Martin v Martin [2015] NZHC 1823 (4 August 2015)

Last Updated: 2 September 2015

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV-2014-463-000123 [2015] NZHC 1823

IN THE MATTER OF	an appeal pursuant to the Property (Relationships) Act 1976, s 39
BETWEEN	JOY ROBERTA MARTIN Appellant
AND	LESLIE PERCY MARTIN Respondent

Hearing:	12 February 2015
Appearances:	T Sutcliffe for Appellant M S McKechnie for Respondent
Judgment:	4 August 2015

_{JUDGMENT OF COURTNEY J}

This judgment was delivered by Justice Courtney on 4 August 2015 at 2.30 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

_{Date............................}

MARTIN v MARTIN [2015] NZHC 1823 [4 August 2015]

Introduction

[1] Joy and Leslie Martin began living together in 1991 and married in 1992. They separated in 2010. Throughout the relationship the couple lived on the farm that Mr Martin had run in partnership with his former wife. The Family Court had ordered that this partnership continue pending the sale of the farm, either to a third party or to Mr Martin. In late 1991 Mrs Martin sold a house that she owned and made $183,504 from the proceeds available so that Mr Martin could acquire the farm.

[2] Mrs Martin claims that the money was a contribution to the relationship and the farm is relationship property. Alternatively, she asserts that it was acquired from her funds for the common use and benefit of the couple. Mr Martin maintains that the money was a loan that he has substantially repaid and that the farm is his separate property.

[3] In the Family Court Judge J F Munro held that the money was a loan that had been substantially repaid so that the entire farm was Mr Martin’s separate property.¹

Nor did Mrs Martin have any interest in the increase in the value of the farm over the period of the marriage. The Judge did, however, find that Mrs Martin had a claim under s 17 of the Property (Relationships) Act 1976 (PRA) on the basis that her funding had sustained Mr Martin’s interest in the farm.

[4] Mrs Martin appeals the finding that the farm is Mr Martin’s separate property

on the grounds that the Judge:

(a) failed to address the application of s 8(1)(e) of the PRA; (b) incorrectly applied s 8(1)(ee) of the PRA;

(c) failed to properly address the application of s 9A of the PRA;

(d) made factual findings that were against the weight of the evidence;

(e) made inconsistent rulings in relation to the apportionment of farm income.

¹ Martin v Martin [2014] NZFC 3492.

[5] Mrs Martin also appeals:

(a) The Judge’s treatment of a property at 34 Pokuru Road, Whakamaru as her separate property and the order requiring her to account to Mr Martin for $60,000 he advanced for the purchase.

(b) The Judge’s failure to take into account monies held in the farm account at the date of separation which Mrs Martin claims were relationship property.

(c) The order requiring her to account for post-separation payments made by Mr Martin on the ground that the payments came from farm income which is relationship property and, in any event, there should have been an adjustment to recognise the disparity in income.

[6] Mr Martin cross-appeals the decision on the grounds that: (a) the award under s 17 is too high;

(b) interest on the amount payable to Mrs Martin should not have been calculated from the date of separation;

(c) Mrs Martin should have been required to pay interest on $60,000 that

Mr Martin advanced for the purchase of 34 Pokuru Rd;

(d) the Judge was wrong to find that a campervan, livestock on the farm at the date of separation and farm plant and machinery were relationship property.

The statutory context

[7] Mrs Martin’s claim engaged ss 8(1)(e), 8(1)(ee), 9(2) and 17 of the PRA. Under s 8(1)(e) property acquired by either spouse after a relationship begins is, prima facie, relationship property, though under s 9(2) property acquired out of separate property or the disposition of separate property is separate property. However, s 9(2) is subject to s 8(1)(ee), under which property acquired after the relationship begins for the common use or benefit of the spouses is relationship property if acquired from property owned by either or both before the relationship

began or acquired from the proceeds of disposition of property owned by either or both before the relationship started.

[8] Section 8 relevantly provides:

(1) Relationship property shall consist of –

...

