PT v S

[2021] NZHC 2399

NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,

11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE

https://

ORDER PROHIBITING PUBLICATION OF NAMES OR IDENTIFYING PARTICULARS OF THE PARTIES.

IN THE HIGH COURT OF NEW ZEALAND WHANGANUI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGANUI ROHE

CIV-2021-483-7

[2021] NZHC 2399

UNDER

the Family Protection Act 1955 and the Property (Relationships) Act 1976

BETWEEN

PT

Appellant

AND

S

Respondent

CIV-2021-483-8

BETWEEN

SH
Appellant

AND

S

First Respondent

PT

Second Respondent

CIV-2021-483-9

BETWEEN

JH
Appellant

AND

S

First Respondent

PT v S [2021] NZHC 2399 [14 September 2021]

PT

Second Respondent

Hearing:

12 August 2021

Counsel:

V A Whitfield for SH K A McDonald for JH

C P Brosnahan and T Manktelow for S No appearance for PT

Judgment:

14 September 2021

JUDGMENT OF CHURCHMAN J

TABLE OF CONTENTS

Introduction  [1]

Background  [5]
Factual background  [5]

JH and SH  [17]
The payments  [25]
Equity in Turakina  [42]
Mortgage repayments  [57]
Source of funds for purchase of Mana  [64]
R’s involvement with his children  [68]

Section 16 of the PRA  [92]

Legal issues and conclusion  [92]

The FPA claim  [112]

The Family Court Judge’s decision  [112]

Position of the parties in relation to FPA claim  [120]

JH and SH  [120]
S  [122]

Relevant law and analysis for the FPA claim  [124]

Section 4 of the FPA  [124]
Moral duty to JH  [148]
SH  [156]

Result  [164]

Costs  [165]

Introduction

[1]                 This is an appeal from a decision of Judge Matheson in the Family Court dated 7 December 2020, relating to the estate of R. R is survived by his children JH and SH and R’s de facto partner, S (the respondent).1

[2]This appeal challenges two aspects of Judge Matheson’s decision:

(a)his failure to exercise his discretion under s 16 of the Property (Relationships) Act 1976 (PRA); and

(b)his decision on the competing claims of parties under s 4 of the Family Protection Act 1955 (FPA).

[3]                 Section 16 of the PRA addresses the situation where each partner owned a home at the date the relationship started, but when the relationship property was divided, only one home was included within it. It gives the Court a discretion to adjust the shares of the partners to compensate for the inclusion of only one home in the relationship property pool.

[4]                 Section 4 of the FPA provides the Court with discretion to make orders from an estate if adequate provision for the proper maintenance and support of a claimant is not available from the estate under the deceased’s will.

Background

Factual background

[5]                 R died on 28 May 2017, at the age of 60. His children, JH and SH were born in 1985 and 1987 respectively. Their mother was R’s then wife, B, who R married in 1983 and separated from in May 1988.

[6]                 Not long after their marriage, R and B acquired five acres of land at Turakina for the sum of $6,000. They transported a house onto that land and spent considerable

1      [S] v [PT & Ors] [2020] NZFC 10717.

time and effort renovating it before they could move in and use it as a home. R’s father, who was a builder, also provided significant assistance with the renovation project. Following their separation in 1988, R and B entered into a property agreement in 1989 whereby R agreed to pay B some $23,000 in exchange for her transferring the property at Turakina into his name.

[7]                 The property at Turakina was not the only asset owned by R and B at the end of their marriage. They also owned a block of land situated between Ohakune and Raetihi which was sold after the execution of their relationship property agreement, and the proceeds divided equally, with R receiving some $10,000. R had also acquired a marine business at Tokaanu in 1986. He retained that asset in the matrimonial settlement. He sold the business in 1993 but retained the leasehold of the land and also owned the building from which the business had been conducted. He leased out the building to the purchaser of the business. The building was burnt down in 1996, and R received the insurance proceeds that year. The property was utilised for boat storage.

[8]                 In 1992, R and S developed their relationship from a longstanding friendship to a de facto relationship. In the late 1980s, S’s mother had died and left her an inheritance of $195,000. She had also been gifted a third share of a bach at Omori on Lake Taupō, and shares worth some $200,000. S also received a third of her brother’s estate upon his death. From her inheritances she acquired one sister’s share in the Omori bach resulting in her owning a one-half share, with another sister, as at 1992 when the de facto relationship started.

[9]                 In August 1990, with the funds from her inheritance, S acquired a residential property at Tanera Crescent, Wellington. S was able to acquire this property without borrowing money, due to the money she had inherited.

[10]             Therefore, as noted by  Judge Matheson, in 1992 when S  commenced  her  de facto relationship with R, she was in a better financial position than R, owning an unencumbered house, a half-interest in the Taupō bach and the shares. By contrast, R’s assets consisted of the house at Turakina which was encumbered, and a leasehold interest in the land as well as the business at Tokaanu. The value of R’s interest in the

house at Turakina as at 1992 is a matter of significant contention in these proceedings and is addressed below.

[11]             After selling the marine business in Tokaanu, R returned to Turakina to undertake further work on his house. S and R began to commute between the Turakina property and S’s Tanera Crescent property in Wellington. From around 1994 to 2008, the Tanera Crescent property was used as the family home. At times, R also conducted his business as a marine technician from there.

[12]             In May 1994, they acquired a property in Mana for approximately $130,000. A year later, they agreed to purchase an additional piece of land at Mana, bringing the total purchase price to $157,000. R and S made roughly equal contributions to the purchase, with R contributing $76,000 (as well as paying the $15,000 deposit) and S

$80,000, although settlement for the purchase was ultimately deferred until 1996. R and S also acquired an additional piece of land to be leased for rental, but R fell out with the tenants, resulting in civil and criminal litigation against him. R eventually incurred significant legal fees, in respect of which S provided $30,000 to defray some of those costs.

[13]R and S sold the property at Mana in 2008. The net sale proceeds were

$1,461,747.70. From those proceeds S received the sum of $480,366 which was described as being $500,000, less the costs of sale, while R received $231,381. S’s claim, which was echoed in the Judge’s finding, was that this money was used to clear mortgage debt then existing over the property at Turakina. This contentious claim is addressed in detail at [57] and following below. It is incorrect. The balance of

$750,000 was used by R to buy some of the land at Mana which the purchaser did not want and subdivided off the original block. That parcel of land was sold some three years later in 2011 for $825,451, with the proceeds going to R.

[14]             R’s health began deteriorating in the 1990s. In 1997, he fractured an ankle, and complications in its healing led to ulcers and the development of Hepatitis C in 2002, which required extensive treatment. Following the collapse of her then employer, Ansett New Zealand, in April 2001, S took a year off work to assist R with

different treatments, and, after his health improved, she returned to the workforce, obtaining a job in government administration.

[15]             R then became unwell again in 2004 and was diagnosed with a terminal illness. He moved back to Turakina, which led to the 2008 sale of the Mana property, and renovations being made on the Turakina property to make it more suitable for R’s health needs. The alterations required substantial funds. S and R moved to the Turakina property in 2008. A second property, a short distance away in Whangaehu was also developed (having been bought by R for $150,000 in 2005).

[16]             In 2010, S resigned from her government administration job to care for R, and to travel with him on holiday to Europe for three months. The Family Court Judge characterised R’s needs as “considerable” during that time and concluded that his illness had made him difficult to deal with and unpleasant. Those observations would appear to be well justified. S provided extensive support and care for R, particularly in the period from 2010 until R’s death in 2017. Although she eventually received some payment from ACC for the attendant care she provided to R, the care she provided went well beyond the hours she was paid for.

JH and SH

[17]             From the age of three when his parents had separated, JH lived in Hamilton with his mother and had limited contact with his father, mainly visits in the Christmas school holidays. In 1997, when JH was 12 years old and in his final year at intermediate school, he began to exhibit some behavioural difficulties. His mother thought that these might have been contributed to by a lack of paternal influence in his life and attempted to address that.

[18]             Arrangements were made for JH to move to Wellington and stay with R and S at Tanera Crescent. He did so and attended Brooklyn School for a short period. However, the arrangement did not work and JH returned to Hamilton to finish the school year there.

[19]             The following year, JH’s behavioural problems resurfaced and, part-way through the year, B arranged for JH to board at St Patrick’s College, Silverstream,

which is located in the Hutt Valley, north of Wellington. This was done in the hope that JH would be able to have regular contact with R in the weekends.

