WL v AJ
[2023] NZHC 703
•31 March 2023
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,
11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
https://
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE
CIV 2020-441-77
[2023] NZHC 703
IN THE MATTER OF the Property (Relationships) Act 1976 AND
IN THE MATTER OF
a claim in equity for constructive trust and knowing receipt
BETWEEN
WL
Plaintiff
AND
AJ
First Defendant
RA
Second Defendant
CIV 2021-441-41 BETWEEN
AJ
Plaintiff
AND
WL
Defendant
Hearing: 3–5 October 2022 (further memorandum filed 17 October 2022) Counsel:
P N Ross for Plaintiff
E V R Stannard and M A B Black for Defendants
Judgment:
31 March 2023
JUDGMENT OF MALLON J
WL v AJ [2023] NZHC 703 [31 March 2023]
Table of contents
Introduction [1]
Background [5]
The relationship [5]
The Agreement [10]
After the Agreement [12]
Contributions during the relationship [16]
Property [23]
Law [25]
General provisions [25]
Division of relationship property [28]
De facto relationships of short duration [34]
Contracting out agreements [36]
The Agreement [44]
Circumstances of the Agreement [44]
Content [56]
Findings on content and circumstances of Agreement [63]
Is the Agreement to be given effect [68]
Is this a contracting out agreement under s 21 [68]
Does the Agreement satisfy the s 21F criteria? [72]
Should the Agreement be given effect under s 21H [75]
Void for duress, undue influence or lack of certainty [82]
Serious injustice [84]
Equal division of relationship property [93]
Compensation for post-separation contributions [100]
Order for division or sale [102]
Costs [105]
Result [106]
Introduction
[1] WL and AJ lived together as a couple for approximately 17 years inclusive of periods of separation. Early in their relationship, WL purchased a property (the Property) for $128,000. During an early period of separation, they signed an agreement (the Agreement), prepared by WL’s sister, purporting to exclude the Property as relationship property. Neither party received independent legal advice at the time they signed the Agreement.
[2] AJ now claims half the equity in the Property, occupational rent for the period WL has lived in the Property following their separation, and a declaration that the
contracting out agreement is void or for it to be set aside on the basis that it is seriously unjust. She also seeks equal division of the other relationship property.
[3] WL seeks an order that the Agreement be given effect so that the Property is his separate property and for the rest of the relationship property to be divided equally. If the Court invalidates the Agreement, then he seeks a division of not less than 80 per cent of the relationship property in his favour and an order that no adjustments be made for occupational rent.
[4] WL also brought High Court proceedings alleging that AJ had used relationship property funds to contribute to her brother’s deposit on his house (RA’s house). WL argued that he therefore had a beneficial interest in RA’s house via a constructive trust. This claim was heard with AJ’s claim.1 In the event, the evidence did not bear out WL’s constructive trust claim and it was abandoned at the end of the hearing.
Background
The relationship
[5] WL and AJ began a relationship in late 1999 or 2000 when WL was 19 and AJ was 16 years old. WL was employed by an engineering company and AJ had left high school. Late in 2000 the parties moved into AJ’s mother’s house. WL paid board to AJ’s mother.
[6] WL bought a property (the first property) on 3 July 2001 when the parties were together. It was purchased for $60,000 with WL’s $7,000 deposit and a loan from Westpac Bank. AJ says that they talked about buying a house and having a family in the early stages of their relationship, that being her dream. She went with WL to an open home for the first property. AJ says that the first property was bought in WL’s name because she was too young to be listed on the title. WL disputes this and says that he always intended to buy a property after leaving his parents’ house.
1 AJ and WL’s proceedings were joined on 27 April 2021: [WL] v [AJ] HC Napier CIV-2020-441- 77, 27 April 2021 (Minute of Associate Judge Johnston).
[7] The parties lived at the first property for a time. They both agree that there were periods of separation and reconciliation throughout their relationship. There was at least one period of separation in late 2001 or early 2002 of several months while they lived at the first property (AJ says the separation was for four months but WL says it was for nine months). AJ says that the separation was because WL said he did not want to have children. During this period, WL thought his relationship with AJ was “definitely finished” and he started a new relationship. They reconciled and restarted their relationship in about August 2002. Their first child was born in May 2003.
[8] After their reconciliation, WL decided to sell the first property. AJ says she helped look for another property by visiting 14 open homes in two weeks. WL, who was working, visited two of them. The first property was sold on 8 September 2003. The Property was purchased for $128,000 on 4 September 2003. Most of the purchase price for the Property was funded through a Westpac Bank loan with the balance coming from the net sale proceeds of the first property. AJ says that WL discussed putting her name on the title when they married and that they always referred to the house as “their home”. WL says that the parties never had this discussion and they were clear they would not marry.
[9] The parties separated again in 2004 for a time. During this period, AJ rented the Property from WL. The parties signed a rental agreement dated 7 October 2004 pursuant to which AJ paid WL a weekly rent of $220. WL says that he bought and lived in a caravan on the back of the property at this time. AJ agrees that WL bought the caravan but says he did not stay in it. She says WL stayed with his parents but then moved back into the Property and stayed in the spare room and she had no choice about this. It is not in dispute that AJ’s last rental payment was on 24 February 2005. After that, the parties resumed their relationship and lived at the Property together.
The Agreement
[10] The Agreement was entered into at around the same time as they entered into the rental agreement. WL says he was concerned about their unstable relationship and his interest in the Property. Both parties agree that WL asked AJ to find out if it was
possible to contract out of the property sharing regime so that AJ did not have a claim on the Property. Having done so, AJ relayed to WL that an agreement needed to be in writing and witnessed. WL’s sister drafted the Agreement. The parties signed the Agreement with witnesses present and without independent legal advice. Each party had a copy of the Agreement and there was no further discussion about the Agreement or varying its terms after it was signed.
[11] There is, however, a dispute about the circumstances that led to the signing of the Agreement, the form it was written in, its exact terms and who witnessed it. This is discussed later. The signed Agreement is no longer available. This is because AJ destroyed both her copy and WL’s copy of the signed Agreement. AJ says she destroyed her copy when the parties reconciled in 2005. She says she found WL’s copy in 2015 when WL asked her to transfer things from his old wallet to his new one. She was upset he still had it and destroyed it by throwing it into the fire. She did not tell WL that she had done this. WL says that when AJ ended the relationship in 2017 he looked for the Agreement and could not find it. He thought AJ might have taken it when she took the bedside cabinet when she left him.
After the Agreement
[12] Following their reconciliation in 2005, they had a second child in 2006 and a third in 2010. There may have been a period of separation between the birth of these two children. However, the relationship from 2005 became more stable until the parties finally separated on 6 October 2017 when AJ left the Property and went to live at RA’s house.
[13] There is a dispute about what AJ took with her when she left. WL says that the house was “essentially empty” other than for some couches, the refrigerator and freezer and a TV set. AJ says that she left “most of the chattels”. These included sheets for a double bed, blankets and sheets for the children, the new lounge suite, the fridge and freezer, the microwave, a TV (she took the smallest TV) and toys for the children. WL says she also took around $7,000 from the safe to tide her over until her benefit started and that she promised to repay him. AJ says that she only took $1,000 of $9,000 from the safe and cannot remember a conversation where she told WL that
she would pay him back. They agree that shortly after AJ left the relationship she told WL, in the presence of AJ’s father, that she would not make a claim on the house.
