Turner v del la Varis
[2021] NZHC 776
•13 April 2021
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,
11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
https://www.justice.govt.nz/family/about/restriction-on-publishing-judgments/
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-2398
[2021] NZHC 776
UNDER the Property (Relationships) Act 1976 BETWEEN
LEWIS JOHN TURNER
Appellant
AND
ANTONIA CAMILLE SHOTA COPPELIA DEL LA VARIS
Respondent
Hearing: 24 February 2021
Further submissions 3, 4, 8, 16, 18, 24 and 30 March 2021
Appearances:
Appellant on own behalf
A Malone for the Respondent
Judgment:
13 April 2021
JUDGMENT OF GORDON J
This judgment was delivered by me on 13 April 2021 at 4 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Snedden & Associates, Auckland Counsel: A Malone, Grey Lynn, Auckland Copy to: The Appellant
TURNER v DEL LA VARIS [2021] NZHC 776 [13 April 2021]
Introduction
[1] The appellant, Lewis Turner, appeals orders made by Judge Burns in the Family Court at Auckland on 19 November 20201 in relation to Mr Turner’s application for interim distribution of relationship property under s 25(3) of the Property (Relationships) Act 1976 (the Act).
[2] In his judgment, the Judge ordered the sale of a Grey Lynn residential property owned by a company, Serene Limited (Serene) which is owned by Mr Turner and the respondent, Antonia del la Varis (Mr Turner’s former partner). The Judge also ordered the sale of a section on Waiheke Island owned by the Turner del la Varis Trust (Trust) of which the parties are both trustees and discretionary beneficiaries.
[3] In the Family Court, the need for interim relief was not in dispute (nor was it in this Court). The issue in the Family Court (and again in this Court) was the form of relief.
[4] Although the Family Court Judge made orders in favour of Mr Turner, Mr Turner submits on appeal that both orders for sale were made outside the jurisdiction of the Family Court and create prejudice. Mr Turner submits the relief he had sought in the Family Court should have been granted and he seeks that relief on appeal.
[5]Ms del la Varis seeks to uphold the orders made by Judge Burns.
The properties
[6]The properties owned by the parties, Serene and the Trust are as follows:
(a)It is common ground the shares in Serene are relationship property. Mr Turner legally owns a 95 per cent share in Serene and Ms del la Varis owns a 5 per cent share, but Serene’s shares are owned 50/50 for relationship property purposes. Serene owns:
1 Turner v del la Varis [2020] NZFC 10016.
(i)77 Sussex Street, Grey Lynn (Sussex Street) valued at
$2.15 million as at September 2019. It comprises a main residential dwelling and another dwelling, both of which were rented at the time of the Family Court hearing. Ms del la Varis received rental income from the main house and Mr Turner received rental income from the subsidiary dwelling. By the time of the hearing in the High Court, neither of the dwellings was rented out; and
(ii)22 Richmond Road, Grey Lynn (Richmond Road) valued at
$2.1 million as at September 2019. Ms del la Varis lives in this property;
(b)A residential property at 94 Fairview Crescent, Omiha, Waiheke Island with a CV of $850,000 as at September 2019. Ms del la Varis is the registered proprietor. Mr Turner claims this property is relationship property. Ms del la Varis claims it is one-third separate property and two-thirds relationship property; and
(c)Sections at 90 and 92 Fairview Crescent, Omiha, Waiheke Island, both of which are owned by the Trust, estimated at a combined value of
$900,000.
[7] All properties are mortgage free save for a revolving credit of $200,000 in the name of Serene.
[8] Mr Turner and Ms del la Varis were joined to the proceeding in the Family Court as directors of Serene and as trustees of the Trust.
Background
[9] Mr Turner, and Ms del la Varis were in a de facto relationship for 26 years from late 1993 until, Ms del la Varis says, the end of May 2019. Mr Turner says he ended their relationship on 27 March 2019.
[10] Mr Turner is a commercial barrister. Ms del la Varis [redacted] describes herself as a homemaker.
[11][redacted]
[12] The parties lived in Sussex Street from 1994 to 2002; Richmond Road from 2002 to early 2015; and 94 Fairview from 2015 to 2017.
