EPAMINONDAS & EPAMINONDAS

[2015] FamCA 465

FFAMILY COURT OF AUSTRALIA

EPAMINONDAS & EPAMINONDAS [2015] FamCA 465

FAMILY LAW – PROPERTY – Valuation of Property – where wife seeks an audit of the husband’s business – where husband opposes application and seeks to restrain wife from having active role in business – where parties have not yet provided joint letter of instruction – orders made for single expert to undertake valuation in absence of joint letter of instruction.

Family Law Act 1975 (Cth)

Family Law Rules 2004 (Cth) r 15.45, 15.54

Foda & Foda (1997) FLC 92-753

APPLICANT: Ms Epaminondas

RESPONDENT: Mr Epaminondas

FILE NUMBER: ADC 2118 of 2014

DATE DELIVERED: 19 June 2015

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 3 June 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Robertson SC

SOLICITOR FOR THE APPLICANT: Camatta Lempens Pty Ltd

COUNSEL FOR THE RESPONDENT: Mr Lindsay

SOLICITOR FOR THE RESPONDENT: Jordan & Fowler Barristers & Solicitors

Orders

1. All previous orders are dismissed.

2. That pending further order, the husband cause to be provided to the wife on a monthly basis:-

   (a)a copy of each and every bank account and credit card statement for B Pty Ltd (“B”), C Pty Ltd (“C”) and the Epaminondas Family Trust (“Trust”) or any account into which funds for B, C and the Trust are paid;

   (b)a monthly print out of the internal accounting records of B, C and the Trust including a copy of all MYOB records pertaining to the companies and the Trust.

   (c)that the husband forthwith provide the wife with internet access to “Net Bank” and “ComBiz” and to any online account held by the National Australia Bank (“NAB”) for all accounts in which the husband has an interest into which C, B, or the Trust Funds are or have been deposited either with the Commonwealth Bank of Australia (“CBA”) or the NAB.

3. That the parties do execute all documents necessary to give effect to any offer from NAB to refinance the debts of C, B and the Trust provided that any refinancing with NAB not be on terms more disadvantageous to the parties, the Trust and the companies than had previously been in place with the CBA.

4. That the parties be restrained and an injunction granted restraining them from selling, assigning, gifting, transferring, encumbering or otherwise dealing with the assets of C, B or the Trust unless by express order of the Court or with the written consent of the parties.

5. Pending further order, B distribute to each of the parties the sum of $1,500 per week and the parties be otherwise restrained and an injunction be hereby granted restraining each of the parties from making or authorising any further distributions or drawings for their personal expenses or the personal expenses of others, in particular members of the immediate family of the parties from B, C or the Trust without the written consent of the other.

6. That pursuant to Rule 15.45 of the Family Law Rules 2004 (Cth) (“the Rules”), within twenty one (21) days of this order the husband and wife shall jointly instruct D Property to value all real property owned by the husband, the wife, the Trust, C and/or B held within the Commonwealth of Australia with B to meet the costs of such valuations.

7. That pursuant to Rule 15.45 of the Rules, within sixty (60) days of this order, the husband and the wife shall jointly instruct and agree a licensed valuer to value all real properties in which the husband has an interest in Thessaloniki and the area of E Town in Country F.

8. That pursuant to Rule 15.45 of the Rules, within twenty one (21) days of this order, the husband and the wife shall jointly instruct Mr G of H Pty Ltd to conduct a valuation of the interests of the parties in C Pty Ltd with B to meet the costs of such valuation.

9. That in the absence of the parties being able to agree a joint letter of instruction pursuant to Order 8 herein, Mr G shall thereafter undertake the valuation upon the provision of the following documents:-

   (a)the financial statements (in draft form if necessary) for C for the 2012, 2013 and 2014 financial years;

   (b)       the MYOB accounts for the 2015 financial year;

   (c)       the 2011 valuation report of Mr I;

   (d)a statement of facts pursuant to Rule 15.45 (4) of the Rules by each of the parties if so advised PROVIDED that the form and content of such statement shall not cause or direct the single expert to undertake an audit of C, shall be limited to no more than ten (10) pages inclusive of annexures and be provided within thirty (30) days of the date of this order.

10. That pursuant to Rule 15.45 of the Rules all other assets the value of which are not agreed in writing between the husband and wife’s solicitors within sixty (60) days of the date of this order be the subject of valuation by a single expert valuer with B to meet the costs of such valuation.

11. That the parties shall do all things necessary to cause and permit the operating accounts for C, B or the Trust to be operated solely by the husband but the continued operation of the account by him shall be conditional upon his strict compliance with his obligation under these orders to provide proper access to records and books of accounts of C, B and the Trust.

12. That the husband shall be responsible for the day to day operation and management of C and the attendance by the wife to the business premises of C shall be limited to one (1) day per month upon the giving of forty eight (48) hours’ notice of her intention to attend or as otherwise agreed between the parties.

