[1] This is an appeal and cross-appeal against a judgment delivered by Wild J in the High Court at Napier on 7 November 2003 in a proceeding in which the respondent claimed to be entitled under a constructive trust to part of the appellant’s interest in a tavern property at Rangiteiki. The claim, which arose out of a de facto relationship between the parties of 20 years duration, was brought on the basis of the principles set out in Lankow v Rose [1995] 1 NZLR 277.
[2] The parties commenced living together in November 1980 at the Hobsonville Air Base where the respondent was serving with the Royal New Zealand Air Force. When he was transferred in February 1986 they moved to live at the Ohakea Air Base. They continued to live together there until 1989 when the appellant retired from the RNZAF.
[3] On his retirement the appellant capitalised part of his Government Superannuation Fund entitlement, receiving a sum which he applied to the purchase of the Rangiteiki Tavern situated on State Highway 5 between Taupo and Napier. The appellant said in evidence that sum was “upwards of $100,000”. It seems, from information supplied to the appellant by the Fund since the hearing and by prior agreement with counsel passed on to the Court, that the lump sum received in March 1990 was $201,305.83. The purchase price was $250,000 and the balance over and above whatever cash sum the appellant did contribute was financed with a loan secured by a first mortgage on the property from Westpac Banking Corporation. On 19 April 1990 the appellant completed the purchase, taking title to the property in his own name.
[4] Thereafter the tavern and cabin business on the site was operated by a company called Idbury Investments Limited in which the appellant held 99 one dollar shares and the respondent one share. Both worked full-time in the business. Each was a director and the respondent was secretary of the company. The parties continued to live and work together at the tavern, with some interruptions, until 18 July 2000 when they finally parted and the respondent left the tavern premises. They were apart for periods during this time, on one occasion for three to four months. These absences were in total about 18 months. The respondent’s evidence was that on each occasion she had left it was because the appellant had physically abused her. The Judge found that the appellant had inflicted quite severe physical violence on the respondent which explained her departures on occasions from the tavern property.
[5] On 17 August 2001 the respondent brought these proceedings in the High Court claiming entitlement, under a constructive trust, to an interest in the tavern property and the company owning the business.

