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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> D. (B.) v. D. (J.) [2005] IEHC 407 (2 December 2005) URL: http://www.bailii.org/ie/cases/IEHC/2005/H407.html Cite as: [2005] IEHC 407

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Neutral Citation No: [2005] IEHC 407

THE HIGH COURT

FAMILY LAW

[2002 No. 83 M]

IN THE MATTER OF THE JUDICIAL SEPARATION AND FAMILY LAW REFORM ACT 1989

AND IN THE MATTER OF THE FAMILY LAW ACT 1995

BETWEEN

B.D.

APPLICANT

AND

J.D.

RESPONDENT

JUDGMENT delivered by Mr. Justice William M. McKechnie on 2^nd December, 2005. (No. 3)

1. At the commencement of these judicial separation proceedings the applicant wife sought, as against her respondent husband, a number of reliefs which were set out in the special summons which issued on the 22^nd August, 2002. After a lengthy hearing this Court gave judgment on the substantive matter on the 5^th December, 2003. The resulting order, which reflected that judgment was made on the 11^th December, 2003. Having granted a decree of judicial separation this Court made the following orders as between the parties:-

"(i) that pursuant to section 9 of the Family Law Act, 1995 the applicant do transfer to the respondent the entirety of her legal and beneficial interest in the shares and share holdings of the W. Group of Companies upon the following conditions:-

(a) The applicant shall resign as a Director and as Production Director within the W. Group of Companies on the 28^th February, 2004, and upon that date shall transfer her existing shareholding in the company to the respondent or his nominee

(b) The applicant shall continue to receive her emoluments from the company until the 28^th February, 2004.

(ii) that pursuant to section 8 (1) (c) (i), in consideration of the transfer set out above, the respondent shall pay to the applicant the following lump sum payments;

(a) The sum of €2,000,000 net on or before the 28^th February, 2004.

(b) The sum of €1,000,000 net on or before the 28^th February, 2005.

(c) The sum of €1,000,000 on or before the 28^th April, 2006.

(d) The aforesaid lump sum payments due in February, 2005 and

February, 2006 shall carry simple interest at the rate of 4% from the 1^st March, 2004, until the dates of payment or the due dates whichever are the earlier and from the due dates to the dates of actual payments (should the event arise) the outstanding sums to carry a rate of interest to cover VAT available as if the outstanding sums were a judgment debt.

(iii) that pursuant to section 9 of the Act of 1995 the applicant do transfer her interest in the family home situate at ……….. in the County of ………… to the respondent in consideration of a payment by the respondent to the applicant of a sum of €500,000.00 such monies to be paid by the respondent to the applicant on or before the 30^th April, 2004, and from the date of such payment the respondent to be solely responsible for all future outgoings in respect of the said property.

(iv) that pursuant to section 36 of the Act of 1995 in respect of the division of the contents of the family home to be agreed between the applicant and the respondent and in default of agreement liberty to apply.

(v) that there be an equal division between the parties or all unit linked funds, quoted shares and deposit bank accounts, and that in respect of bank accounts in the joint names of the parties or managed jointly, same are to cease as and of the 28^th February, 2004.

(vi) that pursuant to the provisions of section 14 of the Act of 1995 that the share to which either party would otherwise be entitled in the estate of the other or as a legal right or upon intestacy whether under the Succession Act, 1965 or otherwise, be extinguishing

(vii) that pursuant to section 15 A (10) of the Act of 1995 that neither party shall on the death of the other party, or at any time thereafter be entitled to apply for order under section 15 (a) of the Act of 1995 or otherwise.

(viii) that the respondent do pay a contribution of €100,000 to the applicant in respect of her costs to be paid on or before the 28^th February, 2005, with no interest to accrue on the said amount."

2. By notices dated the 20^th April, 2004, the respondent appealed against the aforesaid judgment and order. There was no cross appeal by or on behalf of the applicant. During the course of his submission to the Supreme Court, counsel on behalf of the respondent claimed that the trial judge had failed to make findings on the following four matters:-

"(a) Whether it was possible to remove the sums of money in question from the company over a two year period,

(b) What mechanism could be used for extracting such funds,

(c) What would be the commercial effects of the extraction of the funds on the viability and future of the business and

(d) What would be the tax effects of the extraction of the funds".

3. The Supreme Court its decision delivered by Hardiman J. on the 8^th December, 2004, stated at p. 12 of the judgment:

"The valuation and the lump sum award, together with the costs of buying the wife out of the family home, transaction costs and tax liability, is such that the cost to the husband of making the provision ordered substantially exceeds one half of the value of the company. Whether this is appropriate in the circumstances, and if not what sum would be appropriate, can only be assessed after a view has been taken on two of the four points mentioned in a previous section of this judgment. The tax consequences must be considered. The complexity and unpredictability of the effect on the company, in all of the circumstances of the case, must be set against the simplicity and certainty of the award of the sum certain in cash to one of the parties. We therefore consider it necessary that the court should address two of the four points proposed by Mr. Durcan that is the mechanism to be used for the extraction of funds from the company and the tax effects of such extraction. We do not, in the circumstances of this case, consider it necessary to address the other two points proposed by Mr. Durcan, viz whether it is possible to remove the sums of money in question from the company over a two year period and the commercial effects of such extraction. These must be regarded as having been resolved by the trial judge …"

Having also decided that the contribution of €100,000 to the wife's costs should be set aside, the learned judge, under the heading "Conclusion", also said the following at p. 15 of the judgment;-

"I quite appreciate the considerations of economy and speed which makes the husband wish to have a sum substituted in this court. However I do not believe that we can do this. Firstly, the relevant factors, isolated in the four paragraphs quoted elsewhere in this judgment, were not addressed at all by the learned High Court judge by way of finding: each party is entitled to a decision in the High Court on these issues and, if desired, an appeal from it".

