Shepherd v Shepherd HC Auckland CIV 2008-404-2213

[2008] NZHC 2642

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2008-404-2213

BETWEEN  JULIE ANNE SHEPHERD Applicant

ANDGRAYDON AUBREY SHEPHERD Respondent

Hearing:         18 July 2008

Appearances: GA Keene for Plaintiff

S Jefferson as Amicus Curiae

Judgment:      23 October 2008 at 4:30 pm

JUDGMENT OF ASHER J

This judgment was delivered by me on 23 October 2008 at 4:30 pm pursuant to Rule 540(4) of the High Court Rules

………………………………………..

Registrar/Deputy Registrar

………………………………………..

Date

Solicitors:

Kemps Lawyers, PO Box 62566, Greenlane, Auckland

GA Keene, 45B Epsom Avenue, Auckland

S Jefferson, PO Box 196, Shortland Street, Auckland

SHEPHERD V SHEPHERD HC AK CIV 2008-404-2213  23 October 2008

Table of Contents

Paragraph Number

Introduction  [1] Factual background  [5] The issue  [9] Submissions  [15] Conflict of law principles  [19] A date of separation approach  [23] A date of filing the application approach  [37] A date of hearing approach  [45] Section 18C  [53] The partnership argument  [58] Result  [61] Costs  [62]

Introduction

[1]      This  proceeding  concerns  an  application  for  the  division  of  relationship property between the parties.   The application was transferred to this Court by an order of the Family Court under s 22(3) of the Property (Relationships) Act 1976 (“the Act”) on the basis that the “complexity of certain issues” warranted such a step. A particular point of complexity was that a relevant leading decision of the Full Court of the High Court (Birch v Birch [2001] 3 NZLR 413) contained different approaches in the two delivered judgments.

[2]      Potter J has since directed in a minute that a particular question reflecting the issue in Birch v Birch be heard in advance of the substantive issue.  The particular preliminary issue as defined in the minute is:

…  whether  under  s 7  of  the  Property  (Relationships)  Act 1976,  for  the purposes of determining jurisdiction the date of an application made under the Act is the date of the filing or the date upon which the application is entertained by the Court at the hearing.

[3]      This is the issue to be determined in this hearing.  It involves a consideration of  what  amounts  to  immovable  and  movable  property  for  the  purposes  of determining jurisdiction under s 7.   It is desirable that this issue be determined in advance of  the substantive hearing as  the  applicant  has  indicated  that  if  she  is unsuccessful   in   this   hearing,   she   will   immediately   issue   contemporaneous proceedings in Australia.   With the support of both counsel I propose to treat the hearing as being a hearing of a preliminary issue under r 418 of the High Court Rules.

[4]      For  various  reasons  not  relevant  to  this  hearing  Mr Shepherd  has  been debarred from defending the proceeding.  Mr Jefferson has been instructed as amicus curiae and where appropriate has presented arguments in support of Mr Shepherd’s position.

Factual background

[5]      The  applicant  and  the  respondent  were  married  in  1981.    In  1990  the respondent, Mr Shepherd, became a 50 per cent owner of a macadamia nut farm property in northern New South Wales (“the New South Wales property”).  He used assets which it is alleged were relationship property to buy the New South Wales property.  The macadamia farm on the New South Wales property was operated by a partnership in which Mr Shepherd was a partner.  The partnership accounts showed the New South Wales property as an asset of that partnership.

[6]      Mr and Mrs Shepherd separated in April 2003. In August 2003 Mrs Shepherd filed an application in the Family Court at Auckland seeking orders dividing the relationship property.

[7]      The New South Wales property was sold seven months later in April 2004. The partnership operating the farm was dissolved.   In the months that followed, Mr Shepherd’s share of the proceeds of the farm’s sale were paid first into Australian bank accounts and then transferred to Mr Shepherd’s New Zealand bank accounts. The money transferred to New Zealand in June 2004 amounted to NZ$455,960.06.

