Xin & Qinlang
[2022] FedCFamC1F 933
Federal Circuit and Family Court of Australia
(DIVISION 1)
Xin & Qinlang [2022] FedCFamC1F 933
File number: CAC 1782 of 2018 Judgment of: GILL J Date of judgment: 30 November 2022 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Where the wife has disclosed records to the husband and is bound by disclosure obligations under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) – Where husband’s further orders seeking the wife’s disclosure are dismissed – Where there is contention between the parties as to the scope of work and payment of a Single Expert to value the business property pool – Scope of the work to be undertaken by a Single Expert is defined – Shared contributions by parties towards obtaining a single expert for valuations – In context of non-compliance by the parties with procedural directions from the Court. Legislation: Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 1.04, 7.02, 7.04, 7.06
Division: Division 1 First Instance Number of paragraphs: 43 Date of hearing: 2 November 2022 and 10 November 2022 Place: Canberra Counsel for the Applicant: Mr Cox SC Solicitor for the Applicant: Canberra Legal Consulting Solicitor for the First Respondent: Ms Simpson, Dobinson Davey Clifford Simpson Solicitor for the Second and Third Respondents: Ms Goh, Farrar Gesini Dunn Solicitor for the Fourth Respondent: Litigant in person (did not participate) ORDERS
CAC 1782 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR XIN
Applicant
AND: MS QINLANG
First Respondent
MS WANG
Second Respondent
MR B XIN (and another named in the Schedule)
Third Respondent
order made by:
GILL J
DATE OF ORDER:
30 November 2022
THE COURT ORDERS THAT:
1.Order 3 of the orders of 21 September 2022 to be amended such that:
1.1 the husband is to provide any amendment to the amended entity diagram provided by the wife within 6 business days from the date of this Order.
2.Order 4 of the orders of 22 July 2022 that provides for appointment of a valuer for the properties to be amended such that:
2.1 the wife will provide any amendment to the letter of instruction provided by the husband within 5 business days from the date of this Order;
2.2the husband and wife will pay 50% respectively of any valuation; and
2.3the husband and wife will comply with all reasonable requests of any valuer engaged pursuant to this Order.
3.Within 7 days of settlement of the sale of F Franchise, Suburb H, the solicitors for the wife are to provide to the solicitors of the husband a copy of the settlement figures and description of any payments made consequent of that sale such as sale proceeds, return of rental bond and fitout contribution (as applicable).
4.Order 5 of the orders of 22 July 2022 that provides for the appointment of a forensic accountant to be amended such that the forensic accountant is to:
4.1 value the entities and trust:
4.1.1 N Pty Ltd;
4.1.2 P Group Pty Ltd;
4.1.3 Q Pty Ltd;
4.1.4 R Pty Ltd; and
4.1.5 S Family Trust.
4.2ascertain dissipation or wastage of any company or business funds or assets in the entities and trust from the financial year ending 30 June 2016 to date in the entities referred to in 4.1; and
4.3assess the quantum of any loans or investments from or to any parties other than the husband and wife to the entities described in 4.1, in the event that it is not ascertained by the forensic accountant as part of the valuation process referred to in 4.1.
5.Within fourteen (14) days from the date of this court order:
5.1 the parties to agree to a forensic accountant;
5.2within 3 business days, the husband’s solicitors to provide an outline of the proposed forensic accountant and their costs;
5.3within 3 business days, the wife’s solicitors to respond as to acceptance or otherwise;
5.4both parties are to consult and use their best endeavours to reach an agreement in appointing a forensic accountant;
5.5the husband will draft a letter of instruction to the agreed forensic accountant within 7 days from the date of this court order to carry out the following scope of work in Order 4. The wife and third parties are to consult in relation to the letter of instruction, and the parties are to instruct the agreed forensic accountant within fourteen (14) days from the date of this order;
5.6the husband and wife will pay 50% of the cost of the scope of work set out in 4.1;
5.7the husband and wife will pay 50% proportion of the cost of the scope of work set out in 4.2;
5.8 the husband, the wife and together the third party respondents Ms Wang and Mr B Xin, will each share one-third proportion of the cost of the scope of work set out in 4.3; and
5.9the husband and wife will comply with all requests of the forensic accountant engaged pursuant to this Order.
6.The wife discloses to the husband, the primary accounting records in csv records, including by producing the electronic entries recorded on bookkeeping software in respect of the First Respondent N Pty Ltd, Q Pty, R Pty Ltd and F1 Pty Ltd from 1 January 2016 or from the date of incorporation (whichever that is later) to November 2022.
