Blake & Blake
[2007] FamCA 10
•19 January 2007
FAMILY COURT OF AUSTRALIA
| BLAKE & BLAKE | [2006] FamCA 10 | |
| FAMILY LAW – APPEAL – FROM DECISION OF A FAMILY COURT JUDGE – PROPERTY SETTLEMENT – Contributions – Long marriage – Section 79(4) factors – Whether an offer to purchase a property by the sitting tenant affects or provides a valuation – Whether the trial Judge erred in treating as a present liability the CGT that would be payable on the sale of real estate – Whether decision of the trial Judge was just and equitable – Appeal allowed. FAMILY LAW – CROSS-APPEAL – PROPERTY SETTLEMENT – Assessment of contributions made by the husband post-separation – Section 72(2) factors – Assumption of significant liabilities by the husband - Cross-appeal dismissed. FAMILY LAW – APPEAL AND CROSS-APPEAL - COSTS – By way of written submissions. | ||
| Family Law Act1975 (Cth) AJW & MJW (2002) FLC 93-103 Rosati & Rosati (1998) FLC 92-804 T & T (2003) FamCA 1066 Weatherall and Weatherall and Others (2006) FLC 93-261 |
| APPELLANT: | BLAKE |
| RESPONDENT: | BLAKE |
| FILE NUMBER: | BRF | 4991 | of | 2000 |
| APPEAL NUMBER: | NA | 65 | of | 2005 |
| DATE DELIVERED: | 19 January 2007 |
| PLACE DELIVERED: | Brisbane |
| JUDGMENT OF: | Finn, Coleman & May JJ |
| HEARING DATE: | 27 February 2006 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 5 August 2005 |
| LOWER COURT MNC: | [2005] FamCA 719 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Kirk of Senior Counsel |
| SOLICITOR FOR THE APPELLANT: | Neumann & Turnour Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Page of Senior Counsel |
| SOLICITOR FOR THE RESPONDENT: | Butler McDermott & Egan Solicitors |
Orders
That the appeal be allowed.
That in substitution for Order 1 of the Orders made on 5 August 2005 the husband pay to the wife the balance of $491 185.15 not yet paid within three (3) months together with interest on any amount unpaid after three (3) months of today.
That the cross appeal be dismissed.
That each party be at liberty to file and serve any written submissions in relation to the appeal against the costs of the trial, costs of the appeal and the costs of the cross appeal within 28 days of the date hereof.
That each party have a further 28 days in which to file and serve any written submissions in answer to any submissions filed by the other party.
That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 65 of 2005
File Number: BRF4991 of 2000
| BLAKE |
Appellant
And
| BLAKE |
Respondent
REASONS FOR JUDGMENT
finn j:
INTRODUCTION AND BACKGROUND
This is an appeal by the wife and a cross-appeal by the husband against Order 1 of the orders made by Buckley J on 5 August 2005 which required the husband to pay to the wife by way of property settlement the sum of $393,851.15 within 60 days. We were informed at the hearing of the appeal and cross-appeal that this amount had already been paid by the husband to the wife.
In her amended notice of appeal, the wife sought that in substitution for Order 1 of the trial Judge’s orders, the husband should pay her “the balance of” $838,182 “not yet paid, together with interest from 5 August 2005 to the date of payment at the prescribed rate”.
In his notice of cross-appeal the husband sought (presumably in substitution for Order 1 of the trial Judge’s orders) that he pay the wife “the sum of $287,978.80 within sixty (60) days of the date of the decision of the Full Court”.
In his notice of cross-appeal the husband also seeks an amendment to an enforcement order (Order 7) made by the trial Judge which would be consequential to any decrease of the amount payable by the husband to the wife.
The factual background to this appeal and cross-appeal, including the reasoning of the trial Judge are explained in the joint judgment of Coleman and May JJ.
I need only explain that the trial Judge determined (at paragraph 62 of his reasons) that for the purposes of the property settlement proceedings the parties had total assets of $3,804,662, total liabilities of $1,687,215, and thus net assets of $2,117,447.
His Honour recorded (at paragraph 67 and again at paragraph 192 of his reasons) that both parties agreed that their respective contributions to “the property in issue” should be regarded as equal as at the time of separation in November 1996. But then having regard to the parties’ post separation contributions to property and to their family, his Honour assessed (at paragraph 197) their contribution-based entitlements at 55 per cent in favour of the husband and 45 per cent in favour of the wife.
Then on account of the matters other than contributions in s 79(4) of the Family Law Act 1975, including the factors contained in s 75(2), his Honour concluded (in paragraphs 199 to 201) that there should be a further 5 per cent adjustment in favour of the wife because of the disparity in the parties’ income earning capacities and “abilities to continue to develop financial resources”. However, his Honour also concluded that there should be a 5 per cent adjustment in favour of the husband because of his “continuing responsibility for all aspects of the care” of the two children of the marriage still under 18. Accordingly, no adjustment was ultimately necessary to the 55-45 per cent division arrived at on account of the parties’ contributions.
The 55-45 per cent division was to be achieved by the wife retaining various items of property already in her possession and by the husband paying her the sum of $393,851.15 (thereby arriving at a total entitlement for the wife of $952,851.15 and for the husband $1,164,595.80).
THE CHALLENGES TO THE CALCULATION OF THE NET VALUE OF THE PARTIES’ PROPERTY
Included in the trial Judge’s calculation of the net value of the parties’ property at $2,117,447 was a property at the Sunshine Coast, Queensland, (“the former matrimonial home”) valued by his Honour at $1,650,000, and also a capital gains tax (“CGT”) liability of $216,298 in relation to that property as well as a CGT liability of $110,620 in relation to a property, also located at the Sunshine Coast in Queensland (“the Sunshine Coast property”).
In her appeal, the wife challenges both the value of $1.65 million attributed by his Honour to the former matrimonial home – contending that the value ought to have been $2 million on the basis of an offer made to acquire the property on 21 January 2004, and the inclusion of the CGT liabilities in respect of the former matrimonial home and the Sunshine Coast properties – contending that such liabilities ought not to have been brought to account as “present” liabilities.
(i) The value of the former matrimonial home
His Honour recorded in his reasons (at paragraph 20) that the respective valuers engaged by the parties had agreed that the value of the former matrimonial home was $1,650,000, but that the wife had sought a finding that the property be valued at $2 million on the basis of an offer which had been made on 21 January 2004 by the tenants of the property to purchase the property but which had been rejected by the husband.
His Honour also recorded (at paragraph 21) that the husband had given evidence “that he refused to accept the offer, inter alia, because the property was not on the market and that the rental income which he receives is his primary source of income”.
In determining this issue in the husband’s favour (and thus finding a value of $1,650,000) his Honour relied on comments made by the High Court in McDonald v Deputy Federal Commissioner of Law Tax (NSW) 20 CLR 231 and on the following statement of the Full Court of this Court in Smith and Smith (1991) FLC 92-261 at 78,755:
‘It is well established by a long line of authority in Australia that evidence of offers to purchase or sell are not admissible on the issue of the value of the item of property in question: See McDonald v Deputy Federal Commissioner of Land Tax (NSW)….’
The wife’s case before us in relation to this matter was essentially that his Honour had erred in a way which required our interference either by not attributing a value of $2 million to the former matrimonial home or by not taking into account the difference between the agreed value of $1.65 million and the offer of $2 million as a factor in the wife’s favour (either as a s 75(2) matter or as a factor in achieving a just and equitable order as required under s 79(2)) in circumstances where there was no challenge to the genuineness of the offer.
