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Wynyard v Rawiri [2018] NZHC 2509 (25 September 2018)

Last Updated: 12 October 2018

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2016-488-161 [2018] NZHC 2509

_{JUDGMENT OF FITZGERALD J}

This judgment was delivered by me on 25 September 2018 at 3:00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors: Blaikie Law, Kaikohe

Law North, Kerikeri

Wynyard v Rawiri [2018] NZHC 2509 [25 September 2018]

Introduction

[1] Mr Wynyard (the plaintiff) and Ms Rawiri (the first defendant) were formerly in a de facto relationship and purchased a property together in September 1995, in which they lived. They each own (as tenants-in-common) 35 per cent of the property. The remaining 30 per cent is owned (again as a tenant-in-common) by Ms Rawiri’s brother, Mr Rawiri (the second defendant).

[2] Mr Wynyard and Ms Rawiri have been separated since 1997. Ms Rawiri has lived at the property since that time and now lives there with her partner and their daughter. Mr Wynyard wishes to realise his share in the property and applies under s 339 of the Property Law Act 2007 for the Court to divide the property among the co- owners. Mr Rawiri abides the decision of the Court. I therefore refer to Mr Wynyard and Ms Rawiri as “the parties” and refer to Mr Rawiri separately where relevant.

[3] Though the case as originally pleaded sought sale of the property with division of the proceeds between the owners, the parties have agreed that the more appropriate course is for Ms Rawiri to purchase Mr Wynyard’s interest. Accordingly, the sole issue for resolution in this judgment is the appropriate amount to be paid to the plaintiff for his share of the property.

Background

[4] The property was purchased in or around September 1995. Mr Wynyard and Ms Rawiri were not immediately able to satisfy lending requirements to obtain a mortgage, so Mr Rawiri, who was then in employment as a teacher, agreed to be included as a co-owner to enable mortgage finance to be obtained. The plaintiff and first defendant obtained a mortgage of $90,900 through the Housing Corporation of New Zealand. A deposit of $5,000 had been paid to secure the property.

[5] Mr Wynyard and Ms Rawiri lived at the property together with their infant son for approximately two years. Ms Rawiri attended teacher training during that time and Mr Wynyard worked part time in pest eradication. Both have given evidence that their separation was acrimonious and resulted in Mr Wynyard moving out of the property in 1997. It is agreed that he continued to make contributions towards the

mortgage, though Mr Wynyard says he did for approximately one year after separation, whereas Ms Rawiri says this occurred for only a few months. No records remain to confirm the exact position. After a time, however, Mr Wynyard ceased financial contributions to the property. He says this was on legal advice, as his contributions would be “matched” by Ms Rawiri’s occupation rent of the property.

[6] Since around 1997 or 1998, therefore, Ms Rawiri has serviced the mortgage, paid for upkeep on the property and associated costs, herself. By October 2016, the mortgage had been completely repaid. Part of that repayment has come from

Mr Rawiri, who contributed $50 per week since the house was purchased.

[7] Along with upkeep, Ms Rawiri has undertaken fairly significant improvements to the property, including making extensions to the property, installing new furnishings, re-carpeting and other remodelling that has raised the property’s value.

Court-ordered division of property

[8] The relevant law for the purposes of this application is settled. Under s 339 of the Property Law Act, the Court may make an order requiring a co-owner to purchase another co-owner’s share in a property “at a fair and reasonable price”.¹ When making such an order, the Court is empowered to make additional orders under s 343 of the Act.² Those include orders requiring “the payment by any person of a fair occupation rent for all or any part of the property”³ or an order that “provides for, or requires, any other matters or steps the court considers necessary or desirable as a consequence of the making of the order under section 339(1)”.⁴

[9] Section 342 lists relevant considerations the Court must have regard to in considering whether to make orders under ss 339 and 343, being:

(a) the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:

_{(b) the nature and location of the property:}

¹ Property Law Act 2007, s 339(1)(c).

² Per s 339(4).

³ Section 343(f).

⁴ Section 343(g).

