MacNamara v Patterson
[2021] NZCA 588
•9 November 2021 at 3.30 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA583/2021 [2021] NZCA 588 |
| BETWEEN | NOEL JAMES MACNAMARA |
| AND | WILLIAM MALCOM PATTERSON AND CHRISTOPHER ROBERT DARLOW AS TRUSTEES OF THE MACNAMARA FAMILY TRUST |
| AND | SHERYL ANN MACNAMARA |
| Court: | Clifford and Courtney JJ |
Counsel: | B O’Callahan for Appellant |
Judgment: | 9 November 2021 at 3.30 pm |
JUDGMENT OF THE COURT
A The application for a stay is declined.
B The second respondent is entitled to costs for a standard application on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Courtney J)
Noel and Sheryl Macnamara separated in 2019. There were proceedings to resolve issues relating to the Macnamara Family Trust (the Family Trust), of which both (along with Ms Macnamara’s father, Mr Craig) were trustees.[1] One of the issues was whether the Family Trust was liable to repay an advance of $500,000 made to it by a trust associated with Ms Macnamara’s father, the Graham & Julie Craig Family Trust (the Craig Trust). The Craig Trust maintained that it was a loan and made demand for repayment of the advance. Ms Macnamara agreed it was a loan. Mr Macnamara disagreed; he contended that it had been a gift.
[1]Mr and Ms Macnamara and their children are also beneficiaries of the Family Trust and of another trust, the Macnamara Home Trust.
The proceedings were settled by the making of consent orders, which included the replacement of the current trustees with independent trustees, Mr Patterson and Mr Darlow. Order 4.7 required that the independent trustees:
After 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.
The independent trustees concluded that the advance was a loan. They relied to a significant extent on a Deed of Acknowledgement of Debt apparently executed on behalf of the Family Trust (the Deed). They considered that there was no tenable defence to the demand by the Craig Trust. Mr Macnamara resisted the trustees’ conclusion. He did not recall signing the Deed and wanted the document examined by a handwriting expert.[2]
[2]High Court Rules 2016, r 9.34.
The trustees applied for directions. Venning J declined to require the Deed to be examined and directed the trustees to pay the $500,000 to the Craig Trust. [3] Mr Macnamara applied for leave to appeal the decision and for a stay of the effect of the direction. Venning J held that Mr Macnamara was entitled to appeal the substantive decision as of right, but declined leave to appeal the refusal to require examination of the Deed and declined the stay.[4]
[3]Macnamara v Macnamara [2021] NZHC 2361 [Substantive decision].
[4]Macnamara v Macnamara [2021] NZHC 2500 [Leave and stay decision].
Mr Macnamara has appealed the substantive decision. Despite not being granted leave to appeal the refusal to require the Deed to be examined, he intends to raise that issue in the appeal, as he is entitled to do.[5]
[5]Senior Courts Act 2016, s 56(6).
Mr Macnamara has applied for a stay of Venning J’s direction pending determination of the appeal. It is this application that falls for determination now. The independent trustees abide the Court’s decision on the stay application but maintain their view that there is no arguable defence to the Craig Trust’s claim. Ms Macnamara opposes the application.
The case in the High Court
The substantive decision
There was no dispute that the Craig Trust had advanced $500,000 to the Family Trust on 30 May 2008. In September 2008 the Family Trust’s solicitor prepared the Deed. The Deed appears to have been executed on 25 September 2008 by Mr and Ms Macnamara on behalf of the Family Trust.
In September 2019, some months after Mr and Ms Macnamara had separated, the Craig Trust made demand on the Family Trust for repayment of the advance. Mr Macnamara appears not to have asserted that the advance was other than a loan until mid-2021. Then he maintained that the $500,000 had been a gift and that he had no recollection of signing the Deed. He did not (and does not) go so far as to say that his signature has been forged (though that is the unavoidable implication). Ms Macnamara, who holds the original Deed, declined to produce it for examination by a handwriting expert.
