Birk & Farwell
[2021] FedCFamC2F 234
•22 October 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Birk & Farwell [2021] FedCFamC2F 234
File number: MLC 14486 of 2019 Judgment of: JUDGE O'SHANNESSY Date of judgment: 22 October 2021 Catchwords: FAMILY LAW – final property – de facto relationship - adjustment of de facto property – superannuation split – initial contributions – weight to be given to initial contributions – two pools approach – parties inexpert valuations not accepted. Legislation: Evidence Act 1995 (Cth), ss 76, 81, 144
Family Law Act 1975 (Cth), ss 75, 79, 90SM, 90SF, 90XO, 90XT
Family Law Rules 2004 (Cth), r 15.23
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), r 6.35
Federal Circuit Court Rules 2001 (Cth), r 15A.10
Cases cited: Benson v Drury (2020) 62 Fam LR 1
C & C (2005) FLC ¶93-220
NHC & RCH (2004) FLC ¶93-204
Fields & Smith (2015) FLC ¶93-638
Hickey and Hickey and the Attorney-General (2003) FLC ¶93-143
In the marriage of Money and Money (1994) FLC ¶92-485
Jabour & Jabour (2019) FLC ¶93-898
Keskin & Keskin and Anor (2019) FLC ¶93-932
Lovine & Connor and Anor (2012) FLC ¶93-515
Markoska & Markoska & Anor (Costs) [2011] FamCA 833
Norbis v Norbis (1986) FLC ¶91-712
Semperton v Semperton (2012) 47 Fam LR 626
Stanford v Stanford (2012) FLC ¶93-518
Pierce v Pierce (1999) FLC ¶92-844
Wallis & Manning (2017) FLC ¶93-759
Welch & Abney (2016) FLC ¶93-756
Division: Division 2 Family Law Number of paragraphs: 202 Date of hearing: 3-4 May 2021 Place: Melbourne Counsel for the Applicant: Mr A Robinson Solicitor for the Applicant: Lopes Family Law Counsel for the Respondent: Mr D Sweeney Solicitor for the Respondent: Westminster Lawyers Pty Ltd ORDERS
MLC 14486 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR BIRK
Applicant
AND: MS FARWELL
Respondent
ORDER MADE BY:
JUDGE O'SHANNESSY
DATE OF ORDER:
22 OCTOBER 2021
THE COURT ORDERS THAT:
1.Within 14 days the parties are directed to bring in minutes of orders to give effect to these reasons.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Birk & Farwell has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE O’SHANNESSY
INTRODUCTION
In this case I must determine how the property of the parties, after a cohabitation in a de facto relationship of 13 and a half years where they raised two children, should be divided or adjusted between them. The applicant de facto husband is Mr Birk (‘the Husband’) and the respondent de facto wife is Ms Farwell (‘the Wife’). The background of this relationship is set out in the interim decision known as Birk & Farwell [2020] FCCA 2732 following a contested interim hearing.
The dispute is to how their property should be divided or altered in accordance with Part VIIIAB of the Family Law Act 1975 (Cth) (‘the Act’) and largely, but not entirely, revolves around the weight to be given to the disparate initial contributions of the parties back in 2005.
At the commencement of this hearing the parties' property division and the living arrangements for their children were in issue. The matter had been estimated to take three days of hearing time. The evidence included a very detailed private family report that consisted of 240 paragraphs over 83 pages in a small font and as a result of questions to the expert from the parties, and whether or not they could be answered was itself a dispute, a further 26 pages (in the same font) of detailed answers to those questions that covered a further 61 paragraphs. The observations and opinions of the expert were, on first reading, compelling. However because of the range of factual disputes relevant to the children's welfare I was pessimistic that it was even remotely possible to conclude the matter within the estimated three days.
The parties were both represented by solicitors and counsel. The hearing was conducted in person in a courtroom. At the commencement of the matter at 10.00am on the first day the parties' counsel requested that the matter be stood down as they wished to conclude discussions and I agreed.
During the afternoon of the listed first day counsel announced that they had reached a settlement in regard to the children's matters and final parenting orders were then made in detailed terms. Those orders provided for the children to live with the Wife and spend, initially five nights over six days per fortnight with the Husband, moving to six nights over seven days on satisfactory completion of further alcohol testing of the Husband, as well as one half of school holidays.
The dispute about property division proceeded over the remainder of the day and the following day. Although robust and detailed arguments were pursued by both sides, the efficiency of counsel in presentation of their respective cases and cross examination meant that the property dispute concluded at the end of the following day, that is the matter took a total of two days, including the time well spent on negotiations. Without the parties' common sense, courage, concentration on their children's best interests and assistance from their solicitors and counsel, and the resultant agreement about the children's living arrangements, the final hearing would have taken many days and would likely have had to have been adjourned part heard for many months. That is unless other cases awaiting final hearing were to be “bumped” to conclude this case.
EVIDENCE RELIED UPON
The Husband relied upon the following evidence:
(1)Husband's further amended initiating application filed 24 March 2021;
(2)Husband's affidavit of evidence in chief filed on 24 March 2021;
(3)Husband's financial statement filed 24 March 2021;
(4)Husband's affidavit in reply filed on 29 April 2021; and
(5)Husband's outline of case filed on 28 April 2021.
The Husband had filed an affidavit of his father Mr O and Dr P which were ultimately not relied upon for the determination of the property proceedings nor was the affidavit of the family report writer Dr Q.
The Wife relied upon the following documents:
(1)Wife's Further amended response filed on 21 April 2021;
(2)Wife's affidavit of evidence in chief filed on 21 April 2021;
(3)Wife's financial statement filed 21 April 2021;
(4)Wife's first financial statement filed on 29 January 2020 (relied upon in final address without objection);
(5)Wife's financial statement filed 16 September 2020 (relied upon in final address without objection);
(6)Outline of case filed on 28 April 2021; and
(7)Exhibits W1 and W2.
The Wife had filed an affidavit by Ms R and another by Mr S which were ultimately not relied upon for the determination of the property proceedings nor was the affidavit of the family report writer Dr Q.
THE PARTIES
The Husband lives in Melbourne, is 48 years of age and is an professional and he is currently employed, working five days per week, at the rate of about $220,000 per annum.
The Wife lives in Melbourne in the former relationship home, is 49 years of age, is employed in a technology area is a manager and, working four days per week and now earns $180,000 per annum. This income translates, for a 5 day working week, an earning capacity roughly comparable to the Husband’s.
The parties’ have two children, X now 11 years and Y now six years. The parties commenced cohabitation in November or December 2005 and separated on 3 February 2019. At separation the Wife remained living in the former relationship home. Hence the parties have each contributed within the meaning of section 90SM(4)(a), (b) and (c) of the Act from cohabitation to final hearing for about 15½ years. By community standards their property acquisition, conservation and improvement has been successful. They have put together equity of about $2,000,000, largely in the jointly owned former relationship home, and another $550,000 or so in superannuation as well as raising two children and maintaining significant careers and earning capacities.
A SUMMARY OF THE REMAINING PROPERTY DISPUTE
I found the Husband and the Wife to be an open, honest and careful witnesses. The parties’ credit was not in issue. Aspects of the reliability of the Wife’s recollection of events years ago were explored and demonstrated the greater reliability of recollection assisted by contemporaneous source documents over mere recollection.
The Wife bought in quite a bit of equity in a unit or flat, significant cash, some shares and some superannuation. The extent of that equity in the flat at cohabitation, although conceded to be substantial, was also in dispute. The Husband bought in very little by way of assets and some credit card debt.
In addition the Wife seeks what can be described as a “one pool” approach of superannuation and non-superannuation assets and the Husband seeks that those different types of assets be treated differently. There is also a dispute about the costs or compensation for a subpoenaed witness relating to the children’s orders issue who was not called but who appeared and sought expenses or compensation of income forgone as, he said, a result of putting aside work to be available to give evidence when required.
There is a dispute as to how the modest value of the parties’ motor cars should be treated. Not long before separation the Husband purchased another motor car for his use. The Wife retained the “old” car. At separation the Husband took the new car with him. The Wife replaced the “old” car by purchasing a new one from what is agreed to be her “part property” settlement. By the end of the hearing there was a dispute whether both parties’ cars should be simply left out of the asset “pool” or whether values, and if so what value, should be attributed to them.
There is dispute about whether the Wife should be treated as having partial property settlements of $204,580 or $194,580 and if it is to be $194,580 whether, on the Husband’s side his partial property settlement should be regarded as $203,000 or $193,000 plus $10,000 characterised as maintenance. The $10,000 maintenance claim, in the alternative only arose on the first day of the final hearing to rebut or deal with the (also brand new) contention that the Wife’s agreed part property was $10,000 less than previously contended. From a few months before separation until shortly before the final hearing the Husband was unemployed.
The Wife sought an overall division of property and superannuation 65% to her and 35% to the Husband. The Husband seeks a division of non-superannuation property of 52.5% to the Wife and 47.5% to himself and for a base amount super splitting order to equalise the amount of the parties’ current superannuation balances.
The application of settled law was said by each party to favour his or her case.
LAW OF ALTERATION OF PROPERTY OF A DE FACTO RELATIONSHIP
This as an application for property alteration or settlement pursuant to Part VIIIAB of the Act and I set out the key provisions that it is common ground I am to apply.
