Meo v Meo
[2021] NZHC 1601
•30 June 2021
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,
11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
https://www.justice.govt.nz/family/about/restriction-on-publishing-judgments/
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-27
[2021] NZHC 1601
UNDER the Property (Relationships) Act 1976 BETWEEN
JACQUENLINE YASMIN RABEENA MEO
Appellant
AND
DAVID ANTHONY MEO
Respondent
Hearing: 8 June 2021 Appearances:
K Lakshman for Appellant F M Gush for Respondent
Judgment:
30 June 2021
JUDGMENT OF ISAC J
Introduction
[1] Mr and Mrs Meo separated in October 2013. Five years later, in February 2018, Mr Meo filed proceedings in the Family Court seeking division of relationship property. Judge Black issued judgment in December 2020 addressing what he identified as four issues between the parties requiring resolution. 1
1 Meo v Rabeena [2020] NZFC 11100 [Family Court decision].
MEO v MEO [2021] NZHC 1601 [30 June 2021]
[2] Unhappy with the Family Court’s judgment, Ms Meo now appeals advancing four grounds.
[3] First, she says the Judge wrongly took into account post-separation loan repayments by Mr Meo concerning the family home in Seatoun, Wellington. Ms Meo says this debt was not relationship debt and therefore did not fall within the reach of the Family Court’s jurisdiction to order compensation under s 18B of the Property (Relationships) Act 1976 (the Act).2
[4] Second, Ms Meo says retained earnings in a company owned by Mr Meo ought to have been treated as a dividend, reducing the balance of an overdrawn shareholders account in her favour. She says the Family Court overlooked undisputed evidence that the retained earnings were a separate asset requiring division and therefore failed to deal with the issue.
[5] Finally, in combined third and fourth grounds of appeal, Ms Meo argues that an equalisation payment between the parties ordered by the Family Court requires adjustment. However, she accepted that the third and fourth grounds only needed to be considered if her appeal on the second ground was successful.
Background
[6] As noted, Mr and Mrs Meo separated in October 2013 after a marriage lasting 21 years.
[7] In 2018 Mr Meo brought proceedings in the Family Court seeking division of relationship property.
[8] The evidence before the Family Court and the judgment under appeal both reveal a relatively fragile financial position at the time of separation and subsequently. A brief overview of the parties’ situation serves to illustrate the point:
2 That provision provides the Family Court with a discretion to award compensation to a spouse who has done anything after separation which would have been a contribution to the marriage had the relationship not ended.
(a)A family trust owned a property in Seatoun which, prior to separation, was the family home.
(b)Mr and Mrs Meo had purchased four investment properties in Australia.3 To do so they had used equity in the Seatoun home to act as a deposit and raised separate loans to fund the balance of the purchase price for each property.
(c)There was an additional loan securing borrowings over the Seatoun property itself.
(d)Mr Meo was also the sole shareholder in and driving force behind a family business that operated through a company called Meo Imports New Zealand Ltd (the company). Its business was the importation of Italian shoes and leather goods for wholesale within New Zealand. There appears to be no real controversy that the increase in use of online purchases together with the effects of the pandemic seriously affected the company’s turnover and value in recent years. Indeed, the judgment under appeal indicates that at the date of hearing the company was likely to be valueless.
[9] Following separation, Mr Meo continued to work in order to meet the debts and obligations of the company, the trust, and the remaining four advances for the Australia investment properties. Ms Meo moved to Auckland and thereafter did not contribute to the outgoings in relation to the various loans identified above. Equally, Mr Meo continued to occupy the trust property rent free until it was sold in 2020. Proceeds from its sale were used to discharge all of the outstanding bank advances, including advances secured over the Seatoun property itself.
[10] There are separate proceedings before this Court that relate to the resolution of issues concerning the trust property. I was advised from the bar that within those
3 These are referred to in evidence as the Perigian Springs, Castle Hill, North Ridge and Brookwater properties.
proceedings Ms Meo seeks an adjustment to reflect the benefit Mr Meo received through living rent free for several years.
