Adcock & Sealy
[2023] FedCFamC1F 710
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Adcock & Sealy [2023] FedCFamC1F 710
File number(s): MLC 6991 of 2022 Judgment of: MCNAB J Date of judgment: 22 August 2023 Catchwords: FAMILY LAW - PROPERTY – Practice & Procedure – Interlocutory Application -Where an application is made for the appointment of a valuer of the respondent’s business interests when the respondent estimates that he owns assets of about $70 million – Where the relationship is of a short duration – Whether division of assets under s 79(4) of the Act requires a determination based on a percentage of assets – Whether the cost of appointing a single expert valuer is proportionate – Case management – Overarching purpose. Legislation: Family Law Act 1975 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Carmel-Fevia & Fevia (No 3) [2012] FamCA 631
Carmel-Fevia & Fevia [2010] FamCA 50
Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 2) [2013] NSW 574
Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297
Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143
Division: Division 1 First Instance Number of paragraphs: 65 Date of last submission/s: 30 July 2023 Date of hearing: 20 July 2023 Counsel for the Applicant: Mr Berger Solicitor for the Applicant: Farrar Gesini Dunn Counsel for the Respondent: Mr Bartfield Solicitor for the Respondent: Westminster Lawyers Pty Ltd ORDERS
MLC 6991 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ADCOCK
Applicant
AND: MR SEALY
Respondent
ORDER MADE BY:
MCNAB J
DATE OF ORDER:
22 AUGUST 2023
THE COURT ORDERS THAT:
1.Within 21 days the respondent file an affidavit listing the documents and accounts that have been referred to in order to formulate the estimated value of the respondent’s business interests as set out in the letter from the solicitors for the respondent dated 3 July 2023.
2.Pursuant to Rule 4.11(3) the applicant make a genuine offer to settle this proceeding within 14 days and the respondent make a genuine offer to settle within 21 days.
3.The costs of the Application in a Case filed 28 June 2022 be reserved to trial.
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 Adcock & Sealy has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
McNab J:
INTRODUCTION
By an Initiating Application filed on 28 June 2022 the applicant sought interim orders amongst other things for spousal maintenance, litigation funding in the sum of $375,000, disclosure by the respondent of documents relating to business interests that he had interests in and valuations of three real properties located in Suburb B, Victoria, Suburb C, Victoria and Town D, NSW. The applicant also sought orders that the respondent’s interest in E Pty Ltd, the Sealy Family Trust and other companies or trusts. The hearing of that application came before the court on 30 November 2022 with both parties represented by senior counsel.
On 17 July 2023 the court received notification from the parties that they wished to have the matter mentioned pursuant to Notation C of the orders of 30 November 2022, which noted that if any issues arise in relation to the trial directions in preparation for trial generally, the parties may write to the associate of the Honourable Justice McNab for the purposes of having the matter listed for mention. The matter was listed for mention on 20 July 2023.
BACKGROUND
The applicant alleges that she and the respondent commenced co-habitation in a de facto relationship in 2016 and separated in October 2021. The applicant is 56 years of age and the respondent 67 years of age. The respondent contends that the relationship did not commence until 2019 and that from 2016 – 2019 the parties were in a relationship of boyfriend and girlfriend. Both parties agree that the relationship concluded in October 2021. In an affidavit sworn by the respondent filed 2 August 2022 he deposes that he has total assets in the sum of $104,120,000 and liabilities of $32,870,000 leaving net assets in the total sum of $71,250,000. Of those assets he attributes a value to his holdings in the interest comprising the F Group Australia at $31,0000,000 and his interest in the F Group USA at $22,000,000.
By her financial statement filed on 28 June 2022 the applicant declares that she has no income, expenditure of $5,289 per week, funds in the bank in the sum of $16,198 and household contents in the sum of $50,000. Otherwise she states she has a 50% interest in a property in Suburb B jointly owned with the respondent, which interest she values at $6,600,000.
