Perriam v Wilkes [2014] NZHC 2192 (10 September 2014)

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BETWEEN	WENDY JOY PERRIAM Plaintiff
AND	LAWRENCE ERNEST WILKES First Defendant STEPHEN JOHN BRADSHAW Second Defendant ALEXANDER McLENNAN WILSON Third Defendant LESLEY MARGARET INSTONE Fourth Defendant JUDITH ELEANOR FLETT Fifth Defendant
AND	QBE INSURANCE (INTERNATIONAL) LIMITED _{Third Party}

Hearing:	15 and 16 July 2014
Appearances:	S J Callanan for Plaintiff P B Churchman QC for Defendants P J Shamy for Third Party
_Judgment:	_{10 September 2014}

This judgment was delivered by me on Wednesday, 10 September 2014 at 1.00 pm pursuant to r 11.5 of the High Court Rules.

[1] On 13 June 2012, Associate Judge D I Gendall struck out the fourth amended statement of claim in this proceeding on the basis that none of the pleaded causes of action were reasonably arguable.¹The plaintiff now seeks to review the Associate Judge’s decision.

[2] Section 26P(1) of the Judicature Act 1908 provides jurisdiction for the plaintiff’s application to review the decision. In accordance with s 26P(1)(a), the Court must review the decision in accordance with the High Court Rules.

(4) If the order or decision being reviewed was made following a defended hearing and is supported by documented reasons,—

(b) the Judge may, if he or she thinks it is in the interests of justice, rehear the whole or part of the evidence or receive further evidence.

[4] As noted in McGechan on Procedure,²the approach is essentially appellate. The starting point is the Associate Judge’s decision. The plaintiff has the burden of persuading the Court that the decision was wrong – that it rested on unsupportable findings of fact and/or applied wrong principles of law.³The Court will apply the approach in Austin, Nichols & Co Inc v Stichting Lodestar,⁴which involves the

_{Court making its own assessment as to whether the original decision is
wrong.}

²_{Andrew Beck and others McGechan on Procedure (online
ed, Brookers) at [HR2.3.02(1)].}

³Midland Metals Overseas Pte Ltd v Christchurch Press Company Ltd (2002) 16 PRNZ 107 at

⁴Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, (2007) 18 PRNZ 768.

[5] It is accepted that for the purposes of a strike-out application the pleaded facts, whether or not admitted, are assumed to be true. This does not however extend to pleaded allegations which are clearly speculative and without foundation.⁵

The Court is also entitled to consider evidence on a strike-out application if such evidence has been filed. In Attorney-General v McVeagh the Court of Appeal stated:⁶

The Court is entitled to receive affidavit evidence on a striking-out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact, and therefore will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleading, for a striking-out application is dealt with on the footing that the pleaded facts can be proved; see Electricity Corporation Ltd v Geotherm Energy [1992] 2 NZLR 641, 645-646; Southern Ocean Trawlers Ltd v Director-General of Agriculture and Fisheries [1993]

2 NZLR 53 62-63, per Cooke P. But there may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact that the

In this proceeding, a large number of affidavits have been filed since it commenced in June 2009. I take them into account only if they are not able to be disputed.

28 June 2010. He conducted his business through a number of companies, trusts and other entities, which together were known as the Perron Group (the Group). The Group also collapsed at about the same time as Mr Perriam was adjudicated bankrupt and the companies, trusts and entities were either liquidated or ceased trading. The Group’s debts exceeded $130 million.

[7] Mr and Mrs Perriam separated on 4 April 2004. Relationship property proceedings were filed in the Family Court in 2006, but had not been determined as at the date of Mr Perriam’s bankruptcy. Various settlement offers were made by

_{Mr Perriam before his bankruptcy, but they were all rejected by the
plaintiff.}

⁵Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267, endorsed by the Supreme Court in

[8] The defendants were at all material times solicitors practising in Invercargill as a legal firm known as Macalisters. The first defendant, Lawrence Ernest Wilkes, is married to Mr Perriam’s sister. He is therefore the plaintiff’s brother-in-law. Macalisters provided legal services to the Group, Mr Perriam and the plaintiff personally. Between 1991 and 1995 a number of property transactions were conducted in the joint names of Mr Perriam and the plaintiff. Mr Perriam then formed a property development partnership with Cameron John MacLaren Marsh and further property developments were conducted by the partnership, known as Marcam Developments, in 1994 and early 1995. Marcam Developments Limited was incorporated on 28 February 1995. Mr Perriam and Mr Marsh held 5,000 shares each. Property developments continued in the name of the company.

[9] In 2000, Mr Perriam’s property development business underwent a significant restructure, largely on the advice of Deloitte, the Group’s accountants. Two new trusts, the Mark Perriam Trust and the CJM Marsh Trust were established to hold the shares in the Group companies. Two trustee companies, Dacre Trust Limited and John McLaren Trust Limited, were set up to act as trustees of the two new trusts.

[10] On 7 April 2000, Mr Perriam’s 5,000 shares in Marcam Developments Limited were sold to the Mark Perriam Trust for the sum of $175,850, although no money changed hands. The purchase price of the shares was acknowledged by the Mark Perriam Trust by way of a deed of acknowledgement of debt. By 30 June

2000, the shares in all the Group companies which had been set up (normally one for each development) were owned 45 per cent by each of the two new trusts and five per cent by Mr Perriam and Mr Marsh.

