Vessey v Vessey HC Auckland Ap169-Sw00

[2001] NZHC 320

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY AP169-SW00

IN THE MATTER of the Matrimonial Property Act 1976

BETWEEN: KEVIN RUARN VESSEY
Appellant

AND: KATHRYN MAY VESSEY
Respondent

Hearing: 21 March 2001

Judgment: 1 May 2001

Counsel: Charles P Gallagher for appellant
Philippa A Cunningham for respondent

JUDGMENT OF WILLIAMS J

[1] On 5 June 1972 the appellant, Mr Vessey, married the respondent. In about 1975 they moved to 9 Wharf Road, Albany, to live. The owner of the nextdoor property, 11 Wharf Road, was a Mr McNeill who features in the matters in issue on this appeal. He died in May 1988 aged 84. Mr Vessey became the registered proprietor of 11 Wharf Road in the circumstances discussed later. Mr and Mrs Vessey separated on 15 February 1999 after 27 years of marriage. There were two children who were aged 20 and 22 at the date of the appeal hearing.

[2] On 7 May 1999 Mrs Vessey issued proceedings under the Matrimonial Property Act 1976 (to which all sections cited in this judgment refer) out of the North Shore District Court seeking an equal sharing of the couple’s assets. By the time that application came on for hearing on 5 December 2000, the only aspects remaining unresolved were a dispute about chattels, Mrs Vessey’s claim for occupational rental of the matrimonial home in which Mr Vessey had lived since separation, and a claim by Mrs Vessey that 11 Wharf Road, Albany, was matrimonial property.

[3] In an oral decision, O’Donovan DCJ upheld Mrs Vessey’s claim to 11 Wharf Road. By that stage the land had been sold and he accordingly directed that the sale proceeds be equally divided between the parties. Notwithstanding the appeal, by the time of this hearing Mrs Vessey had been paid her share of the proceeds, $57,372.25, so that the appeal effectively became a claim by Mr Vessey for the repayment of that sum to him. There was no appeal against any other aspect of the judgment.

[4] As will be seen, the judgment in the District Court was essentially based on a finding that 11 Wharf Road had become matrimonial property by virtue of the operation of s 10. But by the time of submissions in this Court, the suggestion that 11 Wharf Road had been intermingled with other matrimonial property and s 10 accordingly applied had been abandoned by Mrs Vessey. Instead a number of fresh grounds were advanced on her behalf by counsel - not counsel in the Family Court. The case advanced on Mrs Vessey’s behalf in this Court would have been only faintly recognisable to the learned District Court Judge by comparison with the case presented on her behalf at first instance.

[5] Turning to the facts of the matter as they relate to 11 Wharf Road, the learned District Court Judge noted that Mr McNeill was in residence when the Vessey family moved into 9 Wharf Road. He was a single man, Scots by birth, who had been a mariner and a shipwright and had lived what the learned District Court Judge described as an (para 15 p 8) “adventurous life” before buying 11 Wharf Road in 1968. He had never married, had few relatives in this country or overseas, and became somewhat reclusive to the point where few visitors, even the Vesseys, were admitted to his very modest home. It lacked bathing and toilet facilities and the section itself was unkempt.

[6] That notwithstanding, the Vesseys, whom the learned District Court Judge described as “friendly people”, became good neighbours to Mr McNeill and extended many kindnesses to him. As examples, Mrs Vessey prepared evening meals and took them to his home when he was unwell. Though there was some dispute as to the frequency of such occasions, the learned District Court Judge accepted Mrs Vessey’s evidence on that topic. On the other hand, Mr Vessey worked from home and the learned District Court Judge accepted his account of numerous lengthy conversations between them to the point where Mr Vessey (para 17 p 8) would find it “hard to extract himself and get back to his work”. It was Mr Vessey who arranged his admission to a Salvation Army home when Mr McNeill became infirm. There was ample evidential foundation for the learned District Court Judge’s view (para 18 p 9) that Mr Vessey was “more closely associated” with Mr McNeill though both visited him in the home and later at North Shore Hospital during his final illness.

[7] Mr Vessey’s evidence was that Mr McNeill discussed his will with him on occasions and said he would leave his estate to Mr Vessey because he had few relatives, there was an unfavourable exchange rate between New Zealand and Scotland and he believed that the New Zealand Government would take most of his estate. The learned District Court Judge, however, recorded that Mrs Vessey too, gave evidence of similar conversations with Mr McNeill as a result of which she believed that he intended to leave his estate to both Mr and Mrs Vessey or perhaps to the family as a whole.

