Minke & Minke (No 2)
[2024] FedCFamC1F 157
•14 March 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Minke & Minke (No 2) [2024] FedCFamC1F 157
File number SYC 9122 of 2022 Judgment of WILSON J Date of judgment 14 March 2024 Catchwords FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – late applications for expert evidence – one application refused, the other allowed. Legislation Family Law Act 1975 s 79 Cases cited Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Danell v Saller (2015) 54 Fam LR 416
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Honeysett v R (2014) 253 CLR 122
Keevers & Keevers [2021] FedCFamC1F 338
Lang v R (2023) 95 ALJR 758
Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Minke & Minke [2024] FedCFamC1F 130
Neales & Neales [2022] FedCFamC1A 41
Stanford v Stanford (2012) 247 CLR 108
Verdon v Verdon (2020) 62 Fam LR 573
Division Division 1 First Instance Number of paragraphs 37 Date of last submission 13 March 2024 Date of hearing 13 March 2024 Place Melbourne Counsel for the applicant Mr G Richardson SC with Mr R May of counsel Solicitors for the applicant Barkus Doolan Winning Counsel for the respondent Mr M Kearney SC with Mr C Brickwood of counsel Solicitors for the respondent Walter & Elliot Family Lawyers ORDERS
SYC 9122 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN MS MINKE
Applicant
AND MR MINKE
Respondent
ORDER MADE BY
WILSON J
DATE OF ORDER
14 MARCH 2024
THE COURT ORDERS THAT –
1.The husband's application for leave to rely on the affidavit of Mr C made 11 March 2024 is dismissed.
2.The husband’s application for leave to rely on the affidavit of Ms D made 11 March 2024 is granted.
3.The trial will commence as ordered on 18 March 2024.
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 a pseudonym Minke & Minke has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
WILSON J
INTRODUCTION
The trial of this proceeding has been fixed to commence on 18 March 2024, next Monday, that is to say less than two clear business days from this day.
On 5 March 2024 I handed down ex tempore reasons for judgment that addressed issues relating to evidence proposed to be introduced by the husband from an adversarial witness. That application was dismissed largely by reason of the shortness of time between the application and the commencement date of the trial. The trial date of 18 March remains fixed.
A rush of activity and interlocutory applications then followed from both parties returnable before me yesterday, 13 March 2024.
The husband filed an application in a proceeding dated 11 March 2024. Relevantly paraphrased, he sought the following orders –
(a)the husband have leave to adduce evidence from Ms D in accordance with her affidavit made 11 March 2024;
(b)the parties call the single expert, Ms F and Ms D to confer and to produce a joint statement identifying the matters on which they agree and disagree, narrowing the issues in dispute and identifying the reasons for any disagreement;
(c)the husband have leave to adduce evidence from Mr C in accordance with his affidavit made 11 March 2024;
(d)the husband have leave to adduce evidence from Mr E in accordance with his affidavit made 11 March 2024; and
(e)alternatively, that Mr G be appointed as an expert in this proceeding.
The husband also sought orders truncating all times prior to 18 March 2024.
According to the husband’s case outline, only the husband’s application for leave for him to adduce evidence from Ms D, from Mr E and Mr C were pressed ahead of the trial.
The wife pressed her applications in paragraphs one and two of her application in a proceeding, also dated 11 March 2024. In those she sought an order for the joiner of H Pty Ltd, the trustee of the H Investment Trust as the second respondent.
The wife opposed the husband’s proposed reliance upon the evidence of Ms D and of Mr C. She did not oppose the husband relying on the evidence of Mr E.
Having regard to the urgency of the determination of the respective applications, by agreement I heard full debate on the husband’s applications for leave to rely on the affidavit of Ms D and for leave to rely on the affidavit of Mr C. The wife’s application for the joinder of H Pty Ltd as the second respondent has been held over until the trial.
Before examining in some detail the issues in relation to the husband’s application concerning the proposed witnesses Ms D and Mr C it is utile to record the parties’ competing positions on the impact on the trial if the leave sought by the husband is in fact granted. Mr Richardson SC submitted that the leave sought should be refused with the consequence that the trial would proceed without the evidence of Ms D and Mr C. The cross-examination of existing witnesses would be concluded and the case likely completed in five days, being one day beyond the estimated four day trial. Mr Kearney SC submitted that if leave were granted to the husband to rely on the proposed new affidavits then the trial would most likely need to be adjourned, although he made no adjournment application on 13 March 2024. Mr Richardson SC submitted that the four days allocated to the hearing of the trial of this proceeding on 30 August 2023 should be maintained as near as was possible.
