Tisdale v Tisdale

[2004] HCATrans 309

[2004] HCATrans 309

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S566 of 2003

B e t w e e n -

SVETLANA TISDALE

Applicant

and

TERRANCE ROLAND TISDALE

Respondent

Application for special leave to appeal

McHUGH J
GUMMOW J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 17 AUGUST 2004, AT 2.06 PM

Copyright in the High Court of Australia

MR M.D. BROUN, QC:   If the Court pleases, I appear with MR R.P. BATTLEY for the applicant.  (instructed by McDonnell Schroder)

MR P.L.G. BRERETON, SC:   May it please the Court, I appear for the respondent.  (instructed by Stewart Cuddy & Mockler)

McHUGH J:   Yes, Mr Broun.

MR BROUN:   Your Honours, this application/appeal, if allowed to proceed, involves three closely related questions.  The first question is that in a situation where there were no pending proceedings between the husband and the wife, the parties entered into a document by which they consented to orders.  The trial judge held – the Full Court upheld – that that consent had been induced by, first of all, fraud; secondly, by duress constituted by a pattern of violence and violent threats over some months; and thirdly, by the suppression of a very important piece of evidence.

Our first contention is that in that situation those orders cannot stand.  They have been vitiated three times over – very vitiated, if one likes – and that those orders ought not therefore be permitted to stand.  The second point is that the Full Court of the Family Court of Australia held that there had been an error made by the trial judge in that he had considered fraud, he had considered duress, suppression of evidence.  They all held correctly.  But he had also considered a fourth matter, namely, that in his assessment the wife had received quite an inappropriately small share of the available assets at the time the consent orders were made, and in his Honour’s view that meant that there was, in effect, reason to say, whatever the cause, something has gone wrong here.  There has obviously been some miscarriage of justice because it is so far outside the ambit of a reasonable award.  His Honour, of course, did not have any need to do that because he had already found reasons enough to explain why the order was what it was, namely, the fraud, the duress, the suppression of evidence.

The Full Court, however, held that the trial judge had got that fourth item wrong.  Therefore, his conclusion and the exercise of his discretion was tainted and the Full Court was therefore entitled to substitute its own discretion in the matter.  The basis upon which they came to that conclusion that the order was not just outside the limit of what could be allowed or what was reasonable was the matter that leads to the question of valuation, which is, we would submit, an important question of general application.

The trial judge had before him expert evidence, not challenged on appeal, that plant and equipment – and in this case we were dealing with very valuable pieces of plant and equipment of initial cost of a million, over a million, hundreds of thousands – it was essentially the plant and equipment which was the business.  The trial judge held that he accepted expert evidence that if that plant and equipment had not just been paid for, or in this case the subject of hire purchase agreements, but had also been the subject of investigation as to what was the appropriate equipment.  It had been transported to the factory site, it had been installed, and then, as appeared to be the case for some of these very valuable items of equipment, one particularly ‑ ‑ ‑

McHUGH J:   Mr Broun, there is a number of features of this case which I find rather disturbing.  I am not sure, subject to hearing Mr Brereton, that the learned judges below properly understood valuation principles.  One difficulty is that the joint statement is not in the papers and neither are any balance sheets or profit and loss accounts of this business.  Can I take you to a passage in the judgment which gives me particular concern.  That is at page 233 in volume 2, paragraph 105.  I will read it for you if it helps you.

MR BROUN:   I am very much obliged, your Honour.  I am sorry,…..I cannot read it myself.

McHUGH J:   Justice Kay says:

Here the maintainable earnings gave it a valuation of, at best, $1,333,000.  The assets were worth about $2,000,000 on realisation.  The effective purchase price for a purchaser assuming the hire purchase debt was just over $3,000,000.  Mr Brereton SC correctly asked the question as to why anybody would pay $3,000,000 for something worth at best $2,000,000.  The short answer is that they would not.

