Morrison v Morrison [2016] NZHC 1575 (12 July 2016)

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Morrison v Morrison [2016] NZHC 1575 (12 July 2016)

Last Updated: 16 August 2016

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000701 [2016] NZHC 1575

BETWEEN	JANE MORRISON Appellant
AND	IVAN DONALD MORRISON Respondent

Hearing:	3 June 2016
Appearances:	RJB Fowler QC for Appellant S J Shamy for Respondent
Judgment:	12 July 2016

_{JUDGMENT OF DUNNINGHAM J}

Note: The names of the parties in this judgment are fictitious to preserve the

parties’ anonymity.

[1] On 6 November 2015, I allowed Mr Morrison’s appeal,¹ in part, from a Family Court decision² determining the status of the property that he and his wife owned, under the Property (Relationships) Act 1976 (“the Act”).

[2] In summary, I accepted that a further tranche of 5,523 of the 16,000 shares that Mr Morrison held in Grazing Farm Company Limited (GFCL) was Mr Morrison’s separate property, not relationship property.³ I also allowed his appeal in respect of whether the application of relationship property in the sum of

$10,835 to the debt owed on the farm contributed to an increase in the value of the

_{separate property shares for the purpose of s 9A.}

¹ _{M v M [2015] NZHC 2758.}

² _{M v M [2014] NZFC 5119.}

3. The Family Court decision having already determined that 3,600 of these shares were separate property and the balance of 12,400 was relationship property.

MORRISON v MORRISON [2016] NZHC 1575 [12 July 2016]

[3] However, I upheld the Family Court Judge’s decision to recognise Mrs Morrison’s contribution under s 17, and his decision to award her a 20 per cent share in the increase in value of the separate property. As more property was now categorised as separate property, that 20 per cent share translated to a larger net figure. However, overall, the value of Mrs Morrison’s entitlement reduced, because of my decision to re-categorise some further GFCL shares as separate property.

[4] Mrs Morrison now seeks leave to appeal my decision pursuant to s 39B of the

Act and s 67 of the Judicature Act 1908.

[5] Specifically, Mrs Morrison applies to appeal the decision that the 5,523 B shares were the separate property of Mr Morrison. In the alternative, if the 5,523 B shares are held to be separate property, then Mrs Morrison applies to appeal the decision declining to make an award under s 9A, in respect of the increase in value of the shares, and to appeal the extent of the award made pursuant to s 17.

Legal principles governing applications for leave to appeal

[6] Section 67 of the Judicature Act 1908 provides:

(1) The decision of the High Court on appeal from an inferior court is final, unless a party, on application, obtains leave to appeal against that decision—

(a) to the Court of Appeal ...

[7] The relevant principles applicable to applications under s 67 are summarised in Snee v Snee:⁴

[22] ... for leave to be granted pursuant to s 67, the appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interests, public or private, of sufficient importance to outweigh the cost, both to the Court system and to the parties, and the delay involved in further appeal. Upon a second appeal [the Court of Appeal] is not engaged in the general correction of error. Its primary function is then to clarify the law and to determine whether it has been properly construed and applied by the Court below. It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a Court.

[8] The guiding principle is the requirement of justice.⁵

What are the issues which the intended appellant wishes to raise on appeal?

[9] The notice of application for leave to appeal is extensive. However, in summary, the application for leave to appeal seeks to raise the following issues:

(a) Whether this Court erred in fact and in law in finding that the 5,523 B

shares were the separate property of Mr Morrison.

(b) Whether this Court erred when it declined to find the increase in the value of the 5,523 B shares was attributable to the application of relationship property under s 9A of the Act and subject to equal division.

(c) Whether this Court erred when it did not revisit the Family Court’s finding that an award of 20 per cent of the increase in value of Mr Morrison’s separate property shares should be made under s 17, once this Court had determined that an additional 5,523 B shares were separate property (which meant that 57 per cent of the principal asset accumulated by the parties during the marriage was found to be separate property).

(d) Whether this Court erred in finding that reduction of GFCL debt did not warrant an award for increase in value of separate property under s 9A(1) because the judgment did not address the consequences of the injection of $4,000 by the wife.

[10] I will briefly summarise my findings on each proposed ground of appeal in

the previous judgment and the applicant’s argument in support of granting leave.

The 5,523B shares

[11] I found that these shares were acquired with funds which were received as a distribution from the Mt Parker Trust, a trust established by Mr Morrison’s parents for the benefit of their children. The funds used to acquire these shares were funds received by Mr Morrison in the circumstances described in s 10(1)(a)(iv), so the shares purchased using these funds were also separate property under s 10(1)(c).

