Cullen v Cullen
[2017] NZHC 42
•23 December 2016
NOTE: PURSUANT TO S 35A OF THE RPOPERTY (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 COURT/LEGISLATION/RESTRICTIONS-ON-PUBLICATION
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2015-441-97 [2017] NZHC 42
BETWEEN BRIAN CULLEN
Appellant
AND
CAROL ILEEN CULLEN Respondent
Hearing: 15 March 2016 Appearances:
G R J Thornton for Appellant
M E M Macfarlane for RespondentJudgment:
23 December 2016
Reasons:
27 January 2017
REASONS FOR JUDGMENT OF CLARK J
Table of Contents
Background [2] Family Court decision and appeal [8] Principles governing appeal [11] Overview [13] Date of Valuation [19] Inheritance [34] Section 18B claims [44] Damage to fishing boat [49] Contributions to household payments [57] Funds introduced to Cray 3 Ltd [60] Wife’s liability for relationship property debt [62] Treatment of husband’s contracting income [72] Section 18C claim [79] Did the Judge err in ordering the appellant to pay compensation for damaged locks? [87] Result [91]
CULLEN v CULLEN [2017] NZHC 42 [27 January 2017]
[1] On 23 December 2016 I issued a results judgment with reasons to follow. These are the reasons for dismissing the appeal against Judge Lendrum’s determination of the property relationship interests and entitlements of Brian Cullen and Carol Cullen.1
Background
[2] The parties married in 1972. They separated on 20 March 2011.
[3] In 1985 they formed the B & C Cullen Partnership as a vehicle for their crayfishing activities. In 2010 the business was incorporated as Cray 3 Ltd. From the date of separation Mr Cullen took control of Cray 3 Ltd and operated it to the exclusion of Ms Cullen.
[4] Approximately one month before separating the couple settled a trust and the family home at Mahia was transferred to the trust. For almost two years from the date of separation Mr and Ms Cullen continued to share “most unhappily”2 a joint occupation of the family home. In fact, by the end of 2013, the relationship had become so difficult the Police became involved and Ms Cullen had little option but to leave the family home. She has subsequently lived in a caravan park while
Mr Cullen and his new partner occupy the home.
[5] In May 2012 Mr Cullen had filed an on notice application for relationship property orders. In the main he sought orders classifying certain assets as relationship or separate property and fixing the interests of the parties in the assets classified as relationship property. He also sought orders providing for certain items of relationship property to be transferred to and vested in each of the parties as their sole and separate property.
[6] In November 2013 the Family Court made orders and directions relating to the family home including that the home be transferred from the trust to the parties
as tenants in common with equal shares.
1 Cullen v Cullen [2015] NZFC 6270.
[7] Issues concerning the quantum to be paid to Ms Cullen on the transfer or sale of the former family home came before the Family Court on 7 May 2014. Judge Lendrum affirmed the earlier orders of the Family Court and gave directions relating to a two-day hearing, envisaged at that stage to be in November 2014. The relationship property dispute was eventually heard in May 2015 and Judge Lendrum issued his decision in September 2015.
Family Court decision and appeal
[8] Following a two-day hearing, Judge Lendrum gave judgment determining the relationship property interests and entitlements of the parties. Although prior to the hearing the parties had disputed whether certain property which was subject to the claim was company or trust property, at the hearing the parties agreed that all property was to be treated as relationship property.
[9] The Judge identified some 15 issues for resolution. Many are no longer in contention. For present purposes, the Judge’s decision was to the following effect:
(a) The value of the plant, equipment of Cray 3 Ltd and chattels was to be determined at the date of separation and not at the date of the hearing.3
(b)An advance of $12,000 made by Ms Cullen to the parties’ business partnership was an inheritance and accordingly separate property.4
(c) Claims made by Mr Cullen for deductions on various bases (funds introduced to Cray 3 Ltd by Brian Cullen Ltd between 2012 and
2015,5 50 per cent of household payments made by him as detailed6
and the cost of repairs to the fishing boat7) were rejected or not allowed in full.
3 At [54]–[57].
4 At [69].
5 At [71(a)] and [72]–[75].
6 At [87].
(d)Mr Cullen’s various personal expenditure from the Cray 3 Ltd accounts, and income received by him for a lease of quota, were to be deducted from his entitlements.8
(e) Ms Cullen was entitled to a sum of $25,363.51 representing a share of contracting income.9
(f) Mr Cullen diminished the value of the relationship property and the respondent was entitled to compensation for it.10
(g)Mr Cullen owed compensation for damage done to locks on the family home.11
[10] Against each of these findings the appellant has appealed.
