Herbison v Waugh
[2018] NZHC 3101
•29 November 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-001094
[2018] NZHC 3101
BETWEEN CRAIG DON HERBISON
Appellant
AND
ANITA MARIE WAUGH
Respondent
Hearing: 18 October 2018 Appearances:
B P C Carter for the Appellant M Headifen for the Respondent
Judgment:
29 November 2018
JUDGMENT OF HINTON J
This judgment was delivered by me on 29 November 2018 at 11.00 am pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Counsel:
Brian Carter, Barrister, Auckland
Michael Headifen, Barrister, Auckland
HERBISON v WAUGH [2018] NZHC 3101 [29 November 2018]
[1] Mr Herbison and Ms Waugh were in a de facto relationship for four-and-a-half years from January 2007 to June 2011, when they separated. Mr Herbison had two daughters from a prior marriage. Ms Waugh and Mr Herbison had two sons during their brief relationship.
[2] Proceedings were commenced on 25 June 2012 and heard by Family Court Judge D M Partridge some six years later.
[3] Her Honour determined a large number of outstanding relationship property issues, in a lengthy and thorough judgment dated 8 May 2018, delivered two weeks after the conclusion of the hearing.1
[4]Only four aspects of that judgment are appealed.
Grounds of appeal
[5]The four issues are as follows:
(a)Whether a Maserati car was converted to relationship property by its use, under s 2 of the Property (Relationships) Act 1976. (The Family Court Judge found it had been.)
(b)Whether a diamond engagement ring had been re-gifted by Ms Waugh to Mr Herbison under s 10(3) of the Act. (The Family Court Judge found it had not, and that it remained the separate property of Ms Waugh.)
(c)Whether legal fees incurred during the relationship, relating to a prior relationship breakup, are personal debts and if so, what compensation is payable. (The Family Court Judge found they were personal debts in terms of s 20 of the Act and awarded compensation of 50 per cent of the total debt under s 20E of the Act.)
1 Waugh v Herbison [2018] NZFC 3365.
(d)What compensation should be paid for the post-separation imbalance in the relationship property pool, under s 18B of the Act. (The Family Court Judge awarded interest at five-and-a-half per cent per annum on the full differential from date of separation, a period of approximately seven-and-a-half years.)
Maserati – s 2
[6] The Maserati was separate property. It was purchased by Mr Herbison just before the relationship started.
[7] The question is whether it became relationship property by virtue of s 2 of the Act, which defines family chattels as including motor vehicles “used wholly or principally, in each case, for family purposes”. Family chattels are then subject to equal sharing under s 11(1)(b).
[8] Section 2H(2)(b) of the Act provides that “use” refers to the use to which the asset was being put before the relationship ended.
[9] It seems clear that the Maserati did not incur much mileage. It clocked up about 3,000 kilometres per year over a 10-year period, although there did not seem to be evidence as to the average distance covered during the relationship itself. For the third year of the relationship, the couple lived in Australia and the vehicle was used only on trips back to New Zealand. Throughout, Mr Herbison did not use the Maserati to commute to work, instead he chose to walk.
[10] However, in terms of when the vehicle was used, the Judge preferred the evidence of Ms Waugh that, to the extent it was used, it was used by the family for family purposes, and to a greater extent than Mr Herbison had claimed. This applied especially during the first two years of the relationship when it was the only car they owned. They had another car on loan for some indeterminate period during those two years.
[11] Mr Carter’s argument is that the use at the time of separation was not “principally” for family purposes, because when the couple returned to New Zealand
from Australia about a year before separation, they purchased a Toyota Rav 4, and the Judge found the Toyota was the predominant family vehicle. Mr Carter says the latter finding necessarily means the Maserati was not used principally for family purposes. Putting the same argument in a slightly different way, Mr Carter argues that the use of the Maserati, at least in the period closer to separation, was so limited it was just a toy.
[12] I agree that use has to be considered at or close to the time of separation, so the purchase and use of the Rav 4 in the last year is relevant. However, for purposes of categorising a car under s 2 of the Act, the focus is on the use of that car, and whether it has been principally used for family purposes. The fact that the Rav 4 was the predominant family vehicle does not rule the Maserati out as a family chattel. There could be two or more cars that are family chattels. The section operates differently to the provision relating to the family home where it is clear there is only one property that can be classified as the home as at the date of separation.
