ELLIS V ELLIS HC AK CIV 2008 404 287

ELLIS V ELLIS HC AK CIV 2008 404 287 28 July 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008 404 287BETWEEN DEBRA KAY ELLIS Appellant AND PAUL HOLDEN ELLIS Respondent Hearing: 22 July 2008 Counsel: J Robertson and Z Wackenier for appellant R von Keisenberg for respondent Judgment: 28 July 2008 at 3pmRESERVED JUDGMENT OF DOBSON JThis judgment was delivered by me on 28 July 2008 at 3pm pursuant to r 540(4) of the High Court Rules. Registrar/Deputy Registrar Date:.Solicitors: Jackson Russell, Auckland for appellant Jones Young, Auckland for respondentBackground[1] This is a relationship property appeal challenging a decision of the Family Court to the effect that the former family home of the couple had ceased to have status as such at the time of separation. It is submitted for the appellant ("Mrs Ellis") that a compassionate application of the purposes and principles of the Property (Relationships) Act 1976 ("the Act") should be applied to the widest possible definition of "family home" in s 2 of the Act to reach the opposite conclusion. [2] A short review of the circumstances of this relationship is sufficient to demonstrate why that approach was relied on so heavily in argument of the appeal. [3] The respondent ("Mr Ellis") purchased the residential property in Rewa Road, Maraetai in 1990. In 1997, the couple began a de facto relationship, living at the Rewa Road property. They were married in March 2000 and a first child was born in July 2000. [4] In about July 2001 Mrs Ellis stopped living exclusively at Rewa Road and began dividing her time between that property and her parents' home in another part of Auckland. This was essentially because renovations at the property made it inappropriate for her with a young child, and because she was pregnant. However, it appears that from around this time, Mr Ellis was having difficulty with his mental health, and in circumstances that were subsequently analysed to be affected by his psychotic state, in September 2001 he was responsible for the death of his father. That led to his being admitted as an inpatient at the Mason Clinic pursuant to the Mental Health (Compulsory Assessment and Treatment) Act 1992, in October 2001. One consequence of his admission to the Mason Clinic was the formal allocation to his brother of responsibilities to manage his affairs, and his brother arranged for the tenanting of the Rewa Road property which continued until October 2004. [5] The second child was born in September 2001, and it appears that Mrs Ellis has continued living for the vast majority of the time with her parents since the middle of 2001.[6] In October 2001, Mr Ellis commenced separation proceedings and shortly thereafter Mrs Ellis filed a notice of claim pursuant to the then Matrimonial Property Act in relation to the Rewa Road property. The separation proceedings were subsequently withdrawn, and the parties treated their relationship as having resumed towards the end of 2001. [7] Letters from Mr to Mrs Ellis in 2002, and some of the evidence, clearly suggest that at least for a period around that time, the positive prospects for a happy family life together in the future were important to Mr Ellis. That contemplation included resuming life together at what had been their home. Certainly, Mrs Ellis appears to have been staunch in her support of Mr Ellis in visiting him, taking the children to see him, and providing a context in which he could indeed look forward to a settled family life. [8] For a period, supervised visits were possible at the whanau flat at the Mason Clinic. Subsequently, in 2004, Mr Ellis was permitted leave from the Mason Clinic for him to be in Mrs Ellis' company, and after the tenants left Rewa Road in October 2004, they had time together, with the children, at Rewa Road. Such visits never included an overnight stay. Mrs Ellis' evidence was that she did stay at the property for over a week at Christmas 2004, and also for a short period when Mr Ellis' mother visited from Australia. [9] In December 2004, Mr Ellis again sought a separation. Counselling was undertaken but the parties separated in February 2005. Since that time, there has been continued improvement in Mr Ellis' state of health, to an extent that in March 2008 he was discharged from hospital on leave and is now living in the community on a supervised basis. [10] Had separation ensued in late 2001, there would be no argument but that Rewa Road constituted the family home, with the consequences in terms of the Act that would follow from that. The appeal has been argued on the perceived injustice of Mrs Ellis' continued commitment to the marriage, through what must have been a very traumatic period of support for Mr Ellis when he was compulsorily detained under the Mental Health (CAT) Act, plus the distress of criminal proceedings inrespect of the death of his father, and then lending support to the programmes run by the Mason Clinic for the rehabilitation of his mental health. Having stuck to that commitment, with the apparent support of her own family, Mrs Ellis is confronted with a legal analysis of her entitlement as at the February 2005 date of their final separation, which requires relevance to be attributed to the use that had been made of the Rewa Road property in the intervening years. [11] Against this background, the essence of Ms