Neal v Neal
[2024] NZHC 2297
•15 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1294
[2024] NZHC 2297
IN THE MATTER of declarations of resulting and constructive trusts UNDER
Part 18 of the High Court Rules
BETWEEN
VANESSA ASHLEY NEAL
Applicant
AND
COLIN ASHLEY NEAL
First Respondent
COLIN ASHLEY NEAL and POLAR
CAPITAL TRUSTEES LIMITED as trustees of the COLIN NEAL FAMILY TRUSTSecond Respondents
continued: …/2
Hearing: 7 March 2024 Further submissions:
28 March 2024 for the Respondent
11 April 2024 for the ApplicantCounsel:
J McCartney KC, J Cox and S Round for Applicant V Crawshaw KC and S Caradus for First Respondent
A S Ross KC and T Castle for Second and Third Respondents I Rosic and Z Brentnall for Fourth Respondent
Judgment:
15 August 2024
JUDGMENT OF HARVEY J
This judgment was delivered by me on 15 August 2024 at 4 pm pursuant to r 11.5 of the High Court Rules.
Date: …………………..
(Deputy) Registrar
NEAL v NEAL [2024] NZHC 2297 [15 August 2024]
…/2
CIV-2021-404-1294
COLIN ASHLEY NEAL and POLAR CAPITAL TRUSTEESE (NO 2) LIMITED
as trustees of the GLANDOVEY TRUST Third Respondents
POLAR CAPITAL LP
Fourth Respondent
Introduction
[1] On 26 May 2023, I issued orders by consent settling these proceedings between Mr and Ms Neal.1 Ms Neal now claims that, firstly, the defendants have not furnished her with final accounts from the Colin Neal Family Trust (CNFT) in breach of cl 5.4 of the settlement agreement (the Agreement). Secondly, that those accounts incorrectly refer to the payments she received as “distributions” and not as payments of “relationship property”, contrary to cl 21.2 of the Agreement and cl 1(c) of a Trustee Resolution dated 1 May 2023.
[2]To remedy these claimed breaches, Ms Neal requires the Court to direct that:
(a)Colin Ashley Neal and Polar Capital Trustees Ltd and its directors, Colin Ashley Neal, Nichola Ann Burley and Hendricus Woudberg, provide her with final accounts for CNFT for the year ending 31 March 2023. Those accounts are to be signed by Colin Ashley Neal and the directors of Polar Capital Trustees Ltd and are to reflect the provisions of the Agreement and the signed Trustee Resolution of CNFT trustees dated 1 May 2023.
(b)The accounts must reflect that all property transfers and payments made to her under the Agreement, including [redacted], the mortgage repayment and all other payments including from the Deferred Amount,2 are distributions of relationship property, not trust distributions, and have been received by her absolutely.
(c)The property distributed to her under sch E to the Agreement is not recorded and represented in the financial accounts as an asset of CNFT.
(d)Any entry in her beneficiary account that represents property and payments made under the Agreement is removed and extinguished.
1 Neal v Neal [2023] NZHC 1280.
2 The deferred amount totals [redacted]. The Settlement Agreement records that [redacted]of the deferred amount is the separate property of Ms Neal.
(e)The beneficiary account ledger in her name that shows transactions and distributions to Ms Neal contains no distribution(s) of the property and payments that by the Agreement and the Trustee Resolution of 1 May 2023 are classified as relationship property.
[3] Mr Neal and the other defendants deny Ms Neal’s claims. The trustees of CNFT say that the accounts have been provided as agreed and that they cannot be finalised because the trustees are awaiting the completion of accounts for those entities in which CNFT has an interest, namely Polar Capital Limited Partnership (PCLP) and its subsidiaries. This is because, they say, those entities are engaged in disputes of a commercial nature which affect the finalisation of their accounts and therefore those of CNFT. The trustees further say that they are doing all they can to expedite matters so that final accounts can be supplied.
