Butcher v Haack [2012] NZHC 2991 (12 November 2012)

Last Updated: 21 November 2012

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 HTTP://WWW.JUSTICE.GOVT.NZ/COURTS/FAMILY- COURT/LEGISLATION/RESTRICTICTIONS-ON-PUBLICATIONS.

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV 2012-488-268 [2012] NZHC 2991

BETWEEN MICHAEL MORLAND BUTCHER Appellant

AND HEATHER MARY HAACK Respondent

Hearing: 8 October 2012

Counsel: T G Tetitaha for Appellant

J G Ross for Respondent

Judgment: 12 November 2012

_{JUDGMENT OF HEATH J}

This judgment was delivered by me on 12 November 2012 at 4.30pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Tumanako Law, PO Box 697, Kerikeri SwanLaw, PO Box 1563, Whangarei Counsel:

_{J G Ross, PO Box 1475, Whangarei}

BUTCHER V HAACK HC WHA CIV 2012-488-268 [12 November 2012]

The appeal

[1] Mr Butcher appeals against a judgment given by Judge Lindsay, in the Family Court at Whangarei, on 4 April 2012.1 The judgment was given in relationship property proceedings that followed Mr Butcher’s and Ms Haack’s separation.

[2] A number of issues were resolved following a settlement conference held on

24 November 2010. Consent orders vested possession and ownership of properties situated at 51 Tahuna Road, Paihia and 47 Tahuna Road, in Ms Haack and Mr Butcher, respectively. Three issues were reserved for further decision of the Family Court:

(a) Occupation rent. (b) Superannuation.

A third, whether a further sum of $1000 was payable to Mr Butcher as a post separation adjustment to bank accounts, was not pursued.

[3] Judge Lindsay resolved both points in favour of Ms Haack. On appeal, Ms

Tetitaha, for Mr Butcher, raises three substantive issues:

(a) Did Judge Lindsay err in finding that an oral agreement reached in April 2000, to the effect that Ms Haack was entitled to a one half share of Mr Butcher’s superannuation entitlement?

(b) If an agreement were reached, should it be given effect, notwithstanding non-compliance with s 21F of the Property

_{(Relationships) Act 1976}2 _{(the Act)?}

1 _{Haack v Butcher [2012] NZFC 1752.}

2 Set out at para [30] below.

(c) Did Judge Lindsay err in holding that Ms Haack was entitled to compensation for occupation rent for a period during which Mr Butcher occupied the family home, after separation?

Background

[4] Mr Butcher and Ms Haack were married on 18 December 1993. Each had brought assets from an earlier relationship. They acquired a family home in Hamilton. Ms Haack contributed approximately $180,000 and Mr Butcher $80,000. Those amounts reflected the equity that each had in the properties they owned at the time of marriage.

[5] In 1996, Mr Butcher and Ms Haack sold their Hamilton property and purchased one at 47 Tahuna Road, Paihia. The equity from the Hamilton property was used for this purchase, together with an unsecured loan from Mr Butcher’s step- mother, in the sum of $100,000. The property was registered in both of their names. Mr Butcher and Ms Haack lived together at that property until they separated, on 9

June 2008. At that time, there were no encumbrances on the land but the unsecured debt to Mr Butcher’s step-mother remained unpaid.

[6] In about April 2000, Mr Butcher and Ms Haack had an opportunity to buy a neighbouring property, at 51 Tahuna Road. This property was owned by Mr Butcher’s step-mother. As a result, they were able to purchase it for less than market value. The purchase price was $60,000, representing a discount from market value of about $30,000. Of that, $20,000 was recorded, in a deed, as a gift to Mr Butcher.

[7] To assist in acquisition of the 51 Tahuna Road property, Ms Haack surrendered her interest in the New Zealand Government Superannuation Fund scheme, for about $24,000. Mr Butcher, who also held at entitlement in that Fund, retained his interest.

