JOHNSTON v JOHNSTON [2021] NZCA 181

JOHNSTON v JOHNSTON [2021] NZCA 181 [13 May 2021]NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,11C AND 11D OF THE FAMILY COURT ACT 1980.IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA39/2021[2021] NZCA 181BETWEEN JAMES CHRISTOPHER JOHNSTONApplicantAND ULRIKE URSULA JOHNSTONFirst RespondentJOHN WILSON HART, JAMESCHRISTOPHER JOHNSTON ANDTHE MASY TRUSTEES LIMITED ASTRUSTEES OF THE MASY TRUSTSecond RespondentTHOMAS RUFUS JOHNSTON,RUFUS LIND JOHNSTON ANDCOOK ISLANDS TRUST LIMITED ASTRUSTEES OF THE JCJ TRUSTThird RespondentJAMES CHRISTOPHER JOHNSTONAND THOMAS RUFUS JOHNSTONAS TRUSTEES OF THE NEW ZEALANDTRUSTFourth RespondentCA42/2021CA100/2021BETWEEN THOMAS RUFUS JOHNSTON,RUFUS LIND JOHNSTON ANDCOOK ISLANDS TRUST LIMITEDAS TRUSTEES OF THE JCJ TRUSTFirst ApplicantJAMES CHRISTOPHER JOHNSTONAND THOMAS RUFUS JOHNSTON ASTRUSTEES OF THE NEW ZEALANDTRUSTSecond ApplicantAND ULRIKE URSULA JOHNSTONFirst RespondentJOHN WILSON HART, JAMESCHRISTOPHER JOHNSTON AND THEMASY TRUSTEES LIMITED ASTRUSTEES OF THE MASY TRUSTSecond RespondentCourt: Cooper and Goddard JJCounsel: I T F Hikaka and J L Beverwijk for Applicant in CA39/2021K G Davenport QC and A M Cameron for First Respondent inCA39/2021J W A Johnson and N G Lawrence for Applicants in CA42/2021and CA100/2021Judgment:(On the papers)13 May 2021 at 11.00 amJUDGMENT OF THE COURTA Leave is granted to Dr Johnston and the trustees of the JCJ Trust and theNew Zealand Trust to appeal to this Court from the High Court judgmentdismissing their protest to jurisdiction ([2020] NZHC 2887). The notice ofappeal must be filed and served within 10 working days of the date of thisjudgment. The Registrar is directed to convene a telephone conferencewith a view to timetabling the appeal towards an early hearing.B The application by the trustees of the JCJ Trust and the New ZealandTrust for leave to appeal from the High Court restraining order judgment([2020] NZHC 2197) is declined.____________________________________________________________________REASONS OF THE COURT(Given by Goddard J)Background[1] The applicant in CA39/2021, Dr James Christopher Johnston (Dr Johnston)and the first respondent in CA39/2021, Mrs Ulrike Ursula Johnston (Mrs Johnston)were married in the United States of America in 1996. They have since separated.Mrs Johnston lives in New Zealand and is a permanent resident of New Zealand anda German citizen. Dr Johnston now lives in Texas and is a citizen of the United Statesand of New Zealand.[2] Dr Johnston has commenced proceedings in Texas for divorce and division ofwhat is there termed "community property". It appears those proceedings were filedin December 2018 but were not served on Mrs Johnston until 23 July 2019.In June 2019 (before being served with the Texas proceedings) Mrs Johnston filedproceedings in the Family Court in New Zealand seeking division of relationshipproperty and maintenance.1 The defendants in those proceedings are Dr Johnston andthe second, third and fourth respondents in CA39/2021 — the trustees of three trustsrelated to Dr Johnston. The Family Court has transferred the proceedings to theHigh Court.[3] In June 2019, shortly after filing her proceedings, Mrs Johnston applied fororders under s 43 of the Property (Relationships) Act 1976 (PRA) to restrain thedisposition by the respondents of various assets, including funds in bank accounts,other investments in New Zealand and overseas, and gold bars. The applications weremade on a without notice basis. Those orders were granted by Downs J on17 July 2019.2 At the same time, Mrs Johnston sought orders for substituted serviceon the trustees of the Trusts. She did not seek an order for substituted service inrelation to Dr Johnston. However, Downs J directed substituted service by email on1 These proceedings were filed and served before she was served with Dr Johnston's Texasproceedings.2 J v J [2019] NZHC 1674.Dr Johnston in the United States, on the basis that the orders he had made should bepromptly brought to Dr Johnston's attention.3[4] Dr Johnston objected to the jurisdiction of the New Zealand courts to determineMrs Johnston's claims for division of relationship property and maintenance.The trustees of the JCJ Trust and the New Zealand Trust (the Trustees) also objectedto the jurisdiction of the New Zealand courts to determine the claims against them.