In relation to his Honour’s reliance on the decisions of the High Court in McDonald (supra) and the Full Court in Smith (supra), it was submitted on behalf of the wife that there were more recent cases, such as the decisions of single Judges of the Federal Court in Goold v Commonwealth of Australia (1993) 114 ALR 135 and Henderson v Amadio (1995) 140 ALR 391, which indicated a softening of the earlier approach. Reliance was also placed on the observations of Warnick J in Ramsay v Ramsay (1997) FLC 92-742 and AJW v JMW (2002) FLC 93-103; but in my view those decisions of Warnick J (which concern valuations of shareholdings in companies) are of little or no assistance given the authorities which are directly concerned with the issue of offers in the valuation of real estate.
In his decision in Weatherall and Weatherall and Others (2006) FLC 93-261 Guest J provided a comprehensive analysis of the authorities relevant to the issue of whether evidence of an offer can be relied on in arriving at a value for real property. In the course of that analysis his Honour pointed out that the issue has recently been considered by the Full Court of the Federal Court in Cordelia Holdings Pty Ltd v Newky Holdings (2004) FCAFC 48, with the following observations being made by that Court:
‘128.It seems clear to us the decision of the High Court in McDonald, as applied by single justices of the High Court in James Patrick & Co Pty Ltd v Minister of State for the Navy … and Gregory v Commissioner of Taxation (Cth) … is determinative as to whether it is an error to take into account evidence of offers. Whatever weight may be properly given to evidence of offers for limited or general purposes, it is clear that such evidence is not permissible as direct evidence of value.
129.Insofar as the trial Judge used the evidence in that way he was, we consider, in error in doing so. To the extent that such evidence may be admissible in a general way, as to which see Wilcox J in Goold v Commonwealth … and Heerey J in Henderson v Amadio (No. 1) …, it provided an insufficient additional basis upon which a conclusion as to value might have been arrived at. Moreover, even if such evidence is used in a general way, it would only be used if it were accompanied by an assessment of relevant factors such as the genuineness of the offer and whether it was made at arms length (see Goold at 60).…’
Notwithstanding that there was apparently no challenge to the genuineness of the offer of $2 million in the present case (although one of the expert valuers had placed some caveat on the status of an offer from a sitting tenant), I am not persuaded given the observations of the Full Court of the Federal Court in paragraph 128 of Cordelia (supra), that Buckley J was wrong in law when he relied on the decision of the Full Court of this Court in Smith (supra), which in turn had relied on the decision of the High Court in McDonald (supra).
Thus, and having regard to the following observations of Mason J in Federal Commissioner of Taxation v St Helen’s Farm (A.C.T) Pty Ltd (1980 – 81) 146 CLR 336 at 381), I consider that there would not be sufficient justification for the interference by this appellate court with Buckley J’s determination of the valuation of the former matrimonial home at $1.65 million:
‘Nevertheless, I am unwilling to disturb his Honour's finding on valuation. This Court has consistently applied the rule that on a question of valuation an appellate tribunal is not justified in substituting its own opinion for that of the court below unless it is satisfied that the court below acted on a wrong principle of law or that its valuation was entirely erroneous (The Commonwealth v. Milledge [(1953) 90 CLR 157, at p 159]; Commissioner of Succession Duties (S.A.) v. Executor Trustee and Agency Co. of South Australia Ltd. (1947) [74 CLR 358, at p 367 ]; The Commonwealth v. Reeve [(1949) 78 CLR 410]. See also Emerald Quarry Industries Pty. Ltd. v. Commissioner of Highways [(1979) 142 CLR 351, at pp 356, 374].’
As I earlier indicated, it was also submitted on behalf of the wife that even if the offer of $2 million for the formal matrimonial home was not taken into account in determining the value of that property, nevertheless some adjustment should have been made in her favour in the ultimate award to her because of the value to the husband of the property given the existence of that offer and/ or his refusal to accept that offer. However, I agree with the submission made on behalf of the husband that given that the trial Judge was not asked to take into account these matters, he cannot now be said to have erred in not making an adjustment in the wife’s favour on account of those matters.
(ii) The notional CGT on the former matrimonial home
The wife challenges the trial Judge’s deduction in his calculation of the net value of the parties’ property of an amount of $216,298 on account of CGT payable in respect of the former matrimonial home on the basis that the husband had no present intention to sell that property and that his Honour so found.
His Honour’s findings concerning the husband’s intentions with respect to that property and his reasoning for including the potential CGT liability (the amount of which had been agreed by the parties’ accountants in a document which was Exhibit 11) are as follows:
‘43.It is clear from the Husband’s oral evidence that he intends to retain the premises at the present time as its rental income is his principal source of income which he relies upon to support his children and himself. It is also apparent from Mr George’s cross-examination that the Husband is hopeful that at some stage in the future in the longer term, that he hopes to be able to obtain the necessary funds to either further develop the site or dispose of it to another developer as he regards it as a good investment in the long term.
44.In my view, it is appropriate, even though the property is unlikely to be disposed of in the foreseeable future, to take the Capital Gains Tax into account when valuing this asset. I am satisfied that given the extent of the Husband’s property investing and developing in recent years, as set out in detail in these Reasons, that it is inevitable that such a sale will take place. Furthermore, I am satisfied that the original site was acquired and the current building constructed as an investment which would ultimately be disposed of for a considerable profit.’
His Honour had a little earlier in his judgment set out the following well known passage from Rosati and Rosati (1998) FLC 92-804:
‘It appears to us that although there is a degree of confusion, and possibly conflict, in the reported cases as to the proper approach to be adopted by a court in proceedings under s.79 of the Act in relation to the effect of potential Capital Gains Tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:-
(1)Whether the incidence of Capital Gains Tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2)If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any Capital Gains Tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3)If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the Capital Gains Tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s.75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4)There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of Capital Gains Tax into account in valuing that asset. In such a case, it may be appropriate to take the Capital Gains Tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.’
It must be borne in mind that the statement by the Full Court in Rosati (supra) does no more than provide guidelines for the exercise of the property settlement jurisdiction under s 79 of the Act, and must be applied as the justice and equity of the case in question requires.
In the present case when regard is had to the precise terms of the evidence which the husband gave (at Transcript: 24/1/05, p44, lines 10 – 35) concerning his desire to retain the property in the “longer term future” and concerning the future development potential of the property, and when it is also remembered that the husband had refused an offer of $2 million for the property, it could not, in my view, be reasonably asserted that it would be just and equitable for the wife to have to share the burden of a potential future liability for CGT in relation to that property. I consider, with respect, that in concluding to the contrary his Honour’s discretion miscarried and his order should be varied to relieve the wife of the burden of the potential liability.
(iii) The notional CGT on the Sunshine Coast property
The wife also challenges the deduction in his Honour’s calculation of the net property of the parties, of an amount of $110,620 on account of a potential CGT liability on the Sunshine Coast property. It is clear from paragraph 34 of his Honour’s judgment that he did this because he concluded in light of the submissions of both Counsel, that neither party opposed such a deduction.
It is now asserted on behalf of the wife that his Honour was mistaken in his conclusion that the wife did not oppose such a course. However a careful reading of the relevant passage of transcript (Transcript, 25/1/05, p 77 – 78) clearly reveals that his Honour was entitled to reach the conclusion which he did. Thus this challenge by the wife must fail.
THE CHALLENGES TO THE CONTRIBUTION ASSESSMENT, THE S75(2) ADJUSTMENT AND THE OVERALL RESULT
Both the wife in her appeal and the husband in his cross-appeal challenge his Honour’s assessment of their post-separation contributions, his conclusions in relation to the s 75(2) factors, and the overall justice and equity of his award.
Coleman and May JJ in their joint judgment have examined in some depth these complaints by both parties and determined that they have no substance. I too am not persuaded that his Honour’s discretion miscarried in relation to these matters, and I agree generally with the observations contained in the concluding paragraphs of their Honour’s judgment.
Conclusion
Accordingly, I agree with Coleman and May JJ that the appeal must be allowed to the limited extent necessary on account of the valuation of the former matrimonial home and that the cross-appeal must be dismissed.
