Brodie v Brodie
[2009] FamCAFC 6
•22 January 2009
FAMILY COURT OF AUSTRALIA
| BRODIE & BRODIE | [2009] FamCAFC 6 |
| FAMILY LAW - APPEAL - PROPERTY - Where trial Judge made errors in recording agreed values of assets and liabilities. Whether error in pool vitiated exercise of discretion by trial Judge in his contribution and s 75(2) assessment. Where trial Judge identified as an issue to be determined losses in a discretionary trust, but failed to deal with the trust losses. Error in pool of assets was not minimal and constituted appealable error. Failure to deal with trust losses also constituted appealable error. Whether trial Judge’s treatment of losses incurred by wife in running a restaurant purchased shortly prior to separation was erroneous. Wife’s conduct in operating business did not fall within the exceptions recognised in Kowaliw & Kowaliw (1981) FLC 91-092. No error of principle demonstrated. Trial Judge’s determination not attribute losses solely to wife within the reasonable exercise of discretion. FAMILY LAW - APPEAL - PROPERTY - Assessment of contribution. Whether trial Judge’s assessment of contribution entitlements “plainly wrong” being outside reasonable ambit of discretion. Appealable error established. FAMILY LAW - SPOUSAL MAINTENANCE - Whether order for payment of lump sum maintenance made in accordance with established principles. Where trial Judge failed to have regard to property adjustment to be made in wife’s favour - appealable error established. FAMILY LAW - RE-EXERCISE OF DISCRETION - Whether sufficient adequate findings to enable Full Court to re-exercise the discretion - absence of appropriate findings - matter remitted for rehearing. FAMILY LAW - COSTS OF APPEAL - Parties afforded the opportunity to file submissions in respect of costs of the appeal. |
| Family Law Act 1975 (Cth) s 74, s 75(2), s 75(3), s 79, s 79(2), s 79(4)(a),(b), (c), (d), (e), s 80, s 83, s 83(2), s 94(2) Federal Proceedings (Costs) Act 1981 (Cth) |
| Allesch v Maunz (2000) 203 CLR 172; (2000) FLC 93-033 Anast & Anastopoulos (1982) FLC 91-201 Bevan v Bevan (1995) FLC 92-600 Browne & Green (1999) FLC 92-873 Clauson & Clauson (1995) FLC 92-595 D & D (2006) FLC 93-300 GBT & BJT [2005] FamCA 683 King & Kemp (1996) FLC 92-673 Kowaliw & Kowaliw (1981) FLC 91-092 Kuru v New South Wales (2008) 246 ALR 260; 82 ALJR 1021 Little & Little (1990) FLC 91-147 Mallet and Mallet (1984) 156 CLR 605 Norbis and Norbis (1986) 161 CLR 513 Pastrikos & Pastrikos (1980) FLC 90-897 Pierce & Pierce (1999) FLC 92-844 Steinbrenner & Steinbrenner [2008] FamCAFC 193 W & W (1997) FLC 92-723 |
| APPELLANT: | Mr Brodie |
| RESPONDENT: | Mrs Brodie |
| FILE NUMBER: | BRF | 953 | of | 2006 |
| APPEAL NUMBER: | NA | 14 | of | 2008 |
| DATE DELIVERED: | 22 January 2009 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Boland, Thackray & Watts JJ |
| HEARING DATE: | 15 August 2008 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 25 January 2008 |
| LOWER COURT MNC: | [2008] FamCA 26 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | T L Kirk SC with S Williams |
| SOLICITOR FOR THE APPELLANT: | Hopgood Ganim Lawyers |
| SOLICITOR FOR THE RESPONDENT: | C A Cooper of Charles Cooper Lawyers |
Orders
The appeal is allowed.
The matter is remitted for hearing by a Judge in the Brisbane Registry.
That either party be at liberty to make an application by way of written submissions in respect of costs incurred by him or her in relation to the appeal by filing such submissions at the Northern Region Appeal Registry of the Family Court of Australia and serving them on the other party within 21 days of the date hereof.
That the other party have a further 14 days in which to make written submissions in answer thereto by filing such submissions at the Northern Region Appeal Registry of the Family Court of Australia and serving them on the other party.
That either party be at liberty to reply to an answer by way of written submissions by filing such reply at the Northern Region Appeal Registry of the Family Court of Australia and serving it on the other party within a further 7 days.
That each party endorse on the cover sheet of any submissions filed pursuant to Orders 3, 4 and 5, the date upon which a copy of that submission was served on the other party.
IT IS NOTED that publication of this judgment under the pseudonym Brodie & Brodie is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 14 of 2008
File Number: BRF 953 of 2006
| Mr Brodie |
Appellant
And
| Mrs Brodie |
Respondent
REASONS FOR JUDGMENT
Introduction
On 25 January 2008 Carmody J made orders adjusting the property interests of Mr Brodie and Mrs Brodie on the breakdown of their relationship after almost eleven years of cohabitation and marriage.
His Honour divided the parties’ net assets, (including superannuation) which he found to be $4,638,597.00 between them as to 67.5 per cent or $3,131,052.00 to the husband and 32.5 per cent or $1,507,545.00 to the wife. The trial Judge ordered that the husband additionally pay $40,000.00 to the wife by way of lump sum spousal maintenance. This is the husband’s appeal against his Honour’s orders.
It was not in dispute before us that the table of assets and liabilities found by the trial Judge contained errors in additions, and contained several other mistakes in that values of certain assets and liabilities agreed at trial were not accurately recorded. Notwithstanding the legal representatives for both parties at the hearing of the appeal agreed about a number of the errors in the pool which required adjustment resulting in a net pool of $4,188,183.00 (or excluding superannuation $3,303,653.00), there was no overall agreement about the net assets and liabilities of the parties at the date of the hearing.
The parties remained in dispute about whether the trial Judge should have included in the list of the parties’ assets and liabilities:
(a)an increase in liabilities in the husband’s borrowings from Suncorp post separation; and
(b)a negative value for a trust controlled by the husband (“the H Trust”) (losses in the trust were incurred as a result of post separation transactions).
Further, it was asserted by the husband that the trial Judge had been in error in failing to “add back” losses incurred by the wife in her ongoing operation of an unprofitable restaurant (“L’s ”) purchased in 2005, and ordering that the wife be solely responsible for those losses.
At trial the husband contended, because of his initial contributions, and greater contributions throughout the marriage, that the wife’s contribution entitlement, at its highest, should have been 10 per cent of the parties’ net assets, including superannuation, with a further adjustment of 5 per cent made in her favour to reflect relevant factors under s 75(2).
Before us senior counsel for the husband submitted that the trial Judge’s assessment of the wife’s contributions and the further adjustment under s 75(2) was plainly wrong being outside the reasonable ambit of his Honour’s discretion.
