Stephens v Deans
[2024] NZHC 1442
•31 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000961
[2024] NZHC 1442
IN THE MATTER of an appeal against the decision of the Family Court pursuant to s 39 of the Property (Relationships) Act 1976 BETWEEN
STEPHENS
Appellant
AND
DEANS
Respondent
Hearing: 23 May 2024 Appearances:
Appellant in person
S T Bennett for Respondent
Judgment:
31 May 2024
Reissued:
4 September 2024
JUDGMENT OF ANDERSON J
This judgment was reissued by me on 4 September 2024 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016.
.…………………………..
Registrar/Deputy Registrar
Solicitors:
Presland & Co, Auckland
Copy to:
The appellant
STEPHENS v DEANS [2024] NZHC 1442 [31 May 2024]
Contents
Para No
Legal context[6]
Decision under appeal[13]
Law on appeal[24]
Submissions[27]
Ms Stephens’ submissions[27]
Mr Deans’ submissions[33]
Leave to adduce new evidence [36]
Discussion[40]
Section 13 — extraordinary circumstances?[40]
$136,440 loan[74]
Section 18B — contributions after the relationship [81]
Overview[81]
Assessment of compensation for childcare under s 18B[84]
Occupation rent and costs relating to the property[86]
Orders as to vesting under s 26, s 26A and s 33(3)(d) [99]
Compensation under s 20E[105]
Balance relationship property[106]
Result[109]
[1] Ms Stephens and Mr Deans were in a relationship between 2005 and March 2013.1 They married in 2006. Together they have one child, born in 2011. Mr Deans brought proceedings for division of their relationship property in 2019. The application was heard by Judge R von Keisenberg in the Family Court at Auckland on 8 and 9 December 2022. This included the Judge hearing cross-examination of the parties.
[2] The main item for division was the family home in Oratia. This was purchased by the parties in 2010 from Ms Stephens’ father’s family trust (the Trust) for $360,000 after Ms Stephens’ father had died. The purchase price was based on the property’s council valuation. It was comprised of a $136,440 loan from the Trust and borrowings of $235,000 from the National Bank which was guaranteed by the trustees of the Trust.2
[3] The parties renovated the home with funds drawn down on the mortgage. Ms Stephens says that in December 2012 Mr Deans used funds drawn down on the mortgage for his personal drug use. She also says he was concealing use of other funds withdrawn through Eftpos transactions and in cash for that same purpose.
[4] After they separated, Ms Stephens remained in the home with the parties’ child. She paid all mortgage, rates, insurance and maintenance expenses from that point in time, and had full care of their child. Mr Deans had bought a car in August 2012 funded in part by a further draw down on the mortgage and in part by a trade in of Ms Stephens’ father’s car. Mr Deans took the car with him on separation.
[5] By decision dated 18 April 2023, the Judge made various orders as to the distribution of relationship property.3 Ms Stephens appeals the Judge’s decision. Mr Deans cross-appeals. Mr Deans’ notice of cross-appeal was filed one day late. No prejudice occurred to Ms Stephens by this delay and I grant leave for the cross-appeal to be filed out of time. Both parties seek that the matter be remitted back to the Family Court for reconsideration, or that this Court make any orders that it thinks fit.
1 The names of the parties are anonymised to avoid identification of their child (s 11B of the Family Court Act 1980).
2 I have not seen any formal guarantee, only a letter from the then sole Trustee to the bank advising it would be prepared to guarantee the borrowing.
3 District Court judgment [2023] NZFC 2745.
Legal context
[6] The Property (Relationships) Act 1976 (the Act) provides that on division of relationship property each spouse is to share equally in the family home, family chattels and any other relationship property.4 The value of relationship property to be divided is calculated by ascertaining the total value of the relationship property and then deducting from that total any secured or unsecured relationship debts owed by either or both spouses or partners.5 If a secured or unsecured debt of one spouse or partner has been paid or satisfied out of relationship property, the Court may make an order increasing the other party’s share of relationship property or a sum of money of compensation.6
[7]Section 13 provides an exception to the principle of equal sharing:
13 Exception to equal sharing
(1) If the court considers that there are extraordinary circumstances that make equal sharing of property or money under section 11 or section 11A or section 11B or section 12 repugnant to justice, the share of each spouse or partner in that property or money is to be determined in accordance with the contribution of each spouse to the marriage or of each civil union partner to the civil union or of each de facto partner to the de facto relationship.
[8] The overarching question is whether the case is so out of the ordinary that an equal division is something the Court simply cannot countenance.7 In assessing the circumstances, the Court must ignore circumstances occurring after separation.8 Therefore it is irrelevant for the purposes of s 13(1) that following separation one party has assumed responsibility for the maintenance and costs of a property.9
[9] Section 18B provides that if, after separation, one party has done anything that would have been a contribution to the relationship if it had not ended, the Court, if it considers it just, may make orders compensating that party by payment of money or a transfer of property.
4 Property (Relationships) Act 1976, s 11.
5 Section 20D.
6 Section 20E.
7 Castle v Castle [1977] 2 NZLR 97 (SC); and Castle v Castle [1980] 1 NZLR 14 (CA).
8 Meikle v Meikle [1979] 1 NZLR 137 (CA).
9 At 145, 146, 147 and 158.
[10] Section 26 provides that, in proceedings under the Act, the Court must have regard to the interests of any minor or dependent children of the marriage. If it considers just, it may make an order settling the relationship property or any part of that property for the benefit of the children.
[11] Section 26A permits the Court to make an order postponing the vesting of any share in the relationship property until a specified future date or the occurrence of an unspecified future event if the Court is satisfied that immediate vesting would cause undue hardship for the spouse who is the principal provider of ongoing daily care for a dependent child of the marriage.
[12] Section 33 also permits the Court to make any orders or directions it deems necessary to give effect or better effect to any order made under ss 25 to 32.
Decision under appeal
[13]The issues for determination before the Judge were:10
(a)Whether s 13 of the Act applied, ie, whether there were extraordinary circumstances entitling Ms Stephens to a greater share of relationship property?
(b)Whether the advance from the Trust of $136,440 was repayable as relationship debt?
(c)Whether Ms Stephens is entitled to compensation under s 18B for her sole care of the parties’ child post-separation?
