AB v BC [2013] NZHC 1247 (29 May 2013)

Last Updated: 11 June 2013

NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE HTTP://WWW.JUSTICE.GOVT.NZ/COURTS/FAMILY- COURT/LEGISLATION/RESTRICTIONS-ON-PUBLICATIONS.

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2012-485-774 [2013] NZHC 1247

IN THE MATTER OF the Property (Relationships) Act 1976

BETWEEN AB Appellant/Applicant

AND AB, ERNEST WILLIAM GARTRELL AND GRAHAM ROBERT HILL AS TRUSTEES OF THE MR BOWE TRUST Second Appellant

AND BOWE COMMERCIAL PROPERTIES LIMITED

Third Appellant

AND BC Respondent

Hearing: 15 May 2013

Counsel: R P Harley for the Appellant/Applicant

No appearance for the Second or Third Appellant

E J Collins and H Nimot for the Respondent

Judgment: 29 May 2013

_{JUDGMENT OF MALLON J}

[1] AB (the husband) applies for leave to appeal my judgment given in this

_{proceeding on 21 December 2012.}[1] _{That judgment dismissed the husband’s appeal}

AB v BC [2013] NZHC 1247 [29 May 2013]

from a Family Court decision determining the division of relationship property with

BC (the wife) following their separation.

[2] Leave to appeal may be granted if the appeal raises a question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost, both to the court system and the parties, and the delay involved in a further appeal.[2] The husband raises six grounds which are said to meet this test. In my view they do not because they are not capable of bona fide and serious argument.

[3] The first ground of appeal concerns what is referred to in my judgment as the Cousins debt. The issue was whether the value of the relationship property was to be reduced by the amount of the Cousins debt. The husband continues to assert that because the Cousins debt was relationship debt when incurred it must be deducted from the value of the relationship property to be divided. This is wrong because it ignores the point that the Cousins debt had been repaid by the time of the hearing. If the debt was repaid from relationship property, there is no need to deduct it from the value of the relationship property. A deduction would only be necessary if the husband had repaid that relationship debt from his personal funds. On that point the husband produced no evidence.

[4] The second ground of appeal concerns the date at which the shares in M Ltd No 2 were to be valued. The husband continues to assert that it must be the hearing date because the value of the relevant shares had not been affected by his actions nor were they under his control. The husband makes that submission because the Family Court Judge had identified those two situations as ones in which a date other than the hearing date has been used. However the discretion in the legislation is not confined to those two circumstances. While there is less need to resort to the discretion in light of ss 18B and 18C, that does not mean that there will not be good reason to do

_{so in other situations.}

[5] In this case a hearing date valuation was unfair to the wife for the reasons explained in my judgment. In respect of those reasons the husband takes issue with some of the facts set out at paragraph [34] of my judgment. In particular:

(a) It is said that my description of the sale of the dry cleaning business to PRAM was in error because PRAM did not purchase the business from M Ltd No 2. However paragraph [34] does not assert that PRAM purchased the business from M Ltd No 2. Moreover the correct position is set out at [18] of my judgment where I explain that M Ltd No 2’s assets were sold to M Ltd No 3 for $135, 539 and M Ltd No 3 was sold to PRAM for $905,416.61.

(b) It is also said that I erred by saying that that the insurance proceeds were received by him in 2005. I agree that this is a (typographical) error in paragraph [34] of my judgment. As noted at [14] of my judgment, the proceeds were received in 2000. The typographical error does not detract from the point made in that paragraph that it is unfair to the wife to value the shares in M Ltd No 2 at the hearing date (which would give rise to a nil valuation) in part because substantial insurance proceeds were received by M Ltd No 2 after separation.

(c) It is said that I erred by saying that the husband’s credited drawings were $316,652 from the business in the 2000 financial year. That figure is said to be overstated by $100,000. I do not consider there to be an error. This was the evidence before the Court from the financial statements which had been reviewed by the expert instructed by the wife. The Court was not required to accept the husband’s assertion

that he did not receive these drawings.[3]

[6] Counsel for the husband contends that to address any unfairness from a hearing date valuation, the matter could have been referred back to the Family Court

_{for further consideration as to whether adjustments should be made to the nil}

valuation under ss 18B and 18C of the Property (Relationships) Act 1976. There are in my view three problems with this. The first is that it was never contended by the parties at the Family Court that this should be the course adopted. Secondly, this would be a difficult exercise when the case had not been advanced in that way whereas the Court did have the benefit of detailed expert evidence as to a separation date valuation. Thirdly, no convincing reason has been put forward to suggest that a separation date valuation was unfair to the husband.

[7] The third ground of appeal concerns the application of the capitalisation of earnings methodology adopted by the expert instructed by the wife and accepted by the Family Court. For the husband it is said that this methodology was not appropriate and, even if it was to be applied, it was not applied correctly. The husband’s submissions do not advance matters from where they were at the time of the hearing of the Family Court appeal, which was to assert error but to provide no clear reason why his expert evidence should have been preferred as the more realistic evidence of value. An appellant has the burden of showing error and in this case the burden was not discharged.

[8] The fourth ground of appeal concerns my finding upholding the Family Court’s decision to set aside a disposition of property owned by a company, the shares of which were relationship property. It is said that I erred in describing the Waterloo Road property as relationship property. The important point is, however, that disposition of the property removed that asset from the company and thereby removed its value (reflected in the value of the shares) from the relationship property pool.

[9] The fifth and sixth grounds of appeal concern post-separation contributions:

(a) Compensation under s 18B was not ordered by the Family Court because the evidence was unreliable in part and because of the voluntary nature of the payments.

(b) Occupational rent was potentially available, but it was rejected by the

Family Court on the basis that the husband had also resided in the

family home until June 2000, there was no reliable evidence as to the appropriate rent[4] and the husband had the control of the business assets post-separation.

(c) The husband says that he was not in control of the business assets post-separation and rather they were in the control of his son. However it was not accepted that the husband had no involvement or control. There was evidence that, although his son managed the dry cleaning business day to day, the husband still had overall control of the company assets. For example:

(i) The husband signed the transfer of the Waterloo Road property from M Ltd No 1 to the Trust on 30 July 1999, without consulting the wife.

(ii) Following the fire and incorporation of M Ltd No 3 on 30 July

1999, the husband was involved in the negotiations for the fresh plant and the disposal of some of the destroyed plant that remained in the old premises.

(iii) The husband signed a bailment agreement between M Ltd

No 3 and PRAM on 27 June 2005.

[10] No error was shown in respect of these findings at the appeal nor on this application for leave.

_{[11] The application for leave to appeal is dismissed.}

Solicitors:

Reeves Lawyers for the Applicant

Collins & May Law Office for the Respondent

Mallon J

---

[1] _{AB v BC [2012] NZHC 3619.}

[2] The right to apply for leave to appeal is provided by s 39B of the Property (Relationships) Act

1976 and s 67 of the Judicature Act 1908. For the principles to be applied to determining whether leave should be granted, see Waller v Hider [1998] 1 NZLR 412 (CA); Snee v Snee [1999] NZCA 252; (1999) 13 PRNZ 609 (CA).

[3] In any event, the evidence was that the drawings were a “net-off exercise to get the net surplus as low as possible”. This evidence was relevant to the expert evidence for the wife as to the “on- going earnings” of the business from which the expert’s valuation was derived.

[4] Counsel for the husband says that the husband’s evidence as to rent was unchallenged. While it is the position that no alternative evidence about market rental was put forward that does not mean that the husband’s evidence must be accepted.