Maule v Cooper
[2023] NZHC 1638
•29 June 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-0346
[2023] NZHC 1638
BETWEEN TRACEY MARIE MAULE
Plaintiff
AND
LEONARD WAYNE COOPER
Defendant
CIV-2021-404-0021 BETWEEN
LEONARD WAYNE COOPER
PlaintiffAND
TRACEY MARIE MAULE
Defendant
Hearing: 1 and 2 February 2023 Appearances:
N G Lawrence for Plaintiff
S R Mitchell KC for Defendant
Judgment:
29 June 2023
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 29 June 2023 at 3.45 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Simpson Western, Auckland
Conveyancing Centre, Auckland
Counsel: R J Hollyman KC, Auckland
N G Lawrence, Auckland
S R Mitchell KC, Auckland
MAULE v COOPER [2023] NZHC 1638 [29 June 2023]
Table of Contents
Introduction.......................................................................................................... [1]
Background.......................................................................................................... [5]
Issues..................................................................................................................... [8]
Mahoney Drive................................................................................................... [12]
Background to sale[17]
Submissions[27]
Application for validation[30]
Agreement/prejudice[32]
Whether to give effect to the July agreement[34]
Discussion[37]
Effect of the settlement agreement[44]
Order[53]
Bush Road.......................................................................................................... [54]
Discussion[61]
Jumbo Bins......................................................................................................... [70]
Mangawhai property......................................................................................... [79]
Application to set aside...................................................................................... [84]
Discussion[94]
Application to amend statement of claim........................................................ [97]
Other matters..................................................................................................... [99]
Matters from hereon....................................................................................... [103]
Result................................................................................................................ [104]
Mahoney Drive[105]
Bush Road[108]
Jumbo Bins[110]
Mangawhai property[113]
Application to set aside[114]
Application to amend statement of claim[115]
Legal costs[116]
Leave to apply[117]
Costs.................................................................................................................. [118]
Introduction
[1] This judgment determines various disputes between the plaintiff, Ms Maule, and the defendant, Mr Cooper.
[2] The parties separated in March 2016. They entered into a Separation and Relationship Property Agreement pursuant to s 21A of the Property (Relationships) Act 1976 in March 2018 (“settlement agreement” and “PRA” respectively). They divorced in April 2018.
[3] By her statement of claim, Ms Maule seeks relief in respect of several provisions of the settlement agreement. In his opening submissions, Mr Lawrence, for Ms Maule, also sought leave to amend her statement of claim in the respect referred to below.
[4] Mr Cooper disputes some of the relief sought. He also seeks an order setting aside the settlement agreement pursuant to s 21J PRA, on the ground that to give effect to the agreement would cause serious injustice.1 Alternatively, Mr Cooper seeks a declaration that an agreement the parties reached in July 2018 has effect (“July agreement”).2
Background
[5] The parties entered into the settlement agreement after receiving legal advice. The agreement makes provision for the division and distribution of relationship assets and liabilities. It is clear that the parties expected that what they agreed would constitute an equal division by way of value, as the assets allocated to Mr Cooper were estimated to have a net value of $692,000, and Ms Maule was to receive the same sum but in cash.
[6] The assets subject to the settlement agreement were held by two family trusts, being the Len and Tracey Cooper Family Trust and the Tracey Maule Family Trust. The Maule Family Trust is also referred to in the settlement agreement from time to
1 Property (Relationships) Act 1976, s 21J.
2 Section 21H.
time, as it advanced funds to other entities. I refer to these trusts as the “LTCFT”, “TMFT”, and the “MFT” respectively. Ms Maule was and is the sole trustee of the TMFT and the MFT, and possibly of the LTCFT also.
[7] The parties settled the LTCFT in July 2010. Both were/are discretionary beneficiaries. Ms Maule’s parents settled the other two trusts in March 2009. Ms Maule and the couple’s two children were beneficiaries of these trusts.3 Mr Cooper was not.
Issues
[8] The first matter to address arises in relation to the net proceeds of sale of the relationship home (“Mahoney Drive”). Ms Maule seeks judgment in respect of approximately $162,000 plus interest in respect of this matter. It is necessary to consider Mr Cooper’s claim for an order giving effect to the July agreement at the same time.
[9] Secondly, Ms Maule seeks orders for specific performance of provisions of the settlement agreement regarding two assets that Mr Cooper was allocated, being a residential unit referred to as “Bush Road”, and the shares in what was the parties’ business, Jumbo Bins Ltd (“Jumbo Bins”). These assets are in Ms Maule’s name at present. However, they are to be transferred to Mr Cooper, subject to his taking certain steps regarding creditors, which he has not attended to.