[14] AJ lived in RA’s house and paid him a weekly rent of $350. WL remained at the Property. Initially WL regularly visited RA’s house. He says that he visited to carry out maintenance work, because the children were there and because the parties spoke about resuming their relationship at an early stage. AJ says that WL regularly visited to be abusive or to try to win her back, that she was terrified of him and that she never asked him to come to the property to fix anything.
[15] WL and AJ jointly cared for the children following the end of the relationship. WL says that things became hostile between them when he refused to sign a document for the Ministry of Social Development stating that AJ had care of all three children when this was not true. He says that their eldest son returned to live with him and he shared the care of his youngest child with AJ for a period. AJ says that WL would cancel times when she was meant to have the children. She says the situation become hostile after she stopped allowing WL into RA’s house. The police issued WL with a trespass notice on 15 January 2018. AJ applied to the Family Court for a protection order on 31 May 2018. This application was discontinued on 7 December 2018 without a protection order being made. AJ says it was discontinued at the insistence of the Lawyer for the Children. AJ brought the proceeding for division of the relationship property, including the Property, in December 2015. She says it took her some time to understand and speak about the psychological abuse she says she suffered in the relationship and that this is why it took her some time to make a claim for her share of the house.
Contributions during the relationship
[16] AJ was working full time until early 2003 when she was five months pregnant with the couple’s first child. She then cared for her child when he was born. Thereafter her main sources of income were the Working for Families Tax Credit and a Work and Income New Zealand (WINZ) benefit payment. She received occasional wages for cleaning work she did at a playcentre. With her tax credit, benefit payments and occasional wages, AJ had an income of a little under $400 per week.
[17] Throughout the relationship, WL was in paid full-time employment doing engineering work. In the early years of their relationship WL was earning a weekly wage of $381.72. His wages steadily increased from 2006 until April 2016 when he was earning $764.51 weekly after tax.
[18] The parties kept separate bank accounts during their relationship. WL paid the mortgage, rates and insurance. AJ had access to WL’s account so that she could attend to his internet banking as WL had not learnt how to do this. Out of her income, AJ paid for the household expenses including food, clothes, presents for the children, her car expenses and the phone bill. There is a dispute between WL and AJ about the extent to which WL contributed to household expenses and things for the children.
[19] The tenor of AJ’s evidence is that WL contributed very little towards these. She says that WL sometimes paid for meat (particularly for BBQs and roasts because WL said he did not like the food she cooked). He also sometimes bought other food as well as some things for the children. She says that WL never gave her money when she asked for it and, if she asked, he would tell her to budget better. She says that on one occasion, she asked for money to fix her teeth and he told her that he would remove her teeth himself. She says that when her car needed repairs, WL paid about $300 towards the costs but she had to reimburse him. AJ says that WL would refer to her income as “our money” and constantly questioned what AJ spent her money on.
[20] The tenor of WL’s evidence was that he paid for meat and takeaways for the family and helped with other expenses. He said he bought the children a “basketball hoop, a netball hoop, trampoline, multiple swing sets, [and] motorbikes”. He denied saying he would remove AJ’s teeth when she asked him for money to fix them. WL recalls questioning her on one occasion about what she spent her money on but denies that he constantly questioned her about this.
[21] It is accepted that, early on in their relationship, WL gave AJ his overtime cheques until family assistance kicked in. Apart from this, I accept AJ’s evidence that she was expected to pay for household expenses and child-related expenses from her income. However, the bank statements confirm that WL often purchased meat and sometimes purchased groceries. He also paid the power bills. At times, AJ was short
of money, and I accept that WL would blame her for that on occasion. That is supported to some extent by evidence from AJ’s brother, RA. He loaned AJ approximately $3,000–4,000 during her relationship with WL. This was for AJ to use on Christmas presents for the children, bills and repairs to her car.2
[22] As to their non-financial contributions to the relationship, AJ says she was the primary caregiver for the children whereas WL says it was a “joint effort”. AJ says WL did the lawns and the other outside work and that she did all of the housework. AJ accepts that WL used to complain about the standard of her housework but said he had “very, very high standards” and that was why she cleaned the walls once or twice per month and vacuumed under the couches. I accept AJ’s evidence that she was the primary caregiver. She was the one at home with the children while WL went to work. I also accept that she kept the house (whether to WL’s satisfaction or not) and she cooked meals. WL also cooked.
Property
[23] The Property was valued at $525,000 as at 22 September 2022. From the loan to purchase this property, $46,204 remained owing as at 21 September 2022 secured by a mortgage over the Property in WL’s name. There was also a loan taken out for the purchase of a bus that the family used for holidays, also secured by a mortgage over the Property, with an outstanding balance of $26,995 as at 21 September 2022. AJ also took out a personal loan secured against the property of $3,800 on 28 July 2010 for a car but that loan was repaid in full.
[24] Aside from the Property, the assets of the relationship were: AJ’s Kiwisaver ($1,000); cash (up to $9,0003); AJ’s bank account ($315); AJ’s car; WL’s bank account ($8,327.93); WL’s ute; WL’s 4WD; WL’s motorbikes; and the bus.
2 At Christmas in 2011 she wanted to buy an Xbox for the children and her brother, RA, purchased this for her. AJ set up an automatic payment of $20 a fortnight to pay RA back for this purchase. RA also transferred AJ money in 2012, 2015 and 2017, paid a Kmart layby, a dentist bill, car repairs in 2013 and a vet bill. She continued the automatic payment for these expenditures until January 2018.
3 The amount is in dispute.
Law
General provisions
[25] The Property (Relationships) Act 1976 (PRA) provides for the division of property in relation to married, civil union or de facto partners when they separate.4 The general presumption is that a couple’s relationship property is divided equally between them.5
[26]As set out in s 1M, the purposes of the PRA include:
1M Purpose of this Act
…
(b)to recognise the equal contribution of both spouses to the marriage partnership, of civil union partners to the civil union, and of de facto partners to the de facto relationship partnership:
(c)to provide for a just division of the relationship property between the spouses or partners when their relationship ends by separation or death, and in certain other circumstances, while taking account of the interests of any children of the marriage or children of the civil union or children of the de facto relationship.
[27]As set out in s 1N, the principles of the PRA are:
1N Principles
(a)the principle that men and women have equal status, and their equality should be maintained and enhanced:
(b)the principle that all forms of contribution to the marriage partnership, civil union, or the de facto relationship partnership, are treated as equal:
(c)the principle that a just division of relationship property has regard to the economic advantages or disadvantages to the spouses or partners arising from their marriage, civil union, or de facto relationship:
(d)the principle that questions arising under this Act about relationship property should be resolved as inexpensively, simply, and speedily as is consistent with justice.
4 Property (Relationships) Act 1976, s 1C(1).
5 Section 1C(3).
Division of relationship property
[28] Part 4 of the PRA sets out how relationship property is divided under the Act. The definition of “relationship property” is set out in s 8 of the PRA. It includes “the family home whenever acquired”, “the family chattels whenever acquired”, and “all property owned jointly or in common in equal shares by the married couple or by the partners”.6 Section 9 provides that “[a]ll property of either spouse or partner that is not relationship property is separate property”.7
[29] In this proceeding, the main issue relates to the Property. A family home is defined in the Act as:8
family home—
(a)means the dwellinghouse that either or both of the spouses or partners use habitually or from time to time as the only or principal family residence, together with any land, buildings, or improvements appurtenant to that dwellinghouse and used wholly or principally for the purposes of the household; and
(b)includes a joint family home.