[20]             Unfortunately, the hoped-for level of contact did not eventuate. JH was very unhappy and ran away from the school, catching the train back to Hamilton. After a short while, JH returned to Hamilton permanently and finished the rest of his secondary education there. The prior pattern of a limited contact between R and both JH and SH resumed.

[21]             There is a dispute as to who paid the cost of JH attending St Patrick’s College. B said that she paid those school fees and all of the school fees for both JH and SH throughout all of their education without any contribution from R. S says that she was told by R that he had paid the St Patrick’s College school fees. There was no evidence from R’s bank statements or cheque butts that supported this claim. There was also an assertion by S that R had wanted JH to attend Wellington  College rather than     St Patrick’s College. In the absence of any evidence that R met any of these costs, it seems more probable than not that B in fact met all of the children’s educational costs as she asserted.

[22]             There was evidence that R’s contact with the children and financial contributions to them increased after the children left school. From the age of 18 to 28, R made monthly payments to each of JH and SH. Initially they were $15 per week but then increased to $25 per week. Those payments were documented in R’s bank statements. The payments were described by the children as “pocket money”.

[23]             In his first year after leaving school, JH obtained a job in Wellington and, for a short period, boarded with R and S at Tanera Crescent. After leaving school, SH initially remained in Hamilton but at the age of 20 moved to Australia. His evidence was that, on his periodic visits to New Zealand, he would travel to either Turakina or Wellington to visit R including bringing his wife and children to see R.

[24]             In 2013, R and S attended SH’s wedding in Fiji. R provided a generous wedding gift of NZ$50,401.48 (AUD$40,000). R and S visited SH in Australia on one occasion subsequent to the wedding.

The payments

[25]             In the years between 2013 and his death in 2017, R made a number of payments that were the subject of considerable evidence and dispute. It is plausible that, given that R had been advised by his doctors that his health conditions were terminal, that the payments were part of an attempt on his part to put his affairs in order before his death. In any event, because the Judge’s findings in relation to a number of these payments significantly affected his conclusions on the relevant legal issues, it is necessary to examine them in some detail.

[26]             R had a disabled sister who lived in Whanganui. In 2014, he arranged for the purchase of a flat for her in Whanganui at a cost of $108,150. He put the property in the names of JH and SH and by way of deed, formally gifted the purchase price to them. The evidence of JH and SH was that they understood that they held the property on trust for R’s sister. They say that R told them he did this because he was worried that S would sell the property after his death.

[27]             R’s sister pays a nominal rent of $150 per week from which all costs relating to the property including rates, insurance, maintenance and the fees of a property manager are paid. The property has a value of some $230,000.

[28]             S complained that after the property was purchased, the children did not attend to necessary maintenance on it and R was left to arrange that himself. Given that JH lived in Hamilton (and was by this time a paraplegic with significant health issues resulting from a serious accident on 6 March 2006 when he was hit by a car), and SH lived in Queensland with neither having any connection to Whanganui, S’s criticism seems unjustified. R lived 15 minutes out of Whanganui at Turakina and given that his motivation in facilitating the purchase of the property seems to have been to provide adequate accommodation for his sister, it is understandable that he would have initially arranged for maintenance and, as his health deteriorated, for that task to be undertaken by a property manager.

[29]             While ultimately SH and JH will benefit from the fact that the Whanganui flat is registered in their names, as long as R’s disabled sister is alive and wishes to reside

in it, they are obliged to facilitate that. The nominal rental on the property generates little income after expenses.

[30]             A second financial transaction which occurred in 2014 which was the subject of very different interpretations, was a payment by R to B of the sum of $200,000.

[31]             B’s account of this transaction is found in her affidavit of 13 January 2020 from [30]-[42]. Her evidence was that, in the 2006 accident, JH sustained multiple life- threatening injuries. He was rendered a paraplegic, confined to a wheelchair and had limited use of his left arm. There were many other health consequences including kidney failure, persistent pain, migraines and nausea, pressure sores, incontinence of both bladder and bowel, and continuing effects of the head injury including short-term memory loss, depression and brain fatigue causing extreme tiredness.

[32]             B’s evidence was that between 2006 and 2014, she solely met the costs of supporting JH and looking after him without any financial or other assistance from R.

[33]             B’s evidence was that in 2014, R drove to Hamilton to see JH and stayed with him for a few nights. At that time JH was living with flatmates in a house owned by

B. JH and the flatmates had been rough on the house with the carpet in particular being damaged by JH’s wheelchair and his dogs. B’s evidence was that R wanted to give her $100,000 and JH $100,000, and that he said he wanted her to use some of the money he gave her to fix up the Pembroke Street house in Hamilton and the other

$100,000 to look after JH. B said:

I was surprised when [R] offered to give me the $100,000. I thought that maybe he wanted to make up for not having provided any financial support to me when the [children] were growing up and particularly after [JH]’s accident.

[34]             B denied that there was any discussion about any of the money being used to buy JH a house, and noted that in 2014, the money would not have bought much of a house in Hamilton let alone one that would have met JH’s needs.

[35]             B also said that the following year, in October 2015, R phoned her and said that he had had a flood at a property he owned and needed some of the money back in

order to fix that property. He asked if she could give him $40,000 back and she agreed to return $25,000 to him.

[36]             B produced bank statements which confirmed this payment and also a payment by her to SH of the sum of $25,000 when SH had an urgent need for financial assistance for his business.

[37]             The bank records also confirmed regular substantial payments to JH from the funds given to B, the most significant of which was a sum of $40,000 which JH used to purchase and import an Italian mastiff dog from the United States. JH’s evidence confirmed that the dog was purchased as an assistance dog and also with the purpose of allowing him to start a business breeding and training assistance dogs. B confirmed that JH still lived in a converted flat of some 40 square meters attached to the garage at her house. The kitchen facilities there were unsuitable for his needs and he relied on using the kitchen facilities in her house. JH’s evidence on these issue was similar to B’s.

[38]             S’s account of the payments and reasons for it was somewhat different. She said that R told her that he had given the $200,000 to B to buy a house for JH and that when no house had been brought, R asked for the money back. However, at [38] of her affidavit of 17 April 2018, S did make a concession which would tend to support B and JH’s evidence that some of the money was intended to fix up the damage that had been done to the house that JH was then living in. S’s evidence was “There may have been some talk about repairs to B’s house as well. I can’t now be precise”.

[39]             She conceded that B gave R $25,000 of the money back. She did not explain why R would have accepted only $25,000 back if the purpose for which he had given the money had failed completely as she had claimed. She also accepted that, in 2014,

$200,000 would not have bought a house in Hamilton suitable for JH’s needs. She did confirm that there had been a lot of damage caused by a flood at the Whangaehu property about this time. She said that she had to attend to the clean-up herself as R was unable to. It was this flood and the unexpected need to undertake repairs at the Whangaehu property that B said R told her was the reason why he wanted some of the money back. It seems improbable that B would have known about the flood and the

damage to the Whangaehu property unless R had told her and it is difficult to envisage a reason why R would have telephoned her to tell her that other than in the context of his request for a return of some of the money he had given her. Given these facts, B’s account of this transaction seems more probable than S’s. In any event, apart from the

$25,000 that went to SH, and the $25,000 returned by B to R at his request, it is clear that such of the money that has been spent has been applied by B towards JH’s needs.

[40]At [140] of the decision, the Judge says:

It would appear the funds provided for [JH] to acquire a property, have been dissipated significantly.

Implicit in this statement is the Judge’s acceptance of S’s claim that this is what the funds were provided for. For the reasons set out above, my conclusion is that it is more probable than not that B’s account of what the funds were provided for is correct. The word “dissipate” also has a pejorative connotation. It implies that the funds were wasted. This is presumably an implied reference to the fact that $40,000 of these funds was spent by JH on a dog. However, that expenditure needs to be seen in context. The dog was acquired as an assistance dog and with the intention that JH might be able to establish a business breeding and training assistance dogs. There was evidence that the dog was able to pull JH around in his wheelchair which was assistance to him given the limited use he had of his left arm. There was also evidence that the dog was being trained to achieve certification as an assistance dog. There was evidence of the dog being a significant comfort to JH as he dealt with the physical and mental consequences of the extensive injuries he sustained in his accident.

[41]             Although spending such a large sum on a dog at first seems unusual, when the context is examined, it is not appropriate to categorise its purchase as being a “dissipation” of the funds. The other payments made from the fund would appear to have been for the sort of expenses that would be expected in trying to provide a quality of life for someone with the severe disabilities JH has.

Equity in Turakina

[42]             Another factual finding of the Judge that was strongly challenged on the appeal was his conclusion that, at the commencement of the relationship of R and S in 1992, R had nominal, if any, equity in the Turakina property.

