Knight v Knight
[2022] NZHC 62
•1 February 2022
NOTE: PURSUANT TO S 169 OF THE FAMILY PROCEEDINGS ACT 1980, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B, 11C AND 11D OF THE FAMILY COURT ACT 1980. THIS IS AN ANONYMISED VERSION OF THE JUDGMENT. FOR FURTHER INFORMATION, PLEASE
SEE https://www.justice.govt.nz/family/about/restriction-on-publishing- judgments/
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2021-409-415
[2022] NZHC 62
BETWEEN JOHN KNIGHT
Appellant
AND
MARY KNIGHT
Respondent
Hearing: 8 December 2021 Appearances:
P F Whiteside QC and B K Ferguson for Appellant R L Powell and J Lucas for Respondent
Judgment:
1 February 2022
JUDGMENT OF OSBORNE J
KNIGHT v KNIGHT [2022] NZHC 62 [1 February 2022]
[1] The appellant, John Knight, appeals against a judgment of the Family Court ordering the payment of interim spousal maintenance to the respondent, Mary Knight (the Judgment).1
[2]By the Judgment, Judge J K Hambleton ordered Mr Knight to pay Mrs Knight
$17,000 per month from September 2021 to February 2022.
[3] Mr Knight asserts, on five grounds, that the Family Court erred in fact and law. He asks this Court to quash the interim maintenance order and seeks costs.
[4] Mrs Knight has filed a conditional cross-appeal. In the event this Court is satisfied that the interim maintenance order should be set aside, she seeks an order varying the interim maintenance payable for legal costs to $11,000 (to include a greater sum on account of interim maintenance for legal costs).
Background
[5] Mr and Mrs Knight are 40 and 35 years of age, respectively. They lived together from January 2010 to January 2020. They were married in December 2013 and have one child (born in March 2019). There is an interim parenting order in place whereby Mr Knight has care of the child from 9 am on Friday to 4 pm on Sunday (week 1) and from 9 am on Thursday to 4 pm on Friday (week 2).
[6] The parties have before the Family Court applications for relationship property, maintenance and care of their child.
[7] Under pt 6 Family Proceedings Act 1980 (the Act) the Family Court may make orders for spousal maintenance. Under s 82 of the Act an interim order of up to six months’ duration may be made. The s 82 jurisdiction allows the Court to make more than one interim maintenance order.2
1 Knight v Knight [2021] NZFC 8560 [the Judgment]. The names of the parties have been anonymised both in the Judgment and in this judgment, as have the names of associated entities.
2 Cooper v Pinney [2016] NZHC 1633 at [64]–[65].
[8]Mrs Knight has obtained three such orders:
(a)First order — in May 2020 Mrs Knight sought a monthly sum of
$13,691.62. A consent order was made on 2 June 2020 for payment by Mr Knight of maintenance to Mrs Knight of $1,000 per week for 26 weeks from 25 May 2020. Additionally, a balance in the parties’ joint bank account (approximately $17,000) was to be released to Mrs Knight.3
(b)Second order — in November 2020 Mrs Knight sought a monthly sum of $7,691.62 for her own maintenance and $11,000 per month for legal fees. A consent order was made in December 2020 requiring Mr Knight to pay maintenance of $1,000 per week for 14 weeks commencing 28 December 2020, and a $5,000 catch-up lump sum for five previous weeks. In addition, Mr Knight was ordered to pay a lump sum of $40,000 to Mrs Knight’s solicitors.4
(c)Third order — finally, in March 2021 Mrs Knight sought a monthly payment of $8,096.93 for her own maintenance, a monthly payment of
$7,000 towards her legal fees and a lump sum payment of $20,000 for the fees of a financial expert. Judge Hambleton heard the (third) application on 10 June 2021 and made the order referred to at [2] above and [10] below.
The hearing of the third application
[9] For the appellant, Mr Whiteside QC submitted the Family Court should not have made any further order because:5
(a)the court should have declined to make a third interim order;
3 Mrs Knight reserved her position on whether the bank account sum would be taken into account as relationship property or spousal maintenance.
4 The payment of $40,000 under the second order was subject to Mrs Knight’s same reservation as to the lump sum payment on the first order.
5 Judgment, above n 1, at [37].
(b)there is no jurisdiction to order a lump sum payment;
(c)Mrs Knight’s needs did not justify an award in the sum sought;
(d)Mrs Knight has not demonstrated reasonable efforts to find employment so as to meet her own needs;
(e)Mr Knight’s reduced income in the previous two years weighs against making such an order; and
(f)the legal fees being charged to Mrs Knight are unreasonable and disproportionate to the issues in dispute.
The Judgment (the third interim order)
[10]The Judge ordered:
(a)Mr Knight was to pay to Mrs Knight interim spousal maintenance of
$17,000 per month, ($8,000 for her maintenance; $7,000 for her interim legal fees; and $2,000 for her interim accountancy fees);
(b)payments were to commence on 6 September 2021; and
(c)payments were to continue for six months (finishing on 7 February 2022).
[11] The Judge directed the Registrar to set down the hearing of the application for a final spousal maintenance order before 7 February 2022.
The Judgment – reasoning
[12]Mrs Knight’s application was under s 82 of the Act, which provides:
82 Interim maintenance
(1) Where an application for a maintenance order or for the variation, extension, suspension, or discharge of a maintenance order has been filed, any District Court Judge may make an order directing the
respondent to pay such periodical sum as the District Court Judge thinks reasonable towards the future maintenance of the respondent’s spouse, civil union partner, or de facto partner until the final determination of the proceedings or until the order sooner ceases to be in force.