[10] Thirdly, Ms Maule seeks an order that Mr Cooper pay her $20,000 in respect of what is referred to as the “Mangawhai property”. Mr Cooper disputes this claim and also whether the proceeds of sale of that property were applied in accordance with the settlement agreement.
[11] Lastly, it is necessary to determine Mr Cooper’s application to set aside the settlement agreement. This application is based on the serious injustice Mr Cooper contends arises from provisions of the settlement agreement in respect of Mahoney Drive, the Mangawhai property, and a separate asset, Debut Homes Ltd
3 One of the children was killed, tragically, in a motor vehicle accident in October 2018.
(“Debut Homes”). I propose to decline this application for reasons given at the end of the judgment.
Mahoney Drive
[12] Section 6 of the settlement agreement provides that Mahoney Drive should be sold, the costs of sale paid, and liabilities relating to the property discharged. Thereafter, the net proceeds of sale, up to $692,000, were to be paid to Ms Maule with any surplus to be shared equally. The $692,000 is the same sum as the estimated net value of the assets Mr Cooper was to have, as referred to in [5] above.
[13] As it turned out, the price at which the property was sold — $1.64 million — resulted in net proceeds of sale of $529,438.98, being $162,561.02 less than $692,000. The issue to be determined is what the parties agreed would occur in this eventuality.
[14] Ms Maule submits that, pursuant to the terms of the settlement agreement, Mr Cooper is liable to pay her the entire $162,561.02. She seeks judgment in that sum, plus interest.
[15] In reliance on the July agreement, Mr Cooper submits his liability is no more than $37,000.
[16]Section 6 of the settlement agreement provides:
6.MAHONEY DRIVE PROPERTY
6.1Tracey has been in sole occupation of the Mahoney Drive Property since separation and shall continue to have sole occupation until the property is sold.
6.2The parties agree Mahoney Drive will be marketed for sale no later than 15 February 2018 and that they shall cooperate in appointing a Real Estate Agent and agree on the appropriate method of sale.
6.3Len shall be involved in all negotiations regarding the sale of Mahoney Drive. Tracey shall accept any offer for sale of $1.8m or greater. In the event there has not been an offer for sale of $1.7m or greater by 30 June 2018 Tracey shall be entitled to accept the best price possible for Mahoney Drive. Len shall sign an Authority and Instruction form to give effect to the sale in accordance with this clause.
6.4The parties shall be equally liable for all mortgage repayments (principal and interest) in relation to the Mahoney Debt until the property is sold as well as the costs to prepare the property for sale and marketing costs.
6.5From the gross proceeds of sale the following payments shall be made:
(a)Payment of all costs of sale, including Real Estate Agent’s commission and legal fees;
(b)Repayment of the Mahoney Debt;
(c)Repayment of the First TMFT Advance to the TMFT in the sum of $450,000.00;
(d)Repayment of the MFT Debt of $116,806.02 to the MFT;
(e)Tracey shall receive the sum of $692,000, as set out in the Schedule to this Agreement;
(f)Any remaining proceeds of sale shall be divided equally between Tracey and Len (or any trust nominated by Len).
(g)In the event there are insufficient funds to meet the payment to Tracey of $692,000 Len shall be required to meet the shortfall up to the value of $347,000 within 28 days of the settlement date of the sale of Mahoney Drive. In the event of late payment interest shall accrue on any outstanding sum or part thereof at the rate of 8% per annum calculated daily until the overdue sum is paid. If Len has not met the shortfall owing under this agreement as per clauses 6.5(g) and 9.3(c) Tracey shall be entitled to register a charge or security interest over the Bush Road property to provide security for Tracey until payment is received in full from Len.
Background to sale
[17] Mahoney Drive was listed for sale by auction in early February 2018. Mr Cooper’s evidence is that the agents advised the parties that they could expect the property to sell for between $1.8 and $2 million. The settlement agreement recorded that the estimated value of the property was “approximately $1.7 million”.
[18] As it turned out, the property was passed in at auction on 21 March 2018, without attracting any bids.
[19] On the agents’ advice, the parties withdrew the property from the market then or shortly afterwards. They relisted the property on 19 June 2018, and commenced marketing it again on 1 July 2018.
[20] On 17 July 2018, the agents presented an offer to purchase of $1.64 million. It was events in respect of this offer that resulted in the July agreement.