(d)Whether there should be a distribution of Mr Deans’ share of the home for the benefit of the child pursuant to s 26?
(e)Should there be a postponement of Mr Deans’ share under ss 26A and 33(3)(d)?
10 District Court judgment, above n 3, at [5].
(f)Should the payment of child support by Mr Deans during the marriage for his son from a previous relationship be classified as a personal debt and if so whether an adjustment should be made in favour of Ms Stephens under ss 20D and 20E of the Act.
[14] The Judge concluded that none of the circumstances relied upon by Ms Stephens surrounding the acquisition of the Oratia property amounted to extraordinary circumstances to render equal division of relationship property repugnant to justice.11 The Judge characterised Ms Stephens’ argument as “for the most part [relying] on what her lawyer describes as her close emotional ties with the [Oratia] property and her father’s trust”.
[15] The Judge rejected an argument by Mr Deans that he contributed $20,000 of his funds to prevent a mortgagee sale of the property prior to the parties’ purchase. She found that at best the parties may have contributed $5,000 but in any event such was not a factor which was persuasive or determinative either way for a s 13 claim.12
[16] The Judge held that Ms Stephens’ contribution to the property and care of their child post-separation were not relevant to whether extraordinary circumstances under s 13 had been established.13 She also rejected that Ms Stephens’ allegations of family violence by Mr Deans were relevant as they did not meet the threshold of significantly affecting the value or extent of their property as prescribed by s 18(3).14
[17] Mr Deans contended that the parties’ loan of $136,440 from the Trust was not valid or not repayable. The Judge rejected both arguments and held that it was valid relationship debt.15
[18] The Judge then assessed the parties’ claims for compensation under s 18B. Mr Deans sought occupation rent in respect of the property from 2019, while Ms Stephens sought compensation for Mr Deans leaving her with sole care of the parties’
11 At [34].
12 At [21].
13 At [27].
14 At [33].
15 At [37].
child since 2013 and the sole burden of maintaining and meeting the expenses on the property.
[19] The Judge was satisfied that Mr Deans was entitled to compensation for occupation rent. She assessed this at $430 per week for the period from 2019 claimed. That amounted to $71,810, half of which was $35,905. The Judge held that this must be offset to reimburse Ms Stephens for a half share of expenses over the property and a further amount for half of the capital repayments made. The Judge did not reimburse Ms Stephens for any costs on the home from the date of separation to 2019 (other than on capital repayments). This was on the basis that Mr Deans had not sought occupation rent for this period but these costs should be viewed as the equivalent of fair rental.
[20] The Judge allowed Ms Stephens’ claim for compensation under s 18B for sole care of the parties’ child. She concluded that $100 per week was an appropriate quantum of compensation.16
[21] The Judge was not persuaded that the high threshold for an order under s 26 for vesting relationship property on their child was met. Having considered the child’s interests, the Judge was not satisfied that should be the overriding consideration at the expense of the father’s interest in the property.17 Nor did the circumstances justify orders for postponement of vesting under ss 26A and 33(3)(d). The Judge also declined to make any order under s 20E in regards Mr Deans’ child support payments in relation to his child from a previous relationship.
[22]On the balance of the relationship property:
(a)The Judge determined Mr Deans must account to Ms Stephens for half the value of Mr Deans’ vehicle valued at the date of separation, which she determined as $6,235.18
16 At [66] citing Li v Wu [2019] NZHC 2461 at [155]–[157].
17 At [76].
18 At [98].
(b)The Judge found there was insufficient evidence to conclude on the balance of probabilities that $11,000 of loan money held in an envelope in cash was appropriated for Mr Deans’ personal drug use.19
[23]The Judge then made the following orders:20
(a)The property … is to be placed on the market for sale no later than 1 July 2023.
(b)The parties are to agree on the method of sale and the real estate agency to be appointed within four weeks of this judgment.
(c)From the proceeds of sale, the following payments are to be made:
(i)Repayment of the outstanding mortgage owing to the ANZ Bank;
(ii)Deduction of $136,440.63 repayable to the SF Trust;
(iii)Real estate agent commission;
(iv)Legal costs and disbursements on the sale;
(v)Release of caveat against the interest of Stephen Deans by the Legal Services Commissioner – any monies due to them will be deducted from Mr Deans’ share (see below); and
(vi)The balance remaining shall be divided equally between the parties subject to the adjustments below.
(d)Division and adjustments:
From Mr Deans’ share, he is to pay to Ms Stephens the following:
(i)Pursuant to s 18B, the sum of $50,700 adjustment for her care of the children, calculated from the date of separation to the date of hearing at 507 weeks at $100 pw.
(ii)$6,235 for a half share of the motor vehicle.
(iii)$29,769 for his share of the mortgage reduction on [the property] plus half of any decrease in the mortgage outstanding as at settlement.
(iv)Half the rates, insurance and mortgage excluding capital reduction (from September 2019 to December 2022) as calculated and agreed on by the parties.
19 At [100].
20 At [102].
(e)From Ms Stephens’ share she is to pay the following to Mr Deans:
(i)on account of occupation rent on [the property], at the rate of
$430 per week for 167 weeks being $35,905 ($71,000 divided by half).
(f)The parties are to retain as their sole and separate property all other assets in their possession.
Law on appeal
[24] Appeals from decisions of the Family Court under the Act operate by way of rehearing.21 The High Court Rules 2016 and ss 126 to 130 of the District Court Act 2016 apply. Section 128 of the District Court Act provides:
128 Powers of High Court on appeal
(1)The High Court may, after hearing an appeal, –
(a)make any decision it thinks should have been made:
(b)direct the District Court –
(i)to rehear the proceeding; or
(ii)to consider or determine, whether for the first time or again, any matters the High Court directs; or
(iii)to enter judgment for a specified party to the proceeding:
(c)make any further or other orders the High Court thinks fit:
(d)make an order as to costs.
(2)The High Court must state its reasons for giving a direction under subsection (1)(b).
(3)The High Court may give the District Court any direction it thinks fit relating to –
(a)rehearing the proceeding; or
(b)considering and determining any particular matter.
