Hines v Hines
[2017] NZHC 2143
•6 September 2017
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2017-419-000108 [2017] NZHC 2143
BETWEEN GEOFFREY ROBERT HINES
Appellant
AND
JOSEPHINE HINES Respondent
Hearing: 15 August 2017 Counsel:
E Hudson for Appellant
E Dawe for RespondentJudgment:
6 September 2017
JUDGMENT OF WHATA J
This judgment was delivered by me on 6 September 2017 at 11.00 am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors: Neverman Bennett Lawyers, Hamilton
Beattie Rickman Legal, Hamilton
HINES v HINES [2017] NZHC 2143 [6 September 2017]
[1] Geoffrey Hines and Josephine Hines separated in 2012. The Family Court was tasked with resolving a number of relationship property issues. Mr Hines now appeals to this Court claiming that Family Court Judge G S Collin made three mistakes:
(a) the Judge wrongly excluded a homestead from partnership property;
(b)the Judge wrongly declined to award compensation to Mr Hines for contributions he made to relationship property after separation; and
(c) the Judge wrongly treated a residential property, located at Shakespeare Street, Cambridge, as relationship property, even though it was purchased by Mr Hines following separation.
Background
[2] The background set out by the Family Court Judge is not disputed. I largely adopt the relevant parts of it.
[3] Mr and Mrs Hines married in March 1982 and then travelled overseas for a time. Following their return, they moved onto Mrs Hines’ family farm where they continued to reside together until their separation. Apart from a brief period, Mr Hines’ sole employment has been either on the farm or with a company owned by them, Central Scaffolding (2011) Limited (CSL). Mrs Hines has worked for accounting firms and was in charge of the parties’ finances throughout the duration of their marriage.
The Maungatautari Farm
[4] Following several years of discussions and planning, in 1990 a deed of appropriation was entered into by Mrs Hines and her parents and siblings. As a consequence of that deed, a distribution of trust properties was made to Mrs Hines and her siblings. Mrs Hines received 136.9 hectares of farmland at Maungatautari, together with a plant, equipment and vehicles. The transfer was subject to:
(a) a mortgage in favour of Bank of New Zealand (BNZ) of $200,000;
(b)an unregistered mortgage in favour of G J Hodgson Trust in the sum of $255,566.66; and
(c) a life interest in favour of Mr and Mrs Hodgson in the homestead situated on the Maungatautari farm.
[5] After a deduction of liabilities, the net value of the farm appropriated to her was calculated at $630,500.
[6] Mr Hines is not mentioned in the deed and he was not a final or discretionary beneficiary of the trust. In accordance with the provisions of the deed, the farm was transferred to Mrs Hines’ sole name in 1990. Since that date, the farm has remained registered in her sole name. Located on the farm is a homestead (the Homestead) which was occupied by Mrs Hines’ mother, Mrs Hodgson, until she passed away and a cottage, occupied by Mr and Mrs Hines until they separated.
[7] At about the same time as the transfer of the farm to Mrs Hines’ name, Mr and Mrs Hines commenced a farming partnership, the GR & J Hines Partnership (the Partnership), and the farm was immediately introduced into the accounts of the partnership capital of both parties. The Partnership commenced in the 1990/1991 financial year. Accounts were prepared by Shannon Wrigley & Co for each subsequent year. The Partnership has not yet been dissolved.
[8] Mr and Mrs Hines introduced into the Partnership cash totalling $47,297, which was used to reduce the amount outstanding under mortgage to BNZ.1 A debt of $200,000 owing to G J Hodgson Trust is recorded in the Partnership accounts. At the Family Court hearing Mrs Hines maintained this was an error, and the actual figure was $255,566.66. This amount remains outstanding. Interest, calculated at a
rate of five per cent per annum, was also paid to the trust from 1991.
1 This brought the amount owing to $152,703, as recorded in the Partnership accounts of 1991.
[9] Mr Hines was actively involved in the Partnership from the date of its formation until the parties’ separation in 2012. The Hines’ principal income during the years 1990 to 2012 was received from the Partnership, with the income earned as a consequence of their joint efforts. The majority, if not all, of the physical work was undertaken by Mr Hines, and the financial management was assumed by Mrs Hines. Various improvements on the farm were also undertaken by Mr and Mrs Hines while they resided there.
