Macnamara v Macnamara
[2021] NZHC 2361
•10 September 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 2361
BETWEEN SHERYL ANN MACNAMARA
Plaintiff
AND
NOEL JAMES MACNAMARA
Defendant
CIV-2020-404-000646 BETWEEN
NOEL JAMES MACNAMARA
Plaintiff
AND
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: 8 September 2021 (by VMR) Appearances:
L Kearns QC for S A Macnamara
B O’Callahan and J D Ryan for N J Macnamara J Cundy for Trustees
Judgment:
10 September 2021
JUDGMENT OF VENNING J
This judgment was delivered by me on 10 September 2021 at 9.30 am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
MACNAMARA v MACNAMARA [2021] NZHC 2361 [10 September 2021]
Introduction
[1] Court appointed independent trustees, William Paterson and Christopher Darlow, (the trustees) seek directions from the Court in relation to a claim that has been raised against the Macnamara Family Trust (Family Trust) by the trustees of the Graham & Julie Craig Family Trust (Craig Trust) for the repayment of a loan advance of $500,000 together with interest.
Background
[2] Sheryl and Noel Macnamara separated in February 2019. Most of their assets were held in two trusts, the Macnamara Home Trust (Home Trust) and the Family Trust. In broad terms, the Home Trust held property and the Family Trust held 998 of the 1,000 shares in Oneheat Limited. Both Mr and Mrs Macnamara were trustees of the Trusts as was Mrs Macnamara's father, Mr Craig.
[3] Following their separation Mr and Mrs Macnamara have been unable to agree what was to happen to Trust property. The Trusts were not able to be administered.
[4] Mrs Macnamara filed a claim (the 404 proceedings) in relation to the Home Trust seeking, amongst other things, the appointment of an independent trustee. In separate (the 646) proceedings, Mr Macnamara filed a similar claim in relation to both Trusts.
[5] Before the applications were heard the parties agreed to a number of consent orders including the retirement of the existing trustees and the appointment of Mr Patterson and Mr Darlow as independent trustees. The trustees were to realise the assets of the Trusts and resettle the net assets to new trusts for Mr and Mrs Macnamara. Orders to that effect together with a number of ancillary orders were made by consent on the 27 August 2020.
[6] Unfortunately, the appointment of the trustees has not resolved the ongoing conflict between Mr and Mrs Macnamara. In February 2021, Downs J was required to consider an application by Mr Macnamara for further directions and also an application by the trustees relating to the realisation of an asset of the Home Trust.
There were then further issues in relation to the sale of one of the Trust’s properties. Those issues required the involvement of another judge, Muir J.
[7] On 2 June 2021 Mrs Macnamara made application for further directions and variation of the consent orders. That application is opposed by Mr Macnamara and is scheduled for hearing on 29 October 2021.
[8] In the meantime, the trustees now seek directions on an urgent basis in light of the threatened claim by the Craig Trust in relation to a debt of $500,000 said to be owed to it by the Family Trust.
[9]The trustees have reviewed the claim by the Craig Trust for repayment of the
$500,000 and consider there is no defence to the claim. They are anxious to avoid further costs and potential personal liability if they are required to defend the Craig Trust’s claim for repayment.
[10] The trustees seek directions under the leave reserved in the orders of 27 August 2020 and/or s 133 of the Trusts Act 2019 that they should pay the Craig Trust the principal and interest owing as recorded under the deed or for such other response to the claim as the Court considers appropriate.
[11] Mrs Macnamara supports the trustees’ application for directions. She considers that the trustees should pay the debt and interest.
Mr Macnamara’s opposition to the application
[12] Mr Macnamara opposes the trustees’ application. During the course of the proceedings he raised a number of grounds in response to the trustees’ application. At one time or another he has variously raised the following issues:
·Jurisdiction.
·The directions ignore that the trustees are trustees of two separate and distinct trusts namely the Family Trust and the Home Trust. The Home Trust is not a party to the deed.
·If the Family Trust is liable under the deed (which he denied) the Family Trust is insolvent and has no ability to pay the debt. Funds belonging to the Home Trust should not be applied to meet the debt.