When the application came before the court on 30 November 2022, counsel for each party asked the matter to be stood down for discussions. Prior to the matter being stood down, the question was asked by the court what the applicant would ultimately be seeking as an outcome in the proceeding. The question was asked, “What is the real case?” and the response from senior counsel for the applicant was in these terms:
[MR H]:
Look, my client tipped in about $2.8 million into the lifestyle of the parties while they were together, and she ought to get all of that back. The question is whether or not she is able to sustain the 50 per cent of the existing legal title to the property.[1] The [respondent’s] case is “Give it all back to me” she gets nothing, as I understand it. They’re the real parameters of it. It was a short relationship, your Honour. I won’t be looking for 30 and 40 per cent - those sorts of things.
[1]The property in Suburb B.
HIS HONOUR:
Well, that’s what it says in the application, and it hasn’t been amended.
[MR H]:
I understand that, but your Honour has asked about, in the absence of the parties, what’s the real position. It’s not going to be as significant as that.
HIS HONOUR:
But what’s the evidence - I mean she has filed an affidavit. What’s the evidence of what has happened to the money she received from other settlements?[2]
[2]The applicant gives evidence by her affidavit that she received a settlement in the sum of $1,392,130 by way of property settlement with the father of the children which monies were paid by instalments in December 2016 in the sum of $700,000 and December 2017 in the sum of $692,130. She also deposes at [41] of her affidavit sealed on 3 August 2022 that she received a further $1,400,000 by way of a property settlement with a former partner which monies were paid in three instalments.
[MR H]:
There’s no controversy that she received it. It's a question of how she applied it, and it’s said, as I understand it, by the [respondent] that she blew it on excessive spending and lifestyle and those sorts of things. We say, no, that's not right. It was spent on the joint lifestyle that the parties enjoyed, which was an affluent lifestyle commensurate with the resources that the - and income that the [respondent] commands. The real gravamen of the case, your Honour, is what to do about the reality that the parties bought first one property jointly with the [respondent’s] money – they then developed it, sold for a significant profit and reinvested those moneys into the [Suburb B] place, again jointly, again with the [respondent’s] money and the proceeds of the sale of the first property. And so does your Honour take all that existing legal interest of my client away and return it all to the [respondent], or does my client receive her existing legal entitlement at least, if not something more, which would amount to 50 per cent of the property.
HIS HONOUR:
But that's a $14 million asset.
[MR H]:
It is. And it started out with an asset of a lesser value that they were able to capitalise on.
HIS HONOUR:
And her contribution to that asset?
[MR H]:
Well, it’s not asserted that we made direct financial contributions. We made our direct financial contributions to the lifestyle of the parties, and otherwise my client was involved in the renovations and planning and those sorts of things. And Your Honour, of course, is aware that we don't have to point to only contributions to particular pieces of property.
HIS HONOUR:
But it’s a short relationship.
[MR H]:
It is. It is your Honour. It has got some parallels to a recent decision of your Honour’s.[3]
[3]Transcript of Proceedings from Interim Defended Hearing on 30 November 2022 pages 2-3.
Following those discussions, the matter was stood down. When the hearing resumed, the court was told by senior counsel for the applicant that in relation to valuation, there were three pieces of real estate to be valued which were properties in Town D, Suburb C and Suburb B, with the Suburb B property having been purchased in the course of the relationship.
The parties presented to the court Consent Minutes of Proposed Orders and those minutes are reflected in the orders of the court made on 30 November 2022. The orders relevantly provide that:
(1)The respondent pay the applicant the sum of $500,000 within 14 days at as follows:
(a)$350,000 as and by way of partial property settlement to be applied by her solicitors to legal, accounting and valuation expenses associated with these proceedings; and
(b)$150,000 to be characterised at trial.
The orders provided that the respondent was to continue to meet the outgoings on the Suburb B property including the payment of the mortgage, rates and maintenance costs expenses.
