Conroy & Penner
[2022] FedCFamC1A 39
•24 March 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Conroy & Penner [2022] FedCFamC1A 39
Appeal from: Penner & Conroy (No. 2) [2021] FamCA 411 Appeal number(s): EAA 78 of 2021 File number(s): SYC 8355 of 2017 Judgment of: TREE, WILLIAMS & RIETHMULLER JJ Date of judgment: 24 March 2022 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Appeal from final property settlement orders – Where the grounds seek to challenge the primary judge’s evaluation and assessment of the parties’ relevant contributions and valuation findings – Where the impugned findings of the primary judge were open on the evidence – Adequacy of reasons – Where parties are bound by the way they conduct their case at trial – Technical errors of the primary judge were immaterial – No error established – Appeal dismissed – Costs ordered in a fixed sum. Legislation: Family Law Act 1975 (Cth) s 79
Evidence Act 1995 (Cth) s 136
Cases cited: Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148
Browne v Dunn (1893) 6 R 67
De Winter v De Winter (1979) 23 ALR 211
House v The King (1936) 55 CLR 499; [1936] HCA 40
LC v TC (1998) FLC 92-803; [1998] FamCA 47
Metwally v University of Wollongong (1985) 60 ALR 68; [1985] HCA 28
Penner & Conroy [2020] FamCA 1128
Number of paragraphs: 76 Date of hearing: 23 February 2022 Place: Sydney (via video link) Counsel for the Appellant: Mr Beaumont SC with Mr Roberts Solicitor for the Appellant: Blanchfield Nicholls Counsel for the Respondent: Mr Kearney SC with Mr Longworth Solicitor for the Respondent: Somerville Legal ORDERS
EAA 78 of 2021
SYC 8355 of 2017FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR CONROY
Appellant
AND: MS PENNER
Respondent
ORDER MADE BY:
TREE, WILLIAMS & RIETHMULLER JJ
DATE OF ORDER:
24 MARCH 2022
THE COURT ORDERS THAT:
1.Appeal No. EAA 78 of 2021 is dismissed.
2.Within 28 days, the appellant pay the respondent’s costs in the sum of $30,000.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Conroy & Penner has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
TREE, WILLIAMS & RIETHMULLER JJ:
INTRODUCTION
By his Further Amended Notice of Appeal, Mr Conroy (“the husband”) appeals from final property settlement orders made on 21 June 2021 (albeit amended on 22 June 2021) by a judge of the then Family Court of Australia in proceedings brought by Ms Penner (“the wife”).
Those orders effected a 42/58 per cent division of the parties’ property in favour of the husband, the practical effect of which provided the wife with the remaining net sale proceeds of the former matrimonial home (“Suburb F”) in the sum of $3,214,692 (Order 1), a split of the husband’s superannuation in favour of the wife in the sum of $300,000 (Orders 2–6) and for each party to retain the remaining assets held in their respective names (Orders 7 and 8). The husband appeals from Orders 1–6 only. The wife opposes the appeal.
For the reasons that follow, the appeal will be dismissed.
BACKGROUND
At the time of the property settlement orders, the husband was aged 60 years and the wife 54 years. The husband had been unemployed since being made redundant in September 2013. The wife was a partner in a Sydney business which she established in 1993.
The parties commenced a relationship in early 2008 and were married in May of that year. At this time, both parties had children from previous relationships; the wife had three children aged 10, 9 and 7 and the husband had two children aged 12 and 10. The wife’s children lived with the parties for 12 nights per fortnight and the husband’s children six nights per fortnight.
In September 2008, the parties jointly purchased Suburb F for $6,510,385. Their contributions to its acquisition was a point of contention at the trial, and certain findings as to them are challenged on appeal. The parties opened a flexible loan facility (“the portfolio facility”) in joint names with an overall limit of $5,495,000 to help fund the purchase. The portfolio facility could be allocated between a number of subaccounts, and also had an offset account attached into which the parties paid their residual income.
In March 2014, the parties separated and the wife and her children left Suburb F and rented elsewhere for a number of years. The husband remained living in Suburb F up until its sale in October 2018.
Significant expenditure and works were required to ready Suburb F for sale, including renovating a structural wall costing $60,000, the purchase of furniture, and removing the heritage listing. On 16 March 2018, a contract for Suburb F for $11,200,000 was signed.
