Burt v Yiannakis
[2015] NZHC 1174
•28 May 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-003251 [2015] NZHC 1174
BETWEEN DEANNE MARGARET BURT
Plaintiff
AND
YIANNOS YIANNAKIS Defendant
FAM-2013-004-001390
BETWEEN YIANNOS YIANNAKIS Applicant
ANDDEANNE MARGARET BURT Respondent
Hearing: 16 - 23 February 2015 Counsel:
RJ Macdonald for Plaintiff
S Jefferson QC and EM Eggleston for DefendantJudgment:
28 May 2015
JUDGMENT OF ASHER J
This judgment was delivered by me on Thursday, 28 May 2015 at 3 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
S Jefferson QC, Auckland.
Tauranga Family Law Chambers, Tauranga.
Short & Partners, Auckland.
BURT v YIANNAKIS [2015] NZHC 1174 [28 May 2015]
Table of Contents
Para No
Introduction [1] Background [3] Summary of claims [14] The nature of the constructive trust claims [17] The key issue [21] The claims in equity to the London properties
Sections 4 and 7 [24]
Private international law [49] The in personam exception [55] Overview [72] Conclusion on jurisdiction [78] Conclusion on private international law [82] The relationship property claim [83] The start of the de facto relationship [85] The assets [95] The Winchmore debt to the husband of $210,000 [100] The $4,265.25 interest on the Winchmore debt [107] Monies used to purchase Avondale Road [108] The revolving credit account [110] The E-Saver account [114] Section 18C adjustment [116] The $7,133 interest on the revolving credit account [121] The $8,701.42 and $5,672.92 credit card repayments [123] Result [124]
Introduction
[1] The plaintiff Deanne Burt and the defendant Yiannos Yiannakis lived in a de facto relationship for some years. They married in 2008 and separated in 2012. Their claims in this Court are brought both under the Property (Relationships) Act
1976 (the Act), in the form of proceedings initiated by Mr Yiannakis in the Family Court and transferred to this Court, and in the form of separate proceedings filed in this Court by Ms Burt in which she seeks relief in equity.
[2] The particular feature of the case, which has led to these proceedings being filed in this way, is that the couple either jointly or separately own significant properties in London, and one in New Zealand, and have or have had significant bank accounts in both the United Kingdom and New Zealand. The general rule, accepted by Ms Burt, is that this Court has no jurisdiction to determine relationship
property claims between them in respect to London real estate. However, it is claimed that it is open to her to bring claims in equity arising out of their London dealings.
Background
[3] Ms Burt and Mr Yiannakis first met in New Zealand in March 2001 when Mr Yiannakis was visiting New Zealand on a backpacking holiday. Mr Yiannakis’ home was in London and Ms Burt lived in Auckland. He was 31 and she was 26. In July 2001 they travelled together to London. Ms Burt initially stayed with a friend, but on 1 August 2001 she and Mr Yiannakis began living together in a house owned by Mr Yiannakis’ mother at 68 Willingdon Road, London.
[4] On 23 October 2001 they moved into a property Mr Yiannakis had owned since 1999, at 35 Oxford Gardens, London (Oxford Gardens). They both worked, with Mr Yiannakis earning considerably more than Ms Burt.
[5] In the 2002–2004 period Mr Yiannakis purchased three London properties: (a) on 16 July 2002, 22 Ecclesbourne Close (Ecclesbourne Close);
(b) on 28 March 2003, a property at Dorset Road; and
(c) on 8 August 2004, 97B Willingdon Road.
[6] The properties were heavily mortgaged, with the cash deposit coming from funds under Mr Yiannakis’ control together with some other funds from third parties associated with him. Ms Burt’s contributions are a matter of contention, but it is common ground that once she had started work she contributed funds to relevant bank accounts, and did work on the properties. There are differences as to when and how much.
[7] Sometime in 2005 Ms Burt wished to return to New Zealand to live. In September Mr Yiannakis and Ms Burt incorporated a company Winchmore Estates Ltd in which they each held 50 shares. The next month that company purchased a
property at 43/149 Nelson Street, Auckland. They each contributed £9,000 from their personal savings and took out a large mortgage from Westpac.
[8] On 23 November 2005 the Dorset Road property was sold for £155,000 (showing a £20,000 profit) and on 14 July 2006 an apartment was purchased by them in their joint names at 15C Tower Terrace, Wood Green (Tower Terrace).
[9] Mr Yiannakis and Ms Burt agreed they would marry. They returned to New Zealand in January 2007, and in February 2008 purchased an apartment in St Stephens Avenue for $610,000. They married in the same month. In June 2007
Nelson Street was sold. Although they were still living in New Zealand, on 8 July
2008 they purchased in their joint names a property at 12B Alexandra Road, London
(Alexandra Road).
[10] In June 2012 the parties agreed that they would separate, although they remained living together at St Stephens Avenue. Ms Burt moved out from St Stephens Avenue in November 2012.
[11] In June 2013 Mr Yiannakis purchased a property in London at 41C Avondale Road (Avondale Road) with the funds from two accounts in the names of both parties, together with some monies from other sources.
[12] Mr Yiannakis initiated the Family Court proceeding and that proceeding was later transferred to this Court. Ms Burt commenced this High Court proceeding advancing various claims based in equity in relation to the properties in London. The claims were based on constructive trust, estoppel and resulting trust.
[13] Mr Yiannakis initially filed a counterclaim seeking equitable relief to the properties in England held in the joint names of the parties, but this has been discontinued. Mr Yiannakis applied to strike out all Ms Burt’s equitable claims in this Court relating to the London assets on the basis that they were precluded from being heard by virtue of ss 4(1) and 7(1) of the Act. That application was heard and dismissed by Gilbert J on 30 June 2014 on the basis that it was “at least arguable that
this court has jurisdiction to determine these claims”,1 and because the law could not necessarily be regarded as settled. The issue was to be determined at trial with the benefit of full argument and evidence.2
Summary of claims
[14] As summarised by Gilbert J, Ms Burt advances a variety of claims in relation to the London properties:3
(a) First cause of action — Ms Burt seeks an account of rent and other income received by Mr Yiannakis in relation to the two properties acquired in England in the parties' joint names. (Tower Terrace and Alexandra Road).
(b) Second cause of action — Ms Burt claims that a property at Ecclesbourne Close is held by Mr Yiannakis on a constructive trust for the parties in equal shares, or in such shares as the Court shall determine. Ms Burt seeks a declaration to this effect, equitable compensation and an accounting for rent and other income received in relation to the property from the time it was acquired in June
2002.
(c) Third cause of action — Ms Burt claims a similar interest and seeks similar relief based on an alleged constructive trust in respect of a property at Willingdon Road that was purchased in Mr Yiannakis’ sole name in August 2004.
(d) Fourth cause of action — Ms Burt seeks similar relief on the basis of an alleged constructive trust in relation to the property at Oxford Gardens where the parties lived from 2001 to 2006. This property was purchased by Mr Yiannakis prior to the relationship.
(e) Fifth cause of action — Ms Burt claims that in June 2013, after the parties had separated, Mr Yiannakis purchased another property in England (Avondale Road) with funds drawn from joint accounts in New Zealand and the United Kingdom. On that basis, she claims that there is a resulting trust and that the property is beneficially owned by the parties equally.
(f) Sixth cause of action — this claim, based on an alleged constructive trust in relation to the Avondale Road property, is pursued in the alternative to the fifth cause of action.
[15] The essence of the claims in this case is that Ms Burt, by her cash contributions to and work on properties, and because of promises and understandings
1 Burt v Yiannakis [2014] NZHC 1488 at [15].
2 At [18].
3 At [3].
between her and Mr Yiannakis, has a claim based on constructive trust, or estoppel, or in one claim, resulting trust. An account of rent received is sought in respect of each property. As could be expected in this context, declarations are sought that the properties are held in trust.