(c) the number of other co-owners and the extent of their shares:

(d) the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:

(e) the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:

(f) any other matters the court considers relevant.

[10] The relevant principles in the case law were recently summarised by Muir J in

Bunyan v Parish:⁵

(i) The unity of possession is common to both joint tenancies and to tenancies in common.⁶ Both co-owners are entitled equally to enjoy the property, whether that be in occupation or in receipt of a proportional share of the rents or profits resulting from the property’s management.⁷

(ii) If one co-owner takes sole occupation of jointly owned property, he or she is not usually liable to compensate the other simply by being in sole occupation.⁸ However, if the co-owner has been excluded and is unable to enjoy their occupation rights they may be entitled to compensation in the form of an occupation rent. Exclusion by way of breakdown of relationship has been recognised as one such category.⁹

(iii) Contributions towards mortgage repayments, both principal and interest as well as to rates and property maintenance and expenditures that have increased the value of the relevant property have all been recognised as relevant to the accounting which is required on sale or purchase by one co-owner of another’s share.¹⁰

(Emphasis added)

[11] I have highlighted certain aspects of the above extract from Muir J’s judgment given they are of particular relevance to issues arising in this case.

[12] Muir J also observed that in light of the fact “quantification can seldom be precise”, the role of the Court is to “do its best fairly to reflect the value of the

⁵ Bunyan v Parish [2016] NZHC 2225, [2017] NZAR 931 at [32].

⁶ Tom Bennion and others Land Law in New Zealand (2nd ed, Brookers, Wellington, 2009) at

[6.6.01].

⁷ Bull v Bull [1955] 1 QB 234 (CA).

⁸ McCormick v McCormick [1921] NZLR 382 (SC) at 385.

⁹ Surridge v Quinn HC Wellington CP930/91, 13 May 1993.

¹⁰ Long v Moore [1989] NZHC 667; (1989) 1 NZ ConvC 190,239 (HC).

respective party’s contributions.”¹¹ The Judge also accepted that an approach focusing on “the fruits of contributions”,¹² rather than arithmetic, is to be preferred.¹³

Uncontested figures

[13] Before addressing the competing contentions on quantum, it is useful to set out the figures on which the parties did agree.

[14] A valuation of the property was obtained from Mr Malcolm McBain of Moir McBain Valuations. It is agreed that the present-day value of the property is $300,000. However, this value takes into account capital improvements made by Ms Rawiri since

1997. Mr McBain has therefore valued the property without improvements (that is, the condition the property was in at the time of the parties’ separation) in present-day terms at $235,000. That is an agreed figure.

[15] The total occupational rent the property could have attracted between 1997 and

2018 has been agreed as $122,900.¹⁴ And the parties also agree that between March

1998 and October 2016, Mr Rawiri’s weekly contribution of $50 amounted to $48,450.

[16] It is further agreed that Ms Rawiri’s outgoings since March 1998 total

$228,734.75. The “start point” of March 1998 for calculating such outgoings reflects

Mr Wynyard’s contribution for a period of time after the separation in 1997 (though probably favours Mr Wynyard slightly given the dispute over the period of time over which he made such post-separation payments and he has not provided evidence of the actual amounts involved). The figure of $228,734.75 comprises $205,140 of mortgage repayments made between March 1998 and October 2016, along with

$23,594.75 of rates payments between March 1998 and July 2018. I note that the parties suggested the figure also included insurance paid by Ms Rawiri from October

2016 (when the mortgage was fully repaid) to July 2018, but no separate figure relating

_{to insurance costs has been included in the evidential materials.}

¹¹ Bunyan v Parish [2016] NZHC 2225, [2017] NZAR 931 at [33]; citing Lankow v Rose [1995]

1 NZLR 277 (CA) at 295.

¹² Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327 (CA) at 331 per Cooke P.

¹³ Bunyan v Parish [2016] NZHC 2225, [2017] NZAR 931 at [33].

¹⁴ Taking into account weekly rental of $80 between 1997 and 2002; $100 between 2003 and 2007;

$120 between 2008 and 2012.

