VANESSA ROSEMARY NEAL AND COLIN ASHLEY NEAL continued …/2

[2024] NZHC 3953

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1294

[2024] NZHC 3953

IN THE MATTER

of declarations of resulting and constructive trusts

UNDER

Part 18 of the High Court Rules

BETWEEN

VANESSA ROSEMARY NEAL

Applicant

AND

COLIN ASHLEY NEAL

First Respondent

continued …/2

Hearing:

On the papers

Counsel:

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:

19 December 2024

JUDGMENT OF HARVEY J

[Application for leave to appeal]

This judgment was delivered by me on 19 December 2024 at 4 pm pursuant to r 11.5 of the High Court Rules.

Date: …………………..
(Deputy) Registrar

Counsel/Solicitors:

J McCartney KC, Auckland Rennie Cox, Auckland

V Crawshaw KC, Auckland Duncan Cotterill, Christchurch A Ross KC, Auckland

Burley Castle Hawkins, Lawyers, Tauranga Gilbert Walker, Auckland

/2

NEAL v NEAL [2024] NZHC 3953 [19 December 2024]

COLIN ASHLEY NEAL and POLAR CAPITAL TRUSTEES LIMITED as

trustees of the COLIN NEAL FAMILY TRUST

Second Respondents

COLIN ASHLEY NEAL and POLAR CAPITAL TRUSTEES (NO 2) LIMITED

as trustees of the GLANDOVEY TRUST Third Respondents

POLAR CAPITAL LP
Fourth Respondent

Introduction

[1]    Colin and Vanessa Neal dissolved their marriage.1 The property pool that they accumulated was substantial. Agreement as to its distribution, however, remained elusive and so proceedings were issued. Following a successful mediation the parties entered into a settlement agreement. Consent orders were issued on 26 May 2023.

[2]    Some months later, in an application for directions, Ms Neal claimed that the defendants failed to provide final accounts from the Colin Neal Family Trust (CNFT) in breach of cl 5.4 of the agreement. She also argued that those accounts incorrectly referred to the payments she received as “distributions” and not as “relationship property”, contrary to cl 21.2 of the agreement and cl 1(c) of a Trustee Resolution dated 1 May 2023. On 15 August 2024, I issued judgment dismissing Ms Neal’s application for directions.2

[3]    She now seeks leave to appeal that decision. Ms Neal argued that the Court erred in finding that the consent orders did not require the second defendants, trustees of CNFT, to provide final year 2023 accounts showing that all transfers of money and property were distributions of ‘relationship property’. The defendants oppose this latest application.

Submissions

Ms Neal

[4]    Four grounds of appeal were raised. First, Ms Neal claims that the Court erred by taking a “narrow and literal approach” to contractual interpretation, contrary to Firm PI 1 Ltd v Zurich Australian Insurance Ltd and Bathurst Resources Ltd v L & M Coal Holdings Ltd.3 Secondly, she contended that the Court erred in finding that the payments and transfers from CNFT were not distributions of relationship property because it was determined that trustees cannot distribute relationship property. Ms Neal raised several points under these grounds. She argued that the Court failed to

1     The background to this judgment is set out in my earlier decisions: Neal v Neal [2022] NZHC 2022; Neal v Neal [2023] NZHC 1280; Neal v Neal [2024] NZHC 2297.

2     Neal v Neal above, n1.

3     Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432; Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696.

consider the litigation history prior to settlement as being a relationship property dispute, and that a reasonable person would infer that the property mentioned in the agreement and consent orders was understood by both parties to be “relationship property” under the Property (Relationships) Act 1976 (PRA).

[5]    Thirdly, that the Court’s conclusion that Willis v Willis applied was wrong because the facts were distinguishable from the present case.4 Ms Neal also objected to the application of the case and its reliance by the Court as neither party referred to it in their submissions or were given opportunity to respond.

[6]    Fourthly, Ms Neal submitted that the Court was “plainly wrong” in finding that there was no express obligation for the trustees of CNFT to provide accounts reflecting the transfers to Ms Neal as relationship property. She contended that this obligation is implicit in cl 5.4 of the agreement, which requires the trustees to provide “accounts reflecting the contents of the Agreement”. Ms Neal claimed that compliance required the trustees to acknowledge in the accounts that she had existing ownership of the assets, that the assets were never the property of CNFT, and that the distributions were therefore not distributions of CNFT assets.

[7]    Finally, Ms Neal argued that there is general public interest in identifying when it is appropriate for an agreement under s 21A of the PRA to be used to settle litigation involving property held on trust. She submitted that the correct approach is that such an agreement falls under s 21A when the litigation being settled involves a dispute over the classification of assets as relationship property or otherwise.

Second respondents (trustees of CNFT)

[8]    In summary, the trustees submitted that Ms Neal’s pursuit of leave to appeal is vexatious and serves no meaningful purpose. The trustees oppose the application for leave because it does not meet the high threshold for leave to appeal an interlocutory order. The trustees emphasised their concerns that an appeal would further delay finalising the proceedings between the parties to late 2025. In addition to being

4     Willis v Willis [2015] NZHC 3102.

contrary to the purposes of the agreement and the orders now in dispute, the trustees’ ongoing litigation costs continue to be borne by CNFT’s beneficiaries.

