White v Kay
[2017] NZHC 1643
•17 July 2017
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
CIV 2016-443-062 [2017] NZHC 1643
UNDER the Property (Relationships) Act 1976 IN THE MATTER
of an appeal against a decision of the
Family Court at New PlymouthBETWEEN
MICHAEL COLIN WHITE Appellant
AND
MAREE BETTY KAY Respondent
Hearing: 1 May 2017 Counsel:
A Laurenson for Appellant
C Delston for RespondentJudgment:
17 July 2017
JUDGMENT OF ELLIS J
[1] Mr White and Ms Kay were in a de facto relationship for 28 years from the mid 1980s until 2012. They had one child together who is now an adult.
[2] In 2004, Mr McKay and Ms Kay entered into an agreement contracting out of the presumptive equal sharing regime under the Property (Relationships) Act 1976 (the PRA). The effect of that agreement was that, when the relationship ended, Ms Kay was entitled to nothing. But Mr White kept assets now worth over
$1 million, including the family home.
[3] Ms Kay applied to the Family Court to have the agreement avoided or set aside. Judge Pidwell declined to void it under s 21F of the PRA because she found that Ms Kay had received independent legal advice prior to signing the agreement.
But the Judge set the agreement aside under s 21J of the PRA on the grounds that
WHITE v KAY [2017] NZHC 1643 [17 July 2017]
giving effect to it would cause serious injustice. The Judge then ordered under s 25 that all the property of the relationship be divided equally between Ms Kay and Mr White.1
[4] Mr White now appeals both the setting aside and the equal division. Ms Kay cross-appeals against the Judge’s determination that the agreement was not void under s 21F.
Background
[5] The following factual narrative is largely taken from Judge Pidwell’s
judgment.
The first 20 years of the parties’ relationship
[6] Mr White and Ms Kay met in 1984. Ms Kay was 22 years old at the time and worked in a poultry factory. It was her first significant relationship. Mr White worked at the freezing works. He had had two previous relationships one of which had produced a child. He owned a house in Brown Street, Waitara, which he had bought for $12,000 at a mortgagee sale. He had paid a $2,000 deposit and paid the mortgage off quickly.
[7] Ms Kay moved into the Brown Street property.2 She changed jobs and began working in a sewing factory. Mr White left the freezing works and became self-employed, buying vehicles and equipment, repairing and on-selling them.
[8] The couple kept their financial affairs separate. In 1985 Ms Kay gave up her job. There is a dispute as to whether that was her choice or whether Mr White encouraged it. In any event, it seems that Mr White provided Ms Kay with money
when she needed it.
1 Kay v White [2016] NZFC 4942.
2 Mr White maintains that she did not move in with him until later, but it seems the Judge preferred Ms Kay’s evidence on this point. It does not, in any event, make any real difference in terms of the matters now at issue.
[9] In 1989 Mr White sold the Brown Street property for $45,000 and purchased a property at Silby Street for $73,000. The property was registered in his sole name. He had won $15,000 on Bonus Bonds and that sum, together with his savings, meant that he could purchase the property mortgage free. Mr White and Ms Kay lived together at Silby Street.
[10] In 1992 Mr White sold that property and purchased a property at
254 Smart Road, New Plymouth for $240,000. Once again he was able to purchase the property without borrowing any money by using the sale proceeds of Silby Street ($130,000) in addition to more savings he had accrued.
[11] The couple’s daughter was born in 1994. Ms Kay was a stay at home mother until their daughter turned six. Mr White worked long hours and was quite often away from home. Thus their relationship was “traditional” in the sense that Ms Kay:
(a) was never involved in Mr White's financial decisions;
(b)worked in the home and on the property and was the main caregiver for their daughter (Mr White acknowledged that Ms Kay was a very good mother); and
(c) could not contribute financially during the 16 years when she was not in paid work.
[12] In 2000, Ms Kay began working at a local rest home as a caregiver. Her wages were spent on utility bills, food, clothing and essentials.
[13] In 2001 the Matrimonial Property Act 1976 was amended to include de facto relationships.3 The name of the Act was changed in order to reflect this. The
amendment came into force on 1 February 2002.
3 By way of the Property (Relationships) Amendment Act 2001.
The 2004 contracting out agreement
[14] Mr White and Ms Kay’s evidence differed as to the circumstances giving rise
to the s 21 agreement.
[15] Ms Kay’s evidence was that Mr White was physically and psychologically abusive to her throughout the relationship. She said she felt like a slave and was totally controlled by him. She said that in 2004 Mr White became particularly difficult to live with. He came to her and said that he had “jacked it up for me to sign a prenup”. She said that he had told her he would rather see her dead than let her have half of his money.
[16] Mr White denied any and all abuse. At trial he said that his reason for the s 21 agreement was to protect Ms Kay from exposure to any debt or liability arising from his proposed subdivision at Smart Road. He said that Ms Kay was concerned about his plans and the agreement was designed to protect her and ensure that they each kept the property they currently owned. He also said that they had always had a tacit agreement or understanding that they would remain financially separate.
[17] In any event, Mr White engaged a local lawyer, Ms Smith, to prepare the agreement. She sent two copies of the agreement to Ms Kay under cover of a letter dated 13 August 2004 which read:
1 .Michael visited with us recently and advised that you both wish to enter into an agreement contracting out of the Property Relationships Act.
2. To that end I enclose (in duplicate) an Agreement I have prepared in
accordance with Michael’s instructions.
