B & B - [2000] FamCA 1301

[2000] FamCA 1301

FAMILY LAW ACT 1975

IN THE FULL COURT

OF THE FAMILY COURT OF AUSTRALIA

AT BRISBANE

Appeal No. NA66/99
File No. BR10790 of 1997

IN THE MATTER OF:

MR B

Appellant/Husband

- and -

MS B

Respondent/Wife

REASONS FOR JUDGMENT

BEFORE:                  Ellis ACJ, Coleman and O’Ryan JJ
HEARD:  25 May 2000
JUDGMENT:            20 September 2000

APPEARANCES:

Mr Kirk SC instructed by (Barry & Nilsson, Solicitors, Level 21, 215 Adelaide Street, Brisbane QLD 4000) appeared on behalf of the Appellant Husband.
Mr Sofronoff QC with Mr Murphy of Counsel, instructed by (Hirst & Co, Solicitors, Level 1, 293 Queen Street, Brisbane QLD 4000) appeared on behalf of the Respondent Wife.

Catchwords PROPERTY SETTLEMENT – adequacy of reasons – full and frank disclosure – notional adjustments – hidden assets – contributions – section 75(2) adjustment

This was an appeal by the husband against orders for property settlement made on 1 December 1999 and 17 January 2000.

The wife and husband were both born in 1954 and were 45 and 44 at trial respectively. The parties commenced cohabitation in 1975 and married in 1976. They separated in 1997. There are three children of the marriage, Ms C (21 at trial), Mr D (19) and X (12), the youngest of whom lived with the wife.

The known assets had an agreed total value of $1,050,000. The wife asserted that full and frank disclosure had not been made by the husband and that, accordingly, the figure of $1,050,000 did not necessarily represent the totality of the parties assets.

The trial Judge referred to the percentage claims of each party, having regard to the matters of contributions and “other factors”. The wife sought 70% of the pool of assets, being 50% on the basis of contributions, 10% by virtue of consideration of the s.75(2) factors and 10% to account for the undisclosed assets. The husband contended that the wife should not receive more than 55% of the net pool, or $470,957.

The trial Judge dealt with matters of contribution and found that the wife’s contribution under s79(4) was ‘equal to that of the husband’. His Honour was of the view that the wife should receive 50% on account of s.79(4), finding that though the husband had set up the business, the wife played a significant part in its success and was the main contributor to the welfare of the children.

His Honour considered the matters in s.75(2), in particular the wife's responsibilities to X and the duration of the marriage, and made an adjustment of 7.5% in the wife's favour.
Further, his Honour dealt with the issue of the husband’s asserted non-disclosure of assets. His Honour was satisfied that the husband tried to hide assets which should have been disclosed, in addition, to appropriating for himself property which should have been available for distribution. Accordingly, his Honour made a further adjustment to the wife for 7.5% of the known assets, giving the wife 65% overall.

The trial Judge also dealt with the assets which the wife asserted should be added back into the pool and identified sums of money which totalled $83,207. The wife alleged that the husband had utilised this money for his own needs and that it should be taken into account, which the trial Judge accepted. His Honour identified the second dispute as to whether there should be deducted from the pool of assets, liquidation costs amounting to $108,086. The trial Judge found that this amount was not in dispute. The trial Judge held that it would be fair for the parties to share equally in the costs of any transfers from the husband or his companies to the wife, and otherwise each party was to pay their own costs.

The trial Judge addressed the issue of the order that the husband pay the wife in property and/or cash, which was problematic as both parties indicated that they wanted to retain the property. His Honour ordered that the husband transfer the property to the wife.

It was submitted on appeal:

The amended grounds of appeal in effect submitted that his Honour failed to give any or any adequate reasons, acted on a wrong principle of law, failed to consider the whole of the evidence and the impact of the orders on the husband and failed to give him the opportunity to be heard. Further, that it was not open to the trial Judge to make the adjustments as to various sums of money as he did. Further, it was submitted that his Honour erred in failing to make an order that the costs of transfer to the husband were also to be borne equally by the parties.

Held:-

The Court noted that the difficulty with the incorporation of submissions made at the trial as reasons for judgment, was that it may lead to error because of the inability of an appellate court to discern the process of reasoning. The Court accepted the submission that the issue of the appropriateness of doing so, was not one of principle, but one of degree and the issue was whether or not what the trial Judge did was adequate in all the circumstances. The Court was of the view that the approach adopted by the trial Judge in this case was unusual and was one that the Court would discourage.

The Court was of the view that his Honour’s reasons for arriving at the conclusion that the parties’ contributions were equal, although not elaborate, were adequate in law, in that they were sufficient to reveal, and thus allowed the court to scrutinise, the chain of reasoning by which he came to that conclusion. Accordingly, Ground 1.A was not made out.

In the view of the Court, an adjustment of 7.50% in favour of the wife, was within the ambit of his Honour’s discretion. A significant matter which the trial Judge identified was the responsibility of the wife for the care and accommodation of the 12 year old child. Nevertheless, the ultimate adjustment which was made to the contribution based entitlements of the parties, to reflect the “other factors”, depended upon the findings that the trial Judge made in relation to the financial circumstances of the parties, including the notional additions and hidden assets.

The Court was of the view that if there was a finding of non disclosure of financial circumstances by a party it would only be in a rare and exceptional case that a trial Judge could fulfil the obligation to give adequate reasons by simply incorporating, without more, all of the submissions of one of the parties. That is what his Honour did in this case and the result was that the Court was unable to discern the path that led to the result of a further 7.5% adjustment in favour of the wife. The trial Judge notionally included in the pool of assets items that were capable of identification and quantification. However, his Honour also found that there were other assets, the identify of which was not known, but for which an adjustment was made in favour of the wife. The trial Judge’s reasons and the submissions of counsel accepted by him did not adequately explain why the further adjustment of 7.5% was made. The appeal was thus allowed and a new trial ordered.

Appeal allowed
Costs certificates were granted to the parties in relation to the appeal hearing and the costs of the re-trial.

Not Reportable

Introduction

This is an appeal by the husband, Mr B against orders for property settlement made on 1 December 1999 and 17 January 2000 in property settlement proceedings between the husband and the wife, Ms B.

On 1 December 1999 his Honour made the following orders:

“(1)   That the costs associated with the transfer or transfers from the HUSBAND or his companies to the WIFE be shared equally between the HUSBAND and the WIFE.
(2)     That each party pay their own costs of the proceedings.
(3)     That the HUSBAND pay to the WIFE the amount of $736,610.00 in cash and/or property.

(4) That either party have liberty to apply.”

On 17 January 2000 his Honour made the following orders:

“1.     That within 30 days of the date of these orders the HUSBAND do all things necessary to transfer to the WIFE his right, title and interest in and to the property situated at [E STREET, SUBURB F] in the STATE OF QUEENSLAND and that this property be retained by the WIFE absolutely.
2.       That the HUSBAND meet all payments as they fall due and be responsible for and indemnify the WIFE against any mortgage or encumbrance registered upon or relating to the property at [E STREET, SUBURB F] and further that within 90 days of the date of these orders the HUSBAND do all things necessary to cause any encumbrance on the property at [E STREET, SUBURB F] to be released and the Title Deeds to be delivered to the WIFE.
3.       That the WIFE retain the furniture and contents in her possession as her property absolutely and that the HUSBAND retain the furniture and contents in his possession as his property absolutely.

4. That the HUSBAND do all things necessary to forthwith transfer to the WIFE his right, title and interest in [MOTOR VEHICLE 1] in the possession of the WIFE.

5. That the HUSBAND and WIFE in their capacities as the directors of [F PTY LTD] as trustee of the [B FAMILY TRUST] do all such things and execute such documents as shall be necessary to cause:

5.1the TRUST to transfer to the WIFE the interest of the TRUST in the property situated at [G STREET, SUBURB H] in the STATE OF QUEENSLAND;
5.2the TRUST to deliver to the WIFE all documents in the possession of the HUSBAND relating to that property.

6. That the WIFE do all things necessary to cause to be assigned to the HUSBAND any loan account in her favour within [F PTY LTD] or the [B FAMILY TRUST].
7. That the HUSBAND be responsible for and indemnify the WIFE against any amount owing by her (if any) to [F PTY LTD] or the [B FAMILY TRUST].

8. That immediately following the transfer to the WIFE pursuant to clause 5 of these orders the WIFE forthwith do all things necessary and execute all documents such that she resigns as a director of [F PTY LTD] and transfers to the HUSBAND or his nominee her shareholding in [F PTY LTD].