…
(4)No order made under this section shall continue in force for more than 6 months after the date on which it is made.
(5)An order made under this section may be varied, suspended, discharged, or enforced in the same manner as if it were a final order of the Family Court.
[13] Judge Hambleton said the test under s 82 is what a Judge thinks is reasonable, with the cases turning on their particular facts.6 She noted that an interim order lasts for six months and said it is a “stopgap measure designed to address any injustice or hardship which may arise between the time a substantive application is filed and the substantive hearing”.7 The Judge observed that the decision as to what is reasonable involves a wide discretion and, as explained by Ellen France J in Tsoi v Hua, the Court is entitled to have regard to the statutory principles (set out in ss 62 to 66 of the Act).8
[14] The Judge noted that discretionary considerations in the assessment of an application for interim maintenance (arising from s 64 of the Act) include:9
(a)the reasonable needs of the applicant;
(b)the ability of each party to support themselves, having regard to the division of functions within the qualifying relationship and the earning capacity of each party;
(c)the responsibility of each party for the ongoing daily care of dependent children of the qualifying relationship;
(d)the standard of living of the parties while they lived together;
6 Judgment, above n 1, at [9].
7 At [9], citing L v R FC Auckland FAM-2007-004-1465, 30 September 2008 at [14].
8 At [10], citing Tsoi v Hua [2006] NZFLR 560 (HC) at [19].
9 At [11].
(e)any reasonable period of education/training undertaken by the applicant to be self-sufficient; and
(f)any other relevant circumstances.
[15] In relation to reasonable needs, the Judge referred to the observations of Kόs J in Hodson v Hodson.10 Her Honour noted also the adoption by Kόs J in Hodson of the Court of Appeal’s recognition in Ropiha v Ropiha that payment of a domestic purposes benefit is to be disregarded from the calculation of an applicant’s means.11
[16] Judge Hambleton, referring to L v T [Spousal Maintenance], recognised a respondent may be called upon to utilise capital to pay interim maintenance.12
[17] The Judge referred to the fact that interim maintenance is paid periodically (in contrast to spousal maintenance, where lump sum payments are permitted).13
[18] Finally, in terms of the principles, Judge Hambleton adopted four questions on which to base her analysis:14
(a)what can be identified as the applicant’s reasonable needs and means?
(b)what is the ability of the respondent to meet those reasonable needs?
(c)in assessing the ability of the respondent to meet those reasonable needs, can capital assets be taken into account?
(d)should judicial discretion be exercised to make an interim order?
Mrs Knight’s reasonable needs and means?
[19] Judge Hambleton noted Mrs Knight identified her reasonable needs as being met by a sum of $8,096.93 per month. The Judge said that the difference between Mrs
10 At [12], citing Hodson v Hodson [Maintenance] [2012] NZFLR 252 (HC), at [27]–[29].
11 Hodson v Hodson, above n 10, at [50], citing Ropiha v Ropiha [1979] 2 NZLR 245 (CA).
12 Judgment, above n 1, at [14], citing L v T [2008] NZFLR 975 (HC).
13 At [15], citing Guzman v Osborne [2020] NZFC 1983, [2020] NZFLR 142 at [27].
14 At [16], following M v M FC North Shore FAM-2006-044-2830, 20 March 2008 at [25].
Knight’s budget for the next 12 months and her actual monthly expenditure over the previous three months was explicable for two reasons (relating to some annual expenses not falling within the previous three months and an allowance for the rental of a more suitable home).
[20] The Judge referred to Mrs Knight’s evidence as to an affluent lifestyle the couple enjoyed during the relationship, with examples provided.
[21] The Judge also had regard to Mrs Knight’s assessment of the cost of living in the 2019 calendar year ($120,041.95 per annum or $10,086.83 per month), but noted the expenditure did not include accommodation costs and some other expenses (which were met by a trust or another related entity).
[22]Judge Hambleton recorded Mr Knight had suggested annual expenses of
$70,896 but noted that that did not appear to have been calculated by reference to records of actual expenditure and that Mr Knight had not denied the lifestyle standard referred to by Mrs Knight. The Judge accepted Mrs Knight’s reasonable living needs were $8,000 per month.
[23]The Judge next turned to consider Mrs Knight’s pending costs of litigation.
[24] Mrs Knight had provided a schedule showing the date and quantum of invoices of counsel. The Judge observed that the timely focus of issues between the parties is on the property and maintenance litigation (implicitly leaving to the side costs in relation to care of the child). The Judge concluded that $7,000 was the appropriate amount for the legal fees (rather than the $11,000 pursued at the hearing).
[25] The Judge did not make any deduction from the $7,000 on account of Mrs Knight’s receipt of a benefit or Mr Knight’s payments of child support.
[26]The Judge noted Mrs Knight earned some seasonal income (approximately
$5,000 per annum in the last season).
[27] The Judge also noted Mrs Knight’s status as the primary caregiver for the couple’s daughter would have constrained her ability to be available for secure employment.
[28] The Judge further noted Mrs Knight’s ownership of some limited capital assets that would quickly be eroded were she to have to use them to meet her legal costs.
