BABBITT & BABBITT - [2011] FamCAFC 64

FAMILY COURT OF AUSTRALIA

BABBITT & BABBITT

[2011] FamCAFC 64

FAMILY LAW - APPEAL – PROPERTY – Value of business – Expert evidence – Whether the Federal Magistrate erred in her valuation of the business and treatment of shareholder loans – Whether the Federal Magistrate failed to give sufficient weight to the husband’s post separation contributions – Whether the Federal Magistrate erred in rejecting the evidence of the husband’s physiotherapist and other medical practitioners about his injuries and capacity to work – Appealable error established.

FAMILY LAW - APPEAL – APPLICATION IN AN APPEAL – Application to adduce further evidence – Application refused.

FAMILY LAW - COSTS – Costs certificates granted.

Family Law Act 1975 (Cth)
Federal Proceedings (Costs) Act 1981 (Cth)

APPELLANT:

Mr BABBITT

RESPONDENT:

Mrs BABBITT

FILE NUMBER:

DNC

546

2008

APPEAL NUMBER:

2010

DATE DELIVERED:

25 March 2011

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Bryant CJ, Finn and Ainslie-Wallace JJ

HEARING DATE:

4 March 2011

LOWER COURT JURISDICTION:

Federal Magistrates Court of Australia

LOWER COURT JUDGMENT DATE:

16 July 2010

LOWER COURT MNC:

[2010] FMCAfam 722

REPRESENTATION

THE APPELLANT:	Self-represented litigant
COUNSEL FOR THE RESPONDENT:	Ms Holtham

SOLICITOR FOR THE RESPONDENT:

Holtham & Associates

Orders

The appeal against the orders of Federal Magistrate Turner made on 16 July 2010 be allowed.
The orders be set aside.
The parties’ applications for property settlement be remitted for re-hearing by a Federal Magistrate other than Federal Magistrate Turner.
Should either party seek and obtain a transfer of the applications referred to in Order 3 to the Family Court of Australia, then either party is at liberty to apply by letter to the Appeal Registrar in Brisbane for an urgent hearing of the applications.
There be no order for costs in relation to the appeal.
The husband’s application to adduce further evidence on the appeal be dismissed.
The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
The Court grants to both parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant and respondent in respect of the costs of the re-hearing of the matter.

IT IS NOTED that publication of this judgment under the pseudonym Babbitt & Babbitt is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: NA 93 of 2010
File Number: DNC 546 of 2008

