Herron and Herron

[2017] FCCA 3242

FEDERAL CIRCUIT COURT OF AUSTRALIA

HERRON & HERRON [2017] FCCA 3242

Catchwords:
FAMILY LAW – Property adjustment – valuation of business – subpoena to produce documents – orders and directions.

Applicant: MS HERRON

Respondent: MR HERRON

File Number: PAC 3615 of 2015

Judgment of: Judge Newbrun

Hearing date: 27 September 2017

Date of Last Submission: 24 November 2017

Delivered at: Parramatta

Delivered on: 21 December 2017

REPRESENTATION

Solicitors for the Applicant: West Legal

Solicitors for the Respondent: Saba El-Hanania Lawyers

ORDERS

1. The company (business omitted), within 6 weeks of the date of these orders, shall produce to the Court any receipts required to be produced by it pursuant to clause 2b. of the schedule to the subpoena to the company issued on 3 December 2015 (as confirmed by the Court’s ruling on 28 October 2016) which were not delivered by the husband to the wife on 8 July 2017.

2. The wife make the boxes of documents delivered to her by the husband on 8 July 2017, available to the husband, within 3 weeks of the date of these orders.

3. The above company cause to be delivered the above boxes of documents to the court within 6 weeks of the date of these orders.

4. Order 3 of the Court’s orders of 28 October 2016 is varied so that it reads:

   3. The joint valuer of the business be instructed to revise the valuation of 25 July 2016 in the following respects:

   a. The above valuation shall be updated as at 30 June 2017.

   b. The valuer also take into consideration:

   i. Cash at bank;

   ii. Trade receivables or payables;

   iii. Debtors and creditors;

   iv. Financial statements for (business omitted) for the year ending 30 June 2017, including profit and loss statement, balance sheet.

   c. That the documentary material provided by the wife to the joint valuer be taken into account by the joint valuer.

5. The proceedings are adjourned for mention to 23 March 2018 at 9.30am.

IT IS NOTED that publication of this judgment under the pseudonym Herron & Herron is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT PARRAMATTA

PAC 3615 of 2015

MS HERRON

Applicant

And

MR HERRON

Respondent

REASONS FOR JUDGMENT

Introduction

1. In these property proceedings, the parties have requested the Court to make judicial determinations in relation to:

   ·    Compliance with a subpoenae to produce documents issued by the wife on 3 December 2015 against the husband’s company, (business omitted)

   ·    an application by the husband to discharge orders 2, 3 and 4 of the Court’s orders of 28 October 2016, being orders in relation to a previous joint valuation of the business conducted by the above company (inter alia, those orders provided that the previous “limited scope valuation” of the business be a full valuation of the business

   ·    Whether a full audit of the business should be directed.

Background

1. The above subpoenae came before the Court on 14 March 2016. By consent, orders were made in relation to the subpoenae; the subpoenae was adjourned to 26 May 2016; the wife was to write to the husband setting out the representations she wished to put to the business valuer within 21 days; the husband was to respond within seven days to those representations; failing agreement as to the content of the representations, the valuation would not proceed until the subpoenae was dealt with.

2. A limited scope valuation for the business known as (business omitted) was prepared on 25 July 2016 by Mr S. He valued the business, on a certain basis, at $70,000.

3. On 27 September 2016 orders and directions were made by the Court; the husband was required within seven days to file written submissions, relating firstly to objections that the parties above company has to the subpoenae dated 3 December 2015 issued by the wife, and secondly, any objections that the husband has to the wife’s proposed Minute of Order (exhibit A) relating to the joint valuer of the (omitted) business preparing a supplementary valuation of that business; within a further seven days the wife shall respond to the above written submission by the husband.

4. A notation was made by the Court on 27 September 2016 providing that the parties have informed the Court that they are content for the Court to rule upon the objection to the subpoenae to the above company on the papers, and further, were content for the Court to deal with, and finalise, the wife’s proposed minutes of order relating to the joint valuer preparing a supplementary report in chambers.

5. On 28 October 2016, the Court made certain rulings in relation to the documents sought in the schedule to the above subpoenae, a Notice of Objection – Subpoenae filed 18 December 2016 having been filed by the husband.

