Booth v Booth
[2020] NZCA 451
•25 September 2020 at 3.00 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA529/2019 [2020] NZCA 451 |
| BETWEEN | TANIA BOOTH |
| AND | JASON BOOTH |
| Hearing: | 16 June 2020, further submissions received on 30 June 2020 |
Court: | Goddard, Ellis and Katz JJ |
Counsel: | J J Delany for Appellant |
Judgment: | 25 September 2020 at 3.00 pm |
JUDGMENT OF THE COURT
The appeal is dismissed.
____________________________________________________________________
REASONS OF THE COURT
(Given by Ellis J)
Ray and Ann Booth are embroiled in what is essentially a relationship property dispute between their son, Jason, and his former wife, Tania.[1] The aspect of that dispute presently at issue is Tania’s claim under s 182(1) of the Family Proceedings Act 1980 (the FPA) that there was a post-nuptial settlement by which Ray effectively made available to Jason and Tania some $1.5 million. That claim was the subject of successful applications for summary judgment (by Jason) and for strike-out (by Ray and Ann) in the High Court.[2] Tania now appeals.
Background
[1]Because all the parties have the same surname, we will refer to them by their first names.
[2]Booth v Booth [2019] NZHC 2424, [2019] NZFLR 225 [High Court judgment].
In 1998, Ray and Jason formed Booths Farming Ltd (BFL), a company that bought and sold farmland. In 2001 Ray formed an operational company through which he ran the family farming business. This company became Booth Agriculture Ltd. An asset of the wider farming enterprise was farmland situated at Poplar Road, Opiki, owned by Ray personally.
Jason and Tania married in 2001. The couple then moved onto the Opiki farm property. Jason and Tania were both heavily involved in farming the property.[3] They had three children there together.
[3]Ray and Ann also have a daughter, but she is not involved in the farming operations.
In 2011, the family agreed to a generational handover of the farming operation. They settled on a restructuring plan proposed by Peter Savage, an accountant instructed by the Booths. The corporate entities were reorganised and the farming business (including, in particular, the Opiki farm) was sold to a company incorporated by Jason and Tania for that purpose: Poplar Road Farms Ltd (PRF). Jason and Tania are 50:50 shareholders in PRF.
The reorganisation left the balance of the Opiki farm purchase price as a debt owing by PRF to Ray. This debt was recorded in a deed dated 1 November 2011 (the Deed) and signed by both Tania and Jason, as directors of PRF. In the Deed, PRF was described as the “Debtor” and Ray was referred to as the “Creditor”. Recital A recorded that Ray had advanced $1,150,251.99 to PRF. Recital B recorded that he had done so to help PRF to purchase the farm. The operative provisions were as follows:
1. THAT the said sum of $1,150,251.99 has been advanced by the Creditor to the Debtor repayable “upon demand” …
2. PENDING repayment of the advance or any part thereof interest on the advance or so much of it as shall from time to time remain owing will be payable by the Debtor to the Creditor at a rate to be decided between them from time to time or if no rate is agreed then at the Government Stock rate then prevailing in New Zealand calculated from the date of advance with annual rests and payable on the 31st day of March in each year (“the interest payment date”).
3. NO such interest shall be payable pursuant to preceding clause 2 unless demanded by notice in writing by the Creditor from the Debtor on or before each interest payment date.
4. THIS deed shall constitute an agreement to mortgage and in the event that the Creditor requires security the Debtor will provide in favour of the Creditor a subsequent registered mortgage over the land in Certificate of Title WN469/53 and WN469/51. The intention of this clause is to create a caveatable interest in favour of the Creditor.
The $1,150,251.99 debt figure used in the Deed was indicative only, because the transaction occurred halfway through the financial year. The idea was that the final amount owing would be ascertained at year end by Mr Savage. That process became slightly complicated due to cash payments received by Ray and Ann, and due to transfers of assets and liabilities between the various Booth entities and individuals.
In any event, in March 2012, Mr Savage prepared a final statement of position, which was used to calculate the final quantum of the debt. Mr Savage recorded in an 8 March 2012 email to the lawyer, Mr Wadham, that the “final difference of $1,150,251.99 [could] be confirmed as a debt owing between the parties”. The email also noted that Ray, Jason and Tania had agreed on the figure and that it would be a “loan … between Poplar Road Farms Limited and R C Booth”. This figure was — rather surprisingly — exactly the same as the “indicative” figure first recorded in the Deed.
