SB v DC HC Auckland CIV-2011-404-1005

[2011] NZHC 1421

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-1005

IN THE MATTER OF     the Property (Relationships) Act 1976

BETWEEN  SB Appellant

ANDDC Respondent

Hearing:         27 July 2011

Counsel:         G Harrison for Appellant

S Callanan for Respondent

Judgment:      4 October 2011 at 4:30 PM

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on    at

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:

P Langdon, Langdon & Co. Takapuna, Auckland:  [email protected]
S Callanan, Lewis Callanan, Browns Bay, Auckland:  [email protected]

Copy:

G Harrison, Barrister, Auckland:  [email protected]

SB V DC HC AK CIV-2011-404-1005 4 October 2011

Introduction

[1]      This  is  an  appeal  against  a  judgment  of  the  Family Court  at  Waitakere classifying a residential property acquired by the husband in September 1984, prior to the marriage in 1988, as relationship property under s 8 of the Property (Relationships) Act 1976 (“the Act”).  The parties did not live in the property until they got married, but it became the matrimonial home for the first four years of the marriage.  The parties did not live in it thereafter.  There was also a dispute as to post-separation rental received from the property.

[2]      The central issue before the Family Court was whether the property had been acquired in contemplation of marriage with the intention that it should be for the common use or common benefit of the parties.  The Family Court Judge found that it was and that the rental income derived from it was also relationship property.

[3]      The wife cross-appeals against the decision of the Family Court Judge not to hear submissions as to costs and to make no award.

The factual issues and findings

[4]      Section 8(1)(d)(i)  of  the  Act  includes  in  the  definition  of  „relationship property‟ all property owned by either spouse immediately before their marriage began if the property was acquired in contemplation of the marriage, and if it was intended for the common use or common benefit of both spouses.  The question, in any case, is essentially factual.  Each case will necessarily involve a determination of the state of mind of the party or parties acquiring the property, by drawing inferences from proved facts.

[5]      The  Family Court Judge found  that  the parties  met  in  1982  and  started courting.  For about three months that year, the respondent had a relationship with another man but the parties resumed courting thereafter.   The Judge accepted the evidence of the respondent, supported by that of her mother, that the other relationship occurred during 1982 rather than 1984 as the appellant asserted.

[6]      The respondent‟s evidence was that, in about March 1984, the relationship had become more serious and she and the appellant were talking about settling

down, buying a dog and a house, and getting married.  It was her evidence that they inspected a number of homes with a real estate agent during that year before finding the property in dispute, in Rosewarne Crescent, together.  The respondent‟s mother said that the appellant visited her late husband during 1984 to ask for permission to marry the respondent and that, when asked where they would be living, the appellant said they were looking for a house at that time.

[7]      This evidence was corroborated by a long-term friend of the appellant who said that the appellant drove him to Rosewarne Crescent in 1984 to show him the house and told him it was the parties‟ intention to live in it when they were married.

[8]      The property was purchased in that year in the name of the appellant.  It was the respondent‟s evidence that the appellant told her he would not propose properly until he had bought a house.  She said the appellant told her he wanted to pay off a large part of the mortgage debt before moving in and getting married.

[9]      The property was purchased in September 1984 for $70,000.  The appellant paid a $25,000 deposit from his savings, borrowed $10,000 from his father, and raised the remaining $35,000 from the National Bank.

[10]     No formal  engagement  was  entered  into  by the parties in  1984  and  the appellant did not formally propose until three years later when the parties were on holiday in Hawaii.  From the date of the purchase until the date of the marriage the property at Rosewarne Crescent was tenanted.  The parties did not live together at any time prior to their marriage, but on the day after their wedding they moved into Rosewarne Crescent and lived there until July 1993.

[11]     Against the evidence given by the respondent and her mother, and by the appellant‟s friend, the Judge was faced with the adamant denial of the appellant that the property had been purchased with marriage in mind.   His evidence was that Rosewarne Crescent was purchased by him as an investment property and that the respondent had no part at all in the purchase.  He emphasised that the agreement for sale and purchase was in his name only and that the title to the property has always been in his sole name.  He denied any discussions, between 1982 and 1984, about buying a house together or even making their lives together.  He says marriage was not on his agenda in 1984 and that, although the respondent did go with him from

time to time to look at some houses, the question of getting married was no reason for doing that.

[12]     The appellant acknowledged that he spoke to the respondent‟s father and

formally asked for permission to marry his daughter, but said that that occurred in

1987.  Although he accepts the evidence of the respondent‟s mother about that event, he insists it occurred in 1987.  The appellant said that his friend was mistaken when referring to the parties having had an intention to live at Rosewarne Crescent when they were married.

