HAMMOND V HARDY HC AK CIV 2006-404-4894

HAMMOND V HARDY HC AK CIV 2006-404-4894 17 April 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2006-404-4894UNDER the Property (Relationships) Act 1976 BETWEEN KAREN MARIE HAMMOND Appellant AND AIDAN EDWARD LAURENCE HARDY Respondent Hearing: 8 February 2007 Appearances: V J Vette for the Appellant P M Howard-Smith for the Respondent Judgment: 17 April 2007RESERVED JUDGMENT OF PRIESTLEY JThis judgment was delivered by me on 17 April 2007 at 11.00 am, pursuant to Rule 540(4) of the High Court Rules. Registrar/Deputy Registrar Date: Counsel/Solicitors: V J Vette, McVeagh Fleming Albany, P O Box 300 844, Albany P M Howard, Howard-Smith & Co, P O Box 5386, Wellesley Street, AucklandCONTENTSParagraph The Appeal [1] Background [6] The Extent of the Family Home [16] Homesteads, Cole v Horton, and Hyde v Hyde [29] Hinemoa Street Apportionments and Adjustments [65] Section 15 Economic Disparity Compensation [82] Lump Sum Child Support [95] Settlement of Property on the Child [106] Section 26A Discretion to Postpone Vesting [11] Result [116] Costs [122]The Appeal[1] Judge J H Walker delivered a reserved judgment in the North Shore Family Court on 21 July 2006. The judgment determined the parties' respective claims under the Property (Relationships) Act 1976. [2] The Judge identified 11 issues which she had to resolve. These included: a) 102-108 Hinemoa StreetWhether a leased shop adjacent to and on the same title as the parties' family home was relationship property. b) DebtsThe treatment of substantial indebtedness to the ANZ Banking Group and in particular the apportionment of that indebtedness between relationship debt and personal debt (an issue in large measure being dependent on the classification of Hinemoa Street). c) Hinemoa Street AdjustmentsResolution was required of such matters as claimed occupation rental, post-separation mortgage, rates, and insurance payments, and possible compensation of the appellant's contributions to any separate property component of Hinemoa Street. d) The Appellant's Claim for a Compensation Sum Under Section 15e) Other OrdersThese were claims under ss26, 26A, and 32 which, if successful, would improve the appellant's financial position.[3] The Judge held the Hinemoa Street shop was not relationship property. She made consequential orders apportioning the ANZ debt. She declined, for a number of reasons, to make an order under s15. She also refused orders under ss26, 26A, and 32. [4] The appellant challenges those results on appeal. [5] Determining this appeal and considering counsel's helpful submissions was not a difficult exercise. Ideally, and particularly since the respondent sought a priority fixture because of intimations of a mortgagee sale on the part of the ANZ Bank, I had hoped to deliver judgment within four or five weeks of the hearing. Regrettably circuit and trial commitments created difficulties. A substantial difficulty, however, was created by the arrival of a reserved judgment of Harrison J,Hyde v Hyde (HC WHA 2006-488-504, 9 March 2007). That judgment forced me to reconsider an issue and also obliged me to seek supplementary submissions from counsel, which I have considered.Background[6] The parties were not married. They commenced a de facto relationship in the June/October 2000 period and separated on 14 July 2004. The relationship produced a son born in October 2002. [7] The respondent entered this four year relationship as the owner of Hinemoa Street. He purchased the property in January 1997, at which stage he had separated from his former wife but had yet to settle property matters with her. He acquired Hinemoa Street for $351,000, all but $21,000 of which was borrowed from the ANZ. [8] The respondent also owned 100 shares in a company he operated, Point Wines Limited, and a sloop. The shares and the company (clearly the respondent's separate property) were not an issue in the Family Court. The sloop, two moorings, and chattels were subject to orders made by Judge Walker and are not relevant to this appeal.[9] The appellant appears to have brought little in the way of assets into the relationship other than furniture and a motor vehicle. [10] The parties had known each other for approximately four years before they entered into a de facto relationship. Before April 2000, (a few months prior to the start of the relationship), the appellant earned, with bonuses, approximately $65,000 per annum as a business development manager of Drake International. She resigned from that position, probably to reduce her level of stress and also to assist the respondent with his wine retail outlet at Northcote (Point Wines Limited). [11] After approximately a month the appellant was head-hunted by Zivo NZ Ltd and became an account director on a $65,000 per annum salary, which with bonuses would have increased to $92,000. She continued to manage the wine business. Approximately three months later, however, Zivo made her redundant. She continued working for the appellant's business up until the parties' separation in 2004. The arrival of the parties' son in 2002 did not change that arrangement. Between January 2002 and August 2004 the appellant drew a regular annual salary of approximately $39,000. [12] The Judge's findings of fact relating to the parties' use of Hinemoa Street are important. The couple moved into the property in Labour Weekend 2000. At all material times the property comprised two buildings. The front building, the shop, contained a dairy business which was renting from the respondent. The couple lived in the rear building. [13] In 2002 renovation work was carried out on the front building. Mr M Eglinton, who gave evidence in the Family Court, was engaged by the respondent between April and June 2002. The interior of what he describes as the "commercial building" was gutted. A concrete floor was laid. The building was rewired and generally improved. The front building was then leased at an annual rental of $19,890 plus GST with rights of renewal which, if exercised, will keep the lease in force until June 2008.[14] The Judge accepted an October 2004 valuation of Hinemoa Street which assessed the residential portion of the property at a value of $343,000 and the commercial portion (the front shop) at $301,500 (GST inclusive). In terms of valuation figures the residential/commercial split was 53.34%:46.66%. (The Judge refers to 44.66% but this is a typographical error. See infra para [71]). The respondent's accountants for tax purposes treated the split as 56.4%:43.6%. [15] There is no quarrel on this appeal about this componentry. The quarrel relates to the status of Hinemoa Street, to which issue I now turn.The Extent of the Family Home[16] Clearly at the outset of the relationship, Hinemoa Street was the respondent's separate property. Clearly too, from Labour Weekend 2000, one of the buildings on Hinemoa Street was used as the parties' family home. That use continued throughout the remaining 45 months of the relationship. [17] Section 2 defines a family home, (which in terms of s11(1)(a) must be shared equally on division), thus:2 family home – (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[18] On the facts before the Judge there was no dispute that one of the two Hinemoa Street buildings was the parties' principal family residence. The issue for the Family Court was whether the commercial building on the property fell inside the "family home" definition and in particular whether it was a building "appurtenant to that dwellinghouse and used wholly or principally for the purposes of the household".