Houston-Quay v Henson

[2013] NZHC 294

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV2012-419-001206 [2013] NZHC 294

UNDER  the District Courts Act 1947

IN THE MATTER OF     an appeal against the decision of the

District Court at Hamilton

BETWEEN  AMANDA JANE HOUSTON-QUAY Appellant

ANDJULIAN DOYLE HENSON (AKA IAN HENSON)

Respondent

Hearing:         22 February 2013

Counsel:         K F Shaw for the Appellant

D Hayes for the Respondent

Judgment:      22 February 2013

[ORAL] JUDGMENT OF WYLIE J

Distribution:

K F Shaw: [email protected]

D Hayes: [email protected]

HOUSTON-QUAY V HENSON (AKA IAN HENSON) HC HAM CIV 2012-419-001206 [22 February 2013]

Introduction

[1]      This  case  concerns  the  interface  between  the  District Court  and   the Family Court.    It  is  an  appeal  against  a  decision  by Judge  D  C  Ruth  that  the proceedings commenced by the appellant in the District Court should be pursued in the Family Court.

Factual Background

[2]      The parties were in a de facto relationship.

[3]       The  appellant,  Ms Houston-Quay,  asserted  in  an  affidavit  filed  in  the proceedings that:

(a)       the relationship began as a casual affair in about February 2009;

(b)      the  respondent,  Mr Henson,  moved  into  a  house  she  rented  in

November 2009;

(c)       they commenced living together as a couple in or about February

2010; and

(d)      the relationship terminated on 19 February 2011.

She asserted that the de facto relationship lasted only for a year, or at most two years. [4]      In an affidavit he filed in the proceedings, Mr Henson disputed the nature and

intensity of the relationship at various points of time and took issue with some of the dates asserted by Ms Houston-Quay, but he did not dispute her base assertion that the de facto relationship was of either one or two years’ duration.

[5]      On    24 March    2011,    Ms Houston-Quay    commenced    debt    recovery proceedings  against  Mr Henson  in  the  District Court  at  Hamilton.    She  sought

recovery of a personal  loan she asserts  she made to  Mr Henson  in  the sum  of

$20,000.

[6]      On  11  May  2011,  Mr Henson  filed  an  appearance  under  protest   to jurisdiction.  He objected to the District Court hearing the matter, and asserted that the proceedings should have been commenced in the Family Court.  He alleged that the proceedings concerned relationship property, that he and Ms Houston-Quay were in a relationship to which the Property (Relationships) Act 1976 applied, that they had entered into an oral relationship property agreement, and that she had removed relationship property from the family home when the relationship came to an end.

[7]      On  30  May  2011,  Ms Houston-Quay  filed  an  interlocutory  application seeking to set aside the appearance under protest to jurisdiction.  She argued that the notice of claim filed by her raised a claim in contract, and that the District Court had jurisdiction to hear the matter as a debt recovery proceeding.  She asserted that she was   not   seeking   the   division   of   any   relationship   property,   and   that   the Property (Relationships) Act did not apply.

[8]      A  notice  of  opposition  to  the  interlocutory  application  to  set  aside  the appearance was filed on 8 June 2011.

[9]      As I have noted, affidavits were filed by the parties.  There are a number of factual disputes between them, but it is common ground that the de facto relationship was of short duration.

[10]     On  6  October  2011,  Mr Henson  completed  and  served  a  response  to Ms Houston-Quay’s  notice  of  claim.    Mr Henson  denied  the  claim  being  made against him by Ms Houston-Quay.  He asserted that the debt which he owed her had been set off against other debts which he asserts she owed him.  He said that he and Ms Houston-Quay had agreed to the set off, because she owed him money for work and services that he had performed for her.

[11]     At  the  same  time,  Mr Henson  filed  a  notice  of  counterclaim.     The counterclaim used the notice of counterclaim procedure provided for in r 2.27 of the

District Court Rules 2009 and it was filed in the District Court.   It asserted that Mr Henson  and  Ms Houston-Quay  had  an  overlapping  business  and  personal relationship, and that he provided various services to her which she agreed to pay him for.  Mr Henson referred to various invoices he had issued to Ms Houston-Quay, totalling $26,279.39.  He also asserted that Ms Houston-Quay had retained various items of his personal property when the relationship terminated.  He asserted that she had a duty to account to him for those items, or to recompense him for them.  He claimed a total of $2,698 in this regard.  Further, he asserted that Ms Houston-Quay had him purchase various items for her, in respect of which he was entitled to be reimbursed.   He claimed $2,300 for those items.   He also asserted that various chattels and items owned by him, which he owned prior to the relationship, had been retained by Ms Houston-Quay and he claimed $6,899 for those chattels and items. Further, he said that he had been required to settle various joint obligations when the relationship came to an end.  He claimed $1,000 in this regard.  The total amount claimed by him was $39,176.39.

