SB v GMH HC Hamilton CIV-2010-419-887
[2010] NZHC 2388
•14 December 2010
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2010-419-887
BETWEEN S B Appellant
ANDG M H Respondent
Hearing: 4 November 2010
Appearances: R D Clark for Appellant
E J Hudson for Respondent
Judgment: 14 December 2010
JUDGMENT OF BREWER J
This judgment was delivered by me on 14 December 2010 at 10:00 am pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
SOLICITORS
Lewis' (Cambridge) for Appellant
Cooney Law (Cambridge) for Respondent
COUNSEL
RD Clark; EJ Hudson
S B V G M H HC HAM CIV-2010-419-887 14 December 2010
Introduction
[1] The appellant appeals from a decision of the Family Court that a Contracting Out Agreement should be set aside and determining property to be relationship property to be divided equally between the appellant and the respondent.
[2] In 2005 the appellant and the respondent were living together in a de facto relationship at a property owned by the appellant ("the French Pass Road property"). The appellant instructed his solicitor to prepare a Contracting Out Agreement (described as a Separate Property Agreement), the intent of which was to record that the appellant would transfer a one-quarter share of the French Pass Road property to the respondent for $45,000. Otherwise all bank accounts, vehicles and business interests owned by each party would remain their sole and separate property.
[3] The Contracting Out Agreement was sent by the appellant's solicitor to the respondent's solicitor. On 7 October 2005 the respondent went to see her solicitor and decided, on the solicitor's advice, not to sign the agreement. Nevertheless, she paid $45,000 into the appellant's bank account so that he could purchase a boat, that day being the final day to complete the purchase.
[4] Later that day, following a discussion between the appellant and the respondent, the respondent returned to her solicitor's office, had a further meeting with her solicitor, and signed the agreement.
[5] On 1 May 2006 the appellant and the respondent separated.
The appeal
[6] The respondent applied to the Family Court for the Contracting Out Agreement to be set aside and for orders determining the division of the relationship property of the parties. The hearing of the application took place on 3 and 4 May
2010 with the Family Court Judge's decision being given on 18 June 2010.[1] Judge
[1] GMH v SB FC Hamilton, FAM-2008-019-411, 18 June 2010.
RH Riddell set aside the Contracting Out Agreement, finding that the process which attended the execution of the agreement ultimately resulted in serious injustice for the respondent.
[7] In terms of relationship property, the Judge found that all of the significant assets in the names of the parties were relationship property and that the respondent was entitled to a half share therein in the sum of $226,565.50. Judge Riddell also awarded the respondent interest on her share of relationship property at the
Judicature Act[2] rate from 1 May 2006 until the date on which payment is made. The
[2] Judicature Act 1908, s 87.
respondent was also awarded costs on a 2B basis.
[8] The appellant appeals against all of these decisions. The grounds of appeal in respect of the substantive decisions are as follows:
1. The Decision of the Court is wrong in fact and in law and against the weight of evidence in finding that the agreement should be set aside as it was signed under duress even though the Respondent received independent advice.
2. The Decision of the Court is wrong in fact and in law and against the weight of evidence in finding that there were issues as to the validity of the agreement.
3. The Decision of the Court is wrong in fact and in law and against the weight of evidence in finding that the agreement should be set aside and then finding the Appellant's property (other than the house property) was relationship property, such finding being inconsistent with the evidence as to the existence of an agreement between the parties under section 21H of the Property (Relationships) Act 1976.
[9] The respondent has cross-appealed as follows:
1. THAT the judgment is defective, in that it failed to provide the
Respondent with the means of obtaining her entitlement.
2. THAT the judgment at para [107] be varied or amended to include an Order that "[the appellant] pay to [the respondent] her entitlement of
$226,565.50".
Principles pertaining to the appeal
[10] Appeals to this Court are authorised and regulated by s 39 of the Property (Relationships) Act 1976 ("the Act"). Normal appellate principles apply.[3] The short point is that on a general appeal such as this the High Court must come to its own view on the merits. The weight to be given to the decision of the Family Court Judge is a matter of judgment for this Court. If I should take a different view from the Family Court Judge and form the opinion that the Judge's decision is wrong then
[3] Austin Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141 (SC).
I must act on that view. It is the appellant who bears the onus of satisfying the Court that it should differ from the decision under appeal.
[11] The Supreme Court in Austin Nichols expressed the jurisdiction in this way:
[16] Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ.
[12] The Supreme Court recently revisited the issue in Kacem v Bashir:[4]
[4] Kacem v Bashir [2010] NZFLR 884 (SC) at [32].
[32] But, for present purposes, the important point arising from Austin, Nichols is that those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion involves an assessment of fact and degree and entails a value judgment. In this context a general appeal is to be distinguished from an appeal against a decision made in the exercise of a discretion. In that kind of case the criteria for a successful appeal are stricter: (1) error of law or principle; (2) taking account of irrelevant considerations; (3) failing to take account of a relevant consideration; or (4) the decision is plainly wrong. The distinction between a general appeal and an appeal from a discretion is not altogether easy to describe in the abstract. But the fact that the case involves factual evaluation and a value judgment does not of itself mean the decision is discretionary.
(Citations omitted).
The case in the Family Court
[13] The appellant and the respondent were in a de facto relationship. That did not mean that they were obliged to submit to the relationship property regime set up by the Act. Section 21(1) of the Act provides (relevantly):
... de facto partners ... may, for the purpose of contracting out of the provisions of this Act, make any agreement they think fit with respect to the status, ownership, and division of their property (including future property).
[14] However, s 21F provides:
21F Agreement void unless complies with certain requirements
(1) Subject to section 21H, an agreement entered into under section 21
... is void unless the requirements set out in subsections (2) to (5) are complied with.
(2) The agreement must be in writing and signed by both parties.
(3) Each party to the agreement must have independent legal advice before signing the agreement.
(4) The signature of each party to the agreement must be witnessed by a lawyer.
(5) The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.
[15] Notwithstanding compliance with the procedural requirements of s 21F the Court can set aside an agreement if to give effect to it would cause serious injustice. That discretion is set out in s 21J:
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 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 ... 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.
...
[16] In this case the principal argument advanced by the respondent (the applicant in the first instance) for a finding of serious injustice was that the respondent acted under duress in entering into the agreement. The facts found by the Family Court Judge were as follows:
(1) The agreement was prepared by the appellant's solicitor on the instruction of the appellant. The respondent had no input into the provisions that would be included in the agreement and was not aware that it was being drafted.
(2)The respondent visited her solicitor at the behest of the appellant for the purpose of signing some legal papers but was not aware what they were to be until she saw them.
(3)The respondent's solicitor took her through the agreement line by line and explained her rights. For the first time the respondent appreciated that she was entitled at law to a one-half share in the French Pass Road property.
(4)In accordance with the advice of her solicitor the respondent decided not to sign the agreement but also decided to pay to the appellant's bank account the $45,000 he needed to complete the purchase of the boat. Before returning to her place of work the respondent transferred the funds and sent a text message to the appellant telling him what she had done and advising him that she would not sign the agreement.
