Biggs v Biggs
[2020] NZCA 231
•11 June 2020 at 2.00 pm
| PUBLIC VERSION |
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA224/2020 [2020] NZCA 231 |
| BETWEEN | SOPHIE ANNABELLE BIGGS |
| AND | STEPHEN TIMOTHY BIGGS |
| Hearing: | 4 June 2020 |
Court: | Miller, Collins and Woolford JJ |
Counsel: | DAT Chambers QC for Appellant |
Judgment: | 11 June 2020 at 2.00 pm |
JUDGMENT OF THE COURT
AThe appeal is allowed.
BThe husband must pay the wife the sum of $700,000 without delay on the terms ordered at [97] of our previous judgment ([2018] NZCA 546).
CThe husband’s application to adduce further affidavit evidence is declined.
DThe husband is to pay costs for a standard appeal on a band A basis with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Miller J)
This appeal is brought against an interlocutory judgment of the High Court in which Nation J refused Sophie Biggs an additional interim distribution of $1,100,000, to be paid by her former husband, Tim Biggs, from what he maintains is his separate property and accounted for in the ultimate settlement of her claims to relationship and separate property.[1]
[1]Biggs v Biggs [2020] NZHC 768 [High Court judgment].
This judgment should be read with the judgment below, which was delivered on 20 April 2020,[2] and also with this Court’s judgment of 30 November 2018[3] in which we, among other things, examined the jurisdiction to order an interim distribution under s 25 of the Property (Relationships) Act 1976 (“the Act”), and ordered that Mr Biggs, whom we will call “the husband”, make an interim payment to Ms Biggs (“the wife”) from what he says is his separate property so she might pursue her claim to trial, anticipating that that sum would be taken into account on sale of the former family home at Closeburn Station, Queenstown. The High Court had previously ordered that he make an interim payment of $200,000 pending sale and we ordered that he pay the same amount again.[4]
[2]High Court judgment, above n 1.
[3]Biggs v Biggs [2018] NZCA 546, [2018] NZFLR 854 [Court of Appeal judgment].
[4]Biggs v Biggs [2018] NZHC 1592, [2018] NZFLR 580 [First distribution judgment] at [409]; and Court of Appeal judgment, above n 3, at [97].
Trial is now imminent. The proceeding has a firm fixture of three weeks commencing on 22 June. In the circumstances, this judgment must be brief.
Relevant background
To explain the circumstances it is necessary to refer to the judgments below, beginning with Nation J’s earlier comprehensive judgment of 29 June 2018, in which he ordered sale of Closeburn, essentially on agreed terms.[5] He ordered that each party was to receive $1.5 million from the proceeds when the property sold:
[30] The parties agree that their home is to be sold. It is on the market. This judgment records mostly agreed terms governing the process of sale and payments that are to be made from the proceeds of sale.
[31] To the extent there is an interim distribution from the proceeds of sale, the distribution should be to the parties equally. There is uncertainty as to when a sale will occur and what the net proceeds will be. There is still to be an accounting between the parties over the way a finance facility secured over the property has been used since separation. There may have to be an accounting with regard to costs once the proceedings are resolved. In these circumstances, the parties are each to receive $1,500,000 from the net proceeds of sale once settlement of the sale has taken place.
[5]First distribution judgment, above n 4, at [30] and [388].
The Judge anticipated that the property would sell before the proceeding reached trial. He ordered that the balance of the proceeds be held in trust and reserved leave to seek a further distribution when sale was obtained and the precise balance available for distribution was known.[6] At that time the property was being marketed for more than $8 million. It is subject to mortgage indebtedness of $566,868.
[6]At [32].
