Cross v Cross
[2017] NZHC 1272
•12 June 2017
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
THE-FAMILY-COURT/LEGISLATION/RESTRICTION-ON-PUBLISHING- JUDGMENTS.
IN THE HIGH COURT OF NEW ZEALAND
`AUCKLAND REGISTRY
CIV-2017-404-000309 [2017] NZHC 1272
BETWEEN CLAYTON CROSS
Applicant/Respondent
AND
VALERIE PATRICIA CROSS Respondent/Applicant
Hearing: 31 May 2017 Appearances:
G J Hamlen-Williams for Applicant/Respondent
C J R Baird and A V Shinkarenko for Respondent/ApplicantJudgment:
12 June 2017
JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie
On 12 June 2017 at 3.00pm Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Collins & May Law, Lower Hutt
McLeod & Associates/C J R Baird, Auckland
CROSS v CROSS [2017] NZHC 1272 [12 June 2017]
Introduction
[1] In September 2016, the applicant/respondent, Mr Cross, filed an application in the Family Court at Auckland for orders under the Property (Relationships) Act
1976 (the “Act”).
[2] The respondent/applicant, Mrs Cross, filed an appearance under protest to jurisdiction. She asserted that the parties had entered into a contracting out agreement under s 21 of the Act in March 2004 (the “contracting out agreement”), that the contracting out agreement was in full force and effect and that there was no relationship property available for division under the Act.
[3] In November 2016, Mr Cross responded by filing an application to set aside and/or rectify the contracting out agreement. He also sought various additional orders – including orders:
(a) requiring Mrs Cross to disclose information relating to the nature and extent of all relationship and separate property;
(b)declaring what property is relationship property and what property is separate property;
(c) determining the respective shares of the parties in their relationship property;
(d)requiring Mrs Cross to disclose information relating to the disposition of any property made to defeat his rights;
(e) requiring Mrs Cross to disclose information relating to the disposition of any relationship property to any Trust; and
(f) consequential orders following on from any disposition(s).
These additional orders were sought pursuant to ss 8, 9, 9A, 10, 11, 21O, 23, 25, 33,
43, 44, 44C and 45 of the Act.
[4] Mrs Cross then filed the application which is now before the Court –namely an application to strike out Mr Cross’ proceedings. The application was filed under rr 193 and 194 of the Family Court Rules 2002. An amended application was filed shortly thereafter, and Mr Cross in turn filed a notice of opposition.
[5] On 1 March 2017, the Family Court, by consent, transferred the proceedings to this Court.
Background
[6] As is so common in proceedings of this kind, little is agreed and much is in dispute. What follows is an attempt to outline, for the purposes of Mrs Cross’ application, the core dispute between the parties gleaned from the many affidavits that have been filed to date.
[7] The parties met in 1995 and they married on 7 November 1998. At some stage, prior to their marriage, they commenced living in a de facto relationship. The date the de facto relationship began is in dispute, but it is common ground that they separated on 14 January 2015.
[8] When the parties met, both had previously been married and both had adult children from those prior relationships. There were no children from their relationship.
[9] Mr Cross says that before the parties met, he owned a property at Lake Road, Takapuna. He says that this property was his separate property and that it was the subject of a relationship property settlement he was then finalising with his former wife. He says that it was sold and that the sale proceeds, along with moneys from a property sold by Mrs Cross, were used to buy a property in Williams Avenue, Takapuna.
[10] Mrs Cross says that the property at Lake Road became the family home after the parties commenced living together. She claimed an interest in it when the contracting out agreement was being negotiated.
[11] On 17 July 1997, Mr Cross settled a trust known as the Clayton Cross Family Trust (New Zealand) (“CCFTNZ”). The initial trustees of CCFTNZ were Mr Cross and his son, Glenn Cross.
[12] In July 1997, Mr Cross and his son became the registered owners of a property in Park Avenue, Takapuna. Mr Cross says that they acquired the property as trustees of CCFTNZ.1
[13] As noted, Mr and Mrs Cross purchased a property in Williams Street, Takapuna. Both parties contributed to this purchase, either directly or through trusts controlled by them. In addition, a mortgage was given over the property. The property was either purchased by, or later transferred to, a trust known as the Santa Fe Trust (“SFT-1”), which had been settled by the parties on 31 October 1997. Mr and Mrs Cross were the trustees of SFT-1.
