B & B (No.2)
[2000] FamCA 734
•19 June 2000
[2000] FamCA 734
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT SYDNEY
Appeal No. EA100 of 1999
File No. SY5960 of 1996
IN THE MATTER OF:
B and B (No. 2)
Appellant/Wife
Respondent/Husband
EDITED
REASONS FOR JUDGMENT
BEFORE: Nicholson CJ, Ellis and Joske JJ.
HEARD: 9th day of May 2000
JUDGMENT: 19th day of June 2000
APPEARANCES: Mr Brereton SC with Mr Johnston of counsel, instructed by
Gillis Delaney Brown, Lawyers, Level 6/179 Elizabeth Street,
Sydney NSW 2000, appeared on behalf of the appellant wife.Mr Lindsay SC with Mr Bell of counsel, instructed by Barkus Edwards Doolan, Family Lawyers, Level 9/370 Pitt Street,
Sydney NSW 2000, appeared on behalf of the respondent husband.
Catchwords: Family law - Appeal - Discretionary orders - s.79 Family Law Act - Consideration of ss.79(4) and 75(2) factors
This is an appeal by the wife against orders made on 22 October 1999 by Moss J, the effect of which was to divide the net value of the parties’ assets, nearly $3,000,000, as to 45% to the husband and 55% to the wife, and to dismiss the wife’s claim for spousal maintenance.
The parties married in 1972 and separated in 1995. There are two children of the marriage aged 17 and 15 at the date of trial, who reside with the wife in the former matrimonial home.
At the time of marriage, the parties lived in Queensland, where the wife was employed as a secondary school teacher and the husband had recently commenced employment with A, a large consulting firm. Soon thereafter, he completed a legal degree. In 1974, he was transferred to the firm’s Sydney office. The parties moved to Sydney and in 1980, the husband was made a partner of that firm.
In 1983, following the birth of the second child of the marriage, the wife resigned from employment and has not been engaged in full-time paid employment since.
In 1986, the husband resigned from A and commenced providing business advice and consulting services to C, a major law firm. In 1991, the husband was admitted as a maximum level partner in C.
The main issue at trial was as to the characterisation of the husband’s partnership interest and its value. The trial Judge accepted the evidence of the valuer called on behalf of the husband and valued the husband’s partnership interest at $110,827.
The trial Judge assessed the relevant contributions as being 40% by the wife and 60% by the husband. He assessed the relevant s.75(2) matters at 15% in favour of the wife.
It was submitted on appeal that the trial Judge erred:-
in concluding the husband’s contributions were greater than the wife’s and should be apportioned 60:40 in his favour;
in concluding that the only significant relevant s.75(2) factor was the considerable difference in earning capacity between the parties;
in making only a 15% adjustment on the basis of s.75(2) factors; and
in dismissing the wife’s spousal maintenance claim.
Held:-
The trial Judge did not err in his assessment of the parties’ contributions. It was open to him to make the assessment which he did.
The thrust of the wife’s submission was that in assessing the s.75(2) matters at 15%, the trial Judge failed to take into account, as she submitted before him, the substantial contributions of the wife to the husband’s income earning capacity built up during the marriage. The Court was of the view that the trial Judge did not take that contribution of the wife into account in making his assessment.
The appeal was thus allowed. In re-exercising the discretion, the Court made a s.75(2) adjustment to the contribution based award in favour of the wife of 30% of the net value of the assets of the parties.
The Court dismissed the appeal against the refusal of the trial Judge to make an order for spousal maintenance.
The Court declined to express a concluded view relating to the opinion expressed by the trial Judge that the husband’s partnership interest ought to be classified as a non-assignable chose-in-action and thereof a personal right in the husband rather than a right of a proprietary nature as that aspect was not argued on the appeal.
Directions given for the filing of written submissions as to the costs of the appeal as well as the appeal relating to an order for costs.
Reportable.
This is an appeal by the wife against Orders 1, 2, 3, 9, 10, 12 and 13 made by Moss J. on 22 October 1999. Those orders provided:-
“1.That the parties do all acts and things necessary to sell the property situate at and known as 25 Kardinia Road, Clifton Gardens in the State of New South Wales comprised in folio Identifier 8/3/2395 (the “Clifton Gardens property”) by public auction including:
1.1place the Clifton Gardens property for sale with a real estate agent for the sale by auction at a date to be determined by the Applicant but not later than Saturday, 5th February 2000 with such agent as the parties agree and failing agreement, with such agent as the President of the real (sic) Estate Institute of New South Wales shall appoint (the “agent”) the costs of and incidental to such appointment to be borne equally by the parties as and when same fall due;
1.2execute all documents requested by the agent for the sale of the property by auction;
1.3the reserve price for the purpose of such auction shall be such as the parties agree upon and in default of their agreement for a period exceeding 14 days after the day on which the Clifton Gardens property is listed for sale by public auction, at the price recommended by the agent;
1.4give such instructions as are necessary to a solicitor as agreed upon by the parties and failing agreement with such solicitor as may be appointed by the President for the time being of the Law Society of New South Wales (the “solicitor”) the costs of and incidental to such appointment to be borne equally by the parties as and when same fall due for the preparation of a contract for sale and for the contract for sale to be made available to the agent prior to the auction;
1.5attend at the auction and in the event that the reserve price is not reached, accept the advice of the agent as to the acceptance of a price less than the reserve price and negotiate with the highest bidder provided the price is not less than 10% below the reserve price;
1.6execute the contract for sale and any other documents necessary to complete the sale;
1.7the Applicant shall co-operate in every way with the agent in relation to the auction of the property including (without limiting the generality of the foregoing):
1.7.1 making a key available;
1.7.2allowing inspection of the home at all reasonable times requested by the agent;
1.7.3doing or saying nothing to hinder or prevent a sale being effected;
1.7.4ensuring that the home and grounds are in a neat and clean condition at the time of inspection by the prospective purchasers;
