Starr v O'Meehan

[2017] NZHC 1889

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.  FOR FURTHER INFORMATION, PLEASE SEE

THE-FAMILY-COURT/LEGISLATION/RESTRICTION-ON-PUBLISHING- JUDGMENTS.

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2017-441-000001 [2017] NZHC 1889

UNDER

Section 39 of the Property (Relationships)

Act 1976 and section 72 of the District
Courts Act 1947

IN THE MATTER

of an appeal against a decision of the
Family Court

BETWEEN

ANITA STARR Appellant

AND

GARETH OʼMEEHAN Respondent

Hearing:	24 July 2017
Appearances:	DJ OʼConnor for Appellant GRJ Thornton for Respondent
Judgment:	9 August 2017

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Wednesday, 9 August 2017 at 4:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

D O’Connor, Napier

Lunn & Associates, Napier

Charlile Dowling, Napier

STARR v OʼMEEHAN [2017] NZHC 1889 [9 August 2017]

Introduction

[1]      In a reserved decision dated 6 December 2016, Judge AB Lendrum dismissed an application by the appellant to set aside an agreement she entered into with the respondent on 21 August 2002 to contract out of the provisions of the Property (Relationships) Act 1976 (“the agreement”).1   The appellant now appeals against the dismissal of her application.  She says the Judge was wrong to uphold the validity of the agreement because she says that she only signed the agreement under duress or undue influence and/or the agreement is unfair or unreasonable.

Factual background

[2]      The parties began their relationship during the first quarter of 2010.   The appellant had two adult children from a previous relationship and the respondent had three minor children from his first marriage. The appellant worked for a bank and the respondent owned and operated a bakery business.

[3]      In October 2010 the parties became engaged to be married.  At that time, the appellant was living in a house at Fitzroy Avenue, Hastings (“the Fitzroy house”), which was owned by the Kilfeather Trust (“the Trust”).  The Trust was settled by the appellant and her solicitors.   In December 2010 the appellant moved into the respondent’s home.  In May 2011, the Trust sold the Fitzroy house and the appellant received a distribution of approximately $100,000 from its sale.

[4]      In June 2011 the appellant tendered her resignation to the bank because she was unable to reduce her work hours to become more available to the respondent and his children.   Shortly thereafter, the appellant learnt that her job was to be made redundant.  She therefore withdrew her resignation and on 26 July 2011 received a notice of redundancy. She left the employment of the bank in November 2011, having received a redundancy payment of $35,000.

[5]      In  January  or  February  2012  the  respondent  first  raised  the  issue  of  a contracting out agreement.   The respondent’s solicitor prepared a draft agreement,

1      Starr v O’Meehan [2016] NZFC 10394.

which was sent to the appellant’s solicitor in March 2012. The agreement was signed on 21 August 2012.  It specified the assets that each party took into the relationship and provided that each would be entitled to retain that property free of a claim from the other in the event of a separation.

[6]      The parties separated nine months later on 6 May 2013 without having married. The relationship had lasted just over three years. The appellant filed an application to set aside the agreement on 10 October 2014. The application was heard in the Family Court at Hastings in July and August 2016.   The appeal against the Family Court decision was filed on 23 December 2016.

Application for further evidence

[7]      The appellant applies to adduce further evidence on appeal.   The evidence sought to be adduced is:

(a)      Documentation regarding the sale of the Fitzroy house in May 2011 and the reimbursement of the respondent in June 2011 for the payments he made for advertising the house and commission on its sale;

(b)      Documentation regarding the purchase of a second engagement ring;

(c)      Documentation regarding the respondent’s conviction and sentencing for tax  fraud  after the  hearing of the  application to  set  aside  the agreement; and

(d)Documentation regarding the assault charges against the respondent brought by his ex-wife.

