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High Court of New Zealand Decisions |
Last Updated: 16 August 2018
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NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS)
ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,
11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER
INFORMATION, PLEASE SEE
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
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CIV-2018-485-311
[2018] NZHC 1996 |
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UNDER
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the Property (Relationships) Act 1976
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IN THE MATTER OF
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an appeal
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BETWEEN
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HOPKINS
Appellant
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AND
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WHITEHEAD
Respondent
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Hearing:
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23 July 2018
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Counsel:
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J J Delany for appellant
J L Forrest for respondent
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Judgment:
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7 August 2018
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RESERVED JUDGMENT OF DOBSON J
[1] This is an appeal from a Family Court decision striking out an application by the appellant (the husband) to vary the extent of his periodic maintenance obligations.1 The husband’s commitment to pay child support and spousal maintenance is recorded in an agreement completed in August 2016. The application for variation was made pursuant to s 32 of the Property (Relationships) Act 1976 (the PRA).
HOPKINS v WHITEHEAD [2018] NZHC 1996 [7 August 2018]
[2] The narrow issue on the strike out application was whether the provisions in the agreement recording the husband’s maintenance obligations are severable from the terms settling entitlements to property that were also recorded in the agreement. The husband argues that the Family Court Judge was wrong in treating them as not severable.
Factual background
[3] The parties married in 2001 and by the time of their separation in August 2015 had four children then aged between four and ten years old. The husband is a partner in a large international accounting firm. The respondent (the wife) has been a full- time carer for the children. She was not in paid employment to a meaningful extent between the birth of the first child and the date of separation.
[4] In August 2016, the parties mediated outstanding differences and concluded a mediation agreement. Both of them were legally represented and the agreement was concluded as a matter of form, pursuant to s 21A of the PRA.
[5] The agreement recorded that the husband had been paying maintenance to the wife of not less than $20,000 per month since separation. The agreement committed the husband to pay $11,900 per month as maintenance for the wife and the children. The amount was to be adjusted on an annual basis to reflect any increase in the CPI up to three per cent, and was to reduce by 20 per cent on each child either reaching 18 years of age or becoming financially independent. Payments were to cease entirely on the youngest child turning 18. A further sub-paragraph on maintenance in the agreement provided:
This amount can be reviewed to take into account any significant change in the incomes of either party.
[6] The former family home was owned by a family trust and the agreement recorded terms for its sale and division of the proceeds. Four rental properties were to become the husband’s sole property. The wife was to receive $1 million out of the sale of the former family home, plus instalments totalling $125,000 between August 2016 and September 2017.
[7] The agreement also recorded that the parties had engaged an expert accountant/valuer to value the husband’s interest in his accounting firm. The valuation was $270,000, but the wife subsequently obtained a critique of the valuation from another expert. That valuation suggested the husband’s interest should be valued at between $600,000 and $750,000, without including any amount for “super profit” between dates of separation and payment, nor for retirement benefits.
[8] Under a heading “cash adjustment/settlement”, cl 11 of the agreement provided:
11.1 In addition to the distribution of $1m from the trust [the husband] will pay:
(a) $5,000 per month for a period of 6 months (commencing August 2016) which is to be paid together with the financial support provided in clause 3 above; and
(b) a lump sum of $95,000 payable on 1 September 2017.
11.2 This sum together with the financial support provided at clause 3.2 above has been agreed taking into account any claim [the wife] might have otherwise pursued under the [PRA], and the Family Proceedings Act or any other claim in equity or in law and the disputed value of [the husband’s] interest in [his accounting firm]. It is a full and final settlement of all Relationship Property matters and all matters relating to trust property.
[9] In addition, cl 14 of the agreement provided that:
The provisions of this agreement are in full and final settlement of all or any claims or rights which [the parties] may have against each other, whether under the provisions of the Property (Relationships) Act 1976 or under any Act or Acts passed in substitution or amendment thereof, or under any other statute or rule of the common law or equity, or otherwise however so arising.
