MACNAMARA v MACNAMARA [2023] NZHC 715

MACNAMARA v MACNAMARA [2023] NZHC 715 [3 April 2023]NOTE: ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS11B, 11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHERINFORMATION, PLEASE SEEhttps://www.justice.govt.nz/family/about/restriction-on-publishing-judgments/IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-000404[2023] NZHC 715BETWEEN SHERYL ANN MACNAMARAPlaintiffAND NOEL JAMES MACNAMARADefendantCIV-2020-404-000646BETWEEN NOEL JAMES MACNAMARAPlaintiffAND SHERYL ANN MACNAMARAFirst DefendantContinued overleafHearing: 15 March 2023Appearances: L J Kearns KC for Ms MacnamaraN J Macnamara in personJ P Cundy for the trustees of the Macnamara Home Trust and theMacnamara Family TrustJudgment: 3 April 2023JUDGMENT OF WYLIE J(Application for directions)This judgment was delivered by Justice WylieOn 3 April 2023 at 2.00 pmPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Continued from previous pageBETWEEN SHERYL ANN MACNAMARA, NOELJAMES MACNAMARA AND GRAHAMLINCOLN WILFRED CRAIG as trusteesof the MACNAMARA HOME TRUSTSecond DefendantsAND SHERYL ANN MACNAMARA, NOELJAMES MACNAMARA AND GRAHAMLINCOLN WILFRED CRAIG as trusteesof the MACNAMARA FAMILY TRUSTThird DefendantsSolicitors/counsel:Shieff Angland Lawyers/L J Kearns KC/J S Langston, AucklandClaymore Partners Ltd/B O'Callahan, AucklandJ Cundy, AucklandIntroduction[1] The applicants, Christopher Darlow and William Patterson (the trustees), arethe trustees of the Macnamara Home Trust (the Home Trust) and the MacnamaraFamily Trust (the Family Trust—jointly the Trusts). They have applied to the Courtfor directions under s 133 of the Trusts Act 2019 (the Act).[2] Mr Macnamara has filed a memorandum. He opposes the application in part.He has not filed a formal notice of opposition but no issue was taken with this.[3] Ms Macnamara, through her counsel, Ms Kearns KC, actively supported thetrustees' application. She also sought to clarify some issues from her perspective.Background[4] The background to this matter was comprehensively set out in my judgment of23 March 2022.1 It can be summarised relatively briefly for present purposes.[5] Mr and Mrs Macnamara married in February 1991 and they separated inFebruary 2019. During their marriage they acquired numerous assets. When theyseparated, most of their assets were owned by the then trustees of one or other of theTrusts that they had settled during their marriage. The then trustees of the Home Trustowned the family home at Karaka and a holiday home in Pauanui; the then trustees ofthe Family Trust owned 998 of 1,000 shares in a company known as Oneheat Ltd(Oneheat).[6] Following their separation Mr and Ms Macnamara were unable to agree onwhat was to happen to the Trusts' various assets. Their disagreements were such thatthe Trusts were not able to be properly administered. Both parties filed proceedingsbut before these could be heard, they agreed to the resignation of the then trustees ofboth Trusts, the appointment of the trustees as independent trustees, and on the stepsthat the trustees were to take to resolve matters.1 Macnamara v Macnamara [2022] NZHC 547.[7] Consent orders were made by Moore J on 27 August 2020.2 The then trusteesof both trusts were removed and the trustees were appointed in their stead. The consentorders required the trustees to take various steps to effect a resettlement of the trustsincluding, but not limited to, the following:4.1 Forthwith engaging a reputable real estate agency for the purpose ofselling the Pauanui property owned by the Home Trust 4.3 After consulting with Ms Macnamara and Mr Macnamara, establishthe rental payable to the Home Trust by Mr Macnamara and/or[Oneheat] for the use of the Karaka property owned by the Home Trust.4.4 Reconcile the accounts of [Oneheat] , determine any liability of MsMacnamara, Mr Macnamara or the Trusts to [Oneheat] and take allsteps as necessary to sell the shares/business of [Oneheat] throughthe existing broker.4.5 After consulting with Ms Macnamara and Mr Macnamara, andfollowing the taking of advice from a reputable real estate agency, todetermine the sale processes and the reserve price of the KarakaProperty to enable the Karaka Property to be sold for the best price.4.8 On sale of the Trusts' assets, and after payment of the Trusts' liabilities,payment of the Trustees' reasonable fees and subject to any funds thatthe Trustees determine need to be held back, to distribute the netproceeds of sale to new trusts for Ms and Mr Macnamara inaccordance with the resettlement provisions of the Trusts.[8] The consent orders also recorded that, subject to the above, orders for sale wereto issue in respect of the Pauanui property, the Karaka property and Oneheat. Leavewas reserved to the parties and to the trustees to apply to the Court for furtherdirections. Both Mr Macnamara and Ms Macnamara agreed to withdraw theirrespective proceedings, with no issue as to costs.[9] Regrettably, the consent order did not result in an end to Mr andMs Macnamara's disagreements. This Court has since been called upon to make a largenumber of decisions, all purportedly in reliance on the leave reserved to apply forfurther directions.32 Macnamara v Macnamara HC Auckland CIV-2020-404-404.3 Macnamara v Macnamara, above n 1, at [12]–[36].[10] Relevantly, Ms Macnamara applied in June 2021 to vary the terms of theconsent order. I dealt with this application in my judgment of 23 March 2022. Thejudgment:(a) directed the trustees to deduct from the new trust to be settled in favourof Mr Macnamara, and to apply to the new trust to be settled in favourof Ms Macnamara:(i) half of the rental that the trustees determined thatMr Macnamara (and Oneheat) owed to the Home Trust for theuse of the Karaka property without set-off or deduction; and(ii) half of the amount that the trustees determined thatMr Macnamara owed to Oneheat for unauthorised drawings andunauthorised salary without set-off or deduction; and(b) varied the consent orders to require that:(i) the trustees determine what proportion of costs incurred by them(including disbursements) in implementing the consent orderwas caused by Mr Macnamara's unreasonable conduct;(ii) the costs attributable to Mr Macnamara, the costs of $5,975(which Mr Macnamara had agreed to pay the trustees in March2021), and the costs and disbursements incurred by the trusteesin responding to Ms Macnamara's application were met byMr Macnamara, be deducted from the new trust to be settled infavour of Mr Macnamara and applied to the new trust to besettled in favour of Ms Macnamara; and(iii) the trustees implement the recommendations of Mr Tauber inhis report dated 21 May 2021.