In 2016, Jason and Tania separated. Jason commenced proceedings in the Family Court for the division of relationship property under the Property (Relationships) Act 1976 (the PRA). In those proceedings, Tania alleged it was never intended that the debt owed by PRF to Ray would be repaid, so the PRF shares were worth some $1.1 million more, and her share of the relationship property should be increased by some $550,000.
Next, Ray and Ann commenced proceedings against PRF in the High Court (the rectification proceedings). They sought rectification of the amount owing under the Deed, which they said Mr Savage had undercalculated by over $400,000. As well as rectification of the Deed itself, they sought a declaration that, under the Deed, PRF owed Ray a debt of $1,579.134.94.
The Family Court then transferred the PRA proceedings to the High Court so they could be case-managed with the rectification proceedings. At the first case management conference, Associate Judge Johnston indicated to Tania that if she wished to maintain her claim on behalf of PRF that the Deed was unenforceable, she should apply for leave to bring a derivative action under s 165 of the Companies Act 1993.
Although Tania did then file such an application on behalf of PRF — by way of defence to the rectification proceedings — she later abandoned it, just prior to the hearing. She then filed new proceedings under s 182 of the FPA, naming Ray and Ann personally as defendants as well as Jason. Section 182 relevantly provides:
182 Court may make orders as to settled property, etc
(1) On, or within a reasonable time after, the making of an order under Part 4 of this Act or a final decree under Part 2 or Part 4 of the Matrimonial Proceedings Act 1963, the Family Court may inquire into the existence of … any ante-nuptial or post-nuptial settlement made on the parties, and may make such orders with reference to the application of the whole or any part of any property settled or the variation of the terms of any such … settlement, either for the benefit of the children of the marriage … or of the parties to the marriage … or either of them, as the court thinks fit.
…
(3) In the exercise of its discretion under this section, the court may take into account the circumstances of the parties and any change in those circumstances since the date of the agreement or settlement and any other matters which the court considers relevant.
…
(5) An order made under this section may from time to time be reviewed by the court on the application of either party to the marriage … or of either party’s personal representative.
…
Essentially Tania’s pleading was that:
(a)She had an expectation that the debt owed under the Deed would not be repaid, based on her understanding that the loan was to be gifted and that Ray did not require it to be repaid.
(b)If Ray and Ann were successful in the rectification proceedings (which had not at that point been determined), then:
(i)the value of PRF would be reduced by the amount of the debt, which would reduce the value of Tania and Jason’s relationship property; and
(ii)Tania, Jason, and their children would no longer have an expectation of receiving any benefit from the debt not having to be repaid.
(c)The Court should therefore make orders under s 182 in relation to the outcome of any successful claim by Ray and Ann in the rectification proceedings.
Because PRF’s shareholders, Jason and Tania, were fundamentally at odds (Jason supported the claim; Tania opposed it), PRF did not defend the rectification proceedings. A formal proof hearing took place before Clark J in early 2019. After a thorough analysis Clark J:[4]
(a)ordered that the Deed was to be rectified so that it recorded the amount owing as $1,579,134.94; and
(b)declared that PRF owed Ray the sum of $1,579,134.94 on the terms in the Deed.
[4]Booth v Poplar Road Farms Ltd [2019] NZHC 807 at [47]–[48].
After Clark J’s decision, Jason applied for summary judgment on the FPA claim. Ray and Ann applied to strike it out.[5] It was those two applications that came before the Associate Judge on 12 August 2019.
The decision under appeal
[5]In the alternative, they applied to be removed as parties to the proceeding pursuant to r 4.56(1) of the High Court Rules 2016 on the basis that their presence was unnecessary to determine the claim.
The Associate Judge summarised the substantive pleading of Tania’s FPA claim in the following way:[6]
[25] Paragraph 8 focusses on the 1 November 2011 deed. In this paragraph, Tania says that, although the deed records a loan between [Ray] and Poplar Road Farms, she “had an expectation that the loan would not be required to be repaid to [Ray], and she would receive the full benefit of the wider family business restructuring arrangements between all the parties that took place in 2011”.
[26] In paragraph 9, Tania says that her “expectation that the loan would not have to be repaid results from her understanding that the loan was to be gifted and that [Ray] did not require it to be repaid”.
[6]High Court judgment, above n 2.