High Court judgment

[6] In the High Court there was a conflict in the evidence concerning the nature and extent of the respondent’s contributions to the tavern business over the decade that the parties had lived together in the home at the tavern property. As indicated, the respondent was away from the tavern on occasions (twice for lengthy periods). The Judge, however, found that when she was working at the tavern her contribution to running the business exceeded that of the appellant. The Judge accepted evidence from the respondent, her daughter and other witnesses who had worked at the property, which satisfied him of her active involvement over this period in the bar, cleaning the tavern cabins, and doing all the cooking for the restaurant. He found that she had worked long hours, her responsibilities including keeping the bar open both early in the morning and late during the evening. The Judge found by comparison that the appellant’s performance in the tavern had been detrimentally affected by his alcohol problems. The Judge generally preferred the respondent’s evidence, where it was in conflict with that of the appellant. Overall the Judge concluded that the parties’ contributions to the operation of the tavern business had been approximately equal.
[7] In his consideration of the respondent’s reasonable expectations the Judge did not accept the respondent’s evidence that she and the appellant had agreed to run the tavern business together for a 3 year period and then sell it, sharing the profits equally. He observed that there was no independent verification of any such oral agreement and it seemed to the Judge to be inherently unlikely that the appellant would have agreed to sell the tavern after only three years in the business. What he did accept was that it was agreed that for a substantial period the respondent’s wages would be confined to $200 per week after tax, and that she agreed to take a lesser wage because in her words, she would get “some sort of compensation at the end of it”. The Judge found it probable that the respondent was substantially underpaid in the wages she received for the work that she carried out at the tavern.
[8] Wild J found that the respondent had a reasonable expectation of sharing the profits earned by the tavern business. That expectation was not in the end reflected in the accounts of the company for reasons including that allocation of surpluses to current accounts became directed by taxation considerations rather than equal sharing. The Judge extracted from the material before him figures showing the distribution of profits year by year in the books. The schedule he prepared showed a total of $48,728 had been credited to the respondent in the company’s accounts but had not been paid to her as at 31 March 2000. He said that “an appropriate outcome” was to order that the respondent’s entitlements be paid out with interest on amounts outstanding as shown each year in the respective financial statements at 7½%.
[9] The Judge then rejected the respondent’s claim for a half share of the assets in the name of the appellant. He made no award on that aspect of the claim. His reasons were that the appellant had put up all the capital at the time of acquisition, registering the assets acquired in his own name. He made this finding notwithstanding that the parties had been living together for half of the time in which the pension entitlement had accumulated and both parties had been contributing to the household over that time. There had been no agreement to give her a share of the assets and the Judge found she had no reasonable expectation of that. Nor had there been any questions of contributions to an increase in the capital value of the tavern.
[10] The Judge distinguished the present case from this Court’s decisions in Gillies v Keogh [1989] 2 NZLR 327, Taylor v Watson CA271/01 6 August 2002 and Lankow v Rose because those cases had involved relationship homes or farms (although in one case including a two flat investment property). The present case however had involved the parties going into a business enterprise together, in circumstances in which the Judge had concluded that the respondent could have no reasonable expectation of an interest in the tavern assets to the purchase of which in his view she had not contributed, as opposed to business profits in the use of those assets which she had helped to earn.
[11] The value of the tavern assets was a matter of dispute at the trial. The Judge worked from a valuation of the land and buildings of $210,000, which with shares in the company valued at $21,317 provided a total tavern asset value of $231,317. From this he deducted outstanding debt of $100,000 leaving an equity of $131,317, against which in effect the respondent’s claim was made. In making these findings he had rejected a lower figure for the tavern land and buildings which had been advanced on behalf of the appellant as a consequence of the removal of fuel pumps and tanks from the property earlier in 2003. The appellant said that had resulted in a significant drop in tavern turnover. The Judge was concerned that there had been no expert or even independent verification in evidence of the reduced tavern asset figure for which the appellant was contending. As well, he said that in a letter between solicitors the appellant had accepted that a professional valuation dated 14 February 2002 should be the basis for its case. The Judge also saw questions of capital or investments gains as linked with investment risks, which were part and parcel of what the defendant took on in acquiring the assets for himself. In the end, however, nothing turned on Wild J’s findings as to the value of these assets as the respondent’s claim to a share of them was rejected.
[12] The sum for which the respondent obtained judgment was calculated as follows:

Unpaid directors’ salaries: $48,728.07

Interest to date of judgment: $32,460.65

Less drawing on 13/8/92 ($4,500.00)

Less interest adjustment on drawing ($3,792.00)

Judgment sum $72,896.72

Appeal and cross-appeal

[13] The appellant appealed and applied to this Court for special leave to call fresh evidence at the hearing of the appeal, both as to the valuation of the land and buildings and errors in the Judge’s calculations of the amounts that were owing to the respondent. The respondent cross-appealed against the dismissal of her constructive trust claim to a share of the tavern assets. In his submissions for the respondent in relation to the cross-appeal Mr Dean indicated that she accepted the outcome in the High Court as a just resolution of the case and had brought the cross-appeal in case the appellant succeeded in his appeal.
[14] Wild J allowed the appellant three months to pay the judgment sum and said that it would bear interest until it was paid, under r538, from the date of judgment.