[19] Leaving aside, for the moment, the issue of the s2 definition of "homestead", the central inquiry in this case must be whether the leased building was used "wholly or principally for the purposes of the household". Although such inquiry is not the norm in disputes over urban family homes, the issue is far from novel. [20] In Jack v Jack (1986) 2 FRNZ 176, spouses lived in the master flat of a two flat property, comprising 80% of a building's floor space, the building being owned by the husband prior to marriage. Cooke P (at 178) saw no reason to depart from the natural and ordinary meanings of the words used in what was then the definition of "matrimonial home". He stated:The natural and in my opinion preferable interpretation is to consider the use to which each substantially separate item of appurtenant property has been put.[21] McMullin J (at 183) referred to the smaller flat which Mrs Jack was claiming as part of the matrimonial home thus: the lower flat was not [used for household purposes]. It was let to independent tenants. It cannot be said to have been used for the purposes of the household merely because the rental from it was used to supplement the family income. The use referred to in the definition is the use of the dwellinghouse for family purposes. That must involve a physical use. It would be straining its construction to say that it included the use of rentals which were received from its letting and applied to family living.[22] The Judge referred to Jack v Jack and the s2 definition of "family home". She also referred to my decision in Cole v Horton (2004) 24 FRNZ 449 to which I shall return (infra para [29]). The Judge then concluded:[56] In these present proceedings, I find that throughout the relationship the commercial property and the residential property have been treated separately. The residential part has been occupied with original tenanting and then occupied by the parties and remains occupied by the Applicant. The commercial portion had previously been rented as a dairy, it has been renovated and re-let for commercial purposes. There is no evidence before the Court that at any stage while in the occupation of the parties, the properties ever constituted two residential areas. Mr Eglington's evidence supports that the dairy originally housed three separate shops historically.[23] Ms Vette's submissions on appeal, on this and other issues, were essentially a rerun of the arguments which failed to find favour in the Family Court. These were first the appellant's evidence that the parties considered the whole of Hinemoa Streetas their home, secondly that the Judge had failed to weigh a disputed statement attributed to the respondent that the property would be the couple's "superannuation plan", and thirdly the physical proximity of the two buildings, being a metre apart at the closest point. [24] Counsel also relied on the appellant's evidence that the couple had a long term plan to open a restaurant in the commercial building, which was why a toilet block had been installed during the 2002 renovations, and on the fact that the income received from the leased building was used both to decrease an overdraft and to purchase household and family items through the respondent's personal drawings. [25] Ms Vette referred to the fact that there was not, at the relevant time, a fence or wall between the two buildings. She also repeated a submission which the Judge, correctly in my view, had described as "somewhat misleading", to the effect that when the respondent bought Hinemoa Street both buildings were tenanted. [26] Stripped to its essentials, counsel's submission was that the use of the commercial building was wholly or principally for the purposes of the household because, in combination, its rents had been used for family purposes, and there was a long term intention both to hold the building as a superannuation fund and to operate it as a restaurant. [27] In my judgment the Judge was absolutely correct to find that the residential portion of Hinemoa Street was the family home and its commercial portion the separate property of the respondent. On the facts before the Judge, as she found, the commercial building, despite Ms Vette's collection of arguments, was never used "wholly or principally for the purposes of the household". The various long term plans and musings on which the appellant relied were not brought into effect. The use of the shop building, both before and during the relationship, was commercial and totally separate from the family home a metre away to its rear. The 2002 renovation of the commercial building which led to it being leased, underlines the use of the building and was an additional obstacle in the way of finding the building was being used wholly or principally for household purposes.[28] Because Hinemoa Street, occupied as it is by two buildings with separate status, is on a single certificate of title, it follows that the homestead provisions of ss12 and 12A, together with the s 2 homestead definition apply. To that issue I now turn.Homesteads, Cole v Horton, and Hyde v Hyde[29] Because the parties' family home, as found by the Judge, sits on urban land which would otherwise have separate property status, it is covered by the s2 definition of homestead which I set out in full.2 homestead –(a) means a family home where the dwellinghouse that comprises the family residence is situated on an unsubdivided part of land that is not used wholly or principally for the purposes of the household; but (b) does not include a family home that is occupied – (i) pursuant to a licence to occupy within the meaning of section 121A of the Land Transfer Act 1952; or (ii) because of the ownership of a specified share of any estate or interest in the land on which the dwellinghouse that comprises the family residence is situated and by reason of reciprocal agreements with the owners of the other shares; or (iii) in the case of a flat or town house that is part of a block of flats or town houses or is 1 of a number of flats or town houses situated on the same piece of land, under a lease or other arrangement that entitles the occupants of the flat or town house to exclusive possession of it.[30] The specific types of ownership or occupation rights set out in subsection (b) have no application to this case. [31] Section 12(1) removes a family home which is a homestead from the application of the equal sharing provisions of s11(1)(a). Pursuant to s12(2) each spouse or partner is entitled to share equally in a sum of money equal to the equity in the homestead.[32] Section 12A sets out the apportionment formula for valuing a homestead. In this case the parties obtained a valuation which allowed the Judge to arrive at the appropriate homestead valuation figure [33] It would be wrong to regard a homestead as being a separate item of relationship property. Rather a homestead is, as the s 2 definition suggests, a family home situated on unsubdivided land. [34] A dovetailing or complementarity of the "family home" and "homestead" definitions is to be found in the words "used wholly or principally for the purposes of the household". The definition of "family home" includes land buildings or improvements appurtenant to the dwellinghouse so used. Structures or land not meeting that test cannot form part of the family home, as was the case with the Hinemoa Street commercial building. Similarly that portion of the unsubdivided land which is not used wholly or principally for household purposes cannot comprise part of the homestead. [35] As Fisher on Matrimonial and Relationship Property (para 12.11) puts it:If the whole of the unsubdivided land in question falls within the definition of "family home", that would seem to be the end of the matter. Consideration of the "homestead" provisions then seems to be redundant. If, on the other hand, the owner discharges the onus of proving that only a portion of the unsubdivided land in question satisfies the "family home" definition, it would seem necessary to go on to consider the definition of "homestead".