9. That the HUSBAND and WIFE forthwith in their capacities as directors of [J PTY LTD] do all such things and execute all such documents as are necessary to cause the company to transfer to the WIFE:-

9.1the property situated at [K STREET, TOWN L];
9.2the property situated at [N STREET, TOWN O];

and that the WIFE retain these as her property absolutely.

10. That immediately upon the receipt by the WIFE of the monies and transfer of the [N STREET] property pursuant to paragraph 9 of these orders the WIFE do all things necessary to resign as a director of [J PTY LTD] and transfer to the HUSBAND or his nominee her shareholding in [J PTY LTD].
11. That immediately upon the receipt by the WIFE of the monies and transfer of the [N STREET] property pursuant to paragraph 9 of these orders the WIFE do all things necessary to resign as a director of [M PTY LTD] and transfer to the HUSBAND or his nominee her shareholding in [M PTY LTD].

12. That the HUSBAND indemnify the WIFE and keep her indemnified in respect of any claims, demands, liabilities or debts of whatsoever nature as may exist or arise in respect of the WIFE’S involvement as a director, shareholder, borrower or otherwise in [J PTY LTD] or [M PTY LTD] including any tax which may be assessed (of an income, capital or penalty nature) on dividends, distributions or other benefits of whatsoever nature purporting to come from any of [J PTY LTD] or [M PTY LTD] which have not been paid directly to the WIFE (payment in this context does not include entries made in books of account by journal or otherwise).

13. That the HUSBAND use his best endeavours to release the WIFE from all and any guarantees given by her alone or jointly with others in relation to the activities, operations, property or otherwise of [J PTY LTD] or [M PTY LTD] or any property or other interest retained by the HUSBAND pursuant to these orders and in the event that such guarantees are not released the HUSBAND shall indemnify the WIFE and keep her indemnified in respect of any claim relating thereto with such indemnity being intended to include costs (legal and otherwise) interest and other charges for which she may be liable and/or incur in dealing with any such claim.

14. That within 30 days of the date of these orders the HUSBAND do all things necessary and sign all such documents to transfer to the WIFE his right, title and interest in and to the property situated at [P STREET, SUBURB Q] owned jointly by the parties.

15. That within 30 days of the date of these orders the HUSBAND pay to the WIFE the amount of $4165.00.

16. That the HUSBAND retain as his property his shareholding in [R PTY LTD].

17. That within 30 days of the date of these orders the WIFE do all things necessary and sign all such documents to transfer to the HUSBAND her right, title and interest in and to the property situated at [S STREET, SUBURB Q].

18. That the party to whom property is to be transferred pursuant to these orders shall be responsible for the preparation of any necessary documents to effect the transfer.

19. That the costs of any transfer or transfers from the HUSBAND or any of the companies listed in these orders to the WIFE including any fees or stamp duty in respect thereof be shared equally between the HUSBAND and the WIFE.

20. That each party pay their own costs of the proceedings.

IT IS DIRECTED:

21. That the applications for Property be removed from the Pending Cases List.”

Background

The relevant factual background to this appeal is as follows. Both parties were born in 1954 and were aged 45 years and 44 years at the date of the trial. The parties commenced cohabitation in 1975 and were married in 1976. The parties separated in 1997. The period of cohabitation was about 21 years.

There are three children of the marriage aged 21, 19 and 12 years. The youngest child resides with the wife.

At the commencement of cohabitation neither party had any assets of significance. Senior Counsel for the husband said that the parties started with ‘little’. During the marriage both parties engaged in paid employment, although there were periods when the wife did not work because of her responsibility for the care of the children.

Relevant background facts are set out in written submissions filed on behalf of the wife that were incorporated in his Honour’s reasons for judgment. The current assets and liabilities of the parties are incorporated in a business structure which comprises a number of entities, M Pty Ltd (which was essentially the trading and income earning entity of the parties); F Pty Ltd (which was trustee of the B Family Trust); J Pty Ltd (which operated for some years as the service company for M Pty Ltd and also as a property investment vehicle for the parties); and the B Partnership. Additionally, the husband owns and is the sole director of a company R Pty Limited. This company was incorporated in 1997.

M Pty Ltd was incorporated in 1983 and the parties are both directors. This company operated a business from premises at Suburb Q. In 1990 land was purchased at Town O and, thereafter, the company operated its business from the sites at Town O and Suburb Q. From about 1990 the husband primarily operated the Town O premises and the wife primarily operated the Suburb Q premises.

The husband has limited education and produced evidence at the trial that he experiences difficulty in reading and writing. The wife was primarily responsible, particularly from about 1990 onwards, for the bookkeeping of the business, as well as designing and operating a comprehensive system of record keeping for the business.

After separation in 1997 the wife was in administrative control of the business until April 1998 when the husband took control as a result of orders made by Lindenmayer J on 21 April 1998.

For the purposes of the trial the parties agreed that certain assets had an agreed total value of $1,050,000. It was not the agreed value of the total pool of assets, given the wife’s assertions that full and frank disclosure had not been made by the husband.

Judgment of the Trial Judge

At the trial, written submissions were filed on behalf of both parties and, except in relation to costs, and the percentage entitlement that the wife sought to receive, the trial Judge largely accepted the submissions made on behalf of the wife. The trial Judge commenced his reasons for judgment by identifying the orders sought by each party and then set out a brief history of the relationship of the parties.

The trial Judge referred to the written submissions and said that one of the main areas of dispute was the claim by the wife that the husband had not made a full and frank disclosure of all matters relevant to the Court’s findings.

The trial Judge said (AB 1 at p.17):

“Written submissions were received by both parties and they set out their respective positions of both the husband and the wife. Many of the issues between the parties were resolved and one of the main areas of dispute is the claim by the wife that the husband had not made a full and frank disclosure of all matters relevant to the Court’s findings.
To this end, the wife claims that she is entitled to a greater percentage than she would be if a full disclosure had been made and, if there has been a deliberate non-disclosure by the husband, then the Court should be not unduly cautious in making findings about the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature. The authorities for this proposition are numerous and have been set out in the written submissions on behalf of the wife.
I accept the written submissions on behalf of the wife and make them part of my judgment except for the submissions as to costs and the percentage the wife should receive.”

The written submissions made on behalf of the wife (AB 1 at p.21.1-21.20) were extensive, detailed and made reference to exhibits, affidavits and transcripts.

The trial Judge then said (AB 1 at p.17-18):

“On the evidence before me I am of the opinion that the husband has tried to hide from the Court and the wife assets which should have been disclosed. He also appropriated property to himself, which property should have been part of the property available for distribution. This will be seen from the written submissions of the wife contained generally in paragraphs 17 to 72. As I have accepted these submissions as part of my judgment, it would be needlessly repetitious to set them out again.”

The trial Judge found that he had reservations about the evidence given by an accountant, Mr T, and in particular his evidence about cashflow problems in October 1997 when the husband drew from a company controlled by him, R Pty Ltd, the amount of $52,664 as “wages”.

The trial Judge then dealt with the credit of the parties and said (AB 1 at p.18):

“Apart from the evidence contained in the submissions made by both parties, I had the opportunity to observe, in particular, the husband and the wife in giving evidence. There is no question in my mind that the husband presented as an unreliable witness. He relied largely on his memory whereas his wife kept a diary. I found her to be careful and accurate in the evidence she gave whereas the husband’s evidence on occasions was plainly not acceptable.”

The trial Judge again referred to the written submissions and said (AB 1 at p.18):

“In spite of the valiant submissions of [counsel] for the husband I find it hard to reconcile those submissions with the evidence given during these proceedings. The wife’s submissions, which form part of my judgment, set out in detail the basis of the wife’s case. There is meticulous referencing to affidavits and other material which justify the conclusions reached in those submissions, particularly with regard to the husband’s credibility.”

The trial Judge referred to the percentage claims of each party, having regard to the matters of contribution and “other factors”. The wife sought an amount representing 70% of the pool of assets, being 50% on the basis of contributions, 10% by virtue of consideration of the s.75(2) Family Law Act factors and 10% to take account of the undisclosed assets. So far as the husband is concerned it was put that the wife should receive an amount not exceeding 55% of the matrimonial pool after deduction of realisation and taxation costs. His Honour referred to the submissions of the husband as to the entitlement of each party and said that he concluded that the husband was agreeable to pay to the wife 55% of the matrimonial pool.

