Charles & Charles
[2017] FamCAFC 3
•12 January 2017
FAMILY COURT OF AUSTRALIA
| CHARLES & CHARLES | [2017] FamCAFC 3 |
| FAMILY LAW – APPEAL – PROPERTY – Whether the primary judge erred her determination of wastage arguments advanced by the wife – Whether the primary judge erred by including and/or not including certain items in the non-superannuation asset pool – Whether the primary judge erred in her overall assessment of contributions and in making an adjustment of only 15 per cent in favour of the wife pursuant to s 75(2) – Where no appealable error established – Appeal dismissed – Wife to pay husband’s costs of and incidental to the appeal. |
| Family Law Act 1975 (Cth) |
| Browne & Greene (1999) FLC 92-873 CDJ v VAJ (1998) 197 CLR 172 Chorn and Hopkins (2004) FLC 93-204 Edwards v Noble (1971) 125 CLR 296 Elford & Elford (2016) FLC 93-695 Gronow v Gronow (1979) 144 CLR 513 House v The King (1936) 55 CLR 499 Nolan and Ingram (1984) FLC 91-585 Kowaliw and Kowaliw (1981) FLC 91-092 Mallet v Mallet (1984) 156 CLR 605 Omacini and Omacini (2005) FLC 93-218 Sharman v Evans (1977) 138 CLR 563 Stanford v Stanford (2012) 247 CLR 108 Townsend and Townsend (1995) FLC 92-569 Vass & Vass (2015) 53 Fam LR 373 Watson v Ling (2013) FLC 93-527 |
| APPELLANT: | Ms Charles |
| RESPONDENT: | Mr Charles |
| FILE NUMBER: | MLC | 4327 | of | 2013 |
| APPEAL NUMBER: | SOA | 21 | of | 2015 |
| DATE DELIVERED: | 12 January 2017 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Bryant CJ, Thackray and Bennett JJ |
| HEARING DATE: | 15 October 2015 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 20 February 2015 |
| LOWER COURT MNC: | [2015] FCCA 365 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Hutchings |
| SOLICITOR FOR THE APPELLANT: | Robinson Gill |
| COUNSEL FOR THE RESPONDENT: | Mr O’Shannessy |
| SOLICITOR FOR THE RESPONDENT: | CE Family Lawyers |
Orders
The appeal be dismissed.
The wife is to pay the husband’s costs of and incidental to the appeal, such costs to be agreed or assessed and to be paid within twenty-eight (28) days of such agreement or assessment.
By consent Order 3 of the orders made 20 February 2015 by Judge Stewart be discharged and the following order made in lieu:
(3)The husband advise the wife a date upon which she is required to vacate the O Street property, such date not to be earlier than six (6) weeks after the date of this order (“the date”).
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 Charles & Charles 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 MELBOURNE |
Appeal Number: SOA 21 of 2015
File Number: MLC 4327 of 2013
| Ms Charles |
Appellant
And
| Mr Charles |
Respondent
REASONS FOR JUDGMENT
Bryant CJ and Bennett J
Before the court is an appeal against property settlement orders made by the Federal Circuit Court of Australia on 20 February 2015. The orders appealed relevantly provided for Ms Charles (“the wife”) to receive 55 per cent of the parties’ non-superannuation assets and for Mr Charles (“the husband”) to receive 45 per cent. The orders also provided for superannuation entitlements to be divided equally. The wife now appeals those orders.
On 20 February 2015 the primary judge also made parenting orders in respect of the parties’ two children, then aged five and three. The parenting orders provided for the parties to have equal shared parental responsibility for the children, for the children to live with the wife and spend substantial and significant (as described in the orders) time with the husband. The parenting orders are not appealed.
Background
In order to give context to the appeal, we now set out the background.
At the time of the hearing before the primary judge the wife was 37 years old and was not employed outside of the home, being the primary carer of the parties’ two young children and engaged in fulltime home duties. Her income was by way of Centrelink benefit and child support received from the husband for the benefit of the children. She was living in the former matrimonial home at O Street (“the O Street property”) which had an agreed value of $1.2 million subject to a mortgage of approximately $227,000. The wife sought to retain the O Street property in any property adjustment.
The husband was 41 years old and working as a finance services professional, earning approximately $110,000 per annum.
The parties commenced their relationship in or around 2003 and at some stage of that year, the parties commenced cohabitation. At that time both parties were employed in the financial services industry earning similar incomes.
The primary judge noted that both parties had assets and financial resources at cohabitation but that there was a dispute as to initial financial contributions.
In 2004 the parties became engaged. In late 2004 the parties travelled to Japan where they both taught English. They stayed there until early 2006. When they returned to Australia the husband resumed his employment in the financial services industry, earning a similar salary to that which he had before leaving for Japan. The wife “pursued alternative employment in the fitness industry and in other areas” ([13]).
The parties married in October 2006.
The primary judge outlined:
15.Following marriage the parties bought and sold a property in the eastern suburbs of Melbourne and ultimately purchased [the O Street property], which was to become the site where the former matrimonial home was built by the parties. There are significant disputes between the parties as to the source of funds for the acquisition and improvement of these properties purchased during the marriage…
16.Following the birth of the children [in 2009 and 2011] there is no dispute between the parties that the husband continued in employment outside of the home and the wife was primarily responsible for the care of the children, although she did pursue some employment outside of the home in the fitness industry.
The parties separated in May 2013. At the time of separation the wife obtained an intervention order which required the husband to leave the former matrimonial home. The wife and the children remained in the home.
The parties also had an investment property at H Road (“the H Road property”) which had been acquired by the husband prior to the marriage, and which was rented out at the time of separation.
The husband was paying child support pursuant to an assessment which required him to pay $1,900 per month.
In May 2014 the husband moved in to the H Road property where he continued to reside at the time of trial before the primary judge.