[36] Authority for the introduction of an onus is to be found in the earlier decisionTonkin v Tonkin (1978) 1 MPC 211, 212 where Barker J said:I think it is incumbent on the party who seeks to assert that part only of the land should be set aside as a "homestead" to demonstrate that this part only was regarded as the matrimonial home and not the whole property.A similar approach was taken by Neazor J in Gooch v Gooch (1990) 6 FRNZ 499. [37] Recent Court of Appeal authority, however, suggests that, consistent with the s 1M(c) purpose of providing a just division of relationship property and the 1N(d) principle of resolving relationship property questions inexpensively, simply, andspeedily, a court, in applying the principles of the Act should adopt a quasi- inquisitorial approach and not allow proceedings to be driven by procedural niceties. In M v B [2006] NZFLR 641, Robertson J stated:[39] ...[The Property (Relationships) Act 1976] is about property rights and entitlements. The Act, and the regulations which have been promulgated pursuant to it, make it clear that, although there is not a fully inquisitorial system, a Court needs only to be satisfied about a state of events which has existed, or which exists. Notions of onus of proof fit uncomfortably within this legislative regime.[38] In the Hinemoa Street situation there is no scope for uncertainty. One building was used as the family home. The other building, being commercially leased, was clearly not used wholly or principally for the purposes of the household. The land is unsubdivided. The family home, as the Judge found, thus became the homestead to which the provisions of s 12 applied. The balance of the property remained the respondent's separate property. [39] Nice issues, however, can arise when family homes are on unsubdivided rural land but the use of the land beyond the environs of the family home is problematic. These issues become particularly acute and need consummate care in situations where the unsubdivided land in question has separate property status. In the case before Judge Walker, in the earlier decision of Cole v Horton (op cit), and in Harrison J's recent decision of Hyde v Hyde, the unsubdivided land in question was the separate property of the husband or de facto husband [40] An important feature of the Act, indeed a policy factor which led to the repeal of the Matrimonial Property Act 1963, is the introduction of clear and inflexible rules. Indeed, the heading of s 4 proclaims the Act to be a code. Codes are not to be tinkered with at judicial whim. Rather judges at all levels will endeavour to ensure that fundamental features and principles of the Act remain intact. In M v B [2006] NZFLR 641, Robertson J stated that:[34] ... The underlying philosophy and inspiration is always to be considered, but their operational ambit must be evaluated within the particular statutory responses which Parliament has enacted. They do not permit Courts to go further than Parliament was willing to legislate for. [35] The Chancellor's foot was amputated many centuries ago. Doing what is "just" under any legislation (whether it has a social context or not)also involves making decisions which are predictable and consistent. There is a distinct danger that, in the name of being just, individualised judicial discretion becomes too predominant.[41] A clear divide in the Act is the demarcation between relationship property and separate property. Thus extreme care should be taken to ensure that property which is separate property does not lose that status because of some quirk or expansive interpretation of the s 2 "family home" and "homestead" definitions. [42] These factors weighed heavily with me in Cole v Horton, a case which clearly provided guidance and comfort to Judge Walker, quite apart from its binding nature. The first instance Judge had, inter alia, declared an 18.8 hectare block of rural land, which had been in the husband's family since 1927, a homestead largely on the basis that the other activities carried out on the property such as grazing, silage production, and storing various implements relating to the husband's agricultural contracting business, were not features of an economic unit. [43] I held the Family Court's finding was wrong. When discussing the s 2 definitions I said:[33] "Family home" as defined (supra) is the dwellinghouse used habitually or periodically by a husband and wife as the principal family residence. The definition includes "land appurtenant to any such dwellinghouse and used wholly or principally for the purposes of the household". Section 12 extends to situations where the family home is a homestead and sets out mechanisms to ensure that a partner is not deprived of an appropriate and apportioned capital sum as a result of there being no family home. [34] To ascertain when one is dealing with a homestead rather than a family home, the definition of "homestead" dovetails neatly, by using identical expressions, to the definition of "family home". The demarcation is whether the land surrounding the homestead, and in contradistinction to the land comprising part of a family home, is ". not used wholly or principally for the purposes of the household " [35] Fisher on Matrimonial and Relationship Property (para 12.12) recognises the distinction and provides useful illustrative commentary: Since 'homestead' relates back to the definition of 'family home' in section 2, it includes any lands, buildings or improvements appurtenant to the dwellinghouse used wholly or principally for the purposes of the household. On most farms the test is satisfied by the area of lawns, gardens and/or orchard surrounding the house and physically enclosed by a fence or hedge. This simplistic approachshould not obscure the ultimate 'purposes of the household' test. In some cases the area will need to be extended beyond the immediate physical enclosure, for example where the family keeps horses or pets for pleasure in a defined area. In other cases the area may be less than the immediate physical enclosure when certain out buildings are used exclusively for farming purposes. In cases of contention the precise metes and bounds may need to be judicially determined as a preliminary to valuation.