Liveson and Zhou (No 2)

[2016] FamCA 1014

FAMILY COURT OF AUSTRALIA

LIVESON & ZHOU (NO 2) [2016] FamCA 1014

FAMILY LAW – PROPERTY – Interim Application for orders regulating the manner in which two businesses are valued

Family Law Act 1975 (Cth)

Family Law Rules (2004) (Cth)

APPLICANT: Mr Liveson

RESPONDENT: Ms Zhou

FILE NUMBER: LEC 610 of 2011

DATE DELIVERED: 25 November 2016

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Hogan J

HEARING DATE: 4 November 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms McDiarmid

SOLICITOR FOR THE APPLICANT: GJ Legal Solicitors

COUNSEL FOR THE RESPONDENT: Mr Andrew

SOLICITOR FOR THE RESPONDENT: Somerville Laundry Lomax

Orders

IT IS ORDERED UNTIL FURTHER ORDER THAT

1. Each party do all things necessary to enable Ms B from B Accountants to value the businesses operated by the Respondent at D Town and Suburb C as follows:

   (a)       on an individual basis; and

   (b)       on an “aggregated” basis (that is, as an aggregate); and

   (c)on the basis of an assumption that the Respondent will sell both of them as an aggregate; and

   (d)on the basis of an assumption that the Respondent will sell both of them, but individually; and

   (e)in the event that it would result in valuations different to those already determined by valuing on the bases outlined above:  on the bases that the Respondent will retain one or both of them.

2. Within seven (7) days of the date of this Order, the Respondent shall instruct her accountants, E Accountants:

   (a)to compile divisional Profit and Loss Statements for the businesses operated by the Respondent at D Town and Suburb C for the 2012 to 2015 financial years (inclusive); and

   (b)to provide the same, once compiled, to Ms B so as to enable her to complete the valuations of these businesses on the bases set out above.

3. The parties shall be equally responsible for paying any costs associated with the preparation of the Profit and Loss Statements referred to in Clause (2).

4. In order to assist the valuation process in respect of the D Town and Suburb C businesses, the Respondent shall, within seven (7) days of the date of this Order, provide (or cause to be provided) a copy of the contents of the business management software to Ms B.

5. In the event that, having received the divisional Profit and Loss Statements for each of the D Town and Suburb C businesses for the financial years 2012 – 2015 (inclusive) and a copy of the contents of the business management software, Ms B determines that she is unable to value the D Town and Suburb C businesses on all of the bases outlined in Clause (1), she shall complete such valuations as are possible and on the basis that she considers appropriate and possible having regard to the extent of the financial information provided to her.

IT IS FURTHER ORDERED THAT

1. The costs of the parties of and incidental to the appearance on 4 November 2016 are reserved to the trial Judge.

2. The parties have liberty to approach a Registrar for the listing of a Directions hearing.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Liveson & Zhou (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: LEC 610 of 2011

Mr Liveson

Applicant

And

Ms Zhou

Respondent

REASONS FOR JUDGMENT

1. The parties have come to an impasse about the manner in which the businesses operated by the Respondent at D Town and Suburb C should be valued: the husband asserts that they should be the subject of individual valuation whereas the wife asserts that the single expert witness,[1] Ms B, should be instructed to value them on an aggregated basis.

   [1]Appointed by an Order made by Judge Turner on 7 May 2014.

2. This impasse resulted in the Applicant seeking, in essence,[2] orders that:

   a)the Respondent instruct her accountants (E Accountants) to prepare “divisional profit and loss statements” for the businesses operated in D Town and Suburb C for each of the financial years from 2012 to 2015 inclusive; and that

   b)upon completion of the “divisional profit and loss statements” for each business individually for each of these financial years, these documents are provided to Ms B; and

   c)the parties instruct Ms B to value the D Town and Suburb C businesses on a separate basis and, further, on the alternative bases that the Respondent remain working in the businesses or they are sold.

   [2]Exhibit 1 (26 September 2016).

3. On 17 October 2016, Ms B referred[3] to the dispute between the parties about whether the two businesses will be sold, noting that she would be in a position to prepare two scenarios as to the value of the businesses. Ms B also outlined and acknowledged that the Applicant did not agree with the businesses being valued in aggregate and, instead, asserted that the software utilised in the management and/or operation of them may provide sufficient information to enable the businesses to be valued separately (my emphasis).

   [3]in correspondence dated 17 October 2016: Exhibit 1 (4 November 2016).

4. Ms B made it clear that, if she is to value the D Town and Suburb C businesses on a separate basis, she requires “divisional profit and loss statements” for each business for the four years ended 30 June 2015. She asked that the Respondent confirm whether she could provide this information from the software used in the operation of each of the practises and noted that, in the event it could not be provided, she would consider whether it was possible for her to split the expenditure of each business on a proportional (based on revenue) basis.

