Smale v Smale
[2023] NZHC 3786
•20 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-001952
[2023] NZHC 3786
BETWEEN JACQUELINE FAY SMALE and CAZINA TRUSTEE COMPANY LIMITED as
trustees of the Anzac Trust Plaintiffs
AND
JACQUELINE FAY SMALE and MALCOLM PHILLIP LOWE and HYTHE TRUSTEE COMPANY LIMITED as
trustees of the Hythe Family Trust Defendants
Hearing: 13 December 2023 Appearances:
J Turner for the Plaintiffs M King for the Defendants
M Flood for J Smale and the Hythe Family Trust Company Limited as trustees of the Hythe Family Trust
Judgment:
20 December 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 20 December 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Dev Law, Auckland
Keegan Alexander, Auckland J Turner, Auckland
SMALE v LOWE & Ors [2023] NZHC 3786 [20 December 2023]
Introduction
[1] Jacqueline Smale and Malcolm Lowe began a de facto relationship in 2013, were married in 2014, and separated in 2022. During their marriage they settled the Hythe Family Trust. The Anzac Trust, settled by Ms Smale’s parents, advanced sums to the Hythe Family Trust in 2014 and 2018 to enable the trust to purchase successive family homes for Ms Smale, Mr Lowe, and their children. The advances, which were repayable on demand and interest free unless demanded, were recorded in Deeds of Acknowledgement of Debt.
[2] After Ms Smale and Mr Lowe separated, the trustees of the Anzac Trust (the Anzac Trustees) demanded that the trustees of the Hythe Family Trust (the Hythe Trustees) pay interest on the debt, and subsequently demanded full repayment. The Hythe Trustees have not repaid the debt.
[3] In a statement of claim dated 16 August 2023, the Anzac Trustees claim judgment against the Hythe Trustees in the sum of $887,966.08, plus interest and costs. The Anzac Trustees apply for summary judgment of their claim.
[4] By consent, and pursuant to directions on 8 November 2023, Mr Lowe was appointed to represent the defendants in their capacity as Hythe Trustees, for the purpose of defending the application for summary judgment.1
[5] The issue to decide is whether the Hythe Trustees have a defence to the Anzac Trustees’ statement of claim because:2
(a)the Deeds of Acknowledgement of Debt are void or unenforceable;
(b)Mr Lowe intends to apply to the Court under s 182 of the Family Protection Act 1980; or
1 Prior to this, on 13 October 2023, Ms Smale and the Hythe Trustee Company Limited as trustees of the Hythe Family Trust filed a memorandum consenting to summary judgment against them in that capacity.
2 In their notice of opposition, the Hythe Trustees raised a further ground, that Ms Smale had failed to obtain directions from the Court as required by s 137 of the Trusts Act 2019. Ms Smale subsequently applied for directions under s 137. Consequently, this ground is abandoned.
(c)the quantum of the debt is disputed.
Background
[6] On 27 November 2007, Ms Smale’s parents settled the Jacqueline Smale Trust. The trust was renamed the Anzac Trust on 28 May 2011.
[7] On 10 September 2013, Ms Smale and Mr Lowe commenced a de facto relationship.
[8] On 10 December 2013, Ms Smale and Mr Lowe settled the Hythe Family Trust. Ms Smale, Mr Lowe and Hythe Family Trustee Company Limited (HTC) are the trustees of the Hythe Family Trust. The purpose of the trust was to ensure that “the assets we bring to our relationship on our forthcoming marriage on 26 January 2014 are owned through one coherent ownership vehicle and to ensure that we and our children in years to come are able to benefit from the capital and income of the Trust from time to time”. The beneficiaries of the Hythe Family Trust are Ms Smale, Mr Lowe, and their children, as discretionary beneficiaries.
[9]Ms Smale and Mr Lowe were married on 26 January 2014.
[10] On 8 May 2014, the Anzac Trustees and the Hythe Trustees agreed that the Anzac Trust would advance $459,393.62 to the Hythe Family Trust to assist it in purchasing the family's first home at Miller Street, Point Chevalier. The terms of the loan were recorded in a Deed of Acknowledgement of Debt executed on 8 May 2014 (May 2014 Deed).
