Murphy v Kliangklao-Welsh
[2014] NZHC 3120
•8 December 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1697 [2014] NZHC 3120
UNDER the Property (Relationships) Act 1976 BETWEEN
IAN ROBERT MURPHY Appellant
AND
KANLAYARAT KLIANGKLAO- WELSH
Respondent
Hearing: 28 October 2014 Appearances:
Mr D Singh for Appellant
Mr R Rao for the RespondentJudgment:
8 December 2014
JUDGMENT OF THOMAS J
This judgment was delivered by me on 8 December 2014 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Solicitors:
Shean Singh, Auckland. Jeremy Sutton, Auckland.
MURPHY v KLIANGKLAO-WELSH [2014] NZHC 3120 [8 December 2014]
Introduction
[1] The appellant, Mr Murphy, has appealed from the judgment of Judge Adams delivered in the Family Court at Auckland on 20 June 2014 following a three day hearing on 11-13 June 2014.1
The judgment under appeal
[2] The respondent, Ms Kliangklao-Welsh, had applied for orders dividing the parties’ relationship property pursuant to the Property (Relationships) Act 1976 (the Act).
[3] At the hearing Mr Murphy conceded the existence of a de facto relationship, which he had hitherto denied, and withdrew his claim that the parties had entered into a binding oral relationship property agreement.
[4] The Judge rejected Mr Murphy’s claim of misconduct on the part of Ms Kliangklao-Welsh and his claim that circumstances made equal sharing repugnant to justice.
[5] The Judge identified, valued and divided the parties’ relationship property in equal shares. He found that Mr Murphy was wrongfully in possession of jewellery belonging to Ms Kliangklao-Welsh which she had inherited from her mother and ordered that he compensate her for its value.
[6] To the extent that he had jurisdiction to do so the Judge included assets in the name of Ms Kliangklao-Welsh in Thailand as relationship property. Real property in Thailand owned by Ms Kliangklao-Welsh could not be included as it was outside his jurisdiction.
Grounds of appeal
[7] The appeal is on grounds that the Judge erred in finding that:
1 Kliangklao-Welsh v Murphy [2014] NZFC 5024.
(1)some moveable property in Thailand was not relationship property and that the proceeds of sale of a house at Valentine Street ($48,566.62) were relationship property;
(2)$135,787 transferred out of New Zealand by Ms Kliangklao-Welsh was not relationship property;
(3)funds transferred to Ms Kliangklao-Welsh’s mother or third parties and funds applied in respect of a motor vehicle purchase were not relationship funds;
(4)Ms Kliangklao-Welsh did not covertly divert relationship funds out of the country and there was no extraordinary circumstance such that it would be repugnant to justice for equal sharing (ss 13 and 18A of the Act).
[8] The complaints fall under three heads: Valentine Street and whether it was the family home; the jewellery; and alleged misconduct on the part of Ms Kliangklao- Welsh. I will examine these issues separately before returning to address each ground of appeal.
Approach to general appeal
[9] On a general appeal, the appellate court has the responsibility of considering the merits of the case afresh.2 In Austin, Nichols & Co Inc v Stichting Lodestar, Elias CJ stated that the appellate court must reach its own opinion “even where that opinion is an assessment of fact and degree and entails a value judgment”.3 She continued:4
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. In such circumstances it is an error for the High Court to defer to the lower Court's assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.
2 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31].
3 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
4 At [16].
[10] This does not mean that the appellate Judge should be “uninfluenced” by the lower court. 5 What influence the lower court’s reasoning should have is for the High Court’s assessment. As Elias CJ stated in Austin, Nichols:6
The High Court Judge was obliged to reconsider the issue. He was entitled to use the reasons of the Assistant Commissioner to assist him in reaching his own conclusion, but the weight he placed on them was a matter for him.
