Rennes and Rennes

[2009] FamCA 502

FAMILY COURT OF AUSTRALIA

RENNES & RENNES [2009] FamCA 502

FAMILY LAW – PROPERTY – interim applications – accounts of relevant entities – application for interim property orders – dismissed

Family Law Act 1975 (Cth)

Harris (1993) FLC 92-378

APPLICANT: Ms Rennes

RESPONDENT: Mr Rennes

FILE NUMBER: MLC 1326 of 2008

DATE DELIVERED: 29 May 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Brown J

HEARING DATE: 29 May 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr M.I. Grant

SOLICITOR FOR THE APPLICANT: Gavan J Black

COUNSEL FOR THE RESPONDENT: Ms R. Stoikovska

SOLICITOR FOR THE RESPONDENT: Berger Kordos Lawyers

Orders

1. That each of the parties do all things reasonably necessary to authorise accountants at K Pty Ltd and Mr R to provide to Mr B of P Partners (the auditor) (or such other person nominated by P Partners to conduct the audit referred to hereafter) within fourteen days all information reasonably necessary for the auditor to audit the accounts for the 2003 to 2008 financial years (inclusive) of:

   a.L Services Pty Ltd; and

   b.L Home Pty Ltd

   and that such audit be completed by 10 July 2009 or such later date agreed upon by the parties.

2. That upon completion of the audit, C Accountants complete the valuation of L Service Pty Ltd ordered on 3 September 2008 by 31 August 2009 or, in the event that the parties have agreed to an extension of the time in which the audit was to be completed, within 7 weeks of the date on which the audit was completed.

3. That paragraphs 1(b) and (c) of the orders made herein on 3 September 2008 be discharged provided that the audited reports of L Home Pty Ltd for the financial years 2003 to 2008 (inclusive) be provided to C Accountants.

4. That until further order the wife provide to the husband quarterly accounts and BAS Statements in respect of L Services Pty Ltd.

5. That until further order the husband provide to the wife on a quarterly basis an up-to-date list of his outstanding debtors.

6. That unless the parties agree to the contrary in writing documents to be provided pursuant to paragraphs (4) and (5) hereof be provided within 14 days of the end of the relevant quarter and each order shall take effect in respect of the quarter which commenced on 1 April 2009 and will conclude on 30 June 2009.

7. That reasons for judgement be transcribed and a copy provided to the parties.

8. That all extant interim applications be dismissed.

IT IS CERTIFIED

1. That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

AND THE COURT NOTES

A.That the applications for final orders are listed before a Registrar for directions on 18 June 2009; and

B.That the costs of the Conciliation Conference of 20 August 2008 have been reserved.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 1326 of 2008

MS RENNES

Applicant

And

MR RENNES

Respondent

REASONS FOR JUDGMENT

1. Before the court are a number of interim applications.  The file has a long history, demonstrated by the fact that the application which most cogently sets out the orders sought by the husband is a further amended response to an earlier application of the wife's, and that on which she relies is her response to that further amended response.  Very sensibly counsel have not trawled through the original applications and original responses. Almost all submissions have related to recently filed material, in the husband's case being affidavits filed on 23 April and 27 May, and in the wife' case an affidavit filed on 11 May 2009.  Each annexed numerous documents to her/his affidavits. 

2. There have been a number of earlier orders, some of which have been adverted to by the parties. Each side alleges that the litigation has being thwarted or slowed by, variously, a lack of cooperation or a lack of compliance with orders.  In particular, reference has been made to several orders made on 3 September 2008. One provided for the filing of an amended form 13 by both, which has not been done. One provided for two entities to be valued by C Accountants, which has not been done. One provided for the parties to do what was necessary to ensure certain accounts were audited, at the husband's expense, which has not been done.

3. There is a dispute as to whether certain material provided by the wife to the husband is complete or in a form accessible by him.  There is a dispute as to the genuineness of objections to corporate financial statements prepared for the last financial year. The case has the hallmarks of a steeplechase; when one gets over one jump, another opens ahead.

Background

1. All I will say by way of background is that there is reference in the material to three entities.  In paragraph 15 of his further amended response, the husband referred to L Company and L Home Pty Ltd.   It is common ground that L Company is not an entity to which this court need have regard.  That was an error; it should have been a reference to L Services Pty Ltd. 

2. L Services is a service provider.  The second company, L Home, was a company involved in delivering services ….  The evidence is that that foundered … and the company is now effectively non‑operative.

3. There is evidence from M Accountants that L Home is unlikely to be saleable; its value is its net tangible assets, which are unlikely to be very tangible.  There is reference in that report to the potential for something which could be a "value to owner".  Counsel for the husband submitted that this is a reference to the fact that L Services is a contracting party with the Commonwealth and that there may be some conceptual or notional value which accrues as a result.  It is not put by the husband that these services can be traded or that there is an options market in them.  This court cannot determine this issue but whoever values L Services will no doubt consider all its assets.