[4] Ms Neal claims that the terms of the Agreement and of the final trustees’ resolution record that the transfers of property from the defendants to her were for the purposes of resolving her relationship property claims. Ms Neal is concerned about the potential risk of having any of those property transfers declared voidable transactions by a creditor of CNFT. The defendants deny that the risk is reasonable and underscore that it is the trustees personally who would be liable should such circumstances eventuate, which they say is too remote to be reasonable.
[5] After the hearing on 7 March 2024, the defendants were given leave to file further submissions with the plaintiff able to file reply submissions to any new matters. The defendants filed a memorandum on 28 March 2024 raising four further points and the plaintiff responded on 11 April 2024.
Issues
[6] The issues raised can be confined to two questions: firstly, does the Agreement provide for all the transfers to be “relationship property” or in settlement of trust claims or both? Secondly, are the defendants in breach of the Agreement by providing only draft financial statements? Further, even though counsel made detailed submissions on the solvency of CNFT, recorded below for completeness, as
acknowledged by Ms McCartney in her reply submissions, the solvency of the trust is not relevant and so I take that matter no further in this decision.
Background
[7] The background to these proceedings is set out in my earlier decisions of 16 August 2022 and 26 May 2023 and that detail need not encumber this judgment.3
The Agreement
[8]The relevant terms of the Agreement are set out below:
Background
…
L.Vanessa, Colin, CNFT and GT have agreed for the purpose of settling differences which have arisen between them, on a distribution of relationship property under section 21A of the PRA.
M.Vanessa, Colin, CNFT and GT have agreed for the purpose of settling differences that have arisen between them on a distribution of the property pool, including property currently held in the names of the trustees of CNFT and GT.
…
1.BACKGROUND
1.1Recitals
The parties confirm the contents of the background recitals to this Agreement.
2.MAINTENANCE
2.1Vanessa and Colin agree that by this Agreement on settlement of all relationship property and trust claims they are both able to meet their reasonable needs…
…
5. LIABILITIES
…
5.4 As part of the covenant of Colin, CNFT and GT in respect of all liabilities within the said entities of Colin, CNFT and GT, it is agreed
3 Neal v Neal [2022] NZHC 2022; Neal v Neal, above n 1.
by Colin, CNFT and GT that they will by date of Court orders provide valid and executed trust resolutions for CNFT and GT that reflect the provisions in this agreement and extinguish any liability due by Vanessa to CNFT and GT. They will provide financial year 2023 annual financial accounts to similarly reflect these provisions and the financial accounts will be provided no later than 30 June 2023.
…
15. EXECUTION
…
15.5The parties will discontinue the proceedings upon the following
(a)Court orders being made
(b)provision of financial year 2023 annual financial accounts for CNFT and GT that reflect the contents of this agreement [and] of the trustee resolution referred to at clause 5.4.
…
18.COMPROMISE OF RIGHTS
18.1 This Agreement is acknowledged to be a full and final satisfaction, release and discharge of any and all rights to property which either Vanessa or Colin or CNFT or GT might otherwise have against the other or Vanessa may have against CNFT or GT, whether under the PRA, s 182 of the Family Proceedings Act 1980, or in law or in equity or otherwise howsoever and, in particular, is an agreement to settle differences pursuant to section 21A PRA.
…
21. COSTS AND PROCEEDINGS
…
21.2 All proceedings, including interlocutory proceedings, will be discontinued following court orders, the consent from PCLP as provided for herein and resolution of the trustees extinguishing Vanessa’s current account debt to CNFT and GT and the provision of financial year ending 2023 annual accounts for CNFT reflecting the contents of this agreement.
…
21.4 The parties agree to do all things necessary to obtain the consent orders and for notices of discontinuance to be signed and filed upon provision of the financial accounts of CNFT.