Forward Farms Limited
[10] In 1994 Mr and Mrs Hines, jointly with Brian and Charmaine Morrissey, entered into an agreement to purchase a dairy farm in Northland. To do so they formed a company, Forward Farms Limited, with each of the four owners being a director of the company and owning 250 shares. The shares owned by Mr and Mrs Hines appear on the Partnership accounts as an asset in 1994. This is because Mr and Mrs Hines’ contribution of $347,000 came from a mortgage raised from BNZ against the Maungatautari farm.
[11] Forward Farms Ltd was sold in 2002 and the proceeds of sale were distributed between the shareholders, with Mr and Mrs Hines’ share being applied to the repayment of the BNZ mortgage and to the Partnership.2
Central Scaffolding (2000) Limited
[12] In 2007 an opportunity arose for Mr Hines and Mrs Hines to invest in a scaffolding business. Mr Hines and Mrs Hines jointly owned half the shares, with a company owned by a business partner owning the remaining 50 per cent. The shares owned by Mr and Mrs Hines were funded by the Partnership, which contributed
$232,000, all of which was borrowed from BNZ for that purpose. The shares are first shown as an asset of the Partnership on accounts dated 31 May 2007, at a value
of $219,400.
2 $327,000 was put toward repayment of the BNZ mortgage, with the remaining $49,886 applied to the Partnership.
[13] In 2011 Mr and Mrs Hines discovered monies were being embezzled by their business partner. He was bankrupted and Mr and Mrs Hines formed CSL, which acquired the shares in the business previously owned by the business partner as compensation for the embezzled funds. After forming CSL, two further loans were taken out from BNZ, one of $227,748 and the other of $43,274.
Shakespeare Street
[14] On 16 October 2012, prior to the parties’ separation, Mr Hines signed agreement for sale and purchase of a Shakespeare Street property. The agreement noted CSL as the purchaser. The standard reference to “or nominee” was not deleted. The sale price was $412,500. A deposit of $35,000 was paid by CSL. A further deposit was paid by CSL on November 2013 of $100,000, but this is recorded on the accounts as drawings in Mr Hines’ name. The site was initially leased by Mr Hines and settlement did not occur until 12 December 2013. The property was registered in Mr Hines’ name, who had obtained a mortgage from the BNZ of $320,000. It also appears that $35,159.92 was refunded to Mr Hines after settlement.
Financial position of the parties at separation
[15] At the date of separation the assets owned by Mr and Mrs Hines jointly or severally comprised:
(a) the Maungatautari farm;
(b) other assets of the Partnership; (c) CSL; and
(d) household chattels and motor vehicles.
[16] Upon separation Mrs Hines moved into the Homestead, with Mr Hines remaining in the cottage. The Partnership continues to trade, with Mrs Hines managing some of the land for the growing of maize, grazing and cattle rearing and with the balance being let to a neighbouring farmer.
[17] The Partnership had the following liabilities as at 31 May 2012:
(a)
Loan from G J Hodgson Trust $200,000.00
(b)
BNZ Rapid Repay Farming Loan
02-30367-000, borrowed to fund the
Partnership$132,548.24
(c)
BNZ Farm First Term Loan
82-30367-03009, borrowed to fund CSL
$212,848.05
(d)
BNZ Farm First Term Loan
82-30367-03010, also borrowed to fund
CSL$21,030.27
(e)
BNZ Far, First Term Loan
82-30367-03011
$150,000.00
(f)
BNZ Farm First Term Loan
82-30367-03013, borrowed for equity funding for CSL
$216,000.00
(g)
BNZ Farm First Loan
67-754613-00001, borrowed to fund subdivision costs of the Maungatautari farm
$160,000.00
[18] Since the separation, the Partnership has continued to pay Mr Hines $1,500 per month and has met the outgoings on the cottage, including all payments of power, phone and rates. The mortgages secured against the farm and related to the farm have been paid by the Partnership, from income earned from the farming enterprise.
[19] The accounts for CSL also show it has met the mortgage costs of a number of the loans taken by the Partnership.