3.As explained to Michael in New Zealand for such an Agreement to be binding it is necessary for you to obtain independent legal advice from a Solicitor outside of the firm of Govett Quilliam. To that end I would be grateful if you could attend with a Solicitor of your choice and that Solicitor will be able to advise us whether you are agreeable to the terms of the Agreement and if so have you execute the same and forward the Agreements to us for Michael to execute the Agreements with ourselves. Should your solicitors have any inquiries they shall let me know.
The agreement
[18] The agreement itself is entitled “Contracting Out Agreement Pursuant to Section 21 of the Property (Relationships) Act 1976”. It records that the parties are in a de facto relationship and that they wish to contract out of the provisions of the Act to the extent the agreement provides. Under the heading “objectives” the agreement states:
2.1Michael and Maree desire that property produced by their individual efforts prior to and during their relationship should remain the separate property of that party.
2.2Michael and Maree wish to enter into an agreement recording the status, ownership, and division of their property including any future property.
[19] The operative part of the agreement provides that the property listed in each schedule to the agreement remains the separate property of the legal owner. Schedule A records that all land registered in Mr White’s sole name, together with motor vehicles, bank accounts, life insurance policies and “any choses in action whatsoever” remains in his sole name. Schedule B makes identical provision in
relation to all real and personal property in Ms Kay’s sole name.4
[20] Notably the agreement does not:
(a) identify any particular items of property; (b) refer to the value of any property; or
(c) record the length of the relationship.
[21] The agreement provides that apart from these terms of the agreement, the provisions of the Act apply. It makes no provision for relationship property, apart from clause 4.1 which provides for a separate charge over any property which has become intermingled. It makes no provision for debts, joint or separate, and records
that both parties have made accurate and complete disclosure of all their property.
4 As Judge Pidwell noted, the agreement is poorly and clumsily drafted. One clause consists of a single 122 word sentence without punctuation. The word “realty” is spelled as “reality” throughout.
The legal advice obtained by Ms Kay
[22] Ms Kay’s evidence was that she came home from work one day and was told by Mr White that she had an appointment that day with a lawyer to sign the agreement. She says she was given an envelope by Mr White containing two copies of the agreement and Ms Smith’s letter.
[23] That day she met with Mr Crichton Parker of the law firm Young Carrington Shera. She said she was with him for only 15 minutes and had not read the agreement before the meeting and had not been given an opportunity to read it. She said that Mr Parker told her to sign the agreement, which she did. She felt that she had no other option. She recalled Mr Parker saying “you are signing your rights away”. She said she replied by saying something like “I am signing my life away”. Ms Kay said she said she had a vivid recollection of the events of that day and that she did not want to sign the agreement, but felt pressure to do so. She felt disempowered as a result of her relationship with Mr White and that she could not refuse to sign it.
[24] Ms Kay waived privilege and Mr Parker gave evidence at trial. He was called as the Court’s witness and was cross-examined by each party. His affidavit attaches a number of documents which he had obtained having made inquiries with Govett Quilliam and also Young Carrington Shera (now Ussher), the firm he was working for at the time. The file that had been opened in relation to the matter had been destroyed. Mr Parker had no specific recollection of the meeting. The following extract from his affidavit was reproduced in Judge Pidwell’s decision:
13.1 I was engaged directly by Ms Kay and met with her on 25 August
2004 in my New Plymouth office to discuss the then unsigned
Agreement.
13.2I do not believe a copy of the Agreement had been made available to me prior to this meeting but in any event, I most assuredly would have gone through the detail of it with Ms Kay.
13.3I am mindful, that in Ms Kay's affidavit of 2 July 2014, she expresses the view that Mr White made arrangements for her to see me. While I cannot be sure who made the appointment to see me, I have no reason to believe it was other than Ms Kay, I can confirm that I had no contact with Govett Quilliam or Mr White in this regard.
13.4I am further aware, that Ms Kay has deposed that she had not seen the Agreement prior to our meeting on 25 August 2004. That with respect is clearly not correct. Ms Kay had the agreement in her possession for nearly two weeks prior to our meeting on 25 August. It was sent to her by Ms Smith with the direction that she make an appointment with a lawyer of her choosing …5
13.5My invariable practice, was to go through any such Agreement with the person seeking advice paragraph by paragraph. I would have done so even if I had received a copy of the proposed Agreement earlier.
13.6I am aware that Ms Kay has deposed that she told me that if she did not sign the Agreement she would be “signing away her life”. I am acutely aware of situations where pressure has been brought to bear on a party (generally the female party) to sign agreements when they should not. It has always been my practice to exercise great caution in such circumstances and if I feel, that the party in question does not appreciate or understand what they are effectively foregoing, then I have on instances declined to witness a signature or provide advice. I am confident, that had Ms Kay uttered such words to me or given me any reason to believe, that she was present under duress, then that is the course I would have adopted.
13.7I was clear, that the Agreement itself was iniquitous and that she should not sign it. Clearly Ms Kay was determined to sign the Agreement. I consider it my duty, not to obstruct people from doing as they wish but to ensure that they are fully cognisant of the legal consequences of so acting. Having done so I would consider it to be my duty then to witness the signature and to certify the advice given.
13.8I repeat, had I appreciated that Ms Kay was completing this document under duress, I would not have been prepared to do so.
