Country Land Limited v Blackley [2012] NZHC 898 (3 May 2012)

Last Updated: 29 May 2012

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV 2012-488-173 [2012] NZHC 898

BETWEEN COUNTRY LAND LIMITED Plaintiff

AND DAVID BLACKLEY First Defendant

AND PARUA BAY FARMS LIMITED Second Defendant

Hearing: 24 April 2012

Appearances: S Grice for plaintiff

D Hollings QC and S Robertson for defendants

Judgment: 3 May 2012

_{JUDGMENT OF GILBERT J}

This judgment was delivered by me on 3 May 2012 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ......................

_{Counsel: D Hollings QC and S Robertson, Auckland:} [e-mail]

Solicitors: Sharp Tudhope, Tauranga: [e-mail]

Urlich McNab Kilpatrick, Whangarei: [e-mail]

COUNTRY LAND LTD V BLACKLEY HC WHA CIV 2012-488-173 [3 May 2012]

[1] This is an application by the plaintiff pursuant to r 5.49(5) of the High Court Rules to set aside the appearance filed by the defendants objecting to the jurisdiction of this Court to hear and determine this proceeding. The defendants contend that the claims in the proceeding fall within the exclusive jurisdiction of the Family Court.

The plaintiff ’s claim

[2] The plaintiff is the owner of a farm property in Northland. Mrs Blackley is the sole director of the plaintiff and owns all but one of its shares.

[3] The second defendant owns an adjoining block of land. The first defendant, Mr Blackley, is the sole director of the second defendant and a trustee of the trust which owns the shares in the second defendant.

[4] Mr and Mrs Blackley have recently separated.

[5] Until January 2012, the two properties were run as one farm with the plaintiff’s stock being grazed from time to time on the second defendant’s property and the plaintiff’s equipment being used to maintain it.

[6] The plaintiff alleges that on or about 26 January 2012 the second defendant, on the direction of the first defendant, removed stock and equipment owned by the plaintiff without the plaintiff’s knowledge or consent. The defendants have refused to return the stock and equipment despite demand.

[7] The plaintiff commenced the present proceeding on 16 March 2012. There are two causes of action against both defendants; conversion and trespass to goods. Both claims are based on what the plaintiff alleges was an unlawful removal and detention by the defendants of the plaintiff’s stock and equipment.

[8] At the same time as filing the proceeding, the plaintiff filed a without notice application for a mandatory interim injunction requiring the defendants to return the plant and equipment. This application came before Lang J, who declined to make

the orders sought on a without notice basis. However, he made an interim preservation order under r 7.55 in respect of the stock and equipment, the subject of the claim.[1]

Appearance under protest to jurisdiction

[9] The defendants filed an appearance pursuant to r 5.49(1) objecting to the jurisdiction of the Court to hear and determine the proceeding. The defendants’ objection was based on the following grounds:

(a) The application relates to:

(i) Property which is relationship and/or separate property of the plaintiff and the first defendant; and

(ii) Transactions between spouses and/or third persons in respect of that property.

(b) Section 4 of the Property (Relationships) Act 1976 provides that the provisions of that Act apply to all property transactions between spouses and between spouses and third parties instead of the rules and presumptions of the common law in equity.

(c) Section 22(1) of the Property (Relationships) Act 1976 provides that every application under the Property (Relationships) Act 1976 must be heard and determined in a Family Court.

(d) The relief sought by the plaintiff is relief which the Family Court has jurisdiction to grant in the context of proceedings under the Property (Relationships) Act 1976.

(e) An application has yet to be made to any Family Court for orders determining the respective shares of the plaintiff and the first defendant in their relationship property or dividing the relationship property between them.

(f) The High Court does not have jurisdiction to make any of the orders sought by the plaintiff in regard to this matter. The application is invalid on its face and must necessarily be dismissed.

The Family Court’s jurisdiction

[10] It is necessary to set out the key provisions of the Property (Relationships) Act 1976 (PRA).

This Act applies instead of the rules and presumptions of the common law and of equity to the extent that they apply—

(a) to transactions between spouses or partners in respect of property;

and

(b) in cases for which this Act provides, to transactions—

(i) between both spouses or partners and third persons; and

(ii) between either spouse or partner and third persons.

[12] Section 4(4) provides:

Where, in proceedings that are not proceedings under this Act, any question relating to relationship property arises between spouses or partners, or between either or both of them and any other person, the question must be decided as if it had been raised in proceedings under this Act.

[13] Section 22(1) provides:

Every application under this Act must be heard and determined in a Family

Court.

[14] Section 25(1) provides:

On an application under section 23, the Court may—

(a) make any order it considers just—

(i) determining the respective shares of each spouse or partner in the relationship property or any part of that property; or

(ii) dividing the relationship property or any part of that property between the spouses or partners:

(b) make any other order that it is empowered to make by any provision of this Act.

[15] The scope of s 4 of the Matrimonial Property Act 1976, which was in substantially the same terms as s 4 of the PRA, was considered by the Court of Appeal in Mosaed v Mosaed.[2] Richardson P, in giving the judgment of the Court,

_explained: [3]

In terms of s 4(1) the Act has effect in place of the rules and provisions of the common law and of equity to the extent, and only to the extent, that they apply to transactions between husband and wife in respect of property. Its concern is with the identification and classification of interests in property, their value and division.