Tania’s case, then, was that if Ray was entitled to recover the debt, her expectation that it was not to be repaid would be thwarted. The Associate Judge inferred that Tania also contended that this would differentially affect her and Jason, and would detrimentally affect their children because she had day-to-day care of them. The Associate Judge noted that, while expressed obscurely, Tania’s claimed relief was a s 182(1) FPA order that alleviated the alleged unfairness resulting from the divorce.[7]
[7]At [27] and [30].
As far as the application for summary judgment was concerned, after outlining the terms of s 182(1), the Judge noted that the issue here related to a potential post‑nuptial settlement. He reviewed the relevant authorities: Ward v Ward (CA) and Clayton v Clayton in particular.[8] He noted that in Clayton the Supreme Court had confirmed that s 182(1) involves a two-stage test, namely:[9]
(a)whether the transaction constitutes a nuptial settlement; and
(b)whether (and, if so, in what manner) the Court’s discretion under s 182 should be exercised.
[8]Ward v Ward [2009] NZCA 139, [2009] 3 NZLR 336 [Ward (CA)]; and Clayton v Clayton [2016] NZSC 30, [2016] 1 NZLR 590.
[9]Clayton, above n 8, at [27].
The Associate Judge recognised that the Court of Appeal in Ward had emphasised that there “should be a generous approach to the interpretation of the term ‘settlement’”.[10]
[10]Ward (CA), above n 8, at [22]; cited in Clayton, above n 8, at [32].
Mr Maassen’s submission (on behalf of Jason) was that the Deed — a record of debt — was the antithesis of a settlement in favour of Jason and Tania. But the Associate Judge noted that Tania’s position had developed since her pleading. The Associate Judge said she now claimed that, alongside the Deed, there was a collateral agreement: if she and Jason stayed together, there would be no demand for repayment. It was this collateral agreement that (Tania said) constituted the relevant settlement.[11]
[11]High Court judgment, above n 2, at [50].
As to the existence of a settlement, the Judge said that the arrangements could potentially constitute a disposition:
[54] Although Tania’s case is not very adroitly pleaded, if her evidence as to the terms of the arrangements were to be accepted, then, adopting a liberal approach to the notion of a settlement under s 182(1), and recognising that there are cases in which arrangements well short of an express trust, or anything that looks like a trust, have been found to constitute settlements, the view I take is that it would not be appropriate summarily to dismiss the possibility of a court concluding that those arrangements involved or included a disposition that “makes some form of continuing provision for both or either of the parties to a marriage in their capacity as spouses, with or without provision for their children”.[12] The arrangements were arguably continuing in nature because they depended upon the on-going commitment of [Ray] not to call in the loan, and the on-going anticipation that one day the loan would be forgiven, potentially in parts over a period of time.
[12]This is a quotation from Clayton, above n 8, at [33].
He noted that proving such an arrangement (and so, a collateral agreement) would be difficult for Tania, but concluded that it was not so impossible as to warrant a summary judgment on this point:
[55] Of course, Tania would face difficulties in advancing such a case. Although such arrangements are not uncommon within families, the formal documents here contain no suggestion of any such agreement, and her evidence will be contradicted by [Ray], Jason and others.
[56] However, assessing the evidence — both what the various deponents say and the contemporaneous material — the view I have reached is that Jason cannot establish to the necessary degree of certitude that Tania’s contention that the arrangements involved or included a settlement cannot succeed or that there is no issue worthy of trial. …
Next, and proceeding on the assumption that a collateral agreement/settlement could be established at trial, he turned to the question of whether that agreement could be said to be “nuptial” in nature. He noted that the essential test was whether the settlement was “premised on the continuance of the marriage” and whether it made some form of continuing provision for one or both of the partners “in their capacity as spouses”; there must be “a connection or proximity between the settlement and the marriage or civil union”.[13]
[13]High Court judgment, above n 2, at [59]; citing Ward v Ward [2009] NZSC 125, [2010] NZLR 31 at [20]; and Clayton, above n 8, at [33]–[34] and [86].
The Judge concluded that the (assumed) settlement here was arguably of a nuptial character:
[60] On Tania’s case, the alleged settlement was expressly contingent on the continuation of their marriage. That, in my view, could render it nuptial in character. The fact the debt was owed by Poplar Road Farms, and not Tania and Jason personally, would not detract from the reality of the transaction, if Tania could prove it at trial. There have been other cases where transactions conducted through corporate entities have been recognised as nuptial in character. Nor does the fact [Ray] would be the person providing the benefit under the settlement prevent it from being nuptial in character. The Supreme Court has made it clear that the focus is on whether there is sufficient connection to the marriage and not on the identity of the settlor. In any event, it is common for nuptial settlements to involve dispositions by parents or other family members.