[8]      In August 2004 Mr Shepherd gave an undertaking to the Family Court to hold $160,000 of the funds received pending further directions of the Court.   It is alleged that he then breached that undertaking by dissipating the funds in a development project.

The issue

[9]      As the proceeds of the sale of the New South Wales property appear no longer to be in existence, Mr Keene on behalf of Mrs Shepherd seeks an order under s 18C of the Act compensating her for the dissipation of relationship property after separation.   However, for the application to be entertained, the Court must have jurisdiction under the Act in respect of the allegedly dissipated property, being the proceeds of sale of NZ$455,960.06.   Those proceeds did not exist at the time of separation or the filing of the application as the New South Wales property was

unsold, but did subsequently come into existence prior to the hearing of the application.  This is why it is necessary to determine as a preliminary issue (as set out in Potter J’s minute) whether jurisdiction over property is to be determined as at the date of hearing, or at an earlier date.

[10]     Section 7  of  the Act  deals  with  the issue of  jurisdiction  specifically.    It provides:

7        Application to movable or immovable property

(1)      This  Act  applies to immovable  property that  is  situated  in  New

Zealand.

(2)       This Act applies to movable property that is situated in New Zealand or elsewhere, if one of the spouses or [partners] is domiciled in New Zealand—

(a)      at the date of an application made under this Act; or

(b)      at  the  date  of  any  agreement  between  the  spouses  or

[partners] relating to the division of their property; or

(c)      at the date of his or her death.

(3)Despite subsection (2), if any order under this Act is sought against a person who is neither domiciled nor resident in New Zealand, the Court may decline to  make  an  order in respect  of any movable property that is situated outside New Zealand.

[11]     The section divides property into immovable property (property that cannot be moved, generally land and buildings), and movable property (property that can be physically moved, including funds and money).  Under s 7(1), the Court is given no jurisdiction under the Act over immovable property that is situated out of New Zealand.   The parties’ place of domicile is not mentioned and is irrelevant to a consideration under s 7(1).   Under s 7(2) the Court is given jurisdiction over all movable property wherever it is situated, subject however to one of the parties being domiciled in New Zealand.   Because s 7(2) contemplates jurisdiction over foreign property, the New Zealand domicile requirement is presumably to ensure a sufficient link to New Zealand.

[12]     Under both s 7(1) and s 7(2), then, there  are two issues that  have  to  be addressed.   First, is the property immovable or movable, and second, where is it

situated.   These two central questions are generally not in themselves difficult to answer, as there is seldom an issue over whether property is immovable or movable or where it is situated.  The issue at the heart of this proceedings is the date as at which these determinations are to be made.

[13]     There is nothing in the words of s 7 to indicate when the nature and situation of the property is to be determined for the purposes of determining jurisdiction. There appear to be three possibilities:

(a)      The date on which the parties separate.

(b)       The date on which a party files an application under the Act. (c)       The date of the hearing of the application under the Act.

Only the second two possibilities are referred to in the minute of Potter J, but for reasons that are set out later in this judgment, it is necessary also to consider the possibility of the date of separation.

[14]     At both the time of the parties’ separation and the time of filing of the application in these proceedings, the New South Wales property had not been sold. It was therefore immovable property situated out of New Zealand.  Thus if (a) or (b) apply, the clock stops at a date when the property was the New South Wales farm property   and   in   respect   of   which   there   is   no   jurisdiction   under   s 7(1). Mrs Shepherd’s application under s 18C could not therefore succeed.   But if (c) applies, the clock stops after the property has changed status from immovable to movable by its sale and conversion into proceeds.  Thus, if the nature and situation of the property are determined as at the date of the hearing, the Court has jurisdiction over it in terms of s 7(2) and a s 18C application in respect of its dissipation may be entertained.

Submissions

[15]     Mr Keene for Mrs Shepherd submitted that the correct date for determining the status and situation of property was as at the date of hearing.  Consequently, the

property was  movable  and  situated  in  New  Zealand.    The  Court  therefore  had jurisdiction over the property and the ability to make an order in respect of it under s

18C.  Mr Keene referred extensively to the judgments of Elias CJ and Paterson J in Birch v Birch, where both for different reasons upheld a Family Court finding that the Act applied to property that was movable at the time of the filing of the application but had been immovable at the time of separation.

