Inflated divorce deal fight counted out

Last updated 05:00 27/08/2012

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A New Plymouth farmer has lost a Court of Appeal bid to recalculate his divorce settlement after judges ruled his sudden recovery from a brain injury and a rapid rise in farm property values could not have been anticipated.

Neil Johnston had been appealing a decision ruling against his claim against a law firm and his court-appointed property manager claiming a five-year delay in settling his divorce left him $780,000 out of pocket.

Mr Johnston separated from his wife of 21 years in 1996. By late 1998 the pair had reached provisional agreement whereby he would receive the 126 hectare family farm in Mangorei Rd near New Plymouth while she would receive $443,000 in cash and other assets.

But while the formal settlement was being drawn up in preparation for signing, Mr Johnston suffered a serious road accident.

As a consequence of his injuries, the courts ruled Mr Johnston was incapable of entering into contracts and the farm's accountant Christopher Schurr was appointed by the courts as his property manager.

The 1998 relationship property agreement remained unsigned, with Mrs Johnston now preferring to wait until her former husband recovered to resolve matters.

A July 2000 letter from psychiatrist Dr Ian Hosford, cited in the judges' ruling, said Neil Johnston was unlikely to regain full competence.

But, in late 2002 his condition improved markedly, the ruling said: "Contrary to all expectations, Mr Johnston made a dramatic recovery with the aid of his present wife, Marilyn, and changes of medication.

"By November 2002 there were some indications that he was back to his old self."

Now in control of his affairs Mr Johnston moved to conclude the settlement with his ex-wife.

In the interim, however, farm property prices had boomed with the value of the family property rising from $800,000 to $2.4 million.

Christine Johnston settled in 2004 and received cash and assets totalling $1.2m.

Mr Johnston, employing QC Colin Carruthers, went to the High Court last year claiming Mr Schurr and his then-lawyers Deem & Shearer were remiss in not concluding the 1998 relationship property agreement while he was incapacitated.

This action marked the first time a property manager appointed under the Protection of Personal and Property Rights Act had been sued for a breach of care.

The High Court found the legislation did not allow such claims, Deem & Shearer had ceased being Mr Johnston's lawyers at the time of the crash, and Mr Shurr's powers explicitly prevented him making decisions about the marital assets.

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The Court of Appeal, in upholding the High Court decision, said no-one could have been expected to anticipate the strange turns the case chronicled.

"Care must also be taken to avoid hindsight bias: in particular, it cannot be said that anyone ought to have anticipated that property values would rise to the levels reached in 2004, or that, having failed to improve in the first year, Mr Johnston would ultimately recover his independence," the ruling said.

- © Fairfax NZ News

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