Boxall v Grabowski [2015] NZHC 824 (23 April 2015)

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UNDER	the Declaratory Judgments Act 1908
IN THE MATTER	of the T BOXALL FAMILY TRUST
BETWEEN	TRACY MICHELLE BOXALL AND BOXALL FAMILY TRUSTEE COMPANY LIMITED AS TRUSTEES OF THE T BOXALL FAMILY TRUST Plaintiffs/Applicants
AND	LIVIA GRABOWSKI First Respondent THE SHERIFF of the High Court at Auckland _{Second Respondent}

Hearing:	22 and 23 April 2015
Appearances:	P Wright and A Sinclair for the Plaintiffs M T Hutchings and BMK Pamatautau for the Respondents
_Judgment:	_{23 April 2015}

Mr AFS Vane and Ms L Foley (plaintiffs’ instructing solicitors), Le Pine & Co., Solicitors, Taupo

[1] The plaintiffs seek an interim injunction to restrain the defendants from proceeding with an auction of a residential property in Birkenhead. I will refer to this as “the property”. The auction is scheduled for next Wednesday, 29 April 2015 at 9:00 am. The auction is being conducted by the second defendant, the Sheriff of this Court, in execution of a money judgment the first defendant, Mrs Grabowski, has against the first named plaintiff, Ms Boxall.

[2] The judgment debt arises from a judgment entered in the District Court of New South Wales in July 2011 against Ms Boxall (then known as Tracy Jaffari) and her husband Mehdi Jaffari. The judgment arose from a loan in 2007 from Mrs Grabowski’s mother, Mrs Eleanor Cato. Mrs Grabowski sues as executor of her mother’s estate.

[3] Ms Boxall, with the other plaintiff, Boxall Family Trustee Company Limited, argues that the property is not available for execution of the judgment because it is an asset of a trust – the T Boxall Family Trust. The plaintiffs say that the judgment is against Ms Boxall personally, not against the trust, and in consequence the property as a trust asset is not available to meet Ms Boxall’s personal liability.

[4] Mr Hutchings, counsel for Mrs Grabowski, acknowledged that it is a judgment for a personal debt of Ms Boxall. I note that it is also a judgment for the personal debt of her husband, Mr Jaffari.

[5] Mr Wright, for the plaintiffs, submitted as a proposition of law that trust assets are not available to meet a personal debt of a trustee. Mr Hutchings accepted that that is a correct proposition of law. Because this is an application for an interim injunction, the first matter to consider is whether there is a serious question to be tried in respect of the plaintiffs’ contentions bearing on that proposition of law.

[6] The hearing commenced yesterday afternoon under urgency. Overnight Mr Hutchings helpfully refined his argument. There were issues as to whether the trust is a sham, including whether Ms Boxall intended to relinquish sole beneficial ownership of the property by transferring it to the trust. Mr Hutchings responsibly

accepts that these are matters which, given the present evidence, are properly left to a substantive hearing.

[7] The pivotal issues that now arise relate to the first enquiry on an interim injunction: is there a serious issue to be tried on two issues?

[8] The first issue may be stated as follows: Is it seriously arguable for the plaintiffs that the T Boxall Family Trust was effectively constituted? That requires consideration of documents which are before the Court and, on the face of them, produced in May 2004.

[9] The second issue is: If it is seriously arguable that the Trust was effectively constituted, then is it seriously arguable that the property – the realty in Birkenhead – was transferred to Ms Boxall in her capacity as trustee of the T Boxall Family Trust (which I will simply refer to from now on as “the Trust”)?

[10] In terms of the way the matter was argued, and in particular for Mrs Grabowski, the grant or refusal of the injunction will turn largely on the answer to these matters. Questions of balance of convenience and overall justice might require noting but are secondary. Given the conclusion I have reached, and indicated to counsel before commencing delivery of this oral judgment, I am satisfied that questions of balance of convenience and overall justice do not need to be considered.