[13][redacted]
[14] As noted, Ms del la Varis lives in the Richmond Road property. Mr Turner has acquired another property where he lives with his new partner and her children. He has mortgage liabilities that have been deferred and other financial commitments. He needs an interim distribution to alleviate the financial pressure he is currently under.
The Family Court
[15] In the Family Court, Mr Turner submitted that the relief that best accorded with justice and the purposes of the Act would be for 100 per cent of the shares in Serene to be vested in him, without prejudice to a final division of relationship property, on the basis that:
(a)he would, within 14 days, transfer title to Richmond Road to Ms del la Varis; and
(b)he would provide undertakings to the Court, pending final resolution of the proceeding:
(i)that he would not sell Sussex Street;
(ii)he would limit the priority sum of any security given over Sussex Street to a maximum of $1 million;
(iii)he would not incur more than a maximum of $500,000 in debt against Sussex Street (and hence would preserve all other remaining equity); and
(iv)should the Court subsequently require him to make any payment to Ms del la Varis, he would (if required) have recourse to Sussex Street, including by procuring Serene to sell Sussex Street to make any such payment.
[16] He submitted in the Family Court that the proposed relief would allow him to mitigate his current financial position and allow him to clear debt, including to the IRD and on credit cards.
[17] The Judge noted that in his application, Mr Turner had applied for an alternative order vesting 94 Fairview Crescent in his name. But the Judge said this option was abandoned at the hearing (disputed by Mr Turner on appeal).
[18] As noted, Ms del la Varis consented to an order being made on the basis that Mr Turner was experiencing hardship, but she opposed the specific orders sought. She suggested there be an order for sale of one item of property (Sussex Street). Ms del la Varis proposed that Sussex Street be immediately placed on the market for sale with appropriate conditions relating to its marketing and sale. From the proceeds of sale, $650,000 by way of interim distribution to be paid to each party with the balance, anticipated to be about $1,000,000 to be held in trust pending further order of the Court.
[19] Mr Turner opposed that proposal. The judgment records that Mr Turner submitted that the preferable option was for the shares in Serene to be vested in him so that he could transfer Richmond Road back to Ms del la Varis, effectively leaving him with sole control over Sussex Street on account of his entitlement to relationship property. That would leave him free to raise additional mortgage facilities against Sussex Street to deal with his immediate needs and to provide him with an ongoing rental stream as income.
[20] The Judge did not agree with Mr Turner’s proposal and ordered the sale of Sussex Street and the sale of the section at 90 Fairview Crescent.2 The Judge’s reason for ordering the sale of Sussex Street as opposed to retention was because of the close proximity of the Sussex Street property to the Richmond Road property.3 The Judge had earlier stated he detected that Ms del la Varis was concerned that Mr Turner could possibly return to Sussex Street to live (disputed by Mr Turner).4 The Judge also stated that he could see no benefit to both parties in the retention of Sussex Street, referring to the clean break principle.5
[21] The Judge stated the sale process in relation to Sussex Street would meet the needs for the short to medium-term, coupled with a further order he made giving Mr Turner the ability to raise a mortgage secured against Sussex Street to meet his immediate needs. The orders permitted Mr Turner to immediately draw down
$325,000 which was to be repaid from his $650,000 distribution following the sale of Sussex Street. Ms del la Varis was also to receive a $650,000 distribution from the sale of Sussex Street.
[22] In relation to the section at 90 Fairview Crescent, the Judge said that both parties, as trustees, agreed to the sale. He directed that the parties were to cooperate to resolve the driveway or right-of-way issue.6
[23] The Judge ordered that the net proceeds of sale were to be divided equally between the parties and there was to be distribution from the Trust to them individually.
Grounds of appeal and relief sought
[24] Mr Turner says, in summary, that the orders the Judge made for the sale of Sussex Street and 90 Fairview Crescent were outside the jurisdiction of the Family Court as they are properties owned by third parties, Serene and the Trust respectively.
2 The judgment of the Family Court refers to and makes an order for sale of 92 Fairview Crescent. That was later corrected by the Judge to 90 Fairview Crescent.
3 Turner v del la Varis, above n 1, at [15].
4 At [15].
5 At [21](i).
6 There is no legal access to the section at 90 Fairview Crescent. A driveway or right-of-way would have to be provided through the section at 92 Fairview Crescent.
