Collins v Collins
[2014] NZHC 2121
•4 September 2014
NOTE: PURSUANT TO S 169 OF THE FAMILY PROCEEDINGS ACT 1980, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO
11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE COURT/LEGISLATION/RESTRICTIONS-ON-PUBLICATIONS.
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-000876 [2014] NZHC 2121
BETWEEN G COLLINS
Appellant
AND
J COLLINS Respondent
Hearing: 29 July 2014 Appearances:
Kate Davenport QC for the Appellant
Kevin Muir for the RespondentJudgment:
4 September 2014
RESERVED JUDGMENT OF MOORE J
This judgment was delivered by on 4 September 2014 at 4:00pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
COLLINS v COLLINS [2014] NZHC 2121 [4 September 2014]
[1] Mr and Ms Collins1 commenced a relationship in 2000 and were married in
2003. They separated on 21 November 2010 and their marriage was formally dissolved on 17 June 2013.
[2] They have two young children aged 6 and 4. As part of a shared care arrangement Ms Collins has the primary care with Mr Collins caring for the children five nights per fortnight.
[3] Mr Collins is employed as an aircraft engineer. He also manages rental properties. He resides at an address which is a property owned by a company of which he has control. Ms Collins and the children live in the former family home which is jointly owned in partnership by her trust, the Haven Trust and Mr Collins’ trust, the OPM (Oscar Papa Mike) Trust.
[4] From separation until March 2013 Mr Collins provided Ms Collins with financial support. He made voluntary fortnightly spousal maintenance payments of
$1,100 and additional payments for day care. Naturally, he incurred expenses when the children were in his care. He ceased making the payments apparently for two reasons:
(a) first, he considered his obligations to Ms Collins had been fulfilled given the two and a half years which have elapsed since they separated;
(b) secondly, Ms Collins had recommenced employment.
[5] Ms Collins subsequently gave up work. She continues to live in the former matrimonial home with the children. Mr Collins continued to pay child support at the rate of $1,685 per month.
[6] The partnership between the two trusts also owned a holiday property in
Northland. Since the hearing in the Family Court in March 2014, that property has been sold and the parties have each received a capital payment of $88,000.
1 These are fictitious names to protect the identity of the parties.
[7] Ms Collins made an application for interim spousal maintenance orders in June 2013. An order for interim spousal maintenance was made by the Family Court on 26 March 2014. The Family Court ordered Mr Collins to pay interim spousal maintenance at the rate of $1,600 per month for six months as well as costs in the sum of $3,500.
[8] Mr Collins now appeals on the following grounds:
(a) the capital payment made to the parties following the sale of the holiday property more than meets any shortfall in Ms Collins’ budgeted expenses for the six month period of the interim maintenance order;
(b)the Judge made material errors in the exercise of the discretion to award interim maintenance under s 82 of the Family Proceedings Act
1980 (the “FPA”). The errors, particularly relating to legal expenses, the care of the children and the assessment of the financial information, resulted in a decision which was plainly wrong;
(c) the Judge awarded costs without hearing from either party. The costs award was manifestly excessive and inappropriate in the circumstances.
Approach on appeal
[9] It is well settled that a Family Court’s decision on an award of interim maintenance involves the exercise of discretion. In the circumstances I shall determine the appeal on the basis of the test set out in May v May.2 This confirms that the correct approach is for the appellant to show the Judge either did not take into account relevant factors or took into account factors which should not have been taken into account or the decision was plainly wrong. The review of such a
discretion on appeal is rare but not impossible.3
2 May v May (1982) 1 NZFLR 165 (CA).
3 FH v LH [2013] NZHC 1044 at [13]; Abercrombie v Abercrombie [1997] NZFLR 660 (HC); T v H [Spousal maintenance] [2006] NZFLR 560 (HC); Hodson v Hodson [Maintenance] [2012] NZFLR 252 (HC) at [26].
Relevant law
[10] An interim maintenance order may remain in force for no more than six months.4 Such an order is designed to meet the reasonable needs of the applicant pending determination of the substantive proceedings. Section 82, under which an interim maintenance order may be made, creates a very broad, if not unfettered, discretion which must nonetheless be exercised justly.5
[11] The Court of Appeal in Ropiha v Ropiha discussed the purpose of an interim maintenance order in the following way: 6
The purpose of the provision is obvious enough. It is to protect the position of an applicant who may have inadequate means to meet current needs pending determination of the proceedings, if and so far as it is reasonable in all the circumstances to do so. But the statute does not expressly lay down conditions or criteria as to the granting of an interim order. This is unlike the position that applies where permanent maintenance is sought … . It is given an unfettered discretion both as to whether an order should be made at all and as to the amount if an order is made. All that can be said is that the making of an order depends on all the circumstances of the particular case. The Court must do what it thinks just.