[11] Property developments continued to be conducted through Macalisters, using not only Marcam Developments Limited, but also other companies incorporated for various transactions. When the Group began to be involved in hotel type developments and pooled investment schemes in 2004, the legal work was mostly transferred to an Auckland legal firm, Russell McVeagh. Some conveyancing transactions and some other small matters were dealt with by Macalisters and Mr Wilkes continued to have some involvement with the trustee companies of which he

was a 100 per cent shareholder, although the trustee companies did not trade as such.

Macalisters therefore had little involvement with the Group’s activities after 2004.

[12] The fourth amended statement of claim contains 137 paragraphs and is 32 pages in length with a 17 page schedule. It is prolix and convoluted and therefore difficult to summarise, but five causes of action are set out, each with various alternatives. The first cause of action relates to the Mark Perriam Trust. In the first cause of action, the plaintiff claims $175,850 and $300,000, together with interest on the total sum of $475,850. The sum of $175,850 is the unpaid purchase price of the

5,000 shares owned by Mr Perriam in Marcam Developments Limited, when the shares were sold to the Mark Perriam Trust. The plaintiff alleges that Macalisters breached their fiduciary duty to her by transferring the shares, which were potentially relationship property, to a trust of which she was neither a trustee nor a beneficiary on 7 April 2010, four years before her separation from Mr Perriam.

[13] The sum of $300,000 was received in Macalisters’ trust account on 6 October

2008, four years after the plaintiff ’s separation from Mr Perriam, under the client name Mark Perriam Trust. It was later paid to the BNZ to reduce the indebtedness of the Lake House Trust. The plaintiff alleges that Macalisters breached their fiduciary duty to tell her they had received the sum of $300,000 into their trust account, thereby robbing her of the opportunity to obtain a Court order in relation to the sum. In the alternative, the plaintiff alleges that Macalisters knew that the sum of

$300,000 was relationship property and the laundering of the same through their trust account constituted a misapplication of the plaintiff’s property. In breach of their recipient trusteeship, Macalisters had failed to account to the plaintiff for the sum of $300,000.

[14] The second cause of action relates to an entity named the Colorado Property Trust. The plaintiff alleges that when Macalisters established the Colorado Property Trust on 20 August 1999, they breached their fiduciary duty to her because she was neither a trustee nor a beneficiary. The plaintiff alleges that after she separated from Mr Perriam, the Colorado Property Trust sold 29 properties it owned through

Macalisters’ trust account. The financial accounts of the Colorado Property Trust, as at 31 March 2006, disclose that the net funds after settlement were $2,752,931, of which the plaintiff claims a half share, namely $1,376,465.50. The net funds available after settlement were loaned by Colorado Property Trust to Perron Developments Limited for the development of further properties as authorised by its trust deed. Because Macalisters had failed to disclose any of these transactions to the plaintiff, she alleges that she has been robbed of the opportunity to obtain Court orders to obtain her share of the settlement proceeds.

[15] In the alternative, the plaintiff alleges that Macalisters knew that the assets acquired by the Colorado Property Trust were relationship property and the receipt and subsequent disposal of the same constituted a misapplication of the plaintiff’s property. The unauthorised on-lending of her half share to Perron Developments Limited was a breach of Macalisters’ recipient trusteeship.

[16] In the further alternative, the plaintiff alleges that on 16 June 2008, Macalisters received the sum of $94,250 from Russell McVeagh, which they caused to be received into their trust account under the client name “MF Perriam”. The plaintiff further alleges that on 1 July 2008, Macalisters made a payment to Mr Perriam’s father of $84,750 from their trust account and narrated the payment as “repayment”. The plaintiff further alleges that on 28 July 2008, Macalisters received the sum of $402,208 from Perron Limited, which they caused to be received into their trust account under the client name “Colorado Property Trust” and on the same day made a payment of half that sum, $201,404, to Mr Perriam’s father and narrated the payment as “distribution for M F Perriam”.

[17] The plaintiff alleges that Macalisters knew that Mr Perriam held all monies and dividends as a constructive trustee for the plaintiff and that the total sum of

$286,154 paid to Mr Perriam’s father was relationship property and the laundering of the same through their trust account constituted a misapplication of the plaintiff’s property. In breach of their recipient trusteeship, Macalisters had failed to account to the plaintiff for the sum of $286,154. The plaintiff therefore claims the additional sum of $286,154.

[18] In the further alternative, the plaintiff alleges that from 13 March to 25 March

2008, the Colorado Property Trust received $977,000 into its bank account from Perron Developments Limited in repayment of its loan. From 1 July to 4 July 2008, the bank accounts disclose that a total sum of $135,000 was received by the Colorado Property Trust from Francis McLaren Limited. The plaintiff alleges that Mr Wilkes knew or ought to have known that Colorado Property Trust had received these large sums of money and had a duty to disclose receipt of them to the plaintiff, but that he failed to do so. The plaintiff alleges that the sums of money were hers and were subsequently lost because Mr Perriam and others drew cheques on the account of the Colorado Property Trust depleting its bank account. The plaintiff alleges that Mr Wilkes, as recipient trustee, failed to protect her money. The plaintiff therefore claims an additional $1,112,000.

[19] The third cause of action relates to an entity named the Perriam Queenstown Trust in respect of which the plaintiff claims $4,865,000 together with interest. The plaintiff alleges that on 9 December 2003, Macalisters established the Perriam Queenstown Trust in breach of their fiduciary duty to her because the plaintiff was neither a trustee nor a beneficiary. The plaintiff alleges that on 14 January 2004, the Perriam Queenstown Trust purchased a half share of land in Queenstown on which a Sofitel hotel was built for $1,635,000 with a deed of acknowledgement of debt of

$1,635,000 executed by the Perriam Queenstown Trust in favour of the vendor, Marcam Grand Lakes Limited.