[11] In 2014, Ms Smale and Mr Lowe had their first daughter. Their second daughter was born in 2016.
[12] On 22 June 2018, the Anzac Trustees and the Hythe Trustees agreed that the Anzac Trust would advance $350,000.00 to the Hythe Family Trust to assist it in purchasing a family home at Dignan Street, Point Chevalier. The terms of this loan were recorded in a Deed of Acknowledgement of Debt executed on 22 June 2018 (June 2018 Deed).
[13] On 5 December 2018, the Anzac Trustees and the Hythe Trustees agreed that the Anzac Trust would advance a further $57,900.00 to the Hythe Family Trust. This was recorded in a Deed of Acknowledgement of Debt executed on 5 December 2018 (December 2018 Deed).
[14] The relevant terms of the May 2014, June 2018 and December 2018 deeds (the Deeds) are:3
INTRODUCTION
A.The Lender is the present trustee of a trust known as the ANZAC TRUST (“Anzac Trust”) which was created by deed dated 27 November 2007 (“Anzac Deed”).
B.The Borrower is the present trustee of a trust known as the HYTHE FAMILY TRUST (“Hythe Trust”) which was created by deed 10 December 2013 (“Hythe Deed”).
C.The Lender has advanced or agreed to advance to the Borrower the sum of […] [to assist with the purchase of a property at 42 Miller Street, Point Chevalier, Auckland].
D.The parties wish to record the terms of the advance.
OPERATIVE PROVISIONS
1.The sum of […], advanced or to be advanced by the Lender to the Borrower shall remain outstanding as a debt (“Debt”) payable by the Borrower to the Lender on demand.
2.The Lender may at any time demand that the Borrower repay the Debt in whole or in part.
3.The Borrower shall, on 31 March in each year, pay to the Lender interest on the Debt from time to time outstanding during the preceding 12 months at such rate not exceeding 10% per annum calculated on a daily basis, as the Lender shall, by notice in writing given to the Borrower not later than the first day of March in each year demand, provided that if the Lender shall fail to give such notice by the first day of March in any year, the Borrower shall not be liable to pay the Lender any interest in respect of the 12 months ending on 31 March in that year.
[15]Mr Lowe and Ms Smale separated on 10 May 2022.
3 These terms are common to all three Deeds, with the difference between them being that the May 2014 Deed states that the advance is to assist with the purchase of Miller Street, whereas the June and December 2018 Deeds do not state the purpose of the advance. However, the June 2018 Deed gives the Lender the right to demand a mortgage over Dignan Street.
[16] On 12 October 2022, the Anzac Trustees demanded pursuant to cl 3 of the Deeds that the Hythe Trustees pay interest on the loans for the 12 months ending on 31 March 2023, at a rate of 10 per cent per annum, to be paid in full on 31 March 2023.
[17] On 28 June 2023, the Anzac Trustees, through their solicitors, Keegan Alexander, demanded pursuant to cl 1 of the Deeds that the Hythe Trustees repay the loans and interest calculated in accordance with cl 3 of the Deeds. The total sum demanded was $887,966.08. The Anzac Trustees served, through their solicitors, a further demand on 8 August 2023. The Hythe Trustees have not repaid any of the sum demanded.
Legal principles
[18]Rule 12.2(1) of the High Court Rules 2016 provides:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[19] The relevant principles governing a summary judgment application are well established:4
(a)The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The Court must be left without any real doubt or uncertainty.
(b)The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.
(c)The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents
4 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
or other statements by the same deponent or is inherently improbable. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.
[20] The defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.5
Deeds are void or unenforceable
The competing positions
[21] Mr Smale’s first ground for opposing summary judgment is that the Deeds are void or unenforceable. He alleges that this follows from the fact that the lawyers who prepared the Deeds, Keegan Alexander, acted for both the Anzac Trustees and the Hythe Trustees in breach of their duty to avoid conflicts of interest.
[22] Specifically, Mr King submits that Keegan Alexander breached r 6.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (LCCCR), which provides:
6.1A lawyer must not act for more than 1 client on a matter in any circumstances where there is a more than negligible risk that the lawyer may be unable to discharge the obligations owed to 1 or more of the clients.