[21] Ms Maule wished to accept the offer, Mr Cooper did not. It is common ground, or at least it was after cross-examination, that Ms Maule telephoned Mr Cooper that evening. During the discussion, Mr Cooper continued to say that he did not wish to accept the offer, as a sale at that price would result in a significant shortfall below the
$692,000, and he was in no position to fund half of that shortfall, which he believed to be the extent of his liability. Mr Cooper said he would agree to sell at $1.64 million if Ms Maule agreed that he would be required to contribute no more to the shortfall than $37,000, and that he would pay this sum when he had sold the launch that he was to receive under the settlement agreement. Mr Cooper said if those terms were recorded in writing, he would sign the documents required to effect the sale of Mahoney Drive.
[22] The next morning, 18 July 2018, Ms Maule sent the following email to Mr Cooper:
…
Subject: our personal agreement as of 18 July 2018
I think this is right but please fix it if not....
Just for the record can you please reply with confirmation that we have agreed that as the current sale of Mahoney Drive stands, you have estimated that
you would have to pay me out $78,000.00. There is also the money I have agreed to write off which was documented in yesterday’s emailed spreadsheet totalling $32k …
Our agreement as of today has been to alter that figure of $78k to be paid to me, to a figure of $37k which will be repaid to me upon the sale of the boat.
We have also agreed that the deposit for Mahoney, less the commission will be put into the L & T CFT revolving credit account and the mortgage and insurance repaid until settlement. If necessary, Tracey is entitled to borrow from these funds for a deposit for a property which will be taken into account on settlement also …
[23] The $78,000 referred to reflects Mr Cooper’s belief that he was only ever liable under the settlement agreement for half of the shortfall.
[24] In any event, after receiving the email Mr Cooper confirmed his agreement; the parties signed the agreement for sale and purchase for a sale at $1.64 million; and the sale itself was settled on 29 November 2018.4
[25] A month later, in August 2018, Ms Maule’s solicitors advised Mr Cooper’s solicitors that Mr Cooper was liable for the full $162,561.02.
[26] Mr Cooper’s solicitors responded, referring to the July agreement and saying that his liability was $37,000.
Submissions
[27] Mr Cooper submits that I should declare the July agreement valid pursuant to s 21H PRA, so that he is liable to pay $37,000 on the sale of the launch.
[28] Failing that, Mr Cooper submits that the most for which he is liable under the terms of the settlement agreement is half of the shortfall.
[29] Ms Maule’s case is that, pursuant to cl 6.5(g), Mr Cooper is liable to pay the entire shortfall of $162,561.02, and she seeks an order requiring Mr Cooper to pay her this sum. She submits that she should not be held to the July agreement for the reasons set out below.
Application for validation
[30] Mr Cooper requires an extension of time for his application for a declaration that the July agreement has effect. I grant the extension as there is no prejudice to Ms Maule in doing so. Mr Cooper’s solicitors notified Ms Maule’s that they were relying on the July agreement as soon as demand was made of Mr Cooper for the entire shortfall.
4 I will take the July agreement as having been reached on 18 July 2018, when Mr Cooper confirmed it.
[31] Mr Cooper’s application is made pursuant to s 21H PRA. This permits the Court to declare that an agreement, otherwise void for non-compliance with s 21F, is effective. These provisions are as follows:
21H Court may give effect to agreement in certain circumstances
(1)Even though an agreement is void for non-compliance with a requirement of section 21F, the court may declare that the agreement has effect, wholly or in part or for any particular purpose, if it is satisfied that the non-compliance has not materially prejudiced the interests of any party to the agreement.
(2)The court may make a declaration under this section in the course of any proceedings under this Act, or on application made for the purpose.
21F Agreement void unless complies with certain requirements
(1)Subject to section 21H, an agreement entered into under section 21 or section 21A or section 21B is void unless the requirements set out in subsections (2) to (5) are complied with.
(2)The agreement must be in writing and signed by both parties.
(3)Each party to the agreement must have independent legal advice before signing the agreement.
(4)The signature of each party to the agreement must be witnessed by a lawyer.
(5)The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.
Agreement/prejudice
[32] I am satisfied that the July agreement is an agreement entered into under s 21A and the requirements of s 21F(1) have not been complied with. Given that, the next issue is whether that non-compliance has materially prejudiced Ms Maule’s interests in the sense of s 21H(1). I am satisfied that it has not.
[33] Although Ms Maule’s evidence was that she did not take legal advice prior to the July agreement, both parties had received considerable legal advice by then. The evidence was that it took many months to negotiate the terms of the settlement agreement, and that the process included at least one “round table” meeting of the parties and their legal advisers in January 2018. Both parties would have known that
the usual rule is that relationship property is divided equally, and both would have been familiar with the provisions of the settlement agreement as regards Mahoney Drive.
Whether to give effect to the July agreement
[34] This brings me to the next issue which is whether I should declare that the July agreement has effect.
