Dunsford v Shanly

[2012] NZHC 257

NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980.  FOR FURTHER INFORMATION PLEASE SEE THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-5053 [2012] NZHC 257

IN THE MATTER OF     the Property (Relationships) Act 1976 and the District Courts Act 1947

BETWEEN  GAYLENE DUNSFORD Appellant

ANDEDWARD JOHN SHANLY First Respondent

ANDSTEPHEN THOMAS WOODFIELD Second Respondent

Hearing:         21 February 2012

Counsel:         K G Davenport for Appellant

B V McLean for First Respondent

Judgment:      23 February 2012

I direct the Registrar to endorse this judgment with a delivery time of 2pm on the

23rd day of February 2012.

RESERVED JUDGMENT OF MACKENZIE J

DUNSFORD V SHANLY HC AK CIV-2011-404-5053 [23 February 2012]

Background

[1]      This is an appeal against directions given by Judge Adams in the Family Court at Waitakere on 20 July 2011 in a relationship property proceeding between the appellant (the wife) and the first respondent (the husband) in that Court.   The second respondent, the trustee of the family trust to which I later refer, abides the decision of the Court.

[2]      The wife and the husband were married in 1983.   They first separated in December 2004 when the husband left the matrimonial home.  He moved back into the matrimonial home for a period from September 2006 until February 2007 when the parties separated for the second and final time.  The Family Court proceedings were commenced in 2007 to determine relationship property issues.  In August 2008, there  was  a  mediation  which  led  to  a  mediated  agreement  under  s 21A of  the Property (Relationship) Act 1976 (the Act) dated 26 August 2008.

[3]      In August 2009, the husband filed an application in the Family Court seeking orders setting aside that agreement, and orders determining the respective shares of the parties in the relationship property and related orders.  The wife gave notice of her  intention  to  defend  that  application.    Following  a  judicial  conference  on

5 April 2011, the husband filed an amended application.  The relief sought included orders in relation to property held in a family trust.  The wife then filed a notice of protest to jurisdiction, in relation to the property held in the family trust.

[4]      At a further judicial conference held on 20 July 2011, the Judge dealt with an issue relating to a valuer’s inspection of the property (about which no issue arises on this appeal), and with the procedure to be followed in dealing with the applications. The Judge described the relevant issue in these terms:1

To determine the manner in which these proceedings will be managed. The essential issue is whether the protest to jurisdiction should be dealt with as an initial separate step or whether the whole lot should be rolled together and the jurisdictional issues teased out as part of the overall hearing.

[5]      The Judge noted that counsel for the wife urged that the protest to jurisdiction be dealt with as a separate issue first.  Counsel for the husband urged that the whole property application be set down and heard in one combined hearing on the grounds of efficiency and economy. The Judge dealt with that issue in these terms:2

As  to  the  procedural issues  I observe  that this  matter  has  already been through a number of registrar’s lists and interlocutory hearings. In my view, whatever the protest to jurisdiction outcome may be, there is clearly a substantive case in terms of a relationship property, as a challenge to the agreement, to be heard.

In my assessment it is pragmatically better to have all of these matters aired at one consolidated hearing upon the basis that the Family Court, at that hearing, can exercise any District Court jurisdiction at the same time. It will be a matter for arguing at that hearing whether relevant issues exceed the jurisdiction of either the Family Court or the District Court, if so, the Judge must deal with those pragmatically and remove such issues to the High Court whether that will delay a decision or a decisive direction in respect of the remaining matters I cannot tell, but in my view that is the appropriate manner of managing this particular case as it currently presents.

With regard to the management of the case, I have heard submissions of counsel, I record that Ms Davenport says she is anxious about the length of hearing that might be required to deal with the protest to jurisdiction, trust and other issues. The application is set aside, the agreement and the substantive property matter, in the event that the agreement were set aside. [sic]  Nonetheless it is my view that a fixture should be given for all of these matters in one event.