[12] The Court went on to consider the principles which should be applied in determining whether to make such an order:7
In considering the position of an applicant for an interim order a Court will necessarily pay particular regard to the reasonable needs of the applicant over the period for which an order will subsist and the means likely to be available to the applicant to meet those needs. In assessing those needs the Court will take into account the standard of living the parties had adopted for themselves. And we use the term ‘means’ in the broadest sense to encompass any sums which the applicant could reasonably be expected to earn from his or her own efforts during the term of any interim order together with any other funds available to the applicant during that period. What is important, if those means are to be set against the applicant's needs in determining whether to make an interim order, is that the moneys taken into account should be reasonably assured to the applicant. What could he (or she) reasonably count on having available during the limited term of an interim order? By the same token, a defendant should not be called on to pay maintenance before there is any finding on the substantive proceedings unless proper weight has been given to the applicant's capacity from all sources to meet her needs over that period. In principle, it is immaterial in that regard whether the source of funds is employment reasonably available
4 Family Proceedings Act 1980, s 82.
5 FH v LH, above n 3.
6 Ropiha v Ropiha [1979] 2 NZLR 245 at 247 (CA).7 At 247.
to the applicant, private income, resources of capital, or welfare benefits provided by the State or some other body. This is subject, of course, in the case of welfare benefits, to consideration of the scheme of the relevant legislation or authority under which benefits are or may be provided. (emphasis added)
[13] It is accepted that the appropriate questions the Court should ask when considering the exercise of the discretion are:8
(a) What can be identified as [the respondent’s] reasonable needs? (b) What means does [the respondent] have to meet those needs? (c) What can be identified as [the appellant’s] needs?
(d) What is the ability of [the appellant] to meet [the respondent’s]
reasonable needs?
(e) Should the Court exercise its discretion?
[14] As Ropiha determined, the applicable standard of living is that of the common household prior to the parties separating; the standard of living the parties had adopted for themselves.9
Application to adduce further evidence
[15] Mr Collins seeks to adduce further evidence on this appeal. This relates to two separate bodies of evidence. The first, which is unopposed, is evidence relating to the proceeds of sale from the holiday home. The second is information relating to the finances of the appellant’s trust and company.
[16] Rule 20.16 of the High Court Rules governs the admission of further evidence on appeal. It provides that unless further evidence is required to determine an interlocutory application that relates to the appeal, a party seeking to adduce
further evidence must first have leave of the Court.
8 This is the approach taken by Judge Riddell in RKFH v DPLH [2012] NZFC 8276 which was considered generally correct on appeal despite the appeal being successful overall- FH v LH [2013] NZHC 1044.
9 Ropiha v Ropiha, above n 6, at 247; Langridge v Langridge [1987] 2 NZLR 554.
[17] Rule 20.16 provides:
Further evidence …
(3) The court may grant leave only if there are special reasons for hearing the evidence. An example of a special reason is that the evidence relates to matters that have arisen after the date of the decision appealed against and that are or may be relevant to the determination of the appeal.
[18] The jurisdiction to receive further evidence on appeal is to be exercised sparingly. In determining such an application, the Court must consider whether the evidence was reasonably available at the first hearing. It must also consider the nature and cogency of the evidence.10 As noted in Telecom Corporation of New Zealand Limited v Commerce Commission, to avoid the first hearing being used merely as a “dummy run” the evidence sought to be adduced must be more than simply an improved or revised version of material which was or would have been available at the first hearing.11
[19] The evidence relating to the sale of the holiday property emerged after the hearing in the Family Court. The admission of this evidence is not opposed. It meets the admission criteria set out in r 20.15 and I make an order granting leave.
[20] The information relating to the finances of the appellant’s trust and company fall into different categories. Ms Davenport QC, for Mr Collins, submits this should be admitted in evidence given the disparity in the way the Judge assessed the evidence of each party and the fact that the debt position of the appellant’s trust had not previously been put in issue. Ms Davenport submits that it is in the interests of justice to adduce the evidence in order to confirm the true financial position of the appellant’s trust and company. Mr Collins has made an affidavit in support of the application. He said he did not put this evidence before the District Court because he was not receiving any income from those sources. He said he believed his financial position was adequately explained in his declaration of financial means.
