The High Court refused to liquidate a partnership of mirror family trusts controlled separately by estranged husband and wife. Better they come to some agreement, or failing that have the Family Court unravel their business affairs as part of a relationship property dispute, Associate judge Bell ruled.
Jo and Mike Romanes separated after thirty years marriage. Two years on, settlement of relationship property issues has become acrimonious. Major assets include a Rotorua ‘hobby farm’ called Big Hill Farm having an estimated value of some four million dollars and properties on Kawau Island and at Lawrence in Otago. Big Hill is owned by a partnership of two family trusts: the MJ Romanes Trust and the JC Romanes Trust. Big Hill was used as the family home. The Romanes personally did not have any rights of ownership. A Family Court ruling held they had rights to occupy Big Hill as tenants. It granted a tenancy order allowing Jo to live on the property until relationship property rights were resolved. She has to meet occupation outgoings. Mike’s family trust is appealing the tenancy order.
Mike, through the MJ Romanes Family Trust, took steps to wind up their family trusts partnership. Jo alleges this was done out of spite, to defeat her court-imposed tenancy order. Unusually, Mike asked their partnership be liquidated using the Companies Act. This asks the court for appointment of an outsider to take control of partnership assets, sell up and divide the proceeds. Each of the family trusts has a half share in surplus partnership assets. Neither Jo nor Mike are beneficiaries of their own family trusts. As is common with mirror family trusts, each is a discretionary beneficiary of their spouse’s family trust.
Judge Bell put any Companies Act liquidation order on hold. The warring spouses must first consider other options, he said. One option is a Partnership Act dissolution. Any one partner can give notice under the Partnership Act dissolving their partnership. The partners themselves then arrange for assets to be sold, to outsiders or to themselves, without the cost of a court-appointed official overseeing a sale. Jo alleges Mike wants a Companies Act liquidator doing the job so her estranged husband can buy up partnership assets without her having a say and then forcing her out of Big Hill. An alternative option, Judge Bell said, is to have their business partnership unwound as part of the relationship property dispute currently filed in the Family Court.
MJ Romanes Trust v. JC Romanes Trust – High Court (12.10.18)
18.198