Is there a right of appeal?

[6]      Both parties proceeded on the basis that the appeal was properly brought. Despite that, I have felt it necessary to consider is whether there is a right of appeal against the directions given on 20 July 2011.   Section 39 of the Act provides (as relevant) as follows:

(1)       This subsection applies to a decision of a Family Court or District

Court, in proceedings under this Act, to— (a)      make or refuse to make an order; or (b)     dismiss the proceedings; or

(c)      otherwise finally determine the proceedings.

(2)       A party to proceedings in which there is made a decision to which subsection (1) applies, or any other person prejudicially affected by the decision, may appeal to the High Court against the decision.

(3)       The High Court Rules and sections 74 to 78 of the District Courts Act 1947, with all necessary modifications, apply to an appeal under subsection (2) as if it were an appeal under section 72 of that Act.

…

[7]      That section confers a right of appeal in respect of orders finally determining proceedings  under  the Act.    While  paragraph  (a)  is  not,  on  the  words  of  that paragraph, limited to orders which finally determine some substantive right of the parties,  the  use  of  the  word  ―otherwise‖  in  paragraph  (c)  makes  it  clear  that paragraph (a) extends only to the making of an order, or the refusal to make an order, which has the effect of finally determining the proceedings.  Interlocutory orders are

not included.3

[8]      Although  there  is  no  right  of  appeal  under  s 39(1)  of  the Act,  there  is authority for the proposition that a right to appeal against interlocutory orders arises under s 72 of the District Courts Act 1947.4     Amendments to that Act in 2003 substantially removed the previous requirement for leave for appeals against interlocutory orders.  For my part, I would, in the absence of authority, have some hesitation in holding that s 72 of the District Courts Act confers a right of appeal

additional  to  that  contained  in  s 39.    The  wording  of  s 39(3)  is  open  to  the interpretation that, for proceedings under the Act, it is s 39, rather than s 72 of the District Courts Act, which determines the right of appeal, and the relevant District Courts Act provisions (ss 74-78) apply only to an appeal which falls with the scope of s 39.   On that analysis, it is arguable that, for the purposes of s 72(1) of the District Courts Act, s 39 provides expressly that there is no right of appeal against a decision to which s 39(1) does not apply.   However, following the authorities to which I have referred, I proceed on the basis that s 72 of the District Courts Act does

apply to interlocutory decisions in proceedings under the Act.

3      Smith v Smith HC Whangarei CIV-2003-488-394, 12 March 2004; Crick v McIlraith HC Dunedin CIV-2004-412-37, 1 June 2004; Easton v Gregory HC Palmerston North CIV-2005-

454-789, 9 November 2005.

4      E v E (2005) 24 FRNZ 325;  SMG v EWG (2006) 26 FRNZ 162, [2007] NZFLR 27.

[9]      There is, however, authority to suggest that, even so, not every order or direction as to the conduct of proceedings may be the subject of an appeal.   In Association of Dispensing Options of New Zealand Inc v The Opticians Board, the Court of Appeal considered whether the right of appeal to the Court of Appeal from decisions of the High Court, conferred by s 66 of the Judicature Act 1908, applied to a decision of the High Court refusing leave to cross examine on affidavits filed in the

High Court proceedings.5  The Court of Appeal said:6

The crucial question in this case is whether Wild J's decisions refusing leave to cross-examine, refusing to order production of certain documents at the hearing,  and  refusing  leave  to  file  a  further  affidavit  are  within  the designation ―judgment, decree, or order‖ in s 66.