[12]     Ms Houston-Quay served a response to the counterclaim.  She asserted that she does not owe Mr Henson any money.   She denied that she had agreed to pay Mr Henson for any services he performed for her and asserted that they had never had a business relationship.   She said that such works and services as Mr Henson carried out for her he did as a friend, and that he did not expect payment.  She denied that she retained any of Mr Henson’s personal property when the relationship came to an end, or that she owed him any money for relationship debts.  She also asserted that Mr Henson did not pay an equal share of outgoings during the course of the relationship and that she reimbursed him for most of the items he purchased for joint purposes while they were together.

District Court Decision

[13]     The application seeking to set aside the notice protesting jurisdiction came before Judge Ruth in the District Court at Hamilton on 9 August 2012.  In an oral judgment, he held that the proceedings should be dealt with by the Family Court.  He noted that the existence of a property relationship agreement had been raised.  He commented on the expertise of the Family Court, and expressed the view that the

matters in issue were better dealt with in that Court.  He observed that the parties were not at arm’s-length, but were in a relationship, even if the exact parameters of the relationship were in dispute, and opined that it was desirable to have all of the issues outstanding between the parties dealt with in one Court, rather than in two.

Notice of Appeal

[14]     Ms Houston-Quay  appealed  Judge  Ruth’s  decision.     She  asserted  that Judge Ruth erred when he held that the proceedings should be dealt with in the Family Court.  It was stated that the dispute does not involve relationship property; rather, it involves competing personal debts.   It was also said that there is no agreement complying with the Property (Relationship) Act between the parties, that they were in a short-term de facto relationship, and that the Act does not automatically apply.

Submissions

[15]     Ms Shaw for Ms Houston-Quay submitted that there is no good reason to deny jurisdiction in the District Court for her client’s claim, and that there is no good reason why the matters raised by Mr Henson in his defence, and in his counterclaim, should not also be heard in the District Court.  She referred to the relevant rules, and to the decision of the Court of Appeal in Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue.[1]    She argued that the appellant’s claim is within the District Court’s general jurisdiction as set out in s 29 of the District Courts Act

1947, and that her claim does not raise any relationship property issues.  She argued that the loan the subject of Ms Houston-Quay’s claim is not a relationship debt, and that  Ms Houston-Quay  is  not  seeking  the  division  of  any  relationship  property. Further, she argued that the parties were not in a relationship to which the Property (Relationships) Act applies.  Rather, they were in a short-term relationship, and there is  no  statutory bar preventing the District Court  from  having jurisdiction  in  the circumstances  that  apply.    She  disputed  that  the  oral  agreement  relied  on  by

Mr Henson  is  a  relationship  property  agreement.    She  argued  that  it  is  more

appropriately treated as a set off.  She also noted that no application has been made by  Mr Henson  under  the  Property  (Relationships)  Act.     She  argued  that  the District Court does have jurisdiction to determine Ms Houston-Quay’s claim.

[1] Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] NZCA 638, [2012] 2

NZLR 823.

[16]     Mr   Hayes   for   Mr Henson   asserted   that   the   stance   being   taken   on Ms Houston-Quay’s behalf ignores the fact that Mr Henson has raised as a defence an assertion that a property relationship agreement was entered into at the commencement  of  the  relationship.     He  accepted  that  the  District Court  has jurisdiction to hear disputes about the division of property, notwithstanding that there is a short-term de facto relationship, but asserted that this is not the case where a relationship property agreement is relied on.   He submitted that the question of whether there is a relationship property agreement falls within the jurisdiction of the Family Court exclusively, and that it is the only Court that can determine whether there was a relationship property agreement in place.  He referred to s 4(4) of the Property (Relationships) Act, and noted that s 14A provides that the Court can make a declaration or an order under the Act, even though the de facto partners lived in a de facto relationship for less than three years.  He also noted that under s 21H, the Court can declare that an agreement has effect, notwithstanding that it is void for non-compliance with the requirement of s 21F.  He denied the assertion by Ms Shaw that Mr Henson should be the one to take the proceedings to the Family Court.  He submitted that the current issue goes to jurisdiction, and that it is inappropriate for Mr Henson to take further proceedings in the Family Court, at least until the present dispute is resolved.   He submitted that the Family Court is the only appropriate jurisdiction, and that, in any event, the Family Court is better suited to deal with the matters in dispute between the parties.

