Bloxham & Bloxham (No. 3)
[2021] FamCA 70
•19 February 2021
FAMILY COURT OF AUSTRALIA
Bloxham & Bloxham (No. 3) [2021] FamCA 70
File number(s): PAC 2582 of 2017 Judgment of: FOSTER J Date of judgment: 19 February 2021 Catchwords: FAMILY LAW – PRACTICE & PROCEDURE – EXPERT EVIDENCE – Where application for leave to rely on affidavit of expert at trial – Where affidavit not by appointed Single Expert – Where no application for appointment of Single Expert – Where discussion of applicable principles – Where application dismissed. Legislation: Family Law Rules 2004 (Cth) r 15.42 Cases cited: Salmon and Ors & Salmon [2020] FamCAFC 134 Number of paragraphs: 23 Date of hearing: 10 December 2020 Place: Parramatta Counsel for the Applicant: Mr Richardson SC Solicitor for the Applicant: Dorter Family Lawyers And Mediators Counsel for the Respondent: Mr Campton SC Solicitor for the Respondent: Watts McCray ORDERS
PAC 2582 of 2017 BETWEEN: MS BLOXHAM
Applicant
AND: MR BLOXHAM
Respondent
ORDER MADE BY:
FOSTER J
DATE OF ORDER:
19 FEBRUARY 2021
THE COURT ORDERS THAT:
1.That the husband’s application for leave to rely at trial on the affidavit of Mr BH sworn 6 October 2020 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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bloxham & Bloxham has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
FOSTER J
In ongoing property proceedings between the applicant wife and respondent husband, trial directions to facilitate the matter proceeding to a final hearing were made by the Court on 15 June 2020.
Subsequently, various interlocutory applications have been filed and were before the Court.
On 10 December 2020 proceedings were again before the Court in relation to a discrete issue as to a subpoena for production of documents and inspection of documents. That issue was resolved by the parties and consent orders were made.
On 10 December 2020 the Court facilitated the allocation of trial dates, being eight days for trial commencing in April 2021.
The present application concerns the respondent husband’s application to be granted leave to rely on an affidavit by Mr BH, chartered accountant, sworn 6 October 2020, at final hearing. The affidavit of Mr BH was filed on 16 October 2020.
The applicant wife objects to the affidavit of Mr BH being relied upon at final hearing.
It is of some utility to consider a brief background of this matter. In reasons for judgment delivered 13 December 2018 is the following short history:
29.The parties commenced cohabitation in 2000, living in New Zealand. The parties married in 2007 in Australia and separated in July 2016.
30. There are three children of the marriage presently aged four, six and seven.
31.The wife asserts that during the marriage she was the primary carer of the children and remains so to date. The children continue to live with the wife in the former matrimonial home at Suburb G. The husband, she asserts, spends little time with the children due to his work obligations and significant travel commitments.
32.The wife says that at the commencement of cohabitation she and the husband had no assets of any significance. The business interest of the husband and the parties were commenced and developed during the relationship.
33.The wife asserts that she has had a significant role in the primary business of the parties C Pty Ltd, a business venture, established by the parties at about the time they relocated to Australia in 2007.
34.The wife asserts that she had a significant role in supporting the family from the early days of the business and in the business expanding and developing over the years. She acknowledges that the husband had business acumen and contacts in the industry that enabled them to pursue the development of their new business.
35.The business expanded overseas including in Country B, the United Kingdom and New Zealand. In each of these jurisdictions the business required a director that was resident in the jurisdiction. The wife’s brother Mr O was appointed a director of the business in the United Kingdom where the shareholding in the business was held beneficially for F Pty Ltd as trustee for the parties’ family trust the “Bloxham Family Trust”. Similarly, the husband’s father became a director for the purposes of the business activities in New Zealand and a Mr D was appointed as a director for the purposes of the business activities in Country B.
36.The wife undertook finance training and was involved in the bookkeeping and accounting for the business.
37.Following the birth of the first child the wife asserts that the parties agreed that the husband would focus his primary attention on the business and the wife would attend to family obligations.
38.In 2016 the husband informed the wife that he was engaged in discussions as to a merger of the C Pty Ltd businesses with a company E Pty Ltd that had as its sole director and shareholder a Mr H. A proposed Merger Implementation Deed was signed on 21 December 2016 that in essence provides for underlying shareholdings in HH Group to be transferred to a new “Merged Group Entity”. The husband asserted to the wife, it appears falsely, in late March 2018 that the merger never eventuated.
