Atkins and Hunt and Ors

[2019] FamCA 821

FAMILY COURT OF AUSTRALIA

ATKINS & HUNT AND ORS [2019] FamCA 821

FAMILY LAW – PROPERTY – EVIDENCE – Ruling on application pursuant to s 136 of the Evidence Act1995 (Cth)

Family Law Act 1975 (Cth)
Evidence Act 1995 (Cth)

APPLICANT: Ms Atkins

RESPONDENT: Mr Hunt

2^nd RESPONDENT: Mr J Hunt

3^rd RESPONDENT: Mr D Hunt

4^th RESPONDENT: N Pty Ltd

5^th RESPONDENT: T Pty Ltd

6^th RESPONDENT: H Pty Ltd

7^th RESPONDENT: Mr EE Hunt

FILE NUMBER: SYC 425 of 2012

DATE DELIVERED: 7 November 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 20 August 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Dura, counsel

SOLICITOR FOR THE APPLICANT: Mills Oakley

COUNSEL FOR THE RESPONDENT: Mr Lethbridge, SC

SOLICITOR FOR THE RESPONDENT: Sexton Family Law

COUNSEL FOR 2^ND – 7^TH RESPONDENTS Mr Gray

SOLICITOR FOR 2^ND – 7^TH RESPONDENTS HWL Ebsworth Solicitors

Orders

1. The application by the 2^nd to 7^th respondents to limit the use to which Exhibit 34 might be put is dismissed.

2. Exhibit 34 is to be provided by the applicant to Ms AAA and by the respondents to Ms BBB as soon as is practicable with a request for them each to prepare any statement that they wish, commenting upon Exhibit 34 (although I note that the part of Exhibit 34 which is the valuation of the minority interest in H Pty Ltd as at 30 June 2010 may not be controversial).

3. Any statement prepared pursuant to order 2 be provided to my associate in electronic form as soon as is practicable.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Atkins & Hunt and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 425 of 2014

Ms Atkins

Applicant

And

Mr Hunt

Respondent

And

Mr J Hunt

2^nd Respondent

And

Mr D Hunt

3^rd Respondent

And

N Pty Ltd 

4^th Respondent

And

T Pty Ltd 

5^th Respondent

And

H Pty Ltd

6^th Respondent

And

Mr EE Hunt

7^th Respondent

REASONS FOR JUDGMENT

1. On 20 August 2019, the wife tendered, without objection, two documents which became Exhibit 34.

2. The first is a letter dated 30 March 2011 written by Mr R of R Pty Ltd. The husband, having satisfied himself that Mr R was a person with appropriate experience to provide an opinion, asked Mr R to value the five A Class shares that he held and the one A Class share that T Pty Ltd held in N Pty Ltd (“N Pty Ltd”). Mr R expressed the opinion that the value of the shares in N Pty Ltd were worth in the aggregate $11,333,701 and that the husband’s shares were pro-rata worth $5,666,850 and T Pty Ltd’s one share (and the husband held 99 per cent of T Pty Ltd) was worth $1,133,370.

3. The second document that forms part of Exhibit 34 is a report on the value of minority interests in H Pty Ltd (“H Pty Ltd”) by Mr R dated 30 June 2010. The shares in H Pty Ltd were one of the assets owned by N Pty Ltd. Mr R valued the shares in H Pty Ltd at $1,164,964 and valued a 20 per cent minority interest in H Pty Ltd at $114,978. It is not controversial that the 2^nd respondent acquired a 20 per cent holding in H Pty Ltd at a value consistent with that expressed by Mr R in the second document attached to Exhibit 34.

4. Counsel for the 2^nd to 7^th respondents, late on 20 August 2019, made an application that both the documents which constituted Exhibit 34 be limited in their use so that they were only evidence as to the documents the husband had in his possession as at March 2011 but not to be used as expert opinion as to either the methodology or the value of the shares in 2011. Although counsel for the 2^nd to 7^th respondents during submissions made criticisms of Mr R’s analysis that led him to the valuation of H Pty Ltd, ultimately, in submissions in reply, he conceded that that valuation could not be considered controversial. Consequently, the application was confined to an argument about Mr R’s letter dated 30 March 2011 in relation to the value of N Pty Ltd.

5. Section 136 of the Evidence Act 1995 (Cth) (“the Evidence Act”) is in the following terms:

   General discretion to limit use of evidence

   The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might:

   (a)       be unfairly prejudicial to a party; or

   (b)      be misleading or confusing.

6. Although counsel for the 2^nd to 7^th respondents relied on both limbs of s 136 of the Evidence Act, the arguments concentrated on the first limb, namely, the danger of the evidence being unfairly prejudicial to the 2^nd to 7^th respondents. I do not accept that the opinion expressed by Mr R is confusing or misleading in relation to what he thought N Pty Ltd was worth in 2011. The opinion as to value was quote clearly expressed.

7. Underpinning the submission that the unlimited use of the report would be unfairly prejudicial to the 2^nd to 7^th respondents, are submissions that:

   a)The 2^nd to 7^th respondents have not had the benefit of challenging the report;

   b)The 2^nd to 7^th respondents have not had the opportunity of cross examining Mr R; and

   c)Each party is calling expert evidence at least as to the value of N Pty Ltd as at 2015.