Robertson's argument on appeal was to the effect that the use the parties made of Rewa Road in the period between the tenants leaving in October 2004 and separation in February 2005 was to the full extent permitted by the law constraining how Mr Ellis lived at the time, and that their periodic visits there, including with their children, to have family time and attend to maintenance of the property, constituted its use as their principal family residence.The law[12] Section 2 of the Act defines "family home" in the following terms:(a) means the dwellinghouse that either or both of the spouses or partners use habitually or from time to time as the only or principal family residence, together with any land, buildings, or improvements appurtenant to that dwellinghouse and used wholly or principally for the purposes of the household; and (b) includes a joint family home.[13] Ms Robertson urged the widest possible interpretation of this definition, supported by the purposes in s 1M and principles in s 1N of the Act. Her approach drew support from the purpose in s 1M(b) of recognising the equal contribution of husband and wife to the marriage partnership, and from purpose (c) of providing for a just division of relationship property while taking account of the interests of any children of the marriage. The approach also drew support from the principles in s 1N including recognition of equal status of men and women, and that all forms of contribution to a marriage partnership are to be treated as equal. [14] The approach adopted by the learned Family Court Judge and his conclusion are reflected in the following paragraphs of his judgment of 5 December 2007:[17] I have considered the authorities to which counsel have referred me, and in particular Oakley v Oakley (High Court Christchurch M155/78) Summer [sic] J, Jack v Jack (1986) 4 NZFLR 275, Court of Appeal, Evers v Evers 1985 2 NZLR 209, Court of Appeal, Thompson v Thompson 2000 NZFLR 161, Justice Potter, and the decision of Judge CP Somerville inE v E (2005) NZFLR 313. If I do not explore these decisions in these judgment, it is because it is clear that a home which, originally separate property, has become relationship property will not necessarily retain that status; the key is use, the situation must be looked at as at the date of separation, and in the end it will depend upon the particular facts. [18] I am led to the view that 15 Rewa Road had by the date of separation reverted to being the separate property of the respondent Mr Ellis as a consequence of ceasing to be the only or habitual residence of either party.[15] Ms Robertson for Mrs Ellis submitted that this reflected a wrong approach. As to the approach on appeal, I was referred to the Supreme Court's decision inAustin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, and in particular the passage from paragraph [5]:But the extent of the consideration an appeal court exercising a general power of appeal gives to the decision appealed from is a matter for its judgment. An appeal court makes no error in approach simply because it pays little explicit attention to the reasons of the court or tribunal appealed from, if it comes to a different reasoned result. On general appeal, the appeal court has the responsibility of arriving at its own assessment of the merits of the case.[16] Starting with the components of the statutory definition, the first element requires that it be a "dwellinghouse". The statutory definition of that word "includes a flat or townhouse", and in the more general sense connotes a structure intended for people to live in. [17] It is significant that residing in the property does not have to be on a shared basis – it will qualify as a family home if it constitutes the family residence for either spouse. So too, the breadth of possibilities in its use being either habitual or "from time to time". The qualifier on that breadth is that the dwellinghouse has to be the "only or principal family residence". [18] The common sense notion of "residence" involves the activity of residing, which encompasses the residential elements of day-to-day living, including preparation and eating of food, sleeping and the other activities incidental to residential life.[19] I do not consider it necessary to consider the additional elements of the definition starting with the words "together with any land" as having any immediate bearing on the facts of this case, and nor do I see them aiding an interpretation of the preceding concepts provided for in the earlier parts of the definition. [20] The Act provides further guidance on determining the use of particular property as follows:2H Determination of use to which property put(1) This section applies where the classification of any property as relationship property or as any particular type of relationship property depends on the use to which it has been put. (2) Where this section applies, that classification is to be determined— (a) by the use to which it was put by the spouses or partners; or (b) if the marriage, civil union, or de facto relationship has ended (other than by the death of 1 of the spouses or partners), by the use to which it was being put before the marriage, civil union, or de facto relationship ended. [21] Of the authorities referred to, the decision in Thompson v Thompson [2000] NZFLR 161 was a decision of Potter J under the Matrimonial