[8] The learned District Court Judge went on to hold (para 19 p 9):

“In evidence today the husband acknowledged that although as he claims [Mr McNeill] spoke of leaving the estate to him, namely, the husband, he, the husband, formed the impression that really [Mr McNeill] was talking about leaving it to Mr and Mrs Vessey or to their family.”

Counsel for Mr Vessey submitted at the hearing of the appeal that there was no evidence to support that finding but the Court notes that, although the lead-up to the question may not have been entirely clear, Mr Vessey did say in cross-examination (p 5) that “I assumed at the time that it was possible that he would leave it to us” that is to say to both parties. The learned District Court Judge had the advantage of seeing and hearing the witnesses and in the light of that passage it would be unsafe to conclude that there was no evidential foundation for the learned District Court Judge’s finding.

[9] When Mr McNeill died it was discovered that his will dated 26 September 1986 appointed Mr Vessey sole executor and left the whole of his estate to him. Apart from 11 Wharf Road, the estate consisted of some $12,000 in cash which Mr Vessey used in repayment of the mortgage on 9 Wharf Road, the matrimonial home. Mrs Vessey explained the terms of the will by saying that Mr McNeill’s old-fashioned nature was likely to have led him to the view that matters of property were best handled by men even though he intended to benefit them all.

[10] In light of the terms of the will, the learned District Court Judge then turned to consider Mrs Vessey’s claim to a half share of 11 Wharf Road under s 10 on the basis on which it was presented to him in the Family Court, namely that, despite the terms of the will, Mr McNeill intended to benefit both parties and accordingly Mr Vessey should be regarded as acquiring 11 Wharf Road as a constructive trustee for both.

[11] Mr Vessey resisted the claim on the basis that the will was clear, he was the sole registered proprietor of the property and accordingly s 10 did not apply. 11 Wharf Road was his separate property.

[12] The learned District Court Judge commenced his consideration of the matter by posing what he saw as the essential question in the following terms ( para 21 p 10)

“. . . it seems to be acknowledged by the husband that in the event that I find that [Mr McNeill] intended that the section should be a gift to both parties then it is matrimonial property, notwithstanding what in fact [Mr McNeill] said in his Will. With respect that attitude seems to me to be consistent with principle and certainly I have no difficulty in finding that that is the legal position.”

[13] The learned District Court Judge acknowledged finding the answer to that question difficult having regard to the evidence particularly because, as he put it (para 22 p 10).

“. . . whatever [Mr McNeill] intended, it is clear that following his death the parties acted in a way which indicated that they regarded the property as belonging to both of them and I am satisfied that had it not been for their separation the issue as to whether or not [Mr McNeill] intended a gift to one or both of them would never have arisen between them and my impression of the husband when he gave evidence is that he acknowledged that.”

[14] Although the learned District Court Judge did not record the details of the evidence which led him to the view that the parties “acted in away which indicated that they regarded the property as belonging to both of them”, that was a reference to evidence that

[a] The fence between 9 and the contiguous 11 Wharf Road was removed;

[b] 11 Wharf Road was used by the parties and their children as part of the same property;

[c] The children played in the cottage and the parents used it for such activities as storage;

[d] Mr Vessey applied to the North Shore City Council to have both properties rated as one for purposes such as rubbish collection and the like;

[e] 11 Wharf Road was used twice, in 1991 and 1996, as security for loans raised for matrimonial purposes such as the purchase of cars.

[15] Then, after saying that he accepted both parties as truthful, the learned District Court Judge summed up his views in the following passage (paras 23, 24 p 11)

“. . . at the end of the day I think I am obliged to find that what [Mr McNeill] intended to do was to benefit this family as a whole and he intended to reward these parties for their generosity and charity to him during his lifetime. It is unfortunate that his Will as expressed in the way it was, but . . . . I accept that he probably was of that generation where he would see nothing inconsistent about saying in his Will that the property was left to the husband, whereas intending in fact and in reality that he was conferring a benefit upon the parties. He of course was not to know that at some stage in the future these people would become separated and that the way he had worded his Will would create a problem for them. But that, it seems to me, does not matter. It seems to me that it must have been within his contemplation that by making a gift of the section or the property to Mr Vessey, he was thereby conferring a benefit upon this generous couple as a whole. That is the view that I have reached of the matter.”

Accordingly, I find that the section is matrimonial property.

[16] Section 10(1) reads:

“10. (1) Property, being-

(a) Property acquired by succession or by survivorship or as a beneficiary under a trust or by gift from a third person; or

(b) The proceeds of any disposition of property to which paragraph (a) of this subsection applies; or

(c) Property acquired out of property to which paragraph (a) of this subsection applies,-

shall not be matrimonial property unless, with the express or implied consent of the spouse who received it, the property or the proceeds of any disposition of it have been so intermingled with other matrimonial property that it is unreasonable or impracticable to regard that property or those proceeds as being separate property.”