The trial Judge then dealt with the matters of contribution and said (AB 1 at p.19):

“Under s-79(4) I think it fair to say that the wife is entitled to 50% of the pool. The husband I find was the instigator of the activities which allowed them to reach their current position; in other words he was the moving force of setting up the business which the parties had. I have no doubt that he worked very hard in building up this business. I find that the wife was a willing partner with the husband and that she would have been the main contributor to the welfare of the children, particularly in the younger years and in their later years, I have no doubt that she played a significant part in the success of the business. She will have the care and control of the youngest child, [X] who is 12 years of age. I find her contribution under s-79(4) is equal to that of the husband.”

His Honour then dealt with the matters in s.75(2) Family Law Act and said (AB 1 at p.19):

“Under the s-75(2) factors, the wife is going to have the ongoing care and control of the boy, [X] until he obtains adulthood, and indeed if he takes on a university career, he may be dependent on his mother and father for financial support and accommodation.
Both parties are of similar age and they both appear to be in good health. The husband will maintain that part of the assets from which the parties have made their living. The wife may have to take up employment or she may be able to survive by virtue of the assets which she will acquire. There is no evidence that either party has a responsibility to support any other person nor is there any evidence of either party having any pension or allowance. Both parties have had a reasonable standard of living in the past and they are entitled to maintain that in the future. The marriage has been a lengthy one and it has not affected the earning capacity of the husband and nor has it affected his earning capacity in the future as he will contain control of the company which produces his income. The wife, of course, will not be in receipt of any income from the company. The wife may need to take up employment in the future. I found her to be a competent witness and I have no doubt that she has a degree of business acumen which will see her able to look after herself. The marriage is a lengthy one and there is a need to protect the wife who wishes to continue her role as a parent. Of course, given the age of [X], this need to protect the wife’s role is not as onerous as if it would be were the child younger.
Under s-75(2) I think it is fair to argue, given [X’s] age and the other circumstances which I have numerated, that the wife is entitled to 7.5%.”

His Honour then dealt with what he called the husband’s attempt to hide or disclose other assets and said (AB 1 at p.20):

“I turn now to the question of the husband’s attempt to hide or disclose other assets which he may or may not have. His behaviour leading up to the trial and the evidence he gave during the trial would not be persuasive in describing him as a man of truth. I do not know whether he has hidden any assets. Of course, if they are hidden, how could I? In the circumstances I think it reasonable to find that the evidence of the husband is such that on the balance of probability he has hidden assets and there is justification in awarding the wife 7.5% of the value of the known assets.”

His Honour found that overall the wife would receive an entitlement equal to 65%.

The trial Judge then proceeded to deal with the assets, which the wife asserted should be added back into the pool of assets (AB 1 at p.20). His Honour identified amounts, which totalled $83,207 and the allegation of the wife namely that the husband had utilised this money for his own needs and that it should be taken into account.

His Honour identified the second dispute namely whether there should be deducted from the pool of assets liquidation costs amounting to $108,086 as set out in the submissions made on behalf of the husband. The trial Judge found that the amount of $108,086 was not in dispute and that counsel for the husband relied on Elsey v Elsey (1997) FLC 92-727 to support the submission. The trial Judge said (AB 1 at p.21):

“There is a degree of merit in this submission and the wife will receive some significant properties, namely the former matrimonial home and properties at [Town L], [Town O], etc. It would appear to me to be fair that the cost of transfer of any properties to the wife from the husband or any company of the husband should be paid on the basis of 50% by the wife and 50% by the husband. By such a payment, the percentage distribution that I have awarded to the husband and the wife is maintained. Apart from the costs incurred in the transfer of properties to which I have already adverted, each party should bear their own costs.”

His Honour found that the total amount available for distribution was $1,133,247 and that 65% of this amount was $736,610 (AB 1 at p.21). He then proceeded to make final orders.

In his reasons for judgment of 17 January 2000 the trial Judge addressed the issue of the order that the husband pay the wife in cash or in property, which was problematic as both parties had submitted that they wished to retain property. His Honour found that since he had given the wife the opportunity to receive cash or property, and she had chosen property, he should order the husband to transfer the property sought by the wife to her.

Grounds Of Appeal

In the Amended Notice of Appeal the husband relies upon the following grounds (AB 1 at p.6-7):

“A.    In respect of the Order of 1 December 1999:
1.       That in making the order under appeal the trial judge failed to give any or any adequate reasons.
1.A.   That in making the finding that the parties were entitled on a contribution based assessment to a equal division of the matrimonial assets the trial judge.
(i)failed to give any or any adequate reasons;
(ii)acted upon a wrong principle of law; and
(iii)failed to consider or adequately consider the whole of the evidence.

2. That in finding that the wife was entitled to an additional award of 7.5% of the value of the known assets on the basis that the Husband had hidden assets the trial judge:
(i)failed to give any or any adequate reasons;
(ii)acted upon a wrong principle of law; and
(iii)failed to consider or adequately consider the whole of the evidence; and
(iv)failed to consider the impact of his intended orders upon the Husband’s financial position.

3. That in finding the wife was entitled to an additional award of 7.5% of the value of the known assets on the basis of those matters set out in Section 75(2) of the Family Law Act the trial judge:
(i)failed to give any or any adequate reasons;
(ii)acted upon a wrong principle of law;
(v)failed to consider or adequately consider the whole of the evidence; and
(vi)failed to consider the impact of his intended orders upon the Husband’s financial position.

4.     That in making the adjustments to the agreed matrimonial property pool that he did it was not open to the trial judge to notionally increase the value of the pool by $52,665.00 on amount of monies paid to the Husband from [R Pty Ltd] OR ALTERNATIVELY in the circumstances where the trial judge had awarded the wife 7.5% of the known assets on the basis of the husband’s conduct.
5.     That in making the adjustments to the agreed matrimonial property pool that he did it was not open to the trial judge to notionally increase the value of the pool by $25,000.00 being additional accountancy costs allegedly incurred by [R Pty Ltd] OR ALTENRATIVELY in the circumstances where the trial judge had awarded the wife 7.5% of the known assets on the basis of the Husband’s conduct.
6.     That the trial judge ought to have deducted from the matrimonial property pool as determined by him realisation and other costs amounting to $108,086.00.
7.     That the trial judge having made an order that the costs associated with the transfer or transfers from the HUSBAND or his companies to the WIFE be shared equally between the HUSBAND and the WIFE ought to have made an order which provided that the costs associated with the transfer of property from the WIFE to the HUSBAND and/or the shareholding in the companies be shared equally between the HUSBAND and the WIFE.
B.     In respect of the Order of 17 January 2000.
8.     That given the terms of the Order of 1 December 1999 the trial judge was not entitled to make the Order that he did on 17 January 2000.
9.     That in the making the Order of 17 January 2000 the trial judge:
(i)failed to give any or any adequate reasons;
(ii)acted upon a wrong principle of law;

(iii) failed to consider or adequately consider the whole of the evidence;
(iv)failed to consider the impact of his intended orders upon the husband’s financial position;
(v)failed to give the husband any adequate opportunity to be heard in respect of the order that he intended to make.”

At the commencement of the hearing we were informed that Grounds 8 and 9 had been abandoned and granted the husband leave to rely upon the following additional grounds of appeal:

“10. That the Trial Judge erred in findings:
(a)(i) That the accounting fees usually paid for the business were in the region of $3,000-$3,500 pa;
(ii)That accountancy fees of $28,475 were paid between 24 April 1998 and 13 January 1999;

(b)(i) That the incorporation of [R Pty Ltd] and the circumstances of its operations were evidence of the husband’s lack of credibility and willingness to hide income and assets;
(ii)That the existence of the ([Town U]) contract was only admitted after the wife discovered it;

(c)(i) That the unsourced deposits of $6,000 and $3,000 were “cash”;
(ii)That such deposits establish that the husband had hidden cash resources;

(d)That the husband had appropriated property to himself prior to the commencement of the proceedings;
(e)That the husband had taken, for his personal use, $10,000 in the [V Finance] transaction.

11. That the Trial Judge erred in making findings based upon material evidence was not before him.
12. That the Trial Judge erred in that he made inconsistent findings on the profitability of the business, namely:

(a)That a business which had produced losses in four of the past five years “would continue to return a significant income”;
(b)That the business provides a significant future financial resource for the husband quite apart from providing substantial income.”

We had the benefit of a written outline of argument filed on behalf of each party. In summary, the husband complains that the trial Judge failed to give any or any adequate reasons, acted on a wrong principle of law and failed to consider or adequately consider the whole of the evidence and the impact of the orders on the husband. In addition, that it was not open to the trial Judge to make the notional adjustments for various sums of money as he did. Further, that his Honour erred in failing to make an order that the costs of the transfer to the husband were also to be borne equally by the parties.