[25] The Judge’s decisions under ss 13, 18B, 20E, 26, 26A and 33(3)(d) are all discretionary. To succeed on appeal against an exercise of a discretion, the appellant must demonstrate that the Judge took account of an irrelevant consideration, failed to
21 District Court Act 2016, s 127.
take account of a relevant consideration, made an error of law, or principle or was plainly wrong.22
[26] In this case, apart from on the issue of certain s 18B contributions, I agree with the Judge’s conclusions.
Submissions
Ms Stephens’ submissions
[27] Ms Stephens submits that in assessing whether there are extraordinary circumstances for the purposes of s 13, the Judge failed to give proper consideration to the circumstances relating to the parties’ acquisition of the property, namely:
(a)Her relationship to the Trust, without which the parties would not have been able to purchase the property.
(b)The Trust’s guaranteeing of the loan obtained by the parties from the mortgagor to purchase the property.
(c)The Trust’s advancement of the balance of the purchase price to the parties to purchase the property.
(d)That the property was purchased at council valuation, which was below market.
[28] She also submits the Judge failed to properly weigh the fact that there was “extreme abuse in the relationship” that resulted in the separation.
[29] As to the determination of compensation payable under s 18B, Ms Stephens submits the Judge adopted a narrow view of her contributions and particularly to the care of their child. She says the Judge said that this was not an arithmetic exercise but went on to adopt a figure of $100 per week.
22 May v May (1982) 1 NZFLR 165 (CA) at 169–170, affirmed in Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].
[30] She also submits the Judge erred in making factual findings regarding the weekly rental value of the property. She says the estimate of $430 was made on the assumption that the property “is in rentable condition” but that the Judge found the house was “unconsented and of average quality” and the evidence of a builder was that the house had no insulation.
[31] On the issue of the postponement of the vesting of property under ss 26A and 33(3)(d), she says the Judge failed to consider the needs of her and her child. She says that her standard of living has decreased as a result of these proceedings and that this is impacting the parties’ child. Ms Stephens now relies on food grants. She says the Judge failed to consider that the child has a vested interest in the property as a third party and that if their child decides to go to university, she will bear the sole responsibility for his needs until their child is at least 25 years’ old.
[32] Last, Ms Stephens submits the Judge made errors with regards the balance relationship property. Those are:
(a)The Judge erred in calculating the half value of the car. She submits that the half value is $6,495 rather than the $6,235 as set by the Judge.
(b)The Judge failed to have proper regard to the evidence of Mr Deans’ alleged drug use. She says the $11,000 cash withdrawal was to fund that purpose and Mr Deans’ share of the relationship property should be reduced to reflect this.
Mr Deans’ submissions
[33]Mr Deans appeals the Judge’s decision that:
(a)The $136,440 loan from the Trust is valid and deductible from the proceeds of sale.
(b)Mr Deans is to pay half the rates, insurance and mortgage excluding capital reduction from September 2019 to the date of settlement.
(c)A factual finding that Mr Deans did not pay $20,000 to stop the mortgagee sale of the family home in 2010.
[34] Mr Deans submits that the Trust debt is statute barred by the Limitation Act 2010 so should not be characterised as repayable. He submits that it would be inequitable for his share to be reduced by half the face value of the loan which has not been called up.
[35] As to the rates, insurance and mortgage, Mr Deans submits it was wrong in fact and at law for him to be liable for those amounts under s 18B. He submits that this amounts to “double dipping” and that compensation for his non-occupation of the property should be assessed on an interest on capital basis at $104,043.74, rather than the
$35,905 of occupation rent allowed by the Judge.
Leave to adduce new evidence
[36]Attached to Ms Stephens’ second amended notice of appeal, she seeks to admit:
(a)Bank statements and financial spreadsheets demonstrating withdrawals by Mr Deans from the parties’ shared accounts.
(b)Documents showing the mortgage payments made while the parties lived at the property together.
(c)A letter from ASB saying there was no formal mortgagee sale of the property but that a payment arrangement had been made three weeks prior to Ms Stephens’ father’s death.
(d)A letter from ANZ offering Ms Stephens life insurance.
(e)A letter from the Consulate General of Ireland detailing the rights of New Zealand citizens accompanying a spouse with an Irish passport.
(f)An affidavit from Jan Stephens stating that Ms Stephens and Mr Deans resided at her address until April 2011, meaning they only lived at the house the subject of the relationship property orders for less than two years.
(g)A copy of a text message from the mother of Mr Deans’ first child about the nature of Mr Deans’ relationship with that child.
[37] By application dated 1 March 2024, Ms Stephens also seeks to admit a copy of her late father’s will and a copy of the Auckland Council Rates Assessments on the property. She submits that it was her intention to file these in the Family Court proceeding but that the evidence had been misplaced in the process of collating her materials.
[38] Under r 20.16 of the High Court Rules, a party to an appeal may admit further evidence only with leave of the Court. Admission of evidence on appeal requires special reasons.23 At the outset of the hearing Ms Bennett advised that the admission of the new material was unopposed, so argument proceeded on that basis. I grant leave for its admission accordingly. However, I have not been particularly assisted by most of the new material. In one aspect (the cash withdrawals analysis) I decline to draw the inference Ms Stephens seeks me to draw because Mr Deans was not questioned on the material at the hearing.
[39]I turn now to the substantive appeal.
Discussion
Section 13 — extraordinary circumstances?
[40] I agree with the Judge that the matters raised by Ms Stephens do not meet the threshold justifying displacing the presumption of equal distribution of relationship property.
[41] The threshold of extraordinary circumstances is high.24 It requires a comparison of the circumstances of the case with those of ordinary cases. If such circumstances are extraordinary, the Judge must consider whether it would be “repugnant to justice” to uphold the presumption of equal sharing.25 Many marriages involve unequal
23 High Court Rules 2016, r 20.16(3).
24 Kauwhata v Kauwhata [2000] NZFLR 755 (HC) at [30].
25 At [30].
contributions (financial and non-financial) and therefore the assessment of whether the facts are “extraordinary” must be approached in the “awareness that Parliament has assessed, as a matter of public policy, that most inequalities of contribution” are neither extraordinary or repugnant to justice.26
Acquisition of property
[42] The Judge held that the way in which the parties acquired the property, on its own, was not a factor that meets the high threshold for a finding of extraordinary circumstances.27
[43] It is undisputed that the parties were only able to purchase the property because of Ms Stephens’ connection to the Trust. However, I agree with the Judge that this does not render the circumstances extraordinary. 28 While familial assistance may in some cases be relevant to the s 13 assessment, the facts present here represent a fairly commonplace arrangement for first home buyers in New Zealand. Such cannot be said to be extraordinary.