[30]The presumption of equal division is set out in s 11 of the PRA as follows:
11 Division of relationship property
(1)On the division of relationship property under this Act, each of the spouses or partners is entitled to share equally in—
(a)the family home; and
(b)the family chattels; and
(c)any other relationship property.
(2)This section is subject to the other provisions of this Part.
[31]Section 13 provides an exception to equal sharing as follows:
13 Exception to equal sharing
(1) If the court considers that there are extraordinary circumstances that make equal sharing of property or money under section 11 or section
6 Section 8(1)(a)–(c).
7 Section 9(1).
8 Section 2 (definition of “family home”).
11A or section 11B or section 12 repugnant to justice, the share of each spouse or partner in that property or money is to be determined in accordance with the contribution of each spouse to the marriage or of each civil union partner to the civil union or each de facto partner to the de facto relationship.
…
[32]A “contribution” to the relationship is defined in s 18 of the PRA:
18 Contributions of spouses or partners
(1)For the purposes of this Act, a contribution to the marriage, civil union, or de facto relationship means all or any of the following:
(a)the care of—
(i)any child of the marriage, civil union, or de facto relationship:
…
(b)the management of the household and the performance of household duties:
(c)the provision of money, including the earning of income, for the purposes of the marriage, civil union or de facto relationship:
(d)the acquisition or creation of relationship property, including the payment of money for those purposes:
(e)the payment of money to maintain or increase the value of—
(i)the relationship property or any part of that property; or
(ii)the separate property of the other spouse or partner or any part of that property:
(f)the performance of work or services in respect of—
(i)the relationship property or any part of that property; or
(ii)the separate property of the other spouse or partner or any part of that property:
(g)the forgoing of a higher standard of living than would otherwise have been available:
(h)the giving of assistance or support to the other spouse or partner (whether or not of a material kind), including the giving of assistance or support that—
(i)enables the other spouse or partner to acquire qualifications; or
(ii)aids the other spouse or partner in the carrying out of his or her occupation or business.
(2)There is no presumption that a contribution of a monetary nature (whether under subsection (1)(c) or otherwise) is of greater value than a contribution of a non-monetary nature.
[33] Section 18B provides for compensation for post-separation contributions to relationship property as follows:
18B Compensation for contributions made after separation
(1)In this section, relevant period, in relation to a marriage, civil union, or de facto relationship, means the period after the marriage, civil union, or de facto relationship has ended (other than by the death of one of the spouses or partners) but before the date of the hearing of an application under this Act by the court of first instance.
(2)If, during the relevant period, a spouse or partner (party A) has done anything that would have been a contribution to the marriage, civil union, or de facto relationship if the marriage, civil union, or de facto relationship had not ended, the court, if it considers it just, may for the purposes of compensating party A—
(a)order the other spouse or partner (party B) to pay party A a sum of money:
(b)order party B to transfer to party A any property, whether the property is relationship property or separate property.
…
De facto relationships of short duration
[34]Section 14A provides:
14A De facto relationships of short duration
(1)This section applies if a de facto relationship is a relationship of short duration (as defined in section 2E).
(2)If this section applies, an order cannot be made under this Act for the division of relationship property unless—
(a)the court is satisfied—
(i)that there is a child of the de facto relationship; or
(ii)that the applicant has made a substantial contribution to the de facto relationship; and
(b)the court is satisfied that failure to make the order would result in serious injustice.
(3)If this section applies, and the court is satisfied that the grounds specified in subsection (2) for making an order on an application under this Act are made out, the share of each de facto partner in the relationship property is to be determined in accordance with the contribution of each de facto partner to the de facto relationship.
...
[35] Section 2E defines a de facto relationship of short duration (as relevant) as one where the parties have lived together for a period of less than three years.
Contracting out agreements
[36] The PRA regime applies unless the parties have agreed otherwise. Section 21 of the PRA enables parties who are contemplating entering into a relationship to enter into a contracting out agreement. It provides:
21 Spouses or partners may contract out of this Act
(1)Spouses, civil union partners, or de facto partners, or any 2 persons in contemplation of entering into marriage, civil union, or de facto relationship, 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).
(2)An agreement made under this section may relate to the status, ownership, and division of property in either or both of the following circumstances:
(a)during the joint lives of the spouses or partners:
(b)when one of the spouses or partners dies.
…
[37]Section 21A provides for settlement of disputes over property 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.
…
[38]Section 21D regulates the subject matter of such agreements. It provides:
21D Subject matter of agreement
(1)An agreement under section 21 or section 21A … 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 party of the relationship, 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.
[39] Contracting out agreements must comply with certain requirements as set out in s 21F:
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.
[40] Section 21G provides that s 21F “does not limit or affect any enactment or rule of law or of equity that makes a contract void, voidable, or unenforceable on any other ground”.
[41] Where an agreement does not comply with the s 21F procedural requirements, the Court may still give effect to it pursuant to s 21H which provides:
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.
[42] Conversely, an agreement that complies with the s 21F procedural requirements may be set aside pursuant to s 21J which provides:
21J Court may set agreement aside if would cause serious injustice
(1)Even though an agreement satisfies the requirements of section 21F, the court may set the agreement aside if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice.
(2)The court may exercise the power in subsection (1) in the course of any proceedings under this Act, or on application made for the purpose.
(3)This section does not limit or affect any enactment or rule of law or of equity that makes a contract void, voidable, or unenforceable on any other ground.
(4)In deciding, under this section, whether giving effect to an agreement made under section 21 or section 21A or section 21B would cause serious injustice, the court must have regard to—
(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 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 thew agreement:
(f)any other matters that the court considers relevant.
…
[43] Section 21K(1) provides that every agreement under s 21 is “taken to have been made for valuable consideration”. Section 21M provides that if an agreement under s 21 “is void or is avoided or is invalid or unenforceable (including an agreement set aside under s 21J), the provisions of [the PRA] have effect as if the agreement had never been made”.
The Agreement
Circumstances of the Agreement
[44] As noted earlier, WL and AJ’s evidence differs about the circumstances that led to the signing of the Agreement. WL says that AJ approached him when they had separated in 2004, wanting to resume their relationship. This prompted a discussion about the Property. He thought there was a chance they would resume their relationship but also that they could separate again because of the pattern of their relationship. He says that he told AJ he would rather call time on their relationship than risk the potential financial consequences of AJ having a claim on the Property. He says that he did not know that a contracting out agreement was possible until AJ suggested it. He says she went to get legal advice about what was required to make one. She reported back that the contract needed to be in writing, witnessed, and signed by witnesses.
[45] In examination-in-chief he was asked about whether the Agreement was discussed in contemplation of the relationship resuming or on separation as follows:
Q. It appears from the timing that the agreement over the property was entered into around the time, a day or two later maybe, after the rental agreement. With that in mind, can you comment on why you entered into that agreement?