Judgment under appeal
[11] In the seven years following separation but before the hearing in the Family Court, the Australian investment properties were sold, as well as the trust property in Seatoun. This enabled repayment of the outstanding loans to the bank. Accordingly, the value of the relationship property for division was known at the time of hearing and the scope of the issues between the parties had narrowed.
[12] When the proceedings were heard by the Family Court in September 2020, the Court identified four issues as requiring determination. They were:4
(a)The value of the shares in the company;
(b)Mr Meo’s application for post-separation compensation under s 18B of the Act reflecting the loan repayments he had made since separation;
(c)Quantification and division of a relationship debt in the form of an overdrawn shareholder’s account in the company.
(d)A claim by Mrs Meo for compensation in relation to lost personal effects.
[13] The first issue was the appropriate valuation of the shares in company. The Family Court Judge noted a disagreement in valuation evidence provided by three experts. Mr Murray, for Mr Meo, valued the business as at 31 March 2018 (being the last set of financial statements available for valuation purposes and the valuation date closest to the date of hearing) at $76,850, and $84,000 as at 31 March 2014 (being the balance date closest to the date of separation).5
4 Family Court decision, above n 1, at [6].
5 At [14](a).
[14] An accountant called by Ms Meo, Ms Early, valued the business as at 31 March 2014 as $209,160.6
[15] A third accountant, who was jointly instructed by the parties following a settlement conference and, effectively called as the Family Court’s witness, Mr Wood, assessed the value of the business as at 31 March 2014 as $232,000, and only $61,000 as at 31 March 2018.7
[16] Having identified the relevant legal principles and outlined the range of valuation opinions, the Family Court Judge preferred the evidence of Mr Meo’s accountant:
[27] Having assessed the evidence of the valuers, I prefer Mr Murray’s evidence as to the valuation method which is most appropriate.
[28] Ms Early’s approach, with respect, was acknowledged by her to be effectively a desktop exercise based on conventional accounting principles. It did not take into account the effort required to run the business which it must be said relied heavily on Mr Meo’s background and personal connections with Italian manufacturers and wholesalers. Ms Early acknowledged that if she was taking into account the position of a third party purchaser she would need to consider return on effort and investment.
[29] Mr Wood acknowledged that he would consider salary as relevant for a third party purchase.
[30] Having regard to the nature of this small business I reject Ms Early’s and Mr Wood’s opinion evidence that it is appropriate to ignore the effort required to run the business in assessing value. The discretionary income approach is inappropriate. There is no evidence which allow me to conclude that the market for this sort of business includes purchases willing to “buy themselves a job” to use Mr Murray’s expression.
[31] The ultimate sanity check of valuation is that Mr Meo attempted to sell the business but was unable to find any interested purchaser.
[32] For the above reasons I reject the valuations of Ms Early and Mr Wood. I see no basis not to accept Mr Murray’s valuation evidence and I accordingly fix the value of the business as $84,000 as at 31 March 2014 and as at 31 March 2018 $76,850.
[33] On that basis there has been a relatively modest decrease in value of the business since separation. Mr Meo explained (and was not significantly challenged on this) the reasons for the decline in the
6 At [14](b).
7 At [14](c).
company’s performance over those years including the rise in on-line shopping particularly from overseas stores.
[34] It cannot be said that the decrease in value of the business between separation and March 2018 is a result of poor decision making or lack of application by Mr Meo.
[35] I also have regard to the evidence that Mr Meo has had very limited drawings from the business since separation - effectively he has been working for nothing. Given trading since 31 Mach 2018 and the current Covid environment I suspect the business is valueless but because Mr Meo expressly invites me to do so I exercise my discretion under s 2G to fix valuation date for the business at 31 March 2018 and ascribe it a value of $75,850.
