HYDE V HYDE CA CA48/2008

HYDE V HYDE CA CA48/2008 8 April 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA48/2008 [2009] NZCA 125BETWEEN WILLIAM ALFRED HYDE Appellant AND TANYA HYDE Respondent Hearing: 26 February 2009 Court: Hammond, Ellen France and Baragwanath JJ Counsel: R J Harte for Appellant C L Cook for Respondent Judgment: 8 April 2009 at 2.15 pmJUDGMENT OF THE COURT A The appeal is allowed. B The proceeding is remitted to the High Court for the appeal to be reheard in that Court, in accordance with the approach indicated in this judgment. C Because of the course matters have taken we have not found it necessary to determine the fresh evidence application which was lodged in this Court. It will be entirely for the parties whether they wish to renew that application in connection with the rehearing of the appeal in the High Court. D There will be no order for costs.E Leave is given under s 35A of the Property (Relationships) Act 1976 for this judgment and the reasons therefor to be published generally. REASONS OF THE COURT(Given by Hammond J)Introduction[1] This is an appeal from a judgment of Harrison J in the High Court at Whangarei ((2007) 26 FRNZ 729), which reversed a judgment of Judge O'Donovan in the Family Court at Whangarei (FC WHA 2004-088-248 30 June 2006). [2] The Family Court had held, in the context of a dispute under the Property (Relationships) Act 1976 ("the PRA"), that certain land was a "family home" under s 2 of the PRA. The High Court disagreed, and held the property was a "homestead". [3] Harrison J granted leave to appeal to this Court on the following question:To determine whether a family home is a homestead, should the Court— (a) first determine the extent of the family home by assessing what land, buildings, and improvements appurtenant to the dwelling house are used wholly or principally for the purposes of the household; and (b) secondly, if the boundaries of the family home do not encompass the entire unsubdivided land on which the family home is situated, find that a homestead exists (subject to the exceptions set out in 'homestead' definition b. (i), (ii) and (iii)).[4] The appeal has been said to raise an important question of law as to the proper approach to be adopted in determining whether a property is a family home or a homestead under the PRA. However, we think that the case may well have miscued somewhat on the facts and, for that and other reasons we will outline in this judgment, we allow and remit the appeal to the High Court for a rehearing.Background[5] The appellant, Mr William Hyde, was married twice. In 1980, during the course of his first marriage, he acquired a rural property at Maungatapere, which is some 12 kilometres south west of Whangarei. The area of this property was approximately 80 hectares. It comprised bush and some open space where Mr Hyde grazed cattle. This first marriage did not last. Upon separation, Mr Hyde settled his first wife's claim under the PRA by subdividing and transferring half the land to her. This left Mr Hyde with about 39 hectares (around 90 acres). There was no dwellinghouse on that land. [6] In 1992, Mr Hyde advertised in Russia, seeking a relationship with a woman from that country. The respondent, Mrs Tania Hyde, communicated with him. Mr Hyde was then aged 47 and working as a contractor and truck driver. Mrs Hyde was 39 years of age and qualified as a high school teacher. [7] Mrs Hyde came to New Zealand in August 1994. The parties were married in January 1995, in a bush area on the property. At first, they did not live on the property. But in 1996 the parties built a dwellinghouse in the bush area on the property. Most of the construction work was carried out by Mr Hyde. Mrs Hyde assisted in this, and she prepared the interior of the house. [8] In 1998 and 1999, two road frontage sections were sold off, reducing the overall acreage to 36.8 hectares. [9] In 1999, Mrs Hyde's mother came from Russia to live with the couple, her husband having earlier died. She stayed in the dwellinghouse for a further two years. During this period, Mrs Hyde and her mother sold their interest in a property in Russia. Mrs Hyde's share of $14,124 from that source was utilised for household purposes generally. [10] In 2002, Mr and Mrs Hyde constructed a small "granny flat" immediately adjacent to the main dwellinghouse, for occupation by Mrs Hyde's mother. Not long after that, in November 2002, the Hydes agreed to separate. There were no childrenof the marriage. Mrs Hyde moved in with her mother while Mr Hyde remained in the dwellinghouse. This created the difficult circumstance that they continued to reside separately, but within a few metres of each other on the property. [11] In February 2004, Mrs Hyde applied to the Family Court under the PRA for various orders in respect of relationship property. Her main contention was that the "family home" comprised not only the dwellinghouse and the gardens and buildings around it, but also the rest of the land owned by Mr Hyde. If that contention was correct, then in the normal course of events she would have been entitled to half the value of the entire property. For his part, Mr Hyde claimed that the "family home" was restricted to the dwellinghouse, some improvements, and an area of about one hectare on which they were erected. [12] The Family Court Judge noted that if Mrs Hyde's argument was correct, it had not been put to him that equal sharing of the relationship property was inappropriate. If he found in favour of Mr Hyde, the Court was invited to consider claims based on the application of ss 9A or 17 of the PRA. [13] The parties and the Judges in the lower courts have seen the property issues as relating to a contiguous, unsubdivided block of (now) 36.77 hectares. There is however an argument, which we will address more fully later in this judgment, that this may not be so, on the facts. [14] The legal description of the entire property is:An estate in fee simple being all that parcel of land containing 36.7720 hectares more or less being Lots 1 and 2 Deposited Plan 194851 as shown on Certificate of Title 121C/730.