Remnant v Mills
[2020] NZHC 3414
•18 December 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2020-409-000268
[2020] NZHC 3414
BETWEEN HEATHER IRENE REMNANT
Plaintiff
AND
JEFFREY HARGEN MILLS
Defendant
Hearing: 18 November 2020 Appearances:
A W Watkins and C M Hanafin for Plaintiff T J Flintoff for Defendant
Judgment:
18 December 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 18 December 2020 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
REMNANT v MILLS [2020] NZHC 3414 [18 December 2020]
The application and issues
[1] The plaintiff (Heather) and the defendant (Jeffrey) resorted to litigation to resolve relationship property disputes following the break-up of their marriage. In the course of that they went to mediation and reached a full and final settlement which they recorded in an agreement under s 21A of the Property (Relationships) Act 1976 (the Act). Jeffrey has not paid $709,375.05 owed to Heather under the agreement. Heather applies for summary judgment to recover the debt.
[2] Jeffrey opposes summary judgment. He has applied to the Family Court to set aside the agreement under s 21J of the Act on the ground that to give effect to it would cause serious injustice. The serious injustice is said to arise because:
(a)he suffered from a mental impairment at mediation; and
(b)the agreement conferred on Heather a benefit greater than her legal entitlement.
[3]Heather argues that Jeffrey has no arguable defence to her claim because:
(a)the facts of the agreement, its terms and Jeffrey’s failure to pay what is owed are not disputed;
(b)there is no reasonable prospect Jeffrey’s application to set aside the agreement will succeed; and
(c)the agreement is enforceable by way of summary judgment until the agreement is set aside.
[4]The issues are:
(a)has Heather shown there is no reasonably arguable case that Jeffrey’s application to set aside the agreement will succeed;
(b)if there is no reasonably arguable case, should I exercise my discretion to refuse summary judgment.
[5]For the reasons that follow, I find:
(a)Heather has shown there is not a reasonably arguable case that Jeffrey’s application to set aside the agreement will succeed; and
(b)I should not exercise my discretion to refuse summary judgment.
The facts
[6] Heather and Jeffrey commenced their relationship in 2005. They were married in September 2012 and separated in June 2015. Their marriage has been dissolved. Jeffrey has remarried.
[7] In November 2016, Heather commenced proceedings in the Family Court to resolve property disputes. Those proceedings were transferred to the High Court in May 2018.
[8] In August 2018, Jeffrey was diagnosed with incurable stage 4 renal cell carcinoma with brain metastases. He underwent a craniotomy to resect brain tumours and kidney removal surgery. He received radiation treatment after the removal of tumours. He has at times had difficulties adjusting to medications.
[9] On 21 January 2020, Heather and Jeffrey entered into a partial relationship property settlement agreement which excluded from its scope listed property including family chattels, loans and advances and interests in companies and trusts.
[10] On 17 February 2020, Heather and Jeffrey attended mediation with mediator, and former District Court Judge, Tony Lendrum. Heather and Jeffery had legal representation at mediation. Jeffrey was represented by Stephen van Bohemen, a very experienced law practitioner. Two days were reserved for the mediation but settlement was achieved on the first day.
[11] During the mediation, Mr Lendrum chaired a session without lawyers present. At that session, Jeffrey and Heather agreed on a basis to settle their disputes. Heather and Jeffrey were then advised by their respective lawyers, a written agreement was drafted and signed by them and the lawyers provided their certifications required by s 21F of the Act. Jeffrey was advised by Mr van Bohemen not to sign the agreement but he did not take that advice.
[12] Under the agreement, Jeffrey and Heather retained all property that was then or in the future in their possession or control and by way of cash adjustment Jeffrey agreed to pay Heather $775,000 (the cash adjustment). This was in full settlement of all outstanding financial issues between them. The cash adjustment was payable as follows:
(a)$600,000 by 15 May 2020 or earlier; and
(b)$175,000 within two years by monthly instalments of $7,291.67 (the deferred payments).
[13]Other relevant terms included:
(a)Jeffrey was to provide Heather with a registered mortgage over a property at Kennedys Bush Road as security for the deferred payments;
(b)if Jeffrey did not pay the $600,000, or if he missed any of the deferred payments by 14 days or more, Heather was entitled to demand payment of all outstanding balances owed; and
(c)Jeffrey was responsible for all costs incurred to recover any outstanding balance.
[14] Having settled their dispute, Heather and Jeffrey discontinued the proceedings in this Court.