That runs together two different concepts:  valuation as a going concern and liquidation value.  If somebody is going to pay $1,333,000 for a business, it is because they expect the business to continue on and make profits of something like $250,000 a year.  If the business comes to an end in 10 years time, they will have received some $2.5 million in revenue, discounted to today’s value, and then the assets can be sold and the debts paid off. 

Subject to hearing what Mr Brereton says, it just seems to me at the moment that this is a serious mistake in the approach of Justice Kay.  It is difficult to understand this evidence without having the joint statement or the balance sheets or the profit and loss accounts.  What do you say about that?  Am I in error in thinking that ‑ ‑ ‑

MR BROUN:   No, your Honour.

McHUGH J:   I mean, this is a business on liquidation, which means roughly that you have $2 million worth of assets and $1.7 million owing in debt, giving it a net value of about $300,000 on that basis.  If it is earning $250,000 a year, it is a very profitable business indeed.  Its return on equity is about 80 per cent on that basis.

MR BROUN:   Your Honours, we had attached special significance to the fact that the evidence was undisputed and, in fact, strongly affirmed by both the husband and the other shareholder that this company was not going to be liquidated, was not going to be sold and, further, that there was a great deal of evidence of the value of the enterprise to the husband, the evidence of the other director being that the husband was effectively in control of everything.  He was able to pay himself a handsome salary, he was able to employ his de facto wife at that time on a very beneficial salary.

McHUGH J:   Those things seem irrelevant to the value of the business.  It is a question of the profits of the business.  This is a business that on one view is valued on its profitability.  I do not know whether there was any attempt to value it on its free cash flow business.  There does not seem to have been any attempt to do so.  The ultimate question is:  what was the profit made by this business?  It seems to have been assumed there was 250,000 per year.  To say that a business that is earning 250,000 a year with two major shareholders – there were only two shareholders – cannot justify a valuation of 600,000 seems surprising, to say the least.

MR BROUN:   Your Honour, certainly we would so submit.  But if your Honours felt that there was a necessity for the extra material to be provided, we could certainly put it together within a few days.

McHUGH J:   One thing that worries Justices in a case like this is the question of costs.  An appeal would be an expensive exercise.  How many appeal books were there?

MR BROUN:   I think before the Full Court there were a number.  They were fairly slim.  They were slimmer than they sometimes are, but certainly there was in excess of a dozen, including all the exhibits and the accounts and the various other items.  Those books are still available and sometimes the practice of this Court permits certain parts in any event of the previous appeal books to be reused, which may reduce the costs.  As we see it ‑ ‑ ‑

McHUGH J:   The amount that you are claiming is in today’s terms not a large amount.  Costs must have overtaken them by now, or close to it.

MR BROUN:   Your Honour, certainly because of the great length of the initial hearing where the trial judge gave us an award, I think, of just on $1 million.  Then the appeal was certainly a further expense.

McHUGH J:   What happened to the costs?  There is no costs order in the application books.

MR BROUN:   So far there have been no costs orders made.

MR BRERETON:   Yes, there have.

GUMMOW J:   In the Full Court?

MR BRERETON:   Yes.

MR BROUN:   In the original trial there has not been any costs order.

GUMMOW J:   Is there a Full Court costs order?  It does not seem to be in the book.

McHUGH J:   It is not in the book.

MR BRERETON:   It is not in the book.

MR BROUN:   The wife was ordered to pay $50,000 to the husband for the costs of the Full Court appeal.

McHUGH J:   What about the trial?

MR BROUN:   There has been no order as to the costs there yet.  I think that is right.

McHUGH J:   Anyway, I interrupted you, Mr Broun.  I have told you what my worries about the case are.

MR BROUN:   Your Honours, what I would put forward is that one other error that it seems the Full Court made is to confuse the evidence of the experts where the expert said, “Look, you only use this value in use, or existing use value, if the business is profitable”.  The two accountants both said, “While there are profits, we would value the company more highly by looking at the asset backing than by looking at the capitalisation of maintainable earnings”.  Therefore, the accountants said in the technical sense there is no goodwill to be added to the valuation of the assets on an asset backing basis.  So that the question of profitability, as we would see it, was simply misunderstood by the Full Court.

