Grant v Grant HC Auckland CIV-2010-404-005158
[2011] NZHC 1237
•31 March 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-005158
IN THE MATTER OF THE PROPERTY (RELATIONSHIPS) ACT 1976
BETWEEN JILL GRANT Appellant
ANDJOHN BRYANT GRANT First Respondent
ANDJOHN BRYANT GRANT AND MICHAEL JOHN FOLEY
Second Respondents
Hearing: 8 December 2010
Counsel: M W Vickerman for the Appellant
W G C Templeton and T A Chubb for the First Respondent
A Gilchrist for the Second Respondents
Judgment: 31 March 2011
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on 31 March 2011 at 9.45am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
M W Vickerman, PO Box 105270, Auckland 1143. Email: [email protected]W G C Templeton, DX CP24070, Auckland 1141. Email: [email protected]
T A Chubb, PO Box 1128, Shortland Street, Auckland 1140. Email: [email protected]
A Gilchrist, DX CP24003, Auckland 1141. Email: [email protected]
GRANT V GRANT HC AK CIV-2010-404-005158 31 March 2011
Introduction
[1] The appellant appeals against the judgment of Judge L J Ryan in the Family Court at North Shore on 13 July 2010 which determined various relationship property issues arising between her and her former husband, the first respondent. The appellant and the first respondent commenced a de facto relationship in 1983 or
1984. They had a son born on 3 March 1985. They married on 17 November 1987 and separated in June 2005. The second respondents are trustees of the J & J Grant Family Trust, a family trust settled on 17 February 1997 during the marriage.
[2] Three findings of Judge Ryan are challenged:
(a) That a property in College Hill, Ponsonby owned by the first respondent was gifted to him by his mother and had remained his separate property.
(b)That the correct date to value the first respondent’s bundle of rights in the family trust was the 2009 financial year and that no separate account should be taken of the sum of $505,000 raised post-separation by way of increased mortgage over a property in Target Court, Glenfield.
(c) That the marina berth at which the first respondent’s yacht was moored was not owned by the first respondent and was not therefore relationship property.
[3] Subsequent to the hearing of the appeal, the appellant sought leave to adduce further evidence in relation to settlement of the sale of the College Hill property on
10 December 2010 for the sum of $1,225,000. Settlement of the sale was after the date of the decision appealed from and after the date that the appeal was heard. As the evidence was not available at the hearing of the appeal and the increase in value of the property was said to be an issue on the appeal, I granted leave to adduce the further evidence.
College Hill property
[4] The first issue in the appeal is the status of the property in College Hill, Ponsonby (the property). Judge Ryan found that the property did not form part of the relationship property pool, having retained its status as separate property of the first respondent.
[5] The appellant submitted that the de facto relationship between her and the first respondent had commenced in 1983 before the property was transferred to the first respondent from his mother on 25 January 1984. It was also submitted that the first respondent had failed to establish that it was a gift from his mother and it was therefore relationship property.
[6] Alternatively, if the de facto relationship had only commenced after the property was acquired by the first respondent then s 9A of the Property (Relationships) Act 1976 (the Act) came into play. In that situation it was submitted that the increase in value of the property was relationship property because relationship property had been applied to repay the first respondent’s mother and the bank mortgage on the property.
[7] Judge Ryan noted that there was a dispute as to when the appellant and the first respondent had entered into a de facto relationship, but in the end did not determine the issue as a decision was not necessary in the way he approached the case. Judge Ryan held that the first respondent acquired the property from his mother by way of gift and in terms of s 10(2) of the Act it had not been so intermingled with other relationship property that it was unreasonable or impracticable to regard the property as separate property.
[8] The appellant acknowledges that whether or not the property was acquired prior to the commencement of the de facto relationship is only of significance in the event it was not acquired by way of gift.
Was the property acquired by way of gift?
