PITTMAN and PITTMAN

[2011] FCWA 79

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT : FAMILY LAW ACT 1975

LOCATION : PERTH

CITATION : PITTMAN and PITTMAN [2011] FCWA 79

CORAM : MONCRIEFF J

HEARD : 23/08/2011

DELIVERED : 23/08/2011

FILE NO/S : PTW 578 of 2003

BETWEEN : PITTMAN Applicant Wife

AND PITTMAN

Respondent Husband

Catchwords:

PRACTICE AND PROCEDURE - Late application - Rule 15.5 - Expert Evidence

Legislation:

Family Law Rules 2004 (Cth)

Category: Not Reportable

Representation:

Counsel:

Applicant : Mr K Wilson SC with Dr R Ingleby
Respondent : Mr F Castiglione QC with Mr H Moser

Solicitors:

Applicant : O'Sullivan Davies
Respondent : Hudson Henning & Goodman

Case(s) referred to in judgment(s):

Aon Risk Services Australia Limited and Australian National University [2009] HCA 27
Colgate-Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248
Munday v Bowman (1997) FLC 92-784

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

1By way of a Form 2 application filed on 15 August 2011 the husband seeks orders that he be “granted leave to rely on the affidavit of his expert, Andy Gilmore, sworn 12 August 2011 and filed herewith at the trial in this matter”.

2 The affidavit referred to is an affidavit of Andrew John Gilmore, accountant.

3 The affidavit is the only affidavit filed in support of the application.

4Mr Gilmore deposes that he has been requested by HHG Legal on behalf of [the husband] to provide a valuation report of the husband’s interest in [the Pittman Family Trust] “([the PFT])”as at 30 June 2010.

5Mr Gilmore then goes on to annexe a copy of the report dated 12 August 2011 which he has prepared.

6At all material times it is to be remembered that the trial in this matter was set to commence on Thursday, 18 August 2011 with a period of 10 days being allowed for the trial. In other words, the report itself was prepared 6 days prior to the commencement of the trial and filed on the Monday of the week in which the trial was due to commence.

7The report, if admitted into evidence seeks to proffer an opinion of Mr Gilmore that the interest of the husband in these proceedings, should be discounted by some

$21.6 million on the basis that his interest in the relevant trust is a minority interest and by implication that his interest should be considered separately from the global valuation of the trust.

8This matter has had a significant litigation history as is apparent by its file number, commencing relatively early in 2003. Since the proceedings commenced there has been a significant amount of judicial management of the file, a trial before Her Honour Justice Crisford in 2008 and an appeal to the Full Court of the Family Court which was heard in June 2009.

9 Counsel appearing at the trial before Justice Crisford for the husband, before the

Full Court for the husband and before me have been the same.

10 Before the Full Court in response to an issue raised in the context of the appeal as to the re-exercise of discretion Mr Castiglione QC appearing for the husband had the following to say:

The difficulty I have is that the issue has been raised about values. We have no doubt in our mind that if the Court was to exercise a discretion allowing the appeal we would want as sure as night follows day the opportunity to revalue because we have certain views about that. Now the revaluation you make I appreciate it has happened before and on many occasions. I mean we could theoretically if there is an issue about

valuations we could call the evidence before the Full Court but do we want to?

So whereas it is always practical and expedient to have the Full Court re- exercise discretion and change things, here we wouldn’t feel confident at all that if that is the position that we shouldn’t take the vital step of pinning down now what the pool is. I don’t want to say any more than that at the moment but I have reasons for saying that, and further, yes there are two issues the practicality of bringing it before this Full Court and secondly, I have a vivid recollection because of the complexity of everything the last round of very expensive valuations took over 12 months and in fact closer to 18 months. Obviously it may have to be done a lot faster, for obvious reasons but there are two practical considerations but depending on what the Full Court does, we affirm that we could not rely any longer at the present time given what has happened to the economy on the $62 million or $67 million.

11 The reference to $62 million or $67 million being to the values before the trial judge.

12 The Full Court delivered its judgment in March 2010. In the body of the reasons given by the Full Court, allowing the appeal and, materially, allowing the appeal on the basis that the husband’s interest in the trust should be treated as property, the Full Court said at paragraph 37:

37.Immediately thereafter Her Honour referred to the unchallenged valuation of the [PFT] prepared by KPMG (as at 30 June 2007) on a pre-tax basis, saying:

91. The KPMG report states the present value of the Trust as

$251 million. The wife’s senior counsel says the husband’s fixed interest of 25% is currently $62.75 million. If the husband’s mother dies then he would receive a further 8.33% (giving him a total of 33.33%). This translates to $83.66 million.

