Bergman & Bergman
[2022] FedCFamC2F 1313
Federal Circuit and Family Court of Australia
(DIVISION 2)
Bergman & Bergman [2022] FedCFamC2F 1313
File number: BRC 220 of 2020 Judgment of: JUDGE O'SHANNESSY Date of judgment: 26 May 2022 Catchwords: FAMILY LAW – property valuations – adversarial expert – valuation of horses – expert witnesses – availability of expert witness for cross examination. Legislation: Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 7.08
Cases cited: Carpenter & Lunn [2008] FamCAFC 128
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
TWN & PAQ (2005) 34 Fam LR 190.
Sydneywide Distributors Pty td v Red Bull Australia Pty Ltd [2002] FCAFC 157
Thornton & Little [2022] FedCFamC1A 49
Division: Division 2 Family Law Number of paragraphs: 37 Date of hearing: 25 May 2022 Place: Brisbane Counsel for the Applicant: Mr Drysdale QC Solicitor for the Applicant: O’Reilly Shaw Lawyers Counsel for the Respondent: Mr Linklater-Steele Solicitor for the Respondent: Wilsons The Family Lawyers ORDERS
BRC 220 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS BERGMAN
Applicant
AND: MR BERGMAN
Respondent
order made by:
JUDGE O'SHANNESSY
DATE OF ORDER:
25 MAY 2022
THE COURT ORDERS THAT:
1.That pursuant to rule 7.10 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 the husband be permitted to rely upon the expert report of Mr C filed on 18 May 2022.
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 a pseudonym Bergman & Bergman has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE O’SHANNESSY
The matter comes before me on the first day of a trial where the Applicant Husband (“the Husband”) seeks the leave of the Court, as is required under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”), to lead evidence from what is known as an adversarial expert in regard to the valuation of horses.
The context of that is the following chronology of the litigation:
·The first time the matter was listed for final hearing was on 8 December 2021 before Her Honour Judge Purdon-Sully, which was adjourned.
·The second time the matter was listed for final hearing was on 22 February 2022, which was adjourned.
·In April 2022, the matter was listed for final hearing on 30 May 2022 for an estimated length of one day.
·A listing for two-days was approved on or about 9 May 2022.
·The matter was brought forward to this week, 25 and 26 May 2022, being the third time the matter has been listed for final hearing.
It is common ground that the expert that the Husband seeks to rely upon, Mr D, had been consulted on or before 8 December 2021, and as a result of that consultation, the Husband alone, not the Wife, was provided with his report.
The single expert that the parties had agreed upon was a Mr E, who had provided a report of 20 July 2020. When that report was sought to be updated, a Mr F of the Northern Territory stepped into the role and provided an updated report in substantially the same form as that provided by Mr E. It is unclear why Mr F took over the role from Mr E, but it may have been the unavailability of Mr E.
Mr F's report was obtained on 29 November 2021 and filed in the Court on 7 December 2021. Subsequent to Mr F's report, the Husband delivered questions to Mr F and the questions that the Husband raised on 21 December 2021 are included at page 55 of the Husband's affidavit filed on 18 February 2022. The answers to those questions are provided at page 57.
It is clear that the Husband disagreed with or was troubled by aspects of Mr F’s methodology. He instead seeks that the Court rely upon the valuations provided by Mr D under rule 7.08, being:
7.08 Appointing another expert witness
(1)If 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.
(2)The court may allow a party to tender a report or adduce evidence from another expert witness on the same issue if it is satisfied that:
(a)there is a substantial body of opinion contrary to any opinion given by the single expert witness and the contrary opinion is or may be necessary for determining the issue; or
(b)another expert witness knows of matters, not known to the single expert witness, that may be necessary for determining the issue; or
(c)there is another special reason for adducing evidence from another expert witness.
The context and the intensity to this dispute is that on the Wife's account of a net pool of non-superannuation assets of about just under $1,400,000.
It is significant that on 8 December 2021, a document was produced headed “Horse Valuation,” but could be called a comparison table of Mr D's asserted value and Mr F’s asserted value. It included a limited description of each of the horses.
It should be noted that it is common ground that the Husband retains and will retain nine horses which are principally of G or H type. The Wife will retain the 12 horses that remain and are numbered 9 to 10 and 12 to 24 in both valuation reports. Mr F has valued the Wife’s horses at $36,950 and the Husband's horses at $7,450. Mr D has valued the corresponding horses at about $44,000 for the Husband’s horses and $410,000 or thereabouts for the Wife’s horses.