Otherwise all extant interim applications were dismissed. Those applications included an application for the valuation of the business interests of the respondent. Notation B to the orders provided:
The parties will comply with disclosure and valuation obligations in accordance with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) and for and for the avoidance of doubt, any required single expert valuation fees are to be borne equally.
As noted at [2] above, the orders also provided by a Notation C to the orders that if any issues arise in relation to the trial directions in preparation for trial generally, the parties may write to the associate of the Honourable Justice McNab for the purposes of having the matter listed for mention. Orders also provided for the matter to be fixed for final hearing commencing on 30 October 2023 for hearing as a three-day matter. Trial directions were made.
On 16 June 2023 solicitors for the applicant wrote to the solicitors for the respondent and sought financial disclosure and the disclosure of a very extensive list of documents relating to the respondent's expenditure and also including details of documents in relation to the estate of the respondent's late mother. The letter also sought the appointment of a single expert to value the respondent's commercial interests and real estate interests.
In relation to the real estate interests the solicitors for the applicant nominated three valuers, including G Valuers, to value the real estate interests in Suburb B, Suburb C and Town D.
On 20 June 2023 the solicitors for the respondent responded and, omitting irrelevant parts, the correspondence states:
We refer to your correspondence of 16 June 2023 in relation to the valuation of our client’s business interests.
We were surprised to receive your letter, given what we understood to be the discussions which had taken place between Senior Counsel previously about the necessary steps to prepare for the upcoming hearing.
Can we suggest you contact your client’s counsel to discuss future management of the case.
By letter dated 23 June 2023 the solicitors for the applicant responded:
We have spoken to our client’s counsel and press the request.
[Mr H] is no longer briefed by our client for the hearing of this matter. To the extent that he or any counsel engaged by our client had indicated we did not press for formal valuations, our client agreed not to press for that on the understanding such a process would cause the parties to incur significant costs, and in the hope that a reasonable settlement offer would be forthcoming. As that has not occurred, the cost of valuations is now unavoidable.
We press for disclosure of the requested documents and selection of valuers. Please provide same as soon as possible and at least in the case of valuers within seven days.
The solicitors for the respondent responded by a letter dated 30 June 2023 which, omitting irrelevant parts, provided:
We agree to the appointment of [G Valuers] to value [Suburb B] and [Suburb C] and IPN valuations for [Town D].
Please prepare joint letters of instruction for our review.
We will otherwise shortly respond with respect to the valuation of our client’s business interests.
A letter was then forwarded by the solicitors for the applicant dated 14 July 2023 which responds to the letter of 30 June 2023 and provided:
We are instructed that our client is no longer prepared to instruct [G Valuers].
Three alternative valuers were then nominated. No explanation was provided in that correspondence as to why G Valuers, who had been previously nominated, was no longer acceptable to the applicant. In response to questions by the court on 20 July 2023, senior counsel for the applicant stated that he was instructed that the reason for the change of position in relation G Valuers was because the applicant took the view that they may have too close a relationship with the respondent.
On 3 July 2023 the solicitors for the respondent wrote a detailed letter setting out the basis for the respondent's valuation of the businesses and that are set out in that correspondence. Essentially, the value attributed is based on the value of the respondent’s shareholding in each of the entities being 6.125% in the Australian business and 12.25% in the American business.
The correspondence raises an issue in relation to the difficulty of valuing a notice of consideration payment which was effectively an interest which is subject to the exercise on option, which the respondent has not exercised, and it was said he had no immediate foreseeable expectation of exercising. It was stated that:
The purpose of this Consideration Payment is effectively an account for future profit relating to the land inventory assets held but not sold at the time of the exercise of the option. It is dependent on a number of unsold lots ([over 1000] lots at present) and the projected profit that is expected to be realised on those lots. Tax is of course triggered if and when [Mr Sealy] ever exercised the option to call for the Consideration Payment.