[8]      I am of the view that the application to adduce further evidence should be refused. In general, for the Court to grant leave to adduce further evidence on appeal, that evidence must be cogent and likely to be material, and fresh in the sense that it

could  not  reasonably  have  been  discovered  at  the  previous  hearing.2     The

2      High Court Rules 2016, r 20.16; Telecom Corp of New Zealand Ltd v Commerce Commission

[1991] 2 NZLR 557 (CA).

documentation listed in [7](a) and (b) is not fresh and could have been adduced at the hearing itself.  There are no exceptional or compelling circumstances requiring the further evidence to be adduced.

[9]      As to the sale of the Fitzroy house, in her affidavit sworn on 10 October 2014 the appellant stated that she received a distribution of approximately $100,000 from the sale of the house in May 2011 and then on 23 June 2011 paid two sums of $19,000 and $2,800 to the respondent to reimburse him for commission and advertising.  The documentation now sought to be adduced merely confirms the appellant’s evidence.

[10]     As to the engagement ring, the appellant gave evidence in the Family Court that the first ring was lost and that an insurance claim was made and another ring purchased.  The appellant said that the replacement ring was exactly the same.  In answer to a question from the Court “So in a sense, no one lost anything?”, the appellant replied:

I think [the respondent] lost $500 on the excess of the insurance claim and that was it.  It was full replacement.

[11]     Evidence of the date and cost of purchase of the replacement ring is neither fresh nor sufficiently relevant to be admitted.

[12]    The documentation listed in [7](c) is indeed fresh, but is, in my view, insufficiently relevant.  Criminal offending by the respondent is not directly linked to the issue of whether the appellant signed the contracting out agreement under duress or undue influence.

[13]     Finally, the documentation listed in [7](d) is also not fresh.  At the hearing itself, counsel for the appellant did attempt to cross-examine the respondent about charges relating to his ex-wife, but objection was taken by counsel for the respondent on the basis that no proper foundation had been laid for the introduction of such evidence. There was no formal ruling made by the Judge. Counsel for the respondent says that counsel for the appellant accepted the objection “supported by the Judge”. On the other hand, counsel for the appellant says the Judge allowed the objection because the respondent had been granted name suppression in relation to the criminal

charges.   Whatever the situation, I am of the view that there has not been any miscarriage of justice because criminal offending by the respondent against another person is not directly linked to the issue of whether the appellant signed the agreement under duress or undue influence.

The law

[14]     A contracting out agreement may be set aside by a court if it is satisfied that giving effect to the agreement would cause serious injustice.3    In deciding whether there would be injustice, a court is obliged to have regard to:4

(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; and

(f)       Any other matters that the Court considers relevant.

[15]     Any enactment or rule of law or equity that makes a contract void, voidable or unenforceable on any other ground may also be used to set aside a contracting out

agreement.5

3      Property (Relationships) Act 1976, s 21J(1).

4      Property (Relationships) Act 1976, s 21J(4).

5      Property (Relationships) Act 1976, SS 21J(3) and 21G.

[16]     This appeal is brought under s 39 of the Property (Relationships) Act 1976 and, as a general appeal, proceeds by way of rehearing. This Court is therefore required to reach its own conclusion on the merits and need not defer to the Judge at first instance.6

[17]     The appellant must identify the aspects in which the judgment is said to be in error and bears the persuasive burden of satisfying this Court that it should differ from the Family Court Judge.   In undertaking this assessment I take into account the particular advantages enjoyed by the trial Judge such as those perceived by the Judge in determining questions of fact particularly where assessments of credibility and reliability are concerned.7

Domestic violence

[18]     The appellant submits that the Judge made a correct finding of fact that the respondent had been abusive towards the appellant, but that he then made incorrect assumptions about abusive relationships, including:

(a)       A victim can leave a violent relationship;

(b)A victim who decides to stay in a violent relationship can tolerate the abuse; and

(c)       The longer the abuse has happened the less the effect on the victim.

[19]     The appellant submits that the Judge’s assumptions are wrong, not supported by evidence, undermine the seriousness of domestic violence and wrongly blame the victim.

