Greaves v Baldwin
[2019] NZHC 3390
•18 December 2019
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,
11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
https://www.justice.govt.nz/family/about/restriction-on-publishing-judgments/
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-849
[2019] NZHC 3390
UNDER the Property (Relationships) Act 1976 IN THE MATTER
of an Appeal against a decision of the Family Court at Auckland
BETWEEN
PATRICK GREAVES
Appellant
AND
CECILIA BALDWIN
Respondent
Hearing: 9 December 2019 Appearances:
V A Crawshaw QC and T Townsend for Appellant P J Stevenson and S Carter for Respondent
Judgment:
18 December 2019
JUDGMENT OF WALKER J
This judgment was delivered by me on 18 December 2019 at 3.30 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
GREAVES v BALDWIN [2019] NZHC 3390 [18 December 2019]
Table of Contents
Introduction............................................................................................................... [1]
The facts.................................................................................................................... [4]
Family Court proceedings....................................................................................... [17]
Appeal approach...................................................................................................... [33]
Issues....................................................................................................................... [36]
Is it open to Mr Greaves to seek to reclassify the income stream under the
Sovereign income protection policy?.................................................................. [37]
Was Creighton v Creighton correctly decided?.................................................. [42]
Are there circumstances justifying an unequal sharing of the post-separation
capitalised income protection payments?............................................................ [58]
Conclusion as to s 13........................................................................................... [70]
Was the Family Court wrong to rely on the date of separation value of the
Sovereign policy?................................................................................................ [71]
Did the appellant contribute after separation by his disability such that
compensation is payable under s 18B of the Act?............................................... [75]
Did the appellant’s serious health event dilute the ability to contribute to the
relationship?......................................................................................................... [82]
Was the respondent entitled to compensation under s 18B for care of the youngest child? [85]
Was the respondent’s occupation of the family home a matter which ought to have been considered under s 18B?...................................................................................... [94]
Summary of decision.............................................................................................. [101
Costs...................................................................................................................... [102]
Introduction
[1] Three years before separation, one of the parties to a marriage suffered a life- changing medical event. At the time, Mr Greaves was a CEO of a large organisation and the primary financial provider in the marriage. After the medical event, he could no longer work due to ongoing seizures and memory loss, among other debilitating symptoms. However, 12 months before the medical event, he had taken out income protection insurance with Sovereign. The insurer paid out under the policy, both by way of a lump sum payment which was applied to reduce a mortgage liability and thereafter by periodic payments, which continue subject to certain conditions.
[2] Are the periodic payments received after separation relationship property under the Property (Relationships) Act 1976 (the Act)? This is the primary issue on appeal. Other ancillary issues flow from the outcome of this issue.
[3] To date, the periodic payments under the Sovereign income protection insurance policy have been classified as relationship property but received solely by Mr Greaves, and not accounted for since separation. He continues to receive monthly payments and will do so, barring the unlikely event of his recovery, until his sixty- fifth birthday next year. The reason that it has been treated as relationship property is because of a decision of this Court in Creighton v Creighton.1 The circumstances in which the parties proceeded based on this classification are material. I return to these later in my judgment.
The facts
[4] The parties were married on 1 August 1992 and separated on 1 May 2015. They have three children. The youngest child is now 18 years of age and has joined the workforce. He has lived with Ms Baldwin since separation, initially in the former family home and subsequently in rented accommodation with her. The older children have also lived with Ms Baldwin at various times. One of the older children has also lived with his father at some period.
1 Creighton v Creighton HC Auckland CIV-2003-404-6892 10 September 2004.
[5] In May 2011, Mr Greaves took out an income protection policy with Sovereign Insurance. The reason was that he was the primary breadwinner. He held senior positions in a medical-related company and as director of a research foundation. Ms Baldwin was the primary child-carer and managed the family home. She has worked part-time as a medical receptionist.
[6] One year after taking out the income protection policy, Mr Greaves contracted a non-viral condition (Limbic Encephalitis). This has unfortunately resulted in serious and permanent disability.
[7] Lump sums totalling $100,000 were paid under Mr Greaves’ income protection policy. A lump sum payment of $40,000 was received from his employer. The total of $140,000 were applied by Mr Greaves to reduce a mortgage secured over the family home. Those payments were made before the parties separated.
[8] Mr Greaves has received ongoing monthly periodic payments. These payments are currently just over $12,000 per month, CPI adjusted annually. They are to continue, provided certain conditions are met, until Mr Greaves turns 65 years of age.
[9] Although these payments are intended by such policies to be in substitution for income, the payment on an annual basis of approximately $144,000 is significantly less than that which he earned prior to the medical event, even taking into account the absence of income tax payable.
[10] At the time of separation, Mr Greaves and Ms Baldwin lived in the family home which was owned by a Family Trust.2 The parties are trustees, along with an independent trustee.
[11] The family home was sold for $2,265,000 in May 2016. A mortgage was repaid in full on settlement of the sale of the property. Before sale, the mortgage outgoings had been paid from the sums received by Mr Greaves under the income
2 I do not use the term “family home” in the sense used in the Act, as it is owned by a family trust.
protection policy with Sovereign. He does not seek any compensation for those payments in this proceeding.
[12] Agreement was reached to distribute part of the deposit payment relating to the sale in July 2016. The balance of the net sale proceeds of the sale of the home ($860,000) is currently held to the credit of the trustees in the Carson Fox Trust Account.3
[13] The division of other property, such as household chattels and motor vehicles has been agreed between the parties.
