Herbert and Herbert (No 3)
[2019] FamCA 1060
FAMILY COURT OF AUSTRALIA
| HERBERT & HERBERT (NO. 3) | [2019] FamCA 1060 |
| FAMILY LAW – PROPERTY – Where at the commencement of the trial in this matter, the wife made an oral application for leave to rely upon an adversarial expert report in respect of the valuation of an accounting business operated by the husband and wife – Where the report is a critique of the first report and comes up with a higher figure – Where the wife did not take the opportunity to ask questions of the first report writer as allowed for in previous Court orders – Where in all of the circumstances, it is not appropriate for the evidence to allowed to be adduced and the application is dismissed. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Simonsen & Simonsen [2009] FamCA 698 |
| APPLICANT: | Mr Herbert |
| RESPONDENT: | Ms Herbert |
| INDEPENDENT CHILDREN’S LAWYER: | Lyrene Wiid |
| FILE NUMBER: | BRC | 4902 | of | 2017 |
| DATE DELIVERED: | 29 July 2019 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 29 July 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr George |
| SOLICITOR FOR THE APPLICANT: | Rosen Lawyers |
| THE RESPONDENT: | Self-Represented |
| COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER: | Mr Slade Jones |
| SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: | Ms Wiid Lyrene Wiid Lawyer & Migration Agent |
Orders
That the wife’s oral application for leave to read and rely upon an adversarial expert report be dismissed.
That the single expert witness, Mr T, be provided with a copy of the HH Accountants report, at least 24 hours before he gives evidence at the trial of this matter.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Herbert & Herbert has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 4902 of 2017
| Mr Herbert |
Applicant
And
| Ms Herbert |
Respondent
And
| Independent Children’s Lawyer |
EX TEMPORE REASONS FOR JUDGMENT
These are property adjustment proceedings and parenting proceedings between Mr Herbert and Ms Herbert that were commenced in the Court in 2017 and have progressed through a number of interim hearings and what is summarily described as judge management in the lead up to listing of the matter for trial. The trial is listed to commence before me this morning at 10.00 am and to be of five days’ duration.
From the evidence that I have read and my knowledge of the case gleaned from my involvement in it since last year, I understand that perhaps the largest single item of property of the parties or either of them that will fall into a pool of property that may be made subject to property adjustment orders by the Court pursuant to s 79 of the Family Law Act 1975 (Cth) at the end of these proceedings is an accounting practice that the husband and the wife operate through the auspices of a discretionary family trust, of which a limited liability company, in which I understand they both have interests or at least one of them has share interests and both or one of them is a director, is the trustee.
From the commencement of the proceedings, it is plainly clear to me today, there has been disagreement or dispute between the husband and the wife as to the value of that accounting practice.
Accordingly, as is normally done as these matters are managed towards trial, the parties retained jointly a single expert accountant to value the practice. That was done as at the end of the calendar year 2017.
At the time, the husband was legally represented by his current solicitor and the wife was represented by a well-known, experienced and competent firm of family lawyers, Damien Greer Lawyers. They do not now represent the wife and rather unfortunately, the wife is appearing on her own without any legal representatives at all for this trial.
When Damien Greer lawyers were acting for her, they, along with Rosen Lawyers, the husband’s solicitors, jointly instructed Mr T, an accountant of EE Accountants, to provide a single expert valuation opinion report for the purposes of the property adjustment proceedings, in which he proffered his opinion as to the value of the accounting practice. His report was provided on 18 June 2018, and at that stage, by the addresses used on the front of the report, it appears that Ms Herbert was not retaining the services of Damien Greer Lawyers to act on her behalf.
Mr T’s report has been, pursuant to a direction of mine made at the trial management event that took place on 22 February 2019, attached by the husband’s solicitors to an affidavit sworn by Mr T, which was filed pursuant to a direction on 14 June 2019.
Along the way, at at least one or more of the interim hearings that took place before me in this matter last year, some of which involved property matters, but most of which involved parenting matters, the wife made it clear to me that she did not accept Mr T’s valuation opinion and that she was obtaining, and I actually have a memory that she told me that she had actually obtained, an expert report that just has not been made available to her because she had not been able to pay for it. In any event, she made it clear to the Court that she intended obtaining her own adversarial accounting expert report which she wanted to be able to put into evidence.