[44] Ms Stephens said the Judge did not take account of the fact that the property had become her inheritance prior to being purchased by the parties after her father’s death.29 Ms Stephens referred me to her father’s will, which she said supported that she had inherited the property. The will was one of the documents adduced on appeal.
[45] The first point to make here is that if Ms Stephens herself had inherited the property (presumably somehow also taking on its debt) it would now be relationship property in any event, given that it was then used as the family home30 for just short of two years with the parties also using their joint funds to renovate it. Accordingly, the issue whether Ms Stephens did, or would have otherwise, inherited the property is of no great moment.
26 At [43].
27 At [26].
28 At [24].
29 She points to [6] of the decision the wording of which might suggests shows the Judge thought the property had been acquired by the parties while Mr Stephens was still alive, although it seems unlikely the Judge was in error about that.
30 Property (Relationships) Act, s 8(1)(a) and s 10(4).
[46] In any event, the will does not demonstrate that Ms Stephens inherited the property. It did not purport to deal with the property at all, which had been owned by the Trust for several years. On the death of Mr Stephens, the sole trustee was Ms Stephens’ father’s solicitors’ trustee company.31
[47] Ms Stephens says Mr Deans pressured her into transferring her inheritance to him. This seems to be asserted misconduct which would need to be viewed in terms of the requirements of s 18A for it to be taken into account. Putting that to one side, even viewing this assertion in substantive, not technical, terms, I do not consider that this assertion is made out on the evidence. Mr Deans had a greater income than Ms Stephens, albeit from ACC. Ms Bennett fairly submits that it is through his borrowing ability that the property was able to be retained rather than end up in a forced sale.
[48] In that context, Ms Stephens was critical of the Judge’s reference to the sale to the parties being necessary to avoid a mortgagee sale.32 However, Ms Stephens’ own affidavit evidence was that the bank was taking steps to arrange a mortgagee sale. Correspondence from the bank in October 201033 (prior to Mr Stephens’ death) demonstrates that the bank had required an unconditional sale by the end of September 2011 but were prepared to extend this to no later than 31 January 2011 in light of Mr Stephens’ poor health. The bank refers to having been in ongoing discussions with Mr Stephens since February 2010 regarding his financial position with the property placed on the market in July 2010.
[49] The Trust did not put up money to refinance the property or service current borrowings. It was suggested by Ms Stephens in the Family Court that her mother and brother could have provided funds so that she could have acquired the property herself but there was not sufficient evidence to support this. There is no evidence that the Trust had other income from which a forced sale could be avoided in due course, unless the property was sold to the parties or to a third party.
31 Ms Stephens’ evidence was that she subsequently became a trustee of the Trust in 2011. She was always a beneficiary. The trust deed itself was not before the Court.
32 District Court judgment, above n 3, at [6].
33 Adduced on appeal.
[50] Ms Stephens no doubt now regrets that they acquired the property rather than it remaining a Trust asset. However, in all the circumstances above I do not consider the Judge was wrong, let alone plainly wrong, to reject that s 13 was engaged.
[51] Ms Stephens also contends that the Judge was wrong to reject her claim that the property was sold to the parties under market price. As the Judge set out, correspondence from the Trustee at the time of the sale recorded that it was happy to sell the property at market price. This made clear that the trustee understood the need to hold the equity in the property for all the beneficiaries. The property was sold at its council valuation of
$360,000 but there is nothing to suggest that this was below its market value and/or other than a good proxy for this. There was no alternate evidence of value. Mr Deans says the Trust had recently endeavoured to sell the property and had obtained no higher offer. The bank correspondence adduced on appeal confirms that the property had been placed on the market in July 2010, with no unconditional offer presented to the bank as at 14 October 2010.
[52] All of the above goes to the facts on s 13. However, even if I were satisfied that the facts were different to those found by the Judge, I agree with her assessment that the matters relied upon do not meet the high threshold for a finding of extraordinary circumstances that make it repugnant to justice that there be equal sharing.
Relative brevity
[53] Ms Stephens argues that the parties only lived in the property for one week less than two years before separating and adduces evidence demonstrating this was so. She relies upon this as a further ground for establishing extraordinary circumstances. The parties lived with Ms Stephens’ mother while the property was being renovated after they purchased it.34
[54] The new evidence does not assist Ms Stephens. The relationship itself was not one of short duration. It was at least eight years long. The property was acquired to be their family home in 2010 and occupied as the family home for the last two of those
34 Ms Stephens refers me to the Judge having commented at [20] that the parties purchased the property about three years prior to their marriage. This statement was correct.
years. I do not consider the fact that it was occupied for only around two years of the relationship engages s 13.
Contribution to mortgage during the relationship
[55] Ms Stephens is critical that the Judge relied on a loan statement for the Trust, not the parties, when she recorded that the parties both contributed to the mortgage and outgoings from settlement until separation.35 This was a mistaken reference, but nothing turns on this. Ms Stephens accepts that payments were being made by the parties over this period. She says that mortgage payments that Mr Deans made were contributed from ACC payments not “from his own hard-earned money” but that is irrelevant.
Misconduct
[56] Ms Stephens submits that the Family Court erred in failing to properly consider the misconduct that she says occurred during the relationship. She refers to abuse and use of relationship property on drugs and on acquiring a car.