[16]     Mr Keene alternatively submitted that Mr Shepherd’s interest in the New South  Wales  property  should  be  seen  as  an  interest  in  a  partnership,  which  is movable property, rather than as an interest in the farm itself, which is immovable property.

[17]     Mr Jefferson for Mr Shepherd submitted that the correct date for determining the nature and situation of property was the date of filing the application. Consequently, the property being immovable and situated outside New Zealand at that point, the Court had no jurisdiction over it.

[18]     Mr Jefferson submitted that to accept Mr Keene’s alternative submission, which characterised Mr Shepherd’s interest in the New South Wales property as an interest in a partnership and therefore movable property, would defeat the intention of the Act.   He submitted that the purpose of the Act was to focus on the actual assets under a partner’s control and not to be distracted by legal structures put in place in relation to those assets.

Conflict of law principles

[19]     To interpret s 7 in its legal context, it is necessary first to consider the conflict of law principles that would generally apply to immovable and movable property. The underlying principle is set out in Dicey and Morris Conflict of Laws (14 ed 2006, vol 2) at para 23-062:

23-62     As a general rule, all questions that arise concerning rights over immovables (land) are governed by the law of the place where the immovable is situate (lex situs).   The general principle is beyond dispute, and applies to rights of every description.  It is based upon obvious considerations of convenience and expediency.  Any other

rule would be ineffective, because in the last resort land can only be dealt with in a manner which the lex situs allows.

[20]    This approach requires that substantive rights in land be determined in accordance with the laws of the country in which the land is situated.   This is because substantive rights may differ from country to country, and there are practical difficulties in a New Zealand court determining rights to land in another country, as well as the barrier of the general principle that such issues are best determined by the law of the  country concerned.    Once  immovable  property is  sold  and  becomes movable property, such as funds in a bank, the position changes.   In the family context it is widely accepted that the governing law as regards movables in the absence of an agreement is that of the matrimonial domicile: Dicey and Morris Conflict of Laws (14 ed 2006, vol 2) at para 28-008.

[21]     The proceeds of the sale of immovable property will normally be treated as movable property: Laws of New Zealand “Conflict of Laws: Choice of Law” at para 160.  Thus, on ordinary conflict of laws principles, if there were a dispute not connected  to  the  Act  about  the  proceeds  of  sale  received  in  New  Zealand  by Mr Shepherd, the proceeds having been distributed to him as movable cash in New Zealand would not be regarded as foreign immovable property.

[22]    Section 7 therefore reflects the traditional conflict of laws approach to jurisdiction over immovable and movable property.  There is nothing surprising in its provisions in conflict of law terms.  With that background, I now proceed to consider each of the possible dates as to which the nature and situation of the property should be determined.

A date of separation approach

[23]     Mr Jefferson did not seek a date of separation approach, nor was it put forward as an issue by Potter J  in her minute.   However,  a date of  separation approach to s 7 was adopted by the Family Court Judge in Birch v Birch, although he avoided the consequences of this approach by the application of the discretion in s 9(4) to treat property acquired after separation as relationship property.  On appeal to a Full Court of the High Court Elias CJ expressly rejected such an approach, but it

is by no means clear that her views were accepted by Paterson J, who made statements indicating sympathy for a date of separation approach.  While there is no case that explicitly asserts that a date of separation approach should be adopted in relation  to  s 7,  such  an  approach  was  at  least  contemplated  in  the  decision  of Paterson J at [43] and [45].  There are some indications in the Act that this approach was intended, and it is appropriate that it be considered.

[24]     Section 8(1) governs the classification of property as “relationship property”. It relevantly reads:

8        Relationship property defined

(1)      Relationship property shall consist of—

…

(l)        any income and gains derived from, the proceeds of any disposition of, and any increase in the value of, any property described in paragraphs (a) to (k).