(Footnotes omitted.)
But then came the clincher: whether the Court might (arguably) exercise its discretion and make an order of the kind sought by Tania under s 182. After referring again to the decisions in Ward (SC) and Clayton, the Judge said:
[65] In short, the discretion under s 182(1) exists to remedy injustices resulting from changes in circumstances that arise from the failure of the premise upon which the nuptial settlement was based. Typically, all parties assume the marriage will continue, or at least do not turn their minds to what would occur in the event of divorce. As a consequence, when divorce occurs the nuptial settlement no longer fulfils the purpose contemplated by the parties.
And so (the Associate Judge found) the difficulty with Tania’s position was that the alleged collateral agreement (settlement) was expressly conditional on the marriage continuing. There had, accordingly, been no failure of the premise on which the nuptial settlement was made because the premise was that Jason and Tania could only rely on receiving the anticipated benefit — the value of the loan — for the duration of their marriage. There was no relevant change in circumstances and no injustice to remedy. The Associate Judge concluded:[14]
Accordingly, in my judgement, there is no realistic possibility of the Court exercising its discretion to vary the nuptial settlement for Tania’s benefit. For that reason, even if Tania could establish a nuptial settlement at trial, her claim could not succeed.
[14]At [66].
In light of his conclusion on the summary judgment, the Associate Judge was able quickly to dispose of the strike-out. He said:
[78] To the extent that an application pursuant to r 15.1(1)(a) is focussed on the pleadings, I accept Mr Isac’s submission that Tania’s pleading as it currently stands does not capture accurately the essential basis for her claim and does not disclose a tenable cause of action. There is of course ample authority for the proposition that a court will be slow to strike out a claim on the basis of infelicitous pleading if it appears that the pleading could be amended so as to articulate a tenable case. However, in this case, I have taken Tania’s case as Mr Delany has advanced it — notwithstanding that this goes well beyond the pleading — and concluded that it cannot succeed.
Jurisdiction
The problem
Before turning to consider Tania’s appeal, it is necessary to say something about jurisdiction, which was an issue we raised at the hearing. The question was whether the High Court had jurisdiction to hear and determine the application under s 182.
As noted earlier, in June 2018, Jason’s PRA proceedings were transferred to the High Court. That transfer was effected in accordance with s 38A(2)(b) of the PRA, which permits a transfer where there are High Court proceedings with related issues (as there were here, in the form of Ray’s rectification claim).
It was at a case management conference in December 2018 that counsel for Tania first signalled that she intended to file proceedings under s 182 of the FPA. She filed those proceedings in the High Court; the High Court then directed that they be joined with the PRA proceedings.[15]
[15]All parties agreed that all proceedings concerning claims affecting family property should be before the High Court.
The problem arises because s 182 of the FPA specifies that it is the Family Court that may inquire into and vary a nuptial settlement. On the face of that provision, therefore, it would seem that an application to vary a nuptial settlement must be filed in the Family Court. That is what led us to raise the question of jurisdiction with counsel.
Having invited and received further submissions on the issue, we are now satisfied that the High Court did have jurisdiction. We briefly set out our reasons below.
The solution
We begin by noting that it seems plain — notwithstanding the specific reference to the Family Court in s 182 — that the Family Court does not have exclusive jurisdiction under s 182. That is because proceedings filed in the Family Court under s 182 may be transferred to the High Court by virtue of the general power contained in s 14 of the Family Court Act 1980 (the FCA):[16]
14 Transfer of proceedings to High Court
Subject to the Act under which any proceedings are brought, the Family Court may, on the application of any party to the proceedings, or of its own motion, order that the proceedings be transferred to the High Court if it is satisfied that, because of the complexity of the proceedings or of any question in issue in the proceedings, it is expedient that the proceedings be dealt with by the High Court; and in any such case the High Court shall have the same power to adjudicate on the proceedings as the Family Court had.
[16]Section 182 may be contrasted with other provisions in the Family Proceedings Act 1980 where the jurisdiction of the Family Court is expressed in more mandatory terms — see for example s 21: “Every application for a separation order shall be heard and determined in the Family Court” and also ss 28, 30, 33, 50, 68, 80 and 145F (emphasis added).
