Artinos & Artinos (No 2)
[2023] FedCFamC1F 37
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Artinos & Artinos (No 2) [2023] FedCFamC1F 37
File number(s): MLC 4132 of 2020 Judgment of: STRUM J Date of judgment: 1 February 2023 Catchwords: FAMILY LAW – PROPERTY – Valuation – Single expert witness – Application for adversarial expert witness – No conference with or questions to single expert witness – Application premature – Application adjourned to allow for clarification of single expert witness’ report to be undertaken under Division 7.1.6 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 – Dismissal of application refused. Legislation: Federal Circuit and Family Court of Australia Act 2021 (Cth) s 67
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 Pt 7.1, rr 7.02, 7.08, 7.25, 7.26
Federal Circuit and Family Court of Australia, Family Law Case Management – Central Practice Direction, 28 November 2022
Cases cited: Bass & Bass [2008] FamCAFC 67; (2008) FLC 93-366
Daniels v Walker [2000] 1 WLR 1382
Lambard & Lambard (No 4) [2021] FamCA 47
Moretto & Cosola [2022] FedCFamC1F 433
Neales & Neales [2022] FedCFamC1A 41; (2022) FLC 94-079
Salmon and Ors & Salmon [2020] FamCAFC 134
Simonsen & Simonsen [2009] FamCA 698
Division: Division 1 First Instance Number of paragraphs: 34 Date of hearing: 1 February 2023 Place: Melbourne Counsel for the Applicant: Ms R. Stoikovska SC with Mr W. Newlands Solicitor for the Applicant: Blackwood Family Lawyers Counsel for the Respondents: Mr T. North SC with Ms T. Borger Solicitor for the Respondents: Belleli King and Associates ORDERS
MLC 4132 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ARTINOS
Applicant
AND: MR ARTINOS
First Respondent
C PTY LTD
Second Respondent
order made by:
STRUM J
DATE OF ORDER:
2 FEBRUARY 2023
THE COURT ORDERS THAT:
1.Paragraphs [2] and [3] of the husband’s Application in a Proceeding filed 20 December 2022 be adjourned for Interim Defended Hearing on 2 May 2023 at 9.30 am, not to exceed 2 hours in duration.
2.Any further affidavits and/or written submissions be filed:
(a)by the husband - by not later than 4.00 pm on 18 April 2023; and
(b)by the wife - by not later than 25 April 2023.
BY CONSENT IT IS ORDERED THAT:
3.The final hearing listed on 1 February 2023, with an estimated hearing time of 5 days, be vacated.
4.Pursuant to rule 3.03(4) of the Federal Circuit and Family Court of Australia Rules (Family Law) 2021, leave be granted to the husband to join to the proceedings:
(a)B Pty Ltd as the Third Respondent; and
(b)D Pty Ltd as the Fourth Respondent.
5.The matter be re-listed for final hearing on 16 October 2023 with an estimated hearing time of 7-10 days.
6.Within 7 days, the husband serve the Third and Fourth Respondents with:
(a)A copy of these Orders;
(b)The wife’s Response to the Application in a Proceeding filed 27 January 2023 and affidavit(s) and written submission filed in support thereof;
(c)The husband’s material filed in reply to the Response to the Application in a Proceeding; and
(d)Any other documents to which they are entitled pursuant to the Rules.
7.Within 7 days thereafter, the Third and Fourth Respondents file and serve a Notice of Address for Service.
8.The Third and Fourth Respondents be excused from appearing at the Interim Defended Hearing on 7 February 2023 at 10.00 am.
9.The husband by 1:00pm on 6 February 2023 file and serve a reply to paragraphs [2] to [11] of the wife’s Response to an Application in a Proceeding and any affidavit in support of same.
10.Paragraphs [2] to [11] of the wife’s Response to an Application in a Proceeding be listed for Interim Defended Hearing on 7 February 2023 at 10.00 am as against the husband.
11.Paragraph [7] & [8] of the wife’s Response to an Application in a Proceeding, as against the third and fourth respondents, be listed for mention at 9:30am on 2 May 2023.
