Smith and Smith (No 2) - [2009] FamCA 1223

FAMILY COURT OF AUSTRALIA

SMITH & SMITH (NO. 2)

[2009] FamCA 1223

FAMILY LAW – PROPERTY – application by the wife seeking a partial property settlement order – consideration of the principles in Harris and Harris (1993) FLC 92-378 – where these principles are not satisfied – where the majority of the expenses to be paid from the funds sought are child support issues – application dismissed

FAMILY LAW – EVIDENCE – expert evidence – application by the husband to adduce adversarial evidence pursuant to rule 15.49 – where a single expert has been appointed – where questions have been put to the single expert – whether there is a substantial body of opinion contrary to the opinion of the single expert – where there is no disagreement between the valuers as to the appropriate methodology – whether there are matters of which the single expert was not aware – the husband has not satisfied the requirements of rule 15.49(2) – application dismissed

Family Law Rules 2004 (Cth) rr 15.42, 15.49 & 15.52

Harris and Harris (1993) FLC 92-378
Gemmell and Gemell [2009] FamCA 29

APPLICANT:

Mr Smith

RESPONDENT:

Ms Smith

FILE NUMBER:

ADC

3585

2007

DATE DELIVERED:

1 May 2009

PLACE DELIVERED:

Adelaide

JUDGMENT OF:

Strickland J

HEARING DATE:

1 May 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr D Berman

SOLICITOR FOR THE APPLICANT:

Caldicott & Co

COUNSEL FOR THE RESPONDENT:

Mr B McQuade

SOLICITOR FOR THE RESPONDENT:

David Fidler & Co

Orders

That paragraphs 1 and 2 of the Application in a Case filed by the wife on 31 March 2009 be dismissed.
That the Application in a Case filed by the wife on 31 March 2009 be dismissed and removed from the active pending cases list.
That the Application in a Case filed by the husband on 2 April 2009 be dismissed and removed from the active pending cases list.
That the time for the filing and serving of Mr C’s updated valuation report be extended to 30 April 2009.
That the time for the filing and serving of Mr K’s valuation report be extended to 4 May 2009.

IT IS NOTED that publication of this judgment under the pseudonym Smith & Smith is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADC 3585 of 2007