4. The resulting order of the Supreme Court then provided:-

"It is ordered and adjudged that this appeal be allowed and that paragraphs (ii) and (viii) of the said order of the High Court be set aside and

It is ordered that this matter be remitted to the High Court so that that court may consider and make such findings as it considers appropriate on the following issues

(1) What mechanisms could be used for the extraction from this company of any funds ordered to be paid to the applicant.

(2) The tax effects on the companies or on the respondent of the extraction of the relevant funds…"

5. This matter then came back before me effectively for directions as to how the partial re-hearing ordered by the Supreme Court should proceed. Because of the widespread and divergent views adopted by the parties on how the re-hearing should be conducted, I directed that a notice of motion should issue, within the hearing of which, each party should set out their respective positions. Having received submissions and having considered affidavit evidence, I delivered a decision on these issues on the 4^th May, 2005.
6. In that written judgment I set out the opposing submissions advanced on behalf of both the applicant and the respondent and dealt with the more relevant matters in the manner following:-

(a) I rejected the wife's view that a full up to date valuation of the entire assets should take place in the context of making "proper provision" for her as is required by section 16 of the Family Law Act, 1995. I did on my interpretation of the Supreme Court's judgment and concluded that the previously attributed valuation of €10 million on the business and €1 million on the family home should stand.

(b) Contrary to the husband's forcefully put submission however I felt that I should take into account the up to date financial position of the company and should not restrict myself to the profile which existed in July, 2003. For example, its financial structures, including its cash reserves, debts, investments, tax schemes, etc would all in my view be highly relevant so as to address the questions referred back to me by the Supreme Court.

(c) In addition again though vigorously contested on behalf of the husband, I felt that it would be quite wrong to proceed on the basis that the family home was not available as part of the assets which I could consider when making proper provision. 7. The reasons for this last mentioned view are set out at paragraphs 12 and 13 of that judgment and read as follows:-

"12. In addition to this interpretation of the judgment, it will be recalled that the trial court did not deal with the family home by directing the respondent to acquire the wife's interest in it, at a cost of €500,000. Instead it granted him an option. Without in anyway attempting to explain my earlier decision it is I think reasonable to infer that in so approaching the family home in that way, the court was facilitating the husband and allowing him to take an overall view of his financial obligations under the High Court order. By not exercising this option he would have available to him an extra €500,000 though of course he would have to find accommodation for himself. If therefore there was for example on the financial provisions made a tax liability of say €800,000 that sum could have been reduced, perhaps very significantly reduced, if the alternative choice within the option was followed by him. That was to have the wife acquire the husband's interest in the home. In such a case, there would have been no question of any discretion once the husband declined the offer which the court granted him. It was therefore a decision in his gift. Consequently this particular aspect of the financial provisions which the court made, differed in this material respect from the other provisions it so ordered.

13. In addition it would I feel be grossly unfair if knowing as he did, what the High Court order entailed, the husband could still, by his own action, effectively put a sum of €500,000 out of the reach of this court even in the limited manner in which its re-engagement is required in this case. Such a consequence would seriously hinder the performance of the court's duty in making "proper provision" as of course it must do. Needless to say in arriving at this conclusion, which I do even in the absence of any appeal taken by the wife, I am merely indicating that this asset should be available for the court's consideration and I am not of course in any way either pre-empting or speculating on how the court might actually deal with the asset when making "proper provision".

Accordingly by virtue of the judgment itself and in particular that section thereof which is quoted at paragraph 10 above and by reason of the circumstances just mentioned, I believe that I am entitled to have regard to the family home: though of course I fully realise that I cannot interfere with the valuation of €1 million already placed thereon".

Finally as part of that decision I also expressed a view on this Court's jurisdiction when dealing with the issue of costs in family law proceedings.

7. The purpose of dealing with this question of directions, in such a formal manner, was to try and achieve certainty of position prior to commencing the re-hearing. If that involved an appeal by either party from the Court's judgment then so be it. At least the scope of the re-hearing would have been definitively established. However, having considered my judgment and having expressed dissatisfaction with different aspects of it, both parties suggested that instead of exercising their right to appeal, they would prefer to have the substantive re-hearing take place, but on a without prejudice basis to any subsequent appeal if either so wished. Though somewhat less satisfactory than what I had originally intended, nevertheless, in the face of such a joint request, I agreed with this suggestion. Accordingly the re-hearing proceeded on this basis.
8. The financial position of the three companies forming the W.G. group (which for brevity I will sometimes call "the company"), as it existed in 2003, is outlined in this Court's earlier judgment given in December of that year. That position was based on audited accounts for the three years ending the 31^st August, 2002. Such information was supplemented by management accounts for the first eight months and estimated accounts for the final four months of the year to the 31^st August, 2003. For the purposes of this re-hearing there are now available audited accounts for that year as well as the year 2004 and draft accounts for the year ending the 31^st August, 2005. It is not anticipated that the signed off accounts for the last period will differ substantially from the draft accounts which, although produced earlier than expected, were nevertheless not available until the morning of the actual hearing.
9. On the information available, Mr. Des Peelo Accountant, who gave evidence on behalf of the applicant wife, outlined in summary form the following matters as being relevant to the group's financial position. In so doing he concentrated, though not entirely, on the main trading company which is the core entity within the group. His evidence was as follows :-

(a) At the earlier hearing the forecasted profit for the year ending the 31^st August, 2003, was estimated at €217,000, whereas in fact the subsequent audited accounts show a figure of €551,000, an increase of over €300,000. The corresponding figure for 2004 is €722,000 (Mr. N.C.) which was less than that predicted in the management accounts for the same period. For 2005 the figure has dropped to €43,000.

