Masters v Masters
[2023] NZHC 3027
•31 October 2023
NOTE: PURSUANT TO S 169 OF THE FAMILY PROCEEDINGS ACT 1980, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B, 11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
https://
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,
11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
https://IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-817
[2023] NZHC 3027
UNDER the Property (Relationships) Act 1976, s 182 of the Family Proceedings Act 1980, Companies Act 1993 and the Trusts Act 2019 BETWEEN
NAYANA MASTERS
Plaintiff
AND
SANJAY ARVIND MASTERS
First Defendant
continued…
Hearing: 9 October 2023 Appearances:
J D Noble for Plaintiff
K D Puddle for Third Defendant
M K Macnab for Fourth and Fifth DefendantJudgment:
31 October 2023
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 31 October 2023 at 12.45pm
pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
………………………………..……
MASTERS v MASTERS [2023] NZHC 3027 [31 October 2023]
AND SANJAY ARVIND MASTERS and
BHARAT PARSHOTAM, as trustees of the Sylvania Trust
Second Defendants
AND ARROWMASTERS LIMITED (in
liquidation)
Third Defendant
AND SANJAY ARVIND MASTERS
and HASMUKHBEN MASTERS, as
trustees of the Ennismore Trust Fourth Defendants
AND ARVIND SHIVLAL MASTERS
Fifth Defendant
[1] Nayana Masters (Nayana) and Sanjay Masters (Sanjay) were married in July 1992. They separated in February 2017 and their marriage was dissolved in April 2020, however their broader relationship property issues remain unresolved.
[2] One of Nayana’s main concerns is that value she believed existed during her relationship with Sanjay has been lost, however, her attempts to secure that value have led to her claim becoming overly complicated; the claim now running to 20 causes of action.
[3] The assets relevant to the present application and how they were held at separation are as follows:
Address Held by during relationship 172
Great South Road
Masters Enterprises Limited
]
] The commercial
] properties
174 Great South Road Masters Enterprises Limited 9 Albion Street Masters Enterprises Limited 24A
John Rymer Place
Sylvania Trust
]
] The residential
] properties]
39 Albert Street Sylvania Trust 434A Hillsborough Road Sylvania Trust 37A Sylvania Crescent Masters Enterprises Limited
[4] All of the above properties were eventually transferred to Arrowmasters Limited (Arrowmasters), which is now in liquidation.
[5] It is now common ground that the commercial properties were held by Arrowmasters as its own assets with the remaining properties, all residential, held on trust for the Ennismore Trust, the fourth defendant. The current pleading is that all the properties were held for Ennismore Trust. At the hearing, Mr Noble, counsel for Nayana, confirmed that position was not maintained; that concession alone will require the claim to be re-drafted.
[6] The residential properties were transferred by the Sylvania Trust (the second defendant) to Arrowmasters in April 2017 (other than 37A Sylvania Crescent which was transferred in September 2017). The Sylvania Trust was settled in March 2002. In April 2017, Masters Enterprise Limited (Masters) sold the Great South Road properties to Arrowmasters with the Albion Road property transferred in September 2017. In each sale, the purchase was completed by Arrowmasters taking over the debt secured over the properties leaving the balance of the properties’ value unpaid. The liquidators of Arrowmasters accept the Sylvania Trust and Masters are creditors in the liquidation for the value that was not paid at the time of each transfer.
[7] While Mr Noble submitted this is a late acknowledgment, it will be seen it is a significant one for the shape of Nayana’s claim.
[8] The properties held by Arrowmasters were in due course all sold by it or by mortgagees. Arrowmasters was placed into liquidation in 13 June 2021, having been in receivership since 14 February 2020. The net sale proceeds of the properties are held on trust subject to undertakings.
[9] In these proceedings, Nayana seeks various orders aimed at securing all of the net sale proceeds of the properties.
[10] Arrowmasters, along with the trustees of the Ennismore Trust and the fifth defendant, who is Sanjay’s father, Arvind Masters (Arvind), have applied to strike out various causes of action against them or for further particulars.
