LISTER & LISTER
[2014] FamCA 606
FAMILY COURT OF AUSTRALIA
| LISTER & LISTER | [2014] FamCA 606 |
| FAMILY LAW – PROCEDURAL – where it was asserted that the rules in relation to expert evidence were ultra vires the judge’s rule making power – where the permission rule (rule 15.49(1) Family Law Rules 2004) is not inconsistent with s 56 and s 135 Evidence Act 1995 (Cth) – where the permission rule is not inconsistent with s 79 Family Law Act 1975 (Cth) – where rule 15.49(1) is a permissible use of the judges’ rule making power - where, applying the permission rule, leave was granted to rely upon the evidence of an adversarial expert. |
| Evidence Act 1995 (Cth) Sections 8, 11, 55, 56, 79, 131, 135 and 136 Family Law Rules 2004 Rules 1.04, 1.12, 15.42, 15.45, 15.49, and 15.69 |
| Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 W & W: Abuse allegations, Re: Expert evidence (2001) 28 Fam LR 45 |
| APPLICANT: | Mr Lister |
| RESPONDENT: | Ms Lister |
| FILE NUMBER: | SYC | 5754 | of | 2011 |
| DATE DELIVERED: | 5 August 2014 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 28 January 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Richardson, SC |
| SOLICITOR FOR THE APPLICANT: | Broun Abrahams Burreket |
| SOLICITOR FOR THE RESPONDENT: | Karras Partners |
Orders
Orders made 28.1.14
Leave granted to the husband to rely upon expert evidence from Mr S of X Services, such evidence to be filed and served by 28 February 2014.
I reserve my reasons for making order 6.
Mr S and Mr P are to confer and prepare a joint statement in accordance with rule 15.69 Family Law Rules, to be filed and served by 19 March 2014.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Lister & Lister has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 5754 of 2011
| Mr Lister |
Applicant
And
| Ms Lister |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
A single expert witness who had been appointed with the consent of the parties has prepared a valuation. The husband seeks to rely upon evidence from an adversarial expert which takes issue with certain assumptions and opinions of the single expert.
That application was opposed by the wife on the basis that the Family Law Rules 2004 (“the rules”) require the husband to obtain the court’s leave to rely upon the report from his adversarial expert, and that leave should not be granted.
The husband submitted that he did not need any permission to rely upon the evidence of the adversarial expert because the rule saying that he did (rule 15.49(1); “the permission rule”) was ultra vires the rule making power. Alternatively the husband submitted, if the rule is valid, leave should be granted.
The husband’s central contention is that s 123 Family Law Act 1975 (Cth) (“ Family Law Act”) is an insufficient legislative underpinning to support a rule which the husband submits changes substantive rights which he has arising out of s 56 Evidence Act1995 (Cth) (“Evidence Act”) and s 79 Family Law Act.
An order was made granting the husband leave to rely upon evidence of an adversarial expert. The reasons for making the order were reserved. These are those reasons.
BACKGROUND
The pool of assets in this case is in the range of $6 million to over $8 million.
One of the significant assets is shares in the husband’s name in C Pty Limited. The single expert has valued the husband’s interest in those shares in the sum of R$28.1 million or AUD$3,058,000.
The report prepared by Mr S, the husband’s adversarial expert, provides an assessment of the valuation performed by the single expert.
It is not a matter of contention that Mr S is a person possessed of specialised knowledge (as that term is used in s 79 Evidence Act) that permits him to express admissible expert opinion in the area of business valuation.
Mr S’s assessment is currently limited in its scope and, for the purposes of the assessment, adopted some of the assumptions of the single expert. Mr S focused upon the single expert’s conclusion in relation to the EBITDA multiple. The single expert had settled on a multiple of 5.65. Mr S provides an opinion that the multiple should be between 3 and 4.
That difference in opinion leads to a valuation of the husband’s shares in C Pty Limited by Mr S which is approximately AUD$1,200,000 less than the opinion provided by the single expert. It is not controversial in this case that if Mr S’s evidence were admitted and ultimately accepted, it would be relevant evidence. Mr S also indicates that if a full valuation was done, he contends that the following issues are also to be addressed:
11.1.The cost of equity is understated;
11.2.The risk premium is understated;
11.3.The terminal value approach of the single expert is erroneous; and
11.4.The discounts for lack of control and marketability are inadequate.