Jurisdiction
[20] It is common ground that, in relation to the issues concerning the Homestead and the Shakespeare Street property, I should engage in a full Austin, Nichols
review.3 But, in relation to the challenge to the exercise of discretion pursuant to s
3 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
This approach mandates the appellate court to engage in an evaluative assessment of the merits and allow an appeal whenever it reaches a different conclusion from the court of first instance.
18B of the Property Relationships Act 1976 (the PRA), I should adopt the more limited approach to appeals against an exercise of discretion, which in the Family law context the Court in Blackstone confirmed has not been affected by Austin, Nichols.4
The Homestead
[21] Judge Collin concluded that while the Maungatautari farm was initially separate property of Mrs Hines, the farm became a Partnership asset and Mr and Mrs Hines were entitled to an equal share in the proceeds of a notional dissolution of the Partnership, which included the farm.5 The farm was included because of the extent to which it had been blended into the accounts of the Partnership.6 The Judge nevertheless found that the Homestead was Mrs Hines’ separate property for the
following reasons:
[57] Given that Mr and Mrs Hines never occupied the homestead, nor made any known contributions to its upkeep or maintenance, Mrs Hodgson had the right to remain in occupation of the homestead during her lifetime, and did … so until after the parties’ separation, I cannot find that there was ever an intention that the homestead form part of the farming partnership. I make this finding despite the fact that the homestead was always part of the land acquired by Mrs Hines and was valued accordingly, and that the homestead was at least notionally transferred into the farming partnership. Accordingly the homestead occupied by Mrs Hodgson needs to be treated separately to the rest of the farm. The value of the homestead and its curtilage should be deducted from the total value of the farm, before any calculation is made as to the value of the partnership for the purpose of division between the parties. I find that the value of the homestead and curtilage remains the separate property of Mrs Hines, on the basis that it never formed part of the farming partnership.
[22] Mr Hudson for Mr Hines submits the Homestead has always formed part of the Maungatautari farm and that it was transferred to Mrs Hines and then the Partnership in 1991. He says the Judge, having found that the farm was relationship property, should have concluded that the Homestead was also relationship property.
He adds it was never argued that the Homestead was anything other than part of the
4 Blackstone v Blackstone [2008] NZCA 312, (2008) 19 PRNZ 40 at [8]. The principles in May v May (1982) 1 NZFLR 165 continue to apply, as confirmed most recently in Scott v Williams [2016] NZCA 356, [2016] NZFLR 499 at [32].
5 Hines v Hines [2017] NZFC 1024 at [51]. The farm was included as relationship property pursuant to s 10 of the Property (Relationships) Act 1976.
6 At [50].
farm. The sole dispute between the parties was whether the farm formed part of the
Partnership.
[23] Ms Dawe for Mrs Hines accepts no claim was made in respect of the Homestead alone as separate property. But she contends it remained available to the Judge to conclude on the evidence that it was never intended for the Homestead to form part of the Partnership, referring to the fact that the transfer of the farm was always subject to a life interest in favour of Mrs Hines’ mother, Mrs Hodgson. Ms Dawe also notes, as Judge Collin did, no depreciation was applied to the Homestead, signifying it was treated differently from the rest of the farm in the accounts.
Assessment
[24] Both counsel agree that the following observation in Fisher on Matrimonial and Relationship Property, quoted by the Judge, provides guidance:7
In some circumstances it can therefore be important to decide whether the property used by a partnership in its business operations has become part of the partnership capital or has remained the sole property of one of the partners. The test for this is essentially one of contractual intention: did the parties expressly or impliedly agree that the assets should become the property of the partnerships? If so, one would normally expect to see some form of consideration of the owner’s loss of a half share in the asset, whether in the form of an immediate cash payment from the other partner, or an acknowledgement of debt.
