Sadchykova v Vaughan

[2023] NZHC 1214

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://

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV2023-488-000012

[2023] NZHC 1214

IN THE MATTER OF

the Relationship (Property) Act 1976

BETWEEN

IRYNA OLEKSANDRIVNA SADCHYKOVA

Appellant

AND

STEPHEN FREDERICK VAUGHAN

Respondent

Hearing:

17 May 2023

Appearances:

The appellant in Person

D W Hart for the Respondent

Judgment:

9 June 2023

JUDGMENT OF POWELL J

IRYNA OLEKSANDRIVNA SADCHYKOVA v STEPHEN FREDERICK VAUGHAN [2023] NZHC 1214 [9

June 2023]

Solicitors:

I O Sadchykova – Self Represented DW Hart - Whangarei

[1]    The appellant, Iryna Sadchykova, has appealed against a decision of Judge Ellis ordering the sale of the former family home owned by her and the respondent, Stephen Vaughan, located in Anzac Ave, Morningside, Whangārei (“the Morningside property”).1

[2]    The order to sell the Morningside property was made pursuant to s 25(4) of the Property (Relationships) Act 1976 (“the PRA”). Section 25 of the PRA gives the Court jurisdiction to determine the respective shares of spouses or partners in relationship property including family homes, and to divide that property up between the spouse or partner,2 subject to being satisfied of various matters in s 25(2). It is not in dispute that at the time Judge Ellis made the orders under appeal there were no substantive proceedings seeking such a determination or division of the parties’ relationship property but s 25 subss (3) and (4) relevantly provide:

(3)        Regardless of subsection (2), the court may at any time make any order or declaration relating to the status, ownership, vesting, or possession of any specific property as it considers just.

(4)        To avoid any doubt, but without limiting subsection (3), if proceedings under this Act are pending, the court, if it considers it appropriate in the circumstances, may make an interim order under that subsection for the sale of any relationship property, and may give any directions it thinks fit with respect to the proceeds.

[3]    In her Notice of Appeal Ms Sadchykova challenges three aspects of Judge Ellis’s decision:

(a)There were procedural irregularities with regard to the Family Court hearing;

(b)Judge Ellis was wrong to conclude that as at the date of hearing there were proceedings pending under the PRA and as a result there was no jurisdiction to make the order for sale; and

(c)Judge Ellis was wrong to conclude on the evidence before her Honour that it was appropriate to make the orders sought by Mr Vaughan.

1      Vaughan v Sadchykova [2023] NZFC 1278.

2      Property (Relationships) Act 1976 s 25(1).

[4]    Ms Sadchykova’s focus at the hearing before me was an aspect of this third issue. In her oral submissions Ms Sadchykova asserted that the decision to sell the house was premature and needed to wait until after Mr Vaughan had completed disclosure. In Ms Sadchykova’s submission, if this was done it would show that Mr Vaughan had only a limited interest in the Morningside property. Therefore Ms Sadchykova may be able to raise sufficient finance to buy Mr Vaughan out of the property in the event she was able to increase her income.

[5]    In addressing these issues Mr Hart, on behalf of Mr Vaughan, submitted that the present appeal concerns an examination of judicial discretion exercised by the Family Court. On that basis, it was Mr Hart’s submission that the appropriate approach is to consider the appeal in accordance with May v May,3 which governs the standard for appeals against the exercise of discretion.4

[6]    In contrast, appeals concerning questions of fact and degree entailing value judgments are generally determined as “general appeals” using the approach set out in Austin Nichols & Co Inc v Stichting Lodestar.5 Taking this approach the Court of Appeal found that where a decision involves the evaluation of evidence, assessment, and not a simple choice between two open options, the appeal should proceed by way of re-hearing.6 The Supreme Court observed in Kacem v Bashir “the fact that the case involves factual evaluation and a value judgment does not of itself mean the decision is discretionary”.7

[7]    Unlike a decision involving the quantum of an award or the facts in May v May, I am not persuaded that the decision of the Judge in this case was purely an exercise of discretion. First, the power was contingent on ascertaining whether the proceedings were pending, a matter which the Judge considered in some detail, and which involved considerable consideration of evidence. Secondly, in other decisions, this Court found it appropriate to consider the exercise of powers under s 25 by way of review by

3      May v May (1982) 1 NZFLR 165 (CA).

4      Ross Carter Burrows and Carter Statute Law in New Zealand (6th ed, Lexis Nexis, Wellington, 2021) at 717.

5      Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.