92. Presently, the KPMG report reveals the Trust has a total of

$110,612,816 in Cash Management Accounts.

38.Her Honour then again left the topic of the [PFT] and considered certain other matters relating to the calculation of the pool of property and its value. Following her consideration of those matters, she set out (at paragraph 120 of her reasons) a schedule of assets and liabilities.

39.That schedule contained two asset pools being “Asset Pool A” and “Asset Pool B”. “Asset Pool B” contained only one item being the “[PFT]”, which was shown to be in the ownership of the husband and to have an estimated value of $62,750,000 (which figure, it will be recalled, represented 25 per cent of the unchallenged valuation of

the trust referred to in paragraph 91 of her Honour’s reasons). “Asset Pool A” contained all other assets (and liabilities of the parties) and had a net value of $8,638,079. No explanation was provided by her Honour at this stage for this division of the asset pool into two pools.

40.In relation to the estimated value of the husband’s interest in the [PFT] as shown in her Honour’s schedule of assets and liabilities, it is unclear to us whether the KPMG report valued the husband’s interest in the trust as opposed to only valuing the trust as a whole. But for present purposes this is of no consequence because no ground of the appeal or more importantly, ground of the cross- appeal challenged the value of the husband’s interest as shown by her Honour in her schedule of assets and liabilities.

13 The discussion by the Full Court is significant in my finding in that it identifies firstly, that there was no challenge to the way in which Her Honour had dealt with the question of value, but secondly, it identifies clearly that there may be a discreet difference between the overall value of the trust and the husband percentage interest in that trust.

14 After the hearing by the Full Court the matter was referred to me as judge manager with the expectation that I would manage the preparation of the matter for trial and then conduct the trial.

15 The issue of the valuation of the trust was agitated very early in the piece and on

15 July 2010 I made orders including the following:

9.	Each party be at liberty to adduce expert evidence to the value of the [Pittman Family Trust] with the wife to appoint Duncan Calder of KPMG as her expert to value the [PFT] as at 30 June 2010.
10.	Within 7 days of these orders the husband’s solicitors notify the wife’s solicitor as to the identify of the husband’s nominated valuer.
16	And then at paragraphs 12 and 13:
12.	Each party provide to the other a list of all documents provided to their respective experts within 7 days of the provision of such documents with the list to be updated within 7 days of the provision of further documents to each respective expert.
13.	The parties agree the terms of reference for both expert valuers so appointed and in default of any agreement each party be at liberty to apply.
17	At paragraph 14:
14.	As soon as reasonably practicable after the publication of the respective reports the experts confer, and if they are unable to reach an agreement with the respect to the value of the [PFT] they shall prepare and provide

to the parties’ solicitors a common statement identifying the areas and basis of any disagreement as soon as reasonably practical thereafter.

18 At the time those orders were made the wife was represented by Mr Wilson of Senior Counsel and the husband by Mr Castiglione one of Her Majesty’s Counsel, the same counsel as had previously appeared at the events I referred to earlier. At no point leading the making of those orders was any point pursued on behalf of the husband as to his interest in the [PFT] being separately considered for the purposes of value and ascribing a value for the purpose of these proceedings.

19 The parties were unable to fully resolve the issue of the terms of reference for the experts and following a hearing before me on 11 January 2011 I made orders said to be pursuant to paragraph 9 of the orders of 15 July 2010 defining the terms of reference for Mr Duncan Calder of KPMG and Mr “Andy” Gilmore of RSM Bird Cameron.

20 The terms of reference for the appointment of Mr Calder had the following preamble:

We refer to our letter to you of 16 July 2010 and confirm orders were made appointing you as [the wife’s] expert to value the [Pittman Family Trust] in these proceedings.

This letter constitutes your formal instructions to proceed.

Although you are appointed as our client’s expert and not as a single expert, the Rules in relation to single experts still apply and we provide you with another a copy of Part 15.5 of the Family Law Rules (enclosed).

Your completed report may be used as evidence in this case.

It is essential that you read and understand these Rules prior to commencing your work. A failure to do so may reduce the evidential weight of your report.

If you require clarification of any part of the Rules, please do not hesitate to contact us.

