Willis v Willis
[2015] NZHC 2626
•23 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-1551 [2015] NZHC 2626
IN THE MATTER OF an appeal from the Family Court BETWEEN
LESLIE ARNOLD WILLIS Appellant
AND
EILEEN ANNE WILLIS Respondent
Hearing: 21 October 2015 Counsel:
DJG Cox for the Appellant
G Cameron for the RespondentJudgment:
23 October 2015
REASONS JUDGMENT OF DUFFY J
This judgment was delivered by me on 23 October 2015 at 4.30 pm pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors:
Rennie Cox, Auckland
Peter J Cook, Remuera
Counsel:
Gray M Cameron, Barrister, Auckland
WILLIS v WILLIS [2015] NZHC 2626 [23 October 2015]
[1] This is an appeal from a decision of the Family Court regarding relationship property, which I allowed. My reasons for doing so now follow.
[2] Regrettably, when this matter was before the Family Court it became mired in a procedural morass. Unfortunately, the way in which it has come before this Court precludes me from making determinations that would have resulted in the making of final orders. Instead, I have had no option but to allow the appeal, and to refer the matter back to the Family Court. The result is that a relatively uncomplicated relationship property proceeding involving property of average value which was filed in the Family Court in 2011 remains unresolved, despite the parties having reached an agreed settlement at a judicial settlement conference in 2013.
[3] The issue that led to this appeal had its genesis in a judicial settlement conference in the Family Court held on 30 July 2013 before Judge Southwick QC. On that day the parties reached an agreement (the settlement agreement) which was recorded in handwriting as follows:
May it please the Court, the Parties record the terms of agreement in summary form as follows –
1. 5 Jersey Avenue, Mt Albert, shall be placed on the market forthwith.
The parties shall divide the net proceeds equally.
2.[The appellant] will purchase the former family home at 5A Jersey Avenue, Mt Albert, at an agreed value of $745,000, by paying to [the respondent] the sum of $372,500. This payment is subject to a satisfactory builder’s report being obtained by [the appellant] by 21
August 2013. If [the appellant] is not satisfied with the builder’s
report, this clause may be renegotiated at [the appellant’s] option but
the rest of the terms of this agreement shall prevail. If the parties cannot agree the property shall be placed on the market and sold with the net proceeds to be divided equally between the parties.
3. Funds held with Spicers shall be applied as follows:
a) to pay outstanding debts as identified during the conference;
b)a retention of $10,000 against liquidation winding up and taxation costs
(Any surplus to be divided equally between the parties)
c)the balance to be divided equally between the parties forthwith.
4. [The appellant] keeps the boat and pays [the respondent] $8,000.
5. In respect of [the appellant’s] Waterfront Industry Super [the
appellant] pays [the respondent] $47,500.00.
6. The property at 24 Puriri Bay, Gt Barrier Island shall be retained by
[the appellant] subject to a payment of $175,000 to [the respondent].
7.[The appellant] shall pay to [the respondent] (a) re LAQC tax benefit $2908.00
(b) re arrears child support $14,000
(c) re settlement of spousal maintenance $4000 (d) re payment of loan of legal fees $2500
(e) to balance, plus settlement balance $3592.
The document was signed by the parties and their respective lawyers.
[4] Rule 179 of the Family Court Rules 2002 provides for a Judge who presided over a settlement conference to make orders by consent settling some or all of the issues in dispute. The fact the parties provided the Judge with a handwritten settlement agreement suggests that they contemplated her making orders under s 179 to enact the settlement.1 However no orders were made by Judge Southwick QC that day.
[5] On 12 August 2013 Judge Southwick QC issued a minute recording that the “terms of these heads of agreement are approved as correctly reflecting the mediation agreements reached.” To me this confirms the Judge considered the parties had concluded an agreement on the issues recorded in the settlement agreement. Judge Southwick QC directed the matter was to be placed in a registrar’s list for the first week of September 2014 “by which time the builder’s report will be known”, which was a reference to the provision in clause 2 which made the appellant’s purchase of 5A Jersey Avenue conditional on receiving a satisfactory builder’s report. There was a typographical error in the minute in terms of the year. It should
have read 2013. The final paragraph of the minute recorded that counsel should be
1 The Property (Relationships) Act 1976 operates as a Code. It makes no provision for parties enforcing settlement agreements of their litigation. The usual approach when settlement agreements are made is to obtain orders from the Court that, in effect, confirm the terms of the settlement.
in a position by what the Judge believed to be the first week of September 2013 to present a more detailed memorandum of orders sought.