He also says the orders create prejudice. Additionally, he submits the Judge erred in his judgment by taking into account irrelevant considerations and by failing to take into account relevant considerations, which prejudiced him.
[25] The prejudice in particular is that: the orders tie up a significant asset (Sussex Street) by placing well over $1 million in a solicitor’s trust account for an indefinite period; rental income that would otherwise be generated is lost; an asset would be sold in a rising market; real estate agent and legal fees would be incurred; and the orders did not provide for recovered depreciation.
[26]Mr Turner also appeals in relation to discrete factual findings,7 including:
(a)The statement that he was no longer seeking the vesting of 94 Fairview Crescent Omiha Waiheke on the basis that Ms del la Varis has a particular connection to that property;
(b)The statement that the Family Court needed to find a solution that met the objectives sought by both parties (when Ms del la Varis had not made any application); and
(c)(Unless the Family Court confirms that its intention was to order the sale of both of the sections owned by the Trust at Fairview Crescent, Omiha, Waiheke), the further holding that one Trust section be placed on the market for sale (with related orders) and the statement that the parties agreed to that course.
[27] Mr Turner submits that the relief he sought in the Family Court should be granted on appeal (refer [15] above).
7 I do not include all of the findings challenged but only those that pertain particularly to the sale options available.
Approach on appeal
[28] This appeal is brought under s 39 of the Act. It is a general appeal and is therefore to proceed by way of rehearing.8 This Court must therefore form its own view on the merits, including as to matters of evaluation and degree, although Mr Turner bears the onus of satisfying the Court that the decision under appeal is wrong and should be departed from.9
Procedural history
[29] Before I discuss the merits of the appeal, I need to mention part of the procedural history in this Court.
[30] At the hearing on 24 February 2021, I indicated my view that I accepted Mr Turner’s submission that Judge Burns did not have jurisdiction to make the orders for the sale of the two properties, given that the properties concerned were not relationship property or separate property. I will discuss this issue more fully below but mention it here as context for what then followed. At the conclusion of the hearing at 1 pm I reserved my decision. Over the course of the luncheon adjournment, at my request, the registry contacted Mr Turner and Ms Malone for Ms del la Varis asking them to further appear at 2.15 pm. At that time, I made a suggestion regarding potential consent orders, namely that Serene might raise a loan on the security of the property owned by the company and that Serene might then on-lend to Mr Turner.
[31] Ms Malone and Mr Turner then conferred, and as a result: I allowed the appeal; quashed the orders made by Judge Burns on 19 November 2020; and made consent orders. In making the orders, I reserved leave to either party to apply to the Court, “if there was any difficulty implementing this agreement”.
[32] Mr Turner filed a memorandum and an affidavit in support, both dated 8 March 2021. In short, the position is that neither his bank nor four other banks he has approached, is willing to lend funds whether to Serene or to him. In those
8 Property (Relationships) Act 1976, s 39(3).
9 Austin Nichols & Co Inc v Stitching Lodestar [2008] 2 NZLR 141 (SC).
circumstances, because the consent orders cannot be implemented, he asks that the Court proceed to judgment.
[33] Ms Malone opposes, submitting first, that leave was restricted to the implementation of the orders only and does not extend to asking the Court to set aside the consent orders in their entirety and issue a remedies judgment in their stead. Second, she submits the proper course is for this Court to remit the matter back to the Family Court for further consideration with a direction that the Judge be guided by my view expressed in my minute of 24 February 2021, that the Judge did not have jurisdiction to make the orders sought, given the properties were not relationship property or separate property. Third, Ms Malone submits that if Mr Turner wishes to set aside the consent orders, the proper course is to file a formal application.
[34] I do not accept Ms Malone’s submission that the reservation of leave should be restricted in the way in which she submits. There is difficulty in implementing the orders. The difficulty is to such an extent that the orders cannot be implemented. I consider the reservation of leave extends to cover this situation. I consider the Court has jurisdiction to set aside the consent orders on the basis of either or both of, the order reserving leave made as part of the consent orders and/or the Court’s inherent jurisdiction.10
[35] Second, if I were to remit the matter back to the Family Court, there would remain in existence orders of this Court which cannot be, and which will therefore not be implemented. That creates a procedural difficulty in itself and may well cause procedural difficulties for the Family Court in considering further orders. Finally, while I agree Mr Turner should have filed a formal application, I am prepared to proceed on the basis of his memorandum which is supported by an affidavit.
