MKH v Ge

[2012] NZHC 2471

NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980.  FOR FURTHER INFORMATION PLEASE SEE THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV 2011-470-79 [2012] NZHC 2471

BETWEEN  MKH Applicant

ANDGE Respondent

Hearing:         24 September 2012

Counsel:         E Eggleston for Applicant

A Ashmore for Respondent

Judgment:      24 September 2012

(ORAL) JUDGMENT OF HEATH J

Solicitors:

Holland Beckett, Private Bag 12011, Tauranga Fortune Manning, PO Box 4139, Auckland Counsel:

A Ashmore, 63 Ponsonby Road, Ponsonby, Auckland

MKH V GE HC TAU CIV 2011-470-79 [24 September 2012]

Introduction

[1]      Mr E and Ms H embarked upon a de facto relationship on or about 3 April

2001, separating in December 2004.   During that time a daughter was born, in

November 2003.

[2]      Following separation Ms H brought relationship property proceedings in the Family Court.   Those proceedings were unsuccessful.   On appeal to this Court, however, an award was made in favour of Ms H in the sum of $375,000.[1]

[1] H v E [2012] NZHC 1372 at para [90]..

[3]      That award related to the value of shares in a company operated by Mr E, CSPL.   On 18 June 2012, in giving judgment on appeal, Toogood J left it to the parties to confer and, if possible, to agree on the way in which that interest should be satisfied.  He indicated that it might be by payment of a compensation sum with Mr E retaining all shares in the company in his own name or, alternatively, by the transfer of shares in the company to Ms H.  The Judge also left open the possibility of resolution by some other means.  Leave was reserved for the parties to apply for

further orders, if necessary.[2]

[2] Ibid, at para [91].

[4]      Subsequently, questions of costs on the appeal were resolved by the Judge.[3]

It is unnecessary to refer further to that decision.

Implementation issues

[3] H v E HC Tauranga CIV 2011-470-79, 23 August 2012.

[5]      Circumstances have changed since this Court’s judgment was given on 18

June 2012.  Ms H has applied for various orders designed to give effect to the appeal judgment.  In the meantime, orders were put in place prohibiting Mr E from doing anything which might have the effect of defeating Ms H interest in CSPL, borrowing further moneys against CSPL’s assets, or against the property in which he currently

resides with his partner.

[6]      From evidence put before me for today’s hearing, it appears that Mr E’s corporate fortunes have deteriorated significantly.  There is a debt presently owed to the Bank of New Zealand of approximately $3.5 million.  While that is a company debt, Mr E, I am told, has guaranteed it.  If the information put before me is correct, Mr E is at risk of a demand under that guarantee being made shortly.

[7]      Ms  H  has  filed  evidence  in  which  she  casts  doubt  on  the  impecunious situation  evidenced  by Mr E.   There is  undoubtedly a  lack  of trust.    I readily understand the scepticism with which Mr E’s evidence has been met.  Nevertheless, both parties are now in a position where they must take risks.

[8]      If Mr E is ordered to pay the sum immediately he will need to decide whether to  pay  through  borrowing  or  otherwise,  or  to  file  in  bankruptcy.    If  the  latter occurred, it is likely that the company structures would also fold.

[9]      For Ms H’s part, she takes the risk of payment, as against the possibility of little  in  the  event  of  Mr  E’s  bankruptcy.    The  interest  found  in  her  favour  by Toogood J is relatively small when measured against the amount of the likely bank debt if the guarantee were called upon.

[10]     Mr Eggleston, for Ms H, has put forward today a series of orders which are sought under s 33 of the Property (Relationships) Act 1976 (the Act).  They include an order that the amount be paid within 14 days and, if not, that steps be taken immediately by Mr E to effect a sale of the property in which he currently lives. Orders are also sought in relation to the distribution and proceeds of sale of that property.   Such orders may be problematic if insolvency were to intervene with statutory priorities applying.

[11]     Orders are also  sought  in  relation  to  interests of CSPL but  I accept  the submissions from Mr Ashmore, for Mr E, that there is no jurisdiction for me to make orders in relation to the company.  It is a third party that has not been served.  It is inappropriate for this Court to treat the company as its director’s and shareholder’s alter ego.

[12]     Mr Ashmore submitted initially that a period of eight years should be allowed for Mr E to pay out Ms H share in relationship property.  That proposal was plainly unacceptable both to Ms H and to the Court.  On further reflection a sum of $60,000 was offered over six months, with an order then to be made appointing an accountant to assess the value and viability of Mr E’s companies under s 38 of the Act.   Mr Ashmore submitted that the Court could reconsider the issues after the s 38 report had been filed.  Ms H’s response is that the cost to her and the delay involved does not justify that course.

[13]     I am hampered in determining the precise orders to be made today by the absence of any evidence as to the current value of the property in which Mr E lives, or indeed, his present personal assets and liabilities.

[14]     The Act is designed to achieve a just division of relationship property on separation.[4]  One of the principles of the Act is to achieve a “clean break” between former partners so that each can get on with their lives without interference from the other.[5]    If Mr E’s evidence is accurate, Ms H will have done very well out of the relationship property order, if it can be paid.   On Mr E’s evidence, the value has deteriorated significantly from that put forward at the Family Court hearing due to the general economic downturn.

[4] Property (Relationships) Act 1976, s 1M(c).

[5] Ibid, s 1N(d) and Haldane v Haldane [1981] 1 NZLR 554 (CA).

[15]     I have reached the view that the only appropriate course is to make an order for immediate payment of the amount involved.  That will then allow Ms H to take whatever enforcement action she would be advised to take to achieve payment of the amount owing.   It will also allow further time for the parties to reflect on a final decision,  to  determine  whether  they  wish  to  compromise  to  avoid  unpalatable

outcomes occurring. Those are matters for the parties to consider.

Result

[16]     I make an order for immediate payment of the sum of $375,000  That sum shall continue to carry interest at rates prescribed under the Judicature Act 1908 (currently 5% per annum) until payment.

[17]     The orders previously made restraining Mr E from dealing with property interests involving CSPL are discharged.  That allows each party to deal with issues arising in the context of available civil remedies.

[18]     So  far  as  costs  are  concerned,  those  to  date  have  been  determined  by Toogood J.  Costs shall lie where they fall in relation to today’s hearing.  I am not prepared, on the current state of the evidence, to determine where the merits lie in relation to the positions taken on assets values by Mr E.   The most appropriate approach is to treat today’s hearing as a means of resolving outstanding issues for the

benefit of both parties.

P R Heath J