Analysis

[17]     I start with the relevant District Court rule, r 3.38, dealing with appearances and objections to jurisdiction.  It adopts r 5.49 of the High Court Rules.  Relevantly, r 5.49 provides as follows:

5.49     Appearance and objection to jurisdiction

(1)       A defendant who objects to the jurisdiction of the court to hear and determine the proceeding may, within the time allowed for filing a statement  of  defence  and instead  of  so  doing,  file and  serve  an appearance stating the defendant’s objection and the grounds for it.

(2)       The  filing  and  serving  of  an  appearance  does  not  operate  as  a submission to the jurisdiction of the court.

…

(5)       At any time after an appearance has been filed, the plaintiff may apply to the court by interlocutory application to set aside the appearance.

(6)      The court hearing that application must,—

(a)       if it is satisfied that it has jurisdiction to hear and determine the proceeding, set aside the appearance; but

(b)       if  it  is  satisfied  that  it  has  no  jurisdiction  to  hear  and determine the proceeding, dismiss both the application and the proceeding.

…

[18]     Rule 5.49 was considered in Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue.[2]  The Court of Appeal there noted as follows:

[2] Above, n 1.

[52]  We  consider  that  the  effect  of  the  case  law  on  r  5.49  (and  its predecessor, r 131) can be summarised thus:

(a)       The procedure for filing an appearance and objecting to the High Court’s jurisdiction will generally only be suitable where a party claims that:

(i)       it   is   not   subject   to   the   jurisdiction   of   the

New Zealand courts;

(ii)      the  case  can,  by  law,  only  be  determined  by  a different New Zealand court or authority; or

(iii)     the High Court’s jurisdiction is precluded by the operation of a contractual term or because statutory requirements have not been complied with.

…

This decision was taken on appeal to the Supreme Court.[3]   The appeal was allowed, and the Court considered that the Court of Appeal’s observations noted above were too narrow.  It observed as follows:

[3] Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2012] NZSC 94, (2012) 25

NZTC 20-151.

[25] We also conclude that the Court of Appeal’s view of the scope of what can be addressed in an objection to “jurisdiction” under r 5.49 is too restricted.   The Court has held that r 5.49 can be invoked in only three situations:  first, when the matter is extraterritorial; secondly, when by law the case can only be determined by a different New Zealand court or authority; and thirdly, where the operation of a contractual term or failure to comply with statutory requirements precludes the High Court having jurisdiction.  The third of these categories is obviously directed primarily at arbitration.  Although each of these situations is clearly covered by r 5.49, it is not easy to read the rule as limited to them as it expresses an unqualified right to challenge a court’s jurisdiction to hear and determine a proceeding. The better approach is to give r 5.49 its ordinary meaning.  In that respect, the Court of Appeal’s limitation on the application of the rule appears to cut across Diplock LJ’s classic expression of the meaning of jurisdiction set out in Garthwaite v Garthwaite:

In its narrow and strict sense, the “jurisdiction” of a validly constituted court connotes the limits which are imposed upon its power to hear and determine issues between persons seeking to avail themselves of its process by reference (1) to the subject- matter of the issue or (2) to the persons between whom the issue is joined or (3) to the kind of relief sought, or to any combination of these factors.

[26] Also material to the meaning of jurisdiction in the context of r 5.49 are the remarks of Lord Scott in Tehrani v Secretary of State for the Home Department:

When issues are raised as to whether or not a court of law has jurisdiction to deal with a particular matter brought before it, it is necessary to be clear about what is meant by “jurisdiction”.  In its strict sense the “jurisdiction” of a court refers to the matters that the court is competent to deal with.  Courts created by statute are competent to deal with matters that the statute creating them empowered them to deal with. The jurisdiction of these courts may be expressly or impliedly limited by the statute creating them or by rules of court made under statutory authority.   Courts whose jurisdiction   is   not   statutory   but   inherent,   too,   may   have jurisdictional  limits  imposed  on  them  by  rules  of  court.    But whether or not a court has jurisdictional limits (in the strict sense) there are often rules of practice, some produced by long-standing judicial authority, which place limits on the sort of cases that it would be proper for the court to deal with or on the relief that it would be proper for the court to grant.

