Keir & Ramsay (No 4)
[2022] FedCFamC1F 747
Federal Circuit and Family Court of Australia
(DIVISION 1)
Keir & Ramsay (No 4) [2022] FedCFamC1F 747
File number(s): CRC 8 of 2020 Judgment of: CAMPTON J Date of judgment: 30 September 2022 Catchwords: FAMILY LAW – PROPERTY – EXPERTS – Where an order has previously been made for the appointment of a single expert witness to value three companies in which the parties have an interest – Where it is conceded that the value of each company is nominal – Where the respondent in reality seeks that the single expert witness undertake a tracing or audit of the applicant’s financial dealings on behalf of each enterprise – Order discharged – Where the time and financial cost in pursuing the course proposed by the respondent is wholly disproportionate to the importance of the issue that will be agitated by him in the substantive proceedings – Application dismissed. Legislation: Family Law Act 1975 (Cth) s 90SM
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 68
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ch 6, rr 1.04, 6.06
Cases cited: Black & Kellner (1992) FLC 92-287; [1992] FamCA 2
Keir & Ramsay (No 2) [2022] FedCFamC1F 730
Keir & Ramsay (No 3) [2022] FedCFamC1F 746
Weir & Weir (1993) FLC 92-338; [1992] FamCA 69
Division: Division 1 First Instance Number of paragraphs: 37 Date of hearing: 22 September 2022 Place: Sydney Solicitor for the Applicant: J Lawyers Solicitor for the Respondent: Litigant in person ORDERS
CRC 8 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR RAMSAY
ApplicantAND: MS KEIR
Respondent
order made by:
CAMPTON J
DATE OF ORDER:
30 September 2022
THE COURT ORDERS THAT:
1.Order 3 made on 17 September 2022 be discharged.
2.Within 14 days from the date of these orders, the respondent shall make such request for disclosure of documents as required from the applicant at his risk as to costs specifying with particularity the category and period of documents sought relevant to the issues listed for trial commencing 6 March 2023 and within 14 days thereafter the applicant shall provide disclosure of such documents as are in her possession or control, either by way of the provision of copies to the respondent or in the event of the disclosure requested being voluminous, making the documents available at a reasonable time and place for inspection by the respondent.
3.The Application in a Proceeding of the respondent filed on 22 September 2022 otherwise be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Keir & Ramsay has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J
Introduction
Mr Ramsay (“the respondent”) seeks orders by way of an Application in a Proceeding filed on 22 September 2022, as follows:
1.The Court orders that [EE Accounting Services] undertake the forensic accounting of the affairs of [G Pty Ltd] and [M Pty Ltd] as outlined in the annexed proposed letter of engagement & instructions
2.The Court orders the Applicant wife, within 14 days, produce to [EE Accounting Services] - all [M Pty Ltd] financial documentation for the period 1 Jan 2015 to 22 Sept 2022 - including all invoices, purchase orders, supplier invoices, sales invoices, Shopify transaction statements, monthly bank statements for all accounts held by the entity, or associated with the entity, or held by other persons on behalf of the entity with any and all financial institutions, ATO filings, ASIC filings, tax returns, Paypal transaction records, balance sheets, profit & loss statements, account login usernames & passwords for all accounts, corporate keys, depreciation schedules, income statements, expense receipts, details of all payments to all persons associated with or related to the activities of [M Pty Ltd], full customer list with contact information, signed share transfer documentation, company constitution, applications for Government assistance, domain hosting particulars, login details and password to any or all website domains registered to [Ms Keir], and all correspondence regarding [M Pty Ltd] with [FF Accounting Services] (formerly known as [GG Business Services]) for the period 1 Jan 2015 to 22 Sept 2022
3.The Court orders the Applicant wife, within 14 days, produce to [EE Accounting Services] - all [G Pty Ltd] financial documentation for the period 1 Jan 2013 to 22 Sept 2022 - including all job worksheets, invoices, purchase orders, supplier invoices, details of supplier payments, sales invoices, transaction statements, monthly bank statements for all accounts held by the entity with any and all financial institutions, ATO filings, ASIC filings, tax returns, balance sheets, profit & loss statements, account login usernames & passwords for all accounts, corporate keys, depreciation schedules, income statements, positive solvency resolutions, annual statements, expense receipts, details of all payments to all persons associated with or related to the activities of [G Pty Ltd], customer list, all correspondence with [FF Accounting Services] or [GG Business Services] regarding attempts to alter the share register of [G Pty Ltd] , company constitution, applications for Government assistance, domain hosting particulars, login details and password to website domain ... and all correspondence regarding [G Pty Ltd] business activities or filing requirements between the Applicant and [FF Accounting Services] (formerly known as [GG Business Services]) for the period 1 Jan 2013 to 22 Sept 2022