As indicated, putting a precise figure on this second component would obviously be a massive undertaking, involving an assessment of current value (and potential endpoint value) of over 1000 lots. We consider this would be a completely unnecessary undertaking as the option has not been exercised and [Mr Sealy] is not entitled to any payment for the purposes of these proceedings.
He later went on:
Accordingly, our client estimates his US interests of an overall figure of USD $28.5m [million] and proposes that figure be adopted for the Trial. Please advise whether your client agrees.
If it is not agreed, we confirm our client's position remains that going to the cost of appointing a Single Expert in the context of the parties’ short relationship, his own evidence regarding the significant value of his business interests and your client’s minimal contributions, lacks any sense of proportionality. It is also of concern that your client has refrained from raising this issue until now, despite her having the opportunity to pursue the interim valuations orders sought in her initiating application at the 30 November 2022 hearing, or at any time subsequent. In that regard we note order 5 of the 30 November 2022 interim orders dismissed all extant interim applications, whilst order 17 expressly provided the parties have liberty to approach the Court to vary obligations under the orders to ensure readiness for trial.
By correspondence dated 14 July 2023 the solicitors for the applicant advised that they pressed for the appointment of a single expert valuer to value the respondent's interest in the F Group and the F Group USA, and also sought disclosure of numerous classes of documents relating to each of the entities that comprise the component parts of the respondent’s business interests.
Pursuant to leave granted by the orders made on 30 November 2022, the parties requested the matter be listed for mention. By an Application in a Proceeding which was subsequently accepted for filing, filed 27 July 2023, the applicant sought the appointment of a single expert valuer to value the 12 separate entities that comprise the respondent’s Australian interests and 25 separate entities that comprised the respondent’s United States interests. Valuation of these entities was sought as at 2016 (when the de facto relationship was said to begin), 2019 (when the respondent asserts the relationship commenced) and 10 October 2021 being the date of separation.
The applicant relied on her affidavit in support filed 27 July 2023, which stated, inter alia, that she “is concerned that [the respondent’s] representations about the value of the business do not reflect their true value nor their value to him.”[4]
[4]Applicant’s affidavit in support filed 27 July 2023 at [8].
Evidence About the Cost of Valuing the Business
In the course of the hearing on 20 July 2023, the court inquired as to the estimated cost of valuing the respondent’s business interests. The court advised counsel for the applicant that an estimate of that cost was required in order to determine whether the costs of that exercise were proportionate to the benefits that might be obtained by engaging in that exercise. Initially it was suggested by counsel for the applicant that a costs estimate could be obtained in a matter of a few days. In relation to the cost of the exercise and its potential to be very expensive, counsel for the applicant submitted:
Well, if the quotes come back, Your Honour, and that suggests its going to be the case, and hypothetically if the valuer was to say – each of the valuers was to say, ‘Well it’s going to cost us $100,000 to value this business’ or $250,000 or something, then Your Honour might reach one conclusion. If alternatively they were going to say, ‘It’s going to take $10,000 or $25,000’ Your Honour might reach a different conclusion. We don’t know Your Honour.[5]
[5]Transcript of Proceedings, 20 July 2023, page 25 of 29 at [15].
Rather than taking a matter of days, it took about two weeks to obtain indicative quotes. Rather than the estimated cost of the valuation being $10,000 - $25,000, an indicative quote from J Accountants to value the 14 entities that comprise the respondent’s interests in both Australia and the USA, as at 2016 (when the applicant asserts that the de facto relationship commenced), 2019 (being the date when the respondent asserts that the de facto relationship commenced), 10 October 2021 (being the date of separation) and 19 July 2021 was $130,000- $160,000, plus a 3% technology and administrative fee plus GST. Based on the higher of the figures, the estimated cost to the parties according to that firm was about $180,000.
A cost estimation from K Valuers advised: “As the valuation involves investments in three groups of operations, all of which are considerable in size, at four different dates, the total costs are likely to be in excess of $200,000”.[6]
[6]Email dated 1August 2023 from Ms L, K Valuers to the parties.