[9] Judge Ryan stated:1
the property at 89 College Hill Ponsonby ... was transferred to [the first respondent] on 21 April 1984 (sic) from his late mother. She had purchased it in 1982 for $105,000. There is no documentary evidence that establishes any consideration flowing from the first respondent to his late mother. The first respondent was cross-examined at some length as to how that property came to be transferred into his name. His recollection was not clear but an examination of the notes of evidence shows that it is more likely than not that this property was gifted to the first respondent. The thrust of his evidence was that it was transferred to him. She had bought it for him in the first place to give him a “kick start”. Putting to one side the question of whether the parties were in a de facto relationship as at April 1984 (sic), on the face of it the first respondent acquired this property from his mother by way of gift.
[10] The certificate of title for the property records its initial issue to the first respondent’s mother on 2 September 1982. It also records a mortgage as at the date of issue. That mortgage was discharged at the same time as a transfer to the first respondent was registered on 24 January 1984. A new mortgage to the United Building Society was registered at the time of transfer. This mortgage was discharged and replaced by a mortgage to the Bank of New Zealand on 19 June
1990. The Bank of New Zealand mortgage was in turn later discharged on a date which is unable to be ascertained from the certificate of title.
[11] There are two other documents from the period shortly after the transfer of the property to the first respondent which bear on the issue. The first is a property sharing agreement dated 21 September 1984. The second is a balance sheet of the first respondent’s trading entity, AWB Sole Trader, as at 31 March 1985.
[12] Two copies of a property sharing agreement signed by the parties and dated
21 September 1984 were produced in evidence.2 The agreement was signed by them after they had agreed to purchase their first home together in Oxford Terrace, Devonport but before settlement of the purchase on 24 September 1984. Judge Ryan
noted the concession made by counsel for the first respondent at a preliminary stage
1 At [19].
2 CB 879 – CB 890.
that the agreement could not be binding on either party given that it failed to comply with the necessary provisions of s 21 of the Act. The Judge also noted the difficulty caused by the existence of two different schedules to the agreement. However, he went on to state:3
What the agreement does do however is to give a glimpse into the various properties owned by the parties as at the date it was signed.
[13] In both schedules4 the property is listed as the separate property of the first respondent. Both copies of the agreement are signed by the appellant and her signature has been witnessed by a solicitor but she says that she has no recollection of signing it.5
[14] The one page balance sheet for AWB Sole Trader as at 31 March 1985 included two fixed assets, namely, the property and another commercial property in Mt Eden Road, Mt Eden. As to liabilities, there were three mortgages noted together with a loan of $56,000 from the first respondent’s mother.
[15] It appears that the status of the property was not an issue prior to trial. In her affidavit sworn 1 March 2007 the appellant stated:6
John’s Assets as at April 1983
11. John owned an investment property at 89 College Hill, Ponsonby and had an interest in 37 Evans Street, Balmain, Sydney which I believe was owned by a company named Handmill Pty Ltd. He still owns both properties. Both generate rental income, although we lived in a flat in the attic in 89 College Hill for the first 18 months of our relationship.
12. Provided it can be shown that the rental income generated sufficient to meet the outgoings if any, I make no claim in respect to either
89 College Hill, Ponsonby or 32 Evans Street, Balmain, nor any other property which can be identified as being John’s separate property as at
the commencement of our relationship subject to the same qualification.
[16] In a subsequent affidavit sworn over a year later on 22 April 2008,7 the appellant stated:8
3 At [55].
4 CB 883 and CB 889.
5 CB 62, para 27.
6 CB 59.
7 Although the title page states that it was sworn on Tuesday 22 April 2008, the signature page carries the date 21 April 2007.
Pre-Relationship Entities
4. I refer to my affidavit sworn 1st March 2007. At the commencement of the relationship I understood that John owned:
a.Investment property at 89 College Hill, Ponsonby where the parties lived initially;
b. An interest in a Balmain Sydney property through Handmill Pty
Ltd.
[17] It is of significance that the appellant refers to the property as being an asset of the first respondent prior to their relationship, notwithstanding that title to it was not transferred to the first respondent from his mother until 25 January 1984.
