Faraday & McKenzie

FAMILY COURT OF AUSTRALIA

FARADAY & MCKENZIE

[2009] FamCA 775

FAMILY LAW – COSTS – Application for Costs - costs on a client/own solicitor basis - conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters - engaging in unnecessary litigation - failure of the Husband to comply with orders - the litigation was protracted with very few, if any, concessions – appointment of an adversarial expert when a joint single expert had already been agreed – evidence of joint expert preferred over adversarial expert - order pursuant to r 19.18(10)(a) of the Family Law Rules – Husband to pay the Wife costs - costs of this Costs Application - Wife has established justifying circumstances - order pursuant to r 19.18(10)(a) of the Family Law Rules that the Husband pay to the Wife

Family Law Act 1975 (Cth)

Family Law Rules 2004

Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania) v Fish and Another (2005) 33 Fam LR 123

APPLICANT:

Ms Faraday

RESPONDENT:

Mr McKenzie

FILE NUMBER:

SYF

3543

1999

DATE DELIVERED:

27 August 2009

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Sydney

JUDGMENT OF:

O'Ryan J

HEARING DATE:

N/A

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Swaab Attorneys

SOLICITOR FOR THE RESPONDENT:

Paul & Paul Lawyers

Orders

The Husband pay the Wife’s costs of an incidental to the proceedings concluded by final order made on 21 December 2007 which costs are assessed in the sum of $3,000.
The Husband pay to the Wife the costs referred to in order 1 hereof by 4:00 pm on 16 October 2009.
The Husband pay the Wife’s costs of an incidental to the costs proceedings concluded by order 1 hereof which costs are assessed in the sum of $1,000.
The Husband pay to the Wife the costs referred to in order 3 hereof by 4:00 pm on 16 October 2009.

IT IS NOTED that publication of this judgment under the pseudonym Faraday & McKenzie is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: SYF 3543 of 1999

MS FARADAY

Applicant

And

MR MCKENZIE

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

Before me for hearing is an application for costs. The Applicant is Ms Faraday (“the Wife”). The Respondent is Mr McKenzie (“the Husband”).
On 18 January 2008 an Application in a Case was filed on behalf of the Wife in which she sought the following orders:
1.An order pursuant to the provisions of s 117(2) that:
1.1    The respondent pay the costs of the applicant, in respect of the matters more particularly set out in order 2 hereunder.
1.2    That such costs to be determined on a lawyer/own client basis.
1.3    That in default of agreement between the parties within 21 days of the date of these orders as to the quantum of such costs, that the costs of the applicant to be paid by the respondent pursuant to this order be assessed as provided for in Chapter 19 of the Rules.
2.That the costs payable by the respondent pursuant to order 1 above, include the following issues.
2.1    The additional fees and disbursements paid or payable by the applicant to Mr [B] as a consequence of the orders of Moore J of 7 September 2006.
2.2    The costs, fees, counsel fees and disbursements incurred by the applicant of and incidental to the determination by the Court, of the following issues or evidence, that is to say.
2.1.1The further appointment of Mr [B] of 25 May 2006 and questions put to him on behalf of the respondent.
2.1.2The report of Mr [L] of 26 June 2006.
2.1.3The application of the respondent for leave pursuant to rule 15.49 to rely upon his own expert witness (Mr L).
2.1.4The alleged shareholder agreement in respect of the Husband’s shares in the company [D Company] Pty Ltd (D Company).
2.1.5The correct discount to be applied to the value of the shareholding of the respondent in [D Company].
2.1.6Matters arising from the joint conference and statement between Mr [B] and Mr [L].
2.1.7The “factual assumptions” that were put to Mr [L], being:
2.1.7.1That the market value of the real estate owned by [D Company] had fallen by 12.5 per cent.
2.1.7.2That the debt to [V McKenzie] of $1,285,885 was forgiven.
2.1.7.3That there was an enforceable shareholder agreement that [V McKenzie] and his Wife could continue to occupy the farm and that same would not be sold.
2.1.8The further submissions and the preparation of the further submissions in relation to the value of [D Company] after the conclusion of the hearing of 7 March 2007.
2.1.9The listing of the matter and appearances on the following:
2.1.9.16 and 7 March 2007; and
2.1.9.216 April 2007;
2.1.10The quantum of the discount for minority shareholdings.
3.     That the respondent provide security for the payment of the costs of the applicant pursuant to these orders in such a manner and upon such terms as the Court may determine.
4.     That the respondent pay the costs of the applicant of this application on a lawyer/own client basis.
On 19 March 2008 a Response to an Application in a Case was filed on behalf of the Husband and he sought that the application of the Wife be dismissed.
The proceedings arise as a result of an order for property settlement made by me on 21 December 2007.
The order sought by the Husband in his Application for Final Orders was that he pay the Wife a lump sum and, inter alia, that the Wife transfer her interest in the former matrimonial home to him. On behalf of the Wife it was submitted that in those circumstances the Husband clearly had a vested interest in reducing the net value of the assets.
A significant issue in the proceedings was the value of the Husband’s shares in S Pty Ltd. The parties agreed to appoint Mr W as a Single Expert to value the shares. However the Husband was dissatisfied with the outcome and he then sought permission to call evidence from his own expert. On 7 September 2006, Moore J heard an Application for Review filed by the Husband and gave the Husband leave pursuant to r 15.49 of the Family Law Rules2004 to rely upon an adversarial expert being Mr L. Her Honour reserved the costs associated with the adducing of the evidence of Mr L and also reserved the costs of that application.
The Husband asserted that the net value of the assets was $2,496,031 whilst the Wife said that the net value was $3,037,152. Significantly the Husband said that the value of his 14 per cent interest in D Company Pty Ltd was $150,000 notwithstanding that a Single Expert had found that the value was $504,000. The Husband holds 10,000 ordinary shares being 14.28 per cent of the issued capital.
The Wife submitted that I can infer that the Husband had determined that the way to achieve a reduction in the value of the assets, and in particular the value of the assets that he was seeking to retain, was to “attack” the evidence of the Single Expert. He had consented to the appointment of Mr W as the Single Expert. The evidence of his adversarial witness Mr L “challenged” the evidence of the Single Expert.
The Husband submitted that the application seeks an order for indemnity costs confined to certain periods of time and/or events. The Wife submitted that the orders sought are not for indemnity costs. The orders sought are that the costs be taxed on the basis of solicitor/own client costs which is an entirely different basis for assessment of costs to indemnity costs.
The Wife submitted that the specific areas in respect of which a costs order is sought are detailed in the orders in the Application. The Wife seeks an order for payment of her costs on a client/own solicitor basis in respect of costs incurred by her and in seeking that order, she highlights the special circumstances of this case being:
·her additional costs arising as a consequence of the order that the Husband be permitted to rely upon an adversarial witness where the Court had already, by consent, appointed a Single Expert witness and where the evidence of the Single Expert was preferred to the evidence of the adversarial witness of the Husband;
·the costs occasioned as a consequence of the Husband seeking to adduce evidence and/or have the Court make findings in respect of matters arising from the additional matters that he asked the adversarial witness to deal with but in respect of which he was unsuccessful on the hearing;
·her other costs incurred as a consequence of the appointment of the adversarial witness;
·additional costs arising from the failure of the Husband to comply with directions relevant to this issue and delays occasioned by the Husband seeking to rely upon the adversarial witness and/or adduce evidence on that issue and costs of the Wife incurred as a consequence of these delays;
·the failure of the Husband to comply with directions of the Court to file affidavits and the late filing of the two affidavits of his two brothers on this issue.
The Wife is seeking costs on a solicitor/own client basis and she contended that on that basis her costs in terms of tax invoices rendered to her will be not less than $30,000. It was submitted that the sum of $30,000 is an estimate only. However it is a genuine estimate to show that the Wife's costs incurred as a consequence of the retention by the Husband of an adversarial witness resulted in the Wife incurring additional costs and, inter alia, is based on approximately one day of the hearing, at which she was represented by Senior Counsel, devoted to this issue and the additional costs of the preparation of her case, on this issue by both her solicitor and her counsel.
On 18 January 2008 an affidavit was sworn by Gregory Paul Parker on behalf of the Wife. Mr Parker attached to his affidavit a copy of a costs agreement entered into by the Wife with her solicitors. The Wife also swore an affidavit on 2 April 2008.
On 5 March 2008 I made the following orders;
1.The Husband file and serve by 4 pm on 19 March 2008 a response together with any affidavit in support of that response upon which he would seek to rely.
2.The hearing thereafter proceed by written submissions.
3.The Wife file and serve by 4 pm on 2 April 2008 written submissions in support of her application.
4.The Wife file and serve by 4 pm on 2 April 2008 any affidavits on which she would seek to rely in answer to the proposed affidavits of the Husband.
5.The Husband file and serve by 4 pm on 18 April 2008 written submissions in support of his response.
6.The Wife file and serve by 4 pm on 2 May 2008 written submissions in answer.
The Husband swore an affidavit on 19 March 2008.
On 3 April 2008 extensive written submissions were filed on behalf of the Wife. On 22 April 2008 extensive written submissions were filed on behalf of the Husband. However the Husband also filed 26 documents including a copy of my reasons of 21 December 2007. This material was extensive. On 2 May 2008 written submissions were filed on behalf of the Wife in reply to the submissions on behalf of the Husband.
The delay by me in the pronouncement of judgment and delivery of reasons is inordinate and for that I apologise to the parties. However in the circumstances of this case the delay has not in any way hindered my ability to deal with the matter and bring it to a conclusion. It required me to consider what was in my reasons in relation to the property settlement order and the written material that was relied upon. It was not a particularly difficult application although it raised for consideration an important issue in relation to costs incurred in agitating an issue of value.

