TN v AK

[2019] NZHC 2466

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1944

[2019] NZHC 2466

UNDER

the Property (Relationships) Act 1976

IN THE MATTER

of an appeal

BETWEEN

TN

First Appellant

KHN
Second Appellant

CYK
Third Appellant

AND

AK

Respondent

Hearing:

2 May 2019; further submissions 8 May 2019

Counsel:

D Zhang for appellants

NA Farrands for respondent

Judgment:

30 September 2019

Reissued:

3 October 2019 (anonymised version)

JUDGMENT OF FITZGERALD J

This judgment was delivered by me on 30 September 2019 at 3:45 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar ……………………………             Date…………………………………

Solicitors:           Amicus Law, Auckland (R Zhao)

Morrison Kent Auckland

TN v AK [2019] NZHC 2466 [30 September 2019]

CONTENTS

Introduction  [1]

Facts – overview  [4]

Family Court Judgment  [17]
Finding the Property was relationship property  [21]
Findings in relation to other relationship property  [23]
Division of relationship property  [25]

Admissibility judgment  [30]

Submissions

Submissions for TN  [35]
Submissions for AK  [45]

Approach on appeal  [54]

Did the Judge err in her credibility findings?  [59]

Is the Property held on trust for the Ns?

Introduction and legal principles  [64]

Resulting trust - discussion  [70]

Did the relationship end with AK’s affair?

Legal principles  [93]

Discussion  [95]

Has the $24,000 brought by AK to New Zealand retained its character

as her separate property?  [99]

What is a fair division under s 14A?

Legal principles  [104]

The Judge’s approach  [106]

Discussion  [107]

The resulting division of relationship property

The relationship property pool and its division  [115]

Adjustments to reflect post-separation position  [117]

Occupation rent and interest  [122]

Result and next steps  [127]

Costs  [131]

Introduction

[1]                 The appellants appeal from a decision of the Family Court.1 The Family Court Judge found that the first appellant (TN) and the respondent (AK) had been in a short term de facto relationship. She made orders dividing relationship property in accordance with her assessment of the contribution of each de facto partner to the relationship. The most valuable asset in the relationship property pool (by a significant margin) was a residential property (the Property) held jointly by TN and AK.

[2]                 The second and third appellants (TN’s parents, who I will refer to collectively as the Ns) had been joined to the Family Court proceedings as they claimed an interest in the Property. There is no dispute the Ns advanced $335,000 to TN to put towards the purchase of the Property. The Ns (and TN) said it was always intended the Ns would have an interest in the Property as a result.2 AK says she was not a party to or aware of any such intention or expectation; her position is that the $335,000 was a gift to TN to assist the young couple into their first home. The Judge held that the Ns had advanced the funds to TN by way of a gift and they therefore did not have any beneficial interest in the Property. This finding was largely based on a “gifting certificate” which Mrs N, TN’s mother, had signed as part of the documentation required for bank funding of the balance of the Property’s purchase price.

[3]                 The appellants’ (second amended) notice of appeal includes a range of points of appeal, but the argument advanced on their behalf boiled down to the following key propositions:

(a)First, the Judge erred by preferring, in a “blanket fashion,” AK’s evidence over that of TN. In short, Mr Zhang, counsel for the appellants, submits I should form my own (and different) views on the respective credibility of TN and AK.

1      [AK] v [TN] [2018] NZFC 6072 [Family Court Judgment].

2      Advanced at trial as a claim for the beneficial interest in the entire Property, but limited on appeal only to the extent of their contribution to the purchase price.

(b)Second, the Judge erred in not finding the Property, or a portion of it, was held on trust3 in favour of the Ns.

(c)Third, and in the alternative, the Judge incorrectly assessed the parties’ relative contributions to the de facto relationship – the division of relationship property between TN and AK should be 90/10 per cent in TN’s favour (rather than 75/25 in TN’s favour, as found by the Judge). As a part of this argument, Mr Zhang further submits that:

(i)The Judge erred in finding that the de facto relationship between the parties existed for approximately two and a half years.4 Rather, Mr Zhang submits that when AK had a brief affair during the relationship, it ended the relationship (which was then rekindled). On this basis, Mr Zhang says the relevant relationship was only some one and a half years in duration; and

(ii)The Judge erred in assessing the parties’ respective contributions (both monetary and non-monetary) to that relationship in any event.

(d)Finally, the order awarding AK post-separation occupation rent in an amount of $30,250 should be set aside.

Facts – overview

[4]                 TN and AK first met in New Zealand in June 2013; at the time, she lived in Malaysia and was on holiday here. TN then travelled to Malaysia several times to spend time with AK (and, as the Judge put it, to “woo” her).5 In September 2013, AK moved to New Zealand. It is clear from the contemporaneous documents (including thousands of “WeChat” messages sent between the two), that from the outset, the relationship was passionate and intense.

3      Variously described by the appellants as an express, resulting or constructive trust.

4      While a significant aspect of TN’s argument in the Family Court was that no de facto relationship existed at all, the Judge’s finding that such a relationship did exist is not challenged on appeal.

5      Family Court Judgment, above n 1, at [56].

[5]                 Once AK had moved to New Zealand, she and TN opened joint bank accounts in November 2013 and lived in several different properties together (both in rented accommodation and at TN’s brother’s house for a time).

[6]                 In around July 2014, AK had a brief affair with a co-worker. The Judge found that this did not lead to a separation between her and TN, although “did cause tension and unrest within the relationship”.6

[7]                 In late 2014 – early 2015, the parties jointly purchased the Property. The details of the purchase are of some significance. While I address them in more detail later in this judgment (when considering the Ns’ claimed interest in the Property), the following represents a brief summary.

[8]                 By late 2014, TN and AK had obtained pre-approval for a home loan. This followed TN and his sister having applied for pre-approval, though it was not clear on the evidence before the Family Court Judge whether that earlier application was ever approved.

[9]                 In December 2014, TN entered into a sale and purchase agreement for the Property. He was listed as the only “purchaser”, although AK’s contact details were included on the agreement as well. There also is no doubt Mrs N was involved in the property search in Auckland, including in relation to the Property itself.

[10]              As noted earlier, it is not in dispute that the Ns advanced $335,000 towards the Property’s purchase price. As a requirement for financing the remainder of the purchase price (by way of a bank loan taken out jointly by TN and AK), the bank required a statement from Mrs N confirming the $335,000 was advanced as a gift. She provided the following letter dated 22 December 2014:

To Whom It May Concern:

I confirm that I am giving my son (Name: [TN]) an unconditional gift of

$335,000 for him to use to buy a property. This gift is not repayable or refundable.

6 At [49].

Should you require any additional information please do not hesitate to contact me…

Regards,

Name: [Mrs N]

[11]              The Property was subsequently purchased by way of the $335,000 advanced by the Ns and a $600,000 joint loan taken out by TN and AK. The two were registered as joint owners of the Property on 9 February 2015 and moved in to live at the Property in March 2015.

[12]              As noted, the basis upon which the Ns advanced the $335,000 was the subject of considerable dispute in the Family Court. TN and his parents said the $335,000 was intended as a “family investment”, and the property ultimately purchased would be held on trust for the Ns. The appellants’ said that AK’s name was only included on the title to assist with her then application for a residency visa.

[13]              AK, on the other hand, said the Ns were willing to assist her and TN purchase their own home together, and accordingly she understood the funds were advanced to TN as a gift (or, it seems, potentially with a condition that they be repaid at some point in the future). She said she was not aware of any other arrangements between TN and his parents at the time. Despite this, however, and at least up to the time of the hearing, AK accepted a “moral” obligation to repay the Ns the $335,000 out of any sales proceeds of the Property. Her position changed at the hearing, however, because TN suggested that funds AK considered to be her separate property were in fact relationship property. Given this “attack” on her own funds, AK maintained her position that legally, the Ns did not have any beneficial interest in the Property.

[14]              Returning to the background facts, the Property has multiple bedrooms and after TN and AK moved in, a number of tenants were secured for the remaining rooms. The rent collected from the tenants was sufficient to cover mortgage payments and general outgoings. AK’s position was that, during the term of her and TN’s relationship, she oversaw the management of the tenancies and the Property generally.

[15]              Of some relevance to the orders made by the Judge is a “flexi-loan” obtained by the couple in June 2015. A $100,000 loan was obtained, from which TN and AK

purchased cars and enjoyed an overseas holiday. In evidence, TN admitted to forging AK’s signature to obtain the loan, though said he had done so with her prior approval and knowledge. AK disputed this, and said she knew nothing of the loan until after the loan funds had been advanced.

[16]              The relationship between TN and AK broke down in March 2016 and by around June 2016, AK had moved out of the Property. There is some dispute as to who retained relationship property, and in what amounts, post-separation. I return to these issues later in this judgment.