Section 90SM(1), (3) and (4) of the Act states:
Section 90SM – Alteration of property interests
(1)In property settlement proceedings after the breakdown of a de facto relationship, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the de facto relationship or either of them--altering the interests of the parties to the de facto relationship in the property; or
…
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i) either or both of the parties to the de facto relationship; or
(ii) the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the de facto relationship or a child of the de facto relationship, such settlement or transfer of property as the court determines.
…
(3)The court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4)In considering what order (if any) should be made under this section in property settlement proceedings, the court must take into account:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:
(i)to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii) otherwise in relation to any of that last-mentioned property;
whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:
(i)to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii) otherwise in relation to any of that last-mentioned property;
whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and
(c)the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the de facto relationship; and
(e)the matters referred to in subsection 90SF(3) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the de facto relationship or a child of the de facto relationship; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the de facto relationship.
By section 90SM(4)(e) I am to take into account section 90SF(3) and that provision states as follows:
Section 90SF – Matters to be taken into consideration in relation to maintenance
(3) The matters to be so taken into account are:
(a)the age and state of health of each of the parties to the de facto relationship (the subject de facto relationship ); and
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c)whether either party has the care or control of a child of the de facto relationship who has not attained the age of 18 years; and
(d)commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii)a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f)subject to subsection (4), the eligibility of either party for a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) a standard of living that in all the circumstances is reasonable; and
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(i)the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k)the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l)the need to protect a party who wishes to continue that party's role as a parent; and
(m)if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n)the terms of any order made or proposed to be made under section 90SM in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(o)the terms of any order or declaration made, or proposed to be made, under this Part in relation to:
(i)a party to the subject de facto relationship (in relation to another de facto relationship); or
(ii)a person who is a party to another de facto relationship with a party to the subject de facto relationship; or
(iii)the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(p)the terms of any order or declaration made, or proposed to be made, under Part VIII in relation to:
(i) a party to the subject de facto relationship; or
(ii)a person who is a party to a marriage with a party to the subject de facto relationship; or
(iii)the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(q)any child support under the Child Support (Assessment) Act 1989 that a party to the subject de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the subject de facto relationship; and
(r)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(s)the terms of any Part VIIIAB financial agreement that is binding on either or both of the parties to the subject de facto relationship; and
(t)the terms of any financial agreement that is binding on a party to the subject de facto relationship.
Those provisions were brought into the Act (and hence give this Court the task of determining property alteration or property settlement arising from de facto relationships) from 1 March 2009. The concepts within those provisions (largely but not entirely) mirror corresponding provisions in Part VIII of the Act that apply to property alteration or property settlement arising from legal marriage.
Stanford v Stanford
In the High Court of Australia case of Stanford v Stanford (2012) FLC ¶93-518 (‘Stanford’) the majority stated some fundamental propositions about section 79 proceedings. Section 90SM(3) mirrors section 79(2) and so Stanford is applicable in this case.
In Stanford the essential issue was whether it was just and equitable to make any property order at all, in circumstances where the consortium vitae or marriage relationship had not broken down by way of a separation. The parties had become physically separated due to the ill-health of one of them and that party being in residential care and the other remaining in the matrimonial home. The proceedings for the party in ill-health were conducted by a case guardian who was also the beneficiary under the will of that party.
The Family Court of Western Australia had made an order for a property settlement that would have necessitated the sale of the former matrimonial home where the husband continued to reside. For 37 years prior to the wife moving to a nursing home, the parties had made their matrimonial home in a house registered in the husband's name.
The wife’s expenses in accommodation were being met and she had the benefit of a sum set aside in the event she needed anything further. It was the second marriage for both of the parties. The wife's case guardian was a daughter from her previous marriage. The husband appealed to the Full Court of the Family Court of Australia and before the conclusion of that appeal the wife died.
In the High Court the husband’s argument that there was no power in the circumstances to make a property settlement order was dismissed and the case turned on whether, considering section 79(2), it was just and equitable in to make a property settlement order at all and whether the circumstances of section 79(8) of the Act, which relates to the continuation of proceedings after the death of the parties, had been complied with.
The High Court varied the order of the Full Court and found that in the circumstances it was not just and equitable that a property settlement or property alteration order be made at all (and also that section 79(8) had not been complied with). This was so despite 37 years of marriage and contribution by the wife. Section 79(4) contribution, even 37 years of it, was not to be conflated with the section 79(2) “just and equitable” requirement but should be considered separately and first. The result of the High Court's order was that the property settlement order as originally made was dismissed with costs.
Apart from the general observations about section 79 the High Court also observed that community of ownership arising from marriage has no place in the common law and that it should not be concluded that the making of an order is just and equitable only because of, or by reference to, the matters in section 79 without a separate consideration of section 79(2).
The majority observed at [37]:
[37]First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property… The question posed by s 79(2) (and/or section 90SM(3)) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
The majority continued at [41-42]:
[41]…The fundamental propositions that have been identified require a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interest during the continuance of the marriage.
[42]In many cases where an application is made for property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice by made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and the wife. No less importantly, the express implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship… And the assumption that any adjustment of those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4) (and/or section 90SM(3)).
In this case it is common ground that the parties no longer have, and will not have in the future, the common use of the major asset of the parties, the jointly owned former relationship home.
In addition to those considerations each party here contends that it is just and equitable that I make section 90SM(4) property alteration orders. Because of those matters I find that it is just and equitable to make property alteration orders in this case.
In Stanford the High Court did not go on to comment upon how section 79(4) should be applied where it was just and equitable that a property alteration or settlement order be made. Stanford was not concerned with the nuts and bolts of how section 79(4), or section 90SM(4), was to be applied in the ordinary run of cases, to the extent there is such a thing.
THE PREFERRED APPROACH
In Keskin & Keskin and Anor (2019) FLC ¶93-932 (‘Keskin’) the Full Court, Strickland, Kent & Austin JJ, at [44] approved what was the age old and pre Stanford “preferred approach” as to the how the nuts and bolts of section 79(4), and hence section 90SM, fitted together:
[20]In Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at [39] the Full Court, in setting out what the case law revealed as the “preferred approach” to the determination of an application under s 79 of the Act, referred to four inter-related steps, including that “the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties”. The Full Court did not purport to elevate the preferred approach as being mandatory, as was observed by a later Full Court in Bevan & Bevan (2013) FLC 93-545 at [61]-[63], [72]. However, adoption of that preferred approach is a means by which many of the mandatory factors in s 75(2) of the Act, in particular paragraph (b) – the income, property and financial resources of each of the parties; paragraph (ha) – ability of a creditor to recover debt; paragraph (n) – the terms of any proposed order under s 79 of the Act; can be considered, as these must be considered, in determining any adjustment pursuant to s 75(2) of the Act. Conversely, if the preferred approach is not adopted there must be a means discernible from the reasons to identify that these relevant mandatory s 75(2) factors have been considered, and how they have been brought into account, in the making of any s 75(2) adjustment…
That preferred approach set out at [39] of Hickey and Hickey and the Attorney-General (2003) FLC ¶93-143 (‘Hickey’) is as follows (citations omitted):
[39]The case law reveals that there is a preferred approach to the determination of an application pursuant to the provisions of section 79. That approach involves four interrelated steps. Firstly, the court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of hearing. Secondly the court should identify and assess the contributions of the parties within the meaning of section 79(4)(a), (b) & (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly the court should identify and assess the relevant matters referred to in section 79(4) (d), (e), (f) & (g) (“the other factors”) including, because of section 79(4), the matters referred to in section 75(2) so far as they are relevant and determine the adjustment study (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case.
Lest it be said there is a conflict between the High Court’s disavowal of “entitlement” to a section 79 order by mere separation and/or section 79(4) contribution on the one hand, and the use of the word “entitlements” in the Hickey passage cited above I regard the use of that word in the above context as synonymous with “assessment.” I will have regard to what I find to be the contribution based assessment rather than entitlement.
The division or adjustment of property acquired over the parties’ lifetime is a serious, stressful and emotionally intense legal matter. Many family lawyers find that failing to have regard to the preferred approach in negotiations, mediation or litigation (including submissions) is likely to widen the areas of dispute and make resolution by agreement more difficult and often results in a party, or both, merely seeking what he or she simply wants or regards as fair from his or her point of view.
The preferred approach assists me in making a principled and orderly determination of the parties’ property dispute and the parties helpfully addressed me about those matters.
STEP ONE: IDENTIFY THE PROPERTY AND LIABILITIES
The parties’ respective affidavits and outlines of case set out the assets and liabilities of the parties as follows.
Non-Superannuation Assets Item[1] Owner Husband Value Wife Value Note 1 C Street, Suburb D Joint $1,750,000[2] $1,750,000 Agreed 2 CBA #...31 (re: C Street) Joint ($504,990) ($504,990) Agreed 14 C Street, Suburb D Equity $1,245,010 $1,245,010 3 G Road, Suburb D Joint $850,000 $850,000 To be sold 4 CBA #...66 (re: G Road, Suburb D, est. selling costs) Joint ($604,524)
($20,000)
($604,524)
($20,000)
Agreed G Road, Suburb D Equity $225,476 $225,476 estimated 5 Shares at 16.04.2021 Wife $130,000 $130,000 Agreed 6 I Pty Ltd Wife Nominal Nominal Agreed 7 H Pty Ltd
2017 automobile only assetHusband No value included $14,500[3] Part cars dispute 8 Part property settlement Husband $203,020 $203,020 Agreed 9 Part property settlement Wife $204,580 $194,580[4] Dispute 10 G Road, Suburb D offset #...21 Joint NIL N/A 11 Estimated sales costs G Road, Suburb D Joint Included above Included above 12 CGT on the sales of G Road, Suburb D and E Street, Suburb F[5] Joint Not calculated Not calculated Agreed 13 CGT sale shares $40,000[6] Wife No value included $6,000 Part cars dispute Wife’s car Wife Not included Not included Agreed Parties bank accounts Not included Not included Agreed Total Non-Superannuation Assets $2,008,086 $2,018, 586[7] Dispute [1] The item numbers are from the Husband’s outline of case filed 28 April 2021.
