L-A T S v C B S
[2015] NZHC 1768
•30 July 2015
PURSUANT TO S 35 OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO
11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE - COURT/LEGISLATION/RESTRICTIONS - ON - PUBLICATIONS.
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2013-470-000585 [2015] NZHC 1768
IN THE MATTER of the Property (Relationships) Act 1976 BETWEEN
L-A T S Plaintiff
AND
C B S Defendant
Hearing: 24 and 28 July 2015 Appearances:
N S Elsmore for Plaintiff
No appearance for Defendant
V Scott, as amicus curiaeJudgment:
30 July 2015
JUDGMENT OF ANDREWS J
This judgment is delivered by me on 30 July 2015 at 10 am pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
L-A T S v C B S [2015] NZHC 1768 [30 July 2015]
Background
[1] Mr and Mrs S were married in 1986 and their relationship finally ended in October 2005. At that time they owned, as a partnership, a kiwi fruit orchard near Whakatane.
[2] On 22 May 2013, L-A T S (Mrs S) applied in the Family Court at Tauranga for orders under the Property (Relationships) Act 1976. This was after C B S (Mr S) refused to agree to the sale of the orchard. Mrs S subsequently applied to the Family Court for an order authorising the Registrar to sign documents necessary to complete the sale. On 25 October 2013, the proceeding was transferred to this Court for determination.1
[3] On 17 December 2013, the orchard partnership was placed in receivership by its bankers. The receivers sold the orchard, and the net proceeds of sale have since been held by independent solicitors, Burley Attwood, pending determination of the parties’ respective shares.
[4] On 23 January 2015, pursuant to a direction made by Associate Judge Bell on
10 December 2014, Mrs S filed a statement of claim in this Court, seeking orders as to the division of property. On 24 April 2015, the proceeding was set down for hearing on Friday 24 July 2015.
Representation
[5] Mrs S has at all times been represented by counsel, Mr Elsmore. It appears from the Family Court documents that Mr S was represented in that Court by counsel, Ms Gravatt. However, Mr S has not been represented in this Court. He did not have representation for the hearing on 24 July 2015, but received assistance from Mrs V Scott, who was present at Court as duty solicitor.
[6] As Mrs Scott’s participation was of considerable assistance to the Court, I
indicated that it was appropriate for her to be appointed as amicus curiae for any subsequent hearings.
1 L-ATS v CBS [2013] NZFC 8758.
Hearing on 24 July 2015
[7] The start of the hearing was delayed so that Mrs Scott could discuss the issues with Mr S, and with Mr Elsmore. When the hearing began, I was advised that only three matters were in issue. These were:
(a) the sum of $500,000, which Mr S claimed was a partnership debt owed to his father;
(b) a section at Westview; and
(c) outstanding partnership debts.
[8] I heard submissions in relation to the alleged partnership debt. Mr Elsmore referred me to the partnership accounts for the 2012, 2013, and 2014 years. The
2012 accounts recorded an advance of $500,000 from Mr S Snr. The 2013 accounts did not record an advance from Mr S Snr, but did record the sum of $500,000 credited to Mr S’s overdrawn current account. The 2014 accounts again did not record an advance from Mr S Snr, and the closing balance of Mr S’s current account from 2013 was carried across in the 2014 years.
[9] It is apparent that the accounts were prepared by a professional accountant, and there appears to be no basis on which I could doubt their integrity.
[10] At that hearing, Mrs Scott advised that Mr S had instructed her that he was unaware, until the day of that hearing, that the loan featured in the accounts, and had been forgiven, and that he did not know why it was forgiven. However, she advised that Mr S accepted the accounts as they stood.
[11] I indicated to counsel and the parties that I accepted the submission for Mrs S that the advance from Mr S Snr had been forgiven and did not need to be considered further.
[12] Regarding the Westview section, it was my understanding that I was to be asked to direct that one of the parties take that section. I advised the parties that if
Mr S wished to dispute the nominal value ascribed to the section by Mrs S’s solicitors ($250,000) then I would receive evidence from the agent with whom the section had been placed for sale.