[13]     In resolving the conflict of evidence, which appears to have raised issues not so much of credibility as reliability, the Judge found that the weight of evidence fell heavily against the appellant‟s claim that there were no discussions about marriage, including about buying a home to live in, during 1984.  He accepted the evidence of the respondent‟s mother about the appellant seeking permission to marry in 1984 and saying that they were looking for a house at that time.

[14]     The  Judge  was  plainly  influenced,  in  deciding  when  that  conversation occurred, by the view that it made more sense if the conversation had taken place in

1984.  As the Judge said, the context of the discussion would have had to change if it had occurred in 1987 because the property had already been purchased some years earlier than that.  The discussions between the appellant and the respondent‟s father involved a query about where the couple would live after marriage and the response that they were then looking for a house.  This was a telling point to which the Judge was entitled to give weight.   Further, the Judge accepted the evidence of the appellant‟s friend that the discussions about the parties‟ intentions to live in the Rosewarne Crescent property took place in 1984.

[15]     On the basis of this evidence the Judge found, as he was entitled to do on the evidence, that there was a clear causal nexus between the plan to marry in 1984 and the purchase of the Rosewarne Crescent property.  He concluded, as he was entitled to do, that the proposed marriage materially affected the decision to purchase.

[16]     The Judge addressed the delay of three or four years between the acquisition and the date of the marriage.  It was important to do so.  To bring property acquired before marriage within the definition of relationship property, it is necessary to

establish that marriage was contemplated, and that the property was intended for the common use or common benefit of both spouses, at the time of the acquisition.  The longer the delay between acquisition and marriage, the more difficult it may be for a claimant to satisfy the Court as to the requisite intention at the relevant time.

[17]     The discussions between the appellant and others about the acquisition of Rosewarne  Crescent  as  a  property  in  which  the  couple  would  live  after  their marriage was compelling evidence of the appellant‟s state of mind at the time of acquisition.  The Judge was satisfied that the subsequent delay before the marriage occurred was explicable by the appellant‟s desire to reduce the debt on the property through the application of rental income.  It is not insignificant, in terms of drawing inferences, that the parties moved into the property the day after their marriage.

The appellant’s arguments on legal issues

[18]     For the appellant, Mr Harrison argued that before it could be held under s 8(1)(d) that a property had been acquired in contemplation of marriage, and with the intention that it be for the common use or common benefit of both spouses, it was necessary for there to be, before the acquisition:

[a]       an engagement between the parties to marry;

[b]       a proposal accepted by the other party by one party to marry; and

[c]      such a close proximity between the acquisition of the property and the marriage that contemplation of marriage and the intention of common use or common benefit was the only description that could be applied to its purchase.

[19]     Mr Harrison‟s submission, in other words, was that the section requires that there must be such a close temporal connection or proximity between the date of acquisition and the date of marriage that the only inference to be drawn is that there was contemplation of marriage, and that the intention of common use or common benefit was the only purpose for the acquisition.

[20]     Mr Harrison‟s approach  requires  the  addition  of  a  gloss  to  s 8(1)(d),  by requiring  proof  of  the  acceptance  of  a  formal  proposal  of  marriage  and  close

proximity between the date of acquisition and the date of marriage. Whether there was a formal offer and acceptance of marriage, or close proximity of the same to the acquisition of the disputed property, are matters to be considered and weighed as part of the factual inquiry referred to above at [4]. But there is no basis for implying into the statute any factual pre-requisites for the application of the plain words of s 8(1)(d)(i) and (ii). Delay between acquisition and marriage may be explicable on the facts in a manner nevertheless consistent with the existence of the requisite state

of mind at the relevant time.1

[21]     In advancing the second part of the argument, Mr Harrison submitted that the learned authors of Fisher on Relationship Property were incorrect in relying, at paragraph 11.21 of the text, on the judgment of Barker J in Haggie v Haggie,2  in asserting that where the purchase of the property is for more than one purpose, it will be sufficient if one of the principal purposes is the common use or common benefit of the two spouses.3    I do not consider there is any merit in this argument.   The decision in Haggie is settled law and the reference to a “principal” purpose in the commentary is consistent with the wording of the section.

[22]     Even if a dominant purpose is required,4 there was evidence from which the Judge could properly conclude that the intention to use the property to earn rental income was subservient to the dominant purpose of providing a matrimonial home in due course.

