Banville & Banville and Anor
[2009] FamCAFC 72
•7 May 2009
FAMILY COURT OF AUSTRALIA
| BANVILLE & BANVILLE AND ANOR | [2009] FamCAFC 72 |
| FAMILY LAW – APPEAL – PROPERTY – CONTRIBUTIONS – Whether the trial Judge erred in the exercise of her discretion in not ordering an equal division of assets after a 41 year relationship – Whether the trial Judge failed to give adequate reasons for the final assessment of contributions – Appeal allowed – Re-exercise of discretion FAMILY LAW – COSTS – Appeal successful on point of law – Costs certificates granted |
| Family Law Act 1975 (Cth) Federal Proceedings (Costs) Act 1981 (Cth) |
| House v The King (1936) 55 CLR 499 Norbis v Norbis (1986) 161 CLR 513 Bennett and Bennett (1991) FLC 92-191 Clauson and Clauson (1995) FLC 92-595 |
| APPELLANT: | Mrs Banville |
| FIRST RESPONDENT: | Mr Banville |
| SECOND RESPONDENT: | Mrs Totleben |
| FILE NUMBER: | PTW | 3466 | of | 2005 |
| APPEAL NUMBER: | WA | 15 | of | 2008 |
| DATE DELIVERED: | 7 May 2009 |
| PLACE DELIVERED: | Perth |
| PLACE HEARD: | Perth |
| JUDGMENT OF: | Finn, Thackray and Martin JJ |
| HEARING DATE: | 13 October 2008 |
| LOWER COURT JURISDICTION: | Family Court of Western Australia |
| LOWER COURT JUDGMENT DATE: | 1 May 2008 |
| LOWER COURT MNC: | [2008] FCWA 46 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr P Dowding SC with Ms D Taylor |
| SOLICITOR FOR THE APPELLANT: | Carr & Co |
| COUNSEL FOR THE FIRST RESPONDENT: | Ms G Braddock SC |
| SOLICITOR FOR THE FIRST RESPONDENT: | Dwyer Durack |
| COUNSEL FOR THE S RESPONDENT: | No appearance |
| SOLICITOR FOR THE S RESPONDENT: | DCH Legal Group |
Orders
That the appeal be allowed.
That Order 1 of the Honourable Justice Crisford made on 1 May 2008 be varied by deleting “$689,005” and substituting in lieu “$876,521”.
That the Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
That the Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
IT IS NOTED that publication of this judgment under the pseudonym Banville and Banville and Anor 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 PERTH |
Appeal Number: WA 15 of 2008
File Number: PTW 3466 of 2005
| Mrs Banville |
Appellant
And
| Mr Banville |
First Respondent
And
| Mrs Totleben |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal against orders made by Crisford J on 1 May 2008 in property settlement proceedings between the appellant wife and the respondent husband.
The trial Judge found the assets were worth $1.8 million and determined they should be divided as to 60% to the husband and 40% to the wife. The division was made by an assessment of contributions, with no adjustment made on account of the factors in s 75(2) of the Family Law Act 1975 (“the Act”).
There was significant dispute at trial concerning the assets and liabilities to be included in the asset pool; however, the findings in relation to these matters are not challenged. Nor are there any challenges to findings of fact.
The wife submits, in light of the unchallenged findings, that contributions should have been assessed as equal after a 41 year marriage. In the alternative, she submits that if contributions were assessed correctly, there should have been a 10% adjustment in her favour on account of the s 75(2) factors.
Brief background
The background facts recorded below can now be regarded as uncontentious.
At the time of judgment the wife was almost 67 years of age and the husband was 74. They were married in 1961. Whilst the husband asserted they separated in 1978, her Honour found they did not separate until August 2002. [Reasons for decision, paragraphs 1, 4 and 24 to 26]
There were two children of the marriage, a daughter born in 1971 and a son born in 1975. Both children have lived independently for some time. [Reasons for decision, paragraphs 4 & 5]
The husband worked as a business professional during the marriage. In February 2002 he sold his practice and thereafter has not had paid employment. The sale price of the practice was $316,800 plus work in progress. [Reasons for decision, paragraphs 6, 12 and 188]
During the marriage the wife worked mainly as a scientist. She was still working (on a part‑time basis) at the time of trial in order to supplement her old age pension. [Reasons for decision, paragraphs 6 and 186 and statement of financial circumstances of wife at AB 97]
In 1984 the parties purchased land at H with their friends Mrs and Mr Totleben. There was only one Certificate of Title relating to the property but it was agreed the husband and wife would occupy one portion of the land and the Totlebens would live on the other. [Reasons for decision, paragraphs 7, 33, 59]
There was a falling out between the wife and Mrs Totleben soon after the H property was purchased, but the husband continued to have a close relationship with the Totlebens. He socialised with them, ate with them and had a room made available in their home for his use. [Reasons for decision, paragraph 8]
In June 1988 Mrs Totleben began working with the husband in his practice. She did so as a favour and it was agreed she would not be paid for her services. [Reasons for decision, paragraph 77]
In May 1991 Mr Totleben passed away. From that time onward, the financial relationship of the husband and Mrs Totleben became “considerably intermingled”, with them inter alia purchasing property together. [Reasons for decision, paragraph 9]
In January 1992 Mrs Totleben purchased land in M, on which she built premises to accommodate the husband’s practice. The husband took up occupation in April 1995. There was no lease until January 2000 and Mrs Totleben received no rent, albeit the business accounts recorded rent being paid from the time the husband took occupation. [Reasons for decision, paragraph 78]
In August 1995 the husband and Mrs Totleben, as joint tenants, purchased two properties in a regional centre, one in G Street for $80,000 and the other in S Street for $73,000. The husband paid a deposit and other expenses of $29,278 from his business account. The balance of $117,000 was borrowed. In April 2003 the husband paid out the mortgage secured against the G Street and S Street properties, using funds received from the sale of the practice. The husband recalled that the amount outstanding at the time was $17,596. [Reasons for decision, paragraphs 83 and 85]
In October 1998 the husband and Mrs Totleben purchased another property, as joint tenants, in B Street, for $118,000. The husband paid the deposit of $28,139. The balance required to complete the purchase ($94,000) was borrowed jointly by the husband and Mrs Totleben. In September 2003 the husband discharged the B Street mortgage balance of $94,000 using the proceeds of sale of the practice. In November 2004 he transferred his half interest in the B Street property to Mrs Totleben for the notional sum of $75,000. [Reasons for decision, paragraph 86]
In June 2002 the husband and Mrs Totleben purchased another property in D Street as joint tenants, for $120,485, using the proceeds of sale of the husband’s practice. The rent from the property was deposited into a joint account in the names of the husband and Mrs Totleben. In August 2004 the husband transferred his half interest in the property to Mrs Totleben for the notional sum of $72,500. [Reasons for decision, paragraph 87]
In November 1997 the wife’s aunt died. The wife inherited a half share in her property in N. The parties’ son acquired the other half. Together they built units on the property, all of which were sold. The wife gifted her share of the proceeds to the son. [Reasons for decision, paragraph 10]
In November 1999 the wife’s mother passed away and the wife inherited property she owned in Y. The wife transferred her interest in the property to a company controlled by the parties’ son in September 2000 without consideration. [Reasons for decision, paragraph 11]
The husband suffered a stroke in August 2002. Upon attending the hospital, the wife ascertained the husband had named someone else as next of kin. She thereafter regarded herself as separated from him. [Reasons for decision, paragraph 13]
In June 2005 the wife commenced proceedings for property settlement, after the husband withdrew the modest financial support he had previously been providing to her. [Reasons for decision, paragraph 14]
The matter proceeded to trial in February/March 2008. The wife sought orders for an equal division of the parties’ assets and also sought the setting aside of transactions between the husband and Mrs Totleben. [AB 56 to 59]The husband and Mrs Totleben resisted these orders and Mrs Totleben sought declaratory relief entitling her to register a charge over the H property. [Reasons for decision, paragraph 17]
Judgment was delivered on 1 May 2008. Orders were made determining the issues between the husband and the wife and declarations were made relating to Mrs Totleben’s entitlements.
On 23 May 2008 the wife appealed. Mrs Totleben took no part in the appeal, as the challenges made to the trial Judge’s orders have no direct impact on her.