[18] At trial, the first respondent stated that his mother had bought the property as a kick start for him because he had got nothing from his first marriage.9 She had purchased the property using her own funds and then she had transferred it to him as a gift.10 The first respondent was unclear whether there was a loan back in the arrangement with his mother. When referred to the balance sheet of AWB Sole Trader dated 31 March 1985 he thought that $6,000 of the $56,000 loan from his mother listed in the balance sheet was a “miscellaneous leftover from College Hill”.11 He also did not think he had ever repaid the $56,000 loan to his mother, but he was not sure.12
[19] The first respondent stated in his affidavit dated 1 September 200913 that renovations were carried out on the property at the time of purchase by his mother on
2 September 1982 which was prior to meeting the appellant.
[20] This is broadly consistent with the evidence given by the appellant at trial. She acknowledged that by the time she “arrived on the scene” the four commercial
premises in the property had been leased.14 The first respondent was living in the
8 CB 118.
9 CB 685, lines 16–17.
10 CB 685, lines 22–26.
11 CB 686, line 11.
12 CB 686, lines 30–33.
13 CB 294, para 16.
14 CB 581, lines 30–33.
attic which had been decorated by his mother according to what the first respondent had told her.15 The appellant also stated:16
at the time I think John was out of his first marriage and was a little bit cautious about putting property in his name because I believe it was an acrimonious settlement and he wasn’t willing to take the risk so I think probably was a very sensible thing to do was to put it in his mother’s name.
[21] The appellant also agreed with the proposition put to her using examples of the commercial properties in Mt Eden Road and in Great North Road which were also owned by the first respondent, that the first respondent’s practice was to purchase rundown properties, renovate them and rent them out with the mortgages being serviced by the rents.17
[22] The appellant submitted that generally a party seeking to establish a gift carries the onus to show that it was in fact a gift, just as does a party seeking to establish the status of an asset as separate property, citing Sykes v Sykes.18 However, Sykes v Sykes was a case involving a sum of money received by a husband on the sale of property in his name which he paid to his wife who invested it in her name. The wife claimed it was a gift. The husband disputed that. The learned authors of
Fisher on Matrimonial and Relationship Property refer to a striking contrast between the general readiness to preserve pre-marriage or pre-de facto relationship assets and third party gifts as separate property and the reluctance to recognise the separate property character of gifts between spouses or partners even when dealing with seemingly similar tests imposed by the Act.19
[23] The Court of Appeal has also made it plain that the legislative framework requires the Judge be satisfied of a particular state of affairs based on all of the evidence before the Court, and onus will seldom be a relevant consideration.20
[24] The appellant submits that had the first respondent’s mother gifted the property to him, it is more than likely that there would have been some document
15 CB 582, lines 1–22.
16 CB 582, lines 27–31.
17 CB 604, lines 19–22, CB 605, lines 6–9.
18 Sykes v Sykes (1979) 2 MPC 184.
19 Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis) at 16,701.
20 M v B [2006] 3 NZLR 660 (CA) at [50].
evidencing the gift at least for the purposes of gift duty, or perhaps reference to it in her will. The appellant noted that no corroborative documents had been produced by the first respondent and most significantly evidence had not been given on the point by the first respondent’s mother despite her affidavit expressly addressing the property. The first respondent’s mother had died prior to trial and her affidavit was admitted over the objection of the appellant.
[25] I am not, however, prepared to make anything significant of the lack of further corroborative evidence not only because of the length of time since the events in question, but also because of the apparent acceptance up until trial that the property was in fact the separate property of the first respondent through a generous family arrangement with his mother.
[26] Having reviewed the evidence, I am on appeal unable to find that Judge Ryan erred in his approach or in his findings in relation to the property. In fact, I agree with his finding that there is no documentary evidence that establishes any consideration flowing from the first respondent to his mother and that therefore on the balance of probabilities the first respondent acquired the property from his mother by way of gift.