Family Court Judgment

[17]              Judge Parsons in the Family Court issued a fulsome (reserved) judgment after a three-day hearing. At first instance, TN had suggested the relationship could not properly be categorised as a de facto relationship. The Judge instead found there was a de facto relationship from September 2013 (when the two commenced living together) until the separation in March 2016; a “relationship of short duration” under the Property (Relationships) Act 1976 (the Act).7 She was critical of TN’s contention that the two had only pretended to be in a serious de facto relationship so AK could gain immigration status in New Zealand. She recorded she had found his evidence “inconsistent, evasive and at times unbelievable” – as well as at odds with much of the documentary evidence as to what had taken place.8

[18]              In particular, the Judge rejected TN’s argument the relationship ended and then rekindled following AK’s 2014 affair. Instead, on the basis of messages sent between the two at the time, she found “[w]hile there was an affair between AK and a co-worker for some weeks… the evidence is that the parties had not called off the relationship at that time but had slowed it down in terms of intensity. Nowhere is there evidence to confirm a cessation of affections or plans to be together.”9

[19]              The Judge also considered that AK had made substantial contributions to the de facto relationship, including moving to New Zealand from Malaysia to pursue a

7      Family Court Judgment, above n 1, at [92]-[93].

8      At [37]-[38].

9 At [88].

relationship with TN, jointly applying for a loan to purchase the Property, and managing the tenancy/mortgage of the Property. She had also organised and assisted with joint travel, TN’s debts, and running a household together.10 Given it would be impossible for AK to “untangle the ownership” of the Property without recourse to formal court proceedings, the Judge also considered there would be “serious injustice” if the Act did not apply.

[20]The Judge accordingly went about dividing the property pursuant to s 14A(3):

If this section applies, and the court is satisfied that the grounds specified in subsection (2) for making an order on an application under this Act are made out, the share of each de facto partner in the relationship property is to be determined in accordance with the contribution of each de facto partner to the de facto relationship.

Finding the Property was relationship property

[21]              The most significant of the Judge’s findings as to what was and was not relationship property was in relation to the Property. The Judge considered the Property was relationship property, rejecting TN’s parents’ claim they held a beneficial interest in the Property by virtue of the funds they had advanced. She accepted the parents had an expectation that the house would remain in their family. But, this had never been communicated to AK, “who proceeded on the basis that the home was purchased for the benefit of her and [TN] alone”.11

[22]              Moreover, as noted, TN’s mother had signed a document which expressly provided the funds were a gift. The Judge said:

[129]    Here the legal transaction entered into by [Mrs N] was one of express gifting of $335,000 to her son, the respondent. No contracting out agreement was ever entered into to suggest that the home once purchased would be owned by anyone other than the applicant and the respondent.

[130]    While [Mrs N] gave evidence that she did not understand what the word “gift” meant, there was evidence that she had been told that the gifting certificate was required if monies were to be provided to her son as a deposit on the home.

[131]In the absence of any sufficient evidence to the contrary, the gift of

$335,000 made by [Mrs N] to the respondent is classified as a gift. It is not a

10 At [100].

11 At [128].

gift to the applicant or the applicant and the respondent – it is clearly a gift to the respondent alone and is, as such, a financial contribution he has made to the relationship.

Findings in relation to other relationship property

[23]              The Judge also classified other property as either relationship property, or separate property held by TN and AK.12 The value of that property is extremely minor in comparison to the Property itself. The only item of note is the balance at separation of $81,000 in a bank account in AK’s name (Savings Account). At least up until the hearing, TN had not disputed that this was AK’s separate property, and thus discovery of the related bank accounts had not been given. But at the hearing, TN’s position was that if there was a finding of a de facto relationship, he would seek that the funds in AK’s Savings Account also formed part of the relationship pool of assets.

[24]              Of course, such a “conditional” position, dependent upon the outcome of the hearing, was entirely unsatisfactory. As noted, it led to there being no documentary records in evidence about the account. In the event, and in the absence of evidence to the contrary, the Judge accepted AK’s evidence that the funds in her Savings Account had been brought by her when she moved from Malaysia to New Zealand. She therefore classified these funds as AK’s separate property.

Division of relationship property

[25]              The Judge next analysed TN and AK’s respective contributions to the relationship.13 Although she acknowledged a loan from AK to TN early in their relationship, and the equal contributions the two had made to household expenses, she concluded that TN had made the bigger financial contribution. As noted in the quoted passage at [22], the Judge considered that the $335,000 was advanced (by way of gift) to only TN, so could be viewed as a “contribution” he had made to the relationship in terms of s 14A of the Act.

12     Comprising motor vehicles and sundry bank account balances. No issue is taken on appeal with the Judge’s classification of these minor items of property.

13     At [166]-[167].

[26]              Given this, the Judge was inclined to assess TN’s  financial contribution at  95 per cent to AK’s five per cent. However, she reduced this to 90 per cent on account of TN’s “gross and palpable conduct” in forging AK’s signature to get approval for the

$100,000 flexi loan, which she accepted AK did not know about or agree to prior to TN’s forgery:14

… [the flexi loan] has resulted in increased bank repayments and interest in terms of direct consequence, and is otherwise conduct that affected the net value of the relationship property by diminishing it to the extent of the flexi loan utilised, and has exposed [AK] to increased liability without her knowledge or consent…

[27]              After adjusting for non-monetary contributions (the Judge considered non- monetary contributions could be assessed at 60/40 per cent in favour of AK, but in themselves represented only 30 per cent of the total contributions to the relationship), the Judge ruled that the relationship property should be divided 75 per cent to TN and 25 per cent to AK.15

[28]              The Judge considered some adjustment was needed pursuant to s 18B of the Act, to account for the benefit TN obtained by staying at the Property between separation and the hearing, and to recognise that AK had correspondingly not had that benefit. The Judge ordered a post-separation contribution adjustment (by way of occupation rent) of $30,250 in favour of AK.16

[29]              Finally, the Judge awarded AK interest on her share of the relationship property, at a rate of three per cent.

Admissibility judgment

[30] In March 2019, Hinton J heard an application by TN to adduce further evidence on this appeal. Other than certain bank statements relating to AK’s Savings Account discussed at [23] above, Hinton J was unwilling to allow further evidence on appeal, ruling the evidence was not fresh, there were no exceptional circumstances justifying admitting it, and the evidence was far too detailed and convoluted to assist the appeal

14 At [175].

15 At [179].

16     This was calculated by reference to a sum of $250 per week in occupation rent, from the time AK left the Property to the delivery of judgment.

Court in any event.17 Evidence relating to a dispute over which party currently had possession of a necklace deemed relationship property was considered irrelevant, but also de minimis, given the extremely limited impact it would have on any orders for division.18

[31]              Hinton J also made broader comments as to the value of the appeal. She first noted that since the Family Court judgment, AK had accepted most of the funds in her Savings Account were in fact relationship property. Only $24,000 represented funds that she had brought when she moved from Malaysia to New Zealand. On that basis, AK accepted that the balance of approximately $57,000 was relationship property.19 At the time of Hinton J’s judgment, AK had already made a payment of approximately

$10,000 to TN out of her Savings Account, to reflect it contained some relationship property.

[32]              Hinton J also noted that the parties were agreed that the value of the Property was less than they had believed at the time of the Family Court hearing, being in the region of $1 million (rather than closer to $1.5 million). Given the outstanding debt secured by the Property, and assuming the Judge’s findings were otherwise upheld on appeal, Hinton J observed that these developments meant that the amount potentially outstanding to AK was modest; Hinton J estimated AK was owed no more than around

$46,000. And when that amount was measured against the value of the Property of around $1 million, Hinton J observed that given AK was due so little, “the concept of her receiving occupation rent is most unlikely to stand up”.20 She concluded as follows:

[46]      Pretty clearly, and I have no doubt the Judge would have taken the same approach based on the above figures, any post-separation adjustment would be by way of interest (not occupation rent) on the amount due to [AK] for the period (at most) between separation and now. Any other form of adjustment seems to be unjustifiable and unnecessarily complicated, plus that also disposes of the appellant's argument on appeal that he should receive an adjustment for payment of post-separation outgoings on [the Property]. All mortgage and other outgoings would remain to his account.

17 [TN] v [AK] [2019] NZHC 566 at [54], [60].

18 At [66].

19 Hinton J also noted that there may be an issue as to whether the original $24,000 had become so “intermingled” as to also have become relationship property; at [32]. See further below at [99]- [103].

20 At [45].

[47]      The appropriate interest rate may be a matter for argument, but allowing say four per cent per annum for three years, that would represent approximately $6,000, such that [AK] would be due about $52,000.

[48]      I note the point flagged by the Judge that, if [AK's] bank account were included as relationship property, her percentage contribution might need to be re-assessed, there being a further contribution “from her”. However, that seems to be based on a scenario of the bank balance still being sourced from separate property, but having converted to relationship property. That is not, however, the case. That part of the account that is now being categorised as relationship property, has been acquired during the relationship, effectively out of rental from [the Property]. That is not a contribution “from [AK]”. I do not see the corrected classification of that money altering the Judge's assessment of the parties' respective shares. Standing back, a 75/25 division seems more than fair to the respondent, and she has not cross-appealed that finding.