MR SMITH

Applicant

And

MS SMITH

Respondent

EX TEMPORE REASONS

In this matter I in effect have two issues before me now. One arises out of the application filed by the wife on 31 March 2009 and the other arises out of the application filed by the husband on 2 April 2009. I initially considered both of these applications on 9 April 2009. Unfortunately, I ran out of time to conclude the matter and I adjourned it to today. I did, though, reach the point on 9 April 2009 of dismissing paragraph 3 of the wife's application of 31 March 2009, but what was adjourned to today and left to be concluded were paragraphs 1 and 2 of that application.
Today I am told that the wife is not pursuing her application in relation to paragraph 2, which sought the provision of certain MYOB documents and a back-up disc and the like. That is not being pursued because, as I understand it, further discovery has been made in that regard. Thus I can safely dismiss paragraph 2 of that application.
In terms of paragraph 1, what is sought there is that the injunction made on 20 June 2008 be varied such that the wife be able to borrow up to $200,000 against the security of the property at C, which is the former matrimonial home. That order of 20 June 2008 restrained the wife from encumbering that property beyond the amount of $105,000. Thus the effect of what the wife is seeking is that she be able to borrow a further $95,000 on the security of that property at C. The wife filed an affidavit in support of that application on 31 March 2009 as well.
Since the hearing on 9 April 2009, the wife has filed a further affidavit in support of that application on 20 April 2009. Perhaps before identifying what the wife says in support of this application, it is obvious - and Mr McQuade has confirmed it in his submissions - that what, in effect, is being sought is a partial property settlement order on behalf of the wife. That is how the application has proceeded and that has been the subject of the submissions that I have heard on behalf of both parties.
What the wife says in her most recent affidavit is that there is $8000 that she is obliged to pay to the School for the children Y and T for the last two terms of this year, namely 2009. She then says that she is looking to enrol the children T and N at WT School for the 2010 school year and the sum of $1400 is required for deposits and school uniforms. She says that she would propose to use the balance of the money she wants to borrow to meet the cost of T’s year 7 camp of $500, $2000 to repair the brakes on her car, which she says are in a dangerous state, and legal fees of $50,000.
In addition, but without identifying a total amount, she says that there is an orthodontist who is looking after the teeth of Y and T and that they require considerable work in the future. There is what is described as a true copy of a draft letter prepared by the orthodontist, addressing these issues. It gives figures such as the cost of further treatment for Y will be about $5300, certain costs for T will be $2250 and $6200 and there may be further work which would require payment of $4000.
That is the general detail that the wife provides. Adding up the amounts identified, $8000, $1400, $500, $2000 and $50,000, that comes to roughly $62,000. On top of that, the wife proposes to use some of the money to meet the cost of future dental and orthodontic treatment for Y and T. She then says in her affidavit, in paragraph 7:
“Any amount left after these expenses I have allowed so that I may attend to household and other expenses until the finalization of this matter.”
I do not quite understand that, but the effect of it obviously must be that she proposes to use any money left over to meet her household and other expenses until the matter is finalised.
In that regard, I note that this matter is set for a conclusion hearing commencing on 11 May 2009 with a time estimate of four days. To mention that, one might wonder why this application is being made now. The circumstances are that, at this stage, the matter is proceeding. I have indicated today to the parties that it would be extremely unlikely that I would be in a position to deliver an extempore judgment and if I have to reserve my judgment, that will take some time for me to deliver, given the other commitments that I already have. Nevertheless, the wife pursues the application.
The application is opposed by the husband. With any partial property settlement application, the case that is usually referred to as setting out the principles to which I must have regard is the case of Harris and Harris (1993) FLC 92-378. Those principles are as follows:
1.The exercise of power should be confined to cases where the circumstances are compelling.
2.It is an exercise of the s 79 power.
3.The power must be exercised conservatively and the court must be satisfied the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the order contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so.
However, even before I come to the applicability of those principles there are a number of matters that concern me. Firstly, some of the expenses that the wife seeks to meet with this money cannot be considered as part of her property settlement claim, for example, the dental fees. That is a child support issue, not a property settlement issue. Other expenses, such as T’s year 7 camp fees and school fees are also child support issues and not property settlement issues.