It was further asserted the trial Judge erred in principle in making the spousal maintenance order as, in considering the wife’s needs, his Honour had not taken into account the wife’s entitlements under the property orders to be made by him.
Although in his Notice of Appeal the husband sought orders that the appeal be allowed, and the matter remitted for re-hearing, before us his senior counsel submitted the husband’s primary position was that we should, if at all possible, re-exercise the discretion.
Counsel for the wife also submitted in the event we allowed the appeal, that we should re-exercise the discretion. By agreement of the parties we were informed that in March 2008 the restaurant owned by the wife, L’s Restaurant, had been sold for a sale price of $65,000.00. The wife asserted the whole of the proceeds of sale had been used to repay debt. The husband’s senior counsel, whilst not disputing the date of sale and sale price, was unable to concede how the net proceeds of sale were applied. We will return later to discuss the effect of this further evidence.
Background
The background material in the trial Judge’s reasons was not extensive. Both parties had filed very extensive affidavit material, provided detailed outlines of case documents and written submissions. The following non controversial matters appear in the trial Judge’s reasons or, where we consider necessary, have been extracted by us from the appeal book and identified accordingly.
The husband was born in May 1951 and was aged 56 years at the date of the hearing. The wife was born in September 1950 and was aged 57 years at the date of the hearing. (wife’s affidavit filed 23 May 2007)
According to the wife, the parties commenced a relationship in or about September 1993 and lived together from 1995 in the husband’s home [the first Gold Coast property] (“the matrimonial home”). The husband asserted the parties’ cohabitation commenced in 1995.
The parties married in March 1998 and separated in December 2005. There were no children of the marriage. (wife’s affidavit filed 23 May 2007)
The wife has three children from prior relationships. Her youngest child, MH resided with the parties during the marriage. The husband has been married on two prior occasions, but had no children from either marriage.
Throughout the marriage, and until shortly prior to separation, the wife was employed as a representative for a Trade Association and had a second job as a fingernail technician. In 2005 the wife purchased, and thereafter operated until its sale, L’s Restaurant.
The husband is a qualified professional having obtained his professional qualifications and interest in a professional practice prior to the commencement of cohabitation. The trial Judge noted the husband had “a substantial earning capacity with his taxable income from his professional practice increasing from $127,588 earnings for the 1994-95 year to $219,288 pa in 1996-97 and $376,672 pa by 1998-99”.
At the commencement of cohabitation the trial Judge found the husband’s assets to comprise:
· the matrimonial home valued at between $300,000.00 and $330,000.00 in March 1995 (the matrimonial home had an agreed value of $1,350,000.00 at the date of trial);
· a 50 per cent interest in a property [the second Gold Coast property] purchased in 1994 for $268,550.00; and
· other assets including a power boat, motor vehicle, furniture and possessions.
At the commencement of cohabitation the wife owned a property [the wife’s Gold Coast property] which was sold in 1997 realising $54,000.00. The wife had debts, including a debt of $8,264.00 to the husband, a debt (as guarantor) for her former husband’s car and a tax debt of $30,000.00 which was forgiven by the Taxation Relief Board in August 1995 on hardship grounds. A liquidator of a company in which she was involved with her former husband had a claim against her of $50,058.00.
Throughout the marriage the parties maintained separate bank and savings accounts.
The parties’ only joint investment was the purchase of an apartment [the M apartment]. The wife funded her half share of the M apartment with part of the net proceeds of sale of her Gold Coast property.
In 2000-2001 the matrimonial home was demolished and rebuilt. The wife remained living in the matrimonial home after separation.
In April 2007 the parties’ divorce became final.
From 1999 to June 2005 the husband practised as a partner in K Practice on the Gold Coast. From July 2005 he practised as a partner of K Practice in another suburb on the Gold Coast.
The husband deposed to interests in a number of corporate identities including the BL Property Trust, the B Family Trust and the H Trust. The H Trust is a discretionary trust. The assets of the trust comprise principally a third Gold Coast property which the husband acquired post separation as his residence. (husband’s affidavit filed 6 June 2007, para 244)
The parties appointed a single expert, Mr Calabro, who valued the husband’s professional practice and other corporate and trust interests.
Ground of appeal
The Notice of Appeal contains five grounds with sub-grounds arranged under topic headings - the pool, contributions, s 75(2) adjustment, spousal maintenance, and chattel issues.
By the hearing of the appeal one chattel issue remained undetermined. The so called “chattel” issue was an assertion of error by the trial Judge in failing to make any order in respect of a snooker table with an agreed value of $3,000.00. Each party sought to retain the snooker table. Counsel asked, in the exercise of our discretion, we determine the fate of the snooker table.
Senior counsel for the husband argued the appeal under the five topics identified above. His principal attack was directed to his Honour’s assessment of contribution. We propose to follow the order adopted by senior counsel in his oral submissions in these reasons.
Pool issues
What may be described as the “pool” issues fall into two broad areas of challenge. The first challenge concerns the effect of the errors in the pool identified by senior counsel for the husband, and conceded by the wife’s solicitor. Whilst freely acknowledging the errors, the wife’s solicitor in his written submissions referred to these errors as “being minor arithmetical errors which can be corrected by the Full Court” (wife’s submissions, paragraph 2.1(a), 2.1(b) and 2.1(c), pp 3), and argued that the overall difference would not have affected the trial Judge’s determination of the parties’ respective percentage entitlements. As we identified above, the second broad area of challenge was directed towards the trial Judge’s treatment of the H Trust, the Suncorp mortgage and the losses incurred by the wife’s operation of L’s restaurant.
In order to discuss these challenges, we will record the trial Judge’s reasons where relevant in respect of each topic, then refer to relevant principles, and the evidence before his Honour in respect of the two areas of challenge.
In order to appreciate the issues it is useful if we commence by setting out the list of assets and liabilities as recorded by the trial Judge at paragraph 4 of his reasons:
Assets Owner Value The matrimonial home Husband $1,350,000 Honda Joint $18,000 Mercedes Benz Wife $40,000 Cruiser Husband $45,000 H Furniture Co-owned - pre-separation $8,085 - post-separation $8,852 $17,444 Jewellery Wife $10,400 Bank balance Wife $3,000 $1,500,781 Corporate/Trusts Professional Practice Trust $332,993 BL Property Trust ($14) E Pty Ltd $205,744 B Family Trust $1,127,802 $2,408,537 Superannuation Brodie Super Fund Husband $1,021,077 Superannuation Wife $46,154 $1,067,231 Loans Husband $428,881 Wife ($121,425) Loan to L’s Restaurant and solicitors $35,795 $343,251 Agreed Add backs Wife’s legal costs $89,806 Husband’s prepaid legal costs $88,360 Wife’s pre-trial partial settlement $50,000 $228,165 Total Assets $4,041,818 Liabilities Income tax payable on realised gains ($357,319) Wife’s tax credits $5,375 Husband’s income tax ($36,916) Income tax refund $2,286 Income tax on retained earnings $48,497 Total liabilities $435,070 Net property pool $3,606,748
(a) Mathematical errors and omissions from the pool
At the hearing before us senior counsel for the husband helpfully provided us with an aide memoire in which he set out the non-contentious adjustments required to the pool of assets and liabilities.