[emphasis added]

[25]     Section 8(1)(l) refers to the proceeds of any disposition of “any property described in paragraphs (a) to (k)”.  Thus for the proceeds of sale to be able to be classified  under  s 8,  they  must  be  derived  from  property  which  could  also  be classified as relationship property.  Whether such property under s 8(1)(a) to (k) is relationship property is assessed by considering the status of the property at the time of separation: s 2(F).  Section 8(1)(l) therefore directs attention to the origin of the property in existence at the date of separation.

[26]     The New South Wales property appears to have been a property of the type described in s 8(1)(e), namely property acquired by a spouse after the marriage, although that is to be decided at the substantive hearing.  However, because it was situated in Australia, the Court had no jurisdiction under s 7(1) to classify it as relationship property under s 8.  The argument then arises that anything derived from property which the Court had no jurisdiction to classify as relationship property, such as sale proceeds, also cannot be classified as relationship property as it is not derived from property that falls within paragraphs (a) to (k).

[27]     This    question    concerned    McKay J    in    the    Court    of    Appeal    in

Samarawickrema v Samarawickrema [1995] 1 NZLR 14 at 18:

Because the Act does not apply to immovables situate out of New Zealand, we do not think such property can be said to fall within the classifications of matrimonial property and separate property in ss 8 and 9, or within the provisions in respect of the matrimonial home in ss 11 and 12. To so classify a foreign immovable is to apply the Act to it, which s 7 does not authorise.

[28]     McKay J  at 20 in that case warned  against  applying to  foreign  land  the philosophy of the New Zealand statute.  He said at 20:

The Court may in some circumstances be able to have regard to the existence of the foreign immovable to the limited extent indicated in Enright v Fox but in doing so it must be careful to ensure that it is not applying to the foreign property the philosophy of the New Zealand statute. The claims in respect of the foreign property are to be decided by the local law, and should not be the subject of compensating adjustments in respect of the New Zealand assets to ensure that the final division of the total assets reflects a New Zealand approach.

These statements were interpreted by Paterson J in Birch v Birch at [45]-[47] as indicating that to classify as relationship property the proceeds of sale of what was at the date of separation a foreign immovable would be to illegitimately classify, at the date of separation, a foreign immovable: at [47].

[29]     In Samarawickrema v Samarawickrema the Court of Appeal decided that the Sri Lankan real estate in question had to be excluded entirely from the Court’s consideration of appropriate orders.   However, that case was different from the present as the property in question was still Sri Lankan real estate at the time of hearing.  The judgment did not deal directly with the situation that arises here, where foreign real estate has been sold and the proceeds of sale sent back to New Zealand. For the reasons set out later in this judgment, it is difficult to see how in such a situation  a  court  would  be  applying  the  philosophy  of  our  Act  to  a  foreign immovable by considering a foreign immovable which has become a New Zealand movable, and I do not consider the decision to be of direct relevance to the issues to be determined in this hearing.

[30]     In Birch v Birch the facts were more similar but not identical to the present. The asset in question was a unit in Sydney.  After the parties had separated and the

wife had returned to live in New Zealand, the unit was sold.  The wife applied to the Family Court in August 1998 for orders.  By that time both the husband and the wife were domiciled in New Zealand and the proceeds of sale had been received and used by the husband.  The difference from this case is the fact that in Birch v Birch the Australian property had been sold by the date of the filing of the application in the Family Court.  In this case, Mr Shepherd still owned the land at the date of filing the application, and it was sold later.

[31]     The Full Court upheld the Family Court’s decision that there was jurisdiction to make an order in relation to the sale proceeds, but for different reasons did not accept that the Family Court Judge’s reasoning was correct.  Elias CJ held at [21] that whether a Court has jurisdiction over property is determined under s 7 at the date of an application, but as will be discussed later deliberately did not determine what  was  meant  by  an  application.    Paterson J  took  a  different  approach.    He discussed Samarawickrema v Samarawickrema at [45]. He queried whether, if the proceeds of sale were derived from immovable property, they could be considered under s 8 without the Court considering and therefore accepting jurisdiction over property that was an immovable. He was concerned at [47] that s 8(1)(b) directed the Court back to 8(1)(a) to (ee) and that the Court could be classifying, at the date of separation, a foreign immovable, if it considered the proceeds of sale at the date of hearing.