1.8if the Clifton gardens (sic) property remains unsold, the parties shall do all acts and things and sign all documents necessary to continue to re-list the Clifton Gardens property for sale by public auction again at three monthly intervals or such intervals as recommended by the agent, and the provisions of Orders 1.1 to 1.7 inclusive shall apply successively until the Clifton Gardens property has been sold save that at each successive auction the reserve price to be agreed by the parties in writing as soon as practicable prior to the auction having regard to the advice of the agent;
2.On settlement of the sale of the Clifton Gardens property the proceeds of sale be paid in the following manner and priority:
2.1all costs and expenses of sale including legal costs and disbursements, agents commissions, valuers fees, and auction expenses (including repayment of any such expenses as have been paid by either or both of the parties);
2.2the amounts required to pay all municipal and water rates outstanding with respect to the Clifton Gardens property;
2.3the amount then remaining forthwith be apportioned between the parties so that when that amount is added to the net value of the remaining assets namely $1,200,986.00 and taking into account the value of the assets already in the possession or power of each of the parties the Applicant receives such sum as results in her obtaining 55% of the overall net asset value and the Respondent 45% thereof;
3. That pending the sale of the Clifton Gardens property, the Applicant:
3.1have the right of exclusive occupation of the Clifton Gardens property;
3.2pay all costs of and incidental to her occupation of the Clifton Gardens property including but not limited to all water and council rates, taxes (if any), insurances, telephone, electricity, gas and maintain the property in good order and condition;
…
9.Further, by way of property settlement the Respondent pay to the Applicant the sum of $1,000 per week pending completion of the sale of the Clifton Gardens property, payable monthly, the first payment to be made by the end of October 1999;
10. The Applicant's Application for spouse maintenance be dismissed;
…
12.Pursuant to the Slip Rule Order that paragraph 41 of the Reasons for judgment herein dated 3rd September 1999 be amended by substituting “55%’ for “70%” where the latter appears in the said paragraph;
13.That the Applicant pay the Respondent’s costs and disbursements of and incidental to these proceedings incurred as and from 4th June 1998 as agreed or failing agreement as taxed.”
The effect of those orders is to divide the net value of the assets of the parties, found by the trial Judge to be $2,915,986, as to 45 per cent to the husband and as to 55 per cent to the wife, to dismiss the wife’s claim for spousal maintenance and to provide that the wife pay the husband’s costs incurred as and from 4 June 1998.
BACKGROUND
The wife was born on 9 March 1951 and was thus aged 48 years at the date of the hearing before the trial Judge. The husband was born on 16 April 1950 and thus was aged 49 years at the date of the trial. The parties married on 12 August 1972 and separated almost 23 years later on 11 June 1995 when the husband left the then matrimonial home. A decree nisi dissolving their marriage was pronounced on 29 July 1996. There are two children of the marriage, J (a girl) born in 1981 and D (a boy) born in 1983 and, at the date of trial, were aged 17 and 15 years respectively. Both children were residing with the wife at the date of the trial.
The husband remarried on 16 November 1996.
JUDGMENT OF THE TRIAL JUDGE
None of the findings of fact made by the trial Judge were challenged on the hearing of the appeal. After referring to the orders sought by each of the parties, the trial Judge, in his reasons for judgment, made findings in relation to the relevant background material.
The trial Judge found that at the date of the marriage, the wife was employed as a teacher at a secondary school in Queensland and that the husband was a graduate from Queensland University, having obtained the degree of Bachelor of Commerce. He further found that, a few months prior to the date of the marriage, the husband had commenced work at A in Brisbane and that each of the parties continued to work in their respective professions following the marriage. In paragraph 36 of his reasons, the trial Judge referred to the initial contributions made by each of the parties to the marriage.
For the first six months of the marriage, the parties resided, rent free, in a flat owned by the husband’s parents. Thereafter, they purchased their first home in St. Lucia, a suburb of Brisbane. In the following year, the wife purchased a terrace house in Camperdown, a suburb of Sydney, with two others, utilising for that purpose some $2000 which she had received as damages as a consequence of a motor vehicle accident in which she had been involved. In the same year, the husband graduated from the University of Queensland with the degree of Bachelor of Laws.
In 1974, the husband was transferred from A’s Brisbane office to their Sydney office. As a consequence, the parties took up residence in Sydney in rented accommodation until the St. Lucia property was sold in 1976.
Following the relocation of the parties to Sydney, the wife undertook a two year part-time course which enabled her to be regarded as a three year trained teacher and to be paid accordingly.
In 1976, the parties purchased a home in Montague Road, Cremorne, funded partly from the net proceeds of sale of the St. Lucia property and partly from moneys raised by a mortgage over the property. In the same year, a company, J Nominees Pty Ltd, was incorporated, the shareholders of which were the husband and the wife, with the husband, the wife and the husband’s sister as directors.
In 1979, the wife sold her interest in the Camperdown property, receiving approximately $4500 which she contributed to renovations on the Montague Road, Cremorne property.
In 1980, a company known as L Pty Ltd was incorporated to act as the trustee of the L Unit Trust. The parties were the directors and shareholders of the company, which was not active at the date of the trial. The Trust was established to acquire an investment property in Albany Street, St. Leonards. At the same time, the Mo Trust was established, with J Nominees Pty Ltd as the trustee, with a view to receiving the proceeds of the E Assignment income from A. That Trust was not active at the date of the trial and the trustee of the Trust was at that time PL Properties Pty Ltd.
The husband became a partner in A in 1980 and was placed in charge of the firm’s Sydney taxation practice.
In 1981, the husband, through the L Unit Trust, sold the Albany Street property at a profit of some $50,000. In 1982, the Trust acquired a warehouse at Dixon Avenue, Artarmon.
