Rolleston v Christchurch Residential Care Limited [2012] NZHC 2543 (2 October 2012)

Last Updated: 14 October 2012

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

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

BETWEEN TE TUMU ROLLESTON Plaintiff

AND CHRISTCHURCH RESIDENTIAL CARE LIMITED

First Defendant

AND DONNA 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.

[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

_{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, [e-mail]

S W Rollo, Christchurch, [e-mail]

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[1] _{Leave is granted for the late filing of documents.}
[2] _{Drawings of $21,047 and wages of $51,857.52.}