MYERS and DODD

[2015] FCWA 100

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY LAW ACT 1975

LOCATION: PERTH

CITATION: MYERS and DODD [2015] FCWA 100

CORAM: CRISFORD J

HEARD: 3 NOVEMBER 2015

DELIVERED : 18 NOVEMBER 2015

FILE NO/S: PTW 2664 of 2013

BETWEEN: MS MYERS

Applicant

AND

MR DODD
Respondent

Catchwords:

COMPANIES – Where the parties established separate entities to hold their joint and separate interests – where the constitution of one of those entities made provision for the appointment of an alternate director – where the husband appointed an alternate director – where the wife seeks the appointment of an alternate director be revoked – where no reason has to be advanced, or the approval of any other director sought, for the appointment of an alternate director pursuant to the constitution – where the Court is not satisfied there are grounds to remove or revoke the appointment of the alternate director.

PROPERTY – Valuations – where orders were made previously, by consent, for the appointment of a single expert witness to value real estate and a business – where the husband says the existing single expert witness should update or redo the valuations – where the wife proposes a new expert – where the Court considers it appropriate for the existing single expert witness to provide the updated valuation.

PROPERTY – Interim distribution – where the wife seeks $300,000 to be drawdown from a business loan account – where at the hearing counsel for the husband proposed that each party have access to $150,000 of the $300,000 available – where the wife’s position was that the husband has not provided any evidence to suggest he has a like need for any funds – where the Court is persuaded that the wife has a need for funds, at least, to pay some legal fees – where the Court is not satisfied the wife should have an amount of $300,000 from the source identified, where an amount of $150,000 is appropriate.

Legislation:

Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Category: Reportable

Representation:

Counsel:

Applicant: Mr Hooper SC

Respondent: Mr Kim Wilson SC

Solicitors:

Applicant: Carr & Co

Respondent: O'Sullivan Davies

Case(s) referred to in judgment(s):

Nil

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

1The Court is asked to make some interim determinations arising from the breakdown of the marriage of [Mr Dodd] (“the husband”) and [Ms Myers] (“the wife”). The parties started to live together in early 2001. They married [in] March 2010 and separated exactly two years later.

2The dispute centres around their many and varied financial interests.

3The matter came before this Court on 3 November 2015. After considerable negotiation most of the matters the Court had been asked to determine were settled by consent or otherwise programmed for further hearing. There were however three matters requiring a judicial determination. For ease of reference both parties referred to the wife’s amended Minute of Proposed Orders received, by the court, on 2 November 2015. The outstanding issues fell into three distinct categories and I will deal with them accordingly.

The alternate director

4During the course of their relationship, the parties established separate entities to hold their joint and separate interests.

5[Company A Pty Ltd] (“[Company A]”) was incorporated [in] August 2005. The parties are directors and each hold 50 of the 100 issued shares in Company A. Company A acts as a trustee of [Trust A] which was settled [in] September 2005. This is a unit trust of which the [Trust B] (“the husband’s Trust”) and the [Trust C] (“the wife’s Trust”) each own 50 of the 100 issued units. Trust A owns the land and buildings comprising the [the Business]. This was purchased in or about October 2005 for $4.15 million. The sale settled [in] November 2005. Further funds were spent over the years in renovations of the Business.

6[In] July 2005 the parties incorporated [Company E Pty Ltd] (“[Company E]”). The parties are directors and each hold 50 of the 100 shares in Company E. Company E acts as a trustee of [Trust E] which was settled [in] September 2005. It is a unit trust of which the husband’s Trust and the wife’s Trust each own 50 of the 100 issued shares. Company E trades as the Business. The business was purchased in October 2005.

7The wife presently manages the trading business of the Business and has done so since before separation. She was appointed Chief Executive Officer in mid-2013. Both parties seek to retain the Business as part of their property settlement.

8On 19 March 2015, the husband’s solicitors wrote to the wife in relation to the Business. The correspondence raised the issue of a fall in the Business’ profitability and sought an explanation from the wife as to the reasons for this fall. There were also queries about what steps the wife intended to take to address this issue and what business plan she had to return the Business to its prior profitability.

9There is a dispute over whether in fact there is such a fall as identified by the husband, but this will, no doubt, be an issue for trial and expert evidence.

10On 21 April 2015 an application was lodged for the approval of [Mr Salmon] as a director of Company E. The wife was advised of this on 14 May 2015 when she received correspondence from the Department of Racing, Gaming and Liquor. The correspondence was addressed to Company E. The appointment was made pursuant to cl 72(1) of the Company E constitution and was signed by the husband on 22 May 2015. The appointment was “for the period as from the date of this notice, until such time as I may decide by further notice to revoke such appointment”. In particular, cl 72 reads:

ALTERNATE DIRECTORS

72.

(1)A Director may appoint a person (whether a member of the Company or not) to be an alternate Director in the person’s place during such a period as the person thinks fit.