[36]For the above reasons, I cancel the consent orders made on 24 February 2021.
10 Stead v The Ship “Ocean Guest of Arne” [1995] 3 NZLR 415, (1995) 8 PRNZ 610 (HC) at 420; Smallbone v London [2019] NZHC 1298 at [48]; and SCC (NZ) Ltd v Samsung Electronics New Zealand [2016] NZHC 2630 at [11]–[12].
Did the Family Court have jurisdiction to make the orders (sale of Sussex Street and sale of section at 90 Fairview Crescent)?
[37] The Court has power under s 25(3) of the Act to make orders at any time relating to the ownership or vesting of any specific relationship property “as it considers just”. The Court also has broad discretionary ancillary powers under s 33 of the Act in respect of the s 25(3) jurisdiction, including to make all such orders as may be necessary or expedient to give effect to any order including under s 25, to order the vesting of any property.
[38] There are judgments of this Court that hold that interim orders may also be made in respect of separate property. I will refer to those decisions later in this judgment. However, this does not extend to making orders in respect of property owned by third parties.
[39]Fisher on Matrimonial and Relationship Property states:11
10.23 Nature of Interest in company
Because of the statutory relationship property regime can be applied only to property owned by the spouses or de facto partners themselves, only the spouses’ or de facto partners’ shares, current accounts and any other rights which the spouses or de facto partners may have as individuals in or against the company are of consequence under the Act … Thus a company’s ownership of the family home, family vehicles, or household chattels removes ownership of those assets by the spouses or de facto partners themselves and thus prevents classification as relationship property and division under ss 11 and 13. … the Court’s powers in implementing a division of relationship property appear to be limited to orders affecting a spouse’s or de facto partner’s shares in a company, as distinct from the company’s assets.
[40]In Hedley v Hedley,12 the Court of Appeal stated:
Technically, of course, it was the shares of the parties in the company which constituted matrimonial property. … With respect to that latter argument it overlooks the fact that the item of matrimonial property in question was the shares in the company. That separate legal entity of the company cannot be disregarded and its assets and liabilities treated as the assets and liabilities of its shareholders.
11 RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online looseleaf ed, LexisNexis) at [10.23] at 15,261.
12 Hedley v Hedley (1980) 4 NZFLR 33 at 34.
[41]In Reid v Reid, Greig J stated:13
The whole of the land and buildings so occupied are owned by the Company. The home in which the parties have lived is part of the Company’s assets. The wife claims that it is a matrimonial home and that it is beneficially owned by the husband in terms of the definition of “owner” in the Matrimonial Property Act. I do not consider that the definition, having regard to the intent of the Act, alters the ordinary law as to companies. A shareholder is not the owner or the beneficial owner of the assets of the separate entity of the company. That is an aspect of the fundamental basis of incorporation and follows from the principles declared in Salomon v Salomon [1897] AC 22. There is nothing in the Matrimonial Property Act which could be said to affect that firm principle either expressly or impliedly. In the result there is no matrimonial home within the meaning of the Act.
[42] Neither party referred me to any authority which holds that a court may order the sale of property owned by a third party and I am not aware of any such authority. I therefore conclude that Judge Burns erred when he made an order for the sale of Sussex Street, which is neither relationship property nor separate property, but property owned by Serene, a third party. The same principle applies to the sale of 90 Fairview Crescent. It is not relationship property or separate property. It is property owned by the Trust. The Judge also erred when he ordered the sale of 90 Fairview Crescent. He did not have jurisdiction to make either order.
What is the appropriate form of relief?
[43] The parties made extensive submissions on various issues including a large number of alleged discrete errors made by the Judge in his factual findings. I intend no discourtesy to the parties by not referring to those submissions. It is unnecessary to do so because there are effectively only two options available for consideration (given that it is accepted that interim relief should be granted):
(a)Mr Turner’s preferred option that all the shares in Serene be vested in him; or alternatively
(b)The sale of 94 Fairview Crescent.
