Mikulicic v Jane
[2020] NZHC 656
•31 March 2020
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-1499
[2020] NZHC 656
UNDER section 39 of the Property (Relationships) Act 1976 BETWEEN
FRANICA MIKULICIC
Appellant
AND
ANTHONY BRYCE JANE
Respondent
Hearing: 5 November 2019 Appearances:
D Chambers QC for the Appellant JGA Day for the Respondent
Judgment:
31 March 2020
JUDGMENT OF GAULT J
This judgment was delivered by me on 31 March 2020 at 12:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel:
Lady D Chambers QC, Barrister, Auckland
Mr G Presland (appellant’s instructing solicitor), Presland & Co Ltd, Waitakere Mr JGA Day, Law North Ltd, Kerikeri
MIKULICIC v JANE [2020] NZHC 656 [31 March 2020]
[1] This is an appeal under s 39 of the Property (Relationships) Act 1976 (the PRA) against the reserved judgment of Judge L de Jong in the Family Court dated 28 June 2019.1 There were a number of issues in dispute in the Family Court, and on appeal, but they primarily related to the status of a property in Ranui where the parties lived for a number of years during their relationship.
Factual background
[2]The parties were in a de facto relationship for 12 years from 2001 to 2013.2
[3] Each party had been in a previous relationship. Mr Jane had three children aged 21, 18 and 13 at the start of the relationship. The 21 year old had a child. Ms Mikulicic had no children.
[4] Ms Mikulicic and her former husband owned the Ranui property as joint tenants.3 The land was 1471 square metres. Ms Mikulicic, her father and her former husband had built a house on that property themselves.
[5]Ms Mikulicic and her former husband separated around February 2001.
[6] The parties initially lived together in a property Mr Jane rented in Blockhouse Bay. In mid-2002, when Ms Mikulicic completed the purchase of her former husband’s share in the Ranui property as part of their relationship property settlement, the parties moved into the Ranui property.
[7] In May 2009 Ms Mikulicic obtained a new job in Northland and moved there. Mr Jane followed in March 2011.
1 Jane v Mikulicic [2019] NZFC 4888.
2 The parties disagreed whether the relationship commenced in January or April 2001 but agreed this was not important. The Judge found the parties began living together after 21 April 2001 when Ms Mikulicic broke her leg and moved into a property Mr Jane rented.
3 This is common ground – the Family Court Judge’s reference to Ms Mikulicic purchasing the property “from” rather than “with” her former husband in 1997 may be a typographical error.
Family Court judgment
[8] In the Family Court, although there were a number of issues between the parties, the main dispute was over the Ranui property. In essence, Mr Jane claimed the Ranui property was the family home and therefore relationship property. He wanted its net value divided equally. Ms Mikulicic mounted what the Family CourtJudge described as a multipronged attack: that the parties agreed it was separate property; if not, she challenged whether it was the family home; alternatively, it was a homestead; or “extraordinary circumstances” justified an exception to equal sharing.4
[9] In a detailed judgment, the Judge addressed the various issues, of which the following four issues were pursued on appeal and are for determination:
(a)Whether there was, as Ms Mikulicic claimed, a valid contracting out agreement relating to the Ranui property either before the 1 August 2001 legislative changes to the PRA or thereafter pursuant to s 21H – concluding there was no valid contracting out agreement.
(b)Whether the Ranui property was relationship property as a family home, homestead, or under s 8(1)(ee) of the PRA5 – concluding the Ranui property is relationship property in terms of s 8(1)(ee).
(c)Whether s 18B compensation is payable for work done on the Ranui property by Ms Mikulicic after separation and for interest and outgoings – concluding it was just to make an award of $5,000 for improvements but not an award for interest and outgoings until or unless there is evidence of the rental value of the property. At the hearing Ms Chambers QC, for Ms Mikulicic, abandoned her claim in respect of increased improvements, leaving Ms Mikulicic’s claims for interest and outgoings in issue.
4 Section 13 of the Property (Relationships) Act 1976 (the PRA). This was abandoned during the appeal hearing.
5 Property acquired after the relationship began for the common use or common benefit of both, if acquired out of property owned by either or both of them before the relationship began.
(d)The value of Mr Jane’s Sovereign life insurance/superannuation policy
– concluding the value was $51,721.55.
Approach on appeal
[10] This Court’s approach on a general appeal is settled following the Supreme Court’s decisions in Austin, Nichols & Co Inc v Stichting Lodestar and Kacem v Bashir.6 The appellate court has the responsibility of considering the merits of the case afresh.7 The appellate court must be persuaded that the decision is wrong,8 but the weight it gives to the reasoning of the court below is a matter for the appellate court’s assessment.9 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. If the 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.10
[11] To the extent that the Judge’s decision involved the exercise of discretion, the approach of an appellate court is that an appellant must show that the Judge acted on a wrong principle, failed to take into account some relevant matter or took account of some irrelevant matter or was plainly wrong.11
Appellant’s case
[12] Before dealing with the specific issues, Ms Chambers emphasised three themes underlying her case. First, she submitted there had been a gross disparity of contributions during the relationship. Ms Mikulicic brought all the assets to the relationship, whereas Mr Jane came with debt. Ms Mikulicic paid off his debt, and his children’s university costs. Mr Jane was only earning enough to meet his living costs.
6 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13] and [16]; and Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31]-[32].
7 Kacem v Bashir at [31].
8 Austin, Nichols at [13].
9 Kacem v Bashir at [31]. No deference is required beyond the customary caution appropriate when seeing the witnesses provides an advantage because credibility is important; see Austin, Nichols at [13], and Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 (CA) at [27]-[32].