7.The forensic accountant appointed pursuant to Order 5 is authorised to request access to any records or information reasonably required for the purpose of the report, and the parties are to provide reasonable assistance to comply with any requests made for information and documents.
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.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Xin & Qinlang has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
GILL J:
Introduction
This judgment concerns procedural issues relating to the scope of, and liability for payment for the appointment of a single expert forensic accountant.
Whilst the parties have agreed on a number of the matters concerning the appointment of the accountant, including that the expert’s work will be directed to valuing a number of entities associated with the parties, being N Pty Ltd (which operates F Franchise, Suburb H), P Group Pty Ltd (which operates T Franchise), Q Pty Ltd (which operates F Franchise, U Shopping Centre), R Pty Ltd and S Family Trust, a mechanism for the selection and appointment of the expert, and various disclosure issues, they disagree upon whether:
(a)the expert should ascertain dissipation or wastage of any company or business funds or assets in the entities and trust from the financial year ending 30 June 2016 to date;
(b)the expert should assess the quantum of any loans or investments from or to any parties other than the husband and wife to the entities described in 4.1 in the event that it is not ascertained by the forensic accountant as part of the valuation process referred to in 4.1; and
(c)the apportionment of the costs in relation to the above two matters between the husband, wife and the second and third party respondents (“TPRs”).
The parties also disagree as to whether the wife should produce bank and credit card statements to the husband from herself and a number of the entities and should she assert that no such records exists, provide a written explanation for such.
Whilst such matters are frequently resolved by agreement, in this case they were unable to be.
The resolution of the issues requires consideration of evidence to determine whether the proposed steps are justified absent agreement. To this end, the parties were directed to file a list of paragraphs read from their previously filed material in support of their positions. This step was taken as the most efficient manner of dealing with the contentious issues without requiring the parties to file yet more affidavit material.
The directions made to facilitate the resolution of these narrow issues were not complied with, necessitating a further listing and further directions.
This non-compliance occurred within a further context of significant and ongoing non-compliance with procedural orders. Of particular note is the failure of the parties to produce an entity diagram setting out the interrelationship of the various entities, the subject of these proceedings. Multiple directions have been given for this step to take place, but none has as yet been produced to the Court. This has the practical consequence that consideration of the contentions made by the parties in the extracts of affidavits relied upon occurs against a foggy background as to how the various entities fit together.
An annotated Minute of Interim Orders sought is included as an annexure at the end of this judgment. The document identifies the agreed aspects and, by underlining, the remaining contentious matters.
MATERIAL relied upon
Applicant husband
The applicant husband relied upon the following:
(1)Affidavit of Mr Xin affirmed 30 August 2018 at 53(b), 53(c), 54–58;
(2)Affidavit of Mr Xin affirmed 9 May 2019 at 2(a), 2(b), 2(c), 2(f), 2(h), 3–5, 7(d), 10, 12, 15, 17, 20–22, 24, 27, 29–33, 37–40, 49–51;
(3)Affidavit of Mr Xin affirmed 17 February 2020 at 10–13, 18, 19, 24, 25, 27–31, 33–35;
(4)Affidavit of Mr Xin affirmed 14 May 2020 at 27, 38, 30;
(5)Affidavit of Mr Xin affirmed 14 July 2020 at 19–22, 24, 25;
(6)Affidavit of Mr Xin affirmed 8 July 2022 at 11, 13, 14, 17, 18, 20, 24, 27, 32, 36, 37, 42 & Exhibit “MX-2”, 46 & Exhibit “MX-3”, 47, 52, 53, 56, 66, 71 & Exhibit “MX-6”, 72, 74, 75, 79, 81(e), 81(f), 81(g), 86, 88, 91, 95, 96, 100, 101, 107, 110, 111.
Respondent wife
The respondent wife relied upon the following:
(1)Affidavit of Ms Qinlang filed 8 June 2022 at paragraphs 32-34, 65, 68, 72-74.
Second and third party respondents
The second and third party respondents relied upon the following:
(1)Minute of Orders sought by the TPRs filed on 14 May 2021;
(2)Affidavit of Ms Wang filed 1 May 2020 at 76 to 103, including exhibits MW12 to MW17;
(3)Tender Bundle filed by the TPRs on 8 September 2022;
(4)Exhibit C1 of 2 November 2022; and
(5)Letter from Wife’s lawyers dated 9 November 2021.
The husband’s contentions
The husband contends that the wife has mixed her personal and business expenses (relating to the entities), and otherwise dissipated business assets.
