Aarons & Aarons (No 4)
[2022] FedCFamC1F 502
•13 July 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Aarons & Aarons (No 4) [2022] FedCFamC1F 502
File number(s): MLC 6647 of 2021 Judgment of: WILSON J Date of judgment: 13 July 2022 Catchwords: FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – scope and appointment of single expert for tax advice – whether single expert valuations are updated prior to trial – whether “property” for the purposes of s 79 of the Family Law Act – whether assets that may be the subject of a mutual will should be included in property valuations – applications dismissed. Legislation: Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 rules 7.1.6 and 7.31(3)(e)
Cases cited: Dadon & Dadon (No 2) [2022] FedCFamC1F
Woodcock & Woodcock [2022] FedCFamC1F 173
Division: Division 1 First Instance Number of paragraphs: 34 Date of hearing: 13 July 2022 Place: Melbourne Counsel for the Applicant: T. North SC with Mr A. Barbayannis Solicitor for the Applicant: Strongman & Crouch Counsel for the Respondent: Mr S. Williams QC with Mr C. Nehmy Solicitor for the Respondent: Hargreaves Family Lawyers ORDERS
MLC 6647 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR AARONS
Applicant
AND: MS AARONS
Respondent
order made by:
WILSON J
DATE OF ORDER:
13 JULY 2022
THE COURT ORDERS THAT:
1.The wife’s application for the appointment of the Mr R to provide advice on the most tax effective way to eliminate loan accounts between the respective groups and to calculate capital gains tax payable upon the sale of each asset in the S Group is granted.
2.The husband’s application to include the E Town Estate land and business in any valuation to be supplied by Ms T is refused.
3.The application to value K Street, Suburb L is refused.
4.The husband’s application to value the wife’s interest in the U Family Trust is refused.
5.Costs are reserved.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Aarons & Aarons is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
WILSON J
Introduction
Pursuant to orders made by me on 9 May 2022, the trial of this proceeding was adjourned to 16 May 2022 on an estimated duration of 10 days.
The proceeding was mediated, by consent (naturally) over three days on 16, 17 and 18 May 2022. The proceeding did not resolve. It could not be completed within the allocated time if the trial commenced on 19 May 2022. On 20 May 2022 I ordered by consent that the trial be adjourned for 10 days to commence on 8 August 2022.
Also on 20 May 2022 I ordered by consent that a directions hearing was to be convened on 15 June 2022.
On 15 June 2022 consent orders were made for the sale of a collection of properties as well as a yacht. The parties agreed that objections to evidence would be served by 26 July 2022. The parties agreed that all applications for interlocutory orders were fixed for hearing at 9:00am on 7 July 2022 for two hours.
On 7 July 2022, the husband pressed for orders in relation to four substantive issues. The wife opposed each pointing out that the trial of this proceeding, already once adjourned to accommodate the husband’s desire to adduce additional evidence, will almost certainly be further adjourned if the applications now made by the husband are granted.
As these reasons explain, each application is refused. The trial remains fixed for 8 August 2022.
The first issue – taxation evidence
Mr North SC who appeared with Mr Barbayannis of counsel for the husband submitted that the parties had agreed to the appointment of Mr V as a single expert providing tax advice. They said the parties are unable to agree on the scope of Mr R’s engagement. The husband sought a regime pursuant to which Mr W of X Company and Mr Z of AA Company confer with one another and prepare a joint statement pursuant to rule 7.31(3)(e) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 and that any issues that cannot be resolved between their respective accountants be referred to Mr R.
On behalf of the wife, it was contended that Mr R should be appointed as a single expert to provide evidence as to taxation matters. However, the wife disagreed with the timing of the appointment and the scope of the matters on which Mr R should be requested to express his opinion. So far as the timing was concerned, the wife sought orders for Mr R’s appointment forthwith. This was to be contrasted with the husband’s contentions to the effect that he be engaged only if Mr BB and Mr Z are unable to reach agreement with respect to any taxation issues within 28 days of being appointed to prepare a joint report.
On behalf of the wife, Mr Williams QC and Mr Nehmy of counsel submitted that having regard to the proximity of the trial, Mr R should be engaged immediately. The wife so submitted contending[1] –
(a)she had proposed a letter of instruction to Mr R on 31 May 2022;
(b)once the husband agreed to sell various properties that letter of instruction was amended on 8 June 2022;
(c)on 13 June 2022 the husband proposed allowing three weeks for the accountants to confer, thereafter appointing Mr R in case of disagreement;
(d)on 15 June 2022 the husband rejected the wife’s proposal for the immediate appointment of Mr R which could then be refined based on any agreement reached between the accountants; and
(e)the accountants conferred on 15 June 2022 yet the husband’s accountant stated they were not in a position to discuss certain tax issues.