[12] Mrs Morrison argues that this decision was wrong because:

(a) Mr Morrison’s interest in the trust had already vested before the relationship commenced;

(b) Mr Morrison did not purchase the shares in a “single first stage one purpose exchange”, but instead, the $54,121 credit utilised in the purchase of the shares was a journaled figure, comprising “balance advances from the trust” plus other sums;

(c) to the extent the $54,121 was treated as a distribution of the trust, there was an error of law in that s 10(2) does not preserve as separate property increases in value, income or gains;

(d) there should have been a s 10(2) enquiry “given the genesis and make-up of several components of the $54,121, such that the issue of intermingling arose”;

(e) as a matter of law, s 10(1)(a)(iv) of the Act requires a causative link for the section to apply and that causative link was found by the Family Court to be absent.

The application of s 9A

[13] I held the Family Court Judge was incorrect to say that application of

$10,835 of relationship property to reduce debt, increased the value of shares under

s 9A(1). The same approach was taken to the 5,523 B shares I reclassified as separate property.

[14] Mrs McIraith argues this decision was wrong because:

(a) the Family Court judgment treated the 5,523 B shares as all relationship property and therefore a s 9A issue did not arise on appeal from the Family Court judgment to the High Court;

(b) now that the High Court judgment has classified these shares as separate property, Mrs Morrison should be permitted to renew her alternative argument in the Family Court that s 9A applied if these shares were held to be separate property.

The s 17 award

[15] I found that the Family Court was correct to recognise Mrs Morrison’s contribution under s 17 and the decision to award her a 20 per cent share in the increase in value reflected an appropriate percentage of her contribution to the increase in value and I applied it to the further 5,523 B shares I classified as separate property.

[16] Mrs Morrison argues that this decision was wrong because:

(a) the Family Court arrived at a percentage of 20 per cent having regard to the $500,000 she had already received for “sacrifices made in the relationship in relation to the shares the Family Court found to be relationship property”;

(b) the award under s 17 at 20 per cent was reduced by the Family Court as a consequence of this amount, the Family Court deciding that Mrs Morrison was entitled to “some” recognition in relation to the husband’s 3,600 separate property shares;

(c) while this Court upheld the Family Court award of 20 per cent, it did not take into account that the separate property component of the shares increased significantly (from 22.5 per cent to 57 per cent);

(d) as a further 5,523 B shares have now been classified as separate property, Mrs Morrison ought to be able to renew her argument as to the extent of the s 17 award.

The injection of $4,000 to reduce GFCL debt

[17] I found that application of relationship property funds totalling $10,835,⁶ (which included the $4,000), to reduce the mortgage which GFCL had given over the farm land, did not increase the value of the shares in the farm for s 9A purposes, applying the decision in M v G.⁷

Should leave to appeal be granted in respect of the finding that the 5,523 B

shares were separate property?

[18] The primary thrust of the application for leave focused on the reclassification of the 5,523 B shares as separate property. Mr Fowler QC argued that this aspect of the decision raised questions of law and fact which were capable of serious bona fide argument, and which were of broader public interest and importance. This was because they concerned:

(a) the question of whether an interest in a trust that had vested prior to the relationship, but utilised to acquire property during the relationship, falls within s 10(1)(a)(iv);

(b) the question of identifying the correct stage or timing at which an acquisition said to have emanated from a beneficial interest in a trust

_{falls within ss 10(a)(a)(iv) and 10(1)(c); and}

⁶ The Family Court added the contributions of $3,464, $3,771 and $4,000 to reach a total of

_{$10,835. It seems it should have been $11,235, but the legal issues do not change.}

⁷ M v G [2012] NZHC 1798.

(c) the question of the significance and construction of the word “because” in its unique position in s 10(1)(a)(iv) vis a vis the other limbs of s 10(1)(a).

[19] It was accepted in the course of oral submissions that points (a) and (b) were really factual circumstances which, in the intended appellant’s view, were material to the question of law identified in point (c).

[20] Mr Fowler also emphasised that the classification of the 5,523 B shares was of some moment to Mrs Morrison because it affected her relationship property award by, in his calculation, $524,184.10 and put in issue “33 per cent of what she was awarded in the Family Court”. He submitted that this private interest also warranted leave being granted pursuant to s 67.