12.Save as otherwise ordered herein, the husband’s application in a proceeding filed 13 January 2023 and the husband’s application in a proceeding filed 20 December 2022 be 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 Artinos & Artinos has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
DELIVERED EX TEMPORESTRUM J:
I have before me today three applications, comprised of two Applications in a Proceeding filed on behalf of the first respondent husband (“husband”) on 20 December 2022 and 13 January 2023 and, thirdly, a Response to an Application in a Proceeding filed by the applicant wife (“wife”) on 27 January 2023, which I am told responds to both of the Applications in a Proceeding filed by the husband and additionally seeks a raft of other orders. From what I was told this morning by Senior Counsel representing each party, it appears that the husband’s second Application in a Proceeding, filed on 13 January 2023, is the subject of agreement as to how it should be disposed of. The second respondent, C Pty Ltd, did not appear and, I am told, is not a relevant party to the Applications in a Proceeding and the Response thereto.
Insofar as the wife’s Response filed 27 January 2023 seeks relief against the husband, it has been short-served. Insofar as it seeks relief against the proposed third parties, B Pty Ltd and D Pty Ltd, it has not been served upon them because it appears there was no agreement to their joinder until today. Insofar as the relief sought by the wife against the husband is concerned, it is not apparent to me why, having received the husband’s two applications sealed on 20 December 2022 and on 13 January 2023, the wife waited until 27 January 2023 to file her response.
The wife’s relief sought against the husband will be listed before me next Tuesday, 7 February 2023, which was to have been the fifth and final day of this trial that is not proceeding, not through any fault of the court. Insofar as relief is sought against the proposed third parties, a minute is to be provided to me which provides for the joinder of a third and fourth respondent, and they will then need time to consider their position and I will list it for mention on 2 May 2023 at 9:30am.
The only issues before me today are whether leave should be granted for the husband to call adversarial experts, where single experts have already been appointed and have prepared reports, or whether that application should be adjourned or dismissed. The single experts jointly appointed by the husband and the wife are Mr H of T Accountants, in relation to the valuation of the C Group and, separately, F Pty Ltd, and Ms AA of BB Services, who has valued (inter alia) the former matrimonial home at J Street, Suburb Q.
The proposed adversarial experts are Mr CC of DD Accountants, in relation to F Pty Ltd, and Mr EE of FF Services, in relation to the former matrimonial home. Their appointment is opposed by the wife.
Mr H has previously prepared two draft valuation reports, one dated 28 May 2021 and, more relevantly, one dated 28 October 2022. However, his final report was not received until 17 January 2023, some two weeks ago. Ms AA provided her report on 25 October 2022. Rule 7.02 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“Rules”) specifies the purpose of Pt 7.1 of the Rules. Relevantly, one of the purposes is to ensure that, if practicable and without compromising the interests of justice, expert evidence is given on an issue by one single expert witness: r 7.02(c). That is bolstered by r 7.02(e), which provides that another purpose of Pt 7.1 is to enable a party to apply for permission to tender a report or adduce evidence from an expert witness appointed by that party, if that is necessary in the interests of justice. Thus, unsurprisingly, the interests of justice are a relevant factor in the matters to be decided by me today.
Rule 7.08(1) of the Rules provides that, “[i]f a single expert witness has been appointed to prepare a report or give evidence in relation to an issue, a party must not tender a report or adduce evidence from another expert witness on the same issue without the court’s permission.
Rule 7.08(2) provides that the Court may allow a party to tender a report or adduce evidence from another expert witness on the same issue as a single expert witness if it is satisfied that any of the matters set out in r 7.08(2) apply.
Division 7.1.6 of the Rules provides for the clarification of single expert witness reports. The two avenues for so doing are: a conference with the expert, which is provided for in r 7.25; and questions to the expert, which is provided for in r 7.26 of the Rules. Neither avenue has been pursued by the husband, either in relation to the disputed company valuation or the disputed real estate valuation.
Mr H’s final report is dated 17 January 2023 and time has not yet expired for those avenues to be pursued. In relation to Ms AA’s report, time has well and truly passed, as it was received in October 2022, more than three months ago. On the one hand, the husband’s application in relation to the company is premature. On the other hand, his application in relation to the former matrimonial home is too late.
