BATEMAN & BOWE
[2016] FamCAFC 39
•21 March 2016
FAMILY COURT OF AUSTRALIA
| BATEMAN & BOWE | [2016] FamCAFC 39 |
| FAMILY LAW – APPEAL – PROPERTY – Where the appellant is bound by the way in which he presented his case before the trial judge – Where the appellant sought that a development property be included in the asset pool at trial, and thus it was not open to him on appeal to suggest otherwise – Where the trial judge was not in error in adopting an agreed pre-completion value for the development property where there was no value otherwise asserted – Where there was no error in the trial judge taking the value of the development property and its relative liabilities as at the date when the value of the assets and liabilities were struck – Where it would be illogical to include the development property at its pre-completion value, but exclude the liabilities incurred to bring the property to that value – Where there was no evidence which would indicate the trial judge was in error in his treatment of the development property – Where the trial judge clearly identified, considered and weighed the appellant’s contributions – Where there was no error by the trial judge in determining that the respondent made a greater contribution to the development property – Where there was no error by the trial judge in finding that the appellant made an indirect contribution to the development property – Where the trial judge clearly considered the greater income of the appellant and the appellant’s financial contributions post-separation – Where there was no error by the trial judge in how he treated the non-disclosure of the respondent – Where there was no error in the trial judge accepting the existence of a debt to third parties – Where there was no error by the trial judge in making the adjustment that he did pursuant to s 90SF(3) of the Family Law Act 1975 (Cth) – Appeal dismissed. FAMILY LAW – APPEAL – APPLICATIONS IN AN APPEAL – Where neither party sought to pursue their application in an appeal – Applications in an appeal dismissed. FAMILY LAW – APPEAL – COSTS – Where the appeal was wholly unsuccessful – Order for costs in favour of the respondent. |
| Family Law Act 1975 (Cth) – ss 90SM(3) and 90SF(3) |
| Af Petersens and Af Petersens (1981) FLC 91-095 |
| APPELLANT: | Mr Bateman |
| RESPONDENT: | Ms Bowe |
| FILE NUMBER: | SYC | 5565 | of | 2010 |
| APPEAL NUMBER: | EA | 84 | of | 2013 |
| DATE DELIVERED: | 21 March 2016 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | May, Strickland & Ryan JJ |
| HEARING DATE: | 6 February 2015 18 March 2015 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 19 April 2013 |
| LOWER COURT MNC: | [2013] FamCA 253 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Hodgson |
| SOLICITOR FOR THE APPELLANT: | Sharon Moss Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Schonell SC |
| SOLICITOR FOR THE RESPONDENT: | RJ Thomas Solicitor |
Orders
The appeal be dismissed.
The application in an appeal filed on 16 January 2015 and the response filed on 3 February 2015 be dismissed.
The application in an appeal dated 13 March 2015 be dismissed.
The appellant pay the costs of the respondent of and incidental to the appeal with such costs to be assessed in default of agreement.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bateman & Bowe has been approved by the Chief Justice 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: EA 84 of 2013
File Number: SYC 5565 of 2010
| Mr Bateman |
Appellant
And
| Ms Bowe |
Respondent
REASONS FOR JUDGMENT
Introduction
By Notice of Appeal filed on 8 July 2013 Mr Bateman (“the appellant”) appeals all orders made by Murphy J on 13 June 2013 dividing the property of the appellant and Ms Bowe (“the respondent”), who were in a de facto relationship. The respondent opposes the appeal.
In summary, on 19 April 2013, his Honour ordered that the property interests of the parties be divided such that the appellant receive 45 per cent and the respondent 55 per cent. His Honour then set out how their property interests should be divided to achieve that result, and the parties were ordered to file a joint Minute of Order reflecting that distribution. That was attended to by the parties, and on 13 June 2013 his Honour made orders in terms of that Minute.
On appeal the appellant primarily seeks that instead of a 55 per cent / 45 per cent division of the net assets in favour of the respondent, that that be reversed with the appellant being entitled to 55 per cent and the respondent 45 per cent of a differently formulated property pool.
On 16 January 2015 the appellant filed an application in an appeal seeking to adduce further evidence in the appeal, which application was supported by an affidavit filed on the same date. In that application the appellant sought that leave be granted to him to adduce evidence relating to the sale price of a property at Suburb H, and the discharge of liabilities, and to issue three subpoenas, namely to the Commonwealth Bank of Australia (“Commonwealth Bank”), National Bank of Australia (“NAB”) and to a firm of solicitors, R J Thomas, the solicitors for the respondent.
On 13 March 2015 the respondent sought to file an application in an appeal and an affidavit in support, seeking to adduce further evidence. This application and affidavit were not accepted for filing by the registry as they were out of time pursuant to r 22.39 of the Family Law Rules 2004 (Cth) (“the Rules”).
At the hearing before us, we received that application and affidavit.
The applications in an appeal will be addressed later in these reasons.
For completeness, we also note that as a result of the appellant failing to comply with the order for the filing of his written summary of argument on 31 January 2014, but then filing that summary on 19 January 2015 following the listing of the appeal for hearing on 6 February 2015, that hearing was adjourned on the application of the respondent to enable her to file her summary of argument and list of authorities and to brief counsel. As can be seen, the appeal was ultimately heard on 18 March 2015.
Background
At the time of trial, the appellant was aged 52 years and the respondent was aged 47 years.
It was conceded between the parties that a de facto relationship subsisted for around eight years from mid to late 2001 to separation under the one roof in mid-2009. Final separation occurred at the end of 2009.
There is one child of the relationship, L (“the child”), born in 2002.
Both parties have now re-partnered.
The appellant is a technical professional, and worked for Y Pty Ltd and later K Pty Ltd when that company acquired Y Pty Ltd.
The respondent was employed in communications as well as undertaking project management.