In 1983, the parties acquired, as joint tenants, land at Kardinia Road, Clifton Gardens, upon which they erected a residence in 1984. They then moved into that residence and the wife resigned from her then employment with the New South Wales Education Department. In the same year, the parties sold the Montague Road property, utilising the net proceeds of sale to discharge the loan taken out to build the Kardinia Road residence. Later that year, the husband arranged for investments in the M Unit Trust.
In 1986, the husband resigned from A and together with two others, established C Ltd. He carried on business as a taxation consultant which included providing business advice and consulting services to C.
In 1987, K Marketing Pty Ltd was incorporated. The partners acquired the issued shares of the company in 1988. Also, in 1987, the husband, through the L Unit Trust, sold the Dixon Avenue warehouse for a net profit of some $175,000.
In 1988, the husband disposed of his shares in C Ltd and J Nominees Pty Ltd acquired land at Wyong, shares in K Marketing Pty Ltd and a 50 per cent interest in an investment property at Moorebank.
J Nominees Pty Ltd, in 1989, entered into a sub-underwriting arrangement with BN Ltd. The venture was not successful and resulted in litigation between the two entities. That litigation was resolved on the advice of the husband’s legal advisers.
The husband’s mother passed away in 1989 and, as a result, the husband received $250,000 from her estate which he contributed to the assets of the parties.
In 1990, the wife commenced study at the University of New South Wales to obtain the degree of Bachelor of Arts. She obtained that degree in April 1995.
K Marketing Pty Ltd was placed in provisional liquation in 1991. One consequence thereof was that certain taxation losses became available for use at the husband’s direction. At the date of the trial, those losses were still being utilised by the parties. In the same year, the Ka Trust was established with L Pty Ltd as trustee to carry on a service trust activity previously carried on by the Mo Trust.
In 1991, the husband was admitted as a 100 unit partner in the firm C, that being the maximum level which a partner can obtain. At the date of the trial, the Ka Trust was receiving income arising from the E Assignment of 16 June 1993, being part of the husband’s partnership profits from C. The trustee of the Ka Trust at the date of trial was P Nominees Pty Ltd, of which the husband was the sole director and shareholder.
In 1991, the W Trust was established to receive distributions of service trust income from the C service entity. As at the date of trial, the trustee was P Nominees Pty Ltd.
In 1992, the husband commenced to deposit the sum of $5000 per month into an account in the name of the wife for living expenses. These payments continued to be made until the parties separated in June 1995. The husband continued to make the payments following separation for the use of the wife and the two children of the marriage. Later in 1995, the husband voluntarily increased the payments to $6000 per month.
In May 1999, B Pty Ltd executed a contract to acquire a property at Canowindra for $1,620,000. The husband is the sole shareholder and director of that company.
Thereafter, the trial Judge, in his reasons, identified the assets of the parties, the value of those assets, their liabilities and extent thereof. He found that the parties had net assets to the value of $2,915,986. He commenced that aspect of his reasons by saying:-
“26.As mentioned above, with the sole exception of the value of the Respondent’s partnership interest in C, the parties have come to an agreement, for the purpose of the proceedings, as to values in respect of relevant assets and liabilities. Although there is the issue concerning the value of the Respondent's interest in the partnership, it is not in dispute that the deduction mentioned in the schedule which follows, namely, a deduction of $54,375.00, must be deducted from whatever is found to be the value of the partnership interest. Set out hereunder is an agreed schedule of what are said to be the relevant assets and liabilities and the agreed values other than in respect of the partnership interest –
| ASSETS | Agreed Values | Not Agreed Values ($) |
| Real Estate | ||
| 1 | 25 Kardinia Road, Clifton Gardens | 1,715,000 |
| Credits in banks, building societies and credit unions | ||
| 2 | Respondent’s savings | 1,682 |
| 3 | Applicant’s savings | |
| 3.1 Advance Bank | 56,000 | |
| 3.2 National Australia Bank | 10,000 | |
| Cash | ||
| 4 | Respondent’s cash | 100 |
| 5 | Applicant’s cash | 200 |
| Life Assurance Policies | ||
| 6 | Respondent’s National Mutual life assurance policies: | |
| 6.1 number Q46,845T/5 - $537 | ||
| 6.2 number Q46,846T/3 - $537 | ||
| 6.3 number Q46,847T/1 - $537 | ||
| 6.4 number Q46,998T/2 - $537 | ||
| 6.5 number Q46,843T/0 - $537 total | 2,685 | |
| 7 | Applicant’s life assurance policies: | |
| 7.1 National Mutual | 15,000 | |
| 7.2 Suncorp | 6,000 | |
| Shares and debentures in public companies | ||
| 8 | Respondent’s AGL infrastructure bonds | 1,124,078 |
| 9 | Applicant’s shares in GWA Limited | 13,300 |
| Shares in private companies | ||
| 10 | Respondent’s shares: | |
| 10.1 K Marketing Pty Ltd | 175,408 | |
| 10.2 J Nominees Pty Ltd | 216,366 | |
| 10.3 L Pty Ltd | 18,359 | |
| 11 | Applicant’s shares: | |
| 11.1 J Nominees (50%) | 216,366 | |
| 11.2 K Marketing Pty Ltd (12.65%) | 58,087 | |
| 11.3 L Pty Ltd (50%) | 18,359 | |
| 11.4 L Unit Trust | 19,879 | |
| Interest in unincorporated business, partnership, syndicate, joint venture etc | ||
| 12 | Respondent’s interest: | |
| 12.1 C ($162,502 less $54,375 for the carrying value already recorded in the accounts of the Ka Trust for the E Assignment) | 110,827 | 699,204 |
| 12.2 L Unit Trust | 157,870 | |
| Loan Accounts (company partnership or trust) | ||
| 13 | Respondent’s loan accounts: | |
| 13.1 K Marketing Pty Ltd | 15,220 | |
| 13.2 J Nominees Pty Ltd | 5,852 | |
| 13.3 L Pty Ltd (net $2,252-$596) | 1,656 | |
| 13.4 PL Properties Pty Ltd as Trustee of the Mo Trust | 32,366 | |
| 14 | Applicant’s loan accounts: | |
| 14.1 PL Properties Pty Ltd as Trustee of the Mo Trust | 223 | |
| 14.2 J Nominees Pty Ltd | 11,735 | |
| Motor Vehicles | ||
| 15 | Respondent’s Mazda Eunos | 35,000 |
| 16 | Applicant’s Volvo | 9,000 |