[14] As noted, in November 1998 the parties married and the Williams Street property became the family home.
[15] In April 2001, Mr Cross negotiated an agreement to purchase a marina and caravan park near Brisbane in Australia, and shortly thereafter he formed a company in Australia to manage the property. Mr Cross says that he paid an initial deposit to purchase this property, and that the money came either from his own account or from the accounts of other interests controlled by him. Mrs Cross says that the money to pay the deposit was raised by SFT-1.
[16] At much the same time, a deed was signed whereby Glenn Cross retired as a trustee of CCFTNZ and Mrs Cross was appointed in his stead.
[17] The purchase price of the marina and caravan park in Australia was AUD $3 million. In addition, stamp duty was payable. Moneys had to be raised to complete
the purchase and, in July 2001, the Park Avenue property was sold.
1 Counsel appearing on his behalf say that the proceeds from the sale of Lake Road may have been transferred to CCFTNZ and used by it to purchase the property at Park Avenue. This, however, appears to be inconsistent with Mr Cross’ assertion in his affidavits.
(a) Mr Cross says that, in order to avoid the need to prepare financial statements for CCFTNZ, he arranged for the proceeds from the sale of Park Avenue to be put through SFT-1;
(b)Mrs Cross says that the mortgage over the Williams Street property was repaid from the proceeds of sale, and that SFT-1 then entered into a new arrangement with its bankers to enable it to borrow sufficient moneys to fund the purchase of a one half share in the marina and caravan park in Australia.
[18] Between 23 April 2001 and 10 August 2001, total funds in excess of $1 million were transferred to Australia.
(a) Mr Cross says that CCFTNZ deposited $1,050,000 from the sale of
Park Avenue into SFT-1’s bank account on 30 July 2001. He says that
$1,031,880 was then transferred from SFT-1 to Glenn Cross in Australia through two transactions – first, $371,880 on 8 August 2001, and then $660,000 on 10 August 2001. He says that on 27 August
2001, he settled an Australian trust – the Clayton Cross Family Trust (Australia) (“CCFTAU”) – to own a half share of the marina and caravan park property and that the moneys transferred to Glenn Cross were paid to CCFTAU. The trustees of CCFTAU were Mr and Mrs Cross.
(b)Mrs Cross says that the total sum of NZD $1,154,936.53 was advanced in four separate tranches by SFT-1 to CCFTAU between April and August 2001, largely to enable CCFTAU to complete the purchase of its half share of the marina and caravan park, but also to enable Mr Cross to apply some of the money to a company he controlled.
[19] It seems to be common ground that CCFTAU was only purchasing a one half share in the marina and caravan park property. The other one half share was being
purchased by an entity known as the Platinum Lilly Trust, the trustees of which were
Mr Cross’ former wife and Glenn Cross.
[20] Various documents were put in place to facilitate these transactions:
(a) By an undated acknowledgement of debt, Mr and Mrs Cross as trustees of SFT-1, as borrower, and CCFTNZ, as lender, acknowledged that SFT-1 owed CCFTNZ $1,050,000.
(b)As trustees of CCFTAU, Mr and Mrs Cross signed resolutions authorising the borrowing of sufficient funds from SFT-1 to purchase a one half share in the marina and caravan park property, and to pay interest to the SFT-1 on the funds borrowed.
(c) On 1 August 2001, a further deed of acknowledgement of debt was signed by Mr and Mrs Cross as trustees of SFT-1 as lender, and as trustees of CCFTAU, as borrower. The indebtedness acknowledged in this acknowledgement of debt was NZD $1,178,000.
(d)On 8 August 2001, Mr and Mrs Cross as trustees of SFT-1 signed a resolution confirming that the funds received from CCFTNZ would be advanced to CCFTAU to enable it to purchase a share in the marina and caravan park.
[21] The deed of acknowledgement of debt dated 1 August 2001 predates the settlement of CCFTAU. Mrs Cross says that the deed was prepared by an accountant acting on the instructions of Mr Cross, in anticipation of the deed settling CCFTAU, and in consideration of SFT-1 advancing or agreeing to advance the sum of
$1,178,000 to CCFTAU.
[22] In any event, the marina and caravan park were purchased.