[29] The Judge said, in relation to the fees of the accounting expert, a lump sum award is not available, and instead set the sum for interim accountancy fees at $2,000 per month.
Mr Knight’s ability to meet Mrs Knight’s reasonable needs (including from capital asset resources)
[30] Judge Hambleton found that Mr Knight had the means to meet an order of interim maintenance.
[31] Her Honour stated (in terms of living expenses) that Mr Knight had received weekly accident compensation payments from June 2019 to November 2020, had received private income replacement insurance payments and likely had some living costs and personal expenses met from related entities (as had occurred during the relationship).
[32] The Judge referred to Mr Knight’s assertion that he has limited income but noted the $120,041.95 in annual expenses assessed (for 2019) by Mrs Knight. The Judge recorded Mr Knight’s evidence that he does not derive income from the entities he controls but that, given his control, such was a matter at his discretion.
[33]The Judge referred to Mr Knight’s capital assets as including:
(a)some funds in bank accounts;
(b)some shareholdings in his sole name;
(c)an interest in Knight Properties Ltd (Properties Ltd) both on his own account and as trustee of his family trust, which has a rental income of
over $200,000 in the previous two years, comparable profit, and a total equity of $1,431,262 (including bank funds of $247,514 and a shareholder current account in the appellant’s name of $221,802);
(d)directorship of Knight Development Ltd (Development Ltd);
(e)an equal shareholding (with Mrs Knight) in Trustees Limited; and
(f)trusteeship of the Knight Family Trust (the Trust), including as advisory trustee with the power to direct distribution (the trust at March 2020 having a net equity of $5,031,245, including bank funds of $2,337,036 and a loan owed to Mr Knight of $401,001).
The exercise of the judicial discretion?
[34] Judge Hambleton recorded the six grounds (above at [9]) that, in Mr Whiteside’s submission, counted against any order of interim maintenance.
[35] The Judge observed that the purpose of an interim award is to provide a stopgap until a substantive assessment (of maintenance) can be considered, a point yet to be reached between these parties. The Judge rejected the suggestion Mrs Knight had had ample time to obtain a fixture of the substantive matters, noting that the parties do not control court scheduling.
[36] The Judge recorded her agreement that any order of interim spousal maintenance has to be for periodical payments.
[37] Judge Hambleton rejected Mr Whiteside’s submission that the focus (regarding Mrs Knight’s budget) should be on actual expenses incurred since separation. She cited the judgment of William Young P in M v B (in the context of the Act directing the Court’s attention to the parties’ shared standard of living when they were living together) — there his Honour observed that the wife’s reasonable needs can fairly be
capped by reference to the shared standard of living at or around (that is, in the years immediately preceding) separation.15
[38] The Judge said that, for Mrs Knight, a three-month window of post-separation expenses is likely a diminished version of the budget that existed prior to separation. The Judge referred to the couple having “lived a very comfortable, affluent lifestyle”.16 She noted a clear differential in the quality of accommodation enjoyed by Mr and Mrs Knight post-separation.
[39] While recognising Mrs Knight’s proportion of responsibility for caring for the child, the Judge noted there was a scarcity of evidence in relation to steps she had taken to obtain employment within those constraints. However, her Honour found the application should not fail on that basis alone given it is an interim matter.
[40] Judge Hambleton recognised Mr Knight’s income had diminished in the last six months pre-separation but that on the evidence provided by Mrs Knight the couple continued to enjoy a high standard of living. The Judge noted Mr Knight has the ability to control the income paid to him from related entities and to require repayment of advances made by him to the Trust.
[41] The Judge concluded Mr Knight has the ability to meet Mrs Knight’s reasonable needs according to the terms of any order.
[42] The Judge did not seek to determine the reasonableness of Mrs Knight’s substantive claims or whether the litigation was “out of control”, as submitted for the appellant. The Judge again explained that interim spousal maintenance is a stopgap measure to address hardship or injustice arising before a substantive application is considered.
[43] The Judge found hardship and injustice may arise if Mrs Knight were required to fund her legal and accounting advice solely from interim spousal maintenance awarded. Her Honour considered such hardship would flow from the impact on Mrs
15 Judgment, above n 1, at [41], citing M v B [2006] 3 NZLR 660 (CA) at [197].
16 At [43].
Knight’s ability to house and support herself and the child after professional fees were extracted, and injustice would flow from an inability to pursue claims she is entitled to pursue.
[44] The Judge stated that no comparable assessment of Mr Knight’s ability to fund his legal or accounting advice had been provided and it had not been suggested that the Judge assess the reasonableness of Mr Knight’s instructions to his counsel or his choice of counsel.
[45] The Judge stated it was not reasonable to suggest Mrs Knight’s advisors should have to defer payment until resolution of the substantive matters.
[46] The Judge concluded, taking all those matters into account, the discretion would be exercised in favour of making an interim spousal maintenance order (in the terms made).
Appeals — the legal regime
Appeal as of right
[47] In filing the appellant’s notice of appeal, counsel assumed there was an appeal as of right. Following the hearing, I realised that might be incorrect. I invited further submissions from counsel.
[48] The issue arises in this way, as summarised by the authors of Family Law Service (NZ):17
Whether or not an interim maintenance order is an interlocutory order is a matter of dispute. The importance of [this] issue turns on the fact that an appeal to the High Court from an interlocutory order requires the leave of the Family Court or District Court.
