Brown v Akulinin
[2020] NZHC 1061
•20 May 2020
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,
11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-2384
[2020] NZHC 1061
UNDER the Property (Relationships) Act 1976 IN THE MATTER
of an appeal from a decision of the Family Court at Auckland on 25 September 2019
BETWEEN
NATALIA ALEXANDROVNA BROWN
Appellant
AND
OLEG FATEEVICH AKULININ
Respondent
Date of hearing: 19 May 2020 Appearances:
B N Snedden and J M Gandy for the appellant B D Hayes for the respondent
Date of judgment:
20 May 2020
JUDGMENT OF JAGOSE J
This judgment was delivered by me on 20 May 2020 at 4.00pm.
Pursuant to Rule 11.5 of the High Court Rules
………………………… Registrar/Deputy Registrar
Counsel/Solicitors:
Ben Snedden Barrister, Auckland Barry Hayes Barrister, Auckland Thomas & Co, Auckland
BROWN v AKULININ [2020] NZHC 1061 [20 May 2020]
[1] Natalia Brown appeals against the decision of Judge T H Druce in the Family Court at Auckland on 25 September 2019, setting aside her 23 January 2015 agreement with Oleg Akulinin as to the division of their property.1 As in the agreement, in this judgment I refer to the parties respectively as ‘Natalia’ and ‘Oleg’.
Background
[2] Natalia and Oleg married each other in Russia’s Vladivostok on 9 December 1999. Their son, Petr, was born on 10 April 2000. (Natalia has another son, Pavel, from a previous relationship, born on 16 July 1992, who appears included in the family.)
[3] Natalia and Oleg separated by October 2014. They entered the 23 January 2015 agreement (the “agreement”), “in full and final settlement of all claims and rights which Oleg and Natalia have or may have against each other in respect of property”. The agreement predominantly provided for Natalia to take a 1999/2000th share in their previously jointly-owned family home in Auckland’s Avondale, Oleg the 1/2000th balance, and Natalia the whole of their joint bank account said to amount to some
$37,000. Separately-held bank accounts are the parties’ separate property.
[4]Under the heading ‘Family Home’, clause 4 of the agreement specified:
Oleg records that the Family Home was purchased entirely from contributions made by Natalia’s family and that he wishes for Natalia to remain in residence at the Family Home so as to provide a stable Family Home for the Parties’ children.
The agreement also asserted its terms were agreed, on the basis of the parties’ full disclosure to each other, as “their own agreement on the extent and value of relationship assets … compromised by both parties and intended to achieve a division that they consider to be fair”. They provided informed waiver of any requirement for independent valuations, and acknowledged each obtaining and understanding independent legal advice.
[5] In June 2016, Natalia acquired Oleg’s remaining share in the family home, Oleg realising $407.50 after payment of his legal fees of $2,120.00 on the transaction.
1 Akulinin v Brown [2019] NZFC 7726.
At that time, the property was valued at $815,000. In November 2016, Natalia sold the property. She says she acquired another property in Northland’s Kerikeri, sold to acquire a property in Mangonui, also later sold. Ultimately, Natalia advanced
$373,240.08 to Gordon Neil Brown to acquire another Kerikeri property, such to be among their relationship property. Natalia and Gordon lived together since March 2016, and married each other on 9 September 2018.
[6] In November 2017, under s 21J of the Property (Relationships) Act 1976, Oleg applied to the Family Court to set the agreement aside. Judge Druce concluded:2
Drawing all factors into consideration, I am satisfied that giving effect to the agreement would cause serious injustice to [Oleg] due to both the very substantial unfairness of the agreement at the time it was entered into and due to [Natalia]’s subsequent conduct being inconsistent with the core purpose that the parties had at the time of providing a stable family home for the parties’ children. Inherent in this was their shared desire to provide for their children’s future financial security. Subsequent events suggest that this is now significantly at risk.
The Judge set aside the agreement, and directed Natalia to file an affidavit of her assets and liabilities, including to trace relationship funds from the date of separation.
Pending determination of this appeal, the orders are stayed.3
[7] Natalia’s counsel, Ben Snedden, argues on appeal the Judge’s conclusion, based on his understanding Natalia’s advance to Gordon was unsecured, was unfounded and wrong. The correct position is the advance is acknowledged between them, and forms besides a relationship debt to Natalia; and Natalia’s sons clearly remained supported into adulthood. Accordingly, the agreement should be reinstated.
Approach on appeal
[8] Appeals to this Court from the Family Court are general appeals conducted by way of rehearing,4 in which Natalia bears the onus of satisfying me I should differ from the Family Court’s decision. I only am justified in interfering with that decision if I consider the decision is wrong – in other words, the Judge erred.5
2 At [105].
3 B v A [2020] NZHC 580 at [42(a)].
4 Property (Relationships) Act 1976, s 39(3); see also District Court Act 2016, s 127.
5 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13].