[6] It appears to me that the Judge had it in mind to delay the making of Court orders until she knew which of the outcomes provided for in clause 2 was to be the case. That to my mind could be the only reason for refraining from making orders on the day of the judicial settlement conference. It is also consistent with the reference in the Judge’s minute that when the matter was next called the builder’s report would be available to the parties. All the other issues were finally resolved.
[7] The provision of a formula in clause 2 for dealing with the circumstance of an unsatisfactory builder’s report meant that an order based on clause 2 could have been made at the time of the settlement conference. However, the Judge chose not to do so.
[8] The direction in the minute that the matter was to be allocated to a registrar’s list for the first week of September 2014 caused serious problems for the parties. The Court registry interpreted the order literally and refused to refer the matter back to Judge Southwick QC for correction.
[9] The respondent’s counsel was keen to pursue matters. He informed me from the bar that in order to get the matter back before Judge Southwick QC he filed an application on notice for an order pursuant to r 179(1) of the Family Court Rules
2002 settling issues in dispute in the proceedings and for ancillary orders consequent thereon.
[10] Rule 179 is directed at the making of consent orders at a settlement conference:
179 Consent order may be made at settlement conference
(1) The Judge presiding over a settlement conference may, with the consent of the parties, make an order settling some or all of the issues in dispute in the proceedings.
(2) However, a Judge may not make a consent order if a party to the proposed settlement does not have a lawyer acting for the party unless—
(a) the settlement conference has been adjourned to give the party a chance to take legal advice; or
(b) the party makes an express statement to the effect that he or she does not wish the settlement conference to be adjourned to provide him or her with the chance to take legal advice.
(3) A consent order made at a settlement conference—
(a) has the same effect as if it were made with the consent of the parties in proceedings in a court; and
(b) is the only matter arising out of a settlement conference that is admissible as evidence in a court or before a person acting judicially.
[11] The respondent’s view was that the settlement agreement was a settlement reached at a judicial settlement conference, and orders were required from the Court to perfect that settlement. The respondent took the view that the orders could be made on the basis of the terms of the settlement agreement, and that no refinement of the terms of the agreement was required for them to be made into Court orders.
[12] However, unfortunately the application for an order under r 179 did not accurately reflect the contents of the settlement agreement. Paragraph 2 of the application stated that:
An order in terms of para 2 of the Settlement Conference Memorandum of
30 July 2013 pursuant to which I [the respondent] am to purchase the interest of the Applicant [the appellant] in the property situate at and known as 5A Jersey Avenue Mt Albert for the sum of $265,000.
[13] In this instance it was the respondent seeking to acquire the interest of the appellant for the sum of $265,000. This scenario is not what is set out in the settlement agreement. The explanation I was given for the change from the settlement agreement is that clause 2 of the settlement agreement provided for the parties to renegotiate the sale of 5A Jersey Avenue, Mt Albert if the appellant was not satisfied with the builder’s report. It appeared to be common ground between the parties that the builder’s report revealed that substantial repair work was required to this building, as it is what is commonly known as a leaky building. The respondent’s view was that the parties had therefore fallen back on the ability under clause 2 of the settlement agreement to re-negotiate the purchase, had done so and arrived at a
figure of $265,000 which the respondent would pay to acquire the property. However, it seems that the appellant did not accept there was a renegotiated position.
[14] The inclusion of the renegotiated position in the r 179 application may have provided the appellant with some foundation for opposing the application. By the time the matter came back before Judge Southwick QC as an application under r 179 the parties were no longer agreed on the terms of the settlement. Judge Southwick QC refused to deal with it. The respondent’s counsel advised me that as the parties were no longer agreed and r 180 of the Family Court Rules prevents a Judge who has presided at a settlement conference from hearing and determining opposed applications Judge Southwick QC considered she could not deal with the application.
[15] Under the final part of clause 2 of the settlement agreement if there was no renegotiation of the sale of 5A Jersey Avenue it was to be sold on the open market and the proceeds divided between the parties. If the parties were not agreed as to any re-negotiated purchase of 5A Jersey Avenue the default position under clause 2 of the settlement agreement could have covered the situation; this provided for the property to be placed on the open market, sold and the proceeds divided between the parties.