The liquidators’ position
[11] The liquidators of Arrowmasters take the view the company should not be involved in this litigation as ultimately the funds they hold will, (after payment of third party creditors and liquidators’ costs), be distributed to Masters and the Sylvania Trust as creditors in the liquidation. While the liquidators have not yet formally accepted the creditors’ claims by Sylvania Trust, Mr Puddle, counsel for the liquidators, confirmed the net sale proceeds of the properties would be paid pro-rata to all creditors.
[12]The total of the unpaid purchase price to Masters is approximately
$1,680,000.00 and $1,820,000.00 in respect of the Sylvania Trust. There is some
$870,000.00 approximately held on trust (subject to liquidators’ costs). There is the possibility of recovery of a further approximately $240,000.00, which I will refer to at the end of this judgment. The above figures are approximate only but mean on a rough and ready basis, and allowing for liquidators’ costs and third party creditors, Masters will receive approximately $350,000.00 to $400,000.00 of the funds and the Trust a similar amount.
[13] The Companies Office records show that Sanjay was a shareholder of Masters up until 5 May 2017 when he transferred his shares to his mother who, on 7 March 2018, transferred the shares to Arvind, the fifth defendant. It is said the consideration provided for the transfer of shares from Sanjay to his mother was extinguishment of debts owed by Sanjay to his parents arising from their transfer to him of shares in two companies, one being Masters.
[14] The debt owed by Sanjay to his parents is recorded in two loan agreements. Depending on when demand was made for payment and whether Sanjay’s parents can claim penalty interest over an extended period, the value of the debt relating to the Masters’ shares is anywhere from $41,000.00 (the principle sum) to in the region of
$400,000.00, as a result of penalty interest over an extended term. (The principle under the second loan is $49,000.00). If no interest is payable, then Sanjay transferred his shares for $90,000.00 when Masters was owed approximately $1,680,000.00, of which $350,000.00 to $400,000.00 will be recovered.
[15] Accordingly, Sanjay is no longer a shareholder in Masters. Any value returned by the liquidators of Arrowmasters to Masters will not be relationship property. Arvind, as sole shareholder, will control what happens to the money.
[16] The fourth defendant, the Ennismore Trust, was settled on 12 December 2016, by Sanjay’s parents. Arrowmasters was the original trustee. The Sylvania Trust transferred the residential properties to Arrowmasters for it to hold as trustee for the Ennismore Trust. However, as I have said, Arrowmasters did not pay the full purchase price for those properties. All of Arrowmasters assets, that is, the sale proceeds held on trust, will be exhausted through liquidators’ costs and meeting in part the unsecured creditors’ claims of the Sylvania Trust, Masters and third parties. There will be no property retained by Arrowmasters as trustee which it could hold on trust. I was told there are no other assets held by the Ennismore Trust.
[17]Sanjay and Arvind replaced Arrowmasters as trustees on 14 January 2020.
[18] As a result of discussions at the hearing on 9 October 2023, Mr Noble acknowledged that a number of the causes of action brought against Arrowmasters, had become redundant or otherwise could not proceed. Rulings are required in respect of other causes of action.
Redundant causes of action
[19] With it being acknowledged that Sylvania Trust and Masters are creditors in the liquidation of Arrowmasters, the early part of the hearing on 9 October 2023 became an issues conference aimed at discussing the effect of that acknowledgement on the pleadings. The liquidators should now move to finally quantify and accept the creditors’ claims by Sylvania Trust and Masters, as Mr Noble’s acknowledgement in the hearing of the need to amend the claim, was predicated on those companies being creditors in the liquidation. Mr Noble said he would like to be included in that process. The decision to accept or decline creditors’ claims is one for the liquidators but, as I will address below, the liquidators wish to have Arrowmasters removed as a party from this proceeding. It will require agreements between the parties as to how the distributions to Sylvania Trust and Masters are to be held and co-operation between the parties is required.
[20] That said, given the acknowledgement by all counsel that the fourth defendants, as trustees of the Ennismore Trust, hold no assets on trust, there is no point the fourth defendant remaining in the proceeding. The only assets that Arrowmasters were to hold in the Ennismore Trust were the residential properties. Those properties have all been sold and, as there is no surplus after Arrowmasters has paid what it owes for the Ennismore Trust property (indeed there will be a substantial shortfall), there is nothing in the Ennismore Trust that could be subject to orders in this proceeding.
