Selak v Smith
[2019] NZHC 1487
•25 June 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-418-11
[2019] NZHC 1487
UNDER the Land Transfer Act 2017 and the Property (Relationships) Act 1976 I THE MATTER OF
an application under s 143 of the Land Transfer Act 2017
BETWEEN
JULIE ANNE SELAK
Applicant
AND
GAVIN WAYNE SMITH
Respondent
Hearing: 25 June 2019 at 10:00am Appearances:
W Andrews for the Applicant
J L Thomas for the Respondent
Judgment:
25 June 2019
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Vodanovich Law, Kumeu, Auckland, for the Applicant Schnauer & Co, Milford, Auckland, for the Respondent
Copy for:
Wendy Andrews, Barrister, Auckland, for the Applicant
SELAK v SMITH [2019] NZHC 1487 [25 June 2019]
[1] Julie Anne Selak applies to sustain a notice of claim under s 42 of the Property (Relationships) Act 1976 lodged against the land in identifier NL2/216 in the Nelson land registry. The property is in Romilly Street, Westport. The respondent, Gavin Wayne Smith, is the registered proprietor of the property. There is an old house on the property, where a backpacker’s hostel is run. The proceeding was originally filed in the Greymouth registry but was transferred to the Auckland registry by consent of both parties. Ms Selak says that she was in a de facto relationship with Mr Smith; she has a claim under of the Property (Relationships) Act 1976; and the property at Romilly Street was the family home. Alternatively, she made qualifying contributions to the property, if it is separate property.
[2] The application was started on 28 March 2019 in response to a notice issued by the Registrar-General under s 143(1)(b) of the Land Transfer Act 2017 to lapse the notice of claim. The application says that it is made under the Land Transfer Act 1952. But that Act was repealed by the Land Transfer Act 2017 which came into force in November 2018. I am dealing with this case under the 2017 Act. Edwards J made an interim order by consent that the notice of claim not lapse pending further order of the court.
[3] Both counsel assumed that the test for sustaining a caveat should also apply to applications under s 42 of the Property (Relationships) Act to sustain a notice of claim. That is not necessarily the case. In Re Country Land Ltd: Bennett v Blackley I outlined that in some cases the courts have not applied the caveat test by analogy but have instead followed a “reasonable requirements” approach.1 The difference essentially comes down to the court’s exercise of the discretion once the person lodging the notice of claim has established an arguable case for their claim to an interest in the property under the Property (Relationships) Act. In caveat cases, if the caveator shows an arguable case for an actual existing interest in the land, the court is cautious in exercising any discretion to remove the caveat. That can be seen in decisions such as
1 Re Country Land Ltd: Bennett v Blackley [2015] NZHC 1322.
that of the Court of Appeal in Pacific Homes Ltd v Consolidated Joinery.2 The “reasonable requirement” approach propounded by Thorp J in the Rusden v Rusden allows for a more flexible exercise of the discretion, but it still requires the person lodging the notice of claim to show an arguable case for a claim to an interest in relationship property. 3 In this case, I do not need to decide whether to follow the “reasonable requirements” approach, because I do not consider that the applicant has established an arguable case for a claim to an interest under the Property (Relationships) Act.
[4] Ms Selak and Mr Smith at one stage lived as neighbours at Taupaki outside Auckland. Mr Smith acknowledged that they had known each other for some years before that. They were on friendly terms between 2010 and 2012. It is common ground that in that period they may have been in a relationship, but it does not qualify as a de facto relationship under s 2D of the Property (Relationships) Act.
[5] Instead, Ms Selak puts her case as follows. In December 2012, Mr Smith moved to the South Island and set up the backpackers operation in Westport. While he was in Westport, she remained living in Auckland. She worked as a part-time cleaner. She was also receiving a solo parent benefit. Her daughter was living with her. In June 2014 they agreed to begin a relationship anew. This was a long-distance relationship. She did travel to Westport and on visits helped Mr Smith in the backpacker’s business. Ms Andrews contends that over this period, when he lived in Westport and she lived in Auckland, they were part of a de facto relationship. Mr Smith contests that.