4.The Court orders the Applicant wife, within 14 days, produce to [EE Accounting Services] - all financial documentation for the trading name and business name [‘G Pty Ltd'] registered by [Ms Keir] and trading under the ABN […] for the period 3 December 2019 to 22 Sept 2022 - including all job worksheets, invoices, purchase orders, supplier invoices, supplier payments, sales invoices, transaction statements, monthly bank statements for all accounts held by the entity or associated with the entity including personal accounts held by the Applicant to which transfers were made with any and all financial institutions, ATO filings, ASIC filings, tax returns, balance sheets, profit & loss statements, account login usernames & passwords for all accounts, corporate keys, depreciation schedules, income statements, expense receipts, details of all payments to all persons associated with or related to the activities of the entity trading under the ABN […], customer list, applications for Government assistance for the period 1 Dec 2019 to 22 Sept 2022 and all correspondence regarding['G Pty Ltd'], ABN […], or the sole trader [Ms Keir] with [FF Accounting Services] (formerly known as [GG Business Services]) for the period 25 Sept 2019 to 22 Sept 2022.
(As it was recorded)
In support of the relief sought, the respondent relied on his affidavit filed on 22 September 2022.
By way of her Response to an Application in a Proceeding filed on 23 September 2022, Ms Keir (“the applicant”) seeks that the respondent’s Application in a Proceeding be dismissed.
The applicant seeks additionally that the orders made by Judge Jarrett (as he was then) as to the parties obtaining single expert valuations of three corporate entities be discharged, those entities being:
(a)X Pty Ltd ACN … (“X Pty Ltd”);
(b)G Pty Ltd ACN … (“G Pty Ltd”); and
(c)M Pty Ltd ACN … (“M Pty Ltd”) be discharged.
These reasons assume familiarity with the ex tempore decisions:
(d)Keir & Ramsay (No 2) [2022] FedCFamC1F 730, delivered on 20 September 2022 and orders made on that day; and
(e)Keir & Ramsay (No 3) [2022] FedCFamC1F 746, delivered on 23 September 2022.
Background
The parties commenced a de facto relationship in either mid-2007 or mid-2010. That relationship terminated at some time between December 2016 and September 2019. There are no children of the relationship.
On 15 January 2020 the applicant filed her Initiating Application seeking property adjustment pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”). The latest version of her substantive relief is contained in her Amended Initiating Application filed on 9 August 2022. The respondent currently seeks substantive relief by way of his Response to an Initiating Application filed on 20 May 2022. He seeks different orders for property adjustment pursuant to s 90SM of the Act than those sought by the applicant.
Part of the parties’ property includes their interests in G Pty Ltd and M Pty Ltd. The respondent holds two thirds of the issued shares in G Pty Ltd, and the applicant one third of the issued shares. The applicant holds all of the issued shares in M Pty Ltd.
The respondent filed a claim for oppression as a shareholder of G Pty Ltd and M Pty Ltd in the Federal Court of Australia in late 2020. Those proceedings have been transferred to this forum for determination as part of the s 90SM dispute. The claim is defended by the applicant. Neither corporation has engaged or appeared in the proceedings in this forum.
Both the substantive s 90SM claim and the oppression proceedings are listed for hearing over three days in the Rolling List in Sydney commencing on 6 March 2023.
The application in a proceeding
On 17 September 2020, Judge Jarrett (as he was then) made orders in the Federal Circuit Court of Australia in the following terms:
1.That on the sale of the property at [U Street, Suburb C] Victoria being the whole of the land comprised in Parent Title Volume […] Folio […] the proceeds of sale be disbursed as follows:
(a)Payment of $250,000.00 to the trust account of the [the respondent’s] solicitors to be held pending further Order.
(b)The balance to the Respondent as he directs.
2.The single expert valuers appointed by the parties pursuant to these Orders be paid from the monies referred to in Order 1(a).
3.[Mr V] of [W Pty Ltd] be appointed as single expert valuers to value the following entities:
(a)[X Pty Ltd]
(b)[G Pty Ltd]; and
(c)[M Pty Ltd].