[20]     It is important to note at the outset, however, that the purpose of the hearing was not to determine whether there had been domestic violence in the relationship, but rather whether the appellant had signed the agreement under duress or undue influence

and/or  whether  the  agreement  was  unfair  or  unreasonable  in  light  of  all  the

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

7      Nguy v Lee (2009) 28 FRNZ 618 (HC) at [5].

circumstances at the time it was made or became unfair or unreasonable in light of the changes in circumstances since it was made.

[21]     The appellant cites the following passage in the District Court judgment as an example of the incorrect assumptions made by the Judge:

[118]	(c)	While I accept in considerable degree that the respondent’s
behaviour towards the applicant within the relationship was
offensive, boorish and probably, at times, degrading there is
no evidence that the applicant was not able to handle that;
albeit with difficulty and distress at times.  Support for this
view can be seen from her decision to remain within the
relationship after the completion of the agreement despite a
continuation  of  that  behaviour.   Therefore,  while  highly

unpleasant at times, the essence of their relationship was that

it was one where the applicant accepted this behaviour, over almost the entire period of the relationship, and yet remained with him until separation.

[22]     The Judge however made these comments in light of the legal tests he had to apply in the case.  For duress, the appellant had to establish:8

(a)       Was there a threat against, or the exertion of illegitimate pressure on the [appellant]?

(b)       If so, did the threat result in [her] being coerced into entering into the agreement?

(c)       If the result of that analysis is a finding that there was duress, did the

[appellant] affirm the agreement?

[23]     For undue influence, the appellant had to establish:9

(a)       The respondent had a special capacity and opportunity to influence her;

(b)      That influence was exercised;

(c)       That influence was  misused  but  in  the sense  that there must  be something unconscionable about the respondent’s conduct and he must have induced the [appellant] to enter the contract by unacceptable means;

(d)       That influence brought about the transaction; that is the execution of the agreement; and

8      At [49]; see also Pharmacy Care Systems Ltd v Attorney-General (2004) 17 PRNZ 308 (SC);

McIntyre v Nemesis BDK Ltd [2009] NZCA 329, [2010] 1 NZLR 463 at [25].

9      At [51], citing Hogan v Commercial Factors Ltd [2006] 3 NZLR 618.

(e)       The influence produced a state of impaired free will such that the act of the [appellant] in signing the agreement was not a free and voluntary act.

[24]     In focusing on what are said to be the incorrect assumptions of the Judge about domestic violence, the appellant’s submissions appear to be predicated on the basis that if the respondent had been physically and psychologically abusive to the appellant, then she had been subject to duress or undue influence and any contracting out agreement was voidable at her option.

[25]     While I acknowledge that physical and psychological abuse of the appellant is a factor that may be significant in determining whether there has been duress or undue influence, other factors may also be significant.

[26]     For instance, the parties attended relationship counselling at the insistence of the appellant who told the respondent that the relationship was going to finish if they did not get help. The parties attended joint and individual counselling from July 2011, just over a year before they signed the agreement.  The psychotherapist counsellor gave evidence that both parties described incidents of abuse of a physical and psychological nature.  She confirmed that both parties acknowledged they had been physically violent with each other but both had limited insight into the psychological abuse they were inflicting on each other.

[27]     The parties also attended a sex therapist from about January of February 2012 who did confirm a power imbalance in favour of the respondent.   Neither of the counsellors gave evidence of any complaint by the appellant that she was under pressure to sign the agreement.

[28]     The appellant also left the relationship on a number of occasions, both before and after the agreement was signed and before the final separation.

[29]     Furthermore, the Judge had doubts about the reliability of the evidence given by both parties. As to the respondent, he stated:

[63]      In my view the respondent’s evidence was significantly challenged by his clear, complete, and sworn, denial of any of the actions of abuse as alleged by the [appellant].  In my view those denials lack credibility in a significant

way. They were countered by a wealth of allegations both from the [appellant] and importantly and unchallenged from others, of his alcohol induced unsavoury and distasteful behaviour towards the [appellant].

[30]     As to the appellant he stated:

[66]      However the [appellant] is also in a similar situation. This is because her actions in seeking, in however much an amateur fashion, to blackmail the respondent in the hope of attaining amended terms of the [contracting out] agreement, leaves me in a position where I consider I must treat much of her evidence with real caution. Moreover in my view there was clearly an element of her evidence being influenced by, or tailored to, the outcome she seeks.

