Peraza & Durbin
[2024] FedCFamC1F 83
•19 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Peraza & Durbin [2024] FedCFamC1F 83
File number: SYC 9213 of 2023 Judgment of: CAMPTON J Date of judgment: 19 February 2024 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Where the wife seeks orders for the parties to attend mediation and to appoint a single expert to opine as to a retrospective valuation of the interests of the parties in a corporation of which the husband was the sole director that sold its trading enterprise in the shadow of the separation – Where the husband opposes the appointment of a single expert but supports the orders for mediation – Where the parties are in dispute as to whether the disposal by the corporation was a bona fide transaction conducted at arms-length – Where dispute exists as to whether the consideration received on the sale was less than fair market value – Where the under value of the disposed interest is supported by the wife’s expert who is not a single expert – Orders made as sought by the wife.
FAMILY LAW – COSTS – Where the wife seeks the husband pay her costs in a fixed sum – Where the husband opposes that application – Where the husband’s position on the application was not maintainable - Where the consideration received on the sale of the trading enterprise was at all times a substantive issue in the proceedings attracting the application of Ch 7 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) for the appointment of a single expert to opine as to that subject matter – Where the husband ought to have known, with the benefit of his experienced legal representatives, that an absence of success in opposing the orders sought by the wife implementing the purpose of Ch 7 of the Rules was misconceived and would likely lead to costs looming on the horizon – Husband ordered to pay the wife’s costs in a fixed sum.
Legislation: Family Law Act1975 (Cth) ss 79 and 117
Federal Circuit and Family Court of Australia Rules (Family Law) 2021 (Cth) ch 7, Pt 7.1, rr 1.04, 7.04, 7.1, 7.2, 7.10 and 12.17
Division: Division 1 First Instance Number of paragraphs: 45 Date of hearing: 19 February 2024 Place: Sydney Counsel for the Applicant: Mr Schonell Solicitor for the Applicant: Michael Conley Lawyers Counsel for the Respondent: Mr Bennett Solicitor for the Respondent: Coleman Greig Lawyers ORDERS
SYC 9213 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PERAZA
Applicant
AND: MR DURBIN
Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
19 FEBRUARY 2024
THE COURT ORDERS THAT:
1.The parties shall appoint a single forensic accountant expert to value each of the parties’ interest in B Pty Ltd as immediately prior to the sale of its business in 2021.
2.For the purposes of Order 1:
2.1 the wife shall nominate three experts;
2.2within 7 days thereafter the husband shall select one of those experts to be appointed as the single expert;
2.3within 7 days thereafter the wife shall provide a proposed joint letter of instruction to be sent to the single expert;
2.4within 7 days thereafter the husband shall confirm his agreement to the joint letter or alternatively advise of his suggested amendments;
2.5 the parties shall then send the agreed joint letter of instruction to the nominated single expert including copies of the real estate valuations prepared by C Valuers;
2.6 the husband shall provide any additional documents requested by the single expert within 7 days of any request; and
2.7the parties shall equally pay the cost of the single expert forensic accountant at the first instance with either party having liberty to apply for a contribution to be met to their costs by the other at a later point on the litigation.
3.Within 4 days of receipt of the business valuation pursuant to Order 1, the Applicant shall nominate three mediators with the Respondent to select once within 7 days to be appointed as the parties’ mediator.
4.The parties shall provide all documents and information as requested by the mediator and participate in a mediation at the earliest available date.
5.The parties shall equally pay the mediator’s costs.
6.The husband pay the wife’s costs of and incidental to the hearing today in the sum of $10,000 within 21 days.
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 Peraza & Durbin has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
By way of Initiating Application filed 4 December 2023, Ms Peraza, (“the wife”) sought orders as to the adjustment of property pursuant to s 79 of the Family Law Act1975 (Cth) (“the Act”), after the breakdown of her marriage with Mr Durbin (“the husband”). The husband, by way of a Response to an Initiating Application filed 30 January 2024, sought different orders adjusting property between he and the wife.
The parties commenced cohabitation in 1993, married in 1999 and separated on 12 June 2022. There are two children of the marriage, Mr D, born 2002, and Ms E, born 2005. Both children are now adults.
The proceeding was initiated in the Federal Circuit and Family Court of Australia (Division 2) and transferred to the Federal Circuit and Family Court of Australia (Division 1) on 7 February 2024. It has been allocated to my docket in the Major Complex Financial Proceedings List upon the basis that the pool available for adjustment between the parties is in excess of $30 million.
Pursuant to directions, the parties caused a collaborative balance sheet to be filed on 15 February 2024. Broadly, the wife contends that the value of property and superannuation available for adjustment between the parties is in the range of just shy of $57 million, while the husband contends that value to be slightly in excess of $32 million.