[21] Mr Muir, for Ms Collins, submits that Mr Collins was on notice several times prior to the interim maintenance hearing in March 2014 that Ms Collins took issue
10 Comalco New Zealand Ltd v Television New Zealand [1997] NZAR 97 (HC) at 103; cited with approval in
Gibbston Downs Wines Ltd v Property Ventures Ltd (in rec and liq) [2013] NZCA 546.
11 Telecom Corporation of New Zealand Ltd v Commerce Commission [1991] 2 NZLR 557, [1991] NZAR 337.
with the fact he had not disclosed the means available to him from his trust assets and his trust income. His declaration of financial means and their sources was filed in January 2014. Only Mr Collins’ own income and expenses was included which disclosed a substantial figure for rental, later described as a nominal rental paid to the OPM Trust. Furthermore, Mr Muir submits the material sought to be adduced still does not create a complete picture because the rental income of only three of the various rental properties appears to be included.
[22] The majority of this evidence was readily available at the time of the first hearing. Its relevance to the issues to be determined in March this year on the spousal maintenance application was plain. I am not satisfied that in terms of r 20.16 there exists special reasons to admit the evidence. This is, however, subject to the following exception. The final statement in Exhibit D to Mr Collins’ affidavit is the trust statement for the month ending 31 March 2014. Obviously, this was not available at the hearing and thus satisfies the test for admission under r 20.16. I grant leave to adduce this evidence which supports Mr Collins’ claim that the trust has significant debt.
Appeal grounds
Sale of holiday property
[23] Ms Davenport submits the sale of the holiday property, which resulted in each party receiving a cash payment of $88,000, eliminates the need for Mr Collins to make interim maintenance payments. The Judge identified a shortfall of $1,600 per month in Ms Collins’ ability to meet her reasonable needs over the six months. For the duration of the order this totals $9,600.
[24] Ms Davenport refers to FH v LH in which Priestley J highlighted that interim spousal maintenance protects the position of an applicant with “inadequate” means.12
She submits that as a result of the funds released to Ms Collins her means are no
longer inadequate.
12 FH v LH, above n 3.
[25] Mr Muir, for Ms Collins, challenges this. He submits that although the sale resulted in a cash payment of $88,000 for the Haven Trust, the trust’s liabilities at
$177,000 far exceed that sum. The partnership between the OPM Trust and the Haven Trust has mortgage liabilities totalling $247,000. Ms Collins gave evidence that she had lived off the Haven Trust’s line of credit and had incurred further debt from living expenses since the parties had separated. It is submitted that the debt of
$177,000 is unsustainable by Ms Collins on her current income. She also owes her parents a debt on account of legal fees. Mr Muir submits it is not reasonable that Ms Collins be required to resort to capital in order to meet her living expenses when she has no other source of funds or income.
[26] This Court has previously held that while a party may be able to support themselves by resorting to capital it is open to the Court not to require them to do so.13 On this issue, Courtney J in B v B also noted that it is not generally desirable for parties to have to resort to capital assets in order to maintenance themselves. As a general proposition it is undesirable for either party to reduce or diminish their capital assets in order to maintenance themselves. Her Honour put it this way:14
…there is no general principle by which to determine which party should resort to capital in order to maintain the other where both have capital and neither have income. This is a question of fact that should be dealt with in a way that is consistent with the overall factual context of the case. The relevant factors include the extent of the capital held by each party and the nature of the assets. Where, for example, the capital asset is the primary residence of one and the other has access to capital unconnected with his or her primary residence the obviously preferable course would be for the maintenance costs to meet by resort to that asset.
[27] The changed circumstances that there is a new pool of funds available for Ms Collins to meet her needs does not necessarily lead to the conclusion she should now fund herself from this source. Instead, the new circumstance simply represents an additional factor which this Court may take into account in determining Ms Collins’ ability to meet her needs herself.
Was there an error in the Judge’s consideration of the costs relating to children?
[28] Ms Davenport claims that the Judge was wrong to incorporate the expenses of the children into the assessment of her needs because those needs are already met through the liable parenting scheme administered by the Inland Revenue Department.