As these reasons reveal, in my view –
(a)the trial should remain fixed to commence on 18 March 2024;
(b)leave should be given to the husband to rely on the affidavit of Ms D affirmed 11 March 2024 and the exhibits to that affidavit;
(c)leave should be refused to the husband relying on the affidavit of Mr C made 11 March 2024;
(d)openings and evidentiary issues can be debated on 18 March 2024;
(e)the wife can give her evidence-in-chief and be cross-examined on 18 March 2024; and
(f)any non-expert witness who will give evidence in support of the wife’s case can give his or her evidence thereafter.
The evidence of Ms F should await a reasonable time before the trial is resumed at which time Ms F, Ms D and Mr E will give their evidence.
THE SINGLE EXPERT’S EVIDENCE
Ms F was appointed as the single expert in this case. She was instructed to prepare a valuation report in respect of the financial interests of the parties in the Minke Group as at 30 June 2011 and as at 30 June 2023. She deposed –
(a)she received a joint letter of instructions from the parties’ solicitors on 26 October 2023;
(b)she prepared her valuation on 25 January 2024;
(c)on 9 February 2024 the wife’s solicitors provided Ms F with questions which Ms F answered on 1 March 2024; and
(d)on 13 January 2024 the husband’s solicitors provided Ms F with questions that Ms F answered on 1 March 2024.
Mr Kearney SC submitted that Ms F’s report first became available on 25 January 2024 after which the procedure provided for in the rules for the questioning of single experts began to run, the first being 9 February and the second being 13 February in both instances disclosing rapid attention to the single expert’s tasks with her answering various questions by 1 March 2024, 13 days ago. Mr Kearney SC submitted that the affidavit and report of Ms D both dated 11 March 2024 were prepared without delay and as fast as could be done in the circumstances.
The joint letter of instructions to Ms F was dated 26 October 2023. In that joint letter of instructions the solicitors for the parties recorded –
(a)on 10 July 2023, Ms F provided indicative valuations of the Minke Group as at 30 June 2011 and as at 30 April 2023;
(b)consent orders made by me on 30 August 2023 required the parties to prepare full valuations of the Minke Group as at 30 June 2011 and as at 30 June 2023;
(c)documents were provided to Ms F in respect of Minke Family Trust, L Pty Ltd, M Pty Ltd, N Trust, O Pty Ltd, H Investment Trust, M Super Fund, Q Property Trust, and Minke Charity Trust; and
(d)their request for Ms F to provide her report by 4pm on 22 December 2023, making herself available for cross-examination on 20 or 21 March 2024.
As has already been observed, Ms F provided her report on 25 January 2024, a little over a month after the date requested which was 22 December 2023.
In part three of her report, Ms F expressed her valuation of the net assets of the parties as at 30 June 2011 and 30 June 2023. It was as follows –
(a)30 June 2011 - $18,779,244; and
(b)30 June 2023 - $80,023,971.
Ms F explained in appendix four the various methods that can be applied when valuing an asset or entity. Those included discounted cash flow, capitalisation of future maintainable earnings, capitalisation of dividends, net tangible asset value, liquidation basis and comparable transactions. Ms F reported that in this case some of those methods are inappropriate.
Ms F applied what she considered to be the correct valuation method against the various assets or entities making up the Minke Group. For Minke Family Trust she adopted the net tangible asset method. For M Pty Ltd Ms F adopted the net tangible asset basis. For L Pty Ltd Ms F explained that the company does not carry on any business activity and she adopted the net tangible asset valuation method. For the N Trust Ms F adopted the net tangible asset method. For the H Investment Trust as at 30 June 2023 Ms F adopted the net tangible asset valuation method. For the H Investment Trust as at 30 June 2011 she incorporated an implied EBITDA multiple embedded in future maintainable earnings. So far as K Pty Ltd was concerned, Ms F also incorporated an implied EBITDA multiple in her application of the capitalization of future maintainable earnings valuation method. As to M Super Fund, Ms F adopted the net tangible asset method of valuation. Ms F adopted the net tangible asset method when valuing Minke Charity Trust. Ms F reported that Minke Investments was dissolved on 20 June 2011 on which date its net assets amounted to $1,514 and the surplus for the year of $10,821,519 was allocated at to $10,814,604 towards distributions effected by the liquidator.