(2)An alternate Director is entitled to notice of meetings of the Directors and, if the appointee is not present at such a meeting, is entitled to attend and vote in the person’s stead.

(3)An alternate Director may exercise any powers that the appointor may exercise and the exercise of any such power by the alternate Director shall be deemed to be the exercise of the power by the appointor.

(4)An alternate Director is not required to have any share qualification.

(5)The appointment of an alternate Director may be terminated at any time by the appointor notwithstanding that the period of the appointment of the alternate Director has not expired, and terminates in any event if the appointor vacates office as a Director.

(6)An appointment, or the termination of an appointment, of an alternate Director shall be effected by a notice in writing signed by the Director who makes or made the appointment and served on the Company.

11The approval of the other director is not required for such appointment. No reason has to be advanced for the appointment.

12Mr Salmon is a chartered accountant. The wife was advised by his lawyers, that his appointment was made in order to report to the husband in respect of the profitability of the Business and also other matters relevant to the husband’s obligations as director of the company under the Corporations Act 2001 (Cth) (“the Corporations Act”). The husband deposes that Mr Salmon “is to perform the duties afforded that of a director”.

13Mr Salmons’s affidavit, sworn 16 October 2015, in summary, says the purpose of the appointment is:

•to provide forensic accounting advice about the profitability of the Business;

•to report to the husband on the financial profitability of the Business since 1 July 2007; and

•to advise the husband on any other matters that may be relevant to his obligations as a company director of Company E under the Corporations Act

14The provision of forensic accounting advice is to be undertaken pursuant to a letter of engagement of 1 April 2015, sent prior to the appointment of Mr Salmon as alternate director. However, such appointment was a pre-requisite of the engagement.

15It is common ground that Mr Salmon’s appointment as an alternate director was validly made.

16The wife seeks inter alia:

3.The husband do all acts and things and sign all documents necessary to revoke the appointment of [Mr Salmon] as Alternate Director of [Company E Pty Ltd].

17The wife says that Mr Salmon is not in reality an alternate director. He is a “creature of [the husband]” appointed to further his objectives and position in these proceedings. She says the appointment of Mr Salmon is an opportunity for the husband to appoint an independent auditor of the Business.

18She says that Mr Salmon has made unreasonable requests of her for information and for items such as keys, alarms and security codes. She says these are not items necessary for a director to comply with his duties and obligations.

19She says the relationship between her and the husband is not that acrimonious. They can continue to discuss the directorship and management of the Business without the need for an alternate director.

20The wife points that pursuant to s 182(1) of the Corporations Act where directors must not improperly use their position to gain an advantage for themselves or someone else or cause detriment to the corporation. She also refers to s 183(1) of the Corporations Act where a person who obtains information because they are a director must not improperly use that information to gain an advantage to themselves or someone else or cause detriment to the corporation.

21Again, pursuant to s 184(1) of the Corporations Act, a director commits an offence if he is intentionally dishonest and has failed to exercise powers and discharge duties in good faith in the interest of the corporation or for a proper purpose.

22I have no doubt the appointment of Mr Salmon is irritating; annoying; and inconvenient. The wife sees it as unnecessary but these are not grounds for the discharge of his appointment. There is not necessarily a conflict between his roles. There may be at some stage. Mr Salmon has two distinct roles. It may well be that being a director enhances the ability of Mr Salmon to fully carry out the role of a forensic accountant.

23If such a conflict arises then evidence can be provided to ground an application akin to what the wife presently seeks. However, on the evidence before me I am not satisfied there are currently grounds to remove Mr Salmon or to revoke his appointment as an alternate director. If there is any wrongdoing by Mr Salmon in the execution of his duties and obligations as a director, that can be dealt with when it actually arises.

Valuations and expert evidence

24Both parties agree that their property and business entities need to be valued. They are at odds about who should conduct such valuations.

(a)Property Valuations

25On 28 February 2014, orders were made by consent for the parties to appoint a single expert witness to value various pieces of their real estate and also the Business. There was joint agreement to appoint [XYZ Group] (“[XYZ]”) to conduct the valuations. It appears common ground that XYZ was originally put forward by the wife.

26The wife now opposes the reappointment of XYZ to redo or update the valuations it previously conducted in about mid-2014. She seeks that:

6.Within 7 days from the date of these orders the parties do all acts and things and sign all documents necessary to appoint the following as Single Expert Witnesses:

a.[ABC] to value the real estate referred to in Schedule A and the [Business] and land on the basis of highest and best use …

…

27The husband says the existing court appointment of XYZ as Single Expert Witness remains on foot and is appropriate. XYZ is available and willing to conduct the updated valuations of the real estate and the Business.

28The husband says that there is virtually no price difference between ABC and XYZ for doing the valuations. He accepts that XYZ had originally quoted a higher price for updating the valuations, but this has now been modified and its quote is in line with that of ABC. This strikes the Court as somewhat surprising given at least some of the ground work for the valuations has already been completed and paid for by XYZ.

