Holm-Hansen v Johnson [2013] NZHC 2129 (21 August 2013)

Last Updated: 4 September 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKAND REGISTRY

CIV-2011-404-006022 [2013] NZHC 2129

BETWEEN MAUREEN ELVA HOLM-HANSEN Plaintiff

AND PAUL ROBERT JOHNSON First Defendant

PAUL ROBERT JOHNSON, PETER THOMAS JOHNSON, TERRY DANNY SIDNEY JOHNSON, SHERYL DIANNE HYNDMAN, KINROSS LINCOLN MAIDENS and GRAHAM KEITH SMYTH, AS TRUSTEES OF THE JOHNSON FAMILY TRUST

Second Defendants

CIV-2012-404-002637

BETWEEN MAUREEN ELVA HOLM-HANSEN Plaintiff

AND PAUL ROBERT JOHNSON First Defendant

PAUL ROBERT JOHNSON, PETER THOMAS JOHNSON, TERRY DANNY SIDNEY JOHNSON, SHERYL DIANNE HYNDMAN, KINROSS LINCOLN MAIDENS and GRAHAM KEITH SMYTH, AS TRUSTEES OF THE JOHNSON FAMILY TRUST

Second Defendants

Hearing: 15 May 2013

Appearances: A E Hinton QC and R A Hacking for Plaintiff

P A Fuscic for First Defendant

L T Meys for Second Defendants

_{Judgment: 21 August 2013}

HOLM-HANSEN v JOHNSON [2013] NZHC 2129 [21 August 2013]

_{JUDGMENT OF ELLIS J}

This judgment was delivered by Justice Ellis on 21 August 2013 at 4.45 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date..............................

[1] Ms Holm-Hansen and Mr Johnson were in a de facto relationship from 1979 until November 2002. They, together with Mr Johnson’s family trust, are presently engaged in two interrelated proceedings, CIV-2011-404-6022 (the civil proceedings) and CIV-2012-404-2637 (the Property (Relationships) Act 1976 (PRA) proceedings).

[2] Mr Johnson seeks review of a decision by Associate Judge Doogue dated

17 December 20121 in which he declined to strike out all Ms Holm-Hansen’s claims against him and her PRA claims against the trust. In the same decision, Associate Judge Doogue also declined to order summary judgment against Ms Holm-Hansen and that aspect of the decision is the subject of an appeal to the Court of Appeal.

[3] Both proceedings are centrally concerned with whether or not Ms Holm- Hansen has a continuing right to stay from time to time at a property in Whau Bay, which was acquired by the trust in 1993, while Ms Holm-Hansen and Mr Johnson were still together. At that point Ms Holm-Hansen was a trustee (but not a beneficiary) of the trust and during the relationship she contributed to the development of the property.

[4] Following the breakdown of the relationship, relationship property proceedings were commenced. The proceedings were ultimately settled, as a result of an agreement being reached between the parties under s 21 of the PRA. The agreement was drafted by Mr Johnson’s solicitors. But as noted at [6] of Associate Judge Doogue’s judgment, in November 2004, Ms Holm-Hansen made some handwritten amendments to the agreement, executed and returned it. The amended agreement relevantly provided:

BACKGROUND

...

E.

... It is agreed that this agreement shall constitute full and final settlement of all relationship property issues between the parties subject to paragraph 18,

1 Holm-Hansen v Johnson [2012] NZHC 3445.

and that this agreement shall be presented to the Court once signed so that consent orders may issue.

TERMS OF AGREEMENT

Paul’s separate property

...

Maureen’s separate property

... Adjustments

...

Other property

12. Any other property not referred to above including land, life insurances, company shares, bank accounts and any other property to which the incidence of legal title may be recorded in writing shall vest absolutely in that party who at the date of this Agreement has legal title to or possession of that property (excluding any interest the parties have in the Johnson Family Trust).2

...

The Johnson Family Trust

18. This Agreement and subsequent Court Orders shall be in full and final settlement of all relationship property issues between the parties with the exception of the determination of Maureen having any interest, legal or otherwise, in the Johnson Family Trust, such issue to be reserved for determination between the parties and recorded in writing. Failing agreement Maureen reserves the right to pursue her legal remedies against the Johnson Family Trust.

