Holmes v Crombie

[2020] NZHC 2262

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2020-425-16

[2020] NZHC 2262

IN THE MATTER

of an appeal against a decision of the Family Court at Invercargill

BETWEEN

JACQUELINE LESLEY HOLMES

Appellant

AND

GREGORY SHAUN CROMBIE

Respondent

Hearing:	25 August 2020
Counsel:	RGR Eagles for Appellant J B Walker for Respondent
Judgment:	1 September 2020

JUDGMENT OF OSBORNE J

(on appeal)

This judgment was delivered by me on 1 September 2020 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

HOLMES v CROMBIE [2020] NZHC 2262 [1 September 2020]

[1]                  Jacqueline Holmes and Gregory Crombie had a relationship from 2001 to 2015, to which the Property (Relationships) Act 1976 (the Act) applies.

[2]                  In 2017, Ms Holmes applied to the Family Court for orders in respect to property under the Act.

[3]                  By a judgment earlier this year, Judge J J Brandts-Giesen made orders identifying relationship and separate property and as to division of property (the Judgment).

[4]Ms Holmes appeals six aspects of the Judgment.

The appeal regime

[5]                  Appeals such as this are by way of rehearing.1 The correct approach for the appellate Court is that identified by Elias CJ in Austin, Nichols & Co Inc v Stichting Lodestar, where her Honour stated:2

[16] Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ.3

[6]                  Where the appealed finding involved the exercise of a discretion, the appellate Court’s role is more constrained. As recognised by the Supreme Court in K v B, in order to succeed against an exercise of discretion, an appellant must show that:4

(a)error of law or principle;

(b)taking account of irrelevant consideration;

(c)failing to take account of a relevant consideration; or

1      High Court Rules, r 20.18.

2      Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].

3      As illustrated by Wright v Powell [1982] 1 NZLR 473 (CA).

4      K v B [2010] NZSC 112, [2011] 2 NZLR 1, [2010] NZFLR 884 at [32].

(d)a plainly wrong decision.

The Judgment generally

[7]                  The Judgment concerned relationship and separate property issues arising from a 14 year relationship between the parties, during which time they had five children.

[8]                  The parties met and commenced their relationship in Poverty Bay before moving sequentially to the Wairarapa and Southland. Various properties were purchased in the names of the parties either separately or together.

[9]                  The Judge did not find it necessary to and did not resolve a disputed factual issue as to whether the relationship had commenced in June 2001 (Ms Holmes’ evidence) or August 2001 (Mr Crombie’s evidence).

[10]              The relationship came to an end when Ms Holmes in November 2015 moved out of the property the couple had been living in together.

[11]              The Judge made a number of findings in relation to property which are not the subject of this appeal. One related to Mr Crombie’s ownership of shares in the Fyfe Cattle Company Ltd (Fyfe) which had been incorporated on 22 June 2001. The Judge found Mr Crombie’s shares in Fyfe to have been purchased by him out of his separate property.

Equity in Montgomery Place — Part I: the $90,811.64 contribution

[12]              During the relationship, a property at 1 Montgomery Place, Masterton was purchased for $126,106.36 and the title registered in the name of Ms Holmes.

[13]              The Judge found that Montgomery Place was relationship property because relationship property had been applied to its purchase and shortfalls were met out of the parties’ joint revolving credit account (“the joint account”) which was relationship property, with rental and expenses treated as joint income and outgoings. The Judge also  determined,  pursuant  to  a  concession  made  by Mr  Crombie,  that  a  sum of

$90,811.64  paid  by Ms  Holmes  for the  purchase of  Montgomery Place,  was  her

separate property. (At the appeal hearing, Mr Eagles appearing for Ms Holmes explained by reference to the evidence that the $90,811.64 figure adopted at the hearing in the Family Court involved a miscalculation and should have read “$90,839.64”. In this judgment, I have adopted for discussion purposes the figure used in the Judgment.)

[14]              The findings in relation to Montgomery Place, to this point, are not the subject of appeal.

[15]              Following the parties’ separation, Ms Holmes retained Montgomery Place in her name. The Judge made an order in relation to Montgomery Place whereby he found that Montgomery Place is relationship property and (subject to the $90,811.64 being repaid to the applicant, along with any outstanding secured debt to a third party,

e.g. the bank) is to be treated as relationship property and shared equally. If the house is not sold to a third party, but retained by the applicant, the notional net value is to be added to relationship property and divided equally (the Montgomery Place ruling).

