Daugherty & Long
[2022] FedCFamC1F 478
•6 July 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Daugherty & Long [2022] FedCFamC1F 478
File number(s): MLC 3431 of 2021 Judgment of: WILSON J Date of judgment: 6 July 2022 Catchwords: FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – PRACTICE & PROCEDURE – application to further amend response – by reason of further amendment the respondent is forced to apply to adjourn the trial – leave to further amend granted – trial stood over to 22 July 2022 – cost consequences enlivened – costs thrown away ordered. Legislation: Family Law Act 1975 (Cth) s 117(2A)
Income Tax Assessment Act 1939 (Cth) Division 7A
Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Other Federal Circuit and Family Court of Australia, Practice Direction: Major Complex Financial Proceedings List (FAM-MCFP), 30 September 2021 Division: Division 1 First Instance Number of paragraphs: 20 Date of hearing: 4 July 2022 Place: Melbourne Counsel for the Applicant: Mr G. Dickson QC with Mr A. Barbyannis Solicitor for the Applicant: Coote Family Lawyers Counsel for the Respondent: Ms M. Smallwood SC with Mr C. Dunlop Solicitor for the Respondent: Sage Family Lawyers ORDERS
MLC 3431 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS DAUGHERTY
Applicant
AND: MR LONG
Respondent
order made by:
WILSON J
DATE OF ORDER:
4 JULY 2022
THE COURT ORDERS THAT:
1.The respondent has leave to further amend the response filed 18 March 2022 in the form handed up on 4 July 2022.
2.The further hearing of this proceeding is adjourned, marked part heard to 9:00am on 22 July 2022.
3.The husband must pay the wife’s costs thrown away on the first day of the trial.
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 Daugherty & Long is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
WILSON J
The Major Complex Financial Proceedings List (“MCFL”) enjoys its current success for two main reasons. The first is the timely manner in which steps ordered to be done are in fact done. The second is the diligence exhibited by practitioners regularly practising in the list in identifying and proving the real issues in controversy in the litigation.
Lamentably, in this litigation the husband did not undertake the tasks required of him in the MCFPL to the standard expected of him with the consequence that on the first day of the trial of this proceeding, through his Senior Counsel he has been forced to apply to amend his already amended response and, by reason of the issues now raised, he has been forced to apply to adjourn the trial.
After a day’s worth of debate, at 4:15pm on 4 July 2022 I made orders granting leave to the husband to amend, indicating that I would provide reasons on 5 July 2022. These are my reasons.
Before addressing the specific circumstances of this application, it is utile to recognise that while the MCFPL is a judge-managed list,[1] when matters relating to amendments or adjournments are in contention, the expeditious dispatch of the business in a judge-managed list must be subordinated to the interests of justice, as the High Court held in Aon Risk Services Australia Ltd v Australian National University.[2]
[1] Federal Circuit and Family Court of Australia, Practice Direction: Major Complex Financial Proceedings List (FAM-MCFP), 30 September 2021, para 5.7
[2] (2009) 239 CLR 175.
Let me now go to the relevant issues to hand in this application.
This proceeding was entered in the MCFPL pursuant to my orders made 2 February 2022. Trial directions were ordered by consent, in accordance with usual procedures. One particular order required the parties to provide an agreed letter of instruction to their appointed single expert by 7 April 2022. For reasons not readily comprehensible, an email intended for the single expert was prepared with a sufficiently large number of attachments that it rendered the email incapable of transmission. The email was not received by the single expert until almost 30 days thereafter. Precisely why no one detected the transmission failure, precisely why no one followed up the single expert to confirm receipt of the instructions and attachments, precisely why a hard-copy was not posted and precisely why no one enquired whether the single expert had all that he needed to commence his task was not explained, for almost 30 days. I find that utterly unacceptable and wholly antithetical to the manner in which litigation in this list should be conducted.
Mr Dickson QC, who appeared with Mr Barbayannis of counsel for the wife, submitted that the delays with the instruction of the single expert were overcome without serious impact to the critical path of trial preparation. However, it was common ground that the single expert has been requested to provide responses to questions posed arising from his report and that the time for the provision of those issues of clarification (even though the wife disputed their characterisation as “clarification” matters) will not expire until later this month.
Further, for reasons unexplained, the very same single expert is presently vacationing out of the State of Victoria.