[33]              The Judge concluded by noting there was “only modest money at stake” and that the proceedings needed to be settled promptly.21 Despite this, however, the proceedings did not settle, and indeed occupied a further full hearing day on appeal (with extended sitting hours).

[34]              For completeness, I note that at the hearing of the appeal before me, the parties agreed with the approach taken by Hinton J to the calculation of relationship property and its division, assuming of course, that the Family Court Judge’s findings were otherwise upheld on appeal. Mr Farrands noted, however, that Hinton J’s analysis was predicated on the Property having a value of only $1 million, when that may not now be the case.22

Submissions

Submissions for TN

[35]              Mr Zhang first makes a broad point about the Judge’s credibility findings. He identifies a number of inconsistencies in AK’s evidence which he says are at odds with the Judge’s finding she was a cogent witness. He further suggests this Court should overlook TN’s evidence there was no de facto relationship – suggesting it does not undermine TN’s credibility but simply indicates his ignorance of the legal meaning of “de facto relationship”.

21 At [49].

22 At [35].

[36]              Mr Zhang’s primary legal submission is that the Property is held on trust for TN’s parents.

[37]              In both written submissions and at the hearing, Mr Zhang advanced an express trust over the entire Property in favour of the Ns. They were the settlors; they intended to purchase the Property and advanced $335,000 to TN, with an expectation of full beneficial ownership, and that the mortgage payments would be covered by rental income. AK was, in Mr Zhang’s submission, properly considered a “volunteer” to these arrangements, having introduced no funds of her own to the purchase, and despite being jointly liable for the mortgage debt, the arrangement involved no real risk to her (given the substantial equity in the Property). As such, she and TN held the Property on an express trust for his parents.

[38]              As Mr Zhang acknowledged, however, the difficulty with this argument is there is no evidence of a trust deed that might give rise to an express trust.23 Further, the Ns only contributed $335,000 to the Property, with TN and AK contributing the remaining $600,000 (by advancing the funds loaned to them by their bank). There was no agreement or understanding by at least AK that she was to hold the Property on trust for the Ns. And while TN and AK’s contribution came from bank funding, that nevertheless represents a substantial contribution to the Property’s purchase. It is therefore incorrect to suggest AK was a “volunteer” only.

[39]              Recognising these issues, in an updating memorandum filed with the Court after the appeal hearing, Mr Zhang advised that the appellants no longer pursued a claim that the whole Property was held on express trust for the Ns. Instead, Mr Zhang said the trust was limited to the $335,000 advanced by them (being a 35.8 per cent share in the Property). The basis for the trust was said to be an express trust, but also a resulting or constructive trust.

[40]              On the basis of the earlier argument that the entire Property was held on trust for the Ns, Mr Zhang advised that if the Property were on that basis removed from the relationship property pool, TN would be content with a 50/50 division of the remaining relationship property. It is unclear what division of relationship property he considers

23     See the requirements in the Property Law Act 2007, s 25.

appropriate in light of the fact the Ns now seek only a 35.8 per cent interest in the Property.

[41]              If the Court does not accept that a portion of the Property is held on trust for the Ns, Mr Zhang suggests this Court should set aside the 75/25 per cent division of relationship property arrived at by Judge Parsons, and substitute a 90/10 per cent division in favour of TN. Mr Zhang submits the following factors favour a 90/10 split:

(a)The Judge erred in determining the relationship did not end as a result of AK’s affair in mid-2014. The consequence of this is that she incorrectly determined the relationship lasted two years six months, when in fact it lasted a much shorter period of time; from the point the two re-kindled their relationship after the affair, until March 2016.

(b)The Judge should not have adjusted the monetary contributions in AK’s favour as a result of TN forging her signature on the flexi loan documentation. Mr Zhang suggests it is not possible AK was not aware the loan had been taken out, because it allowed her to purchase cars and holidays she should have known the couple could not have otherwise afforded. Moreover, Mr Zhang says the loan did not cause AK loss, because she enjoyed the benefits of spending the money borrowed.

(c)The Judge overstated AK’s non-monetary contribution to the relationship. In particular, Mr Zhang says the Judge should not have found that AK moved to New Zealand to pursue a relationship with TN, because in fact she moved because she wanted an overseas experience independent of her relationship with TN. He also disputes AK’s payments to TN in fact assisted him to pay off his debts, and suggests her willingness to jointly take on the $600,000 loan from the bank for the Property should not be seen as a contribution, because she benefitted from it.

[42]              Mr Zhang says instead the most important non-monetary contribution in the relationship was the assistance TN gave AK in terms of sponsoring her visa

application. In any event though, he says the non-monetary contributions should carry little weight in terms of the overall contributions, because the relationship was of a short duration, and the non-monetary contributions have little to do with the value of the largest disputed asset; the Property.

[43]              Mr Zhang also submits the post-separation adjustment order (for occupation rent) should be set aside, citing the earlier judgment in this proceeding by Hinton J, who as noted above at [32], opined any adjustment was better dealt with by way of an interest award.24

[44]              Finally, Mr Zhang makes submissions as to how any order is affected by the new information – namely, that AK now accepts that up to $57,000 in her Savings Account is relationship property. Referring to a range of transactions over the course of 2014 and 2016, Mr Zhang submits that the entire $81,000 in AK’s Savings Account ought to be categorised as relationship property. He says the $24,000 which AK had before the relationship began has become so intermingled with relationship property that it has itself become relationship property.25 After analysing the property each have in their possession currently, Mr Zhang submits:

(a)In the event the Court finds the Property is held on trust, AK should refund TN some $46,836, and TN should accept sole responsibility for the balance of the flexi loan; or

(b)In the event the Court finds the Property forms part of the relationship property pool, AK is owed some $8,166.

Submissions for AK

[45]              Mr Farrands for AK submits the Family Court Judge undertook a thorough and accurate assessment of the evidence, which should not be disturbed on appeal. He notes that the Judge’s preference for AK’s evidence was based on contemporaneous documents which corroborated her account, and she did not make a wholesale assessment of credibility, but rather assessed the merits of the evidence on each issue.

24     [TN] v [AK], above n 17, at [46].

25     Citing Property (Relationships) Act 1976, s 8(1)(d)(ii).

The very fact the finding a de facto relationship existed is not being challenged on appeal is a sign, Mr Farrands suggests, that TN did not provide credible evidence to the Family Court. In any case, he says this Court should be slow to overturn credibility findings made by the trial Judge, who was best placed to assess the witnesses as the evidence unfolded.

[46]              In relation to the appellant’s argument that the relevant de facto relationship only began after AK’s affair, Mr Farrands points to the constant contact the two had over messenger applications during the so called “split”. He says the Judge was correct in finding that, on the basis of these messages, the relationship had not ended. To the extent that this Court does find the relationship did end and then re-commence after AK’s affair, Mr Farrands says this might result in a favourable adjustment to AK’s financial contributions to the relationship – noting that from June 2015 onwards, TN had lost his job so did not contribute much to the relationship financially at that time.

[47]              Mr Farrands suggests the claim in constructive (or resulting) trust must also fail. He notes the Family Court’s finding that there was no evidence AK had ever been told there was an expectation the Ns would have an interest in the Property. He also says AK was entitled to rely on the gifting statement Mrs N provided to the bank, which ought to operate as conclusive evidence that it was never intended the Ns would have a beneficial interest in the Property.

[48]              Mr Farrands further submits the Judge was correct to factor TN’s forgery on the flexi loan documentation into her assessment. He submits that pursuant to s 18A, the only way the appellants can negate this adjustment on appeal is by proving that the forgery was either not “gross and palpable” conduct, or that it did not affect the value of the relationship property. He submits the forgery of a signature on a loan of that size is clearly gross and palpable conduct, and substantially increased the relationship debt; Mr Farrands says that if TN had honoured his initial promise to AK that he would take sole responsibility for the flexi-loan, the relationship property pool would look very different.

[49]              Mr Farrands disputes any adjustment is needed to the division of relationship property. He says that, if anything, the calculations in the Family Court were disadvantageous to AK:

(a)AK’s primary reason for giving up an existing life and career in Malaysia was to further her relationship with TN;

(b)At points in the relationship, AK was the sole bread-winner, and used her training as a real estate agent to skilfully manage the tenancies at the Property. He refers to messages sent from TN to AK in which he calls her “a superwoman doing an amazing job with the house and our mortgage…”;

(c)AK assisted TN to pay off his debts by lending money to him early in the relationship. Moreover, it is “ridiculous” to suggest that the joint borrowing of $600,000 was not a financial contribution by AK to the Property;

(d)The Judge’s decision that the monetary and non-monetary contributions could be assessed at 70/30 per cent value to the relationship is arguably too harsh; and

(e)The Family Court knew TN had assisted AK with her visa when making the initial assessments of contributions.

