Cornish & Cornish (No 2)
[2023] FedCFamC1F 158
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Cornish & Cornish (No 2) [2023] FedCFamC1F 158
File number: MLC 12589 of 2019 Judgment of: CARTER J Date of judgment: 17 March 2023 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – where parties seek an adjournment to extend time for an expert witness to value the properties – where the applicant objects to subpoenas issued by the respondent – where the subpoenas are set aside -
FAMILY LAW – FINANCIAL – where the husband seeks to adduce from an expert valuer which is opposed by the applicant
Legislation: Family Law Act 1975 (Cth) ss 4, 75
Family Law Rules 2004 (Cth) r 15.52
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 7.02, 7.08, 7.10, 7.11,
Cases cited: Cornish & Cornish (No. 2) [2020] FamCA 1090 Division: Division 1 First Instance Number of paragraphs: 61 Date of hearing: 14 March 2023 Place: Melbourne Counsel for the Applicant: Mr Christopher Dunlop Solicitor for the Applicant: Taussig Cherrie Fildes Solicitor for the First Respondent: Marsdens Law Group Second to Fourth Respondents: Litigant in person (did not participate) ORDERS
MLC 12589 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PEARCE AS LEGAL PERSONAL REPRESENTATIVE OF MS CORNISH
Applicant
AND: MR CORNISH
First Respondent
CC PTY LTD
Second Respondent
DD PTY LTD
Third RespondentMR E CORNISH
Fourth Respondent
order made by:
CARTER J
DATE OF ORDER:
17 March 2023
THE COURT ORDERS THAT:
1.The following subpoenas be set aside:
(a)subpoena to AL Pty Ltd dated 1 March 2023; and
(b)subpoena to XX Company (formerly known as YY Company) dated 1 March 2023.
2.The trial date of 3 April 2023 be vacated.
3.The matter be listed for final hearing on 16 October 2023 for four days.
4.The matter is otherwise adjourned for a further case management hearing on 5 June 2023 to commence at 10.00 am.
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 Cornish & Cornish has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUSTICE CARTER:
INTRODUCTION
The parties in this dispute are:
(a)the applicant, Ms Pearce (“the applicant”). She is the sister of, and the legal personal representative for, the late Ms Cornish, who was married to the first respondent; and
(b)the first respondent, Mr Cornish (“the husband”).
There was no appearance before me on 14 March 2023 by the second, third or fourth respondents, being two entities with which the husband is involved and the husband’s brother who is also involved in at least one of those entities. The husband’s brother has not played an active part in these proceedings to date.
The matter came before me on 14 March 2023 in relation to three applications:
(a)the applicant’s application for an adjournment of the final hearing, which is opposed by the husband;
(b)the applicant’s objections to three subpoenas issued by the husband; and
(c)the first respondent’s oral application to adduce evidence from the ZZ Group, as to the valuation of B Company. This was opposed by the applicant.
BACKGROUND AND PROCEDURAL HISTORY
The matter has a long and complex history. Relevantly, the husband and Ms Cornish separated on 15 October 2019. There is one child of that marriage, being Z born 2009.
Ms Cornish instituted proceedings on 7 November 2019.
Ms Cornish died in 2021. Her three siblings are the executors of her will. The applicant was substituted for Ms Cornish as the personal legal representative in 2022.
In relation to the parenting dispute, the parties in that were the husband and the maternal grandparents. Final orders were very recently made by consent pursuant to which the child will live with her maternal grandparents, who have sole parental responsibility for her. The orders further provided for the child to spend time and communicate with the father in accordance with her wishes. The family was to consult with Dr AB and one supervised visit was to be facilitated, should that be recommended by Dr AB.
In relation to the property proceedings, the husband and Ms Cornish operated an investment business, B Company, which provided investment advice. B Company is held by AC Pty Ltd as trustee for the AD Trust. The husband and Ms Cornish were unable to reach an agreement as to the value of B Company, and the entities associated with it. The asset pool also includes a number of properties some of which are registered in the names of associated entities, together with shares and superannuation entitlements.
The matter is listed for a final hearing to commence on 3 April 2023.
