PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO
11D OF THE FAMILY COURTS ACT 1980.

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2012-485-2356 [2013] NZHC 1809

IN THE MATTER	of an appeal under section 39 of the
Property (Relationships) Act 1976	

BETWEEN	
MS SIMON Appellant	

AND	
MR WRIGHT Respondent	

Hearing:	9 May 2013	

Counsel:	
B A Corkill QC with J Wademan for Appellant
R C Laurenson for Respondent	

Judgment:	
17 July 2013	

JUDGMENT OF THE HON JUSTICE KÓS

[1]       An appeal from a Family Court decision essentially dividing the assets of this now-estranged couple equally.1   The wife was always, and by a substantial degree, the principal breadwinner.  She contends there are extraordinary circumstances here making equal division repugnant to justice.  The Family Court Judge disagreed.  The wife appeals.

Background

[2]       The parties married in August 1990.  They had been in a de facto relationship since 1986.  A daughter was born in 1992.  The appellant (who for simplicity I will
call the wife) had developed a successful consultancy business.  The respondent (the

1	In this judgment parties’ names have been anonymised.

husband) left his former occupation in 1997.   Thereafter he worked, somewhat fitfully, as a tradesman.

[3]       The parties separated in early 2008.  At the time of separation their principal assets were a family home worth between $1.15 and $1.3 million, a bank account in the wife’s name containing approximately $360,000, a similar account in the husband’s   name  containing  approximately  $138,000,   and   various   investment interests worth approximately $128,000.  There were also family chattels (including vehicles).   These chattels have now been divided on a basis the parties accept as equal.      Liabilities  at   the   time   of   separation   were   various   debts   totalling approximately $194,000.

[4]       The husband remained in possession of the house after separation.  In March

2010  the  wife  applied  for  orders  for  sale  of  the  house.    She  sought  interim distribution of the net proceeds, equally. Agreement was, however reached enabling the husband to remain in possession, on the proviso he made an interim payment to the wife of $260,000.  This he did in May 2010.  In November 2010 Judge Walsh made orders requiring the husband to maintain the house, pay outgoings and permit remedial work arranged by the wife.   All this pending valuation and final determination of respective relationship property entitlements.

[5]       The judgment under appeal, determining those entitlements, was issued by

Judge Johnston in October 2012.2

Decision appealed

[6]       The principal issue the Judge was required to consider was whether there were extraordinary circumstances making equal sharing of the relationship property repugnant to justice, in terms of s 13 of the Property (Relationships) Act 1976 (the
Act).

2	S v W [2012] NZFC 7209 (FC).

Misconduct

[7]       The Judge considered, first, alleged particulars of misconduct by the husband. The husband had borrowings, in his name, from the National Bank.   Eight times, between 1991 and 2003, the husband increased those borrowings.  The husband used the family home as security, without the wife’s consent.  But the bank had considered him solely responsible for repayment.   Repayments had been made from the husband’s separate account.   However the home did not become mortgage-free as expected when, in March 2000, the wife paid what she thought was the final balance of the original bank loan of $180,000.   The husband said he used the moneys for general household living and family expenses.  He said that he had not disclosed the loans because of embarrassment at having to borrow to keep the household going, given the limits of his own income.

[8]       A second particular alleged by the wife was that she had given the husband

$25,000 to purchase MAS Technology shares, but that he had neither done so nor returned the money.  The Judge did not find on the balance of probabilities that that complaint could be sustained.

[9]       The third particular alleged was that the husband had squandered money on “pokies”, to which he was said to be addicted.  Particular withdrawals identified totalled some $7,400 between September 2002 and August 2007.   The husband admitted that he played “pokies”, but said that he was not addicted.  The withdrawals had also been used to meet daily living expenses and buy groceries.  The Judge held there was no clear evidence as to what the husband had spent playing “pokies”.  Nor that this habit (to use a neutral term) caused him to be absent from home for long periods or affected his ability to work.

[10]     The  Judge  did  not  find  that  the  husband’s  actions  amounted  to  an extraordinary circumstance making equal sharing repugnant to justice, or gross and palpable misconduct significantly affecting the value of the relationship property.

Relative financial contributions

[11]	The next issue considered by the Judge was the parties’ relative financial
contributions.  First, as to purchase of the home.  The house was purchased in 1989 for $522,500:

	(a)	The wife said, initially, that each had contributed $150,000 of the

purchase, and the balance was a loan of $180,000 from the National	
		Bank. It appears the shortfall may have been vendor-financed.3	
	
(b)	
The husband, however, said that the funding contributions had been:	
		$96,000 from the wife, $200,000 from the husband, $50,000 vendor	
		finance and $180,000 from the bank.	

[12]	
The	
Judge considered that, given the length of the parties’ relationship, there	
was insufficient difference in their respective financial contributions towards the family home to be extraordinary or make equal division repugnant to justice.

[13]     Next,  the  Judge  looked  at  the  respective incomes generated  by  the  two parties.   Evidence produced by the wife showed that between 1990 and 2008 her taxable income had totalled $1.785 million.  And she had received other payments (including from a trust) totalling approximately $161,000 (a total of $1.946 million). The husband had received taxable income of just $52,000 in those 18 years.  In addition he had received up to $744,000 in distributions from trusts associated with
his family4  (a total of $796,000).   There then followed a lengthy but somewhat

inconclusive analysis of who had paid for what.  Implicitly the Judge did not find the disparity an extraordinary circumstance.