[44] On issues of the use of land and the dangers of destroying, without a proper fact finding exercise, the status of separate property, I pertinently said:[41] A concentration on issues of whether or not land is an economic unit; whether or not various activities carried out on the land are sufficient to sustain a family; and whether there is some financial nexus between income generated by the land and the provision of family necessities, are all issues which, if given undue prominence, will deflect a Court from asking the question "How much of the land surrounding the house is used wholly or principally for the purposes of the household?" [42] A hypothetical example, which I put to counsel during the course of argument, is illustrative. A husband owns some hundreds of hectares of farm land which had been in his family for three generations. The land and farm might be extremely productive and fund, for the "household", motor vehicles, good wardrobes, private school fees, university fees, and overseas holidays. It might be possible for the entire net income of such a farm to be consumed by the family occupying the house. It would be a nonsense, in my judgment, to adopt a reasoning process which, on the basis of those facts, resulting in a finding that the entire farm block was a family home. Yet, that is precisely what the Judge has done here. [43] The risks inherent in such an approach, both in this case and in my hypothetical example, are that what is essentially a definition section of the statute, designed to produce a mechanism whereby partners living in rural areas where the house is surrounded by farmland receive a comparable item of relationship property to partners living in an urban family home, has been used to convert, at a stroke, a block which undoubtedly had the status of separate property into relationship property.The question posed in para [41] is totally consistent with the approach of the Court of Appeal in Jack v Jack (op cit) (supra paras [20] and [21]). [45] Because of the Judge's reliance on Cole v Horton it is necessary for me to analyse briefly Harrison J's recent decision of Hyde v Hyde. [46] Mr Hyde had previously been married. He had owned 80 hectares of bush and open grazing land. This area reduced to 39 hectares when he transferred half of the block (there was no dwelling) to settle his first wife's claim.[47] After his second marriage, during the early years of which the couple lived in rented accommodation, a family residence was built by the couple in the bush area of the land. Some six years later a small granny flat was erected to accommodate Mrs Hyde's mother who emigrated from Russia. Prior to that, Mr Hyde sold two road frontage sections thereby reducing the size of the block to 36.8 hectares. The sale proceeds of those sections was used to repay a mortgage over the property securing a loan from Mr Hyde's son and to fund the building costs of the family home and the granny flat. [48] The Family Court Judge found as a fact that some parts of the farm area were not used wholly or principally for the purposes of the household, but that the balance (which would have included the family home) constituted a homestead. The Judge excluded two grazing blocks from the homestead. He accepted that the farm was not an economic unit but considered there were other more significant factors leading to his demarcation, including Mr Hyde's view of the farm being used for farming activities and in due course for residential subdivision. [49] The Judge determined a specific area as the homestead, comprising 7.7 hectares, including associated chicken runs, orchard trees, and a right-of-way. Bush, pasture, and grazing areas totalling 28 hectares remained Mr Hyde's separate property. [50] In defining the relevant issue Harrison J stated:[8] Thus the principal issue for the Judge's determination, although not articulated in this way, was whether or not the unsubdivided part of the land on which the dwellings were constructed was a homestead. If so, the balance following physical partition of the homestead was Mr Hyde's separate property, and in that event the Judge had to consider Mrs Hyde's separate claims for monetary contributions towards the property and related arguments. If not, all the land was relationship property subject to the statutory equal sharing regime.[51] It is unclear how the Family Court Judge articulated the principal issue. But Harrison J's reformulation, with respect, runs the danger of the primary focus shifting from the fundamental "family home" inquiry of whether the land appurtenant to the dwellinghouse is being used wholly or principally for the purposes of the household, and instead concentrating on what should be thesecondary inquiry, of whether the family home is on unsubdivided land not used solely or principally for the purposes of the household. [52] If the family home focused inquiry reaches the conclusion that the entire rural block was used wholly or principally for household purposes then, as Fisherobserves (supra para [35]) a homestead focused inquiry is unnecessary. [53] The Family Court Judge in Hyde v Hyde apparently made precise factual findings in this area sorting out the "metes and bounds" of the family home and finding, as a result, that the family home land did not extend to the entire block. [54] Harrison J refers to the increasing phenomenon of lifestyle blocks. He comments that the "principal distinction" between "lifestyle" and urban dwellers is the size of land surrounding the family home and the physical environment. Against that background Harrison J did not consider Mr and Mrs Hyde's circumstances as unusual. He commented they had built a house on a rural property which they used as their family home, developing the surrounding land with gardens and fruit trees and using the further reaches of the land to graze livestock. This analysis, however, overlooks both the separate property status of the block and the principal use inquiry. [55] His Honour favoured a "global approach" and described the proper inquiry thus:[20] In my judgment the inquiry must be directed to the use of the property as a whole,. That is the effect of the statutory definition of a homestead as the 'family residence situated on an unsubdivided part of land that is not used wholly or principally for the purposes of the household'. The word 'that' must refer to all the land including the unsubdivided part on which the residence is situated. The inquiry is not directed to the different question of whether any or all of the balance of the land excluding the residence is used wholly or principally for household purposes. That demarcation exercise must be undertaken at a secondary stage, only if the Court has determined that the family home is a homestead and it is necessary to physically define its boundaries. A 'household' means 'the people living in a house, especially a family in a house, a domestic establishment': The New Shorter Oxford Dictionary, Vol.1.With respect, this approach again avoids the prime inquiry which is to establish the extent of the family home by assessing the use to which appurtenant land, building, or improvements are put. If that inquiry does not lead to an entire block beingencompassed, then obviously the homestead definition will be applicable, since part of the unsubdivided land will "not be used wholly or principally for the purposes of the household". The family home definition, designed to assess the extent of land and buildings appurtenant to the family home, must be carried out first since it is that definition (the "family home") which is included in the homestead definition. [56] Harrison J concludes the Family Court Judge erred because he relied on the finding (which in my view was an essential primary finding) that some parts of the farm area were not used wholly or principally for household purposes. His error was compounded, in His Honour's view, because the area could never be described accurately as a farm and Mr Hyde could never be properly characterised as a farmer. Harrison J then examines the farming income to justify that conclusion. [57] Harrison J then turns to the case law, suggesting my approach in Cole v Horton might be wrong. He refers to paras [34] and [41] of my judgment (supra paras [43] and [44] respectively) and then says:[33] I agree with Priestley J that the economic unit test is not decisive in itself, although it is frequently a weighty factor. However, I respectfully differ from his demarcation approach, based upon an inquiry into the use of land surrounding the family home, leading to his conclusion that