6.1.1Subject to the above, a lawyer may act for more than 1 party in respect of the same transaction or matter where the prior informed consent of all parties concerned is obtained.
6.1.2Despite rule 6.1.1, if a lawyer is acting for more than 1 client in respect of a matter and it becomes apparent that the lawyer will no longer be able to discharge the obligations owed to all of the clients for whom the lawyer acts, the lawyer must immediately inform each of the clients of this fact and terminate the retainers with all of the clients.
6.1.3Despite rule 6.1.2, a lawyer may continue to act for 1 client provided that the other clients concerned, after receiving independent advice, gives informed consent to the lawyer continuing to act for the client and no duties to the consenting clients have been or will be breached.
5 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.
[23] Mr King submits that the primary conflict of interest was between the Anzac Trustees, including Ms Smale as the lender, and Mr Lowe as trustee of the Hythe Family Trust, the borrower.
[24] Mr King originally submitted that there was also a conflict of interest between Mr Lowe and Ms Smale personally, because Ms Smale benefitted from the terms of the Deeds as beneficiary of the Anzac Trust, including by the very high interest rate which was chargeable. When questioned however, Mr King conceded that Keegan Alexander did not act for Ms Smale or Mr Lowe in their capacity as beneficiaries.
[25] Mr King expands that Keegan Alexander acted on both sides of the transaction (for a purported borrower and lender) in preparing the Deeds which contained terms that were prejudicial to Mr Lowe, including:
(a)the fact that the loan was purportedly repayable on demand at any time;
(b)an interest rate of 10 per cent, which was far higher than bank lending rates at the time; and
(c)a term that allowed the Anzac Trustees to be appointed as attorneys of the Hythe Family Trust for the purpose of executing and registering a memorandum of mortgage.
[26] Compounding matters further, Mr King submits that the directors of HTC are partners of Keegan Alexander.
[27]Mr Lowe deposes:6
…I never received independent legal advice or was never told to obtain independent legal advice by Mr Barrett of Keegan Alexander at the time the Deeds were signed. I am aware that Jacquie says I am a doctor, and I understood the documents that were presented to me. It is true I am a doctor, but I do not have legal training.
[28]In relation to the May 2014 Deed Mr Lowe deposes:
6 Affidavit of Malcolm Phillip Lowe sworn 18 October 2023, at [10].
26.I was not given any advice by Andrew or anyone at Keegan Alexander about the terms of the May 2014 Deed, nor was I advised I should seek independent legal advice about the May 2014 Deed. I cannot be sure, but I do not believe I received a draft copy of the deed of acknowledgment of debt by email ahead of the meeting at which the May 2014 Deed was signed.
27.My recollection is that I was presented a suite of documents at the meeting at Keegan Alexander and essentially shown where to sign.
28.My understanding is that Keegan Alexander drafted the May 2014 Deed, presumably on instructions from the trustees of the Anzac Trust, and that attended on Jacquie and me to sign the May 2014 Deed. As well as being our independent trustee for the HFT, I considered Keegan Alexander were our then lawyers; with hindsight I wish they had gone through the May 2014 Deed with me thoroughly or told me to seek independent advice about it.
29.Had I received advice about the May 2014 Deed, or been told to get independent legal advice, I do not believe I would have signed it.
30.I do not think the funds from the Anzac Trust were required to purchase 42 Miller Street, as it is likely I could have raised these funds from my family if required.
[29] Mr Lowe makes the same statement in relation to the June 2018 Deed and the December 2018 Deed. That is: he was not advised to seek independent legal advice; he was presented with the Deeds at Keegan Alexander’s offices and asked to sign them; that he would not have signed the Deeds if he had received independent legal advice; and that the advances were not required as it is likely he could have raised the funds from his family.