In her reasons, the primary judge also noted a number of other matters relevant to the history of the parties. Those matters, however, go to the parenting issues and as they are not germane to the orders for property settlement, they have not been reproduced here.
Primary judge’s reasons for judgment
The primary judge commenced her consideration of the applications for property settlement at [157] of her reasons for judgment. Her Honour noted
s 79 of the Family Law Act 1975 (Cth) (“the Act”) before discussing Stanford v Stanford (2012) 247 CLR 108 and determined that it was just and equitable to make an order altering the interests of the parties pursuant to s 79(2).
At [170] her Honour set out the following table reflecting the assets, including superannuation, of the parties:
Item
The former matrimonial home at [O Street]
$1,200,000
This value is agreed.
[H] Street [sic]
$620,000
This value is agreed
ANZ shares in the name of the husband
$58,608
Wife’s ANZ Shares
$7,657
Wife cash at bank
$5,000
Husband asserts should be $11,300
Wife’s motor vehicle
$13,200
Total assets
$1,904,465
Liabilities
Mortgage over [O Street]
$227,000
Husband’s tax liability
$10,000
Joint Visa
$1,800
Total liabilities
$238,800
Net non-superannuation assets
$1,665,665
Superannuation husband
$162,989
Superannuation wife
$46,766
Total Superannuation
$209,755
Her Honour observed that in relation to the former matrimonial home, depending on who retained the property, it would need to be transferred out of one party’s name. In relation to H Road her Honour said there appeared “to be a general agreement that as neither party proposes to keep this property ... [i]t will need to be sold and there will be some Capital Gains Tax Liability”. The primary judge then observed that it was agreed the Capital Gains Tax liability could be dealt with by “holding some money back from the settlement proceeds” ([172]).
The primary judge then observed there were a number of issues pertaining to the asset pool. Those which are the subject of appeal are described.
At [197] the primary judge identified that two wastage arguments raised by the wife needed to be determined. Her Honour noted the wife’s position as being that the husband had reduced the assets and resources available for division between the parties and that this should be reflected in the composition of the asset pool.
The first wastage argument related to share trading by the husband. The wife alleged the husband engaged in “risky share trading which ultimately caused a loss to the parties of some $40,000 to $50,000” ([198]). The primary judge ultimately resolved that issue in favour of the husband.
The second wastage argument related to the mortgage over the O Street property. The wife claimed that, as a result of the husband suspending the scheduled mortgage repayments, there was approximately $20,000 less property available for distribution than there would otherwise have been, and that the husband should be held responsible for this. The primary judge resolved this issue in favour of the husband and declined to make any adjustment ([198]).
At [203] the primary judge rejected the wife’s argument that the husband’s personal tax liability of $11,000 should not be included in the asset pool. Her Honour resolved to include the liability in the pool but said that she would take it into account as a factor “impacting on [her] discretionary assessment of section 79 and section 75(2) matters” ([204]).
At [205] her Honour determined to treat an $1,800 credit card debt of the husband in the same manner as the personal tax liability.
At [214] her Honour further recorded that the husband had 16 weeks’ long service leave entitlements. Her Honour said the matter was “not pursued” but that she would take it into account as a benefit “the husband will derive from his long term and secure employment when assessing section 75(2) factors” ([214]).
In relation to initial financial contributions the primary judge identified “a significant dispute between the parties with respect to property and resources owned by them at the commencement of the relationship” ([176]).
Her Honour then noted that the husband contended that if his arguments in relation to initial contributions were accepted, then his contribution-based entitlement should be between 60 and 62.5 per cent of the asset pool.
Her Honour noted there was a significant dispute about the initial financial contributions, as the wife did not accept the husband’s position that he had contributed assets worth in the vicinity of $390,000 and that she had not contributed assets worth only in the vicinity of $70,000.
Her Honour said the real dispute about the wife’s initial contributions was whether the husband had made any contribution to the $104,000 the wife had provided from a term deposit in her name to the purchase of the parties’ first home. It seems it was not in doubt that the wife had received $70,000 from the sale of her home in Suburb C in 2003, and she maintained that the money in the term deposit was derived solely from the proceeds of that sale, whereas the husband said both parties made contributions to those funds during the marriage.
The husband’s case was that his asserted $390,000 was made up of his equity of $200,000 in the H Road property, a real property in Suburb D with equity of $190,000, and some shareholdings valued at $5,679 at the commencement of the relationship.
The primary judge accepted the husband’s initial contributions were in the vicinity of $390,000 ([186]). In relation to the wife’s initial contributions her Honour quelled the dispute as to their financial value by finding:
183.It is difficult to quantify the wife’s initial financial contributions with precision and it is unnecessary to do so. However … I find that the wife’s initial financial contribution was probably a figure of approximately $70,000…
Her Honour then considered a gift from the husband’s grandparents in 2005 of $50,000 and determined that it was not, as was submitted by the wife, a gift to both parties but was rather a contribution made solely on behalf of the husband ([196]).
In relation to the contributions of the parties during the marriage the primary judge held that the contributions were equal ([220]) and said at [221] that “each of the parties conceded that the contributions made personally by the parties during the marriage should be regarded as equal”.
The primary judge did not consider that there were any contributions made after separation to be taken into account and ultimately assessed contribution-based entitlements as 60 per cent to the husband and 40 per cent to the wife.
Her Honour then considered the matters pursuant s 75(2) of the Act ([229] to [273]). Her Honour concluded:
272.Having regard to all of the matters set out above in my view it is appropriate to make a 15% adjustment in favour of the wife having regard to section 75(2) matters on non-superannuation assets. This equates to an adjustment of just under $250,000 for these matters which is a significant amount.
273.I am of the view that the section 75(2) factors weigh in the wife’s favour and significantly so, the most significant factors being her ongoing requirement to care and provide for the children and her reduced capacity for remunerative employment consequent upon the marriage.