Relative non-financial contributions

[14]     The Judge then considered the relative non-financial contributions of the parties.  She concluded that she could not find on the totality of the evidence that the wife’s care of the daughter was so much greater in quality and extent to amount to an

extraordinary  circumstance.    There  were  a  number  of  occasions  on  which  the husband had cared for the daughter alone when the wife was out of town or on holiday overseas.  The Judge found none of the non-financial contributions were so unequal as to be extraordinary and make equal sharing repugnant to justice.

Conclusion

[15]     After  considering  other  claims  for  adjustments,  the  Judge  ultimately concluded that it was not part of the legislative intent for her to perform “an audit of a 22-year relationship”.  The assets (summarised at [3] above) were to be shared equally, with the exception of an advance made by the wife to a trust she had settled in 2006, the [I] Trust.5   The liabilities of the parties (also summarised at [3] above) were to be shared equally, apart from the husband’s tax debt, and a separate debt to a motor vehicle dealer. The following adjustments were then to be made:

(a)	the $260,000 interim payment received by the wife in May 2010; (b)	$19,317 for refurbishment costs paid by the wife on separation; (c)	$10,000 for a separate pre-relationship debt of the husband; and
(d)	$66,250  to  be  received  by  the  husband  in  compensation  for  the

$120,000 transferred by the wife to the [I] Trust referred to earlier.

[16]     No  adjustment  was  made  for  occupation  rent.    Occupation  rent  is  an adjustment that may be made under s 18B.  It reflects the fact that one party has had the benefit of possession of the house, and the other the disadvantage of dispossession.6    Here, however, no adjustment was made, “given the cash in the [wife’s] possession was as much relationship property as the [husband’s] interest in the house”.

Grounds of appeal

[17]     The appellant’s argument was cast and recast in a number of slightly different ways in the notice of appeal, points on appeal (thus far, consistent) written submissions and oral submissions.  It is, I think, best to revert to bedrock and the notice of appeal.

[18]     The grounds advanced in that document were:

(a)      The Court was wrong in finding that there was no conduct or circumstances which alone or in combination met the threshold test for unequal sharing pursuant to s 13.   The Court should have considered   that   in   all   the   circumstances,   whether   considered separately or cumulatively, the grounds relied on by the wife were sufficient to warrant a finding under s 13.

(b)	The Court was wrong in finding that the wife should account to the husband  in  the sum of  $66,250,  as  compensation for  the sum of
$120,000 transferred by the wife to [I] Trust.  The Court should have concluded that no compensation was payable by the wife to the husband.

(c)       The Court was wrong in finding that there should be no adjustment for occupation rent.  The Court failed to take into account all relevant circumstances, including that the wife had paid rent while not in occupation.  Compensation for occupation of the family home should have been ordered by the Court.

(d)	The Court was wrong in finding that the indebtedness incurred by the husband was relationship debt, incurred to acquire, improve and maintain relationship property (the house and motor vehicles), for the benefit of both spouses in the course of managing the affairs of the household, and for the purposes of bringing up their daughter.  The Court should have found that the husband’s indebtedness was personal debt.

(e)      The Court was wrong in finding that the husband should not have obtained more from his family trust “entitlements”.  The Court should have concluded that the husband conducted his affairs with regard to the trust (of which he was a beneficiary) in a manner which disadvantaged the wife and advantaged the husband.

(f)	The Court erred in ruling that the wife could not raise a claim under s 21H of the Act. She should have been permitted to do so.

[19]     Ground (f) was not advanced further in written or oral argument, and was thereby abandoned.

Approach on appeal

[20]     This is a general appeal by way of rehearing under s 39 of the Act.7    That means the Court should reach its own conclusions on the merits.  It need not defer to the Judge at first instance.  If the Court thinks she was wrong, it should say so forthrightly.8   However, it will recognise that the Judge has seen witnesses and heard evidence (including cross-examination). It will take heed of the advantage the Judge had in seeing the evidential process play out.  That is especially so where issues of contested evidence and credibility arise.  That said, even credibility findings are not immune from challenge.9

[21]     Mr Laurenson (for the husband) invited me to follow the earlier decision of the Court of Appeal in Joseph v Johansen10 where Cooke P said:

If it is apparent to the appellate court that the primary Judge has applied the right test, not overlooking its stringency, and has reached a decision reasonably open  on  the  evidence,  the  decision  will not  be  disturbed  on appeal. Appeals in matrimonial cases are not to be encouraged when correct principles have been applied and a result reasonably open achieved.

7	Section 39 of the Act imports s 75 of the District Courts Act 1975.
8	Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [3] and
[16]; B v F [2010] NZFLR 67 (HC) at [8]; WPH v ITP [2009] NZFLR 745 (HC) at [17].
9	Fox v Percy [2003] HCA 22, (2003) 197 ALR 201 at [31]; Davey v Resource Recovery Ltd HC Auckland CIV 2009-404-7027, 28 May 2010; K v V [2012] NZHC 19.
10	Joseph v Johansen (1993) 10 FRNZ 302 (CA) at 304–305.

I do not think, however, that that more deferential approach can survive the decisions of the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar11 and Kacem v Bashir12 when dealing with a general right of appeal from a non-discretionary determination. In Austin, Nichols, Elias CJ held:13

Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate Court, even where that opinion is an assessment of fact and degree and entails a value judgment.  If the appellate Court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ. In such circumstances it is an error for the High Court to defer to the lower Court’s assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.

[22]     But the appellate court does not ignore the first instance judgment.14    First, the appellant must identify the respects in which that judgment is said to be in error, in its notice of, and points on, appeal.  That is likely substantially to limit the merits which call for examination on appeal.

