Phelps and Phelps (No 2) - [2020] FamCA 900

FAMILY COURT OF AUSTRALIA

PHELPS & PHELPS (NO. 2)

[2020] FamCA 900

FAMILY LAW – PRACTICE AND PROCEDURE – where the proceedings are listed for trial in a month – where the single expert forensic accountant’s report has not yet been completed – where the wife may, after considering the single expert’s report, press her application for the appointment of an adversarial expert – where the wife seeks to provide the single expert with further information – where the husband opposes such information being provided to the single expert – application to provide the single expert with further information dismissed – Where the husband seeks to restrain the wife from causing or permitting accountants retained by her from attending any meeting with the single expert – application dismissed.

Phelps & Phelps [2020] FamCA 285

APPLICANT:

Ms Phelps

RESPONDENT:

Mr Phelps

FILE NUMBER:

BRC

4239

2017

DATE DELIVERED:

19 October 2020

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Baumann J

HEARING DATE:

14 October 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr T Kirk QC

SOLICITOR FOR THE APPLICANT:

Ryan Kruger Lawyers

COUNSEL FOR THE RESPONDENT:

Mr G Richardson SC

SOLICITOR FOR THE RESPONDENT:

Phillips Family Law

Orders

That the wife’s Application in a Case filed 7 October 2020 be dismissed.
That the husband’s application seeking to restrain the wife contained in his Response to an Application in a Case filed 13 October 2020 be dismissed.
That the costs of this Application in a Case be reserved to Trial.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Phelps & Phelps has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 4239 of 2017

Ms Phelps

Applicant

And

Mr Phelps

Respondent

REASONS FOR JUDGMENT

(settled from the oral reasons delivered)

