Townshend v Bellamy CA170/04 [2005] NZCA 361; [2005] NZFLR 1129 (13 September 2005)

Last Updated: 20 January 2014

IN THE COURT OF APPEAL OF NEW ZEALAND

_CA170/04

BETWEEN LEWIS HERBERT EDWARD TOWNSHEND

Appellant

AND HEATHER MARIA BELLAMY Respondent

Hearing: 16 August 2005

Court: Glazebrook, Robertson and Goddard JJ Counsel: G J Thomas for Appellant

S J Ross for Respondent

Judgment: 13 September 2005

_{JUDGMENT OF THE COURT}

A The appeal is dismissed.

B Costs of $6,000 plus usual disbursements are awarded in favour of the

_Respondent.

REASONS

(Given by Glazebrook J)

Table of Contents

Para No

Introduction [1] Relevant legislation [6] The deed of 10 August 1994 [8] The prior negotiations [10] The evidence before the Family Court [12] The Family Court judgment [14] The High Court judgment [22]

TOWNSHEND V BELLAMY CA CA170/04 13 September 2005

Submissions for Mr Townshend [36] Submissions for Mrs Bellamy [38] Discussion [41] Result [47]

Introduction

[1] The parties married in 1979 and separated in May 1994. No children were born during the marriage. At the time of separation, the matrimonial assets included the matrimonial home and contents, three investment rental properties, three vintage Bentley cars and a vintage Harley Davidson motorcycle.

[2] On 10 August 1994 the parties entered into a deed by which Mrs Bellamy retained the matrimonial home and contents and the associated pottery shop and Mr Townshend assumed the sole ownership of the rental properties, the Bentleys and the motorcycle. Further, Mrs Bellamy was to receive for life an annual allowance (payable monthly) of $24,000 free of tax. The marriage was dissolved on 1 February

1999 and in October 2000 Mrs Bellamy remarried.

[3] Mr Townshend ceased to make the monthly payments in May 2001 and brought an application in the Family Court for an order varying the agreement under s 182(2) of the Family Proceedings Act 1980 (FPA). Judge Aubin, in the Family Court at Palmerston North in a judgment reported at [2003] NZFLR 976, varied the agreement so that the monthly allowance was payable not for life but until 1 May

2008.

[4] Miller J, in a judgment reported at [2004] 2 NZLR 692, allowed an appeal by Mrs Bellamy to the High Court, finding that the Family Court did not have jurisdiction to make an order varying the agreement because of the operation of s 182(6) of the FPA.

[5] On 19 July 2004, special leave to appeal to this Court was granted to

Mr Townshend on the following question:

Whether an agreement for maintenance entered into in the light of or in consideration of the terms of a related agreement for property, under the Property (Relationships) Act 1976, is amenable, as a matter of jurisdiction, to variation pursuant to s 182(2) of the Family Proceedings Act 1980.

Relevant legislation

[6] Section 182 of the FPA provided at the relevant time:

182 Court may make orders as to settled property, etc.

(1) On, or within a reasonable time after, the making of an order under Part 4 of this Act or a final decree under Part 2 or Part 4 of the Matrimonial Proceedings Act 1963, a Family Court may inquire into the existence of any agreement between the parties to the marriage for the payment of maintenance or relating to the property of the parties or either of them, or any ante-nuptial or post-nuptial settlement made on the parties, and may make such orders with reference to the application of the whole or any part of any property settled or the variation of the terms of any such agreement or settlement, either for the benefit of the children of the marriage or of the parties to the marriage or either of them, as the Court thinks fit.

(2) Where an order under Part 4 of this Act, or a final decree under Part

2 or Part 4 of the Matrimonial Proceedings Act 1963, has been made and the parties have entered into an agreement for the payment of maintenance, a

Family Court may at any time, on the application of either party or of the

personal representative of the party liable for the payments under the agreement, cancel or vary the agreement or remit any arrears due under the agreement.

(3) In the exercise of its discretion under this section, the Court may take into account the circumstances of the parties and any change in those circumstances since the date of the agreement or settlement and any other matters which the Court considers relevant.

(4) The Court may exercise the powers conferred by this section, notwithstanding that there are no children of the marriage.

(5) An order made under this section may from time to time be reviewed by the Court on the application of either party to the marriage or of either party's personal representative.