[29] However, it is apparent from the Judge’s decision that an important factor in her decision to award interim maintenance recognised that Ms Collins had the majority care of the children and it was thus important that she was in receipt of funds to meet the household expenses for herself and the children.
[30] Her Honour considered Ms Collins’ child care needs. The youngest child is only 4. Ms Collins has attempted part-time work which she has undertaken to fit around her child care responsibilities. Most of this has involved what Ms Collins described as menial tasks such as working for a cleaning agency, doing web writing, pet feeding and hosting home stay students. Even before separation the couple’s financial circumstances were modest. In the judgment her Honour described them as “reasonably frugal”. Her Honour described Ms Collins’ budget as devoid of extravagance, adopting counsel’s expression “parsimonious”.
[31] Interim spousal maintenance is a stop gap measure to address the immediate and interim needs of the spouse pending final determination. Emphasis needs to be placed on the needs of the spouse rather than the children.15 The costs relating to the children should be deducted. The appropriate measure of recovering costs relating to the children is under the Child Support Act 1991 (“the CSA”). However, there are inherent difficulties in extricating from a household budget the cost of the needs of the spouse without taking into account the cost of the needs of the children. Judge Burns in AMG v S(S)G considered the practical way to achieve this was to
deduct from the budget the quantum which would be payable by way of child support, 16 an approach approved by both counsel in this case.
[32] The issue, as it was explained to me in the course of the hearing, is that the budget supplied by Ms Collins included expenses which were incurred in the course of child care and which are already formally assessed under the CSA. This, Ms Davenport submits, amounted to a duplication or double counting with interim maintenance being used as a vehicle to “top up” the existing child support liability of Mr Collins.
[33] I do not accept this submission. The accepted approach is for Ms Collins’ total expenditure to be determined by deducting the child support component. There is no support for an approach which would require the Court to separately consider and assess every item in the budget to determine whether it is purely a child-related expense or one for which Ms Collins should accept responsibility.17 Further, in accordance with the principle in Langridge v Langridge, the Court, while not required to do so, is not prohibited from considering the factors under ss 63 to 64 of the FPA relating to maintenance.18 This includes the circumstances listed in s 64(2) and, in particular, s 64(2)(b) which relate to the responsibilities of each spouse for the ongoing daily care of any minor or dependent children of the marriage.
Was there an error in costs relating to the legal fees?
[34] Ms Davenport submits that her Honour erred in taking into account Ms Collins’ ongoing legal fees; that this was irrelevant evidence. Ms Davenport accepted that as part of interim maintenance an allowance for ongoing legal expenses may be given. However, an order for interim maintenance must not usurp the exercise of discretion to make awards of costs. Evidence or assertions of legal expenses already incurred is relevant only to the extent that it informs what the likely ongoing expenses will be.
[35] In B v B, Courtney J held that there is no reason why legal expenses should not be viewed in the same way as any other expense which may form part of an interim maintenance order.19 Her Honour stated:20
The expenses incurred in resolving the legal issues between the parties are a natural consequence of the separation, as much as the need for the party leaving the matrimonial home to purchase new furniture. In the context of an interim maintenance order I see nothing inherently objectionable about reasonable legal and accounting costs being included and consider that it would be consistent with the approach described in Ropiha v Ropiha and Z v Z (No 2) to treat these expenses as reasonable ones within the broad meaning to be attributed to the needs of the party applying.
[36] In C v G, the Court of Appeal confirmed that legal fees could be included in a maintenance order but only if those costs were likely to represent an ongoing expense.21 Otherwise, legal costs are properly regarded as being a one-off debt. Subsequent cases have also made it clear that legal expenses may be taken into account on an interim maintenance award but only so long as there is no prejudice to a final costs order.22
[37] In the present case the legal costs are ongoing and cannot be regarded as a one off debt. In those circumstances they may be included in any calculation of a spouse’s budget. However, Ms Davenport submits the Judge erred because the figure included in Ms Collins’ budget represented “legal fees to date”. In the figures presented there was no attempt to discriminate between legal costs incurred and likely future legal costs, particularly those to be incurred during the six months of an interim order.