Mr BABBITT

Appellant

And

Mrs BABBITT

Respondent

REASONS FOR JUDGMENT

Background

Mr Babbitt (“the husband”) appeals against orders for division of property made by Federal Magistrate Turner in Darwin on 16 July 2010.
The facts and circumstances of the parties are set out in her Honour’s judgment, are largely uncontroversial, and we do not intend to repeat the background and history other than as is necessary to make plain our reasons.
The husband and Mrs Babbitt (“the wife”) began to live together in 1993 and were married in April 1994. They separated in September 2007 and lived under the same roof until January 2008 when the husband moved out of the former matrimonial home. However, in March 2008 he was injured at work and, as a result, moved back into part of the home previously occupied by the parties, leaving permanently in late 2008. The husband’s injuries were such that he spent the first 12 days in hospital and then on discharge spent about six months in a wheel chair before returning to work. The parties were divorced in March 2009.
There are three children of the parties who were aged 15, 13 and 10 at the date of the hearing before the Federal Magistrate. The oldest child has difficulties and is said to have Asperger’s syndrome. The parties have reached an agreement in which the older child lives full time with his father and they share parenting of the younger two children on a week-about basis.
At the date of the hearing before the Federal Magistrate, the parties had the following assets (apart from a car, boat, jewellery and superannuation interests, all of which were of relatively minor value):
a)Property K: A residential property which was owned by the wife at the beginning of the relationship. It had been subject to a mortgage. At the date of the hearing, the property was unencumbered. The parties lived in this property until 1993 and it was then rented. The rental income was received by the parties. The parties agreed that this property was valued at $315,000.00 at the date of hearing.
b)Property O: A residential property purchased in 2004 in which the parties lived until their separation and in which the wife presently lives. The purchase price of this property was ultimately provided through the sale of other properties purchased by the parties and by using Property K as security for the borrowings. Although Property O was used as security for some business loans and in particular the business overdraft, at the date of the hearing before the Federal Magistrate, there was no debt secured over the property. The agreed value of this property is $690,000.00.
c)Property J: A residential property purchased in October 2007. The whole of the purchase price was borrowed and the property rented. The rents were applied to the mortgage repayments but it was uncontroversial that there was a shortfall between the mortgage repayment and the rental income. The husband lives in this property. Its agreed value is $505,000.00. It is subject to a mortgage of $400,304.00.
d)S Pty Ltd: A company that conducts a business in manufacturing and installing blinds and awnings and upholstery of boats and the like. The husband was a partner in, and working in, this business (then called S) at the beginning of the parties’ relationship. In June 2001 a company, S Pty Ltd, was incorporated and became the proprietor of the business. The parties are both shareholders in, and directors of, this company. For a time until March 2009 the wife acted as its bookkeeper.
e)Property W: An industrial unit purchased in July 2005 and from which the business now conducts its operations. Its agreed value is $1,270,000.00 and is subject to a mortgage of $386,495.00.
f)Property R: A half interest in another industrial unit in R is valued at $525,000.00 and subject to a loan of $59,458.00.
The intended effect of her Honour’s orders was to divide the value of the parties’ net assets ($2,583,175.00) equally between them. The orders provided for Property O to be transferred to the wife and for her to retain her interest in Property K. The husband was to pay the sum of $264,765.50 to the wife. The husband was to have transferred to him Property J and to be, in effect, solely responsible for the mortgage on that property. The wife was also ordered to transfer her interest in Property W to the husband who was ordered to take sole responsibility for the mortgage secured over that property. The husband was to retain ownership of the company. No order appears to have been made in relation to the half interest in Property R, but no issue is raised on appeal in relation to it.
In determining the equal division of the net assets between the parties, her Honour had assessed the contributions of the parties as equal and made no adjustment on account of s 75(2) of the Family Law Act 1975 (Cth) (“the Act”) matters.

The appeal grounds

The husband appeared for himself in the appeal and, it seems, had drafted the grounds of appeal himself. They are somewhat discursive. During argument in the appeal, it became clear that the challenge to her Honour’s decision devolved to a number of discrete areas which we will consider without need to have recourse to all of the stated grounds of appeal. The areas of challenge to her Honour’s findings were:
i) Her Honour erred in accepting the valuation of the business conducted by Mr C of M Partners over the valuation of the company accountant, Mr B, and in particular, in her treatment of shareholders’ loans advanced as working capital for the business.
ii) Her Honour failed to give proper weight to the husband’s post separation contributions in that from early 2008 the wife had the benefit of living in an unencumbered property and was receiving the rental income from Property K, whilst the husband continued to meet all mortgages on the properties and other debts.
iii) Her Honour erred in rejecting the evidence of the husband’s treating physiotherapist and in finding that he lacked the appropriate expertise to comment on the husband’s capacity to work and in failing to take into account the opinions expressed by the husband’s treating specialists.

