Carron & Laniga
[2019] FamCAFC 115
•8 July 2019
FAMILY COURT OF AUSTRALIA
| CARRON & LANIGA | [2019] FamCAFC 115 |
| FAMILY LAW – APPEAL – PROPERTY SETTLEMENT – Where the trial judge made orders providing for final entitlements of 55 per cent to the wife and 45 per cent to the husband – Where the trial judge allowed for a 10 per cent adjustment in favour of the wife based on factors under s 75(2) of the Family Law Act 1975 (Cth) – Where the trial judge correctly took into account the wife’s contributions pursuant to ss 79(4)(d), 79(4)(g), 75(2)(d)(ii), 75(2)(e) and 75(2)(na) of the Family Law Act 1975 (Cth) – Where a denial of procedural fairness was not established – Where the appellant husband’s complaints of the trial judge providing inadequate reasons were unsubstantiated – Where an amount notionally added-back by the trial judge was wrongly allocated to the appellant husband – Where appealable error is established – Where both parties are adversely affected by errors of law – Appeal allowed – Where the orders made by the trial judge are set aside and the matter remitted for rehearing. FAMILY LAW – APPEAL – SUPERANNUATION – Value and treatment of superannuation – Military Superannuation Benefits Scheme – Where one part of the wife’s superannuation was in the growth phase and the other in the payment phase – Where grounds of appeal challenge the trial judge’s failure to distinguish between the two separate components and determine the value of the payment phase – Where the primary appeal point was whether the trial judge’s discretion miscarried by failing to consider the superannuation in the growth phase as an asset of the parties – Where the trial judge did not need to ascertain the capitalised value of a superannuation interest unless superannuation splitting order was sought – Where it was open for the trial judge to find the payment phase should not be taken into account as an asset – Where no error is established. FAMILY LAW – APPEAL – COSTS – Where the appeal is successful and the matter remitted for rehearing – Where the appellant husband is self-represented – Where the appellant husband’s application for costs is dismissed – Where only two grounds of appeal had merit – Where no order as to costs – Where costs certificates are granted pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) for both parties for the appeal and rehearing. |
| Child Support (Assessment) Act 1989 (Cth) Family Law (Superannuation) Regulations 2001 (Cth) regs 38, 43A |
| Conway v The Queen (2002) 209 CLR 203; [2002] HCA 2 Chorn and Hopkins (2004) FLC 93-204; [2004] FamCA 633 De Winter v De Winter (1979) FLC 90-605 King v Kemp (1996) FLC 92-673; [1996] FamCA 24 Lane & Nichols (2016) FLC 93-750; [2016] FamCAFC 234 Pates and Pates [2018] FamCAFC 171 Semperton v Semperton (2012) 47 Fam LR 626; [2012] FamCAFC 132 Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52 Surridge & Surridge (2017) FLC 93-757; [2017] FamCAFC 10 Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173 Welch & Abney (2016) FLC 93-756; [2016] FamCAFC 271 |
| APPELLANT: | Mr Carron |
| RESPONDENT: | Ms Laniga |
| FILE NUMBER: | BRC | 9038 | of | 2016 |
| APPEAL NUMBER: | NOA | 90 | of | 2018 |
| DATE DELIVERED: | 8 July 2019 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Aldridge, Kent & Austin JJ |
| HEARING DATE: | 21 June 2019 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 13 September 2018 |
| LOWER COURT MNC: | [2018] FCCA 2613 |
REPRESENTATION
| THE APPELLANT: | In person |
| COUNSEL FOR THE RESPONDENT: | Mr James |
| SOLICITOR FOR THE RESPONDENT: | ABKJ Lawyers |
Orders
The appeal is allowed.
The orders made by the trial judge on 18 September 2018 are set aside.
The parties’ respective applications for relief under Part VIII of the Family Law Act 1975 (Cth) are remitted for rehearing.
The appellant is granted a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
The respondent is granted a costs certificate pursuant to the provisions of
s 6 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
Both the appellant and the respondent are granted costs certificates pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being certificates that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise payments under that Act to the appellant and the respondent in respect of the costs incurred by them in relation to the rehearing.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Carron & Laniga has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NOA 90 of 2018
File Number: BRC 9038 of 2016
| Mr Carron |
Appellant
And
| Ms Laniga |
Respondent
REASONS FOR JUDGMENT
Introduction
By an Amended Notice of Appeal filed on 22 February 2019, the appellant husband appeals from property settlement orders made under Part VIII of the Family Law Act 1975 (Cth) (“the Act”) by a judge of the Federal Circuit Court of Australia on 18 September 2018. The appeal was resisted by the respondent wife.
The trial judge found the parties had an “asset pool of $1,343,539”, which computation intentionally disregarded some items of personal property possessed by the parties and some of their personal debts. The trial judge found the husband’s contributions warranted his entitlement to 55 per cent of the net assets but, allowing for a 10 per cent adjustment in the wife’s favour by reference to factors prescribed under s 75(2) of the Act, found the parties’ final entitlements were 55 per cent to the wife and 45 per cent to the husband. The trial judge then deducted the sum of $50,000 from the wife’s proportional entitlement because she received that sum by way of “partial property settlement” during the course of the litigation.