[16] In addition to the claims in equity, there are the claims brought under the Act in the form of the Family Court proceedings transferred to this Court. Determination of those claims requires classification of the assets and liabilities held by the parties in London as either relationship property or separate property. There is also a dispute over when in fact the de facto relationship began, which has ramifications in respect to the assets acquired by Mr Yiannakis in the 2001–2004 period.
The nature of the constructive trust claims
[17] The constructive trust concept was developed in the context of de facto relationships in the 1980s and 1990s in a series of cases, including Gillies v Keogh4 and Lankow v Rose.5 Its development was a response to changing social attitudes and the exclusion of de facto unions from the equal sharing provisions of the then Matrimonial Property Act 1976.
[18] It was unjust that in New Zealand a husband and wife were given the benefit of the presumption of equal sharing, while no similar principle applied to de facto partners, who in common law labored under the onus of proving the existence of an actual or inferred common intention to share in the fruits of the relationship.6 The concept of constructive trusts was developed to plug that gap. It was established that where a claimant developed a reasonable expectation of an entitlement in property owned by the other party to a de facto relationship, as a consequence of contributions to the property, then the Court would find a constructive trust in favour of the
claimant if the other party should reasonably be expected to yield the claimant an
4 Gillies v Keogh [1989] 2 NZLR 327 (CA).
5 Lankow v Rose [1995] 1 NZLR 277 (CA).
6 See, for example, Hayward v Giordani [1983] NZLR 140 (CA).
interest.7 In that circumstance, it would be unconscionable for the party with legal title to deny the claimant an interest, and equity would therefore intervene.8
[19] A related (but distinct) basis for recognising a constructive trust is where a couple unequivocally express an intention that a property should devolve exclusively upon one of them. That intention can be enforced by constructive trust.9
[20] As to the other claims (resulting trust and equitable estoppel), they do not in my view add anything more to the plaintiff’s claim for an entitlement by way of constructive trust as they are alternative claims turning on the same considerations.
The key issue
[21] The key issue to be determined is whether there is jurisdiction to consider claims in equity relating to overseas immovables in the property relationship context. I will consider this issue first. That finding will provide a basis on which to determine, if necessary, the equitable claims.
[22] Mr Macdonald for Ms Burt advances two alternative submissions. First, he submits that an equitable interest in the London properties is available for consideration as an asset within the relationship property proceeding. Second, he submits that equitable relief in respect to foreign immovables can be sought in its own right.
[23] Mr Jefferson QC in response submits that the effect of ss 4 and 7 of the Act is that all the equitable claims are statute barred, and that in any event there would be no jurisdiction at common law. He argues that there would be serious practical
problems if equitable claims to overseas property could be entertained.
7 Lankow v Rose, above n 5, at 294 per Tipping J. For a recent restatement, see Marshall v
Bourneville [2013] NZCA 271, [2013] 3 NZLR 766 at [27].
8 Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 173.
9 Cossey v Bach [1992] 3 NZLR 612 (HC) at 627–629; Hayward v Giordani, above n 6, at 143–
145.
The claims in equity to the London properties
Sections 4 and 7
[24] It is possible to approach Mr Macdonald’s arguments as a matter of the interpretation of ss 4 and 7 of the Act. However, while the statutory language is the primary focus, in order to discern purpose and interpret those provisions it is necessary to consider the wider context, namely, the relationship between s 7 and the manner in which claims in equity against foreign immovables are treated under the common law rules as to jurisdiction and private international law.
[25] Having said that, the start point is s 4:
4 Act a code
(1) This Act applies instead of the rules and presumptions of the common law and of equity to the extent that they apply—
(a) to transactions between spouses or partners in respect of property;
and
(b) in cases for which this Act provides, to transactions—
(i) between both spouses or partners and third persons; and
(ii) between either spouse or partner and third persons.
...
(4) Where, in proceedings that are not proceedings under this Act, any question relating to relationship property arises between spouses or partners, or between either or both of them and any other person, the question must be decided as if it had been raised in proceedings under this Act.
[26] The language is plain and unambiguous. The Act applies “instead” of the rules and presumptions of the common law and of equity to “transactions” between partners such as Mr Yiannakis and Ms Burt. If Ms Burt’s equitable claims involve property “transactions” between spouses or partners, the Act as a code applies. While the section is headed as a “code” it is not explicitly stated what is codified. However, it follows from the wording of the heading and s 4(1)(a) that the Act codifies the law that applies to transactions between spouses and partners in respect of property.
[27] It is significant that s 4(1) is not limited to relationship property. It applies to “property” generally, and can be seen as deliberately drafted broadly to cover all or any claims that arise between spouses or partners.
[28] The word “transaction” is not defined in the Act. “Transaction” is a word with a broad meaning. In its narrower commercial meaning it can be a piece of “commercial business done”,10 such as an agreement to buy and sell. In
Kerridge v Kerridge it was described as “an instance of conducting business”.11 It
cannot have a narrow commercial meaning in s 4(1) as commercial dealings between spouses and partners are by their nature not commercial. Spouses and partners do not generally do “deals”. But they interact, make decisions and act together on property matters which, if they were not in a relationship, would be commercial business transactions. It must have been the intention of the legislature to use the word in a broad way.
[29] In my view “transaction” in s 4(1) means all exchanges or interactions concerning property between spouses and partners that have material consequences, or would have if implemented. It has the wider meaning of a property related event that occurs between partners during a qualifying relationship. If transactions were only of the orthodox commercial type, s 4(1) would have a very limited ambit, and the common law and equity could be applied when there were non-commercial arrangements between spouses and partners. Given that the purpose of the Act is to recognise the equal contributions of spouses and partners to a relationship, and to
provide for a just division when it ends,12 that could not have been the intention of
Parliament.
[30] In this case the exchanges that allegedly give rise to a constructive or resulting trust or an estoppel claim are “transactions” in that sense, and they relate to
“property” in that they relate to the London houses.
10 Tony Deverson and Graeme Kennedy The New Zealand Oxford Dictionary (Oxford University
Press, Melbourne, 2008) at 1194.
11 Kerridge v Kerridge [2009] NZCA 14, [2009] 2 NZLR 763 at [45].
12 Property (Relationships) Act 1976, s 1M(b) and (c).
[31] Mr Macdonald relied on s 4(4). He submitted that it makes it clear that the purpose of the section is not to deny the wife the right to claim against her husband for an interest in the property, but to ensure that if she does it is decided as if it had been raised under the Act, so that the end result is a just division reflecting the purposes and principles of the Act. He pointed out that it is unfair for the location of certain assets to deprive a claimant of having all claims determined at once. He
quoted the principle expressed in Shaw v Haven Trustee Ltd that:13
[i]f possible all issues relating to the relationship breakup should be determined together. There is a risk of injustice if issues are heard separately, and at an early stage, when all the facts and circumstances may not be disclosed.
[32] He also relied on the principles in s 1N of equal contributions and the desirability that all questions about the identification, classification and division of property should be resolved inexpensively and simply in a single proceeding. He submitted that only by this means can Ms Burt obtain a just division of the fruits of the relationship. To find otherwise would be to defeat the purposes and principles of the Act.
[33] I do not think that s 4(4) has much relevance. It relates to “relationship” property, and it is common ground that the London properties are not relationship property. Mr Macdonald’s argument that the foreign immovables could be treated as an asset within the relationship property proceeding is misconceived. Section 7 makes clear that the Act applies to immovables situate within New Zealand, and by direct implication excludes foreign immovables from its ambit.