| Furniture, furnishings and household effects | ||
| 17 | At Mosman | 20,000 |
| 18 | Respondent’s furniture, furnishings & effects | 3,000 |
| Personal property eg jewellery, boat, artwork | ||
| 19 | Applicant’s paintings & jewellery | 5,000 |
| Family Law expenses paid | ||
| 20 | By Applicant (as at date of Financial Statement) | 58,027 |
| 21 | By Respondent (as at date of Financial Statement) | 24,425 |
| 22 | Unallocated Trust Income | 360,912 |
| TOTAL | 4,517,982 | 5,106,359 |
| LIABILITIES | Agreed values ($) | Not agreed values ($) |
| Income Tax | ||
| 1 | Respondent’s final provisional tax instalment for 1998-1999 | 16,000 |
| Mortgages | ||
| 2 | Lender – Babcock & Brown | |
| Security – infrastructure bond | 1,124,078 | |
| Credit Cards | ||
| 3 | Respondent’s credit cards | 15,699 |
| 4 | Applicant’s Mastercard | 2,000 |
| Loans | ||
| 5 | Respondent’s entity loans: | |
| 5.1 P Nominees Pty Ltd as Trustee of Ka Trust - $37,376 | ||
| 5.2 P Nominees Pty Ltd as Trustee of W Trust - $277,190 | ||
| 5.3 L Pty Ltd as Trustee for L Unit trust - $41,361 | ||
| Total | 355,927 | |
| 6 | Applicant’s loans: | |
| 6.1 L Pty Ltd as Trustee for L Unit Trust - $69,346 | ||
| 6.2 PL Properties Pty Ltd as Trustee of Mo Trust - $18,946 | ||
| Total | 88,292 | |
| TOTAL | 1,601,996 | |
| NET ASSETS | ||
| Assets | 4,517,982 | 5,106,359 |
| LESS Liabilities | 1,601,996 | |
| TOTAL NET ASSETS | 2,915,986 | 3,504,363 |
In addition, there is agreement between the parties in respect of certain tax losses. In respect of these tax losses (other than capital losses) for each of J Nominees Pty Limited and K Marketing Pty Limited, any tax saving for the years ended 30th June 2000 and subsequently, the Respondent will within 120 days of the end of any particular tax year in which the losses had been used, pay to the Applicant such sum as is equivalent to 50% of the tax saving and provide the Applicant with his calculations of such amount. The Respondent will also provide such reasonable information to the Applicant, or such accountant nominated by her, supporting the calculations, provided that the costs of such accountant be borne by the Applicant.”
He later considered the evidence of Mr V, called on behalf of the wife, and Mr B, called on behalf of the husband, relating to the value of the husband’s interest in C and accepted Mr B’s evidence on that issue. He thus valued the husband’s partnership interest in C in the sum of $110,827. That finding was not challenged before us. Later in his reasons, his Honour said:-
“105.The fact that in my opinion the partnership interest is to be classified as a non-assignable chose-in action and therefore as a personal right in the Respondent rather than a right of a proprietary nature, does not mean it has no value (although it does mean in has no value on exchange).”
…
“106.However it follows that no order pursuant to s79 of the Family Law Act can be made in respect of the relevant interest because the interest does not constitute property: Mullane (supra). In some cases, as where the interest was the only item of value, or where the relevant property was of a modest value, such a finding could result in an outcome significantly different to that which would have been the case had the item been classified as property.
107.However, in the circumstances of this case, given the value of the property and the nature and extent of the contribution and the other relevant factors that have to be taken into account, the classification of the partnership interest as comprising a right personal to the Respondent will have no practical significance. The Respondent’s interest will be taken into account at the value I have found it to have and orders will be made on that basis, with the result that the value of the Applicant's entitlement pursuant to s79 of the Act will be no different than would have been the position had the interest been classified as property.”
Senior counsel for the wife observed that, although those conclusions were, in his view, open to question, they were not the subject of challenge in the appeal. Accordingly, no submissions were made to us in relation to them. It would thus not be appropriate for us to express a concluded view in relation to his Honour's findings. However, we should not be taken as endorsing his conclusions.
The trial Judge then referred to the evidence of both the husband and the wife, in the course of which he recorded that where there was a conflict of evidence between the parties, he preferred to rely upon the evidence of the husband.
Thereafter, the trial Judge reviewed the evidence relating to the respective contributions of the parties within the meaning of s.79(4), at the conclusion of which he said:-
“39.The assessment of contributions is, of course, a subjective matter, and not surprisingly minds may differ as to what should be a proper result. I have no doubt that the overall contribution of the Respondent must be seen as significantly greater than that of the Applicant although I am less confident as to what should be the exact findings as to contribution. Doing the best I can I think that a finding in favour of the Respondent of 60% in respect of overall contributions and 40% in respect of the Applicant's overall contributions is within a reasonable range of assessment.”
He then turned to a consideration of the matters referred to in s.75(2) which he regarded as relevant, saying:-
“40.Undoubtedly a consideration of these factors must, in my opinion, mean a significant gain to the Applicant, over and above her contribution-based entitlement. I take into account, in particular, that although I take the view she has an earning capacity, it will take time for her to re-enter the workforce (she has made no effort to do so to date) and she will never earn anything like what I anticipate the Respondent will continue to earn, at least for the next six years or so. In addition, although the Respondent appears to have a very good relationship with the two children and sees them regularly, the Applicant will continue to supply their day to day care, in the short term, in so far as children of their age continue to require such care, although it is likely they will depend on the Respondent for financial assistance. I also take into account the age of the parties and the fact of their long period of marital cohabitation.