THE PROPOSED WITNESS MS D
The proposed witness Ms D is a director of R Valuers. She provided a report dated 11 March 2024 addressed to the husband’s solicitors as well as to a judicial registrar of this court. She described the scope of her engagement to “consider and review the evidence of the single expert and form an opinion as to whether I agree or disagree with” the opinion expressed in Ms F’s 25 January 2024 report. Ms D recorded that she had been requested to consider whether or not in her opinion –
(a)there is a substantial body of opinion contrary to any opinion given by Ms F and that contrary opinion is or may be necessary for determining the issue; and
(b)she knows of matters not known to Ms F that may be necessary for determining the value of the Minke Group as at 30 June 2011 and as at 30 June 2023.
In her executive summary in part one of her report Ms D stated that she disagreed with Ms F’s valuation of –
(a)J Pty Ltd as at 30 June 2011 and the H Investment Trust’s interest in J Pty Ltd; and
(b)K Pty Ltd as at 30 June 2023 and H Investment Trust’s interest in K Pty Ltd.
Ms D asserted that a substantial body of opinion supports the application of the discounted cash flow methodology for the valuation of the two businesses as at 30 June 2011. She asserted that a substantial body of opinion supported the application of the capitalisation of earnings method on a pre IFRS AASB 16 basis. Ms D also asserted that a substantial body of opinion supported the recognition of non-business assets at market value.
She stated that her knowledge of matters apparently known by the single expert was based on her industry experience and on additional information provided to her subsequent to Ms D’s examination of the single expert report and which may be necessary for determining the full value of the Minke Group as at 30 June 2011 and 30 June 2023. Ms D stated she has separately valued J Pty Ltd as at 30 June 2011 and K Pty Ltd as at 30 June 2023.
In written submissions filed on behalf of the husband in support of this application, Mr Kearney SC compiled a table of the valuations ascribed by Ms F on the one hand and by Ms D on the other concerning J Pty Ltd as at 30 June 2011 and to K Pty Ltd as at 30 June 20233. The table was as follows –
H Interest Ms F Ms D Difference J Pty Ltd
(30 June 2011)$18.650 m
($17.29 to $20.02m)$48.956m
($44.206 to $53.706m)$30.306m
($26.916 to $33.686m)K Pty Ltd
(30 June 2023)$56.416m
($49.574 to $63.354rn)$50.25m
($46.298 to $54.202m)$6.166m
($3.276 to $9.152m)
In other words, the variable between the valuations of the two totalled something in excess of $36 million. That is a very large sum, on any view.
The authorities have attached an array of appellations so as to characterise the size of the monetary differences in valuations given by the experts. In Verdon v Verdon[1] I called an $8 million difference “vast”. In Neales & Neales[2] the court described an $11 million difference as “significantly different”. In Keever & Keevers[3] I called a difference of between $6 million and $15 million “significant”. On any of those appellations, the discrepancy in this case of $36 million is very large.
[1] (2020) 62 Fam LR 573.
[2] [2022] FedCFamC1A 41.
[3] [2021] FedCFamC1F 388.
Elsewhere I have traced the genesis of the single expert rules that find their place in Part 7.1 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021. No useful purpose is served here by repeating those observations beyond recording the reasoning of McClelland J (as the Deputy Chief Justice then was) in Danell v Saller.[4] On behalf of the wife Mr Richardson SC submitted that the appointment of a single expert has at its core a focus on case management with an eye keenly attuned to the efficient and expeditious determination of litigation to which Part 7.1 of the rules apply. Avoiding the proliferation of expert evidence, containing experts’ costs, and confining the issue over which experts offer opinions about matters truly in controversy bear all the hallmarks of case management issues. Yet ever since the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University[5], issues of case management in any piece of litigation must be subordinated to the attainment of the justice in the circumstances of the case.
[4] (2015) 54 Fam LR 416.
[5] (2009) 239 CLR 175.
