Macnamara v Macnamara
[2021] NZHC 173
•16 February 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-000404
[2021] NZHC 173
BETWEEN SHERYL ANN MACNAMARA
Plaintiff
AND
NOEL JAMES MACNAMARA
Defendant
CIV-2020-404-000646 BETWEEN
NOEL JAMES MACNAMARA
PlaintiffAND
SHERYL ANN MACNAMARA
First Defendant
SHERYL ANN MACNAMARA, NOEL JAMES MACNAMARA and GRAHAM
LINCOLN WILFRED CRAIG as trustees of the Macnamara Home Trust
Second Defendants
SHERYL ANN MACNAMARA, NOEL JAMES MACNAMARA and GRAHAM
LINCOLN WILFRED CRAIG as trustees of the Macnamara Family Trust
Third Defendants
Hearing: 11 February 2021 Counsel
LJ Kearns for Plaintiff/First Defendant
B O’Callahan and JD Ryan for Defendant/Plaintiff JP Cundy for Independent Trustees
Judgment:
16 February 2021
JUDGMENT OF DOWNS J
This judgment was delivered by me on Tuesday, 16 February 2021 at 10 am pursuant to r 11.5 of the High Court
Rules................................................................. Registrar/Deputy Registrar
MACNAMARA v MACNAMARA [2021] NZHC 173 [16 February 2021]
Directions?
[1] I heard this case, at short notice, as Duty Judge. It concerns what directions, if any, should be made in relation to trusts under the management of independent trustees. Central is an order of the court made by consent.
[2] I am the third Judge to consider the case in as many months. Associate Judge Gardiner made directions 16 December 2020. Van Bohemen J essentially confirmed those 29 January this year. More about this later.
Background
[3] Noel and Sheryl Macnamara separated 14 February 2019. Most of their assets were (and remain) in two trusts, the Macnamara Home Trust1 and the Macnamara Family Trust.2 Both were trustees, as was Mrs Macnamara’s father. Mr and Mrs Macnamara were unable to agree what was to happen to trust property. These assets include what was the family home in Karaka, and 99.8% of the shares in Oneheat Ltd,3 a company specialising in heating—and the family business.
[4] Oneheat’s accounts need to be reconciled. This has not been an easy task; and one which remains ongoing. It is not clear how long reconciliation will take, beyond some weeks.
[5] On 4 March 2020, Mrs Macnamara filed a claim in relation to the Home Trust seeking, among other things, appointment of an independent trustee. Mrs Macnamara sought summary judgment.
[6] On 8 May 2020, Mr Macnamara filed a similar claim in relation to both trusts. He too sought summary judgment and the appointment of an independent trustee.
[7] The hearing of Mrs Macnamara’s summary judgment application was scheduled for 27 August 2020. Moore J was to be the Judge. On 26 August, hence a day beforehand, Mr and Mrs Macnamara’s lawyers signed a joint memorandum
1 Home Trust.
2 Family Trust.
3 Oneheat.
recording the parties’ agreement to orders. Moore J made the orders as agreed. The Judge vacated the hearing.
[8]Because the terms of the consent orders are important, I pause to record them:
COURT ORDER
Before the Honourable Justice Moore on 27 August 2020.
Upon reading the memorandum of consent orders filed on 26 August 2020. This Court ORDERS that:
1. That Ms Macnamara, Mr Macnamara and Graham Craig be removed as trustees of the Macnamara Home Trust and the Macnamara Family Trust (“the Trusts”);
2. That Mr Patterson and Mr Darlow be appointed as trustees of the Trusts;
3. That the assets of the Trusts, being the property at 134 Motu Grande, Pauanui (“Pauanui Property”), the property at 49 Walters Road, Karaka (“Karaka Property”) and 998 shares in Oneheat Limited, be vested in Mr Patterson and Mr Darlow on the basis that the assets be resettled pursuant to clause 18 of the trust deed for the Macnamara Home Trust and clause 13 of the trust deed for the Macnamara Family Trust following the identification and securing of trust assets by Mr Patterson and Mr Darlow;
4. Mr Patterson and Mr Darlow are to take steps to effect a resettlement of the Trusts, including (but not limited to):
4.1Forthwith engaging a reputable real estate agency for the purpose of selling the Pauanui property owned by the Macnamara Home Trust, which Ms and Mr Macnamara consider should have a reserved price of no less than $1.4 million.
4.2Applying the proceeds of sale of the Pauanui Property to satisfy the secured debt of $1.1 million (plus interest) payable by the Trusts to the trustees of the Graham and Julie Craig Family Trust (“Craig Trust”).