A. Oh yeah, well the relationship was quite rocky, up and down, left multiple times, that sort of carry on and obviously I was getting concerned about my property and the wellbeing of it and so it was addressed and I spoke to my partner, my soon to be partner or whatever it was at that stage and discussed this with her and she told me about an agreement we could get done. I honestly knew nothing about the agreement, this is 20 years ago and I said: “Well, you know, that sounds good. Find out what needs to be done”, and yeah.
Q.One thing that I’m sure will be put to you by my learned friend is that at the time you’d actually separated. So the situation of gaining an interest in the property most likely didn’t arise, what were you expectations concerning the future of the relationship at that stage?
A.Oh, well, the chances are we were probably going to get back together at some stage because that’s the sort of pattern that had been the last multiple years coming and going, on and off again.
Q. After the separation on the 6th of October 2017 did you think that perhaps, what did you think might happen with the relationship?
A. Oh, well, there was a possibility we could get back together.
[46] He was challenged about this evidence in cross-examination. The exchange included the following:
Q. So, Mr Ross has spoken to you about that but that is a tenancy agreement dated the 7th of October 2004 that you accepted you entered into with [AJ], isn’t it?
A. I am pretty confident that’s it, yes.
Q. So, if that 8th of October agreement is the one that was actually signed, that was signed when you had separated, wasn’t it?
A. Correct.
Q. So, that was a post separation rather than a pre-separation agreement, wasn’t it?
A.Well, I am trying to remember 20 years but when you think about it, I think we’ve probably talked about splitting up and you know, a few things came into my knowledge because it was all done within a day of each other. I mean, I can clearly see the days. It’s not post, it’s, you know, I was worried about my property and yeah and I knew, well I was pretty confident that the chances are the break up might be a week, two weeks, three weeks, a month, whatever, and we would probably get back together.
Q. And so that in fact should happen, didn’t it, you reconciled after the agreement was signed, got back together after the agreement was signed?
A. Obviously, at a later date, not the next day or anything.
[47] It was put to WL that he knew that AJ’s father had suffered financially when he separated from AJ’s mother. The exchange about this in cross-examination included:
Q.So, you’ve said in your affidavit: “I had told her I did not want to end up as her father had done as they had a split and he never recovered from it financially”?
A. I have said that, yep, correct.
…
Q.So, you were concerned, even if you did not know the full details, that you didn’t want to end up like [AJ’s] father, that’s correct, isn’t it?
A.Well, I didn’t want to end up like anyone that went through that sort of situation, not particularly him but anyone else.
Q. You were – talked about your concerns about how on and off the relationship was at the beginning, haven’t you?
A. Correct.
Q. So, it was a fear for you that you would lose the house, wasn’t it?
A.Well, not really a fear – the wording is a bit – I mean I didn’t really think I’d lose the house because as far I was concerned, it was already my house but what I did know is that after a certain amount of time, a number of years, there could be an issue and I knew I was coming up to that stage.
[48] AJ disputes that she went to WL wanting to restart their relationship. She says that they were not discussing getting back together at the time they discussed an agreement about the house. AJ says that she thought the Agreement was to protect WL while they were separated and she was renting the house. She says she needed the security of a rental right as she was caring for their first-born child at the time. She says WL told her that, if she did not sign an agreement that she could not claim against the house, she would not be able to live there.
[49] She said she did not have anywhere else to go. She was 20 years old, with no savings or income and was financially dependent on WL. She had a young child and did not have any household things if she moved elsewhere. She was panicked that she could be homeless or even killed if she did not sign the Agreement. She said her father did not want her to live with him and her mother was living about 50 minutes from Hastings. She was challenged on this evidence in cross-examination. She accepted
her mother did not move out of Hastings until 2005 but says that there was some reason, that she does not now recall, as to why she could not stay with her.
[50] AJ does not remember whether it was her idea to enter into an agreement. She does agree that she contacted either the Community Law Centre or the Citizens Advice Bureau about what was required. In questions in cross-examination, she explained the advice she received:
Q. But you did telephone somebody?
A. Yes.
Q.And well we don’t know for sure what you actually told them, clearly one thing you would have explained was that there was as house–
A. Yes.
Q. … That it was owned by [WL], right?
A. I don’t know if I said it was owned by him or we owned the house or
…
…
Q.And you don’t remember being told about the need to get independent advice from a lawyer?
A.I was told in the five minutes I was on the phone it needs to be in writing and witnessed. Whether they thought I would understand it back when they said it needs to be witnessed, maybe they thought I would understand that was a lawyer.
[51] AJ said that the person she spoke to on the phone did not ask her any questions about her personal circumstances. She did not remember whether she was advised to get further legal advice.
[52] In cross-examination she accepted that at some point during the separation they discussed getting back together. On the circumstances that gave rise to the Agreement, she was cross-examined as follows:
Q.He says that he was concerned because the relationship was on again, off again and that would be a fair comment, wouldn’t it?
A. Yes, it was the second time we broke up.
Q.And he says that because of that he was worried that you could acquire the right to make a claim over the house property that he’d purchased. He expressed that to you, didn’t he?
A.He expressed it to me by saying that if anyone tried to do what my mum did to my dad he would kill them.
Q. Well, he disputes making a threat to kill anybody but he certainly expressed that he had a concern about the prospect of a claim over his property, didn’t he?
A. Yes, in the words I just said.
[53] AJ also says that WL frequently told her stories of how he beat other people up. He told her that he had hit a teacher in the head at school. She said she was once in the car with him when he stopped their car and grabbed a friend of his brother by the scruff of his neck over a dispute. She referred to an incident in 2014 when WL said AJ had put too may sausage ends in his dinner. She said he counted that there were 16 sausage ends in his dinner and accused her of doing it on purpose because he did not like sausage ends. She said WL’s brother was there and told him to be happy that she had cooked the dinner. She said WL then pushed his brother into a wall. She also claimed that in the last two to three years of the relationship WL had said things like “I can’t hit you because it would leave marks and give evidence” and “I can’t kill you because I would be the first person they looked at”. She says that she believed WL would follow through on his threats to kill her if she claimed the home.
[54] AJ was challenged about this evidence in cross-examination. She accepted that, despite the seriousness of the allegation that WL would kill her if she made a claim on the house, she never referred to this in her protection order application to the Family Court. She also accepted that the police did not attend their home at any time during the relationship. She maintained that he threatened to kill her “multiple times”. WL says AJ’s evidence about this is “absolute nonsense”. He says that there were some hostile telephone calls between the parties but these occurred some months after their final separation.
[55] WL says that AJ wanted to avoid liability for the house. AJ does not remember whether she was concerned at this time about ending up with that liability. She said she would not have been able to pay for the mortgage if she had ended up having responsibility for it. WL’s evidence was supported by evidence from WL’s parents.
They said that they witnessed the signing of the Agreement. WL’s mother gave evidence that she “had gone to the length of asking [AJ] if she was sure [the Agreement] was what she wanted as [she] realised this was a serious matter and wanted to feel sure that she was exercising her free will and that she really wanted the outcome envisaged by the document she was signing”. WL’s father confirmed that the parties seemed happy and willingly signed the document. He said that AJ was smiling.
Content
[56] The parties prepared their briefs of evidence on the basis that the Agreement they signed could not be found or had been destroyed.
