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Vance v Guerra [2008] TOLawRp 32; [2008] Tonga LR 161 (17 July 2008)

IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

CV 31/2008

Vance

v

Guerra

Andrew J
17 July 2008

Matrimonial property – decree nisi had been granted – ownership of business in question – joint ownership

Both parties had petitioned for divorce and a decree nisi had been granted on 23 April 2008. The plaintiff subsequently issued civil proceedings in relation to property matters and matrimonial assets. She claimed that she had paid and contributed the sum of USD $60,000 to the matrimonial home and that as the defendant had retained possession and use of the home he ought to pay back her contribution. The plaintiff also claimed a 50% share of the net sale of a bar and restaurant business which she and the defendant had operated at Neiafu, Vava'u. The defendant claimed that the USD $60,000 had been spent in paying off debts incurred by the plaintiff prior to the marriage and on the plaintiff's relocation expenses. The defendant claimed that he was the sole owner of the business and the plaintiff was not entitled to any share of the proceeds of sale.

Held:

1. Section 15 of the Divorce Act (Cap 29) provides that whenever a decree for divorce is pronounced, each of the parties to the marriage so dissolved shall retain his own property. The plaintiff was found to be an honest and reliable witness whereas the evidence of the defendant was inconsistent and unreliable. The court was satisfied that the plaintiff had contributed USD $60,000 to building the matrimonial home and she was awarded that sum together with interest at 10%.

2. The tenancy agreement relating to the business was in the name of both the plaintiff and the defendant. That clearly recognised the plaintiff as an owner of the business although the business was only in the name of the defendant. The evidence was overwhelming that the plaintiff and the defendant operated the cafe/bar business as their joint business. The plaintiff was awarded USD $55,000 for her interest in the business together with interest at 10%.

3. The plaintiff was awarded costs to be agreed or taxed.

Statute considered:

Divorce Act (Cap 29)

Counsel for the plaintiff : Mr Niu
Counsel for the defendant : Mr Vaipulu

Judgment

Both parties in this matter petitioned for divorce and a decree nisi was granted on the 23rd April 2008. The Plaintiff however issued civil proceedings in relation to property matters and matrimonial assets. Both matters were heard together.

The Plaintiff makes two claims against the defendant as follows:

"(a) That she had paid and contributed to their matrimonial home at Neiafu, Vava'u, a sum of U.S.$60,000.00 and that as the defendant has retained possession and use of that home, he ought to pay her back that contribution and keep the home as his; and

(b) That she and the defendant were joint owners of a bar and restaurant (Tonga Bob's Cantina) business at Neiafu, Vava'u which they had acquired with a loan of U.S.$20,000 from the Defendant's father, which business has been sold for U.S.$130,000 of which U.S.$20,000 has been paid to the Defendant's father in repayment of the loan and the balance of U.S.$110,000 ought to be shared equally between her and the Defendant, but the Defendant has kept it all for himself as well as the home.

The defendant denied the 2 claims of the Plaintiff as follows:

(a) as to the matrimonial home U.S.$63,812.00 had been used for the construction of the home and that was paid by the Defendant's parents and that the U.S.$60,000 which the Plaintiff had contributed has been used:

(i) to repay to the defendant a sum of $15,000 which the defendant had spent on paying off debts of the Plaintiff in the United States which had been incurred prior to their marriage; and

(ii) to pay for the expenses of relocation of the Plaintiff and the Defendant when they moved from the United States to Tonga.

(b) as to the business,

(i) the $20,000 with which the business was acquired was not a loan but a gift from the Defendant's parents to the Defendant to enable him to acquire the business as his own business;

(ii) the purchase of the business (with the $20,000) was made from the owner directly to the Defendant personally and not to the Defendant and Plaintiff jointly; and

(iii) the Defendant was the sole owner of the business and that the Plaintiff was not entitled to any share of the proceeds of sale of US$110,000.

The Matrimonial Home

The Plaintiff gave evidence (as submitted) of how she had inherited U.S.$60,000 from her grandmother and how it was held in the Defendant's bank account (due to her legal incapacity to have her own bank account) and how accounts were then transferred from that account to the defendant's mother, Barbara Guerra, to transfer to the builder, Steve Bason and the Defendant's father, Robert Guerra, for payment of the construction of the home. There is documentary evidence of those transfers. The Plaintiff stated that the reason that the amounts were transferred to Barbara Guerra's name was because she was working at a bank and it was arranged that way on her instructions.