[20] The plaintiff alleges that the Sofitel land was sold on 31 December 2005 for

$13,000,000 for a capital gain of $9,730,000, leaving the Perriam Queenstown Trust with 50% of the capital gain or the sum of $4,865,000. The plaintiff alleges that because Macalisters prepared the documentation for the various transactions, they had a fiduciary duty to the plaintiff to disclose the relevant documents on the dates those transactions took place or, at the latest, on separation date. Because they did not do so, the plaintiff was robbed of the opportunity to obtain various court orders including the right to share in the ownership of the Sofitel land. She therefore lost her opportunity to share in the capital gain made by the Perriam Queenstown Trust.

[21] The fourth cause of action alleges that because of Macalisters’ breaches of fiduciary duty to her, in particular their fraudulent non-disclosure of the existence of various trusts and their assets, the plaintiff lost her opportunity to settle her relationship property dispute with Mr Perriam in the sum of $1,600,000, which was the largest of various offers made by Mr Perriam to settle the dispute between June

2005 and March 2009. The plaintiff therefore claims the sum of $1,600,000 for the settlement offer she rejected.

[22] The fifth cause of action is said to be an amalgam of all the losses earlier specified in the statement of claim. The general allegation by the plaintiff is that in breach of Macalisters’ fiduciary duties to plaintiff, they knowingly and fraudulently assisted Mr Perriam to defeat her claim or rights under the Property (Relationships) Act 1976 (the Act).

[23] The defendants’ application to strike-out the statement of claim was first heard as long ago as 1 October 2010. In a judgment dated 6 October 2010, Associate Judge Faire found that the second amended statement of claim did not comply with the High Court Rules, but adjourned the application to enable the plaintiff to remedy its deficiencies.⁷

[24] The defendants’ application was then heard and determined by Associate Judge Gendall on 13 June 2012. By this stage, the plaintiff had filed her fourth amended statement of claim. At the outset, Associate Judge Gendall stated:⁸

[16] A major issue to be addressed here is whether the fourth amended statement of claim remedies the deficiencies outlined by His Honour Associate Judge Faire in his previous decision. These were essentially inadequate particularisation of the claims and the loss suffered, and a failure to establish a casual link between the defendants’ alleged breach and the loss said to be incurred. In particular, among the points made in that decision were that there was a major disconnect between the acts complained of and the loss (see [34]); that there was a significant lack of particulars, particularly where fraud was alleged (see [37] and [38]); that it was not pleaded anywhere that the creation of the trust or company structures was the cause of the business failures (see [28]) and that the plaintiff Mrs Perriam

appeared to have overlooked the fact that if the effect of the business venture failures was the loss of the assets owned by the various trusts and companies that were set up, it would not have mattered whether Mr Perriam had used trusts to carry on the business or held the assets in his own name (see [28]).

[17] And significantly, the decision, at [25] pointed out that Mrs Perriam had proceeded in her second amended statement of claim on a fundamental misapprehension that rights under the Property (Relationships) Act 1976 arose without any action being taken on her part to secure either an agreement providing ownership of the assets or an order of the court.

[18] At the outset, I need to say that in my view to a large extent, these defects remain. Essentially, what the plaintiff has done in her fourth amended statement of claim as I see it is simply to embellish the pleadings first, with many speculative and unsubstantiated allegations including liberal claims of “fraud”, “equitable fraud”, “money laundering”, “collusion”, “conspiracy” and “dishonesty”, and secondly, to include some additional allegations said to amount to “factual” information. Instead of picking up on this court’s suggestions as to the need first, for additional particulars, and secondly, to identify how the actions complained of caused the actual claimed losses, and the detail of those losses, the Fourth Amended Statement of Claim it might be said represents a fundamental challenge to the earlier suggestion by His Honour Associate Judge Faire that Mrs Perriam did not have the type of rights which she has asserted were breached, at the time of the claimed breaches of duty on the part of the defendants.

[25] Associate Judge Gendall then considered the plaintiff’s principal claim that Macalisters had breached their fiduciary duty to her. He turned next to consider each of the specific causes of action in the fourth amended statement of claim. While Associate Judge Gendall expressed reservations about the extent of the fiduciary duty owed by Macalisters to the plaintiff and the merits of the specific causes of action, he determined that it was issue of causation that was fatal to the plaintiff’s claim. Associate Judge Gendall stated:

[50] Even if a fiduciary duty can be established, the plaintiff here also must make out an arguable case that the breach of that duty caused loss to her. The defendants contend in this case that no material has been placed before the Court first, to indicate that the trusts and companies involved in the plaintiff’s claim had any assets at all, or secondly, to show how loss was caused by the creation of those structures. Faire AJ also stated at [34] that he could see no connection between the acts complained of and the loss suffered. I am not satisfied that the fourth amended statement of claim remedies this deficiency in causation.

[53] In a situation before me, the plaintiff has not shown that she would have acted materially differently if proper advice and full information had been given. Even if she were properly advised of her husband’s business

affairs, it is likely that the assets would have remained with the trusts and the companies. There might be a potential argument that, but for the alleged breach of duty, the plaintiff would have had a better chance of achieving a more favourable relationship property settlement after separation, as she would have known where and how all her husband’s assets were held. There might also be a potential argument that but for the duty she would have been more inclined to accept an initial relationship property settlement offer of

$1.6 million. But, on that property settlement she was independently advised by other senior legal counsel and the undisputed evidence before the Court is that she and her advisers had been provided with full details of all the entities involved and their asset positions.

