K v V
[2012] NZHC 1129
•24 May 2012
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980.
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-485-002682 [2012] NZHC 1129
UNDER the Property (Relationships) Act 1976
IN THE MATTER OF an appeal against the decision of the Family
Court at Wellington
BETWEEN K Appellant
ANDV Respondent
Hearing: 8 May 2012
Counsel: R C Laurenson and A Kothroulas for Appellant
T G Stapleton for Respondent
Judgment: 24 May 2012
In accordance with r 11.5 I direct the Registrar to endorse this judgment with the delivery time of 3.00pm on the 24th day of May 2012.
RESERVED JUDGMENT OF COLLINS J
TABLE OF CONTENTS Introduction......................................................................................................................... [1] Background ......................................................................................................................... [4]
Appellant ........................................................................................................................... [7]
Respondent ........................................................................................................................ [9] Property and assets acquired during the relationship ................................................... [10] Tamana Farm.................................................................................................................. [11] Terrace apartment .......................................................................................................... [12] Trusts .............................................................................................................................. [14]
K V V HC WN CIV-2011-485-002682 [24 May 2012]
The PR business ................................................................................................................ [16] Proceedings ........................................................................................................................ [19] Summary of the Family Court judgment ....................................................................... [21] Date when the parties’ de facto relationship ended........................................................ [22] Was there a relationship property agreement?............................................................... [24]
Were there extraordinary circumstances that would make equal sharing repugnant to justice? ............................................................................................................................ [26]
Division of property and assets ........................................................................................ [27] Tamana ........................................................................................................................... [28] Terrace apartment ............................................................................................................30] BK Investment Trust........................................................................................................ [32] Balance of BK Family Trust............................................................................................ [33] KS Communications Ltd ................................................................................................. [34] Miscellaneous assets ....................................................................................................... [35]
Determining an appeal under the Act ............................................................................. [37] First ground of appeal: was there a relationship property agreement made pursuant to s 21P of the Act in relation to Tamana? .......................................................................... [41] Relevant provisions of the Act......................................................................................... [42] Evidence relevant to the first ground of appeal .............................................................. [43] Competing submissions................................................................................................... [44] Analysis ........................................................................................................................... [49] Second ground of appeal: what is the true value of Tamana? ..................................... [61] Third ground of appeal: Did the Family Court err when it ordered that the transfer of the apartment to the BK Family Trust be set aside under s 44 of the Act? ................. [70] Relevant legislation......................................................................................................... [72] Relevant evidence............................................................................................................ [73] Passage of legislation ..................................................................................................... [76] Appellant’s evidence ....................................................................................................... [81] Cross-examination .......................................................................................................... [83] Answers to questions from the Family Court Judge ....................................................... [86] Accountant’s cross-examination ..................................................................................... [88] Respondent’s cross-examination..................................................................................... [90] Parties’ competing positions........................................................................................... [92] Respondent ...................................................................................................................... [94] Legal principles applicable to reviewing a lower court’s findings of fact...................... [95] Why did the appellant transfer the apartment to the BK Family Trust? ......................... [99] Did the appellant intend to defeat the respondent’s claims? ........................................ [106] Conclusions ...................................................................................................................... [115]
Introduction
[1] This is an appeal from a decision of the Family Court at Wellington and concerns the parties’ respective shares in two properties following the conclusion of their de facto relationship.
[2] The issues on appeal have been helpfully refined by counsel for the appellant. There are now three issues which I am required to consider, namely:
(1)Whether there was in this case a relationship property agreement made pursuant to s 21P of the Property (Relationships) Act 1976 (the Act) in relation to a farm called Tamana.
(2) Whether the Family Court properly determined the value of Tamana.
(3)Whether the Family Court erred when it held that the transfer of an apartment to a trust should be set aside under s 44 of the Act.
[3] To understand the issues it is necessary to examine:
(1) the background to the dispute between the parties; and
(2) the judgment appealed from.
Background
[4] The parties met in June 1997 and commenced living together in September that year. A considerable amount of time was spent in the Family Court determining exactly when the parties ceased their de facto relationship. Ultimately the Family Court determined that the parties ceased living together in June 2009. That finding of fact has not been challenged in this Court.
[5] At the time the parties started living together the appellant was 57 and the respondent 41. They are now 72 and 56 respectively. There are no children from their relationship.
[6] Both the appellant and respondent had been married before they met.
Appellant
[7] For a significant portion of his working life the appellant was a public relations consultant. When the appellant commenced living with the respondent he was in a business called KR Public Relations. At that time the business was based in
premises which the appellant had purchased in early 1992. Those premises were an office suite in Dixon Street, Wellington.
[8] Prior to meeting the respondent the appellant had, in addition to his business interests:
(1)purchased with his then wife a matrimonial home in Wellington. The appellant estimated that his share in that property was worth approximately $200,000 at the time he and the respondent commenced living together;
(2)purchased a beach home in Riversdale. He purchased that property from his parents in January 1996;
(3)made a number of investments which he estimated were worth approximately $150,000 at the time he and the respondent commenced living together;
(4) had a life insurance policy which was later capitalised; (5) owned a 1991 Toyota Camry; and
(6) owned various chattels.
Respondent
[9] The respondent’s assets at the time she and the appellant commenced living
together comprised:
(1) various chattels;
(2)$50,000 from the sale of a property owned by the respondent and her former husband; and
(3) a 1991 Mazda Astia motor vehicle.
Property and assets acquired during the relationship
[10] The parties met in June 1997. At that stage the appellant was still living with his wife in Wellington. The parties’ relationship developed quickly. Within approximately three months they were living together in a rented property in Newlands.
Tamana Farm
[11] Within a matter of weeks of living together the parties decided to purchase Tamana Farm in the Wairarapa. That farm comprises approximately 31 hectares and is located approximately 37 kilometres east of Masterton and approximately
20 kilometres west of Riversdale. The purchase price was $282,000. The agreement for sale and purchase dated 2 October 1997 was the focus of considerable attention in the Family Court because it recorded the parties’ property shares as tenants in common. The appellant’s share was recorded as 85 per cent and the respondent’s share was recorded as 15 per cent. The settlement of Tamana took place on
28 November 1997. It was common ground that the purchase price was paid by way of a $50,000 contribution from the respondent with the balance coming from the appellant (substantially from his share of the sale of his matrimonial home in Wellington). It was the parties’ intention at this time to live at Tamana on the weekends and continue to live in Wellington during the working week. The parties made Tamana their principal home in about March 2001. They also formed a partnership to manage the farm business throughout the time that they managed the farm together.
Terrace apartment
[12] In November 1997 the parties commenced looking for a suitable place for them to live in Wellington. In early December 1997 they found an apartment on The Terrace, which they thought was ideal for their purposes. That apartment was purchased by the appellant in March 1998. The respondent made no financial
contribution to the purchase of that property. The parties lived at the apartment during the week up until March 2001.