[21] On that basis, it was accepted by Mr Noble that the fourth defendant did not need to be in the proceeding. The fourth defendant is presently named in the first, second, fifth, eighth, 11th, 13th, 15th, 17th, 18th and 19th causes of action. Whatever further orders are made in this judgment I order that the fourth defendant is to be removed from the proceeding and these causes of action.
Strike out applications
[22] The strike out applications are made on behalf of the third, fourth and fifth defendants. Accordingly, the position acknowledged by Mr Noble in respect of the fourth defendant, that there is nothing in the Ennismore Trust, means I do not need to consider further the strike out application in respect of the fourth defendant.
Causes of action against the third defendant – Arrowmasters
First cause of action
[23] As regards Arrowmasters, Nayana’s concern was the value held by the company representing assets previously held in the Sylvania Trust and Masters. It is now common ground that the first cause of action, targeting the funds held by Arrowmasters, has become redundant. Arrowmasters is one step removed from the Sylvania Trust and Masters. Nayana’s causes of action targeting Sylvania Trust and Masters directly and/or the circumstances in which Sanjay transferred his shares in Masters, are recognised by Mr Noble as a more direct means of recovery than the claim against Arrowmasters.
[24] The practical effect is that the first cause of action, which concerned only the third and fourth defendants, is now not needed. Mr Noble accepted the first cause of action would be omitted from the amended pleading.
Second cause of action
[25] The second cause of action seeks orders against all defendants albeit the introduction omits reference to the second defendant. Paragraph 64(e)(i) is directed at the third and fourth defendants and is also redundant given the liquidators’ acknowledgement. Paragraph 6(e)(i) is also to be removed from the amended pleading.
[26] Paragraphs 64(e)(ii) and (iii) are against Arvind and rely on s 44 of the Property (Relationships) Act 1976. I will discuss the claims under s 44 below.
[27] As Mr Noble accepted, paragraph 64(e)(i) was overtaken and I need not consider whether s 44 applies to a disposition made not by a party of the relationship but by an entity controlled by a party.
[28] In the repleading, Mr Noble is to separate out what is presently an omnibus pleading against all defendants.
Fifth cause of action
[29] The fifth cause of action was against the third defendant and in the alternative, against the fourth defendants in relation to the Ennismore Trust. For the reasons already given in respect of the fourth defendants, the fifth cause of action is redundant and is not to be included in the amended pleading.
Eighth cause of action
[30] The eighth cause of action concerns the proceeds of sale for 24A John Rymer Place. This is one of the properties transferred by Sylvania Trust to Arrowmasters as trustee of the Ennismore Trust. This cause of action is an alternative cause of action and seeks an order that the proceeds of sale of John Rymer Place are held on a resulting trust. It is my understanding there were no net proceeds of sale
from this property as it was sold by mortgagee sale. In any event, as I have said, it is acknowledged that the relationship between Sylvania Trust as vendor and Arrowmasters as purchaser created a debtor/creditor relationship with Arrowmasters taking over the secured debt on the property with the balance left owing. This is not a circumstance where a resulting trust would arise as the parties have agreed their relationship was in debt.
[31] With the proceeds of sale of all properties to be returned to creditors, I understand Mr Noble to accept the eighth cause of action was redundant and will be omitted from the amended pleading.
11th cause of action
[32] The 11th cause of action is expressed as an alternative to the tenth cause of action and is a claim against the second, third or fourth defendants. This is a resulting trust claim in respect of the proceeds of sale of a particular property being 434A Hillsborough Road. This is one of the residential properties transferred by Sylvania Trust to Arrowmasters. The same observations made in respect of the eighth cause of action apply it being common ground this was a debtor/creditor situation. Again, this makes the 11th cause of action redundant against the third and fourth defendants, and it is to be omitted from the amended pleading.
13th cause of action
[33] The 13th cause of action is similar to the one just addressed. This time, the thirteenth cause of action concerns the properties transferred from Masters to Arrowmasters. For the same reason, this cause of action is redundant against the third defendant and will need to be omitted from the amended pleading.