The trial Judge’s judgment
After setting out the factual background, the trial Judge recorded that the wife was seeking a payment of $1,049,215, which the wife considered would result in an equal division of the assets. Her Honour noted that the husband was proposing to pay the wife only $205,259. [Reasons for decision, paragraphs 4 to 14 and paragraphs 15 and 16
Having noted other aspects of the relief sought by the parties and by Mrs Totleben, her Honour recorded amongst other matters that:
· the one certain thing in the case was that the parties had “an unconventional relationship”; and
· credibility would not be determinative of the issues, although the wife “overall” was more “believable”. [Reasons for decision paragraphs 20 to 22]
Her Honour then dealt with the dispute concerning the date of separation. She found, contrary to the husband’s assertion, that after the wife obtained work in 1978, the parties had not separated but had “continued to live together, purchase property together and work jointly to provide a home life for their children”. Her Honour found that the marriage continued, “albeit in an unusual form”, until August 2002. [Reasons for decision paragraph 24 to 26]
The trial Judge went on to record that while the relationship between Mrs Totleben and the husband was “unusual”, it was “not difficult to discern a strong and longstanding commitment emotionally and financially”. Her Honour found it unnecessary to make any further finding concerning the extent of the relationship. [Reasons for decision paragraph 27]
The trial Judge then turned to consider the pool of assets. We consider it appropriate to record what she said at the outset of her discussion:
31Counsel for the husband has urged the Court to adopt what is commonly referred to as an asset by asset approach. She points to the fact that the wife received an inheritance to which the husband made no contribution, the relationship of the parties during their marriage was such that each treated some property as exclusively their own and to which property the other party made no direct financial contribution. Mrs Totleben is involved in the acquisition of some of the property. I will return to the appropriate approach later and will now deal with the various items in contention.
Her Honour then went on to determine issues about the asset pool. Given the absence of complaint in relation to her findings, it is unnecessary to consider them, save insofar as they may have relevance to matters that are the subject of appeal.
Her Honour recorded that the H land had been purchased in November 1984. The property at trial was worth $1,945,000 but, after allowance for the different amounts expended by the two families on improvements, her Honour assessed the value of the interest of the husband and the wife at $835,500. [Reasons for decision paragraphs 32 to 66]
Her Honour determined that the value of the parties’ business (“the Stud”) was only $6,200 – being the value of the animals. This business had been conducted from the H property and involved breeding and boarding animals. Her Honour noted that the business had been originally conducted in the name of the husband, apparently in order to provide him with tax relief, as the business was operated at a loss. She found that by the mid 1980’s the husband was no longer interested in the animals and the wife thereafter operated the business alone. From May 2000 the business had been solely operated by the wife. [Reasons for decision paragraphs 67 & 68]
Her Honour then turned to discuss the proceeds of sale of the husband’s practice. Although the business was sold for $316,800, the husband only received $303,000 ‑ being $171,800 paid in March 2002 and the balance by instalments over a period of three years. [Reasons for decision paragraph 69]Her Honour recorded (at paragraph 70) that “[t]he wife says that the money received for the practice which was established and built up during their marriage has not been appropriately accounted for”.
Her Honour went on to record:
71.After the sale of the … practice the husband and Mrs Totleben were involved in the purchase of various parcels of land in [regional centre]. The evidence is that from June 2002 lump sums were paid by the husband towards the purchase of these properties. The husband only deposes to the D Street payment coming from this source. The lump sums paid are:
12 June 2002
… D Street, purchase price
$120,485
4 April 2003
… G Street/… S Street mortgage discharged
17,596
5 September 2003
… B Street mortgage discharged
94,000
TOTAL
232,081
We note that the observation made by her Honour in paragraph 71 suggests that the husband and Mrs Totleben acquired other parcels of land in the regional centre, apart from the D Street property, after June 2002. At this stage of the judgment her Honour had not recorded the chronology of the purchase of the regional centre properties, but her later findings indicate that only D Street was acquired after June 2002. The G Street and S Street properties had been acquired in 1995 and B Street in 1998. Nevertheless, as the table above indicates, the mortgages relating to those properties were discharged after June 2002, using the proceeds of sale of the practice. [Reasons for decision paragraphs 74, 83, 85, 86]
Her Honour next recorded the husband’s assertion that after he sold the practice he did not have a source of income other than the rental from the regional centre properties and dividends from shares – and that otherwise he had “some savings” and was receiving the instalments from the sale of the practice. Her Honour also noted the husband’s evidence that he had employed farm workers on a part‑time basis “for at least three years” (presumably after the sale of his practice). [Reasons for decision paragraphs 72 & 73]
Her Honour concluded there must have been about $70,000 remaining from the proceeds of sale of the practice after the discharge of the mortgages on the G Street, S Street and B Street properties. Her Honour found that these monies were likely to have been spent by the husband on his own support and also on “maintaining assets which the wife has sought to characterise as matrimonial”. She also noted that the husband retained savings. In these circumstances, her Honour determined that she would not add back into the pool any of the proceeds of sale of the practice, “most of which is included in other assets which are included [in the pool]”. [Reasons for decision paragraph 74]
Her Honour next reviewed the chronology of dealings between the husband and Mrs Totleben. We have already made reference to the arrangements concerning Mrs Totleben working in the husband’s practice without payment and providing rent free premises for the practice.
Her Honour noted the husband’s claim that the rent owing to Mrs Totleben’s company was $338,996 for the period from 1995 to 2002. Her Honour went on to note that Mrs Totleben had worked in the practice for 14 years and claimed never to have been paid wages. She recorded the husband’s assertion that once the business started making a profit he was in a position to declare that income was being paid to Mrs Totleben. Her Honour found that no deductions for payment of income to Mrs Totleben were claimed between June 1988 and June 1994. Between July 1994 and June 2002 $124,917 was recorded as payment to Mrs Totleben for secretarial services. This amount was not in fact paid to her, although she paid tax on that amount. [Reasons for decision paragraphs 79 & 80]
Her Honour recorded that at a Case Assessment Conference held in August 2005 the husband was ordered to file a statement of financial circumstances by 20 September 2005. On 15 September 2005, the husband signed an acknowledgement of debt to Mrs Totleben for $338,996 for outstanding rent on the practice and $124,917 for unpaid secretarial services. The husband did not file his statement of financial circumstances until January 2006, but when he did so both of these amounts were included as liabilities. Her Honour recorded that both debts were also included as liabilities in a further financial statement filed by the husband in December 2006 but she noted “despite no payment, at trial only the rent was sought” and that in the husband’s most recent financial statement (filed in October 2007) the outstanding secretarial fees had not been included as a debt. Accordingly, by the time of trial the husband was claiming only the unpaid rent as a liability. [Reasons for decision paragraphs 81 and 82]
Her Honour next recorded the details regarding the acquisition of the G Street and S Street properties in 1995. She noted the husband’s claims that:
· it had been agreed he would pay the deposits to compensate Mrs Totleben for not having been paid for work she had done for him “over the years”;
· the rent was sufficient to cover the mortgage and expenses;
· as he was not able to pay Mrs Totleben all he owed in one payment, the intention was that the mortgage would be discharged over ten years and Mrs Totleben would receive the benefit of the capital appreciation; and
· the income from the properties was to be shared between him and Mrs Totleben and that whoever outlived the other would ultimately receive the properties. [Reasons for decision 83 and 84]
Her Honour found that Mrs Totleben’s half share in the G Street and S Street properties was worth $297,500 at the time of trial. [Reasons for decision paragraph 85]
Her Honour next recorded details relating to the acquisition of the B Street property. Her Honour noted that “again the intention was to recompense Mrs Totleben for her unpaid secretarial services”. Having recorded the discharge by the husband of the mortgage on the B Street property in September 2003 and the transfer of his half interest to Mrs Totleben, her Honour recorded that a half share in the B Street property was worth $162,500 at the time of trial. [Reasons for decision paragraph 86]
Her Honour next recorded details of the acquisition of the D Street property and noted that the rent from the property was deposited into a joint account of the husband and Mrs Totleben. Her Honour found that “again the understanding was that the purchase of an interest for Mrs Totleben was in compensation for her unpaid secretarial services”. Having noted the transfer of the husband’s half interest in the property to Mrs Totleben, her Honour recorded that the property was worth $355,000 at the time of trial. [Reasons for decision paragraph 87]
In paragraphs 88 to 90 of her judgment, her Honour said:
88.The husband offers some explanation for the transfer of his shares in the [D Street] and the [B Street] properties to [Mrs Totleben]. He deposes that these transfers were carried out as a result of [Mrs Totleben’s] concern that if she predeceased the husband then he would acquire all the assets and her family would not receive her share. He then goes on to say that the transfer of the [D] and [B] Street properties were “appropriate recompense for some of the unpaid work she did for me over 14 years, and some of the unpaid rent I owed on the office…”.
