Gfm v Jam

• Jurisdiction: New Zealand
• Judge: Wild
• Judgment Date: 17 December 2013
• Neutral Citation: [2013] NZCA 660
• Docket Number: CA566/2012
• Court: Court of Appeal
• Date: 17 December 2013

Between

GFM

Appellant

and

JAM

Respondent

[2013] NZCA 660

Court:

Randerson, Stevens and Wild JJ

CA566/2012

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal from a High Court (“HC”) decision which had valued the parties’ relationship property at the date of hearing in the Family Court (“FC”) instead of at separation date values as adopted by the FC — parties owned family home valued at $1.5m and three businesses valued at $1.7m at date of separation — at date of hearing agreed business assets were $970,000 and the house was valued by wife at $1.3m and by husband at $1.8m — husband had also acquired assets post separation — whether the presumption for hearing date in s2G Property (Relationships) Act 1976 (“PRA”) (date at which value of property to be determined) had been rebutted — whether losses had to be incurred deliberately under s18C PRA (compensation for dissipation of relationship property after separation) — whether the HC erred in dividing post-separation losses equally and in not taking into account the value of assets acquired post-separation — whether parties had reached an enforceable informal agreement regarding the relationship property.

Counsel:

M J McCartney QC for Appellant

M W Vickerman and Z L Wackenier for Respondent

• A The appeal is dismissed.

• B Orders are made in respect of the former family home as set out in [119] of the judgment.

• C The costs of the appeal are reserved on the terms set out in [135].

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Wild J)

Table of Contents

	Para No
Introduction	[1]
Background	[3]
Other issues	[11]
High Court's approach to the appeal	[13]
Approach on this second appeal	[19]
Second memorandum of counsel for the wife	[25]
Hearing date values
The issue	[29]
Sections 2G and 18C of the Property (Relationships) Act 1976	[30]
The High Court judgment	[36]
Wife's submissions on appeal	[45]
Our decision	[51]
Post-separation business losses
The issue	[54]
The High Court judgment	[55]
Wife's submissions on appeal	[59]
Our decision	[62]
Separation agreement about relationship property
The issue	[89]
Legislation	[91]
The High Court judgment	[93]
Wife's submissions on appeal	[101]
Our decision	[106]
Sale of family home
The issue	[111]
The High Court's orders	[112]
Submissions for wife on appeal	[113]
Our decision	[114]
Assets acquired post-separation
The issue	[120]
Tax losses	[122]
Racehorses	[130]
Result	[134]

Introduction

1 The primary issue on this second appeal is whether the High Court erred in valuing the parties' relationship property at the date the proceeding was heard in the Family Court. In adopting hearing date values the High Court differed from the separation date values selected by the Family Court.

2 This appeal is pursuant to leave granted by Woodhouse J, in a judgment he gave on 17 August 2012, 1 to appeal his substantive judgment of 3 May 2012. 2 That judgment had reversed a decision of Judge Burns given in the Family Court on 4 November 2010. 3

Background

3 The parties married in 1985 and separated on 2 October 2004. When the parties separated, their three children were aged 11, nine and seven. Two had significant health problems. 4

4 Upon separation the husband moved out of the family home. The wife and children have remained living in the home ever since.

5 From the time of the birth of the parties' second child, the wife's role was that of mother and “home maker”. The husband was a businessman. In 1987 he set up a company called Video Unlimited NZ Ltd (VUL). The parties were equal shareholders in VUL, the husband the sole director. A particularly valuable asset of VUL was a licence from the World Wrestling Federation (WWF) for the exclusive rights to distribute its videos in Australasia. VUL's profits were the source of most of the parties' asset base when they separated.

6 During the marriage four other companies of relevance to this proceeding were formed. Tandem Investments Ltd owned a video shop in Christchurch and also sold library rentals. Video Busters Ltd owned a residential investment property next door to the family home in Auckland. Entertainment Properties (NZ) Ltd owned and operated a restaurant called Iguacu in Parnell. Finally, Metropole Ventures Limited owned and operated the Metropole Restaurant and Bar, also in Parnell. The wife was involved little, if at all, in any of these business ventures during the marriage. Following separation the husband continued to operate the businesses. The extent to which he consulted with the wife following separation remains a matter in dispute.