[2] Agreed: the opinion of the jointly retained expert obtained 23 April 2020.
[3] In opening said to be $12,000 from “Redbook” but in closing, when “Redbook” not agreed relied upon amount of $14,500 from item 40 of Husband’s updated financial statement filed 24 Mar 2021 relied upon.
[4] Being agreed $204,580 less $10,000 said to be paid to Husband and included in his $203,020 being $10,000 + $40,000 + $153,020 = $203,020. But, Husband asserted, if the Wife’s part property was to be regarded as $194,580 not $204,580 then $10,000 of the Husband’s $203,020 at #8 should be regarded as “spousal maintenance”.
[5] Agreed that, “It will be what it is and should be divided on same percentage as division”.
[6] Husband asserts that, “As per the above, but only on the $40,000 sold”.
[7] The Wife in W2 put net non superannuation assets at $2,016,086, but without a table, and I infer this document was drawn with the Husband’s car at $12,000 (not $14,500) before the change in the Wife’s case in final address to withdraw reliance on the “Redbook”(when this was not agreed) and rely instead, upon the Husband’s “admission” in his financial statement.
Non-Superannuation Assets Item Owner Husband Value Wife Value Note 14 L Super
(at 06.04.2021)Husband $218,140 $218,140 Agreed 15 J Super
(at 07.04.2021)
Wife $146,207 $146,207 Agreed 16 K Super
(at 07.04.2021)Wife $180,152 $180,152 Agreed 17 T Super
(as 30.06.2021)
Wife $7,594 $7,594 Agreed Total of Wife’s Superannuation $333,858 $333,953 $95 diff Total of parties Superannuation $552,093[8] $552,201[9] Close to agreement [8] From Husband’s outline of case 28.04.2021 page 8 of 32.
[9] From W2 footnote 3, only a total without details.
Total Assets Husband: Wife Total of all assets[10] $2,560,179 $2,570,679 [10] If it is appropriate to aggregate superannuation and non-superannuation assets which is disputed.
The difference between the parties is a total of $10,500 and can be explained thus:
(a)The Husband puts #9, the Wife's partial property settlement, at $10,000 more on her side or as her "keep" (or she puts it at $10,000 less).
(b)The Husband excludes both his and her cars, hence $14,500 less on his "keep" and $6,000 less on her "keep".
The cars “in or out” dispute
The disagreements about the value of second hand motorcars are overrepresented among the usual suspects of the things that cause parties to disagree about the value of their own and the other side’s assets. Often both sides overvalue the second hand motorcars of the other side. Usually second hand motorcars are not collectible and usually depreciating at an astonishing rate from the brand-new purchase price. Frequently the time and angst and resultant legal fees getting agreed values or expert valuations about the parties’ respective second hand motorcars outweighs the utility of the dispute (even where the motorcar is a utility). Frequently the available online facility of “Redbook” or like service is utilised to resolve these disputes by agreement. Unfortunately where there is a dispute about everyday second hand motorcars the court cannot use, or permit the parties to put in evidence the value from such service unless that is agreed.
It is likely that such assertions of value out of court, unless they could be characterised as a business record, would be hearsay. Whether a Redbook “valuation” could be a business record was not argued before me and I proceed on the usual basis that a Redbook “valuation”, when relied upon by one party in court, would be hearsay and inadmissible. The parties proceeded on this basis.
The Husband’s approach, as part of a concise and economical conduct of his case, to determining the pool was to leave out minor assets such as furniture and motorcars which both parties had. There is much to commend such an approach unless it causes injustice. The Wife’s approach was almost the same except she sought to attribute value to the parties’ motorcars and her “car” being an allowance on trade in when she purchased a new car (from the part property already included in the pool). Her case was that the Husband’s motorcar was worth roughly double what her “trade in” was and consistent with the requirement to identify all of the parties’ assets and liabilities as at the time of the hearing sought to include the motorcars at the first stage of the preferred approach by using what her counsel asserted was Redbook values. She put her (traded in) car at $6,000 and the Husband’s existing car $12,000.
Given the parties’ efficiency at reducing the property dispute to its essential components it is unfortunate that this dispute could not be resolved by experienced lawyers, but sometimes a further small concession by a party can be the straw that breaks the camel’s back. I am, of course, not privy to the dynamics of attempts to resolve this issue.
Although the parties’ motorcars are not major assets they are not insignificant. The car dispute is not de minimis. Unless agreed otherwise, the first step of the preferred approach requires me to determine the value of all of the parties’ assets even those minor assets but provided that the value of the minor assets is not vague, mere guesswork or insignificant or de minimis in proportion to the overall dispute.
In his outline of case and through oral submissions the Husband did not attribute any value to either motorcar, his or the Wife’s traded in motor car. Neither party can be regarded as having expertise in attributing a value to second-hand motorcars hence I cannot attribute any weight to their own opinions of the value of the other party’s motorcar if such opinions were admissible.
The Husband asserts that because the Wife was able to purchase, after separation in June 2020, a new motorcar for in the order of $50,000 and he was not, and where neither party seeks to include that new motorcar as an asset in the pool, it is just and equitable not to include that motorcar, or the trade-in allowance the Wife said she received or the value of the Husband’s 2017 motorcar.
In final address when rebutting the alternative argument concerning the $10,000 being the spousal maintenance issue, the Wife’s counsel asked that I look at the two financial statements (being in the form prescribed by the relevant rules at that time) previously sworn or affirmed and filed on the 27 January 2020 and on 16 September 2020. There was no objection to that by the Husband’s counsel and I looked at those documents and I was addressed on them.
According to the 27 January 2020 financial statement, when the Wife was working, she said, three days per week for 44 weeks per year her average weekly income was $2,411 plus share dividends of $244 giving an average weekly income she said of $2,655 and her total expenses she said were $2,406 per week. She described having funds in a bank account ending in #...43 of $73,000 and in another account ending in #...69, of $85,000.
According to the Wife’s 16 September 2020 financial statement, her weekly income was $3,149 plus share dividends of $192 giving an average weekly income she said of $3,341 and her total expenses, she said, were $3,559 per week. She described having funds in a bank account ending in #...78 as only $19,528 and in another account ending in #...69, only $29,924, but she described a recently purchased new motor car in the document as having a current value of $52,000 and I infer that was the approximate purchase price. She asserted she received a $6,000 trade-in allowance on a car that she had acquired during the parties cohabitation.
The inference is overwhelming that the reduction in money in the bank is at least partly because of the purchase of the $52,000 motorcar. The inference is overwhelming that the funds in the Wife’s bank accounts, at least in part, related to her part property settlements. In those circumstances to count the whole of the partial property settlement and the asset of the motorcar purchased with those proceeds would be double counting.
The Husband’s counsel asserted that the Wife had not specifically said where the funds for the purchase of the motorcar came from in her affidavit of evidence in chief. Notwithstanding that I find that the Wife purchased the new car directly or indirectly with the funds attributed to her by way of partial property settlement. All of those funds will be included as held by the Wife for the Wife’s “keep” in the final property alteration analysis. It is not suggested that the purchase of the Husband’s 2017 model motorcar was purchased by him with partial property settlement funds after separation and I infer that he retained this car acquired during the parties’ cohabitation.
Hence unless the parties agree it is not just and equitable to simply leave both cars out of the pool of assets as one party seeks.
In this case each party had recently sworn a financial statement. In the Husband’s financial statement he attributed a value of $14,500 to his motorcar. The Wife’s outline of case attributed a value to her motorcar of $6,000, (that being said to be the trade in value of the car she had at separation). That she had received such an allowance when she purchased a later model, the $52,000 car described above, was not in dispute. The Wife sought, when dealing with motor cars, to use the trade in value, as the value of her car. It is just and equitable that I do so: the alternative is the value of the trade in just disappears. As a general rule parties should account for significant assets disposed of after separation.
One alternative where there is a dispute about the value of assets and the parties have not put any expert or admissible evidence before the court is for the court to order the sale of those disputed assets and the proceeds to be divided as the court determines. In this case it was not submitted that I should, nor did I raise this option with the parties. The parties’ lawyers would know that that is always an option open to me in the case of a dispute about the value of an asset. In this case the expense, trouble and strife of the sale of the Husband’s motorcar and the supervision of that sale to ensure it is at arm’s length would far outweigh the benefit to the parties of the value of the motorcar being determined in that manner.
In discussion with counsel I raised the issue of whether the Husband’s assertion in his financial statement as to the value of the motor car to be retained by him would be admissible as an admission against interest and the Wife’s counsel asserted it could be. But this discussion was in passing only and consideration of the Evidence Act 1995 (Cth) (‘the Evidence Act’) sections 76 (opinion evidence is not admissible to prove the existence of a fact about which the opinion was expressed), section 81 (the opinion and hearsay rules do not apply to previous representations that contain an admission against interest) and the dictionary definitions of admission and previous representation are not without complication when applied to a representation contained in an affidavit that is “relied upon” as evidence in chief in the proceedings. It is not appropriate to go down that burrow without more considered argument.
