K v K

[2022] NZHC 1301

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 WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-15

[2022] NZHC 1301

BETWEEN

K

Appellant

AND

K

Respondent

Hearing:	30 May 2022
Counsel:	D J Patterson and M W Denton for Appellant C J Nicholls for Respondent
Judgment:	2 June 2022

JUDGMENT OF SIMON FRANCE J

Background

[1]    The appellant and the respondent separated in 2013. Following a settlement conference, a division of the relationship property was agreed. The settlement was given effect by Relationship Property Orders made by the Family Court and sealed on 9 June 2014.

[2]    The couple owned a home which was subject to a mortgage. At the time of the settlement the couple had no equity in the property given the size of the borrowings. The agreement reached was:

K v K [2022] NZHC 1301 [2 June 2022]

(a)Ms K had three months to effectively refinance the property so as to release Mr K from his obligations. If this occurred the house would be hers;

(b)if that did not occur, Mr K “at his discretion” could obtain an order for sale. Any surplus was to be divided equally. Any shortfall was to be met by Ms K. Mr K assumed responsibility for paying off another debt owed to a finance company. It is common ground Ms K could also initiate a sale at any time;

(c)pending sale Ms K was to meet all outgoings.

[3]    Ms K did not arrange for Mr K’s obligations to be discharged. She has remained in possession of the house since settlement, occasionally living there but for a four-year period renting it out. Mr K in late November 2021 exercised his rights under the agreement for the house to be sold, and the Family Court issued that order.

[4]    The making of the order had been opposed, but at the hearing Ms K accepted Mr K was entitled to half the equity. However, she sought time to be able to buy him out. The Court allowed seven days for discussions following which the order was to be made.1

[5]    No agreement was reached between the parties and the order was made on  22 November 2021 and sealed on 16 December 2021. Ms K seeks to appeal.

Proposed appeals

[6]    Ms K first seeks to appeal the 2021 decision making the sale order. Leave to appeal out of time (five days) is sought. It is opposed on the basis that the appeal is submitted to be hopeless, but not otherwise. Given the short period involved, leave to appeal is granted as is leave to both parties to file their affidavit evidence.

1      K v K [2021] NZFC 11752.

[7]    The appeal is brought on the basis that Mr K agreed to extend the contract time for Ms K to refinance. Alternatively, he is estopped from seeking the order without allowing extended time. Accordingly the Family Court erred in ordering the sale contrary to the varied arrangements.

[8]    Alternatively, there is an application to appeal out of time the original 2014 order, and should leave be granted to amend that order to alter the time by which Ms K had to arrange for Mr K to be released from his obligations under the mortgage. The new date would be November 2022. If Ms K did not met that date, and Mr K pursued a sale, then a further variation is sought requiring him to “adequately compensate” Ms K for outgoings on the property since separation.

Facts

[9]    The couple separated in 2013. At that time Ms K had custody of the children. The relationship property settlement was agreed. However, the Family Court was required to rule on both child custody and protection orders. The parties differ over the relevance of that decision. It is presently sufficient to observe that the outcome was wholly favourable to Mr K. It is, I consider, fair in the context of what could seem a presently unreasonable stance by him to also note that the Court held that Mr K had, through Ms K’s actions:

lost his home, his inheritance and … his employment, and his chances of finding further employment will be adversely affected by what he has been through.

Mr K had faced criminal charges which were withdrawn prior to trial and concerning which the Family Court made findings the alleged conduct towards his wife and children did not occur.

[10]   Ms K says that after separation she did not want to return to the house. Initially she had custody of the children but in June 2014 concerns led the Court to award temporary custody to Mr K’s mother.2 This loss of the children coincided with the

2      Mr K at the time was facing criminal charges. Shortly after these were withdrawn, and then subsequently the Family Court awarded him custody which remains the position.

period available to her to refinance. Ms K says she was not in a state to think about the property and she thought her lawyer would handle it.

[11]   Ms K next says that she sought refinancing in November 2014 but could not achieve it as there was a caveat on the property flowing from second borrowing from a finance company. Under the agreement Mr K was responsible for repaying that financing. Ms K then advises that further refinancing efforts in early 2015 were thwarted by her own financial situation.

[12]   Ms K describes the difficulties in meeting the repayments, at times falling into arrears but managing to pay them off. It seems the property was empty until late 2016 at which time Ms K rented it out until October 2020. She deposes the total rental income was $23,122.

[13]   At one point Mr K became particularly concerned about the arrears since he was still on the title and was named in the mortgage. He had received correspondence from the bank about the arrears including a final demand. It is these events that led to the communications between the former couple that are said to amount to a variation.

