Okkerse v Aotearoa Enterprises Limited [2014] NZHC 3317 (19 December 2014)

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UNDER	Section 174 of the Companies Act
IN THE MATTER	of an application for (inter alia) rectification of the records of a company
BETWEEN	JANETTE YVONNE OKKERSE AND DAVID JOHN CHAPMAN Plaintiffs
AND	AOTEAROA ENTERPRISES LIMITED First Defendant RICHARD HUDSON CAUGHLEY AND MATTHEW PETER WHIMP _{Second Defendants}

Hearing:	28, 29 and 30 October 2014
Counsel:	G J Toebes and J W Grant for Plaintiff J B M Smith QC and M J Ferrier for Defendants
_Judgment:	_{19 December 2014}

This judgment was delivered by me on 19 December 2014 at 10.00 am, pursuant to r 11.5 of the High Court Rules.

[1] It is axiomatic that every case turns on its facts. This case is no exception. Ultimately, its outcome depends on determining who was entitled to the benefit of dividends declared by Aotearoa Enterprises Limited (Aotearoa) for the financial years ending 31 March 2007 and 31 March 2008 and credited to the current accounts of its shareholders. The dividends declared in those respective years were

$2,067,200 and $172,584. Both dividends derived from success fees earned by two companies, Building Solutions Limited (BSL) and Barnes Street Properties Limited (BSPL). BSL and BSPL were wholly owned by the two directors of Aotearoa, Mr R J Burrell and Mr G S Wilkinson. Neither BSL or BSPL had any connection with the business of Aotearoa, but on advice from Price Waterhouse Coopers (PWC), Aotearoa was nominated to receive the success fees earned by BSL and BSPL. This was achieved by generating invoices for “management fees” in each case, although no management services were provided. The management fees were declared as revenue by Aoteoroa, so that the success fees could be paid out as dividends. The dividends declared were then credited pari passu to the accounts of the three shareholders of Aoteoroa: 50 per cent to Mr Wilkinson’s trust, the GS Wilkinson No 1 Trust (50 fully paid shares); 25 per cent to the predecessor of Mr Burrell’s investment trust, the Taranaki No 2 Trust (25 fully paid shares); and 25 per cent to the predecessor of the Janette Okkerse Family Trust (JOFT) (25 fully paid shares).

[2] In 2008, the accounts were adjusted and the 25 per cent share of the dividend derived from the BSL Success Fee and credited to the JOFT in 2007 was transferred to the Taranaki No 2 Trust. In 2009 the accounts were again adjusted and the 25 per cent share of the dividend derived from the BSPL Success Fee and credited to the JOFT in 2008 was similarly transferred to the Taranaki No 2 Trust. The defendants say these current account adjustments were made with the knowledge and consent of the shareholders of Aoteoroa; and that the financial statements of Aoteoroa for each of those financial years were formally approved by all shareholders.

[3] At issue is whether there was ever any intention that Ms Okkerse, or the JOFT, would have beneficial entitlement to the 25 per cent share of the dividends derived from the success fees and channelled through the JOFT current account.

[4] Ms Okkerse and her co-trustee, Mr Chapman, sue Aotearoa and alternatively the trustees of the Taranaki No 2 Trust. Neither Mr Wilkinson or Mr Burrell are parties to the proceeding.

[5] The claim is for an order under s 174 of the Companies Act 1993 as against Aotearoa for rectification of the financial records of Aotearoa to show as credits in the JOFT current account the sums of $505,196 and $52,939, representing the dividends transferred out of the JOFT to the Taranaki No 2 Trust in 2008 and 2009.

[6] The submission is that the transfers required the consent or approval of the trustees of the JOFT made on an informed basis, drawing on the decision in Hansard v Hansard.¹

[7] It is said that Aotearoa’s financial accounts incorrectly reflect the JOFT credit position because of the ‘unauthorised’ transfers and that a credit in a shareholder’s current account represents a debt due by the company to that shareholder. Aotearoa declared the payments as dividends to its shareholders, resulting in a credit balance in each shareholder’s current account. The disposition of that credit balance was a matter for each shareholder and it was a matter for the JOFT to draw upon those dividends, or direct the payment thereof and was not a matter that Aotearoa could “unilaterally undertake”.