[23]     The  facts  of  this  case  provide  an  example  of  a  dual  purpose  for  the acquisition of a property, one being the earning of rental income, and the other the use of the property as the matrimonial home, which were not in conflict.   On the Judge‟s findings, there was evidence justifying the conclusions that common use as a

home, in due course, was intended and that there was a common benefit purpose in

1 See, for example, Greer v Greer (1978) 2 MPC 71 where the marriage was delayed four years after the acquisition because the husband was waiting to be divorced from his previous wife.

2 Haggie v Haggie (1978) 1 MPC 98.

3  It should be noted that Haggie was decided under the Matrimonial Property Act 1976 where the formula called for an intention of common use and common benefit rather than the disjunctive form of words used in s 8(1)(d)(ii) since the Property (Relationships) Amendment Act 2001 came into force

on 1 February 2002.

4 Sloss v Sloss [1989] 3 NZLR 31, 35; (1989) 5 FRNZ 148, 152 (per Richardson J).

that, by the time the parties married  and moved into the property, the level of indebtedness would have been decreased by the application of rental income.

[24]     I am satisfied the Judge took the correct approach to the legal issues.  The only question which remains, therefore, is whether or not the factual findings made by the Court are unfounded and should be set aside.

The approach on appeal to factual determinations by the Family Court

[25]     Mr Harrison referred to and relied upon the statements of principle in Austin, Nichols & Co v Stitchting Lodestar5  as to the approach to be taken on general appeals where findings of fact are challenged.  The relevant discussion appears at [4] and [5] of the Court‟s judgment.

[26]     I apply those principles.  In this case, the Judge had the benefit of seeing and hearing  the  witnesses.     He  made  a  reasoned  assessment  of  their  reliability, particularly as to the crucial issue of the timing of the conversations between the appellant and the respondent‟s father and the appellant and his friend.  Furthermore, having read the transcript of the evidence myself, I am satisfied not only that there was evidence to support the factual conclusions he reached but also that they were correct.

[27]     For those reasons, the appellant‟s appeal is dismissed.

The cross-appeal as to costs

[28]     Although counsel had indicated during the hearing before the Family Court Judge that costs applications would be made once the Judge‟s liability findings were known (a sensible approach frequently adopted in many jurisdictions), the Judge determined without hearing further from the parties that he would not make any award of costs.

[29]     The Judge acknowledged that the respondent had been successful in relation to the two key matters in issue, which were the classification of the Rosewarne Crescent property and the occupation rental derived from it post-separation, but then

went on to say, “... costs do not always follow the event in proceedings such as these in the Family Court – for good reason.”   The Judge did not explain what those reasons might have been, nor did he refer to any applicable rules as to costs or principles arising from them.

[30]     He said:6

There were some genuinely difficult factual and legal issues that ultimately required a hearing to resolve and both parties had an equal interest in, and responsibility for, that happening.   The organisation and presentation of the case by counsel for both parties was of a very high professional standard and the points in dispute very well argued.   Each party shall therefore be responsible for meeting his/her own costs.

[31]     It  is  not  immediately  obvious  to  me  how  the  matters  mentioned  in  the paragraph just quoted justified taking the view that costs should lie where they fell without hearing from the successful party.

[32]     The possibility that there may have been Calderbank letters exchanged prior to trial affords a compelling reason why it is not only unfair, but also unwise, for a Court to determine questions of costs without hearing from the parties.   In the present case, the reason Ms Callanan sought to address the Court on costs after judgment was that a Calderbank offer had been made, on 21 August 2009, a year before the hearing.

[33]     In  that  offer,  the  respondent  waived  her  claim  to  the  full  value  of  the Rosewarne Crescent property, the rental received from Rosewarne Crescent, and the balance of relationship property.   In contrast, the effect of the Family Court‟s judgment was to award the respondent the full value of the Rosewarne Crescent property,  half  the  rental  received  from  it,  and  half  the  balance  of  relationship property.

[34]     Ms Callanan submitted that the Calderbank offer was generous.  In the result, the applicant recovered significantly less at trial than would have been obtained by him had he accepted the August 2009 proposal.

[35]     The  relevant  costs  provisions  are  those  set  out  by  Ms Callanan  in  her submissions as follows:

(a)       Section 40 of the Property (Relationships) Act 976:

Costs

Subject to any rules of procedure made for the purposes of this Act, in any proceedings under this Act the Court may make such orders as to costs as it thinks fit.