(6) Notwithstanding subsections (1) to (5) of this section, the Court shall not exercise its powers under this section so as to defeat or vary any agreement, entered into under Part 6 of the Property (Relationships) Act

1976, between the parties to the marriage unless it is of the opinion that the interests of any child of the marriage so require.

[7] Under s 2 of the FPA, “maintenance” is defined as the provision of money, property and services. The relevant part of the definition of “maintenance agreement” was:

A written agreement made between a husband and wife, and providing for the payment by either party of a periodical sum of money or lump sum of money or both towards the maintenance of the other party.

The deed of 10 August 1994

[8] The deed of 10 August 1994 was entitled “Separation and Matrimonial Property Agreement” and recorded that the parties separated on 1 May 1994 and that they would continue to live separate lives. The deed then went on:

Income

3. THE parties agree that Heather [Mrs Bellamy] shall receive an annual allowance of TWENTY FOUR THOUSAND DOLLARS ($24,000.00) free of tax payable monthly on the 1^st day of every month commencing on the 1^st day of May 1994, such allowance shall be for life and shall be re-assessed at two (2) yearly intervals commencing with a first such review on the 1^st day of May 1996. Such reviews shall increase the allowance to take into account the percentage movement in the Consumer Price Index for the preceding two (2) year period. Lewis [Mr Townshend] undertakes that he will provide in his Will for the continuation of the payment of such allowance in the event of his death.

Matrimonial Property

4. THE parties hereby covenant that they have each declared to the other all property which is at the date of this deed owned by each of them jointly or separately or in which each has a joint or separate interest, and the parties hereto are and each of them is fully aware of all mortgage monetary and other obligations covenants and conditions and of all other debts and outgoings owing in respect of such property.

5. IT is agreed between the parties that the matrimonial property and family chattels shall be divided as follows:

(a) By Heather retaining as her separate property all that property in Schedule A hereto [essentially the matrimonial home and associated pottery shop].

(b) By Lewis retaining as his separate property all that property in Schedule B hereto [the investment properties, the cars and the motorcycle].

10. LEWIS and Heather acknowledge and agree that each and every of the foregoing provisions of this deed are intended as and shall be a complete full and final settlement and discharge in satisfaction of all claims suits and demands of any nature whatsoever concerning property which Lewis or Heather as the case maybe now have or hereafter elect to have against the other whether pursuant to the provisions of the Matrimonial Property Act

1976, the Matrimonial Proceedings Act 1963, the Matrimonial Property Act

1963 and the Family Protection Act 1955 or any act passed in amendment thereof or in substitution therefore or under any other statute or under any

other rule of common law or of equity or otherwise howsoever arising AND LEWIS AND HEATHER HEREBY EXPRESSLY ACKNOWLEDGE AND DECLARE that the provisions of this deed have been agreed and settled between them pursuant to Section 21 of the Matrimonial Property Act

1976 for the purpose of settling any difference that may have arisen between them concerning property by either of them.

Effect of Cohabitation

11. IN the event of Lewis and Heather at any time hereafter with their mutual consent cohabiting as man and wife SUBJECT HOWEVER to the provisions of Section 40 of the Family Proceedings Act 1980 IT IS HEREBY AGREED that all agreements and provisions herein shall become void with the exception of the agreement as to matrimonial property.

Effect of Dissolution of Marriage

12. IN the event of dissolution of marriage being made it is hereby agreed that none of the provisions contained herein shall become void or shall lapse.

Costs

13. EACH party shall pay their own costs associated with this agreement and all costs relating to the implementation of the terms of this agreement.

Acknowledgement

14. LEWIS and Heather severally acknowledge that they have read the provisions hereof and have been separately advised as to the consequences and law by the signing of each of them of this agreement.

[9] The deed was witnessed by solicitors each of whom certified, as required by s 21 of the then Matrimonial Property Act, that, before his client signed the agreement, he had explained its effects and implications. The evidence was, however, that Mrs Bellamy signed the deed against the advice of her solicitors.

The prior negotiations

[10] When Mr Townshend and Mrs Bellamy separated they went to see Mr Townshend’s solicitor, having already effectively agreed on the terms of their separation. The solicitor arranged for separate representation for Mrs Bellamy and prepared a draft deed recording what he had understood to be the terms of the agreement. This was sent to Mrs Bellamy’s solicitors under cover of the following letter:

We have acted for Mr & Mrs L.H. Townshend. We understand that you have met Mrs Townshend and she has asked whether you are prepared to act for her in connection with matrimonial property advice.