During their relationship, the parties acquired and sold several properties, summarised as follows:
a)N Property – owned by the appellant at the start of the relationship (sold in 2005);
b)R Street – owned by the respondent at the commencement of cohabitation (purchased in 2001);
c)S Street – owned by the respondent at the commencement of cohabitation and rented during the relationship (purchased in 2001);
d)B Street – rented during the relationship, and the appellant took up occupation some five months after separation (purchased in 2002);
e)O Street – purchased as a home for the parties in 2002 or 2004 and sold in 2006;
f)P Street – purchased in 2006 after the sale of O Street and the parties resided there until it was sold in 2008;
g)G Street – purchased in 2008 at the same time as the sale of P Street – the parties lived there until final separation at the end of 2009 (sold in April 2010); and
h)Suburb H property – following the sale of G Street, the respondent lived in rental accommodation until 2011 when she purchased and moved into Suburb H. The property was purchased without the knowledge of the appellant, and substantial renovations have been undertaken.
From the sale proceeds of G Street, the mortgages secured against that property, as well as those secured against R Street, were paid out.
Suburb H was purchased with funds advanced by the Commonwealth Bank and secured by mortgage over that property, redrawing on the mortgages secured against R Street and S Street, vendor finance and a small component from the proceeds of sale of G Street. The treatment of the G Street proceeds of sale and the acquisition and development of the Suburb H property (which had not been completed) lies at the heart of this appeal.
The trial judge’s reasons for judgment
His Honour commenced the reasons for judgment by recording a brief background of the parties’ de facto relationship.
His Honour then recorded that the issues were whether an order should be made pursuant to s 90SM(3) of the Family Law Act 1975 (Cth) (“the Act”), and, if so, what property adjustment order reflected a just and equitable division of the property of the parties when s 90SM is applied.
His Honour stated that an issue germane to the proceedings was the respondent’s acquisition of the property at Suburb H post-separation.
The appellant asserted a lack of disclosure on the part of the respondent and that an adverse credit finding should follow.
His Honour noted that both parties agreed that an order should be made pursuant to s 90SM of the Act (at [2]), however “the Court should itself be satisfied of that conclusion” and his Honour made that determination.
At [14] his Honour set out in full the agreed schedule of assets and liabilities, noting that the respondent said the parties’ net assets plus superannuation were valued at $937,584.88, and the appellant said they were valued at $2,087,383.83. It is appropriate to observe that Suburb H had an agreed value of $1.425 million (calculated as at 28 February 2012).
Turning to issues of credit and disclosure, his Honour said that “an attack was mounted by both parties on the credibility of the other” (at [22]). The appellant’s central complaint, as his Honour recorded, was the lack of disclosure by the respondent in relation to the purchase of the Suburb H property.
As for the appellant, his Honour found that he did not disclose a post-separation disposal of around $100,000 in shares, and a subsequent disposal of $10,000 in shares in a public company. The respondent further asserted, and his Honour found, that the appellant did not contribute $20,000 to the S Street property, as it was not disclosed in his Financial Questionnaire.
His Honour found that the respondent did not properly disclose documents and information pertaining to the purchase and renovation of the Suburb H property.
His Honour recorded that the respondent’s non-disclosures were not necessarily motivated by a “sinister intent” and “that there is little if any apparent advantage to her in her failure to disclose properly”. His Honour considered that “that does not excuse the lack of disclosure. Rather, it seeks to place it into context as an asserted basis for rejecting entirely the [respondent’s] evidence or drawing an adverse inference generally about her credibility” (at [28]) (original emphasis omitted). His Honour rejected that the respondent’s failure to fully understand the process of the acquisition of the Suburb H property was an explanation for her non-disclosure.
Concluding the credit issue between the parties, his Honour found a “barely concealed” level of animosity between the appellant and respondent, and that “each party’s failure to disclose was motivated by [that] animosity.” His Honour then said this at [30]:
…However, I decline to draw adverse inferences generally against the credit of either party and, in particular the [respondent], resulting from any failure to properly disclose and nor do I reject the evidence of the [respondent] entirely where it conflicts with that of the [appellant]. The lack of proper disclosure by the [respondent] will result in my being robust about the findings to which it is related where there is an absence of evidence which I do not otherwise accept.
Turning to the assets and liabilities of the parties, his Honour again recorded that a central issue related to the acquisition by the respondent of the Suburb H property, and in that process the expenditure by the respondent of the sale proceeds of the property at G Street.
In relation to the G Street property, at [32] his Honour referred to a submission by the appellant to the effect that certain liabilities may be “ignored”,
…based upon the premise that at the time of the settlement of the sale of the [G] Street property in early 2010 (that is about a year after the parties separated under the one roof and about four of [sic] five months after they began living separately and apart), significant debt had been paid down and there was equity of about $425,000 “available”. In addition, it is said that monies spent by the [respondent] from the [G] Street proceeds should be “added back”.
His Honour then reframed this submission as follows at [33]:
…The contention can be seen to be that a property settlement should be effected by reference to the value of the parties’ interests, not at the date of trial, but at a point about nearly three years ago and after the parties had separated.
His Honour recorded that long standing authority such as Prince and Prince (1984) FLC 91-501, per Evatt CJ; Af Petersens and Af Petersens (1981) FLC 91-095 per Nygh J; and Biltoft and Biltoft (1995) FLC 92-614, may support the appellant’s contention that the liabilities (in particular, Suburb H related) could be ignored (at [34]).
His Honour concluded that “justice and equity” in the case does not demand that certain liabilities should be ignored (at [38]). However, his Honour accepted that it was necessary to look at some of the issues emanating from the fact that “much [had] happened financially between separation and trial” and that the agreed schedule of the assets and liabilities of the parties represented a “snapshot” of the values at the date of trial.
Turning to the disputes as to assets of the parties, his Honour recorded again that the abovementioned schedule “[represented] the existing interests in property and agreed values (and agreed issues of dispute) as at the commencement of the trial – specifically 28 February 2012” (at [39]).
His Honour noted though that the schedule did not include the “significant” liabilities (totalling over $1 million [39]) from renovations undertaken by the respondent on the Suburb H property. The respondent did not seek that the appellant be responsible for any of these liabilities.
Turning to add-backs, his Honour recorded that regard was had to the authorities of Omacini and Omacini (2005) FLC 93-218, and Kowaliw and Kowaliw (1981) FLC 91-092 per Baker J. His Honour found that none of the amounts claimed should be added-back, and his reasons for that in relation to the expenditure from the G Street proceeds (items 14 and 18 in the schedule) can be summarised as follows.