Principles governing appeal
[11] A party affected by a decision of the Family Court may appeal to the High Court.12 The appeal is by way of a rehearing. The approach to appellate review in the context of relationship property appeals was considered in B v F [De facto relationship].13 Heath J, referring to Austin, Nichols & Co Ltd v Stichting Lodestar, said:
[6] Relationship property appeals from the Family Court are governed by s 39 of the Act, which imports ss 74–78 of the District Courts Act 1947 as part of the procedures on appeal. The appeal is by way of rehearing (s 75) and falls within the scope of an appeal of the type to which the Chief Justice referred in Austin, Nichols at para [17]. If the appeal were allowed, this Court may make any decision that it thinks should have been made or remit the proceeding to the Family Court for reconsideration on a basis to be articulated clearly in its decision: (s 76(1)).
[7] Application of the Austin, Nichols principles is not altogether easy, in the context of appeals from the Family Court. Many first-instance decisions represent a mix of findings of fact (after seeing and hearing
8 At [84].
9 At [106].
10 At [111]–[115].
11 At [132].
12 Property (Relationships) Act 1976, s 39(2).
13 B v F [De facto relationship] [2010] NZFLR 67 (HC), cited in Nicola Peart (ed) Brookers
Family Law - Family Property (online looseleaf ed, Thomson Reuters) at [PR39.02].
witnesses), the formation of an evaluative judgment and the exercise of statutory discretions. Sometimes it is difficult to characterise a particular decision as evaluative, factual or discretionary in nature.
[8] I approach this appeal on the following basis:
(a) first, I must take account of the advantage that Judge Twaddle had of hearing and seeing the witnesses give evidence before him (see Austin Nichols at para [13]);
(b) secondly, to the extent that the Judge exercised any discretion in reaching his decision, I must determine whether those discretionary decisions were or were not open to him, based on May v May (1982) 1 NZFLR 165 (CA) and Blackstone v Blackstone [2008] NZCA 312 at para [8];
(c) otherwise, I am free to reconsider the Family Court’s decision and to substitute my own view on questions of fact and evaluation, if I were convinced that the first instance decision was wrong.
In that regard, I align myself with Randerson J’s remarks in WPH v ITP [Length of Relationship] [2009] NZFLR 745 (HC) at paras [15]–[17].
[12] I propose to adopt an approach that is consistent with these principles. While being mindful of Judge Lendrum’s reasoning I will conduct my own assessment of the issues and the relevant evidence.
Overview
[13] Before turning to the specific grounds of appeal I address an issue which, in
Mr Thornton’s submission, has pervaded the judgment to the detriment of Mr Cullen.
[14] At para [36] of the judgment Judge Lendrum begins his analysis and discussion of the claims in light of the requirement that, before compensation for dissipation of relationship property post-separation can be ordered, the Court requires proof of deliberate action or inaction on the part of the relevant party and a causal connection between that action and the diminution in value. At para [38] the Judge said:
I turn now to consider in terms of the evidence and the law the various claims and counter-claims made by the husband and the wife. I will consider each in turn but prior to commencing that process I record my view with respect to certain actions which I find on the evidence, and on the balance of probabilities, caused many of the obstacles to this matter being resolved well before this Judgment.
[15] Mr Thornton’s concern, and submission, is that the Judge then proceeded to make findings against Mr Cullen in respect of the issue identified at para [38] when that issue had not been identified by the parties and no forewarning of it had been given prior to the judgment. Mr Thornton submitted the issue posed and the Judge’s findings are procedurally unfair and contrary to the Property (Relationships) Act (the Act).
[16] This criticism of the Judge is unfounded. Nor does it assist in resolving the points on appeal. Paragraph [38] is raised out of the context of the Judge’s overall analysis, which runs from [38]–[50], of the difficulties that had “permeated” the case and had also impeded earlier resolution of the issues.
[17] The Judge found that the husband unilaterally assumed control of the relationship property relating to the fishing business from the date of separation and used the company as if it were his own.14 The Judge found also that the husband took steps to force the wife from their home, again, on a unilateral basis.15 The effect of these two actions was to create a power imbalance between the two of them.
While the wife was not without fault her inability to progress resolution of relationship property issues derived significantly from the husband’s unilateral actions.16
[18] The Judge’s findings of conduct explained why the dealings post-separation with respect to Cray 3 Ltd were delayed: the wife had no ability to involve herself due to the husband’s conduct and the same conduct saw him operate the company and his assets as one to the detriment of the wife. The notes of evidence show extensive probing of the wife by the Judge about her ability and willingness to work with accountants towards the preparation of accounts. Overall, the Judge’s discussion of the husband’s conduct (at [38] and following) and the Judge’s findings in that regard were not in error. They were relevant to his assessment of the value of
assets.
