Wilkerson v Wilkerson
[2013] NZHC 2930
•7 November 2013
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE COURT/LEGISLATION/RESTRICTIONS-ON-PUBLICATIONS.
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-3187 [2013] NZHC 2930
IN THE MATTER of an appeal pursuant to s 39 of the
Property (Relationships) Act 1976
BETWEEN WILKERSON Appellant
ANDWILKERSON Respondent
Hearing: 16 October 2013
Counsel: J D Noble for Appellant
H K Patel for Respondent
Judgment: 7 November 2013
JUDGMENT OF GODDARD J
This judgment was delivered by me on 7 November 2013 at 12.00 pm, pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Boyle Mathieson, Auckland for Appellant
Patel Nand Legal, Auckland for Respondent
WILKERSON v WILKERSON [2013] NZHC 2930 [7 November 2013]
Introduction
[1] This is an appeal against a decision of the Family Court under the Property (Relationships) Act 1976 (the PRA).1 Mrs Wilkerson initially filed an application for relationship property orders against her former husband Mr Wilkerson in January
2011, after he had returned to live permanently in Fiji. At the same time, the Family Court made an order for substituted service on Mr Wilkerson by serving his nephew, Nathan Wilkerson. Mr Wilkerson took no steps in the matter.
[2] In January 2012, Mrs Wilkerson applied for an order under s 44 of the PRA that Nathan Wilkerson pay her the sum of $44,987.18. He filed a notice of intention to appear and affidavits in opposition.
[3] The relationship property in issue was identified at a formal proof hearing on
18 January 2012.
[4] Mr Wilkerson did not appear or defend the matter at the substantive hearing in the Family Court. Judge Mather found the elements of s 44 were established but declined to exercise the discretion of the Court to make an order against him. Mrs Wilkerson now appeals against that decision.
[5] Mr Wilkerson died in Fiji in June 2013. Orders were made against his estate in the Family Court on 10 July 2013 in the sum of $43,931.66, together with interest from the date of separation until the date of judgment, plus costs and disbursements.
[6] The crux of Mrs Wilkerson’s appeal is that Nathan Wilkerson was the conduit for a disposition of her share of relationship property by Mr Wilkerson to his daughter and granddaughter for the purpose of defeating her interests under the PRA and that Judge Mather erred in declining to make an order against Nathan Wilkerson
under s 44 (in addition to the order made against Mr Wilkerson).
1 Wilkerson v Wilkerson [2013] NZFC 3628.
Background
[7] Mr Wilkerson was a New Zealand citizen. He and Mrs Wilkerson were married in Suva, Fiji, on 19 December 2001. There are no children of the marriage. Both had been married before and have children from their prior marriages. The parties separated in Auckland on 28 March 2009, where they were living in rented accommodation. Following the separation, Mrs Wilkerson moved to live with her daughter.
[8] During the course of the relationship, Mr Wilkerson acquired shares in various companies. The Judge classified these shares as relationship property under s 8(1)(e) of the PRA. They comprised:
(a) 7,234 shares in Rakon Limited;
(b) 15,500 shares in Vector Limited; and
(c) 8,000 shares in Auckland International Airport Limited.
[9] On 7 April 2009, 10 days after the parties separated, Mr Wilkerson transferred the shares into the ownership of his nephew for no consideration.
[10] At the time of the transfer, Nathan Wilkerson knew that his uncle and Mrs Wilkerson had ceased to live together and that the marriage was in difficulty. Mr Wilkerson told Nathan Wilkerson that he was in poor health and, in the event of his death, instructed him to sell the shares to pay for funeral costs. Nathan Wilkerson was to transfer any remaining money to Mr Wilkerson’s daughter.
[11] Mrs Wilkerson apparently learned of the share transfer to Nathan Wilkerson within days of it occurring, having made an inquiry of Mr Wilkerson’s stock broker, who disclosed the information to her.
