Amero & Croft
[2010] FamCAFC 118
•25 June 2010
FAMILY COURT OF AUSTRALIA
| AMERO & CROFT | [2010] FamCAFC 118 |
| FAMILY LAW - APPEAL – PROPERTY – Whether the Federal Magistrate erred in failing to follow the “four step” approach set out in Hickey & Hickey & the Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 – Where such approach is not mandatory but a guideline – Where the Federal Magistrate adopted a broad brush approach to the parties’ assets and liabilities – Where the Federal Magistrate did not identify whether he intended to assess the parties’ contributions on a global or an asset by asset basis – Where the Federal Magistrate was inconsistent in his approach to the parties’ superannuation interests – Where no findings were made about the weight to be afforded to the parties’ initial contributions – Where the Federal Magistrate did not translate the general finding that the husband’s financial and non-financial contributions exceeded those of the wife to a quantitative assessment – Where the Federal Magistrate failed to express any conclusion in respect of relevant s 75(2) factors – Appealable error established. FAMILY LAW - APPEAL – PROPERTY – Whether the trial Judge erred in making findings of fact not supported by the evidence – Appealable error not established. FAMILY LAW - APPEAL – RE-DETERMINATION – Where there is no agreed pool of assets – Where there is a lack of appropriate findings – Matter remitted for re-hearing. FAMILY LAW - COSTS – Where it is appropriate to grant costs certificates for the appeal and re-hearing. |
| Family Law Act 1975 (Cth) – s 75(2), s 79, s 117(1) Federal Proceedings (Costs) Act 1981 (Cth) |
| Allesch v Maunz (2000) 203 CLR 172 Anastasio & Anastasio (1981) FLC 91-093 Brodie & Brodie (2009) 41 Fam LR 18 Bushby & Bushby (1988) FLC 91-919 Coghlan & Coghlan (2005) FLC 93-220 De Winter v De Winter (1979) 23 ALR 211 Hickey & Hickey & the Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Loude & Loude [2009] FamCAFC 52 Mallet v Mallet (1984) 156 CLR 605 Norbis v Norbis (1986) 161 CLR 513 Steinbrenner & Steinbrenner [2008] FamCAFC 193 Quinn & Quinn (1979) FLC 90-677 |
| APPELLANT: | Mr Amero |
| RESPONDENT: | Ms Croft |
| FILE NUMBER: | PAC | 1709 | of | 2008 |
| APPEAL NUMBER: | EA | 97 | of | 2009 |
DATE DELIVERED: | 25 June 2010 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Boland J |
| HEARING DATE: | 10 February 2010 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 31 July 2009 |
| LOWER COURT MNC: | [2009] FMCAfam 763 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Thomas |
| SOLICITOR FOR THE APPELLANT: | King Cain Solicitors |
| COUNSEL FOR THE RESPONDENT: | Ms Snelling |
| SOLICITOR FOR THE RESPONDENT: | Higgins & Higgins Solicitors |
Orders
The appeal be allowed.
The orders made by Federal Magistrate Lindsay on 31 July 2009 be set aside.
The parties’ competing property applications be listed for rehearing before a Federal Magistrate other than Lindsay FM.
The Court grants to the appellant husband a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of the parties in respect of the costs incurred by them in relation to the new trial ordered.
IT IS NOTED that publication of this judgment under the pseudonym Amero & Croft is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 97 of 2009
File Number: PAC 1709 of 2008
| Mr Amero |
Appellant
And
| Ms Croft |
Respondent
REASONS FOR JUDGMENT
Introduction
On 31 July 2009 Lindsay FM made orders dividing the property of Mr Amero and Ms Croft which they had acquired during their short marriage. The Federal Magistrate ordered that the wife pay the husband the sum of $15,000.00 and that each party keep all property in their sole names. In the wife’s case, that included a home at L in a country town in New South Wales which she purchased several years prior to the commencement of the parties’ relationship.
This is the husband’s appeal against the Order 1 (the order requiring the wife to pay him $15,000.00). In his Notice of Appeal the husband seeks, in the event his appeal is upheld, that the wife pay him $67,000.00. Before me, however, the husband’s counsel submitted that if appealable error was established the matter would require re-hearing before another Federal Magistrate. The wife opposed the appeal.
I heard this appeal as a single Judge pursuant to a direction given by the Chief Justice, her Honour Justice Bryant, under s 94AAA(3) of the Family Law Act 1975 (Cth) (“the Act”).
The husband sought and was granted leave at the hearing of the appeal to amend the grounds of appeal. The amendment sought was unopposed. The amendment to the Notice of Appeal was to add the following two grounds of appeal:
1.His Honour made findings of fact which were not supported by the evidence or available on the evidence.
2.His Honour did not follow the preferred approach in exercising jurisdiction under section 79 of the Act involving the four interrelated steps of:
·identify and value the property
·identify the parties [sic] contributions within section 79(a), (b) and (c) and express those contributions as a percentage of the net value of the parties [sic] property
·make an adjustment pursuant to section 75(2) of the Act
·determine what order is just and equitable in all circumstances of the case See in the Marriage of Hickey (2003) 30 Fam LR 355
Although the original grounds were not formally abandoned, they were effectively subsumed in the new grounds.
The gravamen of the appeal as argued was that the Federal Magistrate fell into appealable error by failing to adhere to the “preferred approach” referred to in Hickey & Hickey & the Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143. It was submitted on the husband’s behalf that this failure resulted in an order which was plainly wrong, being outside the reasonable range of discretion.
A secondary challenge was raised by the husband’s counsel, although not strongly pressed, namely that the Federal Magistrate had made factual errors which vitiated his discretion.
I propose to consider the two challenges raised in this appeal in the same order as argued by the husband’s counsel. Before discussing the principal and subsidiary grounds, I will record the relevant background facts and summarise those parts of the Federal Magistrate’s reasons which are relevant to the grounds.