[17] Noting that s 10(1) does not apply only to property acquired during marriage, where, as here, 11 Wharf Road was acquired in the name of Mr Vessey after the marriage and is thus matrimonial property under s 8(e) unless s 10 applies - s 8(e) being subject to s 10 - it is apparent that the steps to be considered in deciding whether s 10(1) applies, are

[a] Has the property been acquired from a third person by succession, survivorship under a trust or by gift (or is it property to which s 10(1)(c) applies)?

[b] If the answer to question [a] is “Yes”, has the property or the proceeds of its disposition been intermingled with other matrimonial property?

[c] If the answer to questions [a] and [b] is “Yes”, has that intermingling been with the express or implied consent of the recipient spouse?

[d] If the answer to questions [a] [b] and [c] is “Yes’’, is it unreasonable or impracticable to regard that property or proceeds as separate property?

[18] When s 10(1) is so analysed it becomes clear that there are at least two ways in which Mrs Vessey’s claim, under s 10(1) cannot succeed, at least in the way in which it was advanced in this Court.

[19] In the first place, counsel for Mrs Vessey submitted that notwithstanding that Mr McNeill’s will named Mr Vessey as its sole beneficiary and notwithstanding the registered proprietorship of 11 Wharf Road, the property should be regarded as being held by Mr Vessey on a constructive trust for both of them. However, even if that argument were accepted, it would not assist Mrs Vessey since she and Mr Vessey would then be regarded as having acquired the beneficial interest in the property by succession as joint tenants or tenants in common in equal shares and the question would then be whether s 10 applied to the beneficial interests regarded as having been acquired by both Mr and Mrs Vessey and not just to Mr Vessey. The balance of s 10(1) would still require to be satisfied and the same tests applied. Presumably Mrs Vessey would accept that the beneficial interest that she would be deemed to have acquired in that event became matrimonial property but the same tests under s 10 would continue to apply with regard to the beneficial interest which Mr Vessey would then be regarded as having succeeded and he, no doubt, would continue to resist the submission that all the tests under s 10 were satisfied in relation to that share. The only difference, therefore, following the argument advanced on Mrs Vessey’s behalf in this regard would be that the amount in dispute would be halved.

[20] The second point is that, as the analysis of s 10(1) shows, each of the steps set out must be sequentially satisfied for the property acquired by the means set out in s 10(1) to become matrimonial property. One of those steps is proof that the property so acquired has been intermingled with other matrimonial property. And in this case, as earlier noted, it vas expressly conceded on Mrs Vessey’s behalf that no intermingling had occurred. Given that s 10(1) was effectively the entire focus of the hearing in the Family Court and the initial basis of the appeal to this Court, that concession was fatal to Mrs Vessey’s opposition to the appeal so far as it continued to rely on s 10(1).

[21] In those circumstances, it is unnecessary to consider whether the concession was rightly made though the cases collected by the learned author of Fisher on Matrimonial Property (3rd ed para 11.61 p 456ff) demonstrate that although the identity of the property rather than its use is the determining factor (Reid v Reid (1980) 4 MPC 170, 171; Mills v Dowdall [1983] 1 NZLR 154; Murphy v Murphy (1989) 5 FRNZ 180) intermingling has always been regarded as a question of fact and the cases demonstrate that land can be intermingled with matrimonial property (Geddes v Geddes [1987] 1 NZLR 303, 305; Murphy (supra)at 183-184). Here, given the uses to which 11 Wharf Road was put, as earlier described, it might, perhaps, have been a moot point whether it had been intermingled with matrimonial property such as to need consideration of the unreasonableness or impraticability of continuing to regard it as being separate. But the issue does not arise in light of the concession.

[22] As earlier noted, Mr Vessey’s appeal was resisted by Mrs Vessey on two grounds, one of which had been notified to Mr Gallagher, counsel for the appellant, sufficiently in advance of the hearing to enable him to be prepared to meet it. That argument was that 11 Wharf Road should be regarded as matrimonial property because it came within the definition of “matrimonial home” in s 2(1) which relevantly reads:

“Matrimonial home -

(a) Means the dwellinghouse that is used habitually or from time to time by the husband and the wife or either of them as the only or principal family residence, together with any land, buildings, or improvements appurtenant to any such dwelling house and used wholly or principally for the purposes of the household;”

[23] The question whether land and buildings are appurtenant to the dwellinghouse used as the matrimonial home and have been used, at least principally, for household purposes, is a question of fact (Fisher, op.cit. para 12.3 p 483) usually determined on the “circumstances of acquisition and utilisation and the word has a broader meaning than in strict land law cases (Jorna v Jorna (1979) 2 MPC 104, 107). In that case Speight J held (ibid) that there was:

“no positive act of disassociation or division during the time of the Jorna occupation which should cast this piece of land in any role other than as part of the family home Certainly it was not used for any other purpose.”