[34] Subsection (3) is relevant. It states that various specific equitable presumptions do not apply. However, that is without “limiting the generality of subsection (1)”. Subsection (3) operates to give examples of some equitable presumptions that do not apply. It seems highly unlikely that the legislature would have intended some equitable doctrines to apply, but others to be excluded. The need to specify certain equitable doctrines in s 4(3) can be seen as a response to how often those doctrines applied to those in a relationship. So they are excluded, but
without limitation. Constructive trusts are not mentioned, but in 1976 the doctrine of
13 Shaw v Haven Trustee Ltd [2013] NZHC 2961, (2013) 15 NZCPR 241 at [54].
constructive trust in New Zealand had not been developed and applied to de facto relationships as it was in the years that followed.14 There was no need to exclude equitable claims such as constructive trust claims specifically.
[35] Mr Macdonald’s second submission was that the Act is not a code for matters which are not dealt with by the Act, such as in this case claims for equitable damages or constructive trust. He relied in particular on an article by Jane Hunter called “Closing the Great Divide”:
… there remains no barrier to a party bringing and “consolidating” traditional civil proceedings dealing with the constructive trust at the same time. If the respondent was of the view that injustice arises from that occurring then an argument as to forum conveniens would properly air the merits of each position and optimise the justice of the situation.
[36] Mr Jefferson QC in response submits that the effect of ss 4 and 7 of the Act is that all the equitable claims are statute barred. He argues that there would be serious practical problems if equitable claims to overseas property could be entertained.
[37] Mr Macdonald noted the Act does not apply to immovable property situated out of New Zealand. Section 7 states:
7 Application to movable or immovable property
(1) This Act applies to immovable property that is situated in New Zealand. (2) This Act applies to movable property that is situated in New Zealand or
elsewhere, if one of the spouses or partners is domiciled in New
Zealand—
(a) at the date of an application made under this Act; or
(b) at the date of any agreement between the spouses or partners relating to the division of their property; or
(c) at the date of his or her death.
(3) Despite subsection (2), if any order under this Act is sought against a person who is neither domiciled nor resident in New Zealand, the court may decline to make an order in respect of any movable property that is situated outside New Zealand.
14 For a contemporaneous dismissal of the concept, as it was articulated by Lord Denning in Hussey v Palmer [1972] 3 All ER 744, [1972] 1 WLR 1286 (CA), see the discussion by Mahon J in Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 (HC) at 144–155.
[38] Section 7 was briefly considered by the Court of Appeal in Walker v Walker.15
In that case at the time of the parties’ separation in 1971 the husband held in his name a beach property, which was matrimonial property. He left New Zealand and remarried in 1974 and transferred his half share in the beach property to his second wife. In return she transferred to him a half share in a property in England. The first wife then brought a claim under the Act. While it was held that the Act did not apply to the property in England, the Court nevertheless directed that the whole of the husband’s remaining half share in the New Zealand property be vested in the wife.
[39] The majority reached this conclusion by using the machinery provisions of the Act to compensate the first wife for the post-separation acts of the husband, so as to achieve the equal sharing intended by Parliament. Cooke J (with whom Sir Thaddeus McCarthy concurred) held:16
… s 7(1)(a) states that the Act shall apply to immovables which are situated in New Zealand. The Act thus does not purport to apply to immovables situated elsewhere. This harmonises with the well-known general rule that all questions concerning rights over immovables are governed by the lex situs. … The New Zealand legislature has understandably not set out to regulate shares in foreign immovables. That is left to the law of the country concerned.
[40] Richardson J reached the same conclusion but by a different route. He held that the half share which the husband transferred to the second wife was represented by the share which he had acquired in the second wife’s property in England. He considered there to be nothing prohibiting the Court from recognising the existence or character of foreign property when determining what orders should be made in
respect to New Zealand property:17
Section 7 does not in its terms preclude recognition of the existence of foreign immovables. Subsection (1) is a blunt and limited choice of law provision. It is not an exclusive code. It simply directs that the Act shall apply to certain property…. Otherwise it leaves the manner and extent of the application of the statute to other property for determination according to the common law rules. …
15 Walker v Walker [1983] NZLR 560 (CA).
[41] I am not able to adopt this reasoning, and indeed Mr Macdonald did not suggest I do so. It is useful to record Cooke J’s observations of Richardson J’s approach:18
… I would like to be able to adopt this view. But I cannot help thinking that
it requires a wrenching of what the Act understandably says.
He felt unable to apply the New Zealand Act to immovable property in England.
[42] Walker v Walker was considered by the Court of Appeal in Samarawickrema v Samarawickrema.19 In that case the parties had been married in Sri Lanka and lived in a house owned prior to the marriage by the husband, but which was substantially improved and added to during the marriage and used as their home. They had assets in New Zealand to approximately the equivalent value of the Sri Lankan property. A decision of the District Court Judge accepting that he could
not classify the Sri Lankan property under the Act, or make orders directly affecting it, but could take that asset into account in determining a just division of the New Zealand assets, was in question. The decision had been upheld, although on different grounds, in the High Court.
[43] The Court of Appeal held that the type of adjustment made in Walker could not be made if the foreign immovable was already owned at the date of separation. Because the Act does not apply to immovables situate out of New Zealand, they could not be said to fall within the classifications of matrimonial and separate property, or within the provisions relating to the matrimonial home. To so classify a
foreign immovable is to apply the Act to it, which s 7 does not authorise.20 The
Judge was effectively determining rights in a foreign immovable and this could not be done.21
[44] The Court of Appeal also disapproved a High Court decision where a Judge, having found that the wife’s property in Australia was the matrimonial home, vested
18 At 566.
19 Samarawickrema v Samarawickrema [1995] 1 NZLR 14 (CA).
their previous home in New Zealand in the husband on the condition that he made no claim against the Australian home.22 The Court held:23
He vested their previous home in New Zealand in the husband, on the condition that he made no claim against the Australian property. With respect, that order went too far. It purported to control the husband’s rights in respect of a foreign immovable. Section 7(1) goes further than merely to preclude a classification of a foreign immovable or an order as to its disposition. It precludes any interference by a New Zealand Court in the rights of the spouses in respect of the foreign immovable under the lex situs. The Court may in some circumstances to the existence of the foreign immovable to the limited extent indicated in Enright v Fox, but in doing so it must be careful to ensure that it is not applying to the foreign property the philosophy of the New Zealand statute. The claims in respect of the foreign property are to be decided by the local law, and should not be the subject of compensating adjustments in respect of the New Zealand assets to ensure that the final division of the total assets reflects a New Zealand approach.
[45] While McKay J was not considering equitable claims to the Sri Lankan property, the judgment rejected the use of procedures that do not involve direct claims to shares in property, as a way of getting around the prohibition implicit in s 7(1).
[46] The argument run by Mr Macdonald is that because s 7 means the Act does not apply to foreign immovables, Ms Burt’s rights in equity and common law in respect to the London properties are not barred by operation of s 4. However, as I discern it the legislative intent, when ss 4 and 7 were enacted in 1976, was that the lex situs, the local law, would apply to overseas immovables. Clearly New Zealand law in the form of the Act was not meant to apply, and it could be expected, since the Act was a code, that equity and common law were also not meant to apply.
[47] I do not think that this intention altered when the Act was extended to de facto relationships in 2002. As discussed earlier,24 the constructive trust concept was developed to traverse the unjust divide between a married couple’s rights under the Matrimonial Property Act 1976 and the de facto couple’s position at common law. Once the Act was extended to de facto relationships the law of constructive trusts
ceased to develop or be applied in relation to long term de facto relationships, as s 4
22 Lappos v Lappos [1990] NZFLR 223, (1989) 5 FRNZ 218 (HC).
23 Samarawickrema v Samarawickrema, above n 19, at 20. The case cited by the Court, Enright v
Fox (1989) 5 NZFLR 455, (1989) 5 FRNZ 33 (HC), is not directly relevant here.
24 At [17]–[18] above.
excluded it. It was not, in my view, intended that constructive trusts, when there was an overseas immovable, would be taken out of retirement and applied. The intention was that rights to any immovable situate overseas would fall for consideration under the lex situs, and the approach adopted in Samarawickrema would continue.