By then, on 15 December 2017, the wife had initiated these proceedings. On 19 March 2018, the parties were able to agree upon consent orders dealing with the proceeds of sale of Suburb F, which provided for all relevant loan accounts to be discharged, all legal and real estate fees paid, and for each party to retain $3 million by way of partial property settlement. The sale of Suburb F settled in October 2018 and the portfolio facility was paid out and each party received their partial property settlement. The remaining funds were placed in a controlled monies account and are the funds referred to in Order 1 made 21 June 2021. The distribution of those funds was the subject of contention at trial; the wife sought to retain the entirety of them and the husband sought 60 per cent of them.
Another point of contention between the parties at trial was the husband’s superannuation. The wife sought a split of it in the sum of $1,500,000, whereas the husband contended that there should be no superannuation split.
Leading up to trial, orders were made appointing single experts to value the wife’s interest in her business, two other properties owned by the wife, and to assess the relevant market rental value of Suburb F, with such reports later being admitted into evidence at the trial. The husband also sought to rely upon a report of Mr B containing expert evidence in relation to the husband’s company, C Pty Ltd (“C Company”). The structure of that company included the husband’s self-managed superannuation fund, and was designed to provide income to the husband upon his retirement when he turned 65 in March 2026. Mr B’s report detailed the company’s potential capital gains tax liability upon realising its assets when the husband retired. The husband’s application to rely upon Mr B’s report was heard on the third day of trial, after which the primary judge dismissed it for reasons delivered ex tempore on 3 December 2020 (Penner & Conroy [2020] FamCA 1128).
The trial was heard over four days in November and December 2020, and his Honour’s reasons for judgment were delivered in June 2021.
Although the appeal initially challenged both the 3 December 2020 order and the final orders made on 21 June 2021, ultimately it was only the final orders which were challenged.
THE APPEAL
By his Further Amended Notice of Appeal filed 12 October 2021, the husband advanced three grounds of appeal, although they contain numerous sub-grounds within them. At the appeal hearing before us, we allowed the husband to rely upon a Second Further Amended Notice of Appeal filed 23 February 2022, which in essence only added the additional Ground 2.3. However the grounds referred to by senior counsel in the hearing were relevant to the previous Notice of Appeal filed 12 October 2021, thus we will have regard to the earlier document. As ultimately pressed, the appeal only seeks to challenge the primary judge’s evaluation and assessment of some of the parties’ relevant contributions (Ground 1) and the primary judge’s valuation of C Company (Ground 2). It is noted that Grounds 1.1, 1.2, 1.4, 1.6, 1.8, 1.9.3, 1.10, 1.11 and 3 were abandoned, either before, or during, the hearing of the appeal. Ground 2.3 was added during the course of the hearing.
The appeal challenges orders made in the exercise of the primary judge’s discretion. At the outset, it is useful to restate the well-known principles applicable to appeals from discretionary judgments. In House v The King (1936) 55 CLR 499 at 504–505, it was said:
The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
Ground 1.3 – initial contributions
This ground contends:
1.That his Honour’s discretionary decision miscarried as a consequence of errors in his evaluation of the contributions of the parties in that:
…
1.3[His Honour] erred in finding [104] that the initial contributions of the parties were not substantially dissimilar in that:
1.3.1He wrongly concluded that the Appellant did not contend otherwise;
1.3.2He erred in principle in failing to give adequate reasons for the conclusion and failed to engage in any meaningful consideration of the evidence and if he had done so, he would have concluded that the Appellant’s initial contribution exceeded that of the Respondent to the extent of approximately $1.8 million;
At [103] and [104], his Honour said as follows:
103. Neither party appeared to dispute the other’s initial contributions.
104.The wife argued the initial contributions of each party were not substantially dissimilar. I agree. The husband did not contend otherwise.
The first point to note is that no challenge is made by this appeal to the finding in [103], which accurately reflects the parties’ position at trial. Rather, Ground 1.3.1 is partly derived from evidence of the husband given under cross-examination as to his justification for his suggestion that there should be a five per cent adjustment of the pool in his favour, namely:
[THE HUSBAND:]…It would be an adjustment to what I would say is the initial contributions I brought in, recognising the contributions I made after I’ve brought in those larger initial contributions.