RELEVANT FAMILY LAW RULES
Section 123 Family Law Act provides that the judges, or a majority of them, may make Rules of Court not inconsistent with the Act providing for or in relation to the practice and procedures to be followed, and for and in relation to all matters and things incidental to any such practice and procedure, or necessary or convenient to be prescribed for the conduct of any business.
In 2004 a majority of the judges of this court introduced new rules. The following parts of the rules are relevant for the purposes of the current discussion:
Rule 1.04 - MAIN PURPOSE OF RULES:
The main purpose of these Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.
…
Rule 1.12 – COURT MAY DISPENSE WITH RULES
(2) The court may dispense with compliance with any of these Rules at any time, before or after the occasion for compliance arises.
(3) In considering whether to make an order under this rule, the court may consider:
(a)the main purpose of these Rules (see rule 1.04);
(b)the administration of justice;
....
(e)the effect that granting relief would have on each party and parties to other cases in the court.
…
Rule 15.42 - PURPOSE OF PART 15.5 (EXPERT EVIDENCE):
The purpose of this Part is:
(a) to ensure that parties obtain expert evidence only in relation to a significant issue in dispute;
(b) to restrict expert evidence to that which is necessary to resolve or determine a case;
(c) to ensure that, if practicable and without compromising the interests of justice, expert evidence is given on an issue by a single expert witness;
(d) to avoid unnecessary costs arising from the appointment of more than one expert witness; and
(e) to enable a party to apply for permission to tender a report or adduce evidence from an expert witness appointed by that party, if necessary in the interests of justice.
…
Rule 15.45 – ORDER FOR SINGLE EXPERT WITNESS
(1) The court may, on application or on its own initiative, order that expert evidence be given by a single expert witness.
(2) When considering whether to make an order under subrule (1), the court may take into account factors relevant to making the order, including:
(a) the main purpose of these Rules (see rule 1.04) and the purpose of this Part (see rule 15.42);
(b) whether expert evidence on a particular issue is necessary;
(c) the nature of the issue in dispute;
(d) whether the issue falls within a substantially established area of knowledge; and
(e) whether it is necessary for the court to have a range of opinion.
(I shall refer to rule 15.45 as the “single expert witness” rule)
…
Rule 15.49 - APPOINTING ANOTHER EXPERT WITNESS
(1) If a single expert witness has been appointed to prepare a report or give evidence in relation to an issue, a party must not tender a report or adduce evidence from another expert witness on the same issue without the court's permission.
(2) The court may allow a party to tender a report or adduce evidence from another expert witness on the same issue if it is satisfied that:
(a) there is a substantial body of opinion contrary to any opinion given by the single expert witness and 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 shall refer to rule 15.49 as the “permission” rule)
Senior counsel for the husband submits that the rule making power in s 123 Family Law Act is confined to matters of practice and procedure and that the permission rule, both in its theoretical and practical effect, crosses into substantive law by making inadmissible what would otherwise be admissible, or by permitting the court to refuse to grant permission to adduce evidence with the ultimate effect that evidence which is admissible becomes inadmissible.
RELEVANT PROVISIONS IN THE EVIDENCE ACT
It is useful to set out provisions of the Evidence Act that are relevant to these contentions:
Section 8 – Operation of other Acts etc.
(1) This Act does not affect the operation of the provisions of any other Act…
…
Section 11 – General powers of a court
(1) The power of a court to control the conduct of a proceeding is not affected by this Act, except so far as this Act provides otherwise expressly or by necessary intendment.
…
Section 55 – Relevant evidence
(1) The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding.
Section 56 - Relevant evidence to be admissible
(1) Except as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding.
(2) Evidence that is not relevant in the proceeding is not admissible.
…
Section 135 - General discretion to exclude evidence
The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:
(a) be unfairly prejudicial to a party; or
(b) be misleading or confusing; or
(c) cause or result in undue waste of time.
Section 136 – General discretion to limit use of evidence
The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might:
(a) be unfairly prejudicial to a party; or
(b) be misleading or confusing.
IS THE PERMISSION RULE VALID?
Senior counsel for the husband asserts that the permission rule:
16.1.Takes away the substantive right of a party to bring admissible evidence as permitted by s 56 Evidence Act; and
16.2.Impermissibly fetters the ability of the court to make a just and equitable property settlement order as mandated by s 79 Family Law Act.
It is argued that consequently the permission rule is ultra vires the rule making power. A supplementary submission is that if any part of the permission rule is to survive, it must be read down so as to operate conformably with the Evidence Act and not operate to exclude evidence which is otherwise admissible at law.