[48] Accordingly in my opinion s 4 functions as a jurisdictional bar in respect to claims brought in the common law or equity that relate to foreign immovables. That interpretation is supported by the approach taken by McKay J in Samarawickrema and the majority in Walker. In addition, as I develop later, that conclusion is supported by the position at common law and the practical difficulties that a two- track system would cause.
Private international law
[49] I have accepted Mr Jefferson’s argument that the Act created a stand-alone regime excluding all claims relating to immovables including equitable claims. That position is not dependent on or necessarily commensurate with private international law and the Moçambique rule. However, in case this is wrong, and the combined effect of ss 4 and 7(1) is that the common law and equity applies to foreign immovables, I proceed to consider the position in private international law.
[50] Mr Jefferson submitted that there was no jurisdiction in any event for the equitable claims under private international law. He relied on the Moçambique rule, the application of which is discussed below.
[51] At this juncture it should be noted that this case has not been argued or procedurally structured on a private international law basis. Service has been effected on Mr Yiannakis; he has filed a statement of defence and not protested jurisdiction. His position throughout has been that the Act excludes jurisdiction, rather than there being no jurisdiction or that England is the more convenient forum. However, the scope of the Moçambique rule and its interplay with forum non conveniens arguments remains a highly relevant background contextual factor in
interpreting the combined intention of ss 4 and 7(1),25 and, as noted above, for completeness it is necessary to consider whether the in personam exception to the Moçambique rule would apply in this case.
[52] The implicit prohibition against claims against foreign immovables in s 7 reflects the New Zealand common law, which is that New Zealand Courts have no jurisdiction in proceedings primarily concerned with title or the right to possession of immovable property situated outside the jurisdiction of New Zealand, unless the action is based on a contract or equity between the parties (the in personam exception) or the proceeding concerns the administration of an estate or trust and
extends to other property within the jurisdiction.26 This rule (the Moçambique rule)
derives from the House of Lords’ decision in British South Africa Co v Companhia de Moçambique.27 The existence of the rule has been recognised in New Zealand.28
In Schumacher v Summergrove Estates Ltd, the High Court accepted its application (albeit questioning its justification),29 and on appeal the Court of Appeal did not consider it necessary to examine its status.30
[53] I note that despite a full attack on the ongoing existence of the rule, the House of Lords in Hesperides Hotels v Muftizade determined that it still applied in England. I propose to apply it here.31 As Viscount Dilhorne stated in Hesperides
Hotels:32
25 As pointed out by the authors of Fisher on Matrimonial and Relationship Property, the effect of the Court of Appeal’s decisions in Walker and Samarawickrema is to interpret s 7(1) to accord with the Moçambique rule: RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online looseleaf ed, LexisNexis) at [1.60]. I record that in his submissions Mr Jefferson disavowed an interpretation of s 7(1) as a straight codification of Moçambique.
26 Laws of New Zealand Conflict of Laws: Jurisdiction and Foreign Judgments at [36]; and
Schumacher v Summergrove Estates Ltd [2013] NZHC 1387 at [11].
27 British South Africa Co v Companhia de Moçambique [1893] AC 602 (HL).
28 Re Fletcher Deceased [1921] NZLR 46 (SC); Dowson v Lloyds Bank NZA Ltd HC Wellington
CP744/90, 13 March 1991; Nippon Credit Australia Ltd v Girvan Corporation New Zealand Ltd
(1991) 5 PRNZ 44 (HC).
29 Schumacher v Summergrove Estates Ltd, above n 26, at [15].
30 Schumacher v Summergrove Estates Ltd [2014] NZCA 412, [2014] 3 NZLR 599 at fn 9.
31 I respectfully acknowledge recent New Zealand criticisms of the rule: see, for example, David
Goddard QC and Campbell McLachlan QC “Private International Law – Litigating in the Trans
Tasman Context and Beyond” (seminar presented to the New Zealand Law Society, August
2012) at 156–158. I note that the learned authors of that seminar state that “it remains open to aNew Zealand appellate court to reject the Moçambique rule” (at 157, emphasis added).
32 Hesperides Hotels v Muftizade [1979] AC 508 (HL) at 541. See also Lucasfilm Ltd v Ainsworth
[2011] UKSC 39, [2012] 1 AC 208 at [106].
Our attention was drawn to the criticism and we were pressed to revise the rule. In my opinion it would not be right for use to exercise our power to do so. Buller J said in 1792 it was then too late to inquire whether it was wise or politic to distinguish between transitory and local actions. It is now in my opinion far too late for us to seek to do so. Questions of comity of nations may well be involved and if any change in the law is to be made it should only be made after detailed and full investigation of all the possible implications which we sitting judicially cannot make. In my view it must be left to Parliament to change the law if after full consideration that is thought to be desirable.
[54] The concept of comity of nations and respect for local law as it applies to the land of the other nations underlies the concept of the Moçambique rule, and a further justification is that given its long lived application it implements the reasonable and legitimate expectations of the parties to a transaction or an occurrence.33 It is significant that s 7(1) and its implicit exclusion of immovables can be seen as recognition by the legislature of the ongoing application and relevance of the rule.34
The in personam exception
[55] Mr Macdonald did not contest the proposition that the Moçambique rule applied in New Zealand, but argued that the in personam exception to that rule applied in relation to the pleaded equitable claims.
[56] It certainly remains arguable that a claim for a constructive trust over a foreign immovable fits within the in personam exception. As stated by the authors of Laws of New Zealand:35
The Court exercises a jurisdiction in personam in cases involving foreign immovables against people subject to its jurisdiction when there exists between the parties a personal obligation or equity arising out of contract, or trust, or from fraud or other unconscionable conduct. This principle does not give jurisdiction to determine title to foreign immovables when there is no personal obligation between the parties, or when there is only some equity that depends for its existence on the law of the place where the immovable is situated (the lex situs).
[57] It is clear that claims that are entirely in personam are not barred by s 4. Thus, in Mosaed v Mosaed Richardson P was prepared to distinguish an equitable
33 As well as conflict of laws generally: Lawrence Collins (ed) Dicey, Morris and Collins on
Conflict of Laws (15th ed, Sweet and Maxwell, London, 2012) at [1-005], [1-010].
34 See above at fn 25.
35 Laws of New Zealand Conflict of Laws: Choice of Law at [173] (footnotes omitted).
inquiry into accounting for a profit from an enquiry into the just division of matrimonial property.36 The basis for this was a misrepresentation made by the husband to the wife that did not accurately describe the offers that had been made to purchase the house. It was held not to be a transaction between the husband and wife concerning property. Accounting for profit arising from a breach of duty in such circumstances was a different enquiry from the just division of matrimonial
property.
[58] Also in Kerridge v Kerridge the Court of Appeal was prepared to separate tortious claims by a wife against the husband from the relationship property matrix of the Act.37 The heart of the allegation in that case was a claim of deceit where the husband led the wife to believe that he would take certain action to transfer a property. The Court of Appeal held:38
While the PRA is a code in respect of transactions between spouses in respect of property, it is not a code in respect of all available remedies between spouses for all possible legal disputes that may arise between them.
[59] In my view such purely in personam claims are different from these equitable claims that arise in relation to the purchase and improvement of property, and are not applicable. Section 4 does not apply, as they do not relate to property transactions.
[60] More relevant are the decisions of this Court and the Court of Appeal in Schumacher v Summergrove Estates Ltd,39 as well as that of the English and Wales Court of Appeal in Re Polly Peck International Plc (In Administration) (No 2).40 In the latter the applicants claimed a remedial constructive trust over properties in Northern Cyprus that had been seized following the 1974 Turkish invasion. A
question arose as to jurisdiction. In respect to the in personam exception to the
Moçambique rule Mummery LJ held:41
In my judgment, these exceptions do not apply; the applicants’ claim for
relief by way of constructive trust is not founded on a contractual or
36 Mosaed v Mosaed [1997] NZFLR 97, (1996) 15 FRNZ 15 (CA).
37 Kerridge v Kerridge, above n 11, at [30].
38 At [52].
39 Schumacher v Summergrove Estates Ltd, above n 26; and Schumacher v Summergrove Estates
Ltd, above n 30.