Property Act 1976. The analogous approach involved consideration of use of a particular property, over a period of time. It had been matrimonial property when used as the family home, but ceased to have that status when that use no longer applied. With respect to the competing submissions I had about this case, that point does no more than reflect the approach directed by s 2H of the Act. It means that whereas Rewa Road was undoubtedly the family home in terms of the Act at some point, it could cease to have that status and, on the appellant's argument, might subsequently resume its status as the family home if a further change in the use was sufficient to qualify it as such. [22] Reference was also made to the earlier Court of Appeal decision in Evers v Evers [1985] 2 NZLR 209. That case related to the classification of orchard land adjoining the former matrimonial home. In terms of the period in time to which theenquiry should be addressed, the judgment of the Court per Richardson J included the following at 211:It is a matter of surveying the pattern of use of the particular item of property up to the time the parties ceased to live together in order to determine as at that date (in the case of either category of matrimonial property) how the property is to be shared. Concern is not with fleeting or transient uses, but with what may fairly be characterised as the substantial use or uses made of the property before the spouses parted.[23] This reflects a sensible caution that temporary uses inconsistent with a settled trend of use are to be disregarded. Over a reasonable period, there will be a predominant use of any property which is to dictate the determination under s 2H. [24] None of the authorities cited explicitly consider any necessary minimum activities required before a dwellinghouse will qualify as a "family residence". That is unsurprising, given that the concept of a residence for a family is a matter of common sense, and the enquiry in each case will be so intensely fact-specific.Application to the facts[25] What the authorities do recognise is that the character of a particular dwellinghouse can change from being other than a family home, to becoming a family home, and depending on the nature of the use, there may be further transformations. Here, it is common ground that the property prior to settled occupation by Mr and Mrs Ellis as a couple was not a family home, it then enjoyed that status for a period, but ceased to be the family home in the period it was tenanted between 2001 and 2004. [26] The critical issue is whether the use that either or both of the parties made of it in the period between the tenants moving out in October 2004 and separation of the parties in February 2005 was sufficient to transform its use back into that of a family home. [27] Notwithstanding the unusual constraints on how the parties could conduct their relationship in the relevant period, I am satisfied that the circumstances of use in the relevant period were not sufficient to constitute it a family home.Ms Robertson accepted that the definition does not proceed from an assumption that there must be a family home for every couple. She instanced the circumstances of a couple where one party is residing overseas, and the other is in some form of shared accommodation. Once the analysis recognises that this family may have existed without any family home, then one is driven to acknowledge that each party had another address as their principal residence: for Mrs Ellis, that was with her parents and for Mr Ellis, it was the Mason Clinic. Accordingly, the Rewa Road property was not being used as the principal residence for either of the spouses. The short periods when Mrs Ellis did sleep there, over Christmas 2004 and with her mother-in- law, cannot alter the status of her own parents' home as Mrs Ellis' principal residence. It is significant in terms of use that Mr Ellis invited Mrs Ellis to return to live at Rewa Road in 2004, and she declined to do so. Ms Robertson accepted that there was no legal impediment on her doing so, rather that Mrs Ellis needed support, and she got that living with her parents. [28] The possible alternative advanced by Ms Robertson is that, notwithstanding that in their separate lives they each had residences elsewhere, to the extent they could conduct themselves as a family, then that occurred to the greatest extent possible, at Rewa Road. That would still require the character of what was undertaken at the property to qualify as "residing". I consider that it would be a quite forced and unnatural use of the word to suggest the occasional visits there together during weekend days amounted to "residing". The circumstances in which Mrs Ellis declined to reside there in 2004 can only reinforce the distinction between the necessary minimum residential element of the use made of the property, and the most unusual limited resort that the parties had to Rewa Road as a family, to enable them to have time together during weekend days. [29] Accordingly, the challenge to the finding that the property was not a family home for the purposes of the Act at the date of separation must fail.Application of s 9A[30] Given confirmation of the Rewa Road property as Mr Ellis' separate property, consideration must next be given to whether any increase in its value is attributable to the application of relationship property. Section 9A(1) provides:9A When separate property becomes relationship property(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.