In relation to superannuation, her Honour noted the absence of particularity in the husband’s assertion that his superannuation entitlements at the commencement of the relationship were significantly more than those of the wife. She said she proposed to:
275.…equalize the parties’ superannuation by way of splitting order and if there is any adjustment in the wife’s favour, such adjustment is appropriate having regard to the husband’s ability to continue to earn at a superior level into the future together with the other section 75(2) factors as set out.
Finally her Honour considered the orders she proposed to make were just and equitable. Her Honour set out:
278.Thus, in the broad the property orders I propose to make will provide for:-
a) a sale of [the H Road property];
b)a property division on non-superannuation assets of 55% to the wife and 45% to the husband;
c)an equal division of superannuation entitlements by way of superannuation splitting order.
279.As a final check and returning to section 79(2) for a moment I note the parties will each receive a division of property as follows:-
a)The wife will receive a total of $916,116 (assuming [the H Road property] nets $620,000, which it may not). She will take that amount predominately in cash but has $27,857 in other assets comprising her car, her shares and some additional cash. She will also hold superannuation entitlements in the sum of approximately $105,000. She will owe the husband $1,925 for the costs of the Family Report which will be paid to the husband out of the wife’s share of the [H Road property] proceeds;
b)The husband will receive a total of $749,549 (with the same caveat as to [H Road]). He will take that amount by taking the substantial asset of the former matrimonial home and will make a payment to the wife of $549,250. He will be able to defray the payment to the wife by his 45% of the net proceeds of [H Road] and the sale of shares if necessary. By my calculations he will have a significant mortgage of around $440,000 and he will be required to pay his tax and visa card debt. The evidence suggests that he can just afford to retain the property and he will be given the opportunity to do so. He will also hold superannuation entitlements in the sum of approximately $105,000.
At [280] her Honour indicated both parties would have to pay their own legal expenses.
The appeal
By further amended notice of appeal filed 10 September 2015 the wife appeals the orders for property settlement.
The grounds of appeal can conveniently be considered under two main headings to which they are directed:
·Challenges to the property of the parties (or either of them);
·Contribution and s 75(2) challenges.
The challenges to the property of the parties assert the primary judge erred in:
a)Disregarding the post-separation decrease of equity in the former matrimonial home (Grounds 1(a), (b) and (c)).
b)Disregarding the share trading losses incurred by the husband (Grounds 2(a), (b) and (c)).
c)Omitting to take into account the husband’s long service leave entitlements (Grounds 3(a), (b) and (c)).
d)Finding against the evidence that the husband had a personal tax liability of approximately $11,000 and treating it as a liability and as relevant to s 75(2) (Grounds 4(a), (b) and (c)).
e)Including the husband’s credit card liability in the pool available for distribution (Ground 4(d)).
The contribution challenges assert the primary judge erred in:
a)Assessing contributions as to 60 per cent in favour of the husband (Ground 5(a)).
b)Making only a 15 per cent adjustment in favour of the wife for s 75(2) matters (Ground 5(b)).
c)Assessing the overall adjustment as 55 per cent to the wife and 45 per cent to the husband (Ground 5(c)).
Should the appeal be successful the wife sought orders that:
·the husband transfer to her his right, title and interest in the former matrimonial home;
·the wife withdraw any caveat she had lodged over the H Road property;
·the wife pay to the husband $1,950 being one half of the cost of the family report; and
·each party otherwise retain all assets in their respective possession, including superannuation.
Challenges to the property of the parties (or either of them)
Ground 1
Her Honour erred by:
(a)wholly disregarding the post separation decrease of equity in the [O Street] property; and/or
(b)taking into account an irrelevant matter, or failing to properly consider a relevant matter pertaining to her treatment of the decrease of equity in the [O Street] property; and/or
(c)providing inadequate Reasons such that it cannot be ascertained how the issue of the reduction in equity in the [O Street] property was treated.
As we have indicated above, her Honour’s reasons on this issue can be found at [198] of her reasons under the heading “Wastage arguments by the wife”. It is useful to now set out those reasons (original emphasis):
Issue with the mortgage over the former matrimonial home
a)In her affidavit the wife, under a heading “wastage” makes complaints about the husband’s dealings with both the payment and structure of the mortgage over the former matrimonial home.
b)The wife’s complaint relates to a series of events that took place from around August, 2013 and following;
(i)up until August, 2013 the husband had been servicing the mortgage over the former matrimonial home from his income and from rental income received from the [H Road] property;
(ii)On 6 July, 2013 the wife’s application for an administrative assessment of child support was accepted by the Child Support Agency and child support was payable by the husband to the wife from that date;
(iii)At this time the mortgage repayments were well in advance and on 19 July, 2013 the husband took steps to suspend the scheduled fortnightly repayments on the mortgage which were around $2,200 per fortnight. The wife complains that the husband did not advise her that he had taken this step and she did not become aware of the suspension until approximately one month later. She complains that the husband had ample opportunity to advise her that he had suspended payments;
(iv)Upon becoming aware of the husband’s actions the wife sought the husband’s permission to refinance the mortgage so as to reduce the fortnightly repayments to a far more manageable sum of around $560 per fortnight and to stop $2,200 per fortnight being drawn down from the amount the parties were ahead on the mortgage. The wife has calculated, and I accept that the net effect of this would have been approximately a $20,000 saving on the mortgage. In other words, had the mortgage been refinanced the mortgage balance at trial would have been approximately $20,000 lower;
(v)Essentially the wife says that the husband unreasonably refused to refinance and therefore he should be responsible for the net effect which is that there is approximately $20,000 less property available for division between the parties;
(vi)The wife also complains that at around the same time the husband instructed the managing agent for the [H Road] property to pay rental receipts to him whereas previously those receipts had been paid to the mortgage liability;
(vii)The husband’s position in relation to this issue was that in making the proposal the wife had unreasonable expectations that he would pay child support and the mortgage and she would not resile from that position. He refers specifically to a letter from the wife’s then solicitor dated 18 September, 2013 which in terms of child support says as follows:-
We refer to the comments made in your letter dated 16 September and note our client was advised by Child Support that your client remains responsible for any mortgage repayments as they fall due.