If the s 182 application had been filed in the Family Court, then it could (and almost inevitably would) have been transferred under s 14 of the FCA to the High Court. This is because of the clear policy concern underlying family law legislation that related proceedings should be managed and determined together. It is only in that way that the court could have a complete and clear view of the litigation landscape affecting a particular family — and only then can the court properly calibrate the property distributions. This policy is evidenced by s 38A of the PRA, under which Jason’s proceedings under that Act were originally transferred.
That policy is also reflected in s 160 of the FPA, which contemplates the joinder of proceedings under that Act with related PRA proceedings and allows a court to hear and determine such proceedings together:
160 Applications may be heard together
(1) An application under this Act may be joined with an application under the Property (Relationships) Act 1976, and, subject to any rules of procedure made under this Act or under the Family Court Act 1980, it shall not be necessary to file separate applications.
(2) A court may hear and determine any proceedings before it under this Act in conjunction with any other proceedings under this Act or under the Care of Children Act 2004 or under the Property (Relationships) Act 1976 in any case where—
(a) all the proceedings are between the same parties; or
(b)all the proceedings are in respect of members of the same family.
(3) Subsection (2) shall apply whether or not any other person is also a party to the proceedings.
Where related applications under the FPA and the PRA have both been transferred from the Family Court to the High Court, s 160 undoubtedly gives the High Court the power to join, hear and determine them together. The more difficult question is whether s 160 can be interpreted as giving the High Court “original” jurisdiction to receive and hear the s 182 application — jurisdiction absent any such prior transfer.
In Marshall v Bourneville Peters J concluded that the High Court did not have original jurisdiction to make orders under s 182.[17] But in that case there were no related PRA proceedings before the High Court and the Court did not, therefore, consider the possible impact of s 160 of the FPA.
[17]Marshall v Bourneville [2014] NZHC 2334 at [11].
More recently, in Preston v Preston, Fitzgerald J was faced with circumstances more closely aligned to the present.[18] As here, an application under s 182 was ancillary to a PRA proceeding that the Family Court had transferred to the High Court. It appears, however, that the question of jurisdiction may not have been raised by counsel as (again) s 160 of the FPA is not mentioned and, indeed, the jurisdictional issue is only discussed by the Judge in a footnote, where she said:[19]
While jurisdiction for such claims ordinarily lies with the Family Court, such claims can be made in the context of proceedings which have been transferred to the High Court, as in this case: Marshall v Bourneville … And while the s 182 claim was strictly made after the proceedings had been transferred to this Court, I do not consider that alters the jurisdictional position. The alternative would have been for Mrs Preston to have commenced that claim in the Family Court, and then applied to have it transferred to this Court in conjunction with the [PRA] proceedings, as it inevitably would have been.
[18]Preston v Preston [2019] NZHC 3389.
[19]At [56], n 10.
This footnote suggests that the Judge may have misapprehended the relevance and import of Marshall. As we have said, that case did not involve a prior transfer of related proceedings and it did not determine that the High Court could exercise first instance jurisdiction under s 182. But we nonetheless agree with Fitzgerald J’s conclusion, for that reasons that follow.
The wording of s 160(2) of the FPA suggests that consolidation of related proceedings can only occur if the related proceedings are already properly before the relevant court. And if Tania’s application under s 182 of the FPA was required to be filed first in the Family Court then it was not properly before the High Court.
But s 160(1) also contemplates that where there is an extant application under the PRA, a related application under the FPA may be made without the need for separate application. In practical terms, that means a party could add a s 182 FPA cause of action to PRA proceedings properly before the High Court. Equally, an application under s 182 could take the form of a counter-claim in PRA proceedings properly before the High Court. Jurisdiction to hear the FPA claim cannot depend on which party makes the application. So in the present case, we think it would have been open to Tania to pursue her s 182 application in the form of a counter-claim to Jason’s claim under the PRA. And if that is so then the fact that she happened to file the application later, and separately, must be a matter of form rather than jurisdictional substance.[20]
[20]There is no obvious countervailing purpose behind the specific reference to the “Family Court” in s 182. It appears simply to be a function of the provision’s 1982 amendment, which reflected that jurisdiction in divorce matters was transferred from what was then the Supreme Court to the newly created Family Court two years earlier. It is, perhaps, merely an example of what Dr Brinsley Donald Inglis QC has called the “inexplicably tangled” jurisdictional “skein” in family law matters, arising from the updating of the pre-1980 statutes when the Family Court was created: Brinsley Donald Inglis New Zealand Family Law in the 21st Century (Brookers, Wellington, 2007) at 99.