[11] The judgment noted that once the trustees had reconciled Oneheat's accountsand determined the costs attributable to Mr Macnamara, they could apply fordirections under s 133 of the Act and, equally, that Mr Macnamara could seek to reviewthe trustees' determinations under s 126 of the Act.[12] Mr Macnamara asked me to recall my judgment. He also sought leave toappeal to the Court of Appeal. I declined the application for recall on the papers.4 Theapplication for leave to appeal was declined by me on 23 June 2022 following ahearing.5 Insofar as I am aware, Mr Macnamara did not seek special leave to appealand no review of the trustees' various determinations has been sought.[13] Some progress has been made in implementing the consent order. The Pauanuiand the Karaka properties have been sold. Various liabilities have been met. Thetrustees have made some interim distributions to the parties. They are currentlyholding a little over $2,000,000 on trust. The trustees' application for directions isintended to bring matters to a head and facilitate the final distribution of the net assetsof the Trusts between the parties.Applications for directions—relevant law[14] Section 133(1) of the Act provides as follows:133 Trustee may apply to court for directions(1) A trustee may apply to the court for directions about—(a) the trust property; or(b) the exercise of any power or performance of any function bythe trustee.(3) On an application under this section, the court may give any directionit thinks fit.[15] A trustee acting under a direction of the Court is treated as having dischargedthe trustee's duties as a trustee in relation to the direction, even though the order giving4 Macnamara v Macnamara [2022] NZHC 1145.5 Macnamara v Macnamara [2022] NZHC 1478.the direction is later declared invalid, overruled, set aside or found to be otherwiseineffective.6[16] The predecessor to s 133 was s 66 of the Trustee Act 1956. Section 66 was insubstantially similar terms and this Court has confirmed on a number of occasions thats 66 continues to inform the interpretation of s 133.7[17] Section 66 was designed to remove doubt regarding the propriety of a courseof action contemplated by trustees.8 It stands side by side with this Court's inherentequitable jurisdiction to review the administration of trusts.[18] In New Zealand Māori Council v Foulkes,9 Kós J was considering anapplication for directions under s 66. He noted that the section could be used to resolveany live question of interpretation of the trust deed in issue, as well as any uncertaintyas to the exercise of a power. He considered that s 66 was "a robust, parallel sourceof jurisdiction to resolve any substantial question of law concerning the meaning oradministration of a trust".10 He noted that the existence of a dispute, or at least a doubt,was essential before s 66 could be engaged.11[19] In Re Honoris Trust,12 Fitzgerald J also considered the application of s 66 insome detail. In some respects she took a different view than Kós J in Foulkes. She:(a) referred to Court of Appeal authority13 and held that the power to seekdirections is not restricted to minor or procedural issues;(b) expressed the view that there is no threshold requiring trustees to be ingenuine doubt before making an application for directions;6 Trusts Act 2019, s 134(1).7 Re Darlow [2021] NZHC 2184 at [30]; Re McMillan [2021] NZHC 1497 at [7]; Holland v Jonkers[2021] NZHC 3469 at [89].8 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington,2009) at 5.3.3(8).9 New Zealand Māori Council v Foulkes [2014] NZHC 1777, [2015] NZAR 1441.10 At [46].11 At [47].12 Re Honoris Trust [2017] NZHC 2957, [2018] 3 NZLR 160 at [35]–[40].13 Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882 at [32].(c) referred to English authority14 where it had been held that there are atleast four distinct situations where trustees can seek directions;(d) noted that one of those situations arises: where the issue is whether the proposed course of action is aproper exercise of the trustees' powers where there is no realdoubt as to the nature of the trustees' powers and the trusteeshave decided how they want to exercise them but, because thedecision is particularly momentous, the trustees wish to obtainthe blessing of the court for the action on which they haveresolved and which is within their powers. there is no doubtat all as to the extent of the trustees' powers nor is there anydoubt as to what the trustees want to do but they think it prudent, to obtain the court's blessing on a momentous decision. In acase like that, there is no question of surrender of discretion (e) held the view that the jurisdiction conferred by s 66 extends to themaking of what have become known as "blessing orders" in suchsituations;15 and(f) commented on the appropriate approach to such applications asfollows:[55] Given the potential for disadvantages tobeneficiaries resulting from "blessing" orders if improperlymade, it is paramount that applicant trustees provide the courtwith all relevant facts, documents and information when makingan application. Further, it is imperative that when consideringsuch an application, a judge only make the orders sought after"scrupulous consideration" of the evidence. The court will notrubber stamp such applications, and if the court is left in doubt,then it may withhold its approval.[56] Hart J in Public Trustee v Cooper stated that, whenconsidering an application for blessing orders, the court shouldconsider the following matters:(a) First, has the trustee in fact formed the opinion whichthe court is asked to bless?(b) Second, is the opinion formed one at which areasonable body of trustees, properly instructed as tothe proper meaning of any relevant provisions of thetrust deed, could properly have arrived?14 Public Trustee v Cooper [2001] WTLR 901 (Ch) at 922–924.15 Re Honoris Trust, above n 12 at [54].(c) Third, is the opinion vitiated by any conflict ofinterest under which any of the trustees might havebeen labouring?