(footnotes omitted)
[17] In relation to the second issue, post-separation adjustments, the Judge having heard the evidence noted that two items were no longer pursued by Mr Meo, but found that the other adjustments sought in Mr Meo’s opening had been established.8
[18] In relation to classification and division of relationship debts, in particular the remaining matter of an overdrawn current account in the company, the Judge accepted a submission by Mr Meo that repayment of the current account by way of introduction of funds on the sale of the Seatoun property in the sum of $193,879.76 should be treated as the introduction of funds by the shareholder (Mr Meo) thus reducing the current account to $101,869.24.9
[19] The Judge went on to reject a submission by Ms Meo that the balance of the account for the purposes of division should be treated as $295,749 on the basis that business lending had increased during the post-separation period and that Ms Meo should not be responsible for that increase. In rejecting that submission, the Judge noted that the proposition was not pleaded or particularised. More fundamentally, it could only be justified if there was evidence suggesting that Mr Meo had increased the liability of the company as a result of reckless trading or some other improper conduct.10 Contrary to that submission, the Judge accepted Mr Meo’s evidence that the business had continued to trade so that he could pay the various bank loans, including the Australian loans, which ultimately benefited Ms Meo as well.11
8 At [36].
9 At [37]–[40].
10 At [40].
11 At [43].
[20] Ultimately the Family Court concluded that the appropriate balance for the current account was $101,869.24.
[21] The final issue the Family Court dealt with was a claim by Ms Meo for loss of personal belongings which she attributed to high-handed conduct on Mr Meo’s part. Her claim was for $17,800. The Court settled on an order for compensation of $5,000, taking into account the likelihood that the insurance values on which Ms Meo’s figure had been based were unlikely to reflect an indemnity or market value.12
[22] Taking into account those findings, the net result was an adjustment payment due from Ms Meo to Mr Meo of $51,845.80.13
[23] The Court made further orders declaring the shares and other interests in the company vested in Mr Meo as his sole property, and that he would be responsible for the overdrawn shareholder accounts. The Court also ordered that shares in an Australian company of which Mr Meo was the shareholder were to vest in Mr Meo as his separate property (having an agreed nil value). Finally, the Court directed Ms Meo to pay Mr Meo the equalisation payment noted at [22] above.
Approach on appeal
[24] An appeal under s 39 of the Act is a general appeal and proceeds by way of rehearing. The approach outlined by the Supreme Court in Austin Nichols & Co Inc v Stitchting Lodestar therefore applies.14 The Court must come to its own view on the merits, taking into account the relevant facts and any new evidence admitted, and the applicable law.15
[25] In B v F Heath J outlined the approach to appellate review in the context of appeals under the Act.16 After noting that application of the Austin Nichols principles is not straightforward in the context of appeals from the Family Court — as many first instance decisions represent a mix of findings of fact, the formation of an evaluative
12 At [45]–[51].
13 At [53].
14 Austin, Nichols & Co Inc v Stitchting Lodestar [2007] NZSC 103, [2008] NZLR 141.
15 At [16].
16 B v F [de facto relationship] [2010] NZFLR 67 (HC).
judgment and the exercise of statutory discretions — he adopted the following approach:17
(a)The Court must take account of the advantage the Family Court Judge had of hearing and seeing the witnesses who gave evidence before him.18
(b)To the extent the Family Court Judge exercised any discretion in reaching his decision, the High Court must determine whether those discretionary decisions were or were not open to the Judge. Some “reasonably plain ground” ought to be made out before an appellate court will intervene.19
(c)Otherwise, this Court is free to reconsider the Family Court’s decision and to substitute its own view on questions of fact and evaluation, if convinced that the first instance decision was wrong.
Issues for determination
[26]There are three issues for determination:
(a)First, did the Family Court wrongly include the post-separation Seatoun loan repayments in its s 18B compensation order?
(b)Second, were retained earnings in the company an asset requiring division such that there was an error in the Family Court’s approach?
(c)Third, was there an error in adjustments and the equalisation payment?
[27]I now turn to consider those issues.
17 As outlined in Pinney v Cooper [2020] NZHC 1178 at [21].
18 Austin, Nichols & Co Inc v Stitchting Lodestar, above n 14, at [13].
19 Blackstone v Blackstone [2008] NZCA 312 at [8], per Glazebrook J citing May v May [1982] 1 NZFLR 165 (CA).
Did the Family Court wrongly include the post-separation Seatoun loan repayments in its s 18B compensation order?