[6] In August 2015, Ms Selak moved to Westport and lived in the backpacker’s hostel with Mr Smith, sharing the same bedroom and helping him run the hostel. That lasted until April 2016, when they stopped living together. She left the backpackers and returned to Auckland.
2 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLC 652 (CA) at 656; Stewart v Kaipara Consultants Ltd [2000] 3 NZLZR 55 (CA).
3 Rusden v Rusden (1980) 3 MPC 157.
[7] In October 2016, she came back to the backpackers and they lived in the hostel together. That finished in February 2018. They have not resumed living together since then. Ms Selak lodged the notice of claim shortly after they separated.
[8] I need to look more closely at what happened during the periods when they were together and when they were apart, and to put it into context. An issue will be whether there was a de facto relationship and when. But that will require a consideration of a “de facto relationship” under ss 2D and 2E of the Property (Relationships) Act.
[9] Mr Smith says that any de facto relationship between them was one of short duration, within s 2E(1)(b) of the Property (Relationships) Act. If there was a de facto relationship and it was of short duration under s 2E, it will be necessary to consider whether Ms Selak has an arguable claim under s 14A of the Property (Relationships) Act.
[10] I deal first with the period from June 2014 until 1 August 2015. During this period, it is arguable for Ms Selak that a relationship that had ended in December 2012 had renewed. The issue is whether that was a de facto relationship under s 2D. For a de facto relationship, s 2D requires that a couple live together as a couple. It is common ground that during this period Ms Selak did visit Mr Smith, and there is independent evidence showing that she assisted in running the backpackers hostel when she went to Westport. That independent evidence is in the form of Trip Advisor reviews by guests who refer to her good qualities as a host in the backpackers. Certainly, that is at least one pointer to a de facto relationship – it shows some public aspects of their relationship under s 2D(2)(i). Nevertheless, it is not reasonably arguable for her that in the period when Ms Selak was based in Auckland looking after her daughter and working part-time she was in a de facto relationship with Mr Smith in Westport. Even though they had contact with each other over this period, it did not amount to a de facto relationship. The decisive consideration is that Ms Selak was continuing to receive a solo parent benefit. It was a condition of her receiving a solo parent benefit that she was not in a relationship in the nature of marriage with any other person. She could not have honestly collected the solo parent benefit if she were in a de facto relationship with Mr Smith. I assume that she is honest. She was not
cheating in obtaining the benefit. The corollary is that she cannot maintain that she was in a de facto relationship with Mr Smith at that time.
[11] That changed in August 2015 when she moved to Westport. Her evidence shows that they planned the move, even though there was some temporary disagreement between them. She made alternative arrangements for the care of her daughter because she appreciated that her daughter and Mr Smith would not get on. She put her belongings into storage. In moving to Westport, she went to live with Mr Smith on an indefinite basis. Her evidence is consistent with a de facto relationship during that period and shows a mutual commitment to a shared life. She worked in Mr Smith’s business and supported him in running it. They had a common residence at the backpacker’s hostel in Romilly Street.
[12] During this period, Mr Smith arranged for her to be paid, initially from rents from his Taupaki property. Later he paid her directly from his earnings from the backpacker’s hostel. Equally, she played an important role in running the business. That is attested by the reviews of guests attached to her affidavit. I am satisfied that during the eight months from August 2015 to April 2016 they were arguably living together in a de facto relationship.
