Able v Able
[2020] NZHC 177
•14 February 2020
NOTE: PURSUANT TO S 169 OF THE FAMILY PROCEEDINGS ACT 1980, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B, 11C AND 11D OF THE FAMILY COURT ACT 1980. THIS IS AN ANONYMISED VERSION OF THE JUDGMENT. FOR FURTHER INFORMATION, PLEASE
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-791
[2020] NZHC 177
UNDER the Family Proceedings Act 1980 BETWEEN
JOHN ABLE
Appellant
AND
KATHERINE ABLE
Respondent
Hearing: 16 October 2019 Appearances:
S J McCarthy and D Turk for the Appellant D Chambers QC for the Respondent
Judgment:
14 February 2020
JUDGMENT OF GAULT J
This judgment was delivered by me on 14 February 2020 at 4:00 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Counsel / Solicitors:
Mr S J McCarthy and Ms D Turk, Barristers, Auckland
Ms K-S Grant (appellant’s instructing solicitor), Blackhawk Law Ltd, Pukekohe Lady D Chambers QC, Barrister, Auckland
Ms K Lindberg (respondent’s instructing solicitor), Solicitor, Papakura
ABLE v ABLE [2020] NZHC 177 [14 February 2020]
[1] Mr John Able appeals against the judgment of Judge F J Eivers in the Family Court dated 20 March 2019 ordering interim spousal maintenance in favour of the respondent Mrs Katherine Able as follows:1
(a)to continue payment of $1,200 per week;
(b)to continue to pay monthly expenses as listed;
(c)to pay $12,000 per month as a contribution toward her legal costs, to commence 1 April 2019.
[2] At the outset of the hearing, Ms Chambers QC, for Mrs Able, addressed her application for leave to adduce a further updating affidavit. Mr Able had opposed the application but, in the alternative, provided his own further affidavit. The volume of further material was substantial. Ms Chambers submitted that Mrs Able’s updating affidavit passed the “special reasons” test for further evidence and that Mr Able’s affidavit did not.2 But Ms Chambers accepted that, if identified, the parts of Mr Able’s affidavit that addressed the same updating issues might also be admitted if an oral application were made. Recognising the limited relevance of the further evidence to the appeal, Mrs Able’s application was withdrawn by consent and neither further affidavit was admitted.
Factual background
[3] The parties were married in 2004.3 They had two children, born in 2005 and 2006. Mrs Able ceased full-time paid employment after their first child was born and ceased paid work after their second child was born. She was their main caregiver.
[4] Mr Able worked in a market gardening business from 1994, initially in partnership with his father. In 1999 Mr Able’s father settled the John Able Trust (the Trust). In 2003 A Ltd was incorporated. It became the trading entity for the business, growing the vegetables. The Trust owns land and leases it to A Ltd. Initially, 98% of
1 Able v Able [2019] NZFC 1202. By the date of the hearing, the interim order had already expired. An application for a further order was opposed and awaiting a hearing date in the Family Court.
2 High Court Rules 2016, r 20.16(3).
3 There is some dispute as to exactly when the relationship commenced.
A Ltd’s shares were owned by the Trust. After various transfers, all the shares are now owned by the Trust. Mr Able is the managing director.
[5] In 2008 AB Ltd was incorporated. It leases a building from the Trust and operates a packhouse. All its shares are also owned by the Trust. Mr Able is the sole director.
[6] The parties separated in January 2015. Following separation, Mrs Able and the children remained living in the family home (owned by the Trust). Mr Able voluntarily paid maintenance of $1,200 per week plus expenses of approximately
$8,000 per month. Shortly before the Family Court hearing, Mr Able proposed that the $1,200 per week payment should be reduced to $500 per week on the basis of a proposed interim distribution of $300,000.