[15]Jeffrey has since made deferred payments but has not paid the $600,000.
[16] On 3 April 2020, Mr van Bohemen wrote to Heather’s lawyers, Wynn Williams, inviting Heather to negotiate a variation of the agreement due to the effects of the COVID-19 pandemic, the subsequent lockdown and forecasted economic recession. He said he had advised Jeffrey of the possibility of applying to the Court to set aside the agreement under s 21J of the Act or in reliance upon the doctrine of frustration.
[17] In a letter of 17 April 2020, Wynn Williams advised Mr van Bohemen there was no basis to set aside the agreement and Heather would not consider any variation of it.
[18] On 23 April 2020, Wynn Williams emailed Mr van Bohemen that Heather had not received the deferred payment due on 17 April 2020 and asked when it would be paid. Mr van Bohemen responded that his instructions were the payment was made that day.
[19] Jeffrey failed to make both the $600,000 payment due 15 May 2020 and a deferred payment due 17 May 2020. On 19 May 2020, Wynn Williams wrote to Mr van Bohemen asking for confirmation the payments would be made.
[20] On 21 May 2020, Mr van Bohemen emailed Wynn Williams that the deferred payment would be made that day. As to the $600,000 payment, Mr van Bohemen again invited Heather to renegotiate the agreement due to the anticipated recession and its effects on Jeffrey’s business.
[21] On 22 May 2020, Wynn Williams emailed Mr van Bohemen that Jeffrey had failed to provide security over the Kennedys Bush Road property. Heather remained unwilling to renegotiate the agreement. Wynn Williams advised if payment of the
$600,000 was not made by 29 May 2020 Heather would exercise her rights.
[22] On 2 June 2020, Mr van Bohemen wrote to Wynn Williams raising for the first time Jeffrey’s capacity to enter into the agreement. Mr van Bohemen said:
Mr Mills and I have difficulty because an issue has arisen as to his capacity to give instructions both now and at 17 February 2020.
Mr and Mrs Mills have retained Dr Dominic Lim to provide expert medical advice on both matters. Unless and until I have advice from Dr Lim, I am unable to take matters much further.
Having said that, steps are being taken to sell a property which could realise some capital for Mr Mills. You and your client will appreciate that nothing could be done in this regard during the level 4 and level 3 lockdown periods.
Once I have further information and instructions on the issue of capacity, I shall advise you.
[23]Heather commenced this proceeding on 12 June 2010.
[24] Jeffrey’s wife, Fleur Mills (Mrs Mills) applied and was appointed Jeffrey’s litigation guardian on 4 August 20201 and also in a proceeding that has been filed in the Family Court to set aside the agreement.
Summary judgment principles
[25]Rule 12.2(1) of the High Court Rules 2016 provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
…
[26] The correct approach to be taken to a plaintiff’s application for summary judgment was considered by the Court of Appeal in Krukziener v Hanover Finance Ltd, where the Court said:2
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA) . The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents
1 Remnant v Mills [2020] NZHC 1937 at [10].
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
or other statements by the same deponent, or is inherently improbable: Eng Mee Young v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA) .
[27] While the onus of establishing the absence of an arguable defence always rests on the plaintiff where, as is the case here, the plaintiff’s unchallenged evidence is sufficient to convince the Court that there is no defence to its claim, the defendant will have an evidentiary onus to respond to the application if it is to be defeated. In such a case, the defendant will need to provide sufficient particulars to show there is an issue worthy of trial.3 The Court, however, is not required to accept plainly unmeritorious defences.4
[28] Even in a case where the plaintiff has established that a defendant does not have a defence to its claim the Court retains a discretion to refuse summary judgment where to do so is required to avoid oppression or injustice.5
Part 6 of the Act
[29] Section 21A of the Act provides that spouses or partners may enter into agreements to settle differences between them concerning the status, ownership or division of property. Section 21D defines the scope of such an agreement. To be valid the formal requirements in s 21F must be complied with. It is accepted those requirements were complied with in this case.
[30] Section 21J provides the Court may set aside an agreement if giving effect to the agreement would cause serious injustice. It sets out the matters to which the Court will have regard when deciding whether to set aside an agreement on this ground. I set out s 21J in so far as it is relevant below:
21J Court may set agreement aside if would cause serious injustice
(1)Even though an agreement satisfies the requirements of section 21F, the court may set the agreement aside if, having regard to all the
3 Pemberton v Chappell [1987] 1 NZLR 1, (1986) 1 PRNZ 183 (CA) at 185.
4 MacLean v Stewart (1997) 11 PRNZ 66 (CA) at 69.
5 Sayles v Sayles (1986) 1 PRNZ 95 (HC) at 99; Herring v Herring [2010] NZCA 500, [2011] 2 NZLR 433 at [24] – [28]; Ireland v Ireland [2014] NZHC 1432 at [11] and [32] – [39].
circumstances, it is satisfied that giving effect to the agreement would cause serious injustice.