(Transcript 1 December 2020, p.95 lines 23–25)
No elaboration of what the husband intended by the word “larger” was thereafter given in cross-examination nor sought in re-examination. No reference to that evidence, nor any suggestion that the husband’s initial contributions were larger than the wife’s, was made in final submissions by senior counsel for the husband. The submissions by senior counsel for the husband were in keeping with the manner in which the husband’s case was presented. Whilst identifying the assets each party brought to the relationship in his affidavit, the husband did not make any claim as to the value of those assets, nor any allegation that his initial contributions were materially greater than those of the wife. The outline of case for the husband, filed prior to the hearing, made no claim that his initial contributions were greater than those of the wife.
Ground 1.3.1 also derives from the material relied upon in relation to Ground 1.3.2. Particularly, annexure “B” to the husband’s affidavit filed 3 December 2019 (“Annexure B”) was what appears to be the parties’ joint application for finance to assist in the purchase of Suburb F dated 24 July 2008. The document was completed in handwriting and so difficult to read that a clearer version was produced for the argument on the appeal. It lists the parties’ assets and liabilities, however many of the values attributed to them are expressly estimates. More, the estimated values of the most significant assets, being two items of real estate, in fact proved well wide of the mark upon their later sale. Further, many of the figures related to items which, if valued for the purposes of litigation in this Court, would have needed to be undertaken by an expert. As but one illustration, the parties’ personal jewellery was said to be worth $200,000.
Although absolutely no reference was made to this document by then senior counsel for the husband before the primary judge, nonetheless before us, the husband sought to contend that a proper analysis of it, with adjustments for the realised sale prices for the two pieces of real estate, showed that the husband brought into the relationship something in the order of $1.8 million in excess of the wife.
In fairness to senior counsel for the husband before us, he correctly recognised the difficulty in now advancing that argument for the first time. That is because parties are generally bound by the way they conduct their cases at trial (Metwally v University of Wollongong (1985) 60 ALR 68). Appeals are not opportunities to remedy deliberate tactical decisions at trial which proved poor.
If parties contend that a document otherwise completely concealed within the morass of material before the court ought be construed in a particular way, it is incumbent upon them to raise it with the primary judge, and not expect the court to undertake their analysis and advocacy for them, or to await an appeal to draw attention to it for the first time. It is not to the point that the rule in Browne v Dunn (1893) 6 R 67 may not apply to proceedings in the family law jurisdiction where evidence-in-chief is given by affidavit (LC v TC (1998) FLC 92-803) as the parties must nonetheless direct the court’s attention to the material which they say supports their case, and explain how it does so.
In any event, we are far from satisfied that Annexure B could reliably be used in the way in which the husband now seeks. Leaving aside that the stated purpose of the document was to induce a financial institution to lend funds, and hence it was in the applicants’ interest to paint their financial positions in the most favourable possible light, the very nature of the document, which included many estimates and attributed values beyond the competency of the parties to express, should lead to it being treated with great circumspection, especially given the lack of cross-examination of the wife by reference to its contents.
Turning then to Ground 1.3.1 in particular, we are well satisfied that it was open to the primary judge to conclude that the husband did not “contend otherwise” than that “the initial contributions of each party were not substantially dissimilar”. The husband’s unexplained, unparticularised and thereafter wholly ignored, assertion in cross-examination that his initial contributions were “larger” than the wife did not preclude the conclusion made by the primary judge. Nor did Annexure B, particularly given the failure of counsel to even mention it before the primary judge, much less the outcome of the construction of it that the husband now contends should be adopted. The primary judge’s impugned conclusion is literally correct, by reference to the case advanced by the husband’s legal representatives at trial.
Ground 1.3.1 fails.
As to Ground 1.3.2, there was no obligation on the primary judge to engage with, or to give reasons for failing to engage with, something he had never been referred to, or which had not otherwise been brought to his attention. In any event, the reasons for the impugned findings are sufficiently explicit (Bennett and Bennett (1991) FLC 92-191 at 78,266).
Ground 1.3.2 fails.
This conclusion makes it unnecessary for us to consider a further matter which was argued before us, namely whether, by virtue of a direction under s 136 of the Evidence Act 1995 (Cth) given by the primary judge on 30 November 2020, Annexure B was able to be used in the way the husband contends.
Ground 1.5 – contributions to C Company
This ground contends:
1.That his Honour’s discretionary decision miscarried as a consequence of errors in his evaluation of the contributions of the parties in that:
…
1.5His Honour wrongly concluded by inference that during the marriage the Appellant had applied part of his income (other than the dividend referred to in Ground 1.4) to either C Company or the C Superannuation Fund when it had never been suggested by the Respondent or his Honour to the Appellant that he had done so.