[31]     Another factor of relevance is that the appellant was represented by her own lawyer, who reviewed the agreement in draft form and proposed a number of amendments which were agreed to by the respondent’s lawyer.  When the appellant signed the agreement, her lawyer certified as follows:

I JOHN ANTHONY MCARA of Havelock North, Solicitor, witness to the signature of [the appellant] hereby certify that prior to the signing of this Agreement I have explained to the said [the appellant] the contents of this Agreement and further I have explained to her the rights and obligations which she has pursuant to the provisions of the Property (Relationships) Act 1976 and the effects and implications thereof.

[32]     It is also important to note that the agreement sets out to recognise and keep separate the assets that each party brought into the relationship except for a $70,000

BMW motor vehicle, which the respondent had gifted to the appellant in November

2010 in respect of which the appellant had traded in her Hyundai Santa Fe motor vehicle for $7,000.  The terms of the agreement did not require the appellant to give up any of her property, but clearly identified the property she separately brought to the relationship and the BMW motor vehicle gifted to her by the respondent and provided that it was to remain hers and hers alone. It was therefore a standard agreement, which persons entering a relationship may reasonably and properly enter to protect their separate property and any gifts from the other party.

[33]     Finally under this heading the appellant points to evidence that she was on a sickness benefit and had been diagnosed with major depressive disorder with anxious distress and symptoms of post traumatic stress disorder, considered caused by the sexual abuse she experienced in her relationship with the respondent. She submits that the Judge failed to take this evidence into account in his judgment.  While it is true

that the Judge did not refer to this diagnosis in his judgment, the Judge had to make his own determination of the effect of the behaviour of both parties against the legal tests he had to apply.  A medical diagnosis is made in an altogether different context and is not determinative of the issues with which the Judge was dealing.

Sum of $100,000

[34]     The appellant submits that the Judge made incorrect findings of fact in relation to the sum of $100,000, which the agreement recorded was held by the appellant at the time the agreement was signed and failed to take into account the sum of $21,800, which the appellant paid to the respondent from the sale proceeds of her house.  The appellant submits that she did not hold $100,000 at the time the agreement was signed.

[35]     Schedule B to the agreement dated 21 August 2012 recorded the appellant’s separate property as including:

(k)       The sum of $100,000 being the balance of the sale proceeds from the residential property at Fitzroy Road, Hastings, owned by the trustees of the Kilfeather Trust and [the appellant]’s Bank redundancy.

[36]     The appellant submits that it was an essential aspect to the agreement that she was to retain $100,000 from the sale of the Fitzroy house.  With respect, however, I am of view that the agreement does not say that. It refers to the sale proceeds and the redundancy payment from the bank as together constituting the sum of $100,000, which is recorded as the appellant’s separate property.

[37]     The evidence at the hearing was that the appellant had received approximately

$100,000  from  the  sale  of  the  Fitzroy  house  in  May 2011  and  reimbursed  the respondent a total of $21,800 in June 2011 for the commission on the sale and advertising of the property, which he had earlier paid on the appellant’s behalf.  The evidence at the hearing was that the appellant had also received a redundancy payment of $35,000 from the bank in November 2011.

[38]     The appellant gave evidence that the sum of $100,000 from the sale of the Fitzroy house and her $35,000 redundancy payment were significantly depleted during the  relationship.    Apart  from  reimbursing  the  respondent  for  commission  and

advertising costs of $21,800 in June 2011, the appellant says she made three significant payments each of more than $20,000 after she signed the agreement on 21 August

2012. These were:

(a)       $25,000 on 10 September 2012 for a Hyundai motor vehicle for her daughter;

(b)      $20,000 on 25 February 2013 for a crayfish quota purchase; and

(c)       $40,507 on 26 March 2013 for a crayfish quota purchase.