[16] When the r 179 application came before Judge Burns on 20 May 2015, as a result of Judge Southwick QC refusing to deal with it, the respondent had wisely abandoned the argument that the parties had renegotiated the acquisition of 5A Jersey Avenue, Mt Albert. Instead the respondent argued that the final default position under clause 2 was operative. Thus any uncertainty as to which part of clause 2 was operative was removed.
[17] However, by then there was a greater impediment to the r 179 application proceeding, which Judge Burns recognised. He delivered a decision on 10 June
2015 in which he found that he had no jurisdiction under r 179 to make the orders sought by the respondent because he was not the Judge who had presided at the settlement conference.
[18] Judge Burns correctly determined that it is only the Judge presiding over the settlement conference that may, with the consent of the parties, make orders.2 Judge Burns went on to find that in the minute dated 12 August 2013 Judge Southwick QC had made no orders. Judge Burns then found that Judge Southwick QC had made no formal direction to adjourn the settlement conference. This led Judge Burns to conclude that the settlement conference had come to an end on 30 July 2013, without
anything being done to perfect the settlement agreement.
[19] As matters stood as at June 2013 Judge Southwick QC had not made orders to perfect the settlement agreement and Judge Burns had concluded he was powerless to do so. Further, although Judge Burns considered that the parties had properly concluded a settlement agreement, without Court orders to give it effect the respondent was powerless to enforce it. The outcome so far had led Judge Burns to the unenviable position of being faced with what appeared to be to him a concluded settlement agreement that had not been given force by consent orders as at 30 July
2013, and with the legal questions this raised still waiting to be resolved as at May
2015.
[20] As Judge Burns saw matters by May 2015 Judge Southwick QC could not make orders under r 179 as the settlement conference had ended, and he could not as he had not presided at the settlement conference. This led Judge Burns to look for an alternative means by which the settlement agreement, which the parties and their respective lawyers had signed in 2013 could be given legal effect. Judge Burns concluded that he could achieve this end by use of ss 21A and 21H of the Property (Relationships) Act 1976 (the Act).
[21] Section 21A provides for spouses and partners to settle their differences by agreement:
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.
2 See r 179(1).
(2) This section is subject to section 47.
[22] Section 21F sets out the formalities required for a s 21A agreement to be binding under the Act.
21F Agreement void unless complies with certain requirements
(1) Subject to section 21H, an agreement entered into under section 21 or section 21A or section 21B is void unless the requirements set out in subsections (2) to (5) are complied with.
(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.
[23] However, s 21H provides that a Court may give effect to an agreement which does not comply with the formalities required by s 21F in certain circumstances:
21H Court may give effect to agreement in certain circumstances
(1) Even though an agreement is void for non-compliance with a requirement of section 21F, the court may declare that the agreement has effect, wholly or in part or for any particular purpose, if it is satisfied that the non-compliance has not materially prejudiced the interests of any party to the agreement.
(2) The court may make a declaration under this section in the course of any proceedings under this Act, or on application made for the purpose.
[24] Judge Burns found that the settlement agreement was in writing and signed by the parties, so it met the requirements of s 21F(2). He was also satisfied that each party to the settlement agreement had independent legal advice before signing the document, so the requirements of s 21F(3) were satisfied. He found that each of the parties’ signatures to the agreement were witnessed by a lawyer and so the requirements of s 21F(4) were met. However, he found that the requirements of s 21F(5) had not been satisfied as the consent memorandum did not contain certification from the lawyers, who witnessed the signatures of the parties, that they
had explained to the parties the effect and implications of the agreement. Judge Burns concluded that before signing the settlement agreement each party would have received independent legal advice, and he was satisfied each party understood the effect and implications of the agreement. He found, therefore, that the policy reasons for the certificate requirement in s 21F(5) were satisfied, as all that was absent was the formal certification.
[25] Judge Burns then went on to consider whether in the circumstances before him it would be appropriate for the Court to give effect to the settlement agreement pursuant to s 21H, either in whole or in part. Judge Burns weighed the competing arguments for the parties and decided the merits of those arguments clearly weighed in favour of him finding the settlement agreement was intended to be a binding legal document, the enforceability of which was only hampered by the absence of Court orders.