[58] The authors of Underhill and Hayton Law of Trustsand Trustees usefully summarise the position as follows:The task of the court [in a category-two type application] isnot to say how it would itself exercise the discretion, butmerely to ensure (via an inquisitorial process) that theproposed exercise is lawful in the sense that the trustees canproperly form the view which they have.(Footnotes omitted)[20] This approach has been adopted in a number of subsequent cases wheretrustees have made applications for directions.16[21] There are further guiding principles, identified in other jurisdictions which, ithas been held, apply in this country. They were noted by Gendall J in Turvey v Vanceas follows:17(a) The Court is not a rubber stamp and it must be satisfied that thetrustees are indeed justified in proceeding in accordance withtheir decision. But the Court should not place insurmountablehurdles in the way of trustees.(b) The Court may disagree with a trustee's decision, but if it iswithin the range of reasonable decisions the trustee couldmake, the Court should not hesitate to bless it.(c) The lengths to which the Court must go in examining theprocess by which the trustee arrived at the decision mustdepend upon the particular decision. In some cases, thedecision may be a difficult and doubtful one, requiring finejudgment in the face of competing considerations, in others itmay be obvious.(d) Deciding whether the decision is one at which a reasonabletrustee properly could have arrived requires "scrupulousconsideration of the evidence" but does not "require secondguessing or a line by line micro analysis" by the Court.16 See, e.g. Re Darlow, above n 7, at [33]–[34]; Holland v Jonkers, above n 7 at [94]–[95]; Turvey vVance [2022] NZHC 1167 at [24]–[25]; Miller v Cregten [2020] NZHC 1262; Church PropertyTrustees v Carrell [2021] NZHC 1130.17 Turvey v Vance, above n 17 at [25].(e) The Court will sometimes engage in a dialogue with thetrustees as a result of which the trustee's decision is modified;but, properly analysed, that is no more than a process by whichthe Court identifies the circumstances in which it will besatisfied that the proposed exercise of the power is within theproper range of such an exercise.(Footnotes omitted)[22] I adopt the approach discussed in Re Honoris Trust and the further guidingprinciples succinctly summarised in Turvey v Vance.The application[23] There has been a history of dispute in this proceeding. Mr Macnamara inparticular has been difficult and uncooperative. He has instigated a number ofproceedings and, amongst other things, accused the trustees of bias.[24] No doubt as a result of Mr Macnamara's attitude, the trustees applied fordirections as follows:(a) approving their determination of the amount of rent payable byMr Macnamara and/or Oneheat to the Home Trust in respect of theiruse of the Karaka property;(b) approving their reconciliation of the accounts of Oneheat and theirdetermination of the liability of Mr Macnamara to Oneheat;(c) approving their decision that the costs of defending the claim fordefamation brought by Mr Macnamara and his new company, 1 HeatLtd, against Ms Macnamara and Oneheat are properly costs of Oneheat;(d) approving their determination as to the proportion of their costs that isattributable to Mr Macnamara's conduct;(e) approving their determination of the amounts that are to be distributedto new trusts for each of Mr Macnamara and Ms Macnamara, subjectto a retention of $200,000 pending finalisation of the tax positions ofOneheat and the Trusts;(f) authorising them to settle a new trust for the benefit of Mr Macnamarawith the costs of that exercise being met from Mr Macnamara's shareof the assets of the Trusts;(g) in the alternative to order (f), authorising them to distributeMr Macnamara's share of the assets of the Trusts to Mr Macnamarapersonally or as he directs; and(h) granting leave for them to apply for further directions in relation to theimplementation of any orders made and/or the consent order made byMoore J on 27 August 2020 (noted at [7]).[25] The application was supported by various affidavits which have been filed inthe course of the various hearings between Mr and Ms Macnamara, as well as by morerecent affidavits, in particular an affidavit sworn by one of the trustees, Mr Patterson,on 28 November 2022, an affidavit sworn by Benedict Tauber on 30 November 2022,and a further affidavit from Mr Patterson sworn on 27 February 2023.[26] I turn to consider each of the directions sought.The Directions Sought(a) The rental payable by Mr Macnamara and/or Oneheat to the Trusts in respectof their use of the Karaka property[27] Following the parties' separation, Mr Macnamara continued to reside in theKaraka property. He also ran the Oneheat business from the property. Paragraph 4.3of the consent order (set out above at [7]) required the trustees to establish the rentalpayable by Mr Macnamara and/or Oneheat for their use of the Karaka property. Thetrustees had to consult with Ms Macnamara and Mr Macnamara in so doing.[28] Mr Patterson has deposed that the trustees obtained a report from Bayleys RealEstate Ltd. It appraised the rent for the whole property at between $950 and $1,100per week. The trustees wrote to the solicitors for both Mr Macnamara andMs Macnamara on 29 January 2021 proposing that the rental be assessed at $950 perweek for the period from the date of separation to 31 March 2020, at $1,050 for theyear ended 31 March 2021 and at $1,100 for the year commencing 1 April 2021.[29] Ms Macnamara agreed to this proposal. No reply was received fromMr Macnamara or his solicitors. On 12 February 2021, the trustees wrote again toMr Macnamara's solicitors seeking a response and also advising that, in their view,the appropriate percentage of the rental attributable to Oneheat was 28 per cent.[30] On 22 February 2021, Mr Macnamara's solicitors responded, stating thatMr Macnamara did not accept any liability for rental for the period of 1 April 2019 to30 November 2020, because his spousal maintenance liability to Ms Macnamara hadbeen assessed on the basis that there was to be no cost for his ongoing occupancy ofthe Karaka property and that any backdated rental would in effect be double countingto his detriment. He agreed to pay rental from 1 December 2020 to 31 March 2021 at$1,050 per week and from 1 April 2021 at $1,100 per week.[31] Ms Macnamara's counsel responded to Mr Macnamara's assertions. Sheasserted that spousal maintenance had been paid to meet her reasonable needs and thatit had nothing to do with the occupation rental paid by Mr Macnamara and/or Oneheat.