The appellant asserted that amounts received from the sale of the G Street property were unaccounted for. However, his Honour considered that the appellant’s submissions did not clarify how the amounts were arrived at, and thus found that these amounts should not be added-back. In considering the issue further, his Honour found that “the maximum amount susceptible to add-back as against the [respondent] is $250,000” (at [68]). After considering the evidence of the appellant, his Honour found that the appellant did not establish that the expenditure by the respondent was unreasonable, and thus it should not be added-back.
Turning to the disputed liabilities, his Honour considered that “two broad categories” arose; first, the unilateral actions of the respondent in respect of the purchase of the Suburb H property and that, had it not occurred, the parties’ existing equity and debt would have remained the same as it was after the sale of G Street. The second category was the money allegedly owing to Mr and Mrs J, the vendors of the Suburb H property; there was an issue whether this debt existed at all.
His Honour considered that responsibility for the appellant’s credit card debts of just under $70,000 should only be borne by him, and that it would not be just and equitable for the respondent to share in those liabilities.
As to the two alleged loans owed by the respondent to her mother of $126,000 and $90,000 respectively, the loan of $126,000 was accepted as a liability by the appellant. In relation to the $90,000 loan, his Honour found that $30,000 of this amount went to legal fees and the appellant should not share in this indebtedness, but the balance of $60,000 should be included as a liability.
His Honour then turned to the purchase of the Suburb H property and the resulting loan to Mr and Mrs J. His Honour recorded that the purchase of this property by the respondent was “structured in an unusual way” (at [97]). His Honour regarded that the respondent’s disclosure in relation to the sale of this property should be “condemned” but one has to “look at what the evidence actually reveals before conclusions are drawn” (at [100]). His Honour relevantly found that the evidence of the respondent and her solicitor revealed an adequate explanation for the transaction, and that was supported by correspondence from the Stamps Office.
In summary, his Honour found as follows in relation to the purchase of the Suburb H property:
a)The property was on the market for $1.5 – 1.6 million and the vendors would not move off that price;
b)The respondent could not pay more than $1.2 million, primarily because that was the maximum the bank would lend;
c)The respondent was of the view that if the development of the property proceeded as planned, then it would increase in value, and $1.5 million was a price worth paying;
d)The only way the respondent could purchase the property for that amount was with bank finance of $1.2 million and with an additional $300,000 plus interest being paid to the vendors subsequently; and
e)A contract of sale was entered into evidencing the sale at $1.2 million and a deed of loan evidencing the additional $300,000.
At settlement, the vendors demanded $100,000 of the $300,000 be paid at that time. Thus the respondent paid $1.3 million at settlement ($1.2 million pursuant to the contract of sale, and $100,000 pursuant to the deed of loan), leaving $220,000 (including interest) owing to Mr and Mrs J (see [106]).
His Honour accepted the evidence of the respondent and her solicitor in relation to the above, notwithstanding the disclosure issues already discussed (see [107]).
Thus, his Honour found this debt of $220,000 existed and was owing, but it was still necessary “to consider whether it, and the other contested liabilities should be ‘ignored’”.
His Honour then canvassed the submissions and evidence of the appellant as to the “other contested liabilities”, namely the mortgages over the R Street and S Street properties, including money expended on the renovations, and concluded as follows at [116]:
I am not persuaded either that the disputed liabilities should be “ignored” or that about $475,000 in expenditure is “unaccounted for” nor of the submission made otherwise on behalf of the [appellant] that this amount, or any amount, “has vanished”.
His Honour then set out his conclusion as to the existing assets, liabilities and superannuation of the parties at [117]. The total of the net assets including the superannuation of the parties was $963,681.88.
In relation to the position of the respondent and the Suburb H property,
his Honour recorded that upon completion of the renovations, the property would be worth $2.75 million and that it would be sold immediately (expected to be shortly after delivery of his Honour’s judgment). Further, at the time of the trial the respondent owed the bank $1.9 million, and she intended to borrow an additional $200,000, totalling $2.1 million. She also owed her mother $276,000 and her current partner Mr Q just under $200,000. It bears repeating that not all the monies the respondent borrowed to renovate Suburb H were included as liabilities and that, in addition to the amounts included in the list of liabilities taken into account to calculate the parties’ net assets, she carried liabilities in excess of $1 million which had been incurred (after 28 February 2012) renovating that property.
Turning next to the issue of contributions, his Honour accepted the respondent’s evidence that cohabitation commenced at the end of 2001. At that time the respondent owned both the R Street and S Street properties. His Honour was not prepared to attempt to calculate the value of these properties at that time but was “content to find” the respondent “owned two pieces of real property which together had a substantial amount of equity”, and that these properties “formed the basis for future property transactions” (at [127]). On the other hand, the property owned by the appellant at the commencement of cohabitation had no equity at that time, and when it was sold the appellant received $33,000, less agent’s fees.
His Honour rejected the appellant’s evidence that he contributed $20,000 toward the acquisition of S Street.
His Honour accepted that the respondent was the primary caregiver for the child during the course of the relationship, but that the appellant contributed in that role.
The appellant was employed by Y Pty Ltd from 2003 to 2007, and thereafter he sold his shares in that company and received a cash payout of $979,000 together with shares in the company that acquired Y Pty Ltd (K Pty Ltd). His Honour found that the appellant worked hard, and his employment was successful. After Y Pty Ltd was sold, he continued to work for K Pty Ltd until July 2010, earning $170,000 gross per annum. His Honour found that the appellant earnt more than the respondent throughout the course of the relationship.
In relation to the respondent, his Honour accepted that she received “$1,240,606 in profit over the course of [the] relationship of which $873,056 was tax free”, that significant tax deductions were available to her as a project manager (at [135]), and that relevantly, she “[acted] as a project manager for all of the … developments” (at [136]).
His Honour found that the respondent made a “significantly greater contribution” in relation to the works in and around the various properties acquired by the parties.
His Honour, summarised the respective contributions of the parties at [139] to [140] and found them to be equal “to the point of separation”.
Turning to post-separation contributions, his Honour immediately observed that the acquisition of the Suburb H property was an important matter to have regard to, however, his Honour noted that no submission was made by either party that that property be treated separately from other property when assessing contributions, and did not consider it “just and equitable” to do that (citing Zalewski and Zalewski (2005) FLC 93-241, per Finn J and Coghlan and Coghlan (2005) FLC 93-220).