[5] Downs J dismissed their protests to jurisdiction.4 The Judge held that the claimfalls wholly within r 6.27 of the High Court Rules 2016, which provides for service ofproceedings outside New Zealand without leave.5 It was common ground that therewas a serious issue to be tried on the merits of the claims.6 The Judge held thatNew Zealand is the appropriate forum for the trial of Mrs Johnston's claims.7Application for leave to appeal from the High Court protest judgment[6] Because the protest judgment is an interlocutory judgment, an appeal tothis Court requires leave under s 56 of the Senior Courts Act 2016. Dr Johnston andthe Trustees applied to the High Court for permission to appeal to this Court unders 56(3). The Judge declined to grant leave to appeal.8[7] Dr Johnston and the Trustees now apply to this Court for leave to appeal unders 56(5) of the Senior Courts Act. It is well established that leave will not be grantedunder this provision unless:9(a) The proposed appeal raises some question of law or fact capable ofbona fide and serious argument in a case involving some interest, public3 At [9]. See also Johnston v Johnston [2020] NZHC 2887 [High Court protest judgment] at [66].4 High Court protest judgment, above n 3.5 At [40].6 At [41].7 At [52]–[60].8 Johnston v Johnston [2020] NZHC 3422 at [13].9 Moir v IHC New Zealand Inc [2018] NZCA 130, [2018] 24 PRNZ 45 at [6]; and Greendrakev District Court of New Zealand [2020] NZCA 122 at [6].or private, of sufficient importance to outweigh the cost and delay ofthe appeal; and(b) The proposed appeal has some reasonable prospect of success.[8] Dr Johnston and the Trustees submit that the proposed appeal raises a numberof questions of law that justify the grant of leave:(a) Should the High Court have ordered substituted service of theoriginating documents on Dr Johnston without any prior attempt toserve him in person, in accordance with the rules on service ofproceedings outside New Zealand?(b) Did the Judge err in finding that Mrs Johnston's claim falls whollywithin one or more of the paragraphs of r 6.27 of the High Court Rules?Dr Johnston says that the Judge erred in:(i) proceeding on the basis that Mrs Johnston only needed toestablish that there was a good arguable case on questions oflaw relevant to the application of r 6.27;(ii) finding that the subject matter of the proceeding is land or otherproperty situated in New Zealand for the purposes ofr 6.27(2)(e); and(iii) finding that s 7 of the PRA expressly confers jurisdiction overpersons outside New Zealand for the purposes of r 6.27(2)(j)(iv)of the High Court Rules.(c) Did the Judge err in his approach to determining whether New Zealandwas the appropriate forum for the determination of Mrs Johnston'sclaims?[9] Dr Johnston and the Trustees also submit that the High Court Judge madea number of errors of fact which are sufficiently material to justify the grant of leaveto appeal, in particular, in relation to whether the Texas courts have assumedjurisdiction to determine the same claims.[10] We do not consider that it is seriously arguable that the claim falls outsider 6.27 of the High Court Rules, in so far as it seeks division of property in New Zealandthat is claimed to be relationship property. It is arguable that substituted service shouldnot have been ordered before attempts were made to serve the respondents personally,but the argument that the protest should have been allowed because of the manner inwhich the proceedings were served in the present case faces a number of hurdles.However, we accept that there is a serious argument that the Judge erred in hisapproach to the "good arguable case" test, and in finding that r 6.27(2)(j)(iv) appliedto this proceeding by virtue of s 7 of the PRA. It follows that there is a seriousargument that the proceeding does not come within r 6.27 in so far as it relates tomovable property situated outside New Zealand, subject of course to any argumentthat the claim in relation to that property comes within some other limb of r 6.27(or that r 6.29(1)(b) applies).10 This issue is of public importance.[11] The question of whether the New Zealand courts will exercise jurisdiction inthis case, and the scope of the claims to be heard in this country, are also matters ofconsiderable private importance to the parties. Although the protest judgment isinterlocutory in nature, it will in practice finally determine the question of jurisdiction.