[14]   In June 2016 Mr K emailed Ms K saying the bank had made a final demand. Mr K said he:

(a)was powerless to remedy the situation;

(b)commented on why that was (her conduct towards him in the marriage); and

(c)requested her to remedy it.

[15]   Ms K replied that she had written to the bank to sort it. Half an hour later, she further emailed:

I know you don’t want me to lose the house. That is very good [Mr K]. But don’t keep thinking that you go to benefit out of the house. Only for my children in the future.

[16]Mr K immediately replied:3

I don’t want anything from the property. I want the children to have something for themselves. They deserve every good thing we can offer them. Please don’t lose them this chance.

[17]   On 19 July, there being no contact between them, Ms K emailed inquiring about the children and said she had proved to the bank she could pay the mortgage. Mr K replied with news about the children and congratulated her about cleaning up the mortgage arrears. That ended this particular email exchange. It is these exchanges, and particularly the emphasised words, that are said to give rise to an estoppel.

[18]   In 2019 Ms K made application to vary the parenting order. This was unsuccessful but she claims this is the reason Mr K has moved to sell the house. Mr K denies this, explaining that he has not had time until now to focus on the house situation. He has been bringing up two children on his own and essentially on a benefit, and they have absorbed his focus.

[19]   The primary aim of Ms K in this litigation is to achieve an extension of time for when the refinancing option under the settlement agreement is to be exercised by Ms K. Originally 31 August 2014, the proposition is for amendment to 30 November 2022. This is because Ms K has a temporary lending arrangement in place that would allow her to discharge the mortgage currently on the property.   The loan is for      six months at a 10.5 per cent interest rate. Any payments pursuant on the loan are capitalised such that in six months the $266,000 will need to be repaid.

[20]   If the date were varied, Ms K seeks the Court to further order that Mr K sign a discharge and transfer his share of the property to Ms K, as well as arrange for a discharge of a caveat. The latter is not a difficulty as the debt has been repaid, but there would be a cost to remove it.

3      Emphasis added.

Decision

[21]   Central to the appeal, and to the alternative appeal from the 2014 judgment, is the idea that things have happened subsequent to the agreement that constitute either a variation of the original agreement or which create an estoppel by convention which prevents Mr K exercising his sale option in terms of the agreement.4 Mr Patterson identifies the following elements:5

(a)a representation or assurance has been made to the claimant;

(b)the claimant has relied on that representation or assurance;

(c)the claimant has suffered a detriment as a result of that reliance; and

(d)it would be unconscionable for the respondent to depart from the representation or assurance.

[22]   In my view the appellant fails in relation to each of the first three elements, meaning the appeal falls away.

[23]   As noted, the representation or assurance is said to be Mr K’s statement as part of the email exchange in 2016 that:

I don’t want anything from the property.

It is submitted that this is a statement by Mr K that he was forgoing his half share in the property, and his right to trigger the sale of the property. It is further submitted that Ms K continued to apply herself and her funds to the property as a consequence. This is the reliance and detriment.

[24]   First, it is necessary to have regard to the whole of the statement. The words relied upon are immediately followed by “I want the children to have something for

4      Vector Gas Ltd v Bay of Plenty Ltd [2010] NZSC 5; [2010] 2 NZLR 444.

5      Drawn from National Bank of Westminster Ltd v National Bank of New Zealand Ltd [1996] 1 NZLR 548 (CA); Wilson Parking New Zealand Ltd v Fanshaw 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567; and Carroll v Bates [2018] NZHC 2463, [2018] NZAR 1570. In Wilson Parking the expression is “belief or expectation”.

themselves”, thereby illustrating Mr K’s interest is in preserving the asset for his children. It is not on its face a statement reasonably able to be interpreted as gifting Ms K his half. The email exchange arose because Mr K, still on the title and liable under the mortgage, had been made aware of a final demand. His opening email is replete with his concern about the impact of this on the children. There is no suggestion he wants Ms K to have all of the asset; rather that he does not want her to act so as to deprive the children of it.

[25]   Second, I accept Mr Nicholls’ submission that care is needed. The immediately preceding email to the one in which Mr K says what he does is a statement by Ms K, contrary to settlement order, that Mr K should not go thinking he is going to benefit. The import of the Family Court judgment of some years earlier is that Mr K was somewhat of an oppressed and battered spouse. I acknowledge Ms K does not accept that, but it is what the Court concluded. Care is therefore needed before reading too much into a one-line statement made in response to Ms K’s assertion. In his evidence filed on the appeal Mr K says he was trying to avoid more conflict.