Valuation issue

Two valuations were prepared for the hearing in relation to the company, S Pty Ltd (“the company”). Mr C of the firm of M Chartered Accountants was appointed to prepare a valuation. The company accountant, Mr B, also provided a valuation and commented on Mr C’s report. Her Honour (at paragraph 95 of the reasons) preferred the opinion of Mr C to that of Mr B.
In the introductory paragraph to his report (dated 17 May 2010), Mr C recorded that he had been engaged to prepare a valuation report as to the fair value of the shareholders’ interest in the company. The “Summary Opinion” and conclusion in the report were then as follows:
We have estimated the fair market value of shareholders interest in [S] Ltd utilising both the capitalisation of earning method and the net realisable value of asset method to be in the range of $84,000 to $89,000.
In our opinion the more appropriate value of the shareholders interest in the company is the net realisable value net assets ie $89,000.
In arriving at his valuation, Mr C excluded the company’s liability to the shareholders.
However, Mr C’s report also contained the following passages which have present relevance:
…
1.7The company relies on the support of its shareholders through loans to fund its operations. Its financial position has improved significantly during [sic] since 30 June 2009 due to profits made during the nine months to 31 March 2010.
…
1.9Debt Funding
The financial statements do not indicate any debt funding. The company appears to rely on the support of its shareholders/directors to fund working capital.
A balance sheet for the company as at 30 March 2010 (which was annexed to Mr C’s report) showed shareholders’ loans at $84,224.23 ($86,674.20 for the last financial year), being loans from the husband at $59,989.96 ($62,439.93 for the last financial year) and from the wife at $24,234.37 (with the same figure for the previous financial year).
In his oral evidence, Mr C was asked (transcript of 30 June 2010 at p 208) whether a different result would be obtained if he was asked to value the business as opposed to valuing the shareholders’ interests in the company and he responded:
… If we said that we were valuing the business and we said that shareholders’ loans were part of the liability business [sic], that would have given a different result … I would say the business had a negative value.
The other valuation before her Honour had been prepared by Mr B who had been the company’s accountant prior to and since its incorporation. There was also before her Honour an affidavit from Mr B (sworn on 25 June 2010) in which he provided comments on, and criticisms of, Mr C’s valuation.
Mr B concluded in his report dated 3 February 2010 (exhibited to his affidavit):
…
The situation is that if all of the company assets were sold for “market value” at 30 June 2009 there would be a substantial shortfall between the sale of assets and the payment of liabilities. The net result would be that the company would not have the funds to repay the shareholders loans of $86,674. In reality, it is the advances of shareholders funds, that have kept the business trading.
In summary, the company has a net negative value and it would be extremely difficult to find a buyer who would be prepared to take the business on as a going concern.
In her reasons for judgment (at paragraph 82) her Honour identified four areas of dispute in respect of the valuation of the company, and/or its business.
It is only the fourth of those areas, being whether, in her Honour’s words, “… the shareholders loans must be taken into account in the valuation of the business”, and the amount of those loans, that was raised by the husband on the appeal.
Her Honour reached the following conclusions about the treatment of the shareholders’ loans:
114.Mr [C] gave evidence that if the shareholders loans were true loans, then the business would have to take into account these loans as debts to the business, therefore reducing the value of the business.
115.Mr [B] in his evidence stated that the shareholders liability is a liability to the company and that the shareholder loan is an asset to the individual that is owed the money.
116.I accept therefore from the evidence provided by Mr [B] that the shareholders loans are a true debt to the business.
117.But in accepting this, I must also accept that the shareholders loans are monies owing and payable to the parties and on the evidence provided it is evident that should the business be sold there is sufficient equity to enable these loans to be paid. [Our emphasis]
118.On that basis I see it as an academic exercise as to whether to include the value of the business as a whole in the asset column, or to include the reduced value of the business and the shareholders loans as assets as the net effect will be the same. [Our emphasis]
119.Accordingly I find that the value of the business is $89,000 and that it is to be included in the asset pool.
