Findlay v Findlay [2017] NZHC 2797 (15 November 2017)

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NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE

UNDER	The Property (Relationships) Act 1976
AND	The Family Proceedings Act 1980 and The Trustee Act 1956
BETWEEN	ANNE-MARIE FINDLAY Plaintiff
AND	SCOTT ANDREW FINDLAY First Defendant SCOTT ANDREW FINDLAY and H P HANNA & CO TRUSTEES LIMITED as Trustees of the Scott Findlay Family Trust Second Defendants SCOTT ANDREW FINDLAY and H P HANNA & CO TRUSTEES LIMITED as Trustees of the W.N.H.A. Trust Third Defendants SCOTT ANDREW FINDLAY and H P HANNA & CO TRUSTEES LIMITED as Trustees of the J.K.S.T. Trust _{Fourth Defendants}

Appearances:	A M Corry and T D Holton for Plaintiff D M Lester and B J Callaghan for Defendants
_Judgment:	_{15 November 2017}

Ability Ltd	Ability Builders Limited
ASOC	Amended Statement of Claim
Chateau Drive	34 Chateau Drive
DCF	Discounted Cash Flow
EQC	Earthquake Commission
FCL	Findlay Construction Limited
FPA	Family Proceedings Act 1980
GFC	Global Financial Crisis
HPH	H P Hanna & Co. Trustees Limited
JKST Trust	J.K.S.T. Trust
PRA	Property (Relationships Act) 1976
Racecourse Holdings	Racecourse Holdings Limited
SFB	Scott Findlay Builders Limited
SFB2012	Scott Findlay Builders (2012) Limited
SFF Trust	Scott Findlay Family Trust
SFT2000	Scott Findlay Trust 2000
Trustee Act	Trustee Act 1956

[1] Mr and Mrs Findlay married on 17 April 1993 and separated in July 2010. They have four children. Mrs Findlay seeks a remedy for her claimed interest in the building business run by Mr Findlay over the 17 years of their marriage under different corporate structures and shareholder trusts.

[2] In broad terms, her claims are based on the assertion that Mr Findlay controlled the building companies to which she made significant contributions directly, and indirectly, by her contribution to the marriage. Mrs Findlay claims that she therefore has legal and equitable interests in property, both shares and trust property, and in profits and salary drawn from the two building companies run by Mr Findlay since separation. She says she has been wrongly deprived of her legal and equitable interests, by steps deliberately taken by the defendants to defeat those interests.

[3] An underlying theme of this case is the history and performance of two companies, Scott Findlay Builders Limited (“SFB”), and Scott Findlay Builders (2012) Limited (“SFB(2012)”). A striking feature of this litigation is the performance of these companies after separation, as the result of work which came their way after the Canterbury earthquake sequence began on 4 September 2010. Their performance is set against that of Findlay Construction Ltd (“FCL”), which for many years was the family business, but passed into voluntary liquidation.

Mr Scott Findlay, Scott Findlay and H P Hanna & Co. Trustees Ltd (“HPH”) (as trustees of the Scott Findlay Family Trust (“SFF Trust”)), Scott Findlay and H P Hanna & Co. Trustees Ltd (as trustees of the W.N.H.A. Trust “WNHA Trust”)), and Scott Findlay and H P Hanna & Co. Trustees Limited (as trustees of the “JKST Trust”). Her case is brought under the Property (Relationships) Act 1976 (“PRA”), the Family Proceedings Act 1980 (“FPA”), the Trustee Act 1956 (“Trustee Act”), and in equity. Her claims are to relationship property and spousal maintenance, and she seeks orders which are precursors to further applications for resettlement of trusts.

[5] Mr Lester, counsel for Mr Findlay, says that there is little factual dispute, a question of degree rather than credibility. However, the hearing took an awkward course in closing submissions when Mr Lester said that key factual allegations made by Ms Corry in her closing had not been put to Mr Findlay when he gave evidence and in particular, that he was in total control of the SFF Trust, notwithstanding his co-trusteeship with HPH. The SFF Trust is central to much of the evidence, and the case for both parties. Secondly, Ms Corry in closing referred to Mrs Findlay’s status as a residuary beneficiary of the SFF Trust which reversed her position throughout the hearing that without an order of the court she had no status as a beneficiary, having been removed as a discretionary beneficiary by Mr Findlay as appointor on 3 October

2012. This was explained as an eleventh-hour recognition by counsel, to which Mr

[6] The amended (consolidated) statement of claim dated 5 August 2016 (“ASOC”) tracks the various corporate and trust activities over many years.

[7] Mrs Findlay pleads that she has an interest in relationship property and, while such property was, and is, not in her or Mr Findlay’s name, there is a track by which she makes a claim under the PRA.

[8] By the time of separation in July 2010, the parties had survived a tough business environment. FCL had been the family business since 1988, but it had run down, eventually to be voluntarily liquidated. It had been replaced by Ability Builders Limited (“Ability Ltd”), which later became SFB by name change. The SFF trustees were the majority shareholders of SFB. Mrs Findlay was a trustee and discretionary beneficiary and, as it turns out, a residuary beneficiary.

[9] At separation, there was little economic value in FCL or Ability Ltd and therefore the SFF Trust. However, post separation, SFB, with Mr Findlay at the helm, was able to take advantage of the Canterbury earthquake sequence. Mr Findlay was able to draw first from SFB, and then from SFB(2012) as follows:

Year	Salary	Company
2012	$921,062	SFB
2013	$717,500	SFB(2012)
2014	$350,000	SFB(2012)
₂₀₁₅	_$350,000	_SFB(2012)

[10] Mrs Findlay says that, although the shares in SFB were owned by the SFF Trust trustees, her interest in relationship property was put out of reach by a number of steps. First, Mr Findlay incorporated SFB(2012) on 23 March 2012 and arranged the sale of the business of SFB to SFB(2012) at book value on 1 April 2012. The WNHA Trust was created through Mr Findlay’s actions and held the shares in SFB(2012). Mrs Findlay at that point had only an interest in the SFF Trust which owned the shares in SFB which sold its assets to SFB(2012). She had no interest in the WNHA Trust.

[11] Mrs Findlay says that her relationship property claim derives from the value of the building business of SFB, and that she has a claim which is reflected in the drawings and salary taken by Mr Findlay from the two companies, SFB and SFB(2012), and the assets and entities which he has purchased and developed. She says that a property at 34 Chateau Drive (“Chateau Drive”) owned by the WNHA Trust was purchased out of or with profits taken from the company. She says that land and buildings at Distribution Lane owned by Racecourse Holdings Ltd (“Racecourse Holdings”), with a value of some $750,000 - $1,000,000, are owned by the JKST Trust through its shareholding in that company. That Trust was established by Mr Findlay’s father on 9 April 2014.

[12] In essence, Mrs Findlay brings a claim to relationship property against all property which she says is under Mr Findlay’s control, whether owned by him or held in trust, and all corporate entities under his direction or otherwise, including all profits derived from SFB and SFB(2012). She pleads division of property under s 15 PRA to address the economic disparity between them. She says Mr Findlay has judgment proofed himself by having no personal assets, all assets being held in trust, and so all property acquired by, or at the direction of, Mr Findlay is held in trust for her and/or Mr Findlay.

[13] If those claims to relationship property are not upheld, she pleads breach of trust against Mr Findlay and HPH, and breach of fiduciary duty, and seeks judgment which will allow resettlement of the WNHA and JKST Trusts. She otherwise brings a claim in equity against Mr Findlay and those trusts by pleading a remedial constructive trust, in the event the Court does not uphold her claims to relationship property, or towards resettlement of those trusts.

[14] She seeks spousal maintenance since separation on the basis of division of functions between the parties during their relationship under ss 63-67 FPA and says she is in a disadvantaged financial position, with reasonable needs.

[15] A short history of the marriage and the corporate and trust holdings helps inform the pleading described above. In essence, Mrs Findlay says she gave up her banking career to have, and look after, the four children of the marriage. She contributed fully to the marriage and directly to the building business, namely the building of spec homes, often living in them before sale and helping with the interiors, landscaping, and marketing. The family lived in these homes then moved on.

[16] The misfortune of the Global Financial Crisis (“GFC”) in 2008 saw the family

lose nearly all the value in property it had built up over many years, which was by then held by the SFF Trust. Under financial pressure, Mrs Findlay returned to banking part-time in 2007. In 2009 a property at Sunnyvale Lane (the then family home) was sold to repay the bank and a debt to FCL, for which Mr Findlay and Mr Findlay Senior (Mr Findlay’s father) had worked over many years.

[17] Mrs Findlay says she supported Mr Findlay in his building endeavours over 17 years, in ways physical, financial and emotional, and agreed that he should run the business provided no decision would be taken contrary to her interests. She says that she relinquished control of the building company and the trust which owned the shares in the company to her disadvantage.

[18] The SFF Trust was settled in 2000 by Mr Findlay Senior for the wellbeing of the family. Mr Findlay and Mr Hanna were trustees and Mr Findlay the appointor.

Mrs Findlay was a discretionary beneficiary along with Mr Findlay and the children. She was and remains a residuary beneficiary. Mr Findlay had the right to remove a trustee for any reason, but there would always be one trustee. Under cl 29 of the trust deed, the appointor had the power to remove any discretionary beneficiary.

[19] By cl 11 of the trust deed, Mr Findlay could vest the trust capital and income in himself. On 11 May 2004, six years before separation, it is pleaded that Mr Findlay did vest trust capital and income in himself, and added Mrs Findlay as an additional trustee.

7 Sunnyvale Lane, the family home owned by the SFF Trust, and advance the sale proceeds to FCL, said by Mr Findlay to be necessary for survival of the building business. At that point, the family’s financial future depended on the future of the building company, then FCL, and this case is largely about what became of that company, then SFB, then SFB(2012).

[21] A little over a year after separation, on 20 September 2011, Mr Findlay settled the WNHA Trust appointing himself and HPH trustees. The discretionary beneficiaries did not include Mrs Findlay, but included Mr Findlay, any child or grandchild, and persons appointed by Mr Findlay. As appointor, he had the power to appoint and remove discretionary beneficiaries. Clause 11 of the trust deed enabled Mr Findlay to vest the trust capital and income himself.

[22] On 23 March 2012, SFB(2012) was incorporated with Mr Findlay the sole director, WNHA the major shareholder, and Mr Findlay having one per cent of the shareholding. On about 1 April 2012, Mr Findlay directed, without consultation with Mrs Findlay, the sale of SFB’s fixed assets for book value, and in effect transferred the building business to SFB(2012). The sale by SFB of its assets for $81,463 is pleaded to be well below fair value and invalid on the basis it was undertaken to defeat Mrs Findlay’s claims and rights. Mrs Findlay says Mr Findlay and HPH, as trustees of

WNHA Trust, had the same knowledge as they had as trustees of the SFF Trust, and did not take the assets of SFB in good faith and for valuable consideration. Mrs Findlay pleads that the approval of SFF trustee shareholders of SFB was not given, being Mrs Findlay and Mr Hanna, and of Mrs Findlay as a shareholder in her own (limited) right.