40 Re Polly Peck International Plc (In Administration) (No 2) [1998] 3 All ER 812 (CA).
41 At 828. Potter and Nourse LJJ agreed (at 830).
equitable right. It is founded on the legal ownership of properties in Northern Cyprus. The claim to a constructive trust imposed on the assets in the hands of the administrators is the remedy which the applicants assert is appropriate to the infringement of that right of ownership or possession; but the claim is not itself based on a contractual or equitable right.
[61] Re Polly Peck was considered by Woolford J in Schumacher. That case concerned a constructive trust claim brought by a wife in New Zealand in respect to a property in Ireland. The wife had lived at the property with her husband and children and claimed an interest on the basis of contributions she made to the property when they had lived there. No claim was brought under the Act, presumably because title to the property was held by a company controlled by the mother and brother of the husband. The defendants applied to strike out the claim.
[62] In the High Court, on review from a decision of Associate Judge Sargisson, Woolford J held that the in personam exception to the Moçambique rule applied, but Ireland was the more convenient forum to hear the dispute. He allowed the defendants’ objections to jurisdiction and struck the claim out.
[63] In doing so Woolford J distinguished Re Polly Peck on the following basis:
[18] This proceeding is different to Re Polly Peck where the question was who had title to the properties in Cyprus. In our case the plaintiff is not claiming she already has underlying title to Summergrove House. Rather, she is claiming it would be unconscionable for the defendants to have sole ownership of the property due to the time and effort she put into the property. Therefore she is vindicating her equitable rights. Accordingly, the in personam exception to the Moçambique rule applies and the New Zealand courts would not be precluded from hearing this claim due to a jurisdictional bar.
[64] It appears on appeal the parties agreed the in personam exception to the rule applied, and focused their arguments on whether Ireland was the more appropriate forum to settle the dispute. The Court of Appeal accordingly did not hear argument on the dispute.42
[65] Mr Macdonald relied on this decision and submitted that Ms Burt’s claim was
not in substance a claim to a proprietary interest, but was rather a claim against a
New Zealand citizen by another New Zealand citizen in a New Zealand Court over a
42 Schumacher v Summergrove Estates Ltd, above n 30, at fn 9.
relationship breakdown, and that any remedy of damages could be enforced solely within New Zealand. He relied also on the statement of Paterson J in Birch v Birch where the Judge noted that the Court has jurisdiction in relation to foreign land to enforce some personal obligations arising out of a fiduciary relationship, implied contract or other conduct, which in the view of equity would be unconscionable to
ignore.43 Mr Macdonald also relied on Jane Hunter’s article “Closing the Great
Divide” which argued that a blanket refusal of jurisdiction in relation to foreign immovables is outmoded in a modern mobile society. In the article Ms Hunter makes the point that while part of a state rationale for the prohibition on dealing with immovables arises from comity and difficulties of enforcement, this is answered by saying it acts on the conscience of the respondent and does not trespass on a foreign sovereign’s rights nor require overseas enforcement, so there should be no barrier to relief.
[66] I do not agree, and I respectfully disagree with Woolford J’s classification of the plaintiff’s claim in that case as one based upon unjust enrichment.44 The plaintiff sought an institutional constructive trust on the basis of contributions made to the property. The plaintiff did not seek a remedial constructive trust, which is a (possible) response to unjust enrichment.45 Except for the fact it concerned a foreign immovable, owned by a family-held company and not a person, the plaintiff’s claim was materially the same as the claims made in Gillies v Keogh and Lankow v Rose. As Tipping J noted in obiter in Fortex Group Ltd v MacIntosh, the “constructive trust which arises in de facto matrimonial property cases is of an institutional, rather than a remedial kind”.46 These types of common intention constructive trusts are
considered by the authors of one leading text to be constructive trusts recognised to
43 Birch v Birch [2001] 3 NZLR 413 (HC) at [50], His reasoning was not adopted in the decision of the other Judge who sat, Elias CJ, who did not address this particular issue as she had adopted a different route.
44 Schumacher v Summergrove Estates Ltd, above n 26, at [17].
45 Commonwealth Reserves I v Chodar [2001] 2 NZLR 374 at [42], [46]. The remedy is available in Canada: Rawluk v Rawluk (1990) 65 DLR (4th) 161 (SCC). Although Cooke J considered in the Canadian approach to constructive trusts to be “very helpful” in working out the property rights of common law spouses, and by extension de facto unions, in Hayward v Giordani, above n 6, at 148, that opinion was expressed when the constructive trust doctrine as it applied to de
facto unions was in its early infancy. The concept has since matured.
46 Fortex Group Ltd v MacIntosh [1998] 3 NZLR 171 (CA) at 178. Although there remains some debate about the classification of constructive trusts as institutional or remedial in the de facto relationship context, Jessica Palmer considers this to be “the better view”: Jessica Palmer “Constructive Trusts” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thompson Reuters, Wellington, 2009) at [13.2.4].
prevent the fraudulent or unconscionable invocation of legal rules to deny a claimant’s right to property.47 A claim to a constructive trust in a relationship property context is a claim for an interest in property, and is therefore first and foremost a proprietary claim.48
[67] In coming to the conclusion that the in personam exception applied Woolford J referred to the decision of the European Court of Justice in Webb v Webb.49 That case concerned a father who sought orders declaring his son held for him an apartment in France on constructive trust and must execute such documents required to vest legal ownership in him. The Court held that action did not constitute an action in rem that fell within art 16(1) of the Brussels Convention because it concerned only rights between the father and son, and the rights were therefore personal between them.50 However, this decision does not reflect the English and New Zealand position, and the father’s claim would in fact be considered to be proprietary under English law.51 I do not consider this case assists.
[68] In my view the fact an institutional (rather than remedial52) constructive trust was sought in Schumacher is indicative the claim was fundamentally a claim in rem. In this case, the statement of claim seeks declarations as to how the various London properties are held, asking for declarations that they are held by Mr Yiannakis in trust for himself and Ms Burt. The declarations seek effectively in rem declarations and thereby show the true nature of the claim. While damages for equitable compensation and accounts of rent are also sought, those remedies are derivative from the proprietary claim. As Mr Jefferson put it, the relief sought is collateral to the substance of the dispute. In my view, therefore, the in personam exception to the Moçambique rule cannot be said to apply to a Lankow v Rose-type constructive trust
claim brought in respect to a foreign immovable in a relationship property context.
47 David Hayton, Paul Matthews and Charles Mitchell (eds) Underhill and Hayton Law of Trusts and Trustees (18th ed, LexisNexis, London, 2010) at 499, 553 (emphasis added).
48 Lankow v Rose, above n 5, at 282 per Hardie Boys J.
49 Webb v Webb [1994] QB 696 (ECJ).
50 At 712–713. See also Collins, above n 33, at [23-012].
51 Jonathan Hill and Adeline Chong International Commercial Disputes: Commercial Conflict of
Laws in English Courts (4th ed, Bloomsbury Publishing, London, 2010) at [15.1.93].
52 Mr Macdonald rightly did not base his argument on the remedial constructive trust. It would be inappropriate to impose a remedial constructive trust on the basis of unjust enrichment against a foreign immovable of this type.
In particular, I do not think it possible to typify Ms Burt’s equitable claims as in personam claims.
[69] This analysis receives some support from the Court of Appeal’s comments in Schumacher. The distinguishing factor is that these arguments were considered in relation to the issue of forum non conveniens and choice of law, rather than jurisdiction. The in personam exception was not in issue.