[14] There are actuarial valuations of the Sovereign income protection policy. Each party engaged an actuary who valued the policy on a similar basis. After the actuaries conferred in May 2017, they agreed on figures based on percentages of 4 per cent net interest and 2 per cent inflation. They adopted the same contingency deduction. These values are now accepted by the parties as follows:
Separation Date As at April 2017 Present value of future benefit $743,375 $502,415 After contingency deduction $669,037 $452,17 Half-share $334,519 $226,087
[15] The difference in capitalised value between separation date and April 2017 is attributable to the receipt of payments by Mr Greaves.
[16] As the net sale proceeds of the family home are owned by the Trust, they fall outside the relationship property pool. The capitalised value of the future income stream under the Sovereign income protection policy accounts for approximately 83 per cent of the existing property pool.4 It follows that its classification and the consequences of its classification assume prime importance.
3 Interest is accruing in respect of that sum but at a reduced interest rate as the proceeds are not currently held on interest bearing deposit.
4 This percentage calculation is based on a valuation at separation date.
Family Court proceedings
[17] After separation, Ms Baldwin remained in the family home for a period of approximately one-year to care for their then 14-year-old son. Mr Greaves rented accommodation.
[18] On 7 December 2015, Ms Baldwin made an application in the Family Court for division of relationship property. The main sticking point in those proceedings was the discrete issue of the status of the Sovereign insurance policy. Mr Greaves’ position was that the future payments under the policy were his separate property. The Family Court directed that this question be determined as a preliminary issue.
[19] Shortly before the hearing of that issue, Ms Townsend, counsel for Mr Greaves in the Family Court, responsibly notified the Court of the decision of the High Court in Creighton v Creighton. That case dealt with a similar fact situation and Harrison J held that the proceeds of the income protection insurance, the premiums for which were all paid during the marriage, were relationship property. This included the future benefits to be received post-separation, as the policy provided for continuous monthly income arising from one party’s ongoing disability. In her memorandum Ms Townsend recorded that Mr Greaves:
(a)considered this decision manifestly unfair and inconsistent with the principles of the Act;
(b)accepted that the Family Court was bound by precedent but did not accept that Creighton was correct;
(c)intended to raise arguments under s 2F and G which required actuarial input;
(d)reserved the right to argue for unequal division of property by virtue of extraordinary circumstances along with issues under s 18B.
[20] The memorandum, while disavowing the correctness of Creighton, did not expressly reserve the right to contest the point on appeal.
[21] This concession shaped the proceeding in two ways. It cast the issues for determination by the Family Court. Secondly, once the payments under the insurance policy were classified as relationship property, Mr Greaves did not have any income. This meant that Ms Baldwin would have faced an uphill battle seeking spousal support or child support. She has not made either application.
[22] The fixture was adjourned to obtain an actuarial calculation of the payments to be made under the insurance policy. A timetable was set in place. Regrettably, the parties were unable to settle the outstanding issues. The result was a hearing before Judge Pidwell on 6 and 7 March 2019.
[23] The judgment in the Family Court records Mr Greaves’ concession that the Family Court is bound by the decision of Creighton v Creighton as reluctant. Consequently, Mr Greaves was asking the Family Court to use its jurisdiction to vest the ongoing monthly payments in him absolutely, from the date of separation until he turns 65. He sought an equal division of the balance of the relationship property and compensation for post-separation payments and Ms Baldwin’s use of the family home for a period of approximately one year. Ms Baldwin, in response, was seeking equal division of the whole relationship property pool and compensation under s 18B for post-separation expenditure.
[24] Judge Pidwell determined that none of the exceptions under s 13 of the Act applied, so the income protection scheme had to be divided equally. She held that shares in relationship property must be determined as at the date when the parties ceased living together, so the Court had to ignore circumstances occurring after separation; including the fact that Mr Greaves is living off his monthly payments and has spent some of the monthly payments on post-separation issues.
[25] Importantly, Judge Pidwell said she must look at the contributions of the parties to the relationship overall, and not just in the last three years. She held that the fact that one party has contributed almost all of the financial contributions to the relationship property pool is not of itself extraordinary. She acknowledged Ms Baldwin’s contribution through application of her more modest income and her non-financial contributions of raising children and attending the household for
23 years. The Judge also referred to the fact that Ms Baldwin lived with Mr Greaves for three years after he suffered his medical event, inferring that she had to increase her contribution to compensate for his disability over this period.
[26] The Judge concluded that the circumstance of Mr Greaves, being the party who predominantly contributed financially to the relationship property pool by receipt of a compensation entitlement, was not extraordinary; even if its value incorporates post- separation entitlements. The rights under the policy crystallised during the marriage, did not change their status by post-separation factors and, in addition, Mr Greaves’ contribution must have also been diluted post his serious health event. There were, therefore, no extraordinary circumstances rendering equal division of relationship property repugnant to justice.
[27] The Judge determined that she would exercise her discretion to use the date of separation value of the policy rather than the date of hearing, by analogy to the approach in superannuation schemes. One of the reasons was that the Court did not have a valuation of the policy as at the date of the hearing in March 2019. The only evidence provided by the parties jointly was the value as at April 2017, some two years earlier. She considered that date artificial, being only the date of the interim hearing. She recorded that Mr Greaves had treated the compensation received after separation as his own and dissipated its value through its use, albeit making some payments to the parties’ trust property.5
[28] Although Ms Baldwin sought interest to compensate her for loss of use of the benefit of the policy since separation, the Judge off-set this against the benefit from the Court fixing a value at the date of separation, as this was the higher value. It also took into account the Court’s inability to consider payments in respect of the home held in trust, which she had occupied for a significant period after separation while Mr Greaves met mortgage payments. The Judge held it would be unjust to award interest in those circumstances.