(Emphasis added)
Submissions
Ms Neal’s submissions
[9] Ms McCartney KC for Ms Neal submitted that the trustees have failed to provide financial accounts that are compliant with the Agreement and consent orders of 30 June 2023, in breach of cl 5.4 of the Agreement. Counsel contended that the financial accounts supplied by the trustees are not compliant because they were provided in a draft and unsigned form. More importantly, Ms McCartney argued that the financial accounts do not record that the payments made to Ms Neal by the trustees are distributions of relationship property. She says this is in contravention of the intention that all payments be categorised as relationship property distributions, as recorded in the Agreement,4 and acknowledged by the Court.5
[10] In addition, counsel submitted that the financial accounts supplied by the trustees contain at least three errors so as to make them non-compliant. First, Ms McCartney contended that the CNFT balance sheet shows the deferred amount of over [redacted] as an asset of CNFT. However, [redacted] of this amount is separate property of the plaintiff. Secondly, counsel argued that the CNFT balance sheet further shows beneficiary current accounts with a negative [redacted] opening balance and around [redacted] in drawings. These figures were said to be incorrect because they do not properly acknowledge transfers to Ms Neal as distributions of relationship property. Thirdly, Ms McCartney submitted that the beneficiary account transactions wrongly record CNFT distributions to Ms Neal totalling around [redacted]. This was said to be incorrect because this transaction ledger records transfers of relationship property, not trust distributions.
[11] Ms McCartney submitted that it is important to have financial accounts that are completed correctly because Ms Neal is entitled to accounts which are compliant with the Agreement. Further, it was argued that there are compelling reasons to doubt CNFT’s claim to solvency. Ms McCartney submitted that compliant financial
4 Settlement agreement, cl 9, in relation to the transfer of [redacted].
5 Neal v Neal CIV-2021-404-1294, 17 March 2023 (Minute of Harvey J) at [3(k)] in relation to a distribution of [redacted] from the deferred amount.
accounts are important to protect Ms Neal in the event of creditor claims made against CNFT.
Trustees’ submissions
[12] Mr Ross KC submitted that the trustees consider that they supplied the original set of draft accounts of CNFT to Ms Neal on 30 June 2023, in compliance with the Agreement and consent orders. Counsel confirmed that on 13 July 2023, Ms Neal raised issues with the accounts that would make them non-compliant. To ameliorate her concerns, the trustees amended the accounts to address the issues raised, without conceding that the accounts were non-compliant. However, counsel highlighted that despite this, Ms Neal continues to claim that the accounts are non-compliant.
[13] The trustees disagree that all distributions made to Ms Neal are in the nature of distributions of relationship property, as claimed by Ms Neal. Mr Ross submitted that that the body of the Agreement does not refer to relationship property distributions, save for one reference to the [redacted] property. Counsel contended that cl 2.1 records that the Agreement is intended to settle trust claims as well as relationship property claims. In any event, counsel contended that the trustees (being not in the “relationship”) cannot distribute relationship property.
[14] As to the issue of risk raised by Ms Neal, counsel argued that—in accordance with the Agreement—funds have been distributed followed by a mutual discharge in full and final settlement of all claims between the parties. Mr Ross submitted that the argument that Ms Neal still remains at some risk from the trustees’ future conduct is not sustainable when considered against the terms of the Agreement and the orders.
[15] Counsel confirmed that the trustees had explained to Ms Neal that the accounts were necessarily in draft form, due to the timeframes of external accountants and parties beyond the trustees’ control, namely the various subsidiary companies of PCLP. In those circumstances, according to Mr Ross, the best that the trustees can achieve is to assure Ms Neal that her position will not be affected once the accounts have been finalised, which the trustees have repeatedly done.
Unlawfully settled assets
[16] According to Mr Ross, the trustees take issue with Ms Neal’s characterisation of the assets held by the trustees, which were distributed to her in settlement of her trust and relationship property claims, as “unlawfully settled assets”. Counsel submitted that such a characterisation cannot support Ms Neal’s contention that all monies paid to her under the Agreement and consent orders amounted to distributions of relationship property because that was not agreed, and there are no words in the Agreement to that effect.
[17] Referring to several provisions of the Agreement by example, Mr Ross contended that the Agreement and consent orders reflect a compromise of uncertain claims in return for a certain practical outcome. For example, the trustees rejected the claim that recital L of the Agreement contains an acknowledgement that they had held “unlawfully settled assets” for more than 20 years. In addition, counsel argued that the trustees cannot redraft the accounts in a way that satisfies Ms Neal’s concerns. This is because such redrafting would require effectively undoing or amending 25 years of past financial statements and tax returns. Mr Ross submitted that continuing to draft financial statements in the way the trustees have done will not put Ms Neal at risk of claims against CNFT as claimed.