Was relationship property used to repay the mortgage?
[27] The appellant also submits that even if the property was initially the separate property of the first respondent because it was acquired before the commencement of the de facto relationship or because it was a gift from his mother, nonetheless it became relationship property because relationship property had been used to repay the mortgage. She says that this argument was not fully addressed by Judge Ryan.
[28] Given the length of time, there is no documentary evidence as to how the mortgage was in fact repaid although the first respondent, when asked about possible sources, thought it may have been repaid through borrowings secured by mortgage over another property which was also his separate property.21 Nonetheless the
appellant submits that there was no separate property source of funds available.
21 CB 696-697
However, this seems to ignore the fact that substantial income was generated from the property. At the time of its sale at the end of last year, two of the commercial premises were leased and returning an income of $32,400 per annum plus GST. Another commercial premise and the residential flat were vacant.
[29] The appellant herself also acknowledged that the first respondent had a practice of purchasing rundown properties and renovating them with rents received meeting the mortgage repayments on the property.
[30] Nonetheless, the appellant submits that the rental income as disclosed was not sufficient to fund outgoings and never enough to repay the mortgage or the debt back to the first respondent’s mother. In this regard, the appellant points to the balance sheet for AWB Sole Trader as at 31 March 1995 and submits that the entry “rents in advance” with a figure next to it of $1,220 is a record of all rent received in that year for both the property and another one in Mt Eden Road, also owned by the first respondent.
[31] It is however clear that the document is a balance sheet only and not a record of income and expenditure. The entry “rents in advance” is characterized as a current liability together with figures for bonds and sundry creditors. The sum of
$1,220 is clearly not the entire rent received for both properties in the financial year ended 31 March 1985.
[32] The AWB Sole Trader accounts for the year ended 31 March 2004 show rent received of $113,299 (2003) and $112,620 (2004) for both properties with substantial operating surpluses even after payment of interest. A BNZ housing term loan is also shown as having been reduced from $240,000 to $216,097 in the space of a year.
[33] The Mt Eden property was sold in January 2005 and the rent received by AWB Sole Trader in the year ended 31 March 2006 in respect of the property alone was $62,612. Again, there was a substantial operating surplus.
[34] The appellant’s submission that the origin of the funds to reduce the debt and to discharge the mortgage on the property was relationship property because they were incapable of being sourced from income from the property itself is therefore not tenable. Clearly, the property was a profitable commercial investment. In her affidavit sworn 1 March 2007 the appellant implicitly acknowledged that the investment was probably self-funding when she stated:
Provided it can be shown that the rental income generated sufficient to meet the outgoings if any I make no claim in respect to 89 College Hill, Ponsonby
[35] Although there is a paucity of evidence as to how and when the mortgage was discharged, Judge Ryan was properly able to find that the property retained its status as separate property. The property was a passive investment and there is no evidence that the appellant had any role in its management. Nor is there any evidence that the reduction and discharge of the mortgage over the property was funded out of relationship property. The property was always separately accounted for in accounts of AWB Sole Trader although the annual accounts before 2004 are not available (except for a balance sheet only from 1985).
Bundle of rights
[36] The second issue in the appeal is the valuation of the first respondent’s bundle of rights in the family trust. Specifically two separate questions are raised in relation to the bundle of rights:
(a) What was the correct date to value the first respondent’s bundle of
rights in the family trust? and
(b)Should account be taken of the sum of $505,000 raised post- separation by way of increased mortgage over a property in Target Court, Glenfield?
[37] The bundle of rights doctrine had its genesis in Walker v Walker.22 At [38] the Court of Appeal acknowledged that a “party’s ... interests in [a] trust – whether ... as settlor, trustee, appointor, or beneficiary ... may be relationship property”.