The parties’ dispute during the trial was complicated by debate about the value and treatment of the wife’s superannuation, one part of which was in the growth phase, but the other part of which was in the payment phase and received in the form of a non-commutable pension. The manner in which the trial judge resolved that debate was a fundamental component of the appeal.
For the reasons which follow, the appeal should be allowed on some grounds.
Background
The parties met in 1997, married in 1998, and separated in 2015.
Their two children were born in 2003 and 2006 and, at the time of trial, were aged nearly 15 and 12 years respectively.
Both parties brought some modest capital into the relationship, though the trial judge found the husband’s initial capital contributions were “significantly greater” (at [4]-[6], [31(a)]). Both parties were in paid employment at the beginning of their relationship. The wife was made redundant in 2000 and began receiving a pension, but she was then able to regain well paid work (at [7]-[8], [10]). The husband decided to cease work in 2007 so he could attain higher qualifications and, since then, his actual income has been much less than he has the capacity to earn (at [12]-[13]). He has not worked full-time since 2012 (at [17], [31(a)]).
The trial judge found the wife was the principal homemaker and children’s primary carer, both during the marriage and after separation. She will remain the children’s primary carer for several years hence (at [14], [31(a)], [31(c)]).
Both parties made capital contributions after they married. The wife contributed the lump sums she received during the marriage in the form of accrued employment emoluments and compensation (at [8], [10]) and the husband received two inheritances – one just before and one just after final separation (at [15]).
After their separation in 2015, the parties continued to live in the former family home. In late 2016, the wife received a partial property settlement of $50,000, which money she used to move out and set up a separate household with the children. The husband remains in possession of the former family home, the condition and value of which was the subject of dispute at trial.
Grounds of appeal
The amended appeal comprises five grounds and they are addressed by reference to the issues raised rather than in numerical order.
Procedural fairness (Ground 1)
The husband contended the trial judge failed to afford him procedural fairness during the trial.
The precise nature of the alleged procedural unfairness was not revealed by the ground of appeal, so resort to the husband’s Summary of Argument was obligatory to learn the detail. He contended the wife was permitted to make an opening address, to object to portions of his affidavit evidence, and to give oral evidence in re-examination, but he asserted he was not afforded the same opportunities.
When commencing the trial, the trial judge invited the wife’s counsel to open the case which, given the wife was the applicant and the husband was not legally represented, was quite unexceptional. During the oral opening, the wife’s counsel highlighted the contentious issues between the parties and fairly acknowledged the husband’s contentions in respect of those issues. At numerous points during the opening, the trial judge interjected to solicit the husband’s comments, inviting his confirmation or rebuttal. That occurred in relation to the periods of the husband’s employment, the dilapidation of the former family home and why it had not been repaired during his post-separation occupation of it, the status of the business he formerly operated from home, whether he received social security, whether the investment account he held was his own or the joint property of the parties, and the ambit of the parties’ dispute over items of personal property.
Although the husband was not subsequently invited to orally open his case in the same way, the issues were clear from the opening given by the wife’s counsel and the husband’s supplementary comments. Both parties had already filed Case Outline documents and, once the evidence was taken, the parties thereafter filed final written submissions. It could not be reasonably contended the husband was unreasonably denied the opportunity to fully inform the trial judge about the virtues of his case.
Once the issues were crystallised by the opening, the wife’s counsel took some objections to the husband’s affidavit material. The trial judge determined to disregard any evidence which related to either the parties’ children or the pending contravention application between them, because the trial concerned only their respective claims for relief under Part VIII of the Act. Otherwise, the husband conceded one objection and the wife’s remaining objections were overruled. The husband informed the trial judge he understood the objection procedure and, having responded to the wife’s objections, he took no objections of his own to the affidavits relied upon by the wife. He can have no complaint about the trial judge not affording him the chance to take objections if he was familiar with the process and did not ask for it.
The husband contended in his written submissions in the appeal that, if invited, he would have objected to the evidence led by the wife about the contents of an expert report concerning her superannuation interests, but we reject the argument as opportunistic and disingenuous. The portion of the wife’s evidence-in-chief concerning the expert report which the husband identified actually served his purpose because it introduced evidence he wanted before the court.
In that same respect, the husband submitted in the appeal that the trial judge wrongly refused to allow him to adduce in evidence the valuation report prepared by Mr T in relation to the wife’s superannuation interests with the Military Superannuation Benefits Scheme (“MSBS”). The husband alleged the error was compounded by the trial judge wrongly referring to and relying upon statements made by the expert in his valuation report when the report was not in evidence.
The wife had several superannuation interests with different superannuation funds, but only her superannuation interests held with MSBS are pertinent to the appeal. One part of her MSBS superannuation was in the growth phase and the other part was in the payment phase. Following the redundancy of the wife’s employment with the Australian Defence Force in 2000, she commenced receiving a MSBS pension (at [7]), which is payable for life and cannot be commuted. The pension is a superannuation interest in the payment phase. In the appeal, there was some muted debate about whether the pension would revert to any beneficiary upon the wife’s death, albeit paid at a discounted percentage, but there was certainly no evidence on that issue either at trial or before us.