[23] As at 31 March 2012, the statement of financial position for SFB recorded net assets of $278,560 and non-current assets of $81,463. Mr Findlay drew $921,062 for the year.

[24] Mrs Findlay seeks a declaration that the sale of SFB assets to SFB(2012), owned by WNHA Trust, was made to defeat her rights and 50 per cent of the shares held by the WNHA Trust in SFB(2012) should be transferred to her or to the SFF Trust, or payment be made by Mr Findlay and HPH to Mrs Findlay of a sum equivalent to the difference between the consideration paid by the WNHA Trust and the value of the shares in SFB. Mrs Findlay pleads the right to caveat a property owned by WHNA Trust at Chateau Drive, and that in which the JKST Trust holds an interest at 6-8 Distribution Lane.

[25] Mrs Findlay’s claims are thus to an interest in property whether as a “personal asset” or a “trust asset”. If the property is “personal” then, under s 8 PRA, subsequent property acquired is personal property and a transfer of such property may be ordered as the Court directs, or an order for compensation may be made against the legal owner of property in favour (here) of Mrs Findlay under s 44(2)(b) PRA.

(ii) Compensation for her interest in the business as relationship property of between $907,000 and $935,000, being 50 per cent of the valuations

(iii) If property is “returned” to any of the trusts, Mrs Findlay will seek resettlement orders, so half of each trust fund is settled upon a new trust for her and her nominated beneficiaries.

(iv) An award for economic disparity between their shares of relationship property.

[27] The statement of defence to the Amended Statement of Claim (“ASOC”) is by way of general denial but pleads that the duties owed by trustees are determined by the inter relationship of trust and company law, and the terms of the trust deed. A blanket pleading of breach of “fiduciary duty” is too general. Mr Findlay’s position is developed further in this interim judgment, but he denies that there is any relationship property for division, or any breach of trust or of fiduciary duty, but recognises there may be grounds for some award by way of constructive trust.

[28] Several issues require analysis before addressing Mrs Findlay’s claims as mounted at the hearing.

[29] By July 2010, there were very few assets of realisable value owned by Mr and Mrs Findlay, or any company or trust. SFB had weathered the financial storm but there was no family home owned by any company nor Mr and Mrs Findlay, nor the SFF Trust. The seeds of financial recovery lay in Ability Ltd (later SFB), Mr Findlay remaining solvent and carrying on business, the Canterbury earthquakes still to come, and the opportunity which that represented being taken up by Mr Findlay.

[30] Mrs Findlay’s case is that Mr Findlay at separation had worked for his father and first developed his skills there, and with her help developed those further, and she

was directly and indirectly part of the building business over many years of marriage, including her contribution by looking after the growing family. The building “business” had survived the GFC, and Mr Findlay was on the path to becoming a licensed building practitioner.

[31] After the Canterbury earthquake sequence began, the building business flourished from that springboard and Mr Findlay and the two new trusts have had considerable benefits while Mrs Findlay has received nothing. She says that the Court should recognise that while there was little of value at separation, there was intrinsic value in the building business based on the foundation it provided for the prospect of future work and future income, and that has a value attributable by the expert valuation witnesses, Mr Weber and Mr Beylefeld, reflected in the moneys drawn from SFB and SFB(2012) by Mr Findlay, and the assets now held in two trusts.

[32] Mr Findlay details the history of the building operations, and the trusts, before and after the GFC in 2008. A property at 7 Sunnyvale Lane was purchased by the SFF Trust in 2004 for the sum of $554,335. The purchase was financed by a debt to Mr Findlay of $528,213.95 and a loan from FCL. The amount owing to Mr Findlay was relationship property. FCL, which was then the family building company, had arranged term loan finance from Kiwibank for property development and the trustees, Mr and Mrs Findlay and HPH, were required to guarantee the loan from the assets of the trust. Kiwibank held the mortgage over Sunnyvale Lane.

[33] A Linden Grove development project was problematical for FCL. The project was significant in scale. Mrs Findlay acknowledges that bank pressure meant the family home had to be sold. Mrs Findlay agreed with Mr Lester that the assets committed to this speculative development in 2007 were lost because what was quite large scale speculation had not come off.

[34] Mr Findlay said that the family probably lived beyond their means. He thought they were living on capital gain or relying on that, and Mrs Findlay said it seemed like “one whole pot” as to where the money for the family came from. She did not dispute that their lifestyle was funded at least in part by capital gain.

[35] Sunnyvale Lane was sold to pay Kiwibank. The trustees applied $411,012.52 to repay Mr Findlay’s current account balance in the company. If that loan had not been repaid, Mr Findlay would likely have had to file for bankruptcy and, given the impact on his ability to run a business, that would have jeopardised what he calls the “already dire financial position”. To deal with this financial pressure, Mr Findlay Snr lent Mr Findlay $257,000, so drawings could be taken for the family. That sum was repaid, as reflected in the 2009 accounts of the company.

[36] Mrs Findlay accepts that in the last 10 years or so of the marriage, Mr Findlay was undertaking larger scale developments and borrowed to expand the business, so they were doing well and lived a comfortable life. But the “asset rich” and poor cashflow position was exposed by the GFC in 2008 and 2009. The lifestyle they enjoyed came to an end and they had to move to her parents’ home with four children and she returned to the paid workforce, taking on a part-time job at Kiwibank/New Zealand Post as a teller.

[37] It is part of Mrs Findlay’s case that she gave up a career in banking which would have taken her to more senior levels and higher pay grades had she not done so. She puts the sacrifices made, with the loss of their own home and downscaling, in the following way:

We made these sacrifices together because it was vitally important for Scott to maintain business integrity, pay all the creditors and avoid bankruptcy. We succeeded in our aims.

[38] Mrs Findlay crystallises the position at separation with FCL having been replaced as the building company by Ability Ltd, later SFB. The SFF Trust, with

Mr and Mrs Findlay had one share each. As Mrs Findlay puts it, the company “was set up to return to a profitable enterprise”. FCL went into voluntary liquidation, and Mrs Findlay feels that the family “sacrificed a lot” to ensure it could wind down in a controlled and orderly manner, with the “Findlay” business integrity preserved. Thus, it was the end of FCL and the opening of a new chapter, in the name of Ability Ltd, later SFB. All this was before the events of 4 September 2010, when the Canterbury earthquake sequence began.

[39] Mr Findlay says that on separation custody of the four children was shared, but in 2011 he assumed full custody of their three sons and shared custody of their daughter. The family’s financial position was poor with no home owned by them or in trust. His income in the 2010 and 2011 financial years was minimal. However, the Christchurch earthquakes and his part in the rebuild allowed Mr Findlay to make significant financial advances. His ability to buy a section and a car derived from his work since the first earthquake in September 2010, and thus post-separation.

[40] Mr Findlay says he supported Mrs Findlay and the family throughout the marriage to the best of his ability, but in 2008 they were hit very badly, and Mrs Findlay later made the decision to start a new life with her current partner. He says the overall financial position now achieved, corporate and trust, is the result of his own labours, and the paradoxically propitious consequences of the Canterbury earthquakes.

[41] Chateau Drive was purchased after Mr and Mrs Findlay separated. It is owned by the trustees of WNHA Trust, of which Mr Findlay is a beneficiary. The trust is set up primarily for the benefit of the four children. Mr Findlay says it was purchased as a result of his work post separation and the funds applied by the trustees were derived from his “salary” from SFB. Mr Findlay says that money taken from the business by him has otherwise been spent on the children and it should not in retrospect be divided between him and Mrs Findlay.

[42] The property at Distribution Lane is owned by Racecourse Holdings, incorporated after separation. The shareholders are the JKST trustees and the property was purchased after separation. Mr Findlay arranged to subdivide the land and sold some of it, and a commercial building was built by SFB(2012). He had a valuation of Distribution Lane of $720,000 before development according to the personal statement he gave to ASB, that being the rateable value. The subdivided block was then sold for $425,000. The land is said to have a net value of some $550,000, so the JKST Trust has about that interest in Distribution Lane. There is a liability to SFB(2012) for work done, and it has not repaid money advanced when the land was

purchased. The value to the JKST Trust, and the debt to SFB(2012) is not fixed in this litigation.

[43] The claim against the trustees of the SFF Trust is based on decisions which allowed Mr Findlay to take and control all the profits in the business of SFB and later SFB(2012), post separation. Mrs Findlay says those profits properly belonged to the SFF Trust. This claim is in the alternative to the relationship property claim whereby Mrs Findlay seeks compensation for the breach, which she puts at half of the profits that would have been available to the SFF Trust if the building business had not been sold, and/or the trust had received the profits.

[44] Mrs Findlay says the transfer of the SFB business to SFB(2012), including the sale of the fixed assets, was for a nominal sum, as by then the company was in a profitable year, and she asks the Court to set aside the sale to restore it to SFB and for the SFF Trust to own the shares. In other words, Mrs Findlay wants to revert to the position at separation, and then adjust for all that has happened since, in the receipt by Mr Findlay of income from SFB and SFB(2012) and the assets acquired by the two new trusts.

[45] Mrs Findlay says that when the SFF Trust was settled by Mr Findlay’s father in 2000, she understood that was for the benefit of the family. She was a discretionary beneficiary. When she was added as a trustee in 2004, she thinks that was “manipulative” because that was when the family home was transferred into the family trust. So Mrs Findlay thinks that when it suited Mr Findlay, he made her a trustee, and after separation, when it suited him for different reasons, he removed her as a trustee and discretionary beneficiary.

[46] Despite the success of SFB in the 2011/2016 years, post separation the SFF Trust did not receive any dividends from the business. There were no property interests held by Mr and Mrs Findlay, nor the SFF Trust at this time, so everything turned on SFB. Mrs Findlay says she found it hard to get information about the company, but she could see that Mr Findlay was benefiting and he told her

about the purchase of the Chateau Drive section. She later found out that it was owned by the trustees of the WNHA Trust which was settled by Mr Findlay on 28 September

[47] Mrs Findlay position is that as they built the building business together and, while Mr Findlay had control, she was “shocked and upset” to find out in 2012 that the building business had been transferred to SFB(2012), owned by the new WNHA Trust.

[48] The building business, which existed at the time of separation, was sold to SFB(2012) for the book value of the fixed assets owned by SFB, and the WNHA Trust was created, excluding Mrs Findlay as a beneficiary, to own 99 per cent of the shares in the new company. Mrs Findlay was later removed as a trustee and beneficiary of the family trust and all profit was taken out of the business by Mr Findlay. Because she had a share in SFB, and was a beneficiary of the SFF Trust which owned nearly all the shares, she says she should have been consulted when the business assets were transferred to SFB(2012), and then in the decisions to pay all the profit of SFB and SFB(2012), far above market salary, to Mr Findlay, which left nothing for the trust.