[57] WL’s evidence was that the Agreement was handwritten and provided that the Property would always be his separate property, and if he sold it, the proceeds of the sale would also be his separate property. WL’s parents supported this evidence in their briefs of evidence. They all say that the Agreement was prepared by WL’s sister, who was doing a legal secretary course. They also say that it was witnessed by both of WL’s parents and AJ’s father.
[58] AJ did not recall WL’s parents being present when the Agreement was signed. Her recollection is that it was witnessed by WL’s sister and her father. Her evidence was that the Agreement was typewritten, had big words in it and focused on her renting the home while the parties were separated. In her view, it ceased to be relevant when they reconciled. She did not agree with WL that the Agreement stated that the proceeds of selling the house would go to WL. Similarly, in an affidavit of 13 October 2020 she said:
At the time we separated and I began ‘renting’ the property from the Respondent, he said he wanted me to sign a document.
The Respondent’s sister typed something up. It basically said (although I think bigger words were used) that the Respondent leaving the home was not him giving me the house and me staying in it was not me getting it, or claiming against the house. It said that I was renting.
[59] However, shortly before the hearing, WL’s mother found a typed and unsigned version of what appeared to be the Agreement. She produced this at the hearing. WL’s mother said that she had found that agreement on the Saturday or Sunday before the
hearing. She said she had been looking for something on the computer for her memoirs and found the document when she searched for the word “property” in an old file marked “Documents”.
[60] The document WL’s mother produced is dated 8 October 2004, is unsigned, and states:
I, [WL], declare that I purchased [the Property] solely with my own funds.
I, [AJ], acknowledge that [WL] purchased [the Property], within which I currently reside, entirely with his own funds, and that I did not financially contribute to the said property in any way. I therefore agree not to, at any given time, or under any circumstances, pursue legal ownership, or part ownership of the said property.
I also accept, and agree that I will not benefit financially from any future sale of the property.
[61] WL’s mother was asked why she had a copy of the Agreement on her computer. She suggested that her daughter may not have had a printer or even a computer. She also said that her daughter sent her things because she was better at checking them than her daughter. She was asked why the document she produced was typed when she, her husband and WL had all earlier said the Agreement was handwritten:
Q.I just have one or two supplementary questions for you … One thing in the brief you said that you record it was hand-written, have you any idea why you record it that way, ‘cos it’s clearly what you’ve introduced is not hand-written but typed?
A.Well, I don’t if she saw she’d made mistakes and possibly because she wasn’t computer literate that she decided I can’t fix it on the computer, I’ll do it by hand or I can’t remember if she showed me a hand-written one and then typed it up. It’s 18 years ago, I’m sorry I can’t remember.
Q.That version that you’ve just produced now are you sure that that was the version that was signed?
A.I can’t be sure that was the version that was signed because it’s so long ago but that was the version [WL’s sister] sent to me. So the body of it is the same but whether she retyped it or re-wrote it I’m sorry I can’t tell but that was, that wording there was what was on it.
[62] Under cross-examination, it was put to WL’s mother that the document she produced was not a copy of the document that she witnessed. She maintained that it “was probably a copy of that” and that “[t]he document that [they] all signed would
have been a copy of that one that [WL’s sister] sent to [her]”. When asked whether the content of the document could be different to the one that was signed, WL’s mother replied that “I don’t think [WL’s sister would] have changed it” and “all I can say is that as near as my recollection, that body of that document is what I remember signing”.
Findings on content and circumstances of Agreement
[63] I prefer AJ’s evidence to WL’s evidence about how the Agreement came about. That is, that the Agreement came up in the context of AJ wanting to rent the Property when they separated in October 2004. It may have been possible for her to have lived with either of her parents at this time. However, for whatever reason or reasons, she felt her best option for herself and her child was to live at that property. It seems logical, in the context of a separation in which AJ would be living in what had been the family home with the couple’s child, that WL might have been concerned that this could lead to AJ having a claim or seeking to have a claim on the Property.
[64] AJ’s evidence of the Agreement being connected with the rental agreement also fits with the two agreements being signed at about the same time. The rental agreement was dated 7 October 2004 and the typed agreement found by WL’s mother is dated 8 October 2004. AJ probably did come across to WL’s parents as happy to sign the Agreement. She wanted to stay living in the Property. It is likely that AJ’s experience with her parents’ separation (where her mother claimed half the house and her father had financial difficulties and was bankrupted) led her to suggest something like a contracting out agreement to assuage WL’s concerns. A concern about being liable for the mortgage helps explain why she was willing to sign the Agreement. At this time, the loan secured by the mortgage was substantial relative to the value of the house. It is also consistent with my assessment that AJ was more concerned about keeping the peace and having a secure place to live at this time rather than thinking about what she might be losing by signing the Agreement. That approach was consistent with the memories of WL’s parents that AJ appeared outwardly content with the Agreement.
[65] It is difficult to know whether there was violence in the relationship and the extent of it. There is no reliable, independent corroboration of AJ’s evidence.9 If at some point (whether during their 2004 separation or after their last and final separation) WL had threatened to kill her in a manner AJ thought was intended by WL to be taken seriously, it is perhaps surprising that AJ did not refer to it in her protection order application made after the parties had separated. The best evidence that WL was verbally abusive of AJ comes from a recording AJ made of telephone calls from WL on 17 January 2018 after the relationship had ended. There is no evidence of physical violence in those calls. Accepting that WL was in an emotional state at that time, I nevertheless consider it can be inferred that he spoke to AJ in this manner at times during their relationship. The story of too many sausage ends in a dinner served to him is unusual and would be an odd thing for AJ to make up. I also consider that WL came across in giving his evidence in court as somewhat dismissive of AJ’s contributions to the household. I also accept that WL expected AJ to manage the household expenses from the benefits she received and was not happy when she did not. However, it is unclear if the relationship was always like this and whether it was when the Agreement was signed. For reasons that will become apparent, I do not need to reach a final decision on it.
[66] It was not explained why WL’s sister or AJ’s father were not called to give evidence. The sister in particular could have been expected to shed light on what she was asked to prepare. Nevertheless, I consider the typed agreement that WL’s mother produced contained the terms that AJ agreed to. Although the timing of WL’s mother finding the Agreement is suspicious, her evidence about this was not undermined in cross examination. Moreover, its contents align with the evidence that AJ sought advice about a contracting out agreement and her acceptance that, under the contracting out agreement prepared by WL’s sister, she agreed not to make a claim on the house. Furthermore, it fits with AJ’s evidence that she was upset to find that WL still had his copy of the Agreement some years later. She would not be upset about a rental agreement and forgoing a claim to the house while she was renting it. She would be upset to see that some years after their reconciliation WL still kept a copy of the Agreement they signed at a different time and stage in their relationship. I consider
9 A letter from a clinical psychologist relied on AJ’s self-report and was dated well after the parties had ended their relationship.
her recollection now that the Agreement was focussed on renting the Property is unreliable. The link between the rental agreement and the Agreement was WL’s concern that AJ might have a greater basis to make a claim on the Property if she was still living in it.
[67] I find that the typed agreement produced at the hearing contained the terms of the Agreement that the parties originally signed.
Is the Agreement to be given effect
Is this a contracting out agreement under s 21
[68] Section 21 applies to agreements between two persons “in contemplation of entering into marriage, civil union, or de facto relationship”. I have found that, at the time it was entered into, AJ and WL were separated. WL was prepared to allow AJ to rent the property and to live there with their child provided AJ did not seek to make a claim to the property. At the time the Agreement was entered into WL and AJ were not discussing getting back together. While WL and AJ may have thought it was possible that they might reconcile, that was not the primary reason for the Agreement.