(2)The court may exercise the power in subsection (1) in the course of any proceedings under this Act, or on application made for the purpose.
(3)This section does not limit or affect any enactment or rule of law or of equity that makes a contract void, voidable, or unenforceable on any other ground.
(4)In deciding, under this section, whether giving effect to an agreement made under section 21 or section 21A or section 21B would cause serious injustice, the court must have regard to
---
(a)the provisions of the agreement:
(b)the length of time since the agreement was made:
(c)whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made:
(d)whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties):
(e)the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement:
(f)any other matters that the court considers relevant.
(5) …
[31] Where an agreement purporting to be made under s 21A is set aside under section 21J, the provisions of this Act have effect as if the agreement had never been made.6 In Gould v Timms, Ellis J expressed the view that it was not possible to partly set aside an agreement and following a setting aside order under s 21J “the division of property in toto will again be at large…”.7
[32] Section 21J requires a nexus between the terms of the agreement and the alleged serious injustice that will result from giving effect to the terms.8 The onus of proving a serious injustice is on the party seeking to have an agreement set aside.
6 Property (Relationships) Act 1976, s 21M.
7 Gould v Timm [2013] NZHC 2743, [2014] NZFLR 54 at [24].
8 Babylon v Babylon (2007) 2 NZTR 17-019 at [44].
[33] The serious injustice test was introduced in 2001 and represents a higher threshold than had previously applied. It was one of a number of significant changes introduced, the context for which included ‘dissatisfaction with the willingness of the Courts to set aside agreements under the Matrimonial Property Act…”.9 Those changes also included the introduction of “the fact” parties wished to achieve certainty by entering into an agreement as a factor to be considered by the Court in deciding whether to set aside an agreement.
[34] There is no simple definition of serious injustice but in Clark v Sims, Paterson J put the matter in this way:10
… Not every injustice will entitle a Court to set aside an agreement. There must have been at the time of entering into the agreement, or subsequently because of a change of circumstances, unfairness or a lack of equity of a substantial kind. … A Judge, in my view, should not set aside an agreement unless there has been a substantial injustice of sufficient gravity for the Judge to determine that in conscience the Court should intervene. That one party can establish that he or she did not receive what he or she may have received under the provisions of the Act, will not in itself be a sufficient ground to set aside an agreement, although gross inequality may well be a factor which weighs heavily in the determinative process of the Courts.
[35] Helpfully, in Wells v Wells Simon France J stated the following principles apply to the assessment of “serious injustice”:11
(a)serious injustice is a broad discretion which must be exercised in light of the policy underlying the legislation;
(b)an important component of the statutory scheme is the capacity of parties to contract out of its provisions so long as certain procedural requirements are met;
(c)resultant disparity of outcome at the time of separation is relevant, but is not generally as important a factor in contracting out cases as it might be in compromise cases. In any particular case it might of course require considerable weight, but generally it is not to be seen as a determinative or necessarily dominant consideration;
(d)consistent with (c), a comparison to the outcomes that would be ordered if the Act were applied is relevant but not as significant as it might be in compromise cases;
9 Harrison v Harrison [2005] 2 NZLR 349 (CA) at [111].
10 Clark v Sims [2004] 2 NZLR 501 (HC) at [36].
11 Wells v Wells [2016] NZFLR 870 (HC) at [37] and [38].
(e)contracting out will usually occur in circumstances where one party has the assets and is pushing for an agreement. The circumstances will often involve pressure, and may involve an issue of whether the relationship will continue in the absence of an agreement. Accordingly, the presence of such circumstances is not generally relevant to the issue of serious injustice;
(f)more than disparity of outcome per se will often be present before serious injustice arises. Concerns with the procedure will often provide that extra factor. Case law will no doubt develop on the issue of what procedural concerns the Court is referring to. I assume that they are something other than a breach of the s 21F requirement;
(g)a discretion exercised in accordance with these considerations will be difficult to disturb on appeal.