Venning J considered that the evidence before him overwhelmingly supported the conclusion that the $500,000 was a loan.[6] In particular, there existed a file note by the solicitor who had prepared the Deed recording the fact that the advance was to be an interest free loan. Secondly, Ms Macnamara and Ms McCown, the witness to Mr and Ms Macnamara’s signatures, both deposed to the fact that Mr Macnamara had executed the Deed.[7] Mr Macnamara sought to impugn Ms McCown’s evidence because she gave the wrong address as the place she had witnessed the document. The Judge did not consider that this error affected the provenance of the document.[8] Nor did the Judge ascribe any relevance to the fact that the $500,000 was not recorded in the accounts of the Macnamara Family Trust as a liability; those accounts were historically prepared in-house for income tax purposes and related primarily to a business, Oneheat Ltd. Because no interest was being charged there was no need to account for interest for income tax purposes.[9]
[6]Substantive decision, above n 3, at [27].
[7]At [26].
[8]At [29].
[9]At [30].
The Judge was unimpressed by Mr Macnamara’s effort to challenge the authenticity of the document on the basis that he could not recall signing. There had been no challenge until July 2021. Indeed, Mr Macnamara actually referred to the Deed in an affidavit filed in the substantive proceedings in May 2020.[10] The Judge also noted that, although the logical corollary of Mr Macnamara’s suggestion that he had not signed the document must be fraud on the part of the trustees of the Craig Trust, Ms Macnamara and Ms McCown, he had not made any such allegation.[11]
[10]At [33].
[11]At [34].
Finally, the Judge noted that the independent trustees, both experienced lawyers, had sought information and input from Mr and Ms Macnamara as required by the consent order and considered all the relevant information provided. Having done so, they were satisfied that the debt existed.[12] The Judge therefore made the directions they sought.[13]
The application for stay in the High Court
[12]At [38].
[13]At [39].
The Judge accepted that if a stay were not granted, Mr Macnamara’s appeal would be rendered nugatory because Mr Macnamara would not have standing to bring proceedings against the Craig Trust for recovery of the money, in the event it was ultimately shown on appeal to have been a gift.[14] The Judge concluded, however, that this was not determinative, for two reasons. First, a stay would not prevent the Craig Trust taking action to recover the $500,000. The independent trustees did not consider there was a viable defence to such a proceeding and could not, responsibly, oppose an application for judgment.[15]
[14]Leave and stay decision, above n 4, at [33].
[15]At [34]–[37].
Secondly, Mr Macnamara had agreed to the consent order being made which would place determination of the status of the $500,000 in the hands of the independent trustees. Seeking a stay of the directions made to protect the trustees from liability by acting in accordance with the direction would undermine the consent order itself.[16] In these circumstances, and in light of the difficulties with the proposed appeal and its lack of public interest, novelty or importance, the Judge held that a stay was not in the interests of justice.[17]
Application for stay in this Court
[16]At [38]–[41].
[17]At [42]–[44].
The principles applying to an application for stay are well settled, having been set out in Keung v GBR Investment Ltd:[18]
[18]Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11] (footnotes omitted).
… In determining whether or not to grant a stay, the Court must weigh the factors “in the balance” between a successful litigant’s rights to the fruits of a judgment and “the need to preserve the position in case the appeal is successful”. Factors to be taken into account in this balancing exercise include:
(a)whether the appeal may be rendered nugatory by the lack of a stay;
(b)the bona fides of the applicant as to the prosecution of the appeal;
(c)whether the successful party will be injuriously affected by the stay;
(d)the effect on third parties;
(e)the novelty and importance of questions involved;
(f)the public interest in the proceeding; and
(g)the overall balance of convenience.
That list does not include the apparent strength of the appeal. That has been treated as an additional factor.
The appeal will be rendered nugatory if a stay is not granted
It is common ground that if a stay is not granted, Mr Macnamara’s appeal will be rendered nugatory. Mr Macnamara contends that there are no countervailing factors in this case in that would justify refusing a stay. He does not, however, address the point made by Venning J that, even if a stay were granted, the trustees of the Craig Trust will still be able to bring proceedings to recover the money. If that happened, as appears likely, Mr Macnamara’s appeal would still be rendered nugatory.
