Pitney & Amato
[2022] FedCFamC1F 436
•10 June 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Pitney & Amato [2022] FedCFamC1F 436
File number(s): NCC 1317 of 2021 Judgment of: CAMPTON J Date of judgment: 10 June 2022 Catchwords: FAMILY LAW – PROPERTY – Interim property application to sell real properties held by the parties’ self-managed superannuation fund pursuant to an exercise of partial or interim property powers or by way of injunctive relief pursuant to s 114(3) of the Family Law Act 195 (Cth) – Application refused – Where parties agree to an equal adjustment of their superannuation interests and consent orders are made effecting that division of their self-managed superannuation fund – Dispute as to value of a liability of the fund – Mechanism to appoint an assessor to determine that value pursuant to r 7.34 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) – Where the applicant contends a need to engage further single expert witnesses to facilitate the valuation of real property and seeks that the costs of any such evidence be shared between the parties – Where there is insufficient evidence as to the identity or costs of any such expert, and the scope of their engagement, to determine that portion of the dispute. Legislation: Family Law Act 1975 (Cth) ss 90SM, 114
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 7.34
Cases cited: Strahan & Strahan & Commissioner of Taxation (2009) FLC 93-446; [2013] FamCAFC 203
Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82
Tsiang & Wu (2019) FLC 93-911; [2019] FamCAFC 128
Division: Division 1 First Instance Number of paragraphs: 42 Date of hearing: 10 June 2022 Place: Sydney Counsel for the Applicant: Mr Willoughby Solicitor for the Applicant: Hannaway Lawyers Pty Ltd Counsel for the Respondent: Mr Puckey QC Solicitor for the Respondent: Medson Legal ORDERS
NCC 1317 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PITNEY
Applicant
AND: MR AMATO
Respondent
order made by:
CAMPTON J
DATE OF ORDER:
10 june 2022
BY CONSENT IT IS ORDERED:
U Pty Ltd Super Fund
1.The Applicant and the Respondent in their capacity as Trustees of the Fund do all acts and things and sign all documents required to sell:-
(a)the properties known as Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 Suburb B (such properties already being subject to Contracts of Sale) (“the existing sales”); and
(b)the properties known as:-
(i)Lots 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 and 23 Suburb B;
(ii)1 R Street, Suburb E;
(iii)S Street, D Town;
and on a defended basis as to the sale of the property at S Street, D Town, IT IS ORDERED:
A.Upon completion of the sale of same, such sum as may be agreed between the parties within 21 days of the date of these orders; or if not agreed within such period then as determined by an assessor appointed pursuant to r 7.34, be paid from the proceeds of sale to Q Pty Ltd in full and final payment of the construction costs of the house at S Street, D Town; and
B.For the purposes of the appointment of the assessor in paragraph 1(b)iii, the parties appoint the assessor in accordance with the procedures provided in the Rules and if they are unable to do so within 35 days of the date of these orders each party has liberty to seek a relisting of the issue by email correspondence with the Chambers of Campton J for the purposes of a determination as to the identity of the assessor.
C.The costs of the assessor in paragraph 1(b)iii are to be met by the Fund.
(“the new sales”);
BY CONSENT IT IS ORDERED:
(c)The real estate agent shall be as agreed between the parties, but failing agreement the Applicant shall nominate 3 real estate agents and the Respondent shall nominate one of them within 7 days, and if the Respondent has not done so, then the Applicant shall choose the real estate agent.
(d)The sale price for each lot shall be as agreed (with each party advising their position on same within seventy-two (72) hours of notice of a proposed sale price) between the parties but failing agreement as determined by the real estate agent.
(e)The conveyancer shall be as agreed between the parties but failing agreement the Applicant shall nominate 3 conveyancers and the Respondent shall select one within 7 days, failing which the applicant shall select the conveyancer.
(f)If the properties have not sold by private treaty within 3 months then the parties shall take all steps necessary to list the properties for sale by auction, unless otherwise agreed between the parties in writing.
(g)The auctioneer shall be as determined by the real estate agent.
(h)The reserve price for each lot shall be as agreed between the parties (with each party advising their position on same within seventy-two (72) hours of notice of a proposed sale price), but in default of agreement as determined by the real estate agent.
(i)The parties shall attend the auctions and shall co-operate in every way with the auctioneer.