[12] In these circumstances we consider that leave should be granted to appeal fromthe High Court protest judgment. We have considered whether leave should beconfined to the exercise of jurisdiction in respect of movable assets outsideNew Zealand. But we have concluded that as a matter of principle the question ofwhether New Zealand is the appropriate forum for determination of all of the mattersin dispute between the parties, or some subset of those matters, should be resolvedafter determining which of the claims come within r 6.27. It is for this reason that wegrant leave to appeal from the High Court protest judgment as a whole.10 In particular, we note that the Judge did not finally determine whether Dr Johnston is ordinarilyresident in New Zealand for the purposes of r 6.27(2)(g) of the High Court Rules 2016: seeHigh Court protest judgment, above n 3, at [25].[13] However, we are concerned that the grant of leave to appeal should not undulydelay the substantive proceedings in the High Court. The appeal should be broughton promptly. We will direct the Registrar to convene a telephone conference witha view to timetabling this appeal towards an early hearing.Application for leave to appeal from the High Court restraining order judgment[14] As noted above, Mrs Johnston obtained orders under s 43 of the PRA to restrainthe disposition of certain property.11 The Trustees applied to set aside those orders.It appears agreement was reached concerning terms on which the orders could berescinded in relation to assets other than certain gold bars. But no agreement wasreached in relation to the gold bars. The application to set the s 43 PRA order aside inrelation to those gold bars was heard by Peters J on 3 March 2020.12 The Judgeconsidered that the application was finely balanced, but declined to rescind or vary thes 43 PRA order.13[15] The Trustees wish to appeal from the High Court restraining order judgment.Again, because it is an interlocutory judgment, leave to bring an appeal is requiredunder s 56 of the Senior Courts Act. Peters J declined to grant leave to appeal thatjudgment under s 56(3).14 The Trustees now seek leave from this Court under s 56(5).The test for grant of leave to appeal under s 56(5) was set out above at [7].[16] The Trustees say that the prerequisites for making an order under s 43 were notmade out. They say there is no evidence that any disposition was about to be made.They wish to argue that an order can be made under s 43 only if it is established thatthe purpose of a disposition is to defeat a claim under the PRA, and that it isinsufficient that a disposition would have that effect if that is not its purpose. And theysay that the order is unnecessary, on the basis that they are bound by a court ordermade in proceedings in Texas which has the effect of preserving the status quo inrespect of all property, including the gold bars in question.11 J v J, above n 2.12 Johnston v Johnston [2020] NZHC 2197 [High Court restraining order judgment].13 At [23].14 Johnston v Johnston [2021] NZHC 96.[17] We accept that the Trustees have identified questions of law and fact that arecapable of bona fide and serious argument in relation to the making of orders unders 43 of the PRA. But we do not consider that the proposed appeal is of sufficientimportance to outweigh the cost and delay of that appeal in the circumstances of thiscase. If it is not at present open to the Trustees to dispose of the gold bars because ofthe Texas orders, and if they have no current intention of doing so, an appeal wouldserve no practical purpose as matters stand. If circumstances change, and the Trusteespropose to deal with the gold bars and consider that their proposed dealing is notprecluded by the Texas court orders, they can apply to the High Court for therestraining orders to be set aside to permit the proposed dealing, or for a variation ofthe orders to enable the proposed dealing to take place on such terms as may then beappropriate. Leave to appeal is therefore declined.Result[18] Leave is granted to Dr Johnston and the Trustees to appeal to this Court fromthe High Court protest judgment. The notice of appeal must be filed and served within10 working days of the date of this judgment. The Registrar is directed to convenea telephone conference with a view to timetabling the appeal towards an early hearing.[19] The application by the Trustees for leave to appeal from the High Courtrestraining order judgment is declined.Solicitors:Lee Salmon Long, Auckland for Applicant in CA39/2021K3 Legal, Auckland for First Respondent in CA39/2021Wynn Williams, Auckland for Applicants in CA42/2021 and CA100/2021