In the midst of contested property proceedings a significant forensic issue arises as to the current market value of the four T Franchises in which the parties have interests in in Queensland. An issue also arises as to the value of the wife’s business. Forensic accountant, Mr G, prepared (as a single expert) in these proceedings a valuation report dated 12 July 2018, filed with his updated report of 9 April 2020. Those reports were filed in anticipation of an earlier trial listed to commence before me on 26 May 2020.
For reasons delivered on 29 April 2020 (see Phelps & Phelps [2020] FamCA 285) the trial was adjourned, and is now listed to commence on 16 November 2020. As it was identified at paragraph 45 of my earlier Reasons that “…uncertainties as to the valuation evidence arising from the current trading conditions…” it meant that the single expert, Mr G, should update his report. In setting a trial date after 1 October 2020, the Court identified at paragraph 47 what it anticipated would occur after April 2020, being at least provision of management reports to 30 June 2020 with the receipt of an updated report by at least early August 2020 and:
“If a report is available by early August 2020, and a trial does not commence until October 2020, this is sufficient time for the wife to take advice and instruct her solicitors whether at that time she wishes to press the application for the appointment of an adversarial expert.”
Whilst both parties, through their respective Senior Counsel, Mr Kirk appearing for the wife, and Mr Richardson appearing for the husband told me on 14 October 2020 that their clients are keen for the trial to proceed as listed (shaped in part by the Court’s indication that) if it does not proceed then a new trial date is unlikely before May 2021. The single expert, Mr G, has indicated to the parties his report is not likely to be available until this Friday, 23 October 2020. If it is then produced (and at this time I make no findings as to why there has been this delay) then there is significantly less time for the wife to proceed with her anticipated application for an adversarial expert, and for those experts to confer before the hearing only four weeks away.
In this context, on 7 October 2020, the wife filed an Application in a Case seeking the following order:
“1.That the applicant be given leave to provide the single expert Mr G of BB Accountants the affidavits provided by T licensee owners of purchases and sales of licenses throughout Australia to assist in the consideration and preparation of the single expert report of Mr G regarding the party’s ownership of T Franchises within the R Family Trust.”
In opposing the application, the husband’s Response seeks the following additional order:
“2.That the Wife be restrained from causing or permitting Mr CC and Mr DD of FF Consultants to attend any meeting with the Court appointed single expert, Mr G.”
The wife relies upon advice from a forensic valuer, Dr Q as to the values attributed to the T Franchises in the initial reports of Mr G to support her concerns, that “the businesses are significantly undervalued in Mr G’s most recent report”. The wife’s solicitor, Mr Mark Ryan, in his Affidavit filed 13 October 2020 at paragraph 6, gives details of relevant information he says Dr Q requests to undertake an assessment of “comparative” sales – apparently not prepared to rely upon the source of information identified by Mr G in his report at paragraph 94, being the discussions held with Ms GG – the marketing/finance manager for T Franchises in Queensland/Northern Territory.
It is said, in particular, that Ms GG advised Mr G that “…the average multiple achieved in Queensland is 5.7 which is consistent with the national average…a number of T Franchises had been sold at a multiple of 5.5…” Although “[s]he was aware of some businesses selling at 6 but these sales were coupled with a business located in a less valuable location.”
Ms GG is also alleged to have advised Mr G that “…whilst transactions had occurred in New South Wales at multiples greater than 5.5, these transactions were not relevant to Queensland.”
Counsel for the wife, Mr Kirk QC, contends that Mr G should be provided with evidence now available to the wife which challenges, in effect, the information provided to Mr G by Ms GG, upon which he relied informing his opinion as to the appropriate multiple. Mr Kirk QC says that by so doing, Mr G will have a chance to give proper consideration to all relevant evidence (now available to the wife about “comparable” sales) and this might obviate the need to seek an adversarial expert and a potentially delayed final hearing.
Mr Richardson SC, for the husband, says that Mr G should not be given the new “evidence” for a combination of reasons, including that:
a)the Affidavits do not set out all the factors identified by the wife’s shadow expert, Dr Q, in Mr Ryan’s Affidavit at paragraph 6.
b)in their current form, the Affidavits are inadmissible; and
c)if the single expert is given the “information” now relied upon by the wife, it could taint his expert report and cause further delays in the trial process.
The evidence sought to be offered by the wife to the single expert are Affidavits by other T licensees that have been sworn however they do not deal with all of the factors identified by Dr Q. The Court is not, therefore, aware if the deponents of the Affidavits have taken the view that those factors identified by Dr Q were relevant, or not, in their particular transactions. This was one of the concerns raised by Mr Richardson SC when he made some preliminary attacks upon the admissibility of the Affidavits.
I do not regard now is the time to rule on the admissibility of the Affidavits for a trial which has not yet commenced. They have not yet been filed, but, I note that in forming an opinion, an expert gathers information from sources and often relies on hearsay in that process. Often the evidence relied upon in this way is not sworn to be true. An expert is required to reveal information relied upon by the expert to form their opinion. The Court is not bound by the opinion of the expert. If the factual basis underpinning the opinion is ultimately found by the Court not to be accurate or solid, that can of course cause an expert to alter their opinion whilst under cross‑examination and/or reduce the weight or reliability the Court attaches to the expert opinion.
In summary form, the evidence sought to be provided by the wife to the single expert comprises:
a)an Affidavit by Ms HH, a previous licensee of a T Franchise at JJ Town, New South Wales sold in 2018, applying a multiple of seven;
b)a further Affidavit by Ms HH in respect of a business in KK Town, New South Wales sold in 2018, applying a multiple of six;
c)a further Affidavit of Ms HH in respect of a business in LL Town, New South Wales sold in 2018, applying a multiple of six;
d)an Affidavit of Mr MM in respect of a business in NN Town, Queensland he purchased in June 2020, applying a multiple of 5.5;
e)a further Affidavit of Mr MM in respect of a business in PP Town, Queensland he purchased in June 2020, applying a multiple of 5.5;
f)an Affidavit of the wife’s brother, Mr F in respect of a business at Suburb QQ, Queensland he purchased in September 2019, applying a multiple of 5.5;
g)an Affidavit of Mr RR in respect of a business he purchased in TT Town, New South Wales in July 2019, applying a multiple of 6.25;
h)a further Affidavit of Ms HH in respect of a business at SS Town, New South Wales she sold in March 2018, applying a multiple of six;
i)a further Affidavit of Ms HH in respect of a business at RR Town, Victoria she sold in 2018, applying a multiple of 6.5;
j)an Affidavit of Mr VV in respect of a business at Suburb WW, New South Wales he sold five years ago in 2015, applying a multiple of 6.5;
k)an Affidavit of Mr XX in respect of a business located in BL Town, New South Wales he purchased in August 2020, applying a multiple of six;
l)a further Affidavit of Mr XX in respect of a business located in YY Town, New South Wales purchased in March 2018, applying a multiple of six;
m)an Affidavit of Mr ZZ in respect of a business purchased in Suburb BC, New South Wales in November 2019, applying a multiple of 6.69;
n)a further Affidavit of Mr ZZ in respect of a business purchased in December 2018, applying a multiple of 6.475;
o)an Affidavit of Mr BD in respect of a business sold in Suburb BF, New South Wales in December 2015, applying a multiple of 6.7; and
p)a further Affidavit of Mr BD in respect of a business sold in Suburb BK, New South Wales in 2015, applying a multiple of 6.7.