BACKGROUND

On 21 December 2007 I made the following order pursuant to s 79 of the Family Law Act 1975 (Cth):
1.     By 4.00 pm on 23 February 2008 the Wife do all acts and things and execute all deeds, documents, instruments and writings as may be necessary to transfer to the Husband the whole of her right, title and interest in and to the property situate at and known as [C property] in the State of New South Wales being the land in Folio Identifier […].
2.     By 4.00 pm on 23 February 2008 and contemporaneous with the transfer in Order 1 hereof the Husband pay to the Wife the sum of $1,092,259.
3. In the event that the Husband fails to comply with Order 2 hereof by the due date then the Husband also pay to the Wife interest on the sum outstanding and otherwise due to be paid by the Husband in accordance with Order 2 hereof at the rate prescribed in the Family Law Rules on such amount calculated as and from the date of the Husband’s default in compliance with Order 2 hereof.
4.     By 4.00 pm on 23 February 2008 the Husband do all acts and things, execute all deeds, documents, instruments and writings and pay all moneys necessary to discharge the mortgage secured on the title of [C property] and thereafter do all acts and things, execute all deeds, documents, instruments and writings and pay all moneys necessary to indemnify and keep indemnified the Wife against all claims, actions, suits or demands that may be made against the Wife in relation to the mortgage.
5.     If the Husband fails or neglects to comply with Orders 2 and or 4 hereof:
5.1The Husband and the Wife forthwith do all acts and things and execute all deeds, documents, instruments and writings necessary to sell [C property] by private treaty at the earliest possible date and in particular:
5.1.1Instruct solicitors within 24 hours of nomination by the Wife to prepare a contract for sale.
5.1.2List the property with a real estate agent within 24 hours of nomination by the Wife for the sale of the property at the earliest possible date.
5.1.3Execute all documents requested by the agent relating to the sale.
5.1.4Sell the property if a genuine bona fide offer is received for a sum greater than or equal to $1,200,000.
5.1.5Instruct the agent to recommend a marketing programme and to accept and act in accordance with the agent’s marketing recommendation for the sale.
5.1.6Execute a contract for sale.
5.1.7Co-operate in every way with the agent in relation to the sale.
5.1.8Execute all other documents necessary to complete the sale.
5.2    From the proceeds of the sale of [C property] the Husband and the Wife do all acts and things and execute all deeds, documents, instruments and writings necessary to cause the proceeds of sale to be paid in the following manner and priority:
5.2.1In payment of the agent’s commission and expenses (if any) due on the sale.
5.2.2In payment of the legal costs and disbursements of the sale.
5.2.3In payment of the amount required to discharge the mortgage.
5.2.4In payment to the Wife of the sum remaining pursuant to Order 2 hereof together with interest calculated in accordance with Order 3 hereof.
5.2.5In payment of the Wife’s costs and disbursements on an indemnity basis incurred as a consequence of the Husband’s failure or neglect to comply with any obligation imposed pursuant to these orders.
5.3    In the event that there remains a shortfall in respect of the amount due to the Wife pursuant to Order 2 hereof and interest accruing thereon pursuant to Order 3 hereof following the sale, that the Husband do all acts and things and execute all deeds, documents, instruments and writings necessary to transfer to the Wife all of his right, title and interest in National Australia Bank shares standing in his sole name to the value of the sum outstanding.
6. A base amount of $250,000 be allocated as required by s 90MT(4) of the Family Law Act1975 (Cth) to the Wife out of the Husband’s member account in the [K] Superannuation Fund.
7.     The Husband and the Wife do all acts and things and execute all deeds, documents, instruments and writings necessary to satisfy Order 6 hereof by transferring the base amount to the Wife’s member account in the [K] Superannuation Fund and by transferring the balance of the Wife’s member account in the said Fund to a complying superannuation fund nominated by the Wife.
8. In accordance with s 90MT(1)(a) of the Family Law Act the Wife is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation Regulations) 2001 using the base amount allocated in Order 6 hereof and the Husband’s entitlement in the [K] Superannuation Fund is correspondingly reduced.
9.     The operative time for the orders made in relation to the parties superannuation interests shall be the date four days from the date of these orders.
10.    Subject to the trustee of the [K] Superannuation Fund giving effect to the request by the Wife to rollover or transfer the Wife’s interest out of the [K] Superannuation Fund at the expense of the Husband the Wife do all acts and things and execute all deeds, documents, instruments and writings necessary to:
10.1Transfer to the Husband her shares in [K] Pty Limited.
10.2Resign as a member of the [K] Superannuation Fund.
11.    Contemporaneously with the Wife’s compliance with Order 10 hereof the Husband do all acts and things, execute all deeds, documents, instruments and writings and pay all moneys necessary to indemnify and keep indemnified the Wife against all claims, actions, suits or demands that may be made against the Wife in relation to [K] Pty Limited and/or the [K] Superannuation Fund.
12     The Husband do all acts and things, execute all documents and writings and pay all moneys necessary to indemnify and keep indemnified the Wife against all claims, actions, suits or demands that may be made against the Wife in relation to:
12.1 [D Company] Pty Limited.
12.2[K] Superannuation Fund.
12.3the Wife’s directorship and/or shareholding of [K] Pty Limited and/or membership of the [K] Superannuation Fund.
12.4 [K] Pty Limited as trustee of the [McKenzie] Family Trust.
13.    By 4.00 pm on 31 December 2007 the Husband make available to the Wife for her collection:
13.1The framed photographs of the Cremorne Point and Mosman areas which were hanging on the walls of the main hallway of the [C] property on 25 August 2004, and
13.2Three large paintings of the Flinders Rangers in Adelaide that were hanging on the walls of the main hallway of the [C] property on 25 August 2004.
14.Pending the Husband’s compliance with Order 2 hereof, the Husband do all acts and things, execute all deeds, documents, instruments and writings and pay all moneys necessary to:
14.1 Pay all outgoings in respect of [C] property including all rates, taxes, charges, insurance and expenses in relation to repairs and improvements, arrears relating to the mortgage and other sums due or accruing in respect of this property.
14.2Maintain [C property] in a clean, tidy and tenantable condition, fair wear and tear excepted.
14.3Not deal with his interest in National Australia Bank shares standing in his sole name.
15.The Wife and the Husband shall be solely entitled to the exclusion to all other real and personal property of whatever nature and kind in the possession, control or the name of such party as at the date of this order other than the items of property referred to in the preceding orders.
16.In the event that in any of the financial years ended 30 June 2008 to 30 June 2010 inclusive the Husband sold as an undivided lot as it is presently held the property called “[B property]” then the Husband do all acts and things and execute all deeds, documents, instruments and writings necessary to diligently lodge his personal income tax return for the financial year in which the property is sold and to obtain from the Australian Tax Office an assessment of his liability for tax for the relevant financial year ended and forthwith upon receipt of the assessment provide to the Wife a copy of the assessment together with a copy of the tax return and also a calculation certified by his accountant as to the amount of the assessable tax that was referable to the inclusion in the Husband’s assessable income of the taxable capital gain made from the sale of the property.
17.Within 28 days of receipt by the Wife from the Husband of the documents in Order 16 hereof the Wife pay direct to the Husband an amount equal to one half of that portion of the assessable tax of the Husband for the relevant financial year that represents the capital gains tax only in relation to the taxable capital gain from the sale of the property called “[B property]”.
18.In the event that either party refuses or neglects to execute any deed, document or instrument necessary to give effect to all and any of these orders, then the Registrar of the Court be appointed pursuant to s 106A of the Family Law Act to execute such deed, document or instrument in the name of the said party and do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such deed, document or instrument and upon the Registrar being provided with verification of such refusal or failure by way of affidavit.