His Honour recorded that the respondent made greater contributions to the Suburb H property, noting that the appellant had no opportunity to contribute in the way the respondent did. His Honour accepted that equity in the G Street proceeds, to which the appellant plainly had an entitlement, was contributed to the acquisition of the Suburb H property, although he had no control over this.
His Honour summarised the other post-separation contributions at [145]:
Otherwise, in the post-separation period, all of the matters discussed at some length earlier in these reasons with respect to the issue of addbacks, the incurring of expenditure by the [respondent] and the amounts paid by the [appellant] by way of child support and other expenses, are relevant in assessing the respective contributions of the parties, in particular, to the welfare of the family. I consider the [respondent] has made a greater contribution in that respect. I note that the parties have effectively shared the care of [the child] with the [respondent] caring for him eight nights per fortnight and the [appellant] six. The [appellant] spends time with [the child] during four one-week periods during the approximately 12 weeks of school holidays. The [respondent] otherwise supports him. The level of child support paid by the [appellant] is noted, as, too, is the lack of payments by him towards [the child’s] school fees.
His Honour found that in the post-separation period, the contributions favoured the respondent, and concluded that overall contributions should be assessed as 52.5 per cent to the respondent and 47.5 per cent to the appellant.
Turning next to the s 90SF(3) factors, his Honour recorded the respective ages of the parties, and the respondent’s evidence of health difficulties at the commencement of the relationship and ongoing.
His Honour calculated that, by virtue of the contribution assessment above, the respondent would receive property valued at $506,000, and the appellant $458,000.
His Honour found that the appellant would continue to earn an income at about the same level as in the past, and his Honour assessed that both parties had the capacity for effective gainful employment, but assessed the respondent’s capacity for “regular predictable future income” as less than that of the appellant.
His Honour recorded that the parties shared the care of the child who was approaching 11 years at trial. However, his Honour considered that the respondent would “shoulder the greater share of the day-to-day and incidental costs associated with caring for [the child] and, not incidentally, the greater burden of paying for his school fees. In that respect I note that, at age 11, he has much of his (expensive) schooling ahead of him” (at [156]).
His Honour recorded that the standard of living of each party would be diminished, however, both had since re-partnered. The respondent’s partner had the capacity to borrow and lend significant funds to complete the Suburb H renovation. The appellant’s partner had remunerative employment and had been residing rent and board free in the B Street property.
In relation to the Suburb H property, his Honour considered that potential injustices may arise in respect of the appellant if it sold for significantly more than bank value, and, from the appellant not having access to the equity remaining after the sale of G Street. As to the first issue, his Honour had no evidence from which he could draw any confident conclusion, and as to the second issue his Honour found that that would “[depend] upon the property proceedings being determined and an order being made at that time”, but that the “determination of the financial landscape in which such an adjustment would have occurred at that time [had] not been undertaken in these proceedings” (at [165]).
Leaving aside the issues just referred to, his Honour concluded that, taking all else into account, a further adjustment of 2.5 per cent should be made in favour of the respondent. Thus, his Honour found the overall percentage entitlements to be 55 per cent to the respondent and 45 per cent to the appellant.
His Honour then considered the means by which the property adjustment was to be effected, and concluded that the orders were just and equitable in all the circumstances of the case (at [174]).
His Honour then compiled a “Distribution of Property Table” which resulted in the respondent being entitled to $519,024.77 and the appellant $424,656.63.
Finally, his Honour considered the form of the orders at [177] to [179], and made the orders as set out above.
Grounds of Appeal
The appellant advances the following grounds of appeal:
1.That the Trial Judge was in error in the exercise of his discretion as the result embodied in his orders is plainly unreasonable and manifestly unjust.
2.That the Trial Judge was in error in the exercise of his discretion in failing to place sufficient weight upon the financial contribution made by the [appellant] of $979,900.00 from the sale of his interest in [Y Pty Ltd] in August 2007.
3.That the Trial Judge was in error in the exercise of his discretion in failing to place any or sufficient weight upon the [respondent’s] failure to make a full and frank disclosure of her financial circumstances and in particular the circumstances relating to the acquisition of and cost of improvements to the property owned by the [respondent] situated at [Suburb H].
4.That the Trial Judge was in error in the exercise of his discretion in determining that the [respondent] had made a greater contribution to the purchase and development of the [Suburb H] property and assumption of risk but that the [appellant] shared in this by reason of the [Suburb H] property being included as part of the property to be divided, in circumstances where the present net value of the [Suburb H] property was negative as the Trial Judge adopted a pre completion of renovations value for such property.
5.That the Trial Judge was in error on the evidence in failing to place any or insufficient weight upon the diminution by the [respondent] of the parties’ assets through her actions since the time of separation.
6.That the Trial Judge was in error in the exercise of his discretion in failing to place sufficient weight upon the [respondent’s] diminution of the parties’ assets by her unilateral actions and expenditure of joint monies in circumstances where such actions had taken place without the knowledge or consent of the [appellant].
7.That the Trial Judge was in error on the evidence in his finding that the acquisition of the [Suburb H] property can be seen to be integrally connected to the assumptions underpinning the acquisition and use of property during the relationship in circumstances where the parties had separated and there was no longer any joint enterprise in relation to the acquisition and renovation of properties by the parties as had been the case prior to the time of separation.
8.That the Trial Judge was in error in his determination of the asset pool in adopting a value of $1,425,000.00 for the property owned by the [respondent] situated at [Suburb H] in circumstances where he included liabilities referrable to this property, which was being improved and renovated by the [respondent] namely:-
Mortgage to Commonwealth Bank $900,000.00
Renovation loan with NAB $140,000.00
Mortgage [R] Street $204,000.00
Mortgage [S] Street $262,000.00
Loan from Mr & Mrs [J] $220,000.00
Total$1,726,000.00
The quantum of these liabilities exceeded the value of the property thereby creating a distortion to the net asset pool in circumstances where the expenditure which had been made to improve and renovate the property, would clearly have increased its ultimate value.
9.The Trial Judge was in error in including as a liability in the net asset pool the loan to Mr and Mrs [J] in circumstances where it had not as yet been drawn down and where there was no corroborative evidence from either Mr or Mrs [J] relating to this alleged liability in circumstances where they were the vendors to the [respondent] of the property situated at [Suburb H].