The affidavit material identified by the husband identifies removal of funds from business accounts to pay legal fees, reveals the wife’s assertion of low income and purchase of a new Motor Vehicle 1, indicates the payment of personal expenses from business accounts, the transfer of significant sums to third parties including to the wife’s mother in a manner potentially inconsistent with the wife sourcing those amounts from non-business funds. Later material identifies that Motor Vehicle 1 was purchased by loan from the wife’s father partly repaid with business related funds.
The husband secondly contends that while the wife has retained control over the businesses that she has denied him access to bank accounts and financial records, and has transferred business interests from jointly owned entities to entities solely owned by the wife.
The affidavit material indicated the transfer of some business interests. Its dated nature (the most recent affidavit being from July 2022) was of little assistance in prosecuting a case for current non-disclosure by the wife.
The husband thirdly contended that the wife has defaulted on payments that she was required to make pursuant to orders, and has failed to provide disclosure.
Fourthly, the husband identified evidence to justify examination of loans/investments by the husband’s parents.
This appears to flow from the husband’s contention that his parents loaned approximately $1.6 million AUD, each backed by a loan agreement.
It remained unclear on the extracts identified how these borrowings related to the business entities of the parties, as opposed to other assets, and so unclear how they relate to the valuation and assessment of the business interests by the forensic accountant.
The second and third party respondents’ contentions
The TPRs did not oppose the scope of the report as pursued by the husband, but sought limited liability for the payment of the expert, due in large part to what they assert is a limited interest in aspects of what the expert might investigate.
The evidence relied upon by the TPRs depicted close involvement of the TPRs in a number of the business interests, both financially and non-financially, including the investment of significant sums, allegations of fraud in relation to the business by the wife, allegations in relation to payments being made from the businesses by the wife to third parties (in particular to the wife’s father who is now also a party).
The claims pursued by the TPRs include not only the repayment of purported loans, and the reversal of transactions in relation to P Group Pty Ltd (T Franchise), but also an accounting of profits in relation to one of the entities, Q Pty Ltd (F Franchise, U Shopping Centre), based upon the TPR’s investment in that entity.
The wife’s contentions
The wife, in resisting the extension of the report and in pursuing a limiting of her liability for the costs of the expert, relies, in particular, upon the husband’s purported non-disclosure, and obstruction in the management of the entities that the wife has responsibility for. Part of that non-compliance relates to the non-payment of previous costs orders.
The wife contends that the husband’s assertions lack merit, and to the degree that the disputed matters are the subject of investigation by the expert, the husband should bear the expense.
Discussion in respect of the Single Expert’s report
It is agreed that a forensic accountant be appointed for the valuation of the entities.
The principles relating to the appointment of a Single Expert are set out in the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) at 7.04, in the following terms:
7.04 Order for single expert witness
(1)The court may, on application or on its own initiative, order that expert evidence be given by a single expert witness.
(2)When considering whether to make an order under subrule (1), the court may take into account any matters relevant to making the order, which may include the following (without limiting the matters which may be relevant):
(a)the overarching purpose of these Rules (see rule 1.04) and the purpose of this Part (see rule 7.02);
(b)whether expert evidence on a particular issue is necessary;
(c)the nature of the issue in dispute;
(d)whether the issue falls within a substantially established area of knowledge;
(e)whether it is necessary for the court to have a range of opinion.
(3)The court may appoint a person as a single expert witness only if the person consents to the appointment.
(4)A party does not need the court’s permission to tender a report or adduce evidence from a single expert witness appointed under subrule (1).
They in turn draw upon the Purpose of the Part at Rule 7.02:
7.02 Purpose of Part 7.1
The purpose of this Part is as follows:
(a)to ensure that parties obtain expert evidence only in relation to a significant issue in dispute;
(b)to restrict expert evidence to that which is necessary to resolve or determine a proceeding;
(c)to ensure that, if practicable and without compromising the interests of justice, expert evidence is given on an issue by a single expert witness;
(d)to avoid unnecessary costs arising from the appointment of more than one expert witness;
(e)to enable a party to apply for permission to tender a report or adduce evidence from an expert witness appointed by that party, if that is necessary in the interests of justice.
The provisions need to be considered in the light of the overarching purpose of the Rules at Rule 1.04:
1.04 Overarching purpose
(1)The overarching purpose of these Rules, as provided by section 67 of the Federal Circuit and Family Court Act, is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
Note 1:These Rules must be interpreted and applied, and any power conferred or duty imposed by them must be exercised or carried out, in the way that best promotes the overarching purpose (see subsection 67(3) of the Federal Circuit and Family Court Act).
Note 2:See sections 190 and 191 of the Federal Circuit and Family Court Act in relation to the overarching purpose of the Rules of the Federal Circuit and Family Court (Division 2). See also the Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 which applies these Rules with modifications.