Mr & Mrs Townshend decided to separate as from the 1^st of May last. They have reached an amicable arrangement relating to matrimonial property matters and the agreement we are enclosing with this letter, as far as we are aware, properly records those arrangements.

Mr & Mrs Townshend have owned a number of commercial properties in their joint names. They do not wish to totally sever their financial involvement at this stage and the arrangements set out in the agreement reflect this position. In particular we understand that Mrs Townshend does not wish to involve herself in any way with property management and accordingly, at least at this stage, does not wish to take over any of the investment properties in her own name.

You will notice from the agreement that Mrs Townshend is to retain the Wanganui property and to have the financial benefit of the investment property at Porirua. We are advised that the Wanganui house together with the improvements etc has a value of approximately $600,000.00 while the Porirua investment property has a value of $350,000.00.

The two Palmerston North investment properties after allowing for mortgage borrowing have a value of approximately $750,000.00 and Mr Townshend’s Bentley motor car which was acquired by him during their marriage has a value of approximately $150,000.00. Accordingly the figures as to value are not very far away from each other.

We are forwarding a copy of this letter and a copy of the agreement to Mrs Townshend for her information and will ask her to contact you. If there is some reason why you cannot act could you please let us know as soon as possible.

[11] The draft deed provided that Mrs Bellamy would receive the $24,000 per annum for 14 years and, after that, the Porirua investment property (or any substitute property) would pass to Mrs Bellamy absolutely. The clause also provided for any increase in the return on the Porirua property, during the 14 year period, to pass to Mrs Bellamy. The clause read:

Income

3. THE parties agree that Heather shall receive an annual allowance of TWENTY FOUR THOUSAND DOLLARS ($24,000.00) free of tax payable monthly on the 1^st day of every month commencing on the 1^st day of May

1994, such allowance shall be payable for a period of 14 years from the date of separation referred to above or until the death of Heather, whichever shall

be the earlier date. In the event that the net annual rental return received by the parties from their joint ownership of the property located at Norrie Street,

Porirua, occupied currently by Inter Used Furniture shall increase beyond the said sum of $24,000.00 after allowing for personal tax on that sum then the allowance shall be increased by the amount of such rental increase less the

tax thereon PROVIDED ALWAYS THAT such allowance shall not in any event be increased before the 1^st day of May 1996. In the event that the parties decide to sell the Porirua property and invest the proceeds elsewhere then the total net proceeds of sale of the Porirua property free of any mortgages which may be secured over the Porirua and other property shall be allocated for the purpose of providing an income for Heather. After the expiration of the said period of 14 years the said property or any other property or investment purchased in substitution therefore shall be sole and/or realised and the net proceeds of sale thereof shall be paid to Heather absolutely. Nothing herein shall prevent the parties from deciding to sell the Porirua property in which event the full proceeds of sale less selling expenses can if the parties so decide be paid to Heather as a capital sum in which event the monthly allowance referred to above shall cease absolutely. Until the sale of the Porirua property Lewis shall be solely responsible for its maintenance and general management.

The evidence before the Family Court

[12] Mr Townshend’s evidence as to the genesis of the $24,000 a year and the first draft of the deed was as follows:

Now this agreement, as its drawn is not, its nothing to do with maintenance, its simply the division of property between yourself and Mrs Bellamy .... The, before I went to Mark Wadham and Heather and I made up our list, we then said, we discussed the amount of money that Heather would need to live on and that’s how that figure, that figure came about because we ascertained that Heather would need $24,000 per annum to maintain her lifestyle. Mark Wadham has just used that as, well here’s a, we’ve got a commercial property here that’s returning around about the same amount of money, but it was nothing to do with, just because it had rent of A that we should give that to Heather as part of the property settlement, it was how much money do I need or does Heather need and where is that going to come from, and this was just an idea obviously that he’s come up with. But it was all to do with how much Heather needed for the rates and insurances and the telephone and the maintenance of the property and clothing and so on.

But it was, but the wider picture was your division of your property, I mean that’s why you went to see Mr Wadham so he would draw up an agreement

.... Yes.

To divide your property .... Yes.

And that’s what this is about .... Are you talking about this “Clause three”? Yes .... No this was, that was to allow Heather to have her income of the

$24,000.

I know, that, that, she wanted income in lieu of, in lieu of property .... She wanted income to live on.

