Burgess v Beaven

• Jurisdiction: New Zealand
• Judge: William Young J
• Judgment Date: 09 August 2012
• Neutral Citation: [2012] NZSC 71
• Docket Number: SC 9/2011
• Court: Supreme Court
• Date: 09 August 2012

BETWEEN

Gary Owen Burgess

Appellant

and

Susan Natalie Beaven

Respondent

[2012] NZSC 71

Court:

Elias CJ, Blanchard, Tipping, William Young and Chambers JJ

SC 9/2011

IN THE SUPREME COURT OF NEW ZEALAND

Appeal relating to approach Court of Appeal (“CA”) took to separation date adopted in parties' relationship property proceedings — parties were only married for a year — dispute as to division of relationship property resulted in drawn-out litigation process through Family Court (“FC”) to Supreme Court — FC held wife's contribution to relationship had “clearly been disproportionately greater” than husband's — relationship property divided (after appeal) 62:38 in wife's favour — CA allowed husband's challenge and made resulting adjustment in favour of husband — CA recalculated property division on the basis of separation date value, and not hearing date value — appropriate valuation date at issue.

Counsel:

Appellant in person

S J Shamy and A M Corry for Respondent

• A The appeal is allowed and the cross-appeal is dismissed.

• B Orders B, C and D of the decision of the Court of Appeal [2010] NZCA 625 are set aside.

• C The awards of costs made against Mr Burgess by John Hansen J in the Stream A litigation are set aside and in their place Mr Burgess is awarded $5,000 costs in respect

• D Ms Beaven's gross liabilityto Mrn Burgess is:

(a) Balance due on division of property	3,716.10
(b) Refund of money paid to Ms Beaven	36,804.31
(c) Costs and disbursement on first appeal	5,000
Total	$15,474.16.

• E Ms Beaven is entitled to set off outstanding awards of costs in her favour totalling $15,474.16 against her gross liability producing a net figure which she must pay, and on which Mr Burgess may now execute judgment of $30,046.25. Interest will run on that sum from the date of this judgment in terms of r 11.27 of the High Court Rules.

• F Ms Beaven is to pay Mr Burgess usual disbursements in relation to this appeal.

JUDGMENT OF THE COURT

REASONS

(Given by William Young J)

The appeal

1 In the judgment under appeal, the Court of Appeal 1 (a) allowed Mr Burgess' challenge to an unequal division of relationship property under the Property (Relationships) Act 1976 as directed by the Family Court 2 and upheld by the High Court, 3 (b) divided the relationship property based on separation date valuations rather than the hearing date approach adopted by the courts below and (c) made certain consequential orders.

2 Mr Burgess' further appeal to this Court is directed at the separation date approach adopted by the Court of Appeal, which is the primary point of principle on which leave to appeal was granted. 4 If the Court of Appeal's separation date approach to valuation is wrong, it will be necessary to provide for a division of property based on the correct valuation date and to determine what, if any, consequential orders are required. As will become apparent, such division must proceed on the basis that (a) all assets were relationship property, (b) all debts were relationship debts and (c) the contributions of the parties were roughly equal. 5 As well, there is one additional aspect of the case, a claim for compensation by Mr Burgess against Ms Beaven, which we will also address.

The facts

3 Mr Burgess and Ms Beaven married on 18 May 2002. They both owned properties in Christchurch. Mr Burgess' property was in Wychbury Street (Wychbury), while Ms Beaven's was in Woodbury Street (Woodbury). Wychbury was subject to a mortgage (of around $55,000) whereas Woodbury was unencumbered. Ms Beaven, however, owed her mother $40,000 which was treated as a relationship debt 6 within the meaning of s 20(1) of the Act. 7 Both properties were of approximately equal value as at the date of acquisition 8 and if Woodbury is treated as encumbered by the debt to Ms Beaven's mother, there was not much difference in the net equity each brought to the marriage.

4 Mr Burgess and Ms Beaven decided to pool their financial resources to purchase Medbury, a run-down North Canterbury rural property of around 23 hectares. They were interested in developing a vineyard and also contemplated operating a homestay business. An informal partnership was formed for these purposes. Mr Burgess sold Wychbury in July 2002. This produced a net $69,000 which funded part of the $144,000 purchase price. The balance, some $75,000, was borrowed. Working capital and plant were funded by a GST refund and assistance from Ms Beaven's parents.