[17] Finally, other relevant amounts include the values of radio prize money won by Ms Rawiri ($5,000), which went towards the deposit, and what Ms Rawiri says are child support payments that were not paid by Mr Wynyard (totalling $18,700). There is disagreement between the parties over whether these figures should be included in the calculations determining the parties’ respective interests in the property.

The competing approaches to determining Mr Wynyard’s share

[18] In oral submissions on behalf of the plaintiff, Mr Blaikie argued that this was a case in which Mr Wynyard had been required to leave the property without expressly distancing himself from his ownership interest.¹⁵ He acknowledged that Mr Wynyard was responsible for a portion of the outgoings but submitted that portion had to be set off against occupational rent notionally owed by Ms Rawiri for staying at the property.

[19] Mr Blaikie’s approach to the valuation centred on the outstanding balance of the capital component of the mortgage around the time of the parties’ separation (approximately $87,000). Mr Blaikie submitted that this amount should be credited in Ms Rawiri’s favour but the remaining outgoings should be treated as offset by the occupational rent owing to Mr Wynyard. Mr Blaikie therefore suggested taking the adjusted value of the property ($235,000), subtracting the capital payments by

Ms Rawiri ($87,000) and multiplying by Mr Wynyard’s ownership interest (35 per cent) to obtain a figure of $51,800.

[20] The alternative approach suggested by Mr Blaikie was to compare Ms Rawiri’s outgoings and notional income (occupational rent). He took the difference between these figures and suggested a figure of roughly $43,000. With respect, this approach cannot be correct. As the outgoings exceed the occupational rent, a calculation balancing the two figures could only result in a payment from Mr Wynyard to

Ms Rawiri, which was not a submission intended by Mr Blaikie.

[21] Mr Day, on behalf of Ms Rawiri, also provided several approaches to the numbers. The first “reasonable number” for Ms Rawiri to pay out Mr Wynyard’s

¹⁵ As was the case in Bunyan v Parish [2016] NZHC 2225, [2017] NZAR 931, in which the applicant had expressly disclaimed an interest in the property. On that basis, Muir J did not take into the calculations a payment of occupation rent by the respondent (at [36]).

interest, he said, was $9,635.80. This figure took into account the rateable value of the home in 1998 ($120,000) from which the outstanding mortgage at that time (put more precisely as $87,469.14) was subtracted to give a figure of net equity at the time of separation. Mr Day said the $5,000 that Ms Rawiri won from a radio competition was “separate property” that had contributed to the purchase of the house and had to be subtracted from this figure. The plaintiff’s share was determined by taking 35 per cent of the result. Mr Day acknowledged that this approach rested on the Court finding that Mr Wynyard had effectively “abandoned” (in a legal sense) the property from the time of separation, such that an evaluation of the respective financial positions post- separation was unnecessary.

[22] Mr Day’s second proposal was to analyse the respective contributions in arithmetical detail. He suggested taking the plaintiff’s interest in the adjusted value of the property (35 per cent of $235,000, being $82,250) and adding a 35 per cent share of occupational rent ($43,015). From the result Mr Day subtracted: the expenses attributable to the plaintiff ($90,142.38);¹⁶ Ms Rawiri’s radio winnings ($5,000); interest that Mr Day calculated at $8,049.55; and the child support payment said to be owing ($18,700). This resulted in a payment from Ms Rawiri to Mr Wynyard of

$3,353.07.

Evaluation of the appropriate figure

[23] I do not accept Mr Blaikie’s contention, underlying his first approach, that account should be taken only of Ms Rawiri’s capital contributions to the mortgage, rather than all outgoings she paid. That approach assumes either that occupational rent completely offsets all other outgoings or that other outgoings should not be credited in Ms Rawiri’s favour, despite the fact she paid them out of pocket.

Mr Blaikie argued that this approach takes into account the “vagaries” and “difficulties” of determining the respective interests. I disagree. This method would not be in accordance with principle, where all mortgage payments — principal and

_{interest — are taken into account.}¹⁷ _{The outgoings, including mortgage interest}

¹⁶ This figure was reached by taking Ms Rawiri’s total expenses, subtracting the total amount received from Mr Rawiri and attributing the remainder equally between Ms Rawiri and Mr Wynyard.