In the interim, the Judge ordered the husband was to pay the wife $200,000 as an interim distribution of relationship property:
[33] Mr Biggs is ordered to pay Ms Biggs $200,000 within two weeks as an interim distribution of relationship property. He is to be credited with payment of that amount against any sum to which Ms Biggs is ultimately entitled on resolution of all claims. If the home sells before claims have been resolved, that $200,000 is to be paid to Mr Biggs from the $1.5 million that Ms Biggs is entitled to from the sale of the home. The requirement on her to pay that amount to Mr Biggs is without prejudice to any order that might ultimately be made over costs. The application for an interim distribution in excess of this is declined.
It will be seen that the payment was to be deducted from the wife’s share of the interim distribution of sale proceeds, reducing the distribution to her to $1.3 million.
Although the Judge did not state exactly what jurisdiction he was exercising, we apprehend that the order for distribution from the proceeds of sale of Closeburn, which is acknowledged relationship property, was made under s 25(3) of the Act. The Judge’s order that the husband pay money to the wife before Closeburn had been sold was either an ancillary order under s 33(1) of the Act or, more likely, an interim distribution of property that is held by the husband and the status of which has yet to be ascertained.
In our judgment we directed that the husband pay an additional $200,000, to be taken into account on the sale of Closeburn as Nation J had ordered.[7] We reasoned that the jurisdiction under s 25(3) extends to property subject to the wife’s claim under s 9A of the Act notwithstanding that its status remained to be finally determined:[8]
[94] The Judge reasoned that under s 25(3) he might order this payment against the husband’s interests in the home and in superannuation investments to which the wife has a claim.
[95] We observe that neither asset was to be realised before the interim payment was made. The Judge had it in mind that the husband might pay from what he claims is his separate property. Whether a court can order an interim payment from ascertained separate property is a controversial question. We need not answer it here, because the wife’s relationship property claim extends to other relationship assets under the husband’s control, including a share in the husband’s separate property under s 9A, and we accept that the jurisdiction to make interim orders extends to that property although its status remains to be finally determined. The criterion under s 25 is the interests of justice. In this case the Court need not be concerned about a risk of injustice to the husband, because the Judge found that the payment will not embarrass him financially and the wife’s share of the home is more than enough to recompense him for the payment.
[7]Court of Appeal judgment, above n 3, at [97].
[8]At the hearing of the present appeal we declined the husband’s invitation to revisit this conclusion. (Citations omitted.)
As that passage indicates, we considered that the husband’s interests were adequately protected because the interim payment would be recoverable from the sale of Closeburn. In those circumstances it sufficed that the wife had a pleaded and plausible claim.[9] We did not find it necessary to test the factual merits of her claim further. The husband’s ability to pay was not in doubt. We found that the only reason to take a conservative approach was that the payment had to be funded, in the short term, from property that the husband maintains is his own.[10]
[9]At [85] and [96].
[10]At [96].
Everyone envisaged that Closeburn would sell before long, and certainly before trial. It has been on the market since 2017. The parties agreed to a sale at $6.6 million in February 2019 but that fell through because the overseas buyer could not get the necessary regulatory consent. The property will now not be sold before trial.
In the meantime the parties have continued to incur substantial legal and expert witness costs. The wife deposes that she now owes her legal and accounting advisors plus expert witnesses approximately $1,076,000. She has incurred much of that sum since December 2018, when the husband made the payment we ordered at that time. Costs will increase substantially during the three-week trial and the trial preparation phase.
The wife has accordingly applied for payment of a further $1.1 million. That would bring the total advanced by the husband to $1.5 million, her full share of the interim distribution that the Judge originally ordered on sale of Closeburn.
The judgment below
Nation J recorded the wife’s evidence that she has incurred costs of a little more than $1 million, which she cannot pay from her own resources at present.[11] She is the primary caregiver of three young children and she has no independent income but depends entirely on her current partner. She maintained that the additional distribution would be covered by her share of the equity in the Closeburn home. The husband can fund his costs of the litigation and she seeks to be put on an equal footing.
[11]High Court judgment, above n 1, at [3].