13. That there be an order for the disjoinder of J Pty Ltd ACN … and Mr K Epaminondas.

14. All outstanding interim proceeding do stand dismissed save as to costs which shall be reserved.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Epaminondas & Epaminondas has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADC 2118  of 2014

Ms Epaminondas

Applicant

And

Mr Epaminondas

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. The proceedings commenced by the filing of the Initiating Application of Ms Epaminondas (“the wife”) on 16 June 2014.  Whilst that application was the subject of subsequent amendment, it is an important observation that by way of final order she seeks that the property of the parties be distributed equally between them.

2. In addition the wife seeks that the parties do all things as may be necessary to cause B Pty Ltd (“B”) as trustee for the Epaminondas Family Trust (“the Trust”) to transfer or distribute to the wife the whole of its interest in a property at L Street, M Town, Queensland (“the M Town property”) to the wife.

3. She also seeks to transfer to Mr Epaminondas (“the husband”) her interest in B, the Trust and C Pty Ltd (“C”) to the husband.

4. By Response filed 9 August 2014, the husband sought orders that were not dissimilar to the relief sought by the wife.  In particular, the parties are agreed that their property should be distributed equally between them.

5. The husband initially was prepared to transfer to the wife his interest in the former matrimonial home at O Street, Suburb P but it now appears that he would wish to retain that property as part of the eventual property settlement.

6. He also seeks to retain real property situate in Country F and whilst initially he also sought to retain the M Town property, there now appears to be a concession that he will do all that is necessary to cause the transfer or distribution of that property from the Trust to the wife.

7. The parties are agreed that the husband will retain B, the Trust and C free from any further claim or interest by the wife.

8. It is therefore readily apparent that the dispute between the parties should properly focus on the identification and valuation of the interests of each of the parties in property that will comprise the pool available for distribution.  It is in respect of that issue generally but in particular the wife’s focus on the manner in which the husband has conducted the affairs of C, B and the Trust that remains the focus of the interim proceedings and much of the litigation to date.

9. The wife filed an Amended Initiating Application on 18 November 2014.  The only significant amendment is to seek a declaration that the interests of their son Mr K Epaminondas in a company incorporated under the name of J Pty Ltd (“J”) is the alter ego of the husband and/or of C.  That declaration is based upon an assertion that J has been the “knowing recipient of unlawful payments from the husband or [C] to the detriment of the wife and/or [C]”.  As a result of that assertion, if the Court would not consider J to be the alter ego of the husband and/or C, then all proceeds of that company should be held by way of constructive trust for C.

10. The thrust of the interim proceedings to date and the focus of the wife is to allege that the husband continues to manage C, B and the Trust to the detriment of the parties’ property interests generally but to the wife in particular.  There has been a detailed and forensic focus undertaken by the wife to support her contention that the husband’s behaviour has not been transparent.

11. For his part, the husband argues that the current interim proceedings are unnecessary and that he has provided all that could possibly be required of him in terms of financial information as sought, that the longstanding accountants of the parties continue to prepare the financial records of the parties, C, B and the Trust in a manner no different to the long history prior to separation and that a valuation of the C business undertaken in 2011 of $443,000 against a total pool of about $6.2 million places the interim proceedings into a proper context.

12. Against that background, by way of interim application in the Amended Initiating Application filed 18 November 2014 the wife seeks orders summarised as follows:-

    1.That Mr K Epaminondas and J Pty Ltd be joined as parties to the proceedings.

    2.That pending determination of the proceedings the husband cause to be provided to the wife on a monthly basis:-

    2.1A copy of each and every bank account and credit card statement for B Pty Ltd, C Pty Ltd and the Epaminondas Family Trust;

    2.2A monthly printout of the internal accounting records for B and C.

    3.An injunction restraining the husband from conducting the business of B and C other than in the ordinary course of business.

    4.Interim spousal maintenance in the sum of $2,200 per week.

    5.That from the net proceeds of sale of a property situate at Q Street, Suburb R (“the Suburb R property”) the wife receive the sum of $150,000 from funds standing to her credit in the Trust.

    6.That all assets not the subject of agreement as to value be the subject of a valuation by a single expert valuer but with the husband to meet the costs of such valuation at first instance.

    7.That the former matrimonial home at O Street, Suburb P (“the Suburb P property”) be placed on the market for sale.

    8.Orders for the provision of documents by Mr K Epaminondas in his capacity as sole director and shareholder of J.

13. The Response of the husband to the interim orders was to agree that he would cause to be provided to the wife on a monthly basis a copy of each and every bank account and credit card statement for B, C and the Trust together with a monthly printout of the internal accounting records for the various entities.

14. There was also agreement that both he and the wife would be restrained from conducting the business of the various entities other than in the ordinary course of the business.