[32] Mr Patterson has deposed that, as the issue was covered by the consent order,the trustees determined that rental should be fixed at the amounts they initiallyproposed. Mr Macnamara was so advised in a letter dated 18 May 2021 sent to hissolicitors. Mr Patterson has also said that Oneheat ceased trading at the end of April2021, but that Mr Macnamara continued to occupy the property until 23 July 2021when it was sold. The trustees have undertaken the requisite calculations anddetermined that the amount of rental payable to the Home Trust by Mr Macnamara is$132,917.71 and by Oneheat, $46,618.[33] Before me, Mr Macnamara objected to the rental determination and thedirection sought. He again asserted that the spousal maintenance order made in theFamily Court was based on him occupying the Karaka property free of rent, along withOneheat.[34] This assertion was considered and rejected by me in my judgment of 23 March2022. I referred to the order made by the Family Court and recorded that there wasnothing in the Judge's decision to suggest that the fact that Mr Macnamara wasresiding rent free at the Karaka property at the time factored into the spousalmaintenance order made. I recorded my view that Mr Macnamara's opposition to thetrustees' determination of the rental payable was misconceived.18 As I have alreadynoted, this judgment was not appealed. Mr Macnamara is bound by it. The matter isres judicata.[35] Mr Macnamara also complained about the split in the rental payable as betweenhim and Oneheat. As noted, the trustees fixed the split at 72/28 per cent. The trustees,on 12 February 2021, advised Mr Macnamara's solicitors that they had adopted thesepercentages because this percentage split had been used historically. Mr Macnamara'ssolicitor responded on 22 February 2021 asking for copies of any documentationevidencing a 72/28 per cent split. It does not appear that the trustees responded to thisletter. Rather, on 18 May 2021, they recorded their decision regarding the rentalpayable, including that 72 per cent was payable by Mr Macnamara and 28 per cent byOneheat.[36] Mr Macnamara and his solicitors did not respond to the trustees' letter of 18May 2021. No application under s 126 of the Act has been made by Mr Macnamara.[37] The trustees were required to determine the rental payable by Mr Macnamaraand Oneheat for the Karaka property, after consultation with the parties. They tookindependent expert advice. They have relied on that advice. They consulted with theparties as required by the consent order. They have identified for the parties the basison which they have assessed the rent payable. They have complied with the consentorder and they have determined the rental payable by Mr Macnamara and Oneheat.18 Macnamara v Macnamara, above n 1, at [51]–[55].[38] The trustees have made their determination. There is no basis on which it canresponsibly be suggested that the trustees have not properly reached theirdetermination. It is a determination which reasonable trustees could properly havemade. There are unsubstantiated assertions by Mr Macnamara that the trustees arebiased against him. I have already commented on such assertions.19 Notably,Mr Macnamara has taken no steps to advance them. There is nothing in the evidencebefore me to suggest that the trustees' determination as to the rental payable byMr Macnamara and Oneheat is vitiated by any conflict of interest.[39] Accordingly, I make a direction approving the trustees' determination as to therental payable by Mr Macnamara and Oneheat to the Home Trust in respect of the useof the Karaka property by Mr Macnamara and Oneheat.(b) Reconciliation of Oneheat's accounts and Mr Macnamara's liability toOneheat[40] Mr and Mrs Macnamara were both directors of Oneheat. Its day to daybusiness was largely carried out by Mr Macnamara although Ms Macnamara didconsiderable work in the background. Paragraph 4.4 of the consent order (above at[7]) required the trustees to reconcile the accounts of Oneheat and determine anyliability of the parties or the Trusts to the company.[41] To comply with the consent order, the trustees employed the services ofMr Tauber. Mr Tauber is a chartered accountant. He had assisted with the preparationof Oneheat's accounts prior to Mr and Ms Macnamara's separation. He prepared areport setting out his analysis of Oneheat's accounts. The report is dated 21 May 2021.Amongst other things, Mr Tauber recorded that Mr Macnamara had decidedunilaterally halfway through the 2021 financial year to retrospectively increase hissalary. Further, he had taken various unauthorised drawings from Oneheat's accounts.Mr Tauber recommended that Mr Macnamara's unauthorised drawings and salaryshould be repaid without delay so that Oneheat could meet its obligations. His reportincluded draft financial statements for Oneheat for the financial years ending 31 March2020 and 31 March 2021.19 Macnamara v Macnamara, above n 1, at [91].[42] A copy of Mr Tauber's report and all relevant annexures was provided to bothMr and Ms Macnamara on 26 May 2021. The trustees advised Mr Macnamara'ssolicitors that, based on Mr Tauber's draft financial statements, Mr Macnamara had aliability to Oneheat for unauthorised drawings to 31 March 2021 of $311,957.71 andthat he had overpaid himself unauthorised salary to 31 March 2021 of $97,711.81.The trustees requested Mr Macnamara's response.[43] The trustees made an interim determination that Mr Tauber's draft financialstatements be accepted as accurately recording the financial position of Oneheat forthe financial years ended 31 March 2020 and 31 March 2021. The trustees were awarethat there were further unauthorised drawings by Mr Macnamara after 1 April 2021which also needed to be recovered and that financial statements for the 2022 financialyear were also needed to bring Oneheat's rental liability into account.[44] Mr Macnamara's response to the trustees' interim determination was to assertthat any overpayments to him had to be revised to take into account what he claimedwas his personal goodwill over the 2020 and 2021 financial years. He asserted thatthe earnings of Oneheat were almost entirely attributable to his goodwill, skill andlabour, and that therefore he should have been entitled to almost all of Oneheat'searnings following the parties' separation. He said that that trustees' interimdetermination that he owed Oneheat in excess of $400,000 was wrong. He obtained areport from an accountant, Marnus Beylefeld to support his assertions.