Against that, the husband deposed that he had already paid or financed $760,000, including the interim distributions totalling $400,000, and he observed that the wife’s costs are double his own.[12]
[12]At [12]–[13].
The Judge accepted that it is likely the wife’s share of relationship property will exceed the amount she might have to repay the husband on account of the further distribution she seeks plus the payments he has already made.[13] However, there is no certainty about either her claims or the amount and timing of realisations from the sale of Closeburn.[14] It could not now be said that the sale is pending, nor that the equity will inevitably provide a substantial fund from which the husband may be reimbursed.[15]
[13]At [30].
[14]At [31].
[15]At [33].
The Judge observed that trial is scheduled for June 2020 so there would not be a significant delay before the Court can assess the strength of the wife’s claims and value of her entitlements.[16] It is not a case where she needs an interim distribution to prosecute her claims with the aid of senior counsel and expert witnesses;[17] she says she has not paid them since at least December 2018 but it has never been suggested that their continued assistance is conditional on being paid as their work progressed.[18] He inferred that her advisors have been willing to continue because they believe they will eventually be paid in full.[19] The Judge noted that the wife’s accountants have security; they have lodged a caveat over Closeburn, the title to which is in her name.[20] In that way she has been able to access relationship property indirectly. The reality is that the interim distribution is being sought to ensure her advisors can be paid for work they have already done.[21]
[16]At [34].
[17]At [35].
[18]At [39].
[19]At [44].
[20]At [45]–[46].
[21]At [48].
For these reasons, the Judge concluded on the facts that a further interim distribution was not necessary to ensure the wife “receives the reasonable and necessary legal and accounting advice she requires to resolve her claims on an adequately informed basis”.[22] He recorded that, as he had previously found and we had accepted, this is not a case of a husband seeking to defeat his wife’s claim through a process of financial attrition. He accepted that the case justifies her use of leading experts and her costs might reasonably exceed those of the husband, but expressed concern about the amount of her costs, which seemed extraordinarily high.[23]
[22]At [48]. We infer that the quote is from the submissions of counsel.
[23]At [40].
The Judge recorded that while this Court had said a liberal approach might be taken to interim distribution where there exists a pool of relationship property from which it may be funded,[24] there was one reason to take a conservative approach, namely that it must be funded in the short term, pending sale of the house, from property that the husband maintains is separate.[25] He considered that an important consideration in the present times of considerable economic uncertainty, which is likely to have a significant effect on the value of assets that would need to be realised to fund the distribution.[26]
The appeal
[24]At [25].
[25]At [58].
[26]At [56].
Because the proceeding predates the Senior Courts Act 2016, this interlocutory appeal is brought as of right.[27] The wife says that the Judge erred in law, by taking too restrictive an approach to the s 25(3) jurisdiction, and in fact, by doubting that the sale of Closeburn is still pending and will provide a fund sufficient to reimburse the husband, who has the means to pay her in the meantime. It is said that the Judge was also wrong to assume she should soldier on without paying her professional advisors. Finally, it is said that he ought to have considered an interim distribution of less than the $1.1 million sought.
Strength of the wife’s claim to a share of separate property will be decided at trial
[27]Judicature Act 1908, s 66; and Siemer v Heron [2011] NZSC 133, [2012] 1 NZLR 309.
In their submissions before us both counsel debated the merits of the wife’s claim to a share of the husband’s separate property under s 9A of the Act, citing our previous judgment and seeking to read into it conclusions about the merits. Ms Chambers QC was at pains to point to discovery which suggested the husband’s commitment of time to the business was much more extensive, and the couple’s relationship more traditional, than he had claimed when the proceeding was last before us.[28] Ms McCartney QC contended that the market, rather than anything done by the husband, was the major contributor to increases in asset values; alternatively, that increases resulted from decisions made by other people within the Laguna Bay entities.
[28]See Court of Appeal judgment, above n 3, at [28].