In setting out a list such as that, I am not to be taken as suggesting it is exhaustive. Harrison v Harrison is of recent vintage and no doubt over time more refined analyses than mine will emerge. It seems to me that the general thrust of the decision is that the legislation itself, and the legislative history, indicates a desire to respect the capacity of persons to contract out of the Act. Serious injustice must be considered against that philosophy. The specific endorsement by the Court (para [82]) of an earlier statement by Fisher J in Wood v Wood is telling. In the passage in Wood v Wood ([1998] 3 NZLR 234), Fisher J had expressed concern at the apparent ease with which agreements were being set aside. Public acceptance of the whole statutory scheme was based in part on the recognition that people could opt out – it was an integral feature of its public legitimacy.
[36] Serious injustice must be considered not only from the position of the applicant seeking to set aside an agreement but also from the position of the respondent.12 The Court will not exercise its discretion to set aside an agreement on the basis of serious injustice to just one party where setting aside the agreement creates a similar or greater injustice to the other.13
Jeffrey’s position
[37] Jeffrey has not pursued the argument, advanced by Mr van Bohemen on his behalf in correspondence with Wynn Williams, that the agreement should be set aside due to the effects of COVID-19.
12 Harrison v Harrison, above n 9, at [102]–[106].
13 Wilton v Crimmins (2003) 23 FRNZ 357 (DC) at [65]; Harrison v Harrison, above n 9, at [107].
[38] He also no longer contends the agreement should be set aside because he has not been able to sell a commercial building to pay Heather, which is a matter raised in his opposition to summary judgment.
[39] Jeffrey also does not challenge the partial settlement agreement entered into on 20 January 2020 despite its close temporal proximity to the agreement.
[40]Jeffrey’s case is now founded only upon:
(a)an assertion the agreement is unfair because as a result of his illness, treatment and medications he was mentally impaired at mediation and his decision-making faculties compromised; and
(b)an assertion the agreement is unreasonable on the basis of a comparison of the disparity of outcomes between what he agreed to pay Heather and what Mr van Bohemen advised him was Heather’s legal entitlement.
Application of s 21J
[41] It is necessary to evaluate the arguments advanced for setting aside the agreement against the factors set out in s 21J(4).
The provisions of the agreement – s 21J(4)(a)
[42] There is nothing unclear in the terms of the agreement. It was well drafted, easily understandable and plainly sets out the agreed terms. Heather and Jeffrey retained the property they possessed or controlled and Jeffrey was to pay Heather the cash adjustment. For reasons set out below, I am satisfied Jeffrey understood the terms of the agreement at the time he entered into it.
The length of time since the agreement was made – s 21J(4)(b)
[43] I do not consider delay in applying to set aside the agreement is a factor. Jeffrey applied to the Family Court to set aside the agreement in around early August 2020;
some seven months after the agreement was signed. Compared to other cases that period is not significant in itself.14
Whether the agreement was unfair or unreasonable in light of all the circumstances at the time it was made – s 21J(4)(c)
[44] Ms Flintoff submits for the purposes of s 21J(4)(c) unfairness relates to matters of process leading to the making of an agreement and unreasonableness relates to the content of the deal that was struck.
[45] Here, the unfairness is said to be Jeffrey’s mental impairment which impacted his decision making ability. The unreasonableness is said to be the variance between Jeffrey’s understanding of Heather’s legal entitlement as advised by Mr van Bohemen and her entitlement under the agreement.
[46] It is useful to address the arguments in the manner Ms Flintoff has presented them.
Fairness
[47] Ms Flintoff submitted that I must regard Jeffrey as an incapacitated person as defined in r 4.29 High Court Rules because Mrs Mills has been appointed his litigation guardian. The appointment of Mrs Mills was in the nature of a procedural order. It was not a final and conclusive determination of the Court on the issue of Jeffrey’s capacity.15 Heather was not heard on the application, which proceeded as a without notice application under r 4.36, reflecting that such applications are not generally matters in which an opposing party has a legitimate interest.16 Mrs Mills’ appointment does not prevent me from considering whether Jeffrey was or was not mentally impaired at the mediation and whether such impairment resulted in a serious injustice.
14 See Korving v Korving [2015] NZHC 152 (13 months) referring to Clark v Sims, above n 10, (nine years) and Thurston v Thurston [2014] NZHC 2267 (12 years).
15 Poros v Burney [2017] NZHC 3254 citing Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853(HL); Greymouth Petroleum Holdings Ltd v Empresa Nacional del Petróleo [2017] NZCA 490, [2017] NZAR 1617 at [53]-[54]; S v Attorney General [2017] NZHC 2629 at [4(b)(i)] and [13]; and Owens v Owens [2019] NZHC 1950 at [14]-[15].