13.9I believe that Ms Kay must have told me that Mr White was to meet my costs otherwise I would have rendered a note of her costs directly to her. Ms Gelston has asked for my charge rate at that time
- it was $150 per hour.
13.10My letter to Govett Quilliam makes clear the nature of my advice by the inclusion of the words:
Given the contents of the Agreement we were very frank with our advice to Ms Kay, who is equally adamant as to her intention to sign the Agreement.
13.11This statement leaves me in no doubt whatsoever that we discussed the contents of the Agreement, its obvious inequity and that I advised Ms Kay not to sign the Agreement, but that she was determined to do so. It also leaves me in no doubt that she made no disclosure of anything amounting to duress or I would have declined to witness her signature and sign the certificate. I have on rare
occasions declined to witness signatures and provide certificates where it is clear to me, that a client is acting under duress.
13.12 It is entirely likely, consistent with the above that I did indeed tell
Ms Kay that she was:
“ ... signing away your rights.”
[25] Mr Parker certified the agreement and sent the originals back to Govett Quilliam under cover of the letter quoted at [13.10] of his affidavit (an electronic copy of which had been kept by that firm).
[26] Under cross-examination by Ms Gelston, Mr Parker said that while he still believed he was entitled to certify the agreement in the circumstances, he would probably have handled the matter differently were he confronted with it now. There was, in particular the following exchange:
QIn this situation if these facts were presented to you now would you refuse to sign the agreement?
A. That’s a very good question and that’s one I have been thinking
about. I, I think if I am honest I would, I would, I would not sign it.
Post agreement events
[27] In 2005, Mr White formed a company called Contact to Contact Ltd (CCL). He said the company was essentially a tax device, and, consistent with that, Judge Pidwell found that:6
It was clear in the evidence of Mr White that the lines between his personal and company accounts were blurred, with him moving money between them as needed.
[28] Both Mr White and Ms Kay were named as directors and they were equal shareholders. Mr White said that Ms Kay was only named as a director for tax purposes and that she had been named as a shareholder by mistake.
[29] In 2011, Mr White subdivided the Smart Road property and a portion of the land (including the house) was sold for $480,000. He then built a new home on the remaining land. The Judge found that the new build was paid for out of funds from both the sale of the home and his company.
[30] In 2012, after their daughter had turned 18, Ms Kay left Mr White.7 It was a fairly amicable separation. Ms Kay asked Mr White to help her set herself up in a new home. He wrote her a cheque for $20,000 and she took her car. Ms Kay wrote on the back of the s 21 agreement a note which said:
I'm signing this contract we both Maree Betty Dolores and Michael White aggree (sic) we do not owe any money property or have shares in assets or money and to each other. Maree has asked for $20,000 dollar (sic) to help her resettle and Michael has paid this to her.
[31] The note was signed by Ms Kay and by Mr White. It was dated
16 September 2012.
[32] On 2 November 2012 Ms Kay registered a notice of claim of interest under
42(2) of the PRA on the title to the Smart Road property. She filed her application to void or set aside the agreement and to have the property of the relationship divided equally in the Family Court on 2 July 2014.
[33] As at January 2015 the value of the Smart Road property was $1,150,000. The value of the shares in the company is yet to be determined.
The relevant statutory provisions
[34] It is convenient to set out the key statutory provisions at issue before turning
to summarise Judge Pidwell’s findings.
[35] It is s 21 of the PRA which permits contracting out of the Act. It provides in part:
21 Spouses or partners may contract out of this Act
(1) Spouses, civil union partners, or de facto partners… may, for the purpose of contracting out of the provisions of this Act, make any agreement they think fit with respect to the status, ownership, and division of their property (including future property).
[36] A different form of contracting out is contemplated by s 21A. It permits what
are known as “compromise” agreements, as follows:
21A Spouses or partners may settle differences by agreement
(1) Spouses or civil union partners or de facto partners may, for the purpose of settling any differences that have arisen between them concerning property owned by either or both of them, make any agreement they think fit with respect to the status, ownership, and division of that property.
[37] Without limiting the generality of ss 21 or 21A, s 21D provides that an agreement under those sections may do all or any of the following:
(a) provide that any property, or any class of property, is to be relationship property or is to be separate property:
(b) define the share of the relationship property, or of any part of the relationship property, that each spouse or partner is to be entitled to when the marriage, civil union, or de facto relationship ends:
(c) define the share of the relationship property, or of any part of the relationship property, that the surviving spouse or partner and the estate of the deceased spouse or partner is to be entitled to on the death of 1 of the spouses or partners:
(d) provide for the calculation of those shares:
(e) prescribe the method by which the relationship property, or any part of the relationship property, is to be divided.
[38] Section 21E contemplates the promulgation of regulations containing a standard form of contracting out agreement. That has been done.
[39] Section 21F sets out mandatory prerequisites for such agreements and provides that non-compliance with any one of them will render an agreement void. The requirements are:8
(2) The agreement must be in writing and signed by both parties.
(3) Each party to the agreement must have independent legal advice before signing the agreement.
(4) The signature of each party to the agreement must be witnessed by a lawyer.
(5) The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.
[40] It is only s 21F(3) that is in issue in the present case.
[41] Section 21J provides that even if an agreement complies with s 21F, the Court may set it aside if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice. Subsection (4) lists the matters to which the Court must have regard in making such a determination, namely:
(a) the provisions of the agreement:
(b) the length of time since the agreement was made:
(c) whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made:
(d) whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties):
(e) the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement:
(f) any other matters that the Court considers relevant.