This challenge derives from [98] of the primary judge’s reasons, where his Honour said:
98.I accept there are facts here which militate in favour of a two pool approach. It could not be said the parties adopted the attitude that their marriage constituted “a practical union of both lives and property”. The wife said in her evidence “With the exception of the purchase of the Suburb F property and the management of the Suburb F NAB facility, Mr Conroy and I maintained our finances separately.” They did maintain separate bank accounts into which they paid their individual incomes. They largely, but not entirely, kept their superannuation separate. The husband maintained C Company while the wife kept [her business] separate. The parties were married for a little over six years. However, equally it could not be said lived “very separate domestic and financial lives”. As the discussion of contributions below makes clearly, the boundaries between the assets and financial resources of each were blurred in material ways. Suburb F was a jointly owned asset which was used as security for significant borrowings of both parties under the Portfolio Facility, for which they were jointly and severally liable. Each sold their solely owned real estate to contribute to the acquisition of Suburb F, in the case of the wife, or to reduce joint liabilities in the Portfolio Facility, secured against Suburb F, in the case of the husband. The wife used the joint Portfolio Facility to purchase office space from which the business of [the wife’s business] was in part conducted. There was no evidence of the value of C Company at cohabitation, nor at separation. The wife paid utilities and outgoings for Suburb F, while the parties shared expenses for food and groceries although the wife paid the larger share. So the evidence does not permit a finding of how much the husband may have been able to contribute to C Company assets from his income during the marriage, as a result of the wife’s income being available to meet other expenses, such as household expenses, for example, or whether its value at trial was purely the result of increases in the value of share market equities since cohabitation. Answers to these questions were purely in the knowledge of the husband, but he gave no evidence which would allow the Court to know the answers. As discussed elsewhere in these reasons, the husband’s disclosure was incomplete, and in particular he did not make clear how he disbursed his income during the marriage. It is open therefore to infer some of his income during the marriage may have been applied to the increase of C Company assets. Similarly, the drawings by the husband from Portfolio subaccount #...43, discussed in detail below, which helped to fund his post separation expenses, as well as a contribution of $35,000 to his superannuation, was a utilisation of a joint resource rather than his individual resources. There was no evidence of any superannuation balances as at cohabitation or separation so the impact of the $35,000 on the husband’s overall superannuation position is impossible to assess in any precise way. But again his evidence could have addressed these questions. The wife gave no clear evidence of what proportion of her income was paid into her superannuation during the marriage. Again she could have provided such evidence. The evidence overall did not permit quantification of the parties’ contributions to their superannuation funds outside of the period of their marriage, and in the case of the wife, to some extent post separation: cf Van der Linden & Kordell [2010] FamCAFC 157 at [34]. For these reasons, I am satisfied a global approach is preferred. I consider a holistic approach to the assessment of contributions accords with authority. I will adopt a global approach. Below is a discussion of the evidence and my findings in relation to the relevant contributions under s 79(4) of the Act.
(Emphasis added)
The opening sentence to that paragraph makes it plain that the impugned finding was made in the context of determining whether a one or two pool approach ought to be adopted. No challenge is made by this appeal to the one pool approach adopted by the primary judge.
Further, whilst his Honour said it is open to make the inference that some of the husband’s income may have been applied to C Company, it is not at all clear that the primary judge thereafter did so, or even if he did, made an error which thereafter was carried forward beyond the issue immediately under consideration, and which then materially impacted upon the outcome (De Winter v De Winter (1979) 23 ALR 211). We are not prepared to simply infer that his Honour did those things and hence caused the exercise of his discretion to miscarry.
Ground 1.5 fails.
Ground 1.7 – respondent’s contributions to Suburb F
This ground asserts:
1.That his Honour’s discretionary decision miscarried as a consequence of errors in his evaluation of the contributions of the parties in that:
…
1.7He erred in fact in determining the net effect of the Respondent’s contributions to the purchase of the Suburb F property by:
1.7.1wrongly finding [111] that an amount of $201,372.36 was paid from the proceeds of sale of the Respondent’s Suburb UU property to discharge the Respondent’s pre-existing NAB loan account #...48;
1.7.2failing to take into account evidence that the Respondent’s sole liability on loan account #...48 (being the account from which she drew and was credited with contributing $91,768 for stamp duty on 22 August 2008 [109] and [110]) was discharged on 29 September 2008 by the Respondent drawing down $201,321.17 from loan account #...18 which continued as a joint debt of the parties following the purchase of Suburb F on 29 September 2008 [114];
1.7.3wrongly finding [117] that the Respondent “rolled over” an amount of $310,431 in debt in 2008.