[32]     Ultimately  Paterson J  chose  what  he  described  as  “a  different  route”  to uphold the Family Court decision.  He did so by holding first that New Zealand law could be applied by default to the Australian unit because no evidence had been adduced as to Australian law at the hearing, and secondly because the same result could be reached applying equitable principles in personam. His judgment can be construed as favouring a date of separation approach, although in the end he decided the case on the more immediate issues.

[33]     But as Elias CJ pointed out in her judgment in Birch v Birch at [25] when she considered Samarawickrema v Samarawickrema, there is a distinction between the issue  of  classification  (as  separate  or  relationship  property)  and  the  issue  of

jurisdiction, and it does not follow that the date of determining jurisdiction under s 7 should be the same as the date of a s 8 classification.

[34]     When the property that existed at separation no longer exists at hearing, there is no exercise of jurisdiction over it when the classification process takes place.  If the property was foreign land, the New Zealand Court can make no orders that affect it as it no longer exists as property of the parties.  The reference in s 8(l) back to Ss

8(a)-(k) does not mean that the Court makes orders that will affect previously immovable property.   The establishment of the history is part of the process of classification but no more.

[35]     Indeed, the issue of jurisdiction under s 7 is an issue of the nature or status of property, which has nothing to do with contributions to the relationship.  The process of classifying property naturally focuses on the end of the relationship as that is the last frozen point of time of the functioning relationship.  Events after that date are generally irrelevant to classification.  But the process of deciding whether property is immovable or movable and where it is situated for the purposes of s 7(1) is entirely different.  This is a jurisdiction issue, and the date for undertaking this exercise is dictated ultimately by conflict of laws principles as reflected in s 7.  For reasons that I will develop later in this judgment, these are more naturally considered at the date of hearing.  Although property is classified at the date of separation, the process of classification actually occurs at the time of hearing.   The different nature of classification and jurisdiction decisions means that there is no policy reason why a date of separation approach should be adopted.  To classify an asset which was for a period a foreign immovable does not apply the “philosophy of the Act” to a foreign immovable in a manner that is objectionable in conflict of laws terms (as concerned the Court in Samarawickrema).  In the same way as the New South Wales property’s distant origins as movable property in New Zealand cannot be determinative of jurisdiction, the period in which the asset was a foreign immovable is also simply part of the history of the asset relevant to classification, and cannot dictate the Court’s jurisdiction at the hearing.

[36]     I note that a date of separation has not been favoured over the date of filing the application or the date of hearing in any final decision, save for the implicit

support given to by Paterson J at [43] and [45] in Birch v Birch.  Neither the policy of the Act nor the words of s 7 require a date of separation approach and conflict of laws principles do not support it.  I do not consider that such an approach should be adopted.

A date of filing the application approach

[37]     The second possible approach is for jurisdiction to be determined as at the date of the filing of the proceeding before the Court.  This was the approach urged on the Court by Mr Jefferson.   He submitted that this approach was supported by some case law, and consistent with the judgment of Elias CJ in Birch v Birch.  Elias CJ did not accept that the date of separation was the relevant date as at which jurisdiction should be determined but left it open whether the relevant date was the date of filing or the date of hearing.  In that case it was not necessary to determine whether the date of filing the application or the date of hearing was the correct date as at which to assess jurisdiction.  Elias CJ held at [26]:

Jurisdiction over property falls to be determined at the date of an application which invokes the jurisdiction of the Court.  It  is  unnecessary to  decide whether for the purposes of jurisdiction under s 7 the date of the application is the date of filing or the date upon which the application is entertained by the Court at the hearing. The point was not argued.