17th cause of action
[34] The 17th cause of action as against the third defendant, seeks an order that the third defendant (and the fourth defendants as already noted) pay to the beneficiaries of the Ennismore Trust, “the sum of $1,932,696.00 … for their breach of their fiduciary duties as Trustees …”.
[35] Mr Noble accepted this claim was unparticularised. For a start, if there has been a breach of trust for which the trustees are held liable, their obligation would be to restore to the trust fund losses they have caused or any improper gains they have received. Nayana is no longer a beneficiary of the Sylvania or the Ennismore Trusts.
[36] This cause of action is unhelpfully pleaded by there being a prayer for relief below a paragraph referring back to other paragraphs in the statement of claim. The paragraphs incorporated by reference into this cause of action cover the circumstances in which the properties were transferred by Sylvania Trust and Masters to Arrowmasters. As already noted, those transfers were on the basis that Arrowmasters took over the secured debt with the balance unpaid. The gist of the complaint is that those transfers were on uncommercial terms. No security was obtained by Sylvania Trust or Masters for the unpaid balance and Mr Noble submitted that it was not apparent there was an unpaid balance or indeed that such was acknowledged until recently.
[37] These transfers occurred while Nayana was a beneficiary of the Sylvania Trust and while the properties were held in Masters while its shares were relationship property. However, as this cause of action is presently framed, it targets the purchaser of the properties, Arrowmasters, which was originally the trustee of the Ennismore Trust. The fourth defendants took over as trustees of the Ennismore Trust well after the challenged transfers. The fourth defendants as trustees of the Ennismore Trust, had no role in the transfers which pre-dated their becoming trustees. As already noted, there will be no Trust property for the fourth defendants to hold.
[38] The 17th cause of action is struck out, however, it may be capable of being repleaded as against those actually responsible for the uncommercial transfers being Masters, then under the control of Sanjay, and the Sylvania Trust at a time when Sanjay and his solicitor were trustees. But as it stands, the 17th cause of action, in my view, does not name the correct defendants and is struck out.
18th cause of action
[39] The 18th cause of action is also against the third and fourth defendants as trustees of the Ennismore Trust and is under s 182 of the Family Proceedings Act 1980.
Mr Noble accepted that the 18th cause of action would stand or fall with the 17th cause of action. The other practical issue is the fourth defendants will never hold any property on the Ennismore Trust terms. The 18th cause of action is struck out.
19th cause of action
[40] The 19th cause of action is against the second, third, fourth and fifth defendants and is a pleading that both Nayana and Sanjay during their relationship, made financial and non-financial contributions direct and indirect to the acquisition, preservation and maintenance of the properties owned by the Sylvania Trust and Masters.
[41] In my view, this cause of action insofar as it concerns Arrowmasters, must be struck out. Arrowmasters paid value for the properties it obtained from the Sylvania Trust and Masters. Sylvania Trust and Masters agreed to be creditors for the unpaid purchase price. Whether Nayana and Sanjay could argue in respect of the Sylvania Trust and Masters that some of the funds to be received by those companies should be held on constructive trust for them, is a different matter.
[42] The 19th cause of action will need to be repleaded. Mr Puddle, in his submissions with reference to Lankow v Rose, set out the elements that must be shown to establish a constructive trust. These are:1
(a)the direct and indirect contributions Nayana made to the property in question;
(b)how the expectation of an interest in the assets ultimately arose;
(c)how the circumstances made it reasonable for Nayana to expect to have an interest in the assets;
(d)how the Sylvania Trust, Masters Enterprises and C & E Limmer expected there to be an interest; and
1 Lankow v Rose [1995] 1 NZLR 277 (CA).
(e)how it is unconscionable for Arrowmasters now to deny Nayana’s alleged interest.
[43]Any repleading should reflect the above structure.
Causes of action against the fourth and fifth defendants
[44] Ms Macnab acts for the fourth and fifth defendants. In addition to addressing claims against her clients, Ms Macnab’s application to strike out also challenges causes of action which do not concern the fourth and fifth defendants.
[45] I decline to deal with applications to strike out causes of action that concern defendants for whom Ms Macnab does not act. That said, I will be making some observations about aspects of this proceeding that do concern causes of action relating to the other defendants.