(e) Subject to ss 9(2) to (6), 9A and 10, all property acquired by either spouse or partner after their marriage, civil union or de facto relation began; and

(ee) Subject to ss 9(3) to (6), 9A and 10, all property acquired after the marriage, civil union or de facto relationship began, for the common use or common benefit of both spouses or partners if –

(i) the property was acquired out of property owned by either spouse or partner or by both of them before the marriage, civil union or de facto relationship began; or

(ii) the property was acquired out of the proceeds of any disposition of any property owned by either spouse or partner or by both of them before the marriage, civil union or de facto relationship began.

[9] Section 9 relevantly provides:

(1) All property of either spouse or partner that is not relationship property is separate property.

(2) Subject to ss 8(1)(ee), 9A(3) and 10 all property acquired out of separate property and the proceeds of any disposition of the separate property are separate property.

(3) Subject to s 9A any increase in the value of separate property and any income or gains derived from separate property are separate property.

[10] Section 9A provides:

(1) If any increase in the value of separate property or any income or gains derived from separate property, were attributable (wholly or in part) to the application of relationship property, then the increase in value or (as the case requires) the income or gains are relationship property.

(2) If any increase in the value of separate property or any income or gains derived from separate property were attributable (wholly or in part and whether directly or indirectly) to actions of the other spouse or partner, then

–

(a) the increase in value or (as the case requires) the income or gains are relationship property; but

(b) the share of each of the spouse or the partner in that relationship property is to be determined in accordance with the contribution of each spouse or partner to the increase in value or (as the case requires) the income or gains.

[11] Section 17 provides:

(1) This section applies if the separate property of one spouse or partner

(party A) has been sustained by –

(a) the application of relationship property; or

(b) the actions of the other spouse or partner (party B). (2) If this section applies, the court may –

(a) increase the share to which party B would otherwise be entitled in the relationship property; or

(b) order party A to pay party B a sum of money as compensation.

(3) This section overrides sections 11 to 14A.

The acquisition of the farm and subsequent events

[12] Mr and Mrs Martin lived together for about two years before marrying in late

1992. During their marriage they lived on a farm homestead at 359 Pokuru Road North, Whakamaru. The homestead is relationship property and no issue arises in relation to it. The farm is a dry stock farm of about 350 acres located on the other side of the road from the homestead. Mr and Mrs Martin both worked hard on the farm and it was their sole source of income until they became eligible for National Superannuation.

[13] When Mr and Mrs Martin began their relationship Mr Martin was involved in litigation with his former wife with whom he had owned the farm as joint tenants. In April 1991 the Family Court made orders regarding the couple’s property, including an order that their partnership continue until the partnership assets (principally the farm) had been sold. Eventually, it was agreed that Mr Martin would purchase the farm. The last financial statements for the partnership showed a transfer of the farm assets to Mr Martin for $360,000 on the basis of buildings at cost less depreciation and land adjusted so as to show land and buildings combined (in compliance with

s 11A of the Income Tax Act). The amount that Mr Martin actually paid his former wife was $163,504 (the balance obviously met from his existing interest). Settlement was concluded by 31 April 1992. Mr Martin also paid a further $20,000 in satisfaction in relation to other aspects of his former wife’s relationship property claim.

[14] The necessary funds came from Mrs Martin. On 20 December 1991 she provided $163,504 and on a subsequent (uncertain) date a further $20,000. There was no written agreement, nor any other contemporaneous document to show how the funds were to be treated. The solicitor’s file was no longer available and the solicitor’s recollection was unreliable.

[15] The funds were recorded in the farm accounts as a loan (albeit incorrectly as to amount). But the accounts were kept by Mr Martin and Mrs Martin was unaware of their contents until after the separation.

[16] From 1994 onwards Mr Martin began making payments to Mrs Martin which he characterised as interest on the amount that she had advanced. Mrs Martin had not sought these payments. They did not represent interest at a commercial rate and were not regular, either in timing or in amount. From 1998 Mr Martin also began making weekly payments to Mrs Martin which he characterised as wages. Mrs Martin did not seek these payments either. All the payments went into Mrs Martin’s bank account.

