MACNAMARA v PATTERSON AND DARLOW AS TRUSTEES OF THE MACNAMARA FAMILY TRUST [2021] NZCA 588

MACNAMARA v PATTERSON AND DARLOW AS TRUSTEES OF THE MACNAMARA FAMILY TRUST[2021] NZCA 588 [9 November 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA583/2021[2021] NZCA 588BETWEEN NOEL JAMES MACNAMARAAppellantAND WILLIAM MALCOM PATTERSON ANDCHRISTOPHER ROBERT DARLOW ASTRUSTEES OF THE MACNAMARAFAMILY TRUSTFirst RespondentAND SHERYL ANN MACNAMARASecond RespondentCourt: Clifford and Courtney JJCounsel: B O'Callahan for AppellantJ P Cundy for First RespondentL J Kearns for Second RespondentJudgment:(On the papers)9 November 2021 at 3.30 pmJUDGMENT OF THE COURTA The application for a stay is declined.B The second respondent is entitled to costs for a standard application on aband A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Courtney J)[1] Noel and Sheryl Macnamara separated in 2019. There were proceedings toresolve issues relating to the Macnamara Family Trust (the Family Trust), of whichboth (along with Ms Macnamara's father, Mr Craig) were trustees.1 One of the issueswas whether the Family Trust was liable to repay an advance of $500,000 made to itby a trust associated with Ms Macnamara's father, the Graham & Julie Craig FamilyTrust (the Craig Trust). The Craig Trust maintained that it was a loan and madedemand for repayment of the advance. Ms Macnamara agreed it was a loan.Mr Macnamara disagreed; he contended that it had been a gift.[2] The proceedings were settled by the making of consent orders, which includedthe replacement of the current trustees with independent trustees, Mr Patterson andMr Darlow. Order 4.7 required that the independent trustees:After consulting with Mr and Ms Macnamara either reach adetermination on any liability of the Trusts to the Craig Trust for thesum of $500,000 or seek determination of the liability either from theCourt or, by way of arbitration.[3] The independent trustees concluded that the advance was a loan. They reliedto a significant extent on a Deed of Acknowledgement of Debt apparently executed onbehalf of the Family Trust (the Deed). They considered that there was no tenabledefence to the demand by the Craig Trust. Mr Macnamara resisted the trustees'conclusion. He did not recall signing the Deed and wanted the document examinedby a handwriting expert.2[4] The trustees applied for directions. Venning J declined to require the Deed tobe examined and directed the trustees to pay the $500,000 to the Craig Trust. 3Mr Macnamara applied for leave to appeal the decision and for a stay of the effect ofthe direction. Venning J held that Mr Macnamara was entitled to appeal thesubstantive decision as of right, but declined leave to appeal the refusal to requireexamination of the Deed and declined the stay.41 Mr and Ms Macnamara and their children are also beneficiaries of the Family Trust and of anothertrust, the Macnamara Home Trust.2 High Court Rules 2016, r 9.34.3 Macnamara v Macnamara [2021] NZHC 2361 [Substantive decision].4 Macnamara v Macnamara [2021] NZHC 2500 [Leave and stay decision].[5] Mr Macnamara has appealed the substantive decision. Despite not beinggranted leave to appeal the refusal to require the Deed to be examined, he intends toraise that issue in the appeal, as he is entitled to do.5[6] Mr Macnamara has applied for a stay of Venning J's direction pendingdetermination of the appeal. It is this application that falls for determination now.The independent trustees abide the Court's decision on the stay application butmaintain their view that there is no arguable defence to the Craig Trust's claim.Ms Macnamara opposes the application.The case in the High CourtThe substantive decision[7] There was no dispute that the Craig Trust had advanced $500,000 to the FamilyTrust on 30 May 2008. In September 2008 the Family Trust's solicitor prepared theDeed. The Deed appears to have been executed on 25 September 2008 by Mr andMs Macnamara on behalf of the Family Trust.[8] In September 2019, some months after Mr and Ms Macnamara had separated,the Craig Trust made demand on the Family Trust for repayment of the advance.Mr Macnamara appears not to have asserted that the advance was other than a loanuntil mid-2021. Then he maintained that the $500,000 had been a gift and that he hadno recollection of signing the Deed. He did not (and does not) go so far as to say thathis signature has been forged (though that is the unavoidable implication).Ms Macnamara, who holds the original Deed, declined to produce it for examinationby a handwriting expert.