16 R Goldman [2016] NZHC 1010, [2016] 3 NZLR 331 at [17] and [20].
[48] Ms Flintoff acknowledges Jeffrey’s assertion he was mentally impaired at mediation relies heavily upon a report of Dr Dominic Lim. Dr Lim is a consultant psychiatrist who was instructed by Mr van Bohemen on 3 June 2020 to give an opinion on matters related to Jeffrey’s decision-making capacity. Not included in the common bundle, but handed to me at the hearing, was a partially redacted letter from Mr van Bohemen to Dr Lim with those instructions.
[49] In his report Dr Lim makes a clinical finding that Jeffrey has developed a minor neuro-cognitive disorder as a result of his metastatic tumours and their treatment through resection, radiation and medications. He said there was “…a suggestion of impaired attention and executive functioning” and an indication of “… moderate to severe impairment”.
[50] Dr Lim says Jeffrey retains overall the capacity to make informed decisions and to understand complex financial, relationship property and trust issues, retains capacity to grant an Enduring Power of Attorney in respect to his property affairs and to make decisions concerning his personal care and welfare. Jeffrey also retains testamentary capacity.
[51] Dr Lim considers that Jeffrey’s decision-making capacity might be impacted in circumstances involving fatigue, stress, or post-treatment. He considers Jeffrey may have been most vulnerable, in terms of fatigue, anxiety and stress, when negotiating directly with Heather without lawyers present and he may have become confused, not remembering negotiation strategies/proposals or the parameters within which he should negotiate. He says Jeffrey might have become rigid in his thinking towards the end of the day leading him to sign the settlement against legal advice.
[52] Dr Lim states Jeffrey’s personality and language competence might camouflage his cognitive impairment so Jeffrey might appear outwardly competent even if his concentration and attention were waning.
[53] Dr Lim recommends in future Jeffrey should have supervision and assistance from a trusted individual, such as Mrs Mills, to assist in arriving at decisions about relationship property and trust matters and during any negotiations.
[54] Mrs Mills says, in her affidavit, that Jeffrey shut her out of the mediation process, was in a low emotional state in the lead up to mediation and agitated during the day. She says after the mediation he was confused about how the payment to Heather was configured. She referred to poor business decisions he has made since being diagnosed with his illness.
[55] Jeffrey says his ability to make decisions varies depending on a range of factors but his evidence concerning the mediation itself is scant. He refers several times to the mediation being stressful. He says his judgment was impaired and he did not understand what he was doing. He says he signed the agreement not because he understood it or thought it fair but because he wanted the mediation to finish.
[56] In her submissions, Ms Flintoff says that Jeffrey does not lack capacity in the legal sense. She does not argue that Jeffrey is unable to manage his own affairs in relation to property17 or his personal welfare, nor that there is a basis to set aside the agreement on common law principles.18
[57] This is consistent with Dr Lim’s findings concerning Jeffrey’s capacity. Dr Lim also says when Jeffrey receives optimal treatment and is in a stable space, his capacity does not appear majorly affected. Dr Lim also notes the unpredictable, complex and at times intermittent nature of Jeffrey’s cognitive impairment which is consistent with Jeffrey’s evidence that his ability to make decisions varies depending on several factors including, primarily, factors unrelated to stress.
[58] Dr Lim also notes the limitations and difficulties of assessing capacity retrospectively. Consistent with this, when describing the effects of his impairment on Jeffrey’s performance at mediation, Dr Lim qualifies his opinions throughout his report. He states several times it is ‘possible’ Jeffrey’s decision-making capacity was impacted under certain circumstances including when under stress or fatigue. Similarly, it is possible cognitive impairment would not be observed by a medically untrained person. It is possible Jeffrey would push himself to hold it together and appear competent though his attention was waning. When negotiating with Heather it
17 Protection of Personal and Property Rights Act 1988, s 25(1)-(2).
18 O’Connor v Hart [1985] 1 NZLR 159 (PC).
was possible that he became confused which could have skewed his appraisal of his position. I accept all things are possible but the evidence does not support a view that any of this actually occurred.
[59] Jeffrey’s evidence is unsatisfactory. In so far as it deals with his mental state at mediation it consists almost entirely of conclusory statements. He says his judgment was impaired without describing how he experienced impairment. He says he signed the agreement not because he understood it or thought if fair but he does not say what it was about the agreement he did not understand. He says nothing about the process adopted at mediation or about feeling vulnerable in the negotiation with Heather upon which Dr Lim, and Ms Flintoff, placed particular emphasis.