[70] Miller J, speaking for the Court, noted that “Courts ordinarily recognise that controversies over immovable property should be decided in the country where the property is, that being the sovereign state where power over the property resides and to whose authorities of comity and effectiveness invite deference.”53 Miller J also commented on the choice of law rule to apply to constructive trust claims:
[37] We observe that controversy still surrounds the true character of constructive trusts as proprietary or restitutionary, substantive or procedural. The orthodox view of constructive trusts in private international law is that what must be classified is not the trust but the obligation or interest or event that will lead a court to declare or impose it. And where the claimant ultimately asserts an interest in real property, the property choice of law invariably applies. Dicey cites Lord Esher for the proposition that to choose otherwise would be to do indirectly what the court dare not do directly; that is, to assert jurisdiction over foreign land. One commentator, Adeline Chong, puts the rationale in this way:
Giving prime emphasis to the proprietary nature of trusts makes sense in the private international law arena. When it is asserted that property is held on a resulting or constructive trust for the claimant, the establishment of a trust will frequently be a precursor to the claimant ending the trust and compelling the defendant to transfer the property absolutely back into his name. Therefore, the general justifications for the application of the property choice of law rules when outright transfers of property are at issue apply equally when it is a trusts claim.
[38] The interest claimed in this particular case is proprietary in nature. Pauline’s claim rests upon no antecedent obligation, such as a contract or fiduciary duty. Rather, she asserts a proprietary interest in Summer Grove through a constructive trust founded upon her contributions to the property. We accept Mr Gay’s submission that her claim to equitable damages makes no difference; an order that the respondents pay money to her would be made as an alternative means of discharging the trust.
(emphasis added, footnotes omitted)
53 Schumacher v Summergrove Estates Ltd, above n 30, at [30].
[71] In making those findings the Court of Appeal upheld Woolford J’s
characterisation of the underlying dispute as a property issue.54
Overview
[72] In my view these observations are of importance in this case, where unlike Schumacher property relationship issues are expressly raised. Litigation can arise between parties where there is reference to properties but no close connection with them, but a case like this, where the claim is closely connected to the property, is at the other end of the spectrum. The examination is not so much of classification of the type of claim, but rather the obligation or interest or event which may lead the
Court to declare or impose it.55 If in essence the claimant is asserting an interest in
real property, that involves doing indirectly that which a Court cannot do directly, namely, to assert jurisdiction over foreign land.56
[73] Accordingly I consider the in personam exception does not apply. This analysis is consistent with my finding that the natural meaning of ss 4 and 7(1) of the Act is that the Act displaces the rules and presumptions of the common law and of equity to all relationship property, but offers no replacement regime for immovables. This does not mean that foreign immovables must be considered as if the Act does not exist, bringing back equity, but rather that there is a lack of jurisdiction to consider any claims at all concerning foreign immovables. The law of the lex situs applies.
[74] The equity proceeding proposes a back door way for a party to a relationship property claim to obtain financial compensation for dealings with a foreign immovable. Just as the relief sought in Samarawickrema would have pre-empted the jurisdiction of the Sri Lankan Courts,57 so too Ms Burt’s constructive and resulting trust claims would pre-empt or at least constrain an English Court considering claims
under English law to those immovables. For instance, it would be difficult to make
54 Schumacher v Summergrove Estates Ltd, above n 26, at [32].
55 Collins, above n 33, at [29-077]; and Schumacher v Summergrove Estates Ltd, above n 30, at
[37].
56 Collins, above n 33, at [23-051].
57 Samarawickrema v Samarawickrema, above n 19, at 19.
an order vesting a property in Ms Burt, if she had already been awarded a sum of money or an interest in the immovable in New Zealand.
[75] There are other practical problems that derive primarily from the inevitable conflict that would arise between two competing legal regimes, the New Zealand law of equity, and the lex situs.
[76] First, as Mr Jefferson pointed out, if these constructive trust claims were permitted to proceed, the end result could be if Ms Burt was successful that she might get a share, for instance 20 per cent, in one of the properties. Her share, being property acquired could arguably be relationship property and as relationship property it would in itself be subject to division. This would be a nonsensical consequence in terms of the scheme of the Act. While the discretions in the Act might be used to ameliorate this, it could mean that Ms Burt would end up in the New Zealand Court with only a portion of the share she might indeed be entitled to under English law. But any application of that English law by an English Court would have to deal with the fact that there had already been a determination of her interest in a New Zealand Court.
[77] Second, constructive trust claims do not operate in a vacuum. The identity of the property in respect of which the constructive trust arose can be critical, in that the property or part of it can be vested in a party under the Trustee Act 1956.58
Therefore, notionally it would follow that there could be an order vesting an asset that was in Mr Yiannakis’ name into the name of Ms Burt in whole or in part. This cannot be reconciled with s 4(1) and the Act applying and excluding the application of the common law and equity or the Moçambique rule.
Conclusion on jurisdiction
[78] In my view it would be wrenching the purpose and text of the Act to use the Act to allow claims against foreign immovables by the back door of an equitable claim. The intention of the Act was to create a complete regime for all relationship
property claims with an exception in relation to foreign immovables. Relationship
58 Trustee Act 1956, s 52(1).
disputes about overseas immovables were to be dealt with by the local law, presumably the local property relationship regime. It would run contrary to that intent and erode the prohibition against such claims, by allowing claims that are not under the Act.
[79] It would also create the practical and logistical problem of there being parallel jurisdictions and parallel claims in relation to foreign immovables where there can be in existence entirely different legal and equitable regimes. It goes without saying that a potential consequence of permitting two opportunities to claim under different sets of laws in respect of the same asset could be uncertainty and unfairness. While this could be said in relation to any claim for a foreign property, immovables have always been in an exceptional position because of the in rem nature of the ownership of land.
[80] Finally, and fatally, if relief were granted there would be a direct assertion of jurisdiction over foreign land. Even if no orders were sought that the land was held in trust, the upholding of the constructive trust claim would involve the assertion of an interest in the London properties. While Ms Burt may not be seeking legal title to the land, she is seeking an interest in it. As I have observed, in submissions to me counsel inevitably discussed the percentage which would fix her entitlement. She could be given a 10, 20 or 50 per cent interest. That interest would be in the property, although it would not necessarily be reflected by any alteration to the title by order of the Court. Nevertheless that sort of relief would be open to a plaintiff claiming a constructive trust. Thus the substance of the claim remains effectively a claim to a proprietary interest in overseas land.
[81] The consequence of this conclusion is that I put to one side all the claims in this Court which are equitable claims relating to foreign immovables.
Conclusion on private international law
[82] It follows from the discussion above that the equitable claims could not be brought under private international law. The in personam exception to the Moçambique rule does not apply. If that doctrine were to be overturned by a higher
Court, it is likely that the property choice of law would apply,59 which would in turn weigh in favour of the overseas jurisdiction as the forum with which the proceeding has the most real and substantial connection.60
The relationship property claim
[83] The parties were not able to agree on a statement of issues, and I do not have submissions that I can link with certainty to the statement of assets and liabilities. Some of the issues in dispute come down to a few thousand dollars. Some of the issues are clearly identified and argued, but others are not. Because of this uncertainty, I am unable to deal with every issue raised and give a comprehensive judgment. I have just received advice that contrary to expectations the parties have not been able to agree on chattels. I will, therefore, treat this as an interim judgment for the relationship property claim resolving some, but not all the issues.
[84] I note Mr Jefferson’s perceptive submission that the different positions adopted by the parties may, in part, reflect a “cultural” difference. The wife, born and raised in New Zealand, to use his words, instinctively subscribes to the philosophy that, upon separation, the parties to a long term relationship are prima facie entitled to share equally in the financial fruits of the relationship. That is the philosophy which underlies the Act and is part of the New Zealand social DNA. The husband, raised in London, sees things differently as a contributions-based approach to division of assets. As Mr Jefferson observed, this helps explain why the parties are at loggerheads.