Background
The relevant background is found in Lindsay FM’s reasons, and the appeal book. As there are some discrepancies in factual matters recorded by the Federal Magistrate and in the parties’ material, I will indicate the discrepancies by reference to the relevant affidavit material.
The husband was born in September 1952, and is a self employed plumber. The wife was born in December 1957 and was at the date of the hearing employed as a console operator by a multi-national supermarket chain at a service station outlet. At the date of the hearing the wife was earning approximately $40,000 gross per annum. The Federal Magistrate found, based on the husband’s past earnings, that his earnings were likely to be approximately the same as those of the wife.
The parties met in March 2003. They were in dispute about when they commenced living together. The husband asserted he commenced living in the wife’s home at L in January 2004 and the wife asserted the husband moved into her home in July 2004. The Federal Magistrate found the parties were in a “monogamous relationship as from December 2003” (paragraph 2, reasons for judgment)
The parties were married in February 2005 and physically separated in September 2007. The Federal Magistrate found the parties’ relationship “ceased altogether” by November 2007. Thus he found the parties’ cohabitation was of three and a half year’s duration and the marriage endured for two and a half years.
The wife has three children of a prior relationship. All of the wife’s children had attained the age of 18 years at the date of the hearing. The wife’s two younger daughters, aged respectively 21 and 18 at the date of hearing, lived with the parties throughout their cohabitation. The wife’s eldest child, and her two children, moved into the wife’s home at the end of 2006. The eldest child was in receipt of a supporting parent’s benefit.
The husband was, for some period prior to February 2004, in a de facto relationship with another woman. He lived with his former partner in her home. The husband has a daughter from a prior relationship to whom he gave gifts from time to time.
In December 2002 the wife purchased in her sole name a home at L (“the home”). The purchase price of the home was $147,500.00. The wife borrowed $100,000.00 from the Commonwealth Bank to complete the purchase. At the commencement of cohabitation, the wife owned a car worth approximately $4,000.00. She had no superannuation.
The husband asserted at the commencement of cohabitation he had the following assets and liabilities:
· Nissan Patrol;
· Furniture and effects including tools of trade;
· Monies in account of up to approximately $1,100.00;
· Superannuation:
(i)ING Master Fund – E$197,000.00;
(ii)A New South Wales Industry Superannuation Fund - $7,229.20;
(iii)National Nominees Super - $8,502.00;
· Personal loan with F Credit Union for motor vehicle that had been stolen prior to relationship commencing of approximately $12,000.00;
· Visa Card debt (F Credit Union) – approximately $1,500.00;
· Tax liability for personal income tax and BAS payments for the 2003 financial year – approximately $6,033.00. (husband’s affidavit sworn 20 April 2009)
In 2004 the wife traded in her car for $3,000.00 and the parties purchased a Ford Falcon car. They borrowed approximately $18,000.00 to complete the purchase of the car. The husband retained the Ford Falcon car at separation.
A single expert valued the home in January 2004 as having a market value of $185,000.00. The mortgage debt at about that time was $110,000.00. The expert valued the home at the date of separation at $210,000.00. The Federal Magistrate noted the parties agreed the value of the home at the date of hearing was $220,000.00. By the date of hearing the amount required to discharge the mortgage had increased to approximately $126,000.00. The Federal Magistrate explained that sum included borrowings of $20,000.00 obtained by the wife to purchase a new car after separation.
Renovations were carried out to the home during the parties’ relationship. The building works commenced with renovations undertaken by the husband to the bathroom. This work commenced in October 2003 prior to the parties’ cohabitation. Later renovations and improvements included renovation of the laundry, fencing work, work on the timber front of the home, gardening and landscaping. The husband asserted the work was carried out by him with the assistance of a carpenter and an electrician. The services of the other tradesmen were provided to the husband on what the Federal Magistrate described as a “contra” arrangement. The wife disputed a number of the improvements alleged by the husband.
The husband asserted he received lump sum payments during the parties’ cohabitation including:
· $6,302.08 being an insurance payout for his stolen car;
· $32,306.00 from his mother’s estate in March 2005;
· $30,000.00 from a worker’s compensation payout in April 2006;
· $48,474.00 from settlement of his de facto property claim in April 2006; and
· unpaid work entitlements of $3,280.00 in February 2007.
He also asserted he had obtained “draw downs” from his superannuation as follows:
· $14,000.00 in December 2004;
· $10,000.00 in February 2007;
· $8,502.00 in March 2007; and
· $6,000.00 in September 2007 (husband’s affidavit sworn 20 April 2009 and husband’s outline of case document).
Annexures “K” to “N” to the husband’s affidavit (being records from his superannuation funds) disclose the husband received the following sums:
· $14,000.00 in December 2004;
· $10,000.00 gross ($8,502.00 net) in February 2007;
· $6,000.00 in September 2007; and
· $5,000.00 in December 2007.
In March 2005 the husband purchased a Mitsubishi Triton motor vehicle for $17,600.00. The husband asserted the purchase price was paid from his savings (husband’s affidavit sworn 20 April 2009, paragraph 44).
The husband’s capital receipts, together with his earnings, were paid into an account with F Credit Union. The wife had access to this account and was able to draw on it for ordinary household expenses. The Federal Magistrate found the wife’s expenditure from this account was modest and for appropriate purposes. He further found the wife only spent amounts authorised by the husband.
In late April 2006 the husband paid sums totalling $29,319.34 to the Australian Taxation Office (“the ATO”) (Annexure “G” to the husband’s affidavit). The Federal Magistrate noted the husband had not explained “how these two amounts had accumulated to that point” and made a finding “they must be taken to include tax that had accrued upon his earnings as to both the pre and post relationship periods.
By the date of the hearing the wife had acquired superannuation to the value of $15,000.00.