(5)The appellant subsequently visited the respondent at her place of work. He put pressure on her that was sufficient to cause her to think she had no alternative but to sign the agreement.[5]
[5] GMH v SB at [79].
(6)The respondent returned to her solicitor's office without an appointment and in a state of obvious agitation and distress. She signed the agreement and left. The respondent's solicitor returned the signed agreement to the appellant's solicitor but with a covering letter stating that she considered that the agreement had been entered into under duress.
[17] In reaching her decision the Family Court Judge went through the tests set out in the Court of Appeal decision of Pharmacy Care Systems Ltd v Attorney- General.[6] In that case Hammond J set out the elements of duress which must be
[6] Pharmacy Care Systems Ltd v Attorney-General (2004) 2 NZCCLR 187 (CA).
present to override the victim's will:[7]
[7] Ibid, at [98].
First, there must be a threat or pressure. Secondly, that threat or pressure must be improper. Thirdly, the victim’s will must have been overborne by the improper pressure so that his or her free will and judgment have been displaced. Fourthly, the threat or pressure must actually induce the victim's manifestation of assent. Fifthly, the threat or pressure must be sufficiently grave to justify the assent from the victim, in the sense that it left the victim no reasonable alternative. Sixthly, duress renders the resulting agreement voidable at the instance of the victim. This may be addressed either by raising duress as a defence to an action, or affirmatively, by applying timeously to a court for avoidance of the agreement. Seventhly, the victim may be precluded from avoiding the agreement by affirmation.
[18] The Family Court Judge applied the facts as she found them to these elements as follows:
[83] First, there was the pressure by [SB]. I do not accept that the parties discussed the Agreement for some weeks prior. I find that [GMH's] knowledge of the Agreement was confined to the time when she first met her solicitor. After declining to sign the Agreement, I find that [SB] exerted pressure on [GMH].
[84] Secondly, I find the pressure was improper. In my view it went beyond the normal exchange between parties that might accompany the signing of such an Agreement. There is evidence that [GMH] was extremely upset when [SB] visited her business and further, there is evidence from [GMH's] solicitor that when [GMH] called in to see her later in the day, [GMH] was also in an extremely agitated state.
[85] Thirdly, [GMH's] will had been overborne by the improper pressure. She was left with simply no alternative but to sign the Agreement. The pressure on her was in a similar vein to that she had experienced at other times during the relationship which led her to acquiesce rather than challenge [SB].
[86] Fourthly, the threat or pressure induced [GMH's] assent to the Agreement. But for that pressure, [GMH] would not have signed the Agreement but would still have contributed $45,000.00 for the boat’s purchase.
[87] Fifthly, the pressure on [GMH] was sufficiently grave that it left her with no reasonable alternative but to sign the Agreement. She knew that she would face constant and ongoing harassment from [SB] if she did not sign the Agreement.
[88] Sixthly, the duress which [GMH] was put under resulted in the
Agreement becoming voidable and has led to the present application.[8]
[8] Judge Riddell appears to have treated Hammond J's sixth element as part of the test to determine whether duress existed
[89] The seventh element enunciated by Justice Hammond was that the victim may be precluded from avoiding the Agreement by affirmation. There is little evidence of [GMH's] affirmation to the Agreement. There is however evidence that [SB] continued to exert pressure on her over the following month and that pressure led [GMH] to return to her solicitor to see what could be done. She was well aware that the letter written by her solicitor caused serious and significant doubt on the validity of the Agreement.
[19] The Family Court Judge then turned her attention to the mandatory requirements of s 21J of the Act as follows:
[90] Section 21J of the Act requires me to have regard to the factors set out in sub section (4). They are as follows:
a) The provisions of the Agreement
The purpose of the Agreement was to contract out of the provisions of the Act. Accordingly it recorded that property held by each party was to remain separate. However the Agreement did not disclose the value of [SB's] separate property and that information was not provided by [SB's] solicitor. So, to a significant degree, [GMH] signed the Agreement being oblivious to the extent of the rights she was relinquishing. The Agreement made no provision for any intermingling of separate property. Nor did it provide for [GMH] in the event of [SB's] death. Although the Agreement intended for her to have a quarter share, there was no detail about the effect of acquiring such a share – what her rights were on a possible sale, whether she was responsible for a portion of outgoings on the property, or entitled to mortgage that share.
The Agreement excluded ss 9A, 15, 15A, 17 and 17A. The effect of that for example was that [GMH] would not be entitled to recognition under s 9A for her contributions to the garden at French Pass Road before and after the Agreement was signed. Similarly the launch remained [SB's] separate property despite being used as a family chattel during the relationship.
b) The length of time since the agreement was made
The Agreement was signed in October 2005. The parties separated in early May the following year. Inevitably with the passage of time, property in [SB's] separate name has increased in value; although so too has [GMH's] quarter share.
c)Whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made
The unreasonableness of the Agreement is apparent in the provision to [GMH] of a quarter share in the property in return for the sum of
$45,000.00. Yet at law she was, by that time entitled to a half share in the property without any financial contribution from her. Further
there is no recognition for any contributions she might make to separate property. She had for example made significant contributions to the family home and its gardens since [SB] boughtthe property in 1995.
No disclosure was made by [SB] about the value of his assets considered to be separate property.
There was little opportunity for [GMH] to consider the Agreement at the time. I accept her evidence that she was unaware of the Agreement prior to seeing it in her solicitor’s office. She had no input into its terms and was expected to sign the Agreement at that first meeting without any further reflection.
There is evidence from both [GMH] and her solicitor of the pressure [GMH] was under at the time. That pressure went beyond that expected when one party is reluctant to sign an Agreement. It had
the effect of vitiating her consent such was the intimidation she was exposed to.
d)Whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made
The Agreement was signed in early October 2005. At the time [GMH] acquired a quarter share in the property, although for some reason registration of her interest did not occur until after the parties separated.
If the Agreement remains in place, there is a significant disparity in entitlement between the parties. Although the family home has increased in value, an issue has arisen recently about a boundary dispute which may cost a significant sum to rectify and could affect the value of the property. Beyond that, [GMH] would retain only her vehicle, bank accounts and a share in chattels purchased together. The change in circumstances, being the end of the parties’ relationship has resulted in a significant unfairness to [GMH] in two ways. First, she was unfairly induced to enter into the Contracting Out Agreement and second, by virtue of the separation she would not be entitled to a one half share of assets as provided for under the Act. Her share would amount to approximately 14% of the total property pool.
e) The parties' wish to achieve certainty
Certainly [SB] wished to achieve certainty about the status of his property as being separate property. To that end he took legal advice. His solicitor drew up an Agreement and that Agreement was sent to [GMH's] solicitor with a very brief covering letter asking for the return of one copy once executed. It is doubtful that [SB] felt he could rely on the Agreement signed on 7 October 2005. When [GMH] visited her solicitor the following month, a file note recorded that [GMH] had been put under more pressure by [SB] who doubted that the Agreement was enforceable. I accept the evidence of [GMH] when she said that [SB] had claimed the Agreement was “not worth the paper it was written on”. While [SB's] solicitor wrote a letter claiming that the Agreement could be relied upon, it is difficult to understand how the solicitor could have reached that view in the face of the correspondence from [GMH's] solicitor.