The origins of the 2004 expert evidence rules
Part of the main purpose of the rules is to ensure that each case is resolved in a just manner. Prior to the introduction of the current rules in 2004, there was a clear concern expressed by the court that opinion evidence provided by adversarial experts, employed by each of the parties, was often tainted by partisanship.
These views were influenced by the work of Lord Woolf in the United Kingdom:
A single expert is much more likely to be impartial than a party’s expert can be. Appointing a single expert is likely to save time and money, and to increase the prospects of settlement. It may also be an effective way of levelling the playing field between parties of unequal resources. These are significant advantages, and there would need to be compelling reasons for not taking them up[1].
[1] Lord Woolf, Access to Justice: final report (1996) [13.2]
Concerns about partisanship by a party’s own expert were articulated in the following discussion by Nicholson CJ and O’Ryan J in W & W: Abuse allegations, Re: Expert evidence (2001) 28 Fam LR 45 at [149] and [157 – 165]:
149. In a chapter titled “Problems Relating to the Expert Witness in Personal Injury Cases”, appearing in Harold H. Glass (Ed.) (1970) Seminars on Evidence, The Law Book Company Ltd, Mr. Gordon J. Samuels (as he then was) said:
“The criticism made of the expert witness may be justified. But, in justice, it should be directed not at the witness himself but at the role which the lawyers have forced him to adopt. It was they who originally altered his function from that of an assessor to that of a witness; and it is not his own corruption which had brought him into low repute, but the circumstances in which this function has to be discharged. The allegation of undue adherence to his client’s cause is made by those have created and who perpetuate the forensic techniques to which he has been forced to adapt himself. It is not the expert’s own choice to be a partisan but a consequence of the adversary system in which he has to play a part.”
…
157. This brings to mind the statement in Lord Arbinger v Ashton (1873) 17 LR Eq 358 at 374 that:
“Undoubtedly there is a natural bias to do something serviceable for those who employ you and adequately remunerate you. It is very natural, and it is so effectual that we constantly see persons, instead of considering themselves as witnesses, rather consider themselves as the paid agents of the person who employs them.”
158. That impression persists today amongst the Australian judiciary.
159. In July 1999, The Australian Institute of Judicial Administration published a survey of Australian judges by Ian Freckelton, Prasuna Reddy, and Hugh Selby titled Australian Judicial Perspectives on Expert Evidence: An Empirical Study. We share the authors’ view (at para 1.1 of their Executive Summary) that:
“the perspective of the judiciary is important because judges, more than any other participants in the civil, family law and criminal justice systems, consistently see expert witnesses and reports and have an opportunity to evaluate them from a dispassionate standpoint.”
160. Relevantly, the Australian Law Reform Commission Report No 89 Managing Justice – A review of the federal civil justice system released last year, noted (at para 8.159) that a comparative analysis made clear that:
“... the Family Court is much more directly involved than most other courts in the way in which expert evidence is collected and presented to it.”
161. Freckelton et al’s sample of 244 judges amounted to just over half of all those approached and were thought to represent approximately 60% of trial Judges. The results were conveniently summarised in the following way at para 6.95 of the Managing Justice Report:
“most judges responding to the survey questionnaire had occasionally encountered ‘bias’ on the part of experts. Nearly nine out of ten judges said that had encountered ‘partisanship’ in expert witnesses, and nearly half considered that such partisanship was a significant problem for the quality of fact-finding in their court” (footnotes omitted).
162. Freckelton et al commented (at para 1.2 of their Executive Summary):
“... the forensic reality is that experts, especially in civil and family litigation, are retained by one party which is intent upon winning the case, or, if that is not feasible, upon minimising the extent of their loss. Each party pays for the experts of its choice, selecting them on the basis of the extent to which, by opinions and the way that the express them, the experts will advance the party’s contentions (sic) case. Selection of the expert witnesses is not generated by a dispassionate quest for truth by either courts/tribunals or the parties.”
163. In an article by Sperling J presented at the Supreme Court of New South Wales Annual Conference in 1999 and published as “Expert Evidence: The Problem of Bias and Other Things” (2000) 4 The Judicial Review 429, his Honour observed at 432:
“The actual role of the expert witness, particularly in major litigation, is that the expert is part of the team. He – it usually is a “he” – contributes to the way the case is framed and indirectly to decisions as to what evidence is to be got in to provide a basis for his opinion. His report is honed in consultation with counsel. Then, when it comes to the trial he is a front line soldier, carrying his side’s argument on the technical issues under the fire of cross-examination.