[26] In the course of the hearing before Judge Burns the appellant made a number of arguments about the inappropriateness of using s 21H, and so treating the settlement agreement as a s 21A agreement as the two properties in Jersey Avenue were each owned by a family trust and not all trustees were present at the settlement conference. Judge Burns did not see this as an impediment, because the trustees of each trust were the parties plus a solicitor. In the view of Judge Burns, two of the three trustees were present. They were clearly aware of the settlement conference and had attended in their capacities as husband and wife and as trustees. Further, the respondent informed me from the bar (with no objection from the appellant) that the terms of the trust deeds provided for the trustees to make a majority decision. So provided two of the three trustees were agreed as to what should happen to trust property there was no need to involve the third trustee.
[27] I was concerned that the Judge’s reliance on s 21A and s 21H to give effect to the settlement agreement may have been a breach of the principles of natural justice as neither party had sought to invoke ss 21A or 21H in order to have the settlement agreement treated as a s 21 agreement. The idea of doing this was something that Judge Burns raised at the hearing once he came to the view there was nothing else
available to enforce what he plainly regarded to be an agreement that warranted enforcement.
[28] Counsel for the respondent referred me to s 21H(2) which provides that a Judge can, of his or her own initiative, apply s 21H. Whilst that provision enables a Judge to make a declaration under the section in the course of any proceedings under the Act, I still consider that to raise s 21H as the Judge did here required some notice to be given to the parties. Section 21H requires the Court to be satisfied that the non-compliance with the requirements of s 21F has not materially prejudiced the interests of any party to the agreement. By raising the matter in the way that he did, the Judge precluded the appellant from preparing an opposition based upon material prejudice. An alternative approach may have been to have adjourned the hearing, or at least to have offered the parties the opportunity for an adjournment, so that the appellant could have prepared argument on why s 21H should not have been applied.
[29] However, the more formidable argument that the appellant raised in the appeal and to which the respondent had no answer, was the fact that a s 21A agreement can only apply to “property owned by either or both of the spouses or partners.” The Jersey Avenue properties are owned by the parties in the capacities as trustees.
[30] Section 21D sets out what property may be the subject matter of an agreement under s 21A or s 21B.
21D Subject matter of agreement
(1) An agreement under section 21 or section 21A or section 21B 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 one 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.
(2) This section does not limit the generality of sections 21 to 21B.
[31] Section 21D makes it clear that property that may be the subject matter of an agreement under s 21A is relationship property. Further the respondent’s counsel acknowledged to me that the contracting out provisions of the Act, which include ss
21A and 21H, apply to relationship property. Whilst the parties as trustees are registered on the title of the Jersey Avenue properties and hold legal ownership thereof, they do so on trust for the beneficiaries of those trusts.3 Insofar as the settlement agreement purports to provide how the Jersey Avenue properties are to be divided between the parties s 21A could not be used to achieve this outcome. Thus Judge Burns had no jurisdiction to treat the settlement agreement as a s 21A
agreement that warranted being given effect to under s 21H.
[32] Whilst the parties may have approached their settlement discussions on the basis they would look through the trusts and treat property they owned as trustees as property available to them for division in terms of their relationship property dispute, this Court cannot ignore the legal character of their ownership of those properties.
[33] The problem that the presence of trust property presented to the application of s 21A and s 21H does not arise with a settlement agreement that has as its purpose the settlement of litigation. Counsel for the parties were agreed that a court will not enter into a critique or analysis of what took place at a mediation, save when the question was whether a settlement had been reached or whether it could be set aside
on grounds of fraud or other such principles.4
3 I understand that the parties’ children are also beneficiaries of the trusts. I was told that the trusts owned substantial debts to the parties as a result of the parties transferring property to the trusts. Thus the parties’ agreement in 2013 to effectively draw the trust property back into their personal estates could be justified by the effect this would have on extinguishing debts the trusts owed to them. No-one sought to address (a) whether the parties’ conduct in this respect was a breach of their fiduciary duties as trustees, or (b) whether the children should have been represented in parallel proceedings brought under the Family Proceedings Act 1980 in relation to the trust property. This is a further complexity that I need not address at this time.
4 Hildred v Strong [2008] 2 NZLR 629 (CA) at [16].
[34] It is equally important to note what the deal did not include. There was no suggestion that, in resolving the dispute, they would achieve an outcome consistent with the law. Mediation is not a court proceeding in mufti. It is an alternative means of resolving a dispute.
[35] Counsel for the parties were also agreed that the rule applied in Hildred v Strong was equally applicable to a settlement reached during the course of a judicial settlement conference.