We are also instructed by our client that the first notice of payment in relation to child support that was due and payable on 6 September 2013 in the sum of approximately $1,300 remains unpaid. We are instructed that our client made some concessions regarding withdrawals on her part, of which reduced assessment.
Further, we have been instructed by our client, that otherwise, Child Support has assessed your client’s responsibility as being $1,900 per month, of which the next payment is due on or about 6 October 2013.
In the event that the mortgage on the [O Street] property is refinanced and your client pays his share, Child Support can make an appropriate adjustment at its discretion. Our client will not be agreeable to any reduction in child support.
(viii)The wife’s position in relation to this issue is that “any equity in the [O Street] property that has been lost by the husband’s action/inaction be offset against any amount that is ordered to be paid to the husband by this Honourable Court”. It was abundantly clear during the wife’s evidence that she was very angry about this issue and her level of emotion seemed disproportionate to the issue and quantum involved.
(ix)Even if I accepted the wife’s position in relation to this issue it would not be appropriate to simply deduct the alleged loss from the husband’s share of assets pursuant to any orders. Such an approach would be tantamount to an add-back and the position following Stanford v Stanford [2012] HCA 52 is that the concept of an add-back being a notional item of property to the interests held by either of the parties, will have limited compass in the future.
In Watson v Ling Murphy J at paragraph 33-34 said:-
First, consistent with existing authority, it can be recognised pursuant to Section 75 (2) (o) (c), for example Omacini & Omacini [2005] FamCA 195, Brown & Green (1999) FLC 92-873 and Sereni [1998] FamCA 143. Secondly, it might be contended that it might be recognised within the assessment of contribution. This Court has long eschewed the notion of “negative contributions” (see, for example, Antmann & Antmann (1980) FLC 90-908). It might be argued that the “non-dissipating party” can be seen to have made disproportionately greater indirect contribution to the existing legal and equitable interests (for example to their preservation) if it is established that, for the other party’s unilateral dissipation, those existing and legal equitable interests would have been greater or of a greater value.
The assessment of the circumstances under discussion is, ultimately, a matter of discretion. Equally however, authority dictates that it will be the exception rather than the rule that a direct dollar adjustment equivalent to the amount of the alleged dissipation of the pool is made to the otherwise entitlement of a party.
(x)In any event and regardless of the way it should be treated, both parties seem partly responsible for any loss. With the benefit of hindsight perhaps the husband should have agreed to the refinance however the wife, in adopting an unyielding approach to child support issues contributed to the problem. Further, the wife could have issued an interim application in relation to this issue but did not do so.
(xi)I decline to make any adjustment to either party’s entitlements as a result of this issue, even in a wider assessment considering section 75(2)(o).
The wife challenges the determination by her Honour on three bases:
1.She should not have had regard to the child support aspect, which was irrelevant to the determination of this issue;
2.She should not have had regard to any failure to bring an interim application by the wife; and
3.She failed to have regard to the cases relevant to “wantonly, negligently, negligently, or recklessly causing a diminution in the pool available for distribution between the parties” (see Kowaliw and Kowaliw (1981) FLC 91-092).
It is clear that issues of waste were a significant part of the wife’s case. In the wife’s outline of case filed at first instance, under the heading “Husband’s Wastage” the wife alleges that in “July 2013, the husband unilaterally suspended loan payments on the [O Street] property. Mortgage balance at that time was $214,605.83. Amount of ANZ Loan as at 7 August 2014 was $222,793.49”. The wife went on to say that at the date of separation the amount paid in advance of the loan was $200,000 but that by 7 August 2014 the amount had diminished to $145,707.14.
The primary judge seems to have accepted that there was a loss of capital of $20,000. However, her Honour describes this figure, apparently accurately as ([198](b)(iv)):
…The wife has calculated, and I accept that the net effect of this would have been approximately a $20,000 saving on the mortgage. In other words, had the mortgage been refinanced the mortgage balance at trial would have been approximately $20,000 lower…
Counsel for the wife conceded, however, that this was not the actual loss which, according to counsel, was around the $7,000 to $8,000 mark. As we have pointed out, in the wife’s outline of case document, the difference between the mortgage balance at July 2013 and at trial was $8,187.66. The wife’s $20,000 was calculated as being the asserted potential saving had the mortgage been refinanced, not the actual reduction in the amount owing on the mortgage. The wife’s case relied upon the husband’s unreasonable refusal to refinance in July 2013 as leading to there being approximately $20,000 less property available for division. Counsel for the wife submitted that her Honour failed to consider the question of wastage and wrongly found herself bound by Stanford in not accepting this figure as an “add back” to the pool.
The submission that her Honour did not properly consider the principles arising from Kowaliw cannot be sustained in view of [198](b)(ix) where her Honour cited the comments of Murphy J in Watson v Ling (2013) FLC 93-527.
In addition, we do not consider that her Honour fell into any error in failing to find that the husband had “recklessly, negligently or wantonly” caused a diminution in the pool of assets available for distribution (Kowaliw) because in our view his actions do not have that character. As her Honour says, the circumstances in which dissipated property may be included notionally in the pool available for asset division are reasonably limited (see Townsend and Townsend (1995) FLC 92-569 in respect of what could be described as waste, and Chorn and Hopkins (2004) FLC 93-204 in respect of the circumstances in which paid or pending legal fees are or are not added back to the pool of assets).