When I put to Senior Counsel for the husband, my concern that his client had not availed himself of the avenues provided in Div 7.1.6 he, upon instructions, sought an adjournment to allow those steps to be undertaken, including an extension of time to do so in relation to the disputed real property. Senior Counsel for the wife submitted that the husband’s r 7.08 application should be dismissed and that, if so advised, he could apply again. I see little utility in that course. Further, there was no indication given by Senior Counsel for the wife that, if the husband did bring a further application, the client would not take the point that the application had previously been brought and dismissed.
The course urged upon me by Senior Counsel for the wife, whilst understandable, in my view would be contrary, at least, to the purposes and the core principles of the Central Practice Direction. She submitted that, in relation to the company, there was little change between the last draft of the single expert’s report, which was delivered in November 2022, and his final report, which delivered last month. That may be so, but insofar as Div 7.1.6 of the Rules is concerned, as Senior Counsel for the husband submitted, the references there are to “a report” and “the report”. In my view, the must mean the final version of a report. However, insofar as a draft report is concerned, in my view, it is provided for that very reason - to obtain input in relation thereto - and none seems to have been provided by the husband. Nevertheless, rr 7.25 and 7.26 apply notwithstanding. It is far from inconceivable that there may be changes between a draft and the final version of a report.
Senior Counsel for the wife also submits that the application for leave to tender a report or adduce evidence from another expert witness is premature, because the opportunity for a conference with or for questions to the expert was not availed of. That is true but, in relation to the company, the husband’s application must be seen in the context of the final report having been delivered on or about 17 January 2023 and the trial being listed today, a fortnight thereafter.
Whilst nothing in the Rules precludes an application under r 7.08 in the absence of a conference or questions, those avenues are provided for by the Rules and should be availed of before an application is made under r 7.08.
The husband raises several issues in relation to Mr H’s report; most notably, that he has valued the parties’ 30 per cent interest in F Pty Ltd without considering any discounts for lack of control and/or lack of marketability. I was told, in the course of submissions, that Mr H’s response is that he was not instructed to do so. Prima facie, that is an unusual approach because the value of a minority shareholding may well be affected by these factors. In circumstances where the wife has conceded that the trial cannot proceed today, and it will be adjourned to 16 October 2023, in about nine months’ time, with an estimated hearing time of seven to ten days, in my view, greater prejudice would result to the husband than to the wife if the adjournment the husband now seeks, albeit belated, were denied and his application were dismissed.
Turning to the application for an adversarial expert in relation to the former matrimonial home at J Street, Suburb Q, the single expert has valued that property at $4.15 million and the proposed adversarial expert has valued it at $4.93 million. Senior Counsel for the husband, in my exchanges with him, conceded that there is no substantial body of opinion contrary to that of the single expert, as referred to in r 7.08(2)(a) of the Rules. He also conceded that his client’s proposed adversarial witness does not know of matters not known to the single expert, as referred to in r 7.08(2)(b) of the Rules. It was submitted, however, by Senior Counsel for the husband that, as provided for in r 7.08(2)(c), there is a special reason for adducing evidence from another expert, in relation to the valuation of the former matrimonial home; namely, because it is said that subsequent comparable sales were not taken into account by the single expert, which have been taken into account by the proposed adversarial expert. Whether that is a matter properly under paragraph (b) or (c) of r 7.08(2), or at all, is a matter for another day.
However, I am conscious of the need to avoid the so-called, and possibly pejoratively called, ‘tick and flick’ approach that was criticised by the Full Court in Neales & Neales [2022] FedCFamC1A 41.In some cases, when taken severally, the criteria in rr 7.08(2)(a), (b) or (c) may not be met. However, when taken jointly, they may be met.
I note, however, that the sales taken into account by the proposed adversarial expert were sales in December 2022, some two months after the single expert report, and the difference between the single expert and the proposed adversarial expert amounts to $780,000. On either view, however, they agree that the value is more than $4 million and less than $5 million. It may be that it the subsequent sales are put to the single expert, she may take them into account and amend her valuation.
The issue of whether a special reason exists for adducing evidence from an adversarial expert was considered by Murphy J in Simonsen & Simonsen [2009] FamCA 698 at [12] where his Honour referred to the decision of the Full Court in Bass & Bass (2008) FLC 93-366 and said as follows, in relation to the equivalent provision in the former Family Law Rules 2004:
The general thrust of the Rules has been referred to by the Full Court in Bass & Bass. As the court in that case made clear, the adducing of evidence from an additional expert, is not something which ought occur in the usual course, or simply by application made by a party. In simple terms, the word “special” as used in rule 15.49 has real meaning.