[69] The Agreement is therefore arguably better viewed as a post-separation settlement agreement (s 21A) rather than a contracting out agreement (s 21) at the time that it was made. However, the question then is whether the relationship was one of short duration as at 8 October 2004. WL submits that it was of short duration because periods of separation are excluded when determining this. That is, each time the relationship resumed, that period is to be assessed separately. Excluding the separation in 2002, this would mean that the period of the relationship was from about August 2002 to October 2004, a period of just over two years. However, in the circumstances of this particular relationship, I consider it is better viewed as one that began in late 2000. Excluding the first period of separation (of nine months on WL’s evidence), the relationship was longer than three years at the time of the separation in October 2004, and certainly much longer than that at the time WL sought to rely on the Agreement. Because the parties signed a post-separation settlement agreement when in a de facto relationship, the Agreement was required to comply with s 21F at the time it was signed.
[70] The alternative view is that it was a separation agreement but was also intended as a contracting out agreement if they reconciled, as was possible. As they reconciled, it should be viewed as a contracting out agreement under s 21. As a contracting out agreement (s 21) in contemplation of a reconciliation, it must comply with s 21F.
[71] Either way then (that is, as a separation agreement or an agreement in contemplation of reconciliation), s 21F applied. Both parties proceeded on the basis that s 21F applied to the Agreement. I do so also.
Does the Agreement satisfy the s 21F criteria?
[72] As set out earlier, s 21F requires that the agreement be in writing and signed by the parties (s 21F(2)); that each party have independent legal advice before signing it (s 21F(3)); that their signatures be witnessed by a lawyer (s 21F(4)); and that the lawyer witnessing the signature of a party certify that they have explained to the party the effect and implications of the agreement (s 21F(5)). The requirement in s 21F(2) was met. The requirements in s 21F(4) and (5) were not. WL also accepts that neither party had independent legal advice as contemplated in s 21F(3).
[73]The leading authority on the requirement for independent legal advice is
Coxhead v Coxhead.10 The requirement is no “mere formalism”:11
Each party must receive professional opinion as to the fairness and appropriateness of the agreement at least as it affects that party’s interests. The touchstone will be the entitlement that the Act gives, and the requisite advice will involve an assessment of the entitlement, and a weighing of it against any other considerations that are said to justify a departure from it. Advice is thus more than an explanation of the meaning of the terms of the agreement. Their implications must be explained as well. In other words the party concerned is entitled to an informed professional opinion as to the wisdom of entering into an agreement in those terms. This does not mean however that the adviser must always be in possession of all the facts. It may not be possible to obtain them. There may be constraints of time or other circumstances, or the other spouse may be unable or unwilling to give the necessary information. … In such circumstances, provided the advice is that the information is incomplete, and that the document should not be signed until further information is available, or should not be signed at all, the requirements of [s 21F] have been satisfied. …
10 Coxhead v Coxhead [1993] 2 NZLR 397 (CA) at 403–404, affirmed in Wylie v Wylie [2021] NZCA 521.
11 At [14].
[74] I accept AJ’s evidence that she had a brief phone call with either the Citizens Advice Bureau or the Community Law Centre. I accept that she was told that an agreement needed to be in writing, signed and witnessed. That sort of basic advice about the formalities would be expected of the Citizens Advice Bureau or Community Law Centre. It is likely she was also told that legal advice was required but it is quite possible that she did not understand that both she and WL needed independent legal advice. That is more technical advice that AJ would not necessarily understand if it was referred to in the telephone call. Regardless of the precise details of the advice given to AJ, it is clear that neither party had the benefit of independent legal advice as required by s 21F(3).
Should the Agreement be given effect under s 21H
[75] Because the Agreement is void for non-compliance with the s 21F requirements, the next question is whether I am satisfied under s 21H that the non- compliance has not materially prejudiced the interests of any party to the Agreement.
[76] The purpose of the s 21F requirements are for the parties to have “the opportunity to be properly advised in relation to the agreement and to have the certainty that results from that agreement being in writing and signed”.12 For present purposes, it is the opportunity to be properly advised that is relevant. The requirement for independent advice also helps to ensure that a party to the agreement is not unduly influenced or pressured.
[77] While not impossible, it is very difficult to argue that there has not been any material prejudice where there has been no legal advice. As it was put in Evans v Evans:13
I do not think it can reasonably be said that competent legal advice would have made no difference in the sense that Mr Evans would have been left with no choice but to do what Mrs Evans was proposing. He might ultimately have decided to do so, but he was deprived of the opportunity of examining with the benefit of independent legal advice, the various alternatives that were open to him … though there may be cases where an agreement reached without independent legal advice will nevertheless be enforced, it seems to me that
12 McGill v Crozier (2001) 21 FRNZ 157 (HC) at [23].
13 Evans v Evans (1992) 9 FRNZ 614 (HC), quoted and relied on in West v West (No 2) [2004] NZFLR 164 (HC) at [45] (emphasis added).
those cases will be relatively rare. This is because the Court has to be able to postulate with confidence that after receiving independent advice, the party concerned would have entered into an agreement on the same terms.
[78] WL submits that neither his nor AJ’s interests have been materially prejudiced despite the lack of independent legal advice. He submits the whole point of the Agreement was to maintain the house as separate property. He says the Court can infer that AJ understood the Agreement and that she would have signed it even with the benefit of legal advice because AJ was the party who suggested a contracting out agreement when WL raised his concerns. WL submits that AJ very likely understood that relationship property was divided following the end of a relationship from her parents’ separation. Further, he submits that AJ’s action in later destroying the Agreement implies that she understood it would be problematic for a future claim.
[79] I do not accept the evidence shows that AJ would have signed the Agreement had she had the opportunity for independent legal advice. At the time AJ signed the Agreement, she was most concerned about being able to continue living in the Property. With the benefit of independent legal advice she would have been informed that it was not in her best interests to sign the Agreement on the terms drafted by WL’s sister. That was because of the possibility that she already had a claim to an equal share of the Property as it was the family home of a relationship that was not of short duration. If they were to reconcile, she would also be entitled to an equal share of the family home. She would likely also have been advised that, to the extent that AJ was concerned about being responsible for the mortgage or other outgoings, there were other things she should take into account. For example, WL was in stable employment and managed his money carefully. And, if the outgoings could not be met, the Property could be sold and the net proceeds divided between AJ and WL. She would have been told that, as drafted, the Agreement was intended to apply forever, regardless of whether they got back together and how long the relationship lasted and whether there remained any amount owing under the loan. At the very least, she would likely have been advised that the Agreement should be subject to review if the relationship continued. In short, AJ would have been advised that, even though she may have felt it was necessary to sign the Agreement so that she could rent the Property, it was not in her interests to sign it.