[13] The parties moved to Tamana on a fulltime basis in March 2001.
Trusts
[14] On 30 March 2000 the appellant formed two trusts: (1) BK Family Trust; and
(2) BK Investment Trust.
[15] At the time these trusts were created the apartment was transferred to the BK Family Trust. The apartment was transferred to the BK Family Trust for $260,000 (paid by way of annual deeds of forgiveness of $27,000). The Riversdale property, the premises at Dixon Street and a property which the appellant had purchased for his daughter to live in were transferred to the BK Investment Trust.
The PR business
[16] The appellant’s PR business underwent changes during the course of the time the appellant and respondent lived together. In early 2000 the business name was changed to KS Communications Ltd and a new company was incorporated using that name.
[17] The respondent commenced working at the appellant’s PR business in November 1998. She performed a variety of administrative roles for which she was paid an annual salary of $34,199.
[18] In March 2001 the appellant’s business was moved to Tamana. The appellant and respondent worked together in the business and in developing Tamana. These arrangements continued through to December 2006 when the appellant retired from the business. By this stage the business had lost a major client. Also, by this time
the appellant had turned 67. From his perspective it was an appropriate time to retire. The business, however, continued to exist “in name only” during the course of 2007. The respondent continued to be paid her annual salary during 2007.
Proceedings
[19] The parties’ separation in June 2009 led to the commencement of proceedings under the Act. Initially the proceedings put at issue the parties’ respective interests in nine categories of property:
(1) Tamana Farm (comprising the homestead and cartilage);
(2)Tamana Farm Partnership (comprising the balance of the farm land and farm assets);
(3) The Terrace apartment;
(4) The credit balance in the BK Investment Trust; (5) The credit balance in the BK Family Trust;
(6) KS Communications Ltd; (7) Shares and securities;
(8) Family chattels, furniture and effects; (9) Bank accounts and bonus bonds.
[20] The hearing in the Family Court focused upon the property and assets referred to in [19(1)] to [19(6)] above and how they were to be divided between the parties.
Summary of the Family Court judgment
[21] There were three overarching issues before the Family Court, the answers to which substantially assisted in resolving the issues relating to the division of the property and assets referred to in [19(1)] to [19(6)]. The three overarching issues were:
(1) The date when the parties’ de facto relationship ended;
(2)Whether there was a relationship agreement under s 21P of the Act in relation to Tamana;
(3)Whether there were in this case extraordinary circumstances which would render it repugnant to justice for there to be an equal division of relationship property.1
Date when the parties’ de facto relationship ended
[22] The appellant submitted to the Family Court that the parties’ de facto relationship ended in 2004. If this argument had succeeded the respondent’s application for relationship property orders would have been out of time.2
[23] The Family Court Judge carefully weighed all of the evidence before him and concluded that in fact the parties’ de facto relationship ended in June 2009. Accordingly he held that the respondent’s application was brought within time. There has been no appeal from this aspect of the Family Court judgment.
Was there a relationship property agreement?
[24] It was the appellant’s case in the Family Court that:
(1) from the outset of their relationship the parties had a
1 Property (Relationships Act) 1976, s 13.
2 Property (Relationships) Act 1976, s 24.
clear and express agreement ... that the property and assets which [they] each owned at the outset of [their] relationship were to remain the sole and separate property of each party and that [their] respective property and financial affairs were to be separate from each other except to the extent that [they] expressly allowed and agreed to combine them.
and;
(2)at the time they purchased Tamana they discussed and agreed that they would own and share the benefit of the property on the basis of the appellant owning 85 per cent of Tamana and the respondent 15 per cent of that property.
[25] The Family Court Judge examined the evidence concerning both branches of
the appellant’s submission as to the existence of a s 21P agreement and concluded:
(1)There was no evidence that before the parties commenced their de facto relationship they had any detailed discussion about their financial situation. Accordingly the Family Court Judge rejected the appellant’s argument that there had been “a clear and express” agreement from the outset of their relationship that they would treat their property and assets as separate property except to the extent that they agreed to combine their property.
(2)The agreement for the purchase of Tamana reflected the financial contributions which the parties made to the purchase of Tamana and that they would be tenants in common on an 85 per cent (appellant) and 15 per cent (respondent) basis. The Family Court Judge concluded that there was nothing in the sale and purchase agreement for Tamana which referred to the parties’ future intentions in relation to the ownership of Tamana, or whether their shares as tenants in common would be reflected in any future division of their relationship property. Accordingly, the Family Court Judge also found against the appellant in relation to the second limb of his claim in relation to the existence of a relationship property agreement.
Were there extraordinary circumstances that would make equal sharing repugnant to justice?
[26] The Family Court Judge traversed the leading authorities on the definition of “extraordinary circumstances” within the meaning of s 13 of the Act. When he applied the accepted jurisprudence to the facts of this case, the Family Court Judge concluded that there were no extraordinary circumstances within the meaning of s 13 of the Act and that accordingly, there was no reason for departing from the usual equal sharing of relationship property that applies to relationships that exceed three years duration.
Division of property and assets
[27] After making his three overarching decisions the Family Court Judge proceeded to rule on the allocation of the parties’ property and assets in the following way.
Tamana
[28] The Family Court determined that the parties were entitled to an equal share of Tamana.
[29] The Family Court Judge was presented with two assessments of the value of Tamana. Both assessments were made by registered valuers. The appellant’s valuer treated Tamana as being substantially farm land. He believed that Tamana should be valued on the basis of it being farm land rather than as a lifestyle block. The respondent’s valuer took the opposite approach. He regarded Tamana as being a livestyle block and valued it accordingly. The Family Court Judge accepted the approach advocated by the respondent’s valuer. The Family Court Judge concluded that the value of Tamana including the farm chattels was $898,459. The Family Court Judge also assessed the liabilities of Tamana as being $388,349 meaning that the net value of the whole of Tamana was $510,762.
Terrace apartment
[30] The Family Court accepted that the apartment was purchased by the appellant in his own name without any direct financial contribution from the respondent. The initial purchase was funded in part from the sale of shares which the appellant owned at that time and a mortgage which was soon repaid by the appellant.
[31] The Family Court Judge ruled, however, that the Terrace apartment was transferred by the appellant to the BK Family Trust to prevent the apartment from being the subject of a future claim under the Act and in order to defeat the claim of the respondent. The Family Court Judge concluded that this disposition was made “otherwise than in good faith and for valuable consideration”.3 The Family Court Judge accordingly decided that the interests of justice required him to transfer the apartment from the BK Family Trust to the appellant and respondent in equal shares.
BK Investment Trust
[32] The Family Court concluded that the assets transferred to the BK Investment Trust (principally the property at Dixon Street and the Riversdale beach property) were the separate property of the appellant and that there had been no relationship property transferred to this particular trust.