[45] In response, Ms Macnamara obtained a report from Joshna Mistry, a charteredaccountant. She disputed Mr Beylefeld's analysis.[46] In my decision of 23 March 2022, I varied the consent orders to require thetrustees to implement Mr Tauber's recommendations in his report of 21 May 2021. Ialso recorded that further reconciliation of Oneheat's accounts was required. Irecorded the Court's expectation that the trustees would take into account whatMr Beylefeld and Ms Mistry had said before finalising their reconciliation ofOneheat's accounts, but observed that the final reconciliation of Oneheat's accountswas for the trustees.2020 Macnamara v Macnamara, above n 1, at [64].[47] As a result, the trustees asked Mr Tauber to prepare draft accounts for the yearended 31 March 2022. He did so. He also updated his calculation of Mr Macnamara'sliabilities to Oneheat. The revised amounts are as follows:(a) $369,205.52 in respect of unauthorised drawings;(b) $111,515,57 in respect of unauthorised overpayments of salary (whichreduces to $74,715.43 when adjusted for tax); and(c) $4,773.19 in respect of penalties and interest payable to the IRD.[48] Mr Tauber has filed an affidavit dated 25 November 2022 which explains hiscalculations. He recorded that the unauthorised overpayments of salary should bereduced to $74,715.43 to acknowledge that Mr Macnamara has been (or should havebeen) paying income tax on the overpaid salary. He explained that he treated theresidual IRD penalties as an item that requirement adjustment against Mr Macnamarabecause he failed to pay the tax as it fell due. Annexed to his affidavit were draftbalance sheets and profit and loss statements for Oneheat for each of the financialyears ending 31 March 2020, 31 March 2021 and 31 March 2022, a balance sheet forthe then current year, a calculation setting out Mr Macnamara's liabilities to Oneheat,a ledger of unauthorised drawings by Mr Macnamara from Oneheat and IRDstatements showing the PAYE and GST penalties.[49] Mr Patterson has deposed that the trustees have accepted Mr Tauber'srecommendations and determined that the amounts identified by Mr Tauber, totalling$448,694.14, are owing by Mr Macnamara to Oneheat. The trustees, in determiningMr Macnamara's liability to Oneheat, took into account Mr Beylefeld's andMs Mistry's views. They considered that Mr Beylefeld's affidavit was irrelevant totheir determination. Mr Beylefeld's view was based on Mr Macnamara's assertionthat the goodwill belonged to Mr Macnamara personally. The trustees preferredMs Mistry's view that the consent order contemplated the sale of Oneheat and directedthat the proceeds, including any goodwill, were to be distributed equally between theparties. They did not consider that Mr Macnamara was entitled to continue workingfor Oneheat, to increase his salary without the agreement of Ms Macnamara, or todivert Oneheat's income into another account for his personal use. The trustees weresatisfied that the unauthorised salary that Mr Macnamara unilaterally paid to himselfand the unauthorised drawings that he took, were liabilities that he owed to Oneheat.[50] The trustees view that the goodwill belonged to Oneheat and notMr Macnamara personally accords with my own view expressed in my judgment of23 March 2022.21 Mr Macnamara did not seek to dispute this before me afresh.[51] Mr Macnamara, in his initial memorandum, asserted that he had not receiveda final set of accounts to review. I do not accept this assertion. Mr Tauber's draftaccounts were annexed to his affidavit of 25 November 2022. I assume this affidavitwas served on Mr Macnamara. In any event, Mr Macnamara was sent electroniccopies of the accounts by counsel for the trustees by email on 20 December 2022.Mr Patterson has annexed the email as an exhibit to his affidavit of 27 February 2023.[52] Mr Macnamara also said that an independent accountant needs to be appointedto complete Oneheat's accounts. Again, I do not accept this assertion. The trusteesretained Mr Tauber to reconcile Oneheat's accounts. He is independent of the parties.Moreover, this Court has already twice considered and declined applications byMr Macnamara for the appointment of further expert accountants.22 It is not open toMr Macnamara to now seek to undermine those decisions.[53] Mr Macnamara took issue with a number of the figures used by Mr Tauber inhis reconciliation accounts. He said that some of the figures used by Mr Tauber arewrong and that some expenses Mr Tauber treated as unauthorised expenditure for hisbenefit should be shared jointly between himself and Ms Macnamara, for example,expenses he said were incurred for the benefit of his and Ms Macnamara's children.Other expenses he said were incurred by him for the benefit of Oneheat, or for his andMs Macnamara's joint benefit. He criticised the delays and what he asserted areinaccuracies in the final accounts. He said that the final accounts are "very one sided"and that costs had been allocated against him in a biased manner. He asserts that some21 At [65].22 Macnamara v Macnamara HC Auckland CIV-2020-404-404, 16 December 2020 (Minute ofAssociate Judge Gardiner); Macnamara v Macnamara [2021] NZHC 173.of the figures used by Mr Tauber were "so obviously out of line that it did not take aprofessional to determine their apparent inaccuracy".[54] There is nothing but Mr Macnamara's unsupported assertions to justify theseassertions. They were denied by Ms Macnamara. There is no evidence suggestingthat she knew or approved of any of the expenditure incurred by Mr Macnamara whichhe now says was for their children or for their joint benefit. Mr Tauber was entrustedwith the task of untangling the accounts. The Court is not required to second guesshis analysis on a line by line basis. Mr Macnamara has had ample opportunity to takeissue with Mr Tauber's calculations and the trustees' subsequent determinations. Hehas been aware of the trustees' preliminary determination of his liability to Oneheatsince 28 May 2021. He has been aware of my judgment of 23 March 2022 since itwas released and of my direction requiring the trustees to implement therecommendations made by Mr Tauber in his report dated 21 May 2021. He has beenaware of Mr Tauber's final report and his final reconciliation of Oneheat's accountssince November/December 2022. He has not raised any substantive opposition to thereconciliation of the accounts prepared by Mr Tauber or to the trustees' determinationof his liability to Oneheat.