[23]     Secondly, the appellant bears the persuasive burden of satisfying the appeal court that it should differ from the first instance decision.15   As the Supreme Court put it in Austin, Nichols:16

The appeal court must be persuaded that the decision is wrong, but in reaching  that  view  no  “deference”  is  required  beyond  the  “customary” caution appropriate when seeing witnesses provides an advantage because credibility is important.

In WPH v ITP,17 Randerson J said that he proposed to adopt the approach that “some reasonably  plain  grounds  should  be  made  out  before  this  Court  intervenes  on appeal”, while recognising that the appellate court should form its own opinion without undue deference to the first instance decision.   In Nguy v Lee18  White J
observed:

11	Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
12	Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1.
13	At [16].
14	Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31].
15	Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4].
16	At [13].
17	H v P [2009] NZFLR 745 (HC) at [17].
18	Nguy v Lee (2009) 28 FRNZ 618 at [5].

The appellant bears an onus of satisfying the High Court that it should differ from the decision under appeal ... It is only if the High Court considers that the Family Court decision is wrong that it is justified in interfering with it ... The High Court may or may not find the reasoning of the Family Court persuasive in its own terms.

[24]     Thirdly,  in  evaluating  whether  the  first  instance  decision  is  wrong,  the appellate court reverts to the distributed burdens applicable at first instance.  In this case some of those lay on the wife (for instance as to s 13 non-equal division or s 18(3) misconduct).  Others lay on the husband (e.g. to persuade the Court that his bank borrowings should be treated as relationship property under s 20).

Issues

[25]     It is convenient to deal with the primary contention by the wife, concerning s

13, last. The issues on appeal therefore are these:

(a)       Issue 1: Was the Judge wrong to hold that the wife should account to the husband for the sum of $66,250 by way of compensation?

(b)	Issue  2:  Was  the  Judge  wrong  to  hold  that  there  should  be  no adjustment for occupation rent?

(c)       Issue 3: Was the Judge wrong to hold that the indebtedness incurred by the husband was relationship, rather than personal, debt?

(d)	Issue 4: Was the Judge wrong to hold that the husband need not have obtained more financial assistance from the family trust of which he was a beneficiary?

(e)       Issue 5: Was the Judge wrong to hold that s 13 (unequal sharing) did not apply?

Issue 1: Was the Judge wrong to hold that the wife should account to the husband for the sum of $66,250 by way of compensation?

[26]     In April 2006 the wife settled the [I] Trust.  The trustees were the wife and a friend of hers.  The wife and any of her children (including the couple’s daughter)

were amongst the discretionary beneficiaries of the trust.   In May 2006 the wife advanced $120,000 from her BNZ bank account to the trust.  The trust re-advanced the moneys to a company.  The trust held 50 per cent of the shares in the company. The company purchased a property in Grey Lynn, Auckland.  The trust’s debt to the wife was forgiven progressively.  In October 2009 the wife resigned as a director of the company and as a trustee of the trust.  She transferred the shares in the company to another friend, who also became a trustee of the trust.

[27]     The wife did not disclose the existence of this transfer and interest in the course of her first eight affidavits between March 2010 and September 2011.  Those affidavits did, however, challenge trust transactions by the husband.  In a November
2011 affidavit, the husband challenged the wife to inform the Court of the true nature of her interest in the property in Grey Lynn.   Eventually the wife provided an affidavit in January 2012 which provided information about the transfer and the two recipient entities.  The Judge found that the details of the transaction, including the bank statement which would have shown the transfer in May 2006, had been deliberately omitted from discovery by the wife.   Mr Corkill QC, for the wife, challenged that finding, on the basis that the point had not been put to the wife in cross-examination.  That charge is not correct.  Precisely that point was put to her in cross-examination. The Judge also rejected an explanation given by the wife that she had not disclosed the information because she had received legal advice from her solicitor that the information concerning the two entities was irrelevant to the proceeding. The solicitor was challenged on that point in correspondence. Although he answered the letter, he did not respond to the challenge.  The Judge found that on the balance of probabilities the solicitor did not give the wife that advice.  The Judge concluded:

The particular structures used, the use of a residential address other than [the family home] the omission of the particular bank statement and my rejection of the legal advice the applicant claimed to have received from Mr Foley and the approach and knowledge the applicant displayed in her pursuit of information about the respondent’s finances and trust interests lead me to conclude that the disposition of funds without the respondent’s knowledge was intended to defeat his claim and would have had the effect of defeating his claim had he not by chance discovered the existence of [the company].

Mr Corkill accepted he was in no position to appeal that adverse credibility finding against the wife.

[28]     The Judge concluded it was likely the $120,000 transferred to the trust was money earned during the relationship. That value now took the form of a 50 per cent interest in the Grey Lynn property.  The current value of that property was $265,000. Half of that was $132,500.  The Judge assessed the husband’s interest to be half of that amount again, i.e. $66,250.

[29]     Mr Corkill submitted that despite the fact that the Court had found wrongful non-disclosure by the wife, it was nonetheless unfair that the Court permit an oral application to be made under ss 44 and 44C.  The essence of what had occurred was apparent before trial began.  Application for relief was made only when the husband opened his case, and after the wife had closed hers.

[30]     The Judge found the disposition was intended to defeat the husband’s claim, a finding for the purposes of s 44(1).  Mr Corkill submitted that the Judge could not then make a compensation order under s 44C.  That is because s 44C(1)(c) provides that section applies only if the disposition is “not one to which s 44 applies”.  The claim for relief under s 44 was a claim that a disposition to the trust should be set aside.  A claim under s 44C would also require consideration of a claim for remedy against the trustees. But the trustees had not been joined.

[31]     I find the wife’s arguments distinctly unattractive.