[60] I am satisfied Jeffrey was well prepared for the mediation. He was assisted by Mr van Bohemen. Dr Lim records Mr van Bohemen’s instructions that in the build- up to the mediation Jeffrey was advised regarding the “many possible permeations and possible settlement options”. He was also advised that Heather was seeking a cash adjustment of $1,823,915; a sum substantially greater than what Jeffrey ultimately agreed to pay her. Jeffrey apparently successfully negotiated Heather down from that figure to $775,000.
[61] Dr Lim records Mr van Bohemen was aware of Jeffrey’s health issues but Jeffrey felt capable to participate in and make decisions at the mediation. Dr Lim also records Jeffrey told him that in the lead-up to the mediation he felt prepared and he knew what had to be done. Jeffrey also recounted the discussions he had with Mr van Bohemen about settlement options.
[62] There is no evidence Jeffrey demonstrated signs of fatigue, exhaustion, confusion or, indeed, any mental impairment at all to anyone present at the mediation. There is nothing to suggest anyone present could have had reason to consider him mentally impaired. I have no doubt Jeffrey felt some level of stress but the mediation process is by its nature stressful. Mediation requires parties who are in conflict, and often with entrenched views, to meet in person, listen to each other’s point of view and act constructively to explore options for settlement. Heather also experienced
stress, the process was at times highly emotive and she, like Jeffrey, wanted to get it over with.
[63] As well as emphasising that Jeffrey may have been vulnerable when negotiating with Heather, Dr Lim speaks about the agreement having been made after a long day of intense negotiation. However, the uncontested evidence is that agreement was reached around 3 pm. There were breaks during the mediation. Even if Jeffery felt at a disadvantage in negotiating with Heather (which he does not claim to have been) the agreement they reached was not, of course, binding upon Jeffrey until the formalities required by s 21F were completed. This did not occur until 5.30 pm. There was a lengthy period for Jeffery to receive, consider and reflect upon the advice he received from Mr van Bohemen.
[64] Dr Lim records that Jeffrey told him that leading to the making of the agreement he felt pushed, and “plucked a figure out of the sky” and bargained around it. There can therefore be no suggestion he was unable to negotiate and it appears he did so successfully.
[65] More importantly, in his affidavit for the Family Court proceeding Jeffrey describes a logical approach in calculating the cash adjustment and providing a means to pay it. He explains this in the following way:
Notwithstanding the above, and despite legal advice to the contrary, in terms of the [agreement], I contracted to pay Heather $775,000 in settlement of all claims under the [Property (Relationships) Act] and the [Family Proceedings Act]…I accepted that there was a pool of undivided property worth over $1.5 million and that Heather was entitled to a half share. The biggest component in that pool were the shares in Advanced Applicators Limited.
….
… when I signed the [agreement] I anticipated that my father and I would be able to sell a commercial building we owned in Sydenham, Christchurch in reasonably short order and that my share of the proceeds (along with income from Advanced Applicators Limited) would be sufficient to meet my obligations under it.
Following the mediation in February 2020, I met with my solicitors. I engaged a commercial real estate agency for advice as to the marketing and sale of the building.
I learned that the building could not be sold quickly because it was less than 40% of the building code which made it an unattractive investment option because banks will not lend against such properties.
[66] Importantly also, Jeffrey’s evidence shows he immediately took steps following the mediation to satisfy his obligation to Heather. This is contrary to Mrs Mills’ evidence that in late March 2020 she contacted Mr van Bohemen because Jeffery had not done anything to address the agreement or settlement.
[67] Jeffrey’s evidence is that he signed the agreement against Mr van Bohemen’s advice because he wanted to bring the stress of the unresolved litigation with Heather and the mediation to an end. He could have refused to settle at any stage of the mediation and taken the risk of an adverse Court decision but the desire for finality and certainty of result were plainly important to him. He says he was prepared to pay a premium to resolve matters. In addition, Mr van Bohemen’s letter to Dr Lim referred to the fact a High Court hearing of the dispute was likely to last seven to 10 days and cost $100,000 to $200,000 and there were many areas of dispute between the parties. These are factors one would expect Mr van Bohemen to have discussed with Jeffrey when considering whether to sign the agreement.
[68] It is notable Mr van Bohemen has not filed an affidavit. Ms Flintoff says he may need to be a witness in support of Jeffrey’s application to set aside the agreement but there is no explanation for why he has not provided evidence in this proceeding.