[35] Mr Cooper submits that I should. His evidence is that he believed the parties should continue to market the property, that it could be sold for more than
$1.64 million, that he was concerned at the financial implications of accepting the offer, and he would only agree to do so on the terms of the July agreement.
[36] Ms Maule submits that I should not. This is because, on her view of it, she acted under a mistake, believing that she required Mr Cooper’s consent to accept the offer. Ms Maule’s evidence was that Mr Cooper confused her when they spoke, something she contends he was prone to do, by “throwing around figures and accusations”; that Mr Cooper convinced her to agree; and that it was in those circumstances that she wrote her email of 18 July 2018.
Discussion
[37]I am satisfied that the July agreement should be given effect.
[38]First, the sale of the property cannot be reversed.
[39] Secondly, I consider it most unlikely that Mr Cooper conducted himself in the manner Ms Maule says, or that he confused her. The correspondence between the parties at that time is amicable. It is inconsistent with Ms Maule’s portrayal at trial of Mr Cooper bullying her, and with her portrayal of herself as someone confused by financial matters. On the contrary, the correspondence indicates that Ms Maule had a good grasp of the parties’ finances, and incomings and outgoings.
[40] It is also to be borne in mind that it was Ms Maule who recorded the terms of the agreement in writing, not Mr Cooper, and that she did so having had time to reflect on matters overnight. The email is formal, and appears to have been drafted with considerable care. It does not appear to have been written by someone who was flustered or confused.
[41] In addition, the July agreement conferred a benefit on Ms Maule that was additional to the settlement agreement. In this I am referring to the concession in the July agreement that she should be able to apply the deposit paid by the purchasers of Mahoney Drive to any purchase she might herself wish to make. Whether Ms Maule did so or not, that benefit was available to her.
[42] In my view, these are all compelling reasons to give effect to the agreement reached and relied upon.
[43] I appreciate that the effect of validating the July agreement is possibly to make the division of assets unequal. I say possibly because it seems, for instance, that the value attached to the launch was unrealistic. However, on the face it, validating the July agreement means Ms Maule receives at least $40,000 less than Mr Cooper, and possibly more. However, I do not consider that differential warrants a refusal of Mr Cooper’s application, given the other matters to which I have referred.
Effect of the settlement agreement
[44] In case I am wrong on that, I record that I do not accept the submissions for Ms Maule as to the effect of section 6 of the settlement agreement, i.e. the provisions which would apply in the absence of validation of the July agreement.
[45] Mr Lawrence made two main submissions on this. The first was that, as of July 2018, Ms Maule did not require Mr Cooper’s consent to sell Mahoney Drive at
$1.64 million. The second is that, on the proper construction of cl 6.5(g), Mr Cooper would be liable for all of the shortfall that eventuated.
[46]The first submission derives from the following sentence in cl 6.3:
... In the event there has not been an offer for sale of $1.7m or greater by 30 June 2018 Tracey shall be entitled to accept the best price possible for Mahoney Drive ...
[47] There had not been an offer for sale of $1.7 million or more by 30 June 2018. Accordingly, on the face of cl 6.3, as of 17 July 2018 Ms Maule was entitled to accept an offer that constituted “the best price possible” for Mahoney Drive.
[48] However, the submission that Ms Maule could accept the offer or not as she wished overlooks that cl 6.3 required that Mr Cooper “be involved in all negotiations regarding the sale”. Accordingly, Ms Maule was bound to consult Mr Cooper about the offer.
[49] Moreover, Mr Mitchell KC, for Mr Cooper, submits that the 1 July date in cl 6.3 must be extended to reflect that Mahoney Drive had been taken off the market for several months. The property had only been back on the market for a matter of weeks when the offer of $1.64 million was made. Accordingly, if the provisions of the agreement, properly construed, contemplated that the property would be on the market for a four-month period without interruption, that is from mid-February to July 2018, before Ms Maule could accept an offer at less than $1.7 million, it had not been. Even then, as I have said, Ms Maule could only accept the best price possible.
[50] Accordingly, there are difficulties with Ms Maule’s case that she could accept the offer of $1.64 million at the time it was made, and that she could do so without reference to Mr Cooper.
[51] Turning to Mr Lawrence’s second submission, on one reading, cl 6.5(g) does require Mr Cooper to meet the entire shortfall up to $347,000. However, as Mr Mitchell submits, the consequences of this construction are that, given the shortfall of approximately $160,000, the value of the net assets that Mr Cooper takes reduces to $530,000, whilst Ms Maule’s $692,000 remains. There is no obvious reason justifying such a discrepancy. In addition, other provisions of the settlement agreement expressly provide for equality, such as cls 6.4 and 6.5(f), and section 9 also, which anticipates that the proceeds of sale of the Mangawhai property will be divided
equally. Also, it is only possible to make sense of the $347,000 as essentially half of the $692,000 (leaving aside an agreed sum of $2,000 earmarked for legal costs).