[30] The Anzac Trustees reject that there was any real or apparent conflicts between Ms Smale and Mr Lowe while they were a de facto and then a married couple, or as trustees of the Hythe Family Trust, until they separated in 2022, several years after the transactions at issue. They say that the Hythe Family Trust was established for the benefit of Ms Smale, Mr Lowe, and their children, as recorded in a Memorandum of Guidance dated 10 December 2013. They say Ms Smale and Mr Lowe were working towards the mutual objective of providing successive matrimonial homes for themselves or their children to reside in and benefit from during their marriage.
[31] Mr Turner submits that even if there was theoretical risk of a more than negligible conflict of interest, Mr Lowe has not shown that he sustained any loss or
disadvantage from the Deeds. He submits that the Hythe Trust benefitted from loans from the Anzac Trust on favourable terms, including being interest free unless interest was demanded.
Assessment
[32] As I signalled at the hearing, the Anzac Trustees have misapprehended the Hythe Trustees’ defence as advanced by Mr Smale. The primary conflict of interest alleged is between the Anzac Trustees and the Hythe Trustees, including Mr Lowe, not between Ms Smale and Mr Lowe as trustees of the Hythe Family Trust or personally as beneficiaries of that trust.
[33] To my mind, r 6.1.1 of the LCCCR is engaged. There was a potential conflict between the interests of the Anzac Trustees as lender and the Hythe Trustees as borrower of the three loans. As the Anzac Trustees are at pains to emphasise for the purposes of their application for summary judgment, the relationship between the Anzac Trustees and the Hythe Trustees created by the Deeds is one of debtor-creditor. On that basis, arguably Keegan Alexander ought to have told both the Anzac Trustees and the Hythe Trustees, including Mr Lowe, to obtain independent legal advice. If the trustees chose not to obtain independent legal advice, Keegan Alexander ought to have obtained their prior informed consent before acting for both of them.7 It seems that they did not do so. Mr Lowe’s evidence that he was not told to obtain independent advice is unchallenged by the Anzac Trustees.
[34] Having said that, I am not persuaded that this issue provides Mr Lowe or any of the Hythe Trustees with a defence to the Anzac Trustees’ claim for repayment of the debt pursuant to the Deeds. That is because the remedy for breach of a lawyers’ fiduciary duty to avoid a conflict of interest is damages payable by the lawyer.8 Damages may be compensatory or restitutionary. It is necessary for the client to show that they have suffered a loss arising out of the transaction or circumstances to which
7 Matthew SR Palmer (ed) Professional Responsibility in New Zealand (LexisNexis, Wellington, 2019) at [17.3.3].
8 At [17.6.3] and [17.6.5]; and Witten-Hannah v Davis [1995] 2 NZLR 141.
the breach of fiduciary duty was material.9 Even then, the client will not succeed if the lawyer can show by cogent evidence that the loss would have arisen in any event.10
[35] Therefore, if Keegan Alexander breached their fiduciary duty by acting for the Anzac Trustees and the Hythe Trustees in relation to the loans recorded in the Deeds, at best the trustees, including Mr Smale, have a claim against Keegan Alexander for damages. It does not follow that this arguable breach of fiduciary duty renders the Deeds void or unenforceable.
[36] At the hearing I pressed Mr King to explain how, as a matter of law, the Deeds are void or unenforceable because of Keegan Alexander’s arguable conflict of interest. His submission was that Ms Smale (presumably in her capacity as trustee of the Anzac Trust) was aware of the conflict of interest and improperly took advantage of it; and that it would be unconscionable to permit the Anzac Trustees to enforce the Deeds in these circumstances. It is unclear whether this is a reference to the equitable doctrines of undue influence or unconscionable bargain but if it is, it is altogether too vague, and these doctrines were not pleaded in Mr Lowe’s notice of opposition.
[37] I conclude that while arguably Keegan Alexander breached their fiduciary obligation to not act in circumstances of an actual or potential conflict of interest, this arguable breach does not invalidate the Deeds and therefore does not present an arguable defence to summary judgment.
Family Proceedings Act 1980
[38] Mr Lowe’s next ground of opposition is that he intends to apply to the Court under s 182 of the Family Proceedings Act 1980 (the Act) to have the terms of the loans from the Anzac Trust to the Hythe Family Trust varied so that they need not be repaid.