[32]     First, the wilful non-disclosure by the wife makes it entirely appropriate that the Court take a liberal view as to the late advancement of the claim for relief under s
44 or 44C.  Plainly the husband could not have relief under both.  But I find nothing inappropriate about the decision of the Judge to receive the application after close of the  wife’s  case.    Mr Corkill did not point to  prejudice.    Plainly he  had ample opportunity to cross-examine the husband, who gave evidence.   No particular prejudice is pointed to, other than an argument as to inconsistency with the Family

Court’s refusal to permit the wife to raise a late claim under s 21H.   That is the

abandoned ground, and I need say no more about it.19

[33]     Secondly, it is correct that the Court must first decide whether s 44 “applies” before considering s 44C.20   But in my view s 44C(1)(c) precludes relief under that provision only where relief is granted under s 44.  That is the sense in which the word “applies” is used in that provision.   I do not think it likely that Parliament intended  s  44C  relief  only to  be  available where  s  44  would  be  incapable of applying.

[34]     The provisions overlap.  Each concerns dispositions of relationship property. Section 44 is concerned with dispositions generally, but only where made “in order” to defeat rights.21      The amendment introduced in s 44C drew on the recommendations of the 1988 Working Group on Matrimonial Property and Family Protection. The Working Group had noted that the existing s 44 regime failed to deal with dispositions to trusts and companies that had the effect of defeating matrimonial property claims, but where intent to defeat could not be proved. The Working Group recommended the Courts be given discretionary powers to deal with that situation.22
Section 44C thus is concerned with dispositions to trusts that have the “effect” of

defeating rights.23

[35]     Section 44 may be capable of applying (there has been a disposition made in order to defeat rights), but relief may be withheld (for instance because of the exception in s 44(4), or for other reasons - such as that the recipients are not before the Court). Whether s 44 is capable or incapable of application therefore depends on a range of jurisdictional considerations. Some within parties’ control; some not.

[36]     The grant of a remedy under s 44 is mutually exclusive with the grant a remedy under s 44C.  But that does not mean the reasoning that led to refusal of an
order under s 44 must also apply to s 44C.  Parliament’s intent was to furnish the

19	See [19] above.
20	See Babylon v Babylon HC Auckland CIV 2006-404-3217, 12 October 2007 at [54].
21	Nation v Nation [2005] 3 NZLR 46 (CA) at [143].
22	Department of Justice Report of the Working Group on Matrimonial Property and Family
Protection (October 1988) at 29.
23	Section 44F deals with dispositions to companies.

Courts with more effective discretionary powers to make orders appropriate to a wide variety of trust dispositions.   I do not consider Parliament intended that the mere possibility, actual or theoretical, of making a more radical order under s 44 should preclude the Court making a compensation order under s 44C.   In some circumstances, compensation rather than setting aside may be more appropriate.  No sound reason would seem to exist why the Court might not then consider s 44C relief instead.   No reason, sound or otherwise, was offered in submission why that construction should not be adopted.

[37]     In any event, in this case the wife contends that the absence of joinder of the trustees precludes setting aside under s 44.   I express no view on that contention. But even if that is so, if relief under s 44 is precluded, it is entirely right that the Court instead make an adjustment via a compensation award under s 44C.  The alternative  would  be  a  windfall  by  procedural  malfeasance.    One  that  in  turn produced a procedural oversight by the other party.

[38]     The only authority on point appears to be a Family Court decision, O v S.24

In that case the husband had settled a family trust.  He then transferred property to it. The Judge found the transfer was intended to defeat the claims of his wife.  The trustees were independent professional people.  The Judge did not feel able to find receipt by them in bad faith. The Judge did not think, therefore, that she could award relief under s 44.  That is of course a different situation from the present case.  Here the trustees (or at least one of them, the wife) would have been fully cognisant of the purpose of the transfer.  In O v S, the Judge then went on to consider s 44C.  She made an order that the husband compensate the wife under that section.  I consider that decision correct as to the relationship between ss 44 and 44C, and I apply it here.

Conclusion

[39]     The answer to Issue 1 is “No”.

24	O v S (2006) 26 FRNZ 459 (FC) at [104]–[107].

Issue 2: Was the Judge wrong to hold that there should be no adjustment for occupation rent?

[40]     Section  18B  of  the  Act  enables  the  Court  to  make  adjustments  for contributions made by a party after separation. Retained occupation by one party may be regarded as a contribution by the other, non-occupying party.   Permitting retention of the family home gives the occupying party emotional and practical benefits.   It also averts the financial and practical burden of having to relocate to
alternative accommodation.25    That burden is borne instead by the non-occupying

party until relationship property issues are resolved.

[41]     Where appropriate the Court may order either a payment of occupation rent, or an award of interest on the non-occupying party’s capital. As Ronald Young J has said:26

Payment of occupation rent has been a way in which “just” payment of compensation is assessed for exclusive use of the spouse’s capital tied up in the family home. A Judge could, if seen as just and appropriate, instead order interest payable on the capital being used. Where there is, as here, an unmortgaged house occupied by one spouse on which the other spouse has also enjoyed a capital gain, occupation rent has an obvious attraction.

