Falkner & Candle (No 2)
[2022] FedCFamC1F 609
Federal Circuit and Family Court of Australia
(DIVISION 1)
Falkner & Candle (No 2) [2022] FedCFamC1F 609
File number(s): PAC 623 of 2018 Judgment of: CAMPTON J Date of judgment: 22 August 2022 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Application for leave to adduce further expert forensic accounting evidence in circumstances where a single expert witness has been appointed pursuant to the Rules – Where the proposed further expert has the expertise to opine on matters of potential relevance to an important factual issue in these proceedings beyond the expertise of the single expert witness – Leave to adduce evidence granted. Legislation: Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ch 7, rr 7.02, 7.08, 7.11, 7.31
Cases cited: Salmon v Salmon [2022] FamCAFC 134 Division: Division 1 First Instance Number of paragraphs: 22 Date of hearing: 22 – 25 August 2022 Place: Parramatta Counsel for the Applicant: Mr Grew Solicitor for the Applicant: Coleman Greig Lawyers Counsel for the Respondent: Mr Taylor Solicitor for the Respondent: James Noble Law ORDERS
PAC 623 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS FALKNER
Applicant
AND: MR CANDLE
Respondent
order made by:
CAMPTON J
DATE OF ORDER:
23 August 2022
THE COURT ORDERS THAT:
1.That pursuant to r 7.11 of the Federal Circuit and Family Court of Australia(Family Law) Rules 2021 (Cth), the wife be granted leave to adduce expert forensic accounting evidence from Mr AM and may rely on that evidence as contained in Mr AM’s affidavit sworn and filed on 19 August 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 the pseudonym Candle & Falkner has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
CAMPTON J:
By way of an unopposed oral application, Ms Falkner (“the wife”) seeks leave to amend the relief in her Response to an Application in a Proceeding filed on 21 July 2022, so as to adduce and rely upon evidence of an expert forensic accounting nature of Mr AM as contained in his affidavit filed and sworn on 19 August 2022. In her Response to an Application in a Proceeding filed on 21 July 2022, she sought to rely on a report to be prepared by Mr AM which at that date had not been released. Mr AM’s affidavit filed 19 August 2022 annexes his report, which was dated 6 August 2022. Such leave is necessary in circumstances where Mr AM is not a single expert witness appointed pursuant to ch 7 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”). Mr Candle (“the husband”) opposes the wife’s application for leave.
By way of brief background, the parties commenced cohabitation in 2003, married in 2008 and finally separated in February 2017. In 2005, the parties incorporated a company C Pty Ltd (“C Pty Ltd”). That entity traded as F Company Suburb E during the course of their relationship.
The current litigation was commenced by way of the wife filing an Initiating Application on 15 February 2018 seeking orders for property adjustment pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). The parties engaged in a number of interlocutory hearings over the course of the litigation that was ultimately determined in the first instance by way of reasons and orders delivered on 29 April 2021 by Foster J (“the final orders”), subsequent to the parties engaging in three days of hearing in December 2020 and April 2021. Those orders provided for the wife to pay to the husband a specified sum of money, and for the husband to transfer to the wife all of his interests in C Pty Ltd subject to the wife providing him with indemnities.
A single forensic accounting expert, Mr Y, was engaged by the parties for the purposes of the trial before Foster J. He provided two reports as to the value of the parties’ interests in C Pty Ltd, the first dated 23 January 2019 and the second dated 1 April 2021.
The husband appealed from the final orders. For reasons delivered by the Full Court of this Court on 23 December 2021, the husband’s appeal was successful and the proceedings were remitted for hearing. The remitted proceedings are now listed before me for trial over four days commencing today, 22 August 2022.
Mr Y, the single forensic accounting expert, has prepared a further report as to the value of the wife’s interests in C Pty Ltd subsequent to the implementation of the final orders of Foster J. His updated report was dated 6 August 2022 and was annexed to his affidavit filed and sworn on 19 August 2022.
In addition to the contents of his updated report, Mr Y has attached to his affidavit a series of documents comprising specific questions put to him by each of the parties pursuant to the rules arising from the contents of his latest report, and as to other matters, and his responses to those questions.