Rule 7.08(2) is made up of three alphabetical subrules which permit the deviation from the general prohibition imposed in rule 7.08(1) if any of the three elements in rule 7.08(2) is met. That rule seems to give effect to the purpose of Part 7.1 reposed in rule 7.02(c) to the effect that without compromising the interests of justice, expert evidence is given on any issue by a single expert witness (as defined). The endeavour to give effect in that aspiration is subject to the words in rule 7.02(c) “to endeavour that, if practicable and without compromising the interests of justice”. The expression “interests of justice” can be ephemeral. It may also be in the eye of the beholder. What amounts to the interest of justice to one party may be precisely the opposite in the other party in litigation. Hence, the husband seeks to invoke rule 7.08(2), contending that it is antithetical to the interests of justice for the court to rely only on the single expert report of Ms F. He says that a substantial body of opinion exists, contrary to the opinion offered by Ms F, and which contrary opinion may (repeat, may – not must) be necessary for the determination of the issue, the “issue” being the valuation of the Minke Group.
Conversely, the wife submits that allowing the Ms D report into evidence creates an imbalance because it causes serious prejudice to the wife occasioning her unfairness in meeting and responding to the Ms D report.
To my way of thinking, if the Ms D report is relevant and if she otherwise demonstrates compliance with the authorities of Dasreef Pty Ltd v Hawchar,[6] Honeysett v R,[7] Lang v R[8] and Makita (Aust) Pty Ltd v Sprowles[9] then the report is prima facie admissible. Once one reaches that point in the analysis, considerations about compromising the interests of justice by the exclusion of the Ms D report are enlivened.
[6] (2011) 243 CLR 588.
[7] (2014) 253 CLR 122.
[8] (2023) 97 ALJR 758.
[9] (2001) 52 NSWLR 705.
To my way of thinking, having regard to the imperative of s 79 of the Family Law Act of making orders altering the property interests of parties only if satisfied that it is just and equitable to do so,[10] then I can only reach a just and equitable determination about all relevant property and its value if all relevant evidence is before me – whether adduced by a single expert or other expert. In this case I take the view that I will be at very serious risk of compromising the interests of justice if I proceed only on the evidence of Ms F. The discrepancy in the valuations is enormous to say the least, approximating $36 million. If I were to proceed only using Ms F’s evidence, I may very well reach a determination that is not just and equitable. I took a similar view in Verdon v Verdon.[11]
[10] Stanford v Stanford (2012) 247 CLR 108.
[11] (2020) 62 Fam LR 573, 586 (at [49]).
If Ms D is the advocate for the husband’s cause that Mr Richardson SC submitted she is, he will be perfectly free to cross-examine on that issue when the time arrives.
I am of the view that Ms D’s evidence will be important in this case. The husband has my leave to rely on her affidavit.
THE EVIDENCE OF MR C
On 5 March 2024 I refused an application that implicated the proposed witness Mr C, although the application then was limited to a walk-through of the home and dwelling at Suburb B. The witness Mr C has now been identified as a witness who the husband wishes to call to give evidence about the value of the Suburb B property on 5 June 2015 and 2 May 2023.
On this application the husband relied on rule 7.11 of the rules rather than rule 7.08 as he did in Minke & Minke.[12] The wife opposed the husband’s proposal to adduce Mr C’s evidence contending that a single expert, Mr P, has already expressed an opinion about the valuation of the Suburb B property. On behalf of the wife, Mr Richardson SC relied on a collection of propositions that he said told against allowing Mr C’s evidence, those being –
(a)no suggestion is made that the Mr C proposed evidence is critical or of central importance in the case;
(b)significant delay attends the proposal to adduce Mr C affidavit as this stage;
(c)if allowed, significant prejudice will be occasioned to the wife;
(d)no meaningful explanation has been proffered for the lateness of the affidavit; and
(e)the lateness in this application is the very matter with which Aon was concerned.
[12] [2024] FedCFamC1F 130.
I agree with each of those contentions. To attempt to introduce an expert’s evidence, not in reliance upon rule 7.08 but on rule 7.11 at such an advanced stage before trial without any proper explanation spells the doom of Mr C’s evidence. I refuse leave to the husband to rely on the affidavit of Mr C made 11 March 2024.
The trial will commence as ordered on 18 March 2024.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 14 March 2024
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