Glover No 2 Ltd v Glover Trust Ltd - [2013] NZCA 608

IN THE COURT OF APPEAL OF NEW ZEALAND

CA194/2013
[2013] NZCA 608

BETWEEN	GLOVER NO 2 LIMITED Appellant
AND	THE GLOVER TRUST LIMITED, BAILEY TRUSTEE SERVICES LIMITED AND AUCKLAND WEST LEGAL SERVICES LIMITED First Respondents
AND	CIT HOLDINGS LIMITED Second Respondent

Hearing:	6 November 2013
Court:	Harrison, French and Miller JJ
Counsel:	R C Knight and T A Chubb for Appellant R B Stewart QC, Z G Kennedy and M D Pascariu for Respondents
Judgment:	3 December 2013 at 3 pm

JUDGMENT OF THE COURT

AThe application for leave to adduce further evidence is granted.
BThe appeal is dismissed.
C The appellant must pay the respondents one set of costs for a standard appeal on a Band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Harrison J)

Introduction

Gregory Olliver and his former wife, Sarah Sparks, were developers of high value residential properties in St Heliers, Auckland. Their operations were conducted through a convoluted legal structure of trusts and companies apparently designed to protect assets from creditors and minimise taxation liability. Entities associated with each of the Ollivers were parties to a joint venture which was formed to carry out the development.
Differences arose between the couple leading to their separation. Ms Sparks held fears about the viability of the development project. She instructed Don Thomas, a solicitor who represented the couple in their commercial interests, to take immediate steps to protect her interests and those of her children in the development assets, both from Mr Olliver and the parties’ creditors. At short notice Mr Thomas prepared and he and Ms Sparks in their capacities as trustees executed, a series of documents designed to ensure that Ms Sparks and her trusts obtained ownership and control of four properties.
One of the documents was a deed of trust whereby the appellant, Glover No 2 Ltd, declared that it held the four properties upon trust for a nominated beneficiary. Ms Sparks now asserts, despite her active participation, that the deed is not a valid document having legal effect. Instead, she says, it is a sham, intended to mask or conceal the true nature of the underlying transaction.
Allan J rejected that proposition in a decision delivered following a trial in the High Court.[1] As a consequence of his finding that a valid trust had been created, the Judge ordered Glover No 2 Ltd to deliver to other entities associated with Mr Olliver an executed transfer for the four properties. Glover No 2 Ltd now appeals.
[1]The Glover Trust Ltd v Glover Trust Corp Ltd [2013] NZHC 545.
Glover No 2 Ltd also applies for leave to adduce a new document, a resolution of the trustee of the Glover Trust dated 10 March 2011. The application was opposed. We grant leave but we are satisfied that the resolution is of no consequence to the substantive argument. The document is immaterial to the primary issue of whether the deed of trust was a sham.

Facts

The relevant facts…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] NZCA 608
Decision Date: 3 December 2013 at 3 pm

CaseChat Overview and Summary

In Glover No 2 Limited v Glover Trust Limited, the Court of Appeal of New Zealand considered the validity of a deed of trust executed by Glover No 2 Limited, a trustee company, which declared that it held certain properties upon trust for a nominated beneficiary. The appellant, Glover No 2 Limited, sought to challenge the validity of the deed, asserting that it was a sham designed to conceal the true nature of the underlying transaction. The High Court had previously rejected this proposition and ordered Glover No 2 Limited to deliver an executed transfer of the properties to the other associated entities of Mr Olliver.

The central legal issue before the Court was whether the deed of bare trust was a valid instrument having legal effect and, if so, what was its effect. The Court considered the principles surrounding sham transactions, noting that a party asserting that a trust is a sham must discharge a high onus. The Court held that there was nothing on the face of the deed or in the surrounding circumstances to show that it did not correctly reflect the common intention of the parties. Furthermore, the Court found that the parties' intention was unmistakable, and the deed was intended to be effective despite the trustees' resolution approving the receipt of the distribution of the properties.

The Court of Appeal upheld the decision of the High Court and dismissed the appeal. Glover No 2 Limited was ordered to deliver and execute a transfer of the properties as directed. Glover No 2 Limited was also ordered to pay the respondents' costs for the standard appeal on a Band A basis and usual disbursements.

This case highlights the importance of ensuring that the common intention of the parties is correctly reflected in commercial documents and the high onus on a party asserting that a trust is a sham. It also demonstrates the Court's willingness to enforce the terms of a deed of trust where it is clear that the parties intended to create a valid trust.

Orders