[10] A further provision in the agreement was as follows:
15 Severance
15.1 In the event of any provision of this agreement being invalid or unenforceable, all other provisions thereof will nevertheless continue in full force and effect to the extent that they can be severed from such provisions as have been held invalid or unenforceable.
[11] The agreement acknowledged that both parties had received independent legal advice and that the terms of the agreement were fair and reasonable in light of the
provisions of the PRA and all of the circumstances at the date of the agreement. Their execution of the agreement was confirmed by certification completed by their respective solicitors.
[12] In April 2017, some eight months after the agreement had been completed, the husband applied to Inland Revenue for a formula assessment of child support. He failed to pay the monthly amount of $11,900 at the end of that month. In early May 2017, the husband received a formula assessment and then paid the wife $7,000 in respect of the payment due for April.
[13] The wife promptly applied for a summary judgment from the District Court to enforce on-going payments at the higher rate of $11,900. At the end of July 2017, the District Court granted the wife’s application for summary judgment. Until that time, the husband had continued payments of $7,000 per month.
[14] In June 2017, the husband applied to the Family Court to vary the extent of his maintenance payments. The application was brought under s 32 of the PRA, which provides for the making of orders relating to maintenance and child support in proceedings under the PRA. Section 32(2)(d) creates jurisdiction for the Court in any proceedings and where it considers it just to cancel, vary, extend or suspend a voluntary agreement. There is no issue that the component of the parties’ agreement in this case recording the husband’s maintenance commitment qualifies as such a voluntary agreement.
[15] However, s 182(6) of the Family Proceedings Act 1980 limits the circumstances in which the Court can vary agreements entered into under Part 6 of the PRA to cases in which the Court is of the opinion that the interests of any child of the marriage so require. The husband does not contend in this case that there are any relevant interests of the children of the marriage that require a reconsideration of the extent of his maintenance obligations.
[16] The effect of these provisions is that the Family Court will only have jurisdiction to entertain the husband’s application if the provisions as to maintenance
are severable, enabling them to be reviewed independently of the components of the agreement addressing relationship property settlements.
[17] In July 2017, the wife applied to strike out the husband’s application to vary the extent of maintenance payable. That application was heard in March 2018 and the reserved judgment upholding the strike out was issued in early April 2018.
The Family Court judgment
[18] Judge Grace acknowledged that such agreements can cover discrete areas of compromise, and in particular both maintenance and property settlements. His Honour found that the agreement had both components in this case, and focused on the issue of whether the different matters agreed on were dealt with discretely, or were arrived at in a composite or inter-dependent manner.
[19] The Judge cited the wife’s affidavit evidence to the effect that she had compromised her potential position on property claims in reaching the agreement and found that the wording of the agreement appeared to reflect that. The Judge held that the provisions concerning the division of property and maintenance were so entwined that it was impossible to isolate one from the other.2
[20] The judgment continued:
[59] This is not just a simple exercise of saying that the figure for maintenance is now inappropriate because of any purported change in circumstances, because the maintenance payments are so inter-linked with what the wife may have been entitled to as part of her property claim, that to sever the maintenance proceedings and deal with those matters in isolation would have the effect of potentially interfering with the relationship property agreement in a way that is detrimental to one party.
[21] The wife swore an affidavit in support of her strike out application in which she described the background to the mediation. She stated:
The agreement was comprehensive in that it addressed the division of relationship property and financial support (maintenance for me and the children) as one package deal that suited both our needs.
2 At [57], [58].
[22] In opposing the strike out application, the husband completed an affidavit in which he categorically denied and disagreed with the characterisation that the provisions to divide the relationship property and the financial support provisions were “a package deal”. Rather, the husband deposed that the division of relationship property and trust property was agreed in the earlier part of the mediation, which then proceeded on to the issue of financial support for the wife and their children.
[23] The husband deposed that he had given the wife “far more than her property entitlement”, partly by virtue of large periodic payments before the mediated agreement, and also because of the amount payable by him under the agreement.
[24] The Judge rejected the husband’s evidence that the wife had received a greater than 50 per cent share of the assets. He did so because that was not reflected in the agreement and because it was not appropriate to go behind the agreement to investigate what was discussed at the mediation, which had been conducted confidentially.
