Stephensen and Stephensen

[2009] FamCA 509

FAMILY COURT OF AUSTRALIA

STEPHENSEN & STEPHENSEN [2009] FamCA 509

FAMILY LAW – PROPERTY – Interlocutory application to lead adversarial expert evidence – Adjournment of trial – Costs party/party or indemnity

APPLICANT: Mr Stephensen

RESPONDENT: Ms Stephensen

FILE NUMBER: BRF 2532 of 2006

DATE DELIVERED: 25 May 2009

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Jordan J

HEARING DATE: 25 May 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Kirk SC

SOLICITOR FOR THE APPLICANT: Thynne & Macartney

COUNSEL FOR THE RESPONDENT: Mr North SC

SOLICITOR FOR THE RESPONDENT: Murdoch Lawyers

Orders

IT IS ORDERED

1. That pursuant to Rule 15.52 of the Family Law Rules 2004, leave be granted to the Husband to adduce evidence from Mr J in relation to the valuation of the property known as W property.

2. That the trial dates allocated for 25-29 May 2009 be vacated.

3. That the matter be listed for final hearing for five (5) days commencing 19 October 2009.

4. That the Husband pay the Wife’s costs of and incidental to his application filed 14 May 2009 and any costs thrown away as a result of the adjournment of the trial, such costs to be agreed between the parties and failing agreement as taxed.

5. That the matter be listed for mention and the determination of any further interlocutory applications at 9.45 am on 30 June 2009, such mention to be by way of telephone-link, save in the event of the hearing of contested interlocutory applications.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRF 2532 of 2006

MR STEPHENSEN

Applicant

And

MS STEPHENSEN

Respondent

REASONS FOR JUDGMENT

ex tempore

1. In this matter, the husband makes application by way of interlocutory proceedings filed on 14 May 2009 pursuant to r 15.52 of the Family Law Rules for leave to adduce evidence from a valuer, Mr J, in relation to the valuation of a property known as W property. The wife opposes that application.

2. The background includes observing that the parties commenced proceedings in - as appears on the record anyway - 2006, although I suspect the case had its real life commencing with an amended application filed in April of 2008. 

3. The matter was allocated to me and first came before me on 20 August 2008 as a first day hearing.  Final hearing dates were allocated on 16 December 2008, being five days commencing 25 May 2009.  

4. At that time, a number of directions were made, including a direction for the preparation of a joint valuers' report to be filed by 31 January 2009.  A Mr B was engaged for that purpose and it is common ground that he was unable to comply with the timeframe envisaged in those directions and, in a subsequent mention on 3 March, further directions were made extending the date for filing of that report to 31 March 2009.

5. For today's purposes, this case might appropriately be described as a farming case and there are two substantial properties in issue.  One is a grazing property, W property, which was introduced into the marriage by the husband and operated by the parties as a grazing partnership during the marriage.  Again, for present purposes, that property has a value somewhere of the order of between six and seven million dollars.  There is another property owned at G and I understand its value is something of the order of four million dollars and there will be issues at the trial as to the nature and extent of the parties' interest in that property.

6. Mr B had previously provided a valuation for the husband in September of 2006.

RECORDED   :   NOT TRANSCRIBED

1. The wife subsequently agreed to engage Mr B as a joint expert and he first provided a valuation to the parties on 31 January 2008.  The updated reports required by the directions were not, in fact, received until 8 April 2009.  Having received that report, the husband's solicitors sought a valuation of W property on a retrospective basis as at 1978 and they received that supplementary report on 24 April 2009. 

2. In an affidavit filed in this interlocutory application, the husband attested to the fact that he had ongoing concerns about Mr B’s valuation of W property from the time of the receipt of the first joint report in January of 2008.  He was concerned that it was an unrealistically high valuation.  In consultation with his solicitors, he had apparently canvassed the prospect of obtaining an independent report in the event he remained dissatisfied with Mr B’s valuation.

3. It appears that the solicitors for the husband were becoming concerned about the delays in the production of the joint report and at some time prior to 7 April - not clear on the material - a Mr J was engaged.  Further evidence on that point indicates that Mr J was, at least at first, engaged directly by the husband and, it would appear, on some oral instructions only from the husband.

4. I should have indicated Mr B’s value of W property is 7.35 million dollars.  Mr J’s valuation, which was first received on 6 May 2009, fixed the value of W property at somewhere between 6.04 and 6.7 million.  Counsel for the husband has adopted the median of that range to suggest that the difference between the valuers could be of the order of one million dollars.

5. Having received the report from Mr J, the solicitors apparently sought instructions and received instructions to file an application to seek leave to lead this further evidence from Mr J.  That application was filed on 14 May 2009 and a hearing date was allocated by the Court on 18 May 2009.  The hearing date allocated by the Court on 18 May was 20 May 2009, which then was only two clear working days prior to trial.