Following the hearing on 20 July 2023, the court drew the legal practitioners’ attention to Carmel-Fevia & Fevia [2010] FamCA 502 (“Carmel-Fevia”) (Cronin J) as an authority that was relevant. Supplementary written submissions were filed addressing the effect of that decision.
Carmel-Fevia concerned an application by the wife for disclosure, the filing of a financial statement by the respondent and the appointment of a single expert to give evidence regarding the respondent’s wealth. The parties were parents of two young children who lived with the wife. The marriage was of approximately seven years’ duration and the respondent was wealthy at the commencement of the marriage. The husband estimated his wealth at $268 million. The wife had made a claim for payment of $35 million.
The husband’s wealth was in his hands at the commencement of the relationship.
The husband opposed the application on the grounds that further disclosure was unnecessary as he had the funds to pay the claim made by the wife if so ordered.
The wife’s claim was that she had made significant non-financial contributions to the welfare of the family as a primary caregiver of two young children of the marriage, the care of three children from a previous marriage of the respondent and the provision of assistance to the respondent in the development of his career to the detriment of her own (Carmel-Fevia at [43] – [44].
In Carmel-Fevia, Cronin J identified that the first step of the process in how s 79 and s 75 of Family Law Act 1975 (Cth) (“the Act)” was to be applied was to work out “the pool” for division at [29].
He then surveyed relevant authorities in relation to whether the court may assess contributions and make any determination as to a just and equitable adjustment to the parties’ interests which may be expressed as a percentage of assets or as a dollar sum. At [75] Cronin J stated:
75.Although I am only dealing with an interlocutory issue, its resolution is guided by the fact that the wife’s case as expressed in her affidavit relates mostly to her non-financial contributions. Those, to use the words of Murphy J are not “readily susceptible to expression in dollar terms”. Be that as it may, the assessment of a contribution and the weight given it as well as the adjustment for s 75(2) factors are tasks which ultimately have to be delivered in dollar terms. Traditionally, the assessment and determination of weight has been done in percentage terms as described by Murphy J but there is nothing in the Act nor in any authority of the Court that mandatorily requires that approach.
His Honour then went on to state at [76] – [79]:
76.Proportionality is still important. The parties and the court have to have some idea of the size of the asset pool because otherwise the determination could be drawn into the “needs”-type approach for the s 75(2) factors or some form of “compensation” for contribution as a yardstick rather than an assessment of entitlement. Having said that, I do not accept that proportionality requires preciseness in a case of wealth of this magnitude.
…
79.My concern is that it is obvious that the wife needs to know as does the Court, the husband’s financial position for the purposes of ultimately deciding whether or not the ultimate outcome is just and equitable. However, in a situation in which:
(a) the husband estimates his property entitlements at $268 million; and
(b)the wife is reliant upon a modest period of years for contribution and a very clear picture of what her future economic circumstance will be, this seems to be a case in which a fixed sum can be calculated to achieve a just and equitable outcome and that a proportional or percentage division is unlikely to be of any particular use. The husband therefore ought to provide sufficient detail to enable the wife to understand how he calculates his $268 million entitlement.[7]
[7]Carmel-Fevia & Fevia [2010] FamCA 502 (“Carmel-Fevia”).
In determining what constituted providing “sufficient detail,” Cronin J made reference to the then Rule 13.22(3), now expressed as substantially equivalent to Rule 6.18 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”). At [81] he stated:
81.A party making such an application must satisfy the court that the order is necessary for disposing of the case or an issue or reducing costs. In this case, I have been given valuation and forensic examination exercise costs estimates of $75,000 from the wife’s perspective for a cursory view through to as much as $1 million plus significant delays from the husband’s perspective. In addition, there will be costs and time.[8]
[8]Carmel-Fevia.