[38]     Her Honour decided that for the purposes of the appeal it was enough that at the date upon which the application was filed in the Family Court and at the date of hearing, neither spouse owned immovable property outside New Zealand.  For this reason Elias CJ  considered that the proceeds  could be classified as relationship property under s 8(1)(e) (now s 8(1)(l)).  She therefore did not consider it necessary to invoke the discretion in s 9(4) to treat property as relationship property.

[39]     It is difficult to see why the date of filing an application should be the date used to determine the Court’s jurisdiction over property.  The filing will generally follow the more significant date of the termination of the relationship, and reflects a decision to seek the assistance of the Court to resolve matters.   It reflects no event in the history of the relationship of substantive relevance to property.  Nor, of course,

does the date of hearing, but that later date is when the Court has to do justice between the parties in relation to the available assets.

[40]     It is necessary to refer to the words of s 7.  There is no reference to the “date of application” in s 7(1) of the Act.   That date is therefore on the face of s 7(1) irrelevant to determining whether property is to be treated as “immovable”.   The phrase “at the date of an application made under this Act” occurs, rather, in s 7(2).  It is immediately preceded by the phrase which reads “if one of the spouses or partners is domiciled in New Zealand”.  On a plain reading, it is clear that “at the date of an application” is qualifying the domicile requirement, and not the earlier phrase in s 7(2) relating to movable property that is situated in New Zealand or elsewhere. The natural reading is, therefore, that the Act applies to movable property that is situated in New Zealand, if at the time an application is made under the Act one of the spouses or parties is domiciled in New Zealand.   The date of application is relevant to the issue of domicile only in relation to movable property.   It is not relevant to the issue of whether the property is immovable or movable.  I therefore, with respect, am unable to agree with that aspect of the decision of Elias CJ in Birch v Birch.

[41]     Even if “the date of application” is relevant, it is to be noted that the two concepts of date of application and date of hearing are distinguished elsewhere in the Act.   As observed, s 2F states that the date at which the “share” of the spouse or partner in relationship property is to be determined is the date of the end of the relationship.  However, s 2G in contrast provides that the date at which the “value of property” is to be determined is to be the “date of the hearing of the application by the Court of first instance”.  In distinguishing between the date of application and the date of hearing, the Act indicates that they should not be treated as the same.

[42]     Mr  Jefferson  relies  on  two  decisions  in  addition  to  Birch  v  Birch  for establishing the date of filing the application as the relevant date.   The first is Livingstone v Livingstone (1980) MPC 129, a case decided not long after the original Act came into force.   Somers J concluded that the date when the application was made was the relevant date.  However, in the relevant paragraphs at 136, it is clear that the Judge was considering the date of determining the issue of domicile, which

is clearly fixed at the date of application under s 7(2) of the Act.  He did not purport to determine the date at which the immovable or movable status and situation of the property was fixed.    I do not regard his observation as indicating that the status of property as immovable or movable should be fixed on the basis of the position of those assets at the date the application was filed.  That issue was not addressed.

[43]     In  the  second  case,  Evans  v  Evans  FC  NEL  FP042/189/97  5 June 1998, Judge Grace  concluded  that  the  Court  had  a  discretion  in  fixing  the  date  for determination of the status of the property given that the purpose of the Act was to achieve fairness between spouses and given the lack of any clear direction in the Act. In that case the Judge exercised his discretion to find that the date of the filing of the proceedings was the relevant date.  With respect to that approach, it is not desirable for the date of determining whether property is immovable or movable to turn solely on the Judge’s perception of fairness on the facts of a particular case.  Section 7 must be applied on a consistent basis on its words and in the context of the Act as a whole.

[44]     Therefore counsel have not been able to provide the Court with any case that explicitly supports a date of filing the application approach.  For the reasons given, it is my conclusion that in terms of the wording of s 7, the date of application is not the date for determining whether property is immovable or movable.