There is a notation to the orders and directions I made on 22 February 2019 to this effect:
IT IS NOTED:
(A)The wife was previously given leave to file an Application in Case seeking an order that she be allowed to adduce into evidence a report or evidence from another (adversarial) expert witness on the issue of the valuation of the husband’s accounting business. It was the Court’s intention that such application, if it was going to be filed, be heard on Monday, 18 February 2019. The wife did not file such an Application in a Case but has still indicated her desire to do so.
On Monday, 18 February 2019, the wife was informed that no further direction or orders would be made about that issue at this point in time and that it was now a matter for her and anyone who may advise her as to how to proceed with that issue and it was made clear to her that there is no guarantee that any such application would be successful, if and when such application is made. Indeed the provisions of r 15.49 of the Family Law Rules 2004 (Cth) were specifically brought to the wife’s attention.
Today, she acknowledges that I did that. Indeed, Mr George also reminds me that I caused the parties to be provided that day with a copy of a relevant decision in the matter of Simonsen & Simonsen [2009] FamCA 698 (“Simonsen”) of his Honour Justice Murphy in a determination of an application on this very same point.
So the wife has been on notice since early this year, February at least, that if she wanted to bring an application for leave to tender an adversarial accounting report or to use evidence from another expert on the same issue, she would have to make such an application and it would have to be brought pursuant to r 15.49 of the Family Law Rules 2004 (Cth). Clearly, with reference to that rule and that decision that I have just referred to, the things that she would have to persuade the Court of in order to convince the Court to give her that leave were made clear to the wife.
On 12 July 2019, so a couple of weeks ago, the wife filed an affidavit that she had sworn. In that, she says this:
I am the Respondent in these Proceedings.
I filed an Application in a Case for leave to adduce adversarial expert accounting evidence at the trial of the property adjustment proceedings.
She does not say when she did that. I suspect she may be referring to the application for leave to extend the period of time she was to file such an application. I am not quite sure. She does say:
These were to be filed and served by 31st January 2019…
So this explains it a bit. She does acknowledge that she was to file and serve her Application in a Case by 31 January 2019. That was, I remember, pursuant to an earlier direction made by me after she had given notice that she was going to be doing it. She says in her affidavit, however, that she put in an affidavit requesting leave for time to adduce further evidence. She does not refer to what I said in my order by that notation that I read out on 22 February 2019. She goes on to say this:
This evidence is now available and was requested at the hearing 18 February 2018 to have Mr FF from HH Accountants as a witness to adduce adversarial expert accounting evidence for review of the valuation of D Practice, E Pty Ltd ATF the Herbert Family Trust.
Hereto is a Report to the review and report explaining the value of Practice with two contracts for the value of $1,200 million with Appendices [attached]…
Attached to the affidavit, as she says, is a report dated 12 July 2019, on letterhead of a firm called HH Accountants of Brisbane, and the report is signed off by Mr FF, who is a director of that firm.
The report in itself is described as a review of a valuation of E Pty Ltd. So it is effectively a review of Mr T’s valuation of the accounting practice that is the property of the parties through the family trust that operates the practice.
The rule that I referred to, r 15.49, says:
If a single expert witness has been appointed to prepare a report or give evidence in relation to an issue, a party must not –
So it is mandatory.
– must not tender a report or adduce evidence from another expert witness on the same issue without the court’s permission.
And it is that permission that the wife is now seeking.
However, in order for the Court to give that permission, the following part of the rule is indeed relevant. Rule 15.49(2) says this:
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…
Firstly, before I turn to the things that the Court must be satisfied of or at least one of them, I identify that the subsection simply gives the Court a discretion. It does not mandate the allowing of the proposed evidence to be adduced. It gives the Court a discretion if it is satisfied of one of those things to consider whether it will indeed allow the evidence to be adduced.
The three pre-conditions of which the Court must be satisfied of at least one, if not two or three of them, are these:
(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.
I have heard submissions from Ms Herbert in support of her application. With all due respect to her, I consider that her submissions demonstrated, as I said to her during the exchange between bench and bar, a fundamental lack of understanding of the true substance of the two reports. Indeed, I was satisfied after the exchange and having read the two reports myself, with all due respect to Ms Herbert and I will say this as humbly as possible, I consider I understand more about the reports than Ms Herbert herself does. As I have said, that is not surprising.