[8] The plaintiffs say the JOFT did not request, authorise, make, direct or incur any obligation to make the payments to Taranaki No 2 Trust recorded in those shareholder current accounts for the years ending 31 March 2008 and 31 March

[9] The defence position is that, acting on PWC advice to both BSL and to Aotearoa, Aotearoa was simply to be a conduit; no relevant services were provided by Aotearoa to earn the management fees invoiced for each of the success fees; and

_{there was never any intention to deliver to the JOFT (or any predecessor
of the}

JOFT) a “windfall gain” of a quarter share of the Optimation Success Fee or of the Barnes Street Success Fee. To grant the relief sought by the plaintiffs would procure the unjust enrichment of the JOFT.

[10] Furthermore, the defence say that the JOFT trustees cannot recover any portion of the Optimation Success Fee because they are precluded by agreement, and/or are estopped from doing so on a number of bases. In relation to the Barnes Street Success Fee, the defence position is similar. Again, the submission is that it was never the intention of the arrangements that were put in place as between BSPL and Aotearoa to deliver to the JOFT (or any predecessor) a windfall gain in respect of the Barnes Street Success Fee and the channelling of that success fee through Aotearoa was with the knowledge and consent of all three shareholders of Aotearoa, did not reflect any financial interest by the JOFT in the Barnes Street Success Fee, and the fee was held by the JOFT as a bare trustee for the benefit of Taranaki No 2

Trust in accordance with well-understood arrangements. Granting the relief sought would again procure the unjust enrichment of the JOFT.

[11] As an alternative cause of action against the second defendants, the plaintiffs allege that the inter-trust transactions in issue were loans, relying on a reference to inter-trust loans between Ms Okkerse and Mr Burrell by PWC in a letter of 17 May

[12] Whilst the second defendants admit that the statement in the pleaded letter dated 17 May 2011 made reference to inter-trust loans, they deny that trust loans were in fact created between Ms Okkerse and Mr Burrell or that such loans are repayable on demand.

[13] A third cause of action seeks an order from the Court under s 147 of the Companies Act directing a change of residential address of Mr Burrell be notified to the Companies Office. That cause of action is of no consequence to this proceeding and plays no part in the judgment.

[14] Ms Okkerse and Mr Burrell were married but separated in April 2003. Part of the agreement reached in relation to division of their assets was the establishment of new family trusts to replace their existing mirror trusts (the Richard Burrell Family Trust (RJBFT) and the JY Family Trust (JYBFT)) and the resettlement of assets from those mirror trusts on their respective new trusts, the Taranaki No 2 Trust and the JOFT, both established in 2004. Resettlement of the assets on the new trusts was achieved in November 2005 and included transfer of the 25 per cent of Aotearoa shares paid into the mirror trusts.

[15] Agreement on the final division of their relationship property was not reached by Mr Burrell and Ms Okkerse until 17 May 2005, on which date they executed a Separation, Financial Support and Property Deed pursuant to s 21 (Relationship Property Agreement). In fact, they had reconciled shortly prior to that date and began living together again in about mid-June 2005. The Relationship Property Agreement continued in force however and was expressed to be in full and final settlement of all or any claims which either party had against the other and despite their reconciliation. Ms Okkerse made it clear in her evidence that, following reconciliation, she remained at pains to maintain her assets as her separate property in order to protect them. She acknowledged that Mr Burrell, however, chose to merge his funds in spending on their joint lives during the period of their reconciliation.

[16] In 2009 Mr Burrell and Ms Okkerse again separated. A second round of property settlement apparently took place and the marriage is now dissolved.

[17] Mr Burrell and Mr Wilkinson are longstanding business partners. At all material times they owned a group of companies, referred to as the Burrell Wilkinson Group in equal shares and trading under the name “Building Solutions”. BSL was incorporated in 1991. Together Messrs Burrell and Wilkinson constituted its board

of directors. As already noted, both are also the directors of Aoteoroa. Acting on advice received in 2005, BSL decided to use Aotearoa as the Group’s banker for receipt of significant payments received by it.

[18] BSPL was incorporated on 20 June 2005 and was a 50 per cent joint venture with another company. At all material times Messrs Burrell and Wilkinson were the directors of BSPL, together with trustees representing their joint venture partners. For the same reasons and based on the same advice, Messrs Burrell and Wilkinson decided to again nominate Aoteoroa for receipt of their 50 per cent share of the success fee earned by BSPL in 2006.