[8] In evidence in the Family Court, Ms Haack said that she believed that the use of this superannuation money justified an adjustment in her favour. Ms Haack asserted that, against the background of use of her personal superannuation moneys,

she and Mr Butcher had agreed that she would share equally in Mr Butcher’s interest

in his superannuation scheme. Ms Haack deposed:

[Mr Butcher] in fact agreed with me that I could share in his annuity in the future and that there would be no prejudice to me in spending my superannuation (the bulk of which would otherwise have been my separate property) in this way.

[9] After separation, Mr Butcher claimed his New Zealand Government Superannuation Fund entitlement should be classified as his separate property. While denying that he had entered into any agreement with Ms Haack of the type alleged, Mr Butcher did confirm that he had told Ms Haack that if they were still married when he died, she would be entitled to receive one half of his superannuation entitlement. His view was that this was permitted by the rules of the scheme.

[10] The other issue for the Judge concerned occupation rent. Separation appears to have been precipitated by Mr Butcher leaving to travel on a cruise in May 2008 and using $4000 from a joint bank account to pay for it. Ms Haack acknowledges that Mr Butcher requested her to accompany him but says that she declined. Ms Haack deposed that she made it clear to Mr Butcher that she did not want him to spend joint funds on a cruise for his own benefit.

[11] On 9 June 2008, when Mr Butcher returned from the cruise, Ms Haack moved out of the family home at 47 Tahuna Road. That was the date of separation. The Family Court found that, after a period of six months had elapsed from separation, Ms Haack should be entitled to receive a notional occupation rent, by way of an adjustment for her post-separation contributions to the marriage partnership.

Analysis

(a) Occupation rent

[12] Because Mr Butcher had exclusive possession of the family home at 47

Tahuna Road, Paihia from separation, Ms Haack claimed compensation based on a

notional occupation rental. The justification for such an order is that a spouse who leaves the family home, while leaving his or her capital for the other to use, is liable to incur cost to rent other premises in which to live. On the other hand, a spouse who remains in the family home is saved that expense.

[13] Jurisdiction to make a compensation order is conferred by s 18B of the Act. Section 18B(2) provides:3

18B Compensation for contributions made after separation

...

(2) If, during the relevant period, a spouse or partner (party A) has done anything that would have been a contribution to the marriage ... if the marriage ... had not ended, the Court, if it considers it just, may for the purposes of compensating party A—

(a) order the other spouse or partner (party B) to pay party A a sum of money:

(b) order party B to transfer to party A any property, whether the property is relationship property or separate property.

....

[14] In E v G,4 this Court considered an application that sought compensation based on a notional occupation rent for the family home. After recording a submission from counsel that there was “uncertainty about the precise jurisdictional basis for such an order,”5 Ronald Young J said:

[24] [The departing spouse], by providing his half share in the capital in the house to the [other party] to use is making a “contribution” in terms of s 18B. Section 18B requires a Judge then to consider whether it is just for compensation to be made for this contribution. Here the Judge concluded the answer was yes. I agree. Finally the Judge is to decide how much (here money pursuant to s 18B(2A) need be paid for the purpose of proper compensation. Payment of occupational rental has been a way in which a “just” payment of compensation is assessed for exclusive use of the spouse’s capital tied up in the occupied 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, occupational rental

3. For present purposes, the term “relevant period” (as defined in s 18B(1)) runs from 9 June 1998 to 7 March 2012.

4 _{E v G HC Wellington CIV 2005-485-1895, 18 May 2006.}

5 Ibid, at para [22].

has an obvious attraction. I am satisfied therefore that there was a clear case for ordering occupational rental here.

(Emphasis added)

[15] Judge Lindsay described the nature and extent of Ms Haack’s claim under s 18B:

[15] [Ms Haack] claims compensation of $21,000. This sum is a mid- point between the calculated lost rental ($17,050 and, in the alternative, loss of interest on capital at 5% being $28,000). My view is [Ms Haack], by pitching her claim at the mid-point has endeavoured to claim a reasonable amount rather than to seek the full amount that is potentially claimable.