Next I am concerned about how the application of the wife has changed over the time since it was first made to now. When it was first brought the wife was suggesting that she was going to use $30,000 of the money to meet arrears of school fees. That is no longer the case. The school fees that she seeks to meet out of this money are the fees for the final two terms of this year for Y and T. I am not even told whether there is a liability yet for that, or an account received. Thus apart from the fact that it is child support and not property settlement, what is the compelling circumstance? There is no requirement to pay that now. Thus the focus of the wife's application has changed entirely. It might have been a different thing and, indeed, Mr Berman put to me that his client might have been sympathetic in terms of his attitude to this application if what the wife was looking to do was to pay arrears of school fees. However, there has been absolutely no explanation given to me, in any document or in any submission made on the wife's behalf, for the change of focus.
Then I come to the biggest sum involved, namely $50,000. All I am told is that that sum is required for legal fees; extraordinary in the lack of detail. What should have happened, and what I should have before me, is complete and fulsome details of the wife's legal costs, namely what they have been, what they currently are, what the proposed fees for the trial are, what the current position is as to what has been paid and what has not been paid, what arrangements if any have been made with the legal representatives and whether there is a costs agreement. That detail, and in particular any need for the wife to pay the $50,000 now is what can create the compelling circumstance to satisfy the principles in Harris.
The wife could have chosen another tack in terms of seeking money to be able to run her case, and that would not have been an application for a partial property settlement but an application for costs, what is commonly called a Barro order or a Hogan order. With such an application, it is absolutely vital that the detail that I have just indicated be set out, because otherwise the judicial officer cannot make any informed assessment of what the applicant needs. True it is that, if I provided the wife with a partial property settlement, she in effect can do what she wants to with that money. She could pay her lawyer, or she could go out and feed $10,000 into poker machines. If it is property settlement that is hers to retain and I would simply take it into account in the final property settlement. However, in this case the wife has chosen to pitch her claim for a partial property settlement at payment of her legal fees, and all I get is one line. Indeed, it is not a full line, it is a third of a line - four words and a figure.
Mr McQuade has put to me that I should look at this application in the context of the history of these proceedings, and specifically and particularly that sometime before the proceedings were commenced, and indeed this is what led to the commencement of the proceedings, the husband drew down an amount of approximately $130,000 to buy a property. That drawdown, as I recall, was from an existing mortgage. There was a limit of a certain amount and the husband was able to increase the borrowings by drawing down $130,000. At that stage, prima facie, he was able to do that. Whether he was entitled to or not may be the subject of some issue at trial, but that is what happened. I am told that that is the context in which this application is made.
That said, I fail to see what relevance that has to the issue now at hand. It can not mean that the wife does not have to establish a proper basis for this Court to make a partial property settlement order. As far as I am concerned, it says nothing about the basis on which the wife seeks this money. Thus, I note Mr McQuade's submission, but I do not accept that it has any bearing upon whether I make the order that the wife seeks in the terms that she seeks and on the basis that she now seeks.
Now to return to the principles from Harris's case. The first principle is an obvious one. However, here there is nothing compelling whatsoever.
With the second principle, I need to have regard to the relevant factors under s 79(4) and then, if necessary, consider any relevant s 75(2) factors to the extent that I can. However, the wife's affidavit is bereft of any reference to this issue. Further, I have not been referred to one previous affidavit in support of the wife's claim for property settlement, which would properly inform me as to the issues that the wife wants me to take into account in relation to this application. All I am told on the wife's part is, if you look at the totality of the assets of the parties, then the husband's potential claim is able to be met even if the wife is allowed to draw down a further $95,000.
The husband disagrees with that, but in any event, there is insufficient before me either by way of evidence or submission to allow me to address s 79 in considering this particular application.
The third principle is that the power must be exercised conservatively and the judge must be satisfied the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing. To repeat, Mr McQuade has put to me that the assets will satisfy the potential claim of the father, even if I allow for the $95,000. However, the husband disagrees with that and I am not in a position to resolve that dispute.
Thus the principles are not satisfied in this application, and in any event the majority of the expenses sought to be paid out of this money are not the subject of a property settlement application, but they are child support issues. In all the circumstances, I have no difficulty in dismissing paragraph 1 of the Application in a Case filed on 31 March 2009.
Next I turn to the husband's application filed on 2 April 2009, which as I say, was before me on 9 April 2009 but unable to be completed. I have now heard further submissions from counsel in relation to this application.
The order sought by the husband is:
That pursuant to rule 15.49 of the Family Law Rules 2004 this Honourable Court do grant leave to the husband to adduce adversarial evidence from Mr [B] at trial in relation to the value of the former matrimonial home situated at [C] in the State of South Australia.
There are other orders, costs and the like, but I will not concern myself with that at the moment. Thus, that is the application. It is an application that is opposed by the wife. There have been affidavits filed in support of the application. The immediate affidavit in support is one filed on 2 April 2009 by the husband's solicitor which refers to the questions administered to Mr I, the single expert, and which are annexed to the affidavit of Shona McDermott filed on 5 March 2009. Annexed to this affidavit of Mr Douglas are Mr I’s answers to those questions. Mr Douglas also refers to further annexures to the affidavit of Shona McDermott, and in particular the updated valuation of Mr B of 13 February 2009. In paragraph 10 Mr Douglas also says this:
“There remains a discrepancy of $95,000 between Mr [I’s] view of the value of the former matrimonial home, and Mr [B’s] view of the value of the former matrimonial home as stated in the updated valuation.”
Initially though I was concerned that there was simply nothing in that affidavit which told me anything about the basis of the application by reference to the Rules, but that detail has now been provided in the submissions of Mr Berman, who appeared as counsel for the husband.
The brief background to this application is that in the context of this being a property settlement matter there has been a need to value assets including the former matrimonial home. There was a valuation obtained by the wife's solicitors from Mr U. That is annexed to an affidavit filed by Mr Douglas on 1 December 2008. Mr U’s valuation was dated 19 January 2007, and valued the property at $760,000. Then the husband obtained a report himself from Mr B of 28 March 2008, and his valuation was $890,000. Thus the scenario confronting the parties and the court at that time was that there were two valuers who differed in their opinion, and so quite properly and appropriately in accordance with the Rules, the parties reached agreement to appoint a single expert to value the property. That turned out to be Mr I. Mr I, on the joint instructions of the parties, provided a valuation dated 28 October 2008 at $740,000.
It is quite apparent, and there is no dispute about this, that the husband felt aggrieved by that valuation, given that he had obtained a valuation from Mr B some six or seven months beforehand of $890,000, namely a difference of $150,000. The wife of course would have been relatively comfortable with the single expert’s opinion, given that there was only some $20,000 difference from Mr U’s valuation.
The husband initially on 1 December 2008 filed an application seeking leave to adduce evidence from Mr B at trial. I heard that application, and in the end it was determined that the appropriate course was for questions to be asked of Mr I, and then the matter addressed subsequent to that. Thus I dismissed the husband’s application.
On 5 March 2009 the husband filed an application seeking leave to administer questions to Mr I. That application was consented to and I made the necessary order on 11 March 2009.
The current position is that Mr I has been asked questions pursuant to the leave that I gave. He has answered those questions and he has determined not to change his opinion. He remains of the view that the subject property is valued at $740,000. Mr B has undertaken an updated valuation dated 13 February 2009 and he valued the property at that time at $830,000. As I referred to earlier, there is therefore now a difference of $95,000 between the two valuers. Mr B’s updated valuation has been filed, and he has also provided what is described as a critique of Mr I’s valuation. Bringing all that together, the husband seeks leave to adduce evidence from Mr B of his valuation at the trial of this matter. That is opposed by the wife.
The relevant rules are contained in Part 15.5 of the Family Law Rules 2004. The particular rule which deals with the issue at hand is Rule 15.49. Sub-rule 15.49(2) provides that:
The court may allow a party to tender a report or adduce evidence from another expert witness if it is satisfied that:
(a) there is a substantial body of opinion contrary to any opinion given by the single expert witness and that the contrary opinion is or may be necessary for determining the issue;
(b) another expert witness knows of matters, not known to the single expert witness, that may be necessary for determining the issue; or
(c) there is another special reason for adducing evidence from another expert witness.
Mr Berman on behalf of the husband at the commencement of the hearing indicated that he was relying on (a) and (b), and I need not consider (c). Mr Berman though has also referred me to sub-rule 15.42(c) which provides that, "The purpose of this part" - namely Part 15.5 is:
To ensure that, if practicable and without compromising the interests of justice, expert evidence is given on an issue by a single expert witness.
Mr Berman lays great store in that particular rule as setting the scene in which this particular application should be considered. He says that the husband has followed the Rules in terms of dealing with this issue, namely, he has put questions to the single expert witness, received answers, and obtained his proposed witness’ comment on and critique of the valuation of the single expert. Mr Berman says there is no evidence of any capriciousness on the part of the husband in this application. He asked me to treat it as a situation where the husband genuinely believes that Mr I’s valuation is not correct, and that Mr B’s is the correct valuation, if you could ever describe valuations as being correct or incorrect.