41.I do not overlook the fact that the Respondent has remarried, but as the evidence makes clear his wife is more than able to provide for herself and her three children. Each party appears to be in reasonable health and neither has a superannuation entitlement. Again, doing the best I can, I would increase the Applicant’s share to 70% of net asset value.”
In relation to paragraph 41, in a subsequent judgment delivered on 22 October 1999, his Honour said:-
“6.In the submissions filed on behalf of the Respondent it is pointed out that there is a clear, and significant, typographical error in paragraph 41 of the reasons for judgment. Clearly the reference to “70%” should be deleted under the Slip Rule and there be substituted therefor “55%.” On the publication of the supplementary reasons and final Orders, the parties will be supplied with an amended paragraph 41.”
The trial Judge next, in his reasons for judgment, turned to consider the wife’s claim for spousal maintenance. He completed that consideration, saying:-
“43.Accordingly I propose to dismiss her claim for spousal maintenance other than to provide that she be paid a sum each week by the Respondent to tide her over until she is in a position to receive the benefits which would flow to her as a result of the orders to be made in these proceedings. I propose that during this period, which I would apprehend to be of short duration, that the sum payable be $1,000.00 each week.”
He concluded his reasons by saying:-
“108.I again remind myself that these parties cohabited as man and wife for 23 years. I have found the Respondent’s contributions relevant to s79(4) to be such as to amount to 60% of the parties’ total contribution. Having regard to the value of the net property (and including the value of the partnership interest) this contribution in monetary terms must be seen to be an enormous one, as is the difference in monetary terms between the two contributions. The only significant factor relevant to s75(2), in my opinion, is the considerable difference in earning capacity between the parties, although, of course, I take into account the other matters to which I have adverted in these reasons. That difference in earning capacity for at least the next six years will continue. However I must bear in mind that during the marriage the Applicant acquired qualifications with a view to gaining paid employment and that she has made no attempt to do so notwithstanding the long period since separation.
109.Doing the best I can to bring about a just and equitable result it seems to me that there should be an increase in the Applicant's contribution-based entitlement of 15%, giving her an overall percentage result of 55%. Having regard to the value of the property, and including the partnership interest, this results in the Applicant obtaining, on the figures in the schedule, property to a value of $1,603,792.00, and the Respondent obtaining property (and his partnership interest) having a value, again in the light of the figures from the schedule, of $1,302,194.00. The difference in favour of the Applicant is therefore $291,598.00. In addition she will get the benefit of the tax losses to which I have referred.
110.I direct the parties within 21 days to bring in Short Minutes of Orders in accordance with the determinations come to herein.”
The orders against which the wife has appealed were made, as we indicated earlier, on
22 October 1999.
GROUNDS OF APPEAL
The grounds contained in the Amended Notice of Appeal are as follows:-
“1. His Honour was in error in concluding:-
1.1that the contributions of the Respondent (Husband) were significantly greater than those of the Appellant (Wife) [Judgment, ¶39];
1.2that measured in monetary terms, the difference between the respective contributions of the parties must be seen as enormous [¶108];
1.3that the contributions should be apportioned 60:40 in favour of the Respondent (Husband) [¶39].
2. His Honour was in error:-
2.1in concluding that the only significant factor relevant to s75(2) was the considerable difference in earning capacity between the parties [¶108];
2.2in failing to take into account or give sufficient weight to the circumstance that one of the most significant facts in the case was the Respondent (husband)’s earning capacity, which capacity had been developed during the marriage and to which the Appellant (wife) had made substantial contributions;
2.3in concluding that on account of the s75(2) factors, the share of the Appellant (wife) should be increased only by 15% to 55% [¶¶41,109].
3.His Honour was in error in purporting to correct, pursuant to “the slip rule”, the reference in Judgment ¶41 from 70% to 55%.
4. His Honour was in error:-
4.1in concluding that having regard to her contribution based entitlement, the Appellant (wife) could not be seen to be in need of maintenance [¶42];
4.2in failing to take into account or give sufficient weight to the circumstance that one of the most significant facts in the case was the Respondent (husband)’s earning capacity, which capacity had been developed during the marriage and to which the Appellant (wife) had made substantial contributions;
4.3in dismissing the claim of the Appellant (wife) for maintenance, and in failing to make an order for periodic and/or lump sum maintenance [¶43].”
APPLICABLE PRINCIPLES
The appeal is one against discretionary orders. The manner in which an appeal against an exercise of discretion is governed by well established principles, described by Dixon, Evatt and McTiernan JJ. in House v The King (1936) 55 CLR 499 at 504 as follows:-
“The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.”
SUBMISSIONS ON APPEAL
Senior counsel for the wife made submissions in support of each of the grounds of appeal seriatim and we propose similarly considering the grounds.
Ground 1
In support of this ground, we were initially referred to paragraph 39 of the judgment of the trial Judge to which we referred in paragraph 31 hereof and were reminded that the wife contended that the respective contributions of the parties should have been assessed by the trial Judge as being equal or very close to equal.
We were then referred to the written submissions for the husband to the trial Judge and, in particular, to the following passage:-
“H’s submissions to support a finding of a 65% assessment of contribution in his favour rest upon the submission that a finding of equality at the end of the day would be appropriate, having regard to the history of the parties (sic) contributions, but for the cumulative effect of the following contribution of H which are simply unequalled in any way by W:
1. An inheritance of $250,000.00.
2. An extraordinary imbalance of post separation contributions.
3. A modest disparity in the initial contributions of each of them.
It is proposed to briefly examine each of these contributions separately.”