(2)Parties to family law proceedings must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.
Note: See subsection 68(1) of the Federal Circuit and Family Court Act.
(3)A party’s lawyer must, in the conduct of a proceeding before the court (including negotiations for settlement) on the party’s behalf:
(a)take account of the duty imposed on the party referred to in subrule (2); and
(b)assist the party to comply with the duty.
Note: See subsection 68(2) of the Federal Circuit and Family Court Act.
Payment of a single expert is provided for at Rule 7.06:
7.06 Single expert witness’s fees and expenses
(1)Unless the parties agree otherwise or the court otherwise orders, the parties (but not an independent children’s lawyer) are equally liable to pay a single expert witness’s reasonable fees and expenses incurred in preparing a report.
Note:Rule 12.32 sets out the circumstances in which an amount paid to an expert for preparation of a report is a disbursement properly incurred in a proceeding.
(2)A single expert witness is not required to undertake any work in relation to the expert witness’s appointment until the fees and expenses are paid or secured.
Dealing firstly with the scope of the report, it may be observed that at this stage of the proceedings there is some uncertainty as to what is necessary to resolve the proceedings. There is a risk that a report may be cast wider than the significant issues in dispute, and also a risk that an unduly restrictive scope may leave the evidence short on what is in fact required to resolve the proceedings.
Given the stage of the proceedings at which the issue has arisen, the determination of the scope should be recognised to be heavily reliant upon judicial impression, based on the factual contentions raised by the parties.
What is firstly contentious is the extension to assess dissipation or wastage. There is sufficient identified by the husband to raise this as a legitimate forensic issue that could require resolution for the husband and wife for all of the entities, and for the TPRs in relation to at least their claims in respect of P Group Pty Ltd and Q Pty Ltd. It should be noted that wastage and dissipation also arises on the wife’s claims against the husband in, at least, her assertions of his obstruction. The enquiry by the single expert ought to extend to such matters.
What is secondly contentious is the identification of loans or investments where such may not be picked up by the valuation exercise. It is difficult to imagine that the loans issue would not be picked up, such being intrinsic to the assessment of value, but in any event the extent and nature of the financial inputs by the various parties are matters likely to require resolution to both answer their claims, and to inform the adjustment of property interests pursuant to s 79 of the Family Law Act 1975 (Cth) in a manner that takes into account creditor rights of the third parties.
Given what has been identified above, there is good reason to consider that, as a matter of impression, the issues identified in the contentious aspects of the scope are likely to arise in the trial of the matter and require resolution. That is sufficient to justify scope in accordance with the terms proposed by the husband and accepted by the TPRs.
The next issue is that of the costs of the single expert.
The default position is that such be equally shared between the parties. Some modification of this has already occurred, as joinder of the fourth parties and the pursuit by the TPRs of the fourth respondents as contributors occurred so late in the process as to disallow the prosecution of the issue against the fourth parties while providing procedural fairness to the fourth parties. Further modification is seen in the husband and wife’s acceptance that Orders 4.1 and 4.2 should be borne by either or both of them. Insofar as there is dispute in relation to Order 4.2, those costs should be borne equally by the husband and the wife, there apparently being no issue of contribution by the TPRs regarding Order 4.2, and the issue being live between the husband and wife, as seen earlier.
That leaves, from the TPRs, the issue being as to what proportion they should bear with respect to Order 4.3. It may be considered that, as proposed by the solicitor for the TPRs, there is good reason to depart from the usual course of equal shares where there are third parties involved in the proceedings who do not have an interest in the significant issue in dispute to be resolved by the single expert. Such is acknowledged in the husband and wife’s approach to Orders 4.1 and 4.2. It may be envisaged that in some proceedings such third parties may have no interest in the issue to be resolved by a single expert, the most striking being where the third parties are joined in relation to property and the single expert is appointed in relation to the parenting aspects.
However, the issue should not generally be resolved by a fine parsing of the issues in the case, particularly where there is so significant an overlapping of issues between the various parties. As in this case the nature of inputs into each of the entities is important to the resolution of each party’s case, the husband and wife, and together Ms Wang and Mr B Xin (the TPRs), should bear the costs of Order 4.3 of a third each.
This does not mean that the issue cannot be revisited should an application for costs be made in the substantive proceedings, particularly where the circumstances of, and factual determinations made in the trial reveal conduct in relation to the proceedings, in respect of the scope of the expert’s report, that justifies an award for costs.