[5] As Associate Judge Doogue explains at [6] of his decision, the signed agreement (which was subsequently also executed by Mr Johnson) was accompanied by a letter of explanation from her solicitor, which stated:3

What she understood was that they had effectively agreed that any interest that they have in the Trust be set aside, to be resolved at some later stage in the future, if at all. Maureen's major interest is to preserve the right of access to the property for the rest of her life. She doesn’t necessarily wish to pursue a monetary claim against the Trust property at this stage but is very keen to ensure that she has long term access. This has been promised to her by Paul and his two daughters and other members of the family and she has

2 _{The parenthesised words in this clause were added by Ms Holm-Hansen.}

3. Like Judge Doogue I do not rely on this letter as an aid in interpreting the s 21 agreement. Rather, it is included as part of the factual narrative.

accepted those promises in good faith and she believes they can be relied upon.

On that basis, she doesn’t wish to pursue at this stage a monetary claim and would only resurrect that monetary claim in the event of being denied access. Hopefully that will never occur.

I didn’t want the Agreement however eliminating the possibility of a monetary claim against the Trust and that is why the above amendments have been made. Hopefully they are satisfactory to Paul and he will now sign and execute the agreement and the matter can be finalised accordingly.

Paul and Maureen have advanced money and work to the Trust over the years which is considerable although this has never been quantified. Now that this element has been introduced, especially in the light of the fact that they could not reach agreement on whether Maureen did or did not have an interest in the Trust in terms of relationship property, it was of concern that the reference to a loan outstanding by the Trust to Paul becoming his separate property was not in terms of what was understood by Maureen.

[6] Between 2005 and 2010 Ms Holm-Hansen was permitted to use the Whau Bay property. But on 14 December 2010, she was informed in writing by Mr Johnson that she had “no further right or entitlement to enter upon or stay on the property.” He said: “If you attempt to do so you will be treated as a trespasser”. It is that advice that has led to the two sets of proceedings presently at issue.

The claims and the application to strike out

[7] In the civil proceedings Ms Holm-Hansen says that:

(a) the recent refusal by Mr Johnson and the trust to allow her to stay at the Whau Bay property constitutes a breach of a contract that was collateral to the s 21 agreement;

(b) Mr Johnson and the trust are estopped from denying her such access;

and

(c) as a result of either a common intention or a constructive trust Mr Johnson and his family trust hold part of the Whau Bay property on trust for Ms Holm-Hansen.

[8] In the PRA proceedings, Ms Holm-Hansen says that:

(a) Mr Johnson disposed of the Whau Bay property to the trust in order to defeat her PRA claim and that she should be awarded relief either under s 44 or s 44C of the PRA; or

(b) Mr Johnson’s “bundle of rights” in the property constitutes relationship property in respect of which payment should be made to her.

[9] The application for strike out was principally founded on the s 21 agreement, although arguments based on abuse of process, waiver and estoppel were also advanced. In relation to the “bundle of rights” claim there was a further, separate, ground, namely that such a claim does not exist or is untenable as a matter of law.

Associate Judge Doogue’s decision

Section 21 agreement

[10] Associate Judge Doogue’s critical findings in relation to the interpretation of

the s 21 agreement can be found between [22] and [28] of his judgment. He said:

[22] The effect of the agreement was that the parties identified property as relationship property and concluded an agreement that would be binding with regard to the property so identified. Clause 18 constituted an exception to the scope of the provisions of the agreement. The clause in question made it clear that no agreement had been reached concerning the status and sharing of the Trust property. A decision in respect of that property would have to be made by other means, the parties agreed. If ultimately they were not able to come to any agreement then Maureen would retain such rights as she had to make a claim on the basis that the Trust property was relationship property. The wording used in cl 18, therefore, made it clear that claims of the nature of relationship property claims with regard to the Trust were regarded by the parties as being an exceptional category. That is to say, while agreement had been reached about the categorisation and sharing of other property, those provisions did not extend to the Trust property. The wording of the provision further made it clear that further claims under the PRA could be forthcoming.