In the previous judgment we examined the elements of a s 9A claim in some detail, seeking to explain, in the context of a discovery application, that the wife has a substantive claim in law should the High Court find in her favour on the evidence led at trial.[29] We pointed out that it would be wrong in law to assume that contributions of the kind she claims to have made under s 9A(2) are presumptively less valuable than those of the husband.[30] However, the question whether she has a strong claim on the facts will be answered at trial. As explained above, we did not need to consider the merits further in our previous judgment and we do not find it necessary to do so now. This remains a case in which the pool of admitted relationship property is sufficient to fund an interim distribution.
The husband’s circumstances
[29]At [22]–[28] and [96].
[30]At [26]–[28].
The Judge accepted that the husband has, or can raise, funds to pay the interim distribution sought.[31] The husband has not disputed that in his evidence. During argument before us Ms McCartney contended that he has relatively few assets and those he has have been caveated by the wife.[32] However, the issue of capacity to pay has been live from the beginning and there is no evidence to the effect that he would be embarrassed by an order that he fund the sum requested. There is no evidence that he would suffer hardship by having to realise assets in the current market if that were necessary to fund the payment. We declined a request that he be allowed to file an affidavit on the point at this late stage.
Will the husband’s payments be reimbursed from a sale of Closeburn?
[31]High Court judgment, above n 1, at [51].
[32]We record at her request that he maintains the assets we referred to in [51(b)] of our previous decision are held in trusts that are not “Clayton” trusts entirely under the husband’s control. Their ownership and relationship property status remain to be resolved at trial.
Closeburn is undoubtedly relationship property and there has never been any dispute that it is susceptible to an order for interim distribution under s 25(3) of the Act. As the former family home, it is also subject to a powerful presumption of equal sharing.[33] We record that the husband pursues unequal distribution, but having regard to the strength of the statutory presumption we have not discounted the wife’s prima facie entitlement to equal sharing for present purposes.
[33]Property (Relationships) Act 1976, s 11(1).
There is an estimate that Closeburn might now realise $[…] million to $[…] million if treated as a forced sale. (This commercially sensitive estimate will be redacted from the public version of this judgment.) The wife prefers not to sell in market conditions affected by the Covid-19 pandemic. In a letter of 8 April 2020 her counsel advised that she does not agree to a sale at the current time.
Even at that price, there is no reason to doubt that the amounts the husband has been ordered to pay, plus the distribution now sought, would be repaid from the wife’s share of the proceeds of sale. Even on a conservative view of its value the property should still comfortably net significantly more than the $3 million ordered as distributions. What has changed is that the sale may be further delayed, perhaps indefinitely, though that will be for the High Court to decide.
Ms McCartney argued that the margin is thin once one takes into account the additional $360,000 that the husband has paid plus what he anticipates will be the costs he is awarded when the wife’s claim fails. His claim to repayment of monies paid to the wife is disputed — Ms Chambers characterised the payments as maintenance — but we accept that it may be recognised when assessing an interim distribution. Having regard to the Act’s purposes and principles, we are not prepared to allow the husband what amounts to security for costs. It remains the case, then, that the proceeds of Closeburn should still comfortably fund the further interim distribution sought by the wife.
The prospect of further delay is a significant consideration, but as noted there is no evidence that the husband cannot fund the distribution. Further, Closeburn is currently rented for $2500 per week and the proceeds, net of outgoings and debt servicing, are paid into the husband’s bank account. The parties have agreed to extend the existing tenancy, which is terminable on two months’ notice.
Who should fund the wife’s costs in the meantime?
It cannot be said that a further interim distribution is necessary to ensure the wife has the expert assistance she will need at trial. As the Judge recorded,[34] Ms Chambers and the wife’s solicitor and other advisors will prosecute the trial if the appeal fails, notwithstanding that they have not been paid.
[34]High Court judgment, above n 1, at [39], [44] and [47]–[48].
