FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Macvean & Manton [2022] FedCFamC1F 376
File number(s): MLC 13788 of 2019 Judgment of: BERMAN J Date of judgment: 26 May 2022 Catchwords: FAMILY LAW – EVIDENCE – Expert evidence – Where the respondent seeks leave to rely upon separate adversarial evidence – Where the respondent sought a report from a separate expert a few days before the trial commenced – Consideration of when separate adversarial evidence can be called – Where the jointly appointed single expert is qualified to give evidence – Where the issues put to the separate expert have not been put to the single expert – Where the Court rules provide an opportunity for questions to be put to a single expert – Where the separate expert does not present an opinion based upon a substantial body of opinion contrary to that given by the single expert – Application dismissed. Legislation: Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 1.05, 7.08, 7.18, 7.26 Cases cited: Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 Division: Division 1 First Instance Number of paragraphs: 36 Date of hearing: 26 April 2022 Place: Melbourne Counsel for the Applicant: Mr Werner Solicitor for the Applicant: Johnston Family Lawyers Counsel for the Respondent: Mr Mellas Solicitor for the Respondent: Nicholes Family Lawyers ORDERS
MLC 13788 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR MACVEAN
Applicant
AND: MS MANTON
Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
27 APRIL 2022
THE COURT ORDERS THAT:
1.The Application in a Proceeding filed 26 April 2022 is 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 Macvean & Manton is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
Mr Macvean (“the applicant”) and Ms Manton (“the respondent”) remain unable to reach agreement in respect of property settlement and division. By a consideration of the Amended Initiating Application of the applicant filed 24 November 2021 and the Response to Application for Final Orders of the respondent filed 7 December 2021, it is apparent that the significant area of disagreement is as to the assets and liabilities of the parties.
At the commencement of the trial on 26 April 2022, counsel for the…
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CaseChat Overview and Summary
The case of Macvean & Manton involves the assessment of the value of a business, P Pty Ltd, and its product, P1 Service. The applicant, who is the registered proprietor of a property and the founder and chief executive officer of P Pty Ltd, was in dispute with the respondent over the valuation of the business and product. The applicant submitted a report from a single expert, Hockley, who valued P Pty Ltd and P1 Service as a single trading entity using the capitalisation of earnings method due to the lack of forecast financial information. The respondent proposed to call an additional expert, Mr N, to give adversarial evidence, which the applicant opposed. The court was required to decide whether leave should be given to adduce separate adversarial evidence in the context of expert evidence in family law matters.
The court considered the rules and principles governing expert evidence, particularly the purpose of ensuring that expert evidence is restricted to significant issues in dispute and that it is given by a single expert where practicable. The court noted that Mr N's evidence did not present an opinion substantially contrary to the single expert's opinion and that the respondent had not posed proper questions to the single expert. The court also observed that the exercise had been undertaken without notice or opportunity for the single expert to consider the matter further. Given these circumstances, the court concluded that the court would not be assisted by evidence from both the single expert and the proposed adversarial expert.
The court determined that leave should not be given to adduce separate adversarial evidence. This decision was based on the lack of substantial difference in opinion between the single expert and the proposed adversarial expert, the absence of proper questioning by the respondent to the single expert, and the procedural unfairness of the situation. The court made an order in line with its conclusion, prohibiting the respondent from calling Mr N as an expert witness.
The court considered the rules and principles governing expert evidence, particularly the purpose of ensuring that expert evidence is restricted to significant issues in dispute and that it is given by a single expert where practicable. The court noted that Mr N's evidence did not present an opinion substantially contrary to the single expert's opinion and that the respondent had not posed proper questions to the single expert. The court also observed that the exercise had been undertaken without notice or opportunity for the single expert to consider the matter further. Given these circumstances, the court concluded that the court would not be assisted by evidence from both the single expert and the proposed adversarial expert.
The court determined that leave should not be given to adduce separate adversarial evidence. This decision was based on the lack of substantial difference in opinion between the single expert and the proposed adversarial expert, the absence of proper questioning by the respondent to the single expert, and the procedural unfairness of the situation. The court made an order in line with its conclusion, prohibiting the respondent from calling Mr N as an expert witness.