21 That letter was sent by the wife’s solicitors, Messrs O’Sullivan Davies.

22 The terms of reference for Mr Gilmore were similarly settled with a preamble in the following terms:

Orders were made appointing you as [the husband’s] expert to value the [Pittman Family Trust] in these proceedings. [The husband] is represented by HHG Legal.

Although you are appointed as [the husband’s] expert and not as a single expert the Rules in relation to single experts still apply and we provide you with a copy Part 15.5 of the Family Law Rules 2004 (enclosed). This letter

constitutes your formal instructions to proceed. Your completed report may be used as evidence in this case.

It is essential that you read and understand these rules prior to commencing your work. A failure to do so may reduce the evidential weight of your report.

If you require clarification of any part of the Rules, do not hesitate to contact

HHG Legal [the husband’s solicitors].

23 Notwithstanding the terms of reference and the specific incorporation of Chapter

15.5 of the Family Law Rules 2004 (“the Rules”), Mr Castiglione QC in support of his application submits to me that Chapter 15 does not apply.

24 It was, in my finding, the clear intention of the parties and of the orders of 11

January 2011 that the relevant chapter of the Rules would and did apply to the preparation of these reports, if not de jure, as a consequence of these orders, then certainly de facto.

25 It is of some significance that the submissions filed on behalf of the husband in support of the application refer to the orders of 11 January 2011 in the following terms:

The discussions at the hearing on 11 January 2011 centred around a minority interest of [PFT] and other entities and their assessment on how any liabilities and costs from the potentially necessary realisation of the husband’s interest in the [PFT] to satisfy any award in favour of the wife.

26 Materially, the submissions also quote Mr Wilson SC on 15 July 2010 where he referred to “a valuation being completed with the PFT and the respondent husband’s interest in the trust.”

27 Messrs Gilmore and Calder completed their valuations and as directed by my orders of 15 July 2010 they conferred and produced a joint statement dated 8 June

2011 which they each signed.

28 The valuers agreed the methodology and agreed outcomes as to the discounting for minority share holding. That is to say where the interest of the PFT in an entity was a minority shareholding.

29 The issue of minority shareholdings had been flagged prior to the orders of January 2011 and the possibility of the husband’s interest in the PFT being not necessarily a mathematical division of the valuation of the PFT had been flagged in, that it had been identified as being a separately considered issue for the determination of the asset pool, not only by Senior Counsel for the wife but also by Her Majesty’s Counsel for the husband.

30 Following the valuers conferring and signing off on a joint statement HHG Legal Group wrote to Mr Gilmore on 24 July 2011 in the following terms:

Dear Andy,

Re [Steven Pittman] and the [Pittman Group]

We enclose copies of the following cases relating to determining an appropriate discount rate if one of the parties has a minority interest in a company. These cases are:

(1) Georgeson (1995) FLC 92 618 with particular reference to page 4, 5th

paragraph, and section of valuation to the wife’s share pages 13-21;

(2) Manx and Jenner (2009) FAM CA 1264 with particular reference to section “J company shares” starting on page 5 and comments on valuations generally starting on page 7 with a summary of the relevant case law on pages 7-25 and 27-29;

(3) B and B (2000) FLC 93-002 with particular reference to pages 16-

22.

(4) Harrison (1996) FLC 92-682 with particular reference to pages 6-

8.

31 The letter was signed HHG Legal Group and copied to the husband.

32 Materially, it was not copied to the wife’s solicitors.

33 In the report prepared by Mr Gilmore, the subject of the application Mr Gilmore includes a copy of his letter of instructions.

34 The letter is as follows: Dear Mr Gilmour

[STEVEN PITTMAN] & [THE PITTMAN GROUP] We refer to our letter dated 4 July 2011.

We now provide you with amended instructions in relation to a valuation of the interest of [the husband] in the [Pittman Family Trust].

We ask that you prepare a Report as to the value of our client's interest in the [Pittman Family Trust], if our interpretation of the Trust Deed and associated documents set out below is adopted by the Trial Judge.

We advise that, in our opinion, the following are the main provisions of the Trust Deed and related documents:

Trust Deed

1.The [Pittman Family Trust] was established by a Deed of Settlement dated 15 August 1977. The original Trustee was [B Ltd]. The Guardian and Appointor was [David Fisher]. The specified beneficiaries were [Terence Pittman], [Edna Pittman],

[Mark Pittman], [Nancy Kemp], [Steven Pittman], [Sean Pittman] and [Denise Pittman]. Additional members of the class of general beneficiaries were [Lucy Pittman], children and sisters plus nominated companies.