14 Cullen v Cullen, above n 1, at [39].
15 At [48].
16 At [50].
Date of Valuation
[19] The appellant says the Judge erred in determining the value of the plant, equipment of Cray 3 Ltd and chattels as at the date of separation rather than the date of the hearing.
[20] The items were valued at $107,000 at the date of separation and, by a different valuer, at $48,000 at the date of the hearing.
[21] Mr Thornton referred to the helpful passage of the Court of Appeal in GFM v JAM17 containing the Court’s summary of the position (as at December 2013) of ss 2G and 18C of the Act as they had been interpreted and applied by the Supreme Court and Court of Appeal. Without setting out that summary in full the key points are:
(a) The Court’s overall aim should be to achieve a just division of relationship property between the parties having regard to the purposes and principles of the Act set out in ss 1M and 1N.
(b)Section 2G, introduced in 1 February 2002, carried forward the presumption operating since 1976 for valuation at the date of hearing. That presumption was strengthened by the introduction of ss 18B and
18C.
(c) The presumption reflects the basic statutory premise that parties share equally in the “product” of their relationship and the value of that product is to be assessed at contemporary not historic values because otherwise equal sharing would not be achieved. The Court cited William Young J’s observation in the Supreme Court judgment in Burgess v Beaven:18
The general approach, however, was that hearing date values were conducive of equity and in particular that both parties should usually share increases in values associated with inflation (as opposed to personal effort).
17 GFM v JAM [2013] NZCA 660, [2014] NZFLR 418 at [35].
18 Burgess v Beaven [2012] NZSC 71, [2013] 1 NZLR 129 at [24].
(d)The onus of persuading the Court to depart from the presumptive position in s 2G(1) rests on the party contending for a different valuation date.
(e) Section 2G is not expressly subject to ss 18B and 18C. Nevertheless, where a court desires to attribute to one party the benefits or losses that party has brought about post-separation that is more directly achieved under ss 18B and 18C respectively and there is less need than in the past to depart from the default position of hearing date valuation.
[22] Notwithstanding the presumptive position there is in s 18C(2) a discretion to order a spouse, whose deliberate actions or inactions have materially diminished the value of relationship property, to pay the other spouse a sum of money by way of compensation.
[23] I note the quota and matrimonial home were, by consent, valued as at the date of the hearing.
[24] Judge Lendrum acknowledged the Supreme Court’s observation in Burgess v Beaven that, following the enactment of ss 18B and 18C which allow for compensation for contribution and dissipation post-separation, there is less need than in the past to depart from the default position of hearing date valuation.19 But also applicable is the principle that valuations at separation may be appropriate where one of the parties has had the post-separation use and enjoyment of a depreciating asset.
[25] That is the approach Judge Lendrum took:20
… this is a case where the husband took unilateral and complete control of the business …. He has had the benefit of using them as he chose to. He has had the ability to dispose of them as he chose to. They have depreciated when under his watch. It would be unfair to allow him that use and then have the wife accept a depreciated value particularly where, as here, the husband has chosen not to utilise those assets to earn relationship income. I do not
19 Cullen v Cullen, above n 1, at [56] citing Burgess v Beaven [2012] NZSC 71, [2013] 1 NZLR
129 at [25].
20 At [57].
agree with the submission made by counsel for the husband that this property should be valued as at the date of hearing.
[26] Mr Thornton submitted that the Judge’s finding was incorrect for the
following principal reasons:
(a) Mr Cullen endeavoured to continue the business post-separation but he was thwarted because he was unable to get sufficient fishing quota to continue.
(b)The Judge did not acknowledge that the wife bore the onus of demonstrating why there should be a departure from the presumption of hearing date valuation.
(c) Regarding the order that the husband pay compensation for projected income that should have been earned using the plant and equipment Mr Thornton submitted that it is:
wholly inconsistent for the husband to have to account for deemed income which necessarily would require the use of the plant and equipment without any allowance for the consequences to that plant and equipment as a result of its use — losses and depreciation.
[27] The decision to depart from the presumption of a hearing date valuation is discretionary.21 With the exception of the point about onus of proof, the appellant does not suggest that the Judge misdirected himself as to the applicable principles. Rather, he seeks to relitigate findings and matters that were the subject of cross- examination: that the husband endeavoured to continue the fishing business after the parties separated and that he was unsuccessful was not due to any deliberate action or inaction on his part; that the wife took steps to prevent the husband from using the assets of the business – mainly the fishing boat — and in doing so caused damage
for which he sought compensation; the husband explained why he was not able to earn income and it would be unfair if he should shoulder the full effect of depreciation for events outside his control; and income earned by the husband from
the use of the plant and equipment can be accounted for with necessary allowances.