13 Reid v Reid HC Wellington M503/79, 20 December 1982 at 2.
[44] The sale of one or both of the sections at 90 and 92 Fairview Crescent, owned by the Trust, is not an option. Mr Turner says he would cooperate in the two sections being sold. However, Ms del la Varis only consents to 90 Fairview Crescent being sold, not 92 Fairview Crescent. Mr Turner does not consent to 90 Fairview Crescent being sold on its own. That then is the end of the matter in relation to the sections owned by the Trust.
[45] But I add for completeness, that Mr Turner’s objection to 90 Fairview Crescent being sold on its own does have a reasonable basis. The section does not have a driveway and legal access is only achievable from 92 Fairview Crescent. To arrange and implement legal access would require the parties to work together, when they simply cannot do so without conflict.
[46] I now address Mr Turner’s preferred option. There are at least two difficulties with Mr Turner’s proposal that all the Serene shares be vested in him. In his oral submissions Mr Turner said that if the order were made, he would then have the right to remove Ms del la Varis as a director. However, Serene’s constitution provides that the number of directors shall not at any time be less than two.14
[47] In response to that evidence, Mr Turner submitted that by special resolution he would be able to appoint another director, remove Ms del la Varis as a director and execute the necessary bank documentation. He submits Ms del la Varis would remain fully protected by his undertakings.
[48] I do not consider this Court should make orders that would lead to Ms del la Varis being removed as a director. She has been joined to the proceedings as a director of Serene.
[49] But more importantly, (and while not overlooking Mr Turner’s undertakings) once the shares vest in Mr Turner, they become his separate property. This option removes the ability of the Court to make orders in relation to that property at the substantive hearing.
14 Which this Court received as fresh evidence on appeal.
[50] The second difficulty is a practical one. Mr Turner concedes that if this Court also ordered the Sussex Street rental income be shared equally, he would not be able to raise a loan.
[51] Ms Malone confirms that Ms del la Varis does seek an equal sharing of the Sussex Street rental income on an interim basis.15 This was reflected in one of the orders forming part of the consent orders which was that:
The parties shall immediately take steps to rent out both dwellings at 77 Sussex Street. The rental shall be applied to tax, rates, insurance and agreed outgoings. The balance shall be divided equally between the parties.
[52] Mr Turner disputes that Ms del la Varis is entitled to receive anything on an interim basis when it was his application that was heard in the Family Court. Ms del la Varis did not make an application for interim distribution.
[53]That submission ignores s 34 of the Act which provides:
34 Discretion of court as to orders
Where application is made to the court for any order under any provision of this Act, the court may, subject to the provisions of the Act, make any other order under this Act which could have been made if application for that other order had been made when the first-mentioned application was made.
[54] It also overlooks the draft orders filed by Ms del la Varis in the Family Court proposing that each of the parties receive $500,000 from the proceeds of the sale of Sussex Street (on the basis that this sum would be 50 per cent of the net proceeds).
[55] Mr Turner also argues that there is no evidential basis for financial hardship on the part of Ms del la Varis and that Ms Malone is simply making statements from the bar. That is not correct. There was affidavit evidence from Ms del la Varis before the Family Court that she was suffering financial hardship. Ms del la Varis says she does not work in paid employment and she has no career or independent source of income. [redacted] Ms del la Varis receives a benefit from Work and Income New Zealand. [redacted] She says she does not receive any additional funding from Mr Turner [redacted].
15 The rental income is $1,575 per week.
[56] When Sussex Street was rented out (at which time Ms del la Varis received the income from the larger house on the property being $965.00 per week including $15 for water) she said she diverted that income to her personal bank account and it was applied towards outstanding rates, insurances and property related expenses and towards her legal fees.
[57] I accept that given the likely passage of time before the substantive proceeding is heard, Ms del la Varis has established a need and it would be just as between the parties for the rental income from Sussex Street to be shared, if the Court were to accept Mr Turner’s preferred option, namely the vesting of the Serene shares in him.16 But as noted in [50] above, the sharing of rental income means Mr Turner could not borrow against Sussex Street.
[58] For all the reasons set out above, I do not accept that the Court should make, or is able to make, an order in terms of Mr Turner’s preferred option.