I agree also with the orders proposed by their Honours.
MAY J AND COLEMAN JJ:
BACKGROUND
The appeal of the wife is from paragraph one of an order made on 5 August 2005 that the husband pay the wife the sum of $393,851.15 within 60 days. The order sought should the appeal be successful is:
‘That in substitution of Order 1 of the Orders made by the Honourable Justice Buckley herein on 5 August 2005 the husband pay to the wife the balance of eight hundred and thirty eight thousand, one hundred and eighty two dollars ($838,182.00) not yet paid, together with interest from 5 August 2005 to the date of payment at the prescribed rate.’
The grounds of appeal which were amended and such amendment not opposed by the respondent are in five categories:
(1)The effect of an offer to purchase the former matrimonial home which is the ground of appeal relating to the valuation of that property;
(2)Whether notional capital gains tax should be deducted in relation to a property at the Sunshine Coast and the former matrimonial home;
(3)Contributions of the parties post separation;
(4)Section 75(2) factors; and
(5)Whether the overall result demonstrates that the orders were outside the ambit of a reasonable exercise of discretion and did not reflect a just and equitable result.
In the cross appeal on behalf of the husband it is asked:
‘That the husband pay to the wife the sum of $287,978.80 within (60) days of the date of the decision of the Full Court
That in Paragraph 7 of the orders of the Honourable Justice Buckley of the 5th August 2005 the sum of $393,851.15 be replaced therein with the sum $287,978.80.’
The grounds of appeal in relation to the cross appeal of the husband may be summarised as follows:
(1)The assessment of the contributions made by the husband post separation;
(2) The impact of the care of a child with special needs;
(3) That the orders were outside the reasonable discretion of the trial Judge.
We were informed that the husband has paid the sum as ordered to the wife.
THE JUDGMENT
No issue was taken with the essential findings of fact of the trial Judge in relation to the history of the marriage. The chronology referred to is in the Joint Case Summary Document. (AB2 p230)
In summary the core facts are as follows. The husband at the time of the hearing was 53 years old and the wife 49 years of age. The parties married on 14 December 1973 and separated in June 1997, the marriage lasting for some 22 years. There are four children of the marriage, a daughter aged 28, a son aged 27, a son aged 15 and a daughter aged 13 at the time of trial. The two older children were independent and the younger two children were the subject of parenting orders made by consent on 31 May 2004. Those orders primarily provide that the two youngest children live with the husband and that they have contact with their mother at all reasonable times as agreed between the children and their mother.
The parties separated in November 1996 and stayed living in the same house. In June 1997 the husband left the former matrimonial home and arrangements were made for the two younger children to stay with the wife. The husband visited the children at the house each Tuesday and Thursday evening and they stayed with him each alternate weekend. This arrangement continued until March 2003 when they began living with their father.
Property of the parties
Through their respective accountants the parties were able to reach agreement in relation to their assets and liabilities. The document entitled ‘Joint Statement of Expert Accountants Exhibit 10’ is reproduced below (p.32AB)
Agreed property values
The Sunshine Coast property
$900,000.00
One third interest in a property North of Brisbane (“ the Beach property”)
$150,000.00
One half interest in a property on the Sunshine Coast
Hinterland (“ the Hinterland property”)
$71,250.00
One half interest in a property located on the Southside of Brisbane (“the Southside property”)
$170,000.00
The former matrimonial home
$1,650,000.00
A unit located in the Western suburbs of Brisbane (“the Unit”)
$187,500.00
Cash at Bank Superannuation Fund
$25,047.00
Cash at Bank Unit Trust
$3,410.00
Cash at Bank Family Trust
$975.00
Cash at Bank
$16,160.00
Cash at Bank Van
$1,637.00
Assets in possession and control of the Wife
A coastal property located North of Brisbane (“the coastal property”)
$455,000.00
Motor Vehicle
$19,000.00
Furniture and Effects
$10,000.00
Artwork Painting
$10,000.00
Cash
$00.00
Funds received by the wife by way of legal costs from pool
$65,000.00
Assets in possession and control of the Husband
Boat – Jet Ski
$7,000.00
Motor Vehicle
$28,000.00
Furniture and Effects
$10,000.00
Funds received by the husband by way of legal costs from pool
$28,605.00
Loan funds
$14,850.00
Profit on sale of investment property
$00.00
TOTAL AGREED ASSETS
$3,823,434.00
Liabilities
Loan – CBA Family Trust No 2
$157,062.00
Viridian Line of Credit – Family Trust No 2
$309,181.00
One third liability in the Beach property per bank statement
$95,369.00
Loan – CBA Joint Venture per bank statement
$525,000.00
Loan – One half interest in the Southside property
$170,000.00
Monies owing Solicitors’ Complaints Tribunal
$38,484.00
One half loan – The Hinterland property
$55,000.00
Rates owing – former matrimonial home
$5,203.00
Land tax owing
$3,299.00
Land tax owing
$699.00
Orthodontic Fees owing for daughter
$4,400.00
Various credit cards - husband
$26,369.00
TOTAL AGREED LIABILITIES
$1,390,066.00
NET AGREED ASSETS
$2,433,368.00
The trial Judge accepted the submission of Mr Page on behalf of the husband that there be deducted various items from the assets and liabilities.
Deduct from Agreed List of Assets:
Cash at Bank Family Trust $ 975.00
Cash at Bank – Former matrimonial home $16,160.00
Cash at Bank Van $1,637.00
Total $18,772.00
Deduct from Agreed List of Liabilities:
Rates owing - Former matrimonial home $ 5,203.00
Land Tax Owing $ 3,299.00
Land Tax Owing $ 699.00
Orthodontic Fees Owing for daughter $ 4,400.00
Various Credit Cards of husband $26,369.00
Total $39,970.00
The credit balances of the accounts represented the income from the former matrimonial home and the beach property and the liabilities represented expenses which were to be paid from those bank accounts. The credit card apparently included a debt incurred by the parties’ youngest son.
Ultimately, his Honour concluded that the pool of assets and liabilities to be divided is that contained in paragraph 62 of the judgment (AB p.43 & 44)
Property Values
The Sunshine Coast property
$900,000.00
One third interest in the Beach property
$150,000.00
One half interest in the Hinterland property
$71,250.00
One half interest in the Southside property
$170,000.00
Former matrimonial home
$1,650,000.00
The Unit
$187,500.00
Cash at Bank - Superannuation Fund
$25,047.00
Cash at Bank Unit Trust
$3,410.00
Assets in possession and control of the Wife
The Coastal property
$455,000.00
Motor Vehicle
$19,000.00
Furniture and Effects
$10,000.00
Artwork Painting
$10,000.00
Funds received by the wife by way of legal costs from pool
$65,000.00
Assets in possession and control of the Husband
Boat – Jet Ski
$7,000.00
Motor Vehicle
$28,000.00
Furniture and Effects
$10,000.00
Funds received by the husband by way of legal costs from pool
$28,605.00
Loan Funds
$14,850.00
TOTAL ASSETS
$3,804,662.00
Liabilities
Loan – CBA Family Trust No 2
$157,062.00
Viridian Line of Credit – Family Trust No 2
$309,181.00
One third liability in the Beach property per bank statement
$95,369.00
Loan – CBA Joint Venture per bank statement
$525,000.00
Loan – One half interest in the Southside property
$170,000.00
Monies owing Solicitors’ Complaints Tribunal
$38,484.00
One half loan – The Hinterland property
$55,000.00
CGT – Former matrimonial home
$216,298.00
CGT – A development property South of Brisbane (“the Development property”)
$4,002.00
CGT – the Sunshine Coast property
$110,620.00
CGT – the Unit
$6,199.00
TOTAL LIABILITIES
$1,687,215.00
NET ASSETS
$2,117,447.00
The parties were ultimately unable to agree on the value of the former matrimonial home for the purpose of the division of the assets. His Honour had the evidence of two valuers, Mr Coonan on behalf of the wife and Mr Devine on behalf of the husband. Both valuers assessed the value of the property at $1,650,000 however the wife asked that the property be valued at $2,000,000 on the basis of an offer from the tenants on 21 January 2004 to purchase which offer was rejected by the husband. This issue is Ground 1 in the appeal of the wife. The trial Judge found the value of the property to be $1,650,000.