[19] Mr Graham Archer, formerly a partner in PWC, provided accountancy and financial advice to Mr Burrell and Ms Okkerse for many years, as well as to the various trusts and companies associated with them. He was a trustee of their predecessor mirror trusts. Mr Archer did not however become a trustee of the new JOFT or the Taranaki No 2 investment trust when these were settled in November

2005, as Mr Burrell and Ms Okkerse had separated by then. He did however continue to act as accountant for Ms Okkerse’s successive trusts until the end of the

In addition to general accountancy services, I provided advice to Richard and Janette about the most effective structuring of their assets, for reasons including wealth growth, asset protection and estate planning. This involved, on my advice, Richard and Janette holding personal assets in various trusts, separate from their business assets which were generally held through trading companies.

[20] The success fee earned by BSL was the result of a sale and purchase agreement entered into by BSL with a company styled Property Fund Thirty-One Limited (PF31) for the sale of a commercial property known as Optimation House. The agreement provided for BSL to be contracted by PF31 over a three-year period, from March 2001 to March 2005, to work on improving the net rent income and

weighted average lease term for Optimation House. If BSL were successful in achieving this, it would be entitled to share in the increased capital value by way of a rental growth fee, referred to as the “Optimation Success Fee”.

[21] In late March 2005, at the end of the agreed three year term, BSL successfully achieved a success fee. Although the agreement had provided for the quantum of the fee to be calculated as at each anniversary of the settlement date, it was not until the third and final anniversary in March 2005 that the calculation was made. Thus the fee “hung in the balance” until the very end of the agreed term. Mr Burrell said it was only at the last minute and following a number of fraught negotiations that a fee was finally achieved. Even then, there was uncertainty about the amount due and this was not determined until 20 June 2005, at which time it was agreed that a fee in the sum of $2,480,000 would be paid to BSL in July 2005.

[22] The BPSL success fee was earned through the development of a commercial property at Barnes Street, Seaview by Messrs Burrell and Wilkinson and their joint venture partners. The associated profit from the development was $700,000 in total, which was split equally between the partners. On advice, the same methodology was utilised by Messrs Burrell and Wilkinson to channel their $350,000 share in the success free through Aotearoa. Aotearoa was nominated to receive the payment, an invoice generated for a management fee in the amount of $350,000 and the invoice was paid on 23 November 2006. Once again, no actual management services were provided by Aotearoa to BPSL.

[23] The evidence of both Mr Burrell and Mr Archer, and also Mr Whimp, was that, despite the Barnes Street Success Fee being channelled through Aotearoa, it was never intended that Ms Okkerse or any trust associated with her would have a beneficial interest in it.

[24] While this case has not been pleaded as a claim for relationship property; nor as an action to set aside the Relationship Property Agreement entered into by

Ms Okkerse and Mr Burrell on 17 May 2005, it has essentially been argued as such and much of the evidence was directed towards relationship property issues. Mr Toebes’ submissions also reflected this to an extent. Thus it is necessary to set out the position in relation to that.

[25] Essentially, the claim made under the first cause of action and the allegation underpinning it are directed to relationship property; the allegation being that Mr Burrell and “his” advisors concealed the “increased quantum of the” Optimation Success Fee toward the end of the Optimation House agreement’s three year term; and that this ultimately affected the value of BSL for relationship property purposes.

[26] In refuting this allegation, Mr Burrell was at pains to emphasise that the Optimation Success Fee, if there were to be any, and its quantum, was by no means certain until very late in the piece and long after the valuations of the relationship property had been finalised.

[27] Under cross-examination, Ms Okkerse acknowledged that she was well aware of what Mr Smith described as “an urgent drive by Mr Burrell and Mr Wilkinson” to earn the fee during the closing stages of the three year term of the Optimation House agreement; and aware that it had been “a considerable focus for the two men at the time;” and that there was “considerable anxiety as to whether” a fee would ultimately be achieved.

[28] However, although Messrs Burrell and Wilkinson, through BSL, undertook a great deal of work, both personally and through employed staff, to achieve the Optimation Success fee, and Ms Okkerse had no involvement in either BSL or in its efforts to achieve the fee, the possibility that Mr Burrell’s share of that fee (if earned) would form part of the relationship property pool was clearly contemplated by the parties.

[29] The fee was valued by PWC on a future contingent basis for relationship property purposes in December 2004 as nil. There was at that time no certainty that any fee would be achieved, let alone certainty as to what the quantum of such a fee might be. In the event, the fee was not earned until late March 2005; and then not

finally quantified until June. It was paid out in July 2005, well after the parties had reconciled and had executed their Relationship Property Agreement.