Application to call further evidence

[15] The appellant applied for leave to call evidence from the company’s accountant in relation to the Judge’s calculation of unpaid director’s salaries of $48,728. Ms Clark’s affidavit indicated that tax had been paid by the company on the amounts credited as salary to the respondent in the accounts of the tavern operating company. She also corrected a sum already paid to the respondent which had not been reflected in the calculations done by the Judge. Ms Clark’s affidavit provided a substitute schedule making adjustments to the sums owing to the respondent under the judgment to reflect these matters. In the schedule the respondent’s total net salary entitlement (after tax) was reduced to $21,345 which with interest, on the basis calculated by the Judge, of $13,922, less the $8,292 figure deducted by the Judge, came to an adjusted total entitlement of $26,975. This was instead of the sum of $72,906 for which she had received judgment.
[16] The appellant also sought to call evidence in the form of an affidavit from a hotel broker who has been an associate of the Real Estate Institute of New Zealand for over thirty years. He inspected the tavern property in November 2003 and was of the opinion that the property and business would realise a total price on sale in the range of $160,000 to $175,000. He refers to the loss of the petrol pumps and the ancillary spin-off business derived from that activity as influencing his valuation assessment. This affidavit has obviously been obtained in an endeavour to meet Wild J’s criticism of the failure to lead evidence. As indicated, the Judge was not prepared to depart from the valuation of 14 February 2002 by Veitch Morrison, which he found the appellant had expressly accepted as the basis of its case at the hearing.
[17] After hearing counsel we decided to admit the accountant’s evidence but not the valuation evidence and announced those decisions. We now give our reasons for them.
[18] Rule 24 of the Court of Appeal (Civil) Rules 1997 gives the Court power on application by a party to receive further evidence on questions of fact. Where, as in this case, the appeal is from a judgment following trial further evidence may be admitted only with special leave of the Court on limited grounds, unless the evidence concerns matters that have occurred since the date of hearing (r24(3)).
[19] In Fidow v Registered Securities Ltd (1991) 3 PRNZ 233 at 238 this Court said that evidence would not be admitted on appeal unless it could not, with reasonable diligence, have been obtained for use in the Court below, is cogent and is credible. This well established approach has been reaffirmed by the Court in subsequent cases such as Rae v International Insurance Brokers Ltd [1998] 3 NZLR 190 where at 193 this Court referred to the need to balance the interests of the parties to the appeal and the public interest in ensuring that litigants put up their best case at trial.
[20] Of course it is open, under the terms of Rule 24, for the Court to recognise unusual cases that give rise to special grounds for granting special leave which fall outside the guidelines stated in Fidow, which indeed was such a case. So is the present case in relation to the accountant’s evidence. The proceeding was pleaded and, we were told by both counsel, presented by the parties as a claim for a share of assets. In that context detailed evidence of the manner in which the company’s financial statements were made up was not presented by the respondent and only came out in cross-examination. Had counsel for the appellant appreciated that when evidence of directors’ current account balances emerged at the trial it would become pivotal to the Judge’s decision, a different approach to this matter would have been taken. In those circumstances we were satisfied that the interests of justice required us to admit the accountant’s evidence. Although this evidence was not technically fresh, it was directed to an unforeseen contingency and met requirements of cogency and credibility. Only by doing so would a more accurate picture of the balances in the parties’ current accounts with the tavern company be before the Court. Mr Dean did not seek to cross-examine this witness once leave to admit her evidence was given.
[21] The valuation evidence came from a hotel broker who was an experienced real estate agent, its tenor being that the market value of the tavern land and buildings on their own was $150,000 to $160,000 taking into account the removal of petrol pumps since the Veitch Morrison valuation in April 2002. As indicated, that valuation, which was relied on by the Judge, had given those assets a market value of $210,000. The impact of the removal of the pumps was referred to by the appellant in his evidence at the trial. It was open to him then to call updated valuation evidence but he did not. Mr Jenkins submitted that the respondent had undertaken to obtain an updated valuation before trial but had failed to do so. We read the relevant exchange of letters differently. The appellant’s solicitors took the position that they were content with the 2000 valuation but would cooperate if the respondent were to arrange at her cost for it to be updated. The respondent’s solicitor said they would be instructing the valuer who prepared the 2000 report. It transpired that he was unavailable when approached shortly before the hearing. The respondent did not make a commitment to the appellant to obtain an updated valuation, and eventually elected to proceed on the basis of the 2000 report. No breach of undertaking was involved. It was open to the Judge in these circumstances to reject the appellant’s attempts to obtain a reduction in the valuation figure by referring to removal of the pumps in his own evidence.
[22] There is also merit in Mr Dean’s point that the valuer would have been well aware in 2000 of the possibility of the pumps being removed and that it could not be assumed that subsequent actions by Mobil would have led Veitch Morrison to reduce its figure. In any event, the new evidence did not meet the requirements for freshness and we were satisfied that there were no special grounds justifying its admission. Accordingly we refused that part of the application.