The experts reached agreement in respect of capital gains tax payable in the event of the sale of the properties. The calculations formed part of the document Exhibit 11. This issue relates to Ground 2 of the appellant wife’s case. The issue in relation to capital gains tax relates only to two of the properties, the Sunshine Coast property and the former matrimonial home. The wife’s case is that capital gains tax ought not to have been brought into account as present liabilities.
Contributions
Only some of the findings in relation to contribution are controversial. They relate to findings about post separation circumstances in the case of the husband’s appeal including the care of the children and in relation to the wife’s appeal her contribution to the parenting role since separation, the impact of the husband being struck off as a solicitor and an asserted error in the finding that from March 2003 to the date of hearing the husband was paying the wife $3,000.00 per week when in fact he was paying $692.00 per week. It was also argued that it was not possible to determine from his reasons how he arrived at a contribution disparity of 10 per cent against the wife in the post separation period.
At the time of the marriage the husband was 21 and the wife 17. It was common ground that at that time neither had any assets of any value; the husband had a motor vehicle. In the year of their marriage the husband began his employment as an articled clerk and he later became a solicitor. The wife began employment as a secretary in the husband’s firm where she continued until 1976 prior to the birth of the first child.
The wife remained at home caring for the children and running the household until she returned to part time work in mid 1983. The wife returned to work as a legal secretary with the husband’s legal firm. Her evidence was accepted by the trial Judge ‘…as to the extensive assistance that she provided to the management and successful operation of the Husband’s legal practice during this period.’ The wife worked between 1983 and 1989 when she ceased work again before the birth of the third child. The wife has not been in paid employment since then.
There was no issue that throughout the marriage the wife was responsible for all of the domestic tasks related to the household and primarily the care of the children. The wife also assisted in the renovation of the office at the husband’s firm.
The husband began his own firm in April 1978 and then entered into partnership with another solicitor in mid 1986 to form a legal partnership. On 1 July 1994 his partner sold his share in the partnership to the husband who continued as a sole practitioner until 1996.
The husband worked hard it seems as a solicitor and also involved himself in numerous financial transactions involving the purchase and sale of real property. In November 1996 the husband sold sixty per cent of his solicitors practice and entered into partnership with three other solicitors. They each paid $130,000.00. The husband invested the proceeds. In February of 1998 he sold a further five per cent of his interest to each of the solicitors in each case for $40,000.00. Another solicitor purchased a five per cent interest in February 2001 for $85,000.00 and a further twenty per cent interest was sold in September 2001 for $400,000.00. After the parties separated there were investigations by the Law Society, the husband was struck off as a solicitor in June 2003.
Apart from the property transactions which are set out in detail in the judgment it can be seen that substantial monies were produced by the sale of the solicitors firm built up by the husband. It was agreed at the trial that at the date of their separation in November 1996 the parties’ respective contributions to the property was equal.
It is the contributions of the parties post separation which were both controversial at the trial and forms part of this appeal.
The trial Judge found that ‘From the time of the physical separation of the parties in June 1997 until March 2003 the wife continued to undertake the role of homemaker and parent and cared for the children on a full-time basis’. (AB59) The trial Judge also accepted
‘172.…the Husband’s evidence that since the date of separation, he has paid, on behalf of the wife, all expenses for both the children and the Wife including her personal expenses.
173.I accept the Husband’s evidence that at separation, the Wife was provided with a credit card which was a supplementary card to his MasterCard…and that he would pay all accounts presented to him by the Wife for the credit card from the date of separation without question. The Husband estimates the approximate spending per month on that credit card by the Wife to be approximately $3,000.00.
174.The Husband paid the expenses of the Wife and the children as they were presented to him. He maintained a record of the monies paid to the Wife since July 1998 from the account [Family Trust] up to and including June 2001. This record included all medical bills, all doctors accounts, groceries, cash drawn by the Wife, school fees, school expenses, clothing expenses for the Wife and the children, mowing expenses for the matrimonial home before its sale, mowing expenses and gardening expenses for the property in which the Wife now resides, insurance expenses, payments for haircuts, cosmetics and the like, Body Corporate payments for the unit, electricity and telephone as they became payable, dry cleaning accounts, window cleaning accounts, X-Ray accounts, publications and/or any expenses that the Wife or the children incurred. He also states that he paid all taxation incurred by the Wife on all of the drawings from the Trust.
175.The Husband also drew from his income from the [legal practice], the sum of $130.00 per week which he paid to the Wife in cash, up to and including March 2003.
176.A schedule of all monies totalling $267,785.49 expended by or paid to the Wife by the Husband for the period from 1 July 1997 until April 2002, is annexure “N” of his Affidavit filed on 12 December 2003.
177.In or about March 2003, when the children came to reside with him he restructured the Wife’s access to the use of the MasterCard but voluntarily agreed to pay her an amount of $3,000.00 per week by way of cash so that she might use it for her own expenses. He has not, since that time, paid any other expenses of the Wife.’
It is in relation to a finding in this last paragraph that the wife appeals.
Section 79(4) Which Includes S75(2)
Under this heading the trial Judge referred to a number of matters. These included that the parties both had good health, that the wife had not been involved in paid employment since 1989 and did not propose to seek employment in the future and that the husband appeared to accept the wife’s position. Additionally, that although the husband had been struck off the roll of solicitors he might reasonably expect to successfully apply to practice as a solicitor in the future but otherwise intended to pursue property investment and development. The trial Judge also accepted that the husband:
‘182.…is presently inhibited from pursuing property investment opportunities as he is unable to borrow the necessary funds to facilitate the transactions as his income is insufficient to pay any such loans.’
It was accepted that the husband relies on the rental income from former matrimonial home to support himself, the children and the monies that he was paying to the wife.
It was also accepted that he needs to be available to care for the children for at least another four to five years. As his Honour said:
‘184.…His obligations in this regard have increased significantly in view of [the son’s and the daughter’s] emotional difficulties and their need to seek psychiatric and counselling assistance. I am satisfied that he is unlikely to receive any assistance from the Wife in this regard in view of the fact that her relationship with both children seems to have broken down irretrievably. He states that he is able to be available for the children both before and after school because his work commitments now are such that he works for himself by way of property investment at home and that he wishes to continue with this arrangement. He states that in order to continue to earn a sufficient income, he will need to rely on future property investments and the rental income from [the former matrimonial home].’
The expenses outlined in Annexure ‘L’ of the husband’s affidavit were accepted by the trial Judge. His Honour referred to the unfortunate fact that the wife has not exercised contact to the son since January 2004 and has had little contact with the adult children.
The younger children who live with their father are being treated by a psychiatrist. A report to the Court was provided by their doctor and a summary of it is contained in paragraph 188 of the judgment. These factors led his Honour to conclude:
‘188.[The daughter] also suffers from depression and was also referred to [Dr H] following an incident which involved self harm on her part. [Dr H] has provided a Report to the Court dated 24 January 2005. In summary, [Dr H] assessed her condition as being unstable and her prognosis was that [the daughter] will require contact with her for “years to come”. Her Report outlines the extensive role undertaken by the Husband in respect of [the daughter’s] care. [Dr H] invited the Wife in a letter dated 12 November 2004 to contact her if she wished to discuss [the daughter’s] position with her. As at the trial [Dr H] had not received a response from the Wife.