[54] And, in addition, what is fatal to the plaintiff’s claim here as I see it is that even if she were properly advised and more information had been disclosed, there would be very little in the way of property that could be subject to a claim. The depletion of what she now claims might have been relationship property assets was caused by the failure of the Perron Group’s business ventures. These failures caused the loss of assets owned by all the trusts and companies that were set up. The establishment of those structures, in and of themselves, did not cause any loss. It would have made no material difference to the plaintiff’s position whether Mr Perriam had used companies and trusts to hold these business assets or whether he held them in his own name. Even if the plaintiff had full knowledge of every past transaction, there would have been no property available to be subject to a claim or a relationship property settlement, and the loss would not have been avoided. As I see it, this issue of causation is fatal to the plaintiff’s claims here.

[27] Finally, Associate Judge Gendall also commented that the fourth amended statement of claim failed to properly particularise the nature of the loss suffered:

[57] In the present case, the plaintiff has not made out the exact loss she claims to have suffered as a result of the actions of the defendants. It might possibly be argued that her bargaining position in respect of relationship property matters could have diminished as a result of her not being advised earlier of the trusts and companies which were incorporated during her marriage. Therefore, at the time of separation, she might endeavour to say she was in a materially less favourable position in terms of entering into negotiations to divide relationship property than she otherwise would have been. However, despite the evidence before me which is to the contrary, the plaintiff in any event as I see it encounters the same problem, in that even if her bargaining position would have been materially different, there were no assets remaining in the trusts or companies that could have been subject to a claim. If the Perron Group assets in some way were seen to be relationship property, so too would its debts to genuine outside third parties (which vastly exceeded the value of the assets) be seen as relationship debts.

[28] By way of conclusion, Associate Judge Gendall was not satisfied that any further opportunity to amend the statement of claim would establish a properly arguable case. He therefore allowed the defendants’ application to strike-out the fourth amended statement of claim.

[29] The application for review of the decision made by Associate Judge Gendall states that the application is made “on the following grounds”. There follows

72 paragraphs and 15 pages of grounds in which the plaintiff challenges every aspect of the decision. On what Associate Judge Gendall stated was the critical issue of causation, the application refers to his conclusions as wrongful findings of fact that the plaintiff was required to show that she would have acted materially differently if proper advice and full information had been given and that there was very little in the way of property that could be the subject of a claim.

[30] The application states that either those findings are not correct or are disputed, in which case the claim needs to proceed to a hearing.

[31] I agree with Associate Judge Gendall that the statement of claim should be struck out as not disclosing a reasonably arguable cause of action. As noted, the statement of claim is prolix and convoluted, but I shall take one example of a transaction from the statement of claim to illustrate how in my view the plaintiff continues to be unable to establish that the various transactions undertaken by Macalisters caused her any loss. That is the plaintiff’s claim for $175,850, being the purchase price of Mr Perriam’s 5,000 shares in Marcam Developments Limited. The relevant paragraphs of the statement of claim are as follows:

7 The defendants provided legal services to the Plaintiff. At all material times as particularized hereunder there was a solicitor/client relationship between the defendants and the plaintiff given rise to a fiduciary duty.

7.3 Particulars of the legal services from 1995 and 1996 for the plaintiff and the plaintiff’s husband in the property development business, including, but not limited to, acting on:

(a) 28 February 1995 – the incorporation of Marcam Developments Limited (later called Perron Developments No 1 Limited and then GT3 Limited) (“Marcam Developments Limited”) which carried on business as a property developer. The Plaintiff’s husband held 5,000

8 From the 28^thof February 1995 onwards, the defendants knew, or ought to have known, that 5,000 shares held by the Plaintiff’s husband in Marcam Developments Limited and the shares in the subsequent companies that were incorporated by the defendants, as particularised in Schedule 1 hereto, were relationship property of the plaintiff and/or were eligible to be classified as relationship property, and as defined by the Property (Relationships) Act 1976. Particulars:

9 From the 28^thof February 1995 onwards, the defendants knew that the plaintiff’s husband held 5,000 shares in Marcam Developments Limited for his wife, the plaintiff, as a constructive trustee.

13 In or about the 29^thof March 2000 the defendants took instructions from the plaintiff’s husband to fraudulently dispose of the shares in Marcam Developments Limited to a Trust, in which the plaintiff would have no right or interest and in breach of their fiduciary duty to her.

14 In or about the 6^thof April 2000 the defendants established the Mark Perriam Trust as particularised in paragraph 11.2 above in breach of their fiduciary duty to her, because the plaintiff was neither a trustee nor a beneficiary.

15 In or about the 7^thof April 2000, the defendants knowingly and fraudulently assisted the plaintiff’s husband to sell and/or dispose of 5,000 shares in Marcam Developments Limited to the Mark Perriam Trust for the sum of $175,850 (“the purchase price”).

16 The defendants were parties to the fraudulent concealment of the sale and/or disposition of the shares because:

(a) All of the documents pertaining to the sale and/or disposition were prepared by the defendants, including a Deed of Acknowledgement of Debt between the Mark Perriam Trust and the plaintiff’s husband for the full purchase price. Such debt remains due and owing.

31 The defendants had a duty to disclose to the plaintiff the relevant documents on the following dates:

(b) The share transfers of Marcam Developments Limited to the Mark Perriam Trust and other pertinent sale/disposition documents on the 7^thof April 2000.

(c) The various shareholder consent forms on the dates that the Mark Perriam Trust acquired the shares in the various companies itemized in paragraph 26.