The issue of certainty had not been resolved yet [SB] elected to do nothing further about it. He well knew there was doubt about enforcing the Agreement and that is why [GMH] went back to her solicitor in November 2005. [GMH] was given advice about the need for another Agreement. That did not happen and I consider [SB's] reliance on a fatally flawed Agreement to be unreasonable.
[GMH] did not want to achieve certainty. She simply wanted to alleviate the pressure she had been placed under. However she too knew that there were difficulties in enforcing the Agreement based on the advice of her solicitor. For her the sole issue was withstanding the pressure exerted on her by [SB].
At any time [SB] could have instructed counsel to draw up a new Agreement. I accept the evidence of [GMH] that he had doubts about the enforceability of the existing Agreement. A new Agreement would have achieved the certainty that [SB] sought. He did not take that step.
f) Any other matters
The court must consider any likely serious injustice to [SB] if the Agreement is set aside. His evidence was that he always intended his property to remain separate property and he hoped that the Contracting Out Agreement would achieve that. If the Agreement remains in force, then all of his assets are protected as he intended. If not, then [SB] will be required to compensate [GMH] for her share. His evidence was that the parties discussed and agreed they would keep their assets separate. He also claimed that they had discussions about the draft Agreement. However [SB] produced no evidence to the Court that such a draft was ever sent to his address and his solicitor did not give evidence of any prior discussions. On balance I have found [GMH] to be the more credible witness. She denied any such discussions took place. If [SB] did intend to protect his assets, he took no steps until the time he wanted to buy the boat and then he exerted improper pressure on [GMH] to sign the Agreement.
Accordingly any injustice caused to [SB] is more than outweighed by the serious injustice to [GMH] were the Agreement to be upheld. She would have emerged from a lengthy relationship having paid for a quarter share in the home and gaining little else.
[20] The Family Court Judge's conclusions are set out in [93]-[95] of her judgment as follows:
[93] As in Gemmell v Harlow (supra) I am satisfied that [SB] pressured [GMH] to execute the Agreement and as Mr Harlow did, I find [SB] relied unconscionably on his dominant part in their relationship to exploit her emotional vulnerability.
[94] Such exploitation was significant and was recorded at the time by
[GMH's] solicitor.
[95] Therefore when one considers the process which attended the execution of the Agreement, that process has ultimately resulted in serious injustice for [GMH]. In those circumstances the Agreement cannot be upheld. The Agreement is unenforceable and will be set aside.
The appellant's submissions
[21] The appellant submits that the Family Court Judge erred in fact and law in finding that there was duress. He submits that the agreement did no more than record the arrangement already in place between the parties.
[22] The appellant further submits that the evidence shows that the respondent was an independent person who had, throughout her relationship with the appellant, kept her separate property separate as had the appellant. The respondent was well used to the appellant's personality and was not intimidated by him. Indeed, she had a history of acting independently and of going against the wishes of the appellant if she felt it was necessary.
[23] The appellant submitted that whatever pressure was put on the respondent by the appellant at their meeting following the respondent's first visit to her solicitor, it was beneath the threshold required by the Courts before duress can be found:
31.The solicitor acting for the Respondent has referred to her client being under duress to sign the Agreement. However, at no time has there been any evidence given as to the Respondent having no other alternative and reaching a point where the Respondent had "retained no independent mind". (Gemmell v Harlow (Keane J, High Court Registry Auckland, CIV-2005-404-002993, 4 July 2006)).
[24] The appellant submitted further:
33.In this case, the Respondent has had every opportunity to consider her position before it was executed. She gave evidence as to the characteristics of the Appellant's behaviour that she termed his dark side and despite her evidence about the Appellant's behaviour over a number of years she elected to move in with him. She had her daughter move in with him also. Prior to that time, she owned her own home and she lived there with her daughter. With this background, it is difficult to understand that the duress that the Respondent complains of had reached a level where she had no alternative but to sign the Agreement and at that time she had no idea what she was doing. She had received competent advice. She and her lawyer had accepted that the Agreement set out the separate property in schedules and that the Respondent would have a quarter share in the house property which had a value in excess of
$45,000.00.
34. It is submitted that in this case the approach of Justice Paterson in
Clark v Sims [2004] NZFLR 546 should be followed in that there
has been no substantial injustice of sufficient gravity for the Judge to determine that in conscience the Court should intervene.
35.The parties for some years got to know each other's behaviour and had a clear understanding as to each other's separate property. The Agreement they were entering into was doing nothing more than formalising that situation.
36. The case of Pharmacy Care Systems Ltd v Attorney-General
(CA198/03, 16 August 2004) also refers to the requirement that:
"The victim's will must have been overborne by the improper pressure so that his or her freewill and judgment have been displaced."
37.That case in settling out the elements of duress also refers to the fact that:
"The threat or pressure must be sufficiently grave to justify the assent from the victim, in the sense that it left the victim no reasonable alternative."
38.As already referred to, there was an alternative available. The alternative simply involved the Respondent's solicitor contacting the Appellant's solicitor to discuss matters. The Respondent's solicitor could so easily have declined to sign the Agreement. The matter is compounded by the fact that it is the Respondent's solicitor that suggests in her file note that a tame solicitor should be engaged to sign off an agreement without any detailed inquiry.
Duress ⎯ discussion
[25] The Family Court Judge treated the issue of duress as being bound up with her inquiry as to whether the agreement should be set aside pursuant to s 21J of the Act for causing serious injustice. In fact, she never actually ruled that the respondent executed the agreement under duress, although such a finding is implicit in her judgment.[9]
[9] GMH v SB at [88], quoted at [18] herein.
[26] "Duress" is a common law concept. It operates to make voidable at the election of the victim a contract entered into by the victim under a degree of illegitimate threat, the effect of which was to bring about a "coercion of the will, which vitiates consent".[10]
[10] Pao On v Lau Yiu Long [1980] AC 614 (PC) at 636, cited in Pharmacy Care Systems Ltd v Attorney-General at [89].
[27] Section 21J(3) of the Act provides:
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.
[28] Therefore, where duress is raised in relation to an agreement made for the purpose of contracting out of the provisions of the Act, that is an issue distinct from a s 21J inquiry. If the agreement is found to have been obtained by improper pressure then, so long as it has not been affirmed by the victim, it can be declared void.
[29] However, if the tests for duress are not met that does not prevent a s 21J inquiry being made. Indeed, many of the matters relevant to an examination of a pleading of duress will be relevant to the broader s 21J inquiry into whether the agreement has caused serious injustice.[11]
[11] This is the approach taken by French J in Everist v Burbury (2008) 27 FRNZ 334 (HC), with which I respectfully concur.