The start of the de facto relationship
[85] I am asked to determine the date of the start of the de facto relationship. Given my finding that the constructive trust claims relating to the London properties cannot be heard in New Zealand, the date of the start of the de facto relationship is not a critical point. But the duration of a relationship is always of relevance if only
by way of background, and I will determine this issue.
59 Schumacher v Summergrove Estates Ltd, above n 30, at [37].
60 Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754 at
[45]; citing Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460 (HL).
[86] Ms Burt contends that the de facto relationship began at the point when she and Mr Yiannakis decided to leave New Zealand together to establish a residence in London. Thus, from her perspective the de facto relationship commenced when they left New Zealand in July 2001.
[87] Mr Yiannakis argued that Ms Burt always intended to move to London before she met him, and their mutual path to London was simply a matter of mutual convenience. For him it is submitted that he and Ms Burt were only in a relationship of boyfriend/girlfriend from 2001 through to 2004, and that the de facto relationship only began in March/April 2004 when Mr Yiannakis lost a job he had held for a good deal of time with a company Ally Lilly, and Ms Burt then became particularly supportive. It was then that the nature of their relationship and mutual commitment changed. He submits that there were frequent disagreements and absences up to that point. On Ms Burt’s approach they were in a relationship under the Act for over
12 years; on Mr Yiannakis’ approach, eight years.
[88] Section 2D of the Act sets out the meaning of de facto relationship. Section 2D(1) provides:
2D Meaning of de facto relationship
(1) For the purposes of this Act, a de facto relationship is a relationship between 2 persons (whether a man and a woman, or a man and a man, or a woman and a woman)—
(a) who are both aged 18 years or older; and
(b) who live together as a couple; and
(c) who are not married to, or in a civil union with, one another.
…
Subsection (2) sets out a non-exclusive list of relevant matters. Subsection (3) confirms the evaluative nature of determining whether 2 persons live together as a couple, and subs (4) provides for when a de facto relationship ends.
[89] The approach to the issue as to when a de facto relationship starts, must be evaluative, with all relevant matters being weighed. Factors in addition to those listed in s 2D(2) may be considered. The essence of the three criteria set out in
s 2D(1) involves two persons over the age of 18 “living together as a couple”. It is this concept of “living together” that is at the heart of a de facto relationship.61
However, it is clear from s 2D(2) that parties do not have to continuously cohabit, and equally cohabitation is not in itself conclusive.
[90] Certain factors are common ground. By the time the parties left New Zealand they were in a sexual relationship and they were travelling together. Soon after they arrived in London they commenced living together, and continued to do so, with short breaks, until June 2012.
[91] Both Ms Burt and Mr Yiannakis gave evidence and were cross-examined. I found them both to be honest and straightforward witnesses, but in the end their own personal perceptions in hindsight of what their relationship meant, are far from determinative. In my view the de facto relationship did not begin when the parties left New Zealand. I accept that Ms Burt was minded to travel to Europe in any event. They were still then a couple who had met relatively recently, and who while they were a couple were not, in the convenient arrangement of being co-travellers, showing the requisite degree of commitment.
[92] However when, shortly after arrival in London, they commenced living together first in a property provided by Mr Yiannakis’ mother, and thereafter in other properties, they did in my view commence living together. The really important question is the degree of commitment they showed to each other at that point. By living together in an intimate relationship, with Mr Yiannakis helping support Ms Burt initially and with them sharing living expenses with Mr Yiannakis, there was that requisite degree of commitment. On 24 August 2001 Ms Burt began paying her wages into their joint Nationwide account.
[93] Their own perception of where they stood, unclouded by this dispute, was demonstrated by the visa application that they lodged in early 2003, which showed them as living together, and having done so for some time (accepting that the exact
details of what was in the application were not available).
61 Lawson v Perkins [2008] NZFLR 401, (2007) 26 FRNZ 946 (HC) at [34].
[94] Mr Yiannakis referred to the considerable number of trips that Ms Burt took to Europe during the 2001–2004 period. This was of course part of the attraction of living in London for a New Zealander; the ability to enjoy cheap and quick trips to Europe. She exploited this to the full. However, in the end it was clear that on more than half the occasions Ms Burt and Mr Yiannakis travelled to Europe together. They were from August 2001 functioning as a couple, showing a mutual commitment to a shared life. I accept that the trust between them may have increased further in 2004 when Mr Yiannakis lost his job, but that was not the turning point between them being boyfriend and girlfriend and a couple in a de facto relationship. That turning point had taken place earlier when they set up home in London, and I fix the time at August 2001.
The assets
[95] I received this balance sheet of assets (which is not an accepted list):
Assets St Stephens Avenue $850,000.00 Mazda (wife) $11,600.00 Wife’s superannuation $2,000.00 Interest on wife’s superannuation $157.50 Tower Terrace / Alexandra Road rental account $17,705.00 Husband’s superannuation $27,038.00 Interest on husband’s superannuation $2,129.24 Wife’s bank account $1,895.49 Pfizer bonus pro rata $1,689.83 Debt to husband by Winchmore Estates Ltd $210,000.00 845 account $6,994.10 982 account $9,134.80 590 account $4,534.10 Total $1,144,878.06
[96] There was also a list of liabilities. These figures were subject to considerable change and argument through the course of submissions.
[97] It is necessary for me to go through these various items and when I am able to do so, make findings in respect of them.
[98] Many of the items were agreed. I record in particular my understanding that the value and classification of St Stephens Avenue, the Mazda motor vehicle, the wife’s superannuation, the interest on the wife’s superannuation, the interest on the husband’s superannuation, the wife’s bank account, the Pfizer bonus pro rata, the Westpac credit card debt, the Nationwide credit card debt and the St Stephens Avenue debt are all agreed.
[99] I will now proceed to deal with some of the items in which there is no agreement, where I have a clear understanding of the issue and the submissions.
The Winchmore debt to the husband of $210,000
[100] It is common ground that the shares in Winchmore Estates Ltd are relationship property. The accounts show a debt due by the company to Mr Yiannakis of $210,000. There is a dispute as to whether this is relationship property, or the separate property of Mr Yiannakis.
[101] Mr Yiannakis has outlined that the sum has its origins in the refinancing of a property he owned prior to the marriage at Oxford Gardens (which the parties lived in for a while as their home in London). He also submitted that another source of funds for the original purchase was the Dorset Road property, which was owned by Mr Yiannakis. He asserts that the sum of £75,000 (at the then exchange rate
$215,000) was raised by him personally by borrowings from the Britannia Building Society and secured against the Oxford Gardens property. It was then applied, as a deposit, to the purchase of the St Stephens Avenue property in March 2007. The underlying loan has been serviced from the Oxford Gardens rentals. He submits that this money trail shows that the debt to him shown in the accounts should be classified as separate property.
[102] I accept that portions of the funding for the purchase of St Stephens Avenue derived from such sources. However, I am also satisfied that some of the contribution was from Ms Burt who from 2002 worked throughout the relationship and was contributing to a number of the accounts which indirectly fed the ultimate purchase fund. It is significant that had the home been purchased in the usual way by the husband and wife jointly then monies paid by either of them to acquire the property would have become relationship property and there would have been an equal division.
[103] On its face the debt of Winchmore Estates Ltd is property acquired by Mr Yiannakis after their marriage and after the de facto relationship began, and thus relationship property under s 8(1)(e):
8 Relationship property defined
(1) Relationship property shall consist of—
…
(e) subject to sections 9(2) to (6), 9A, and 10, all property acquired by either spouse or partner after their marriage, civil union, or de facto relationship began;
…
[104] Winchmore Estates Ltd can be seen as a vehicle through which the parties acquired the St Stephens Avenue property equally. I accept Mr Macdonald’s submission that the way in which these funds were used, transferring them from a joint account to New Zealand for the purpose of acquiring a family home, meant that an asset was created in the debt of $210,000 and that was an asset for relationship property purposes.