(footnote omitted)
17 Family Law Service (NZ) (online ed, LexisNexis) at [5.30].
[49] The commentary goes on to refer to a decision of this Court in Norris v O’Sullivan.18 There, Holland J (not following an earlier decision of the Court)19 struck out an appeal of an interim maintenance order on the ground s 82(5) of the Act clearly recognises that an interim maintenance order is not a final order and, by reason of s 71A District Courts Act 1947, leave was required to appeal against the interlocutory order.
[50] Assuming Norris v O’Sullivan to have been correctly decided, its effect has since been abrogated by the repeal of the 1947 Act. The general right of appeal provided under s 124 District Court Act 2016 is in relation to a “decision” of the Court. The word “decision”, by s 123 of the 2016 Act, includes a judgment and an interim or a final order. As the authors of District Courts Practice (Civil) (NZ) observe:20
The wide definition of “decision” includes a judgment made to finally determine a proceeding on its merits, together with interim and final orders.
This makes the right to appeal an interlocutory order plain …
[51] I am accordingly satisfied that Mr Knight was entitled as of right to bring this appeal. The commentary in Family Law Service (NZ) above at [48] has been overtaken by the provisions in the 2016 Act.21
Appeal against an unfettered discretion
[52] Under s 82 of the Act the Family Court has an unfettered discretion both as to whether an order should be made at all and as to the amount, if an order is made.22 There are no mandatory considerations such as those that apply to final spousal maintenance orders — the real question is whether the Judge was plainly wrong.23
[53] This appeal is accordingly one to which the approach in May v May applies.24 To succeed on the appeal, the appellant must show that the Judge acted on a wrong
18 At [5.30], citing Norris v O’Sullivan (1988) 3 FRNZ 278 (HC).
19 Langridge v Langridge (1986) 4 NZFLR 240 (HC).
20 District Courts Practice (Civil) (NZ) (online ed, LexisNexis) at [DCA 2016.123.1].
21 Section 124 District Court Act 2016 applies to an appeal from the Family Court by reason of s 16 Family Court Act 1980.
22 Ropiha v Ropiha, above n 11, at 247.
23 Able v Able [2020] NZHC 177, [2020] NZFLR 8, at [9].
24 May v May (1982) 1 NZFLR 165 (CA); Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32]; Stephens v Johnson [2021] NZHC 423 at [22].
principle, failed to take into account a relevant matter or took into account an irrelevant matter, or was plainly wrong.25
Relevant principles and considerations
[54] Counsel were generally agreed that the framework for analysis adopted by Judge Hambleton was appropriate. Mr Whiteside, however, identified what he submitted were three errors of principle or approach.
Interim maintenance as a “stopgap measure”
[55] Mr Whiteside submitted the Judge was incorrect to identify an interim maintenance order as a “stopgap” measure. He referred to the implicit rejection of that description by Priestley J in FH v LH, where his Honour described the expression as adding an unnecessary gloss to s 82.26 Priestley J considered the description “stopgap” to be an “accurate enough approximation of the underlying policy” but stated it “runs the risk of overlooking the carefully focused comments of the Court of Appeal in Ropiha”.27 His Honour appeared to consider that the expression “stopgap” may wrongly suggest there is a period of adjustment and reflection, akin to a “therapeutic interlude”.28
[56] For my own part, I detect no inaccuracy in Judge Hambleton’s explanation that the purpose of an interim spousal maintenance application is to provide “a stopgap measure designed to address any injustice or hardship which may arise between the time [the] substantive application is filed [and] the substantive hearing”.29 It is a “stopgap” because it temporarily supplies the need.30 That description of the purpose of interim maintenance need not assume the significance of a “gloss”, especially when the Judge in question proceeds to analyse the relevant considerations.
25 Hohaia v Caldwell [2019] NZHC 102, [2018] NZFLR 974 at [6]; Stephens v Johnson, above n 24, at [22].
26 FH v LH [2013] NZHC 1044 at [18].
27 At [18], citing Ropiha, above n 11, at 247.
28 At [18].
29 Judgment, above n 1, at [9]. See also L v R, above n 7, at [14]; Marginson v Bhana [2016] NZHC 2835 at [7]; PB v BJB [2014] NZHC 3165 at [87], citing Nicola Peart (ed) Brookers Family Law
– Family Property (online ed, Brookers) at [FA82.01]. In PB v BJB at [87], Moore J also referred to interim maintenance providing “a financial bridge”.
30 Catherine Soanes and Angus Stevenson (eds) Concise Oxford English Dictionary (11th ed, Oxford University Press, Oxford, 2004) at 1422 defines “stopgap” as a “temporary solution or substitute”.
Multiple interim maintenance orders
[57] In Cooper v Pinney, this Court determined that more than one application for interim maintenance can be made.31 In setting aside the Family Court’s refusal to consider a second application, Mander J nevertheless recognised that a previous interim order must not simply be “rolled over” and allowed to become a de facto substantive order — on each application the Court must undertake a fresh review of the circumstances of the individual case before exercising its discretion to make (or refuse) an order.32
[58] Notwithstanding the jurisdiction to make multiple maintenance orders, Mr Whiteside submitted that, in determining what is just and fair, it is an important consideration that 18 months has elapsed since the application for final spousal maintenance was made, with the consequence that (interim) maintenance orders are being made on the basis of evidence not tested by cross-examination.