[13] That came to an end because Mr Smith wanted Ms Selak to enter into an agreement under s 21 of the Property (Relationships) Act to define their respective property interests. His lawyers prepared an agreement. The agreement was completely one-sided. Mr Smith was to keep all his property entirely, Ms Selak would have no claim at all, and the agreement did not recognise any property in the name of Ms Selak. Mr Smith now explains that that was no more than a first draft and he encouraged Ms Selak to see a lawyer with a view to their negotiating a more acceptable agreement. In the event, Ms Selak did not obtain independent legal advice and no agreement was made. Because no agreement was made, Mr Smith terminated their relationship. Ms Selak was served with a trespass notice and required to leave.
[14]Ms Thomas refers to s 2D(4):
For the purposes of this Act, a de facto relationship ends if-
(a)the de facto partners cease to live together as a couple; or
(b)one of the de facto partners dies.
Ms Thomas submits that that de facto relationship came to an end with the departure in April 2016. It accordingly ran for only some eight or nine months.
[15] Ms Selak returned to Auckland, but later came back to Westport and lived in the backpacker’s hostel with Mr Smith from October 2016 to February 2018. There is a dispute between them as to the quality of the relationship and whether it amounted to a de facto relationship. So far as Mr Smith is concerned, she stayed in the hostel. She said she had returned to Westport because she liked living in the South Island and she enjoyed working in the hostel. But there was nothing more in the matter than that. While they shared the same bedroom, there was little intimacy. The shared use of the bedroom was only a matter of convenience to free up rooms for guests. On the other hand, Ms Selak’s evidence points to something more. I cannot resolve that conflict on the limited affidavit evidence, when neither of them has been cross-examined. For this application to sustain the notice of claim, I accept that Ms Selak’s evidence as to the period between October 2016 and February 2018 shows an arguable de facto relationship.
[16] During this period also, Ms Selak received some remuneration. Mr Smith’s evidence is that he wanted to take $400 a week out of the business, plus the AirBnB commissions, and that Ms Selak was welcome to take the rest. She helped herself to all the cash in the business. It does not appear that there was any formal employment agreement or any formal wages paid as such, but I am satisfied that Ms Selak did receive remuneration from the business during the period when she returned to Westport the second time.
[17] The evidence of both points to one or other of them being absent from time to time. Absences from the business do not count against a finding of a de facto relationship. That happens in any ordinary relationship. Mr Smith had to be absent for surgery and he sometimes was out of Westport when he took part in bridge tournaments. Ms Selak also travelled away, but I do not regard those trips as inconsistent with their living permanently and using Romilly Street as their main place
of residence. There is no dispute that this relationship came to an end on 25 February 2018.
[18] Ms Thomas submits that the evidence shows at best two separate de facto relationships at best. She does not accept the argument for Ms Selak that the second period was a de facto relationship. Her case is that the first relationship ended in April 2016, and the second relationship ended in February 2018. If they are to be considered separately, each of them was a short duration relationship because each of them is less than three years. Ms Thomas submits that the periods cannot be run together.
[19] As a matter of interpretation, Ms Thomas is correct in relying on s 2D(4) which states when a de facto relationship ends. But that is not necessarily the end of the matter. It may happen that some relationships are on and off, and that the end of one period of living together may mark the end of a de facto relationship under s 2D(4). But when the total periods are taken together, they go beyond the short duration period of three years under s 2E. In that case, the court considering an application under s 14A may find that, when taken together, all the contributions during all the periods of cohabitation, may amount to substantial contribution which ought to be recognised under s 14A(2)(a)(ii). The accumulation of contributions over different periods of cohabitation may result in a serious injustice if those contributions are not recognised.
[20] In this case, however, the total period of cohabitation is less than 3 years. Excluding the period up to April 2016, when Mr Smith was living in Westport and Ms Selak was living in Auckland, the periods of cohabitation were, at most, about 2 years 2 months. That is less than 3 years. Even taking the cumulative approach, the matter is still to be decided under s 14A. Under that section, the court cannot grant relief unless-
(a)the court is satisfied-
(i)…
(ii)the applicant has made a substantial contribution to the de facto relationship; and
(b)the court is satisfied that failure to make the order would result in serious injustice.