[57] The Supreme Court has made clear that negative conduct cannot affect a party’s share of relationship property unless the conditions of s 18A are met.36 That is, the conduct is so gross and palpable and must have significantly affected the extent or value of the relationship property.37 Even then, qualifying misconduct is only permissibly taken into account when determining the relative contribution to the parties when assessing whether one of the exceptions to equal division applies or when the Court is exercising the powers referred to in s 18A(2)(b).38
[58] In deference to Ms Stephens’ arguments, I address the factual issues she raises. Around or shortly after separation, Ms Stephens obtained a protection order. In large part the orders seem to have been acquired based on text messages and harassment. There is also some evidence of physical violence around the end of the relationship. As the Judge found, there is no evidence that family violence was a feature or formed part of the fabric of the relationship or that it affected the value or extent of their property as
35 At [24]. The statement referred to was for a period when the Trust owned the property.
36 Scott v Williams [2017] NZSC 185, [2018] 1 NZLR 507.
37 Property (Relationships) Act, s 18A(3).
38 J v J (2005) 25 FRNZ 1 (CA).
prescribed by s 18A(3). The Judge was right to reject the contention that this was qualifying misconduct, let alone that it had an impact on the extent or value of relationship property.
[59] On appeal, Ms Stephens characterises the misconduct as additionally “financial abuse as a form of domestic abuse and family violence”. It is asserted that Mr Deans “stole money” from Ms Stephens and “forced her to agree to sell or sign over her inheritance”. The latter relies on the same facts underlying acquisition of the house. I have already addressed and rejected this above.
[60]The allegations of “stealing” are that:
(a)Mr Deans deliberately drew down as much borrowing as possible against the property and left the relationship once he achieved this.
(b)Mr Deans was concealing using the couple’s relationship property to buy illegal drugs by using cash.
[61] In August 2012, further funds were drawn down against the house. Some of this was used by Mr Deans to buy a car. As noted above, Mr Deans took the car at separation. Ms Stephens was left with the mortgage repayments funding the loan after separation.
[62] Ms Stephens took me to inconsistencies between Mr Deans’ evidence and the documentary record about the date and price of purchase of the car, the make-up of the price of the car and what happened to it after separation. These matters were also explored with Mr Deans in cross-examination. The Family Court found Mr Deans’ evidence neither plausible nor credible on that issue.39 The Judge also accepted that Ms Stephens was meeting the loan repayments relating to the car after separation given that the loan was drawn down on the mortgage. These matters are not directed at misconduct during the relationship which is what s 18A is concerned with.
[63] The Judge dealt with these issues by valuing the car as at the date of separation at its acquisition price and crediting Ms Stephens with half of this value. Accordingly,
39 District Court judgment, above n 3, at [94]–[98].
what happened to the car after separation became Mr Deans’ problem. There is no issue to consider based on misconduct within s 18A. Any issue regarding post-separation loan repayments is a matter for s 18B. This is a separate ground of appeal that I return to below.
[64] On the more general proposition that Ms Stephens makes regarding loan advances against the property, it was not put to Mr Deans in the Family Court that he was deliberately drawing down further loan funds with a view to then leaving the relationship. I do not have sufficient basis to conclude that this occurred.
[65] Second, Ms Stephens contends that Mr Deans used $11,000 of cash for drug use. There was evidence in the Family Court of an additional draw down of just under $12,000 in December 2012, just a few months before separation. A sum of $11,000 of this was taken out in cash that the parties had in an envelope. Ms Stephens says Mr Deans used this on drugs. The Judge said she was suspicious about this, but there was not sufficient evidence for her to conclude on the balance of probabilities that the funds were appropriated for his personal/drug use.40
[66] Ms Stephens demonstrated to me by referring to an invoice that this money could not have been used on a $2,000 septic tank purchase that Mr Deans referred to as the timing did not match. She also said that I should reject Mr Deans’ submission that the remainder was used for renovations on the property as those renovations had mainly been completed by then. However, Ms Stephens’ own affidavit evidence had been that the envelope money was intended to be used on the property. This was the purpose of the loan. And it does appear that there were works after the initial renovations such as earthworks/gravel works also on the property.
[67] Mr Deans was tested on the application of the envelope funds in cross- examination and he emphatically denied that he took the $11,000 for his own means. I do not consider the Judge was wrong in her conclusion on this. I do not consider that the evidence Ms Stephens took me to as to whether or not Mr Deans was prepared to take a hair follicle test the following year in the context of Care of Children Act proceedings has sufficient relevance to that enquiry.
40 At [100].
[68] The third aspect relates to other cash funds Ms Stephens asserted Mr Deans used to buy drugs over the period of November 2010 to December 2013. On appeal, Ms Stephens adduced the parties’ bank account records for relevant periods. She pointed to cash withdrawals by Mr Deans. She also referred me to Mr Deans’ Eftpos transactions at retailers and asked me to infer that cash was a component of these. She further asked me to infer that Mr Deans used the cash from both these sources to fund the purchase of drugs. Mr Deans’ counsel maintained that these funds were not used for drug use and cash funds were used for proper purposes. While Mr Deans did not oppose this material being adduced on appeal, I am not prepared to infer that the various transactions identified by Ms Stephens involve cash being taken to buy drugs when the documents relied upon have not been put to Mr Deans in cross-examination.
[69] As to the unequal contributions to childcare and the property post-separation, I agree with the Judge that those factors are not relevant to the s 13 assessment. Compensation for post-separation contributions is appropriately addressed through s 18B.
[70] In summary, the Judge was right to determine that s 13 was not engaged. This ground of appeal fails.
Cross appeal — $20,000 used to prevent mortgagee sale
[71] Given my conclusion that s 13 is not engaged, strictly I do not need to address Mr Deans’ submission in response to Ms Stephens’ case on the house acquisition that he paid $20,000 to stop a mortgagee sale and the impact that may have had on whether extraordinary circumstances are present.
[72] However, it was a ground of cross appeal, so I deal with it briefly. The Judge found insufficient evidence supporting this. She referred to a contemporaneous settlement statement from the Trust’s solicitors showing payments of only around $5,000 were made.41
41 At [11] and [21].
[73] The Judge was correct to conclude there was insufficient evidence. In 2013, Mr Deans himself recorded that the figure had been $5,000, not $20,000 as he now contends. Documents that Ms Bennett referred me to on appeal only go to confirm the Judge’s findings that the Trust’s mortgage debt to the bank was cleared by funds the parties borrowed from the bank, leaving them $14,790.46 for their own use out of the
$235,000 borrowed. In any event, I agree with the Judge that even if Mr Deans’ assertion was established, it is not a factor that is determinative or persuasive for a s 13 claim.