At [84] he found that the question of valuation was not particularly relevant to the issue in dispute which is the wife’s entitlement; that the valuation exercise will be extremely expensive although not significant compared to the pool of assets; that the respondent had the funds to pay whatever amount was necessary to pay and the court has a responsibility to ensure that the exercise (of disclosure) is cost effective and does not have a significant impact upon the parties personally.
In Carmel-Fevia, the court had before it opinions as to the value of the pool from the finance director of the respondent’s business, who had personal knowledge of the business, and had consulted with the businesses auditors as to the valuation methodology: [86]. The approach taken by the finance director was described by an expert retained by the wife in an affidavit filed by her as a “headline valuation” which was appropriate for management purposes but not appropriate for determining the “value of the equity interest held by the husband”: [87].
At [88] His Honour held that it was “appropriate to work on a “headline” valuation because, on any view, it will be in the vicinity of what the respondent estimated his wealth to be”. He held that the wife’s expert:
… should have the opportunity to test that by having access to some material upon which [the finance director] made his statements which… includes the real estate valuations and subject to any argument about privilege, the advice of the auditors as to the valuation methodology used.
At [89] His Honour stated it was only after that consideration is undertaken by Ms BY (the wife’s expert):
that an indication can be obtained, not about a “big picture,” but about whether the estimates of the husband’s wealth are within a reasonable parameter of what he declared bearing in mind the matters to which I have referred as to it being unnecessary in the circumstances to be precise.
It is not apparent from the judgment the terms of orders that were made subsequently as to the terms of disclosure as His Honour invited the parties to digest the reasons and discuss what documents should be exchanged for the purposes of implementing orders.
I do note that Carmel-Fevia & Fevia (No 3) [2012] FamCA 631 dealt with the final property orders in that proceeding. At the time of trial, the asset pool was agreed to be in the sum of $430 million. At [45] and [46], His Honour noted that, whilst the Full Court in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 “made it clear that it was desirable to express various adjustments in percentage terms … that approach was not a statutory requirement”.
In that matter, the wife at trial sought to retain assets in her possession (valued at about $4.8 million) and receive a property adjustment of an amount equivalent to 12.5% of the net assets of the parties ($54 million).
Cronin J made orders “that the wife receive $20 million” (less monies already received) with the wife’s contribution assessed at $10 million and 75(2) factors in the sum of a further $10 million: [185] and [186]. [9]
[9] Carmel-Fevia & Fevia (No 3) [2012] FamCA 631.
SUBMISSIONS SUMMARISED
By written submissions, counsel for the respondent submitted that the respondent had explained how he had arrived at the values disclosed in the detailed letter from his solicitor dated 3 July 2023, which was referable to his financial statement from the proceeding. He submitted that the factors the court may consider when making an order under Rule 6.18(4) of the Rules which provides:
(4) In making an order under subrule (1) or (3), the court may consider:
(a) whether the disclosure sought is relevant to an issue in dispute; and
(b)the relative importance of the issue to which the document or class of documents relates; and
(c)the likely time, cost and inconvenience involved in disclosing a document or class of documents, taking into account the amount of the property, or complexity of the corporate, trust or partnership interests (if any), involved in the proceeding; and
(d)the likely effect on the outcome of the proceeding of disclosing, or not disclosing, the document or class of documents.
Counsel referred to the principles regarding proportionality as set out in the Central Practice Direction and reflected in the overarching purpose set out in Rule 1.04(1) of the Rules.
The applicant submits that there are important distinguishing features between those in the present case and those considered in Carmel-Fevia these being:
(a)there is considerable difference in the quantum of assets being $70 million (to $280 million in 2010);
(b)the applicant has not expressed a claim in a fixed sum and that if the court was to presently express a view as to whether it will adopt a fixed sum approach or a percentage based approach it will have unfairly prejudged how the matter should be dealt with;
(c)the applicant claims to have made significant financial contributions of around $2.8 million to the relationship as well as non-financial contributions;
(d)the extent to which respondent’s wealth was in his hands and the value of the applicant’s contributions to that wealth by allowing the respondent to pursue the acquisition of wealth are not known and a valuer is sought to assist with that;
(e)there is a lack of information to enable the applicant or the court to conclude with any certainty that the respondent’s financial position is “somewhere in the vicinity” of what he asserts or estimates in correspondence and in his financial statement.
