Alberti & Alberti (No. 2)

[2017] FamCAFC 245

FAMILY COURT OF AUSTRALIA

ALBERTI & ALBERTI (NO. 2) [2017] FamCAFC 245

FAMILY LAW – APPEAL – where the respondent concedes that the orders the subject of appeal are unenforceable – where the appeal is allowed.

Family Law Act 1975 (Cth)

House v The King (1936) 55 CLR 499

APPELLANT: Mr Alberti

RESPONDENT: Ms Alberti

FILE NUMBER: BRC 1422 of 2016

APPEAL NUMBER: NA 9 of 2017

DATE DELIVERED: 23 November 2017

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Murphy, Kent & Carew JJ

HEARING DATE: 17 November 2017

LOWER COURT JURISDICTION: Federal Circuit Court of Australia

LOWER COURT JUDGMENT DATE: 15 February 2017

LOWER COURT MNC: [2017] FCCA 953

REPRESENTATION

SOLICITOR FOR THE APPELLANT: Mr Brown, Browns The Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr George

SOLICITOR FOR THE RESPONDENT: Geldard Sherrington Lawyers

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

IT IS NOTED that publication of this judgment by this Court under the pseudonym Alberti & Alberti (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE

Appeal Number: NA 9 of 2017
File Number: BRC 1422 of 2016

Mr Alberti

Appellant

And

Ms Alberti

Respondent

REASONS FOR JUDGMENT

1. On 11 May 2017 Judge Coates made orders for property adjustment pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) between Ms Alberti (“the wife”) and Mr Alberti (“the husband”).

2. Those orders purported to give effect to reasons for judgment the primary judge had delivered orally on 15 February 2017 following the trial of the parties’ competing applications for property adjustment orders which took place on 13 February 2017.

3. On 17 November 2017 at the outset of the hearing of the husband’s appeal from those orders we afforded counsel for the wife, who to that point had opposed the appeal, the opportunity to address an apparent fundamental error in the orders.  That error is discussed further below but, in summary, by the terms of the orders it was not possible to identify the amount of an ordered cash payment by the husband to the wife, rendering the order unenforceable (Order 2).  Counsel for the wife properly acknowledged that the identified error was indeed an error rendering the order unenforceable, and that the error was incapable of correction by operation of the slip rule. 

4. Counsel for the wife consequently acknowledged, correctly in our view, that the appeal must succeed and the subject orders be set aside. 

5. Counsel for the wife sought to have the hearing of the appeal stood down so that he might seek formal instructions and have discussions with the solicitor advocate representing the husband.  The deficiencies in the findings of the primary judge, and other apparent errors made, rendered the prospect of this Court re-exercising the discretion to make final orders unavailable.  Allowing the appeal in these circumstances would inevitably result in an order for the remitter of the proceedings for a rehearing, with the attendant costs to both parties.  This feature was emphasised to the parties in advance of the hearing of the appeal being stood down and in the course of so doing, we outlined some of the deficiencies and errors on the part of the primary judge referred to, in an effort to promote meaningful consideration by both parties.

6. In the result, the parties joined in seeking orders that the appeal be allowed; that the orders made on 11 May 2017 be set aside; and that the proceedings be remitted.  We made orders to that effect.  As to remitter, the parties were able to negotiate agreed final property orders to be made by consent such that upon remitter the parties would seek for those orders to be made by consent in the Federal Circuit Court of Australia that day.  We record our gratitude that Judge Jarrett made himself available for that purpose.

7. The remaining issue for our consideration was as to costs. By Order 2 of the orders made by the Full Court (Ryan, Aldridge and Forrest JJ) on 24 August 2017 ([2017] FamCAFC 174), the parties’ costs of the wife’s application for security for costs of the appeal, which was dismissed, were costs in the appeal. The husband sought an order that the wife pay his costs of the appeal, an application opposed by the wife. The orders this Court made on 17 November 2017 included an order (Order 4) that:

   The wife pay the husband’s costs of and incidental to the application in an appeal seeking security for costs filed on 14 June 2017 and the appeal filed 14 March 2017 fixed in the total sum of $12,000, such sum to be paid within 60 days of the date of these orders.

8. The orders we made on 17 November 2017 carry a notation to the effect that the reasons of the Full Court for allowing the appeal and for the costs order made would be delivered subsequently.  These are those reasons.

Errors infecting the orders made by the primary judge

1. Orders 1 to 5 made by the primary judge on 11 May 2017 were as follows:

   1.That the matrimonial property pool be divided so that the [wife] receives eighty percent (80%) and the [husband] receives twenty percent (20%).