5 The parties have additional entitlements as beneficiaries under the Family Trust, which matters are not within the Court’s jurisdiction under the Act.
[29] In respect of the compensation that both parties sought for post-separation contributions, the Judge pointed out that the status of Mr Greaves’ insurance payments had precluded Ms Baldwin from applying for child support; nor had she applied for spousal maintenance. It was therefore just to compensate her for care of the youngest child during the relevant period. The Judge awarded $34,000 representing payments of $1,000 per month across 34 months.
[30] In terms of moneys paid by Mr Greaves to Ms Baldwin post-separation, the Judge considered that, as he should have been paying her $6,000 per month from the date of separation, she had forgone a higher standard of living and that contribution negated the amount claimed by him.
[31] In terms of Ms Baldwin’s occupation of the home, the Judge concluded that Mr Greaves’ vaguely worded claim for compensation was not quantified nor supported by evidence of the cost of occupation. Moreover, it related to trust property rather than relationship property and was therefore not available to him. She dismissed that claim.
[32] Mr Greaves now appeals the decision of the Family Court. His primary ground of appeal seeks to reopen the question of classification of the periodic payments under the insurance policy. This is despite the fact there was no determination of this issue by the Family Court. He also seeks an unequal division of relationship property in the alternative, and a valuation of the policy as at the date of hearing rather than separation. He further says that an allowance ought to have been given to him under s 18B. Some of those issues raise related sub-issues.
Appeal approach
[33] This appeal is governed by s 39 of the Act. Section 39(3) imports ss 126 to 130 of the District Court Act 2016. This in turn dictates the procedure.
[34] This is an appeal by way of rehearing. This means that this Court must reach its own conclusion and need not defer to the Court below. That said, caution is appropriate when the tribunal has a technical expertise or opportunity to assess the
credibility of witnesses.6 As was aptly remarked by Woolford J in a case relating to s 13 of the Act:7
While no particular technical expertise is called for, this sort of case is the Family Court’s bread and butter.
[35] Thus, it does not mean restarting the process as if there had been no initial decision. As appellant, Mr Greaves has the burden of satisfying the Court that it should differ from the decision below. It is only if I consider that the Judge was wrong that I am justified in interfering with the decision.8 It also follows that the appeal proceeds based on the Family Court Judge’s findings of fact drawn from her assessment of the evidence and her findings as to credibility.
Issues
[36]The issues before me on this appeal are:
(a)Is it open to Mr Greaves to seek on appeal to reclassify the income stream under the Sovereign income protection policy in view of his concession?
(b)If so, was Creighton v Creighton correctly decided?
(c)If the income protection policy is relationship property, are there extraordinary circumstances justifying an unequal sharing of the post- separation capitalised income protection payments?
(d)Was the Family Court wrong to rely on the date of separation value of the Sovereign policy rather than a later date?
(e)Did Mr Greaves’ on-going disability amount to a contribution within the meaning of s 18B?
6 The appeal is brought under s 39 of the Act. It is a general appeal.
7 Venter v Trenberth [2015] NZHC 545, [2015] NZFLR 57 at [18].
8 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [17]; Kidd v Russell [2018] NZFLR 841 at [5]-[9]; Bowden v Bowden [2016] NZHC 1201, [2017] NZFLR 56.
(f)Did Mr Greaves’ serious health event dilute his ability to contribute to the relationship?
(g)Is Ms Baldwin entitled to compensation under s 18B for care of the youngest child?
(h)Was Ms Baldwin’s occupation of the family home a matter which ought to have been taken into account under s 18B?
Is it open to Mr Greaves to seek to reclassify the income stream under the Sovereign income protection policy?
[37] Both parties acknowledge that the concession, responsibly made before the Family Court, has dictated the approach on all issues to date. Ms Crawshaw QC, who did not appear in the Family Court, suggested at the hearing that should the appeal succeed, it may be necessary to remit the issues to the Family Court for consideration to avoid any prejudice to the respondent. She submits first, that a concession of law ought not bind an appellant even in the absence of an express reservation of rights. Secondly, there is a discretion to hear new arguments on appeal which is more likely to be exercised if limited to issues of law and there is no prejudice.9
[38] Ms Stevenson counters that an appeal is not a procedure to be invoked to correct the consequence of a concession made by a party. She emphasises the prejudice to the respondent from proceeding with expert evidence as to valuation based on the appellant’s concession.
[39] It is difficult to see how the potential prejudice to the respondent could be overcome. To remit the issues back to the Family Court strikes me as an unsatisfactory result. It is inconsistent with the principle expressed in the Act that questions arising under this Act about relationship property should be resolved as inexpensively, simply, and speedily as is consistent with justice.10 However, it is correct that parties cannot
9 Brodie v Turkmani [2017] NZHC 2945.
10 Property (Relationships) Act 1976, s 1N.
be bound by a concession on a matter of law. As the Court of Appeal stated in Walsh v Walsh:11
..not every concession by counsel is irreversibly binding upon his client, but only a concession as to fact: Haller v Worman (1861) 3 LT 741. Even then, it may generally be withdrawn unless the circumstances have given rise to an estoppel: H Clark (Doncaster) Ltd v Wilkinson [1965] 1 Ch 694. But a concession as to a matter of law cannot be binding. It is for the Courts to determine the law....