If the court is so satisfied on those grounds, it orders a division of relationship property in accordance with the contribution of each de facto partner to the de facto relationship.
[21] In Lawson v Perkins Asher J dealt with the question of substantial contribution:4
… What is helpful is the focus, seen in most of the decisions on substantial contributions, on the natural meaning of the word “substantial”. Substantial is defined in the New Zealand Oxford Dictionary as of “real importance or value”. There is no need to refine the meaning of “substantial” further. It has a clear meaning and can be properly applied without refinement.
[22] In this context, I regard the work by Ms Selak in her periods of cohabitation as substantial under s 14A(2)(a)(ii). Admittedly her contributions did not match Mr Smith’s. He started the relationship owning the Romilly Street property. It appears to be unencumbered. He therefore had made a very significant capital contribution. And he worked in the business. No one suggests that while he lived in Westport he did not work in the business. But equally, on her evidence, Ms Selak was a valuable member of the workforce. That is reflected in part by the reviews by customers who obviously were very satisfied with her hospitality. In paragraph 24 of her first affidavit, she says:
My responsibilities included cooking, cleaning, laundry, food shopping, reception duties, dealing with enquiries from guests, monitoring social media reviewed, assisting guests, maintaining the garden, mowing lawns, transporting guests and customer services.
Mr Smith tends to downplay her efforts. But in the context of an application where Ms Selak is required to establish a reasonably arguable case, I cannot reject her evidence out of hand. Clearly, she played an important role in running the business. I regard it as arguably substantial for the test under s 14A(2)(a)(ii).
[23] She must, however, also show that a failure to make an order would result in serious injustice. Again, there is helpful guidance from Asher J in Lawson v Perkins:5
In assessing “serious injustice”, it is legitimate to apply the concept of a party getting a just return for “contributions” which is indeed the benchmark under s 14A(3) for making orders in the event of the s 14(2) thresholds being
4 L v P [2008] NZFLR 401(HC) at [70].
5 At [75].
reached. It is also relevant to consider the concepts that have been developed in constructive trust cases relating to de facto relationships referred to in Lankow v Rose [1995] NZFLR 1 (CA). The concept of a return for contributions and the notion of a constructive trust can be seen as a benchmark entitlement of entitlement, against which the position of the applicant if a court does not interfere can be measured. If the status quo after separation without intervention of the Court results in a return that is less than the entitlement under s 14A(3) and Lankow v Rose there will be a serious injustice.
[24] If Ms Selak had received nothing in return for her work at the backpacker’s operation, I would accept that there was a serious injustice. In my judgment what prevents a claim for serious injustice arising is that she was paid for her work. There is clear evidence of payment during the period from August 2015 to April 2016. She also acknowledges that she took money out of the operation during the period from October 2016 to February 2018. Admittedly there was some irregularity and informality about the arrangements but I am nevertheless satisfied that she took money out and was able to use that for her own purposes. That is, the money was not recycled back into the business. There is some evidence that the business was relatively modest. One of the guest reviews refers to being charged $20.00 for a room for the night. That suggests relatively modest earnings by the business. The evidence is consistent with Ms Selak being paid for her work at the time that she did carry out work in the business. Given that she was able to take money out of the business in return for her contributions to it, I do not accept that she has an arguable case that there will be a serious injustice if she does not receive some other interest in relationship property.
[25] My decision is that she does not have an arguable case for a claim under s 14A and she does not have an arguable case that any de facto relationship was longer than the required three years under s 2E. Accordingly, she does not have an arguable case to support the notice of claim. I direct that the notice of claim 11068310.1 be removed from the land in identifier NL2/216.
[26] Mr Smith is entitled to costs. Costs will be under category 2. I trust that counsel will be able to agree costs themselves but if they cannot memoranda may be filed.
….……………………………….
Associate Judge R M Bell