89.When the acknowledgment of debts were signed there was no recognition of the interest of [Mrs Totleben] in these properties. It is to be noted the first properties were purchased at a time when the secretarial services and rent monies were outstanding and allegedly continuing to accrue. No effort was made to then discharge the existing debts although funds were available. When the husband sold his … practice he again made no specific payment to these debts.
90.A decision was made instead to invest the money in real estate. There is no evidence of any attempt by the husband and [Mrs Totleben] to quantify what was outstanding at either time.
Her Honour then noted that the wife was applying under s 106B to set aside the transaction pursuant to which the husband had transferred his half interest in the D Street property to Mrs Totleben. She recorded that the wife was proposing that the husband retain his original half interest in the D Street property and that the half interest gifted to Mrs Totleben be added back into the pool. Her Honour noted that the wife also made similar applications in relation to the B Street property. [Reasons for decision paragraphs 91 & 92]
In addition, her Honour noted that the wife sought to add back all of the gross rent for the B Street property from November 2004 until trial, and the gross rent from the D Street property for the period from August 2004 until trial. The amount of rent sought to be added back was $70,670. [Reasons for decision paragraph 93]
Her Honour recorded that counsel for the wife had accepted that the Court did not necessarily have to consider setting aside the various transactions “if it was minded to include these amounts in the pool of assets utilising another principle”. [Reasons for decision paragraph 93]
Her Honour then turned to consider the principles relating to “add backs” in property settlement proceedings. In doing so, her Honour said it was necessary to bear in mind this citation from the judgment of the Full Court in C and C [1998] FamCA 143:
Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives. [Reasons for decision paragraph 95 to 97]
Her Honour then went on to say:
98.Although the parties did not ultimately separate until 2002 they lived quite different lives for many years beforehand.
99.The starting point for the Court’s consideration here will be whether the money claimed for unpaid secretarial services and the unpaid rent on [the practice] are debts which are appropriate to take into account, at least at this stage, of the property settlement exercise.
100.A substantial intermingling of the husband and [Mrs Totleben’s] finances appears to have taken place after her husband’s death. This gathered momentum very quickly and I accept that by 1995 there was tacit agreement that there would be some form of quid pro quo between [Mrs Totleben’s] work for the husband, his use of her premises and the purchase of properties. The initial purchase of [G] and [S] Street was some months after the husband occupied the … premises … and just over a year after he found himself in a position to declare income being paid to [Mrs Totleben] although this did not actually happen.
101.Despite some lack of detail and precision about the manner in which the amounts were quantified this aspect was never seriously challenged. I do accept that [Mrs Totleben] carried out the work she details in her affidavit and that the husband had the use of the business premises until he chose to retire. That being the case it would be unjust for [Mrs Totleben’s] specified claims to be ignored. I take into account that for many years she specifically refused payment of wages.
102.Although the wage debt and the unpaid work debt are now separately identified until about September 2005 they were merged, in my view, into one unspecified debt.
103.I am satisfied there was a debt for both unpaid work from 1 July 1994 and the use of premises owing to [Mrs Totleben] and as documented in the acknowledgments of debt.
104.Even if it is accepted that the amounts were owing by the husband to [Mrs Totleben] and the amounts stated in the acknowledgments are an accurate reflection of those debts, it is difficult on the evidence to ascertain just exactly what the present position is.
105.Although I accept that there was a tacit agreement there would be some repayment at some stage, there is no evidence that this was ever discussed in detail or considered thoroughly until after proceedings were instituted by the wife.
Her Honour then considered authorities concerning the way in which the Court deals with liabilities owed by one party of the marriage to a third party. She concluded that “[t]he Court may take the view that because of the circumstances surrounding the incurring of a liability it ought, in justice and equity, to be wholly or partly disregarded in determining the appropriate order to make under s 79” and that “it is necessary for the Court to consider all matters before arriving at an appropriate allowance to be made for the money owing to [Mrs Totleben]”. [Reasons for decision paragraphs 107 to 110]
Her Honour then referred to a number of considerations she regarded as being relevant to her determination. She observed that the amount said to be owing to Mrs Totleben in 2002 totalled $463,833. She noted that Mrs Totleben’s half share in the G and S Street properties was presently valued at $297,500; that this amount would be likely to increase in the future; and that rent is received on the properties. She also observed that the husband had paid the deposit on the properties, discharged the balance owing under the mortgage and that the mortgage was otherwise paid by any rent received. [Reasons for decision paragraphs 111 & 112]
Her Honour went on to record, inter alia, that:
· there had never been any demand for immediate repayment of the monies said to be owed to Mrs Totleben;
· the “quid pro quo for [Mrs Totleben] was to be the subject of a future reckoning”;
· both the husband and Mrs Totleben were “vague in their evidence about present quantification of what [Mrs Totleben] had received in discharge of the debt”;
· although the evidence was “somewhat imprecise the Court is required to do the best it can”. [Reasons for decision paragraph 113]
Her Honour observed that it was only after all of the evidence had been given that the wife sought to include all of the B Street property as an asset of the husband. She also observed that it seemed the wife’s “original position was more reflective of the evidence”. Her Honour’s judgment does not disclose what was the wife’s “original position”. Reference to the wife’s amended application for property settlement [AB 1:57] indicates that the wife was seeking to set aside the transfer to Mrs Totleben of the husband’s (original one half) interest in the property. We therefore presume that the wife originally accepted Mrs Totleben was entitled to retain a one half interest in the property. [Reasons for decision paragraph 114]
Her Honour went on to note that the combined value of Mrs Totleben’s half interest in the G Street and S Street properties was $297,500 and that if her “original half share of B Street” was included, the total value of her interests was approximately $460,100. Her Honour noted that this figure equated approximately to the amount originally outstanding on the two debts the husband claimed should be taken into account. Her Honour concluded that “one half of B Street is a genuine accounting for the debt and it is not intended to be included in the asset pool”. [Reasons for decision paragraphs 115 & 116]
Her Honour recorded that Mrs Totleben had also had the benefit of all of the B Street rent after the property was transferred into her sole name. She found that Mrs Totleben was entitled to one half of the rent, given the finding that she had received her original half share of B Street in partial discharge of the debt owed by the husband. Her Honour continued:
Taking into account her one [semble, half] share of these three properties and one half of the B Street rent which over the relevant period is a gross amount of $14,875 it appears to the Court that she has been repaid for her secretarial services and the rent on [the practice premises] along with any interest she may have earned on the amounts if the money had been available to her. [Reasons for decision paragraph 117]
Her Honour said she next needed to consider “the transfer of the husband’s original half share of B Street, the addback of all of the D Street property, all the D Street rent and one half of the B Street rent”. [Reasons for decision paragraph 118]
Her Honour then noted the details surrounding the acquisition of the B Street property in 1998; the discharge of the B Street mortgage; and the purchase of the D Street property. Her Honour then said, in a paragraph which is of considerable relevance in this appeal:
120.…The Court has taken into account the fact that these payments were made solely from the proceeds of sale of the husband’s … practice. That practice was built up during the course of the parties’ marriage. The husband provided for [Mrs Totleben] with assets he was able to build up due, in part, to the way the parties ran their marriage. The properties were not acquired with assets or earnings generated after separation.
In a paragraph which also assumes significance in this appeal, her Honour expressed the view that:
121.As in Townsend I am of the view that what occurred in relation to these assets is a premature distribution by the husband. It may be a portion of the assets to which the wife made little contribution but the husband distributed to a third party assets in which the wife had a legitimate interest. These transfers were not to discharge any debts.