Complications associated with the single expert assumed a secondary importance, however. The mainstay of the husband’s adjournment application was premised on his having leave to further amend his response so as to render it consistent with his case outline. On behalf of the wife, Mr Dickson QC opposed the amendment, initially contending, correctly in my view, that as with any proposed amendment, the precise form of the amendment should be formulated to enable careful consideration to be given to the precise nature and extent of the amendments sought.
At 12:30pm or thereabouts I stood the matter down to enable Ms Smallwood SC who appeared with Mr Dunlop of counsel for the husband to formulate the husband’s proposed further amended response. This was set against a backdrop where consent orders had been made by me on 10 June 2022 on the hearing of a compliance check at which time the solicitor for the husband indicated that he proposed to file an application for the adduction of evidence from an adversarial expert by 17 June 2022. That application was duly filed and it was returned on the first day of the trial.
By way of overview, Ms Smallwood SC contended that the proposed further amended response on which the husband sought leave to rely addressed three issues namely –
(a)issues pertaining to liability for imposts due pursuant to Division 7A of the Income Tax Assessment Act 1939 (Cth) (“Div 7A”);
(b)issues relating to valuations taking into account commercial risks; and
(c)issues relating to valuations factoring in discounting for minority shareholding.
Mr E is proposed to address the first and second of those issues whereas Mr C is proposed to address the third issue.
Those three issues were raised in the proposed further amended response.
In addition, the husband adopted a different position in the proposed further amended response compared with the position he adopted in his amended response in relation to four parcels of real estate. In his amended response the husband sought orders for the sale of all real estate whereas, subject to having a complete understanding of his taxation liability, the husband now asserts an entitlement to all four parcels of real estate. That enlivened a debate with Ms Smallwood SC about why the evidence about the husband’s potential exposure to Div 7A liability had not been the subject of careful attention until now. Ms Smallwood SC, quite properly, informed me that she was unable to say as she had only recently come into this matter. Naturally, I accept her statement. However, precisely why other advisors in the husband’s camp were not alive to that issue until now beggars belief.
The husband’s earlier proposal to sell all real property was recorded in paragraphs 6, 7, 8 and 9 of his amended response. In his proposed further amended response, he proposes the sale of certain real estate then to apply the proceeds of sale to meet capital gains tax and in other instances to deposit funds into a controlled moneys account. Paragraphs 21-24 were said to be new.
Ms Smallwood SC submitted that the net effect of the amendments proposed, in monetary terms, was $17 million. On any view, that is a substantial amount.
Having regard to the sums involved in the proposed amendments and the husband’s statement that he wishes to amend, the question became whether in the interests of justice this case should proceed on the husband’s version of orders sought in his amended response or whether he should be permitted to advance a case in accordance with his proposed further amended response. It was true that the wife informed me that she wanted to proceed and was ready, willing and able to proceed on the case recorded in the husband’s amended response. But the case he wishes to advance at trial is the one recorded in his further amended response. Should he have leave, at this very late stage to alter his case? Will the wife be prejudiced if leave is granted? Will costs be an adequate remedy if leave is granted? Will justice be served if leave is refused?
In my view, the explanation proffered by the husband for his late change of course is less than detailed. That said, having regard to the amount in issue by the change of the husband’s position ($17 million) an order refusing leave to amend has the potential to work a serious injustice. In addition, any hardship occasioned to the wife by the grant of the adjournment sought will be ameliorated as I propose to list this proceeding for further hearing on 22 July 2022, once Mr D has provided the parties with the clarification the husband seeks to Mr D’s report. The case will not go into orbit.
It is premature to canvass the further evidence that the husband wishes to adduce. In debate, Ms Smallwood SC on behalf of the husband volunteered that Mr B could file and serve additional material on the Div 7A issues as well as material on commercial risks by 18 July 2022 whereas Mr C could provide evidence by 29 July 2022 concerning discounting in relation to minority shareholding. To my mind, the sequence of events to unfold should be—
(a)leave should first be granted to the husband to file and serve his further amended response as handed to me on 4 July 2022;
(b)Mr D must then provide his clarification to specific questions put by the husband’s legal representatives; and
(c)the further hearing of the trial of this proceeding should be adjourned to 22 July 2022, marked part heard, to canvass whether any, and if so which, further evidence is to be adduced as well as the resumption date of the trial.
Costs thrown away of the first day on 4 July 2022 must be paid by the husband. In my view, the manner in which this amendment application came about was wholly antithetical to the way litigation in the MCFPL should be conducted. A basis has thereby been enlivened as to one of the provisions of s 117(2A) for an order to be made for costs thrown away under s 117(2).
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 6 July 2022
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