[12] In September 2009, Nathan Wilkerson transferred $5,500 Vector shares back to Mr Wilkerson.
[13] In late September 2009, Mr Wilkerson instructed Nathan Wilkerson to sell the remaining shares and transfer the proceeds to his daughter and granddaughter in Fiji, as he was planning to move to Fiji and live with his daughter. Nathan Wilkerson’s understanding was that the money was to be transferred into the accounts of Mr Wilkerson’s daughter and granddaughter because Mr Wilkerson did not have a personal bank account in Fiji into which the money could be transferred. It was agreed Nathan Wilkerson would sell the majority of the shares and transfer the proceeds as instructed and would retain a smaller parcel of shares for himself, for which he would pay Mr Wilkerson cash.
[14] Nathan Wilkerson sold the shares in three separate transactions between
1 October 2009 and 27 October 2009. The Judge accepted Nathan Wilkerson’s evidence that he purchased the parcels of shares he retained by paying the market price in cash to Mr Wilkerson.
[15] According to Mrs Wilkerson, Mr Wilkerson left New Zealand on
29 November 2009. She made efforts to contact him and was told by Mr Wilkinson’s son-in-law that he intended to return to New Zealand in July 2010. Mrs Wilkerson says she delayed filing proceedings in an effort to settle relationship property matters with Mr Wilkerson without involving the court. Mrs Wilkerson says Mr Wilkerson never returned to New Zealand.
[16] On 25 January 2011, Mrs Wilkerson applied to the Family Court for relationship property orders. That same day, the Court made an order for substituted service on Mr Wilkerson by serving Nathan Wilkerson. The hearing proceeded on an undefended basis as far as Mr Wilkerson was concerned, but on a defended basis in relation to Nathan Wilkerson.
Relevant law
[17] Section 44 of the PRA claws back relationship property disposed of to a trust where the disposition was made in order to defeat the claimant’s rights under the PRA. The term “disposition” covers all forms of alienation whether for value or not. The key element is whether the disposition was made with the intention of defeating a claimant’s relationship property rights. The test is whether the person disposing of
property knew, or ought to have known, that by disposing of property they were exposing any person to a significantly enhanced risk of not obtaining their share of the relationship property.2
[18] Section 44 provides:
44 Dispositions may be set aside
(1) Where the High Court or a District Court or a Family Court is satisfied that any disposition of property has been made, whether for value or not, by or on behalf of or by direction of or in the interests of any person in order to defeat the claim or rights of any person (party B) under this Act, the court may make any order under subsection (2).
(1A) The court may make an order under this section on the application of party B, or (in any proceedings under this Act or otherwise) on its own initiative.
(2) In any case to which subsection (1) applies, the court may, subject to subsection (4),—
(a) order that any person to whom the disposition was made and who received the property otherwise than in good faith and for valuable consideration, or his or her personal representative, shall transfer the property or any part thereof to such person as the court directs; or
(b) order that any person to whom the disposition was made and who received the property otherwise than in good faith and for adequate consideration, or his or her personal representative, shall pay into court, or to such person as the court directs, a sum not exceeding the difference between the value of the consideration (if any) and the value of the property; or
(c) order that any person who has, otherwise than in good faith and for valuable consideration, received any interest in the property from the person to whom the disposition was so made, or his or her personal representative, or any person who received that interest from any such person otherwise than in good faith and for valuable consideration, shall transfer that interest to such person as the court directs, or shall pay into court or to such person as the court directs a sum not exceeding the value of the interest.
(3) For the purposes of giving effect to any order under subsection (2), the court may make such further order as it thinks fit.
2 Regal Castings v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433 at [54] as cited in Ryan v Unkovich [2010] 1 NZLR 434 (HC) at [33].
(4) Relief (whether under this section, or in equity, or otherwise) in any case to which subsection (1) applies shall be denied wholly or in part, if the person from whom relief is sought received the property or interest in good faith, and has so altered his or her position in reliance on his or her having an indefeasible interest in the property or interest that in the opinion of the court, having regard to all possible implications in respect of other persons, it is inequitable to grant relief, or to grant relief in full, as the case may be.