Appeals from the Family Court
[11] Under s 39 of the Act, s 75 of the District Courts Act 1947 applies to appeals from Property (Relationship) Act decisions made in the Family Court. Section 75 provides that appeals are by way of rehearing.7
[12] The Court is not bound to accept the Family Court’s findings of fact and can exercise any power or discretion available to the Family Court. In accordance with Austin, Nichols, the Court must exercise its own judgement but, where appropriate, the Court may give weight to the findings of the Family Court.8
[13] K v V concerned an appeal from a Family Court decision on relationship property.9 Collins J gave an overview of the legal principles applicable to reviewing a lower court’s findings of fact.10 He stated:
[95] In R v Munro the Court of Appeal discussed the extent to which an appellate court should defer to findings of fact on credibility made by a Court at first instance. After discussing some of the difficulties in assessing credibility at first instance, the Court concluded that assessing credibility from a written transcript will not achieve better outcomes. Although credibility assessments are not sacrosanct, there are recognisable advantages in seeing and hearing witnesses in the context of the entire trial. This aspect of Munro was affirmed by the Supreme Court in Owen v R recognising the advantages that lower courts have in assessing the honesty and reliability of witnesses.
(footnotes omitted)
5 Kacem v Bashir, above n 2, at [31].
6 Austin, Nichols & Co Inc v Stichting Lodestar, above n 3, at [17].
7 See also High Court Rules, r 20.18.
8 K v V [2012] NZHC 1129 at [37].
9 Ibid.
10 At [95]-[98].
The Valentine Street property
Was Valentine Street the family home?
[14] Mr Murphy purchased the Valentine Street property in March 2004 using his own savings and a mortgage of around $149,000.
[15] Section 2 of the Act defines family home as:
family home—
(a) means the dwelling house that either or both of the spouses or partners use habitually or from time to time as the only or principal family residence, together with any land, buildings, or improvements appurtenant to that dwellinghouse and used wholly or principally for the purposes of the household; and
(b) includes a joint family home
[16] It was only part way through the hearing in the Family Court that Mr Murphy conceded there had been a de facto relationship within s 2D of the Act. At the same time he withdrew his claim that there had been an oral agreement between the parties whereby Ms Kliangklao-Welsh agreed she would not make any claim in connection with Valentine Street or if she did, the real property she owned in Thailand was to be taken into account.
[17] Given Mr Murphy’s change of position the Judge proceeded on the basis he was not required to make any explicit finding that Valentine Street was relationship property. He did so implicitly, however, awarding Ms Kliangklao-Welsh $62,496 for her half-share in the relationship property, which included half of the proceeds of the sale of Valentine Street.
[18] The Judge recited the factors on which he “would have” relied (and, in fact, presumably did rely) when making that determination. These were that Mr Murphy purchased Valentine Street so he and Ms Kliangklao-Welsh and her son could live there. While Ms Kliangklao-Welsh and her son did not move in immediately, that was to enable him to complete his year at school. During this time, Mr Murphy visited Ms Kliangklao-Welsh at her accommodation and she spent weekends at Valentine Street. After that period, she went to live at Valentine Street permanently.
[19] Having perused the evidence I am independently satisfied that Valentine
Street was the family home.
[20] Mr Murphy acknowledged that he and Ms Kliangklao-Welsh had lived together for about five months prior to the purchase of Valentine Street and that, once he moved into the property, she kept all her possessions there. As well as the factors identified by the Judge, I also take account of the evidence from Ms Kliangklao-Welsh that she went to view a number of properties with Mr Murphy, she believed Valentine Street was acquired for them as a family and she contributed towards the costs of the property. I say that notwithstanding Mr Murphy’s denial of these factors.
[21] As Fogarty J observed in Newman v Lee, persons who occupy separate property as homes with their de facto partners or spouses do so at their own risk.11
Did Valentine Street cease to be the family home once it was sold?
[22] Relying on Foote v Rea,12 Mr Singh submitted that a property which had been owned by one of the parties prior to commencement of the relationship retains separate properties status once the parties move out. Mr Singh noted that at paragraph 44 of that decision the High Court found that classification of the property as a family home in terms of s 8(1)(a) must have necessarily ended at the point at which the property was sold. It then became separate property unless classified as relationship property pursuant to any other provision of the Act.