[15] Lot 1 consists of mature or regenerating native bush, apart from a small triangle of grass amounting to less than a hectare. It is on this land that the dwellinghouse was erected. [16] Lot 2 is poor quality pasture land. From the photographs which were before us, it can be seen to have been separated by electric wire fences into smallerpaddocks. The grazing area, on the evidence in Court, was not capable of supporting a "working farm". [17] The site plan which was attached to the Family Court judgment is set out as an appendix to this judgment. Lot 2 can be seen clearly enough. Lot 1 comprises the dark area of bush and the more marginal area of bush marked with striped lines. The house and appurtenances situated on Lot 1 were marked by counsel with the letter "X". [18] Mrs Hyde maintained that the whole property was really a "lifestyle block" on which the parties had elected to build their matrimonial home. She said that the parties were attached to the bush, liked walking in it, and that the property should be seen as a totality. For his part, Mr Hyde made much of what had been carried out on "the farm" in the way of grazing and associated activities. He maintained that it is simply absurd to see a 36.8 hectare block, admittedly with a respectable degree of bush on it, as a "family home", although this is ultimately what the High Court Judge found to be the position.The legislation[19] It is convenient at this point to set out the statutory definitions. Section 2 of the PRA provides the following definitions of a "family home" and a "homestead":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.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 wholly or principally for the purposes of the household; [20] The practical significance of the distinction is that if the property is a family home, the value of the property is to be apportioned equally between the parties under s 11(1)(a) of the PRA. If it is a homestead, the balance of unsubdivided land becomes separate property rather than relationship property under s 12 of the PRA.The judgments below[21] After a three day hearing in the Family Court, Judge O'Donovan determined that this case involved what he termed a "homestead situation" and that some parts of the total farm area were "not used wholly or principally for the purposes of the household" (at [56]). The Judge demarcated off the marginal area of bush marked with striped lines in the appendix that was legally part of Lot 1, describing the homestead as the denser area of bush. The Family Court Judge declined a claim based on s 9A of the PRA but made a modest award of $20,000 to Mrs Hyde in terms of s 17A(2)(b). [22] In the Family Court the case was then adjourned to enable the parties to agree on a valuation of this area if they were able to do so. They could not. Mrs Hyde's valuer came in with a figure of $310,000. Mr Hyde's figure was $283,562. The parties seemed quite unable to split the difference. The Family Court Judge was then required to deliver a further judgment on 13 October 2006, valuing the "homestead" land he had demarcated off on the property. Unsurprisingly, he settled on a figure of $300,000. [23] Mrs Hyde was dissatisfied. She appealed to the High Court, on the factual footing that the Family Court Judge was wrong in holding that this was a "homestead situation". It was said that the Judge should have found that the whole "lifestyle block" was relationship property or, in other words, that the entire property constituted the family home. In particular, the Notice of Appeal urged that the Family Court Judge had placed insufficient weight on the overall nature of the block; the parties' actual use of the block as opposed to their intentions in respect of the block; the economic nature of the block; and the overall household activities on the block. If the High Court were to identify a homestead, counsel for Mrs Hyde arguedin the alternative that there should have been an award under s 9A, and that the award under s 17 was not high enough. There were also grounds of appeal raised with respect to the mortgage debt. [24] In the High Court, Harrison J considered that "the relevant facts [were] not in material dispute" (at [2]). He saw the matter as substantially one of law, in which the real issue was how a court ought to approach the "family home" and "homestead" statutory definitions. In the result, the Judge allowed Mrs Hyde's appeal, declaring that the entire property at Maungatapere "constitutes the family home and each party is entitled to share equally in the net proceeds of sale, after allowing for the adjustments made by Judge O'Donovan" (at [36]). [25] Now Mr Hyde was dissatisfied. He was not at all enamoured with the High Court Judge's expansive view of the family home. He applied for leave to appeal to this Court on the ground that the High Court Judge had erred in his approach to determining whether a property constituted a family home or homestead. It was in that context that Harrison J granted leave to appeal, solely on the question set out at [3] above.The present problem areas in the case[26] It is convenient to discuss the issues which arise before us under three heads: (a) Is the land subdivided? (b) The proper approach to the construction of the statutory terms "family home" and "homestead". (c) Unresolved issues.Is the land subdivided?