She didn’t want property .... No.

She wanted income .... That’s right. But it had to come from somewhere and this was a method that Mark Wadham had come up with.

And you agreed with it obviously, because it was sent to Heather’s lawyer

.... I think it would be fair to say that I was fairly naïve about this. I hadn’t gone through a marriage separation before and of course, one is not thinking as clearly when all of this is happening, as they might at a later date and of course I was guided by what he told me.

Now this Porirua property in the first agreement, was to be sold and the nett proceeds paid to Heather absolutely, because then she would have the capital to continue to receive the income from .... Yes.

Now that, that, that has nothing to do with income, that is a provision to her of a matrimonial asset .... But this is not the final one, is it.

It’s the one that you would have agreed to at the time, it was Heather who promoted changes to it, not yourself .... The, yes, but the value of the sale of the Porirua property would have been paid to Heather and that the $24,000 payment would have ceased, so to me it’s the same thing but slightly different in the way that whilst the property was still retained in ownership, Heather received $21,000. Whether it came from that property or not, it didn’t really matter, she was entitled to her $24,000. Once, if that property had been sold and she received the nett proceeds, then there would be no more $24,000. So –

So why don’t you pay her the nett proceeds .... Well I’ve been paying her the $24,000.

No, no the agreement said you’d pay $24,000 for 14 years and we haven’t had that period pass yet have we ... No.

And then you were going to pay her the nett proceeds of sale. So now you are saying you won’t even go back to this agreement. Why don’t we go back to this agreement .... But we have another agreement.

Why did you propose, the, that Heather be given the nett proceeds of sale .... Probably my generosity.

Well the reality is that property needed to be divided equally and you understood that at the time, didn’t you .... No I didn’t. It was only what Heather and I had worked out that we thought that it had to be divided equally. I did not seek any legal advice as to, in our situation and all marriages must be different so I didn’t seek any outside advice as to whether it needed to be divided equally.

[13] Mrs Bellamy essentially agreed that the $24,000 per annum was set on the basis of what she needed to live on rather than bearing any relationship to the return on the Porirua property. She also confirmed that she had, at the time, no desire to manage investment properties. She said:

Was there discussion between you and Lewis with Mr Wadham about what would happen to the Porirua property, or is what was in clause three of Mr Wadham’s creation really .... I don’t think it would be his creation, we discussed things quite thoroughly with him of how the division would happen. Lewis certainly wished to retain the three Bentleys and all the commercial properties so there had to be some way, we felt, of giving me an income than lieu of. I really didn’t want to manage a property, it made good sense to me at that time to have an income instead of owning a building and then worrying about what may or may not happen when Lewis had really been the one who managed that side of our affairs.

But did you both think at that stage that you should have the Porirua property for there to be a fair division of property .... No I really just wanted an income to pay the bills at Wildwood. I wasn’t at that time, I had been unhappy for quite a number of years. This was the final breaking up of a marriage that had made me extremely unhappy, I didn’t want to start getting into very detailed ways of having to then look after my future. The easiest way I guess was what I wanted it to be, as easy as possible and I thought a monthly income of whatever we decided on, that we both jointly decided on, would be far easier and less stressful to think about than looking after a property.

And you’d already agreed on what you needed to live on, the $2000 a month hadn’t you .... Yes we had, we discussed everything.

Can you remember what rental income was being obtained from the Porirua property at that time .... Only from what I read through the things that it was very similar to the amount that we had decided.

But would you agree that that’s entirely coincidental .... Yes I would.

When you and Lewis were having your discussions, did you talk about the possibility of your taking the Porirua property .... I wouldn’t have discussed the possibility of wanting to take the property.

Your view was that you wanted nothing to do with property whatsoever .... That’s right.

You just wanted to make sure that you got $24,000 per annum .... I wanted an income sir and that was what we’d agreed on. I didn’t want luxury money, I wanted money to pay the bills.

The Family Court judgment

[14] Judge Aubin examined the terms of the first draft of the deed which linked the allowance of $24,000 per annum with the rent being received from the Porirua investment property. However, the Judge was satisfied that the figure agreed was ultimately not based upon projected income from the Porirua or from any other property, but was based rather upon what Mrs Bellamy would need to support herself. The fact that regular reviews provided for increases based upon the

consumer price index, indicated that the focus was upon Mrs Bellamy’s needs and changes to the cost of living and not upon achieving equality of asset division by way of a programme of capital payment.