[39]That section provides:
9 Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 687 referring to Gilbert v Shanahan [1998] 3 NZLR 528.
10 Bank of New Zealand v New Zealand Guardian Trust Co Ltd, above n 9, at 687.
182 Court may make orders as to settled property, etc
(1)On, or within a reasonable time after, the making of an order under Part 4 of this Act or a final decree under Part 2 or Part 4 of the Matrimonial Proceedings Act 1963, the Family Court may inquire into the existence of any agreement between the parties to the marriage or civil union for the payment of maintenance or relating to the property of the parties or either of them, or any antenuptial or post- nuptial settlement made on the parties, and may make such orders with reference to the application of the whole or any part of any property settled or the variation of the terms of any such agreement or settlement, either for the benefit of the children of the marriage or civil union or of the parties to the marriage or civil union or either of them, as the court thinks fit.
(2) …
(3) In the exercise of its discretion under this section, the court may take into account the circumstances of the parties and any change in those circumstances since the date of the agreement or settlement and any other matters which the court considers relevant.
[40]The Supreme Court has said that the purpose of s 182 is to:11
…empower the courts to review a settlement and make orders to remedy the consequences of the failure of the premise on which the settlement was made.
[41] The Supreme Court has clarified that s 182 involves a three-stage process.12 The first stage is to determine whether there is a nuptial settlement. A generous approach should be taken to that question.13 To come within the term ‘settlement’ as used in s 182, an arrangement must be one that “makes some form of continuing provision for both or either of the parties to a marriage in their capacity as spouses, with or without provision for their children”.14 The requirement that the settlement be for both or either of the parties “in their capacity as spouses” means only that there must be a connection or proximity between the settlement and the marriage.15
[42] The second stage is to assess whether there is a difference between the position of the spouse under the settlement with the marriage dissolved and what the position would have been under the settlement had the marriage continued.16 This is a
11 Clayton v Clayton (Claymark Trust) [2016] NZSC 30, [2016] 1 NZLR 590 at [60].
12 Preston v Preston [2021] NZSC 154, [2021] 1 NZLR 651 at [39].
13 Clayton v Clayton, above n 11, at [32] and [85].
14 Clayton v Clayton, above n 11, at [34] affirming Ward v Ward [2009] NZCA 139, [2009] 3 NZLR 336 at [27].
15 Clayton v Clayton, above n 11, at [34].
16 Preston v Preston, above n 12, at [39].
forward‑looking exercise that involves comparing the position under the settlement assuming a continuing marriage against the current position under a dissolved marriage.17 If there is a difference, the discretion under s 182 is enlivened. The third stage is to determine how the Court’s discretion should be exercised.
[43] Mr Lowe claims that the acquisition of the funds by the Anzac Trustees from a third party that were then advanced to the Hythe Trustees was a nuptial settlement in the sense that the funds were acquired with proximity to Mr Lowe and Ms Smale’s marriage and were used to purchase their family home(s). Mr Lowe contends that there will be a difference in his position under the nuptial settlement when his marriage to Ms Smale is dissolved as compared to what his position would have been had the marriage continued. His evidence is that he ‘considers” that had he and Ms Smale not separated, the Anzac Trustees would not have demanded repayment of the loans or interest.18 He says that once the marriage is dissolved in six months’ time, he intends to ask the Court to make orders under s 182 to vary the advances from the Anzac Trust to the Hythe Family Trust so they are no longer repayable, or at least not while he continues to live in Dignan Street.
[44] The Anzac Trustees submit that Mr Lowe’s intended claim under s 182 of the Act faces several hurdles, including that it is untenable given the Court of Appeal’s decision in Booth v Booth.19
Assessment
[45] I accept the Anzac Trustees’ submission that Mr Smale’s foreshadowed application under the Act does not present an arguable defence to their application for summary judgment.