In the affidavits and submissions a great deal of the history of the proceedings was referred to in respect of which I had some difficulty understanding the relevance. However that comes as no surprise to me.
On 7 February 2005 a Trial Notice was issued and orders made appointing a Pre-Trial Conference for 9 August 2005 and that affidavits be filed. At that time the Husband had not raised as an issue the matters to be dealt with by the adversarial witness and nor did he seek to rely upon evidence of his two brothers.
On 15 June 2005 Judicial Registrar Johnson made orders in relation to:-
1.The appointment of Mr W as the single expert accountant (replacing Mr K).
2.The Husband selling National Australia Bank shares in payment of the costs of the experts appointed on 18 October 2004.
3.The documents to be included in the brief to the experts.
4.The Husband’s application for appointment of a recruitment consultant as Court expert be dismissed.
The Judicial Registrar noted that the Wife may not wish to present herself for an interview with any expert and that the Husband have leave to rely at the hearing upon the evidence of an expert being a consultant to a recruitment company that may be selected by the Husband’s solicitors as to the income earning capacity of the Wife.
In summary, on 15 June 2005 an order was made by consent for the appointment of Mr W as the Single Expert (in lieu of an earlier order on 18 October 2004 appointing Mr K). Mr W was nominated by the Husband (although he had originally been proposed by the Wife). On behalf of the Wife it was submitted that the Husband, at the time of the application for the appointment of a Single Expert, should have made an application for the appointment of an adversarial witness (instead of a Single Expert). Alternatively he should have requested that some of the issues that he had the adversarial witness direct his evidence to, such as the existence of a shareholder agreement and alleged decrease in the value of the relevant real estate be included in the letter of instructions to the Single Expert.
The Husband submitted that given the confines of the application for costs, the correct commencement point is the engagement of the Single Expert Mr W. His appointment was as a consequence of the order made on 15 June 2005. On behalf of the Wife it was submitted that the “correct commencement point” was not on 15 June 2005 but after 7 September 2006 being the date of the orders the Husband obtained pursuant to r 15.49 of the Family Law Rules. The costs application of the Wife only seeks those costs that date from 7 September 2006.
In any event, consistent with the order of 15 June 2005, a joint letter of instruction was forwarded to Mr W on 22 June 2005. A direction was made for the Husband to dispose of shares in payment of the costs of the experts.
At the time of the appointment of Mr W, neither of the parties had filed their evidence. Neither of the parties had complied with earlier directions in relation to the filing of affidavits.
On 24 June 2005 Mr W acknowledged the instructions to act as a Single Expert. It was submitted on behalf of the Wife that these matters have no relevance to the adversarial witness or issues that the Husband sought to have his adversarial witness address.
On 30 June 2005 the Husband’s Solicitors confirmed with Mr W that they would arrange for the financial statements to be completed with D Company Pty Ltd.
On 28 July 2005 Mr W raised issue with a document entitled “History” prepared by the Wife’s solicitors and referred to in the letter of instruction.
On 9 August 2005 orders were made, inter alia, that the matter be listed in a defaulter’s list at 9:30 am on 30 September 2005 and that the parties file and serve affidavits by 9 September 2005. There was a failure by both parties to comply with directions in respect of the filing of primary affidavits
On 26 August 2005 Mr W advised that his firm was awaiting valuations of the real estate associated with D Company Pty Ltd.
On 29 August 2005 the Husband’s solicitors wrote to Mr W enclosing a valuation of real estate.
On 27 September 2005 Mr W raised various issues including the loan of the Directors of D Company Pty Ltd and other associated matters.
On 29 September 2005 the Husband’s solicitors wrote to Mr W enclosing a copy of a letter from CDA Mr N with supporting documents answering matters raised.
On 30 September 2005 the matter was before a Registrar. The parties were directed to file and serve an Application in a Case relating to expert issues within seven days with the matter being fixed before the Registrar on 3 November 2005. The issues related to the contents of the report by Mr H, Valuer, of a rural property called “B property”, who proposed in his report of August 2005 that the Husband as registered proprietor of the property apply to the Regional Council for clarification in relation to the dwelling entitlements upon that land.
On 4 October 2005 Mr W wrote to the parties’ solicitors seeking additional information. On 10 October 2005 the Husband’s solicitors wrote to Mr W regarding issues raised.
On 12 October 2005 an Application in a Case was filed by the Wife and she sought orders that she be appointed the Husband’s agent to apply to the Regional Council for a “Dwelling – approval in principle development application” relating to the B property.
On 13 October 2005 the Wife’s solicitors wrote to Mr W suggesting that a “notional rent” should apply to the property as the Husband’s brother was not paying rent but was operating the property.
On 3 November 2005 the matter was before a Registrar. A few days prior to the appearance, the Husband lodged a Development Application, without prior notice, with the Regional Council, the determination of which was pending. The Wife was directed by the Registrar to file an Amended Application in a Case by 18 November 2005, the Husband a Response by 2 December 2005 and the matter listed before a Judicial Registrar on 5 December 2005. Both of the parties were granted leave to photocopy documents produced by the Regional Council.
On 5 December 2005 orders were made by consent which provided that:
·Mr H was excused from answering questions put to him by the Husband;
·the Wife only proceed with her application to assume conduct of the Development Application with the council if it was refused or deemed to be refused;
·the Husband send a letter to the council in terms of a draft letter;
·the Husband notify the Wife of correspondence and outcomes received from the council in relation to the application;
·the parties file their affidavits no later than 28 days prior to the date fixed for the Pre-Trial Conference.
On 10 January 2006 Mr W wrote to the parties’ solicitors seeking additional information. On 12 January 2006 Mr. B sent a facsimile asking that his letter of 10 January be ignored as particulars were given.
On 13 January 2006 Mr W wrote to the parties’ solicitors confirming raising issues by the Wife’s solicitors. This included a “notional rent” sought to be introduced by the Wife because the Husband’s brother “worked” the property and was not paying rent.
On 30 January 2006 the Husband’s solicitors wrote to Mr W advising of a family arrangement between the shareholders. On behalf of the Wife it was submitted that this supports the Wife's case as it represents belated provision of material to Mr W. Mr W was given his letter of instructions in June 2005. The Husband admitted that this material was not sent to Mr W until 30 January 2006 – less than two weeks before Mr W produced his report. On 30 January 2006 Mr W responded.
On 6 February 2006 the parties filed their affidavits and a Pre-Trial Conference was confirmed. The Husband filed his primary affidavit referring to arrangements with his brother and other shareholder agreements. On behalf of the Wife it was submitted that in terms of her application for costs this is a particularly significant date because:
1.The Husband did not include in his affidavit of evidence in chief, any material relevant to:
·       the alleged forgiving of the loan account of his brother V McKenzie;
·       the alleged “shareholder agreement”;
·       the alleged change in the value of the S land being the underlying asset of D Company Pty Ltd.
2.The Husband had not, at that point in time, complied with orders in that he had not filed affidavits of his two brothers.
3.The Husband had not filed or sought to file any evidence of an adversarial witness.
4.Mr W had prepared his valuation report for the proceedings.
It was not until 6 February 2006 that the parties filed their affidavits consistent with the further order made 5 December 2005. That is almost six months after the appointment of Mr W. On behalf of the Wife it was submitted that whether the Wife did or did not comply with the directions of the court for filing affidavits has no relevance. The only matter that is relevant is the failure of the Husband to file his affidavit because the subsequent application of the Husband for the appointment of an adversarial witness relied, in part, upon the fact that matters were not known to Mr W. It was submitted that the only reason that these matters were not known to Mr W was because the Husband had failed to file his affidavit or the affidavits of his brothers in time to ensure that these matters were known to Mr W at the time of the preparation of his report.
On 9 February 2006 Mr W produced a report. On behalf of the Husband it was submitted that no reference was made to matters raised by the Husband’s solicitors on 30 January 2006 or as suggested in their letter of 13 January 2006.
In my reasons I said at [176]:
Mr [B] was appointed by the parties as a single expert pursuant to Part 15.5 of the Family Law Rules and he prepared a valuation report dated 9 February 2006. In this report Mr [B] said that in summary the value to be ascertained is the value to the owner having due regard to the underlying concepts of value such as willing buyer, willing seller, market value and fair value. Mr [B] said that a net assets based valuation should be adopted because the value of the shares rests in the underlying value of its assets comprising cash, [S property] and loans to directors. The [S property] was valued in August 2005 at $2,200,000. As seen above in 1991 when it was probably a larger holding [S property] was valued at $850,000 or $1,100,000. After adjustment to the net assets for the market value of [S property] Mr [B] arrived at a value of the capital of the company of $3,714,208. Mr [B] then ascribed a value of $53.065 to each of the ordinary shares and this had the result that he valued the 10,000 shares of the Husband at $530,600. However, Mr [B] was of the opinion that as the Husband had a minority interest he could not control decisions as to the management or realisation of assets, dividend policy nor effect distribution of assets or force a liquidation and under the circumstances considered that a discount should be applied to reflect the impediment of a minority interest. Mr [B] ascribed a discount of five percent and thus was of the opinion that the Husband’s shares had a value of $504,000.
On 7 March 2006 at the Pre-Trial Conference, the Applications for Final Orders were listed for hearing with an estimated duration of five days on a date to be fixed.
On 13 March 2006 the Husband filed an Application in a Case seeking orders that:
1.The Registrar’s decision to list the matter for a five day hearing be set aside and discharged.
2.The parties attend mediation conducted by Unifam or Relationships Australia.
3.Upon the conclusion of the mediation, the proceedings be listed before the Complex Cases Judge.
4.Alternately, the parties have liberty to restore the proceedings to the Duty Registrar’s list for further directions.
5.Costs.
On 1 May 2006 the Husband's Application in a Case was listed before Dawe J and orders were made by consent that:
1.The parties attend mediation.
2.The parties share equally the costs of mediation.
3.The parties forward short outline of case document to the Independent Children’s Lawyer seven days prior to the mediation.
4.The review application and applications for final orders be adjourned to a Registrar on 7 June 2006.
5.Leave to ask experts questions.
6.The Husband serve a report by Mr A (accountant) by 2 May 2006.
The Mediation only related to parenting and not financial issues.
On 15 May 2006 the Husband’s solicitors sent to Mr W the affidavits of V McKenzie of 4 May 2006, A McKenzie of 10 May 2006 and relevant pages of the Husband’s affidavit being paragraphs 17 to 22 inclusive of his affidavit of 6 February 2006 and requested reconsideration of the report issued on 9 February 2006.
On 19 May 2006 the Husband’s solicitors responded to a facsimile from Mr W, confirming the Husband’s instructions in relation to the arrangements with his brother.
On 23 May 2006 at a callover before Le Poer Trench J the matter was stood over to the July callover.
On 25 May 2006 Mr W produced a supplementary report.
On 7 June 2006 the matter was listed before a Registrar who made orders adjourning for hearing on 20 June 2006 the Husband’s objection on the grounds of legal professional privilege to the Wife’s lawyers inspecting documents produced by the identified lawyers and accountants for D Company Pty Ltd. The Registrar made an order that the matter be listed before a Registrar on 13 July 2006 for hearing of the Husband’s Application in a Case filed on

