Morris & Morris (No 5)
[2023] FedCFamC1F 940
•3 November 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Morris & Morris (No 5) [2023] FedCFamC1F 940
File number: SYC 4955 of 2021 Judgment of: CAMPTON J Date of judgment: 3 November 2023 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Where the husband seeks to put questions to the single expert witness pursuant to r 7.26 during the course of a trial – Where the wife objects to the experts report being adduced into evidence – Where the wife objects to the questions being posed to the expert report writer – Where the wife contends that the questions as posed are outside that as envisaged by r 7.26 – husband’s application dismissed. Legislation: Family Law Act 1975 (Cth) ss 78 and 79
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67 and 68
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ch 7, Divs 7.1.4, 7.1.5 and 7.1.6, rr 7.22, 7.24, 7.25, 7.26 and 7.27)
Evidence Act 1995 (NSW) s 79
Cases cited: Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Morris & Morris(No 2) [2023] FedCFamC1F 835
Morris & Morris (No 4) [2023] FedCFamC1F 931
Division: Division 1 First Instance Number of paragraphs: 45 Date of hearing: 1 – 2 November 2023 Place: Sydney Counsel for the Applicant: Mr Richardson SC with Mr Roberts of counsel Solicitor for the Applicant: Barkus Doolan Winning Counsel for the Respondents: Mr Kelly SC with Mr Smallbone and Dr Parkinson of counsel Solicitor for the Respondents: Prime Lawyers ORDERS
SYC 4955 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MORRIS
Applicant
AND: MR MORRIS
First Respondent
D2 LIMITED
Second Respondent
F LIMITED ATF THE D TRUST (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
3 NOVEMBER 2023
THE COURT ORDERS THAT:
1.The oral application of the husband for an order that the respondents be at liberty to administer to the single expert witness Mr JJ questions numbered 1, 2, 3, 5, 7, 8 and 9 as contained in a letter dated 27 October 2023 from the husband’s solicitors to the single expert witness 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 pseudonyms Morris & Morris has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
The husband by way of an oral application during the currency of this 10 day Major Complex Financial List trial seeks orders that he, together with the other respondents, being E Limited ATF the D Trust, F Limited ATF the D Trust and D2 Limited, be at liberty to administer questions to a single expert witness, Mr JJ, pursuant to r 7.26 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”). The ten questions proposed to be administered are contained in a letter from his solicitors provided to the single expert witness dated 27 October 2023 (Exhibit A in the application).
The wife objects to the report of the single expert witness Mr JJ being admitted into evidence. These reasons do not determine that objection.
The wife objected to the administering of all ten questions posed in Exhibit A. The objections to questions 4, 6 and 10 have been withdrawn. The expert has a copy of Exhibit A. The wife opposes the husband’s relief to direct questions to the single expert in terms of paragraphs 1, 2, 3, 5, 7, 8 and 9 of Exhibit A.
For the reasons that follow, the oral application of the husband is dismissed.
BACKGROUND
Mr JJ was instructed to opine, as a ch 7 single expert, as to the likely effect on the share price of an ASX listed corporation, B Limited, should orders be made that the husband and the other respondents sell quantities of shares they hold to meet his or their obligations arising from orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
Mr JJ was appointed as a single expert pursuant to orders made 15 May 2023:
6. As to the expert evidence relating to the value (and related matters) of the [B Limited] shares, the husband has requested and the wife has without admission by her as to the existence of a relevant field of opinion evidence in each case:
…
c)Agreed to obtain an expert report from a stockbroker or investment banker as to the likely effect a sale of shares as sought by the wife would have on the share price of [B Limited], including what discount, if any, would be commanded at point of sale.
The relevant report is dated 22 October 2023 (Exhibit B in the application)
At the commencement of the proceeding in July 2021, the husband held 57 million shares in B Limited, a publicly listed company on the ASX. The husband on or about late 2021 caused 48 million of those shares to be transferred to the D Trust, subsequently joined as a respondent in the proceeding. The husband personally continues to hold 9 million shares (see Morris & Morris(No 2) [2023] FedCFamC1F 835.
It is the wife’s case that the shares in B Limited held by the D Trust are the husband’s property for the purposes of the s 79 determination and are amenable to orders despite subrogation to the D Trust. As recorded in Morris (No 2) at [4], the husband conceded during the course of the hearing on 6 December 2022, that for the purposes of the litigation pursuant to s 79 of the Act that:
(a)The husband is the only eligible beneficiary of the D Trust (for which F Limited and E Limited are the trustees); and
(b)F Limited and E Limited are the alter egos of the husband, and the husband controls F Limited and the husband’s accountant controls E Limited.
The wife contends that the B Limited shares held by the husband and D Trust have a current value of $584,250,000 (being a calculation of the ASX listed share value at the commencement of the trial multiplied by the number of shares held) and that the property of the parties has a net value in the range of $697,092,033.