Senior counsel for the wife then referred us to the decision of this Court in Ferraro and Ferraro (1993) FLC 92-335 and the following observation of the Full Court in McLay and McLay (1996) FLC 92-667 at 82,902:-
“The reference to “normal range” in Ferraro and in her Honour’s judgment is not a return to a presumption of equality as a starting point or any other presumption or starting point but is a practical recognition of the circumstance that in many marriages each party contributes in ways which might be described as the normal way in our society and that in any qualitative evaluation of those matters the likely outcome is one of equality. This is repeatedly recognised in the day to day experience of this Court over many years in dealing with a very large number of s. 79 cases. In many cases any assessment of the facts readily makes it clear that an outcome of equality within pars. (a) to (c) is most likely and that a lengthy trial in which those facts are examined in detail will produce no different result. It will only mean significant extra costs to the parties and an unproductive use of the time of the Court. Of course the other factors in s. 79, especially the s. 75(2) factors, may call for a different outcome but that is a separate matter.”
It was then submitted that the husband had conceded at the hearing before the trial Judge that the respective contributions of the parties within the meaning of paragraphs (a), (b) and (c) of s.79(4) were equal but for the three factors identified.
We were then referred to the following passages of the reasons of the trial Judge where, after referring to the written submissions, his Honour said:-
“36.For his part, the Respondent relies on an initial contribution detailed in paragraph 25 of his affidavit as to the facts, which clearly was more than the initial contribution of the Applicant. On the other hand, as to initial contributions, one must of course take into account, as well, the passage of the many years since those contributions were made.
37.He places particular reliance, understandably, on the contribution of $250,000.00 which he contributed quite late in the marriage, and his clearly substantial contribution as the provider of funds, business investment advice, tax advice, legal advice and so on. He relies on the evidence that all moneys earnt from his various and complex endeavours were used to advance the welfare of his then family. He relies on the fact that from about 1984 onwards to the date of separation his earnings in his professional capacity were in excess of $3,800,000.00. I must also take account of his very considerable financial contribution during the four-year period since separation. His contributions during this period took the form, in addition to the substantial maintenance payments, of his surrendering his interest in the matrimonial home so that it might be occupied by the Applicant and the children. His unchallenged evidence is that during the same period his efforts resulted in a very substantial increase in the value of the parties’ assets. I do not overlook the evidence that during this period he provided funds in the order of $100,000.00 which were used on improvements to his present Wife’s residence, which also houses him. However I take into account that he would otherwise be required to pay rent and that given the lengthy period involved an overall rental figure may well have required the expenditure of the same order.”
However, it was submitted that, given the concession of the husband, the trial Judge was not entitled to take into account in making an assessment, other than that of equality, any factors other than the inheritance, the post-separation contributions and the modest disparity in the parties’ initial contributions.
Whilst acknowledging that it was appropriate to take into account the contribution by the husband of the inheritance received by him in assessing the parties’ contributions, it was put that its significance should be measured not relatively to the net assets of the parties at the date of trial but in the context of all the moneys which flowed in during the marriage. The $250,000, it was submitted, represents only 6 per cent of the total of the husband’s professional earning ($3,800,000) during the period 1984 to the date of separation plus the inheritance ($4,050,000). Accordingly, it was submitted that even if the inheritance was “given full weight” it would justify an adjustment of no more than 3 per cent.
We were then referred to the evidence relating to those three factors.
The Inheritance
The husband’s mother died in 1989, as a consequence of which the husband received $250,000 during 1990 and 1991 which he then contributed to the matrimonial property. However, it was submitted that this contribution, when weighed with all other contributions, could not justify a departure from an assessment of equality of contribution of more than 1 or 2 per cent.
Post-Separation Contributions
It was submitted that in concluding that the contributions of the husband were greater than those of the wife, the trial Judge took into account the following post-separation contributions of the husband:-
(a) his substantial maintenance payments;
(b)the surrender of his interest in the matrimonial home so that it might be occupied by the wife and the children of the marriage;
(c)his contribution from earnings as a consequence of which firstly, the assets of the parties increased by $623,736 between 1 July 1995 and 30 June 1998 and secondly, an asset, the unallocated trust income of $360,912, included in the net assets of the parties was built up substantially from his 1999 C income.
It was submitted, however, that the payment of maintenance was not a relevant contribution but rather the discharge of an obligation and thus ought not to have been taken into account by the trial Judge in his assessment.
Further, it was submitted that the husband did not surrender his interest in the matrimonial home. The wife, as a joint tenant, had a legal right to occupy the home and thus, it was put, that permitting her to exercise that right was not a relevant contribution and ought not to have been taken into account by the trial Judge. We were referred to the evidence of the husband that he did not pay rent to his present wife and it was put that the $100,000 referred to by the trial Judge related to expenditure on her property not calling for any adjustment in favour of the husband.
It was also submitted that in treating the financial contributions of the husband as being made by him alone, the trial Judge overlooked that that income was generated from an earning capacity nurtured and developed during the marriage and that the wife’s parenting contribution post-separation continued and enabled the husband to earn income.
In support of the submission, we were referred to Best and Best (1993) FLC 92-418 at 80,295 and Mitchell and Mitchell (1995) FLC 92-601 at 81,997 and 81,998.
Thus, it was submitted, the trial Judge erred in seeing the contribution of income post-separation as being a contribution by the husband rather than a joint contribution and in relying upon that contribution to justify a departure from an assessment of equality. Accordingly, it was submitted that the reasoning of the trial Judge to arrive at the assessment of the respective contributions of the parties was erroneous. Whilst the wife may well have made a contribution to the husband’s income earning capacity and did make post-separation contributions herself, we do not accept that, in the circumstances of this case, the post-separation financial contributions should be seen as equal.
In his reasons, the trial Judge did not refer to the concession made by the husband to which we earlier referred and which is recorded at AB 106. However, along with all other contributions made by the parties, the trial Judge was required to take into account, in his assessment of the respective contributions of the parties from the date of the marriage to the date of the hearing, the husband’s inheritance received in 1990-1991, which was contributed by him to the parties’ assets, the financial contributions from his income post-separation and the modest disparity in the initial contributions of each of the parties.