   2.That the [husband] pay to the [wife] within ninety (90) days of the date of these Orders (or within 90 days of the lifting of any stay pertaining to these orders), a sum sufficient to give effect to Order 1 hereof taking into account the assets being retained by both parties at Orders 3, 4 and 5 hereof and calculated by reference to the schedule attached to the reasons for judgment of His Honour Judge Coates.

   3.That the [wife] shall retain the following assets to the exclusion of the [husband]:

   a.        Any bank account held in the [wife’s] name;

   b.[4WD] motor vehicle currently in her possession and/or control;

   c.Household furniture and personal effects currently in the [wife’s] possession and/or control;

   d.        Jewellery in the [wife’s] possession and/or control;

   e.Any policies of insurance held in the [wife’s] individual name;

   f.         Any superannuation interest held by the [wife].

   4.That the [husband] shall retain the following assets to the exclusion of the [wife]:

   a.        Any bank accounts held in the [husband’s] name;

   b.Jewellery in the [husband’s] possession and/or control, including, but not limited to:

   i.         [gold] watch with diamonds;

   ii.        [antique] men’s watch;

   iii.      [gold] men’s watch;           

   iv.       Wife’s wedding ring;

   v.        Wife’s engagement ring;

   vi.       Wife’s grandmother’s black opal ring;

   vii.     24K gold chain;

   viii.     Wife’s diamond and sapphire bracelet;

   ix.Wife’s 14K gold bangle incorporating 1K of   diamonds.

   c.Household furniture and personal effects currently in the [husband’s] possession and/or control;

   d.        Any superannuation interest held by the [husband];

   e.        [Motor vehicle 1];

   f.         [Motor vehicle 2];

   g.        [Motor vehicle 3];

   h.        [Motor vehicle 4];

   i.         [Motor vehicle 5];

   j.Series of [Australian] paintings in the [husband’s] possession and/or control;

   k.Various sporting memorabilia in the [husband’s] possession and/or control

   l.         Tools in the [husband’s] possession and/or control;

   m.       Go-Kart;

   n.        Grange Hermitage Wine (2 bottles).

   5.That the [wife] shall retain all of her right, title and interest in the real property [at B Street, Suburb R] in the state of New South Wales (Folio […]) (herein after referred to as the property) with the [husband] to relinquish his right, title and interest in the same.

2. By its terms Order 2 requires account to be taken of the assets each party is to retain under Orders 3, 4 and 5 in order to calculate the “sum sufficient” for the husband to pay the wife to give effect to the overall division of 80 per cent to the wife and 20 per cent to the husband. 

3. Several fundamental and related errors attend that order resulting in its unenforceability.  First, despite the terms of Order 2, there is in fact no “schedule attached to the reasons for judgment of His Honour Judge Coates” in the written iteration of the reasons which were published on 11 May 2017 with the orders.  Counsel for the wife contended that the schedule referred to in Order 2 in fact appears at [12] of those reasons.  However, assuming that to be so, many of the asset items listed in Orders 3 and 4 do not appear in that “schedule”, either by identification or by value.  There is thus no means of “taking into account” any of the items identified in Orders 3(a), (c) to (f) (inclusive); Orders 4(a) to (c) (inclusive) and (l).  This renders the task of calculating the “sum sufficient” in Order 2 impossible to perform, thus rendering the order unenforceable.

4. Second, cross-referencing the orders made to the “schedule” referred to produces further glaring deficiencies.  That “schedule”, replicated from [12] of the reasons, is as follows:

Ownership		Description	Wife/de facto partner’s value	Husband/ de facto partner’s value
ASSETS
1.	J	[B Street, Suburb R]	$950,000	$1,255,000
2.	H	[Motor vehicle 4]	$60,000	$60,000
3.	W	[4WD]	$10,000	$10,000
4.	H	[Motor vehicle 2]	$4,000	$4,000
5.	H	[Motor vehicle 5]	$15,000	$15,000
6.	H	[Motor vehicle 1]	$35,000	$35,000
7.	W	[Motor vehicle 3]	$5,000	$1,000
8.	H	Go-kart	$3,500	$1,000
9.	H	[Australian] paintings	$10,000
10.	W	[Australian] paintings	$10,000
11.	H	Sporting memorabilia	10,000
12.	W	Sporting memorabilia	$10,000
13.	H	Jewellery	$50,000
14.	W	Jewellery	$50,000
Total		$1,152,500	$1,451,000
ADDBACKS
15.	W	[Motor vehicle 6] sold by wife	$0	$2,500
16.	W	Money redrawn from mortgages	$19,763
Total		$0	$22,263
LIABILITIES
17.	J	Mortgages to […] Bank	$427,945	$427,945
18.	H	Loans from the husband’s brothers	$14,000
19.	W	Loans from the wife’s mother (pre separation)	$12,515
20.	W	Loans from the wife’s mother (post separation)	$26,086
Total		$466,546	$441,945