13 March 2006.
On 20 June 2006 the application of the Husband was before a Registrar who made an order that the Husband pay the Wife’s costs of $910. The Husband ultimately did not pursue a claim for legal professional privilege in respect of the subpoena. On behalf of the Wife it was submitted that this highlights another example of costs being unnecessarily incurred by the Husband seeking to frustrate attempts by the Wife to put relevant material before the Court. These documents were the subject of subpoena because they related to the new issues that the Husband was seeking to raise, being the subject of the material to be addressed by the adversarial witness of the Husband. By raising these issues himself the Husband had clearly waived any claim that he could make for legal professional privilege.
On 27 June 2006 the Husband filed a Response seeking orders for the appointment of an adversarial expert and supported the application with affidavits of Mr A filed on 21 June 2006 and of Mr L filed on 28 June 2006. The Husband’s application was initially refused and a review of that application was heard by Moore J on 7 September 2006. The Husband was successful with costs reserved relating to that evidence and the costs of the application itself. Accordingly, the report of Mr L filed on 28 June 2006 effectively became the “adversarial” report and on 29 November 2006 both accountants prepared a joint statement.
On 13 July 2006 a Registrar heard the Wife’s Amended Application in a Case filed on 11 July 2006 in which she sought orders for photocopy access to certain documents and for the Family Court file in respect of the Husband’s first marriage to be available for inspection. Also, the Registrar heard the Husband’s Response filed on 21 June 2006 in which he sought orders relating to conditions associated with a child’s attendance at winter school; leave to adduce expert evidence from Mr L; leave to rely upon and adduce evidence from two additional witnesses, being his brothers A McKenzie and V McKenzie; leave to ask further questions of Mr H in relation to the rural property called S property; leave to appoint a human resources consultant to give evidence as to the issue of income earning capacity of the Wife; and if leave was not granted for the preceding order, an extension of time within which to file an application for review of the Judicial Registrar’s orders of 15 June 2005. The Registrar reserved judgment.
On the following day, 14 July 2006, the matter was before Le Poer Trench J and he ordered that the matter be listed on the first day of the next callover. His Honour noted that the decision of the Registrar in relation to the single or adversarial experts was pending and that the expert report of Dr M (relating to the children) was pending and expected to be available by the next callover.
The Registrar delivered reasons for judgment (following the hearing on 13 July) and on 27 July 2006 made orders granting the Wife photocopy access to documents and for the Husband’s Family Court file in respect of his first marriage to be available for inspection. The Wife consented to the Husband being granted leave to rely upon the evidence of A McKenzie and V McKenzie. The balance of the Husband’s Application was dismissed. An order was made that the Husband pay the Wife’s costs as agreed or assessed.
On 27 July 2006 the Husband filed an Application in a Case seeking orders:
1.Dismissing the Registrar’s orders.
2.Leave to adduce expert evidence from Mr L and/or Mr A as to the value of the Husband’s interest in D Company Pty Ltd.
3.Leave to file an application for an extension of time within which to file an application for review of Judicial Registrar Johnston’s order of 15 June 2005.
On 7 September 2006 Moore J made an order permitting the Husband to rely upon a report of Mr L. Her Honour reserved costs and any particular costs relating to that evidence to be reserved to the trial and reserved the costs of the hearing before her. Her Honour dismissed paragraph 2(b) of the application of the Husband relating to the application for leave to file an application for an extension of time within which to review the Judicial Registrar’s orders of 15 June 2005.
At the hearing before Moore J on 7 September 2006 the Husband tendered two reports being the report of Mr A dated 28 April 2006 annexed to the affidavit of Mr A sworn on 6 June 2006 and the report of Mr L dated 26 June 2006. The Husband was called upon to elect which report he sought to rely upon and elected to rely upon the report of Mr L.
In my reasons I said that:
177.Subsequent to the report of Mr [B] there was a great deal of correspondence between the Husband’s solicitors and Mr [B] and it is apparent that the Husband was dissatisfied with the report of Mr [B]. Mr [B] prepared a further report dated 25 May 2006. In this further report he was asked to make certain assumptions in relation to the recoverability of shareholders loans.
178.The Husband then retained Mr [L] and he prepared a valuation report dated 26 June 2006 which was a critique of the report of Mr [B]. It thus becomes necessary to see what Mr [L] did and the source of the value of $150,000 contended for in the joint statement of assets.
On 11 September 2006 at a callover, Le Poer Trench J made orders granting leave to the parties and their legal representatives to inspect photocopied documents produced on subpoena by Y Human Resources Consultant. His Honour also made an order permitting the Wife to request Mr W to answer questions. His Honour reserved the costs. He directed each party file a trial plan prior to the next call-over. He dismissed the Independent Children’s Lawyer application for discharge. He noted that the solicitor for the Husband held funds in his trust account pursuant to orders made on 15 June 2006 which provided for the sale of assets and payment of Mr W’s fees and noted that it was intended that the Husband forthwith attempt to comply with those orders. He also made an order that Mr W and Mr L confer with directions for the timing of a joint conference such that a joint report be issued prior to the next call-over.