8 Only the s 21F(3) requirement for independent legal advice is in issue in the present case.
[42] And lastly, s 25 relevantly provides:
25 When Court may make orders
(1) On an application under section 23, the Court may—
(a) make any order it considers just—
(i) determining the respective shares of each spouse or partner in the relationship property or any part of that property; or
(ii) dividing the relationship property or any part of that property between the spouses or partners:
…
(2) The Court may not make an order under subsection (1) unless it is satisfied,—
…
(b) in the case of a de facto relationship, that the de facto partners no longer have a de facto relationship with each other[.]
Judge Pidwell’s judgment
[43] The Family Court judgment begins by summarising the issues the Judge was required to determine as follows:
(a) Did Ms Kay receive independent legal advice in compliance with
s 21F(3) of the PRA?
(b)Should the Court exercise its discretion under s 21J and set aside the agreement on the ground that giving effect to it would cause serious injustice?
(c) If so, should orders be made to divide the parties’ property or is further evidence required?
[44] I set out the Judge’s findings on each issue, in turn.
Section 21F: did Ms Kay receive independent legal advice?
[45] The Judge noted the decision in Coxhead v Coxhead, which sets out the following propositions: 9
(a) the requirement for independent legal advice is no mere formalism;
(b)each party must receive a professional opinion as to the fairness and appropriateness of the agreement at least as it affects that party’s interests;
(c) the touchstone will be the entitlement that the Act gives, and the weighing of that entitlement against any other considerations that are said to justify departure from it;
(d)advice is more than an explanation of the meaning of the terms of the agreement and includes their implications;
(e) although the party is entitled to an informed professional opinion that does not mean that the lawyer must always be in possession of all the facts. There may be constraints of time or other circumstances, or the other spouse may be unable or unwilling to give the necessary information; and
(f) the section does not protect a person who simply chooses to ignore or disregard the advice given.
[46] After setting out the submissions made on Ms Kay’s behalf, the Judge said that although Mr Parker had no actual recollection of giving Ms Kay independent advice, she accepted his evidence that:
(a) his usual practice was to go through the agreement clause by clause;
(b) he was not acting on instructions from Mr White’s lawyers;
9 Coxhead v Coxhead [1993] 2 NZLR 397 (CA).
(c) he had explained the effect of the provisions of the agreement to
Ms Kay and compared this to her entitlement under the Act; and
(d)if there had been any suggestion that Ms Kay was signing under duress or pressure he would not have certified the agreement.
[47] Judge Pidwell concluded that Ms Kay chose to sign the agreement, notwithstanding Mr Parker’s professional opinion. She noted that view was confirmed by the contents of his letter to Govett Quilliam, which recorded that he had told Ms Kay not to sign the agreement as it was against her interests. She said:
[65] … Mr Parker’s advice to Ms Kay was as complete as it could have been. Although no valuations were done, it was clear that Ms Kay was giving up all rights to any land held by Mr White, and any other property in his sole name. The fact that she did not know the exact value of that does not invalidate the advice. She had a clear understanding that she was giving up “all rights”.
[66] I do not consider the adequacy of the legal advice given was diminished in any way by Ms Kay's emotional state or hidden feelings of pressure. I am satisfied that there were no outward signals to prompt Mr Parker to make any further enquiry.
[48] The Judge went on to conclude:
[70] I find the advice that Mr Parker gave Ms Kay in the circumstances fulfilled the requirement of s 21F(3). Ms Kay was fully aware that she was signing away all her entitlements under the Act, in particular to a share in the property that she was living in at Smart Road. As to the suggestion that Mr Parker should have been alive to the fact that Ms Kay was under pressure, I accept Mr Parker's evidence that there was nothing apparent in the demeanour of Ms Kay which suggested to him that there was any need for additional caution. In the circumstances the submission that Ms Kay did not receive independent advice must fail.
Section 21J: would giving effect to the agreement cause serious injustice?
[49] Judge Pidwell began this part of her judgment by noting that s 21J placed the onus on Ms Kay to satisfy the Court that the agreement should be set aside and that counsel were agreed as to the leading authorities, to which she then referred.10 She
then carefully considered each of the mandatory s 21J(4) requirements in light of her
10 Namely Harrison v Harrison [2005] 2 NZLR 349, (CA); Wells v Wells [2006] NZFLR 870 (HC).
view of the evidence. For present purposes, however, it is unnecessary to do more than refer to her conclusion and her summary of the reasons for it. She said:
[99] Balancing all of the factors in s 21J(4) as set out above, I am satisfied that the agreement should be set aside because to give effect to it would cause the applicant serious injustice. I have formed this view for the following reasons:
(a) The agreement had the effect of stripping the applicant of all of her accrued rights under common law and the Act, and prevented her from accruing any future rights to relationship property. Under the agreement she has no entitlement to relationship property.
(b) The terms of the agreement did not cover the status of the parties’ debts which was, on Mr White’s evidence, the primary motivation for the agreement.
(c) The applicant had no input into the drafting of the agreement, [or] its terms, and had little time to reflect on it, albeit that she was advised not to sign it.
(d) I accept that she was in a position where she felt she had to sign the agreement, irrespective of legal advice.
(e) Upon separation, she took her car worth $13,000 and was paid $20,000 by Mr White, receiving a total value of property of $33,000. The Smart Road property at 2015 was valued at $1,150,000.00. Accordingly the proportion of relationship property she took (not including any value to the shares in the company) was less than 3%.