Mr T’s report was prepared in February 2017, apparently on the wife’s unilateral instructions. The report purported to value both of her MSBS superannuation interests, giving the value of the growth phase interest as at March 2015 and the value of the payment phase pension as at February 2017.
So far as we are aware, Mr T was not engaged as a court expert under Division 15.2 of the Federal Circuit Court Rules 2001 (Cth), nor did the wife seek leave to adduce his report in evidence as the opinion evidence of her adversarial expert witness. Nevertheless, without any challenge by the husband to either the admissibility or accuracy of her evidence, the wife deposed in her affidavit to the existence of the report and some of its contents in these terms:
87.On 8th February 2017 [Mr T] of [Company H] provided me with a Valuation report in respect of my Military Superannuation. More particularly, my MSBS Pension. In his report, [Mr T] identified the following: -
(a)The valuation of $230,148.47 is a notional calculation of Payment Phase interest;
(b)The fortnightly pension was converted to an annual equivalent; and
(c)The resulting value will usually be different to an actual ’payout’ value, and must not be relied upon as such.
88.The MSBS Pension is unable to be liquidated or realised in a monetary capacity other than a fortnightly pension. I receive $520 per fortnight in pensions.
Despite the reception of that evidence, the husband then tried to tender the whole report in evidence. It remains unclear why it was necessary, since he only sought to use it to establish the capitalised value of the wife’s MSBS pension at $230,148 and the wife had already admitted Mr T’s valuation of the pension at that figure. Regardless, the trial judge did not allow the husband to tender the report in evidence, apparently because Mr T would not be called to give any oral evidence. We need not comment upon the validity of the reason given to reject the report because the asserted invalidity of its rejection is not dispositive of this ground of appeal. Even without the report, the evidence of the capitalised value of the wife’s MSBS pension was in evidence as a consequence of the wife’s admission, so any wrongful rejection of the report was inconsequential.
In the reasons for judgment, the trial judge said as follows in relation to Mr T’s report:
26.… it was noted by [Mr T] that the valuation was a notional calculation of “payment phase interest”, and that, as a fortnightly pension, was assessed as if converted to an annual equivalent, such that it would have a different value to an actual payout value…
The trial judge was seized of evidence of the wife’s admission about the notional capitalised value of her MSBS pension and the subsequent decision about whether the pension would be taken into account as an asset at that or any other value (as the husband wanted) or merely taken into account as the wife’s financial resource (as the wife wanted) did not hinge upon the expert opinion of Mr T. That was a question of law for the trial judge and his Honour’s finding in that regard is the subject of Grounds 2 and 3 in the appeal, yet to be addressed.
Finally, the husband contended he was not permitted to give any evidence in re-examination, unlike the wife, but his contention was groundless as the following portion of the transcript reveals:
[HIS HONOUR]: …You’re excused, Mr [Carron]. There’s nothing that you wanted to add specifically arising of the cross-examination of [the wife’s counsel], is there?
[THE APPELLANT]: No, there isn’t.
[HIS HONOUR]: All right. Thank you, Mr [Carron]. You’re excused. And that’s your case …
(Transcript 14 June 2018, p.116 lines 33–36)
The husband did not establish that he was denied procedural fairness.
Superannuation (Grounds 2 and 3)
The husband contended the trial judge erred by failing to distinguish between the two separate components of the wife’s MSBS superannuation (Ground 3) and by acting upon wrong principles in failing to determine the value of the two different MSBS superannuation interests in accordance with prescribed statutory formulae (Ground 2). The grounds are rejected.
The wife’s case at trial was that her MSBS superannuation interest in the growth phase should be taken into account as an asset, but that her MSBS pension should not and instead only be regarded as a future financial resource. The husband’s case was that both interests should be taken into account as assets.
The wife opposed her MSBS pension being attributed any notional capitalised value because it could not be commuted and the husband did not seek any superannuation splitting order in relation to it, as the trial judge correctly recognised (at [27]). The husband certainly sought no superannuation splitting orders either before or during the trial nor, even once the evidence was closed, when he afterwards made final written submissions. However, once the trial judge delivered reasons for judgment and made procedural orders on 13 September 2018 requiring the parties to bring in orders reflecting his Honour’s reasons, the husband filed a panoply of alternative orders several days later which included a proposed superannuation splitting order in relation to the wife’s two MSBS superannuation interests. The appealed orders made by the trial judge on 18 September 2018 did not split the wife’s MSBS superannuation interests.
The wife deposed at trial that the MSBS superannuation interest in the growth phase was valued at precisely $123,293, which the husband admitted during his cross-examination, though in his final written submissions to the trial judge he tried to exploit the wife’s admission of its approximate value at “$133,900”.
Although the trial judge accepted the precise value of $123,293 as being correct, his Honour inferentially appears to have mistakenly attributed that value to the wife’s MSBS pension instead of to her MSBS superannuation interest in the growth phase and, incidentally, decided to treat it as property. The trial judge said:
21.The valuations agreed upon were as follows … Wife’s MSBS pension/superannuation, $123,293 …
…
26.…it was submitted on behalf of the husband that the MSBS pension should be valued at an amount greater than that which it is because it has had a value of $230,148 attributed to it by one [Mr T] of [Company H] … it was noted by [Mr T] that the valuation was a notional calculation of “payment phase interest”, and that, as a fortnightly pension, was assessed as if converted to an annual equivalent, such that it would have a different value to an actual payout value. It is appropriate in cases such as the present to value the superannuation interest on the basis of the payout value, which, as agreed by the parties at the hearing, was in the amount of $123,293.