[46] I have already dealt with the fourth defendants and I now address the causes of action that concern the fifth defendant, Arvind.
Second cause of action against the fourth and fifth defendants – s 44 of the Property (Relationships) Act 1976
[47] Arvind is included in the omnibus second cause of action. This seeks an order under s 44 of the Property (Relationships) Act directing Arvind to transfer 50 per cent of the shares in C & E Limmer Holdings Ltd (the other company in which Sanjay’s parents transferred shares to him) to Nayana, along with 50 per cent of the shares in Masters.
[48] During the hearing, Mr Noble said paragraphs 64(e)(i), (ii) and (iii) were alternatives. Mr Noble may need to revisit that concession as paragraph 64(e)(ii) concerns the shares in C & E Limmer Holdings Ltd which are not subject to the claim in paragraphs 64(e)(i) or (iii). The claim in paragraph 64(e)(ii) is to 50 per cent of the shares in Masters.
[49] Post-separation, Sanjay transferred his shares in Masters to his mother in May 2017 and she then on-transferred those shares to Arvind on 7 March 2018.
[50] There is a general pleading in relation to the shares in each company that the fifth defendant: “… received the said property … otherwise than in good faith and for valuable consideration and/or adequate consideration.” No particulars are given.
[51] If the claim of lack of good faith is to be maintained by Nayana in respect of Arvind, then details of why there was an absence of good faith should be pleaded. Similarly, why there was not adequate consideration also needs to be detailed. It is not necessary for a claimant relying on s 44 of the Property (Relationships) Act to prove both a lack of good faith and a lack of consideration.2 Relief is available against third parties. Section 44 applies to a subsequent third party in the chain if that third party lacked good faith or failed to give valuable consideration.3 Mr Noble will need to establish a breach of s 44 in respect of the transfer by Sanjay to his mother and subsequent transfer by her to Arvind.
[52] This aspect of Nayana’s claim does not concern a transfer by an entity controlled by Sanjay – this claim targets the transfer of relationship property held by Sanjay being the shares.
[53] Accordingly, I decline to strike out the second cause of action as against Arvind concerning the transfers but I direct that the cause of action is to be repleaded to provide particulars of the lack of good faith and/or of the inadequate consideration and, as I have said, it needs to be repleaded on a standalone basis as against Arvind.
[54] On my reading of the second cause of action, while its heading says it is against all defendants, no relief is sought against the fourth defendants other than paragraph 64(e)(i) which I understand is redundant as against the fourth defendants as already noted.
2 Bill Atkin (ed) Fisher on Matrimonial and Relationship Property (online ed, LexisNexis) at [9.47] referring to Sutton v Bell [2023] NZSC 65 [2023] NZFLR 49 at [107]-[108].
3 At [9.47].
Sixth cause of action against the fifth defendant
[55] The sixth cause of action is against Arvind alone and is an alternative to the s 44 cause of action just addressed. It pleads a resulting trust claim against Arvind in respect of the shares in C & E Limmer Holdings Ltd and Masters.
[56] The relief sought is that Arvind holds the shares on a resulting trust for Sanjay as to the shortfall between the value of the assets transferred and the actual consideration paid.
[57] Nayana does not have standing to seek orders on behalf of Sanjay. In any event, Arvind obtained the shares in Masters from his wife. It is not clear what this cause of action adds to s 44 as it is dependent upon the shares in the two companies referred to, being transferred for inadequate consideration. If inadequate consideration can be shown, then s 44 is likely to apply. If there was adequate consideration then the issue of a resulting trust does not arise.4
[58] In the strike out context, there is a presumption that pleaded facts are capable of being proved, however, a transfer at an undervalue without more does not create a resulting trust as confirmed in the Lendich v Codilla decision. This cause of action is struck out. A transfer by Sanjay at an undervalue is actionable against him under s 18C of the Property (Relationships) Act.
Seventh cause of action against the fifth defendant
[59] The seventh cause of action builds on the sixth cause of action and seeks an order that Sanjay’s interest in the resulting trusts referred to in the sixth cause of action, is itself relationship property.