(f) Setting aside the agreement simply returns the parties to the legal position in which they would have been if the agreement had not been signed.
(g) While the Court should be reluctant to interfere with agreements which have been reached between the parties, the agreement between the parties in this case has resulted in such a gross disparity of the division of property that it can only have the effect of disturbing the conscience of the Court. While it is clear that Ms Kay disregarded the legal advice which she received in respect of the matter, the disparity is so great that this is a case where it should be set aside.
Section 25: division of property
[50] Having determined to set the agreement aside, Judge Pidwell turned her attention to whether orders should be made dividing the relationship property. In that respect she simply said:11
At a pre-trial hearing, it was directed that any orders for the division of property would be “left for another day”. I do not consider there is any evidence suggesting anything other than equal division of the parties' relationship property is appropriate.
[51] The Judge then made an equal division order. Leave was reserved to either party to bring valuation issues back before the Court. The Judge ordered that costs should to lie where they fall.
The appeal and cross-appeal
The appeal
[52] Mr White challenges on appeal both the s 21J setting aside decision and the s 25 division decision. His notice of appeal identifies over 15 alleged factual and legal errors in the Judge’s s 21J analysis, of varying significance. But because of the approach I intend to take on appeal it is not necessary to set them out here. I will address them as necessary in my own analysis, later in this judgment.
[53] Mr White contends that the equal division decision was wrong because: (a) it “ went beyond the scope of the hearing”; and
(b)it denied him the right to be heard on all matters relevant in this particular case to a fair division of relationship property, including:
(i)whether an equal division of property is appropriate considering “the extraordinary circumstances of this case”;
and/or
11 Kay v White, above n1, at [101].
(ii)what the just outcome would be if the property is to be divided as if the Agreement had never been made.
The cross-appeal
[54] Ms Kay’s cross-appeal contends that the Judge’s conclusion that she had adequate legal advice, and her consequent refusal to void the agreement under s 21F, was wrong for a variety of reasons. Most or all of these necessarily relate to the Judge’s assessment of the facts and evidence. Again, however, it is not necessary to set these out in any detail, in light of the approach I intend to take on appeal. So it is to that issue that I now turn.
Approach on appeal
[55] Relationship property appeals from the Family Court are governed by s 39 of the PRA, which incorporates ss 74 to 78 of the District Courts Act 1947.12 The appeal is therefore by way of rehearing and is governed by the principles articulated in Austin, Nichols & Co Inc v Stichting Lodestar.13
[56] The application of the Austin Nichols principles in the context of general Family Court appeals was helpfully elucidated by the Supreme Court in Kacem v Bashir as follows:14
[31] The Court of Appeal discussed the application of the decision of this Court in Austin Nichols & Co Inc v Stichting Lodestar to the present kind of appeal. The Court correctly observed that on a general appeal of the present kind the appellate court has the responsibility of considering the merits of the case afresh. The weight it gives to the reasoning of the court or courts below is a matter for the appellate court’s assessment. … The High Court was required to reach its own conclusion, but this did not imply that it should disregard the Family Court’s decision. What, if any, influence the Family Court’s reasoning should have was for the High Court’s assessment.
[32] But, for present purposes, the important point arising from Austin, Nichols is that those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion involves an assessment of fact and degree and entails a value judgment. In this context a general appeal is to be distinguished from an
12 This was the provision in force when the appeal was filed. Section 39 now refers to ss 126-130 of the District Court Act 2016.
13 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
14 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 (footnotes omitted).
appeal against a decision made in the exercise of a discretion. In that kind of case the criteria for a successful appeal are stricter: (1) error of law or principle; (2) taking account of irrelevant considerations; (3) failing to take account of a relevant consideration; or (4) the decision is plainly wrong. The distinction between a general appeal and an appeal from a discretion is not altogether easy to describe in the abstract. But the fact that the case involves factual evaluation and a value judgment does not of itself mean the decision is discretionary. In any event, as the Court of Appeal correctly said, the assessment of what was in the best interests of the children in the present case did not involve an appeal from a discretionary decision. The decision of the High Court was a matter of assessment and judgment not discretion, and so was that of the Family Court.
[57] Likewise in the present case I regard the Judge’s assessments under ss 21F,
21J and 25 were inherently evaluative, rather than discretionary, in nature. I
therefore approach this appeal on the basis that:
(a) I must come to my own view of the merits of the case;
(b) the weight I give to Judge Pidwell’s reasoning is a matter for me; and
(c) if I reach a different view from Judge Pidwell, then I must allow the appeal (or the cross-appeal).
Discussion
Mr White’s s 21J appeal
[58] As I have just foreshadowed, it seems to me that the most useful analytical approach is simply to perform my own assessment of the s 21J(4) factors based on my own view of the evidence, rather than address each of the discrete errors alleged by Mr Laurenson individually. Those specific matters raised that I regard as relevant will be addressed as I go along. But my analysis will be relatively brief because, in very large part, I agree with Judge Pidwell.