[11] There is a question relating to sufficiency of evidence bearing on both of those primary issues. Mr Hutchings referred to the absence of evidence which, he submitted, should be available to the plaintiffs if their arguments on the two primary issues are correct. But this evidence has not been produced when it should have been produced. This submission was made in respect of a number of points, but it is conveniently illustrated by reference to one point arising on the first issue – whether the trust was effectively constituted. The trust deed states that a trust fund was established by a gift of $10 from Ms Boxall to herself as trustee. I need not go into the detail. The provisions recorded in the trust deed are in conventional form. Mr Hutchings submitted that there is no proof of the payment when such proof should be readily available, and that there is also no proof of the establishment of a bank

account for the trust into which that sum was paid – or evidence of establishment of a bank account for the trust at all. Mr Wright submitted that the documentary evidence that is before the Court is sufficient for the purpose of establishing a serious question to be tried. He submitted, in essence, that matters of this nature need to be addressed by construing all of the related documents.

[12] Mr Hutchings cited an observation of Slade J in Re Lord Cable (deceased).¹

[It] is still necessary for any plaintiff who is seeking interlocutory relief to adduce sufficiently precise factual evidence to satisfy the court that he has a real prospect of succeeding in his claim for a permanent injunction at the trial.

[13] That observation is one of a number of statements in cases bearing on the debate as to whether the interim injunction enquiry is appropriately described as being an enquiry as to whether there is a serious question to be tried, or whether the standard should be higher or lower than what is implicit in the conventionally used statement. For present purposes, the “serious question to be tried” test is the test that I will apply. It is certainly not sufficient for a plaintiff merely to assert propositions bearing on the central matters in issue. It is for that reason that I advised Mr Wright that I left to one side simple assertions by Ms Boxall in her affidavit that it was always her genuine intention to establish a trust, that she did so, and that she transferred the property to the trust. On the other hand, a determination on an interlocutory injunction application as to whether a trust was effectively constituted, or whether a particular asset was effectively transferred to the trustees of the trust, is in my judgment not to be determined on the basis that there should be particular documents evidencing each necessary step, but the plaintiff fails because the plaintiff has not produced those documents. The question is to be determined by reference to the documents that are before the Court and reasonable inferences that can be drawn from them with that part of the exercise assisted by reference to evidence before the

[14] Mr Hutchings’ submissions on this issue are founded on the three essential certainties for effective creation of a trust. These were more recently summarised by the Court of Appeal in Clayton v Clayton.²They are elementary but are conveniently repeated here, particularly in relation to the second of the three essentials:

(a) Mr Clayton, as settlor, intended to create a trust for legitimate business purposes.³There are concurrent factual findings to that effect in the Courts below.⁴

(b) There was trust property ($10) held by Mr Clayton in his capacity as a trustee.

[15] Mr Hutchings in respect of the issue I am now considering cited the following observation of Lord Justice Turner in Milroy v Lord.⁶

I take the law of this Court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him.

[16] The question of fact arising from Mr Hutchings’ submissions – or at least the heart of them – is whether there is evidence making it seriously arguable that the trust fund of $10 was constituted.

[17] I am satisfied that this is sufficiently established. The trust deed records payment of $10. On this interlocutory application I do not consider it appropriate in the absence of other evidence to effectively go behind that solemn statement in a

_{deed on the basis that, if the sum was paid, there should be additional
documentary}

³Official Assignee v Wilson [2008] NZCA 122, [2008] 3 NZLR 45 at [45] per O'Regan and

⁴_{Family Court judgment, above n 1, at [73]-[74]; High Court
judgment, above n 1, at [79].}

⁵Andrew S Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington,

evidence of the fact of payment. This statement is evidence and it is presently not challenged.

[18] The point also needs to be assessed having regard to the fact that the settlor and the trustee are the same person – Ms Boxall – and the initial trust fund is a money sum, not real property. Even if there was no recorded transfer of $10 from Ms Boxall to a bank account established for the Trust she is still, on the face of the documents she signed, holding $10 in her own name as a trust asset. I should emphasise that these observations are not ones of law, but of reasonable arguments that might be available from the documents that are before me. In this regard there are broad principles of equity which have relevance and I will note some of these at the conclusion of my discussion.

[19] Having considered Mr Hutchings’ careful submissions on this first issue I am satisfied that it is seriously arguable, on the basis of the evidence before me, that the Trust was effectively established on or about 3 May 2004. 3 May 2004 is the date recorded on the trust deed and some related documents.

Issue 2: Was the property transferred to Ms Boxall as trustee for the Trust?

(a) Failed to provide sufficient evidence of the necessary transfer of the property to Ms Boxall as a trustee.