10.That the Trial Judge was in error in including as joint liabilities as opposed to sole liabilities of the [respondent] in the net asset pool, the mortgages in relation to the [R] Street and [S] Street properties, which had been discharged upon the sale of the [G] Street property and subsequently drawn down by the [respondent] and used for her sole purposes.
11.That the Trial Judge was in error in including as a joint liability as opposed to a sole liability of the [respondent] in the net asset pool, the renovation loan from NAB which had been repaid upon the sale of the [G] Street property and subsequently drawn down by the [respondent] and used for her sole purposes.
12.That the Trial Judge was in error in the exercise of his discretion in determining that the [respondent’s] contributions exceeded those of the [appellant’s] by 5% (his assessment in relation to contributions being the [respondent] 52.5% and the [appellant] 47.5%) and that this was a just and equitable assessment of the parties’ contributions up to the conclusion of the Trial.
13.That the Trial Judge was in error in the exercise of his discretion in making an adjustment pursuant to the provisions of Section 90SF(3) of 2.5% in the [respondent’s] favour having regard to the relevant considerations.
14.These Grounds of Appeal are settled without the benefit of all of the Transcript and it may be necessary to amend these Grounds of Appeal once all of the Transcript has been obtained.
Applications in an Appeal
Towards the end of the oral submissions of counsel for the appellant, he advised that the appellant was no longer pursuing his application in an appeal. On that basis, at the commencement of the submissions of the senior counsel for the respondent, he advised that the respondent was therefore not pursuing her application. In these circumstances both applications will be dismissed.
Discussion
Ground 1
The complaint here is that his Honour’s orders are unjust or unreasonable because they leave the Suburb H property with the respondent, and do not allow the appellant to share in the benefit that will thereby flow to the respondent upon the ultimate sale of that property.
There is no doubt that at [164] his Honour acknowledged that a “potential injustice to the appellant arises if [Suburb H] sells for significantly more than bank value”, but as identified by the appellant, and as we highlight, his Honour said that there was “no evidence from which any confident conclusion [could] be drawn.”
It seems that the argument of the appellant is that there was evidence that allowed the trial judge to make findings about the ultimate benefit that would be achieved when the renovations were completed and the property sold. However, that argument cannot be sustained.
First, the only evidence of what the ultimate sale price might be was the respondent’s belief that the property is worth more than the bank value, and that she hopes to achieve more upon sale.
Plainly, his Honour was correct in declining to reach a conclusion on a basis of that belief.
The appellant also sought to challenge his Honour’s assessment of the liabilities that would be in place upon the sale. However, we are not persuaded that his Honour was in error in that regard. We also observe that many of these liabilities were not brought to account in the determination of the net asset pool because they were, or would be incurred, after the date struck for that determination (at [39]).
Secondly, and fatally, we agree with the submission of the respondent made at paragraph 11 of the written summary of argument filed on 5 March 2015 that:
…given that the Appellant did not at any time seek to either adjourn the proceedings or determine his entitlement by reference to the ultimate sale value or completed value of the [Suburb H] property the Appellant must be taken to have made a tactical and forensic decision to fix the value at a particular point in time. He cannot now be heard to complain or resile from that proposition.
In other words, the appellant is bound by the way in which the case was run before the trial judge (Metwally v University of Wollongong (1985) 60 ALR 68).
We add that during the course of the hearing the trial judge in effect invited the appellant’s counsel to seek an adjournment to await the completion of the renovations and the sale of the Suburb H property if that was to be when the relevant value was to be determined, but that invitation was not taken up.
Thus, there can be no error by his Honour (despite any potential injustice to the appellant) in taking the value of the property and the liabilities in relation to it as at the date during the trial when the values of the assets and liabilities were struck.
There was also a “second potential basis for a conclusion of injustice to the appellant” recognised by his Honour at [165], namely the appellant not having access to the equity remaining after the sale of G Street. The respondent, of course, indirectly used that money in the acquisition and renovation of Suburb H. However, as his Honour emphasised, that could only be taken account of if the property proceedings had been determined and orders made at the time of the sale of G Street, and that was not how the case was run before him. Indeed, the Suburb H property, and the liabilities associated with it, were included in the assets and liabilities schedule struck as at the relevant date during the trial, and the appellant shared in that net asset pool. The appellant’s final submission on 30 December 2012 was that the net asset pool should be determined as at 28 February 2012 using the agreed valuation of Suburb H at $1.425 million, and the difference between what the appellant sought and what his Honour ultimately accepted, was that the appellant sought the exclusion of the liabilities incurred by the respondent, save and except perhaps the mortgage to the Commonwealth Bank of $900,000 (at [111] and [112]). As to these liabilities his Honour said this:
110.As has been seen, the [appellant’s] contentions emanate from the proposition that expenditure on [Suburb H] not agreed to by him should see a property order made by reference to, in effect, the situation which pertained prior to the sale of [G] Street. In order to do so, it is just and equitable, he contends, to ignore liabilities incurred since that time.
111.No submissions on behalf of the [appellant] (nor any cross-examination of the [respondent] at trial) sought to establish a “balance sheet” of assets and liabilities as at the date of settlement of the [G] Street property that took account of circumstances other than the indebtedness incurred in respect of the purchase of the [Suburb H] property. On the contrary, the balance sheet with which the [appellant] agrees reflects agreed values of assets and liabilities as at the date of trial. The [appellant] seeks to include in that balance sheet the [Suburb H] property at an agreed value as at February 2012 but to ignore liabilities, at least some of which were incurred in purchasing the property and contributing to its then value (noting that the February 2012 is the value of a property under significant renovation/construction).
112.The [appellant] asserts that the debts owing in respect of the mortgages on the [R] Street and [S] Street properties should be ignored (Items 35 and 36). There could be no challenge to the evidence of the [respondent] that borrowings in respect of the purchase (and later renovation) of [Suburb H] are cross-collateralised against that property and the two properties just referred to. The [respondent] deposes (at [70], [71] of her affidavit filed 2 December 2011) to borrowing $900,000 from the Commonwealth Bank and to the balance of the purchase price for [Suburb H] being “paid by offset mortgages for the [R] Street Property and the [S] Street Property”. That evidence was not challenged. It accords with the evidence as a whole. The [Suburb H] property is included in Schedule “A” as an asset; the funds which acquired it are included as a liability.