[30] I therefore have to decide, first, whether the agreement was voidable for duress. If it was, it can be set aside without the need for a s 21J inquiry.
[31] The Family Court Judge had before her the evidence of the respondent, the respondent's solicitor and the appellant.
Evidence for the Respondent
[32] The respondent's evidence was that in 2005 the appellant had seen a boat which he wanted to buy and wanted the respondent to contribute $45,000 to enable the purchase to be completed. In her affidavit of 17 March 2008 (which formed the substantive part of her evidence-in-chief) the respondent gave her description of what happened:
28.Over the next few days [SB] was withdrawn and moody. Eventually I confronted him, asking 'what was the problem?' [SB] told me that he had been to see his solicitor and that he had an agreement that I was to sign. I asked him what sort of agreement and was told it was to safeguard us.
This was the first time that I was aware that [SB] wanted an agreement. We had not previously discussed the subject. [SB] did not have a copy, but endeavoured to outline the terms of the agreement, which would be that I was getting a quarter share of the property in return for giving him the $45,000.
I was told by [SB] that Simon Magill, his lawyer, had prepared the agreement and that it was being sent to my solicitors for me to sign it. I was instructed to get in and sign it.
29.The next day I made an appointment to see Jocelyn Cooney, my solicitor. The appointment was on Friday 7 October.
When I arrived, Jocelyn Cooney had the agreement. This was the first time that I had seen it.
Jocelyn obtained some information from me concerning my relationship with [SB], details of property and what contributions I had made to the relationship.
She then went through the agreement, explaining its contents to me. She then told me that given the contributions that I had made to the
relationship, I was already entitled to share in the property and that I
should not be paying $45,000 for a quarter share.
She told me that the agreement was not fair and that I should not sign it. I accepted her advice and did not sign.
30.I left Jocelyn's office somewhat in a state of shock, having learnt of the terms of the agreement and what my rights under the Property (Relationships) Act 1976 were.
I was aware that [SB] needed the $45,000 to complete the boat purchase that day.
I was also aware that for the sake of peace, I had no option but to pay the money to [SB]. I went to the bank, withdrew the $45,000 and paid it into [SB's] bank account...
I then text [SB] informing him that:
30.1 I had put the $45,000 into his bank account.
30.2 On Jocelyn Cooney's advice I had not signed the agreement.
31.[SB] phoned me. He wanted to know where I was working. [SB] arrived at the gardening job where I was working. He was what I would describe as extremely agitated. In a very heated manner I received a lecture. I was told that he was right, that an agreement was needed, it was needed to protect us. That I didn’t know what I was doing, and what I was doing was wrong. He even made adverse comments about Jocelyn Cooney, saying that she was a man-hater. While I was not afraid for my physical safety, I did feel intimidated and threatened mentally. [SB] was, as I felt, working me over. I
knew from what [SB] said that if I didn’t go back and sign the agreement then either the relationship would be over, or I would be faced with weeks, if not months, of mental torture for having crossed [SB]. My life would be miserable. I was upset. I was crying. Eventually I gave in and told [SB] that I would return to Jocelyn's office and sign the agreement that day.
[33] The respondent then returned to her lawyer's office without an appointment and signed the agreement, despite firm opposition from Ms Cooney.
[34] In cross-examination it was put to the respondent that the Contracting Out Agreement had been seen by her prior to her going to see Ms Cooney. The respondent maintained her denial.[12]
[12] Notes of evidence, page 25, line 1.
[35] The respondent was asked:[13]
[13] Ibid, page 34, from line 2.
Q.So you then went to the bank, the money was paid over, and then did you return back to Ms Cooney's office?
A. No, I then went back to work, I text [SB] to say that I had paid the
$45,000 into his bank account but no I had not signed the agreement. He asked me why. He, when I ⎯ first off he says, 'Where are you working?' I told him. He arrived at my work and said why hadn’t I signed and I said Jocelyn had explained to me what my rights were for, um, after talking to her about the [SB] and I relationship and that in actual fact I was entitled to quarter share of the property without even giving him the money and he said, um, 'So you're just' ⎯ well he made like, oh, 'She's a man-hater and she's gonna do this and she wants this and this, a lawyer does what you tell them to do [GMH], you go in there and you tell Jocelyn what you want her to do. I want you to sign that paper, it's to protect both of us, rah dee rah, and put the asset on', as in saying, well you know, here is another one of these things I'm asking you to do something, I'm, [SB] asking you to do something and you are saying, 'No you're gonna listen to Jocelyn beside me', and that might have gone on for half an hour or so. Him telling me that I'm going to do his children out of their whatever, whatever, and I said, 'But [SB], I had a house too, I've got to do what is right for me'. And he said 'rah, rah, rah', and when I said about my house, you know, ⎯
...
A.Well with anything that I should say Jocelyn's concerns were, [SB] would, um, turn it around and put it back at me, um, implied that, you know, I would stand by what Jocelyn said and not him. Um, and, yeah, and I tried to say, 'Well [SB] I had a house too and, you know, I've, you know, that through commitment I've still given you
the 45,000, um', and he said, 'Well my house was a piece of shit anyway', like it's not ⎯ I just, actually I was just a mess when he left. I thought, 'Well I'm between a rock and a hard place, I'm going against Jocelyn who's meant to be looking after my best interest and me knowing that she is actually looking after my best interest and I'm upsetting my partner once again and I'm gonna go home and get manipulised and whatever I should do, how I put the cup, how I ⎯ like the whole scenario of the dark side of [SB]. That was my option. I was a complete and utter mess, I went into ⎯ without an appointment I just got in my truck and thought, oh, I've got to go and sign this, 'cos I've got to go home to [SB] tonight. I told Jocelyn what had just taken place and she's going, 'No, no [GMH], you've asked me, I've got to look after your best interest, it's not in your interest to do, to sign', and I said, 'Jocelyn, like 13 years of just [SB] hit me and my God, I just can't fight this anymore. I said to Jocelyn,
'Please just let me sign it so I don’t have to face this when I go home tonight'. And she was angry with me and she pushed the papers towards me and I signed them and she said, and I probably was like I was now, well I was, and I felt like I'd let her down, I'd let myself but, hey I wasn’t letting [SB] down. Jocelyn said to me, 'I can't do this [GMH], like, I can't stand by and say that I have given you all what I should have given you and you've gone against what is in your best interest. I'm going to add something to this'. I didn’t actually ask her what it was, I said, 'Jocelyn you do what you gotta do but I've gotta do', and I left.
[36] Subsequently during the cross-examination the respondent was asked:[14]
[14] Ibid, page 37, from line 27.
Q. You mentioned that you were concerned because you said to [SB], that you had a house and that you ⎯ could you just explain what you meant by that?