[80] It is likely AJ suggested a contracting out agreement based on her parents’ experience. She would have had some abstract idea of what her rights were under the PRA, having experienced her parents’ separation. However, these circumstances are not sufficient to show that she would have signed under the same terms with legal advice or that she had a perfectly clear idea of what her future entitlement was and how the Agreement purported to alter that. AJ was vulnerable to doing what WL wanted. She was young (aged 20), had a young child, had left school at a young age, had no formal qualifications and no assets of her own. These circumstances would have made AJ weary of accumulating more debt and concerned with providing a safe home for her and her child. The lack of independent legal advice here is material and “attacks the very rationale for allowing a party to contract out”.14 Upholding the Agreement would materially prejudice AJ.
[81] It cannot be inferred that AJ would have proceeded to sign the Agreement if given that advice. WL relies on C v W in support of his submission.15 However, that was a case where W had the benefit of legal advice at two meetings (up to 36 minutes for one and up to 18 minutes for the other). The problem was that the lawyer had not taken adequate notes of the meetings which led the Judge to find that inadequate advice had been given. WL has not satisfied me that AJ would have signed the Agreement on the same terms if she had the benefit of independent legal advice as required by s 21F.
Void for duress, undue influence or lack of certainty
[82] The argument that the Agreement was void for uncertainty was based on an agreement that could not be found. As the terms of the Agreement have been located, this argument falls away.
[83] AJ also submits that it is only necessary to decide whether the Agreement is void for duress or undue influence if the Agreement is not void under s 21F, or void but given effect under s 21H, or not void but substantial injustice arises under s 21J. As I have found that the Agreement is void under s 21F and should not to be given
14 Wells v Wells [2006] NZFLR 870 (HC) at [32].
15 C v W HC New Plymouth CIV-2010-443-192, 28 July 2010.
effect under s 21H, it is not necessary to consider the claims of duress or undue influence.
Serious injustice
[84] Nor is it necessary to decide if the Agreement should be set aside because it would cause serious injustice. That is because s 21J only applies to an agreement that complies with s 21F. Nevertheless, I consider this issue because it reinforces my view that the Agreement should not be given effect under s 21H. It also involves similar considerations although it has a higher threshold than s 21H because of the desire to respect the contractual intentions of the parties.16 I assess whether there would be serious injustice with reference to the principles in Wells v Wells.17
[85] First, the terms of the Agreement are clear that the Property is WL’s separate property and that AJ will make no claims of ownership against the property nor over potential future sale proceeds. The clarity of the terms is a factor in WL’s favour.
[86] Secondly, WL relied on the Agreement for a reasonably long time.18 This factors does not strongly point in WL’s favour because he took inadequate steps to ensure the validity of the Agreement that he says was so important to him. He says he would have walked away from the relationship in 2004 if AJ had not accepted that the Property was his separate property. If that was so, he ought to have sought legal advice himself to ensure he had a valid agreement rather than relying on AJ to make enquiries from a free legal services provider.
[87] Thirdly, the Agreement might have been viewed as reasonable, or at least less unreasonable, at the time it was entered into. At that time, both WL and AJ were relatively young; it was WL’s savings that had enabled them to buy the first property which in turn enabled them to buy the Property; it was WL that intended to be responsible for the mortgage (AJ was not in a position to do so and did not wish to
16 The test of “serious injustice” is a higher threshold than merely “unjust”. See Clark v Sims [2004] 2 NZLR 501, (2004) 23 FRNZ 757 (HC).
17 Wells v Wells, above n 14, at [37].
18 The Agreement was signed in 2004 and WL says he relied on it until their relationship ended in 2017, that is, for 13 years. AJ did not apply to the Family Court for the division of property until 12 December 2019, two years after separation.
have that burden); and the relationship had been unstable and the parties were separated. However, it became unreasonable (or became more unreasonable) when the parties reconciled and went on to share a family home together for the next 13 years.
[88] Fourthly, I put to one side AJ’s evidence that she was in a violent relationship at the time. As noted earlier, it is difficult to make a finding about the extent of any psychological abuse she had experienced when she signed the Agreement in 2004 and it is not necessary to make a finding about this. However, there is no doubt that AJ was vulnerable when she signed the Agreement. She was young, without qualifications, with a young baby, without assets, and with parents who she did not consider she could live with at that time. Her priority was security for her child. She was told to sign the Agreement if she wanted to rent the property when they were separated. Those are unfair circumstances in which to sign the Agreement on the terms on which it was drafted and when she did not have the benefit of legal advice. It is not sufficient that WL’s mother had asked AJ if she was sure that the Agreement was what she wanted. AJ’s vulnerability meant that the benefits and negatives of entering in the Agreement needed to be explained to her by someone independent. This factor strongly favours AJ.
[89] Fifthly, there was no clause in the Agreement providing for its review if the relationship resumed. As stated in Fisher on Matrimonial Property, there is “no harm in identifying specific assets and declaring them separate property” but it is “desirable” to include a formula for “absorbing future changes in the assets and liabilities and circumstances of the parties”.19 A point will be reached where an agreement, seeking to deny a party a substantial proportion of the assets attributable to joint contributions, becomes so unreasonable and departs too far from the equal contribution principle that it is “seriously unjust”.20 While AJ might have raised the need to review the Agreement during the relationship if she felt able to, this does not count against her. It is apparent that WL would not have agreed to revisit it.
19 Augustine Choi (ed) Fisher on Matrimonial Property (online loose-leaf ed, LexisNexis), at [5.32].
20 At [5.31].
[90] I consider that the Agreement became unreasonable as the relationship proceeded. It did not adequately recognise AJ’s contributions to the relationship in the years following the reconciliation. In light of her contributions, the disparity of outcome at separation is a strong factor here. The Property is the major asset and there are very few other assets in the relationship property pool.21
[91] The wish of the parties to achieve certainty in relation to their property should be respected where possible. However, certainty must give way to serious injustice where it is found to exist.22 The Agreement no doubt assuaged WL’s concerns and provided him with what he may have thought was certainty. Given that AJ signed to lessen WL’s concerns and to (in her view) solidify her ability to rent the Property without incurring liability for its outgoings, it provided her with certainty in this respect. This certainty was of little benefit to her. I consider any certainty was outweighed by the unfairness and unreasonableness of the Agreement as time went on.23
[92] Overall, I conclude that even if the Agreement was not void (which it is), I would have set the Agreement aside for creating serious injustice.
Equal division of relationship property
[93] Because the Agreement is void, the relationship property, including the Property, falls to be divided in accordance with the presumption of equal sharing subject to WL’s submission that the Court should provide for unequal sharing under s 13 of the PRA.
21 This is similar to KDR v JAR FC Blenheim FAM-2003-6-229, 6 July 2005, where the s 21 agreement deemed the family home separate property without providing for an increase in value or how the assets would be divided. The respondent had substantially more assets at the end of the relationship, while the applicant had raised the children and contributed income to a farming partnership. The Court held that the s 21 agreement was solely for the respondent’s benefit. It was set aside for insufficient advice but would have been set aside under s 21J. See also Bartram v Bartram [2016] NZHC 2706, where the High Court upheld the Family Court’s finding that the s 21 agreement, purporting to protect one party’s deposit for the house, should be set aside under s 21J as it made the relationship property split $1.4 million in favour of one party and $20,000 in favour of the other. Unlike the present case, the contract there provided for future property and the property was bought as a joint endeavour.
22 Bill Atkin Relationship Property in New Zealand (3rd ed, LexisNexis NZ Ltd, Wellington, 2018) at 185, quoting Tennison v Tennison [2014] NZFC 5335, [2015] NZFLR 185 at [206] per Judge A P Walsh.