15. There was not agreement as to the extent of the spousal maintenance as sought by the wife but the husband did concede that the wife should receive $1,000 per week from C provided that she also be injuncted from disposing of or dealing with the assets of C, B or the Trust without the husband’s consent.  As matters have transpired the parties have agreed on each of them receiving $1,500 per week but without concession that it is a payment in respect of spousal maintenance.

16. Critical to the current proceedings was an order sought by the husband that the wife shall sign all such documents and do all things necessary to permit the overdraft of C to be increased to enable certain specified creditors to be paid.

17. The husband also sought orders that the wife make further discovery within 14 days evidencing the disposal by her of a sum of $103,628.83 which the husband alleges she withdrew from an C overdraft account and a B overdraft account without his consent or knowledge.

18. Finally, there was agreement that any asset not the subject of agreement should be the subject of valuation by a single expert valuer.

19. By Application in a Case filed 8 May 2015, the wife sought detailed orders requiring the parties to jointly instruct Mr G of H Pty Ltd to conduct a financial audit of C’s financial records and a valuation of C, with the costs of this audit and valuation to be met by B.

20. That order if made would also require the parties to provide a significant quantity of financial records in respect of C together with passwords, codes and keys to the C business to allow the retrieval of financial records both electronically and physically.

21. The wife also sought that the parties do all things necessary to cause the “Bell Potter share portfolio” held by the Trust to be sold and the net proceeds of sale be distributed to the wife for her “maintenance and legal expenses”.  Paragraphs 10, 11 and 12 of the application were directed to ensuring that all monies received by C in the course of its business was paid into the company’s Commonwealth Bank account number ...

22. There was the broad allegation by the wife that the husband had opened accounts to which the wife did not have access and that monies properly paid to C, B or the Trust were being paid into those accounts.

23. A secondary focus of the wife was the extent to which either the husband was attempting to either transfer and/or dispose of property, income or client base to the son’s company J.  Additionally, it was alleged that the husband had directed excessive financial benefit to Mr K Epaminondas which bore no resemblance to his employment duties.

24. Order 14 targeted the ability of the husband to use C credit cards for any purpose other than C business expenses.

25. Paragraph 16 of the application required the husband to provide the wife within 24 hours of her request access to all C computers, hard drives, records and premises.

26. It is a reasonable summary of the Application in a Case of 8 May 2015 that its prime and principal focus was on C and the manner in which the husband conducts that business.

27. Whilst it will be addressed in more detail, the husband argues that whilst there is no basis for the wife’s concerns, in any event the value of the interests of the parties in C (if any) is modest and when considered against the balance of the asset pool, does not justify the level of attention lavished upon it by the wife.

28. By Application in a Case filed 21 May 2015, the wife seeks further orders that would have the husband restrained from “selling, assigning, gifting, transferring, encumbering or otherwise dealing with the assets of C, B or the Trust unless by order of the Court or consent of the wife.

29. Finally, the wife seeks a mandatory injunction requiring the husband to transfer the Bell Potter share portfolio back into the Trust with the husband to bear the cost of transfer and any tax or other liabilities that have arisen in respect of his action in what ultimately was a sale of the share portfolio by the husband.

30. By Response filed 2 June 2015, the husband indicates his consent to orders being made in terms of paragraphs 4 and 5 which would enable the parties to separately instruct Mr G and that the husband do make disclosure on oath.  Otherwise the orders sought by the wife are generally opposed but in particular any concept that an audit should be conducted on C.

31. Additionally, the husband requires the wife to execute all documents necessary to give effect to any offer from NAB for the refinancing of C and Trust debts.

32. He also seeks that the wife sign off on the financial statements for C and the Trust for the financial years 30 June 2012, 30 June 2013 and 30 June 2014 as prepared by S Chartered Accountants instructed to prepare tax returns for the parties and the various entities.

33. Finally, and notwithstanding an order made on 20 January 2015 in respect of the appointment of Mr G as a single expert valuer, because of what appears to be an inability by the parties to agree a joint letter of instruction, orders are sought to give effect to that earlier order.

DOCUMENTS CONSIDERED

1. The wife relies upon the following documents:-

   1.Amended Initiating Application filed 18 November 2014.

   2.Affidavit of wife filed 16 January 2014.

   3.Financial Statement of wife filed 16 January 2014.

   4.Affidavit of wife filed 1 October 2014.

   5.Affidavit of wife filed 18 November 2014.

   6.Affidavit of wife filed 8 May 2015.

   7.Application in a Case filed 8 May 2015.

   8.Application in a Case filed 21 May 2015.

2. The husband relies upon the following documents:-

   1.Response to Initiating Application filed 9 August 2014.

   2.Affidavit of husband sworn 8 August 2014.

   3.Affidavit of husband filed 11 May 2015.

   4.Affidavit of husband filed 2 June 2015.

   5.Response to Application in a Case filed 2 June 2015.

BACKGROUND

1. The husband was born in 1947 and is currently 67 years of age.  He is a director of C which is a company that wholesales in the marketing of alternate therapeutic products.  The wife was born in 1951 and considers herself to be a retired business director.  She is however a director and shareholder (together with the husband) in the entities C and B.  Whilst historically controversial, it would appear that at present the wife does not take an active role in the day to day affairs of C.