In relation to the orders made on 1 December 1999 the husband seeks that the costs of transfer of property to the husband be shared equally by the parties and that Order 3 be set aside and an order made that the husband pay to the wife $564,000 in cash and/or property in lieu of $736,610 or alternatively that the applications for property settlement be remitted for a re‑hearing.

Submissions

In the outline of argument filed on behalf of the husband the grounds of appeal are grouped in the following way:

·Adequacy of Reasons - Grounds 1, 1A(i), 2(i) and 3(i).
·Hidden assets - Extra 7½% of Pool - Ground 2.
·Notional Add Back ($52,665) - Ground 4.
·Notional Add Back ($25,000 - accounting fees) -Ground 5.
·Section 75(2) Adjustment – (7½%) -Ground 3.
·Taxation and Realisation costs ($188,086) -Ground 6.
·Costs of Transfers Shared Equally - Ground 7.

The outline of argument did not address the additional grounds of appeal.

Adequacy of Reasons -Ground 1

In the outline of argument of the husband, under the heading of “General Overview”, it was submitted that the “…Court is unable to follow the Trial Judge’s line of reasoning and the reasons were given were inadequate.” It was submitted that apart from the adequacy of the reasons the trial Judge made a range of appealable errors. Then when dealing with the grounds of appeal (Grounds 1, 1A(i), 2(i) and 3(i)), which are said to specifically address the issue of adequacy of reasons, a number of submissions were made.

The hearing before his Honour took place over three days and involved substantial material. Written submissions were filed on behalf of both parties and in his reasons his Honour incorporated the written submissions made on behalf of the wife. His Honour found that as he accepted the submissions “as part of his judgment, it would be needlessly repetitious to set them out again”.

On behalf of the husband it was submitted that the first hurdle that besets any attempt to elicit what findings were made is how are the accepted submissions to be read and a question was posed namely are the positive assertions in the written submissions to be translated as findings by the trial Judge? An example was given in relation to the issue of hidden assets. It was submitted that in his reasons the trial Judge made a finding relying upon “paragraph 17 to 72” of the wife’s written submissions. Elsewhere in his reasons, his Honour said “I do not know whether he has any hidden assets” and “of course if they are hidden how could I” and finally “that the evidence of the husband is such, that on the balance of probabilities he has hidden assets”. On behalf of the husband it was submitted that his Honour did not in his reasons identify the evidence of the husband that he was referring to and that it was not possible to ascertain how the trial Judge reached the conclusion that he did in relation to the hidden assets. Thereafter, in the outline of argument, examples were given in relation to the add back of $25,000 for accounting fees, the incorporation of R Pty Ltd, the cash deposits of $6,000 and $3,000 and other matters. It was then submitted, referring to Bennett and Bennett (1991) FLC 92-191, that the task of a trial Judge is to disclose the path by which the result was reached. It was submitted:
“In that case, the Trial Judge carefully traversed the evidence on the issues, determined, disputed questions of fact and made assessments of the parties but then jumped (in error) to a conclusion without indicating the process of reasoning.
The Trial Judge here did none of that-he effectively jumped from the Wife’s submissions to his conclusion.”
It was submitted that his Honours reasons were inadequate and call for the intervention of this Court.

In Bennett and Bennett (supra) the Full Court (Nicholson CJ, Simpson and Finn JJ) reviewed the authorities relating to the adequacy of reasons for judgment and described at 78,266 as “particularly useful” a test propounded by Gray J in Sun Alliance Insurance Ltd v Massoud, (1989) VR 8, at 18, where that learned Judge said:
“The adequacy of the reasons will depend upon the circumstances of the case. But the reasons will, in my opinion, be inadequate if
(a)the appeal court is unable to ascertain the reasoning upon which the decision is based; or
(b)justice is not seen to have been done
The two above stated criteria of inadequacy will frequently overlap. If the primary judge does not sufficiently disclose his or her reasoning, the appeal court is denied the opportunity to detect error and the losing party is denied knowledge of why his or her case was rejected.”

Further, the Full Court said at 78,267:-

“In general, the appellate Court should be able to discern either expressly or by implication the path by which the result has been reached.”

The obligation to give reasons for a decision has been dealt with in numerous reported cases- see Pettit v Dunkley [1971] 1 NSWLR 376 at 380; Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378; Public Service Board of New South Wales v Osmond (1986) 159 C.L.R 656; Brazel and Brazel (1984) FLC 91-568; Soulemezis v Dudley (Holdings) Pty Limited [1987] 10 NSWLR 247; Power and Power (1988) FLC 91-911; Commonwealth v Pharmacy Guild of Australia (1989) 91 ALR 65; Beale v Government Insurance Office of NSW (1999) 48 NSWLR 430 This Court has addressed the issue in Horsley and Horsley (1991) FLC 92-205; Bonnici and Bonnici (1992) FLC 92-272; Merriman and Merriman (1993) FLC 92-422; Smith and Smith (1994) FLC 92-488; Peters and Castuera (1994) FLC 92-500, Townsend and Townsend (1995) FLC 92-569, A and J (1995) FLC 92-619 and Doig v Doig (1999) FLC 92-869.

An important and perhaps primary purpose of the necessity to give adequate reasons is to enable an appeal court to properly examine the decision appealed from. In Beale v Government Office of New South Wales (supra) Meagher JA said at 441:

“The absence of reasons or insufficient reasons may not allow an appeal court to determine whether the trial judge’s verdict was or was not based on an error of law or an appealable error.”

However, there are other purposes. In Commonwealth v Pharmacy Guild of Australia (supra) Sheppard J said at 88:-

“... that is not the only important purpose which the furnishing of reasons has. A prime purpose is the disclosure of the tribunal’s reasoning process to the public and the parties. The provision of reasons engenders confidence in the community that the tribunal has gone about its task appropriately and fairly. The statement of bare conclusions without the statement of reasons will always expose the tribunal to the suggestion that it has not given the matter close enough attention or that it has allowed extraneous matters to cloud its consideration. There is yet a further purpose to be served in the giving of reasons. An obligation to give reasons imposes upon the decision maker an intellectual discipline. The tribunal is required to state publicly what its reasoning process is.”

As to the content of reasons for judgment in A and J (supra) the Full Court referred to various authorities where concerns have been expressed about the extent of the requirement to give reasons: Soulemezis v Dudley (Holdings) Pty Limited (supra) per Kirby P at 259-260, Mahoney JA at 271, McHugh JA at 279-280; Bennett and Bennett (supra) at 78,267; R & D (Unreported, 29 November 1994, Full Court (Fogarty, Kay and Tolcon JJ) at p.8) and Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32 at 41 per Hill J; Beale v Government Insurance Office of NSW (supra) at 442-444 per Meagher J.

In Soulemezis v Dudley (Holdings) Pty Limited (supra) Mahoney JA said at 271, 273-274:

“In my opinion, the law does not require that a judge make an express finding in respect of every fact leading to, or relevant to, his final conclusion of fact; nor is it necessary that he reason, and be seen to reason, from one fact to the next along the chain of reasoning to that conclusion
…
To require that a judge detail the way in which he has reasoned step by step to his conclusion is, in my opinion, to mistake the nature of the reasoning process..
…
The weight which a judge will give to the evidence of a witness will often be not capable of rationalisation beyond the statement: having heard him, I am not satisfied that I should accept what he says. The weight which a judge gives to a particular fact may be affected by, as it has frequently been put, his experience and, in particular, his experience of the significance of that fact in the order of things....His reasons, in the particular case, may partake as much of intuition based on experience as on formal and deductive reasoning.

That leads to, as I have described, the subjective element in the fact finding process. A fact is found in a particular case if the judge is satisfied that it is so. In many matters - and the weight to be given to a fact in the process of assessing facts is one of these - whether a judge is so satisfied in the sense required by Briginshaw v Briginshaw (1938) 60 CLR 336, may depend upon matters subjective to him as well as upon matters common to judges. I do not mean by this that decisions are, or are to be, made upon the basis of matters essentially idiosyncratic to the particular judge. The determination of facts is assumed to be objective. But it would be to misunderstand the basis of a decision, and in particular decisions in matters of assessment, weight and the like, to assume that decisions can always, or perhaps ordinarily, be justified by objective rather than subjective considerations. And, if such be true of the reasoning process, it is, in my opinion, a mistake to conclude that a judge should or can set forth the reasoning process he has followed from one fact to another.”