The purpose of the Rules relating to expert evidence are expressed in r 7.02 as follows:
7.02 Purpose of Part 7.1
The purpose of this Part is as follows:
(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.
Where parties have engaged a single expert, r 7.08 prevents them from adducing evidence from another expert save for in limited circumstances set out in that rule, as follows:
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.
In a number of Full Court authorities, the purpose of r 7.08 has been described as avoiding a “battle of the experts” and the disproportionate cost in allowing evidence from multiple experts on the same subject matter in circumstances where the Rules direct that costs ought to be proportionate and reasonable (see, e.g. Salmon v Salmon [2022] FamCAFC 134 at [24]). A further underlying purpose of the rule is to ensure on party does not achieve an advantage over another by occasioning what is often colloquially identified as “litigating them into the ground”.
It is important to keep in mind that the application of what might be described as the “permission rule” ought not to be read down in circumstances where there are genuine issues in the proceedings that attract the attention of probative expert evidence.
In my view, r 7.08 must not be applied in a way that results in what may be a significant issue in the proceedings being foreclosed (at least on a practical level) from effective challenge, or in a way that would compromise the interest of justice in preventing relevant evidence, or potentially relevant evidence, from being placed before the Court.
It is submitted by the wife that in each of his three reports, the single expert Mr Y has not expressed an opinion as to the taxation implications that would be a direct function of the sale of the wife’s shareholding in C Pty Ltd, or the sale of either an active trading portion of that corporation, or any of its passive income producing assets.
The construction of these proceedings has very much altered from those presented to Foster J for the purposes of the prior s 79 determination.
In the proceedings as presently constructed, it may be that in order to achieve the s 79 mandate, a disposal of the wife’s shareholdings in C Pty Ltd or any of the assets of that entity will be required. So much is foreshadowed in the amended relief sought by each of the parties before me.
The husband contends that the wife should not receive the indulgence of relying on Mr AM’s evidence in the circumstances. It is broadly his submission that any aspect of the Division 7A loans entered by the wife with C Pty Ltd was a function of her own actions and ought to have been in her mind as part of her conduct of that enterprise. He further submits that there is a degree of speculation as to whether the corporation’s shareholding would be sold, or any of its assets, and as to the validity of the Division 7A loan accounts as asserted by the wife. In those circumstances, the evidence of Mr AM may have no apparent relevance. It is his submission that the wife’s application for leave to adduce and rely upon Mr AM’s evidence is premature and should be delayed until the wife’s cross-examination is complete, by which time she may have pinned her colours to the mast in respect of her final proposal as to how a just and equitable division of property may be effected. I do not accept the gravamen of those submissions.
To my mind, it is important that the parties have a fair understanding as to the likely evidence that will be placed before the Court at the commencement of the trial. In the circumstances, at this time, it cannot be said that Mr AM’s report has no apparent relevance.
It is submitted on behalf of the wife and I accept that Mr Y when questioned as to the possible tax consequence of the range of potential orders that could be made in the s 79 proceedings, responded firstly by indicating that the questions were outside the scope of his engagement, and secondly and more importantly, that they were outside the scope of his expertise.
In circumstances where Mr AM qualifies himself in his affidavit to provide expert opinion evidence as to the taxation consequences insofar as they relate to Division 7A loan accounts, the payment of dividends, and capital gains tax consequences on disposal of the C Pty Ltd shareholding or portions of the assets of C Pty Ltd, I do not accept that Mr AM’s evidence offends either the purpose of the Rules relating to expert evidence or that it does not fit with the permission identified in the Rules.
In the circumstances I am satisfied that the evidence of Mr AM has potential relevance to an important factual issue in these proceedings, and that Mr AM has expertise to opine on matters not known to Mr Y. Hence, I am satisfied that Mr AM’s evidence may be necessary for determining the issues identified in these reasons. I am further satisfied that a special reason exists for adducing evidence from another forensic accounting expert other than Mr Y for the purposes of r 7.08.
In circumstances of Mr Y advising in correspondence to the parties that he does not have the expertise to engage with the matters identified in Mr AM’s evidence, I find there would be no utility in marshalling a mandatory conference between the experts pursuant to r 7.31.
For the reasons above, I make orders as set out at the forefront of this judgment.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 25 August 2022
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