[105] A purpose of the broad definitions in s 8 is to avoid the dissection of the history of the contributions of each party to a particular asset. This debt does not fall under any of the definitions of separate property in ss 9 or 10. In particular there were sufficient contributions by Ms Burt in the course of the parties’ build up of funds in the lead up to the purchase of St Stephens Avenue, for that property to be clearly not property acquired out of separate property in terms of s 9(2).
[106] The Act in this area works in broad strokes and s 8(e) applies. This was a debt to Mr Yiannakis created after marriage. I am satisfied that the debt of $210,000 to Mr Yiannakis was relationship property.
The $4,265.25 interest on the Winchmore debt
[107] This is the sum calculated as interest on the $210,000 owed to Mr Yiannakis. While I have found that debt is relationship property, and while it was under Mr Yiannakis’ control, I have not found that it constituted a specific sum that he used for his benefit. In all the circumstances I am not prepared to make an adjustment in Ms Burt’s favour under s 18B for that amount.
Monies used to purchase Avondale Road
[108] The Avondale Road property in London was purchased by Mr Yiannakis after the marriage had ended. It is not only a foreign immovable, but on its face, if the Act had in fact applied to that asset, it would be separate property.
[109] Mr Macdonald does not make any claim for Ms Burt in relation to the Avondale Road property. However, he does claim that two of the funds that Mr Yiannakis used to buy that property after separation were relationship property, and that there must be a s 18C adjustment in respect of the dissipation of those relationship property funds, even if there is no claim in New Zealand against Avondale Road.
The revolving credit account
[110] This concerns $86,000 taken from the revolving credit account by
Mr Yiannakis to help fund the Avondale Road purchase.
[111] The revolving credit account was in existence at the date of separation. The account was in the parties’ joint names. At the date of separation the balance stood at $337,208 debit. From the date of separation the parties continued to operate that account and continued to live in St Stephens Avenue. After separation various funds were deposited into the account, including the wages of the parties, some money
from Mr Yiannakis’ mother ($12,374), a work-related bonus paid to Mr Yiannakis ($15,754), and some Southern Cross Medical Insurance funds. It was also used by both parties for the payment of living expenses.
[112] From the date of separation until June 2013 the account oscillated between
$220,000 and $340,000 debit. On 7 June 2013 Mr Yiannakis removed $86,000 from the account and applied it to the purchase of Avondale Road.
[113] Ms Burt asserts that this amount taken by Mr Yiannakis was relationship property, and that this money, taken from a joint account, and for which she is jointly liable, should therefore be added to the relationship pool under s 18C. Mr Yiannakis’ position is that the contributions to the monies he took have to be traced.
The E-Saver account
[114] The husband took £125,000 ($256,200) from a Nationwide E-Saver account in London in their joint names. It is his case that the funds in the account derived from a refinancing of Alexandra Road in June 2009, and:
(a) that refinancing amounted to a repayment, to him, of the funds initially utilised to purchase Alexandra Road in July 2008;
(b)that repayment to him, was a repayment of an advance made by him from his separate property and was (as such) his to use as he saw fit;
(c) the repayment actually due to him was £155,000 (excluding the fact that he had also paid stamp duty and legal fees of approximately
£2,500); and
(d)the £125,000 taken from the account in June 2013 was part (only) of the funds due to him.
[115] He also says in respect of the money he drew down from the account, that it represented the balance of what he says he was owed.
Section 18C adjustment
[116] Section 18C provides:
18C Compensation for dissipation of relationship property after separation
(1) In this section, relevant period has the same meaning as in section
18B.
(2) If, during the relevant period, the relationship property has been materially diminished in value by the deliberate action or inaction of one spouse or partner (party B), the Court may, for the purposes of compensating the other spouse or partner (party A),—
(a) order party B to pay party A a sum of money:
(b) order party B to transfer to party A any property, whether the property is relationship property or separate property.
(3) In proceedings commenced after the death of 1 of the spouses or partners, this section is modified by section 86.
[117] The $86,000 taken by Mr Yiannakis to purchase Avondale Road was taken from the revolving credit account which was in the joint names of Ms Burt and Mr Yiannakis. Ms Burt was jointly liable to repay the debt accrued. The net effect of the increased indebtedness was to materially diminish the relationship property in value by increasing their indebtedness and thereby reducing relationship property overall.
[118] The E-Saver account was relationship property. While there may have been unequal contributions to it, the account was in their joint names and on its face under s 8(1)(c) it was property owned jointly by them and relationship property for that reason. In addition under s 8(1)(e) it was property acquired after the marriage. Whether the property is relationship property does not turn on a minute examination of the parties respective contributions.
[119] I conclude that Mr Yiannakis when he took the monies from the revolving credit account increased the parties’ joint indebtedness and diminished relationship property available to the parties, and when he took monies from the E-Saver account he again diminished relationship property.
[120] The purpose of s 18C(2) is to give the Court a discretion to compensate a party whose spouse or partner has diminished the value of relationship property by deliberate action or inaction. I consider it fair to compensate Ms Burt for the amounts taken, and I would make an order under s 18C(2) to the effect that Mr Yiannakis pay Ms Burt a sum equivalent to half the value of what he took, together with interest.
The $7,133 interest on the revolving credit account
[121] Mr Yiannakis claims interest from the overdraft after Ms Burt removed
$200,000 of funds from the revolving credit account in response to him withdrawing funds to pay for the Avondale Road purchase. She in fact repaid $148,000 and there is no doubt that arithmetically her actions cost the account $7,133. However, in my view she acted reasonably, as Mr Yiannakis’ actions in taking the money from the account unilaterally showed that she was at risk of him taking further large amounts, a risk she could cancel by withdrawing a large amount herself.
[122] I consider that she acted reasonably and in my discretion I am not prepared to make an adjustment for that figure.
The $8,701.42 and $5,672.92 credit card repayments
[123] These are repayments by Mr Yiannakis of Ms Burt’s credit card at Westpac, and the 50 per cent adjustment on the Tower Terrace account. Both these sums appear to have been payments by Mr Yiannakis for Ms Burt’s benefit made after separation. I consider it fair for there to be an adjustment for those figures in his favour.
Result
[124] I enter judgment for the defendant Mr Yiannakis on the claim filed in this court under number CIV-2013-404-3251.
[125] I give an interim judgment only in relation to the Property (Relationships) Act proceeding. I make the following declarations:
(a) The parties formed a de facto relationship as defined in the Property
(Relationships) Act in August 2001.
(b)The debt of Winchmore Estates Ltd of $210,000 to Mr Yiannakis is relationship property.
(c) There will be an adjustment under s 18C by Mr Yiannakis paying or giving credit to Ms Burt half the sums he took of $86,000 from the revolving credit account and $256,200 from the E-Saver account.
(d)There will be no adjustment in relation to the $7,133 interest on the revolving credit account and $4,265.25 interest on the Winchmore debt.
(e) There will be an adjustment under s 18B by Ms Burt paying or giving credit to Mr Yiannakis half the credit card repayments she received of
$8,701.42 and $5,672.92.
[126] This is an interim judgment on the property relationship proceeding, and I reserve leave to the parties to apply for further orders consequential on or additional to this judgment.
[127] I reserve the question of costs. If the parties wish to make a costs application I direct Mr Yiannakis to file submissions within 21 days and Ms Burt submissions in reply within 35 days.
[128] If the parties are unable to agree on the division of the remaining relationship property in the light of these findings, then they should file submissions on the outstanding issues within 28 days. They should first prepare a joint list of the issues that cannot be agreed, and the outcomes sought by each party, and that should be submitted at the same time. The issue of whether a further hearing is necessary should also be addressed.
[129] If this timetable is not practicable, counsel should seek a telephone conference or file memoranda seeking alternative directions.
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Asher J
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