In my reasons I said:
181.Mr [B] and Mr [L] then conferred in relation to their reports of 19 February 2006, 25 May 2006 and 26 June 2006 and produced a joint statement dated 29 November 2006 (Exhibit A). In the joint statement they set out the areas of agreement and disagreement.
182.Mr [L] and Mr [B] both agreed as a matter of principle that:
·       the market value of the minority interest in a private company is less than the pro rata share of the value of the whole company;
·       the discount for minority interests is dependent upon the circumstances that prevail in each particular case although Mr [L] contended that the discount is generally around 25 per cent to pro rata value;
·       this discount is derived from empirical stock market evidence of takeovers and the average controlled premium paid in public company takeovers;
·       a separate and additional discount for non negotiability normally applies to the valuation of minority interests in unlisted companies;
·       a further separate and additional discount is appropriate if a third party has an enforceable life interest or similar occupancy right.
On 13 December 2006 at another callover, Le Poer Trench J made orders:
1.Discharging the appointment of the Independent Children’s Lawyer.
2.Granting the Independent Children’s Lawyer leave to make an application for costs.
3.Adjourning the costs application to a date to be arranged with the Manager of Court Services.
4.Listing the applications for final orders for hearing commencing 5 March 2007 fixed for five days however the case will continue until concluded if five days is insufficient.
5.Requiring the parties are to cause updated valuations of S property to be conducted by the single expert on certain terms. It was noted that an updated valuation would be available by mid January 2007.
7.Requiring the legal representatives to confer in relation to whether there is an objection to the Husband relying upon the evidence of Mr D relating to the Wife’s income earning capacity.
8.Requiring the Wife to serve on the Husband by 19 January 2007 a minute of orders that she would seek in respect of the children.
9.Requiring the parties to serve by 19 January 2007 a list of affidavits to be relied upon.
10.Requiring that objections to affidavits be served by 2 February 2007 and the parties meet and confer in relation to those objections by 16 February 2007.
11.Listing the matter for mention before me on 26 February 2007 (subsequently changed to 23 February 2007) at which time the parties were to present single balance sheets.
On 23 February 2007 I made the following orders:
1.Each party provide to the single expert by 4:00 pm on 28 February 2007 primary records to enable updated the valuation of relevant interests.
2.The Husband have leave to rely upon the evidence of Mr [D] and the Wife have leave to file and serve a report from an expert of her choosing dealing with the issues addressed by Mr [D].
3.The question of enforcement of order 7 of the orders made 15 June 2005 be adjourned for consideration by the trial judge.
4.The parties lodge a Joint Case Summary document not less than 48 hours prior to the commencement of the trial.
5.The parties lodge costs memorandum not less than 48 hours prior to the trial.
6.The parties to lodge a summary of argument not less than 48 hours prior to the trial.
7.The parties confer by 27 February with a view to reaching agreement as to the value of the [P] apartment and in the event of failure to reach agreement, a single expert be appointed.
8.Objections to affidavits by 28 February 2007.
I noted that the hearing would proceed on the allocated dates.
On 5 March 2007 the hearing commenced before me. In my reasons I said:
184.In the joint statement of assets I received on 6 March 2007 the Wife contended for a value of $504,000 being the value arrived at by Mr [B]. Mr [B] adhered to his original valuation subject to the findings I may make about the factual assumptions. As I have already said, in the joint statement of assets the Husband contended for a value of $150,000 and I had some difficulty reconciling this figure with the evidence of Mr [L]. It therefore becomes necessary to consider what Mr [L] said in the joint statement of experts.
The hearing continued on 6 and 7 March, 16 April and 30 May 2007. I first reserved judgment on 7 March 2007.
On 16 April 2007 the matter was relisted by me to hear submissions predominantly with regard to the value of the Husband's shareholding in D Company Pty Ltd. Directions were made for the Husband to file written submissions within 14 days.
On 1 May 2007 the Husband filed written submissions. On 11 May 2007 the Wife filed submissions in reply to the Husband's submissions.
On 30 May 2007 the Husband and the Wife filed joint written submissions with regard to the sporting club membership issue.
On 21 December 2007 I pronounced judgment and delivered reasons.
In my reasons I said:
6.There are issues in relation to the extent and value of the assets of the parties which I will shortly identify. In summary, the Husband contended that the parties have assets of a net value of $2,486,031 and the Wife contended that the parties have assets of a net value of $3,027,152.
…
161The first step is to determine the extent and value of the assets of the parties at the time of the hearing. I received a joint statement of assets which disclosed the following:
Assets Husband               Wife
$                   $
·[C property] (h/w)   1,200,000         1,200,000
·Interest in [B property] (h)  837,000            837,000
·14% interest in [S property] (h)  150,000            504,000
·1991 Nissan Patrol (h)  5,000                 5,000
·[R Pty Ltd] (w)  33,875              33,875
·NAB Ltd fund (h)  9,261                 9,261
·Football Stadium Gold Membership (h)  nil              17,000
·Paid past disbursements to Swaab (w)                 27,650              27,650
·[P] apartment (w)  310,000            310,000
·Swaab Trust (future disbursements including interest) (w) 39,392          39,392
·CBA Savings Account (w)  not known  nil
·Husband’s savings (h)  3,600         not known
·Contents (h/w)  nil  nil
·Paid legal fees (w)  3,000                 3,000
·Paid legal fees (h)     134,255            134,255
Total  2,753,033      3,120,433
Liabilities
·       Loan to [D Company] (h)  61,000          61,000
·       Loan from [R Pty Ltd] (w)  52,210          52,210
·       Loan from [K Pty Ltd] (h/w)  2,600            2,600
·       NAB mortgage ([C property]) (h/w)  260,700        260,700
·       AMP ([P property]) (w)  236,000        236,000
·       Income tax unpaid (w)  nil                 nil
·       Impact Funding for past disbursements paid to Swaab (w) 27,650 27,650
·       Impact Funding (for urgent expenses) including the
costs of borrowing and interest to 11 January 2007 (w) nil        117,079
·       Impact funding for anticipated disbursements including SC and
witness expense for experts (Controlled monies account) (w)      38,750     38,750
·       Additional Interest due to 5/3/06 Impact Funding between
11 January 2007 & 5 March 2007 (w)  nil            2,953
·       Salvation Army (w)  nil            5,100
·       [School fees] debt (h/w)  51,538          51,538
·       Loan from superannuation fund (w)  nil          18,000
·       Vendor finance loan ([P apartment]) (w)  nil            9,000
·       Wife’s debt due to Superfund (w)  92,400          92,400
·       Husband’s Liabilities (h)  43,000                 nil
·       Debt to [R McKenzie] (h)  90,000                 nil
·       CGT on sale of [B property] (h)  169,750                 nil
·       Husband anticipated tax (h)  23,612                 nil
·       Loan to Director (w)  nil            5,000
·       Tax on NAB shares (h)  4,491                 nil
·       Impact Funding Loan (h)     100,017        100,017
Total  (1,253,718)   (1,079,997)
Net  $1,499,315    $2,040,436
Superannuation interests  $  $
·       [K] PLSF (h)  493,533        493,533
·       NAB Super Fund (h)  351,000        351,000
·       [R Pty Ltd Super Fund] (w)  149,015        149,015
·       [Q Super] (w)      3,168             3,168
Total  $996,716      $996,716
162.In summary, the Husband contended that the parties have assets of a net value of $2,496,031 and the Wife contended that the parties have assets of a net value of $3,037,152.

Shares in D Pty Ltd

163.There is an issue as to the value of the Husband’s shares in [D Company] Pty Ltd. The Husband holds 10,000 ordinary shares being 14.28 per cent of the issued capital. Evidence was given by [Mr W], who was a single expert, and on behalf of the Husband evidence was given by [Mr L].

