High Court of Ireland Decisions

2005 IEHC 272

THE HIGH COURT

[2003 No: 69M]

IN THE MATTER OF THE FAMILY LAW (DIVORCE) ACT 1996

BETWEEN

A. K.

APPLICANT

- and -

P. K.

RESPONDENT

DECISION OF THE MASTER OF THE HIGH COURT 27^TH JULY 2005.

In support of her application for discovery Mrs. K. the applicant has exhibited an unsigned, undated, seven-page list of 34 "items" listed under the heading "Information required under discovery" and printed on the headed paper of a firm of accountants. The applicant, at paragraph 10 of her affidavit of 17^th June, 2005 - it is an affidavit supplemental to the grounding affidavit of 2^nd March, 2005 and the supplemental affidavit of 18^th April, 2005 - deposes as follows: "I beg to refer to a list of the information sought by (the accountants). I say and believe that they are not in a position to provide a report on the respondent's finances pending discovery sought".

The information "required" includes detailed statements of Mr. K.'s mobile phone bills for 2003 and 2004; correspondence with Revenue in relation to non disclosure of any foreign bank accounts; list of any single premium investment products; full documentary evidence of accounts with Paddy Power, the bookmaker, and a list of all racecourses outside the State to which Mr. K. travelled in the last 5 years; his passport for each of the years 2001 to date; accounts opened in names of P.K., Mr. K., A.K., S.K., A.K., C.K. (all children) and L.M., and in the case of the latter the accountant notes that though "Mr. K. is of the opinion that to seek financial information is vexatious, as Mr. K. is in a longstanding relationship with this person he (the accountant) does not accept his point".

To fully appreciate just how outrageous and wholly speculative this list of items really is, one has to recall that Mr. K. has already discovered (2^nd March, 2005) bank and credit card statements for 2003 and 2004 and professional audited accounts back to 1995. Not only that, but he has responded to Mrs. K.'s queries (per her affidavit of 18^th April, 2005) by providing (in his affidavit of 5^th May, 2005), clear explanations of the discrepancies which she thought she had identified.

I must ask the question: what does this accountant think he is up to? Precisely what is the expert evidence that he is being retained to provide? He cannot seek discovery simply to have a good look around Mr. K.'s records to see what he can come up with. That is fishing: not even an expert is allowed to fish. The accountant doesn't say if he has examined the audited accounts furnished. If he has, he doesn't tell us if he has spotted anywhere where they don't add up. This is also of significance.

And in this exchange of affidavits, and in the affidavit of discovery and the discovered document themselves (which have been furnished to me and I have considered) I can find nothing whatsoever which might prompt the lines of inquiry which the accountant now apparently wants to investigate. There is nothing, repeat nothing, suggesting Revenue irregularities on the part of Mr. K., and to suggest otherwise is to cast an unwarranted slur. The Court will not tolerate such an abuse of the accountant's somewhat privileged position. This is not the Star Chamber. Accountants, and other professionals, have sometimes secured discovery of documents of questionable discoverability simply because the Court hasn't the time or the expertise to second guess the professional say-so of the expert witness. As a result, we now have to deal frequently with oppressive, intrusive and vindictive requests of this sort. No longer will they go through "on the nod". The Court will not indulge the flights of fancy of an accountant.

Standard discovery rules apply. No relevance, no reason, no necessity, no discovery! And no fishing, no way! A party may choose to employ an expert, but the purposes for which the expert has been retained, and the expert evidence (for the preparation of which he says he needs discovery) must be spelt out to enable the Court adjudicate the application. Experts will not be allowed to set their own agenda in litigation. (See Aherne v. Southern Health Board, 29^th April, 2005)

Of course there will be cases where the skills of a forensic accountant (self styled?) will be required. But first reflect on the fact that the Affidavit of Means (and the vouching thereof) is the basic evidential package which each party in Matrimonial proceedings must deliver over to his opponent. Thereafter it is a matter of choice for either party to request discovery. In most small cases with one or two salaries, a single (mortgaged) asset, overdrawn bank accounts, the ubiquitous SSIA account, and perhaps the pension fund, discovery is usually not "necessary". (Yet it is invariably agreed to without reference to the Court!).

The particular skills of an accountant may be called for if the first discovery throws up clear gaps or internal inconsistencies or is at variance with the clear hearsay or direct knowledge of the discoveree. But for further and better discovery to be ordered, the quantum of such uncertainties must be significant. (See F.D. v. P.J.D., 28/07/04.)

It is not a sufficient basis for an application for there to be an assertion that the discoverer's figures cannot be audited. There is no auditing standard for matrimonial cases: the Court uses a broad brush in assessing and apportioning the available incomes and assets. I's do not have to be dotted and t's do not have to be crossed. If the Court is satisfied that (to employ accountancy's own much favoured phrase) "a true and fair picture" of the parties' means has been proven, it will proceed to judgment. It will audit neither party's books before doing so.

It is peculiarly inappropriate for an applicant to seek further and better discovery in a case such as this where the respondent has already discovered audited accounts. To warrant further discovery there would have to be fairly clear prima facie evidence that the accounts did not tell the full story. Even then, the further and better discovery which might be considered would be only in relation to those matters which appeared not to have been included in the initial auditing process, else we are talking of a full audit de novo, which is ipso facto unnecessary.