4.3After consulting with Ms Macnamara and Mr Macnamara, establish the rental payable to the Macnamara Home Trust by Mr Macnamara and/or Oneheat Limited for the use of the Karaka property owned by the Macnamara Home Trust.
4.4Reconcile the accounts of Oneheat Limited, determine any liability of Ms Macnamara, Mr Macnamara or the Trusts to Oneheat Limited and take all steps as necessary to sell the shares/business of Oneheat Limited through the existing broker.
4.5After consulting with Ms Macnamara and Mr Macnamara, and following the taking of advice from a reputable real estate agency,
to determine the sale process and the reserve price of the Karaka Property to enable the Karaka Property to be sold for the best price.
4.6Negotiating, in consultation with Ms Macnamara and Mr Macnamara, with the Craig Trust for the release of the security to enable the Karaka Property to be sold (including as an example only holding a portion of the sale proceeds back as security for any claim that they have in relation to the $500,000 disputed debt).
4.7After consulting with Mr and Ms Macnamara either reach a determination on any liability of the Trusts to the Craig Trust for the sum of $500,000 or seek determination of the liability either from the Court or, by way of arbitration.
4.8On sale of the Trusts’ assets, and after payment of the Trusts’ liabilities, payment of the Trustees’ reasonable fees and subject to any funds that the Trustees determine need to be held back, to distribute the net proceeds of sale to new trusts for Ms and Mr Macnamara in accordance with the resettlement provisions of the Trusts.
5. Subject to the above, that orders for sale issue for the Pauanui Property, the Karaka Property and Oneheat Limited;
6. That the reasonable fees of Mr Patterson and Mr Darlow be met from the assets of the Trusts;
7. Leave be reserved for the parties and the independent trustees to apply to the Court for further directions.
[9] It will be noted the orders refer to the Karaka home and another in Pauanui. The independent trustees sold the latter and began to make arrangements to market the Karaka home for sale, in which Mr Macnamara and his adult daughter still live.
[10] The claims were scheduled for mention in the Chambers List 16 December 2020. On 14 December, Mr Macnamara filed a memorandum seeking further directions, something the consent orders permitted. Mr Macnamara wanted an independent expert appointed to determine Oneheat’s financial position. This because:
Mr Macnamara (together with his daughter, Drew) wishes to reserve a right to purchase the Karaka Property with a view to avoiding real estate commission and minimising further costs. He believes that a global resolution and the winding up of the Trusts are possible on a “hotchpot” basis. Essential to this is the determination of the assets and liabilities of the Trusts, including the amounts due to Oneheat.
In respect of resolution, Mr Macnamara has made a proposal to acquire the Karaka Property on the basis the purchase settles upon reconciliation of the
financial statements for the Trusts and Oneheat. He has also offered to acquire the business and assets of Oneheat to resolve its day-to-day operational issues.
However, the accountants engaged by the Trusts (Ben Tauber) and Oneheat (Nicky Reynolds) have not been able to progress the reconciliation of the financial statements for the Trusts and Oneheat. Given this and the impact it has not only on the winding up of the Trusts but also concluding the issues in dispute, counsel suggests that the Court appoint an expert under Subpart 5 (Experts), Part 9 (Evidence) of the High Court Rules.
[11] Mrs Macnamara opposed the direction the next day with her own memorandum. Mrs Macnamara expressed concern Mr Macnamara was attempting to needlessly delay sale of the Karaka home. She noted Mr Macnamara was still living there, but not paying rent, while she was paying rent for her accommodation (elsewhere).
[12] One of the independent trustees is William Patterson. On 16 December 2020, Mr Patterson filed a memorandum explaining his position and that of his fellow trustee, Christopher Darlow:
Sale of Karaka property
In order to progress the sale of the Karaka property the trustees met with agents from Bayleys and they provided the trustees with a marketing report proposing a sale by tender commencing with signboard installation on 11 January 2021 and marketing through to close of tenders on 10 February 2021.
On 11 December 2020 the trustees received a valuation of the Karaka property as at 4 December 2020. It assessed a market value of $4 million.
On Friday 11 December, before the valuation was received but after the marketing report and estimate of selling price ($4m to $4.5m) had been sent to counsel for Mr Macnamara, the trustees were asked to advise whether they would be willing to sell the Karaka property to Mr Macnamara and his daughter Drew. Counsel was advised that the trustees had no objection in principle but the price would need to match the estimates and be approved by Mrs Macnamara if the market was not to be tested.