(j)If the properties have not sold at the first auction, then the parties shall take all steps necessary to hold subsequent auctions every 4 weeks until the properties are sold, reducing the reserve price by 5% at each subsequent auction.
(k)Upon the sale of the properties, the proceeds shall be paid to U Pty Ltd Super Fund.
2.The Applicant and the Respondent in their respective capacities as trustees of the Fund each do all things necessary and sign all documents as are required upon completion of the sale of all of the properties referred to in these Orders, to apply the net proceeds as follows:
(a)firstly, to pay all capital gains or other tax and other such expenses applicable to the lots referred to in these Orders;
(b)secondly to pay any fees payable to Mr F of T Services associated with the Super Split, compliance, audit and reporting costs and/or the calculation of any capital gains or other tax applicable to the lots referred to in these Orders, with it being required that both parties are to agree on the quantum of the fee payable and that the fees are reasonably incurred;
(c)the balance be retained in the Fund.
3.The Applicant and Respondent in their respective capacities as trustee of the U Pty Ltd Super Fund (“Fund”) each do all things necessary and sign all documents as are required to:-
(a)roll over the Applicant’s superannuation entitlement (“Applicant’s Super”) in the Fund to the P Super Fund; and
(b)roll over to the P Super Fund such further entitlement in accordance with the provisions of paragraphs 3 to 9 inclusive hereof (“Super Split”) the amount of which shall be equivalent to the dollar value of “x” in the following equation:-
x = [50% of (a + b +c)] – (a +c)
a = value of the Applicant’s superannuation entitlements in the Fund as at the date of valuation;
b = value of the Respondent’s superannuation entitlements in the Fund as at the date of valuation; and
c = value of the Applicant’s superannuation entitlements in P Super Fund as at the date of valuation.
4.Paragraphs 3 to 9 inclusive of these Orders are binding on each of the Applicant and the Respondent as Trustees and the Applicant and the Respondent do all such acts and things and sign all such documents as may be necessary so that the Trustee, in accordance with the obligations imposed under the Family Law Act 1975 ("Act") and Family Law (Superannuation) Regulations 2001 ("Regulations"), can calculate the entitlement of, and make payment to, the Applicant in accordance with the provisions of paragraph 3 hereof.
5.Pursuant to section 90XT(1)(a) of the Act:-
(a)the Applicant is entitled to be paid the specified amount of each splittable payment out of the Respondent's interest in the Fund; and
(b)the Respondent's entitlement to payment out of the Applicant's interest in the Fund is correspondingly reduced by force of this order.
6.The base amount for the purpose of paragraph 5 of these Orders is the amount calculated pursuant to the provisions of paragraph 3(b) hereof.
7.The Trustee do all acts and things and sign all such documents as may be necessary so that, in accordance with the obligations imposed by the Act and the Regulations, the Trustee can calculate the entitlement of, and make payment to, the Applicant whenever the Trustee makes a splittable payment out of the Respondent’s interest in the Fund in accordance with the provisions of paragraph 5 hereof.
8.The Applicant do all things necessary including but not limited to exercising a request pursuant to Regulation 7A.06(2) of the Superannuation Industry (Supervision) Regulations 1994 for the roll over or transfer of the transferable benefits out of the Respondent’s interest in the Fund to the P Super Fund.
9.For the purposes of paragraph 3 hereof:-
(a)the valuation of the fund be effected as at 30 June 2022 by the Fund’s accountant, Mr F of T Services, with the costs of such valuation to be borne by the Fund, such valuation to be subject to review and agreement by the Applicant;
(b)the roll-over of the Applicant’s Super and the Super Split be effected by way of such cash adjustment as is required to meet the Applicant’s entitlement in paragraph 3 hereof.
10.The Respondent indemnify and keep the Applicant effectively indemnified against all unpaid liability of whatsoever nature and kind past present or future incurred by the Applicant or hereinafter incurred by her of and in relation to the Fund or otherwise arising out of the Applicant’s involvement with the Fund and the Trustee and from all costs claims demands proceedings interest penalties or fines in relation thereto.
11.Contemporaneously with the roll-over of the Applicant’s Super and the Super Split respectively to the P Super Fund, at the expense of the Fund:-
(a)the Applicant resign a member of the Fund; and
(b)the Applicant tender her resignation as a Trustee.