Discussion

[23] It is clear on the accountant’s evidence that, on the approach that the Judge took, whereby the appellant was to receive her current account balance with interest, judgment for the respondent should have been given for $26,976 instead of $72,906. On this basis the appellant’s submissions in support of the appeal are sound and, subject only to the outcome of the cross-appeal, he would be successful.
[24] Irrespective of the adjustments made to the respondent’s current account balance in the operating company to reflect the new accounting evidence, there were difficulties in the determination of the respondent’s claim in effect solely by reference to those entitlements. One reason is that the surplus available each year for distribution was not allocated equally between the two working directors but simply reflected a policy of tax minimisation. Mr Dean sought an adjustment for that to reflect the position had there been an equal distribution. This would have considerably increased the respondent’s entitlements. However, for us to proceed in this way could create further difficulties including taxation complexities in relation to the award. We are accordingly reluctant to enter into such calculations unless it is necessary to do so. Whether they must be attempted turns on the correctness of the Judge’s decision on the cross-appeal. We accordingly now approach that issue, putting aside what we have decided in the appeal, although we will return to that in due course.
[25] The respondent’s position, as already indicated, was that she accepted as a fair result the judgment sum that Wild J awarded on her claim. If, however, the appellant were successful in obtaining a reduction of the respondent’s judgment, in light of the admission of the accountant’s evidence or for any other reason, the respondent wished to cross-appeal and to seek in addition to the entitlement she was ultimately found to have in relation to monies standing to her credit in the accounts, one half share of the tavern assets. Given our conclusions on the appeal we accordingly have to consider the argument that we heard from the parties on the cross-appeal.
[26] We start with the legal principles which must be applied, concerning which there is no dispute between the parties nor serious issue taken with the Judge’s formulation of them.
[27] In Lankow v Rose this Court held that on the termination of a de facto relationship (in that case of ten years duration) a claim for the division of assets fell to be decided according to whether the party claiming could establish a constructive trust, in property in which the legal ownership was vested in the other partner. The inquiry centred around whether the claimant had contributed to the property in question, whether the claimant had an expectation of an interest in the property, whether that the expectation was reasonable, and whether in all the circumstances the other party should yield an interest to the claimant.
[28] Also of relevance to consideration of the respondent’s expectations are the views expressed by this Court in Gillies v Keogh at p347 per Richardson J:

It seems to me that social attitudes in New Zealand readily lead to expectations by those within apparently stable and enduring de facto relationships, that family assets are ordinarily shared, not the exclusive property of one or the other unless it is agreed otherwise or made plain.