·Mr Macnamara does not consider that he has signed the deed. He seeks to have his signature on it reviewed by an expert.
·Mr Macnamara also says the deed was not signed by Graham Craig as trustee.
[13] In his written submissions for the hearing, Mr O’Callahan also submitted that the Court was not in a position to make the directions sought as important facts were either not before the Court or were in issue, not all beneficiaries had been served and Mrs Macnamara had a conflict of interest.
[14] Mr McNamara suggested that he should be given leave to defend any claim on behalf of the Family Trust on terms.
Jurisdiction
[15] The trustee’s application for directions was made in a memorandum of counsel dated 17 August 2021. As noted, the trustees seek directions confirming that they should pay to the trustees of the Craig Trust the principal of $500,000 (together with any interest owing on it) or such other response as the Court deems appropriate.
[16] Mr O’Callaghan correctly points out that applications by trustees for directions under s 133 of the Trusts Act 2019 are generally made under Part 18 of the High Court Rules. However, the Court has accepted that in appropriate cases applications for directions may be made in other forms, for instance by using the Part 19 originating application procedure.1
[17] While the trustees have not followed either formal procedure in the present case (even though the application was initially expressed to be made under s 133 of
1 Public Trust v Kain [2018] NZHC 1547.
the Trusts Act), I accept Mr Cundy’s submission that the trustees may rely on the reservation of leave in cl 7 of the orders of the Court made on 27 August 2020 to bring the application within these existing proceedings. The consent orders were made in proceedings constituted for the purpose of resolving issues between the then trustees in relation to the administration of the trusts. The intent of the consent orders was to enable the new, independent trustees to realise the assets of the Trusts and then take steps to resettle the net trust funds for the benefit of Mr and Mrs Macnamara.
[18] The orders expressly contemplated that one of the issues the trustees would have to address was the liability of the Trusts to the Craig Trust for the sum of
$500,000 or to seek determination from the Court or by way of arbitration. The reservation of leave to apply for further directions applies to that issue.
[19] It is also relevant that on at least two occasions in the past the trustees have sought and obtained directions or further orders from the Court within the existing proceedings in relation to the administration of the Trusts and their obligations in relation to dealing with assets of the Trusts in accordance with the consent orders. In those circumstances, although the applications were brought informally (and not opposed on that basis by Mr Macnamara) the Court was prepared to accept it had jurisdiction to consider the applications for directions. I see no reason to depart from that procedure. Indeed, Mr Macnamara adopted that procedure and availed himself of the leave reserved when he pursued further directions by way of memorandum filed in December 2020. That application was dealt with by Downs J.
[20] Mr O’Callaghan raised a related point arising from the wording of s 133(2). He noted that two of the other beneficiaries had not been served with the application or heard. With respect, that objection seems opportunistic. At the time the substantive proceedings were before the Court counsel for both parties negotiated the detailed consent orders with the knowledge and approval of the other adult beneficiaries. The other beneficiaries are well aware of the terms of the consent orders which enabled the trustees to make a decision on the $500,000 debt after consulting with Mr and Mrs Macnamara. There was no requirement to consult with the other beneficiaries. The other beneficiaries have not been joined in any of the previous applications for directions.
Does the Court have sufficient information?
[21] Mr O’Callaghan then focused on the substantive opposition to the trustees’ application. With reference in particular to the case of Marley v Mutual Security Merchant Bank and Trust Co Ltd,2 he submitted that the trustees had not put sufficient information before the Court to enable it to give the directions they sought.
[22]Mr O’Callahan relied in particular on the following passage from that opinion:3
A trustee who is in genuine doubt about the propriety of any contemplated course of action in the exercise of his fiduciary duties and discretions is always entitled to seek proper professional advice and, if so advised, to protect his position by seeking the guidance of the court. If, however, he seeks the approval of the court to an exercise of his discretion and thus surrenders his discretion to the court, he has always to bear in mind that it is of the highest importance that the court should be put into possession of all the material necessary to enable that discretion to be exercised. It follows that, if the discretion which the court is now called upon to exercise in place of the trustee is one which involves for its proper execution the obtaining of expert advice or valuation, it is the trustee's duty to obtain that advice and place it fully and fairly before the court, for it cannot be right to ask the judge in effect to assume the burdens of a trustee without the information which the trustee himself either has or ought to have to enable him to carry out his duties personally. The court ought not to be asked to act upon incomplete information and, if it is so asked, the proper course is either to dismiss the application or to adjourn it until full and proper information is provided.