[16] In that case the wife claimed that her husband had breached his fiduciary duty by failing to provide information during matrimonial property settlement negotiations. The Court held that s 4 of the Matrimonial Property Act 1976 did not preclude a remedy in separate proceedings for breach of fiduciary duty.

[17] Both counsel referred to the decision of this Court in Jew v Jew.[4] That case concerned an application for a declaratory judgment that a trust did not own certain property. Paterson J held that the High Court had jurisdiction to determine whether property was owned by a trust.

[18] Ms Hollings QC referred to the Court of Appeal’s decision in Kerridge v Kerridge.[5] The Court held, following Mosaed, that s 4 of the PRA did not bar Mrs Kerridge’s claims in the High Court against Mr Kerridge based on negligent misstatement, negligence and deceit and did not preclude her equitable claim for an accounting for profits.[6]

[19] Counsel also referred to two recent decisions of Associate Judge Bell, Yeoman v Public Trust and Shirtliff v Albert.[7] In Yeoman, Associate Judge Bell confirmed that the High Court has jurisdiction to make a declaration as to ownership of assets held by third parties, including a trust.[8] In Shirtliff, Associate Judge Bell held that the High Court could not make orders for the division of relationship property because such orders are within the exclusive jurisdiction of the Family

_Court.

[20] Ms Grice, for the plaintiff, pointed out that there is currently no application for division of relationship property between Mr and Mrs Blackley. She submitted that the present proceeding is not caught by s 4 of the PRA as it does not relate to any transaction between Mr and Mrs Blackley, or between Mr and Mrs Blackley and a third party. She pointed out that the Court is not being asked to determine whether the stock and equipment, the subject of the claim, is relationship or separate property under ss 8 or 9 of the PRA. She submitted that the proceeding simply involves a claim by a limited liability company seeking a declaration that it is the owner of property and an order directing that it be returned.

The defendants’ submissions

[21] Ms Hollings submitted that:

Mrs Blackley is effectively seeking orders for the division of stock and equipment. This is an application that ought to be made under s 25 of the [PRA] to the Family Court. Therefore the proceeding and application for a mandatory injunction are outside the jurisdiction of the High Court.

This proceeding has at its heart, control of the plaintiff company and all its assets pending final orders for classification and division of all relationship property. That application is one which the Family Court should determine when it has before it all information about the total relationship property of Mr and Mrs Blackley.

[22] In conclusion, Ms Hollings submitted that:

There is no dispute that the plaintiff company is the relationship property of both Mr and Mrs Blackley. It is submitted Mrs Blackley is attempting to use her position as sole director to “obtain a march” over the assets of the company. An application relating to the control of the plaintiff company and its assets pending final orders for classification and division of all relationship property is within the exclusive jurisdiction of the Family Court.

Discussion

[23] There is an important difference between the shares in the plaintiff company and the assets owned by the plaintiff. The shares in the plaintiff may well be relationship property but the assets owned by the company are not. The value of the

company’s assets will obviously be relevant to the value of the shares and therefore to the value of relationship property, but this does not mean that the company’s assets are relationship property.

[24] The present proceeding does not relate to the classification or division of relationship property. It does not involve the classification or division of the shares in the plaintiff company.

[25] Contrary to Ms Hollings’ submission, the proceeding does not relate to the control of the plaintiff. No determination of that issue is required or sought. There cannot be any doubt that Mrs Blackley currently controls the plaintiff because she owns all but one of its shares.

[26] Section 4 of the PRA is not engaged. The relevant “transaction” giving rise to the proceeding was the allegedly unlawful taking and retention of the plaintiff company’s assets by the second defendant company. This was not, in terms of s 4, a transaction between:

(a) Mr and Mrs Blackley; or

(b) Mr and Mrs Blackley and any third person; or

(c) Mr or Mrs Blackley and any third person.

[27] The proceeding will determine whether the plaintiff company owns the stock and equipment, whether it was unlawfully removed and retained by the defendants and, if so, whether there should be an order for its return or damages. None of this requires the classification or division of relationship property.

[28] This Court has jurisdiction to determine claims by limited liability companies in conversion and trespass against other limited liability companies. The Family Court has no jurisdiction to do so. It follows that the plaintiff’s application must be allowed.

[29] The defendants’ appearance dated 5 April 2012 objecting to the jurisdiction of the Court to hear and determine this proceeding is set aside.

[30] Counsel agreed that if the appearance was set aside, costs on this application should be reserved. Costs are reserved accordingly.

[31] I direct the Registrar to arrange a telephone conference to enable timetable

directions to be made for the disposal of the plaintiff’s application for interim

_injunction.

M A Gilbert J

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[1] See interim orders of Lang J dated 16 March 2012.
[2] _{Mosaed v Mosaed (1996) 15 FRNZ 15 (CA).}
[3] At [20].
[4] _{Jew v Jew [2003] 1 NZLR 708 (HC).}
[5] _{Kerridge v Kerridge [2009] NZCA 14.}
[6] _{At [53].}
[7] _{Yeoman v Public Trust [2011] NZFLR 753 (HC); and Shirtliff v Albert [2011] NZFLR 971 (HC).}
[8] See [40], [44] and [76].