Whilst there is force in some of the submissions made on behalf of the wife, we are not persuaded that the reasoning of the trial Judge was erroneous or that, in the circumstances, it was not open to him to assess the respective contributions of the parties from the date of the marriage to the date of hearing as being 40 per cent by the wife and 60 per cent by the husband.
Accordingly, Ground 1 has not been established.
Ground 2
We have earlier referred to paragraphs 40 and 41 of the reasons of the trial Judge and to his conclusions appearing in paragraphs 108 and 109 of those reasons.
The thrust of the submissions on behalf of the wife in support of this ground was that the trial Judge failed to take into account in arriving at his assessment of 15 per cent in favour of the wife on account of s.75(2) factors what was described as the most striking feature of the case, namely that the husband’s income earning capacity was built up during the marriage and that the wife had made a substantial contributions to that capacity.
In support of the ground, we were referred to the evidence relating to the husband’s income and the findings of the trial Judge. His Honour found that the husband could command a market salary package equal to or greater than the sum of $750,000 per annum and that he would continue to derive such an income until he retired from C when he reaches the age of 55 years, he being aged 49 at the date of trial. In addition, the husband anticipated receiving income from the property at Canowindra purchased by him in 1999. He gave oral evidence that his net income at the date of trial was $4280 per week ($222,560 per annum) after allowing for income tax and the repayment of the infrastructure bonds.
The wife accompanied the husband to Sydney when he was transferred in 1974 and in 1983 resigned from the workforce since when she has not been in paid employment. However, in 1990, she commenced a degree course at the University of New South Wales with a view to obtaining qualifications so that she could re-enter the workforce. She obtained that degree in 1995. Thereafter, she embarked on a post-graduate course with a view to obtaining qualifications as a librarian. However, as she interrupted her studies because of these proceedings, she will not obtain her qualifications until the end of 2000 or 2001. She has no work experience as a librarian and has not been in paid employment for some 15 years.
It was submitted that in considering the matters referred to in s.75(2), the trial Judge took into account the disparity in the earning capacity of the parties but failed to take into account the matters referred to in s.75(2)(j), namely the contribution made by the wife to the husband’s earning capacity over a period of 23 years of marriage and continuing.
In support of the submission, we were referred to the following comments of the Full Court in Stay v Stay (1997) FLC 92-751 at 84,132:-
“… the result of the trial Judge’s order is that at the end of the marriage lasting 27 years, of which there were five children and in which both parties performed their allotted roles, the wife, who has the lesser earning capacity, is left with 45 per cent of the value of the assets plus her superannuation entitlement ($130,780 less income tax) whilst the husband is left with 55 per cent of those assets plus his superannuation entitlement ($555,111 less income tax). That division is, in our judgment, outside the range of a reasonable exercise of the discretion vested in the trial Judge.”
We were then referred to the following passage from Best and Best (supra) at 80,295:-
“This was an unusual, almost unique, case as the facts already set out demonstrate. The wife has significant responsibilities in the support of herself and four children but has limited financial means. Although the husband has earned a very substantial income over a number of years, and although the parties have been involved in property transactions for a significant period of time, the reality was that at the hearing there was a very small margin between their assets and liabilities. The most striking feature in this case is the husband’s very high and continuing earning capacity. Even allowing for the husband’s maintenance commitments referred to hereafter, his profession gives him a continuing capacity to steadily earn his way out of the financial position in which he now is. On the other hand, the wife has no such capacity. This is even more significant here because of the husband’s acquisition and development of his professional skills during the marriage and the loss by the wife of the professional skills which she had at the time of the marriage. It is a particularly striking example of the “feminization of poverty” which has been widely discussed both here and overseas over the last decade, including Weitzman, The Divorce Revolution; The Unexpected Social and Economic Consequences on Women and Children in America (1985); Weitzman and Maclean, Economic Consequences of Divorce; The International Perspective (1992); The Australian Institute of Family Studies; Property and Income Distribution on Divorce in Australia (1986) and the recent, detailed, discussion by the Supreme Court of Canada in Moge v. Moge (1992) 43 RFL (3d) 5345.”
In relation to those observations, we are conscious of the facts of that case, including that the net value of the assets of the parties at the date of trial was only $108,197 as opposed to $2,915,986 in the instant case.
Finally, we were referred to Mitchell and Mitchell (supra) at 81,997 and to the following passage at 81,998:-
“Returning to the case in hand, it is important to recognize and give realistic effect to the circumstance that the acquisition and development by the husband of his professional skills (and thus his present high earning capacity) occurred during the marriage whilst at the same time the wife sacrificed her professional skills to care for the family. These are matters to which paras. (j) and (k) of s. 75(2) are directed.”
We would, with respect, adopt those observations.
In our view, the trial Judge did not take into account the contribution of the wife to the husband’s substantial earning capacity, a factor which, in the circumstances of this case, was of particular significance. It is clear from the written submissions made on behalf of the wife at trial that she relied upon what was described as her “extensive contributions to the income earning capacity, property and financial resources” of the husband. This issue was agitated before the trial Judge and we reject the submission made on behalf of the wife that, in that regard, she seeks to make out a different case before this Court to the case she sought to make out before the trial Judge.
We further reject the submission made on behalf of the husband in relation to the s.75(2) factors that the wife was seeking to conduct a case before this Court different from that conducted at trial. At trial, the wife sought findings that the net assets of the parties were valued in the sum of $3,504,363, that the contributions of the parties were equal and that there should be a 20 per cent adjustment in her favour by reason of the matters referred to in s.75(2). Given that the trial Judge found the net value of the assets to be $2,915,986 and assessed the contributions at 60 per cent to the husband and 40 per cent to the wife, it is, in our view, open to the wife, whilst not challenging the finding as to the net value of the assets, to seek a s.75(2) adjustment of more than 20 per cent, particularly if she is not successful on Ground 1.