[31] Mr Ellis purchased the property in about 1990 for $100,000, contributing $25,000 himself and borrowing the remainder on a mortgage from Westpac. The property was valued at $180,000 as at July 1997, $190,000 as at October 2001, $370,000 as at September 2006, and the valuation at the time of the Family Court hearing was $415,000. [32] During the marriage, the bank mortgage was fully repaid, principally from the rents received and also from a lump sum superannuation payment to which Mr Ellis became entitled in September 2001 of $16,433, plus the proceeds of sale of a motor bike owned by him amounting to $10,000. [33] Each of those amounts is recognised as relationship property. In addition, prior to separation Mrs Ellis sold a motor vehicle for $8,000 which has been earning interest in a bank account and is also acknowledged to be relationship property. [34] The Family Court Judge accepted arguments on behalf of Mr Ellis to the effect that reductions in the mortgage secured against separate property do not increase the value of that property. It was also accepted that increases in the value of the property attributed to general market increases cannot be treated as increases in value specific to the property in a way that has to be taken into account in considering the parties' contributions.[35] I agree with both findings. Mrs Ellis' interest is in the amount of money that was paid to the bank, to which she has a claim because it is relationship property, not the subsequent consequences for the net amount that would be realisable out of separate property for Mr Ellis. On the second point, if replacement of Mr Ellis' separate property that cost $100,000 when acquired would now cost $415,000, then it would be inconsistent with a notion of separate property to require him to share part of the increased value that would be needed for him to now replace the separate property. There is accordingly no basis for overturning the Family Court finding that s 9A did not apply.Section 17[36] The outcome of such an analysis under s 9A has to be assessed in cases like the present, with the potential application of s 17 of the Act which was also considered by the Family Court Judge. That section will apply if the separate property of one spouse has been sustained by the application of relationship property, or the actions of the other spouse. To the extent that has occurred, then the Court has a discretion to increase the share of the contributing party to relationship property, or order that the spouse owning the separate property pay the contributing spouse a sum of money as compensation. [37] Accepting that the circumstances were not capable of precise or arithmetical calculation, the Family Court Judge considered that $7,500 was the appropriate measure of Mrs Ellis' efforts in sustaining Rewa Road as separate property. [38] In one sense, reflecting on what has "sustained" Rewa Road since October 2001 is an extraordinarily unusual analysis: in the narrow property management sense, it appears the intervention of Mr Ellis' brother in tenanting and supervising the property is what "sustained" it. However, in a broader sense, the aspirations of both parties for at least part of the period since then that a normal family life might subsequently be possible, and that Rewa Road represented the physical location at which such aspirations would be realised, might be treated as a form of sustaining the property in these exceptional circumstances. In a negative sense, such aspirations would have excluded the prospect of its sale.[39] This is not to suggest that actions in sustaining the separate property for the purposes of s 17 are to be equated with the broader notion of contributions of spouses under s 18. That broader notion, which I accept is not directly relevant in a s 17 enquiry, includes the notion of one spouse assisting or supporting the other to enable the other spouse to acquire qualifications. In the broadest sense, the mental rehabilitation of Mr Ellis is an equivalent notion, so that Mrs Ellis' efforts could be treated as such a contribution. [40] In the end, I consider the justice of this case requires the notion of Mrs Ellis' efforts in sustaining what had been the family home, but which by circumstances in large part beyond her control had reverted to being the separate property of Mr Ellis, are to be evaluated in a somewhat wider sense than the Family Court determined. Accepting fully that it is not capable or arithmetical calculation, I would value the contribution Mrs Ellis has made to sustaining that property at $15,000 and order that Mr Ellis is to pay that sum to her as compensation under s 17(2)(b).Summary[41] The decision of the Family Court is upheld in all respects, save for the extent of the order under s 17. For the avoidance of doubt:• The property at Rewa Road is confirmed as the separate property of Mr Ellis.• Mr Ellis is to make a compensatory payment of $28,217, together with interest at 5% per annum from 1 October 2001.• There is to be equal division of the proceeds of sale of the vehicle by Mrs Ellis, together with the interest that has accumulated up to the date of division. [42] There is to be no order as to costs. _________________Dobson J