113.No submission is made as to why those amounts secured by mortgage over those two properties should be “ignored” save for the argument made more generally and quoted above that the [G] proceeds retired then existing debt and produced equity which now does not exist as such. So much is true, but each is represented by the fact that [Suburb H] is included in the Schedule. (Of course, what [Suburb H] might be worth when completed and how that property in the [respondent’s] hand at its completed value might be treated is a different matter).
114.The written submissions which underpin this contention quoted earlier in these reasons have already been referred to in the context of the earlier discussion of “addbacks”. As has been seen, they refer to “amounts drawn down on the mortgages on [R] Street and [S] Street in the total amount of $466,000” and to a total of $756,000. They sit together with an assertion that the [respondent] spent “an amount of some $476,490 … in a fifteen month period [i.e. between the sale of [G] Street and trial]”. It is said that the [respondent] “provides no adequate explanation for the expenditure of such a large sum in such a short period of time” and the assertion is made that “clearly the net asset pool has been diminished by this amount”.
115.Those submissions individually and taken together ignore, in my respectful view, two very significant factors. The first is that, on any view of the evidence, the [respondent] is undertaking a very significant renovation that involves very considerable expenditure. The evidence that she has required over a million dollars since the commencement of the trial (none of which is sought to be attributed to the [appellant]) with which to live and to complete the renovation is of itself evidence of that. Secondly, the submission appears to me to ignore the direct evidence of the [appellant] himself discussed in some detail above. To repeat, the [appellant] admits in his own affidavit to his satisfaction with the expenditure as listed in the affidavit save for a disputed amount to which he was taken carefully in cross-examination.
116.I am not persuaded either that the disputed liabilities should be “ignored” or that about $475,000 in expenditure is “unaccounted for” nor of the submission made otherwise on behalf of the [appellant] that this amount, or any amount, “has vanished”.
No error has been demonstrated in how his Honour addressed these liabilities.
There is no merit in this ground of appeal.
Ground 2
This complaint is essentially a weight challenge, and it is unnecessary to repeat the well-known principles applicable to such a challenge. Suffice to say that what needs to be established is that the trial judge was plainly wrong, his decision being no proper exercise of his discretion. Further, it is never enough that an appellate court would have reached a different conclusion when no error of law or mistake of fact is present (Gronow v Gronow (1979) 144 CLR 513 at 519 – 520, per Stephen J).
The ground is also somewhat misleading in the sense it fails to take into account that, from the $979,000, the appellant was required to repay a company share loan of $136,000 and capital gains tax. The company share loan was paid from the G Street proceeds of sale and capital gains tax in the amount of $174,970.62 was taken into account in determining the parties’ net property. It follows, as his Honour well understood, that from the sale of his interest in Y Pty Ltd, the appellant contributed about $668,000 and not the amount referred to in this ground.
His Honour identified the proceeds of sale as a significant contribution by the appellant, and plainly took that contribution into account in the exercise of his discretion (see [132] and [139]); his Honour weighed it together with the other contributions of the appellant and the respondent in assessing their respective contributions (at [149]). Accordingly, the hurdles in the path of a weight challenge have not been overcome and we find no merit in this ground of appeal.
Ground 3
This is another weight challenge, and the appellant faces the same hurdles as he did in Ground 2.
There is no doubt that his Honour was appropriately critical of the respondent for her failure to disclose (as he was of the appellant’s failure to disclose), and thus the real issue for his Honour was what should the consequence of that non-disclosure be.
At trial it was conceded on behalf of the appellant that the respondent’s “lack of disclosure [did] not occur in the context of a case where it is said that monies are hidden or have been misappropriated to the disadvantage of the appellant” (at [28]). Thus, his Honour said that it should be treated “as an asserted basis for rejecting entirely the respondent’s evidence or drawing an adverse inference generally about her credibility” (at [28]).
His Honour then addressed this in the following way:
30.There is, as I perceive it, a barely concealed animosity between the parties bordering on contempt and, as I find, their post-separation relationship has been marked by significant mistrust and suspicion. Most, if not all, of that mistrust has involved their respective financial positions. The mistrust has in my view been exacerbated by the failure to resolve the instant claims. I consider that each party’s failure to disclose was motivated by their animosity toward the other and, more specifically, an attitude post-separation of, in effect, “what is mine is mine” and that “their business” was “no business of the other”. Those things said, the [respondent] cannot avoid the fact that her disclosure has been manifestly inadequate, particularly in respect of the events occurring after the sale of the [G] Street property and, specifically, the purchase of the [Suburb H] property and the transactions associated with it. However, I decline to draw adverse inferences generally against the credit of either party and, in particular the [respondent], resulting from any failure to properly disclose and nor do I reject the evidence of the [respondent] entirely where it conflicts with that of the [appellant]. The lack of proper disclosure by the [respondent] will result in my being robust about the findings to which it is related where there is an absence of evidence which I do not otherwise accept.
Pausing there, we do not understand that the appellant cavils with any aspect of the trial judge‘s approach as expressed in those paragraphs of his Honour’s reasons. When challenged then as to how the trial judge had erred, the appellant’s counsel explained that his Honour failed to apply the “robust” approach that he said he would when making relevant findings.
However, counsel was only able to take us to one example of where it is said his Honour should have, but failed to, apply that approach, and that was in relation to the loan of $220,000 by Mr and Mrs J.
However, that is not an issue that was caught by the last sentence of his Honour’s reasons for judgment in [30]. Despite the claims by the appellant of a paucity of evidence by the respondent, and a criticism that his Honour did not adequately examine what evidence there was from the respondent, his Honour plainly accepted the respondent’s evidence and that of the solicitor who drew the deed of loan (see [102] – [104]).
In these circumstances, this ground must fail.
Ground 4
There are a number of aspects of this ground of appeal.
First, as to the assessment of the respective contributions of the parties, it has not been demonstrated to this court how his Honour has erred in his finding in relation to the Suburb H property, when the appellant was unaware of the purchase of the property, and he took no part in its renovation and development. It stands to reason that the respondent made the greater contribution in this regard.