2. [B Ltd] retired as Trustee and [W Pty Ltd] was appointed as new

Trustee pursuant to a Deed dated 12 June 1995.

3.By an appointment dated 8 July 1997 [David Fisher] nominated [Terence Pittman] as his successor as Appointor and Guardian with effect on the date of the Notice.

4.By an appointment dated 4 July 1998 [Terence Pittman] nominated [Donna Pittman], [Mark Pittman], [Steven Pittman] and [Sean Pittman] as Appointors and Guardians on his death.

5. [Terence Pittman] died in July 1998.

6.There have been a number of amendments of the Trust Deed but the important amendments are those made on 28 November 2002.

7. Three documents were executed on 28 November 2002 namely:

a. An appointment whereby the Trustee irrevocably appointed as the vesting day the day immediately preceding the date of death of the first to die of [Mark], [Steven] or [Sean Pittman],

b.An appointment where the Trustee irrevocably appointed such of [Donna], [Mark], [Steven] and [Sean]as are living on the vesting day as beneficiaries for whom the Trust Fund will be held absolutely and if more than one in equal shares,

c. Deed Poll dated 28 November 2002 varying Clause A3 (1) of the Trust Deed by deleting the words "during any accounting period" where they first appear in Clause A3 (1) and substituting the words "for any accounting period" for the words "for such accounting period" where they first appear in A3 (1).

8.The document dated 30 June 2001 is a nullity. Stamp duty was not paid on it and it is not included amongst the documents comprising Trust Deed. 9. The documents executed on 28 November 2002 achieved what the document dated 30 June 2001 tried to achieve.

[W Pty Ltd]

1. [W Pty Ltd] is the Trustee of the [PFT]. The Directors are [Mark

Pittman] and [Keith Campbell]. [Mark] was appointed in

November 1996 and [Keith Campbell] was appointed in July 1998 (the date of death of [Terence Pittman]).

2. The shareholders of [W Pty Ltd] are [Donna], [Mark], [Sean] and

[Steven Pittman]. They each hold one ordinary share.

3.The Articles of Association of [W Pty Ltd] include the following provisions:

a. Clause 22: No transfer of shares unless rights of pre- emption exhausted. The shares must be offered first to other members of the company, at a price to be fixed by the Board,

b.Clauses 23-26: Procedure to exercise rights of pre- emption.

c. Clause 27: Directors may in their absolute discretion and without assigning any reason refuse to register any Transfer or Transmission of Shares,

d.Clause 29-31: Transmission of shares in the event of the death of a shareholder to the legal personal representatives of the deceased shall be the only persons recognised by the company as having any title to his interest in the shares if the deceased was a sole holder of the shares. If the deceased was a joint holder, then the survivor shall be recognised as having the interest in the shares (subject to some conditions).

e. Clauses 65-74: Refer to the appointment and removal of directors.

f. Clause 82: Provides that at a meeting of directors, where there is an equality of votes, the Chairman of the meeting in addition to his deliberative vote, has a casting vote.

g. Clause 66: Provides that each year one third of the directors for the time being, or if their number is not three or a multiple of three, then the number nearest one third, shall retire from office. A retiring director is eligible for re-election.

Enduring Powers of Attorney

1. [Steven] executed an Enduring power of Attorney on 30 July 2001.

He appointed [Mark] and [Sean Pittman] as his joint and several attorneys.

2. [Mark] executed an EPA on 30 July 2001, and appointed [Steven]

and [Sean Pittman] as his joint and several attorneys.

3. [Donna] executed an EPA on 30 July 2001 and appointed [Mark]

and [Sean Pittman] as her joint and several attorneys.

4. [Sean] executed an EPA on 11 July 2001 and appointed [Mark] and

[Steven Pittman] as his joint and several attorneys.

5.Each EPA limited the attorneys to dealing with the share held by the person granting the power, and to his/her interest in any shares held jointly with any other shareholder in the capital of [W Pty Ltd] acting in its capacity as trustee of [PFT].

Control of the Trust

1. [Donna], [Mark], [Steven] & [Sean] are:

• the shareholders and directors of the Trustee, [W Pty Ltd].

•the Appointors and Guardians of the Trust. Their appointment is joint and they each must agree in the exercise of the powers, i.e, they can only act unanimously.