[9] I then am to come to my own assessment of the merits of the case afresh, without deference to the Family Court (save for some caution in differing on witness credibility, when I have not had the advantage of observing the witnesses).6 I may rely on the Family Court’s reasons in reaching my own conclusions, but the weight I give those reasons is a matter for me.7
[10] After hearing the appeal I may make any decision I think should have been made, or direct the Family Court to rehear the proceeding or consider and determine any particular matter.8
Relevant law
[11]Section 21J of the Property (Relationships) Act 1976 provides:
21J Court may set agreement aside if would cause serious injustice
(1) Even though an agreement satisfies the requirements of section 21F, the court may set the agreement aside if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice.
(2) The court may exercise the power in subsection (1) in the course of any proceedings under this Act, or on application made for the purpose.
(3) This section does not limit or affect any enactment or rule of law or of equity that makes a contract void, voidable, or unenforceable on any other ground.
(4) In deciding, under this section, whether giving effect to an agreement made under section 21 or section 21A or section 21B would cause serious injustice, the court must have regard to—
(a)the provisions of the agreement:
(b)the length of time since the agreement was made:
(c)whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made:
(d)whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties):
(e)the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement:
(f)any other matters that the court considers relevant.
6 At [13].
7 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31].
8 Property (Relationships) Act 1976, s 39; High Court Rules 2016, r 20.19(1).
(5) In deciding, under this section, whether giving effect to an agreement made under section 21B would cause serious injustice, the court must also have regard to whether the estate of the deceased spouse or partner has been wholly or partly distributed.
[12] So far as is relevant here, such agreements may be contracting-out agreements under s 21 or settlement agreements under s 21A. Although the Judge refers throughout to the parties’ “s 21 agreement”, the agreement was not to contract out of the Act’s provisions but to settle their differences:9
In most compromise cases, the parties will presumably set out to provide for a division of property which accords, at least broadly, to what would be ordered under the statutory regime. So where there is a significant discrepancy between what the agreement provides and the way in which the relevant statutory regime would have operated, this in itself may well suggest that the agreement is unfair or unreasonable and, as well, may well require explanation.
In compromise cases, there is a strong presumption “as such agreements are entered into in respect of entitlements already accrued[, they] should usually reflect the reality of those entitlements”.10 The reality of that entitlement is a presumption of equal sharing in relationship property.11 But, importantly, inequality of outcome with that entitlement is not a measure of ‘serious injustice’.12
[13]Section 26 also obliges the Court to:
… have regard to the interests of any minor or dependent children of the marriage … and, if it considers it just, may make an order settling the relationship property or any part of that property for the benefit of the children of the marriage … or of any of them.
Although the Judge refers to “the parties’ children” and “their children’s future financial security”, at the time of the parties’ entry into the agreement, Petr was 14, and Pavel 22, years old; at the time of Natalia’s sale of the family home, they respectively were 16 and 24 years old; and at the time of his decision, 19 and 27. Neither are asserted to be dependent.
9 Harrison v Harrison [2005] 2 NZLR 349 (CA) at [85].
10 At [112].
11 Property (Relationships) Act 1976, s 11.
12 Harrison v Harrison, above n 9, at [113].
[14] There is no threshold for a finding of ‘serious injustice’; the various factors “are to be assessed depends on the circumstances of individual cases, the evidence given, and the weighing of that evidence”.13
Discussion
[15] The Judge plainly was troubled by various evidential deficiencies,14 and particularly those at odds with contentions set out in the agreement. The agreement records Natalia and Oleg separated in January 2012; the Judge found the date of separation to be by October 2014.15 As has been seen,16 the agreement records Oleg’s contention “the Family Home was purchased entirely from contributions made by Natalia’s family”; the Judge found the parties’ joint funds were contributed roughly one-third from Oleg, and two-thirds from Natalia,17 although he allowed the parties genuinely may have perceived her funds alone were applied to the property’s acquisition.18 The Judge’s financial enquiry was as to the proceeds from the parties’ sales of Russian properties, in the face of the parties’ incomplete and inadequate New Zealand financial records.
[16] Conversely, the Judge found Oleg to lack credibility,19 particularly in relation to his contentions he was vulnerable to Natalia’s control20 and poorly advised on the proposed agreement.21 The Judge came to the view Oleg understood Natalia sought the agreement’s arrangement to alleviate risk the relationship property entitlements of any subsequent partner of Oleg’s may dilute her sons’ inheritance:22
The irony of all this is that it is [Natalia] who has remarried, not [Oleg], and there is no evidence she had protected the boys’ inheritance by contracting out of the Act with her current husband.
13 Taylor v Taylor [2009] NZCA 579 at [5].
14 Akulinin v Brown, above n 1, at [24], [32]–[35], [56], and [59].
15 At [48].
16 At [3] above.
17 Akulinin v Brown, above n 1, at [66].
18 At [103].
19 At [79].
20 At [79]–[80].
21 At [87]–[94].
22 At [85]–[86].
The Judge found absence of such protection “breached” the agreement’s intention the family home be retained for the parties’ children.23 Taken together with the “substantial unfairness” of the agreement at entry, Natalia’s subsequent conduct was inconsistent with the agreement’s core purpose, meaning Oleg was here caused serious injustice.24
[17] I have considerable difficulty with the Judge’s conclusions in these respects. First, the Judge identifies the agreement’s ‘substantial unfairness at entry’:25
… crystallized in June 2016 when [Oleg] received only $407.50 in satisfaction of his relationship property interest in the family home at a time when the equity value was close to $550,000 and, but for the s 21 agreement, he would have received $225,000.