[49] Mrs Findlay says there was no business reason or need for the transfer of the assets of SFB to SFB(2012) and that Mr Findlay did this without a trustees’ or shareholders’ meeting, and without consulting with Mrs Findlay as a trustee or shareholder. Although she was removed as a trustee and discretionary beneficiary of SFF in October 2012, as it turned out she was not removed as a residuary beneficiary, something which I think escaped Mrs Findlay’s attention and that of her advisors.

[50] Mrs Findlay says she was deliberately excluded from the business in which she played a major part in developing, and she helped it survive the GFC. Her legal interest was as a trustee of the SFF Trust but Mr Findlay has undone that and used legal structures to benefit himself “to such an extent that the business ought to be treated as relationship property”.

[51] Mrs Findlay says that all the business “profit” between 2011 and 2013 was drawn as salary and employed by Mr Findlay and the two new trusts, that she has had

no benefit from it, yet it stemmed from the her many years of work in supporting FCL, then SFB.

[52] Mrs Findlay says that by April 2013 (nearly three years after separation), she knew that the purchase of Chateau Drive had been settled, Mr Findlay was driving a new car, renting a large home in Tudor Avenue, Ilam, taking overseas holidays, and had most of the chattels. On the other hand, she was living with her parents until early 2011 and then moved in with her new partner. In April 2013, she had still not secured fulltime work and was earning $28,000 per annum before tax, on average, and drove a 1998 Nissan car.

[53] Mrs Findlay’s case is that she gave up what would have been a developing career in banking, and she points to colleagues who have risen to management or executive levels, so that, but for her commitment to the family, by the time she and Mr Findlay separated in 2010, she would have been at management level, or would have had that opportunity. A branch manager would be paid about $85,000 per annum but she earns only half of that, and has had to revert to a position which she was in some

[54] The parties divided their roles with a largish family. Mrs Findlay stayed at home looking after the family until they struck the tight patch referred to. Mr Findlay had first worked “on the tools” for his father’s company, FCL, in which he had a minority shareholding. In 2006, Mr Findlay became the sole director and the SFF Trust became the majority shareholder in FCL, and Mr Findlay became more of a manager than “on the tools”. He was away a good deal, but was able to organise work from home as communications became more sophisticated.

[55] Mrs Findlay ran the home successfully, and helped with the sale of spec buildings. Mrs Findlay says that in the first 10-12 years they would live in one of these spec homes while Mr Findlay worked on the next, and she would give the property its finishing touches to make it attractive to the market, including landscaping and working on the interior. She worked with real estate agents on promotion and marketing, then would organise the packing up of the children, the movers, cleaning,

vacating and setting up the new home. Mrs Findlay says that moving 17 times in 17 years was an intense and stressful way to live. The houses were always brand new, fully renovated, landscaped and modern, but what Mrs Findlay wanted was a comfortable home for the family and to grow roots in the community. Mr Findlay wanted to move on to the next property. Their focus began to change and there was strain in the marriage.

[56] Mrs Findlay says Mr Findlay’s position in the litigation ignores the “shared history and sacrifices”, but that is not entirely so, as he acknowledged in court that some recognition might be appropriate, as did Mr Lester. But neither attributed any specific value to that. It is part of Mrs Findlay’s case that the joint commitment to the business and the SFF Trust, which essentially owned the business, was exemplified by the purchase by the trust of 7 Sunnyvale Lane as the family home for $434,000 and making capital improvements to value the property at $554,335, which was made possible by the proceeds of sale of the previous family home being advanced to the trust and FCL lending a small sum. When it was sold, the company had enough funds to clear the last of the bank debt, which the trustees had guaranteed, and for which Mr Findlay was personally liable. By clearing the overdrawn current account, Mr Findlay would have no personal exposure to the planned liquidation of the company. Apart from the IRD and some minor unsecured creditors, they had managed to pay off the business creditors, and FCL went into liquidation, but the family was well placed to continue the business in the name of Ability Ltd. Mrs Findlay says that the need to avoid Mr Findlay’s bankruptcy was recognised, and a lot was done to achieve this. It came at a cost, because 7 Sunnyvale Lane was expected to be a family home, a property off Gleneagles Tce with a stream boundary, and is described by Mrs Findlay as a “lovely modern family home”. The family spent four years there, the longest of any property. At the end of that time they moved into a townhouse they owned in Waimari Rd because it was not selling.

[57] Mrs Findlay says that while they were living with her parents after the sale of Sunnyvale Lane, Ability Ltd got going using the contacts, people and skills which had accrued as part of FCL, so that after the September 2010 earthquake, Ability Ltd/SFB was “underway” and shortly afterwards it signed up with Fletcher EQR. Mrs Findlay

says that SFB would not have been able to do this, had everything not been sacrificed to support Mr Findlay’s reputation, and he not be bankrupted.

[58] Aside from the money that has been derived from SFB(2012), now represented in the value of that company (whatever that may be) and the WNHA Trust and JKST Trust property, Mrs Findlay points more broadly to the comparison of income received

Year	Mrs Findlay	Mr Findlay	Difference
July 2010 to March 2011	$19,082 gross	$48,000 gross Plus $7,000 cash drawings from FCL	$35,918
April 2011 to March 2012	$28,312 gross	$951,057 gross	$915,820
April 2012 to March 2013	$45,643 gross	$717,500 gross	$671,847
April 2013 to March 2014	$57,061 gross	$350,000 gross	$292,939
April 2014 to March 2015	$61,877 gross	$350,000 gross	$288,123
April 2015 to March 2016	$53,404 gross	$350,000 gross	$296,596
April 2016 to March 2016	$27,946 gross to September 2016	Not known

[59] Mrs Findlay says that if she works until 65 years, her earnings will be at least

$44,000 per annum below the income she would have earned had she stayed in her banking career, this resulting in a difference of $792,000, or $530,640 (allowing for tax). Otherwise, Mrs Findlay claims past maintenance from July 2010 to judgment, as they have ended up in such different financial positions, as a result of the success of SFB and SFB(2012). She seeks $10,000 per annum spousal maintenance.

[60] Mrs Findlay says that Mr Findlay should reasonably have had $200,000 per year by way of salary from SFB and SFB(2012), and he could have lived on that and provided spousal support, but he has taken some $3,000,000 one way or another and made generous dispositions to the children and his father and to the two new trusts. So, she says it is not reasonable or fair that Mr Findlay has been able to take all the profits from the “business” to which they gave everything while she has struggled

financially and lived without the material comforts of the past. Her personal position is one of frugality.

[61] Other than seeking to unwind the sale of SFB assets to SFB(2012), Mrs Findlay’s claims an interest in the business of SFB(2012), in which 99 per cent of the shares are owned by the WNHA Trust. She says that is where much of the benefit now lies, from which she is excluded. She seeks financial compensation from

Mr Findlay and the other defendants, equivalent to what she says in a half-share of the value of the business, between $907,000 and $933,000. This half-share is based on the expert valuation evidence.

[62] She also seeks $10,000, being the difference between them given the family chattels which Mr Findlay retained when they separated. That should not require a judgment.

[63] The discussion which follows addresses the Table produced by the expert witnesses, Mr Weber and Mr Beylefeld.

	Beylefeld	Weber	Difference
Personal Goodwill Intangible Asset Tangible Assets	655,740 - 24,260	- 821,740 24,260
Enterprise Value 2012	$680,000	$846,000	$166,000
Plus: profit Dividend / Net of Surplus Assets and Debt	495,000	495,000
Notional Equity Value 2012	$1,175,000	$1,341,000	$166,000
Profits made 2013 to 2016 Reduction in Personal Goodwill Reduction in Intangible Assets	1,122,922 (484,236) -	1,122,922 - (593,047)
Notional Equity Value 2016	$1,813,687	$1,870,875	$57,189

[64] Mrs Findlay says SFB should be valued to comprehend SFB(2012) and has a value reflected in the reports by independent experts, Mr Weber for her, and

[65] They made a joint expert report to the Court and there are areas of common ground but Mr Beylefeld says that the personal goodwill of Mr Findlay is his “personal asset”, and should not be valued as part of the building business, although

that depends on whether the Court is attributing “fair value” in the relationship setting, or “fair market value”. Mr Weber says the valuation of the building companies is a valuation of the benefits to SFB and SFB(2012) from the Fletcher EQR contracts, which had a terminal date, and should not include Mr Findlay’s personal goodwill. Each company signed a Fletcher EQR contract. Mr Weber’s valuation reflects Mrs Findlay’s position that any personal goodwill of Mr Findlay is derived from and sustained by the relationship contributions and “sacrifices” made by Mrs Findlay while in the marriage, so it should not be treated as his alone.

[66] The first major drawing shown on the company books as the result of Fletcher EQR work was from SFB as at 31 March 2012. The market value of the assets which have been acquired from those drawings is not at all clear. Some assets are held in the names of the WNHA Trust and the JKST Trust. There is no hard up to date evidence of value, and the value of the shares in SFB and SFB(2012) is in dispute. However, the shareholding in SFB is a useful measure of valuation in this setting as while it is not accepted as relationship property by Mr Findlay, it has value attributed to it by Mr Weber and Mr Beylefeld, and reflects the company’s future earnings, proven by time. It allows a measure of value of the only asset of any consequence which existed at separation.

mid-2015, and in May 2016 they met to complete their joint report. The experts know the circumstances of the sale of the SFB business to SFB(2012), said by Mrs Findlay to be without the consent of the majority of its shareholders or the trustees of the SFF Trust and Mrs Findlay. Mr Weber did not value the shares in SFB(2012), with draft financial statements for 2016. He expressed a “notional current value” of SFB on the assumption that the sale to SFB(2012) did not take place as Mrs Findlay contends and Mr Beylefeld adopted the same approach. They both agree on the valuation method being Discounted Cash Flow (“DCF”), and the notional salary of

$200,000 per annum to be credited to Mr Findlay. They agree on the expected future profits of the business, which reflected an earthquake induced surge of work, then a levelling, then a tailing off. The profits are of course known.

[68] They disagree on the discount to be applied under the DCF valuation method (Mr Weber 33¹/3 per cent and Mr Beylefeld 50 per cent), and as mentioned they disagree on the value of, and nature of, goodwill or intangible assets in SFB at the valuation dates they were given of 31 March 2012 and (notionally) 31 March 2016. The end difference, however, is not significant. The notional equity value of the business as at 2012 is $1,175,000 (Mr Beylefeld) and $1,341,000 (Mr Weber).