[42]    The parties were disagreed on whether a s 18B decision is an exercise of discretion.  In my view it is.  Clifford J took the same view in J-AP v ERJP.27   The criteria for appeal therefore are stricter: error of law, irrelevancy, overlooked relevancy or a decision plainly wrong.28

[43]     For the wife, Mr Corkill submitted that an adjustment for occupation rent should be made because the husband has had exclusive use of joint capital (the family home) since separation.  The wife had had to pay rent of $350 per week over the separation period.  The Judge had not referred to that consideration.  The reason the husband had retained the property was because he had (until shortly before the Family Court hearing) wished to acquire the home. The home had not been required
to care for the daughter.  She did not live there.  In addition, the husband was not

25	Griffiths v Griffiths [2012] NZFLR 327 (HC) at [36].
26	E v G HC Wellington CIV-2005-485-1895, 18 May 2006 at [24].
27	J-AP v ERJP HC Auckland CIV 2009-404-4758, 9 December 2009 at [37].
28	Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].

paying child support.  So the wife had to support the daughter. The fact that the wife could draw on substantial cash reserves was immaterial. So could the husband.

[44]     On the husband’s behalf, Mr Laurenson submitted that the substantial sum in the wife’s name ($360,000) plus the interim payment made in May 2010 of $260,000 by the husband to the wife meant that little remained to be adjusted between the parties.  Occupation rent was not necessary to adjust the parties’ entitlements.  The wife had funds in her possession which could produce income equivalent to any occupation rent.

[45]     Standing back, I am not satisfied that this is a case in which it can be shown there was an omission by the Judge to consider a material relevancy, or that the decision is plainly wrong.  On the calculations put forward by Mr Laurenson, before the distribution of the family home is considered, the husband was in possession of negative $25,158 net relationship assets.   The wife had positive $544,959 net relationship assets.  Assume then the family home was sold for $1.15 million, the sum suggested by Mr Laurenson. Allowing for (1) the interim payment of $260,000 by the husband in May 2010 and (2) equal division (as the Judge ordered), the vast bulk of the sale proceeds would be payable to the husband.  Less than $30,000 would go to the wife.  If the net proceeds of sale were instead $1.26 million (using figures
suggested by Mr Corkill),29 then some $85,000 would go to the wife.  In the overall

scale of matters, where joint net assets are approximately $1.7 million, the difference is, at most, an only marginally material one.

[46]     In  those circumstances I am satisfied that there is no  sufficient error of principle or outcome to justify interfering with the Family Court Judge’s exercise of discretion to refuse an order for occupation rent under s 18B.  While I have put the matter in a slightly different way from the Family Court Judge,30 I am satisfied that the decision she made was correct in substance.  This is not a case where there has been so inequitable an interim allocation of the relationship property as to require
recognition under s 18B as a tacit, quantifiable contribution by the wife.

29	He suggested a value of $1.3 million. Sale costs would account for $40,000.
30	See at [16].

Conclusion

[47]     The answer to Issue 2 is “No”.  If, however, I were to differ from the Judge on the s 13 issue (Issue 5), I accept it would be necessary to revisit this conclusion.

Issue 3: Was the Judge wrong to hold that the indebtedness incurred by the husband was relationship, rather than personal, debt?

[48]     The  Judge’s  conclusion  in  relation  to  the  husband’s  indebtedness  was

succinct:

I find on the balance of probabilities that all the indebtedness apart from the tax and [motor vehicle dealer] debt was incurred to acquire, improve and maintain relationship property being the house and motor vehicles and for the benefit of both spouses in the course of managing the affairs of the household and for the purpose of bringing up [the daughter].   The funds from the respondent’s borrowing meant that there was less call on monies earned by the applicant and that the family as a whole could continue to have a high standard of living.  It enabled the applicant to amass a high level of savings being approximately $360,000.  While the applicant considered the respondent’s  further  borrowing  without  her  knowledge  or  consent misconduct or an extraordinary circumstance the same could be said about her disposition of $120,000 to her trust without the respondent’s knowledge.

[49]     The particular items in issue identified in Mr Corkill’s submissions concern a National Bank Thoroughbred flexible home loan and second National Bank home loan amounting together to $137,728.  These were found by the Judge to have been borrowings acquired unilaterally by the husband.  The wife appears to have learned of the second loan in 2004.  She was unaware of the Thoroughbred debt until after separation.  Mr Corkill submitted that the borrowings were not for the purposes of “acquiring, improving or maintaining relationship property”.  There was no reliable evidence that the respondent had applied the borrowings to relationship property, such as the family home.  The couple had maintained independent finances, and it could  not  be  said  that  the  funds  borrowed  from  the  bank  were  in  relation  to managing household affairs.  Funds contributed by the husband to that expenditure was “more likely” to have been sourced from distributions he received from the [R] Trust No 2.

[50]     Mr Corkill submitted that the husband carried the onus to satisfy the Court that funds borrowed from the bank met the test under s 20 for “relationship debt”,

and that that onus had not been satisfied.  The bank indebtedness should be regarded as personal debt, as the bank had acknowledged in correspondence to the wife in September 2008.

[51]     The submission as to onus was challenged by Mr Laurenson, on behalf of the husband.  He submitted that it was for the wife, as the original applicant and now appellant, to show that the bank overdraft was a personal and not relationship debt.

[52]     The authorities as to allocation of onus under s 20 are mixed. For instance, in Brookers Family Law31  it is said the onus “is on the party alleging a debt to be a relationship or non-personal debt to establish such a claim”.  One of the authorities cited (and the only apparent prior High Court consideration) is B v M.32   In that case, Allan J said:33

To a certain extent the Court’s role in proceedings under the Property (Relationships) Act is inquisitorial.   But while there is no general onus of proof on a party (often as here it would largely be a procedural accident as to which party initiates the proceeding), an onus of proof does remain where a party seeks to establish, in the face of opposition, that a particular asset exists.