(citations omitted)

[19]     As  can  be seen,  the Supreme Court  accepted that  each  of the situations discussed by the Court of Appeal, and noted in [18] above, is clearly covered by r 5.49, albeit that it disagreed with the narrow meaning which the Court of Appeal adopted in regard to the word “jurisdiction” used in the rule.

[20]     Before addressing whether the dispute between the parties can, by law, only be determined by the Family Court, I deal briefly with the issue of waiver.

[21]     A  protest  to  jurisdiction  is  not  mandatory.    Rule  5.49  provides  that  a defendant who objects  to the jurisdiction of the Court “may” file and  serve an appearance, instead of a statement of defence.

[22]     In some circumstances, the filing of a statement of defence can be treated as submitting to a jurisdiction which is otherwise open to objection.  If a statement of defence does not challenge the Court’s jurisdiction, then in cases where jurisdiction can be conferred by waiver and submission to the Court, the statement of defence will generally be treated as a submission to the jurisdiction.   However, in cases where jurisdiction cannot be conferred by waiver or submission, for example, where jurisdiction has been vested by law in another Court or Tribunal, the filing of a statement of defence cannot operate to waive the protest to jurisdiction.   In such circumstances, the attitude of the parties is immaterial, and the appropriate Court

must be determined as directed by the legislature.[4]

[4] Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corporation [1981] 1 QB 368 at

375-376.

[23]     In the present case, the notice of response served by Mr Henson did not protest the District Court’s jurisdiction.  In the counterclaim which was filed in the District Court, Mr Henson does, however, preface his claim to relief with the words “[i]f this Court has jurisdiction”.  Further, the protest to jurisdiction in this case is founded in the statutory provisions applicable to the jurisdiction of the Family Court and the District Court respectively.  It is not an objection which can be waived.

[24]     Nor do I consider that the notice of response and the counterclaim amount to consent in terms of s 15(c) of the Family Courts Act 1980.  The documents in their

terms do not expressly refer to consent, and in my view, it would be reading too much into them to treat them in that way.

[25]     Accordingly, in my judgment, it cannot here be asserted that Mr Henson has waived his protest to jurisdiction by filing his notice of response and counterclaim. Nor has he consented to the District Court dealing with the matter, notwithstanding the relationship property issues involved.   The fact, however, that the notice of response  was  served,  as  required  by  the  District Court  Rules,  and  that  the counterclaim was filed in the District Court, is relevant, and I come to that issue shortly.

[26]     I now turn to the question whether the dispute between the parties raised in the pleadings can, by law, only be determined by the Family Court.

[27]     The  appropriate  starting  point  is  s  11  of  the  Family  Courts  Act  1980. Relevantly, it provides as follows:

11       Jurisdiction of Family Courts

(1)       A Family Court shall hear and determine all such proceedings as are to be heard and determined by such a court under or by virtue of any of the provisions of—

…

(e)      the Property (Relationships) Act 1976:

…

[28]     Section  15  is  a  related  provision  that  limits  the  District Court’s  general jurisdiction in Family Court matters to interlocutory matters, ex parte applications, or to situations where the parties consent.

[29]     Here,  the pleadings,  by both  parties, raise  debt  recovery and  contractual issues.  They also raise property issues arising out of the de facto relationship.  There can be no question but that the debt and contract issues fall squarely within the civil

jurisdiction  of  the  District Court.[5]     In  effect,  Mr  Hayes  is  arguing  that  the

proceedings in their totality should be heard and determined by the Family Court, because they also involve relationship property issues.

[5] District Courts Act 1947, s 29.

[30]     The  wording  of  s  11  of  the  Family  Courts Act  directs  attention  to  the provisions of the Property (Relationships) Act.  Section 22 of this Act provides that every application under the Act must be heard and determined in a Family Court, (unless transferred to the High Court).[6]   In the present case, this provision does not, in my view, assist, because there is no application under the Property (Relationships) Act.

[6] Property (Relationships) Act 1976, s 22(1).