[38] The Court later stated:23
...Further, the wife seems to have conceded that certain other assets, which were relationship property ... were to become the husband’s property. Those other assets were:
(a) the directorship of the trustee company; (b) the shares of the trustee company;
(c) the power to appoint and remove directors of the trustee company; (d) the power to appoint and remove trustees of the trust;
(e) the parties’ discretionary interests under the trust.
...Those five items of property, plus the debt, formed a very valuable package, as together they confer control of the company.
[39] The debt referred to by the Court of Appeal which was owed by the trust to the husband had a book value of $2.275 million. The appeal related primarily to the proper valuation of the debt.
[40] Subsequently, in Harrison v Harrison24 the Court of Appeal used the term
“bundle of rights” rather than “package”:
There was also a bundle of rights associated with their positions as discretionary beneficiaries under the [family trust], and as the joint holders of the power of appointment of the [family trust] trustees.
[41] The case was an application for leave to appeal a judgment of the High Court making an interim order for distribution of relationship property.
[42] In the present case, Judge Ryan noted25 that the first respondent had control of the trust entities. He had the power to appoint and remove trustees and he had an
interest in the trust as a discretionary beneficiary. The Judge stated:
22 Walker v Walker [2007] NZFLR 772 (CA).
23 At [48] and [49].
24 Harrison v Harrison [2009] NZFLR 687 (CA) at [10].
25 At [73].
All of these rights can properly be called a “package of rights” as that phrase
was used by the Court of Appeal.
[43] The Judge referred to the principles set out in Walker v Walker relating to the valuation of the package of rights and stated:26
...it is wrong to focus on the debt in isolation from the rest of the package. In Walker, that package had not been valued. In this case taking Mr McLoughlin’s approach I do have a valuation of the trust entities.
[44] Mr G R McLoughlin was a chartered accountant retained by the first respondent. His evidence was preferred by Judge Ryan to that of Mr G S Hatten, a chartered accountant who was retained by the appellant. No issue was taken on appeal with Judge Ryan’s preference for the evidence of Mr McLoughlin.
[45] The Judge then stated:
[76] Monies are due from various of the trust entities to the First Respondent. As Mr McLoughlin asserts the inter-entity account balances offset each other to produce a negative sum of $34,941. In paragraph 46 of his second affidavit he provides the details of those account balances and observes that the residual related party balance of $28,129 is unlikely to be settled and as a result does not take it into account.
[77] Applying that approach to the amended schedule produced by
Mr McLoughlin, I conclude that the net residual value of the trust entities is
$369,000. I exclude the $63,000 deduction as set out in that schedule for the same reason Mr McLoughlin excluded it in his second affidavit. He appears to have overlooked that he had excluded it in his earlier calculation.
[78] I am satisfied that this is the most practical and realistic way of valuing the package of rights being enjoyed now by the First Respondent. It recognises the practicalities of the circumstances applicable to the trust entities and it applies a common-sense approach to the valuation of the package of rights.
[79] I find that the package of rights is relationship property. This is a lengthy relationship. As I have mentioned earlier in this judgment earnings and profits accumulated during the relationship have in part been absorbed into one or more of the trust entities. A simple example can be found by examining the profits made by Readymark Limited and Readymark Consultants Limited throughout the marriage. Where the parties did not receive a direct benefit by way of drawings, advances and the like, those profits and earnings went into the conglomerate. It is impossible now because the intermingling of relationship property in what might very well have been the first respondent’s separate property, to identify any pure separate property. Another example is that part of the sale proceeds of the
26 At [75].
Embassy Construction Limited shares that incorporated what was clearly recorded as a salary paid in advance of $441,000. That component of the sale proceeds of the Embassy shares must have been relationship property. It related to income earned during the marriage. That too has been intermingled with separate property so that its separate identification is now no longer possible. This case is a very good example of why the legislature enacted s 9A(1).
[46] No issue was taken in the appeal with this approach. I am aware of commentators who have questioned the process by which the bundle of rights doctrine can convert trust property into either separate property or relationship property. Fundamental questions have been asked as to whether a power to appoint and remove trustees can be “property” for the purposes of the Act. These fundamental questions were, however, not argued before me. Accordingly, I am not in any position to reconsider this approach. I will therefore confine my discussion to the two separate questions raised in the appeal which are noted in [36] above.