21 Property (Relationships) Act 1976, s 2G(2).
[28] Mr Cullen was cross-examined extensively about why he did not continue commercial crayfishing after 8 May 2012. I have reviewed the notes of evidence. In addition to extensive cross-examination on his various explanations as to why he could not operate the business as he wished and decided instead to work at Pan Pac rather than working to make the company profitable, the Judge himself asked questions of Mr Cullen and required clarification of the various explanations.
[29] I am satisfied that the Judge’s conclusion was not only available to him but predictable in light of Mr Cullen’s inconsistent and contradictory answers. In fact the Judge recorded only a sample of his unsatisfactory accounts.22 Other examples included Mr Cullen’s concession that he fished for up to five or six hours at a time under a customary fishing permit to provide kaimoana for friends for no reward for the use of the boat or his labour. Mr Cullen accepted that some 176 customary permits were issued and that he had done “about 139 trips for customary permits”.
[30] The Judge was entitled to view Mr Cullen’s explanations for not working the business as contradictory and to not accept them.23 The arguments in support of this ground of appeal are, in the main, a restatement of those made by the appellant at first instance. The appellant does not contend the Judge lacked an evidential basis for his findings. In effect I am invited to reach a different conclusion from the Judge on matters which ultimately turned on the Judge’s assessment of the husband’s evidence. Even without the advantages the Judge had in hearing the evidence, on the basis of the record, I would, and have, made an assessment of the evidence similar to Judge Lendrum’s. I have no basis for reaching a different conclusion from the
Judge: that Mr Cullen’s deliberate actions caused diminution in the value of the
company and that he intended that outcome.24
[31] Nor is there error as to the onus of proof. Ms Cullen bore the onus of showing that the Court should depart from the presumption that the date of valuation was the date of the hearing.25 The judgment reflects that she discharged that onus.
Ms Cullen brought evidence and justifications for finding that the proper valuation
22 Cullen v Cullen, above n 1, for example, at [97]–[104].
23 At [111].
24 At [111].
25 GFM v JAM, above n 17, at [35(d)].
date was separation, and the Judge was persuaded to that view. That the Judge did not expressly record that Ms Cullen bore the onus of showing that the presumption should be departed from is not an error.
[32] In respect of the income compensation point26 I have difficulty seeing how it bears on the issue raised by the ground of appeal, namely, the correct date for valuation of the plant and equipment of Cray 3 Ltd.
[33] The appellant has not established that the Judge has erred in principle or otherwise erroneously exercised the discretion available to him.
Inheritance
[34] The issue raised by this ground is whether the Judge erred in determining the advance of $12,000 made by the respondent to the parties’ business was the separate property of the respondent.
[35] It was not contested that Ms Cullen received an inheritance of $12,000 which
was transferred to the parties’ partnership prior to that partnership becoming Cray 3
Ltd in 2010. Mr Cullen’s position is that the inheritance is relationship property
because it was applied to the partnership.
[36] The Act provides that inheritance is not relationship property unless:27
with the express or implied consent of the spouse or partner who received it, the property … [has] been so intermingled with other relationship property that it is unreasonable or impracticable to regard that property … as separate property.
[37] Two months prior to the separation, Mr Cullen called the parties’ accountant,
resulting in a note being placed on their file:
Brian [Cullen] called today and wanted us to put on file that Carol put $12K
of her own money into the partnership years ago. This was approximately
2000-2002.
26 At [26](c) above.
27 Property (Relationships) Act 1976, s 10(2).
She doesn’t want to take this money out at this point, she just wanted this
documented on file.
[38] Relying on this note dated 10 January 2011 the Judge concluded that the inheritance was separate property:
[69] I find that the parties both agreed, and effectively sequestered, this inherited sum for the wife. Furthermore it was the husband who requested this be done by the parties’ accountants and less than two months prior to their separation. That is a clear expression of his views, and intention, at a critical time. Accordingly I find that Cray 3 Limited owes the wife the sum of $12,000 on account of that inheritance.
[39] Mr Thornton submitted that:
(a) Ms Cullen clearly consented to the inheritance being applied to the
parties’ partnership property;
(b) Ms Cullen has acknowledged it was not separately identified;
(c) while the Judge relied on the note of 10 January 2011 as “a clear expression of Mr Cullen’s views, and intention, at a critical time”,28 that proposition is not accepted by Mr Cullen and the note did not alter the status of the inheritance; and
(d) no attempt has been made to trace the funds.