[27] It will be apparent that counsel, and both the Family Court and High Court Judges, have assumed that they were dealing with one undifferentiated block of land. Therefore, either the whole property was a family home or, if it was not, the land was unsubdivided and was within the definition of a "homestead". [28] There is however real difficulty as to whether this assumption is correct. The land as a whole is arguably subdivided. The fact that Lots 1 and 2 are comprised in one Certificate of Title may be something of a red herring in this context. It is clear from the Certificate of Title that there is a Deposited Plan for Lots 1 and 2 which would have been approved by the District Land Registrar under the provisions of the Land Transfer Act 1952 ("the LTA") and the relevant land transfer regulations (now SR 2002/213). Subject to any other constraints, this would enable Lot 1 or Lot 2 to be transferred by sale or otherwise to a third party. [29] The s 2 definition of a "homestead" speaks of "an unsubdivided part of land". The term subdivision is not defined in the PRA. The issue then is what is meant by that term. [30] The legislative analogues which immediately spring to mind are s 218 of the Resource Management Act 1991 ("the RMA") and s 167 of the LTA. [31] Section 218 of the RMA has an extensive definition dealing with the division of allotments. This Court has recently cast doubt on the desirability of transposing the "subdivision of land" definition in s 218 of the RMA to other areas of property law. In Big River Paradise Ltd v Congreve [2008] 2 NZLR 402, this Court considered the meaning of the term "subdivision" in the context of private covenants. In that case, counsel had sought to argue that the words "subdivision" and "allotments" in a private covenant should be construed in an ambulatory sense so as to accord with the definitions in the RMA. William Young P, for the Court, rejected that assertion, and held (at [33]):A division of property accomplished by depositing a survey plan under the [LTA] and the obtaining of separate titles is perhaps the core meaning of theword "subdivision". But when the legislature has set out to regulate land development, it has customarily done so by reference to concepts of subdivision which go well beyond that core meaning, a proposition which is exemplified by the terms of s 218 of the [RMA] .[32] This Court has elsewhere adopted a contextual meaning for the term, "subdivision". In Waitemata County v Expans Holdings Ltd [1975] 1 NZLR 34 (CA), Haslam J noted (at [48]):The absence of legislative consistency in the use of the term suggests that where, as here, the word "subdivision" is left undefined in an enactment, it must be accorded a common sense meaning which will conform to the context in which it is used.[33] Turning to s 167 of the LTA, Part 10 of that Act governs plans and surveys. Once land has been brought under the LTA, the maintenance of a proper standard of survey is ensured by the provisions of s 167. The effect of that section is to give the Registrar power to require the deposit in the Land Registry Office of a survey plan in accordance with the regulations for the time being in force, broadly in the following circumstances: when land is being brought under the LTA; when Land Transfer land is subdivided; when a new certificate of title is ordered for the untransferred part (or residue) of the land comprised in a certificate of title or other instrument of title; and when an application has been made for the registration of any instrument affecting only part of the land comprised in any certificate of title or other instrument of title. [34] We do not have available in the evidence before us at this time all the information that would be required to finally determine the issue. Further, because the Court raised the subdivision issue but counsel had not considered it, we did not have the benefit of argument. We do however make the following provisional observations. [35] Here there is a deposited plan dividing the land, but Lots 1 and 2 in the deposited plan are included in a single Certificate of Title. But even if separate titles were not obtained, it seems clear from the trial record that Mr Hyde, at the very least, obtained approval for subdivision of the Maungatapere property. For example, a 1995 valuation report which is in evidence states:Mr Hyde has recently obtained approval for subdivision of the subject property into two allotments, Lot 1 being 8.22 hectares and the balance area 30.96 hectares, subject to final survey. Both are separately saleable entities once title is obtained, I enclose a copy of the plan prepared to obtain subdivision consent.