10 Austin, Nichols at [16]; and Kacem v Bashir at [32].
11 May v May (1982) 1 NZFLR 165 (CA) at 169-170. See also Kacem v Bashir at [32].
In response, Mr Day, for Mr Jane, submitted this is essentially the exceptional circumstances argument, which is no longer pursued.
[13] Secondly, Ms Chambers submitted Mr Jane had stated that he would not claim Ms Mikulicic’s house. The Judge had made such a finding, and there was no cross- appeal. Ms Chambers submitted that Ms Mikulicic relied on these statements and never completed a s 21 agreement.
[14] Thirdly, she submitted the vacant land adjacent to the house on the property was never used by the couple and was seen by Ms Mikulicic as her retirement nest-egg.
Contracting out agreement
[15] In the Family Court Ms Mikulicic submitted that from as early as June 2001 there was an oral agreement with Mr Jane that the Ranui property would remain her separate property and she would help pay Mr Jane’s significant pre-relationship debts, build his superannuation fund, and support his children, including paying for his daughter’s overseas tertiary education.
[16] Ms Mikulicic also claimed the parties signed an adapted property agreement around June/July 2002 in which Mr Jane agreed, among other things, to the Ranui property remaining her separate property. A copy of the agreement was not produced to the Court but Ms Mikulicic reconstructed a copy of what she believed the agreement looked like.
[17] Mr Jane asserted there was no discussion about the ownership of the Ranui property. Also, his position was that there was no written agreement and, even if there was, it would have no legal effect because it would not comply with the requirements of the PRA.
[18] There is no issue that the Judge identified the relevant law, which changed in 2001. On 29 March 2001 Parliament passed the Property (Relationships) Amendment Act 2001. This included extending the application of the Matrimonial Property Act 1976 to de facto couples from 1 February 2002. The Matrimonial Property Act was renamed the PRA.
[19] The PRA provided that valid and enforceable agreements entered into by de facto couples prior to 1 August 2001 have effect as if the PRA had not been passed.12
[20] It has otherwise been possible to contract out of the PRA since 1 August 2001. De facto partners can make any agreement they think fit with respect to the status, ownership and division of their property.13
[21] As the Judge noted, the first step is to decide whether there is an agreement.14 This involves scrutinising the facts in the context of legal concepts such as “offer and acceptance”, “certainty”, and an intention to create legal relations.15
[22] Secondly, there are specific requirements for an agreement to be valid under the PRA, including that the agreement must be in writing, the parties must have independent legal advice, their signatures must be witnessed by a lawyer, and the agreement must be certified by a lawyer confirming he or she explained the effect and implications of the agreement before it was signed.16 If an agreement does not comply with the specific requirements, the Court may declare the agreement has effect, wholly or in part or for any particular purpose, if it is satisfied that the non-compliance has not materially prejudiced the interests of any party to the agreement.17 The onus is on the party asserting no material prejudice.
[23] The third step involves exercising a judicial discretion as to whether or not to uphold the agreement in whole or in part. Prior to 1 August 2001, the provisions of s 21(10) were relevant to the exercise of that discretion.18 Now, s 21J(4) contains a list of factors to which the Court must have regard when deciding whether giving effect to an agreement would cause serious injustice.
12 Sections 21P and 21R.
13 Section 21(1).
14 Jane v Mikulicic [2019] NZFC 4888 at [36], citing McGill v Crozier (2001) 21 FRNZ 157 at [21].
15 Jane v Mikulicic at [36], citing C v W HC New Plymouth CIV-2010-443-192, 28 July 2010 at [39].
16 Section 21F.
17 Section 21H.
18 McGill v Crozier (2001) 21 FRNZ 157 at [21] and [26].
[24] In relation to whether there was a valid agreement, the Judge observed that the evidence of the parties evolved as each affidavit was filed but accepted both parties and their witnesses had done their best to give their version of events.
[25] The Judge was not satisfied on the balance of probabilities there was a valid and enforceable agreement in relation to the status, ownership or division of property between the parties prior to 1 August 2001. The Judge considered it was unlikely the parties were having meaningful discussions, or committing to agreements/promises, about the legal status of the Ranui property prior to August 2001.
[26] In relation to events after 1 August 2001, Mr Jane had rejected any suggestion the parties discussed ownership of the Ranui property but the Judge considered there must have been at least some discussion. The Judge was satisfied on the balance of probabilities that from, at the very least, when Ms Mikulicic was in the final throes of settling her PRA proceeding with her former husband in 2002, Mr Jane told her and various family members that he would not make a claim against her Ranui property. In particular, the Judge referred to an event at the Ranui property around June 2002 when Ms Mikulicic returned from a meeting with her former husband at which agreement was reached that later led to their settlement. The Judge preferred the evidence of Ms Mikulicic’s brother (Marko) over Mr Jane’s evidence about this. The Judge accepted that Ms Mikulicic’s brother and Mr Jane had a long discussion during which Mr Jane gave an assurance he would not make a claim against the Ranui property.
[27] However, the Judge concluded that a promise or statement not to make a claim against the Ranui property does not in itself amount to an offer, acceptance or intention to create legal relations.
[28]In relation to the claimed written agreement, the Judge said:
[61] I accept Ms Mikulicic wanted security and certainty. I accept the parties purchased a will kit from Whitcoulls that included a draft relationship property agreement. I am not satisfied on the balance of probabilities that the purported agreement was signed by both parties. It is possible Ms Mikulicic’s brother (Anton) saw an agreement on the kitchen bench that had only been signed by Ms Mikulicic. What is difficult to understand about his evidence is why the agreement was headed up “prenuptial agreement” when
Ms Mikulicic’s evidence is that it was simply the standard document set out in the bundle of documents.