[9]    Mr Ross KC, for the trustees, addressed two points in Ms Neal’s submissions. First, he argued that the Court correctly relied upon Willis in concluding that the consent orders fell within the Court’s jurisdiction under pt 18 of the High Court Rules 2016, rather than s 21A of the PRA. The agreement and consent orders were to settle all disputes between the parties, both trust and relationship property claims. Counsel contended that the Court was correct in finding that Ms Neal’s application was misconceived and purported to read into the consent orders obligations which were not intended. In addition, Mr Ross argued that the correct avenue, should Ms Neal wish for those terms to be in force, is to seek a variation.

[10]   Secondly, Mr Ross submitted that Ms Neal was incorrect in asserting that the Court had no basis to say it was unclear whether or not the trustee resolution of 1 May 2023 was the final version. Counsel contended that the plaintiff is “well aware” that the resolution of that date was not the final version, noting that an amended trustee resolution, dated 28 July 2023, had been filed by memorandum on 4 August 2023. That document, which Mr Ross identified as the “final resolution”, included the clarification that “the Trustees are not able to make distributions of “relationship property” and remained neutral as between Colin and Vanessa Neal in terms of the division of their relationship property and property held by the Trustees (referred to in the proceedings and in the agreement as the “Property Pool”).”5 Counsel argued that Ms McCartney failed to bring the 28 July trustee resolution to the Court’s attention because it was contrary to her client’s position.

[11]   Mr Ross emphasised that all money had been paid in accordance with the settlement agreement and consent orders. His submission is that Ms Neal’s concerns

5     Memorandum of counsel for the second defendants (4 August 2023). Resolution of the Trustees of the Colin Neal Family Trust, 28 July 2023, cl G.

regarding the financial health or otherwise of CNFT are unfounded and are also contrary to the liabilities and indemnity clauses of the agreement.6

Legal principles

[12]Leave to appeal is sought per s 56 of the Senior Courts Act 2016:

(1)  The Court of Appeal may hear and determine appeals—

(a)from a judgment, decree, or order of the High Court:

…

(3) No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.

[13]The relevant considerations on an application for leave under s 56(3) are that:7

(a)a high threshold exists;

(b)the applicant must identify an arguable error of law or fact;

(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

(d)the significance or implications of such error either for the particular case or for the applicant or as a matter of precedent must warrant

incurring further delay; and

6  For example, cl 5.3 states:   Colin, CNFT and GT [Glandovey Trust] agree and covenant to meet  any and all liabilities, including current account liabilities that may in the past, now or in the future purport to be shown as  belonging  to  Vanessa.  They  indemnify  Vanessa  accordingly. Similarly, in cl 5.5: Vanessa, Colin, CNFT and GT acknowledge that Vanessa is not responsible for any liability in any of the entities within the property pool other than those expressly shown in the separate property of Vanessa as set out in Schedule E… They acknowledge and covenant that this is the position now and in the future and indemnify Vanessa accordingly.

7 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6], referencing Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].

(e)the ultimate question is whether the interests of justice are served by granting leave.

Discussion

[14]   The first factor discussed in Finewood is whether a high threshold exists. This acts as a “filtering mechanism” to ensure that unmeritorious appeals of interlocutory orders, or those which are not greatly significant to the parties, do not delay the proceedings in which interlocutory orders were made.8 As Mr Ross pointed out, this issue is especially pertinent here as the substantive proceedings were intended to be at an end in 2023 following issue of the consent orders.

[15]   Ms McCartney, in her reply submissions, took issue with Mr Ross’s characterisation of Fitzgerald J’s decision in Finewood as establishing a high threshold for leave. She pointed to [11] of Finewood as a rejection of the high threshold for leave argument. That discussion, however, relates to the difference in application between leave to appeal from an arbitral award, as opposed to leave to appeal on a question of law. Despite this, as noted, the Court of Appeal confirmed in Greendrake that a high threshold for leave applies to applications for leave to appeal.9

[16]   Ms McCartney submitted that there was relevant background information that should have been taken into account when interpreting the consent orders, as information which would reasonably have been available to the parties at the time of entering the agreement. In particular, that the proceedings which the agreement purported to settle were a relationship property claim under s 44 of the PRA, and an institutional constructive trust claim. The plaintiff’s claim in both proceedings required the trustees to account for or disgorge assets to which Ms Neal claimed an existing entitlement.

[17]   Counsel contended that Recitals L and M of the agreement would have led the reasonable person to understand that the property subject of the consent orders was in settlement of her claims under the PRA, and further that the agreement captured

8     Finewood Upholstery Ltd v Vaughan, above n 7.

9     Greendrake v District Court of New Zealand, above n 7, at [6].

property that was at the time held by the trustees of CNFT. According to counsel, the Court should have accepted that the parties adopted the format of a s 21A agreement purposefully, and that doing so recognised the status of the subject property as “relationship property”. Further, Ms McCartney argued that the Court was incorrect to state that it is not possible for trustees to make distributions of relationship property on the basis that they had already agreed to distributions of property held in their name, and again, that the agreement was to settle claims under s 44 of the PRA.