A date of hearing approach

[45]     The Court of Appeal has in two cases been obliged to consider the relevance of the changes to the nature of property between the date of separation and the date of hearing.  In both cases the Court looked to the date of hearing rather than the date of separation.   In Brown v Brown [1982] 1 NZLR 513 the Court held that the provisions of the Act could be directed at a property which had been dissipated and so was not in existence at the date of the hearing. Woodhouse J stated at 514:

In this Court Richardson J in the Castle case [Castle v Castle [1980] 1 NZLR

14]  said  (at  p  23)  that  "the  provisions  [of  the  Act]  for  division  of  the matrimonial property are directed to property in existence at the date of

hearing".  We accept that statement as correct.  We accept as well the wider corollary that property whether matrimonial property or not that has changed
its form by the time of the hearing needs to be examined in the new form in order that its status may be determined; and this is so whether done in terms

of s 8 of the Act or in terms of s 9(4) which has particular relevance in the present case.

[46]     In  Walker v  Walker  (1983)  2  NZFLR  240,  the  Court  of  Appeal  had  to consider whether the Act was directed only to property in existence at the date of hearing and did not apply to property that was no longer in existence.  The general approach of the majority of the Court was to examine the relevant  property in existence at the date of the hearing.  Cooke J observed at 248:

If by the date of the hearing some of the property is traceable into another form of property within the jurisdiction of the Court under the Act, any order will naturally be made in relation to the property in its new form.  But this should not prevent the Court from using the machinery provisions to make proper compensation to one spouse for post-separation acts of the other which, if not compensated for, would in effect alter the sharing intended by Parliament.

[emphasis added]

[47]     These statements in Brown v Brown and Walker v Walker were not made in a s 7 context.  However, the approach in those cases is consistent with property being determined as movable or immovable or movable as at the date of hearing.  While the process of classifying property as relationship or separate property focuses on the position at separation, it is not intended to ignore what happens subsequently.  Thus s 8(1)(l) refers to relationship property as including the proceeds of sale of such property and s 9(4) gives the Court a discretion to treat property acquired after separation as relationship property.

[48]     The larger task of determining the division of the property as a whole is carried out by looking at the state of the parties’ assets at the date of hearing. This is why s 2G provides that it is the date of the hearing at which a value is determined, as both parties should bear the benefit or burden of changes in value pending division of the assets.   This was the approach adopted in Brown v Brown and Walker v Walker.

[49]     The underlying purposes of the Act also support a date of hearing approach. Section 1M refers to recognising the equal contribution of spouses and partners to the partnership, and the need to provide for a just division.  Section 1N states that questions under the Act should be resolved having regard to the parties’ economic

advantages or disadvantages (s 1N(c)) and as “inexpensively, simply, and speedily as is consistent with justice”: s 1N(d).

[50]     If value is determined at the date of hearing, it follows that the status of assets is more fairly considered then as well so that the Court can do justice at that point in time.  The Court should not be hidebound by the past history of the assets when that history has been overtaken by later events.  There is no conflict of laws principle that at the time of hearing would restrain the Court from considering all relationship property in existence at the time it makes orders under the Act, providing that the property at that time is not a foreign immovable.  The practicalities at the time of hearing should govern the determination of jurisdiction, not what has gone before.

[51]     All these factors indicate that the issue of whether property is immovable or movable and where it is situated should be considered at the date of the hearing, rather than an earlier date which is not related to the reality of the parties’ asset position when the Court’s decision must be made.  This was essentially the approach adopted by Cooke J in Walker v Walker and Woodhouse J in Brown v Brown.  It is also consistent with the general approach of Elias CJ in Birch v Birch, when she observed at [21]: “Whether a New Zealand Court has jurisdiction is determined when a dispute is brought to the Court.”

[52]     I conclude that whether the Court has jurisdiction over the property under s 7 should be determined as at the date that the hearing takes place.  In the words of the minute of Potter J, it is the date upon which “the application is entertained by the Court”.

Section 18C

[53]     Mr Keene has sought orders determining whether a compensatory payment under  s 18C  can  be  made.    The  Court  in  this  preliminary  hearing  has  no  an opportunity to consider the merits of the application and so cannot make a definitive order on the point, but the question of the Court’s jurisdiction can be addressed. Section 18C provides:

18CCompensation for dissipation of relationship property after separation

(1)      In this section, relevant period has the same meaning as in section

18B.