•Such of the beneficiaries as are living on the vesting day, will be absolutely entitled to [the PFT] Fund on the vesting day. The estate of the son whose death triggers the vesting of the Trust will be entitled take possession of the deceased's one third or one quarter share (if [Donna] is still alive at the vesting day).

2.The rights of pre-emption with respect to the shares of [W Pty Ltd] mean that the shares probably will continue to be held by the surviving 4 family members.

3.The Articles of [W Pty Ltd] provide that the directors do not have to act unanimously. If there is an equal vote then the chair has a casting vote.

Currently there are only two directors of [W Pty Ltd], [Keith Campbell] and [Mark]. We have been informed by [Mr Campbell] that there is no chairman of directors.

4.Two members of [W Pty Ltd] constitute a quorum. If the directors have elected one of their number as Chairman of their meetings, he shall preside as Chairman at every General Meeting.

5.A resolution may be passed at a General Meeting by a simple majority. If there is an equality of votes then the Chairman of the meeting in addition to his deliberative vote (if any) has a casting vote.

6. The Guardian of [PFT] has the following powers and rights:

a. the Trustee cannot exercise a Reserved Power or Restricted Power unless it gives written notice to the Guardian of its intention to exercise that power - R5 ;

b.the Guardian may by notice in writing declare that all or any of the Restricted or Reserved powers shall cease to be Restricted of Reserved Powers - R6;

c. the Guardian can renounce that position by notice in writing to the Trustee - J3(1);

d.any Guardian can nominate by notice in writing a person to ,be his successor - J2(1)

7.The Trust Deed is silent as to what the Guardians may do if they object to the exercise of any Restricted or Reserved Power by the Trustee.

8.The Appointor of [PFT] may remove a Trustee, appoint any additional Trustee or appoint a new Trustee in lieu of a Trustee. This means that all four family members (or the survivors of them) must act unanimously to remove a Trustee, appoint any additional Trustee or appoint any new Trustee in lieu of a Trustee of the Trust.

9.[Mark] is one of the Directors of the Trustee [W Pty Ltd] and also one of the Guardians Theoretically it seems that to us that [Mark] and [Keith Campbell] as directors of [W Pty Ltd] could do something with which the other 3 Guardians ([Donna], [Steven] and [Simon]) do not agree and [Mark] in his capacity as one of the Appointors could oppose the removal of himself and [Keith Campbell]as - in effect - trustee.

Entitlements of Beneficiaries

On The Vesting Day

1.The Trust Deed has been varied by the Deed of Appointment and the Appointment both dated 28.11.2002.

2.The vesting day is the day before the date of death of the first to die of the three sons, [Mark], [Sean] and [Steven].

3.The vesting day will not be known until the date of death of the first to die of the three sons.

4.The son who is first to die will not have anything other than a theoretical benefit of the vesting of his interest. Although it vests on the day before his death it will not be possible for him to take possession of or exercise control over the interest which will then pass to his estate subject to any equities.

5.The three sons must by the vesting day obtain either a one quarter or a one third interest in the Trust Fund in existence at the vesting day. They will receive a one third interest if [Donna] dies before the date of death of the first to die of the three sons, otherwise they (or the estate of the deceased son) will receive a one quarter share.

Interim Distributions of Income

6.Clause A3 of the Trust Deed provides that the Trustees at any time and from time to time may make distributions of income in any accounting period to the General Beneficiaries. Income may be accumulated. The effect of Clause A3 is that it is possible that no part of the income is distributed to the four family members.

7.However, the Declaration signed by the Trustees on 10 March 2003 is stated to be irrevocable; and provides that the net income of each and every financial year after 30 June 2003 be distributed in equal proportions to such of [Donna], [Mark], [Steven] and [Sean] who is living on 1 July of the financial year. A copy of the Declaration dated 10 March 2003 is enclosed.

8.We are not certain whether the irrevocable resolution could be revoked by the Trustees and will seek an opinion from a leading trust lawyer.

9.In practice, the net income since 2001 has been distributed equally between the four family members.

Interim distributions of capital

10.Clause M of the Trust Deed provides that the whole of the Trust Fund and any income can be distributed to beneficiaries or to eligible trusts prior to the vesting day so that there are no assets and no Trust Fund available for distribution on the vesting day.

11.There is no resolution of directors or provision in the Trust Deed or Appointment for capital distributions prior to the vesting day to be made equally between the beneficiaries.