[16] [Mr Butcher] claims his ill health, but also the downturn in the economic market compromised the sale of the property and delayed resolution of property matters. Early in the separation period [Ms Haack] proposed to purchase the property at 51 Tahuna Road. [Mr Butcher] rejected the offer, claiming he believed the offer was unreasonably low. However, the property was eventually valued at a sum lower than the offer made by [Ms Haack]. It transpires [Ms Haack’s] offer was more than reasonable. [Mr Butcher] justified his refusal by relying on the downturn in residential sales as having driven down the value of the property. This is a difficult argument given it was only over a matter of three months that the valuation returned a lower property value.

[17] [Ms Haack] claims a pragmatic approach to the division of the property could have been each party retain one of the two houses. This was to become the framework of the interim settlement, however with some adjustments.

...

[20] The evidence reflects that [Ms Haack] made a fair proposal to purchase the property however this was declined by [Mr Butcher], [Mr Butcher’s] reasons for rejecting the offer being he anticipated the value of the property to be in excess of [Ms Haack’s] offer. Of course this was not found to be substantiated given the joint valuation returned a value for the property lower than the offer made by [Ms Haack]. [Mr Butcher’s] assessment of the value of the property was well off the mark. The net effect however was there was a delay and moreover due to [Mr Butcher’s] mistake over a Court date, there was a further delay in reaching a settlement conference at which a partial division was agreed on.

[21] During the period [Mr Butcher] was in sole occupation of the family home he met household expenses, but also incurred own costs. Mr Butcher claims his housekeeper’s costs be taken into account. That due to his physical incapacity he required a housekeeper to ensure the property was tidy and well maintained for inspection. Likewise, the lawns were mowed on a regular, if not weekly, basis. I have come to the conclusion that Mr Butcher’s costings were excessive.

[16] The Judge rejected Mr Butcher’s suggestion that occupation rent should only run from the time of Ms Haack’s application to the Court, on 23 July 2009. She said:

[24] ... I do not accept a period of 13 months is a reasonable period for the parties to settle their affairs. It is too long for these parties. There were no children of the relationship and childcare to be taken into account. There was no dramatic health issue post-separation and arguably both are health conscious. Moreover, the fact they owned two properties did present a pragmatic approach available to them to resolve the resolution of the division of their relationship property. [Ms Haack] made a generous offer to settle the division of property which was declined. The downturn in the property market should not be the overriding consideration. There were delays in supplying information to the point an application for discovery was filed. I find [Ms Haack’s] view of delay on the part of [Mr Butcher] is a fair criticism by [Ms Haack]. [Ms Haack] argues compensation for the full period (calculated at $17,050), but it is arguable that her claim in the alternative of loss of interest on capital (calculated at $28,000) is also available to her. [Ms Haack] has pitched her claim at the midpoint being

$21,000. I am prepared to accept a “settling” period post-separation, but only of six months duration. I calculate that taking this into account the

amount of rental period is 100 weeks rather than 124 weeks, and I accept the valuation provided by Mr Moir at $280 per week.

(emphasis added)

[17] In relation to expenses that ought properly to be deducted from any notional award, the Judge remarked:

[28] In all the circumstances I direct that [Ms Haack] is awarded occupation rental calculated and I prefer the quantum is set at the midpoint between a one half share of lost rental and the alternative loss of interest on capital at 5% (being $28,000). At 100 weeks, the gross amount of occupation rental is $28,000, however the calculation needs to take into account the additional rent from the basement flat at 47 Tahuna Road ($1,700) and rent from 51 Tahuna Road with deductions being made for expenses, but only rates and insurances. However, this sum requires final calculation. I prefer the position taken by Ms Haack as to notional occupation rental at a midpoint between the two claims. The final sum subject to calculation by counsel.