Discussion

In my view, it is relevant to record that at least by reference to paragraph 94 of the earlier report of Mr G, he was content to rely upon the information from Ms GG. There is no suggestion he has sought the information the wife seeks to offer for his consideration. Of the 16 sales referred to in the listed Affidavits above, only three relate to Queensland sites. The Court does not know the basis for Ms GG’s advice to Mr G that sales outside of Queensland are not relevant to Queensland sales. The appointed single expert has not requested, as I say, the information about comparable sales in other states. He is entitled to adopt the methodology he regards to be appropriate.
Considering the issue at least of the multiplier rate has apparently been an issue since at least April 2020, when Mr G produced his updated report, procuring evidence five months later on the cusp of the single expert completing his report, is also a factor which persuades me in the exercise of my discretion, not to permit the wife, at this late stage, to offer the evidence to Mr G. I appreciate that in so doing I may be confronted with the wife seeking to press her application for Dr Q to be appointed as an adversarial expert. It is noted this matter already has a date before me, listed at 9.30am on 4 November 2020. If the wife wishes to press that application, having read the report of Mr G, I will hear it on that day.
Although time will be tight, but inferring that Dr Q has had some access to some information (at least the earlier reports of Mr G) so as to enable him to have the discussions with Mr Ryan, the wife’s solicitor referred to in his Affidavit at paragraph 6, it is to be hoped that there will be sufficient time for the adversarial expert, if permitted, and Mr G, to confer prior to the hearing. In my view, those discussions should not impede the parties’ trial material being prepared and filed, as the expert evidence goes more to the value of the pool to be adjusted; although I accept that the valuations to the pool may affect payments made by one party to another, or the transfer of property. That is more about the form of order.
I am not persuaded that if Mr G has, as appears to be the case, agreed to confer with the wife to gather material on her business or otherwise, that the wife should be restrained from being accompanied by whoever she chooses from a firm of accountants, who she has retained. On balance, they may clarify some issues for Mr G. Mr G is a very experienced forensic accountant, used to the rigors of competent cross‑examination, often by Senior Counsel. I am not concerned that he would not be able to manage a conference with the wife accompanied by her accountant of choice.
For those reasons I will be dismissing the wife’s application.
I will dismiss the application by the husband to seek to restrain the wife being accompanied by persons to meet with Mr G.
I will reserve the costs of this application to the trial.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Baumann delivered on 19 October 2020.

Associate:

Date: 6 November 2020