39.The wife’s solicitors were informed in June 2018 of negotiations in place for the sale of the C Pty Ltd entities including its related overseas entities to a publicly listed company J Company. Previously in late March 2018 the husband had requested that the wife transfer to him her shareholding in C Pty Ltd. It was asserted by his solicitors that the wife’s interests in the corporate entities were protected by her rights under the Family Law Act and that the wife’s retention of her shareholding was “inappropriate” as the parties had separated.
40.Subsequently, the wife asserts that the sale of the C Pty Ltd entities was part of an overall sale that included the E Pty Ltd entities at a total sale price of $270 million to be distributed pursuant to a Share Purchase Deed dated 8 July 2018. The share purchase deed was signed by the wife but she complains that she was not permitted at any time to be party to the negotiations nor has she been provided with any documents from the husband as to the course of those negotiations.
41.Relevantly, the share purchase agreement provides that funds from the sale would be apportioned, inter-alia, in part as follows:
a)24.71 per cent to C Pty Ltd (Australia) for the sellers the husband and wife;
b)2.79 per cent to C3 Limited for the seller F Pty Ltd as trustee for the Bloxham Family Trust;
c)26.5 per cent to C4 Inc (Country B) equally apportioned for the sellers AT Inc and Mr D;
d)One per cent to C5 Inc (US) for the seller “P” Inc.
42.The wife expresses her concerns as to the husband having an undisclosed interest in the Country B and United States entities through which the sellers were to receive 27.5 per cent of the proceeds of sale being about $74 million. In that event, the wife asserts that through the various entities the husband could be entitled to a total of about $145 million and not the $74 million as asserted by him.
43.Otherwise, the wife expresses concern as to the entitlement of Mr D who she says was a director of convenience for the entity’s operations in Country B. Under the share purchase agreement he has an ostensible entitlement through his “shareholding” of about $74 million yet the wife asserts that Mr D never held a critical role in the business. For various reasons propounded by the wife and most likely to be tested at final hearing, the wife infers that Mr D may well simply be a puppet of the husband. The wife continues her enquiries in this regard.
44.The wife asserts that the current asset pool is in the order of about $84 million comprising variously of:
a)proceeds of sale of the parties’ shareholding in C Pty Ltd, C3 Limited and C2 Limited of at least $74 million;
b)a pre-completion sale dividend paid to the husband in July 2018 of about $10 million;
c)a property purchased by the husband in City Q in July 2018 for about $3 million;
d)the former matrimonial home occupied by the wife and children having, she says, a value of about $2.8 million.
45.The wife makes significant complaint as to the husband’s failure to provide proper and fulsome disclosure including his failure to comply with previous orders made by registrars. The wife further complains that the husband has withdrawn funds totalling about $900,000.00 from his account …31 with those funds being unaccounted for. Although it appears there is an inference that a significant portion of those funds have been applied to the deposit for the husband’s proposed purchase.
46.The wife says that the property in which she and the children live requires extensive repairs that she estimates to cost about $41,000.00 together with significant other work required to bring the property up to standard.
47.At present, the husband pays child support of $833.33 per child per week from which the wife is to maintain herself and the children that are in her primary care.
48.The wife for her part seeks the release to her of funds in the sum of $10.5 million to facilitate the purchase by her of a property for occupation by herself and the children. Otherwise, the wife and the husband own an investment property in City K, New Zealand with a small surplus available after mortgage payments and property outgoings. Otherwise, the wife has monies at bank totalling about $15,800.00. Her solicitors as at 19 October 2018 held a balance of $92,000.00 in their trust account from the interlocutory payment made pursuant to orders on 28 August 2018.
49.At present she has an interest in purchasing a property at Suburb L for the sum of about $9 million.
50.The property purchased by the husband is in very close proximity to the matrimonial home in which she resides with the children. The wife has a poor relationship with the extended paternal family that all live within the Suburb G community.
It is readily apparent that the sale of the corporate entities was the primary source of the parties’ present significant wealth.
Senior counsel for the husband contended that an order made by a Registrar on 7 August 2017 in the following terms:
“that the parties agree that the husband shall instruct a suitably qualified expert to inquire into and report as to the value of the C Pty Ltd and associated entities”
obviates the necessity for any leave to be granted for the husband to rely upon that expert evidence at trial.
However, the discrete order made by the Registrar simply facilitates the husband obtaining a report and does not address the question as to whether such report is admissible and may be relied on at final hearing. This is particularly so when the subject entities have been sold with the result that the parties’ present assets mostly comprise real estate holdings and cash at bank, subject to assessment of taxation liabilities arising from the sale of the corporate entities.
The report of Mr BH (“the BH report”) purports to value the relevant entities as at 30 June 2017.
The BH report was provided to the wife’s legal representatives in mid-December 2017, subsequent to which the wife confirmed that she was in the process of obtaining a review of the report by her own independent accountant. The wife appointed a Mr AV as her independent accountant and the costs of Mr AV were met by the husband.