Her Honour earlier (at paragraph 119) had said that it was “accepted that a premature distribution of matrimonial assets is one of the clear categories of cases where a Court considers it appropriate to notionally addback to the pool of assets, assets that no longer exist”. In support of this proposition she had referred to Townsend and Townsend (1995) FLC 92-569 as well as Omacini and Omacini (2005) FLC 93-218.
Her Honour went on to observe that the premature distribution here was not a matter appropriate to be dealt with under s 75(2), since the husband had had the sole benefit of the money from his practice and had “sought to precipitously dispose of that money or of what has been acquired with the money”. It was therefore appropriate to add back into the pool his one half share of the B Street property and all of the D Street property. [Reasons for decision paragraph 122]
Her Honour then referred to the unsatisfactory evidence in relation to the rent Mrs Totleben had received from the B Street and D Street properties. Her Honour indicated her intention to deal with the rent “in the context of it very likely having been used to pay the husband’s legal fees or to assist in his living”. Her Honour then recorded that she would not add back any of the rent for reasons she said she would canvass later in her judgment. [Reasons for decision paragraphs 123 to 125]
Her Honour then turned to discuss the inheritances the wife had received. She noted that whilst the husband sought to add back an amount of $292,000 on account of the inheritances, there was no evidence to support that figure. Her Honour also recorded the husband’s acknowledgement that he had made no contribution to the inheritances. Her Honour went on to find that the wife’s attempt to give an “altruistic slant” to her actions in giving her son the benefit of the inheritances was “unconvincing”. Nevertheless, given the lack of contribution by the husband and the fact that the inheritances were received just before separation, her Honour determined that the inheritances would not be added back but said she would have regard to the wife’s conduct when dealing with the s 75(2) factors. [Reasons for decision paragraphs 126 to 133]
Her Honour then moved to discuss the husband’s interest in the “Farm partnership”. She noted it was the wife’s case that the husband’s interest in the partnership, which he had transferred to Mrs Totleben in 2004, should be added back in to the pool at a value of $307,737. The partnership had been conducted from the time of Mr Totleben’s death in 1991. For reasons which we need not discuss, her Honour determined it would not be appropriate to add into the pool any provision for the partnership. However, she did record that Mrs Totleben had accepted that the husband had “put the start up capital into the partnership and also funded any shortfall in its operation over the years”, albeit at the end of the life of the partnership it had only assets of minor value. [Reasons for decision paragraphs 134 to 138]
Having concluded her discussion of the assets, her Honour turned her attention to the liabilities. Given there is no challenge to her Honour’s findings, we consider it necessary to refer to only one matter which concerns the capital gains tax liability payable in the event of sale of the two [regional centre] properties the husband owns jointly with Mrs Totleben (G Street and S Street). Her Honour noted that the only evidence of the possible extent of the liability was the estimate provided by the husband ($32,279). Having considered the relevant authorities, her Honour determined that she would not include the potential capital gains tax as a liability but she would “take into account pursuant to s 75(2) the fact that the husband may risk capital gains tax liabilities” [emphasis in the original]. [Reasons for decision paragraphs 149 to 157]
Having determined the assets and liabilities, her Honour then considered the submission of counsel for the husband to the effect that there were categories of assets which needed to be considered separately, whereas the wife’s counsel submitted that a global approach was appropriate. Her Honour reviewed the authorities and then said:
161.In this case an asset by asset approach might arguably assist in assessing the respective contributions. I say this, taking into account that a substantial amount of the property was acquired by the husband when he was involved in a relationship with [Mrs Totleben] and the parties lived separate lives.
162.However, I respectfully agree with the Honourable Justice Thackray (as he then was) when he:
“…. elected to adopt a hybrid position – i.e. I will assess very carefully the contributions the parties made to the three properties, but I will then assess their contributions globally. In doing so, I have in mind the advice given by Nygh J in G & G (1984) FLC 91‑582 (which was cited with approval by members of the High Court in Norbis) that judges undertaking a purely asset-by-asset analysis sometimes risk mistaking the trees for the forest. (Yukhnevich and Stazzonelli [2006] FCWA 98 at para 25).”
163.I intend to adopt the same hybrid approach although I have prepared a schedule, for ease of reference, to show the assets the husband had acquired with [Mrs Totleben] separately.
Her Honour then set out the following table in which she grouped the assets into what were called the “matrimonial assets” and the “Totleben assets”. The Totleben assets comprised the four pieces of real estate in [regional centre] discussed above. [Reasons for decision paragraph 163]
Assets “matrimonial assets”
Ownership
Value
H property
Husband (to retain)
$835,500
Bendigo Retirement cheque account
Husband
27,323
Westpac cash management account
Husband
3,740
Nissan Navara motor vehicle
Husband
7,850
Household contents
Husband
200
Plant and equiment
Husband
3,000
Personal effects
Husband
500
Addbacks for legal fees
Husband
115,000
Addbacks for legal fees (dollar for dollar order)
(a) Husband
(b) Wife
9,385
9,385
BankWest account
Wife
3,789
BankWest account
Wife
7,050
ANZ account
Wife
4,300
Nissan Navara motor vehicle
Wife
5,900
Household contents
Wife
2,000
The Stud
Wife
6,200
Jewellery
Wife
2,535
Addbacks for legal fees
Wife
59,866
Money held in Carr & Co trust account
Wife
25,146
Superannuation asset
Wife
6,910
Assets TOTAL
$1,135,579
Liabilities
Money owed to RB for legal fees
Wife
16,000
Credit card
Wife
3,024
Impact Capital Funding
Wife
53,000
Money owed to Mrs Totleben for valuations (joint)
Husband
3,398
Liabilities TOTAL
75,422
TOTAL NET Assets
$1,060,157
Asset “Totleben” assets
Ownership
Value
Half share – … G Street
Husband
$152,500
Half share – … S Street
Husband
145,000
… D Street
Husband
355,000
Half share – … B Street
Husband
162,500
TOTAL
$815,000
Liabilities
Nil
TOTAL NET Assets
$815,000
GRAND TOTAL
$1,875,157
Her Honour then turned to consider the parties’ contributions to the asset pool. Since the focus of this appeal relates to contributions, we intend to repeat all that her Honour said:
164.The parties were married for around 45 years. They were together approximately 41 years. Understandably there were different phases in their relationship. The husband accepts that from the date of their marriage in 1961 until 1978 there was an equal contribution to their assets. From that point in time the parties are apart on their view as to contributions.
165.The husband says that the Stud business operated by the wife was a drain on the family’s finances and that his … business and the money flowing from that was a substantial contribution he made solely. Following from that he says he funded the bulk of the purchase of the H property and made a far greater contribution to the overall conservation and acquisition of assets.
166.I do not share the husband’s view that his contribution to what can loosely be described as the H assets is greater than that of the wife.
167.I accept the wife’s evidence that although the Stud business was not an enormous success, it provided the husband with some tax relief. There were times when money was earned and times when debts needed to be paid.
168.I find that the wife made an overwhelming contribution to the welfare of the family. Despite the husband’s very negative approach to the wife’s contribution, I do not accept his criticisms are borne out by the evidence.
169.He deposes to working nights and weekends in the … business. He said he worked long hours to build it up. He played much less of a role in family life than she did. The wife did activities with the children and attended to most of their needs in the home. She said the children were her priority and her own activities were secondary. I accept her evidence in this regard.
170.The husband was overly critical of the wife’s housekeeping yet a photograph of his living area at the H property did not suggest he had a meticulous approach to cleanliness or to cleaning up.
171.[The parties’ daughter] was not required for cross-examination. [The parties’ son] was cross-examined on a number of matters but was never challenged on his recall of family life and how the family operated. However, it was clear the husband had another view.
172.Overall I prefer the wife’s evidence and the evidence of [the parties’ son] in that regard.
173.The fact the wife made the overwhelming contribution to the children allowed the husband to work the hours he did and establish himself in his … business. It allowed him to build the foundation for future assets. Although he did sell one business before moving to the H property he had established contacts and this enabled him to develop another business and to attract further clients. He retained a few clients from his original business. I have no doubt the husband worked very hard to do this but he was able to do so given the way the parties ran their marriage.
174.The wife and children moved to H before the husband. The husband explained that the wife was in charge of the school routine and needed to be with them. When asked in cross-examination how the move to H was carried out he said he did not know as he was at work.