[55] The trustees were required to reconcile Oneheat's accounts and determineMr Macnamara's liability to Oneheat. They have taken expert advice from Mr Tauberin this regard. They have adopted Mr Tauber's reconciliation of Oneheat's accountsand they have determined Mr Macnamara's liability to Oneheat. They have compliedwith the consent order and they have made determinations which I am asked to bless.Again, there is no basis on which it can responsibly be suggested that the trustees havenot properly reached their determinations. They are determinations which reasonabletrustees could properly have made. Again, there are unsubstantiated assertions byMr Macnamara that the trustees (and Mr Tauber) are biased against him butMr Macnamara has taken no steps to advance that assertion. There is nothing in theevidence to suggest bias or that the trustees' determinations are vitiated by any conflictof interest.[56] Accordingly, I make a direction approving the trustees' determination to adoptMr Tauber's reconciliation of the Oneheat accounts and their determination of theliability of Mr Macnamara to Oneheat.(c) Costs of defending defamation claim[57] On 27 September 2021, Mr Macnamara and his new company 1 Heat Ltd,issued a defamation claim against Ms Macnamara and Oneheat. It related to emailssent by Ms Macnamara from her Oneheat email account to former clients of Oneheat.The claim was ultimately settled. Mr Macnamara and 1 Heat Ltd discontinued theproceeding and made a costs contribution of $10,000 to Ms Macnamara and Oneheat.[58] In April 2022, Ms Macnamara asked the trustees to meet the costs incurred indefending the defamation claim. The trustees responded by indicating their intentionto seek directions from the Court in relation to the defence costs. In the interim, theyagreed to make an on demand loan of $18,998.75 to Ms Macnamara, being the amountshe required to meet the defence costs at that stage. Ms Macnamara has since advisedthe trustees that the total costs incurred in defending the defamation claim were$37,323.75. She has provided the trustees with copies of the relevant invoices.[59] The trustees have since determined that the costs of defending the defamationclaim were properly costs of Oneheat. They have paid Ms Macnamara $8,325 (beingthe total defence costs, less the on demand loan, less the amount she received fromMr Macnamara). The trustees have resolved to treat the total amount of $27,323.75paid to Ms Macnamara (being the initial loan of $18,998.75 and the payment of$8,325) as an unsecured advance to Oneheat from the Trusts.[60] The trustees advised that they have made this determination having regard tothe following:(a) Ms Macnamara sent the emails at issue in the defamation proceedingin her capacity as the sole remaining director of Oneheat;(b) Oneheat was a defendant in the proceeding, but was unable to meet thecosts of the defence because of its financial position (which was a resultof the unauthorised drawings by, and the unauthorised salaryoverpayment to, Mr Macnamara);(c) Ms Macnamara effectively met the defence costs as agent for Oneheat;and(d) the claim appears to have been without merit. Mr Macnamaradiscontinued it before trial and paid an agreed contribution to costs.[61] In his memorandum, Mr Macnamara accepted that the defamation proceedinghad been discontinued and noted that he had made a settlement payment (of $10,000)to Ms Macnamara. He did not directly address me on this issue at the hearing.[62] The trustees are seeking a direction approving their determination that the costsof defending the defamation claim were properly costs of Oneheat and to pay toMs Macnamara the balance of the defence costs she incurred, treating thereimbursement as an advance from the Trusts to Oneheat.[63] I am satisfied, on the basis of Mr Patterson's affidavits, that the trustees haveacted properly in determining that the total amount of $27,323.75 paid toMs Macnamara should be treated as an unsecured advance to Oneheat from the Trusts.I am also satisfied that this determination is one which reasonable trustees, properlyinstructed and properly informed as to their obligations, could have arrived at. Thereis nothing to suggest that the trustees' determination is vitiated by any conflict ofinterest.[64] Accordingly, I make a direction:(a) approving the trustees' determination that the costs of defending theclaim for defamation brought by Mr Macnamara and his new company,1 Heat Ltd, against Ms Macnamara and Oneheat are properly costs ofOneheat;(b) approving the payment to Ms Macnamara of $27,323.75; and(c) approving the trustees' determination to treat this payment as anunsecured advance to Oneheat from the Trusts.(d) Costs attributable to Mr Macnamara[65] As noted above at [10], in my judgment of 23 March 2022, I varied the consentorder to require that the trustees determine what proportion of the costs incurred bythem (including disbursements) in implementing the consent order was caused byMr Macnamara's unreasonable conduct.[66] The trustees prepared a report, which is annexed to Mr Patterson's affidavit of15 November 2021. They there set out the various difficulties they had encounteredin giving effect to the consent order, noting the various obstructive steps which weretaken by Mr Macnamara at almost every turn. I discussed the trustees' report in myjudgment.23 When the report was prepared, the costs the trustees had incurred(excluding GST) were $78,600 for counsel, $302,050 for the trustees and $9,410 forconveyancing costs. The trustees' view was that all of counsel's cost were attributableto Mr Macnamara's conduct, as were $150,000 of the trustees' costs and $5,000 of theconveyancing costs.[67] On 10 November 2022, the trustees, through their counsel, wrote toMr Macnamara and the solicitors for Ms Macnamara setting out their preliminarydetermination that these costs were attributable to Mr Macnamara's unreasonableconduct. They also recorded that in the period since the report of 15 November 2021,they had incurred further costs (excluding GST) of $37,100 for counsel and $49,095for the trustees. They considered that $24,200 of counsel's further costs and $5,000of their further costs (both excluding GST) were attributable to Mr Macnamara'sconduct. They recorded their preliminary determination that a total of $302,220 (being$262,800 plus GST) should be attributed to Mr Macnamara's unreasonable conductand paid out of his share of the net assets of the Trusts. They invited bothMr Macnamara and Ms Macnamara to comment on their preliminary determinationby 17 November 2022, before they made their final decision.23 Macnamara v Macnamara, above n 1, at [85]–[86].