2. There are two children of the marriage, one of whom is Mr K Epaminondas born in 1974.

3. The parties married in 1972 and following a brief separation and then reconciliation in 2011, the parties finally separated in mid to late 2013.

4. There is little controversy in respect of the early history of the matter.  Neither party came into the relationship with a significant asset base, although the husband had an interest in a house property at Suburb T. Whilst the wife is critical of some of the conduct of the husband early in the relationship, nonetheless the picture painted by the parties is of each of them working hard and using their best endeavours to provide appropriate financial support for the family.

5. In early 1980 the parties purchased a health food store in Suburb U.  The parties concede that they were each involved in the day to day running of the store and that the work was particularly hard.  It was made more difficult by the need to provide proper care for a young family.

6. In the early 1980’s the business was offered a W Pty Ltd Agency and also the right to sell and distribute “Product V”.  C had by this time been incorporated and it was the vehicle for the Product V agency in 1983.

7. The husband does not disagree with the assertion of the wife that from the early days of the agency each of the parties were active in the promotion of the business and the potential health benefits of Product V as promoted to target shops.

8. The business appeared to flourish and the cashflow and resultant profit enabled the parties to purchase property both locally and interstate.

9. At various stages the adult children of the parties were involved in the C business. Their daughter Ms X remains a director but it is conceded that she has not been directly involved in the business and does not take an active role.  She resides interstate.  The position in respect of Mr K has been quite different.  He has worked in the business but his continued involvement has clearly been the cause of much complaint and conflict.  Mr K was ultimately removed from the position of a director.

1. In or about 2011 Mr K left the employ of C.  That appears to have been a pivotal point in time.  The wife alleges that her opposition to Mr K remaining involved in C was the catalyst for the husband excluding her from the management of the business.

2. The husband asserts that the wife has not been involved in the business for over 23 years and following their initial separation and then reconciliation in 2011, she attempted to reinvolve herself in the day to day affairs of C.

3. What is not in dispute is that the parties have experienced a high level of conflict since separation and whatever the position may have been prior to 2011 in terms of the wife’s involvement, I consider it beyond contention that for the last four years or so the wife has had little or no effective involvement in terms of day to day management.  That is not to suggest that the wife has been excluded completely from the business in that a significant quantity of  financial documents have been provided to her.

4. The husband would say the operation of the company is entirely transparent whereas the wife would allege that the husband has made it difficult for her to gain a proper understanding as to how the income generated by C and the trust have been utilised.  She considers that the actions of the husband in the conduct and management of both the business and the trust have been carried out to her detriment. The husband denies the allegation.

5. As will be seen, a critical stage has been reached in respect of C.

PROPERTY OF THE PARTIES

1. At paragraph 41 of the wife’s affidavit filed 16 June 2014 she sets out the property of the parties held directly or indirectly via B Pty Ltd as trustee for the Mr Epaminondas Family Trust and C Pty Ltd.

2. Notwithstanding that there is no agreement as to the value of the asset pool or indeed the assets that should properly comprise the pool, the wife considers that there are total assets of $9,975,712 and taking into account the liabilities of the parties both personally but also in respect of B and C totalling $2,964,077, the net equity is $6,194,573.

3. The husband disagrees with some of the wife’s assertions.  He disputes the likely value of real property in Country F asserted by the wife to be $1,162.437.  He also raises the issue of the method and methodology of valuation namely whether it should be on a future maintainable income basis or in respect of a net asset basis.  The distinction is important.  The wife’s schedule of assets may be overstated in respect of the inclusion of trade receivables, inventories and property, plant and equipment given the valuation methodology adopted by a forensic accountant in the valuation of C in August 2011.

4. Accordingly, whilst it could not be said that the pool is concluded, in terms of magnitude of scale the wife considers the property of the parties to be in or about the net sum of $6,000,000 whereas the husband might see this sum reduced by $1,000,000 or thereabouts.

5. The pool of property available for division is therefore substantial and the dispute and focus on C should be given some context.

C

1. Whilst an order has been made for Mr G of H Pty Ltd to be appointed as the single expert valuer of the interests of the parties in C, they have not been able to agree on an appropriate joint letter of instruction.  That state of affairs has now been outstanding since January 2015.  It is unfortunate that the valuation exercise has not been undertaken.  A valuation report may well have been of significant assistance to the parties in terms of placing the status of C into appropriate context.

2. In 2011, Mr I, chartered accountant was instructed by S accountants for the parties and C to provide an independent valuation of the company.  It is conceded in the report of Mr I that the company documents and records have not been the subject of audit.  That is not surprising nor unusual.  In any event it was not requested to be undertaken and there does not appear to have been any basis for such consideration.  The executive summary of the valuer indicates that the business did not have any goodwill on the basis of capitalised future maintainable earnings.  His focus then was to consider whether a net tangible asset valuation or a future maintainable dividend valuation was the appropriate approach.  On a net tangible asset basis the valuation was about $400,000.  A consideration of future maintainable dividends formed a range between $370,000 and $407,000.  In effect both valuation methodologies produced a similar outcome.