Natural selection ensures that expert witnesses will serve the interests of their clients on this way. If the expert measures up he will be kept on and he will be used again by the same client, the same solicitors and others. If he does not measure up, he will be dropped from the case or never used again by anyone. He then disappears from the forensic scene.
An appearance of objectivity is a marketable attribute. Cross-examination or contrary evidence may unmask dissemblance or may not. A judge is ill-equipped to diagnose bias in an expert witness. It is likely, therefore, that the incidence of bias as assessed by surveyed judges in the Freckelton report is an under-estimate.
Judges are interested in valid fact-finding. So long as the adversarial system continues unremittingly, however, the interests of litigants in presenting expert evidence that may win the case will prevail over the interests of judges in obtaining objective assistance on technical issues as a basis for valid fact finding.”
164. Taylor on Evidence has this to say on the subject:
“These witnesses are usually required to speak, not to facts, but to opinion; and when this is the case it often quite surprising to see with what facility, and to what extent, their views can be made to correspond with the wishes or the interests of the parties who call them.”
165. In a similar vein, Walsh J observed in Miller Steamship Co. Pty. Limited v Overseas Tankship (U.K.) Ltd. (1963) N.S.W.R. 737 at 753:
“As to the evidence of the academically qualified scientists, a brief review of it will suffice because I cannot regard this as of much assistance ... Professor X, Y & Z, called for the defendant and Professor P. for the plaintiff, are all learned and intelligent men, I have no doubt that they gave their evidence honestly, although affected in greater or less degree by the kind of unconscious bias which is a well-known characteristic of expert evidence.”
The concern that partisanship was getting in the way of just outcomes was a clear motivation for the introduction of the single expert rule and the permission rule. The Explanatory Statement to the Family Law Rules, Division 15.5.2: Single Expert Witness says:
Division 15.5.2: Single expert witness
Overview
One of the strategies employed in these new rules to overcome the identified problems of partisanship, lack of clarity of evidence and excessive cost is to encourage parties to consider at an early stage whether expert evidence is necessary and if so whether that evidence can be given by a single expert witness.
One of the reasons leading to this approach is the difficulty that modern courts have in deciding between two completely contrary opinions in complex and abstruse problems
“in many cases a judge being unable to fully understand the expert evidence because of its complexity may be compelled to decide between competent opinions on some wholly artificial basis………”[2]
[2] Chief Justice Paul de Jersey AC “Experts, adversarialism, a non-partisan solution: Queensland’s draft rules” 20th June 2003
Experience in the UK is that since the introduction of similar rules in the Uniform Civil Procedure Rules 1999, parties, in most cases, instruct a single expert witness and that:
· single experts are more impartial;
· single experts see their duty as being to the Court;
· the process saves time and money;
· single experts assist in levelling the playing field between parties with unequal resources;
· single experts increase the prospect of settlement.
It is about controlling admissible evidence to that which is necessary to assist the court to determine a relevant issue. In appropriate cases the Court will allow parties to instruct an adversarial expert.
In relation to the suggestion that sole expert witnesses interfere with a party’s fundamental adversarial rights Justice de Jersey says “ It is however difficult to conceive that confining the evidence on a point to that of a sole expert, where the parties
· have a say in his or her identity,
· have the full capacity to instruct the witness
· are not restrained from privately engaging an advising expert
· retain the full capacity to test the evidence in court
could infringe” that right…. ….
“ …and the judge may feel greater confidence, not only in accepting the opinion of the expert, but in seeking the expert’s help in better understanding the questions in issue and the opinions on those questions….”
Court’s power to control its own processes
Senior counsel for the husband relied in his written submissions on the following passage from State of Queensland v J L Holdings Pty Limited (1997) 189 CLR 146 (per Dawson, Gaudron and McHugh JJ) p155:
…Justice is the paramount consideration in determining an application such as the present one… Case management, involving as it does the efficacy of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties.
Here the husband asserts that the permission rule works to exclude the evidence of the husband’s adversarial expert and operates to potentially preclude a material and substantial argument about the valuation of one of the major assets held by the parties.
The passage cited by senior counsel for the husband has been considered further by the High Court in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175. French CJ quotes [155] from J L Holdings in its entirety (at [29] of his judgment). At [30] of his reasons French CJ says:
It might be thought a truism that "case management principles" should not supplant the objective of doing justice between the parties according to law. Accepting that proposition, J L Holdings cannot be taken as authority for the view that waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants, should not be taken into account …Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification...