In Housing Commission of New South Wales v Tatmar Pastoral Co. Pty Limited (supra) Mahoney JA, referring to the duty of a judge to state reasons, said at 385-386:

“However, such a duty does not exist in respect of every matter, of fact or of law, which was or might have been raised in the proceeding. It is not the duty of the judge to decide every matter which is raised in argument. He may decide a case in a way which does not require the determination of a particular submission: in such a case he may put it aside or as Lord Scarman said, merely salute it in passing”

In A and J (supra) the Full Court said at 82,232:

“It is important to guard against too zealous an application of the requirement to give reasons, particularly in circumstances where it is argued that inadequacy in the reasons lies in the failure to make findings of fact leading to a finding of a material or an ultimate fact.”

Senior Counsel for the wife referred to the written submissions made on behalf of the wife in which the following appears (AB 1 at p.21.3-21.4):

“17. The circumstances surrounding the incorporation of this company, (which occurred by unilateral action by the husband without reference to the wife), assume an important position in this case. It is a clear forensic signpost to the lack of credibility of the husband and, in particular, of his willingness to hide income and assets from the wife, and to act with flagrant disregard to the entitlements of the wife. The existence of [R Pty Ltd] was not initially disclosed to the wife. It existence - and the existence of the contract obtained by it producing revenue of $158,125 - was admitted only after the wife discovered it and raised queries.
18. The husband sought to exclude the revenue from the [Town U] contracts conducted through [R Pty Ltd] because it was “a commercial […] job which is out of the ordinary course of business for [M Pty Ltd]”. That explanation was false and has now, apparently, been abandoned. The current explanation appears to be that the company was set up and the [Town U] contract undertaken in its name because the wife was not referring work. This explanation comes late and is entirely inconsistent with the evidence provided […], which evidence was not shaken in cross-examination and, it is submitted, would ready be accepted.”

Senior Counsel submitted that in this case the significant issue was the credit of the husband and that it is in essence an appeal against a finding of credit. He submitted that if the above passages appeared in the reasons for judgment, then it would reflect findings of fact by the trial Judge. It was submitted that in this case the trial Judge incorporated the submissions and that by incorporating and accepting the wife’s submissions, insofar as they contain statements of fact, the trial Judge was making findings in relation to those facts.

Senior Counsel for the wife submitted that a trial Judge may incorporate in his/her reasons for judgment the submissions made on behalf of the parties, for example submissions made in relation to questions of law. A trial Judge may also identify a discrete submission and say that it is accepted: Housing Commission of New South Wales v Tatmar Pastoral Co Pty Limited (supra). However, the approach, which the trial Judge adopted in this case was unusual and is one that we would discourage. The difficulty with a slavish incorporation of submissions made at the trial is that it may lead to error because of the inability of an appellate court to discern the process of reasoning. However, we accept the submission that the issue of the appropriateness of doing so is not one of principle but one of degree and the issue is whether or not what the trial Judge did was adequate in all the circumstances. It therefore becomes necessary for the appellate court to scrutinise the decision with particular care.

The outline of argument filed on behalf of the husband was unhelpful, and did not attempt to address the issues in a logical and helpful way. As was pointed out in the written outline of the wife there was a great deal of “emotional rhetoric”. However that said the difficulty in this case remains, namely to discern how the trial Judge arrived at the outcome. It becomes necessary for this court to consider the written submissions of the wife at the trial to ascertain what findings of fact it was submitted the Court should make, whether the evidence supports the relevant findings and further whether the submissions identify and address the findings to be made in relation to all necessary relevant statutory considerations

Notwithstanding the approach that was adopted in the outline of argument of the husband we propose to address the issues raised in the manner that authority suggests an application pursuant to s.79 Family Law Act be considered.

The approach to the determination of an application pursuant to s.79 is well established by authority: see Lee Steer and Lee Steer (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; Whitely and Whitely (1996) FLC 684 and Doig v Doig (supra). Section 79(2) provides that the court shall not make an order, under the section, unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. The court is required, in considering what order, if any, it should make, to take into account the respective contributions of the parties referred to in paragraphs (a), (b) and (c) of s.79(4); the effect of any proposed order upon the earning capacity of the parties; the matters referred to in s.75(2), so far as they are relevant; any other order made under the Act affecting a party or a child, and any child support under the Child Support Assessment Act.

The authorities establish that the approach normally to be taken is a three step process. The first step is to determine the extent and value of the property, liabilities and financial resources of the parties at the time of the trial: Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614. The second step is to consider what contributions have been made by the parties within ss.79(4)(a),(b) and (c). The third step requires consideration of what is identified as the ‘other factors’ being the matters in ss.79(4)(d),(e),(f) and (g), including by reference to s.79(4)(e) the matters in s.75(2): Lee Steere and Lee Steer (supra); Ferraro and Ferraro (supra) and Waters and Jurek (1995) FLC 92-635 Finally, it is necessary for the Court to be satisfied that, in all the circumstances, it is just and equitable to make an order.

Financial Circumstances

It was agreed that the ascertained property of the parties had a net value of $1,050,000. There was however the issue of non-disclosure, which the trial Judge dealt with when considering the matters in s.75(2). However, as to the ascertained assets he notionally included the amount of $83,207 to arrive at a net asset pool of $1,133,247.

The amount of $83,207 comprised the following:

·Amounts paid to husband from R Pty Ltd  $52,665
·Balance of proceeds of sale of a vehicle  $ 5,542
·Additional accounting fees   $25,000

The trial Judge did not in his reasons explain why the amounts were included. However, the written submissions of the wife addressed the issue and the trial Judge said that he accepted those submissions except in relation to the liquidator’s costs.

Given the considerable overlapping of issues raised in the grounds of appeal, and the manner in which the submission were made to us on behalf of the husband, we propose to deal with the complaints about the notional adjustments that the trial Judge made to the list of property when addressing the ground of appeal in relation to the further 7.50% that the wife was awarded because of non-disclosure by the husband.

Contributions - Ground 1.A

In relation to consideration of the contributions of the parties his Honour did in his reasons make relevant findings (AB 1 at p.19) and did not simply adopt what was submitted on behalf of the wife. The trial Judge made a finding that the contributions of the parties were equal. He found that the husband was the instigator of the activities that allowed the parties to achieve what they had and that the husband worked very hard. Further, the trial Judge found that the wife also played a significant part in the success of the business and was the main contributor to the welfare of the family.

At the trial, the husband had submitted (AB 4 at p.851-852) that to the date of separation the contributions were equal and that because of what happened after April 1998 there should be an adjustment to contributions in favour of the husband of between 2%-5%.

In our opinion, in the circumstances of this case, we consider that his Honour’s reasons for arriving at the conclusion that the parties’ contributions were equal, although not elaborate, are adequate in law, in that they are sufficient to reveal, and thus allow this court to scrutinise, the chain of reasoning by which he came to that conclusion.

We accept the written submission made on behalf of the wife at the trial that there could be little controversy directed towards the issue of contribution. Thus we find that this ground has not been made out.

Section 75(2) Adjustment - Ground 3

The trial Judge accepted the written submissions made on behalf of the wife in relation to the relevant s.75(2) considerations and found that a further 7.5% adjustment in favour of the wife was justified. However, the trial Judge did not simply adopt what was submitted on behalf of the wife; he also referred to other matters (AB 1 at p.19-20).

On behalf of the husband it was submitted that the trial Judge failed to have regard to the fact of the modest earning capacity of the business and further, that the trial Judge failed to have any regard to the husband’s future child support obligations. It was said that the trial Judge may have accepted the wife’s submissions that any future child support would be modest, however- this was not supported by the evidence and the husband had been paying child support of $150 per week and there was nothing to suggest that this was inadequate. Further, it was submitted that the evidence established that the care of the child has not in the past nor is likely in the future to affect the wife’s earning capacity. It was submitted that there was no evidence to support the finding that the wife intended to devote herself full time to the role of parent, such that she needed to be protected. It was submitted that there was no evidence that the duration of the marriage had affected the wife’s earning capacity. It was contended that the submission made on behalf of the wife that the retention of the business provided a significant future financial resource for the husband quite apart from providing substantial income, and that the business would give the husband the opportunity in the future to engage in significant real property investment, were not findings supported by the evidence.

In his reasons for judgment the trial Judge identified the factors that he took into account. He made a finding in relation to the following relevant factors, namely: the age of the parties, the state of health of the parties, the wife’s capacity for paid employment, that the husband would retain the income earning asset, that neither party had the responsibility to support any other person, the standard of living of the parties and importantly, the wife’s responsibility for the ongoing care and control of the youngest child of the marriage.