[46] First, I am not persuaded that the acquisition by the Anzac Trust of the funds used for the loan to the Hythe Family Trust can conceivably be characterised as a nuptial settlement. The Anzac Trust was settled in 2007, six years before Ms Smale and Mr Lowe began their relationship and settled the Hythe Family Trust. Mr Lowe
17 Clayton v Clayton, above n 11, at [53]; and Preston v Preston, above n 12, at [32].
18 Affidavit of Malcolm Phillip Lowe, above n 6, at [12].
19 Booth v Booth [2020] NZCA 451.
offers some vague evidence about the source of the funds loaned by the Anzac Trust pursuant to the Deeds, but this evidence is unreliable and arguably inadmissible. Certainly, the evidence falls well short of laying a factual foundation for a defence that the Anzac Trust’s acquisition of the loan funds was an arrangement that made a continuing provision for Mr Lowe and Ms Smale in their capacity as spouses, and therefore was a nuptial settlement.
[47] Second, the arrangement which Mr Lowe seeks to have varied under s 182 is the debt owing from the Hythe Family Trust to the Anzac Trust under the Deeds, not the earlier Anzac Trust’s acquisition of the funds for the purposes of the loans.
[48] Third, any application to vary that debt under s 182 faces the insurmountable problem that, according to the Court of Appeal decision of Booth v Booth, a debt is not a nuptial settlement of property.20 As this case is highly relevant, I will set out its findings in some detail.
[49] The case concerned a relationship property dispute between the son of the two respondents and the son’s former wife. The son and his wife had incorporated a company in which they were 50:50 shareholders. The respondents sold their farming business to that company and the balance of the farm purchase price was left owing as a debt from the company to the son’s father. That debt was recorded in a deed in which the company was the debtor, and the father was the creditor. Under cl 3 of the deed, no interest on the advance was payable unless demanded in writing by the creditor.
[50] The wife issued s 182 proceedings. The wife’s case was that the wider family restructuring arrangements constituted a nuptial settlement, and that the father’s forbearance in not demanding repayment of the debt constituted the relevant “provisioning”. She pleaded that she had an expectation that the debt would not be repaid, based on her understanding that the loan was to be gifted and the father did not require it to be repaid. (That distinguishes the case from the present one, in which Mr Lowe does not go that far in his affidavit evidence).
20 At [70].
[51] The Court of Appeal rejected the wife’s case that the family restructuring arrangements involved the settlement of property on her, her husband, or their company and that there was any ongoing provision for any person under a legally binding arrangement.21 The Court held that the family restructuring was essentially an agreement for sale and purchase between the father and the spouses’ company, with the father providing vendor finance, not a settlement of property.22 The debtor/creditor relationship was clear from the deed recording the arrangement. A debt cannot constitute a settlement in terms of s 182.23 There was no obligation on the father to make periodic payments to the husband and wife or to both.24 The Court held that the debt was not property of a kind that might constitute a nuptial settlement.
[52] As to whether there was a legally binding arrangement that required variation to remedy an injustice upon divorce, the Court held that the only legally binding arrangement was the debt owed by the company which has not been altered by the ending of the marriage. The relevant liability (the debt owed by the company to the father) could not be seen as an arrangement that made any kind of continuing provision either for the daughter, son or for both “in their capacity as spouses”. The company owed the debt. The obligation flowed from the company and thus in substance from the spouses to the father, not to the spouses. The company received value in return for its promise to pay, in the form of the farm property itself.
[53] The Court held that the arrangement could not be seen as giving rise to any inequity when the marriage ended. It stated that the core purpose of s 182 is to ensure any pre-existing provision for spouses is not unfairly affected by the relationship breakdown. In that case the spouses, as 50:50 shareholders of the company, were both left in the same position. The value of their respective shares in the company was equally diminished by the debt, as it always has been. The fact that the father may later forgive the debt or gift the whole debt to the son (and so, make later “provision” for him) had no bearing on that — an order under s 182 could not be used to divide a possible gift that has not yet been made.
21 At [57].
22 At [58].
23 At [59].
24 At [58] to [61].
[54] Additionally, the father’s historical forbearance from calling up the debt could not be such an arrangement because it was not legally enforceable.25 And even if there was some form of understanding that the father’s forbearance would continue, then either: the arrangement would, in substance, constitute a gift to the company, which would not amount to a qualifying settlement; or to the extent such forbearance gave rise to some other legal or equitable bar preventing the father from calling up the debt, then there would be no need for a s 182 variation at all.