…190. Furthermore, I am satisfied that, in view of the concerns in respect of the health of both of the children, that the Husband will be required to be available to provide them with a significant level of care and support. In this regard, I accept his evidence that this commitment will impact on his capacity to engage in full time remunerative employment.’
In his conclusion the trial Judge assessed the parties respective contribution based entitlements at fifty five per cent in favour of the husband and forty five per cent in favour of the wife after repeating an earlier agreement in paragraph 192 of the judgment that ‘…that their respective contributions to the acquisition of the property in issue should be regarded as equal as at the time of their separation in November 1996.’
In paragraph 199 the trial Judge said:
‘199.I am satisfied that, in terms of their respective capacities to earn income as well as their abilities to continue to develop financial resources, there will be a significant disparity between the parties in favour of the Husband. I have assessed a further 5% in favour of the Wife in respect of this issue.’
200.The Husband will have the continuing responsibility for all aspects of the care of both children well into the future. The Wife is highly unlikely to provide the Husband with any assistance in respect of these obligations. As I have already found, the Husband’s capacity to obtain remunerative employment will be affected, in part, by his obligation to provide significant assistance to both children. In view of the heavy responsibility which the Husband will be required to undertake in respect of both children, the Husband should receive a further 5% in his favour.
201.Accordingly, I am satisfied that the property in issue should be apportioned between the parties on the basis of 55% in the Husband’s favour, and 45% in the Wife’s.’
The trial Judge then discussed the various positions of the parties and the orders that they were seeking. This included that the wife asked for orders which he described ‘will give effect to permanently severing the parties’ financial relationship.’ In deciding how the property should be divided his Honour said:
‘206.It is clear that the Wife is dependent on the proceeds of these Orders for settlement of property to provide for her own maintenance and support. In my view, to make the above Orders as sought by the Husband would be unfair to the Wife. It is preferable to sever their financial relationship and provide the Wife with access to a particular sum in the relatively near future to enable her to make arrangements for her support with an appropriate degree of certainty.’
His honour decided that the wife should retain the coastal property, the furniture and effects in her possession, a particular painting, the motor vehicle and the funds received by way of legal costs. To effect the division as determined by his Honour the wife was to receive a payment from the husband in the sum of $393,851.00. Each party would be obliged to pay their own legal costs and outlays. It should be mentioned at this point that there is an appeal in relation to orders for costs which will be considered by us after this judgment is delivered.
Ground 1 – The offer for the former matrimonial home
In relation to this issue the trial Judge appreciated that the wife asked that the property be valued at $2,000,000 on the basis of an offer from the tenants on 21 January 2004 to purchase the property. The details of the offer were set out in an affidavit of Mr S who is the managing partner of the law firm who are the tenants. The relevant parts of the judgment in relation to this issue are reproduced below.
‘21.The Husband gave evidence that he refused to accept the offer, inter alia, because the property was not on the market and that the rental income which he receives is his primary source of income.
22.The issue as to whether an offer constitutes evidence as to the value of a property was considered by the High Court in McDonald v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 231. In that case, the High Court (Isaacs, Power & Rich JJ) made the following comments in relation to the status of offers as evidence relating to the value of property (at 239-240):
“It is true that from a logical standpoint, a bona fide offer of ₤1,000 is just as good evidence the moment before acceptance as the moment after. Why, then, should one be received, and the other rejected? The answer is found in the same principle, namely, the better service to justice on the whole.
“When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify it. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and impulses of human nature, indicates a consensus of opinions between two adverse parties in the community respecting the value of similar lands…
“But if the negotiations do not end in a concluded bargain, the field is at once open to a multitude of other considerations before the same point of opinion is reached. Excursions into the realm of collateral circumstances would be endless. They would so add to the cost, delay and uncertainty of litigation as on the whole to render a great disservice to the cause of justice. The Court might have to inquire whether the owner of the other party really terminated the negotiations, and, if so, for what reason. Had either of the parties discovered the true worth of the property or been misinformed by some means as to its real value? Did the owner mistrust the ability of the purchaser, or did the latter find an adverse claimant to the property, or did his circumstances change, or was there a personal quarrel? Or did he learn of a still better bargain? Or, again, was the offer a sham on either side, or both sides? Such inquiries would render litigation intolerable, and defeat the purpose for which they were permitted.
23.These considerations were adopted many years later by the Full Court of the Family Court in Smith & Smith (1991) FLC 92-261. In that case, the Full Court (Fogarty, Baker & Rourke JJ) made the following statement (at 78,755):
“It is well established by a long line of authority in Australia that evidence of offers to purchase or sell are not admissible on the issue of the value of the item of property in question: See McDonald v Deputy Federal Commissioner of Land Tax (NSW)…”
24.Accordingly, I find the value of [the former matrimonial home] to be $1,650,000.00.
…
43.It is clear from the Husband’s oral evidence that he intends to retain the premises at the present time as its rental income is his principal source of income which he relies upon to support his children and himself. It is also apparent from Mr George’s cross-examination that the Husband is hopeful that at some stage in the future in the longer term, that he hopes to be able to obtain the necessary funds to either further develop the site or dispose of it to another developer as he regards it as a good investment in the long term.’
As already mentioned the trial Judge referred to some authorities in relation to the principles applicable to the admissibility of evidence of offers. Counsel in the written submissions referred to Henderson & Amadio [1995] FCA 1029 where Heerey J after referring to McDonald’s case said:
‘In Goold v Commonwealth (1993) 42 FCR 51 at 57-60 Wilcox J analyses McDonald and subsequent cases, and in particular Phillipou v Housing Commission of Victoria (1969) 18 LGERA 254, and concludes that
... it would be anomalous and unjust for the Courts to adopt a blanket rule excluding offer evidence. Such a rule might exclude cogent evidence of the interest of a particular purchaser in the land being valued, a person who was willing to pay more than the ordinary market price.
I respectfully agree with Wilcox J's comments. Although the present case is not concerned with the particular kind of issue as to which Wilcox J thought evidence of genuine offers might be relevant, his Honour shows that it is unsafe to assert in unqualified terms that a specified kind of evidence is per se inadmissible without careful analysis as to the purpose for which it is sought to be used in the instant case.’
As correctly we think pointed out by counsel in his written submissions
‘the offers in this case were not challenged as other than being genuine and provided “cogent evidence of the interest of a particular purchaser” …willing to pay more than the ordinary market price.”’
In the alternative it is submitted that in the event the trial Judge correctly rejected the offer of $2,000,000 as evidence of value, the trial Judge erred in failing to have regard to this as a matter relevant to section 75(2) as part of the husband’s financial circumstances. Part of this argument related to a submission about economic consequences of conduct and by reference to G & G an unreported decision of the Full Court dated 25 October 2001. We do not think that this is a sustainable argument in this case. In G & G the husband after the separation invested a substantial amount of money in the purchase of wine with a view to it being a long term investment. In paragraph 45 of the judgment their Honours said:
‘To deny the wife the right to share in nearly $580,000 which she would have done but for the wine investment whilst at the same time denying her the opportunity to participate in that investment cannot in our opinion be said to be just and equitable.’
In the next paragraph it was observed that the facts of that case were ‘unique’.
‘This is not a case about sharing financial losses whether or not there are gains or losses will not be known until the investment has run its course.
We are of the view that this is one of those, admittedly fairly rare, cases where the economic consequences of the husband’s conduct ought to have been taken into account in order to achieve a just and equitable result.’
In addition, in these circumstances we are not of the view that the husband’s rejection of an offer of $2,000,000 should be dealt with in terms of waste according to Townsend guidelines or upon consideration of section 75(2) factors.