The written submissions made on behalf of the wife (AB 1 at p.21.17-21.18) identified various relevant factors, which included that the husband would receive the assets from which he would derive an income and that the bulk of the wife’s entitlement would comprise the former matrimonial home in which she would live with the child and that the wife would continue to have the full time care and control of the child.

In the written submissions made on behalf of the husband (AB 4 at p.852-853) it was submitted that there should be no adjustment but that if an adjustment were made then a figure of 2% should be afforded the wife.

In our opinion, notwithstanding the brevity of his Honour’s reasons, and reference to s.75(2) matters that are not relevant in proceedings pursuant to s.79, the trial Judge did identify and assess relevant factors and the process of his Honour’s reasoning is disclosed such that it is possible to scrutinise what he did. In our opinion, an adjustment of 7.50% in favour of the wife, was within the discretion of his Honour even allowing for the matters raised in the outline of the husband. A significant matter that the trial Judge identified (AB 1 at p.20) was the responsibility of the wife for the care and accommodation of the 12 year old child.

However, the ultimate adjustment which is made to the contribution based entitlements of the parties to reflect the “other factors” would depend upon the findings that the trial Judge made in relation to the financial circumstances of the parties including the notional additions and hidden assets. The ultimate outcome of step three therefor depends upon the findings made at step one.

Hidden Assets - Ground 2
Notional Adjustments- Grounds 4 and 5

In addition to notionally including in the pool of assets the amount of $83,207 the trial Judge also awarded 7.5%, or $85,000, of the net pool of assets to the wife because he found that the husband had hidden assets. In our opinion, these are the significant issues in this appeal. The trial Judge found that one of the main areas of dispute was the claim by the wife that the husband had not made a full and frank disclosure of his financial circumstances. The wife sought a further 10% of the assets of the parties to reflect her entitlement for what the husband had not disclosed.

His Honour made a finding that the husband was not a reliable witness and that his behaviour leading up to the trial, and the evidence he gave during the trial, was not persuasive in describing him as a witness of truth. Senior Counsel for the wife described the appeal as an appeal against a finding of credit. However, the trial Judge did not identify in his reasons the matters that led him to this conclusion. Further, apart from the finding as to credit of the husband, the trial Judge did not identify in his reasons any other matters that led him to the conclusion that the husband had failed to make a full and frank disclosure of his financial circumstances at the date of the hearing. The trial Judge did not set out how he arrived at the percentage adjustment of 7.5%. It is therefore necessary to consider the written submissions made on behalf of the wife at the trial that were incorporated into the reasons of the trial Judge.

The obligation of parties in financial proceedings to make a full and frank disclosure of their financial circumstances, and all matters relevant thereto, has been considered in a number of authorities: St John v St John (New South Wales Court of Appeal, 19 June 1974, unreported per Hutley JA); Penfold v Penfold (1980) FLC 90-800 at 75,055; Livesey v Jenkins (1985) 1 All ER 106; Oriolo v Oriolo (1985) FLC 91-653; Giunti v Giunti (1986) FLC 91-759; Mezzacappa v Mezzacappa (1987) FLC 91-853; M v M (Full Court, 4 February 1991, unreported); Black v Kellner (1992) FLC 92-287; Weir v Weir (1993) FLC 92-338; Suiker and Suiker (1993) FLC 92-436; H v H (Nicholson CJ, 2 August 1993, unreported); Efthimiadis and Efthimiadis (1993) FLC 92-362, Stay and Stay (1997) FLC 92-751 and D & D [1999] FamCA 426.

In our opinion, some of the principles that emerge from the authorities are as follows:

·In proceedings in the Family Court, in relation to financial matters, there is an obligation on each party to make a full and frank disclosure of his/her financial circumstances and all matters relevant thereto;
·The obligation arises because of the necessity for the Court in such proceedings to consider all aspects of the financial circumstances of each party (steps 1, 2 and 3);
·If there is non-disclosure, in the relevant sense, then the failure to disclosure undermines the whole process of adjudication of the proceedings in relation to financial matters;
·The obligation is not created by the rules or practice of the Court and the rules simply set out the procedure by which that obligation may be fulfilled;
·If there is a deficiency in the rules or practice adopted for the purpose of making such a disclosure mere compliance with the requirements of the relevant rule or practice, if deficient, is not enough;
·A finding of non-disclosure may, in appropriate cases, result in the other party being granted, without more, the relief sought. However, it does not follow that the outcome sought is appropriate in all such cases. It depends on the circumstances of each case. It may be, in the circumstances of certain cases, that it is appropriate to simply award to the innocent party all that he/she seeks. However, we do not accept that such an outcome is required or necessary in all cases where there is a finding of non-disclosure. That said, it also does not follow that non-disclosure should be ignored: Penfold and Penfold (supra). However, if there is a finding of non-disclosure there should always be reasons given supporting the findings and for the consequences of such a finding

It may be appropriate, depending on the circumstances, to make notional adjustments to the pool of assets to reflect identified items of property that have been bona fide disposed of or one party only has had the benefit of to the exclusion of the other party: Townsend and Townsend (supra); Farnell and Farnell (1996) FLC 92-681.

It may also be appropriate, depending on the circumstances, to notionally include in the pool of assets items of property in respect of which no or no reasonable explanation has been given for the assertion that they no longer exist or never existed: Mezzacappa and Mezzacappa (supra). In other words, it is also possible, in appropriate cases, to have regard to, and notionally include in the list of assets, what is called unascertained property the value of which is capable of some identification and quantification.

In this case, the trial Judge notionally included in the pool of assets items that were capable of identification and quantification. However, he also found that there were other assets the identify of which was not known but for which an adjustment should be made in favour of the wife. There is no doubt that such a finding is open to a trial Judge.

The trial Judge said (AB 1 at p.20):

“I do not know whether he has hidden assets. Of course, if they are hidden, how could I?”

We would understand his Honour to mean that the consequence of his finding about non disclosure was that he could not identify the assets that the husband did not disclose.

The wife was in administrative control of the business until April 1998. Thereafter the husband was in control for about 18 months before the trial. It was also accepted that the husband had limited education and experienced difficulty in reading and writing. In the written outline of the husband it was said that the husband’s limitations were not in issue. A psychological report put his reading age at 11 years. The wife at the trial said she was primarily responsible, particularly from about 1990 onwards, for the bookkeeping of the business and designing and operating a comprehensive system of bookkeeping for the business.

In the written submission made on behalf of the wife an analysis was undertaken of the evidence about various transaction (AB 1 at p.21.3-21.14) and a submission made (AB 1 at p.21.14) that the transactions, when taken as a whole, lead to the conclusion that the Court would have real concerns both as to the husband’s veracity and the reliance that could be placed on his evidence with respect to the true picture of the property of the parties or either of them. Given the incorporation by the trial Judge in his reasons of the written submissions made on behalf of the wife at the trial it is necessary to consider what was submitted in relation to various transactions.

There was an issue about the circumstances surrounding the incorporation of R Pty Ltd. The company was incorporated in September 1997 and the husband was the sole director and shareholder. We have already identified (pa 47) what was said in the written submissions (AB 1 at p.21.3) about the circumstances surrounding the incorporation of this company. Senior Counsel for the wife described what was submitted as the ultimate finding supported by intermediate findings based on evidence.

After separation the husband caused R Pty Ltd to be incorporated and in the period between September 1997 and about April 1998 this company undertook a commercial contract called the ‘[Town U] contracts’, for W Company, from which it obtained revenue.

Senior Counsel for the husband submitted that the evidence established that the wife always knew about the ‘[Town U] contracts’, that the financial controller had opened up a file for it, that on the same day that the company was incorporated the husband effectively told the wife what was going on and the husband used his own name for the company having acquired it through the business accountant whose office was the registered office of the company.

Detailed submissions were made on behalf of the wife at the trial in relation to the company and the Town U contracts (AB 1 at p.21.4). Senior Counsel for the wife submitted that the relevant matter was the existence of the company and not the contract work undertaken by the company. The husband did not tell the wife that he was setting up the company and was directing work through it and not M Pty Ltd. The explanation was that the company was set up, and the Town U contract undertaken in its name, because the wife was not referring work. We are satisfied that the existence of the company was discovered by the wife as a result of her own enquiries, or enquiries made on her behalf, and not as a result of anything said or communicated by the husband. However, the wife and those advising her were aware of the company before the trial and had the opportunity to investigate the company and the Town U contract.