For these reasons, we consider that the parties were right to proceed on the basis that the High Court had the requisite jurisdiction to hear and determine the s 182 FPA proceedings alongside the PRA proceedings.
On that basis, we now turn to consider the substance of the appeal itself.
The appeal
Appellant’s position
Tania’s notice of appeal states:
3. The Appellant appeals only against that part of the High Court Judgment that relates to whether or not the Court would be able to exercise its discretion to make an Order in favour of the Appellant pursuant to s 182(1) of the Family Proceedings Act 1980.
The specific grounds of the appeal are:
In relation to the nuptial settlement Judge Johnston erred in finding
• At [66] it included a condition that the Appellant and First Respondent would only receive the benefit of the forgiveness of the debt so long as they remained married.
• At [66] the Appellant and First Respondent could only rely on receiving the anticipated benefit of the value of the loan for the duration of their marriage.
• At [66] there were no changed circumstances for the Appellant at the end of the marriage and therefore no injustice to remedy.
• At [72] there was no evidence of a change in its terms.
• There were no adverse consequences for the Appellant that were brought about by the end of her marriage to the First Respondent.
Mr Delany, for Tania, thus disowned any submission that there was a “collateral agreement” of the kind posited in the judgment below. Rather, he said that there was an expectation that was integral to the overall family arrangement that the debt would not have to be repaid. And he challenged, too, the Judge’s finding that the Court’s discretion could not be exercised in Tania’s favour because the alleged collateral agreement (settlement) was expressly conditional on the marriage continuing. Mr Delany said that the factual basis for that finding falls away because the references in Tania’s affidavits to her understanding that the debt would not be called on “while the marriage remained on foot” were merely examples of “bad assisted drafting”.
Mr Delany also expressly:
(a)confirmed that Tania’s claim remained as pleaded; and
(b)eschewed any argument that the Deed was not valid or that the debt was not owed by PRF to Ray.
Respondents’ position
As well as supporting the Associate Judge’s judgment on the basis of the reasons he gave, the respondents also filed memoranda under r 33 of the Court of Appeal (Civil) Rules 2005 seeking to support the judgment on other grounds.
Jason maintains that the s 182 claim cannot succeed and that there is no real question to be tried because:
(a)The only “property” referred to in Tania’s statement of claim is the debt recorded in the 1 November 2011 Deed (as later rectified) between Ray and PRF.
(b)That debt is not “property” in terms of s 182 but rather a liability, which lacks the essential quality of provisioning.
(c)Tania has accepted in her statement of claim that there is a debt recorded in the Deed, but says she had a (contrary) “expectation” and “understanding” that she would receive the full benefit of the wider family restructuring in 2011.
(d)The Deed did not constitute or record a “settlement” by Ray on Jason and Tania but was rather a consequence of the settlement of a property transaction between Ray and PRF.
(e)Both the Deed and Clark J’s decision estop Tania from denying the debt is owing — the judgment operates in rem and gives rights over PRF’s land like a mortgage under the Deed.
(f)Objectively assessed, there can be no reasonable expectation of the sort pleaded.
(g)On the contrary, Jason and Tania’s only reasonable expectation was that the debt would have to be repaid if required — the fact that repayment was unlikely to be demanded from PRF while the marriage continued cannot give rise to a reasonable expectation the debt would never be repayable.
(h)Even if the relationship had continued, the debt remains Ray’s property to dispose of as he wishes — even if it came by inheritance to Jason, it would be separate property under s 10 of the PRA.
Ray and Ann maintain that the pleading discloses no tenable cause of action against them because:
(a)It pleads nothing capable of constituting a nuptial settlement made on Jason and Tania because there is no “settlement”, and, in any event, it is not “nuptial” in character.
(b)The claim is an abuse of process because it attempts to relitigate an issue that has been the subject of a final judicial determination, namely that the Deed is valid and enforceable and that the debt is owed by PRF to Ray.
(c)Ray and Ann have been improperly joined as parties to the proceeding because there is no pleaded cause of action against them, nor any relief sought from them.
In short, even though Tania’s appeal focused on the Associate Judge’s conclusion as to the possible exercise of discretion, the respondents’ respective positions require us to consider the tenability of Tania’s s 182 application as a whole.