6      Financial Markets Authority v Vivier and Company Ltd [2016] NZCA 197, [2016] 3 NZLR 70 at [40]–[46]; Carter, above n 4, at 717.

7      Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].

general appeal, even where the power was characterised as “discretionary”.8 Thirdly, the decision was not a matter that involved a Judge’s “personal appreciation” of a matter. Rather it concerned a factual inquiry into the nature of the parties’ positions, and a review of the evidence. Finally, although the Judge characterised the decision to order the sale as “discretionary”, the character of the decision is broader than merely a value judgment.

[8]    As a result I am satisfied Judge Ellis was not in fact exercising a discretion; her Honour was making an assessment and decision based on an evaluation of the evidence. Therefore, I proceed to consider the appeal on the basis of the approach set out in Austin Nichols,9 namely that the Court must come to its own view on the merits of the appeal.

[9]I deal with the issues raised by Ms Sadchykova in turn.

Issue 1 – Were there any procedural irregularities arising out of that Family Court process?

[10]   On the first issue, Ms Sadchykova claims she was not aware the application was to be dealt with by Judge Ellis and in addition Mr Hart monopolised the time available at the hearing.

[11]Neither of these contentions can be sustained.

[12]   The application for sale of the Morningside property followed a lengthy process by which the parties had attempted to reach agreement over their relationship property issues, including the Morningside property. There is a dispute as to when exactly the parties separated as it appears even after the relationship ended, they remained residing in the property together.

[13]   At some point in 2021 it appears Ms Sadchykova moved out and, after unsuccessful efforts to reach agreement Mr Vaughan applied without notice for an order to sell the property on 28 March 2022. After the application had been filed there

8      Brown v Cheung [2016] NZHC 2408, [2016] NZFLR 860 at [23] and [52].

9      Austin, Nichols & Co, above n 5, at [3].

appear  to  have  been  further  negotiations  but  no  agreement  to   sell,   before   Ms Sadchykova reoccupied the property around October/November 2022.

[14]   The application was called at a conference before Judge L King on 9 November 2022. At that point Mr Vaughan was self-represented and Ms Sadchykova represented by counsel. In a Minute issued after the conference Judge King noted that Ms Sadchykova had raised as a preliminary issue the absence of substantive proceedings, thereby calling into question the jurisdiction to make the sale orders sought by Mr Vaughan.

[15]   Noting that Mr Vaughan had already filed evidence in support of his application, Judge King issued timetable directions as to the filing of Ms Sadchykova’s evidence in opposition to the application, and submissions on behalf of both parties. Mr Vaughan’s application was set down for a one hour submissions only hearing.

[16]   While both parties filed submissions it is noted Ms Sadchykova did not file evidence as directed, and only finally attempted to do so after the hearing and Judge Ellis declined to consider Ms Sadchykova’s affidavit at that point.10

[17]   Having reviewed the background, there can be no doubt that Judge King’s Minute makes it clear that it was Mr Vaughan’s entire application that was set down for hearing and not simply a hearing on the jurisdictional issue raised by Ms Dodds on behalf of Ms Sadchykova.

[18]   There is likewise no evidence before me that Ms Sadchykova (by then self- represented) did not have sufficient time to put her submissions to Judge Ellis. While there is no dispute Mr Hart took close to an hour to present submissions on behalf of Mr Vaughan, there is equally no suggestion Ms Sadchykova was cut short in any way. On the contrary, in the hearing before me Ms Sadchykova confirmed there was in fact nothing further she had wished to put to Judge Ellis at the hearing of the application.

[19]The appeal cannot succeed on the first issue.

10     Vaughan v Sadchykova, above n 1, at [5]–[6].

Issue 2 – Were substantive Relationship (Property) Act proceedings pending for the purposes of s 25(4)?

[20]This was one of the two key issues considered by Judge Ellis in her decision.

[21]   Judge Ellis concluded that the use of the word pending in s 25 did not require substantive RPA proceedings to have been filed before an application for sale of relationship property could be entertained as Ms Sadchykova contended. Instead, her Honour concluded it could include proceedings yet to be filed. In particular Judge Ellis observed:11

To be pending there must be a realistic possibility of actual proceedings being filed. It must be more than just a hope or whimsical fancy. It must be a distinct possibility. I accept that is the case here based on the submissions made by Mr Hart who is now instructed. The fact he has instructed a lawyer is a game changer. It adds a reality to the promise of applications being filed. Indeed, if Mr Vaughan had not had a lawyer and continued to have been representing himself it is likely that I would not have found that this was the case. After all, if he had intended to file the substantive application, he would have. However, he now was a lawyer who is to file the application.

