It was double counting to treat $75,500 retained earnings in a family company as relationship property when those same retained earnings are included in the company share valuation.
Jacqueline Meo challenged a Family Court ruling that she pay former husband David some $51,000 to settle a relationship property dispute after their twenty-one year marriage ended.
On appeal, two issues were in dispute: the value of Wellington shoe wholesaler Meo Imports New Zealand Ltd and family trust mortgage repayments.
Meo Imports Ltd was relationship property. The company had declined in value since separation; first because of customers switching to online purchasing and secondly because of reduced sales during pandemic lockdowns. The Family Court assessed Meo Imports’ value as being $84,000 at date of their 2014 separation and $76,800 at later date of the first court hearing. Jacqueline had valued the company at $209,000 as at 2014. Her accounting adviser treated profits retained within the company but available for distribution as a separate item of relationship property. Not correct, Justice Isac ruled. Retained earnings are included in any share valuation; remove retained earnings in a notional distribution, then the share value drops proportionately. Jacqueline’s half interest in Meo Imports as relationship property proved not to her net benefit; her personal drawings from the company, being a debt she owed the company, exceeded her half share of the company’s value.
The court rejected David’s claim that payments he made personally on loans secured over family trust properties were post-separation payments making a ‘contribution to the marriage.’ Post separation payments by one spouse can be taken into account as a relationship liability where payments protect or preserve a relationship asset. Evidence was given that David personally paid some $73,800 principal and interest on loans secured over five properties owned by their family trust in the immediate period after separation and before four of the properties were sold. These payments were not relationship liabilities, Justice Isac ruled. The properties were not relationship assets; they were owned by a family trust.
Disallowing the $73,800 David claimed as a relationship liability reduced the amount Jacqueline was ordered to pay David to a total of $14,900.
The court was told there is separate litigation underway between the two regarding entitlement to family trust assets.
Meo v. Meo – High Court (30.06.21)
21.109