(b) The turnover for the three years ending 31^st August, 2005, was respectively €10 million, €13 million and €14.4 million.

(c) The accounts show that the company had total assets of €10.29 million in 2004 with shareholders fund of €8.1 million, which include the sum referred to at subpara (f) of this paragraph.

(d) The company's balance sheet for 2004 showed a sum of €2.946 million in respect of premises, which was a very substantial increase over the corresponding figures for both of the previous years.

(e) The cash reserves of the company (including investments which can be treated as cash) which stood at €3.7 million in 2003 had fallen to €1.8 million in the following year and had dropped a further €200,000 in 2005.

(f) "Loans" made by the company increased substantially in 2004 with Mr. D. personally obtaining a sum of over €900,000 of which he paid his wife €500,000 as part of these proceedings and the remaining balance to his solicitors in part discharge of his costs of such proceedings.

(g) Debtors dropped by €563,159 between 2004 and 2005 - a decrease of about 50%.

(h) Expenses for 2005 were sharply up on the previous year, and,

(i) The company throughout all of this period continued to invest heavily in plant, machinery, equipment technology, etc.

10. On these figures Mr. Peelo made the following observations:-

(a) For the year 2003 the company out performed its estimated pre-tax profits, thus indicating that the pessimism previously expressed was not justified.

(b) During 2004, cash reserves substantially decreased whereas its fixed assets substantially increased. This occurred largely by reason of the company's purchase of premises, situated immediately next door to its existing plant, which increased its overall floor area by approximately 50% (Mr. N.C. says 40%),

(c) The company continued to spend heavily on new plant, machinery, equipment etc, all of which represents an investment for the future, and

(d) Turnover increased in the three years up to 2005, and indeed had reached a level not previously exceeded save for 2001.

He also pointed out that notwithstanding the fact that expenses had sharply increased in 2005, in particular those associated with sales and promotion and salaries and outlay thereon, the ultimate profit nevertheless had fallen to a level just above the break even point.

11. This witness' overall view was that this was a successful company with virtually no borrowings and with €2 million cash (approx) in the bank. He felt that in the years 2003 and 2004, Mr. J.D. could have paid himself a salary substantially in excess of the €130,000 which he actually received. Whilst mentioning a figure of €1 million, Mr. Peelo acknowledged that the pre-tax profit levels were not sufficient to cover this figure and therefore such a sum could not have been paid without the company going into a loss making situation. However any remuneration up to that level of profit could have been withdrawn without incurring such a loss. As the figures for 2005 show, it certainly would not be possible to have taken that type of salary out of pre-tax profits for that year.
12. In cross examination it was strongly suggested to Mr. Peelo, that apart from a generalised interpretation of the figures, he could not offer any evidence as to why the turnover for 2005 had increased and yet the pre-tax return had dramatically declined. The reasons for being unable to so do were simple but yet decisive. These were, that as he had no personal knowledge of the company's workings, he was not in a position to explain the underlying cause for the latest figures. For the same reasons, it was suggested to him, that he could offer no opinion on the business justification or prudence of any decision taken by the company throughout the years and in particular, in the more recent times, of its use of cash resources to increase its fixed asset base. He agreed that this had to be so, and inevitably had to further agree that his evidence, in terms of detail, had to yield to that of Mr. N.C.'s the company's financial director.
13. Mr. N.C. in evidence explained what had occurred in 2005. Apparently when planning for that year, the Board of Directors decided to make a determined effort to increase growth by a factor of approximately 40%. To deliver on this ambition, the company increased its staff numbers and expanded its budget on sales, promotion and marketing. Unfortunately the market was not as buoyant as had been anticipated, with the result that the sales targets were not in fact achieved. Losses over several months followed. In the middle of that financial year the company carried out a review of its position and decided to alter strategy. It focused on consolidation. Staff were let go and costs were curbed. With the result that at year's end, the situation had stabilised and despite the bad experience a break even situation had been achieved.

For the current year that is 2006 the company adopted a more modest target of 20% growth and has predicted profits of about €800,000.

14. As part of his evidence Mr. N.C. produced a document headed "Projected funds flow for year to the 31^st August, 2006". That showed the following:-

Projected Funds Flow for year to 31 August 2006

	Project	€m	€m
1 2 3 4 5 6 7 8 9 10	Net Cash Balance at 31 August 2005 Budgeted profit to 31 August 2006 Depreciation to be provided for 2006 Corporation Tax on 2006 profits (Est @ 10%) Balance due on glass line supplier Taxation on monies already paid to BD Further legal fees (Est.) Capital Expenditure for 2006 (separate listing) Additional Working Capital re development of timber business (est.) Working Capital Increase/decrease for existing businesses	0.500	1.605 0.797 0.662 - 0.080 - 0.565 - 0.443 - 0.100 - 1.190 - 0.425 -
	Projected Net Cash Balance at 31 August 2006		0.261

As can therefore be seen when the expenditure above outlined is provided for, which does not include a loan of just under €1 million from the Bank of Scotland, it is the opinion of the financial director that as of August, 2006 the company should only have a cash reserve of about €260,000.