Neither party produced a schedule setting out the large number of transactions between various accounts that were involved in the purchase of Suburb F, nor did the affidavits set out the payments and transfers in a way that was either clear or complete. No clear submissions were made to the primary judge by senior counsel for the husband at trial as to precisely what occurred in the various transactions. The absence of a schedule and clear submissions left the primary judge in a most unenviable position when making findings with respect to these complex financial transactions.
At [107]–[117] the primary judge said:
107.The parties paid the deposit of $613,500 for the purchase of Suburb F on 29 May 2008. The husband drew $400,000 from an existing O bank account which held $441,031 at the time. The wife drew down $213,500 from an existing NAB loan account #...18. These payments were not in dispute.
108.I have already made reference to the establishment of the Portfolio Facility, which the parties brought into existence to fund the balance of the purchase of Suburb F.
109.The payment of stamp duty on the purchase of Suburb F was a matter of controversy. The total amount payable was $369,944. In her trial affidavit, the wife claimed that on 22 August 2008 she drew $91,768 from NAB account #...48 and $278,176 from NAB loan account #...18. The wife put NAB bank statements for these accounts on these dates into evidence. On 22 August 2008 $91,768 was debited to #...48 (Exhibit B, p. 34), and $278,176.17 was debited to #...18 (Exhibit B, p. 35), in each case for a bank cheque in favour of the wife. The husband on the other hand claims that he gave a cheque for $91,768 to the wife for the balance of the stamp duty. He said this money came from the remaining balance of a NAB HomeSide account. However, no statements or other supporting documentation concerning this account were produced by the husband. The wife submitted this was notable because in other respects the husband had been assiduous in producing documentary support for his affidavit evidence. He agreed in cross examination that he could not identify where the wife deposited the asserted cheque. The wife’s evidence would appear more compelling, except she swore an affidavit filed on 15 December 2017, at the start of the proceedings, to which she annexed a spreadsheet as Annexure B, said to record the parties’ contribution during the relationship. The affidavit and spreadsheet became Exhibit 1 in the trial. The spreadsheet, among other matters, records the wife’s recollection about payments for the purchase of Suburb F. It shows the wife accepting the husband paid $91,768 towards the stamp duty. The available evidence therefore contains conflicts which cannot be easily reconciled.
110.On balance, I prefer the wife’s evidence in this regard. The bank statement for NAB account #...48 clearly shows a debit of $91,768 on 22 August 2008. There was no dispute this was the wife’s account. The bank statement is a banking record and a standard business record which records an indisputable transaction. It is not subject to any vagaries of memory. The wife’s spreadsheet attached to her affidavit of 15 December 2017 was subject to such vagaries. It is inherently less reliable than the bank statement. There was no other explanation of why $91,768 was debited to account #...48 on 22 August 2008. Since this is the same date as the additional payment of $278,176, and since $91,768 plus $278,176 adds up to $369,944, I infer the debit was made for the purpose of paying part of the stamp duty. The spreadsheet could have been the result of a mistaken memory by the wife. As already pointed out, the husband produced no documentary support for his claim to have drawn a cheque for $91,768. I find the wife paid the disputed amount of $91,768 for stamp duty.
111.The wife also sold D Street, Suburb UU (“the Suburb UU property”) in tandem with the purchase of Suburb F. The sale settled on 29 September 2008 concurrently with settlement of the purchase of Suburb F. The wife received $2,950,000. $71,392 was paid for legal costs and real estate agent commission. $201,372 was applied to discharge the wife’s pre-exiting [sic] NAB loan account #...48. $2,448,022 was paid to the vendor to settle the purchase of Suburb F. The balance of the deposit, $229,214, was deposited into the Portfolio sub-account #...18.
112.The balance of the purchase price for Suburb F, $3,076,643, was drawn from #...18 on 29 September 2008.
113.At settlement of the purchase of Suburb F, three existing loan accounts of the wife became subaccounts of the parties’ joint Portfolio Facility, specifically, the wife rolled over existing debt as follows: #...18 with a debit balance of $177,865, #...99 with a debit balance of $47,785 and #...80 with a debit balance of $84,386.