(f)Whilst the costs of valuation are significant they represent only approximately 0.2% of the overall property pool assuming a property pool in the sum of $75 million.[10]
[10]Applicant’s Supplementary Submission filed 3 August 2023 at page 3 of 4.
CONSIDERATION
The statements made to the court about how applicant put her claim and the basis of that claim made by the then counsel for the applicant at the hearing on 30 November 2022 were made in the course of an interlocutory application.
Those comments do not have the effect of fixing the applicant’s claim which may be brought at final hearing. However, those statements were relied upon by the parties and were given effect to when orders were made by consent on 30 November 2022. It was agreed then that the parties would not at that time appoint a single expert to value the respondent’s business assets (as opposed to his real estate interests).
That said, counsel’s statements in relation to how the applicant viewed her claim to entitlements and the basis of her claims in relation to contributions included statements of fact based on the affidavits that have been filed on behalf of the applicant. The statement was made that each of the pieces of real estate purchased in the course of the relationship were purchased solely with funds supplied by the respondent and that the applicant made no direct financial contribution to the purchase of those assets.
In considering this application, I must take into consideration case management principles and the overarching purpose under the Rules. The orders sought by the applicant in this interlocutory application constitutes a substantial amendment to the position put on her behalf on 30 November 2022. I do not regard the submissions made by counsel for the applicant on that day to have been off the cuff or intended to be without consequence. He was effectively putting that the applicant was approaching the matter of there being two pools of assets: one comprising the business assets of the respondent and the other the real estate assets. By consent no orders were made for the valuation of the business assets.
In assessing the effect of this change of position by the applicant, I approach this as I would an application amendment to amend pleadings if the proceeding was subject to pleadings, particularly in relation to delay. In that regard I referred to Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. In Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297 at [21] and [98] – [100], the Full Court accepted the view expressed by Davies J in Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 2) [2013] NSW 574 at [73]:
… that the explanation for delay will in most cases not be regarded as subsidiary to showing the bona fides of the proposed amendment.
This proceeding has been fixed for hearing on 30 October 2023 since 30 November 2022. No adequate explanation has been provided as to why there has been a delay in bringing this application until the end of July 2023. If orders of the kind sought by the applicant were made, it is almost certain that the trial date will be lost. This will create considerable stress and uncertainty for parties and interfere with the efficient and timely management of these matters.
The explanation first given for now seeking a valuer to be appointed to value the respondent’s interests is in large part because it is thought that the respondent has not made a sufficiently generous offer of settlement (see [14] above). The more appropriate response to that situation is to serve an offer to settle a proceeding under Part 4.2.2 of the Rules, or a Calderbank Offer making clear the terms of the offer and the costs orders that would be sought if not accepted.
In the present case the respondent has set out in clear terms the basis on which he estimates the value of his business interests. There has been no identification by any expert or accountant as to why those estimates should not be relied upon to provide to the applicant a basis of determining whether or not to accept those estimates.
Whilst the respondent’s wealth in this case is not at the same level as that enjoyed by the husband in Carmel-Fevia, it is still very significant, and the significance of that wealth is illustrated by the calculation done by the applicant in relation to the cost of valuation to illustrate how apparently insignificant the estimated cost of valuation process is. He has more than enough to satisfy any claim to be brought by the applicant in this proceeding having regard to the limited duration of the relationship, whether as contended by the applicant or by the respondent.
The applicant relies on her non-financial contributions referred to in her affidavit filed 28 June 2022 and in particular her evidence at [52] that throughout the relationship she:
waited on the [respondent] hand and foot. I did all the cooking and kept the house immaculate.
