Le Noel v Le Noel
[2017] NZHC 159
•15 February 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-2017-404-182 [2017] NZHC 159
BETWEEN PAULA JANINE LE NOEL
Applicant
AND
ALAN BRIAN LE NOEL First Respondent
AND
MICHAEL PAUL ATKINSON, MATTHEW GRAEME BELLINGHAM AND AARON JAMES WALLACE AS DIRECTORS AND SHAREHOLDERS OF LE NOEL TRUSTEES LIMITED Second Defendants
Hearing: 14 February 2017 Appearances:
D A T Chambers QC and J M McGuigan for Applicant
K G Davenport QC and R Butler for RespondentJudgment:
15 February 2017
JUDGMENT OF PALMER J
This judgment is delivered by me on 15 February 2017 at 9.00 am pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Counsel & Solicitors:
D A T Chambers QC, Auckland
K G Davenport QC, AucklandR D Butler, Barrister, Auckland
Auckland Property Legal Service, Auckland
Sellars & Co, Helensville
LE NOEL v LE NOEL [2017] NZHC 159 [15 February 2017]
Summary
[1] Ms Paula Le Noel and Mr Alan Le Noel are in dispute over effecting transfer of a property pursuant to a relationship property settlement. Ms Le Noel seeks urgent interim orders requiring the transfer to her to be effected before her onsale of the property settles today. Having resisted it, Mr Le Noel now agrees to effect the transfer subject to reservation of $500,000 for the benefit of ASB which has a mortgage over the property which it will not otherwise release. I make interim orders to enable the transfer, reserve the $500,000 and protect Ms Le Noel’s position.
Factual context
Who is who
[2] Ms Le Noel and Mr Le Noel were in a relationship from 2003 until they separated on 15 November 2015.
[3] Together with the directors of Le Noel Trustee Limited (the Trustee Company) they were trustees of the Le Noel Family Trust (the Family Trust). The directors, Mr Michael Atkinson, Mr Matthew Bellingham and Mr Aaron Wallace, are also partners of the accounting firm used by the Le Noels. The Family Trust was settled by the Le Noels in February 2004. At the time of separation the Family Trust held a number of companies and two commercial properties.
[4] From June 2015 the Le Noels also used a separate Personal Assets Trust into which the family home in Castor Bay on Auckland’s North Shore (the Property) was transferred. The trustees for that trust were the same as for the Family Trust.
Section 21A Agreement
[5] On 18 November 2015 Mr and Mrs Le Noel entered an agreement under s 21A of the Property (Relationships) Act 1975 (the s 21A Agreement). It was intended to be a global settlement of relationship and trust property. Any disparity in settlement reflected the economic disparity and lump sum spousal maintenance adjustments agreed in Ms Le Noel’s favour. Mr Bellingham was involved in this process and was aware of aspects of the negotiations.
[6] Mr and Mrs Le Noel agreed, in the s 21A Agreement, that the Property be distributed to Ms Le Noel in her name, free of all mortgages, aside from a security required by the ASB Bank in respect of a $20,500 personal debt. They agreed “trustees of the Le Noel Personal Assets Trust hereby agree to distribute the former family home… to Paula”. The s 21A Agreement was signed by Mr and Mrs Le Noel in their own right and, separately, by each of them as trustees of the Family Trust and then as trustees of the Personal Assets Trust. None of the directors of the Trustee Company, who were also trustees of both trusts, signed it.
[7] The Property would reflect Ms Le Noel’s share of the relationship property. The Property was valued at $2 million and both Mr and Ms Le Noel acknowledged in the Agreement that they had obtained their own valuations and that settlement was “fair and reasonable based on those valuations”.
[8] The Property was also subject to mortgages to ASB Bank for $1.38 million, relating to the companies held by the Family Trust, which would need to be disposed of for transfer to occur.
[9] Ms Le Noel’s evidence is that, in preparation for the s 21A Agreement in October 2015, Mr Bellingham had asked ASB to remove the Property as security for the companies to allow the settlement to proceed.
Onsale of the Property
[10] After the settlement Ms Le Noel had no spousal maintenance and no access to funds from the companies. She was keen to sell the Property. On 25 November
2016 she engaged a real estate agent to do that. On 7 December 2016 Ms Le Noel entered into a sale and purchase agreement with a third party in respect of the property as “Paula Le Noel (pending title paperwork to name displayed)” for $2.1 million. The sale became unconditional on 15 December 2016. Settlement was scheduled for today, 15 February 2017.
[11] In an affidavit of 14 February 2017 Ms Le Noel deposes the purchaser and his family are currently staying in B&B accommodation and must leave it on 15
February 2017. In two weeks’ time they depart for a three month holiday. They have already delivered furniture to the property which is being stored in the garage.
ASB mortgage
[12] On 17 December 2016, unaware of the sale, Mr Bellingham emailed Mr and Mrs Noel with news of ASB’s response to the request to release the mortgage on the Property. ASB declined the request because of the companies’ poor trading results but indicated it would reconsider the position on receipt of the companies’ March
2017 results. In the meantime ASB agreed to a partial release, so that at least
$500,000 of security over the Property would be retained but the mortgage would be fully discharged, to allow the settlement to take place. Mr Bellingham proposed that Ms Le Noel could sell the Property but place $500,000 in an interest-bearing facility in her name with the bank taking a charge over it. The charge would be removed through negotiation after March 2017 or by refinancing.