12.In practice, over the last 10 years or so there have a number of capital distributions to the four family members. On each occasion they each received the same amount. The most recent capital distribution was of $20m in December 2010 and they each received

$5m.

13.Theoretically all of the Trust Fund could be distributed prior to the vesting day, and there is no provision that if this occurs the Trust Fund will be distributed equally.

14.The four family members are the Appointors and Guardians and they must act unanimously. As a distribution of capital prior to the

vesting day is an exercise of a Restricted Power, notice of a distribution must be given to the Guardians pursuant to clause R5, and the Trustees shall not exercise the Restricted Power in such a manner "as to impair or diminish the expectations of any Specified Beneficiary or any other person upon whom pursuant to any appointment by them validly made pursuant to clause A4 of the Trust Fund is to devolve on the vesting day unless they are sui juris and have consented thereto".

15.Theoretically it seems that there could be a distribution of all of the Trust Fund prior to the vesting day and such a distribution could exclude [Steven] or give him a much smaller share than 25%, but only if he, as a beneficiary, consented.

Yours faithfully

HHG LEGAL GROUP Encl. As above

cc: Client

35 The letter:

•refers to earlier correspondence of 4 July 2011, a copy of which is not before me and refers to a legal position which is now inaccurate insofar as the determination of the issue of the document dated 30 June 2001, which is the subject matter of orders I made on 22 August 2011;

• states a position as to the effect of documents executed on 28 November

2002 which proceeded on the first assumption as to the position of the document dated 30 June 2001;

• misrepresents as to the directors of the Trustee;

•refers to information having been received by [Mr Keith Campbell], a person who is not giving evidence in these proceedings;

•refers to the absence of resolutions, without identifying the source of the information; and

• reaches legal conclusions about the structure of the trust.

36 The letter was not copied to O’Sullivan Davies, the solicitors for the wife.

37 In the valuation prepared by Mr Gilmore he makes reference in paragraph 3.7 as follows:

I understand from discussions with Heather Nichols of HHG that the activities and operations of [PFT] are determined and directed by the directors of [W Pty Ltd]. I understand that to date [Steven Pittman] has had no direct involvement in the activities and operations of [ PFT].

38 There is nothing indicated as to the content otherwise of the discussions had between the valuer and Ms Nichols.

39 Further, in his deliberations, Mr Gilmore opines as to a minority discount of a percentage between 20 and 30 per cent acknowledging, however, that the rationale for such a discount appears to be based on the application of a formula not necessarily linked to the Trust or the husband’s interest in the Trust, which Mr Gilmore opines is a “blocking interest”.

40 Significantly in Mr Wilson SC’s submission Mr Gilmore makes no reference to historical distributions and the equality of distributions between the four beneficiaries.

41 No evidence is advanced as to why the report was prepared so late.

42 Other than the affidavit of Mr Gilmore himself and his submissions prepared by Her Majesty’s Counsel for the husband there is no evidence or explanation for the delay in bringing the proceedings that address an issue that Mr Castiglione himself identified as “critically important” and “highly relevant” to these proceedings.

43 As I referred earlier, Mr Castiglione QC appears to have overlooked the terms of reference that were settled and the subject of orders made on 11 January 2011 incorporating by reference obligations to comply with Chapter 15 of the Rules. The Rules provide mutual obligations not only for the experts but also for those instructing them.

44 The expert has the duties to the Court prescribed in Rule 15.59 and the clarification of issues arising from single expert reports, specifically as to questions, are covered in Division 15.5.6, notably including provision that a questioning party must give a copy of any questions to the other party.

45 Irrespective of the mutual obligations that are placed upon parties to whom Chapter 15 of the Rules apply, there is a specific ordered obligation on the husband’s solicitors to provide copies of documents provided to the single expert to the other side. This they did not do, but rather effected a valuation effectively in secret which was produced within a week of the trial due to commence.

46 Given the statements by Her Majesty’s Counsel for the husband that the issue of the husband’s interest in the Trust and its value being different from one quarter of the value of the Trust as an entity was said to have been agitated with the solicitors for the wife “but they didn’t agree” as early as June 2011, one questions why then no application was brought to address the issue or why no question was sought to be raised with the respective experts and properly exchanged and its terms properly settled with the rights reserved to the Court of oversight arising from the Rules. Why were these procedures not followed?