6. On 28 October 2016 the Court also ordered that:

   ·    within 28 days of the company producing to the Court the documents required to be produced by it to the Court, pursuant to its order 1, the wife shall provide to the joint valuer of the business such documentary material that the wife considers relevant to the value of the (omitted) business conducted by the husband;

   ·    the joint valuer of the business be instructed to revise the valuation of 25 July 2016 in the following respects:

   o   That it not be a “limited scope valuation”, and that it be a full valuation of the business as contemplated in the second paragraph on page 5 of the said valuation; that it not expire after 60 days as indicated on page 6 of the valuation; that the valuer take into consideration cash at bank, trade receivables or payables, debtors and creditors, and that the documentary material provided by the wife to the joint valuer be taken into account by the joint valuer.

7. Further the Court ordered that the parties are to bear the cost of the supplementary report of the business equally if the existing valuation is increased by more than 50%, otherwise the wife shall bear the whole cost of the supplementary valuation report.

8. On 15 March 2017, by consent the Court make certain directions, inter alia, as follows;

   ·    within 14 days from today’s date, or 28 days from the date upon which the company complies with the subpoenae (whichever is the later) issued 3 December 2015, the wife is to comply with order 2 of the orders made on 28 October 2016, and is to forward further instructions to the valuer in accordance with order 3;

   ·    the valuer is to be requested by the wife’s solicitors to further clarify whether he requires an audit to be carried out before he can provide a full valuation; if the valuer confirms that an audit will be required, then within 14 days of the valuer so confirming, the husband is to file short submissions and affidavit as to whether and how the orders made on 28 October 2016 are to be varied;

   ·    the wife to respond to those submissions with short submissions and Affidavit within 14 days; order 4 of the orders made on 28 October 2016 to be varied by adding the following sentence, “if the valuer requires payment in advance or on account, the same shall initially be paid equally by the parties”.

9. On 15 August 2017, inter alia, the Court reserved its decision in relation to the parties’ written submissions, referred to within the orders and directions of Exhibit A of the Court’s order of 15 March 2017.

10. On 15 August 2017, the Court was informed by the wife’s solicitor that the joint valuer had informed the parties that for a full valuation to be provided, an audit would be required. It was confirmed by the parties that the husband wanted no such audit, but that the wife wanted the business to be valued, expressly stating that the wife did not wish an audit to occur (rather it was the valuer who had stated that for a full valuation to occur an audit would be required).

11. On 15 August 2017, the wife, through her solicitor, stated that his instructions were that the company “continues to the present day in its failure to comply with that subpoenae”, being the subpoenae in relation to which the Court had made a ruling on 28 October 2016 for the production of certain documents.

12. In response, the husband’s solicitor stated that the subpoenae had been complied with; and that 12 boxes of subpoenaed material had been provided directly to the wife on 8 July 2017, and the wife had provided a written receipt for such boxes. The wife’s solicitor informed the Court that he had sent written correspondence to the husband’s solicitors stating that the subpoenae had not been complied with. The wife’s solicitor further informed the Court that on 31 July 2017 a series of further documents were provided by email. The Court made directions that within 14 days the husband’s solicitors shall respond in writing to the three letters sent to them by the wife’s solicitors alleging non-compliance with the subpoenae.

13. 10 October 2017, the Court made further directions in Chambers, inter alia, in relation to the wife’s solicitors sending an email letter to the company setting out which documents the wife contends are required to be produced by the company to the Court to fully and properly comply with the subpoenae. The directions were:

    ·    Within 14 days the wife’s solicitors shall send an email letter to (business omitted) setting out the documents that the wife contends are required to be produced by the said company to the Court to fully and properly comply with the subpoena to produce documents served upon it in December 2015. In such letter, the company shall be given a further 21 days to produce the requested documents to the Court (with copies to the wife’s solicitors).

    ·    In the event that the said company produces the above requested documents within the time stated above, then the wife’s solicitors shall forthwith inform the Court’s associate, and the Court will then proceed to make further orders and directions in relation to the valuation of the said company, pursuant to past directions of the Court and noting the written submissions of the parties filed with the court under the Court’s directions of 15 March 2017.

    ·    In the event that the wife solicitors inform the Court’s Associate that the said company has not complied with the above request within the time stated above, then the wife’s solicitors shall forthwith inform the Court’s Associate accordingly, and in such event the Court will re-list the proceedings to consider whether the said company should be dealt with pursuant to Rule 15A.16 for any alleged breach of the above subpoena.