(d) On the date the various companies sold their assets and made substantial profits.

(e) And, at the latest, on the separation date all of the information particularized in the proceeding paragraphs.

32 The defendants failed to disclose any or all of the documentation referred to above and at separation date the plaintiff could not ascertain what the assets of her relationship were and where they were.

33 The defendants failed and/or refused to disclose the information and fraudulently concealed the same, causing the plaintiff loss.

WHEREFORE THE PLAINTIFF CLAIMS AGAINST THE FIRST, SECOND, THIRD, FOURTH AND FIFTH DEFENDANTS:

A Judgment in the sum of ONE HUNDRED AND SEVENTY FIVE THOUSAND EIGHT HUNDRED AND FIFTY DOLLARS ($175,850) in accordance with paragraph 15 above being the minimum amount of the plaintiff’s loss.

[32] Marcam Developments Limited was incorporated on 28 February 1995, nine years before the plaintiff ’s separation from Mr Perriam. The statement of claim does not allege that separation was contemplated at that time or Macalisters in some way were impressed with knowledge that the plaintiff and Mr Perriam would separate nine years later.

[33] Contrary to the allegation in paragraph 8 of the statement of claim, the 5,000 shares issued to Mr Perriam on the incorporation of Marcam Developments Limited were not relationship property and never became relationship property. As noted in Fisher on Matrimonial and Relationship Property:⁹

The property regime instituted by the 1976 Act is one of deferred sharing in the sense that conventional property principles are retained as the fundamental source of property rights within marriage ... unless and until the statutory relationship property regime is invoked by Court order or agreement. When the statutory regime is invoked, new property rights operate from the date of the Court order or agreement. They are not retrospective. Accordingly, where questions relating to revenue, torts,

dispositions to third parties, creditors’ rights and other matters turn on the existing rather than future property rights of spouses ... , the Act has a peripheral role only. It qualifies conventional property rights in minor respects, but essentially recourse must be had to conventional property principles.

The result is that the law as to relationship property in New Zealand may be regarded as consisting of two largely autonomous systems. One is that body of substantive law which might be conventionally referred as “conventional property” ... from which the parties’ existing and perfected rights may at any time be ascertained. The other is the statutory property regime instituted by the 1976 Act, which comes into operation only if positively invoked by Court order or agreement. It follows that unperfected rights under the Property (Relationships) Act, while valuable rights, do not constitute existing equitable estates or interests in property.

[34] Although the 5,000 shares issued to Mr Perriam on the incorporation of Marcam Developments Limited were potentially relationship property, they were legitimately disposed of by Mr Perriam five years later and a number of years prior to the invocation of the statutory regime under the Act.

[35] In paragraph 9 of the statement of claim, the plaintiff also alleges that from

28 February 1995 when the 5,000 shares were issued to Mr Perriam, he held the shares for her as a constructive trustee. No particulars are given and it is difficult to understand how they could possibly be held on a constructive trust, an issue I will discuss later.

[36] On 7 April 2000, as part of the business restructure recommended by Deloitte, the 5,000 shares in Marcam Developments Limited were sold to the Mark Perriam Trust for the sum of $175,850. This was four years before the plaintiff’s separation from Mr Perriam. Again, the statement of claim does not allege that separation was contemplated at that time or that Macalisters in some way were impressed with knowledge that the plaintiff and Mr Perriam would separate four years later. Further, the statement of claim does not allege that the business restructure was carried out for any reason other than as a result of advice from Deloitte.

[37] Section 19(a) of the Act specifically enabled Mr Perriam to dispose of the shares. It provides:

(a) Affect the power of either spouse or partner to acquire, deal with, or dispose of any property or to enter into any contract or other legal transaction whatsoever as if this Act had not been passed; or

[38] Counsel for the plaintiff acknowledges that s 19 of the Act allows each spouse or partner to deal freely with his or her own property during the relationship, but submits there are major exceptions to this general rule, namely, the statutory exceptions of ss 43, 44 and 44C of the Act, as well as the equitable exceptions imposed by way of a resulting and/or constructive trust.

[39] Section 43 enables dispositions of property to be restrained by the Court where it appears to the Court that a disposition is about to be made by or behalf of or by direction of or in the interests of any person in order to defeat the claim or rights of any other person under the Act. The plaintiff is unable to invoke s 43 in the present case. No disposition of property is about to be made.

[40] Section 44 enables a Court to make any of three specified orders if it is satisfied that any disposition of property has been made by or on behalf of or by direction of or in the interests of any person in order to defeat the claim or rights of any person under the Act. The orders that can be made are:

(a) an order that any person to whom the disposition was made and who received the property otherwise than in good faith and for valuable consideration, or his or her personal representative, shall transfer the property or any part thereof to such person as the Court directs (s 44(2)(a)); or

(b) an order that any person to whom the disposition was made and who received the property otherwise than in good faith and for adequate consideration, or his or personal representative, shall pay into Court, or to such person as the Court directs, a sum not exceeding the

difference between the value of the consideration (if any) and the value of the property (s 44(2)(b)); or

(c) an order that any person who has, otherwise than in good faith and for valuable consideration, received any interest in the property from the person to whom the disposition was so made, or his or her personal representative, or any person who received that interest from any such person otherwise than in good faith and for valuable consideration, shall transfer that interest to such person as the Court directs, or shall pay into Court or to such person as the Court directs a sum not exceeding the value of the interest (s 44 (2)(c)).