Balance of BK Family Trust
[33] For reasons similar to those that applied in relation to the BK Investment Trust, the Family Court held that the balance of the BK Family Trust was the appellant’s separate property.
KS Communications Ltd
[34] The Family Court held that as at the date of the hearing, KS Communications
Ltd was valueless. The company’s principal asset, namely its goodwill had
dissipated when the company lost its major client and when the appellant decided to retire in late 2006.
Miscellaneous assets
[35] The Family Court allocated various shares and securities. There is no appeal
against that part of the Family Court’s judgment.
[36] The parties resolved their claims to various family chattels, furniture and effects. The parties also resolved their claims to various bank accounts and bonus bonds.
Determining an appeal under the Act
[37] An appeal of this nature is conducted as a rehearing pursuant to s 39 of the Act, ss 72 and 75 of the District Courts Act 1947 and r 20.18 of the High Court Rules. The Court is not bound to accept the Family Court’s findings of fact and is entitled to exercise any power or discretion available to the Family Court. The Court must exercise its own judgement but, where appropriate, the Court may give weight to the findings of the Family Court.
[38] In Austin, Nichols & Co Inc v Stichting Lodestar, the Supreme Court said that when considering a general appeal from a decision of the Trade Marks Commissioner, the High Court is required to:4
... come to its own view on the merits. The weight it gives to the decision of the Commissioner is a matter of judgment [sic]. If the High Court is of a different view from the Commissioner and is, therefore, of opinion that the Commissioner’s decision is wrong, it must act on its own view.
[39] The Court went on to say:5
Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment [sic]. If the
4 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [3].
5 At [16]-[17].
appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ. In such circumstances it is an error for the High Court to defer to the lower Court’s assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.
In the present appeal there was no basis for caution in differing from the assessment of the tribunal appealed from. The case entailed no question of credibility. It turned on a judgment [sic] of fact and degree, not the exercise of discretion entrusted to the tribunal. We are of the view that the Court of Appeal was not correct to suggest that, because the decision turned on a value judgment [sic] apparently open to the Assistant Commissioner, “the High Court Judge ought not to have embarked on a reconsideration of the issue without considering, and giving weight to, the Assistant Commissioner’s conclusion”. The High Court Judge was obliged to reconsider the issue. He was entitled to use the reasons of the Assistant Commissioner to assist him in reaching his own conclusion, but the weight he placed on them was a matter for him.
[40] The same approach is required of the High Court when it hears a general appeal from the Family Court.6
First ground of appeal: was there a relationship property agreement made pursuant to s 21P of the Act in relation to Tamana?
[41] The first ground of appeal will be addressed by explaining: (1) the relevant provisions of the Act;
(2) the evidence relevant to the first issue; (3) the competing submissions;
and then analysing and determining the question posed by the first ground of appeal.
Relevant provisions of the Act
[42] There are three sections of the Act that are most relevant to the first issue:
(1) 21P Agreements made before 1 August 2001 between de facto partners
(1) This section applies to any agreement—
(a) that is made, before 1 August 2001, by de facto partners, ...; and
(b) that is made with respect to the status, ownership, or division of their property.
(2) An agreement to which subsection (1) applies—
(a) may relate to existing or future property, or both:
(b) may relate to the status, ownership, or division of property in either or both of the following circumstances:
(i) during the joint lives of the de facto partners:
...
(3) Subsection (2) does not limit the generality of subsection
(1).
(2) 21R Agreements to have effect as if Act not passed
(1) The following agreements, to the extent that the agreements were valid and would have been enforceable before 1 August
2001, have effect as if this Act had not been passed:
(a) an agreement to which section 21P applies:
...
(3) 21O Application of Act to relationship property not subject to agreement
Relationship property is subject to the provisions of this Act if neither of the following kinds of agreement applies to the property:
...
(b) an agreement to which section 21P ... applies.
Evidence relevant to the first ground of appeal
[43] There were three principal pieces of evidence which the parties have focused upon as being relevant to the first ground of appeal:
(1) The agreement for the sale and purchase of Tamana dated 2 October
1997 recorded that the parties were purchasing Tamana as tenants in common. Their shareholding was split 85 per cent in favour of the appellant and 15 per cent in favour of the respondent. This equated to the approximate contributions they each made to the purchase of Tamana. The parties’ unequal tenancy in common is also recorded on the certificates of title for Tamana.
(2)Tamana was farmed as a partnership between the parties. The farm partnership incurred annual average losses of $25,425 during the
1999 to 2011 period. Those losses were apportioned on a 85 per cent to 15 per cent basis with the 85 per cent losses being attributed to the appellant’s income. Had there been any profits from the Tamana partnership they would also have been allocated on the same 85 to
15 per cent basis.
(3)(a) Prior to the purchase of Tamana the parties’ Wairarapa solicitor had drafted a property sharing agreement. The draft agreement related only to Tamana. It provided inter alia:
(i)for the parties’ interest in the property to be registered as tenants in common in unequal shares, namely 85 per cent share for the appellant and a 15 per cent for the respondent;
(ii)that the parties’ ongoing contributions to Tamana would be on the basis of an 85 per cent contribution from the appellant and a 15 per cent contribution from the respondent;
(iii)that upon the sale, transfer or other disposition of the property then the net proceeds would be paid to the parties on the basis that the appellant would receive
85 per cent of the proceeds and the respondent would receive 15 per cent of the proceeds.
(b) The respondent’s evidence was that she had taken advice over whether or not she should sign this agreement. She said that she was advised that it was not in her interests to do so.
(c) On 24 August 2000, the lawyer who prepared the draft property sharing agreement wrote to the parties (there is a dispute as to whether the appellant received this letter) explaining that the parties should consider making changes to the draft agreement in view of changes in the law contained in the Act which was to come into force the following year.
(d) The proposed property sharing agreement was not amended and it was never executed by the parties.
Competing submissions
[44] The appellant’s case is that the sale and purchase agreement (supported by the registration of the parties’ respective interests on the titles to Tamana, and their agreement as to how losses and profits for the farm partnership were applied) is an agreement that satisfies the requirements of s 21P of the Act.
[45] The appellant expands upon this submission by saying that:
(1)The sale and purchase agreement was in all respects a valid agreement.7
(2)That it was made before 1 August 2001 by persons in a de facto relationship.8
7 See by way of example MW v FEW (2006) 26 FRNZ 59; LAC v KAY [2011] NZCA 271, (2011)
28 FRNZ 466.
8 Property (Relationships) Act 1976, s 21P(1)(a).
(3) That it was made “with respect to the status, ownership, or division of
their property”.9
[46] From this position the appellant submits that as the parties had a valid s 21P
agreement in relation to Tamana, it is not subject to the provisions of the Act.10
[47] The appellant submits that the Family Court Judge erred in relation to this issue when he, in effect held that to be a valid agreement under s 21P of the Act, an agreement had to expressly recognise that the parties were contracting out of the provisions of the Act.