[23] At some stage, Mrs Cross became concerned to protect her interests, and in or around late 2001, the parties started discussing their position under the Act. This led to the signing of a matrimonial property agreement on 27 March 2002. It is common
ground, however, that this agreement did not comply with the requirements of the
Act, and that it is unenforceable.
[24] In early 2003, Mrs Cross sought legal advice, and in March 2003, both she and Mr Cross met with their respective lawyers. As already noted, by April 2003, Mrs Cross through her lawyer was asserting to Mr Cross through his lawyer that she was entitled to $800,000 from the sale proceeds of the Lake Road property. Eventually, the parties reached agreement and the contracting out agreement was entered into on 27 March 2004. Inter alia, it recorded as follows:
(a) Mr and Mrs Cross wished to identify assets that were separate property and assets which were relationship property.
(b)Mr and Mrs Cross wished to provide that SFT-1 was for the benefit solely of Mrs Cross and her issue.
(c) Property identified in a schedule was to be and remain Mrs Cross’ separate property, notwithstanding that it might be applied to the purchase of a family home. The schedule identified the following:
(i)a sum of AUD $200,000 to be paid by Mr Cross to Mrs Cross from the sale of a block of land in Vanuatu, or on 31 March
2006, whichever was the earlier;
(ii)a sum of AUD $200,000 to be paid to Mrs Cross by the trustees of CCFTAU on Mr Cross’ death, or on the sale of the marina/caravan park property, whichever was the earlier;
(iii) Mrs Cross’ interest as a beneficiary of SFT-1.
(d)Mr Cross and Glenn Cross, as trustees of CCFTAU,2 agreed to distribute the payment referred to in (c)(ii) above, and Mrs Cross
agreed that on payment, she would have no further interest in
2 It seems that at the time Mr and Mrs Cross were the trustees of CCFTAU. Mrs Cross did not retire as a trustee until 1 April 2004.
CCFTAU. Mr Cross agreed to ensure that the trustees of CCFTAU executed, in favour of Mrs Cross, a deed of acknowledgement of debt in a form which was to be attached to the agreement.3
(e) Mr and Mrs Cross as trustees of SFT-1 agreed to execute various deeds to give effect to (c)(iii) above.
(f) All property owned and acquired by Mr Cross then, or in the future, was to be his separate property, whether or not the property was used as a family home.
(g) Clause 7 read:
If any dispute or difference arises between [Mrs Cross] and [Mr Cross], following a separation, or as to any other aspect touching on the fair division and implementation of relationship property, then the Family Court shall have full power to resolve and adjudicate on these issues in the same manner as if the Court were dealing with conventional proceedings under the Act.
(h)Clause 10 of the agreement appears to have incorporated a separate agreement dated 27 February 2004. It read:
It is agreed by [Mr Cross] and [Mrs Cross] that property that is owned by each party is from now and in the future to be treated as separate property.
[25] Either before or following execution of the contracting out agreement, there were a number of resolutions signed by the parties in their capacity as trustees of the various trusts. Presumably these resolutions were intended to give effect to the contracting out agreement.
(a) On 5 February 2004, the trustees of SFT-1 appointed Mrs Cross as sole appointor of SFT-1;
(b) On 2 March 2004, Mr Cross retired as a trustee of SFT-1. Mrs Cross’
solicitor was appointed in his stead;
3 Neither party has exhibited this acknowledgement of debt.
(c) On 27 March 2004, the assets of CCFTNZ were distributed and resettled upon the trustees of SFT-1.4
(d) On 29 March 2004, Mr Cross was removed as a beneficiary of SFT-1; (e) On 1 April 2004, Mrs Cross retired as a trustee of CCFTAU; and
(f) On 16 April 2014, the assets of SFT-1 were resettled onto a new trust
– the Santa Fe Trust-No 2 (“SFT-2”).
In broad terms, the effect of the contracting out agreement and the various resolutions was to record that Mr Cross was excluded from controlling or benefitting from the assets in CCFTNZ and SFT-1, and Mrs Cross was excluded from controlling or benefitting from the assets in CCFTAU.
[26] The contracting out agreement made no reference to the loan between the
SFT-1 and the CCFTAU recorded in the acknowledgement of debt dated 1 August
2001.