[62] In any event, Ms Mikulicic claimed for the first time, late in her evidence, that there were in fact two agreements. One was the standard will kit model agreement signed by her and a second agreement based on the will kit model agreement that both parties had signed. Overall, I was left deeply troubled by Ms Mikulicic’s evidence about the agreement and it’s [sic] existence. I found her evidence on this point was inconsistent, contradictory and selective. I can not [sic] be satisfied on the balance of probabilities that the purported signed relationship property agreement ever existed.
[63] Even if I am wrong about the existence of a signed agreement, Ms Mikulicic’s evidence about the explanatory notes accompanying the relationship property agreement was inconsistent, contradictory and not plausible. At first Ms Mikulicic accepted she would have read the explanatory notes before she drafted the agreement but was then not sure and, by the end of her evidence, was left wondering if she had. My assessment of Ms Mikulicic is that it is more likely than not that she read the explanatory notes.
[64] Ms Mikulicic has held managerial positions that suggest she is an astute person. She is said by her lawyer to have prepared many of her affidavits in these proceedings herself and she attached the explanatory notes to one of her affidavits with a Whitcoulls model relationship property agreement. On any reading of the explanatory notes Ms Mikulicic would have known that, before signing the agreement, the law required both parties to receive independent legal advice, that both their signatures were required to be witnessed by a lawyer, and that the lawyers were required to certify the effect and implications of the agreement had been explained to each of them. This is also reinforced by the effect of her evidence that she wanted a relationship property agreement prepared in 2009 to formalise their situation.
(footnotes omitted)
[29] On appeal, Ms Chambers submitted that there was a quid pro quo by way of oral agreement, namely that Ms Mikulicic would help Mr Jane build his superannuation fund and support his children. She noted that at the time there was not much equity in the house (Ms Mikulicic agreed to pay her former husband $35,000 to purchase his share). Ms Chambers also submitted it was revealing that Mr Jane did not go on the mortgage. Alternatively, she submitted that the subsequent conduct gave effect to or ratified the arrangement, relying on Yates v Yates.19
[30] In relation to the claimed written agreement, Ms Chambers submitted that the Judge placed too much emphasis on one aspect of the brother’s evidence, relating to the “prenuptial” heading on the document he saw, rather than appreciating his evidence
19 Yates v Yates [2015] NZFC 1141.
was corroborative of an oral agreement. She accepted the Judge’s credibility findings but submitted that Mr Jane was not credible either as the Judge had found in relation to the promises made. She submitted that Ms Mikulicic was naïve as to the legal requirements of the PRA.
[31] There were no contemporaneous records of any oral and/or written agreement. The Judge’s findings necessarily involved assessment of the reliability, if not credibility, of the witnesses.
[32] As to the claimed oral agreement in June 2001, the parties were in the very early months of their relationship. Accepting that Ms Mikulicic already wanted to buy out her former husband’s share in the Ranui property, they had yet to agree at least on the price. The parties began living together after 21 April 2001 when Ms Mikulicic broke her leg and moved into the Blockhouse Bay property Mr Jane rented. She claimed that after six weeks living there they tried to move into the Ranui property and Mr Jane agreed to make no claim against the Ranui property before the move (and in the middle of the night the former husband broke in, so they left). Even if Mr Jane said to Ms Mikulicic as early as June 2001 that he would not make a claim against her Ranui property, I agree with the Judge that it is unlikely there was any enforceable oral agreement prior to August 2001. I am certainly not persuaded the Judge was wrong. It was not clear that Ms Mikulicic was paying off Mr Jane’s debts at this early stage – the earliest recorded payment claimed was $2,000 on 10 August 2001. At the hearing Ms Chambers focused on building up Mr Jane’s superannuation fund and supporting his children rather than repayment of debts. But prior to August 2001 even an agreement that, in return for the Ranui property remaining Ms Mikulicic’s, she would help build up his superannuation fund and support his children seems unlikely and is not made out on the evidence. Any agreement thereafter had to comply with the requirements of the PRA.
[33] As to the alternative argument that there was a later oral agreement which the Court should give effect to under s 21H, as mentioned the Judge found that Mr Jane told Ms Mikulicic and various family members that he would not make a claim against her Ranui property, but this did not amount to an agreement. The Judge was of course correct that a unilateral promise does not of itself amount to an agreement.
The discussion around June 2002 involving Mr Jane’s promises as found by the Judge did not also involve any of the claimed promises by Ms Mikulicic. I do not consider the brother’s evidence was corroborative of an oral agreement. I consider the Judge was right to conclude on the evidence that there was no offer and acceptance or mutual exchange of promises. The fact that Ms Mikulicic subsequently contributed to Mr Jane’s debts, superannuation and supported the children does not prove otherwise
– those contributions are not only consistent with a contracting out agreement. Also, Ms Mikulicic’s claim that soon after they drafted (and signed) a written agreement seems inconsistent with there being an intention to create legal relations orally.