[52] In short, even if I had decided the July agreement was ineffective, I would not have entered judgment for Ms Maule. For the reasons given, I am not persuaded that the terms of the settlement agreement permitted Ms Maule to accept the offer of
$1.64 million at the time that offer was made or, if she was, that Mr Cooper would be liable for more than half of the resulting shortfall.
Order
[53] I declare the agreement the parties reached on 18 July 2018, as recorded in Ms Maule’s email of the same date, valid. Mr Cooper is to pay Ms Maule $37,000 on the sale of the launch, if not before. If the launch has been sold, and the money not paid, it is to be paid forthwith.
Bush Road
[54] Bush Road is a residential unit, presently owned by Ms Maule in her capacity as trustee of the TMFT.
[55] The effect of section 8 of the settlement agreement is that Mr Cooper is to have this asset; to assume liability for a debt of approximately $450,000 owed to the BNZ and secured against the property; and to ensure Ms Maule is released from any liability to the bank.
[56]Section 8 provides:
8.BUSH ROAD PROPERTY
8.1Len is currently in occupation of the Bush Road property and shall retain the Bush Road property as part of the division of property.
8.2Len shall be solely liable for the Bush Road Mortgage as at settlement date and shall ensure the TMFT and/or Tracey is released from liability in relation to the Bush Road Mortgage.
8.3On the settlement date of the sale of Mahoney Drive Tracey shall do all things necessary in her capacity as trustee of the TMFT to transfer the Bush Road property to Len, or a trust nominated by Len provided
Len has obtained the release of the TMFT and/or Tracey in relation to all liability for the Bush Road Mortgage.
[57] The settlement date referred to in cl 8.2 is the settlement date of Mahoney Drive, which was 29 November 2018.
[58] Mr Cooper has not sought the release referred to in cl 8.2, and the property has not been transferred to him.
[59] In her statement of claim, Ms Maule seeks the following orders in respect of Bush Road:
(a)An order for specific performance of clause 8.2 and 8.3 of the Agreement requiring the defendant:
(i)To facilitate the transfer of title of the Bush Road Property from the plaintiff to the defendant, including the execution and delivery of an Authority & Instruction form (A&I) ...
(ii)To attend to repayment of the outstanding loan of $450,000.00 owed by the plaintiff to BNZ ...
(iii)To procure the release of the plaintiff in her personal capacity and as trustee of the TMFT, from their liability whether as personal debtors or guarantors pursuant to the BNZ Loan and the BNZ Mortgage;
(b)An order, if the defendant fails to comply with the orders for specific performance set out in paragraph 27(a)(i) and (ii) above within 14 days of the sealing of the judgment, directing and authorising the Registrar of the High Court at Auckland to execute an A&I form ...
(c)Judgment in the sum of $5,505.26 as set out in paragraph 32 above ...
[60] The sum of $5,505.26 is said to comprise outgoings in relation to Bush Road which Mr Cooper is alleged to have been liable to pay but which he did not pay.
Discussion
[61] In his closing submissions for Ms Maule, Mr Lawrence acknowledged that it was no longer realistic to pursue the orders sought in the statement of claim because Mr Cooper may not be able to “re-finance” the debt due to the BNZ. With respect to Mr Lawrence, section 8 of the settlement agreement does not expressly require a re-financing.
[62] In any event, in his closing submissions, Mr Lawrence stated that Ms Maule now sought orders:
31.… confirming clauses 8.2 and 8.3 of the settlement agreement require Mr Cooper to:
(a)Release Ms Maule and the T Maule Family Trust from all liability in relation to the Bush Road property;
(b)Obtain the release of Ms Maule and/or the T Maule Family Trust in relation to all liability for the Bush Road mortgage before the property is transferred to Mr Cooper.
[63] I assume that by seeking orders “confirming” what cls 8.2 and 8.3 require, Mr Lawrence intends that the Court should declare that the proper construction of those clauses is to the effect referred to in [31](a) and (b) as quoted above.
[64]Even so, for the following reasons, I decline to make the declaration sought.
[65] At its highest, Mr Cooper’s obligation is to ensure the TMFT and/or Ms Maule are released from liability in relation to the Bush Road mortgage. That obligation is narrower than [31](a).