[15] The Judge was therefore unable to accept Mrs Bellamy’s submission that this was not an agreement for the payment of maintenance. He accepted that the

10 August 1994 deed sought to resolve all financial matters arising out of the breakdown of the marriage but, in achieving an overall financial resolution, he was unable to see why a particular provision could not be both an agreement to pay maintenance as defined and also a component of the division of assets.

[16] The Judge said that he had difficulty in seeing how it could be said that it was never intended that maintenance be paid for life. He pointed out that this was not an agreement that was rushed into at a time of emotional or other crisis. The process was a measured one from the commencement of the separation down to the signing of the agreement, and, if the wife in the end signed the agreement against her lawyer’s advice, there was nothing to indicate that Mr Townshend did, or that he was any way unhappy, at least at the time, with the form of the agreement. Although Mr Townshend was now inclined to say in his evidence that he was unable to understand what made him agree to what he did, the Judge noted that the fact remains that he did so, knew what he was doing, and that he did not suggest that any kind of duress or improper pressure was placed upon him to agree.

[17] At that time, his wife was a woman in her 40’s, likely to have many years ahead of her, and with the prospect of her remarriage both foreseeable and very possible. The Judge could not accept that Mr Townshend did not consider these factors at the time of signing the deed and yet there was no evidence from Mr Townshend that he sought to have included a provision for the payments to end upon remarriage. The Judge said that it was difficult to escape the conclusion that the likely explanation was that Mr Townshend’s primary concern was to avoid having to sell any of his major assets, and, if he could achieve that and use the property income to meet his commitment to Mrs Bellamy, then that took care of what was of most immediate concern to him in terms of getting financial matters formally resolved.

[18] The Judge said that, under s 182(2) and (3) of the FPA, the Court has a very wide discretion in considering what, if any order should be made. A number of considerations seemed to him to be relevant:

(a) It is proper to regard the payments as having an element of relationship property settlement in them as well as providing for future maintenance and support.

(b) Whether or not it was reasonably foreseeable, Mrs Bellamy has as a matter of fact remarried, and, whether as a matter of law or as a matter of common sense, should not be eligible for ongoing support from her former husband. In the Judge’s view, the remarriage was a significant change of circumstance.

(c) Courts should be slow to make any order that would lead to the need for the reopening and reconsideration of relationship property issues when these matters were resolved by agreement some eight and a half years previously.

(d) Regardless of the remarriage or Mrs Bellamy’s present right to “maintenance”, Mr Townshend agreed to make the payments during the lifetime of Mrs Bellamy. The Judge asked whether there was any sufficient reason why Mr Townshend should be able to obtain relief in respect of this commitment.

[19] Weighing these considerations, the Judge was not persuaded that the fact of the remarriage was in itself a sufficient ground to lead to the cancellation of the payments at this point. That was not the bargain, and in any event, the strands of maintenance and property were interwoven. On the other hand, Judge Aubin was persuaded that it was unreasonable for the financial link between Mr Townshend and Mrs Bellamy to be maintained for what might very well be a period in excess of a further 20 years. Given that the $24,000 is tax free in the hands of Mrs Bellamy, it seemed to him that the amount likely to be paid, given Mrs Bellamy’s life expectancy, would be excessive in terms of any reasonable justification for the

payments to continue on the basis of equalisation of matrimonial or relationship property. The Judge was thus persuaded that it was appropriate to adopt the 14 year period that was proposed in the course of the negotiations and put that into the earlier, draft agreement (but, we note, without including the provision in the draft deed that the Porirua property was to pass to Mrs Bellamy at the end of the 14 year period). His selection of the 14 year period was not based upon any arithmetical precision. Rather it seemed to the Judge to be reasonable in all the circumstances.

[20] The Judge then went on to address Mrs Bellamy’s application with regard to reopening the relationship property agreement. It was argued for Mrs Bellamy that the agreement was unfair or unreasonable if Mr Townshend was relieved, at least in part, of the obligations with regard to the $24,000 per annum imposed upon him. The Judge noted that, when the agreement was entered into, there was a lack of professional valuation information available, and that the parties themselves had made some rather inaccurate valuation guesses. The Judge held that the parties’ assumption of equality of division of all assets favoured Mrs Bellamy and that the evidence before the Court suggested that, failing agreement, had the point been argued at a hearing under the old legislation in terms of the weight to be given to contributions of various kinds to the marriage partnership, there could well have been at the least a 60 - 40 division in favour of the husband in respect of assets other than matrimonial home and chattels.