[41] Although counsel for the plaintiff refers in her written submissions to the ability of the Court to order Macalisters to pay various sums to the plaintiff under s

44(2)(c), the statement of claim does not seek orders under s 44. Such orders are, in any event, not available because the 5,000 shares in Marcam Developments Limited were not disposed of to Macalisters nor did Macalisters receive any interest in the shares at any later stage. The Mark Perriam Trust to whom the shares were disposed is not a party to this proceeding.

[42] Section 44C enables a Court to make one or more orders for the purpose of compensating the spouse or partner whose claims or rights under the Act have been defeated by the disposition since the marriage began of relationship property to a trust, which has the effect of defeating the claim or rights of one of the spouses or partners. The orders that can be made are:

(a) an order requiring one spouse or partner to pay to the other spouse or partner a sum of money, whether out of relationship property or separate property (s 44C(2)(a)); and/or

(b) an order requiring one spouse or partner to transfer to the other spouse or partner any property, whether the property is relationship property or separate property (ss 44C(2)(b)); and/or

(c) an order requiring the trustees of the trust to pay to one spouse or partner the whole or any part of the income of the trust, either for a specified period or until a specified amount has been paid (s 44C(2)(c)).

[43] The plaintiff does not seek to invoke s 44C in the present case. An order against Macalisters under s 44C is, in any event, not available and neither Mr Perriam or the trustees of the Mark Perriam Trust are parties to this proceeding.

[44] Sections 43, 44 and 44C are remedies where dispositions of property are about to be made or have been “in order to defeat the claim or rights of any other person ... under this Act” or where a disposition of relationship property to a trust has been made, which “has the effect of defeating the claim or rights of one of the spouses or partners”. The availability of remedies under ss 43, 44 and 44C does not make dispositions of property unlawful during the subsistence of a marriage. Any rights a spouse or partner may have under the Act are not crystallised until the Act is invoked.

[45] As noted above, the plaintiff also seeks to rely on the concepts of resulting and/or constructive trusts. As to resulting trusts, Fisher on Matrimonial and Relationship Property states:¹⁰

... it is a long-established general principle of equity that a person providing or contributing to the purchase price of real or personal property, conveyed as to a sole or joint interest into the name of another, retains an equitable interest in that property to the extent of his or her contribution, if there is nothing to indicate that he or she intended to confer the beneficial interest on the legal transferee. Even where land or an existing equitable interest becomes the subject of the trust, writing is not ..., and indeed could not, be required – the essence of a resulting trust is that there is no declaration and the trust “results” from the lack of effective disposition of the beneficial interest.

[46] As to constructive trusts, Fisher on Matrimonial and Relationship Property

[c]onstructive trusts are trusts imposed where there is no relevant intention on the part of a settlor, presumed or otherwise, but where according to established principles of equity it would be a fraud for the person on whom the Court imposes the trust to assert a beneficial ownership. Such trusts have traditionally been imposed where a profit is improperly made by a person standing in a fiduciary position, where existing trust property has been received by a stranger in such circumstances that the Court will hold the stranger bound by the trust, or where a person holds property consequent upon a transaction voidable due to the equitable fraud of the holder. The principle has also been extended to persons knowingly receiving stolen moneys as volunteers, and to vendors holding sold property pending settlement. The conservative view, however, is that constructive trusts may be imposed only “by precedent out of principle” and not whenever it appears to the Court to be “fair”. Clearly constructive trusts based on orthodox principle can apply to relationship property.

[47] It is difficult however to see how either of these concepts apply to the example set out above of the transfer of the 5,000 shares held by Mr Perriam in Marcam Developments Limited to the Mark Perriam Trust, four years before the plaintiff separated from Mr Perriam. The statement of claim does not allege that the transfer was not at full value or that the deed of acknowledgement of debt was in some way a sham or that Mr Perriam retained a beneficial interest in the shares, such that there was a resulting trust in favour of Mr Perriam or some sort of constructive trust in relation to the shares in the hands of the Mark Perriam Trust. And, of course, Macalisters never had any proprietary interest in the shares and so the concept of a resulting or constructive trust does not apply to them.

[48] The plaintiff nonetheless says that the transfer was a fraud only because she was not a trustee or beneficiary of the Mark Perriam Trust and did not know of it, although the shares that were transferred were in Mr Perriam’s sole name. No other reason is advanced why the transfer was a fraud. In that regard, I note that Mr Marsh’s wife was not a trustee or beneficiary of the CJM Marsh Trust, which was the second trust set up to hold the shares in the Group companies as a result of advice from Deloitte. The plaintiff’s counsel does not cite any statutory provision in support of the proposition that the transfer of the shares was a fraud. She does

however, cite three cases in support: Babylon v Babylon,¹²Clayton v Clayton,¹³and

_{what she says as the most important case, Regal Castings Limited v
Lightbody.}¹⁴

[49] In Babylon v Babylon, the husband and wife signed a matrimonial property agreement on 13 April 2000 after difficulties had arisen in their marriage. The agreement reclassified sums of $139,000 and US$20,000 as the separate property of Mr Babylon. On the other hand, the agreement reclassified only $12,500 as the separate property of Mrs Babylon. Mrs Babylon was on antidepressant medication at the time and said she had been subject to threats by her husband that if she did not sign the agreement, he would not allow her to have contact with their children.

[50] Ms Babylon also did not know that a trust deed was to be executed later that afternoon by Mr Babylon and his cousin, as trustees. After the trust deed was signed, the trustees resolved to purchase a property in Auckland in which Mr and Mrs Babylon and their children were to live as their family home. Although purchased in the name of the trustees, the whole of the purchase price was derived from the proceeds of sale of their former family home in Lower Hutt. These proceeds of sale were, before 13 April 2000, matrimonial property.