15. This witness also produced a series of options involving Investment and Diversification not only for 2006 but also for 2007. The expenditure allocated to the current year was €1.2 million and that suggested for 2007 was €1.5 million, though this later figure was subject to further review and verification.
16. On a general basis it was Mr. N.C.'s opinion that the company in the future will continue to face major challenges from its continental competitors who have a cost advantage in terms of the price at which they can supply the finished product on the Irish market. Overall he concludes that whilst the company may do reasonably well and return to a profit figure of about €800,000 in the current year, it is highly unlikely that the group will again see the profit levels which were achieved in 2001 (€2.4 million) or in 2002 (€1.95 million).
17. Whilst the latest set of accounts show what the current financial position of the company is, these do not however in my opinion, indicate the full underlying value of the company or demonstrate its medium or long term prospects. Even against, what appears to be a poor set of results for 2005, I fully agree with Mr. Des Peelo's assessment that this is a successful company. I do so for several reasons. Firstly, it has continued to invest heavily in plant, machinery, equipment, etc which is indicative of its confidence for the future. Secondly, it recently has acquired a large premises for approximately €1.7 million, which likewise, is an expression of such confidence. Thirdly, even though it has used some of its cash resources to fund its acquisitions and investments, it still has a substantial amount of cash available and could not be said to be heavily indebted. Fourthly, it has significantly reduced its debtors by almost 50%. In addition, whilst it clearly over reached in its targeted expansion for last year, including the expenditure necessary to drive that programme, it quickly realised however that its expected growth figures could not be achieved. It therefore took immediate action to redress the situation and even allowing for a substantial loss on a single contract, ended the year with a credible result of just above break even. This year its growth target is still about 20%. Moreover, except for 1994, it has always returned a profit and in the last three years has increased its turnover by more than €4 million. Given its historical record and the hugely experienced and loyal management team which it has, including Mr. J. D. and Mr. N. C., it seems to me that there is every reason for having confidence in this company for the coming years. The concerns of Mr. N. C. with regard to competition have obviously been well flagged for some time and I have no doubt but that senior management has in place, a strategy for responding to all competition, both foreign and domestic. I am therefore satisfied that there are no unusual reasons, outside the industry norm, which should have any unforeseen consequences for this company. On the contrary, I firmly believe, that in both the medium and long term, it will continue to thrive.
18. On the taxation side I heard evidence from Mr. Andrew Clarke who was called on behalf of the wife. He is a chartered accountant of thirty years standing, a fellow of the Irish Taxation Institute and a former President of that body as well as being the current Vice President of the European Tax Practitioners body. Mr. Brian Little, who gave evidence on behalf of the husband, is a chartered secretary and an associate with the Institute of Taxation. He has been a taxation consultant for almost thirty years.

Mr. Clarke, in the first section of his evidence, said that he had considered the four options as outlined by Mr. Little in a letter dated the 27^th January, 2005, to the company's auditors. He agreed that the first two of such options, namely the granting by the company of a loan to Mr. J.D. and secondly, a buy back or redemption of part of his shareholding in the company, could be discounted as being tax inefficient. He therefore concentrated on the respondent withdrawing monies from the company, either by way of remuneration or dividend. Whilst he favoured the option of remuneration, Mr. Little's preference however was for a dividend payout. Mr. Clarke explained his view in the following way.

Whether by way of remuneration or dividend the director in question was obliged to pay 47% tax on any sum received. If distributed by way of dividend there is no allowable deduction from the company's point of view as a dividend is paid after all expenses and taxation have been accounted for. On the other hand remuneration is an expense of the business and is paid to a director in respect of his duties as such. It is thus a cost to the business and accordingly is categorised as a 'qualifying deduction' for tax purposes. As the tax allowed is 12.5%, the combined cost to the company and to the respondent of any such payment would be 39.4% and not a straight 47%. Hence his preference for this method.

19. To illustrate how the payment and tax consequences would work in practice he took one million euro as a unit example. To receive one million euro net, the company would have to gross up that sum up by 47%, (to cover PAYE at 42% and PRSI at 5%) which would amount to €1,886,792. On that sum the company could claim a 12.5% deduction or credit which equals €235,849. When that is deducted from the gross amount the resulting figure is €1,650,943. This equates to a total aggregate tax liability of 39.4% and not 47%. So, for every one million euro net, which the respondent might receive from the company, the real cost is €1.65million and not €1.886million. Whilst this calculation relates to a base figure of €1 million the formulae equally applies to any incremental increase above that sum. This in broad terms is how the scheme would work. In terms of detail there would be a certain time gap between the discharge of the 47% liability to the Revenue and the recoupment of the 12.5% deduction. Whilst of course that would be a cost to the company it has not being suggested that this would be significant.
20. The reasons why Mr. Little did not favour the adoption of this route were two fold. In the first instance he felt that the Revenue Commissioners might challenge such a scheme on the basis that such increased payments to Mr. J.D. were not "wholly and exclusively" for the benefit of the company. Going from €135,000 to €1million or more could in his view raise their suspicion. He doubted therefore if the lower rate could be achieved.

The second point of concern was this. In the example given above, the saving or claw back would be €235,000. In order to obtain the benefit of the entire of that sum in any given tax year, the company would have to earn sufficient pre-tax profits to cover it. In the last financial year for example the deduction would only be 12.5% of €43,000. Even with the predicted increase of profits to €800,000 in the current year, the sum recoverable would amount only to €100,000. Whilst the company could carry forward the unattained benefits from one year to another, this clearly would also have a cost implication for the company. Such a factor however was not quantified.

21. Mr. Clarke did not agree with the first reason advanced by Mr. Little and I accept his evidence in this regard. It seems to me that whilst one cannot be one hundred percent certain of what interest the Revenue might show on such payments, it is, nevertheless, in my opinion, highly probable that they would not successfully involve themselves in any challenge to the proposals above outlined. I accept the views of Mr. Clarke when he says that once full tax, that is PAYE and PRSI, is paid on the entire sum then the Revenue from his experience are satisfied. He has never known of like circumstances in which a challenge has been made. In his opinion the Revenue are not interested in how the money is spent and consequently whilst they may possibly ask questions, they are most unlikely to disallow the lower tax regime. Accordingly I am satisfied as matter of probability that the combined rate of 39.4% would be available in the aforesaid circumstances.