175.What cannot be ignored is that the wife also worked, albeit part-time, and her evidence is that the money assisted the household.
176.When cross-examined about her contribution to the H property she said she had spent her earnings to, amongst other things, buy portable stockyards and supply household items. She had assisted in rock picking, establishing tyre fences to prevent horse damage and erosion. She had planted some trees, weeded and generally checked fences.
177.I accept the husband was mostly responsible for constructing a modest house on the property.
178.Although the parties had an unusual way of sharing their life together as the wife said “it was how we ran things”. [The parties’ son] has deposed to it being unusual but essentially it worked for his parents. The wife said “it suited us and it worked”.
179.I find that the contributions to the H property and related assets built up during the course of the marriage were overall equal. However, this is not the end to it as there are other assets to consider and given the state of their relationship and the age of the children contribution considerations are different.
180.These assets were acquired by the husband with [Mrs Totleben]. They were funded, in the main, from money from his … practice and are parcels of real estate in the [regional centre] area purchased from 1995 onwards.
181.I accept that [Mrs Totleben] took the responsibility for overseeing the management of the rental properties that now form part of the asset pool of the parties. Although they were managed by agents in [regional centre], [Mrs Totleben] was the point of contact in relation to any decisions and enquiries about the properties. This is a contribution on behalf of the husband.
182.The husband made the sole financial contribution to the properties. The money for all the properties came directly from his income from his … practice. This practice was built up over many years and I am satisfied that without the wife’s input early on to children and the parties’ properties then the husband would not have been in a position to devote so much of his time to his work. As a result of my judgment he has discharged the debt to [Mrs Totleben] for wages and rent.
183.The sale of the … practice took place just prior to separation. The properties have been rented and there was no evidence of improvements made to them.
184.Although the wife made no direct contribution, she did make some considerable indirect contribution to the husband’s ability to earn an income and establish a business. The properties have increased in value, at least to some extent through market forces.
185.Overall, I assess the wife’s contribution as being 40% of the total asset pool.
Her Honour next proceeded to consider the s 75(2) factors. She found that the wife was:
· almost 67 years of age and in reasonably good health for her age;
· working part‑time as a scientist and intending to continue in her employment (as there was no age limit for employees at her workplace);
· earning a “modest income”, as well as attending university part‑time; and
· still active and continued her involvement with animals, and would like to continue to live her semi rural lifestyle for the next eight to ten years.
Her Honour also found that the wife had withdrawn $15,000 from her superannuation fund after separation to meet living expenses and only had $6,910 remaining (which had been included in the asset pool). Otherwise the wife had no other financial resources. [Reasons for decision paragraphs 186, 187 and 189]
Her Honour noted that the husband was 74 years of age. She found he was in poor health, having suffered two strokes in 2002 and 2005, and having undergone surgery in 2005 and 2006. [Reasons for decision paragraph 188]
Her Honour also noted that the husband had retired from his work as a business professional, but had the income from the rental properties and “what appears to be freely given financial assistance” from Mrs Totleben who had “her own investments and financial resources”. Her Honour found that although the husband had no superannuation, he had considerable resources available to him. She mentioned he would retain the H property on which he has access to comfortable living arrangements and that he would also retain some investment properties. [Reasons for decision paragraph 190]
Her Honour noted that both parties had lived “in frugal circumstances, at least since their move to the H property” (with the husband having chosen to live mostly in even more “modest circumstances” in an abode he had constructed on the property). [Reasons for decision paragraph 191]
The trial Judge noted that whilst the wife no longer had her inheritance, she had made a “choice about how that was utilised” and that “her modest circumstances, to a certain extent, may well have been alleviated with a more appropriate use of that money”. Her Honour was nevertheless not satisfied that the wife’s conduct in disposing of the inheritance was designed to reduce or minimise the value of assets in the way discussed in Kowaliw and Kowaliw (1981) FLC 91‑092. As the inheritance was no longer a resource available to the wife, her Honour said she did not intend to make any adjustment for it. [Reasons for decision paragraphs 192 to 195]
The trial Judge went on to find that the parties’ son, who had been the beneficiary of the wife’s generosity with the inheritance, “may well not be financially accommodating” towards the wife. [Reasons for decision paragraph 196]
The trial Judge also found that the wife had a debt of $26,212 associated with her studies, which her Honour had not taken into account in assessing the pool. She also had a debt to her son, the amount of which was not specified (unless her Honour was referring to a loan from the son to cover legal costs, which was included in the pool). In any event her Honour found that neither debt was of a “pressing nature”. [Reasons for decision paragraph 197]
Her Honour went on to observe that the husband said he had debts to Mrs Totleben, but “if this is the case” they were not “pressing”. In this context her Honour observed that Mrs Totleben had had the benefit of whatever assets had been received from the Farm partnership, save for the $10,000 paid to the husband for the equipment, and that she also had “other benefits from the husband”. Taking these matters into account, her Honour said the husband should pay “the valuation costs owing to [Mrs Totleben]” which had been earlier included in the pool at a figure of $3,398. [Reasons for decision paragraphs 197 and 163]
Her Honour also observed that the husband “will likely have a capital gains tax liability if he sells property other than H”, but said that she was unable to ascertain exactly the amount. [Reasons for decision paragraph 198]
Her Honour then completed her discussion of the s 75(2) factors:
199.Neither counsel made any strong submissions as to any adjustment for the factors set out in s 75(2) of the Act. I appreciate the asset pool as I have found it may not be as either anticipated. However, I have reviewed all the factors I need to and having done so my independent assessment is there should be no further adjustment.
Her Honour next considered whether the proposed orders were just and equitable. She noted that as a result of her assessment, the wife would retain assets worth $750,063 and the husband would retain assets worth $1,125,094. Her Honour calculated that in order to bring about the proposed 60:40 division it would be necessary for the husband to pay the wife $689,005. She observed that this might necessitate the husband disposing of a number of his investment properties, although the husband’s relationship with Mrs Totleben and her willingness to assist in paying out the wife meant there were “a number of choices” available to the husband. [Reasons for decision paragraphs 200 to 203]
Her Honour went on:
204In considering the justice and equity it is necessary to again address the issue of the inheritance which was not added back into the pool of assets and for which no adjustment in favour of the husband was made. Despite the husband having to pay the wife a substantial amount of money he will still be left with an interest in property from which he receives some rent and he will be cared for by [Mrs Totleben] who has other resources to which the husband, if they retain either of [G Street], [S Street] or [B Street], made a contribution to. He will have a substantial interest in the [H] property. The wife will be able to re-house and also have some money to invest. Although she is employed part-time this will not continue indefinitely and she does not receive anything other than a modest income.
Her Honour concluded by saying the orders she proposed would allow each party to maintain themselves and that although the wife was working part‑time the husband had more “resources available to him”. Accordingly, in all the circumstances the outcome proposed was just and equitable. [Reasons for decision paragraph 205]
Appellate principles
The circumstances in which an appellate Court can legitimately interfere with a discretionary judgment are well known. In House v The King (1936) 55 CLR 499 Dixon, Evatt and McTiernan JJ said at 504-5:
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 discretion is reviewed on the ground that a substantial wrong has in fact occurred.
In Norbis v Norbis (1986) 161 CLR 513 Brennan J said, at pp 539-540:
The difficulties in the way of developing guidelines beset an appellate review of the exercise of a discretion under s. 79. Unless the primary judge reveals an error in his reasoning, the Full Court can intervene only if the order made is not just and equitable. How does the Full Court arrive at that conclusion? In Bellenden (formerly Satterthwaite) v. Satterthwaite [[1948] 1 All ER 343 at 345], Asquith L.J. stated the rationale of an appellate court’s approach:
“It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.”
The “generous ambit within which reasonable disagreement is possible” is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.
The law requiring trial judges to give adequate reasons is also well settled. The adequacy of the reasons will depend on the circumstances of the case. Generally, reasons are inadequate if the appeal court is unable to ascertain the reasoning upon which the decision is based or justice is not seen to be done. If the trial judge does not sufficiently disclose the reasoning behind a decision, the appeal Court is denied the opportunity to detect error and the losing party is denied knowledge of why his or her case was rejected (see Bennett and Bennett (1991) FLC 92-191).