[69] In 2016, largely because of Mr Beylefeld’s reduction in what he says is the personal goodwill of Mr Findlay, and a corresponding reduction in the “intangible” assets by Mr Weber, their notional equity values are $1,813,687 (Mr Beylefeld) and

[70] Mr Weber considers the “intangible asset” component is associated with the Fletcher EQR work and is not “personal goodwill” in the strict sense because the Fletcher EQR contract is an identifiable and tangible asset of the company. The business was unlikely to be sold so Mr Weber adopts the concept of fair value as ‘value to owner”, because he thinks a third party purchaser is likely to pay a premium to take over the contract and work in progress to get immediate income, as opposed to a “greenfields” start up. Mr Weber assumes that the contract, now with SFB(2012), can be assigned, and Fletcher EQR will enter into a new contract with a suitable notional purchaser, as that happened when the business was sold by SFB to SFB(2012) in 2012. However, that simply involved Mr Findlay wearing another corporate hat.

[71] Mr Beylefeld applies a 50 per cent discount rate, as opposed to Mr Weber’s

^331/3 ^{per cent, because he considers most of the
“goodwill” is personal to Mr Findlay}and relates to Mr Findlay’s skills, contacts and reputation. Therefore, he says it remains with the individual and is not transferrable, and is of little or no commercial value to anyone else. Mr Beylefeld asks what value it would have if Mr Findlay was unwilling to enter an employment contract with a notional purchaser, or a restraint of trade? If Mr Findlay were to die, then Mr Beylefeld says that would reflect in the value of goodwill, as the value of the contract with Fletcher EQR in his opinion would simply evaporate. If it was advertised for sale, anyone interested could simply approach Fletcher EQR for the work. He says there was no enduring contract with EQR.

[72] Mr Weber, on the other hand, says the business had a value whether Mr Findlay worked in it or not. In his view the discount rate is no longer a significant issue because the “intangible asset” or “goodwill” has been converted into cash, which is a check on the discount rate. As Mr Weber observed, an earnings figure is not in perpetuity, and discount reflects cashflow not being available to the company.

Mr Weber amended his valuation to reflect the 2016 year result being less than forecast. As of 31 March 2016, the difference between Mr Weber and Mr Beylefeld was some $57,000 (reflected in the table above) and as at the date of hearing he thought it would be less.

[73] Two major areas of disagreement thus relate to the “intangible” asset and the Court must consider, the “reach” of earnings to be brought to account. Mr Weber considers the Fletcher EQR contract was enforceable by the company.

Mr Weber considers that Mr Beylefeld has moved his position from “fair value” to “fair market value”, whereas Mr Weber considers a “fair value” reflects the “fairness between the parties to the transaction”. But even here, Mr Weber does not consider there is a big difference between the two valuers, because if a purchaser could satisfy Fletcher EQR of its ability to undertake the contracts, a “fair market value” could result. Mr Weber believes that in relationship property matters the concept of “fair value” is important, and he considered that was the approach that Mr Beylefeld and he had set out to achieve. Mr Weber’s position is that the Fletcher EQR contract is not so attributable to Mr Findlay’s involvement, so “personal” to him, that the “personal goodwill” should be taken out of the valuation. But Mr Weber said that even if his valuation is to be approached without reference to the relationship setting, thus as an ordinary commercial valuation, there would be no difference in the evidence he gave before the Court.

[74] Cross-examined by Mr Lester, Mr Weber acknowledged that a business may never be exposed for sale in the market, and that is why notional sale and purchase transactions are brought to account. In particular, minority shareholdings are almost never exposed to the market.

[75] Mr Lester tested Mr Weber’s position and put it to him that post earthquake there was so much building work that anyone who could meet Fletcher’s criteria could

approach it direct, and that meant no one was going to pay up to $1,000,000 for the business when they could have simply knocked on Fletcher’s door and got the work for nothing. Mr Weber responded that the value of the business lies in the fact there was a contract, an existing business, and there would be cashflow “from day one”.

[76] Approaching the issue as “fair value”, Mr Weber said that Mr Findlay would not have sold the business for anything less than the figure which he ascribed, because that was what it was worth to him. With that would come a restraint of trade, giving up earnings in competition, which I reject as an unfair term, which would land on Mr Findlay alone in its effect.

[77] Mr Lester also put to Mr Weber that the Fletcher EQR contract with SFB simply sat with that company when the SFB(2012) contract was entered, but it could not do anything with it because Mr Findlay had left. Mr Weber questioned whether

Mr Findlay was entitled to do so, but otherwise, the value and utility of the contract depended on Mr Findlay remaining working for the old company and Mr Weber’s answer was that he agreed, subject to whether there was “someone like him” in the company.

[78] When re-examined, Mr Weber emphasised that he viewed the issue as a relationship property matter, and the correct standard of value is “fair value” as opposed to “fair market value”. But at the end of the day, the valuer has to step back and assess the commercial reality so, “erroneously or not”, Mr Weber adopted this approach.

[79] In questions from the Court, Mr Weber said that in a DCF valuation of this kind, the purchaser is probably not going to end up with anything to sell because the acquisition is for a short-term cashflow. For a normal business, the general rule of thumb is to pay the intangible asset back, the so-called goodwill, within two to three years. Here, the intangible asset has been “repaid”, and after that there is a “free ride”, when the capital asset has been paid for in full, but the “free ride” is for a much smaller earnings stream. That in my view influences what the notional purchaser would pay and there must be an element of capital advantage in buying an earnings stream, not just to pay off the purchase price.

[80] When Mr Beylefeld gave evidence, he said he treated the valuation in the first place for relationship property purposes, to reach a “fair value” for the business, as opposed to the value of the company. Under cross-examination he said that he could not assess the value of the personal goodwill he ascribes to Mr Findlay, but he thinks that most of the goodwill is reflected in Mr Findlay personally. His fundamental position is that the goodwill is personal and sits outside the company, but he recognised

it is for the Court to determine. Mr Beylefeld says that personal goodwill was created, beginning with Mr Findlay’s parents he thinks, but beyond that he does not know.

[81] Mr Beylefeld says that the discount rate he applied reflected the fact that the business had risk, because the fundamental question is the present value of future prospects and the cashflow position is not as certain as government guaranteed deposits. Mr Beylefeld said that if personal goodwill is excluded from the valuation but intangible assets remain, then the notional equity value was something in the order of $520,000. If profits were realised, they would be reflected in what was otherwise personal goodwill, as that intangible had turned into a tangible monetary asset, whether Mr Findlay stayed in the business or not.

[82] In re-examination, Mr Beylefeld said that future economic benefits are to be “estimated”. This would be affected by decisions as to when the profits are reflected in dividends. However, before then, the valuer must consider whether profit is dependent on the work of individuals. Mr Beylefeld said this is quite unlike a franchise arrangement which is territorial in nature. Here a notional purchaser would have no such territorial benefit, only a contract, the performance of which may, or may not, depend on Mr Findlay remaining involved in the company, and negatively whether Mr Findlay might get the work that would have come to the company by setting up another business.

[83] Mr Findlay said that he has a long history in the construction industry and when the Canterbury earthquakes occurred he became accredited with Fletcher EQR. He had to “learn on the go” and had to work out how to remediate buildings using strategies he had never used before. Most work was in that category, which contrasted

with “kit set building” before then. He agreed that Mrs Findlay initiated his registration as a licensed building practitioner before they separated. He obtained a licence which enabled him to build within a 10 metre height restriction envelope and to employ carpenters. He was helped by having an Advanced Trade Certificate which he gained before he met Mrs Findlay. Mr Findlay’s position is that while he earned a high income in the years 31 March 2012 onwards, he had to work “really hard for it”, and without that work the rewards would not have been available. Other companies were incorporated including Structural Block & Brick Ltd, which became S&J Builders Group, and Findlay Homes which never traded. They do not figure in the case.

[84] I will make some preliminary observations with regard to the money earned from SFB and SFB(2012) after separation. The Court knows what has been withdrawn from the company/companies, and I think it is reasonable to conclude that

Mr Findlay’s earnings of $200,000 per year are an appropriate allowance for his own work. Much more than that, however, was earned from the two companies. So, unless Mrs Findlay is to obtain some relief by an unwinding of the WNHA and JKST Trusts, for reasons which are developed further in this interim judgment, I consider a value should be put on SFB, for the purpose of addressing the earnings from the time that the Fletcher EQR work became available. Leaving aside the categorisation of the shares in SFB or SFB(2012) and their ownership, whether that of the SFF Trust or the WNHA Trust, this is a step on the way to judgment to attribute a value to the business, for the purposes of this litigation.

[85] If one were to take a “fair value” approach, then I conclude on the evidence this would be open market value because the business was mainly that of Mr Findlay, or associated with him. I do not find the company has a value based simply on the Fletcher EQR contracts or earnings, because they should in part be treated as the personal goodwill of Mr Findlay, in part based on the launchpad of which Mrs Findlay was very much part.

[86] Based on a fair market value approach, Mr Findlay’s future involvement was very important and he should not have to enter a restraint of trade covenant but there must also be recognition that there was an existing business, with contracts, and some profit might be yielded. How much that would be, given that any purchaser would want to be paid a proper sum for its own work, is debatable. I consider a fair valuation as between the parties is the correct way to approach the matter.

[87] Even under a fair valuation in the relationship setting, Mr Findlay would not be bound to work for the company forever, but some profits would be derived, from which Mrs Findlay might reasonably expect to take a share based on a value of those benefits for a reasonable but terminating period of time. The benefits are substantially those enjoyed by Mr Findlay and the children since separation, since the companies have generated profits. There is no evidence that Mr Findlay has anything of his own as the profits, or drawings, are represented by the holdings of WNHA and JKST Trusts, including SFB(2012).

[88] Another factor in any valuation of the business is the impact of tax. The figures referred to are gross and, unless there is no tax to pay because of accumulated tax losses, it would be inappropriate to take the gross figures derived.

[89] The bottom line is that the court really only has the evidence of Mr Beylefeld and Mr Weber to bring to account. Each of them gives very useful evidence but this is an unusual case which involves judicial assessment to reach a fair valuation.

[90] I do not consider Mr Findlay had any obligation to simply keep working for SFB and SFB(2012) over the full period 2010-2016 so as to attribute part of the value of that business to Mrs Findlay, who had left the marriage in 2010. That would produce a fair valuation. There is no such obligation in the context of an asset where the value is yielded by that of the continued contribution of one party, but I do accept that Mrs Findlay’s role must be recognised. I return to this under constructive trust.

[91] Mr Lester emphasised the distinction between a director and a trustee, and submits that the sale of an asset by a company owned by a trust is for the directors and not the trustee shareholders. The trustees own the shares. Mrs Findlay says that she was not consulted about the sale of SFB assets to SFB(2012). Mr Lester says that she did not have to be consulted and, even if that was a “major transaction” under the Companies Act 1993, which Mr Lester says is open to debate, it is not invalidated for non-compliance with s 129 of the Act.