The second point made by Mr. Little, which is quite separate from the first point, is undoubtedly true and must be taken into account in considering how to make proper provision for the parties.

22. In the belief that he was rigidly confined to the two questions remitted back by the Supreme Court, Mr. Clarke had not initially considered whether there were any other options which might provide an even more tax efficient solution to the task of making proper provision for the parties. Overnight however he did so and on day two of the trial he outlined a number of further possibilities for the Court's consideration. These involved an adjustment to the existing shareholding in the company as between Mr. D and his wife, Mrs. D. In broad terms it was envisaged that by court order the wife would be allocated a substantial shareholding in the company say 30% and at a future date such shares would be repurchased from her at a specified figure, either under a scheme involving the establishment of a new company which would acquire the shares or else by Mr. D himself. Which ever the ultimate source of funding would be the company, either from existing resources or out of its future stream of profit or both.

There would have to be established a complex financial arrangement so as to deal with the various stages of such a scheme, including the method of funding. Though technical and perhaps difficult, such an arrangement could work and would have the benefit of having a 20% tax regime applied to it. Several variations to the generality of this suggestion would have to be considered including the option of Mr. D. himself, rather than any corporate entity, repurchasing the allocated share from his wife. In the period available however it was not possible for this witness to produce details of such a scheme but given time, an arrangement particular to these parties could be established.

23. In my opinion, with all due respect to Mr. Clarke whose efforts in this regard I greatly appreciate, I do not think it necessary to further pursue this line of inquiry in any detailed way. In the first place there is no co-operation from Mr. J.D. In fact he has expressed out right opposition to this suggestion and all variations thereof. It could therefore only be implemented through a court order which would involve a series of business, commercial and legal decisions being imposed on the company. Such decisions could have unforeseen consequences for the future viability of the group as well as having potential effects on its business and legal relationship with third parties the effects of which are not presently capable of identification. In addition such a scheme would have a far greater chance of success if the parties were divorced, as in such circumstances they would not be "connected persons" for the purposes of the taxation code. Evidently I could not proceed on that basis. As "connected persons" one of the variations would require a freeze on the distributive reserves of the company, which presently stand at €8.2 million, at transaction date. Moreover a shareholding of say 30% would confer statutory rights on Mrs. D, which, notwithstanding her offer of furnishing a binding undertaking, might be difficult to legally restrict, if the Court still favoured a total disengagement by her from the company. Matters such as when these shares would be repurchased, how the necessary funding would be put in place, what would happen in a default situation, what judicial encouragement could be given to the company and/or Mr. J.D. to complete the transaction, are but some only of the further matters that seriously complicate this suggested scheme, although I am satisfied that at least one problem, namely the "benefit test" could be met. Even Mr. Clarke himself felt that the Revenue might challenge a buy back by the company or a new company. Accordingly for these and other reasons which are later set out in this judgment, I do not consider the establishment of such a scheme as being appropriate in the particular circumstances of this case.
24. A point of some general importance arises in this case in that the major family asset is owned by a private company which is under the exclusive control of Mr. J. D. who holds 99% of the shares therein. Throughout the cross examination of Mr. Peelo it was repeatedly put that the only persons who could give evidence about the prudence of business decisions taken by the company in the past number of years were those who had intimate knowledge of the company's affairs. His general views therefore on any such matters were virtually of no value and with certainty had to give way to those of, for example, Mr. N. C., the financial director. Equally so this proposition was put to Mr. Clarke. As a result, without undertaking a most detailed forensic examination of the company's books and records, including minutes of its meetings and details of its transactions and without having the same analysed by comparable experts in the same industry, it would not have been, and in this case was not possible, for the applicant to adduce any worthwhile evidence on many of the business decisions taken in the past two to three years. This even where such decisions had a significant impact on the asset and asset mix of the company. For example, decisions such as to acquire further premises at a cost of €1.7 million, to continue to invest substantially in plant, machinery and equipment etc, to use part of its cash resources to fund these activities with the result that from having €3.8 million cash available in 2003, the comparable sum in 2005 is €1.6 million, and to reduce its debtors by almost 50%. These decisions, as was forcibly put in cross examination, were matters for the board of directors and save for conducting an extensive inquiry of the type above mentioned, were largely immune from comment, let alone from critical appraisal in the circumstances of this case. If there were sufficient funds immediately available to make proper provision for the wife, then such matters would not be of any great relevance. But that is not the situation here. It is of no benefit to her to see the fixed assets being increased but the cash resources depleted. As was pointed out, again on cross examination, it is not practicable to dispose of any of these assets and yet have the company continued to trade. A comparable situation would not arise, or at least would be more readily capable of influence and perhaps challenge, if the asset was held, not by a company, but by her husband personally. In essence, by reason of this entity (but ignoring his total control over it) the husband can make, or require to be made, decisions which can seriously effect what assets and in what form such assets might be available to the Court when making proper provision.
25. In such circumstances one could be forgiven for hoping that the respondent husband would have engaged in a genuine and constructive way in facilitating this Court's task of making proper provision for his wife. In the evidence section of this case that simply did not occur. The main focus of the husband's cross examination of both witnesses called on behalf of the plaintiff was to establish that, due to their lack of familiarity with this company, they were not in a position to offer any credible comment on certain highly relevant matters. For example, in the case of Mr. Peelo, the cause of the profit decline in 2005 and secondly the appropriateness of many of the company's decisions. In the case of Mr. Clarke the point was even more dramatically illustrated. On his preferred method of extracting money from the company, the cross examination was entirely focused on highlighting the risks, the uncertainty and the likelihood of a revenue challenge to his suggested overall tax rate of 39.4%. The entire concentration of the respondent was to establish a rate of 47% and nothing less. Even more so with regard to Mr. Clarke's suggestions of a share adjustment. Whilst I appreciate, that in principle it would not be desirable for Mrs. D to re-engage in the business of the company (which in fact was never suggested), nevertheless the respondent's entire approach to all such suggestions was one of utmost negativity. Whilst I am not sure if one should go as far as Mr. Hegarty S.C. submitted, namely that the respondent husband was obstructionist, one can readily see how he could make that submission.