It is the applicant’s case that the husband has not complied with various court orders regarding the provision of material with the effect that this has caused significant delays in the finalisation of financial statements for the various entities in which the husband has an interest. In turn, the applicant says that has caused frustrations and delays in the provision of valuations of the entities. It is clear, for instance, there has been considerable difficulty in getting the valuation of B Company completed.
Earlier in these proceedings, orders were made by consent appointing Mr KK of AE Pty Ltd as the single expert to provide a valuation of the parties’ interests in B Company and any associated entity, at the equal cost of the parties. There were significant issues with the provision of information to Mr KK, and with the husband’s communications with him. Ultimately, Mr KK resigned as the single expert.
In those circumstances, on 14 December 2020, Bennett J dismissed the order for the appointment of a single expert valuer. An order was made pursuant to rule 15.52 (of the Family Law Rules 2004 (Cth), as was then in force) providing Ms Cornish with leave to file evidence from an appropriately qualified person as to the value of the parties’ interests in B Company.
In her Honour’s reasons she said at [93]:
The husband says (sic) has completely and finally ceased to operate the family business. He is now employed [in the financial industry]. The husband says, on that basis, there is no need for a valuation of [B Company.] The wife, on the other hand, seeks that she be able to adduce evidence of the value of [B Company.] She does not seek to hinder the husband from doing likewise. The husband is not agreeable to the wife obtaining a valuation of her own at her own expense. He says that if a valuation has to be done, it should be done by appropriately qualified person nominated by the president of the Institute of Chartered Accountants in Australia.
The parties previously agreed on a valuer, [Mr KK]. At paragraphs 7 to 14 of the wife’s affidavit prepared [in late] 2020, she chronicles various communications between the husband and the valuer, [Mr KK], which the wife says culminated in [Mr KK] resigning as a single expert in late 2020 […]. This part of the wife’s affidavit bears reading in its entirety. It does not reflect particularly well on the husband.
The husband’s material in response does not take issue with any of the matters to which the wife deposed, but raises his own concerns about [Mr KK].
I am satisfied that it would invidious position to be the single expert valuer of [B Company]. Accordingly, I will not accede to the husband’s application to appoint a single expert witness. The wife can adduce evidence herself. If the husband chooses to adduce evidence to challenge that of the wife, he may do so at his own expense and I will order accordingly.
On 26 March 2021, after a contested hearing, Williams J made orders permitting Ms Cornish to have leave to file evidence from an expert to provide a valuation of:
(a)CC Pty Ltd;
(b)DD Pty Ltd; and
(c)The L Trust.
There were, apparently, ongoing issues with obtaining information from the husband, and with the husband inappropriately contacting the valuer. On 13 April 2021, Williams J made orders restraining the husband from contacting the valuer appointed by Ms Cornish.
Provision of documents continued to be difficult. Orders were made by a Senior Judicial Registrar on 30 March 2022 for the tax returns of all entities and trusts to be lodged within 90 days (being on or before 30 June 2022) for the financial year ended 2021. However, that did not occur.
When the matter was listed before me in August 2022, the court was informed that the husband was in the process of completing the financial returns and they would be ready to be lodged in ‘a few weeks’.
I understand Mr AF of AG Pty Ltd had been instructed on behalf of the applicant to prepare the expert valuations.
I note that on 11 January 2023 the matter was again listed regarding the ongoing issue of discovery and the provision of information. The day before that hearing, I understand a large number of documents were provided to the applicant. The court was then informed that documents were continuing to be discovered – although late – and that there was little that remained to be provided. That included that the husband by then had provided his financial documents and those in relation to the various entities in which he was involved up to the end of the 2022 financial year. I understood as at January 2023 that only one group of documents – those in relation to Superannuation Fund 1 – remained outstanding.
In the circumstances the husband was given a further 28 days to produce those documents.
That did not occur within the stipulated time frame. Indeed the applicant says there are still documents and information that has not been produced, such that the valuation of the various entities has not yet been completed.
ADJOURNMENT APPLICATION
It is the applicant’s position that the trial must be adjourned in circumstances where the corporate entities have still not yet been valued.
In relation to the superannuation documents, I understood from the husband’s lawyer that there were issues obtaining those documents as a number of documents were quite historical, and it was therefore somewhat complicated to obtain the material. Additionally I was told there was an auditor involved, who delayed the provision of the documents. Those documents have now been provided.