[43]             This idea was promoted  by S  in  her  evidence.  At [20] of her  affidavit  of 7 February 2020, S had listed the mortgages on the property at 1985 not long after R and B had purchased it and started to develop it. These were a first mortgage of

$25,000 to the United Building Society, a second mortgage of an unspecified sum to the National Bank of New Zealand Ltd, and two charges to Borg Warner Acceptance which related to R’s business.

[44]             Having set the details of these charges out, S, at [21] of the affidavit opines that “it seems likely that there was no equity in the Reynolds Road property at the time of separation”. The Judge refers to these mortgages and charges in his decision and S’s contentions seem to have influenced his finding that there was only nominal equity in the Turakina property at the time R and S’s relationship commenced in 1992.

[45]             There are two problems with this. Firstly, it confuses the equity situation in the property in 1985 with the equity situation in 1988/89; and secondly, it assumes that the same mortgages were in place and the equity situation did not change between 1985 and 1992. Both of these propositions are incorrect.

[46] As set out at [6] above, the evidence was that, once the house was shifted onto the Turakina site R, B and R’s father, who was a builder, worked extensively on it so that it could be used as a home. The 1989 separation agreement recorded that R was to pay B $23,000 for her interest in the Turakina property. That would indicate an equity of $46,000 at that point. More importantly, the title search attached as exhibit “M” to S’s affidavit confirms that all of the mortgages and charges dating from 1985 were discharged in December 1989. At the time of the commencement of the relationship in 1992, there was only one mortgage to the National Bank of New Zealand registered against the title to Turakina. There does not appear to be any evidence of exactly what the balance of that mortgage was at that point. In the absence of any evidence as to either the valuation of the Turakina property at 1992 or what was

owing under the National Bank mortgage at that date, it is not possible to reach a conclusion that the equity was “nominal” or non-existent.

[47]             There was evidence that R (and other members of his family) had continued to work on and develop the Turakina property between 1988 and 1992.

[48]             I am driven to the conclusion that the Judge’s repeated characterisation of the Turakina property having minimal, if any, equity as at 1992, is a significant over- statement, with the Judge appearing to have confused the situation that prevailed in 1985 with the circumstances in 1992. By that time all of the 1985 encumbrances had been discharged and extensive development work had been undertaken on the property.

[49]             The Judge’s finding that “all but an insignificant amount of the equity in the [Turakina] property, as at R’s death, is attributable to the relationship”2 seems to be the result of two other findings which need to be examined. Firstly, the Judge’s acceptance that during the relationship “some $347,000 was subsequently spent on improving the Reynolds Road property and the factory acquired at Whangaehu from relationship resources”, and secondly, the finding that “…each contributed to the development of the value of property through manual labour”. Each of these findings was also attacked.

[50]             The Judge’s finding is also likely to have been influenced by S’s claim at [35] of her affidavit of 1 May 2019 that, following the sale of the Mana property “R used part of his share of the proceeds, approximately $419,000 to repay the mortgage over his property at Reynolds Road, Whanganui”.

[51]             Starting with the Judge’s conclusion that $347,000 was spent on “improving” the Reynolds Road and Whangaehu properties, the Whangaehu property was acquired by R in 2005 for $150,000. There was no evidence that this sum was relationship property. S had produced a schedule of what she said were payments made in respect of the Turakina Road property. That schedule came to $166,475.24. It covers the 16- year period between 4 June 1998 and 21 July 2014. Rather than relating just to

2 Above n 1, at [83].

payments that might have improved the value of the property, it seems to cover a great many payments that were simply outgoings incidental to living on a property of this nature. These include the Telecom and power accounts, insurance, rates to both Rangitikei District Council and Horizons Regional Council, security services, food and various vehicle and farm equipment expenses. There are also payments of $2,400 for “wages for farm work”.

[52]             Many payments relate to the costs incurred in operating a small farmlet such as tyres for the farm trailer, a vet fee of $228.54 for the farm dog, many entries relating to the farm mower and a great many entries for unspecified purchases from farm supplies stores Farmlands Trading and PGG Wrightson. These are not the sort of payments that could be said to have necessarily resulted in an improvement in value in the property. There are recurring significant payments for “concrete”. Presumably these are related to the concreting of the driveway and the barn floor. S’s evidence was also that the floors of some sheds on the property were also concreted. These are more likely to have some positive effect on the value of the property but in the absence of any expert valuation evidence, it is not possible to confidently conclude just what effect the payments listed by S had on the properties’ value. S herself also refers to work being undertaken in that latter years of R’s life to modify the property to accommodate R’s use of a wheelchair and other physical limitations. While such expenditure would have improved the amenity of the property as far as a place for R to live, it is uncertain whether, or by how much, it might have increased the market value of the property.

[53]             S’s schedule also contains reference to payments for farm vehicles ($6,000 on 28 November 2008) for “4x4’s for farm” and $25,300 on 29 April 2013 for a digger. This expenditure seems to have been double counted in the calculation of the money spent by R on vehicles which is a matter of contention and is addressed at [82] to [85] below.

[54]             I conclude that this schedule does not establish that $166,475.24 was spent, over a 16-year period in “improving” either the Turakina property or the Whangaehu property. There is no breakdown of the expenditure as between the Turakina and Whangaehu properties. Whatever was spent on the Whangaehu property does not

seem to have had any effect on its value as it appears to have been sold by R for the same amount that was paid for it. It is not clear what stage the sale transaction is at.  S acknowledges that a $15,000 deposit was received for the Whangaehu property but it is not clear whether or when the sale transaction might have been completed.

[55]             At [83] of the decision, the Judge also concluded “In addition to the financial commitment, each contributed to the development of the value of the property through manual labour”. It was clear that, particularly in the early years of the relationship, R, and often a number of his family and friends, spent a lot of time working on the property. The evidence of S’s involvement in such activities is much more limited. In her affidavit of 17 April 2018, she said:

[12]      I have undertaken significant work in assisting him with the Turakina property although looking at it now it’s hard to see where it all went. I did make the curtains, assisted in pouring concrete for the barn floor, there were a large number of other people working on the property from time to time. Whenever we were there we were working on the property.

[13]      I cooked and maintained the property for them [sic] throughout the periods I was there. He often had the place partially tenanted while retaining a portion of it for his own use and between tenants he and I would go and I would clean the property in readiness for new tenants to move it.

[56]             S also confirmed that she helped in cleaning up the Whangaehu property after it was damaged by the flood. While the evidence confirms that both parties worked on the Turakina and Whangaehu properties, and that work likely had some positive effect on the value of the Turakina property, although not the Whangaehu property (for the reasons discussed above), there is no evidence which would reliably indicate how much the value of the property was improved by the work.

Mortgage repayments

[57]             At [35] of her affidavit of 1 May 2019, S addresses what R did with the funds of the sale of the Mana property. She says:

[R] used part of his share of the proceeds, approximately $419,000 to repay the mortgage over his property at Reynolds Road, Whanganui, a copy of [R’s] bank statement dated 15 September 2008 evidencing this, is annexed hereto and marked “I”.

[58]             At [56], the Judge makes a finding which seems to be based on this evidence where he says “…a substantial proportion [of the Mana proceeds] were used to clear the mortgage and in improving Reynolds Road”. The claim that $419,000, or any part of it, was used to repay a mortgage over the Turakina property is incorrect and attachment “I” to S’s affidavit confirms this. From the funds totalling $419,000 that R received, $187,661,93 was used to pay the GST on the sale transaction. This is confirmed by the settlement statement relating to the transaction which was exhibit “H” to S’s affidavit.

[59]             The balance of $231,381.55 was not used to pay anything to do with the Turakina property. R’s account into which the funds were paid was in overdraft and that sum simply reduced the overdraft.

[60]             At [83], the Judge again links the sale of the Mana property with a contribution to the Turakina property. He says:

It is clear that the subsequent development of equity in the [X] Reynolds Road property is principally down to the resources of the relationship between [S] and [R]. Firstly, the sale of the Mana property released sufficient capital to clear any mortgage debt. The evidence identified that on the sale of the Mana property in August 2008, the sum of $231,000 was paid to reduce overdraft debt and a further $187,500 was held to meet a GST debt. …

[61]             The problem with this finding is that it is clear that none of the sale proceeds of the Mana property in August 2008 were spent on anything to do with a mortgage on the Turakina property. In 1985, the first mortgage had only been for $25,000. As previously noted, that mortgage had been repaid and there was just one mortgage on the property as at 1992, to the National Bank. The implication in S’s evidence that the property, in 2008, had a mortgage of as much as $419,000 on it, is wholly unsupported by any evidence at all. These facts undermine the Judge’s conclusion at [83] of his decision that “…the subsequent development of equity in the Reynolds Road property is principally down to the resources of the relationship between S and R”.