There was no dispute between the parties that his Honour made an addition error in relation to the “H Furniture”. The value of furniture recorded by the trial Judge in paragraph 4 of his reasons was $17,444.00 ($8,085.00 and $8,852.00) when it should have been $16,937.00).
In dealing with the items recorded under the heading “Corporate/Trusts” there was no dispute that the trial Judge had, contrary to his determination in paragraph 27 of his reasons, included goodwill of the professional practice in the figure for the professional practice trust. That required adjustment by substituting the sum of $214,969.00 for the sum shown of $332,993.00. It was also agreed that the B family trust, shown at a value of $1,127,802.00, should have been recorded at $1,132,802.00.
Minor adjustment was necessary to the value of the husband’s superannuation (by inserting $1,035,230.00 in lieu of $1,021,077.00). We note although the trial Judge included the parties’ superannuation interests in the net property pool, somewhat confusingly, his Honour did not include those interests in his addition of the net pool of assets.
Under the heading “Agreed Add backs” it was not in dispute that the partial property settlement received by the wife was $70,000.00, not $50,000.00 as recorded by the trial Judge.
Finally it was agreed that the figure to be included for income tax on retained earnings should have been $55,382.00, not $48,497.00 as shown.
The effect of these adjustments is that rather than finding, as did the trial Judge, (in the table set out in paragraph 4 of his reasons) that the parties’ net assets before adjustments totalled $4,673,979.00, the correct finding was $4,233,564.00.
After discussing and making findings on disputed pool issues, the trial Judge concluded, at paragraph 36 of his reasons, that the adjusted net non-superannuation assets were $3,571,366.00 and total superannuation interests were $1,067,231.00 ($4,638,597.00) and his Honour used these figures as the basis for his contribution based adjustment. The parties agreed that the overall effect of the incorrect recording of agreed values and mathematical errors meant that instead of the overall combined figure being $4,638,597.00 it should have been $4,188,183.00. The difference is $450,414.00.
The wife’s solicitor sought to support his submission that the errors made by the trial Judge in the schedule of assets (and carried through to his ultimate findings on the property pool at paragraph 36) could be cured by the Full Court applying the reasoning of the Full Court in King & Kemp (1996) FLC 92-673 at 83,010.
We are unable to accept that submission. A careful reading of the judgment of the Full Court in King & Kemp reveals that the trial Judge, dealing with property adjustment between de facto partners, had found that the parties’ net assets had a value of $185,094.00 and that the female de facto partner should receive 37.5 per cent of that sum. The Full Court determined there was a mathematical error by the trial Judge in her calculation adjusting amount to be paid to the female de facto spouse (the trial Judge had deducted from the female spouse’s percentage entitlement, $10,000.00 received by way of partial property settlement but had not included that sum (and $10,000.00 received by the male de facto spouse) in the overall pool of property to be divided). Thus it was the adjusting sum to be made to the female de facto spouse which the Full Court found was in error, and which could be corrected on a re-exercise of the discretion.
We do not consider the approach adopted by the Full Court in King & Kemp provides justification for us to correct mathematical errors exceeding $450,000.00 unless we were to do so after allowing the appeal and in the course of re-exercising the discretion. Although the value of the pool exceeded $4 million, an error of more than $450,000.00 could not be regarded as de minimus. At the very least, it could not be assumed that his Honour would have made the same percentage adjustment for s 75(2) factors had he appreciated that the pool had a value approximately 10 per cent less than he must have assumed in reaching his decision. In our view, these errors vitiated his Honour’s exercise of discretion and thus constitute appealable error.
The H Trust
At the commencement of his reasons for judgment, the trial Judge set out the list of assets and liabilities we have reproduced above. His Honour then turned, under the heading “Disputed Property Items”, to consider the assets and liabilities in respect of which the parties had not reached agreement. At paragraph 5 his Honour said:
The wife asserts that the husband has reduced the value of the available assets by allowing his professional practice to run down by $.5M and that [H] Trust losses have depleted net funds by a further $579,065. She wants the whole $1,079,065 added back in to the pool. She also alleges that the husband has $300,000 concealed in overseas accounts and that his brother holds a $200,000 “loan repayment” for him as trustee.
It is not in dispute that his Honour did not at any time thereafter in his reasons deal with the H Trust.
The husband’s senior counsel in his written submissions submitted (at paragraph 3.3(c) (page 5)) “the Trial Judge ought to have found the negative value of the [H] Trust was, as agreed by the parties to be the value assessed by the joint expert at $204,065 (annexure 13) (AB7 p.2374)”. Senior counsel went on to submit that “once that finding ought to have been made, it should have properly been the subject of an adjustment at paragraph 36 of the Reasons (AB1 p.035)”.
In his written submissions, having recorded the confusion occasioned by the single expert’s figures undergoing changes up until the conclusion of the hearing, the wife’s solicitor submitted:
It is clear the judge did not deal with the negative value of the [H] Trust in his decision. He identified the issue in respect of the [H] Trust (AB1 p.030.5). The wife’s submissions in relation to the [H] Trust are set out on pages 3 and 4 of her submissions (AB5 p.1626-1627) and where [sic] subject to discussion between the wife’s solicitor and the Trial Judge (AB6 p.1986 line 30 to p.1988). The wife’s evidence in relation to the [H] Trust losses is contained in her Affidavit of Evidence in Chief (AB5 p.181 paras 18-21). The [H] Trust losses were incurred by the husband post-separation through a transaction that was effectively concealed from the wife. On the husband’s evidence in respect of the transaction set out in his Affidavit (AB3 p.718-721) he concedes it was set up by him post separation and acquired and substantially improved the principal place of residence of the husband on the waterfront (AB3 para 244 on p.18). (wife’s submissions p 4)
Later in his submissions the wife’s solicitor summarised the wife’s position about this liability and said:
The evidence is that it was a post-separation liability incurred by the husband without reference to the wife. This Court has the power under Section 93A to determine this issue on the evidence that was before the Trial Judge. Additional evidence in relation to the [H] Trust appears in the transcript and in particular the cross-examination of the Appellant (AB p.1882-1897 line 5). The Full Court has power to make its own finding in relation this issue which appears to have been overlooked by the Trial Judge to determine whether the agreed negative value of the [H] Trust of $204,065.00 should be excluded or included in the calculation of the asset pool. Clearly from the Respondent’s point of view it should be excluded as a post-separation loss incurred by the Appellant through his investments without reference to the Respondent. (wife’s submissions, p 5)
We are satisfied that at paragraph 5 of his reasons the trial Judge identified as an issue the H Trust losses but did not return to the question of whether those losses should be included in the pool.