[23] However, the High Court’s finding in Foote cannot be read in isolation. Importantly in that case, after the property at issue was sold, the parties moved into another property (still as a married couple) which then became their family home. The Judge’s finding was therefore simply a recognition of two key principles, namely, there can be only one family home, and the characterisation of a property as a “family home” or separate property is dependent on the use of the property as at the date of separation. In this case, then, the important fact is that when Mr Murphy
and Ms Kliangklao-Welsh’s relationship ended in March 2009, the Valentine Street
property was being used as the family home.
[24] For similar reasons, the case of Oakley v Oakley relied on by Mr Singh also does not assist.13 In that case, while the property had previously been used as a family home, by the time the parties separated, they had moved out of that property and into another home. Somers J therefore rejected the submission that the property retained the status of the matrimonial home notwithstanding that the parties had moved into a different home by the time they separated:14
The characterisation of the property falls to be made as at the date the parties separated … Nor do I think it possible to say that having once gained the character of matrimonial property — the home — it thereafter retains that character. That is because its classification in earlier years as the matrimonial home depended on its user. Once it ceased to be the home it reverted to the character it had at marriage.
[25] Therefore, while Mr Rao was prepared to concede that there was an issue as to whether Valentine Street was the family home, I am not persuaded that he was correct to do so.
[26] Mr Rao also relied on s 8(1)(ee) of the Act which provides that relationship property includes:
(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;
[27] It is undisputed that the parties’ relationship began in June 2003 (around a year before the Valentine Street property was purchased), and that the property was acquired out of property Mr Murphy owned before the relationship began. Whether
the property is relationship property pursuant to s 8(1)(ee) therefore depends on whether it can be said that it was acquired “for the common use or common benefit” of both parties. Given that I have found that the property is relationship property by virtue of being the family home under s 8(1)(a), I do not need to decide this point. But if I did, I would likely find that on the balance of probabilities the property was purchased for their common use or benefit. Despite Mr Murphy’s claim that he bought the property as an investment, the Judge considered that Mr Murphy
“purchased the Valentine Street [property] so that they would live there”.15 There
would be nothing to lead me to a different interpretation of the evidence.
Were the proceeds from the sale of Valentine Street relationship property?
[28] Section 8(1)(l) provides that “the proceeds of any disposition of” the family home are relationship property. The Judge was therefore correct to include the proceeds of the sale of Valentine Street in the pool of relationship property.
Jewellery
[29] There are three issues relating to the jewellery:
(1)Was the jewellery purchased using relationship funds and therefore was it relationship property as Mr Murphy contended or was it separate property having been inherited by Ms Kliangklao-Welsh from her mother?
(2)Who currently has possession of the jewellery – Mr Murphy as contended by Ms Kliangklao-Welsh or Ms Kliangklao-Welsh as contended by Mr Murphy?
(3) What is the value of the jewellery?
Status of the jewellery
[30] Section 10 of the Act provides:
15 Kliangklao-Welsh v Murphy, above n 1, at [5].
10Property acquired by succession or by survivorship or as a beneficiary under a trust or by gift
(1) Subsection (2) applies to the following property:
(a) property that a spouse or partner acquires from a third person—
(i) by succession; or (ii) by survivorship; or (iii) by gift; or
(iv) because the spouse or partner is a beneficiary under a trust settled by a third person:
(b) the proceeds of a disposition of property to which paragraph
(a) applies:
(c) property acquired out of property to which paragraph (a)
applies.
(2) Property to which this subsection applies is not relationship property unless, with the express or implied consent of the spouse or partner who received it, the property or the proceeds of any disposition of it have been so intermingled with other relationship property that it is unreasonable or impracticable to regard that property or those proceeds as separate property.
(3) Property that one spouse or partner acquires by gift from the other spouse or partner is not relationship property unless the gift is used for the benefit of both spouses or partners.
(4) Regardless of subsections (2) and (3) and section 9(4), both the family home and the family chattels are relationship property, unless designated separate property by an agreement made in accordance with Part 6.
[31] Ms Kliangklao-Welsh’s evidence was that she inherited the jewellery in 2008 after her mother had died. Mr Murphy claims that the jewellery is relationship property as it had been acquired by Ms Kliangklao-Welsh using funds remitted to Thailand during the course of their relationship.