This view of mine is by no means answered by saying that the latest set of accounts were produced ahead of schedule. Even if these were near completion only the respondent was duty bound to make available the underlying figures.

26. In any event, at the conclusion of the evidence this Court was left with a distinctly uneasy feeling of finding itself in a situation whereby, for business reasons which save for huge expenditure could not be reasonably challenged, the company had adopted a series of measures which considerably restricted what assets could readily be included in any assessment under s. 6 of the 1995 Act. This feeling was not helped by the fact that Mr. D., whenever it would appear he so wished, could obtain moneys from the company as he did when withdrawing of over €900,000 for the purposes of this case. The corporate veil was not a problem in such circumstances. In addition on his behalf Mr. N.C. the financial director, who had given unconditional support to his employer throughout his matrimonial difficulties, offered the following response when asked by Mr. Durcan S.C. "what kind of money could be taken out of this company and still leave it available, still a trading company?" He said

"there is no absolute answer to that question … according to my projection [there is] about €300,000 at the end of next year (that is after three various lodgments of money have been taken out and we are budgeting on a profit of €790,000) … now, so far as my concerns as the finance person in the company, I would hate to enter into a scene where we are borrowing €1 million, €2 million, that wouldn't be where I want to be at all. I do anticipate that some amount of money has to be found and paid over, but it would hopefully be in the hundreds of thousands rather than the millions".

Even allowing for his position as financial director, this evidence from the Court's point of view was a further illustration of the respondent's approach to this case.

27. Even in the absence of any case law being opened on what possible complications the existence of a private company might have, I wish to assert as a matter of principle, that this Court has jurisdiction over all the assets of both the applicant and respondent, including those held by the latter through the medium of a limited company, and can make use of them in the most appropriate manner feasible so as to make proper provision for the parties to this marriage. This jurisdiction is found in the relevant statutory provisions of the Family Law Acts and, if necessary, subject only to third parties vested rights, would take precedence over any business decision made by a corporate entity such as the company in question in this case. I could not under any circumstances accept that this Court could be disabled from performing its constitutional and statutory duties simply by the creation and existence of a private company where its entire affairs are within the exclusive control of one party to the marriage. If there was no other way of achieving proper provision I would not be dissuaded from exercising this jurisdiction and if that involved a company restructure or even a sale then so be it. Whilst obviously such a decision would not be taken lightly and would have to be based on evidence and guided by underlying legal principles, nevertheless if that course was the only course available, than that would likewise also follow. Otherwise I would simply be abdicating my duty and ceding my responsibility to one party of a marriage. That the Court could never do.
28. In making these observations I wish to state clearly that the problems encountered were not a necessary consequence of the nature of the family asset, namely a business being conducted through a private company. In fact given that the company is totally solvent and that sole ownership, and thus control, rests with one person, the mere existence of a corporate entity should only have a minimum effect on the Court's discharge of its s. 16 responsibilities. Rather the point at issue is how one party to this litigation has utilised the existence of such a structure in furtherance of his personal position. Such a stance perhaps would attract little adverse comment if these were not family proceedings but they are. If, as many people strongly feel, and perhaps correctly so, that such proceedings, which inevitably arise out of a marital and family relationship, should be treated at least in part sui generis, then the parties' conduct of such litigation must appropriately reflect that position.
29. Notwithstanding these comments however I do not find it necessary in the particular circumstances of this case, to invoke the type of jurisdiction above described. This because I am satisfied that proper provision can be made, without substantially effecting the structure of the company or interfering with previously made decisions or altering or modifying the thrust of its present policy or direction.

Before setting out the parties' submissions, I should say that by virtue of my concern as to how the evidence unfolded, I asked on the second day of the hearing how in fact this Court could possibly make proper provision for the wife. At p. 74 of that day's transcript this acute problem was acknowledged by counsel. In response both counsel then made very detailed and helpful suggestions in this regard which I am most grateful for.

30. Mr. David Hegarty S.C. made a number of submissions on behalf of the applicant wife. He said:-

(a) That the overall responsibility of this Court, even in the limited circumstances of its further engagement, was to make proper provision for each party having regard to the matters identified in s. 16 of the Family Law Act, 1995.

(b) That, when considering s. 16 of the 1995 Act, the Court must give due and proper weight, inter alia, to:-

(i) the significant input which Mrs. D. made in respect of her marriage and her family;

(ii) the dual role which she played as a mother and as a major contributor to the development of the family business;

(iii) the fact that as a result of her marriage breakdown, her quality of lifestyle, standard of accommodation and employment satisfaction and achievement had all been greatly reduced;

(iv) the fact that her opportunity of regaining any comparable position in the workforce was far different to the guaranteed future position of her husband and

(v) the fact also that she will lose her succession rights.