A.Well [SB] was telling me about all that he was going to lose if I listened to Jocelyn about, are you happy about taking me for half of everything. Like, do you feel good about that? Like, how do you feel about my children missing out on their rah, rah, and I'm going well, yeah, I've got four children too and I had a house [SB], and you know, my house was given to you in money. Like what have my children got? I've got to go with Jocelyn as her saying, it's the right thing to do.
[37] The respondent's evidence as to the events at her solicitor's office and her state of mind at each of the two visits was confirmed by her solicitor, Ms Cooney, in evidence.
[38] Ms Cooney was cross-examined as to the circumstances in which the respondent returned to her office on 7 October 2005 having had the meeting with the appellant:[15]
[15] Ibid, page 57, lines 1-11.
Q. And what transpired when she saw you?
A.Um, she was crying, she was standing at my office door, she'd come round my reception desk, so she couldn’t be seen by reception and she was just standing there crying.
Q. And did you take her into your office? A. I took her in my office.
Q. And did you have a discussion with her? A. Yes I did.
Q. And what was that discussion about?
A.She just said that, um, [SB] was giving her really hard time and that she felt she had no choice but to sign the agreement.
Evidence for the Appellant
[39] The appellant, in his affidavit of 20 June 2008 which formed the substance of his evidence-in-chief, had a different perspective. He said that he and the respondent had both read the Contracting Out Agreement at their home and that they had both sat at the table in the dining room for some time talking about it.[16] He said that the respondent had said that she was happy with the agreement and that she would sign it.
[16] At para 7.11.
[40] The appellant also denied that he had put the respondent under any pressure to sign the Contracting Out Agreement.[17]
[17] See, for example, para 29 of his affidavit.
[41] In cross-examination it was elicited from the appellant that he had had various conversations with his solicitor, Mr Magill, in which Mr Magill had advised
(in summary) that a Contracting Out Agreement should be entered into. The following exchange ensued:[18]
[18] Notes of evidence, page 104, from line 24.
Q.But you were aware from these various conversations which you had with Mr Magill ⎯
A. Yes.
Q. ⎯ that that was a potential possibility, or were you aware from the discussions you had with Mr Magill that it was a possibility that if something happened to your relationship, your home could be at risk of a claim by [GMH]?
A. The information that I received sir, said that if I didn’t have something in place that if [GMH] should leave I was at risk of losing a part of my property, yes.
Q. So why then did it take three years before such an agreement was prepared and submitted to [GMH]?
A. Because at the time that I was, um, enthusiastic about purchasing a boat, I went to see Mr Magill because I was concerned about the situation and he said to me, '[SB], you do not want to be adding to your assets while you are vulnerable with [GMH], we need to put something in place that identifies separate property'.
[42] A little later the following exchange occurred:[19]
[19] Ibid, page 106, from line 30.
Q.Okay. So you went to see Mr Magill and Mr Magill and you had a discussion about what, as you say, would be a fair agreement for you and [GMH] and as a consequence the document was then prepared and sent to you and to [GMH's] lawyer. Is that what you're saying?
A. That's correct.
[43] The cross-examination then focused on when the respondent had first seen the Contracting Out Agreement. Initially the appellant stuck to his evidence that Mr Magill had sent a copy of the agreement to their home prior to the respondent meeting with Ms Cooney. He volunteered, however:[20]
[20] Ibid, page 108, line 22.
We didn’t go all over it, no.
[44] Later, the following exchange occurred:[21]
[21] Ibid, page 110, from line 3.
Q. That's not what I'm putting to you, I'm putting to you that this proposal came from you and Mr Magill without any input from [GMH] for her to consider?
A. Yes, yes.
Q.So doesn’t it follow ... that there was never any agreement between you and [GMH] that she would put in 45,000 to buy a quarter share of the house prior to you approaching Mr Magill to draft this agreement?
A. That is correct.
Q. And that the first [GMH] knew of such a proposal was when she saw the contents of the agreement, be it when you say or when she went to see Jocelyn Cooney?
A. That is correct, yes.
[45] The cross-examination continued and the following exchange occurred:[22]
[22] Ibid, page 124, from line 22.
Q.Did you decide to go and see [GMH] for the purposes of persuading her that she should go back and sign the agreement?
A. No, sir, persuading is not the right word. Q. Well why did you go to see [GMH]?
A. Sir, you have to appreciate that, that the, the timeframe between the purchase of the boat and the agreement were miles apart and there was never an issue and [GMH] and I had discussed the agreement and, as I understood it, [GMH] was happy with it. What happened over time was that the agreement didn’t get signed and it got closer and closer to the purchase of the boat time to the point where there was some urgency about whether the agreement was going to get signed or not in regards to purchasing the boat which was very unfortunate so by, so the reason that I went to see [GMH], in answer to your question, was by now, some weeks later, I'm starting to get a bit agitated because I need to either confirm or deny whether I'm buying a boat and so I went to see [GMH] to, to try and sort out why or why not she had chosen not to sign the agreement.
[46] Subsequently:[23]
[23] Ibid, page 126, from line 29.
Q. [GMH] says that you were extremely agitated and in a heated manner she received a lecture, did that occur?
A.I do not, um, believe that her terminology is correct sir. By this time, as you can imagine, I'm trying to co-ordinate, um, an agreement in a boat and had been for some time, and I believed
everything to be in order sir, and quite obviously on the very day that I needed to, if I was to buy this boat at all, on the very day that I needed to do it, I had a woman who told me that she thought everything was fine was now telling me it is not fine. And I had people to answer to sir.
[47] The point is picked up again later in the cross-examination:[24]
[24] Ibid, page 129, from line 9.
Q. How would you describe your demeanour?
A.Well I was, I was obviously, um, concerned that, that things weren’t going as, as well as they could have been.
Q. And did you make that known to [GMH]?
A.I don’t think, I don’t know that I would have done that verbally, sir, but undoubtedly my, um, tone of voice would have undoubtedly indicated that I was, yes.
Q. She goes on to say that in a heated manner she received a lecture. Is that an accurate description of what occurred?
A. Not at all, sir, no.
Q.What did you advise, or what did you discuss with [GMH] when you went to see her?
A. I asked [GMH] why she hadn’t signed the agreement and she said to me that Jocelyn had advised her that under her rights she was possibly already entitled to a half share of my property anyway and that she had advised her not to sign the agreement.
Q. And what was your response?
A. Sir, [GMH] had always said to me, 'I will never take half of your property, [SB]', and I said to [GMH], 'Is that your wish that you would like half my property?' She said, 'No, it's not'. I said to her,
'Do you have a problem with the agreement?' She said, "No, I do not'. And she went back and signed it.
Q.Did you advise her that the agreement was necessary to protect you both?
A. Not at that time, sir, but previously, yes, I had done that.
Q.Did you advise her that she didn’t know what she was doing and that what she was doing was wrong?
A. No sir I did not.
Q. Did you make adverse comments about Jocelyn Cooney?
A.I, I've read that and find that a little disturbing and, um, I'm not denying I said that and if I did sir, I, ah, I apologise because it's not in my nature but maybe at the time, um, maybe I did.