[13] The Judge did acknowledge that use was on a reduced basis in the last year. If the family use had been truly negligible over the last year, such that it could be said that the vehicle’s “principal” use was as a collector’s item, a “toy”, or to sit in the garage (ie in effect little or no “use”), then I would agree it would be classified as separate. However, although the Judge could have been clearer, I take it she considered family use was still material, and that some of her general observations as to the unlikelihood of the car not being used for family purposes would still stand. Further, although the car was not a daily runner, 3,000 kilometres per year, or 60 kilometres per week on average, which I have to treat as the minimum mileage, is not negligible.
[14] I therefore agree with the Family Court Judge that the Maserati was a family chattel, converted by its use to relationship property.
[15] It may be thought perverse that someone who shares an expensive separate property chattel, as opposed to keeping it for show, should lose half, but such are the swings and roundabouts of the deeming provisions of the Act. Anyone wishing to avoid that consequence would be advised to enter into a contracting-out agreement.
[16] Finally, I note that the Judge took into account, in categorising the car as relationship property, that the outgoings had been paid out of Mr Herbison’s income, which was relationship property. I note also that the vehicle seems to have been stored in the garage of the couple’s Viaduct apartment, which was also relationship property. There is no evidence as to quantum of the outgoings, but it could be assumed that a Maserati would not be cheap to run. The cost of garage rental would also be material (ie the saving brought about by use of relationship property).
[17] Payment of outgoings from relationship property alone would clearly not convert a separate property vehicle to relationship property, because such payments do not amount to, or determine, use. Such payments or contributions would generally be reflected in a sustenance award under s 17 of the Act. However, I consider the assumption of “joint” responsibility for outgoings and storage, is relevant, along with actual use, in determining whether something is “principally used for family purposes”, so the Judge fairly took this into account.
Diamond ring – s 10(3)
[18] Mr Herbison gave Ms Waugh a diamond ring on their engagement. There is no question it was her separate property.
[19] Mr Herbison argues that there was a gift back, and the ring is his separate property under s 10(3) of the Act. He says the Judge made an error of law in her approach to the evidence.
[20]Section 10(3) of the Act provides as follows:
10 Property acquired by succession or by survivorship or as a beneficiary under a trust or by gift
…
(3) Property that one spouse or partner acquires by gift from the other spouse or partner is not relationship property unless the gift is used for the benefit of both spouses or partners.
…
[21] An allegation of gift between partners will fail if the requisite gifting intention on the part of the donor is not established.2 In Milne v Armijo, Hardie-Boyes J observed:3
Whether there was a gift turns on two things: Firstly delivery, and secondly, intention of the donor; the latter being significant rather than the understanding of the donee.
[22] Mr Herbison gave affidavit evidence that, over the years, Ms Waugh gave or threw the ring back at him and then would beg for it back. He said that on the last occasion, namely at separation, she told him the relationship was over and gave the ring back. He says Ms Waugh also told him at that time that she had never had any intention of getting married.
[23] Ms Waugh had given her own affidavit evidence prior to Mr Herbison’s. She said that Mr Herbison had taken the engagement ring and either refused to return it, or claimed it had been lost. She also listed the ring as separate property in her affidavit of assets and liabilities.
[24] Ms Waugh did not respond to Mr Herbison’s evidence about the return of the ring, in her affidavits in reply.
[25] Although Mr Herbison knew there was a dispute over the status of the ring, he sold it at a Webb’s auction for $9,000 in June 2014. The cost of the ring was approximately $20,000, the diamond having been purchased overseas and then set by a jeweller. At that time, March 2009, replacement cover was recommended of $42,000 and indemnity cover of $33,600.
[26] Mr Carter cross-examined Ms Waugh on the issue. She said it was a “ridiculous” proposition that she had given the ring back and it was untrue. She said she never told Mr Herbison the engagement was off or that she would never marry him.
[27]Mr Herbison was not cross-examined on the point.