Counsel for the applicant said that on 13 February 2023 Mr AF requested additional information to be provided by the husband. On 15 February 2023 the applicant’s solicitors then wrote to the husband with a list of further documents sought and setting out a number of enquiries seeking, for instance, explanations of various matter. There were more than 39 items requested.
It was asserted that the husband on 28 February 2023, only partially complied with providing the documents and the further information requested. I understand he advised the applicant’s solicitors that he needed to provide his accountant with funds that he did not have in order to procure the balance of the requested information.
The documents and explanations to the requests for information were then provided to Mr AF. Mr AF in turn advised the applicant’s solicitors on 7 March 2023 that he had read the documents provided, and the husband’s responses to his enquiries. Mr AF informed the applicant’s solicitors that he was still missing crucial information and accordingly he was unable to meaningfully progress with the valuation.
I was further informed that on 10 March 2023 a further tranche of documents was provided to the applicant’s solicitors, which will be forwarded to Mr AF. However, it is asserted that it remains unclear whether all information that Mr AF says is required to complete the valuations has been provided. Further, it was submitted that Mr AF will require four to six weeks after receipt of the final pieces of information before he can complete his valuation. That will mean that the valuation cannot be completed prior to the commencement of the trial if the matter is not adjourned.
As observed, in the circumstances, the applicant said the final hearing must be adjourned, so that the valuation can be completed, and then considered by the parties in a timely manner prior to the commencement of the trial.
The husband strongly opposed the trial being adjourned. He was critical of the applicant’s behaviour, which he says has caused difficulties with the valuation being completed on time. For instance, the husband’s lawyer noted that the request for additional documents and information was not made until 15 February 2023 – being some five weeks after the hearing in January 2023. It is apparent from that correspondence a number of additional documents were required. It included multiple questions regarding the operations of the various entities. The husband’s lawyer said his client had done all he could to provide that information as quickly as possible.
The husband further submitted that an adjournment, because the corporate entities had not been valued, was an unnecessary response given the makeup of the asset pool. His lawyer argued that real properties make up the vast bulk of the pool, and that the only trading entity was B Company, which was relatively worthless. I was told that in 2020, when the properties were last valued, the real estate was valued around $2.5 million, and that the additional assets and superannuation, exclusive of B Company, amounted to another $200,000 or so. Those properties are in the process of having updated valuations prepared, which it was expected would be completed within another week.
The husband’s lawyer asserted that in circumstances where the vast majority of assets are properties, and the valuation of B Company and the associated entities has not yet been completed, ought not be used to hold up the matter proceeding to a final hearing.
The difficulty with that submission is that without the valuations being completed by Mr AF, I do not know whether or not B Company is a substantial asset. Whilst the husband asserts that B Company is in financial distress and that its income has “tailed off”, that is not accepted by the applicant. It is quite apparent that the value of B Company is a hotly contested matter.
In circumstances where the valuation of that entity has caused considerable issues over the last few years, it seems to me it would be unreasonable to leave these proceedings listed to commence prior to the time by which the valuation is expected to have been completed.
In all the circumstances, it is clear to me that the valuations by Mr AF need to be completed well prior to the commencement of the hearing. The parties then will have the opportunity to consider the valuations, and seek clarification of it if appropriate. For that reason, the final hearing shall be vacated and the matter re-listed at a later date.
Further, I understand there are documents still to be produced under subpoena to AJ Limited. The husband objected to that subpoena. The objection was determined by a Senior Judicial Registrar, on 9 March 2023, who set aside the notice of objection and extended the time for compliance to 31 March 2023. I understand that the applicant asserts AJ Limited has been involved with B Company, although the extent of that involvement is unclear. The husband asserts there is nothing in his dealings with AJ Limited which will impact any valuations. If the applicant is correct, the documents to be produced may be relevant to the valuation of B Company and/or the AD Investment Trust. As indicated, those documents are to be produced by 31 March 2023, leaving little time for the documents to be inspected and considered by the applicant, and then by Mr AF before the current trial date.