I must have regard to the parameters of the factual disputes relevant to my determination that the parties, in adversarial proceedings, set.
In this case the recent financial statement of the Husband, adopted as true and correct in evidence in chief and relied upon as part of his evidence in chief, is in evidence. In final address the Wife’s counsel moved to adopt and press upon the court that value that the Husband had asserted. Hence there was, in the end, no dispute as to the value of the Husband’s second hand motorcar. The Husband’s case never moved from the value asserted. His case was that regardless of the value, whether agreed or otherwise, it should not be included in the pool of assets.
Hence I find that the Husband’s motorcar should be regarded as a value as he attributed to it in his financial statement, and with which the Wife’s case ultimately agreed, of $14,500 and that value included as part of his “keep” in the asset pool.
The same applies to the issue of the amount attributed the Wife’s motorcar (traded in). There was not a dispute that the Wife in fact received allowance of $6,000 as she asserted on the trading of that motorcar. The dispute was whether any value at all should be attributed to motorcars: retained and/or traded in. Hence I find that the value of that trade in should be as she asserted it in her outline of case, $6,000 and that value included as part of her “keep” in the asset pool.
The Wife’s partial property settlements $194,580 or $204,580?
The Husband sought to characterise funds that the Wife had received or had the benefit of as partial property settlements to the extent of $204,580. The Wife sought to characterise those partial property settlements as $10,000 less: that is $194,580.
In opening the Wife by her counsel asserted that $10,000 paid to the Husband, and part of his $203,020 had come from the $204,580 that were asserted to be all partial property settlements and hence the Wife should be regarded as receiving only $194,580 as partial property settlement. In closing address the Wife’s counsel put it again and thus:
…I have $204,000 of joint funds and you have $203,000 joint funds, and from my joint funds I pay you $10,000, and then when we come to court the joint funds are then apportioned against each party as to who got what of those joint funds. That’s the test.
As a matter of logic that proposition makes sense. The issue is whether the evidence demonstrates the factual platform for the proposition. Had the Wife, in fact, paid to the husband $10,000 of “his” $203,020 from “her” $204,508 that she received as partial property settlement, there would be substance in the position.
It was put to the Husband that from the Wife’s $204,508 she paid to the Husband $10,000 and he said he had no knowledge where that money came from. It was also put to him that her (the Wife’s) evidence is that it (the $10,000) came from the $204,508. The Husband acknowledged that he “had heard that’s her evidence”.
In the Wife’s trial affidavit, filed 21 April 2021, at paragraph 100 the Wife set out in a convenient table the funds she had received or retained which totalled $204,508. In the same table she set out the funds that she said the Husband had received which she said totalled $203,020.
The table at paragraph 100 also purported to set out the source of the funds received. There was no suggestion in that table that any of the funds received by the Husband in the $203,020 sought to be characterised as partial property settlement on his side had been sourced or paid to the Husband from the $204,508 that the Wife had received or retained.
A table similar to the table at paragraph 100 was included in the Wife’s Further Amended Initiating Application filed 21 April 2021 where an order was sought that sum received or retained following separation be characterised as partial property settlements: to the Wife $204,580 and to the Husband $203,020. No mention was made of $10,000 included in the $204,580 to the Wife as being subsequently, and from those funds, being paid to the Husband.
In the recital of the orders sought in the Wife’s Outline of Case filed 28 April 2021, that is mere days before the first day of final hearing on Monday 3 May 2021 that Wife sought a declaration that she had received part property in the sum $204,580.
Given the care and detail of the Wife’s affidavit of evidence in chief, and the Wife’s Further Amended Initiating Application filed 21 April 2021, I would have expected to see a reference to such matter had it occurred.
When the Wife was asked questions by the Husband’s counsel, Mr Robinson, there was the following exchange:
MR ROBINSON: When was it you changed your position from saying, “I want to be treated as having $204,580 worth of part property settlement, to now only saying, “I want to be treated as having $194,580”?---
THE WIFE:I would say that is more my lawyers advise me that there was an accounting error that it should be coming off because it came from my personal funds.
MR ROBINSON: So my question was when?
THE WIFE: When?
MR ROBINSON: Yes?
THE WIFE:That probably would have been when developing the outline of case I imagine. I’m not sure exactly the right-exact date.
MR ROBINSON: So have you got some document that shows where this $10,000 comes from?---
THE WIFE:I will be able to produce the document. It came from my I business account on 22 May.
MR ROBINSON: So the Company HH business account is where you paid your income into. Is that correct? -----
THE WIFE:My income when I was contracting, so before my current job.
…
MR ROBINSON: …But as I understand it the evidence you’ve just given, that the $10,000 came from an account that your income and JobKeeper were being paid into?---
THE WIFE: That is correct.
MR ROBINSON: That’s correct?
THE WIFE: That is correct-where the money came from, yes.
MR ROBINSON: And if you do produce that document, will I see any monies going into that account that aren’t your income and JobKeeper?---
THE WIFE:I don’t think so, but I would need to check.
At paragraph 183 of her affidavit of evidence in chief filed 21 April 2021 the Wife referred to the funds in the I bank account are a combination of pre-tax funds and GST collection and as such did not provide a true representation of income or available funds. Although dealing with a different topic this evidence is consistent with the passage referred to above.
At paragraph 184 of the same affidavit the Wife set out another table of funds received by the Husband and Wife since separation (excluding the $73,000 loan from the Wife’s mother) and the total was said to be $274,149 on the Husband’s part and $424,841 received by the Wife. This table included what was said to be income received by the parties including JobKeeper received by the Husband up to 8 April 2021 being shortly before the final hearing and $10,000 superannuation withdrawal on the Husband’s side as well as “balance of money spent on credit cards” which appears to be a notional amount. However that table is consistent with the table set out in the Further Amended Initiating Application and the table at paragraph 100 of her affidavit filed 21 April 2021.
In final address the Wife’s counsel (at page 108 of the Transcript) asserted as follows;
…The characterisation of the amounts that my client says, “I paid from my account to the husband”- the accounts have been put aside and treated as though they contain, effectively, what the parties have had. Your honour, by logic, it must have come from the account. If one looks at the tables that are drawn from the dates on which those payments are made, on the evidence of my client, she paid the amount over- the $10,000 over on the May date… that can only have come from savings. My learned friend said, well, it might have come from earnings. Yes, it might have. If you then treated- and this is where the argument becomes circuitous----
I interrupted counsel and the following exchange occurred:
HIS HONOUR: The $10,000 payment was to come from a specific account - …43,
MR SWEENEY: Yes.
HIS HONOUR: The witness says it came from the-she doesn’t use those numbers-the I account.
MR SWEENEY: It came from the business account. Yes. Yes.
HIS HONOUR: And she says that the I account is what JobKeeper and income went into.
MR.SWEENEY: Absolutely.
HIS HONOUR: Yes.
The Wife’s counsel then went on to address and rebut the alternative argument that if the $10,000 was included as partial property settlement to the Wife $10,000 should be deducted from what was otherwise conceded to be partial property settlement on the Husband’s side and treated as spousal maintenance paid to him.
Conclusion as to the $10,000
I will not recite every point or argument that each side advanced but I have read the transcript of proceedings in writing these reasons and have considered, and taken account of, all arguments put.
Based on the evidence and taking into account the parties arguments I conclude that it is proper and just and equitable to regard the Wife’s partial property settlements as $204,580 not $194,580: that is to include the controversial $10,000 as partial property settlement. I do so for the following reasons. The Wife had until the drawing of the outline of case herself characterised the whole of the $204,580 as partial property settlement. The evidence does not disclose that the controversial $10,000 came from those funds, that is the $204,580. The evidence discloses that the controversial $10,000 came from the Wife’s I account and that was the account into which the Wife paid her income and JobKeeper notwithstanding that in her affidavit she deposed to moving money between accounts. It has not been established that the $10,000 came from the partial property settlement to contradict what was set out in application, affidavit and outline of case.
Because of my findings about the $204,580 partial property settlement I do not need to consider the alternative argument of the Husband of “take $10,000 from my side as spousal maintenance”. The Husband has conceded, and opened his case on the basis, that the sum of the $203,020 should be treated as partial property settlement.
However there may be substance in the point when the Wife’s counsel asserted in final address:
… You can’t just simply say, “that’s a lump sum, and for some reason I will sing Kumbaya and then make it all maintenance. It has got to be a legal approach to it. The legal approach… is not just a vibe…
It is unnecessary for me to address the argument asserting the $10,000 could not be characterised as lump sum maintenance nor is it necessary to address the issue of whether, if it is not to be characterised as lump sum maintenance whether it automatically becomes partial property settlement.