Bona fides
Mr Macnamara says his bona fides are evident from his prompt pursuit of the appeal. Ms Macnamara does not accept that; submissions on her behalf detail the history of the litigation between the parties which, she says, shows a strategy by Mr Macnamara of delaying and frustrating progress and not raising issues until the last moment. In this regard, she points to the fact that, although the issue of repayment of the $500,000 was raised in 2019, Mr Macnamara did not question the authenticity of the Deed until July 2021. There appears not to have been any explanation for this delay and, as a result, it is a factor that must count against Mr Macnamara when assessing his bona fides.
Effect of a stay on the independent trustees
The independent trustees had sought directions in the High Court because, although the terms of the consent order permitted them to determine whether to repay the advance, Mr and Ms Macnamara, the principal beneficiaries who are both sui juris, had differing views and the independent trustees wished to have the sanction of the Court for any action they took. They abided the decision in the High Court and take the same position in this Court. They are, however, concerned about how they will respond to proceedings brought by the Craig Trust in the event of a stay being granted.
Following the delivery of Venning J’s decisions and Mr Macnamara’s current application for stay, the trustees of the Craig Trust indicated that, if this Court grants a stay, they reserve their right to commence proceedings to recover the debt. The independent trustees have formed the view that they cannot responsibly resist any claim brought. If they are prevented by a stay from paying the Craig Trust, the Family Trust will be exposed to a costs liability.
Mr Macnamara says that any costs liability could be easily met from his entitlement under the trusts. We do not see this as a satisfactory response. The independent trustees, both experienced solicitors and professional trustees, ought not to be put in the position of having to defend a claim to which they consider there is no tenable defence. They have trustee obligations to the beneficiaries as a whole and are entitled to discharge those obligations in what they consider to be a proper and responsible manner.
The effect on third parties
Self-evidently, a stay would further delay payment of the debt to the Craig Trust and put the trustees of that trust to the expense and trouble of recovery proceedings. The delay ought to be able to be addressed through interest, though the litigation is likely to bring some level of irrecoverable cost.
The novelty and importance of the questions involved and the public importance
Although Mr Macnamara suggests that the case could provide helpful authority in this area, there is no serious assertion that it raises any novel issue or is of general or public importance.
The overall balance of convenience
We consider that the balance of convenience is against the granting of a stay. First, the issue over the advance was only one of several issues that were the subject of the lengthy proceedings that followed Mr and Ms Macnamara’s separation. The parties agreed to resolve those issues on the basis of the consent orders, including entrusting to the independent trustees the task of determining the status of the advance.
We do not accept Mr Macnamara’s criticism that trustees sought directions from the Court because they wished to have the protection of directions by the Court in circumstances where they have refused Mr Macnamara the opportunity to have the Deed examined by a handwriting expert. The independent trustees say that they do not have the deed and have explained their reasons for seeking directions. We consider the application for directions to have been reasonable in the circumstances and there ought to be good reasons for preventing the independent trustees from taking what they consider to be the correct course, and which course the High Court has affirmed.
Secondly, as Venning J identified, the granting of a stay will not prevent the Craig Trust from pursuing the debt in separate proceeding. There is little utility in granting a stay in these circumstances.
The apparent strength of the appeal
Mr Macnamara’s claim that the advance was a gift turns on the authenticity of the Deed. If he signed the deed there is no tenable basis on which to assert that the advance was not a loan. Since Mr Macnamara does no more than say that he cannot recall signing the Deed, this issue depends on him impugning Venning J’s refusal to order that the document be examined.
Acknowledging that the present assessment is impressionistic only, there nevertheless appears only a weak basis for requiring such an examination. The affidavit evidence from the handwriting expert simply says that the copy of the Deed that she has seen raises issues. But there is no indication as to what those issues are. Further, any expert opinion as to authenticity must necessarily be weighed against the solicitor’s file note, and the evidence of Ms Macnamara and Ms McCown as to the execution of the Deed. Overall, the appeal could not be regarded as strong on the material before us.
Result
The application for a stay is declined.
The second respondent is entitled to costs for a standard application on a band A basis and usual disbursements.
Solicitors:
Claymore Partners Ltd, Auckland for Appellant
LeeSalmonLong, Auckland for First Respondents
Shieff Angland, Auckland for Second Respondent
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