[24] As the learned author of Fisher puts it (ibid):

“‘Appurtenant’ does not seem to lend itself to rigid definition but instead seems to involve a value judgment based upon a number of factors. These factors include the extent to which there is an absence of any physical division such as a fence or wall between the dwellinghouse and the extras in question, whether the dwellinghouse and the extras were acquired at the same time and for the same general purpose, whether they are physically contiguous or at least in close proximity to each other, whether they are laid out in a manner suggesting a physical relationship with each other, the previous history of the two properties as separate or combined, the general attitude of the parties to the two properties as separate or combined, whether the extras have had any use or are likely to have any use for any purpose other than that of the household, and whether the extras are on the same certificate of title. In general, there seems to be a judicial readiness to include extras with the matrimonial home where they are physically contiguous with the dwellinghouse, are not excessively large in the context of New Zealand residences generally and have been used principally for the purposes of the household.”

[25] Considering the matter, as the Court must, in terms of the use to which 11 Wharf Road was put (s 2(4)), there is force in the submissions on Mrs Vessey’s behalf that the land was appurtenant to 9 Wharf Road and was principally used for household purposes. The parties and their families incorporated 11 Wharf Road in 9 Wharf Road by removing the fence, by using the cottage for household storage or as a playhouse or a rumpus room, by using the land as a playground for the children, together with the evidence as to the rates reduction and the use of the property as security.

[26] Mr Gallagher, however, submitted that 11 Wharf Road did not come within the definition of “matrimonial home”, again drawing attention to the registered proprietorship, the fact that it was not acquired for matrimonial purposes and that it was, in his submission, not essential for family use or used exclusively for such a purpose. He submitted the evidence as to usage was insufficient to found the conclusion that 11 Wharf Road was appurtenant to 9 Wharf Road in the sense required by the definition of “matrimonial home” and the authorities.

[27] Whilst there is a certain force in Mr Gallagher’s submissions about the paucity of evidence that is, of course, because the basis on which the appeal was resisted was not a basis raised in the Family Court. Nonetheless, such evidence as there is supports Mrs Vessey’s contention that 11 Wharf Road comes within the definition of “matrimonial home” as being land appurtenant to the family home and used principally for household purposes. As the learned District Court Judge commented (para 22 p 10) “the parties acted in a way which indicated that they regarded the property as belonging to both of them”. In those circumstances, in this Court’s view, notwithstanding the fact that this argument was raised so late in the resolution of the dispute between these parties, Mrs Vessey has demonstrated that 11 Wharf Road came within the definition of “matrimonial home” for the reasons earlier advanced and accordingly the appeal falls to be dismissed on that ground.

[28] It remains to deal with a number of other matters.

[29] The first of those is that at the hearing of the appeal, Mrs Cunningham sought to advance a ground of opposition to the effect that if it were held that 11 Wharf Road was Mr Vessey’s separate property, Mrs Vessey was entitled to an unequal share of the balance of the matrimonial property pursuant to s 14. That argument was not pursued after it was pointed out to Mrs Cunningham that Mrs Vessey had, ever since the commencement of this case in the Family Court, contended that this was a marriage which justified equal sharing and there had been no prior notice to counsel for Mr Vessey of any submission to the contrary.

[30] The second point is to note is that s 17 was not impleaded by any party.

[31] The third point is to note that, although arguments based on constructive trust were advanced, the Court has found it unnecessary to deal with those arguments in the light of its comments concerning that matter appearing in para [19] of this judgment.

[32] The next matter relates to the decision in Mills v Dowdall (supra). The Court suggested to counsel during the hearing that the case may have been of relevance. Following the hearing, a request was received from Mrs Cunningham for leave to make additional submissions on the relevance of the decision. Mr Gallagher opposed. In the event, despite its appreciation of counsel’s preparedness to assist, the Court found it unnecessary to seek that further assistance in relation to that case.

[33] The final matter relates to costs. Having regard to the way in which Mrs Vessey’s opposition to the appeal was argued in this Court, the Court’s inclination is to order that costs should lie where they fall. If, however, either counsel takes the view that an order to that effect is not appropriate, costs will be reserved and memoranda may be filed with counsel certifying, if they consider it appropriate so to do, that the Court may determine the question of costs without the necessity for a further hearing. If memoranda are to be filed both counsel should file the same within 28 days of the date of delivery of this judgment.

[34] In the result -

[a] Mr Vessey’s appeal is dismissed.

[b] The question of costs is reserved in terms of para [33] of this judgment.