[48] The respondent endorses the conclusions of the Family Court. The respondent’s case was that an examination of the whole of the evidence confirmed that there was no s 21P agreement. In particular the respondent submitted:
(1)that if the draft property sharing agreement had been executed then it would have constituted a valid s 21P agreement. The fact that the draft agreement was never completed and executed was said to be powerful evidence that the parties did not agree to a s 21P agreement;
(2)the sale and purchase agreement made no reference as to how the net proceeds of the sale or other disposition of Tamana would be allocated between the parties. In this respect the respondent adopted the reasoning of the Family Court summarised in [25(2)] above.
Analysis
[49] The purpose of s 21P of the Act is to enable de facto couples who agreed on how their property would be allocated prior to 2001 to rely on that agreement
without being affected by the new regime created by the Act.
9 Property (Relationships) Act 1976, s 21P(1)(b).
10 Property (Relationships) Act 1976, ss 21O(b) and 21R(1)(a).
[50] Counsel for the appellant submitted that in this case the Family Court Judge had effectively construed the provisions of s 21P of the Act as requiring that an agreement under s 21P recognise the parties are “contracting out” of the Act.
[51] In the following eight paragraphs I explain why I do not share the appellant’s concerns about the conclusions reached by the Family Court Judge in relation to the first ground of appeal.
[52] The authors of Fisher on Matrimonial and Relationship Property identify four requirements for a valid agreement under s 21P of the Act:11
(1) The agreement must have been made prior to 1 August 2001;
(2)The agreement must have been made by “de facto partners or by any two persons in contemplation of entering into a de facto relationship”;
(3) The agreement must be contractually valid; and
(4)The agreement must address questions relating to “status, ownership or division of their property”.
[53] I would add a fifth potential requirement, namely that any agreement that relates to the disposition of land or parties’ entitlement in respect of land must be in writing and signed by the parties.12 Section 2(4) of the now repealed Contracts Enforcement Act 1956 defined “disposition” as any conveyance, transfer, grant, partition, exchange, lease, assignment, surrender, disclaimer, appointment, settlement, or other assurance; and any declaration or creation of a trust; and any devise, bequest, or appointment by a will. That definition has been substantially re-
enacted by s 4 Property Law Act 2007.
11 R L Fisher (ed) Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis NZ)
at [5.53].
12 Property Law Act 2007, s 24.
[54] To be valid, an agreement must comply with basic principles of contract law:13
(a) An intention to be immediately bound (at the point when the bargain is said to have been agreed); and
(b) An agreement, express or found by implication, ... on every term which:
(i) was legally essential to the formation of such a bargain; or
(ii) was regarded by the parties themselves as essential to their particular bargain.
A term is to be regarded by the parties as essential if one party maintains the position that there must be agreement upon it and manifests accordingly to the other party.
[55] These requirements apply to s 21P agreements in the following way:
(1) There must be an intention for the agreement to bind the parties in respect of the status, ownership or disposition of their property; and
(2)There must be agreement or a meeting of the minds between the parties on the legally essential elements of the agreement: on the status, ownership or division of the property.
[56] It is a separate question as to whether there needs to be intention to be bound in respect of future ownership, status or division of property, as opposed to merely an intention to be bound at the time of signing the agreement. In TAP v REC,14 the Family Court found that the agreement in question recorded the parties’ intention to own the home as tenants in common in specified shares, which reflected their contributions towards its acquisition. The Judge found that the parties intended to be
legally bound by that agreement without considering whether the parties intended the
agreement to define their future rights in respect of the property.
13 Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR
433 (CA) at [53].
14 TAP v REC FC North Shore FAM-2004-044-1992, 24 November 2005.
[57] The requisite intention for an agreement under s 21P should be an intention for that agreement to define the parties’ future rights in respect of that property. The question must be whether the parties intend the agreement to define their ownership share of the property in the foreseeable future and if property were to be divided.
[58] An agreement is to be determined objectively, by appraisal of the intentions of each party as they appeared at the time the agreement was entered.15 The outward conduct of the parties at the time should indicate that they knew the agreement would bind them in respect of the future status, ownership, or division of property.16
[59] In this situation, it can be objectively determined that the parties intended the agreement to record their contributions and ownership share of the Tamana Farm at the time they entered the agreement, as opposed to ownership rights in the future. It seems neither party contemplated the future status, ownership or division of the Tamana Farm if it were sold, and therefore their minds did not meet on a term which is essential to a s 21P agreement. The Family Court Judge was correct to contrast the documentation relied upon by the appellant with the draft property sharing agreement. Had that agreement been completed it would have fully satisfied the requirements of s 21P of the Act. The fact that the respondent was apparently not willing to sign the property sharing agreement reinforces the conclusion that the parties did not focus on future allocations of Tamana when they purchased that property.
[60] For these reasons the appellant fails in relation to his first ground of appeal.
Second ground of appeal: what is the true value of Tamana?
[61] The Family Court Judge was provided with two valuations. The respondent’s valuer assessed the value of Tamana to be $885,000. The appellant’s valuer assessed
the value of Tamana to be $740,000.
15 R L Fisher (ed) Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis NZ)
at [5.40].
16 R L Fisher (ed) Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis NZ)
at [5.41].
[62] The key reason for the difference between the two valuations was that the respondent’s valuer approached his task by treating Tamana as a lifestyle property because that was how the parties had treated Tamana. The appellant’s valuer, however, regarded Tamana as being more akin to a small farm rather than a lifestyle block.
[63] The Family Court Judge resolved the issue he was faced with by accepting the valuation submitted by the respondent’s valuer. The Family Court Judge focused upon the parties’ reasons for purchasing Tamana. He said in his judgment:17
The parties found this property because of their holidaying and lifestyle associations with the Riversdale area which was where they met. It was for them in the first three to four years of their relationship a weekend and holiday retreat while they otherwise continued their day-to-day living and business activities in the city. The property had, and would still have – were they together – fundamental value because of its very “lifestyle” features. Those undoubtedly include the native bush and wooded areas otherwise discounted as “ineffective” by [the appellant’s valuer].
[64] I have sympathy for the dilemma faced by the Family Court Judge. He candidly acknowledged that he lacked the “expertise to critique” the assessments made by the valuers. The Family Court Judge properly acknowledged that any attempt to find a middle ground between the valuers would “be necessarily arbitrary”.
[65] I am no better placed than the Family Court Judge to “critique” the differences between the valuations. I am, however, able to conclude that as a matter of principle, the correct approach to assessing the value of Tamana was to determine the market value of the property based upon what a willing but not anxious buyer would be willing to pay for the property and what a willing but not anxious vendor
would be willing to sell the property for.18 The views of the vendors about the merits
of the property, and their reasons for purchasing the property in the first place are not important in the circumstances of this case. Their motives in purchasing a property
are unlikely to affect the true market value of the property.