He points to the fact that Mr B, as with Mr I, is a well qualified and experienced valuer and he says in effect that where you have a situation like that and there is a difference of opinion, that it is in the interests of justice to allow the husband to present the evidence of his expert. Otherwise, Mr Berman says, the husband may be prejudiced in the proceedings. Although the husband through his counsel can cross‑examine the single expert witness, the answers of the single expert witness in effect are already known because of course that was the subject of questions and answers. The problem for the husband, Mr Berman says, in those circumstances, would be that the judge would not have the benefit of the expert evidence of Mr B to properly determine the value of this subject property where there is a dispute about it.
Mr Berman relies on a case of Gemmell & Gemmell [2009] FamCA 29 where Ryan J was faced with, as she described it:
“…a genuine disagreement between two appropriately qualified experts concerning the appropriate valuation methodology. Each of the valuers asserts a substantial body of opinion which supports their preferred methodology and opinion.”
In the end result Ryan J did not rule on the issue and indicated that there should be a conference pursuant to the Rules at which the differences between the valuers should be explored to see if there could be any agreement. Mr Berman says - and I think this is quite correct on the basis of the reasons for judgment - that if not for the option of a conference bring available her Honour was prepared to allow the presentation of another expert opinion in that case. I will come back to that case in a moment.
Clearly I have to take into account the purpose of Part 15.5 in deciding this matter. However, in looking specifically at the issue at hand, I need to address Rule 15.49. It is not a case of simply going to 15.42(c) and ignoring 15.49. In my view I should address Rule 15.49 knowing that the purpose of the Part is “to ensure that if practicable and without compromising the interests of justice, expert evidence is given on an issue by a single expert witness”. Of course overarching Rule 15.49 and Rule 15.42 insofar as I take it into account, is that I have a discretion as to whether I allow or not the presentation of evidence from another expert witness.
There are very few Full Court authorities in this area. Indeed, there are very few authorities which give me any guidance at all as to what is meant by, for example, "a substantial body of opinion" in Rule 15.49(2)(a). With respect though it seems to me that there has been some confusion between Rule 15.49 and Rule 15.52 amongst my fellow judges in some judgments that I have read.
Rule 15.52 deals with an application for permission to tender a report or adduce evidence from an expert witness, but it applies in a case where there is no single expert witness. What I have sometimes seen in judgments is that in cases where there is a single expert witness and the issue is whether there should be evidence produced from another expert witness, reference has been made to the factors set out in Rule 15.52, and particularly sub-rule 15.52(3). In my view that is incorrect, however, sub-rule 15.52(3) does set out a useful checklist of matters that might very well guide the exercise of discretion by a judicial officer faced with the application that I have before me now. It includes such factors as the impact of the appointment of an expert witness on the costs of the case, the likelihood of the appointment expediting or delaying the case, the complexity of the issues and the like. Indeed, they are the sorts of things that Mr McQuade has referred to in his responding submission, namely that the effect of me allowing Mr B’s evidence to be presented might then lead to an application by the wife to lead evidence from Mr U. The point is the prospect of the trial being lengthened, and the trial becoming more costly, and they are the outcomes that the single expert rules were meant to overcome.
Turning then to Rule 15.49. When one looks at the valuations respectively of Mr B and Mr I, it seems to me that there is nothing to indicate that Mr B is relying on a substantial body of opinion contrary to any opinion given by Mr I. He adopts the same methodology that Mr I uses, namely, looking at comparable sales. As a check, he does, at the end of his valuation, in the way of some valuers, apportion the valuation between the land component, the building component, and outside structures and the like, which is sometimes referred to as the summation method. The primary method though is to look at comparable sales, assess the subject property against those comparable sales, and apply his expertise as a valuer to arrive at his valuation. That is what Mr I did.
Nowhere does Mr B in his valuation or in his critique of Mr I’s valuation refer for example to any other opinion, or suggest that there is a different methodology to which he has had regard. Indeed, can I just interpolate that that is a point of distinction between the case of Gemmell and this case. As I read out from Ryan J's judgment, and to repeat:
“…the court is faced with a genuine disagreement between two appropriately qualified experts concerning the appropriate methodology.”