[36] A common-sense approach, as noted by Haslam J, would seem to suggest that the greater has indeed been subdivided into two lesser portions. [37] The logical downstream consequence of a finding, if made, that the land in the Certificate of Title is subdivided for the purposes of the PRA, is that the most that could have operated as a "family home" would have been Lot 1. Lot 2 would have been separate grazing land.The appropriate legal approach to the statutory definitions[38] It appears from the authorities which were placed before us by counsel that there has been an ongoing dispute in the lower courts as to the interpretation of "family home" and "homestead". That dispute is in danger of becoming unnecessarily semantic and highly formulaic. [39] Mr Harte suggested that the correct approach to the two definitions of a "family home" and a "homestead", which he characterised as the Family Court approach, can be diagrammatically expressed as follows:Apply family home definition to ascertain the principal family residence and appurtenant land buildings and improvements used wholly or principally for the purposes of the household. Is all the unsubdivided title of land containing the family residence used wholly or principally for the purposes of the household? Yes No Family Home Homestead[40] Ms Cook on the other hand argued that the correct approach, which she characterised as the High Court approach, is as follows:Apply homestead definition to ascertain whether the whole of the unsubdivided title of land on which the family residence is situated has a principal use other than for the purposes of the household. No Yes Family Home Homestead Apply family home definition to physically define boundaries.[41] Further, Ms Cook says that even if the family home definition is to be applied first, the High Court Judge's "global approach" must still be applied as a secondary test. That can be diagrammatically expressed as:Apply family home definition to ascertain the principal family residence and appurtenant land buildings and improvements used wholly or principally for the purposes of the household. Is all the unsubdivided title of land containing the family residence used wholly or principally for the purposes of the household? Yes No Family Home Apply homestead definition to ascertain whether the unsubdivided land taken as a whole on which the family residence is situated has a principal use other than for the purposes of the household. No Yes Family Home Homestead[42] We were told that, at the bar, and apparently by some judges, Mr Harte's approach is referred to as a "demarcation" test. This approach is said to be exemplified by the judgments of Priestley J in Cole v Horton (2004) 24 FRNZ 449 (HC) and Hammond v Hardy [2007] NZFLR 910 (HC). Ms Cook's approach has been described (as did the High Court Judge in the case before us) as a "global approach". [43] We consider that the issues are overwhelmingly factual ones. Plainly, the approach adopted by the Family Court Judge of at least starting with the issue of the family home must be correct. If the unsubdivided land in this case is Lot 1 (rather than Lots 1 and 2), the question then is whether the whole of the unsubdivided Lot 1 falls within the definition of a "family home". If it does, that is the end of the matter. It is not necessary to even reach the definition of a "homestead". That later definition covers the rather obvious possibility that there may be cases in which only a portion of the unsubdivided land in question (here, this is likely to be Lot 1) may satisfy the "family home" definition. In such a case, where there is unsubdivided land only part of which satisfies the definition of a "family home", the homestead definition is intended to apply. There is nothing particularly difficult about such an approach which, as we have said, is essentially factual. It simply involves the application of the explicit statutory formula (which requires no further exegesis) to the facts as found. [44] There are cases in the law reports where, given the attraction of lifestyle blocks in New Zealand, something more than a traditional quarter-acre or half-acre lot may satisfy the statutory formula for a family home. An example is Hight v Hight (1996) 15 FRNZ 129 (HC) where Elias J (as she then was) held that an 8.5 ha block used partly as an orchard was nevertheless used principally for the purposes of the household and should be categorised as a family home. It has to be said that the 29 ha in Lot 1 in this instance would be of a dimension rather more like an English country estate than a family home. But we agree with Elias J that the area alone is not determinative. The test is simply whether the particular land was used wholly or principally for the purposes of the household (at 144).