[21] The Judge held therefore that Mrs Bellamy had not satisfied the Court that the matrimonial property provisions of the agreement should be set aside. He did not consider that the agreement had become unfair or unreasonable so as to cause serious injustice by reason of the income provision for Mrs Bellamy being for a further period of five years rather than for the remainder of her life.

The High Court judgment

[22] Miller J considered that the key issue was whether s 182(6) of the FPA applied, an issue not brought to Judge Aubin’s attention. Miller J said that, while s 182(6) of the FPA recognises that a relationship property agreement may be captured by s 182(2), it provides that the Court shall not exercise its powers under

that subsection where the effect would be to defeat or vary an agreement entered into under s 21 of the Property Relationships Act 1976 (PRA).

[23] Accordingly, it is not sufficient for a Court that is dealing with an application under s 182(2) to inquire only into the question of whether the agreement provides for maintenance. The Court must also consider whether there is a relationship property agreement entered into under s 21 of the PRA and, if so, whether the proposed exercise of the Court’s powers under s 182(2) would have the effect of defeating or varying it. Miller J held that, if the orders would have that effect, the parties are left to their remedies under the PRA unless the interests of a child of the marriage require that the agreement be varied or defeated.

[24] Miller J characterised the deed made by the parties as mixed. The money payments provided for in cl 3 of the deed were payments of maintenance, being payments of money (but not the provision of property or services) towards a spouse’s normal and recurring necessaries and conveniences of life. In addition, however, the agreement as a whole was a matrimonial property settlement. The question whether an agreement is a relationship property agreement under s 21 is, in Miller J’s view, answered by reference to its form (since it must be witnessed and certified by a solicitor) and its content (which must address the relationship or separate property of the parties).

[25] Miller J held that the agreement in this case was entered into under s 21 of the then Matrimonial Property Act. It took the form of a matrimonial property agreement and dealt with matrimonial and separate property. It also provided for separation and maintenance but their inclusion was not a matter of simple convenience. Clause 10 provided that all of the provisions of the agreement, including those relating to maintenance, were intended to be in full and final settlement of all claims to property. Further, the agreement was entered into in circumstances where there were no children of the marriage and no age, health, or other reasons why Mrs Bellamy might have required long-term maintenance.

[26] Judge Aubin had found that Mr Townshend was motivated, in agreeing to the annual payment, by his desire to retain a larger share of the matrimonial and separate

property. That property included some valuable cars in which Mrs Bellamy might have attempted to claim an interest. It suited Mr Townshend to retain income-producing assets that could be used to provide Mrs Bellamy with the income that she sought. For her part, Mrs Bellamy had no ambition to enter the property management business, as she would have been required to do had she taken on the Porirua property, and she evidently was prepared to take an economic risk on Mr Townshend’s continued success in business.

[27] In Miller J’s opinion, the agreement was a matrimonial property settlement in its entirety, including cl 3. Accordingly, s 182(6) applied. The result of these conclusions was that s 182(6) acted as a bar to Judge Aubin making orders varying the maintenance agreement since any orders would “vary or defeat” a matrimonial property agreement.

[28] In reaching this conclusion, Miller J did not find it necessary to rely on the draft agreement but he considered that it tended to confirm this conclusion. The draft deed provided that Mrs Bellamy would receive $24,000 tax free per annum until 2008, at which point the Porirua property would pass to her or would be sold and its proceeds transferred to her. Maintenance payments would then cease. Under the agreement that the parties signed, Mrs Bellamy surrendered irrevocably her claim to the Porirua property but received an income stream for life. Miller J noted that, had the Porirua property been transferred to Mrs Bellamy, the asset division would have been roughly equal, which the parties, perhaps mistakenly, thought was the correct division.

[29] Miller J then went on to consider a number of subsidiary arguments that had been made on behalf of Mr Townshend. The first was that the amounts paid to Mrs Bellamy as maintenance since 1994 already equalled the value of the Porirua property that was to have been assigned to Mrs Bellamy under the earlier draft. Miller J observed that this submission (ironically) sought to justify variation of maintenance by reference to entitlement to property. In any event, he pointed out that, under the draft deed, Mrs Bellamy would have had the payments of maintenance together with, in due course, the asset represented by the Porirua

property which no doubt would have continued to earn an income for her for so long as she chose to retain it.