[34] Turning to the claimed written agreement, I am far from persuaded that the Judge was wrong to conclude there was no written agreement signed by the parties. Having heard the witnesses, the Judge was best placed to assess their credibility and I have seen nothing that indicates error. I do not accept that the Judge placed too much emphasis on the brother’s evidence relating to the “prenuptial” heading. The Judge was more concerned with Ms Mikulicic’s subsequent evidence. It is hard to accept that Ms Mikulicic prepared an agreement around July 2002 along the lines of the version she handwrote in 2016 based on the will kit and without legal advice. It seems unlikely that she would have prepared any such relationship property agreement and arranged its signature without bothering to get the required legal certification given the presence of the will kit explanatory notes which she likely read and the fact that she had been involved, and had a lawyer, in relationship property proceedings with her former husband in the period immediately before July 2002.
Relationship property under s 8
[35] The Judge next addressed whether the Ranui property was a family home, or homestead, or relationship property by virtue of s 8(1)(e) or (ee) because it was purchased after the relationship began.20 The Judge found for the purpose of s 8(1)(ee) that the Ranui property was acquired for the “common use” of the parties, stating:21
At the time the Ranui property was acquired in Ms Mikulicic’s sole name the parties had been in a de facto relationship for at least a year and were living in the Ranui property with Alex. Ms Mikulicic acquired the property at a time
20 Section 8(1)(e), which is subject to s 9(2), was not in issue on appeal.
21 Jane v Mikulicic [2019] NZFC 4888 at [80].
when she expected the relationship to last. She loved Mr Jane. She intended the family unit would continue to live there and intended the parties would contribute their joint finances to meet the outgoings, including the mortgage over the property that had been refinanced to draw down an additional $35,000 to pay out Ms Mikulicic’s former husband. To this extent the property was acquired for their common use.
[36] Having found the Ranui property was relationship property in terms of s 8(1)(ee), the Judge did not determine whether the home was a family home or homestead.
[37]Section 8(1)(ee) states:
(1)Relationship property shall consist of—
…
(ee) subject to sections 9(3) to (6), 9A, and 10, all property acquired, after the marriage, civil union, or de facto relationship began, for the common use or common benefit of both spouses or partners, if—
(i)the property was acquired out of property owned by either spouse or partner or by both of them before the marriage, civil union, or de facto relationship began; or
(ii)the property was acquired out of the proceeds of any disposition of any property owned by either spouse or partner or by both of them before the marriage, civil union, or de facto relationship began; …
[38] Ms Chambers challenged the Judge’s finding that s 8(1)(ee) applied on two grounds. First, in terms of timing, she submitted that property is acquired as soon as a spouse or de facto partner obtains a beneficial interest in it.22 She submitted that Ms Mikulicic already owned a half share in the Ranui property with her former husband and acquired her former husband’s share in the Ranui property as soon as she obtained a beneficial interest in it when they agreed she would purchase his share. Ms Chambers relied on a letter from the former husband’s solicitor to Ms Mikulicic’s solicitor dated 3 December 2001, which stated:
… There was clear understanding between the parties from the outset that matrimonial property matters would be resolved by Fran purchasing Warwick’s share in the matrimonial home. Figures were discussed and agreed
22 Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis) at [10.7].
verbally, then negotiated down drastically by Fran. Bank approval for advances to Fran was given at an early stage. Since then, negotiations have been slow to make progress, usually because of Fran’s slow response to correspondence forwarded on Warwick’s behalf. Those delays can be documented.
[39] Based on this letter and that Ms Mikulicic separated from her former husband around February 2001, Ms Chambers submitted Ms Mikulicic obtained a beneficial interest in her former husband’s share before the parties’ relationship began in April 2001, before they started living in the Ranui property and before settlement of her purchase from her former husband. Thus, in terms of s 8(1)(ee), the property was not acquired after the relationship began.
[40] Secondly, in any event, Ms Chambers disputed the finding of “common use”. She submitted Ms Mikulicic’s dominant purpose in acquiring the property was to obtain her share of relationship property from her previous relationship and that property had significant meaning for her.
[41] Mr Day submitted that the Ranui property was acquired by Ms Mikulicic after the relationship began and was used for the common use or common benefit of the parties. As to the timing of acquisition, he questioned the weight to be given to the December 2001 letter and submitted that McKay v Smith was directly applicable.23 In that case, Panckhurst J held that a purchase by one joint tenant of a property from the other joint tenant was an acquisition of the whole property, not merely of a half share. Mr Day also relied on Martin v Martin where Courtney J also found that the purchase of a former wife’s share in a property held as joint tenants is to be treated as an acquisition of 100 per cent, rather than of a discrete half share, unless there had been a severance of the joint tenancy prior to the transfer.24 In Martin, severance did not occur until after the relationship began.
Timing of acquisition
[42] In McKay, Mr McKay owned sections jointly with his former partner at the time he commenced a new relationship. He subsequently acquired his former
23 McKay v Smith HC Invercargill CIV-2005-425-153, 22 June 2005.
24 Martin v Martin [2015] NZHC 1823, (2015) 30 FRNZ 568.
partner’s interest in the sections. Mr McKay argued that he had acquired only a half share of the property and that this was insufficient to bring the entire property within s 8(1)(ee). Panckhurst J rejected that argument. He held that Mr McKay’s acquisition of the exclusive interest in the property was to be viewed as an acquisition of the whole, not just a half:25
I agree with Judge Walsh that Mr McKay acquired his exclusive interest in the Brook Street property out of property which he owned before the de facto relationship began. Previously he held an undivided joint interest in that property. In 1992 he acquired an exclusive interest borrowing, I infer, from Westpac in order to do so. As in Geddes and approaching the matter in accordance with the “normal realities relating to the acquisition of property” this was an acquisition out of property previously owned by him. For these reasons I am satisfied that the elements of acquisition and that such acquisition was out of previously owned property, are satisfied. On this analysis it does not matter that Mr McKay previously enjoyed a half interest in the property. His acquisition of an exclusive interest is to be viewed as an acquisition of the whole (not just of a half as Mr Slater contended), because a pragmatic approach is required in determining whether property has been acquired “out of” previous separate property.