5. On 21 October 2016, the Respondent’s solicitors replied to Ms B’s request for further information (as contained within the B Accountants correspondence dated 1 September 2016 and 17 October 2016).[4] Included within the correspondence is:

   a)a recounting of the Respondent’s instructions to them to the effect that there is “a lot of information” she does not enter into the software such that the Applicant’s assertion that such accounting tool would provide Ms B with sufficient information to enable her to value the D Town and Suburb C businesses separately is incorrect; and

   b)a recounting that they had been advised by the Respondent’s accountant that it would be “near impossible” to prepare divisional profit and loss statements and that all of the contractors and most of the staff work across both the D Town and Suburb C businesses; and

   c)a request about whether Ms B would consider whether a split of the expenditure of the businesses on a proportional basis (based on revenue) is possible.

   [4]in correspondence dated 21 October 2016: Exhibit 2 (4 November 2016).

6. As noted in the Reasons I delivered in disposing of other aspects of the Applicant’s Application in a Case on 24 September 2016, Clause 2 of the Order made by Judge Turner on 7 May 2014 requires that the parties provide to B Accountants all information reasonably required by the single expert witness to enable her to complete valuations, including those of the D Town and Suburb C businesses.

7. As I raised with Counsel during the course of hearing their respective submissions on 4 November 2016, it seems to me that the appropriate course in this case is for the parties to have the D Town and Suburb C businesses valued:

   a)on an individual basis; and

   b)on an “aggregated” basis; and

   c)on the basis of an assumption that the Respondent will sell both of them as an aggregate; and

   d)on the basis of an assumption that the Respondent will sell both of them, but individually; and

   e)on the bases that the Respondent will retain one or both of them.

8. In that way, in the event that the parties are unable to resolve these proceedings at a mediation (in which it is intended they participate after the finalisation of the valuations) the Court will have evidence of the value of the businesses in all of these possible scenarios.  Further, given that the Respondent’s position vis-à-vis the retention or disposition of the businesses is, perhaps, uncertain at this point in time, access to such valuations may also assist her to crystallise her position.

9. Whilst there may be deficiencies in the content of the software package as used by the Respondent in her operation of the businesses, it is, I consider, appropriate that Ms B is provided with whatever information is captured and held within that system so as to place her in the best possible position to value the businesses on the alternate bases outlined above.

10. It is, I think, sufficiently established for the purpose of disposing of this interim Application that the Respondent’s accountants have not previously been engaged by her to prepare divisional profit and loss statements for the two businesses: that is, it appears that the Respondent has not, as an incident of her usual operation of her businesses, engaged her chosen accountants to undertake this task.

11. Consequently, the preparation of such divisional profit and loss statements is highly likely to involve additional expense. I consider, on a prima facie basis at least, that any such expense is a cost that is connected with this litigation between the parties rather than being an expense incurred in the usual course of business. As such, and given that those divisional profit and loss statements which can be created will be created for the purpose of these proceedings, it is appropriate that the parties share equally in the costs of the same – at least initially.

12. The combination of the concerns expressed by the Respondent’s accountants (as relayed in the material relied upon by the Respondent) about their ability to prepare divisional profit and loss statements for each of the D Town and Suburb C businesses and the previous impasses between the parties about matters relating to the valuation process, has lead me to conclude that it is necessary I explicitly state what ought be implicit in any requirement for accountants to prepare any financial statements:  namely, that the Respondent’s accountants can only prepare those required documents to the best of their professional ability on the basis of the (identified) material and information provided to them by the Respondent. Accountants are, of course, at liberty to indicate - perhaps by way of footnote - the basis upon which they have prepared the documents they have been directed to prepare and any limitations to the same which have arisen as a consequence of any deficiency in the information relied upon.

13. In an attempt to have this matter progress toward the jointly intended mediation (and, if that is unsuccessful, a trial), I have concluded that, following receipt of the information which is to be provided to her, Ms B should be empowered to proceed to finalise the valuations on the basis of the same and on whatever basis she, in the exercise of her professional opinion, considers appropriate.

14. I reserve the parties’ costs of and incidental to the appearance on 4 November 2016 and that aspect of the interim relief sought that day to trial. I do so in circumstances where it is my intention to take this matter into my trial list at some stage. As I said when I delivered oral reasons on 26 September 2016, since I know that (subject to any unforeseen events) I will be the trial Judge for this matter, at that time I will, with the benefit of evidence outlining the party’s respective financial situations, then be able properly to consider those matters I am required to consider pursuant to s 117(2) of the Family Law Act 1975 (Cth).

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 25 November 2016.

Associate:     

Date:    25 November 2016