[40] The standard established in s 10(2) of the Act is whether it is “unreasonable or impracticable” to regard the claimed property as separate property. The evidence, such as it is, is contained in the note of a call by Mr Cullen for the purpose of placing on record that Ms Cullen did not want to take her inheritance “out at this point”. It is difficult to see what purpose there was in the call if not that Mr Cullen agreed that the $12,000 inheritance was effectively sequestered for Ms Cullen.
[41] In cross-examination Mr Cullen confirmed that he talked to the accountant about the $12,000 inheritance. He did not dispute that the note accurately recorded
28 Cullen v Cullen, above n 1, at [69].
what he stated to the accountant and that at the time he was recognising that
Ms Cullen’s inheritance was to be recorded as such in the company’s books.
[42] I note that Ms Cullen recorded in her affidavit of assets and liabilities as a “Debt or mortgage owed to me” $12,000 being “Inheritance from my mother’s estate which has been invested in partnership and I believe CRAY3 Ltd”. There was no cross-examination of the wife on this point or the inheritance more generally.
[43] This ground of appeal is not made out. The Judge’s finding was supportable
on the evidence and the appellant has not established that the Judge was wrong.
Section 18B claims
[44] Under this ground of appeal I am required to determine whether the Judge erred in rejecting Mr Cullen’s various claims made pursuant to s 18B of the Property (Relationships) Act 1976.
[45] Mr Cullen had made claims for funds introduced to Cray 3 Ltd by Brian Cullen Ltd between 2012 and 2015: 50 per cent of household payments made by him as detailed; cost of repairs to the fishing boat; accounting costs of Crowe Horwath in respect of Cray 3 Ltd; and IRD penalties.
[46] The accounting costs and the IRD penalties are no longer in issue. I address the remaining claims in turn.
[47] Section 18B allows for compensation to be made for contributions by a party to relationship property post-separation. It relevantly provides:
18B Compensation for contributions made after separation
(1) In this section, relevant period, in relation to a marriage, civil union, or de facto relationship, means the period after the marriage, civil union, or de facto relationship has ended (other than by the death of one of the spouses or partners) but before the date of the hearing of an application under this Act by the court of first instance.
(2) If, during the relevant period, a spouse or partner (party A) has done anything that would have been a contribution to the marriage, civil union, or de facto relationship if the marriage, civil union, or de
facto relationship had not ended, the court, if it considers it just, may for the purposes of compensating party A—
(a) order the other spouse or partner (party B) to pay party A a sum of money:
(b) order party B to transfer to party A any property, whether the property is relationship property or separate property.
…
[48] The Judge determined that the husband was entitled to reimbursement for payments made in respect of relationship property debt. The starting point therefore, before considering Mr Cullen’s claims for compensation, was the sum of $61,661.14 which Ms Cullen was to pay to him.29 From this starting point deductions were made and other claims by Mr Cullen were rejected.
Damage to fishing boat
[49] Mr Cullen’s position is that the Judge should have ordered compensation to him for damage allegedly done by Ms Cullen to the fishing boat. Mr Cullen relies on an email exchange within New Zealand Police in which guidance was sought from its legal section.
[50] Mr MacFarlane submitted that an objection was taken to these notes at the time but that Judge Lendrum’s ruling has been omitted from the casebook. I am not confident about that. First, the Police note is included in the case on appeal (perhaps wrongly so but it is there) while the case on appeal contains no Family Court ruling as to the admissibility of the note.
[51] Secondly, the Judge himself refers to the note albeit in somewhat ambiguous terms:30
… While there was some damage occasioned the boat, as the police notes apparently disclose, I do not know on the balance of probabilities who caused that damage to the boat.
29 At [83].
Accordingly, I am unable to put the internal document aside confident that it was ruled inadmissible.
[52] Even so, what does that document reveal? The email request for legal advice contains the following statement:
Carol CULLEN has stated that she’s tried to immobilise the tractor and boat by carrying out these damages to it to stop him using the boat and causing wear and tear.
[53] Although on its face the passage seems to reflect that the Police Officer is reporting a statement from Carol Cullen herself, a careful reading of the email suggests that the whole account which it contains has been reported by Brian Cullen. For example: “Brian has reported to police that just before he moved out … a number of cords or cables in the boat were cut”.
[54] Following a warning from the Judge about self-incrimination, Ms Cullen declined to answer questions that may have incriminated her. Mr Thornton submitted that there is an abundance of evidence upon which to find that Ms Cullen damaged the boat.
[55] I do not agree. I am unable to draw the inference from Ms Cullen’s response in cross-examination that she was responsible for the particular damage to the boat for which Mr Cullen claimed. Judge Lendrum was influenced in his decision by an earlier complaint to the police by Mr Cullen in respect of which Ms Cullen had been unsuccessfully prosecuted. Ms Cullen claimed by way of compensation the $1,000 in legal fees which she incurred.
