Saito & Eichel (No 2)

Case [2023] FedCFamC1F 997

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Saito & Eichel (No 2) [2023] FedCFamC1F 997

File number: SYC 5342 of 2020
Judgment of: CAMPTON J
Date of judgment: 23 November 2023
Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Application as to the content of instructions to an agreed appointed single expert as to foreign law – Where the parties are contended to have interests in trusts established in State L USA – Whether the single expert is to be instructed to provide opinion evidence as to the content of the foreign law only or in additional thereto opinion evidence as to its application to facts and hypothetical facts – Application as to the content of instructions to agreed appointed single experts each as to Australian and USA taxation opinions – Applications as to other procedural orders as to the identity of single experts and as to disclosure
Legislation:

Evidence Act 1995 (NSW) ss 56, 80

Family Law Act 1975 (Cth) s 79

Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 68

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ch 7, rr 1.04, 7.13, 8.01
Cases cited:

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 69

Idoport v National Australia Bank (2000) 50 NSWLR 640

Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56

Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 31; [2005] HCA 54

Division: Division 1 First Instance
Number of paragraphs: 62
Date of hearing: 24 October 2023 and 17 November 2023
Place: Sydney
Counsel for the Applicant: Mr Henry SC
Solicitor for the Applicant: Brown Abrahams Burreket
Counsel for the Respondent: Mr Richardson SC
Solicitor for the Respondent: Barkus Doolan Winning

ORDERS

SYC 5342 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS SAITO

Applicant
AND:

MR EICHEL

Respondent

ORDER MADE BY:

CAMPTON J

DATE OF ORDER:

23 NOVEMBER 2023

THE COURT ORDERS THAT:

1.The husband, within 14 days of the date of this Order, shall insert in the document titled “Propositions” being Annexure D to Annexure A1 of the Response to an Application in a Proceeding of the wife filed 8 September 2023 (“the Response”) admissions or denials of the propositions not the subject of an admission or denial in his Notice Denying Facts dated 31 March 2023.

2.The husband and the wife forthwith thereafter do all acts and things and sign all documents necessary to cause the following documents to be issued to the single C Trust Law Expert, Ms D:

(a)Letter of instruction – Annexure A1 to the Response (“Letter of Instruction”)

(b)Annexure A to the Letter of Instruction, being a list of documents to be included in the brief to Ms D;

(c)Annexure B of the Letter of Instruction, being a document setting out details of the relevant United States (“USA”) entities to be included in the brief to Ms D;

(d)Annexure…

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AGLC
Saito & Eichel (No 2) [2023] FedCFamC1F 997
Case
[2023] FedCFamC1F 997
Decision Date

CaseChat Overview and Summary

In the matter of Saito & Eichel (No 2), the wife sought orders concerning the instructions to single experts appointed in the proceedings, particularly focusing on the scope of the USA trust law expert’s opinion. The wife and husband, both American citizens with significant assets held in trusts in the USA, were embroiled in a complex dispute over the valuation and control of these trusts. The wife argued that the interests in the trusts were subject to property adjustment orders under the Family Law Act 1975 (Cth), while the husband contested this, asserting that the trusts were not subject to such orders. The court was tasked with determining the appropriate scope of instructions to the single expert on USA trust law, Ms D.

The central legal issue revolved around the distinction between "content evidence" and "application evidence" in the context of foreign law, a distinction upheld by the High Court in Neilson v Overseas Projects Corporation of Victoria Ltd. The wife contended that Ms D should provide a strictly factual opinion on the content of the USA trust law, whereas the husband argued that Ms D should also provide opinions on the application of the law, especially given the complexity of the trusts and the potential tax implications. The court needed to resolve whether the expert's instructions should be limited to the content of the law or if they could also include its application, considering the intricacies of the case.

The court found that the distinction between content and application evidence is well established and should be maintained. It concluded that the single expert on USA trust law, Ms D, should be instructed to provide evidence on the content of the law, including identifying and explaining the principles of construction and substantive law, and relevant authorities or legislation. The court ruled against expanding the scope to include application evidence, as this would usurp the court’s role in applying the law to the facts of the case. The court also made several other orders regarding the content of instructions to other experts, disclosure of evidence, and procedural matters to facilitate the efficient progress of the case.

In summary, the court ordered that the USA trust law expert, Ms D, should be instructed to provide content evidence only, and not application evidence, regarding the USA trust law. Other procedural orders were also made to ensure the smooth progression of the case, including instructions for other experts, disclosure of evidence, and costs management. The detailed reasoning provided by the court was aimed at maintaining the appropriate scope of expert evidence while addressing the complex factual and legal issues present in the case.