[13] Concerning the alleged outstanding partnership debts, Mr Elsmore advised the Court that Mrs S accepted that any outstanding partnership debts have to be paid. He had ascribed a nominal value of $40,000 for such debts. However, Mr S contended that the debts are greater than that.
[14] At the conclusion of the hearing on 24 July 2015, I directed that any evidence as to the quantum of the outstanding partnership debts was to be provided to the Court and to Mr Elsmore no later than 2.30pm on Monday 27 July 2015. The hearing was adjourned to 10 am on Tuesday 28 July 2015, to deal with outstanding matters.
Hearing on 28 July 2015
[15] Mr S did not attend the hearing. He left a message on the Registrar’s telephone to the effect that he was not well. Mrs S appeared, with Mr Elsmore as counsel, and Mrs Scott was in attendance.
[16] Mrs Scott advised me that she had had limited contact with Mr S and he had not responded to messages to call to her. However, he had provided her with some signed instructions.
[17] In the circumstances, I advised Mrs Scott that she would be appointed as amicus curiae for the hearing on 28 July 2015, and any associated preparation.
Waterview section
[18] Mrs Scott advised that Mr S had confirmed to her that he wishes to take the Waterview section, at a value of $240,000. Mr Elsmore confirmed that that is acceptable to Mrs S. Accordingly, I direct that the section is to be transferred to Mr S, and its value at $240,000 taken into account in calculating the parties’ respective shares in the partnership property.
Provision for unpaid partnership debts
[19] Mr S has not provided any evidence as to the partnership debts he alleged were outstanding. He says that he has not had enough time since Friday to obtain the evidence.
[20] Mr Elsmore submitted that, having gone through the partnership accounts and the receivership accounts, he has not been able to identify any outstanding partnership debts. He submitted that the current provision for debts ($40,000) is more than adequate.
[21] I accept that there is no indication on the evidence presently before the Court that there are outstanding partnership debts which cannot be covered from the
$40,000 provision. However, as I indicated to Mr Elsmore at the hearing, it would be appropriate for the provision to be maintained for a period of three months, so that any debts which are identified can be paid before final distribution of the partnership assets.
$500,000 advance
[22] Mrs Scott advised that Mr S had instructed her that, notwithstanding his having accepted at the hearing on 24 July 2015 that the partnership accounts showed that the advance of $500,000 had been forgiven, and credited against his current account, it was intended that the advance was to be a separate debt, personal to him, and forgiveness of the debt was to be taken into account in his inheritance from his father’s estate. Mr S contends that the partnership accounts should be re-worked so that the advance and forgiveness are removed from the partnership property calculations.
[23] Mr Elsmore submitted that Mr S is attempting, at the very last minute, and without any evidence in support, to re-plead his defence, to introduce a new positive defence in the proceeding. He submitted that this defence, that the advance is separate property, is entirely contrary to everything Mr S has said thus far in the proceeding. In particular, he referred me to Mr S’s narrative affidavit sworn on
27 July 2013, and filed in the Family Court, in which he said at paragraphs 11 to 13:
11 My father initially advanced [Mrs S] and I $200,000 during the
1990s and subsequently forgave $154,659 of this advance, leaving a balance as at 30 June 2000 of $35,341. Further advances have been
made as follows:
a. September 2007 of $100,000 b. December 2007 of $100,000 c. August 2009 of $200,000
d. May 2011 of $40,000
12$50,000 of my father’s advances were used to replant the last 25 acres of our orchard (which was in [sic] reflected in the registered valuation as improvements,) meet bank payments and tax liabilities of the orchard partnership.
13 The current balance of advances to my father is therefore $475,341.
[There is a handwritten notation on this document, initialled by Mr S:
“+ $10,000 on June mid GST”]
[24] Mr S exhibited a copy of the 2013 partnership accounts as exhibit “A” of his
affidavit.
[25] Mr Elsmore submitted that until now, Mr S had never contended that the advance was anything but a partnership debt, and had never asserted that it was a personal debt and part of his inheritance. He also submitted that notwithstanding the passage of time since his affidavit was filed in the Family Court, Mr S had done nothing to suggest that he resiled from that evidence.
