Dam v Prm
| Jurisdiction | New Zealand |
| Judge | Judge G F Ellis |
| Judgment Date | 30 March 2011 |
| Court | Family Court |
| Docket Number | FAM-2008-035-512 |
| Date | 30 March 2011 |
and
FAM-2008-035-512
IN THE FAMILY COURT AT MASTERTON
Applications for income and capital distributions under s44C(2) Property (Relationships) Act 1976 (compensation for property disposed of to trust) and s182 Family Proceedings Act 1980 (Court may make orders as to settled property) by applicant — application for occupation order by respondent for homestead under s27 Property (Relationships) Act 1976 (occupation orders) currently occupied by the wife — parties married since 1968 — farming assets placed in trust — farm had been in husband's family since the 1920s.
Mr K McClure for the Applicant
Mr G Allan with Ms B Inglis for the First Respondent
Ms J Hunt for the Second Respondents
RESERVED JUDGMENT OF Judge G F Ellis
[Relationship Property: Farming Trust]
These are proceedings under the Property (Relationships) Act 1976 (“PRA”) and the Family Proceedings Act 1980 (“FPA”). The parties were married in July 1968. They have lived apart since 2006 and their marriage was dissolved on 8 December 2008. For their privacy (and to avoid a confusing proliferation of initials) I will refer to them as Mr M and Mrs M.
The parties have three adult children: K (39) who is married, has three children and is currently living and working in France with her husband; S (36) who is married, has one child, and lives on the family farm which he is working as lessee; and B (31) who with his partner lives and works in Wellington and has no children yet.
At the centre of the case is a family property known as Y Station situated in P, Wairarapa. The farm has been in the M family since the 1920's when it was acquired by Mr M's grandfather. Mr M became sole proprietor of the farm in 1975 and then transferred it into a Trust settled by Mr M in September 1975 and known as the Y Trust. Mr and Mrs M are trustees of the Y Trust. A third professional trustee has resigned and no other trustee has yet been appointed.
There are three substantial dwellings on Y Station, the homestead, a ‘farm manager's’ house, and a cottage. These dwellings are currently occupied respectively by Mrs M, their son S and his family, and Mr M. Relations between the parties have been and are seriously strained, interfering with the work of the farm and the administration of the Trust.
The issues raised by the parties include primarily:
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— Occupation of the homestead; and
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— Provision of income from the Trust; and
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— Review of the settlement of the Trust.
Counsel for both parties ask the Court to consider and apply the provisions of s 44C PRA and s 182 FPA. Counsel agree that the facts of the case do give rise to jurisdiction under both provisions and they were largely in agreement as to the scope of orders that could be made by this Court with regard to the Trust.
Differences between counsel on the law went to issues regarding the possibility of the sale of trust property and interference with the rights of the lessee. Neither party is pressing for such outcomes and since I am satisfied that neither is necessary nor justifiable on the facts I will not go into those aspects.
It is not necessary to set out the provision in full. Counsel agree and I am satisfied on the evidence that:
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— Since their marriage either or both parties have disposed of relationship property to a Trust; and
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— That the disposition of that property has had the effect of defeating the claims of one or other, and potentially both, of the parties; and
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— That s 44 has no application to the disposition or dispositions in question.
Counsel also agree, with regard to s 44C(2) that the Court has jurisdiction in this case to make orders with regard to the income of the Trust under s 44C(2)(c).
I have considered s 44C(3) which prohibits an order with regard to trust income if orders under ss (2)(a) or (b) would compensate the claimant. On the facts of the case the relationship property held by the parties or to which they are entitled is relatively modest (in comparison to the assets of the trust). Mr M is a substantial creditor of the Trust but has limited access to capital (whether relationship property or separate property).
Actuarial evidence shows that the capital sum that would be required to meet the reasonable financial needs of Mrs M for the foreseeable future could exceed any capital sum presently available to Mr M.
I am therefore satisfied – as both counsel urge – that the Court does have jurisdiction to make orders under s 44C(2)(c) in relation to the income of the trust.