[19] Where a court finds an intention to defeat, it has discretion to make an order under s 44(2), subject to s 44(4).
Family Court decision
[20] Judge Mather found that Mr Wilkerson had an intention to defeat Mrs Wilkerson’s claim for the purposes of s 44(1). The Judge inferred that intention from Mr Wilkerson’s view that the shares were his separate property and his instruction to Nathan Wilkerson to sell the shares and transfer the proceeds to the bank accounts of his daughter and granddaughter in Suva at the time he left to live permanently in Fiji. Having found that s 44(1) had been established, the Judge had a discretion, subject to s 44(4), to make an order under s 44(2).
[21] As noted, s 44(4) allows the Court to deny relief where a person receives property in good faith and has altered their position in reliance on an indefeasible interest in the property. The Judge found that s 44(4) did not apply because Nathan Wilkerson did not receive the shares in good faith. The Judge accepted that Mr Wilkerson may have told his nephew he was concerned about his health and had instructed him on disposing of the shares in the event of his death. That did not, however, justify Nathan Wilkerson accepting approximately $50,000 worth of shares within days of the parties’ separation without further enquiry.
[22] Notwithstanding his decision in this regard, the Judge did not exercise his discretion to make an order under s 44(2) in favour of Mrs Wilkerson. He found an order would not be appropriate in this case because Nathan Wilkerson had not benefitted personally from the shares and would have to pursue Mr Wilkerson or the ultimate recipients of the share proceeds in order to comply with the order. The Judge also took into account Mrs Wilkerson’s knowledge of the share transfers and that she could have applied under s 43 of the PRA to prevent Nathan Wilkerson from
disposing of the proceeds to Fiji. Based on those factors, the Judge concluded “it would not accord with the intention of s 44, and hence reflect the principles of the Act” to make an order against Nathan Wilkerson.3
[23] Having dismissed the application, the Judge indicated willingness to make an order under s 44(2)(c) against Mr Wilkerson’s daughter and granddaughter, as the ultimate beneficiaries of the proceeds of the sale of the greater parcel of shares, but did not do so as no such order had been sought.
[24] The Judge directed counsel for Mr Wilkerson to file a further memorandum relating to the value of the shares and, on 10 July 2013, made an order that Mr Wilkerson pay Mrs Wilkerson the sum of $43,931.66 plus interest and costs.
Discussion
[25] This is an appeal against a decision made in the exercise of a discretion. In this context, the appellant must establish the decision contained an error of principle, or that a relevant factor was not considered, or that an irrelevant factor was taken into account, or that the outcome was plainly wrong.4 The Court will not interfere if it is simply a matter of giving different weight to the factors considered.5
[26] I deal with the appeal in two parts: firstly, in relation to the parcel of shares sold by Nathan Wilkerson (the first parcel of shares); and secondly, in relation to the parcel of shares retained by Nathan Wilkerson (the second parcel of shares).
[27] Dealing with the first parcel of shares, Mr Noble submitted that the Judge had erred in declining to exercise the Court’s discretion under s 44(2) to make an order against Nathan Wilkerson on four grounds:
(a) That the Judge took into account an irrelevant consideration, namely that Nathan Wilkerson did not retain the benefit of the disposition. In
the alternative, the Judge was wrong in his interpretation of s 44.
3 Wilkerson v Wilkerson, above n 1, at [44].
4 May v May (1982) 1 NZFLR 165 (CA) at 170; Kacem v Bashir [2010] NZSC 112, [2011]
2 NZLR 1 at [32].
5 Alex Harvey Industries Ltd v Commissioner of Inland Revenue (2001) 15 PRNZ 361 (CA).
(b)That the Judge took into account an irrelevant consideration, namely that the appellant did not apply under s 43 of the PRA to restrain the disposition of the shares after she became aware of the transfer.