Conclusion as to the pool of assets and liabilities
The word “pool” is not mentioned in the Act but it is convenient to adopt that frequently used shorthand description of all of the parties assets and liabilities at the time of the hearing. I conclude the pool is, again using the table from the Husband’s outline of case for convenience, as follows:
Non-Superannuation Assets Item[11] Owner Value Note 1 C Street, Suburb D, C Street, Suburb D Joint $1,750,000 Agreed 2 CBA #...31 (re C Street, Suburb D) Joint ($504,990) Agreed C Street, Suburb D Equity $1,245,010 3 G Road, Suburb D, C Street, Suburb D Joint $850,000 To be sold 4 CBA #...66 (re G Road, Suburb D estimated selling costs) Joint ($604,524)
($20,000)
Agreed
Agreed
G Road, Suburb D Equity $225,476 Estimated 5 Shares (various) at 16.04.2021 Wife $130,000 Agreed 6 I Pty Ltd Wife Nominal Agreed 7 H Pty Ltd 2017 Automobile only asset Husband $14,500 By the Court 8 Part property settlement Husband $203,020 Agreed[12] 9 Part property settlement Wife $204,580 By the Court 10 G Road, Suburb D Offset #...21 Joint NIL 11 Estimated cost G Road, Suburb D Joint Included above 12 CGT on the sales of G Road, Suburb D and E Street, Suburb F[13] Joint Not calculated Agreed 13 CGT sale shares $40,000[14] Wife Not calculated Agreed Wife’s car Wife $6,000 By the Court Parties bank accounts Not included Agreed Total Non-Superannuation Assets $2,028,086 By the Court [11] The item numbers are from the Husband’s outline of case filed 28 April 2021.
[12] Agreed unless I determined the Wife’s partial property was $194,208 not $204,208.
[13] Agreed that, “It will be what it is and should be divided on same percentage as division”.
[14] Husband asserts that, “As per the above, but only on the $40,000 sold”, the Wife having sold shares to realise the $40,000 court ordered interim payment.
Superannuation Assets Owner Value Notes 14 Super L at 06.04.2021 Husband $218,140 Agreed 15 Super J at 07.04.2021 Wife $146,207 Agreed 16 K Super at 07.04.2021 Wife $180,152 Agreed 17 T Super at 30.06.2021 Wife $7,594 Agreed Total Wife’s Superannuation $333,858 By the Court Total Parties Superannuation $552,093[15] Agreed [15] From Husband’s outline of case f28.04.2021 page 8 of 32 and agreed at TP-70 line 22.
[16] If it is appropriate to aggregate superannuation and non-superannuation assets which is disputed.
Total of all assets[16] $2,570,679
The Wife’s ‘keep’ from the above pool is:
5 Shares (various) at 16.04.2021 $130,000 Agreed 6 I Pty Ltd Nominal Agreed 9 Part property settlement $204,580 By the Court 13 CGT sale shares $40,000[17] Not calculated Agreed Wife’s car $6,000 By the Court CGT on remaining shares if sold to raise payment to Husband Not calculated By the Court Wife’s non-superannuation ‘keep’ $340,580 Less CGT X 2[18] [17] Husband asserts that, “As per the above, but only on the $40,000 sold”, the Wife having sold shares to realise the $40,000 court ordered interim payment.
[18] Being the CGT on the $40,000 shares sold and the CGT on the shares of the $130,000 to be sold consequent upon these orders.
The Husband’s ‘keep’ from the above pool is:
7 H Pty Ltd 2017 Automobile only asset $14,500 By the Court 8 Part property settlement $203,020 Agreed[19] Husband’s non-superannuation ‘keep’ $217,520 [19] Agreed unless I determined the Wife’s partial property was $194,208 not $204,208.
The remaining joint non-superannuation assets of the above pool are:
Item[20] Owner Value Note 1 C Street, Suburb D Joint $1,750,000 Agreed 2 CBA #...31 (re C Street, Suburb D) Joint ($504,990) Agreed C Street, Suburb D Equity $1,245,010 3 G Road, Suburb D Joint $850,000 Agreed to be sold 4 CBA #...66 (re G Road, Suburb D estimated selling costs) Joint ($604,524)
($20,000)
Agreed
Agreed
G Road, Suburb D $225,476 Estimated 10 G Road, Suburb D Offset #...21 Joint NIL CGT on the sales of G Road, Suburb D and E Street, Suburb F[21] Joint Not calculated Agreed Total joint non-superannuation assets $1,470,486 But less CGT [20] The item numbers are from the Husband’s outline of case filed 28 April 2021.
[21] Agreed that, “It will be what it is and should be divided on same percentage as division”.
Hence the pool can be summarised as follows:
Total joint non-superannuation assets $1,470,486 But less CGT Husband’s non-superannuation ‘keep’ $217,520 Wife’s non-superannuation ‘keep’
(but less CGT on the $40,000 shares sold and to be sold to comply with these orders)$340,580 Total non-superannuation assets/liabilities $2,028,586 But less CGT Husband’s superannuation $218,140 Wife’s superannuation $333,858 Total superannuation $552,093 Agreed figure Total all assets (if appropriate to total) $2,580,679
The parties did not address section 90XO of the Act, and as the value of superannuation interests were agreed and I infer agreed to be accumulation funds, did not need to be. I infer the parties superannuation interest are not covered by a superannuation agreement or a flagging order or a waiver notice as referred to in section 90XO. For the purpose of section 90XT(2) I find the value of the parties interests are as was agreed for the purpose of this hearing and as recited above.
STEP TWO: ASSESSMENT OF CONTRIBUTIONS - SECTION 90SM(4)
I now assess the direct and indirect financial contributions of the parties and the direct and indirect non-financial contributions of the parties to the acquisition, conservation or improvement of the property of the parties and the contribution to the welfare of the family of the parties including any contribution made in the capacity of homemaker or parent as required by section 90SM(4). I will for convenience refer to all of those concepts within those sections as “contribution” as the parties’ counsel did in submissions to me.
It is helpful to assess such contribution in percentage terms and the parties sought that I do so.
The Wife in outline of case contended, “that there should be an adjustment of 2.5% to the respondent and contributions in the exercise of weighing all of the contributions from the commencement of the relationship to date”, and maintained that position in opening and final address. I took this is the equivalent of asserting that overall the Husband should be regarded as contributing in the proportion of 47.5% and the Wife 52.5%.
The major dispute in the case is the weight to be attached to the common ground fact that the Wife bought in to the relationship substantial property and the Husband brought in a small debt.
It was put by the Husband’s counsel that apart from the disparity of initial contributions the parties’ respective contributions should be regarded as about equal to the date of the hearing. As I understood this expression this was merely a shorthand way of identifying where and why the parties disagreed about the very different contribution assessments each pressed. This was not expressly adopted by the Wife’s counsel but there was no dispute or demur from that proposition as a convenient means of identifying where the parties disagreed when assessing contribution.
All contributions that fall within section 90SM(4) must be taken into account. While I find shorthand identification of the contribution elements in dispute helpful, and the use of such approach in negotiations is ubiquitous among family lawyers, the ultimate decision cannot be made by segmentation and/or concentration upon a particular element of the contribution matrix.
In Wallis & Manning (2017) FLC ¶93-759 (‘Wallis & Manning’) the Full Court (citations omitted) observed:
19. By… submissions the parties approached the assessment of contributions by suggesting that “an adjustment” should be made to a result reached otherwise by reference to a miscellany of other contributions. Her Honour adopted a similar approach. Such an approach is by no means uncommon to both the presentation of cases and the structure of judgments. It is convenient in this case, as it is more broadly, so as to describe a contribution or contributions of a particular type said to have particular importance and to distinguish it or them from other contributions.
20. Yet, that approach must also ensure that the “myriad of other contributions” and the duration over which, and circumstances in which, the miscellany of other s 79(4) contributions were made is not accorded a subsidiary role. The essential s 79(4) task is for “trial Judges [to] weigh and assess the contributions of all kinds and from all sources made by each of the parties throughout the period of their cohabitation”.
…
110. The approach adopted by the parties (at first instance was) that “the contributions of the parties would be equal aside from gifting by the Husband’s father of significant parcels of land which remain in existence at the present point in time”… For the reasons given earlier, we reject that approach; the gifts by the husband’s father should be taken into account as a contribution together with the miscellany of other contributions made by each of the parties over the course of their marriage.
The same approach was applied in Benson v Drury (2020) 62 Fam LR 1, at [35-36] where the Full Court observed:
[35]The central question raised by this appeal is how a judge takes into account the contributions of one party, found to have been made significantly more arduous by the conduct of the other, when assessing contributions under section 79(4)(a-c) or 90SM(4) of the Act. The answer is the primary judge must take a holistic approach. The contributions which have been made significantly more arduous must be weighed along with all other contributions by each of the parties, whether financial or non-financial, direct or indirect to the acquisition conservation and improvement of property and in the role of home maker and parent. All contributions must be weighed collectively and so it is an error to segment or compartmentalise to various contributions and way one against the remainder (citations omitted).
[36]That principle has its counterpart in the application of fact as described in section 75(2) or section 90SF(3) of the Act (citations omitted). Any adjustment to the parties at contribution based entitlements should be determined inclusively after considering all relevant factors; not by incremental adjustments in respect of each relevant factor.
In that case the appeal turned on how the so-called “Kennon claim” should be taken into account but the observations are apposite to a dispute relating to disparate property brought into the relationship which can be described as initial contributions.
This is a case where the parties worked in paid employment, raised 2 children, supported each other and conserved and acquired property over 13.5 years of cohabitation and a total of 15.5 years contribution to the time of this final hearing. One factor that the parties agree must be taken into account is the property the Wife brought into the relationship and another is the debt the Husband brought in and that had to be repaid.