4.[HH Valuers] be appointed as single expert valuers to value the real estate known as [AA Street, Town F] being the whole of the land comprised in certificate of title folio identifier […].
The sale of the respondent’s property at U Street, Suburb C Victoria (“the Suburb C property”) completed in late 2020 for $945,000. Save for the $250,000 retained in a trust account of the respondent’s then solicitors, the balance of proceeds of sale (of approximately $695,000 less agent’s commission and selling costs) were made available to the respondent as identified in the reasons in Keir & Ramsay (No 3) [2022] FedCFamC1F 746. That sum has been exhausted by the respondent over the past two years. Approximately $200,000 remains subject to the injunctive order and is currently held by the solicitors for the applicant in their trust account on behalf of the respondent.
The parties have agreed that the valuation of the property at AA Street, Town F (“the Town F property”) will be updated prior to the commencement of the trial. Those costs will be met from the injuncted funds pursuant to Order 2 made on 17 September 2020.
In late 2020 Mr V advised the parties he could not accept the appointment as a single expert valuer pursuant to Order 3 made on 17 September 2020. The applicant subsequently proposed three other experts to complete the valuation of the parties’ corporate interests. That invitation was not taken up by the respondent, who proposed that EE Accounting Services be appointed as the expert. There is currently no agreed single forensic accounting expert.
The parties agree that the liabilities of X Pty Ltd far exceed its assets and hence there is no utility in the single expert providing an opinion as to the value of their respective interests in that entity for the upcoming trial.
The applicant submits that the costs to be incurred in retaining another single forensic accounting expert to opine as to the value of M Pty Ltd and G Pty Ltd will far exceed the value of each corporation. Hence she submits that Order 3 made on 17 September 2020 ought to be discharged.
The applicant relies upon her affidavit filed on 23 September 2022, which exhibits the unsigned financial statements for M Pty Ltd for the financial years ending 30 June 2019 to 2021 inclusive, prepared by JJ Financial Services, and the unsigned financial statements G Pty Ltd for the financial years ending 30 June 2016 to 2018 inclusive, prepared by FF Accounting Services. It is her evidence that no financial statements have been prepared for G Pty Ltd after 30 June 2018.
In the course of the hearing the respondent conceded that:
(a)The value of each of M Pty Ltd and G Pty Ltd were nominal; and
(b)G Pty Ltd had no assets or capacity to repay the recorded shareholders’ loan of $649,991 recorded in its financial statements dated 30 June 2018, and M Pty Ltd had no assets or capacity to repay the $251,000 contended to be due to him as recorded in its financial statements for the financial year ended 30 June 2017 and written out of the corporations accounts by the applicant in the 2018 financial year; and
(c)In reality he was seeking that a single forensic accounting expert undertake a tracing or audit of the applicant’s financial dealings on behalf of each enterprise for the period from 1 January 2013 to 22 September 2022 in relation to G Pty Ltd and for the period 1 January 2015 to 22 September 2019 in respect of M Pty Ltd.
In these circumstances, Order 3 made on 17 September 2020 has no or little utility for the purposes of the issues listed for trial. It will be discharged.
The respondent contends that the cost of the single expert opinion in the terms as now sought by him would be in the range of $25,000. It is his proposal that part of the injuncted funds held in the trust account of the applicant’s solicitors would be applied to that cost in the first instance. Those funds are the respondent’s at law but are subject to the s 90SM claim of the applicant.
The respondent submitted that he has (and implicitly that he is not fishing for) the “documents to verify his contention” that the applicant has diverted in the range of $150,000 to $500,000 from the said corporations. He said that he has all of the relevant documents for the purposes of that tracing or audit process in respect of G Pty Ltd, but that he does not have the documents he requires by way of disclosure from M Pty Ltd. He conceded that he now has the past three published financial statements of that entity, given they were attached to the applicant’s affidavit filed on 23 September 2022.
He accepts that the contended diverted funds cannot be recovered from the applicant. His contention is that the fact and value of those diverted funds will have a significant impact on any exercise of discretion pursuant to s 90SM(3) of the Act.
The applicant disputes that she had not provided all documents requested by the respondent to his prior solicitors over the course of these proceedings. Her solicitor submitted, and I have no reason not to accept, that the respondent has engaged a number of different solicitors (potentially from up to seven firms) over the course of the proceedings and that those solicitors have all the documents in the applicant’s possession or control as have been requested to date. She says that folders of material have been provided.