[62]             The references at [56] and [83] are not the only occasions where the Judge has mis-stated what happened to the proceeds of the sale of the Mana land in 2008. At

[27] he says:

Subsequently the property at Mana was sold in 2008, with total gross proceeds in excess of $1.5 million. [S] received $480,000, with the rest going to [R] which he used to clear mortgage debt over the property at Turakina, and to buy back part of the land.

[63]            For the reasons set out above, the statement that any part of the proceeds of the 2008 sale went to reduce mortgage debt over the property at Turakina is unfounded.

Source of funds for purchase of Mana

[64]            In her evidence, S referred to the fact that, in addition to contributing equally to the original purchase price of the Mana property, she had made what she described as additional loans totalling approximately $50,000 and said, “That money has never been repaid”.3

[65]            At [23] and [24], the Judge found that the first block of land at Mana was acquired in May 1994 for $130,000 and the second block acquired in 1996 for

$157,000, although S’s 1 May 2019 and 13 March 2020 affidavits appear to indicate that there were not two separate purchases, but that after R and her had agreed to purchase the property for $130,000, there was a long delay, with the agreement being varied in 1995 to include an additional piece of land on the property, raising the purchase price to $157,000. S makes the point that she applied resources from her separate property to fund her share of the purchase price, and provided evidence at exhibit “G” of her 13 March 2020 affidavit by way of a National Bank statement that she had contributed $80,000 to the purchase, while R had contributed $76,000 (but had also paid the $15,000 deposit). JH’s evidence was that he understood that the proceeds that R received from the insurance pay-out relating to the fire at the Tokaanu property were used by R to fund his contribution to the Mana purchase. The timing for that would seem to fit with the settlement of the second block occurring in late 2006. The insurance proceeds would have been R’s separate property. Therefore it seems that, like S, his contribution to the Mana property also came from separate property.

[66]            In relation to the alleged unpaid loans, the total of S’s initial cash contribution and the subsequent advances was $130,000. S received $480,366 when the property

3      [19] of S’s affidavit of 17 April 2018.

was sold in 2008. She therefore received back very substantially more than her total investment. There was no evidence as to what she did with that $480,000.

[67]            The majority of the proceeds of the 2008 sale (some $750,000) were invested by R in buying back from the purchaser a part of the block which had been sold but which the purchaser did not want. That parcel of land was sold some three years later, in 2011, for a net figure of $825,451. That money went into R’s bank account. At

[30] of her affidavit of 17 April 2018, S’s evidence as to what the proceeds of the 2011 sale were used for was:

There were always ongoing expenses at the Reynolds Road property which were funded from the proceeds of the sales of the Mana property. As an example a deck and glass balustrading was put above the back shed of the barn, a full drive way was concreted into [sic] 2012, a kitchen was put in the barn, and [R] bought a Porsche Carrara [sic] in August 2011 for $62,500.

At this stage, Turakina was the relationship home. There is nothing exceptional about R using proceeds from the sale of the Mana property to meet the costs of maintaining or altering the home that both parties lived in for the rest of the relationship.

R’s involvement with his children

[68]   Following R’s separation from B, B retained custody of JH and SH. She had moved to Hamilton to be able to more easily access hospital care for SH who then had a serious medical condition. JH and SH were very young at the date of R and B’s separation: about three years and 19 months old respectively. For the decade following separation, contact between R and the children was limited to school holiday (mainly the Christmas holidays) visits, initially at Tokaanu and Turakina and, from 1992, at Wellington. B’s evidence was that R provided no financial contribution at all for the children at this period. S challenged that, pointing to an assessment for the 1997/1998 financial year for child support in respect of JH and SH at a rate of $91.10 per month that she had found amongst R’s papers. However, there was no evidence that the assessment had resulted in payments from R and nothing in R’s bank statements or cheque butts that would support S’s contention or rebut B’s claims. Even if R did start paying child support from April 1997, in terms of the assessment, the weekly sum per child would have been about $10. This would have been a tiny

fraction of the actual cost borne by the children’s mother of accommodating, feeding and educating the children.

[69] In the 2010s, it is clear that R sought to re-engage with JH and SH, and made a number of gifts to them. In 2013, he gave the wedding gift of $50,000 to SH, and gave B the $200,000 discussed at [30] above in May 2014.

[70]   In 2017, R went on what was characterised by the Family Court Judge as a “spending spree”, purchasing what the Judge described as motorbikes, a digger, and a welder. The characterisation of these purchases as a “spending spree” is challenged in this appeal.

[71]   The term “spending spree” is again something that is lifted from S’s evidence (they are the same words she uses at [42] of her affidavit of 17 April 2018).

[72]   The specific examples S gave to support her claim of R going on a spending spree are set out in [43] of her affidavit. She says:

[43] As an example he bought a new Triumph Bonneville which had done 1.7km [sic] and then in March 2017 without selling the earlier model he bought another Triumph motorbike and then in April 2017 he bought a late model 1.8 ton digger. In addition he had shortly before his death purchased a

$1,300 welder which is still sitting in the box in the barn.

[73]   Contrary to the Judge’s finding, R only purchased one motorbike in 2017. S’s complaint was not that he had purchased multiple motorbikes that year but that he purchased a new bike without selling the bike he had bought second-hand a couple of years previously.

[74]   Exhibit “V” to S’s affidavit of 17 April 2018 lists the purchase price of the Triumph Street Cup motorbike bought by R on 23 March 2017 as $18,290. PT assessed its value as at the date of the affidavit sworn by its employee Regan Elizabeth Storer on 29 May 2018 as being $15,000.

[75]   The second-hand Kubota digger was purchased on 20 April 2017 for $30,705. The latest schedule of assets filed by PT contains information that S sold this digger for $28,000 on 28 September 2017.

[76]   Not only did the Judge described R’s purchase of the Triumph motorbike, the digger and welder as being spending spree, he also concluded, at [85]:

[85] There is also evidence that as [R’s] death approached, he  was  profligate in his spending on motor vehicles to the extent of $316,785 with the worth of those vehicles effectively halved in the short time since.

[77]   The two vehicles that R bought in 2017 did not halve in value as detailed above. The welding set, which is apparently still in the box it came in, is unlikely to have halved in value either although there was no evidence as to what its current value might be. The use of the term “profligate” to describe the vehicle purchases R made in the year before his death is unwarranted. Although R knew that he had a terminal illness, he did not think that he was about to die. R’s friend, Darryl Dowman, filed an affidavit in support of S. That affidavit of 26 May 2020 contained this statement:

[20] By the time of his death, [R] had been told he was going to die by the doctors treating him so many times and over a span of many years that he had long ceased to take their warnings seriously.

[78]   R had a longstanding interest in Triumph motorcycles and there was nothing “profligate” about him buying another one before selling one he had purchased in 2015. Neither has the value of that machine “halved”.

[79]   The digger was brought for use on the Turakina and Whangaehu properties. It was a small machine purchased second-hand. Its purchase also cannot be described as “profligate”. Its value did not halve either.

[80]   The figure of $316,785 does not relate to vehicles purchased “as R’s death approached”.

[81]   The figure of $316,785 described as “profligate” appears to have been taken from exhibit “V” to S’s affidavit of 1 May 2019. That is a schedule of vehicles purchased between 2006 and 2017, not as R’s death approached. They include a number of farm related vehicles including a ride-on lawnmower purchased in 2010 for

$8,000, two 4x4 quad bikes, one purchased in 2008 for $6,000, one in 2009 for

$14,500, and a 4x4 Rhino purchased in 2011 for $30,000. The latest PT statement of assets indicates that the Rhino purchased for $30,000 was sold by S for $10,000 on 29

March 2018. The same list of assets also show S selling a “4x4 bike” for $650 on 24 October 2017.

[82]   Other than the quad bike and Rhino sold by S, the other quad bike referred to in exhibit “V” to S’s affidavit of 17 April 2018 is not referred to in the schedules of assets prepared by PT. It is not possible to know whether the quad bike referred to in S’s list had been traded in or still existed at the time of R’s death. There was medical/ACC evidence in the documentation produced by S which confirmed that R used a quad bike to enable him to get about the Turakina property. The 4x4 Rhino would have been used for the same purpose. The ride-on mower purchased from

$8,000 in 2010 is also clearly farm related and would have assisted R in maintaining the property’s extensive grounds.