[13] On 21 December 2017 Ms Le Noel requested finalisation of the documentation required to implement the s 21A Agreement and transfer title to the Property. ASB would hold $500,000 in an interest-bearing account in her name pending refinancing of the monies it was owed or an improved financial position of the companies.
Dispute
[14] At this point, Mr Le Noel agreed to effect the terms of the s 21A Agreement if he was paid an additional $100,000 (the amount the sale price exceeded the valuation for relationship property purposes). As might be expected, further lawyers’ letters and negotiations ensued in December 2016 and then January and February
2017. These did not help the parties reach agreement. By 7 February 2017 Ms Le Noel had withdrawn her offer to quarantine $500,000 and was insisting the s 21A Agreement be honoured by transfer of the Property to her with clear title. And by
9 February 2017 the directors of the Trustee Company were saying they did not consent to the s 21A Agreement or to the sale of the Property.
[15] On Friday 10 February 2017 Ms Le Noel filed proceedings in the High Court for breach of contract by Mr Le Noel, for breach of contract, breach of trust and misrepresentation by Mr Le Noel as trustee and by the directors of the Trust Company, and for excluding her from trustee communications. She seeks specific performance of specified clauses of the s 21A Agreement, disclosure of communications and written documents relating to the operation of the trusts and costs.
[16] The settlement date for Ms Le Noel’s onsale of the property was scheduled for 15 February 2017. W hen the matter had its first call in the High Court Duty List on Monday 13 February, Ms Chambers QC, for Ms Le Noel, sought interim orders requiring transfer of the property. Mr Butler, for Mr Le Noel and the directors of the Trust Company as trustees, opposed the orders and sought an urgent hearing after
23 February 2017. I directed them to file an affidavit that day, 13 February, in preparation for a hearing of the application on the afternoon of 14 February 2017.
Current positions
[17] Now Ms Davenport QC, for Mr Le Noel and the directors of the Trustee Company, says they will, sensibly, consent to orders directing them to sign all appropriate transfers and other documents necessary to give effect to the property transfer contemplated by Ms Le Noel’s sale and purchase agreement. They do so on the condition that Ms Le Noel confirms she will hold $500,000 from the net proceeds of sale for the benefit of the ASB. Otherwise the ASB mortgage will not be discharged.
[18] Ms Chambers QC, for Ms Le Noel, maintains her primary position of insisting on transfer of clear title to the property pursuant to the s 21A Agreement. However, the ASB position makes it unlikely that insisting on that will effect it. The ASB requires $500,000 of security to allow the transfer to occur. Ms Le Noel’s fallback position is to seek alternative interim orders that would require transfer of the property free of all mortgages except a $500,000 ASB security by way of a loan from Ms Le Noel to a company which would be transferred to ASB, repaid within
three months and secured by caveats, as well as personal guarantees from Ms Le
Noel to ASB and Mr Le Noel to Ms Le Noel (and solicitor-client costs).
Law
[19] The Court has inherent jurisdiction to make interim orders to preserve its ability to give effect to the parties’ substantive rights, pending trial.1 Ms Le Noel seeks interim orders under the following more specific sources of authority:
(a) r 7.53 of the High Court Rules 2016 which entitles an application for an interlocutory injunction to be made;
(b)r 11.22 which empowers a court to give all necessary directions to effect the sale of a property by a judgment;
(c) s 52(1)(g) of the Trustee Act 1956 which empowers a court to vest land in any such person, in any such manner as the court may direct where a trustee has been required by a person entitled to require a conveyance of land to convey the land and has wilfully refused or neglected to do so; and
(d)ss 339 and 343 of the Property Law Act 2007 which provide a broad discretion to empower a court to order the sale of property owned by co-owners and make certain ancillary directions.2
[20] As Arnold J summarised for the Court of Appeal in NZ Tax Refunds v Brooks
Homes Ltd:3
The applicant must first establish that there is a serious question to be tried or, put another way, that the claim is not vexatious or frivolous. Next the balance of convenience must be considered. This requires consideration of the impact on the parties of the granting of, and the refusal to grant, an order. Finally, an assessment of the overall justice of the position is required as a check.
1 Andrew Barker “Interim Injunctions” in Sir Peter Blanchard (ed) Civil Remedies in New Zealand
(2nd ed, Thomson Reuters, Wellington, 2011) at ch 6.
2 Bayly v Hicks [2013] 2 NZLR 401 at [33].
3 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12].
[20] Or, as Asher J summarised in Cabco Group Ltd v Bartlett:4
The approach to interim injunction applications in New Zealand is now well settled. The Court first considers whether there is a serious question to be tried in respect of any of the causes of action pleaded or available to the plaintiff. The Court then goes on to consider whether the balance of convenience is in favour of the granting of an injunction, or against it. In considering the balance of convenience the Court will pay particular attention to the question of whether damages would be an adequate remedy. If damages would be an adequate remedy for the plaintiff, it will generally follow that the balance of convenience does not require any interim intervention by the Court. Finally, after considering matters under these heads the Court will on overview consider where the justice of the case lies.