McHUGH J:   Maybe I am not understanding the case properly, but if you have assets of 2 million, debt of 1.7 million, that is net assets of 300,000.  If somebody is prepared to pay 1,330,000 for the business as a going concern, it must have goodwill of $1 million, must it not?

MR BROUN:   Yes, I would certainly adopt that, your Honour.  Both valuers agreed there was no goodwill in that sense but neither of them ‑ ‑ ‑

McHUGH J:   There is no goodwill if the business is going to be liquidated, but that does not seem to have been a real option, does it?

MR BROUN:   No.  Indeed, the evidence was very strongly and clearly it was not going to be liquidated.  The point at which these issues arose, of course, was 1996 and the judge was considering the matter in 1999/2000 figures, by which time it was clear that not only had the company not gone into liquidation but it had continued to increase its turnover by roughly 20 per cent a year during those intervening years.  So that the evidence was quite clearly the business was ‑ ‑ ‑

McHUGH J:   What about its profit margins?  Were they stable, increasing or what?  Do you know?  Is there any evidence to that effect?

MR BROUN:   Your Honour, neither of the expert accountants tried to put a profit figure which would produce a goodwill over and above the valuation of the company, but the valuer for the wife, relying on the expert evidence of a Mr Rodney Hyman, had said the plant and equipment has an extra value for being in use over what it would have on an auction room floor so long as, in effect, the company is still going.  Our accountant used therefore that value in existing use, which was roughly $1 million more than the value that would have been realised on an auction room floor.  Not only had our valuer done that but ‑ ‑ ‑

McHUGH J:   I am afraid I do not understand that.  What do you mean by “in use”?

MR BROUN:   A valuation which allows for the fact that the plant and equipment has been selected, transported – and some of these are enormous pieces of equipment – installed and then commissioned, that is to say got to the point where it was running effectively, which for one million‑dollar piece had taken some months to get it properly commissioned so that it was actually running and producing product for the company.

McHUGH J:   Yes, one can understand if you are looking at it on a going concern basis, but on a liquidation basis what does it matter?

MR BROUN:   It does not if the company is to be liquidated, but the evidence was from all sides it is not going to be and we were looking at the 1996 position from an advantage of having a few years further observation.  It certainly was not and was even less likely to be liquidated and continued to be a thriving concern with a very large turnover, an increasing turnover and, at least as to the amount of money that the husband was able to channel out to himself, increasing benefits to him. 

The focus in the Family Court, of course, is the value to the party, as distinct from a more objective value perhaps, but even on an objective basis the valuation evidence we had was that this business up and running – and it had by that stage been running for a number of years and then continued after the relevant date that we were looking at – this plant and equipment has more value in use and producing product than it would have in a liquidation. 

That was the figure which our valuer adopted.  It was the figure which the balance sheet of the company adopted – and, in fact, at all stages the signed balance sheets of the company adopted that in use valuation – and it was the figure which the husband himself gave evidence that he believed to be the fact.  Indeed, his partner gave evidence that he believed it to be the position that the plant and equipment had that real extra value by being in there in use.  In fact, the husband’s figure as to what he thought his interest was worth, $600,000 less tax – if he had to realise it, his figure was almost exactly the balance sheet figure using the in use valuation, the in use valuation being so much higher than a mere valuation of realisability.

GUMMOW J:   I suppose there is a question – assuming the situation is that something went wrong with the valuation treatment by the Full Court, the question then would be whether the primary judge’s judgment nevertheless was vulnerable on some other ground.

MR BROUN:   Yes, that problem arises, but the Full Court did not, I think, ultimately deal with any of the other grounds except for a few what we might call small ticket items like the way in which the valuers treated the hire purchase debt, which I think worked out as a relatively small matter, at least for the 1996 valuation, which was the crucial point.

GUMMOW J:   One may apprehend that Mr Brereton would be coming here with a large notice of contention.  I suppose that is something we should take up with him.