Z Street, G Town (W Pty Ltd and W Family Trust)
12.Subject to the value of same being taken into account in any final orders, the Applicant do all things necessary and sign all such documents as are required, at the Respondent’s sole expense, to effect the following:-
(a)resign as a Director of W Pty Ltd ACN … (“W Pty Ltd”);
(b)resign as a Secretary of W Pty Ltd;
(c)transfer to the Respondent all shares held by her in W Pty Ltd; and
(d)relinquish all claim and entitlement in respect of W Pty Ltd.
13.The Respondent retain, to the exclusion of the Applicant, all of his right, title and interest in W Family Trust (“the W Trust’) inclusive of all assets of the W Trust and all bank accounts standing in the name/s of the W Trust and the Applicant do all things necessary to transfer any share in the trust to the Respondent, at the Respondent’s expense, and the Respondent be restrained from making any further distributions to the Applicant from the Trust.
14.The Respondent indemnify the Applicant and keep her effectively indemnified in respect of all unpaid liability of whatsoever nature and kind howsoever and whensoever arising of and in relation to any liability incurred by the Applicant in respect of the W Pty Ltd and/or the W Trust AND INCLUDING any liability personally guaranteed by the Applicant AND INCLUDING any taxation of whatsoever nature or kind assessed or hereinafter assessed against the Applicant in respect in respect of income or capital gain paid or distributed or deemed to have been paid or distributed to the Applicant by W Pty Ltd and/or the W Trust including all interest, penalties, costs, claims and demands in respect thereof.
N Pty Ltd
15.Subject to the value of same being taken into account in any final orders, the Respondent do all things necessary and sign all such documents as are required, at the Applicant’s sole expense, to effect the following:-
(a)resign as a Director of N Pty Ltd ACN … (“N Pty Ltd”);
(b)transfer to the Applicant all shares (both “Ordinary” and “E” class) held by him in N Pty Ltd; and
(c)relinquish all claim and entitlement in respect of N Pty Ltd.
16.The Applicant indemnify the Respondent and keep him effectively indemnified in respect of all unpaid liability of whatsoever nature and kind howsoever and whensoever arising of and in relation to any liability incurred by the Respondent in respect of the N Pty Ltd AND INCLUDING any liability personally guaranteed by the Applicant AND INCLUDING any taxation of whatsoever nature or kind assessed or hereinafter assessed against the Respondent in respect in respect of income or capital gain paid or distributed or deemed to have been paid or distributed to the Respondent by N Pty Ltd including all interest, penalties, costs, claims and demands in respect thereof.
17.In default of the Applicant or the Respondent, in their personal capacity doing all acts and things and executing all such documents as are necessary to give effect to these Orders, a Registrar of the Federal Circuit and Family Court of Australia be appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to execute all such documents in the name of the defaulting party and to do all such things and acts necessary to give validity and operation to these Orders.
AND IT IS ORDERED:
Valuation of Lot Suburb C
18.The Applicant be permitted to obtain from the single real property valuation expert, Mr H, referrals to appropriately qualified experts to complete the valuation exercise referred to in sub-paragraph (b) of the joint letter of instruction dated 15 April 2022 and obtain from those experts advice as to their capacity to undertake the proposed task, information they will require, together with estimates of their likely costs, such information to be filed with the Court in the event the Applicant seeks to pursue that course further, with either party having leave to restore the proceedings by email to my chambers. [put in minute of direction]
19.The Applicant’s Application for the sale of 1 R Street and 2 R Street, Suburb E is dismissed.
20.The respondent file and serve any submissions as to costs of the interlocutory matters determined today within 7 days and limited to 5 pages and the applicant filed and serve any submissions in reply within 14 days thereafter similarly limited to 5 pages, with the issue as to costs to be determined in Chambers.
Case management listing
21.The proceeding be listed for mention and further case management by Teams on 9.30 am on 24 October 2022, noting that the parties propose to continue a mediation process with the Honourable Ian Coleman SC after implementation of these orders.
22.The parties each have leave to consent by way of joint email correspondence with my chambers to administratively adjourn the case management listing at 9.30 am on 24 October 2022.
23.That each party has liberty to re-list the proceedings for mention on 7 days’ written notice to by chambers and the other party by way of an email particularising the reason for the relisting and attaching a Minute of Order to be sought upon the matter being relisted.
AND THE COURT NOTES:
Disclosure re V Town & Culcairn
A.The Respondent asserts he has made full and frank disclosure of all documentation he has relating to the purchase of properties at J Street and K Street, V Town.