large parts devoted to agricultural production were not used wholly or principally for household purposes. While that approach may correctly encapsulate the test to be applied in a dispute about whether a residence is a family home, it is not apt in my judgment where one party is seeking to establish the discrete proposition that the family home is a homestead. [34] Priestley J was influenced in Cole by his recognition of the interlocking definitions of family home and homestead. I agree with him that parts of the definitions dovetail. But I think that in other respects they differ materially, depending on the nature of the inquiry. The definitions share the same primary component of a dwellinghouse comprising the family residence, which was admitted in this case. [35] However, the concepts diverge where one party seeks a departure from the equal sharing regime to establish that the residence is a homestead. The status of the land assumes a decisive importance. Instead of focusing on the purpose of the use of the land appurtenant to the dwellinghouse, the second component of the family home definition, the inquiry shifts to the purpose of the use of the unsubdivided whole of the land on which that dwellinghouse is situated. The logical consequence of rejecting a homestead argument is that the property is a family home, with the result that all the land is deemed to be land appurtenant to the dwellinghouse and used wholly or principally for the purposes of the household. In this way the twodefinitions are consonant, as Priestley J observed, but they follow different paths.[58] Harrison J is right ([35]) that the status of the land has decisive importance. Particularly that is the case where, but for a family home on it, the land would be separate property. The homestead definition is not a mechanism to assist a party who "seeks a departure from the equal sharing regime". The definition is to cover situations where, as a result of the delineation of the family home in accordance with its s 2 definition, the Court is left with a situation where the "metes and bounds" of the family home do not coincide with the unsubdivided land. [59] Thus, as Fisher rightly observes (supra para [35]), a judicial determination of whether or not parts of a rural block are used wholly or principally for household purposes is necessary. The fact that part of a rural block may lie idle, or not support an economic farming operation, cannot possibly be justification for a default finding that those portions of land comprise part of the family home. [60] These obiter comments on Harrison J's Hyde v Hyde judgment are not designed to comment on the decision he reached. They are necessary, however, first because His Honour cast doubt on the methodology I employed with the family home/homestead definitions in the conceptually similar case of Cole v Horton, secondly because Judge Walker clearly relied on Cole v Horton, and thirdly because Ms Vette in her supplementary submissions calls Hyde v Hyde into aid as an additional reason for submitting that Judge Walker's treatment of the Hinemoa Street property was wrong. [61] For reasons which are now apparent, I am unconvinced that my Cole v Horton methodology was incorrect. Nor, with respect, do I consider that the approach suggested by Harrison J, particularly in the face of found facts, is a correct approach in the light of the two relevant s 2 definitions. [62] Perhaps at some stage this judicial divergence, if it is one, will need to be determined by the Court of Appeal. In the meantime Family Court Judges, in those rare situations where they may be confronted with competing High Court authorities in this area, will need to analyse the relevant facts and definitions with care, payingparticular regard to the Act's policies and the dovetailing of the two relevant definitions. [63] People contemplating using a block of land with separate property status as the site of a family home would be well advised to use the provisions of s 21 to place the status of the land and the extent of the family home beyond doubt, rather than running the risk of the issue being subject to judicial vagaries. [64] In my judgment practitioners with clients in this situation are doing their clients a disservice if they fail to give robust advice both on the risks and on the wisdom of specifying in a s21 agreement the extent of the family home, thereby preserving the separate property status of the balance of a rural block.Hinemoa Street Apportionments and Adjustments[65] The Judge made a number of findings and orders in this category. Not all are challenged by the appellant. [66] Her relevant findings were: a) The debt attributable to the family home was $85,442.96 (of a total ANZ indebtedness at 30 May 2006 of $160,185.53). b) There was no basis for the respondent's claim for occupational rental. c) Pursuant to discretionary powers exercisable under s 18B the respondent was entitled to be refunded half of the capital payments he had made under the mortgage and of rates and insurance payments since the separation, being respectively $17,968.37 in respect of the mortgage and $3,010.27 in respect of rates and insurance. [67] The Judge's arithmetic, to which there was no challenge, on the basis of the family home valuation of $343,000, left a balance to be divided equally between the parties of $236,638.40.[68] The Judge also ordered, and helpfully so, that if the property were to be sold to a third party the applicant's responsibility for sale costs was to be 25%. [69] Ms Vette sought two modifications of these orders. She submitted that the Judge was wrong in treating the ANZ indebtedness on a global basis and apportioning it between the commercial and residential components of Hinemoa Street on a percentage basis. She further submitted that the Judge made a factual error in her treatment of the respondent's two (suffix) 91 bank accounts with the ANZ. [70] In her submission the outstanding ANZ mortgage should be apportioned equally between the two Hinemoa Street buildings rather than on a percentage basis. She also submitted the respondent's 91 accounts should be classified as a separate debt. [71] What the Judge did was this:[64] As to the apportionment on the basis of value, this is addressed in the affidavit of the Respondent sworn on 30 May 2006. In terms of the preparation by accountants for tax purposes, there has been a 43.6% and a 56.4% split, and in respect to the valuation of the property by Sheldons this states a 44.66% commercial and 53.34% residential split. [67] (a) The indebtedness to the ANZ is set out in the ANZ Statement of 30 May 2006. In respect to the property the total indebtedness at 30 May 2006 is $160,185.53. Although this is totalled from a number of accounts numbers, it relates to the initial ANZ loans at time of purchase and the subsequent loan for renovations. As stated above I intend to deal with the debt globally on a percentage basis. (b) The personal account 0113-0148394-00 has a balance of $436.30 but it is accepted that at separation this account was $1,000.00 overdrawn. [68] There was some confusion during the proceedings because of the fact there were two accounts ending 91, but one clearly relates to the tax liability owed solely by the Respondent, and the other, the Respondent advises, came about as a result of splitting of the loan from ANZ because part of it had been guaranteed previously by his mother.Paragraph 18 of the respondent's affidavit correctly gives the valuation split as 46.66%:53.34%. Clearly there is a typographical error in [64] (supra). [72] As best I can understand counsel's submission, it