[83]   In the list are two diggers.  The first is a second-hand digger acquired  from  C B Norwood in April 2013 for $25,300, and the second is the Kubota digger acquired in April 2017 discussed above.

[84]   The digger acquired in 2013 appears to have been involved in an accident as there is a notation on the schedule prepared by S that it was “sold for $2,500 damaged”. The note also refers to a “claim”. This may be an insurance claim. There is no evidence of this.

[85]   The list also refers to a purchase in April 2012 of a Ford Transit van that was kitted out as a motorhome. The vehicle is a 2002 model so was 10 years old when purchased for $25,000. S’s notation on her list says, “offered $20k Jan 2019”. This vehicle does not appear to have been sold.  Given that S did not accept an offer of

$20,000 for it in 2019, she presumably thought it was worth more than that. It therefore also cannot be said to have “halved in value” since it was purchased in 2012.

[86]   There is also a 1984 ex-army land rover purchased in 2006 for $5,000. The latest PT estimate of value lists this as being worth $15,000. There are three cars listed in the schedule. In May 2012, R bought a Mercedes 4x4 for $21,000. It was a 2003 model. S’s notation is that it was “not working value now scrap metal”. The latest PT asset list estimated its current value at $1,000.

[87]   The other cars on the list are a 2004 Porsche Carrera purchased in August 2011 for $62,500, and a 2007 Audi Q7 purchased in January 2013 from Turners Auctions at

$40,000. The latest PT estimate of value for the Porsche is $40,000, and for the Q7 is

$17,000.

[88]   The list also includes the two Triumph motorcycles purchased in 2015 and 2017 and discussed above.

[89]   The final item on S’s schedule is a Haines Hunter boat. No purchase date or cost is given. PT valued it at $15,000. S’s schedule has a note saying that it has been transferred into her name.

[90]   When the nature of these vehicles, the date of their purchase, and the values of those still in existence is examined, it can be seen that there is no evidential basis for the Judge’s conclusion in [85] that $316,785 worth of vehicles was purchased “as R’s death approached”, and that the “worth of those vehicles effectively halved in the short time since”. The vehicles were purchased over 11 years between 2006 and 2017, six of the vehicles are clearly farm related, all of the vehicles, except the Triumph motorbike purchased in 2017 were second-hand and some were over 10 years old when purchased.

[91]   The Judge’s findings that R had purchased some $316,785 worth of vehicles “as death approached” and that they had halved in value “in the short time since” are clearly wrong. His characterisation of the purchase of these vehicles as “profligate” is unsustainable.

Section 16 of the PRA

Legal issues and conclusion

[92]   After making those factual findings, the Judge then turned to the law concerning s 16. He noted that a common theme among judgments is that s 16 calls for “an essentially discretionary assessment”, noting that the Court of Appeal has held that it is not something that should lightly be overturned on appeal,4 and that the

4      See Besley v Besley (1993) 10 FRNZ 128 (CA) at 133.

discretion must be guided by the interests of doing justice to the particular parties, having regard to the very specific facts of the case.5

[93]   A relevant factor, according to the Judge, was the intention of the parties at the beginning of the relationship.6 Another relevant factor to be taken into account by the Court was the contribution of the parties to the relationship. The Judge referred to the case of Watene v Morrison, where Judge Twaddle observed that in considering the contribution of the parties to the relationship, regard could be had to the exhaustive list of factors in s 18(1) of the PRA, and that under s 18(2), there was no presumption that a contribution of a monetary nature was of greater value that a contribution of a non-monetary nature.7

[94]   Turning to his own analysis, the Judge considered that when assessing an application for adjustment under s 16 of the PRA, it was relevant that:8

(a)Tanera Crescent was unencumbered;

(b)no relationship funds were used “to support the property, or its outgoings”;

(c)the property was, for a time, the registered office of R’s business and at some time he operated his business out of a garage on the property and was thereby “used to support” the business;

(d)the financial, emotional and practical support given by S enabled R “to sustain his existing property including Reynolds Road, and to add to it”;

(e)that the Turakina property had nominal equity at the date of commencement of the relationship;

5      Referring to JNG V MAG FC Porirua FAM-2007-091-000693, 8 March 2011 at [33].

6      See EHM v JOG FC Palmerston North, FAM-2009-015-92, 17 October 2011.

7      Watene v Morrison FC Hamilton FAM-2008-019-0001027, 4 March 2010 at [50].

8      At [77]-[87].

(f)that the subsequent development of equity in the Turakina property was “principally down to the resources of the relationship between S and R”;

(g)that the sale of the Mana property released sufficient capital to clear any mortgage debt;

(h)that some $347,000 was spent on improving the Turakina property and the factory acquired at Whangaehu;

(i)that R and S each contributed to the development of the value of the Turakina property through manual labour;

(j)that R’s gifts to his children were a relevant factor;

(k)that $375,000 had been paid to JH and SH over the years;

(l)that as R’s death approached he was profligate in his spending on motor vehicles to the extent of $316,785 with the worth of those vehicles effectively halving in the short time since; and

(m)S’s non-financial contributions to the relationship were significant.

[95]   For the reasons discussed above, a number of the factual findings that have influenced the exercise of the discretion under s 16 are unsustainable.

[96]   I accept that the cases referred to in the judgment demonstrate that there are a range of factors which the Courts have held can appropriately influence the application of the discretion in s 16. In this case, I assess the relevant factors as being:

(a)that the Tanera Crescent property was the separate property of S. Although it was not an inherited property, it had been acquired by her utilising the funds she had inherited prior to the commencement of the relationship;

(b)that Turakina had a mortgage on it for an unknown amount at the date the relationship began, and that the equity in the property was less than the equity S had in Tanera Crescent;

(c)that during the 25 years of the relationship, both R and S worked on the Turakina property and that some of that work such as the conversion of the barn into accommodation, is likely to have increased the value of the property;

(d)that, for a substantial period in the relationship, Tanera Crescent was in fact used as the parties’ residence and, if R had died while the parties were living there rather than at Turakina, Tanera Crescent would have been relationship property; and

(e)S’s non-financial contributions to the relationship were significant.

[97]   I do not accept that there is any evidence that relationship property in the form of sale proceeds of the Mana property was used to make a large lump sum, or indeed any reductions in the mortgage on Turakina. The mortgage on Turakina was not repaid. S’s evidence was that the mortgage remained in place even at 2017. I do not accept that spending relationship property on the Whangaehu property or undertaking development work on that property during the relationship is relevant to the exercise of the discretion in s 16.

[98]   Although I have found that the Judge was not warranted in concluding that in the period immediately prior to his death, R went on a “spending spree” and was “profligate” in his spending on vehicles, even if these factual findings had been justified, they would not have been relevant to the exercise of the s 16 discretion. Effectively, they are findings of misconduct. There is limited scope in the Act for misconduct to displace the fundamental assumption that relationship property is to be shared equally. Qualifying misconduct needs to be “gross and palpable” and to have “significantly affected the extent or value of the relationship property”.9

9      Property (Relationships) Act 1976, s 18A.

[99]   The focus of the Court is on dividing the property that exists at the end of the relationship.10 Other than in the limited circumstances discussed above where misconduct can be taken into account, the Court does not engage in an exercise of analysing whether, during the course of the relationship, each of the parties had access to, or spent, an exactly equal amount of relationship assets. As the Court of Appeal noted in Thompson v Thompson:11

The starting point for the ascertainment of property resulting from a marriage partnership is the date of separation.

[100]   There are two other issues of fact that seemed to have influenced the Judge in exercising his discretion under s 16. Much was made by S of the fact that, at times, particularly towards the end of his life, R could be grumpy and unpleasant. The Judge clearly had some sympathy for S in this regard. The evidence seems to be that R’s behaviour changed as his various illnesses progressed. He was on some very strong medication towards the end of his life and that, coupled with the pain he was in, may possibly have contributed to that. S clearly made a very significant contribution, particularly during the last decade of the relationship to R’s care, but that is just one of the contributions each of the parties made to a relationship which lasted some     25 years. The fact that R could at times be grumpy and demanding was not misconduct and was not relevant to the exercise of the s 16 discretion.

[101]   Section 1N of the PRA sets out the principle that all forms of contribution to the marriage partnership, civil union, or de facto relationship partnership, are to be treated as equal. Both parties made contributions to this relationship: S provided companionship and unstinting support. She also contributed cash from her separate property to the investment in the Mana property which seems to have produced the bulk of the wealth generated during the relationship. S also worked in paid employment for much of the relationship.