The husband’s lawyer said the applicant had delayed in paying AJ Limited funds to provide documents which they had requested when documents were previously subpoenaed from them by the applicant. It was essentially put that the applicant’s failure to provide funds to AJ Limited had delayed the production of documents, and that the applicant’s delay ought not be used to derail the final hearing. It might be that there are aspects of the applicant’s conduct that has contributed to the trial needing to be adjourned. That does not, in my view, assist. The reality is that without those documents being produced and inspected, I do not know whether the husband or the applicant is correct regarding the impact of those documents on the pool.
This is another reason that supports the matter being adjourned.
Additionally, the husband wishes to adduce evidence from another expert. If he is given leave to do so, arrangements will need to be made for the experts to confer. According to the rules, that conference is to take place at least 28 days before the first day of trial. That timeframe clearly cannot be accommodated if the matter remains listed for 3 April 2023.
The husband also suggested that the trial could still proceed if he is allowed to adduce evidence from his own expert about the valuations, as his expert is able to produce a report very quickly. That is not a suitable solution, as the timeframe between when that valuation (if leave is granted) would be provided to the other party and the start date of the trial would not allow sufficient time to properly consider the contents of any valuation, or to seek clarification of the report as envisaged under the rules. Moreover, given the long standing dispute regarding the value of B Company in particular, I anticipate the applicant would still want to adduce evidence from her own expert as she has been permitted to do by earlier orders of this court, but which she says has not been possible due in large part to failures by the husband to provide documents in a timely fashion.
Lastly, a notation to the orders made on 26 August 2022 provided that the applicant and the husband were to attend mediation after the valuations had been completed, and by no later than 28 February 2023. I was not advised any mediation had been attempted. It seems to me that if the parties are serious about attempting to have sensible settlement discussions – as they should be – and so that they can genuinely endeavour to resolve the dispute, the valuations need to be completed and the parties can then attend a mediation.
In all the circumstances it is readily apparent that the matter cannot proceed on 3 April 2023 and must be adjourned.
SUBPOENA OBJECTIONS
The parties were able to reach an agreement in relation to an appropriate manner in which to deal with the subpoena issued to AK Pty Ltd on 1 March 2023, who have provided litigation funding to the applicant. Orders were made in relation to that subpoena and objection pursuant to which the documents produced are to be released to the applicant only at first instance. The applicant’s objection to the subpoena was adjourned to 31 March 2023 before a Senior Judicial Registrar. That will enable the applicant to consider the documents once they have been produced, and if appropriate, adduce evidence to support any submission that the documents produced (or at least some part of those documents) are privileged.
In relation to the subpoenas to YY Company and AL Pty Ltd (“AL Pty Ltd”) both issued on 1 March 2023, it was submitted by the applicant that the documents sought could have no relevance to any issue in dispute. Both YY Company and AL Pty Ltd were funds into which Ms Cornish made superannuation contributions. Both funds have determined to pay the death benefit to the maternal grandparents, to be held on trust for Z. It was submitted that the death benefit cannot be property within the definition and meaning as set out in s 4 of the Family Law 1975 (Cth) (“the Act”).
The husband’s lawyer said even if the death benefits have been paid, and accordingly the payments cannot be characterised as property, he said the documents sought remained relevant. The husband’s lawyer said that the information was still relevant in terms of an assessment of contributions globally, and also relevant in relation to s 75(2) factors of the Act. It was submitted that if there was a significant resource – being a substantial death benefit paid for the benefit of Z - that would be relevant to the needs that he has, and the obligations he has to support her.
I note that the test of relevance is wide. I need only be satisfied that there is a logical or rational connection between the evidence to be adduced, and a fact that is in issue. However, I do not agree that the amount of death benefits paid to the maternal grandparents who are not parties to these proceedings, with such funds to be held by them on trust of Z is relevant to determining contributions or needs between the husband and the estate.
In terms of assessing contributions I understand that the husband has been provided with the superannuation statements that show Ms Cornish’s contributions to and entitlements in those accumulation funds. I do not understand how the further documents sought would provide better information to the husband as to the contributions made by Ms Cornish to her superannuation entitlement than those statements already disclose.