29It is plain that either the husband or his solicitors negotiated this reduction in the price. The wife complains about this. I am told that the documents in relation to any such negotiations have now been disclosed, although only after a number of very recent requests were made. I do not accept such a negotiation on price automatically translates to a bias in favour of the husband by all, or any, of the valuers involved.

30The husband also points out that when the original XYZ valuations were provided, the wife did not seek to issue any questions pursuant to r 15.65 of the Family Law Rules 2004 (Cth) (“the Rules”), regarding any clarification she required.

31The wife maintains she has no confidence in the ability of XYZ to update its valuations. She cites significant delays in it producing the original valuations. I accept from XYZ’s point of view and given the number of parcels of real estate, both rural and urban, a number of valuers were engaged. It is not always possible, in those circumstances, to have a completely coordinated time frame for delivery. To have some piecemeal provision of the various valuations is to be expected. The wife further says that she did not agree with the values. She says she did not have to ask any questions of the valuers as the valuations were to progress a likely mediation which did not eventuate. The valuations were, at that stage, redundant.

32The husband’s counsel drew the court’s attention to r 15.49 of the Rules. This refers to the appointment of another expert witness and makes provision for the tender of a report from that other expert witness, where a single expert witness has already been appointed to prepare a report on the same issue. The court’s leave must be granted in these circumstances.

33Both parties agree there is a need for an updating of the earlier reports. The task for which XYZ was originally appointed has been carried out, but it is in an ideal position, practically speaking, to update the earlier valuations. Although it may not be mandatory that XYZ complete any further valuation, I consider it appropriate here.

34I will make the order that the husband seeks.

(b)Business Valuations

35The wife seeks orders that [Ms F], of [F Forensic Accounting], be appointed as single expert witness to value [Business X]. This is a business run and controlled by the husband.

36The husband proposes that the business be valued by [Mr G] at [EFG]. The husband says this expert is more appropriate than Ms F because he is based in Western Australia. This makes it more convenient in terms of accessing the business and also because of the time difference. Information can be easily exchanged and considered on a needs basis rather than on a one-off attendance when the valuer comes to Western Australia.

37The comparative costs between the two is a little difficult to ascertain. EFG has given a price range between $6,000 and $8,000. Ms F anticipates her costs to be between $7,000 and $9,000.

38Realistically, any difference in valuer here is more perceived than real. Both valuers are well qualified and no doubt will do the task appropriately. Based on what might be greater convenience and possibly a lower price, I will appoint Mr G.

Release of funds

39On 4 September 2015 the wife’s solicitors wrote to the husband seeking consent for the wife to draw some of the equity available in a NAB facility secured over the Business, in the name of Company A as trustee for Trust A. The limit on the facility was $2.73 million. The current balance on the facility is $2.43 million, leaving $300,000 available.

40Thus, the wife seeks:

10.Within 7 days from the date of these orders the parties do all acts and things and sign all documents necessary to cause a drawn [sic] down of $300,000 from the NAB Business Markets Flexible Rate Loan account to be paid to the wife, with such advance to be recorded in the most tax effective manner.

41The wife seeks this money to assist in funding her legal case and what she terms “other expenses”. The wife deposes that the husband has had access to significant amounts of joint funds since separation. She says she was not aware of him accessing, at least some of, these funds.

42At the hearing, the husband’s counsel made a proposal that each party have access to $150,000 of the $300,000 available. Whilst the wife may well have been willing to accept $150,000, her position is that the husband has not provided any evidence to suggest he has a like need. He simply says split the funds.

43I am persuaded on the basis of the affidavit material of the wife, and also of her solicitor, that she does have a need for funds, at least, to pay some legal fees. I am not satisfied she should have an amount of $300,000 from the source she identifies. There is a concession of sorts that $150,000 is appropriate. I will make that order accordingly.

Orders

1The order sought by the Applicant, [MS MYERS], in her Amended Minute of Proposed Orders, received by the Court on 2 November 2015, in paragraph 3 in relation to the revocation of the appointment of [Mr Salmon] as alternate director of [Company E Pty Ltd], be and is hereby dismissed.

2Within 7 days from the date of these orders, the parties do all acts and things and sign all documents necessary to appoint, or reappoint, the following as Single Expert Witnesses:

(a)[XYZ Group], to prepare an updated value of real estate and the [Business] conducted by [Company E] Pty Ltd; and

(b)[Mr G] of [EFG], to prepare a valuation of [Business X] conducted by [X] Pty Ltd as trustee for the Trust [X].

3Within 7 days from the date of these orders, the parties do all acts and things and sign all documents necessary to cause a drawdown of $150,000 from the NAB Business Markets Flexible Rate Loan to be paid to the Applicant with such advance to be recorded in the most tax effective manner.

4The balance of the applications otherwise be adjourned to 4 December 2015 at not before 2:15pm.

I certify that the preceding [43] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court

Associate