[9] Venning J considered that the evidence before him overwhelmingly supportedthe conclusion that the $500,000 was a loan.6 In particular, there existed a file note bythe solicitor who had prepared the Deed recording the fact that the advance was to bean interest free loan. Secondly, Ms Macnamara and Ms McCown, the witness toMr and Ms Macnamara's signatures, both deposed to the fact that Mr Macnamara had5 Senior Courts Act 2016, s 56(6).6 Substantive decision, above n 3, at [27].executed the Deed.7 Mr Macnamara sought to impugn Ms McCown's evidencebecause she gave the wrong address as the place she had witnessed the document.The Judge did not consider that this error affected the provenance of the document.8Nor did the Judge ascribe any relevance to the fact that the $500,000 was not recordedin the accounts of the Macnamara Family Trust as a liability; those accounts werehistorically prepared in-house for income tax purposes and related primarily to abusiness, Oneheat Ltd. Because no interest was being charged there was no need toaccount for interest for income tax purposes.9[10] The Judge was unimpressed by Mr Macnamara's effort to challenge theauthenticity of the document on the basis that he could not recall signing. There hadbeen no challenge until July 2021. Indeed, Mr Macnamara actually referred to theDeed in an affidavit filed in the substantive proceedings in May 2020.10 The Judgealso noted that, although the logical corollary of Mr Macnamara's suggestion that hehad not signed the document must be fraud on the part of the trustees of the CraigTrust, Ms Macnamara and Ms McCown, he had not made any such allegation.11[11] Finally, the Judge noted that the independent trustees, both experiencedlawyers, had sought information and input from Mr and Ms Macnamara as requiredby the consent order and considered all the relevant information provided. Havingdone so, they were satisfied that the debt existed.12 The Judge therefore made thedirections they sought.13The application for stay in the High Court[12] The Judge accepted that if a stay were not granted, Mr Macnamara's appealwould be rendered nugatory because Mr Macnamara would not have standing to bringproceedings against the Craig Trust for recovery of the money, in the event it wasultimately shown on appeal to have been a gift.14 The Judge concluded, however, that7 At [26].8 At [29].9 At [30].10 At [33].11 At [34].12 At [38].13 At [39].14 Leave and stay decision, above n 4, at [33].this was not determinative, for two reasons. First, a stay would not prevent the CraigTrust taking action to recover the $500,000. The independent trustees did not considerthere was a viable defence to such a proceeding and could not, responsibly, oppose anapplication for judgment.15[13] Secondly, Mr Macnamara had agreed to the consent order being made whichwould place determination of the status of the $500,000 in the hands of theindependent trustees. Seeking a stay of the directions made to protect the trustees fromliability by acting in accordance with the direction would undermine the consent orderitself.16 In these circumstances, and in light of the difficulties with the proposed appealand its lack of public interest, novelty or importance, the Judge held that a stay wasnot in the interests of justice.17Application for stay in this Court[14] The principles applying to an application for stay are well settled, having beenset out in Keung v GBR Investment Ltd:18 In determining whether or not to grant a stay, the Court must weigh thefactors "in the balance" between a successful litigant's rights to the fruits of ajudgment and "the need to preserve the position in case the appeal issuccessful". Factors to be taken into account in this balancing exerciseinclude:(a) whether the appeal may be rendered nugatory by the lack of astay;(b) the bona fides of the applicant as to the prosecution of theappeal;(c) whether the successful party will be injuriously affected bythe stay;(d) the effect on third parties;(e) the novelty and importance of questions involved;(f) the public interest in the proceeding; and(g) the overall balance of convenience.15 At [34]–[37].16 At [38]–[41].17 At [42]–[44].18 Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11] (footnotes omitted).That list does not include the apparent strength of the appeal. That has beentreated as an additional factor.The appeal will be rendered nugatory if a stay is not granted[15] It is common ground that if a stay is not granted, Mr Macnamara's appeal willbe rendered nugatory. Mr Macnamara contends that there are no countervailing factorsin this case in that would justify refusing a stay. He does not, however, address thepoint made by Venning J that, even if a stay were granted, the trustees of the CraigTrust will still be able to bring proceedings to recover the money. If that happened, asappears likely, Mr Macnamara's appeal would still be rendered nugatory.Bona fides[16] Mr Macnamara says his bona fides are evident from his prompt pursuit of theappeal. Ms Macnamara does not accept that; submissions on her behalf detail thehistory of the litigation between the parties which, she says, shows a strategy byMr Macnamara of delaying and frustrating progress and not raising issues until thelast moment. In this regard, she points to the fact that, although the issue of repaymentof the $500,000 was raised in 2019, Mr Macnamara did not question the authenticityof the