mr Clayton receives the same amount towards legal expenses as Mrs Clayton. Mrs Clayton did not agree to this.
The basis for the application
[13] Ms McCartney outlined the basis for Mr Clayton’s application as follows. The $409,000 Mr Clayton owes his legal advisers reflects the additional costs incurred following the death of his previous lawyer, Mrs Harley, in August 2014. This necessitated the engagement of new solicitors and counsel. Substantial work was required by Ms McCartney and the new solicitors to become acquainted with the litigation and review the position taken to date on both the relationship property and maintenance proceedings. Mr Clayton also has substantial ongoing legal expenses similar to those being sustained by Mrs Clayton. However, Mr Clayton’s salary is fixed at $280,000, which he claims is less than market, and the amount that he may draw from the group overall is capped at $350,000. Mr Clayton cannot meet his outstanding and ongoing legal costs as well as his other commitments from the income he is currently permitted.
[14] Determining this application has been impeded by the lack of evidence regarding Mr Clayton’s financial means. Mr Clayton did not swear an affidavit in support of the application. Instead, he requested that Mr Trevor Jacobs, the chief financial officer of the Claymark Group, do so. It was understandable that Mr Jacobs should have sworn an affidavit in support of the application as originally framed because it related, to a large extent, to commercial issues on which he could have been expected to comment. I also accept that Mr Jacobs has knowledge of the other matters to which he refers, including the level of Mr Clayton’s income from the company and the fact of his personal obligations. However, his evidence did not contain any specific information as to the demands on Mr Clayton’s income. The last affidavit before the Court as to Mr Clayton’s means was sworn in 2009.
[15] Determining the application has not been helped by Mrs Clayton’s attitude to this issue. Her counsel, Ms Hosking, submitted, with no evidential foundation, that Mr Clayton could afford to pay his legal fees from his salary, noting that his obligations to pay maintenance have been met by the VRPT. However, she opposed any suggestion of updating evidence on the issue. Ms Hosking also asserted, again without an evidential foundation, that Mr Clayton received a market salary. After the hearing, she sought to file a memorandum annexing evidence given in 2011 of a professional report on remuneration for the Claymark Group dated June 2010 which covered the market salary for Mr Clayton’s position. I decline to place any weight on that material because of its age.
[16] Ms Hosking submitted, further, that Mr Clayton’s current outstanding costs were not so much attributable to Mrs Harley’s untimely death but to the fact that Mr Clayton has senior counsel at most hearings whereas Mrs Clayton’s senior counsel does not appear at every hearing. I do not accept that submission. It is obvious that the death of counsel who has had long-time carriage of a proceeding of this complexity will result in substantial additional costs when new counsel are appointed. The direct involvement by senior counsel in these circumstances is not necessarily more expensive and may be the more efficient course in the long run.
[17] I am prepared to make the order to which the parties have agreed under which each will receive $110,000 from Clayton Holdings Ltd. I am also prepared to make an order that Mr Clayton receives $10,000 from VRPT so that Mr and Mrs Clayton have equal access to those assets to meet their ongoing legal costs. In the absence of any better information about Mr Clayton’s outgoings I am not prepared to allow further variations.
[18] I am, however, concerned to ensure that the interests of justice are not defeated by the failure to put the necessary evidence before the Court. I reserve leave to Mr Clayton to apply to further vary the restraining order on the basis of current evidence as to his means. Naturally, this reservation of leave is not to be regarded as an indication of the outcome of any such application.
Result
[19] The application is allowed and the restraining orders are varied as follows:
(a) Clause 2(b)(viii) is amended so as to read: there shall be no further payments by any trust other than as provided in this order and there shall be no payments whatsoever made for Mark’s benefit (such being outside of the ordinary course of business and outside the scope of (vi) and (vii) above) save for legal and accounting costs incurred by Mark for the purpose of litigation without the express written consent of Melanie’s financial adviser, Brendan Lyne, or by order of the Court. Such consent shall not be unreasonably withheld.
(b)Subject to the consent of the ASB and as cash flow permits, Clayton Holdings Ltd will declare a dividend of $220,000, which will be credited to Mr Clayton’s current account and paid to Tompkins Wake upon Tompkins Wake’s undertaking to immediately pay $110,000 to Anderson Creagh Lai for Mrs Clayton by way of an interim distribution of relationship property and then $110,000 to Mr Clayton.
(c) Subject to the consent of the ASB and as cash flow permits, from
17 April 2015 Mr Clayton shall be entitled to receive $10,000 per month either as an advance or by way of distribution as a beneficiary at the same time as the current payment of $10,000 is made to Mrs Clayton pursuant to the existing maintenance orders. In the event of cash flow not permitting both amounts to be paid at the same time in any particular month the payment to Mrs Clayton shall be paid first.
[20] Leave is reserved to Mr Clayton to further vary these orders and to apply for leave to adduce further evidence.
P Courtney J
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