MR BROUN:   Yes.  Unless there is any other matter with which I can assist your Honours, those would be our submissions as to why.  If your Honours feel that it is impossible to adjudicate on this without at least looking at that material that the accountants were referring to, that can certainly be provided within a few days.  Thank you, your Honours.

McHUGH J:   Yes.  Yes, Mr Brereton.

MR BRERETON:   Can I begin with some short observations directed to what your Honour Justice Gummow has just said and then come to what your Honour the presiding Judge has been discussing with my learned friend.  The Full Court, in fact, held that the judgment was vulnerable and liable to be set aside on at least two other grounds.  One of those was the 1999, as distinct from the 1996, valuation which was flawed on a completely different basis.

McHUGH J:   This is the Rushton valuation, is it?

MR BRERETON:   No, your Honour, this is the overall valuation of the assets as at the date of the trial, as distinct from as at the date of the consent orders.  In that respect, what his Honour did against what both of the valuers said ought to be done was to revalue assets from, in effect, cost to market but not provide for the tax that would flow from such revaluation.  Contrary to what both the valuers said, his Honour did not provide for tax.  The Full Court held that that on any view had to be overturned and there would have to be a new trial in any event.

McHUGH J:   I thought your valuer, Mr Fischl, did not include tax.

MR BRERETON:   He did not, for the very good reason that he did not revalue to market.  Mr Fischl’s position was that if you revalue to market, then you have to include tax.  What I have just said is to be found at paragraphs 235 to 237 of the Full Court judgment.  Secondly, at paragraph 250 of the Full Court judgment the Full Court held that the overall exercise of discretion under section 79 re‑exercising the discretion of 65/35 in favour of the wife was demonstrably outside the scope of a just and equitable order, so the judgment failed on that basis as well.  Leaving aside completely the valuation issue which my learned friend has been discussing, the judgment was set aside on two other bases.

Thirdly, the Full Court held that the assessment of the pool of assets as at the date of the original consent orders ‑ ‑ ‑

McHUGH J:   But the statement at 250 depends upon what the available assets were, does it not?

MR BRERETON:   That depends on his Honour’s findings.  No, your Honour, that accepts his Honour’s findings of the assets as at the date of trial.  That is the fourth step.  As at the date of trial, accepting his Honour’s findings (which were wrong), nonetheless 65/35 was manifestly unreasonable.  In addition to that, going back to the first stage, the Full Court held that his Honour’s calculation of the pool of assets at the date of the original consent orders was wrong not only because of the valuation exercise but also because his Honour failed to bring to account certain liabilities which would have reduced the assets by about $150,000.  That is at Full Court 128 and 360 to 365.  So that was another basis upon which the Full Court held that the trial judge’s original exercise was flawed.

The net result of that is that even if the Full Court made some error, it was inevitable that at the very least there would have to be a new trial.  If an appeal to this Court were to succeed, the outcome would be a new trial.  In deciding whether this is an appropriate vehicle to agitate these questions, that, in my submission, is a highly relevant consideration.

Can I shortly answer the questions that were asked about costs orders.  In a supplementary judgment given on 31 March 2004 ‑ ‑ ‑

KIRBY J:   On that last point, though, if the matter went back to reassessment, that would have to be done in accordance with the approach of the Full Court to the question of the valuation of the company, would it not?

MR BRERETON:   As things stand, yes, your Honour, and that would achieve nothing.  Now, on the question of costs, very shortly, in the supplementary judgment delivered on 31 March this year the Full Court by majority ordered that the wife pay half of the husband’s costs of the trial, half of the husband’s costs of the appeal, half of the husband’s costs on the costs appeal but put a cap on the total sum payable of $50,000.  Justice Mullane dissented and would not have – I think the position was his Honour would not have imposed the cap, but that was the substantial difference between them.