2 Hooson v Hooson (1990) 7 FRNZ 83 (FC).
3 Milne v Armijo HC Christchurch, CP7/88, 25 August 1989 at 2.
[28] The Judge held that Mr Herbison had not met the onus of proving a clear intention by Ms Waugh to gift the ring to him, and the ring was Ms Waugh’s separate property.4 After considering the cost and insurance assessments, the Judge fixed value at the sale price of $9,000.5
[29] Mr Carter’s argument turns on a failure to cross-examine Mr Herbison. He submits that, given Mr Herbison’s evidence was not challenged, it must be taken as accepted and it must prevail. In this regard, the Judge acknowledged Mr Herbison was not cross-examined, but said “his case was squarely put to Ms Waugh in cross-examination”.6
[30] Mr Carter relies on what was known as the rule in Browne v Dunn, now encapsulated in s 92 of the Evidence Act 2006 and recognised by r 9.15 of the High Court Rules 2016.7
[31]Section 92 of the Evidence Act 2006 provides:
In any proceeding, a party must cross-examine a witness on significant matters that are relevant and in issue and that contradict the evidence of the witness, if the witness could reasonably be expected to be in a position to give admissible evidence on those matters.
[32]Rule 9.15 of the High Court Rules 2016 provides:
9.15 Cross-examination duties
The exchange of briefs under this subpart does not affect the cross-examination duties referred to in section 92 of the Evidence Act 2006.
[33] Mr Carter cited from an earlier version of McGechan on Procedure HR 9.15 as follows:
It is well established that if the Court is going to be asked to disbelieve a witness, the witness should be cross-examined. The leading case is Browne v Dunn (1893) 6 R 57 (HL), which provides that if the Court is to be asked to disbelieve a witness, the witness should be cross-examined. Indeed, the previous rule was known as the “rule in Browne v Dunn”. When the rules
4 At [57].
5 At [59].
6 At [54].
7 Browne v Dunn (1893) 6 R 67 (HL).
were being revised, it was thought inappropriate to name a rule after an 1893 English case. Hence the change to the current title.
Cross-examination of witnesses in this manner, including the presentation of contradictory evidence to the witness, is intended to ensure both that the witness is able to address and explain such evidence and that the other party is able to call evidence against any contradiction. The rule can be seen as ensuring coherence in the evidence before the Court. A recent illustration of the application of Browne v Dunn is Heslop v Cousins (2007) 18 PRNZ 345 where the rule was not complied with in a number of respects.
[34]The current version has very little commentary on r 9.15.
[35] It is helpful to consider the following passage from the Court of Appeal judgment in R v Soutar:8
The general purpose of the duty reflected in s 92 was commented on by this court in R v Dewar [2008] NZCA 344 as being one of fairness. It relates to the challenge and confrontation of opposing witnesses under the adversarial system. It is not, however, absolute. Nor does it need to be slavishly followed where the witness is perfectly well aware if his or her evidence is not accepted on a particular point.
[36] Mr Carter is correct as to the significance of the evidentiary rule and the need for counsel to take particular care in complying with it.
[37] The issue that the Judge had to decide was whether Ms Waugh intended to gift the engagement ring back to Mr Herbison. The onus is on Mr Herbison to establish the gift. The focus is on what is in Ms Waugh’s mind, not Mr Herbison’s perception of it.
[38] While I agree that the Judge could not treat a failure to comply with s 92 of the Evidence Act 2006 as having been remedied by Mr Carter’s questioning of Ms Waugh (which is another matter altogether), I do not consider the section has been breached. This is for the simple reason that Mr Herbison had already had the opportunity to answer Ms Waugh’s contradictory evidence regarding whether a gift was intended by her, as his own affidavit evidence was in reply to hers. This was not, for example, a case of exchange of briefs.
8 R v Soutar [2009] NZCA 227 at [27].
[39] Also, the Judge’s conclusion did not turn on a finding that she disbelieved Mr Herbison, or if it did, it could have been reached in any event. She decided, and was entitled to decide, that the whole of the evidence “falls short of proving a clear intention by Ms Waugh to gift the ring back to Mr Herbison”.9 The evidence included the fact this was an engagement ring in the first place; that, on Mr Herbison’s evidence, Ms Waugh had previously handed it back, (presumably without intention on those occasions for it to be a gift), and that Mr Herbison had sold the ring knowing its status to be in dispute. Even without disbelieving Mr Herbison’s other evidence, the Judge could fairly have concluded that he had not proven intent to gift. She could have accepted that Ms Waugh “gave” the ring to Mr Herbison (in the sense of handing it to him), without intent to “gift”.