(c) That the Judge failed to take into account the precedent effect of this decision on the operation and effectiveness of s 44.
(d)That the Judge failed to take into account the principle that questions arising under the PRA about relationship property should be resolved as inexpensively, simply and speedily as is consistent with justice.6
The appellant argues that the Family Court decision means she must now undertake the difficult, lengthy and uncertain task of attempting to enforce the Family Court order in Fiji.
[28] In relation to the first ground, Mr Noble submitted that the purpose of s 44 is to give the Court wide powers to ensure equal division of relationship property. Section 44(4) protects a person who alters their position in reliance on receiving an indefeasible interest in property received; that is, a bona fide third party. One way in which a person can alter their position is to dispose of property, which is what Nathan Wilkerson did. Section 44 therefore contemplates an order being made against a person who no longer retains the benefit of the property at the date of the hearing, where that person has not acted in good faith.
[29] Mr Patel in response argued that s 44 is only intended to empower the Court to order the return of property or its value from third parties who are still in possession or have control over the property or have benefitted from disposing of the property.
[30] The central issue is whether the Judge was plainly wrong to conclude that it would not accord with the purpose of s 44 to make an order against a knowing recipient of relationship property where that recipient has since disposed of the property and did not retain the benefit of the disposition. Neither counsel nor the
Court were able to identify any case law that would assist in determining this ground of appeal.
[31] As noted, the Judge held that even though Nathan Wilkerson did not receive the shares in good faith, it would not accord with s 44 to make an order because he was merely a conduit and did not receive a benefit for his role in defeating the appellant’s rights.
[32] This reasoning does not however take account of the relationship between ss 44(2) and 44(4). Section 44(4) operates alongside s 44(2) to protect a party that acts in good faith and that has altered their position in reliance on having received an indefeasible interest in the property in question. That subsection protects an unknowing conduit that has not received a benefit for their role in defeating a party’s rights under the PRA.
[33] In this case, s 44(4) was not available to Nathan Wilkerson because, as the Judge found, he did not receive the shares in good faith. Nathan Wilkerson knew that his uncle and Mrs Wilkerson had separated and accepted $50,000 worth of shares into his ownership as a trustee/caretaker from Mr Wilkerson without inquiring further. Five months later he sold the same shares and transferred the proceeds to Fijian bank accounts on the instruction of his uncle. He knew his uncle was intending to live permanently in Fiji and would have the benefit of those proceeds. Again, he failed to inquire further.
[34] Having found that Nathan Wilkerson did not act in good faith, it was plainly wrong for the Judge to conclude that an order under s 44(2)(b) would not accord with the purpose of s 44 and of the PRA. The central purpose of this legislation is to ensure partners to a relationship receive a just settlement that recognises the contribution each has made to the relationship.7 A just settlement is achieved by the equal sharing of relationship property. As calculated by the Judge, the relationship property pool in this case is $102,091.25. Of that amount, the total property vested in the appellant is $7,113.96. The remainder of the total property vested in
Mr Wilkerson (and now in his estate) is $94,977.29. This is clearly an unfair result
that is contrary to the purpose of the PRA. Further, it is a result that was facilitated by Nathan Wilkerson’s actions.
[35] Parliament has recognised that a party may seek to dispose of property for the purpose of defeating the claim or rights of their former spouse or partner under the PRA. That is the mischief that s 44 was enacted to prevent. In this case, Nathan Wilkerson actively assisted in the disposition of relationship property. His actions not only enabled Mr Wilkerson to defeat the relationship property entitlement of the appellant, but made it difficult for Mrs Wilkerson to enforce any order made by a New Zealand court against Mr Wilkerson. It would be contrary to the purpose of the PRA and s 44 to decline to make an order under s 44(2) in these circumstances, simply because Nathan Wilkerson no longer retains the benefit of the property. Had Nathan Wilkerson acted in good faith he would have been protected by s 44(4).