(a) Mr Cross says that this was a mistake, and that the contracting out agreement and subsequent resolutions were intended to result in a global division whereby all assets and liabilities of SFT-1 and CCFTAU were to be settled and divided between him and Mrs Cross. He says that at the time the agreement was made, he had forgotten about the deed of acknowledgment of debt, and that it only became apparent to him that the contracting out agreement was flawed when Mrs Cross, as sole director and shareholder of the corporate trustee managing the assets of SFT-2, wrote to CCFTAU demanding payment of $1,178,000 plus interest in April 2015.
(b)Mrs Cross says that the fact that the contracting out agreement makes no reference to the outstanding loan recorded in the deed of
acknowledgement of debt was deliberate. She says that the agreement
4 This had the effect of expunging the debt which had previously been owed by SFT-1 to
CCFTNZ.
dealt with relationship property and not with trust property, that the loan between SFT-1 and CCFTAU recorded in the acknowledgment of debt dated 1 August 2001 was the property of SFT-1, that the loan has been transferred by SFT-1 to SFT-2, and that it remains due and owing.
[27] In November 2015, Mrs Cross commenced separate proceedings in this Court through the corporate trustee of SFT-2 against Mr Cross and the corporate trustee of CCFTAU (the “Securities House proceedings”).5 These proceedings are based on the deed of acknowledgement of debt dated 1 August 2001. It is asserted that this was “in effect a deed of acknowledgment of future indebtedness”, given the date of the deed and the date that CCFTAU was settled. It is asserted that $1,178,000 was advanced in reliance of the deed, that demand has been made for that sum, and that it
has not been repaid by either Mr Cross or CCFTAU. Judgment is sought in this amount. Both Mr Cross and CCFTAU have filed statements of defence in these proceedings. They deny the existence of the debt and say that the deed of acknowledgement of debt was entered into in anticipation of a transaction that did not occur in the way set out in the deed. They say that, through tracing, the funds came from CCFTNZ and that they originated from the sale of the Lake Road
property.6
[28] Glenn Cross has recently been added as an additional defendant, and various interlocutory steps have been taken by all parties.
[29] As already noted, Mr Cross commenced the Family Court proceedings in
September 2016.
Submissions
[30] Mrs Cross seeks that Mr Cross’ substantive application for the division of their relationship property should be struck out in its entirety and/or dismissed. She also seeks that his application to set aside the contracting out agreement should be
struck out or dismissed.
5 Securities House Trustee Limited v Cross and Galarate Pty Limited CIV-2015-404-002772.
6 This is inconsistent with the assertion made by Mr Cross in his affidavit – see above at [9].
[31] The grounds relied on by Mrs Cross are as follows:
(a) Mr Cross’ substantive application discloses no reasonably arguable or tenable cause of action, because the parties entered into the contracting out agreement, and there is no relationship property;
(b)Mr Cross’ application to set aside or rectify the contracting out agreement discloses no reasonably arguable or tenable cause of action;
(c) The separate proceedings commenced by her in this Court concern substantially the same issues and facts, and as a result, the Family Court proceedings commenced by Mr Cross are duplicitous;
(d)There has been material non-disclosure and/or deliberate omission of key material facts in Mr Cross’ affidavits, and that the claims made by him are “speculative, untenable and utter nonsense”.
Mrs Cross asks the Court to give effect to, and uphold, the contracting out agreement.
[32] Mr Cross notes that there is yet to be a final hearing, with cross-examination, on any of his claims. He says that the events giving rise to his claim span some 20 years, and that they involve many historical documents. He says that the disclosure process is ongoing, and that both parties to date have, to the dismay of the other, produced further documents. He says that there are major factual disputes which cannot be resolved in the context of a strike out application, and that it cannot be said that his claims are clearly untenable. He does not claim that the various trusts’ assets or debts are relationship property, but rather, that he has remedies in relation to the trusts under the Act, and/or under other legislation, which the contracting out agreement does not exclude. He also submits as follows:
(a) The contracting out agreement did not deal with all relationship property in existence at the time the agreement was signed or has
subsequently been acquired. He says that such property continues to be the subject of provisions of the Act;
(b)The contracting out agreement does not exclude claims in respect of trusts and other entities in existence at the time of the agreement, or subsequently, and that he has tenable claims under ss 44, 44C and/or
44F of the Act, as well as under s 182 of the Family Proceedings Act
1980, and in equity, by way of constructive trust;
(c) If he succeeds in his application to set aside the agreement, then any property dealt with in the agreement will be subject to the provisions of the Act;
(d) His claim is not duplicitous of the proceedings commenced by Mrs
Cross in this Court.