The summons in this case issued on 10^th June, 2003 and the respondent (Mr. K.) swore his Affidavit of Means on 20^th April, 2004. The respondent then agreed to voluntary discovery of his professional audited accounts, but none of the other eight categories requested by applicant's solicitor's letter of 27^th July, 2004. A motion for discovery (eight categories) issued returnable for 8^th December, 2004 and Mr. K. by replying affidavit exhibited his audited professional accounts from 1/4/95 to 31/12/2002.

Nevertheless the Court made an order for (additional) discovery (two categories) on 26^th January, 2005, adjourning the balance of the motion to 9^th March, 2005. An affidavit was completed by Mr. K. on 2^nd March, 2005, listing his bank, Visa card, credit union, and SSIA accounts for 2003 and 2004, together with his audited professional accounts for the same years.

There followed an exchange of affidavits: two each from Mr. and Mrs. K. Mrs. K. (18^th April, 2005) was not happy with the discovery. She said that because the professional accounts showed a fee income significantly in excess of the total lodgements to Mr. K's. only disclosed personal bank account, there must be another account somewhere. Mr. K. replied (5^th May, 2005) that the difference was due to retention tax etc. and he exhibited a letter from his accountants confirming this. In passing, it must be noted that the "discrepancy" (if there had been one) could be of no benefit to Mr. K., as his practice accounts disclosed his annual income and revealed that it was in excess of the total lodgements.

Mrs. K. pointed to monthly withdrawals to "P. J. K." and suggests that this also points to the existence of other accounts or another account in that name. Again, the very existence of the funds from which the withdrawals were made means Mrs. K. is in possession of no evidence suggesting that there is undisclosed income. (Also, if he had other income, why would he need to feed this alleged non-disclosed account from the disclosed account?) In any event, Mr. K. (5^th May, 2005) confirms that "all of my earnings are lodged to the (discovered) account" and that the regular withdrawals are payments to the joint account with his professional partner and to the salary earning employees of his business. He says he has made "full and frank disclosure of all (his) income and expenditure".

Mrs. K. complains of substantial recorded expenditure by Mr. K. in the Isle of Man in October, 2004, (so?) and that the accounts do not break down his drawings figure into cash, cheques or tax paid.

Finally, Mrs. K. refers back to paragraphs 2, 3, 4, 5, 6, 7 and 8 of the Notice of Motion (which had been adjourned) and seeks discovery "for the reasons outlined in the letter of 27^th July, 2004". But before the matter was opened fully, Mrs. K. responded (17^th June, 2005) to Mr. K.'s affidavit of 5^th May, 2005 with the accountant's list aforementioned and queried also Mr. K.'s entitlement to rent from the premises owned jointly with his business partner by way of rental income from an asset partly owned, in respect of which the business pays rent, each partner apparently paying half (monthly payments of €668.19 are included in the accounts). She also points to what appears to be a discrepancy between the monthly drawings figure of €9,680.59 in Mr. K's Affidavit of Means (April, 2004) and the annual total withdrawal figure for 2004, per the accounts, of €135,137 and accuses Mr. K. of understating his income by hiding a particular source of income which is not taxed at source. She says that she "was for over twenty five years closely involved in the…management" and that "a significant percentage of Mr. K's earnings" derived from this source.

In his following affidavit of 21^st June, 2005, Mr. K. disclosed that the property which he jointly owns with his business partner yielded a profit to him of €18,500 approximately per annum. He also exhibits his "only" pension scheme and says again that he has "disclosed all his personal accounts as directed by the Court".

In a sense, the Court has to decide on the request for discovery of categories

2, 3, 4, 5, 6, 7 and 8 as, in effect, a further and better discovery application in the light of the material already discovered. For ease of reference please refer to the order of 26^th January, 2005, which recites the categories in question.

Mrs. K. is looking for –

(2) all statutory tax forms in relation to employees, cleaners and L.M. from June, 1998 to October, 2004, reason: to vouch the expenditure recorded in the accounts,

(3) lease related documents concerning properties at B., Westmeath (family home) (no reason) and B., Longford (business premises), reason: to vouch rent shown in accounts and identify to whom paid,

(4) vouching of breakdown of income (same period), reason: no breakdown of income (retention taxable: cash (?) undeclared),

(5) sub-contracts: invoices/receipts (same period) – vouching,

(6) all accounts…etc. and statements from "financial institutions with which the respondent had or transacted a business over the same period", reason: Mr. K.'s Affidavit of Means does not refer to these,

(7) pension scheme(s): reason – to assess value thereof,

(8) all loan documentation – A.I.B; First Active Mortgage; car loan and State grants: same period, reason – because the Affidavit of Means lists such as liabilities.

With the exception of two of the foregoing, I believe the discovered documents cover all these matters. The two exceptions are (8) and (4). Mrs. K. is clearly entitled by law to vouching in respect of liabilities listed in Mr. K.'s Affidavit of Means.

As for (4), I believe Mrs. K. has raised a matter which is supported by adequately probative evidence (her own) of the possibility of a flow of unrecorded income. She is entitled to probe further. By way of a lifting of the lid on this matter, I will order discovery in respect of two sample years selected at random. In doing so, however, I am also conscious of Mr. K.'s evidence of his advancing age and recent ill health: his earning capacity as of 2004 may only be of historical interest when this case comes to trial. (I am, of course, referring to retirement, not death!). I am ordering discovery of the appointment books and records of fees invoiced to clients whose fees are not discharged on their behalf by a third party which deducted retention tax. The years selected at random by myself are 1999 and 2002.

Approved: Edmund Honohan

27/07/05