The Husband points to the circumstances that one of the horses (“Horse A”) valued by Mr F at $1500 has since been sold for $4000. The point is that Horse A was sold soon after or relatively soon after Mr F's valuation for a figure in excess of double that valuation. On the other hand, Mr D valued Horse A at $20,000, that is five times what that horse was sold for.
The point of this application and my determination of it is not to determine which expert is correct at the end of the day. My obligation in a Family Law Act 1975 (Cth) section 79 case is to determine the value and be satisfied with the value myself. I may take either expert's opinion, were both in evidence, or I may make another conclusion, provided the parties have procedural fairness about that and there is a proper evidentiary basis for it. The key is that it is not a chess set piece and I must be satisfied with the valuation I reach.
The valuation of Mr D was only provided to the Wife on 13 May 2022. Mr Drysdale of senior counsel says that the late provision of that report has prejudiced the Wife in a number of ways, including a lack of ability to make inquiries about an appropriate expert herself, if that were to be the appropriate course, and to file other evidence in the event that she disagrees with the factual basis of the matters asserted by Mr C.
Before I come to the submissions opposing the report, I will briefly touch on the Husband’s submissions saying why the report should be admitted (these settled reasons recite from the transcript):
MR LINKLATER-STEELE: I say it’s methodology with one working from, firstly, the use of the comparable sales which the court would be familiar with as a technique. Secondly, the factual consideration of the lineage. I mean obviously one could value these things as hamburger but that would obviously ignore the very essence of the nature of what is being valued. And to value it, as it seems to be on the face of the all assets appraisal, as is where is, which is usually something one hears about in terms of cars and the like, in my submission, fails to meet the requisite need that the court has to understand truly the value of these horses given the background of the investor.
…
MR LINKLATER-STEELE: And… at this stage it would seem, on the face of it, there are comparative sales that [Mr D] has relied upon. I can’t say specifically because the matter couldn’t be taken any further with [Mr F] as to whether he was alert to but certainly his report and methodology doesn’t reference or rely upon comparative sales at all. So, in my submission, it’s established factually that that information is known at this stage only to [Mr D].
…
MR LINKLATER-STEELE: I would say the special reason [is] that it has been considered from time to time is that it’s not a matter that can be cured by cross-examination [of] [Mr F]. It will leave your Honour with a hole in the evidence, particularly, given some of the evidence that your Honour already has as to the amount of money spent in the advancement of the breeding and sale activities. It’s not a matter where if cross-examination is undertaken of [Mr F] the court is going to be provided with a level of evidence to make the requisite findings. So there is a need for there to be actual evidence before the court to which the court can call upon to make a definitive determination as to value. … And, obviously, as to whether the court accepts that at the end of the day is a matter for, ultimately, submissions, but from a purely evidentiary basis there will be a ravine in the evidence that [Mr F] seems to not be able to fill in terms of his report and obviously all efforts to try and alleviate and provide him with instructions haven’t been successful so that he could perhaps provide further evidence.
Mr Linklater-Steele points to the circumstance that Mr F has no comparable sales, and that in the context of rule 7.08(2)(a) of the Rules, Mr D’s report has a significantly different methodology. He asserts this is not just one of those cases where it is just a margin of error or an issue of discretion, but a significant difference. He points to the fact that Mr D’s valuation uses a different methodology, being the reference to comparable sales, and points to the additional factual consideration of the lineage of these horses. I would include in that, Mr D's reference to the World Breeding Federation of Sport Horses (“WBFSH”), which is uncontroversial. Mr Linklater-Steele also points to the lack of comparable sales in Mr F's report against the use of comparable sales by Mr D.
In regard to rule 7(2)(c), he also points out that this is a matter where the dispute of the total value of all of the horses is in the order of $40,000 against $450,000. He says this dispute as to value is of such a dimension, and given the methodology, that it cannot be cured by mere cross examination of Mr F. It may be Mr Linklater-Steele is being very modest about his abilities as a cross examiner. He says that there is a lacuna in the evidence.
In Mr Linklater-Steele's submissions, a further problem was highlighted. Notwithstanding that this is the third time that the case has been listed for hearing, putting aside the listings in May 2022, the issue of notice to Mr F is problematic. The Rules provide that there must be no less than 14 days’ notice to Mr F. It transpires that no written notice was given to Mr F for him to be available for cross examination. The impression I have is that the obtaining of the report from Mr D and the service of it created procedural pandemonium in both solicitors' offices.
Mr Linklater-Steele tells me and I accept that there was a compliance mention on 13 May 2022 and that at that compliance mention the issue of Mr F being challenged in evidence was raised with the Court and the other side. As I understand it, the next event was that on 16 May 2022 there was telephone contact, not with Mr F himself, but with the office, as he is retained by what appears to be a one stop shop valuation service that provides multiple skills of valuation of a wide range of assets.