6. Mr J provided an affidavit which was filed in these proceedings.  That affidavit, firstly, identified the basis for the difference in valuation figures and, secondly, concerns he had about Mr B’s methodology.  Mr J indicated in his affidavit that he thought the comparatives relied upon by Mr B were inappropriate on a number of grounds and produced an unrealistic outcome.  Perhaps more importantly, Mr J suggested that Mr B’s entire methodology was discredited and went on to say that it had not been used in the Land Court for some 30 years.

7. In my view, this is a significant component of Mr J’s affidavit as valuers regularly deal with differences based on the use or otherwise of available comparative sales.  Such issues are very much their daily bread.  However, I accept that a challenge to the very methodology used by a valuer in such fundamental terms gives rise to serious considerations, serious implications for the experts, and serious implications for the parties who might seek to rely upon each of the experts.

8. In opposing the application for leave, the wife relies upon matters emerging from the evidence, particularly that her solicitors did not receive notice of the application or copies of any material until well after business hours on 18 May 2009. 

9. Mr Kirk of Senior Counsel appearing for the husband, acknowledges the lateness of the application and acknowledges the rules relating to single experts, but says that, at the end of the day, there is an overriding discretion to admit such reports.  He submits that the Court should exercise that discretion judicially and in the interests of justice, which, of course, includes the interests of his client.  In that regard, he says that the value of W property is a central issue in this case.  He highlights the fact that the husband relies upon the history which includes the observation that the husband introduced that property, and upon the orders sought by his client which includes an order that he be at liberty to retain the property should the wife be otherwise able to receive a just and equitable distribution in other ways.  He says that, in those circumstances, the implication of a flawed valuation impact particularly upon the interests of his client.

10. Mr North of Senior Counsel who appears for the wife, argues strongly that I should refuse the application on a number of grounds, including that the application is not brought in accordance with the rules, is not supported by evidence required under the rules, and is brought in a way which denies the wife procedural fairness. 

11. It needs to be observed that some of those procedural aspects were addressed by subsequent affidavits, or sought to be addressed by subsequent affidavits, but nonetheless they were matters relevant to the application and the wife's opposition.  One of the procedural aspects addressed by the subsequent evidence may, indeed, serve to highlight the concerns of the wife.  The husband's recent affidavit reveals that the husband retained Mr J by direct and personal instructions.

12. The rules provide a guideline as to the usual procedure.  Those rules specify that, provided it is practicable and without compromising the interests of justice, ordinarily a single expert should be retained on matters in issue.  I must take into account issues such as costs, delays, complexity of the issues and prejudice to each of the parties. 

13. Mr North submits that the deficits in procedure are greatly exacerbated by lateness and that these developments on the eve of trial are likely to cause the wife real prejudice.  He points to the fact that, notwithstanding the delays in presentation of the joint reports at the commencement of this year, the evidence discloses that the husband had reservations for 18 months about the value provided by Mr B in January 2008 and the apparent intention in the end to at least seek to secure single expert evidence even prior to the release of the joint report.  Mr North submits that, whilst the husband may have some explanation for the delays in the early part of this year, it was essentially his election to delay until the last moment the decision to seek out that further evidence.  He submits that the husband compounded that error by, as it were, keeping the wife and her legal representatives in the dark.

14. Further, Mr North submits that it is apparent that it became the clear intention of the husband to proceed with this application as at 6 May 2009.  He contends that there was ample opportunity during that time to at least place the wife and her legal representatives on notice of the intention to bring such an application and perhaps the grounds for such an application by way of some form of communication between solicitors.

15. I, today, had made available to me an affidavit by the solicitor for the husband, Ms Rice, and it sets out in detail the commitments of the solicitor for the husband to this and other matters and I have not discerned at any stage there has been any criticism directly of the solicitor for the husband in that regard.  Rather, it is the consequences for the wife which are the matters being focussed upon.  In the event that the husband and those advising him chose not to, or were unable to provide such notice, the consequences for the wife remain the same.

16. Mr North submitted last week that, if the report of Mr J is admitted, the wife was left only with a number of unpalatable options, including taking her chances and relying upon a report subject to a late challenge, to lose the trial dates which have been in place now for some months, and to incur the costs and inconvenience and uncertainty of further delays.

17. The wife has, today, made application for an adjournment of the trial based, in part, upon the events of last week.  I should have indicated, last Wednesday I reserved my decision in relation to the husband's application, indicated to the parties that I would like them to use the intervening time to confer with the experts, amongst other things, to determine whether there were ways of avoiding an adjournment, and to address questions of whether the late admission did present the wife with real, as opposed to apprehended, prejudice.

18. I will admit into evidence and mark as Exhibit 1 a copy of a letter from Murdoch Lawyers to Thynne and Macartney dated 21 May 2009, and a copy of a letter from Murdoch Lawyers to Thynne and Macartney dated 22 May 2009, and in relation to Exhibit 2, I highlight certain extracts of that letter as follows:

    "We have conferred with Mr [B] and the results were inconclusive.  We do not propose to disclose the contents of the discussions that we had with Mr [B] as they were specifically privileged.  