[28] Although it is not explicit on the face of the Family Court’s decision, it is clear from the material filed on appeal, and in particular Mr Meo’s synopsis of opening submissions, that the Family Court was asked to make an order for compensation under s 18B of the Act for Mr Meo’s post-separation contributions to the various loans.
[29] The Judge dealt with what he described as “post-separation adjustments” succinctly:20
The adjustments claimed are set out in Ms Gush's synopsis of opening submissions dated 7 September 2020. Following the evidence items 10.2 and
10.3 are no longer pursued. The evidence establishes the other adjustments sought.
[30] The two items noted as no longer being in contention related to a claim for alleged damage by Ms Meo to the Seatoun property, and an alleged withdrawal of funds by her from the company following separation.
[31] In support of Mr Meo’s claim for post-separation compensation, he provided the Court with a table identifying the amount of principal and interest repayments he had made over a period of seven years relating to the four Australian properties as well as the Seatoun home. In relation to the Seatoun property, he sought a compensation payment limited to the principal he had paid, which came to $73,795.16.
[32] On appeal, Ms Meo argues that the Seatoun property debt repayments ought not to have been taken into account by the Judge as part of the s 18B enquiry. She says that the debt was not a relationship debt but rather one owed by the trustees of the family trust. And, she submits, Mr Meo’s payments of the principal were as a trustee of the family trust. Any adjustments relating to the repayment of the Seatoun debt can only be addressed within the context of the parties’ separate proceedings before this Court concerning the trust property.
20 Family Court decision, above n 1, at [36].
[33] Ms Meo, in written submissions in reply, and in oral submissions at the hearing, says that the jurisdiction of the Family Court to award compensation under s 18B is strictly confined to anything done by a spouse after separation that would have been “a contribution to the marriage”. Section 18 of the Act exhaustively defines what a “contribution to the marriage” is. Post-separation payments by a spouse in their capacity as a trustee of a trust do not fall within the exhaustive definition. It follows the Judge erred by taking into account Mr Meo’s repayments of the Seatoun home advance as part of the s 18B compensation award.
[34] Finally, Ms Meo argued that she initially advanced in the Family Court, but abandoned before the end of trial, a claim for occupation rent against Mr Meo. She said she did so because, first, it appeared unlikely the claim would find favour with the Judge, but second, because more correctly it is one of the issues to be dealt with in the High Court proceedings concerning the trust property. Accordingly, taking into account trust debt as part of the relationship property adjustments was unfair; Ms Meo has, effectively, been denied the ability to claim a set-off in the related High Court proceedings to the extent the loan was subsumed within the Family Court’s s 18B order.
[35]Ms Gush for Mr Meo advanced five points in reply.
[36] First, she contended that Ms Meo’s interpretation of the scope of s 18B was wrong. She argued that s 18B(1)(c) directly captured the payments made by Mr Meo to the Seatoun loan.
[37] Second, she argued that the point taken on appeal had never been squarely raised by Ms Meo in her pleadings, evidence or submissions before the Family Court. On the contrary, the only evidence before the Court directly put the Seatoun loan in issue along with the debts relating to the Australian properties.
[38] Third, there is no practical benefit to Ms Meo advancing the point on appeal. That is because if she wants to claim an occupation rent against Mr Meo she will need to satisfy the Court that she deserves some accommodation on the basis that she also addressed the property outgoings during Mr Meo’s occupation. As she did not make
any such contribution for a period of seven years, she would not be entitled to claim a set-off in the related High Court proceeding.
[39] Fourthly, Mr Meo says that the question of occupation rent was advanced before the Family Court. It was only abandoned at the end of the trial, when it became clear that it was unlikely to be accepted by the Judge. Advancing the claim for occupation rent in relation to the Seatoun property reinforced the impression the parties had left the Judge with — that he had been asked to examine issues relating to the trust property, including loan repayments and occupation rent.