This court has the power to control its own practices and procedures. This power is both inherent and conferred by s 123 Family Law Act. A party does not have a right to call admissible evidence at any stage of proceedings.
Section 8 Evidence Act provides that provisions in that Act are subject to provision in any other Act. Section 11 Evidence Act provides that, unless expressly or by necessary intendment, provisions in that Act do not affect the power of a court to control the conduct of a proceeding.
It was correctly conceded that the permission rule is made in the furtherance of the object of case management.
All superior Australian courts have rules which seek to control how expert evidence is prepared and presented to the court. The Federal Court, the Supreme Courts of all States (except Western Australia) and of the Australian Capital Territory, have particular legislative underpinning for making rules in relation to expert evidence. Reliance by the judges of the Family Court to make rules in relation to expert evidence based on a power expressed in more general terms does not determine the argument in the husband’s favour.
Substantive rights and the rules
The husband relied upon statements by the High Court in Harrington v Lowe (1996) 190 CLR 311 at pages 323-6 and 337-344. In that case, the wife sought that consent property settlement orders be set aside on the basis that the orders did not reflect the agreement reached by the parties at the conciliation conference and that the husband knew the wife had made a mistake when agreeing to the form of the orders. In order to succeed, the wife needed to be able to give evidence as to what had been said at the conciliation conference.
In Harrington v Lowe the High Court dealt with two different rules (as then existed), one which was found to be a valid exercise of the rule making power within the scope of s 123 Family Law Act and the other which was not.
The first related to the rule which fixed a time by which a review against the registrar’s decision could be made; the second related to a rule which provided that evidence of anything said in the course of a conciliation conference was not admissible in any court.
In finding the rule limiting the time to seek a review of a Registrar’s decision was valid, the High Court pointed, amongst other things, to the discretion in the rule which allowed the court to extend time. In contrast, in finding the rule forbidding the admission of evidence invalid, the High Court pointed, amongst other things, to the absolute nature of the prohibition, which did not contain the usual exceptions that would allow the admission into evidence of confidential communication (see Rogers v Rogers (1964) CLR 608[3]).
[3] Harrington v Lowe was decided at first instance before the introduction of s 131 Evidence Act
The plurality in Harrington v Lowe at page 324-5 state that s 123 Family Law Act contains broad but limited terms:
The power does not authorise the making of regulations which....vary or depart from, and thus are inconsistent with[4], the positive provisions of the Act such as s 79A(1)...
[4] Ansett Transport Industries (Operations) Pty Ltd v Wardley (1980) 142 CLR 237 at 260
There is not always a bright line between legitimate rules of court in relation to practice and procedure and rules which stultify substantive rights (see Kirby J in Harrington v Lowe at page 341).
There is a line which may not be crossed if the rule abrogates substantive rights. The husband asserts that substantive rights to which he is entitled, arising from s 56 Evidence Act and s 79 Family Law Act, have been taken away by the permission rule.
Is the permission rule inconsistent with s 56 and s 135 Evidence Act?
Section 56 Evidence Act is not a stand-alone section. The section is stated to be subject to other provisions in the Evidence Act. Relevantly, it may be excluded by s 135 Evidence Act. Section 135 is a discretionary provision which allows the court to manage the nature and quality of the evidence which it accepts for the purposes of determining a particular controversy. There is to be a balancing of the advantages of admitting the evidence against the disadvantages of doing so. Probative evidence is to be admitted unless substantial dangers outweigh that happening. When viewed through the prism of the dangers of partisanship, the single expert and the permission rule sit comfortably with s 135 Evidence Act. It might be argued that the rule reverses some forensic onus but that is all it does. It does not remove substantive rights. Rule 15.49(1) Family Law Rules is based upon the premise that the integrity of opinion evidence is likely to be superior if one party does not commission it. Rule 15.49(2) and rule 1.12 give the court wide discretion, in the context of the facts of a particular case, to ensure that adversarial expert evidence is admitted if it is not unfairly prejudicial to the other party, if it is not misleading or confusing, and if it does not cause or result in undue waste of time for the other party and the court. The rules recognise that not every issue of expert opinion is amenable to resolution by untested or tested opinion of a single expert. The rules do not sweep under the carpet the need to examine legitimate differences of opinion in relation to complex issues that will have a material effect upon the ultimate outcome. The rules provide a discretion which caters for those cases.