[59] As was accepted by both counsel the jurisdiction to make a third interim maintenance order clearly exists. That said, the Court in determining such an application and in the exercise of the discretion will be entitled to take into account a matter such as wilful delay if satisfied it goes to the fairness and justice of a possible award.
Accounting for state support income
[60] In his submissions (but not in the notice of appeal) Mr Whiteside submitted that the Judge had erred by not bringing into account income received by Mrs Knight by way of solo parent support benefit ($375.17 per week) and Working for Families tax credits ($138 per week). The issue was raised for Mr Knight in submissions filed less than two weeks before the hearing and I decline leave to amend the notice of appeal. That said, I will briefly answer the point which would have been raised.
31 Cooper v Pinney, above n 2, at [64]–[65].
32 At [55]–[60].
[61] The leading authority is the Court of Appeal’s judgment in Richardson v Richardson.33 In that case Judge Adams in the Family Court had ordered the payment of spousal maintenance. In doing so, he found the benefits derived by the wife from Work and Income New Zealand (being a domestic purposes benefit) and Working for Families tax credits to be irrelevant.34 The High Court allowed an appeal, finding Judge Adams had erred in disregarding the “state benefits”.35 The Court of Appeal allowed the wife’s appeal — the question for which leave to appeal was granted was answered as follows:36
Judge Adams was right not to take into account the receipt by the wife of a domestic purpose benefit or Working for Families tax credits when assessing her entitlement to spousal maintenance.
[62] In reaching that decision, the Court of Appeal found that a requirement to bring into account both the domestic purposes benefit regime and the Working for Families tax credits scheme, with their complexities, would impose on Courts a very difficult, if not impossible, task. There is nothing to indicate in this case that the circumstances that were weighed by the Court of Appeal in Richardson have altered. Judge Hambleton was accordingly correct to not take into account Mrs Knight’s income and entitlements from her Sole Parent Support benefit and her Working for Families tax credits.
The grounds of appeal
[63]The notice of appeal says that Judge Hambleton erred in five ways:
(a)by granting a third interim maintenance order when Mrs Knight had had ample time to proceed to a substantive hearing;
(b)by giving no or insufficient weight to the fact the parties and the Court had assessed Mrs Knight’s reasonable needs twice previously as requiring payment of $1,000 per week;
33 Richardson v Richardson [2011] NZCA 652, [2012] 1 NZLR 796.
34 At [7].
35 At [9].
36 At [37].
(c)by finding Mr Knight was living in comparative luxury and by disregarding the impact of the sale of Knight Services Ltd (Services Ltd) before the separation, causing substantial reduction of income;
(d)by ignoring Mrs Knight’s obstruction of the Knight Development Ltd subdivision and the funds it would have provided for her reasonable maintenance needs; and
(e)by not recognising Mr Knight’s inability to access cash funds to immediately pay interim spousal maintenance at the ordered rate.
The conditional cross-appeal
[64] Mrs Knight, in the event this Court sets aside the Family Court Judgment, cross-appeals on one ground, namely that the Judge erred by limiting the award of interim maintenance of legal costs incurred in relation to property and maintenance litigation.
[65]I will now address each of the alleged errors.
First alleged error: making a third interim maintenance order
[66] The first ground of appeal was that the Family Court should have refused to make a third order given the time and opportunity available to the respondent to proceed to a substantive hearing in the period since the first order (on 2 June 2020).
[67]Mr Whiteside made a number of points:
(a)notwithstanding the jurisdiction to make multiple interim maintenance orders (as recognised in Cooper v Pinney),37 counsel are unaware of any case in which a third interim maintenance order was made;
(b)there is no valid reason for the substantive maintenance hearing not having been brought on for determination;
37 Above n 2.
(c)conflicts in relation to the evidence on relevant issues have not been able to be tested at interim hearings;
(d)Mrs Knight’s affidavit evidence clearly indicates her expectation her substantive application would be dealt with in 2020;
(e)it is not cost effective for parties to have repeated interim maintenance applications;
(f)the Judge recognised there was no valid reason for delaying final determination of the substantive maintenance application when she directed the Registrar to set it down for hearing by February 2022; and
(g)notwithstanding the Judge’s rejection of the submission that Mrs Knight had ample time to bring on the substantive hearing, she had not sufficiently pressed for the substantive hearing — the previous consolidation of the maintenance and relationship property proceedings did not mean they had to be heard and determined at the same time.
[68] Nothing in Mr Whiteside’s set of points indicates the Judge acted on a wrong principle, failed to take into account a relevant matter or took into account an irrelevant matter, or was plainly wrong. In the course of his submissions in relation to the lack of testing of the conflicting evidence, Mr Whiteside himself observed that this is an important consideration in determining what is just and fair.
[69] The Judge’s decision to not refuse an order in the exercise of her discretion on this ground was plainly within the broad scope of that discretion. The Judge was not required to accept counsel’s submission that Mrs Knight was so responsible for the delay in reaching a substantive hearing that she should be denied maintenance to meet her reasonable needs. The Family Court had appropriately ordered the consolidation of the relationship property and maintenance applications and, as matters stood, both applications needed to be ready for hearing. Contrary to Mr Whiteside’s submission, the consolidation order did have the effect for the time being of anticipating a single hearing for the applications (when they were both ready for hearing).
[70] The Judge was also entitled38 to have regard, as she did, to matters of Family Court scheduling.