[30] Miller J accepted that the arrangement finally arrived at may have meant that there was a disparity in Mrs Bellamy’s favour. However, he was not in a position to assess to what extent Mrs Bellamy’s rights under the deed exceed an equal division of matrimonial property or whether that should have been apparent at the time. In any event, on the view he took of the matter, such inequality of division cannot be taken into account under s 182(2) where the effect would be to vary the agreement for the division of property.

[31] The next argument on behalf of Mr Townshend was that the s 21 agreement was ill-advised from Mr Townshend’s perspective and that he had not paid attention to its potential cost because he had been motivated by a desire to reconcile. Miller J accepted that the agreement may have been generous to Mrs Bellamy but pointed out that Judge Aubin had found that the process of negotiating the agreement was a measured one and that there was no evidence of duress or improper pressure. There was thus no justification for going behind the certificate given by the solicitor who advised Mr Townshend, particularly when the solicitor did not give evidence.

[32] Mr Townshend’s next submission was that to allow the agreement to continue would be inconsistent with the principle that the parties should be allowed to put a failed marriage behind them. Miller J considered that, if that were the dominant consideration, Mr Townshend might have sought an order that gave Mrs Bellamy the economic equivalent of her rights under cl 3 of the agreement instead of pursuing a reduction in her rights by reference to the merits of the property settlement.

[33] The Judge concluded that the variation ordered by Judge Aubin had the effect of defeating or varying the relationship property agreement entered into by them. The parties had proceeded, rightly or wrongly, on the basis that they were entitled to an equal share of matrimonial property and Mrs Bellamy took less than her share in return for lifelong maintenance. Having found that the payments under cl 3 were maintenance, Judge Aubin did not go on to determine whether the orders proposed

would have the effect of defeating or varying the relationship property agreement Had he done so, Miller J considered that Judge Aubin’s factual findings to the effect that the agreement as a whole was a mutually convenient way of settling property issues should have led him to the conclusion that the Court did not have jurisdiction to make the orders.

[34] For completeness, Miller J also considered the question whether, assuming jurisdiction existed, Mrs Bellamy’s remarriage constituted a significant change of circumstances for the purposes of s 182(3) of the FPA. He had not been referred to any authorities under s 182(2) but cases on s 182(1) and s 76 of the Matrimonial Proceedings Act 1963 demonstrated that courts are reluctant to vary an agreement where it was solemnly entered into; Totty v Totty (1984) 1 FRNZ 316. In such a case, the courts look for some injustice or unfairness in the original agreement or some new matter that was not fairly in the contemplation of the parties at the time of the agreement; Roome v Roome [1976] 1 NZLR 391, 396 (CA), Hammond v Hammond [1974] 1 NZLR 135. Miller J also noted that, if such agreements are set aside too readily, compromise may be discouraged; PN v PN (1984) 3 NZFLR 277.

[35] Following Roome, Miller J held that Judge Aubin was wrong to find that remarriage was a significant change of circumstances in light of his finding that it must have been in the contemplation of the parties in making the agreement. There was no suggestion that Mr Townshend was no longer able to fund the payments, or that the parties’ circumstances had otherwise altered in ways that were not fairly in contemplation at the time of the agreement and thus no basis for varying the agreement even if jurisdiction to do so had existed.

Submissions for Mr Townshend

[36] Mr Thomas, for Mr Townshend, accepted that the elements of property settlement and maintenance were interwoven in this case, but submitted that the payment of the $24,000 per annum was not some sort of financial instrument created by the parties in lieu of a transfer of capital. It was a maintenance agreement. Therefore, Mr Thomas submitted that an order varying the maintenance clause

would not have the effect of varying the property settlement agreement and there is, thus, in his submission, no jurisdictional bar under s 182(6) of the FPA.

[37] Mr Thomas submitted that the Court must be concerned to overcome injustice. One of the consequences of allowing this maintenance agreement to remain is that Mr Townshend might have to pay over $1m in his lifetime to someone who is not married to him, who he has no legal obligation to maintain and where both Courts considered that an inequality of division would result. Because there is no jurisdictional bar under s 182(6), Miller J effectively came to a different opinion from Judge Aubin on a matter of discretion. Mr Thomas submitted that, since it has not been shown that Judge Aubin was in error in terms of the factual findings, Miller J ought to have deferred to the exercise of discretion of the Judge.