Now, can I then come to the valuation question and turn directly to the issue which your Honour the presiding Judge raised.  Justice Kay at paragraph 105 may well have been wrong.  His Honour was in the minority on that issue.  If we go to page 279, paragraph 259, on grounds 1 and 4, which were the valuation grounds, Justice Holden generally agreed with the reasoning of Justice Mullane.  The reasoning of the court, therefore, is to be found in the judgment of Justice Mullane.

If we go to page 280, paragraph 262, his Honour recorded that the wife’s valuer, Mr Jansen, looked at the consolidated profit and loss accounts; “calculated the adjusted profit or loss for each of the 4 years”; taking 1995/1996, after providing for tax, capitalised at “20% to arrive at a capitalised future maintainable earnings value” of just under $1.7 million.  Now, his Honour then notes at paragraph 264 that some adjustments were made to the balance sheet in light of the calculation of FME:

the most significant of which is the addition of goodwill of $436,200.

265.    But Mr Jansen’s calculation of net business assets (and therefore his arrival at the goodwill figure) involved including hire purchase debts. 

This was the issue which the trial judge has totally failed to address, that the wife has failed to address as Justice Mullane goes on to point out and still does not come to grapple with in this Court.

McHUGH J:   I have to say, from the judgment, I really could not understand what Mr Jansen was getting at.  I had the impression that he was saying that the hire purchase terms were so good that in some sense it constituted an asset, but how a debt can be an asset I just do not know.

MR BRERETON:   The general position is that when one values a business one leaves the debt out of consideration.  The debt is personal to the vendor.  It does not pass with the business.  Mr Jansen treated it as if the debt would pass with the business and, therefore, for some reason someone would pay more because you would take that debt on with the business.  It just does not make sense at the end of the day.  But it was only by that process that Mr Jansen got a result on capitalising earnings which exceeded the net asset value result.  If we can go back to first principles in Mallet’s Case ‑ ‑ ‑

McHUGH J:   If you looked at this business, Mr Brereton, it seemed to have, let us say in general terms, assets – plant and equipment and so on – of 2 million and debt of about 1.7 million, which suggests equity of about 300,000.

MR BRERETON:   Yes.

McHUGH J:   Now, if somebody is prepared to pay $1.3 million, it must have a goodwill value of $1 million. 

MR BRERETON:   But the assumption, your Honour, is why is someone prepared to pay $1.3 million.  The only person who says ‑ ‑ ‑

McHUGH J:   Because it is a going business and it may go in perpetuity.

MR BRERETON:   But the only person who says that anyone would pay $1.3 million is Mr Jansen and he only gets to that result by this exercise with the hire purchase debt.

McHUGH J:   No, he does not, does he?  I mean, take the capitalisation rate.  Your valuer took a figure of 25 per cent and Jansen took a figure of 20 per cent, but you have a profitability of something like 250,000 per annum, well, capitalise that, you are going to, on one view, pay about $1.2 million and on the other about $800,000 or $1 million.

MR BRERETON:   But the critical question, your Honour, is whether that produces a result which is higher than the result you would reach on a net asset backing basis.  If it produces a result higher than on a net asset backing basis, then sure you adopt the capitalised maintainable earnings basis.  If it does not, you take its highest and best value to be on a net asset backing basis.  Mr Jansen derived his values on capitalised maintainable earnings.  Mr Fischl derived his on the net asset backing basis and the crux of the question for the trial judge should have been:  was Mr Jansen entitled to adopt an FME basis in circumstances where he could only show a sufficient profit to exceed net asset backing basis by using the hire purchase debt in the way in which he did?

McHUGH J:   Yes, but this is a business that is a going concern.  I mean, amazon.com’s net assets is very low, but the market is prepared to pay a very large sum of money for shares in the company because of what is seen as its potential.  It is a company making 250,000 a year.

KIRBY J:   Is this company in the same league as amazon.com?

MR BRERETON:   I am not sure where that 250,000 comes from, your Honour.  Let me go back to it.

McHUGH J:   Well, that is what I thought I saw somewhere or other.