27.It is to be noted that no splitting order is sought in this matter, in respect of the MSBS pension. It is further noted, however, that the pension has a value, and, at least if assigned, would have at least that value as agreed at the hearing. It ought to properly be treated as property therefore …
His Honour erred by both wrongly attributing that value to the wife’s MSBS pension and by then omitting the wife’s MSBS superannuation interest in the growth phase from consideration as an asset of the parties, when both parties wanted the growth phase interest treated as an asset. However, the error caused no disadvantage to either party because, regardless, the case was decided on the basis that the wife held as an asset one MSBS superannuation interest correctly valued at $123,293 (at [26]-[27]) and she would continue to receive an MSBS pension (at [33]), consonantly with her case. Errors of fact are immaterial if they do not have any influence upon the ultimate decision (see De Winter v De Winter (1979) FLC 90-605). The same is true of errors of law when no miscarriage of justice occurs or the established error cannot be reasonably seen as having any influence on the result (see Conway v The Queen (2002) 209 CLR 203 at 207-208, 217, 219-220, 232, 244; Lane & Nichols (2016) FLC 93-750 at [72]-[81]).
Therefore, from the husband’s perspective, the nub of these grounds of appeal devolved to whether or not the trial judge’s discretion miscarried by the omission of the wife’s second MSBS superannuation interest from consideration as an asset and, more particularly, an asset valued at $230,148. The husband must be taken to agree with that practical analysis because he submitted in the appeal:
His Honour … failed to understand or apply the correct principle as prescribed by the law for the valuation of the [wife’s] superannuation interests. As a result, the property pool value was understated by an amount of $230,148 …
…
… [The wife’s] assets and the joint property pool value were understated by an amount of $230,148 and resulted in an unjust gain for the [wife] through the omission of a significant asset in the [wife’s] possession.
(Emphasis added)
The husband’s reference in those submissions to the trial judge’s failure to apply the “correct principle” for the “valuation” of the wife’s MSBS superannuation interests was an intended reference to the statutory methodology for the valuation of prescribed superannuation interests.
The husband contended, without contradiction, that the wife’s MSBS pension is paid under the Military Superannuation and Benefits Act 1991 (Cth), is administered by the Commonwealth Superannuation Corporation, and its value is calculable under the Family Law (Superannuation) (Methods and Factors for Valuing Particular Superannuation Interests) Approval 2003 (Cth) (“the Approval”). That may all be true but, significantly, the husband asserted it was obligatory for the pension to be valued under that formula. Therein lies the husband’s error.
In property settlement proceedings, there is no need to ascertain the capitalised value of a superannuation interest, much less one in the payment phase being paid in the form of a non-commutable pension, unless a superannuation-splitting order is sought in relation to the interest (Welch & Abney (2016) FLC 93-756 (“Welch & Abney”) at [33]–[34], [61]; Surridge & Surridge (2017) FLC 93-757 (“Surridge”) at [30]). At trial, neither party sought a superannuation-splitting order in respect of the wife’s MSBS pension.
The Act only provides that a superannuation interest must be valued before it is amenable to a splitting order (s 90XT(2)), for which purpose the Family Law (Superannuation) Regulations 2001 (Cth) (“the Regulations”) make provision for the manner in which different superannuation interests are valued. The Regulations empower the Minister to approve the manner in which certain growth phase and payment phase superannuation interests are to be valued (regs 38, 43A), but otherwise prescribe how certain superannuation interests are to be valued in a more generic way. Relevantly for present purposes, the Approval makes specific provision for the valuation of superannuation interests in the payment phase paid in the form of an MSBS pension (see Volume 2, Schedule 1, Part 4, Division 4.3, Item 1).
Although any valuation correctly ascribed to the wife’s MSBS pension pursuant to the methodology dictated by the Approval would be unimpeachable, as no superannuation-splitting order was sought by either party in respect of the pension, its “nature, form and characteristics” needed to be considered when both evaluating the parties’ contributions to its existence and how it would be taken into account when determining the nature of the final property settlement orders that should be made between the parties (see Semperton v Semperton (2012) 47 Fam LR 626 at [154]-[197], [203]-[208]; Welch & Abney at [58]-[60], [63], [70]-[71]; Surridge at [29]-[34], [103]-[106]; Pates and Pates [2018] FamCAFC 171 (“Pates”) at [94]-[96]).
Relevantly, the wife’s entitlement to the MSBS pension crystallised in 2000 following her redundancy from employment in the armed services, shortly after the parties’ marriage in 1998. She is entitled to receive the pension for life, during which time it cannot be commuted or alienated. While it will continue to be a modest income stream for her, it will not be enough alone to sustain her and she will always need to supplement it with other income from paid work. Such features of the pension made it readily identifiable as a financial resource rather than an asset. Despite the trial judge’s apparent conflation of the wife’s two MSBS superannuation interests, it was certainly open to find that the second superannuation interest should not be taken into account as an asset. The fact the husband did not seek any order to split the wife’s MSBS pension at any point prior to the publication of the trial judge’s reasons made it unnecessary to value the pension under the Approval. That being so, the opinion evidence of Mr T about the notional capitalised value of the pension, calculated pursuant to the Approval, together with the wife’s admission of the capitalised value in reliance upon his opinion, became irrelevant. It was properly taken into account as a continuing income stream (at [33]).