$136,440 loan
[74] The Judge concluded that the loan of $136,440 was valid and owing. She found that this is a relationship property debt properly deductible from the proceeds of sale.
[75] On behalf of Mr Deans, Ms Bennett submitted that recovery of the loan by the Trust is barred by limitation. She says it is inequitable to have his share of equity reduced by half of the face value of the loan which has not, and may never be, called up. Mr Deans says that Ms Stephens is now a trustee and beneficiary of the Trust and it is not in her interests to have to pay half the loan. It is said that the effect on her is neutral whereas to Mr Deans it is a significant reduction in equity.
[76] The loan deed was signed on 10 December 2010 and the provisions of the Limitation Act 1950 therefore apply.42 That Act prevents any action upon a deed after the expiration of 12 years from the date on which a cause of action accrues.43 The deed here does not stipulate a date of payment. Instead, cl 2 provides that the borrowers may repay the debt in whole or in part at any time. Where, as here, a contract of a loan is silent about repayment, the right to repayment and commencement of time for limitation purposes starts at the time the money is advanced.44 However where there is a subsequent demand by the creditor, part repayment and/or acknowledgement of indebtedness by the borrower, the limitation period starts running afresh from the date of that event.
[77] The 12-year limitation period began on 10 December 2010 at the time of the advance. The limitation period had not expired at the date of the hearing on 8 and
42 Limitation Act 2010, s 59.
43 Limitation Act 1950, s 4(2).
44 DFC New Zealand Ltd v McKenzie [1993] 2 NZLR 576 (HC).
9 December 2022. The limitation period has expired now unless there has been an acknowledgement of the debt, after which time would start running afresh under the Limitation Act 2010.45
[78] The question is whether any of this impacts on whether the debt owed to the Trust is a relationship debt within the Act that is deducted from the parties’ relationship assets for the purposes of a division of their property. I do not consider that it does. Statutory limitations bar the remedy not the right.46 Even where the Limitation Act operates to bar a remedy, a “debt” still exists.47 In the context of the definition of “debt” in the Act, I do not accept that this should be interpreted as “a debt enforceable by action.” It is a debt that can be deducted from relationship property under s 20D.
[79] To the extent that such a conclusion relies upon the particular facts of a given case as to whether the debtor would in fact pay the debt if called upon, the evidence from Mr Deans is compelling on this point. In answer to questions in cross-examination, he acknowledged the existence of the debt, acknowledged that the debt was owing, and also confirmed that if called upon there is no dispute that the monies should be repaid to the Trust.48 Ms Stephens also acknowledged that there is a debt back to the Trust in her evidence. Accordingly, this is not a case where there is evidence of an intention not to repay.
[80] I agree with the Judge that the loan from the Trust is a relationship debt. She was correct to order that this sum be deducted from the proceeds of sale of the property.
Section 18B — contributions after the relationship
Overview
[81] Under s 18B the Judge has a wide discretion to compensate a spouse or partner for contributions they have made from separation date to the date of hearing. The provision is not a mechanism to punish. Nor is it a substitute for compensating
45 Able Ventures Ltd v Bolton [2022] NZHC 1957 at [37].
46 Securities Commission v Midavia Rail Investments BVBA [2006] 2 NZLR 207 (HC) at [31] and [139].
47 Keller v Pittwood (2002) 22 FRNZ 372 (FC) and see Bill Atkin (ed) Fisher on Relationship Property (NZ) (online ed, LexisNexis) at [15.15].
48 Because this was not an acknowledgement in writing to the Trust, it would not set time running again: Limitation Act 2010, s 47(1).
inadequacy in any maintenance payments that have been made. The overriding consideration is whether an award under the section is just, applied on a fact-specific basis.49
[82] The overall position here is that Ms Stephens has been left with the burden of meeting all mortgage payments, rates, insurance and maintenance on the property since separation and has had the full-time care of their child, with no assistance at all from Mr Deans. However, she has had the occupation of their property, which means Mr Deans has needed to pay for accommodation elsewhere and has not had income from the property.50 That has allowed Ms Stephens to provide a stable home for their child. Ms Stephens demonstrated that at separation, there was negative equity in the property. It is the increase in property prices since separation that has led to Mr Deans now having equity tied up in the asset.
[83] Neither party has ever been in a strong financial position. Mr Deans has had income from ACC, currently some $72,000 per annum, with Ms Stephens earning very little annually from her beauty therapy business and otherwise on domestic support.
Assessment of compensation for childcare under s 18B
[84] The Judge allowed Ms Stephens’ claim for compensation under s 18B for sole care of the parties’ child. The Judge said the amount of compensation was not an “arithmetical exercise” and that compensation to a parent under s 18B was to reflect that the burden of raising a child has fallen on only one of the parties.51 In line with the quantum awarded in Li v Wu, the Judge considered $100 per week an appropriate quantum of compensation.52
[85] Ms Stephens submitted that the Judge was inconsistent in concluding that the exercise was not arithmetic yet going on to award $100 per week. There is nothing in this. Obviously, the compensation has to be quantified. The Judge was simply conveying
49 IAT v SJG [2013] NZHC 2976 at [45]; and Chong v Speller [2005] NZFLR 400 (HC) at [21].
50 Ms Stephens was critical of the lack of supporting documents for Mr Deans’ claim to have been paying rent elsewhere or detriment from being deprived the capital from the property. However, he deposed to paying rental, most recently at $230 per week where he is living in Dannevirke.
51 District Court judgment, above n 3, at [65].
52 At [66] citing Li v Wu [2019] NZHC 2461 at [155]–[157].
that it is not based on a precise cost calculation and needs to be broad brush. I do not consider the Judge was wrong in her conclusion on contributions to recognise Ms Stephens having full care and responsibility over the parties’ child. The Judge made an assessment of $100 per week after thoroughly considering the applicable legal principles and the parties’ circumstances. The award adopted was consistent with an analogous case. That was a matter in her discretion. In any event, there is no error.
Occupation rent and costs relating to the property
[86]Both parties take issue with the occupation rent awarded by the Judge.