The word itself is ambiguous enough to include anticipated applications (noting my comments at (b)). If Parliament had meant for the provision to only be confined to situations where actual applications were on foot then it was open to them to word it differently, for example by saying ‘applications yet to be determined’ or something similar.

[22]   Although this point is now substantially moot given that in accordance with Judge Ellis’s judgment substantive  PRA  proceedings  have  now  been  filed  by  Mr Vaughan, I nevertheless endorse Judge Ellis’s approach. It is quite clear s 25(4) of the PRA does not specify that substantive proceedings must have been filed before the power of sale can be exercised. In accordance with the ordinary meaning of pending it was therefore open to Judge Ellis to accept Mr Hart’s assurance that substantive proceedings were in train and were intended to be filed shortly. Those anticipated substantive proceedings were therefore pending for the purposes of s 25(4), and to ensure that they would in fact be filed Judge Ellis also issued directions that such proceedings were to be filed within 28 days, by 1 March 2023.12

11 At [26].

12     At [31(c)].

[23]   It is obvious that the use of the word “pending” as opposed to “filed” gives the Family Court the ability to deal promptly with issues arising with particular assets if circumstances require immediate action, notwithstanding no substantive application has been filed.

[24]   There is accordingly no merit in  relation  to  the  second  issue  raised  by  Ms Sadchykova.

Issue 3 – Was the order for sale appropriate in terms of s 25(4)?

[25]   In concluding that an order for sale was appropriate Judge Ellis noted the time that the application had been outstanding and accepted the evidence presented by Mr Vaughan showed that the value of the property had declined and was likely to decline further, and that it was in the interests of the parties to sell now. Her Honour noted that the proceeds would be held until the respective interests of the parties were determined, including a determination as to whether Ms Sadchykova was entitled to a greater share of the relationship property or a contribution for improvements she stated she had made since re-entering occupation. Finally, Judge Ellis noted that it was unclear if the property was not sold whether Ms Sadchykova could continue to pay the outgoings, noting it was clear that “she was experiencing real difficulties financially”.13 The Judge observed that if the sale proceeded Ms Sadchykova could apply for an interim distribution.14

[26]   It is difficult to fault this approach. As Mr Hart submitted, the evidence before the Court showed that the parties had been unable to agree what should happen to the Morningside property for a considerable period, while the evidence placed before the Family Court by Mr Vaughan, and not contradicted by any evidence filed by Ms Sadchykova, was that the value of the property had been decreasing throughout that period.

[27]   It is also clear that while Ms Sadchykova now appears adamantly opposed to the sale (at least pending disclosure from Mr Vaughan) that has not always been her

13     At [29(g)].

14     At [29(h)].

position. On the contrary Ms Sadchykova has previously accepted through counsel the inevitability of the sale of the house. In correspondence dated 7 and 14 December 2021, Ms Westenra, Ms Sadchykova’s then lawyer, advised Mr Vaughan’s lawyer that her client sought for the Morningside property to be listed with Barfoot and Thompson with a reserve price of $700,000. When Ms Sadchykova later engaged Ms Dobbs as counsel, it remained her intention for the property to be sold, as evidenced in a letter sent on 29 March 2022. And an email dated 7 December 2022 sent by Ms Sadchykova to Mr Vaughan’s lawyer is further evidence that her intention to sell the property and divide the remaining assets had not at that time changed.

[28]   Finally, it is clear not only from the evidence before the Court, but also from Ms Sadchykova’s submissions at the appeal hearing that Ms Sadchykova has little or no ability to buy out any share of the property Mr Vaughan is found to have. On the contrary, Ms Sadchykova indicated that would only be able to happen if she was to increase her income and no information about the likelihood of that was placed before the Court. It is clear that any further delay for the purpose of assisting Ms Sadchykova’s chances of purchasing the property would be speculative and open ended.

[29]   In the circumstances I agree with Judge Ellis. It is to both parties’ advantage that the sale take place as soon as possible. As Judge Ellis noted such a sale does not affect the relative interests of the parties which stand to be determined in the course of the  substantive  proceedings  that  have  now  been  filed,  and  also  encourages   Ms Sadchykova to seek an interim distribution in the event that the final resolution of PRA issues is delayed.

Decision

[30]   The appeal is dismissed. Mr Vaughan is entitled to costs. Any memorandum on behalf of Mr Vaughan is to be filed by 23 June 2023 and any response by Ms Sadchykova by 7 July 2023, following which I will determine costs on the papers.

Powell J