Disclosure issues
The remaining issue relates to the pursuit of specific disclosure orders against the wife in respect of bank and credit card statements, in respect of herself, N Pty Ltd, Q Pty Ltd, R Pty Ltd and F1 Pty Ltd from 1 January 2016 to the present, along with a written explanation should records be asserted to be unavailable.
The wife’s schedule of disclosure (Exhibit W1) reveals the scope of this proposed order to be oppressive, requiring the re-production of records already produced. While it may be the case that further disclosure may be required in respect of such records, post-dating previous disclosure, the wife remains bound by the disclosure obligations imposed by the Rules. She should not be subjected to the onerous requirements of the proposed orders.
Conclusion
Orders will be made as agreed, along with proposed Orders 4.2 and 4.3. Orders will be made for the costs of the single expert to be shared between the husband, wife, equally in relation to Orders 4.1 and 4.2, and together with the TPRs in thirds in relation to Order 4.3.
The proposed further disclosure orders will not be made.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gill. Associate:
Dated: 30 November 2022
SCHEDULE OF PARTIES
CAC 1782 of 2018 Respondents
Fourth Respondent:
P COMPANY, P GROUP PTY LTD, P HOLDINGS PTY LTD
ANNEXURE
Minute of Interim Orders By Consent – 2 November 2022
1.Order 3 of the orders of 21 September 2022 to be amended such that:-
1.1the Husband to provide any amendment to the amended entity diagram provided by the Wife within 6 business days from the date of this Order;
2.Order 4 of the orders of 22 July 2022 that provides for appointment of valuer to be amended such that:-
2.1 the Wife will provide any amendment to the letter of instruction provided by the Husband within 5 business days from the date of this Order;
2.2 the Husband and Wife will pay 50% of any valuation; and
2.3the Husband and Wife will comply with all reasonable requests of any valuer engaged pursuant to this Order.
3.That within 7 days of settlement of the sale of F Franchise Suburb H, the solicitors for the wife are to provide to the solicitors of the husband a copy of the settlement figures and description of any payments made consequent of that sale such as sale proceeds, return of rental bond and fitout contribution (as applicable).
4.Order 5 of the orders of 22 July 2022 that provides for appointment of forensic accountant to be amended such that the forensic accountant is to
4.1 value
and ascertain dissipation or wastage of any company or business funds or assertsthe entities and trustfrom the financial year ending 30 June 2016 to date:-4.1.1 N Pty Ltd;
4.1.2 P Group Pty Ltd;
4.1.3 Q Pty Ltd;
4.1.4 R Pty Ltd; and
4.1.5 S Family Trust.4.2to ascertain dissipation or wastage of any company or business funds or assets in the entities and trust from the financial year ending 30 June 2016 to date in the entities referred to in 4.1.
4.3to assess the quantum of any loans or investments from or to any parties other than the Husband and Wife to the entities described in 4.1, in the event that it is not ascertained by the forensic accountant as part of the valuation process referred to in 4.1.
5.That within 14 days from the date of this court order
5.1 the parties to agree to a forensic accountant; and
5.2within 3 business days, the Husband’s solicitors to provide an outline of the proposed forensic accountant and their costs;
5.3 within 3 business days, the Wife’s solicitors to respond as to acceptance or otherwise;
5.4both parties are to consult and use their best endeavours to reach an agreement in appointing a forensic accountant;
5.5 the Husband will draft a letter of instruction to (???) within 7 days from the date of this court order to carry out the following scope of work in Order 4.1. The Wife and third parties are to consult in relation to the letter of instruction, and the parties are to instruct the agreed forensic accountant within 14 days from the date of this order.
5.6the Husband and Wife will pay 50% of the cost of the scope of work sets out in order 4.1; and
5.7 the Husband and Wife will pay ## proportion of the cost of the scope of work sets out in 4.2;
5.8the Husband, the Wife, P Company and the Husband’s parents will share one-fourth proportion of the cost of the scope of work sets out in 4.3;
5.9the husband Wife will comply with all requests of the forensic accountant engaged pursuant to this Order
6.That the Wife discloses (to???) the primary accounting records in csv records, including by producing the electronic entries recorded on bookkeeping software, and banks/credit card statements in respect of the First Respondent N Pty Ltd, Q Pty, R Pty Ltd and F1 Pty Ltd from 1 January 2016 or from the date of incorporation (whichever that is later) to November 2022.
7.To the extent that the Wife says that no records exist for a particular entity in part of the period in order 6, an explanation is to be provided as to the absence of records in writing through her solicitors.
8.That the forensic accountant appointed pursuant to order 5 is authorised to request access to any records or information reasonably required for the purpose of the report, and the parties are to provide reasonable assistance to comply with any requests made for information and documents.
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