[18]Ms McCartney submitted that the Court has misinterpreted Willis:

There is a second aspect to Willis which Ms Neal seeks to argue, namely that Duffy J in Willis accepts that a s21A agreement can deal with property when the agreement has at its purpose the settlement of litigation. Justice Harvey at

[38] of the judgment records that the distributions from the trust to Ms Neal are in settlement of the litigation between the parties, but fails to recognise that the consequence of this finding is that the s21A agreement was properly and validly adopted to settle Ms Neal’s relationship property claims, with the trustees giving effect to the settlement by way of distribution of relationship property.

[19]   I am unable to accept Ms McCartney’s submission on this point. She has not provided any references to the parts of Willis which she support her contention that Duffy J accepted that s 21A agreements can deal with property where the agreement is to settle litigation. In contrast, the judgment states:

The Property (Relationships) Act 1976 operates as a Code. It makes no provision for parties enforcing settlement agreements of their litigation. The usual approach when settlement agreements are made is to obtain orders from the Court that, in effect, confirm the terms of the settlement.

…

The scope of the settlement agreement takes it outside the scope of a s 21A agreement, for the reasons I have already addressed. Moreover, it is hard to equate a settlement agreement following a judicial settlement conference with the agreements provided for in the s 21 contracting out provisions of the Act. On the other hand, if a settlement agreement is not to be equated with a s 21A contract, it follows that the Act says nothing about the validity and enforceability of agreements to settle disputed litigation, which raises the question of whether such agreements can be sued upon. When I raised this with counsel the response was that the Act is a code. If litigation settlement agreements cannot be enforced without the making of orders under r 179, this emphasises the need for clear, express directions from judges who preside at settlement conferences for relationship property proceedings as to what is to occur after the parties have executed a settlement agreement. Otherwise the

benefits achieved at the judicial settlement conference will be subsequently lost through a failure to make an agreement legally enforceable.

[20]   Setting aside the differences in the factual background, which I accept are distinguishable, Duffy J was noting that agreements the purpose of which is to settle litigation are not contemplated by the PRA. The relevance of this to the instant case, as outlined in the judgment, is that there is no basis to say the agreement should have been assumed to be an agreement under s 21A. In any case, the text of the agreement itself is sufficient to make that point.

[21]   The broader reply to Ms Neal’s arguments that the Court erred in failing to interpret the consent orders as including an implied obligation for the trustees to note the transfers of property to Ms Neal as being distributions of relationship property is simply that there is no term of either the consent orders or Settlement Agreement requiring that action from the trustees. Had Ms Neal pursued her claims under the PRA and in equity, and had succeeded in those, then the claims she makes as to the nature and ownership status of the property held by the trustees would be accurate.

[22]   However, the litigation was not pursued, and the parties entered a compromise which was then drafted into an agreement and made enforceable through consent orders. It is not reasonable for Ms Neal to now claim that the Court give her the benefit of what she would have gained as a remedy on the basis of the consent orders. If the key issue was that Ms Neal claimed an existing ownership to the property pool, that all distributions from the pool were to be classified as relationship property, and that those distributions were to be recorded on CNFT’s accounts, then it was incumbent upon her to state that in the orders sought.

[23]   It follows that I do not consider Ms Neal has met the high threshold for leave to appeal. While it would have been preferable for counsel to have had an opportunity to respond to the Court’s use of Willis, I am satisfied by Ms Neal’s submissions that her opposition to the case law would not have altered my assessment. Nor do I consider that the agreement was incorrectly interpreted. Where the Court is assured that all parties have had the benefit of experienced counsel, it is reasonable to interpret the terms of an agreement according to its text rather than reading ambiguity into it after the fact.

[24]   Regarding the personal interest of the parties, as the respondent noted, Ms Neal has received the money and property the was the subject of the agreement. It is difficult to understand the risk Ms Neal contemplates regarding the potential receivership of CNFT (a possibility which the respondent has denied). Neither do I see any greater public interest in the questions raised by Ms Neal on her proposed appeal. While it may be of public interest to resolve the question of whether s 21A agreements under the PRA may be used to settle litigation involving trustee-held assets, that can hardly be answered on an appeal of this case, because as discussed, the agreement is not a s 21A agreement.

[25]   Finally, the delay that would result from a grant of leave is unjustified in the circumstances. The trustees have expressed their frustration at having to continue to engage in litigation over a year after entering an agreement to settle, at the expense of CNFT’s beneficiaries and their own time. In conclusion, I agree with Mr Ross that the application for leave should be dismissed. Moreover, the remedy for Ms Neal in the first instance, as outlined in my earlier judgment, is for her to seek a variation to the consent orders.

Decision

[26]The application for leave to appeal is dismissed.

[27]Counsel may exchange memoranda as to costs by 10 February 2025.

Harvey J