I agree with the submission that it was never put to the Plaintiff in cross-examination that the money transferred (as above) were monies of the Defendant's parents only, NOT her inheritance money or that all her inheritance money had been spent in the relocation costs and payment of her debts in the U.S.

The defendant's further, also Robert Guerra, gave evidence that these transfers were monies of his own and not transferred from the Defendant's bank account. I found his evidence to be devious. Whilst it might be technically correct to say the money was not transferred from the defendant's bank account, the defendant himself in his statement of claim said that the $60,000 was paid to him by the plaintiff.

I also found the defendant to be a devious witness. An example is that the house was situated on Lot 11. Lot 12 was the defendant's parents house. By error the Plaintiff and the defendant had "Lot 12" entered on their agreement with the landholder dated 14th June 2004. On 24th October 2006 the Plaintiff and the Defendant signed as assignment of Lot 12 to "Robert Guerra", father of the defendant to regularize the matter. The defendant and his father tried to use this to show that the Plaintiff had agreed to assign the matrimonial home to the defendant and had signed the assignment of 24th October 2006 to effect that transfer, especially when the Defendant himself had signed it as the assignee himself and not his father, Robert Guerra.

Further, the defendant then stated in evidence that the US$60,000 was not an inheritance of the Plaintiff but was a gift directly from the Plaintiff's mother to him personally. But in his Statement of Defence he had said that the US$60,000 has been paid to him because he had paid for the Plaintiff's debts and because the Plaintiff could not have her own back account.

In my view what has happened in this case is that the Plaintiff and the defendant had separated, she had returned to the United States but he believed that the marriage was not finally over. When it because clear to him that the marriage was at an end for various reasons including his belief that she had committed adultery, he then because bitter and decided that she would get nothing; yet he had previously confirmed the right of the Plaintiff to the home. In an e-mail of the 20th February 2008 he said:

"I will keep up on the land payments seeing as how I am going to be here for a while, and if you decide you need to sell the house or have buyers for it, let me know and I will find another place to live.

Further : As far as our mutual assets go I've always tried to keep you in the know as soon as I have known anything, and that will continue. When I know what is going on you will be the first to know."

The defendant's submissions concede that the U.S.$60,000 was from the Plaintiff.

I accept the evidence of the Plaintiff. I found her to be an honest and reliable witness. I found the evidence of the defendant to be inconsistent and unreliable.

I am satisfied that the Plaintiff inherited U.S.$60,000 and that she contributed that amount to building the home. I do not accept that that amount is depleted by the paying off of some debts prior to marriage or that the money was used for relocation costs.

Section 15 of the Divorce Act (Chapter 29) provides as follows:

"15. Whenever a decree for divorce is pronounced, each of the parties to the marriage so dissolved shall retain his own property."

In this case the defendant will retain the home. In my view she is entitled to retain the U.S.$60,000 which she contributed to the building of the home and which was her money which she had inherited.

The Business

There is no dispute that the Defendant's father paid $20,000 to buy the business ("Tongan Bob's").

The Plaintiff says that it was given to her and the defendant as a loan. She says the defendant's father said: "We give you the money and you pay us back when you sell the business". She also said that when the defendant and herself were discussing the sale of the business to Matthew Mulligan (the eventual buyer of the business) they agreed that the US$20,000 loan would be re-paid and the balance would be split 50/50 between them. This was at a time that the parties were separating.

The defendant said that the loan was made to himself alone.

The defendant's father said it was a gift by himself to the defendant and not a loan.

I am satisfied it was a loan. Both the defendant and the Plaintiff say it was a loan. The defendant's father has been re-paid which must show that it was indeed a loan and not a gift.

The tenancy agreement for the business was in the name of the Plaintiff and the Defendant. It stated that the Tenant was to pay the monthly rent and operate the premises as "a business venture as a bar/café, be responsible for operational overhead such as all utilities and to insure the building and also its contents and stock in the premises."