Returning to the issue of valuation, counsel for the appellant submitted that there was nothing within section 79 of the Family Law Act 1975 (Cth) (The Act), that mandates in alteration of property interests that the Court ought base it upon market values or any other form of value for that matter. Reference was made to Smith & Smith (1991) FLC 92-261 at p 78759:
‘Quotations of valuation of property arise very frequently in s79 proceedings in the Family Court, perhaps more frequently in this Court than any other Court in Australia. That is fundamentally because the first step in the exercise under s79 is to ascertain the “property” of the parties. However, what is sometimes overlooked is that the exercise is to identify the property of the parties, not to necessarily determine the value of every piece of property at the time of the hearing.’
It was submitted that in most cases acceptance of the application of market value as a form of measurement for the division would produce a just and equitable result but that this was not always the case. It was argued in this case that the question is what is the value of the property to the husband. As an example of this counsel referred to the case of Ramsay v Ramsay (1997) FLC 92-742 where Warnick J said:
‘The purpose of the valuation is to ascertain the value of the shares to the shareholding party, “…not their commercial value or their value to a hypothetical purchaser”…
In a number of cases in which it is stated that the value to be ascertained was that to the shareholding party, it was also stated that the value must be “realistic”…
…Thus it has a strong “notional” aspect, in contrast to the reality of the market. It seems arguable that the concept of “realistic” value to the shareholder ought include a recognition of what can be achieved on sale. …’
Counsel also referred to another case of Warnick J’s, AJW & MJW (2002) FLC 93-103 where he said:
‘As I indicated in Ramsay v Ramsay (1997) FLC 92-742 where there is a market for shares, evidence of market value may well be one and the same as “value to the owner”….
Parties and the court would be better assisted by the recognition of a range of possibilities, to match, leaving it to the court, on the facts established before it to apply the relevant value…’
Counsel submitted that on the evidence before the Court the relevant value of the former matrimonial home was not less than $2,000,000. It was further submitted that if the husband’s actions in refusing the offers at $1,800,000 and $2,000,000 impacted upon him alone then there would be no complaint but his refusal impacted equally upon the wife because the trial Judge both ignored the offer in terms of the value of the former matrimonial home nor did he deal with it in any other way.
Counsel handed up a table to establish the impact of the trial Judge’s findings on the wife’s entitlement in relation to the former matrimonial home.
It was submitted that the evidence revealed the following:
(a)The Husband rejected a genuine offer which he knew to be well above market value in January 2004;
(b) The Husband’s intention was to hold this property for the long term;
(c)Whilst not prepared to sell the property for $2,000,000, it was brought into the pool at $1,433,702 ($1.65M – capital gains tax);
(d)Whilst the Trial Judge only intended the Husband to receive 55% of the pool, the reality is he received 64½% by reason of the value and the allowance for capital gains tax.
Counsel made submissions about the offers to purchase the former matrimonial home making reference to the first offer made on 11 June 2003 for $1,800,000 and the second offer made on 21 January 2004 for $2,000,000 (AB p885-889). Counsel asked that note be made of the date of the second offer being 21 January 2004 and then referred to the valuation of Mr Glen Coonan, the valuer engaged by the wife which was dated 8 January 2004 for $1,650,000 and submitted that at that time Mr Coonan was only aware of the first offer to which he refers in his report (AB 908) were he says:
‘I understand the sitting tenant recently made an offer to acquire the property for $1,800,000. Sitting tenants often offer a premium above what the property might realise on the open market due to the property’s “special value” to them. If the property has the potential to be further developed, the tenant had the best potential to exploit this.’
Counsel referred to the valuation of the former matrimonial home made by Mr Lawrence Devine on behalf of the husband dated 27 November 2003 (AB 967) also valuing the property at $1,650,000 and particularly to the following section (AB 981) where he says in connection with the offer of $1,8000,000:
‘…We treat this offer with caution and apprehension as it has been made by the sitting tenant. We believe the sitting tenant represents a premium buyer similar to an adjoining owner. Therefore we don’t consider that an offer of this magnitude could be repeated in a normal 3 month selling period.’
Counsel submitted that the husband was clearly aware of the offer of $2,000,000 made on 21 January 2004. It was also submitted that the husband was aware of the valuation of the former matrimonial home because of a valuation by his valuer, Mr Devine, in November of 2003 which was $1,650,000 and then the valuation made by Mr Coonan for the wife in January 2004 which was also at $1,650,000. Counsel asserted that he must have been aware that the offer made on 21 January 2004 for the property was $350,000 higher than the market value when he refused it.
An affidavit of Mr S was referred to by counsel wherein the offers that were made for the former matrimonial home were recounted. It was noted by counsel that Mr S was not required for cross examination at the trial and that there were no suggestions that the offers were other than genuine and that Mr S was the managing partner in a firm called STO, previously the firm owned by the husband, and the firm that the husband had been a partner in for a very long period of time.
The facts in this case lead to a conclusion that his Honour could have accepted the evidence of the husband’s refusal of the $2,000,000 and in those circumstances placed the property at that value in the pool to be divided between the parties. A concession properly made by Kirk SC was that if we adjusted the pool to allow the figure of $2,000,000 for the former matrimonial home then capital gains tax would also have to be deducted. In the alternative, the trial Judge could have accepted the agreed value as provided by the experts, accepted the husband’s evidence of a present intention not to sell and therefore not included an allowance for the capital gains tax. In our view, the latter course is to be preferred in the circumstances of the husband’s own evidence. We are supported in this view by the statement made in Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1980) 146 CLR 336 where Mason J said at 381:
‘As with the assessment of damages, especially in personal injury cases, the valuation of property by a court has many of the characteristics of a discretionary judgment. Valuation is a matter of estimation, not of precise mathematical calculation. It certainly involves the making of a value judgment in the metaphorical as well as the literal sense.’
Ground 2 - Notional capital gains tax
It is argued that the trial Judge erred in treating as a present liability the capital gains tax that would be payable if the Sunshine Coast property (capital gains tax of $110,620) and the former matrimonial home (capital gains tax of $216,298) were sold immediately when the husband had no present intention to do so. As observed by his Honour in paragraph 25 of the reasons, the experts reached agreement in respect of the amount of the capital gains tax payable in the event of a sale (Exhibit 11). This was on the basis of an agreement between the parties that the calculations be prepared on the marginal rate of tax at 48.5 per cent.
In paragraph 38 of the judgment the trial Judge referred to Rosati & Rosati (1998) FLC 92-804 where the well known four general principles are set out. Reference was also made to T & T (2003) FAMCA 1066 and JEL v DDF (2001) FLC 93-095. The reference to Rosati (supra) contained in G & G (2001) FamCA 1453 at paragraph 104 is set out.
In relation to the circumstances of the former matrimonial home his Honour at paragraph 43 said as follows:
’43.It is clear from the Husband’s oral evidence that he intends to retain the premises at the present time as its rental income is his principal source of income which he relies upon to support his children and himself. It is also apparent from Mr George’s cross-examination that the Husband is hopeful that at some stage in the future in the longer term, that he hopes to be able to obtain the necessary funds to either further develop the site or dispose of it to another developer as he regards it as a good investment in the long term.
44.In my view, it is appropriate, even though the property is unlikely to be disposed of in the foreseeable future, to take the Capital gains tax into account when valuing this asset. I am satisfied that given the extent of the Husband’s property investing and developing in recent years, as set out in detail in these Reasons, that it is inevitable that such a sale will take place. Furthermore, I am satisfied that the original site was acquired and the current building constructed as an investment which would ultimately be disposed of for a considerable profit.’