[25] I agree with Mr Hudson that, having found the farm was Partnership property, the Judge erred in then seeking to carve out from that property the Homestead located on it. First, in terms of any contractual intention to carve out the Homestead, it was quite plainly, on the available information, only separate insofar as it was encumbered by Mrs Hodgson’s life estate. Secondly, the Partnership accounts record the Homestead (described in the accounts as “the house”) as part of
the Partnership property; had been any intention otherwise, one would have expected
7 Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis, 2016) at [10.22] (footnotes omitted). One aspect that was not argued before me was the effect of s 12 of the PRA. Nevertheless, I am satisfied its treatment falls to be determined by the ordinary operation of ss 8 and 10. Pursuant to s 12, if a family home is a homestead that is owned by either spouse or both of them, s 11, which provides for equal shares in divided relationship property, does not apply. But in accordance with its s 2 definition, a property is only a “homestead” if it is a “family home”. Prior to separation, the Homestead was occupied by Mrs Hodgson, so is not a “family home” or “homestead” within the purposes of the PRA. See Fisher on Matrimonial and Relationship Property at [12.10-12.11].
the accounts to reflect that. Instead, it was blended with the other assets and liabilities of the Partnership.8 Third, as the Judge noted in concluding the farm was Partnership property:9
(a) At the time the farm was given to Mrs Hines it was subject to the mortgages in favour of BNZ and the G J Hodgson Trust. The accounts indicate that both mortgages were serviced from income earned by the Partnership. The Partnership made significant principal repayments on the BNZ mortgage. In the 1991 accounts the amount owed is recorded as $152,803. At 31 May 1994 the amount owed is recorded as $65,694, a reduction of $87,109. It is not difficult to conclude that further principal reductions occurred after that time.
(b)The Partnership had a long term commitment to meeting and servicing capital expenses, which would otherwise have been the responsibility of Mrs Hines as the owner of the property.
(c) For 22 years the Partnership was the parties’ principal business vehicle. It was relied upon by them to fund the Forward Farms Ltd and CSL purchases. All borrowings were from BNZ, and although secured over land owned solely by Mrs Hines, were in the joint names of both Mr and Mrs Hines. This was a condition of BNZ, as the income earned by both parties via the Partnership was required to service the mortgages.
[26] Fourth, I do not accept that the absence of a depreciation claim signifies a separate interest.10 Expert evidence is needed to clarify the significance of this. It may be that the accountants did not think depreciation was available. In any event, this is only one countervailing indication, the significance of which is subsumed by the extent to which the farm and Homestead were mingled with Partnership assets
and liabilities (including the mortgages) over twenty years.
8 Brenssell v Brenssell [1995] 3 NZLR 320 (HC) at 327, per Tipping J.
9 Hines v Hines, above n 5, at [45].
10 In subsequent accounts, no depreciation was claimed in respect of the cottage either. This is a function of s EE 7 of the Income Tax Act 2007, as earlier tax treatment may be a function of the then prevailing rules.
[27] Fifth, I acknowledge the deed provided Mrs Hodgson was to be responsible for rates, insurance, electricity, upkeep and maintenance. But as the Judge noted, the accounts were not clear as to whether this was given effect to, or whether recorded payments of rates and insurance in the Partnership accounts related to the Homestead. In the absence of a firm indication they were given effect to, the words of the deed do not displace the actual treatment of the Homestead. Indeed, the deed gifted the farm to Mrs Hines alone, but as Judge Collin correctly found, over time it was intermingled with the Partnership, such that it became relationship property.
[28] Finally, Mrs Hines went to hearing on the basis that the value of the land would require adjustment to take into account the life interest only, rather than a permanent interest. This fortifies my view that Mrs Hines never intended to permanently carve the Homestead out of the farm.
[29] For the foregoing reasons, this part of the appeal is allowed. The order treating the Homestead as separate property is set aside. There is a residual issue as to the significance of the life interest. I understand it is now agreed that as Mrs Hines’ mother has passed away this is no longer an issue. To the extent necessary, I refer this aspect back to the Family Court for consideration in terms of any final orders.
Compensation
[30] On this subject, Mr Hines advanced two arguments in the Family Court:
(a) the value of CSL should be at the date of separation not hearing, given the significant contribution made by Mr Hines to CSL since separation; and
(b)in any event, he should be compensated for the increase in the value of CSL since separation, which was due to his efforts, referring to independent expert evidence.
The key findings
[31] The Judge rejected Mr Hines’ claim that valuation should be assessed from
the date of separation. Key reasons were:
[88] …
(a) That legislative changes and increased emphasis on health and safety have significantly contributed to the increase[d] demand for scaffolding. This is a fact beyond the control of Mr Hines.
(b) Although Mr Hines’ efforts may have increased the client base of the company, he has been afforded significant assistance because of the environment in which the company operates and by key employees of the company.