The issue of whether or not the trust losses should be included in the pool of assets to be divided was an issue to be determined by the trial Judge, and we are satisfied his failure to do so constitutes appealable error.
In light of the submissions of both parties that we should, if possible, re-exercise the discretion of the trial Judge, we consider although we have determined appealable error by the trial Judge in identification of the parties’ net assets and liabilities, that it is also necessary we examine the balance of the grounds of appeal (see Kuru v New South Wales (2008) 246 ALR 260; 82 ALJR 1021). In this respect, we note senior counsel for the husband referred to the fact there was no cross-appeal by the wife on the issue of the H Trust losses, and submitted in those circumstances the trust loss should be included as a liability. He asserted that as the wife benefited from the increase in value of the premises in which the husband’s professional practice is conducted (reflected in the value of the BL Property Trust), so too she should share the losses incurred by the H Trust.
We detect some potential confusion exists in the submission made on behalf of the wife (and set out by us in paragraph 47) as to the role of an intermediate appellate court which has the power to re-exercise. If what is suggested, as seems to us implied from the wife’s submission, that the overlooking of the H Trust losses is not appealable error (the wife’s position being at all times to assert the correctness of the trial Judge’s orders) then we reject that submission as it represents a misunderstanding of the role of an intermediate appellate court (see Allesch v Maunz (2000) 203 CLR 172 at pp 180-181, paras 22 – 23; (2000) FLC 93-033 at 87,515, paras 22 – 23).
If, however, what is being asserted is, if our examination of all the material in the Court below leads to a conclusion that the trial Judge erred in failing to deal with the H Trust losses, and we re-exercise the discretion on the material before the trial Judge, and determine to exclude the trust losses, but dismiss the appeal because our determination leads to an identical result to that reached by the trial Judge, we understand the basis of that submission.
Suffice it to say at this point we are satisfied the failure to deal with the H Trust losses constitutes appealable error. We will return to the parties’ arguments on the H Trust losses when we discuss whether we can re-exercise the discretion.
L’s Restaurant
Senior counsel for the husband submitted that the trial Judge was in error in not finding the wife solely responsible for losses of $160,000.00 incurred in respect of the restaurant post 1 July 2006 (husband’s summary of argument, p 7, 4.2). At the hearing of the appeal, senior counsel for the husband conceded the selection of the date 1 July 2006 as the commencement date for calculating losses incurred had been a matter of convenience because of accounting records prepared up to that time (transcript, 15 August 2008, p 26). He conceded that, as the wife had been put on notice by a letter forwarded by the husband’s solicitors in February 2007, the husband would seek at trial to have the trial Judge attribute the losses solely to the wife on the principles discussed in Kowaliw & Kowaliw (1981) FLC 91-092 that date could also have been an appropriate date from which to attribute losses solely to the wife.
Trial judge’s treatment of the restaurant losses
At paragraph 17 of his reasons the trial Judge referred to the husband’s claim that the sum of $160,000.00 “should be added back on the basis that the wife initially paid too much and over-capitalised the restaurant renovations”. The trial Judge then referred to the husband’s assertion of ongoing restaurant losses which his Honour explained were “costing $4,000 a month to prop up”.
Having referred to the decisions in Browne & Green (1999) FLC 92-873 and Kowaliw his Honour said in paragraph 19:
In order to make the wife bear sole responsibility for the restaurant losses after 1 July 2006, therefore, I either have to find that her conduct was designed to reduce or minimise the restaurant’s value (which I don’t) or that its value has been reduced by reckless, negligent or wanton economic lapses on her part. It is hard to see how throwing good money after bad, of itself, affects the overall value of the restaurant.
The trial Judge went on, in paragraph 20, to record:
Still, I am not persuaded the money she has lost or the diminution in value of the restaurant was not the result of mere commercial ineptness as distinct from economic recklessness [so] as to justify the wife bearing sole responsibility for the consequent loss.
Having rejected treating the restaurant loss as a separate liability, at paragraph 23, of his reasons the trial Judge said:
…The wife may have been unrealistically hopeful or even wilfully blind to the underperformance of the restaurant and the drain it was on the household income. However, most of the losses have been paid for by loans, her management fees of $490 a week, the $168,770 in proceeds from the sale of the [M] apartment and the $70,000 repayable advance from the husband.
His Honour concluded his discussion and findings in respect of the restaurant in paragraph 25 of his reasons where he noted the wife sought the partial property settlement of $70,000.00 she received in December 2006, together with her share of the proceeds of sale of the M apartment, less her prepaid legal costs, be treated as a financial contribution to the business. His Honour rejected that submission and ultimately concluded:
…I think the fairest thing to do in the circumstances is for the losses to be shared but not to give the wife credit for the period after 1 July 2006 as a contribution to “property” because it is probably worthless by now due to the delay in putting it on the market at a realistic price and the losses incurred.
Discussion – Restaurant losses
There was no dispute that the restaurant was purchased with the consent of the husband in July 2005 some five months prior to the parties’ separation. The wife’s solicitor referred us to the evidence before the trial Judge including that:
· the unchallenged evidence was that the wife was suffering from depression post separation;
· the husband provided the rental bond, looked at the restaurant and supported the wife purchasing it;
· the wife’s unchallenged evidence was she was advised to list the restaurant for sale at $140,000.00 and subsequently at $90,000.00, which advice she adopted;
· the husband knew the wife had no business expertise;
· the husband knew small businesses could fail in a short period of time;
· the husband knew the vendor of the business had not been able to operate the restaurant profitably; and
· the wife had ongoing lease commitments.
In Kowaliw Baker J set out two broad categories of circumstances or exceptions in which losses incurred by a party to a marriage should not be shared by them.
In this case senior counsel for the husband sought to rely on the exceptions to the general principle enunciated by Baker J of losses being shared by both parties. It is useful we set out the whole of the relevant passage of Baker J’s judgment in Kowaliw (at 76,644):
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
The wife was not challenged about her evidence that the restaurant was listed for sale at a price recommended by a competent real estate agent (or listed at a subsequently reduced price by the time of trial). The venture was one which was commenced during the marriage with the husband’s support and approval.
We discern no appealable error by the trial Judge in the exercise of his discretion in rejecting the submission that the wife’s conduct in continuing to operate the restaurant after July 2006 fell within the exceptional category of conduct recognised in Kowaliw, namely, that it was reckless, negligent or wanton.
The contribution grounds
As we earlier noted we discerned the principal challenge agitated at the hearing of the appeal was the husband’s contention that the trial Judge’s exercise of discretion in respect of his contribution based assessment was plainly wrong being outside the reasonable ambit of his discretion.