The applicant gives evidence that between 2016 and 2017 she was living in what she describes as the former family home, where she had lived with her former partner and as at the end of 2016 she was still being financially supported by her former partner. During this period the applicant was living in her former family home and spending on average two nights per week with the respondent.[11]
[11]Applicant’s affidavit filed 28 June 2022 at [11] – [13].
In 2017 she moved out of her former family home and into a rental property in Suburb M, NSW. From this time until July 2021 she says that the respondent spent on average 3-4 nights per week in Sydney with the applicant (except when subject to the COVID-19 lockdown travel restrictions). The applicant says that she also travelled to Melbourne or Town D to meet the respondent about 10 - 12 times per year. Between 2016 and 2021 they spent about 26 weeks on holidays together.[12] The respondent continued to run his business in Melbourne and the applicant cared for her two secondary school aged daughters until one went to boarding school at the start of 2015.
[12]Applicant’s affidavit filed 28 June 2022 at [15].
In July 2021 she moved into the respondent’s town house in Suburb C. They separated on 10 October 2021. The COVID-19 lockdown in Melbourne operated prior to July 2021 from 31 March 2020 to 12 May 2020 (43 days); 9 July 2020 to 27 October 2020 (111 days); 13 February 2021 to 17 February 2021 (5 days) and 28 May 2021 to 10 June 2021 (14 days).
I raise this evidence of the applicant because this is the evidence forming part of the substance of a claim of contribution to the respondent’s wealth based on non-financial contributions. Plainly the applicant’s non-financial contributions have to be assessed at trial having regard to all the evidence that she may include in her trial affidavit. The respondent’s evidence will also be considered. I assume that the narration of the chronology of the living arrangements will not change substantially. It is apparent that when taking into account the applicant’s evidence about living arrangements, the parties spent substantial periods living apart or on holidays together.
The quotations for the cost of valuation shows that the valuation process will be expensive on any terms, whether as a comparison to the value of the stated assets or not. There is no indication on the face of the indicative cost estimates provided as to how they might deal with the benefits that have not yet accrued under the arrangements that the respondent has in relation to his American interests.
The parties have incurred very substantial costs in this matter to date. By a Costs Notice filed on 21 July 2023 the solicitors for the applicant estimated that the applicant’s legal fees for this property if the matter proceeds to judgment and fees for a single expert would be $457,778.75. That estimate put the estimated cost of 50% of the single expert’s fees to value the corporate/trust interests at $12,500 which significantly underestimated the costs involved.
CONCLUSION
As senior counsel for the applicant foreshadowed in oral submissions (as set out at [24] above), the approach that the court may take may depend on the anticipated cost of the exercise. Whether or not an adjustment is made using a percentage based on the respondent’s current estimated corporate/trust assets and the real estate interests, or by adopting a dollar amount (which course I have not presently determined), the respondent’s assets are more than sufficient to satisfy any claim that the applicant may make and the costs of obtaining that valuation and the disruption caused by delay in hearing the proceedings are disproportionate to the benefits that may obtain to the applicant if the orders were made.
I will make an order that within 21 days the respondent make, file and serve an affidavit listing the documents and accounts that have been referred to in order to formulate the estimated value of the respondent’s business interests as set out in the letter from the solicitors for the respondent dated 3 July 2023 (referred to above at [19] – [20]). This will enable the applicant and her legal and accounting advisors to assess whether the respondent’s estimate of his wealth is within a reasonable parameter of what he has declared.[13]
[13]Carmel-Fevia at [89].
Otherwise, I will make orders that pursuant to Rule 4.11(3) the applicant make a genuine offer to settle this proceeding within 14 days and the respondent make a genuine offer to settle within 21 days. Given the very substantial costs incurred by each party, it is important that steps be taken to seek to resolve the matter.
I will otherwise dismiss this application and reserve the question of costs to trial.
I certify that the preceding 65 (sixty-five) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McNab. Associate:
Dated: 22 August 2023
0
4
0