[43] In Martin, when Mr and Mrs Martin began their relationship Mr Martin was involved in litigation with his former wife with whom he had owned a farm as joint tenants. In April 1991 the Family Court made orders regarding the couple’s property, including an order that their partnership continue until the partnership assets (principally the farm) had been sold. Subsequently, it was agreed that Mr Martin would purchase the farm. Settlement was concluded by April 1992. Mrs Martin relied on Panckhurst J’s decision in McKay v Smith. Courtney J stated that:26
[22] However, the facts in Geddes v Geddes, to which Panckhurst J referred, were rather different to those in both McKay and the present case in that the husband in Geddes had not previously held any interest in the subject farm. The case was concerned with the property that Mr Geddes used to buy the farm rather than the nature of the interest that he acquired in the farm. To that extent I am doubtful that Geddes did provide the basis for determining Mr McKay's argument. Although I respectfully agree with Panckhurst J’s conclusion I do not find the reasoning in McKay helpful in determining the present case.
[23] In my view, whether Mr Martin acquired the whole farm or a half- share in it depends on the nature of his interest in the farm at the time of the transaction. He and his former wife had owned the farm as joint tenants … Mr Martin therefore had a right to the whole property but not to any particular
25 McKay v Smith HC Invercargill CIV-2005-425-153, 22 June 2005 at [29].
26 Martin v Martin [2015] NZHC 1823, (2015) 30 FRNZ 568. The Court of Appeal declined leave to appeal: Martin v Martin [2016] NZCA 225.
share in it. He and his wife effectively owned the farm together as a single entity.27 Only if their joint tenancy were severed, becoming a tenancy-in- common in equal shares prior to the 1992 transfer, could he have acquired a discrete half-share.
[44] I agree with that analysis. In the case of a joint tenancy, an acquisition by one joint tenant involves acquisition of the whole property interest irrespective of the prior joint interest, whereas if a joint tenancy is severed each party will acquire a discrete share upon severance and a subsequent acquisition will be of the other share(s).
[45] Courtney J went on to consider whether the Martin’s joint tenancy had been severed, referring to the Court of Appeal’s decision in Gateshead Investments Ltd v Harvey.28 In that case, Mr and Mrs Harvey owned a property as joint tenants. They entered into a relationship property agreement which purported to transfer the entire property into Mr Harvey’s name, but the agreement was held to be void because it was designed to defeat creditors. However, the Court held that the joint tenancy was nevertheless severed in equity, so that the parties held their shares as tenants in common. The Court of Appeal stated that in every case where it is contended there has been a mutually agreed severance, the primary question must always be whether the evidence establishes such an agreement.29
[46] In Martin, notwithstanding the 1991 Family Court order resolving the relationship property dispute with the former wife which gave Mr Martin the right to purchase the property on the same (or similar) terms as an acceptable third party offer, Courtney J concluded that the parties’ intention was that the partnership should remain on foot until all its assets were disposed of, and therefore the joint tenancy continued to exist until the farm was transferred to Mr Martin in 1992.
[47] The Court of Appeal considered severance again in A v B, which Ms Chambers relied on. The Court stated that separation does not itself result in severance, but mutual intention may more readily be inferred on separation, at least because the principle of survivorship may no longer serve its intended purpose.30 In that case, the
27 Gateshead Investments Ltd v Harvey [2014] NZCA 361, [2014] 3 NZLR 516 at [10].
28 Gateshead Investments Ltd v Harvey [2014] NZCA 361, [2014] 3 NZLR 516.
29 At [52].
30 A v B [2017] NZCA 25 at [20]-[22].
Court found that severance had occurred, including by reference to without prejudice negotiations that had broken down. The conclusion was reinforced by one party’s termination of the other’s operating authority over a bank account, and the service of a statutory demand.
[48] In Burgess v Rawnsley, the English Court of Appeal held that an oral unenforceable agreement by one joint tenant to sell her interest to a co-tenant for £750 effected a severance in equity, by mutual agreement.31 Mr Honick and Mrs Rawnsley had bought a house together as joint tenants. Later, Mr Honick advised his solicitors that Ms Rawnsley had agreed to sell her interest in the house to him for £750. However, when the solicitors made enquiries, Ms Rawnsley said she was unwilling to sell; she was not satisfied with £750 but wanted £1,000. The sale did not proceed. Three years later, Mr Honick died. His daughter, the plaintiff, claimed as his administratrix she was entitled to a half share in the house. Ms Rawnsley claimed it belonged to her. The trial judge found and the Court of Appeal accepted that Mr Honick and Ms Rawnsley had reached an agreement that he would buy her share for £750 pounds.32 The agreement was not in writing and it was not specifically enforceable. Ms Rawnsley then reneged on it. Nevertheless, the fact of agreement was held to constitute a severance of the joint tenancy, by mutual agreement.33 Lord Denning MR also said that even if there was not any firm agreement, a course of dealing clearly evinced an intention by both parties that the property should be held in common and not jointly, whereas Browne LJ doubted there was enough evidence of a course of dealing and Sir John Pennycuick considered the negotiations, if they could be properly described as negotiations at all, fell far short of warranting an inference of a common intention to sever.34 As Katz J observed at first instance in Harvey v Gateshead Investments Ltd, Burgess v Rawnsley is a clear example of a finding of equitable severance, on the basis of evidence commentators have noted was particularly thin, where the right of survivorship potentially gives rise to injustice.35