4. For reasons which will be clear from my discussion with counsel in the course of their respective submissions, I do propose to make orders to implement the earlier order for the auditing of the accounts of L Services and L Home for the years 2003 to 2008.  Each of the parties will need to authorise K Pty Ltd and Mr R to provide all necessary information to Mr B of P Partners, or such other person nominated by that firm to undertake the work.  The information is to be provided within 14 days and the audit completed by 10 July 2009 or such later date as is agreed by the parties.

5. Once the audit is completed, C Accountants can prepare the valuation of L Services.  The accounts for 2003 to 2008 for L Home are to be provided to the valuer. 

6. That deals with a number of the applications, including those relating to the provision of financial data.  As I understand the evidence, MYOB 18 is accessible. There is no point in discussing why the MYOB 16 was provided or why it cannot by accessed.

7. I do propose to make provision for BAS statements and quarterly accounts for L Services to be provided to the husband. I see no benefit in monthly accounts; quarterly accounts are adequate.

8. I will not make orders for the filing of amended financial statements at this time. Nor do I consider the wife’s application for the transfer of L Home to the husband, as events have overtaken it.  The husband is no longer pressing for a specific valuation of L Home and that is no longer a live issue. 

9. An order was sought for the provision by the husband of his debtors.  I understand a list has been provided as at today and orders will require that to be provided on a quarterly basis into the future.

10. That leaves what I referred to as the big ticket item, which is the husband's application, made in paragraph 16 of his further amended response, that $109,040 be paid to each of the parties by way of a distribution from the Rennes Family Trust Number 1 (of which the trustee is L Services).  There is no dispute the parties are primary beneficiaries under that trust.

11. The husband's complaint is that the trust accounts for 2007, and the draft accounts for 2008, show what he referred to as “profit” in that trust of some $160,380 in 2008 and $57,699 in 2007.  What he has done is add those figures together, rounded them up $218,080 and proposed that the whole of those “profits” be divided between the parties now.  A significant part of Mr Grant's submissions went to the problems the husband would face if he characterised this proposed payment as a Barro order.  His counsel has made it clear that it is not advanced in that way.  The husband seeks the sum by way of a partial property settlement, an option set out as an alternative in paragraph 16(b) of his further amended response.

12. In the affidavit filed on 23 April, the husband deposed to struggling, in terms of cash flow and outgoings.  By the time he swore an affidavit on 27 May, he deposed that his situation had improved in some respects since February this year.  It is his evidence that part of that improvement is attributable to a loan from his parents, which has enabled him to reduce a number of regular payments which were otherwise required.  He candidly said in that affidavit that he had received a number of large professional fee payments.

13. It is a long time, I know, since I was at the bar but I accept that a professional’s cash flow can fluctuate enormously and that professionals who may be seen as very successful and affluent, and who write high fees, can have lean times in terms of cash flow.  There is a reference in documents provided by the husband to some $95,000 outstanding potentially.  Documents provided by the husband today show some $210,000 outstanding.  I cannot say if that includes the $95,000 which is contingent. 

14. The wife's submission is that the husband's financial position is much stronger than he admits.  She has done an analysis of discovered documents.  Her counsel concedes there is a typing mistake in terms of the financial year in one of those documents.  She refers to gross fees that the husband has received as $279,000 in 2006, $328,000 in 2007 and $371,000 in 2008.  In his material the husband deposed to a taxable income in 2008 of some $109,000.  More evidence is needed about outgoings and his not insignificant superannuation contributions.  The wife's analysis points to expenditure which she says is discretionary expenditure, such as overseas travel.

15. There is no doubt that the court has the power to make an interim property order but it is a power to be exercised cautiously. In Harris (1993) FLC 92-378 the Full Court found, first, that the exercise of the power should be confined to cases where the circumstances are compelling. As a generality, the interests of the parties and the court are better served by one final hearing. Second, the Full Court referred to the fact that as the exercise is of the s 79 power, it must be preformed within those parameters. Third, the Full Court held that the power should be exercised conservatively and the judge satisfied that the remaining property will be adequate to meet legitimate expectations at the final hearing or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so.

16. The husband's argument rests on his poor cash flow.  There has been reference, quite properly, to the draft trust accounts which show a number of distributions.  The largest are to the parties' adult children, as I infer, but there are other distributions. The husband may be justified in taking objection to learning of those distributions through the draft accounts, when he is a director and shareholder of the trustee company. 

17. I note there is a certain irony in the husband basing this argument on the very draft accounts which, elsewhere, he suggests may be unreliable and inadequate.

18. Nothing in the evidence or submissions advanced by the husband satisfies me that, absent agreement, the court should order that these - and I use the husband’s word - profits should be distributed equally between the parties now.  In my view, that would be premature.  The entity is to be valued.  The court will assess other potential calls on the resources of the trust.  There is a real issue in this case about the eventual distribution of assets, having regard to real, but not immediately realisable assets, like superannuation and unpaid fees.  I could not be satisfied that the “profit” is even available for distribution, nor that there will be sufficient assets from other sources to fund eventual orders.

19. I will make it clear that the costs of the conciliation conference were reserved.  All extant interim applications will be dismissed.  I will certify for counsel.  My reasons will be made available. 

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Brown

Associate:

Date:  12 June 2009