Secondly, we do not understand how it is said his Honour erred in the exercise of his discretion by finding that the appellant “shared” in the contributions to the purchase, the assumption of risk, and the development of the Suburb H property by reason of that property being included in the asset pool for division. As his Honour said at [144], the appellant plainly had an entitlement to the G Street proceeds which indirectly found their way into the purchase of Suburb H, and the contribution became relevant when Suburb H was included in the asset pool.
Thirdly, there appears to be some complaint that the “net value” of Suburb H was “negative” because the trial judge adopted a “pre-completion of renovation” value. The difficulty with this argument is that the appellant did not contend for a different value at trial.
As can be seen, there is no merit in any aspect of this ground of appeal.
Grounds 5 and 6
It is convenient to address these grounds together.
Once again, they raise what can be termed a weight challenge to his Honour’s decision.
The challenge is directed to the respondent’s purchase of Suburb H and the indirect use by her of the proceeds of sale of the G Street property in that exercise.
Plainly, his Honour was aware of what happened in this regard, albeit there was an initial lack of disclosure by the respondent. Equally plainly his Honour can be seen to consider the various ways of treating this property and the liabilities associated with it, and in that process address the complaint of the appellant that the equity established upon the sale of the G Street property became unavailable.
As we have already referred to, one option, namely establishing the net asset pool as at the date of settlement of sale of the G Street property, was not open because the appellant did not seek it, and there was insufficient evidence in any event to do that (at [111]).
Another option would have been to treat the Suburb H property separately when assessing contributions, because of the appellant’s lack of participation in the purchase of the property and its development. His Honour raised this option at [143] but significantly pointed out that no submission to that effect was made by either party, and we add, particularly by the appellant. In any event, his Honour did not consider it “just and equitable to approach the task in that way”.
Yet another option was to include the property at the agreed value but ignore many of the liabilities associated with the purchase and development of that property. Again, his Honour duly considered this, and as referred to above in relation to Ground 1, rejected it. To repeat, we can find no error by his Honour in that approach.
The option that his Honour did adopt was to include the Suburb H property at the agreed value, namely $1.425 million, and that was done to, in effect, overcome the argument about the “loss” of the equity achieved upon the sale of the G Street property. Importantly, that was a position urged upon the trial judge by the appellant.
His Honour also included the liabilities as they stood at the date of the agreed valuation, and we have referred above to his Honour’s reasons for that, and we need not repeat them.
Thus, it cannot be maintained that his Honour was plainly wrong and he erred in the exercise of his discretion in this regard. The result was a combination of how the case was run before his Honour, and in order to properly take into account what had in fact occurred, namely the acquisition of Suburb H, the source of the funds for that and the liabilities incurred.
There is no merit in these grounds of appeal.
Ground 7
This complaint can realistically only go to his Honour’s finding in [21] that it is “just and equitable to make a property adjustment order within the meaning of s 90SM(3)”, including in relation to the Suburb H property, and stems from the principles emanating from the High Court decision in Stanford v Stanford (2012) 247 CLR 108 at [42]. However, it is not entirely clear from the terms of the ground of appeal, and the summary of argument in support of it, that it is being suggested that it was not just and equitable to make an order, including in relation to the Suburb H property
It seems that what is being put is that his Honour should have left out the Suburb H property entirely. As referred to above, the difficulty with that though is it was agreed by the parties, and thus it was the appellant’s case before his Honour, that the property should be included in the asset pool at a value of $1.425 million. Thus, it is not open to the appellant on appeal to suggest otherwise, and accordingly the ground has no merit.
For completeness, we observe that his Honour’s findings in relation to the Suburb H property appear at [19] as follows:
19.The [respondent’s] legal interest in the [Suburb H] property was acquired by her post-separation and without agreement by, or reference to, the [appellant]. However, the manner of its acquisition should not, for the purposes of s 90SM(3) of the Act, be seen as falling into a different category (although, for the purposes of s 90SM(4) of the Act, different considerations might apply to it). The [Suburb H] property was acquired using, in part, funds obtained from those prior property dealings by the parties. Although, in one sense, separate to the relationship, the acquisition and renovation of the property can in my view be seen to be integrally connected to the assumptions underpinning the acquisition and use of property during the relationship.
That then led to his Honour’s conclusion in [20] where his Honour applied what the High Court said in Stanford v Stanford at [42] to all of the property of the parties. His Honour said this:
20.There is here, as a result of the voluntary separation of the parties, no longer a common use of property. Furthermore, the common assumptions upon which property was acquired and used during the currency of the parties’ relationship and which is represented now by the property of the parties or either of them, have been brought to an end by that voluntary separation.
That in turn resulted in his Honour’s finding in [21] set out above.
In this regard we were not taken to any evidence before his Honour which would indicate that his Honour was in error in how he treated the Suburb H property in [19].
Ground 8
We have effectively dealt with this complaint in addressing the previous grounds of appeal, and in particular Grounds 5 and 6. We do not need to repeat all of what we have said, but we confirm that his Honour did not err in adopting the agreed value of $1.425 million for the Suburb H property, and in including the liabilities incurred in relation to that property to the date of that valuation.
As we have identified already, it seems that the appellant argues for the exclusion of all of those liabilities, save and except perhaps the mortgage to the Commonwealth Bank. However, as submitted by the respondent, it would be illogical to include the property at its then value, but exclude many of the liabilities incurred to, in effect, bring the property to that value.
It has not been established that his Honour erred in the exercise of his discretion in how he treated the Suburb H property and its liabilities.
There is no merit in this ground of appeal.
Ground 9
This ground in effect challenges his Honour’s acceptance of the existence of a debt of $220,000 to Mr and Mrs J.
His Honour addressed this debt extensively in his reasons for judgment at [95] – [108].
Clearly there was doubt and suspicion surrounding the alleged debt because of the lack of disclosure by the respondent, but ultimately his Honour accepted the evidence of the respondent, and significantly, the evidence of the solicitor who drew the deed of loan. The documentation produced by the solicitor also supported the existence of this loan. That documentation primarily comprised the conveyancing file of the solicitor and included emails with the Stamps Office.
The appellant asserts that the debt should not have been accepted because “it had not as yet been drawn down”, and there was no corroborative evidence from either Mr or Mrs J.