(b) In numbers of material respects the documents relied on even failed to record a transaction capable of being given effect; in essence, the critical document relied on, to use Mr Hutchings expression, is “a nonsense” (referring to a deed of nomination of Ms Boxall as trustee to take title to the property – referred to below).

(a) A relationship property agreement which has the date 6 May 2004 and is between Ms Boxall and her former husband, Robert William Boxall.

(b) Three trust documents dated 3 May 2004. One is the deed of nomination that I have just referred to. The other two, as just noted with the same date, are minutes of “trustees” [sic] for the first meeting of “trustees” and a resolution of “trustees”. The essential objective of the deed of nomination was noted above and obviously bears directly on the second issue now being considered. The two other documents contain references to this central question of transfer of the (Birkenhead) property.

[22] The deed of nomination is perhaps the central document although by going to this in order to indicate some of the points made, I am not overlooking difficulties that may arise in respect of the two other documents. There are some aspects of the drafting of the deed of nomination which certainly raise an enquiry, but they may readily be answered as infelicities in drafting, as Mr Wright submitted. For example, Ms Boxall, apparently in reference to her in her personal capacity, is in fact defined in this document as “the trustee”. Taken literally the document has one person nominating herself to take title from herself. However, and as Mr Wright submitted, the use of the definition “trustee” can also be regarded as simply a form of shorthand. No matter how unwise it may have been to use that as the shorthand the meaning remains sufficiently clear. Points of a different kind are, for example, that the first recital to this deed refers to an agreement under the Property (Relationships) Act 1976 pursuant to which the parties to that agreement were to transfer the property to Ms Boxall (that is to say, in terms of this deed of nomination, to “the trustee”, that on the basis noted above obviously intended to mean a transfer to Ms Boxall). The primary point made by Mr Hutchings is that there was in fact no entitlement at all at the date of this deed of nomination because there was no agreement. The only agreement that could have been applicable is the relationship property agreement which is dated 6 May. Further recitals and operative provisions

can reasonably be argued to be of no effect for reasons flowing from the matters I

[23] I intend no discourtesy to Mr Hutchings by not addressing a number of further points made, and it may be that what I have sought to summarise in what I have just outlined does not fully capture the submissions he did make. His submissions were reasonably made. But they do not persuade me that there is not a serious question to be tried as to whether the property was transferred to Ms Boxall in her capacity as trustee of the Trust. I will briefly expand on that conclusion in a moment. At this point I record that it is also probably best that I do not address specific points beyond what I have done because they will remain for determination at a substantive hearing given the fact, as I have already indicated, that I am going to grant the injunction.

[24] The essence of the reason why I am satisfied that it is seriously arguable for the plaintiffs that the property was transferred to Ms Boxall as trustee of the Trust is that there are further contemporaneous documents which evidence the proposition. I should say that in referring to other contemporaneous documents I am not suggesting that Mr Hutchings ignored these. I will touch on these, or some of them.

[25] There is evidence of two loan agreements dated 3 May 2004 between Westpac Banking Corporation and Ms Boxall as trustee of T Boxall Family Trust. There is sufficient evidence to indicate that these loan agreements tie in with the other evidence recording an intention to have the property transferred to Ms Boxall as trustee of the Trust. There was a subsequent mortgage to Westpac registered against title to the property. Registration was effected on 26 May 2004. This is the same date as registration of a transfer into the sole name of Ms Boxall.

[26] The memorandum of transfer is dated 13 May 2004, and therefore after the apparent date of execution of the various trust deeds and after the completion of the relationship property agreement. The transfer is from Ms Boxall’s former husband, Ms Boxall herself and a trustee company. It is plain enough that those parties were the registered proprietors at the date the trust documents were entered into and when the relationship property agreement was completed. (Although this may be

somewhat out of context, I should record that I do not attach significant weight in this hearing to the fact that the date handwritten on the relationship property agreement is inconsistent with the date on the trust agreements.)

[27] The transfer is simply to “Tracy Michelle Boxall”. Nothing turns on the identification of the transferee because, if she was taking title as trustee, this would not be recorded in the memorandum of transfer or on the title. The transfer is at least just as consistent with a transfer to her as trustee, as seemingly contemplated by the deed of nomination, as a transfer to her in her personal capacity.