[1] This was the gravamen of paragraph 2 of the husband’s minute of orders filed on 8 June 2022.
In debate with Mr North SC I raised how the concept of interposing Mr R to provide some form of determination where division of opinion emerged between Mr BB and Mr Z added to the time involved in obtaining Mr R’s evidence. Further, where the accountants disagreed, it seemed to me to be wasteful for Mr R to provide some form of determination in the dispute between the accountants. The determination of conflicts between experts was the province of the judge, not for some expert having a putative supervisory function. If the determination by Mr R provided yet a third opinion on some issue, the point would be of no further utility and if anything, burdened the evidence by more conflicting opinion. In my view, experts in the Major Complex Financial Proceedings List should adopt a more enabling approach.
It must not be overlooked that Mr R’s engagement was ready to be activated on 31 May 2022, almost a month and a half ago An unsatisfactory delay has occurred, again antithetical to the way a proceeding in the Major Complex Financial Proceedings List should be conducted. The husband’s approach to the taxation evidence has the potential to torpedo the resumption of the trial.
In my view, the husband’s suggestion of having Mr BB and Mr Z undertaking subsets of activities will delay the provision of the expert evidence. I reject the idea that Mr R’s hourly charge-out rate is too vast for him to be undertaking less important tasks associated with this report.
I agree with the suggestions of the wife’s counsel in paragraph 54(b) of their written submissions. Mr R should be retained to advise on taxation consequences arising from the division of the parties’ assets. Mr R should provide advice on the most tax effective way to eliminate loan accounts between the respective groups and to calculate capital gains tax payable upon the sale of each asset in the S Group. That of course, is in addition to the advice he will give in relation to the financial orders proposed by the husband on the final orders proposed by the husband. Such a way forward also renders otiose the objections to admissibility in relation to Mr Z’s evidence.
the second issue – MS T’s retainer
Both the husband and the wife agreed that Ms T should be appointed as a single expert and that Ms T update her valuation prior to 8 August 2022. The husband submitted that Ms T should value the wife’s interest in the N Company Group on the basis that the wife has a 20% interest in N Company Group and also on the basis that the wife has a 25% interest in N Company Group.
According to the husband, the wife has also agreed to her interest in N Company Group being valued notwithstanding her primary contention that her interest in N Company Group does not constitute property for the purposes of the Family Law Act.
The parties are opposed on whether Ms T’s valuation is to include the E Town Estate land and the E Town BB Business, the wife contending that the E Town land and the BB Business should not be included. The husband adopts the contrary position.
The husband argued that the question whether the E Town Estate land and the E Town BB Business is included in the pool of assets that falls for division as a triable issue but each should first be valued in any event. The wife has consistently argued that any interest in N Company Group at best may – repeat, may, constitute a financial resource but it does not constitute property.
The basis of the wife’s overall opposition to the valuation of the E Town Estate land and the BB Business was recorded in her counsel’s written submissions.[2] In précis form, they may be recorded in the following terms –
(a)in a document called Letter of Wishes dated 20 September 2017, Mr CC expressed the desire that the land and business making up the E Town BB Business be retained for future generations and that his children meet the operational costs of the property to facilitate its retention;
(b)the wife is of the view that the E Town Estate property is her parents’;
(c)the wife intends to give effect to her father’s letter of wishes by retaining the property for future generations;
(d)in any event, since 2001, arrangements entered into by the wife’s family on family matters including the disposition of the E Town Estate require all decisions thereupon to be unanimous;[3] and
(e)she is unable to realise the property.
[2] Paragraphs 40 to 44.
[3] This is deposed by the wife in paragraph 15 of her 8 June 2022 affidavit.
The wife argued that the husband’s application for the inclusion of the E Town Estate land and the business in the Ms T Valuation must be dismissed. She relied on the following bases for that submission –
(a)since 2009 when the husband was directly involved in discussions leading to various agreements[4] being entered into pursuant to which the wife advanced $260 million or thereabouts, he has known that the wife has had no direct proprietorial interests in the E Town Estate property;
(b)the husband has failed to explain why, on the eve of yet another trial date, he again seeks the valuation of the E Town Estate property and business;
(c)the husband has altered his position from earlier pressing for the valuation of the E Town land and improvements only, to now pressing for the valuation of the E Town Estate land as well as the E Town Estate business;
(d)very little prospect exists of the valuation sought by the husband being achieved in time to comply with the evidentiary requirements of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 as contemplated in particular by rule 7.1.6; and
(e)if I were to accede to the husband’s request for the valuation of the E Town Estate and business, the time prescribed by the rules in relation to expert evidence would likely be in progress by 8 August 2022, especially in the clarification phase prescribed by the rules.