In Kowaliw Baker J enunciated the general rule that financial losses incurred by the parties throughout the course of the marriage, whether jointly or otherwise should be shared by them, although not necessarily equally. Adding back is the exception, not the rule and the exception arises where a party, has by a “deliberate act or by economic recklessness reduced the value of assets available for distribution” (at 76,644-5).
Baker J held (at 76,644):
…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 Full Court in Omacini and Omacini (2005) FLC 93-218 accepted
Baker J’s analysis and, in addition, noted the court’s discretion to add back necessarily extends to circumstances where there has been a premature, although not always wanton or negligent distribution of marital assets.
Clearly, her Honour did not consider that the husband had been wanton, negligent or reckless in his failure to renegotiate the mortgage payments and that finding was open to her.
Counsel for the wife asserted that the primary judge conflated the husband’s obligation to pay child support with his obligation to maintain the wife (by making mortgage payments) and wrongly regarded the wife’s failure to bring an interim application seeking orders to compel him to resume making repayments as relevant to this issue.
It seems to us however that her Honour was doing no more than explaining why she did not consider the husband’s reduction in mortgage payments to have the character of “wastage” as described in Kowaliw. Her Honour took into account that the mortgage was significantly in advance and that the husband’s circumstances changed when he was required to pay child support. She further took into account that each party contributed in some way to the outcome ([198](b)(x)), finding:
In any event and regardless of the way it should be treated, both parties seem partly responsible for any loss. With the benefit of hindsight perhaps the husband should have agreed to the refinance however the wife, in adopting an unyielding approach to child support issues contributed to the problem. Further, the wife could have issued an interim application in relation to this issue but did not do so.
These were all matters her Honour was entitled to take into account in determining the question of whether, and in what amount, any item should be added back to the asset pool as a notional asset and in what circumstances. Her Honour rejected the submission that this came within the considerations of Kowaliw and further eschewed the notion of “negative contributions” as set out in Watson v Ling.
The primary judge was dealing with an argument that “but for” certain circumstances, there would have been more equity. But as her Honour observed at [198], citing Watson v Ling:
The assessment of the circumstances under discussion is, ultimately, a matter of discretion. Equally however, authority dictates that it will be the exception rather than the rule that a direct dollar adjustment equivalent to the amount of the alleged dissipation of the pool is made to the otherwise entitlement of a party.
Her Honour, in our view, considered all matters relevant to this issue and ultimately exercised her discretion not to take it into account by adding it back to the pool or in any other way. Her Honour had a wide discretion and we are not satisfied that it miscarried. We therefore find no error in the complaints raised by Ground 1.
Ground 2
Her Honour erred by:
(a)wholly disregarding the share trading losses incurred by the Husband; and/or
(b)failing to consider the share trading losses as relevant to the assessment of the parties’ respective contributions; and/or
(c)failing to provide adequate reasons such that it could be ascertained how the share losses were treated.
Her Honour also dealt with this issue at [198] of her reasons. Her Honour relevantly said:
a)During the marriage the husband engaged in alleged risky share trading which ultimately caused a loss to the parties of some $40,000 to $50,000. Although the husband had initially deposed to a small gain of $10,000 he corrected that position in his evidence in chief and indicated there was an error made by his solicitor. It is concerning that the husband could make such an error when the share issue was clearly of concern to the wife. Nevertheless it was corrected and I accept the husband’s latter position as accurate.
b)The wife cites her concern about the share trading (which was funded by increased mortgage over the real property in [Suburb D]) and said that it was done without her authority. During cross examination the wife told me that she wanted the court to take the loss on shares into account and not to disregard the issue totally;
c)I am not persuaded that the husband has either:-
i)embarked on a course of conduct designed to reduce or minimise the parties’ wealth; or
ii)acted recklessly, negligently or wantonly with the parties’ money
my conclusion with respect to the husband’s financial management of the parties’ assets is quite the opposite and I regard him [and the wife] as a competent investor;
d)The evidence suggests that this is the only instance in the marriage where the parties have lost money and the loss was incurred during the global financial crisis. Although the loss is a relatively significant amount it is easily categorised as being part of the financial ups and downs of married life.
Her Honour therefore declined to take the share trading into account.
Counsel for the wife first criticised the primary judge for not considering whether the share trading should be taken into account as a contribution (presumably as a negative contribution) and limiting her consideration as to whether or not the losses should be “added back”. Counsel submitted that had her Honour considered the issue as part of her assessment of contributions it would have been open to her to “notionally balance these losses with the Husband’s asserted direct financial contributions” (appellant’s summary of argument at [14]), and that this was particularly so where the husband received credit for an initial contribution of the equity in the property, which he borrowed against to fund the share trading.
The first point that we make in relation this submission is that counsel for the wife did put this, at least to the husband in cross-examination, as a wastage argument, although it is not referred to in the outline of case document relied upon at first instance. In the course of cross-examining the husband about the borrowings and the share trading, counsel for the wife said:
MR PANNIFEX: So when she says that there has been some wastage in this case, what I put to you is that there has been, hasn’t there?
(Transcript, 30 September 2014, p 42)
Her Honour said a few lines later:
HER HONOUR: You might want to explore it, because I just can’t see at the moment how it gets even close to a wastage argument.
(Transcript, 30 September 2014, p 42)
It is not therefore accurate, with respect, as counsel submitted to us that it was not put at trial as a wastage argument, but rather as a matter going to the question of contributions.