[32] Although there was no evidence as to how Ms Kliangklao-Welsh’s mother came to own the jewellery, there was nothing to contradict Ms Kliangklao-Welsh’s evidence that she had inherited all but two items of limited value she purchased from
Michael Hill Jeweller in New Zealand. At the hearing Mr Murphy accepted that Ms
Kliangklao-Welsh had inherited at least some of the jewellery.
[33] It was clear that Mr Murphy was aware of the sentimental value to Ms Kliangklao-Welsh of the jewellery and he acknowledged that. This supports Ms Kliangklao-Welsh’s evidence that it was inherited from her mother and her affidavit evidence that the return of the jewellery was the most important factor as far as she was concerned.
[34] Mr Welsh, Ms Kliangklao-Welsh’s former husband, gave evidence to the Family Court that, when they were married, he had accompanied Ms Kliangklao- Welsh on a visit to Thailand and was shown at least some of the jewellery by Ms Kliangklao-Welsh’s mother.
[35] I see no reason to depart from the conclusion of the Family Court Judge on this issue. The jewellery was inherited by Ms Kliangklao-Welsh from her mother.
Who has possession of the jewellery?
[36] I take no issues with the way in which the Judge dealt with the evidence on this point. The notice of appeal implicitly criticises the Judge’s reliance on Mr Anderson, the lawyer called by Ms Kliangklao-Welsh. However, that reliance was clearly warranted. Mr Anderson, a lawyer with a duty to the Court, would have no reason to fabricate the conversation which he recollects having with Mr Murphy about the jewellery. In support of that is Mr Murphy’s own acknowledgement that he did phone Mr Anderson.
[37] While Mr Singh suggested that the caller was not in fact Mr Murphy I agree with the Judge’s assessment in this regard. Mr Anderson’s evidence was that the caller introduced himself as Mr Murphy, he was familiar with the facts of the case and that Ms Kliangklao-Welsh had lodged a notice of sale against the property. When that is added to Mr Murphy’s acknowledgement that he did telephone Mr Anderson, I am satisfied that the Judge’s conclusion that the person who phoned Mr Anderson was indeed Mr Murphy is correct.
[38] The sentiments expressed by Mr Murphy in his telephone conversation with Mr Anderson were consistent with the evidence of the witnesses Mr Welsh and Mr Shah that Mr Murphy’s strategy was to withhold the jewellery from Ms Kliangklao- Welsh until she relinquished any claim on Valentine Street. Ms Ninthara, Ms Kliangklao-Welsh’s friend, gave evidence that she had asked Mr Murphy to return the jewellery to Ms Kliangklao-Welsh and he replied the effect that he would not do so without a guarantee that Ms Kliangklao-Welsh would not claim against Valentine Street. As the Judge noted, there was no challenge to this aspect of Ms Ninthara’s evidence.
[39] The allegation that Mr Murphy has retained the jewellery is consistent with Mr Murphy’s own evidence in the Family Court that he would do anything to stop Ms Kliangklao-Welsh having a share of Valentine Street.
[40] I have considered the issues identified by Mr Singh, for example Mr Shah’s evidence. That does not in my assessment undermine a finding that the jewellery is in Mr Murphy’s possession. While Mr Shah acknowledged that he had seen the jewellery in a box at some stage, that was clearly prior to the time of the parties’ separation.
[41] Having independently reviewed the evidence, I concur with the findings of the Judge that, on the balance of probabilities, Mr Murphy has possession of the jewellery.
Value of the jewellery
[42] Having decided that the jewellery is not relationship property and that Mr Murphy has possession of it, the value of the jewellery then becomes important because Mr Murphy was ordered by the Family Court to recompense Ms Kliangklao-Welsh for its loss. As a result it was then in Mr Murphy’s interest to downgrade the value of jewellery.
[43] Mr Singh questioned the likelihood of Ms Klianglao-Welsh’s mother having accumulated jewellery to the value claimed. Mr Murphy said that, when he met Ms Klianglao-Welsh’s mother, she was a relatively poor farmer with no substantial
assets. Mr Murphy’s affidavit said that he doubted she had jewellery worth $40,000
(the value initially ascribed to the jewellery by Ms Klianglao-Welsh).