[18] Counsel also contended that money has been paid in accordance with the Agreement and there has been a mutual discharge in full and final settlement of everything between the parties. Mr Ross argued that the suggestion that the plaintiff remains at some risk from how the second defendants’ conduct themselves in the future does not bare the scrutiny of the Agreement, nor the court orders.
[19] In response, Ms McCartney submitted that because the Agreement provides that Ms Neal is the sole and absolute owner of her assets, set out in sch E to the Agreement, those assets should not be included as assets owned by CNFT in its accounts. Counsel contended that to the extent that the 2023 accounts of CNFT include those assets, this is a misrepresentation of its financial position. Ms McCartney argued that this is in breach of the Trustee Resolution of 1 May 2023 (as well as the Agreement and court orders) which provide that the transfers and
payments to the plaintiff are of relationship property, not trust distributions. She argued that CNFT has no entitlement to those assets, regardless of whether the Agreement explicitly records that the assets held in sch E were unlawfully settled by CNFT.
Offer to resolve
[20] Mr Ross submitted that the Ms Neal’s contention of a lack of engagement from the trustees is incorrect and misleading. He pointed to an email of 16 January 2024 from the trustees’ solicitors to Ms Neal’s solicitors regarding the scheduling of the March 2024 hearing date. The trustees confirmed that they were open to a meeting to explore a solution. Counsel stressed that Ms Neal rejected this proposal.
[21] Ms McCartney responded with a chronology that she submitted does not support the trustees’ argument. In sum, it highlighted a reply from Ms Neal’s solicitors to the proposal explaining the decision to decline a face-to-face meeting and instead invited the trustees to provide their proposal for resolution. According to counsel, the trustees did not reply until 5 minutes prior to the hearing on 7 March 2024.
Proposal to amend
[22] Without conceding that the accounts require amendment, the trustees confirmed that they were prepared to make certain amendments to resolve the issue. Specifically, to make an additional entry to CNFT’s March 2023 notes which explain and acknowledge that Ms Neal is the sole and absolute owner of [redacted] of the “Mac & Co Escrow account”.
[23] Ms Neal considered that this proposal ignored the Agreement and its intent that the assets in sch E are her property, as her share of relationship property, and not that of CNFT. She took issue with the trustees’ ongoing attempt to treat the Mac & Co Escrow account as CNFT’s property because the funds held there contain the Deferred Amount, which did not exist until 12 August 2022, so was never an asset of CNFT. Ms McCartney submitted that it has been held as “disputed funds” with ownership entitlement to be determined by written agreement or court order.
Solvency of CNFT
[24] Mr Ross submitted that the trustees disagreed with the plaintiff’s prior challenge to the solvency of CNFT saying that in Ms Neal’s own assessment, displayed in a table recording the realisable assets of CNFT, it is solvent. The trustees also highlighted several allegedly incorrect assertions and assumptions made by Ms Neal in the assessment of CNFT’s solvency, including that:
(a)the deduction for distributions made from the deferred amount (in the Mac & Co Escrow account) of [redacted] has already been taken into account in the net assets of CNFT and is therefore already accounted for;
(b)the assumption that all assets of PCLP ought to be definitely written off as unrecoverable is not necessarily correct because it has assets of value, including an investment value which needs to be accounted for;
(c)the deduction of “trade payables” and loans as from the net assets of CNFT have already been taken account of as liabilities when calculating the net assets of CNFT, and would be deducted twice on Ms Neal’s assessment; and
(d)the liability in the form of [redacted] owing to PCLP by CNFT would be written off or offset against the [redacted] loan owed to CNFT in a notional wind up, meaning it would not be realised and therefore can be eliminated when calculating solvency under the notional wind-up method.
[25] Ms Neal asserted that her challenges to the accounts were not an acknowledgment of solvency because she has no knowledge of the extent of guarantees and borrowings by the trustees. Instead, Ms McCartney submitted that it is not necessary to make a finding as to solvency because Ms Neal remains entitled to have the Agreement and court orders enforced, neither of which are conditional on any finding as to solvency.