In any event, as her Honour found (and there is no challenge to this finding) the husband had not acted recklessly, negligently, or wantonly with the parties’ money or embarked on a course of conduct designed to reduce or minimise their wealth. Rather, her Honour regarded him as a competent investor, and she was therefore, in our view, not in error in refusing to take the losses into account as a negative contribution offsetting the husband’s initial contribution. This is consistent with what the Full Court observed in Browne & Greene (1999) FLC 92-873 where they said:
53.… There can be little doubt that had the [investment] succeeded, the wife would have sought to share in the fruits of that success, and there would seem to be no reason why she would not have been entitled to do so. It is this last-mentioned consideration, being that parties generally expect to share the economic profits of a marriage, which, in our view, requires that there should be good and substantial reasons for departing from the principle that where there are economic losses incurred in a marriage, those losses should be shared, absent any negligence, recklessness or deliberate dissipation of assets by one party…
Her Honour’s findings were, in our view, consistent with accepted authority and do not constitute an appealable error.
Ground 3
Her Honour erred by:
(a)Finding that the issue of the Husband’s long service leave entitlements was not pursued by the Wife; and/or,
(b)Failing to give adequate reasons such that it can be ascertained how the Husband’s long service leave entitlements were treated; and/or,
(c)Giving no weight, or insufficient weight to the Husband’s entitlement to long service leave.
Relevant to this ground her Honour said:
214.The husband has around 16 weeks of accrued long service leave with his present employer. It is unclear to me why this was raised. In any event it was not pursued and I merely take it into account as one of the benefits the husband will derive from his long term and secure employment when assessing section 75(2) factors.
Counsel for the wife sensibly conceded that:
· The evidence was unclear as to whether the long service leave entitlement could be taken as a lump sum;
· The husband said he was unsure he would take his long service leave in the next 24 months; and
· With that dearth of evidence, it could not reasonably have constituted a financial resource of any substance.
Having regard to the above, counsel for the wife conceded that any consideration of this issue lies in a consideration of s 75(2) factors as part of the husband’s employment package.
That concession is demonstrably correct and thus we treat this ground as not being seriously pressed and therefore it must fail.
Ground 4
Her Honour erred:
(a)by finding that the Husband ‘has been assessed for a personal taxation liability in the sum of approximately $11,000’ as such finding was not available on the evidence; and/or,
(b)by including the Husband’s taxation liability in the asset pool as a liability of the Husband as to do so was to give weight to an irrelevant or improper matter; and/or,
(c)by finding that the taxation liability (if included in the calculation of the asset pool available for distribution) was relevant to the s 75(2) factors; and/or
(d)by including the Husband’s credit card liability in the pool available for distribution between the parties.
Grounds 4(a), (b) and (c) deal with a tax liability which the primary judge found to be approximately $11,000 and Ground 4(d) deals with a credit card debt of the husband in the sum of $1,800.
The income tax liability was dealt with by the primary judge at [203] and [204].
In his last statement of financial circumstances filed before the hearing (sworn 21 August 2014), the husband deposed to two amounts of tax outstanding. The first being $7,000 for “the last financial year” and the second being $4,937 for the previous financial year. There was cross-examination of the husband on the previous year’s tax which the husband related to the 2013 year. The evidence was that he had made an arrangement with the Australian Taxation Office (“the ATO”) for payment by instalments. A letter from the ATO indicated a repayment schedule involving total payments of $5939.60. The husband said that after the instalments already due were paid, the remaining balance was “around about $3,000” at the time of hearing.
Despite some cross-examination of the husband, there was no serious challenge to the 2013 debt, with the husband indicating that he had already paid some of the tax liability before the hearing before the primary judge. The husband was not challenged about the liability for “the last financial year”, that is the $7,000 for 2014. Counsel contended that the 2014 tax estimate was “faintly” challenged. We do not agree. An appeal court should not interfere with the findings of a trial judge if there was evidence available to support such a finding of the trial judge (Edwards v Noble (1971) 125 CLR 296 at 304).
Accordingly the challenge to the factual finding of a liability of $11,000 to the ATO must fail.
In her written submissions filed 4 September 2015 the wife asserted:
24.Once her Honour concluded that she ought to include this ‘liability’ [being the $11,000 total as found by the primary judge] in the asset pool, it is inconceivable how it could have been considered under
s 75(2). This had the effect of the Wife paying 55% of the Husband’s post separation taxation debt (as guessed by the Husband).This contention by the wife cannot be supported. Consideration of the matters that the primary judge took into account under s 75(2) (see [229] to [275]) reveals that there was no further consideration of the tax liability. The closest one could come to any reference to it is at [244] where her Honour said:
244.… The husband will have significant debt at the conclusion of these proceedings in order to fund the transfer of the former matrimonial home into his name and to refinance the existing mortgage over the property. This is his choice. He could also live in a more modest home with the children and therefore I do not regard his probable debt level after these proceedings as a matter which impacts on my assessment of section 75(2) factors and it was not suggested that I should…
There is no other reference to the husband’s tax liabilities in her Honour’s consideration of s 75(2) factors and they were certainly not taken into account by the primary judge in any way against the wife.
Grounds 4(a), (b) and (c) must therefore fail.
Ground 4(d) relates to a credit card debt of $1,800. Counsel for the wife conceded that even if we found error by the primary judge (which we do not) it would be de minimis in the overall pool and could not, of itself, be sufficient to disturb the judgment.
Counsel for the husband submitted that no issue was taken by the wife at trial to the inclusion of this item in the pool and counsel could not now resile from that position on appeal. We agree with that proposition (see Nolan and Ingram (1984) FLC 91-585).
We therefore find no merit in Ground 4(d).
Contribution and s 75(2) challenges
Ground 5
That her Honour’s assessment/s of the following were plainly wrong and/or not a proper exercise of judicial discretion and/or not just and equitable:
(a)The assessment that the contributions of the parties overall were 60/40 in favour of the Husband; and/or,
(b)The assessment that there ought only to be a 15% adjustment in favour of the Wife pursuant to s 75(2); and/or,
(c)The overall division of the (non-superannuation) property as 55/45 in favour of the Wife.