[30] The possibility of a future fee had however been the subject of specific focus and discussion during the relationship property negotiations. The issue of Ms Okkerse’s participation in such a fee had been raised by her solicitors well prior to finalisation of PWC’s nil valuation. The solicitors had suggested that it “may well be appropriate for an agreement to be reached between Janette and Richard for her to share to some extent in any payment when received”. The solicitors were in turn advised by Mr Burrell’s solicitors that PWC considered the fee irrelevant to the valuation, then still in draft. They were invited to contact Mr Archer for clarification. Correspondence then took place between PWC and an independent accountant engaged by Ms Okkerse. That correspondence included express reference to the Optimation Success Fee. Notwithstanding, PWC’s valuation of the fee as nil was ultimately issued without amendment.

[31] The Relationship Property Agreement was then prepared based on PWC’s valuations. The value attributed to Mr Burrell’s shareholdings in the Burrell Wilkinson Group was $1,213,365.00, of which Ms Okkerse was entitled to a half share. The valuation attributed to the agreement between PF31 and BSL was nil, based on its contingent and uncertain status at the time. A copy of PWC’s valuation was attached to the Relationship Property Agreement, which was executed by the parties on the advice of their legal advisers. It is not insignificant that the Matrimonial Settlement Agreement was expressed to be “in full and final settlement of all or any claims or rights which Janette and Richard may have against each other”, and that it remained binding despite their reconciliation. Each party to the Agreement acknowledged that “he or she was estopped against the other from all or any claim or demand in respect of the property of any nature whatsoever”. Each agreed to bind his or her trusts to the agreement’s terms, as well as any successor trusts, which included the JOFT.

[32] Notwithstanding, Ms Okkerse in her evidence, in support of her claim to a share of the Optimation Success Fee, said:

It is without doubt that the assessment of the value of the Burrell Wilkinson Group would have been increased if the quantum given to the Optimation House success fee was more than “nil”. Any increased quantum of the success fee would have increased the value of Richard Burrell’s 50% interest in the Burrell Wilkinson Group; and by half of that increased figure, the sum that Richard would have been required to pay to me in settlement of my relationship property claim.

As I record later on in this statement of evidence there was never any advice to me of the increased quantum of the success fee, or any discussion, suggestion or agreement that neither I nor JOFT would be entitled to a share of such increased quantum. Now that I have seen all the material on discovery, it has become clear to me that there was no way that Richard Burrell, or his advisors, were ever going to advise me (or JOFT) of the increased quantum of the Optimation House success fee, because that would have led immediately to almost a doubling of my entitlement under my relationship property claim.

[33] Mr Archer, who assisted with the preparation of the PWC valuation, said of this claim, in his evidence:

Had there been any discomfort on Janette and her advisers’ part about PWC’s valuation of this fee, then there is no reason why this aspect of the relationship property claim could not have been carved out of the settlement, to be addressed at a later date. It is noteworthy that other items of relationship property were dealt with in this way. I refer in particular to Richard’s share in what was known as Seaview Industrial Park, which is dealt with in the final two bullet points on page 5 of the PWC Valuation. As can be seen from clauses 3.6 to 3.9 of the [Relationship Property Agreement], Richard was to pay Janette half of all the income he received from this, and 50% of the net share in its assets, if certain criteria were met. This approach was adopted because at the time of settlement these amounts were uncertain. If Janette and her advisers considered she had any entitlement to the Optimation Success Fee, she could have insisted on a similar clause requiring Richard to pay her a share of it, if it came to fruition.

[34] As Mr Smith submitted, the only available inference is that Ms Okkerse, and her advisors at the time, both knew and were content that she had no entitlement to participate in the Optimation Success Fee and that was accepted.

[35] Much was made of a passing reference to the fee (in the context of Mr Burrell settling his relationship property dues) in Mr Archer’s letter of 17 June 2005 to Messrs Burrell and Wilkinson. The purpose of that letter was to give advice about Aoteoroa acting as BSL’s banker and being nominated to receive the Optimation Success Fee. Mr Archer said his principal focus in giving this advice was on how to best utilise the success fee, in light of the general strategy at the time of building as

many assets in trust for Messrs Burrell and Wilkinson as opposed to in their trading companies. As the companies in the Group were invariably owned by those men personally and Aoteoroa was owned by their family trusts, it made sense for Aotearoa to be nominated to receive payment of the fee. He emphasised however that “[i]t was never the intention of any party to deliver to RJBFT (or any successor trust, including JOFT) a windfall gain in respect of the Optimation Success Fee”.