Ground 2 in the appeal implied the trial judge also erred by failing to establish the value of the wife’s MSBS superannuation interest in the growth phase under the Approval, though the implication is misconceived. The Approval does not prescribe a valuation method for the growth phase interest but, in any event, the wife admitted the value of her MSBS growth phase interest and the husband did not dispute it. In the face of her uncontested admission, no other valuation evidence was necessary.
Child Support (Ground 2)
The husband alleged the trial judge erred by failing to take into account, as required by s 79(4)(g) of the Act, the “child support arrangements in place” under the Child Support (Assessment) Act 1989 (Cth) when determining the 10 per cent adjustment in the wife’s favour. He contended that, as a consequence, the wife received “a lump sum for the maintenance of the children” as a component of the property settlement orders when he will remain liable for the payment of periodic child support.
The complaint is without substance. In respect of the 10 per cent adjustment made in favour of the wife under s 75(2) of the Act, the trial judge reasoned:
31.Referring to the matters in section 79(4) of [the Act] it is commented as follows:
…
e)As to the matters referred to in section 75(2) of the Act, the parties are in a good state of health and are each able to continue working until retirement. The income, property and financial resources of each of the parties is as set out above, and each of the parties have the capacity to be engaged in gainful employment. The wife is likely to have the predominant care and control of the children of the marriage up until the time of trial of parenting proceedings, which is perhaps likely to be listed in about six months’ time.
32.Each of the parties are able to meet the commitments to repay loans which have been referred to earlier in the judgment. The husband does not have to support another person and will, if he maximises his opportunities, be able to make maintenance payments in respect of the two children of the marriage, at least up until the time of trial in the parenting proceedings. The wife has a partner who, though not supporting the wife in any financial sense, is, nonetheless, supportive of her. Her prospects for remarriage or re-partnering are, in that regard, good.
33.She is in receipt of ongoing MSBS payments and she has superannuation entitlements which will continue to grow as she continues to be employed. Each of the parties are able to maintain a standard of living commensurate with that which they enjoyed prior to separation. The marriage was over a period of some 17 years. The duration of the marriage has not affected the earning capacity of either party. It is the case that since separation the wife has continued to have the predominant care of the two children of the marriage.
(Emphasis added)
As can be seen, the trial judge took into account as one influential factor the husband’s ability to make “maintenance payments” – obviously an intended reference to child support payments – into the future.
The trial judge found the husband had not worked full-time since 2012 (at [17], [31(a)]). His annual taxable income between 2006 and 2016 was set out by the trial judge (at [12]), the correctness of which was admitted by the husband during his cross-examination. The husband did not lead any evidence to suggest his income might imminently increase and, in that context, he deposed his current child support assessment was $337.67 per month – that is about $80 per week in total for two adolescent children. Against that background, it is hardly surprising the trial judge found the wife would bear the primary financial burden of maintaining the children into the future, which was one feature of the evidence that ss 79(4)(d), 79(4)(g), 75(2)(d)(ii), 75(2)(e) and 75(2)(na) of the Act required the trial judge to take into account when settling the parties’ entitlements to the available assets.
Add-backs (Grounds 3 and 5)
The husband contended the trial judge fell into error when dealing with add-backs by:
(a)using an incorrect period for calculating his notional add-back for the rental relief he experienced by living in the former family home at no cost; and
(b)giving inadequate reasons for only notionally adding-back the sum of $30,000 incurred by the wife on legal fees, when her actual liability for legal fees amounted to $87,000, but then compounding the error by incorrectly assigning to him, rather than the wife, the $30,000 as a notional asset enjoyed by him.
In respect of the add-back for rent saved by the husband, the trial judge found he lived rent-free in the former family home for “about two and a half years” and, allowing for a notional weekly rent of $400 per week saved by him over that period, added back $50,000 as his notional property (at [36]). Those rough calculations are correct, but the point of the husband’s complaint was that for the first year of his occupation of the former family home following the marital separation the wife also lived rent-free in the home. Accordingly, he contended the add-back against him should only have been calculated at $30,000, so as to only cover the period of about 18 months when he had exclusive rent-free use of the property. The wife conceded the error.
During the appeal, the husband sought to contend there should not have been any add-back against him at all on account of his notional rent, since he only made a saving and did not actually spend any money. No doubt the wife indirectly contributed to the husband’s maintenance by allowing him to exclusively occupy their jointly owned home at no cost, but that is a fact which would feature in the analysis of the parties’ contribution-based entitlements, rather than justify the add-back of an arbitrary amount of saved rent as a notional asset. This argument was not evident from the grounds of appeal, though it could be faintly inferred from the husband’s written submissions. The wife experiences no prejudice by this argument being confronted, despite her surprise, because several appealable errors are demonstrated and the matter must be remitted for re-hearing.