In my reasons I said:
183.There were some significant factual assumptions. Mr [L], on instructions, proceeded on the basis that the market value of the farm had fallen by 12.5 per cent. Further, Mr [L] proceeded on the basis that the loan to [V McKenzie] of $1,285,885 was forgiven and was no longer an asset of the company. Mr [L] in the joint statement also made clear, as he had in his report, that the value of the Husband’s shareholding would assume that the property will not be sold and [V McKenzie] and his present wife will continue to occupy the property. Mr [L] undertook his valuation on the assumption I would find that “an enforceable shareholders agreement is in existence” and assume that the property is sold at the end of a specified period and the proceeds distributed and this period could be anywhere between 10 and 20 years.
In my reasons I said:
191.When I considered the evidence of Mr [W] and what Mr [L] said in the joint statement of experts it was apparent to me that, subject to the three factual assumptions I had to resolve, the only area of difference between the accountants related to the quantum of the discount to be applied for the Husband’s minority interest and lack of negotiability. This was made clear by Mr [L] in answer to some questions I asked. I then arranged a further listing and subsequently received further written submissions.
192.In the written submissions of the Husband it was submitted that the experts contended they approached the matter in different ways. Subject to the factual issues I have to resolve when an analysis is undertaken of the evidence of Mr [L] in the joint statement of experts and his oral evidence I have difficulty accepting that this submission is correct. Both accountants conceded that I had to resolve the three factual assumptions and then the issue in relation to the extent of the discount to be applied to the Husband’s minority interest.
In the submissions on behalf of the Wife a number of paragraphs of my judgment were referred to. In my reasons I said:
195I will first deal with the alleged reduction in land value. In the Husband’s additional submissions this contention was abandoned. I am troubled by the lateness of this concession because it should have been made clear to me at the hearing. In fairness it may not matter because in his submissions on 7 March 2007 counsel for the Husband referred to Mr [L’s] valuation as being “the 150 odd”. Mr [L’s] value in accordance with his instructions was $92,143 and was $159,935 or say “150 odd” if I did not accept the 12.50 per cent reduction in land value and included the loan to [V McKenzie]. However, in the additional submissions the value contended for may now be $119,816.
The Wife submitted that this is the most significant finding on the issue of costs as sought, not only because the contention was abandoned, but also because it was put as a hypothesis to the adversarial expert and there was never any evidence to support the contention that there had been a reduction in value of the land and nor was there any attempt by the Husband to adduce that evidence. It was submitted that in those circumstances it was clearly incumbent upon the Husband to never have raised that issue in the first place and/or to have abandoned that contention at a much earlier stage of the proceedings and as soon as he knew that he could not adduce evidence to support the hypothesis. This is one of the matters that I am asked to take into account in determining that the costs order should be on solicitor/own client basis.
In relation to the loan to V McKenzie I said:
196.There is then the contention that there is no requirement for [V McKenzie] to repay his loans to the Company of $1,285,885. I repeat what I said above in relation to the reduction in land value issue. However assuming that it remains an issue, on behalf of the Husband it was submitted that [V McKenzie] had never been called upon and was unlikely to be called upon by the minority shareholders to repay the loan. On behalf of the Wife it was submitted that neither [V McKenzie] or [A McKenzie] gave evidence in their affidavits in relation to this issue. Neither were called to give evidence on this issue. Mr [W] was appointed as the single expert and each party had the opportunity to place matters before me as they wished. Mr [W] was not told anything by the Husband at the outset about the loan not being repayable by [V McKenzie]. It was submitted that the only evidence relating to this issue is the financial accounts of the Company (Exhibit T) for the financial years ended 30 June 2003, 30 June 2004 and 30 June 2005. Each of the accounts are signed off by the directors of the Company, specifically [V McKenzie] and he certified that the accounts were true and correct. The accounts included reference to the requirement for [V McKenzie] to repay his loan account to the Company of $1,285,885.00. There is no evidence to the contrary.
197I accept the submissions on behalf of the Wife and reject the submissions on behalf of the Husband. In the result I am going to include as an asset of the Company the loan to [V McKenzie].
The Wife submitted that it should have been ascertained by those advising the Husband that this was probably the single most important issue in the proceedings so far as the Husband was concerned, because of the impact that the finding that the loan to V McKenzie of $1,285,885 would have on my determination of the value of the assets making up the asset pool. It was submitted that I specifically highlighted that the difference between what each party contended was the value of the asset pool. The difference was more than $500,000 which, in terms of what was contended by the Husband, represented a reduced value of the asset pool of approximately 20 per cent.
In my reasons I said:
174.There was put into evidence a copy of the financial statements of the Company for the years ended 30 June 2003 to 30 June 2005 inclusive. The accounts and other statutory records were signed by [V McKenzie] and his wife as directors of the Company. The 2005 statement reveals, as a fixed asset, an amount of $61,000 owed by the Husband. This loan was made in the year ended 30 June 2003 and appears in the 2003 and 2004 accounts. The accounts also reveal as a fixed asset “Loans to Directors” of $591,165 for 30 June 2002, $809,659 for 30 June 2003, $1,313,078 for 30 June 2004 and $1,285,885 for 30 June 2005. No ledgers or other records were put into evidence.
The Wife submitted that it must also have been abundantly obvious to the Husband and/or those advising him that a real problem he had in pursuing this issue was the contents of the financial accounts of D Company Pty Ltd. These were the Husband's documents, he was a member of the corporation and these entries in the financial accounts had to have been well known to him and to his advisers. It was further submitted that the Husband's problem in relation thereto was compounded because Mr L did not address this fact in his report and one would have thought that this would have been an issue that an expert, such as Mr L, would have highlighted. Mr L had been given copies of the relevant accounts for the preparation of his report.
In relation to the issues about a shareholders agreement amongst the brothers I said:
198.There is then the alleged right of occupancy of “[S property]” by [V McKenzie]. On behalf of the Wife it was submitted that Mr [L’s] contention is that “the appropriate method to value the husband’s shares is the application of an appropriate risk adjusted discount to the eventual realisation of a value for his shares in ten to 15 years’ time”. Mr [L’s] contention is qualified in his affidavit with reference to footnote 10 which states: “On the basis of the likely scenario presented in [the husband’s] and Mr [V McKenzie’s] affidavits”. As Mr [L] made clear in his oral evidence it was a factual assumption made by him that I had to resolve.
199.In the Husband’s additional submissions reference was made to the operation for some years of a rural business upon “[S property]” by [V McKenzie] and his wife. I accept the submission on behalf of the Wife that this is not evidence of a valid and legally enforceable shareholders agreement for [V McKenzie] to continue to occupy “[S property]” into the future. I note that in the written submissions on behalf of the Husband it was submitted that [V McKenzie] has an “understanding” with his brothers.
200In the Husband’s additional submissions reference was made to the evidence of [A McKenzie] to the effect that “there may be a discussion after [V’s] retirement as to what is to happen to the property”. That evidence was disallowed by me.
201.In the Husband’s additional submissions reference was made to the evidence of [A McKenzie] to the effect “…[t]hat [D] and his wife [P] will continue to utilise [S property] until they decide to retire and move off the property”. On behalf of the Wife it was submitted that the paragraph quoted in the Husband’s additional submissions omits the first three words of paragraph five of the evidence, namely “… My understanding is …”. I accept that accordingly, at its highest, [A McKenzie’s] evidence is limited to evidence of an “understanding”, not of an agreement.
202.In the Husband’s additional submissions reference was made to the evidence of [V McKenzie] to the effect that he “envisages” that he may continue the partnership for the next 10 to 15 years. On behalf of the Wife it was submitted that again, that is not evidence of a shareholders agreement with his brothers that [V McKenzie] has a legal, valid and enforceable right to occupy “[S property]” into the future.
The Wife submitted that again this was simply another area in which the Husband was “grasping at straws” and as a consequence he must bear the additional and unnecessary costs incurred by the Wife by his raising this issue. The Wife submitted that this evidence was an attempt by the Husband to establish that there was a “shareholder agreement”. Again the significance of this issue to the Husband's case should have been appreciated by the Husband and/or those advising him because of its potential impact in reducing the value of the shares. At all relevant times the Husband was a member of D Pty Ltd and not only in those circumstances should he have had knowledge of these matters but that if there was any such “shareholder agreement” he would have been a party to that agreement. This is not an area that the Husband addressed in his affidavit of evidence in chief.
In summary, I accepted the evidence of Mr W and rejected the evidence of Mr L. I found that the assets had a net value of $2,918,261. On behalf of the Wife it was submitted that the Husband was wholly unsuccessful in his challenge to the evidence of the Single Expert. As a consequence, the Wife incurred substantial and unnecessary additional costs. The Wife submitted that in the circumstances she is entitled to be indemnified by the Husband in relation to those additional costs.

On 18 January 2008 the Wife filed an application which commenced the current costs proceedings.
On 18 January 2008 an affidavit was sworn by Gregory Paul Parker on behalf of the Wife. Mr Parker attached to his affidavit a copy of a costs agreement entered into by the Wife with her solicitors.
On 5 March 2008 directions were made for the filing of the Husband's Response and for the parties to file written submissions with regard to the costs application.
The Husband swore an affidavit on 19 March 2008. The Wife submitted that much of the material in the affidavit of the Husband is in the form of submissions and because objections are raised as to the admissibility of some of the material, it is necessary to deal with the matters raised by the Husband in that affidavit, both in the affidavit in reply of the Wife and in the submissions, in particular where the Husband asserts matters which are inconsistent with the record of the Court.
The Wife submitted that none of the matters in the affidavit of the Husband, whether admissible or in the form of submissions or otherwise, has any relevance to the Wife's application which primarily relates to seeking an order for costs of the Wife that were thrown away or wasted as a consequence of the conduct of the Husband.
The Wife also swore an affidavit on 2 April 2008. The Wife gave evidence that she was billed tax invoices from time to time in accordance with the costs agreement and all tax invoices that were rendered to her by her solicitors had been paid. The Wife gave evidence that she paid $367,318. The Wife said she paid this amount when the Husband complied with paragraph 2 of the order of

21 December 2007. The Wife said that in addition the sum of $66,400 was paid by Impact Funding and she paid a further $3,000. The sum of $66,400 was also paid to Impact Funding from the settlement monies the Wife received from the Husband. The total amount of the Wife’s costs paid to her solicitors, other than costs of the present application and the costs of enforcing compliance with orders made on 21 December 2007, was $436,718. The Wife exhibited to her affidavit a bundle of tax invoices that she received from her solicitors. The Wife also gave evidence in reply to evidence given by the Husband in an affidavit sworn on

19 March 2008.

RELEVANT PRINCIPLES

Section 117(1) Family Law Act 1975 (Cth) provides that subject to s 117(2) and s 117AA and s 118, each party to proceedings under the Act shall bear his or her own costs.
Section 117(2) provides that if, in proceedings under the Family Law Act, I am of opinion that there are circumstances that justify me in doing so, I may, subject to sub secs (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs whether by way of interlocutory order or otherwise, as I consider just. Section 117(2A) provides that in considering what order (if any) should be made under s 117(2), I shall have regard to the matters set out in paras (a) to (g). In Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania) v Fish and Another (2005) 33 Fam LR 123 the Full Court said at page 130:
[41]. …The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subsection 2(A) or elsewhere in section 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subsection 2(A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.