In terms of the s 75(2) factors it seems to me that they can only be relevant in so far as they apply to the husband and not to the estate. I struggle to see how the s 75(2) considerations may be impacted by funds that have been paid for the benefit of Z. Logically, the only way the payment out of the death benefit monies could be relevant is if the existence of those monies reduced the obligations or responsibilities of the husband to provide support for the child. That is, the husband’s ‘needs’ would be reduced. I do not understand this to be his contention.
Accordingly, I will set aside those subpoenas.
EXPERT EVIDENCE
The husband wishes to adduce evidence from an expert valuer to value B Company. That is opposed by the applicant.
As already set out, the court previously appointed a single expert to value B Company. That order was set aside and Ms Cornish was permitted to adduce evidence from her own expert witness as to the valuation of the corporate entities.
Importantly, that means there is no order for the appointment of a single expert. Thus rule 7.08 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) – preventing a party from adducing evidence from another expert witness on the same issue without the court’s permission – has no application. It follows that the matters set out in rule 7.08(2) about which the court should be satisfied in order to exercise its discretion and permit another expert witness where there is already evidence from a single expert are not matters applicable to the extant matter.
Rather, the husband’s application is made pursuant to rules 7.10 and 7.11.
The husband has not complied with rule 7.11(1). There is no Application in a Proceeding seeking orders to that effect. Rather, an oral application was made on 14 March 2023. I note the husband’s affidavit filed on 13 March 2023 deals with most of the relevant matters as set out in rule 7.11(2).
The husband deposed he has instructed Mr AM (“Mr AM”), of ZZ Group to complete a valuation of B Company. He has set out Mr AM’s qualifications in conducting forensic accounting, and preparing business valuations for family law proceedings. He said Mr AM is able to complete a valuation within seven days. He advised the applicant’s solicitors of his application to have Mr AM prepare a valuation in November 2022. On 28 February 2023 he wrote to the applicant’s solicitors regarding the need for the valuers to confer.
The husband – and Mr AM – have not confirmed whether there is any previous connection between Mr AM and the husband.
Rule 7.11(3) sets out that in determining whether to permit the husband to rely on a valuation prepared by Mr AM, I can take into account:
(a) the purpose of this Part (see rule 7.02);
(b)the impact of the appointment of an expert witness on the costs of the proceeding;
(c) the likelihood of the appointment expediting or delaying the proceeding;
(d) the complexity of the issues in the proceeding;
(e)whether the evidence should be given by a single expert witness rather than an expert witness appointed by one party only;
(f)whether the expert witness has specialised knowledge, based on the person’s training, study or experience:
(i) relevant to the issue on which evidence is to be given; and
(ii) appropriate to the value, complexity and importance of the proceeding.
Rule 7.02 sets out the purpose of this part as:
(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 proceeding;
(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;
(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.
As indicated, a determination has previously been made that in the particular circumstances of this matter, it was inappropriate for a single expert to be appointed. At this stage, without the valuation of the applicant’s expert having been completed, it is difficult to determine whether there is, or is not merit in the husband’s application. It may be, that upon Mr AF completing his valuation the husband accepts the conclusions reached. If he does not, it seems most likely that the husband’s application pursuant to rule 7.11 would be successful. Indeed it might be a denial of natural justice if leave were not granted in circumstances where only one party is able to adduce evidence as to the value of an asset.
As already observed, I do not agree with the proposal advocated by the husband’s solicitor that the trial need not be delayed in circumstances where the husband says he is able to arrange a valuer to provide a completed report more quickly that the applicant’s expert. The order for the applicant to have their own valuer was made a considerable time ago. There have been significant delays in the completion of that valuation, some at least of which is the result of the husband’s failure to provide documents in a timely fashion.
It is apparent that this matter has taken up an inordinate amount of court time and resources. Fortunately, the parenting aspect of the dispute has been finalised. Regrettably, it seems to me that in order to ensure that the matter remains on track for the final hearing on 16 October 2023, the matter will require further case management. I will need to consider the husband’s application to adduce expert evidence pursuant to rule 7.11 at that time. In the event leave is so granted, arrangements will then need to be made for the expert witnesses to confer at least 28 days before they will be required to give their evidence. Consideration will also be given to the parties attending mediation.
In the circumstances I am accordingly listing the matter for a further case management hearing on 5 June 2023.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carter. Associate:
Dated: 17 March 2023
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