[29] In this case the High Court Judge decided that the only reasonable expectation that the respondent had to an interest in the appellant’s tavern interests was to a share of the trading profits earned from the operation of the business. That was because she had only contributed to the operation of the business. She had not contributed to the acquisition of the assets. The appellant should accordingly yield an interest to a share of the profits. The Judge decided that “the appropriate outcome of this case” was that the respondent should receive the salaries actually credited to her but not paid plus interest.
[30] We do not accept that the Judge was correct in finding that the respondent had made no contribution to the original capital sum that was applied to purchase the tavern assets. It came from the capitalisation of part of the appellant’s superannuation entitlement on cessation of his service with the RNZAF. The Judge found that the parties had been living together for approximately half the time during which the entitlement had accrued to the appellant. The respondent had brought in an income during part of this period. She said that she had worked between July 1981 and February 1986. At some point in 1987 or 1988 the appellant took custody of his two sons and the respondent had by then taken responsibility for the household. She had contributed directly to household finances by paying certain expenses in relation to these children, and indirectly by caring for them during the appellant’s absences. He was often away from home on assignments with the RNZAF. Without these contributions the household would have incurred expense. While superannuation contributions were drawn from the appellant’s salary, the provision of the scheme was part of his remuneration which she helped him earn through these direct and indirect contributions to the household. A realistic appraisal of this situation would attribute a significant part of the value of the scheme benefits, in the order of 25%, as the contribution of the respondent to the investment asset. It eventually produced the capital that was put into buying the tavern.
[31] The respondent gave evidence that she believed, at the time of the purchase of the tavern, that, although it was acquired by the appellant in his name alone, he “would do good by me”. She said “he told me not to worry about anything, he would see it all through and I believed him.” The Judge did not reject this evidence, confining himself to rejecting the respondent’s evidence concerning a claim to a half interest in the tavern. Consistent with His Honour’s preference for the evidence of the respondent, where it was in conflict with that of the appellant, we consider we should accept the accuracy of this passage of her evidence. We conclude that this, coupled with the respondent’s appreciation of her direct and indirect financial contributions to the household, during the period in which the pension entitlement accrued, gave rise to an expectation by the respondent that she would share in the proceeds following the realisation of the tavern assets whenever that occurred. This would be on top of a share of gross income of the business that was relative to her contributions to the running of the tavern.
[32] In passing, we note that the Judge may not have appreciated that the capitalisation of the appellant’s superannuation did not exhaust his pension entitlement. As previously mentioned, with the agreement of the parties, we asked Mr Jenkins to seek from the Government Superannuation Fund a statement of the proportion that the capitalised sum represented to the value of his total entitlement in 1990. Unfortunately the reply does not clarify that matter, but the appellant is guaranteed a pension from his 60th birthday being a percentage of his salary at retirement. The right to the pension will remain his own property. It is unclear how much of the lump sum paid to the appellant was put into buying the tavern, but the respondent, in our view, clearly has contributed towards the equity.
[33] For these reasons we are satisfied that the Judge was wrong to reject the respondent’s claim to an interest under a constructive trust in the tavern property. That is independent of her interest in profits derived from the business, by virtue of her very significant contributions, recognised by the Judge’s findings, in running it.
[34] At this point we must assess the amount of the interest the appellant should yield. We have concluded that it is preferable to deal with the entirety of the respondent’s claims by making an award of a capital sum to be paid by the appellant to the respondent. This sum will be a debt payable by the appellant to the respondent. It is to be paid in cash by 31 December 2004. In the event that it is not paid by that date and the respondent has to take enforcement proceedings, the debt will be payable out of the proceeds of sale of the tavern property and business.
[35] The assessment of the quantum of this sum must take into account all the respondent’s contributions including those represented by the current account balance in her name (to which she would be entitled on a winding up as a tax paid sum) and the fact that this sum does fully reflect the value of her services to the running of the business for the reasons indicated. We must also take into account that the appellant has enjoyed continuing occupancy of the premises without rent during the period since the parties separated until the date of the High Court judgment, following which the respondent’s interest entitlement will compensate her in this respect. Finally, we must consider the value of the assets to which the claim is made and that the appellant himself has made contributions to those assets of which he is the legal owner.
[36] Our conclusion is that the respondent’s claim to a constructive trust has been established. The value of the assets, against which the constructive trust claim is made, by the respondent is $131,317 as set out in para [10] above. We find that the respondent’s very substantial contributions to the asset that sum represents entitle her to a payment of $70,000 to reflect the value of her contributions to all tavern assets, with interest to run on that sum from the date of the High Court judgment until payment at the rate decided on by Wild J.
[37] To achieve that result the cross-appeal is allowed and judgment in those terms given in favour of the respondent. The appeal is consequentially allowed and that judgment set aside. Counsel should be able to settle an order, but if they are unable to do so they can file memoranda in the usual way.
[38] The mortgage given to the respondent as a condition of the stay order granted in the High Court, (and handed to the respondent’s counsel during the hearing of the appeal) will remain in place until discharged by the satisfaction of the judgment debt or by operation of law. The respondent may not take steps to enforce the mortgage before 1 January 2005.
[39] There will be no costs on the appeal nor on the application for admission of fresh evidence. The respondent is entitled to costs of the cross-appeal in the sum of $6,000 together with reasonable disbursements to be agreed by the parties or failing agreement fixed by the Registrar.

Solicitors:
McKay Hill, Napier for Appellant
John Dean Law, Wellington for Respondent

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