The federal magistrate’s reasons
Lindsay FM commenced his reasons noting the case was an unfortunate one “because the asset pool is so small and the costs which each party must have expended on the matter to date are out of all proportion to the value of the property adjustment order in dispute”.
The Federal Magistrate, at paragraphs 2 to 8, recorded, in a summary way, the history of the parties’ relationship, the wife’s assets at the commencement of cohabitation and the work asserted to have been carried out by the husband to the home. It is unnecessary that I repeat that material which I have already extracted under the heading “Background”.
At paragraph 9 of his reasons, the Federal Magistrate explained the husband had called a plumber in his case who had estimated the cost of plumbing work performed by the husband to be in excess of $10,000.00. The Federal Magistrate noted he had also called a builder who had expressed an opinion “that the total cost of the building work was in excess of $65,000”. The Federal Magistrate noted “[b]oth estimates were inclusive of material costs”.
The Federal Magistrate went on to record that the wife had responded to the claims contending that some of the work was not as significant as claimed by the husband, that he had obtained trade discounts and that neither the plumber nor the builder called by the husband had inspected the work in situ.
At paragraph 11 the Federal Magistrate explained “[n]ow, it is plain that I am not going to be able to make clear findings as to the value of the work performed by the husband nor the extent of it”.
The Federal Magistrate went on, at paragraph 12, to say:
But I am satisfied that the work was extensive. The gardening development was obviously a joint enterprise. Some work (“the granny flat”) was overstated by the husband and I repeat that it is manifestly not possible to ascribe accurately a “value” to the work. Doing the best I can, I find that if the wife had engaged an arms-length tradesman or tradesmen to do the work that the husband did without charge from October 2003 to the end of the relationship, it would have cost her somewhere between $40,000 and $50,000 (therefore say $45,000). How that finding sounds in the property orders I make is another matter considered hereunder. Whatever was spent and whatever work was done, the value of the property increased from $185,000 at co-habitation to $210,000 at separation - an increase of $25,000.
In the following paragraph, the Federal Magistrate turned to discuss what he described as “significant financial contributions to the marriage” made by the husband. He then set out (albeit rounded up) the lump sums received by the husband from his late mother’s estate, his worker’s compensation claim, his de facto property settlement and unpaid work entitlements.
The Federal Magistrate also set out the draw-downs the husband had obtained from his superannuation fund and said:
…It was never explained how it was that he was able to access those entitlements pre-separation. He did not attain the age of 55 years until September of 2007.
The Federal Magistrate went on to note that during the course of the parties’ relationship, excluding the superannuation draw-downs, the husband had received capital amounts of over $110,000.00. The Federal Magistrate then referred to the husband depositing both his capital and earnings into the F Credit Union, and set out the husband’s taxable income for the years 2004 to 2007 inclusive.
The Federal Magistrate then explained that he was not given the wife’s taxable income for the years ended 30 June 2004 and 2005 but recorded she had earned $17,969.00 in 2006 and $17,828.00 in 2007. The Federal Magistrate said “I proceed upon the basis of assuming that she did not have a taxable income for 2004 and 2005” (paragraph 17).
The Federal Magistrate thereafter focussed his discussion on the husband’s taxation debt at the commencement of cohabitation and concluded that the husband had a tax liability at the commencement of cohabitation of approximately $11,000.00.
In paragraph 20 of his reasons, the Federal Magistrate referred to the sum of $48,474.37 received by the husband in respect of his de facto property claim. The Federal Magistrate recorded that the day this sum was paid into the Credit Union account the husband had withdrawn $27,000.00 but was unable to explain the use he had made of the money. The Federal Magistrate noted the wife’s suggestion that it was given to the husband’s daughter. The Federal Magistrate said:
…He acknowledged giving money to his daughter from time to time but not in such an amount as this. I cannot find that such was the purpose to which this money was put but I am satisfied on the basis of his evidence that it was not used for joint or matrimonial purposes.
The Federal Magistrate went on to deal with the sum paid by the husband to the ATO approximately two weeks later. He concluded that the amounts paid to the ATO must have included tax on the husband’s “pre and post relationship periods”. Given the payment was received and paid in 2006, that is, prior to the parties’ separation in September 2007, I assume that the Federal Magistrate meant the tax was paid in respect of both earnings prior to and during the parties’ cohabitation.
The Federal Magistrate then, at paragraph 22, discussed the motor vehicles owned by the parties at the commencement of cohabitation and acquired by them during cohabitation.
In paragraph 23 of his reasons, the Federal Magistrate summarised his conclusions about the parties’ respective initial contributions, excluding superannuation. He said:
23.In summary, then, and excluding any reference to superannuation and upon the basis of the findings described above and other evidence before me which was not controversial, I find that at co-habitation the wife had a home worth $185,000 and a car worth $4,000. She had a mortgage liability in the amount of $110,000 (I have ignored her minor credit card liability and liability for rates and taxes as at that time as they balance out with an equivalent minor credit card balance liability of the husband at that time). She earned very little income during the relationship. She was supported by the husband, who also assisted her in the care of her two daughters.
24.The husband brought liabilities of approximately $12,000 into the marriage together with an older motor vehicle.
25.He received capital of approximately $110,000 (excluding his superannuation draw-downs) during the course of the marriage. That was used (as to $17,000) for the purchase of one of the motor vehicles he retains and to pay tax (in the amount of $29,000, though only $11,000 relates to his taxation debt at co-habitation) and he also spent $27,000 which was unaccounted for.
26.He performed work and supplied materials (I cannot say in what proportion) of a total value of $45,000 to the wife’s home during the relationship.
The Federal Magistrate then recorded his findings about the wife’s assets and liabilities at trial and concluded she then had a net worth of $123,000.00. He found that the husband had a net worth of $5,000.00.