[60] In my view, if the sixth and seventh cause of action are to be maintained, they should be consolidated into an allegation that Sanjay holds an item of relationship property, that is, Sanjay’s cause of action against Arvind for the under payment for the transfer of the shares in Masters. However, Mr Noble is to reflect on the authority noted at footnote 4. I do not strike out this cause of action on the basis of that authority
4 Lendich v Codilla [2023] NZCA 222.
as it was not raised during the hearing, but it presents significant difficulties for this part of the claim.
16th cause of against the fifth defendant
[61] The 16th cause of action is against Arvind as director of Arrowmasters, between 26 April 2017 and 14 February 2020. It is a claim that Arvind caused or allowed the business of Arrowmasters to be carried out in a manner likely to create a substantial risk of loss to creditors. Accordingly, it is a claim of a breach of director’s duties. Nayana has no standing to bring this claim against Arvind. That is reflected in the convoluted relief sought which depends upon Nayana being successful in her s 44 claim which would see her receive half the shares in Master. The prayer for relief in the 16th cause of action seeks an order that the shareholders, who at that stage would have been Nayana and Sanjay, place the company in liquidation and that a liquidator then bring proceedings against Arvind under the Companies Act 1993.
[62] The 16th cause of action is struck out. If relief is obtained under s 44 then it will be up to Sanjay how he votes his shares. In the event that Nayana and Sanjay agree to appoint a liquidator, how that liquidator wishes to conduct the liquidation will be a matter for them.
19th cause of action against the fourth and fifth defendants
[63] The 19th cause of action is the final cause of action that concerns the fifth defendant. I have already commented that this cause of action needs to be repleaded.
[64] The repleading insofar as it concerns the fourth defendants, should recognise that Arvind, Sanjay and Hasmukhben, as trustees of the Ennismore Trust, will not hold any assets as trustees. As I have said, so much was common ground at the hearing, given all of Arrowmasters’ funds will be exhausted, as already described. There is simply no point in the fourth defendants being included in this cause of action which is based on contributions said to have been made by Arvind and Sanjay to the assets held by the Sylvania Trust, Masters, and C & E Limmer Holdings Ltd. I have already commented that whether Nayana and Sanjay may have constructive trust claims against those entities is a separate matter, but none of the value that was held by
Sylvania Trust, Masters or C & E Limmer Holdings Ltd, will ever reach the hands of the fourth defendants as trustees of the Ennismore Trust.
[65] The point of the constructive trust causes of action is to fix value in Sanjay’s name which Nayana can argue is relationship property. If Nayana can establish that an item of relationship property owned by Sanjay is a constructive trust claim against Masters then that may be a way of diverting value away from the shareholders, as Masters must meet its obligations to creditors/claimants before any funds could flow to its shareholders.
[66] While the point of this cause of action is clear enough, it does require repleading.
Observation on s 44 Property (Relationships) Act claims against Sanjay
[67] The third cause of action against Sanjay pleads that a contract entered into by Sanjay on 5 February 2002 to purchase properties in Hillsborough Road was relationship property. The pleading is that through nominating the then trustees of the Sylvania Trust to complete that purchase, Sanjay transferred away relationship property which can be addressed pursuant to s 44 of the Property (Relationships) Act.
[68] The fourth cause of action also concerns that transfer and also relies on s 44 of the Property (Relationships) Act 1976.
[69] I recommend that Mr Noble focus on the real target of these claims. If the Sylvania Trust was nominated to complete the purchase under a contract made by Sanjay, then the issue becomes how did the Sylvania Trust fund that purchase? If the purchase was at market value and if Sanjay had not paid a deposit, the benefit of which (if paid) may have passed to the Sylvania Trust, then while the Sylvania Trust gained an asset (the purchase contract),5 it also took on the obligation of payment of the purchase price. On that basis, the Sylvania Trust completing the purchase did not shift matrimonial property of any value to the Sylvania Trust. The contract to purchase in
5 The definition of “property” in s 2 of the Property (Relationships) Act 1976 includes any thing in action and any other right or interest which is wide enough to include rights under an agreement for sale and purchase.