[10]     After discussing that question, the Court concluded:7

Clearly s 66 could not be intended to confer jurisdiction to appeal every decision made by the High Court in relation to the proceeding and before delivery of the substantive judgment. As noted in Winstone at para [19] there are numerous rulings which are simply procedural or administrative, not affecting rights or liabilities as such and where the rights immediately in issue will remain for substantive determination. Such rulings may be made in the pretrial case management process or at trial. Next, rulings on matters of evidence and the scope of the hearing arise broadly in two ways: as a pretrial determination of the shape of the hearing and as decisions in the course of the hearing. Decisions in that second situation in the course of the hearing  could  not  sensibly  for  policy  and  practical  reasons  have  been intended to be subject to instant appeal before the completion of the hearing. Equally, interlocutory applications which, as pretrial determinations as to pleadings,  discovery,  evidence  and  the like,  may  substantially affect  the shape of the hearing, are separate from the trial process and fit squarely and comfortably within s 66.

The real difficulty is to resolve in a principled way how to determine what decisions or rulings are sensibly intended to come within the description of judgment, decree or order for the purposes of s 66 and so where and how to draw the line.

We are inclined to the view that the broad classification of ―decision‖ suggested in Winstone reflecting as it does similar considerations of the scheme and object of the relevant provisions and underlying policy and sound practice may be a helpful starting point. In that regard rulings made either in the course of the hearing of the proceeding (using that term in a broad sense, including for example an adjournment application), or as part of the trial conduct or management process would not ordinarily be susceptible to  interlocutory  appeal.  On  the  other  hand  rulings  which  have  some

5      Association of Dispensing Options of New Zealand Inc v The Opticians Board [2000] 1 NZLR

158.

6 At [23].

7      At [34]-[36].

substantive effect on rights and liabilities in issue would be. Obviously the boundary lines will not be cut and dried and, as seen in Winstone, particular cases may fall into an exceptional category but that classification may be helpful at least as a matter of general approach.

[11]     In  this  case,  the  decision  sought  to  be  appealed  is,  in  form,  a  case management  direction,  directing  how  the  various  applications  before  the  Court should be heard.  As such, it is a direction which forms part of the trial conduct or management  process,  which  would  not  ordinarily  be  amenable  to  interlocutory appeal.  However, I consider that the decision involves important points of law and principle which takes it out of the routine case management category.  The process which the decision directs to be followed is predicated upon the proposition that both the application to set aside the s 21A agreement, and the substantive application for orders as to the relationship property (other than chattels) are properly before the Court, so that they can be addressed together.  It is a question of law whether that proposition is correct or not.  Further, if the applications are both properly before the Court at this stage, the question whether there should be one hearing is a question of principle which takes the matter outside the category of rulings made as part of the trial conduct or management process which would not ordinarily be susceptible to interlocutory appeal.

[12]     For these reasons, I consider that there is a right of appeal in this case.

[13]     It is also necessary to consider the approach to be adopted on this appeal. Counsel for the appellant submits that the approach mandated by Austin, Nichols & Co Inc v Stichting Lodestar applies.8    As the subsequent judgment of the Supreme

Court in Kacem v Bashir makes clear,9  Austin Nichols applies to general rights of

appeal.  A general appeal is to be distinguished from an appeal against a decision made in the exercise of a discretion.   In such a case the criteria for a successful appeal are stricter. The appellant must show:

(a)      An error of law or principle;

(b)      Taking into account of irrelevant consideration;

(c)       Failing to take account of a relevant consideration;  or

(d)      The decision is plainly wrong.

The appeal

[14]     From the Judge’s description of the issue, and the way in which he dealt with it as I have set out at [4] and [5], it appears that his primary focus was on whether it was appropriate to hear together the protest to jurisdiction and the substantive relationship property application.  He did, however, direct that all three issues (that is including the application to set aside the s 21A agreement) be heard together.  The principal  issue  on  this  appeal  is  whether  that  is  appropriate,  or  whether  the application to set aside should be heard first, as a separate and discrete issue.