On 16 May 2022, the Husband became aware that Mr F was not available and it became apparent that someone then suggested they cross examine Mr E instead. The communication of 16 May 2022 should have been writing and should have been communicated to the Wife's solicitors.
The Wife's submissions, in summary, are that this is too little, too late:
18. It is submitted that the application to adduce adversarial evidence be dismissed, for the following reasons:
(a)the application does not fall within one of the pre-conditions set out in Rule 7.08(2). The mere expression of an opinion as to value by another expert no matter how substantially contrary to that of the single expert does not in itself constitute a substantial body of opinion within the meaning of the Rule; (Salmon & Ors & Salmon [2020] FamCAFC 134 at [35];
(b) if, contrary to that submission, the Court finds the discretion has been enlivened then the application should be dismissed in any event because:
(i) All Assets Appraisal valuations have been in the parties’ possession, in the respect of the first valuation since 2020 and second valuation since November 2021;
(ii) despite that the [Mr D] report was only provided to the Wife less than two weeks prior to the final hearing (at 3.53 pm on a Friday afternoon);
(iii) no explanation has been provided for the delay in circumstances where the letter of instruction to provide the adversarial report was dated 21 December 2021 and where the Husband already had a comparison report on 8 December 2021, which was not disclosed to the Wife;
(iv) the letter from Wilsons engaging [Mr D] commences with “We refer to the above and previous correspondence, most recently last week.” (Affidavit of the Husband filed 18 May 2022 at [“-04”])
(v) the previous correspondence has not been disclosed;
(vi) the period between December 2021 and the delivery of the report on 11 May 2022, is totally unexplained. There is evidence that further information has been obtained by [Mr D] during that period however, that information has not been disclosed;
(vii) the late provision of the report means that Division 7.17 cannot be complied with. Rule 7.30 prescribes that where two or more parties tender an expert report to adduce evidence from different expert witnesses about the same or similar questions, the parties must arrange for the expert witness to confer at least 28 days before the earlier of:
A. the first day of the trial in which the expert’s report will be relied on in evidence;
B. the first day when the expert reports or otherwise be relied on in evidence.
(viii) the late provision of the report has further caused prejudice to the Wife by denying her the opportunity to herself obtain a “shadow expert” to provide an expert report. That is the very vice Kent J in Tsoutsouvas & Tsoutsouvas & Ors at [26] cautioned against.
19. The Husband has had months, if not years, to challenge the single expert report. The delay will cause severe prejudice to the Wife, which should be avoided by dismissing the Husband’s application. The dismissal will not prejudice the Husband as he will still be able to use the contents of the [Mr D] report in cross-examination of [Mr F].
I particularly note paragraph 19 where it was asserted, at a time when it was not known to Mr Drysdale, that Mr F would not be available for cross-examination, that the dismissal of the application for the adversarial expert will not prejudice the Husband, as he will still be able to use the contents of the Mr D report in cross examination of Mr F.
It now appears Mr F is out of the country and no one knew that at the time when the matter was fixed for hearing. Mr Drysdale says that that is not the fault of the Wife, as she fully accepts the valuation of Mr F and it was up to the Husband to set that in train. Nonetheless, everyone proceeded on the basis that if he was required, Mr F would be available.
Mr Drysdale also points to the Rules that require, if there is going to be a conference of experts, that that be done 28 days before the hearing. Of course, that was not even possible, given the lateness of the report. Mr Drysdale points to the lack of explanation as to what it was that took from 21 December 2021 to 13 May 2022 to provide the report. Mr Drysdale also raised that were the provisions of rule 7.08(2)(a), (b) or (c) to be satisfied, that the lateness of the matter was such that the discretion should not be exercised in accepting the material.
He further raised the issue that Mr D's report did not satisfy the rule in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 (“Makita”) that the assumptions upon which he has based his valuations could not be said to have been proven from the report. That was essentially a reference to the basis rule and was not expounded in detail by Mr Drysdale, but nonetheless was pressed, and he said that the manner in which the comparable sales in Mr D's report informed his opinion about the values was not set out.
The basis rule is extensively discussed in Uniform Evidence Law (Stephen Odgers SC, 16th edition, 2021, Thompson Routers) paragraph [79.240]. The basis rule could be said to be set out in Makita. I note that Makita was recently referred to by Aldridge J in the matter of Thornton & Little [2022] FedCFamC1A 49, but observed more in passing than in analysis. Makita has been qualified by Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588.