Orders

Orders of the court

SYC 5342 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS SAITO

Applicant

AND:

MR EICHEL

Respondent

ORDER MADE BY:

CAMPTON J

DATE OF ORDER:

23 NOVEMBER 2023

THE COURT ORDERS THAT:

1. The husband, within 14 days of the date of this Order, shall insert in the document titled “Propositions” being Annexure D to Annexure A1 of the Response to an Application in a Proceeding of the wife filed 8 September 2023 (“the Response”) admissions or denials of the propositions not the subject of an admission or denial in his Notice Denying Facts dated 31 March 2023.

2. The husband and the wife forthwith thereafter do all acts and things and sign all documents necessary to cause the following documents to be issued to the single C Trust Law Expert, Ms D:

(a) Letter of instruction – Annexure A1 to the Response (“Letter of Instruction”)

(b) Annexure A to the Letter of Instruction, being a list of documents to be included in the brief to Ms D;

(c) Annexure B of the Letter of Instruction, being a document setting out details of the relevant United States (“USA”) entities to be included in the brief to Ms D;

(d) Annexure C to the Letter of Instruction, being diagrams showing the structure of entities the subject of the Letter of Instruction; and

(e) Annexure D to the Letter of Instruction, being the document entitled “Propositions” and created pursuant to Order 1 above.

3. The content of the letter of instruction to the single Australian tax expert, Mr E, be completed and executed by the parties in terms of Exhibit 6, in accordance with the wife’s highlighting to that Exhibit as shaded yellow, and the green shaded portion of the husband be deleted.

(a) Page 2

(b) Page 16

4. The executed letter of instruction to the single Australian tax expert pursuant to Order 5 be forwarded to the expert within 21 days of the date of this Order.

5. The content of the letter of instruction to the single USA tax expert, Mr F, be completed and executed by the parties in terms of Exhibit 7:

(a) In the terms of the wife’s highlighting to that Exhibit, as shaded yellow, and those parts green shaded portion of the husband be deleted as to:

(i) Page 2

(b) In the terms of the highlighting to that Exhibit;

(i) Page 3 paragraphs (g) – (i) to be in terms as contained in the exhibit, (such that any yellow shading be ignored) so as to instruct the expert to opine (if possible) as to the future tax rates be included in the letter of instruction.

(ii) As shaded in green on page 3 sub paragraph (i) II subject to that instruction being amended to include a restriction for the expert to opine in the paragraph as to “any taxation effect on the husband”

(c) For the purposes of Annexure D, the Annexure shall include each of the assets identified in the current draft balance sheet prepared by the single expert Mr B, so as to instruct the expert to opine as to the attraction of a taxation liability in the USA arising from the status of the parties or otherwise in the event that each such asset is the subject of disposal.

6. The executed letter of instruction to the single USA tax expert pursuant to Order 5 be forwarded to the expert within 21 days of the date of this order.

7. The wife is to make available for viewing by the husband, personally, at the offices of her solicitors, within the next 42 days, any vision she holds by way of recording referrable to husband's daughter Ms G.

8. Subject to compliance with Order 7 and within 14 days of his inspection, the husband, should he elect, shall notify the wife with precision identified as to date, time period, length and subject matter in writing of vision he selects and the wife shall within 21 days of such notice in writing reproduce digital copies of such selected vision and shall disclose the selected vision of the recording to the husband in digital format.

9. In the event the parties fail to agree in writing as to the identity of any alternate single expert to be nominated pursuant to Order 3 made 22 June 2023 to value the contents at the H Property then the prior agreed experts, J Valuers and K Valuers, shall be appointed by way of implementation of the said order as those single experts.

10. The costs of each of the husband and the wife of an incidental to this determination be reserved to the trial.

11. Save and except as provided for by these orders, each of the Amended Application in a Proceeding filed 10 October 2023 by the husband and the Response to an Application in a Proceeding filed by the wife on 8 September 2023 are dismissed.