[26]   It is submitted on behalf of Ms K that there were a number of other assurances made that Ms K would be the owner. In addition to the statement already discussed, it is said that the agreement itself represents such an assurance because there was an option for Ms K to obtain sole ownership. This, however, is to focus only on the first option which did give Ms K that opportunity, at the expense of the balance which clearly is to the opposite effect. Once the initial option is not exercised, Mr K remains a half owner entitled to his share, and to initiate a sale to realise that share.

[27]   Next it is said Mr K stopped making payments towards the house. This is correct but nothing can be read into it. That is exactly what the settlement order called for, and Mr K did continue to pay off the other loan as required. Finally it is noted Mr K did not live at the property. However, initially there was an occupation order in Ms K’s favour, and thereafter the separation agreement gave her occupation rights. Everything Mr K did reflected the agreement.

[28]   On the facts there is no basis on which it can be said Mr K has made representations of the type alleged. There was no agreed variation, and nor was there conduct reasonably capable of the interpretation Ms K says she placed on it.

[29]   Concerning reliance and altering one’s position, the situation is equally as unhelpful to the appellant. The starting point is that the agreement required Ms K to meet outgoings on the house. This made sense as she had occupation rights, and indeed could have obtained the whole property. Everything that she did after Mr K’s alleged representations in 2016 was that which she had been doing beforehand. There was no altering of her position.

[30]   Mr Patterson submits the alleged assurance had the effect of deflecting any decision Ms K might have made to sell. There is, however, no evidence that she thought of selling before or after the 2016 email exchange. Indeed, in her evidence Ms K says that from 2014 she believed she owned the property and could refinance when she wanted. Accepting that was her belief, 2016 would not seem to be a catalyst for any change or altering of her position. Further, her understanding is totally at odds with the agreement reached. That agreement followed a settlement conference where each party was legally represented. There is no basis for a Court to rework its terms to conform with an incorrect understanding one party says they have had, especially when the agreement is plain on its face.

[31]   These conclusions address the crux of the appeal but some other matters require comment. An aspect of Ms K’s appeal is that the agreement should be varied so as to ensure that, if there is a sale, Mr K meets the outgoings, or at least half of them, on the property since the agreement in 2014. This is because Ms K has been making the payments but Mr K will receive the benefit of a full half-share of whatever the property is now worth.

[32]   There are matters that balance this perceived unfairness. The calculations of outgoings that have been proffered make no allowance for Ms K’s right to occupy the property. For most of that time Mr K, with no employment income, has had to find accommodation for him and their children, and provide for them. Ms K has paid some support but her own straitened circumstances have meant that is a relatively minimal

sum. Second, there is a narrative in the Family Court judgment that suggests Mr K has a genuine basis for considering he has been a financial victim of the relationship.6

[33]   It seems to me unhelpful to either party to rehearse this further, but it would be unfair to Mr K not to record my assessment that the present outcome is not unfair to either.

Conclusion

[34]Some formal decisions are needed.

[35]   Leave to appeal the 2021 decision is given, as is leave to admit further evidence. The appeal is dismissed. The 2012 agreement was not varied by the parties, nor were representations made by Mr K that could found an estoppel. Nor has there been reliance and detriment on the part of Ms K.

[36]   The application for leave to appeal the 2014 consent judgment is declined. Were leave to appeal given, the same arguments would be advanced to allow a variation of the agreement, with the effect being to allow Ms K to implement a refinancing option that would deprive Mr K of his share. Orders to give effect to that would have been required.

[37]   Separately from the lack of merit in the proposed appeal, serious concerns arise with the proposition of allowing an appeal in a relationship property matter so far out of time. As noted, the parties were legally represented and an agreement reached. No flaw in that process has been suggested or identified. Rather, there is now dissatisfaction with how the terms of the agreement have worked out over time. For reasons given, I consider those concerns are not as clear cut as suggested, but separately the principle of finality is important. There is no sound explanation for a delay of now eight years and leave to appeal out of time is declined.

[38]   Finally, I note for completeness Mr Nicholls reminded the Court of s 26 of the Property (Relationships) Act 1976 which makes the interests of the children a

6      [K] v [K], above n 6.

mandatory consideration in the making of any orders. How that might impact on any decision need not now be considered, but it is appropriate to acknowledge the provision.

[39]Mr K is legally aided. The parties may file costs memoranda if required.

Simon France J

Solicitors:

Chapman Tripp, Wellington for Appellant Chris Nicholls, Lower Hutt for Respondent