[66] Ultimately, however, the BNZ’s agreement to release the TMFT and/or Ms Maule will be required. The terms, if any, on which the bank will be willing to proceed are unknown because nobody has approached the bank. However, at the very least, the bank is likely to require Ms Maule’s written undertaking to transfer the property to Mr Cooper immediately on receipt of the release. Alternatively, it is conceivable the bank will require a transfer of the property before it grants the release.
[67] Given that, the first step must be for Mr Cooper to seek from the BNZ the release referred to in cls 8.2 and 8.3 of the settlement agreement. Mr Cooper may require legal assistance in making that request but it must be made forthwith. In addition, Ms Maule must supply such information or authorisation to the bank as may reasonably be required to facilitate compliance with cls 8.2 and 8.3. I accept Ms Maule’s evidence that she has given the required authorisation to the bank previously. This order as it relates to her is made for the avoidance of any possible delay on that ground.
[68]It is to be hoped that these orders will break the present “logjam”.
[69] I record that the revised version of the orders sought, as referred to in [62] above did not include an order in respect of the $5,505.26 claimed in the statement of claim. That may be an oversight. However, I am not persuaded this claim was proved on the evidence and thus would not have made the order in any event.
Jumbo Bins
[70] Under the settlement agreement, Mr Cooper is also to have all the shares in Jumbo Bins.
[71] The TMFT has always held, and it continues to hold, all of the shares in Jumbo Bins. Both parties worked in the business at the time of their separation. Ms Maule ceased her employment with the company at the end of September 2018. Mr Cooper receives all the income earned by the business and is the company’s sole director.
[72]Clause 7.4 of the agreement provides:
7.4On the settlement date of the sale of Mahoney Drive:
(a)Tracey shall procure the TMFT to transfer its shareholding to Len and/or a trust nominated by Len;
(b)Len shall ensure Tracey and/or the TMFT is released from any personal guarantees or liabilities past or present in relation to Jumbo Bins and shall indemnify Tracey and/or the TMFT in relation to the same;
(c)The shareholders current accounts shall be assigned to Len;
(d)The company credit card in Tracey’s personal name shall be repaid from Jumbo Bins and shall be closed.
[73] Again, neither party has complied with their obligations under these provisions. The TMFT had not transferred the shares to Mr Cooper, although Ms Maule’s evidence is that it is ready, willing and able to do so on satisfaction of cls 7.4(b) and (d). Mr Cooper has not sought the release(s) referred to in cl 7.4(b).
[74] I do not know the position regarding the shareholders current accounts referred to in cl 7.4(c).
[75] Ms Maule is liable to the issuer of the credit card referred to in cl 7.4(d) but it is common ground that it has been used to pay company expenses. At the date of the hearing the sum outstanding on the credit card was approximately $33,000. Jumbo Bins has not repaid the sum outstanding and the credit card has not been closed.
[76]In her statement of claim, Ms Maule seeks:
(a)An order for specific performance of clause 7.4 of the Agreement requiring the defendant:
(i)To procure the release of the plaintiff and/or the TMFT from any personal guarantees or liabilities past or present in relation to Jumbo Bins; and
(ii)To procure or arrange for repayment of the outstanding balance held in the credit card account and to attend to closure of the account.
[77] The situation regarding Jumbo Bins is similar to that pertaining to Bush Road and I propose to make similar orders. Mr Cooper needs to take whatever steps are required to seek the release referred to in cl 7.4(b) forthwith and, to the extent Ms Maule’s co-operation is required, it must be forthcoming.
[78] In addition, I propose to make the order sought in (a)(ii) above. As I have said, cl 7.4(d) of the settlement agreement provides that the sum outstanding on the credit card will be repaid “from” Jumbo Bins. Although Jumbo Bins is not a party to this litigation, Mr Cooper is the sole director of the company and has power to arrange the necessary repayment or to agree with the issuer the terms on which Ms Maule will cease to be liable for the outstanding balance.
Mangawhai property
[79] The trustees of the TMFT owned a property in Mangawhai, which they sold in July 2017. Section 9 of the settlement agreement makes the following provision for the application of the proceeds of sale:
9.MANGAWHAI PROCEEDS
9.1On 10 July 2017 the Mangawhai Property was sold. From the process of sale the following payments were made:
(a)The sum of $114,106.00 was paid to the L&T Cooper Family trust being the balance owed by the TMFT to the L&T Cooper Family Trust for the 2nd L&T Cooper Advance;
(b)Len received $10,000 by way of interim distribution;
9.2On the date of this Agreement the following Interim distributions will be made:
(a) $20,000 to Len;
(b)$30,000 to Tracey to equalise the distributions to Len in clause 9.1(b) and 9.2(a);
9.3On the settlement date of the sale of Mahoney Drive the Mangawhai proceeds shall be distributed as follows:
(a)Tracey shall receive the sum of $20,000 to repay a joint debt of the parties;
(b)The remaining proceeds shall be divided equally between Tracey and Len.