B.The Respondent is subject to an ongoing obligation to make disclosure of any further documentation in regard to these purchases, as well as Hamilton Street, Culcairn, as the documents come into his possession, power or control.
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 Pitney & Amato has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
CAMPTON J:
These are substantive proceedings for property adjustment arising from the termination of a de facto relationship between Ms Pitney (“the applicant”) and Mr Amato (“the respondent”). That relationship commenced in 1998 and concluded in either May (on the respondent’s case) or August 2020 (on the applicant’s case).
The proceedings for adjustment of property pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”) were initiating by the applicant on 25 April 2021. The proceedings are before me, having been placed in the Major Complex Financial Proceedings list.
The applicant was born in 1957 and the respondent was born in 1959.
By way of an Amended Application in a Proceeding filed on 9 August 2021, the applicant sought a range of interlocutory relief, that relief has been joined in issue by the respondent by way of his Amended Response to an Application in a Proceeding filed on 20 May 2022.
The proceedings have previously come before me for case management, including on 24 November 2021 on which date orders were made by consent between the parties. I will return to those orders later in these reasons.
Each of the parties has identified the material that they relied upon for the purposes of the interlocutory determination before me today by way of comprehensive Case Outline documents, each including the Minute of Orders sought on disputed matters. The applicant’s Case Outline document was filed on 7 June 2022 and the respondent’s was filed on 8 June 2022. The parties for the purpose of the interlocutory hearing have relied on a large volume of affidavit material and exhibits thereto.
To the credit of the parties and their legal representatives, the scope of the interlocutory dispute between them has been substantially narrowed. The parties have provided a document which was marked as Exhibit 1 in the proceedings before me today, being a proposed Minute of Interim Order. That Minute determines all the outstanding interlocutory issues currently between the parties and includes the matters which remain the subject of contest, identified as follows:
(a)Whether two real properties forming part of the property of the parties’ self-managed superannuation fund (“the fund”) ought be sold;
(b)The mechanism by which the value of a liability owed by the fund to a company ought be determined, that value currently being in dispute between the parties; and
(c)Who should meet the costs, if any, of a further single expert witness who may be an engineer or a quantity surveyor to implement part of the instructions provided by the parties to a single real property valuation expert for the purposes of the valuation of a property at Lot …, Suburb C, pursuant to orders made on 24 November 2021.
The application to sell the Suburb E Properties
The first issue between the parties is that the applicant seeks orders on an interlocutory basis whereby the parties’ self-managed superannuation fund would effect the disposal of two real properties held by it identified as 1 R Street, Suburb E and 2 R Street, Suburb E (“the Suburb E properties”). The respondent opposes the disposal of those real properties and seeks to retain them as part of the fund.
The consent position of the parties as contained within Exhibit 1 records a process whereby a superannuation splitting order will adjust in the applicant’s favour, 50 per cent of the value of the combined interests of the parties in the fund, and further provide for the applicant roll out her splittable superannuation interest into a fund of her election. The respondent would thereafter retain the structure of the fund, and its remaining assets, he then being its sole member.
It was agreed during the course of the hearing that the superannuation split to be ordered effects an equal adjustment of the parties’ superannuation interests and that the dispute as to the disposal of the Suburb E properties will not prevent the implementation of that equal adjustment.
The applicant contended that the orders sought for the disposal of the Suburb E properties held by the fund were grounded by way of the exercise of an interim or partial s 90SM power.
She contended that:
(a)In an earlier part of the proceedings, the respondent had indicated that he agreed to sell the Suburb E properties held by the fund;
(b)The parties appear to accept that there is an issue relating to the compliance of the fund with relevant legislative and regulatory requirements. It appears uncontroversial that the fund has undertaken enterprises that may cause it to be non-complying for revenue purposes. These include the fund’s assets being used for the private use and benefit of what are described as related parties. One such use is the respondent residing on and using real property owned by the fund subsequent to separation.
It is the applicant’s contention that she has received expert advice from Mr L on the topic. He has specialised expertise in dealing with and advising as to what he describes as “highly complex issues” attaching to the management of self-managed superannuation funds. His professional expertise includes accreditation as a financial planner and his affidavit records that he has received a number of awards on this particular subject matter. He sets out his qualifications in his affidavit relied on by the applicant. I am satisfied as to his expertise to provide an opinion as to the circumstances confronting these parties and as to his interpretation of relevant legislation, regulations and rulings within the self-managed superannuation fund space.