[40] Finally, the award the Judge made under s 18B related to principal repayments only. No claim was made for the additional interest repayments made by Mr Meo during his seven years of occupation of the trust property. That reflected a concession by Mr Meo as part of his claim before the Family Court. Implicitly, the order of the Family Court already made an adjustment in Ms Meo’s favour for an occupation rental; that is, the interest paid by Mr Meo for a seven-year period but not claimed by him as part of the s 18B compensation payment.
Analysis
[41] Section 18B(2) of the Act confers on the Family Court a wide power to order compensation in favour of a spouse or de facto partner for contributions made after separation. It provides:
18B Compensation for contributions made after separation
…
(2)If, during the relevant period, 21 a spouse or partner (party A) has done anything that would have been a contribution to the marriage, civil union, or de facto relationship if the marriage, civil union, or de facto relationship had not ended, the court, if it considers it just, may for the purposes of compensating party A—
(a)order the other spouse or partner (party B) to pay party A a sum of money:
21 The expression “relevant period” is defined in s 18B(1) as the period after a marriage, civil union, or de facto relationship has ended but before the date of the hearing of an application under the Act by the Family Court.
(b)order party B to transfer to party A any property, whether the property is relationship property or separate property.
[42] The term “contribution to the marriage” is defined in s 18, and includes the provision of money, including the earning of income, for the purposes of the marriage.22
[43] Ms Meo’s submission, as noted above, was that post-separation payments by a spouse in their capacity as a trustee of a trust do not fall within the exhaustive definition of the expression “contribution to the marriage”.
[44] I do not accept the appellant’s submission that the payments were made by Mr Meo in his capacity as a trustee. This was not trust income, and it was not income generated by Ms Meo either. I consider the moneys were Mr Meo’s separate property, having been generated post-separation, and were an advance by Mr Meo in his personal capacity to the trust.
[45] Despite this, I have concluded, with some reluctance,23 that while Mr Meo made the advances in his personal capacity from his own income, the Seatoun loan repayments fell outside the reach of s 18B and should not have been taken into account by the Family Court. That they were is no reflection on the careful approach of the Judge. The error arose because the parties advanced the case on the basis it was an issue properly before him.
[46] The Seatoun property was not relationship property; it was owned by the trust. Any post-separation contributions Mr Meo made were therefore for the benefit of the trust.
22 The Act, s 18(1)(c).
23 My reluctance arises for two reasons. The first is that, as Ms Gush submitted at the hearing, the result for Ms Meo is likely to be a pyrrhic victory. That is because Mr Meo will be entitled to claim against the trust the entire amount of the Seatoun loan repayments made (including interest). The second is that, despite the approach adopted by the Court of Appeal in Ronayne v Coombes, discussed below at [47], it seems there may be scope to consider the language of ss 18(1)(c) and 18B captures the earning of post-separation income, especially where, had it been generated during the course of the relationship, it would have been considered relationship property. For instance, it seems that Mr Meo’s income generated during the relationship would be relationship property, and would not lose that character by virtue of having been applied to enhance the value of trust property.
[47] In Ronayne v Coombes, the Court of Appeal rejected the appellant’s claim for occupation rental for the post-separation period a family trust property was occupied by the former spouse.24 The Court agreed with the High Court Judge that s 18B could not apply in that context because the home was not relationship property: it was trust property.25 And in DGH v PIH, the Family Court observed that it had no jurisdiction under s 18B to deal with a claim for maintenance and upkeep costs of the trust owned property, noting that it was a matter to be resolved between the claimant and the trust.26
[48] In light of the Court of Appeal’s decision in Ronayne, I have concluded the Family Court did not have jurisdiction to find the payments made by Mr Meo to the trust amounted to contributions for which he could claim compensation under s 18B. This approach at least ensures that the claim for occupation rent and Mr Meo’s claim to a debt-back from the trust (representing the post-separation advances he made to the trust), will be resolved within the one proceeding concerning the disposition of trust property. It also avoids the risk of double-counting, given that it was still open to Mr Meo to claim the full amount of his mortgage repayments over the Seatoun property in the trust proceedings, notwithstanding the s 18B order of the Family Court.