The permission rule is not inconsistent with the Evidence Act when sections 56 and 135 are read together.
Is the permission rule inconsistent with s 79 Family Law Act?
Senior counsel for the husband submits that the permission rule is inconsistent with the obligation imposed by s 79 to make a property settlement order which is just and equitable.
A court when exercising jurisdiction under s 79 must identify and value the property of the parties held jointly or individually (Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143 at [39]; Stanford v Stanford (2012) 247 CLR 108 at [37]; Bevan and Bevan (2013) FLC 93-545 at [60]).
A court cannot abrogate the obligation of making findings as to the value of assets to expert witnesses (Lenehan and Lenehan (1987) FLC 91-814; In the Marriage of WJ and M Dunbar (1987) 11 Fam LR 901)
It is axiomatic that findings as to values should be made upon the best evidence available. Partisanship gets in the way of a court having that best evidence. The single expert rule and the permission rule, if they neutralise partisanship, are rules which buttress the likelihood of a more accurate finding about the values of assets and promote the likelihood of a court achieving a just and equitable alteration of property. There, of course, needs to be safeguards against a single expert getting something wrong. The expert evidence rules provide a range of protective measures. They include the pre-trial ability of a party to ask written questions of a single expert witness and to have a conference with a single expert witness. They also relevantly allow a party to ask a court for permission to call an adversarial expert if the facts of the case warrant it. Significantly, as rule 15.42(e) makes clear, one of the purposes of the rules is to enable a party to apply for permission to tender a report or adduce evidence from an expert witness appointed by that party, if necessary in the interests of justice.
Seen in that context, the permission rule is not a rule which stultifies the operation of s 79 Family Law Act and not one that imposes a regime inconsistent with s 79 Family Law Act.
Conclusion as to whether Rule 15.49 is valid
I find that with its inbuilt protections, rule 15.49 is a permissible use of the judges’ rule making power. It is consequently not necessary to read down rule 15.49 in any way.
THE EXERCISE OF DISCRETION IN THIS CASE
In the event that the rule was found to be valid, senior counsel for the husband in the alternative, sought leave pursuant to rule 15.49(2).
The discretion provided by that rule stands to be exercised in the shadow of rule 1.04 which states that the main purpose of the rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.
Senior counsel for the husband pointed particularly to rule 15.49(2)(b) and (c) which I have set out above.
In this case, Mr S has identified a dispute as to the approach taken by the single expert which is multifaceted. At its core Mr S asserts that there is serious error as to the EBITDA multiple adopted by the single expert and in relation to bench marks used by the single expert. I accept that there are a number of controversial issues that emerge on the face of the single expert’s valuation, including issues relating to the admissibility of particular parts of the report (which issues have not yet been fully argued nor determined).
In relation to the discount for lack of control and marketability, senior counsel for the husband submitted that the single expert assumed that a minority shareholder can access the underlying assets of the company and referred in passing to what Mason J said at page 627-8 in Mallet v Mallet (1984) 156 CLR 605.
I have regard to the complexity of the issues involved in the valuation of the husband’s interest in his shares in C Pty Limited I find that if the applicant is deprived of an opportunity to adduce evidence from Mr S, that would in the context of the facts of this case constitute a serious denial of natural justice and may operate to undermine the integrity of the proceedings. I have regard to the whole of the purpose of Part 15.5 as identified in rule 15.42.
On the face of the material presented by Mr S, I am comfortable that he is another expert witness who may know of matters, not known to the single expert witness, that may be necessary for determining the issue of the valuation of the husband’s interest in C Pty Limited (rule 15.49(2)(b)) or alternatively, that there is a special reason for adducing evidence from Mr S in this case arising from a controversy over a number of identified issues, including issues going to methodology (rule 15.49(2)(a) and (c)). I have regard to the effect the evidence of the adversarial expert, if accepted, would have on the outcome in this case (rule 15.49(2)(c)).
I am assured by both parties that Mr S can complete his valuation and Mr S and the single expert can do what is provided for in rule 15.69 (a conference between experts and the provision of the 15.69(3)(e) joint statement) within a time frame that does not jeopardise the scheduled hearing dates.
Leave is granted to the husband to rely upon expert evidence from Mr S.
I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 5 August 2014.
Associate:
Date: 5 August 2014
Key Legal Topics
Areas of Law
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Family Law
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Evidence
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Statutory Interpretation
Legal Concepts
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Expert Evidence
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Procedural Fairness
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Judicial Review
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Statutory Construction
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Remedies
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