[50]              Overall, Mr Farrands suggests if any adjustment is made to the division of relationship property, it should be in AK’s favour, not in TN’s. He does not suggest any alternate calculations (nor is there a formal cross-appeal).

[51]              Mr Farrands says the post-separation occupation rent ordered by the Judge was fair. However, in the event the Court prefers an interest-based approach, he says the interest awarded should be generous, in the realm of 6 per cent. He says TN’s intransigence in not selling the Property as required by the Family Court orders has

denied AK of funds properly owing to her and prevented her from moving on both financially and otherwise.

[52]              Mr Farrands also addresses the issue of how the division is affected by AK’s acceptance her bank accounts contain some $57,000 of relationship property. He says that since separation, AK has made a number of payments to TN, such that any relationship property she has retained is now only $28,791.43.

[53]              Finally, he disputes the $24,000 AK had in her accounts at the start of the relationship has become intermingled with relationship property for the purposes of  s 8(1)(d) of the Act; it cannot be said the property was intended for the common benefit of both partners, including when the funds were lent to TN as a loan and repaid in accordance with that arrangement.

Approach on appeal

[54]              There is no dispute the appeal proceeds by way of re-hearing. But in the appellants’ second amended notice of appeal, relief by way of “an Austin Nichols de novo full rehearing” is sought. That confuses, however, the concepts of an appeal by way of rehearing and a de novo appeal.

[55]              The leading decision in relation to the approach to be taken on an appeal of this kind is the Supreme Court’s decision Austin, Nichols & Co Inc v Stichting Lodestar. The following key principles may be drawn from the Supreme Court’s judgment:26

(a)Appeals proceeding by way of general appeal require the appeal court to come to its own view on the merits.

(b)The weight an appeal court gives to the decision under appeal is a matter of judgment. For example, if the High Court is of a different view from the District Court, it must act on its own view.

26     Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [3] to [5].

(c)The appellant bears the onus of satisfying the appeal court that it should differ from the decision under appeal.

(d)It is only if the appeal court considers that the trial court is wrong that it is justified in interfering with it.

(e)The appeal court may or may not find the reasoning of the trial court persuasive in its own terms.

(f)The trial court may have had a particular advantage (such as the opportunity to assess the credibility of witnesses, where such assessment is important). In such a case, the appeal court may rightly hesitate to conclude that findings of fact or fact and degree are wrong, and it may take the view that it has no basis for rejecting the reasoning of the trial court and its decision should stand.

(g)The extent of consideration the appeal court gives to the decision of the trial court is a matter for its judgment. The appeal court makes no error in approach simply because it pays little explicit attention to the reasons of the trial court, given the appeal court has the responsibility of arriving at its own assessment of the merits of the case.

[56]              The Court of Appeal has also recently commented on the proper approach to be taken on a general appeal. In Green v Green, the Court made the following observations:27

[29]      Austin, Nichols reaffirmed the appellate court’s obligation to form its own independent judgment on the merits of an appeal by way of rehearing. But two fundamentals remain constant.

[30]      First, it is still axiomatic that the appellant bears the onus of persuading the appellate court to reach a different conclusion. Of necessity, in discharging that onus the appellant must identify the respects in which the judgment under appeal is said to be in error.

[31]      Second, it is also axiomatic that in determining whether the judgment was wrong the appellate court will take into account any particular advantages enjoyed by the trial court. The advantages possessed by a trial judge in

27     Green v Green [2016] NZCA 486, [2017] 2 NZLR 321. (citations omitted)

determining questions of fact are obvious, especially where assessments of credibility and reliability are involved. The trial judge gets to see and hear the witnesses, and is able to evaluate the strength of the evidence as it progressively unfolds within the context of the trial as a whole. As this Court pointed out in Rae v International Insurance Brokers (Nelson Marlborough) Ltd:

As the evidence unfolds the trial Judge gains an impression from the evidence which is not necessarily or usually apparent from the cold typeface of the transcript of that evidence on appeal. The Judge forms a perception of the facts in issue from which he or she adds or subtracts further facts as witnesses give their evidence, and so obtains as complete a picture as is possible of the events in issue. The Judge perceives first hand the probabilities inherent in the circumstances traversed in the evidence and can obtain a superior impression of those probabilities as a result.

[32]      It was for those reasons the Supreme Court in Austin, Nichols expressly stated an appellate court should exercise caution in considering challenges to findings of credibility.

[57]              The Court of Appeal made similar observations in Fonterra Co-operative Group Ltd v McIntyre and Williamson Partnership, affirming that “compelling grounds” will need to be shown before an appeal court will reverse factual findings.28

[58]              I am bound by these principles. In particular, and while I have carefully reviewed the evidence, including the full notes of evidence, many of the key issues in this case turn on intensely factual matters, and involve assessments of credibility and reliability. Judge Parsons had the advantage of hearing all the viva voce evidence over a three-day period, and was in a position to assess that evidence as it unfolded. While of course it is open to me to differ from the Judge on key factual findings where I consider it is appropriate to do so, I proceed with the “customary caution” when intensely factual issues and credibility findings are challenged.

Did the Judge err in her credibility findings?

[59]              Having examined the evidence in this case, including the full notes of evidence, there is no reason to arrive at a different view to the Judge on the respective credibility of TN and AK. Indeed, as TN’s evidence progressed, his answers to questions in cross- examination became more evasive and lacking in credibility (for example, even

28 Fonterra Co-operative Group Ltd v McIntyre and Williamson Partnership [2016] NZCA 538, (2016) 14 TCLR 435 at [153]-[158], citing Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 198. See also Sena v Police [2019] NZSC 55.

refusing to agree or acknowledge matters clearly set out in documentary records). The reason for this was, of course, that TN was seeking to maintain what was a false, and now accepted to be false, foundation to his case, namely that he and AK had never been in a qualifying de facto relationship.

[60]              On appeal, Mr Zhang sought to ameliorate TN’s conduct, suggesting it was a denial of the legal effect of their relationship only. I disagree. The notes of evidence make it clear that TN disputed the very nature of his relationship with AK; for example, suggesting that the multitudes of loving and passionate messages from him to her were variously simple flirting; what a “guy” would normally say to a girl seeking attention; attempts to calm AK down at times; an untruthful response by him to her loving messages; and/or all part of an elaborate (and long-standing) effort to lay a false paper trail for AK’s visa applications. He also sought to deny the two were living together at all, when the evidence was patently to the opposite effect.

[61]              In short, much of TN’s evidence before the Family Court was untrue. And while I agree with the Judge’s observation that “[TN] now feels an enormous burden in having entered a legal arrangement of joint ownership with the applicant in the absence of clarifying the ramifications of this with his family”, that does not excuse being untruthful in material respects before a court.

[62]              In contrast, AK’s evidence on key issues for determination was consistent with the contemporaneous documentary record, in particular, on the nature of the parties’ relationship. She was also clear in her responses to the questions put to her in cross- examination and made concessions where appropriate. I accept that she now acknowledges that some of the funds in her Savings Account are relationship property. Mr Farrands, counsel for AK, characterises this as a “mistake”. Whether or not that is so is difficult to discern, given the matter never arose in the Family Court and so AK was not cross-examined on it. But I accept the financial arrangements between the two and the movement of funds between bank accounts was somewhat complicated. AK also accepted in cross-examination that only some of the balance of that account had been brought by her to New Zealand. Further, AK’s present acknowledgment in relation to those funds does not undermine the fact that her evidence on key issues in dispute was credible.

[63]              Accordingly, I am far from persuaded that the Judge erred in preferring AK’s evidence over TN’s evidence on contested factual issues. This ground of appeal fails.

Is the Property held on trust for the Ns?

Introduction and legal principles

[64]              The true basis of trust claimed by TN’s parents is somewhat unclear. It seems the claim was advanced at trial on the basis of the principles set out in Lankow v Rose.29 At the hearing of the appeal before me, the argument was advanced on the basis of an express trust. And as noted, while Mr Zhang’s updating memorandum filed after the hearing still refers to an express trust, the claim appears to be by way of a resulting or constructive trust. But whatever the “label” given to the argument advanced on behalf of the Ns, the underlying premise remains that in advancing the $335,000 towards the Property’s purchase, the Ns expected to obtain an interest in it. These facts give rise to orthodox principles of resulting trust.30

[65]              The Court of Appeal has recently summarised the principles concerning resulting trusts in Chang v Lee as follows:31

[18] Our starting point is with the principle explained by Lord Browne- Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council. A resulting trust arises in circumstances where:

… A makes a voluntary payment to B or pays (wholly or in part) for the purchase of a property which is vested in either B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B; the money or property is held on trust for A (if he is the sole provider of the money) or in the case of the joint purchase by A and B in shares proportionate to their contribution. It is important to stress that this is only a presumption, which presumption can be easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer …

[…]

[20]      The rationale for a resulting trust is that, absent evidence to the contrary, the law presumes a person intends to retain the beneficial ownership of funds which he or she advances towards the purchase price of a property. The legal owner holds title to the property subject to the payer’s equitable

29     Lankow v Rose [1995] 1 NZLR 277.

30     I note that the outcome in this case is unlikely to have been different even if the matter is approached on the basis of the principles in Lankow v Rose, above n 29. See [79]-[85] below.