3. To compound the problems of the parties, it appears that of recent date C has suffered a downturn in revenue and income and whereas in the past it had been profitable, in the most recent figures available it appears that the business may well have made a loss.  Clearly if correct, that would significantly impact upon the value of the interests of the parties in C.  The husband would assert that at least some of that downturn can be blamed upon the most recent interference by the wife in the business whereas she would allege that the business remains profitable but that the income has been diverted to undisclosed accounts.

CONDUCT OF THE PROCEEDINGS

1. On 11 August 2014 the parties were able to agree the following order:-

   1.   That until final orders the husband cause to be provided to the wife on a monthly basis:-

   1.1A copy of each and every bank account statement for [B Pty Ltd], [C Pty Ltd] and the [Epaminondas] Family Trust;

   1.2A monthly print out of the internal accounting records of [B Pty Ltd], [C Pty Ltd] and the [Epaminondas] Family Trust including a copy of all MYOB records pertaining to the companies and the trust.

   2.   That an injunction be granted restraining the husband and the wife from conducting the business of [B Pty Ltd], [C Pty Ltd] and the [Epaminondas] Family Trust other than in the ordinary course of business and including but not limited to ensuring that all transactions conducted by or on behalf of the companies and trust be recorded in the formal banking records pertaining to each entity as appropriate.

2. Those orders clearly satisfy paragraphs 2.1, 2.2 and 3 of the interim orders as sought in the Amended Initiating Application.

3. By consent order made 18 November 2014, the parties agreed that:-

   1.Pending further order, [B] distribute to each of the parties the sum of $1,000 per week and the parties be otherwise restrained and an injunction be hereby granted restraining each of them from making or authorising any further distributions or drawings for their personal expenses from [B] or [C] without the written consent of the other.

   2.All assets the value of which are not agreed be the subject of a jointly instructed valuation with [B] to meet the costs of such valuation in the first instance.

4. The wife initially sought an order of interim spousal maintenance in the sum of $1,200 which was later amended to $2,200.  There was a concession on behalf of the wife that there were no documents that could be relied upon to support the wife’s spousal maintenance application.  Certainly, nothing in the wife’s financial statement filed 16 June 2014 could be relied upon.

5. The parties have however agreed that each of them should have the ability to draw either from B or from C the sum of $1,500 per week.

6. Whilst there appears to be some complaint by the wife that the payment to her has been irregular, that is not conceded and ultimately the wife’s application in respect of interim spousal maintenance was not pressed.

7. It seems that it is not so much the receipt by the parties of $1,500 from their joint financial resources that is the concern but rather, to what extent each of the parties has received a benefit over and above the agreed weekly distribution.

8. In any event paragraph 4 of the Amended Application was not pressed and can be dismissed.

9. The agreement between the parties as to the valuation by a single expert valuer of the assets of the parties that are not capable of agreement as to value is also resolved by order and accordingly, order 6 of the Amended Application can be dismissed.

10. The issues between the parties were further narrowed following the consent order before a Registrar on 20 January 2015 which provided notice that the wife intended to seek orders by way of extensive discovery from Mr K Epaminondas both personally and in his capacity as sole director and shareholder of J.  That notation was an extension of paragraph 8 of the Amended Application in that the wife’s focus was not simply confined to her son’s operation of J but also she sought details of any financial benefit that he may have received from C.  At the hearing Mr K Epaminondas appeared without representation.  His father’s solicitors had prepared an affidavit on his behalf but made it clear that they were not acting for him.  Whilst it is difficult to reconcile the status of the husband’s solicitors in respect of the subject affidavit, in the circumstances of this case it can be seen to be of assistance rather than a further complication.

11. Mr K conceded that whilst formerly a director and shareholder of C, his involvement ceased as at 2011 when he was removed as a director and transferred his shares to his parents in 2012. He has no remaining interest in C.

12. He confirms that from June 2013 he was re-employed by C and has been working there ever since.  He receives $800 per week net of tax and he states that his work entitlements include the use of a company car from time to time, a fuel card with the occasional benefit of the vehicle being used for personal use.  He does not have a C credit card.

13. He received a loan in the 2014 financial year which has produced a debit loan account in favour of the company of $12,259.  As at 2 June 2015 the MYOB ledger indicates a loan balance in favour of the company of $11,639.

14. Any money received by Mr K Epaminondas on behalf of C was used exclusively for C costs and outgoings.

15. Mr K is an undischarged bankrupt with an order for bankruptcy made 10 November 2014.  I am uncertain whether his current loan account in favour of C is effectively lost arising out of his bankruptcy. It would seem that his liability to C is unlikely to be considered with any priority but in the absence of any better understanding of the extent of his bankrupt estate, any further consideration can be no more that idle speculation.