was that the evidence produced by the respondent relating to personal debts and relationship debts did not support his actual assertions. [73] The Judge accepted (supra [71]) the respondent's evidence that for tax purposes the borrowings on Hinemoa Street had been apportioned 43.6%:56.4% between the commercial and residential components. In counsel's submission, the respondent acknowledged in evidence that this apportionment was purely for tax reasons and in fact the commercial tenant paid 50% of the property's outgoings and somewhat less for the water rates. [74] On the issue of the respondent's 91 accounts counsel submitted that one of those accounts related solely to the respondent's tax debt in respect of Point Wines Limited and that since this was separate property it was "grossly unfair and incorrect" for the Judge to include that loan as a relationship debt. [75] In fact, the Judge has apportioned Hinemoa Street's debt on the basis of the 53.34% being attributable to the family home valuation rather than the higher 56.4% split which was used for taxation purposes. [76] On the issue of the 91 accounts, I have read the respondent's 30 May 2006 affidavit which exhibited and explained various back records. Only one of the respondent's 91 accounts was claimed to relate to Hinemoa Street. The other one, as stated by the Judge and asserted in the respondent's affidavit, relates to Point Wines Limted's debt. It was not included in the Judge's $160,185.53 assessment of the total Hinemoa Street indebtedness. [77] I thus reject the submission that the Judge has made factual errors in these findings. Nor is there any error of fact or law in her apportionment of the mortgage debt attributable to the family home.[78] Ms Vette, referring to the s 18B(2) discretion submitted, in effect, that the payments relating to mortgage reduction and family home outgoings ordered by the Judge were too high. In her submission the appellant had clearly borne the bulk of expenses for the parties' son since separation. The Judge failed to take into account the fact that, although paying the home's outgoings, the respondent had been the sole recipient of the rental from the leased property. For this reason, submitted counsel, the discretion should have been exercised differently. [79] Section 18B confers a broad discretion enabling a court to make appropriate adjustments in cases such as this. There are a large number of possible variables relating to post-separation occupation of a home and meeting the post-separation outgoings. [80] In some situations (this being one) the equity which both parties will share on sale is increased by post separation capital reductions of a mortgage. In general terms both parties will benefit, through sharing, from the property being kept afoot by payment of its outgoings. [81] In this case, the appellant was in receipt of a welfare benefit. She did not seek any accommodation allowance. The respondent met the outgoings on the property. Properly reflecting the fact that the parties' son was benefiting from his mother's occupation, the Judge refused to make any occupation allowance. In those circumstances a submission that the Judge wrongly exercised the s 18B(2) discretion is untenable.Section 15 Economic Disparity Compensation[82] Although not conceptually impossible, it would be factually unusual, given the policy which underlies s 15, to make out an economic disparity claim in a relationship of four years duration with only one child aged 21 months when the relationship ceased. Section 15 provides:[15] Court may award lump sum payments or order transfer of property(1) This section applies if, on the division of relationship property, the Court is satisfied that, after the marriage [civil union] or de facto relationship ends, the income and living standards of 1 spouse or [partner] (party B) are likely to be significantly higher than the other spouse or [partner] (party A) because of the effects of the division of functions within the marriage, [civil union] or de facto relationship while the parties were living together. (2) In determining whether or not to make an order under this section, the Court may have regard to— (a) the likely earning capacity of each spouse or [partner]: (b) the responsibilities of each spouse or partner for the ongoing daily care of any minor or dependent children of the marriage, civil union, or de facto relationship: (c) any other relevant circumstances. (3) If this section applies, the Court, if it considers it just, may, for the purpose of compensating party A,— (a) order party B to pay party A a sum of money out of party B's relationship property: (b) order party B to transfer to party A any other property out of party B's relationship property. (4) This section overrides sections 11 to 14A.[83] Case law is gradually illuminating the jurisdictional principles and the evidential requirements. (See M v B [2006] NZFLR 641; Nation v Nation [2005] NZFLR 103; de Malmanche v de Malmanche [2002] 2 NZLR 838; X v X (HC Auckland, CIV 2006-404-903, 8 March 2007, Rodney Hansen J)). [84] This is not a case which on its facts lends itself to developing s15 jurisprudence. Nor has the Judge erred in the application of s15 to the facts as she found them. In one area, her reliance on Clarkson DCJ's decision of X v X [2006] NZFLR 361, which has been reversed on appeal, ran the risk of following the X v Xroute of seeing a choice to assume a role inside a relationship as a jurisdictional obstacle. (See [2006] NZFLR 361 at [147]; cf Rodney Hansen J, op. cit. [116]). This risk the Judge avoided. [85] The Judge reviewed the appellant's employment history (supra paras [10] and [11]). She mentioned the appellant's current position of working one day a week whilst her son is at day care, and her hope that once the child begins school (October2007) she would be able to seek more gainful employment consistent with her role as a solo parent. The Judge also reviewed the evidence of the respondent's taxable income, the appellant's assertion that he was capable of earning $70,000 per annum, and her claim that he took substantial cash from his business not recorded in its accounts. [86] With reference to s15 and the law the Judge correctly set out (at [86]) four steps. These were: a) Satisfaction that the respondent's income and living standards on division of relationship property would be significantly higher. b) Proof that a significant disparity, if it existed, was caused by the division of functions within the relationship while the parties were living together. c) Consideration of the discretion of whether, having regard to s15(2) factors, it was just to make a s15 order. d) The appropriate quantum for a compensatory payment. [87] In critical areas there was no relevant evidence before the Judge. The assessment, in terms of s15 must be prospective. An assessment on the first issue, of the parties' respective income and living standards after the relationship break down, is required. The Judge noted, and pertinently so, that the appellant had left employment as a business development manager before the relationship began. She referred to the appellant's qualifications and her stated intention of returning to human resources employment. The Judge also referred to the fact that the respondent's mother had effectively kept his business afloat by lending $300,000. She found that the level of debt the respondent was carrying ruled out, for the foreseeable future, any significant change in his income position. She noted there being no evidence to support a finding that the respondent was enjoying a particularly high standard of