K S Phair v C C Galland

 
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[2010] NZFC 3

IN THE FAMILY COURT AT OAMARU

FAM-2008-045-000113

In the Matter of Property (Relationships) Act 1976

BETWEEN
K S Phair
Applicant
and
C C Galland
Respondent
Appearances:

Applicant appears in person

P Maciaszek for the Respondent

NOTE: 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. FOR FURTHER INFORMATION PLEASE SEE WWW2.JUSTICE.GOVT.NZ/FAMILY/LEGISLATION/RESTRICTIONS.

RESERVED JUDGMENT OF JUDGE S J Coyle

As to Classification and Division of Relationship Property
1

Ms Phair and Dr Galland began living together in a de facto relationship in 1984. They married on 24 July 1987, and remained living together until May 2006 when they each moved into separate homes. They formally separated on 1 June 2007. While I am sure at some point in time they cared for and loved each other, the disdain in which Ms Phair now holds Dr Galland, and the brokenness of Dr Galland, was palpable during this hearing.

2

Ms Phair and Dr Galland are Canadian, and lived and worked in Canada for most of their relationship. During their marriage Dr Galland initially practised as a doctor but then, with the support of Ms Phair, retrained as a radiologist in an effort to gain greater job satisfaction. Throughout their entire relationship, there was a severely strained relationship with Dr Galland's mother, to the point where rapidly Ms Phair chose to have no contact with her at all. By 2002, Dr Galland and Ms Phair had decided to relocate permanently to New Zealand some time in 2007 and in April 2003 they bought an apartment in Peterborough Street in Christchurch. Dr Galland intended to seek employment with the Christchurch District Health Board.

3

Unexpectedly, Mrs Galland Senior died on 14 December 2004. As a consequence, Ms Phair and Dr Galland brought forward their intention to relocate and they moved to New Zealand during October 2005. Shortly before shifting to New Zealand, Dr Galland developed significant misgivings about relocating to New Zealand and there were severe tensions within the relationship around that time.

4

Their relocation to New Zealand does not appear to have been a happy event, both personally and professionally, and by March 2006 Ms Phair was expressing her misgivings as to whether the marriage could or should endure. Notwithstanding these misgivings, they purchased a property together in Tweed Street, Oamaru in May 2006. There continued to be marital and personal unhappiness and on 1 June 2007 they bought a second property at 11 Stour Street, Oamaru. From that date they lived apart in separate homes, having decided to formally end their marriage and to separate.

5

Pursuant to the will of Mrs Galland Senior, Dr Galland received an inheritance. While some of the inheritance monies were used for relationship purposes including the purchase of Tweed Street, Dr Galland claims that the balance of the inheritance monies are his separate property pursuant to s 10 of the Property (Relationships) Act 1976 (“the Act”). Ms Phair, on the other hand, claims that the inheritance monies were intermingled to such an extent that they became relationship property. Apart from that issue all other aspects of the division of the parties' relationship property have been agreed, apart from one issue pertaining to a dispute as to the value of one of the motor vehicles.

Inheritance
6

Mrs Galland Senior died on 14 December 2004. Her will provided that, after payment of debts, taxes, and administration costs, the residuary of her estate would pass in equal shares to Dr Galland and his brother, Gordon. Additionally, there was a provision that if Gordon predeceased his mother, his one-half share would go to his wife. Significantly, there was no corresponding provision for Dr Galland's share in the residuary estate to pass to Ms Phair in the event that Dr Galland predeceased his mother such was the level of antipathy between Mrs Galland Senior and Ms Phair.

7

The will contained a “community of property clause”, with clause 11 of the will expressly directing that any provision to either of her sons:

shall not fall into any community of property which may exist between any such person and his or her spouse and shall not form part of his or her net family property for the purpose or purposes of the Family Law Act 1986 in the Province of Ontario (or similar legislation at any other province) … but shall only be paid by my trustees to such person on the condition that the same shall remain the separate property of such person, free from the control of his or her spouse.

8

As Mr Maciaszek submitted, clearly that clause was directed towards Ms Phair and Dr Galland given the previous provision in the will that if Dr Galland's brother Gordon predeceased his mother, his half-share would go to his wife.