[17] By 2000 there were difficulties in the marriage and Mrs Martin left the farm for a short time to consider whether she wished to separate. Before she left she asked Mr Martin for her money back in the expectation that she would have to start again. However, Mrs Martin chose to return to the marriage and continued to live with Mr Martin until their final separation in 2010. Nevertheless, Mr Martin paid Mrs Martin $165,600.

A preliminary issue: did Mr Martin acquire the whole farm or only a half-share in it in 1992?

[18] Mr Sutcliffe argued that when Mr Martin acquired the exclusive interest in the farm in 1992 he acquired the entire farm, not just the half-share of his former

wife. Therefore, if the money that Mrs Martin advanced was not a loan but a contribution to the relationship the whole farm would be relationship property. This question affects the claim generally, whether determined under s 8(1)(e) or s 8(1)(ee).

[19] Although the Judge made no specific finding it is implicit that she did not accept Mr Sutcliffe’s argument and treated the transaction in 1992 as an acquisition of only a half-share rather than the whole farm; in determining the application of s

8(1)(ee) she considered that it “would apply, at least to the half-share acquired with

Mrs Martin’s funds”.²

[20] Mr Sutcliffe relied on Panckhurst J’s decision in McKay v Smith.³ Mr McKay owned a number of sections jointly with his former wife at the time he commenced a relationship with Ms Smith. He subsequently acquired his former wife’s interest in the sections which he financed with a bank loan. On the question whether the property was relationship property, having been acquired out of separate property for the common use or benefit of the spouses, Mr McKay argued that he had acquired only a half-share of the property and that this was insufficient to bring the entire property within s 8(1)(ee).

[21] Panckhurst J rejected that argument. He held that Mr McKay’s acquisition of the exclusive interest in the property was to be viewed as an acquisition of the whole, not just a half:

As in Geddes and approaching the matter in accordance with the “normal realities relating to the acquisition of property” this was an acquisition out of property previously owned by him. For these reasons I am satisfied that the elements of acquisition and that such acquisition was out of previously owned property, are satisfied. On this analysis it does not matter that Mr McKay previously enjoyed a half-interest in the property. His acquisition of an exclusive interest is to be viewed as an acquisition of the whole (not just of a half as Mr Slater contended), because a pragmatic approach is required in determining whether property has been acquired “out of” previous separate property.

[22] However, the facts in Geddes v Geddes, to which Panckhurst J referred, were rather different to those in both McKay and the present case in that the husband in

_{Geddes had not previously held any interest in the subject farm. The case was}

² _{At [38].}

³ McKay v Smith HC Invercargill CIV-2005-424-000153, 22 June 2005.

concerned with the property that Mr Geddes used to buy the farm rather than the nature of the interest that he acquired in the farm. To that extent I am doubtful that Geddes did provide the basis for determining Mr McKay’s argument. Although I respectfully agree with Panckhurst J’s conclusion I do not find the reasoning in McKay helpful in determining the present case.

[23] In my view, whether Mr Martin acquired the whole farm or a half-share in it depends on the nature of his interest in the farm at the time of the transaction. He and his former wife had owned the farm as joint tenants, with the certificate of title showing the original purchase by them as a transfer “to Lesley Percy Martin of Mangakino and Ann Marsden Martin his wife”. Mr Martin therefore had a right to the whole property but not to any particular share in it. He and his wife effectively

owned the farm together as a single entity.⁴ Only if their joint tenancy were severed,

becoming a tenancy-in-common in equal shares prior to the 1992 transfer, could he have acquired a discrete half-share.

[24] The Court of Appeal recently considered the severance of a joint tenancy in the relationship property context in Gateshead Investments Ltd v Harvey.⁵ Mr and Mrs Harvey owned a property as joint tenants. When Mrs Harvey was bankrupted, they entered into a relationship property agreement which purported to transfer the entire property into Mr Harvey’s name, in order to avoid Mrs Harvey’s creditors acquiring her interest. That agreement was held to be void because it was designed

to defeat creditors. However, the Court of Appeal held that the joint tenancy was nevertheless severed in equity, so that the parties held their shares in tenants-in- common. Whether or not a sale by joint tenants of their entire property amounts to severance was said to depend on the circumstances. The Court found that “[i]n every case where it is contended there has been a mutually agreed severance, the primary question must always be whether the evidence establishes such an

agreement.”⁶ In that case, the relationship property agreement provided “compelling

evidence of a mutual intention to sever”:

The underlying intention was undoubtedly for Mrs Harvey to dispose of or assign a divided half-share interest in the Coatesville property absolutely to

⁴ _{Gateshead Investments Ltd v Harvey [2014] NZCA 361, [2014] 3 NZLR 516 at [10].}

⁵ _{Gateshead Investments Ltd v Harvey [2014] NZCA 361, [2014] 3 NZLR 516.}

⁶ At [52].

Mr Harvey, just as it was the intention that he dispose of his half-share interest in the rest home businesses. Such as disposition made in those circumstances must in our view amount to a severance in equity of the joint tenancy.

[25] The Court said that, in the circumstances of the case, “the greater (transfer to Mr Harvey as sole owner) must be taken to include the lesser (severance of the joint tenancy and transfer of Mrs Harvey’s half-share as tenant in common to Mr Harvey)”.

[26] In this case, however, the parties’ intention was that the partnership should remain on foot until all its assets were disposed of: sealed orders of the Hamilton Family Court made under s 25 of the Matrimonial Property Act 1976 and dated 23

April 1991 show that the joint tenancy between Mr Martin and his former wife continued to exist up until the farm was sold:

1(a) For the purposes of division of matrimonial property the Partnership known as LP and AM Martin shall continue to operate until the assets of the Partnership have been sold or otherwise disposed of ...

2(a) The farm property situated at Pokuru Road, Whakamaru, described in Certificate of Title 20D/176 be immediately placed on the market for sale by tender, marketed by Wrightson Real Estate, on terms acceptable to both parties, including the following chattels, the shearing plant, office desk, drapes, fixed floor coverings, light fittings, dishwasher and supertub in the residence.

...

(c) In the event that the Applicant [Ann Marsden Martin] is prepared to accept any third party offer, on terms which are unacceptable to the Respondent [Lesley Percy Martin] then the Respondent shall have the right to purchase the property on the same, or similar, terms.

[27] It is clear from these orders that Mr Martin and his former wife, as joint tenants, were to sell the farm and that Mr Martin was to have the right to purchase it. In doing so, he acquired the whole of the farm from the partnership (reflected in the partnership’s final financial statements). I am therefore satisfied that the joint tenancy still existed at the time of the transfer of the farm to Mr Martin in 1992 and no severance was effected; rather, the partnership sold its whole joint interest to Mr Martin.

Section 8(1)(e): was the farm acquired out of separate property?

The issue

[28] Because Mr Martin’s exclusive interest in the farm was acquired after the relationship between he and Mrs Martin began the farm is, prima facie, relationship property under s 8(1)(e). If, however, it was acquired out of separate property it would have remained separate property by virtue of s 9(2), unless acquired for the common use and benefit of the couple – a point I come to later. Mr Martin purchased the exclusive interest in the farm in 1992 using the value of his existing interest in the farm and the money that Mrs Martin provided. His existing interest was unquestionably separate property. If the money that Mrs Martin provided was a

loan to Mr Martin then the farm was acquired entirely out separate property.⁷

However, if Mrs Martin’s money was not a loan but a contribution to the relationship, the farm was not acquired out of separate property and is to be treated as relationship property.

The Family Court’s finding

[29] Although Mrs Martin relied specifically on s 8(1)(e) the Judge did not address that provision at all, but instead determined the claim under ss 8(1)(ee) and 17. This was an error. The application of s 8(1)(e) should have been considered.