[40] I therefore uphold the Judge’s finding that the diamond ring was not gifted back to Mr Herbison and remained the separate property of Ms Waugh.
Mr Herbison’s legal fees for his prior relationship breakup – s 20E
[41] In the Family Court, Ms Waugh claimed that payments made during the relationship in respect of Mr Herbison’s child support obligations, and payment of his legal and actuarial fees in connection with his previous break-up, should be considered personal debts. She sought compensation for half of those payments, relying on s 20E of the Act.
[42] Judge Partridge rejected the claim in respect of child support payments, relying on a decision of Judge Burns in the Family Court at Auckland.10 In HEW v JGW, Judge Burns discussed the provisions of s 20E and ruled that the payment of child support, in the circumstances of the case, was payment of a relationship debt because it was incurred jointly under s 20(1)(a).11 The Judge also said that he would have declined to award compensation and in doing so said:12
… to recoup payment of child support made in the circumstance of this case would produce an unjust result. When I look at the principles contained in
9 At [55].
10 HEW v JGW FC Auckland FAM-2007-004-663, 12 December 2007.
11 At [46]. On the particular facts, he decided the children were not children of the relationship and so the debt did not fall into s 20(1)(e).
12 At [46].
section 1N, in my view, when a marriage takes place each party takes the other for better or worse. It would be in contravention to a mutual understanding between them. The wife knew of the husband’s ongoing obligation to support his children from the previous relationship. …
[43] In respect of the legal and actuarial expenses, Judge Partridge proceeded on the basis that Mr Herbison accepted these were personal debts, but she also found they were personal debts, after a brief discussion. The Judge then went on to consider the question of compensation. As noted earlier, the Judge decided compensation should be at 50 per cent of the fees and expenses paid.
[44]Section 20E provides:
20E Compensation for satisfaction of personal debts
(1)If a secured or unsecured personal debt of one spouse or partner (party A) has been paid or satisfied (directly or indirectly) out of the relationship property, the court may make one of the following orders in favour of the other spouse or partner (party B):
(a)an order increasing proportionately the share to which party B would otherwise be entitled in the relationship property:
(b)an order that property that is part of party A’s separate property be treated as relationship property for the purposes of any division of relationship property under this Act:
(c)an order that party A pay party B a sum of money as compensation.
(2)The court may make an order under this section on its own initiative, but must make an order under this section if party B applies for such an order.
(3)This section applies whether the debt was paid or satisfied voluntarily or pursuant to legal process.
[45]Section 20 provides:
20 Interpretation
(1)In sections 20A to 20E, unless the context otherwise requires,— personal debt means—
(a)a debt that is not a relationship debt:
(b)a debt to the extent that it is not a relationship debt
relationship debt means a debt that has been incurred, or to the extent that it has been incurred,—
(a)by the spouses or partners jointly; or
(b)in the course of a common enterprise carried on by the spouses or partners, whether alone or together with another person; or
(c)for the purpose of acquiring, improving, or maintaining relationship property; or
(d)for the benefit of both spouses or partners in the course of managing the affairs of the household; or
(e)for the purpose of bringing up any child of the marriage, civil union, or de facto relationship.
(2)To avoid any doubt, for a debt to fall within paragraph (c) of the definition of relationship debt in subsection (1), it is not necessary that, at the time at which the debt was incurred, the property for which it was incurred was relationship property, as long as the property later becomes relationship property.
[46] Mr Carter says that the Judge was mistaken that Mr Herbison had agreed the legal and actuarial fees were his personal debts. He says he argued that the legal and actuarial fees were “for the benefit of both spouses or partners in the course of managing the affairs of the household”, and therefore relationship debts in terms of s 20(1)(d) of the Act.
[47] Nonetheless, it would be fair to say that Mr Carter did not press this particular point strongly before me.
[48] The ambit of ss 20E and 20 is not clear. I have considered briefly whether s 20E is limited, for example, to personal debts still in existence at separation, and repaid out of relationship property after separation. It seems contrary to the general thrust of the Act to be trawling back through the relationship and making adjustments for payments incurred and made during a relationship, of which both parties were aware. However, I agree with Judge Murfitt in LJW v CFW, that there does not seem to be any limit on when the debt at issue was incurred. It could be before, after or during the relationship.13 Likewise, there does not seem to be any limit on when the debt was paid, providing it has been paid, and paid out of relationship property.