Relevant law
[33] Mrs Cross’ application was made under rr 193 and 194 of the Family Court
Rules 2002.
[34] It is common ground between the parties that the legal principles applicable to the striking out of Family Court proceedings are the same as those applicable to the striking out of proceedings in this Court under r 15.1 of the High Court Rules. Because the proceedings have been transferred to this Court, both parties agreed that the Court should proceed as if the application were made under r 15.1. It provides as follows:
Dismissing or staying all or part of proceeding
(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.
(2) If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3) Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4) This rule does not affect the court’s inherent jurisdiction.
[35] The legal principles applying to a strike out are straightforward and well settled.7 Relevantly:
(a) The pleaded facts are assumed to be true. This does not, however, extend to pleaded allegations which are entirely speculative and without foundation;
(b)The cause of action or defence it is sought to strike out must be clearly untenable;
(c) The jurisdiction is to be exercised sparingly and only in clear cases.
The Court is reluctant to terminate a claim, or a defence, short of trial;
(d)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument;
(e) The Court should be particularly slow to strike out a claim in any developing area of the law.
[36] A strike-out will not succeed if a re-pleaded claim is feasible. There is a difference between a pleading “which is a total write-off and one which is deficient but is capable of effective repair”.8
[37] The Court is entitled to receive affidavit evidence on a strike out application, and it will do so in a proper case. It will not attempt to resolve genuinely disputed
issues of fact and therefore will generally limit evidence to that which is undisputed.
7 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
8 Marshall Futures Ltd(in liq) v Marshall [1992] 1 NZLR 316 (HC) at 324.
Normally it will not consider evidence inconsistent with the pleading, for a striking out application is dealt with on the footing that the pleaded facts can be proved. There can, however, be cases where an essential factual allegation is so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further.9
[38] Allegations that are entirely speculative may be dismissed, and the Court is not required to assume the correctness of factual allegations obviously put forward without any foundation.10 Nevertheless, it is clear that there is a high threshold
before the Court will reject affidavit evidence, and strike out a proceeding.11
Analysis
Contracting out agreements
[39] Part 6 of the Act deals with contracting out agreements. Pursuant to s 21 of the Act, spouses may, for the purpose of contracting out of the provisions of the Act, make any agreement they think fit with respect to the status, ownership and division of their property, including future property. Pursuant to s 21A, spouses may, for the purpose of settling any differences that have arisen between them concerning property owned by either or both of them, may make any agreement they think fit with respect to the status, ownership and division of that property.
[40] Section 21D of the Act provides as follows:
Subject matter of agreement
(1) An agreement under section 21 or section 21A or section 21B may do all or any of the following:
(a) provide that any property, or any class of property, is to be relationship property or is to be separate property:
(b) define the share of the relationship property, or of any part of the relationship property, that each spouse or partner is to be entitled to when the marriage, civil union, or de facto relationship ends:
9 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
10 Collier v Pankhurst CA136/97, 6 September 1999 at [19]; Siemer v Stiassny HC Auckland CIV-
2008-404-6822, 30 November 2009 at [21].
11 Pharmacy Care Systems Ltd v Attorney-General (2001) 15 PRNZ 465 (CA) at [28]-[31].
(c) define the share of the relationship property, or of any part of the relationship property, that the surviving spouse or partner and the estate of the deceased spouse or partner is to be entitled to on the death of one of the spouses or partners:
(d) provide for the calculation of those shares:
(e) prescribe the method by which the relationship property, or any part of the relationship property, is to be divided.
…
[41] While contracting out agreements can deal with all or part of spouses’ property, relationship property not dealt with by agreement continues to be subject to the provisions of the Act.12
The contracting out agreement in this case
[42] The contracting out agreement at issue in this case is, it seems to me, an agreement made pursuant to s 21A. It was made long after the parties had started cohabitating, and some years after they married. On the limited materials available, it appears that it was entered into to settle differences, or at least potential differences, between them.
[43] The contracting out agreement sought to provide that certain items of property were the separate property of either Mr or Mrs Cross. It did not, however, purport to be in full and final settlement of all rights either Mr or Mrs Cross had under the Act, nor of other claims either of them might have, for example, under the Family Proceedings Act 1980 or other applicable principles of law. Specifically:
(a) The objectives in the agreement recorded, inter alia, that Mr and Mrs Cross wanted to identify the assets that were and were always to be their separate property, and:
[r]ecognise that any other property acquired, or otherwise up for consideration as relationship or separate property, shall be classifiable as relationship property, or separate property, according to the principles of the Property (Relationships) Act 1976.