17 AJV v ABGK FC Wellington FAM-2009-085-1268, 2 December 2011 at [131].
18 Coleman v Myers [1977] 2 NZLR 225 at 258 (SC); Holt v Holt (1986) 4 NZFLR 339, [1990]
3 NZLR 401 (JC).
[66] In my judgement the Family Court Judge misdirected himself when he opted to favour the valuation provided by the respondent’s valuer based upon the parties’ use of the property, as opposed to what a willing purchaser would be likely to pay for the property. The error in the approach taken by the respondent’s valuer and therefore by the Family Court is reinforced when regard is had to the following two facts:
(1)Tamana is located a considerable distance from recognisable lifestyle blocks in the Masterton, Greytown, Featherston and Martinborough regions.19
(2) The property is mixed in contour.20
[67] Having concluded that the Family Court Judge misdirected himself on the correct approach to take when assessing the value of Tamana, I am bound to set aside his decision on that issue. However, I am not willing to accede to the appellant’s request that his valuer’s valuation be accepted as being necessarily correct.
[68] The only way that the true value of Tamana will be determined is if it is sold. If the property is not to be sold then the parties are going to have to reach agreement as to what they think it is worth. The difference between the two valuations is
$145,000. The parties have previously demonstrated an ability to reach agreement and to compromise on many other issues relating to property and assets. An agreement as to the value of Tamana may ultimately only be achieved by both parties compromising.
[69] I will quash the orders made by the Family Court concerning the value of
Tamana but make no other orders in relation to the second ground of appeal.
19 The respondent’s valuer used as comparatives:
(1) a lifestyle block at Greytown;
(2) a lifestyle block 5 km from Masterton; and(3) an Eketahuna dairy farm.
20 The extent to which the property is contoured was not agreed by the valuers.
Third ground of appeal: Did the Family Court err when it ordered that the transfer of the apartment to the BK Family Trust be set aside under s 44 of the Act?
[70] The third ground of appeal focuses upon the Family Court’s decision to set aside the transfer of the apartment from the appellant to the BK Family Trust. That transfer was set aside under s 44 of the Act.
[71] This ground of appeal shall be addressed by:
(1) examining the relevant provisions of the Act; (2) examining the evidence relevant to this issue; (3) explaining the parties’ competing positions;
(4) analysing the issues raised by the third ground of appeal; and
(5) explaining my conclusions in relation to this ground of appeal.
Relevant legislation
[72] Section 44(1) of the Act empowers the Court to set aside any:
... disposition of property ... made ... by or on behalf of or by direction of or in the interests of any person in order to defeat the claim or rights of any person ... under this Act ...
Sections 44(2)(a) and 44(4) provide:
(2) In any case to which subsection (1) of this section applies, the Court may, subject to subsection (4) of this section,—
(a) order that any person to whom the disposition was made and who received the property otherwise than in good faith and for valuable consideration, or his [or her] personal representative, shall transfer the property or any part thereof to such person as the Court directs
...
(4) Relief (whether under this section, or in equity, or otherwise) in any case to which subsection (1) of this section applies shall be denied wholly or in part, if the person from whom relief is sought received the property or interest in good faith, and has so altered his or her position in reliance on his or her having an indefeasible interest in the property or interest that in the opinion of the Court, having regard to all possible implications in respect of other persons, it is inequitable to grant relief, or to grant relief in full, as the case may be.
Relevant evidence
[73] The Family Court judgment contains the following chronology by way of background to the issues relevant to the third ground of appeal. Apart from in one important respect the appellant agrees with the chronology. The respondent says the chronology is accurate in all respects. I have placed in [parenthesis] the portion of the chronology disputed by the appellant:21
08/09/97 Parties commence living together in a de facto relationship
10/12/97 Apartment at ... The Terrace purchased and parties commence living there together
02/03/98 Transfer of apartment title is registered to respondent
24/04/98 Introduction and first reading in Parliament of Bill that became Property (Relationships) Amendment Bill 2001
28/11/99 Labour government elected [with publicised policy to extend matrimonial property law to de facto relationships]
31/03/00 Formation of BK Family Trust
01/06/00 Property (Relationships) Amendment Bill referred to Justice and Electoral Committee
27/06/00 Transfer registered of apartment to respondent and LR England as trustees of BK Family Trust
24/08/00 Letter of advice to parties from Mr Logan with advice of Property (Relationships) Act changes
29/03/01 Third reading of Property (Relationships) Amendment Act 2001
March
2001
Probable date of parties’ move from apartment on the Terrace to live fulltime at Tamana farm
01/08/01 Operative date in Property (Relationships) Act for agreements between partners under s 21
21/08/01 Evidence given of apartment being let to other tenants
01/02/02 Commencement date for “new” Property (Relationships) Act 1976 including de facto relationships
[74] In his judgment the Family Court Judge recorded:22
(1) The [appellant] implied, if not actually asserted, that he was unaware of the implications of the impending change of matrimonial property law and that he had not taken advice on that aspect of the matter or the implications of the transfer to a trust of the home in which the parties had been living as man and wife for several years.
...
His Honour went on to say:23
(2) I have to say I did not believe him. I do not accept that he was unaware of the impending change of matrimonial property law and its important implications for persons such as himself living in a long-term (that is not of short duration) de facto relationship. I do not accept that he was not advised either by his lawyers or by his accountant of the potential implications of a change of law in respect of a property such as a property which was then their home.
And further:24
(3) ... I have given my reasons for being satisfied on the balance of probabilities that a principal intention of the respondent in disposing
22 At [160].
23 At [161].
of the apartment was to prevent it becoming the subject of a future claim under the Act which he did know was before Parliament and was about to be enacted. It follows on that same reasoning that the respondent did so in order to defeat the claim of the [respondent].
(emphasis in Family Court judgment)
[75] It is necessary to examine in more depth the basis upon which the Family
Court Judge reached his conclusions.
Passage of legislation
[76] The Bill that became the Property (Relationships) Amendment Bill 2001 was the product of two Bills:
(1)The De Facto Relationships (Property) Bill 1998. This was introduced into Parliament on 26 March 2008. This Bill, if enacted, would have extended the matrimonial property’s sharing regime in the Matrimonial Property Act 1976 to de facto couples.
(2)The Matrimonial Property Amendment Bill 1998. This was introduced on 24 April 1998. It did not apply to de facto couples.
[77] The introduction of these Bills took place approximately six to seven months after the parties commenced living together and shortly after the appellant had purchased the apartment from his separate funds and registered the title to that apartment in his name.
[78] These two Bills were effectively consolidated by the Justice and Electoral
Select Committee. That Committee, by Supplementary Order Paper No. 25 dated
31 October 2000, recommended the name of the Bills be changed to one single Bill, namely the Property (Relationships) Amendment Bill. That Bill extended the whole matrimonial property sharing regime to de facto couples.