[53]     I agree with the approach taken by Allan J in that decision.   In this case, however, it seems to me that the onus must have lain on the husband to satisfy the Court  that  the  funds  borrowed  from  the  bank  fell  within  the  definition  of “relationship debt”. That is because he is contending that it is a liability to be shared, and is doing so in the face of an acknowledgement by the bank that it was a debt for which he alone was liable.

[54]     While  the  Judge’s  conclusion  was  succinct,  I  accept  the  submission  by Mr Laurenson that it was built upon the earlier findings in the judgment recording three things.  First, that his own personal income over the relevant 18 year period was very low.34    Secondly, that that income was supplemented from two sources: distributions from the [R] Trust No 2 and the covert bank borrowings.  The fact of
the latter is not seriously challenged by the husband.  Nor is it in issue that the bank

31	Peart (ed) Brookers Family Law (looseleaf ed, Brookers) at [PR20.03].
32	B v M [2005] NZFLR 730 (HC).
33	At [90]. See also X v X [2009] NZCA 399, [2010] 1 NZLR 601 at [96] (a s 15 case).
34	See [13] above.

on three occasions confirmed to the wife that it was not joint borrowing for which she was liable – apart from the overhanging mortgage security in the event of default by the husband.  Thirdly, that the moneys the husband did receive from all these sources were substantially expended on communal property, household expenditure and the care and education of their daughter. This is the key point.

[55]     The judgment records that the husband estimated that by 2007 he had spent

$534,500  on  the  following  matters:  the  daughter’s  school  fees  of  $210,000,

insurances  of  $37,500,  power  $63,000,  rates  $99,000,  food  $50,000  and  cars

$75,000.  It is also clear that he did a significant amount of house maintenance, and the materials costs are not included in the estimate just set out.  If payments of anything like these amounts were made, plainly the husband had to have supplemented his taxable income referred to in [13] above.

[56]     Some of these amounts appear exaggerated, however.  The alleged amount for school fees, for one child, appears excessive.  But the total was not examined closely in submissions.  The wife challenged the husband’s claim that he had paid all or most of the daughter’s school fees.  It is possible that the position was as the wife deposed in 2010 (and said in evidence), rather than as she deposed (and wrote) in
2008.  Then she said that the [R] Trust No 2 and the husband had paid the school fees.  But just how much the wife contributed was not the subject of definitive analysis on appeal.  The sum paid by the husband for rates is more likely $37,000 than $99,000.

[57]     There is no dispute however that the husband made substantial payments of these general kinds.  Nor that he serviced the bank mortgage on the house property and paid outgoings on it. As Mr Laurenson submitted, there was also no dispute that he contributed to the general living of the family, such as holidays, entertainment, restaurants and other things “in the daily round”.

[58]     Mr  Laurenson submitted, further, that expenditure on  personal  recreation (even involving gambling) does not by that alone convert that expenditure immediately into a personal debt.   No more than discretionary expenditure on antiques, china and wine by the wife did.  It is a singular feature of this case that the

allegation as to squandering of assets by the husband on gambling (to which it was alleged he was addicted) could be quantified at no more than $7,400 over the course of a relationship of 22 years.

[59]     There is authority that debt may be relationship debt even though incurred without the other party’s knowledge.35    The Judge’s finding (set out at [47] above) meant that the Judge found that the bank borrowings were incurred in terms of s 20(1)(c),  (d)  and  (e).    That  is,  for  the  purpose  of  acquiring,  improving  and maintaining relationship property, for the benefit of both spouses in the course of managing the affairs of the household, and for the purpose of bringing up the daughter.  That is really the key point here, rather than the fact that the house was used as security for personal borrowing.  The Judge reached that conclusion on the
balance of probabilities, after hearing the evidence and extensive cross-examination. The Judge clearly considered the point made at the time by Mr Corkill for the wife that such payments were “in reality” or “more likely” to have been sourced from distributions from the [R] Trust No 2.  Be that as it may, the Judge reached the conclusion that the indebtedness was applied in addition to those distributions.   I acknowledge the advantage the Judge had in seeing that evidence and hearing cross- examination.   In the absence of an exhaustive analysis of that evidence (which neither counsel have provided me with), I am in no position to reach a different view to the Family Court Judge, and do not do so.

Conclusion

[60]     The answer to Issue 3 is “No”.

Issue 4: Was the Judge wrong to hold that the husband need not have obtained more financial assistance from the family trust of which he was a beneficiary?

[61]     What the Judge held was as follows:

I do not accept the applicant’s assertion that in some way the respondent
should have obtained more financial assistance from the [R] Family Trust No
2  and  his  failure  to  do  so  should  be  considered  misconduct  or  an extraordinary circumstance.   The capital of that trust was in commercial

35	PGO v MAB [2011] NZFLR 232 (HC) at [29]; M v P HC Wellington CIV 2005-485-1559,
18 September 2006 at [12].

buildings and the interest of the trust of which the respondent was a beneficiary was only a quarter.  There was no evidence that there were more funds available.  Equally it could not be said that the relatively small amount the applicant received from the [S] Trust showed any failing on her part.

[62]     Mr Corkill submitted for the wife that the husband was a beneficiary of a substantial family trust settled by his father, the [R] Trust No 2, which has been mentioned already in this judgment.  If the husband was in financial difficulty, he should have obtained funding by way of a beneficiary’s advance or distributions to relieve that pressure.  Such receipts would have ensured that the bank borrowings were averted, and not added to relationship debt.  The husband was a discretionary beneficiary under that trust.   He would be final beneficiary on the death of his mother.  The husband acknowledged in evidence that he could have sought financial assistance from the trust, but saw no reason to do so.