[30] The Judge found that Mrs Martin had intended the money to be a contribution to the relationship and that, but for her asking for the money back in 2000 and Mr Martin paying it, a half-share in the farm would have been relationship property under s 8(1)(ee). However, once the money was repaid it had to be viewed as a loan. The result was that s 8(1)(ee) did not apply and the farm was entirely separate property:

[38] There was some force in Mrs Martin’s assertion that her funds were contributed to enable the purchase of a share in the asset for their common use and benefit. That is, in fact, what happened. They lived together on the farm as a married couple; the farm provided the only source of income for them both, with the exception of superannuation; Mrs Martin worked alongside Mr Martin on the farm at times; and also undertook household and gardening duties. They both worked hard. The farm was their life and they lived off the income it produced. The fact that Mrs Martin did not

acquire or expect to acquire a share in the ownership of the farm is not, in my view, determinative of whether the funds put in were a contribution, as she says, or a loan. On this basis, s 8(1)(ee) would apply, at least to the half- share acquired with Mrs Martin’s funds, if those funds had not later been repaid. Although Mrs Martin initially intended her funds to be a contribution, she later requested repayment and since 2000 has had the benefit of that money, resulting in the Kawhia property being acknowledged as her separate property. Of her contribution $165,000 must be regarded as a loan repaid, with minimal interest also having been paid. On the basis of the subsequent repayment, I find that s 8(1)(ee) does not apply and the farm is therefore Mr Martin’s separate property.

(emphasis added)

Challenge to this finding

[31] Mr Sutcliffe argued that the Judge’s finding as to the circumstances in which the funds were provided should have led to the conclusion that s 8(1)(e) applied so that the farm was relationship property and, further, that the finding that repayment of most of the funds determined whether they were a contribution or a loan was impermissible because subsequent conduct could not alter what was originally intended.

[32] Mr McKechnie, for Mr Martin, argued that on Mrs Martin’s own account she did not expect that, by advancing the funds, she would acquire an interest in the farm. However, the parties’ statements of what they intended, such as that by Mrs Martin that she never expected to acquire an interest in the farm, are declarations of subjective intent and inadmissible for the purposes of determining the intention of parties to a contract.⁸

[33] The Judge’s conclusion that the money was a loan “on the basis of the subsequent repayment” is capable of being read in two ways; either that, based on evidence of subsequent conduct, the money was always a loan or, alternatively, that the character of the money was not a loan to begin with but became so later as a result of the repayment. The latter approach would have been an error because the character of the money had to be determined as at the date the farm was acquired; it either was or was not a loan at that point. I therefore treat the statement as meaning that, taking into account the evidence of both contemporaneous and subsequent

conduct, the money was always a loan. However, I do not consider that this finding was supported by the evidence.

[34] The contemporaneous evidence from which the Judge could discern the parties’ intentions was scant and predominantly circumstantial. The couple clearly had discussed the use of Mrs Martin’s money to buy out the farm. Both said so in evidence and there was reference to Mrs Martin’s money in a letter dated 16 October

1991 from Mr Martin’s solicitor. However, there is virtually no direct evidence as to what was said about the status of the funds. Although the matter was handled by Mr Martin’s solicitor there was no record of how the money was to be treated, whether it was to be repaid and whether interest would be paid.

[35] The clearest statement as to the basis on which the monies were advanced came from Mr Martin in response to a question from the Judge:

Q: At the time that Joy made those funds available to you - A: Yes.

Q: What was it that made you think that that was a loan?

A: I have never ever had anybody make a gift of a sum of money like that. I did not expect it as a gift. It was my own thoughts possibly that triggered the idea in my mind that it was a loan. As Joy has said I think and I reiterate that I have said this, she put no strings on that money whatsoever. She never said it’s a gift, it’s a loan or whatever. She just paid the money to Charles Fletcher for part-settlement of my matrimonial property. I never imagined myself that it was anything other than a loan⁹.

Q: At what stage did you have the discussion with Joy about whether it should be secured by a mortgage?

A: The very first time that she said she would like to sell her house and put the money into the farm to pay the matrimonial property, ah, arrangement with my wife. And I said “well do you want me to give you a mortgage on the farm to secure your money?” I’ve never imagined anybody offering me money without requiring security. Joy declined to take a mortgage.

[36] This evidence is consistent with Mrs Martin’s evidence and with the circumstances in which the monies were advanced; it is apparent that Mrs Martin did not tender the money as a loan. It was tendered with “no strings attached” and,

whatever Mr Martin might have thought privately, he clearly accepted it on that basis.