31     Chang v Lee [2017] NZCA 308, [2017] NZAR 1223.

interest. In this way a trust results to the payer to the extent of his or her contribution. Evidence which might contradict or rebut the presumption is traditionally of an intention to gift or of consideration in the nature of satisfaction of independent indebtedness, both of which Fogarty J rejected here.

[21]      In the absence of an agreement on terms, the  Court’s inquiry into  Mr Chang’s intention as settlor must be confined in its scope to the question only of whether he intended to part with beneficial ownership through payment of the funds. We agree with Ms Reed that this is the starting point and end point of the Court’s inquiry. The status of the payment determines whether the presumption applies.

[Citations omitted]

[66]              While Mr Zhang argued that the concept of a gift is consistent with a trust, the above makes it clear that it is not. If the Ns intended to gift the $335,000 to TN, that would carry with it an intent to convey to TN both the legal and beneficial interest in the funds. Accordingly, and as Judge Parsons observed, a finding that the $335,000 was intended to be a gift necessarily precludes a finding that the Ns acquired an interest in the Property.32

[67]              A key issue on the appeal is therefore whether the Judge erred in concluding that the Ns intended to gift the $335,000 to their son.

[68]              Before turning to that issue, I note for completeness that where the relationship between the transferor and the transferee creates a natural obligation to provide for the transferee, a presumption of advancement can apply which negates the existence of a resulting trust.33 In the context of transfers from parent to child, the presumption of advancement traditionally applies. However, there is some doubt whether the presumption of advancement carries much weight in transfers between parents and adult children; the Supreme Court of Canada, for example, has held the presumption of advancement is not applicable to adult children.34

[69]              It does not appear that the presumption of advancement was raised at trial. Nor was it raised before me. I therefore do not consider it further. I merely note that had

32     Family Court Judgment, above n 1, at [139]. See also Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Brookers, Wellington, 2009) at [12.5.2].

33     Woodcock v Woodcock [2018] NZHC 470 at [111].

34     Pecore v Pecore 2007 SCC 17, [2007] 1 SCR 795.

it been raised as an issue in this case, I see merit in the approach adopted by the Canadian Supreme Court.

Resulting trust - discussion

[70]              The starting point is of course the presumption of a resulting trust in the Ns’ favour. As explained by Farwell LJ in The Venture:35

On its being proved that Percy Stone had advanced a certain part of the purchase money, the presumption of law arose that he was beneficially entitled to a corresponding share in the yacht. It was for the plaintiff to displace that presumption by bringing evidence to the contrary; but she has entirely failed to bring any such evidence. The court must therefore give effect to the presumption, and must hold that, as the defendant paid a part of the purchase money, he acquired an interest in the yacht...

[71]  In many circumstances, and as the Judge concluded,36 the presence of the gifting certificate might be determinative in rebutting the presumption of a resulting trust. But in this case, I have reached a different conclusion to that of the Judge. I have done so for the following reasons.

[72]              First, the broader context to the Property’s purchase is consistent with the Ns making a “family investment” in a property in New Zealand. As the Judge accepted, there had been general family discussions around the purchase of a further family home in Auckland, leading to TN and his sister applying for bank finance. AK also accepts there were discussions around the Ns buying a property and that she was aware of this. In this context, Mrs N had located the Property as a potential property to purchase. It is also clear Mrs N was quite involved in the viewing and arrangements to purchase the Property, including, for example, attending the final inspection prior to settlement.

[73]              Second, the Ns’ evidence as to the circumstances in which they came to advance the $335,000 is credible, particularly in the context of their family and cultural dynamic. Their evidence was not seriously challenged on cross-examination. Indeed, and importantly, the Judge expressly found that the Ns did have an expectation from

35     The Venture [1908] P 218 (CA).

36     Family Court Judgment, above n 1, at [139].

their discussions with TN that they would have an interest in the Property.37 Having reviewed the Ns’ evidence, I agree with this finding. That the Ns had such an expectation is inconsistent with the concept of gifting the funds outright to their son.

[74]              Third, as the Court of Appeal made clear in Chang v Lee, it is the transferor’s intention which is the focus of the inquiry (and indeed, as the Court put it, “the end of the inquiry”).38 It is correct that AK was not party to or aware of the basis upon which the Ns advanced the $335,000. In this context, it seems TN got himself into a difficult position; on the one hand, obtaining funding from his parents to put towards a property in Auckland in which they expected to have an interest; but on the other hand, presenting a picture to AK, with whom he was clearly besotted and wanted to be seen to be providing for, that they were purchasing “their” home (albeit with help from his parents). But the fact AK was not party to the arrangements between the Ns and TN does not itself rebut the presumption of resulting trust. As noted, what is important is the transferor’s intention; the principles operate to “fasten to the conscience” of the transferee.39

[75]              Fourth, I am unpersuaded, at least in the particular circumstances of this case, that the gifting certificate operates to rebut the presumption of resulting trust. TN’s father’s evidence, which was not challenged in cross-examination, was that he had transferred the $335,000 to put towards the purchase of the Property. He was clearly the breadwinner of the family, and while spending most of his time living in Brunei managing his business, regularly sent funds to New Zealand. He was in Brunei at the time the Property was located and purchased. He expressly said he was not aware of the gifting certificate. Nor was it suggested otherwise on AK’s behalf.

[76]              Mrs N of course signed the gifting certificate (though did not herself advance the funds). She did not take specific legal advice in relation to the purchase. In relation to the gifting certificate, the following exchange took place with counsel for AK:

Q. Right, yes, yes, okay thank you. In relation to the purchase of the property, the bank required some formalities didn’t it, do you remember that?

37 At [128].

38     Chang v Lee, above n 31, at [21], [24] and [27].

39 At [22]. See also Butler, above n 32, at [12.2.3].

A.       Formal, what’s –

Q.The bank needed documents signed and  so  the mortgage broker, Ms Shao, you know Ms Walsh Shao? You need to say “Yes” or “No”?

A.       Yes.

Q.       She sent you a document didn’t she that the bank needed to be signed?

A.       Yes.

Q.       For them to advance the money?

A.       Yes.

Q.       Remember that?

A.       Yes.

Q.       Before signing that do you spoke to Ms Shao on the phone about it?

A.       Yes.

Q.       And then you signed the document?

A. Yeah, she, this guy, another mortgage broker call me and he need the signature on this for the bank, she guide me to sign this is, she emphasise this is compulsory for the bank.

Q.       So you knew it was required by the bank?

A.       Yeah.

Q.       In relation to the lending?

A.       Yeah.

Q. And it was a gift wasn’t it, it was a gifting statement, do you remember that?

A.       No, no.

Q.       But that’s what it says doesn’t i?

A. No, because the mortgage broker  say that  it  just  signing for  the purpose is for the bank only.

Q.So I need you to look at that document for me, so this is 1849, which is in the yellow, the bundle with the yellow dot, I’ve got it here, it’s the bundle with the yellow dot on it, did you find that one with the yellow dot, and the page we are looking for is 1849, so just take your time to read it over, have a quick -familiarise yourself with that document. So can you tell the Court, tell her Honour here, in your understanding, what is a gift? A gift, what does that mean.

A.       That’s why I asked the mortgage broker Diana to –

Q.You just need to answer the – listen to the question and just answer it, very carefully. In your understanding, what does the word “gift” mean?

A.       I don’t understand the word gift.

Q.       And what does the word “unconditional” mean, what does that mean?

A.       I don’t understand. I did ask Diana to explain.

Q.       But you signed this document, didn’t you?

[77]              I accept that Mrs N did not understand the concept of “gifting”, at least in the sense of an outright conveyance of funds to her son. Further, the concept recorded in the gifting certificate that the $335,000 was not subject to refund or repayment would have been uncontroversial to Mrs N given, as the Judge found, she expected the Property would remain in the family. Further, her evidence that she simply signed the certificate as it was a paper the mortgage broker told her was required by the bank has the ring of truth about it.

[78]              In these particular circumstances, therefore, the fact Mrs N signed a gifting certificate is not sufficient evidence to rebut the presumption of a resulting trust. On that basis, I find that the Ns have a 35.8 per cent beneficial interest in the Property.

[79]              For completeness, I note that the same outcome is likely even if the matter had been approached on the basis of the principles in Lankow v Rose.

[80]              In Lankow v Rose, Tipping J set out the following criteria for the establishment of a constructive trust in circumstances where a party claims an interest in property to which they have contributed but are not legally registered on the title:40

(a)the claimant must show a direct or indirect contribution to the property;

(b)the claimant had an expectation of an interest in the property;

(c)the claimant’s expectation was reasonable in the circumstances; and

40     Lankow v Rose, above n 29, at 294.

(d)the claimant must show “that the defendant should reasonably expect to yield her an interest”.