(Citations omitted)
The issue was further considered by McClelland DCJ in Lambard & Lambard (No 4) [2021] FamCA 47 at [14]. Having set out the equivalent provision in the former Rules, his Honour said:
It is necessary to pay attention to the actual words used in 15.49(2)(c) being that “there is another special reason”. I have not been referred to any definition of “special reason”, however, I construe the word “special” as requiring a reason which is more than “the ordinary”: see Gyselman and Gyselman [1991] FamCA 93; (1992) FLC 92-279 at 79,064.
I do not today need to determine whether or not there is a special reason for adducing evidence from another expert witness or, indeed, whether the proposed adversarial expert witness knows of matters, not known to the single expert witness, that may be necessary for determining the issue of valuation. That determination will, by reason of this judgment, await another day. The sales relied upon by the proposed adversarial expert, especially in circumstances where they postdate the single expert’s report, should have been put to the single expert, whether by questions to and/or in a conference with her. In circumstances where the single expert’s report has been in existence since October 2022 and the husband has been aware of the more recent sales brought to his attention by his proposed adversarial expert since at least December 2022, it defies comprehension as to why neither of those steps have been taken. However, I am conscious of the provisions of r 7.02 and the need not to disregard the interests of justice.
As I have mentioned earlier in these reasons for judgment, I am conscious of the purposes and core principles of the Central Practice Direction, as well as the overarching purpose of the practice and procedure provisions referred to in s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), which is to facilitate the just resolution of disputes according to law and as efficiently as possible. Simply to dismiss the husband’s application, as the wife seeks, would be inconsistent with that Act, the Rules and the Central Practice Direction. In order to consider the husband’s application, without compromising the interests of justice, I need more information. That information can be obtained by the means prescribed in rr. 7.25 and/or 7.26. Any prejudice to the wife, arising from the husband’s very belated adjournment application, might be remedied by a costs order, an application for which has been flagged by her senior counsel.
Further, if I were to dismiss the husband’s application today, as the wife seeks, and the husband were to reapply, there would be no less prejudice to the wife. Senior counsel for the husband submits that, without adversarial experts being able to be called by his client, there may be an evidentiary lacuna. That is an issue for another day, but I do not necessarily agree with that submission. In Salmon and Ors & Salmon [2020] FamCAFC 134 at [41], the Full Court said as follows:
…the submissions assume that a trial judge is bound to accept expert evidence of valuation, or expert evidence upon the identified issues, and that in the event that the trial judge does not accept the single expert’s evidence in some respect, there will be “no evidence” to enable those issues to be justly determined.
At [42], the Full Court continued:
This contention ignores well settled principles as to the means by which a trial judge determines questions of valuation, as expressed by the High Court in Commonwealth v Milledge (“Milledge”) as “a commonsense endeavour, after consideration of all the material before the court, to fix a sum satisfactory to the mind of the court as representing the value” Milledge has often been applied by the Full Court of this Court in emphasis of the principle that a court must arrive at its own conclusion as to value by application of established principles of valuation.
(Footnotes omitted)
I was referred, and helpfully so, by senior counsel for the husband, to a comprehensive decision by Riethmuller J in Moretto & Cosola [2022] FedCFamC1F 433. At [7], his Honour said:
The rules contained in r 7.08 of the Rules cannot be applied in a way that results in a significant valuation issue being largely foreclosed (at least on a practical level) from effective challenge in the litigation, as that would compromise the interests of justice and therefore go beyond the purpose of the rules: see r 7.02(c) of the Rules and the poignant example of a terrible injustice caused by the reliance upon a single expert discussed in Penelope Kari, “Opinion: ‘Single experts’ – Guns for hire?” (2007) 29 Bulletin (Law Society of South Australia) 6. Similarly, r 7.08 of the Rules is not to simply relieve judges of the burden of making findings as between competing experts where there is a real issue as to valuation. Rather, it is to ensure that judicial time (and thus public resources) are not wasted on protected hearings involving multiple experts where the nature of the dispute is disproportionate to the costs involved.