[51] In the District Court, the matrimonial property agreement was set aside on the basis of serious injustice under s 21J of the Act. In the High Court on appeal, it was also determined that s 44 of the Act applied in that the purchase of the house in Auckland in the name of the trustees, but using the proceeds of sale of the Lower Hutt property, was a disposition of property which had been made in order to defeat the claim or rights of Mrs Babylon. It was therefore liable to be set aside.

[52] In Clayton v Clayton, a pre-nuptial agreement entered into six weeks before the parties married in November 1989, was also set aside on the basis of serious injustice under s 21J of the Act.

[53] During the marriage, a number of trusts were established. Some were set up for business purposes – to facilitate a restructuring of business assets and, on the advice of a tax expert, to reduce income tax liability. Others followed advice to address the risk to Mr Clayton’s business that would be posed by a marriage breakdown. Further trusts were established after separation to hold assets acquired by Mr Clayton.

[54] Advice was received from a Queens Counsel in 2003, three years before the parties’ final separation in 2006, as to the risks to Mr Clayton of a marital separation. Two trusts set up by Mr Clayton in 2004 did not name Ms Clayton as a beneficiary. Land was also transferred to the trusts at book value and, accordingly, significant unrealised profits arose on the transfer of the land to the trusts. The Court found that these dispositions of land were made with the intent of defeating Mrs Clayton’s claim. Orders under s 44 of the Act were made setting aside the dispositions. The

[55] Regal Castings Limited v Lightbody is the case on which the plaintiff places greatest weight. At a time when Mr Lightbody was personally responsible for the debts owed by his jewellery business to its major supplier, Regal Castings Limited, comprising a term loan of $220,000 and a current account deficit of $90,000 of which $65,000 was in arrears, he and his wife transferred their family home, their only major asset, into the ownership of a family trust. Consideration for the transfer was a debt of $230,000 to be repaid in one lump sum, seven years later. However, Mr Lightbody and his wife progressively gifted sums to the trust under a programme which extinguished the debt completely in five years.

[56] Four months after the debt was extinguished, Mr Lightbody’s jewellery business was placed in liquidation. Regal Castings Limited was owed $164,683. It obtained judgement against Mr Lightbody, but he was bankrupted. The Court then ordered that the transfer of the family home be set aside as having been made with intent to defraud. Elias CJ thought that it was doubtful that Mr Lightbody and his jewellery business was solvent at the time of the transfer. The transfer was kept secret from Regal Castings Limited and there was no adequate explanation for the transfer of the house property into the family trust, apart from its protection from creditors. The Court declared that the trustees of the trust held one half share of their interest in the property upon trust for the Official Assignee of the estate of Mr Lightbody to be dealt with by the Assignee for the benefit of Mr Lightbody’s

[57] It is my view that when closely analysed, these cases do not support the general principle that where a trust is created during the subsistence of a marriage without one of the spouses as a beneficiary, that an intent to defeat the claim or rights of that spouse is to be inferred. Each of the cases is fact specific. None of them deal with the position of lawyers setting up a trust on instructions from a client. In the present case, there is an adequate explanation for the transfer of the 5,000 shares to the Mark Perriam Trust. It was a business restructure on the basis of advice from Deloitte.

[58] I agree with comments of Associate Judge Gendall in the judgment under review as follows:

[35] I am satisfied too that Regal Castings does not stand for the principle claimed by the plaintiff – that solicitors acting on instructions from one spouse cannot establish trusts or companies that could possibly have the effect of defeating the other spouse’s interests. No discussion whatsoever was made in the Regal Castings case of those like solicitors who assist in the establishment of trusts/companies which defeat (in that case) a creditor’s interests. It was only the debtor’s intention which was the topic of discussion there. It appears in the present case that, in reliance on this “principle” advanced by the plaintiff, which in my view does not in fact at law exist, Mrs Perriam claims that there is equitable fraud. Logically, in my judgment, this claim cannot have any merit either, because as I see the position its legal foundation does not exist. The plaintiff contends that the Court should be particularly slow to strike out a claim based on a developing area of the law and as I have noted this is accepted – A-G v Prince [1998] 1 NZLR 626, affirmed in Couch v A-G [2008] NZSC 45. However, in my judgment there is no developing area of the law at play in the present case, and that principle simply does not apply here.

[59] I am therefore of the view that the principle put forward in reliance upon the above cases is quite wrong. However, the plaintiff goes further and says that Macalisters also had an obligation to advise her, at the time, of the execution of the deed setting up the Mark Perriam Trust on 6 April 2000 and the transfer of the 5,000 shares in Marcam Developments Limited from Mr Perriam to the trust on 7 April

2000. This was four years before the plaintiff separated from Mr Perriam. Her counsel does not cite any statutory provision or case law in support of this proposition. Again, it is quite wrong.

[60] The plaintiff then goes yet further and says that Macalisters also had an obligation to advise her, at the time, of the acquisition by the Mark Perriam Trust of

shares in 17 other companies as well as the subsequent sale of assets owned by all

17 companies. These companies are itemised in the statement of claim. An example is Marcam Epsom Limited, which was incorporated on 28 June 2000, and which bought land and then developed and sold 58 units at 218 Greenlane Road, Auckland, known as the Stonybrook Development. In the alternative, the plaintiff says that Macalisters had an obligation to advise her of all these transactions at the latest on the date of her separation from Mr Perriam in 2004. This is an extraordinary proposition, which is also quite wrong. If the plaintiff is correct, then all law firms acting on any property transaction for an individual or a company or other entity in which an individual may have an interest would be obliged to make full disclosure to the spouse or partner of that individual on the basis that they may separate at some stage in the future and the spouse or partner may then wish to apply for orders under ss 43, 44 or 44C of the Act in relation to the property.