The trial Judge’s findings on contribution
Having determined (in paragraphs 5-36 of his reasons) the disputed items of property, his Honour turned, at paragraph 39, to the parties’ initial contributions.
We have already set out, at paragraphs 17 and 18 of these reasons, the trial Judge’s findings on the parties’ initial contributions.
The trial Judge found (at paragraph 50) “[t]he husband owned more than 90 % of the initial property which represents nearly 35% cent [sic] of the current net value of the total non-superannuation pool”. Under the heading “[t]he marital acquest or ‘fruits’ of the marriage partnership (1995-2005)” his Honour recorded that the parties’ cohabitation “was 10 years 9 months, but, say, eleven years” and went on to record the wife’s contributions during the marriage. His Honour said:
· the wife mostly remained in employment as a regional manager earning $70,000.00 per annum;
· in 2005 the wife set up L’s Restaurant;
· the wife invested the proceeds of sale of the wife’s Gold Coast property to purchase her share of the M apartment;
· the wife’s profit from the sale of the M apartment was applied to acquire and operate L’s Restaurant in 2005;
· the wife (as did the husband) made substantial financial and non-financial contributions;
· the wife’s income was applied towards operating the restaurant, supporting herself and her children;
· the wife contributed $100.00 per week towards groceries and bought the husband clothes, took him out, and bought him alcohol;
· the wife conducted dinner parties and the running of the home; and
· the wife provided the husband with emotional and loving support during the relationship.
His Honour further recorded (at paragraph 62) “that the wife helped with the planning and construction of the home”.
In respect of the wife’s operation of L’s Restaurant, the trial Judge set out his findings in respect of that enterprise at paragraphs 63 and 64 of his judgment as follows:
I accept that the husband initially supported the wife’s decision to leave her secure and well paid job with the Trade Association in 2005 and encouraged her to [sic] into business for herself.
He provided her with some financial assistance and paid the lease bond.
In dealing with the husband’s contributions throughout the parties’ marriage the trial Judge, at paragraph 55, explained:
The husband was the main breadwinner in the sense that he maintained his professional practice, engaged in property investment and share trading, paid all the household bills and did the weekly shopping. He also retained the services of a domestic housekeeper, gardener and pool cleaner.
but did not otherwise expand other than in a “broad brush” fashion in paragraph 207 (which we will shortly set out) the husband’s contributions throughout the marriage.
In paragraphs 66-162 of his reasons for judgment the trial Judge extensively reviewed a number of Australian and English authorities on the division of assets on the breakdown of marriage and as well discussed a number of Law Reform reports and other academic writings on the subject of division of matrimonial property.
It is unnecessary for the purposes of this judgment that we extensively consider the material set out by the trial Judge in those paragraphs, save and except we think it is relevant to note at paragraph 193 of his reasons the trial Judge’s apparent rejection of the Full Court authorities of D & D (2006) FLC 93-300 and GBT & BJT [2005] FamCA 683. At paragraph 193 his Honour said:
193.The results in D and D and DBT and BJT [sic] are comparable and arguably consistent with a strict evaluative approach of counting and comparing contribution with the discernible tendency of that method to favour the par (a) over par (b) and par (c) at step two of the process. Neither, however, seems fair because both fell in to the trap of giving too much weight to financial contribution of the husband and too little to the non financial contribution of a “good enough” but not extraordinary wife.
His Honour’s treatment of the decisions of the Full Court in paragraph 193 demonstrates a misunderstanding of the well established principles of precedent in our legal system.
At paragraph 205 of his reasons the trial Judge noted, correctly, that “[u]ltimately, I have to be satisfied that any order I make is just and equitable in all the circumstances not just the underlying percentage division but in real money terms”.
His Honour went on to explain, in paragraph 206, the assessment role he was required to carry out. His Honour’s findings in respect of his contribution based assessment are central in this appeal. It is for that reason we set out in full below paragraphs 207 to 211 of his Honour’s reasons:
207.Both parties contributed directly to the capital appreciation but I find that the bulk of the increase is related more to the husband’s initial and subsequent sole contribution, rather than joint effort as well as inflationary pressures. However, there is no clear way of identifying how much was due to the active efforts of the parties and in what proportion or the comparative extent of passive growth. The asset disparity in 1995 was used as a platform to create greater wealth and also to improve living standards and lifestyle for the mutual benefit of the parties. Nonetheless, the husband’s [professional] practice and investments had mixed fortunes during the period of the marriage.
208.The marriage was not a lengthy one by comparison with others but is [sic] was longer than average. It was long enough, in my judgment, for the wife’s non-financial contribution to wear away, like the dripping of water on a stone, some of the significance of this husband’s pre-owned assets and entitle her to a part, though by no means equal, share of their current value.
209.I am satisfied here that the wife did all that was required of her given the shape and nature of this marriage. She gave what she could financially and emotionally. The husband clearly benefited from the role the wife played in is [sic] life. He brought in wealth whereas she invested non-economic qualities no less important and appealing to him, though less tangible, than he did. Most importantly, she dedicated nearly 11 years of her life to being a good and loyal supporter of the husband and indirectly his business. However, the husband’s overall contribution to the acquisition, improvement and conservation of the total property available for distribution exceeded the wife’s [sic] justifies a significantly greater share allocation to him.
210.Taking into account all the matters I have mentioned and hard as it is to compare the relative value of fundamentally different types of contribution over a lengthy period but doing the best I can to be fair to both parties I have concluded in the final analysis that the relevant concept of justice and equity requires that the wife be awarded $1,159,650 or around 25 % share of the current day value of the total net assets and superannuation for past contribution. I know this amount is more than twice the sum given to the wife in GBT & BJT and D & D but so was the duration of the relationship. It took Mrs Bremner two more than 30 years to earn a 50 % share in non-matrimonial as well as matrimonial property. The wife here put in just under half that amount of time.
211.The size of the wife’s award is also intended to give more emphasis to the Ferraro and Figgins notion of partnership when measuring para 79(4)(c) contribution with financial contribution than appears to have been given in the cases cited by Mr Kirk SC. Counter weighting [sic] that is the opinion I formed that the capital growth was linked to a degree with the husband’s much greater efforts in actively value adding and improving. (footnotes omitted)
Was his Honour’s contribution based assessment plainly wrong?