Having discussed, at paragraph 30, the husband’s superannuation entitlement at the commencement of cohabitation, the Federal Magistrate said the husband’s superannuation was valued at the date of hearing at $175,000.00 (following a further post separation withdrawal of $5,000.00). Significantly he said “it is immediately accessible by him and indeed he has already accessed it”. His Honour concluded, at paragraph 32:
If I add the superannuation interests as a component of the present net value of the assets of the parties the position of the husband is $180,000 and the wife $138,000.
Thus it appears at this point in his reasons the Federal Magistrate had identified and valued the parties’ assets and liabilities and included the husband’s superannuation entitlements as part of the property pool.
At paragraph 33, the Federal Magistrate set out principles to be applied in determining an application under s 79 with reference to a number of authorities.
Although the Federal Magistrate did not set out the parties’ asset pool in a table form he explained, at paragraph 34, that he had set forth his findings as to the “constitutive” elements of the pool.
At paragraphs 36 to 39, the Federal Magistrate appeared to assess and weigh the parties’ respective contributions. Those paragraphs are brief and I set them out in full:
36.The wife’s home has increased in value from $185,000 to $210,000 during the period of the relationship.
37.The parties occupied her home during the relationship.
38.The husband made significantly greater direct and indirect financial contributions and I have set them out herein in detail. They each otherwise contributed equally to the marriage partnership.
39.The increase in value of the wife’s home is contemporaneous with the husband’s improvement of the property. Those contributions may account, wholly or in part, for the increase in value. That issue is not the subject of any expert evidence. It is difficult to know what opinion evidence could have meaningfully been adduced in respect of that matter, so finely calibrated would the expression of such an opinion be in the context of this case.
However the Federal Magistrate did not, at this point in his reasons, express his contribution findings in either a monetary sum or percentage of the pool of assets available for division. Nor significantly did he refer to the parties’ respective contributions to superannuation.
At paragraph 40, the Federal Magistrate appears to have commenced his discussion of relevant factors under s 75(2) by reference to the age of the parties. However, at paragraph 41, the Federal Magistrate said:
In short marriages, the Court should always attempt to restore the parties to their ante-marriage position if possible and if such is consistent with an evaluation of their contributions and of the relevant s.75(2) factors and if such an order is just and equitable.
At this point in his reasons, the Federal Magistrate discussed the husband’s application noting he had originally sought payment of $110,000.00. The Federal Magistrate explained such an order would result in the husband obtaining the entirety of the equity in the home. He went on to explain that by the end of the trial the husband was seeking a payment that represented 50 per cent of the net non-superannuation assets of the parties and retention by them of their respective superannuation entitlements.
The Federal Magistrate then set out his calculations of what the husband was seeking, noting that 50 per cent of the non-superannuation assets would require a payment of $64,000.00 by the wife to the husband which would have the effect she would need to increase the mortgage balance to approximately $185,000.00 or $190,000.00 or sell the property.
The Federal Magistrate then noted that the orders sought by the wife were that she pay the husband $15,000.00 and they otherwise retain both their superannuation and non-superannuation assets.
At paragraph 44, the Federal Magistrate discussed a number of s 75(2) factors “apart from the ages of the parties”. His Honour made the following observations:
· neither had a “specially notable health complaint”;
· the wife had negligible future financial resources in the form of superannuation. The husband had a superannuation base to which he could continue to contribute. The wife “will have” an equity in the home which (presumably) would gradually enlarge as she made mortgage payments;
· the husband would have to rent accommodation or draw-down on his superannuation to put a deposit on a home;
· if the wife borrowed approximately $64,000.00 her mortgage would represent approximately 90 per cent of the equity in the home and increase her mortgage payments;
· the marriage was a short one but had not affected the earning capacity of either party in any meaningful way.
I observe at this point the Federal Magistrate does not appear to have weighed and balanced the relevant s 75(2) considerations independently of his contribution assessment. At paragraph 45, he said:
It is the shortness of the marriage and the small size of the non‑superannuation asset pool which are the most significant factors governing the exercise of my discretion.
The Federal Magistrate then referred to the generosity of the husband in making his income and a portion of his capital available to the wife, and also explained the wife did not indulge in excessive or unnecessary expenditure and that she had made her home available as their residence for their joint use. Having referred to the fact that the husband’s contributions were not reflected in the capital appreciation of the home and the fact that the home had increased in value by a further $10,000.00 since separation, the Federal Magistrate repeated his earlier findings about the effect of the orders sought by the husband.
At paragraph 49, the Federal Magistrate appears to have carried out an overall assessment of the husband’s, but not the wife’s, contributions and his assessment of the s 75(2) considerations of both parties and concluded that no adjustment between the parties would result in a just and equitable order. The Federal Magistrate then said:
…I do not consider, therefore, that any cash or other adjustment is required. I have weighed the superannuation assets and non-superannuation assets separately. There is a marked disparity in each “pool” in favour of one party or the other. The fact that the husband’s superannuation assets are immediately available to him is significant.
The Federal Magistrate then went on to note that the wife was prepared to pay to the husband the sum of $15,000.00. The Federal Magistrate set out his ultimate conclusions to the orders made in paragraph 51 as follows:
The exercise of evaluating the various factors referred to above is not so finely calibrated that it can be said that such an adjustment of their financial positions would not be just and equitable. She is prepared to pay the sum. It is her own assessment of the financial adjustment required at the end of the relationship and it does not seem to me to be appropriate for the Court to refuse to make it if she is prepared to pay it. It leaves the husband with $20,000 in non-superannuation assets and $175,000 in superannuation. It leaves the wife with $123,000 in non-superannuation assets and $15,000 in superannuation. It leaves the husband with 58.5% of their current assets and the wife with 41.5%, but that must be seen against the modest size of the total pool and of the wife’s assets, which is almost entirely her home equity. Seen in such perspective, such an outcome is just and equitable.