On 16 February 2024, upon the matter being listed before me for the purposes of case management and determination of a raft of interlocutory disputes:
(a)The wife contended a finding as to contribution by way of equality up to the current time and thereafter an adjustment to that contribution finding in her favour in the range of 10 per cent, being reflective of the respective current income of the parties and the impact of the marriage dynamic on the wife’s future income earning capacity when compared to that of the husband.
(b)The husband also agitated for a contribution finding by way of equality up to the current time and contending that there would be no adjustment having regard to the factors identified in s 79(4)(e) – (g) of the Act.
(c)The parties compromised all outstanding interlocutory disputes save one. Consent orders were made by way of injunction for the preservation of property. Orders were made as to:
(i)Part property distribution by way of equally dividing a cash sum of $150,000 in a bank account;
(ii)The regulation of the receipt of income from a real property at Suburb F; and
(iii)The preservation of corporate and like interests.
The relief sought by the wife, on an interlocutory basis identified in paragraphs 22 and 23 of her Initiating Application filed 4 December 2023, was adjourned for hearing today.
That relief has been refined and identified in Exhibit 1, being the wife’s outline of case document as follows:
1. The parties shall appoint a joint expert to value each of the parties interest in [B Pty Ltd] as immediately prior to the sale of its business [in] 2021.
2. For the purposes of Order 2:
2.1 the wife shall nominate three valuers;
2.2 within 7 days thereafter the husband shall select one of those valuers to be appointed as joint expert;
2.3 within 7 days thereafter the wife shall provide a proposed joint letter of instruction to be sent the joint expert;
2.4 within 7 days thereafter the husband shall confirm his agreement to the joint letter or alternatively advise of his suggested amendments;
2.5 the parties shall then send the agreed joint letter of instruction to the nominated joint expert including copies of the real estate valuations prepared by [C Valuers];
2.6 the husband shall provide any additional documents requested by the joint valuer within 7 days of any request; and
2.7 the husband shall pay the cost of the valuer/s at first instance.
3. Within 4 days of receipt of the business valuation pursuant to Order 1, the Applicant shall nominate three mediators with the Respondent to select one within 7 days to be appointed as the parties’ mediator.
4. The parties shall provide all documents and information as requested by the mediator and participate in a mediation at the earliest available date.
5. The parties shall equally pay the mediator’s costs.
During the hearing the wife orally amended the relief sought in paragraph 2.7 to provide that the parties would in the first instance equally meet the cost of the single forensic accounting opinion.
The husband opposes the relief sought by the wife to appoint a single forensic accounting expert to opine as to the value of the interests of the parties in B Pty Ltd, at about late 2021. He broadly agrees with orders being made for the parties to engage with a mediator and for the parties to equally meet the cost of that mediation process.
BACKGROUND
The husband in his affidavit filed 30 January 2024 gives evidence as to his tenure and experience in a wholesale industry. In or about 2005, the parties incorporated B Pty Ltd, a wholesale trading enterprise. The parties are the equal shareholders of that corporation. The husband is the sole director.
It is the husband’s case that during 2021, he was engaged in “full consultation” with the wife as to B Pty Ltd selling its trading enterprise. The wife puts this fairly and squarely into issue. It was agitated during the hearing on Friday 16 February 2024 as to whether the husband had engaged in the disclosure of all documents and information relevant to those discussions and the fact of the disposal.
The wife contends that by way of a contract entered by B Pty Ltd in 2021, that corporation agreed to sell its trading enterprise for $5 million. The consideration was made up as to $4.5 million for goodwill and $500,000 for equipment and stock. The wife contends that the disposal was made to employees of the corporation. The husband disputes this contention. He gives evidence that the purchasers, by way of their corporation, K Pty Ltd, were “two men in the industry” who operate a retail business. The disposal completed in late 2021.
As an addendum to the disposal, the purchaser, K Pty Ltd, acquired and entered a lease of premises at Suburb J owned by H Pty Ltd, another corporation of the parties to the marriage.
The parties are at issue as to whether the disposal was at arm’s length on a bona fide basis for market value.
It is the husband’s contention that the value of the disposition was commercial in his mind.
For the purposes of this application, the wife relies on a report prepared by a forensic accountant, Mr G dated September 2023. Mr G opines as to the goodwill component of the trading enterprise as at the date of disposal being valued between $10.4 and $15.1 million.