(c)In the event there are insufficient funds to meet the payment to Tracey of $20,000 as per clause 9.3(c) [sic], Len shall be required to meet the value of the shortfall up to $20,000 from his share of the sale proceeds of Mahoney Drive.
[80] The issues between the parties arise in relation to cl 9.3. Ms Maule’s case is that she applied the “remaining” proceeds of sale referred to in cl 9.3(b) to joint expenses such as rates and mortgage payments on Bush Road and readying Mahoney Drive for sale. However, as it turned out, doing so left insufficient funds to meet the payment of $20,000 due to her under cl 9.3(a). She seeks this sum from Mr Cooper pursuant to cl 9.3(c).
[81] Mr Cooper denies liability to pay this sum. He also raised an issue as to whether the proceeds of sale had been divided equally, in accordance with cl 9.3(b). However, by the end of the hearing, Mr Cooper accepted, as did I, that Ms Maule had applied the funds to joint expenses.
[82] There are, however, difficulties with cl 9.3. The reference to “cl 9.3(c)” in cl 9.3(c) is clearly a typographical error so I put that to one side. However, Mr Cooper
did not receive any share of the sale proceeds of Mahoney Drive and cl 9.3(c) provides for the payment of the $20,000 to come from that source. Given the specific reference in that clause to those sale proceeds as the source of repayment, I am unable to construe cl 9.3(c) as a general obligation on Mr Cooper’s part to make up the deficit.
[83]Given this, I decline to make any orders in respect of the Mangawhai proceeds.
Application to set aside
[84] Mr Mitchell seeks an order setting aside the settlement agreement on the basis that giving effect to it would cause serious injustice. The serious injustice is said to arise from provisions of the settlement agreement in respect of Mahoney Drive, Mangawhai, and Debut Homes.
[85] There is nothing in this argument as it pertains to Mahoney Drive and Mangawhai, given the position reached above in respect of these assets. However, it is necessary to consider the argument to the extent it relates to Debut Homes.
[86] The application to set aside is made pursuant to s 21J PRA, the relevant parts of which provide:
21J Court may set agreement aside if would cause serious injustice
(1)Even though an agreement satisfies the requirements of section 21F, the court may set the agreement aside if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice.
...
(4)In deciding, under this section, whether giving effect to an agreement made under section 21 or section 21A or section 21B would cause serious injustice, the court must have regard to—
(a)the provisions of the agreement:
(b)the length of time since the agreement was made:
(c)whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made:
(d)whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties):
(e)the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement:
(f)any other matters that the court considers relevant.
...
[87] The parties established Debut Homes in 2003. Although initially successful, it encountered difficulties and, in 2009, liquidators were appointed on the application of the Inland Revenue Department.
[88] The liquidators, and the company itself, sued Mr Cooper for breach of his director’s duties, and Mr Cooper and Ms Maule as trustees of the LTCFT. The essence of the litigation against the parties as trustees was that company funds had been applied to benefit them, by reducing their exposure under personal guarantees they had given to some of the company’s creditors.
[89] The liquidators and the company succeeded in the High Court, failed in the Court of Appeal, and succeeded in the Supreme Court.
[90] The High Court decision was issued on 18 March 2018, shortly after the settlement agreement. The Court of Appeal decision was issued in March 2019 and the Supreme Court decision in September 2020. The consequences of the latter decision were very adverse for Mr Cooper, as the settlement agreement provided that he alone would be liable for all legal fees associated with the litigation from January 2018, and also for any liabilities arising from the litigation. As I understood it at the hearing, Mr Cooper has little, if any, prospect of paying the sums due.
[91] Mr Mitchell submits that, under the PRA, the debts and quite possibly the costs, would be relationship debts. That the agreement provides for Mr Cooper alone to bear these liabilities gives rise to serious injustice and the settlement agreement should be set aside.
[92] Ms Maule’s evidence at the hearing was that, at the time of the settlement agreement, her preference was to resolve matters with the liquidators, rather than to
continue with the litigation. Mr Cooper did not. On Ms Maule’s evidence, this is why the settlement agreement provides as it does.
[93] Mr Lawrence submits that the circumstances of this case fall short of those in which the Court will set aside a settlement agreement. Both parties had legal advice in advance of the agreement, it is now of long-standing, and parts of it have been implemented. Mr Lawrence submits that any injustice wrought by the agreement (and he contends there is none) does not meet the high threshold required for a successful application to set aside.