Did the Agreement and consent orders identify the transferred property as ‘relationship property’?
[26] Ms Neal’s argument is that the terms of the consent order and the underlying Agreement correctly recorded that the transfer of property and funds to Ms Neal were distributions of “relationship property”. As foreshadowed, her contention therefore is that the accounts as they currently stand are in breach of the terms of the consent order. Ms McCartney submitted that sch E to the Agreement confirms that the transfers and payments were “agreed to take effect as distributions of relationship property”, that property being:
a.[redacted], mortgage free;
b.[redacted] from the Deferred Amount;
c.The distributions to date:
i.[redacted]from sale of [redacted] per Court order;
ii.[redacted] by way of MHM and Savor Group shares per Court order;
iii.[redacted] paid from Deferred Amount in February 2022;
iv.[redacted] from sale of MHM shares, paid November 2022;
v.[redacted] from sale of MHM shares paid in March 2023;
vi.[redacted] from Deferred Amount on account of costs made in March 2023;
vii.[redacted] on account of expert accountant costs made on 16 March 2023.
[27] Counsel contended that there is evidence contained in the Agreement itself and in court documents which prove that the property has been classified as interim distributions of relationship property. [redacted] is specifically provided for under the Agreement as being an interim distribution of “relationship property”. Clause 9.2 provides:
Colin, CNFT and GT acknowledge and agree that the said transfer of the property and repayment of the Westpac mortgage is part of the settlement of Vanessa’s claim made in proceedings CIV 2021-404-1294, and expressly confirm and acknowledge that the said transfer and mortgage repayment are no longer an advance and/or a distribution by CNFT to Vanessa, as beneficiary or otherwise. They confirm that the transfer and payment made is, pursuant to this Agreement, an interim distribution of relationship property and is
received by Vanessa and the trustees of Ben Paton Family Trust absolutely. They confirm that the trustees of the CNFT shall enter into a valid and executed trustee resolution in accordance with clause 5.4 and shall by 30 June 2023 provide annual financial year 2023 financial statements for CNFT in similar terms.
(Emphasis added)
[28] The Agreement classifies this asset as relationship property. Distributions from the Deferred Amount, however, are not identified in the same way. Clause 7.1(a) of the Agreement states that “Vanessa shall receive [redacted] plus half the interest less half of the costs of Mac and Co and less half the costs of Calibre Partners.”
[29]Clause 7.7 of the Agreement provides:
The cash, property, distributions and other assets shall be received by Vanessa, together with distributions to date and the property set out in Schedule E, in full settlement of any claim she may have, now or in the future, to any interest in CNFT, GT, or any company or other property in which Colin has an interest, including as beneficiary. Subject to implementation and completion of transfers and payments to provide Vanessa with the property set out in Schedule E attached, the payment is received by Vanessa, and made by Colin, CNFT and GT, in full settlement of all claims, and cross claims and counterclaims of Colin, CNFT and/or GT and interests associated with them, now or in the future arising in resulting trust, constructive trust, under PRA and under Family Proceedings Act 1980 (including s 182) or howsoever otherwise.
(Emphasis added)
[30] Notably, there is no classification of the funds and properties received by Vanessa as “relationship property” in this comprehensive clause. At face value, these distributions are part of a catch all settlement of the various claims between Ms and Mr Neal. While it may be that certain of those claims are properly classified as “relationship property”, the terms of the Agreement do not support Ms McCartney’s claim that all the distributions were agreed to be “relationship property”, or that there was a corresponding obligation for the trustees to note them as such in the accounts. The Agreement is only clear on this point with respect to [redacted].