That there was no intended entitlement on the part of RJBFT or any successor to any part of the Optimation Success Fee should be clear from the third bullet point under paragraph 5 in my advice: it refers to the “after tax cash amount [of the Optimation Success Fee] being split equally between the shareholders following the nomination as to $837,500 each” on “the basis of a payment of $2.5 million” (with a company tax rate of 33 percent at the time the after tax amount would have been $1.675 million, of which

$837,500 is half). The “shareholders” being referred to are clearly those of

BSL, namely Richard and George, because an equal split among the shareholders of AEL was not possible since it [Aotearoa] was not held in equal shares.

The fifth bullet point below paragraph 5 in my advice is also important, and so I set it out in full:

In regard to Richard’s half share, half each will go to the two mirror trusts of which Richard can apply the amount to meeting his obligations under the matrimonial agreement to Janette. By maintaining it in a trust structure, we also have the ability to later resettle the trust assets (which include AEL shares) to his new Investment Trust and secondly to Janette’s new trust.

As can be seen, it was clearly mooted that Richard might use his share, including that to be credited to the current account associated with Janette’s trust, to offset what he owed Janette under the Matrimonial Property Settlement Agreement. As it happens, Richard used other means to settle with Janette, but nothing turns on that. I recall this was because settlement became less of an immediate priority between Richard and Janette, after the signing of the Matrimonial Property Settlement Agreement, because they had reconciled.

[37] As is clearly apparent from Mr Archer’s evidence, Mr Burrell’s share of the

Optimation Success Fee, including the 25 per cent channelled into the predecessor of the JOFT, were funds available to Mr Burrell out of which he could settle his share

of the relationship property, should he choose to do so. That evidence confirms the money was his to dispose of and that there was never any intention for ownership of or entitlement to the money to pass to Ms Okkerse, simply because the money was being channelled through her trust’s current account. Whether or not Mr Burrell ultimately chose to utilise that particular money for settling his relationship property dues was entirely a matter for him.

[38] Mr Whimp, in his evidence, clearly stated that his firm throughout the relationship property negotiations was perfectly open with Ms Okkerse and her advisers about the Optimation Success Fee. Importantly, Mr Whimp assisted with the preparation of a deed of acknowledgement by the trustees of Ms Okkerse’s trust, being Ms Okkerse and Mr Archer. The operative part of that deed of acknowledgement recorded that:

16.1 RJBFT [JOFT] was not entitled to benefit from the Optimation Success Fee paid to AEL pursuant to the Optimation House Agreement;

16.2 they would direct AEL to pay any distributions that RJBFT would otherwise be entitled to receive from AEL which relate to, or to the extent that they comprised, the Optiomation Success Fee to the trustees of JYBFT; and

16.3 any distribution of the Optimation Success Fee to RJBFT as a shareholder of AEL would be held by RJBFT on trust for the benefit of JYBFT, and the trustees of RJBFT would have no beneficial interest in those funds.

[39] The deed of acknowledgement is said to have been signed but is now unable to be found, for whatever reason. However, that is of no particular moment. The important thing is that it reflected Mr Whimp’s instructions at the time. As Mr Whimp said in his evidence:

I note that Morrison Kent does not hold an executed copy amongst its files, but Richard’s brief of evidence explains that he recalls taking it to Ms Okkerse and them both signing it. Nevertheless, it reflects my instructions at the time, namely that it was never intended to deliver to RJBFT, or any successor trust, a windfall gain in respect of the Optimation Success Fee.

[40] A further aspect of significance is that Mr Archer said in evidence, that prior to the second and final separation of the couple in 2009, Ms Okkerse expressed no

disquiet to him about not having a beneficial interest in either of the success fees. He said it was not until after the final separation that she sought to make a claim on the fees. He also said that during the period of reconciliation, he was aware that much of the success fee money was expended by Mr Burrell on extensive overseas holidays for he and Ms Okkerse, payment of their living expenses, a new Mercedes convertible motorcar for Ms Okkerse, house renovations and assisting one of their children into a house property. Mr Burrell confirmed that this was so and in essence Ms Okkerse did not deny it when questioned on the subject.