8. Mr R’s opinion is expressed in very short form. It is appropriate to set it out in full:

   On Mr Hunt’s instructions, we have valued the five A class shares held by Mr Hunt and one A class share held by T Pty Ltd. These shares are of equal pro rata value because Mr Hunt controls T Pty Ltd and is therefore the effective owner of all A class shares. All of the shareholders’ value in N Pty Ltd is attributed to the A class shares principally because they have all the voting power. Although they do not share in a winding up the prospect of a forced winding up is so remote that this prospect bears no impact on value. If members wished to voluntarily wind up the company, a decision which could only be made by the A shareholders, they would cash up the assets of N Pty Ltd and distribute fully franked dividends. It would be a decision of the A shareholders as to whom dividends would be distributed.

   We have used the realisation of assets method under the Asset Approach to valuation to value the A class shares. They are worth in the aggregate $11,333,701 and Mr Hunt’s shares are pro rata worth $5,666,850 and one T Pty Ltd share is worth $1,133,370. These shares have a high degree of marketability and could be sold to an external purchaser.

   At your request we have issued the shares in draft for your review particularly in light of the director real estate valuation. In our recent experience capital expenditure on premises at the behest of franchisors adds no value to the underlying real estate because rarely does the underlying viability of the franchise improve.

9. Counsel for the 2^nd to 7^th respondents raised a number of issues in respect of this report. Firstly, he pointed to the different methodology used in the two valuations. When valuing N Pty Ltd, Mr R used an “Asset Approach”. He pointed out that in the second document, when valuing the minority interest in H Pty Ltd, the valuer had not adopted an “Asset Approach” but rather an “Income Based Approach”. It is not controversial that H Pty Ltd was the company which operated the Company 1 franchises at Town O and Town P. Adopting an income based approach to the trading company seems unremarkable.

10. N Pty Ltd, however, held assets, primarily real estate, but also shares in H Pty Ltd. Whilst the activities in real estate involved some trading activities, it is not remarkable that Mr R would have adopted an asset backing basis to that valuation.

11. There was no challenge to the admissibility of the opinion and Mr R’s expertise was not challenged. Counsel for the 2^nd to 7^th respondents correctly pointed out that the material that Mr R had been provided, including the “director real estate valuation”, is not part of Exhibit 34 and so a proper assessment as to Mr R’s opinion as to the value of N Pty Ltd as at March 2011 cannot be made or tested. It is primarily on that basis that it was submitted that it would be unfairly prejudicial to the 2^nd to 7^th respondents to allow Mr R’s letter of 30 March 2011 to be evidence of value as to N Pty Ltd as at that date.

12. Counsel for the 2^nd to 7^th respondents also argued that it is not possible to understand what Mr R means by “a high degree of marketability and could be sold to an external purchaser” in the first document. In respect of the shares in H Pty Ltd, the second document in Exhibit 34 does deal with the issue of marketability. At Part 1.5 of the report, Mr R opined that it would be either a relatively simple transaction to find someone to acquire a minority stake in H Pty Ltd (on the basis that many large franchise groups, including regionally located groups, operate under an equity partner model) or alternatively, it would be a “relatively simple transaction to find an investor familiar with the industry and possibly an existing corporate participant in the industry to acquire the majority equity or full ownership of the franchise business”.

13. In relation to the balance of the assets in N Pty Ltd, whilst Mr R does not explain why they have a high degree of marketability, subject to any further evidence, it is not controversial that those assets were real estate holdings from which franchises were conducted.

14. Counsel for the 2^nd to 7^th respondents also complained that there was no suggestion that Mr R had applied the expert’s Code of Conduct to the valuation. Given that Mr R expressed an opinion based upon an instruction from the husband to provide that opinion outside the context of court proceedings, it was not necessary for Mr R to comply with any expert Code of Conduct pursuant to Chapter 15 of the Family Law Rules (2004) (Cth).

15. Further, counsel for the 2^nd to 7^th respondents observed that nobody had provided a copy of Exhibit 34 to either of the experts and asked them whether or not they agreed or disagreed with what was in those documents. In fact, counsel made clear he wasn’t encouraging that to happen. There is, however, no reason why that could not happen and I intend, on my own motion, to make an order to create an opportunity for that to happen.

16. The letter of March 2011 is a valuation which was admitted into evidence without objection. It is artificial to use it as a valuation of the A class shares that the husband had been provided on the one hand and limit its use as to an opinion as to the value, particularly of N Pty Ltd as at March 2011, on the other. Ultimately, the question is what weight can be placed on the document going to the ultimate issue of valuation of the shares in N Pty Ltd at other relevant dates. A judgment as to weight will be the subject of further evidence from the experts and final submissions.

17. Approached in that way, I conclude it is not unfairly prejudicial to the 2^nd to 7^th respondents not to limit the use to be placed on Exhibit 34.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 7 November 2019.

Associate: 

Date:  7 November 2019