Stanley v McDonald - [2012] NZHC 2198

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-005898 [2012] NZHC 2198

BETWEEN LN & M J STANLEY Applicants

ANDD P MCDONALD First Respondent

ANDMCDONALD TEXTURES PROPERTIES LIMITED
Second Respondent

ANDL MCDONALD Third Respondent

Hearing: On the papers

Counsel: DJ Powell for Applicants
RK Potter for Second and Third Respondents

Judgment: 29 August 2012

JUDGMENT OF RODNEY HANSEN J As to costs

This judgment was delivered by me on 29 August 2012 at 2.00 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors: Grimshaw & Co, P O Box 6646, Auckland 1141 for Applicants
Martelli McKegg, P O Box 5745, Auckland 1141 for 2nd and 3rd Respondents

LN & M J STANLEY V D P MCDONALD HC AK CIV-2011-404-005898 [29 August 2012]

[1] In my judgment of 30 March 2012[1] I made an order under s 348 of the

Property Law Act 2007 (the Act) transferring to the first respondent (Mr McDonald)

49 shares in the second respondent that he had earlier transferred to his wife, the third respondent (Mrs McDonald). The transfer to Mr McDonald was for the purpose only of enabling the carrying out of any execution or similar process against him or the administration of a future bankruptcy of him or arrangement with his creditors.

[1] Stanley v McDonald HC Auckland CIV-2011-404-005898, 30 March 2012. [2012] NZHC 597

[2] The applicants had made a successful claim before the Weathertight Homes Tribunal against Mr McDonald. They had been awarded $332,897. They unsuccessfully appealed to this Court. Before the appeal was determined and while bankruptcy proceedings against him were outstanding, Mr McDonald sold the shares to his wife and used the proceeds to pay other creditors. I found the disposition had been made with intent to prejudice the applicants and at an undervalue. I also found that Mrs McDonald could not rely on s 349(1) of the Act to avoid an order. She was unable to prove that the shares had been acquired in good faith without knowledge of the fact that they had been the subject of a disposition which would prejudice the applicants.

[3] The applicants seek costs on a category 2 band B basis totalling $12,408 and disbursements of $6,911.90. They ask that the costs be awarded jointly and severally against all respondents.

[4] Counsel for the second and third respondents (the first respondent did not oppose the application) does not challenge the award of scale costs or the amounts claimed. However, he submits that I should exercise my discretion under r 14.7 of the High Court Rules to refuse to make an order for costs or to make a reduced award of costs. The stated reasons are as follows:

(a) The applicants are not creditors of Mrs McDonald.

(b) Mrs McDonald did not act dishonestly or with an improper motive.

(c) Mrs McDonald obtained a valuation of the shares and purchased them for the price set out in the valuation. She acted reasonably and was entitled to oppose…

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 Stanley v McDonald

Details

AGLC: Stanley v McDonald [2012] NZHC 2198
Case: [2012] NZHC 2198
Decision Date: 29 August 2012

CaseChat Overview and Summary

The applicants, LN & MJ Stanley, sought an order under s 348 of the Property Law Act 2007 to transfer 49 shares in McDonald Textures Properties Limited from D P McDonald (the first respondent) to his wife, L McDonald (the third respondent). The applicants had previously obtained a judgment against Mr McDonald, and he transferred the shares to his wife before bankruptcy proceedings were initiated against him. The applicants claimed that the transfer was made to defeat the judgment and at an undervalue. The court ordered the shares to be transferred back to Mr McDonald.

The legal issues before the court included whether the transfer of shares was made with the intent to prejudice the applicants and whether it was made at an undervalue. The court also had to determine whether L McDonald could rely on s 349(1) of the Act, which provides that a disposition is not affected by a prior disposition if it was made in good faith and without knowledge that it would prejudice the applicants.

The court found that the transfer of shares was made with the intent to prejudice the applicants and at an undervalue. It held that L McDonald could not rely on s 349(1) of the Act as she could not prove that she acquired the shares in good faith without knowledge that they had been the subject of a disposition which would prejudice the applicants. The court also rejected the argument that it should not award costs to the applicants against L McDonald as she was not a party to the original proceedings, did not act dishonestly or with an improper motive, and acted reasonably in opposing the application to revest the shares. The court found that the arguments did not justify refusing or reducing costs despite the principle that the determination of costs should be predictable and expeditious. The applicants were entitled to an order against all respondents for their costs on a category 2 band B basis, comprising scale costs of $12,408 and disbursements of $6,911.90.

Orders