In relation to the question of proportionality, his Honour referred at [9] to a decision of the Master of the Rolls, Lord Woolf, in Daniels v Walker [2000] 1 WLR 1382, where the weight placed upon whether the amount involved was disproportionate to the likely costs of multiple experts was considered. Riethmuller J continued:
This approach, albeit under different rules, reflected the purpose of the rules in ensuring that there is, on a practical level, real proportionality between the costs of expert evidence (directly, and in increasing the costs of the litigation more generally) compared to the amounts involved in cases involving valuation evidence.
His Honour referred at [10] of his judgment to decisions both in support of and against the grant of leave to call an adversarial expert on the basis of large differences in valuation amounts, some of which were held to be sufficient, and others which were held to be insufficient.
His Honour continued, however:
However, as the Full Court noted in Neales & Neales [2022] FedCFamC1A 41 that it is erroneous to refuse leave when focusing only upon the difference in values: at [42]. Whilst these cases appear to indicate a diversity of judicial opinion, they may be better explained by reference to the reasons of Watts J in HRBH & IABH [2009] FamCA 1131, where his Honour noted the potential practical difficulty that may arise where the single expert’s evidence on an important factor is so undermined by cross-examination that there would then be “a vacuum in the evidence”: at [8].
His Honour continued at [11], and I respectfully agree, that:
An evidential “vacuum” is to be avoided, if possible, particularly in valuation cases where the effective alternative of forcing a sale, even if it is open to the court, is a far from desirable option if one party wishes to retain a property.
Perhaps ironically, it is the wife who seeks to retain the former matrimonial home at trial and it would be unfortunate, from her perspective, if I were left with an evidentiary vacuum that required me to order a sale of the home.
Riethmuller J then addressed the methods for avoiding that potential difficulty, which are, at least initially, those to which I have already referred, namely, those in rr 7.25 and 7.26 of the Rules. At [13], his Honour said:
Not surprisingly, it has been held that these processes should be utilised prior to making an application to the court
Having referred to the decision in Salmon and Ors & Salmon, his Honour said at [14]:
Ultimately, a trial judge is not bound to accept the evidence of a single expert (Salmon at [41]), nor even any particular expert where there is more than one expert who gives evidence: see Borriello & Borriello at 77,558 and Goodwin and Goodwin Alpe at 78,275. Whilst a judge cannot simply average the values of differing experts (Commonwealth v Milledge at 160–161; and Borriello at 77,558), a judge can nonetheless come to a figure that is different from that put forward by the experts, if the evidence is properly approached: see also Arcus Shopfitters Pty Ltd v Western Australian Planning Commission at [76]. However, the judge cannot become a third valuer: Players Pty Ltd v Corporation of City of Adelaide at [81]. In this context, the discussion of Kent J in Salmon (at [43]–[46]) as to the findings that may be open with respect to capitalisation rates and discounts for minority shareholdings is instructive.
(Citations omitted)
His Honour then said at [15]:
In cases where the valuation is based upon the comparable sales method this distinction can be a fine one, however it must be recalled that the expertise of the valuer (which goes beyond a non-expert or real estate agent providing an appraisal) is in making a nuanced assessment of which sales are truly comparable and then forming a view as to a valuation after weighing the different comparable sale prices. Where the values for which each of the parties contend fall within the ambit of a broad range that the single expert identifies, cross-examination would ordinarily be a sufficient tool to avoid injustice. Where the value contended by the party challenging the single expert is outside of the range identified by the single expert (after making use of the right to send questions to the expert and a conference between experts) the interests of justice would tend to weigh in favour of allowing evidence from the other expert, provided that such evidence is not obviously flawed and the difference involved is not out of proportion to the likely additional costs of permitting the evidence to be adduced.
I express no view as to the ultimate merits of the husband’s application for leave to adduce adversarial expert evidence. It may or may not be successful, wholly or partly. However, the material presently before the Court does not enable me to determine that application in a way that would do justice to both parties. For these reasons, I shall grant the adjournment sought by the husband, albeit very belatedly, in relation to his application to adduce adversarial expert evidence.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 7 February 2023
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