[40] A question of classification is a question of law and even an agreement between the parties as to classification of property cannot be dispositive or preclude consideration on appeal.12
[41] The answer to the first issue is that Mr Greaves is entitled to reopen this issue on appeal.13
Was Creighton v Creighton correctly decided?
[42] The Court in Creighton v Creighton held that the income protection policy consisted of a bundle of rights which are relationship property. 14 Counsels’ research has not turned up any other cases in New Zealand in which these issues have been determined.
[43] Ms Crawshaw submits that Creighton should not be followed. She submits that the periodic payments received after separation, and which will continue to be received until Mr Greaves turns 65 (subject to certain conditions), are intended to be a substitute for income. The Act’s policy is to treat income post-separation as separate property so that, but for the appellant becoming disabled, he would have earned not only more money but retained all that income as his own (subject to any spousal maintenance or s 15 obligations).
11 Walsh v Walsh (1984) 3 NZFLR 23 at 29.
12 Z v Z (No.2) [1997] 2 NZLR 258, 15 FRNZ 88 at 103.
13 There is no suggestion that if Creighton was incorrectly decided there is any need to remit on the question of classification of the payments under the insurance policy. The options are binary. Either Creighton is correct and the payments are relationship property or it is incorrect with the result that the payment stream is separate property.
14 Creighton v Creighton HC Auckland CIV-2003-404-6892 10 September 2004.
[44] Ms Crawshaw relies on Z v Z, where the Court noted that earning capacity is not property within the Act.15 She says that the value of the policy attributable to the relationship has already been received during the relationship through the lump sum and periodic payments received before separation. She characterises the outcome of classifying the income stream as relationship property as a windfall gain to Ms Baldwin. This is contrary to the policy and purpose of the Sovereign policy which was to compensate for Mr Greaves’ disability. She adds that the future income stream cannot be capitalised at Mr Greaves’ election; it is paid monthly in arrears and only if Mr Greaves continues to be disabled. There are also potential off-sets if Mr Greaves can earn other income.16 The insurer requires regular proof of Mr Greaves’ medical status, although the regularity has decreased over time.
[45] Ms Crawshaw refers to decisions in the relationship property jurisdiction in Australia where such payments are not treated as relationship property, albeit recognising there is a different statutory framework in the Australian jurisdiction.17 In my assessment, those cases are not directly relevant. The different statutory regime restricts their usefulness. I put them to one side.
[46] The policy arguments underlying Ms Crawshaw’s submissions are attractive for many reasons. A person entitled to insurance payments because of an event affecting health may continue to suffer injury and loss well after the end of a relationship. Indeed, this is the case here. This means accounting for property received in respect of post-separation loses unconnected with the relationship.18 This strikes me as inconsistent with the classification policy in the Act. It is contrary to the distinction made between post-separation income, which is not relationship property, and income insurance payments spread over time, which are.
[47] The nub of the issue is whether the periodic payments under the income protection policy are “property” and whether that property is “acquired” after marriage
15 Z v Z (No. 2) [1997] 2 NZLR 258.
16 Mr Greaves has reached accommodation with Sovereign that receipt of capped income will not disentitle him to on-going payments. Fam CAFC 133.
17 Raine v Creed [2015]; Falcken v Weule [2019] Fam CAFC 140.
18 Law Commission Review of the Property (Relationships) Act 1976: Final Report (NZLCR 43, 2019) at 140.
(and before separation). The answer lies in the statutory definition of “property” and the proper characterisation of the benefits under the Sovereign policy.
[48]“Property” is defined in s 2 of the Act in this way:
property includes—
(a)real property:
(b)personal property:
(c)any estate or interest in any real property or personal property:
(d)any debt or any thing in action:
(e)any other right or interest
[49]This definition is: 19
An inclusive definition, with, arguably, an extension of the normal concept of property to include a “right” or an “interest”, even if it is not a right or interest in property.
[50]Materially, relationship property is defined in s 8(1) of the Act as follows:
8[Relationship] property defined
...
(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; and]
(ee) subject to sections 9(3) to (6), 9A, and 10, all property acquired, after the marriage [[, civil union,]] or de facto relationship began, for the common use or common benefit of both spouses or [[partners]], if—
...
(h) any policy of insurance in respect of any property described in paragraphs (a) to (ee); and
...
[51] The definition of relationship property specifically refers, in subparagraph (g) to life insurance policies, or the proceeds of such a policy, and in subparagraph (i) to
19 Clayton v Clayton [2016] NZSC 29 at [38].
the value of any superannuation scheme entitlement. These subparagraphs expressly qualify their inclusion as relationship property by reference to the proportion of the value or proceeds attributable to the marriage. This is not directly relevant because of the respective definitions of life insurance policy and superannuation scheme entitlement. However, the fact that it is only the proportion of the value of any life insurance policy, or of the proceeds of such a policy, or the proportion of the value of any superannuation scheme entitlements attributable to the marriage which are classified as relationship property supports the policy argument. On the other hand, that it was considered necessary to specifically qualify these types of policies also supports the notion that benefits under an income protection insurance policy are property.
[52] Equally relevant to the definition of “relationship property” is the definition of “separate property” in s 9 of the Act:
9Separate property defined
(1) All property of either spouse or [[partner]] that is not relationship property is separate property.
...
(4)The following property is separate property, unless the Court considers that it is just in the circumstances to treat the property or any part of the property as relationship property:
(a)all property acquired by either spouse or [[partner]] while they are not living together as [[a married couple]] [[or as civil union partners]] or as de facto partners:
(b)all property acquired, after the death of 1 spouse or [[partner]], by the surviving spouse or [[partner]], as provided in section 84.