[55] The Court held finally that none of the possible variation orders canvassed were tenable under s 182.26 Notably, an order that the father forgive the debt (immediately or in the future) or that he cease demanding payment was contrary to the core of the “settlement” (a debt) and would involve depriving the father of a significant sum of money and granting the daughter a significant gift. The Court considered that s 182 could not be used in that way.
[56] The Court concluded that it was not seriously arguable that there was a nuptial settlement. It upheld the entry of summary judgment for the son and strike-out by the parents.27
[57] Turning to the present situation, the debtor/creditor relationship between the trusts is clear from the Deeds, which refer to the Anzac Trustees as the ‘Lender’ and the Hythe Trustees as the 'Borrower’. The operative provisions record that the advances shall remain outstanding as a debt payable by the ‘Borrower’ to the ‘Lender’ on demand. The debt is not an arrangement that makes a continuing provision for Ms Smale or Mr Lowe, or both in their capacity as spouses. Rather, it is a liability flowing from the Hythe Trustees to the Anzac Trustees. Applying Booth, the debt is not property of a kind that might constitute a nuptial settlement.
[58] Furthermore, as in Booth, the only legally binding arrangement that could require variation to remedy an injustice on the dissolution of Ms Smale’s and Mr Lowe’s marriage is the debt owed by the Hythe Trustees to the Anzac Trustees. But
25 At [65].
26 At [66] to [69].
27 At [70].
this debt cannot be seen as giving rise to any inequity when the marriage dissolves. Mr Lowe owes the debt to the Anzac Trust in his capacity as a trustee of the Hythe Family Trust, not personally. The Hythe trustees’ position as debtor will be unchanged by the dissolution of their marriage.
[59] As in Booth, the Anzac Trustees’ historical forbearance from calling up the debt is not an arrangement within the meaning of s 182 because it is not legally enforceable. Furthermore, the fact that the Anzac Trustees may forgive the debt or gift the debt in the future is irrelevant — an order under s 182 cannot be used to divide a possible gift that has not yet been made.
[60] Finally, the Court of Appeal in Booth indicated that an order of the kind Mr Lowe intends to seek (that the debt need not be repaid) was not available under s 182 as that would involve requiring the Anzac Trust to gift the money to the Hythe Family Trust.
[61] For these reasons, I find that Mr Lowe’s foreshadowed application under s 182 of the Act does not present an arguable defence to the Anzac Trustees’ application for summary judgment.
Quantum dispute
[62] Mr Lowe’s position is that of the claimed debt, $61,914.58 has been repaid by the Hythe Family Trust to the Anzac Trust. He attaches to his affidavit a copy of a Hythe Family Trust bank statement showing repayment of this amount on 22 June 2018, with the annotation “temp loan THFT Repay”.
[63] Ms Smale addresses this issue in her reply affidavit. She deposes that the amount represented a temporary facility advance from her father’s trust, Kanuka Trust, to the Hythe Family Trust, which was repaid on 22 June 2018. She attaches the bank statement for the Anzac Trust from 1 May to 9 October 2018. There is no transfer from the Hythe Family Trust to the Anzac Trust of an amount of $61,914.58 on 22 June 2018, or on any date.
[64] Ms Smale also attaches to her reply affidavit the depreciation schedule for the Hythe Family Trust for the year ended 31 March 2019. Repayments for improvements at 42 Miller Street, Pt Chevalier, totalling $61,914.58 are highlighted in the schedule. Furthermore, there is a note “[k]itchen payments were paid from Kanuka Trust, debited to J F Lowe’s beneficiary drawings account. Total $61,914.58”.
[65] In my assessment this adequately addresses the issue raised by Mr Lowe. I am satisfied that there is no tenable dispute over quantum.
Result
[66]I enter summary judgment against the defendants in the sum of $887,966.08.
[67]I further order the defendants to pay:
(a)interest pursuant to s 10 of the Interest on Money Claims Act 2026; and
(b)costs on a scale 2B basis and reasonable disbursements to be fixed by the Registrar.
Associate Judge Gardiner
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