[56] I have no basis for reaching a different view from Judge Lendrum who considered the only appropriate set-off was to let both claims lie where they fall with no adjustment.31
Contributions to household payments
[57] As to Mr Cullen’s claim for 50 per cent contribution to household payments, the Judge determined that Ms Cullen should meet half of the household payments in respect of rates and insurance only for the period of time she was in occupation of the home. The Judge found that Mr Cullen later had sole occupation of the home because he, in effect, forced Ms Cullen to leave. Consequently Ms Cullen was liable for a lesser sum than that claimed by Mr Cullen. (The actual amount was to be
calculated by counsel.)32
[58] As Mr Cullen’s claim for 50 per cent of household payments by him was accepted to the extent of insurance and rates and as those payments were detailed in his affidavit sworn in August 2014 and not challenged by Ms Cullen, Mr Thornton submitted the Judge should have ordered the wife to pay $4,089.97 rather than requiring counsel to confer.
[59] It may have been preferable for the Judge to so order but the conclusions he reached and the orders he made consequent upon those conclusions were open to him. The appellant identifies no error in the Judge’s determination of the liability which the parties bore for their respective contributions to household payments.
Funds introduced to Cray 3 Ltd
[60] The submissions for the appellant relating to the claim for funds introduced to Cray 3 Ltd by him between 2012 and 2015 suggest that in some way he held back a claim for further compensation:
The detail provided in Schedule A was only made available after the hearing. The husband wished it to be acknowledged that the extent of his financial contributions were far greater than the formal claim. If the Court were to consider further issues of post separation contributions in light of the provision of the financial statements for Cray 3 Limited for years ended
2012 to 2015 then the husband’s position is that he would make claim for
further compensation as revealed in those statements. The husband does not expect the Court now to make such award but effectively wants his position in this regard preserved depending on the outcome of this appeal.
[61] No error has been identified and the point made in submissions is able to be taken no further.
Wife’s liability for relationship property debt
[62] The Judge determined that Ms Cullen must make payment to Mr Cullen of
$61,661.14 as reimbursement of payments made by him in respect of relationship property debt. From that sum the Judge made deductions:
[84] However from that sum there must be deductions made for income received by the husband but which should have been received as relationship property and which were not used to repay relationship debt. In this regard I refer particularly to:
(a) the sum of $3,855 [an amount received by Mr Cullen from
Cray 3 Ltd account for personal expenditure];
(b) a further sum of $2,005 [an amount received Mr Cullen from
Cray 3 Ltd account for personal expenditure];
(c) a further sum of $4,927 [an amount received Mr Cullen from
Cray 3 Ltd account for personal expenditure]; together with
(d) $6,000 repaid to him in respect of the Greening quota lease.
[63] Mr Thornton submitted that, while Mr Cullen acknowledged payments (a)– (c) as personal expenditure, “that acknowledgement must be seen in the context of a large number of transactions recorded by the husband” in the relevant affidavit. It was unfair to identify three transactions of the many recorded in the affidavit as the personal expenditure of the husband because those personal expenditures “might be offset by other transactions”.
[64] I am unable to discern an appeal point in the submission.
[65] Mr Thornton submitted that there is “no particular basis” for the making of the deductions and these deductions were not identified by the parties as being in issue. But, as Mr Macfarlane submitted, the question of deductions was at issue in the hearing. The notes of evidence show that one focus of cross-examination of the appellant was the extent of his personal use of the funds of Cray 3 Ltd.
[66] Mr Thornton also submitted that, while the Judge added to Ms Cullen’s
reimbursement $1,769 for income she had received, the Judge did not account for
$4,300 of Ms Cullen’s legal fees which were met by Cray 3 Ltd. In an affidavit Mr Cullen claims that Ms Cullen incurred legal fees of $4,300 and in her affidavit Ms Cullen admits that these legal fees were incurred.
[67] The appellant’s position is that the Judge’s approach is unfair but I am unable
to identify the respects in which this part of the judgment is wrong.
[68] Finally, Mr Thornton submitted that the $6,000 in respect of the Greening quota lease “appears to arise from the correspondence between” Ms Cullen’s solicitors and the parties’ accountants which was attached to closing submissions. Mr Cullen therefore had no opportunity to respond and the proper treatment of this amount had not yet been agreed by the parties.
[69] The accountants’ treatment of the $6,000 is recorded in Crowe Howarth’s
letter to Ms Cullen’s solicitors dated 28 May 2015:
The quota leased from Y C Greening of $6,000, paid in April 2012 was accrued in the March 2012 financial statement. Subsequently Y C Greening terminated the agreement and refunded the $6,000 in April 2012. At the time this was recorded as funds introduced by Mr Cullen, however further investigation has shown this should have been recorded against lease expenses. This will need to be rectified. We propose that this is corrected in the 2015 Financial Statements if this is acceptable to both parties. Please advise.