[71] Mr Knight has not shown that the Judge’s conclusion was based on ignoring relevant matters or taking account of irrelevant matters, or that it was plainly wrong.
Second alleged error: ignoring the sums ($1,000) set in the previous interim orders
[72] Under this ground of appeal, Mr Whiteside submitted the Judge erred in paying no heed to the fact that on two previous occasions (June and December 2020) the parties and the Court had assessed Mrs Knight’s reasonable needs as requiring payment of weekly interim maintenance in the sum of $1,000, when consent orders to that effect were made.
[73] Mr Whiteside noted Mrs Knight (on the present interim application) offered no evidence as to why she had previously accepted a weekly interim maintenance sum of
$1,000 as reasonable to meet her needs but now has such radically altered circumstances that she needs a weekly sum of twice that amount. Mr Whiteside submitted, similarly, the Judge did not articulate the basis on which Mrs Knight’s reasonable needs justified a doubling of the previous awards of interim maintenance.
[74]This ground of appeal is misconceived for a number of reasons.
[75] First, as the authorities establish (above at [57]), each interim maintenance application must be considered on its own merits, afresh — there is not to be a “rolling over” of such orders. If a Judge on their assessment of the evidence and in the exercise of the discretion decides a fresh maintenance order is required, the level of a prior maintenance order does not establish at what amount the applicant’s reasonable needs (or the extent to which the respondent is able to meet them) should be fixed.
[76] Furthermore, as submitted by Ms Powell on behalf of Mrs Knight, the submission for the appellant ignores the fact that lump payments were negotiated as part of the previous resolutions that resulted in consent orders. As Ms Powell
38 Judgment, above n 1, at [38].
submitted, the decision of the parties to reach those settlements is not a determinant of Mrs Knight’s reasonable needs. By nature it will involve compromise on a range of factors, including litigation costs and the availability of other elements (such as a lump sum payment).
[77] Mr Knight has not shown that the Judge erred by “paying no heed” to the level of the two previous awards.
Third alleged error: a finding as to Mr Knight’s “comparative luxury” and ignoring of the family’s substantially reduced pre-separation income
[78] Under this ground of appeal, Mr Whiteside submitted the Judge had erred in finding Mr Knight was living in comparative luxury and had failed to pay any heed to the fact the family income had substantially reduced before the breakdown of the marriage as a result of the decision by the parties to sell the business of Services Ltd and alter their lifestyle.
[79] I will discuss the two aspects of financial circumstance covered by this appeal ground, namely Mr Knight’s current living standards and the couple’s pre-separation arrangements.
Mr Knight’s current living standards
[80] The first aspect of Mr Whiteside’s submission was that Mr Knight was living in comparative luxury (that is in the post-separation period).
[81] This came through as one aspect of the points that Mr Whiteside made in his written submissions in these terms:
The Appellant consistently has contended that the Respondent’s portrayal of their lifestyle was of a lifestyle much higher than what it actually was. As to his own current lifestyle my submission is it cannot be viewed as extravagant. I rely on his evidence on the third application for interim spousal maintenance. That evidence was ignored by the Family Court Judge, who instead, at paragraph [21] of her judgment recorded that the Appellant had “not denied the lifestyle standard.”
(emphasis added; footnotes omitted)
[82] While the expression “living in comparative luxury” was attributed by Mr Whiteside to Judge Hambleton, as an assessment made by the Judge, it is in fact a quotation from the judgment of Kós J in Hodson where his Honour was discussing the need for focus on the lifestyles the parties enjoyed during their marriage.
[83] Judge Hambleton found: “This couple lived a very comfortable, affluent lifestyle; “going without” is not the point of comparison, and I refer again to the Hodson decision”.39
[84]The full paragraph in the judgment of Kós J in Hodson reads:40
[28] Close reference should be made to the lifestyles the parties enjoyed during their marriage. As Judge Callinicos noted, the reasonable needs of the applicant are not to be so diminished as to create a “sudden and traumatic end to that lifestyle, regardless of what the respondent might wish”. It also seems logical, in assessing what is reasonable, to consider and compare the continuing lifestyle of the respondent. If he is living in comparative luxury, it hardly lies in his mouth to say that the applicant should cut her cloth more closely than he is prepared to do.
(footnote omitted).
[85] I make two observations in relation to that. First, the focus is on the lifestyles of the parties during their marriage. Secondly, the relevance of the respondent’s post- separation lifestyle is in relation to the extent to which it may be reasonable to expect the applicant to “cut her cloth” post-separation.
[86] Contrary to Mr Whiteside’s implicit submission, Judge Hambleton did not find Mr Knight to be living “in comparative luxury”. Rather, in the immediately following paragraphs ([44]–[45]) the Judge identified the contrast in the standard of accommodation being enjoyed by the parties post-separation. In that regard, the adoption of the observation by Kós J in Hodson as to “cloth-cutting” was clearly apt.
[87] The Judge did not err by having some regard to Mr Knight’s comparative situation when assessing Mrs Knight’s reasonable needs.
39 Judgment, above n 1, at [43], citing Hodson v Hodson [Maintenance], above n 10.
40 Hodson v Hodson [Maintenance], above n 10, at [28].
[88] Mr Whiteside (in the part of his submissions I have quoted at [82] above) took the Judge to be referring to Mr Knight’s current lifestyle standard when stating Mr Knight had “not denied the lifestyle standard”. But in the relevant paragraph ([21] of the Judgment) the Judge is referring to the lifestyle standard the couple had previously enjoyed.