Ms Chambers argued rather that the wife’s advisors should not be put in the position where their ethical obligations compel them to continue rather than abandon their client so close to trial. As she put it, the husband’s advisors are being paid but the wife’s are being asked to soldier on. The interests of justice require that they be put on an equal footing.
Put in this way, the question on which the appeal turns is whether the burden of funding the wife’s costs of the litigation should be borne by the husband or by the wife’s advisors. We repeat that it falls to be answered in circumstances where, on the record before us, the husband has not provided evidence of any inability to pay and the payment can be reimbursed from what is indisputably relationship property.
We readily accept that in the normal way counsel and experts may insist on payment as work is done and a court should not insist that an applicant engage counsel and experts who are willing to work on a delayed payment basis.
In this case, though, a lot of water has passed under the bridge and the parties are very close to trial. The wife’s advisors have continued to work without payment, suggesting that they have come to an accommodation of some kind with her. What she now seeks, as the Judge observed,[35] is payment for work they have already done. We agree with the Judge that the accountants’ caveat on the Closeburn title is evidence that the wife has effectively accessed the property by using it to secure payment of some of her costs.[36] It was for these reasons that he was not persuaded that it was necessary to order the husband to pay more.
[35]At [48].
[36]See [46].
We agree with the Judge that these circumstances put in issue the nature of the arrangements between the wife and her advisors. They might have agreed some time ago that the advisors would be paid at the end of the day, perhaps with some element of contingency fee or cost of money arrangement. It is a question of litigation funding which calls for evidence, rather than assurances from the bar.
Ms Chambers submitted that the wife’s affidavit, though sparse, justifies the inference that the wife owes a debt which is presently due and all that has happened is that her advisors have chosen to exercise forbearance. She pointed out that for legal advisors conditional fee agreements are precluded in proceedings within Family Court jurisdiction.[37] In the circumstances, we gave the wife leave to file an additional affidavit deposing to the arrangements.
[37]Lawyers and Conveyancers Act 2006, s 335(d).
The affidavit, which was sworn by the wife, records the following:
(a)She owes her lawyers (including Australian counsel) $487,851.50. Some of the fees owed to Ms Chambers have been outstanding since November 2017 and those owed to her solicitor, Mr Eggleston, have been a running debt since December 2018. None of her lawyers have taken security and they have agreed that they will not charge interest.
(b)She owes her accountants, Lyne Davis Opinion Ltd, $490,638. She is accruing interest at 0.75 per cent per month, though this was not charged for the first nine months after she was unable to pay. She has entered an agreement to mortgage Closeburn which sustains the caveat.
(c)She owes other expert witnesses AUD91,757.50, some of which has been outstanding for a significant time. The arrangement is that they will be paid at the conclusion of the case.
(d)She entered these arrangements in the belief that the proceeding would be resolved, likely by settlement, long before now. She has not been able to make any payments and that is an embarrassment to her.
Was the Judge wrong to consider the reasonableness of the wife’s costs?
Ms Chambers criticised the Judge for what she characterised as an inappropriate focus on the reasonableness of the wife’s costs. She acknowledged that the Judge cited what this Court had to say at [85] of its judgment, to the effect that there need be no reticence about an interim distribution from a pool of relationship property, but submitted that he then failed to apply it.
We do not agree. Paragraph [85] was directed to a slightly different point. The payment here is not being made, in the first instance, from what is clearly a relationship property pool; if it were, we agree there would be no reason to resist the distribution.[38] The payment is being made by the husband from what he says is his separate property, on the basis that he will be reimbursed from relationship property when an accounting is done. The status of the property from which the payment is to be made will be resolved in litigation that the husband is being asked to fund in the meantime. In these circumstances a balance must be struck. Considerations such as those listed in [78]–[83] of our previous judgment, which dealt with interim costs orders, may assume relevance. It is permissible to consider the reasonableness of her costs when examining whether and how much he must pay from what may yet prove to be property to which she has no claim in law. The Judge has case-managed the proceeding and he was entitled to express a provisional view of her litigation strategy. He did not fail to recognise that her costs might understandably be higher than his.[39]
Further interim distribution
[38]See Murray v Murray (1989) 5 FRNZ 177 (CA) at 179.