SUPERANNUATION
Member		Name of Fund	Type of Interest	Wife/de facto partner’s value	Husband/de facto partner’s value
21.	H	D Fund	Accumulation	$1,500
Total		$1,500

1. By Orders 4(g) and 4(m) the husband is to retain motor vehicle 3 at item 7 of the schedule and the go-kart at item 8 of the schedule.  However, it can be seen that in the schedule these items have a combined value of $8,500 if the “wife’s value” is used as compared with $2,000 if the “husband’s value” is used.  The reasons for judgment reflect that the primary judge failed to address that difference rendering it impossible to discern which values are to be attributed to the husband in retaining these items, and consequently impossible to calculate the “sum” in Order 2.

2. Third and similarly, the schedule lists two items under the heading “Addbacks”.  The figures listed in the “husband’s value” column for those items total $22,263 and reflect the husband’s contention at trial that this total sum should be notionally added back and credited against the wife’s entitlement, as being retained by her, for the purpose of overall adjustment.  The “$0” figures for these items in the “wife’s value” column reflect the wife’s contention at trial that nothing ought be notionally added back.  Again, reference to the reasons for judgment discloses that this issue as joined between the parties at trial, was not resolved by the primary judge.  Again, it is impossible to ascertain whether “$0” or “$22,263” ought be attributed to these items for the purpose of calculating the sum in Order 2.

3. Fourth, the schedule lists at item 18 a liability the husband claimed, and the wife disputed, for a loan owing to his brother for $14,000.  Likewise, at item 20 the wife claimed, and the husband disputed, that a post-separation loan from her mother in the amount of $26,086 was to be taken into account.  Yet again, reference to the reasons for judgment reveals that the primary judge did not resolve these issues and it is impossible to know whether, by reference to the schedule, these items and values are to be included, or excluded, in undertaking any calculation.

4. In summary, Order 2 of the orders made on 11 May 2017 is unenforceable by reason that it is not possible to calculate the payment sum. Moreover, this reflects other errors on the part of the primary judge, namely, his Honour’s failure to determine issues which were joined between the parties and required resolution for the discretion to make just and equitable orders under s 79 of the Act to be legitimately exercised.

5. Relevant to the question of costs, we were informed at the hearing that the orders were made in the form proposed by the parties as submitted by them to the primary judge.  That is, that the terms of the orders were not formulated independently by the primary judge, but were in fact tendered in that form by the parties as being orders said to give effect to the reasons of the primary judge.  Of course, it is central to the judicial function for the primary judge to make orders giving effect to his reasons for judgment and there cannot be any suggestion that this responsibility was delegated to the parties.  The point is, relevant to costs, that in resisting an order for costs it was not open to the wife to contend that she did not contribute to the fundamental error resulting in Order 2 being unenforceable.

6. The wife was represented by solicitors and counsel in preparing her resistance to this appeal, including with respect to her unsuccessful application for security for costs determined on 24 August 2017.  It ought to have been obvious to the wife’s legal representatives for the appeal, at an early stage of the appeal proceedings, that the subject orders could not sustain review on appeal. 

Other apparent errors of the primary judge

1. It is unnecessary for us to exhaustively traverse all of the grounds of appeal and the arguments foreshadowed in respect of them, which in the event were not canvassed at the hearing of the appeal, given the evaporation of the wife’s opposition to the appeal.  However, in light of the discussion between the Bench and counsel to which we have earlier referred, we consider it proper to record at least some of what appear to be obvious errors infecting the orders made relevant to costs and the wife maintaining her opposition to this appeal until we had the exchanges with her counsel at the hearing referred to.

(a)      The primary judge’s reliance upon affidavits not in evidence

1. Reference to the transcript of the trial (transcript, 13 February 2017, p. 2) confirms that for the trial the wife relied upon the list of documents in her case outline document filed on 30 January 2017; and the husband relied upon the list of documents in his case outline document also filed on 30 January 2017.

2. Neither list included the husband’s affidavits, filed at interim stages of the proceedings, on 24 February 2016 and 6 April 2016 respectively.  Review of the transcript reveals that neither of these affidavits were ever tendered in evidence in the course of the trial.  Thus neither affidavit formed part of the evidence before the primary judge. 