[23] Despite Mr O’Callahan’s submission, I am satisfied the Court has sufficient information before it to properly consider and determine the application for directions in relation to the Craig Trust debt. While I also accept that the Court should not seek to resolve any seriously disputed issue of fact on such an application, for the reasons that follow I do not consider there can be any reasonable dispute as to the Family Trust’s obligation to repay the $500,000 (together with interest).
[24] The trustees have received a formal demand from the solicitors representing the Craig Trust for repayment of the $500,000 (and interest). Although the trustees do not have access to bank accounts going back to 2008, the trustees of the Craig Trust provided a bank statement evidencing the payment of the $500,000 from the Craig Trust to the Family Trust on 30 May 2008. Further, Mr Tauber, the accountant
2 Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 (PC).
3 At 201.
assisting the trustees has confirmed that Mrs Macnamara has provided him with a bank statement for the Family Trust showing receipt of the $500,000 from the Craig Trust. Mr Tauber has some relevant background knowledge. Formerly he prepared tax returns for Oneheat Limited.
[25] Mr O’Callaghan conceded during the course of the hearing that Mr Macnamara no longer suggested that the trustees would have no funds to pay the debt. It follows that Mr Macnamara implicitly, if not expressly, acknowledged that the way Mr and Mrs Macnamara had operated the Family and Home Trusts meant there had been substantial advances from the Family Trust to the Home Trust. Mr Tauber has confirmed that to be the position.
[26] The principal issue now raised by Mr Macnamara is whether the payment was a loan or a gift. The prima facie evidence that the payment was a loan rather than a gift is the Deed of Acknowledgement of Debt. Mr Macnamara purports to challenge the veracity of that document. He says “I have no recollection of signing the deed of acknowledgement of debt and I am not sure that it contains my signature”. Against that rather equivocal statement is the sworn evidence from Mrs Macnamara confirming the execution of the Deed of Acknowledgement of Debt. The trustees were also provided with evidence from Ms McCown, who witnessed the signature of both Mrs Macnamara and Mr Macnamara to the Acknowledgement of Debt. Next, the trustees have an affidavit from Mr Stainton, from the solicitors’ firm that prepared the Acknowledgement of Debt to confirm they created the document. (I infer they did so on instructions).
[27] The evidence before the Court overwhelmingly supports the conclusion that the $500,000 was a loan as recorded in the Acknowledgement of Debt. The starting point is the Acknowledgement of Debt document itself. Added to that is the evidence that all other parties to the advance of $500,000 consider it to have been a loan. Next, there is further independent evidence from the solicitor’s note at the time which records the $500,000 was to be a loan to the Family Trust. that document is reproduced as follows:
[28] The document records the $500,000 was an interest free loan to the Family Trust and that an acknowledgement of debt was to be prepared. The document subsequently proposed is entirely consistent with that.
[29] Significantly, Mr Macnamara’s contrary evidence is inconclusive. Mr O’Callahan pointed out that Ms McCown must be wrong when she says the document
was signed at Walters Road, Karaka. Even if that is correct, the mistake is as to where the document was executed, not as to its provenance.
[30] Mr O’Callahan also noted that in the past the accounts from 2013 to 2019 for the Family Trust had not recorded the loan as a liability. However, as Mr Tauber has confirmed, historically, accounts were prepared in-house with the assistance of Carolyn Miller, to meet the income tax requirements of the Family Trust. The Home Trust was not required to file tax returns as it had no income. The focus on the Family Trust account was on the business of Oneheat Limited. As the Craig Trust did not demand interest (until recently) there was no need to account for interest for income tax purposes by Oneheat Limited or the Family Trust.