13 LJW v CFW FC New Plymouth FAM-2004-043-891, 18 April 2007 at [43].
[49] I note that there is little case law on the interpretation of ss 20 and 20E. There seem to have been very few arguments of the sort advanced here. I was advised by counsel that the only relevant cases appear to be the two Family Court decisions I have already cited HEW v JGW, and LJW v CFW. I was referred to a single High Court judgment where the sections were at issue, but that case turned on its own facts and did not relate to accounts incurred and paid during a relationship.14
[50] I have decided that these debts were incurred or paid “for the benefit of both spouses or partners in the course of managing the affairs of the household” in terms of s 20(1)(d) and were therefore relationship debts. I consider that a fairly liberal view needs to be taken of what is a relationship debt in terms of s 20, for essentially the same reason noted by Judge Burns, and applied by Judge Murfitt. The parties take each other for better or worse. Ms Waugh knew that Mr Herbison was still engaged in legal proceedings with his former wife. The evidence as I understand it is that she encouraged him in that proceeding. (Admittedly, there would have been little choice.) She also knew that he was bringing with him a high salary,15 significantly higher, as Mr Carter advised me, than she was earning herself, and at the outset when these “debts” were being incurred, they did not have children. In the course of managing the affairs of the household, they had the benefit on the one hand of deemed relationship property in terms of income-earning capacity that a partner brings with them and, on the other side of the household ledger, they had the cost of the obligations that same person brings with them. Overall, that was to the benefit of both partners.
[51] These considerations would, in any event, go to the question of compensation, which I come to next, but it seems to me they must also shape the Court’s view of the meaning, and approach to meaning, of the sub-sections of s 20.
[52] In case I am wrong in my finding as to categorisation, I consider briefly the compensation that would have otherwise been awarded under s 20E.
14 See A v R [2007] 2 NZLR 399, which cites Hebberd v Hebberd [1992] 3 NZLR 517 (CA), considering the application of s 20(6), the predecessor to s 20E.
15 From his affidavit evidence, it seems Mr Herbison’s salary in the 2008 financial year was $216,000 and subsequent years was higher, including a year in which he was made redundant.
[53] Section 20E(1) leaves the Court with a discretion as to the orders it may make in favour of a party. Section 20E(2) then says, where an order is sought by a party, the Court must make an order. Judge Burns, in HEW v JGW, said that overall there remained a discretion as to whether the Court must make an order at all.16 Judge Murfitt, in LJW v CFW, considered some order had to be made, but the quantum of the order is unrestricted.17 While I have some concerns about using the discretion as to quantum, to potentially negate an order, I consider Judge Murfitt’s interpretation to be preferable. Both counsel before me seemed to accept the approach adopted in the latter case.
[54] If I were ordering compensation, I would fix it at $500 only, that is, a nominal amount.
[55]This takes into account:
(a)Mr Herbison’s high income, which it is not suggested was other than shared. He brought that earning capacity with him to the relationship.
(b)The amount involved was not particularly large, approximately
$32,000 in total.
(c)The fact that Mr Herbison’s separate property motor vehicle has been converted to relationship property, purely by virtue of use, which more than offsets the payment of his legal fees.
(d)The expenditure of relationship property on separate property jewellery for Ms Waugh. I note in this regard that there was some evidence of Mr Herbison’s having similarly acquired watches, a point on which the Judge relied, but there is no evidence as to the value of those watches, whereas there is clear evidence as to Ms Waugh’s own view of the value of the jewellery she had acquired, which was approximately $25,000.
16 At [46].
17 At [35].
[56] I question whether Mr Carter’s additional point, that the expenditure was necessary and unavoidable, is validly taken into account in exercising the discretion under s 20E(1).
[57] For the above reasons, had I not found these were relationship debts, I consider it would be unjust for Mr Herbison to have to account in any material way for the legal and actuarial fees he has paid.
[58] The order made by the Judge is quashed and replaced with an order that the legal and actuarial fees incurred by Mr Herbison were relationship debts and therefore no compensation is payable under s 20E.
Post-separation adjustments – s 18B
[59] Having reached a conclusion as to each party’s entitlement, the Judge noted that there was an “extraordinary disparity” in terms of relationship property held by each up to that point. Leaving to one side the various assets (including apartment sale proceeds), held on deposit pending a final settlement, Mr Herbison had possession of approximately $400,000 more of the balance relationship property than Ms Waugh. He was therefore having to account to Ms Waugh for 50 per cent of that amount, or approximately $200,000.