[23] To put matters another way, by signing the agreement that they did, the parties were acknowledging that the plaintiff should not be restrained from bringing in the future such relationship property claims that she might be entitled to advance in regard to the Trust property. Such a claim, if made, could conceivably have a direct effect on Paul Johnson. That is because any such claim could include a claim under s 44 for compensation in regard to the Trust property. That is the natural meaning of cl 18. Such an interpretation meshes in with the provision in recital E to the general effect

that the parties intended to reach a full and final settlement of all relationship property issues “ ... subject to paragraph 18”. The provision just quoted plainly makes an exception of relationship property issues so far as they relate to the family Trust.

[24] The “legal remedies” available to the plaintiff (noted in cl 18) are wide enough to be read as a general reservation of any relationship property rights that the plaintiff might have had. It would also seem to embrace remedies in the narrower meaning that is attached to that term in legal parlance, describing measures available to a person to enforce legal rights. It is wide enough to reserve to the plaintiff any legal rights that she might have, in regard to the Whau Bay property, for the Trust to set aside or to obtain orders modifying the terms upon which the Trust was entitled to deal with that property. There is no reason why the expression “her legal remedies” should be read down.

[25] Counsel for the first defendant submitted that the Court was required to give effect to the following words in cl 18: “ ... failing agreement Maureen reserves the right to pursue legal remedies against the [Trust]”.

[26] I understand the first defendant’s submission to be that effect can only be given to the above words by reading the saving provision as extending only to The Plaintiff’s rights to claims against the Trust (that is, against the trustees), but not perpetuating any rights she may have against the first defendant.

[27] In my view, it would be wrong to isolate one phrase out of the agreement, and accord it special emphasis. An alternative way of reading that expression, in my view, is to view it as being an elliptical reference to all claims that have to do with the Trust. It is not necessary to consider Mr Fuscic’s further submission that the reservation of a right to claim against the Trust was nugatory because such a right could not survive the release of the first defendant by operation of the s 21 agreement. The first defendant was never released in regard to claims arising out of the Trust property. That eventuality does not need to be considered.

[28] The interpretation that I intend to adopt is supported by the further consideration that cl 18 speaks of proceedings between “the parties”. It does not restrict the operation of the clause to the plaintiff and the Trust, but includes claims that the plaintiff might have against the first defendant. Further, the clause expressly refers to relationship property claims. That consideration, together with the fact that it finds its place in an overall settlement of relationship property claims, suggests that the reservation is not restricted to some type of claim against the Trust or the trustees based upon an alleged misuse of the trustees’ powers of appointment, or a claim not related to relationship property.

Bundle of rights

[11] Associate Judge Doogue’s analysis of the bundle of rights argument can be

found between [72] and [92] of his judgment. He begins by noting that the rights

possessed by Mr Johnson said to constitute the relevant (relationship property)

bundle are:

(a) his interest as a primary beneficiary; (b) his office as a trustee;

(c) holding the sole power to remove trustees;

(d) holding the sole power of appointment of new trustees.

[12] After extensive discussion and analysis in which the learned Judge notes a number of difficulties faced by Ms Holm-Hansen’s claim in this respect, he said:

[92] I conclude that there is some support for the concept, including at appellate level. The concept has not emerged with anything approaching clarity. It may yet be developed further. In these circumstances it would be wrong to strike out the cause of action. Similarly, because such uncertainty as there is arises from the state of the law, rather than whether the factual pre-requisites for invoking the doctrine are present, it is not an appropriate case for summary judgment to be entered. In any event, the fact that the application under s 44C has survived the defendants’ application for summary judgment, there is an additional reason why summary judgment cannot be entered in regard to the “bundle of rights” cause of action.4

The application for review

[13] The approach to an application for review of an Associate Judge’s decision is, essentially, appellate.5 An applicant has the burden of persuading the Court that the decision was wrong; that is, that it rested on unsupportable findings of fact and/or applied wrong principles of law.6 The High Court’s role in a review of an Associate Judge’s decision is to make its own assessment as to whether the original decision was wrong.7

[14] Here the application for review seeks orders reversing the Associate Judge’s

_{decision not to strike out the claims on the grounds that:}

4. Although the learned Judge appears here to refer to the summary judgment application, in fact the discussion occurs in the context of the application to strike out.