[69] Mr van Bohemen could be expected to give evidence about why, acting on Jeffrey’s instructions, he sought to renegotiate the agreement but did not raise Jeffrey’s capacity as an issue until months later. Also, unlike Dr Lim and Mrs Mills, Mr van Bohemen was present and observed Jeffrey at mediation. He could be expected to give evidence that Jeffrey exhibited signs of fatigue, stress, lack of understanding or capacity if any of that was the case. He would have had a lengthy discussion with Jeffrey before Jeffrey signed the agreement and he provided his certification of it. If there was anything in Jeffrey’s manner that gave him any concern he could be expected to have raised it at the time and given evidence about it in this proceeding.
[70] The failure to have Mr van Bohemen make an affidavit to address these issues is so surprising and vital that the only inference that can be drawn is that he observed nothing about Jeffrey’s manner over the course of the mediation that suggested Jeffrey suffered from an impairment.
[71] Balancing all of these matters, the evidence satisfies me that Jeffrey was not significantly mentally impaired at mediation, that he negotiated the agreement fully informed of his position and priorities and understood the terms of the agreement. The agreement was not unfair.
Reasonableness
[72] Ms Flintoff’s submission is the Court cannot determine what Heather’s entitlement was under the Act because the issues are complex and the parties’ evidence is not before the Court making the summary judgment process unsuitable for any inquiry into those matters. I do not accept that submission.
[73] It appears that the principal issue at mediation concerned shares in Jeffrey’s company, Advanced Applicators Ltd. Jeffrey owns 25% of the shares. The remaining 75% shareholding had been transferred to the Jeffrey Mills Family Trust.
[74] Heather always maintained she had a legal entitlement to half the value of all of the shares in Advanced Applicators Ltd. Her starting position at mediation was that to settle, Jeffrey had to pay her more than $1,800,000 based on valuations of the shares the parties had obtained. The valuations have been attached to her affidavit and include a valuation obtained in February 2020 valuing the shares at between
$4,055,000 and $4,300,000.
[75] Jeffrey has given evidence demonstrating an awareness of the issues. The position he maintained in the litigation and took into mediation was:
(a)the shares held by the Jeffrey Mills Family Trust were not relationship property;
(b)the transfer of the shares to the Jeffrey Mills Family Trust was not a nuptial settlement for the purposes of s 182 of the Family Proceedings Act 1980;
(c)Heather had no entitlement to the value of the Trust’s 75% shareholding;
(d)Heather had a possible entitlement to one-half of the value of his 25% shareholding which he estimated had a value of $433,000 as at 31 March 2015 based on a BDO valuation;
(e)that the half value of the 25% shareholding was therefore $216,500; and
(f)that after adjustments made pursuant to ss 44 and 44C of the Act amounting to $62,000, there would be a net payment due to Heather of
$154,500.
[76] The competing positions of the parties entering mediation were therefore poles apart with Heather seeking more than $1,800,000 to settle and Jeffrey considering her entitlement was approximately $154,500. There can be no suggestion that Heather’s position was indefensible. It had been conveyed to Jeffery in the proceedings, maintained consistently and was based on valuation evidence. Heather says, and I accept, the agreement represented a substantial compromise on her position but achieved certainty and finality and allowed her to move on with her life and put the litigation behind her. It offered similar benefits to Jeffrey. In those circumstances, viewed in the context of the litigation between these parties, the agreement was not unreasonable.
[77] Parties attending mediation, including in a relationship property context, are not only concerned with their strict legal entitlements, nor do they expect the outcome will necessarily reflect what would be achieved if their litigation was heard in Court. They go to mediation to resolve their dispute without a determination of the Court. To achieve a settlement they will almost always have to make some and often significant
compromises. They cannot complain if, due to prioritising avoidance of cost and risk or achieving certainty, they receive less than might otherwise have been the case.
[78] This point is made by the Court of Appeal in Hildred v Strong where it was said:19
[21] The same can be said about any case which is compromised whether after a formal mediation process or not. It is the nature of alternative dispute resolutions. The parties decide that the value, benefit and advantage in putting a matter behind them outweighs the advantage which would flow from full- scale litigation.
[22] Parties are often influenced by questions of cost. There are issues of containment, finality, emotional strain and commercial convenience which are weighed. Every piece of litigation has risk attached to it. If parties choose to make their own bargain so as to eliminate such risk, only in exceptional circumstances can they have the Court permit them the opportunity to start again by engaging in conventional litigation.