[36] It is clear to me that Judge Burns was understandably most concerned about the delay and uncertainty in terms of the resolution of this proceeding. He said:5
Clearly the proceedings have been before the Court for a long period of time which finally culminated after considerable delay in the settlement conference. There would be significant prejudice to both parties if the agreement that they reached considerable cost and expense was not enforced. It means that they have to start completely from scratch. It would open up applications for cost, create further delay and expense.
[37] I have sympathy with the position the Judge found himself in, and I can understand why he acted as he did, but the difficulty he faced was a jurisdictional one. It is simply not possible to make provision for the ownership of trust property in the context of a s 21A agreement. It is for this reason that I allowed the appeal setting aside the orders that he made under s 21H.
[38] The appellant sought to have the orders Judge Burns made set aside in their entirety. The respondent did not argue for severing the trust property from the other aspects of Judge Burns’ orders. This was sensible as once the trust properties were removed from the equation the division of the parties’ property took on a completely different hue.
[39] The parties are now at the stage they were before the hearing before Judge Burns. Indeed, if the appellant is correct they are back to the position that they were in before the settlement agreement was executed. The appellant, who no longer wants to be bound by the settlement agreement, wants to pursue a different outcome
from that provided for in the agreement. The respondent, who is happy with the
5 Willis v Willis [2015] NZFC 4657 at [48].
outcome achieved at the settlement conference in July 2013, still seeks to enforce that agreement if she can. The big question now is where do the parties go from here.
[40] The appeal before me was limited to a challenge to Judge Burns’ application of ss 21A and 21H of the settlement agreement. Whilst the respondent still wants consent orders to follow the settlement agreement, she sensibly recognised that it is only the Judge that presided at the settlement conference who can make such orders, so there was no cross-appeal regarding Judge Burns’ refusal to make orders under r 179.
[41] A key issue for the respondent therefore is the question of whether it is still possible for the settlement agreement to go before Judge Southwick QC and for her to make consent orders.
[42] Whether the settlement agreement can still support orders under r 179 involves consideration of whether the way in which Judge Southwick QC handled the settlement conference led to her:
(a) actually concluding it without making consent orders, or
(b)or by implication adjourning the case for it to come back before her for the making of orders under s 179.
Secondly, whether Judge Southwick QC was right to refuse to hear and determine the respondent’s s 179 application for orders to enforce the settlement agreement; within this second question is the ancillary question of whether it is still open to the appellant to oppose orders being made under r 179 when he has signed a settlement agreement that sets out the terms of such orders. These are questions that could possibly be determined in this Court in a judicial review of how Judge Southwick QC dealt with the matters before her as well as a declaration on the validity of the settlement agreement, but they are not questions that were open to me to engage with on the present appeal. It was for this reason that I refused the respondent’s request to
refer the matter back to Judge Southwick QC with directions as to what she should do next.
[43] The respondent did not argue that a settlement agreement recorded at a judicial settlement conference can be enforced without the need for orders under r 179. In other civil proceedings such an agreement would be enforceable. The scope of the settlement agreement takes it outside the scope of a s 21A agreement, for the reasons I have already addressed. Moreover, it is hard to equate a settlement agreement following a judicial settlement conference with the agreements provided for in the s 21 contracting out provisions of the Act. On the other hand, if a settlement agreement is not to be equated with a s 21A contract, it follows that the Act says nothing about the validity and enforceability of agreements to settle disputed litigation, which raises the question of whether such agreements can be sued upon. When I raised this with counsel the response was that the Act is a code. If litigation settlement agreements cannot be enforced without the making of orders under r 179, this emphasises the need for clear, express directions from Judges who preside at settlement conferences for relationship property proceedings as to what is to occur after the parties have executed a settlement agreement. Otherwise the benefits achieved at the judicial settlement conference will be subsequently lost through a failure to make an agreement legally enforceable.
[44] Given it is now late in 2015 and any Court hearing date is now not likely to be until 2016, I consider the parties would be wise to seriously consider the appropriate steps to take to bring this matter to an end. The longer this matter remains alive the more likelihood there is for changes in value to the properties which will only provide more grounds for dispute, and so more time and expense will be spent on litigation.
[45] I record that in addition to allowing the appeal and setting aside Judge Burns orders I granted the parties leave to file memoranda as to costs.
“Duffy J”
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