[102]   However, R made similar contributions in relation to things like companionship, work and contribution of cash to the Mana purchase. He brought to the relationship his skills as a marine technician and his established business at

10     Property (Relationships) Act 1976, s 79.

11     Thompson v Thompson [2014] NZCA 117 at [71].

Tokaanu. He, often along with his family and friends, undertook extensive physical labour on the Turakina and Whangaehu properties. He also generated income throughout much of the relationship by operating his business as a marine technician.

[103]   The property at Mana was purchased for the express purpose of establishing a marine servicing business. Given S’s work background in secretarial and administration work, it seems improbable that she would have invested in the Mana land were it not for R’s experience in owning and operating his own marine technician business.  In relation to the assets that were accumulated during the relationship, at

[126] the Judge specifically acknowledged that, “No doubt R’s forthright business style assisted …”.

[104]         Both parties benefitted financially from the relationship, R getting some financial support from S at the start of the relationship when he needed it, and S in sharing in what turned out to be the highly successful investment in the Mana land, which would not have been made without R’s drive and skills.

[105]         A further factor which influenced the Judge in exercising his discretion under s 16 is the gifts that R made to his children. The Judge, at [84], referred to that sum as being $375,000. $108,000 of that relates to the cost for the Whanganui flat for R’s sister to live in. While R’s children will ultimately benefit from the value in that property, it was clearly intended by R to be for the principal benefit of his disabled sister. R clearly felt he had a moral obligation to support his sister. The financial provision made for his children over the last decade in his life also needs to be seen in the context of R’s obligations. It needs to be balanced against the fact that for the first decade following R’s separation from B, he had little involvement in the upbringing of the children and made little financial contribution leaving the children’s mother to undertake the work of, and meet the costs of, raising the children largely unaided. After JH’s accident on 6 March 2006, he needed ongoing extensive practical and financial support. The practical support was provided entirely by JH’s mother and, up until 2014, some eight years after JH’s accident, almost all the financial support was also provided solely by JH’s mother as well.

[106]         While the provision made by R during his life for JH and SH is clearly relevant to the claim under the FPA, it is not a matter which, in this case, should influence the discretion under s 16 of the PRA.

[107]         In exercising its discretion under s 16, the Court is required to do what it considers just, to compensate for the inclusion of only one home where both parties to a relationship owned homes which could have become the relationship home.

[108]         I accept that on appeal, a Court will not likely interfere with the exercise of a discretion such as that contained in s 16. It does give rise to a relatively broad discretion.12 However, as a significant part of the Judge’s reasoning relied on factual findings which I have found to be either unsustainable or irrelevant, this is an appropriate case for this Court to come to a different view as to how that discretion should be exercised.

[109]         The exercise of the s 16 discretion must be done in a principled way. Regard needs to be had to the principles of the PRA. Chief among those are the principles that property will normally be divided equally, that there is no presumption that contributions to a relationship of a financial kind are to be preferred over other contributions and that misconduct should determine division of assets only in limited and extreme circumstances.

[110]         Section 16 specifically addresses the injustice that may arise if both parties to a relationship had their own homes at the start of the relationship but only one of those homes became the relationship home and the other remained the separate property of the other party. That is exactly the situation that prevailed here. The Court has a discretion as to whether all of the value of the other home is to be relationship property and to make such adjustment to the shares of the de facto partners in any of the relationship property as it considers just. Although wider factors, such as those discussed above, can be considered, the learned author of Fisher on Matrimonial and Relationship Property indicates that caution must be applied when applying much

12     JNG V MAG, above n 5, at [21]-[22].

weight to extraneous factors – since the ultimate object of the discretion is to compensate for the inclusion of the home of only one spouse or de facto partner.13

[111]         Overall, and having regard to the fact that this was 25-year relationship to which both parties made substantial contributions, and the Tanera Crescent house was actually where the parties resided for much of their relationship, I conclude that it is just for 50 per cent of the value of that property to be included in the relationship pool.

The FPA claim

The Family Court Judge’s decision

[112]         The Judge noted that s 4 of the FPA may apply where adequate provision is not available from the deceased’s estate for the proper maintenance and support of those who are entitled to claim under the Act, founded on the expectation that a testator owes a moral duty and if that duty is breached, a claim may arise. Central to the assessment of whether there was a breach of moral duty was whether adequate and proper support and maintenance has been provided.

[113]         The Judge observed that here, there was “clearly” abundant evidence of a moral duty towards both S and JH, given what he described as S’s significant financial support to R for over a quarter of a century, which paled “into insignificance when compared to her devotion and sacrifice in supporting him through two decades of illness”. The Judge was of the view that, while S did have financial resources, this had its challenges, as the Tanera Crescent property was in need of remedial work to bring it up to a safe standard, and that for her to move back into that property would be to reduce her income earning capacity. In relation to the need for the Tanera Crescent property for remedial work, the evidence disclosed that S had in fact received an insurance pay-out in respect of this work which, at the time it was received, would cover most of the estimated cost of the work.

[114]         While the outcome of the relationship property proceedings provided S with over $1 million of financial resources, the Judge considered that her contribution to

13     Fisher on Matrimonial and  Relationship  Property  –  Property  (Relationships)  Act  1976:  Two Homes Available at Date of Marriage (s 16) (online ed, LexisNexis) at 12.94.

R’s life and her commitment to him caused a need for recognition of that over and above simple ratification of her own entitlement under the PRA.

[115]         The Judge also acknowledged that JH had some specific needs. He noted that while at some points R’s relationship with his children was distant, he was interested and supported JH at a time of need. JH’s financial situation was not strong, and his frailties identified a need, and a moral duty.

[116]         Acknowledging that this was a matter of balance, the Judge noted that the estate (at $1.2 million) was not insignificant, and that the claims of all the parties could be satisfied out of it.

[117]         Because S was responsible for assisting with “the generation of wealth and the value on the home and in the development as a place of comfort”, the breach of R’s duty through making no provision for S could be rectified by R’s half-interest in the relationship home at Turakina, and his half-interest in the family chattels (other than identified sentimental items) being vested in S.

[118]Following the Judge’s reasoning, this would have left a balance in excess of

$730,000 in the estate, to be split 60 per cent to JH and 40 per cent to SH.

[119]         In considering the claim under the FPA, the Judge identified the relationship pool to be divided as amounting to approximately $2.2 million to $2.3 million, a half share of which was $1.1 million to $1.15 million. The property included the relationship home at Turakina (worth $840,000), a property in Whangaehu worth

$150,000, household chattels worth some $100,000, bank accounts and investments worth $1,056,265, motor vehicles worth $165,500, together with a boat worth $15,000 and miscellaneous unvalued plant and machinery. There was also an unspecified liability to S of $1200.

Position of the parties in relation to FPA claim

JH and SH

[120]JH and SH appealed in relation to s 4 of the FPA on four grounds:

(a)first, that the Judge took into account S’s contributions and R’s financial contribution at the start of the relationship in determining what was required to remedy the breach of moral duty. This was the incorrect approach, as the Judge did more than what was required to remedy the breach of the moral duty – instead what was required was an assessment of what was needed for S’s proper support and maintenance in the context of her financial position, the size of the estate, and competing claims, particularly that of JH;

(b)second, that the Judge failed to objectively consider JH’s circumstances. Counsel stressed that JH’s position was one of significant financial need, and that the size of the estate was large enough for JH to be able to receive a sufficient amount to buy a house;

(c)third, that the Judge erred in respect of the extent of the inter vivos gifts received by JH and SH from R. It was submitted that the Judge placed too much weight on these factors, and that R had given no financial support to JH and SH’s mother during their childhood, which was important context to the gifts he made; and

(d)finally, that the Judge erred in respect of R’s financial position at the start of his relationship with S, and the extent of relationship property contributions made to the Turakina property.

[121]         As a result, counsel submitted that the proper approach would be to include the value of the Tanera Crescent property in the pool of relationship property and either provide for the estate to retain the Turakina property, and for the chattels and vehicles to be divided equally, and make a cash adjustment of $120,629.36 from S to the estate which would equate to her receiving a 10 per cent adjustment in addition to her relationship property entitlement or, in the event that the Court still did not want to exercise its discretion under s 16, make no further adjustment in favour of S from the estate’s share of the relationship property.