Q. Does that give a clue then to what your demeanour might've been?
May have said it in the heat of the moment?
A.It's unlikely to be derogatory sir and, um, I'm not denying that maybe I did but it's certainly something I'm not in the habit of doing and I can't say whether I did or I didn’t in that instance.
Q. Would you accept that the purpose of your discussion with [GMH] was to endeavour to persuade her that the decision she had made was wrong?
A. Not at all sir, no.
Q. Well what was the purpose of you having that discussion with her?
A.Sir you're making it sound like it was an odd thing to do, in my world when there's a problem or something, um, someone is obviously unsatisfied with something and something is not going to plan you endeavour to, to work through why that might be and quite obviously [GMH] was in a situation where she was having trouble deciding what was right and what was wrong and, um, and ultimately that was going to affect me and my day and so I called to, to discuss it with her.
[48] And subsequently:[25]
[25] Ibid, page 131, from line 24.
Q.She says, 'I was upset. I was crying. Eventually I gave in and told [SB] I would return to Jocelyn's office and sign the agreement'. Did you observe [GMH] as being upset?
A. [GMH] was uncomfortable with the situation, yes. Q. What do you describe as being uncomfortable?
A. Well she was, um, as I say, she, she ⎯ we had talked about a scenario, um, that, that I understood us all to be happy with and, and
now it seemed that [GMH] was, um, was unhappy with it so she was obviously, um, concerned I guess that she'd told me one thing and,
and was now trying to tell me another.
Q. Was she crying? A. She wept, yes.
Q. Wept, or was she crying?
A. She wasn’t standing in front of me crying. She was weeping while we were having the discussion.
Q. Was she weeping because of what had passed between you and her? A. I don’t think that was what was making [GMH] weep, no.
Q. Well why do you think she may have been weeping?
A. I think she was weeping because we had made a decision about, about what was right between [GMH] and I and now the next day she was having second thoughts about that.
Q. Would it be because of matters which you had said to her when you confronted her?
A. Not at all, sir, no.
Credibility
[49] In reaching her conclusions the Family Court Judge made findings of credibility which favoured the respondent.[26]
[26] See, in particular, [47], [52] and [90](e).
[50] Having read the evidence, considered it in its context and having regard to the Family Court Judge's advantage of also having seen and heard the witnesses, I conclude that Judge Riddell was entitled to make the findings of credibility which she made and I have no reason to disturb them.
Duress ⎯ Finding
[51] I now apply the evidence to the law as summarised by Hammond J in
Pharmacy Care Systems Ltd.[27]
[27] Quoted above at [17].
(i) Pressure
[52] I agree with the Family Court Judge that the appellant put the respondent under pressure to sign the agreement.
(ii) Pressure must be improper
[53] I disagree with the Family Court Judge that, in the context, the pressure was improper:
(a)On the evidence as accepted by Judge Riddell the respondent had gone to see her lawyer because the appellant had said that there were some papers for her to sign. Having received the advice of her lawyer the respondent decided not to sign the agreement because it was not in her best financial interests to do so. The respondent sent the appellant a text message advising of her decisions to transfer the $45,000 but not to sign the agreement. She knew the appellant would not be pleased;
(b) The appellant came to her place of work and lectured her angrily. He did not make threats. He did not intimidate her physically. He forcefully put to her the reasons why he wanted her to sign the agreement. This was a couple in a 12 year relationship;
(c) I find assistance in this area[28] in the Court of Appeal's decision of Harrison v Harrison.[29] That case did not involve duress, but as part of a s 21J analysis the Court considered what constitutes unfair pressure in the context of agreements made under the Act. I cannot
[28] As did Keane J in Gemmell v Harlow (2006) 25 FRNZ 887 (HC) at [57].
[29] Harrison v Harrison [2005] 2 NZLR 349 (CA).
see any real difference in the terms "improper pressure" and "unfair pressure". The Court said:
[84] In cases concerning contracting-out agreements, it will usually be the case that one of the parties (being the party with the most assets at risk) will have driven the proposal that such an agreement be entered into. The legislation provides substantial protection for those who contract in this area in the form of the requirements for legal advice and certification. This might be thought to be a legislative acceptance of the reality that such agreements are usually negotiated in pressured circumstances. In most instances, contracting-out agreements are signed against
express or implicit threats directed at the underlying relationship. Such a threat may be along the lines of that present in Wood of, “Sign the agreement or I will call off the wedding”. In the case of de facto partners about to become subject to the Property (Relationships) Act, the threat might be along the lines of, “Sign the agreement, or I am going to terminate the relationship”. It would be very destabilising of the contracting-out regime for the Courts to hold that the sort of pressure which is almost always present in such cases is itself a basis for holding that an agreement is unjust.
(d)In this case the appellant did not threaten the underlying relationship, nor was there the sustained pressure that Keane J found improper in Gemmell v Harlow;
(e)In my view, it would be going too far, even given the background relationship of the parties, to characterise this single angry lecture as constituting improper pressure for the purpose of assessing common law duress.
(iii) and (iv) Victim's will overborne by pressure which induces assent
[54] Even if the pressure were improper, I do not find that the respondent's will was overborne to such an extent that her free will and judgment were displaced:
(a)This was not a case, such as Gemmell v Harlow, in which a woman was threatened with imminent eviction from her home and the ending of a relationship which had supported her for years. Nor was there the sustained pressure which reduced Ms Gemmell to the point where Keane J found she "retained no independent mind or, as she saw it, any other practical choice";[30]
[30] Gemmell v Harlow at [84].
(b)I accept entirely that the pressure put on the respondent by the appellant caused her to change her mind about signing the agreement. She did not want to sign the agreement and she was upset by the appellant's attitude. The respondent chose to sign the agreement
because she wanted to maintain her relationship with the appellant and because she knew that if she did not sign it there would be another of those bleak domestic periods which she described during which the appellant would be sullen and withdrawn. That is a far cry from having her free will and judgment displaced.
(v) Pressure sufficiently grave to justify assent
[55] It follows from what I have said that I do not consider that the appellant's angry lecture (and I do not forget that it was in the context of the domestic relationship described by the respondent) left the respondent with no reasonable alternative. The alternative was to spend a period of time with a sullen and withdrawn partner.
[56] The first ground of appeal[31] had as its premise that the Family Court Judge set aside the agreement because it was signed under duress. In fact, Judge Riddell did not do that. What Her Honour did, impliedly, was to hold that the agreement was executed by the respondent under duress, that this was relevant to her s 21J analysis and that overall the agreement was unenforceable because the process which attended its execution "ultimately resulted in serious injustice" for the respondent.[32]
[31] Quoted above at [8].
[32] GMH v SB at [95].
[57] The second ground of appeal[33] is that the Family Court Judge should not have found "issues as to the validity of the agreement". I am not sure what that means. However, since this is a general appeal on the merits I will treat the first two grounds of appeal as being:
[33] Quoted above at [8].