As to the Sunshine Coast property the trial Judge considered that by reason of the submission of counsel for the wife that neither party opposed the deduction of capital gains tax in respect of that property such an order should be made. It is said that was an error of the trial Judge in understanding the submissions. The transcript reveals that the wife’s counsel conceded that there may be taxation consequences but only if the sale of property was required by an order of the Court. The submissions of counsel for the wife which do appear to have been misunderstood by the trial Judge appear in the transcript (AB 4 p815-816) where there were two questions posed. It is clear that as the Sunshine Coast property was owned by a corporate trustee capital gains tax would certainly apply on the sale and that was all counsel was conceding not that capital gains tax ought be considered as a present liability. Of more importance, the husband did in his own affidavit filed 18 January 2005 at paragraph 99 say ‘I am going to have to liquidate the [Sunshine Coast or the Hinterland properties] and then at paragraph 104 ‘I would intend selling [the Sunshine Coast property] initially and attempting to pay out all of my liabilities including property settlement to the wife from that fund’. Although it was submitted by Mr Kirk that there was some uncertainty about which property should be sold in our view the position of the Sunshine Coast property is quite different to that of the former matrimonial home. In view of the husband’s own evidence an allowance should have been made for capital gains tax within the pool of property. We do not accept the submission that the better course would have been to leave that to one side, the wife to bear a proportion of the cost should the property be sold. In any event that was not suggested by counsel during the trial.
It is now argued that there were other matters not addressed by the trial Judge such as the benefit of the carried forward capital losses to any sale of the Sunshine Coast property which would have reduced the notional capital gains tax from $110,620.00 to $87,289.00 and whether it was appropriate to use the top marginal rate of 48.5 per cent. In view of the way the case was presented by the lawyers at the hearing it would not be appropriate to now allow submissions that would lead to a different result.
Finally, in relation to the issue of capital gains tax we would refer to the decision of IRBH & HRBH (2006) FamCA 379. In IRBH & HRBH (supra) the trial Judge found the parties to have net total assets of $6,418,442. Of these assets the husband resided in a villa at the Sheraton Mirage resort valued at $2,000,000. It was capital gains tax free. The trial Judge determined that in relation to the other assets capital gains tax should be deducted.
In paragraph 49 of the judgment of the Full Court we recorded that
’49. …It was submitted on behalf of the wife that:
The husband’s evidence, as it emerged in cross examination, is that none of the income earning properties are likely to be sold in the foreseeable future. The husband’s view is that the strength of a portfolio is the income producing property and it is a last resort to sell such property. (Appellant Wife’s Summary of Argument, paragraph 15)’
In paragraph 65 of the judgment we recorded that:
‘65.The husband’s “unchallenged affidavit evidence” was submitted to be that since 1958 he had “made his living buying and selling real estate” and that “his success was due to his buying and selling at the appropriate highs and lows in the market and moving his investment portfolio to different locations accordingly” (Respondent Husband’s Summary of Argument, paragraph 14)’
In paragraph 77 of the judgment we concluded that:
’77.In our view, the trial Judge’s finding that the “sale of the entities are an inevitable consequence of the Husband continuing to conduct his business in the manner in which he has done so for many years” (paragraph 74) was not open to him given his failure to have any apparent regard to the evidence of the husband to which we have referred of his determination to refrain from selling any real property other than the Sheraton Mirage villa. The trial Judge failed to consider the impact of a sale of the Sheraton Mirage villa on the prospects of the husband being able to achieve his stated ambition of retaining the trust properties. Nor did the trial Judge consider the clear absence of need to liquidate all of the trust properties. Capital Gains Tax liability and selling expenses of the magnitude Mr Coonan had calculated were thus not able to be found “probable”’
As already indicated it is our view that the evidence in this case leads to a conclusion that his Honour was correct in deducting capital gains tax in relation to the Sunshine Coast property but not in relation to the former matrimonial home. The appeal in relation to Ground 2 will be allowed. A mathematical adjustment is all that is necessary. Assuming no other parts of the appeal or cross appeal are allowed the effect is that the husband pay the wife the additional sum of $97,334 being 45 per cent of $216,298 the sum to be added to the pool representing the CGT deducted for the former matrimonial home..
Ground 3 - Contribution
It was agreed and the trial Judge accepted that the contribution made by the parties at the date of separation in November 1996 should be regarded as equal. The significant findings in relation to the post separation period to which we were referred by the appellant wife were as follows:
a)That the husband was solely responsible for the acquisition and preservation of property. In paragraph 196 the trial Judge said;
‘Since that time (March 2003), the Husband has been solely responsible, save for the Wife’s involvement in the maintenance of the property in which she resides, for the acquisition and preservation of all of the property in issue between them.’
b)That until March 2003 the husband provided a significant level of financial support for the wife and children, judgment paragraph 193;
c)That he spent time with the children up to March 2003 when the two youngest children moved to reside with him;
d)That since March 2003 the husband has continued to provide financial assistance to the wife.
An issue was particularly taken in relation to the findings in paragraph 177 as follows:
‘177.In or about March 2003, when the children came to reside with him he restructured the Wife’s access to the use of the MasterCard but voluntarily agreed to pay her an amount of $3,000.00 per week by way of cash so that she might use it for her own expenses. He has not, since that time, paid any other expenses of the Wife.’
It seems that this figure was taken from the husband’s affidavit whereas the financial statements of the husband and wife demonstrate that she was receiving some $700 per week. In all probability the $3,000 was a reference to a monthly sum. It was incorrect.
A specific complaint within this ground of the appeal is that the trial Judge ought to have taken into account the impact of the husband being struck off as a solicitor in a consideration of post separation contributions. The submissions of the Queensland Law Society were relied upon by the trial Judge. The submissions are exhibit 3 (AB 4 p844). It seems that the husband pleaded guilty to six of the eight charges. In paragraph 38 of the submission the following of relevance is revealed:
‘So that the Society’s position is clearly understood, it is not alleged that [the husband] intended to deliberately mislead the client lenders. In other words, it is not suggested that the Practitioner acted dishonestly. Nor is it suggested in relation to any of the other charges that the practitioner was so motivated. Rather, it appears to be a case where the Practitioner was torn between a number of competing interests and was driven by a desire to avoid the circumstance where, what had evolved as a delicate house of cards in the case of [Mr P’s] developments would come crashing down. However, so far as the interests of the client lenders in relation to the second advance are concerned, the Practitioner was grossly negligent and/or guilty of very serious errors of judgment because he plainly acted to their disadvantage by preferring the interests of, in the main, the client lenders in relation to the [loan] and his own interests in continuing to run a successful mortgage lending practice.’
In the husband’s affidavit filed 12 December 2003 he explains that he has been ordered to pay compensation and costs in an amount of $97,000.00 and that he had paid $60,000.00 in legal costs in his defence of the proceedings. Reference was made to the possibility of further action. As referred to in the written submissions on behalf of the appellant wife there was a dramatic decrease in the income of the husband from the 2000 year to 2003. The submission is accepted in part that:
‘Through the husband’s gross negligence and serious errors of judgment during the post separation period the substantial earning capacity of the husband as a solicitor created during the course of this long marriage has been decimated.
One limitation of this submission is that the activities of the husband leading to him being struck off as a solicitor began during the relationship when the parties have already agreed that their contributions were equal.
It is submitted on behalf of the wife that taking into account the wife continued with her primary role as homemaker and parent up until March 2003 together with the substantial decrease in the husband’s income which affected her and, appreciating that there was an error made by the trial Judge as to the financial support provided by the husband there could be no justification for the wife receiving anything less than one half of the parties assets as at the date of trial prior to the consideration of section 75(2) factors.
In relation to section 75(2) it is submitted on behalf of the appellant wife that had his Honour had proper regard to the relevant matters there ought to have been an overall adjustment in the wife’s favour. As the cross-appeal involves an assessment of S 75(2) matters a consideration of this aspect of the wife’s appeal will be contained within that section of the judgment.
Ground 5 – Overall Result
This submission is that the overall result of the wife receiving 45 per cent could not be justified and is outside the range.
As the cross appeal involves consideration of the post separation contributions and the assessment of section 75(2) factors it is appropriate to consider those submissions prior to providing any conclusions in relation to these aspects of the wife’s appeal.