[87] As set out above, s 18B of the Act enables the Court to make adjustments for contributions made by a party after separation. To compensate the non-occupying party for retaining use of the capital in the property and/or for forgoing income from it, the Court may order either a payment of “occupation rent” or an award of interest on the non-occupying party’s capital. Which basis to adopt is a matter of judicial discretion.53 In some cases, where the occupying spouse has been paying all expenses associated with the property, the Court has taken those expenses as a fair proxy for occupation rent.54
[88] Here, Mr Deans claimed occupation rent only from 2019, not from separation. In setting an occupation rent the Judge relied on a Ray White email dated 24 July 2020 that assessed market rent for the property in 2013 at $325 per week, a 2020 rental of $430 per week and expressed the view that an appropriate average rental for the first seven years post separation would be $375 per week. The Judge chose the upper figure of $430 per week for the full 167 weeks between 26 September 2019 and the date of hearing, having regard to what she described as a “significant concession” by Mr Deans in giving Ms Stephens a six-year grace period to September 2019 for which no occupation rent was claimed.55 The occupation rent for that period amounted to $71,810, 50 per cent of which was $35,905.
[89] The Judge held that this amount must be offset to reimburse Ms Stephens for half of her payment of rates, mortgage, maintenance and insurance for the home over that
53 At [38].
54 See, for example, Sutton v Bell [2020] NZHC 1557; and WL v AJ [2023] NZHC 703.
55 District Court judgment, above n 3, at [61].
period and a further amount (to be calculated at settlement) to reimburse Ms Stephens for half the capital repayments she made on the property.56 No reimbursement was awarded to Ms Stephens for expenses she paid on the property prior to 2019. While Mr Deans had not sought occupation rent for this period, the Judge considered these costs should be viewed as the equivalent of fair rental for that period.
[90] Ms Bennett invited me to conclude that the Judge ought to have made an order of interest on capital rather than calculate an occupation rent for the period from 2019. This alternative basis was not advanced at the hearing. The inputs Ms Bennett used in her workings on this (for example the interest rate adopted) did not have appropriate evidential basis. In any event, in my view the Judge was not plainly wrong to adopt occupation rent rather than an interest calculation here.57
[91] Ms Bennett also submitted that to require Mr Deans to pay a share of mortgage interest, rates and insurance offsets the award paid to him on account of occupation rent. She characterised this as “double dipping”. There is no substance in this point. On the approach taken by the Judge, both parties share equally in payment of the overheads of the property post-separation in the period from 2019 to the hearing and both share equally in the notional income from it for that period (occupation rent). 58 This approach does not impose a double deduction on Mr Deans. It correctly requires him to contribute to the overheads on the property that would be needed to earn net income from it. Notably the usual approach to coming to occupation rent is to take the notional market rent for the property and deduct the expenses incurred on it before a party’s half share is calculated.59 The approach the Judge took is equivalent in effect.
[92] There is more merit in Ms Stephens’ appeal that occupation rent was set too high, and her complaint that she has not been adequately compensated for her contributions to relationship property.
56 At [62].
57 See the discussion in Griffiths v Griffiths [2012] NZFLR 327 (HC) at [38] quoting S v B [2010] NZFLR 1045 (FC) at [15]. See also E v G HC Wellington CIV-2005-485-1895, 18 May 2006.
58 Griffiths v Griffiths, above n 57, at [39].
59 E v G, above n 57, at [27].
[93] First, as noted earlier, the Judge limited the extent to which Ms Stephens could recover her costs (excluding capital reduction on the mortgage) to those incurred after 2019 on the basis that the expenses prior to that date would be equivalent to fair rental and in light of Mr Deans’ concession in not seeking occupation rent prior to September 2019. However, the Judge had also adopted a higher market rent of $430 per week for the period since 2019 in recognition of this same concession. In my view, the “concession” was substantively wiped out by requiring Ms Stephens to bear all expenses in the period up to September 2019. The effect was that there was no recognition of any period of grace following separation that it would be appropriate for Ms Stephens not to pay occupation rent to give stability to their child, notwithstanding that Mr Deans himself had recognised a 6-year concession.
[94] Second, at least at around separation, there was little equity in the property. Ms Stephens’ efforts in staying in the property with the couple’s child and meeting the full interest payments on the parties’ mortgage facilitated the subsequent capital gains on the property. In my view it is fair to say that this contribution was not only financial, given the stresses involved for Ms Stephens in meeting all of these overheads without assistance.
[95] Third, Ms Stephens submitted that the occupation rent adopted was too high because of the condition of the house on the property. She said it would not meet healthy homes standards and is unrentable for that reason. She noted that the evidence from the Ray White agent tendered by Mr Deans was on the assumption that the property was in tenantable condition. The healthy homes standards would apply to a new or renewed tenancy after July 2021. The evidence before the Family Court demonstrated that the property would not comply, at least, due to lack of insulation. The property could not achieve the market rental of $430 per week adopted by the Judge and assumed by Ray White without work on the property.
[96] Factoring in a discount to market rent due to what would be required if there was a new tenancy is artificial given that the intention of occupation rent is to compensate for the current parties’ occupation or otherwise of the property. The artificiality is compounded given that the weekly figure adopted by the Judge was adopted other than based on a straight market assessment due to her allowance for Mr Deans’ “concession”.
Nonetheless, Ms Stephens makes a fair point that the living conditions were substandard. This was not taken into account. For these reasons I agree that occupation rent at $430 per week was excessive.
[97] In my view, because of the factors above, the Judge’s assessment of the s 18B contributions favoured Mr Deans. The issue is then where that leaves the assessment of contributions relating to use of the property and expenses paid on it. An assessment of occupation rent or other method of compensation for a non-occupying spouse being out of the property is intended to produce a “just” figure for compensation of the contribution/s in issue. An overly analytical or precise approach will not be appropriate. I do not disturb the Judge’s decision not to award occupation rent or recoverability of expenses pre-2019. Instead, I substitute occupation rent at a rate of $325 per week from 2019. This amounts to $54,275. Mr Deans is entitled to 50 per cent, or $27,137.
[98] Both parties will not share equally in the expenses on the property since separation. However, I accept Ms Stephens’ submission that the Judge ought to have taken into account the heavy burden on Ms Stephens of having to meet all these expenses on her own in the period following separation. In substance this enabled the capital gain and the equity produced.60 I allow a further $15,000 to reflect this contribution by Ms Stephens which I consider is necessary to achieve a just division of property.