Impact of agreed sale of Services Ltd
[89] Services Ltd was a panel-beating business owned and operated by Mr Knight. In his affidavit evidence Mr Knight had referred to it as having generated substantial cash flow which had allowed the couple to live a comfortable lifestyle. Mrs Knight also worked as a contractor for the business. The business was sold and settled in stages during 2018/2019. There was evidence from both parties that a joint decision was made to sell the business to reduce stress in their lives. They provided conflicting evidence as to the expected impact of the sale of Services Ltd on their lifestyle. Mr Knight said he had explained to Mrs Knight that they would have to live on considerably less income and he thought she understood the lifestyle would change. For her part, Mrs Knight deposed that the couple intended (after the sale of Services Ltd) to take their income from another entity, Properties Ltd (which had its indebtedness reduced by an injection of funds following the Services Ltd sale).
[90] The thrust of Mr Whiteside’s submission was that the standard of lifestyle enjoyed by the couple to which Mrs Knight was referring (and the Judge adopted for comparison) was historical, and had been overtaken by an agreement which (through the sale of Services Ltd) would have involved a reduced standard of living.
[91] Ms Powell observed that the evidence of family expenditure provided by Mrs Knight was for the period after the business was sold. To the extent the Services Ltd sale had an impact on the couple’s expenditure up to the point of their separation, she submitted it was reflected in the family expenditure.
[92] It is clear from the Judgment (from [20]) that the Judge’s consideration of the pre-separation lifestyle standard and the cost of living expenditure went hand-in-hand. The Judge assessed Mrs Knight’s reasonable needs for the six months from September 2021 on the basis of Mrs Knight’s evidence of actual expenditure and to her
satisfaction that the interim maintenance she ordered would reflect the pre-separation lifestyle standard.
[93] That approach was principled. The appellant has not established that the Judge ignored relevant matters or took into account irrelevant matters, or was plainly wrong.
Fourth alleged error: ignoring Mrs Knight’s obstruction of the Development Ltd subdivision
[94] Although Mrs Knight’s relationship property application was yet to be determined, the parties recognised that she would have an entitlement in funds to come from the development undertaken by Development Ltd, a residential subdivision of 16 sections at Rakaia.
[95] Both parties gave evidence as to the progress (or lack of progress) in relation to the subdivision following their separation. Mr Knight was working almost full-time on the project following separation and was expecting (he says pursuant to a prior agreement) to be properly remunerated for that work. Mr Knight is of the view Mrs Knight blocked progress by taking a number of positions that did not allow resolution of issues before she filed her third application for interim maintenance.
[96] As it happened, just prior to the hearing of this appeal, Mrs Knight agreed to accept the sum of $257,500 as her entitlement out of Development Ltd (leaving Mr Knight to carry on with the development).
[97] In her evidence, Mrs Knight rejected the suggestion that she had prevented the resolution of issues related to Development Ltd. She referred to her duties as a director of Development Ltd and asserted the time to ultimately obtain resolution reflected the many and complex issues involved.
[98] Mr Whiteside submitted the critical point in relation to this ground of appeal is that had Mrs Knight not been so obstructive in relation to Development Ltd’s subdivision she could have obtained the fund of $257,500 at a much earlier date and thereby had that source of funds to assist in meeting her reasonable living needs.
[99] Ms Powell, while rejecting the suggestion Mrs Knight should be treated as responsible for the delayed resolution of issues relating to Development Ltd, submitted her receipt of a small amount of capital does not cut across her need for maintenance. On present returns, Ms Powell submitted this capital would not have produced a significant flow of income and it would be unreasonable to expect Mrs Knight to expend that capital resource on maintaining herself (and the child) or exhausting it to meet the costs of her relationship property proceeding.
[100] The suggested relevance of the capital sum of $257,500 lies in the proposition that Mrs Knight could have had it available to her by the time of the third interim maintenance hearing as a source of funds to meet her reasonable living costs.
[101] While Mr Whiteside is correct to say that the Judge did not directly address the availability of any funds out of Development Ltd, the Judge did consider the more general issue of the availability of capital assets when recording that “Mrs Knight has some limited capital assets which would quickly be eroded, were she to have to rely on them to meet her costs.”41 The context of that consideration of Mrs Knight’s capital assets is the comparative state of Mr Knight’s capital assets which the Judge later summarised before concluding that Mr Knight has substantial assets and interests on which he could draw to meet any order.42 The equity held in companies or trusts associated with and either fully or partly controlled by Mr Knight dwarfs the capital available to Mrs Knight.
[102] Furthermore, section 66 of the Act provides that certain conduct is relevant to the maintenance of spouses. I note in particular the Court may have regard to conduct amounting to a device by the applicant to prolong their inability to meet their reasonable needs. While submissions were not addressed to this provision, the nature of the submissions for Mr Knight would logically bring it into play. That said, the Judge was entitled in the context of an interim hearing on untested evidence, and having considered Mr Knight’s arguments, to not engage with the implicit proposition that Mrs Knight had deliberately obstructed progress as a device to procure an interim maintenance award. That was especially so when the delayed capital entitlement
41 Judgment, above n 1, at [30].
42 At [35]–[36].
identified by Mr Knight — the $257,500 from Development Ltd — would not have constituted a capital base of a size Mrs Knight could reasonably be expected to resort to.