Analysis
For convenience, we begin by setting out the relevant parts of s 182 again:
182 Court may make orders as to settled property, etc
(1)On, or within a reasonable time after, the making of an order under Part 4 of this Act or a final decree under Part 2 or Part 4 of the Matrimonial Proceedings Act 1963, the Family Court may inquire into the existence of … any ante-nuptial or post-nuptial settlement made on the parties, and may make such orders with reference to the application of the whole or any part of any property settled or the variation of the terms of any such … settlement, either for the benefit of the children of the marriage … or of the parties to the marriage … or either of them, as the court thinks fit.
…
Section 182 is a provision of some antiquity.[21] Indeed, in Thakurdas v Wadsworth, this Court described it as “archaic”,[22] and the Law Commission has
recently noted that some commentators have referred to it as a “relic of the past”.[23] But as the Commission went on to observe:[24]Its resurgence in recent times is due to the PRA’s failure to provide an effective remedy for accessing trust property when relationships end. In the absence of any evidence of a need to provide a remedy with wider application than amended section 44C, we are not convinced that section 182 needs to be retained.
[21]The history of s 182 is described by the High Court and the Court of Appeal in Ward v Ward [2008] 3 NZLR 383 (HC) at [64]–[69]; and Ward (CA), above n 8, at [8]–[15]. The Supreme Court also refers to the history of s 182 to support its interpretation of the provision in Clayton, above n 8, at [5]–[6].
[22]Thakurdas v Wadsworth [2018] NZCA 516, [2018] NZFLR 835 at [13].
[23]Law Commission Review of the Property (Relationships) Act 1976 (NZLC R143, 2019) at [11.108(a)].
[24]At [11.108(a)]. The Law Commission has recommended the repeal of s 182, on the basis that its proposed amendments to s 44C of the Property (Relationships) Act 1976 are designed to “eliminate the need for partners to rely on section 182 to achieve a just division of property at the end of a relationship”.
The high point of this “resurgence” was the Supreme Court’s decision in Clayton. There, the Court made it clear that the purpose of s 182 is to:[25]
… empower the courts to review a settlement and make orders to remedy the consequences of the failure of the premise on which the settlement was made.
[25]Clayton, above n 8, at [60].
As the Associate Judge noted, Clayton also clarified that s 182 involves a two‑stage inquiry:[26]
(a)whether there is a nuptial settlement; and if so—
(b)whether and in what manner the Court should exercise its discretion.
[26]At [27].
And to be a nuptial settlement, the arrangement must make some continuing provision for both or either of the parties to a marriage in their capacity as spouses, with or without provision for their children. The phrase “in their capacity as spouses” requires “a connection or proximity between the settlement and the marriage”.[27]
Is there an arguable “nuptial settlement” here?
[27]At [33]–[34]; and Ward (CA), above n 8, at [27].
We agree with Mr Delany that the particular form an arrangement takes may not matter and that the courts have taken a liberal approach as to what constitutes a nuptial settlement. We agree that the cases establish that the relevant spousal interest in settled property can be discretionary or contingent.
Here, Mr Delany maintained that it was the wider family restructuring arrangements in 2011 that constituted the relevant nuptial settlement, and that Ray’s forbearance in not demanding repayment of the debt constituted the relevant “provisioning”.
That is where we and Mr Delany must part company. For reasons we shortly explain, the family restructuring arrangements did not involve the settlement of property on Jason, Tania, PRF or anyone else. Nor is there any ongoing provision for any person under a legally binding arrangement, the terms of which could be varied by the Court under s 182 to remedy an injustice that giving effect to those terms would otherwise produce.
As to the first point, the family restructuring remains, at its core, an agreement for sale and purchase between Ray and PRF, with Ray providing vendor finance, not a settlement of property. The relevant documentation — the Deed — is clear about the debtor/creditor relationship. And however the debt may from time to time have been treated in the various financial statements, that it remains owing has been put beyond doubt by Clark J’s judgment in 2019.
Although Mr Delany submitted that authorities such as Bosworthick v Bosworthick demonstrate that a debt can constitute a settlement, we think his reliance on those cases is misplaced.[28] By way of example, in Bosworthick itself, the wife had — as a result of her marriage — an ongoing liability under a bond to pay her husband a £300 annuity. Post-divorce, she sought (and obtained) a variation releasing her from that liability, under the then English equivalent of s 182.