[70] I accept Mr Macfarlane’s submission that there is no need to hear further on this point or achieve the agreement of the parties. The accounting and treatment of the sum is explained and the Judge properly regarded the $6,000 as relationship property. The agreement of the parties to which the accountants refer is for the rectification of the financial statements not agreement as to the provenance of the sum.
[71] The Judge did not err in making the deductions set out in paragraph [84] of the judgment and the appeal does not succeed on this ground.
Treatment of husband’s contracting income
[72] In respect of the husband’s claim that he introduced $50,727.02 into Cray 3
Ltd by way of contracting income between 2012 and 2015 the Judge concluded:
[105] I see the matter in this way. After the separation the fishing business was under the control of the husband. He continued to work the business for the first financial year (being the year ending 31 March 2012) in the way he had operated it prior to separation. After 8 May 2012 he stopped working as a commercial fisherman. The fishing quota was leased when possible and generated some income. The husband claims this income as his separate property contribution and seeks a compensation adjustment accordingly. Schedule A produced by counsel for the husband claims some $50,727.02 as contracting income between 2012 and 2015.
[106] I cannot understand the basis on which he makes this claim. Any income received from the activities of the fishing boat as an asset of Cray 3
Limited belongs to the business because it was generated by the boat and/or
the quota and the business and the quota are relationship property. In my view $25,363.51 of that income should have been made available to the wife. Accordingly I do not accept the claim for compensation derived from company income.
[73] Mr Thornton submitted that the Judge misunderstood the reference to “contracting income” in Schedule A as being income attributable to Mr Cullen working for Cray 3 Ltd and using its equipment. Yet all amounts referred to in Schedule A are directly attributable to Mr Cullen “contributing his contracting income completely unrelated to fishing”.
[74] The alleged mistake is in the Judge’s award of $25,363.51, being half of the contracting income, to Ms Cullen when she was not entitled to any share because Mr Cullen’s contracting income was unrelated to fishing.
[75] There is no evidence to support the contention that Schedule A has the meaning now advanced by the appellant. It is said the contracting income is “mainly from Pan Pac to Cray 3 Limited.33 I have also read the relevant part of Mr Cullen’s submissions in the Family Court but they do not assist. In fact there is no reference
there to Pan Pac.
33 Submissions of counsel for the appellant dated 7 December 2015 at [56].
[76] The appellant submits that had he been given the opportunity he “would have corrected the misapprehension of the Court” in its belief the contracting income was from the activities of the boat as an asset of Cray 3 Ltd.
[77] I do not accept the Judge misapprehended the position which was presented to him in a simple schedule and accompanying submissions, neither of which contained the narrative now advanced on appeal. If the narrative now advanced reflects the actual position Mr Cullen should have put that to the Judge, along with the relevant evidence, when the opportunity was provided to do so in final submissions.
[78] This ground of appeal does not succeed.
Section 18C claim
[79] The issue raised by this ground of appeal is whether the Judge erred in determining that the husband diminished the value of the relationship property and that the wife was therefore entitled to compensation.
[80] Section 18C of the Act provides:
18CCompensation for dissipation of relationship property after separation
(1) In this section, relevant period has the same meaning as in section
18B.
(2) If, during the relevant period, the relationship property has been materially diminished in value by the deliberate action or inaction of one spouse or partner (party B), the court may, for the purposes of compensating the other spouse or partner (party A),—
(a) order party B to pay party A a sum of money:
(b) order party B to transfer to party A any property, whether the property is relationship property or separate property.
[81] The Judge reviewed the authorities bearing on post-separation conduct having the effect of dissipating relationship property and the powerful remedial response of s 18C to such outcomes. The conduct leading to the dissipation of the asset must be deliberate and the purpose of s 18C is to provide the Court with a
discretion to compensate a party whose spouse or partner has deliberately diminished the value of relationship property by action or inaction following separation.34 The Judge continued:
[113] As previously set out there is clear authority that the property must be materially diminished in value before s 18C compensation claims can apply. In this case that material change is self-evident from the income received in the year ending 2012 and the year ending 2013. As stated above, the company’s income diminished to 23 percent of the income received in the previous year. The only reason that happened was because of the deliberate actions or inactions by the husband. The necessary causal connection is clearly present.
…
[115] In my view the wife is entitled to compensation for the manner in which the business was diminished in value by the actions of the husband after 31 March 2012.