[15]     Both counsel referred, in their submissions, to the authorities as to when it will be appropriate to order the consideration of a preliminary question before trial. Counsel referred to Innes v Ewing, decided under what is now r 10.15 of the High Court Rules.10    That empowers the Crown to make orders for the decision of any question in a proceeding separately from any other question.  Counsel also referred to Turners & Growers Ltd v Zespri Group Ltd, which dealt with an application under rr 10.4 and 10.15 of the High Court Rules.11

[16]     I do not consider that this case is properly to be decided by analogy with these cases.   Those cases involve proceedings in which a number of more or less discrete questions are properly raised by the pleadings.  The question in such cases is whether the interests of justice will be better served by dealing with those questions together  or  separately.    In  this  case,  the  relationship  property  claim  cannot  be properly before the Court unless and until the agreement is set aside.   The s 21A agreement precludes the relationship property claim (except for chattels) so long as the agreement is in force.   That is so both as a matter of contract, and under the statute.

[17]     The claim is precluded by cl 27 of the agreement which provides:

This agreement is in full and final settlement of all property matters between the parties save as to the chattels and in particular Gay and Ted each acknowledge that they have no claim against each other under the provisions of the Property (Relationships) Act 1976 or in equity or at law or otherwise save as to any enforcement provision contained in the Property (Relationships) Act.

[18]     The  claim  is  also  precluded  by  the Act.    Under  s 21O,  the  relationship property (except the chattels) is not subject to the provisions of the Act.

[19]     Accordingly, the effect of a direction that the application to set aside the s 21A  agreement,  and  the  application  to  determine  the  shares  of  relationship property, be heard together is to require the Court to hear an application which, at the time of the hearing, may not properly be before the Court (except to the minor extent of the chattels).

[20]     I do not consider that considerations of convenience will ordinarily overcome that jurisdictional difficulty.   To the extent that considerations of convenience and case management are relevant, I do not consider that they justify the conflation of two issues which are necessarily separate and sequential.

[21]     Whether the agreement should be set aside is to be determined under s 21J, which provides:

(1)       Even though an agreement satisfies the requirements of section 21F, the Court may set the agreement aside if, having regard to all the circumstances,  it  is  satisfied  that  giving  effect  to  the  agreement would cause serious injustice.

(2)       The Court may exercise the power in subsection (1) in the course of any proceedings under this Act, or on application made for the purpose.

(3)       This section does not limit or affect any enactment or rule of law or of equity that makes a contract void, voidable, or unenforceable on any other ground.

(4)       In  deciding,  under  this  section,  whether  giving  effect  to  an agreement made under section 21 or section 21A or section 21B would cause serious injustice, the Court must have regard to—

(a)      the provisions of the agreement:

(b)      the length of time since the agreement was made:

(c)       whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made:

(d)       whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties):

(e)       the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement:

(f)       any other matters that the Court considers relevant.

(5)       In  deciding,  under  this  section,  whether  giving  effect  to  an agreement made under section 21B would cause serious injustice, the Court must also have regard to whether the estate of the deceased spouse or [partner] has been wholly or partly distributed.

[22]     The  test  is  whether  giving  effect  to  the  agreement  would  cause  serious injustice.  That is a question which requires discrete consideration, having regard to the matters in subs (4).   That is a different question from what the appropriate division of relationship property would be if there were no agreement.  The evidence necessary to address the one question may well be substantially different from the evidence required to address the other.  Furthermore, I consider that there is a danger that, if the two questions are considered together, the requisite degree of focus on the s 21J issue may be less clear.

[23]     Section 21J gives a clear legislative direction that agreements entered into concerning relationship property should be given effect and not lightly overridden. Both  counsel  referred  to,  and  rely  on,  the  decision  of  the  Court  of Appeal  in Harrison v Harrison.12  There the Court said:

[107]  In issue is the proper application of s 21J of the Property (Relationships) Act  which,  on  the  one  hand,  empowers  the  parties  to  a relationship to contract out of the statutory provisions concerning, or to settle disputes  as  to,  relationship  property  but  on  the  other,  permits  such agreements to be set aside on the basis of a ―serious injustice‖ test.