Makita then has been further qualified in particular for a judge in this position at the start of the case by the case of Sydneywide Distributors Pty td v Red Bull Australia Pty Ltd [2002] FCAFC 157 (“Sydneywide Distributors”). Sydneywide Distributors has been approved by or applied by the Full Court of the Family Court of Australia in TWN & PAQ (2005) 34 Fam LR 190 and referred to in Carpenter & Lunn [2008] FamCAFC 128 by the Full Court and the judgment of the late Thackray J at 216. The point of the qualification of Makita is the issue of whether a report is inadmissible if, on its face, it does not satisfy the Makita guidelines or whether that goes to weight. Ultimately, I find, at this stage, it goes to the weight, not the admissibility.
However, the criticisms of the form of Mr D's report highlight what for me is a very considerable difficulty. That is what I described in discussion with Mr Drysdale as the skinny nature of Mr F's report. All of the criticisms made of the form of Mr D's report apply to Mr F's report. It is clear from a reading of Mr F's report that he has expertise and that he expresses an expert opinion. It is not at all clear how the matters that he describes in regard to the horses informs his conclusion as to the value.
At this stage I treat the information in Mr D's report as allegations and it is not a finding of fact that they are correct. Mr D’s report provides significantly more information about each individual horse, including the bloodlines of the sires, the dams and the sires of the dams. Mr F's report does refer to the sires, but it is absent any comment as to their significance. Mr D's report, on its face, places considerable weight on the WBFSH ranking of the sires. If Mr D's opinions are correct, the Wife’s horses would be of significant value and significantly greater than $40,000. I do not make any comment about the extent to which they are worth more than $40,000. The disparity between the selling price of Horse A and each valuer's valuation is not lost on me.
Nonetheless, I then turn to rule 7.02 and the purposes of the Rules:
7.02 Purpose of Part 7.1
The purpose of this Part is as follows:
…
(e)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.
Turning to rule 7.08(2)(a), I may allow a party to tender a report if there is a substantial body of opinion contrary to any opinion given by the single expert witness.
Taking the totality of Mr D's report and the concentration on the bloodlines, I find that that is a substantial body of opinion contrary to the opinion given by the single expert. I accept what Mr Drysdale says, that a disparity of the value is not of itself a substantial body of opinion and I accept that submission. Nonetheless, the detail about the bloodlines of both dams and sires and the sires of the dams of, in particular of the Wife's horses, is significant and is a substantial body of opinion.
As to 7.08(2)(b), on the face of Mr F's report and on the face of Mr D's report, it appears that a matter that is known to Mr D but not to Mr F is the issue of the WBFSH ranking. Now, of course, it may be that that ranking is immaterial and of little weight. Nonetheless, on the face of the two reports, there are matters known to Mr D which are not referred to by Mr F and may not be known. I find that those matters, such as the ranking of the sires and the sires of the dams, may be necessary for determining the issue.
Rule 7.08(2)(c) is "another special reason". Mr Linklater-Steele pointed to the huge disparity in the endpoint of the value. Mr Drysdale said that of itself is not a reason and I accept that. What is significant to me in 7.08(2)(c) and the special reason is, as I raised with Mr Drysdale, the skinny nature of Mr F's report.
It needs to be pointed out that this is not the fault of the Wife that Mr F was not available for cross examination. When that became apparent, Mr Drysdale's submissions to me were that I should proceed on the basis that Mr F's report should be accepted into evidence unchallenged, without the possibility to cross examine upon it. Indeed, on a strict analysis of the Rules and provided I turn my eyes away from the interests of justice, that is a possible way forward.
I also take into account, and it weighs heavily on me, the circumstance that this is the third time that this matter has got to the barrier. The last two times the matter was unable to be reached or a judge was not available. I am here ready to start the case.
A further matter that I must take into account is that the ultimate orders I must make must be just and equitable. I am troubled by the lack of detail of Mr F's report when it is challenged on the basis of Mr D's report. Hence, I cannot see that it is in the interests of justice or just and equitable as between these two parties to proceed on the basis that Mr F's report goes in unchallenged because of the consequences of the Rules and the Husband's failure to deal with those Rules appropriately.
It is, at the end of the day, not a default judgment situation. I must be satisfied of the value of these horses myself. It may be that ultimately I, or another judge, accept Mr F's report and Mr D's report is not followed or some other value is determined but I have the responsibility of determining the value of disputed assets.
This is not a dispute of a minor dimension; it is a dispute as to a significant proportion of the asset pool. In all of those circumstances, I will permit the Husband to rely upon Mr D's report.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of Judge O'Shannessy. Associate:
Dated: 28 September 2022
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