Date of valuation
[47] As to the first of those questions, the correct date to value the first respondent’s bundle of rights in the family trust, the appellant submits that it should have been at the date of separation. As at the date of separation she says that those rights were valued at $1,865,721. Judge Ryan did not however make a factual finding as to the value of the bundle of rights as at the date of separation. The figure of $1,865,721 is taken from Mr McLoughlin’s first affidavit and is the maximum assessed value ascribed by him to all matrimonial property, including but not limited to, the value of the assets in the family trust. Mr McLoughlin did however modify his approach in his second affidavit. Judge Ryan accepted the modified approach taken by Mr McLoughlin in his second affidavit as “practical, sensible, realistic and understandable”. In his second affidavit, Mr McLoughlin did not ascribe a value to the matrimonial property as at the date of separation.
[48] The first respondent supports Judge Ryan’s decision to value those rights as at the end of the accounting period nearest to the date of hearing for which accounts were available. At that time, those rights were valued by Judge Ryan using Mr McLoughlin’s modified approach at $369,000.
[49] The Judge stated:
[26] I have decided that the date to value the assets and liabilities in this relationship is to be the date of hearing. My reasons are these: Unlike the situation the Court of Appeal faced in X v X [Economic disparity]27, when they separated these parties did not control broadly equal property assets at separation. As Robertson J said at paragraph [33] of the judgment:
If the Judge’s s 2G order is intended to apply only to assets controlled by each spouse, it is obviously important that the value of the property received by each is about the same.
[27] Remembering that the policy of the Act is to effect a fair and just division of relationship property upon the ending of a relationship, post- separation events have had a very real impact on the nature and extent of the relationship property pool. To disregard post-separation events gives artificiality to the process with the potential to create a serious injustice to one or both of the parties. It is not possible to say as the Court of Appeal did in X v X28 that it is:
Fair and just that the bulk of the relationship property be valued as at the date of separation. Any alternative valuation date is just too difficult and now impractical.
To carry out a hypothetical exercise by valuing the various assets as at separation date, creates difficulties and impracticalities that militate against adopting such an approach.
[28] Section 2G(1) of course provides that the date to value property is to be the date of hearing. The section provides for the Court to exercise a discretion in valuing a property as at another date.
[29] As the Court of Appeal noted in Walker v Walker29:
Since 1976, the presumption under the Act has been for valuation at date of hearing. The presumption was strengthened following the passage of the Property (Relationships) Amendment Act 2001, which introduced sections 18B and 18C. These new sections have conferred on Courts new powers to grant compensation where contributions have been made after separation or where a party has, since separation, deliberately diminished the value of relationship property.
[30] There is no cogent reason why I should adopt a separation date valuation given the clear guidance provided by the Court of Appeal.
[50] Because it is an exercise of discretion, this Court is not able to interfere with Judge Ryan’s decision to value the property as at the date of hearing unless he has misdirected itself on the law, acted on a wrong principle, failed to take into account
some relevant matter, or has taken account of some irrelevant matter or was
27 X v X [Economic disparity] [2010] 1 NZLR 601 (CA).
28 At [25].
29 At [42].
otherwise plainly wrong.30 In his submissions, counsel for the appellant did not specifically address as a matter of principle why this Court should review the exercise of Judge Ryan’s discretion to follow the statutory presumption to value property at the time of the hearing. Rather, he submitted that post-separation benefits to the first respondent were ignored by Judge Ryan.
[51] It was on this basis that he argued for a valuation as at the date of separation. However, if necessary a Court has jurisdiction under s 18C to compensate the appellant for dissipation of relationship property after separation. In those circumstances, the appellant has not persuaded me that Judge Ryan exercised his discretion in an inappropriate manner such that a Court on appeal should reach a different conclusion.