(c) That the company and Mr. J.D. should be associated together and treated as one: this view is fully supported, inter alia, by the fact that in the last three years the respondent had withdrawn almost €600,000 in respect of his own legal fees as well as a further €500,000 which he had paid to Mrs. D. as part of an earlier Supreme Court order granting a stay pending appeal, and

(d) That the latest set of accounts do not reflect the truly successful nature of this business which success is most likely to continue for several years to come. Even for 2005 the profit would have been well above the €600,000 mark if the company had not decided to reduce its debtors by more than €560,000 and if it had not lost more than €200,000 on a single contract.

31. Counsel then went on to indicate how in his opinion the Court should make proper provision for his client. He suggested the following:-

(a) that certain items, such as the unit linked funds, quoted shares and deposit bank accounts, had already been dealt with on a fifty fifty basis and therefore could be disregarded;

(b) that the contents of the family home should be equally divided on a "turn and turnabout basis";

(c) that the €500,000 which his client had already received and which in part had been used to acquire her present accommodation must obviously be taken into account;

(d) that a contribution of €500,000 should immediately be paid to her pension fund;

(e) that a share adjustment should take place, the broad details of which would involve Mrs. D. acquiring a 30% interest in the company with her husband or the company or a new company, repurchasing these shares after five, seven or ten years. The price payable would be commensurate with a valuation of €10 million or with such higher figure which the respondent might obtain on a disposal of the business. Mrs. D. would give all required undertakings, supported by court order, not to directly or indirectly engage in or otherwise seek to have any influence over this company and would hold her shareholding at the sole discretion of her husband in the event of a vote being required,

(f) that the husband should pay to his wife the sum of €100,000 per annum as maintenance until the aforesaid repurchase took place. This payment would have the dual purpose of making money available to the wife as well as acting as an inducement to the husband to ensure that the shareholding would be acquired within the periods above mentioned, and finally

(g) some provision should be made for her costs.

32. Mr. Gerry Durcan S.C., who appeared on behalf of the husband, said that his submissions were made on a "without prejudice" basis to his client's position that the decision of this Court delivered in May, 2005 was incorrect. He then said that in dealing with this case, the Court was heavily circumscribed by the earlier order which it had made in December, 2003, by the order of the Supreme Court dated the 8^th December, 2004, and by the May judgment. In particular in relation to the family home he claimed that this Court could not make a property adjustment order and in that regard relied upon s. 18 of the Act of 1995. In his view to so do, it would logically mean that either this Court's first judgment of December, 2003 or its later judgment of May, 2005 was meaningless. In the same light he submitted that since this court envisaged, in its December, 2003 judgment, that the company would continue trading, it had no jurisdiction to make any share adjustment in favour of Mrs. D. even if it was minded to so do. Reference was then made to pp. 15 and 16 of the judgment of Hardiman J. delivered on 8^th December, 2004, and on foot of a passage therefrom, which is quoted at para 3 on page 5 above, it was submitted that this Court must make findings on each of the four questions which he as counsel had raised during the currency of that appeal (See also para 2. above).
33. Dealing with the valuation of this company, counsel went on to suggest that this question could only be resolved by the Court restricting itself to what were the "realisable assets" available. He said that given the desirability of the business continuing to trade, this company did not have a value of €10 million as even on a disposal of the business and having paid tax at 20%, the figure would be €8 million. Indeed this figure was also too high. To extract €1 million net would require a gross figure of €1.6 or €1.8 million, so the most that one could say the company was worth, was between €5 or €6 million. Even that was wholly unreal as a valuation, because in order to extract such funds, the assets would have to be disposed of and in that event the company would effectively cease to exist. So in reality one could say that the evidence of Mr. N.C.'s was the only evidence which could be relied upon.
34. In considering specifically how to make proper provision, Mr. Durcan S.C. then made the following suggestions.

Mrs. D. was already paid €500,000 as well as receiving investments to the value of €400,000. These, together with her half share of the "miscellaneous items", came to €1.1 million. In addition the husband was prepared to pay €500,000 in respect of the family home and a further €1 million in the immediate future. He would extract a third of this money from the company and for the balance would mortgage the family home up to its historical value of €1 million. Such a mortgage over 20 or 25 years would require repayments of about €50,000 per annum which could be covered by extracting a further €100,000 approximately from the company. In addition €500,000 would be immediately lodged to the wife's pension fund. Furthermore an offer of maintenance was made in the sum of €50,000 per annum from now to age 65. On that, which would cost the husband about €23,000 or €24,000 a year, the wife would have to pay 47% tax. Over 15 years, (the wife being aged 51) counsel calculated this additional benefit to be approximately €500,000.

These elements in his opinion constituted proper provision for the wife and there should be no order for costs.

Finally, counsel went on to comment on the proposals made by his opposite number Mr. Hegarty S.C. He pointed out that if the figures sought were obtained, the applicant would be in receipt of a sum even greater than that which resulted from the first order of this Court in December, 2003.

35. Before setting out my views on what I think would constitute proper provision, there are a number of matters which can conveniently be dealt with at this point:

(a) There can be no question but that this Court must apply the provisions of s. 16 of the Act of 1995 to the facts and circumstances of this case, being those which survive from the earlier decision and those found by this Court on the re-hearing. As circumstances have changed between both hearings, including the financial position of the company, and as the parties' proposals and submissions have also differed, it seems to me that the correct way of approaching this matter is not for the Court to assess, whether in the new circumstances the previously made provisions are still appropriate, but rather to determine the issue of proper provision afresh. This of course within the scope of the limited re-hearing before me.

(b) In so doing I propose to apply the relevant findings of fact as set out in the earlier judgment of this Court insofar as these are relevant to the various sub-paragraphs contained in s. 16 of the Act of 1995. Having previously noted what these are it is not I think now necessary to repeat the same.