[63]     The wife’s submission seems misconceived to me.  As a mere discretionary beneficiary, the husband had no entitlement to trust funds.  He had at best, a mere expectation of assistance from it.36    In Hunt v Muollo, for instance, the Court of Appeal said: 37

It  is  generally  regarded  as  settled  law  that  a  discretionary  beneficiary’s interest in a normal discretionary trust is no more than a mere expectancy.  It is simply an expectation or hope (in Latin a spes) that the trustee’s discretion may be exercised in the beneficiary’s favour.

[64]     The thrust of this argument remained obscure.   Perhaps the husband could have tried harder to obtain additional funding for family expenditure.  Either through undertaking  more  gainful  employment,  or  by  pressing  the  trustees  for  more assistance.  As a matter of fact he did neither.  That may mean the net relationship assets are less than they might have been.  But that does not mean the borrowing is not relationship debt for the purposes of s 20. The relevance of the husband’s inertia, if anything, is simply to the primary argument under s 13, to which I now turn.

Conclusion

[65]     The answer to Issue 4 is “No”.

36	Kain v Hutton [2008] NZSC 61, [2008] 3 NZLR 589 at [55]; Hunt v Muollo [2003] 2 NZLR 322 (CA) at [11]; Johns v Johns [2004] 3 NZLR 202 (CA) at [31].
37	Hunt v Muollo [2003] 2 NZLR 322 (CA) at [11].

Issue 5: Was the Judge wrong to hold that s 13 (unequal sharing) did not apply?

[66]     Prima  facie,  relationship  property  is  to  be  divided  equally  between  the parties.38    One of the very limited exceptions to that presumption is found in s 13, dealing with extraordinary circumstances. Section 13 provides as follows:

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
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 of each de facto partner to the de facto relationship.

(2)        This section is subject to sections 14 to 17A.

[67]     Thus, the circumstances contemplated by s 13 must be extraordinary.  They must  fall  outside  those  likely  to  be  found  within  an  ordinary  relationship.39
Secondly, the advantages of equal sharing must be outweighed by an objective determination that to permit that course would be repugnant to justice.  As Fisher puts it:40

Essentially, the normal primacy of equal sharing over sharing on the basis of equal contributions may be reversed whenever the reasons for equal sharing are unusually weak or whenever the reasons for recognising contributions are unusually strong.

But the case must be so out of the ordinary that equality of division is something the Court “simply cannot countenance”.41     The equality principle is difficult to displace.42

[68]     I accept, as a matter of law, that s 13 requires the whole of the circumstances taken in combination to be considered. In Joseph v Johansen,43 Cooke P emphasised
the need to review the whole circumstances. Richardson J emphasised consideration

38	Property (Relationships) Act 1976, s 11(1).
39	Fisher on Matrimonial and Relationship Property (looseleaf ed, Lexis Nexis) at [12.22] and
[12.25].
40	At [12.28].
41	Castle v Castle [1977] 2 NZLR 97 (HC) at 102; Martin v Martin [1979] 1 NZLR 97 (CA).
42	Atkin & Parker Relationship Property (2nd ed, Lexis Nexis, Wellington, 2009) at 82.
43	Joseph v Johansen (1993) 10 FRNZ 302 (CA) at 304 and 306.

of circumstances cumulatively.  I accept that a possible weakness in the judgment below is the lack of a broad view taken at the end of the s 13 analysis.

[69]     Because we are dealing with both an exception to the presumed order, and a very rigorous test to enter the exception, the persuasive onus on this issue lies upon the party invoking s 13. That is, the wife.

[70]     Mr Corkill’s argument for the wife depends to some extent on misconduct, although he expressly limited that on appeal to the husband’s “pokies” gambling. The misconduct case advanced on appeal was therefore narrower than at first instance.44    Beyond the husband’s gambling, he relies on these considerations: the covert borrowing by the husband, the very great disparity in income generation, and the circumstances in which the original family home was acquired.  It is useful to consider these matters in their roughly chronological order.

Acquisition of the family home

[71]     I have set out already the Judge’s conclusion, at [12].  She also held that it was inappropriate and contrary to the intent of the legislation that she resolve precisely what each party contributed to the purchase of the family home, given that it occurred back in 1989.

[72]     For the wife Mr Corkill submitted that the wife had stated throughout her evidence that she believed that she contributed $150,000 towards the purchase.  The proceeds of sale of her own house ($87,000), together with cash of $75,000 which she had saved, had been available.  He submits that the wife was “unshaken” in her testimony,  and  the  Court  should  have  accepted  that  the  wife  had  contributed
$150,000 and the husband $94,000.

[73]    For the husband, Mr Laurenson submits that the wife, rather than being unshaken in cross-examination, simply refused to accept the obvious.  He referred to his  cross-examination  of  the  wife  on  this  topic,  and  to  settlement  statements
produced by the couple’s solicitors, Phillips Nicholson, in January 1990.

44	See [7] to [10] above.

[74]	The latter indicated that the house was funded on the following basis:

Deposit (paid by wife) [R] Trust No 245
National Bank loan
Further funds contributed by wife
Transfer of funds from sale of husband’s house46

$  50,000
$  50,000
$180,000
$  51,000
$194,084

$525,084

[75]     I accept that the wife maintained in cross-examination that she had access to a greater level of funds, from the sale of her own house and savings.   Given the irreconcilable conflict of evidence, I prefer the position attested to by the contemporaneous documents.  That would suggest that the contribution of the wife to the purchase of the house was of the order of $101,000.  The question I cannot resolve is whether the wife applied a further amount of just under $50,000 to the purchase or retained those funds in cash (with the husband’s direct and indirect contribution reduced commensurately).