Determination of the subpoenae issue

1. The orders of the Court of 28 October 2016 required certain categories of documents to be produced by the company pursuant to the subpoenae. The wife’s contention that documents held by the company falling within the stated categories and postdating the Court’s order of 28 October 2016 should be produced is incorrect. The effect of the Court’s order of 28 October 2016 required the categories of documents pursuant to the subpoenae, required to be produced under that order, to be produced to the date of its order, namely 28 October 2016.

2. The affidavit of the husband filed 24 November 2017 indicates that the wife was personally provided with 12 boxes of documents on 8 July 2017; the categories of documents being provided to the wife (referred to in annexure B to the affidavit), including reconciliation reports, general ledger reports, GST detail cash reports, trial balance monthly reports, profit and loss statements (accrual and cash) monthly, balance sheet monthly documents, and sundry reports, together with other documents, spanning the period from 1 July 2012 to 28 October 2016.

3. The affidavit of Ms K filed 24 November 2017 in some respects mirrors the above affidavit of the husband. Further, it annexes a copy of the company’s tax return for 2016 and a copy of its financial report for the year ended 30 June 2016.

4. The Court has considered the affidavit of the wife filed 1 December 2017. The Court notes that the company tax return to 2016 is annexed to the affidavit of Ms K.

5. On the basis of the wife’s contentions, in paragraph 10 of her affidavit, relating to her allegation that she has found

   that there are a substantial number of transactions shown in those bank statements (of the company) in relation to which a receipt has not been produced as required by the subpoenae

   the Court proposes to make an order as follows:

   “The company, within 6 weeks , shall produce to the court any receipts required to be produced by it pursuant to clause 2 b. of the schedule to the subpoena to the company issued on 3 December 2015 (as confirmed by the court’s ruling on 28 October 2016) which were not delivered to the wife on 8 July 2017.”

6. As conceded by the husband before the Court on 15 August 2017, the boxes of documents delivered to the wife on 8 July 2017 should have been produced to the Court; as the wife does not dispute that she received such documents, the Court will direct that the wife make these boxes of documents available to the husband, within 3 weeks, so that he can deliver them to the Court within 6 weeks of the date of these orders.

Application by husband to discharge orders 2, 3 and 4 of the Court’s Orders of 28 October 2016

1. The wife contends that the valuer has “now clarified that he does in fact require an audit to be carried out before he can provide a full valuation.” The reference to “a full valuation” is stated in the Court’s order 3 of 28 October 2016.

2. In the view of the Court, it is not appropriate that the valuer be required to conduct an audit for the purposes of a valuation of the (omitted) business. As stated in the email letter of 16 January 2017 to the wife’s solicitor from the office of the valuer, “A business valuation is not an audit to determine the accuracy of the business financials.”

3. In that above email from the valuer’s office, it is further stated that,

   We can remove the expiration date of the report, and include debtors and creditors, cash at bank, in the valuation, but we need the exact date of valuation, as well as the corresponding balance sheet, as at the date of valuation, to be able to do this.

4. It appears to the Court that provided the valuer has the above further documents, together with any documents provided by the wife from the company’s subpoenaed documents (pursuant to order 2 of the court’s orders of 28 October 2016), and the valuation is brought up to date (as at 30 June 2017), the valuation of 25 July 2016 can be revised, and updated, appropriately.

5. Accordingly, it will be proper, appropriate, and in the interests of justice, for the Court to vary order 3 of the Court’s orders as follows:

   3. The joint valuer of the business be instructed to revise the valuation of 25 July 2016 in the following respects:

   a. The above valuation shall be updated as at 30 June 2017

   b. The valuer take into consideration:

   i. Cash at bank;

   ii. Trade receivables or payables;

   iii. Debtors and creditors;

   iv. Financial statements for (business omitted) for the year ending 30 June 2017, including profit and loss statement, balance sheet.

   c. That the documentary material provided by the wife to the joint valuer be taken into account by the joint valuer.

6. The Court now expects the parties to finalise the valuation of the business as soon as possible, in a co-operative manner. The parties should now progress this case expeditiously to the holding of a meaningful conciliation conference.

7. The Court will make orders and directions accordingly.

I certify that the preceding twenty seven (27) paragraphs are a true copy of the reasons for judgment of Judge Newbrun

Date: 21 December 2017