The asserted error in failing to follow the four step approach
Relevant legal principles
This is an appeal against a discretionary judgment. The constraints on appellate interference with a discretionary judgment are well known. The principles are discussed by Mason J (as his Honour then was) in Mallet v Mallet (1984) 156 CLR 605 at 621-622 as follows:
It has been accepted, at least since the judgment of Gibbs J. in De Winter v. De Winter, that a judgment of the Family Court in determining what order should be made under s. 79 of the Family Law Act 1975 (Cth), as amended, is exercising a judicial discretion and that the well settled principle governing an appeal from the exercise of that discretion applies to the Full Court of the Family Court when it hears and determines an appeal from the making of an order under the section. The Full Court, in determining the appeal cannot substitute its opinion for that of the primary judge unless it is shown that he made some error in exercising the discretion, i.e., by acting on a wrong principle, by allowing extraneous or irrelevant factors to influence him, by failing to take into account some material consideration or by mistaking the facts: House v. The King; Australian Coal and Shale Employees’ Federation v. The Commonwealth. And in some cases the exercise of the discretion may be vitiated by the primary judge’s failure to give sufficient weight to a relevant factor. However, an appellate court needs to view this ground of appeal with considerable caution, as Stephen J. noted in Gronow v. Gronow:
“The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be show to overturn a primary judge’s discretionary decision on grounds which only involved conflicting assessments of matters of weight.” (footnotes omitted)
As I earlier indicated the principal challenge to the Federal Magistrate’s orders was based on asserted error in failing to follow the so called “four step” approach in Hickey.
The preferred approach to dealing with the adjustment of property interests under s 79 is explained by the Full Court in Hickey (Nicholson CJ, Ellis and O’Ryan JJ) at paragraph 39 as follows:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s. 79. That approach involves four interrelated steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss. 79(4)(d), (e), (f) and (g), ( “the other factors”') including, because of s. 79(4)(e), the matters referred to in s. 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1985) FLC ¶91-626; Ferraro and Ferraro (1993) FLC ¶92-335; Davut and Raif (1994) FLC ¶92-503; Prpic and Prpic (1995) FLC ¶92-574; Clauson and Clauson (1995) FLC ¶92-595; Townsend and Townsend (1995) FLC ¶92-569; Biltoft and Biltoft (1995) FLC ¶92-614; McLay and McLay (1996) FLC ¶92-667; JEL and DDF (2001) FLC ¶93-075 and Phillips and Phillips (2002) FLC ¶93-104.
It must be remembered, however, as recognised in Hickey the “four step approach” is not mandatory, but rather a guideline or preferred approach. There is no mention in s 79 itself of any “steps”. However the approach suggested is both practical and useful. It allows a party to clearly understand the path by which the judicial officer reached his or her decision, and adopting the guideline facilitates the mandatory considerations required by the provisions of s 79 (which includes consideration of relevant s 75(2) factors).
The question of departure from an established approached is discussed by Mason and Deane JJ (as their Honours then were) in Norbis v Norbis (1986) 161 CLR 513 at 519- 520 as follows:
… To avoid the risk of inconsistency and arbitrariness, which is inherent in a system of relief involving a complex of discretionary assessments and judgments, the Full Court, as a specialist appellate court with unique experience in the field of family law in this country, should give guidance as to the manner in which these assessments and judgments are to be made. Yet guidance must be given in a way that preserves, so far as it is possible to do so, the capacity of the Family Court to do justice according to the needs of the individual case, whatever its complications may be. Reconciliation of these goals suggests that in most, if not all, cases the Full Court of the Family Court should give guidance in the form of guidelines rather than binding principles of law. The nature of the issues which arise under s. 79 is such that there is either little or no scope for giving guidance in the form of binding rules of law. The term “guidelines”, though not commonly used in relation to judicial discretions, is familiar enough in the bureaucratic and administrative world, where it denotes rules or standards which are not binding and may be relaxed when it is expedient to do so in order to do justice in the particular case. Guidelines were what Lord Wright had in mind in Evans v. Bartlam when he said:
“It is ... often convenient in practice to lay down, not rules of law, but some general indications, to help the Court in exercising the discretion ...”
The reference to “wrong principle” in the passage quoted from House v. The King no doubt refers to a binding rule rather than a guideline in the sense already explained. A failure to apply a guideline does not of itself amount to error, for it may appear that the case is one in which it is inappropriate to invoke the guideline or that, notwithstanding the failure to apply it, the decision is the product of a sound discretionary judgment. The failure to apply a legitimate guideline to a situation to which it is applicable may, however, throw a question mark over the trial judge’s decision and ease the appellant’s burden of showing that it is wrong. However, in the ultimate analysis and in the absence of any identifiable error of fact or positive law, the appellate court must be persuaded that the order stands outside the limits of a sound discretionary judgment before it intervenes. (footnote omitted)
Discussion
Although the wife’s counsel submitted the appeal should be dismissed she conceded his Honour’s approach to the s 79 exercise was not orthodox. The husband’s counsel asserted that in failing to follow the preferred approach the Federal Magistrate had failed to make a finding in respect of the husband’s net worth at the commencement of cohabitation. I do not accept that to be the case. The finding is found in paragraph 24, although I accept the finding excludes the husband’s furniture and tools of trade, his taxation liability and does not include his superannuation entitlement. Otherwise the husband’s counsel’s submissions concentrated on the lack of appropriate findings, particularly in respect of the husband’s superannuation interest.
In final submissions to the Federal Magistrate the wife’s counsel submitted that the non-superannuation assets should be adjusted 70 per cent in the wife’s favour and the husband should retain his superannuation entitlement. She later qualified this statement by reference to the wife’s outline of case document and submitted that the Federal Magistrate should adopt an “asset by asset” approach to the non-superannuation assets with the result that the husband would receive total non-superannuation assets of $31,544.28 (transcript, 20 May 2009, pp 106-107). Counsel for the husband’s final submissions to the Federal Magistrate were that the non-superannuation assets, excluding the husband’s furniture at $15,000.00, should be divided equally, and no adjustment made under s 72(2) (transcript, 20 May 2009, p 97).