31 Burgess v Rawnsley [1975] 1 Ch 429.
32 At 440 per Lord Denning MR, at 443 per Browne LJ and at 446 per Sir John Pennycuick.
33 At 440 per Lord Denning MR, at 444 per Browne LJ and at 446 per Sir John Pennycuick.
34 At 440 per Lord Denning MR, at 444 per Browne LJ and at 447 per Sir John Pennycuick.
35 See Harvey v Gateshead Investments Ltd [2013] NZHC 2253, [2014] 2 NZLR 79 at [35].
[49] In this case, Ms Mikulicic and her former husband were joint tenants in the Ranui property. The timing issue depends on whether their joint tenancy was severed before the parties’ relationship began in April 2001.
[50] The timing argument did not feature in Ms Mikulicic’s opening submissions in the Family Court. It appeared to arise after the December 2001 letter was put to Mr Jane in cross-examination. The Judge did not specifically address the letter nor make a specific finding as to when Ms Mikulicic and her former husband agreed that she would purchase his share. Rather, the Judge found that at the time the Ranui property was acquired in Ms Mikulicic’s sole name the parties had been in a de facto relationship for at least a year and were living in the Ranui property.36 It is evident from the preceding paragraph of the judgment that the Judge was aware of Panckhurst J’s decision in McKay v Smith, but the Judge did not address the issue of severance as in Martin.
[51] Mr Day submitted that the late disclosure of the December 2001 letter and other documents was prejudicial to Mr Jane, and that while the Judge admitted them it can be inferred that the prejudicial manner was considered by the Judge when it came to weight.
[52] On its face, the December 2001 letter states there was understanding between Ms Mikulicic and her former husband from the outset (that is, around February 2001) that matrimonial property matters would be resolved by Ms Mikulicic purchasing her former husband’s share in the Ranui property. Figures were discussed and agreed verbally, then negotiated down drastically by Ms Mikulicic. Ms Mikulicic confirmed the understanding in evidence, which she said was because she and her father had built the house, it was important, and her former husband could not afford the mortgage and did not want debt. Mr Jane acknowledged that he knew about it because she talked about the dispute. But Ms Mikulicic did not say any more in evidence about the dealings with her former husband regarding the Ranui property, including when they occurred or the terms of any verbal agreement.
36 Jane v Mikulicic [2019] NZFC 4888 at [80].
[53] I acknowledge that a mutual intention of severance may more readily be inferred on separation. The question is whether there was sufficient evidence to amount to a mutual intention of severance. As there was no suggestion of an express act of severance, this requires consideration of the second and third ways in which a joint tenancy may be severed derived from the seminal English case of Williams v Hensman, namely by mutual agreement or course of dealing.37
[54] Gateshead was a case of severance by mutual agreement.38 The circumstances warranting an inference of severance involved an executed agreement albeit the agreement was held to be void. Similarly, Burgess involved an oral agreement that was not specifically enforceable. In Martin there was positive evidence in the Family Court order that severance was not intended. A v B was a course of dealing case. Under the course of dealing category of severance it may be possible to infer from negotiations a common intention to sever even though the negotiations break down.39 The references to inferring mutual intention are in that context.
[55] As to severance by mutual agreement, Gateshead and Burgess show that if there is evidence of a common intention to sever a joint tenancy, even if it falls short of constituting a specifically enforceable agreement, severance by mutual agreement may still be found to have occurred.40 For example, the lack of an agreement in writing or terms recorded in writing, required for enforceability of agreements for the disposition of land,41 is not determinative. The primary question must always be whether the evidence establishes an agreement.42 Here, I do not consider the limited evidence of the December 2001 letter and Ms Mikulicic’s evidence confirming the understanding is sufficient to infer severance by mutual agreement before the parties’ relationship began in April 2001. An understanding that matrimonial property matters would be resolved by Ms Mikulicic purchasing her former husband’s share in the Ranui property without agreement as to the terms of sale and purchase would not be
37 Williams v Hensman (1861) 1 J & H 546 at 557, 70 ER 862 (QB) at 867. See also Burgess v Rawnsley [1975] 1 Ch 429 at 438-439; Gateshead Investments Ltd v Harvey [2014] NZCA 361, [2014] 3 NZLR 516 at [36] and [52]; and A v B [2017] NZCA 25 at [21].
38 At first instance, Katz J would, if necessary, also have found severance by course of dealing.
39 A v B [2017] NZCA 25 at [23] citing Burgess v Rawnsley [1975] 1 Ch 429 at 447.
40 Harvey v Gateshead Investments Ltd [2013] NZHC 2253, [2014] 2 NZLR 79 at [39].
41 Property Law Act 2007, s 24.
42 Gateshead Investments Ltd v Harvey [2014] NZCA 361, [2014] 3 NZLR 516 at [52].
binding. Even if the understanding meant that only price was in issue, which is not clear from the limited material before the Court, there was insufficient certainty of terms to create an agreement giving rise to a beneficial interest. The letter also suggests figures were agreed verbally but the letter is dated some ten months after Ms Mikulicic separated from her former husband and the detail it contains is sparse. There is no evidence in the letter or otherwise as to whether figures were agreed verbally before the parties’ relationship began in April 2001, nor what the terms were. Ms Mikulicic did not say. Further, Ms Mikulicic evidently did not consider any figures discussed were binding as the letter suggests she proceeded to negotiate them down. PRA proceedings were commenced in November 2001 and Ms Mikulicic filed her own PRA application in February 2002 – although the details are unknown. Without more, the letter is insufficient to infer an oral agreement, that is with sufficient certainty of terms and an intention to create legal relations, regardless of whether it was specifically enforceable.