[37] The parties’ subsequent actions do not affect this conclusion. Only mutual conduct would be admissible to assist in determining the basis on which the money was originally advanced.¹⁰ But there was very little relevant mutual conduct. Mr Martin’s recording of the money as a loan in the farm accounts is not relevant because Mrs Martin knew nothing about it. Mr Martin’s tendering of money as interest is not relevant either because it was clear on the evidence that this was a unilateral decision on his part and that when the first payment was made Mrs Martin neither knew nor understood why it was made nor the basis on which it was

calculated. She put the money in her bank account only because Mr Martin told her to do so, telling him at the time that it was to be used for them both if they needed medical care. Further, the payments would have represented interest of between two per cent and four per cent (when, at least during the early years of the parties’ marriage, residential mortgage rates were between nine and 10 per cent and overdraft rates between 14 and 16 per cent) and were made from farm income earned with Mrs Martin’s assistance at a time when she was not being paid wages.

[38] The critical piece of mutual conduct was Mrs Martin’s request in 1999 for repayment of the money when she was considering leaving the marriage and Mr Martin’s repayment of a substantial amount of it. In evidence Mrs Martin did not describe her demand as being for repayment of any loan but simply wanting back the amount she had put in. However, Mrs Martin would unquestionably have had a claim to half of the homestead and chattels so her request was equally consistent for payment in respect of relationship property that was hers anyway.

[39] Further, Mr Martin repaid less than the full amount initially advanced and without any interest. Mrs Martin made no complaint about that. I consider that the totality of the evidence showed that Mrs Martin offered her money without any conditions attached to it and Mr Martin accepted it on that basis. The subsequent mutual conduct is not inconsistent with that. The money is therefore to be viewed as a contribution to the relationship, not a loan.

[40] I therefore allow the appeal against the finding that the farm was separate property. The farm is properly classified as relationship property under s 8(1)(e).

Section 8(1)(ee): was the farm purchased for the common use and benefit of the parties?

[41] Mr Sutcliffe’s alternative ground of appeal was that the Judge’s conclusion regarding s 8(1)(ee) was incorrect because the farm had clearly been acquired for the common use and benefit of the parties. As a result of my earlier conclusion regarding s 8(1)(e) it is, strictly, unnecessary to consider this further ground of appeal and I do so only briefly.

[42] The starting point is the Judge’s finding at [38] that the farm was used by the parties for their common benefit. This finding was plainly right. The evidence was clear that the farm was run jointly, with both Mr and Mrs Martin working on it and living off the income it produced. However, the Judge did not address the question raised by s 8(1)(ee), whether the farm was acquired for that purpose; if so it would fall within s 8(1)(ee) as relationship property regardless of whether Mrs Martin’s money was advanced as a loan or as a contribution to the relationship.

[43] I consider the evidence to be clear that, not only did the parties actually use the farm for their common use and benefit but that this was always the intended purpose. The couple had been living together and working the farm together for at least a year before they married. The farm represented their way of life and their only income. There was no arrangement for Mrs Martin to earn an income other than from the farm and the evidence is clear that she worked alongside Mr Martin to run the farm.

[44] In these circumstances the farm was certainly acquired for the common use and benefit of this couple. This fact would have been sufficient for the farm to have been classified as relationship property under s 8(1)(ee) even if it had been acquired with Mr Martin’s separate property. Given these conclusions, it is unnecessary to address the issues raised in relation to the Judge’s treatment of ss 9A and 17 and her rulings in relation to farm income.

Kawhia and 34 Pokuru Road

[45] With the $165,000 that Mr Martin paid her in 2000 Mrs Martin purchased a property at Kawhia in her own name. She envisaged that she and Mr Martin would both use it but Mr Martin spent very little time there. Mrs Martin therefore resolved to sell it. Prior to the property selling a house at 34 Pokuru Rd, Whakamaru came on the market. Ms Martin purchased that and, at the time of the hearing, was living there. Mr Martin advanced Mrs Martin $60,000 to complete the purchase of

34 Pokuru Road. When the property at Kawhia sold Mrs Martin arranged for that money to be held in her solicitor’s trust account for repayment to Mr Martin and retained the balance.