[39]     In  addition,  the  appellant  says  that  she  made  payments  totalling  $8,051 between February and April 2013 for her daughter’s university hostel costs. I therefore infer that she held at least $93,558 from the sale proceeds of the house and her redundancy payment when she signed the agreement in August 2012 because the payments  noted  above  were  all  made  after August  2012.    The  respondent  also acknowledges that she has retained her interest in the Hyundai motor vehicle and the crayfish quota.

[40]     When the appellant signed the agreement, her lawyer explained its contents to her (he has certified as such) and must have gone through all the assets listed as her separate property.  There is no evidence that the appellant told her lawyer she did not then have the sum of $100,000 from the sale of the Fitzroy house and her redundancy payment.

Ownership of engagement ring

[41]     The appellant further submits that the Judge made incorrect findings of fact in relation to the ownership of an engagement ring.  The first engagement ring was lost. The respondent purchased a second engagement ring for $49,500 after the agreement was signed and gifted the second ring to the appellant. The appellant submits that the Judge incorrectly assumed that this was the same ring recorded in the agreement as the respondent’s separate property when it was not.  The appellant submits that the second ring was gifted to her and belonged to her under the agreement, but that the respondent took the ring back after the relationship ended and sold it.

[42]     Schedule A to the agreement dated 21 August 2012 recorded the respondent’s separate property as including:

(o)      The 2.01 carat diamond engagement ring given by [the respondent] to

[the appellant].

[43]     Schedule  B  to  the  agreement  dated  21  August  2012  also  recorded  the appellant’s separate property as including:

(d)      Property acquired by [the appellant] by way of a gift from [the respondent].

[44]     The Judge was aware that the first engagement ring which the agreement said was to remain the respondent’s separate property had been lost and that a second engagement ring had been purchased by the respondent and gifted to the appellant but it seems that he was unaware whether it was before or after the date of the agreement. The Judge only referred to the retention of ownership of the first engagement ring by the respondent in considering whether the inclusion of such a provision in the agreement could have been as a result of undue influence. The Judge did not consider such a provision to be indicative of undue influence.

[45]     I am of the view, however, that the Judge’s lack of knowledge of the date of the loss of the first engagement ring and the purchase of a second ring is immaterial for the purposes of the appeal.  It must be an implied term of the agreement that the respondent’s separate property would include any ring bought in replacement of the

2.01 carat diamond engagement ring if it was lost.  The agreement does not specify that the respondent’s separate property included any replacement ring. Obviously, the parties did not contemplate the loss of the first engagement ring, but if asked they would have agreed that a second ring should be treated in the same way as the first. There is no reason why they should be differentiated. The appellant said it was a “full replacement”.

Conclusion

[46]     The appellant accepts that the Family Court Judge applied the correct legal principles.  The appellant’s case on appeal, is however, that the Judge made incorrect factual findings, made incorrect assumptions in relation to domestic violence and

failed to take into account relevant evidence. I am, however, not persuaded on appeal that the Judge fell into error.

[47]     The Judge accepted that the appellant was under significant pressure to sign the agreement but this was within the bounds contemplated by the legislation as recognised by the Court of Appeal in Harrison v Harrison.10

[48]     The issue of the unfairness or unreasonableness of the agreement was not strongly advanced on the appeal.  The process by which the agreement was drafted and signed was fully compliant with the procedural requirements of the Property (Relationships) Act and provided certainty insofar as the respective property interests of the parties were concerned. The Judge recognised that the appellant had dissipated some of the sale proceeds of the Fitzroy house and her redundancy payment which together totalled $135,000 but that she had been gifted an asset of $63,000 (being the BMW motor vehicle minus the trade in).  It is acknowledged that the appellant does not now own her own home nor does she have a job.  She no doubt regrets selling her house but neither the sale of the Fitzroy House nor her redundancy are directly connected with the agreement and did not make it unfair or unreasonable at the time

it was signed.

[49]     The appeal is accordingly dismissed.  The respondent is entitled to costs on a

2B basis.

Woolford J

10     Harrison v Harrison [2005] 2 NZLR 349 (CA).