Wootton v Wootton

[2020] NZHC 2684

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2020-485-300

[2020] NZHC 2684

BETWEEN

MARGARET ANN WOOTTON

Applicant

AND

PHILLIP GARRY WOOTTON

Respondent

Hearing:

5 October 2020

Appearances:

Applicant in person

E Collins and C McDonald for respondent

Judgment:

13 October 2020

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    Mr Phillip Wootton and Ms Margaret Wootton married in December 1993. They separated in January 2006. Their marriage was dissolved in June 2008. They have three children.

[2]    In November 2004 Mr and Ms Wootton settled the Wootton Family Trust. They were the settlors, the trustees (along with the Public Trust) and two of the beneficiaries (along with their children and others). As I understand it the Wootton Family Trust was settled with a view to distancing the family’s financial affairs from any risk being assumed by Mr Wootton around this time when he took a shareholding in and became a director of Maycroft Construction Ltd, by which company he had been employed for some time.

[3]    Following Mr and Ms Wootton’s separation in January 2006, the resolution of their affairs appears to have been fraught to say the very least. However, not long after

WOOTTON v WOOTTON [2020] NZHC 2684 [13 October 2020]

the dissolution of their marriage in June 2008, the division of their relationship property was  resolved by way of  a consent order made by the  Family Court dated  2 July 2008. Both parties were represented by solicitors and counsel in the proceeding. The order was in conventional terms. It identified assets that were to be received by Mr Wootton and assets that were to be received by Ms Wootton (both of which included assets then owned by the trustees of the Wootton Family Trust). It contemplated that the assets of the Wootton Family Trust to be received by Mr and Ms Wootton would be resettled on or transferred to new trusts to be settled by each of them. It provided that Ms Wootton was to be removed as a trustee and beneficiary of that trust.

[4]    Some time previously, Mr Wootton had, no doubt in anticipation of an earlier resolution of the relationship property dispute, settled two new trusts — the Esrastar Trust (Mr Wootton’s family trust) and the Esrastar Business Trust (Mr Wootton’s business trust). Mr Wootton had by this  time  begun  a  new  relationship  with  a  Ms Cheryl Vendt whom he subsequently married but who has since died. Mr Wootton was the settlor of the new trusts. He and Ms Vendt were trustees and beneficiaries. During the course of the hearing before me these trusts were consistently referred to by Ms Wootton as shams, although I am unsure why.

[5]    The Family Court order was to be implemented within 14 days. Implementation was delayed. That is unsurprising. I infer nothing from it (other, perhaps, than ongoing difficulty between Mr and Ms Wootton). It is not suggested in this proceeding that it was not fully implemented in all respects.  In  that process,   Mr Wootton, now as the sole trustee of the Wootton Family Trust, executed deeds effecting the transfer of assets from that trust to his family and business trusts, and to a new trust settled by Ms Wootton called the Wootton Family Trust (No. 2).

[6]    The assets transferred from the Wootton Family Trust to Mr Wootton’s business trust consisted of:

(a)The shareholding in Maycroft Construction;

(b)Mr Wootton’s shareholder current account with that company; and

(c)Cash in the sum of $12,419.73.

[7]    The parties plainly expected that following the transfer of the assets out of the Wootton Family Trust to the new trusts settled by Mr and Ms Wootton, that trust would become moribund. If 100 per cent of the assets were transferred out then as a matter of law that is exactly what happened. A trust is a relationship, not an entity. It is elementary that in order for a trust to exist there must be assets owned legally by the trustees and beneficially by the beneficiaries to which the relationship of trustee and beneficiary can apply. If there are no assets, then there is no trust. Much was made of the fact that the Wootton Family Trust has apparently never formally been wound-up, but I fail to see how that is of any significance at all.

[8]    Over the next decade the trustees of Mr Wootton’s family trust have acquired the three properties which are the subject matter of this proceeding:

(a)A property at 189  Katherine  Mansfield  Drive  in  Upper  Hutt  on  13 August 2010;

(b)A property at 14B Greenslade Road in Raglan on 14 July 2017; and

(c)A property at 426A No. 1 Line in Palmerston North on 19 October 2018.

[9]    In February 2020 caveats were lodged against the title to these three properties owned by the trustees of Mr Wootton’s family trust by Ms Wootton.1 In each case Ms Wootton as the caveator claimed:

… a beneficial interest in the [property] as cestui que trust of which the registered owner Phillip Garry Wootton is Trustee.

1      Earlier this year I ordered the removal of one of the caveats on terms requiring the proceeds of a then pending sale of the property to be held in trust pending the resolution of this application. The case was argued on the basis that the outcome of the application in respect of the two remaining caveats would also resolve the issue of who was entitled to those proceeds. For convenience I therefore propose to deal with the case as if all three caveats were in issue.

[10]   In this proceeding, Ms Wootton seeks an order pursuant to  s 143  of the  Land Transfer Act 2017 sustaining these caveats. In doing so she relies on s 138(1)(b) of the Land Transfer Act which provides:

138     Caveats against dealings with land

(1)A person may lodge a caveat against dealings with an estate or interest in land (a caveat against dealings) on the basis that the person—

…

(b)has a beneficial estate or interest in the land under an express, implied, resulting, or constructive trust; or

…

[11]   It is well settled law (unaffected by recent changes to the legislation) that an applicant for an order under s 143 must be able to establish that he, she or it has a reasonably arguable claim to a legal or equitable interest in the property.2 It is no use for such a claimant to come to court with a claim however strong it might  be of an  in personam character against the owner or owners of the property. It must be shown that there is a proprietary interest in the property over which the caveat has been lodged. Section 138 sets out the type of interests that are capable of sustaining a caveat and these include — in s 138(1)(b) — interests by reason of the operation of constructive trusts. As already said, that is the basis for the claim in this case.