living. Nor was there any evidence about where theappellant would live once the family home was sold. Both parties, in her view, were restricted in their respective abilities to acquire capital and service debt. [88] On the basis of that evidence, the Judge was not satisfied that the respondent's income and living standards were or were likely to be significantly higher than the appellant's. I see no error in that finding. [89] Nonetheless the Judge went on, in case she were wrong, to the second step (supra para [86]) and examined whether any significant disparity, if it existed, was caused by the division of functions in the relationship. Given that the appellant was already working for the husband's business at the outset of the relationship, and indeed was prepared to be lured from it to a position for which she was well qualified, and given further that her employment remained unchanged by the birth of the parties' son, the Judge found that the appellant's role of caring for the child was not "instrumental in her choice of employment". There was, in short, no evidence that any disparity related to the division of functions during the relationship. [90] In para [113] of her judgment the Judge skates on thin ice when she finds, (similarly to Judge Clarkson in X v X) that the appellant's "decision in respect to the work undertaken by her was a matter of choice rather than necessity" thus preventing a causal nexus. But that comment did not lead to error. Quite simply, this was not a situation where, as a result of a relationship function (whether forced or chosen), the appellant lost career opportunities. The relationship, being of short duration, and the arrival of a child, made no discernible difference to her career. Nor was there any evidence of an impediment to her re-entering her profession at equivalent levels to her two previous positions in it. [91] Ms Vette's submissions on appeal fell well short of damaging the Judge's approach. She identified (and were it in isolation correctly so) the flaw in para [113] of the judgment (supra paras [84] and [90]). She submitted that there was clear evidence the parties had made a joint decision for the appellant to cease work to assist with the respondent's business. She submitted that the Judge had wrongly assessed the parties' respective standard of living and income at the date of the hearing rather than prospectively, and that the Judge, on the facts, had been wrong in any event not to hold that the respondent's income and living standards were higher.[92] These submissions do not persuade me that the Judge erred in the application of relevant principles to the facts before her. Besides which, as Mr Howard-Smith correctly submitted, there was a total void in relevant evidence which might have assisted the Judge in any prospective assessment. There was no evidence from the appellant as to economic limitations which might befall her as a result of her parenting role. [93] The appellant's case fell at the first and second of the above four hurdles (supra para [86]). The Judge's findings in that regard were correct. [94] As a result the appeal as it relates to s15 must fail.Lump Sum Child Support[95] Maintenance and child support obligations can, in some cases, be examined in the context of a relationship property proceeding.32 Orders relating to maintenance and child support(1) In any proceedings, the Court must have regard to— (a) any order made under the Family Proceedings Act 1980 for the maintenance of a spouse or [partner]; and (b) any child support payable by 1 spouse or [partner], under a formula assessment under the Child Support Act 1991, for a child of the marriage[, civil union, or de facto relationship; and] (c) any voluntary agreement, whether or not the agreement has been accepted under Part 3 of the Child Support Act 1991. (2) In any proceedings, the Court, if it considers it just, may— (a) make an order under the Family Proceedings Act 1980 for the maintenance of a spouse or [partner]: (b) discharge, vary, extend, or suspend an order made under the Act 1980 for the maintenance of a spouse or [partner]: (c) make any order in relation to child support that may be made under section 106 or section 109 or section 112 of the Child Support Act 1991, as if an application had been made under section 104 or (as the case requires) section 108 or section 112 of that Act: (d) cancel, vary, extend, or suspend a voluntary agreement.(3) An order made under this Act in respect of relationship property is not sufficient by itself to support— (a) an application under section 99 of the Family Proceedings Act 1980 for the discharge, variation, extension, or suspension of an order for the maintenance of a spouse or [partner]; or (b) an application for an order under Part 7 of the Child Support Act 1991; or (c) the cancellation, variation, extension, or suspension of a voluntary agreement.[96] Ms Vette submitted that the Judge erred in not awarding a lump sum for the child under s32(2)(c). [97] During the hearing I stated I could see some sense in a modest capital sum being made available to the appellant to recognise the constraints she might have in re-entering the workforce before the child's fifth birthday. If the circumstances of a case justify some modest additional capital entitlement, lump sum maintenance awards provide a much easier and less expensive route than a s15 application. I adjourned the hearing briefly to enable the parties to discuss this possibility but nothing eventuated. [98] The difficulties in the way of such an award are first the appellant's current status as a domestic purposes beneficiary and secondly the related assessment of the respondent under the provisions of the Child Support Act 1991. [99] The Judge pertinently observed that although a s32(2)(c) order was mentioned in counsel's opening before her, no evidence was led. That, one would have thought, would have justified dismissing the application without more. However, the Judge went on to refer to a dictum of Boshier DCJ in Stapleton v Stapleton (2004) 23 FRNZ 314:[38] In my view, s 32(2)(c) contains unequivocal jurisdiction for the Court to make an order under Part VII of the Child Support Act even although no separate application may have been made under that Act. Section 32(3)(b) applies to a wholly different situation namely it says that the mere making of a relationship property order is not of itself sufficient to justify the making of an application under Part VII. There is jurisdiction for the Court to make a departure order and to fix the form of payment for the future because s 32(2)(c) confers that jurisdiction.[100] The s 32(2)(c) power to make an order can only be made under the stipulated provisions of the Child Support Act. Such an exercise would require evidence relating to the appropriate formula and the circumstances in which a departure from the statutory assessment to which the respondent is currently subject, might be justified. [101] The purpose of s32 is briefly discussed by the Court of Appeal in M v B[2006] 3 NZFLR 660:[126] Section 32 of the Act provides that, in any proceedings under the Act, a Court must have regard to any order for maintenance. This provision should not be read as linking any maintenance inquiry with that of s 15. The purpose of s 32 is to ensure cogency between the different determinations made for separating couples that arise under various pieces of family law legislation. It also recognises the reality that it is not uncommon for couples to face multiple legal proceedings at different times. It is often the case, as with the situation in front of us, that the issue of maintenance will be dealt with in a separate proceeding under urgency to ensure that a spouse/partner is able to survive financially while the legal proceedings are completed. The purpose of s 32 is to ensure that these previous proceedings are accounted for in any determination made under the Act. This approach is supported by subs (2), which gives the Court the power to cancel, vary, extend or suspend any order or voluntary agreement.