The written submissions of the wife concede in relation to Ground 5(a) that for it to succeed either Grounds 1 and/or 2 need also be successful. Counsel contended that if either was successful, the existing contributions assessment would be plainly wrong. If they were unsuccessful, the assessment of 60 per cent in favour of the husband “was at the limit of a proper exercise of discretion when considered in the context of the findings made by her Honour”.
Counsel for the husband submitted that at trial counsel for the wife did not disagree that financial contributions during the marriage were equal and that in relation to initial financial contributions, the husband was “somewhere between 10 and 12 and a half per cent ahead.” Counsel for the wife conceded that there was no error of law by the primary judge but the complaint fell to be considered as a question of weight.
The exercise of discretion central to the decisions made by courts exercising power under the Act and the jurisprudence which relates to the circumstances in which a discretionary decision can be overturned are well established (see House v The King (1936) 55 CLR 499 at 505; Gronow v Gronow (1979) 144 CLR 513 at 519 per Stephen J; Mallet v Mallet (1984) 156 CLR 605; CDJ v VAJ (1998) 197 CLR 172 at 186). In particular, an appellate court should be slow to overturn a primary judge’s discretionary decision on grounds which only involve conflicting assessments of matters of weight (Gronow at 520). This must especially be so when submissions made at trial were not inconsistent with the outcome.
In relation to Ground 5(b), the wife contended that the adjustment of 15 per cent was inadequate having regard to the husband’s earnings, long service leave entitlements, capacity to defer payments of his borrowings to pay legal fees and his good health in comparison to her own position. The wife further asserted that the non-superannuation property adjustment, when converted to monetary terms, equated to less than $250,000. Counsel for the husband correctly pointed out that in practical terms the disparity between the parties on account of that adjustment was almost $500,000. The wife asserted the adjustment was inadequate and plainly wrong.
The same considerations that we have already discussed about the exercise of discretion attend this ground. It was not contended that the primary judge had regard to any irrelevant matter nor failed to take account of relevant matters and this ground must fail.
Ground 5(c) asserts that the overall result was plainly wrong. As we were not taken to any error by the primary judge in the discretionary assessment, which counsel conceded were ultimately matters of weight, this ground must also fail and accordingly the appeal must be dismissed.
Form of orders
At the hearing of the appeal we were informed by counsel that there was an order staying the orders under appeal. The stay will cease to operate on determination of the appeal. It was agreed that on dismissal of the appeal, Order 3 of the orders made on 20 December 2015 would need to be varied to provide a new timeframe in which the husband is to advise of the date on which the wife is required to vacate the O Street property.
Costs
In Elford & Elford (2016) FLC 93-695 at [68] the Full Court said:
Section 117(1) of the Act describes that each party bears their own costs. However, in the exercise of the broad discretion conferred by s 117(2A), the expectation that the making of orders at the conclusion of a trial should ordinarily bring an end to the litigation and consequently, the legitimate expectation that the parties should retain the fruits of their judgment is an important consideration in combination with an appeal being “wholly unsuccessful” (s 117(2A)). (See, for example, Trask & Westlake (Costs) [2015] FamCAFC 214, at [4]; Limousin & Limousin (Costs) (2008) 38 Fam LR 478, at [60])…
Counsel for the husband sought costs on the basis that if the appeal was dismissed then the wife would have been wholly unsuccessful. The wife resisted an order for costs on the basis that the husband’s financial position was superior to hers and, if the appeal was dismissed, would remain, substantially superior to hers.
As one of the mattes to be considered when determining what order, if any, to make under s 117(2), s 117(2A)(a) requires the court to have regard to the financial circumstances of each of the parties to the proceedings. Overall, in determining a division of assets, the wife received 55 per cent to the husband’s 45 per cent. Thus, the distribution of assets was in her favour and the primary judge made an “adjustment of just under $250,000” on account of s 75(2) factors ([272]).
Whilst noting the inferior financial position of the wife, for which the primary judge made an adjustment, the fact that she has been entirely unsuccessful in her appeal must be weighed against this in circumstances where, as was said in Elford, the husband was entitled to assume that the orders made a trial brought the litigation to an end. As Barwick CJ said in Sharman v Evans (1977) 138 CLR 563 at 565-566, albeit in a different context:
I think it is relevant to the decision of this appeal to remember that our system by which differences between citizens and, for that matter, between the state and the citizen are resolved in one of trial. It is not a system of resolution by appeal … I have said elsewhere, and I venture to repeat, that resolution of difference by trial rather than by appeal is of great public benefit. It tends to earlier finality and greater certainty than would be the case if cases were chiefly decided on appeal.
We will therefore order that the wife pay the husband’s costs of and incidental to the appeal.
Thackray j
I have had the advantage of reading the draft judgment of the Chief Justice and Bennett J. In agreeing that the appeal should be dismissed, I adopt the reasons of the majority concerning Grounds 2, 3 and 5, but wish to make some observations of my own concerning Grounds 1 and 4.
Ground 1 - Wastage relating to mortgage payments
The first issue arising under Ground 1 is whether the trial judge misapplied Stanford v Stanford (2012) 247 CLR 108 when deciding not to “add back” $20,000, or some other amount, into the asset pool on account of the husband's conduct relating to the mortgage on the former matrimonial home.
The wife's complaint relating to this issue arises out of [198(a)] of the reasons, where her Honour said (emphasis added):
ix)Even if I accepted the wife's position in relation to this issue it would not be appropriate to simply deduct the alleged loss from the husband's share of assets pursuant to any orders. Such an approach would be tantamount to an add-back and the position following Stanford v Stanford [2012] HCA 52 is that the concept of an add-back being a notional item of property to the interests held by either of the parties, will have limited compass in the future…
In making this observation, the trial judge did not have the benefit of the decision in Vass & Vass (2015) 53 Fam LR 373, which was delivered soon after she handed down her decision. The Full Court in that matter made clear that, notwithstanding what had been said about Stanford, there is no error in principle when a court adjusts property interests by notionally “adding back” money or assets which have been dissipated by one of the parties. It is unnecessary to consider whether the trial judge’s passing reference to Stanford is inconsistent with anything that was said in Vass, since examination of the judgment demonstrates that her Honour's understanding of Stanford ultimately formed no part of her reasoning.