[59] That only leaves the possibility of the sale of 94 Fairview Crescent which Mr Turner seeks as the alternative form of relief. Ms del la Varis resists this option. First, Ms Malone submits that Mr Turner did not pursue his application for an interim order for the sale of this property, in the hearing before the Family Court. She submits it was only resurrected by Mr Turner during the course of the hearing before the High Court. Ms Malone submits Ms del la Varis was denied the opportunity to present considered submissions to the Court.
[60] Mr Turner’s position is that he did not abandon this option in the Family Court. However, even if he did so (and it is not possible for the Court to determine which party is correct on this issue) this was an option this Court explored with counsel at the hearing of the appeal. Ms Malone had the opportunity to make submissions at that time. Additionally, subsequent to Mr Turner advising that the banks he had approached would not assist with a loan, Ms Malone filed a memorandum which
16 For completeness, I note that as at 23 July 2020 Ms del la Varis had the sum of $93,521.66 in two bank accounts. That is balanced out by the amount of $109,500 Mr Turner received from the parties’ joint bank account on separation.
addressed this issue (among others). I do not accept that she has lacked the opportunity to make meaningful submissions to the Court.
[61] Ms Malone further submits that in making orders for an interim distribution, “the Court should only vest such sum in one party as the Court is quite satisfied that the party would, at least, receive upon ultimate determination”.17 Ms Malone submits the Court cannot be satisfied that Mr Turner will receive at least half of the property at 94 Fairview Crescent in the substantive hearing.
[62] Ms Malone says Ms del la Varis’ mother purchased 94 Fairview Crescent in 1994 and it was registered in the name of Ms del la Varis and her two sisters as to one-third share each. In 2007, Ms del la Varis’ sisters’ shares were acquired by the parties and the whole of the property registered in Ms del la Varis’ name. Ms Malone submits that Ms del la Varis’ original one-third share of the property is her separate property pursuant to s 10(1)(ii) of the Act.
[63] Ms Malone’s submission is misconceived in two respects. First, the property at 94 Fairview Crescent (which was placed in the name of Ms del la Varis by the parties in 2007) cannot have two separate characters. Mr Turner submits it is clear that 94 Fairview Crescent is relationship property. He says it is uncontested that the property was purchased (to the extent cash was needed) with relationship funds, namely mortgage finance, and that it was purchased and funded for the benefit and use of the relationship, and later used as a home.
[64] In any event, there are cases of this Court which have considered the issue of whether an interim distribution may be made from separate property.
[65]In Cossey v Bach, Fisher J said:18
Although I have by this stage concluded that all of the relevant assets constitute separate property, s 25(3) of the Matrimonial Property Act permits the Court to “make such declaration or order relating to the status, ownership, vesting, or possession of any specific property as it considers just”. The jurisdiction appears to extend to separate property. Orders may therefore be
17 B Atkin Relationship Property: Orders of the Court, Family Law Service (NZ) at , [7.401], citing
MDC v EJK FC Blenheim FAM 2004-006-159, 7 July 2004 at [35].
18 Cossey v Bach [1992] 3 NZLR 612 (HC) at 639.
made vesting particular assets in their entirety and particular parties notwithstanding the existing state of the legal title, with compensating monetary adjustments in favour of other parties …
[66]Then, in SM v LFDB, Ellis J said:19
I note that there is authority that suggests that an order made under s 25(3) need not be limited to relationship property: Cossey v Bach. Although Mrs Hinton candidly expressed her reservations about the correctness of that authority, the plain words of the subsection do appear to admit that conclusion. The relevance of such a conclusion in the present case is that even if I could not be satisfied to the requisite standard that the debt owed by LFDB’s company to LFDB was relationship property, I would not be precluded from making an interim distribution order in relation to it.