(c) It is very difficult to differentiate between the increase in the company’s fortunes as a consequence of Mr Hines’ efforts as opposed to those that have occurred as a consequence of market changes.
(d) Mr Hines has had the sole benefit of the income generated from the company since separation and has at least in part already been rewarded for his efforts.
(e) That the company has received significant financial support from the farming partnership without which the company may not have survived the 2011 crisis, nor been able to expanded to the extent that it has.
[32] Judge Collin accepted Mr Hines’ efforts contributed to an increase in the value of the company, but was unwilling to place a value on the increase.11 He also expressed caution about the valuation evidence said to support Mr Hines’ contribution claims, noting:
[92] …
(a) It is not possible to ascertain with any accuracy how new clients were in fact introduced to Central Scaffolding; and
(b) Mr Dobson has assumed that 50 percent of new clients’ revenue has arisen solely from Mr Hines’ efforts. There is no evidential basis for that assumption and Mr Dobson accepts that it is at best an educated guess. Whilst I accept that Mr Hines’ efforts have contributed to an increase in the value of the company, I am unwilling to place a value on the increase:
11 Hines v Hines, above n 5, at [92].
(i) Firstly due to the arbitrary nature of the underlying base assumption;
(ii) Secondly because Mr Dobson’s reports fail to recognise the importance of the partnership in the company’s survival and expansion; and
(iii) Thirdly and importantly I have in any event decided that it is not just to compensate Mr Hines for the increase in value, even if in the end Mr Dobson’s calculations are correct.
[33] The Judge also found that Mrs Hines had not benefitted from the increase in
CSL’s value since separation, while since separation Mr Hines:
[97] …
(a) Lived rent free in the cottage on the Maungatautari farmlands, with all outgoings and utility costs being met from the farming partnership;
(b) Received $1500 per month from the farming partnership, payment having been made monthly. The total received by Mr Hines, from the date of the parties’ separation in November 2012 until the date of the hearing would be about
$78,000;
(c) Had the insurance costs of his boat and chattels met by the partnership;
(d) Had the use of the $50,000 received from the subdivided section;
(e) Had the benefit of the funds from the farming partnership used to pay the mortgage of $216,000 raised to purchase Central Scaffolding;
(f) Had benefit of the capital introduction and security offered by the farming partnership, which I have found to be critical to the survival and growth of Central Scaffolding;
(g) Had exclusive access to the income and drawings derived from Central Scaffolding, at a rate greatly in excess of fair market value. To that extent he has already been compensated for the increased revenue of the company brought about by his efforts.
[34] Having weighed the contributions made by Mr Hines and the benefits he enjoyed from CSL and the Partnership, the Judge concluded that no adjustment was needed.
Argument
[35] Mr Hines no longer challenges the date of valuation of CSL. But Mr Hudson on his behalf submits the Judge was wrong:
(a) to disregard the valuation evidence; and
(b) to attribute various benefits of the Partnership to Mr Hines.
[36] As to the valuation evidence, Mr Hudson contends the Judge should have given more weight to the uncontradicted valuation evidence of Mr Dobson and Mr Bridges. He submits it was not simply guess work. Rather, as Mr Dobson explained under cross-examination, he used his “best judgment” for the purpose of the assessment. He described it as “more of an educated guess”.
[37] Mr Hudson also examined the benefits identified by the Judge said to offset any separate contribution made by Mr Hines to CSL. He submits:
(a) The rental benefit is neutral as Mrs Hines had a similar benefit (she lived rent-free at the Homestead following separation).
(b)Mr Hines received $1,500 a month from the farm, but Mrs Hines also received drawings.12
(c) Mrs Hines also utilised the proceeds of sale to meet sub-divisional costs and she received $40,000.
(d)While it is true that the mortgage contribution was made by the Partnership, both Mr and Mrs Hines were partners and therefore the contribution cannot be attributed to Mrs Hines alone.
(e) The Judge erred in his assessment of salary – Mr Hines received an
“excessive” salary in 2016 but the balance of funds Mr Hines
12 The evidence of this was included in supplementary evidence provided by Mr Hines on appeal.
The 2016 Partnership accounts show Mrs Hines received two payments of $90,000 and $44,674 between 2014 and 2016.
received was by way of drawings, accounted for as a debit in the
current account.