Notwithstanding the finding in paragraph 119 concerning the value of the business, it was in fact the value of the company which her Honour included in her schedule of assets.
Nevertheless, we do not consider that her Honour was wrong in her analysis which resulted in the sum of $89,000.00 being shown as the value of the company and thus as an asset of the parties. This is because (as is shown in the schedule of assets) her Honour was valuing the company and if the company sold its business for $89,000.00 there would be money available to pay out the shareholders’ loans.
Rather, it appears to us that the problem lies in her Honour’s treatment of the liabilities incurred by the parties to fund shareholders’ loans, and in her reliance on the amount of the shareholders’ loans shown in the March 2010 balance sheet while relying on more up to date figures in respect of the liabilities incurred to fund the loans.
The husband complains that although the March 2010 balance sheet was an accurate depiction of the business as that date, subsequent borrowings and the attribution by her Honour of these borrowings as the husband’s loans to the company, increased the shareholders’ loans, and if properly accounted for, would have resulted in the company being unable to meet the husband’s liabilities which would affect its value.
Mr B, the company accountant, explained (transcript of 30 June 2010 at p 228) that the parties used funds borrowed by them from various sources to provide working funds for the company. Principally, the parties used an overdraft facility that allowed them to draw down funds as needed and it was secured against Property O. He said that from time to time when the company had funds available, it would pay down some of its liability to the shareholders.
It was undisputed that in the second half of 2009 the wife had stopped activity on the overdraft facility. As a result, the husband used his credit card to draw funds to pay into the business and for his personal expenses, such as payments to his solicitor. In February 2010 the overdraft facility was re-activated and the husband withdrew $64,000.00 of which $28,806.00 was used to pay down the credit card.
At the date of hearing (in June 2010) slightly less than $120,000.00 was owed on the overdraft.
There was a controversy between the parties as to how much of that debt was to be borne jointly by the parties.
Her Honour said at paragraphs 129 to 134 of her reasons:
129.At the conclusion of submissions that [sic] Husband proposed that he accept responsibility for $63,549.50 and that the sum of $56,450.50 be included as the joint debt pertaining to the overdraft facility.
130.The sum of $63,549.50 was calculated by deducting half of the paid school fees and deducting it from $64,500.
131.I do not accept that the amount of $64,500 should be reduced by the school fees.
132.I do however accept that the Husband should take sole responsibility for the sum of $64,500.
133.The Husband has the capacity to be reimbursed by [S] Pty Ltd either directly or through an adjustment in the share holders loans, for monies paid to the business or on behalf of the business by the Husband.
134.Accordingly I find that the sum of $55,500 be included as a joint debt, that being the amount owing under the overdraft facility after the deduction of $64,500 from the sum of $120,000.
It is her Honour’s conclusion in paragraph 133 of her reasons that is erroneous. Her Honour failed to consider whether, in light of the accepted value of the business, the funds realised on a sale of the company would be sufficient to reimburse the husband the full amount of the loans. It seems to us that, accepting Mr C’s valuation, her Honour could not readily have come to that conclusion when the additional $64,000.00 was included in the husband’s shareholder loan account.
The evidence before her Honour established that, accepting Mr C’s valuation, if the company was sold there would be sufficient money produced to pay out the husband’s shareholder loans based on the amount of the company’s debt to him shown in the March 2010 accounts.
However, her Honour then found that the husband had, in effect, made a further loan to the company in the sum of $64,500.00 which would be therefore added to the company’s liability to him and, as she said in paragraph 133, could be reimbursed to him by the company. But she had earlier found a value for the company of $89,000.00 on the basis of the value of shareholders’ loans at some $84,000.00 as at 30 March 2010. There is no evidence that the company could re-pay the husband a further $64,500.00. Having made these findings, her Honour should have gone on to apply this debt to the husband’s loan account. This would have indicated whether the company could meet all of its liabilities. Further evidence may have been necessary, but it was fundamental to the exercise.
We find this challenge to her Honour’s decision made out.