[16]              Ms Holmes appeals the Montgomery Place ruling, upon the basis that the Court ought to have fixed her separate property interest as a proportionate share of the value of Montgomery Place (her separate property contribution having represented 72.64 per cent of the purchase price). As the property has since been sold for $315,000, the effect of the Montgomery Place ruling (by requiring that only $90,811.64 be repaid to Ms Holmes out of the proceeds) is that Ms Holmes receives 22.82 per cent of the sale proceeds.

[17]              For Ms Holmes, Mr Eagles invokes the provisions of ss 9(2)–9(3) of the Act. He submits that the repayment order was plainly unfair and inequitable. He submits that there were orthodox ways by which the Judge should have protected the value of the separate property contribution. Mr Eagles cited the Court of Appeal’s judgment in Watson v Watson.5 In that case, the Court of Appeal, in allowing an appeal, found that there should have been recognition of a husband’s original separate property contribution to his acquisition of bonus shares by reference to a calculated interest return of 15 per cent applied for the period of the marriage. The Court of Appeal

5      Watson v Watson (1996) 14 FRNZ 571.

recognised that the total sum thereby arrived at ($90,000 as against the husband’s original $35,000 capital interest in the company) was then being “arbitrarily treated as separate property”, achieving “some overall justice between the parties”.6

[18]              Watson v Watson has subsequently been cited and followed in a number of cases for the now well-settled proposition that bonus issue shares are gains from separate property to which s 9(3) of the Act applies if the original shares were separate property.7 I was informed, however, that the research of both counsel had not brought to light any subsequent decisions in which the Courts, upon the basis of Watson v Watson, had effectively apportioned assets partly to relationship property and partly to separate property (that is, property which in terms of s 8(1)(e) of the Act was acquired by either spouse after their marriage).

[19]              On my reading of Watson v Watson, the Court of Appeal considered itself able to undertake an apportionment exercise in Watson because what was involved were 40,000 bonus shares which, by their nature, are capable of being held and allocated in separate numbers. The same is not true of the parties’ acquisition of Montgomery Place, which was acquired in the sole name of Ms Holmes and without any attempt to identify distinct entitlements, such as through a tenancy-in-common.

[20]              Mr Eagles, for Ms Holmes, submitted that the Judge had failed to apply the provisions of s 9(2) and (3) of the Act, to which the definition of relationship property in s 8(3) is subject. Those subsections provide for property acquired out of separate property and income or gains derived from separate property to be separate property. Those provisions do not assist if what once was separate property has lost that character through intermingling with other property, as had occurred in this case.

[21]              In his oral submissions, Mr Eagles made reference to the decision of this Court in S v W.8 Section 10 of the Act deals with property acquired by succession, gift and similar means. In S v W, Chisholm J found that s 10 prevails over s 8(1)(c), rather than vice versa.9 Mr Eagles continued that as Ms Holmes’ case was that her

6      At 577–578.

7      See, for instance, DTB v KB [2014] NZHC 2894 at [21].

8      S v W [2006] 2 NZLR 669.

9      At [52]–[53].

contribution to the property purchase was derived from gifts received from her mother, the separate character of the $90,811.64 subsisted.

[22]              Mr Eagles’ submission has the potential to be correct only if Ms Holmes’ use of the $90,811.64 is not caught by the intermingling provisions of s 10(2). That subsection provides:

(2) Property to which this subsection applies is not relationship property unless, with the express or implied consent of the spouse or partner who received it, the property or the proceeds of any disposition of it have been so intermingled with other relationship property that it is unreasonable or impracticable to regard that property or those proceeds as separate property.

[23]              For Mr Crombie, Mr Walker submitted that Judge Brandts-Giesen had correctly found that Montgomery Place was relationship property, having been purchased during the relationship. While, through Mr Crombie’s concession to recognise a debt of $90,811.64 to Ms Holmes on account of her separate contribution, there was nevertheless at the outset such an intermingling with relationship property (in terms of s 10(2) of the Act) as to make it “unreasonable or impracticable to regard Montgomery Place as separate property”. Mr Walker refers to how the property was purchased and dealt with including:

(a)all purchase money was brought together in the joint account and settlement of the purchase was effected from there;

(b)all rental income was paid into the joint account and expenses paid out of it; and

(c)the parties in their accounting, including to the Inland Revenue Department, treated all rental and expenses as joint and accounted on a 50/50 basis.

These matters were adverted to by Judge Brandts-Giesen in reaching his determination that Montgomery Place was relationship property.

[24]              In reaching that determination, the Judge did not misapply any provision of the Act or reach a decision which was not available to him on the facts.