Deed until July 2021. There appears not to have been any explanation for thisdelay and, as a result, it is a factor that must count against Mr Macnamara whenassessing his bona fides.Effect of a stay on the independent trustees[17] The independent trustees had sought directions in the High Court because,although the terms of the consent order permitted them to determine whether to repaythe advance, Mr and Ms Macnamara, the principal beneficiaries who are both sui juris,had differing views and the independent trustees wished to have the sanction ofthe Court for any action they took. They abided the decision in the High Court andtake the same position in this Court. They are, however, concerned about how theywill respond to proceedings brought by the Craig Trust in the event of a stay beinggranted.[18] Following the delivery of Venning J's decisions and Mr Macnamara's currentapplication for stay, the trustees of the Craig Trust indicated that, if this Court grantsa stay, they reserve their right to commence proceedings to recover the debt. Theindependent trustees have formed the view that they cannot responsibly resist anyclaim brought. If they are prevented by a stay from paying the Craig Trust, the FamilyTrust will be exposed to a costs liability.[19] Mr Macnamara says that any costs liability could be easily met from hisentitlement under the trusts. We do not see this as a satisfactory response.The independent trustees, both experienced solicitors and professional trustees, oughtnot to be put in the position of having to defend a claim to which they consider thereis no tenable defence. They have trustee obligations to the beneficiaries as a wholeand are entitled to discharge those obligations in what they consider to be a proper andresponsible manner.The effect on third parties[20] Self-evidently, a stay would further delay payment of the debt to the CraigTrust and put the trustees of that trust to the expense and trouble of recoveryproceedings. The delay ought to be able to be addressed through interest, though thelitigation is likely to bring some level of irrecoverable cost.The novelty and importance of the questions involved and the public importance[21] Although Mr Macnamara suggests that the case could provide helpful authorityin this area, there is no serious assertion that it raises any novel issue or is of generalor public importance.The overall balance of convenience[22] We consider that the balance of convenience is against the granting of a stay.First, the issue over the advance was only one of several issues that were the subjectof the lengthy proceedings that followed Mr and Ms Macnamara's separation.The parties agreed to resolve those issues on the basis of the consent orders, includingentrusting to the independent trustees the task of determining the status of the advance.[23] We do not accept Mr Macnamara's criticism that trustees sought directionsfrom the Court because they wished to have the protection of directions by the Courtin circumstances where they have refused Mr Macnamara the opportunity to havethe Deed examined by a handwriting expert. The independent trustees say that theydo not have the deed and have explained their reasons for seeking directions. Weconsider the application for directions to have been reasonable in the circumstancesand there ought to be good reasons for preventing the independent trustees from takingwhat they consider to be the correct course, and which course the High Court hasaffirmed.[24] Secondly, as Venning J identified, the granting of a stay will not prevent theCraig Trust from pursuing the debt in separate proceeding. There is little utility ingranting a stay in these circumstances.The apparent strength of the appeal[25] Mr Macnamara's claim that the advance was a gift turns on the authenticity ofthe Deed. If he signed the deed there is no tenable basis on which to assert that theadvance was not a loan. Since Mr Macnamara does no more than say that he cannotrecall signing the Deed, this issue depends on him impugning Venning J's refusal toorder that the document be examined.[26] Acknowledging that the present assessment is impressionistic only, therenevertheless appears only a weak basis for requiring such an examination. Theaffidavit evidence from the handwriting expert simply says that the copy of the Deedthat she has seen raises issues. But there is no indication as to what those issues are.Further, any expert opinion as to authenticity must necessarily be weighed against thesolicitor's file note, and the evidence of Ms Macnamara and Ms McCown as to theexecution of the Deed. Overall, the appeal could not be regarded as strong on thematerial before us.Result[27] The application for a stay is declined.[28] The second respondent is entitled to costs for a standard application on a bandA basis and usual disbursements.Solicitors:Claymore Partners Ltd, Auckland for AppellantLeeSalmonLong, Auckland for First RespondentsShieff Angland, Auckland for Second Respondent