[26] Mr Elsmore further submitted that it would be unfair, and prejudicial to Mrs S, for Mr S to be allowed to re-plead his defence at this very late stage. He also submitted that Mrs S’s case had been run on the basis of the pleadings filed in the Family Court and then in this Court. In the event that Mr S were to be allowed to re- plead, then Mrs S would be bound to do so, as well. In all the circumstances, he submitted that Mr S’s (in effect) application to re-plead his defence was contrary to the purposes and principles of the Property (Relationships) Act, which aims to achieve resolution of relationship property disputes in an efficient and cost-effective manner.
[27] Mrs Scott pointed out, by way of response, that Mr S had with him at Court on 24 July 2015 a letter from the accountants for Mr S Snr’s trust, which listed a series of advances and confirmed Mr S Snr’s instructions that they were to come out of Mr S’s inheritance. However, Mr S had taken that letter with him, and it was not available to be presented to the Court.
[28] After careful consideration, I have concluded that the proceeding should not be further delayed. As Mr Elsmore pointed out, Mr S’s present contention is contrary to the manner in which his case has been run, both in the Family Court and in this Court. This is despite there having been ample opportunity for him to seek to re-plead it earlier.
[29] I record Mrs Scott’s advice that Mr S had expressed dissatisfaction with his earlier counsel. As I understand it, Mr S says that he was told that he had to say that the advance was to the partnership, because that was how the accounts portrayed it.
[30] On that point, I make the following observations. First, Mr S’s comment is inconsistent with what he said through Mrs Scott on 24 July 2015, which was that he did not know, until that day, that the advance was shown in the accounts as being to the partnership. Secondly, at the time he swore his affidavit, Mr S was represented by counsel experienced in relationship property matters. I find it difficult to accept that Mr S could have sworn an affidavit which he did not believe was true.
[31] Further, I note that following a face-to-face case management conference on
23 March 2015, Associate Judge Bell made directions as to filing evidence for the substantive hearing. In doing so, his Honour said:
By 21 April 2015 [Mr S] is to file and serve any affidavits which set out evidence in opposition to the application. I record that a significant matter in dispute is an alleged debt to the R S Family Trust. Mrs S’s case is that there is no such debt. She says that if there was such a debt the trustees are no longer seeking repayment. On the other hand, Mr S says that the debt is due and owing and that it needs to be brought into account in the division of the relationship property. If Mr S wishes to produce further evidence on that question, he will have the opportunity to do so before 21 April 2015. Likewise, he will have the opportunity to adduce any further evidence on all other relationship property issues.
[32] Mr S did not file any evidence, and he did not take any steps to correct what he must now be saying was an incorrect statement of his position regarding the advance.
[33] I have concluded, as I did on 24 July 2015, that the advance from Mr S Snr was to the partnership, and that it has been forgiven. It does not need to be considered further. The upshot is that there is now a difference of only $24,246 in the parties’ respective current accounts in the partnership, with Mr S’s recorded at
$243,322 and Mrs S’s recorded at $219,076.
[34] I am not prepared to further adjourn the hearing. Mr S has had ample opportunity before now to put his case, but he has not done so.
Shares in Eastpak
[35] A final matter to deal with is the partnership’s shares in Eastpak. I order that the shares be sold and the proceeds held by Burley Attwood pending distribution in equal shares.
Result
[36] I make the following orders:
(a) The Waterview section is to be transferred to Mr S, and the value ($240,000) taken into account in calculating the parties’ respective shares in the partnership property.
(b) The $40,000 provision for unpaid partnership debts is adequate.
However, that sum is to be retained by Burley Attwood and not distributed until three months following distribution of other partnership property assets, so that there can be certainty that all outstanding partnership debts have been met.
(c) The proceeding is not further adjourned for the matter of the $500,000 advance from Mr S Snr to be reconsidered. The advance was to the
partnership and has been forgiven. Its impact is reflected in the partnership accounts for the 2014 year, in the parties’ respective current accounts.
(d) The partnership’s shares in Eastpak are to be sold and the proceeds
held by Burley Attwod pending distribution in equal shares.
[37] Mr Elsmore is to submit a draft order for consideration.
Andrews J
0
0
1