(a) The Family Court Judge was wrong to find impliedly that the respondent entered into the agreement under duress. On this point I find in favour of the appellant.
(b)The Family Court Judge was wrong to find on a s 21J analysis that the agreement caused the respondent serious injustice and could therefore be set aside. That is the ground I will now address.
Section 21J analysis
The Appellant's submissions
[58] The appellant's submissions can be summarised as contending that the agreement did no more than record what had been the informal agreement of the parties since their relationship commenced. The terms of the agreement were fair and reasonable as between the parties and the respondent signed it having had the benefit of legal advice which had very firmly told her what her legal entitlements might otherwise be. In no way can the terms of the agreement be characterised as causing her serious injustice.
The Respondent's submissions
[59] The respondent's submissions stressed the degree of pressure that the respondent was put under by the appellant to sign the agreement. They also focused on the terms of the agreement to the effect that it was a compromise agreement reducing greatly the benefit of rights already accrued to the respondent.
Family Court Judgment
[60] Section 21J(4) states factors to which the court must have regard in deciding whether giving effect to a Contracting Out Agreement would cause serious injustice. The findings of the Family Court Judge on these factors are quoted at [19] above.
(a) The provisions of the agreement
[61] I agree with the findings of the Family Court Judge. Further, this was an agreement that to a large extent was, to adopt the language used in Harrison v Harrison,[34] a compromise agreement. That is to say, by reason of the duration of their de facto relationship and her contribution to it the respondent had rights under the Act. This agreement was intended to reduce the value of those rights substantially. In this light, the material deficiencies in it identified by the Family Court Judge go significantly to the fairness of the agreement.
[34] Harrison v Harrison at [80].
(b) The length of time since the agreement was made
[62] As the Family Court Judge noted, the agreement was signed in October 2005 and the parties separated some seven months later in May 2006. The respondent filed her application to have the agreement set aside in March 2008. However, the point here is the longer the period in which an agreement has been the basis on which parties have acted the stronger the case for upholding it. In this case, right from the time the agreement was executed it was under challenge, and the appellant knew that. The letter written by the respondent's lawyer to the appellant's lawyer, with which was enclosed the signed agreement, made it clear that duress was a live issue. The appellant put pressure on the respondent to return to her lawyer to see what could be done. He had, as the Family Court Judge found, told the respondent
that the agreement was "not worth the paper it was written on".[35]
[35] GMH v SB at [90](e).
[63] Accordingly, this is a factor which does not assist the appellant.
(c) Whether agreement unfair or unreasonable when made
[64] I agree with the Family Court Judge's findings as to the unreasonableness of the agreement in its terms. I reserve the points about the circumstances in which it was made to my discussion below of "other relevant matters".
(d) Whether agreement became unfair or unreasonable
[65] This factor requires an examination of the circumstances occurring after the agreement was executed. Circumstances can arise which might make an agreement which was fair or reasonable unfair or unreasonable. Or more unfair or more unreasonable. A division of property rights in, for example, shares in companies made in reliance on valuations could acquire a different character if the valuations proved to be very wrong. In this case, because of the short period between the execution of the agreement and the ending of the parties' relationship, I cannot see anything relevant under this heading.
(e) Fact that the parties wished to achieve certainty
[66] The Family Court Judge treated this heading by looking at the subjective wishes of the parties. With respect, s 21J(4)(e) does not pose a question, it makes a statement. It presupposes that the parties indeed sought to achieve certainty.[36]
[36] Harrison v Harrison at [91].
Section 1I of the Act explains that Part 6 (which includes s 21) "... deals with the rights of spouses or partners to decide themselves how their property is to be divided". Therefore, this factor will invariably weigh in the balance on the side of upholding an agreement.
(f) Other relevant matters
[67] It is under this heading that I prefer to consider the circumstances under which the agreement came to be signed. I accept that the respondent did not want to sign the agreement and that she did so under strong pressure from the appellant. I also accept that she had had no input into drafting the agreement and in the circumstances of the day little chance of reflecting on its effect on her future.
[68] So far as injustice to the appellant is concerned if the Family Court Judge's decision is upheld, I note that since this is really a compromise agreement, setting it
aside simply puts him in the position in which he would have been if the respondent had maintained her refusal to sign.
[69] A significant point to note here, in my view, is that the respondent signed the agreement, knowing it was not in her financial interests to do so, because she anticipated her relationship with the appellant enduring for the foreseeable future. The respondent would not have signed it if she had foreseen that the relationship would end in seven months. This made the extent of her surrender of rights she already had unfair.
Section 21J analysis determination
[70] In the result, although for somewhat different reasons, I uphold the Family Court Judge's decision that the agreement must be set aside. I am satisfied that giving effect to it would cause serious injustice to the respondent.
[71] I base my decision on the overall effect of the matters discussed above. In summary, and in no particular order:
(a) The agreement had the effect of substantially taking away from the respondent rights already accrued to her under the Act;
(b) The terms of the agreement were incomplete in material respects;
(c)The respondent did not know, and could not tell from the agreement, the value of the concessions she was making;
(d)The respondent had no input into the drafting of the agreement and, in the circumstances of the day, little chance to reflect on the implications for her of signing it;
(e)The appellant exerted considerable pressure on her to sign the agreement. She did not want to sign it;
(f)The respondent signed the agreement in the expectation that her relationship with the appellant would last for the foreseeable future. It ended seven months later;
(g)The agreement was never relied upon by either party. Its validity was in question from the day it was signed;
(h) Setting aside the agreement simply returns the appellant to the legal position in which he would have been if the respondent had maintained her refusal to sign it.
[72] I emphasise that my conclusion results from the interweaving of all these matters, giving due weight to each.
Was the Appellant's property (other than the house property) relationship property?
[73] This is the third ground of appeal.
[74] The Family Court Judge determined that the parties' relationship property consisted of:[37]
[37] GMH v SB at [166].
(a) The home at French Pass Road ($310,000);
(b) The launch bought in October 2005 ($100,000);
(c) The assets of the appellant's business as a builder ($52,319); (d) The assets of the respondent's landscaping business ($3,188); (e) The respondent's vehicle ($1,500);
(f) The appellant's caravan ($1,000).
[75] The appellant in his written submissions put his case in this way:
73.The Appellant's case is that overriding any consideration of whether these items of property as listed in schedules A and B of the Agreement were acquired in contemplation of the de facto relationship and intended for the common use or benefit of the parties is the issue of whether there was an agreement between the parties that these items of property were the subject of an agreement and understanding between the parties that the Appellant would retain the property listed in schedule A as his separate property and the Respondent would retain the property listed in schedule B as her separate property.