[81]              The first three requirements are, in my view, easily satisfied by the Ns in this case. That also appears to have been the Judge’s view. But she held the claim based on Lankow v Rose principles failed at the fourth stage of the inquiry, given her view that “it must have been reasonable for … [AK] (the applicant) to expect there to be such an interest”.41

[82]              The Judge found, and I agree, that AK did not have any actual expectation that the Ns would have an interest in the Property. But the defendant having an actual expectation is not a requirement of the test in Lankow v Rose. As Tipping J stated:42

The fact that the defendant is not willing to yield an interest or did not expect to have to do so is no bar to [the claimants] claim if [the defendant] should reasonably expect to do so. In that respect the Court stands as his conscience.

[83]              Accordingly, the fact AK did not herself expect to have to yield an interest in the Property to the Ns is not a bar to their claim. The proper (objective) question is, whether AK should reasonably expect to do so?

[84]              In my view, the answer to that question is “yes”. The Ns were contributing a substantial proportion of the purchase price, in the absence of which bank funding for the balance may not have been possible. And while AK became jointly liable for the resulting mortgage, she also enjoyed a substantial interest herself in the Property without advancing any pre-existing funds of her own. As noted, the Ns not unreasonably expected that they would have in interest in the Property. There is nothing to suggest in these circumstances that it would be unreasonable for AK to expect to yield to the Ns an interest in the Property, at least one which is limited to that now claimed, i.e. proportionate to their contribution. That is also consistent with AK’s acceptance of a moral obligation of repayment of the Ns, at least up until the Family Court hearing.

41     Family Court Judgment, above n 1, at [135].

42     Lankow v Rose, above n 29, at 294.

[85]              Accordingly, while I have preferred to resolve this aspect of the appeal on the principles relating to resulting trusts, I am satisfied that the same outcome is arrived at by the application of the requirements in Lankow v Rose for a similar claim in constructive trust in any event.

[86]              One issue remains. Does the fact that the Ns, or at least Mrs N, represented to the bank that the funds were advanced as a gift, when I have found that they were not, disentitle the Ns to the (equitable) relief they seek? It is, after all, a maxim of equity that “seekers of equity must come with clean hands”.43

[87]              Associate Judge Bell, in considering the strength of a party’s case in a security for costs application, provided a useful summary of the case law where a person claiming a resulting trust asserts a dishonest purpose:44

[24] In general, when property is made over to another person and a  resulting trust is claimed, that claim will [not] succeed if the person claiming the trust is asserting some illegal, fraudulent or dishonest purpose. That approach can be seen in decisions such as Gascoigne v Gascoigne, Re Emery's Investments Trusts and Tinker v Tinker. Those are cases of alleged resulting trusts where the claimant was not allowed to set up a dishonest purpose to rebut a presumption that a conveyance was intended as a gift. The same approach is available when a claim is made to set aside a concluded transaction supported by consideration. In Gascoigne v Gascoigne a husband had put a lease in his wife's name to protect it from his creditors. He was not allowed to use this fraudulent purpose to rebut the presumption that he was making a gift to her. In Re Emery's Investments Trusts a husband had securities registered in his wife's name to escape paying US tax on the bonds. He was not allowed to rebut the presumption of advancement by saying that his purpose was to defeat a foreign revenue law. In Tinker v Tinker a husband was planning to set up a risky business venture. He bought a house and put it in the name of his wife so that it would not be available to creditors if his business failed. When the marriage failed and he sought directions that he was the owner of the house, he was unsuccessful. He was not allowed to rebut the presumption of advancement by saying that he did it to defeat creditors. Lord Denning MR said:

“… I am quite clear that the husband cannot have it both ways. So he is on the horns of a dilemma. He cannot say that the house is his own and, at one and the same time, say that it is his wife's. As against his wife, he wants to say that it belongs to him. As against his creditors, that it belongs to her. That simply will not do. Either it was conveyed to her for her own use absolutely: or it was conveyed to her as trustee for her husband. It must be one or other. The presumption is that it was  conveyed  to her  for her  own use:  and  he  does not  rebut that

43     New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 2 NZLR 163 (PC) at 168.

44     Brown v Brown [2017] NZHC 350.

presumption by saying that he only did it to defeat his creditors. I think it belongs to her.”

[88]              An outcome in line with these authorities was reached by Hillyer J in Angell  v Morresey.45 Mr Angell had been in a de facto relationship with Ms Morresey. He had contributed to the purchase price of Ms Morresey’s house but did not appear on either the title of the property or the loan documentation, because Ms Morresey at the time was claiming the domestic purposes benefit which she would lose if her relationship with Mr Angell became known. Mr Angell also did not want to jeopardise a favourable mortgage deal offered to Ms Morresey by the Housing Corporation. Hillyer J dismissed a claim in resulting trust. The only reason Mr Angell’s name was not on the title of the property was because he was “was assisting the first defendant to defraud the Social Welfare Department and the Housing Corporation.” Due to the doctrine of clean hands, equity could not assist him.46

[89]              I do not consider these principles ought to deprive the Ns of an interest in the Property. Mrs N’s conduct in signing the gifting certificate was not “fraudulent” in the sense described in the authorities. As noted, I am satisfied she was not fully aware of what was involved when she signed the document. In that sense, I do not consider there to have been an active and informed attempt to deceive the bank in order to secure an advantage. As also noted, there is no evidence TN’s father, who actually provided the funds, knew of the gifting certificate or his wife’s signature of it. Further and in any event, for the clean hands doctrine to apply, there must be a nexus or connection between the conduct complained of and the relief sought.47 In this case, it far from clear that any potential “misconduct” in the context of the gifting certificate is sufficiently related to the relief sought by the Ns, which is directed at and “attaches” to the registered proprietors of the Property, namely TN and AK. Indeed, without the gifting certificate, the bank finance may not have been advanced to TN and AK, and they might therefore have no present interest in a residential property in Auckland.

45 Angell v Morresey HC New Plymouth A33/85, 1 April 1986. Cited with apparent approval in

Milloy v Dobson [2016] NZCA 25.

46 The Supreme Court has more recently considered similar issues, at least in the context of transfers of property by a husband to a wife to secure a particular advantage – such as a tax advantage or to shelter the property from creditors – but then later sought to assert that the wife was never intended to have a beneficial interest. See Horsfall v Potter [2017] NZSC 196, [2018] 1 NZLR 638.

47 Milloy v Dobson, above n 45, at [100].

[90]              For these reasons, the Ns retained a beneficial interest in the Property proportionate to their contribution to its purchase price. It is appropriate the resulting trust is in favour of TN’s father, the second appellant, being the person who actually advanced the funds.

[91]              I emphasise that the above conclusion is very specific to the facts of this case. As noted, in most cases, a document such as the gifting certificate will generally be conclusive.

[92]              The Ns’ share of the Property will therefore need to be excluded from the division of relationship property. This, coupled with the existing debt secured against the Property, significantly reduces the net value of the relationship property. It also has flow on consequences for the parties’ respective contributions to the relationship, given TN’s purported (personal) contribution of $335,000 was a material factor in the Judge’s assessment of financial contributions to the relationship.

Did the relationship end with AK’s affair?

Legal principles

[93]              A full bench of the High Court (Gendall and Ellen France JJ) in Scragg v Scott considered the extent to which infidelity belied the mutual commitment required in a de facto relationship. They held that the mutuality of understanding required to form a de facto relationship may also be a factor in determining whether one has ended:48

[50]      As the Judge rightly observed, concepts such as “commitment” do not lend themselves to easy analysis. He found this factor to be what he called the most troublesome aspect of the case. He said that the evidence raised considerable doubts as to both parties' commitments to a shared life “at varying times”. That was not a finding that an absence of commitment existed throughout the 12 years. Obviously, the word “mutual” involves a commitment on the part of both parties and that it is to a “shared life”. But this paragraph also refers to “the degree” of such mutual commitment. It may be high, moderate or low. But of course it should exist. It has to be commitment shared by both parties and we agree with the Judge that it is not simply for one party to be committed to a relationship if that commitment is not shared by the other party.

[51]      But once a de facto relationship has commenced, if one party subjectively finds his or her commitment weakened, or has doubts about its

48     Scragg v Scott (2006) 25 FRNZ 942 at [50]-[51].

continuing, but does not communicate that to the other party and takes no objective steps to terminate that relationship, then an inference may be drawn that the existing relationship continues. It would not necessarily follow that an unspoken, and unacted upon, weakening commitment ends that which had existed for some time without there being some other features. It must always be question of fact when a commitment to a shared life was formed if at all, and when it ended. The absence of communication by a party who later claims that the relationship was over because of a hidden belief, when such may have been expected to occur, may well be a matter that tells against a party when a finder of fact has to decide at what point an established relationship has ended in fact…

[94]              Their Honours also observed that “mere unfaithfulness cannot, of itself and without more, end a de facto relationship which has already formed and which continues through having necessary characteristics”.49

Discussion

[95]              As will be appreciated, resolution of this issue is intensely factual, and is also dependant on the parties’ competing evidence of what occurred between them at the time.