As noted,26 Oleg’s receipt included legal fees of $2,120. The Judge’s focus on equal sharing in the family home’s value is to disregard his own finding Oleg only contributed one-third of the cash toward its $465,000 purchase price. The agreement records a $267,000 mortgage to New Zealand Home Loans. But the only New Zealand Home Loans financial records in evidence seem to record a $10,000 loan. I cannot identify what contributions Oleg made to the property’s mortgage. Natalia’s evidence, consistently with her insistence only she contributed to the property’s acquisition, was only she paid the mortgage. Nonetheless, the evidence also is Oleg’s wages were paid into the parties’ joint account held at Westpac, in reduction of its floating home loan, which appears to be in the order of $266,000, but cleared by November 2014. The agreement’s divergence from the statutory regime only suggests, and does not substantiate, its unfairness. The explanations proffered are inadequate, but that inadequacy does not convert into unfairness in itself.27
[18] Second, the agreement’s clause 4 imposes no obligations. It is instead a statement of Oleg’s assertion the family home was acquired “entirely from contributions made by Natalia’s family”, and his wish Natalia remain in residence there “to provide a stable Family Home for the Parties’ children”. Although the Judge
23 At [74].
24 At [105].
25 At [73].
26 At [5] above.
27 At [12] above.
reconstructs the parties’ $383,500.00 financial contributions to their joint bank account to arrive at the third shares between Oleg and Natalia,28 he also records the family home was acquired with a contribution of $182,500.00,29 after which both parties were responsible for making mortgage repayments on the balance, Oleg ceasing such payments in November 2014.30 So Oleg’s assertion to the contrary is wrong. Neither could Oleg require Natalia to remain in residence at the family home. The agreement expressly recognises Natalia may wish to sell the family home, and gives her an option to purchase Oleg’s share at registered valuation. But the $200,000 balance of contributions to the joint bank account is not addressed further, and the Judge is unable to trace other funds had by either party, while acknowledging they also should be taken into account “on any fair s 21 agreement”.31
[19] Third, Natalia’s subsequent conduct was not in issue between the parties: it arose instead in questions of her from the Judge; and those questions stopped short of enquiring as to any steps she may have taken to protect her advance to Gordon.32 The Judge appears to have inferred from her answers no steps had been taken. Whether or not she was required to take any steps, the uncontested evidence permitted to be raised on this appeal is her advance to Gordon is recorded in a Deed of Acknowledgment of Debt, entitling her to register a notice of claim against the titles, and constituting relationship debt to her. In semi-mutual wills, Natalia and Gordon leave a life interest in each other’s property used as their relationship home to the other, with residual interests to their respective children. Oleg’s counsel, Barry Hayes, expressly conceded in oral submission “the debt is secured”.
[20] The Judge therefore erred in his opposite conclusion. Mr Hayes urges I should conclude giving effect to the agreement nonetheless would cause serious injustice to Oleg. He argues Oleg cannot be considered to have given “genuine consent” to it; had “real regrets” about its operation when Natalia sold the family home; was susceptible to Natalia’s influence of its contents; and received inadequate independent advice in relation to the agreement’s content and operation.
28 Akulinin v Brown, above n 1, at [57]–[66].
29 At [71].
30 At [42].
31 At [70].
32 B v A, above n 3, at [29].
[21] ‘Serious injustice’ is to be assessed from both parties’ perspectives.33 Given the significant evidential inadequacies, I cannot make a balanced assessment. The agreement does not reflect the facts as found by the Judge, but the evidence does not establish a complete counterfactual to that depicted in the agreement. The fundamental point is Natalia and Oleg voluntarily entered into an agreement they knew to be at odds with reality, but that reality remains obscure in very material ways. I am unable to determine if giving effect to the agreement, in that reality, would cause serious injustice. Neither can I conclude it would not.
[22] Faced with those difficulties, and recognising the Family Court’s specialist expertise in addressing the division of relationship property, I reluctantly conclude the better course is to remit the matter to the Family Court for rehearing on all the evidence (including that for which leave was granted to be adduced on appeal). While the parties are to be in undesired continuation of the proceeding, it very much is a circumstance they have brought upon themselves in seeking to avoid presumed equal sharing. I do not exclude the prospect the Family Court may grant leave for filing of further evidence, such as was contemplated after the agreement was set aside.
Result
[23]The Judge’s decision is quashed. I direct the Judge to rehear the proceeding.
Costs
[24] In my preliminary view, as the successful party, Natalia is entitled to 2B costs and disbursements on her appeal. That is because, from what I presently know of them, nothing in the steps taken by her in this averagely complex proceeding required other than a normal amount of time.
[25] If that is not accepted by the parties, and they cannot otherwise agree, costs are reserved for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by Natalia within ten working days of the
33 Harrison v Harrison, above n 9, at [102]–[106].
date of this judgment, with any response and reply to be filed within five working day intervals after service.
—Jagose J
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