[41] In the end, it is the timeline of events that underscores the reality that, even if a claim for relationship property were being frankly advanced, it could have no prospect of success:

• The PWC report valuing the relationship property for division, including attributing a nil value to the Optimation House agreement and its contingent success fee, was finalised on 7 December 2004.

• The settlement date of the Optimation House Agreement was 31 March 2005, by which time the success fee had been achieved. Ms Okkerse and Mr Burrell were presumably in the process of reconciling at this time.

• On 17 May 2005 Ms Okkerse and Mr Burrell executed their negotiated Relationship Property Agreement, which included a nil value attributed to a possible Optimation Success Fee. Each acted on independent advice.

• Mr Burrell and Mr Whimp took advice from Mr Archer about which company should be nominated as recipient of the fee. On 17 June 2005

• On 30 June 2005 the fee was received in Morrison Kent’s Trust account and on 4 July 2005 paid to Aoteoroa on payment of an invoice for management services.

• On 27 June 2005 a Deed of Acknowledgement was drafted by Mr Whimp, recording that the Optimation House fee had been earned and that Ms Okkerse and Mr Archer, as trustees of RJBFT, as the predecessor trust to JOFT, acknowledged that the Trust was not entitled to benefit from the fee. There is evidence that the deed was executed although Ms Okkerse does not now recollect that and no executed copy has been located.

[42] The first cause of action is brought under s 174 of the Companies Act 1993. [43] Section 174 provides a two stage test:

(i) under s 174(1) the issue is whether the conduct complained of is unjustly detrimental to the applicant shareholder; and

[44] There is clear overlap between the two issues. The leading case remains Thomas v H W Thomas Ltd,³which concerned the predecessor section to s 174.⁴In the context of this case, the following statement by Richardson J is apposite:⁵

... the underlying concern of the subsection [is] that conduct of the company which is unjustly detrimental to any member of the company whatever form it takes and whether it adversely affects all members alike or discriminates some only [is] a legitimate foundation for a complaint under s 209. The statutory concern is directed to instances or courses of conduct amounting to an unjust detriment to the interests of a member or members of the company.

[45] As recorded, in their claim under s 174, the plaintiffs seek rectification of the financial records of Aotearoa to show the alleged “Correct Entries”. This claim is based on the simple proposition that the crediting of the two success fees by way of dividends declared into the JOFT’s current account in 2007 and 2008 represented debts due by Aotearoa to the JOFT; and that the transfer out of those same sums in

2008 and 2009 amounted to unauthorised transfers of those sums, thus rendering Aotearoa’s financial accounts incorrect. The contention is that “correction” of the financial accounts by transfer back of those amounts will do justice between the parties. That, however, assumes an automatic entitlement to the money, without regard to the surrounding circumstances. It rests on the one-dimensional premise that, if money is transferred into an account, ownership automatically passes regardless of the circumstances. On that basis, any money credited to a bank account in error would automatically become the property of the account holder; a proposition that is clearly not correct.

[46] This cause of action can be shortly disposed of, when regard is had to the evidence. The case turns on its facts and the facts speak for themselves.

[47] The success fees were not relationship property (for the reasons already set out); nor is it contended they were gifts. Nor is it tenable to suggest the transactions can now be simply reversed, so as to “rectify” the accounts. The source of the dividends declared by Aoteoroa in the 2007 and 2008 years were the success fees, which were one-offs, the proceeds of which have long since been expended.

[48] The evidence is that Ms Okkerse was well aware of the provenance of those particular sums of money and well aware they were being channelled through her family trust’s current account on professional advice taken by Mr Burrell for financial accounting reasons personal to him. The monies were never intended to be retained by Ms Okkerse or her family trust; and it is significant that she did not raise the issue until years later and after the final separation. It is also significant that the current account adjustments by way of transfer of the monies to Taranaki No 2 Trust in 2008 and 2009 were not unauthorised as alleged but made with the knowledge and consent of the shareholders of Aoteoroa; and that the financial statements of

Aoteoroa for each of those financial years were formally approved by all shareholders.

[49] Pivotal to these conclusions is the fact that Ms Okkerse had both legal and financial accounting advice on all of these matters at the critical times.

[50] In conclusion, on all of the evidence as adduced, there is no basis whatsoever for concluding that Ms Okkerse, or the JOFT, were ever intended to obtain any beneficial entitlement to the 25 per cent share of the dividends derived from the two success fees and channelled through the JOFT current account. Further, Ms Okkerse well understood that neither she nor JOFT were intended to obtain any beneficial entitlement to the 25 per cent share of those dividends.