[12]   Ms Wootton advanced her case for an equitable interest in the three properties on the foundation of an accusation of common law fraud or deceit. As I understood her case it was to the effect that Mr Wootton in the lead up to the resolution of the relationship property proceedings knew that within Maycroft Construction Ltd moves were afoot which would result in an increase in the value of the shares owned by the trustees of the Wootton Family Trust and deliberately withheld that information, breaching the obligations he had in the context of that proceeding to provide full disclosure, so that the interests in Maycroft Construction (taken as a whole, so including the shares and the shareholders’ current account) were more valuable than

2      Catchpole v Burke [1974] 1 NZLR 620 (CA); Mall Finance & Investments Co Ltd v Slater [1976] 2 NZLR 685 (CA); Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104 (CA); Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA); Sims v Lowe [1988] 1 NZLR 656 (CA).

disclosed, with the result that there was a material imbalance between what the parties received in the order.

[13]   At this point it may be worth mentioning that immediately following the Family Court’s consent order Ms Wootton applied for a variation of it (though as I understand it on different grounds from those being advanced now). That application was declined by Judge Geoff Ellis who in his judgment of 21 July 2008 referred to the Wootton proceedings as having a history that involved lengthy processes of disclosure and delays on account of changes of legal representation and went on to say:

The appearances of Counsel on behalf of Mrs Wootton in the past, and the signatures of both parties and counsel to the “Consent Memorandum” submitting the detailed agreed order, show that both parties were represented by competent counsel at the time. Both parties and counsel have formally recorded that their settlement was reached after proper disclosure by both parties, and represents a full and final settlement of all claims, and includes provision for the children of the marriage.

[14]   Both parties filed and served lengthy affidavit evidence. Furthermore, notice was served  requiring  Mr  Wootton  to  be  available  for  cross-examination,  and  Mr Wootton was cross-examined by Ms Wootton at some length, although, at the conclusion of her cross-examination, I was left in some doubt as to the purpose of the exercise.

[15]   Notwithstanding all that, as far as I am able to discern, there is no evidence at all establishing material non-disclosure by Mr Wootton in the Family Court proceeding all those years ago, inadvertent, deliberate, fraudulent or otherwise.

[16]   It is true that over the same period of time as Mr and Ms Wootton were dealing with their separation, divorce and property arrangements, Maycroft Construction was commencing a process of change of shareholders, with the Maycroft family shareholders looking to exit the company. Towards the end of  2008,  after  the Family Court order was made and implemented, those arrangements came to fruition. This involved the payment out of retained earnings, adjustments to shareholder account balances and the transfer of shares. But, Mr Wootton’s effectively unchallenged evidence, which I accept, is that none of this made any difference to the value of the company or the net interest owned by the trustees of his business trust.

[17]   In any event, to establish an institutional constructive trust that would give rise to interests capable of supporting caveats over the properties owned by the trustees of Mr Wootton’s family trust, it would be necessary to establish, to a reasonably arguable standard, that the proceeds of any alleged fraud could be traced into those properties.3 On the evidence there is no prospect of a successful tracing exercise of that sort. The alleged fraud concerned the value of the interests of the trustees of the Wootton Family Trust in Maycroft  Construction.  Those  interests  passed  not  to  the  trustees  of  Mr Wootton’s family trust but to the trustees of his business trust. The properties were purchased years later by the trustees of Mr Wootton’s family trust and there is no evidence linking the proceeds which Mr Wootton and the trustees of the family trust received from the Family Court judgment to those properties.

[18]   In my judgment, Ms Wootton cannot establish even an arguable claim to a proprietary interest in any of the three properties.

[19]   Her application is dismissed. This means that Mr Wootton is entitled to require the removal of the caveats over the two properties owned by the trustees of his family trust, and to the immediate release of the monies held in trust to by Collins & May being the proceeds of the sale of the third property.

[20]   As to costs, whilst I did not hear Ms Wootton or counsel on this topic, my preliminary view is that the respondent is entitled to his costs on a 2B basis. If costs cannot be resolved in view of that preliminary indication, then the parties may file memoranda in the usual way.

[21]   I mention that since the hearing of this case on 5 October 2020, Ms Wootton has filed a document dated 9 October 2020 headed “Urgent Interlocutory Application without notice of the Applicant for consideration of new matter in relation to unheard formal application of the 24.9.20 regarding Mr Collins’ removal”. This is accompanied by an affidavit sworn by Ms Wootton on 8 October 2020 which is said to be in support. I have read these documents. I have found it impossible to follow the application. In any event, I am not prepared to deal with yet another application by Ms Wootton made on an ex parte basis. If she has an application to make in this

3      See Boscawen v Bajwa [1996] 1 WLR 328 (CA) per Millett L J at 334.

proceeding, she must file and serve the same so as to give the respondent, Mr Wootton, an opportunity to have his say.

Associate Judge Johnston

Solicitors:
Collins & May, Lower Hutt for the respondent