114.After the settlement of the purchase of Suburb F, the four subaccounts in the Portfolio Facility held the following balances:
(a) #...18 – Joint – debit balance of $3,503,778
(b) #...39 – Joint – credit balance of $200,822 (offset account)
(c) #...99 – wife - debit balance of $47,785
(d) #...80 – wife - debit balance of $84,386
115.The husband also sold his property at VV Street, Suburb OO (“the Suburb OO Property”) for $2,100,000. The sale settled on 7 November 2008, after the purchase of Suburb F. The net proceeds of sale, being $1,449,374 were applied to the NAB subaccount #...18. On 10 November 2008 the husband also deposited the balance of the deposit, $67,806 into #...18, according to his evidence, or #...39, the offset account, according to the wife’s evidence. It is unnecessary to resolve this factual difference.
116.The wife, therefore, contended that she contributed a total of $2,983,642 to the purchase of Suburb F, while the husband contributed $1,918,318, a difference of $1,065,324. I accept these figures are correct.
117.The wife also accepted she “rolled over” $310,431 in debt, so that she made a net contribution to the purchase of Suburb F of $754,893 in excess of the husband’s contribution. The husband did not seem to dispute this. I accept it is correct.
(Emphasis added)
Although there may be some technical merit to them, Grounds 1.7.1 and 1.7.2 are based upon an incomplete analysis of the relevant bank records. From the wife’s bank account ending #...48 she drew $91,768 for stamp duty on Suburb F. That account then had a debit balance of $201,714.62 (tender bundle of wife’s affidavit filed 29 November 2019, p.34).
The primary judge was incorrect to find that the $201,372 was paid to account #...48; in fact it is clear that on 29 September 2008, it was deposited to account #...39 which was the offset account attached to the portfolio facility (tender bundle of wife’s affidavit filed 29 November 2019, p.42).
Also on 29 September 2008, a separate amount of $201,321.17 was transferred from the portfolio facility account #...18 to pay out the debit balance of the wife’s account #...48 (tender bundle of wife’s affidavit filed 29 November 2019, p.37). The difference between the balance of account #...48 on 6 September 2008 of $201,714.62, and the amount required to pay it out on 29 September 2008 of $201,321.17 is explicable by transactions on the account which occurred between those dates (tender bundle of wife’s affidavit filed 29 November 2019, p.37).
There was a further deposit by the wife to #...18 on 29 September 2008 of $229,213.70 (wife’s affidavit filed 29 November 2019, paragraph 22 and tender bundle, p.38). Thus the assertion made by the husband, under this ground, whilst acknowledging the deposit of $229,213.70, overlooked the wife’s further deposit to the same account on the same day of $201,372 and hence there is no basis upon which to reduce the wife’s contribution to Suburb F by that amount, and the primary judge did not err by not doing so. In any event we should note the concession by senior counsel for the husband before us that, even if his Honour erred as contended, if that were the only error, it would, given the size of the pool, nonetheless be de minimis and therefore not material.
Grounds 1.7.1 and 1.7.2 fail.
Ground 1.7.3 includes within its challenges an amount said to have been erroneously ignored by the primary judge as contended by Ground 1.6. However given Ground 1.6 was abandoned, and Ground 1.7 otherwise fails, it follows Ground 1.7.3 also fails.
Ground 1.7 fails in its entirety.
Ground 1.9 – sub-account #...43
This ground provides (noting Ground 1.9.3 was abandoned):
1.That his Honour’s discretionary decision miscarried as a consequence of errors in his evaluation of the contributions of the parties in that:
…
1.9He erred in fact in respect of sub-account #...43 by:
1.9.1wrongly finding [122] that the discharge of debt secured against the Appellant’s Suburb OO property in 2008 caused an increase in the debit balance of sub-account #...18;
1.9.2wrongly finding [122] that the creation of sub-account for $542,342 caused an increase of the debit balance of account #...18 when it did no more than partition an existing part of debt to which a tax-deductible component of interest related;
…
1.9.4wrongly concluding that the creation of sub-account #...43 only benefited the Appellant;
The transactions that are the subject of this ground were driven by the incidents of taxation. Part of the husband’s pre-relationship debt, which was secured over his house at Suburb OO, was tax deductible. If the entirety of the debt on Suburb OO was simply paid out the tax deductible debt would cease to exist. Instead, the transactions, in substance, allowed the tax deductible part of the debt to continue, but secured on Suburb F through sub-account #...43, rather than being discharged. This meant that the interest charges on that debt continued to be tax deductible for the husband, giving him a taxation benefit. In this context there is a clear difference between discharging a particular debt to a particular lender (in effect through refinancing the debt) and extinguishing the debt.