[46] The Judge recorded that 34 Pokuru Road was agreed to be Mrs Martin’s separate property. Mr Sutcliffe advised that this was incorrect; Mrs Martin in fact asserts that 34 Pokuru Road is to be treated as relationship property, the source for the purchase having been farm income.

[47] The status of 34 Pokuru Road clearly turns on the status of the farm. As I

have concluded, the farm is relationship property. The money used to purchase 34

Pokuru Road came in part from the money that Mr Martin had paid to Mrs Martin in

2000 and in part from the $60,000 he advanced her for the purchase. The source of both funds was farm income, which is relationship property. Therefore 34 Pokuru Road is also relationship property.

Farm bank accounts

[48] In the Family Court Mrs Martin sought to have funds held in accounts controlled by Mr Martin at separation classified as relationship property. These were a current account holding $1,455.16, a cheque account holding $21,649.97 and a term deposit account holding $50,074.06. Over the subsequent year these amounts increased to $22,281.68, $24,073.10 and $93,855.97, respectively. However, the Judge did not deal with this issue at all.

[49] Aside from an inheritance in 1997 the farm was Mr Martin’s only source of income during the relevant period and the farm was relationship property. As I discuss later, the inheritance was so intermingled with farm funds that it lost its

separate character. The money in the accounts is to be treated as income from relationship property. Mrs Martin is entitled to half of the balance as at the date of separation.

[50] The only issue is whether the increase in the year following separation is to be regarded as relationship property as well. The notional division of the farm as relationship property is made as at the date of separation. Without evidence showing the extent to which income received subsequent to that date was derived prior to separation, Ms Martin’s entitlement does not extend beyond that date. Therefore, Mrs Martin is entitled to $36,589.60, being half of the amount in the accounts as at the date of separation.

Post-separation payments

[51] Following separation Mr Martin paid Mrs Martin $450 per month for 15 months, totalling $6,750. The Judge directed that this figure be deducted from the interest on the amount Mr Martin was required to pay Mrs Martin as a result of the various adjustments in the judgment. Mrs Martin appeals that finding on the basis that the payments came from farm income and were therefore relationship property. Further, Mr Sutcliffe submitted that the Judge should have made an adjustment for the disparity in the respective post-separation incomes. The evidence showed that Mr Martin had a personal pre-tax income for the 2010 financial year that was

$33,344 higher than Mrs Martin’s income for the same period.

[52] The post-separation payments that Mr Martin made are properly viewed as spousal maintenance under s 63 of the Family Proceedings Act 1980; where one party to a marriage cannot practicably meet the whole or any part of his or her reasonable needs, the other party is liable to pay maintenance to meet those needs. As a result, Mrs Martin should not be required to repay the money.

The campervan

[53] Mr Martin purchased a campervan for $85,000 in 2009. He sold it 18 months later to his daughter for $1,000. For the purposes of this appeal, however, he accepts its value at $85,000.

[54] In the Family Court Mr Martin asserted that the campervan had been purchased from money he inherited from his father in 1997 and was therefore separate property under s 10 of the PRA and, further, that it was not a family chattel because, except for one occasion, only he used it. The Judge accepted Mrs Martin’s argument that the inheritance money had been so intermingled with relationship property funds as to have lost its separate identity by the time the campervan was purchased and that, in any event, the campervan was a family chattel as that is

defined in s 2:¹¹

On the evidence I find that Mr Martin’s claim fails in both respects. Over the 12 years that the inheritance money was in term deposit, its separate status has been lost due to intermingling. Further to that, I find that although the campervan was used only once by both Mr and Mrs Martin together, it was purchased as a family chattel and the fact that Mrs Martin preferred not to accompany Mr Martin on fishing trips does not change its status. Accordingly the campervan is to be classified as relationship property and valued at $85,000 for the purposes of division.

[55] Section 10 applies, amongst other things, to property acquired by succession and property acquired out of property acquired by succession. Sections 10(2) and (4) provide that:

(2) Property to which this subsection applies is not relationship property unless, with the express or implied consent of the spouse or 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.