¹⁷ See Bunyan v Parish [2016] NZHC 2225, [2017] NZAR 931 at [32](iii), quoted at [10] above.

payments, were a necessary expense to be met in order to maintain the property as an asset. Had the interest on the mortgage gone unpaid, for example, the property would have been sold by way of mortgagee sale and all three parties’ interests lost or at least significantly eroded. To take the benefit of his ownership interest in the property,

Mr Wynyard must conversely be taken to owe a proportion of the total cost of outgoings.

[24] Though Mr Wynyard is only a 35 per cent owner of the property, his share is properly measured at 50 per cent of the outgoings once Mr Rawiri’s weekly contributions have been accounted for. Mr Wynyard and Ms Rawiri would have been liable for 50 per cent of the remaining outgoings, had they not separated. I see no basis to take a different approach post-separation. Half the outgoings (already reduced for Mr Rawiri’s contributions) amounts to $90,142.38.

[25] I accept Mr Blaikie’s submission that his client must be entitled to offset notional occupational rent against these contributions. The authorities demonstrate that where there has been a relationship breakdown such that it is simply impractical for one co-owner to reside in the home, that will amount to an “exclusion” in the context of giving rise to a right to occupational rent.¹⁸ In his oral submissions at the hearing, Mr Day, quite properly and responsibly in my view, acknowledged that there ought to be a credit for occupational rent in Mr Wynyard’s favour.

[26] I do not accept that the full value or even 50 per cent should be credited in

Mr Wynyard’s favour, as Mr Blaikie appeared to suggest. The effect of that approach would be to “reward” Mr Wynyard with rent attributable to (at least part of) Ms Rawiri and Mr Rawiri’s own shares in the property. In Surridge v Quinn, Neazor J determined a “fair rent” on the basis of the “market rent” that the parties may have obtained, which his Honour attributed to the plaintiff according to the 75 per cent interest he held in the property.¹⁹ A similar “proportional” approach is reflected in Muir J’s summary of the principles in Bunyan v Parish and set out at [10](i) above.²⁰ The occupational rent

¹⁸ At [32].

¹⁹ See Surridge v Quinn HC Wellington CP830/91, 13 May 1993 at 14.

20. See also Dennis v McDonald [1981] 1 WLR 810 (Fam) at 816-817, where the plaintiff, who had a 50 per cent share in the property was awarded 50 per cent of the notional occupational rent.

must be apportioned to Mr Wynyard’s ownership interest. In this case, 35 per cent of the agreed total of occupational rent amounts to $43,015.

[27] I do not accept Mr Day’s submissions that the Court should treat the $5,000 radio winnings as Ms Rawiri’s “separate property”. Ms Rawiri’s affidavit evidence is that she won the money and decided to keep it separate from her joint finances with the plaintiff. She says that no “joint savings” were used to make the deposit on the property, rather the entire deposit consisted of her separate $5,000 winnings.

Mr Wynyard’s evidence is that the money was put aside for the purposes of the couple purchasing a home jointly.

[28] I am inclined to favour Mr Wynyard’s evidence on the point. Ms Rawiri’s explanation contradicts the fact the couple owned the property in equal shares of

35 per cent. Had the $5,000 been separate property, it would be expected Ms Rawiri’s interest would exceed Mr Wynyard’s. The evidence also demonstrates that each party’s income went to join family and living expenses. I note also that the parties treated the property as a “family home” before separation. The evidence of their relationship prior to separation is accordingly consistent with the $5,000 radio winnings, used as the deposit for the property’s purchase, being treated as joint property for the purposes of securing a family home.

[29] Next, I consider whether it is appropriate to take into account the $18,700 child support amount claimed by Ms Rawiri to have been unpaid by Mr Wynyard. Mr Day argued that it was appropriate to do so because s 342(f) of the Act allows the Court to take into account “any other matters the court considers relevant”. But that subsection must be read in light of the text of the section as a whole and its purpose,²¹ which requires the Court to have regard to:

(a) the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:

(b) the nature and location of the property:

_{(c) the number of other co-owners and the extent of their shares:}

²¹ Interpretation Act 1999, s 5.