(c) I agree with the submission that the company and Mr. J.D. can be fully associated together and treated as one. I do so for the reasons set out above. In addition however this approach has the clear approval of the Supreme Court; see paragraph 11 of the judgment of Hardiman J.

(d) As is clear from an earlier part of this judgment I have decided against making use of any share adjustment scheme in this case. I do so however for the reasons set out at paras.23 and 24 above, and not on foot of the respondents submission which was, that by virtue of the December, 2003 judgment I was bound to preserve the trading status of the company. Whilst I agree that the business should continue, this view is arrived at solely in the context of what is in the best interest of both parties and their family.

(e) As set out in the May, 2005 judgment, which the parties agreed to operate for the purposes of this appeal, albeit on a without prejudice basis, the family home is available as part of the assets which this Court can avail of, if it thinks it correct to so do. Given that this approach was entirely at the parties initiative, it was rather surprising to hear a submission from the respondent that this Court could not make a property adjustment order in respect of the family home. It was said that in view of the December, 2003 judgment, there was no power to now vary or discharge the previously made order. I cannot recall, I have to confess, whether or not such a point, put on that basis, was advanced as part of the motion for directions which led to the May, 2003 judgment. If it was not it ought to have been. In any event this is but one of the unfortunate difficulties which has arisen, partly by the absence of any appeal by the applicant wife and partly by the problems encountered in isolating, from what was intended to have been an integrated package, certain matters for re-hearing. However, despite these difficulties it seems to me that a decision on this point of law is not necessary in view of the manner in which I propose to make proper provision. What is clear however is that there are no such restrictions on dealing with the 3.5 acres which were, subsequent to the initial hearing, purchased by Mr. J.D.

(f) I reject the submission made on behalf of the husband that, in addition to dealing with the two questions referred back by the Supreme Court, I must also make findings on the two other questions which were not referred back. In my view there is nothing in either the judgment of that Court or in its order dated the 8^th December, 2004, to that effect. In fact, at p. 13 of the judgment, referring to questions (a) and (c), the Supreme Court said that … "these must be regarded as having been resolved by the trial judge". In addition the specific order made in response to that judgment referred back questions (b) and (d) but made no mention whatever of the other questions. I therefore do not believe that this Court was asked to make any findings on these other questions.

(g) Finally in this context I do not accept Mr. Durcan's view as to the real value of the company. It seems to me that as a matter of high probability the business will continue to provide a source of real income for Mr. J.D. for several years to come and, if at any time he so decides, he would have a valuable asset available capable of realisation as a going concern.

36. On making proper provision I have considered all of the evidence including the latest affidavit of means of both parties as well as the findings above made on how monies can be extracted from the company and the tax implications in so doing. As a result I propose the following:-

(a) That the contents of the family home, as is provided for at paragraph (iv) of the order of 11^th December, 2003, be divided equally between the parties and that in respect of items which sadly cannot be agreed upon, this should now take place on a "turn and turnabout basis";

(b) The items referred to as "miscellaneous" were to have been divided on a equal basis in accordance with the earlier order. It would now appear that the wife has received investments to a value of approximately €400,000;

(c) A sum of €500,000 as part of the Supreme Court's order granting a stay pending appeal, has already being paid to the wife;

(d) A further sum of €500,000 is to be paid to the wife in respect of the family home which, together with the 3.5 acres, is to remain in the sole ownership of the respondent. I am informed that Mr. J.D. proposes to borrow this sum from the company. The tax liability will vary between 47% and 39.4% depending on the method of extraction if indeed that sum is withdrawn at all as either remuneration or as dividend;

(e) A further €1 million is to be paid to the wife. This, I am informed, is to be borrowed by the husband on the security of the family home. Over 20 or 25 years the annual repayment on such a mortgage will be about €50,000. Such a figure will cost the company about €100,000 gross. There is no question in my view but that the company is totally capable of bearing this sum;

(f) A payment of €500,000 is to be made to the wife's pension fund. This will have no tax implications for the company and none for the applicant until she is in receipt of benefits therefrom. No submission has been made that the company is incapable of covering this figure.

(g) A further €500,000 is to be paid to the wife in four equal annual instalments. There is likewise in my view no question but that the company will be able to accommodate this figure without in anyway affecting its affairs or operations. It can discharge these annual amounts out of cash resources, or out of future profits or out of borrowings or by a combination of some or all of these methods or indeed otherwise as its sees fit. On findings previously made, the gross cost to the company of such sums, if withdrawn as remuneration, would be, on a straight calculation and assuming immediate payment which of course is not the case, about €850,000.

(h) Maintenance shall be paid to the wife at the rate of €80,000 per annum on which she will have to pay tax at a rate of 47%. The cost to the company will be about €35,000 per annum, again a figure well within its budget capacity. At age 65 I am satisfied that given her present pension fund as well as the further contribution above ordered, the wife will thereafter have appropriate funds to meet her proper needs.

37. The aforesaid payments are to be discharged as follows:-

(a) The €500,000 in respect of the family home is to be paid by the 31^st December, 2005,

(b) The €1 million, which I am told is being borrowed, is to be paid by the 28^th February, 2006,

(c) The €500,000 pension contribution to be paid within 14 days from today's date,

(d) The €500,000, to be paid by four equal annual instalments, shall commence on the 30^th June, 2006, and shall continue thereafter. Such payments to be index linked in accordance with the CPI as and from the date of first payment.

38. The balance of the assets, including the family home and the business, are in my opinion quite sufficient to make provision for the respondent husband.
39. A number of consequential orders follow from this judgment and I will hear counsel in respect thereof.

Approved: McKechnie J.