The husband withdrew an amount of $52,664 from R Pty Ltd and included in that amount were payments of $22,250 for legal expenses. Some were paid at a time when the husband was asserting that he had no funds to pay legal expenses and was seeking an order that he be paid a sum of money to defray the costs of the Family Court proceedings. In the outline of argument of the husband it was conceded that $22,254 paid from this source for legal costs should be included in the list of assets. We are satisfied that the evidence does establish that at the time when the husband was asserting that he had no money to pay legal costs he had or was paying such costs from funds that he had taken from R Pty Ltd. However, so far as the wife is concerned the trial Judge notionally included the amount of $52,664 in the list of assets. On behalf of the husband it was submitted that no allowance is made for the notional tax of $21,785 on the amount taken by the husband

The husband also paid $6,240 as a donation to a friend. In the written submissions made at the trial on behalf of the wife (AB 1 at p.21.5) it was submitted that the husband could not explain why the amount was an odd amount as distinct from an even amount such as $6,000. No submissions were made to us on behalf of the husband about this payment and it is not the subject of a ground of appeal. The amount was paid from the amount of $52,664 and in the outline of argument of the husband it was said that the only add-back from the $52,664 should be for legal costs. In our opinion, the trial Judge would have been entitled to also add back or notionally include this amount.

The husband paid to the credit of an account in his name cash sums of $6,000 and $3,000 and neither he nor his accountant could explain the source of those funds. These amounts were the subject of detailed written submissions on behalf of the wife at the trial (AB 1 at p.21.5). In the outline of argument of the husband it was submitted that the only evidence was that of the wife’s accountant who had been unable to identify the source of the funds. Further, that the husband had not had the opportunity to locate the source, had not read the report of the wife’s accountant and would not have understood it anyway. Senior Counsel for the wife submitted that it does not matter whether the deposits came from cash or cheques, although if they were from cheques then the source could be identified. Senior Counsel submitted that what was relevant was that the husband was unable to explain the source of the money. The money did not come from the proceeds of the Town U contracts. The money did not come from M Pty Ltd. In the written submissions made on behalf of the wife at the trial it was said that the husband denied that the money could be explained by cash sales of materials as these had been sold through M Pty Ltd and banked. Further, that in cross examination the husband said that he may have borrowed the money but could not name the lender, specify the purpose of the loan nor say whether the loan had been repaid.

It was submitted on behalf of the wife at the trial that the above matters raise grave reservations about the husband’s credibility in general and, in particular, the honesty of his disclosure of assets and the sources of cash or other property (AB 1 at p.21.6).

The written submissions then addressed an issue about the fall in revenue of M Pty Ltd after the husband assumed control of the business in consequence of orders made in April 1998 (AB 1 at p.21.6). In the written submissions made on behalf of the wife (AB 1 at p.21.6) it was submitted that up until the husband assumed sole control of the business in April 1998 M Pty Ltd consistently earned revenue of about $100,000 gross per month averaged over a year and that immediately the husband assumed control the systems put in place by the wife ceased and the reported revenue dropped by half to $50,000 gross per month on average. The wife asserted that the husband had failed to account to M Pty Ltd for income earned. It was submitted that although the wife could not particularise the extent and dollar value of all such failure to account there was a powerful circumstantial case of such activity and examples were identified as the Y Street transaction, the Z transaction, the AA Street transaction and the two cash payments of $6,000 and $3,000.

In the outline of argument of the husband it was submitted that M Pty Ltd had made substantial losses in four of the five years prior to the hearing and that the most recent year in which a profit was made was 1996. Further, that the submissions of the wife at the trial were pre-occupied with the fall in revenue rather than profitability which was described as marginal and that the accountants had attributed no goodwill value.

The written submissions made on behalf of the wife then addressed the transactions identified above that were given as examples of behaviour on the part of the husband that he had failed to account to M Pty Ltd for income earned during the period April 1998 to the date of the trial. The first transaction was identified as the Y Street properties (AB 1 at p.21.6-21.9). The issue was in respect of three houses and it was accepted at the trial that the husband had not discovered certain documents. No submissions were made on behalf of the husband before us in relation to the Y Street properties. However, the value of the houses was included in the value of M Pty Ltd (AB 1 at p.21.2).

There was an issue about what was identified in the written submissions of the wife as the “[Z] transaction” (AB 1 at p.21.9-21.11). Again, no submissions were made on behalf of the husband before us about this transaction.

There was an issue about a purported joint venture between the husband and another person to purchase and renovate a house at AA Street, Town BB (AB 1 at p.21.11-21.12). The property was acquired in mid-1998 and sold in early 1999. The venture was the subject of evidence from the wife’s accountant Mr CC (AB 2 at p.456). Again, no submissions were made on behalf of the husband before us about this transaction.

The next transaction that was identified in the written submissions of the wife was titled as “Other housing stock” (AB 1 at p.21.12-21.13). No submissions were made on behalf of the husband about this transaction.

The next transaction dealt with in the submissions made on behalf of the wife at the trial relates to the proceeds of sale of a vehicle (AB 1 at p.21.13). There was an issue about an amount of $5,542.89 that the husband said he “trousered” from the proceeds of sale of a vehicle. However, the trial Judge notionally included the proceeds of sale of the vehicle in the list of assets. This item was not the subject of submissions on behalf of the husband in the outline of argument filed on his behalf.

The next transaction dealt with in the submissions related to a debt of $10,000 owed by DD Company and the husband admitted he was allowed by the owner of the company to use a V Finance account in order to obtain goods from EE Company. It was submitted that (AB 1 at p.21.13) the effect of the arrangement was to reduce the assets of M Pty Ltd by the $10,000 written off while allowing the husband to have the benefit of the money by means of access to the V Finance account. On behalf of the husband it was submitted that part of the money spent was the purchase of machinery for the company. However, Senior Counsel for the wife submitted that there was no evidence of goods being received. The trial Judge did not notionally include this amount in the list of assets.

The written submissions made on behalf of the wife at the trial then provided what is called a “Summary of Concerns” (AB 1 at p.21.14) and it was said that the transactions described, when taken as a whole, would lead the court to have real concerns about the veracity of the husband and the reliance that could be placed on his evidence with respect to the true picture of the property of the parties or either of them.

The written submissions (AB 1 at p.21.14-21.15) then summarised the conclusions that the trial Judge should reach in relation to non-disclosure by the husband and the difficulties with his evidence. The fall in revenue of M Pty Ltd was described as the best indicator of all of the husband’s behaviour. In the context of addressing the fall in revenue submissions were made about the amount of accountancy fees of $28,475.55 paid after the husband obtained control of the business (AB 1 at p.21.15). It was submitted that the usual amount paid for accountancy fees was in the region of $3,000-3,500. It was not challenged that $25,000 was spent and the issue was as to the appropriateness of the payment. However, the trial Judge notionally included the amount of $25,000 in the list of assets.

Then in the written submissions of the wife, under the heading of “Effect of Findings” (AB 1 at p.21.16-21.17), it was submitted that some of the transactions were capable of precise quantification, some amounts were appropriated by the husband for his own benefit, and thus diminished the pool of assets available for distribution, and some expenses were incurred by the husband on the account of M Pty Ltd that ought have been met by the husband. It was submitted that in respect of ‘these transactions and amounts” they should be notionally added back to the pool of assets and the items identified were amounts that totalled $83,207.89 namely the amounts paid to the husband from R Pty Ltd ($52,665), the proceeds of sale of the vehicle ($5,542.89) and the additional accountancy fees ($25,000). This gave a total pool of $1.13 million. The trial Judge accepted the submissions in relation to the amount of $83,207.89 (AB 1 at p.21.16 at pa.68) and added the amounts to the pool of assets to arrive at a net value of $1,133,247.