Shortly thereafter the trustees received by email an offer from Mr Macnamara and Drew (subject to contract) to buy the Karaka property for $3m. This offer not acceptable given the estimate referred to above.
On receipt of the valuation counsel for Mr Macnamara was asked if Mr Macnamara was interested in submitting an offer at valuation. He was advised that it needed to be a clean offer and not tangled up with Oneheat issues.
The trustees made a further enquiry on Monday 14th December and were advised that counsel hoped to respond later that day. No response has been received.
The property has today been listed with Bayleys to market in accordance with the marketing plan referred to … above.
Reconcile the accounts of Oneheat Limited etc
The trustees do not consider that it is possible to combine this issue with the sale of the Karaka property.
The trustees have engaged Ben Tauber to assist. Mr Tauber is a chartered accountant who was formerly involved in assisting with the preparation of Oneheat Ltd accounts. Mr Tauber (and a Carolyn Miller who had previously assisted) had ceased acting as accountant for the company after Mr and Mrs Macnamara separated. Mr Tauber has had trouble in retrieving relevant records required for the reconciliation exercise but has obtained sufficient information to provide the trustees with a preliminary estimate of the position as it relates to Mr Macnamara.
Subject to revision if further information is provided to him, Mr Tauber presently estimates that in addition to salary taken by Mr Macnamara since the separation (the level of which is subject to dispute), Mr Macnamara has also withdrawn or used company funds which Mr Tauber says will need to be repaid to the company. The amount is significant.
Once Mr Tauber’s enquiries are completed, unless agreement is reached with Mr Macnamara to resolve the issues the trustees intend [to] commission Mr Grant Graham of Calibre Partners (formerly Korda Mentha) to review and report to the trustees so they can make a final determination.
[13] The memoranda and files were given to Associate Judge Gardiner. The Judge declined to make the directions sought by Mr Macnamara. She explained:4
(a) Reconciliation of the accounts of Oneheat Limited and any liability of Ms Macnamara, Mr Macnamara, or the Trusts to Oneheat is specifically within the functions of the independent Trustees appointed by the Court by order dated 27 August 2020 (in particular, 4.4 of that order);
(b) As appears in the memorandum filed by the Trustees, they are progressing that reconciliation exercise;
(c) The Trustees themselves propose to commission an independent expert, Mr Grant Graham of Calibre Partners, to review and provide a report to them so they can make a final determination;
(d) An appointment of an expert by the Court is not necessary or appropriate, as the issue of the Trusts’ liability to Oneheat is not a question that the Court is called upon to determine at this point, that being a matter for the independent Trustees as per the Court order of 27 August 2020.
4 Minute of Associate Judge Gardiner, 16 December 2020 at [4](a)–(d).
[14]Instead, the Judge made these directions:5
(a) The Trustees are to continue to carry out the orders of the Court dated 27 August 2020;
(b) The proceedings will be listed in the Duty Judge list in February 2021 to monitor progress;
(c) The Trustees have leave to seek directions from the Court by way of memoranda, if necessary;
(d) The Chambers list mention today at 2.15 pm is vacated and appearances are excused.
[15]Christmas then intervened.
[16] On 21 January 2021, the independent trustees filed a memorandum saying they could not progress the sale of the Karaka home because Mr Macnamara had not provided the real estate agent access. On 25 January, Mr Macnamara responded with a memorandum, saying:
The Trustees have sought a judicial conference so that appropriate directions can be made to ensure that real estate agents have necessary access to the Karaka Property to enable it to be marketed and sold. This is opposed by Mr Macnamara and raises two immediate issues:
(a) The timing to complete the reconciliation of the financial statements for the Trusts and Oneheat in accordance with the Court Orders; and
(b) The timing for the sale of the Karaka Property and any present need for the real estate agents to access the Karaka Property.
Mr Macnamara would prefer to purchase the Karaka Property and, at present, he has an option to meet any offer to purchase the Karaka Property. However, and in order to enable him to be in a position to purchase the Karaka Property, he needs to make an application for finance. This necessarily requires the reconciliation to be completed as soon as possible to ascertain his likely entitlements under winding up of the Trusts and, therefore, his ability to acquire the Karaka Property. Without the reconciliation, he cannot apply for finance and his ability to acquire the Karaka Property is likely to be prejudiced.
[17] Mr Macnamara proposed a timetable delaying marketing and sale of the Karaka home.