12 Property (Relationships) Act, s 21O.
(b)It did not extend to property which was at the time owned, or which might later be acquired, by Mr and Mrs Cross jointly.
(c) The agreement recognised that the property listed in the schedule was Mrs Cross’ separate property. It preserved as separate property all property either Mr Cross or Mrs Cross owned at the time of the agreement and all property acquired by either of them in the future.
(d) There was no schedule of relationship property.
(e) It recognised that future application to the Family Court might be necessary, and that there might be other items of relationship property not caught by the agreement. Clause 7 provided that if any difference or dispute were to arise between Mr and Mrs Cross, following separation, as to any “other aspect touching on the fair division and implementation of relationship property”, the Family Court was to have full power to resolve and adjudicate on those issues.
[44] Mr Cross says that there was relationship property not dealt with in the contracting out agreement. He says that after an initial separation in or around 2010, he and Mrs Cross reconciled and that he moved into an apartment which was owned by a company incorporated by her, Platinum Holdings Trustee Limited. He says that subsequently this apartment was sold, and that the company bought another apartment in Milford Road in Auckland. He says that this apartment then became the family home until final separation, that he contributed approximately $5,000 per month to common expenses, and that in part his contributions were applied to the mortgage secured on the title to the apartment and on various expenses relating to the property. He also says that there were approximately $225,000 worth of family chattels in the Milford Road apartment, which, following separation, were retained by Mrs Cross. He says that he and Mrs Cross owned a property in Spain, where Mrs Cross now resides. He says that Mrs Cross has not paid any rent for her occupation of that property, and that there is approximately $170,000 worth of chattels in the property which Mrs Cross needs to account for. He also says that he and Mrs Cross
have a joint bank account in Spain, and that he is contributing AUD $1,500 to that account per month.
[45] Mrs Cross disputes all or most of these assertions. She says that the “majority of the assets” were, and remain, in trusts. She denies that Mr Cross contributed to the mortgage repayments made by Platinum Holdings Trustees Limited. She denies that any joint chattels remain, and says any chattels which they owned at the time the contracting out agreement was signed were stored and later written off following an accident. She denies that Mr Cross contributed to the running expenses of the house in Spain, and says that she has met all of the expenses relating to that property. She accepts, however, that Mr Cross made sporadic contributions and she further says that any chattels in the house in Spain are worth no more than $50,000.
[46] I cannot go behind Mr Cross’ assertions in determining this application. There is no material before me one way or the other which would entitle me to reject Mr Cross’ affidavit evidence in relation to these matters. While some of the assets are overseas and not subject to the jurisdiction of the Court, it appears that some of them are still in New Zealand. It cannot be said that the factual allegations made by Mr Cross are so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further.
[47] Further, there is no reference in the contracting out agreement to CCFTNZ, or to any future trust(s) settled by the parties, such as SFT-2. There is no provision purporting to exclude those provisions of the Act which give remedies against trusts
– for example, ss 44, 44C and 44F.
[48] Mrs Cross argued that claims under ss 44, 44C and 44F can only be advanced if the contracting out agreement is overturned under s 21J of the Act. The Act does not, however, say this, and counsel did not refer me to any case law to this effect. I note that some commentators have suggested that any attempt to contract out of these provisions may be void, on the ground that it would fall outside the enabling
provisions of s 21 (and s 21A), and, at common law, on the ground that it would purport to oust the jurisdiction of the Courts.13
[49] As already noted – above para [3] – Mr Cross’ application specifically seeks orders requiring Mrs Cross to disclose information relating to the disposition of any property made to defeat Mr Cross’ claim or rights, and relating to the disposition of any relationship property to any trust during the relationship. He also seeks orders requiring Mrs Cross to pay to him a sum of money to compensate him in relation to any claim that has been defeated by the disposition of relationship property to any trust. These orders are sought, inter alia, pursuant to ss 44, 44C and 44F of the Act.