[79] It is important to note the Matrimonial Property Amendment Bill was referred to the Justice and Electoral Select Committee after the appellant had established the BK Family Trust and signed the deed selling the apartment to that trust. The trust
was set up on 31 March 2000. That was also the date of the deed of sale and purchase of the apartment.
[80] Thus, it is important to explore further the basis upon which the Family Court
Judge concluded that the appellant’s intention:
... in disposing of the apartment was to prevent it becoming the subject of a future claim under an Act which he did know was before Parliament and was about to be enacted ... in order to defeat the claim of the appellant.
(emphasis added)
Appellant’s evidence
[81] The appellant’s explanation for establishing the BK Family Trust and the BK Investment Trust and for transferring the apartment to the BK Family Trust was to gain tax advantages that were available to those who faced personal higher marginal tax rates than the tax rates that were applicable to trusts at that time.
[82] The appellant was cross-examined on his motives for establishing the BK Family Trust and for transferring the apartment to that trust. It is important to carefully consider the relevant portions of the appellant’s cross-examination and his response to questions put to him by the Family Court Judge.
Cross-examination
[83] The appellant’s motives for establishing the BK Family Trust, and for transferring the apartment to that trust just prior to the end of the 2000 tax year was first challenged in the following part of his cross-examination:25
Q ...it is correct that at the end of 1999 Labour Government was
elected wasn’t it?
A Yes it was.
Q Like all New Zealanders, you knew that it had a number of policies
that were left of centre, didn’t you?
A Um, yes.
Q You knew they were likely to raise income taxes, didn’t you?
A Yes I did.
QAnd you also knew that it was part of their election manifesto policies to extend the provisions of the Relationships Property Act to
cover de f act o relati onshi ps, di dn’t you?
ANo I did not. I was looking at the whole thing purely from a tax point of view when it was actually pointed out to me by Lindsay England [appellant’s accountant].
QAnd did he point that out to you some time between the election result in November 1999 and the completion of the documents on 30
March 2000?
A Yeah must have – well, yes it must have been early that year, I
suppose, I, um, yea h, t hat’s when t he tr ust s wer e f ormed, ea r l y i n
2000, yeah.
[84] Counsel for the respondent returned to this topic a few minutes later in his cross-examination of the appellant. The transcript reads:26
Q [The respondent’s] not a beneficiary of either trust, is she?
A Nope.
QAnd in setting up the trusts, what you did was this. First, in relation to the investment trust, you transferred to the trustees of that trust the Dixon Street and Riversdale Beach properties, didn’t you?
AYes I did because they were purchased from my own money and had absolutely nothing to do with her.
QAnd you knew at the time of the transfer of these properties to the investment trust that would stop her making any claim in respect of those properties, didn’t you?
AI didn’t know that for certain because it was never discussed with anyone. That line of reasoning was never discussed with Sievwrights [appellant’s lawyers] and it was not discussed with Mr England.
Q But you set up trusts for tax reasons and for asset protection reasons,
didn’t you?
AI set up the trust for tax protection, tax reasons ‘cos the rate, I was told by Lindsay England that the rate was going to go up over, I think it was $40,000. The rate was gonna go from 33 cents to 39
cents in the dollar and I said to him, “well, is it worth setting up the trusts” and he said, “well, yes, you’re gonna save money if you do”. He said, “you might spend the first, the first year’s savings might go to Sievwrights for setting up the trusts, but after that they will save you a lot of money”.
[85] A short time later this line of cross-examination continued in the following way:27
QSo in early 2000 when the apartment is still your primary place of residence for the two of you, you transfer it to the family trust, don’t you?
A I did for tax reasons only.
QYou knew at the time you transferred the apartment to the family trust, that it would stop [the respondent] making a claim against it in future?
A No, I didn’t because I thought the apartment was mine anyway
because I’d paid for by my money which I had before I met her.
Q So for that reason, the one you’ve just mentioned –
A Mhm.
Q– did you think it was okay for you to transfer the apartment to the family trust?
AI did think it was okay and I discussed it with her and she raised no objection.
Q You knew at the time of transfer that it would stop her making a
claim against it in future, didn’t you?
AI didn’t think that was a relevant point because I thought I’d pay for all, the entire proceeds, the entire cost of the apartment had been borne by me, she had nothing to do with it, from money that I had before I met her.
QDo you agree that the distinction between the properties and the two trusts is this, that you owned Riversdale Beach and Dixon Street before you met [the respondent], correct?
A Yeah, mhm.
QThey were your separate property in your view and you transferred them to the investment trust, correct?
A Well, I didn’t, wouldn’t use the word “separate” property, they were
my properties.
Answers to questions from the Family Court Judge
[86] The Family Court Judge then asked questions of the appellant. The transcript reads:28
Q What you said and I note it’s verbatim,
“Because they were purchased with my own money they were
nothing to do with her, –
A Mhm, yes, your Honour.
QAnd that was the explanation you gave when you asked why the Dixon Street, Riversdale properties were transferred to the investment trust?
A Mhm.
Q “Because they were purchased with my own money and were
nothing to do with her”?
A Mhm.
QI noted that because ‘something to do with her” obviously was a relevant consideration, that’s why I thought it a significant answer.
A Well, that’s not, I’m sorry, your Honour, that was not the way I was
thinking about it, I just thought, well, it’s mine I can do –
Q Well, it was your evidence, that’s all.
[87] The Family Court Judge resumed this line of questioning after the appellant had been re-examined. It is not necessary to set out the entire section from the transcript. The primary focus was on whether or not the respondent was aware of the creation of the BK Family Trust, and the transfer of the apartment to that trust when those events took place in late March 2000. The appellant explained:
(1) He acted on the advice of his accountant and lawyer.
(2)That his children and grandchildren were made beneficiaries of the trust.
When questioned why the respondent was not made a beneficiary the exchange between the Family Court Judge and appellant was as follows:29
AI left it to the lawyer and accountant followed their advice but also, um, didn’t think there was anything wrong with it in my own mind, um –
Q I’m not suggesting that –
ANo, no, because I have paid for the whole entity [apartment] and I figured well, you know, if we were going to start life at Temana, well she was going to share in that and that was her part of the action.
Accountant’s cross-examination
[88] Mr England, the appellant’s accountant was also cross-examined about the appellant’s motives for forming the BK Family Trust and transferring the apartment to that trust. The cross-examination on this topic was:30
QWhen those trusts were in the planning stage, was it the intention of those involved in the planning to put those assets beyond the reach of [the respondent] to make them safe –
A No.
Q – from any claim?
A No, I’m sure it was never discussed or certainly not with me.
[89] Earlier in his cross-examination and in answers to questions from the Family
Court Judge Mr England:
(1)acknowledged that the creation of the BK Investment Trust and BK Family Trust would serve two purposes:
(a) reduction in the appellant’s personal tax rate; and
(b) “asset protection”.
29 At 226.
30 At 320.
(2) explained that the formation of the trusts was undertaken mainly by
the appellant’s lawyer.