Orders
Orders of the court
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Background
Background to the litigation
The intention of the respondent, via her solicitors, was not to seek assistance from Mr N for the purposes of cross-examination of the single expert but rather that he give evidence as a separate adversarial expert. Mr N’s report dated 21 April 2022 (“the N report”) is annexure “N-3” to his affidavit filed on the same date.BACKGROUND The parties commenced cohabitation in 2007. At the time, the applicant was the registered proprietor of the property at B Street, Suburb C. The equity in the property was relatively modest. In addition, the applicant held a one third interest in the P Pty Ltd business. In 2008, the applicant purchased a further one third interest in the business and then the final remaining one third interest in 2015. Whilst the P Pty Ltd Group is comprised of a number of entities the principal focus of the single expert was the valuation of P Pty Ltd (“P Pty Ltd”). It is uncontroversial that P Pty Ltd was established on 3 May 2001 and for the purposes of the proceedings, the applicant is to be considered as the chief executive officer and founder of P Pty Ltd. The applicant concedes that P Pty Ltd is promoted by him as a significant and highly regarded private business service provider. By reference to the P Pty Ltd Linkedin profile as appears in the M report at page 13, paragraph 45, P Pty Ltd is described as follows:[P Pty Ltd] is one of Australia’s leading product developer and service providers…(Emphasis in original) As part of research and development, P Pty Ltd developed a product known as P1 Service. The product is intended to enable a partnership with R Company to enhance and interface with S product and will then be distributed on a worldwide basis. There is already contention between the parties as to the likely success of P1 Service. The applicant seeks to adopt a cautious approach and considers that P Pty Ltd is currently operating in a poor business environment and that the take up of P1 Service has been disappointing. The respondent does not accept the applicant’s pessimism and refers to evidence of a marketing strategy where sales could reach up to $30 million.THE HOCKLEY REPORT The single expert valued P Pty Ltd and P1 Service as one trading entity. The valuer accepted the content of a letter from the applicant’s solicitors dated 28 October 2021 which seeks to present the P Pty Ltd business as operating in a depressed market with P1 Service facing marketplace acceptance difficulties. An important consideration in terms of the valuation approach adopted by the single expert is set out in the M report as follows:156.I understand that [P1 Service] is facing difficulties with its acceptance in the marketplace, however, based on the extent of the R&D costs incurred in FY2021 compared to prior financial years I have assumed that the product is no longer in the core development phase of the product life cycle and as such should be considered as a revenue-generating component of the broader [P Pty Ltd] business.157.It is generally accepted that the most technically accurate method to adopt for the valuation of a business is the discounted cash flow method; however a lack of appropriate forecast financial information means that it is rarely adopted. I have not been provided with forecast financial information for at least five years for the above entity and consequently, I have not been able to apply the discounted cash flow method.158.The capitalisation of earnings method is generally adopted in the valuation of enterprises as a proxy for the discounted cash flow method, as it is forward looking but assumes that the assessment of future earnings will remain static or grow consistently in the future. 159.Given the lack of forecast financial information and lack of reliability, I have assessed the value of [P Pty Ltd] by the application of the capitalisation of earnings method. THE LONERGAN REPORT
Evidence
Evidence Before The Court
Mr N considered that the value of P1 Service should be brought to account at $1,092,478 being slightly more than the figure of $984,492 as determined by Mr M. He also opined that there were additional tax benefits from ongoing research and development and if so, the ongoing benefit should properly add $495,000 to the value of P Pty Ltd by reason of the additional tax benefit at the rate of 18.5 per cent over the general tax deductable expenditure at the company tax rate of 25 per cent. Whilst there is some uncertainty at this stage, the extent to which the tax incentive of 18.5 per cent for research and development may well depend upon whether the research and development can properly be described as “core” development or not.SHOULD LEAVE BE GIVEN TO ADDUCE SEPARATE ADVERSARIAL EVIDENCE The rules dealing with expert evidence have at their core purpose to ensure that the parties obtain expert evidence only in relation to a significant issue in dispute, to restrict expert evidence to that which is necessary to resolve or determine a case and to ensure that if practicable and without comprising the interest of justice, expert evidence is given on an issue by a single expert and to avoid unnecessary cost from the appointment of more than one witness. Rule 1.05 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) sets out the relevant definitions. In particular, an expert is defined to be “an independent person who has relevant specialised knowledge, based on the person’s training, study or experience”. Heydon JA in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 provided an analysis of the authorities in respect of expert evidence as follows:85.In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of “specialised knowledge”; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be “wholly or substantially based on the witness’s expert knowledge”; so far as the opinion is based on facts “observed” by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on “assumed” or “accepted” facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert’s evidence must explain how the field of “specialised knowledge” in which the witness is expert by reason of “training, study or experience”, and on which the opinion is “wholly or substantially based”, applies to the facts assumed or observed so as to produce the opinion propounded. …
Decision
Reasons for decision
I do not consider that Mr N seeks to present an opinion based upon a substantial body of opinion contrary to the opinion given by the single expert nor do I consider that the matters raised by Mr N are not known to the single expert witness. In addition, I do not consider that there is any special reason to adduce evidence from another expert witness in circumstances where the respondent has not sought to pose proper questions to the single expert and in any event, the exercise has been undertaken without notice nor opportunity for the single expert to consider the matter further.CONCLUSION In all the circumstances, I do not consider that the Court would be assisted by the evidence from both the single expert and the proposed adversarial expert. I make the order as appears at the commencement of these reasons.
Ratio Decidendi
Legal Principle Established
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