Issues
[7] There are essentially two issues on appeal: whether the Judge was correct to order payment of:
(a)$1,200 per week (rather than $500); and
(b)$12,000 per month towards Mrs Able’s legal costs.4
Approach on appeal
[8] There is no real dispute about this Court’s approach on appeal. Orders for interim maintenance under s 82 of the Family Proceedings Act 1980 involve the exercise of discretion. Accordingly, on appeal the approach taken in May v May applies.5 As the Supreme Court said in Kacem v Bashir, in this kind of case the criteria for a successful appeal are: (1) error of law or principle; (2) taking account of irrelevant considerations; (3) failing to take account of a relevant consideration; or (4) the decision is plainly wrong.6 The appellant seeking to appeal against the exercise of a discretion, particularly an unfettered discretion, has a difficult task.
4 Mr Able no longer challenges the separate monthly expenses order.
5 May v May (1982) 1 NZFLR 165 (CA) at 170.
6 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].
[9] In the interim maintenance context, the discretion is unfettered in the sense that there are no mandatory considerations such as those that apply to final spousal maintenance orders.7 Thus, the real question in relation to each of the two orders in issue is whether the Judge was plainly wrong.
Analysis
[10] The purpose of interim maintenance is to protect the position of an applicant who may have inadequate means to meet current needs pending determination of the proceeding, if and so far as it is reasonable in all the circumstances to do so.8
[11] Mr McCarthy submitted that it is not just to allow Mrs Able to protect her capital while requiring Mr Able to pay maintenance, including legal costs, out of his capital. He submitted the payment of maintenance cannot be taken into account in the subsequent distribution of relationship property under s 18B of the Property (Relationships) Act 1976. Since relationship property is determined at the date of separation, Mr Able is effectively having to fund maintenance out of his share of relationship property.
[12] There is no issue about Mrs Able’s reasonable needs, which she is not able to meet, nor Mr Able’s ability to meet them. The requirements for maintenance are accepted. The dispute, in relation to both the $1,200 per week (rather than $500) and the $12,000 per month contribution towards legal costs, is whether those needs should be met out of maintenance or the proposed interim distribution.
[13]Mr McCarthy also submitted that the Judge misunderstood that the proposed
$500 per week was based on the disputed value of money owed to Mr Able in his A Ltd’s current account rather than the interim distribution offer. Ms Chambers submitted that in the Family Court Mr Able’s position was rather that he would not be able to fund the weekly payment of $1,200 if the interim distribution was paid. In any event, it is true that the Judge linked the proposed reduction in weekly maintenance to
7 See T v H [2006] NZFLR 560 (HC) at [19]–[21] and [27], referring to Family Proceedings Act 1980, ss 62-66; and Hodson v Hodson [2012] NZFLR 252 (HC) at [25]–[26].
8 Ropiha v Ropiha [1979] 2 NZLR 245 (CA) at 247.
the disputed current account, but she also referred to the $300,000 offered by way of interim distribution.
[14] Mr McCarthy submitted that the proposed interim distribution in the Family Court was not conditional. He referred to Mr Able’s updating affidavit in the Family Court dated 20 February 2019, two days before the hearing, in which Mr Able said: “I will call-up $300,00 (sic) from my current accounts and pay that to the applicant by way of an interim division of relationship property”. Although the affidavit went on to say that Mr Able’s ability to pay the interim division of relationship property would depend on the ability of the trustees to pay him and that depended on the bank being prepared to lend funds to the trustees, which he was hopeful would be all resolved by the time of the hearing on 22 February 2019, Mr McCarthy said that at the hearing he advised the Judge that finance had been approved. Ms Chambers did not dispute that. Mr McCarthy confirmed the proposal again to me.
[15] I consider that the offer in the Family Court was still conditional, in the sense that payment by the trustees was not assured and the offer was linked to weekly maintenance being reduced. Mrs Able did not accept the offer. The proposed distribution was therefore not available to her to meet her reasonable needs. I was told that Mrs Able had applied for an interim distribution of a significantly higher sum, the quantum of which was opposed by Mr Able, and that the parties were awaiting a hearing at the time of the maintenance hearing. The interim distribution application was not before the Judge with the interim maintenance application. I accept the Judge could have crafted an interim maintenance order to reflect Mr Able’s offer, such that if Mr Able paid an interim distribution of $300,000 then the maintenance would be at the reduced level, and made clear this was without prejudice to Mrs Able’s application for a higher interim distribution. But the question is whether the Judge was plainly wrong not to do so.