CROSS APPEAL
The cross appeal of the husband relates largely to the assessment of contributions made by him post separation. In the written submissions provided on behalf of the husband we were asked to consider the transactions arranged by the husband and maintenance to the property by him after the separation. These transactions include an assumption of significant liabilities by the husband.
While conceding that from separation especially after the physical separation in June 1997 until March 2003 the wife had the primary care giving role in relation to the children it is clear that since then the husband has assumed that role without assistance from the wife.
The husband paid all the expenses for the children and his former wife after separation until March 2003. He has continued to solely maintain the children and made as found by the trial Judge a substantial contribution to the wife’s expenses. It is submitted on behalf of the husband that taking into account his contribution to the children post separation and the considerable property transactions he undertook an adjustment in the husband’s favour of five per cent represented by a sum of $105,872 is inadequate and outside the reasonable range of adjustment.
In relation to section 75(2) matters it was particularly emphasised that the husband has the responsibility of caring for the two younger children. Reference was made to the treating psychiatrist, Dr H, in particular the report about the daughter. It must be observed that the trial Judge did refer to such evidence so that the only argument open is that the adjustment made is outside the range. At paragraph 189 his Honour said:
‘189.I am satisfied on the evidence that the Husband will continue to have the primary responsibility for the care of both the son and the daughter for a considerable period of time into the future. I am satisfied that the Husband is highly unlikely to receive any assistance from the Wife with respect to either their financial support or their psychological and emotional welfare.’
The response on behalf of the wife correctly referred to the well known decisions in relation to how this Court makes judgments in relation to discretionary matters, especially on appeal.
In G and G [2004] FamCA 1179, Warnick J discussed a number of cases with regard to the breadth of the trial Judge’s discretion in circumstances such as the instant case as follows:
“82. The statements of principle applicable to appeals from discretionary judgments are familiar. Revisiting those statements, one is struck by the regularity with which the width of discretion of the trial court and the caution that the appeal court should exercise, are stressed. This is demonstrated by adding emphasis within some of the often quoted statements of principle. In Bellenden (formerly Satterthwaite v Satterthwaite) (1948) 1 All,ER 343 at 345, Asquith LJ stated the rationale of an appellate court’s approach:
“…We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.” (emphasis added)
83. In Norbis v Norbis (1986) 161 CLR 513; (1986) FLC 91‑712 at 75,178 Brennan J stated:
“The “generous ambit within which reasonable disagreement is possible” is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.” (emphasis added)
84. Kitto J in Australian Coal & Shale Employees Federation v. The Commonwealth (1953) 94 CLR 621 at 627 said:
“…there is a strong presumption in favour of the correctness of the decision appealed from, and that that decision should therefore be affirmed unless the court of appeal is satisfied that it is clearly wrong.”
85. In Gronow & Gronow (1979) 144 CLR 513 at 520, Stephen J said:
“…an appellate court should be slow to overturn a primary judge’s discretionary decision on grounds which only involve conflicting assessments of matters of weight.”
86. Finally, in CDJ & VAJ (1998) 197 CLR 172 at 231, touching upon the features applicable to the exercise of discretion in the Family Court, Kirby J said:
“1.…The reference to ‘plainly wrong” is designed to remind the appellate court of the need to approach an appeal with much caution in a case where an error of principle cannot be clearly identified.
2.Such reasons for appellate restraint…have particular relevance to appeals within, and from, the Family Court of Australia. This is because of the functions and purposes of that Court and the difficulty and evaluative decisions which it often has to make. The peculiar nature of decisions relating to the intensely personal questions of the division of the property of parties to a failed marriage and the welfare of their children makes it essential that those who decide appeals respect the onerous responsibilities of those whose decisions they review. They need to recognise that it is of the very nature of such decisions, including those relating to the residence of children, that any two decision-makers may, with complete integrity and upon the same material, often come to differing conclusions.” (emphasis added)
87. While I think one must be careful not to lose the ordinary sense of a passage by focussing excessively on one or two words, I note that the passages refer to the ambit being wide enough, at a minimum, to contain reasonable disagreement. In other words, something more even than actual disagreement is required before interference is justified. Attention is then drawn to the strength of disagreement, to determine whether the appellate court may interfere or not.
88. It seems reasonable to imagine that, along the continuum of levels of disagreement, before a conclusion is reached that the result below was plainly wrong or manifestly excessive, the appellate Judge may pass through a stage of uncomfortable uncertainty about the result below, of which uncertainty that result is entitled to the “benefit of the doubt”.
89. Reinforcing the proper reluctance of an appellate court to interfere, is the observation that a trial Judge, in exercising a discretion, may have an advantage over the appellate court in reviewing that exercise. We are, of course, familiar with discussion of the advantage of a trial Judge, particularly in relation to conclusions about the credibility of witnesses. But there are other reasons for such advantages beyond the opportunity to observe witnesses.
90. In Fox v Percy [2003] HCA 22, the High Court considered a decision of the Court of Appeal of the Supreme Court of New South Wales, reversing a judgment of the District Court of that State, following a review by the Court of Appeal of findings of fact based on the trial Judge’s assessment of the credibility of witnesses, but which findings were inconsistent with other incontrovertibly established facts.
91. In discussing the powers and functions of the Court of Appeal, Gleeson CJ, Gummow and Kirby JJ said: [para 23]
“[the appellate court] …must, of necessity, observe the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses’ credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.” (emphasis added)”
CONCLUSIONS
It must first be noted that the parties agreed that their contributions to the date of separation should be regarded as equal. As to the contributions of the parties post separation his Honour attributed a further five per cent to the husband. In our view even if as it seems he was wrong in assuming that the husband paid to the wife the sum of $3,000 per week rather than per month it is apparent that the husband met all the expenses relating to the children post separation and substantial expenses of the wife. It is correct that both parties cared for the children post separation the children living with the mother in the former matrimonial home until March 2003 the parties having physically separated in June 1997, and then cared for by the father from March 2003 until the date of hearing on 24 January 2005. In addition, the husband continued to manage the parties financial affairs although it could be concluded that this is offset by the significant loss of income suffered to the family after the husband was struck off as a solicitor. In our view the contributions made by the husband to which we have referred significantly exceeded that of the wife and to attribute five per cent to that which in real terms is the sum of $105,872 was hardly outside the range.
Each party argued that there should have been a different weighting and result in relation to relevant section 75(2) factors. Certainly as his Honour identified in paragraph 199 of the judgment there is a significant disparity in the parties’ income and future financial positions but the husband is and will remain entirely financially responsible for the children who have significant difficulties. In our view taking into account the significantly lesser financial position of the wife which includes a decision made by her to not be in employment, weighing against the husband his superior financial position but also the total responsibilities of the children the trial Judge was correct in assuming that five per cent should be applied as a reasonable exercise of his discretion in favour of the wife and also that the same percentage be applied to the husband, in particular because of the responsibilities towards the children.
The overall result then was that the wife received 45 per cent of the parties’ net assets. In our view the matters his Honour took into account, the weight he applied to them and the ultimate result achieved through this method were proper in the circumstances.
The orders we propose are as follows:
1. That the appeal be allowed.
2. That in substitution for Order 1 of the Orders made on 5 August 2005 the husband pay to the wife the balance of $491 185.15 not yet paid within three (3) months together with interest on any amount unpaid after three (3) months of today.
3. That the cross appeal be dismissed.
4. That each party be at liberty to file and serve any written submissions in relation to the appeal against the costs of the trial, costs of the appeal and the costs of the cross appeal within 28 days of the date hereof.
5. That each party have a further 28 days in which to file and serve any written submissions in answer to any submissions filed by the other party.
6. That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
I certify that the preceding seventy seven (109) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
Date: 19 January 2007
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