(d) the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:

(e) the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:

(f) any other matters the court considers relevant.

[30] Subsections (a), (b), (c) and (e) all concern matters related to the property itself. Subsection (d) is somewhat distinct, as it concerns a hardship assessment. But that assessment requires examination of the effects of the order affecting the property. The listed items in the section, but for subsection (f), are directed therefore to concerns regarding the property. This creates a general class that may inform the interpretation of the broader “catch-all” language of subsection (f).²² That rule of interpretation is not decisive,²³ but may suggest that “other matters” refers to matters related to the property in issue, rather than broader financial considerations between the co-owners which are quite separate and distinct from the property itself.

[31] On the other hand, the Court of Appeal has emphasised the breadth of the discretion available to a court under ss 339 and 342.²⁴ In Bayly v Hicks, the Court observed:²⁵

The previous division between the Partition Acts, which dealt with division between co-owners and the Property Law Act 1952, which related to sales to third parties, has gone. So has the rigid requirement of the past that the court must make orders if the criteria set out in the Acts were proved. This has been replaced by a broad discretion, where the relevant considerations are set out in s 342. The discretionary factors include “any other matters the court considers relevant”.

(Footnote omitted)

[32] An issue in that case was whether a court making orders under s 339 is bound by the orders specifically sought by a party. Having listed the considerations in s 342, the Court continued:

[26] It seems unlikely that such a broad list of discretionary powers as expressed in s 339(1) could carry the implicit limitation that such powers

²² According to the ejusdem generis or limited class rule; see Ross Carter Burrows and Carter Statute

Law in New Zealand (5th ed, LexisNexis, Wellington, 2015) at 254.

²³ At 255.

²⁴ Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401.

²⁵ At [25].

could only be exercised on the express request of one particular party. Indeed, Mr Templeton accepted that if so driven by one of the factors in s 342, particularly hardship, the court could make an order for sale although the parties had sought division. So too the court's power to make further orders is broadly expressed. ...

...

[27] We see nothing in the words of these sections to indicate that the powers of the court are only to make an order for division along the lines of that sought by a party to the proceedings. The narrow jurisdiction of the past, split as it was between the Partition Acts and the 1952 Act is replaced by a broad discretion, limited by s 339(1), but beyond that turning on whatever factor appears to the court to be relevant when the broad range of factors in s 342 and the broad powers in s 343 are considered.

[33] I accept, in light of the Court of Appeal’s reasoning, that broader considerations than the class identified in s 342(a) through (e) may be captured by subsection (f). But I have not been persuaded it would be appropriate to take into account any outstanding child support in this case.²⁶ Parliament has enacted legislation that gives effect to the complex and competing considerations that apply in that area of the law.²⁷ It is an area of the law sitting outside the Property Law Act. The “objects” of the Child Support Act 1991 include:²⁸

(f) to provide legislatively fixed standards in accordance with which the level of financial support to be provided by parents for their children should be determined:

...

(j) to ensure that the costs to the State of providing an adequate level of financial support for children and their carers is offset by the collection of a fair contribution from liable parents:

(k) to provide a system whereby child support and domestic maintenance payments can be collected by the Crown, and paid by the Crown to those entitled to the money.

[34] The Child Support Act provides mechanisms to give effect to these, and other, objects. If Mr Wynyard is legally liable for outstanding child support payments (on

_{which I express no view), the appropriate method to calculate and recover the sum of}

²⁶ I say “any” as the affidavit evidence is conflicting on the point. While it does not seem in dispute that Mr Wynyard did not pay child support over the relevant period, he says this was because Ms Rawiri never sought any formal maintenance or child support and that, if she had sought it, he would have paid it.

²⁷ Child Support Act 1991.