Post separation contributions

The husband claimed during the hearing before the Federal Magistrate that his post separation contributions were significant and should weigh in his favour in the division of the parties’ assets. In particular, the husband claimed that he had made direct financial contribution to Property O in paying off the indebtedness secured against it and, as a result, the wife was able to live in that property rent free while the husband was making other financial contributions to the children and other properties. He also claimed a post separation contribution to Property J.

The evidence establishes that the parties separated in about September 2007 but remained living in Property O until the husband moved out in January 2008. Because of his accident in March 2008, he moved back into Property O and then moved out in December 2008 into Property J continuing to pay the mortgage on that property. Thus, put simply on the husband’s case, the wife was living rent and mortgage free, while he was paying a mortgage on the property in which he and the parties’ eldest child lived and the other two children spent half their time.

Property O

Her Honour referred to the complexity of the parties’ financial arrangement in which personal drawings were used both for business and private expenses. She said at paragraphs 176 to 177 of the reasons for judgment:
176.Further the payout of [Property O] on or about December 2008 in the sum of $8,852 was not a unilateral decision taken by one party, but what appeared to be a business decision, although this was not fully canvassed in evidence.
177.It was admitted by the Husband however in cross examination that the amount for the payout came out of either the overdraft facility or [S] cheque account and therefore paid out of joint funds.
Her Honour then declined to make a further adjustment in the husband’s favour to reflect the post separation contributions to Property O.
The wife did not dispute the husband’s assertion in his affidavits that after separation he continued to make the repayments on the debt secured against Property O in the sum of $400.00 per week. This continued until he paid out the remaining balance to which her Honour referred in her reasons (above).

Property J

In referring to Property J her Honour said at paragraphs 181 to 183 of her reasons:
181.It is not in dispute that up until late 2008, the property was rented and that the rental covered the mortgage.
182.It is admitted by the husband in cross examination that when the husband moved into [Property J] in February/March 2009, the mortgage was paid in excess which enabled the husband to not make any repayments for five to six weeks.
183.I have no evidence before me to support the husband’s submission [sic] therefore find that no adjustment should be made to the husband in respect to his post separation contribution to [Property J].
The husband argued that her Honour was in error in her findings about his contributions in the time since separation.
It seems undisputed that Property J was purchased in about October 2007. The mortgage repayments on the property were in the order of $800.00 per week. The property was rented for the first year of the parties’ ownership at a weekly rent of $470.00. The husband met the shortfall from either his income from working in the business or from company funds. In late 2008, the husband moved into the property at which time he was responsible and did pay the whole of the mortgage repayments on that property together with the other, usual outgoings in relation to it. Thus he argued, and there was no dispute on the evidence, that for 16 months after the purchase of Property J, he paid the shortfall between the rental income and the monthly mortgage payments.
The reference to the husband not paying the mortgage in paragraph 182 of the reasons was apparently a reference to a period in March 2010 in which he was finding it difficult to make the repayments on Property J and, having been told by the bank that he had overpaid the mortgage by about $60.00 per week, stopped paying for a period of six weeks until the excess was exhausted and he then recommenced paying the mortgage (transcript of 29 June 2010 at p 627). This occurred in March 2010 not, as her Honour said, in February or March 2009 and should be considered in the context of his paying the mortgage from when the property was purchased in October 2007 until the date of the hearing. The funds to make these payments came either from the husband’s wages derived from working in the business or from his entitlements as a shareholder.
Her Honour was alive to the difficulties of untangling the intermingling by the parties of their private and business expenses and said at paragraph 173:
The incomes attributable to the parties on paper, the continued intermingling of the party’s financial situation up until late 2008 and the complexity of the financial interplay between the overdraft facility, [S] Pty Ltd and the shareholders loans has muddied the waters somewhat in determining what has occurred post separation.
While some of the funds used to make the payments to which we have referred came from shareholders funds, so much as came from the husband’s wages should have been considered by her Honour especially in light of the wife’s receipt of the income from Property K.
It seems to us that her Honour did not give proper consideration to the extent, nature and source of the post separation contributions made by the husband to Property J and Property O and, in our view, had she done so, she may well have reached a different view about whether they warranted a further adjustment in his favour.
We find this challenge established.

Medical evidence- s 75(2)