Arguments on appeal
[25] The Family Court judgment was challenged essentially on the ground that the Judge erred in treating the two components of the agreement as being inter-dependent. Arguably, evidence of the surrounding circumstances and the proper interpretation of the agreement showed that the agreement as to maintenance was separate from the relationship and trust property settlement, and the maintenance provision was accordingly severable from the rest of the agreement.
[26] The status of the maintenance provisions as severable is critical to the Court’s jurisdiction to hear and determine an application to vary the quantum of the husband’s liability.
[27] Mr Delany for the husband also submitted that the Family Court Judge had erred in treating as inadmissible the husband’s evidence on the sequence in which issues were settled at the mediation. He submitted that where it was common ground that a mediated agreement had been concluded, but its interpretation was subsequently in issue or the manner in which issues came to be agreed were subsequently relevant, then evidence of the conduct of the mediation was admissible. Mr Delany sought to
rely in particular on the husband’s evidence that all property issues were agreed between the parties before they addressed the level of maintenance payments he might make, to support his argument that the two components were severable.
[28] As to the terms of the agreement, Mr Delany submitted that the provision in the agreement recognising that the amount of maintenance could be reviewed if there was any significant change in the income of either party meant that, unlike the provisions in relation to their property settlement, the quantum of the husband’s maintenance obligation was not permanently determined. The prospect of a review in those circumstances meant that the maintenance commitment was severable from the discrete provisions recording a final property settlement.
[29] For the wife, Ms Forrest supported the Judge’s reasoning that all of the financial elements of the agreement were intertwined to an extent that one aspect (for example, maintenance) could not be revisited without re-opening the entire agreement. The Judge was correct in finding that the wife compromised what might have been a larger claim to property, at least in part in reliance on the level of maintenance payments the husband agreed to make.
[30] In supporting the Judge’s decision that evidence of the conduct of the mediation was inadmissible, Ms Forrest disputed that the husband was seeking to rely on such evidence as an aid to the subsequent interpretation of the agreement as completed. Rather, he was wanting to make impermissible reference to the manner in which the mediation was conducted, for the purpose of attributing a different character to the agreement from that which the terms of the agreement itself might bear.
Analysis
[31] The issue of whether the mediated agreement comprises a single composite agreement addressing all the commitments made, or alternatively reflects two or more discrete agreements that are merely bundled in the one document for convenience, necessarily starts with an analysis of its terms.
[32] The recitals to the agreement make no reference to child support or spousal maintenance. Instead, they record the status of the parties as trustees and beneficiaries
of a family trust as a pre-cursor to having the agreement address the future of the trust’s property.
[33] The first operative clause specifies that the agreement is made pursuant to s 21A of the PRA and that the agreement records the parties’ intentions to fully settle their differences concerning the status, ownership and division of property owned by them. Clauses 3.1 to 3.5 record the higher level of maintenance that the husband had paid to the wife since separation, and then set out the detail I have reviewed, including the acknowledgement of limited prospects for review of the amount to be paid. Those clauses are self-contained in the sense that they do not cross-refer to other provisions in the agreement, nor are the parties’ rights and obligations under them expressly dependent on other provisions.
[34] In addressing the husband’s interest in his accountancy firm, the agreement recorded the difference in valuations of that interest described at [7] above. The relevant clause acknowledged that the wife was receiving an amount that included full and appropriate compensation to her in respect of the husband’s interest in the accounting firm. The extent of the range in values raises the prospect that other obligations assumed by the husband justified a compromise of what might have been the wife’s larger claim to the husband’s interest in the firm.
[35] Clause 11 (quoted at [8] above) is a summary of the various amounts being paid to the wife. In the first of two provisions addressing the scope of the settlement, cl 11.2 adds together all the sums on account of property interests and the commitments to child support and spousal maintenance as the consideration for which the wife agrees not to pursue any other claims against the husband. The “it” at the start of the second sentence that is referring to a full and final settlement can only refer to the combined value of the various sums to be paid to the wife, including the on-going payments for child support and spousal maintenance.