[59] Like her, I begin by noting that the onus was and is undoubtedly on Ms Kay to satisfy the Court that the agreement should be set aside. And like her I note that the relevant authorities suggest that:
(a) “serious injustice” is a high threshold;
(b)in the kind of circumstances which tend to give rise to a contracting out agreement, it is to be expected that at least a small degree ofpressure is likely to be exerted by the party who holds, and wishes to protect, the relevant assets;
(c) generally speaking, mere inequality or disparity between the parties, in terms of the division of property effected by an agreement is unlikely to be decisive in determining whether that threshold is met; and
(d)successful applications under s 21J are more likely to involve some kind of prejudicial process failure or fault, albeit of a sort which would not activate s 21F.
[60] I also observe, however, that none of these are statements of rigid principle. The answer in the individual case will always depend on a proper weighing of all relevant factors in light of the evidence adduced. So it is to those factors that I now turn.
[61] As far as the “provisions of the agreement” are concerned (s 21J(4)(a)) I note that Judge Pidwell was of the view that the agreement seemed to her to be more in the nature of a compromise (s 21A) agreement than a contracting out (s 21) agreement. She said that because the parties had been in a relationship for 20 years at the time it was signed, by which time Ms Kay had accrued substantial rights to property held in Mr White’s sole name. Mr Laurenson took issue with that analysis.
[62] I do not consider it necessary to debate whether it the agreement here is more appropriately viewed as a s 21A compromise or a s 21 contracting out. It is stated to be a contracting out agreement under s 21. It does purport to contract out of the Act. Moreover, there was, at the time it was entered, no dispute to settle between the parties. Nor could it fairly be said that an agreement which gives one party everything and the other nothing constitutes any form of “compromise”. But the
Judge’s underlying point, namely that the agreement took away Ms Kay’s substantial
substantive rights is indisputable, and I return to that later.
[63] For subs (4)(a) purposes, however, it seems to me that the salient points about the agreement itself are as follows:
(a) it is poorly and opaquely drafted and, because it neither identifies nor values the relevant separate property, and does not give a reader who comes to it cold any idea of what it actually effects;
(b) its terms suggest both that:
(i) Ms Kay held property in her own name when she did not; and
(ii) there was some underlying equality of treatment (in the sense that each party got to keep his or her separate property);
(c) given its quite remarkable effect, and the fact that it departs from the standard form agreement contained in regulations promulgated under s 21E (which requires the relevant property to be identified) there is a reasonable inference to be drawn that its obscurity was intentional;15
(d)it does not achieve (or even attempt to achieve) Mr White’s stated purpose of shielding Ms Kay from his debts or any other form of potential liability.
[64] Next, in terms of s 21J(4)(b), it was eight years before Ms Kay took issue with the agreement (by registering a notice of claim over the Smart Road property) and 10 years before she commenced these proceedings. It seems to me that the
potential significance of this period is that:
15 My own view of the matter is that Mr White did not want to disclose the extent or value of his assets to Ms Kay and that, notwithstanding the obligation under the agreement to make such disclosure, he did not do so.
(a) during that time Ms Kay continued to contribute to the relationship and to the property that was the subject of the agreement;
(b) that property increased in value significantly; and
(c) during that time Ms Kay did not acquire any assets of her own and nor was she in a position where she could have done so.
[65] I nonetheless acknowledge that, in a general sense, it can fairly be assumed that Mr White relied on the agreement and his understanding was that it would be enforceable throughout this period. That said, however, there was no evidence of any particular steps or decisions that he took that would not have been taken had he known that the agreement might be set aside.
[66] For myself, I doubt that Ms Kay’s “failure” to attempt to undo the agreement at some earlier point can be of much significance here. As Judge Pidwell noted, she had no real reason to turn her mind to it while the relationship remained on foot. To the extent that it is necessary for me to do so, I also agree with her assessment that the dynamics of the relationship made it unlikely that she would take any steps to rock the domestic boat while the couple remained together.
[67] Section 21J(4)(c) requires an inquiry as to whether the agreement was unfair and unreasonable in the light of all the circumstances at the time it was made. Mr Laurenson’s principal submission was that it was not, because it simply reflected what had always been the couple’s “tacit understanding”.16
[68] It seems to me that the relevant circumstances at the time the agreement was made were, essentially, that Ms Kay had:
16 At the hearing before me Mr Laurenson did not really pursue Mr White’s alternative explanation that the agreement was to protect Ms Kay from any debts or liability he might incur. That is unsurprising, given that the agreement does not appear to address the issue of debt or liability.
(a) lived with Mr White for 20 years;
(b)supported him domestically throughout that period, while he grew his business and his property,
(c) raised their child;
(d)spent her own meagre earnings on the family’s day to day living expenses; and
(e) a “default” or prima facie entitlement to a 50 per cent share of the
property of the relationship, including the family home.
[69] In terms of any tacit understanding, I accept entirely that that Mr White believed that his property was his property and should remain so in the event of a separation. And it may well be that he expressed that view from time to time to Ms Kay and that she “understood” it or did not demur. But I do not think for one minute that there was any real element of mutuality or that she actively or willingly acceded to his view. It was, after all, a view which would effectively see her out on the streets in the event of separation. It was a view that was predicated on Ms Kay forgoing a significant legal entitlement and receiving nothing in return while Mr White forwent nothing and would receive everything. I agree with Judge Pidwell. The only available conclusion here is that the agreement was both unfair and unreasonable from its inception.