[21] Mr Fowler submitted that the fact that husband’s interest in the Mt Parker Trust had vested prior to the commencement of the relationship was relevant to whether the shares he acquired come within the scope of s 10(1)(c). His argument was that Mr Morrison’s vested interest was utilised, at least in part, to acquire the

5,523 B shares. As a vested interest, it was property that the husband brought to the relationship in his own right and not, in the language of 10(1)(a)(iv), because he was a beneficiary under a trust.

[22] As Mr Fowler explained, before s 10(1)(c) can apply, so that subsequently acquired property is still separate property, it must be clear that one of the categories in s 10(1)(a) applies to the property used to acquire it. Here, s 10(1)(a)(iv) is relied on and it applies to property which is acquired:

(iv) because the spouse or partner is a beneficiary under a trust settled by a third person: (emphasis added)

Unlike s 10(1)(a)(i)-(iii), this subparagraph begins with the word “because” as a result of the 2001 amendments to the Act. Consequently, Mr Fowler submitted, it introduces a distinct linkage element and, unlike acquisition by succession, survivorship or gift, where the mere fact of acquisition would suffice, s 10(1)(a)(iv) requires something more.

[23] Here, he said, there are two “acquisitions” at work under s 10(1)(c):

(a) the acquisition of property because the spouse is a beneficiary under a trust; and

(b) property acquired from that property.

[24] He suggested it can be argued that the sum of $54,121 used to purchase the shares was not just comprised of Mr Morrison’s entitlement as a beneficiary of a trust, but had certain “relationship property strands”, which meant that the link from s 10(1)(a)(iv) to s 10(1)(c) was broken and the latter could not apply. Alternatively, the effect of the shares being paid for by journal entries was that a s 10(2) intermingling enquiry should result.

[25] Mr Shamy for Mr Morrison rejected that any of these issues went beyond challenges to factual findings which were clearly available on the evidence. Indeed, he asserted there was no evidential basis for some of the arguments raised and, in any event, they did not raise any issue which met the threshold for leave to appeal articulated in Snee v Snee.

[26] Specifically, he considered that Mrs Morrison’s argument on the

categorisation of the 5,523 B shares was predicated on two errors:

(a) The contention that Mr Morrison’s interest in the Mt Parker Trust vested prior to the relationship. He said that the shares of the capital of the trust could not vest until Mr Morrison’s youngest sibling attained the age of 21 years in 1978. Until that time the value of each beneficiary’s share of the trust was not ascertainable as the value of the trust, and the number of final beneficiaries, was not ascertainable. As the parties were married in 1971, the vesting of Mr Morrison’s interest in the trust and the use of that interest to purchase shares took place after the commencement of their relationship.

(b) There was no basis for asserting there had been intermingling, as:

(i) the distribution from the trust which was used to acquire the shares, through journal entries, kept its separate identity and did not become relationship property;

(ii) the distribution from the trust did not include “income” of Mr Morrison. The income was that of the Trust and it distributed that money to the beneficiaries.

[27] Finally, in terms of the causative link that Mrs Morrison contended was needed for s 10(1)(a)(iv), the whole purpose of Mr Morrison’s appeal was to argue precisely that point. Mr Morrison acquired the distribution because he was a beneficiary of a trust and that was the property which was used to acquire the 5,523

B shares.

Discussion

[28] This proposed ground of appeal relies on the provisions of s 10(1) of the Act. That subsection provides:

(1) Subsection (2) applies to the following property:

(a) property that a spouse or partner acquires from a third person—

(i) by succession; or (ii) by survivorship; or (iii) by gift; or

(iv) because the spouse or partner is a beneficiary under a trust settled by a third person:

(b) the proceeds of a disposition of property to which paragraph

(a) applies:

(c) property acquired out of property to which paragraph (a)

applies.

[29] Subection (2) provides that property identified in s 10(1) is not relationship property unless, with the consent of the spouse who received it, the property has become so intermingled with other relationship property that it is unreasonable or impracticable to regard it as separate property.

[30] While Mr Fowler focused his arguments on what he said was a question about the “significance and construction of the word ‘because’ in s 10(1)(a)(iv)”, I consider his grounds of appeal are instead, founded on factual issues which arise in the context of the well understood, and frequently applied, provisions of s 10.

[31] The question of when Mr Morrison’s interest in the trust “vested” is, in my view, a factual issue which does not warrant leave being granted for a second appeal. Furthermore, this ground of appeal appears to be advanced on the erroneous premise that separate property which is acquired prior to the relationship under s 10(1)(a)(iv) does not continue to be separate property if it is used to acquire other property after the relationship commences.