5 At [6](a)–(d).
[18] The independent trustees responded with a memorandum 28 January, and an affidavit of Mr Darlow. Mr Darlow noted the trustees did not understand the consent orders to confer any option or right of first refusal on Mr Macnamara in relation to the Karaka home. He noted there had been no discussions between them and Mr Macnamara’s representatives to that effect. The independent trustees sought “further court supervision of the implementation of the [consent] order”.
[19] The files were given to the Duty Judge, van Bohemen J. The Judge declined to make the timetable directions sought by Mr Macnamara. He noted that would have the effect of delaying sale of the Karaka home, there being nothing to justify that. The Judge said nothing existed to “indicate that the sale process for the Karaka property was intended to be contingent on completion of the reconciliation of the Oneheat account by the trustees”. He added, “it appears ... the trustees are being obstructed in implementing the court orders of 27 August 2020 which were made by consent… in both proceedings”.6
[20] The Judge placed the claims in the Duty Judge for 10 February 2021, hence my involvement the next day (the parties agreed to the hearing being 11 February).7
[21] This introduces the applications I must decide. On 4 February, Mr Macnamara filed an application for directions the independent trustee promptly complete the reconciliation, and the Karaka home not be sold until after that is complete. The independent trustees seek directions they proceed with the marketing and sale of the Karaka home “forthwith”; and requiring Mr Macnamara to provide “all assistance reasonably necessary ... for the Karaka property to be marketed and sold”. The independent trustees also seek a direction clarifying that reconciliation and sale are distinct.
[22] Mrs Macnamara supports these directions and opposes those sought by Mr Macnamara. She seeks an unless order requiring Mr Macnamara to leave the Karaka home if he does not provide assistance to market and sell it.
6 Minute of van Bohemen J of 29 January 2021 at [12].
7 On behalf of Mr Macnamara, Mr O’Callahan initially objected to a hearing on 11 February. However, by agreement, I adjourned the hearing until 3 pm that day. Mr O’Callahan expressly abandoned his objection during the hearing that afternoon.
Analysis
[23]The arguments turn on the correct interpretation of the consent orders.
[24] Mr Macnamara emphasises cl 3 of the consent orders. It provides resettlement of the trusts is to occur following the identification and securing of trust assets by the independent trustees. On behalf of Mr Macnamara, Mr O’Callahan submits because Oneheat’s reconciliation is directed at determining its assets and liabilities; this is part of the identification/securing process, hence antecedent to any sale.8
[25] Mr Macnamara has filed an extensive affidavit. He says one of the reasons he agreed to the consent orders “was to be able to buy the Pauanui property and the Karaka home if that was feasible”.
[26] Mr O’Callahan observes the feasibility of Mr Macnamara’s purchase of the Karaka home turns on finance, and because any financier would wish to know Oneheat’s financial position and whether Mr Macnamara is to continue to be involved with the company, reconciliation must occur first. Mr O’Callahan also refers to correspondence between Mr Macnamara and the independent trustees in relation to his possible purchase of the Karaka home.
[27] There are several difficulties with these submissions. First, the consent orders do not expressly require reconciliation to occur before the Karaka home is marketed and sold. It would not have been difficult for the drafters to have made reconciliation a prerequisite to marketing and sale. They did not.9
[28] Second, Oneheat’s reconciliation and the marketing and sale of Karaka are dealt with by different terms of the consent orders. Nothing in the orders implies Oneheat and Karaka are interlinked or intertwined. Indeed, their distinct treatment suggests otherwise. True, Oneheat’s reconciliation involves the identification of its
8 Mr O’Callahan also referred very briefly to the wording of the trust agreements. This submission need not be recorded, for, it adds nothing.
9 Some clauses are clearly sequential. For example, the proceeds of the Pauanui sale (cl 4.2) could only be derived from sale of that property (cl 4.1).
assets and liabilities. However, again, there is nothing in the orders to suggest this is a specific prerequisite to the sale and marketing of the Karaka home.
[29] Third, the consent orders identify a series of things the trustees must do, without limiting the discretion of the trustees. Mr Macnamara’s proposed interpretation would significantly compromise this discretion, in turn undermining the purpose of the orders: control, management and sale of trust assets by independent trustees. The obvious bears repeating: the consent orders came into being because Mr Macnamara and Mrs Macnamara were unable to agree as to what would happen to trust property, hence the need for independent trustees to take control of that property and make binding decisions about it.