²⁸ Section 4.

those payments is through the mechanisms in that Act. I consider that taking into account alleged unpaid child support payments under s 342 of the Property Law Act in this case risks upsetting the mechanisms Parliament has implemented in the Child Support Act in order to meet the objects and policies of that legislation.

[35] Further, while I agree in principle that an allowance should be made for interest on Ms Rawiri’s outgoings since March 1998,²⁹ I disagree with the way in which

Mr Day has calculated interest. Mr Day’s “Schedule 3” provided for his calculation of interest by taking an average annual expenditure on the property of $4,507.12 and adding 5 per cent interest (being the rate adopted in Bunyan v Parish in relation to a similar timeframe over which one party funded all outgoings) to reach a total for each year. He then added the next $4,507.12 for the expenses in the following year, adding further interest, and so on. This had the effect of compounding the interest. But

Mr Day’s final interest figure was obtained by taking 5 per cent of the total outstanding amount in 2018, which was $8,049.55.

[36] The interest figure reached by Mr Day is more than 5 per cent interest on the property outgoings incurred on Mr Wynyard’s behalf. The appropriate figure may be obtained by taking 5 per cent of the portion for which Mr Wynyard is liable ($90,142.38). That results in $4,507.12, which I account for in Ms Rawiri’s favour.

[37] I do not consider that interest should be calculated on the occupational rent. The rent is a representative or notional figure — Mr Wynyard did not incur or fund any actual cost or expenses by Ms Rawiri occupying the property. Conversely,

Ms Rawiri incurred actual expenditure in paying for the outgoings over the years. Interest on Mr Wynyard’s” portion” of those outgoings is therefore appropriate.

[38] Finally, I consider that a further general allowance should be made in

Ms Rawiri’s favour to reflect the “fruits” of her contributions and the justice of the case as a whole.³⁰ A further allowance is appropriate and necessary to take into account several factors. First, while the figure given for Ms Rawiri’s outgoings is said to incorporate mortgage repayments, rates and insurance, no figure is given for

insurance between October 2016 and July 2018.³¹ I accept Ms Rawiri’s evidence that she has, however, paid for insurance on the property since October 2016. Further allowance must be made for this expense. Second, no separate allowance has been made for the costs of general maintenance and upkeep of the property. Undoubtedly over a period of two decades Ms Rawiri will have incurred costs in repairs and maintenance which have in some way maintained or enhanced the property’s value, for which Mr Wynyard is (notionally) equally liable, and for which a general allowance may be made. I consider $5,000 is appropriate.

[39] The arithmetic resulting from the figures discussed is as follows. Ms Rawiri owes Mr Wynyard for the following amounts:

_{[40] Conversely, Mr Wynyard owes Ms Rawiri for the following amounts:}

[41] The difference between the figures results in a payment of $25,615.50 to

Mr Wynyard in exchange for the realisation of his interest in the property.

Conclusion and orders

[42] I accordingly order that:

(a) Within a period of six months of the date of this judgment, Ms Rawiri is to purchase Mr Wynyard’s share in the property 20A Miro Avenue, Omapere, for the sum of $25,615.50.

(b) Mr Wynyard shall execute all such documents as are necessary to effect a transfer of his share of the property to Ms Rawiri on payment of the aforementioned sum.

[43] Leave is reserved to the parties to apply for any further orders necessary to give effect to the judgment. I record that, should the above purchase by Ms Rawiri of

Mr Wynyard’s share not be effected within six months of the date of this judgment, leave is reserved to all parties to apply for further relief, including, if required, a sale of the property and division of the proceeds between the co-owners.

[44] My preliminary but strictly non-binding view is that while Mr Wynyard has had some success on his application, that is to a limited extent, as compared to the amounts sought by him at the hearing for his share in the property. An appropriate outcome may be that costs lie where they fall, or a very modest award of costs is made in Mr Wynyard’s favour.

[45] Nonetheless I encourage the parties to agree costs. If no agreement can be reached, the plaintiff may file a memorandum within 15 working days of the delivery of this judgment. Any memorandum in response may be filed within a further five

_{working days. Memoranda are not to exceed three pages.}

Fitzgerald J