The Husband’s counsel acknowledged the nature of the initial contributions of the Wife but concentrated on the length of time and the many contributions of the parties over 15.5 years. The Wife’s counsel acknowledged the 15.5 years of contribution and reminded me of that I should, consistent with the authorities, take a “holistic” approach and emphasised the importance of the Wife’s initial contribution of substantial property.
As to contribution the Wife’s counsel referred generally to the Full Court decisions of Pierce v Pierce (1999) FLC ¶92-844 (‘Pierce’), In the marriage of Money and Money (1994) FLC ¶92-485 (‘Money’) and Jabour & Jabour (2019) FLC ¶93-898 (‘Jabour’). As to the issue of treating a superannuation asset alike with equity in a home or cash he referred me to the decision of C & C (2005) FLC ¶93-220 (‘C& C).
One pool or two pools?
In this case it is logical to determine whether I should assess one or two pools at this stage. In C & C the Full Court provided Norbis type guidelines (see: Norbis v Norbis (1986) FLC ¶91-712) as follows:
65.In summary, then, the trial Judge has a discretion as to how superannuation interests will be treated in a particular case. If superannuation is not included in the list of property but rather made the subject of a separate pool, it will be necessary where a splitting order is sought, or extremely prudent where no such splitting order is sought (in order to ensure that justice and equity is achieved) to:
(a)value the superannuation interest (according to the Regulations if an order under Part VIIIB is sought or according to the Regulations or otherwise if no order is sought);
(b)consider and make findings about the types of contributions referred to in s 79(4)(a), (b) and (c) which have been made by the parties to the superannuation interests on either a global approach or an asset by asset approach depending on the circumstances;
(c)consider the other factors in s 79(4) being the matters in s 79(4)(d), (e), (f) and (g); and
(d)ensure that pursuant to s 79(2) the orders in relation to the parties' property, and any order under Part VIIIB in relation to superannuation interests are just and equitable.
66.In the context of a consideration of the matters referred to in sub-paragraphs (b) and (c) of the last paragraph, the following matters may well be relevant: the relationship between years of fund membership and cohabitation; actual contributions made by the fund member at the commencement of the cohabitation (if applicable), at separation and at the date of hearing; preserved and non-preserved resignation entitlements at those times; and any factors peculiar to the fund or to the spouse's present and/or future entitlements under the fund.
67.If this approach is adopted, whereby superannuation interests are dealt with separately from property as defined in s 4(1), but are subject to the considerations in s 79(4), then not only will any contributions, both direct and indirect, by either party to such superannuation interests be more likely to be given proper recognition, but the real nature of the superannuation interests in question can also be taken into account, both in consideration of the s 75(2) matters and in the final assessment of whether the ultimate order is just and equitable.
68.When we refer to “the real nature” of the relevant superannuation interest, we are referring to the fact that notwithstanding that its value according to the Regulations may well be calculated to be a very significant amount, that superannuation interest may be no more than a present or future periodic sum, or perhaps a future lump sum, the value of which at date of receipt is unknown.
Consistent with these observations, in Welch & Abney (2016) FLC ¶93-756 (‘Welch & Abney’) at [60] the Full Court adopted the authority of another Full Court in Semperton v Semperton (2012) 47 Fam LR 626 (‘Semperton’) where observations of Murphy J in another case, concerning a pension, were adopted. The Full Court in Welch & Abney observed:
59.The Full Court’s reasons in Semperton… emphasised that whilst a trial judge has a discretion as to how superannuation interests will be treated in a particular case, the discretion is guided by statements of principle; including that the nature, form and characteristics of the subject interest must be considered, whether or not a splitting order of the interest is made.
60.In emphasising these principles the plurality quoted extensively from the judgment of Murphy J in Hayton v Bendle (2010) 43 Fam LR 602, a case concerning a judicial pension… the following paragraphs have particular resonance in the instant context:
105.…It has always been the task of courts making orders pursuant to s 79 to properly examine the nature, form and characteristics of the property forming part of the pool for division. Variety in the nature of such property is by no means uncommon…
106.There has never been a requirement for different types of property to be treated the same as other types of property, nor has there ever been a requirement for different types of property to be treated differently. The nature, form and characteristics of the property has always been recognised…
107.What is crucial is that the nature, form and characteristics of all components (or groups of components) of the “pool” to which s 79 orders might apply are considered. That is neither more nor less true of “superannuation interest”. “Superannuation interest” — particularly unvested superannuation interests — can be seen as being of a nature, and having a form and characteristics, markedly different from, say, real property…
…
117.The characteristics of the pension — which see it as starkly different from, say, the cash proceeds from the sale of the former matrimonial home — need to be taken into account within the broad-based discretion provided for by s 79 in general and the assessment of contributions in particular (difficult though that may be).
61.Crucially, at [175] of their joint judgment the plurality in Semperton emphasised that the mandatory requirement expressed in s 90MT(2) of the Act to determine an amount in relation to a “superannuation interest” as defined arises only when the superannuation interest is to be split.
So in considering the nature, form and characteristics of the all of the parties assets the matters I take into account include the following. Consistent with the efficient approach of counsel and although never expressly stated the parties proceeded on the basis that the superannuation of each was of an accumulation type and that the statements of each fund accurately stated the value of the individual interests.
In this case the parties’ are 48 and 49 and both are capable of earning, by general community standards, a decent income. They will have the responsibility of supporting their children, now aged 11 and 7 for many years, including the likely issue of school fees. When the modest amount of superannuation the parties have now and what they will be able to contribute over coming years and the likely need to provide for retirement are considered it is unlikely that either party will retire from remunerative employment for many years. The most pressing need of both parties is the need to provide for their own and the children’s support which includes the provision of the most suitable home each is able to obtain. When divided between them what each party ends up with is, relative to the cost of housing in the city they live in, modest.
Hence, absent poor health, there is little prospect that either will retire from the paid workforce in the foreseeable future. Their asset of superannuation will not be available to assist house or support them and their children in the foreseeable future. Their superannuation is a valuable and important asset but will likely only be available to them in the future.
Where the parties’ ages mean they could retire and access superannuation if they wished, soon or immediately, the advantageous taxation environment of income from superannuation may well mean that superannuation is a more desirable asset.
Until the parties are in a position to access their superannuation that asset, although valuable, has the limited benefit to them of being provision for the future. It will not now and in the foreseeable future, fund the deposit on a home or provide security to a lender for a loan to purchase a home or provide income to pay rent on a home.
Hence I find that it is not appropriate, for these parties, at this stage of their lives, to treat a dollar of a superannuation as equivalent to a dollar of cash or equity in real estate. And so I proceed on the basis that I will treat and consider superannuation differently to the parties other assets.
Non-super contribution including initial contributions
The Wife’s case as to contribution was succinctly set out at part J [1-7] of her Outline of Case. Those submissions bear repeating:
1.At the date of cohabitation the Respondent had substantial assets with a value representing between 30% to 32.4% of the current asset pool available for division.
2.The Respondent’s pre-cohabitation assets were used by the Respondent as security to enable the parties to purchase and acquire the E Street, Suburb F property, the C Street, Suburb D property and the current family home thereby improving their financial position.
3.In comparison, the Applicant had no assets and had liabilities by way of 3 credit card debts amounting to approximately $25,000.
4.Financial contributions were made on behalf of the Respondent during cohabitation by way of an interest free loan of $73,000 received from the Respondent’s mother. That loan was placed in the mortgage offset account and saved the parties in excess of $20,000 in interest payments which would otherwise have been paid on the mortgage.
5.The Respondent was in gainful employment during cohabitation save for a period of 10 months and a further period of 2 years and 8 months when she had the responsibility for the day to day care of the 2 children of the relationship. Part of these 2 periods of unemployment were taken as paid maternity leave during which the Respondent continued to receive an income. In 2015 the Respondent received a redundancy payment of $66,000 which again was utilized into the acquisition, maintenance and improvement of the matrimonial assets.
6.The Respondent’s direct and indirect financial contributions to the acquisition, conservation and improvement of the asset pool is far greater than that of the Applicant’s.
7.The Respondent made a substantial contribution to the welfare of the family in her capacity as homemaker and parent to the children for whom she was primarily responsible during her period of unemployment totalling 3 ½ years and by way of restricting her employment to part time since the birth of the first child in 2009.
The Husband’s case placed greater weight on the many years of contribution during co habitation including a time when he was, he said, the primary care giver when he was without employment outside the home, but caring more for the children as the Wife pursued her career. When the children were little the Wife was a full time homemaker and parent and the Husband worked. He had resigned his employment in August 2018, 6 months prior to separation.
The Husband’s outline of case made the following observations about contribution:
1.The Applicant contends that there should be an adjustment of 2.5% to the Respondent on contributions in the exercise of weighing all of the contributions from the commencement of the relationship to date.
2.Those contributions (that all need to be identified and weighed over the duration of the relationship and to date, include but are not limited to (others detailed in submissions):
(a) The initial contributions of the Respondent:
(i)being: her Suburb B property with a mortgage of approximately $25,424.84 as at the date of cohabitation. The value is disputed; and as the best evidence the Applicant relies on a property that he says was the same size in the sane block that sold two years after the parties commenced cohabitation for $340,000. In any event, for this purpose the value is around about what either party asserts as the difference is unlikely to effect the outcome; as it is an initial contribution to be weighed with all other contributions. This asset was intermingled with the parties other properties; and
(ii)She had shares totalling approximately $10,000 and savings of around $150,000 as at November 2005.
