Parking: Nelson City v. Stanton

Life on the open road has its pleasures but not for Nelson City Council when a gypsy lifestyle comes to town and parking restrictions are ignored.  Council got riled when unpaid parking fines exceeded $8800.  The High Court has sent on to the Court of Appeal questions of whether local authorities are justified in seeking court injunctions to enforce bylaws when there is a prosecution regime in place to enforce these rules.

Mr Stanton enjoys life on the road with his horse and cart.  The High Court was told he often frequents Nelson City, stopping in the city centre soliciting donations from the public.  He refuses to pay the required fee on metered parking spaces.  He ignores the time limits on unmetered spaces.  When prosecuted, his arguments that parking laws were in breach of his rights of freedom under the Bill of Rights Act and that car parking restrictions applied only to cars not horses did not succeed.  He refused to do community service ordered for non-payment of parking fines and was imprisoned for contempt.

Nelson City obtained an injunction in the District Court prohibiting Mr Stanton from breaching the City’s parking bylaws.  The High Court quashed the injunction: questioning whether local authorities should use injunctions to enforce bylaws in situations where a penalty regime already exists; whether an injunction serves any useful purpose when the penalty regime is being ignored in any event; and whether an injunction is appropriate where behaviour complained of is intermittent and periodic, rather than continual. 

Next stop: the Court of Appeal.

Nelson City v. Stanton – High Court (6.03.15)

15.014

Land: Dempsey v. Howe

A former Barfoot & Thompson real estate agent was ordered to pay net damages of nearly $194,000 after defaulting on a speculative $5.5 million purchase of an Auckland seaside property.  This after the Court of Appeal ruled he was entitled to credit for the $360,000 gain made on resale when vendors dealt with his breach of contract by finding another buyer fourteen months later.

Real estate agent Paul Dempsey took a bold punt in March 2010 when he signed up to buy 28 Ronaki Road, Mission Bay in Auckland’s eastern suburbs.  He was promising to pay $5.5 million.  Settlement was to be in 12 months time.  Mr Dempsey had plans to build three premium apartments on the 2.3 hectare site.  He had an agreement in principle with a building company that it would join him in a joint venture for the project.  In the end, the project fell through and Mr Dempsey defaulted on his purchase.

The High Court was told that Ronaki Road’s owners, a family trust called the Roidon Trust, elected not to cancel the contract when Mr Dempsey defaulted.  The contract was left running, with penalty interest at 12.5 per cent accumulating at $1,746 per day, while both Mr Dempsey and the Trust actively searched for a new buyer.  One year on, Mr Dempsey had an Asian buyer interested at $5.85 million but this was conditional on the Trust releasing him from liability under his earlier contract.  The Trust refused and this deal fell through.  Two months later, the Trust sold to a different Asian buyer for $5.86 million.  Litigation followed between the Trust and Mr Dempsey to determine damages payable for his breach of contract.

The High Court said the Trust could keep the deposit paid by Mr Dempsey and recover interest for his failing to settle: a total of $258,100.

In the Court of Appeal, Mr Dempsey was held entitled to a credit for the $360,000 gain made by the Trust on resale.  Their contract had never been brought to an end; it had just run on.  This meant Mr Dempsey still had an entitlement to Ronaki Road unless and until the Trust had formally demanded a final settlement and this had been ignored.  The value of his entitlement was the gain made on resale.  But deducted from this were costs of the second sale, amounting (in round figures) to $295,600: being agents commission ($141,500); property maintenance costs ($30,600); legal costs ($47,100) and demolition costs ($76,400).  It was agreed that demolishing the existing house did improve prospects of a resale.  The house was badly run down.

Dempsey v. Howe – Court of Appeal (5.03.15), High Court (5.09.13)

15.013

Relationship property: Clayton v. Clayton

A Bay of Plenty timber milling entrepreneur with business interests valued at $107.2 million and assets held through a structure of family trusts has seen a key funding trust prised open by the Court of Appeal in a relationship property claim because a general power of appointment in the trust deed potentially enabled him to take sole ownership of all trust assets.  The case has been referred back to the High Court for a decision on the value of this power of appointment now categorised as relationship property.  

Mark Clayton established various trusts to hold business and personal assets during his seventeen year marriage.  The court was told that when the marriage came to an end in 2006 title to the family home in Banksia Place, Rotorua was in his name, but most of the family’s assets including holiday homes and motor vehicles were owned by interest associated with Mr Clayton.  His business interests are owned and controlled by a number of companies and trusts in New Zealand and the United States.  His wife Melanie claimed she was entitled to half the net value of the business and trust assets as relationship property: a claim totalling $28.8 million.

At issue was whether Mark Clayton’s business assets are relationship property.    

Evidence was given that a key component of his business is a trust set up in 1999 called the Vaughan Road Property Trust.  This trust is used as banker for the business.  Loans to the business are channelled through the Trust and then advanced to companies and other trusts within Mr Clayton’s business empire.

Legal advisers for Mrs Clayton attacked the validity of this Trust, arguing it was a sham or illusory, being Mr Clayton in disguise.  The Court of Appeal ruled the Trust was valid.  It was properly set up and operated for a valid business reason; to separate fixed assets owned by the business from its operating assets.  The general rule is that assets held within a valid trust are safe from any relationship property claim.   In an uncommon move, Court of Appeal judges then invited the legal advisers to consider another line of attack: look at the wide powers of appointment given to Mr Clayton in the trust deed.