(Citations omitted)
[67] In Owen v Thomas, Duffy J, after referring to the above two cases and a passage in Fisher on Matrimonial and Relationship Property,20 stated that she had less confidence than Ellis J as to whether orders under s 25(3) of the Act can affect separate property.21 Duffy J concluded:22
On one view, therefore, once a Court has made decisions under those provisions in the Property (Relationships) Act that have the effect of adjusting or drawing what would otherwise be separate property into the pool of relationship property for distribution, those findings may then be put into effect by an order made under s 25(1)(b). In this way, the Court’s ability under s 25(1) would not be constrained to ordering division of property that prima facie was relationship property. If s 25(1) were to be read this broadly, it would also allow for s 25(3) to be read as applying to specific property that was separate property of the type that would be susceptible to being drawn into the pool of relationship property. However, in that case, an order under s 25(3) that affected specific separate property could only be made once a Judge was satisfied that the circumstances of the parties justified the separate property of one party being drawn into the pool of relationship property to be divided under s 25(1) …
…
[68] For Ms del la Varis to require a determination that property is relationship property would defeat the purpose of an interim distribution which is sought prior to the ultimate determination. If a party could prevent interim distribution from
19 SM v LFDB [2013] NZHC 1056 at [31].
20 RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online looseleaf ed, LexisNexis) at [18.56].
21 Owen v Thomas [2014] NZHC 2200 at [22].
22 At [25].
occurring by claiming that an asset is not relationship property, it would result in perverse incentives and unjust outcomes.23
[69] The second misconception relates to the calculation of the value of the relationship property. The calculation made at the ultimate determination is in respect of all of the property in total, not in respect of each individual property comprising the total pool. In the substantive claim, Ms del la Varis says she has a substantial economic disparity claim (or perhaps more accurately a claim for unequal sharing). However the claim is classified, the expert witness for Ms Del La Varis calculates, on a worst- case basis for Mr Turner, his entitlement to the relationship property pool totals
$662,000. Mr Turner’s expert disagrees. Without necessarily accepting the evidence of Ms del la Varis’ expert, it is apparent that the sale of 94 Fairview Crescent, which is valued at $850,000, would produce $425,000 if distributed equally. This amount therefore does not exceed, even on a worst-case basis, for Mr Turner the amount he would receive on final distribution. Even adding in 50 per cent of the $1575 weekly income from Sussex Street does not exceed the figure calculated by Ms del la Varis’ expert.
[70] An order for the sale of 94 Fairview Crescent is the only available option for interim distribution purposes. The parties accept that there is a need on Mr Turner’s part for interim relief. The Judge did not err when he found Ms del la Varis was also in need of interim relief.
Application to admit fresh evidence on appeal
[71] Finally, in the substantive proceeding Ms del la Varis claims that her separate property interests in both Richmond Road and Sussex Street were disposed of to Serene at Mr Turner’s direction for inadequate or no consideration. In relation to Richmond Road, Ms del la Varis claims that its transfer to Serene occurred without her having the benefit of independent legal advice.
[72] Mr Turner strongly disputes that and sought to file fresh evidence on appeal which he says proves otherwise. Even if I were to admit the evidence, the Court could
23 See SM v LFDB, above n 19, at [33].
not reach a view on the issue without cross-examination; and in any event, a determination on this point is not necessary in order to dispose of the appeal. I therefore do not admit the evidence.
Result
[73] The appeal is allowed. To the extent it is necessary to do so again, I quash the orders made by Judge Burns on 19 November 2020.24 I make orders:
(a)directing the sale of the property at 94 Fairview Crescent, Omiha, Waiheke Island;
(b)that the net proceeds of the sale are to be divided equally between Mr Turner and Ms Del La Varis;
(c)that the parties shall immediately take steps to rent out both dwellings at 77 Sussex Street, Grey Lynn, Auckland;
(d)that the rental income from 77 Sussex Street shall be applied to tax, rates, insurance and agreed outgoings; and
(e)that any balance shall be divided equally between the parties.
Costs
[74] Mr Turner, as the successful party on the appeal, is prima facie entitled to costs. I did not hear from the parties on costs, and they are accordingly reserved.
[75] In the unlikely event that the parties are able to agree on costs, they are to file a joint memorandum within 20 working days of the date of this judgment. In the absence of agreement, Mr Turner is to file and serve his memorandum within five working days of the date for the joint memorandum. Ms del la Varis is to file and serve her memorandum in response within a further five working days.
24 As noted in [31], the orders made by Judge Burns were quashed when I made the consent orders on 24 February 2021.
[76] Costs memoranda should not exceed five pages (excluding attachments). I will determine costs on the papers.
Gordon J
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