[36] Clause 11.2 reflects explicit reliance by the husband on all payments he is to make as consideration for the wife’s commitment to thereafter not make any further claims of any type against him. The effect of that provision is that (except for the limited circumstances in which the quantum of maintenance can be re-opened in
cl 3.3) none of the components of the total consideration passing from the husband and the trust to the wife could be revisited without freeing her of the commitment not to make additional claims. On that approach, there is no basis for treating the commitments to pay maintenance as severable from the settlement of the property issues addressed by the agreement.
[37] None of the remaining provisions in the agreement alter the inter-dependent effect of cl 11.2. In particular, the recognised ability to sever any provisions that become invalid or unenforceable3 cannot influence the inter-dependence of the two sets of financial provisions that are both relied on in cl 11.2.
[38] Given this tolerably clear meaning and effect of the agreement, a question arises whether there is scope for other influences on the interpretation of the agreement, irrespective of whether the sources of such evidence might render it inadmissible because of the confidential circumstances in which the mediation occurred.
[39] Section 57 of the Evidence Act 2006 reflects previously recognised privileges from disclosure for the content of communications that are intended to be confidential and are made in connection with an attempt to settle a dispute. The limited exception in s 57(2B) empowers the Court to order disclosure in limited circumstances, including if it considers it necessary to clarify the terms of an agreement reached, if the terms are later disputed or are ambiguous. Mr Delany submitted that circumstance arose here. He also cited cases applying the exception where the interpretation of a mediated agreement is at issue or where the existence of an oral agreement was disputed.
[40] In Oceanbulk Shipping and Trading SA v TMT Asia Ltd, the United Kingdom Supreme Court held that evidence of negotiations may be admitted in order to assist the Court to interpret the agreement in accordance with the parties’ true intentions.4 In those limited circumstances, Lord Clarke, writing for the Court, considered settlement is likely to be encouraged and not discouraged.
3 Quoted at [10] above.
4 Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44, [2011] 1 AC 662 at [41].
[41] The Court of Appeal adopted the same approach in Sheppard Industries Ltd v Specialized Bicycle Components Inc, where the issue was whether a mediated agreement had been concluded orally when there was no written and signed settlement agreement.5 That circumstance brought the dispute in that case within s 57(3)(b), which creates an exception to the privilege for settlement negotiations in relation to evidence necessary to prove the existence of an agreement in a proceeding in which that fact is in issue.
[42] In circumstances closer to the present, Mr Delany cited my own decision in EBS v CAS.6 An issue in that litigation was the extent of potential claims one spouse had settled by the terms of an earlier agreement. The opposing party sought to adduce evidence on that issue of a memorandum that had been prepared and presented to the other party outlining the claimant spouse’s range of potential claims prior to the mediation. A mediation agreement had been concluded that settled a number of claims, but the claiming spouse contended that a new claim was not precluded by the terms of the previous settlement. In those circumstances, I allowed the memorandum to be adduced, holding that s 57 of the Evidence Act could not be invoked to resist admission of the relevant documents.
[43] In this case, the husband wishes to adduce evidence of his apparently unrecorded recollection of the sequence in which the issues that were being mediated were resolved. The evidence does not go to the meaning of the written agreement. Rather, it goes to address the character of the components of the agreement as being different from the character of those components as I interpret them by analysis of the terms used. I am not satisfied that s 57(2B)(b) extends to this situation. There is no doubt here about what the terms of the agreement were. It was formally concluded and is in evidence. It might be argued that there is some ambiguity as to the meaning of cl 11.2 but to the extent an ambiguity does arise, it is not one that is explained or made any clearer by admitting evidence of the sequence in which issues were supposedly agreed during the mediation.
6 EBS v CAS [2013] NZHC 752.
[44] Accordingly, I agree with Judge Grace. The husband’s evidence of the sequence in which issues were agreed during the mediation is not admissible in determining whether the maintenance obligations in the mediated agreement are severable from the terms recording property settlements.