[96]              Mr Zhang places reliance on a draft email that AK apparently intended to send to the co-worker’s girlfriend (though it seems it was never sent). In it, she referred to “breaking up” with TN the day after she had sexual relations with her co-worker. But as the Judge noted, the communications between TN and AK continued through that time, in loving and affectionate terms. It was also clear that, once he became aware of the affair, TN was conscious of the need to give AK some space, as their relationship had been particularly intense since she had moved to New Zealand.

[97]              Having reviewed the evidence, I do not consider the Judge erred in her findings on this issue. As the Court noted in Scott v Scragg, mutual commitment to a shared life is a question of degree and can ebb and flow from time to time, while continuing to exist throughout. I agree with the Judge that the parties remained committed to each other during this time, even if, as the Judge described it, it was a little less intense for a period. Further, the reference to “breaking up” in an ultimately self-serving email (drafted several months after the events in question), intended to be sent to the co-

49 At [59].

worker’s girlfriend, is insufficient to outweigh the actual communications and actions between the parties themselves during the period in question.

[98]              The challenge to the Judge’s finding that the de facto relationship continued despite the affair is accordingly dismissed.

Has the $24,000 brought by AK to New Zealand retained its character as her separate property?

[99]              As noted earlier, there is now agreement that at least $57,000 in AK’s Savings Account at separation was relationship property, given only $24,000 of that balance reflected funds AK brought with her when she came to New Zealand.

[100]          Mr Zhang submits the $24,000 should also be classified as relationship property pursuant to s 8(1)(d)(ii) of the Act, on the basis it was intended for the common use or common benefit of both parties. Mr Zhang notes that at the outset of the relationship, AK lent this money to TN (as his then salary was insufficient to meet his living expenses), and TN at one point used some of it for the couple’s general living expenses. He also points to the fact that it was transferred into the couples’ joint account for a time, before being repaid by TN (through selling a vehicle).

[101]          I do not consider the $24,000 lost  its  character  as  separate property.  As  Mr Farrands notes,  for  separate  property  to  become  relationship  property  under s 8(1)(d), the property must have been intended for the common use or common benefit of both partners (s 8(1)(d)(ii)), but also have been acquired “in contemplation of the marriage, civil union, or de facto relationship” (see s 8(1)(d)(i)). There is no suggestion, nor evidence, that the $24,000 was acquired by AK in contemplation of her de facto relationship with TN. That alone is dispositive of the point raised by TN. But it is also debateable whether the funds were intended for the common benefit of the parties; they were lent by AK to TN, and then repaid by him in full. This is inconsistent with the notion of funds being provided by one party for the common benefit of the parties together.

[102]Further, despite finding its way into the joint account for a short time, the

$24,000 was clearly treated by the parties as separate property, and the tracing exercise

carried out on TN’s behalf showed it was repaid to AK Savings Account fairly promptly. The fact separate property moneys are paid into a blended fund does not automatically involve their loss of identity as separate property.50 It is a question of fact and degree.51 In the circumstances of this case, and particularly given the funds’ prompt repayment to AK’s Savings Account (where they remained over the balance of the parties’ relationship), I do not consider it is unreasonable or impracticable to regard the funds as having retained their character as separate property.

[103]The $24,000 is accordingly to be classified as AK’s separate property.

What is a fair division under s 14A?

Legal principles

[104]          A division under s 14A of the Act is undertaken “in accordance with the contribution of each de facto partner to the de facto relationship”.52 Contributions are described in s 18 in this way:

18       Contributions of spouses or partners

(1)        For the purposes of this Act, a contribution to the marriage, civil union, or de facto relationship means all or any of the following:

(a)the care of—

(i)         any child of the marriage, civil union, or de facto relationship:

(ii)        any aged or infirm relative or dependant of either spouse or partner:

(b)        the management of the household and the performance of household duties:

(c)        the provision of money, including the earning of income, for the purposes of the marriage, civil union, or de facto relationship:

(d)        the acquisition or creation of relationship property, including the payment of money for those purposes:

(e)the payment of money to maintain or increase the value of—

50     Allan v Allan (1990) 7 FRNZ 102.

51     At 107-108.

52     Property (Relationships) Act 1976, s 14A(3).

(i)         the relationship property or any part of that property; or

(ii)        the separate property of the other spouse or partner or any part of that property:

(f)the performance of work or services in respect of—

(i)          the relationship property or any part of that property; or

(ii)        the separate property of the other spouse or partner or any part of that property:

(g)        the forgoing of a higher standard of living than would otherwise have been available:

(h)        the giving of assistance or support to the other spouse or partner (whether or not of a material kind), including the giving of assistance or support that—

(i)         enables the other spouse or partner to acquire qualifications; or

(ii)        aids the other spouse or partner in the carrying on of his or her occupation or business.

(2)        There is no presumption that a contribution of a monetary nature (whether under subsection (1)(c) or otherwise) is of greater value than a contribution of a non-monetary nature.

[105]          The principles in relation to these two sections are relatively straightforward and do not appear to be in dispute between the parties; the appeal is intensely factual. Relevantly:

(a)The “substantial contribution” to be assessed is the contribution made to the relationship, not to the relationship property;53

(b)It is necessary to weigh the contributions of both parties and carry out some comparative assessment;54

(c)While the Act provides there is no presumption monetary contributions are greater than non-monetary contributions, greater weight may be given to monetary contributions in relationships of short duration,

53     Schmidt v Jawad (2003) 23 FRNZ 101 at [27].

54     Lawson v Perkins (2007) 26 FRNZ 946 at [82].

“such that there has not really been time for the non-monetary contributions to have built up in value”.55

The Judge’s approach

[106] As noted at [26]-[27] above, the Judge assessed the parties’ monetary contributions as 95/5 per cent in favour of TN, largely on the basis of him having personally contributed the $335,000 to the Property (which I have found not to be the case). This was then reduced to 90/10 per cent, to reflect what the Judge considered to be TN’s gross and palpable conduct in forging AK’s signature on the flexi-loan application. Non-monetary contributions were assessed as 60/40 per cent in AK’s favour, with the weight to be attached to monetary versus non-monetary contributions being 70/30.

Discussion

[107]          There must obviously be some adjustment to the above findings, given my conclusion that the $335,000 was not a personal financial contribution by TN to the relationship.

[108]          In terms of monetary contributions, once the $335,000 is removed, there appears to be little difference between the parties. Both were working during phases of the relationship, but not at all times. Both earned relatively modest salaries and contributed in broadly equal terms to the day to day finances of the relationship. Given the very modest amounts now in issue and the intensely factual nature of this aspect of the appeal, I can only stand back and conduct a relatively broad assessment. In my view, equal monetary contributions are appropriate. I note Mr Zhang’s submission that if the Property as a whole were removed from the relationship property pool, TN agreed a 50/50 division of remaining relationship property was appropriate.  And   Mr Farrands noted that the Judge was correct to recognise that “on an overall basis”, the financial contributions between the parties were largely reciprocal.

55     Walker v Walker (2002) 22 FRNZ 452 at [56].

[109]          The next question is whether this 50/50 assessment of respective financial contributions should be adjusted to reflect TN’s forgery of AK’s signature on the flexi- loan facility.

[110]          The Judge found that AK did not know of the proposal to obtain the loan before the application was submitted. That is a credibility finding the Judge made and there is no basis upon which I should interfere with it. Further, given AK’s clear concerns about TN’s ability to deal with money, and her work in assisting him reduce his debts, it is unlikely she would have agreed to the couple taking on a further $100,000 in debt had she been aware of the proposal in advance.

[111]          In terms of whether TN’s conduct was gross and palpable (for the purposes of s 18A of the Act), forging a person’s signature on banking documentation without that person’s approval is a serious matter. It led to AK incurring further (significant) debt without her prior approval. And despite both parties evidently enjoying the benefits of the funds, the loan clearly adversely affected the value of the relationship property in a not insignificant way, particularly when the Ns’ interest in the Property is excluded.

[112]          Viewed in this way, therefore, I do not consider the Judge erred in reducing TN’s financial contributions by five per cent. The parties’ financial contributions to the relationship are therefore assessed as 55/45 per cent in AK’s favour.

[113]          In terms of non-financial contributions, again, I consider these broadly even, though a slightly higher contribution from AK is in my view appropriate. I place some, though not significant, weight on her moving to New Zealand to pursue the relationship with TN. There is certainly some evidence that she may have always intended to have a form of overseas experience in any event. But, in my view, she was clearly the driving force in the relationship, and took on the role of managing the couple’s finances, and the mortgage and tenancy arrangements once the Property had been purchased. She also supported TN during periods when he was retraining, and took an active role in trying to help him manage and reduce his debts. She also enabled not insubstantial savings to accrue in her Savings Account which are now recognised as relationship property. Against this, however, there were also periods, particularly at the outset of the relationship, when TN was supporting AK, including in locating

and securing accommodation for them, and he clearly supported her in terms of her residency application.