[31] The consent orders record the position in the same way. The judgment of 26 May 2023 confirmed that a settlement had been reached and that orders were sought according to the terms of the Agreement, annexed in a Schedule to the judgment. It confirmed at cl 1 that the “Agreement by way of combined settlement of
trust claims and pursuant to s 21A of the Property (Relationships) Act 1976… signed by the plaintiff, the first defendant, the second defendants and the third defendants shall be binding on them”. At cl 16 it also provides:
These orders are acknowledged in full and final settlement release and discharge of all rights to property which either the plaintiff or first defendant, or second defendants, or third defendants and interests associated with them, including PCLP, might otherwise have one against the other whether under the Property (Relationships) Act 1976, under the Family Proceedings Act 1980, including for maintenance, and under s 182 of the Family Proceedings Act 1980, and settles any claim for economic disparity and is an agreement to settle all differences between the parties.
[32] The orders do not make any explicit reference to any property as being classified as “relationship property” or otherwise. The consent orders were made in furtherance of a combined settlement of litigation between the parties, which included not only Ms and Mr Neal but the second, third and fourth defendants, being trustees and trust entities.
[33] As mentioned, cl 1 of the orders records that the combined settlement is entered by the parties “pursuant to s 21A of the Property (Relationships) Act 1976”. An order made under s 21A of the Act deals with “relationship property” only, per s 21D:
21D Subject matter of agreement
(1)An agreement under section 21 or section 21A or section 21B may do all or any of the following:
(a)provide that any property, or any class of property, is to be relationship property or is to be separate property:
(b)define the share of the relationship property, or of any part of the relationship property, that each spouse or partner is to be entitled to when the marriage, civil union, or de facto relationship ends:
(c)define the share of the relationship property, or of any part of the relationship property, that the surviving spouse or partner and the estate of the deceased spouse or partner is to be entitled to on the death of one of the spouses or partners:
(d)provide for the calculation of those shares:
(e)prescribe the method by which the relationship property, or any part of the relationship property, is to be divided.
(2)This section does not limit the generality of sections 21 to 21B.
[34] In Willis v Willis, Duffy J considered that an agreement that purported to be made under s 21A of the Act could not validly deal with property other than relationship property.6 The Judge found that property that was held on trust and was legally owned by the trustees (as opposed to the parties themselves seeking to contract out of the Act by s 21A) could not properly be dealt with by s 21A:
[31] Section 21D makes it clear that property that may be the subject matter of an agreement under s 21A is relationship property. Further the respondent’s counsel acknowledged to me that the contracting out provisions of the Act, which include ss 21A and 21H, apply to relationship property. While the parties as trustees are registered on the title of the [address deleted] properties and hold legal ownership thereof, they do so on trust for the beneficiaries of those trusts. Insofar as the settlement agreement purports to provide how the [address deleted] properties are to be divided between the parties s 21A could not be used to achieve this outcome. Thus Judge Burns had no jurisdiction to treat the settlement agreement as a s 21A agreement that warranted being given effect to under s 21H.
[32] While the parties may have approached their settlement discussions on the basis they would look through the trusts and treat property they owned as trustees as property available to them for division in terms of their relationship property dispute, this Court cannot ignore the legal character of their ownership of those properties.
[35] Duffy J noted that while trust property could not be properly dealt with under s 21A, an agreement between the parties could deal with that property in a manner which is enforceable and jurisdictionally sound (having as its purpose the settling of litigation rather than an agreement to contract out of the provisions of the Act).7
[36] In applying this approach to the present case, it is evident that, despite the somewhat ambiguous language of cl 1, the orders were not made under s 21A but were orders by consent falling within the Court’s jurisdiction under pt 18 of the High Court Rules 2016. The judgment observes that the parties agree “that the settlement extends to all and any claims that the parties and their interests may have against each other now and in the future”.8 Moreover, Ms Neal’s approach is not supported by either the form or the language of the Agreement or the orders. In my assessment, it is therefore not clear that the property and distributions referred to in the orders is, or was intended by the parties to be, only distributions of “relationship property”. Therefore,
6 Willis v Willis [2015] NZHC 2626, [2015] NZFLR 555.
7 At [33].
8 Neal v Neal, above n 1, at [7]. (Emphasis added).
Ms Neal’s application for directions to that effect, that go beyond the express terms of the Agreement, cannot succeed.
Have the trustees complied with the Agreement?