[4] She deposed in paragraph 14 of her 8 June 2022 affidavit that those agreements were in writing, they have been supplied to the husband and the husband has exhibited those agreements to his trial affidavit.
On 9 May 2022, Mr EE, then holding the brief now held by Mr North SC, pressed for a similar outcome yet Mr EE then conceded that his client’s case would go on for trial even if the application he pressed were to be refused.[5]
[5] Dadon & Dadon (No 2) [2022] FedCFamC1F 331 (at [20]).
To my mind, a similar fate befalls the husband’s present application in relation to the valuation of the E Town Estate land and the business. The time contemplated by rule 7.1.6 of the rules is unlikely to play out in such manner that the valuation could be obtained. In addition, the rules contemplate the parties having an opportunity to seek clarification of aspects of the report, and if that period is to play out, the trial is likely to be in progress. Further, the parties have not yet settled upon the accounts to go to Ms T. That is unsatisfactory at this late stage of the preparation for the trial of a 10 day case.
I refuse the husband’s application to include the E Town Estate land and business in any valuation to be supplied by Ms T.
The third issue - The U family trust
According to the husband, pursuant to observations in the affidavit of Mr DD made 8 June 2022, the wife has an interest in the U Family Trust that the husband asserts is property, and the husband seeks its valuation. Mr DD deposed that –
(a)under the trust, the specified beneficiaries of the trust are the children of Mr CC and Ms CC;
(b)the additional members of the class of general beneficiaries are Mr CC and Ms CC;
(c)no other beneficiaries are defined in the relevant deed of trust, and
(d)the wife is a director of the appointor of the trust and she is a director of the trustee of the trust.
The husband contended that the wife’s interest in the U Family Trust is capable of being valued “and comfortably falls within the definition of property under s 79 of the Family Law Act” (his counsels’ words). That is an ambitious submission and fails to engage with any of the considerations I extolled in Woodcock & Woodcock[6] as constituting “property” under s 79. In the absence of a vastly more sophisticated debate on the issue I am not at all persuaded that the husband is correct in his contentions that four matters identified by Mr DD as being possessed by the wife constitute property.
[6] [2022] FedCFamC1F 173.
But timing is an additional consideration. It beggars belief that in the time available between now and 8 August 2022 a valuer could be retained and then execute the tasks required to value the wife’s interest in the U Family Trust so as to comply with the rules.
In those circumstances, I refuse the husband’s application to value the wife’s interests in the U Family Trust.
The fourth issue – K Street, Suburb L
This is the second time the husband has made a late application for a valuation to be conducted of the wife’s father’s home at K Street, Suburb L.
The wife’s father is the registered proprietor of that land. According to the husband, he believes the father is likely to have made a mutual will in relation to assets that include K Street. No such mutual will has been located. The husband’s case for mutual wills is based on an inference he seeks to draw. The wife’s father is alive, and no evidence exists that he is bereft of testamentary capacity. He is well capable of creating a codicil or making an altogether new will and disposing of K Street, Suburb L in any way he considers appropriate. I do not share the husband’s enthusiasm for the notion that K Street, Suburb L is property of the wife on the basis that she is a beneficiary under a mutual will or that K Street, Suburb L is a financial resource.
The application to value K Street, Suburb L is refused.
rulings on evidence
The husband has invited me to rule now, ahead of the trial, on the admissibility of various affidavits.
In my view, senior counsel of the parties should confer, in the way matters such as this case are conventionally approached, to ascertain which objections remain live and if so, they should agree on such objections as they are able ahead of the trial. If they are unable to do so, then on the first day of the trial, it will be necessary for me to rule on the admissibility. Without hearing the parties’ openings and how each party casts his and her case, it is abstract in the extreme to request me to rule on admissibility without even knowing who will be called and the point that his or her evidence of the relevant witness will address.
I decline to make rulings on admissibility at this juncture.
The trial remains fixed to commence on 8 August 2022.
Costs are reserved.
I certify that the preceding thirty-one (34) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 13 July 2022
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