The husband argued that the Federal Magistrate erred in finding that there should be no further adjustment between the parties particularly in relation to the matters referred to in s 75(2)(a) of the Act, namely the age and state of health of the parties.
It was undisputed that in March 2008 the husband was injured at work and suffered fractures to both heels when he fell six metres onto concrete while fixing an awning to the fly-bridge of a boat. It seems that the fractures were realigned using internal fixings and after being released from hospital, the husband was in a wheelchair for about six months. He said in his affidavit sworn on 3 November 2009 (at paragraph 9) that he has a permanent disability, his mobility is significantly reduced and he is in pain when working.
The husband attached to his affidavit sworn on 10 May 2010, a report from the orthopaedic registrar of Royal Darwin Hospital, Dr H; a report of MrG, physiotherapist; a report of Dr E, a podiatric surgeon and a report of Mr M, orthopaedic surgeon. Those reports considered the nature of the injuries, the likely course of any disability and its impact on his ability to function.
Objection was taken to these reports on the basis that they were “inadmissible”. Her Honour said (transcript of 28 June 2010 at p 17):
... I am hindered by the fact that we do not have the medical practitioners here to be examined and cross-examined, that it is likely that I am able to give very little weight to that, by way of evidence.
Although asked to do so, her Honour did not exclude the evidence.
There, the matter rested, although the husband’s solicitor obtained an affidavit from Mr G, the physiotherapist (affirmed on 30 June 2010) and was given leave to rely on that in the proceedings. Mr G was called and cross-examined.
Dr H’s (undated) report noted:
Mr [Babbitt] suffered bilateral calcanei fractures on 31/3/08. At this stage he had his right side internally fixed …
Currently he has occasional pain, he walks with a slight limp + finding walking on uneven grounds causes instability. His Xrays showed formation of post traumatic subtalar joint arthrosis.
He is unable to climb ladder, works on roof etc or surface with inclination as it might aggravate his subtalar joint conditions and causing fall etc.
Dr E (who appeared to be the husband’s treating specialist) in a letter dated 20 November 2009 said, after referring to the right foot fracture and noting that there was no joint displacement in that fracture:
The left foot however did involve the subtalar joint which is one of the important joints in the foot that allows for sideways motion primarily which allows the foot to adapt to sloping surfaces. As a result of the fracture there is significant disruption of the subtalar joint which makes it difficult for Mr [Babbitt] to walk and stand on sloping surfaces. In my experience will most likely need to be fused at some stage to relive the pain. While this will help the pain it will limit the function of the foot to walk on sloping surfaces which may necessitate a change in occupation.
Mr M wrote a letter dated 21 April 2010, in which he said:
…
He now presents with symptoms with pain in both the midfoot and the hind feet.
Radiographs performed on 22/03/10 suggest left subtalar osteoarthritis. There is hypertrophy of the right posterior calcaneal tuberosity, which is also noticed clinically. However, this is not tender.
…
The fracture of the right calcaneus appears to have healed and there isn’t any gross evidence of right subtalar arthritis.
I have informed [Mr Babbitt] that his injuries will impact on his ability to work. Presently, I do not see the need for surgical intervention, but this is a possibility in the future. I do not see the need to remove the screws in the right calcaneus for the present and there is no suggestion of tenderness related with that.
In his affidavit (affirmed on 30 June 2010) Mr G noted he had been treating the husband from May 2008 in relation to this injury. He referred to his report dated 21 July 2009 (exhibited to his affidavit) which was written after a Functional Capacity Assessment conducted by him on the husband:
[Mr Babbitt] suffers pain across the top of his feet after les[s] than two hours on his feet everyday. The pain in the left foot is accompanied by swelling which extends to the mid-calf. This swelling necessitates the wearing of pressure stockings on the lower legs intermittently for control.
After testing the husband for balance, toe raise test and single leg quadriceps strength and control against a norm set by the construction industry, he noted that the husband fell short of that standard in each test.
He concluded:
The inability of the left foot and ankle in particular to cater with slopes and surface irregularity plus the pain suffered when the joints are put into certain positions means that [Mr Babbitt’s] ability to climb ladders and walk on roofs is compromised.
[Mr Babbitt’s] lack of balance and reduced muscular strength and control around the foot and ankle prompt the recommendation that he reduce or eliminate working at heights on irregular surfaces.
As to prognosis, Mr G said:
[Mr Babbitt] already shows formation of significant joint arthrosis in several foot/ankle joints. These changes are related to the original trauma and will likely increase in the future.
This suggests it is likely there may be a worsening of Mr [Babbitt’s] functional ability in activities requiring weight-bearing through the feet in the future.
A report dated 29 June 2010 referring to an examination of the husband in February 2010 was also exhibited to Mr G’s affidavit. Mr G noted that there was a small reduction in the swelling of the lower legs. He observed that the husband’s main disabling feature is right heel pain and said:
…
Left foot is sore constantly while WB [sic]; but this does go away after NWB for 30 minutes. Both feet still swell, L>R requiring the wearing of pressure stockings …
…