[16] It is common ground that there is no ability to adjust the division of relationship property to take account of maintenance paid from the appellant’s share. I accept that maintenance is effectively funded out of Mr Able’s share of relationship property. In some circumstances, an interim distribution of relationship property may be preferable and hasten the path towards independence. But that is unlikely with the proposed
distribution here and I consider the payment of interim maintenance out of capital is fair. Although the quantum is disputed, Mr Able currently has the use of Mrs Able’s relationship property. The proposal that Mrs Able fund her own maintenance to the extent of $700 per week out of the proposed interim distribution of capital is less fair, including because she would need to find somewhere else to live. She would need to spend capital on maintenance, which would not assist her path towards independence. That proportion would be even higher now given that the proposed interim distribution is net of refunds for the overpayments pending appeal. Ongoing maintenance also incentivises earlier determination of the relationship property dispute.
[17] Mr Able accepted that he has money owed to him in his A Ltd’s current account (although the quantum is disputed) and therefore his ability to pay maintenance was not an issue. But he does not accept that he controls the Trust or that he owns everything. Given the concession, Mr McCarthy submitted that it was unnecessary for the Judge to make findings about control of the Trust – they were irrelevant given Mr Able’s ability to pay was not in issue. Mr McCarthy submitted the Judge went too far; she should have acknowledged there is a dispute and not made findings. Further, he submitted the Judge’s findings were plainly wrong – both in relation to the value of the current account and in relation to control of the Trust.
[18] I do not agree that just because Mr Able accepted he had the ability to pay it was irrelevant for the Judge to consider the quantum of funds available. That is relevant to the question of what level of maintenance is appropriate in the circumstances.
[19] On the evidence, I also do not accept that the Judge’s conclusions in relation to the value of the current account were plainly wrong. The Judge acknowledged that it was a “moving feast” and that the issue of whether an earlier share transfer was valid has yet to be decided, and stated:9
… on the evidence before me the current legal position is that the current account has a value of $1.8 million. This is on the basis that the accounts to date have been prepared on the basis that the shareholding was valid. This represents the present position presently registered in the Companies Office.
9 Able v Able [2019] NZFC 1202 at [23].
[20] The Judge made it clear she was not determining the issue. I consider she was entitled, for the purposes of considering interim maintenance, to proceed on the basis that the accounts were correct. In any event, I do not consider that the issue makes a real difference given it is undisputed that a substantial sum remains in the current account.
[21]In relation to Mr Able’s control, the Judge said:10
The issue about the trust and its structure forms part of the background and it is helpful insomuch as it provides the basis upon which the respondent husband runs and manages his business and the context to the wealth that has been acquired over the years of the relationship. The evidence shows that the respondent husband is a successful businessman who has worked extremely hard to build assets and wealth up from nothing throughout the time of the relationship. It is clear on the evidence that he is the driving force behind his successful business, and further that the business operates through the Trust which he manages and operates to derive income for the trust and its beneficiaries, and to build on and improve the assets of the trust.
[22] Mr McCarthy disputes the last sentence in particular. Ms Chambers submitted that this should be understood to mean that Mr Able manages and operates the business rather than the Trust. Grammatically, I am not sure that is what the Judge meant but, in any event, Mr Able has not established that the Judge’s conclusion was plainly wrong. Of course, in this interim maintenance context, the Judge was not making substantive determinations for relationship property purposes. Mr Able was not required to set out his case in relation to the Trust as he would need to do in that context. But I accept Ms Chambers’ submission that the limited evidence he did file did little to contest Mrs Able’s case in relation to the operation of the business through the Trust and the companies. In the absence of reliable contrary evidence, the natural inference to be drawn at this stage from the financial records, in addition to Mrs Able’s direct evidence, is that Mr Able had a substantial degree of control over his earnings, whether by way of salary or otherwise.