In respect of the add-back related to the wife’s legal fees, the husband contended it is impossible to understand why only $30,000 was added-back when the trial judge found the wife incurred $87,000 and then, when dividing the available assets between them, the trial judge mistakenly attributed the $30,000 figure as property notionally enjoyed by him, rather than by the wife. The wife did not, because she could not, dispute that the notional add-back was wrongly allocated to the husband. She admitted the error.
The trial judge identified the assets of the parties and valued them at $1,263,539 (at [34]), but then notionally added-back, as assets, the husband’s rent saving of $50,000 (at [36]) and the $30,000 incurred by the wife on legal fees (at [35]), which, in aggregation, made their assets notionally worth $1,343,539. That figure was described as the “total asset pool” in the first order made by the trial judge on 18 September 2018, which explains why the 10 per cent adjustment in the wife’s favour under s 75(2) of the Act was computed to be $134,353.90 (at [37]).
Of the total existing and notional assets, the wife was to receive $738,946 (being 55 per cent x $1,343,539) and the husband was due to receive $604,593 (being 45 per cent x $1,343,539). However, the trial judge determined to deduct from the wife’s entitlement the sum of $50,000 which she received earlier in the litigation as a “partial property settlement” (at [3], [37]). Axiomatically, that meant the husband would receive an extra $50,000 from the available assets. Accordingly, the wife was entitled to assets with a net value of $688,946 (at [37]) and the husband would be entitled to assets with a net value of $654,593. In that way, the full value of the parties’ existing and notional assets would be distributed between them ($1,343,539 = $688,946 + $654,593).
Of the assets amenable to distribution between the parties (at [34]), the appealed orders provided for the wife to receive her bank account (Order 4(a)), all of her superannuation interests (Orders 4(b), 4(c) and 4(d)), a cash payment from the husband (Order 6), and a split of the husband’s superannuation (Order 7). The net value of the property received by her was $688,946. As can be seen, the wife received the amount intended by the trial judge.
By comparison, the husband received the former family home (Orders 2 and 5(a)), his bank account (Order 5(d)), and his superannuation (Order 5(e)), less the amount split from his superannuation (Order 7) and the cash payable to the wife (Order 6). The net value of the property received by him therefore amounted to $574,593. This figure is $80,000 less than the trial judge intended he receive, which differential is explained by his notional receipt of both the add-backs of $50,000 related to his rent-free occupation of the former family home and the $30,000 referrable to the wife’s legal fees. The errors asserted by the husband are therefore evident.
Ground 5 contended the trial judge provided inadequate reasons for why the intended add-back in respect of the wife’s legal fees was quantified at only $30,000 when it was found she incurred $87,000 on legal fees. In that respect, the trial judge said:
35.There should be add backs. The wife’s liabilities leading up to and including trial for legal fees are in the amount of $87,000. It is considered appropriate that an amount of $30,000 should be allowed as an add back in that regard. In arriving at such figure, I attribute the sum of $30,000 as being appropriate because it reflects the extent to which it is just and equitable to do so, having regard to how the wife has had to sacrifice expenditures on herself and the children for the purpose of her paying those legal fees in circumstances where the requirement for her to do so arose out of the matrimonial relationship
With respect, the meaning of that explanation remains elusive to us and so the complaint of inadequacy of reasons is also substantiated.
The findings that the wife had incurred legal fees of $87,000 and had paid $30,000 of that amount were factually incorrect. The wife deposed she incurred legal fees of only $81,623.85, of which she paid $48,402.25 from her own income, leaving an “outstanding balance of $33,21.60 [sic]”, none of which evidence was the subject of contest. Having found the wife incurred $87,000 on legal fees, the trial judge then sought to mistakenly add-back the unpaid portion of the liability as an asset when the concept of notional add-backs only seeks to redress unilateral expenditure which represents the waste or premature distribution of the parties’ joint property. Furthermore, since the wife paid a portion of her legal fees from her own income, it was an error of established principle for the trial judge to intend the add-back of any of either the wife’s paid or unpaid legal fees as her notional asset, let alone to add any of it back against the husband instead. Those errors added another dimension to the appeal and, although not the subject of the husband’s appeal, were raised by the wife defensively.
The analysis of the law, facts and findings about the add-backs in this instance should not be interpreted as our endorsement for the commonality of the practice, as it has been discouraged as the exception rather than the rule (Chorn and Hopkins (2004) FLC 93-204 at [24]; Pates at [18]). Rather, we refer to and endorse the recent analysis undertaken in Trevi & Trevi (2018) FLC 93-858 at [27]-[82]).
The wife asserted the various add-back errors could be corrected, without the appeal being upheld, as mathematical slips not matching the findings and reasons of the trial judge, for which proposition she cited and relied upon King v Kemp (1996) FLC 92-673 at 83,010. We reject the submission for several reasons: first, the husband had a plausible argument about there being no proper basis for any add-back on account of his rent saving, so the argument was not confined to the mathematical difference of $20,000; second, the add-back on account of the wife’s legal fees entailed errors of both fact and law; third, the wife sought to defensively raise another apparent error of law pertaining to her wrongful deprivation of the sum she received by way of “partial property settlement” by its deduction from her final share of the parties’ assets, which error was not raised by her in any cross appeal or Notice of Contention; fourth, all of the errors were pervaded by an absence of satisfactory reasons; and lastly, the multiple errors involved not insubstantial sums.