[36] Given this conclusion, it is unnecessary to deal with the remainder of the
appellant’s submissions in relation to the first parcel of shares.
[37] In relation to the second parcel of shares the appellant submitted that the Judge erred in finding that Nathan Wilkerson paid cash in return for ownership of these shares. The Judge found that:8
[Nathan Wilkerson’s] inability to provide documentary evidence of the source of the cash used to pay for the shares he retained raises doubts ... as to whether any such payments were in fact made. On balance, however, I am not prepared to make a finding that Nathan Wilkerson did not make such payments. His oral evidence generally struck me as straightforward and essentially reliable, and his claim that he made the payments from cash available to him from his dairy business and from family borrowings is not so improbable that it can properly be dismissed.
[38] The appellant challenges this finding on two bases. First, that the Judge wrongly concluded Nathan Wilkerson’s evidence was essentially reliable. The appellant submits Nathan Wilkerson dishonestly portrayed his personal finances and made an allegedly spurious claim that he did not contact his uncle upon learning of Mrs Wilkerson’s claim against him personally. Because of this, the appellant says
Nathan Wilkerson lacked credibility. Second, there was no independent, reliable
evidence to support Nathan Wilkerson’s claim that he paid for the shares.
[39] It is well established that the Court on appeal is required to treat with caution a challenge to findings as to credibility made by a Judge in a lower Court after hearing the evidence. That is particularly so in the context of conclusions of fact that turn on credibility.9
[40] The Judge in this case had the distinct advantage of seeing and hearing Nathan Wilkerson give his evidence. Even though Nathan Wilkerson’s description of his financial affairs was found to be inaccurate during his cross examination, the Judge nevertheless found him to be “straightforward and essentially reliable”. This was a finely balanced issue that turned on the Judge’s view of the evidence as he heard it. Mr Noble, on behalf of the appellant, was unable to point to any clear evidence to support a contrary conclusion. On that basis, the Court on appeal will not disturb the Judge’s finding that Nathan Wilkerson did pay cash for the second parcel of shares.
[41] I have considered the possibility that an order should be made against Nathan Wilkerson for the value of the second parcel of shares. I accept that Nathan Wilkerson did not receive the second parcel of shares in good faith for the same reasons given in relation to the first parcel of shares. However, s 44(2)(b) only empowers the court to order a person to pay a sum not exceeding the difference between the value of the consideration (if any) and the value of the property. The reason for this is that where any consideration is paid, the amount of that consideration is returned to the relationship property pool and is therefore available for division. Section 44 is concerned with the disposition of property outside the relationship property pool.
[42] Here, Mr Wilkerson disposed of $43,264.05 worth of shares to Nathan
Wilkerson, thereby removing that property from the relationship property pool. Nathan Wilkerson paid $7,606.12 back to Mr Wilkerson, returning that money to the
9 Rae International Insurance Brokers [1998] 3 NZLR 190 (CA) at 199 as cited in Austin, Nichols
& Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13].
relationship property pool (just as the 5,500 Vector shares were returned to Mr Wilkerson).10 It was the first parcel of shares that remained outside the relationship property pool, and for which Nathan Wilkerson did not pay any consideration. Mrs Wilkerson’s only option in relation to the money returned to Mr Wilkerson is to attempt to hold Mr Wilkerson’s estate to account for her relationship property entitlement.
Result
[43] The Judge erred in declining to exercise the Court’s discretion to make an order under s 44(2) against Nathan Wilkerson for the value of the first parcel of shares. I make an order under s 44(2)(b) that Nathan Wilkerson pay to Mrs Wilkerson the difference between the value of the consideration paid by Nathan Wilkerson ($7,606.12) and the value of the shares received ($43,364,05), being $35,757.93.
[44] Counsel is given leave to file memoranda on costs within 21 days.
Goddard J
10 See [12] above.
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