I commence my discussion of this challenge by observing the Federal Magistrate, in paragraph 33 of his reasons, clearly articulated, by reference to authority the preferred three step or four step approach. He did not suggest the facts of the case required departure from this approach. Nor did he explain whether he would assess contributions globally or on an “asset by asset” basis.
It is useful in considering this challenge that I set out in tabular form the assets and liabilities as found by the Federal Magistrate. Before I do so I propose to refer to some relevant matters. First, I observe unfortunately the Federal Magistrate did not set out such a table in his reasons. It is difficult to be certain that the Federal Magistrate treated the parties’ respective superannuation entitlements as part of the property to be adjusted between them although paragraphs 27 to 31 are indicative of such an approach. But such a conclusion is inconsistent with his Honour’s reference in paragraph 49 to separate “pools”.
I note that in the husband’s case outline document he included both parties’ superannuation entitlements in the list of assets and liabilities to be adjusted between the parties. The wife however listed the superannuation entitlements separately from the other assets and liabilities. There is no dispute that neither party sought a splitting order in respect of the husband’s superannuation interest. Nor was in it dispute before the Federal Magistrate that the husband had accessed part of his superannuation entitlement, and his evidence in cross-examination was that he had been able to do so without any application to a regulatory authority (transcript, 19 May 2009, p 46). In these circumstances the Federal Magistrate could well have determined to treat the husband’s superannuation interest as property immediately available to the husband (see Coghlan & Coghlan (2005) FLC 93-220). However, there was no expert or other evidence which would support a finding that the wife’s superannuation interest was immediately available to her.
I have endeavoured to reconstruct the assets and liabilities of the parties as they appear from reading of the Federal Magistrate’s reasons. It is clear that his Honour adopted a very “broad brush” approach to the assets and liabilities. No mention is made of the husband’s furniture which the husband valued at $15,000.00 or to his tools of trade. That “broad brush” approach was perhaps unfortunate given the short duration of the parties’ relationship and the understandable emphasis of the parties on financial contributions. It has no doubt made it harder than might have been the case if such a table had been included in the reasons to allow the reader to more easily follow the path which lead to his Honour’s ultimate determination. The lack of such a table may be explicable because the Federal Magistrate’s reasons appear to have been delivered orally.
The Federal Magistrate’s findings are found in paragraphs 27, 28, 30, 31 and 32 of the reasons as follows:
27.At trial the wife had a home worth $220,000, motor vehicle worth $20,000 and a mortgage liability of $125,000 with a credit card liability of $8,000. The wife’s “net worth” then at trial was $123,000.
28.The husband had credit card and personal liabilities of approximately $10,000 and motor vehicles (three of them) worth a total of $15,000. His net worth, therefore, was $5,000.
…
30.At co-habitation the husband had superannuation of about $212,000 in value. It is now of an approximate value of $175,000 (following a further post-separation withdrawal of $5,000). It is immediately accessible by him and indeed he has already accessed it.
31.The wife has superannuation of approximately $15,000. She had no superannuation at co-habitation.
32.If I add the superannuation interests as a component of the present net value of the assets of the parties the position of the husband is $180,000 and the wife $138,000.
Translating the Federal Magistrate’s findings into a table reveals the following:
Assets The wife’s L property (W) $220,000.00 Motor vehicle (W) $20,000.00 Motor vehicle (H) $15,000.00 Superannuation (W) $15,000.00 Superannuation (H) $175,000.00 $445,000.00 Liabilities Mortgage over L property (W) $125,000.00 Credit card liability (W) $8,000.00 Credit card liability (H) $10,000.00 $143,000.00 Net Assets $302,000.00
However, if the superannuation is excluded, as referred to by the Federal Magistrate, in paragraph 49, the net assets and liabilities are as follows:
Assets The wife’s L property (W) $220,000.00 Motor vehicle (W) $20,000.00 Motor vehicle (H) $15,000.00 $255,000.00 Liabilities Mortgage over L property (W) $125,000.00 Credit card liability (W) $8,000.00 Credit card liability (H) $10,000.00 $143,000.00 Net Assets $112,000.00 Superannuation (W) $15,000.00 Superannuation (H) $175,000.00
As the table demonstrates, the Federal Magistrate made a mathematical error in his calculation of 50 per cent of the net non-superannuation assets at $64,000.00. The correct sum was $56,000.00. That, however, is probably irrelevant if, as appears to be the case and contrary to paragraph 49, the superannuation was included in the pool of assets to be divided.
The requirement under s 79 to evaluate and weigh each party’s respective contributions is not in doubt. In Hickey it is expressed as the second requirement of the legislation. The necessity to evaluate contributions is referred to by Mason J (as his Honour then was) in Mallet at 625:
… The section contemplates that an order will not be made unless the court is satisfied that it is just and equitable to make the order (s. 79(2)), after taking into account the factors mentioned in (a) to (e) of s. 79(4). The requirement that the court “shall take into account” these factors imposes a duty on the court to evaluate them. Thus, the court must in a given case evaluate the respective contributions of husband and wife under pars. (a) and (b) of sub-s. (4), difficult though that may be in some cases…
Turning then to the Federal Magistrate’s evaluation of the parties’ contributions. I have already noted that Lindsay FM determined that the husband’s direct and indirect financial contributions exceeded those of the wife and otherwise their contributions should be deemed equal. He did not, however, express that finding in either percentage or monetary terms. I further note the Federal Magistrate did not say whether he proposed to assess contributions globally or on an asset by asset basis.