[50] It follows that the strike out application cannot succeed, insofar as Mr Cross’ substantive application seeks to determine the parties’ respective shares in their relationship property, and orders declaring the status and ownership of that property. His claim is not clearly untenable. It is reasonably arguable that the contracting out agreement is limited in its application to the property specifically mentioned, and that there is relationship property not dealt with by the agreement. Pursuant to s 21O of the Act, any relationship property not dealt with by a contracting out agreement continues to be subject to the Act.
Application to set aside the contracting out agreement pursuant to s 21J of the Act
[51] Relevantly, s 21J provides as follows:
Court may set agreement aside if would cause serious injustice
(1) Even though an agreement satisfies the requirements of section 21F, the court may set the agreement aside if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice.
(2) The court may exercise the power in subsection (1) in the course of any proceedings under this Act, or on application made for the purpose.
…
13 RL Fisher (ed) Fisher on Matrimonial and Relationship Property (looselead ed, Lexis Nexis) at [5.24]. cf. Nicola Peart (ed) Brookers Family Law – Family Property (online looseleaf ed, Thomson Reuters) at [PR 21.04(5)].
(4) In deciding, under this section, whether giving effect to an agreement made under section 21 or section 21A or section 21B would cause serious injustice, the court must have regard to—
(a) the provisions of the agreement:
(b) the length of time since the agreement was made:
(c) whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made:
(d) whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties):
(e) the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement:
(f) any other matters that the court considers relevant.
…
[52] Mrs Cross assumes that Mr Cross is saying that the debt the subject of the acknowledgement of debt dated 1 August 2001, which is at issue in the High Court proceedings, is relationship property. On this basis, she says that Mr Cross’ application is misconceived and untenable, because a contracting out agreement cannot extend to trust property.
[53] In my view, Mrs Cross has misunderstood Mr Cross’ position. As I understand it, Mr Cross is not saying that the debt the subject of the acknowledgement of debt, or any of the trust owned assets, are relationship property. Rather, his application to set aside the agreement is premised on the assertion that the contracting out agreement was intended to achieve a fair and equal distribution as between both of them and all of their various entities. It is Mr Cross’ position that the liability recognised in the deed of acknowledgment of debt dated 1 August 2001 between SFT-1 and CCFTAU was overlooked at the time the contracting out agreement was negotiated and entered into, and that his agreement to pay Mrs Cross AUD $400,000 by way of adjustment to achieve a fair and equal distribution failed to take into account the debt acknowledged in the deed of acknowledgment dated 1
August 2001. He also says that Mrs Cross assumed that she was entitled to a share in the proceeds of the sale of the Lake Road property. He is saying that the parties, or he at least, entered into the contracting out agreement pursuant to a
misunderstanding, and that as a result, giving effect to the agreement causes serious justice to him, sufficient to invoke the provisions of s 21J.
[54] There is no evidence that there were any discussions or consideration of the deed of acknowledgment of debt during negotiations leading up to, or prior to, execution of the contracting out agreement. There is some potentially relevant documentary evidence after the agreement was signed, but it is equivocal. For example, it appears that Mrs Cross signed a set of accounts for SFT-2 for the year ended 31 March 2005 which do not record the debt owed by CCFTAU as an asset of the trust. This would seem to favour Mr Cross’ argument. However, it seems that the accounts were signed at about the same time as Mrs Cross’ lawyer was querying them with Mr Cross’ accountant who had prepared them. It seems that there was subsequent correspondence in which the accountant, who Mrs Cross says prepared the acknowledgment of debt in the first place, appears to agree that the 2005 accounts were in error. This would seem to favour Mrs Cross’ argument. There is, however, nothing to suggest that Mr Cross was aware of the letter to this effect written by the accountant.
[55] Many of the other documents referred to by the parties are in draft, and/or undated and/or unsigned, and formal discovery has not as yet been undertaken in the Family Court proceeding, although it has been attended to in the Securities House proceedings.
[56] The onus of proving that there has been a serious injustice is on the party seeking to set the contracting out agreement aside.14 It is also clear that there is a high hurdle facing a party wishing to set aside a contracting out agreement under s
21J. A Court will not set aside an agreement unless there has been a substantial injustice of sufficient gravity for the Judge to determine that in conscience the Court should intervene. That one party can establish that he or she did not receive what he or she may have received under the provisions of the Act, will not in itself be a sufficient ground to set aside an agreement, although gross inequality may well be a
factor that weighs heavily on the determinative process of the Court.15 Gross
14 H v C [2015] NZHC 1006 at [54].
15 Clark v Sims [2004] 2 NZLR 501 (HC) at [27]-[28], [30]-[36] and [70]-[75].
inequality may be a more important consideration, however, in s 21A compromise agreement cases.16
[57] On the materials available to date, I am not persuaded that Mr Cross’ application to set aside the contracting out agreement is clearly untenable. He has a difficult task ahead of him but his claim cannot be said to be hopeless.