[70] If the agreement was unfair and unreasonable in the circumstances as they were in 2004, the possibility of it becoming less so over time (s 21J(4)(d)) is remote. Unsurprisingly, Ms Kay did not acquire any assets in the years which followed; she did not have the means to do so. It is equally unsurprising that Mr White grew his assets over time. He improved the property (with Ms Kay’s assistance and support) and it increased in value. He incorporated a company for tax purposes, which presumably yielded financial benefits to him. By his own admission he named
Ms Kay as a director solely for the purpose of furthering such benefits.17
17 Mr White’s evidence was that he did share these tax benefits with Ms Kay.
[71] In my view the fact that Mr White voluntarily paid Ms Kay $20,000 on separation has no ameliorating impact on the ongoing unfairness of the agreement. Her departure from their 25 year relationship left her with nowhere to live and no money while he retained assets worth more than $1.1 million. The $20,000 was a drop in the ocean. Nor do I regard the fact that Ms Kay confirmed in writing in September 2012 that she had received that sum and that Mr White owed her nothing
as a meaningful affirmation of the earlier agreement.18 I have little doubt that she
would not have received the $20,000 had she not signed it. And without that sum she would have been left to start her new life with nothing.
[72] As Judge Pidwell said, therefore, the initial unreasonableness and unfairness of the agreement only compounded over time.
[73] As to s 21J(4)(e), like Judge Pidwell I acknowledge that, in entering the agreement, Mr White undoubtedly “wished to achieve certainty as to the status, ownership, and division of property”.19 As I have said, the agreement may well have put his mind at ease, but I am not persuaded that there was any active detrimental reliance by him on it beyond that feeling of comfort. And by contrast, there was no obvious benefit in certainty for Ms Kay. If anything, the agreement was a sword of
Damocles hanging over her head. Knowledge that she would get nothing on separation was of no advantage to her.
[74] All that being said, however, I accept (as did Judge Pidwell) that the general desirability of parties to contracts being able to rely on their enforceability is a factor that weighs in favour of Mr White’s position here.
[75] Lastly, there is the question of any other relevant matters that might go to serious injustice, under s 21J(4)(f). Under this heading the Judge considered the question of any pressure, falling short of duress, under which Ms Kay might have been placed to sign the agreement. I can see no logical or legal objection to that
approach.
18 It was, quite rightly, not disputed that the handwritten note could not, itself, constitute some further and separate s 21 agreement.
19 Kay v White, above n 1, at [96].
[76] The compelling point here is that Ms Kay’s signing the agreement is inexplicable, absent some form of untoward psychological pressure, however subtle that may have been. Ms Kay may, perhaps, have hoped that the relationship would last and the agreement would never come into play, although that does not sit particularly easily with my own reading of the evidence. Moreover there can be little doubt that Mr White was the dominant and controlling force throughout the relationship. Nor can there be any doubt that he really wanted Ms Kay to sign the agreement. The strength of his view that he remains entitled to retain all the property of the relationship is manifest, even now.
[77] By contrast, Ms Kay’s evidence revealed that she had little understanding of the detail of the couple’s financial affairs or position. And I have noted above my view that there is an available inference that Mr White instructed the agreement to be drafted in an obscure way, without disclosing what his assets actually were.20 So while I do not think that the dynamics of the relationship should be given any significant weight, I do regard them as a relevant s 21J consideration.
[78] The other, related, point which I would take into account under subs (4)(f) is Mr Parker’s evidence that he would not have certified the agreement were he asked to do so again today. That merely serves to underscore a number of the matters already discussed.
[79] The remaining s 21J question is whether, after weighing the matters canvassed above in the balance, it can be concluded that giving effect to the agreement would give rise to a serious injustice.
[80] In considering that question I acknowledge (again) that the authorities make it clear that disparity by itself is unlikely to meet that threshold. Equally, however, there is to my knowledge no decided case involving an agreement for a 100:0 “split”, let alone after an otherwise orthodox 25 year relationship. It seems to me that generalities must, in such a case, go out the window. So while I accept that
contractual certainty and Mr White’s expectations (which I would not be inclined to
20 As noted earlier, there is no real evidence to suggest that Mr White ever disclosed the extent and value of his assets to Ms Kay notwithstanding his contractual obligation to do so.
term “reasonable”) do tell somewhat against a finding of serious injustice, the disparity here is, quite simply, overwhelming. When taken together with the provisions of the agreement (which I have found to be deliberately obfuscatory), the length of the relationship, the parties’ respective roles in it and the clear power imbalance I agree with Judge Pidwell that serious injustice is made out.
[81] Mr White’s s 21J appeal must fail.
Appeal against 50:50 division
[82] The essence of Mr White’s appeal against this part of Judge Pidwell’s decision is that he had not expected her to deal with division and that it was unfair because doing so was contrary to the scope of the hearing as it was understood to be. It is therefore necessary to say a little about the lead up to the hearing. The relevant points are as follows:
(a) The trial was scheduled to (and did) commence on 8 June 2016; (b) There was a pre-hearing conference scheduled for 1 June 2016;
(c) Ms Kay’s counsel, Ms Gelston, filed a memorandum in advance of that conference. Under the heading “Issues for determination” she referred first to the applications under ss 21F and 21G and then said:
Section 25 – Depending on the outcome of the above decision; a determination of how relationship property should be divided. Ms Kay sees an equal division of relationship property, interest on such sum and legal costs.
(d)Then, under the heading “Pre-hearing directions re evidence” she noted that because Mr White had refused to consent to an updated valuation of the Smart Rd property, one would be required in the event the agreement is overturned. She also noted that Mr White had refused to provide disclosure in relation to:
(i) the value of all bank accounts as at separation date; (ii) the value of the CCL shares at separation date; and (iii) the value of five vehicles.