Orders as to vesting under s 26, s 26A and s 33(3)(d)
[99] As set out earlier, s 26 permits the Court to settle any part of the relationship property for the benefit of the children of a marriage if it considers it just to do so. I agree with the Judge that such an action is not appropriate in this case. The principal purpose of the Act is, in terms of s 1M, “to provide for a just division of the relationship property between the spouses or partners”. The “interests of any minor or dependent children” in s 26(1) means not that the children have any proprietary interest in the relationship property, but rather concerns the welfare of the children in light of the property division and the concern for the financial protection of the children during
60 Compare Bennington v Bennington [2010] NZFLR 695 (FC) and Re Little [1991] 1 NZLR 135 (CA) at 137.
minority or dependency.61 It is wrong to use s 26 to anticipate succession.62 Such an order is usually not required if the Court is satisfied that a parent intends to fulfil their obligation to provide for the interests of the minor or dependent child.63
[100] In this case there is no indication that the parties’ child’s needs will not be satisfied unless an order is made. Further, vesting of Mr Deans’ share for the benefit of the child also unduly ties the hands of Mr Deans who should be free to use his portion of relationship property in furtherance of the clean break principle after such a long period post separation.64 The Judge was not wrong to dismiss Ms Stephens’ application for such an order.
[101] As to applications for orders postponing vesting of property of under ss 26A and 33(3)(d), the Judge noted that Ms Stephens had the benefit of sole occupation of the house since 2013 and that the postponement was effectively seeking a further five-year occupation.65 The Judge determined that, having regard to the clean break principle underpinning the Act, it was not appropriate to postpone immediate vesting. While the Judge acknowledged that sale of the property would involve upheaval for Ms Stephens, that had to be “weighed up against the interests of the other party whose access to his share of capital has already been deferred 10 years to date”.66
[102] I acknowledge that selling the property will be difficult for Ms Stephens, given her emotional connection to the property. However, sale of a property being an “emotional wrench” has consistently been held by the courts not to constitute undue hardship.67 Further, although Ms Stephens does bear the full burden of childcare responsibilities and is likely to do so for some time, the appropriate avenue for Ms Stephens to be compensated for this is through child support payments, rather than postponement of vesting. The threshold of undue hardship is high.68 I agree with the Judge that such threshold is not met.
61 Rhodes v Rhodes (No 2) (1979) 2 MPC 160 at 161.
62 R v R [1998] NZFLR 611 (FC) at 622.
63 Babylon v Babylon (2009) 2 NZTR 19-016 (HC) at [83(b)].
64 BJR v VMR (Economic Disparity) [2007] NZFLR 177 (FC).
65 At [85].
66 At [87].
67 De Malmanche v de Malmanche [2002] 2 NZLR 838 (HC); S v W HC Auckland CIV-2008-404-4494, 27 February 2009; and Prakash v Gupta [2024] NZHC 684.
68 Hammond v Hardy [2007] NZFLR 910 (HC) at [114].
[103] I note here, echoing comments made by the Supreme Court declining to exercise s 26A in Sutton v Bell,69 that Ms Stephens and Mr Deans have been apart for more than 10 years. The adjustment to the situation caused by separation is not new, sudden nor unexpected. Neither party is in a strong financial position. Both parties will benefit from the application of the clean break principle and finality to their relationship property dispute.
[104] Ms Stephens presented an impassioned case for orders that would enable her and the parties’ child to remain in the property. I have full sympathy with her reasons for seeking that outcome. However, the Judge was correct to come to the conclusion that she did on deferring vesting and/or vesting property on the parties’ child.
Compensation under s 20E
[105] Ms Stephens submitted that the Judge failed to properly consider that Mr Deans used relationship property to make payments of child support to his child from a previous relationship, and an adjustment should be made under s 20E of the Act. This provides for adjustment when a personal debt has been met out of relationship property. This issue was raised for the first time in closing submissions. In those circumstances, the Judge was correct to conclude that Mr Deans had not had proper opportunity to respond to the claim, nor was there sufficient evidence to make determination.70
Balance relationship property
[106] The balance relationship property constitutes Mr Deans’ car and the $11,000 cash withdrawal.
[107] The car was valued at $12,990. I accept Ms Stephens’ submission that the Judge erred in calculating half of that figure as $6,235, when in fact half of $12,990 is $6,495. Although a virtually de minimis amount, I will make an adjustment for this error.
[108] As to the cash withdrawal, as I noted earlier, I agree with the Judge that there is insufficient evidence to be satisfied that the $11,000 was appropriated by Mr Deans for
69 Sutton v Bell [2023] NZSC 65, [2023] 1 NZLR 150 at [112].
70 District Court judgment, above n 3, at [93].
personal purposes. Ms Stephens did not adduce any evidence to support this claim. The Judge did not err in this regard.
Result
[109] The appeal is allowed to the extent that I substitute orders (d)(ii)–(iv) and (e) of the order set out at [102] of the decision and add a new (d)(v) as follows:
(d)(ii) $6,495 for a half share of the motor vehicle.
(iii)$29,769 for his share of the mortgage reduction on [the property] plus half of any decrease in the mortgage outstanding as at settlement.
(iv)Half the rates, insurance and mortgage excluding capital reduction (from September 2019 to December 2022) as calculated and agreed on by the parties.
(v)$15,000 for Ms Stephens’ contribution post-settlement.
(e)From Ms Stephens’ share she is to pay the following to Mr Deans:
(i) on account of occupation rent on [the property], at the rate of
$325 per week for 167 weeks being $27,137 ($54,275 divided by two).
[110] Because the appeal is being heard almost 18 months after the hearing, it seems to me to be appropriate to continue the orders in (d)(iv) and (e)(i) through to this judgment. I direct this accordingly, on the basis that the position continues to be that Ms Stephens is paying all expenses for the property. I grant leave to the parties to revert to the Family Court if there are any issues in agreeing these calculations.
[111]The cross-appeal is dismissed.
[112] Ms Stephens has been partly successful. She is self-represented. There will be no order as to costs. Subject to any fee waivers she has received, Ms Stephens is entitled to disbursements as fixed by the Registrar.
Anderson J
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