[30] Fourth, that Mr Macnamara might have agreed to the consent orders hoping to buy the Karaka home does not change what the orders mean. As will be apparent, the issue is not what a party believes the orders mean, but what, objectively, they mean. In any event, having read the extensive correspondence between the independent trustees and Mr and Mrs Macnamara, it is quite clear the independent trustees have not agreed Mr Macnamara should have a right of first refusal in relation to the home, or that Oneheat’s reconciliation and the sale of Karaka are interlinked or intertwined.10
[31] Fifth, two other Judges have already concluded marketing and sale of the Karaka home should continue notwithstanding Oneheat’s reconciliation remains incomplete. I heard little argument about the status of these decisions, given each was made on the papers. However, I note Mr Macnamara has not attempted to argue any material change of circumstance in the wake of the decisions of Associate Judge Gardiner and van Bohemen J. It would be odd if each were merely treated as legal history, the implication of Mr Macnamara’s approach. And, as will be apparent, I agree—entirely—with both Judges.
[32] This leaves a related point. Mr O’Callahan said while he was not alleging bad faith by the independent trustees, he then said it was “weird and inappropriate” they had not completed Oneheat’s reconciliation.
10 Mr Macnamara’s memorandum of 25 January 2021—see [16]—asserts “an option to meet any offer to purchase the Karaka Property”. This assertion is not supported by the record.
[33] Reconciliation has fallen to Benedict Tauber, a chartered accountant. Mr Tauber was the tax agent for Oneheat and the Macnamaras for approximately 10 years. Mr Tauber’s services were terminated when Mr and Mrs Macnamara separated. The independent trustees have engaged Mr Tauber to complete the reconciliation, presumably in part because of his knowledge of the company and Mr and Mrs Macnamara. Mr Tauber has filed an affidavit. So too Nicol Reynolds, whom Oneheat engaged to deal with its financial matters following the couple’s separation.
[34] I have considered these affidavits, those on behalf of the independent trustees, those of Mr and Mrs Macnamara, and the record more generally. I am quite satisfied there is nothing “weird and inappropriate” about Mr Tauber’s attempt to reconcile Oneheat’s financial position, the independent trustees’ related efforts, or their efforts more generally. On the contrary, the record implies Mr Patterson and Mr Darlow are acting diligently and professionally, in less than propitious circumstances.11
[35] These reasons also explain why the directions sought by the independent trustees should be made. No further analysis is required.
[36] This leaves Mrs Macnamara’s application for an unless order. I acknowledge Mrs Macnamara’s frustration at her former husband. However, I am not persuaded an unless order is yet required in relation to Mr Macnamara. It is possible Mr Macnamara misapprehended the effect of the consent orders. Any such misapprehension will now be displaced. Moreover, it would be wrong to presuppose Mr Macnamara will not cooperate with the independent trustees in the marketing and sale of the Karaka home, particularly as if he does not do so, he risks committing contempt of court. But, I leave open the possibility of such an order in the future.
Result
[37]Mr Macnamara’s application for directions is dismissed.
11 The independent trustees wish to sell the Karaka home reasonably quickly because a loan of
$250,000 is secured against it, interest is accruing at 10.5 percent per annum, and the trustees do not hold enough funds to repay the loan. They consider this the best approach to maintain the corpus of trust property.
[38] The independent trustees’ application for directions is granted. I make these directions:
(a)Sale of the Karaka home is not contingent on completion of reconciliation of Oneheat’s accounts.
(b)The trustees are to proceed with the marketing and sale of the Karaka home forthwith.
(c)Mr Macnamara is to provide all assistance reasonably necessary in order for the karaka home to be marketed and sold.
(d)Without limiting the generality of (c), Mr Macnamara is to:
(i)Allow Bayleys access to the Karaka home to ensure the lawns are mowed and the property is in order; and
(ii)Allow Bayleys access to the Karaka home for one hour each Sunday during the period of the marketing campaign for the purposes of conducting open homes.
[39]Mrs Macnamara’s application for an unless order is declined.
[40] The claims are to be called Monday, 1 March 2021 in the Duty Judge list (to monitor progress).
Costs
[41] I can think of no reason why Mr Macnamara should not be liable for 2B costs, but I will receive memoranda (of not more than five pages each) if the parties disagree, in this order:
(a)Mrs Macnamara by 9 March 2021.
(b)Mr Macnamara by 16 March 2021.
(c)The independent trustees by 23 March 2021.
……………………………..
Downs J
Solicitors/Counsel:
Shieff Angland, Auckland.
Claymore Partners Ltd, Auckland. LeeSalmonLong, Auckland.
LJ Kearns, Auckland.
B O’Callahan, Auckland.
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