[44] The only evidence as to the jewellery’s value was provided by Ms Kliangklao-Welsh by way of a valuation from a local jeweller. The jeweller did not have the opportunity to examine the jewellery because, of course, Ms Kliangklao- Welsh does not have possession of it.
[45] Ms Kliangklao-Welsh was, however, able to provide the jeweller with photographs of the jewellery which she had taken some time previously at Mr Murphy’s instigation for insurance purposes. The jeweller, whilst qualifying his valuation because he had not had the opportunity to examine it, valued the jewellery at $70,000. No expert critique of the valuation was provided on behalf of Mr Murphy. The only evidence was Mr Murphy’s opinion referred to in paragraph [43] above.
[46] Mr Singh submitted that the Judge should have critically analysed the valuation on the basis that it purported to ascribe carats to it. I accept that the Judge was alive to the limitations of the valuation and the fact that, as the valuer was working from colour photographs, he had to evaluate the physical characteristics of the jewellery.
[47] The problem for Mr Murphy is that the Judge was not presented with any evidence on which he could rely in order to reject the valuation.
[48] In any event, the other evidence in the case (that the jewellery was kept in a safe and that Mr Murphy attempted to use it as a bargaining chip in respect of the family home) all supports the conclusion that the jewellery was of some considerable worth.
[49] In those circumstances the Judge was entitled to reach the conclusions as to value which he did.
Unequal sharing (s 13) and misconduct (s 18A)
[50] Mr Singh submitted that:
The respondent’s late disclosure of funds held, covert diversion of relationship funds, purchase of land [sic] were all designed to significantly affect the value of the relationship property in terms of S.18A of PRA. Her actions of covert diversion of relationship property also amount to serious misconduct entitling this Court to hold equal sharing would be repugnant to justice. S.13 of PRA.
[51] The Judge rejected those claims for lack of proof and lack of relevant jurisdiction.
[52] Mr Rao submitted that the case for the appellant was illogical because Mr Murphy was claiming extraordinary circumstances under s 13 but then seeking equal division of what he said were assets of the relationship. As I understand Mr Murphy’s case however, he is indeed seeking an unequal division because he claims entitlement to half of the money which was at some stage in the Thai bank accounts rather than the $5,000 of relationship property which was in the accounts at the time of separation.
[53] Mr Murphy’s case on this issue begins with criticisms of Ms Kliangklao- Welsh’s disclosure in the proceedings. In her original affidavit of assets and liabilities, Ms Kliangklao-Welsh claimed she had no money or bank accounts either in New Zealand or elsewhere. It seems there were three applications for discovery and directions by the Court and eventually Ms Kliangklao-Welsh provided incomplete records of two bank accounts held in Thailand and information about a property she owned in Thailand before the relationship and other land which was put into her name in Thailand during the relationship.
[54] The details of her Thai bank accounts were provided in July 2013 but it was not until March 2014 that an English translation of those records was provided.
[55] It was not until part way through the Family Court hearing itself that Ms
Kliangklao-Welsh referred to a BNZ bank account she held in New Zealand.
Fortunately partial records were able to be obtained from the lawyer who had previously acted for Ms Klianglao-Welsh.
[56] Details of land held in Ms Kliangklao-Welsh’s name in Thailand, which Mr Murphy says must have been acquired using relationship funds, were disclosed as follows:
(1)an agreement dated 22 August 2005 in respect of land under deed number 33351; and
(2)an agreement dated 29 October 2007 in respect of land under deed number 14991.
[57] The Judge could not discount the possibility that relationship funds were used in the acquisition of that property. But any orders in relation to the property were, of course, outside the jurisdiction of the Family Court; per s 7, the Act only applies to immovable property situated in New Zealand.
[58] Mr Murphy claims that Ms Kliangklao-Welsh sent relationship funds to Thailand to be used to purchase property in Thailand, thereby putting those funds beyond the jurisdiction of the Family Court.