The Grounds of Appeal
The wife relied on the following Grounds of Appeal:
1. Having found that:
(a)the parties’ contributions to the [H] property and related assets were overall equal;
(b)the monies from all the [regional centre] properties came directly from the husband’s income from his … practice and the sale of … practice took place just prior to the separation;
(c)the wife made some considerable indirect contribution to the husband’s ability to earn an income and establish the … business;
(d)the length of the marriage (1961 to 2002) and other contributions made by the wife (being both direct and indirect financial and non-financial contributions and her contributions as homemaker and parent);
(e)the calculations contained in the husband’s Papers for the Judge filed 22 February 2008 that the net assets of the parties be divided equally
the learned trial Judge erred in assessing contributions overall at 60% to the husband and 40% to the wife.
2.The learned trial Judge erred in law in failing to give adequate reasons why she assessed contributions as to 60% to the husband and 40% to the wife.
3.In the event that the assessment by the learned trial judge of contributions was correct, she erred in then failing to make an adjustment of 10% in favour of the wife for section 75(2) factors.
Grounds 1 and 2
By these grounds the wife asserts that her Honour erred in the exercise of her discretion in assessing contributions 60:40 in favour of the husband and erred in law in failing to give adequate reasons why she assessed contributions in these proportions. Counsel for both parties effectively argued these grounds together and we propose to discuss them together.
The wife’s submissions
Senior counsel for the wife submitted that the effect of her Honour’s decision to divide the asset pool in proportions 60:40 in favour of the husband was to award the wife 50% of what her Honour had called the “matrimonial assets” but only 27% of the “Totleben assets”. (This calculation was not contested by senior counsel for the husband.)
Senior counsel for the wife submitted that in arriving at this result, her Honour had ignored the finding made at paragraph 120 of her reasons where, having recorded the acquisition of the B Street property (and the discharge of the associated mortgage) and the acquisition of the D Street property, she had said:
The Court has taken into account the fact that these payments were made solely from the proceeds of sale of the husband’s … practice. That practice was built up during the course of the parties’ marriage. The husband provided for [Mrs Totleben] with assets he was able to build up due, in part, to the way the parties ran their marriage. The properties were not acquired with assets or earnings generated after separation.
Senior counsel for the wife then took issue with portion of paragraph 121 of her Honour’s reasons, in which her Honour had said:
…I am of the view that what occurred in relation to these assets is a premature distribution by the husband. It may be a portion of the assets to which the wife made little contribution but the husband distributed to a third party assets in which the wife had a legitimate interest. These transfers were not to discharge any debts.
Senior counsel for the wife argued that the proposition that the wife may have made “little contribution” to the assets in question was inconsistent with her Honour’s earlier findings which indicated that the marriage was a very long one in which the wife had taken the “overwhelming role” as homemaker and parent. In these circumstances, senior counsel questioned how it could be that her Honour could “corral” one section of the assets and say the wife had made little contribution to them.
Senior counsel for the wife submitted that in suggesting in paragraph 121 that the wife had made “little contribution”, her Honour had “simply forgotten” s 79(4)(c) of the Act, which requires the Court to take account of contributions made to the welfare of the family. He rhetorically asked how a contribution built up over 25 years could be regarded as “somehow or other not relevant to a discussion of an asset which was also built up over this long period of time and disposed of essentially to a third party?”
In support of his argument, senior counsel for the wife referred to what had been described in his Summary of Argument as “the principle in Farmer v Bramley” [(2000) FLC 93‑060]. He cited authority concerning this “principle” which drew attention to the fact that there is no need to establish a direct or indirect nexus between contributions to the welfare of the family and the property available for distribution.
Senior counsel for the wife acknowledged that her Honour had found the marriage to be an unconventional one, but drew our attention to the findings that after the date on which the husband claimed they were separated, the husband and wife “had continued to live together, purchase property together and work jointly to provide a home life for their children” and that the marriage had “continued, albeit in an unusual form, until August 2002”.
Senior counsel for the wife also drew attention to the fact that not only had the wife made what her Honour found to be the “overwhelming contribution to the welfare of the family” (paragraph 168) but had also worked part-time (paragraph 175), done work around the H property (paragraph 176) and had worked in the Stud from 1969 to the date of trial, with no involvement by the husband in that business from the mid 1980s (paragraph 67). Senior counsel also pointed out that given the two children were not born until the 10th and 14th years of the marriage, they were still requiring care from the wife into the mid 1990s.
Senior Counsel for the wife submitted that the point in her Honour’s judgment at which she had “misconceived the whole process” came at paragraph 161 where her Honour determined that an asset by asset approach might assist in assessing the respective contributions of the parties. In coming to this decision her Honour had said, “I say this, taking into account that a substantial amount of the property was acquired by the husband when he was involved in a relationship with [Mrs Totleben] and the parties lived separate lives”.
Senior counsel for the wife submitted this was the only point in her Honour’s judgment at which a “clue” was provided as to why the wife had received only 27% of the Totleben assets. He submitted this statement by her Honour overlooked the finding already made by her (at paragraph 120) that the payments to acquire the B Street and D Street properties had come “solely from the proceeds of the sale of the husband’s … practice … [which] was built up during the course of the parties’ marriage”.
Counsel submitted therefore that the acquisition of the Totleben assets was no more than the investing of the property of the parties and that her Honour had erred in determining that the assets so acquired should be treated differently merely because at the time of acquisition the parties were living in a “different lifestyle” and because the ownership of the properties “ran over the date of separation”. He submitted that no improvements had been made to the properties and they should therefore have been treated merely as a “rolling over” of the practice to which the wife had made a substantial contribution.
Counsel further submitted that the analysis of contributions carried out by her Honour at paragraphs 164 et seq of her reasons took the matter no further in endeavouring to understand what had happened to the contribution that the wife had made in the first 30 years of the marriage. He made particular reference to paragraph 173 in which her Honour found that the wife’s contribution to the family had “allowed the husband to work the hours he did and establish himself in his business. It allowed him to build the foundation for future assets.”
In addressing the question of the extent to which the wife’s contribution as homemaker and parent continued in the latter years of marriage, senior counsel for the wife submitted that it was not appropriate and “not in the context of Norbis” to say that contributions made as homemaker, parent, carer and mother stop at a particular time and that thereafter all of the contributions are made by the income earning husband. He also referred to paragraph 176 of the judgment, where her Honour detailed the wife’s evidence concerning the wife’s contribution around the H property and submitted that these contributions had continued in the latter part of the marriage.
Senior counsel for the wife submitted that the findings made in paragraphs 179 and 180 of her Honour’s reasons were not an exercise of discretion but rather constituted appellable errors. It will be recalled that in these paragraphs her Honour said:
179.I find that the contributions to the [H] property and related assets built up during the course of the marriage were overall equal. However, this is not the end to it as there are other assets to consider and given the state of their relationship and the age of the children contribution considerations are different.
180.These assets were acquired by the husband with [Mrs Totleben]. They were funded, in the main, from money from his … practice and are parcels of real estate in the [regional centre] area purchased from 1995 onwards.
The error asserted by senior counsel for the wife was that whilst it was true these “other assets” had been acquired with money from what in paragraph 180 her Honour had called “his [i.e. the husband’s] … practice”:
· that practice had been “built up during the course of the parties’ marriage” (paragraph 120);
· that practice had been “built up over many years” and “without the wife’s input early on to children and the parties’ properties … the husband would not have been in a position to devote so much of his time to his work.” (paragraph 182);
· these “other assets” had not been “acquired with assets or earnings generated after separation” (paragraph 120).
Senior counsel for the wife went on to observe that given her Honour’s findings that the sale of the practice took place just prior to separation, that the regional centre properties had been rented and there was no evidence of any improvements made to them, it was extraordinary and inexplicable that her Honour would have found that the wife would receive just 27% of the Totleben assets.
The husband’s submissions
Senior counsel for the husband submitted that the argument advanced on behalf of the wife was flawed because it assumed that because the practice had been built up during the course of the marriage it had been built up equally by the husband and wife. It was submitted this was not so, and that at no stage of her judgment did her Honour make any finding about the proportions in which the parties had contributed to the building up of the practice.