I agree with the submission that that clearly recognised the Plaintiff as an owner of the business and the defendant signed it as co-owner with the Plaintiff. It is true that the purchase of the business was only in the name of the defendant. But I am satisfied that it was purchased by the U.S.$20,000 which was loaned to the plaintiff and the defendant. It was in the name of the defendant only as a matter of convenience.

When the business was sold the negotiation preceeding it was between the Plaintiff and the Defendant on the one hand and Mr Matthew Mulligan, the purchaser, on the other. The Plaintiff gave that evidence and it was confirmed by Mr Mulligan in his evidence by the fact that he instructed his lawyer to draw up the sale and purchase agreement in the joint names of the Plaintiff and defendants as sellers and his own company, Island Quays Pty Ltd, as purchaser. Mr Mulligan said that the draft agreement was then given to the Plaintiff as the defendant was not working in the business at the time and for her and the defendant to sign it and return to him for his signature.

All of that would clearly show that this was a jointly owned business. Furthermore it is confirmed in e-mail messages between the Plaintiff and the defendant, as follows:

E-mail Plaintiff to Defendant on 1st Novemer 2006:

"I will leave the money in the chopping block and the balance in the till. Did you come take the deposit book from the bar by chance? I am not able to locate it as of yesterday. Mathew is meeting with Koli today and will get a copy of the power of attorney. Mathew is also dropping off a copy of the sale agreement that his lawyer has sent to him. Also do you just want of split the lot payments, I pay one and you the other to Robert of the months? I plan to go to work in the morning and do the shopping and payroll. I will be out of there by 10 a.m. The bar rent has been paid for this month with the land payments.

I will check e-mail tomorrow before I go if there is anything else. Thank you for everything."

The Defendant replied the next day:

"I didn't take the deposit book, I haven't been in the bar for over a week.

The only thing I need is your account information for the deposit. It will be written into the sale agreement, so if you can, get the routing and account numbers."

This is the clearest evidence and acknowledgement that this was a jointly owned and jointly run business between husband and wife and that the Defendant had agreed to pay the Plaintiff her share of the business.

In an e-mail of the 20th February 2008 the defendant refers to their mutual assets and "I'll keep you informed of the assets and your money".

What then happened was that the Plaintiff left for the U.S. having been told that she would receive her share of US$55,000 from the sale of the business to Mr Mulligan. But again, the defendant changed his mind upon his realisation that the marriage was finished and he refused to pay the Plaintiff anything. He told Mr Mulligan that the Plaintiff was no longer involved in the business and Mr Mulligan then instructed his lawyer to draw up a new sale and purchase agreement between the Defendant and Mr Mulligan's company. In pursuance of that agreement payment of US$130,000 was made to the defendant.

The Defendant had admitted in evidence that he had agreed to give half of the proceeds of sale (after repaying the US$20,000 to his father) of the business to the Plaintiff but that he subsequently changed his mind.

I think the evidence is overwhelming that the Plaintiff and the Defendant operated the cafe/bar business as their joint business. As submitted, they had joint weekly drawings of $300; they did not pay PAYE income tax in that drawing; they both managed the business-buying stock and paying bills, banking etc.; the Plaintiff worked long hours and on days even weeks on end. I am satisfied that she was largely responsible for the success and worth of the business which she knew and understood was her business as well. I accept the evidence that both the Defendant and Plaintiff referred to the business as theirs.

I am satisfied on the evidence that the Defendant did know very well that the Plaintiff was a joint owner of the business with him but he has refused to pay her due to his belief that she has forfeited her share of the proceeds because of his belief that she had been an unfaithful wife.

Again, s 15 of the Divorce Act provides:

"15. Whenever a decree for divorce is pronounced each of the parties to the marriage so dissolved shall retain his own property."

I am satisfied that the business "Tongan Bobs" was jointly owned by the Plaintiff and the Defendant from the beginning to the end and that they are both entitled to the proceeds of the sale on a 50/50 basis.

For all of the above reasons I give judgment to the Plaintiff in the sum of U.S.$55,000 for the business, plus interest at 10% per annum on that sum from the 1st December 2006 until payment of the same and in the sum of U.S.$60,000 for the matrimonial home plus interest at 10% per annum on that sum as from the date of the Statement of Claim being 24th April 2008 until payment of the same.

Costs are awarded to the Plaintiff as agreed or taxed.