MR BRERETON:   Your Honour may well be right but ‑ ‑ ‑

McHUGH J:   It is at 229, paragraph 95:

The assessment of adjusted profit before tax (Jansen $433,000; Fischl $350,000) –

If you take Jansen’s figure and have a 40 per cent tax debt, you are in the 250,000 bracket and in Fischl’s case you are in the 210,000.

MR BRERETON:   Even taking that to be so and capitalising say 250,000 at say 25 per cent, that produces a value on the maintainable earnings basis of $1 million.  The question then becomes whether or not that implies any goodwill in the business.

McHUGH J:   Well, it must.  If assets less debt is 300,000 and somebody is prepared to pay 1 million or 1.3 million, the difference is goodwill.

MR BRERETON:   But that is why I am having immediate difficulty in accepting that, your Honour, because all the valuers accepted that if you perform that exercise in this case, once you disregarded the hire purchase debt there was not such a surplus.  Indeed, all the valuers accepted there was no surplus at all.

McHUGH J:   Yes, but that is a question as to whether or not goodwill should have been added in.  Does not the Rushton report say something about that?  Was that prepared by KPMG?

MR BRERETON:   I do not think so, your Honour.  KPMG was Mr Fischl.  But the Rushton report deals with value in use.

McHUGH J:   It was Ernst & Young, was it not?

MR BRERETON:   Ernst & Young was Mr Jansen.

McHUGH J:   Yes.

MR BRERETON:   But can I come back to Justice Mullane because, in my submission, his Honour ultimately spells it out reasonably clearly.  At page 281, paragraph 266, his Honour notes that:

If the hire purchase debts had not been treated as part of the net business assets then the net business assets would instead on his calculation have been $3,027,926; some $1,331,330 more than the future maintainable earnings valuation of $1,696.696.

So once you cease to deduct the hire purchase debts and assume that they will be retained by the vendor, the net business assets were 3 million and that is 1.3 million more than the FME calculation.  The deduction is there is no goodwill because the net assets of the business are worth more than the future maintainable earnings.  But the fact that the net business assets are worth 3 million does not mean that that is the value of ‑ ‑ ‑

McHUGH J:   But that is another error on the part of this judge, is it not?  It just turns the whole exercise on its head.

MR BRERETON:   No, your Honour, his Honour is exposing the error in Mr Jansen’s approach that because the future maintainable earnings exceeded what Mr Jansen thought were the net business assets after deducting hire purchase debts, Mr Jansen thought an FME valuation was tenable and his Honour is exposing the error of that point.

McHUGH J:   I do not understand where the 3,027,000 comes from.  What has Jansen done?  How did the hire purchase debt to the plant and equipment ‑ ‑ ‑

MR BRERETON:   I think the best way of dealing with that is going to the trial judge’s judgment – I thought the trial judge had extracted a table that shows ‑ ‑ ‑

McHUGH J:   There is a table in Justice Kay’s judgment.

MR BRERETON:   That is, I think, at 1999, your Honour.

McHUGH J:   It is at 219 and 220.  That shows 1999.

MR BRERETON:   Yes, that is the 1999 valuations which really ‑ ‑ ‑

McHUGH J:   Page 221 shows net assets at hearing, but they seem to be personal assets.

MR BRERETON:   Yes.  Well, that does not answer the question because we need the 1996 figures really.  Can I come back to the $3 million figure because I just want to follow through this theme in Justice Mullane.

McHUGH J:   Yes.

MR BRERETON:   Now, at paragraph 268, his Honour notes that ultimately:

Mr Jansen reluctantly conceded in cross‑examination that in treating the hire purchase debts as part of the net business assets he was departing from “usual principle”.

At 283, paragraph 275, his Honour notes that:

Mr Fischl treated the hire purchase debts as an attribute of the proprietor’s financial arrangements, not of the business itself.  He said in his report that if this principle were applied to Mr Jansen’s calculation of capitalised earnings . . . the liabilities of the companies would exceed the assets by $273,033 and the shares had no value.

Mr Fischl’s own valuation gave them a value of $119,000.