In support of this proposition, senior counsel for the husband placed emphasis on the finding at paragraph 173 of her Honour’s reasons that the earlier contribution made by the wife to the children allowed to the husband to build “the foundation for future assets”. She submitted that “establishing something of a foundation for the assets is not the same as maintaining an equal half share in whatever comes out of those assets at the end”.
Senior counsel for the husband asserted that it had been specifically submitted to her Honour there had been distinct periods in the parties’ relationship and that her Honour’s reference (in paragraph 164) to different “phases” of the relationship averted to the different circumstances in that part of the relationship following the death of Mrs Totleben’s husband in 1991 during which period it was submitted Mrs Totleben had “significantly assisted the [husband] in the practice assisting him to build up the firm to a profitable state”. [Respondent’s summary of argument paragraph 11]
It was submitted that paragraph 179 of the judgment was the key to understanding her Honour’s decision. This was where her Honour had said that whilst contributions to the H property and related assets were overall equal, different considerations applied to the other assets “given the state of [the parties’] relationship and the age of the children”.
It was submitted by senior counsel for the husband that this was a reference to the fact that in the period after the death of Mr Totleben, “the parties were living separate lives, and the children were, in the case of [the daughter], of full age throughout and of [the son], for most of the time”, with the son having turned 18 in 1993. [Respondent’s summary of argument paragraph 13]
It was submitted that once the children had left home:
such credit as the wife might be given for parental/homemaker type contributions falls away, and indeed in terms of any support for the husband on a domestic emotional basis falls away. So while her Honour is correct in saying in the earlier period he was able to build up/commence his practice because of efforts of the wife on other fronts, in the latter period the factual foundations for those findings or that assessment did not any longer exist.
This explained, so it was submitted, why her Honour had found that the wife had made “little contribution” to the assets acquired in the latter part of the marriage.
It was further submitted by senior counsel for the husband that “it cannot be said that because during one period of a marriage a party made a significant contribution to the earning capacity or business of the other, by indirect means, that this contribution is carried forward in the same proportion over decades and in different circumstances”. Merely because there had been a “long marriage” did not “of itself dictate equality”. [Respondent’s summary of argument paragraphs 15 & 17]
Senior Counsel for the husband submitted the circumstances were analogous to an “initial contribution” where one party had invested heavily at the commencement of the relationship but slowly, over time, the initial contribution is not given the same weight.
In attempting to dissect the marriage into effectively two periods, senior counsel for the husband submitted that at the time the parties took up residence at H in 1985 they had only about $23,000 “profit” from their previous home and the husband’s practice had an overdraft in the vicinity of $60,000. She submitted that, in effect, the parties had “started over” when they moved to H and the husband’s practice was thereafter built up. It was submitted that the “more significant period … was when the children left home and the contributions on the domestic front take on a very different light”. The children were “long gone before the period that really merited her Honour’s attention in looking at the [regional centre] properties”.
Senior counsel for the husband submitted that in this latter period of the marriage the wife had “engaged in her passion for horses, dogs and cats” but had not from “an early stage in the piece” provided any domestic services to the husband and had not performed any of the “traditional matrimonial roles”. It was further asserted that the husband was “better remunerated” than the wife after the children had ceased to be dependent and this factor entitled the court to find that the husband had made the greater contribution.
Although the argument was not developed to any extent, senior counsel for the husband also submitted that while her Honour had dealt with the monies due to Mrs Totleben arising out of the work she had done in the practice, this had not dealt with Mrs Totleben’s contribution “overall”. She submitted that if Mrs Totleben had been “substituted” for the wife at the time the parties’ children left home, then it would have been appropriate to regard the contributions as having been equally made.
Senior counsel for the husband also noted that the issues at trial had largely been directed to matters which were not the subject of appeal – namely disputes about the asset pool and the transfer of assets to Mrs Totleben by the husband. She submitted that although very little had been said in submissions relating to contribution issues, it had been put by the husband from the outset that this was a case which was not the “standard situation” and it was in that context hardly surprising her Honour had made the determination in the way she had.
Discussion
We accept the submission of senior counsel for the husband that the parties’ marriage can be perceived as having different phases and that contributions during some phases were of a different nature to those made at other times. It would be surprising if it were otherwise in a marriage spanning 41 years.
It is apparent her Honour considered that the parties’ contributions in the earlier phase(s) of the marriage were of equal value. It is only in paragraph 179 that her Honour gave any clear indication of why contributions in the latter phase(s) were not assessed in the same way. It was in paragraph 179, when discussing “the other assets”, where her Honour said the state of the parties’ relationship and the ages of their children meant that “contribution considerations are different”. In referring to the “other assets” her Honour was clearly alluding to the Totleben assets. However, her Honour did not go on to explain how the state of the parties’ relationship and the children’s ages impacted on her assessment.
It is, of course, possible for us to infer that her Honour had taken into account the “unconventional” nature of the relationship. Presumably an aspect of this was the fact that the wife had made no domestic contribution for the benefit of the husband in the latter phase(s) of the marriage. However, if this was considered important, we would have thought it equally important to take into account that the husband did not make any domestic contribution for the benefit of the wife. Furthermore, neither spouse appeared to be providing the other with any emotional support in this latter stage of the marriage. It is therefore not immediately obvious why “the state of the parties’ relationship” should have been a factor leading to an outcome favourable to the husband. This is especially so in light of the observations made by her Honour (at paragraph 178) which suggested she accepted that while the parties had an “unusual way of sharing their life together” it suited them and worked.
What then was the impact of the ages of the children on contributions? We can, of course, fairly safely assume that the children matured as the marriage progressed, and the “overwhelming” contribution the wife had made to their welfare required increasingly less effort (or perhaps effort directed to different areas of child rearing). However, the parties did not commence a family until ten years into their relationship and the youngest child therefore did not turn 18 until 1993. This was only two years before the first of the Totleben assets was acquired.
We can accept nevertheless it might have been within her Honour’s discretion to have considered that a diminution in the effort required in caring for children was relevant to the assessment of contributions. However, in that event, it remained incumbent upon her Honour to consider and compare what was left of the parties’ respective contributions.
Consideration of her Honour’s reasons shows the remaining contributions requiring consideration were primarily:
· the husband’s efforts in the practice;
· the wife’s part-time work;
· the wife’s work in the Stud;
· the wife’s work around the H property (which it seems from consideration of paragraph 176 her Honour accepted the wife was doing).
With respect to her Honour, we are unable to discern from her judgment where she carried out any analysis of the respective value of these contributions. She did not, for example, make any findings concerning the amount of income the husband and wife each earned in this period – or how much of the husband’s income was used in meeting the shortfall in the Farm Partnership (from which the wife derived no benefit).
In making these observations we do not suggest that earning a greater income should necessarily be treated as making a greater contribution. This is especially so in circumstances where the husband’s income was derived entirely from a business that had been built up during the parties’ marriage.
However, there was also no finding by her Honour that the husband made any greater effort than the wife in seeking to earn an income and conserving and improving the assets. In this regard, we respectfully concur with the following observations made by the Full Court in Clauson and Clauson (1995) FLC 92-595 at 81,910:
An important aspect of our conclusions is that we feel that his Honour placed much greater emphasis than was appropriate upon the circumstance that this business operated at a significant loss. The important fact was that this was a chosen business of both the parties and the wife was the one who made the significant contributions of time, energy and skill. The circumstance that it continued to run at a loss was not the significant issue here; the significant issue was that it was a jointly chosen business activity to which the wife made the significant continuing contributions over a number of years.
The Full Court in Clauson was dealing with findings of a trial Judge concerning an unprofitable stud business. In the present matter, her Honour was also dealing with a stud business which she found was not “an enormous success”. We do not suggest her Honour discounted the wife’s contributions to that business in quite the same way as occurred in Clauson. On the contrary, her Honour noted that the losses made in the business had provided the husband with tax relief and that at times money had been earned.
Notwithstanding these allowances relating to the wife’s efforts in the stud business, it seems implicit in her Honour’s ultimate finding that the value of what the husband was doing in the practice in the latter part of the marriage was deemed to be of significantly greater value than what the wife was doing (both on and away from the H property). If that was her Honour’s view, then we consider it should have been stated.
As it is, we are left in doubt as to whether her Honour arrived at her decision by reference to disparities in the parties’ incomes in this period or by reference to disparities in their effort – or both. Furthermore, by her express reliance on the parties’ relationship as a factor of importance, we are left wondering whether her Honour considered the wife’s lack of support of the husband to be of greater significance than the husband’s similar lack of support of the wife.