(b)       Rule 207  of  the  Family  Court  Rules  2002  (which  came  into  force  on

1 November 2009):

Costs at discretion of Court

(1)       The Court has discretion to determine the costs of –

(a)      any proceeding:

(b)      any step in a proceeding:

(c)      any matter incidental to a proceeding.

(2)       In exercising that discretion, the Court may apply any or all of the following [District Court Rules], so far as applicable and with all necessary modifications:

(a)      4.2 – principles applying to determination of costs: (b)      4.3 – categorisation of proceedings:

(c)      4.4 – appropriate daily recovery rates: (d)  4.5 – determination of reasonable time:

(e)      4.6 – increased costs and indemnity costs: (f)       4.7 – refusal of, or reduction in, costs:

(g)      4.8 – costs in interlocutory applications:

(h)      4.9 – costs may be determined by different Judge:

(i)       4.10 – written offers without prejudice except as to costs: (j)        4.11 – effect on costs:

(k)      4.12 – disbursements.

(3)      This rule is subject to the provisions of the family law Act under which the proceedings are brought.

(c)       Rule 4.6 District Court Rules:

4.6      Increased costs and indemnity costs

4.6.1    Despite rules 4.2 to 4.5, the Court may make an order –

(a)      increasing   costs   otherwise   payable   under   those   rules

(“increased costs”); or

(b)       that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (“indemnity costs”).

4.6.2the  Court  may  make  the  order  at  any  stage  of  a  proceeding  in relation to any step in the proceeding.

4.6.3    the Court may order a party to pay increased costs if –

(a)       the nature of the proceeding or the step in the proceeding is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b)       the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in the proceeding by –

(i)        failing to comply with these rules or a direction of the Court; or

(ii)      taking  or  pursuing  an  unnecessary  step  or  an argument that lacks merit; or

(iii)      failing,  without  reasonable  justification,  to  admit facts, evidence, or documents or accept a legal argument; or

(iv)      failing, without reasonable justification, to comply with a notice for discovery, notice for further particulars,   notice   for   interrogatories,   or   other similar requirement under these rules; or

(v)       failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 4.10 or some other offer to settle or dispose of the proceeding; or

(c)       the proceeding is of general importance to persons other than just the parties and it was reasonable necessary for the party claiming costs to bring the proceeding or participate in the proceeding in the interests of those affected; or

(d)       some other reason exists that justifies the Court making an order for increased costs despite the principle that the determination  of  costs  should  be  predictable  and expeditious.

(d)      Rule 4.10 District Court Rules 2009:

Written offers without prejudice except as to costs

4.10.1 A party to a proceeding may at any time make to any other party to the proceeding a written offer that –

(a)      is expressly stated to be without prejudice as to costs; and

(b)      relates to an issue in the proceeding.

4.10.2 The fact that the offer has been made must not be communicated to the Court until the question of costs is to be decided.

[36]     It cannot be doubted that the Family Court has a broad discretion as to costs. Nevertheless,  bringing  r 207  of  the  Family  Courts  Rules 2002  into  force  on

1 November 2009 must have been done for the purpose of ensuring that the Family Court‟s costs  discretion  should  be  exercised  in  a  principled  manner.     While principles such as those to be derived from the rules which are listed at r 207(2) of the Family Courts Rules are not mandatory, they provide guidance to the exercise of the discretion.

[37]     The  respondent  was  necessarily  prevented,  by  r 4.10.2  District  Court Rules, from drawing the offer to the Court‟s attention to the Calderbank offer before delivery of the judgment.   The Judge‟s failure to hear the parties on questions of costs following delivery of his substantive judgment deprived the respondent of an opportunity to argue for increased costs on the grounds of the pre-trial offer.

[38]     I did not understand Mr Harrison to disagree, in general terms, with these propositions.   Counsel were agreed that the Family Court Judge would be better placed than this Court to consider the question of costs in the Family Court proceedings and, particularly, to weigh the effect of the Calderbank offer and the appellant‟s refusal to accept it.

[39]     The cross-appeal is allowed and the matter remitted to the Family Court for determination as to costs in accordance with the principles reflected by r 207 Family Courts Rules.

Costs on the appeal

[40]     The respondent, having succeeded on both the appeal and cross-appeal, is entitled to costs in this Court.  Counsel are invited to confer and, if possible, reach agreement.   In the event that no agreement is reached, the respondent shall have

20 working days from the date of this judgment to file a memorandum as to costs, with the appellant having a further 20 days to file a memorandum in response.  The appellant shall have five working days thereafter to file any reply, and I shall then issue a costs judgment.

........................................

Toogood J