Should I grant interim orders?
[21] I am satisfied there is a serious question to be tried here. Mr Le Noel’s initial attempt to threaten to frustrate the s 21A Agreement unless he got $100,000 was opportunistic and ill-judged.
[22] I also consider the balance of convenience favours granting interim orders. Ms Le Noel will be exposed to legal claims if she does not settle on her agreement to sell the Property. And the evidence suggests the third party purchaser, who is agreed to be bona fide, would be seriously inconvenienced if settlement does not occur and possession of the Property cannot be taken. I am not persuaded by Ms Davenport’s submission that damages is an adequate remedy for the flow on consequences of failing to make the Property available for settlement.
[23] The primary inconvenience arising from interim orders requiring transfer of the property concerns ASB’s mortgage security over the property. If ASB’s security interest is not preserved in the amount of $500,000 it has indicated it would not consent to its mortgage being discharged. No one has suggested ASB’s security rights be overridden. Effecting the s 21A Agreement so as to allow settlement of the sale and purchase agreement today requires ASB’s security to be honoured somehow. That can be reflected in the terms of the interim orders.
[24] Other than the ASB security, the inconvenience to Mr Le Noel of transferring the property is that he would have to perform an agreement which he is obliged to
4 Cabco Group Ltd v Bartlett (2009) 6 NZELR 500 (HC) at [30].
perform anyway. Neither is there anything to suggest the other trustees, the directors of the Trustee Company, have any other reason to prevent the transfer of the property.
[25] I consider the overall justice of the situation favours interim orders being made to effect the s 21A Agreement subject to honouring ASB’s security interest.
What interim orders should I grant?
[26] The pressure of proceedings being issued has crystallised the parties’ positions so there is less between them now than there was. The defendants are willing to consent to orders directing them to transfer the property subject to Ms Le Noel holding $500,000 for the benefit of ASB. In her fallback position, Ms Le Noel is willing to lend $500,000 to allow ASB’s security interest to be honoured if that loan is repaid in three months.
[27] Under the s 21A Agreement Ms Le Noel is entitled to receive the Property free of all mortgages other than a $20,500 personal debt. But Ms Le Noel has, to some extent, put herself into the position she now finds herself by entering into the sale and purchase agreement precipitately.
[28] In order to ensure the transfer occurs today Ms Le Noel has sensibly offered, in her fallback position, to facilitate honouring of the $500,000 security interest by way of a loan for three months. Three months allows the defendants to organise refinancing of that amount, if ASB’s position does not change in light of the companies’ trading position at the end of March. Ms Chambers’ additional suggestion that leave be reserved to the parties to seek further directions adds further flexibility.
[29] I do not accept Ms Davenport’s submission that many of the terms of Ms Le Noel’s proposed fall back orders bear an insufficient relationship with the underlying proceedings. The proceedings are intended to preserve Ms Le Noel’s rights under the
s 21A Agreement against Mr Le Noel and the other trustees and that is also a key aim of the interim orders.5
[30] However I do have concerns about the involved wording of, and multiple transactions inherent in, the terms of the interim orders sought, hurriedly today, by Ms Chambers on behalf of Ms Le Noel. I consider the more straightforward course is for Ms Le Noel to meet ASB’s request for the form of security in its letters of 8 and 9 February 2017 to Davenports Harbour and APLS Lawyers’ confirmation to ASB in its letter of 9 February 2017.
[31] At the end of the hearing just before 3.30 pm on 14 February 2017 I explicitly gave the parties the opportunity to agree on the terms of mutually acceptable orders themselves before my judgment is issued at 9.00 am 15 February
2017. Since they have not done so I make orders in the terms below.
Result
[32] I order:
(a) the defendants are to sign all transfers and other documents necessary to give effect, on 15 February 2017, to the property transfer to Ms Le Noel of 13A Commodore Road, Castor Bay (described in the certificate of title NZ31C/1342) as recorded in the Settlement Agreement as to Trust Property and Relationship Property of 18
November 2016 (particularly at clause 7(i));
(b) the parties are to sign all documents necessary to give effect, on 15
February 2017, to ASB’s requests for security in its letters of 8 and 9
February 2017 to Davenports Harbour and in APLS Lawyers’
confirmation to ASB in its letter of 9 February 2017;
(c) if the funds held by ASB in Ms Le Noel’s name have not been
released to her by 15 May 2017, the parties are to sign all documents necessary to substitute, on that date, those funds (which will be
5 Roseneath Holdings Ltd v Grieve [2004] 2 NZLR 168 (CA).
released to her) with such equal or lesser funds as are required by ASB to be held in the name of Mr Alan Le Noel or his associated entities;
(d)the parties, and ASB, have leave to apply to Court for further directions as are required; and
(e) costs are awarded to the applicant but if the parties cannot agree on quantum they have leave to file brief written submissions within 20 working days of the date of this judgment.
Palmer J