RELEVANT MATTERS

I am required to have regard to the financial circumstances of each of the parties to the proceedings.
The Wife relied upon my findings in respect of the financial circumstances of each of the parties. In my reasons I made findings at [276] - [280] in relation to the income and earning capacity of each party. I also made findings at [295] - [296] in relation to the effect on each party of the property order.
The Husband submitted that the effect of the property order was to grant to the Husband the opportunity of retaining the C property in consideration of a payment to the Wife of $1,092,259 and the order has been complied with. It was said that the Husband borrowed those funds and has a significant debt as a consequence. It was submitted that on the other hand the Wife has cash resources in excess of $1 million having recently received those from the Husband. Her net assets are $1.313 million. Whilst it was conceded that the Husband’s net assets exceed that after the payment to the Wife of the $1,092,259 the significant and “unusable” asset retained by the Husband is his interest in B property and 14 per cent interest in D Pty Ltd. Also approximately $850,000 of the Husband’s assets are also found in superannuation which he cannot currently access.
I am required to have regard to whether any party to the proceedings is in receipt of assistance by way of Legal Aid and, if so, the terms of the grant of that assistance to that party. Neither party is in receipt of Legal Aid.
I am required to have regard to the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters. In the circumstances of this case this is the important matter.
The Wife submitted that conduct is a significant matter and in particular the conduct of the Husband in terms of his decision to seek the retention of an adversarial expert after the issue of the report of Mr W and the Husband’s earlier failure to adduce evidence on the issues that he sought to raise.
The Husband submitted that the conduct of the parties to the proceedings are of limited consideration, however the Husband was engaged in unnecessary litigation concerning the children given the final orders that were made.
The Husband submitted that I am entitled to look at the conduct of both parties. The Wife submitted that the only relevant conduct of the parties is in respect of the specific areas in which the costs are sought and that I should not look at the conduct of the parties in respect of other areas of the proceedings that are not the subject of a specific costs application. It was submitted that if the submission of the Husband in this regard is accepted then this would be grossly unfair to the Wife. If the Husband believes that he is entitled, as a consequence of the conduct of the Wife, to some order for costs, then that should be the subject of a separate costs application by the Husband and not pleaded as some form of set-off against the costs sought by the Wife. It was submitted that the way in which the Husband is asking me to deal with this facet of the matter is a “back door” attempt by the Husband to achieve some sort of costs order without the requirement of seeking leave to bring his application out of time and complying with the necessary requirements of s 117(2A). Even if the approach taken by the Husband is correct I do not accept that the matters he relies upon in relation to the conduct of the Wife are relevant to what I have to decide.
I am required to have regard to whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court.
The Wife relied upon the failure of the Husband to comply with orders for the filing of affidavits by witnesses on the valuation issue at the time of the Pre Trial Conference and the failure of the Husband to seek to have these issues addressed by the Single Expert at the time of the appointment of the Single Expert and the preparation of the letter of instructions to that expert.
The solicitor for the Husband signed a certificate of readiness, yet subsequent to the signing and filing of that certificate the Husband sought to file two further affidavits being of his two brothers going to the issues that the Husband sought to have his adversarial witness address and also the Husband made an application for the appointment of an adversarial witness. The report of the Single Expert had been received before the Pre Trial Conference and the solicitor for the Husband certifying that the matter was ready for hearing.
The Husband submitted that both parties failed to comply with orders of the Court in relation to the filing of Affidavit material which unfortunately led to the Husband’s affidavit not being filed prior to the engagement of Mr W.
I am required to have regard to whether any party to the proceedings has been wholly unsuccessful in the proceedings.
The Wife contended that the Husband was wholly unsuccessful in relation to the issues as to the value of his shares in D Pty Ltd.
The Husband contended that he was successful in many of the orders sought by him. The Husband contended that the Wife sought an order that the Husband pay direct to the Wife the sum equivalent to the amount of 30,000 ordinary shares in a company identified as X Company and that the Wife failed in that I did not make the order. The Wife also sought an order that the Husband vacate the former matrimonial home at C and transfer his interest in this property to the Wife and also pay an amount of $952,500. The Husband contended that the Wife failed “in this regard”.
The Husband also contended that on 5 March 2007 by consent I made final parenting orders which provided for what the Husband described as a week about arrangement. The Husband contended that the order consented to was the same as the order sought by him in his response to an application for final orders. The Wife did not consent to a week about arrangement on a final basis. However this was the advice of a court expert after discussion with the children. The Husband contended that he incurred considerable costs in having to prepare his evidence as to parenting. The Husband also contended that on 23 March 2006 he instructed his solicitors to make an offer to settle the parenting proceedings on the basis of a week about arrangement. The Wife did not agree with this proposal. I am not going to repeat all of what the Husband said. He set out some history of the parenting proceedings and in conclusion contended that he incurred considerable excessive and unnecessary costs as a result of the manner in which the Wife conducted herself in the proceedings. The Wife made detailed submissions in reply to the affidavit of the Husband, including what was said to be the correct sequence of events.
I am required to have regard to any offers to settle the proceedings and the terms of any such offer. This matter is not relevant.
I am required to have regard to any other matters as I consider relevant.
The Husband contended that he has been responsible for and paid the costs of Mr W to-date from the sale of NAB shares. As far as the Husband is able to determine, the Wife may have paid Mr W some fees in relation to specific questions asked by her of him, which in the circumstances would not form part of any costs order should one be made in any event, she having brought on those costs herself.
The Husband received a total of $18,310.50 from the sale of his NAB shares, which vested post-separation, and applied those funds towards the experts’ fees. Indeed, the Husband has been responsible for the expert costs of BK Property Advisory and Mr ON. In ordinary circumstances 50 per cent of those fees should have been met by the Wife. It is understood that Mr W still has an outstanding portion of his costs payable, namely approximately $7,000.00. The Wife has refused to contribute towards those costs and no doubt it will be left to the Husband to satisfy those costs from his own resources.
The Wife submitted that these matters have no relevance to the subject costs application. Alternatively these matters should be the subject of a separate costs application by the Husband and the Husband should not be allowed to rely upon these matters as some sort of “set-off” against the Wife's costs application.

CONCLUSION

In this case the matter that I find most troublesome relates to the issue of the value of the Husband’s shares in D Company Pty Ltd.
I commenced to deal with the issue at [163] of my reasons. Both accountants gave evidence and were cross-examined. Mr L had been instructed by the Husband to accept some factual assumptions. Those factual assumptions were contained within the Husband’s affidavit and the affidavits of V McKenzie and A McKenzie. Mr L was asked to assume that the loan to V McKenzie of $1.285 million was forgiven and was no longer an asset of the Company and that V McKenzie and his wife would continue to occupy the property. The Husband sought to adduce such evidence and indeed did in his affidavit and the affidavits of V McKenzie and A McKenzie. I analysed the evidence of Mr L in some detail and also acknowledged that Mr. W had adhered to his original valuation subject to the findings I might make about the factual assumptions. I determined that in considering the evidence of both Mr W and Mr L, it was apparent that subject to the three factual assumptions for determination the only area of difference between the accountants related to the quantum of the discount to be applied for the Husband’s minority interest and lack of negotiability. Indeed, I made reference specifically to that at [191] of the reasons. I was troubled by the evidence in that regard and requested counsel to provide further written submissions on the evidence in relation to those assumptions and indeed that was done by the provision of additional written submissions. The evidence in relation to this particular topic was in fact in some instances confusing.
I then went on to consider the assumptions in [196] of the reasons onwards. On behalf of the Husband it was submitted that these issues obviously were matters which were capable of findings one way or the other. There was no suggestion by the Court that the assumptions were the subject of any mischievous conduct on the part of either the Husband or his brothers or that the attempts to adduce such evidence was in any way brought about to deliberately minimise the value of the Husband’s shareholding. It was submitted that matters of fact are determined on the balance of probabilities and at the end of the day, I preferred the evidence of Mr W.
On behalf of the Wife it was submitted that it is not necessary for her to establish “mischievous conduct” to be successful with her application. It was submitted that what other inference is there for the Court to draw than this evidence and the retention of an adversarial expert was with the intent that same would result in a reduction/minimisation of the value of the assets of the Husband.
Part 15.5 of the Family Law Rules deals with expert evidence. The purpose of Part 15.5 is set out in r 15.42. The Wife submitted, and I agree, that the intent of Part 15.5 is that reliance by parties on an adversarial witness, as distinct from a Court appointed expert, is to be an exception rather than the rule. The intent of Part 15.5, inter alia, is to reduce and not increase the costs of parties to the proceedings.
Rule 15.44 provides that if the parties agree that expert evidence is required to resolve a substantial issue then they may agree to appoint a single expert witness and permission of the Court to tender the report or adduce evidence from the single expert is not required. That is what happened in this case and Mr W was appointed by the parties as their Single Expert.
Rule 15.49 of the Family Law Rules provides:
(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 that the contrary opinion is or may be necessary for determining the issue;
(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 this case, in circumstances where a single expert had been appointed, the Husband then sought to tender a report and adduce evidence from another expert and in those circumstances he could not do that without the Courts’ permission.
On behalf of the Wife it was submitted, and I agree, that there are two circumstances in which a party can seek to rely upon an adversarial expert being:
·pursuant to r 15.49 which is available to a party after receipt of a Single Expert report and where a party seeks to "challenge" the report of the Single Expert on restricted grounds; or
·pursuant to r 15.52, the intent of which is that the application seeking permission should be made at the time that one party seeks to appoint a Single Expert and before the Pre-Trial Conference.
The Wife submitted that in this case the Husband relied upon the provisions of

r 15.49 for the appointment of an adversarial expert and specifically that rule provides very limited circumstances for that rule to be availed upon and which are set out in sub-rule (2).
The Wife submitted that it must follow that where one party seeks to rely upon