The fact that we are unable to ascertain the path by which the trial Judge arrived at her ultimate decision leads us to conclude there was appellable error.
Having reached this view, it is strictly unnecessary for us to say more; however, we think it proper to address what senior counsel for the wife asserted was an inconsistency between paragraphs 120 and 121 of her Honour’s reasons. It will be recalled that in paragraph 120 her Honour referred to payments towards certain assets having been made solely from the proceeds of sale of the husband’s practice (which her Honour found had been built up during the course of the marriage). It will also be recalled that in paragraph 121 her Honour referred to the husband’s premature disposition of certain assets to which the “wife had made little contribution”.
On careful consideration of both paragraphs we do not accept there is any inconsistency. In context, it is clear that in paragraph 120 her Honour was speaking of only two of the Totleben assets she had mentioned in paragraph 119 (i.e. the B Street and D Street properties) which were funded entirely from the proceeds of sale of the practice. In paragraph 121 her Honour appears to have been speaking of the other two Totleben assets (the S Street and G Street properties), only portions of which were funded from the sale of the practice. In suggesting that the wife may have made “little contribution” to the S Street and G Street properties, we assume her Honour was alluding to the fact that between the time of acquisition in 1995 and the time of discharge of the balance owing on the mortgage in 2003, the husband had reduced the level of indebtedness relating to those two properties from $117,000 to $17,596, presumably using income generated from the practice post separation.
Whilst we therefore do not accept there is any inconsistency between paragraphs 120 and 121, there does appear to be inconsistency between paragraphs 120 and 182 of her Honour’s reasons. In the latter paragraph her Honour, when clearly referring to all of the Totleben assets, found that “[t]he money for all the properties came directly from [the husband’s] income from his … practice”. This is not the case as the greatest proportion of the money came from the sale of the practice (which had been built up during the marriage) and not from income derived from the practice. This inconsistency would provide a further basis for determining that her Honour erred in coming to her decision.
We should also record that we do not accept the submission of senior counsel for the husband that the judgment can be understood on the basis that her Honour had accepted that the parties had “started over” at around the time they took up residence at H. Her Honour made no finding to that effect and, to the contrary, stressed how the wife’s earlier contribution had allowed the husband “to build the foundation for future assets”.
Nor do we accept the submission made on behalf of the husband that in finding that the practice had been “built up during the course of the parties’ marriage”, her Honour was saying anything other than that it had been built up by the equal contribution of both parties. In our view, any fair reading of her Honour’s reasons would indicate that she did not allow the husband any greater credit than the wife for the building up of the practice – the sale of which was the source of funds for the bulk of the Totleben assets.
For these reasons we have concluded there is merit in these grounds.
Ground 3
By this ground the wife asserts that in the event the assessment of contributions was correct, her Honour erred to failing to make an adjustment of 10% in favour of the wife on account of the factors set out in s 75(2).
Given that we have determined that her Honour’s assessment of contributions should not stand, it is unnecessary for us to consider Ground 3.
Re‑exercise of discretion
By her Notice of Appeal, the wife proposed that in the event the appeal was allowed we should re‑exercise her Honour’s discretion by substituting the figure of $876,521 for the figure of $689,005 her Honour ordered the husband to pay the wife.
It was not suggested by either counsel that the matter should be remitted for rehearing in the event we found merit in the appeal. In our view, it would be inappropriate for us to cause further delay and expense by remitting. Her Honour made sufficient factual findings to allow us to re-exercise the discretion.
It is not in issue that all of the assets, save for the Totleben assets, were acquired as a result of equal contributions made by the husband and the wife. It is also not in issue that most of the money required to acquire the Totleben assets came from the sale of the practice which was built up during the marriage.
Whilst there is no challenge to her Honour’s finding that Mrs Totleben took responsibility for “overseeing the management” of the [regional centre] properties, her Honour recorded that these assets had been managed by agents and that Mrs Totleben was merely “the point of contact in relation to any decisions and enquiries about the properties”. Although her Honour did find this was a contribution made on behalf of the husband, no finding was made as to whether or not Mrs Totleben undertook this work during the time in which she was working in the husband’s practice (for which she was ultimately remunerated) or whether it was undertaken independently of that work. Be that as it may, the evidence does not suggest that Mrs Totleben’s contribution in this regard was at all onerous (see paragraph 155 of Mrs Totleben’s affidavit [AB 2:201].)
We have observed that her Honour made no express finding as to the respective values of the husband’s contribution in the latter phase of the marriage in earning income from the practice and the wife’s contributions in working part‑time, attending to the stud business and working around the property. However, our own consideration of the evidence does not lead us to conclude that either set of contributions should be regarded intrinsically as having any greater value than the other. It seems to us both parties were doing their best to earn income and to maintain and conserve assets.
To the extent that any consideration of contributions might lead to an assessment that the husband had made any greater contribution than the wife, we would to that extent make an adjustment pursuant to s 75(2), having regard in particular to subparagraphs (a), (b), (g), (j), (k) and (m).
We consider that after a marriage spanning 41 years, and taking into account her Honour’s uncontested factual findings, an outcome where the assets were divided equally would be just and equitable.
Although it is not the basis upon which we have reached our decision, we note that the husband’s Amended Response filed on 14 November 2006 [AB 1:62] sought orders for an equal division of the parties’ assets. The same approach was adopted in the calculations contained in his Papers for the Judge filed on 22 February 2008 [AB 3:418]. Nevertheless, in the Minute of Orders Sought contained in the husband’s Papers for the Judge, the relief sought was amended to propose payment of a fixed sum, rather than orders for an equal division. [AB 3:425] In any event, we accept that at all times the husband had in mind a pool of assets very different to that found by her Honour. We also accept that in the course of opening addresses at trial, senior counsel for the husband made clear that the husband’s case was that he had made a far greater contribution than had the wife. (Transcript of Proceedings, 27 February 2008 pages 21 and 22) [AB 3:448 and 449]
In coming to our conclusion that the pool of assets as found by her Honour should be divided equally, it is important we record again that any obligation the husband had incurred to Mrs Totleben for the work she did in the practice (at least after June 1994) and in providing rent free premises was discharged by the way in which her Honour approached the division of assets.
We have not overlooked the fact that Mrs Totleben worked in the practice from 1988 until June 1994 without payment. Whilst this potentially could be a matter of significance in assessment of contributions, we note that in her analysis of contributions (paragraphs 164 to 185) the trial Judge made no reference to Mrs Totleben’s work in this earlier period as a factor favouring the husband. This omission is noteworthy, given that a finding was made that the work done by Mrs Totleben in overseeing the [regional centre] properties was such a factor. We are left then only with her Honour’s finding (at paragraph 184) that the result of her judgment was that the husband “has discharged the debt to Mrs Totleben for wages and rent”. We accept that “the debt” to which her Honour referred here was for the period after June 1994 when wages for Mrs Totleben commenced being claimed on the books of the business. The balance of her work was, by Mrs Totleben’s own admission, done as a “favour” to the husband. We can only presume that in her Honour’s view this “favour” was matched by similar “favours” provided by the husband – perhaps in the form of meeting the shortfall in the Farm Partnership “over the years”.
Orders
The net value of the asset pool as found by her Honour was $1,875,157 of which the wife already has $61,057 (net). In order to bring about an equal division, the husband would be required to pay the wife $876,521.
We will therefore make an order varying the amount to be paid by the husband to the wife from $689,005 to $876,521. Any amount already paid by the husband pursuant to the trial Judge’s orders will, of course, be treated as having been paid toward the amended amount.
Costs
Both counsel submitted that if the appeal were to be allowed it would be appropriate for costs certificates to be issued pursuant to the Federal Proceedings (Costs) Act 1981 (Cth).
The appeal has succeeded on a point of law and we consider that certificates should be issued to both parties.
Postscript
Before concluding our reasons, we should record that the major issues of contention at trial were the composition and valuation of the asset pool and the extent of the husband’s legal obligation to Mrs Totleben. The trial Judge’s careful and erudite approach to those issues which were very difficult issues was not the subject of any challenge.
I certify that the preceding one hundred and fifty two (152) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
Date:
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