The wife in support of the application has identified what she contends are several irregularities grounding her suspicions as to an absence of bona fides on the husband’s part in that process of the disposal. The wife identifies that:
(a)It was the accountant of both the husband and B Pty Ltd who established the corporation K Pty Ltd;
(b)The accountant commenced the process of opening bank accounts for the purchaser corporation;
(c)There is an absence of engagement by the purchasing corporation in the process of the acquisition of the trading enterprise;
(d)The solicitor acting for B Pty Ltd on the disposal is now the solicitor for the husband in these proceedings. At the hearing on 16 February 2024 potential issues were identified that may arise from that circumstance, founded from the fiduciary duty owed by the firm to the shareholders of the corporation and the current role of the firm on the husband’s behalf in these adversarial proceedings. That may well be a matter for another day; and
(e)Disclosure requests were made by the solicitors for the wife as to an opinion obtained by the husband as to the value of the trading enterprise disposed of by B Pty Ltd prior to the entry of the contract, in 2021, and for any documents as to the calculation of the value of the “business” prior to that date. The wife identifies that on 19 July 2023, the solicitors for the husband responded that their client does not hold any documents and is not aware of there being any documents relating to the calculation of the value of the business prior to its sale.
Additionally, by way of a letter, dated 26 July 2023, the wife sought the following:
a. how was the selling price of $4.5 million for goodwill plus $500,000 for equipment, plus stock, fixed?
b. when did negotiations in relation to the sale commence?
c. did your client make one or a series of offers to sell, or did the purchasers make one or a series of offers to buy, and, in either case, what were those offers?
d. If your client made any offers to sell then how was the asking price fixed?
e. if your client received any offers to buy on what basis did he evaluate those offers and determine whether they were reasonable or unreasonable?
f. did your client consult his accountant or any other party in relation to the determination of the selling price and, if so, which party and, if so, please provide copies of any correspondence or file notes or any other documentation relating to those discussions or advices.
g. did your client give consideration to any factors which might indicate the value of the business, including sales of any other comparable businesses, the profitability of the business, appropriate multiple to be applied to profit, or any other factors, and if so which factors, and if so, please provide details of how these factors were taken into consideration
The response from the husband’s solicitors, on 23 August 2023, was as follows:
In relation to your extensive request for particulars concerning the sale of [B Pty Ltd], my client does not intend to have to explain the decisions surrounding the sale of the business in circumstances where this occurred during the parties’ marriage and furthermore there is no independent evidence adduced on behalf of your client to suggest that the business was sold for under value (if this is what your client is contending).
It is the wife’s contention that no documents have been produced to ground how the sale price was calculated as at late 2021. It is her contention that Mr G’s indicative opinion as to the value of the trading enterprise disposed of in late 2021 is supported by the published financial statements of K Pty Ltd, for the year ended 30 June 2022.
CONSIDERATION
The wife’s application for the appointment of a single expert forensic accounting witness is pursuant to r 7.04 of the Federal Circuit and Family Court of Australia Rules (Family Law) 2021 (Cth) (“the Rules”). That rule records:
In considering to make an order for the appointment of a single expert witness, the court may take into account any matters relevant to the making of the order which may include but are not limited to considering the overarching purpose of the rules as contained in Rule 1.04, whether expert evidence on a particular issue is necessary, the nature of the issue in dispute and the qualifications of the proposed single expert witness.
Importantly, r 7.04(4) of the Rules provides that:
A party does not need the Court’s permission to tender a report or adduce evidence from a single expert witness appointed pursuant to this rule.
Rule 7.04 is contained in Pt 7.1 of ch 7 of the Rules. The purpose of the part is identified in r 7.2, being to ensure that expert evidence is only obtained in relation to a significant issue in dispute and to that which is necessary to resolve or determine a proceeding. The rule sets out that if practicable, the interests of justice ought not be compromised in the operation of the rule.
It is self-evident, for the purposes of this application, that substantive issue exists as to whether the trading enterprise was disposed of at significantly less than market value.
The husband in his Outline of Case document identifies that the obtaining of the proposed single expert evidence as sought by the wife is likely to discourage settlement at a mediation. I do not accept that submission. It may have the opposite effect.
The husband further submits that the timing of the sale, being six months prior to the separation of the parties, is a matter to consider in determining this application. I do not accept that submission. The husband’s conduct in disposal of the property of the parties, if that disposal occurred at less than market value, is a significant matter that may be considered for the purposes of a finding as to contribution or the adjustment to those contribution findings.
The husband submits that the obtaining of an opinion from a single expert evidence is unnecessary in that the wife currently has some indicative opinion from Mr G. I do not accept that submission. The wife or the husband, can adduce evidence from a single expert pursuant to the rules. The wife would, pursuant to rule 7.10, require leave to adduce and rely upon the opinion of Mr G, he being an expert other than a single expert.