February 2012, which sought money to refund Working for Families. Mr Findlay said he would pay that, but Mrs Findlay was asked to sign documents to be removed from SFB and any trusts. He referred to information sought by Mrs Findlay about FCL and SFB, and said “I struggle to understand why you want all this information, you know what happened, we lost everything, my father had to sell his home which the bank pretty much owned.” So, he regarded the past as the past, and that he was entitled to arrange things, and his work, to the advantage of himself and the children. He has become more reflective of that, as this interim the judgment holds that he should, but the hurt he felt when Mrs Findlay left the marriage was very much in evidence.

[93] On 15 March 2012, there was another exchange, and Mr Findlay said that FCL had been liquidated “as you know” and “The earthquake for some has been terrible, for me it has been fortunate”. He then said “I am sorry for the position you are in. From now on any information sent to me re business will not be responded to”. Mrs Findlay had been seeking information from HPH from 29 July 2011 when her solicitor wrote saying she was a trustee of the SFF Trust and sought access to the trust deed and other records of the trust. Nothing had been received. She wrote to SFB on the same day giving notice of her intention to inspect the company records, and asking that copies of the company records be sent to her. She wrote again on 13 and 14 September

[94] Ms Corry submits that Mr Findlay’s decision to sell assets of SFB to SFB(2012) on 1 April 2012 could only be made under cl 27 of the trust deed. That allows for majority decision-making, but does not allow for exclusion of the “third trustee” in that decision-making. Mrs Findlay was a trustee until 3 October 2012 and

Ms Corry says her exclusion “renders the decision invalid”. On this line of argument, the assets identifiable today in different entities have been derived as a result of the “invalid transfer”, and remain the property of the SFF Trust. If that is so, then on restoration of the position Mrs Findlay will seek resettlement of that trust. This is in essence to unwind all that Mr Findlay with Mr Hanna (HPH) arranged on the sale of SFB assets to SFB(2012) and the creation of two new trusts, property acquisitions and development dealing work.

[95] Under the PRA, Mrs Findlay says that the transfer of the business of SFB to SFB(2012) was a disposition intended to defeat her rights. Once that intent is established, the Court may set aside the disposition and order transfer to such person as the Court directs. Alternatively, under s 44(2)(b) PRA, the Court may make an order that Mr Findlay and HPH pay a sum to Mrs Findlay in lieu.

[96] Mr Findlay is said by Ms Corry to be the sole beneficiary “in real terms” of SFB(2012), WNHA Trust, JKST Trust and, earlier SFF Trust. This submission is based on Mr Findlay’s “unilateral” decision making. This is submitted to be evident from the nature, extent and use of his powers, and his profit taking. Mr Findlay is the sole director of all the corporate entities and has exclusive power of appointment in all trusts. Mrs Findlay says that he has put himself in the position of being able to act without the involvement of the professional trustee HPH. Mr Lester took a strong exception to this not being put to Mr Findlay, and says Mrs Findlay’s case is wrong in its construction of Mr Findlay’s powers.

[97] Ms Corry says that while Mr Hanna is being sued for breach of trust and/or fiduciary obligation, he has not been called to give evidence. She contends that “his silence is compelling”. Ms Corry points to Mr Findlay’s overall drawings of “more than $3,000,000 to $4,000,000” from SFB and SFB 2012 since 2011, but Mr Findlay says he has no personal assets, and whatever assets are now owned are held in the WNHA and JKST Trusts.

[98] Ms Corry places emphasis on Mr Findlay’s evidence, when it was put to him that if he thought SFB was not worth anything, there was no reason to remove Mrs Findlay from the trust which owned the shares in the company. Mr Findlay said that was “possibly” correct, but he was acting on Mr Hanna’s advice. He did not tell Mr Findlay that he had to do this, but recommended that he should do so. Mr Findlay thinks that was to do with the “interference” Mr Hanna was getting from Mrs Findlay. Mr Findlay thought that Mr Hanna may have been more concerned about interference than “possibly I was”. Ms Corry’s submission is that Mr Findlay did not appreciate he had any duties to his wife in relation to the trust, or in respect of SFB in which the SFF Trust was a majority shareholder, and in which Mr and Mrs Findlay held one share each. On the facts, Mr Lester submits that Mr Findlay was not questioned on the proposition that Mr Hanna acted under his direction and the Court cannot make such a finding without such evidence, and I agree with that.

[99] Mr Lester submits there are no breach of trust claims available to Mrs Findlay, as she was validly removed as a beneficiary and trustee, subject to the above observation as to her being a residuary beneficiary of the SFF Trust. Mr Lester submits there is no remedy available to Mrs Findlay, as the personal powers vested in Mr Findlay are not reviewable. This position accords with the Supreme Court judgment in Clayton.¹However, Mrs Findlay’s rights as a residuary beneficiary came to the Court’s notice only at the end of the hearing, as has been mentioned.

[100] This claim is based on the sale of assets by SFB, owned by the SFF Trust, to SFB(2012), owned by the new trust, WNHA. The sale of the assets and building business was effected on or about 1 April 2012. Mr Lester refers to the pleading that this was “undertaken to defeat the plaintiff’s claims and rights”, and submits that the statement of claim does not identify these claims and rights.

[101] The building business from before marriage has always been that of a company. The April 2012 sale was of the business that had been owned by FCL (incorporated in 1988 and liquidated in November 2010), but was then operated by

9 February 2011, SFB owned the business before SFB(2012), and acquired it as of April 2012. The business was owned by a company at all times, and the majority shareholder of FCL and SFB was the SFF Trust created in 2000. Mr Lester submits that the business was never relationship property, but for two shares. The business was that of a company owned by the SFF Trust.

[102] At one stage Mrs Findlay owned one share in FCL and Mr Findlay 1,000 shares, but Mr and Mrs Findlay each owned one share in SFB and the 98 remaining shares were held by the trust. Thus, Mr Lester submits the sale to SFB(2012) involved the assets owned by SFB, the shares in which were, but for two, owned by the trust. The transaction which is challenged under s 44 PRA is the sale of assets and business, but it was never relationship property as those assets were always held by a company, the shares owned by a trust.

[103] Mr Findlay held powers under the SFF Trust which Ms Corry submits he exercised to take the benefit of trust assets for himself. This is said to be analogous with the powers in Clayton v Clayton.²The fact that Mr Findlay made decisions about the business without Mrs Findlay knowing, at least until later, is said to show that “the constraints of the Trust Deed were ineffective”. Ms Corry says that Mr Findlay acted with a belief that “he could do as he wished”. The example given is that Mr Findlay did not consider the interests of the trust when he took dividends and paid all profits from SFB and SFB(2012) to himself until 2013, and a sizeable proportion of profits thereafter.

[104] Ms Corry submits that the “powers” held by Mr Findlay within the trust(s) are relationship property and the “value” of those powers is to be divided equally. Mr Lester says the “powers” held by Mr Findlay are not “Clayton powers” so ss 44 and

15 PRA are not applicable. Further, while the statement of claim pleads that cl 11 of the SFF Trust deed enables Mr Findlay to vest the trust capital and income in himself there is no pleading that the cl 11 power is a “Clayton” power, and thus relationship

property. Mr Lester says that Mr Findlay’s positions as director, and as a trustee/shareholder are distinct. Apart from that, the powers under a trust deed are submitted to be different from those in Clayton. Clause 12.2 of the SFF Trust prevents a sole trustee exercising any of the powers contained in cls 4-11 of the trust deed, and they are the powers utilised in distribution or re-settlement. Mr Findlay cannot take all the trust property for himself as there is a bar to his doing so, so this is not like Clayton. The Clayton power requires that the property exists within the valid exercise of the trust powers, not utilising a “tame” trustee or acting in breach of trust. Mr Lester submits that Mr Findlay cannot take ownership of the assets himself, and he did have a general power of appointment in respect of the assets of the old trust,³There is no evidence, beyond an assertion, that Mr Hanna is a “compliant” trustee to do what Mr Findlay wants, Mr Lester submits that he is not, and that is an end to it.

[105] There is no relationship property. With very limited exception there never was after the SFF trust owned the family home and the shares in the building companies. The family’s fortunes lay and lie in trusts, first the SFF Trust and then the WNHA and JKST Trusts. This allowed the family to borrow for the business and flexibility in distribution of profit. The company owned by the SFF Trust had little value at separation but by 2011-2012 had a value, which must bring to account the relationship history as found by this interim judgment, but Mr Findlay did not have “Clayton” powers. He did not have unfettered power.

[106] Mr Lester submits that Mrs Findlay does not have standing to bring a claim in respect of the SFF Trust because she was validly removed as a trustee and beneficiary of that trust under powers in the Trust Deed.

[107] Mrs Findlay at first seemed to accept that she could not take action as a trustee, beneficiary or as a shareholder of SFF Trust because she was removed by Mr Findlay as a trustee and beneficiary on 3 October 2012. While she applied for leave to

commence derivative action against the directors of SFB, that is on hold pending the outcome of this interim judgment. However, in closing, Ms Corry raised for the first time that Mrs Findlay is a residuary beneficiary and was not removed in that capacity, so she has standing with regard to that trust.

... every discretion vested in the trustees shall be absolute and uncontrolled and every power vested in them shall be exercisable at their absolute and uncontrolled discretion.

[109] There is some restriction on the power of a trustee if that person has become a sole trustee, but that has no application here. Clause 13 provides that the appointor has power to appoint new trustees and cl 14 provides the power to remove. The trustees’ powers are submitted by Mr Lester to be reinforced by cl 20 which reads:

The trustees may in their discretion do anything pertaining to the trust fund which they think fit as if they owned it absolutely.

[110] His submission is that the Court will not interfere with the bona fide exercise of a trustee’s discretion just because the Court would have exercised the discretion differently, especially if that discretion is expressed to be absolute or uncontrolled. Mr Lester categorises the duties pleaded in this cause of action for breach of trust as based on duties implied where not inconsistent with the Trust Deed.⁴There are three implied principles whereby the trustees must exercise their discretion impartially between beneficiaries, there must be an exercise of discretion, and they must exercise their discretion honestly and for the benefit of the beneficiaries, not for a collateral purpose. Implied principles are subject to the terms of the trust deed, and here the discretions and powers mean that there is no room for the implied duties relied on for Mrs Findlay.

[111] Unless and until Mrs Findlay’s removal as beneficiary and trustee of the old trust is overturned, it was submitted that she has no standing to bring a claim because she is neither a trustee nor a beneficiary, so is a “stranger to the trust”. That submission

_{did not survive the hearing as she retained her status as a residuary
beneficiary.}

[112] The position is the same as that is Clayton v Clayton, where the power to appoint or remove trustees was vested in the appointor. Mr Lester submits that

Mr Findlay was free to remove Mrs Findlay as trustee and discretionary beneficiary as he saw fit. However, she did have standing.

[113] Mrs Findlay seeks an enquiry into damages to fix the difference in value between what was paid to the old trust for the business, and what Mrs Findlay says it was is worth. She says there was a breach of duty by the trustees, but that does not alter her “interest” in the trust, assuming she is restored to being a discretionary beneficiary. It does not give her a fixed interest in half the trust assets. Mr Lester submits if she has standing she cannot convert what was only a discretionary interest into an “entitlement”.