[18] I uphold the Judge’s decision to award an occupation rent, for the reasons that she gave. Notwithstanding Mr Butcher’s ill health and the circumstances in which he was endeavouring to settle relationship property issues, he had the benefit of living in the former family home at no cost to himself, while Ms Haack was required to rent other property, for the duration fixed by the Judge; 100 weeks. An order of that type is “just”, for the purposes of s 18B(2).

[19] A separate issue arises as to quantum. Ms Tetitaha questioned the basis on which the occupation rent was calculated. It has been necessary for me to examine this issue in more detail that I had expected because both counsel have invited me to fix the amount payable, rather than to remit that issue to the Family Court for reconsideration in the absence of any agreement between them.

[20] The Judge set out the occupation rental at an amount at the midpoint between a one-half share of lost rental (on the one hand) and an alternative calculation based on loss of interest on capital at 5% (on the other). The calculation was further complicated by the need to take account of additional rent from the basement flat at

47 Tahuna Road ($1,700), rent from 51 Tahuna Road (calculated, by Mr Ross, for Ms Haack at $2,625, 15) and relevant expenses paid by Mr Butcher for rates and insurances.

[21] I am concerned about the way in which the Judge expressed the formula to determine the quantum of occupation rent, in respect of an unmortgaged property from which Ms Haack’s capital was to be unlocked on transfer of her one-half interest to Mr Butcher, in terms of the order made following the settlement conference on 24 November 2010. That approach created a risk of double-counting as any interest component is distinct from the calculated rent that ought to have been paid.

[22] In my view, the better approach is to base the occupation rent on the notional lost rental, as assessed by a registered valuer and accepted by the Judge.6 That involves calculating the one-half share that Ms Haack was otherwise entitled to in respect of use of the family home, its flat and the 51 Tahuna Road property. Using Mr Ross’ calculations for that purpose:

(a) 47 Tahuna Road:7

100 weeks at $280 per week = $28,000, one-half of which is $14,000 (b) Flat at 47 Tahuna Road:8

6 _{Haack v Butcher [2012] NZFC 1752 at para [24], set out at para [16] above.}

7 Ibid.

$1,700, half of which is $850 (c) 51 Tahuna Road:9

$2,625, being 15 weeks at $175 per week; half of which is $1,312.50.

[23] On those figures the amount to which Ms Haack would be entitled, before taking account of relevant expenses, would be $16,162.50.

[24] Rates and insurances, for the period between June 2009 and November 2010, totalled $6,808.89. That represented an outgoing of $378 per month. Adjusting that to reflect the period of 100 days to which those expenses must refer, I arrive at a figure of approximately $5,800. One-half of that sum is $2,900.

[25] Deducting $2,900 sum from Ms Haack’s one-half share of the rent ($16,162.50) leaves an amount of $13,262.50 payable to her. Interest accrues on that sum, at 7.5% per annum from 24 November 2010, the date on which Ms Haack’s one-half share in 47 Tahuna Road was ordered to be transferred to Mr Butcher, to the date of payment.

(b) Superannuation

[26] Judge Lindsay correctly recorded the difference between Mr Butcher and Ms Haack on the superannuation issue. There was no dispute that there had been a conversation about Ms Haack being entitled to one half of Mr Butcher’s superannuation entitlement. The dispute was as to context.

[27] Ms Haack took the position that the promise was linked to the acquisition of the 51 Tahuna Road property in Paihia, for which $24,214.63 from her own superannuation funds had been used. On the other hand, Mr Butcher said that any comment that he may have made was designed to do no more than to assure his wife that, in the event of his death, she would receive one-half of his entitlement. That

_{conflict raised two issues for the Court’s determination.}

8 _{Ibid, at para [28].}

9 Mr Ross’ calculation.

[28] The first was whether and, if so, in what terms the parties had reached an

agreement. On this topic, Judge Lindsay preferred Ms Haack’s evidence, saying:

[32] Prior to separation, [Mr Butcher] had suffered a stroke which has effected physical movement, at least in his arm. At hearing, it was apparent that [Mr Butcher’s] memory has its shortcomings and is impaired. There were a number of instances when [Mr Butcher] was unable to recall past events or matters that had arisen during the course of the proceeding. I prefer the account of the oral agreement as provided by [Ms Haack]. I accept there was an oral agreement between them and the fact it was not confirmed in writing was, perhaps, no oversight on the part of [Mr Butcher]. The parties were at the time of the agreement married, and may not have seen the necessity for a written contract. I stop short of finding that the remedy should be a half share of [Mr Butcher’s] annuity for two reasons; [Ms Haack] does not seek half of the annuity, and I believe to do so would then give rise a material prejudice to the interests of [Mr Butcher]. The parties each made a capital gain of approximately $105,000 from the purchase of 51 Tahuna Road, Paihia, that gain was not solely the result of the applicant’s contribution. However, it was due to her contribution by way of deposit to purchase the property that the parties were able to proceed with the transaction.

[33] I prefer the approach that the sum of $24,214.63 was a contribution from [Ms Haack’s] separate property and it was contributed by way of a loan and should be repaid. That being the case, I reject the submission of counsel for [Mr Butcher] that, at best, [Ms Haack] is entitled to only a half-share on the basis that the Court treat the contribution as relationship property.

[29] The second aspect involved the enforceability of the oral agreement that the Judge found to have been made. Section 21H of the Act10 enables the Court to give such an agreement effect, if no “material prejudice” has been caused to the other spouse, as a result of non compliance with the s 21F11 formalities. The Judge took the view that there was no “material prejudice”, given the way in which the order was to be expressed.

[30] Sections 21F and 21H of the Act provide:

21F Agreement void unless complies with certain requirements

(1) Subject to section 21H, an agreement entered into under section 21 or section 21A or section 21B is void unless the requirements set out in subsections (2) to (5) are complied with.

_{(2) The agreement must be in writing and signed by both parties.}

10 _{Set out at para [30] below.}

11 Ibid.

(3) Each party to the agreement must have independent legal advice before signing the agreement.

(4) The signature of each party to the agreement must be witnessed by a lawyer.

(5) The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.

...

21H Court may give effect to agreement in certain circumstances

(1) Even though an agreement is void for non-compliance with a requirement of section 21F, the Court may declare that the agreement has effect, wholly or in part or for any particular purpose, if it is satisfied that the non-compliance has not materially prejudiced the interests of any party to the agreement.

(2) The Court may make a declaration under this section in the course of any proceedings under this Act, or on application made for the purpose.

[31] This Court must, on an appeal by way of rehearing, have regard to the advantages available to a first instance Judge in assessing questions of credibility.12

The Judge concluded, after hearing from the parties, that an oral agreement had been entered into on the basis for which Ms Haack had contended. Judge Lindsay’s reasons for accepting Ms Haack’s evidence are compelling. She was entitled to have regard both to Mr Butcher’s memory impairment (as evidenced by his inability to recall a number of past events or, even, things that had occurred during the course of the proceeding) and the circumstances in which Ms Haack came to contribute her own superannuation funds.

[32] Next, it is necessary to consider whether the oral agreement into which Ms Haack and Mr Butcher entered is enforceable on separation, having regard to ss 21F and 21H of the Act.

[33] There is no doubt that the oral agreement did not comply with s 21F. None of the formalities identified in s 21F were met. Nevertheless, is the oral agreement saved by s 21H? The Family Court had a discretion to declare the agreement valid,

_{in part, in full or for a particular purpose, if it were satisfied that non-compliance has}

12 Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141 (SC) at para [13].

not materially prejudiced Mr Butcher’s interests. The Judge did so, but in part only.13

[34] The first question is whether there were an “agreement” for, for the purposes of s 21H. It does not necessarily follow that the type of oral agreement reached in this case would always fall within s 21H.14 In this case, however, I have no doubt that the agreement came within s 21H. There was an element of consideration as well as an unspoken focus on property classification, for the purposes of the Act.