[31] There is no evidence that the advance was anything other than a loan as the Deed records. Mr Callahan’s submissions on behalf of Mr Macnamara overlook that the Craig Trust does not rely solely on the Deed of Acknowledgement of Debt. It is just part of the evidence that the $500,000 was advanced as a loan. There is other evidence as well. In addition to the above, the point can be made (as it is by the Craig Trust’s solicitors) that if it was intended to be a gift it could have simply been made as a distribution to Mrs Macnamara personally as a beneficiary of the Craig Trust.
[32] Further, noting turns on Mr Craig’s failure to execute the document. He has clearly ratified it and relies on it.
[33] Mr Macnamara suggests the signature on the Acknowledgement may not be his and says he should have the opportunity to have it examined by a document examiner. There are a number of difficulties for him with the proposition the signature may not be his. First, Mr Macnamara has only belatedly raised that issue. It was raised for the first time in his solicitor’s response of 19 July 2021. Prior to that Mr Macnamara had not challenged the validity of the Acknowledgement of Debt. Indeed, in support of his opposition to Mrs Macnamara’s application in the 404 proceedings, dated 8 May 2020 Mr Macnamara referred to the loan agreement and deed of acknowledgement of debt and deposed that:
I do not accept that those funds were ever meant to be repaid by us. The funds were gifted to Sheryl and me (not to the Family Trust) in May 2008, and it was only retrospectively that her father asked us to sign the documentation for tax purposes. As I understand it his reasons were to avoid the imposition of
gift duty which would otherwise apply. This is why the documentation is dated some months after the money was given to us in September 2008.
At no stage in that response did Mr Macnamara suggest he had not signed the document or that the signature on the document was not his.
[34] Next, the logical corollary to Mr Macnamara’s suggestion that he has not signed the document is that he must be alleging fraud on behalf of the lenders and Mrs Macnamara and also that Ms McCown has perjured herself. If the signature is not his it must have been forged. But Mr Macnamara has been careful not to expressly say that.
[35] To support his case Mr Macnamara has recently filed an affidavit from Ms Morrell, a forensic handwriting expert. Her expertise is not in issue. However, her expert evidence is only relevant if there is a basis for the examination, which on the current information is lacking.
[36] Under HCR 9.34 the Court may, for the purposes of enabling the proper determination of any matter in question in a proceeding, direct an examination by an expert. In A v B 4 Wylie J confirmed there was however a threshold requirement. An applicant for such an order must satisfy the Court the order was necessary before the Court could consider whether to exercise its discretion to direct an examination. The evidence falls well short of crossing the threshold for the exercise of the discretion in this case.
[37] Mr Macnamara’s evidence that the signature may not be his is unsatisfactory and unconvincing. It is vague and inconsistent with his earlier evidence. I reject it on the basis that it is lacking in credibility and is inherently implausible: Eng Mee Yong v Letchumanan.5
[38] Reverting to the trustees’ position, the trustees are experienced legal practitioners. They have properly considered their obligations under the consent orders in relation to the demand for repayment of the $500,000. They have sought
4 A v B [2020] NZHC 580.
5 Eng Mee Yong v Letchumanan [1979] UKPC 13.
information and input from Mr and Mrs Macnamara as required. They have provided both parties with an opportunity to respond. They have considered all the relevant information including the parties’ responses. Having done so they are satisfied that the Trusts have a debt obligation to the Craig Trust. However, given Mr Macnamara’s response and opposition, the directions sought from the Court are appropriate.
Result
[39]The Court makes the following directions:
(a)the trustees are to pay the Craig Trust the principal of $500,000 claimed together with interest owing under the terms of the Acknowledgement of Debt.
Costs
[40] I reserve the issue of costs. The general corpus of the Trusts and Mrs Macnamara should not have to bear the costs of Mr Macnamara’s unsuccessful opposition to the application for directions. If the parties cannot agree costs I will fix them following an exchange of submissions:
(a)submissions by the trustees and Mrs Macnamara by 30 September 2021;
(b)submissions by Mr Macnamara by 7 October 2021;
(c)any responses by 14 October 2021.
Venning J
Solicitors: Lee Salmon Long, Auckland
Shieff Angland Solicitors, Auckland Claymore Partners Limited, Auckland
Counsel:L Kearns QC, Auckland B O’Callaghan, Auckland
4