[79] Jeffrey has failed to provide substantive evidence and submission on the issue of Heather’s legal entitlement. For instance, Jeffrey advanced no argument why anything other than a date of hearing valuation of the shareholding would be adopted in this case.20 Even if Jeffrey is correct that Heather had an entitlement to no more than half the value of his 25 per cent shareholding, adopting a mediation date valuation she was entitled to around $600,000. Given the ultimate settlement figure of $775,000 included provision for the division of other property in addition to the shares, the agreement was reasonable.
Whether the agreement has become unfair or unreasonable in light of any change in circumstances since it was made – s 21J(4)(d)
[80] Contrary to Ms Flintoff’s submission the receipt of Dr Lim’s report is not a relevant change of circumstances. There is no causal nexus between it and what Jeffrey claims is the serious injustice resulting from giving effect to the agreement.
19 Hildred v Strong [2007] NZCA 475, [2008] 2 NZLR 629.
20 Property (Relationships) Act, s 2G(1).
The fact that the parties wish to achieve certainty as to the status, ownership, and division of property by entering into the agreement
[81] This was a factor emphasised by William Young J in Harrison v Harrison.21 As I have already outlined, both Jeffrey and Heather were motivated in their decision to settle by the certainty of outcome that was achieved. This factor weighs against a finding of serious injustice in this case.
Any other matters the Court considers relevant – s 21J(4)(f)
[82] There are other factors to be taken into account which also weigh against setting aside the agreement. First, in reliance upon the agreement the parties discontinued their proceeding in this Court. If an order was made setting the agreement aside proceedings would likely have to be commenced anew at significant additional cost and delay to the parties. Heather bears no responsibility for the circumstances that Jeffrey now relies upon to set aside the agreement. If Jeffrey was impaired she did not and could not have known that. She has acted in good faith. It would be unjust that she be put to the uncertainty, risk, stress, expense and delay of further proceedings.
[83] Second, the evidence is that Jeffrey has had the greater benefit of the relationship property pool for over five years since separation. Heather has been paying rent/board whereas he has been in the former family home. Without the
$600,000 payment from Jeffrey, Heather has not been able to pay down debt or take an equity stake in a property for herself. That too is unjust.
[84] Third, it appears Jeffrey’s health will not improve and his condition is incurable. He has no incentive to advance promptly the proceeding to set aside the agreement or further proceedings over the division of relationship property. There is also a prospect his health will be a cause of delays and prevent him ultimately taking any part in such proceedings.
21 Harrison v Harrison, above n 9, at [90] – [91].
Conclusion
[85] Standing back and weighing up all the S27J(4) factors, I do not consider it is arguable that Jeffrey’s application to set aside the agreement will succeed. This is certainly not a case where there is an injustice that exercises the Court’s conscience to intervene on Jeffrey’s behalf. In my view, it is plain the injustice to Heather in setting aside the agreement would outweigh any injustice to Jeffrey in upholding it.
Should the Court exercise its discretion to refuse summary judgment?
[86] Ms Flintoff has referred to Herring v Herring, Sayles v Sayles and Ireland v Ireland.22 Those cases were concerned with the exceptional use of the Court’s discretion to refuse summary judgment where to do so would cause injustice to a defendant arising out of other aspects of the overall dispute between the parties or where summary judgment has been used as an instrument of oppression.
[87] Ms Flintoff made no submissions identifying any injustice or oppression that would result from granting Heather summary judgment in circumstances where Jeffrey’s application to set aside the agreement has no reasonable prospect of success. There is no basis to exercise the discretion to refuse summary judgment.
Result
[88]Heather’s application for summary judgment is granted.
[89]There shall be judgment for Heather against Jeffrey in the amount of
$709,375.05.
[90] Heather’s statement of claim has sought interest expressed only as “Interest pursuant to the Interest on Money Claims Act 2016”. The statement of claim does not specify which section of the Interest on Money Claims Act 2016 is relied upon nor the period for which interest is claimed. Under s 25(1) the Court may not award interest under that Act in those circumstances.
22 Herring v Herring, above n 5; Sayles v Sayles above n 5 and Ireland v Ireland, above n 5.
[91] Heather is entitled to costs which, in accordance with the agreement, are awarded on a solicitor/client basis. If there is any disagreement in relation to costs, I reserve leave for the parties to file memoranda.
O G Paulsen Associate Judge
Solicitors:
Wynn Williams, Christchurch
Layburn Hodgins, Christchurch
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