[59] The BNZ bank statement showed that approximately $72,000 was sent from that bank account to Thailand, not all of which went to either of the two bank accounts disclosed. The implication, in Mr Singh’s submission, was that there must have been at least one other bank account in Thailand which was not disclosed.
[60] Ms Kliangklao-Welsh had purchased a Toyota Hilux motor vehicle in Thailand for her mother’s use. The Court found that some of the funds transferred to Thailand were used to acquire that motor vehicle. In Mr Singh’s submission that finding was contrary to the evidence and it was clear, he said, that the Hilux was acquired from cash taken out of New Zealand in addition to funds in the various bank accounts.
[61] Mr Murphy’s case is that $135,787 comprising $63,787 deposited to Ms Kliangklao-Welsh’s Thai bank accounts plus $72,000 transferred from her BNZ account to her and her mother’s Thai bank accounts, was relationship property to which Mr Murphy was entitled a half share. In his submission, her diversion of these funds justifies unequal sharing of the remaining relationship property.
Applicable law and analysis
[62] The statutory presumption, contained in s 11 of the Act, is that all relationship property is to be divided equally between the parties. For the Court to depart from the presumption of equal sharing, Mr Murphy must establish that the exception to the equal sharing in s 13 of the Act applies:
13 Exception to equal sharing
(1) If the court considers that there are extraordinary circumstances that make equal sharing of property or money under section 11 or section
11A or section 11B or section 12 repugnant to justice, the share of
each spouse or partner in that property or money is to be determined in accordance with the contribution of each spouse to the marriage or of each civil union partner to the civil union or of each de facto partner to the de facto relationship.
(2) This section is subject to sections 14 to 17A.
[63] As the Court of Appeal observed in Martin v Martin:16
…the phrase “extraordinary circumstances” refers, I think, to circumstances that must not only be remarkable in degree but also be unusual in kind. It is vigorous and powerful language to find in any statute and I am satisfied that it has been chosen quite deliberately to limit the exception to those abnormal situations that will demonstrably seem truly exceptional and which by their nature are bound to be rare.
[64] The observations of Baragwanath J in Kauwhata v Kauwhata are also relevant:17
What is “extraordinary” and what is “repugnant to justice” must be approached in the awareness that Parliament has assessed, as a matter of public policy, that most inequalities of contribution entail neither.
16 Martin v Martin [1979] 1 NZLR 97 (CA) at 102.
17 Kauwhata v Kauwhata [2000] NZFLR 755 (HC) at [43].
[65] Ms Kliangklao-Welsh’s conduct can only be taken into account in assessing “extraordinary circumstances” under s 13 if it was “gross and palpable” misconduct that “significantly affected the extent or value of the relationship property” in terms of s 18A(2):18
18A Effect of misconduct of spouses or partners
(1) Except as permitted by subsections (2) and (3), a court may not take any misconduct of a spouse or partner into account in proceedings under this Act, whether to diminish or detract from the positive contribution of that spouse or partner or otherwise.
(2) Subject to subsection (3), the court may take into account any misconduct of a spouse or partner—
(a) in determining the contribution of a spouse to the marriage, or of a civil union partner to the civil union, or of a de facto partner to the de facto relationship; or
(b) in determining what order it should make under any of sections 26, 26A, 27, 28, 28B, 28C, and 33.
(3) For conduct to be taken into account under subsection (2), the conduct must have been gross and palpable and must have significantly affected the extent or value of the relationship property.
[66] Ms Klianglao-Welsh’s evidence was that money had been spent acquiring the
Toyota Hilux for her mother which was paid for by instalments; approximately
$5,000 was transferred out of her BNZ account to Thailand at the request of a friend in New Zealand who deposited that sum in her account (and indeed the bank records corroborate this); money was spent during Ms Kliangklao-Welsh’s visit to Thailand when she was accompanied by her son when she stayed for at least one month, on other occasions, and when Mr Murphy accompanied her; and she had purchased her Thai life insurance policy which was agreed was relationship property. Furthermore, her evidence was that she expended significant sums for her mother’s care as her mother became unwell. This evidence was unchallenged in the Family Court.