5 _{High Court Rules, r 2.3(4).}

6 _{Andrew Beck McGechan on Procedure (online looseleaf ed, Brookers) at [HRPt2.3.02(1)(a)].}

7 Burmeister v O’Brien [2008] 3 NZLR 842 (HC) at [29].

(a) the Associate Judge did not correctly interpret the s 21 agreement which (properly interpreted) precludes all the cliams; and

(b) there is “no cause of action of a bundle of rights”.

[15] Review is therefore sought of every aspect of the learned Associate Judge’s strike out decision. As I have said there is a separate appeal to the Court of Appeal in relation to the summary judgment application.

Discussion

[16] I have little hesitation in concluding that the Associate Judge’s refusal to strike out the civil claims on the basis of the s 21 agreement was correct, although I would not express my reasons in quite the same way.

[17] The civil claims are concerned either with Ms Holm-Hansen’s alleged right of access to, or interest in, the Whau Bay property. The Whau Bay property is and was owned by the trust. At the time of separation it was neither relationship property nor separate property. It was trust property. For that reason I do not consider that it can be said to constitute part of either or the parties’ “interest in the trust” as that term is used in cl 18 of the agreement.

[18] Accordingly, it seems to me that Ms Holm-Hansen’s civil claims in relation to the Whau Bay property are (whatever their ultimate merits) quite separate from the relationship/separate property issues that were settled by the s 21 agreement. There is nothing in that agreement that precludes her bringing those claims.

[19] The position in relation to the relationship property claims is, however, less clear. The relevant parts of the agreement, and cl 18 in particular, are unhappily worded. But when they are read together it seems clear enough that:

(a) the parties’ “interests” in the Johnson Family Trust had not yet been

(but were to be) determined;

(b) the parties’ “interests” in the trust were not regarded by the parties as

separate property, but rather as relationship property;

(c) while the s 21 agreement addressed the division of all other items of relationship property, it did not purport to deal with the division of the parties’ “interests” in the trust; and

(d) the relationship property issues relating to the parties’ interests in the trust were to be determined between the parties, failing which Ms Holm-Hansen could pursue her legal remedies in that regard.

[20] In other words: the agreement contemplates that:

(a) any interests in the trust held by either Mr Johnson or Ms Holm- Hansen might be relationship property:

(b) issues about:

(i) the nature and extent of any such interests; and

(ii) how they should be dealt with in relationship property terms were left open (and available for later litigation).

And unless the present relationship property claims can be said to be encompassed within those issues, I consider that the agreement precludes them.

[21] Once that point is reached, it seems to me that the claims under PRA ss 44 and 44C – which focus on the disposition of the Whau Bay property to the trust, rather than the parties’ “interests” in the trust – are barred by the agreement. Claims under ss 44 and 44C of the PRA are clearly “relationship property issues” which (as recital E in the agreement makes clear) have been settled. For the reasons just given, they do not fall within the cl 18 exception.

[22] As far as the s 44 claim is concerned, I also consider that there are other grounds upon which it should be struck out. In the context of the summary judgment application Associate Judge Doogue said:

[52] The next question concerns whether the defendant is able to demonstrate that the s 44 application cannot succeed for factual or legal reasons. The Whau Bay property was acquired in 1992. There is no doubt that the first defendant played a central part in making this acquisition. The plaintiff, because she was the first defendant’s de facto partner, rather than his spouse, did not qualify as a beneficiary under the Trust deed. The plaintiff was kept abreast of events leading up to the purchase of the property. She was told at a meeting with the solicitor acting on the property transaction, Mr Harborne, that she was a trustee only. More significantly, though, the defendants point to the fact that in 1992, the plaintiff did not have any rights as a de facto partner because the relationship property sharing regime did not cover de facto partners until the enactment of amending legislation, which occurred on 3 April 2001. Even if the Regal Castings test is applicable, when the Trust was established in 1992, the first defendant would have had to appreciate that the “disposition” of the Whau Bay property to the Trust would defeat the plaintiff ’s rights in regard to that property. It is correct that a disposition can be caught by the section even though it does not have the immediate effect of defeating rights. However, it is also the case that the requisite intention to defeat such rights must exist at the time the dispositions took place.