[76] To appreciate the nature of this argument it is necessary to return to the Act. Section 8 defines relationship property:
(1) Relationship property shall consist of⎯
(a) the family home whenever acquired; and
(b) the family chattels whenever acquired; and
(c)all property owned jointly or in common in equal shares by the husband and the wife or by the partners; and
(d)all property owned by either spouse or partner immediately before their marriage, civil union, or de facto relationship began, if⎯
(i) the property was acquired in contemplation of the marriage, civil union, or de facto relationship; and
(ii) the property was intended for the common use or common benefit of both spouses or partners; and
(e)subject to sections 9(2) to (6), 9A and 10, all property acquired by either spouse or partner after their marriage, civil union, or de facto relationship began; and
(ee) subject to sections 9(3) to (6), 9A and 10, all property acquired after the marriage, civil union, or de facto relationship began, for the common use or common benefit of both spouses or partners, if⎯
(i)the property was acquired out of property owned by either spouse or partner or by both of them before the marriage, civil union, or de facto relationship began; or
(ii) the property was acquired out of the proceeds of any disposition of any property owned by either spouse or partner or by both of them before the marriage, civil union, or de facto relationship began; ...
[77] Section 9 defines separate property:
(1) All property of either spouse or partner that is not relationship property is separate property.
(2)Subject to sections 8(1)(ee), 9A(3), and 10, all property acquired out of separate property, and the proceeds of any disposition of separate property, are separate property.
(3)Subject to section 9A, any increase in the value of separate property, and any income or gains derived from separate property, are separate property.
(4)The following property is separate property, unless the Court considers that it is just in the circumstances to treat the property or any part of the property as relationship property:
(a)all property acquired by either spouse or partner while they are not living together as husband and wife or as civil union partners or as de facto partners:
(b)all property acquired, after the death of 1 spouse or partner, by the surviving spouse or partner, as provided in section 84.
...
[78] However, the parties can, with one exception, contract out of the provisions of the Act pursuant to s 21 so long as the requirements of s 21F are complied with.[38]
[38] The s 21F requirements are that the agreement must be in writing and each party must have received independent legal advice.
The exception is provided for in s 21H which reads as follows:
21H Court may give effect to agreement in certain circumstances
(1)Even though an agreement is void for non-compliance with a requirement of section 21F, the Court may declare that the agreement has effect, wholly or in part or for any particular purpose, if it is satisfied that the non-compliance has not materially prejudiced the interests of any party to the agreement.
(2)The Court may make a declaration under this section in the course of any proceedings under this Act, or on application made for the purpose.
[79] Therefore, the appellant's case is that the items of property listed in schedules A and B of the agreement were separate property pursuant to the above definitions, but even if they were not then there was an oral agreement between the parties that
they would be retained as separate property and this verbal agreement is given effect by s 21H.
[80] The respondent's submissions are that even if there were an agreement between the parties it cannot be saved by s 21H because the court could not be satisfied that the non-compliance with s 21F had not materially prejudiced the interests of the respondent.
[81] The respondent also refers to each of the assets listed above, pointing out that the French Pass Road home is covered by s 8(1)(a), the launch is covered by s 8(1)(b) as a family chattel, the appellant's business assets insofar as they related to funds held in bank accounts and to accounts receivable accrued as a result of work undertaken during the course of the relationship and must be relationship property. The respondent's business vehicle, since that was purchased in 2005 and there is no evidence to show it was purchased out of separate property, must in terms of s 8(1)(e) be relationship property.
[82] The caravan is also a family chattel within the provisions of s 8(1)(b).
[83] The Family Court Judge held that the items of property were relationship property due to the operation of s 8 of the Act. Given the Judge's finding that this was a 12 year relationship, she felt able to hold that all of the items must be relationship property.
Was there a s 21H agreement?
[84] I consider that this issue lies at the heart of the appellant's discontent with the judgment of the Family Court Judge and so I will address it in more detail than I would otherwise.
[85] The appellant was the more affluent of the parties. He had his own business as a builder and he bought an attractive home at French Pass Road using, in part, money from his parents' legacy to him. It was mortgage free.
[86] The respondent had only modest assets. The $45,000 she contributed to the purchase of the launch represented almost everything she had.
[87] I doubt very much that before the parties began to live together at French Pass Road either thought that the closeness of their relationship had started ticking the Act's property sharing clock. Each would have regarded their separate property as being entirely separate.
[88] From 2002 when the parties started living together at French Pass Road there would have been a greater awareness that their rights under the Act could accrue.
[89] However, both parties kept the assets they had before 2002 under their individual control. The respondent accepted in cross-examination[39] that schedules A and B in the agreement accurately recorded the situation and:[40]
[39] Notes of evidence, page 21, from line 30.
[40] Ibid, page 22, line 18.
... I didn’t look on what was [SB's] as being mine.
[90] This is consistent with the appellant's evidence that the parties had agreed to keep their separate property separate.
[91] I do not find on the evidence that there was an actual agreement between the parties as to each retaining their separate property in the event of their relationship ending. There may well have been a tacit understanding that each owned their separate property and that was reflected in the way they separately managed their assets. Section 21H cannot assist the appellant in this situation.
[92] But even if I am wrong, s 21H does not operate to validate an informal agreement simply because it is found to exist.
[93] The purpose of s 21F is to ensure that before the parties to a relationship make a binding decision to contract out of the Act's regime they know what they are doing. The Contracting Out Agreement must be in writing both for certainty and to enable proper legal advice to be given. That advice must be independent and the
advising lawyers must certify that before their client signed the agreement they explained its effects and implications.
[94] Therefore, a court could only use s 21H to give effect to an informal agreement if it were satisfied that not having the s 21F procedure had not materially prejudiced the interests of a party to the informal agreement.
[95] In this case no such finding could be made. The respondent simply was not aware of her rights until she saw her lawyer in the context of taking advice on the agreement. Her response on learning her rights was to refuse to sign the agreement. That she later did has been rectified by setting aside the agreement. Section 21H cannot now be used to put in place the same regime informally.
[96] Therefore, the disposition of the items of property listed falls to be considered under s 8 of the Act. Given the 12 year period of the relationship, I can find no fault with the Family Court Judge's approach.
[97] Accordingly, this ground of appeal fails.
Cross-appeal
[98] The respondent seeks an order varying the judgment of the Family Court Judge to the effect that the appellant be directed to pay to the respondent the sum of her entitlement. The appellant resists this and through counsel advised me that the French Pass Road property now has to be sold. It was, if I understand the submission correctly, suggested that rather than a cash payment the order should be varied to apply to 50% of the sale price and the sum resulting to be paid from the proceeds.
[99] I am not prepared to disturb the judgment of the Family Court Judge. A cash sum, pertinent at the time of the judgment, has been awarded. If the property is to be sold then no doubt the appellant will be able to pay the stipulated amount. I leave it to the good sense of the parties and the rights at civil law that this judgment gives for the resolution of that matter.
[100] On the question of the award of interest and the award of costs, it is entirely unexceptional for a Judge at first instance to make such orders and I will not disturb them.
[101] Again, in this proceeding, the respondent is entitled to costs and I award them on a 2B basis.
Brewer J
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