[58] Similarly, Mr Cross’ application to rectify the contracting out agreement is
not clearly untenable.
[59] It was common ground that rectification is an available remedy in disputes regarding the provisions of an agreement entered into under either s 21 or 21A of the Act.17 For the reasons I have set out, it is arguable that the contracting out agreement, and the subsequent arrangements which were entered into, support Mr Cross’ assertion that there was a common intention, whereby Mrs Cross would retain the control and benefit of the New Zealand trust assets, he would retain the control
and benefit of the Australian trust assets, and that what was intended by both parties was that there would be a global division, whereby all matters relating to relationship property and the various trusts were resolved, with a $400,000 adjustment in Mrs Cross’ favour.
[60] It cannot be said that the cause of action seeking rectification is untenable, and that it has no prospect of success.
Abuse of process
[61] Mrs Cross also asserts that Mr Cross’ applications are an abuse of process, because they deal with the same issues that are in dispute in the Securities House proceedings.
[62] I do not agree that the issues raised by Mr Cross in the Family Court proceedings duplicate the matters at issue in the Securities House proceedings.
16 JMM v TTM [2012] NZHC 2522 at [65]-[69]; upheld on other grounds on appeal: Manning v Manning [2013] NZCA 671, (2013) 29 FRNZ 586; Wells v Wells [2006] NZFLR 870 (HC) at [37].
17 Maunder v Sanderson [2015] NZFC 2200 (FC) at [30].
[63] The Securities House proceedings are essentially between the trustee of SFT-
2, Mr Cross, the trustee of CCFTAU and Glenn Cross. They relate to an alleged debt, which the trustee of SFT-2 asserts is owing to it.
[64] In contrast, Mr Cross’ Family Court applications are concerned with his rights as a spouse pursuant to the Property Relationships Act 1976. Aspects of the Family Court applications overlap with the Securities House proceedings, but there are numerous other elements to Mr Cross’ applications which do not concern the debt, and whether or not it is owed. Indeed, Mr Cross’ application to set aside the contracting out agreement, or to rectify it, proceeds on the assumption that the debt is owed.
[65] Nor in my view can Mr Cross be criticised for undue delay. His application was brought within the time limit described by s 24(1)(a) of the Act, and I accept the contention made on his behalf that it reasonably followed the initial discovery process in the Securities House proceedings, and the receipt of legal advice.
[66] Mrs Cross asserts there has been material non-disclosure by Mr Cross. I accept that in some respects, his affidavits are economical and in other respects inconsistent. I acknowledge, however, the point made on Mr Cross’ behalf that the proceedings span events which have occurred over some 20 years, that those events have involved a large number of entities and transactions, and that they are inherently complex. It is clear that both parties have attempted discovery in the Securities House proceedings, but that they are still coming across additional documents which ought to have been discovered. There have been issues with disclosure on both sides, and given the passage of time, I do not consider that assertions made by Mr Cross, which have turned out not to be supported by subsequent documentation, can necessarily be criticised. It is apparent from the shifting of positions by both parties that they have relied heavily on the documents disclosed to date to refresh their respective memories, and that both have changed their position on various matters over time.
Result
[67] Mrs Cross’ application to strike out Mr Cross’ applications made to the
Family Court is declined.
Costs
[68] Mr Cross is entitled to his reasonable costs and disbursements. It is my preliminary view that the same should be assessed on a 2B basis. If counsel agree, I anticipate that they will be able to finalise costs and disbursements between them. If they do not agree, then I make the following directions:
(a) any memorandum seeking costs on behalf of Mr Cross is to be filed and served within 10 working days of the date of this judgment;
(b)any memorandum in reply by Mrs Cross is to be filed and served within a further 10 working day period;
(c) memoranda are not to exceed five pages in length.
I will then deal with the issue of costs and disbursements on the papers unless I
require the assistance of counsel.
Wylie J
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