Should account be taken of $505,000 raised post-separation?
[52] As to the second question, whether account should be taken of the sum of
$505,000 raised post-separation by the increased mortgage over the property in Target Court, Glenfield, the appellant submitted that the first respondent should account to the appellant for one half of the sum of $505,000 or, at the very least, one half of the sum of $325,000 together with interest at a reasonable rate to reflect that she has effectively funded the first respondent’s business from March 2008.
[53] The sum of $505,000 is the difference between a BNZ mortgage of $995,000 on the Target Court property which was replaced post-separation by a National Bank mortgage of $1.5 million. In his second affidavit Mr McLoughlin stated that the additional cash injection of $505,000 had been used to fund and/or repay (in part) various associated entities and advance an amount of $325,348 to the first respondent.
[54] However, when he gave oral evidence in the Family Court, Mr McLoughlin said that the advance of $325,348 had been mistakenly allocated to the first
30 May v May [1982] 1 NZFLR 165 (CA).
respondent in the draft accounts and should more properly have been allocated to the trust.31
[55] Nonetheless, the appellant submitted that Judge Ryan appeared to have excluded the post-separation debt owed by the first respondent to the trust which was funded by the increase in the mortgage over Target Court, but included the full amount of the mortgage as a liability in valuing the trust. In other words the related party balances excluded by Mr McLoughlin included the sum of $330,785 advanced to the first respondent, but the increased mortgage over Target Court (from whence the payment to the first respondent was derived) was included in the assessment of net assets.
[56] This submission seems to ignore the revised evidence given by
Mr McLoughlin that the advance of $325,348 (which made up the bulk of the sum of
$330,785) was mistakenly allocated to the first respondent in the draft accounts. Nevertheless, it seems to me that even if the sum of $325,348 was advanced to the first respondent, Judge Ryan did not fall into error.
[57] Exhibit 3 to Mr McLoughlin’s second affidavit sets out the external net assets and related party balances of the trust and related entities as at 31 March 2009 with the exception of Powershield, which is valued separately. In that table, the mortgage over the Target Court property of $1.5 million, along with a figure for trade creditors, sundry creditors and accruals and tax is deducted from all assets of the trust and related entities (the bulk of which was the value of land and buildings at Target Court, Glenfield stated to be $1.6 million) to arrive at a figure of $144,106 which represents the net realisable commercial assets of the trust and related entities.
[58] The Judge separately valued Powershield at $225,000. No issue is taken with this valuation on appeal. This figure is then added to the figure of $144,000 to reach a total of $369,000, which is said to be the value of the package of rights retained by
the first respondent in the trust and related entities.
31 CB 772, lines 11–18.
[59] The appellant complains that the $1.5 million mortgage is taken into account in the calculation of the value of the package of rights but no account is taken of the benefit said to have been accorded to the first respondent through the increase in the mortgage by $505,000, in particular, by the advance of $325,348 to him.
[60] However, this point is dealt with by Mr McLoughlin at paragraph 46 of his second affidavit in which he gives separate consideration to balances associated with the parties themselves. He notes that advances to the first respondent from the trust and related entities total $330,785 (the bulk of which is the advance of $325,348 relating to the increased mortgage). However, he also notes that the sum of
$147,847 has been advanced to the appellant. There is no suggestion that she should repay that advance or that it should be taken into account in some way.
[61] Furthermore, Mr McLoughlin notes that advances totalling $519,737 have been made to the trust and related entities from AWB Sole Trader. Again there is no suggestion that the trust and related entities should repay that sum, or that it should be taken into account in some way. In fact, Mr McLoughlin states that the residual related party balance is unlikely to be settled and he therefore considers it no further.
[62] This seems to me to be a sensible approach. I am of the view that this does not disadvantage the appellant in that she retains the value of advances made to her, and the trust and related entities do not have to account for substantial advances made to them by AWB Sole Trader. Judge Ryan has not been shown to have fallen into error in his approach to the valuation of the bundle of rights in the family trust and related entities.