However, in the written submissions it was then said (AB 1 at p.21.16-21.17):

“69    Additionally, in the words of the Full Court in Weir it has been difficult enough for the [wife] to establish” transactions and business conducted surreptitiously by the husband, “let alone establish the quantum of what has been taken” by him. As the Full Court has pointed out, Courts should not shy away from making appropriate awards in cases of non-disclosure or hiding of assets by reason of the difficulty in quantifying same.
70      Here, there are pointers available to the court in approaching that task. Some indication of the true level of the asset pool is given by what is known of the specific dishonest transactions identified by the wife. A measure of the true position with respect to [Y Street] is a diminution to the pool of $21,750 (three houses at the agreed value of removal stock of $7,250 per house). In respect of the [Z] transaction, the true picture is represented by adding $34,000. The [V Finance] transaction resulted in a debt write-off of $10,000. The [AA Street Town BB] property resulted in a diminution to the pool of about $1,860 (an unexplained write off of $1,500 and half the profit of $723 not received).
71     There is the clearest possible evidence that the husband has been able to access $9,000 in cash at a time (on his case) where his sole income earning entity is experiencing a very severe liquidity crisis. The cash has been accessed from a source wholly undisclosed and unexplained by either the husband or [Mr T]. The questions which are obviously begged are: if $9,000 at that time, how much more? If he could do it then, why not as and when he needed more? How big is this source of cash? Where is it? What is it? As the husband himself said under cross-examination, he knew he was “under scrutiny”. Given what is now known about the manner in which he attempted to hide and obfuscate the transactions which the wife has been able to identify, what steps has he taken to hide his cash source and any unsourced cash transactions?
72.     The wife frankly concedes that she cannot offer any evidence in support of specific answers to any of those questions. But, this court could feel absolutely confident about finding that the total represented by the transactions outlined at paragraph 70 (about $67,500) represents only the tip of the iceberg in terms of the amounts hidden or undisclosed by the husband. An addition to the pool of $113,000 or 10% (or put another way, an additional entitlement to the wife of 10% of the known pool) to take account of those undisclosed or hidden assets can, in that light, only be seen as generous to the husband. There should be a finding to that effect”.

As can be seen from the above analysis of the written submissions made on behalf of the wife at the trial, some of the transactions were identified, quantified and notionally included in the list of assets. However, in relation to the other transactions, dealt with in the written submissions, these were also identified and quantified, namely the Y Street properties of $21,750, the Z transaction of $34,000, the V Finance transaction of $10,000 and the AA Street transaction of $1,860. These transactions came to a total of $67,500 but were not notionally included in the list of assets.

The written submissions made on behalf of the wife at the trial not only identified, and quantified, the items of property that should be notionally included in the list of assets ($83,207.89) but also identified, and quantified, the other transactions ($67,500) that it was submitted justified a further 10% to the wife or $130,000. The trial Judge however did not notionally include the amount of $67,500 but awarded to the wife a further 7.50% or $84,993.52 being a difference of $17,493.52 presumably because he accepted that the amount of $67,500 was “only the tip of the iceberg”.

The written submissions made at the trial on behalf of the wife were detailed and comprehensive. However, in this case the trial Judge made a finding of a failure to make a full and frank disclosure by the husband in circumstances where his Honour simply incorporated the written submissions filed on behalf of the wife. When the written submissions made on behalf of the wife are analysed it is difficult to ascertain the process of reasoning that lead to the conclusion that by reason of such non-disclosure the wife should receive a further 7.50% of the assets of the parties. This is particularly so because some of the items dealt with were notionally included in the list of property and other transactions, although identified and quantified, were not included in the list of property but simply relied upon as examples of why the trial Judge should find that the husband failed to make a full and frank disclosure and had hidden assets. Adopting the line of reasoning in the written submissions of the wife it would have been open to the trial Judge to notionally include the amount of $67,500. It was also permissible for his Honour to make an adjustment by a specified percentage of the ascertained property to reflect the non-disclosure having regard to s.75(2)(o). It was also permissible for his Honour to have his findings reflect the non-disclosure in the percentage adjustment he considered appropriate having regard to all the “other factors” including the matters in s.75(2).

In Soulemezis v Dudley (Holdings) Pty Limited (supra) McHugh JA said at 280:

“If an obligation to give reasons for a decision exists its discharge does not require lengthy or elaborate reasons: Ex parte Powter; Re Powter (1945) 46 SR (NSW) 1 at 5; 63 WN 34 at 36. But it is necessary that the essential ground or grounds upon which the decision rests should be articulated”

As we have already said, although as a matter of principle it may be done, we would discourage what his Honour did namely simply referring to the submissions made on behalf of one party and, without more, incorporating them in the reasons for judgment. In our view, in a case where it is asserted that a party has failed to make a full and frank disclosure of his/her financial circumstances it is incumbent on the trial Judge to identify in his/her reasons the essential grounds upon which such a finding rests. This is particularly so when the finding of non-disclosure may result in an award to the innocent party of a percentage of the ascertained property to reflect what is hidden and cannot be identified and quantified. If there is a finding of non-disclosure there should always be reasons given supporting the finding and for the consequences of such a finding given the wide range of outcomes that are possible. In our opinion, such a finding is significant and the outcome can be varied: Briginshaw v Briginshaw (1938) 60 C.L.R 336 at 362 per Dixon CJ. In such circumstances, it would only be in a rare and exceptional case that a trial Judge could fulfil the obligation to give adequate reasons by simply incorporating, without more, all of the submissions of one of the parties. However, that is what his Honour did in this case and the result is that we are unable to discern the path that led to the result of a further 7.50%. The question is posed why 7.50% and why not 10% given that this is the percentage that the wife sought and the trial Judge accepted the submissions of the wife. In the result, in our opinion, it has been established that the trial Judge was in error in that he failed to give adequate reasons for the further adjustment of 7.50% to reflect the asserted non-disclosure. For this reason alone the appeal must be allowed.

It is then necessary to consider whether we are able to re-exercise the discretion in substitution for that of the trial Judge. In Bennett and Bennett (supra) the Full Court said at 78,267:

“In the absence of adequate reasons, the Full Court is not obliged to uphold a judgment merely because the result may be said to fall within the wide ambit of the Judge’s discretion. In general, the appellate Court should be able to discern either expressly or by implication the path by which the result has been reached”.

The appeal will succeed because of inadequate reasons. However, there remains the issue of non-disclosure of assets by the husband and in determining this issue the credit of the husband may be relevant. Further, the evidence does not enable us to reach any safe conclusion as to what the pool of assets is. We also do not suggest that the evidence could not justify a further adjustment, having regard to s.75(2)(o), for hidden assets. In the result there will have to be a re-trial.

Given that we propose to uphold the appeal, and remit the case for hearing before a single judge, it is not necessary for us to deal with Ground 6 (Taxation and realisation costs) and Ground 7 (costs of transfer).

Costs

At the conclusion of the hearing, we received submissions as to costs. On behalf of the husband, Senior Counsel submitted that if the appeal was successful the wife should pay the husband’s costs of the appeal. In the alternative Senior Counsel submitted that if the appeal succeeded on a question of law, then the husband would seek a certificate pursuant to s.9 of the Federal Proceedings (Costs) Act 1981 in relation to the appeal and a certificate pursuant to s.8 of that Act in relation to the costs of a retrial.

The appeal has succeeded because we are satisfied that the trial Judge failed to give adequate reasons for his decision. The failure to give reasons when reasons ought to be given is an error in the judicial process and constitutes an error of law: Pettitt v Dunkley (supra) at 388-389; Beale v Government Office of NSW (supra) at 444.

On behalf of the wife Senior Counsel opposed any order for costs, and submitted that if the appeal was successful a certificate should be granted to the wife pursuant to s.6 of the Federal Proceedings (Costs) Act in relation to the appeal and further a certificate granted pursuant to s.8 of that Act in relation to the costs of a retrial. In our view, having considered the submissions, we do not consider it appropriate to grant an order for costs.

In the circumstances, we propose to grant certificates to the parties both in relation to the hearing before us and the costs of the retrial

Orders

That the Appeal be allowed.

That the orders made on 1 December 1999 and 17 January 2000 be set aside.

That there be no order for costs of and incidental to the appeal.

That the Applications for final orders for settlement of property be remitted to the Brisbane Registry of the Family Court of Australia for determination by a Judge other than the trial Judge at the earliest possible date.

That the Court grants to the appellant/husband a costs certificate pursuant to the provisions of s.9 of the Federal Proceedings (Costs) Act 1981 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/husband in respect of the costs incurred by the appellant/husband in relation to the appeal.

That the Court grants to the respondent/wife a costs certificate pursuant to s.6 of the Federal Proceedings (Costs) Act 1981 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/wife in respect of the costs incurred by the respondent/wife in relation to the appeal.

That the Court grants to the appellant/husband a costs certificate pursuant to the provisions of s.8 of the Federal Proceedings (Costs) Act 1981 being a certificate stating 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/husband in respect of such part as the Attorney General considers appropriate of any costs incurred by the appellant/husband in relation to the new trial granted by these orders.

That the Court grants to the respondent/wife a further certificate pursuant to the provisions of s.8 of the Federal Proceedings (Costs) Act 1981 being a certificate stating 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/wife in respect of such part as the Attorney General considers appropriate of any costs incurred by the respondent/wife in relation to the new trial granted by these orders.

I certify that the preceding 31 paragraphs are a true copy of the reasons for judgment delivered by this Honourable Full Court.

Associate