At paragraphs 45 to 49 of his reasons the Federal Magistrate appears to discuss the justice and equity of the orders he proposes to make. I have already noted the inconsistency of approach in respect of the parties’ superannuation interests in paragraphs 32 and 49. Essentially, the Federal Magistrate concluded that it was not just and equitable for him to make any adjustment of the parties’ property, but because the wife was prepared to pay the sum of $15,000.00 it was not “appropriate for the Court to refuse” it.
In the final paragraph of his reasons the Federal Magistrate refers to the result of the orders leaving the husband “with 58.5 % of their current assets and the wife with 41.5%”. Thus, at least inferentially at this point in his reasoning process the Federal Magistrate purported to refer to both the net non-superannuation and superannuation assets. However the percentages set out by him are incorrect. The husband as a result of the Federal Magistrate’s order had an entitlement to net assets of $5,000.00 + superannuation $175,000.00 + $15,000.00 payment from the wife = $195,000.00 and the wife had entitlement to net assets of $107,000.00 + superannuation of $15,000.00 less $15,000.00 payment to the husband = $107,000.00”. Expressed as a percentage of the total net non-superannuation assets and superannuation assets the percentage division was 64.6 per cent to the husband and 35.4 per cent to the wife.
It is important to remember that s 79(2) only requires a court to adjust the property of the parties to a marriage if it is just and equitable to do so. But in determining whether or not to make an adjustment a court must make findings about and evaluate the parties’ respective contributions both financial and non-financial, direct and indirect, as well as contributions to the welfare of the family either on a global or asset by asset basis. Additionally consideration must be given to s 79(4)(d), (e), (f) and, if relevant, (g). Section 79(4)(e) incorporates consideration of s 75(2).
This exercise, particularly in respect of a short marriage where there are no children of the relationship and a modest pool of assets often requires a much more analytical consideration of individual contributions to that to be undertaken when dealing with a long term marriage where there have been a myriad of diverse contributions over many years. While the authorities stress the exercise is not an accounting one (see Quinn & Quinn (1979) FLC 90-677; Anastasio & Anastasio (1981) FLC 91-093; Bushby & Bushby (1988) FLC 91-919) in a short term marriage assessment on an asset by asset basis is often appropriate.
As I noted at the commencement of these reasons, the pivotal challenge to his Honour’s contribution assessment is to the Federal Magistrate’s treatment of the husband’s superannuation. Assuming the Federal Magistrate did include both parties’ superannuation in the pool to be divided, he failed to evaluate both parties’ contributions to their respective entitlements.
I further accept that if the superannuation interests were to be treated as “another species of assets” by reason of their unique characteristics that his Honour did not discuss and evaluate appropriately both parties’ superannuation entitlements.
The evidence disclosed the wife had net assets of approximately $79,000.00 at the commencement of cohabitation (equity in the home of $75,000.00 plus her car of $4,000.00). The husband had a gross superannuation entitlement of approximately $212,000.00 and a liability for a car of $12,000.00, plus unquantified tax liabilities. The Federal Magistrate makes no findings about the weight afforded to the parties’ initial contributions.
At no point does the Federal Magistrate translate his generalised finding that the husband’s contributions financial and non-financial exceeded those of the wife and that “they each otherwise contributed equally to the marriage partnership” to a quantitative assessment. I am satisfied that omission constitutes appealable error (see Steinbrenner & Steinbrenner [2008] FamCAFC 193 at 234; Brodie & Brodie (2009) 41 Fam LR 18 and Loude & Loude [2009] FamCAFC 52). That error is also compounded by the failure to express any conclusion in respect of relevant s 75(2) factors requiring adjustment in either party’s favour.
In summary, I am satisfied his Honour’s reasons are inconsistent in respect of the treatment of the parties’ superannuation interests. This makes identification of the assets to be divided uncertain.
Further, the approach adopted by his Honour failed to:
· assess contribution by each party to the respective superannuation interests;
· express his Honour’s qualitative assessment of the parties’ respective contributions as a percentage of their assets, or as a monetary sum; and
· identify specifically the s 75(2) factors which required adjustment in either party’s favour and express that adjustment as a percentage or monetary sum.
As a consequence, it is impossible to discern the process by which his Honour determined the orders were just and equitable. Thus, I am satisfied appealable error is established.
Asserted factual errors
In light of my conclusion of appealable error in the Federal Magistrate’s approach to contribution and adjustment under s 75(2), it is unnecessary that I deal in any significant way with the asserted factual errors. As I noted at the commencement of my reasons these grounds, although not abandoned, were not strongly pressed by the husband’s counsel.
The first challenge was to the Federal Magistrate’s finding, at paragraph 6 of his reasons, that the wife’s two younger daughters worked during the parties’ cohabitation. Reliance was placed on the husband’s cross-examination when it was put to him that he knew the wife’s eldest daughter was in receipt of a supporting parent’s benefit. No concession was made by the husband to that effect (transcript, 19 May 2009, p 21). Reference was also made to the wife’s concession in cross-examination that the husband’s funds were used for family purposes although the wife qualified that evidence and said:
… My children also paid money as well. They gave me money which went towards living expenses.
For them?---For their board, yes. (transcript, 20 May 2009, p 78)
Later in her evidence the wife referred to the board paid by her daughters as being between $30.00 a week or maybe $150.00 a week each (transcript, 20 May 2009, p 80).
I am satisfied that the Federal Magistrate’s statement in paragraph 6 that:
The two younger girls worked, but the husband clearly assisted the wife in meeting the expenses associated with their occupation of the property with them.
was open to him on the evidence and there is no merit in this ground.
The second challenge is in relation to the manner in which the Federal Magistrate assessed the value of the work carried out to the matrimonial home pursuant to the “contra” arrangements. The husband’s counsel asserted:
His Honour is not entitlement to make an assessment of the value of a party’s contribution in the absence of evidence to the facts. His Honour is not entitled to take an “average” and substitute that evidence of the value.