That this is so can be seen first in the portion of [198](a)(ix)] which I have highlighted in the citation above. It can also be seen from the fact that her Honour, having referred to Stanford, immediately went on to quote from Watson v Ling (2013) FLC 93-527, where Murphy J discussed the pre-Stanford authorities dealing with the circumstances in which a court can take into account conduct leading to a diminution in the value of assets available for distribution. Having referred to the authorities, Murphy J concluded at [34]:
The assessment of the circumstance under discussion is, ultimately, a matter of discretion … Equally, however, authority dictates that it will be “the exception rather than the rule” … that a direct dollar adjustment equivalent to the amount of the alleged dissipation of the pool is made to the otherwise entitlement of a party.
Having quoted this passage, the trial judge said (emphasis added):
x)In any event and regardless of the way it should be treated, both parties seem partly responsible for any loss. With the benefit of hindsight perhaps the husband should have agreed to the refinance however the wife, in adopting an unyielding approach to child support issues contributed to the problem. Further, the wife could have issued an interim application in relation to this issue but did not do so.
xi) I decline to make any adjustment to either party's entitlements as a result of this issue…
Once again, the highlighted portion of this passage makes clear that her Honour was not proceeding on the basis that she was bound by what she understood to be the effect of the decision in Stanford. Rather, she was proceeding on the basis that she was not satisfied that the husband’s conduct warranted the making of any “adjustment” to his entitlement. It was accordingly her Honour’s view of the character of the husband’s conduct, not any (mis)application of Stanford, which formed the basis of the decision.
The second issue raised by this ground is the alleged failure “to consider the principles arising from Kowaliw & Kowaliw (1981) FLC 91-092”.
It is true that the trial judge did not make any express reference to the Kowaliw “principles” when dealing with the mortgage issue; however, this part of her Honour’s reasons stands to be considered in light of the fact that, when dealing with the “wastage” argument about the share trading, her Honour had already said she was “not persuaded that the husband has either embarked on a course of conduct designed to reduce or minimise the parties’ wealth; or acted recklessly, negligently or wantonly with the parties’ money” (at [198(c)]). The trial judge there was paraphrasing Kowaliw, which lays down the approach to be followed when a court is asked to take into account conduct which has reduced the value of the assets available for distribution.
Having already made reference to the applicable principles, it was unnecessary for the trial judge to make reference to them again when discussing the mortgage. Clearly, her Honour would have had the Kowaliw principles in mind when considering that topic, but they had no application if she was right in concluding that both parties were to blame for the reduction in the value of the assets. If that conclusion was correct, then it would not have been appropriate for her Honour to conclude that responsibility for the loss should fall entirely on the husband. Nothing that was put in argument persuaded me that the conclusion was not open to her Honour. In any event, I respectfully agree with the Chief Justice and Bennett J that the husband’s conduct did not warrant an “adjustment” of the sort proposed by the wife, even if her Honour erred in concluding that the wife was partly responsible for what occurred.
The third issue raised under this ground relates to the adequacy of the reasons. The issue relating to the mortgage was one of fairly small moment, involving at most $20,000 in an asset pool worth more than $1 million. Her Honour discussed the applicable authorities and gave a brief explanation of why the wife’s case failed. In my view, more elaborate reasons were not required.
Ground 1 must therefore fail.
Ground 4 – Husband’s outstanding taxation assessments
The trial judge dealt with the husband’s tax liability in these terms:
203.The husband has been assessed for a personal taxation liability in the sum of approximately $11,000.
204.The wife does not accept that these liabilities should be included in reducing the amount of property available to be divided between the parties. Her argument is that the husband has had the benefit of post separation income from personal exertion and the rental property. The tax liability is incurred over the two financial years of 2013 and 2014. In respect of the 2014 year the wife's point may have some validity. I propose to include the tax in my assessment of assets but take this issue into account as one of the myriad of factors impacting on my discretionary assessment of section 79 and section 75(2) matters.
In my view, the only arguable deficiency in her Honour’s reasons was her failure to explain why she included the husband’s tax debt in her table of liabilities at a figure of $10,000, while finding that the husband “has been assessed for a personal taxation liability in the sum of approximately $11,000”.
The husband was not cross-examined about his claim that he had an unpaid tax assessment of $7,000. As for the remainder of the tax, the evidence was that after the husband made the next payment on a tax debt for a different tax year, there would be a balance left of “about $3000” for that year (transcript, 30 September 2014, p 70). Her Honour was entitled to proceed on the basis that it was not in dispute that the husband's total tax debt was therefore in the sum of $10,000, which she used when constructing the table of liabilities. The difference between the $10,000 and $11,000 figures related to the amount of the instalment payment, and was of such small moment that it did not warrant mention.
Otherwise, I accept the submissions of counsel for the husband that it was entirely open to the trial judge to take into account the husband’s tax liability, even though portion of it related to income earned following separation.
In my view, the wife’s submissions about the interaction between the tax debt and the “discretionary assessment” mentioned at [204] are misconceived. Her Honour was not saying she was going to take the liability itself into account in making her assessment. Instead, she was proposing to take into account the fact that the husband had the benefit of the income for the 2014 year. It is true that her Honour did not expressly mention this issue again when discussing the “section 79 and section 75(2) matters”, but her failure to do so was not a ground of appeal.
Ground 4 should therefore also fail.
I certify that the preceding one-hundred and thirteen (113) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Bryant CJ, Thackray and Bennett JJ) delivered on 12 January 2017.
Associate:
Date: 12 January 2017
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