(b)The Applicant worked full time or thereabouts for the majority of the relationship and contributed his income towards the parties’ day to day expenses; with the Respondent working part time for periods after the birth of the children.
(c)The Applicant was solely responsible for and paid all mortgage repayments upon the E Street, Suburb F property being purchased in October 2007, until settlement of the purchase of the G Road, Suburb D property in November 2008, due to the Respondent’s contributions of $120,000 from her saving she entered the relationship with towards the purchase price.
(d)Upon the purchase of the G Road, Suburb D property in November 2008, which was purchased by drawing down on the mortgage secured over the Suburb B property and in effect cross securing the mortgage secured over all properties owned at the time, the Applicant equally shared in the repayments of all mortgages and all expenses of all properties including the Suburb B property. This continued upon the purchase of the C Street, Suburb D property which required the parties to refinance all loans secured over the other properties in joint names; and, to the extent these amounts have been paid it has continued right up to the date of the Hearing.
(e)In terms of contributions to the welfare of the family, financially the parties pooled their income and resources (through a joint account) and jointly expended on/ contributed to relationship expenses of all kinds and their properties, for the benefit of the family for the period of the relationship and after separation in the terms set out in the Applicant’s material.
(f)The Applicant made a contribution to the Respondent’s superannuation that built up during the relationship by contributing in all the terms set out herein; on a global pool, as the contributions do not need to be linked.
(g)The Applicant’s employment being relatively flexible throughout the relationship broadly equally shared in the homemaker and carer tasks over the relationship; and until mid-August 2018 until separation the Applicant primarily cared for the children.
The Husband’s case was that cohabitation commenced in November 2005 and the Wife’s case was that the date of commencement of cohabitation was December 2005. Nothing material turns upon that month of time in dispute. The Wife set out her account of the parties’ initial contributions as follows:
57. At the date of cohabitation, I had the following assets:
(a)I was the sole registered proprietor of real property known and situate at A Street, Suburb B (“Suburb B”) which I had purchased in 1998 for approximately $150,000. At the date of cohabitation the mortgage balance on the Suburb B was approximately $25,000. It was tenanted and the rental income paid for the mortgage and all outgoings. At the date of cohabitation I estimate that the Suburb B property was valued at between $380,000 to $420,000.
(b) Approximately $150,000 in savings;
(c) Approximately $10,000 in publicly listed shares;
(d) A motor vehicle and household furniture.
(e)Superannuation entitlements of approximately $46,000 which I had accumulated over the previous ten years, that is from approximately 1995.
58.Despite the Applicant working in the technology industry for in excess of ten years and having a higher salary, he had no assets at the date of cohabitation. Indeed, he had various debts including three credit card defaults at the ANZ, NAB and I believe HSBC totalling in excess of $25,000. As a result of the Applicant’s bad credit rating, he was unable to obtain finance. I believe that his lack of assets at that time was due to him having a serious drug and alcohol habit.
In this case it is not only Mr Z who earns about $1,000 per day. The Wife earns about $1,000 per day. The Husband earns about $1,000 per day.
Mr Z told me his circumstances from the bar table and the long in the short of it is that as a result of cancelling work to be available at court and the very late notice that he was no longer required he would be out of pocket for about "seven grand". I had Mr Z sworn in the witness box and asked him on oath if what he had told me from the bar table was true and correct. He said it was. He was not challenged on his evidence by either party. His usual earnings and the fact that he would be unable to obtain replacement work was not contested. He had provided a pay slip evidencing his daily rate with Mr AA’s letter.
The Husband's counsel made clear that he did not act for Mr Z. The Wife's counsel did not complain of the quantum of the compensation sought but rather that in the circumstances it was not appropriate that the Wife be ordered to pay any of the witnesses costs and that if any costs were to be awarded to Mr Z they should be paid by the Husband.
I enquired of Mr Z what the costs sought as compensation would be if I was to determine that they should be paid by the Husband and not the Wife as he sought. He told me that he would leave that in my hands and speculated that perhaps they should pay some each.
The submissions included the following:
MR SWEENEY: The issue on which the witness was to give evidence was in respect of the children’s issues, and your Honour, he would have still been required to give evidence on the children’s issues. It’s a question who would have had to have called him. We issued
HIS HONOUR: Well, who was going to wear the inference if he wasn’t?
MR SWEENEY: Absolutely, and that’s the point, your Honour – that we wrote to the other side. I found out that we had subpoenaed the witness on Friday, and I said, “I don’t want that witness subpoenaed and lose our right to cross-examination”, for obvious reasons. He still had to be called. We said to the other side, “If you don’t call him, we will be asking for the inferences to be drawn.” The witness has turned up here today, and we assume that had the children’s issues proceeded, he would have been a witness.
HIS HONOUR: Somebody would have called him.
MR SWEENEY: Someone would have had to have called him, and it wouldn’t have been us, I can assure your Honour, because we could have taken the benefit of an inference, particularly when you look at – the trial affidavit of the husband puts this issue in play for the very first time.
HIS HONOUR: Yes. Now, this issue, doesn’t that go to the issue of who ultimately bears Mr Z’s costs?
MR SWEENEY: If Mr Z– I don’t think Mr Z will make a claim against the husband. He’s the husband’s best mate. But whether he does or he doesn’t
HIS HONOUR: He might. I will ask him. If I determined that it should be – now, and I’m going to assume that it should be Mr Birk. Now, I’m told that he’s your friend, and I think you figured in dispatches in affidavits, so that’s why I remember your name. But if it was to be ultimately Mr Birk who was to bear the costs, would you be seeking it from him?
MR Z: Again, your Honour, whatever you deem fair.
HIS HONOUR: Right. Okay, all right, thank you. So, for your purposes, the first issue is, what is the loss you have suffered after reasonably attempting to minimise it? Number one. Number two – should you be paid that? And then, number three, who should pay it? And number four, ultimately who should bear it when I work out all the financial matters? So, they’re the steps that I will go through. So, Mr Sweeney, who is the barrister for Ms Farwell, says that you won’t claim your costs if Mr Birk has to pay, and you say to me, “I will if the judge thinks it’s fair.” Is that what you’re saying?
The Wife's argument was that Mr Z was a very proper witness in the Husband's case and that the decision not to proceed with requiring his attendance pursuant to subpoena was made on the Friday before the trial (on the following Monday) in circumstances where it was obvious that an adverse inference would be drawn from the Husband failing to call Mr Z.
Between when Mr Z was given notice that he was no longer required (and his expenses not agreed) and the application for costs/compensation before me, the parties settled the children's proceedings as set out at the start of these reasons. Ultimately Mr Z was able to leave the court at about 3.30pm on Monday.
In responding to the application that the Husband should pay the costs sought on the subpoena the Husband's counsel, Mr Robinson referred me to a number of authorities in an effort to assist the court. Each of the authorities were Family Court of Australia authorities and dealt with rule 15.23 of the Family Law Rules 2004 (Cth) (‘Family Law Rules’).
In Markoska and Markoska and Anor (Costs) [2011] FamCA 833 (‘Markoska’) and dealing with the old rule 15.23 of the Family Law Rules, Murphy J observed:
The Court’s Powers
67.Under the heading “Who should the costs be awarded against?”, the firm’s written submissions contend that:
Typically costs are awarded against the issuing party. In this matter it is submitted that the costs should be apportioned between the issuing party and the Respondent Husband as in the case of Zova and Elliott [2008] FamCA 166 and Elliott and Zova [2009] FamCA 49. [Emphasis added].
68.Those decisions of O’Reilly J are relied upon in support of the submission that a person other than the “issuing party” can be ordered to pay “costs” pursuant to r 15.23. As her Honour observed, the facts underpinning each of those cases were highly unusual, including, for example, the fact that one party (the wife) had issued the subpoena but the other party (the husband) had served it. Her Honour held in the earlier of the two cases:
63.However, Rule 15.23(3), which provides that a named person may apply for the reimbursement of “substantial loss or expense” that is greater than the amount of conduct money or witness fee payable under Rules 15.23(1) and (2), invites the exercise of a discretion and, it must be observed, the discretion is not fettered by the requirement that the reimbursement may be sought or ordered only against the issuing party.
64.Therefore in my view it is open to me to order the reimbursement of Mr Zova’s substantial loss or expense (if I find there has been any) against either or both of the wife, as the issuing party, or the husband, as the serving party, or both of them by way of apportionment.
65.In short, whilst usually the issuing party is responsible for the named person’s costs (conduct money and witness fee) and loss and expense, Rule 15.23(3) is not constrained to order such only against the issuing party. It is not for me to speculate whether this may be by oversight or intention. It is sufficient that I observe that whilst Rules 15.23(1) and (2) contain a restraint, Rule 15.23(3) does not.
69.As her Honour observes r 15.23(1) and (2) are each confined by their terms to amounts being paid by “the issuing party”, whereas r 15.23(3) contains no such constraining words. However, I respectfully disagree with her Honour’s conclusion that r 15.23(3) contains a separate discretionary head of power.
70.The terms of r 15.23(3) might be contrasted with the provisions of Order 20 Rule 17 of the Family Law Rules 1984 (that is, the Rules as they existed prior to their amendment in 2004). That rule provided:
17. Where in proceedings a person being –
(a) a respondent to an application under rule 7; or
(b)a person required by an order made under rule 8 to produce a document, reasonably incurs costs or expenses on the hearing of the application or in connection with the production of the document, as the case may be, the person may apply to the court for an order as to the assessment and payment of such costs and expenses and the court may make such an order or give such directions as it thinks fit. [Emphasis added].