The applicant additionally relied on an affidavit of Mr F, who is the accountant for the parties and has been the accountant for a number of their corporate interests, including their self-managed superannuation fund. Mr F records that the fund holds significant assets consisting of cash and real properties. He has been the professional with oversight as to the certification of the fund and the compliance of the fund with regulatory and statutory requirements historically during the course of the parties’ relationship.
For the purposes of the application to sell the Suburb E properties, it is contended on behalf of the applicant that the advice of specialists and experts upon whom she relies is uniform in that all property in the fund should be sold so as to bring the fund into alignment with compliance. She identifies that the respondent’s position has shifted in the course of the proceedings, in that he initially indicated that the relevant properties now sought to be retained by the fund could be sold and that his substantive Response to an Initiating Application does not specifically propose that he retain the fund and its assets on a final basis. It is the applicant’s case that the risk of retaining the properties by the fund presents to both members, and that the uncertainties as identified in Mr L’s evidence should the real properties not be disposed of presents as an invitation for further litigation and disputes regarding the fact and quantification of liabilities and the causation of those liabilities with the fund.
Counsel on behalf of the applicant quite properly concedes that Exhibit 1 provides for a regime whereby the respondent will retain the fund in specie, and specifically identifies in Clause 10 of Exhibit 1 what might be described as a broad and all but complete indemnity that the respondent provides to the applicant arising from her involvement with the fund and any future penalties raised against the fund. Counsel for the applicant further contends that if the liabilities foreshadowed by Mr L come to fruition, there may be an inability to appropriately adjust those liabilities going forward as between the parties. He quite properly indicates that the liability cannot be quantified today.
On behalf of the respondent it was conceded that the structure of the applicant’s submissions may also invite a consideration as to her relief of the sale of the Suburb E properties, being of an injunctive character grounded by s 114(3) of the Act.
The Full Court has made it clear by way of authorities as far back as Strahan & Strahan (2009) FLC 93-466 that the relevant principles in relation to interim or partial property orders involve effectively two steps, the first is enlivening that it is in the overarching considerations of justice to exercise an interim or partial property power. The Full Court made it clear that the test is not confined to compelling circumstances and that more is required than the mere fact that upon a final hearing, the quantum of the property sought to be retained or otherwise dealt with can be adequately accommodated. The second step requires regard to the usual contribution matters and adjustment thereto, however given the imprecise nature of the exercise in making orders any discretion ought to be conservative so as to ensure the final property outcome is not compromised, and importantly for this case, that the remaining property is sufficient to meet the legitimate expectations of the parties at a final hearing, including that the interim or partial property order is capable of being reversed or adjusted if it subsequently considered necessary to do so.
In this matter, albeit that the respondent has not clearly pinned his colours to the mast by way of his relief in his Response as to property adjustment, the proposed consent position as contained in Exhibit 1 makes it clear that he will retain the fund in specie subsequent to the superannuation splitting order in favour of the applicant and the rolling out of her member entitlements in the fund and that the respondent will provide her with an indemnity. To my mind it is pivotal, against that background, that it is his sworn evidence that he wishes to retain the Suburb E properties as part of the fund property. He sets out in his affidavit and I accept for the purposes of this interlocutory determination that they are farming properties that have not been the subject of improvements that may compromise the fund as identified in the evidence of the applicant’s expert, Mr L.
Mr L’s evidence at this current time is to my mind somewhat speculative and has not been the subject of evaluation of evaluation or testing by way of cross-examination. I am mindful that there has been historically audit certifications of the fund undertaken by the parties as personal trustees of the fund under the oversight of the accountant, Mr M. I am further mindful as to the caveats contained in Mr L’s affidavit are as to future possibilities, and find that for the purposes of this interlocutory determination the indemnity provided by the respondent in Exhibit 1 ought to provide some comfort to the applicant.
The irreversibility of the disposal of those two pieces of real property coupled with the matters identified earlier in these reasons, and the agreed position as to the parties on implementation of Exhibit 1, leads me to the conclusion at this time that the relief sought by the applicant as to the sale by the fund of the Suburb E properties grounded from an exercise of an interim property power ought to be refused.