16. The importance of his affidavit tendered on 2 June 2015 is that the wife appears persuaded that there is no longer any purpose in pursuing any orders against Mr K Epaminondas and J. 

17. Accordingly, both he and his former company can be the subject of an order for disjoinder.

18. The operative orders made on 20 January 2015 provided for the husband to give the wife internet access for all accounts in which the husband has an interest and into which C, B or the Trust Funds are or have been deposited but in particular a Commonwealth Bank Account Number ...

19. The parties also agreed to appoint Mr G of H Pty Ltd to conduct a valuation of their interests in C and B with such letter of instruction to be provided within 21 days of the order.

20. It is common ground that the parties’ mistrust of each other has not enabled a joint letter of instructions to be formulated and sent to the single expert.  Accordingly, the parties are in breach of that order.

21. The wife’s reluctance may be explained by her application to undertake an audit of C before any valuation takes place.

22. Whilst I accept the wife seeks that C be audited, I consider that the parties would have benefited by the preliminary valuation advice of the single expert. There is at least a bench mark as at 2011 as determined by Mr I. In circumstances where there has been a reduction in profitability (and possibly even to the extent of a loss in the last financial year) it is unlikely that the valuation will be substantially different. A report, even with the suspicion currently harboured by the wife as to the conduct of C, may still have been of considerable assistance in a resolution of the proceedings. I remind the parties of the provisions of Rule 15.46 of the Family Law Rules 2004 (Cth) (“the Rules”) which enables the Court to make an order as to the appointment of a single expert in circumstances where the parties cannot agree and if necessary to require a draft letter of instruction to be submitted for settling by the Court, or to provide the necessary instruction directly to the single expert.

23. Rule 15.54(2) provides:-

    All instructions to an expert witness must be in writing and must include:-

    (a)a request for a written report;

    (b)advice that the report may be used in an anticipated or actual case;

    (c)the issues about which the opinion is sought;

    (d)a description of any matter to be investigated, or any experiment to be undertaken or issue to be reported on; and

    (e)full and frank disclosure of information and documents that will help the expert witness to perform the expert witness’s function.

24. Rule 15.54(3) provides:-

    The parties must give the expert an agreed statement of facts on which to base the report.

25. Rule 15.54(4) provides:-

    However, if the parties do not agree on a statement of facts:

    (a)unless the court directs otherwise – each of the parties must give to the expert a statement of facts upon which to base the report; and

    (b)the court may give directions about the form and content of the statement of facts to be given to the expert.

26. Accordingly, even in circumstances where the parties were not able to agree a joint letter of instruction, Rule 15.54(4) provides a process by which each of the parties can provide a separate statement of facts.  That is not to suggest that the parties are able to direct the single expert to undertake a different exercise.  The order of 20 January 2015 provides for the single expert to “conduct a valuation of the interests of the parties in C Pty Ltd” not to conduct an audit.  That is a separate exercise and clearly is a matter that needs to be determined.

27. It may be the case that the wife would wish to put a different history to the single expert consistent with the matters raised in her affidavit material, but the rules do not permit either a change in the focus namely, a valuation of the parties interest in C and B, nor an additional or other task unless agreed or as may be ordered.

28. To the extent that an appropriate order exists, I propose to do no more than to extend time for the parties to prepare a joint letter of instruction, if not agreed then further time will be allowed for the parties to provide a separate statement of facts upon which they seek Mr G to base his report, but if not forthcoming then I propose to order that as a matter of Court direction, the single expert undertake the valuation process and that the parties comply with any request for documents that may be made to enable a valuation to take place.

29. Paragraph 5 of the Amended Application seeks that upon the sale of the real property situate at Q Street, Suburb R, the husband pay or cause to be paid to the wife the sum of $150,000 from funds standing to her credit in the Trust.  At paragraph 20.1 of the husband’s affidavit filed 11 May 2015, he confirms that the Suburb R property settled and that the sale proceeds of $888,491 was paid to the Commonwealth Bank to pay down debts.  Accordingly there are no available funds for distribution. There are difficulties in simply ordering the payment of money from a company or a trust to a party to a marriage under a property settlement order pursuant to s 79.  Issues of Division 7A may be relevant and monies received by way of such an order may be assessed as income in the hands of the recipient spouse.  Tax may well be paid.

30. The decision Foda & Foda (1997) FLC 92-753 stands for the proposition that a court should be cautious in bringing to account the loan account of a party when valuing the entity where the court finds that the entity may be the alter ego or property of the parties.

31. As I now understand the wife’s position, she does not seek any order in respect of the proceeds received following the sale of the Suburb R property and to the extent that she has an interest in ensuring that the assertion of the husband accurately discloses the disbursement of the sale proceeds, that can be achieved by the discovery process.