[53] The facts in Creighton are apposite. There is no doubt that the concession made by counsel for Mr Greaves at the Family Court hearing was entirely appropriate. The arguments traversed in the case are also the same as those before me. Harrison J focussed his analysis of the novel issue on whether any new or fresh rights were acquired under the income disability policy after separation. This was to answer the question of whether there was any property “acquired” after the marriage. The
purpose of the income protection policy, to replace earnings no longer able to be earned, was neither determinative nor even particularly relevant.
[54] Harrison J determined first that the bundle of rights under the policy amounted to a chose, or thing in action, so fell within the statutory definition of property under s 2 of the Act. I respectfully agree. The policy, like any contract, is a bundle of rights and obligations. A right or entitlement to lump sum payments or periodic payments arises when a defined event occurs. In this case, when the insured suffered a medical event leading to disability within the terms of the policy. At that point, a right to claim arose. That right to claim is itself a property right. Does that right fundamentally change at separation; and, can new property rights be said to arise thereafter which results in on-going payments? Having found that a property right arose or crystallised on the insured event, Harrison J determined that no new property right was acquired after separation. Rather, the continued disability was a condition of the progressive receipt consequential on exercising the right to claim.20
[55] Harrison J’s analysis and approach was orthodox, and consistent with authority in the High Court and Court of Appeal.21 It was, with respect, sound notwithstanding the policy concerns I set out in [46] above. For instance, in Z v Z the question was whether the earning capacity of the husband, enhanced during the marriage was “matrimonial property” within the meaning of the relationship property legislation of the time.22 The Court of Appeal concluded it was not, but that the definition of property is broad enough to encompass a right or interest in the nature of the husband’s rights and interests in a partnership. It is the right or interest which is property and not the underlying economic concept of earning capacity which gives rise to or is the product of that right or interest. As the Court in Z v Z stated:23
Future earnings of the husband are not property which has been acquired by him at the time of the separation or the hearing. There is no acquisition until such time as the earnings have been received or are receivable. They have no present existence, nor, for reasons which have been explored under the “enhanced earning capacity” argument, can they be sourced to other existing property.
20 Creighton v Creighton HC Auckland CIV-2003-404-6892 10 September 2004 at [33].
21 Gill v Gill [1995] NZFLR 550; Roberts v Roberts [1990] NZFLR 193 at 199; Yu v Yu [1994] NZFLR 474.
22 Z v Z (No. 2) [1997] 2 NZLR 258, 15 FRNZ 88.
23 At 114
[56] Creighton v Creighton has since been discussed in only one other authority, to my knowledge, X v X.24 In that case, the husband’s employment incentive payments were held by the High Court to be partly relationship property based on the date that they were acquired, said to be the date he achieved performance targets affecting the value of the incentives. On appeal, the Court of Appeal determined that the right to the benefits of the performance scheme did not depend on the achievement of performance objectives. The question was solely when the right to receive the benefit was acquired. As this was during the marriage, the payments in their entirety were relationship property.
[57] Therefore, in my judgement, Creighton was decided correctly in accordance with the legislation. The entitlement to the periodic payments was acquired on the date on which the medical event occurred. No fresh rights were acquired after separation by dint of the ongoing disability. Rather, the ongoing disability was a condition which, if not met, would have disentitled Mr Greaves to ongoing payments. This is not the same thing as a fresh entitlement to those benefits. It follows that the classification of the net present value of the future stream of payments is properly classified as relationship property.
Are there circumstances justifying an unequal sharing of the post-separation capitalised income protection payments?
[58] The touchstone of the Act is a presumption of equal sharing of relationship property. This recognises the principle of equality of contribution. There are statutory exceptions and compensatory adjustments set out in the Act. In this appeal, the relevant statutory exception engaged is s 13 which reads:
13 Exception to equal sharing
(1)If the Court considers that there are extraordinary circumstances that make equal sharing of property or money under section 11 or section 11A or section 11B or section 12 repugnant to justice, the share of each spouse or … partner in that property or money is to be determined in accordance with the contribution of each spouse to the marriage [or of each civil union partner to the civil union] or of each de facto partner to the de facto relationship.
(2)This section is subject to sections 14 to 17A.
24 X v X [2006] NZFLR 361.
[59] The parties are largely agreed on the applicable legal principles. There are three elements to this test:
(a)Are there extraordinary circumstances?
(b)If so, do they make equal sharing repugnant to justice?
(c)If so, what should the division be considering the parties’ contributions to the marriage?
[60] It is important not to conflate the first of these two elements. Whether extraordinary circumstances exist is a factual question. Whether there is repugnancy such that s 13 bites is a value judgment.25 It does not follow that equal sharing is necessarily repugnant merely because the circumstances are extraordinary. The test is a rigorous or stringent one and the fact of a disproportionately greater financial contribution by one partner does not of itself attract unequal sharing.
[61] The Family Court found that there were no extraordinary circumstances. The Judge concluded that the facts of this case were “remarkably ordinary”. She assessed the contributions of the parties to the relationship overall, not just on the last three years, holding that the effect of s 2F of the Act was that the Court was prevented from having regard to post-separation events. In short, the fact that Mr Greaves is living off his monthly payments and has spent some on post-separation issues was irrelevant. She said:
[25] I am not satisfied that the circumstances of [Mr Greaves] being the party who predominantly contributed financially to the relationship property pool (by receiving a compensation entitlement three years before separation) is extraordinary. Nor is the fact that the value of it incorporates post-separation entitlements. As determined by Harrison J in Creighton the fact that the policy insured against loss of income is irrelevant.
