Clayton v Clayton [vaughan Road Property Trust] [2016] NZSC 29, 23 March 2016
- Court
- Supreme Court
- Judgment
- 23 March 2016
- Neutral
- [2016] NZSC 29
Areas of law
Judgment analysis
AI-generated summary
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Facts
Mr and Mrs Clayton separated in 2006 after a 17-year marriage. Shortly before their marriage, they signed an agreement contracting out of the PRA, which was later set aside by the Family Court as causing serious injustice. During the relationship, Mr Clayton built a significant business, the Claymark business. One of the entities involved was the Vaughan Road Property Trust (VRPT), settled by Mr Clayton in 1999. Mr Clayton was the settlor, sole Trustee, and 'Principal Family Member'. The discretionary beneficiaries included Mr Clayton, Mrs Clayton, and their two daughters, who were also the final beneficiaries. The VRPT owned land from which the business operated. The case revolves around whether the assets of the VRPT, or Mr Clayton's powers over it, form part of the relationship property pool.
Held
- A combination of powers held by a person in their capacity as Principal Family Member, Trustee, and Discretionary Beneficiary under a trust deed (the 'VRPT powers'), which together allow that person to appoint all of the trust property to himself without being constrained by any meaningful fiduciary duty to other beneficiaries, constitutes 'property' for the purposes of s 2 of the Property (Relationships) Act 1976.
- Such powers, when acquired during a marriage, are 'relationship property' under s 8 of the Property (Relationships) Act 1976.
- The value of such powers, which amount in effect to a general power of appointment and are tantamount to ownership, is equal to the net value of the assets of the trust over which the powers can be exercised.
Orders
The appeal is allowed in part. The finding of the Court of Appeal that cl 7.1 of the VRPT deed is a general power of appointment and relationship property is set aside. It is substituted with a finding that the powers of Mr Clayton as Principal Family Member and Trustee under cls 6.1, 7.1, 8.1 and 10.1 of the VRPT deed are property and relationship property having a value equal to the net assets of the VRPT. The Court of Appeal's finding that the VRPT is not a sham is upheld. The Court declined to rule on the 'illusory trust' issue. No award of costs was made due to the parties having reached a settlement.
Key passages5
The definition of property in the PRA is a fluid concept which can extend to include interests not previously covered, and its meaning is affected by statutory context, social values, economic interests, and technological developments.
“The Court said its meaning and scope must also be affected by the statutory and wider context (including changing social values, economic interests and technological developments) in which it is used.”
The property definition in s 2 of the PRA must be interpreted in a manner that reflects the statutory context, with the reference to 'any other right or interest' broadening traditional concepts of property.
“We accept the submission for Mrs Clayton that the property definition in s 2 of the PRA must be interpreted in a manner that reflects the statutory context. We see the reference to 'any other right or interest' when interpreted in the context of social legislation, as the PRA is, as broadening traditional concepts of property and as potentially inclusive of rights and interests that may not, in other contexts, be regarded as property rights or property interests.”
A non-fiduciary power of revocation of a trust can be regarded as giving rights tantamount to ownership, and can be treated as property.
“The powers of revocation are such that in equity, in the circumstances of a case such as this, Mr Demirel can be regarded as having rights tantamount to ownership.”
A general power of appointment is a power under which the donee may appoint to anyone including himself, and is usually viewed as tantamount to ownership and can be treated as property for particular purposes.
“A general power of appointment is usually viewed as tantamount to ownership and can be treated as property for particular purposes.”
A sham is a pretence: a document that does not evidence the true common intention of the parties.
“As this Court made clear in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue, a sham is a pretence: a document that does not evidence the true common intention of the parties.”
Cases mentioned in judgment
Legislation mentioned
- Property (Relationships) Act 1976, s 1M, s 1N, s 2, s 4, s 8, s 8(1)(e), s 9, s 9A, s 9A(1), s 9A(2), s 11, s 11(1), s 13, s 21J, s 25, s 25(1)(a)(ii), s 26, s 33, s 33(3)(d), s 33(3)(e), s 33(3)(m), s 44C
- Family Proceedings Act 1980, s 169
- Property (Relationships) Act 1976, s 35A
- Family Courts Act 1980, s 11B, s 11C, s 11D
- Matrimonial Property Act 1976
- Matrimonial Property Act 1963
- Property (Relationships) Amendment Act 2001
- Property Law Act 1952
- Property Law Act 2007, s 4
- Crimes Act 1961, s 249(1)
- Child Support Act 1991, s 105(2)(c)(i)
- Legal Services Act 2011
- Overseas Investment Act 2005
- Insolvency Act 2006, s 412
- Companies Act 1993
- Family Law Act 1975 (Cth), s 4, s 75(2)(b), s 79
- Matrimonial Causes Act 1973 (UK), s 25(2)(a)
- Matrimonial Property Act RSA 2000 c M-8, s 8(d)
- Criminal Proceeds (Recovery) Act 2009, s 58
- Social Security Act 1964, s 147A
- Estate and Gift Duties Act 1968, s 8
- Perpetuities Act 1964, s 6
- Trustee Act 1956, s 13D