[39]High Court judgment, above n 1, at [40].
Ms Chambers submitted that the wife has made out her claim to payment of $1.1 million, but she argued that it is not an all or nothing decision; if we think it is too much we should order a lesser payment.
We reiterate that an applicant should not be required to engage advisors who are prepared to work on a delayed payment basis when there is a pool of relationship property available to fund the litigation. The wife’s arrangements with her advisors in this case have become relevant for two reasons: her application has been made at a late stage to fund costs already incurred, and the status of the property that will be used to fund the interim distribution, pending sale of Closeburn, is in dispute.
In the very particular circumstances of this case, and having regard to evidence that was not before the Judge, we have reached the view that a further interim distribution is warranted. We do not think it is reasonable in the circumstances to require that the wife’s advisors continue to bear the entire burden of funding her claim.
We take the view that the order should suffice to cover all of the wife’s legal costs (New Zealand and Australian) incurred to date. Nothing in her arrangements with her legal advisors suggests a contrary approach. We recognise the Judge’s concern about reasonableness of fees, but it is unlikely that the total that the husband is being required to fund will be found unreasonable once the costs of trial, which have yet to be incurred and are not included in this order, are taken into account. We take the same view of the costs incurred by her expert witnesses, excluding those from Lyne Davis Opinion Ltd.
Lyne Davis is in a different position from other advisors. They have taken security and are charging the wife interest. The amount outstanding is very substantial for an expert witness, and we do not know how much more work will be required of the firm at trial. In our previous judgement we recognised that the wife needed the assistance of a forensic accountant but expressed concern about the uncompromising approach Mr Lyne had taken to discovery at that time.[40] Against these matters, which suggest there is no reason to be solicitous of the firm’s interests, to refuse an interim distribution for the outstanding costs is to require that the wife continue to fund them. She undoubtedly would have preferred to pay Lyne Davis on the same basis as we understand the husband’s advisors are funded; that is, as fees are incurred and without giving security or incurring interest.
[40]Court of Appeal judgment, above n 3, at [39]–[43].
We propose to deal with this by ordering that the husband make an interim distribution that will substantially fund the wife’s legal and expert witness costs of the litigation but leaves it to her to decide how the payment is distributed among her advisors. The distribution is intended to balance the competing interests of the wife and the husband, and to ensure that any necessary adjustments can be made from a pool of relationship property the nature and size of which remains to be fixed. We must also recognise that the husband claims to have advanced other sums to the wife and all the money he has paid, including interim distributions, may end up being reimbursed from the eventual sale of Closeburn, which seems likely to be delayed for some time.
For these reasons the amount is inevitably both conservative and somewhat arbitrary. We fix it at $700,000, so bringing the total that the husband has been ordered to pay by way of interim distribution — including the two previous payments of $200,000 — to $1.1 million. We order that the sum of $700,000 is to be paid to the wife without delay on the terms ordered at [97] of our previous judgment.
Other matters
The Judge also mentioned that this is a second application for an interim payment. Ms Chambers argued that that is immaterial. We agree but do not think his decision turned on it. We take the same view of her submission that the Judge appears to have assumed the accountants’ caveat would preclude raising money on the house to fund the payment that the wife seeks. Nor are we prepared to infer from the Judge’s reference to her claim to separate property, as opposed to property that the husband claims is separate, that the Judge failed to take into account this Court’s guidance on s 9A.
Costs of this appeal
The husband is to pay costs for a standard appeal on a band A basis with usual disbursements.
Solicitors:
Holland Beckett Law, Tauranga for Appellant
Lloyd Troon Law, Queenstown for Respondent
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