Respondent’s cross-examination
[90] Although not referred to during the course of the hearing of the appeal, I note the following passage of cross-examination of the respondent concerning her knowledge of the transfer of the apartment to the BK Family Trust:31
QYou know that it was transferred ... to [the appellant’s] family trust in March 2000 don’t you?
A Yes I do now yes.
Q But did you know at the time?
ANo, first I, first I knew about it was when new cheque books came and new coding came.
...
Q Okay well when that happened, that would’ve been what, about
pretty soon after March 2000? ...
AYes ... I don’t know what date it was. I know that the whole way that we coded, that I coded things was different ... and that there were now new sheets in which had the coding on and new cheque books arriving.
Q ... Did you talk to [the appellant] about that?
...
AHe said that a trust had been set up ... I couldn’t not understand why Temana Farm was still Temana Farm and the other things were in trust, and also the apartment was in a trust.
...
Q... was it explained to you by [the appellant] or Mr England that the reason for that was because of taxation advantages and estate planning purposes.
A Tax advantages ... but not, not estate.
Q So it was explained to you that it was done for tax advantage?
31 At 101-103.
A That’s right. (emphasis added)
[91] This evidence is consistent with the appellant’s explanation that his motive for transferring the apartment to the BK Family Trust was solely for tax planning purposes.
Parties’ competing positions
[92] The appellant submitted:
(1)there was no evidence before the Family Court that entitled the Family Court Judge to conclude that the appellant knew that legislative changes were soon to be made that he knew would have given the respondent an interest in the apartment; and that
(2)there was insufficient evidence before the Family Court Judge to enable him to conclude that the appellant’s motives in relation to the apartment transactions were to defeat any claims which the respondent would have in relation to that property.
[93] The appellant also raised a legal argument. The essence of that argument was that the appellant’s actions in relation to the formation of the BK Family Trust and transferring the apartment to that trust predated the legislation. The appellant submitted that as the legislation was not in force at the time these actions took place it was not possible for the Family Court to conclude that the actions were in breach of the Act.
Respondent
[94] The respondent submitted on the other hand that the Family Court Judge carefully examined the evidence and that he was fully entitled to make credibility findings about the appellant and that he was also entitled to conclude that the appellant’s motives in relation to the transactions concerning the apartment were
designed to defeat any claim the respondent may have had in relation to that property.
Legal principles applicable to reviewing a lower court’s findings of fact
[95] In R v Munro32 the Court of Appeal discussed the extent to which an appellate court should defer to findings of fact on credibility made by a Court at first instance. After discussing some of the difficulties in assessing credibility at first instance, the Court concluded that assessing credibility from a written transcript will not achieve better outcomes. Although credibility assessments are not sacrosanct, there are recognisable advantages in seeing and hearing witnesses in the context of the entire trial.33 This aspect of Munro was affirmed by the Supreme Court in Owen v R34 recognising the advantages that lower courts have in assessing the honesty and reliability of witnesses.
[96] In State Rail Authority of New South Wales v Earthline Constructions Pty Ltd,35 Kirby J conducted a thorough survey of the ability of appellate courts to overturn findings of fact, and in particular, findings of credibility. His Honour observed that the initial reluctance of appellate courts to interfere with findings of credibility is no longer justified, in light of the changing context in which appeals are heard. I fully adopt the very helpful analysis undertaken by Kirby J. His Honour cited changes to the appellate function of higher courts including:
(1)Greater recognition that a trial judge’s assessment of credibility from the appearance and demeanour of witnesses is not infallible, especially in the artificial and stressful circumstances of the
courtroom.
32 R v Munro [2007] NZCA 510, [2008] 2 NZLR 87.
33 At [83]-[84].
34 Owen v R [2007] NZSC 102, [2008] 2 NZLR 37 at [15].
35 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd [1999] HCA 3 at 609-
622 (see also Fox v Percy (2003) 214 CLR 118 at [31] and CSR Ltd v Della Maddalena (2006)
224 ALR 1 at [19]-[22] for more recent affirmations of the approach taken by Kirby J in State
Rail Authority of New South Wales).
(2)The initial faith in judges to discern witness credibility from appearances and demeanour was because trial judges assumed that they had the same “infallible” capacity to determine credibility as juries. The reluctance to overturn findings of fact is also a result of an unwillingness to usurp the traditional role of juries where oral testimony was the most important part of a trial.
(3)Greater recognition that the assessment of credibility and demeanour can be influenced by culture, distaste, and prejudice.
[97] Kirby J went on to assess the advantages a trial judge has over an appellate court in assessing matters of fact. The appellate court is conducting a second look at the facts, with more time to evaluate particular facts in the context of the record of a complete trial hearing. However, the trial judge enjoys the advantage of being able to hear the evidence chronologically and in its entirety, whereas the appellate court is typically taken to selected passages, chosen by parties to advance their arguments. An appellate court may not have the time or opportunity to read the entire transcript and all of the exhibits. Additionally, only the trial judge has an impression of a particular witness, influenced by his or her demeanour, hesitation, or displays of partisanship which are not readily conveyed by printed record.
[98] Kirby J then set out a non-exhaustive list of situations where credibility findings do not bar re-examination of factual matters on appeal. The situations his Honour identified with most relevance in the present case are:
(1)Where there is other unchallenged, unanswered and ostensibly reliable evidence, an adverse credibility finding in respect of one witness or more does not remove from consideration of all the other evidence.
(2)Incontrovertible facts or uncontested testimony can show that the trial judge’s conclusions as to credibility were plainly wrong. They might be based on expressed or implied assumptions about the evidence which careful analysis demonstrates to be incorrect.
(3)The reasons given by a trial judge for rejecting the evidence of a particular witness may go beyond a simple statement about their appearance or demeanour. The additional reasons may demonstrate that the judge took into account irrelevant considerations or has not properly weighed all of the relevant considerations.
(4)A trial judge’s findings may not depend on the demeanour or apparent credibility of a witness but upon the judge’s assessment of objective facts or inferences from proven facts. In this situation, the appellate court is in as good a position as the trial judge to make the assessment and draw the inferences. This reflects an earlier statement from the English Court of Appeal in Coghlan v Cumberland.36 The Court observed that where conclusions on credibility are based on the manner and demeanour of a witness, the appellate court must be
guided by the impression of the judge who saw the witnesses. But where the conclusions are based on circumstances other than demeanour and manner, the appellate court is justified in differing from the judge.37
(5)Where a credibility finding has been made that is so contrary to the rest of the evidence, or is so glaringly improbable, or contrary to the compelling inferences of the case, the appellate court is justified in interfering in findings of fact. The appellate court has the duty to intervene in these situations to prevent the risk of a serious injustice. However, full reasons must be given by the appellate court to demonstrate that, notwithstanding the credibility finding, the result of the trial is palpably, glaringly or compellingly erroneous when viewed
in light of all of the evidence.