[114]          Approaching the division of relationship property as a “single global exercise”,56 I conclude that the appropriate overall assessment of the parties’ monetary and non-monetary contributions to the relationship is 60/40 per cent in AK’s favour.

The resulting division of relationship property

The relationship property pool and its division

[115]          On the above basis (and using rounded figures), the total relationship property available for division is as follows (assuming for present purposes, a net value of the Property of $1 million):

Property	TN separate property	AK separate property	Relationship property
The Property	$642,000.0057
Vehicle (1)	$9,150.00
Vehicle (2)	$23,000.00
Chattels	$5,400.00
Sundry bank accounts	$1,940.0058
Bank accounts (separate)	$10,073.00
Savings Account (AK)	$24,000.00	$57,000.00
Necklace	$4,800.00
Total	$743,290.00
Relationship debt at separation	$623,523.0059
Net relationship property	$119,767.00

56     RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online ed, LexisNexis) at [12.37].

57     Excluding the Ns’ 35.8 per cent share.

58     Being the total of the smaller bank accounts listed in the table in Family Court Judgment, above n 1, at [152].

59     $583,523 (mortgage) plus $40,000 (flexi-loan); reflecting $10,000 of the total loan balance was acknowledged by TN to be post-separation debt incurred by him.

[116]          Based on the relative contributions of 60/40, this results in shares of relationship property of $71,860 (to AK) and $47,907 (to TN).60

Adjustments to reflect post-separation position

[117]          Relationship property in each party’s hands at the time of separation must then be considered, including whether this requires any post-separation adjustments.

[118]          There is no challenge on appeal to the relationship property retained by TN. AK retained a VW Beetle car, which she later sold for $23,000. She also retained relationship property in her Savings Account, which I assess at $43,791.61 Taking these amounts into account, and assuming for present purposes her share of relationship property is $71,830, AK would be entitled to a payment from TN of

$5,069.

[119]          I do not propose to make any adjustment for the necklace. The Judge found that the necklace was in TN’s possession at or after separation. Mr Zhang submits the evidence relied on by the Judge to reach this finding was limited to an inadmissible hearsay text message from AK to TN.

[120]          The submission is misconceived. Given AK was a witness at trial, any out of court statement by her (such as the text message) is not a hearsay statement.62 There is therefore no basis for ruling the text message inadmissible. The burden rests on TN, as appellant, to persuade me that the Judge erred in accepting AKs evidence on this point. He has not done so. And as Hinton J noted, the issue concerning the necklace is de minimis in any event.

[121]          I have also not made any adjustment (if required) for a payment to the flexi- loan account of $15,000 on 19 April 2016 (which appears to have been an insurance pay-out in relation to flooding at the Property). The parties’ submissions on this point are insufficient for me to reach a concluded view on how this payment should be

60     The final amounts will obviously turn on the actual value of the parties’ share in the Property.

61     Being the $57,000 less a payment by AK to the flexi-loan account of $10,800, and $2,408.57 in tenancy bonds refunded to tenants.

62     See the definition of “hearsay statement” in s 4 of the Evidence Act 2006, namely a statement made by a person “other than a witness” (and which is relied to prove the truth of its contents).

treated in any post separation adjustments. It would appear to be relationship property. The parties may file a joint memorandum, or if required, separate memoranda, within 15 working days of the date of this judgment setting out how, if at all, this payment is to be addressed in the context of post-separation adjustments.

Occupation rent and interest

[122]          As noted, the actual amount due to AK (if any) will turn on the value of the parties’ share in the Property. Unless the parties can agree a process to fix the value of the Property (which would seem the preferable course), then as already ordered by the Family Court Judge, the Property will need to be sold.

[123]          What is clear, however, is that any amount now due to AK is relatively small (even allowing for a modest increase in value in the Property from that discussed at the hearing before Hinton J in March this year). I agree with Hinton J’s observations that because of this, there is no principled basis to award AK post occupation rent of some $30,000. AK has had an amount of something likely to be less than $50,000 “tied up” in the Property since separation. Hinton J noted, and I agree, that an award of interest on any amount found to be due to AK would be sufficient to compensate for this. And this is reinforced by the fact that a 35.8 per cent share of that Property is held on trust for the Ns in any event. Mr Farrands, quite properly in my view, did not seriously challenge an award of interest as being the appropriate outcome in such circumstances.

[124]          Mr Farrands says that an interest rate of 6 per cent is warranted, particularly given the delay in selling the Property. The prescribed rate of interest under s 62B of the District Courts Act 1947 was 5 per cent.63

[125]          I consider the prescribed rate to be sufficient. This reflects the likely amount due to AK, and that the continuing delay in selling the Property may have benefitted her in any event (in that Mr Farrands suggests the Property may now be worth in

63 District Courts (Prescribed Rate of Interest) Order 2011. The provisions on interest in the District Courts Act 1947 continue to apply to claims commenced in the District and Family Courts before 1 January 2018; See Interest on Money Claims Act 2016, s 7 (transitional provisions) and s 2, sch 1 cl 2.

excess of $1 million). While the Judge adopted three per cent, that was in addition to the occupation rent award, which I have set aside.

[126]          There will accordingly be an order for interest on any amount found to be due to AK by way of her share of relationship property, running from the date she commenced proceedings in the Family Court to the date of this judgment.64

Result and next steps

[127]          The appellants’ appeal has been successful in part. I make the following orders:

(a)TN and AK jointly hold a 35.8 per cent share of the Property on resulting trust for the second appellant.

(b)$57,000 of the balance held in AK’s Savings Account as at separation is classified as relationship property. The remaining $24,000 is classified as her separate property.

(c)The net relationship property for division, after taking into account relationship debt at separation, is as set in the table at [115] above. (This amount will need to be adjusted once the Property’s actual value is ascertained.)

(d)The net relationship property is to be divided 60 per cent to AK, 40 per cent to TN.

(e)The trial Judge’s orders as to post separation occupation rent and interest payable to AK are quashed.

(f)Interest is to be paid on the final sum (if any) due to AK for her share of relationship property from the date she commenced proceedings in

64     District Courts Act 1947, s 62B.

the Family Court to the date of this judgment at the rate of 5 per cent per annum.

(g)To the extent it is yet to be complied with, the Judge’s order for sale of the Property is quashed.

[128]The appeal is otherwise dismissed.

[129] I do not propose to remit the matter to the Family Court for the final division of relationship property and related orders in accordance with the terms of this judgment. Given the (now very small) amounts in issue, it is in all parties’ interests that these proceedings are concluded without further delay. Accordingly, in the same memoranda or memorandum referred to at [121] above, the parties are to set out their proposed orders for final disposal of the appeal, and if they cannot be agreed, where the parties disagree. For the avoidance of doubt, this is not an opportunity to make further substantive submissions.

[130]The proposed orders will need to address:

(a)A process for fixing the value of the Property, and thus the value of TN’s and AK’s share to be included in the relationship property pool. This may be by, for example, the value being fixed by a registered valuer appointed jointly by the parties, or ultimately by sale of the Property.65

(b)If the parties agree that the Property is to be sold, the appropriate orders for effecting that sale without further delay.

(c)The time period within which any final payment to be made to AK for her share of relationship property is to be made, once the value of the Property has been agreed/crystallised.

65 Given the amounts in issue, and the inevitable costs attendant on a sale, it may be in all parties’ interest that the value is fixed by agreement, through a mechanism such as the receipt of a valuation report. If the parties cannot agree on the process for fixing the Property’s value, the Court will order how the value is to be fixed. That may involve a valuation process, or sale.

(d)The process for removing AK from the Property’s title once any sums due to her have been paid (assuming a process other than sale is adopted to fix the Property’s present value).

Costs

[131]          The costs judgment in the Family Court is quashed. The Family Court is to reconsider costs in that Court in light of the findings in this judgment.

[132]I will need to receive submissions on costs on the appeal.

[133]          It would be in the parties’ interests to agree costs of the appeal. Given the outcome on the appeal, it may be appropriate that costs lie where they fall. While the appeal has been successful in part, a key basis upon which the appeal was brought, namely that the entire Property was held by TN and AK on an express trust for the second and third appellants, was misconceived, and abandoned after the hearing in any event. The trust argument on which the second appellant has been successful was adopted in the appellants’ post-hearing memorandum only. On the balance of the issues, there has been mixed results for the parties. The overall result, particularly relative to the costs of pursuing this matter to a hearing, remains in line with that predicted by Hinton J.

[134]          These are, of course, initial and non-binding views only. I also do not have visibility of any other materials a party may wish to rely on on the question of costs (for example, any Calderbank offers made).

Accordingly, to the extent the parties cannot agree costs, costs memoranda are to be filed within 15 working days of the date of this judgment. Any memoranda in response are to be filed within a further five working days. No memorandum is to be longer than three pages in length. I will thereafter determine costs on the papers.

Fitzgerald J