Upon proof of appealable errors confined to these grounds of appeal, the parties hesitatingly agreed we could re-exercise discretion and make property settlement orders in substitution for those made by the trial judge. Despite the husband’s concession to that effect, in relation to other grounds of appeal he maintained that he was unreasonably denied the opportunity to lead more evidence about the wife’s MSBS pension and to explain why repairs have not been effected to the former family home, so we impute he really did want the opportunity to adduce more evidence before the discretion under Part VIII of the Act is re-exercised. Foreseeably, the evidence he wishes to adduce on those topics will be controversial and this Court is not geared to hear and determine factual disputes. Additionally, given the passage of time and the prospective change in value of the parties’ assets, we are unable to see any practical alternative but to remit the parties’ applications for property settlement relief for rehearing, as unfortunate as that outcome may be, because of possible attendant delay and probable expense.
Although the husband may be emboldened by his demonstration of these errors in the appeal, he still needs to be wary of the aspects of the evidence in respect of which the wife was ostensibly not the subject of favourable treatment by the trial judge when she should or could easily have been. As already noted, she did not cross appeal or file a Notice of Contention in respect of such issues, but they will surely be raised on rehearing. For example:
(a)It is not clear to us why the sum of $50,000 was deducted from the wife’s proportional share of the assets on account of her receipt of that sum during the litigation as a “partial property settlement”. The evidence revealed the money was spent by her establishing a new home for herself and the children and in meeting their living expenses, which facts would not ordinarily warrant any add-back of the expenditure as a notional asset, let alone recovery of the money from her and its concomitant payment to the husband. The result did not mean the money was returned to the family economy and then proportionately shared by the parties; the husband instead received the whole of it;
(b)The parties agreed the husband owned shares which were worth $84,776 at the time of trial (at [20]-[21]), but the trial judge ignored that asset in the property settlement process (at [22]). Assuming the wife’s receipt of 55 per cent of the assets, she would be entitled to an extra payment of $46,627 from the husband to account for his retention of those shares; and
(c)There will unlikely be any add-back at all against the wife in respect of her legal fees, given her unchallenged evidence that her post-separation income was the source of the funds used to partly pay the legal fees.
Inheritances (Ground 3)
The husband contended the trial judge erred in relation to the treatment of the inheritances he received.
The parties separated in 2015 (at [2]). In 2013, the husband received an inheritance of about $290,000 from his deceased father’s estate, at least some of which money was mingled in the family finances (at [15]). Then, in 2017, the husband received another inheritance of nearly $80,000 from his deceased grandmother’s estate (at [15], [24]). At the time of trial in 2018, the husband retained $152,039 in a bank account (at [21]), much of which money must have comprised the unspent residue of the inheritances because his income from paid employment was paltry after 2011 (at [12]-[13], [17]).
The trial judge determined to:
(a)exclude the entirety of the husband’s 2017 inheritance from the “property pool” (at [24]);
(b)exclude an amount equivalent to the spent portion of the husband’s 2013 inheritance from the “property pool” (at [24]-[26]); but
(c)include in the “property pool” as an asset the remaining credit balance of the husband’s bank account, which was then part of the property settlement orders (at [26], [34]).
No error was thereby apparent. There is always discretion to treat inheritances differently from other assets, but never an obligation to always exclude them from consideration. In fact, ordinarily, a trial judge should begin by identifying all of the parties’ existing legal and equitable property interests (see Stanford v Stanford (2012) 247 CLR 108 at [37]-[40], [50]). The trial judge did so by identifying the cash controlled by the husband in his bank account. That the cash in the husband’s bank account may have mostly originated from inheritances did not deprive it of characterisation as the husband’s legal property.
Apparently, the husband’s narrow point was only that the trial judge took some of the inheritance money into account when his Honour contrarily said he would not. He submitted:
… [t]here is no evidence of this exclusion [of inheritance money] being accounted for in the property settlement calculation. As a result, this inheritance was incorrectly included in the property pool to the benefit of the [wife] and the detriment of the [husband].
The flaw in the submission is the assumption that the trial judge determined to exclude from consideration all of the inheritance money when, in fact, his Honour only determined to exclude from consideration the 2017 inheritance and the spent portion of the 2013 inheritance. The trial judge was quite clear that the residue of $152,039 banked in the husband’s account, which was imputed to be the unspent portion of the 2013 inheritance, would be taken into account (at [26], [34]).
Real property (Ground 4)
The former family home was a major component of the parties’ wealth and it was the focus of two significant arguments between them – one as to its current value and the other over who should bear responsibility for the decline in its value because of its decrepit condition.
In essence, the husband contended the trial judge erred by rejecting expert evidence of the former family home’s current value and by attributing the decline in its value entirely to him.
Several uncontroversial facts are salient to this ground of appeal. The former family home was valued in December 2015 at $525,000 (at [29]). At the time of trial, another expert valued the property at between $270,000 and $300,000, but opined its value would be in the “mid-$500,000 range” if it was in “average” condition, rather than in the dilapidated condition it was (at [27]-[28]). During the litigation, while the parties were also still in dispute over their children, orders were made precluding the children from spending time with the husband at the home because its dilapidation endangered their safety (at [29]). Indeed, the husband refused to let the expert enter the property to inspect it unless he signed a waiver releasing the husband from any liability for personal injury he may suffer when upon the property.