[32] Similarly I consider the other issues which Mrs Morrison, as the intended appellant wishes to raise are all challenges to factual findings as to the classification of these shares as separate property. For example, the question of whether there was intermingling of Mr Morrison’s separate property distribution from the Mt Parker Family Trust with other funds is a factual issue and was not argued before me. It

was raised in the Family Court, and rejected in that Court’s decision.⁸ This issue is

of no particular moment except to the parties themselves and does not warrant the grant of leave to appeal.

Should the increase in value of the 5,523 B shares be attributed to the application of relationship property under s 9A?

[33] The Family Court Judge discussed s 9A in relation to the 3,600 shares which he had classified as the husband’s separate property. He considered that application of relationship property (in the form of surrender of life insurance policies and of a further amount of $4,000) to pay down farm debt, increased the value of the shares, and he allowed that contribution to be treated as relationship property under s 9A(1). He held that s 9A(2) had no application in this case.

[34] I overturned the Family Court’s judgment in respect of the application of

relationship property to separate property, relying on the decision in M v G. There was no cross-appeal of the Family Court’s decision in relation to s 9A(2).

⁸ M v M, above n 2, at [51]-[53].

[35] Mrs Morrison seeks leave to argue that s 9A should apply to the 5,523 shares if they remain classified as separate property. However, no grounds are raised for saying why these separate property shares should be treated any differently from the

3,600 shares which were already held to be separate property and where there was no cross-appeal of the Family Court’s finding that s 9A(2) had no application.

[36] In respect of s 9A(1), the Family Court held there was no evidence of relationship property being used to increase the value of the shares, apart from the amounts listed at [59] of that judgment which included the proceeds of life insurance policies and $4,000 from the wife. While the notice of appeal suggests this sum was omitted, it is included in the figure referred to at [30] of my judgment.

[37] Again, I consider this aspect of the proposed appeal simply seeks to revisit factual findings as to whether s 9A applies, applying existing authority as to whether the application of funds to reduce debt, increases the value of shares. It does not raise a question of fact or law which meets the threshold for leave to be granted.

Whether the s 17 award of 20 per cent should be increased in light of the finding of the High Court regarding the 5,523 B shares?

[38] The Family Court awarded Mrs Morrison $85,000 pursuant to s 17, being

20 per cent of the increase in value of the husband’s 3,600 separate property shares. Mrs Morrison argues that the award of 20 per cent was premised on the magnitude of her relationship property award. For that reason, she argues that the reduction in the relationship property makes it appropriate to award a greater percentage of the increase in value of the husband’s separate property shares.

[39] Mr Shamy says, however, that the effect of this Court’s judgment is that Mrs Morrison’s s 17 award has increased from being 20 per cent of the value of Mr Morrison’s 3,600 shares to being 20 per cent of the value of 9,123 shares.⁹ Given the Family Court saw 20 per cent as a fair award for sustenance of the separate

_{property shares, Mr Shamy argues that there is no basis in principle for adjusting that}

9. Being the 3,600 held to be separate property in the Family Court plus the 5,523 shares held to be separate property in this Court.

percentage simply because the number of shares categorised as separate property of

Mr Morrison has increased.

Discussion

[40] The fact that Mrs Morrison was receiving less of the total property pool as a consequence of my decision to categorise more GFCL shares as separate property was expressly identified and discussed in my judgment.¹⁰ I held the 20 per cent award was still appropriate in light of that outcome and, furthermore, was consistent with other levels of s 17 awards.¹¹

[41] Again, this is a distinctly factual issue and no question of law of general or public importance is raised by it. I therefore decline leave to appeal on this ground.

Interest to the parties

[42] I acknowledge that, in terms of the dollar amount involved, the impact of the decision is of some significance to Mrs Morrison and that is a factor I have had regard to in deciding whether leave should be granted.¹² However, the relative impact is lessened somewhat by the fact that the total asset pool exceeds $3,000,000.

[43] While not an insignificant change, I do not consider that it, alone, justifies the cost and delay of further litigation.

Conclusion

[44] In conclusion, all grounds of appeal proposed involve relatively straightforward questions of applying the statutory provisions to the evidence given in this case. As such, I find that they do not raise issues of fact or law of sufficient

_{importance to justify a further appeal pursuant to s 67 and leave is declined.}

¹⁰ _{M v M, above n 1, at [60].}

¹¹ _{At [61].}

¹² Mr Fowler estimated her entitlement would be reduced by around $500,000.

[45] Mr Morrison, as the intended respondent, is entitled to costs. That issue is reserved, although I expect those can be agreed on a 2B basis.

Solicitors:

Anderson Lloyd, Christchurch

Harmans, Christchurch