Her relief by way of adjustment of the property of the parties (Exhibit 2) seeks to achieve orders whereby she would receive 50 per cent of that property, being made up of cash payments jointly and severally payable by the husband and the other respondents of not less than $320,000,000 by instalments payable between 1 December 2023 and 1 December 2026, together with the adjustment of other property interests in specie. Implicitly, it is her case that it is a matter for the husband and the other respondents as to how they source the funds to pay the adjusting sum by instalments as and when they are due. In default of payment of an instalment of a cash sum jointly and severally due by the husband and the other respondents, she seeks orders for the balance of unpaid instalments to become payable and for the husband and the other respondents to sign all documents necessary to sell sufficient shares in B Limited to pay the balance of the sum due to the wife.
The husband and the other respondents contend that the shares have a discounted value of $379,762,500. They have not articulated the foundation for the asserted discount in the range of 35 per cent. It is the husband’s case that the property of the parties has a net value in the range of $451,471,059.
In September 2023, just over a month prior to the trial, the husband made three deed polls. He contends that they effect a transfer to the wife of his legal and beneficial interests in three real properties jointly owned by the parties at Suburb O, Suburb S and in City Z having a combined value in the range of $21,204,000. On the same day, he made a further deed poll assigning what he identifies as an annuity he has acquired that would pay to the wife an indexed tax-free sum of $1,000,000 for 15 years. The wife contests the validity and effect of the deed polls and has renounced them (see Morris & Morris (No 4) [2023] FedCFamC1F 931).
It is the husband’s primary case that in the circumstances that he contends exist as at trial, considering the effect of the four deed polls, there is no warrant for any order adjusting the property of the parties pursuant to s 79 of the Act. As part of that primary case, he seeks a s 78 declaration by application of equitable principle, including by way of resulting trust, common intention constructive trust, the construction of a trust arising from a failed common or joint law endeavour and a claim in estoppel that the wife holds her legal interest in a property known as “P Street” of which the wife is the sole registered proprietor beneficially for him. That property was acquired in 2003 at a cost of NZ$1,550,000 plus GST. It has an agreed value for trial of $3,091,800. That value does not take into account the evidence of the husband that he and other entities have invested in the range of $120,000,000 by way of improvements to the property. In the alternative, he seeks the exercise of an adjusting property power, for an order that the wife transfer her interest in the P Street property to him. He and the D Trust vehemently opposes orders as to the sale of B Limited shares. It is their case that there is no equity in any circumstance for the adjustment of the B Limited shares or any warrant to interfere with the husband and the D Trust’ shareholding in B Limited.
The nature of the wife’s objection to the report of the single expert witness Mr JJ being admitted into evidence gives context to the oral application of the husband.
THE WIFE’S OBJECTION TO THE REPORT OF THE WITNESS BEING ADMITTED INTO EVIDENCE
The joint letter of instruction to Mr JJ dated 6 October 2023 included a copy of Divisions 7.1.4, 7.1.5, and 7.1.6 of the Rules. The witness was directed to the content of the Rules in the instructions. The instructions also stated:
Matters to be included in your report
Please include in your report:
A. The reasons for your conclusions;
B. A statement about the methodology used in the production of the report;
C. A statement with the following information:
a) your qualifications;
b) the literature or other material used in making the report, including references to other known market transactions, including but not limited to the material provided to you in this letter;
c) the relevant facts, matters and assumptions on which the opinions in the report are based;
d) a statement about the facts in the report that are within your knowledge;
e) details about any experiments or investigations relied on by you and, if they were carried out by another person, details of that person’s qualifications and experience;
f) a statement identifying any assumptions that you have made for the purpose of forming your opinions, that are not already identified above;
g) if there is a range of opinion on the matters dealt with in the report – a summary of the range of opinion and the basis for your opinion;
h) a summary of the conclusions reached;
i) if necessary, a disclosure that:
(i) a particular question or issue falls outside your expertise; or
(ii) the report may be incomplete or inaccurate without some qualification and the details of such qualification; or
(iii)your opinion is not a concluded opinion because further research or data is required or because of any other reason.
The first objection of the wife is that Mr JJ has not established, based on his training, study or experience, that he is seized of “specialised knowledge” to provide an opinion as to the subject matter of the report. The wife accepts that this finding is to be established on the balance of probabilities. She submits that the requirements of s 79(1) of the Evidence Act 1995 (NSW) as to specialised knowledge to provide an expert opinion are mandatory, and absent the witness’s specialised knowledge being established, the evidence contained within the report ought to be rejected. As to this finding, the wife concedes that there is no requirement as to a purported expert opinion meeting a requisite standard of probative value to be admissible.