[62] Ms Stevenson submits that the Family Court considered and applied the appropriate legal tests, recognising the financial and non-financial contributions equally. She recognised the fact that this was a long-term relationship of 23 years, with
25 Kidd v Russell [2018] NZFLR 841 at [27] citing the first instance decision.
three children and that the main asset in the relationship property pool was the Sovereign policy (approximately 83% of the pool) because the home was held by a family trust,
[63] The Judge also noted that Ms Baldwin lived with Mr Greaves for three years after the medical event, drawing an inference that she had to contribute more to compensate for his disability.
[64] Ms Stevenson submits that the usual circumstances in which Courts are minded to invoke s 13 are where there is a short term relationship without children and one party has brought property into the relationship. None of these factors are present in this case. She also reminds me that the fact-finder had the benefit of hearing evidence – both examination in chief and cross-examination – in making her own assessment about the impact of this medical event on both parties. I acknowledge that this is a weighty consideration.
[65] I agree with the Family Court’s factual finding that, before the medical event, the circumstances of this partnership were ordinary in the legal sense. However, in my judgement, it is wrong to conclude that the medical event three years before separation and consequent triggering of the Sovereign policy did not significantly change the complexion. This is not because it resulted in a substantial swelling of the relationship pool. As I have indicated, a focus on disproportionate financial contribution is seldom enough. Nor does my conclusion depend on the actual circumstances occurring after separation, which may or may not rub up against s 2F of the Act. I do not need to decide that point.
[66] Rather, it is because it is the purpose of the policy which is determinative of the question. The purpose is to compensate Mr Greaves for his on-going loss of income through inability to work in his usual occupation. Had he not suffered a permanent disability, his post-separation income would not be relationship property. I therefore accept Ms Crawshaw’s submission that contracting the serious illness at a late stage in the relationship creates extraordinary circumstances. It is the nature and character of the substituted income payments under the policy which makes equal sharing of the relationship property repugnant to justice since it is Mr Greaves whose
quality of life and a loss of income earning ability has been and continues to be reduced. It is also Mr Greaves who is contractually bound to forego other income streams above a capped level to preserve the on-going entitlement to payments.
[67] To the extent that the Family Court relied for support on the statement in Creighton as to the relevance of the character of the Sovereign Policy, this led to error. The statement in Creighton informs only the question of classification and not the assessment under s 13.
[68] That Ms Baldwin contributed to the premia paid under the policy and the policy may have been undertaken through a joint decision during the relationship does not, in my view, mitigate what would otherwise be a result repugnant to justice.
[69] I conclude that s 13 is engaged and the circumstances displace the presumption of equal sharing.
Conclusion as to s 13
[70] The quantification of the shares under s 13 is more a matter of impression than formulaic. I have therefore carefully considered whether the appropriate course is to remit the question of the appropriate proportionate share in the relationship property back to the Family Court for assessment. I have concluded not to do so for two reasons. First, that would undermine the Act’s emphasis on achieving a just and speedy division. Secondly, it is not a matter of weighing the parties’ contributions over the substantial life of the relationship in the circumstances of this case, given how and why s 13 is triggered. I conclude that Mr Greaves is entitled to a 65 per cent share of the relationship property and Ms Baldwin to a 35 per cent share.
Was the Family Court wrong to rely on the date of separation value of the Sovereign policy?
[71] Mr Greaves argues for a date of hearing valuation for the policy although, as I apprehend it, this is primarily run as an alternative argument to achieve a similar result to his claim under s 13.26 The Family Court held that the date of separation value was
26 In fact, the second valuation is dated shortly after the anticipated first hearing date.
appropriate, exercising the available discretion under s 2G of the Act. The Judge reasoned that this was the only reliable evidence the Court had as to the value of the policy and that an analogy could be drawn with valuation of superannuation policies. Those factors, combined with the fact that Mr Greaves had treated the compensation as his own and dissipated its value through use justified reliance on a date of separation value.
[72] The later value has the consequence of attributing a lower value to the capitalised value of the future income protection insurance payments, as evidenced by the agreed actuarial values in [14] above. The reason is that the value as at 1 April has been diminished because payments have been made to Mr Greaves between separation and 1 April 2017. This means that, unless he also must account for those payments (in the appropriate proportion) the property is effectively severed and becomes part relationship and part separate. Had I been minded to rely on the 1 April 2017 valuation, I would also have directed an appropriate accounting for the payments actually received.
[73] In my view, the Family Court’s discretion to value as at separation was properly exercised on sound principles. My view is supported by the fact that Mr Greaves has had the benefit of receipt of payments during the period between separation and date of hearing, including through the fact that none of the contingencies have arisen as at this point in time. This has presented some economic opportunity for him. Ms Baldwin meanwhile has been deprived of any of the capitalised income stream.
[74]I dismiss this aspect of the appeal.
Did the appellant contribute after separation by his disability such that compensation is payable under s 18B of the Act?
[75] Before the Family Court the parties made various claims and counter-claims for compensation under s 18B of the Act. This section gives the Court a discretion to compensate for post-separation contributions by making adjustments for contributions made by a party. Ms Crawshaw does not express the appeal under this section as alternative. In short, she submits that the Court can both order an unequal division of
the relationship property and make an order under s18B as to the benefit obtained from contributions.
[76]The section reads:
18B Compensation for contributions made after separation
(1)In this section, relevant period, in relation to a marriage [, civil union,] or de facto relationship, means the period after the marriage [, civil union,] or de facto relationship has ended (other than by the death of 1 of the spouses or [partners]) but before the date of the hearing of an application under this Act by the Court of first instance.