Now, in essence, the trial judge never addressed the valuers’ disagreement about the hire purchase debts or any of the evidence going to that issue and Justice Mullane so held.  The trial judge failed to consider the difference between the experts as to how the hire purchase liabilities should be treated and, as a result of failing to do that, Justice Mullane concluded at page 302, paragraph 339, that that led to the position that his Honour ought to have accepted Mr Fischl.

What was happening here was these judges were not purporting to be valuers.  They were analysing the evidence of experts and choosing between the evidence of experts and applying that to the facts.  What has happened in this case, in essence, is that in a situation of competing expert evidence the Full Court has come to the conclusion that on analysis the trial judge was wrong to accept one expert and ought to have accepted the other expert and that, although dressed up as a matter of opinion, is ultimately a question of fact peculiar to this particular case and giving rise to no question of general application on which the guidance of this Court will be of lasting benefit.

McHUGH J:   Well, except that there is a general miscarriage ground, section 35 of the Judiciary Act, miscarriage of justice in a particular case.  I mean, here is a case where there is a finding of fraud on the part of your client.  It seems to have some support.  Justice Kay held that Justice Purdy had correctly identified the act of fraud and now there is a real question about a valuation.

MR BRERETON:   May I have leave to deal with that, your Honour, notwithstanding the colour of the lights facing me?

McHUGH J:   Yes, naturally.

MR BRERETON:   In a case which your Honour will remember from another place, West v AGC Advances, your Honour identified the different concepts of procedural unfairness and substantive unfairness.  What, in essence, happened in this case is the trial judge found both procedural unfairness – that is, fraud, suppression of evidence and duress – and substantive unfairness – the wife got a raw deal.  The Full Court, on re‑examination, upheld the findings of procedural unfairness but overturned the findings of substantive unfairness.

Now, from the very beginning of section 79A, authority of this Court, in particular Sir Anthony Mason in Taylor v Taylor, in the bundle we have provided at page 14, says that relief under section 79A is discretionary and you need much more than a mere finding of a ground to get there.  In essence, there are four steps.  The first step is proving a relevant vitiating factor such as fraud or duress; the second is proving that that results in a miscarriage of justice; the third is persuading the court to exercise its discretion to set aside the original orders; and the fourth is making new orders.

Now, if, in fact, as the Full Court found, the wife did not persuade it that she received a raw deal, then that was a ground for finding that there was not a miscarriage of justice despite the fraud or, alternatively, it was a ground for declining to exercise the discretion just as in criminal cases your Honours are amply familiar with the proviso to section 6 of the Criminal Appeal Act and despite significant errors in a trial, if there was a trial and if there was not a loss of a significant chance of an acquittal, then the appeal will still be dismissed.

Section 79A is in substantially the same plight as that.  Here the Full Court said, “Well, granted that there were these vitiating factors, at the end of the day, having now exhaustively looked at the valuation situation, the wife would not have done substantially better, therefore, she should not have succeeded at trial”.

McHUGH J:   Yes, but that is the issue, is it not, as to whether she would have done substantially better?

MR BRERETON:   That was an issue which has been examined on the facts by the Full Court and resolved on the facts by the Full Court, in my submission.

McHUGH J:   Thank you.  Yes, Mr Broun.

MR BROUN:   Your Honours, a few points.  First of all, where the Rushtons’ valuation came from, that was, in fact, commissioned by the company itself, that is to say the husband, and always used by the company and the suppression of evidence, in effect, referred to by the trial judge was failing to make that Rushtons’ valuation available to the wife so that she could see that there was, as it were, in this continuing business a much larger value than might otherwise have appeared.

Your Honours, with respect, Mr Brereton’s argument has confused the two areas.  We were looking at valuation questions in 1996 where Mr Jansen did not, in fact, find any goodwill and the hire purchase argument did not arise in respect of the 1996 valuation.  It is the 1996 one that is crucial because it was on the basis of that that the Full Court said, “We’re looking at 1996.  We set aside the Rushtons’ valuation for existing use.  We go back to the realisation‑type value and then she didn’t do too badly”.