Assessment
[38] Section 18B(1) states:
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.
[39] The Judge had to be satisfied about two matters:13
(a) Mr Hines made a contribution to the marriage (in this case, his
contribution to CSL’s value) after separation; and
(b) it is just for Mrs Hines to pay compensation for this contribution.
[40] Argument on s 18B was, with respect, sparse. Both counsel referred to Dixon v Kingsley, in which the Family Court awarded compensation pursuant to s18B without identifying the relevant factors.14
[41] The PRA’s guiding purposes and principles do however provide some assistance:
1M Purpose of this Act
The purpose of this Act is—
…
(c) to provide for a just division of the relationship property between the spouses or partners when their relationship ends by separation or death, and in certain other circumstances, while taking account of the interests of any children of the marriage or children of the civil union or children of the de facto relationship.
13 Property (Relationships) Act 1976, s 18B(2).
14 Dixon v Kingsley [2015] NZFC 9596.
…
1N Principles
The following principles are to guide the achievement of the purpose of this Act:
…
(c) the principle that a just division of relationship property has regard to the economic advantages or disadvantages to the spouses or partners arising from their marriage, civil union, or de facto relationship or from the ending of their marriage, civil union, or de facto relationship:
(d) the principle that questions arising under this Act about relationship property should be resolved as inexpensively, simply, and speedily as is consistent with justice.
[42] While the scope of the Court’s discretion to achieve outcomes consistent with fairness and justice under the PRA is disputed, the existence of such a discretion is not.15 In the case of s 18B, the “parameters of operation” Robertson J referred to in
M v B are not particularly restrictive,16 and dovetail with the purposes and principles
set out in ss 1M and 1N. As Gilbert J said in Lawrence v Baker:17
[38] An award of compensation under s 18B cannot be made in favour of a party unless that party has done something during this relevant period that would have qualified as a contribution to the marriage had it not ended. Assuming that threshold test is satisfied, the Court must then determine whether it is just to make an order in the particular circumstances of the case. This will require the Court to assess the value of the contribution and balance it against all other relevant considerations. These may include any offsetting contributions made by the other party. It may be necessary to consider the arrangements made for the care of dependent children and spousal maintenance because, to some extent, these matters may all be interconnected. In exercising its discretion to make an award of compensation pursuant to s 18B, the Court must endeavour to achieve a just division of relationship property in accordance with the purpose and principles of the Act as set out in ss 1M and 1N.
[43] I propose to adopt an approach most favourable to Mr Hines. I proceed on the basis that any contribution made by him to the Partnership after separation is a materially relevant contribution for the purposes of s 18B. This recognises that the
Partnership was the vehicle for relationship property. Clearly separate contributions
15 See M v B [2006] 3 NZLR 660 (CA) at [32]-[34], per Robertson J and at [227], per Hammond J.
16 At [33].
17 Lawrence v Baker [2013] NZHC 2378 at [38].
to it should be considered in the assessment of what is just.18 This includes his contributions to CSL (with all shares being owned by Mr and Mrs Hines either separately or jointly).
[44] With this in mind, I am nevertheless not satisfied that the Judge erred in any material way in arriving at his conclusion. It was available to the Judge to conclude that the success achieved by CSL was the product of a multiplicity of factors including joint contribution that extended beyond the date of separation (in the form of loans from the Partnership), increased demand and the changing regulatory environment. Indeed, Mr Hudson’s fine grained review supports the conclusion that, while separated, the Partnership continued, with both parties relying on Partnership contributions. It is too simplistic to focus simply on Mr Hines’ contributions to CSL in isolation of the other benefits he and Mrs Hines received from the Partnership generally. As to the ‘excessive salary’, the Judge may have erred in terms of the full quantum of the excess, but this error is not sufficiently material to warrant interfering with the otherwise careful analysis undertaken.