S

[122]         In relation to the issue of s 4 of the FPA, counsel submitted that in the circumstances faced by the Judge, there were exceptional factors at play, given S’s significant contribution to the relationship. According to counsel, this was a broad discretion, to be undertaken on the facts of each case, but that this was similar to Flathaug v Weaver, where a widow was awarded further provision under the FPA, given the importance of providing for her needs, comfort and financial security.14

[123]         It was submitted that the Judge was also correct to consider both S’s contributions to the relationship and relationship property, but also R’s substantial inter vivos gifts to his children, and their acceptance of a 60/40 split of the remainder of the estate indicated that they essentially accepted the award made to them in respect to that division and their ultimate entitlements.

Relevant law and analysis for the FPA claim

Section 4 of the FPA

[124]Section 4(1) provides:

4        Claims against estate of deceased person for maintenance

(1) If any person (referred to in this Act as the deceased) dies, whether testate or intestate, and in terms of his or her will or as a result of his or her intestacy adequate provision is not available from his or her estate for the proper maintenance and support of the persons by whom or on whose behalf application may be made under this Act, the court may, at its discretion on application so made, order that any provision the court thinks fit be made out of the deceased’s estate for all or any of those persons.

[125]         In essence, s 4 allows any of the persons listed under s 3(1) of the Act to apply to the Court to exercise its discretion to intervene in relation to a deceased’s estate if adequate provision is not available for the proper maintenance and support of the claimant.

14     Flathaug v Weaver [2003] NZFLR 730 (CA).

[126]         As noted in Williams v Aucutt, the onus is on the applicant to prove that the deceased was in breach of their moral duty at the date of their death by failing to make adequate provision for the applicant’s proper maintenance and support.15 As noted by the Family Court Judge, the Court of Appeal in Williams characterised “support” as having a wider meaning than “maintenance”:16

The test is whether adequate provision has been made for the proper maintenance and support of the claimant. “Support” is an additional and wider term than “maintenance”. In using the composite expression, and requiring “proper” maintenance and support, the legislation recognises that a broader approach is required and the authorities referred to establish that moral and ethical considerations are to be taken into account in determining the scope of the duty. “Support” is used in its wider dictionary sense of “sustaining, providing comfort”. A child's path through life is supported not simply by financial provision to meet economic needs and contingencies but also by recognition of belonging to the family and of having been an important part of the overall life of the deceased. Just what provision will constitute proper support in this latter respect is a matter of judgment in all the circumstances of the particular case. It may take the form of lifetime gifts or a bequest of family possessions precious to its members and often part of the family history. And where there is no economic need it may also be met by a legacy of a moderate amount. On the other hand, where the estate comprises the accumulation of the family assets and is more than sufficient to meet other needs, provision so small as to leave a justifiable sense of exclusion from participation in the family estate might not amount to proper support for a family member.

[127]         The Family Court Judge also referred to Little v Angus, where the Court of Appeal noted that the test under this provision is whether there has been a breach of moral duty by the deceased judged by the standards of a wise and just testator or testatrix.17 “Moral duty” is a composite expression which is not restricted to mere financial need but includes moral and ethical considerations, while “proper” also means something different to “adequate”, and the amount to be provided is not to be measured solely by the need for maintenance which would be the case if the Court were concerned solely with adequacy.18

[128]         In Talbot v Talbot, the Court of Appeal discussed the proper manner in which to approach appeals relating to s 4:19

15     Williams v Aucutt [2000] 2 NZLR 479 (CA) at [68].

16 At [52].

17   Little v Angus [1981] 1 NZLR 126 (CA) at 127.

18     Talbot v Talbot [2017] NZCA 507 at [40].

19     At [37] (footnotes omitted).

In our judgment the position is straightforward. Whether or not there has been a breach of the moral duty set out in s 4 of the Act is a threshold issue, turning on matters of law, fact and degree. Appeals involving this threshold issue fall to be determined by reference to the approach set out in Austin, Nichols. If there is a breach of moral duty found, then what remedy should be granted by the court below is an issue involving the exercise of a discretion, and an appellate court will only intervene if there has been an error of law or principle, if the Judge below took into account an irrelevant consideration or failed to take into account a relevant consideration, or if the decision below is plainly wrong.

[129]         Randerson J in Vincent v Lewis articulated principles relevant to claims for further provision and these were endorsed by Fitzgerald J in AP v Lucas:20

(a)the test is whether, objectively considered, there has been a breach of moral duty by [the testatrix] judged by the standards of a wise and just testatrix;

(b)moral duty is a composite expression which is not restricted to mere financial need but includes moral and ethical considerations;

(c)whether there has been such a breach is to be assessed in all the circumstances of the case including changing social attitudes;

(d)the size of the estate and any other moral claims on the testator's bounty are relevant considerations;

(e)it is not sufficient merely to show unfairness. It must be shown in a broad sense that the applicant has need of maintenance and support;

(f)mere disparity in the treatment of beneficiaries is not sufficient to establish a claim;

(g)if a breach of moral duty is established, it is not for the Court to be generous with the testator’s property beyond ordering such provision as is sufficient to repair the breach;

(h)the Court’s power does not extend to rewriting a will because of a perception it is unfair; and

(i)although the relationship of parent and child is important and carries with it a moral obligation reflected in the Family Protection Act, it is nevertheless an obligation largely defined by the relationship which actually exists between parent and child during their joint lives.

[130]         I agree with the Family Court Judge that there is evidence of a moral duty to both S and JH and SH in these circumstances. Given that the moral duty is not just to remedy financial need, but also extends to moral and ethical considerations, in my

20     See Vincent v Lewis (2006) 25 FRNZ 714 (HC) at [81]; and AP v Lucas [2021] NZHC 1017 at [36].

view a “wise testator” would consider there to be a duty to both S due to her significant contribution to the relationship (especially due to her care of R while he was in ill- health for many years) but also to JH and SH as R’s children, and particularly JH as a result of his extensive disabilities. Those disabilities are permanent, and mean that he has no prospect of ever supporting himself by undertaking conventional employment. An occupation such as training and breeding assistance dogs is about the only type of work he might be reasonably fit for. JH will be physically dependent upon others for the rest of his life in respect of some of the most basic human functions.

[131]         The starting point in determining whether there has been a breach of moral duty is to examine the testator’s will. R’s will was made on 25 February 1997. It provided:

(a)PT was appointed as executor and trustee;

(b)R’s interests in the land and buildings at Mana were to pass to S;

(c)the residue of R’s estate was to be divided equally between JH and SH.

[132]         Two significant events occurred after the will was made. Firstly, the land and buildings at Mana were sold with the result that the bequest to S in respect of them failed. Secondly, JH suffered catastrophic injuries in the accident in 2006 that changed his life forever.

[133]         Where there are claims under both the PRA and FPA, the correct approach is to consider the PRA claim first (as was done here) and, only after a determination has been made on that issue, to consider the FPA claim to determine whether, in light of the PRA outcome, a breach of moral duty still exists that requires remediation under the FPA.

[134]         The fact that I have made an order under s 16 of the PRA including 50 per cent of the value of the Tanera Crescent in their relationship property pool, is relevant to the extent of the moral duty owed by R and what steps need to be taken to remedy that

breach. It effectively increases the value of the estate’s interest in the relationship property pool.

[135]         As acknowledged by the Judge at [118] of his decision, it is not for a beneficiary to justify the provision for them in the will of the testator, but for the claimants (S and JH) to establish that they have not received adequate provision for their proper maintenance and support.21

[136]         Once the Court has identified a moral breach, it is not entitled to rewrite the will in any way it sees fit. It is limited to ordering such provision as is sufficient to repair the breach of moral duty.22

[137]         The Judge found that there was a moral duty toward both S and JH. His findings in relation to the moral duty owed to S are set out at [125]-[134]. Some of his findings of relevant fact relate to the same matters which have been analysed above in the context of the s 16 application and found to be unsustainable.

[138]At [126], he describes R, at the start of the relationship as having had:

A frail financial position, which frailty was exacerbated by the burning down of his building at Tokaanu and was turned into one that resulted in and accumulation of $2.3 million over 25 years of significant shared toil.

[139]         The basis of the claim that R’s financial position was “exacerbated by the burning down” of the Tokaanu building is not clear. The building burnt down some three and a half years after the relationship commenced. By this stage, R had long since sold the business that he had once operated from part of the site. The building was insured and he received the insurance proceeds. R was, by the time of the fire, working as a mobile marine technician in Wellington. Far from “exacerbating” any financial difficulties, the insurance proceeds from the fire appear to have provided him with some capital to invest in the Mana property.