Sanjay’s hands was matrimonial property but its value was cancelled out by the obligation to pay the purchase price. Provided the purchase price was not at an undervalue, the contract itself was not a thing of value, albeit it was an item of relationship property. The real question, as I have said, is how did the Sylvania Trust fund either the purchase or development of the properties it held? If those costs were met from its own funds then such did not involve relationship property. However, if relationship property was diverted to the Sylvania Trust to allow it to meet debt repayments or development costs of the properties, then it is those payments to the benefit of the Sylvania Trust that resulted in value leaving the relationship unless those payments to the Sylvania Trust resulted in a debt back to Sanjay and/or Nayana.
Judicial Settlement Conference
[70] Mr Noble was keen to see the matter set down for a Judicial Settlement Conference (JSC). Ms Macnab resisted a JSC until the pleadings were in a better form. While I can understand Ms Macnab’s position, the reality is the matters in issue here are relatively clear.
[71]Nayana asserts:
(a)Sanjay retained the assets of the second-hand car dealership he operated;
(b)Sanjay’s transfer of his shares in Masters and/or of its properties, was either at an undervalue or on uncommercial terms intended to, or having the effect of, driving down the value of those assets; and
(c)the residential properties were transferred out of the Sylvania Trust on uncommercial terms, again resulting in harming Nayana’s rights as a beneficiary.
[72] Sanjay says that value was lost in the properties due to financial pressures and the need for the properties to be refinanced with second tier lenders. He says the transfer of his shares in Masters to his parents was for value, being the extinguishment of relationship property debts.
[73] Further, the value available to the Sylvania Trust is for the benefit of all beneficiaries, not just Sanjay and Nayana.
[74] At [12] above, I referred to the possibility of the recovery of a further amount. It seems the liquidators sold a residential property at Hendon Avenue. That was sold to a relative of Sanjay who took over the debt with the balance of the purchase price left unpaid, secured over a property owned by Arvind at 26 Sylvania Crescent. Arvind’s property at Sylvania Crescent was sold by mortgagee sale and the liquidators did not recover anything under their security. However, the liquidators hold a personal guarantee from Arvind. The amount owing is in the region of $240,000.00 but again, that is an approximate figure. That this sum is owed to the liquidators also has to be reflected in any outcome. The liquidators can issue summary judgment proceedings against Arvind and take security over the shares he owns in Masters and thereby ultimately gain a share of the funds to be distributed in the liquidation to Masters.
[75] All parties were concerned at the fees being incurred in the liquidation. Such fees are a fact of life. The liquidators pursuing Arvind in the way I have described, will ultimately reduce the overall pool of assets available to fund a settlement.
[76] The Court has the power to order the parties to attend a JSC. When this matter is repleaded, Mr Noble is to request a telephone conference with me, and I intend to order that a JSC take place. The parties must simply adopt a more pragmatic approach to settlement and recognise there are a number of interests to be addressed including those of Nayana and Sanjay, their children and Sanjay’s parents.
[77] As to the role of the liquidators, they do not need to be actively involved in this proceeding. Once the amounts due to Sylvania Trust and Masters are crystallised and third party creditors are paid, the liquidation can effectively be put on hold as all the liquidators will be waiting on is whether there is a recovery in respect of a claim they have against C & E Limmer Ltd (in liquidation). That liquidation is in the hands of independent liquidators.
[78] If the issue of the debt owed by Arvind to the liquidators cannot be resolved at a JSC or by agreement, inevitably further costs will be incurred.
Timetable
[79] Mr Noble is to replead the statement of claim, reflecting the acknowledgments made at the hearing, the above directions and the liquidators’ acknowledgment that funds will flow back to the Sylvania Trust and Masters. Such is to be filed and served within 20 working days of the date of this judgment.
[80] The defendants are to file their amended statements of defence within a further 20 working days.
[81] My understanding is that relief will no longer be sought against the third or the fourth defendants. On that basis, Nayana is to file a notice of discontinuance against the third and fourth defendants.
Costs
[82]The costs of the application are reserved.
[83] If Mr Noble considers I have not correctly recorded the acknowledgments by him as to the future shape of the proceeding, he may request a telephone conference with me.
Associate Judge Lester
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