[37] Ms McCartney also highlighted the draft “Trustee Resolution of the Trustees of CNFT” dated 1 May 2023, said to be in furtherance of cl 5.4 of the Agreement.9 Following email exchanges between counsel and the trustees, the resolution attached to an email from Mr Castle to Ms Round dated 3 May 2023 contains the following wording at cl 1(c) regarding [redacted] and payments from the Deferred Amount:
The Trustees confirm that these transfers and payments are made as a [sic] distributions of relationship property and have been received by Vanessa (and the Trustees of Ben Paton Family Trust) absolutely. The Trustees will prepare and provide 2023 financial year end statements for the Trust [and] will reflect this accordingly.
(Emphasis added)
[38] This position is that which Ms Neal is seeking to have enforced under the leave granted to her to seek directions on the Agreement. However, it is not clear that this wording or the document it is contained within is the final version of the resolution. A further email from Ms Neal’s lawyers dated 5 May 2023 made suggestions for minor corrections. Even if this resolution does represent an agreement by the trustees that the distributions made from the Deferred Amount are “relationship property”, I have already outlined the position of the Act with respect to trust property. As Mr Castle submitted, it is not possible for the trustees to make distributions of relationship property. Distributions flowing from the Trust to Ms Neal are in settlement of the litigation between the parties.
[39] In any case, I do not consider that there is scope in this decision to determine the effects of ancillary agreements between the parties as to the form of the accounts the Trust is obligated to provide. Ms Neal has an interest in the accounts stating that the distributions she has received are classified as “relationship property”. Yet according to the terms of the orders, no such classification was made, nor was there an express obligation that the trustees provide accounts reflecting that classification.
9 Above at [6].
[40] Moreover, in such circumstances, I consider that it is not appropriate for the Court to inquire further into the negotiations surrounding the Agreement, and particularly the mediation at which it was drafted, in order to read into the Agreement meaning that one party asserts exists. The proper avenue for Ms Neal would be to apply for variation of the orders, bearing in mind the principle that a Court will be slow to vary or set aside consent orders, given that they flow from an agreement made between the parties, presumably following careful negotiation, and with advice.10
Draft financial statements
[41] Mr Ross submitted that the statements are in draft form because they are dependent on third parties. At first blush, taking account of the surrounding circumstances, the various relationships and the terms of the Agreement, this may appear an argument of convenience. In any event, when the Trust provides ‘final’ statements that do not classify the property in question as relationship property, Ms Neal will doubtless consider them incomplete. I note that the accounts are acknowledged to be in draft form by both parties and that they have been in active communication and so it does not appear that Mr Neal or the Trust are avoiding their obligations. Yet it would be unreasonable to expect Ms Neal to wait indefinitely without any indication of a timeframe for the provision of those final accounts. I therefore direct that counsel file a memorandum within 10 working days confirming when the accounts can be expected. Further directions may then be issued.
Decision
[42] Counsel for CNFT is directed to file an updating memorandum confirming the completion date for the final accounts for the CNFT within 10 working days.
[43]Ms Neal’s application for directions is otherwise dismissed.
Costs
[44] The trustees submitted that Ms Neal’s desire to pursue the issue, after she had received everything that was agreed to under the Agreement and consent orders, has
10 Macnamara v Macnamara [2022] NZHC 547 at [72].
created a considerable amount of wasteful expenditure. They seek costs on a solicitor- client basis.
[45] Ms Neal rejected the trustees’ characterisation and contended that they are in breach of their obligations and have failed to act in a way that could have prevented her from having to pursue this issue. She seeks an order that the trustees pay the substantial costs incurred in getting CNFT to comply with the court orders, including her expert accountant. Ms McCartney confirmed that she wished to be heard on quantum.
[46]Memoranda on costs are to be filed by 30 August 2024.
Harvey J
Counsel/Solicitors:
J McCartney KC, Auckland Rennie Cox, Auckland
V Crawshaw KC, Auckland Duncan Cotterill, Christchurch A Ross KC, AucklandBurley Castle Hawkins, Lawyers, Tauranga Gilbert Walker, Auckland 2297
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