[45] It is appropriate here to add a few words about the so called "onus of proof" problem, which keeps intruding itself into this subject area. This Court has had occasion recently in M v B [Economic disparity] [2006] NZFLR 641 (at [39]), and here does so again, to deprecate the notion of an onus of proof in the PRA legislative regime. What the Court is doing is classifying the property. To that extent the views of Barker J in Tonkin v Tonkin (1978) 1 MPC 211 (HC) go too far. The purposes of the Act as stated in s 1M, and the principles as stated in s 1N, need to be kept firmly in mind. The Court does not necessarily sit back as if this was a pure forensic joust, in traditional common law style. For instance, in a case such as the present the Family Court Judge or the High Court Judge would have been quite justified in indicating – regardless of what had been put in front of the Court – that further information was required as to the legal and subdivisional status of the land in question because it is the Court which must make a significant classification. Obviously it is open to the parties to argue for a particular position, but that has nothing to do with whether cases should be determined on an "onus of proof" basis in this subject area. [46] It follows from the foregoing that we consider the High Court Judge did err in law as to the way in which he said relationship property cases of this kind should be approached. On that point alone, this appeal should be allowed.Unresolved issues[47] In this subject area, courts are struggling to do the best they can as "problem solvers" for the unfortunate litigants whose lives have been blighted by the kinds of disputes which have arisen in this case. We would have vastly preferred, if it was possible, to finalise this dispute for these litigants. Unfortunately however, as in too many of the relationship property cases which come on appeal, what has happened in the lower courts very much ties the hands of this Court. All too often an appellate court ends up having to remit the matter back for further consideration. This leads to an important practice point which the family law bar needs to keep firmly in mind: if the issues are not got straight from the outset and proper evidence on them put beforethe hearing court, then the case not uncommonly ends up in a quagmire. The family law bar has a particular responsibility for real care in this respect. [48] That said, there are issues which remain undetermined in this case which are presently well beyond the writ of this Court on appeal. First, there is the problem which has gone unrecognised thus far as to the actual subdivisional status of the land. Secondly, because of the view he took of the case, the High Court Judge did not reach the s 9A and s 17 issues. Thirdly, there may be an issue as to the mortgage debt. The Family Court rulings on them were never traversed. We do not know how, if at all, they will be affected by the principal issue. We are not a fact finding court, and the case will have to be remitted. [49] But remitted to whom in this particular case? Counsel were very anxious not to have to go back to the Family Court. No disrespect whatsoever to that Court is intended or implied by that observation. The problem is that it would put the parties right back where they first began, after all the expense and delays of coming to the High Court and then this Court. It was their view, which we are inclined to share, that the case should be remitted to the High Court for a rehearing of the appeal. This is somewhat unusual, although such a course is within our powers. It also accords with principle. Here, the High Court Judge determined the appeal on a footing which we have said was wrong in law. As it transpires, the way the appeal was determined also cut across the way the appeal had been advanced to the High Court, as primarily an appeal against the facts as found in the Family Court. It is therefore a principled approach to say that the appeal should be reheard, bearing in mind the observations that have fallen from this Court.Conclusion[50] The appeal is allowed. [51] The proceeding is remitted to the High Court for the appeal to be reheard in that Court, in accordance with the approach indicated in this judgment.[52] We record that because of the course matters have taken in this Court, we have not found it necessary to determine the fresh evidence application which was lodged in this Court. It will be entirely for Mrs Hyde as to whether she wishes to renew that application in connection with the High Court rehearing. [53] Both parties are legally aided. We were not asked to make any order for costs, and do not do so. [54] Leave is given under s 35A of the Property (Relationships) Act 1976 for this judgment and the reasons therefor to be published generally. [55] We would not wish to leave this case without stating the obvious. The total property in issue is said to be worth around $300,000. Its value may have declined in the current economic climate. Litigation of this kind in relation to property of that value must have been distinctly problematic to begin with; it can now only be considered ruinous. The parties must endeavour, for their own financial wellbeing, or such of it as is left, to resolve this matter without further recourse to the courts. It must be obvious that, on this Court's analysis, it will be extremely difficult – one never says never – for Mrs Hyde to claim a 36.7 hectare family home. Likewise, we would have thought Mr Hyde has no prospect (and indeed he did not cross-appeal on the point) of reducing Mrs Hyde's entitlement to less than what was awarded in the Family Court. The outcome, as is so often the case in the law, patently lies somewhere in between.Solicitors: Webb Ross, Whangarei for Appellant Cook Westenra, Whangarei for RespondentHYDE V HYDE CA CA48/2008 8 April 2009