[114] Mr Findlay had the power to remove Mrs Findlay as trustee and discretionary beneficiary. He did so in circumstances which were designed to give him a free hand and to distance her from any further benefits in the SFF Trust, although he did not in so doing recognise that she was still a residuary beneficiary. If she were to be a discretionary beneficiary, and be restored to that position by an order of the court, it still does not give her an “entitlement”. It would beg the question as to what interest she might receive in the future as part of any dispositions to Mr Findlay, the children and her. It is not a course which finds any favour with me, as I regard it as creating yet another set of problems, including resettlement litigation, better addressed in terms of the constructive trust discussion and conclusion which follows.

[115] A “further breach of trust” is pleaded, that transfer of the business from SFB to SFB(2012) was not at a “fair value”. Mr Lester’s submission is that Mrs Findlay has no standing to bring this claim as it was for the directors of SFB to decide.

[116] However, Mrs Findlay pleads that Mr Findlay and HPH owed a fiduciary duty to the beneficiaries of the SFF Trust to act for the benefit of all beneficiaries. As Mrs Findlay was a beneficiary at the relevant time (she was not removed as

discretionary beneficiary until 3 October 2012), she pleads that the fiduciary duty of the trustees was to invest for the benefit of all the beneficiaries, to achieve a reasonable return on investment, to maximise, income and capital from the shares owned by the SFF Trust in SFB. These decisions should have been made by all trustees.

[117] The decision to allow Mr Findlay to receive all profits of SFB and SFB(2012) as shareholder’s salary, is submitted a breach of fiduciary duty because the profits belonged to SFF Trust, after Mr Findlay was notionally paid a reasonable $200,000 per annum for his management. There was no consultation with Mrs Findlay and the decisions taken favoured the personal interests of Mr Findlay. Ms Corry submits there was an improper purpose in the sale to prevent her claim to the assets of the trust as beneficiary and this allowed Mr Findlay remuneration in excess of that which was reasonable.

[118] Mrs Findlay also seeks a declaration that the transfer of the business and assets owned by SFB to SFB(2012) was in breach of trust and that the second defendants are in breach of fiduciary duty in allowing Mr Findlay’s remuneration arrangements. She seeks orders setting aside the sale to SFB(2012) returning the assets to SFB, and an enquiry as to damages against the second and third defendants for any difference in value as a result of the transactions in question. Finally, she seeks damages for the difference between the “reasonable remuneration” of Mr Findlay and that drawn by him, and damages equal to the loss of profits arising from the sale to SFB(2012).

[119] Against the WNHA and JKST Trustees, Mrs Findlay pleads that the transfer of the business to SFB(2012) was in breach of trust, that it was known or should have been known to them, to be not for value, and they did not receive property in good faith. She pleads that the JKST Trust should return property to the SFF Trust. She seeks orders tracing any funds received, and vesting of those funds or any property acquired in Mrs Findlay’s name and/or the second defendants as trustees of the SFF Trust.

[120] Mr Lester simply submits that this claim that the transfer of the business was not at fair value is one for which Mrs Findlay has no standing, and there is no evidence that it was unfair.

[121] I do not consider Mrs Findlay has a claim for breach of trust in this regard, as the business was sold by SFB to SFB(2012) as a commercial transaction. The impact of that did fall on the SFF trustees because it meant their interests as shareholders in SFB was not afterwards part of the business then conducted under SFB(2012). However, the underlying premise is really part of the other causes of action, that what should have been Mrs Findlay’s, namely the benefit of the SFF trust shareholding in SFB, was spirited away and she seeks a share of what was derived following that, or an unwinding of the transactions which distanced the SFF Trust from the two building companies. I do not find the sale of SFB assets to have been at an undervalue on the evidence, but I think the answer otherwise lies in constructive trust.

[122] Mrs Findlay pleads that Mr Findlay owed her a fiduciary duty as her spouse, and as trustee of the SFF trust he owed a fiduciary duty to the beneficiaries. Mrs Findlay says that Mr Findlay also owed her a personal fiduciary obligation when he transferred the business for less than its market value, and when he exercised his powers to remove Mrs Findlay as a trustee and a beneficiary, that he breached his personal fiduciary duty to her, for an improper purpose, based on his “personal view” of the relationship with Mrs Findlay, and the rights arising from that relationship, which was intended to defeat Mrs Findlay’s claims against the trust.

[123] Mr Lester’s submission is that Mr Findlay’s powers as appointor were conferred on him personally as in Clayton where the Court did not suggest personal powers held under the trust deed were coloured by the relationship between husband and wife. By the time the power of appointment was exercised on 3 October 2012, the parties had been living apart as husband and wife for more than two years, so

Mr Lester says there was no “carry over” of the by then historical concept of the relationship between husband and wife, to the exercise of a power held under a trust deed as appointor.

[124] The authority Ms Corry relies on, Mosaed v Mosaed,⁵is not authority for there being a fiduciary duty between spouses, and that duty was not recognised in Clayton. Where a husband acts as agent for his wife as co-owner of a home and misrepresented offers received when he brought out his wife’s interest, so as to make a profit, the fiduciary relationship arises from agency principles, not the relationship.

[125] Mr Lester says that the Court of Appeal in Clayton held that where someone holds a power to appoint or remove beneficiaries, and does so in a capacity other than as trustee, then there is no need to consider the interests of the beneficiaries removed or appointed because that would be to constrain the exercise of the power, contrary to the donor’s intention, and convert the general power into a special power, restricting the exercise of a discretion solely in his or her own interest.⁶The Court of Appeal’s approach was not diluted by the Supreme Court judgment which followed. In short, Mr Lester submits that Mr Findlay’s personal capacity as appointor, and not as trustee, means his power was not constrained by fiduciary duties. Hence, administrative law considerations, such as bringing to account irrelevant matters or use of a power for improper purposes, have no application. There is no jurisdiction to review the powers of the appointor, in this case Mr Findlay, so Mr Lester submits this cause of action must also fail.

[126] Mr Findlay exercised his powers as appointor, not constrained by his obligations as a trustee. His power was unfettered in this regard. As the cause of action is raised on the basis of a mis-use of that power, I find it fails for the legal reasons advanced by Mr Lester.

[127] An application for interim maintenance was part heard in November 2015 and not finally determined. Mrs Findlay seeks a final maintenance order which is “largely

_{retrospective”, and she accepts that spousal maintenance is not
required after she}

receives her share of property. She gives evidence of her income and outgoings and makes a claim for spousal maintenance in arrears in the sum of $10,000 per annum from September 2010.

[128] Spousal maintenance cannot be ordered under ss 64 and 182 FPA, as there is no jurisdiction given the marriage has not been dissolved. The ASOC pleads that

Mr Findlay is liable for spousal maintenance under s 64 FPA, but the pre-condition for an order is that the parties’ marriage has been dissolved.

[129] Otherwise, the claim is to a retrospective payment from 1 August 2010 and Mr

Lester submits that if Mrs Findlay received her relationship property entitlement as at

1 August 2010, there could be no argument that she could thereafter seek spousal maintenance, as once she receives her entitlement there is no basis for making a spousal maintenance payment.

[130] As an award is made by this interim judgment, pursuant to a constructive trust, I would make no award for spousal maintenance as I consider it is effectively comprehended considerations under which the judgment in constructive trust is reached, and Mr Findlay is in the circumstances of separation I find under no obligation to pay spousal maintenance to Mrs Findlay. There is also a jurisdictional bar.

[131] Mrs Findlay seeks re-settlement of the trust under s 182 FPA in respect of the SFF Trust, WNHA Trust and JKST Trust if her claims under the PRA are not upheld, because their affairs were organised so that their property and financial interests would be held by a trust. She had an expectation that she would benefit equally with Mr Findlay and have access to and enjoyment of those interests. However, Mr Findlay has sole control of those trusts and favours them and himself to her exclusion, so under s 182 she seeks to re-settle 50 per cent of each of WNHA Trust and JKST Trust by transferring 50 per cent of all shares held by those trusts and the SFF Trust, and

transferring to her sole name or nominee half of the interest held in any titles of land or any other assets owned by the three trusts.

Matrimonial Proceedings Act 1963, the Family Court may inquire into the existence of any agreement between the parties to the marriage or civil union for the payment of maintenance or relating to the property of the parties or either of them, or any ante-nuptial or post-nuptial settlement made on the parties, and may make such orders with reference to the application of the whole or any part of any property settled or the variation of the terms of any such agreement or settlement, either for the benefit of the children of the marriage or civil union or of the parties to the marriage or civil union or either of them, as the court thinks fit.

(3) In the exercise of its discretion under this section, the court may take into account the circumstances of the parties and any change in those circumstances since the date of the agreement or settlement and any other matters which the court considers relevant.

[133] There is no jurisdiction to make an order unless the marriage has been dissolved, a bar to the order sought. Otherwise, Mr Lester says the WNHA Trust and the JKST Trust are not “post-nuptial” trusts in terms of Clayton, as a settlement for the purposes of s 182 must be one that makes some form of continuing provision for both or either of the spouses to the marriage in the capacity as spouses, with or without provisions for their children.

[134] The post separation trusts do not make any provision for Mr Findlay in his capacity as a spouse and there must be some connection or proximity between the settlement and a marriage given the expression “in their capacity as spouses”. Mrs Findlay says that the WNHA Trust (created in September 2011) and the JKST Trust (created in April 2014), were designed to defeat her interests, notwithstanding the fact the relationship between the parties came to an end in July 2010. Mr Lester submits that the creation of those trusts had no connection or proximity to the marriage. But if that is not accepted, Mr Lester submits the position of a spouse under

the settlement must be set against his founding submission, that it contemplates a settlement for the purpose of a continuing marriage.

[135] When the parties have been separated for some time at the creation of a post-separation trust, the claimant would logically expect to receive nothing from the new trust. So, the position is submitted to be the same whether the marriage formally continues or not. The issue is not one of “expectations” but objective determination, as in Clayton. Under a post-separation trust there cannot have objectively been any expectation or provision from those trusts. Otherwise, Mr Findlay accepts that the SFF Trust was post-nuptial.

[136] I accept Mr Lester’s submissions that s 182 FPA is not engaged. However, even if it were, I would not in my discretion exercise a power to resettle or make an order which made that possible given my distinct preference for an order which allows the defendants the opportunity to find the sum awarded by way of constructive trust, and to end this longstanding litigation. The children are catered for under the two trusts established since separation, and Mrs Findlay will receive a sum by this interim judgment from one source or another.

[137] No order is, or will be, made under s 182 FPA, but should it be necessary, the court in exercising equitable powers may make orders which affect the two trusts established post-separation, and would do so to effect this interim judgment.