That is not the case here. There is no disagreement between these valuers as to the appropriate methodology, i.e. comparable sales. Thus, in my view Gemmell does not assist me.
Mr Berman did attempt to argue that there was a difference in how the valuers approached the matter despite using the same methodology of comparable sales, and the difference is how they have each interpreted those comparable sales. Mr I in his report in paragraph 8 on page 11, in referring to the sales that he has had regard to, says this:
“Apart from the most recent contract at […], I have viewed all of the sales quoted and have arrived at the conclusion that there was a price ceiling for the area.”
Mr B has challenged Mr I in that approach and suggests that there is no price ceiling for the area. Mr B refers to two sales which prima facie indicate a higher sale figure than the price ceiling identified by Mr I. They are lot 5, C, which sold for $1,125,000 in July 2006, and lot 1, which sold in December 2004 for $900,000. My own comment which I made during submissions was I wondered how relevant those sales were, given how old they were relative to the date of the valuations. In any event, the issue raised by Mr B was the subject of a question put to Mr I and Mr I responded saying that he was aware of those two sales, but they do not affect his view that there is a price ceiling. He says that they are quite different properties, and they are not comparable. He particularly refers to the size of one of them.
Mr Berman suggests that this demonstrates a different approach, a point of difference which is significant enough and could be said to provide or be part of a substantial body of opinion contrary to the opinion given by the single expert witness. In my view though, this is nothing more than one valuer saying, "Looking at comparable sales here, there is a price ceiling and I take that into account in fixing my figure," whereas the other valuer says, "I've looked at the comparable sales, there are a couple which are over that figure, and therefore I don't think there's a price ceiling." In other words, each valuer takes a different view of the comparable sales, and that is what it is all about. The methodology used by each valuer is still the same, namely, comparable sales, and as Mr McQuade quite rightly said, this difference is a different appreciation and a different assessment of those sales in comparison with the subject property. Thus to repeat, in my view there is still no evidence of a substantial body of opinion contrary to the opinion given by Mr I.
Turning to Rule 15.49(2)(b), Mr Berman points to a number of matters here, and they are all to be found in the questions put to Mr I arising out of Mr B’s critique and his own valuation. He submits that there are factual matters which Mr I has not taken into account. Mr I has responded though and says that he was aware of these matters, he has taken them into account, and they make no difference to his opinion.
There was one matter which Mr I did say that he was unaware of. He says in paragraph 6 on page 2 of his answers in relation to lot 2, C:
“I was aware that the property had been listed for resale, but I was not aware of the offer at $800,000, the circumstances surrounding that offer nor the reason why it was not accepted.”
He notes though that the property is not sold at this time, and continues:
“In terms of value, I suggest that on my analysis the land component of this property was in excess of the subject, with added value of structural improvements being less.”
If that is all that Mr I was not aware of, and that seems to be the case, in my view that is simply insufficient. An offer is not evidence of value. A sale is, but not an offer. Thus, there is no evidence that satisfies me that Mr B knows of matters not known to Mr I that may be necessary for determining the issue.
I am not satisfied that Rule 15.49(2) applies here. On that basis, the husband will not be permitted to present the evidence of Mr B. That does not compromise the interests of justice. As Mr McQuade has pointed out, and so did I during submissions, Mr I can be cross‑examined on his valuation. Whether that cross‑examination is from the questions and answers or from Mr B’s report, that matters not. The fact that Mr I has presented his report and is the single expert witness, and his evidence will be the only evidence that I hear in the sense of an expert presenting a report, does not mean that I will accept his valuation. If as a result of the cross‑examination I am not satisfied with the evidence, then I will make the appropriate finding. It becomes a matter of semantics, but as I put to Mr Berman, if it was the case that one allowed an adversarial expert because if you did not, all that could happen is cross‑examination of the single expert, then that would open the floodgates. Mr Berman put it around the other way, and I was interested in how he phrased it, but at the end of the day I do not consider that I am imparting from the purpose of the rules in deciding that the husband has not satisfied the requirements under Rule 15.49(2).

I certify that the preceding 41 paragraphs are a true copy of the reasons for judgment of the Honourable Justice Strickland delivered on 1 May 2009.

Associate