If the wife’s primary objection to the admission of the report into evidence is not accepted, her alternate objection is grounded from that identified by the High Court in Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 (“Dasreef”). She submits that Mr JJ’s report fails to:
(a)Explain how his field of specialised knowledge grounds his opinion; and
(b)Explain how the reasoning process of his conclusions are transparent to ground his opinions.
Putting it another way, if I understand it correctly, the wife’s alternate objection is that the basis of the opinions expressed by Mr JJ are not disclosed in his report such that the court would be unable to assess the reliability of the opinion or the weight to be given to it, or the opinion may not be relevant.
It is against this background that the husbands seeks the orders to facilitate specific questions to the expert pursuant to r 7.26.
The Rules
Division 7.1.6 of the Rules is entitled “clarification of single expert witness reports”.
Rule 7.24 provides:
7.24 Purpose of Division 7.1.6
(1)The purpose of this Division is to provide ways of clarifying a report prepared by a single expert witness.
(2)Clarification about a report may be obtained at a conference under rule 7.25 or by means of questions under rule 7.26.
Rule 7.26 provides:
7.26 Questions to single expert witness
(1) A party seeking to clarify the report of a single expert witness may ask questions of the single expert witness under this rule:
(a)within 7 days after a conference (if any) is held under rule 7.25; or
(b)if no conference is held under that rule—within 21 days after the party received the single expert witness’s report.
(2) The questions must:
…
(b) be only for the purpose of clarifying the single expert witness’s report;
Rule 7.27(4) provides that the questions and answers are “taken to be a part of the expert report”.
The husband conceded that the formulation of the questions pursuant to r 7.26 and proposed to be put to Mr JJ occurred after he had received notice of the wife’s objections to the contents of the report being adduced into evidence at the trial.
CONSIDERATION
The husband submitted that his enquiries by way of the objected questions are intended to, and in fact do, address the criticisms made by way of the objections made by the wife and that they are an attempt to expose in more detail the exposition of his reasoning and how the subject matter relates to his qualifications. He further submitted that the proposed questions seek further clarification of his qualifications, of reasons for the conclusion which has already given, and the relationship between the two. It was his submission that the questions did no more than seek clarification of the relationship between Mr JJ’s qualifications and his reasoning. He said it is appropriate to permit them to be administered in circumstances where a consequence of the Rules does not permit the husband to have a conference with the expert.
Alternatively, the husband submitted that if the questions as posed were not strictly as envisaged by the Rules, they should nevertheless be permitted to be administered so the evidence does not “come up short” to ensure that an opinion is “fully expressed and admissible”.
Although not formally made, this was a further oral application to dispense with the Rules insofar as was necessary so as to permit the questions posed to be put before the witness.
In support of this implicit further application, the husband submitted that “we are working within the prism” of the single expert rule, and the policy limitations that inform it. He submitted that the parties does not have the traditional adversarial method to converse with the witness to ensure that he submits his opinion in a fashion that is admissible and given such constraints, the court should allow the parties to do what can be done to ensure that the expert witness that does not express himself in a way consistent with that required by existing authority has the opportunity to do so. Having regard to what the husband contends is the “significance of the evidence and where it goes” a pivot to an exercise of discretion to dispense with the Rules comes from ensuring that the court has available all possible evidence relevant to the qualities of the property by way of the publicly listed shares and the consequences to the value of that property if it is sold. He submitted that this is a powerful factor driving the conclusion that the expert evidence ought to be considered “as to its substance” and not be deflected by any deficiencies in the way the expert has expressed himself. The husband submitted that it would be a matter of “significant prejudice” to him not allow a party to adduce evidence on a subject matter through no fault of their own.
The wife submitted that the evidence contained in the report is “barely relevant”. She identified the portions of the report. As to his methodology, the report records:
I have had regard to precedent market transactions and factors that typically determine the pricing (or pricing discounts) of large share sales. In Opinions 1 – 4, I have presented what I believe are relevant precedents and an assessment of the factors that I believe will influence the share price of [B Limited] and of any share sales. I have made a number of assumptions in addition to those listed in the letter of instruction, each listed in this section or in the relevant Opinion section.
It should be noted from the outset that the share price impact of any new circumstance will be determined by the many thousands of market participants that are willing to buy or sell shares in that company. There will always be many different views among market participants as to what is an attractive level to buy or sell the shares. The share price at any one time simply reflects the price at which one buyer and seller are willing to transact with one another based on the circumstances of the time. It is often the case that share price trading levels or share price movements do not have regard to a company’s operating or financial performance, or past share price levels. Any opinion on the share price impacts of a new set of circumstances is therefore a qualitative judgement as to how those circumstances affect the behaviour of the many thousands of possible buyers and sellers in those shares. As such any opinion is an educated guess as to the likely behaviour of market participants. My views regarding potential share price impacts in Opinion 1 are based on my experience in the Australian equity market and my judgements as to how investors may react to the new circumstances presented,
rather than on any particular quantitative factor.