Insofar as these reasons related to a preservation of property pursuant to s 114(3) of the Act I would also dismiss that application if it is grounded by way of mandatory injunction. I have identified earlier in these reasons that the compliance issues are a matter of controversy and in the circumstances find for the purposes of this interlocutory application that the risk that has been identified by the applicant does not cause the balance of convenience favouring the making of the injunction to fall in her favour. The Full Court in Tsiang & Wu (2019) FLC 93-911 set out how that balancing exercise is to be undertaken for the purposes of a mandatory injunction. I am not satisfied as to the existence of a risk and magnitude of a risk being sufficient to prejudice the position of the applicant going further into the future. For those reasons, in the event the relief as to the sale of the Suburb E properties by the fund was made grounded from an injunctive power, I refuse that application.
An order will be made dismissing the applicant’s relief for the sale of the Suburb E properties.
Assessment of liability owing to the parties’ self-managed superannuation fund
The second issue in dispute between the parties is as to a liability of the fund in favour of Q Pty Ltd (“the company”). It is uncontroversial that a piece of real property owned by the fund at S Street, AA Town (“the AA Town property”), had constructed upon it a house or dwelling, and that the company undertook the cost and completion of that building. It is further uncontroversial that the fund has a liability payable to the company for those works.
The respondent contends that the company is due the sum of $435,000 for the works that have been undertaken. The applicant contends that the value of that liability is $248,000. The respondent’s contention as to the value of the liability is said to be grounded in the MYOB records that he contends were maintained by the applicant during the period of the construction of the AA Town property and that there were additional items that have not been accounted for which may be the foundation for the difference in contended value as between he and the applicant.
Both parties agree that it is necessary for there to be a determination as to the quantification of the liability due by the fund to the company for the purposes of implementing the superannuation split and rollover orders as proposed in Exhibit 1. During the course of the hearing, the parties agreed that in the event they cannot achieve an agreement as to the value of that liability, the Court ought to appoint an assessor for the purposes of making a determination as to the value of that liability for and on behalf of the fund, the parties being the personal trustees of the fund and having the capacity to direct the fund to undertake that task.
For the purposes of these orders, I propose to:
(c)Permit the parties an opportunity to agree as to the value of the liability owed by the fund to the company over a period of 21 days from the date of today;
(d)In the event of failing to agree to that quantum within such specified period, require the parties to thereafter confer for a period of 14 days as to the identity of an assessor to be appointed to undertake that task pursuant to r 7.34 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) upon the basis that the cost of the assessor is met by the fund.
(e)In the event the parties have not either agreed as to the value of the liability, or as to the identity of the assessor to be appointed within the above specified period, to grant the parties leave to relist that issue for determination of the identity of the assessor, any issue as to which the assessor’s assistance is sought, and any other matter relevant to the assessment on seven days’ notice to my chambers by way of email. Upon receipt of that email I would anticipate making orders in chambers as to the filing and serving of evidence relevant to the appointment of that assessor.
Valuation of the Suburb C property
The final issue between the parties centres upon an order made on a consensual basis on 24 November 2021, being that the parties would engage a single expert witness to value the Suburb C property (“the single real property expert”). The parties have progressed the valuation of that property. It is uncontroversial that the property has the benefit of a development approval for some 44 lots.
The agreed single real property expert, Mr H, was instructed by way of a letter signed by the solicitors for each of the parties dated 15 April 2022 to undertake the valuation of the Suburb C property by way of two processes, the first being current market value if it was sold “as is” and the second as to the value of the 44 lot subdivision if completed and sold.
By way of response to that instruction, the single real property expert forwarded correspondence to the solicitors for the parties stating:
Our valuer has read all the documentation that you have both kindly provided and would like to propose the following:
•Both parties be willing to engage an independent Engineer/or Quantity Surveyor for construction costs to be provided. Inclusive would be a breakdown of design fees, headwork expense and subdivisions costs by components
This as a critical part of the valuation process and would need to be agreed upon both parties. Also, we would require the following information:
•Details of any pre sales be provided
•Statutory expenses incurred to date
•Request/invite either party to make submissions for consideration within 3 weeks of the engagement for consideration
Please advise if both parties would consider the above as part of the engagement
(Respondent’s affidavit filed 20 May 2022, paragraph 61).
The respondent gives evidence in his affidavit which appears uncontroversial that no steps have been undertaken to progress the proposed subdivision beyond pre-developmental approval, that there have been no pre-sales, and that the expenses incurred in relation to the subject to date have been to obtain the development approval only.