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

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

The wife relied upon:·Her Response to an Application in a Proceeding filed 8 September 2023;·Her affidavit and its annexed exhibits filed 8 September 2023; and·Her Case Outline document filed 20 October 2023 (Exhibit 3).BACKGROUND The parties commenced cohabitation in mid-1998 and married in late 1998. They separated on 23 December 2018. In May 2020 an order for divorce was made in the Federal Circuit Court. The wife was born in 1963 in the United States of America (“USA”), is currently 60 years old and has dual Australian and USA citizenship. The husband was born in 1962 in the USA, is currently 60 years old and is a USA citizen and an Australian permanent resident. There are three children of the marriage all of whom are now adults. The husband has one child from a previous marriage, who is also now an adult. On 6 August 2020 the wife commenced proceedings for the adjustment of property pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). The husband by way of a Response to Final Orders sought different adjustments as to property. A single forensic accounting expert, Mr B, has been engaged by the parties to prepare a balance sheet recording each of their respective contentions as to their property and the value of each item of property. He has during since 24 October 2023 produced a draft balance sheet for the parties. That document is not yet in evidence. The wife contends that the value of the property of the parties is in the range of $237 million and the husband contends it is in the range of $190 million. The parties primarily lived in State L USA from 2004 until 2008. They established a number of trusts and limited liability corporations (“LLC’s”) in State M and State L. The wife asserts that the interests of the parties in six of the trusts established by way of foreign law (“the C Trusts”) are the property of the parties and are amenable to s 79 orders, relying upon a long line of established authority as recited by the High Court in Kennon v Spry (2008) 238 CLR 366. The husband opposes this finding, contending that the said interests are not property for the purpose of s 79 of the Act. The wife seeks orders that directly affect the regulation of and the assets of the C Trusts. It is the wife case that she and the husband jointly controlled of the assets of the C Trusts and the LLC’s prior to August 2020 and that steps taken by the husband between then and August 2021 have impacted on control of the trust’s assets such that it has shifted to others to whom it is reasonable to infer will act under the husband’s sole direction. These others include the husband’s fiancé and his friend. It is her case that they will each not act independently of the husband's direction. The parties agree that the C Trusts’ structures are complex. They are in dispute as to questions as to the construction of the documents constituting the trusts and the consequential impact on the conduct of the trustees of the trusts. Additional complexity is generated from the USA and Australian tax consequences of the parties being ordered to take specific steps in relation to the C Trusts. The factual complexity of the proceeding, and specifically of these matters, is illustrated by:(a)The wife serving on the husband a 321-paragraph with sub paragraphs proposition Notice to Admit facts and the authenticity of documents dated 15 February 2023 pursuant to r 8.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”); (b)The husband’s detailed response to that Notice dated 31 March 2023 admitting in part and denying in part that contained within the wife’s Notice. The husband’s Notice included “commentary” accompanying his responses that he says was “input” from “US advisors” in making what he says are “substantial admissions” in his Notice. He added his “contentions” as to why the admissions sought were denied. This commentary includes a significant quantity of propositions of USA law. He gives evidence that he has expended $100,000 in costs in engaging with the wife’s Notice, implicitly incorporating the expert opinion advice he has sourced; and (c)The wife’s subsequent changes to her 15 February 2023 Notice to Admit were later incorporated in her revision document dated 6 July 2023.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The parties agreed that the following be appointed as single experts in the proceeding:(a)Mr E as to Australian tax; (b)Mr F as to USA tax; and (c)Ms D as to USA trust law.CONSIDERATIONTHE USA TRUST LAW EXPERTInstructions to the USA trust law expert As to the instructions to Ms D in so far as it relates to the C Trusts, both parties agree that:(a)The single expert ought to be instructed to opine as to the content of the law that would be applied in the USA; (b)The content of that foreign law is a question of fact to be determined in this proceeding. That question of fact informs the determination of other facts during the s 79 dispute; and(c)There is a long held distinction between an expert opinion as to the content of a foreign law and an expert opinion as to the application of a foreign law once it has been ascertained, as identified by the High Court in Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 31 (“Neilson”) citing Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 69 (“Allstate”). That difference is often described as “content evidence” and “application evidence”. The High Court in Neilson (at [220]) held that “The former is said to be admissible; the latter not”. The dispute as to the instructions to the single expert is twofold. The first is as to the subject matters defining the scope of the expert opinion. The second is as to the documents to be provided to the expert.The content of the subject matters of instructions to the USA law expert The wife submits that Ms D’s single expert opinion should: (a) identify and explain the principles of construction that would be applied by a US Court to decide whether each Proposition is correct; (b)identify and explain any principles of substantive law that would be applied by a US Court to decide whether each Proposition is correct; (c) for each principle of construction or of general law identified in the report, identify any relevant authorities or provisions of legislation establishing or explaining those principles; (d) to the extent any principles identified in the report are not the subject of any authority directly on point, give an opinion as to what a US Court’s ruling would be if that particular principle arose for consideration; (e) for any relevant provisions of legislation, identify any relevant authorities interpreting those provisions and the general principles of construction applied by a US Court; and (f)explain the status of any identified authorities as a source of law. The husband submits that the single USA law expert can, and in the circumstances of this case should, provide an opinion going beyond strictly giving evidence as to C Trust law. He identifies three exceptions to “content evidence alone” being:(a)If the foreign law confers a discretion upon its courts, then the manner in which the discretion is exercised by reference to the pattern or course of decision is admissible; (b)Principles of statutory construction or contractual interpretation are admissible to inform an understanding of the content of the applicable foreign law; or(c)That identified by Einstein J in Idoport v National Australia Bank (2000) 50 NSWLR 640 at [44] (“Idoport”), where:…the Court is concerned with foreign law as a subsidiary fact necessary to determine the rights and liabilities of the parties under the law of New South Wales. The essential curial function of this Court in this case is the administration of and the proper application of the law of New South Wales. Evidence of foreign law experts as to the effect of foreign law, where the effect of foreign law is relevant to the administration of domestic law, is not capable of usurping the function of the court any more than is evidence of any other fact relevant to the determination of the rights and liabilities of the parties under domestic law.(Emphasis added)