She further identified another part of the report:
There is no precedent that I can identify of a situation in recent ASX history that combines the announcement of a pre-defined sale timetable, a very large overhang of shares to be sold, together with the negative signalling effect of a founder sale.
…
I note that given the unprecedented nature of this situation and the likely share price volatility caused by the sale announcement, there is significant uncertainty as to the quantum of the fall in the [B Limited] share price.
The wife identified that she does not seek as a primary order the sale of shares, her primary order as to cash adjustment leaving it to the husband and the D Trust as to how such payments are funded. She highlighted a contended deficiency in the husband’s case by way of a failure to articulate alternative relief if his contention as to no warrant for the adjustment of property is not accepted. The wife submitted that it is only in the event of default as to payment and the only option is by way of enforcement by way of the sale some of the shares, the evidence subject to objection does not address such circumstance in that it engages with a very different scenario of a forced sale. Her submission is the opinions in the report do not go down that path such that they are not purported opinions cast in terms of the wife’s alternate enforcement relief on default.
The wife submitted that, similarly to r 7.25, questions posed by way of r 7.26 must be for the purpose of only clarifying the single expert report. The rule does not state that “any” question arising from the work or report of the expert may be asked. The rule contains a narrower concept, such that to “clarify” is limited to questions that operate on something that is already contained within a report or something to resolve ambiguity, rather than asking the single expert to do something else. Counsel submitted that the questions as drafted are all asking for something more, such that they amount to a cross-examination.
CONSIDERATION
The purpose of Pt 7 Division 7.1.6 is to limit single expert opinions prior to trial to clarification and to not permit interrogation. The current application of the husband seeks to apply a pre‑trial process during the currency of a trial.
The Rules do not permit the asking of simply any question, and the construction of the division in ch 7 is a narrow concept including to remove ambiguity.
To “clarify” means “to make something clearer or easier to understand”. To my mind, the rule is constructed and expressly envisages questions that “clarify” contents of the report and do not permit questions that may be legitimately put to a witness in cross examination.
The object in clarification is to make something clear from the opinion that is not clear on its face. The rule is not constructed to permit an expansion of the contents of a report or to challenge matters contained within the report.
An evaluation of the questions posed by the husband not subject to objection go beyond seeking clarification of that contained within the report. The submission within the confines of r 7.26 of getting to the “substance” rather than the form is not accepted. Many of the objected questions are directed to the foundations of the transactions grounding the witness’s methodology relied upon to conclude his opinions. This is not an attempt to clarify.
The witness in a paragraph of the report provides his qualifications, training, and experience. To further enquire on this subject matter is not by way of clarification. To ask the witness the link his disputed specialized knowledge with his process of reasoning and then to his alternate conclusions is not clarification.
Each line of enquiry by way of the objected questions are not seeking to make the contents of the opinion clearer. They are crafted and designed to, and have the effect of, reconfiguring and then linking the integers of the opinions and then further expanding the opinions as contained in the report. Such efforts are outside the parameters of r 7.26 and ought not be permitted by reference to the rule.
As to the husband’s implicit application to dispense with the rules so as to pose the objected questions to the expert, it is accepted that the husband is attempting to engage in a bona fide attempt to reduce the issues at trial and so as to progress the overarching purpose identified in ss 67 and 68 of the Federal Circuit and Family Court of Australia Act 2021 (Cth).
The objected report is of significant density and volume. It is not an easy document to distil and evaluate. The task the expert was instructed to undertake was made very clear by way of identification of and provision of copies of the relevant rules, including r 7.22 and by way of the detailed letter of instruction. There can be not apprehension that the witness was unaware of scaffolds and requirements of his opinions.
The use at this time in the trial of what is a pre-trial process is somewhat unorthodox. It requires each party to meet what may or may not be a shift in the basis of an expert opinion on the run while other evidence is being taken. By way of r 7.27(4) the answers may be, in reality, a new report. It is not known when the questions if posed will be answered.
It is not appropriate in the circumstances of this case for the parties to be required during the middle of a trial to consider what may be a significant recasting of the foundation for and possible expansion of a highly contested opinion. So as to ensure the provision of fairness and an even playing field, the process of admission into evidence and the testing the disputed opinion by cross examination of the expert ought to occur in the orthodox way. If the report is admitted into evidence, each party will the opportunity to put relevant and proper questions to the witness in cross examination during the trial.
The oral application of the husband will be dismissed.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 3 November 2023
SCHEDULE OF PARTIES
SYC 4955 of 2021 Respondents
Fourth Respondent:
E LIMITED TRUSTEES LIMITED ATF THE D TRUST
2
3
4