McCarthy v McManamon - [2021] NZHC 294

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-470-029

[2021] NZHC 294

BETWEEN
CHRISTOPHER WAYNE MCCARTHY as

Trustee and Beneficiary of the Earnscleugh Trust and as Trustee and Beneficiary of the Elizabeth Street Trust Plaintiff

AND

CATHERINE MCMANAMON

First Defendant

AND

IMPACT LEGAL TRUSTEE LTD as

Trustees of the Elizabeth Street Trust Second Defendant

Hearing: 19-23 October 2020

Counsel:

A H Brown and J Y Leenoh for the Plaintiff

R C Laurenson and C D Batt for the First Defendant No appearance by or for the Second Defendant

Judgment:

26 February 2021

JUDGMENT OF GRICE J

Table of contents

Background[5]
The marriage[14]
The prenuptial arrangements[30]
Elizabeth Street Trust assets[58]
Earnscleugh Trust assets[59]
Bank accounts[89]
Ms McManamon[100]
Errors and omissions in the documentation[121]
Mr McCarthy's claims [125]
The Heads of Agreement (HOA)[128]
Were the provisions of the HOA implied into the trusts?[134]
Specific performance[137]
The defences[149]
Summary of factual findings on undue influence and unconscionable bargain[150]
First general defence: undue influence[159]

MCCARTHY v MCMANAMON [2021] NZHC 294 [26 February 2021]

Second general defence: unconscionable bargain[173] Third general defence: failure to perform HOA and failure of express/implied provisions[180] Application of s 182 of the Family Proceedings Act 1980[192] Nuptial settlement[196]

Discretion[207]

The post nuptial settlement circumstances[218]

The present circumstances[226]

Constructive trust[246]

Proprietary estoppel[252]

The present deadlock[257]

Conclusion[263]

[1] The day before they married, Wayne McCarthy and Catherine McManamon each set up a trust to hold assets they would bring to the marriage. This was part of a prenuptial arrangement, the terms of which was set out in a Heads of Agreement (HOA), which existed at the same time as the trusts. The general intention then expressed was that if they separated after three years of marriage they would share equally in the joint assets of the trusts. They did separate after nearly 12 years of marriage. One trust now holds a house worth about $1,515,000. The other held approximately $150,000, which was distributed following separation.

[2] They now disagree about the effect of the prenuptial arrangements. In simple terms, Mr McCarthy seeks a half share of the $1,515,000 house held in Ms McManamon’s trust with a small adjustment for a distribution from his trust.1

[3] In general terms, Ms McManamon raises three defences: undue influence, that the prenuptial arrangements constituted an unconscionable bargain and that the HOA is void for a number of reasons including the fact Mr McCarthy did not transfer all the required assets into his trust.

[4] Both parties sought relief under s 182 of the Family Proceedings Act 1980 which I have granted, following my conclusion that Mr McCarthy breached his fiduciary obligations to transfer certain assets into his trust.

1 Mr McCarthy claims that the Court should order specific performance and the transfer of a half share of the house in question. He also claims a constructive trust and proprietary estoppel in relation to the house. I also refer to the plaintiff and the first defendant by…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading McCarthy v McManamon

Details

AGLC: McCarthy v McManamon [2021] NZHC 294
Case: [2021] NZHC 294
Decision Date: 26 February 2021

CaseChat Overview and Summary

Wayne McCarthy and Catherine McManamon married in 2003 and entered into a prenuptial agreement that included the establishment of two trusts. The couple separated in 2014, and Mr McCarthy commenced proceedings in the High Court in 2019 seeking enforcement of the Heads of Agreement (HOA) between the two trusts. The central issue in the case was whether the HOA was incorporated into the trusts and if not, whether the terms of the HOA could be enforced as a contract. The court held that the HOA was not incorporated into the trusts, but some obligations under the HOA were fiduciary in nature. The court also held that the prenuptial settlement arrangements were valid and should be enforced.

The court considered the application of section 182 of the Family Proceedings Act 1980, which allows the court to exercise its discretion to vary the terms of a nuptial settlement. The court found that the circumstances of the parties had changed significantly since the nuptial settlement, and the exercise of the court's discretion was warranted. The court ordered that Mr McCarthy should receive $542,000, which included $142,000 he had already received from one of the trusts. The court also ordered that the trustees and beneficiaries of each trust be removed.

The court dismissed Mr McCarthy's claims for specific performance, constructive trust, and proprietary estoppel, finding that the most appropriate approach was under section 182 of the Family Proceedings Act. The court also dismissed Ms McManamon's defences, except for the claim seeking resettling of the trusts under section 182. The court found that the trust arrangements put in place by the parties before marriage amounted to a prenuptial settlement for the purposes of section 182, and the circumstances of the parties had changed significantly from when they entered into the nuptial settlement to the present time.

The court exercised its discretion under section 182 and ordered that Mr McCarthy should receive $542,000, which included $142,000 he had already received from one of the trusts. The court also ordered that the trustees and beneficiaries of each trust be removed. The court noted that each party had been successful in some measure and that it appeared an appropriate case for costs to lie where they fall.

Orders