[60]I assume for present purposes that the Judge’s differential of approximately
$400,000 is before any adjustment for her finding under s 20E, and therefore unaffected by my having allowed the appeal on that point.
[61] As I have recorded above, it had been seven-and-a-half years since the separation.
[62] The Judge decided to take the approach of allowing interest for the full period from the date of separation down to the date of payment, at five-and-a-half per cent per annum on “the difference between what the parties each received from the relationship property pool”.18 That would amount to approximately $165,000.
18 At [149] and [155(d)].
[63] Mr Carter’s first point is that the interest, if upheld, should apply only to 50 per cent of the difference, not the full differential between the parties. This is clearly correct. Mr Headifen did not really argue to the contrary, only observing in written submissions that his client was in the Court’s hands in that regard.19
[64] Beyond that, Mr Carter accepts that an interest award is correct in principle, but says the Judge’s approach erred in a number of respects. These are:
(a)Interest should not have been awarded on certain assets, including the Maserati, the public company shares and a painting.
(b)Interest should not have been at five-and-a-half per cent per annum.
(c)Interest should not have been awarded from the date of separation.
[65]Section 18B provides as follows:
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 one 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 one of the spouses or partners, this section is modified by section 86.
[66]The Court has a broad discretion under s 18B to address post-separation issues.
19 It seems that the Judge in fact only intended to award interest on 50 per cent of the difference, and the failure to refer to 50 per cent was just a slip. See for example at [146] of her judgment.
[67] Most of the case law relates to adjustments regarding the family home which typically are based on adopting hearing date value under s 2G(1) of the Act, and adjusting for use, by way of occupation rent under s 18B. In this case, the Viaduct Harbour apartment was sold, the proceeds of sale have been held on deposit, and interest will be shared in any event.
[68] Where the adjustment relates to other than real property, as a matter of general principle I agree with the Judge’s approach of applying interest, (although only to half of the differential). That puts the party who has been out of funds, in the approximate position they would have been in, had their share been available to them throughout. That is consistent with the guiding principle of the Act, which is to achieve a fair and just division and also consistent with the Court’s approach in the civil jurisdiction.20 The prospect of an interest award should also act as a disincentive to the asset-holding partner who might otherwise be stalling on division, and therefore an incentive for a prompt division, also one of the principles of the Act.21
[69] I now turn to Mr Carter’s point that some of the assets should be excluded from the interest calculation.
[70] Bearing in mind the purpose of the s 18B adjustment, in cases where a Judge has decided interest should be applied, I do not consider assets need to be excluded just because they are unlikely to have appreciated in value. I therefore consider it reasonable to include the painting in the interest calculation. While such assets are not appreciating, it remains the case that the adjustment sum has in effect been due to Ms Waugh from the time of separation.22
[71] However, I view the Maserati differently. That was Mr Herbison’s separate property, now to be equally shared as a result of use during the relationship. I do not consider it a fair and just division of property for Mr Herbison to have to pay interest
20 Property (Relationships) Act 1976, ss 1M(c) and 1N(c); Worldwide NZ LLC v NZ Venue & Event Management Ltd [2014] NZSC 108, [2015] 1 NZLR 1 at [23].
21 Property (Relationships) Act 1976, s 1N(d).
22 The appellant’s real complaint here is that the Judge said she was unable to value the chattels held by the parties and so vested them as held, but then fixed a value for the painting and directed interest on it. However, the Judge effectively decided that the division was roughly equal, bar the painting.
(which in this case is significant), on top of a 50 per cent share of a vehicle that he has brought into the relationship. The Maserati is therefore to be excluded from the calculation, reducing the sum on which interest is calculated from $200,000 (approx) to $175,000 (approx).
[72] Secondly, the Judge included the public company shares for purposes of her interest calculation, and excluded dividends on those shares. However, the parties had already agreed that the shares should be valued at hearing date, and that there would be an accounting for dividends. Furthermore, that is the appropriate approach to post-separation adjustment for public company shares, as a general rule. The shares are therefore to be similarly excluded from the interest calculation, and dividends are to be taken into account separately. The shares are worth about NZ$65,000 in total, which brings the 50 per cent imbalance, or adjustment sum, down to about $143,000.