[51] Therefore, under both limbs of the s 174 test, there has been no unjustly detrimental conduct to Ms Okkerse; and it would not be just and equitable to order any relief.

[53] It cannot be seriously contended that the 25 per cent share of the dividends derived from the success fees and channelled through the JOFT current account were in the nature of loans.

[54] Although Mr Archer used the term “loan” in a letter to Ms Okkerse dated

17 May 2011 in relation to the inter-trust current accounts, he said in evidence that this was a simple error (or perhaps loose terminology) on his part. Correctly speaking, the transactions should have been reflected as inter-trust balances. None of the contemporaneous financial statements referred to the transactions as loans but rather, correctly, as inter-trust balances.

[55] Mr Archer went on to express his expert opinion as to the character of a loan and said that neither of the dividends deriving from the success fees qualified as such. He said:

In so far as treating a transaction as a loan for accounting purposes, my opinion is that a loan is the act of one party giving money to another in exchange for future repayment of the principal amount. It must follow that the lender needs to have legal title or right to the money lent. Given that JOFT was holding the dividends, to the extent they derived from the Success Fees, as a bare trustee for Taranaki Trust, it was in no position to lend the money to anyone, much less to Taranaki Trust. In any event, the borrowing party would need to acknowledge the receipt as a loan, for repayment, and the terms of the loan would need to be agreed between the parties.

[56] In any event, Ms Okkerse herself acknowledged in her evidence that at no stage did the JOFT agree to an inter-trust loan between JOFT and the Taranaki No 2

[57] In summary, under this head, there is no evidence that the dividends were ever contemplated or regarded as being in the nature of loans. There is no documentation to support such a claim and no evidence of any terms of agreement or of any specified timeframe in which to support such a contention.

[58] The defendants do, however, accept that slightly more money was transferred back to the Taranaki No 2 Trust than should have been. Included, or in addition to, the amounts equal to 25 per cent of the success fees transferred, was a fraction of Ms Okkerse’s attributable share of the underlying trading income of AEL, declared and paid as a dividend. It is conceded that this overpayment amounts to $41,806. The exact amount requires finalisation and will be transferred back to the JOFT accordingly.

[59] Finally, for the sake of completeness, even if I were not correct in my findings above, there are aspects of potential fairness or unfairness as between Mr Burrell and Ms Okkerse that militate against allowing any claim against the success fees, much of the proceeds of which have been expended on the relationship and on children of the relationship.

[60] As given in evidence, in 2007 and 2008, during the period of their reconciliation, Mr Burrell made substantial drawings from Aoteoroa, which were generated by his half share of the success fees earned by BSL and BPSL, as well as

normal dividends, and he expended these largely on his and Ms Okkerse’s mutual

[61] A second aspect relating to fairness comes from Mr Archer’s evidence that, as the dividends arising from Mr Burrell’s half share of the success fees were necessarily credited to the current accounts of the JOFT and the Taranaki No 2 Trust in equal shares (rather than entirely to Taranaki Trust), Mr Burrell’s high level of drawings would have left Taranaki Trust’s shareholder current account in an overdrawn position in both the 2007 and 2008 financial years. By contrast, the JOFT’s current account had an artificially high credit balance. The overdrawn current account would have required Aotearoa to charge Taranaki Trust interest at commercial rates, to avoid tax accruing on what is known as a deemed dividend. That would have been an unfair situation.

[62] In any event, as an overall proposition, Mr Archer’s evidence was that there was nothing unfair about channelling the success fees through Aotearoa for the benefit of Messrs Burrell and Wilkinson; nor transferring the credit in the JOFT’s current account to Taranaki No 2 Trust, to avoid the deemed dividend issues. Of this Mr Archer said: “If there was, as a trustee, I would not have proposed it. At all times I acted in the best interests of both parties based on the fact that nobody intended that Janette would have a beneficial interest in the success fees”.

By transferring these amounts between the trusts, substantial interest cost was saved for the Burrells on what would otherwise have been an overdrawn Taranaki Trust current account. This was a reflection of their matrimonial status and was in keeping with treating them as husband and wife to achieve a beneficial outcome.

[65] Costs should normally follow the event. If the parties are unable to agree on the issue of costs, there will be an award in favour of the successful defendants on a

High Court of New Zealand Decisions

Okkerse v Aotearoa Enterprises Limited [2014] NZHC 3317 (19 December 2014)