[56] Turning to severance by course of dealing, an agreement is not required. The best evidence of a course of dealing would be direct evidence of each of the dealings. The December 2001 letter and Ms Mikulicic’s confirmation of the understanding are hardly that. But the letter does indicate there were negotiations to agree terms whereby Ms Mikulicic would purchase her former husband’s share in the Ranui property. Is that sufficient evidence of a mutual intention to sever the joint tenancy before Ms Mikulicic’s relationship with Mr Jane began in April 2001?
[57] The only timing reference in the letter is to an understanding “from the outset” (that is, around February 2001). The letter states that figures were discussed and agreed verbally, although the letter is not explicit as to when this occurred. The letter states that they, that is the figures, were then, that is subsequently, negotiated down. The timing of this negotiation is unknown. Unless the understanding “from the outset” is sufficient in itself to constitute a course of dealing or the letter implies figures were agreed verbally from the outset, there is no evidence on which to conclude the dealings occurred before Ms Mikulicic’s relationship with Mr Jane began in April 2001. Even taking into account that a mutual intention of severance may more readily be inferred on separation, I am not persuaded on the limited evidence provided that there was a mutual intention to sever the joint tenancy before Ms Mikulicic’s relationship
with Mr Jane began in April 2001. I do not consider the understanding itself is sufficient to infer a mutual intention to sever. Nor do I consider the December 2001 letter sufficiently indicates a course of dealing before Ms Mikulicic’s relationship with Mr Jane began in April 2001 to infer a mutual intention to sever. A further consideration is that, while it is not clear whether the Judge deliberately gave the letter little or no weight, that may well have been open in the circumstances. It appears the Judge refused to admit an earlier letter from the former husband’s lawyer dated 6 March 2001. Other correspondence between the solicitors appears not to have been produced. Also, this is not a case of survivorship causing injustice following separation.
[58] For these reasons, even though the Judge did not address severance which was apparently not a focus in the Family Court, I do not consider the Judge was wrong to conclude that at the time the Ranui property was acquired in Ms Mikulicic’s sole name the parties had been in a de facto relationship for at least a year. Ms Mikulicic acquired the Ranui property after the relationship began whether or not there was a subsequent severance.
Common use or benefit
[59] I turn to whether the Ranui property was acquired for the common use or common benefit of both partners. This is assessed at the time of acquisition – what was intended rather than what was done with the asset.43 The timing of the acquisition relative to the commencement of a relationship may be relevant to what was intended.
[60] If there was a severance after the parties’ relationship began, there are two relevant acquisition dates when considering whether common use or benefit was intended. Ms Mikulicic would have acquired a discrete half share upon severance and then the other half share subsequently – although I consider the timing makes no real difference in this case.
[61] Absent evidence of earlier severance such as during the PRA proceedings commenced in November 2001, I consider Ms Mikulicic acquired the Ranui property
43 Sloss v Sloss [1989] 3 NZLR 31 (CA) at 35.
when she and her former husband signed the consent memorandum dated 28 June 2002. I accept Ms Chambers’ submission that property is “acquired” under s 8(1)(ee) as soon as a spouse or de facto partner obtains a beneficial interest in it.44 Unlike Martin, this was an agreement to purchase, not merely a right to do so. That agreement gave rise to a beneficial interest on 28 June 2002, albeit that the settlement date in the consent memorandum was 2 July 2002 and the legal transfer occurred on 10 July 2002. This is consistent with the fact that the parties moved from Blockhouse Bay into the Ranui property before 2 July 2002, although it is unclear exactly when. It might have been earlier in June 2002 if Mr Jane was receiving mail there.
[62] As mentioned, Ms Chambers submitted that Ms Mikulicic’s dominant purpose in acquiring the property was to obtain her share of relationship property from her previous relationship and that property had significant meaning for her. I accept that would have been part of Ms Mikulicic’s purpose. But I do not consider that negates an intention of common use. I also accept, as Ms Chambers submitted, that neither the title nor the mortgage was put in the parties’ joint names when the transfer took place. Nevertheless, if the acquisition was on 28 June 2002, I agree with the Judge that Ms Mikulicic intended the family unit would (continue to)45 live in the Ranui property and intended the parties would contribute their joint finances to meet the outgoings, including the mortgage. If the acquisition date was earlier, I consider her intention was the same – her evidence was that the parties had tried to move into the Ranui property in mid-2001. They were living together from April 2001. Ms Chambers also relied on Mr Jane’s acknowledgment that Ms Mikulicic viewed the balance of the land as her retirement fund. That may be relevant to her homestead argument, but I do not consider it undermines her intention of common use.
[63] Therefore, I do not consider the Judge was wrong to conclude that the Ranui property was relationship property under s 8(1)(ee).
44 Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis) at [10.7].
45 The Judge said “continue to” apparently by reference to the settlement date of 2 July 2002 by which time the parties had moved in, but nothing turns on this.
Family home or homestead
[64] It is therefore unnecessary to determine whether, if s 8(1)(ee) does not apply, the Ranui property is relationship property as the family home or part of the property is relationship property as a homestead. Mr Day submitted that, if it were necessary, I should remit this to the Family Court. Ms Chambers submitted I should not remit. She submitted that the Ranui property was no longer the family home at the date of separation because the parties had lived and worked together in the Far North for the last two and half years of the relationship. She submitted they only visited the Ranui property occasionally, and it is irrelevant that Mr Jane’s son and his girlfriend lived there. Even if it was the family home, she submitted this was a homestead situation such that the bare land should not be included.