[68] The trustees received no reply from Mr Macnamara.[69] Ms Macnamara requested that the trustees should reconsider the quantum oftheir costs incurred in the period between November 2021 and April 2022 attributableto Mr Macnamara.[70] Given Ms Macnamara's request, the trustees reviewed their time records. Theyconcluded that some further costs were properly attributable to Mr Macnamara. Theyrevised their preliminary estimate of $5,000 to $10,920. The trustees then reached afinal determination, concluding that a total of $309,028 (being $268,720 plus GST)should be attributed to Mr Macnamara's unreasonable conduct and paid out of hisshare of the net assets of the Trusts.[71] Mr Macnamara did not deal with this topic in his memorandum. At the hearing,he contended that only Court costs ordered against him should be deducted from hisshare of the net assets of the Trusts. He asserted that if this was not accepted, thetrustees should be instructed to provide full documentation of all costs incurred, sothat a precise breakdown of the costs attributable to him could be ascertained.[72] I do not accept Mr Macnamara's arguments.(a) My judgment of 23 March 2022 directed the trustees to apportion theircosts to take account of the costs properly attributable toMr Macnamara's unreasonable conduct. There was no appeal againstmy decision and it is now res judicata between the parties.(b) It is clear from email correspondence that the trustees have providedcopies of all invoices to Mr Macnamara. This occurred on 1 February2023. The only exception was time narrations on counsel for thetrustees' invoices, because it was considered that those narrations wereprivileged. Mr Macnamara has not challenged the claim to privilege.[73] The consent order, as varied by me, required the trustees to determine whatproportion of the costs incurred by them (including disbursements) in implementingthe consent order was caused by Mr Macnamara's unreasonable conduct. The trusteeshave undertaken that exercise and made the determination noted in [70]. In doing so,they consulted with the parties. They have complied with the consent order. Again,there is no basis on which it can be responsibly suggested that the trustees have notproperly reached their determination. It is a determination which reasonable trusteescould have made. There is nothing to suggest that the trustees' determination isvitiated by any conflict of interest.[74] Accordingly, I make a direction approving the trustees' determination as to theproportion of their costs and disbursements that is attributable to Mr Macnamara'sunreasonable conduct.(e) Amounts to be distributed[75] As at 25 November 2022, the net assets of the Trusts were estimated to be$2,039,360.92. This sum was subject to final adjustments, including in respect offurther trustee and legal costs and the finalisation of the tax positions of Oneheat andthe Trusts. The trustees considered it appropriate to hold back $200,000 ascontemplated by [4.8] of the consent order, being $100,000 for Mr Macnamara and$100,000 for Ms Macnamara, to allow for the possibility that the IRD might reviewits position and conclude that some income has been omitted or some expensesoverstated. This figure was recommended by Mr Tauber. He expressed the view thatit is a prudent approach given that there has been no audit of Oneheat's accounts andbecause in preparing the accounts, he accepted the presented transactions at face value.[76] The consent order contemplates an equal distribution of the net assets of theTrusts to new trusts for Ms Macnamara and Mr Macnamara. The trustees, however,consider that there are some adjustments that need to be taken into account. They areas follows:(a) the rental payable by Mr Macnamara in respect of his use of the Karakaproperty—namely, $132,917.71, as determined by the trustees and asapproved by me;(b) Mr Macnamara's liability to Oneheat—namely, $448,694.14, asdetermined by the trustees and as approved by me;(c) the costs attributable to Mr Macnamara's unreasonable conduct,namely $309,028, as determined by the trustees and as approved be me;(d) disbursements awarded in various costs orders against Mr Macnamarain favour of the trustees—namely, $1,851.92;(e) three interim distributions of $10,000, $10,000 and $200,000 made bythe trustees to Ms Macnamara; and(f) two interim distributions of $78,014 and $9,039.50 made by the trusteesto Mr Macnamara.[77] Based on these deductions, the trustees determined that, subject to any finaladjustments, the net assets of the Trusts should be distributed to the new trusts, one forMs Macnamara and the other for Mr Macnamara as follows:(a) $544,427.58 to Mr Macnamara's new trust; and(b) $1,294,933.35 to Ms Macnamara's new trust.These figures however do not allow for one of the interim distributions made toMr Macnamara in the sum of $9,039.50.[78] It was not clear from Mr Macnamara's memorandum whether he agreed ordisagreed with the trustees' calculation of the amounts to be distributed. While hedisputed the allocation of various sums by Mr Tauber in his draft accounts, he did notexpressly take issue with the proposed distributions at the hearing.[79] The trustees sought a direction approving their determination of the amountsthey consider should be distributed to each of the new trusts.[80] I am not in a position to approve the proposed distributions. Interest will haveaccrued on the amounts held in trust. As noted, the proposed distributions do not allowfor one of the interim distributions to Mr Macnamara. Nor do I know what finaladjustments the trustees propose. I cannot be satisfied that the figures set out in anaffidavit filed on 25 November 2022 are still accurate.[81] I can however make a direction approving the adjustments that the trustees willhave to take into account in making the distributions.[82] The trustees have determined that the adjustments noted in [76] should be madebefore any final distributions of the net assets of the Trusts is undertaken.