[138] Mr Lester accepts that the court may consider that this cause of action allows some form of compensation to Mrs Findlay, and Mr Findlay frankly acknowledges some provision is fair.

[139] A constructive trust attaches by law to property which is held by a person in circumstances where it would be inequitable to allow that person to assert the full

beneficial ownership of the property.⁷That is distinguishable from those circumstances when someone receives property with actual or constructive notice that trust property is being transferred, or in breach of trust, which also may establish a constructive trust. A constructive trust may also be imposed on property owned by a trust.⁸The constructive trust has been described as a means to an end, a mechanism to enforce personal accountability with proprietary consequences. It has a remedial aspect of disgorging money held by someone in circumstances which the Court does not countenance. The rule underlying constructive trusts is elusive. Edmund Davies LJ, in Carl Zeiss Stiftung v Herbert Smith & Co No. 2, said the boundaries have been left, perhaps deliberately, vague so as not to restrict the Court in deciding what the justice of a particular case may demand.⁹Tipping J in Fortex Group Ltd (In Rec and Liq) v Macintosh, referred to a remedial constructive trust as that imposed by the court as a remedy in circumstances where, before the order of the court, no trust of any kind existed.¹⁰The principle of unconscionability underlies much of the rationale for constructive trusts and arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property to assert his or her, or another’s own beneficial interest in the property, and deny the beneficial interest of another.

[140] A constructive trust is a proprietary claim and contributions have to be made to assets, but not necessarily particular assets.¹¹Such a claim is predicated on contributions direct or indirect to property, the expectation of an interest, that such is reasonable, and that the defendants should reasonably expect to yield to a claim of such interest. The question for this interim judgment is whether to make an order based on constructive trust and how to quantify such a claim, bringing to account all equities on the facts of this case.

[141] The claim is based on direct and indirect contributions to the assets owned by the SFF Trust, that Mrs Findlay made substantial direct and indirect contributions to

⁸Prime v Hardey (2002) 22 FRNZ 553 and Vervoort v Forrest [2016] NZCA 375; Selangor United

the trust’s interest in the business of the building companies and those companies. Mr Lester’s submission is that the Court should look at the matter in the round to assess the value of the contributions by a claimant, compared to the benefits received by that claimant, and he contemplates what are the value of her contributions, and to what did Mrs Findlay contribute?

[142] Mrs Findlay was fully committed to the family, and willingly adopted a lifestyle which sustained the business, as already discussed. The family home was sold to meet a bank debt and the SFF trust had provided the home as security to the bank. I consider those to be important contributors but they do not reflect the overall scale of her contributions to the business, both direct and indirect.

[143] Mr Lester says the loss of the family home was just the “commercial risk” run by the trustees, but I find it was part of supporting bank borrowing for the business and in the end keeping the business solvent. The building business was started by

Mr Findlay’s father. Mr Findlay served an apprenticeship, and worked in the business prior to meeting Mrs Findlay. There was in Mr Lester’s submission no “business” to be sold to a third party, but rather the “business” was represented by Mr Findlay’s experience and acumen in the building industry. Nevertheless, Mr Lester accepts the numerous shifts of the family, house to house, allowed Mr Findlay to build up experience and connections, and provided capital and income.

[144] Mr Lester submits that the correct approach to this claim is found in the Court of Appeal judgment in Hawkes Bay Trustee Company v Judd, where a value is placed on the services provided by a claimant, before taking into account the benefits received.¹²In this case, while there is some disagreement about their lifestyle, the evidence is that the family had a good standard of living. This includes overseas travel, dining at restaurants, and the benefits that Mrs Findlay received by being at home for the children until the GFC. These and other lifestyle factors came from the business. Mr Lester says the court does not know how much time Mrs Findlay spent working in

_{the business and that it is not straightforward to assess, given the
lack of particulars.}

[145] The business stalled in the GFC and Mr Lester says the only asset then was the “building business” being Mr Findlay’s knowledge and acumen. The “home” had been lost in the development venture which failed. Mr Lester asks what value can be placed on the interest asserted by Mrs Findlay when the contributions have to be to an asset held in trust, as there is no family home or other asset developed or improved over the years through contributions made by Mrs Findlay. However, I conclude she did contribute directly and indirectly to the business run by the company and owned by the SFF trustees. That contribution is the starting point, but valuing that against the benefits received from the business over the years is difficult, as is valuing the benefits still to come after separation. The post nuptial trusts are also for the benefit of the children and that too cannot be put aside in the reckoning.

[146] If the business is to be valued, Mr Lester says a hearing date valuation is not called for. The Court is concerned with a transaction whereby a company was formed in April 2010, the shareholding that of a trust created in 2000, which sold the business assets to a company owned by a new trust. An open market valuation is submitted to apply. Mr Lester otherwise submits the only evidence as to the building industry in Christchurch post-earthquake (relevant to valuation) comes from Mr Findlay.

[147] When Mr Findlay gave evidence, it was put to him that he thought he was fully entitled to the fruits of success derived since the Canterbury earthquakes. He said that while he was unsure about the legal position, this was a marriage of 17 years, and he thought it was fair Mrs Findlay receive some money and, without discussing settlement amounts, said he has been proactive in “offering some money”.

[148] Mr Findlay otherwise says he is the business, but he extends that to include people in his care, particularly the children. He says that post separation he did all the work, “huge quantities of work”, for the large income drawn, and he wants his family to benefit. He does not want Mrs Findlay and her new partner to benefit, because they have been leading their own lives and did nothing towards the success of SFB and SFB(2012). He has not interfered with their business, and he decided to concentrate on his own work and do things “for myself and my family”, excluding Mrs Findlay.

[149] Ms Corry asked Mr Findlay if he knew Mrs Findlay had sought to bring proceedings in the name of the “old company” SFB, and if he was aware that there was “further litigation to come”, including possible re-settlement of trusts once the marriage is dissolved. Mr Findlay said that he could have simply set up a new company after separation before engaging in EQC work and Mrs Findlay would not have been involved, but between separation and starting the EQC work his whole life had been “turned upside down” and he did not take the professional advice which he now thinks he should have done. The SFF Trust remained in place and it, and the company, just “went on”.

[150] Mr Findlay said that there was “zero likelihood” that he would sell his shares in the building company, and he has never really contemplated doing so. He agreed that every dollar that he earned went into the “partnership of marriage”, and the SFF Trust was the legal owner of property, and the business. That was the way in which the marriage partnership worked. He agreed they made a joint decision that Mrs Findlay stay home when their first child was born, and later the employment of a carer allowed her to return to work in the business.

[151] Mr Findlay was lawfully entitled to remove Mrs Findlay as a discretionary beneficiary and trustee. Even though she held a residuary beneficiary’s interest in SFF Trust, in my view, that had no real value to her. However, she was left with no “interest” in the assets, limited though they were, and it depended on the trustees what she would receive, if anything.

[152] I have said that I do not consider it can be said that Mr Findlay had such control over any of the trusts that Mr Hanna should be treated as irrelevant, in his corporate guise. There was nothing like a Clayton setting to cause Mr Findlay’s trustee and beneficiary interests to be treated as relationship property. It follows that I do not consider, as set out above, that there is any basis for a claim in relationship property, or for potential resettlement by an order under s 182 FPA. However, I do consider, as

Mr Findlay himself acknowledges, that a constructive trust should be upheld for the benefit of Mrs Findlay. I now explain and quantify that.

[153] The position at separation must be analysed. In July 2010, Ability Ltd, later SFB, was owned by the SFF Trust as principal shareholder. The extreme financial pressure which led to an orderly wind-down of FCL, Mr Findlay avoiding bankruptcy and the impact of the GFC generally, had largely passed, but the family had long lost their home and there was little else by way of assets. The family fortunes had been tied to a building company, the shares of which were owned by the family trust. The trust had once owned property, but that had been given up as security to the Bank and lost for the preservation of the company’s and Mr Findlay’s solvency, and financial integrity.

[154] Considerable uncertainty and financial pressure accompanied the separation. Mr and Mrs Findlay had to do the best they could with very limited assets and in pressing circumstances, despite having worked hard for many years. It was a combination of the perverse good fortune of the Canterbury earthquakes (for this business) and Mr Findlay’s building ability, including his contacts and management skills, and readiness to take up the opportunity with Fletcher EQR, that saw the fortunes of the “family” reverse, at least on one side of the ledger.

[155] Mr Findlay took the view that he would go his own way, but nothing much happened at first. He signed the first Fletcher EQR contract on 21 February 2011. Chateau Drive was purchased, and in September 2011 the WNHA Trust was created, with which Mrs Findlay had no connection. By early 2012, Mr Findlay plainly wanted Mrs Findlay to relinquish any interest she might otherwise claim in SFB. At this time the company was nearing the end of the 2012 financial year, in which Mr Findlay was able to withdraw, on the books and in fact a large amount of money. I find it is no coincidence that on 23 March 2012 SFB(2012) was incorporated and on 1 April 2012, the fixed assets of SFB were sold to that company with SFB(2012) signing an earthquake reinstatement contract with Fletcher EQR four days later. That put distance between SFB and the SFF Trust and the “new” structure. Further devolution of Mrs Findlay’s interests then came about when she was removed as a trustee of the SFF Trust and as a discretionary beneficiary on 3 October 2012.

[156] Overall, there is no doubt, and I so find, that, after Mrs Findlay left the marriage, Mr Findlay decided to remove her from any future association with the business, and that the building business would be run under a different company which was not owned by the SFF Trust. The SFF Trust was left with no assets of any consequence. On Mr Findlay’s view of it, all this should be understood in the context of Mrs Findlay “leaving the marriage”, and he thought there was nothing of real value at the time of separation. The company had survived, and the trust shareholding was in that sense preserved, but it was only later, with the realisation that there was a great deal of building work to be had, that he began to think about how he could take advantage of that, without Mrs Findlay taking any benefit. His perspective was that she should have no part of any future benefits derived.

[157] Mr Findlay thus could see the future, but did not recognise or reflect on the past, although I repeat that I was impressed by his frankness and preparedness to do so when he gave evidence. That “past” was, I consider, an essential facet of the springboard for the Fletcher EQR contracts and the profits that began to flow. Granted Mr Findlay had to carry out the work, and I have recognised that, but it was from a base which was established during the marriage. In that, Mrs Findlay played her full part, directly and indirectly.

[158] Overall, I find this was, in most important respects, a successful partnership and marriage, where Mr and Mrs Findlay chose to take a hard route to finance their family lifestyle, while bringing up four children, the latter with commendable success. Their chosen lifestyle and business modus operandi turned on their respective contributions, working together, so that part of the family’s everyday financing came from their preparedness to move house multiple times with young children. As fate had it, in its first fickle reach, the business and the family was afflicted by the GFC in

2008 and the years subsequent. Nearly all they had was lost, and their home was lost to the bank. It was with the support of Mr Findlay Snr that they worked their way out of that position. However, at that point there was very little to rub together, whether measured in income, assets, or the value of the business.