9

The estate funds were not distributed in one lump sum. As at 11 July 2005 Dr Galland received Canadian $604,202.52 being his share of two life policies over the life of his mother and payments from various life insurance policies.

10

Two months later he received his share of the sale proceeds of his mother's car to his brother Gordon. The estate monies were initially paid into a bank account set up by the trustees of the estate in Canada and then Dr Galland's share was transferred to a BNZ 083 account in the joint names of Dr Galland and Ms Phair. On 12 July 2005, NZ$718,806.13 was transferred into the account (Canadian dollars

$600,080).

11

On 16 September 2005, $307,305.95 was transferred into the same account. This figure comprises the net sale proceeds of the home owned by Ms Phair and Dr Galland in Canada and from the sale of their car. Additionally, it included the sum of Canadian $38,000 received by Dr Galland from his brother for the purchase of his mother's car and a small balance owed as part of the estate funds.

12

On 20 September 2005 there was a deposit of NZ$160,075.32 into the account. This represents the transfer from Canada of the proceeds of the sale of Dr Galland's shares in his professional corporation in Canada. It is accepted that those funds are relationship property. On the same day the sum of NZ$307,305.95 was transferred into the account, being the monies referred to above from the sale of Ms Phair and Dr Galland's Canadian house and car, and some small residual estate funds. Thus, as at 20 September 2005 there was NZ$1,263,966.30 in the BNZ 083 account, which included $NZ718,806.13 of estate funds.

13

What then followed was a series of investments and re-investments of the inherited funds, and the purchase of two residential properties. It is these complicated transactions which have given rise to the claim by Ms Phair that the inheritance monies have become so intermingled that they are now relationship property.

The law
14

The relevant section of the Act is s 10 which provides that, prima facie, inheritance monies are separate property. That presumption is subject to s 10(2) of the Act which states:

10 Property acquired by succession or by survivorship or as a beneficiary under a trust or by gift

  • (2) Property to which this subsection applies is not relationship property unless, with the express or implied consent of the spouse or de facto partner who received it, the property or the proceeds of any disposition of it have been so intermingled with other relationship property that it is unreasonable or impracticable to regard that property or those proceeds as separate property.

15

Thus, an intended intermingling per se does not affect the status of Dr Galland's inheritance monies unless the Court finds that it is unreasonable or impracticable to regard those monies as separate property. Mr Maciaszek, in his very full and helpful submissions, set out the relevant cases in relation to the debate as to whether s 10 is subject to section 8(1)(c) and (e) of the Act. While there had been some uncertainty on this issue, Chisholm J in S v W [2006] 2 NZLR 669, after a thoroughly traversing the history of judicial consideration on the issue, and in examination of the purpose of the legislation, concluded that s 10 prevails over s 8(1)(c) of the Act. Whilst there are earlier High Court decisions expressing a contrary view, Chisholm J's decision is the more recent decision, and I am bound to follow that decision. I have no difficulty in accepting being bound by His Honour's decision as it accords with my own view that s 10 must prevail.

16

There can be no doubt on the facts of this case that the inheritance funds have been intermingled in a technical sense in that they have been paid into the 083 joint account. The fact that Dr Galland paid his inheritance monies into a joint bank account and that relationship property funds were subsequently paid into the same bank account does not automatically mean that the status of the entire monies have changed into relationship property ( Allan v Allan (1990) 7 FRNZ 102 (HC), Tipping J; Gerbic v Gerbic (1982) 5 MPC 40 (HC), Thorp J). In addition, Holland J in Flayv Flay (1990) 6 FRNZ 131 (HC) held that:

In my view it would be contrary to the spirit of the Act to deprive [the husband] of his separate property merely because he used his general bank account for a period instead of opening a separate account and keeping the receipt of the proceeds of his inheritance and the payment of his new farm property in that separate account.

17

What is clear from a perusal of the cases (see, for instance, B v B [1995] 13 NZFLR 673 (HC)) is that the application of s 10(2) turns on the particular facts of each case; as Tipping J stated in B v B at p 682:

In the end those matters are points of fact and will turn essentially in many cases on matters of degree and what is reasonable or unreasonable against the circumstances affecting the issue as a whole.

18

Mr Maciaszek also referred me to a decision Millington v...

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