[28] There are some further documents of reasonable importance from which the substance of the transaction – transfer to Ms Boxall as trustee – might reasonably be argued. There is a deed of acknowledgement of debt of Ms Boxall as trustee to herself in her personal capacity. This is dated 13 May 2004, the same date as the memorandum of transfer. It records a debt of $188,000. Construed in context it is seriously arguable – or putting it another way, there is presently sufficient evidence – that this represents the equity in the property which in terms of the relationship property agreement was going to Ms Boxall in her personal capacity. (There is some evidence directly from Ms Boxall, not supported by the relationship property agreement, that it was a term of the relationship property settlement that the property be held in trust with the children of Mr and Ms Boxall to be included as beneficiaries). The debt recorded in this deed of acknowledgement of debt was then forgiven in sums of $27,000 over successive years. This is a gifting arrangement consistent with standard gifting programmes on transfer of realty (or other assets) to a trust.

[29] I earlier mentioned principles of equity which have a bearing on both of the issues. I do not intend to develop any discussion about these or indeed the legal effect of what may simply be maxims of equity. I nevertheless note the following, taking these from Mr Wright’s submissions in reply:

(b) “Equity regards as done what ought to be done.” This was referred to in respect of Mr Hutchings’ submission to the effect that at the time the deed was signed the property had not yet vested in Ms Boxall. In that regard he cited Camelot Court Motel Ltd v Anderson.⁸He further submitted that the maxim is often used in the context of enforcing incompletely constituted trusts, referring to Andrew Butler, Equity and Trusts in New Zealand.⁹

[30] As I understood Mr Hutchings’ submissions he did not seek to argue that, if the decision was against his client on those two issues, it would nevertheless be necessary to consider the balance of convenience. That again was a responsible acknowledgement given the nature of the underlying issues in this case. I am satisfied that it is not necessary to take the enquiry further to conclude that the order sought should be granted. And again it is probably inappropriate for me to make observations given the reasonable possibility that such matters will need to be determined at a substantive hearing.

[31] Although I am satisfied that an injunction should be granted I am also satisfied that it should be granted subject to conditions which I will record in a moment.

[32] The plaintiffs apply for costs. The general rule is that costs follow the event. Notwithstanding this, there is no doubt that as a matter of principle there may be cases where costs should not follow the event. I am satisfied that the proper course in this case is simply to reserve costs. In this context I do observe that if the Court stands back and looks at this well beyond the context of an application for an interim injunction, it might be said (and for reasons earlier indicated this is far from a definitive conclusion) that overall merit certainly does not rest with Ms Boxall,

_{putting to one side the interests of other beneficiaries of the Trust,
assuming it was}

effectively constituted. One of the balance of convenience matters that had been earlier argued was that this property is the family home for Ms Boxall and Mr Jaffari. Although there is reference to children, and they may be beneficiaries, there is a further document indicating that the only “children” who might have an interest are adults. This, of course, does not bear on the rights and interests of those who may be beneficiaries of a properly constituted trust, but it does bear on the apparent approach of both Ms Boxall and Mr Jaffari to their liability to the estate of Mrs Cato, now represented by Mrs Grabowski. As I understand the evidence, and having regard to numbers of decisions of this Court, the Court of Appeal and indeed the Supreme Court, no effort has been made by either Ms Boxall or Mr Jaffari to make any payment of the judgment debt. Strenuous efforts have been made to avoid meeting a firmly established liability.

[33] There is an order in terms of paragraph 1(a) of the interlocutory application dated 17 April 2015.

(a) Neither of the plaintiffs, directly or through any other person, shall take any step to seek to remove the caveat, or the charging order, in favour of Livia Grabowski, registered against title to the property.

(b) Neither of the plaintiffs, directly or through any other party, shall dispose of or otherwise deal in their respective interests, in any capacity, in the property without leave of the Court.

(c) In the event of sale of the property by the mortgagee Westpac Banking Corporation, or its assigns, the proceeds of sale remaining after payment due under that mortgage shall stand charged for the judgment sums due by Ms Boxall to Mrs Grabowski.

[36] The formal order can be amended as necessary to better define “the property”

High Court of New Zealand Decisions

Boxall v Grabowski [2015] NZHC 824 (23 April 2015)