At [122] the primary judge said:
122.Also in June 2010, the parties agreed the husband should create a further subaccount with a debit balance of $542,340 to create a tax deductible debt equivalent to a tax deductible loan which had been previously held by the husband and secured against the Suburb OO property, and which was discharged when that property was sold in November 2008. The discharge in effect caused the debit balance of #...18 to be increased by the outstanding balance of the loan. Accordingly, subaccount #...43 was created with a debit balance of $542,340. This benefitted the husband.
(Emphasis added)
The husband says “[t]he error is in the conclusion in the penultimate sentence in contending that the discharge caused the debit balance of #...18 to be increased. As his Honour had already observed, the debt was discharged when the Suburb OO property was sold” (husband’s Summary of Argument filed 12 October 2021, paragraph 26).
However, whilst the wife concedes that the third last sentence of [122] is incorrect, (and thus Ground 1.9.1 technically correct) in that the discharge of the tax deductable debt was effected by the sale of Suburb OO, rather than a drawing against account #...18, she points to [140] of the primary judge’s reasons, where his Honour said:
140.For the husband’s part, he created subaccount #...43. By doing so, he turned $542,340 of the debit balance in #...18 into separate tax deductible debt from which he benefitted. The transfer of $300,000 into #...43 in August 2013 substantially reduced the debit balance in this subaccount, for which the husband was individually responsible as between the parties, but for which both parties were ultimately responsible to NAB. He agreed in cross examination that this amount of $300,000 came from deposits made into the offset subaccount #...39. In this way I accept Suburb F in part supported the financial circumstances of the husband, and the wife contributed in the husband’s financial position.
In this passage it is clear that the primary judge understood the transactions and the purpose of creating subaccount #...43. That is, the net proceeds of the sale of Suburb OO (after discharge of the respective mortgage) was paid toward Suburb F and part of the large debt secured over Suburb F was structured in order to continue to have the character of the husband’s tax deductible debt that was formerly secured on Suburb OO (and discharged by the sale proceeds), allowing the husband to claim interest charged on that part of the Suburb F debt as a tax deduction.
We are therefore satisfied that, as the wife contends, this demonstrates that the primary judge was well aware of the nature of the transactions in question, and did not mistakenly conclude in [122] that there was a net increase of debt of $542,340. However the husband continued to obtain a tax deduction from the $542,340 loan, and thus to that extent, it did benefit the husband as the primary judge recognised at [122]. No error in that respect is established.
Ground 1.9 fails.
Ground 2 – value of C Company
This ground provides:
2.That his Honour erred in finding the Appellant’s interest of C Company was valued at $6,664,033 by reason of:
2.1There being no evidence of such value; and
2.2Error in concluding [56] that the Appellant had accepted the value in cross-examination.
2.3The fact that by the close of the trial the wife had conceded, and the common position of the parties was, that the value of C Company was around $6,000,000 rather than the $6,664,033 previously contended by the wife.
At [56]–[58] the primary judge said:
56.The wife proposed that the assets of C Company be attributed the value of $6,664,033 in the balance sheet. In cross-examination, the husband accepted this as its present value. There was no dispute that C Company also holds $3,073,134 in assets as trustee of the C Superannuation Fund.
57.In submissions, the wife conceded there was no dispute that upon the liquidation of C Company’s holdings of equities a significant tax liability would accrue which would ultimately be borne by the husband.
58.I accept the value husband’s interest in C Company should be included in the balance sheet as $6,664,033. However, the ultimate taxation impost which will fall upon the husband after March 2026 should be taken into account under s 79(4)(e) when considering the s 75(2) factors. I discussed the relevant authorities and reasons for this approach in my ex tempore judgment. It is unnecessary to repeat them here.
(Emphasis added)
The joint balance sheet tendered into evidence before the primary judge, disclosed that the wife contended for a value of C Company in the amount of $6,664,033, whereas the husband contended for $3,358,350. The discrepancy was explained in note 25 to the balance sheet, where the wife contended that C Company had cash of $242,809, shares which had a market value “(as per letter from Blanchfield Nicholls dated 11 November 2020)” of $6,525,724, and liabilities of $104,500. The husband’s figure appears to be based upon his assessment of the value of the company after taking into account likely capital gains tax that would be payable when the company’s shares in other publically listed companies were ultimately sold. It is clear from the transcript that the case was put on the basis that the relevant issue for determination with respect to the value of C Company was whether to adopt the gross value of C Company’s assets (as contended by the wife) or a discounted value based upon taxation projections (as contended by the husband). The accuracy of the two figures never appeared to be in issue.