36 Coghlan v Cumberland (1898] 1 Ch 704.
37 At 705.
Why did the appellant transfer the apartment to the BK Family Trust?
[99] I have a number of concerns with the approach taken by the Family Court
Judge in relation to this issue.
[100] The adverse findings of credibility against the appellant by the Family Court Judge were based on a mistaken assumption by the Family Court Judge that the Property (Relationships) Bill was about to be enacted when the appellant transferred the apartment. This was a key finding relied upon to support the Judge’s conclusion that the appellant was lying. In my assessment, because that assumption was erroneous, the subsequent finding that the appellant was not credible constituted a significant error on the part of the Family Court Judge.
[101] Counsel for the respondent strongly relied upon the appellant’s cross- examination which is highlighted in [83] above. In my view, that passage of the appellant’s cross-examination is equivocal. It is quite capable of being interpreted to mean that the appellant’s motive in establishing the BK Family Trust and transferring the apartment to that trust was solely confined to tax planning. In my judgement the Family Court Judge needed to have much clearer evidence before he could reasonably take the significant step of determining that the appellant was not to be believed when he said that he took the steps that he took on 30 March 2000 in relation to the apartment solely for tax reasons.
[102] My concerns are reinforced when regard is had to the fact that the appellant’s accountant denied suggestions that the transactions of 30 March 2000 in relation to the apartment were to put the apartment “beyond the reach of” the respondent. There was no suggestion that the accountant’s evidence on this vital point was impeached in any way.
[103] Furthermore, in the absence of evidence from the appellant’s lawyer it is difficult to see how the appellant’s lawyer could be implicated in the Family Court Judge’s finding set out in [74(2)] above.
[104] The trial judge’s findings were not dependent on the demeanour or apparent credibility of the appellant, but rather his assessment of all the evidence relevant to motive. The trial judge does not record anything in particular about the appellant’s demeanour on the stand which influenced his findings on credibility. Therefore, this is a situation where I am in as good a position as the trial court to ascertain the appellant’s motive from written records.
[105] In my assessment, the evidence traversed in [81] to [91] establishes that it was not fair and reasonable for the Family Court Judge to have concluded that the appellant was aware of the impending change of matrimonial property law as at 30
March 2000.38
Did the appellant intend to defeat the respondent’s claims?
[106] I am equally concerned about the Family Court Judge’s findings that the transactions of 30 March 2000 relating to the apartment were motivated by desire to defeat any future claim which the respondent may have to an interest in the apartment.
[107] To set aside a disposition under this section, there must be a conscious desire on the part of the appellant to remove some items of relationship property from the reach of the respondent.39 That must be the object of the transaction or the end which the transaction was intended to achieve. It need not be the sole aim of the transaction, or the dominant aim, it will suffice that it was one of the aims.40
[108] In the context of a debt recovery case, the Supreme Court has held that an intention to defeat another’s interest can be inferred from knowledge of that as a likely consequence.41 Where someone alienates property, knowing that it is likely to hinder or defeat creditors’ recourse to that property, intention can be inferred even if
it is not actually the debtor’s wish to cause loss. This could be applied in the
38 AJV v ABGK at [161].
39 Coles v Coles (1988) 4 NZFLR 621 (CA).
40 R L Fisher (ed) Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis NZ)
at [9.42].
41 Regal Castings Ltd v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433 at [54].
relationship property context, to infer requisite intention for the purposes of s 44(1) from the transferor’s knowledge that the transfer will place assets beyond the reach of the other party.
[109] However, the evidence in this case shows that the appellant was not motivated by a desire to defeat any potential property claims. It is unclear whether he even foresaw this as a likely consequence of the transfers. In cross-examination the appellant expressly denied any knowledge that the transfers would defeat the
respondent’s existing rights in respect of the apartment:42
QYou knew at the time you transferred the apartment to the family trust, that it would stop [the respondent] making a claim against it in future?
ANo, I didn’t because I thought the apartment was mine anyway because I’d paid for by my money which I had before I met her.
...
Q You knew at the time of transfer that it would stop her making a
claim against it in future, didn’t you?
AI didn’t think that was a relevant point because I thought I’d pay for all, the entire proceeds, the entire cost of the apartment had been borne by me, she had nothing to do with it, from money that I had before I met her.
[110] At the time the transfers were made, the appellant simply assumed that the respondent had no relationship property rights in respect of the apartment. Therefore, he could not have had the intention to defeat an interest that he thought did not exist at the time. The elements of s 44(1) were therefore not established.
[111] In addition, I note that when the Family Court Judge touched on the topic of the appellant’s motives for not including the respondent as a beneficiary in the BK Family Trust his Honour appeared to indicate that he was not concerned about the appellant’s motives (refer to Transcript in [87] above). That was not a sound evidential foundation for concluding that the appellant was acting in bad faith when
he established the BK Family Trust and transferred the apartment to that trust.
42 AJV v ABGK Transcript, 17 August 2011 at 176.
[112] For these reasons I have also concluded that it was not fair and reasonable for the Family Court Judge to have concluded that the appellant’s actions on 30 March
2000 in relation to the apartment were “to defeat the claim” of the respondent to that
property,43 and that the disposition of the apartment was made “in bad faith”.44
[113] The appellant’s second basis to the third ground of appeal can be addressed succinctly. His submission that the events of 30 March 2000 could not be “caught” by the Act because they predated the passing of the Act is difficult to reconcile with the judgment of French J in Ryan v Unkovich.45 In that decision her Honour held that the mere fact the dispositions in issue predated the commencement of the Act was not sufficient to dispose of a claim under s 44 of the Act. Her Honour held that
the true issue was what the actual knowledge and intentions were of the person making the disposition, taking into account the law at the time and pending amendment. I respectfully agree with her Honour’s reasons.
[114] I have already found the Family Court Judge lacked sufficient evidence to enable him to find that in this case the appellant had the requisite knowledge and intention to engage s 44 of the Act.
Conclusions
[115] For the reasons set out above I have concluded:
(1)There was not an agreement between the parties created pursuant to s 21P of the Act in relation to Temana.
(2)The Family Court Judge misdirected himself when considering the correct approach to take when assessing the true value of Temana. His ruling in relation to the value of Temana is quashed. No other
order is made in substitution of the Family Court Judge’s ruling.
43 At [179].
44 At [191].
45 Ryan v Unkovich [2010] 1 NZLR 434 (HC).
(3) The Family Court Judge erred when he ruled that the transfer of the apartment from the appellant to the BK Family Trust should be set aside pursuant to s 44 of the Act.
[116] If the parties are unable to reach agreement as to costs, then I will consider their submissions. It should be noted, however, that in my assessment neither party
has had an outright win in this Court.
Solicitors:
Sievwrights, Wellington for Appellant
Sygrove Law, Wellington for Respondent
D B Collins J
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