47 It would seem that the husband took a determined course to exclude the wife from the process he was undertaking. Further, criticism is appropriately levelled at the husband’s solicitors for giving Mr Gilmore “directions” in terms of reference to relevant authorities. Whilst Mr Castiglione QC might take objection to that criticism it is my finding well founded, for whilst Mr Gilmore may indeed be able to appraise

himself of information as to discount rates from any source, in this case he has been specifically directed. Such an action is in my finding contrary to the spirit, if not the letter of the Rules, and I further question its professionalism.

48 The effect of the introduction of the report into evidence would be to place before the Court an opinion, that, if accepted, may have the effect of reducing the husband’s interest in the trust from the previously uncontroversial amount, based on an equal division of the interest of the beneficiaries and presently an equal division of the Trust value between the beneficiaries by some $20 million. That is a significant figure.

49 This application has been brought very late and raises an issue not previously agitated (albeit on notice) and an issue that could have been appropriately raised on many occasions during the management of the matter to trial.

50 Mr Castiglione QC argues that there is no prejudice to the wife as she will “be able to cross-examine”.

51 I utterly reject that argument which is specious and unrealistic and assumes a capacity in the wife’s solicitors to be able to obtain the relevant instructions once they have properly considered the body of the report, their expert has considered the body of the report and then prepare a case accordingly. Such a suggestion is contrary to the very essence of effective case management.

52 I suggested in argument to Mr Castiglione QC that were I to allow the report to be received the inevitable result would be an adjournment of the trial. Mr Castiglione did not accept that point but conceded that it was highly likely that the trial would then unable to be concluded and have to resume part heard. In other words, the trial would have to be adjourned at some point to enable the wife to properly consider the contents Mr Gilmore’s report and prepare her case in reply thereto.

53 In the judgment of French CJ in Aon Risk Services Australia Limited and Australian National University [2009] HCA 27 the Chief Justice observed at paragraph 5:

In the proper exercise of the primary judge's discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. Given its nature, the circumstances in which it was sought, and the lack of a satisfactory explanation for seeking it, the amendment to ANU's statement of claim should not have been allowed. The discretion of the primary judge miscarried.

54 Whilst the Chief Justice was referring to an amendment of claim, the parallel is comfortably drawn and is dimensionally manifest given the effect that it is that the introduction of the evidence is sought to have on the asset pool.

55 In the body of his judgment, the Chief Justice reflects upon the history of the approach taken by the courts to amendment applications, particularly late amendment applications. His Honour reflections on the approach taken previously by courts that an order for costs was a sufficient compensation.

56 His Honour at paragraph 25 records as follows [footnotes omitted]: Recognition of the public interest in the administration of civil justice

procedures in Australia and the United Kingdom pre-dates the Woolf Report and its attendant reforms. In Dawson v Deputy Commissioner of Taxation, King CJ acknowledged the responsibility of judges to ensure, "so far as possible and subject to overriding considerations of justice", that the limited resources which the State commits to the administration of justice are not wasted by the failure of parties to adhere to trial dates of which they have had proper notice. In a late amendment case considered by the House of Lords in 1987, there was a marked departure from the approach of Bowen LJ in Cropper v Smith. Lord Griffiths required that judges considering amendments weigh in the balance:

“The pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently.”

The same indulgence could not be shown towards the negligent conduct of litigation as might have been possible in a "more leisured age". That approach was followed by Sheppard J in a revenue case heard in the Federal Court and in the New South Wales Court of Appeal in GSA Industries, Samuels JA said that:

“the emollient effect of an order for costs as a panacea may now be consigned to the Aladdin's cave which Lord Reid rejected as one of the fairy tales in which we no longer believe.”

The approach reflected in these authorities was applied by a majority of the Full Court of the Federal Court in Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd.

57 His Honour went on:

Sali v SPC Ltd was concerned with a refusal by the Full Court of the Supreme Court of Victoria to grant an application for an adjournment of an appeal. By majority, this Court held that in the exercise of a discretion to refuse or grant an adjournment, the judge of a busy court was entitled to consider "the effect of an adjournment on court resources and the competing claims by litigants in other cases awaiting hearing in the court

as well as the interests of the parties". Brennan, Deane and McHugh JJ

went on to say:

“What might be perceived as an injustice to a party when considered only in the context of an action between parties may not be so when considered in a context which includes the claims of other litigants and the public interest in achieving the most efficient use of court resources.”

58 At paragraph 34 the Chief Justice went on to say:

A broad merits-based judgment was required, taking account of public and private interests affected and focussing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it an issue which could and should have been raised earlier.