[140]         The finding that the parties accumulated “$2.3 million over 25 years of significant shared toil” is also an overstatement. The bulk of the difference in the

21     See Auckland City Mission v Brown [2002] 2 NZLR 651.

22     Williams v Aucutt, above n 14, at [36].

parties’ assets from the time when the relationship commenced to the time of R’s death resulted from one transaction. That was the Mana property purchase. The dramatic increase in the value of the property had nothing to do with significant shared toil. Indeed it does not seem that either of the parties did any work on the property itself. It seems that for a short period of time before the site was leased out, R operated his marine technician business from there, and S remained in her prior full-time employment.

[141]         It may be that the reference to “significant shared toil” refers to the Turakina property. That property undoubtedly required a lot of maintenance. It also needed to be remodelled to be more suitable for R’s needs. That work undoubtedly enhanced the amenity of the property and the ability of R and S to enjoy it. However, any connection between the work and money spent on the property and the building up of an asset base worth $2.3 million is tenuous.

[142]         The reality is that the only business venture during the duration of the relationship that proved successful was the purchase of the Mana property. S’s financial contribution to that investment was roughly similar to R’s. Other than for the proceeds of that one investment, the identity of the assets held by the parties at R’s death was similar to the assets they had at the start of the relationship.

[143]         A feature of the relationship which is relevant to the moral duty is that, during the relationship S provided a degree of care to R in connection with his various illnesses that was above and beyond anything normally experienced in a relationship of this nature. This included her, on two occasions, giving up her paid employment to look after R.

[144]         The finding that I have made about s 16 will increase the relationship property pool for division and thereby the share of R’s estate in it. It also reduces the value of S’s separate property by a corresponding amount. The fact that S’s separate property is less than the value upon which the Judge’s assessment and calculations were made, means that the question of what is necessary to remedy the breach of moral duty to S needs to be looked at afresh.

[145]         The Judge noted that medical information indicated that S was unlikely to be able to return to paid employment. There was no evidence about the nature of S’s illness. There was some reference to her receiving ACC payments and it may be that her present inability to work results from an accident in respect of which she has some ACC cover.

[146]         The Judge noted at [143] that S was in a comfortable financial position. I agree with that assessment. She has a house, half-interest in a holiday home, interest in Turakina as well as liquid assets. The Judge held that R’s moral duty to S could be rectified by vesting in her R’s half-interest in the relationship home at Turakina, and his half-interest in the family chattels other than for certain sentimental items, the large billiard table and vehicles vested in S.

[147]         As a result of the order that I have made under s 16 of the RPA, although the value of R’s share in the total relationship property pool is increased, his share in the value of Turakina remains unchanged. R’s half share in the Turakina property is the largest asset in his estate. If I find that the approach taken by the Judge to remedying the breach of moral duty to JH was inadequate, then any adjustment has realistically has to come from the interest in the Turakina property.

Moral duty to JH

[148]         The Judge accurately summarised S’s living circumstances and the nature of the breach of R’s moral duty to her but examined JH’s situation in much less detail. It is therefore necessary to address it at this point. Other than for the brief period of time that JH spent living with R and S during his final year at intermediate school, R had very little involvement in the lives of his children until after they had left school. Not only was the role of parenting left to the children’s mother, but almost the entire financial burden of bringing the children up was left to her as well.  The payment of

$200,000 (later reduced to $175,000) paid to the children’s mother in 2014 needs to be seen in this context. It is understandable that R would have wished to pay something to B in recognition of her having had minimal financial support from him in bringing the children up, and also that she had solely borne the significant costs of

caring for, and accommodating, JH in the eight years between his accident in 2006 and 2014 without any significant financial and no practical assistance from him.

[149]         As discussed above, the Judge’s categorisation of the 2014 funds being “provided for JH to acquire a property” is not an accurate description of the transaction and neither is it accurate to describe those funds as having been “dissipated significantly”.

[150]         The Judge also had some regard to the fact that JH and SH would benefit when the Whanganui flat is ultimately sold. This is the case but, as I have found, R’s primary purpose in relation to the Whanganui flat was to secure somewhere for his disabled sister to live at a nominal rental. JH and SH are receiving little, if any, present benefit from that property and would be in breach of their fiduciary obligations to attempt to sell it up and evict R’s sister. They have no control over how long it will be before they are able to realise any value in that asset.

[151]         The Judge acknowledged at [138] that “JH’s financial situation was not strong” and noted that he was confined to a wheelchair and dependent on a sickness benefit of

$350 per week out of which he paid board of $100 per week to his mother, paid other living expenses of $100 and serviced credit card debt.

[152]         The description of JH being confined to a wheelchair does not do justice to his level of disability and physical and mental limitations. Many paraplegics confined to a wheelchair are able to hold down full-time employment, be financially self- sufficient, and lead productive and rewarding lives. In addition to being a paraplegic, JH has multiple other serious physical conditions and his brain injury has produced consequences such as regular and severe migraines, constant pain and depression. His memory and ability to concentrate are also affected. While the financial assistance R provided in 2014 is relevant to R’s moral obligation to JH, it is very far from discharging those moral obligations.

[153]         The Judge noted at [136] that “The relationship between R and his [children] was a mixture of love and affection and distance”. That is accurate as far as it goes. However, to the extent that R had little involvement in the children’s lives, at least

until they left school, that was not the children’s fault. It is not as though that there is any behaviour on the part of JH or SH which could be said to have reduced R’s moral obligation to them.

[154]         JH needs somewhere suitable to live. He has, since 2006, been dependent on his mother to provide him with accommodation. His present accommodation is far from ideal. It only works because JH is able to access some of the facilities at his mother’s house. JH is also only able to live on his own as a result of the practical and financial support of his mother. She must be coming near to the end of her working life. Ultimately, JH will have to face the prospect of living on his own without her support. His ongoing financial and support needs are, if anything, likely to increase rather than decrease. Even if he is able to successfully establish a business breeding and training assistance dogs, his financial circumstances are likely to remain precarious.

[155]         I have concluded that the result reached in the Family Court was inadequate to remedy the breach of moral duty to JH.

SH

[156]         SH’s position is very different to that of JH. He put the wedding present that R gave him to good use as the deposit on a house. That house is now rented out but is subject to a large mortgage which SH services.

[157]         SH operates his own road marking business which seems to have been very successful, something of which R was proud. SH is married with two small children. His wife does not work outside the home. They own and reside in an attractive home in the Gold Coast which is again subject to a large mortgage.

[158]         However, the fact that SH is comfortably off does not extinguish the moral duty owed to him by R. As the Court of Appeal said in Williams v Aucutt:23

A child’s path through life is supported not simply by financial provision to meet economic needs and contingencies, but also by recognition of belonging to the family and of having been an important part of the overall life of the

23 Above n 14, at [52].

deceased. … Where there is no economic need it may also be met by a legacy of a moderate amount.

[159]         R therefore owed a moral duty to SH. SH did not advance a claim under the FPA but, because he was, together with JH, the beneficiary of the residue in R’s estate, his position needs to be considered when evaluating the competing claims of S and JH.

[160]         The moral duties that R owed to S and JH are not such that they completely extinguish the moral duty that he owed to SH. It would therefore not be just to rewrite the will so as to exclude SH entirely.

[161]         Balancing the competing moral interests as best I can, I conclude that, notwithstanding my finding under s 16 of the PRA, there needs to be a further adjustment. I conclude that the breach of moral duty to S is satisfied by awarding her half of R’s interest in the Turakina property rather than the whole of his interest in that property. The residue of the estate will still be divided 60/40 as between JH and SH.

[162]         It seems that there are still some loose ends arising from the Family Court decision. In [157], the Judge reserved leave for the parties to come back to the Court if they could not agree how to achieve equalisation in terms of the relationship property. It seems that they have not been able to achieve agreement. There is also the issue of the vintage Buick car that was inherited by R from his father and is of sentimental value to JH and SH.

[163]         At the hearing, there appears to have been confusion as to whether there was a concession by S as to whether this car was relationship property or not. That matter will also need to be determined by the Judge.

Result

[164]         The appeal is allowed. An order is made under s 16 of the PRA that half of the value of the Tanera Crescent property is to be regarded as relationship property. In relation to the FPA claim, the decision of the Judge is varied so that S is to receive half of R’s interest in the Turakina property rather than all of that interest. Other than as expressly varied, the Judge’s other findings in relation to the FPA claim remain.

Costs

[165]         If costs are an issue, the appellants are to file and serve a memorandum within 15 days with the respondent having 15 days to reply.

Churchman J

Solicitors:

Martelli McKegg, Auckland

Innes Dean Lawyers, Palmerston North Gallie Miles Lawyers, Te Awamutu

cc         V Whitfield, Barrister, Cambridge