[73] As to the appropriate interest rate, Mr Carter points out that there was no evidence before the Family Court as to interest rates over the seven-and-a-half-year period at issue, nor was he able to locate any case, or other source, from which the Judge might have gathered the figure to which she refers of four per cent per annum on deposits on average over that period. The Judge also observed that there was an exceptionally high inflation rate in 2011. Again, Mr Carter was not able to identify the source of that information. In fact, he identified that in 2011, for the June quarter, the inflation rate was 5.3 per cent per annum, but said that was an aberrant figure, and the quarter immediately following was 4.6 per cent.
[74] Mr Carter questions the imposition of a 5.5 per cent interest rate at a time when for much of the period there have been historically low interest returns.
[75] I should add, at this point, that it was accepted by the parties, I consider correctly, that interest received by one party from another is taxable, so that the rates at issue are gross, not net of tax.
[76] Mr Carter also said it was an over-statement for the Judge to refer to there being an “extraordinary disparity”, and that this is likely to have influenced the terms of the s 18B order.
[77] I agree that for one party to owe the other $200,000 following a judgment is not an “extraordinary disparity”, and even if it were, that would be unlikely to affect the appropriate interest rate.
[78] In terms of interest rate, a number of factors come into play. It would be preferable if there were some evidence, even if only of a recognised statistical nature, of applicable rates, especially over a lengthy period such as this. However, there is no requirement for such evidence to be adduced. I agree with Mr Headifen that it is relevant that Ms Waugh apparently had the lion’s share of care of the children from the date of separation. For that reason, the Court would not want to be niggardly in fixing the s 18B compensation. In the absence of any relevant evidence, including evidence of a higher actual return to Mr Herbison, or of a higher likely return to Ms Waugh, had she been in possession of the $143,000 sum, I consider it would be prudent for the rate to not exceed the interest rate payable in civil proceedings, which was five per cent per annum.23 While, as Mr Headifen submits, interest would arguably have compounded over such a lengthy period, that factor was presumably taken into account by the legislature in fixing the Judicature Act rate.
[79] I also have to accept Mr Carter’s submission that retail bank deposit rates have been lower than five-and-a-half per cent for some time. The interest rate awarded by the Judge is not materially out of the ballpark, but the difference becomes material when viewed over a long period.
[80] Taking the above factors into account, I have decided to reduce the interest rate down to four-and-a-half per cent per annum.
[81] That leaves Mr Carter’s final point, which is the date from which interest should run. While, based on the principles above, interest could arguably run from the date of separation, that is not the general approach, and it is a little hard-hitting. In my view, interest should run from the date when Ms Waugh issued proceedings, which was 25 June 2012.
23 The Judicature Act 1908 was the Act in force at the time of the Family Court judgment. That provision has been repealed and replaced by the Interest on Money Claims Act 2016, under which the interest calculation is more complicated and currently is about 3.4 per cent.
[82] For completeness, I note Mr Carter’s point that Ms Waugh did not raise s 18B as an argument until 2017. That point, along with who is responsible for delays, I consider of marginal relevance, on the same principles noted above.
[83]The Family Court Judge’s interest award will be substituted with the following:
Interest will run at four-and-a-half per cent per annum from 25 June 2012, being the date proceedings were issued, to the date of payment of the adjustment sum.
[84] On an indicative basis only, that will result in interest payable by Mr Herbison to Ms Waugh reducing from approximately $165,000, to a sum of approximately
$42,000.
Conclusion
[85]The Judge’s finding that the Maserati is relationship property is upheld.
[86] The Judge’s finding that the diamond engagement ring remained the separate property of Ms Waugh is upheld.
[87] Mr Herbison’s legal and actuarial fees were relationship debts. Therefore, there is no compensation under s 20E and the Judge’s ruling in that regard is overturned.
[88] The award of interest by way of compensation under s 18B is materially reduced and the Judge’s ruling is replaced with the order set out at [83] above.
[89] I was advised that there were some issues as to final accounting between the parties. They will endeavour to resolve these and will file memoranda if they cannot.
[90] The appellant has been substantially successful and is entitled to costs, which I fix on a category 2B basis.
[91] I am indebted to both counsel for their thoroughly professional and well-argued submissions.
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Hinton J