[83] I am satisfied that those adjustments are appropriate. Indeed a number of themare covered by this judgment. There is no basis on which it can responsibly besuggested that the trustees have not properly reached their determination that theadjustments in [76] are appropriate. The proposed adjustments are adjustments whichreasonable trustees can and should make. There is nothing to suggest that the trustees'determination of the proposed adjustments is vitiated by any conflict of interest.[84] Accordingly, I make a direction approving the adjustments set out in [76] tothe distributions of the net assets to the new Trusts. Nothing in this direction precludesthe trustees from making any further adjustments which can properly be made in termsof [4.8] of the consent order.(f) Settlement of a new trust for Mr Macnamara/distribution to himpersonally/distribution as he directs[85] Paragraph 4.8 of the consent order envisaged that the trustees would distributethe net assets of the Trusts to new trusts for Mr Macnamara and Ms Macnamara inaccordance with the resettlement provisions contained in the original trust deeds.[86] In June 2022, the trustees asked both Mr Macnamara and Ms Macnamara, viatheir respective solicitors, to advise whether they had established new trusts.Ms Macnamara confirmed that she had. The trustees did not receive a substantiveresponse from Mr Macnamara.[87] In his memorandum, Mr Macnamara advised that he wanted the trustees tosettle his share of the net assets of the Trusts directly on his and Ms Macnamara's twodaughters. He reiterated that stance before me.[88] Ms Macnamara did not object to Mr Macnamara's share of the net assets beingpaid to him personally or to him directing that payment be made to his and her twodaughters.[89] The trustees did not object to Mr Macnamara's proposals either.[90] In my view, there are difficulties with the Court making a direction approvinga payment direct to either Mr and Ms Macnamara's daughters or as Mr Macnamaradirects. The difficulty arises out of the trust deeds.(a) The family trust was established on 20 November 2001. It is adiscretionary trust. The discretionary beneficiaries are Mr andMs Macnamara, their two daughters, any child or children or remoterissue of Mr and Ms Macnamara who are born before the vesting date,any trust or other settlement under which any of the persons referred toas discretionary beneficiary is a beneficiary, any company that is underthe control of any discretionary beneficiary or combination ofdiscretionary beneficiaries, every charitable purpose which is regardedas charitable by the trustees, and any other persons appointed by thetrustees under the deed. The final beneficiaries are the same persons.(b) The Home Trust was settled on 29 March 2011. The beneficiaries areMr and Mrs Macnamara, their children, any children of the children,any other trust of which any one or more of the beneficiaries is abeneficiary provided that such trust does not have a later day ofdistribution and any charity or charities as may be chosen by thetrustees from time to time.[91] Both trust deeds to an extent dictate the terms of any new trusts and bothenvisage that any resettlement on separation will be to new trusts with the samebeneficiaries (except for one or other spouse).[92] I do not know whether there are any beneficiaries other than Mr andMs Macnamara and their children. If there are any other beneficiaries, I do not knowwhether they have consented to Mr Macnamara's proposal that his share of the netassets of the Trusts should be distributed to his daughters. I do not know whether thedaughters consent to this suggestion.[93] It would not be appropriate for the Court to grant its approval to Mr Macnamaradistributing the Trusts' funds to his daughters or as he directs. This would beinconsistent with the existing Trust deeds. The trust funds once settled on the newtrust will belong to the trustees of that trust and they will fall to be determined inaccordance with the new trust deed. As I have noted, the new trust deed will in largepart have to mirror the existing Trust deeds.[94] The appropriate course is either for Mr Macnamara to settle a new trust and forhis share of the net assets of the Trusts to be paid to the trustees of that new trust, asenvisaged in the consent order, or if Mr Macnamara fails to do so, for the trustees tosettle a new trust for the benefit of Mr Macnamara and the other beneficiaries of theexisting Trusts (other than Ms Macnamara), with the costs of this exercise being metfrom Mr Macnamara's share of the net assets of the Trusts.[95] I decline to make a direction authorising the trustees to pay the net assets ofthe Trusts to Mr and Mrs Macnamara's daughters or as Mr Macnamara directs. I dohowever make a direction authorising the trustees to settle a new trust for the benefitof Mr Macnamara and the other beneficiaries of the existing Trusts (other than MsMacnamara), with the costs of this exercise being met from Mr Macnamara's share ofthe net assets of the Trusts. This direction however is to lie in Court for a period ofone month from the date of release of this judgment to give Mr Macnamara a finalopportunity to set up a new trust himself.(g) Leave to apply for further directions[96] I reserve leave to the trustees to apply for further directions in relation to theimplementation of any of the orders made in this judgment and/or the consent order(noted at [7]).Costs[97] The trustees sought an order that they be indemnified from the assets of theTrusts for their costs in bringing this application. Neither Mr Macnamara norMs Macnamara opposed this application. I consider it appropriate to make the same,but subject to the reservation that the trustees are only entitled to be indemnified fortheir reasonable costs and disbursements. If there is any dispute in this regard it is tobe referred back to the Court. I so order.[98] Ms Macnamara signalled that she intends to seek costs against Mr Macnamara.In this regard, I direct as follows:(a) any memorandum seeking costs is to be filed and served within fiveworking days of the date of release of this judgment;(b) any memorandum in response is to be filed and served within a furtherfive working days; and(c) memoranda are not to exceed five pages.I will then deal with the issue of costs and disbursements on the papers, unless I requirethe assistance of Mr Macnamara and/or counsel for Ms Macnamara.____________________________Wylie J