It is appropriate to commence our discussion of this ground by reference to the role of an intermediate appellate court hearing an appeal from a judgment under s 79. In Mallet and Mallet (1984) 156 CLR 605 at 621-622 Mason J said:
It has been accepted, at least since the judgment of Gibbs J. in De Winter v. De Winter, that a judgment of the Family Court in determining what order should be made under s. 79 of the Family Law Act 1975 (Cth), as amended, is exercising a judicial discretion and that the well settled principle governing an appeal from the exercise of that discretion applies to the Full Court of the Family Court when it hears and determines an appeal from the making of an order under the section. The Full Court, in determining the appeal cannot substitute its opinion for that of the primary judge unless it is shown that he made some error in exercising the discretion, i.e., by acting on a wrong principle, by allowing extraneous or irrelevant factors to influence him, by failing to take into account some material consideration or by mistaking the facts: House v. The King; Australian Coal and Shale Employees’ Federation v. The Commonwealth. And in some cases the exercise of the discretion may be vitiated by the primary judge's failure to give sufficient weight to a relevant factor. However, an appellate court needs to view this ground of appeal with considerable caution, as Stephen J. noted in Gronow v. Gronow:
“The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge’s discretionary decision on grounds which only involved conflicting assessments of matters of weight.” (footnotes omitted)
In this case the trial Judge was called upon to assess the parties’ respective contributions over the period of their 11 year cohabitation and marriage.
Before us, senior counsel for the husband submitted that the trial Judge was in error in determining that the husband’s initial contribution was 90 per cent of the parties’ assets, but rather submitted the husband had contributed 100 per cent of the initial assets (on the basis that the wife’s equity in the wife’s Gold Coast property was not realised until later in the marriage). Thus he submitted the husband had either 97 per cent or 100 per cent of the parties’ assets in 1995. He went on to note that the trial Judge had referred to the husband’s initial contributions as representing 35 per cent of the parties’ assets at trial and that he was unsure what use the trial Judge had made of that calculation (transcript, 15 August 2008, p 31). Senior counsel for the husband submitted that the trial Judge appeared to have adopted an approach of partnership to his contribution assessment.
The husband’s senior counsel submitted the wife had made no contribution to the husband’s interest in the second Gold Coast property purchased in 1994 for $268,000.00 and sold in February 2007 for $860,000.00. He also referred to the increase in value of the matrimonial home introduced by the husband in March 1995 and noted that the wife had made no financial contribution to that property. He also noted the husband’s financial contribution reflected in the value of his professional practice and referred to his professional skills, which were not acquired during the marriage, but which he brought to the marriage.
Senior counsel for the husband attacked the trial Judge’s finding that the wife made substantial financial (and non financial) contributions, as the former contributions were not explained by his Honour in paragraphs 59-62 in his reasons for judgment. Senior counsel for the husband acknowledged that the wife contributed $100.00 a week towards the groceries and bought some clothes for the husband and was involved in entertainment. However he said these contributions, as well as the wife’s contribution to her own support, were not “substantial” financial contributions. He also referred to the wife’s concessions made in cross-examination of the nature of her assistance with the rebuilding of the matrimonial home.
By contrast, senior counsel for the husband referred to the husband’s overwhelming financial and non financial contributions. He submitted:
· the husband was the main breadwinner;
· the husband engaged in property investment and share trading;
· the husband paid all the household bills and did the weekly shopping;
· the husband retained the services of a domestic housekeeper, window cleaning and pool cleaning, thus impliedly minimising the wife’s domestic contributions; and
· the wife’s contributions as homemaker and to the welfare of the family were limited, not unreasonably, because of her full-time employment.
Senior counsel also referred to the fact that post separation the wife made no contributions, and had the benefit of occupation of the matrimonial home. He submitted that the wife’s contributions overall were minimal and thus his Honour was in error in his 25 per cent contribution assessment. He submitted his Honour’s reasoning was inconsistent with authority.
In Mallet Deane J at 641 referred to the need for general consistency in cases decided under s 79. Mason J, in the context of discussing the misconception that equality of contribution was the starting point, said at 625:
The section contemplates that an order will not be made unless the court is satisfied that it is just and equitable to make the order (s. 79(2)), after taking into account the factors mentioned in (a) to (e) of s. 79(4). The requirement that the court “shall take into account” these factors imposes a duty on the court to evaluate them. Thus, the court must in a given case evaluate the respective contributions of husband and wife under pars. (a) and (b) of sub-s. (4), difficult though that may be in some cases.
Shortly after the decision in Mallet, the High Court in Norbis and Norbis (1986) 161 CLR 513 discussed whether or not the assessment of contribution should be on a global or asset by asset basis. In the course of that discussion Mason & Deane JJ (referring to the global approach) at 523 said:
It follows that the Full Court is quite entitled to prescribe that approach as a guideline in order to promote uniformity of approach within the Court. In saying this we are not to be understood as denying the legitimacy of the trial judge’s ascertainment in the first instance of the financial contributions of the parties by reference to particular assets. It is difficult to conceive how the trial judge in many cases could otherwise take account of such contributions as he is required to by s. 79(4)(a) of the Act. In this respect we agree with the comment of Nygh J. in G and G. that, although mathematical precision is certainly not required, there is ordinarily a need to know the circumstances in which assets were acquired and the general extent of each party’s contribution to them.
Their Honours went on to refer to Full Court criticism of “over zealous” attention to ascertainment of contributions and said at 524:
…we take this opportunity of expressing our unqualified agreement with that criticism, noting at the same time that the ascertainment of the parties’ financial contributions necessarily entails reference to particular assets in the manner already indicated.
The Full Court of this Court in Pierce & Pierce (1999) FLC 92-844, having discussed the question of “erosion” of initial contribution, at paragraph 28 said:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home: See also Campo and Campo (unreported, Full Court (Ellis, Lindenmayer and Finn JJ), Sydney, delivered 19 May 1995 at pages 21 and 22 of the joint judgment) and Zahra and Zahra (unreported, Full Court Sydney, delivered 3 October 1996, per Ellis J at page 10).
We appreciate that application of the principles referred to above, as recognised by Mason J in Mallet, is not always an easy task. It is not one, in a marriage stretching over a decade, which can be carried out as a purely mathematical exercise, but requires careful evaluation of each party’s disparate contributions in the individual circumstances of the case before the trial Judge. Other decided cases involving similar facts give guidance to approach and promote consistency in decision making particularly in relationships of many year’s duration. The discretion involved in the evaluative exercise under s 79 properly exercised will lead to an order which is just and equitable in all the circumstances.
We see two fundamental problems in the trial Judge’s evaluation reasoning. First, his Honour commenced his contribution assessment in respect of a pool which contained significant errors resulting in a 10 per cent “over valuation” of the pool. We are simply unable to determine what part that error played in his Honour’s overall percentage adjustment. Second, the evaluation exercise was not conducted with any particular reference to the parties’ contributions to the acquisition, conservation or improvement of their property but ultimately focused on what his Honour determined to be “fair” to both parties.
His Honour failed to evaluate and give appropriate weight to the massive initial contribution of the husband’s assets, which assets largely formed the assets to be adjusted at trial. The husband’s contributions included his professional practice, which provided the substantial income to the parties throughout their cohabitation and marriage and enabled other investments to be made, the contribution of the second Gold Coast property to which the wife made no contribution, and albeit that it was rebuilt during the parties’ marriage, the initial contribution of the matrimonial home.