Submissions for Mrs Bellamy

[38] Mr Ross, for Mrs Bellamy, supported Miller J’s judgment in the terms in which it was expressed and, in particular, the finding that s 182(6) constitutes a jurisdictional bar.

[39] In Mr Ross’ submission, the document was a relationship property agreement in its entirety and thus the bar applies. In the alternative, he submitted that it does not matter how the maintenance and relationship property agreements are expressed, the question is whether, in exercising its powers under s 182(2), the Court will defeat or vary “any” agreement entered into under Part 6 of the PRA. In his submission, any variation of cl 3 will have the effect of varying or defeating the bargain that was at the heart of the s 21 agreement. Succinctly, he said, “vary one part of the agreement, and the whole agreement is compromised”.

[40] Second, if the issue arises, Mr Ross submitted that Miller J was correct in finding that Judge Aubin erred in principle in finding Mrs Bellamy’s remarriage was significant change in circumstances justifying variation of the agreement under s 182(2) of the FPA.

Discussion

[41] We consider that Miller J was correct in his conclusion that s 182(6) provided a jurisdictional bar to the variation of cl 3 of the deed. Like Miller J, we consider that the issue is not whether cl 3 is a maintenance agreement but whether any change to cl 3 will vary an agreement made under Part 6 of the PRA. We agree with Miller J that the whole of the deed of 10 August 1994 was made under s 21 of the PRA (and thus is an agreement entered into under Part 6 of the PRA). As Miller J held, this is made clear by the form of the deed and the acknowledgement in cl 10, which cannot sensibly be read as relating to the asset division parts of the agreement alone.

[42] The position is even clearer if the prior negotiations of the parties are taken into account. Mr Thomas submitted that these should not be taken into account on the basis that the negotiations of parties are inadmissible in interpreting a contract. In this case, however, it is not a question merely of interpreting the deed to ascertain the rights and obligations of the parties to it. Mr Townshend is seeking a variation of the deed in circumstances where there is a statutory bar if the agreement is one under Part 6 of the PRA. In our view, the court should be entitled in such circumstances to look at all relevant information to ascertain if that bar applies.

[43] It is common ground that the parties believed, possibly wrongly, that the matrimonial assets should be split evenly. It is also common ground that Mrs Bellamy would have received some $350,000 more had the assets been so divided, coincidentally the value of the Porirua property at the time. Instead, she received the annual sum of $24,000 a year, again coincidentally the amount the Porirua property was at the time returning. It is difficult to avoid the conclusion that, however it was viewed by the parties and however it was in fact calculated, the annual sum was in lieu of part of what was perceived to be Mrs Bellamy’s property entitlement and this was quite clearly the view of Mr Townshend’s solicitor when he prepared the first draft of the deed. Any change to that sum must therefore be a modification of the parties’ property agreement and come under the s 182(6) jurisdictional bar.

[44] Even had there been jurisdiction, however, we would have upheld Miller J’s conclusion that Judge Aubin should not have varied the cl 3 of the agreement. We agree with Miller J that, given Judge Aubin’s findings that remarriage must have been in the contemplation of the parties at the time of the deed, he should not have taken it into account as a significant change of circumstances. All of the other factors identified by Judge Aubin, and recorded at [18] above, would have militated strongly against there being any modification to the agreement.

[45] Judge Aubin appears to have been influenced (see at [19] above) by the fact that the arrangements, as they have turned out, appear to have favoured Mrs Bellamy. Mr Townshend was, however, legally advised at the time of entry into the deed. There is no suggestion of duress or incapacity on his part at the time the deed was entered into. Equally, there is no suggestion of any relevant change of financial capacity on the part of Mr Townshend. The fact that he may be perceived with hindsight as having made an unwise bargain in 1994 is no reason for the courts to rewrite the agreement between the parties.

[46] We also remark that it may be thought strange that, in rewriting the agreement, Judge Aubin reverted to the 14 year period set out in the first draft of the deed without taking into account the fact that, at the end of that period, the draft provided for the Porirua property (and associated income stream) to be transferred to Mrs Bellamy.

Result

[47] The appeal is dismissed. Costs of $6,000 plus usual disbursements are awarded to Mrs Bellamy.

Solicitors:

Thomas Dewar Sziranyi Letts, Wellington for Appellant

Cameron Ross, Wanganui for Respondent