As to the first issue, we agree with the respondent that this demonstrates a misunderstanding of the transaction on the part of the appellant. It was a loan by the vendors to the purchaser, and as such clearly would not be formally drawn down; that would have been an unnecessarily circuitous exercise.
As to Mr and Mrs J, once there was the evidence of the solicitor and the production of the relevant documentation, there was no need for Mr and Mrs J to give evidence. Significantly, as emphasised by the respondent in her summary of argument, “[a]t no time during the course of [the solicitor’s] cross-examination was it ever suggested that the transaction with Mr and Mrs [J] did not occur or that [the solicitor’s] evidence was other than correct, truthful and honest”.
The appellant argues that the principles in the High Court decision of Jones v Dunkel (1959) 101 CLR 298 required the respondent to call Mr and Mrs J as witnesses. However, we reject that argument. Apart from the circumstances referred to in [122] above, Mr and Mrs J were not in the camp of the respondent; they were parties to a commercial transaction and could just as well have been called as witnesses by the appellant.
There is no merit in this ground of appeal.
Grounds 10 and 11
These grounds can conveniently be dealt with together.
Although it is difficult to understand the challenge that these grounds raise, and the written summary of argument does not assist, it seems that it is yet again a complaint that his Honour brought to account certain liabilities associated with the acquisition and development of the Suburb H property.
First, his Honour did not regard the liabilities as joint as submitted by the appellant; they were liabilities of the respondent that it was necessary and appropriate to take into account.
Secondly, it is not an error when including an asset in the asset pool to bring to account the liabilities incurred in relation to that asset.
These grounds of appeal have no merit.
Ground 12
This is a ground which not only repeats the complaint made in Ground 2, but suggests that his Honour erred in his overall assessment of the respective contributions of the parties.
We rejected the complaint in Ground 2, and there is no basis to revisit that.
As to the balance of the ground, again it is a weight challenge and the appellant must overcome the hurdles identified earlier in these reasons when raising such a challenge.
It is in effect submitted that his Honour’s assessment of the contributions is wrong because the appellant’s income “greatly exceeded” the respondent’s income, and because his Honour failed to take into account the appellant’s financial contributions to expenses post-separation.
It is a dangerous exercise to attempt to identify specific contributions of one party and suggest that they have not been taken into account at all, or adequately, in determining the overall percentage division. That approach fails to take account of the fact that the task of the trial judge is to identify and weigh all of the various contributions of the parties during the period of the relationship and post-separation. Thus, here, in making the submission that he does, the appellant overlooks not only that his Honour was well aware of the greater income of the appellant (see [134]), but his Honour also identified and took into account the significant contributions made by the respondent, including in relation to project management and in her role as homemaker and parent.
Further, it is not correct to say that his Honour failed to take into account the financial contributions of the appellant to expenses post-separation. His Honour identified and discussed the contributions made by the appellant, for example in [64], [71] – [76], and [80], and took them into account along with all other post-separation contributions at [145].
There is no merit in this ground of appeal
Ground 13
This ground lacks specificity, and can barely be described as a proper ground of appeal. It merely comprises an assertion that the trial judge erred, without identifying the “relevant considerations” not taken into account.
In the summary of argument there is an attempt to identify the errors allegedly made by his Honour, but that attempt is bereft of any substance.
First, it is suggested that his Honour failed to consider the respondent’s lack of disclosure as a relevant factor. However, it is not explained how his Honour should have taken that into account, and that was also the position before his Honour at trial. Further, as referred to earlier in these reasons when addressing Ground 3, his Honour was well aware of the lack of disclosure and in our view dealt with it appropriately.
Secondly, it is asserted that his Honour failed to take into account that subsequent to separation the respondent had the sole control over assets “accumulated by the joint efforts of the parties during cohabitation”. However, again, there is no attempt to explain how his Honour should have taken this into account, if at all, and that was also the position before his Honour at trial.
Thirdly, it is contended that as a consequence of the appellant “having no access to the parties’ assets, a taxation liability … incurred in 2008 was not able to be repaid and continued to incur penalty interest”. However, as the respondent has correctly pointed out in her summary of argument, this contention is inconsistent with the appellant’s evidence recorded by his Honour in [81].
Fourthly, it seems to be suggested that his Honour should have taken into account that the respondent had “embarked upon a course of action whereby she has incurred significant liabilities which attach to the assets of the parties, thereby significantly reducing the asset pool apparently available for distribution between the parties”. However, yet again it was not explained how his Honour should have taken this into account under s 90SF(3) of the Act, if at all, and that was also the position before his Honour at trial. We also observe that this complaint was also the subject of Ground 6 (but in a different context) and as we have set out, his Honour was well aware of the course of action undertaken by the respondent, and dealt with it appropriately.
Doing the best we can with this ground of appeal we are not persuaded that his Honour erred in the exercise of his discretion in making the adjustment that he did pursuant to s 90SF(3) of the Act. For example, if the appellant is concerned about the injustices to him identified by his Honour in [164] and [165], his Honour addressed that in [166] and [167]. In other words, his Honour has plainly pared back what he would otherwise have found in relation to the entitlement of the respondent by taking into account those matters.
Again, this ground of appeal has no merit.
Conclusion
Given that we have found no merit in any of the grounds of appeal, the appeal must be dismissed.
Costs
At the conclusion of the hearing we sought submissions from the parties as to the question of costs depending upon the result of the appeal.
If the appeal was dismissed, the respondent sought an order for costs against the appellant. For the appellant’s part, in the event of the appeal being dismissed, he sought that each party bear their own costs.
We also note that in response to the application for costs the appellant sought the opportunity to present written submissions in support of his position. Other than making reference to the appeal raising complex issues and that the court should consider the party’s respective financial circumstances, we were not informed as to why written submissions should be necessary. The respondent opposed any requirement for written submissions.
Given that the appeal was wholly unsuccessful, we consider that there should be an order for costs against the appellant. In the absence of any explanation as to why written submissions are necessary as opposed to an oral argument (for example that there had been written offers of settlement) we do not see the need for written submissions in relation to this issue; to require the same would create unnecessary delay and further costs to the parties.
I certify that the preceding one hundred and fifty-four (154) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Strickland & Ryan JJ) delivered on 21 March 2016
Legal Associate:
Date:
0
4
5