(2)If, during the relevant period, a spouse or [partner] (party A) has done anything that would have been a contribution to the marriage [, civil union,] or de facto relationship if the marriage [, civil union,] or de facto relationship had not ended, the Court, if it considers it just, may for the purposes of compensating party A—
(a)order the other spouse or [partner] (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.
[77] One such claim made by Mr Greaves was that his continued disability constituted a contribution since that was the precondition for ongoing payments from Sovereign. There is no reference in the judgment to this head of claim however Ms Stevenson implicitly accepts that this is not a fresh point raised for the first time on appeal.
[78] Instead, Ms Stevenson submits that, although the notion of contribution in s 18 may be broad, it does not extend to any circumstance arising from the state of health of a party and their consequent inability to work. She also invokes s 18(2) which makes it clear that a contribution of a monetary nature is of no greater value than a non-monetary contribution.
[79] Cast in this way, I agree with Ms Stevenson. However, I consider there is a more appropriate characterisation at play here. One of the conditions for on-going receipt of payments from Sovereign is that Mr Greaves’ ability to earn income is
capped at a relatively low level. Although Ms Crawshaw put it in slightly different terms, I accept that this amounts to a forbearance, analogous to the forbearance associated with occupation rental. Where the family home is not owned by a Trust, continued occupation after separation by one party can justly be regarded as a contribution by the other, non-occupying party within s 18B.27 In the same way, Mr Greaves’ forbearance is also a contribution in my view.
[80] However, in the light of the adjustment I have made under s 13, I do not consider it would be just to also make an order under s 18B for this contribution. Rather, a global assessment must be made. To approach it otherwise would be to permit the same contribution to be “counted” twice.
[81]I dismiss this ground of appeal.
Did the appellant’s serious health event dilute the ability to contribute to the relationship?
[82] The Family Court determined that after Mr Greaves suffered his medical event, it could be inferred that Ms Baldwin had to contribute more to compensate for his disability. Further, that the event would have diluted his ability to contribute to the relationship in other ways.
[83] Ms Crawshaw takes issue with this finding which she submits is a corollary to the argument on s 13. She submits that there was no evidence to support it. She distinguishes between an injury which renders someone unfit in their previous occupation and someone disabled in the sense they require assistance with daily needs. In the absence of evidence as to increased burden, it is not axiomatic based on the event itself.
[84] There is force to this submission. However, it does not materially add to my analysis under s 13 in terms of the proportionate share which I have found justified in these circumstances. I therefore make no finding on this ground.
27 Griffiths v Griffiths [2012] NZFLR 327 at [36].
Was the respondent entitled to compensation under s 18B for care of the youngest child?
[85] Ms Baldwin had the primary care of the youngest child (then 14) from separation. She claimed $54,840 as compensation based on the amount she would have received in child support calculated under the Child Support Act 1991, using as a basis, the $12,000 compensation per month received by Mr Greaves. She claimed only up to the point at which the child began working in March 2018.
[86] The Family Court relied on s 18(1)(a)(i) of the Act which makes it clear that care of a child is a qualifying contribution. The Judge referred to the caution expressed in X v X that:28
An application which in substance seeks maintenance by another name may not appropriately be dealt with under this section.
[87] However, relying on the fact that the status of Mr Greaves’ compensation payment precluded Ms Baldwin from applying for child support (because he had not earned a taxable income to which the formula assessment under the Child Support Act applies), Judge Pidwell allowed the claim but reduced it to acknowledge Mr Greaves’ financial contributions to the children. She awarded $34,000 (being 34 months at
$1,000) per month.
[88] Ms Crawshaw submits that this approach is wrong in principle as it does not properly assess claims for Child Support. There was no such application before the Court, no affidavit of financial means or the source of financial means. I apprehend that underpinning this submission is concern about Ms Baldwin receiving an inheritance after separation as a means of financial support. This was not permitted to be explored at the Family Court hearing.
[89] I find no error in the Family Court’s assessment that a contribution to compensate for the primary care of a child is appropriate. Its value should not be underestimated. The difficulty arises in quantification in terms of the impact of the payments under the Sovereign policy. The Family Court’s approach was understandable as a pragmatic and holistic approach in the circumstances of this case.
28 X v X [2009] NZCZ, [2010] 1 NZLR 601 at [161].
There is however a conceptual issue in using the receipt of the full $12,000 per month as the basis for the calculation when half of the date of separation value of the income stream had been awarded to Ms Baldwin. It amounts to a potential double-dipping.
[90] Ms Townsend argued for Mr Greaves that it in fact amounts to a form of triple- dipping because no amounts paid by Mr Greaves after separation were considered to off-set this analysis. In fact, the Family Court Judge did reduce the amount claimed to acknowledge financial contributions to the children. She did not off-set the sum of
$29,500 paid to Ms Baldwin because this in turn was off-set by Ms Baldwin’s contribution in forgoing a higher standard of living caused by non-receipt of her share of the separation date value of the policy.
[91] In oral submissions, Ms Stevenson acknowledged the conceptual difficulty but emphasised Ms Baldwin’s lost opportunity to utilise the funds. Ms Crawshaw countered that, in real terms, Mr Greaves did not have that opportunity either since the payments were drip-feed at month end rather than being paid as a capital sum.
[92] Taking all these factors into consideration, I propose to make an adjustment to the s 18B contribution attributable to the care of the child. This flows from my assessment of the appropriate division under s 13 in this judgment insofar that its practical impact is that Mr Greaves has the benefit of 65 percent of the capitalised income stream.