[45] In the event that I am wrong in excluding the husband’s evidence, I am mindful that in opposing its admission Ms Forrest emphasised that his evidence does not go to the meaning of the provisions in dispute, that his recollection is in any event disputed, and the evidence of it is only oral.
[46] Even if the husband’s evidence was admitted, to the effect that all property matters were agreed before the parties turned their mind to the level of maintenance, I doubt that one party’s perception of sequence in which issues were addressed during the mediation would alter the outcome. I do not see it as displacing the reliance placed on all amounts being paid by the husband to procure the wife’s acknowledgement that she would forgo any other claims. Both parties were represented by experienced family lawyers. Even if not apparent to the parties during the mediation, it seems likely that their lawyers would have had in mind an acknowledgement of the complete nature of the settlement as they eventually drafted the terms of cls 11.2 and 14.1, even if in somewhat overlapping terms.
Constraint creates injustice
[47] Mr Delany argued that applying the constraint in s 182(6) of the Family Proceedings Act worked an injustice in this case because the combined effect of provisions in various family law statutes are not adequately co-ordinated. He suggested that, where a maintenance commitment made by way of a voluntary agreement is “by accident or oversight” combined with an agreement recording settlement of property issues, the stringent onus in s 182(6) requiring a person in the husband’s position to establish that it was in the interests of a child of the marriage to vary that agreement is likely to work an injustice. He contrasted the absence of opportunity in the present circumstances with the ability under s 63 of the Child Support Act 1991 to apply for a variation where a voluntary agreement as to maintenance has been registered with the Commissioner of Inland Revenue.
[48] Mr Delany further argued that the upshot of the analysis adopted by the Family Court in this case was that the parties to the agreement had contracted out of the effect of s 32 of the PRA, which otherwise created jurisdiction for the Court to cancel, vary, extend or suspend a voluntary agreement.
[49] Mr Delany submitted that all the husband wished to do was have the Family Court review the appropriateness of the level of maintenance committed to in the agreement. He suggested that, in effect, the husband would have to make out a significant change in the incomes of one of the parties (as contemplated in cl 3.3 of the agreement) before he would succeed.
[50] However, that mischaracterises the husband’s application. The grounds for his relevant application are that:
... a formula assessment of child support has been in force since 3 May 2017 and that the voluntary agreement needs to be cancelled, varied or suspended to take into account both the formula assessment now in place and the merits of [the wife’s] entitlement to spousal maintenance.
[51] Those grounds do not suggest that, if the application were heard, the husband would rely on the ground for review recorded in the agreement.
[52] Ms Forrest acknowledged that if the husband considered he could make out a significant change in one party’s income, then after exploring a change by agreement, it would be open to the husband to make an application to the Family Court in reliance on that ground.
[53] An affidavit by the wife in support of her strike out application included correspondence from Ms Forrest to the husband in April 2017, after he had raised with the wife the prospect of reviewing the extent of the maintenance payments. That correspondence pointed out the limited ground for review in cl 3.3 of the agreement and proposed a process for undertaking such a review, focusing on any changes in the income of both parties. I understand there was no substantive response to that proposal.
[54] I am not persuaded that the relevant provisions in the various family law statutes, which constrain the prospects of review in cases such as the present, require those provisions to be applied any differently. The effect of the agreement is tolerably clear. Having relied on the extent of maintenance as a component of the consideration for the wife refraining from making any further claims, there is no injustice in the husband being limited in the circumstances in which he can seek a review of the extent of that commitment. Such circumstances are themselves tolerably clear in the agreement.
Outcome
[55] For substantially the same reasons, I agree with the Family Court Judge that the application was advanced without tenable grounds and it is appropriately struck out. The appeal is dismissed.
Costs
[56] The respondent is entitled to costs. If they cannot be agreed, I will receive memoranda, first from counsel for the respondent and within 10 working days thereafter from the appellant. Such memoranda in both cases are to be limited to no more than four pages.
Dobson J
ChapmantongLaw, Wellington for appellant Darroch Forrest, Wellington for respondent
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