[67] The Judge did not accept that the total of funds remitted by Ms Kliangklao- Welsh to Thailand amounted to $135,000. In his assessment it was likely that some of the funds must have “tied up with” (or, been the same money as) some of the
funds deposited into her bank accounts in Thailand, although he accepted that
18 J v J (2005) 25 FRNZ 1 (CA) at [11].
perhaps not all of it was. The Judge was satisfied that $63,787 was remitted by Ms Kliangklao-Welsh into her Thai bank accounts for her own purpose and that a total sum of between $65,000 and $135,000 was remitted from time to time. He noted that $41,757 worth of assets located in Thailand were included in the list of relationship property (the vehicle, life insurance policy and the $5,000 left in the account). He considered it possible that some of the remaining funds may have been applied for the purchase of real estate but found that a substantial sum must have been spent on looking after Ms Kliangklao-Welsh’s mother. The value of any property was unknown and was not subject to his jurisdiction.
[68] The Judge found himself unable to conclude that Ms Kliangklao-Welsh had been guilty of any misconduct in terms of s 18A. He noted that remitting money for the care of one’s frail mother, even if generous, can surely not amount to misconduct and in any event Mr Murphy was aware of some of that support. In saying that, I appreciate that Mr Murphy’s evidence at the hearing, to the effect that he had no issue with the transfer of funds to Thailand, was made in the context of his stated belief that each party was keeping its assets separate from the other.
[69] The Judge conceded that, if Ms Kliangklao-Welsh had covertly diverted relationship funds to acquire real property in Thailand as a device to avoid the Act, it might amount to misconduct. However, he was unable to make such a finding.
[70] Likewise he concluded that sending funds overseas (even if it was as much as
$70,000) did not constitute circumstances so extraordinary that equal sharing of property would be repugnant to justice. He expressed doubt that any of this behaviour occurred with an eye to the provisions of the Act, noting that the parties seem to have been comfortably happy in their domestic relationship until mid-2008.
[71] I concur generally with the Judge’s reasoning. I acknowledge that it might seem somewhat unfair on its face that some relationship funds were in all likelihood used to acquire property in Thailand, which is beyond the jurisdiction of the New Zealand courts. I also acknowledge that, given the Judge’s finding that up to
$135,000 of relationship property was remitted to Thailand, it could be said that Ms
Kliangklao-Welsh’s conduct “significantly affected” the extent of the relationship
property. However, there is simply no evidential basis to allow a conclusion that her conduct was “gross and palpable” so that there are extraordinary circumstances making equal sharing repugnant to justice. I agree with the Judge that, had there been evidence that Ms Kliangklao-Welsh transferred money to Thailand and acquired real property there for the purpose of putting relationship funds outside of the courts’ jurisdiction, that might meet the test under s 13. However, there was no evidence of that. The evidence points to a close relationship, including taking holidays together both in Thailand and in Australia so that Ms Kliangklao-Welsh could meet Mr Murphy’s mother and family. There is also insufficient evidence on which to conclude that Ms Kliangklao-Welsh has further savings accounts in Thailand which she is not disclosing.
[72] As the Judge noted, the case turned primarily on his assessment of the credibility of the two parties. He essentially concluded that Mr Murphy was willing to say whatever he thought necessary in order to win the case. This was in contrast to his assessment of Ms Kliangklao-Welsh whose demeanour he found straight forward to the extent he was able to assess it in the circumstances. He found no reason to doubt her credibility. I have some reservations on that score. Ms Kliangklao-Welsh’s incorrect affidavit evidence that she did not have any bank accounts provides grounds to question her credibility. The late disclosure of that evidence is of concern and would have warranted adjourning the Family Court hearing part heard. That did not occur, however.
[73] Mr Singh suggested that less weight should be placed on the lower Court’s assessment of credibility because Ms Kliangklao-Welsh required an interpreter. He suggested the Judge may have focused more on the interpreter rather than Ms Kliangklao-Welsh. I see no basis for that submission. The Judge made specific credibility findings about Ms Kliangklao-Welsh. As a Family Court Judge with considerable experience he would be well used to assessing credibility of witnesses, even those using interpreters. Tellingly, Ms Kliangklao-Welsh’s evidence in crucial respects was corroborated by other witnesses including her former husband, Mr Welsh, and the lawyer, Mr Anderson.