Equity in Montgomery Place — Pt II: the $10,000 contribution

[25]              In her notice of appeal, Ms Holmes identified a further sum of $10,000 which she claimed should have been recognised by the Judge as further separate property.

[26]              Ms Holmes had provided evidence in the Family Court as to the payment of the deposit for the purchase of Montgomery Place. The deposit of $10,000 was initially paid by a debit against the joint account. Three weeks later, through payments made from Ms Holmes’ father’s bank account into her bank account, Ms Holmes was able to pay the $10,000 back into the account. In the Family Court, Ms Holmes sought recognition for that $10,000 in addition to the $90,811.64 which was the subject of Mr Crombie’s concession.

[27]For his part, Mr Crombie was not prepared to concede that the additional

$10,000 should be credited to Ms Holmes. Mr Crombie had not received discovery of all the relevant bank accounts which may have shown more clearly whether the

$10,000 represented a repayment or other redirection of her own monies back to Ms Holmes rather than a gift from a parent. Mr Walker noted that evidence had not been provided on that subject by Ms Holmes’ parents.

[28]              There is no express reference in the Judgment to the additional $10,000. Had there been, it is clear that the Judge would still have held that Montgomery Place represented relationship property (for the same reasons as his Honour applied in relation to the $90,811.64 — above at [24]).

[29]Given the inconclusive state of the evidence in relation to the source of the

$10,000, and the absence of any concession on the part of Mr Crombie, the Judge was correct to limit the repayment direction to the sum of $90,811.64.

$7,809.44 withdrawn from joint revolving home loan account

[30]              Upon the parties’ separation, Ms Holmes withdrew $7,809.44 from the joint account and transferred it to her personal account, which she renamed the “rental” account.

[31]              Ms Holmes had given evidence that she had received advice from her accountant to keep rental from Montgomery Place separate from the rental for another property. She explained that the sum withdrawn comprised rental accrued from Montgomery Place on 1 April 2015 less all expenses. That said, she never provided a breakdown or other calculation in relation to the $7,809.44. Mr Walker, by reference to the financial statements prepared in relation to Montgomery Place was able to demonstrate that Montgomery Place had not produced a net profit to the time of the parties’ separation.10

[32]              The Judge held that Ms Holmes was required to repay the $7,809.44 to the relationship property pool. Given that the sum had been removed to Ms Holmes’ personal account, that finding was inevitable and correct.

$15,550.42 paid towards Bonus Bonds

[33]              Bonus Bonds were purchased with funds from a bank account of the parties (referred to in the Judgment as the “05” account). The Bonus Bonds were purchased for $18,000 on 8 May 2014 in the name of Ms Holmes. Ms Holmes had earlier on 15 April 2014 deposited a sum of $15,550.42 into the “05” account.

[34]              Ms Holmes explained in her affidavit evidence that with money received from her parents she had purchased Bonus Bonds from time to time in the name of the two children she had before her relationship with Mr Crombie. She explained that the money “from them” was $15,000 being “from the Bonus Bonds kept on their behalf”. She exhibited a handwritten note on which she had recorded:

8/05/2014 —    $18,000 purchase bonus bonds

as mentioned in earlier documents

10 Mr Eagles noted that the Montgomery Place accounts had taken into account depreciation, which was not an actual expense, but the amounts claimed by way of depreciation were still less than required to produce a profit.

—    $15,550 remaining school fund term deposit and funds in

[XXX] school account

[35]              Mr Eagles submitted that that evidence was not contradicted and should have been accepted by the Judge. He further submitted that the difference between the

$18,000 and the $15,550.42 could be treated as relationship property but the

$15,550.42 should have been treated as separate property.

[36]              In the Judgment, the Judge found that, as the Bonus Bonds had been purchased out of the “05” account, they constituted relationship property.

[37]              The Judge noted that Ms Holmes’ evidence that the $15,550.42 had come from the account of one of her children. But his Honour continued:

[78]The source of these funds is not clear.   Throughout the relationship,  the applicant moved funds from her own accounts to those earmarked for her children, and vice versa.

[38]              At this hearing, Mr Eagles has referred to the affidavit evidence provided by Ms Holmes’ mother which confirms a history of reasonably significant gifts made to Ms Holmes. It is clear on the evidence that Ms Holmes received numerous gifts from her parents.

[39]              Mr Walker, however, referred me to the notes of evidence, and in particular his cross-examination of Ms Holmes in relation to her allegation that the $15,500 came from gifted funds set aside for her children. Mr Walker took Ms Holmes through an analysis of the amounts she had received by way of gift and reductions by which that total had been whittled down. Ms Holmes was not able to explain exactly how her calculations tallied. She accepted that whatever money was in her account had at all times not been formally gifted over to the children but remained hers.