...

(4) Regardless of subsections (2) and (3) and section 9(4), both the family home and the family chattels are relationship property, unless designated separate property by an agreement made in accordance with Part

6.

[56] The evidence was that in 1997 Mr Martin inherited $120,000. He put it into a term deposit account. There was already $38,000 in that account that had come from farm income. Over subsequent years further farm income was paid into the term deposit account. At one point the balance stood at $253,000. This was the account used to pay Mrs Martin the $165,600 in 2000. Some $130,000 from this account

_{was also invested elsewhere and lost in the global financial crisis of 2008.}

¹¹ At [51].

[57] Mr McKechnie submitted that there had not been intermingling for the purposes of s 10(2) because the only money in the account from which the campervan was funded was the inheritance money and farm income and since (on Mr Martin’s case) the farm was separate property then income from the farm should also have been viewed as separate property.¹² However, given my conclusion that the farm was relationship property, this argument cannot succeed.

[58] Nor can Mr Martin’s alternative argument that the campervan was not a family chattel. The fact that an item of property is not a family chattel does not preclude it from being relationship property by virtue of s 10(2); whether the campervan was a family chattel or not is irrelevant if it was relationship property by virtue of intermingling. I therefore dismiss the cross-appeal against the finding that the campervan is relationship property.

Livestock, plant and machinery

[59] The Judge’s finding on plant and machinery was as follows:¹³

The average of the two valuations is $58,357. Some machinery was owned prior to separation. Some was acquired from Mr Martin’s former wife through a payment from Mrs Martin of $20,000. Some was acquired during the marriage from farm income, which is relationship property.

Accordingly, I find that the plant and machinery must be treated as relationship property.

[60] Mr McKechnie submitted that, to the extent that the plant and machinery acquired from Mr Martin’s former wife was acquired with $20,000 of Mrs Martin’s money, the Judge has overlooked the fact that the $20,000 was repaid as part of the loan. He did not accept that Mrs Martin had acquired any interest in the plant and machinery.

[61] The Judge concluded that the livestock was on the farm at the date of separation and was relationship property because it was acquired during the relationship and at least partly with income from the farming operation. Any classification of the stock as separate property had been lost over the course of the

_{20-year marriage.}

¹² _{Property (Relationships) Act 1976, s 9.}

¹³ At [59]-[60].

[62] Mr Martin challenges that conclusion on the same basis as the plant and machinery, namely that farm income is separate property so that livestock acquired with it was also separate property. Those submissions cannot survive the finding I have made regarding the status of the farm; since the farm is relationship property, so too is the income from the farm and the stock, plant and machinery purchased when the farm was acquired.

Date from which interest should run

[63] The Judge directed that interest be paid on the amount payable to Mrs Martin as a result of the judgment at four per cent from the date of separation (April 2010). There is no challenge to the rate. But Mr McKechnie submitted that interest should have been payable from a date six months or a year after separation because even if agreement had been reached on the amount payable immediately upon separation it is very unlikely that it would have been paid (or expected to have been paid) straight away.

[64] I accept this submission and consider that interest from a date six months after separation would have been reasonable, this being 31 October 2010.

Result

[65] I have found that the farm, income from the farm and assets acquired with income from the farm are all relationship property. The appeal is allowed. The orders made in the Family Court are set aside.

[66] Mrs Martin shall retain as her separate property her vehicle (subject to an adjustment to reflect the difference in value between her and Mr Martin’s vehicles), chattels and amounts payable by Mr Martin to her.

[67] Mr Martin shall retain 36 Pokuru Road, Whakamaru as his separate property, his vehicle and boat, shares owned by him and chattels in his possession.

[68] The cross-appeal is allowed only in relation to the date from which interest is to be calculated.

[69] The parties are to confer as to the value and method of division of the assets that are relationship property. If agreement cannot be reached the parties may seek further directions regarding the amounts payable by and to the respective parties and the vesting of any asset.

_{[70] Mrs Martin is entitled to costs on a 2B basis.}

P Courtney J