Complaint about funding of post-separation entities
[63] However, the appellant then submits that a number of the first respondent’s separate entities were funded post-separation by relationship property but that these post-separation benefits were ignored by Judge Ryan. It is said that documentary disclosure was “spartan” and information about these benefits was mainly elicited through cross-examination.
[64] The appellant referred in particular to four companies, Commercial Improvements Ltd, Boston Six Ltd, Kingsland Four Ltd and Sunnybrae Holdings Ltd, although reference was also made to a number of other entities. Complaint was made about material non-disclosure which it said resulted in an inequity in Judge Ryan determining value.
[65] The Judge did not make any finding about this issue. Counsel for the first respondent states that the issue was not pursued in the appellant’s submissions in the Family Court. This may be an explanation for the lack of a specific finding in the judgment.
[66] Various assertions were made that the activities of these four companies were funded in part by relationship property but whether that was the case, and if so, whether that indebtedness has been repaid cannot be determined in this appeal. While there are various financial statements relating to the companies in evidence, the questions asked of the first respondent about them were quite perfunctory and incomplete and do not enable a Court to reach any findings in relation to them. Nor did the expert witnesses discuss the companies’ activities in any detail.
[67] I do note, however, that the appellant’s own expert Mr G S Hatten ascribed a value of $1,000 to Boston Six Ltd and a value of $0 to the other three companies as at the date of separation. The only company to have a positive value as at the present date was Boston Six Ltd which had a value of $1,352. The other three companies had significant negative values.
[68] In those circumstances, I am unable to make any finding on the appellant’s
complaint that certain post-separation benefits were ignored by Judge Ryan.
Marina
[69] The third issue in the appeal is the status of a marina berth at Westhaven where the first respondent’s yacht is moored. Judge Ryan referred to the evidence of the first respondent that the marina berth was leased and stated that there was no
evidence of ownership. In the circumstances the Judge was not satisfied on the balance of probabilities that the marina berth was relationship property.
[70] On appeal against that finding, I am constrained by the lack of evidence from reaching any other decision. Counsel for the appellant acknowledged that the evidence as to the marina berth was “scant”, even by the standards of this case.
[71] In his evidence, the first respondent stated that the marina berth was leased by a trading entity of his, Freewind Charters.32 A yacht broker was then called by the first respondent to give expert evidence as to the valuation of his yacht. In cross- examination he was asked about the marina berth.33 He acknowledged that there was value in the marina berth. When asked what he thought the value of the marina berth was he stated:
I would have to check with Westhaven as to how long a lease it has left to run. Each year the value comes down, depending on the amount of leases left to run. But Westhaven are the best ones to be doing that. Westhaven Marina.
[72] Notwithstanding this initial response, he was then asked whether he had any knowledge of what sort of prices people pay for marinas in Westhaven. He then said that 45 foot berths were “running between about 60 and 85”.
[73] It is on the basis of this evidence that the appellant seeks an order on appeal that the first respondent pay to the appellant one half of the value of the marina berth. Although the first respondent may well have a leasehold interest in the marina berth through his trading entity, Freewind Charters, the Court has no evidence when the marina berth was acquired and the source of funds for its acquisition. It also has no evidence of the nature or terms of the lease. Finally, the Court also has no expert evidence as to its value. The sole evidence of value was given by a marine broker who initially declined to ascribe a value to it, but who then gave general evidence of
the value of 45 foot berths at Westhaven.
32 CB 700, lines 19–35.
33 CB 809, line 10 – CB 810, line 6.
[74] No application was made for the production of further evidence on appeal. In those circumstances I decline to overturn Judge Ryan’s finding that he was not satisfied on the balance of probabilities that the marina berth was relationship property.
Conclusion
[75] The appeal is accordingly dismissed. Costs should follow the event. If the parties cannot agree, they are to file memoranda within 10 days of the date of this
judgment.
Woolford J
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