r 15.49, that reliance upon that rule will inevitably involve the other party in further and additional costs. Further where:
·ultimately the report of the adversarial expert does not satisfy the Court in respect of any of the issues in sub-rule (2) of r 15.49;
·and/or where as in this case the Court found against the Husband in respect of findings that he asked the Court to make, solely referrable to the report of the adversarial witness;
·and/or the Court rejected/failed to make findings in favour of the Husband in respect of which the report of the adversarial witness was dependent (e.g. that there was a shareholder agreement and the loan account of the brother had been forgiven);
then the Court is entitled to find that these amount to circumstances justifying the making of a costs order because as a consequence the other party incurred unnecessary costs.
The Wife submitted that the only real basis that the Husband could seek to rely upon the provisions of r 15.49 was the grounds in sub-rule (2)(b). The only reason that “evidence” was known to the adversarial expert and not the Single Expert was because of the failure of the Husband to adduce that evidence, as required by the Directions of the Court, before the letter of instructions, and the affidavit evidence of the other witnesses of the Husband, was sent to the Single Expert. This evidence was not served at all until some months after the Pre-Trial Conference.
The Wife submitted that having regard to the various adverse findings in respect of the issues that the Husband sought to raise from the evidence of his adversarial expert, the lateness in seeking to adduce this evidence and the consequences thereof and the circumstances of this case, it is appropriate that the Wife should be indemnified in respect of those costs, not simply on a party/party basis, but on a solicitor/own client basis.
The Wife submitted that nothing in the report of Mr L would satisfy the requirements of sub-rule (a). In terms of sub-rule (b) this was solely the evidence of the two brothers of the Husband and the reason that that material was not known to the Single Expert was simply because the Husband had not deposed to these matters in his own affidavit of evidence in chief and only sought to file the affidavits of his brothers after receipt of the report of Mr W. Again I note that the solicitor for the Husband had signed a Certificate of Readiness. The Wife submitted that no explanation was ever advanced on behalf of the Husband as to why the two affidavits of his brothers were not filed in accordance with the directions of the Court.

It is difficult to determine any “special reason” for allowing the Husband to rely upon the evidence of Mr L which could not have been the subject of instructions being properly given to the Single Expert.
The Husband submitted that throughout the entire proceedings, matters of fact and issues needed to be determined, which were indeed determined, dealing with issues of contribution, matters touching upon s 75(2) considerations etc. The issue of the value of the Husband’s shareholding was simply yet another matter for determination based upon two competing views and two competing professional opinions. Both experts are well known to the Court and are generally held in high regard. The evidence of Mr W was preferred. This was not a case where the Court made factual findings in favour of the Husband on the relevant issues but then went on to say that the Court nevertheless preferred the report of Mr W. The Court did not make the factual findings that the Husband asked the Court to make. The retention of the adversarial expert on behalf of the Husband was dependent upon the Court making those findings in favour of the Husband which the Court did not do.
I have come to the conclusion that the Wife has established a justifying circumstance. The parties agreed to retain a Single Expert for the purposes of valuing the Husband’s shares in D Company Pty Ltd. Then after the valuation became available the Husband sought permission to adduce evidence of value from his own expert. Such permission was given. The Single Expert and the adversarial expert conferred and were unable to reach agreement.
In my reasons at [192] I said that the experts conceded that I had to resolve the three factual assumptions and then the issue in relation to the extent of the discount to be applied to the minority interest of the Husband. I also said at [193] that I identified the following matters:
·that there is a reduction in the value of the underlying asset of D Company Pty Ltd by 12.5 per cent
·that a discount operates because the Husband is unlikely to receive any cashflow (income or capital) from his shareholding in D Company Pty Ltd for some years because of a continuing right of occupancy of the farm by his brother and principal shareholder of the Company, V McKenzie;
·that there is no requirement for V McKenzie to repay his loans to D Company Pty Ltd of $1,285,885;
·that there is a 25 per cent discount for the Husband’s minority shareholding in D Company Pty Ltd;
·that there is an additional 25 per cent discount for the Husband’s non-negotiability with the principal shareholder, V McKenzie.
I determined each of the above matters in favour of the Wife.
I have no doubt that the Wife incurred cost and expense in consequence of the Husband resiling from reliance on the opinion of the Single Expert and seeking permission to rely on his own expert. In so doing he had to accept that he did so at risk that the Wife may, depending on the outcome, seek recompenses for the costs and expenses she incurred in then having to deal with the evidence of the Husband’s expert. This possibility was foreshadowed by Moore J at the time she granted permission to the Husband because she reserved the issue of costs that may arise.
In my view, all of the other matters relied upon by both parties are largely irrelevant and are the sort of complaint(s) about the conduct of litigation that is commonplace. Particularly is that so in this case where the litigation was protracted and there were very few, if any, concessions. In summary, with the exception of the cost and expense the Wife incurred in relation to the issue of the value of the Husband’s shares in D Company Pty Ltd, nothing has been put by either party that justifies an order for costs. I propose to make an order that the Husband contribute to the costs of the Wife in relation to this issue.

QUANTUM OF COSTS

Extensive submissions were made by both parties in relation to indemnity costs and solicitor/party costs.
The Husband submitted that having regard to the fees of the Husband identified in “Tab W”, it is incomprehensible to imagine how it was that the Wife’s fees could have amounted to $436,718. The Husband submitted that in the submissions of the Wife the Court is not appraised of the amount of costs sought by the Wife other than to say that they would not be less than $30,000 based on approximately one day of the hearing time being allocated to the issues. It was submitted that the submission is out of all proportion to what would be reasonable in all of the circumstances should a costs order be made in any event.
The Husband submitted that given that the costs order sought by the Wife is limited, the totality of her costs have no relevance to the Application. The only matter of relevance, is the quantum of the costs being sought – the subject of the Costs Application. If a costs order is made the Wife seeks an order that those costs be taxed/assessed unless agreement can be reached in relation thereto.
The Husband submitted that the Wife has not made specific submissions as to why costs, if made, would be on an indemnity basis. Nothing in the conduct of the Husband, or his witnesses, would warrant the Court considering such an application. Various authorities were cited in the submissions.
The Wife submitted that the costs are not sought on an indemnity basis. The costs are sought on the basis of solicitor/own client taxation and the authorities relied upon by the Husband have no relevance to costs being taxed on that basis.
I accept that the quantum of what the Wife seeks is in all the circumstances excessive. As I have said I am going to make an order that the Husband make a contribution to the costs of the Wife. I am not going to order that the parties agree on the quantum and in the absence of agreement within a specified period the costs be taxed as I am confident that such an agreement would not be reached and that any taxation would be a further protracted and expensive exercise.
I am going to make an order pursuant to r 19.18(10(a) of the Family Law Rules that the Husband pay to the Wife an amount of $3,000 which sum, in my view, adequately compensates the Wife on a party/party basis for the extra expense she incurred. In arriving at the amount of $3,000 I have taken into account the matters in r 19.18(3) of the Rules.

COSTS OF THE COSTS APPLICATION

The Wife seeks an order for costs of this Application in the event that the Application is successful. In terms of justifying circumstances the Wife relied upon the submissions in respect of substantive Costs Application and in particular submissions in relation to justifying circumstances that Application and the fact that this Application has been successful.
The Wife submitted that if I accepted her submissions that the bulk of the evidence of the Husband in his affidavit of 19 March 2008 had no relevance to the Costs Application of the Wife and/or that the effect of the Response of the Husband was a “back door” attempt by the Husband to bring a costs application out of time (without leave) and should be refused, then the Wife has incurred further and unnecessary costs in responding to same. I am of the view that there is some merit is the Wife’s submissions about the approach of the Husband.
In terms of s 117(2A) the Wife relied upon the same submissions above in relation to the financial circumstances of the parties.
I am satisfied that the Wife has established justifying circumstances and I am going to make an order that the Husband pay the Wife’s costs of the costs application. The Wife succeeded in obtaining a costs order albeit she did not recover an amount of the quantum she sought.
However, again, I am not going to order that the parties agree on the quantum and in the absence of agreement within a specified period the costs be taxed as I am confident that no such agreement would be reached and that any taxation would be a further protracted and expensive exercise. I am going to make an order pursuant to r 19.18(10(a) of the Family Law Rules that the Husband pay to the Wife an amount of $1,000 which sum, in my view, adequately compensates the Wife on a party/party basis for the extra expense she incurred. In arriving at the amount of $1,000 I have taken into account the matters in r 19.18(3) of the Rules. I am of the view that the material I had to consider in relation to the costs proceedings was excessive. It ought to have been a simple exercise with limited material.

I certify that the preceding one hundred and forty five (145) paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Ryan

Associate:

Date: 27 August 2009

[2009] FamCA 775

27 August 2009

Key Legal Topics

Areas of Law

Family Law

Civil Procedure

Legal Concepts

Costs

Appeal