After hearing legal argument from lawyers for both Mr Clayton and Mrs Clayton the Court of Appeal ruled that the power of appointment in the trust deed was so wide as to amount to “property” in the Property (Relationships) Act.  The wording of the trust deed states that Mr Clayton has the role of settlor, sole trustee and potential beneficiary.  The deed also gives him power to appoint and remove trustees and to appoint and remove beneficiaries.  While he is a potential beneficiary, it is within Mr Clayton’s power to ensure he is the only beneficiary.  This power has considerable commercial value.  The case was referred back to the High Court to assess this value, being the net value of Mr Clayton’s equity in the Vaughan Road Trust.  Mrs Clayton is entitled to half the value.

The court also ruled that Mrs Clayton was entitled to claim against a number of Mr Clayton’s trusts holding real estate.  This included trusts set up after the couple separated.  Relationship property was transferred to trusts in which Mrs Clayton was not listed as a potential beneficiary.  The court ruled these were dispositions of property made to defeat Mrs Clayton’s rights.

Clayton v. Clayton – Court of Appeal (26.2.15)

15.017

Fair Trading: Batchelar Centre v. Westpac

Allegations of sharp practices by a Manawatu real estate firm for its role in the forced sale of a Palmerston North commercial building where a buyer was gazumped through a “better offer” clause saw Westpac and a Bayleys Real Estate franchise facing claims under the Fair Trading Act. 

Property company Batchelar Centre Ltd complains it was robbed of the chance to re-negotiate its deal for the purchase of a building in Broadway Avenue, Palmerston North because of misleading behaviour by staff at a Bayleys franchise, Coast to Coast Ltd.  In the High Court, Associate Judge Smith ruled there was prima facie evidence of a breach of the Fair Trading Act and the dispute should go to a full hearing.

The court was told Coast to Coast marketed the Broadway property in late 2013 on behalf of Westpac in a mortgagee sale.  It was passed in at auction with Batchelar Centre the only bidder at $400,000.  Batchelar had made a pre-auction offer of $750,000, but this offer was withdrawn.  After the auction, Batchelar signed a contract to buy at $400,000.  The contract contained a “better offer” clause: Westpac could cancel the contract if it received a better offer before settlement by Batchelar – due in some fourteen weeks.  Evidence was given that Batchelar was astounded to learn seven weeks prior to settlement that its contract was cancelled.  It had no inkling that other buyers had been interested.  The new buyer was buying at $405,000.  This buyer had also been present at the unsuccessful auction.  When Batchelar protested and asked for evidence of the better offer, the new buyer accelerated its date for settlement and finalised the deal quickly.

Batchelor sued, alleging breach of the Fair Trading Act.  Judge Smith said there were two aspects of the sale which might be considered a breach of the Act.  First, when Batchelar asked Coast to Coast why there was no “sold” sign posted on the property it was told one would be put up immediately.  This gave to Batchelar an impression that the property was off the market.  But at this time Coast to Coast staff were in fact actively looking for alternative offers.  Secondly, Batchelar was given brief access to the building around this same time “to have a look around”.  As it transpires, contractors hired by Batchelar removed some partitions from the building during this period in readiness for refurbishment of the building after settlement.  Again, granting early access gave Batchelar the impression it was the only buyer in the market.

If Coast to Coast is found to have breached the Fair Trading Act, Westpac is liable also.  Coast to Coast was acting as agent for Westpac in carrying out the sale.  Proof that there was a breach of the Act will require a later full court hearing.

Batchelar Centre v. Westpac – High Court (25.2.15)

15.012

Family Trust: Shailer v. Shailer

Where married couples choose to hold assets spread across different independent entities such as partnerships, trusts and companies they bear the risk that one of them could pre-empt a relationship property settlement by bringing a separate individual claim to get immediate cash.  The High Court held a Foxton farmer was entitled to $419,000 as repayment of her current account balance due from a family trust.

Wayne and Denise Shailer ran a dairy farm and contracting business in Foxton prior to their separation in November 2012.  Like many farmers, the land is owned by a family trust while a separate partnership stocks and runs the farm.  The Shailers as joint trustees of their family trust leased the farmland to themselves as partners in the farming partnership.  The High Court was told matters reached a head when the family trust sold some of its land, netting about $867,500.  Initially it was intended these funds would be used to reduce debt.  Rules governing the Shailers’ family trust require trustees’ unanimous consent for trust decisions.  The trustees could not agree on how the $867,500 should be used.  Evidence was given that a stalemate followed with the money sitting in an interest-bearing lawyer’s trust account pending some agreement.

After establishing their family trust in 1994, the Shailers sold farmland to the trust, leaving that part of the purchase price owing to each of them on current account as an on demand loan.  At the date of separation, Mr and Mrs Shailer were each owed $419,000 on their separate current accounts.  Mrs Shailer (as an individual) then made formal demand from the trustees of the trust (which included herself as a trustee) for repayment of the $419,000 owed to her with payment to come out of the funds held in their lawyer’s trust account.

Associate Judge Smith ruled she was entitled to payment.  He said there is nothing in relationship property legislation which affects the right of a spouse to sue a third party for the recovery of a debt.  The $419,000 current account debt was owed by a third party – the family trust.  A family trust is an independent entity separate from the people who set it up.

Shailer v. Shailer – High Court (24.2.15)

15.011