[102] Certainly child support and maintenance issues can legitimately be raised in the context of a Property (Relationships) Act dispute. (Slee v Slee, HC Wellington CIV 2004-485-001795, 11 May 2005, Ronald Young J). [103] Where the formulae and assessments of the Child Support Act apply, a court is not able, for jurisdictional reasons, to step outside the provisions of that statute and pluck a discretionary figure. (See generally F v F [2003] NZFLR 903; Stapleton v Stapleton (2004) 23 FRNZ 314; Chong v Speller (2004) 24 FRNZ 273). Section 109 of the Child Support Act and in particular s109(3) set out matters which a court must consider in respect of an application for lump sum child support. [104] The effect of these provisions, which I do not intend to set out, is almost certainly to limit a lump sum award, in all but the most unusual circumstances, to a capitalisation of the formula assessment in any given financial year.[105] There was no evidence before either the Judge or before me to embark on such an exercise. It was clearly an application which was not pursued with any vigour or supporting evidence in the Family Court. The appeal on this ground cannot possibly succeed.Settlement of Property on the Child[106] The jurisdiction for such an order is contained in s26 which provides:26 Orders for benefit of children of marriage, civil union, or de facto relationship(1) In proceedings under this Act, the Court must have regard to the interests of any minor or dependent children of the marriage, civil union, or de facto relationship and, if it considers it just, may make an order settling the relationship property or any part of that property for the benefit of the children of the marriage, civil union, or de facto relationship or of any of them. (2) If the Court makes an order under subsection (1), the Court may reserve such interest (if any) of either spouse or partner, or of both of them, in the relationship property as the Court considers just. (3) An order under this section may be made and has effect regardless of any agreement under Part 6.[107] The reasons advanced by the appellant in the Family Court for such an award were first her inability to purchase a replacement home in the Birkenhead area which, it was submitted, would impact adversely on the child's welfare. In particular she might lose her network of friends and would be unable to walk to the shops and to the local school. The second reason advanced in the Family Court was an allegation that the respondent was a methamphetamine user who was thus unlikely to contribute financially or emotionally to his son's life. [108] The Judge briefly reviewed the authorities and concluded that s26 awards were only made in exceptional circumstances which were absent here. [109] This is not an appropriate case to examine the s26 discretion. A useful summary of the jurisdiction and decided cases is found in para 18.84 of Fisher on Matrimonial and Relationship Property. An award is normally only justified if, aftera division of property and taking into account child support obligations, there are remaining grounds for belief that during a child's minority or dependency he or she will not be adequately provided for by the parents. Settlements appear to occur where the situation is "somewhat out of the ordinary", there being cited examples of parental disappearance or death; sexual abuse; or some form of physical or mental disability on the part of the child. [110] This is not a case where the parties' child has special needs. Both parents are employable and have a demonstrable capacity to earn good incomes. The Judge refused to find that the respondent's financial situation was attributable to methamphetamine use. There are no grounds, in my judgment, for interfering with the Judge's s 26 discretion.Section 26A Discretion to Postpone Vesting[111] Section 26A empowers a court to postpone vesting of any share in relationship property to a future specified date if the court is satisfied that immediate vesting would cause "undue hardship for the spouse or partner who is the principal provider of ongoing daily care for 1 or more minor or dependent children". [112] Counsel's submission in both courts was that this provision applied to the appellant in respect of whom the requirement to leave Hinemoa Street would cause, in her capacity as her son's caregiver, undue hardship. [113] In dealing with this submission the Judge observed that the appellant had been living rent free for two years, that she may have access to family money or loans, that there were other areas in Auckland to which she could relocate, and that indeed such relocation from the child's standpoint would be preferable before he started school. [114] Again this is not the case for a consideration of s 26A issues. In the 1960s and 1970s, agreements were relatively commonplace whereby the primary caregiver and children would remain in a family home with its sale being delayed until certain stipulated events occurred. Social conditions, however, have changed withgeographic relocation and relatively rapid re-partnering in the wake of broken relationships being commonplace. The "undue hardship" threshold is high. [115] I do not intend to interfere with the Judge's exercise of her s26A discretion, there being no reasons to do so.Result[116] The various points raised by the appellant as grounds for attacking the Family Court decision have failed for the reasons stated in the relevant sections of this judgment. [117] Accordingly the appeal must be dismissed. [118] The appellant's notice of claim will remain lodged against the Certificate of Title to protect her interest in 102-108 Hinemoa Street as set out in this judgment. The notice of claim is to be withdrawn on settlement of the appellant's entitlement which will clearly occur either on the respondent buying out her interest or alternatively on the property's sale. I have some uneasiness, particularly having regard to other litigation with a third party involving the property, over ordering the discharge of the notice of claim before the appellant is actually paid. [119] The Judge directed in her decision ([161]) that the appellant's entitlement was to be paid within four months of the judgment with interest at the rate of 5% per annum from that date until the date of final payment. She also ordered that the notice of claim was to be discharged and the appellant's right to occupation would cease within the same four month period. [120] The Judge clearly intended finality within four months (21 November 2006). By the time this judgment is released a further five months grace will have been extended to the appellant. The nettle must be grasped. I direct cessation of occupation and payment no later than Friday 8 June 2007.[121] All other matters relating to the parties' Property (Relationships) Act dispute, the implementation of the Family Court judgment, and the implementation of changes to it flowing from this Court's judgment, are remitted to the North Shore Family Court.Costs[122] It is unclear to me whether there are legal aid or other costs dimensions. If costs are in issue memoranda are to be filed no later than 30 June 2007. Priestley J