[40]              Neither the exhibits produced by Ms Holmes nor her answers in cross- examination produced any clear evidence that the funds paid into the “05” account had been sourced from separate property.

[41]              The Judge was entitled to conclude that the source was not clear. Ms Holmes had therefore not established an entitlement to having any portion of the Bonus Bonds

treated as her separate property. In the absence of a concession on the part of Mr Crombie, parallel to his $90,811.64 concession, the Court was not entitled to make a direction as to the crediting back to Ms Holmes of any sum representing the value of the Bonus Bonds.

Chattels

[42]The Judgment records in relation to furniture and chattels:

[88]      It is noted that there is a large measure of agreement as to the value of assets, and in whom they should vest. There is no doubt that some chattels at the time went missing. There was no reliable schedule of everything the parties had in their home.

[89]      I accept that Ms Holmes made various visits to recover items she considered were her separate property, as taonga/heritage pieces, or items she needed or wanted. I accept that many items have disappeared but only after she had been given an opportunity for an orderly division. It is unfortunate that such a division was not done at an early stage, and that a complete list of chattels was not available.

[90]       If values of remaining items cannot be agreed, all chattels which are relationship properly should be valued and divided equally as to value. Taonga or inheritance items are to belong to the party with whom they are associated and need not be valued. Items actually sold to unrelated third parties should be treated as being relationship property at prices attained at their sale. If still in dispute, this also applies to livestock, sheepdogs, and a boat, which were sold.

[91]      I consider that the expression “taonga/inheritance items” should be seen in its broadest sense, i.e. that items which have some association with a party’s family should belong to that party.

[92]      I have insufficient evidence to make any clearer decision about chattels.

[43]              Ms Holmes appeals this aspect of the Judgment on the basis that the Judge failed to deal adequately with furniture and chattels when Ms Holmes had provided extensive evidence of chattels which were missing and unavailable to her.

[44]              The Judgment implicitly recognises the time lag between the parties’ separation (8 November 2015) and the point (June 2017) at which proceedings were issued, including for resolution of matters relating to chattels.

[45]              In making her application, Ms Holmes produced a list of 31 items in relation to which she sought orders of return. She deposed that an extensive collection of chattels had remained with Mr Crombie and that some chattels would have depreciated and some had been left outside. She observed that the chattels had been collectively insured for $151,000.

[46]              Chattels in the possession of either party were subsequently valued by William Todd & Co Ltd (Todd & Co) in February 2018. Ms Holmes deposed that a large number of chattels (left in the possession of Mr Crombie were missing, and that Mr Crombie had given no explanation as to why those items were not valued or where they now were).

[47]              In his submissions on this appeal, Mr Eagles recorded that the list of missing items was “extensive” and they were “thought privately by the appellant to be worth up to $16,000”.

[48]              Mr Eagles recognised that in a subsequent affidavit, Mr Crombie had responded in relation to chattels. Mr Crombie stated that Ms Holmes and her daughter had collected some items from the property at the time of the separation afterwards. He stated that some of the chattels had been broken or were unusable at the time of the valuations. He stated that he had disposed of some items shortly after separation and that what Ms Holmes had not taken he had simply thrown out. He finally stated that when he had left his rented property, more items were taken down and left at Ms Holmes’ property.

[49]              Against the background of these matters, Mr Eagles submitted that the Family Court ought to have approached matters in a robust way and that an award of $10,000 should have been made for the missing items alone.

[50]              Mr Walker rejected the submission that Mr Crombie ought to have been held financially responsible for any loss of items. Mr Walker referred me to further aspects of the evidence. He first noted an affidavit sworn by Ms Holmes in December 2017 in which she identified a mere six sets of chattels (which she valued at $130) as the only items she had. Ms Holmes did not in that affidavit take issue with Mr Crombie’s

own affidavit, provided three months earlier, to which he had exhibited a list of furniture and chattels left with him at the time of separation. The list ran to a full six pages and was arranged in detail by reference to rooms and outbuildings. As Mr Walker noted, that list of chattels provided by Mr Crombie in September 2017 bears a reasonable relationship to the chattels later valued by Todd & Co.

[51]              The Judge, against this background, was justified in reaching the conclusions in relation to chattels set out in the Judgment (above at [42]). The burden of proof was clearly in play. It was not open to the Court to find that Mr Crombie should be financially responsible for any particular items which remained unaccounted for.