23 KDR v JAR, above n 21, at [70]–[72] and White v Kay [2017] NZHC 1643, at [72].
[94] WL submits that the fact he provided all the funding for the house and the clear intention of the parties in the Agreement to define the house as his separate property should give rise to a finding that it would be repugnant to justice to order equal sharing of the house. He says the Agreement should be given some meaning and, to recognise the parties’ intentions by signing it, there should be an 80:20 split of relationship property in his favour.
[95] AJ submits that the home should be divided equally in accordance with the provisions of the PRA. She submits there are no extraordinary circumstances that would make equal sharing repugnant to justice. She says that neither the fact that WL contributed more to the house nor the Agreement itself are extraordinary circumstances. Both parties were financing relationship expenses or contributing to the relationship and WL took minimal steps (via having AJ make enquiries from a free advisory body) to ensure that the Property was separate property.
[96] Section 13 provides an exception to equal sharing if there are “extraordinary circumstances” that make it “repugnant to justice”. This is a “stringent test”.24 As it was put in Martin v Martin:25
Clearly enough ‘extraordinary circumstances’ and ‘repugnant to justice’ are strong words and reflect a Parliamentary intention that the primacy of the equal sharing of the matrimonial home and the family chattels is not to be eroded in the ordinary circumstances of marriage. … ‘Extraordinary circumstances’ imposes a stringent test, particularly when it is recognised that such matters as the provision of the matrimonial home by one spouse or by gift to that spouse are not in themselves extraordinary circumstances. ‘Repugnant to justice’, even when stripped of its emotional overtones, is a most emphatic phrase. Moreover, it is repugnancy to justice giving full weight to the scheme and objectives of the legislation that must be established. …
[97] WL again relies on C v W.26 In that case, the Court said that where parties order their affairs in reliance on an agreement and unexpectedly can no longer rely on it at the end of their relationship, this could “create or contribute to” extraordinary circumstances in relation to equal sharing. It was not an extraordinary circumstance
24 Martin v Martin [1979] 1 NZLR 97 (CA) at 102–103. See also De Malmanche v De Malmanche [2002] 2 NZLR 838, [2002] NZFLR 579 (HC); Castle v Castle [1977] 2 NZLR 97 (HC) at 102; and Bowden v Bowden [2016] NZHC 1201 (HC) at [37].
25 At 111.
26 C v W, above n 15.
in the context of that case as the Judge upheld part of the agreement on appeal.27 But if the agreement was not partially upheld, “it would be unrealistic not to acknowledge C’s insistence on a contracting out agreement, and his clear reliance on it in ordering his affairs throughout the relationship”.28 In C v W, the Judge referred to a line of previous authority with differing views on the correct approach.29
[98] In this case, the fact that WL relied on the Agreement is relevant. But its weight as an exceptional factor is diminished by his failure to take steps to ensure the Agreement was legally binding under the PRA requirements and AJ’s vulnerability when she signed it. More importantly, a gross disparity of contributions in the relationship did not exist. WL relies on a disparity in financial contributions to the home. However, unlike some cases,30 WL did not have substantial assets going into the relationship. I accept that he worked hard and was careful with his money in order to have a deposit to purchase the first property, which then provided the deposit for the Property. However that purchase was financed by a substantial loan. During the relationship he was able to substantially pay down that loan. But AJ paid for household and the children’s expenses throughout the relationship. She was also the primary caregiver and undertook household duties. These contributions are treated as equal under the PRA.
[99] Even if I had found that reliance on an invalid contracting out agreement and the respective contributions the parties made to the relationship constituted an exceptional circumstance (which I have not), this was not so gross as to justify unequal sharing. The length of the relationship, the fact that there are three children of the relationship and that WL and AJ each contributed to the relationship are more compelling factors. I therefore conclude that the relationship property is to be divided equally.
27 At [103]–[106].
28 At [16].
29 English v Vorstam CA166/98, 16 November 1998; Bergner v Nelis HC Auckland CIV-2004-404- 149, 19 December 2005 at [7]–[13]; and A v R [2007] 2 NZLR 399 (HC) at [3]
30 For example, in C v W, above n 15, the assets included two properties, a horse trekking business, livestock and vehicles worth over $1.3 million. In White v Kay, above n 23, Mr White had assets worth $1 million.
Compensation for post-separation contributions
[100] AJ seeks a s 18B contribution in the form of occupation rent as a result of being deprived of her share of the Property for five years since the relationship ended. WL says that his continued payment of property outgoings since the end of the relationship and works to improve the property are contributions that balance out any occupation rental.
[101] Leave was reserved for further information to be provided about this. A memorandum was subsequently filed that advises that WL paid $91,416.07 in loan repayments, rates and insurance over the relevant period. He also did work on the house. This approximately balances out AJ’s claim for occupational rent. It is therefore not appropriate to make an order for occupational rent under s 18B and I decline to do so.
Order for division or sale
[102] AJ applies for an order that WL should pay her share of half of the value of the house within 20 working days of this judgment and also seeks an order of sale of the Property if payment is not made in that timeframe. She says this is justified because WL has delayed the proceedings and she has been denied her half share for what is now a lengthy period of time.
[103] WL says that it is objectionable to make an order of sale at this point (conditional on non-payment within a stated period) as that is an order of enforcement. He says this would normally follow after there had been default resolving settlement. He says WL should be provided the opportunity to seek finance to settle AJ’s share of the property. If this is not resolved satisfactorily, then an application for an order of sale could be made. As to the claimed delay, WL says that has been for various reasons, including his motorbike accident and the time that was necessary to work through the significant amount of discovery in relation to other Family Court proceedings. He also says that AJ delayed the proceedings by applications she made, including an application for summary judgment.
[104] It is unhelpful to focus on delay in these proceedings. AJ delayed bringing the proceedings (albeit, she says, for reasons of her mental state) having initially told WL she would not make a claim on the house. In the conduct of proceedings there is usually delay on both sides for various reasons. I decline to make an order for sale. WL should first have the opportunity to settle AJ’s claim in an orderly fashion and in a reasonable timeframe. Absent special circumstances, I can indicate a period of three months would be reasonable.
Costs
[105] If there is an issue as to costs, I also reserve leave for the parties to file brief submissions within three weeks of the date of this judgment. I can indicate my view that they should follow the event and that band 2B would be appropriate.
Result
[106]I make the following orders:
(a)WL’s applications for constructive trust, knowing receipt and breach of fiduciary duty are dismissed.
(b)The Agreement (pursuant to which AJ agreed to make no claim on the Property) is void pursuant to s 21F and is not to be given effect under s 21H.
(c)There are no extraordinary circumstances that make equal sharing of the Property repugnant to justice under s 13 of the PRA.
(d)The relationship property (inclusive of the Property) is to be shared equally.
(e)AJ’s claim for occupation rent pursuant to s 18B of the PRA is dismissed.
(f)Within three weeks of the date of this judgment, the parties are to file brief submissions if they are unable to resolve costs despite the
indication I have given that they follow the event and band 2B should apply.
[107] I have anonymised the judgment recognising that AJ has a letter from a clinical psychiatrist that says she has PTSD from abuse she says she suffered and because there are children that may be identified without the anonymisation I have adopted.
Mallon J
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