3. However, at [55] of the reasons for judgment the primary judge quotes a paragraph from the husband’s 24 February 2016 affidavit and makes further references to that affidavit at [69] and [71]. That affidavit is referred to by the primary judge in purported support of a finding to the effect that the husband has previously given evidence inconsistent with his evidence at trial. The primary judge makes specific references to the husband’s 5 April 2016 affidavit at [85], [86] and [90]. It can be seen from the reasons that the primary judge purported to use these affidavits as part of the foundation for making credit findings adverse to the husband, and as fundamentally informing the conclusions the primary judge reached as to the assessment of the parties’ contributions pursuant to s 79(4) of the Act. The primary judge’s references to, and use made of, these affidavits cannot conceivably be characterised as immaterial or incidental. Those references and use were made without any opportunity being afforded to the husband by the primary judge to address the legitimacy of the use the primary judge intended to make, and did make, of these affidavits.

4. Within the formulation in House v The King (1936) 55 CLR 499 the primary judge plainly allowed extraneous or irrelevant matters to guide or affect him and his Honour’s discretion thus miscarried.

(b)      The Suburb R property

1. The wife was the legal owner of a real property known as the Suburb R property acquired by the parties during their relationship and upon which the parties constructed a second residential dwelling.

2. The undisputed expert evidence, which each party accepted was that, in its unsubdivided form, the Suburb property was worth $950,000.

3. However, it was uncontroversial that as at trial Council approval had been given for subdivision of the property.  It was also uncontroversial that the expert valuation evidence was that, subdivided, the property was worth $1,255,000, an increase of $305,000 in its value. 

4. The wife (we repeat the legal owner of the property) gave evidence at trial as to her understanding that the cost of all steps to complete the subdivision would be somewhere between $15,000 and $20,000 (transcript 13 February 2017, p. 9 line 35).  The husband’s evidence was that the fee payable to Council was “just under $13,000” plus (an unspecified) land titles charge.  In summary, there was no evidence whatsoever of any significant cost, or any other impediment for the subdivision proceeding.

5. Against that uncontroverted evidence, the primary judge’s finding at [24] that “… the possibility of having the property increase by about $300,000 on a subdivision is just that – it is only a possibility” is inexplicable, and plainly wrong.  The wife accepted or confirmed during her cross-examination at the trial that:

   a)It had been the parties’ intention from the time of the acquisition of the property to build another house on the land and subdivide it (transcript 13 February 2017, p. 9, line 30);

   b)Council approval of the subdivision had been obtained (transcript 13 February 2017, p. 9, line 21);

   c)While she was not “100 per cent sure” it was her “understanding” that the costs of subdivision of the block was somewhere between $15,000 and $20,000 (transcript 13 February 2017, p. 9, line 39-41);

   d)There was a line of credit from which a possible further $23,000 could be drawn (transcript 13 February 2017, p. 10, line 44);

   e)It was her “hope” to complete the subdivision (transcript 13 February 2017, p. 11, line 13-14);

   f)If “the husband could provide the 15 to 20 thousand to subdivide” the wife would be agreeable to that happening (transcript 13 February 2017, p. 11, line 33-34); and

   g)She was willing to have the subdivision go ahead (transcript 13 February 2017, p. 11, line 38).

6. For approximately a year prior to the final hearing, the wife had been seeking to have a car owned by the husband sold to raise the money to have the property subdivided (transcript 13 February 2017, p. 112 line 46 – p. 113, line 1) but opposed the use of the funds available in the offset account being applied to the subdivision, as they were her sole “safety net” of funds available for the needs of the family (transcript 13 February 2017, p. 113, line 2-5).

1. Counsel for the husband contended in final submissions for orders for sale of the Suburb R property (transcript 13 February 2017, p. 104 line 12-20).  Counsel for the wife acknowledged during his final submissions that the Suburb R property “does need to be sold” (transcript 13 February 2017, p. 112, line 37) and that the wife “doesn’t propose to keep that property, she proposes that [it] does get sold so there’s some merit in making an order enabling that to occur” (transcript 13 February 2017, p. 112, line 42-44).

2. Notably, the primary judge himself expressed in his reasons, at [107], the conclusion that “it [the property] probably does have to be sold”.

3. Despite all of that, the primary judge not only did not ultimately make orders for sale of the Suburb R property, but against the background of the primary judge’s unwarranted adoption of $950,000 as the value, made an order (Order 5) for the wife to retain that property. 