    We have asked Mr [B] for further information and without that information our client is not in a position to make a determination as to whether she would seek to rely upon Mr [B] as her witness in the event that leave is granted for Mr [J’s] evidence to be relied upon in the trial.   Our client is in no better position to meet the case you propose to mount on this issue than she was on Wednesday and is unwilling to be forced to make an election of such a significant matter on incomplete information and under extreme pressure as to time".

19. Mr Kirk is somewhat critical of this approach, suggesting that a preferred course would have been one which he suggests is more consistent with the request made by the Court, that the wife identify the real areas of prejudice arising as a result of the possibility of the late admission of Mr J’s report.

20. Whilst I accept that was an option, I also accept the legitimacy of the response of Mr North that the difficulty, or one of the difficulties in this case, is that the further development is so late in time that, necessarily, these matters are being addressed on the run and that the wife should be at liberty to receive appropriate information and considered advice without, at this stage, disclosing to the legal representatives for the husband, or to this Court, the matters which may, or may not, be of concern to her and her legal representatives.

21. At the end of the day, this is possibly a one million dollar question, so the implications for each of the parties are significant.  As I have indicated earlier in argument, the fact that the wife seeks an adjournment of the trial is a matter which, I think, I am entitled to take into account.  I should say, my views as of last week and prior to receiving that information were fairly finely balanced in weighing up the interests of the parties.  I had not reached a concluded view, and I was concerned about the prejudice to the husband of not being able to argue his case on this issue, and greatly concerned about the prejudice to the wife of the late emergence of this issue.

22. I am of the view, as I expressed on the occasion of last week, reinforced by the submissions I have heard today, that, in the event I admit the report, the wife should be at liberty to obtain proper advice from her experts and her legal representatives and that she should be granted an adjournment. 

23. Having understandably chosen that course, on balance, I am satisfied that the interests of justice and the interests of these parties are best met if I admit the report of Mr J and then consider the wife's application for an adjournment in that context.  In the circumstances, I propose to make orders in terms of the husband's application for leave to lead single expert evidence.

RECORDED   :   NOT TRANSCRIBED

1. As is apparent from what I have said during the course of that judgment and from my observations last week, in the circumstances, I will proceed to grant the wife an adjournment of the trial, and I will come back to that in a moment. 

RECORDED   :   NOT TRANSCRIBED

1. In this matter, the wife makes application for an order for costs of and incidental to the application filed on 14 May 2009 and heard on 20 May 2009, and of and incidental to the adjournment of these proceedings.  The order is sought on an indemnity basis. 

2. I refer to my earlier reasons in relation to the application for leave to lead adversarial evidence, and the background to the matter appears in those reasons.  In relation to the costs orders, notwithstanding that the husband was successful in the interlocutory application, I take the view that it would be inappropriate for the wife to be required to bear her costs of and incidental to that application. 

3. I take the view that, essentially, the application was filed by the husband to seek a departure from the normal and, in this case, agreed practice to appoint a joint expert.  He sought the indulgence of the opportunity to lead contrary evidence, which has been said on his behalf raises a question which potentially advantages him by the degree of one million dollars in the estate and whatever portion of that which might be relevant to his circumstances once distributions have been made.

4. The wife did not seek to have the Court move to consider that application.  Certainly, in the circumstances of this case, it was not unreasonable that she opposed the orders sought.  She has been put to the expense of appearing and presenting argument. 

5. I take the view that the lateness of the joint report is a factor which contributed to the delay in the presentation of the interlocutory application.  On all of the evidence, I am satisfied that the husband had determined to proceed with an application on 6 May 2009 and had given instructions to his solicitors to prepare an application at that time, and that therefore his decision was not determined by the subsequent information relating to methodology.  That information only came to light in Mr J’s recent affidavit well after the husband had chosen to proceed with his application.

6. In my view, given the proximity of the trial dates and the wife's previous expectation that issues of value were to be determined by joint valuers, it was incumbent upon the husband to give the wife and her legal representatives the maximum possible notice so that she might be aware of the issue and enabled to take advice and secure any necessary evidence.

7. Mr B’s late report has contributed to the wife's inability to secure that advice and have potentially further evidence in time to be ready for trial today.  Had she been aware of the husband's intention on 6 May, she may have been able to be more proactive in this whole exercise.

8. Further, in my view, there are relevant delays which have further compounded the problem from 12 May, when it was again open to the husband's solicitors to then provide the wife's solicitors with copies of material being prepared.

9. I take the view that indemnity costs should be reserved for those cases of serious misconduct not limited to fraud, and I accept that the term used by Mr North may provide a basis for an order for indemnity costs, that is "gross negligence" on the part of the party or those legally representing the wife. 

10. On balance, whilst I am not satisfied that the delays of the joint expert provide an excuse and a defence against an order for costs, I am satisfied that they are relevant on the question of whether the costs should be on an indemnity basis.  In my view, that delay was a contributing factor to the reason why this matter has been sent away. 

11. In all the circumstances, I order that the husband pay the wife's costs of and incidental to his application filed on 14 May 2009 and any costs thrown away as a result of the adjournment, such costs to be agreed between the parties and failing agreement as taxed.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Jordan

Associate: 

Date:  12 June 2009