McHUGH J:   Mr Broun, the problem facing you is that this Court does not sit as a general court of appeal.

MR BROUN:   I appreciate that, your Honour.

McHUGH J:   There does not seem to me to be any point of principle involved in this case.  The only issue that you have arguably got going for you is that there has been a miscarriage of justice in the particular circumstances of this case and this Court ought to grant special leave, but I cannot see any point of general principle in the case.

MR BROUN:   Your Honours, there is, first of all, the question of general principle about valuation:  is there a value to a company to have assets that are in existing use even if the company is not generating a profit that would lead one to say that it had a goodwill value in excess of its realisable value or liquidation value?  That is, in our submission, an important question of valuation which is going to, in fact it would seem, become progressively more important as tax law, particularly, looks more to questions of value than to questions of, as it were, cost.  But that is an important question of principle, in our submission.

KIRBY J:   How could the discretion be exercised or re‑exercised properly by the Full Court in a way that did not effectively destroy the goose that is laying the golden eggs?  I mean, how could it be done without requiring liquidation of the company to the advantage of your client?

MR BROUN:   One would have thought, your Honour, that that would be a matter capable of resolution ‑ ‑ ‑

KIRBY J:   Give me a hint.

MR BROUN:   ‑ ‑ ‑ by the formulation of the order as the trial judge did.  He provided that the amount to be paid to the wife was to be paid by a number of relatively manageable instalments over, I think, four or five years so that it was going to be possible to pay the wife without ‑ ‑ ‑

GUMMOW J:   Five instalments it was.

MR BROUN:   Five instalments, yes.  So that was the way the trial judge found to achieve that objective.  But, your Honours, the important question is that it was the initial 1996 question we were looking at as to whether the orders should be set aside or not, and the effect of what the Full Court has done is to say that even though there was no application before the court, there was nothing to settle, there was no pending proceeding, the court was not going to be asked what was a fair award for her.  She was, by duress and fraud – the trial judge attached particular significance to the duress – compelled or effectively forced into a settlement or led into a settlement where she did not genuinely consent and that consent was the sole basis of the order, yet she was held to it.

Now, in our submission, your Honours, there must be some question of principle there.  It must be a matter of principle to say where there was no consent, no genuine consent, where that consent was induced by fraud and duress, then an order based solely on that consent cannot stand.

McHUGH J:   Yes, but the problem you have is that that only gets you through the door.  You still have to ask for the discretion to be exercised.  What was put against you is that the trial judge took into account the assets on an erroneous basis and that, together with other factors, must have influenced the exercise of his discretion and, therefore, the Full Court wanted to exercise the discretion itself.

MR BROUN:   Only, your Honours, if the Full Court was right in what we would submit is their total misconception of the principle of valuation, that you need to have a goodwill factor into the value of the company before you can look at the question of whether the machinery, very valuable machinery in operation and producing is worth more than it was on the showroom floor.

McHUGH J:   Yes.

MR BROUN:   So that we say that the principle in respect of valuation is related back to the principle of whether the wife could reasonably be held to an agreement to which she never consented.

McHUGH J:   Yes, well your time is up, Mr Broun, in reply.  The Court will adjourn to consider this matter.

AT 2.53 PM SHORT ADJOURNMENT

UPON RESUMING AT 3.00 PM:

McHUGH J:   Despite the earnest argument of Mr Broun, no question of general principle is involved in this case.  The only question therefore is whether the applicant has shown that there is an arguable case of a miscarriage of justice in the particular circumstances of the case.

Mr Brereton for the respondent conceded that the reasoning of Justice Kay in paragraph 105 concerning the valuation of the business and assets might be difficult to support.  However, his Honour’s reasons on this point did not represent the judgment of the court.  That is to be found in the judgments of Justice Mullane and Justice Holden.

In our view, the applicant has insufficient prospects of demonstrating that their Honours’ judgment on the important question of valuation is incorrect.  Accordingly, the application must be refused with costs.

AT 3.01 PM THE MATTER WAS CONCLUDED