[82] It is said that the Judge has erred because he made no finding that Mr Cullen “acted or failed to act intending to diminish the value of relationship property”. Accordingly the Judge erred in ordering compensation for the diminution of the value of Cray 3 Ltd. The Judge has failed to apply the requirement of deliberate conduct and intention to diminish the value of the property emphasised by the Court of Appeal in GFM v JAM.35
[83] I do not accept the submission. The Judge was clear in his finding that the company’s income decreased “because of the deliberate actions or inactions of the husband”.36 The husband’s awareness of the consequence of not working the
business meets the requisite standard of intentional conduct.37 On the basis of all the
evidence the Judge concluded:
[111] … In this case there is no question but that the husband’s actions were deliberate. He chose to work elsewhere. Given that decision it is difficult to understand how it could be claimed he did not intend to diminish the value of the company as a relationship property asset. There is clear evidence that in the year post-separation he worked the business properly. After that time, and having sequestered the property from the control or oversight of the wife he:
34 Cullen v Cullen, above n 1, at [35]–[36] citing GFM v JAM, above n 17, at [37]–[38].
35 GFM v JAM, above n 17.
36 Cullen v Cullen, above n 1, at [113].
37 GFM v JAM, above n 17, cited by the Judge at [36].
(a) Worked in Tauranga first and then with PanPac;
(b) Operated private charters with his friends, recreational fishing, and customary permit fishing;
(c) He utilised company funds for his own purposes; (d) He took holidays overseas; and
(e) He sent money, albeit of limited quantum, to his new partner’s
family in the Philippines.
It follows from these findings that I do not accept Mr Thorburn’s submissions set out at para [18] of his closing submissions as to why the husband could not earn an income by operating Cray 3 Limited
[112] Those actions must be reviewed against those of a dedicated fisherman who had operated the business profitably in various forms from 1985.
[84] The remaining submissions advancing this ground of appeal essentially reargue Mr Cullen’s case that his conduct did not diminish the value of Cray 3 Ltd. The Judge rejected Mr Cullen’s evidence:
[109] … The husband gave a number of different reasons for the non- operation of the business. I was not convinced by any of these reasons. In fact as the husband has stated both in affidavit and evidence he plans to resume working in the business once these proceedings are resolved. The husband is a practical man and it defies reality that he would wish to do so unless he believed that the business could, or would, be profitable.
[85] The appellant has not established that the Judge erred in the application of s 18C. The factual findings relating to his conduct were a result of the Judge’s assessment and rejection of his evidence and, in view of the Judge’s advantages in hearing the evidence, I see no basis for departing from those findings.
[86] Further submissions were made by Mr Thornton as to the method of calculation of the compensation. They exceed the notice of appeal and accordingly do not fall for determination.
Did the Judge err in ordering the appellant to pay compensation for damaged locks?
[87] Ms Cullen produced an invoice for $1,134.45 in respect of a callout to repair and fit locks in the family home. The Judge found on the balance of probabilities that Mr Cullen was the only person who could have damaged the locks given that
Ms Cullen installed them for her personal security and the protection of her chattels. In the circumstances the Judge ordered Mr Cullen to pay $1,134.45 in respect of this claim.38
[88] Mr Thornton submitted the Judge erred in his findings particularly in light of Ms Cullen’s acknowledgement that both she and her husband had caused damage to the property and that she had employed a locksmith to secure the property after gaining access to it.
[89] I have read the evidence to which Mr Thornton refers in his submissions and also the notes of evidence and cross-examination of Mr Cullen on this particular point. There is no basis for me to take a different view from the Judge. Although the Judge does not identify the evidence upon which his finding is reached, Mr Cullen had to accept in cross-examination that “his behaviour in connection with her ability to remain on one of the floors in the home” meant Ms Cullen had no security of
accommodation.39 He had moved her possessions to a different floor and, on another
occasion, removed some of her possessions outside. Mr Cullen also gained entry into the property although he denied smashing locks. His evidence was that he entered through a window.
[90] The Judge was better placed than this Court on appeal to assess the witnesses and the conflicting evidence they gave about these aspects of their co-habitation. He frequently asked questions himself of both parties. The finding at [132] is supportable on the evidence and I am not persuaded that the Judge erred in his assessment of the evidence or the conclusion he reached. This ground of appeal is
unsuccessful.
38 Cullen v Cullen, above n 1, at [132].
39 Notes of evidence pp 60–61.
Result
[91] The appeal is dismissed.
[92] The respondent is entitled to costs. If the parties cannot agree costs, brief memoranda should be filed by 28 February 2017.
Karen Clark J
Solicitors:
Carlile Dowling Lawyers, Napier for Appellant
Sainsbury Logan & Williams, Napier for Respondent
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