5 A caravan was put on the site. A small vineyard was developed and Mr Burgess ran a small flock of sheep. When working on the property, Mr Burgess and Ms Beaven stayed in the caravan. For the balance of the time, they occupied Woodbury. In March 2003, about two months before separation, Ms Beaven entered into an agreement to sell that property.

6 Settlement of the Woodbury sale was effected in June 2003, the month after separation. After discharge of debts and payment of costs of sale, Ms Beaven received a net sum of $156,642.11. In September 2003, Ms Beaven used $110,000 of the proceeds of sale to buy a property in Cranford Street, Christchurch. She sold it three years later, in November 2006, and received $166,113.09 (net of commission and other expenses). The balance of the Woodbury sale proceeds were not kept separate. It is, however, clear that Ms Beaven did meet a joint liability of $4,000 on the cancelled purchase of relocatable homes and it has been held that she repaid her mother the $40,000 advance. 9 Complicating the picture slightly is that some of the Woodbury proceeds of sale 10 were put to the purchase of a property in Geraldine. No valuation of this property was provided and it was not taken into account in the division of relationship property. As will become apparent later, 11 all but a little over $2,000 of the Woodbury proceeds can be accounted for and given this, there would be little point in trying to analyse the possible relevance of the Geraldine property to the division. 12

7 Between separation (May 2003) and the hearing (January 2007) Mr Burgess occupied Medbury. He met the outgoings and incurred various maintenance expenses. His standard of living was low (given the absence of a house and Ms Beaven's removal of the caravan which had been placed there) and he plainly worked hard on the property. By January 2007 (which is when the hearing in the Family Court commenced) the property was worth $252,000 not including stock and plant, which was $77,000 more than it had been worth as at separation (which was $175,000). It was subject to a mortgage of approximately $75,000. Mr Burgess accepted that the appreciable increase in value between May 2003 and January 2007 was largely due to a general lift in rural property values over that period. On the other hand, as he pointed out, that increase in value would not have been available for division without his efforts which ensured that the property was retained.

The process to date

8 In the first substantive judgment this dispute has generated, Judge Strettell addressed Ms Beaven's argument that for the purposes of s 14 of the Act, her contribution to the relationship had been “clearly disproportionately greater” than that of Mr Burgess. 13 In quantifying the respective contributions of the parties, Judge Strettell valued (a) Mr Burgess' contribution through Wychbury at the net price for which it was sold early in the marriage but (b) Ms Beaven's contribution through Woodbury by reference to the sale price later received (which included inflationary gains). 14 And in carrying out this exercise, he did not allow anything to Mr Burgess for the increase in value of the Medbury property as at the date of separation over its acquisition cost. 15 These conclusions provided the foundation for his finding that Ms Beaven's contribution to the relationship had “clearly been disproportionately greater” than that of Mr Burgess 16 and his decision that the relationship property should be divided 65:35 in her favour. 17

9 Mr Burgess appealed to John Hansen J against Judge Strettell's decision but was only modestly successful. The result was an order for a limited rehearing before Judge Strettell. 18 Mr Burgess later applied to John Hansen J to recall his judgment and for leave to appeal but both applications were declined. 19

10 When the case came back to Judge Strettell, that Judge revised his assessment of the respective contributions slightly, to 62:38. 20 The Judge directed that Medbury was to be sold forthwith unless within seven days of the judgment Mr Burgess gave notice of his intention to retain the property. Mr Burgess did indicate that he wished to retain the property and the parties subsequently agreed that on the basis of the findings of the Judge, Mr Burgess was to pay Ms Beaven $36,250. We note in passing that this calculation must have encompassed a payment of $3,852 which Ms Beaven made before the second hearing towards mortgage arrears.

11 Mr Burgess appealed against the second judgment of Judge Strettell. But before this appeal could be heard, he and Ms Burgess reached an interim settlement (intended to be implemented by consent orders) to facilitate Mr Burgess refinancing Medbury (on the basis that it would eventually be his absolutely) but in the meantime providing security for Ms Beaven for what she was owed under the second judgment of Judge Strettell, namely the $36,250 we have already mentioned. This sum was to be held by Mr Burgess' solicitors pending the outcome of the appeal against the second judgment of Judge Strettell. As well, it was agreed that Mr Burgess was to pay $9,000 for costs which had already been awarded to Ms Beaven (or such lesser sum as should be appropriate on the determination of the appeal). The proposed consent orders provided that the money owed to Ms Beaven, along with any other costs ordered, were to be...