[49] And while this ground of appeal may not have been put in issue in the Family Court, it needs to be corrected as it affects the final division of relationship property. I do not consider there is any prejudice to Mr Meo in the sense contemplated by the Court of Appeal in Needham v Samy Trustee Ltd,27 because the issue in this case does not turn on the resolution of any matter of disputed fact capable of a different outcome had the point been raised in the pleadings before trial. Nevertheless, the failure to raise the point before the Family Court is a factor relevant to the determination of costs in this Court, to which I return later.
Were retained earnings in the company an asset requiring division such that there was an error in the Family Court’s approach?
[50] The second ground of appeal relates to the treatment of retained earnings within the company.
24 Ronayne v Coombes [2016] NZCA 393; X v Y [2015] NZHC 1166 [High Court judgment].
25 At [11] and [19].
26 DGH v PIH [2012] NZFC 5535 at [62].
27 Needham v Samy Trustee Ltd [2017] NZCA 117, (2017) 24 PRNZ 184.
[51] As noted, Ms Meo argues that there was an error of approach in the Family Court. She says that retained earnings ought to have been treated as a dividend and deducted from the current shareholder account in accordance with her accounting evidence.
[52] During the hearing of the appeal, Mr Lakshman amplified the submission. He argued that while the Judge had dealt with the question of share value, he had simply failed to deal with the separate and distinct question of retained earnings. He went on to submit that the accounting evidence called by Mr Meo also overlooked the issue. It was for that reason that he submitted that the only evidence on the question of retained earnings before the Family Court was that provided by Ms Meo’s accountant.
[53] This ground of appeal was not raised as an issue in the Family Court. It is therefore difficult for Ms Meo to argue there was an error by the Judge. However, having reviewed the accounting evidence before the Court, and the judgment under appeal, I am unable to accept Ms Meo’s second ground of appeal. In particular, the evidence of both parties’ accountants acknowledged the relationship between retained earnings as part of the equity of a company, and the value of its shares (or, on Mr Murray’s analysis, the value of its business).
[54] Ms Early, the accountant called by Ms Meo, identified three issues that she considered “should be taken into account in deciding the issues in this case”. The first matter she identified related to the quantification of the overdrawn shareholders account for the company. In that context, she considered that in determining the level of the shareholders current account debt it was first fair and reasonable to declare a dividend reflecting the retained earnings. That would have the effect of reducing Ms Meo’s half-share of the overdrawn shareholder’s account as a relationship debt. The second matter in Ms Early’s view related to “the value of the shares in [the company]”, which as at the date of separation she put at $209,160.00. Half of the value of the shares was relationship property belonging to Ms Meo, being $104,580. The third issue Ms Early identified related to losses in relation to the four Australian investment properties (and is of no further relevance to this ground of appeal).
[55] According to Ms Early’s evidence the first two issues she identified — quantification of the overdrawn shareholders account and the value of the company shares — were interdependent. She deposed:
On the basis of the two matters that I have discussed, Ms Meo’s share of the overdrawn shareholders current account of Meo Imports New Zealand Ltd as at the separation date will be effectively $5,544.00, calculated as follows:
Overdrawn shareholders current as at the separation date $295,749.00 less dividend as at the separation date
75,500.00
220,249.00
Ms Meo’s one-half share
110,124.50
Less Ms Meo’s one-half share of the value of the shares as at the separation date
104,580.00
$5,544.50
(emphasis added)
[56] It is clear from this passage that Ms Early was not simply commenting on the question of retained earnings entirely disconnected from share value. She was providing evidence on the value of the company shares as a form of relationship property, taking into account her view that the retained earnings ought to be considered a dividend payable to the parties in reduction of the relationship debt represented by the overdrawn shareholders account. On Ms Early’s evidence, declaring a dividend in this way and taking into account the value of her half of the shareholding resulted in a net liability for Ms Meo for the overdrawn shareholders account of only $5,440.00. It follows that Ms Early’s analysis necessarily included both the value of the shareholding and an acknowledgment of the retained earnings in arriving at her assessment of Ms Meo’s liability for the overdrawn shareholders account.