[108]    Fogarty J held that the serious injustice test had to be applied in light of the concepts of justice provided for in that Act and the values of the legislation. In his view, the most important of these is the strong presumption of equal sharing once qualifying criteria had been satisfied.

[109]    We think that this approach to s 21J gives too little weight to the context and history in which the Property (Relationships) Act was enacted.

[110]    The Act was intended to bring de facto and same-sex relationships within the statutory regime for the division of property on separation. Previously such relationships had given rise to division of property only where   a   constructive   trust   could   be   established.   The   scope   of   the relationships which came within the regime was thus significantly extended by the Act. The circumstances of such relationships are likely to vary widely

– rather more widely perhaps than the circumstances of married relationships to  which  the  Matrimonial  Property  Act  applied.  The  legislation  also

extended the presumption of equal sharing to cover all relationship property

unless that was repugnant to justice. There were inevitably arbitrary transitional provisions associated with all of this.

[111]    It  was  this  context,  along  with  some  dissatisfaction  with  the willingness of the Courts to set aside agreements under the Matrimonial Property Act, which provided the background to the legislation. Given this background, it is not surprising that Parliament elevated the test for setting aside a settlement or contracting-out agreement to one of ―serious injustice‖.

[112]    The consequence  is that, at least for  contracting-out  agreements,

―serious injustice‖ is likely to be demonstrated more often by an unsatisfactory process resulting in inequality of outcome rather than mere inequality of outcome itself. Parties are in general free to agree to quite different arrangements to those otherwise imposed upon them by the Act. It may be different for settlement agreements, as such agreements are entered into in respect of entitlements already accrued and should usually reflect the reality of those entitlements. In this case, however, the settlement agreement was entered primarily in respect of additional rights that would be gained over a period of attempted reconciliation. As such, the position is similar to that for a contracting-out agreement.

[24]     Those comments emphasise the importance of giving effect to settlement or contracting out agreements in respect of relationship property.

[25]     Ms Davenport also referred to the decision of the Court of Appeal in Hildred v Strong.13     That decision, which involved a settlement between parties to a relationship (albeit one to which the Act did not apply), emphasises the importance of upholding agreements reached at mediation.

[26]     I consider that the statutory scheme will ordinarily require that, before a relationship property claim can be brought in the face of a s 21A or s 21P agreement, the  party seeking  to  bring  that  claim  must  first  meet  the  hurdle  of  having  the agreement set aside.  I consider that this will conform with the principle in s 1N(d) of

the Act.   The inexpensive, simple and speedy resolution of issues is likely to be assisted by determining first whether the agreement should be set aside, rather than by requiring parties to engage in a relationship property dispute which they have settled.    The  setting  aside  of  the  agreement  can  properly  be  dealt  with  as  a preliminary question by the Family Court.14    That should, except possibly in cases which may raise some particular consideration, mean that the two aspects must be dealt with separately, and sequentially.  I do not consider that considerations of case management will routinely justify the substantive relationship property claim being

heard before the right to bring it has been determined.

[27]     For these reasons, I consider that the decision to direct that the issues be heard together was wrong in principle.  In saying that, I emphasise that the Judge’s directions were given in the course of a directions hearing, without the benefit of the substantial argument that I have heard.  For these reasons, whether I were to apply the test in Austin, Nichols, or the stricter test for appeals against the exercise of a discretion described in Kacem v Bashir, I reach the conclusion that the appeal must

be allowed.15

[28]     The appeal is allowed.   The case is remitted to the Family Court for the hearing  of  the  application  to  set  aside  the  s 21A  agreement.     Any  further consideration of the relationship property application, or the protest to jurisdiction, must necessarily await the outcome of the application to set aside.

“A D MacKenzie J”

Solicitors:         Kate Davenport, Barrister, Auckland for Appellant

Barry McLean, Barrister, Auckland for First Respondent

14     LAC v KAY [2011] NZCA 271.

15     Kacem, above n 9.