It is not necessary to explore the background of s 44C which is fully discussed in such cases as Nation v Nation (2005) 3 NZLR 64. There is also helpful comment on s 44C in the Supreme Court decision Ward v Ward [2010] 2 NZLR 31 (SCNZ) which is discussed further below.
I raised with counsel the question whether there is any order of priority or precedence between s 44C PRA and s 182 FPA where both provisions are applicable. I put the question whether the Court should first address the issue of compensation under s 44C and then only address s 182 if an outcome available under s 44C did not provide adequate relief. Counsel were not agreed on that question and on further reflection (and reading of Ward) I conclude that it is not necessary or helpful to pursue it.
The Supreme Court decision in Ward makes it clear that both provisions exist side by side (where they apply) and must be considered without any presumptions or limitations other than as prescribed by the sections themselves. I do note nevertheless what was said by the Court in Ward at paragraphs [18] and [19] of the judgment and the concluding comment in paragraph [19]:
There is however no necessary inconsistency in allowing the Courts to exercise a Trust varying power in these particular circumstances, while providing that, in the wider and distinct relationship property context, Trusts will prevail, subject to ss 44 and 44C, over relationship property rights.
Both of counsel nevertheless addressed the issue of income provision under s 44C(2)(c) first, so I have done likewise.
Because both counsel agree that s 182 does apply on the facts of this case, it is not necessary to set out the provision in full. What did lead to discussion however was the scope and purpose of s 182 and the principles guiding the exercise of the Court's discretion.
Notwithstanding a number of questions I put to counsel about any correlation between the s 182 assessment and relationship property principles, I fully accept – as both counsel advised me – that such questions have been conclusively determined by the Supreme Court decision in Ward (above).
The background, history and correct interpretation of s 182 to be applied in this Court is set out in the Ward judgment and I do not need to repeat that analysis here. As to this Court's starting point and approach I note what was said at paragraph [20]:
The fundamental starting point is that under s 182 there is no entitlement to a 50/50 or any other fractional division of the Trust property. Nor is there any presumption in favour of a 50/50 or any other fractional division. As already mentioned, a nuptial settlement, whether it be ante or post-nuptial, is premised on the continuation of the marriage. When the Court is addressing an application under s 182, it must assess whether an order is necessary and, if so, in what terms, to reflect the fact that this fundamental premise no longer applies.
That was reinforced at paragraph [30] of the judgment where the Court, disapproving of an opinion expressed in Fisher on Matrimonial Property (Butterworths Looseleaf para [6.14]) said:
As we have said earlier, equal sharing principles do not underpin s 182. The s 182 assessment, which may lead in some cases to equal sharing, is not underpinned by any entitlement to or presumption of equal sharing. The Court's task is not to produce the outcome that would have applied if the relationship property had not gone into a Trust. A fact specific judicial assessment is required in each case.
The task for this Court is clearly set out at paragraph [25] where the Court said:
… The proper way to address whether an order should be made under s 182, is to identify all relevant expectations which the parties, and in particular the applicant party, had of the settlement at the time it was made. Those expectations should then be compared with the expectations which the parties, and in particular the applicant party, have of the settlement in the changed circumstances brought about by the dissolution. The Court's task is to assess how best in the changed circumstances the reasonable expectations the applicant had of the settlement should now be fulfilled.
As to the matters to be considered, the Court drew attention to s 182(3) at paragraph [26] and said:
By its reference to change of circumstances the subsection envisages that the parties circumstances, both as regards the settlement, and generally, are to be compared with their circumstances at the date of the settlement. The Court is also empowered by ss (3) to take into account any other matters it considers relevant. Among those matters it may, as here, be significant who established the settlement Trust and, subject to ss 6, the source and character of the assets which have been vested in the Trust. Obviously the terms of the settlement will be relevant, as will how the trustees are exercising, or are likely to exercise, their powers in the changed circumstances. Also relevant, of course, are the interests of any children or other beneficiaries involved.
The purpose of applying s 182 is then summarised at paragraph [27]:
It can therefore be seen that s 182 applies if the...
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