[38] However, an analysis of the Judge’s decision demonstrates that she engaged in a comprehensive consideration of the legal costs for both parties. After reviewing the relevant authorities she recognised the legal costs in the present case as not being a “one-off requirement”. She pointed out that the Courts have yet to resolve substantive and complex relationship property matters, s 182 proceedings and, as foreshadowed in the course of the argument before her, a possible application for
restraining orders. She also acknowledged the complexity derived from the number
19 B v B, above n 14; cited with approval in DCK v RK HC Auckland CIV-2009-404-4421, 20 November 2009.
20 At [17].
21 C v G [2010] NZFLR 497; NZCA 128 at [52].
of properties involved and the substantial accounting and valuation costs which will be incurred in preparation for trial. While noting that once the proceedings are concluded legal costs would not be properly claimable by Ms Collins, her Honour accepted that at the present stage of the proceedings “ … they are as necessary to her as living expenses.”23
[39] It thus follows that in taking into account the issue of legal expenses her
Honour expressly turned her mind to the ongoing costs of the litigation.
[40] I accept Ms Davenport’s submission that the inclusion of legal costs to date in Ms Collins’ budget suggests, at least on its face, that her Honour, in making the assessment took into account past costs rather than estimated future costs. However, it is evident from the judgment that this figure was used by her Honour as a base to assist in the analysis of likely future costs and if anything, represented a lower figure than that which would be likely to be incurred in the future.24 It follows that I am satisfied there was no error in this regard.
[41] However, Ms Davenport submits that in light of the new evidence of the sale of the holiday property I should follow the decision of Whata J in GCH v SMH.25 In that case it was held that an order for interim maintenance inclusive of legal fees should not be made where it would pre-empt a final accounting exercise in terms of litigation costs. That case shares some obvious factual similarities with the present, albeit not to the same scale. There, Whata J held it was just for the trusts to cover
legal expenses so as to avoid the payment of legal fees being treated as a distribution to the respondent from the trusts thus preserving the appellant’s position on any subsequent costs award.26 As I understand Ms Davenport’s submission it is that the proceeds from the sale of the holiday house which were distributed from the trusts’ partnership should be used by Ms Collins to fund her litigation. This would mean that as in GCH v SMH one party is not forced to fund the other party’s litigation, possibly pre-empting any
final award of costs.
23 GTS v JLS FC North Shore FAM-2013-044-886, 26 March 2014 at [114].
24 At [146] and [148].
25 GCH v SMH, above n 21.26 At [44].
[42] The interim spousal maintenance order in this case is a modest one. Its principal component is ongoing legal costs. As acknowledged by Mr Muir, Ms Collins is able meet her other needs from non-capital sources. As the Judge observed, Ms Collins’ means is not easy to quantify. Mr Muir advises that on a corrected version of her provisional budget Ms Collins’ total expenses for the 12 months after February 2014 amount to approximately $110,000 which, after deducting various expenses paid for by the trusts’ partnership and Mr Collins, come to $83,000. Legal fees are estimated at approximately $53,000 leaving a balance in the order of $30,000. Ms Collins estimated her possible income over the period to be $33,702.00. Although these figures are necessarily approximate, Ms Collins’ prospective budget indicates her expenditure, less estimated legal costs, roughly
equates to her income. This is consistent with the Judge’s finding.27
[43] Following the reasoning in GCH v SMH I am of the view that this is a proper case where the respondent should meet the cost of ongoing legal expenses from the capital derived from the sale of the holiday home. The estimated amount for legal expenses for the six month period is modest, particularly when measured against the full amount Ms Collins received from the sale. Furthermore, as Mr Muir indicated in argument, the amount received by Ms Collins would otherwise be applied to reduce the trust’s borrowings. The funds would not be applied for living expenses.
[44] Based on this finding there is no need to consider whether the Judge erred
when comparing the parties’ access to trust capital and income positions.
Costs
[45] Due to my finding that Ms Collins’ ongoing legal costs should be met from the proceeds of the sale of the holiday home the complications of the double counting of legal costs are removed.
[46] Although the appellant has been successful, this was on the basis of further evidence which was admitted by consent. The appeal on the order of costs in the
Family Court is discharged. The appellant is entitled to an award of costs on the
27 GTS v JLS, above n 23 at [93].
present appeal and I set that on a 2B basis with disbursements as fixed by the
Registrar.
Result
[47] The Judge did not err in fact or in law, however, the appeal is allowed on the basis of the new evidence. The order awarding interim spousal maintenance to Ms Collins is quashed.
Reporting
[48] This case, if reported or referred to in a digest or periodical, is to be cited with the fictitious names of Collins v Collins.
Moore J
Solicitors:
Ms Davenport QC, Auckland
Mr Muir, Auckland
4