Rolleston v Christchurch Residential Care Limited

[2012] NZHC 2543

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-001301 [2012] NZHC 2543

BETWEEN  TE TUMU ROLLESTON Plaintiff

ANDCHRISTCHURCH RESIDENTIAL CARE LIMITED

First Defendant

ANDDONNA CELIA ROLLESTON Second Defendant

Dealt with on the papers

Counsel:         K W Clay for Plaintiff

S Rollo for Second Defendant

Judgment:      2 October 2012

JUDGMENT OF CHISHOLM J

[1]      On  17  May  2012  I  made  various  orders  in  relation  to  this  proceeding. However, an application by Mr Rolleston for Mrs Rolleston’s remuneration from Christchurch  Residential  Care  Limited  to  be cancelled  was  adjourned  to  enable further information to be provided.  That information has now been provided[1]  and the parties have agreed that the remuneration issue can now be finally determined on the papers.

[1] Leave is granted for the late filing of documents.

[2]      Given that background information was provided in the earlier judgment it is unnecessary  to  repeat  that  information.     Suffice  to  say  that  Mr  Rolleston’s application  is  on  the  basis  that  the  company  cannot  afford  to  continue  paying Mrs Rolleston at the rate of $72,904.52 per annum[2]  pending determination of the

[2] Drawings of $21,047 and wages of $51,857.52.

relationship  property  issues  by  the  Family  Court.    Mrs  Rolleston  opposes  the

ROLLESTON V CHRISTCHURCH RESIDENTIAL CARE LIMITED HC CHCH CIV-2011-409-001301 [2

October 2012]

application on the basis that she is totally reliant on the income from the company and the company can still afford to make such payments pending determination of the relationship property issues.

[3]      When the matter was before the Court on 17 May 2012 there were indications that the relationship property issues might be heard by the Family Court this year.  It is now apparent that this will not happen.   Although no hearing date has been allocated by the Family Court it appears that relationship property issues will not be determined until next year.

[4]      Management reports now before the Court indicate that the company incurred a loss of $66,389 for the year ended 31 March 2012.   This is after allowing for shareholders’ salaries and non-deductable expenses.   An explanation for the loss (which follows modest profits for the earlier previous years) has been provided by Mr  Trewin,  chartered  accountant.     The  company  is  experiencing  cash  flow difficulties and arrears of tax are attracting penalties.

[5]      Mrs Rolleston has provided affidavit evidence as to her income, outgoings, assets and liabilities.   Clearly she is not in a strong situation and is dependent on income from the company.  She maintains that the company can afford to continue making payments to her at the level authorised by Fogarty J.   She complains that legal expenses have been taken by Mr Rolleston by way of drawings.  On her behalf Mr  Ambrose,  chartered  accountant,  has  provided  a  critique  of  the  company’s business expenses.

[6]      Given that Mrs Rolleston’s current account is overdrawn it does not make commercial sense for her drawings of $474.10 per fortnight to continue.  They will need to cease.  While Mr Rolleston’s current account appears to be in credit, there also needs to be a cap on his drawings pending determination of the matrimonial property issues.  It will therefore be a condition of the termination of Mrs Rolleston’s drawings that Mr Rolleston’s drawings are reduced to $3742 (which represents the same  reduction  as  for  Mrs  Rolleston).    Pending  resolution  of  the  matrimonial property matter neither party is to take legal expenses relating to the relationship property dispute from the company by way of drawings.

[7]      It is also to the benefit of both parties that the financial health of the company be preserved pending resolution of the relationship property issues.  Salaries at the current levels are unsustainable.  Again I do not see why Mrs Rolleston should bear the  whole  of  this  cost.    In  reaching  that  conclusion  I  appreciate  that  whereas Mr Rolleston is providing services to the company, Mrs Rolleston is not.  To avoid the financial health of the company deteriorating any further there will be an order that her salary is to immediately reduce by $10,000 per annum (to $41,857.52) on the  condition  that  Mr  Rolleston’s  salary  also  reduces  by  a  similar  amount  (to

$69,770).

[8]      There will therefore be the following orders:

(a)       Mrs   Rolleston’s   drawings   are   to   cease   on   the   condition   that

Mr Rolleston’s drawings are reduced to $3742 per annum.

(b)Neither party is to take any further legal expenses relating to the relationship property dispute from the company by way of drawings.

(c)       Mrs  Rolleston’s  salary  is  to  be  forthwith  reduced  by  $10,000  to

$41,857.52  per  annum  on  the  basis  that  Mr  Rolleston’s  salary  is

reduced by a similar amount to $69,770. (d)    There will be no order as to costs.

(e)      Leave is reserved to either party to apply further should there be a significant change in circumstances.   This is not, however, an encouragement for the matter to be brought back before this Court unless there is some compelling reason for that step.

Solicitors:

Kevin Clay, Christchurch,  [email protected]

S W Rollo, Christchurch,  [email protected]