[45] In addition, the Judge’s conclusions about the evidence offered by Mr Dobson were available to him. Mr Dobson acknowledged that his attribution to Mr Hines was “arbitrary” and conceded that his approach involved, at best, an “educated guess”. While the expert also said his assessment involved a best judgment, the Judge’s conclusion cannot be seriously faulted in this context. Furthermore, I agree the methodology used by the expert invites subjective evaluation on a key variable, put simply the allocation of a percentage contribution to increased revenue. The higher or lower the allocation of this percentage to Mr Hines, the greater the net contribution attributed to Mr Hines in terms of the rise in value of CSL. The Judge was just as well placed to make that subjective evaluation on the objective facts presented and reach a contrary view to the expert.
[46] This is further supported by the objective evidence. The first valuation report, which was not written with the current issue in mind, identified the following factors
as determinative of improved performance:
18 It is also consistent with the broad definition of compensation in s 18 of the Property
(Relationships) Act 1976.
Favourable weather conditions have provided dry ground for easy scaffold erection and dismantling.
A large proportion of contracts allowed for the use of “speedy” scaffolding, which is significantly more efficient than the Company’s other two systems of scaffold. The “speedy” system can only be used for box-shaped buildings on flat land.
Contract work has been acquired steadily throughout the year, and therefore in many instances scaffolding has been dismantled and sent off to the next job without having to first come back to the yard, saving on time and expense.
More scaffolding available to be deployed.
[47] The valuation report also notes:
Many of these reasons are not within the Company’s control, such as the favourable conditions allowed by the weather, therefore it is unlikely the Company can maintain the earnings forecast for 2013 in the future for the same reasons that have underpinned 2013’s performance.
[48] This reinforces the conclusion reached by the Judge as to the significance of
Mr Hines’ personal contribution.
[49] Finally, to the extent Mr Hines’ contributions were critical to the success of the company, this can be reflected in his salary. This is a matter capable of independent evaluation without recourse to s 18B. The fact he is a part owner, and thus shares in any improvement in CSL’s fortunes, should also not be overlooked.
[50] In terms of weighing the relevant factors, a different result was available to the Judge. But it cannot be said that the Judge was plainly wrong to attribute the significance he did to specific factors or to downplay the significance of Mr Hines separate contribution when measured against the contributions made by the Partnership over the full life of CSL. Equally, he cannot be said to have overlooked any relevant factor or taken account of irrelevant considerations.
Shakespeare Street
[51] The Judge found:
[104] Although I was not specifically asked to determine whether or not
Shakespeare Street is relationship property the evidence suggests that the
agreement to purchase was entered into prior to separation and that all of the funds for the deposit had their origin in Central Scaffolding, which is relationship property.
[52] Mr Hudson contends the Judge’s determination was plainly wrong, because counsel were denied the opportunity to make submissions on the issue, and because any beneficial interest in the property at the date of separation was held by CSL, not Mr Hines. He submits the subsequent change of title was by virtue of events occurring post separation.
[53] I agree, in part, with Mr Hudson’s complaints about this part of the judgment. There are competing considerations upon which argument was required. The property was in fact settled after the separation period, with Mr Hines it appears, ultimately assuming liability for the lion’s share of the purchase price via a personal loan and drawings from CSL. That being the case, closer inquiry was needed as to the relative contributions made by Mr Hines, CSL and therefore the Partnership. As a minimum it appears to me that some recognition should be made of the fact that Mr Hines assumed personal liability for the purchase.
[54] Mr Hudson and Ms Dawes submitted that if I agree that the conclusion required a finer grained assessment, I should refer it back to the Judge for reconsideration. I am content to proceed on that basis.
[55] But I wish to make a comment. It may be necessary for the Family Court Judge, in the event he finds that Mr Hines in fact was simply using CSL as a vehicle for the purchase, to look behind the strict legal description of CSL’s contributions and arrive at a conclusion that treats the financing provided by CSL to Mr Hines as a direct contribution to the purchase price.
[56] I allow this part of the appeal and direct that this aspect be reconsidered by the Judge in light of my comment at [55].
Outcome
[57] The appeal is allowed in part. The orders excluding the Homestead from relationship property, and treating the Shakespeare Street property as relationship
property, are set aside. By consent, these matters are referred back to the Family Court for reconsideration in light of my judgment. In respect of the Homestead, it is only referred to the Family Court for final orders if necessary.
Costs
[58] The appellant is entitled to costs on a 2B basis, less a third for failing to succeed on the s 18B claim, and disbursements.
0
2
1