(2)If, during the relevant period, the relationship property has been materially diminished in value by the deliberate action or inaction of one spouse or [partner] (party B), the Court may, for the purposes of compensating the other spouse or [partner] (party A),—

(a)      order party B to pay party A a sum of money:

(b)order party B to transfer to party A any property, whether the property is relationship property or separate property.

(3)      In proceedings commenced after the death of 1 of the spouses or

[partners], this section is modified by section 86.]

[54]     Section 18C permits compensation where the relationship property has been materially diminished in value after separation by the deliberate action or inaction of the spouse.  Given the purpose of the Act, which is to provide for a just division, I consider that the phrase “relationship property” in s 18C(2) is used in the sense of meaning all relationship property of the parties, whether or not in existence at the date of the hearing.  Thus, while the Court will start by examining the relationship property actually in existence at the time of the hearing, it will be open for the Court to find that the relationship property would have included the proceeds of sale but for the deliberate actions or inactions of a spouse.

[55]     Such an approach was adopted prior to the enactment of s 18C in Walker v Walker.  There, while focusing only on property still owned by the parties at the date of  the  hearing,  the  Court  stated  that  it  would  not  be  deterred  from  using  the machinery provisions in the Act to make proper compensation to one spouse for post-separation acts of the other which, if not compensated, “would in effect alter the sharing intended by Parliament”: at 248.  Applying that reasoning to s 18C, it must have been the intention of Parliament, with its emphasis on a just division between the parties, that a movable asset over which a Court should have had jurisdiction at the date of hearing but for an act of dissipation could be considered for s 18C purposes, even if that asset was originally derived from immovable property not situated in New Zealand.

[56]     In this case the farm has been sold and the proceeds have been converted into movable property which may have been diminished by the actions of a spouse or partner.  The Court has jurisdiction to consider that action relating as it does to an asset over which the Court would have had jurisdiction if the hearing had taken place at an earlier date when the proceeds were still in existence.

[57]     I conclude that this Court has jurisdiction to consider the history of  the proceeds of the sale of the New South Wales property for the purposes of s 18C of the Act.

The partnership submission

[58]     Mr Keene has succeeded in his primary submission and it is not necessary to determine his argument that the New South Wales property was an asset in a partnership and therefore movable property.   I would have reservations about classifying the New South Wales property and the proceeds of sale in this way.  The nature  and  origin  of  each  asset  and  liability of  a  partnership  is  more  naturally considered individually under this Act, rather than through the application of partnership accounts.   This arises from the fact that each partner has a beneficial interest in each of the partnership assets, and the approach of the Courts has been to look at the reality of the asset position insofar as it has benefits for a partner: Z v Z (No. 2) [1997] 2 NZLR 236.

[59]     In any event, determination of this issue would require detailed evidence of the activities of the partnership and its assets.  While the New South Wales property is listed as an asset of the partnership in the partnership accounts, I note that the accounts also show a substantial loan which has not been explained.  Mr Shepherd’s equity is shown as $51,162.68 at 30 June 2004.   There are apparent difficulties in relating what is in the accounts to what Mr Shepherd received.

[60]     I am not satisfied that I have sufficient information before me to determine the issue. Given my decision that the proceeds can be considered under s 8(1)(l), it is not necessary to do so.

Result

[61]     I conclude that whether property is immovable or movable and where it is situated in terms of s 7 is to be determined as at the date that the hearing takes place. Where prior to hearing the proceeds of sale of a foreign immovable have been distributed and transformed into a movable asset in New Zealand, the Court under s 7(2) has jurisdiction to make orders in relation to them.  I also consider that there is no jurisdictional bar to applying s 18C(2) to that asset.

Costs

[62]     Given that Mr Shepherd has had no personal legal representation, I reserve the question of costs.   If Mr Keene wishes to pursue that matter, he should file a memorandum of no more than five pages and serve it personally on Mr Shepherd, and also Mr Jefferson, within 14 days.   They each have leave to respond in memoranda of no more than five pages within a further 14 days.

………………………… Asher J