32. The husband seeks to retain the former matrimonial home situate at O Street, Suburb P.  At this stage the wife seeks that the property be sold but given the husband’s position, there is now a concession that such an order will not be pressed.

33. Accordingly, there does not appear to be any matters outstanding in respect of the interim orders sought by the wife included in the Amended Initiating Application filed 18 November 2014.

APPLICATION IN A CASE FILED 8 MAY 2015

1. Paragraph 1 seeks an order for the single expert to conduct a financial audit of C.

2. The wife raises a number of concerns in respect of the operation of C and to a lesser degree, B.

3. She alleges that the husband has been paying his own medical bills, lawyer’s fees and other personal expenses without restriction from the entities. 

4. Whilst she acknowledges that between 13 March to 7 July 2014 she withdraw $90,246.20 from the C Overdraft Cheque Account … together with the further sum of $13,382 from the B Overdraft Account …, she says that this was done in anticipation of her future needs and her observations from the documents provided to her that between 1 January 2014 to 7 July 2014 the husband has approved or “apparently approved a total of $221,174 on payments which do not appear to relate to the ordinary operations of [C]”.

5. By his affidavit of 11 May 2015, the husband seeks to answer the allegation of misappropriation of C funds made by the wife and considers that post-separation the management of C and B have not differed significantly to the conduct of those entities prior to separation.

6. It is accepted by the husband that some benefit was provided to the parties’ adult children Mr K and Ms X but that this is explained by there being a “lengthy history of the applicant (wife) agreeing our children having this benefit from [C]. In fact, the applicant also has a history of using [C] credit cards for personal use”.

7. Ultimately, it will be a matter of evidence but I consider that the response by the husband to the allegations and assertions of the wife is on the face of the matter credible and it could not be said that the husband’s response appears inherently inconsistent or lacks credibility.

8. Moreover, many of the transactions complained of by the wife fall into the category of “de minimus” or negligible concerns.  In respect of a pool of the size as presented by the parties, there is merit in the husband’s complaint that to conduct an audit would be to incur expense that could conceivably exceed any anomalies that might be established by the wife by a significant factor.

9. The wife has been able to identify the areas that are of concern to her only because of the extent of the discovery and disclosure of the husband in circumstances where that has come about following his clear consent.   There is of course nothing to stop the wife seeking to analyse the financial records that are clearly in her possession.

10. Moreover, the order sought by the wife provides no detail as to the extent of the audit, that is high level, mid-level or low level, nor is it at this stage confined by any specific period. The proposed exercise is open-ended and I am not satisfied that the wife has established there is any proper focus for her concerns that could only be addressed by an audit.  Even at its highest, there is sufficient asset available to the parties that an appropriate adjustment is able to be made at the final hearing.

11. It is certainly not the case that the wife has established sufficient concern to justify a preliminary financial investigation as precursor to the single expert conducting a valuation of the interests of the parties in C and B.

12. Accordingly, I do not propose to make orders in terms of 1 – 6 inclusive.

1. I do not consider that the wife has established that the parties should be put to the unnecessary expense of discovery on oath.

2. It is not suggested by the wife that her only concern is in respect of the records that might relate to C and possibly B.  The parties are possessed of other property and it may be the case that there is no complaint made by the wife generally but she targets his management of C.

3. The preparedness of the parties to reach a consent order in respect of the provision of documents that has clearly enabled the wife to undertake a detailed forensic examination of the financial affairs of the husband, C and B would suggest that at this stage discovery on oath is an unnecessary exacerbation of the proceedings in circumstances where that level of discovery may simply not be warranted.  In any event I am not satisfied that the husband’s conduct would merit or warrant such an order.

4. Orders 10, 11 and 12.1 relate to the wife’s application that funds paid or payable to C be paid into the Commonwealth Bank Account number …

5. Unfortunately events appear to have overtaken the wife’s application.

6. At paragraph 26 of the husband’s affidavit of 2 June 2015, the husband says as follows:-

   I oppose the orders sought.  I say that as a direct result of activities of the wife the Commonwealth Bank have frozen the bank accounts and credit cards of [C Pty Ltd], [B Pty Ltd] as trustee for [Epaminondas] Family Trust, [Mr & Ms Epaminondas] and my daughter [Ms X Epaminondas]  (I do not understand why the wife would want to interfere with our daughter’s bank account).

7. Annexure “A” to his affidavit reveals email communication from the Commonwealth Bank of Australia (“CBA”) to the parties dated 27 May 2015.  It confirms that as a result of a request apparently made by the wife in the prior week to stop the C and B accounts the bank has acted on the request and those accounts have now been suspended or stopped.  It is suggested by the bank that the stop on each account can be removed but will require a new account authority be signed by all of the directors of each company.  A blank authority was attached to the communication.  I have not been advised as to whether the parties are in agreement that the authority should be signed thereby lifting the freeze on the accounts.