[61] Marcam Developments Limited was struck-off the register in 2008 on the basis that it had no surplus assets after paying its debts in full or part and no creditor had applied to the Courts under s 241 of the Companies Act 1993 for an order putting the company into liquidation. The shares are, accordingly, worthless. Although there is no specific evidence on the point, I infer that the Mark Perriam Trust does not have the present ability to pay the debt to the Official Assignee acting in the bankruptcy of Mr Perriam and the deed of acknowledgement of debt is also worthless.

[62] This is, but one example, from the prolix and convoluted statement of claim. I do not intend to analyse in any detail the remaining claims as this judgment would then be much delayed and intolerably long, but in my view, they all suffer from similar defects. It is my view that counsel for the plaintiff has substantially misconstrued the obligations of a firm of solicitors such as Macalisters when acting for a husband and wife and a business run by the husband. It seems that the plaintiff has only issued proceedings against Macalisters because her ex-husband is bankrupt and the companies, trust and other entities, which did own various Group assets, have now been wound up or ceased trading. There is no money available. The plaintiff probably now regrets not accepting Mr Perriam’s offer of $1.6 million to settle the relationship property proceedings. Mr Perriam was to borrow the money to

settle the proceedings, but was unable to do so when he was bankrupted. Macalisters cannot now be held liable for her lost opportunity as the plaintiff claims in the fourth cause of action.

[63] I agree with Associate Judge Gendall that the issue of causation is fatal to the plaintiff’s claim. The loss of the assets owned by the companies, trust and other entities in the Group (which the plaintiff claims is relationship property) was caused not by any actions or omissions on the part of Macalisters, but by the business failure of the Group itself. It made no difference whether the assets were owned by Mr Perriam personally or by the companies, trusts and other entities that Mr Perriam set up on the advice of Deloitte, with the assistance of Macalisters. The statement of claim does not allege that the structures set up by Mr Perriam were themselves causative of the loss of the assets. The assets would have been lost even if Mr Perriam owned them personally.

[64] It is also important to realise that the assets held by the companies, trusts and other entities were not of themselves relationship property, or even potential relationship property. Rather, it was the value of the shares or the profit or distribution available to the shareholders of a company or the beneficiaries of a trust which potentially was relationship property. So any assets held by Marcam Developments Limited were not relationship property or even potential relationship property. Rather, it was the shares in Marcam Developments Limited, valued at

$175,850 when they were transferred to the Mark Perriam Trust, which were potential relationship property. The shares and the acknowledgement of debt are now worthless however. Similarly, the sum of $1,376,465.50, being a half share of the net funds of $2,752,931, available to the Colorado Property Trust after the sale of

29 properties through Macalisters’ trust account, was not relationship property or even potential relationship property. The plaintiff claims a half share of the net funds in the second cause of action. In the same way, the plaintiff claims in the third cause of action the sum of $4,865,000, being a half share of a capital gain made by the Perriam Queenstown Trust when it sold the Sofitel land in Queenstown. The half share was not relationship property or even potential relationship property.

[65] The sums of $1,376,465.50 and $4,865,000 were never available to the beneficiaries of the Colorado Property Trust or the Perriam Queenstown Trust as a distribution. The statement of claim actually acknowledges that the net funds of

$2,752,931 available to the Colorado Property Trust after the sale of 29 properties were loaned to Perron Developments Limited and used in further property developments. This was in accordance with its trust deed. The loan was never repaid and when Perron Developments Limited was liquidated, it was still outstanding. As to the claim for the sum of $4,865,000, being a half share of a capital gain made by the Perriam Queenstown Trust when it sold the Sofitel land in Queenstown, the statement of claim does not allege that it was available for distribution to the beneficiaries of the trust and therefore potential relationship property. This demonstrates the lack of connection between the acts complained of, being preparation of all the relevant documents by Macalisters, and the alleged loss.

[66] I am of the view that the alleged losses suffered by the plaintiff were not caused by any actions or omissions on the part of Macalisters. The plaintiff’s attitude is summed up by the following statement taken from her counsel’s submissions:

The plaintiff pleads that the defendants have dishonestly assisted in the breach of trust/fiduciary duty of the plaintiff’s ex-husband by setting up trusts, alienating property and allowing the plaintiff’s ex-husband to plunder vast amounts of money without any accounting to the plaintiff.

[67] In a similar vein, counsel concluded her oral submissions with the broad proposition that “from about October 2008 when large cash sums were coming through” (over four years after the plaintiff separated from Mr Perriam) any sums of money that came into Macalisters’ trust account “should have been held by them for both the plaintiff and Mr Perriam”. Counsel submitted that “it didn’t matter which entity was involved”.

[68] With respect, these and many other bald assertions do not suffice to put forward a prima facie case. The defendants do not have to produce evidence to

disprove such bald assertions. It is for the plaintiff to establish a reasonably arguable cause of action. This she has consistently failed to do.

[69] The application for review is dismissed. The defendants are entitled to costs. I direct that costs memoranda are to be filed by both parties within 15 working days of the date of this judgment.

High Court of New Zealand Decisions

Perriam v Wilkes [2014] NZHC 2192 (10 September 2014)