Discussion
[94] Having regard to the matters in s 21J(4), I am not persuaded that giving effect to the agreement would cause serious injustice.
[95] I accept Mr Mitchell’s submission that, in the usual run of things, the PRA requires spouses or partners to bear an equal share of liabilities arising from or during their relationship. I will also proceed on the basis that the liabilities arising in respect of Debut Homes are such liabilities. Equally, however, the matters Mr Lawrence identified and Ms Maule’s evidence, which I accept, count against setting aside the settlement agreement. Mr Cooper assumed liability for the consequences of continuing with the Debut Homes litigation. That it has proved unsuccessful is not in itself a sufficient reason to set aside the settlement agreement.
[96] I should add that this conclusion assumes that Mr Cooper will have the benefit of Bush Road and Jumbo Bins as provided for in the settlement agreement. If he does not, then it is conceivable this issue may need to be revisited in a further proceeding.
Application to amend statement of claim
[97] I referred above to Ms Maule’s application to amend her statement of claim. The proposed amendment seeks an order to the effect that the settlement agreement provides that she is not liable for any of the debts owed in respect of Debut Homes.
[98] Any such order would be pointless. The agreement says what it says. It may or may not be effective against any creditor. Accordingly, I decline leave to Ms Maule to amend her statement of claim.
Other matters
[99]There are three further matters to address.
[100] The first is $2,000 Ms Maule contends is due from Mr Cooper as his agreed contribution to legal fees incurred in the preparation of the settlement agreement. This sum is clearly owed and is to be paid.
[101] The second is that, in his evidence, Mr Cooper contended that Ms Maule was indebted to him for $45,000 for legal costs incurred in respect of the Debut Homes litigation prior to the settlement agreement. However, no counterclaim has been made in respect of this sum and, accordingly, it does not form part of this judgment.
[102] Thirdly, Mr Cooper contended that Ms Maule had omitted to make full disclosure of her assets. However, the assets in question are trivial, being a modest Kiwisaver balance and cash at bank. I also accept Ms Maule’s evidence that she overlooked these matters when disclosing her assets for the purposes of the settlement agreement. I propose to put them to one side.
Matters from hereon
[103] It was apparent at the hearing that the relationship between the parties is at a low ebb and has been for some time. It is to be hoped that the parties can resolve the outstanding matters without further litigation and cost. That, however, will require co-operation from both, and probably the assistance of their solicitors.
Result
[104]I make the following orders, each of which is to be complied with forthwith.
Mahoney Drive
[105]I declare the July agreement valid.
[106] The defendant is to pay the plaintiff the sum of $37,000 on the sale of the launch.
[107] If the defendant has sold the launch, or the launch is not now to be sold, the defendant is to pay the funds to the plaintiff now.
Bush Road
[108] The defendant is to seek from the mortgagee the release referred to in cls 8.2 and 8.3 of the settlement agreement.
[109] The plaintiff is to supply such information and/or authorisation as may reasonably be required by the mortgagee to facilitate the defendant’s compliance with cls 8.2 and 8.3.
Jumbo Bins
[110] The defendant is to seek the release or releases referred to in cl 7.4(b) of the settlement agreement.
[111] The plaintiff is to supply such information and/or authorisation as may reasonably be required to facilitate the defendant’s compliance with cl 7.4(b).
[112]The defendant is to:
(a)procure or arrange from Jumbo Bins Ltd payment of the outstanding balance on the credit card referred to in cl 7.4(d) of the settlement agreement and then to take such steps as are required to close that account; or
(b)to take such steps as are required to ensure that the plaintiff ceases to be liable to the issuer of the credit card for any outstanding balance.
Mangawhai property
[113]I make no orders in respect of the proceeds of sale of the Mangawhai property.
Application to set aside
[114] I dismiss the defendant’s application to set aside the settlement agreement pursuant to s 21J Property (Relationships) Act 1976.
Application to amend statement of claim
[115]I decline the plaintiff’s application to amend the statement of claim.
Legal costs
[116] The defendant is to pay the plaintiff the sum of $2,000 on account of legal costs incurred in respect of the settlement agreement.
Leave to apply
[117] I reserve leave to apply in respect of any matters that the parties have been unable to resolve between themselves. The leave reserved is to be used only if essential and the parties will need to be mindful of their potential liability for costs in respect of any matter on which they require the Court’s further assistance.
Costs
[118] The parties may make submissions on costs and disbursements. Any submissions should not exceed five pages in 1.5 line spacing.
Peters J
0
0
0