It the applicant’s case for the purposes of this dispute is that the parties have agreed as to the fact of the alternate valuation process and that inherent to the order made on 24 November 2021 was that the parties agreed to equally meet the costs of obtaining that expert evidence. It is her submission that the single real property expert requires the material identified above to form the basis of their alternate opinion, that it is uncontroversial that the Suburb C property is owned by a corporate enterprise of which the respondent has an interest disparate from the applicant, and that she has no legal interest in that corporate enterprise.
It is the respondent’s position that he agrees to the applicant undertaking such enquiries as she considers necessary or appropriate, and in the circumstances, by way of compromise he agreed to the alternate foundation for valuation as provided to the single expert in instructions. Putting it another way, he says he did so to avoid a dispute. It is his contention that the second limb of the opinion as sought will be irrelevant at trial and that the current value of the Suburb C property “as is” will include a consideration of the current developmental approval and its potential. He identifies what the High Court said in Spencer v The Commonwealth (1907) 5 CLR 418 per Isaac J at 441 being:
All circumstances subsequently arising are to be ignored. Whether the land becomes more valuable or less valuable afterwards is immaterial. Its value is fixed by Statute as on that day. Prosperity unexpected, or depression which no man would ever have anticipated, if happening after the date named, must be alike disregarded. The facts existing on 1st January 1905 are the only relevant facts, and the all important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. The plaintiff is to be compensated; therefore he is to receive the money equivalent to the loss he sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him. To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.
I am told that no enquiries have been made by the parties as to whether, having regard to the evidence, a further single expert witness or a number of further witnesses will still be required by the single real property expert to be engaged in order to progress the provision of additional material he has sought. An enquiry was made this morning of the single real property expert as to the identity of such person or persons but no reply has been received.
I raised with senior counsel for the respondent during the course of the hearing as to whether in circumstances where he would contend that the second alternate opinion from the single real property expert would be irrelevant for the purposes of the s 90SM dispute the respondent would agree to the applicant solely providing instructions to any further single expert witnesses of an engineering, quantity surveying, or other expertise for the purposes of this supplementary opinion. Senior counsel for the respondent would not take the leap into the dark albeit he would have the opportunity to conduct an enquiry into any further single expert witness opinion by way of the processes contained within the Rules subsequent to the production of the report and thereafter by way of cross-examination at the hearing.
I am told for the purposes of this dispute and accept that there has been no estimation done as to the construction costs of the subdivision project, or as to the design parameters of the subdivision. I accept the submission made on behalf of the respondent that the proposal as to the estimated sale values achieved on the disposal of the 44 lots sometime potentially years into the future is highly speculative.
The expert relied upon by the applicant, Mr L, recorded in his affidavit what is self-evident for the purposes of this dispute. Property development, he says, is an inherently risky venture and may involve unexpected costs, delays, and vagaries of markets, including sales markets and markets as to the costs of funding.
The terms of this portion of this dispute are defined by the parties and how they have agreed to instruct and fund the expert. To my mind there is currently an evidentiary vacuum that prevents this aspect of the dispute proceeding to determination. Unless and until I receive an evidentiary foundation as to the identity of the proposed further single expert or experts and as to their estimated costs, in the circumstances of the embryonic presentation of the current subdivision, it would be contrary to fundamental aspects of fairness and justice to commit these parties to a course that may have a substantial cost for very little benefit.
I propose to order that the applicant:
(a)Be permitted to progress on behalf of the parties to identify such additional expert evidence as is required to pursue the inquiries made by the single real property expert valuer to date; and
(b)In the event the current presentation of the subdivision does not permit a sufficient foundation for an expert to provide an opinion, request that the single real property expert advise the parties of same; and
(c)In the event that part of the single real property expert’s opinion is to be progressed, that the parties do all things to obtain an estimate of costs for the opinion(s).
Conclusion
The parties are to forward to my chambers an amended Minute of Order reflecting my reasons set out herein, and indicating clearly the orders that are sought by consent and those that are the subject of my determination.
Costs
The respondent makes an application for costs of and incidental to the interlocutory proceedings before me today. The applicant contends that there ought to be no order as to costs.
I reserve the questions of costs to be determined in chambers. The respondent is to file and serve in a period of seven days such submissions as to costs as he considers appropriate, including a foundation as to any quantum of costs to be fixed, such submissions to be no greater than five pages in length and the applicant has 14 days thereafter to file any submissions in response.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 22 June 2022
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