[57] A similar approach was taken by the accountant called by Mr Meo, Mr James Murray. His evidence noted the obvious connection between retained earnings forming part of the equity of a company, and the value of its shareholding or business. His evidence was:
A share valuation of a company is generally calculated by taking the Equity in the company and making the adjustments as appropriate.
The Equity of a company is represented by the value of assets less liabilities and equates to the Paid-Up Share Capital plus Reserves.
Reserves include both Revenue Reserves (Retained Earnings) and Capital Reserves (Retained Capital Gains).
[58] Later in his evidence, Mr Murray explicitly recorded the figure attributed to equity in the company as at 31 March 2014, which he assessed as being the retained earnings figure of $75,782.28 This is essentially the same figure used by Ms Early in arriving at her analysis of Ms Meo’s share of the overdrawn shareholder’s account.
[59] It follows from the evidence of both accountants that if the retained earnings were treated as a dividend then the net equity in the company (and the value of the shares) would be reduced by precisely the same amount. Simple arithmetic suggests that even if Ms Meo’s contention were correct, there could be no benefit to her in this ground of appeal given the requirement to account for any dividend in the assessment of value of the company’s shares.
[60] The Judge correctly noted the main area of disagreement between the parties in relation to the value of the shares, and preferred, for reasons he articulated, the evidence of Mr Murray. Mr Lakshman was unable to point to any error in the approach taken by Mr Meo’s accountant, or by the Judge when he accepted that evidence. Nor do I accept Ms Meo’s submission that the Judge simply overlooked dealing with the question of retained earnings in his assessment. Retained earnings were firmly imbedded in the valuation evidence of both parties.
[61] It also appears from the Family Court decision that the real issue at trial was not about what to do with the company’s retained earnings, but whether a repayment of debt by the company to its bank of $193,879.76 should be treated as an advance by the shareholder such that the level of debt on the overdrawn current account ought to be reduced to $101,869.24.29 Ms Early’s analysis, at [55] above, was undertaken some years before the repayment of the bank debt and, accordingly, did not take the bank repayment into account. And Ms Meo argued that for the purposes of division, the
28 Ms Early described the value of retained earnings as at that date as $75,682, while Mr Murray’s affidavit referred to it as $75,782. I infer that the discrepancy of $100 is down to a numeric error.
29 Family Court decision, above n 1, at [37]–[44].
balance of the overdrawn shareholders account should be the balance on the date of separation, being $295,749. This claim was based on the submission that Mr Meo should be solely responsible for the increase in the company’s debt after separation.30 The Judge dismissed that claim, quite properly in my view.31
[62] It is for this reason that I also accept Ms Gush’s submission that Ms Meo failed to raise her second ground of appeal before the Family Court, and should not be permitted to do so now.
Third and fourth grounds of appeal: was there an error in adjustments and the equalisation payment?
[63] Given my finding on the first ground of appeal, it is necessary to adjust the equalisation payment made in the Family Court to reflect the fact that the payments made by Mr Meo to the trust were not contributions capable of engaging s 18B.
[64] But beyond that conclusion, I would not have granted the appeal on these grounds separately. They do not raise any fresh error in approach by the Judge. Rather, they appear to be suggested financial adjustments in Ms Meo’s favour in the sum of
$37,750, being half of the value of retained earnings of $75,500.
Result
[65]The appeal is allowed in part.
[66]The equalisation payment in the Family Court of $51,845.80 is reduced by
$36,897.58 to $14,948.22 (being half of the s 18B adjustment acknowledged in the Family Court of $73,795.16).
[67]In all other respects the orders of the Family Court remain undisturbed.
30 At [41].
31 At [42].
Costs
[68] Given the partial success of the appellant, and more particularly her failure to raise the point she has succeeded on in the Court below, I am minded to let costs lie where they fall.
[69] If the parties are unable to agree, the respondent is to file submissions not exceeding three pages within 15 working days. Any submissions by the appellant in reply are to be filed and served 15 working days thereafter. They are also not to exceed three pages.
Isac J
Solicitors:
Cuba Family Law, Wellington for Appellant
0
2
0