The parties’ respective accountants conferred in May 2019 and May 2020. It is contended by senior counsel for the husband that the wife had made no objection to the report of Mr BH but upon the husband filing the present Application in a Case, dated 16 October 2020, the wife now seeks to prevent the husband relying upon the BH report at trial.
It is contended by senior counsel for the husband that the BH report is relevant to the assessment of contributions of each of the parties’ post separation. The report, it is submitted, provides a valuation of the interests of the parties as at 30 June 2017. It is, otherwise, contended by senior counsel for the husband that “the valuation of the interest at that point in time provides context and quantification to the contributions made by the husband generating a significant uplift in the consideration achieved on disposal of the enterprise – including the Court having a marker to assess and weigh the contributions of the husband in negotiating the sale, the fact and terms of the business relationships he had established with the “other sellers” of which he contends that the wife cannot be said to have contributed.”
The BH report is a valuation of the parties’ respective interests in the various corporate entities as at 30 June 2017 on a future maintainable earnings basis founded on published accounts as adjusted. The report does nothing to address the issue of the marketability or, otherwise, on the international market, of the various business entities, in respect to which the parties had an interest in conjunction with other third-party business entities. Nor does it give recognition to the earlier and subsequent corporate machinations under way at the instigation of the husband as referred to above.
It is contended by senior counsel for the wife that as a consequence of the sale of the parties’ corporate interests, there are now no assets that require valuation by an accountant. It is further properly contended that the valuation exercise conducted by Mr BH is simply irrelevant.
The application of the Rules is a matter for the Court. Chapter 15 of the Family Law Rules 2004 deals with the question of expert evidence before this Court. Rule 15.42 provides:
Purpose of Part 15.5
The purpose of this Part is:
(a)to ensure that parties obtain expert evidence only in relation to a significant issue in dispute;
(b)to restrict expert evidence to that which is necessary to resolve or determine a case;
(c)to ensure that, if practicable and without compromising the interests of justice, expert evidence is given on an issue by a single expert witness;
(d)to avoid unnecessary costs arising from the appointment of more than one expert witness; and
(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 necessary in the interests of justice.
The BH report is clearly not a single expert report as contemplated by the Rules. Nor is it a report sought to be relied upon as an “adversarial expert” in relation to a single expert report obtained by the parties using the regime provided for in Chapter 15 of the Rules.
As was observed by the Full Court in Salmon and Ors & Salmon [2020] FamCAFC 134:
24.Underlying the whole of the FLR is the statutory requirement in s 97(3) of the Act that the Court endeavour to ensure that proceedings are not protracted. In pursuit of that requirement, r 1.04 expresses that the main purpose of the FLR “is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case”. Rule 1.06 mandates that the Court must apply the FLR to promote the main purpose.
25.Court rules of practice regulating expert evidence, and the use of single expert evidence, and providing the Court with the discretion to appoint another expert, are not peculiar to this jurisdiction. The principles governing the exercise of discretion to appoint another expert have been considered in other jurisdictions in connection with rules similar to the FLR.
26.As Beazley JA observed of the similar rules in Part 39 of the Supreme Court Rules 1970 (NSW) in Owners of Strata Plan 58577 v Banmor Developments Finance Pty Limited and Others[4] such rules involve consideration of a balance between competing, though not disconnected, factors in the judicial system:
... The first factor relates to case management principles and the need for the courts to provide, so far as is possible, expeditious resolution of disputes. The second relates to ensuring, again so far as is proper and possible, that the disputes are resolved so as to provide justice according to law to the parties to the dispute...
As to why some time ago the husband sought to obtain a unilateral valuation of the parties’ underlying interests in the relevant corporate entities, is not known. The forensic reasoning behind such a decision is not readily apparent.
The reality is, that the parties’ interests in the relevant corporate entities have now been sold and have been crystallised into substantial cash holdings. It will be a matter for the husband to give evidence as to his endeavours to procure the sale price obtained. The issue of a valuation of the parties’ interest in the relevant corporate entities, at a date 12 months after separation, and at a date 12 months prior to the sale of those interests, at market value, is not necessary for the resolution of these proceedings. As said, it is a matter for the husband to adduce evidence as to his efforts and negotiations that led to the sale of the parties’ interests for a significant sum, subsequent to separation.
Otherwise, the introduction of such an issue at trial would unnecessarily prolong the hearing for little, if any, forensic purpose.
In the circumstances as discussed above, leave is not granted to the husband to rely upon the affidavit of Mr BH sworn 6 October 2020.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Foster. Associate:
Dated: 19 February 2021
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