71.In drafting the Rules, the rule-makers, presumed to be cognisant of the provisions of the earlier Rules, altered the expression “costs and expenses” to the expression “substantial loss or expense”. So, too, the specific reference to “costs or expenses on the hearing… or in connection with the production …” was changed to make specific reference to “substantial loss or expense” and so as to provide in the sub-rule a specific reference to relevant amounts “payable under this Rule”.
72.Rule 15.23 appears within Part 15.3 of the Rules which deal generally with subpoenas. Within that context, r 15.23 provides initially for the payment of conduct money sufficient to meet the reasonable expenses of complying with a subpoena in an amount at least equivalent to the amount specified in Part 1 of Schedule 4 to the Rules (15.23(1)) and, separate to that, “a witness fee” where the subpoena relates to giving evidence or to giving evidence and producing documents (15.23(2)). The entitlement to claim provided for in sub-rule (3) is, by the terms of that sub-rule, confined to a reimbursement of an amount considered reasonable that is related to either conduct money or a witness fee (as the case may be), “payable under this rule”.
73.In my view, the rule should be read as a whole and the sub-rule as governing the amounts that might be paid by an “issuing party” to a “named person” as “conduct money” or a “witness fee” as the case may be.
74.Consistent with the historical context earlier referred to (e.g. Bank of New South Wales v Withers; Lucas Industries v Hewitt, above) the Rules prescribe very modest amounts payable as a minimum or “default” (r 15.23(1) and (2)) but, in order to strike the balance referred to, for example, in the authorities just mentioned, application can be made for the issuing party to pay a greater (but reasonable) amount where loss or expense is established as “substantial”.
75.In my view the sub-rule gives power to the Court to enlarge the amounts of conduct money or witness fee payable to a named person by an issuing party in compliance with a subpoena, where the claimed loss or expense can be regarded as “substantial”; where the conduct money or witness fee as the case may be is otherwise payable pursuant to sub-rules (1) or (2); and where any amount claimed is, in any event, determined by the Court to be reasonable in all the circumstances of the individual case.
76.In other words, the sub-rule does not, in my respectful view, give power to the Court to recompense loss or expense to a person other than the issuing party.
At the time of the hearing the relevant rule was rule 15A.10 of the Federal Circuit Court Rules 2001 (Cth) (‘the FCC Rules’) which states as follows:
15A.10 Order for cost of complying with subpoena
Subject to rule 15A.11, the Court may, on application, make an order for the payment of any loss or expense incurred in complying with a subpoena.
At the time of the hearing the relevant rule of the Family Law Rules was set out at rule 15.23(2) & (3) and was as follows:
(2)A named person served with a subpoena to give evidence and a subpoena to give evidence and produce documents is entitled to be paid a witness fee by the issuing party in accordance with Part 2 of Schedule 4, immediately after attending court in compliance with the subpoena.
(3)A named person may apply to be reimbursed if the named person incurs a substantial loss or expense that is greater than the amount of the conduct money or witness fee payable under this rule.
The rules of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), (as this court now is) relating to compensation of a witness called on subpoena is as follows:
6.35 Cost of complying with subpoena if not a party
(1) This rule applies if:
(a)a subpoena is addressed to a person who is not a party to the proceeding; and
(b)before complying with the subpoena, the person subpoenaed has given the issuing party notice that substantial loss or expense would be incurred in properly complying with the subpoena, including a particularised estimate of the loss or expense; and
(c)the court is satisfied that substantial loss or expense is incurred in properly complying with the subpoena.
(2)Unless the court otherwise directs, the amount of the loss or expense estimated under paragraph (1)(b) is payable by the issuing party.
(3)The court may fix the amount payable having regard to the scale of fees and allowances payable to witnesses in the Supreme Court of the State or Territory where the person is required to attend.
(4) The amount payable is in addition to any conduct money paid.
(5)If a party who is to pay an amount under this rule obtains an order for the costs of the proceeding, the court may:
(a) allow the amount to be included in the costs recoverable; or
(b) make any other order it thinks appropriate.
The scheme of the new rule 6.35 is different to the old rules. If substantial loss or expense of a witness is to be considered, rule 6.35(1)(b) sensibly requires notice of the substantial loss or expense before complying with the subpoena to be given to the issuing party. If the court is satisfied that the loss or expense, as previously notified, "is incurred in properly complying with the subpoena" (Rule 6.35(1)(c)), then, unless the court otherwise directs, the previously notified and properly incurred loss or expense is payable by the issuing party.
Hence in the 2001 FCC Rules there is a presumption that the issuing party will pay the notified and properly incurred loss or expense but there is a residual discretion as to whether payment should be made and by whom.
The court may, not must, take into account the Supreme Court scale of witness expenses of the state where the person is to attend. In Victoria S.R. 16/2021, Appendix B at 3 sets out those costs as follows:
3 Any other witness –
(a) per day $174.80
(b)but if the witness is remunerated in any employment by wages, salary or fees, the amount lost by the attendance but in any event not to exceed in any one day. $816.80
The Costs Court may allow in addition any appropriate reasonable expense incurred by the witness, e.g. child minding expenses.
A witness attending in more than one proceeding shall be entitled to a proportionate part only of the expense of the proceeding.
The Costs Court may allow a country witness, in addition to the above expenses, a reasonable sum for the actual expense of travel to and from the place of trial or hearing and for maintenance or sustenance. For this purpose, a witness who does not reside within 50 kilometres of the place of trial or hearing is a country witness.
In that jurisdiction unless the rules are departed from the maximum daily expense lost for a witness is "not to exceed in any one day - $816.80". This is a substantial amount but less than the daily ordinary charges of the parties and the amount lost by Mr Z.
Further where a costs order is made the court may, not must, allow the costs payable to a subpoenaed witness to be included in the costs recoverable or make "any other order it thinks appropriate".
This new rule overcomes the limitations of the old rule 15.35 identified in Markoska.
There is a new transitional practice direction which says:
1.4The new rules apply to all proceedings in the Court commenced before 1 September 2021 but not finally determined before that date in accordance with the transitional arrangements set out in Part 2 below.
1.5The Court retains the discretion to dispense with compliance with any provision of the new rules at all times, including where application of the new rules would operate unfairly or cause injustice.
In the circumstances of this case, and to avoid injustice, I apply the rules as at the time of the subpoena issue but I take into account the scheme of the new rule now applying, but I am not bound by the new rules.
The courts of the law very firmly set their face against a witness "gouging" or attempting to gouge or opportunistically pick up an "earn" from the service of a subpoena. On the other hand it is in the interests of the administration of justice that subpoenaed witnesses should unquestioning comply with a subpoena and it is not unreasonable that reasonable costs and income forgone by attending court be compensated and particularly where the loss is substantial.
In this case it may, not would, have been the case that an adverse inference was drawn against the Husband's case had Mr Z not been called if the case had proceeded. However, in this case, that does not determine whether Mr Z should receive witness costs, or who should pay them or their quantum. I acknowledge that Mr Z is a friend of the Husband’s. However that does not determine from whom Mr Z should look for his costs. For what appeared good reason the Wife issued the subpoena that compelled Mr Z to cancel work to be available to attend.
I do not know and do not place any weight on the unknown taxation consequences of a payment of compensation or witness costs. It is not disputed that Mr Z is a friend of the Husband's. The effect of Mr Z's evidence was that if the costs were to be borne by the Husband, his friend he may not press for payment.
I take into account all of the evidence and submissions but the most significant matters in the exercise of my discretion are:
·The Wife issued the subpoena to the named person Mr Z.
·The named person cancelled remunerative work and substantial payment therefrom to ensure he could attend court. His daily rate is roughly the same as the parties.
·The notice he was not required was very late, the afternoon of the last working day before the Trial.
·No agreement as to his costs was made and there is no evidence that any proposal to pay his costs was ever made and the witness needed to attend court to seek his costs.
·A subpoena is a serious command of the court undertaken in the name of the court by the privilege of a party being able to summon the court's authority to compel the attendance of a person.
·On my division of the parties’ assets the Wife will retain about $1,186,000 of assets (but less his share of CGT).
·I do not know if Mr Z was able to obtain employment on any of the following Tuesday, Wednesday or Thursday, given he had from the previous Friday to attempt to find work.
·The case was not about Mr Z but the interests of the parties.
·The Supreme Court of Victoria witness costs are as set out above.
·The loss or expense of Mr Z was incurred in properly complying with the subpoena and he provided notice of that loss and expense.
My decision would be the same were I to apply only the rules now applying.
In the formal letter from Mr AA of the Friday before the witness asserted he would forgo "at least $2,166". $2,166 is a reasonable and proper cost or compensation for the loss and expense for the person complying with the subpoena in the circumstances of this case. Balancing all those matters I find that Mr Z’s “loss or expense” that should be compensated is two days lost employment, being the Friday and the Monday in the sum of $2,166 and that should be paid by the issuing party, the Wife. The payment of such cost should be made contemporaneously with the payment to the Husband as defined in the orders I will make, if the Wife is to retain the former matrimonial home, or to be will be paid contemporaneously with the division of the proceeds of sale if the former matrimonial home is to be sold.
I certify that the preceding two hundred and two (202) numbered paragraphs are a true copy of the Reasons for Judgment of Judge O'Shannessy.
Associate:
Dated: 22 October 2021
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