Services and work provided to Fyfe

[52]Mr Crombie’s shares in Fyfe constituted separate property.11

[53]              Ms Holmes in the Family Court sought a compensatory payment for services provided to Fyfe in the event the Court found (as it did) that the shares were not relationship property. On her behalf, Mr Eagles invoked both s 9A of the Act (based on an increase to value) and s 17 of the Act (based on sustenance of the separate property).

[54]              The Judge found that there was insufficient evidence to support a claim based on significant contribution by Ms Holmes, stating:

[48]It appears that Ms Holmes had never previously made any claim for work done by her in relation to managing the properties owned by the company. Any claim by her for work done may be outside the limitation period. In any event, it would be a claim against the company. Exactly what Ms Holmes did for the company is difficult to give a value to. Most of what she did was for the [address 1] and [address 2] properties. Even if her claim against the company could be considered in these proceedings, I find her evidence was insufficient to prove such a claim for a significant contribution by her to what I have found to be the respondent's separate property.

[49]Insofar as payments were made by her, it appears that the payments were reimbursed to her out of relationship property. It is between the parties and the company to sort out any moneys owing by the company to the parties, or vice versa.

11 Above at [11].

[55]              Ms Holmes had provided evidence in relation to services she had performed and payments made in relation to the holding and letting of two residential properties (in Masterton) owned by Fyfe. Her evidence related to a period between 2010 and 2013. She referred to her involvement in the acquisition of one of the properties (signing the agreement for sale and purchase as agent for Fyfe), dealing with tenants, attending the Tenancy Tribunal for Fyfe, attending to tenancy applications, and cleaning before and after tenancies and engagement in services and maintenance.

[56]              Mr Crombie and his brother, Stacey Crombie, have been the directors and equal shareholders of Fyfe. Stacey Crombie provided affidavit evidence as to his involvement and responsibilities in Fyfe. He stated that he was responsible for paying invoices in relation to property management, maintaining the cash book and monitoring the company bank account. He deposed that Ms Holmes had not had the role of property manager for Fyfe, as there had always been professional property managers employed by Fyfe, responsible for tenancy arrangements and for major renovations. He recognised that on “odd occasions” Ms Holmes had paid for items and listed from the records a range of such items for which Ms Holmes had in each case been reimbursed.

[57]              Mr Eagles at this appeal hearing did not pursue an argument that the Judge could have made a finding of increased value or gains under s 9A of the Act.

[58]              That left in Mr Eagles’ submission the proposition that the Judge should have made an allowance for sustenance of separate property under s 17 of the Act.

[59] The Judge, in the passage referred to at [54] above, directly addressed Ms Holmes’ evidence as to a contribution to Mr Crombie’s shareholding in Fyfe. Having noted that Ms Holmes had never pursued a claim against Fyfe itself for her work, and that there would be obstacles to any such claim now, the Judge turned to the evidence on contribution. His Honour found Ms Holmes’ evidence to be “insufficient to prove such claim for a significant contribution by her to what I found to be the respondent’s separate property”. His Honour noted that she had been reimbursed for such expenses as she had paid on behalf of Fyfe.

[60]              Each of these findings was open to the Court on the basis of the evidence. There was no basis on which the Court could have concluded that Ms Holmes was “out of pocket” for expenses. In relation to services generally, the detail provided by Clyde Crombie as to the management of Fyfe’s tenancies undermined any proposition that the value of the shareholding in Fyfe had been truly sustained by Ms Holmes’ actions. She had clearly helped from time to time, but not to the extent that her evidence may at first have suggested.

[61]              The Judge was entitled to find that Ms Holmes’ evidence was insufficient to identify actions which had significantly contributed to sustenance of the Fyfe shares. It was open to the Court, within its discretion, to refuse relief under s 17 of the Act.

Outcome

[62]              It has not been established that the Judge erred in fact or law in relation to any of the findings challenged on this appeal. The appeal must be dismissed subject to a reservation of leave to the parties to refer back to the Court any final matters which requires documentation in light of the discontinuing required under the Judgment.

[63]Costs must follow the event, which appropriately should be on a 2B basis.12

Orders

[64]I order:

(a)The appeal is dismissed, subject to leave to either party on three days’ notice to have the appeal brought back on for hearing and determination of any final matters of accounting which arise from the Judgment.

12     High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).

(b)The appellant is to pay to the respondent the costs of the appeal, fixed on a 2B basis, together with disbursements to be fixed by the Registrar if there is disagreement on their quantum.

Osborne J

Solicitors:

Eagles & Redpath, Invercargill

Walker Murdoch Law Ltd, Invercargill