The wife has adopted the approach codified within ch 7 of the Rules by making an application for a single expert witness providing opinion evidence as to a substantive issue in dispute in the proceeding. It is important to remember that the evidence from the single expert witness that may support one party’s case or the other. Again, importantly, the Rules provide a process for the parties to clarify the opinion when first published by a single expert evidence and contain provisions to test the opinion of a single expert witness at trial, or if considered appropriate, permits an application to obtain permission to adduce evidence from an expert other than a single expert in due course.
The husband has raised an issue in opposing the application grounded from the costs that will be incurred in obtaining the single expert opinion evidence as sought by the wife. These parties have substantial property available for adjustment. In the event the single expert opinion evidence as sought by the wife proves to be of little utility and the husband’s contentions as to the commerciality of his disposal are established, it is available for the husband to seek contribution from the wife further down the litigation pathway for any costs that may have been thrown away in obtaining the single expert evidence for which she agitates. Similarly, it may be that the wife somewhere down the litigation pathway will seek that the husband pay her costs met in the first instance of any such single expert evidence.
CONCLUSION
For all of the above reasons, orders will be made generally in terms as sought by the wife as to the appointment of a single expert witness.
COSTS
The wife makes application for the husband to pay her costs of and incidental to the hearing of her relief listed today for the appointment of a single forensic accounting expert to opine as to a retrospective value of the interests of the parties in B Pty Ltd, at or about late 2021, such costs fixed in the sum of $12,000.
The husband opposes the wife’s application for costs. In the alternative and without concession, the husband seeks for the wife’s costs be reserved.
The principles as to costs are well settled. The starting position established by s 117(1) of the Act as identified by the husband is that each party pays their own costs. Section 117(2) allows the Court to make such orders as it considers just if there are circumstances which justify doing so. In considering what order for costs if any should be made, the Court is required to have regard to the matters set out in s 117(2A) of the Act and give weight as it considers appropriate to any relevant factor. It is well settled that not a single factor has priority, nor must there be more than one factor satisfied. Rather, any one factor may be sufficient.
If the wife establishes there are circumstances justifying a costs order, the next consideration is on what basis costs should be paid. The Full Court has made it clear that it is unnecessary to spell out detailed reasons for decisions in costs matters. I shall refer to such s 117(2A) matters as are relevant and engaged here.
The parties have the benefit of very significant property as identified in the primary reasons for judgment. The party’s financial circumstances are a factor that gives some weight.
Each of the parties are represented by very experienced solicitors and counsel. They each filed costs notices on 15 February 2023 for the purposes of the hearing listed 16 February 2023 and today.
The wife was successful in the relief she agitated today, for the appointment of a single forensic accounting expert to provide the opinion identified earlier in these reasons. During the hearing, she amended her position such that the parties would equally pay the cost of that opinion, as opposed to the husband solely meeting the cost of the opinion in the first instance.
I give weight to the approach taken by the husband which appears to fly contrary to that as contained in ch 7 of the Rules. In opposing the relief sought by the wife, he failed to engage with what is self-evidently a substantial issue in dispute between the parties in the litigation. To my mind, it was all but self-evident that single expert opinion evidence on that disputed issue would become a necessary part of these proceedings. Insofar as he opposed that relief, such a position was never maintainable.
I am satisfied that the wife has established justifying circumstances to warrant an order for costs being made in her favour. I am not satisfied that it would be just “to kick the costs down the road” by reserving them, as sought by the husband. I do not accept his submission as to the materiality of the report to be obtained to underscore the reason to reserve the costs incurred by the fact of this hearing today.
I take into account the costs notices filed by each party, noting that there appears to be not an insignificant difference between the costs that have been incurred by the parties in the conduct of the litigation to date.
In seeking costs be fixed, I am mindful of r 12.17, that permits the Court to adopt that course. It is entirely a matter of discretion as to whether costs are fixed. I am also mindful of the requirements of r 1.04, being to facilitate a just resolution of disputes between the parties as efficiently as possible.
I am of the view that the fixing of costs in this case can avoid the complex and often protracted process of the assessment of costs and the delay associated with that process.
The husband elected to oppose the relief as sought by the wife with the benefit of legal advice. He ought to have known that his opposition, in the terms it was presented, may have led to a costs order looming on the horizon. Parties in this Court have an obligation to engage in litigation responsibly and to progress the purposes of the Rules. To my mind, the husband has not done so in this case. The approach of the husband ought to be reflected in the quantum of costs to be ordered.
CONCLUSION AS TO COSTS
For all of the above reasons, I am satisfied this is an appropriate case to fix the costs of the wife of the proceedings before me today in the sum of $10,000 and that such order is just.
Such order will be made.
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: 21 February 2024
0
0
2