[65] It is sometimes helpful to address alternative arguments in case of an appeal. But here I do not consider that is appropriate. The Family Court Judge did not determine either the family home or homestead issue. They involve intensely fact specific enquiries – likely involving some witness reliability issues – and this Court has not heard the evidence nor had the benefit of the trial Judge’s views. For example, even assuming use by Mr Jane’s son is insufficient, the family home argument requires surveying the pattern of use up to the time the parties ceased to live together,46 which may require going back two and a half years to early 2011, to decide whether the property’s use as the family home is “spent”.47 Ms Mikulicic’s alternative homestead argument requires assessment of whether part of the Ranui property includes “land that is not used wholly or principally for the purposes of the household” over a period of many years.48
Interest and outgoings under s 18B
[66] The Judge noted that s 18B enables the Court to compensate a partner for contributions made to the relationship after the marriage is ended if it is “just”.49 A s 18B award is discretionary. The Court’s discretion is potentially wide but must
46 Evers v Evers [1985] 2 NZLR 209 (CA) at 211.
47 F v F [2017] NZHC 1450, [2017] NZFLR 768 at [31].
48 PRA, s 2 definition.
49 Jane v Mikulicic [2019] NZFC 4888 at [125], citing Ronayne v Coombes [2016] NZCA 393, [2016] NZFLR 672 at [32].
be considered alongside other possible remedies where applicable.50 Section 18B is designed to ensure neither party unduly benefits, or is left disadvantaged, as a result of post separation contributions.51
[67] The Judge declined to make a s 18B compensatory award for a claim for interest and outgoings in respect of the Ranui property until, or unless, there is evidence of the rental value of the property. The Judge considered dismissing this part of the claim altogether and but said that may not be just depending on the outcome of a rental appraisal/valuation.
[68] Ms Chambers submitted that the fact that Mr Jane did not file evidence about rental value should count against him, not Ms Mikulicic. That evidence was needed for his claim to a post-separation contribution because Ms Mikulicic moved back into the Ranui property a few months after separation (that is, a claim for occupation rent), not for her claim relating to interest and outgoings. Ms Chambers accepted there is some connection between the two claims but maintained that the Judge erred. She submitted that the total interest paid by Ms Mikulicic out of separate property was
$104,000 so she should be compensated for half, that is $52,000. She also submitted that in the absence of adequate evidence of the value of occupation rent claimed by Mr Jane or the value of the outgoings (rates, insurance, maintenance) paid by Ms Mikulicic, which she said was $20,000, those claims can be treated as netting off each other.
[69] Mr Day submitted that Mr Jane has never made a claim for occupation rent, but rather has said that such a claim would offset Ms Mikulicic’s claim for mortgage payments. That seems a fine distinction and I do not characterise the Judge’s decision as declining Ms Mikulicic a s 18B award on the basis an occupation rent claim could be made and the claims offset each other. In any event, while I acknowledge that s 18B awards are discretionary, and lack of a rental valuation was a basis to decline or defer any such claim for occupation rent and even to defer Ms Mikulicic’s claim for interest and outgoings, I do not consider it was a basis to decline Ms Mikulicic’s claim.
50 Riddle v Riddle HC Christchurch CIV-2005-409-335, 17 August 2005 at [47]; and Loader v Loader [2003] NZFLR 553 (FC) at [57].
51 Fischbach v Bonnar [2002] NZFLR 705 (FC) at [48].
[70] Given the various relevant factors, this Court is not well placed to exercise the discretion. Ms Mikulicic’s claim for interest and outgoings should be remitted to the Judge for determination whether or not evidence of rental value is forthcoming. Rental value may well be relevant but I say no more about how the discretion whether to make an award should be exercised.
Sovereign policy
[71] Mr Jane had a Sovereign life insurance/superannuation policy when the relationship commenced. He accepts that at the commencement of the relationship the policy had no surrender value. The parties agreed the surrender value of the policy at the end of the relationship was $51,729.55 although Mr Jane sought a modest discount. The Judge found $51,729.55 to be the value of the policy, of which Ms Mikulicic was entitled to receive a half share.
[72] Ms Chambers submitted that the Judge erred in finding the value of Mr Jane’s superannuation was $51,729.55 instead of $59,165. She submitted that Mr Jane gave evidence that he received $59,165 within a year of separation, and the whole of that amount should have been determined to be relationship property. Mr Jane accepted that figure in cross-examination.
[73] Mr Jane’s acknowledgement is not determinative. The evidence does not indicate whether the difference between $51,729.55 and $59,165 is post-separation appreciation. But the value of $51,729.55 ascribed by the Judge was stated by Sovereign to be the value as at 1 October 2013, which was very soon after separation. I do not consider the Judge was wrong to choose this figure.
Result
[74] The Family Court’s order that Ms Mikulicic’s claim for s 18B compensation for post separation contributions (interest and outgoings) be declined unless further evidence is filed is quashed, and the issue is remitted to the Family Court for determination.
[75]The appeal is otherwise dismissed.
[76] I consider the respondent is entitled to costs on a 2B basis but with a modest deduction in respect of the appellant’s success in part in relation to s 18B. If the parties cannot agree, I direct that the respondent file and serve a costs memorandum of no more than three pages within 15 working days, and the appellant file and serve a costs memorandum of no more than three pages within a further 10 working days.
Gault J
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