We are satisfied that his Honour failed to consider and make findings, except in the most general way, about the husband’s contributions, nor did he properly evaluate and weigh those contributions against the wife’s contributions.
In Steinbrenner & Steinbrenner [2008] FamCAFC 193 Coleman J, on hearing an appeal from a Federal Magistrate as a single Judge, dealt with an appeal ground which asserted the Federal Magistrate had erred in his contribution based assessment and awarded the wife a sum which was unjust. In considering the transposition from evaluation of actual contributions to determination of a monetary sum (or impliedly a sum represented by a percentage of assets), his Honour said at paragraph 234:
Given that the evaluation of contribution based entitlements inevitably moves from qualitative evaluation of contributions to a quantitative reflection of such evaluation, there will inevitably be a “leap” from words to figures. That is the nature of the exercise of discretion, whether it be in the assessment of contributions in the matrimonial cause, assessment of damages in a personal injuries case, or determination of compensation in a land resumption case. In some cases, the “leap” is so great, and so unheralded by the discussion which precedes it as to render the reasoning process defective. …
Our assessment of the record indicates that the “leap” in this case, was too great.
In so determining, it would be inappropriate for us at this point, given there is no agreement in respect of the pool of assets to be adjusted, and a lack of necessary findings by the trial Judge, to express a concluded view that the submissions made on behalf of the husband that the wife’s maximum contribution based entitlement should be 10 per cent of the pool, is correct.
Section 75(2) challenge
At the trial, senior counsel for the husband submitted that any adjustment to be made in the wife’s favour under s 75(2) should be limited to a maximum of 5 per cent. The trial Judge made an adjustment under s 75(2) in favour of the wife of 7.5 per cent.
Before us, senior counsel for the husband candidly admitted that if the trial Judge had properly assessed contributions (at, he asserted, 10 per cent) there would be little basis for the challenge to the trial Judge’s adjustment of 7.5 per cent for relevant factors under s 75(2).
In his written submissions in support of this ground senior counsel for the husband asserted that his Honour erred in describing the parties’ relationship as a “relatively long relationship”. It was also asserted that the trial Judge fell into error in making his adjustment under s 75(2) on the basis of the disparity in the parties’ earning capacities, given the husband’s proposed retirement in two years. Senior counsel for the husband noted the wife was in receipt of a part-time income, and that, on the basis of his Honour’s contribution assessment, a further adjustment was manifestly unjust.
By contrast the wife’s solicitor referred to the adjustment under s 75(2) as reflecting the wife’s age, health problems (which he noted were not disputed), and her limited physical and mental capacity for gainful employment as well as disparity in assets.
The trial Judge’s reasons in respect of s 75(2)
At paragraphs 212-228 the trial Judge dealt with relevant factors under s 75(2). At paragraph 214 his Honour noted:
The parties are both in their mid 50’s. The husband has some health problems related to stress and hypertension and proposes to retire within 2 years. No one suggests this is unreasonable or unlikely.
His Honour then went on to consider the disparity in the parties’ financial positions.
At paragraph 219 his Honour turned to consider the wife’s health problems. It is not suggested there was any error in his Honour’s recording of those problems.
His Honour noted the wife had limited physical and psychological capacity for gainful employment, that she had not re-partnered and “is not involved in a highly profitable business as was the wife in GBT & BJT for example” (footnotes omitted) (paragraph 222). Having referred to the need for the wife to retrain, his Honour concluded, at paragraph 225, “[a]t 57 years of age however the wife’s employability in any event is somewhat limited”.
Somewhat confusingly, as he had already made his contribution assessment, the trial Judge said at paragraph 227:
The applicant will be at risk in relation to employment in the future due to her age, health and medical problems. The respondent is in a far better position for the future than is the applicant especially if orders are made in the terms of the respondent’s application.
His Honour then concluded that an adjustment of 7.5 per cent of the overall pool should be made in the wife’s favour.
Discussion
It is not suggested by senior counsel for the husband that the trial Judge took into account any irrelevant factor or disregarded any relevant factor when making his adjustment under s 75(2). The challenge to the trial Judge’s assessment under s 75(2) is predominantly focused on the effect of that further adjustment having regard to the trial Judge’s contribution assessment by which the wife is to retain, on his Honour’s figures $1,159,650.00 by way of contribution entitlement.
Whilst the s 75(2) challenge in isolation does not, in our view, demonstrate appealable error by the trial Judge, it is unrealistic to consider this adjustment without regard to the proper value of the pool (which we have found was to be in error) and his Honour’s contribution assessment, which we have also found to have been in error.
We simply note having regard to the statutory imperative to achieve finality in the financial affairs of the parties where possible, if the disparity in the parties’ financial circumstances is increased as a result of the reduction in the wife’s contribution based assessment, a larger percentage adjustment under s 75(2) would appear warranted.
The just and equitable challenge
Little needs to be said in respect of this challenge having regard to our findings of appealable error in respect of identification of the pool and his Honour’s contribution assessment.
Spousal maintenance
In her further Amended Application filed 10 October 2006 the wife sought an order (Order 5) as follows:
5.That for a period of 12 months from the date of these orders the husband pay to the wife the sum of $500.00 per week by way of spousal maintenance.
The wife sought a similar order in her Case Summary Document dated 17 October 2007. Additionally, her claims included a claim for reimbursement by the husband to her by way of contribution to necessary expenses for the maintenance of the matrimonial home for a period of two years (a total sum of $85,696.00), and for the duration of the restaurant lease $1,000.00 a week towards its operating expenses.
The husband sought to attack the order for lump sum maintenance on the basis that the trial Judge had, contrary to authority, failed to have regard to the effect of the property settlement orders he intended to make, or if he had taken the wife’s property entitlements into account, he did not explain how he had done so.
The wife’s solicitor disputed the contentions of the husband’s senior counsel and submitted the trial Judge’s reasons adequately explained the basis of the order for the payment of $40,000.00 by way of lump sum.
Trial judge’s reasons – spousal maintenance
At paragraph 229 of his reasons for judgment the trial Judge set out the wife’s claims which he classified as being claims for spousal support.
At paragraph 231 the trial Judge summarised the statutory provisions applicable for a claim for spousal maintenance. His Honour then referred to the wife’s Financial Statement in which she estimated her expenditure at $725.00 per week without “the restaurant assistance”. The trial Judge agreed with a submission made on behalf of senior counsel for the husband that a boarder occupying the matrimonial home should share in the utility costs associated with the home. His Honour then referred to the wife’s ongoing operation of L’s Restaurant and her part-time job income.