[93]I accordingly vary the award of $34,000 by replacing it with an award of
$22,100 (34 months x $650 per month).
Was the respondent’s occupation of the family home a matter which ought to have been considered under s 18B?
[94] Mr Greaves claims compensation under s 18B of the Act for the fact that Ms Baldwin remained in the home owned by the Family Trust from May 2015 to August 2016, although their son also lived there for that period. The Family Court dismissed this claim on the basis that it was not quantified or supported by evidence of the cost of occupation. A second ground for dismissal was that the home was owned by the family trust.
[95] I find that a claim to occupation rental is barred by the fact that the home is not relationship property but owned by the Family Trust. The recent Court of Appeal decision in Ronayne v Coombes makes this clear when it dismissed an appeal from the High Court declining to grant occupation rental because of the trust status of the home.29 It is for the trustees to decide to impose occupation rental.
[96] Anticipating this issue, Ms Crawshaw sought a ‘work-around’ by relying on s 44C of the Act. This section provides for compensation for property disposed of to a trust. It reads:
44C Compensation for property disposed of to trust
(1)This section applies if the Court is satisfied—
(a)that, since the marriage [[, the civil union,]] or the de facto relationship began, either or both spouses or [[partners]] have disposed of relationship property to a trust; and
(b)that the disposition has the effect of defeating the claim or rights of 1 of the spouses or [[partners]]; and
(c)that the disposition is not one to which section 44 applies.
(2)If this section applies, the Court may make 1 or more of the following orders for the purpose of compensating the spouse or [[partner]] whose claim or rights under this Act have been defeated by the disposition:
(a)an order requiring 1 spouse or [[partner]] to pay to the other spouse or [[partner]] a sum of money, whether out of relationship property or separate property:
(b)an order requiring 1 spouse or [[partner]] to transfer to the other spouse or [[partner]] any property, whether the property is relationship property or separate property:
(c)an order requiring the trustees of the trust to pay to 1 spouse or [[partner]] the whole or part of the income of the trust, either for a specified period or until a specified amount has been paid.
(3)The Court must not make an order under subsection (2)(c) if —
(a)an order under subsection (2)(a) or (b) would compensate the spouse or [[partner]]; or
(b)a third person has in good faith altered that person’s position—
29 Ronayne v Coombes [2016] NZFLR 672, [2016] NZCA 393.
(i)in reliance on the ability of the trustees to distribute the income of the trust in terms of the instrument creating the trust; and
(ii)in such a way that it would be unjust to make the order.
(4)The Court may make 1 or more orders under subsection (2) if it considers it just to do so, having regard to—
(a)the value of the relationship property disposed of to the trust:
(b)the value of the relationship property available for division:
(c)the date or dates on which relationship property was disposed of to the trust:
(d)whether the trust gave consideration for the property, and if so, the amount of the consideration:
[[(e) whether the spouses or partners, or either of them, or any child of the marriage, civil union, or de facto relationship, is or has been a beneficiary of the trust:
(f) any other relevant matter.
[97] However, the Court of Appeal in Ronayne also found this route untenable. It stated:30
Section 44C applies where, during their marriage, either or both spouses had disposed of relationship property to a trust. That had not occurred here. Rather, the trust had purchased, and throughout, owned the property in respect of which the appellant claimed occupation rent. There had simply not been a disposal of relationship property, in particular the family home, by the parties to the trust.
[98] Ms Crawshaw seeks to distinguish Ronayne on the basis that the trust distribution had already been made in that case. However, based on the distribution schedule presented by Ms Crawshaw there is a presumption before me that the parties are to share equally in the net proceeds of the sale of the Trust property before the payments they owe each other in respect of relationship property are accounted for.
[99] The Family Trust was settled in 2000. I was informed from the Bar by Ms Stevenson, without objection by Ms Crawshaw, that the family home was purchased by the Trust, rather than transferred to the Trust from the relationship
30 At [12].
property pool. While the evidential position is unsatisfactory, there is certainly no evidence of a disposition from relationship property to the Trust. On my reading of s 44C and Ronayne, this would be necessary evidence to support a claim to compensation for occupation rental.
[100] I therefore uphold the Family Court decision to decline to consider occupation rental under s 18B and s 44C of the Act.
Summary of decision
[101]In summary:
(a)I quash the award to the respondent of $34,000 under s 18B and replace it with an award of $22,100 to the respondent as compensation for care of a child;
(b)I dismiss the appeal in respect of the date of valuation of the Sovereign Policy;
(c)I dismiss the appeal as to classification of the Sovereign Policy;
(d)I uphold the appeal under s 13 and make an order that Mr Greaves is entitled to 65 per cent of the relationship property;
(e)I dismiss the appeal in respect of occupation rental.
Costs
[102] Both parties have had a measure of success. I will deal with the question of costs on the papers in the event the parties cannot reach agreement. Short costs submissions of no more than three pages should be filed in hard copy and electronically. In view of the forthcoming holiday period, I will not make timetabling directions but invite the parties to agree on an appropriate timetable for the filing of costs memoranda and to advise the Court accordingly.
[103] I authorise the reporting of this decision under the fictitious names used in this judgment to preserve the privacy of the parties.
[104] Finally, it would not be appropriate to make timetabling directions for effecting division of the property in circumstances where that requires Trust distributions. It is however plain that these matters need to be settled as early as practicable and I urge the parties to achieve this without further delay.
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Walker J
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