[Mr Babbitt] is likely to experience ongoing pain swelling and disability in both ankles. He is likely to suffer increasing reduction in capacity to sustain WB and remains a safety risk if asked to work on ladders or at heights.
It is not recommended [Mr Babbitt] continue to work in a job requiring spending >1.5 hrs standing consistently. It is not recommended that [Mr Babbitt] work at heights or on unstable surfaces.
Mr G was cross-examined. His evidence was in accordance with the opinions and findings expressed in his reports. He said that despite the husband’s restrictions, that he had been working long hours was a “reflection on his force of will” (transcript of 30 June 2010 at p 177).
In dealing with the husband’s injuries in the context of s 75(2) matters, the Federal Magistrate correctly observed that the fact of the injury was undisputed and that she was required to consider the impact on his future employment of those injuries. She said at paragraphs 195 to 202 of her reasons:
195.The only medical evidence as to the injury provided by the husband upon which I can give any weight was that of Mr [G], a consultant physiotherapist.
196.I find the choice of expert witness in support of a future need argument as to health issues and long term impact as an inappropriate choice, as Mr [G] does not have the qualifications to comment on the long term impact of the injury, (such as an orthopaedic surgeon or similar specialist might have) nor is Mr [G] able to comment on the viability of the Husband continuing in his trade, (such as an Occupational Therapist might have).
197.Whilst Mr [G] explained in detail the application of a standards test applied to scaffolders and other people in the construction business, this only leads to an observation as to the Husband’s capacity to work at heights and did not address the issue of [sic] ability to perform all his tasks as an upholsterer or as a proprietor of a business.
198.I therefore give minimal weight to Mr [G’s] evidence, and only to the extent that it confirms that the Husband has had an injury, is in pain and will have ongoing problems with his feet, and none of these issues are not [sic] in dispute.
…
200.As to the long term impact of the injury on the Husband, in [sic] lack of any evidence I can only rely on the testimony of the Husband, and what he considers to be his capabilities.
201.The husband however in his evidence was inconsistent in the impact the injury is having on his day to day activities.
202.Whilst the Husband described at great length the difficulties he experienced after climbing up and down ladders, he comments that stairs will not present the same problems.
Her Honour then commented on the husband’s evidence that he intended to work even if he had to, “… crawl to do what [he] need[s] to do …”. She then said at paragraphs 205 and 206 of the judgment:
205.But what is the most compelling evidence is that it is not the intention of the Husband to sell the business, nor to reduce his hours or his role within the business.
206.Taking all this evidence into account, I find that there should be no adjustment in the Husband’s favour on the grounds of health.
It is first to be observed that her Honour had before her the opinion of medical specialists, Dr H, Dr E and Mr M, all of whom had expertise in orthopaedics. Dr E is an orthopaedic surgeon and Mr M is a podiatric surgeon. Her Honour had not excluded that evidence. It is difficult to imagine what possible advantage she would have gained from hearing those doctors cross-examined given that there was no dispute as to the injuries or to the husband’s complaints of pain, discomfort and future deterioration or why not having the doctors available would diminish the weight of their opinions. However, that evidence was before her and in our view, their reports were deserving of weight.
Having read the evidence of the husband and that of Mr G, together with the opinions of the treating doctors, we find there is force in the husband’s challenge to her Honour’s findings that there was inconsistency in the husband’s account of his disabilities and his determination to continue working.
However, it is in her Honour’s comments about the qualifications of Mr G to give his opinion that we find error.
First, it was never suggested either in cross-examination or in submissions that he did not have the qualifications necessary to express his opinion. Secondly, he was the husband’s treating physiotherapist and had the advantage of seeing and assessing the husband’s injuries over a considerable period of time in the context of his recovery and return to work and its effects on him. Thirdly, his curriculum vitae, set out in his affidavit, together with the evidence he gave could not have provided the basis for her Honour’s finding that he was unqualified and, finally, there was simply no evidence before her Honour that would permit a finding that an occupational therapist would be qualified to give the opinion about how the husband’s injuries have affected his capacity to work.
A reading of Mr G’s evidence, together with that of the husband, about the nature of his work provided ample evidence of how his injuries have impacted on his capacity to work both presently and in the future.
It is true that her Honour was entitled to give weight to the husband’s work in the business and his efforts not to allow his injuries to prevent him from working. However, whilst he had managed this in the short term, the medical evidence, had her Honour given it some weight, suggested that in the longer term he could be less likely to continue working in the way in which he had been.
Her Honour did have evidence other than the husband’s evidence and had she evaluated it and considered it together with the husband’s evidence, we are of the view that she could not have come to the same conclusion about the husband’s future earning capacity.
We find this challenge to her Honour’s decision made out.