4. It bears repetition that the prospect of subdivision was not academic.  Council approval had been obtained.  The proposition that a willing but not anxious purchaser of the Suburb R property who, for expenditure in the order of $15,000 to $20,000, could achieve a property value of $1,255,000, would only be prepared to pay $950,000 for the property, only needs to be stated for the flawed logic to be apparent. 

5. In circumstances where both parties made final submissions at trial seeking orders for sale of the Suburb R property; and the primary judge as earlier observed apparently concluded that the property would have to be sold, the primary judge was plainly in error in not making orders for sale.  Indeed, it is difficult to see how the orders actually made can be characterised as giving effect to the primary judge’s reasons for judgment in this respect. 

6. An order for the wife to retain the property at the unsubdivided value of $950,000 was, for the reasons expressed, reflective of error.  Such an order could only have been sustained, arguably, if it could be seen that, when addressing s 75(2) factors, the prospect of the wife effecting the subdivision and thereby enhancing the value of the subject property by in excess of $300,000, was properly recognised.  However, reference to the reasons for judgment confirms that the primary judge made no mention of this very significant relevant factor when addressing himself to s 75(2) factors and concluding that a further 15 per cent adjustment in favour of the wife ought be made.  On the combined total pool of interests as found by the primary judge, discussed below which is in the order of $720,000, the husband’s total 20 per cent ordered entitlement is worth approximately $140,000.

7. If, as earlier referred to, the primary judge intended to make an order for sale of the property, as indicated at [107] of the reasons earlier referred to, then the primary judge’s failure to discuss this feature in addressing s 75(2) factors might be understandable.  However, the primary judge also includes in his reasons some detailed discussion in concluding that the property should be taken in at $950,000 and, as has already been referred to, ultimately made an order for the wife to retain that property.

8. In this context it is to be noted that whilst, for the reasons earlier discussed Order 2 is unenforceable, on any interpretation any notional “sum” contemplated by that order would be significantly in excess of the estimated $15,000 to $20,000 costs to complete the subdivision.  That is, the orders made included an order intended to result in the husband paying to the wife a cash sum more than ample to enable the wife to complete the subdivision.  The failure of the primary judge to recognise this in any way evidences error.

9. The husband’s submission on appeal that the orders the primary judge made delivered to the wife a windfall in excess of $300,000 has merit.  We are comfortably satisfied that the primary judge’s approach and consideration of the Suburb R property reflects fundamental errors in the exercise of discretion.

(c)      Failure to take account of the husband’s inheritance

1. It was not in issue that in 2010 the husband received an inheritance of $96,000.  Nor was there any challenge to the husband’s evidence that he used a total of about $15,000 of this inheritance to purchase Motor vehicle 1 which remains in the above schedule at a value of $35,000.  It was also not in issue that the husband used the balance of his inheritance monies to contribute to the construction of the second dwelling on the Suburb R property. 

2. Whilst it is not possible, given the earlier discussion concerning Order 2 to determine with precision the overall value of the “pool” of assets adjusted by the primary judge, doing the best we can it would seem that the overall value (using the reduced valuation figure for the Suburb R property) as found by the primary judge is in the order of about $720,000.

3. Relative to that figure, the inheritance the husband obtained carries significance.  However, there is no mention whatsoever of the fact of the inheritance, or the use made of it, appearing in the reasons for judgment.  Plainly, the primary judge has failed to take into account a material consideration in assessing the parties’ contributions-based entitlements.

Conclusion

1. We reiterate that we do not consider it necessary to address all of the errors made by the primary judge which were contended for on appeal.  The preceding discussion is sufficient to support what was indicated to counsel at the outset of the appeal and the conclusion that there was ample reason for this appeal to be allowed and for the subject orders to be set aside.

2. As to costs, the wife can be seen to have been wholly unsuccessful in the appeal proceedings, including with respect to her application in an appeal for security for costs. 

3. For the reasons we have discussed, it ought to have been readily apparent to the wife, with the benefit of legal advice, that as a first response to this appeal being initiated her prospects of upholding the subject orders were remote, indeed illusory.

4. For these reasons we were comfortably satisfied that there existed justifying circumstances within the meaning of s 117(2) of the Act for a costs order in favour of the husband to be made in respect of the appeal proceedings.

5. With respect to the order for the quantum of those costs being fixed in the sum of $12,000, that is the fixed sum that was ultimately expressed by the solicitor advocate for the husband as being reasonable, and counsel for the wife confirmed that in the event an order for costs was to be made he could not argue against that fixed sum as reasonable.

6. It is for these reasons that we made the orders of 17 November 2017.

I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Murphy, Kent & Carew JJ) delivered on 23 November 2017.

Associate: 

Date:  23 November 2017