59 At paragraph 100 of the judgment of the plurality of Gummow, Hayne, Kiefel and Bell JJ in their joint judgment observed the views that [footnotes omitted]:

The views expressed by Lord Griffiths in Ketterman and Hansel Properties Limited that justice cannot always be measured in money and that a judge is entitled to weigh in the balance of the strain the litigation opposes upon litigants, are also now generally accepted.

In Bomanite Pty Ltd and Slatex Corporation Australia French J, said of Bowen LJ’s statements in Cropper v Smith:

“that may well have been so at one time, but it is no longer true today … Non compensable inconvenience and stress on individuals are significant elements of modern litigation. Costs recoverable even on an indemnity basis will not compensate for time lost and duplication incurred where litigation is delayed or corrective orders necessary.”

60 In conclusion at paragraph 111 Their Honours observed:

An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to the payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendments should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out and a significant succession of cases. On the contrary, the statements are not consistent with this Court’s earlier recognition of the effects of delay, not only upon the parties to the

proceedings in question, but upon the Court and other litigants. Such statements should not be applied in the future.

A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly of litigations advanced. That is why, in seeking the just resolution of the dispute reference is made to the parties having sufficient opportunity to identify the issues they seek to agitate.

61 Mr Castiglione QC would argue that the potential for prejudice is significant in the event that the application is not successful.

62 There is no doubt that there is a very significant prejudice to the wife if the proceedings are further delayed and no doubt a further significant cost of the wife in the consideration of the report. If the proceedings are significantly delayed then further valuation issues may arise, again at a significant cost as previously identified by Mr Castiglione QC.

63 There are mechanisms in the way that a court frames its orders that can diminish any potential prejudice to the husband through the failure to allow his application and whilst the potential prejudice on the face of it though a refusal of the application to the husband may seem extreme, that is a perception that is more apparent than real given that an option available to the Court is to determine the matter on a percentage basis and deal with the assets and the entitlements of the husband as and when they were realised. There is also alternative relief sought before the Court that the proceedings be adjourned pursuant to s 79(5) pending the vesting of the trust.

64 Further, in arriving a conclusion to the proceedings, it is open to me under s

75(2) and s 79(2) to take into account the deferred nature of any benefit that the husband may receive in measuring the entitlements that the wife may have.

65 In my view, any perceived prejudice to the husband can be remedied.

66 In any event were I to admit the report, there remains a cloud over the weight that could be attached to the same given the circumstances surrounding its preparation to which I have referred.

67 The late application of the husband in this regard is not adequately explained nor indeed is the conduct which led the preparation of the report when measured against the obligations arising from earlier orders.

68 As Mr Wilson SC reserved on behalf of the wife, “If there is a prejudice to the husband then that it is an issue between him and his solicitors.”

69 I respectfully agree with the observations made by Mr Wilson SC, but I would temper them by my finding that in any event it is open for me to ameliorate any potential prejudice.

70 In all the circumstances, I am not satisfied that leave should be granted as sought and the application will stand dismissed.

71 I also propose to make an order for costs on an indemnity basis and in doing so, I have regard to my observations about the orders of 15 July 2010, 11 January 2011 and the terms of reference to which I have referred.

72 The application is made without explanation as to the conduct of the husband in terms of the late preparation of the report, the failure to previously agitate the issue, or the conduct of his solicitors, despite the earlier orders.

73 This is a matter that could have been squarely raised at any time since the decision of the Full Court was published in March 2010 and was clearly an issue alive to the husband. There is no credible reason for the late application which has been wholly unsuccessful and in my view is devoid of merit the more so when measured against the orders to which I have referred and the chronology of events which I have referred.

74 This is in my finding one of the exceptional cases as considered by Sheppard J in Colgate-Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 and Holden CJ in Munday v Bowman (1997) FLC 92-784 where in an order for indemnity costs is appropriate.

75 I also have regard as I must to the provisions of s 117 and the criteria set out therein. As I have indicated this is an exceptional and there can be no suggestion of a want of capacity in the husband to meet in an order for indemnity costs.

76 My orders will therefore be:

1. That the Form 2 application in a case filed by the husband on 15

August 2011 stands dismissed.

2.That the husband do pay or cause to be paid the costs of the wife for the day of 23 August 2011 and antecedent preparation relevant to the Form 2 on an indemnity basis.

I certify that the preceding [76] paragraphs are a true copy of the reasons for judgment delivered by this Honourable Court

Associate