His Honour, at paragraph 236, made a finding that the husband had no capacity to pay spousal maintenance from income “because of unchallenged partnership losses”. Having referred to the deterioration in the cash flow of the husband’s professional practice, and noting the husband’s concession that it was probably a “temporary hiccup in cash flow”, the trial Judge said “[t]he husband also agreed that:” Unfortunately it appears that his Honour may have accidentally omitted a further concession by the husband from his reasons for judgment. His Honour concluded at paragraph 237 as follows:
He does, however, have some capacity based on his assessed share of the available assets. I will add an extra lump sum of $40,000.00 to her property entitlement specified under s 77A(1) as provision for the wife’s maintenance.
Discussion
The legislative framework and principles to be applied in dealing with a spousal maintenance claim are well known. In summary, the Act requires an applicant to satisfy the threshold tests demonstrating an inability to support himself or herself adequately, and to establish the capacity of the other spouse to pay maintenance. In exercising jurisdiction under s 74 the Court must have regard to relevant sub-sections of s 75(2), and disregard any entitlement to an income tested pension or benefit (s 75(3)). An order may be made under s 80 for payment of periodical or lump sum maintenance. Such a payment ceases on the death of the recipient or the death of the party liable to make the payment, and such payment ceases on remarriage of the payee except in special circumstances. Section 83 of the Act allows the Court to discharge, suspend, or revive wholly or in part an order, or to vary an order so as to increase or decrease the sum payable if certain factors in s 83(2) are satisfied.
The general principles to be applied in considering an application for spousal maintenance include a requirement that the Court have regard to the terms of a property order made or proposed to be made under s 79 (see Bevan v Bevan (1995) FLC 92-600; Pastrikos & Pastrikos (1980) FLC 90-897; Anast & Anastopoulos (1982) FLC 91-201 and Little & Little (1990) FLC 91-147). Different approaches may be found in the cases about the requirement for a spouse to apply his or her capital to meet living expenses rather than such needs being met by a spousal maintenance order (see W & W (1997) FLC 92-723; Bevan & Bevan at 81,980).
In Clauson & Clauson (1995) FLC 92-595 the Full Court explained the interrelation between an order under s 79 and the exercise of the maintenance power under s 74. At 81,907 Barblett DCJ, Fogarty and Mushin JJ said:
Where spousal maintenance is sought in addition to a property order it becomes, in effect, the fourth step in the process. It is only to be exercised after the three step process under s. 79 has been completed and it is not to be confused with the s. 75(2) component in that latter exercise. The reason why it must be exercised after the s. 79 exercise is because that latter exercise establishes the background against which s. 74 must operate, that is, the financial circumstances of the parties.
The result of the s. 79 order may be such that the applicant for maintenance can no longer be described as being “unable to support himself or herself adequately” because he or she may have sufficient assets which, with or without income arising from the investment or use of those assets, will provide an adequate level of support. It also defines the other party's capacity to meet any order.
In addition, it is necessary to determine the issue of periodic maintenance first because this type of lump sum maintenance is the capitalization of that conclusion. The Court must satisfy itself of the components necessary to justify a periodic maintenance order, namely, in effect, need and capacity, and determine the amount in question and in some cases the duration of that order. If the applicant fails to establish those components that will end any claim for not only periodic maintenance but lump sum maintenance as well.
His Honour’s reasons for judgment fail to disclose any consideration of the wife’s entitlements under the s 79 order and consideration of her reasonable needs taking into account the sum to be received by way of property adjustment. Further, there is no reasoning demonstrated by the trial Judge as to how he quantified the sum of $40,000.00 by reference to the relief sought by the wife in her further Amended Application. We are satisfied these matters are errors of principle, and that the husband’s appeal against the spousal maintenance order has merit.
The re-exercise of the discretion
Section 94(2) of the Act provides as follows:
(2) Upon such an appeal, the Full Court may affirm, reverse or vary the decree or decision the subject of the appeal and may make such decree or decision as, in the opinion of the court, ought to have been made in the first instance, or may, if it considers appropriate, order a re‑hearing, on such terms and conditions, if any, as it considers appropriate.
In Allesch v Maunz the High Court discussed the effect of s 94(2). Gaudron, McHugh, Gummow and Hayne JJ said at paragraphs 30 and 31:
Although, on an appeal by way of rehearing from a discretionary judgment, an appellate court may, itself, exercise the discretion in question by reference to circumstances as they then exist, it is not bound to do so. It may, instead, set aside the order under appeal and remit the matter for rehearing or, in terms of s 94(2) of the Act “order a re- hearing, on such terms and conditions, if any, as it considers appropriate”. And where circumstances have or are likely to have changed between the original hearing and the disposition of the appeal, it is not uncommon for an appellate court to remit the matter for rehearing rather than, itself, exercise the discretion in question.
If on an appeal by way of rehearing from a discretionary judgment an appellate court is minded to exercise the discretion in question by reference to circumstances as they exist at the time of the appeal, it is necessary that the parties be given an opportunity to adduce evidence as to those circumstances…
We readily understand the desire of the parties for finality of their litigation, and that this Court should re-exercise the discretion of the trial Judge. Senior counsel for the husband acknowledged however, in the circumstances of this case we may not be able to do so. Neither party sought to formally adduce further evidence, and we discern the husband’s senior counsel did not press the lack of evidence pertaining to the disposition of the proceeds of sale of L’s Restaurant as an impediment to our re-exercising the discretion.
While we could dissect items in the Suncorp borrowings referable to legal costs and properly add back those sums, (and perhaps other reasonable expenditure), into the table of assets and liabilities, for reasons set out below, we consider we are unable to properly deal with the issue of the H Trust losses and L’s Restaurant. We have carefully considered the question of our ability to re-exercise and have come to the conclusion we are unable to do so. Amongst the matters precluding us from so doing are:
· a lack of findings by the trial Judge about the asserted lack of proper disclosure of the husband of the H Trust, and any findings by his Honour as to the source of funds applied to its purchase of the third Gold Coast property, and the reasonableness or otherwise of the husband’s post separation expenditure on that property (see transcript 22 October 2007 particularly at page 207);
· a lack of findings by the trial Judge as to the reasonableness or otherwise of the husband’s post separation time off work and expenditure resulting, it appears, in an increase in the Suncorp borrowings;
· how the sale proceeds of L’s restaurant (and any debts associated with the restaurant) should be treated as a result of post trial events;
· a lack of sufficient findings by the trial Judge of the husband’s contributions (as prescribed in Mallet); and
· a lack of findings by the trial Judge of the effect of the wife’s property entitlement when determining to award $40,000 by way of lump sum maintenance.
Accordingly the matter will be remitted for re-hearing by a Judge in the Brisbane Registry.
Costs
At the conclusion of the appeal we sought submissions on costs. Both parties sought the opportunity to provide written submissions on costs of the appeal. We record at this point our conclusion that the appeal has been allowed on the basis of an error of law, and that the parties may wish to seek the relevant certificates pursuant to the Federal Proceedings (Costs) Act1981 (Cth).
I certify that the preceding one hundred and twenty-three (123) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
Date: 22 January 2009
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