[76]     In these circumstances I am not satisfied that the wife has met the burden of establishing that her contribution exceeded that shown in the solicitors’ settlement statements.  Even if she had, I would not have found the disparity in contribution extraordinary.   No more do I find it extraordinary that, on the face of things, the husband’s direct and indirect contribution was more than double the wife’s.  Judged from a distance of 22 years, any early disparity in contribution to the purchase of the house pales into insignificance. These things happen in ordinary marriages.

Inequality of income-earning

[77]     I have summarised earlier in this judgment47  the relative income-earning levels of the parties. It is uncontested by the husband that the wife earned very much more than he did during the marriage.   His taxable earnings from 1990 to 2008 totalled just $52,000.  There is some argument over trust distributions received, but
accepting  the  husband’s  more  conservative  affidavit  evidence  at  face  value,  he

45	Accepted by the wife in cross-examination. In effect contributed via the husband.
46	Including a loan from the [R] Trust No 2 of $100,000, transferred from one house to the other.
47	At [13].

received capital distributions of $523,000.48    I do not think for present purposes it makes any relevant difference whether the distributions received by the husband were capital or income.  Together with his own income, that was the financial contribution he made to the relationship.

[78]     I accept Mr Laurenson’s submission that disparity of income is part and parcel of any marriage.  It is a frequent occurrence in ordinary marriages.  Once it was almost invariably the case that spousal income contribution was disparate. With more substantial social and occupational equality has come more effective economic equality.  Despite the fact that the husband’s taxable income was minuscule, albeit supplemented by trust distributions, the relationship obviously endured for 22 years. There was here no radical change in contribution.   Merely a persistent disparity. That is not an extraordinary consideration.  Its existence does not mean that equal sharing of the final assets is repugnant to justice.  It is just something that happens in countless ordinary marriages.

Covert borrowing

[79]     In tone, if not substance, this was presented as misconduct by the husband. Albeit, Mr Corkill confined formal misconduct to the allegation of family funds being squandered on gambling.  However the legal position is clear: absent gross, palpable and economically tangible misconduct for the purposes of s 18A(3), it is irrelevant to s 13.49

[80]     The husband’s borrowing has been discussed already in this judgment at [47] to  [59].    I  was  not  disposed  to  disagree  with  the  Judge’s  conclusion  that  the borrowing  was  substantially  expended  on  communal  property,  household expenditure  and  the  care  and  education  of  the  daughter.     It  was,  therefore, relationship debt.  Half the borrowing, some $69,000 or so, is thereby attributable to the wife.  However, given the application of that money, I do not think it can be said that the covert borrowing was so reprehensible or unusual as to amount in its own
terms to an extraordinary circumstance.

48	The wife says in her evidence it may have been as much as $744,000.
49	J v J (2005) 25 FRNZ 1 (CA) at 4.

[81]    If the moneys had been used for the husband’s own purposes alone, and seriously diminished the net relationship property, the matter might be different.  In M v P50 the husband forged the wife’s signature to secure a $15,000 loan.  The loan was used to pay off a joint loan, and to meet other relationship expenses.  Despite that,  the  forgery  was  regarded  as  triggering  s  13.    That  conclusion  was  not challenged on appeal, seemingly to the surprise of the Judge hearing the appeal. The present case is more in keeping with another High Court decision, E v G,51 a decision I have referred to already in the context of occupation rent.  In that case the covert use of the family home by the husband as security for a loan was not found to offend the equality of division principle.

Gambling

[82]     The  Judge  found  that  the  evidence did  not  establish  that  the  husband’s gambling on “pokies” amounted to an extraordinary circumstance making equal sharing repugnant to justice.  Nor was it gross and palpable misconduct significantly affecting the value of relationship property.

[83]    Mr Corkill advanced the evidence of the husband’s gambling addiction as misconduct.  In his submissions he criticised the Judge for requiring the conduct complained of to significantly affect the value of relationship property to be taken into account.  I do not think the wife can have it both ways here.  If the matter is being advanced in substance as misconduct, as plainly it is, then s 18A(3) is clear that it may only be taken into account if gross and palpable, and has significantly affected the extent or value of relationship property.

[84]     In any event, despite Mr Corkill’s careful analysis of the evidence, the short point remains that the actual proven extent of any squandering of family assets by the husband on gambling could be quantified at no more than $7,400 over the course of a relationship of 22 years.52  Absent a better economic analysis of the effect of the husband’s gambling than that, I am in agreement with the Judge that the husband’s
gambling habit was not misconduct falling within s 18A.  Even if s 18A(3) did not

50	M v P HC Wellington CIV 2005-485-1559, 18 September 2006.
51	E v G HC Wellington CIV 2005-485-1895, 18 May 2006.
52	See [57] above.

apply here, that habit, and its economic effects, were not so pervasive as to justify a conclusion that they amounted to extraordinary circumstances justifying unequal sharing.

Cumulative consideration

[85]    None of these four considerations individually amounts in my view to extraordinary circumstances meeting the  test  described  in  [65]  and  [66]  above. Rather they reflect the particular version of normality that applied through the course of a 22 year relationship that endured between these two parties.  Even taken in combination, they do not so offend a robust and realistic sense of justice as to command a response under s 13.   Rather they are the consequence of a long relationship between one spouse who generates the bulk of the family income, and the other who does not.

Conclusion

[86]     The answer to Issue 5, therefore, is also “No”.

Result

[87]     Appeal dismissed.

[88]	If costs are in issue, brief memoranda may be filed within 14 and 21 days respectively.

Stephen Kós J

Solicitors:
Foley & Hughes, Auckland for Appellant
Gault Mitchell, Wellington for Respondent