The parties were in dispute about the value of the property at trial (at [20]). The husband wanted the court to accept the valuation at between $270,000 and $300,000 (at [27]), but the wife wanted the value fixed at $525,000 on the basis that the husband should be held responsible for the deterioration in its value and, since he would retain the property, he would experience an unfair windfall if the property was devalued as he wanted. The wife did not urge the trial judge to adopt the lower valuation, as the ground of appeal and the husband’s submissions wrongly alleged.
During his cross-examination at trial in June 2018, the expert agreed the unimproved land was worth about $240,000 and the decline in the property’s value was due to the physical deterioration of the home over the past few years. Significantly, the wife and children vacated the former family home in November 2016, leaving the husband in exclusive occupation of it thereafter (at [3]-[4], [17]).
During the trial, the husband admitted the former family home was dilapidated. He alleged that was because the wife refused to allow him to spend any money to fix it. He admitted the local council had served a rectification notice upon him requiring the property to be made good, but no rectification work had been done.
The trial judge found the value of the property was depreciated because “vital repairs” were not done and it was incumbent upon the husband, as the sole occupier, to have undertaken the repairs (at [29], [31(c)]), particularly given he was the party served by the council with the rectification notice (at [30]). Accordingly, the trial judge found the property to be worth $525,000 (at [34]). Although not mentioned by the trial judge, in March 2018, only several months before trial, the husband sent a letter to the wife’s solicitors proposing that the former family home be listed for sale at $525,000. Presumably, he was not making the proposal vexatiously, in which event he must have entertained the belief that the property was capable of being sold at or close to that value.
The trial judge did not reject the expert’s evidence, as the husband implicitly contended, since the expert additionally said the property would be worth in the “mid-$500,000” range if it was in “average” condition. The property was apparently in a much worse condition than merely “average”, so the corollary of the trial judge finding the value of $525,000 established was the husband being held responsible for the deterioration in its condition during the period of his exclusive occupation of it. Having vacated the property, the wife could only adduce evidence of her observations about its changing condition. It was entirely within the province of the husband to lead evidence to explain the reasons behind the dramatic decrease in the property’s value over such a relatively short space of time so as to exculpate him from blame. He adduced no such evidence, save for alleging the wife would not agree to the release of money to cover the cost of repairs. That was an implausible excuse for several reasons.
First, importantly, there was no hint that the decrease in value was due in any way to downward movement in the property market. The decrease in value was wholly attributed to the physical condition of the house.
Second, the dilapidation of the house was not seemingly caused by mere inattention to regular maintenance. The husband told the expert the property was structurally unsound and egress to the house was only by way of a step-ladder propped against the side of the house.
Third, the husband did not rationally explain why or how the house fell into such a dangerous state of disrepair, when only he could have known. He simply asserted in a letter to the wife’s solicitors:
The significant drop in value [of the property] between December 2016 and January 2018 was a direct result of the continued deterioration of the house because of [the wife’s] refusal to agree on the scope and funding of repairs…
Fourth, the wife was found to have no cash or liquid assets she could commit to rectification of the property (at [33]-[34]) so she cannot be blamed for not attributing her meagre resources towards repair costs.
Fifth, the husband was possessed of cash in the sum of about $150,000 (at [34]), though he did not explain why he was loathe to use the money to fund any rectification expense, particularly since he proposed orders for him to acquire exclusive title to the property.
In the circumstances, we are not persuaded the trial judge’s discretionary findings in relation to the former family home were foreclosed.
Section 75(2) adjustment (Ground 4)
Ground 4 contended the trial judge erred by finding the wife was entitled to an adjustment of 10 per cent under s 75(2) of the Act, but no submissions directed to the alleged error were evident from the face of the husband’s written Summary of Argument. Absent any satisfactory elaboration, the bare contention fails.
Conclusion and costs
The appeal must succeed for the reasons explained in relation to the add-backs, which were the subject of Grounds 3 and 5, thereby requiring the orders made by the trial judge under Part VIII of the Act to be set aside and the remitter of the proceedings for re-hearing.
The husband was self-represented, but understandably incurred some modest expense in acquiring the transcript and preparing the appeal books. He sought an order that the wife pay those costs, which he quantified at $2,000, but his application is dismissed, conformably with the wife’s resistance to the application. The two add-back errors identified in the husband’s grounds of appeal, in isolation, may well have been amenable to rectification by his request of the trial judge to exercise the slip rule and thereby avoid the appeal. It was only the argument in the appeal which revealed more widespread error affecting the wife’s interests, so both parties were then affected. Aside from the grounds concerning the add-backs, the husband’s appeal was without merit. There will be no order for costs.
Since the appeal revealed errors of law which adversely affected both parties, we exercise discretion to grant both parties costs certificates for the appeal and the rehearing under the Federal Proceedings (Costs) Act 1981 (Cth).
I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Aldridge, Kent & Austin JJ) delivered on 8 July 2019.
Associate:
Date: 8 July 2019
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