[23] For these reasons, I consider Mr Able falls well short of showing that the Judge was plainly wrong to order the payment of $1,200 per week. Indeed, I agree with the Judge that interim ongoing maintenance of $1,200 per week was reasonable and just.
10 At [22] (footnotes omitted).
[24] In relation to legal costs, I do not accept Mr McCarthy’s submission that the Judge ignored the proposed interim distribution. The Judge referred to the offer and the submission that it would put the parties on a level playing field whereas ordering legal fees by way of interim maintenance would alter the playing field. The issue is whether the Judge wrongly concluded that the legal costs be paid by way of maintenance rather than out of the proposed interim distribution.
[25] Mr McCarthy also submitted that awarding legal costs as maintenance cuts across the costs principle that a party is awarded costs if he or she wins – that costs follow the event. In C v G, the Court of Appeal concluded that legal costs should not be included in a maintenance order unless they are likely to be an ongoing expense, and that to include awards of costs in periodical maintenance orders would cut across the policies behind the costs rules.11 Although C v G involved a final rather than interim maintenance order, Mr McCarthy submitted that it does not matter whether the Court is considering interim or final maintenance, relying on Clayton v Clayton where Courtney J acknowledged that some of the reasons given for the Court of Appeal’s decision in C v G would have the effect of excluding legal costs in all maintenance orders.12
[26] In Clayton, Courtney J said that putting a party in funds to meet legal expenses through interim distribution of relationship property may be preferable to making an allowance in a final maintenance order.13 It may hasten the path towards independence.14 Even so, she concluded that the statutory scheme for final maintenance orders does not preclude a final maintenance award making an allowance for legal expenses in relation to ongoing litigation.15
[27]In Hodson v Hodson, Kós J referred to the Court of Appeal’s decision in C v G
as clearly providing that legal costs should only be included in a final maintenance
11 C v G [2010] NZCA 128, [2010] NZFLR 497 at [52]-[54].
12 Clayton v Clayton [2015] NZHC 550, (2015) FRNZ 153 at [24].
13 At [27].
14 At [27].
15 At [29].
order if likely to be a continuing expense and added that in the context of a s 82 interim order, a more liberal approach may be taken.16
[28] In any event, the key distinguishing feature of C v G is that the legal costs in that case were not ongoing. That is not an issue here. At least where the legal costs are ongoing during the relevant period, I consider it may be reasonable in some circumstances for interim maintenance to include payments for legal costs.
[29] The Judge considered it a forceful argument that a contribution to legal costs is required, referring to proceedings having to be issued because of delay in reaching settlement and the complexities of the case, increased with the issue of validity of the share transfer 10 years ago. Mrs Able does not have access to funds (other than maintenance) nor assets.
[30] I agree with the Judge that legal costs form part of Mrs Able’s reasonable needs in the circumstances of this case. She will not be able to sustain the relationship property proceedings without such funding. I do not consider the Judge erred in concluding that the legal costs should be paid out of maintenance rather than the proposed interim distribution. As indicated above, it was not assured and its use on legal costs would not have assisted Mrs Able’s path towards independence.
[31] Including the funding of ongoing legal costs in the interim maintenance order would not predetermine the issue of costs in the substantive proceedings. The contribution can be taken into account in the fixing of costs in the substantive proceedings as the Judge considers appropriate. As Courtney J said in B v B, there is no real risk that Mr Able would be faced with having to meet those costs twice over.17
[32] There was no issue as to the reasonableness of the legal costs and in the circumstances of this case I consider the Judge was right to conclude that Mr Able should pay $12,000 per month as a contribution to them as part of his interim maintenance.
16 Hodson v Hodson [2012] NZFLR 252 (HC) at [36]. See also GCH v SMH [2014] NZHC 211, (2014) 29 FRNZ 727 at [30]-[36].
17 B v B [2008] NZFLR 789 (HC) at [20].
Result
[33]The appeal is dismissed.
[34]The respondent is entitled to costs on a 2B basis plus disbursements.
Gault J
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