[159] That vulnerable position was compounded when the relationship broke up. While there are strong feelings still held about that, it is a fact, and this court will not

attribute cause or fault. Mrs Findlay left, leaving Mr Findlay feeling as though she had left the family. What followed was another twist of fate, this time to the advantage of Mr Findlay and the children and, as it happens, to the benefit of Mrs Findlay given the conclusion reached in this interim judgment.

Mr Findlay was, I find, getting back on his feet in a small way by 2010 when Ability Ltd was incorporated, but he was further able to capitalise after the Canterbury earthquake sequence. The reason he could do so lay in substantial part in his education and training from an early age with his father, and his long experience and contacts which developed in the time he and Mrs Findlay lived together and brought up their children, and in separate and joint ways, contributed to the building business. He was well set to take advantage of the flow of work which came following the beginning of the earthquake sequence. Mrs Findlay had her small part to play when he became a licensed building practitioner as she helped initiate that process.

[161] It cannot in my view be right that Mrs Findlay, who was in a very vulnerable position through the family’s fortunes being anchored in the SFF Trust, should simply told that at a certain date there was little or no value in SFB, thus the SFF Trust, and then when it did turn out to have value, or when it should have had value, her discretionary interest was removed and her trusteeship revoked. By that time,

Mr Findlay, and was continuing to do so in the 2012/2013 year. It was not relationship property. But while it was very much the product of Mr Findlay’s hard work post separation, it built on the past with which Mrs Findlay was so much involved. Mr Findlay was able, experienced, with long developed contacts, and without financial stigma. How then is all this to be recognised?

[162] I conclude a significant contribution to Mr Findlay’s position and thus of SFB post 2010, lay in these contributions, and the fact that the family home had been sold to meet bank debt, rather than his being placed under more personal pressure, which may have led to bankruptcy. Mr Findlay thus took his building history, his “personal” goodwill and that of the company into a new corporate setting with the incorporation of Ability Ltd, later SFB Ltd, later SFB(2012). A flow of profits and income came

first from SFB then SFB(2012), exceptional returns in the context of the history of the companies for which Mr Findlay had worked. That money flowed out to Mr Findlay, and found its way into further trust holdings so that today, for the beneficiaries of the two holding trusts, there are significant assets. This includes the interest in SFB(2012) held by WNHA Trust. The evidence before the court is of property holdings in trust and there is expert valuation evidence of the value of SFB, measured in 2012 and in

[163] Mrs Findlay is unlikely to gain anything in the future administration of either of the trusts established for the benefit of the “family”, or the income from SFB(2012). Yet in one sense she is indeed fortunate that Mr Findlay was able to take advantage of the position which developed after the parties separated. She is also perhaps fortunate he did not more effectively shield himself from this claim. He took advice about SFB, the platform to which I have referred, and to which Mrs Findlay undoubtedly made a major contribution. Mr Findlay could not have carried out the work that he did, the rather haphazard means of earning a good living for the family, without Mrs Findlay’s wholehearted support in the bringing up of the family and working within the company, and with her banking background. She went on a journey with Mr Findlay and the family to keep the business going and it fell on hard times. The foundation for a remedial constructive trust is made out.

[164] The question returns to the reasonable expectation which this Court considers Mrs Findlay is entitled to hold, and to which Mr Findlay and the defendant trustees should respond under the equitable considerations associated with a constructive trust. I have the strong impression that Mr Findlay would have liked to have found a way of reflecting this claim by Mrs Findlay under constructive trust, or as he would see it, something to reflect the contributions made by Mrs Findlay to the marriage. Her contribution in a rather undefined way, has now found its way into the assets of the trusts established and the standard of living Mr Findlay has been able to achieve for himself and the children. No precision can be brought to the exercise, but I have come to the view that I must use Mr Beylefeld’s and Mr Weber’s valuations as a yardstick. However, I prefer a valuation which recognises all the considerations above, then to reflect on the assets which are now owned, again without reliable valuation, by the two new trusts.

[165] I have concluded that it would be wrong not to recognise some of Mr Findlay’s personal goodwill in the valuation of the company, so I will reflect that to some degree. Further, I would not adopt a valuation of the company which required Mr Findlay to give up his future earnings by restraint of trade. That would not reflect the equities between Mr and Mrs Findlay. I conclude that confining this Court’s judgment to one or other version of the expert valuation evidence inadequately reflects the way in which the company, through Mr Findlay’s efforts, has continued to earn substantial sums of money, whether taken in salary or otherwise, to the benefit of other trust holdings. I accept these have been essentially to support Mr Findlay and the children in the first instance, now and in the future, so far as Mr Findlay is concerned. He otherwise has a modest personal lifestyle and is and has been protecting and advancing the position of the children.

[166] I consider there needs to be a balancing to reflect what “survived” as of separation, and as of the commencement of the earthquake sequence, to be measured against what followed. Mrs Findlay had no more part to play in the company, but she had an interest as a discretionary beneficiary in a trust which owned shares in a company which had comparatively little value at separation, but which acquired value as a result of the Fletcher EQR contract(s). That was the result of Mr Findlay bringing to bear his developed skills and reputation to which she had contributed, together with his own work which clearly was considerable in order to achieve the profits which are before the Court. The need for balance, to recognise this “before and after” position, is important. Overall, Mr Findlay’s determination to keep building and his success and hard work must weigh in the balance.

[167] No precision can be brought to quantum because the information before the court is not in reliable evidential form, nor tested at hearing. For example, assets are now owned by the WNHA and JKST Trusts, or they have an interest in assets, which stem from moneys withdrawn from SFB and SFB(2012), and the value of those interests will reflect other activity such as subdivision, building and debt to SFB(2012) for building work. The money withdrawn from SFB and SFB(2012) will have tax implications, as Ms Corry recognises.

[168] It is for those reasons that I have decided that any award should reflect the expert evidence given by Mr Weber and Mr Beylefeld, although without accepting the view of either as definitive. I consider their evidence should be addressed by way of a “fair valuation” as opposed to a “fair market valuation”, because I think there is much in Mr Beylefeld’s evidence, and the submissions of Mr Lester, that the Fletcher EQR contract with SFB and later with SFB(2012) should not be assumed to assure profits to a purchaser, given it was a competitive market where any company such as SFB and SFB(2012) had the necessary skills, experience and reputation to get the work. There was, however, a business which had value.

[169] There must be recognition of the fact that any valuation reflects a stream of taxable earnings, bar any deductibility for tax losses available to the company. Further earnings have not been maintained at the levels reflected in the first few years of the Fletcher EQR contracts. The notional value of the earnings stream has to reflect that. The “value” must be that which can be repaid, net of tax, from the earnings derived, and still leave a significant profit in the future. Otherwise there is no point in purchasing future revenue at a price which will only be repaid, leaving a much lesser business for the future.

[170] Taken in combination, these factors lead me to judgment that those who have benefited from the stream of earnings, being Mr Findlay and the trusts, should yield something to Mrs Findlay for the fact that she held an interest as a discretionary beneficiary in a trust which owned the family business she helped build up. The effect of this interim judgment is that Mrs Findlay should be paid the sum calculated below, pursuant to a constructive trust against all of the defendants, but without attaching this interim judgment to a particular item of property. I have taken the expert valuation evidence and recognised the assets that have been derived from SFB and SFB(2012) have in part been spent, properly, on the maintenance and support on Mr Findlay and the children, and in part invested in trust holdings. It is impossible without a full enquiry to know exactly what those interests represent in present day values and the reasonable inference is that they will have increased in value. However, there are the yardsticks in the valuations of Mr Weber and Mr Beylefeld, and the evidence of value derived from the companies. I do not consider any greater precision can be brought to the exercise without extensive further evidence of assets and values.

[171] The exercise is not one of precision but I reach the figure of $500,000 by recognising that the enterprise value as at 2012, whether inclusive of personal goodwill or the “intangible asset” averages at approximately $760,000.

[172] The “profit dividend/net of surplus of assets and debt” of $495,000 is applied by both Mr Beylefeld and Mr Webber, so before determining the approach to personal goodwill and intangible asset value, the average between the two valuers is approximately $1,250,000.

[173] I do not consider all the profits in the period 2013 to 2016 should be brought to account in full, six years after the separation, as I consider that to “reach” too far, and adopt a figure of $1,500,000.

[174] That does not reflect the other matters discussed, including the attribution of an element of personal goodwill to Mr Findlay which I treat as half of the “personal goodwill” fixed by Mr Beylefeld, adopting a figure of $325,000.

[175] Then there is tax, and recognition of the fact that the valuation cannot be fixed at a price which returns only the cost of acquiring the earning stream which is not sustainable.

[176] Beyond that point, more ephemeral considerations apply, because the original trust was always intended to be for the benefit of the family as a whole, not just to be divided equally between Mr Findlay and the children. The even more ephemeral consideration is to recognise the extent to which the “springboard” should be reflected as opposed to the fact the business had very little value at separation, although I do find that by the sale of assets from SFB to SFB(2012) the directors must have known there was a significant value accruing in the company both for work in that year to 31

[177] These last few considerations can only be addressed in the round, and I can do no more than that, so fix the constructive trust in the sum of $500,000.

[178] The overarching consideration is that what existed at separation was nothing like what has eventuated, through Mr Findlay picking up the work over several years of extreme disruption to Canterbury families and property, and it was hard work.

[179] The sum of $500,000 is to be paid to Mrs Findlay from such sources as the defendants choose. By this interim judgment they have the opportunity to do so. If that can be arranged and the Court is satisfied payment is certain, within a reasonable period from the date of this interim judgment, I do not intend to make any award of interest, or of costs.

[180] If the defendants do not advise the Court that such a payment will be made in terms agreed by Mrs Findlay as to date and form of payment, then I reserve my position under this interim judgment, as to whether judgment should be entered against the defendants jointly or severally, to enquire into the financial position of each of the WNHA and JKST Trusts, and to further consider the possibility of orders which may lead to resettlement of the trusts, to effect this interim judgment.

[181] By this interim judgment, a constructive trust is upheld whereby Mrs Findlay has an interest in assets held by the defendants in the sum of $500,000. That sum would comprehend any possible award of costs or interest. I make no other orders as sought on the pleading, but reserve the question of chattels.

[182] To effect this interim judgment, I reserve the position until the defendants respond, and I direct that they do so within 21 calendar days of the date of delivery of this interim judgment. If the defendants cannot arrange a payment to meet this interim judgment within what the Court considers a reasonable time, then the position is reserved as to what further orders may be made to attach to assets, against the defendants jointly or severally.

[183] I reserve all other issues not answered by this interim judgment, or orders to effect it.

Copy to: A M Corry, Barrister, Christchurch and D M Lester, Barrister, Christchurch

High Court of New Zealand Decisions

Findlay v Findlay [2017] NZHC 2797 (15 November 2017)