If I can say this, the first report of the single expert basically applies a rule of thumb style value to the valuation process asserting that it is the way in which small accounting practices are valued and he says this process is undertaken by establishing the annual gross fees that the business invoices and applying a figure to that annual gross fee along a sliding scale of between $0.60 in the dollar to $1.05 in the dollar. He says that is a range he has obtained from some research he has done, referring to a particular body of research. He then breaks down the fees that the firm was earning on a gross basis at the time into classes of fees ranging from $0 to $1,000 per client, $1,000 to $5,000 I think, $5,000 to $10,000 and then above. He opines that as about 75% of the gross fees are from small clients, namely clients who are being charged between $0 and $1,000 for their annual work, the value to be attributed to the practice is not as great as it might otherwise be because of the greater churn factor, the prospect of losing those customers is greater than losing the more valuable customers, and he therefore attributes a figure of $0.67 in the dollar to the valuation process. He then arrives at a figure of some $612,000 and adds that in as the goodwill in determining – I think no sorry it is less than that. That is added to the goodwill along with the other assets of the practice that brought the total valuation to $612,000.
Now, there is no evidence at all that Ms Herbert did what the Rules otherwise provide for, which is to submit written questions to Mr T to ask him questions about some of the things he might have said in his report or some of the opinions he might have expressed. She has not done that whatsoever. There has been no attempt to confer with him or anything like that.
She simply wants to put in a report from Mr FF, where Mr FF has just taken Mr T’s report and expressed the view that he would not use the same scale that Mr FF has used because it was from a Western Australian firm. He would prefer to look at scales used by CPA Australia and a Queensland-related organisation, which had the sliding scale starting at a higher rate of some $0.80 in the dollar. He also then says he would apply a different cents in the dollar rate for each of the categories of fees in the four different fee bands; namely, $0.65 in the dollar for the first band, $0.85 in the dollar for the second band, $1.00 per dollar for the third band, and $1.05, a premium, per dollar in the fourth band in which there are only three customers and some $40,950 worth of fees. He ultimately comes up, using that approach, with an average of $0.81 in the dollar, which is some $0.14 in the dollar more than Mr T. His approach basically adds an extra $100,000 to the valuation and he arrives at a figure relying on Mr T’s report, but subject to those changes, of somewhere around $712,000, or $100,000 more than Mr T.
In order for Ms Herbert to persuade me that I should allow that in, she needs to be able to persuade me of one of those matters that I need to be satisfied of in order to consider whether I will allow it in or not. She has not, in any way, attempted to address any of those things, save to say that it is a higher figure, and that it would not be fair if I do not allow it in.
With all due respect, that is not a good enough reason in the circumstances. I am not satisfied from my reading of the second report as compared to the first report (Mr FF’s as compared to Mr T’s) that there is a substantial body of opinion contrary to the opinion given by Mr T and that this contrary opinion is or maybe necessary for determining the issue. Clearly, there is another opinion, that of Mr FF, but that does not persuade me that there is a substantial body of opinion that is contrary.
In respect of “another expert witness knows of matters, not known to the single expert witness, that may be necessary for determining the issue”, although Mr FF refers to some other research sources for coming up with some different sliding scales of cents in the dollar to be applied in this process, I am simply not satisfied that those are matters not known at all to the single expert witness. As I say there is no questions asked of Mr T and he may indeed know of those and have some reason for not preferring them. That is a matter I simply cannot decide or determine or say I am satisfied of at this particular time.
Furthermore, I am not persuaded that there is any other special reason for allowing this evidence to come in. It is simply a critique of the first report and comes up with a different figure that is higher, but that in itself is not enough to justify it coming into evidence.
In any event, even if one of those matters was satisfied, in all the circumstances, where the wife has had since the beginning of the year to do this, I consider it would be unfair and unjust to the husband to allow her at this point of the first day of the trial to adduce this evidence into evidence.
However, as I said in the exchange between bench and bar with Mr George of counsel for the husband and as was pointed out by his Honour Justice Murphy in Simonsen, armed with her report from Mr FF, the wife will be at liberty to cross-examine Mr T and to put some of these propositions to him to see whether or not he comes up with a different view. Indeed, I asked Mr George of counsel whether he would object to me directing Mr T to be provided in advance of his evidence with a copy of this report, to which he did. I note that objection. Nevertheless, in the circumstances, I consider that it is appropriate for Mr T to be provided with a copy of this report of Mr FF in advance so that he is prepared and ready to answer questions that Ms Herbert may wish to ask him in cross-examination in a way that will not cause any further delays or adjournments of time or unfairness to Mr T.
So I dismiss the wife’s application for leave to adduce Mr FF’s report into evidence but I direct that Mr T be provided with a copy of the HH Accountants report at least 24 hours before he gives evidence in this Court.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 29 July 2019.
Associate:
Date: 30 November 2020
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