There is insufficient evidence for me to determine what has been requested and when it was requested by way of disclosure, or what has been disclosed or when it has been disclosed. The solicitor for the applicant implicitly contends that the respondent’s request for disclosure as contained in his Application in a Proceeding filed on 22 September 2022 is oppressive and contrary to the legislation and rules regulating these proceedings.
The respondent now seeks expert evidence that will encompass a complex and intricate tracing of the use and application of funds. That process will involve an extensive review of a plethora of documents and information spanning a period of nine years in respect of G Pty Ltd and seven years in respect of M Pty Ltd.
The determination of the expert evidence relief now sought by the respondent drills down to proportionality of obtaining the expert evidence and assessing the probative value of that evidence, against the context of the property of the parties and the issues to be determined at trial.
Proceedings as to property adjustment pursuant to s 90SM are not an accounting or audit exercise.
In the event the respondent has in his possession or control the documents supporting his claims in respect of the applicant’s financial conduct in operating G Pty Ltd, and he ought to have the same documents in respect of her operations of M Pty Ltd, he ought to simply use those documents forensically, and in cross-examination, to establish his contentions.
In order for a forensic accountant to undertake the single expert exercise in the terms sought by the respondent, it will be necessary for that accountant to audit the published accounts of each corporation for a large number of years, engage by way of conferences with the applicant, her accountants and others (likely including the respondent) and then cross-reference the information provided with many years of source materials. The complex web of categories and sources of documents fused and aggregated in paragraphs 2, 3 and 4 of the orders sought in his Application in a Proceeding filed 22 September 2022 are a floodlit billboard to the checker plated labyrinthine avenues and pathways that are likely to be controversially pursued by the enquiries of the single expert.
As identified in my reasons for judgment in Keir & Ramsay (No 3) [2022] FedCFamC1F 746 delivered 20 September 2022, the modest value of the property of the parties available for adjustment is broadly the range of equity in the Town F property of between $45,000 and $220,000, the $200,000 regulated by the injunction and the applicants 50 per cent interest in real property recently acquired at DD Town having a value asserted of $21,500. The value of their corporate interests are nominal. The liabilities of the respondent, if accurately recorded, may lead to a conclusion that he is insolvent. It may be that the parties have lost perspective as to the value of the property pool available for adjustment. Concern exists that the remaining limited property of the parties will be consumed in funding the cost of this litigation to the completion of a trial. This is a matter that attracts significant weight in my determination.
Section 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”) mandates that the overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. Importantly the Act mandates the resolution of dispute is to occur at a cost that is proportionate to the importance and complexity of the matters in dispute. This overarching purpose is echoed in r 1.04 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”).
Section 68 of the FCFCOA Act imposes a statutory duty on the parties to the proceedings to act consistently with the overarching purposes of the legislation and rules.
Concepts of fairness to all parties are also appropriate. It is important that the concepts identified in the Act and Rules do not operate to thwart a meritorious claim.
That said, in all of the circumstances of this case, I am of the view that the appointment of a single forensic accounting expert to undertake the audit of both G Pty Ltd and M Pty Ltd in the terms sought by the respondent would be irreconcilable with the obligation of the Court to promote the overarching purpose mandated in the legislation and rules, and would be contrary to the statutory duty imposed upon the parties by way of s 68 of the FCFCOA Act and r 1.04 of the Rules. The time and financial cost in pursuing the course proposed by the respondent is wholly disproportionate to the importance of the issue that will be agitated by him in the substantive proceedings. That is evident when cast against his current financial circumstances and the relatively modest value of the pool of property available for adjustment.
The making of orders to facilitate disclosure will ensure that the respondent has the benefit of source documents to permit him to prosecute this part of his case. The respondent can identify with precision the category and date range of documents sought by way of a letter to the applicant’s solicitors to be sent within 14 days, at his risk as to costs if the documents he requests have already been disclosed or are found to be not relevant at trial. The respondent can respond to the letter within 14 days thereafter providing disclosure of the documents requested and in her possession or control.
The obligations of disclosure by parties to financial litigation as codified in ch 6 of the Rules are absolute and continuing. By way of the trial directions, each party is required to file and serve an undertaking as to disclosure in compliance with r 6.0 prior to the trial. The failure of a party to comply with an appropriate disclosure request may expose that party to the consequences identified in Full Court authorities such as Black & Kellner (1992) FLC 92-287 and Weir & Weir (1993) FLC 92-338.
Orders will be made otherwise dismissing the Application in a Proceeding filed 22 September 2022.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 30 September 2022
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