Conclusion and Application to adduce further evidence

For the reasons we have given, we have concluded there have been errors on her Honour’s part which require our intervention. We have been able to do this without considering every one of the husband’s grounds of appeal.
During the hearing of the appeal, we raised with the parties what course might be adopted by us if we were satisfied that the appeal had substance. It became clear during submissions on that point that the bank is pressing for payment on the various mortgages and is proposing to exercise its power of sale. Thus, there is urgency in the determination of the matter.
Both parties considered that this Court should re-exercise the Federal Magistrate’s discretion and re-determine the issue. However, to adopt that course would involve the reception by us of further evidence and that would require agreed figures in relation to the shareholders’ loans in the company, and possibly also in relation to the value of the properties and mortgages on them. We consider that it would be necessary to give the parties a period of at least two weeks to a month to try to agree such matters.
The concern is, however, that if at the end of such a period the parties have been unable to reach agreement, we would then have to remit the matter for re-hearing, with the result that valuable time would have been lost.
Therefore, given the urgency that now apparently surrounds this matter, and given that arrangements could be made if the matter were to be transferred to the Family Court, for a Judge of that Court to re-hear the matter no later than June 2011, we consider the safer and more efficient course is to order a retrial of the parties’ applications for property settlement. Our orders will provide that if either party obtains from the Federal Magistrates Court a transfer of the matter to the Family Court, either party is at liberty to apply by letter sent through the Appeals Registrar in Brisbane for an urgent hearing of the matter by the Family Court.
There was also before us at the hearing of the appeal an application by the husband to adduce further evidence about a range of issues. The difficulty with the husband’s application and supporting affidavit was that even if the matters sought to be raised by him could be shown to have relevance, the material annexed to his affidavit was for the most part not in proper form, and likely to be controversial. This means that such material could not be accepted by this Court and that therefore the application to adduce further evidence must be refused.
However, the existence of at least some of the material which the husband sought to put before us, and the submission on behalf of the wife in response to the husband’s application to adduce further evidence, suggests to us that the parties may well have difficulty in putting before us agreed figures on which we could re-determine the matters. We are thus fortified in our view that the appropriate course for us is to remit the matter for a new trial.

We would explain for the benefit of the husband that our refusal to accept the material which he sought to put before us as further evidence, does not mean that he cannot seek to rely on such material at the new trial, provided of course, that that material is in proper form and can be shown to be relevant to the issues to be decided in the new trial.

Costs

At the end of the hearing we sought submissions from both parties in relation to the costs of the appeal. In the event that the appeal was successful both parties sought there be no order for costs and certificates under the Federal Proceedings (Costs) Act 1981 (Cth).
Given the success of the appeal and having regard to the submissions made by both parties in relation to the costs of the appeal, we propose that there should be no order for costs in relation to the appeal and that the parties should receive certificates in respect of both the costs of the appeal and the costs of the new trial.

I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Bryant CJ, Finn and Ainslie-Wallace JJ) delivered on 25 March 2011.

Legal Associate:

Date: 25 March 2011