It is apparent from paragraph 11 of the Federal Magistrate’s reasons that he was unable to make clear findings about the value of the work performed by the husband. The Federal Magistrate repeated, in paragraph 12, his inability to make such a finding.
While the Federal Magistrate did go on to make an estimation of what the work would have cost if the wife had engaged outside tradesman, it was irrelevant to the Federal Magistrate’s ultimate reliance on the objective expert evidence which was the house had increased in value from $185,000.00 at the commencement of cohabitation to $210,000.00 at the date of separation.
I am satisfied this asserted challenge to the Federal Magistrate’s reasons has no validity.
The final challenge based on factual matters was in relation to the Federal Magistrate’s determination that the husband had a taxation liability at the commencement of cohabitation of $11,000.00. This challenge is mounted on the basis there was insufficient evidence for the Federal Magistrate to make such a finding.
At paragraph 18 of his reasons, the Federal Magistrate set out the evidence before him in relation to the husband’s taxation liability at the commencement of cohabitation. That evidence included Exhibit “3” which disclosed that as at 29 August 2003 the husband’s tax debt stood at $3,559.98 but on 26 May 2004 the debt was $15,946.93. The Federal Magistrate noted the evidence was imprecise.
Although the Federal Magistrate could not find a precise figure for the husband’s tax debt at the commencement of cohabitation he was able to make a finding it was between the sums disclosed in the ATO Portal.
I do not find that the statement of the Federal Magistrate about the husband’s tax liability of itself vitiated the exercise of discretion by him (see De Winter v De Winter (1979) 23 ALR 211).
The final complaint is in relation to the Federal Magistrate’s statement about the increase in the mortgage secured over the home, which increase was occasioned by the wife’s borrowing to obtain a new motor vehicle. The Federal Magistrate’s reasoning is attacked because he referred to “the husband’s retention of all three vehicles which the parties had at separation”.
It is asserted there is error by the Federal Magistrate in understanding the evidence because the husband had offered a car back to the wife. The wife’s evidence was to the effect that although the husband offered her a car it was on the basis she paid for it (transcript, 20 May 2009, p 85).
Again I am satisfied this complaint is without merit.
Re-determination
At the conclusion of the appeal the husband’s counsel submitted if I could be satisfied there were sufficient findings by the Federal Magistrate which would enable me to re-determine the matter I should do so. However he candidly acknowledged that I may have difficulty because of a lack of appropriate findings. No submissions were addressed to me by the mother’s counsel on the issue of whether or not I could re-determine the matter, rather she sought to uphold the correctness of the Federal Magistrate’s orders.
I have already recorded that in his Notice of Appeal the husband sought, in the event the appeal was successful, an order that the wife pay to him the sum of $67,000.00 and in the event she failed to do so that the L property be sold and he receive that sum plus interest under the Family Law Rules 2004. In the event I re-determined the matter neither party sought a superannuation splitting order, and no submissions were made that their respective superannuation interests should be included in the pool of assets to be adjusted between them.
The parties made no submissions about the nature and quantum of their assets, and neither party sought to adduce any updating financial information or valuation evidence (see Allesch v Maunz (2000) 203 CLR 172).As noted earlier in these reasons, the Federal Magistrate adopted a somewhat “broad brush” approach to the identification of, and value attributed to, the parties’ assets.
At trial the value of the matrimonial home was agreed at $220,000.00. There was similar agreement about the value of the parties’ motor vehicles, and their superannuation interests. The wife provided corroborative evidence of her superannuation entitlement ($14,764.27). The husband’s case outline document disclosed his entitlement superannuation entitlement as $160,710.00 at the date of hearing. As to their liabilities, although the Federal Magistrate recorded that the mortgage secured over the L property was $125,000.00, the undisputed evidence (in both parties’ outline of case documents) was it stood at $125,730.00. The husband asserted he had furniture having a value of $15,000.00 (husband’s financial statement filed 21 April 2009), and some small savings. Those saving were de minis and it appears thus ignored by the Federal Magistrate.
However, no where in the Federal Magistrate’s reasons did he refer to the husband’s furniture, which he valued at $15,000 in his Financial Statement nor did he refer to the wife’s assertion the husband had tools of trade. If I too adopted the broad brush approach used by the Federal Magistrate to arrive at his findings at to the parties’ assets and liabilities I could commence the re-determination exercise. But I think it would be unsafe for me to do so. First, as is apparent from my earlier discussion, it is unclear whether or not the parties’ respective superannuation interests can be treated as property to be divided between them. Both sought different approaches in the case outline documents. Second, given the modest assets of the parties, and the significance of the mortgage liability (the largest debt) it is unrealistic to round that figure down by $730.00 or to round up the husband’s superannuation entitlement from 160,710.00 to $175,000 (husband’s case outline page 5) and to ignore the husband’s furniture and tools of trade. In summary, there is no agreed pool of assets and liabilities.
Given the lack of appropriate findings I regret, particularly having regard to the parties’ modest assets, and the emotional and financial stress to them, that I am unable to re-determine the matter. I observe that the amount in dispute is between approximately $15,000.00 and $67,000.00. It is to be hoped, with the assistance of their legal representatives, a compromise may be reached. Otherwise the matter will accordingly require re-hearing before a Federal Magistrate other than Federal Magistrate Lindsay.
Costs
At the conclusion of the hearing both parties submitted if I found appealable error and the matter was to be remitted that they be granted costs certificates pursuant to the Federal Proceedings (Costs) Act 1981 (Cth). This is not a case where there should be departure from s 117(1) of the Act. As I am satisfied there was error of law by the Federal Magistrate I will grant the costs certificates as proposed.
I certify that the preceding one hundred and seven (107) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Boland.
Associate:
Date: 25 June 2010
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