(e) Mr White’s counsel, Mr Laurenson, also filed a memorandum in
advance of the conference. In it, he advised:
If the Court gets to the point that a determination under s 25 is required, then it is accepted that the Court may need some further information, as to the extent of the assets. Further valuations are now sought by the applicant. Despite this all items of property are identifiable and a valuation of the home is available. It is submitted that on the information before it the court is able to assess the scope of the property pool in the event the agreement is set aside.
(f) The pre-hearing trial conference took place in front of Judge Harrison.
Judge Harrison recorded in her minute that counsel were agreed that:
[1]… the outstanding applications to be determined made by Maree Kay are, firstly, s 21F Property (Relationships) Act 1976, an application that the contracting out agreement be declared void. Secondly, pursuant to s 21J of the Act, that the contracting out agreement be set aside on the basis of serious injustice and depending on the outcome of those applications then there is an application for the division of relationship property and that will be left for another day.
[2] I record the following agreements from the prehearing conference. Ms Kay takes no further her request that there be an updated valuation of the home at 254 Smart Road. Furthermore, she takes no further issue at this point in time regarding the need for Mr White to provide full disclosure of various assets. These things are detailed in Ms Gelston’s memorandum at paragraph 4, points 1 and 3. I note however that in due course if the application is successful that those particular matters will require further judicial direction. (emphasis added.)
[83] The highlighted part of Judge Harrison’s minute was referred to by Judge Pidwell immediately prior to her making the order for the 50:50 split, and it is really that passage which also forms the basis of this aspect of Mr White’s appeal.
[84] I have little hesitation in concluding that this aspect of the appeal cannot succeed. When Judge Harrison’s minute is read in light of the memoranda filed by both counsel immediately prior to the pre-hearing conference (the relevant parts of
which I have also set out above) it is readily apparent that both parties were ready to go to trial (in a week’s time) on all issues other than valuation. Indeed, the following paragraph of Judge Harrison’s minute itself seems to reflect that.
[85] Moreover, Mr White’s notice of defence makes it clear that his defences to the application for orders under the Act were that the agreement precluded them and “further grounds” set out in the affidavit that had been filed in support. The Judge must, accordingly, have been right to infer that all evidence that was relevant to division was already before her.
The s 21F cross-appeal
[86] It is tempting to say that, in light of my findings on the s 21J appeal I do not need to consider Ms Kay’s cross-appeal. Strictly speaking, however, the s 21F issues arise prior to the s 21J issues and arguably the legal effect of a successful application is different under each.21 So for completeness I consider s 21F briefly, below.
[87] As noted earlier, the only issue in terms of s 21F is the adequacy of the legal advice received by Ms Kay prior to her signing the agreement. Notwithstanding Mr Parker’s (unsurprising) lack of recall and the destruction of his records, however, it does not suffice to say that the Judge should simply have preferred Ms Kay’s account. Although she said that she remembered her meeting with Mr Parker and the advice he gave with some clarity, aspects of her evidence in that respect were
demonstrably wrong.22
[88] So although drawing specific conclusions about what occurred based on Mr Parker’s evidence of his “invariable practice” is not ideal, the Judge had little choice about that. I agree with her that it is relevant that Mr Parker evidenced an
in-depth understanding of the PRA and of his role in providing independent advice.
21 If s 21F is not complied with the agreement is void. If serious injustice is found the agreement is set aside. But in either event the parties are returned to the position they would have been in had the agreement not been entered.
22 For example she said that she had not seen the agreement prior to the meeting when there was objective evidence that she had been sent it some two weeks prior by Mr White’s solicitor. There was also objective evidence (in the form of Mr Parker’s fee note) that suggested that the meeting with Ms Kay had lasted for approximately 40 minutes, rather than 15 minutes as she had said.
I note too that she found him to be a careful, honest and credible witness. In light of his frank and thoughtful acknowledgement that he would do things differently if confronted by similar circumstances today, I would be inclined to concur with her on that.
[89] I confess that I do have some reservations about the extent of the information that was in Mr Parker’s possession as to the nature and value of Mr White’s assets. As I have said, the agreement was completely devoid of detail in those respects. Ms Kay’s knowledge about those matters was hazy at best. And as I have said, although the agreement required disclosure there was no satisfactory evidence that Mr White had complied with that obligation or that Mr Parker had sought it either from him or from his lawyer.
[90] But in the end, there is one matter which, in my view is determinative of the matter. Although Mr Parker’s records and any file notes may not have been in evidence, an electronic copy of the letter he sent to Mr White’s lawyer enclosing the signed and certified agreement was before the Court. Like Judge Pidwell I consider the statements in that letter that, in light of the contents of the agreement, Mr Parker had been very frank with his advice, and that Ms Kay was equally adamant in her intention to sign the agreement, constitutes the best evidence of what occurred and what Mr Parker’s advice was. It is, as well, consistent with Ms Kay’s own recollection that he told her that she was “signing away” her rights. I therefore agree with the Judge that the evidentiary basis for Ms Kay’s application under s 21F is not made out.
Conclusion
[91] The outcome can shortly be stated. Mr White’s appeal fails and is dismissed.
Ms Kay’s cross appeal fails and is dismissed. Judge Pidwell was right on all counts.
Costs should lie where they fall.
Rebecca Ellis J
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