7 We will need to revert, in considerably more detail, to the manner in which the businesses were operated and disposed of following separation.

8 The parties agreed that the value of the relationship property at the date of separation was $3,402,865. Of that the net value of the parties' businesses comprised $1,714,885 and the value of their family home $1.55 million.

9 At the date of hearing, the total value of the parties' business assets was agreed at $973,000, putting the losses incurred by the businesses post-separation at $742,000. The family home was valued at date of hearing by the wife's expert at $1.3 million, and by the husband's expert at $1.8 million.

10 The parties' accounting experts did not agree on post-separation drawings.

Other issues

11 Other issues argued on this appeal are:

• (a) Post-separation business losses: Did Woodhouse J err in the way he dealt with losses incurred post-separation by the parties' businesses?

• (b) Separation agreement about relationship property: The High Court Judge held the parties did not reach agreement on their relationship property when they separated. Was this finding erroneous?

• (c) Sale of family home: Woodhouse J directed that the wife should have an opportunity to buy the husband's half interest in the family home. In the event that the wife was unable to do that, the Judge directed that the home be sold with an equal division of the net proceeds. 5 Were these orders wrong?

• (d) Assets acquired post-separation: Did Woodhouse J err in not taking into account the value of three assets:

  • (i) Jigsaw, a business started by the husband after the parties separated;

  • (ii) racehorses acquired, and race winnings earned, by the husband post-separation; and

  • (iii) tax losses made by the parties' businesses up to the time they ceased trading.

12 Should we find Woodhouse J erred in adopting hearing date values, we obviously need not resolve any of these other four issues.

High Court's approach to the appeal

13 Ms McCartney QC sought to fault the way Woodhouse J had approached the husband's appeal to the High Court. First, she submitted the Judge had erred in treating the appeal as a general one, and not as an appeal from the exercise of a discretion which, she submitted, involves the “much stricter and narrower” test laid down by this Court in May v May. 6

14 Secondly, Ms McCartney argued Woodhouse J had failed to acknowledge the specialist skills of the Family Court Judge, or the advantage hearing the parties give evidence over four or five days had given the Family Court Judge in applying “his specialist understanding to the dynamics of the relationship and the needs and circumstances of the parties and their children”.

15 Neither of these criticisms is correct. As we point out in [35](b) below, s 2G of the Property (Relationships) Act 1976 (the Act) contains a presumption, and one strengthened by subsequent amendments, rather than giving an open discretion. Yes, there is a discretion to depart from that presumption, but it is a fettered one.

16 Insofar as Judge Burns was exercising a discretion, the High Court found he had done so upon irrelevant or improper considerations. For one example, Judge

Burns factored in an informal agreement he found (incorrectly) the parties had reached when they separated. As Woodhouse J put it, the consequence was that “s 2G(2) has been used in this case to achieve what Part 6 directs should not happen”. 7 For another example, Judge Burns under the heading “Difficulty and practicality” had taken into account 12 issues which would require resolution if the s 2G presumption applied, and which he considered he could not practically resolve. Working through these, Woodhouse J dismissed a number of them as immaterial. Those that were material could be resolved without difficulty. The answers to some of the material issues had been agreed. If the May v May test applied — and we consider it did not — then Woodhouse J's analysis demonstrated that it was met

17 The gist of Ms McCartney's second submission is that the High Court did not defer to the Family Court, given the latter's specialist skills and the advantage it had as the court of first instance which heard the evidence. Ms McCartney did not use the word “defer”; her complaint was a lack of “acknowledgment”. Whichever word is used, the submission flies directly in the face of what the Supreme Court made clear in Austin, Nichols & Co Inc v Stichting Lodestar, for example in this passage: 8

… The appeal court must be persuaded that the decision is wrong, but in reaching that view no “deference” is required beyond the “customary” caution appropriate when seeing the witnesses provides an advantage because credibility is important.

(Footnotes omitted.)

18 Having...