Andreevich & Andreevich (No 3)
[2023] FedCFamC1F 246
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Andreevich & Andreevich (No 3) [2023] FedCFamC1F 246
File number(s): MLC 8101 of 2020 Judgment of: MCNAB J Date of judgment: 31 March 2023 Catchwords: FAMILY LAW – PARENTING AND PROPERTY – Application in a Case – Application to set aside the evidence of an adversarial expert valuer – Where the expert valued the business based on a hypothetical rate based on the industry standard – Where he gave sufficient explanation for the use of the hypothetical figure Cases cited: Dasreef Pty Ltd v Hawchar [2011] HCA 21 Division: Division 1 First Instance Number of paragraphs: 5 Date of hearing: 27 – 31 March 2023 Place: Melbourne Counsel for the Applicant: Mr Williams Solicitor for the Applicant: KHQ Lawyers Counsel for the Respondent: Mr Whitchurch Solicitor for the Respondent: Garland Hawthorn Brahe ORDERS
MLC 8101 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ANDREEVICH
Applicant
AND: MR ANDREEVICH
Respondent
order made by:
MCNAB J
DATE OF ORDER:
31 MARCH 2023
THE COURT ORDERS THAT:
1.The applicant’s application on this day to exclude all the evidence of Mr B is dismissed.
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 Andreevich & Andreevich has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
(Revised from Transcript)McNab J:
Counsel for the wife has made an application on this day to exclude all of the evidence of Mr B on the basis that the valuation of the wife’s business he has prepared is predicated on a false basis, being that he has fixed a cost of the services at 40 per cent of the fees earned by two consultants, whereas the evidence is that the fees paid to them are based at a higher rate. It is said that there is no value to the report or alternatively it is inadmissible, because it is a hypothetical valuation based on a business which does not reflect the business carried on by the wife.
It was also put that the evidentiary foundation for the assumptions in the report have not been established, and therefore the report is not admissible citing Dasreef Pty Ltd v Hawchar [2011] HCA 21.
Mr B has purported to provide an enterprise value or a fair-market value of the business, as is set out in his report at page 960 of the court book.
The evidence is that Mr B, in adopting a 40 per cent rate for the consultants, has assumed that a purchaser would adopt what he gave evidence was usual industry practice when assessing the business and considering how that business would be conducted and the price that they would pay for the business. Mr B has set out in his reports the basis for fixing that rate, which was based on his extensive experience of preparing valuations of Businesses and being involved in their sale. In my view, the basis of that valuation is transparent. It has been apparent that that is the approach that he has taken since about mid-2022 when a first report was produced. In my view, his report does fall within the ambit providing expert evidence in relation to what the court is required to determine, that is, the fair value of the business operated by the wife. Submissions can be made in relation to the variations in figures that he has adopted and the effect that that has on the valuation. Submissions will also be made as to whether the rate that he has adopted does constitute an industry standard. The fact that he has adopted a hypothetical rate of remuneration rather than adopting the rate actually paid does not render the report inadmissible. He has explained why he has fixed the rate of 40 per cent of the fees generated by two consultants as that being the rate that would be applied by a respective purchaser in assessing the profitability of the business, and in turn fixing on a price to purchase the business. Mr B has expressed an opinion based on his training and experience (which training and experience was not challenged) that the industry standard for the purpose of remunerating consulting or employee professionals is 40 per cent of gross fees (inclusive of superannuation entitlement). In those circumstances, the basis for his opinion has been set out. The assumptions that he has made and the evidence that he has given of his view regarding industry standards can be challenged in cross examination.
I also note that, for the purposes of the valuation, Mr D, who has also valued the business, has adopted what is a hypothetical figure to allow for the remuneration provided to the wife in his assessment of the value, and he has adopted a figure of 40 per cent of fees generated by her plus an allowance of 10 per cent for the value of the business administration that she performs. Those figures do not, on the evidence before me, reflect the reality of the benefits derived by the wife from the business, but have been adopted by the expert for the purposes of establishing the value of the business. In my view, the reports of Mr B are not inadmissible on the grounds raised in the submissions of counsel for the wife, and in those circumstances, I will receive those reports into evidence.
I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McNab. Associate:
Dated: 31 March 2023
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