[103] The appellant has not established the Judge was incorrect in not requiring the respondent to fund her reasonable needs of interim maintenance out of the capital resources available to her (whether immediately or imminently).
Fifth alleged error: Mr Knight’s inability to access cash funds at a monthly rate of $17,000
[104] Mr Whiteside submitted the Judge erred in failing to properly assess Mr Knight’s ability to pay the interim maintenance awarded.
[105]He referred in particular to:
(a)the Judge’s failure to refer to Mr Knight’s monthly child support payments of $500;
(b)the Judge having “paid little heed” to Mr Knight’s significantly reduced income at the time of separation (down to gross earnings of $41,608.80 for the year ending 31 March 2020); and
(c)the Judge ignoring Mr Knight’s unremunerated work on the Development Ltd project.
[106] Mr Whiteside submitted the Judge was incorrect to conclude Mr Knight had access to income and capital resources which would enable him to meet an interim order. He submitted in particular the Judge failed to consider the financial consequences of Mr Knight’s family trust having advanced most of its funds to Development Ltd in 2020 and 2021 (reflected in the fact that the family trust’s funds in bank accounts reduced from $2,337,036 (at 31 March 2020) to $190,946.76 (at 20 April 2021)). Mr Whiteside noted also a family trust debt of $401,001 owed to Mr Knight is a term loan, not repayable on demand.
[107] In relation to Mr Knight’s company, Properties Ltd, Mr Whiteside noted an error in the Judge’s statement of funds in bank accounts (stated to be $247,514, whereas the correct bank funds figure is said to be $151,881, the balance being accounts receivable).
[108] Ms Powell submitted the detailed analysis invited by Mr Whiteside is unnecessary because subsequent events have confirmed Mr Knight’s ability to meet the interim payments ordered. Through steps taken on this appeal to obtain a stay, Mr Knight has been making the payments (albeit into a trust account).
[109] Ms Powell, nevertheless, dealt also with the detailed critique of the Judge’s conclusion that Mr Knight had access to income and capital resources to enable him to meet an interim order. The Judge, having reviewed Mr Knight’s interests in companies and trusts, with summarised financial details, referred to:43
a number of possibilities not limited to requiring repayment of his current account in the company, or his advance to the Trust; he could take income from [ ] Properties Ltd as drawings or he could liquidate an asset owned by that company.
[110] Ms Powell noted the evidence that Mr Knight meets his expenses through Knight Properties Ltd and through the family trust, but stated that he has not filed up to date details of his income derived from his closely associated entities. But, more significantly, she submitted the Judge’s emphasis was upon Mr Knight’s ability to access capital out of the associated entities.
[111] Ms Powell cited as an example the situation of Properties Ltd of which Mr Knight is sole director and sole shareholder. The 2021 draft financial statements for that company showing:
(a)net income (after taxation) of $184,371;
(b)total equity of $1,615,634;
(c)cash in the bank of $66,534;
43 Judgment, above n 1, at [52].
(d)a shareholder current account in Mr Knight’s name of $225,479; and
(e)a shareholder current account in the name of the family trust of
$2,727,323.
[112] Ms Powell emphasised Mr Knight’s legal control over the trust, in which he has power as Advisory Trustee to determine in his absolute discretion how income should be distributed.
[113] Ms Powell referred to the financial situation of the family trust (in the draft 2021 financial statements) as being:
(a)trust capital of $5,031,574;
(b)bank funds of $322,276;
(c)an investment of $40,900;
(d)a beneficiary advance account in Mr Knight’s name of $781,986;
(e)a debt to Mr Knight (a term loan) of $401,001; and
(f)a debt owed by Development Ltd to the family trust of $838,830.
[114] Ms Powell referred also to evidence of two sizeable investments arranged by Mr Knight in property syndicates ($448,693 and $193,793, respectively), and a loan to Mr Knight’s brother and sister-in-law from the family trust of $277,825.
[115] It is clear, notwithstanding some matters of detail which may have been misunderstood or misstated by the Judge, that the Judge’s overall conclusion, as to Mr Knight’s ability to sustain the level of ordered monthly payments from the capital resources available to him, was inevitable. The combination of Mr Knight’s legal control, the value of capital and equity, and the history of his dealings all support the Judge’s conclusions.
[116] The appellant has not shown that the Judge’s conclusion (leaving aside some matters of detail which could not have affected the overall assessment) was plainly wrong.
[117] By reason of the above findings, the respondent’s (conditional) cross-appeal does not need to be considered.
Orders
[118]I order:
(a)the appeal is dismissed;
(b)the trust arrangement referred to at para [4](b) of the interlocutory order dated 17 November 2021 is terminated, with the payments required under the Family Court judgment dated 24 August 2021 to resume and be made in terms of that judgment for the stipulated term, with leave to the parties to apply for further directions relating to the sum held by Argyle Welsh Finnigan, should further directions be necessary; and
(c)the appellant is to pay to the respondent the costs and disbursements of the appeal on a 2B basis (without a certificate for second counsel), but with no allowance for the costs of the interlocutory application dated 1 October 2021.
Osborne J
Solicitors:
Wynn Williams, Christchurch Meares Williams, Christchurch
Barristers:
Peter Whiteside QC, Christchurch Rhonda Powell Barrister, Christchurch
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