[28]Bosworthick v Bosworthick [1926] All ER Rep 198 (CA).
As the House of Lords later explained in Brooks v Brooks, although such periodical payment provision lies at the controversial end of what a “settlement” can be:[29]
… income provision from settled property would readily qualify, and it is only a short step from this to include income provision which takes the form of an obligation by one party to the marriage to make periodical payments to the other.
[29]Brooks v Brooks [1996] 1 AC 375 (HL) at 392.
That is a far cry from the present case. Here, there was no obligation imposed on Ray to make periodical payments to Tania or to Jason or to both of them. The closest that the arrangement comes to any continuing income provision is the fact that Ray did not, during the marriage, demand interest on the loan to PRF. We therefore agree with Mr Maassen that the debt here was not property of a kind that might constitute a settlement.
As to the existence of a legally binding arrangement that requires variation to remedy an injustice upon Tania and Jason’s divorce, we make several points.
First, the only legally binding arrangement is the debt owed by PRF which has not been altered by the ending of the marriage. The relevant liability (the debt owed by PRF to Ray) cannot be seen as an arrangement that makes any kind of continuing provision either for Tania or for Tania and Jason “in their capacity as spouses”. PRF (in which Tania and Jason are shareholders) owes the debt. The obligation flows from PRF, and thus in substance from the spouses, to Ray; not to the spouses. And PRF received value in return for its promise to pay, in the form of the farm property itself.
Secondly, this arrangement cannot be seen as giving rise to any inequity when the marriage ended. The core purpose of s 182 is to ensure pre-existing provision for the spouses is not unfairly affected by the relationship breakdown. In this case, Jason and Tania — as 50:50 shareholders of PRF — were both left in the same position. The value of their respective shares in PRF is equally diminished by the debt, as it always has been. The fact that Ray may later forgive the debt or gift the whole debt to Jason (and so, make later “provision” for him) has no bearing on that: an order under s 182 cannot be used to divide a possible gift that has not yet been made.
Thirdly, Ray’s historical forbearance from calling up the debt cannot be such an arrangement because it is not legally enforceable. And even if there was some form of understanding that Ray’s forbearance would continue, then either:
(a)the arrangement would, in substance, constitute a gift to PRF, which would not amount to a qualifying settlement;[30] or
(b)to the extent such forbearance gave rise to some other legal or equitable bar preventing Ray from calling up the debt, then there would be no need for a s 182 variation at all.
[30]See for example the discussion in Brooks, above n 29, at 391; and Ward (CA), above n 8, at [27].
Lastly, we think it is telling that, when pressed by the Court, Mr Delany was unable to come up with a variation order that would both satisfy Tania’s claim and be tenable under s 182. Various possibilities were canvassed:
(a)an order that Ray must forgive the debt owed by PRF (now or in future);
(b)an order that Ray continue not to demand repayment of the debt; and
(c)an order that Jason be required to compensate or reimburse Tania for her half of the debt.
An order of the first kind is wholly contrary to the core of the “settlement” itself and would constitute an impermissible collateral attack on the High Court’s decision that the debt is owing. Moreover, it would involve both depriving Ray — a third party — of a significant sum of money and granting Tania a significant gift. It would effectively be an order requiring Ray to make a settlement on Jason and Tania via PRF, which confirms that no such settlement has yet been made. We agree with the respondents that s 182 cannot be used in that way.
An order of the second kind would not only be of similar effect (from Ray’s perspective) but also would not give Tania what she wants — the value of her shares in PRF would continue to be burdened by the debt. And it would beg the question of what would happen when Ray dies. As noted earlier, he could simply give the debt to Jason.
An order of the third kind bears no relationship to (and so cannot be seen as a variation of) the alleged “settlement” at all.
For all the above reasons we are of the view that it is not seriously arguable that there was a nuptial settlement here. We do not therefore need to consider the question of discretion.[31] We agree with the Associate Judge that summary judgment should be entered for Jason — and the claim against Ray and Ann should be struck out — accordingly.
[31]As noted earlier, the basis upon which the Associate Judge concluded that it was not arguable that the Court’s discretion would be exercised in Tania’s favour fell away as a result of Tania’s change of position on appeal.
The appeal is dismissed.
Solicitors:
Chapman Tong Law, Wellington for Appellant
Britten’s Lawyers, Palmerston North for First Respondent
Le Pine & Co, Taupo for Second and Third Respondents
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