8. This has had a flow on effect.  The freezing of the accounts has meant that there is now no account from which loan repayments can be debited.  In the correspondence the bank considers this to be a default and additionally, the bank appears to have concerns as to the “operation of the business and the bank accounts”.

9. The bank advises that they will be removing the overdraft facility from C without any suggestion that the CBA are prepared to reinstate that facility.

10. It would appear that the bank is aware of the litigation and it may be that the information provided to them has caused them to consider whether their finance arrangements should be reconsidered.

11. It was not suggested on behalf of the wife that she knows nothing of the matter and it is reasonably apparent that for whatever reason or motivation, the wife’s actions have had an immediate and potentially deleterious effect on the day to day operation of C and B.

12. The husband has opened a personal bank account with the National Bank of Australia (“NAB”) to enable the business to trade and it is into this account that he would intend to place all income due to C and the Trust.

13. The husband seeks an order that would require the wife to execute all documents necessary to give effect to any offer from the NAB to refinance the debts of C and B.

14. The wife also seeks that the husband provide her with access within 24 hours of her request to all C computers, hard drives, records and importantly, premises.

15. Whatever the history may have been, it is conceded by the wife that she has had little to do with the business for the last four to five years.

16. The parties are in high conflict.  The wife acknowledges that the staff will not deal with her and however it has come about, I am satisfied that it would not be in the interests of the financial advancement of C or B for the wife to have any physical involvement in the day to day affairs or operations of those entities.  That is not to suggest that she should be denied access to appropriate financial records and indeed the orders currently in place would appear to enable the wife to receive significant information in hard copy and electronic form.

17. It is unlikely that the husband could run the C business if every cheque or expenditure, however mundane or routine, was required to be countersigned or authorised by the wife.  Whilst the business has a substantial turnover, its expenses are significant and the income certainly in the last two financial years has been relatively modest.  In any event there are orders made which provide for each of the parties to withdraw an appropriate distribution and the husband is now well aware that whatever historical practice may have developed as to the company benefiting the non-business related expenses of the parties or their adult children, that practice is now to cease.

18. I propose to require the wife to sign all necessary documents to enable a new loan facility to be taken up by C, B or the Trust either with the CBA or the NAB with the husband to have the sole ability to operate the accounts providing that all receipts for C and B are dealt with transparently.

BELL POTTER SHARES

1. By Application in a Case filed 21 May 2015, the wife seeks orders that the Bell Potter Share Portfolio be transferred back into the Trust with any liability that arises from the husband’s actions to be at his expense.

2. The husband acknowledges that the Bell Potter Share Portfolio has been sold on accounting advice but also noting that it was the wife’s application for the portfolio to be sold in order to minimising a CGT liability.

3. On 4 May 2015 the husband received $36,638 being the net proceeds of sale and those proceeds have been expended by the husband to the extent of $11,282.45 which remains in his bank account on behalf of B Pty Ltd.  The husband seeks to retain this money because he says that he is not able otherwise to satisfy the legal fees currently incurred in relation to these proceedings.  The husband argues that the wife has failed to explain what she did with the monies taken from C and B in 2014 and that it does not present a level playing field for the wife to be able to fund her legal fees with the husband not having the same opportunity.

4. Whilst I have not enquired of the solicitors for the parties the extent to which they have incurred legal fees to date, the sheer volume of material already on the Court file would suggest that the expense of litigation is likely to be onerous.

5. Obviously I do not need to make any order in respect of the transfer back of the share portfolio.  It no longer exists.

6. The wife’s position is that from the $11,282 she would seek $6,000 to be provided to her. I have no information as to the respective financial circumstances of each of the parties but at this stage I consider that the amount involved if made available to the husband is unlikely to cause significant prejudice to the wife providing that the use of the funds is restricted to the payment of his legal fees as submitted.

RESPONSE OF THE HUSBAND FILED 2 JUNE 2015

1. The husband seeks an order that the wife sign off on the financial statements and tax returns for C, B and the Trust for the financial years ended 30 June 2012, 2013 and 2014 as prepared by the parties’ accountants S.

2. The argument of the husband is to be found at paragraph 12 of his affidavit.  His concern in respect of the financial statements (as distinct from the 2014 tax return) is that Mr G is not able to proceed with the business valuation without the wife’s acceptance of the accuracy of the reports and statements.

3. I propose to order that Mr G conduct his valuation in respect of the financial statements as currently drafted by the parties’ accountants.

4. Whilst there is obviously a difficulty in respect of the 2014 tax return, I am not advised that this presents an immediate issue and accordingly I do not propose to make any order in that regard.

CONCLUSION

1. I consider that it will be of benefit to the parties to have all of the outstanding orders to be found in one place and accordingly I propose to discharge all previous orders and restate them for the convenience of the parties, their bankers and their accountants.

2. I make orders as appear as the commencement of these reasons.

I certify that the preceding one hundred and thirty two (132) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 19 June 2015.

Associate:

Date:  19 June 2015