[74] Furthermore, the Judge’s assessment was made in recognition of the issues as to late discovery and the apparent conflict in some of the evidence, for example exactly how the land held by Ms Kliangklao-Welsh in Thailand was acquired - whether it was as the result of inheritance, a purchase by her or whether the fact her name was on property documents did in fact mean she was the owner of the property. For there to have been misconduct to the extent of requiring an unequal division of relationship property would require a finding of improper motive on the part of Ms Kliangklao-Welsh when dealing with assets during the course of the relationship as opposed to when making disclosure of assets after the relationship had terminated.
[75] It is clear that the primary purpose of much Mr Murphy’s evidence was to avoid Ms Kliangklao-Welsh being entitled to any proceeds of the sale of Valentine Street and what Mr Singh effectively claims was the inherent unfairness in her being able to have a share of those proceeds of sale when Mr Murphy was excluded from the possibility of acquiring any interest in the Thailand properties. This does not, however, reflect the contribution Ms Kliangklao-Welsh made to Valentine Street. Not only did she incorrectly believe that the house would be registered in joint names but she also contributed to outgoings including the mortgage by cash payments to Mr Welsh.
[76] Mr Murphy’s problem comes from the fact that, no matter how much may have been in Ms Kliangklao-Welsh’s Thai bank accounts over the period of the relationship, at the time of separation there was some $5,000 in there only. Absent a finding of gross and palpable misconduct, there is no way under the Act to account for relationship property funds spent by one party during the course of the
relationship.19
19 See R Fisher (ed) Fisher on Matrimonial Property (online looseleaf ed, LexisNexis) at [12.41].
Furthermore, I note that, even if I did formally find that a certain amount of relationship funds were spent on Ms Kliangklao-Welsh’s purchasing of real estate in Thailand, the Court would not be permitted to take those funds into account when assessing the value of the relationship property pool. To do so would be to circumvent s 7 by treating the overseas immovable property as though it were subject to the Act: Samarawickrema v Samarawickrema [1995] 1 NZLR
14 (CA) and Shandil v Shandil [2011] NZFLR 554 (HC).
Assessment of grounds of appeal
[77] Given that analysis set out above I turn now to consider the specific grounds of appeal where errors in the Family Court decision were alleged:
(1) Error in not finding other moveable property, being all funds transferred out of New Zealand or cash taken out of New Zealand to Thailand, were not relationship property.
[78] I am not clear that was the finding of the Family Court at all. The Judge concluded that the $5,000 (approximately) remaining in the Thai account was relationship money. His assessment of what happened to the rest of the money was in the context of the appellant’s claim that Ms Kliangklao-Welsh covertly diverted relationship funds to Thailand as a device to avoid the Act and was therefore guilty of misconduct in terms of s 18A.
(2) Error in finding that proceeds of sale of Valentine Street was relationship property.
[79] For the reasons given, I find no such error.
(3) Error in finding that all of the money transferred out of New Zealand by Ms
Kliangklao-Welsh was not relationship property.
[80] The same comment as set out under [78] above applies.
(4) Error in finding funds transferred to Ms Kliangklao-Welsh’s mother or third parties were not relationship funds or funds applied for motor vehicle purchases was accounted for in the judgment for diversion of property.
[81] The same comment as set out under [78] above applies.
(5) Error in finding Ms Kliangklao-Welsh had covertly diverted relationship funds and there were no extraordinary circumstances relevant to ss 13 and 18 of the Act.
[82] For the reasons given, I find no such error.
(6) Error in finding that Mr Murphy had possession of the respondent’s jewellery
and its value.
[83] For the reasons given I find no such error.
Result
[84] For the reasons given the appeal is dismissed.
[85] There would appear to be no reason why Ms Kliangklao-Welsh should not be entitled to costs on a 2B basis. If the parties wish to be heard on costs they are to file memoranda, from Ms Kliangklao-Welsh within 21 days of this decision with any
response on behalf of Mr Murphy’s seven days thereafter.
Thomas J
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