[35] Where the formalities of s 21F have not been complied with, there is an onus on the party seeking to uphold an informal agreement to establish that the other party has not been materially prejudiced.15 In Williamson v Williamson,16 Moller J observed that “the concept of an agreement being “materially prejudicial” sets a less strict standard than the concept that it is unjust”.

[36] In my view, having regard to the way in which she limited Ms Haack’s claim to less than one half of Mr Butcher’s entitlement,17 the Judge was correct to hold that there was no material prejudice suffered by Mr Butcher.

[37] Looked at in the round, Mr Butcher gained the benefit of the acquisition of the 51 Tahuna Road property through the use of Ms Haack’s superannuation entitlement. He agreed that, in consideration for that, one half of his superannuation entitlement would become Ms Haack’s. The relief granted in favour of Ms Haack was less than Mr Butcher was found to have agreed she could have. He did not act to his detriment in some other way, in reliance on any understanding that the proceeds of the superannuation fund would not be shared on separation. For the same reasons, there is no reason why the residual discretion conferred by s 21H(1)

_{should not be exercised in Ms Haack’s favour.}18 _{This ground of appeal also fails.}

13 _{See para [36] below}

14 _{See Fisher on Matrimonial and Relationship Property (LexisNexis looseleaf) at para 5.73.}

15 For example, Williamson v Williamson (1980) 3 MPC 200 (HC) at 202, Evans v Evans (1992) 9

FRNZ 614 (HC) and West v West [2003] NZFLR 231 (HC) and West v West (No 2) [2004] NZFLR 164 (HC).

16 Williamson v Williamson (1980) 3 MPC 200 (HC) at 202. See also Fisher on Matrimonial and

_{Relationship Property (LexisNexis looseleaf) at para 5.74.}

17 _{Haack v Butcher [2012] NZFC 1752, at para [32], set out at para [28] above.}

18 Generally, see McGill v Crozier (2001) 21 FRNZ 157 (HC) at paras [26]–[32].

(c) Costs

[38] Counsel invited me to fix costs in both this Court and the Family Court, even though the latter has not yet determined them. I have misgivings about that approach but, on reflection, do so because it is clear that finality is in the best interests of both parties.

[39] While submissions have been filed in the Family Court on costs, the Judge had a very clear view that costs should lie where they fell. She said:

[35] I note the indication that the applicant may wish to pursue costs. I trust this is not the case. In saying this I have considered the nature of the substantive application and although I have found largely in favour of Ms Haack, I am not satisfied that costs is in the overall interests of justice. I do not have information other than the evidence I heard as to the parties’ means. However, it was apparent at hearing that there is resolution of these proceedings. There was no evidence that caused the Court concern about the way either party conducted the proceedings. My view is if there is a presenting cost issue it may be limited to the interlocutory application (filed by Ms Haack) for further discovery. This was necessary given the respondent’s view he should not be put to inconvenience and expense of providing the information sought. In the context of Family Court litigation in respect of the division of relationship property, that view is difficult to rationalise.

[40] Having reviewed the submissions filed by the parties in the Family Court on costs, I see no reason to depart from that provisional assessment.

[41] Ms Haack has been successful on appeal. She is entitled to costs in this

Court.

Result

[42] For the reasons given, the appeal is dismissed, on the basis that the amount payable by Mr Butcher to Ms Haack for occupation rent is calculated at $13,262.50. The order that interest run on amounts payable, from 24 November 2011 remains extant.

[43] Costs on appeal are ordered in favour of Ms Haack on a 2B basis, together with reasonable disbursements, both to be fixed by the Registrar. Costs shall lie

_{where they fall, in the Family Court.}

_{P R Heath J}

Delivered at 4.30pm on 12 November 2012