[53] In 1992, there was not even preliminary discussion about the possibility of a statutory amendment to extend the property sharing regime to de facto couples. There is simply no basis upon which the plaintiff can assert that the first defendant was exposing the plaintiff to risk as regard her rights or interests in the Whau Bay property, or as regards an opportunity or advantage that the law accorded her with respect to the property. Significantly, the statement of claim does not provide particulars of how it might be said the defendants acted intentionally or knowingly to defeat the rights of the plaintiff under the PRA. The combination of the express deposition by the first defendant and the fact that it is not contradicted by the plaintiff, and in the absence of any inherent circumstances that might give rise to a suspicion that the defendants acted so as to defeat the rights of the plaintiff, mean that there is only a bare assertion that there has been a breach of s 44, without any supporting particulars or evidence as to how that occurred. Nor can it be said that this is a case where knowledge of a consequence can be equated with an intention to bring it about.

[23] Accordingly, he concluded at [54]:

In those circumstances, the defendants have laid the foundation for a successful application for defendants’ summary judgment in the property relationship proceeding, subject to some other matters discussed below.

[24] But because the learned Judge went on to hold that the summary judgment application in relation to the other claims could not succeed he noted that he had no jurisdiction to enter judgment for the defendants solely in relation to that claim. And

it appears that he considered he was precluded from striking out the s 44 claim because he had to accept the pleaded facts as true. Those pleaded “facts” included that “the disposition was made in order to defeat the rights of the plaintiff”.

[25] In my view, however, the Court does not have to accept as true a statement that is factually impossible. It seems to me inescapable that Mr Johnson could not have acted in 1992 “in order to defeat” a claim or rights that did not at that time exist as a matter of law.

[26] Although I accept that the application for review did not seek to impugn this aspect of the learned Associate Judge’s decision, I would (if necessary) grant leave to amend in that respect. The defendants are facing a plethora of other claims by Ms Holm-Hansen; there is no benefit to her for her to be permitted to pursue a cause of action that (in my view) is plainly untenable.

[27] In my view, the “bundle of rights” claim is not similarly barred, however, because it very clearly relates to the nature and extent of Mr Johnson’s interest in the trust; the very matter left open by the agreement. The issue in that respect is therefore whether such a claim is nonetheless legally untenable.

[28] The learned Associate Judge took the view that he should not strike out the claim because it relates to a developing area of the law and should be left alone at this interlocutory stage. While I have no hesitation in accepting that there is controversy and debate around the existence of the doctrine, in my view, the Judge was correct to be cautious. As he noted there are at least obiter dicta in the Court of

Appeal that support its existence.8 Moreover, those dicta have been applied with

substantive effect in relationship property cases in the Family Court.9 Moreover, there remains the possibility that the nature and extent of any such doctrine will depend (in part) on the particular facts of the case. It would, in my view, be wrong

_{in principle to hold (as Mr Fuscic asked me to do) that the terms of a trust deed could}

8 _{Walker v Walker [2007] NZFLR 772 (CA); Harrison v Harrison [2009] NZFLR 687 (CA).}

9. JG v JBG FAMC North Shore FAM-2002-044-591, 13 July 2010, upheld (without the benefit of argument on the bundle of rights point) in Grant v Grant HC Auckland CIV-2010-404-5158, 31

March 2011.

never give rise to a bundle of rights capable of valuation for relationship property purposes.

Conclusions

[29] The application for review therefore succeeds in part. In summary, I

consider:

(a) The learned Associate Judge was correct in concluding that the civil claims should not be struck out; and

(b) The learned Associate Judge was correct in concluding that the bundle of rights claim should not be struck out; but

(c) The learned Associate Judge was wrong in concluding that the claims under PRA ss 44 and 44C should not be struck out.

[30] In my view, the first and second causes of action in CIV-2012-404-2637 have no prospects of success against either defendant, for the reasons I have given. They are struck out accordingly.

[31] Because neither party has been wholly successful my preliminary view is that costs should lie where they fall. If there is disagreement about that, memoranda may

_{be filed within 10 working days.}

Rebecca Ellis J