Accordingly, we are of the view that the trial Judge erred in the appellate sense in not taking into account the contribution of the wife to the husband’s earning capacity.
Ground 3
No submissions were made in support of this ground, it not being submitted that the trial Judge was not entitled, in the circumstances of this case, to amend his judgment.
Ground 4
As a consequence of our conclusion that Ground 2 has been established, we are of the view that we should first consider whether it is appropriate for us to re-exercise the discretion before turning to consider whether it is proper that an order be made in favour of the wife for spousal maintenance; see Rosati v Rosati (1998) FLC 92-804.
RE-EXERCISE OF DISCRETION
In the light of the findings of the trial Judge, the material contained in the Appeal Books and the submissions of the parties, we are of the view that, rather than remit the property application for rehearing, we should re-exercise the discretion.
There is no appeal against the finding of the trial Judge that the net value of the assets of the parties as at the date of trial was $2,915,986.
The trial Judge assessed the respective contributions of the parties within the meaning of s.79 from the date of the marriage to the date of the hearing as being 60 per cent to the husband and 40 per cent to the wife. In so assessing the contributions, we have concluded that the trial Judge did not err in the appellate sense.
In re-exercising the discretion, we propose adopting those two conclusions of the trial Judge. Thus, on the basis of their respective contributions, the husband was to receive $1,749,592 and the wife $1,166,394.
The trial Judge identified the relevant matters referred to in s.75(2), with the exception of the matter referred to in s.75(2)(j), namely the extent to which the wife contributed to the husband’s earning capacity. In our view, the evidence demonstrates that the wife made a significant contribution to the husband’s earning capacity and accordingly, we would attach considerable weight to it. We would also attach significant weight to the disparity in the earning capacity of the parties, at least for the next six years. The husband is making a substantial financial contribution to the support of the children and it is not suggested that he will not continue to do. We also attach not insignificant weight to the amount each party will receive as a result of their respective contribution based entitlements.
Given our conclusion in relation to the respective contributions of the parties in order to arrive a figure which we consider to be a just and equitable exercise of the discretion, we would assess the adjustment to be made in favour of the wife to the contribution based award at 30 per cent of the net value of the assets of the parties, that is $874,795. Thus, the wife would receive by way of property settlement $2,041,189 and the husband $874,797. In addition, the parties will receive the benefit of the tax losses pursuant to their agreement recorded by the trial Judge at the conclusion of paragraph 26 of his reasons. The husband, in addition, retains his significant earning capacity and his substantial income, albeit offset by his child support payments. Such a result, in our judgment, is on the facts of this case just and equitable.
Having regard to the effect of the orders of the trial Judge against which the wife has not appealed and putting aside the value of her interest in the former matrimonial home, the wife would retain property to the value of $192,527, made up as follows:-
· Savings $66,000
· Cash 200
· Life assurance policies:
National Mutural 15,000
Suncorp 6,000
· Shares in GWA Limited 13,300
· Volvo 9,000
· Furniture, etc. at Mosman 20,000
· Paintings and jewellery 5,000
· Family Law expenses paid 58,027
In addition, the wife has a liability in the sum of $2000 on her Mastercard.
Thus, if the wife were to retain the former matrimonial home, which has an agreed value of $1,715,000, the husband would be obliged to pay her the sum of $135,662, which we would round off to $135,700. The husband sought an order that the former matrimonial home be sold. It is appropriate, in our view, however, to make the order sought originally by the wife and on appeal, namely that the husband transfer his interest therein to her. It is also just that he bear the costs associated with that transfer.
Spousal Maintenance
We now return to a consideration of whether it is proper to make an order for spousal maintenance. We do so having regard to the impact of the proposed order for property settlement upon the financial circumstances of each of the parties. Given that, as a consequence of that order, the wife will receive the former matrimonial home, valued at $1,715,000, and receive or retain assets to the net value of $326,277, in our view, it would not be proper for us to make an order for spousal maintenance, notwithstanding that the wife is not in employment and the evidence relating to her expenses, as she is, in the circumstances, able to adequately support herself.
COSTS
We indicated at the completion of the hearing that we proposed giving directions for the filing and service of written submissions in relation to the wife’s appeal against the order for costs (Order 13) and in relation to the costs of and incidental to the appeal.
ORDERS
We order:-
1. That the appeal be allowed.
2.That Orders 1, 2, 3 and 9 made on 22 October 1999 be set aside and in lieu thereof it be ordered:-
“(a)That the husband, on or before 10 July 2000, do all acts and things and sign all documents necessary to transfer unencumbered to the wife at his expense the whole of his right title and interest in the former matrimonial home situate at and known as 25 Kardinia Road, Clifton Gardens, in the State of New South Wales.
(b)That the husband pay to the wife, on or before 10 July 2000, the sum of $135,700.”
3.(a) That the appellant wife file and serve any written submissions in relation to the costs appeal within 21 days of the date hereof.
(b)That the respondent husband file and serve any written submissions in answer thereto within 14 days thereafter.
(c)That the appellant wife file and serve any written submissions in reply thereto within a further seven (7) days thereafter.
(d)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
4.(a) That either party be at liberty to make an application by way of written submissions in respect of costs incurred by him or her in relation to the appeal within 21 days of the date hereof.
(b)That the other party have a further 14 days in which to make written submissions in answer thereto.
(c)That the first mentioned party have a further seven (7) days in which to make any written submissions in reply thereto.
(d)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
I certify that the preceding 84 paragraphs
are a true copy of the reasons
for judgment delivered by
this Honourable Full Court.
Associate
Key Legal Topics
Areas of Law
-
Civil Procedure
-
Administrative Law
Legal Concepts
-
Judicial Review
-
Procedural Fairness
-
Natural Justice
-
Appeal
-
Jurisdiction
4
1
0