[31]     Section 4 of the Property (Relationships) Act provides that the Act is a code, applying instead of the rules and presumptions of common law and of equity, to transactions  between  spouses  or  partners  in  respect  of  relationship  property.[7]

Section 4(4) provides that where, in proceedings that are not proceedings under the Act,  any  question  relating  to  relationship  property  arises  between  spouses  or partners, the question must be decided as if it had been raised in proceedings under the Act.  However, the section as a whole does not apply if de facto partners lived in

a de facto relationship for less than three years.[8]

[7] Section 4(1).

[8] Section 4(5).

[32]     Here, Ms Houston-Quay and Mr Henson did live in a de facto relationship, but that relationship lasted only one to two years.

[33]     Section 4(6) goes on to state that if the Court makes an order under s 25(1)(a) in respect of relationship property of de facto partners whose relationship lasted for less  than  three  years,  and  any  question  relating  to  relationship  property  arises between those de facto partners in any subsequent proceedings that are not proceedings under the Act, then the question is to be decided as if it had been raised in proceedings under the Property (Relationships) Act.   This provision, however, cannot apply in the present circumstances.  Insofar as I am aware, there has been no prior application by either party to the Family Court under s 23 (which is required to trigger an order under s 25(1)(a)).  Nor has the Family Court made an order under

s 25(1)(a) of the Act.

[34]     Mr Hayes referred me to s 14A of the Act.  That section applies to de facto relationships of short duration.  It provides that an order cannot be made under the Act for the division of relationship property, unless the Court is satisfied that there is a child of the de facto relationship, or the applicant has made a substantial contribution to the de facto relationship, and in either case, the Court is satisfied that failure to make the order would result in a serious injustice.   In my view, this provision does not assist either.   It is clear from s 14A(3) that the Court can only enquire into the grounds detailed in s 14A(2) if application is made for an order under  the Act.    There  is  no  application  under  the  Property (Relationships) Act; further, there is no suggestion in the affidavits that any of the matters detailed in s 14A(2) apply.

[35]     Section 14A(4) goes on to provide that nothing in the section prevents the Family Court from making a declaration or order under s 25(3), even though the de facto partners lived in a de facto relationship for less than three years.  Section 25(3) in turn provides that the Court may, at any time, make an order or declaration relating to the status, ownership, vesting, or possession of any specific property as it considers just.   Again, however, there has to be an application under the Act to trigger such an order, and here, there is no such application.

[36]     Mr Hayes also referred to s 21H.   He acknowledged that the relationship property agreement asserted by Mr Henson does not comply with the procedural requirements detailed in s 21F of the Act.   Rather, Mr Henson is alleging an oral relationship property agreement.  Mr Hayes noted that even though an agreement is generally avoided if the relevant procedural provisions are not complied with, the Family Court may nevertheless declare that such an agreement has effect, wholly or in part, for any particular purpose, if it is satisfied that the non-compliance does not

materially prejudice the interests of any party to the agreement.[9]  The difficulty from

Mr Henson’s perspective, however, is that the Family Court can only make such a declaration in the course of any proceedings under the Act, or an application made for  the  purpose.     Here,  there  are  no  proceedings  extant  under  the  Property

(Relationships) Act, and no application has been made under s 21H.

[9] Section 21H(1).

[37]     Accordingly, it seems to me that, notwithstanding that relationship matters have been referred to by both parties in their respective pleadings, the matter is not required to be dealt with by the Family Court.  There is no statutory bar restricting the District Court determining the dispute disclosed in the pleadings in this case. The District Court has jurisdiction in the present case, and on the pleadings, the Family Court has no jurisdiction in relation to the matter.  Pursuant to r 5.49(6) of the High Court Rules, which has been adopted into the District Court Rules, the Court hearing an  application  to  set  aside  a protest  to  jurisdiction  must,  if  it  is satisfied that it has jurisdiction to hear and determine the proceeding, set aside the appearance under protest to jurisdiction.  This is what should have occurred in this case.

[38]     Accordingly, I allow the appeal.

Costs

[39]     The appellant is entitled to her costs and reasonable disbursements.  Costs are fixed on a 2B basis.  In the event that there is any dispute between the parties as to quantum, the same is to be referred to me within 10 working days of the date of release of this judgment.   I will then deal with the issue on the papers, unless I

require the assistance of counsel.

Wylie J