As senior counsel for the husband before us conceded, having been tendered as an exhibit, all of the balance sheet, including the statements of fact in note 25, became evidence. In the context of the limited issue in dispute concerning C Company by the end of the trial (whether the gross or discounted figure was more appropriate), it is unsurprising that there was no detailed evidence as to how each of the two figures was calculated. Put simply, the issue as presented to the primary judge was not whether each figure was correctly calculated in accordance with the methodology that lay behind it, but rather which of the two was the appropriate figure to use for the purpose of exercising the discretion under s 79 of the Family Law Act 1975 (Cth).
It follows Ground 2.1 must fail.
Ground 2.2 contends that the primary judge misconstrued the evidence of the husband as containing a concession. The relevant transcript reads as follows:
[SENIOR COUNSEL FOR THE WIFE:] Now, when you’re talking about a director’s valuation, that’s what you referred to in item 38 and also in part O; is that right?
[THE HUSBAND:] What – there’s a director’s valuation of the company done every year and, not – item 38, the last page of the financial statement has the after tax value sitting there. It doesn’t have the pre-tax values sitting there.
[SENIOR COUNSEL FOR THE WIFE:] Sure. So the pre-tax values, for values, for the purposes of your calculation as at 30 June 2020 was how much?
[THE HUSBAND:] The pre-tax?
[SENIOR COUNSEL FOR THE WIFE:] Yes?
[THE HUSBAND:] That’s not showing there, [Mr S]. You’re not showing me the document that has it.
[SENIOR COUNSEL FOR THE WIFE:] Yes. I know. Well, I’m asking you how much it was?
[THE HUSBAND:] On a pre-tax basis.
[SENIOR COUNSEL FOR THE WIFE:] Yes?
[THE HUSBAND:] It would be above six million, but I don’t know the exact number unless I see the document. I can verify immediately for you the number.
[SENIOR COUNSEL FOR THE WIFE:] Well, I suggested to you it was 6,664,033?
[THE HUSBAND:] Well, I – I will take – take you on your word that it’s---
[SENIOR COUNSEL FOR THE WIFE:] All right?
[THE HUSBAND:] comes off the investment summary document that records that.
(Transcript 2 December 2020, p.163 line 23 to p.164 line 4)
No re-examination ensued on this topic, and particularly the “investment summary document” in question was never shown to the husband, nor sought to be tendered into evidence.
We are satisfied that the state of the evidence permitted the impugned statement of the primary judge in [56] of his Honour’s reasons and hence Ground 2.2 fails.
That then brings us to Ground 2.3, which was sought, and permitted, to be introduced during the course of the hearing of the appeal.
Notwithstanding its extremely late introduction, we permitted the amendment because the ground was of very short compass, and depended only upon a consideration of the transcript of addresses before the primary judge. Further, the wife conceded that if the amendment was permitted, no adjournment would be sought, and hence no waste of court time or the parties’ resources would ensue.
Essentially this ground contends that by the conclusion of the trial, the wife accepted that the value of C Company was not $6,664,033, but rather “around $6,000,000”. However before us, the husband’s senior counsel also accepted that this (somewhat unusual) ground invited us to make a finding of fact, such that in order to succeed, we would need to be affirmatively satisfied of the contended matters, and since the onus of proof was on him, a state of equipoise would necessitate the dismissal of the ground.
The starting point for a consideration of this ground are events which occurred at the trial on 2 December 2020. The transcript of 2 December 2020 at p.175 lines 26–40 records that at that point of the trial, an updated balance sheet was handed up, and substituted for the earlier one which had been tendered. It is in the terms we had previously recited, and plainly maintained an assertion by the wife that the appropriate value of C Company was $6,664,033.
Next, on the following day, during submissions, senior counsel for the wife said as follows:
So consistent with what the Full Court has identified in Stanford, we will go to the balance sheet. And fortunately, your Honour, the only outstanding two issues or three issues, I’m sorry – three issues on the balance sheet are these: the current value of [C Company] for the husband – well, I think the concession in the evidence was – this is item 25, he said it was six million before taxation impost. And that’s the highest we can get to for the time being…
(Transcript 3 December 2020, p.196 lines 11–16)
Then in the transcript of 3 December 2020 at pages 206 and 207, senior counsel for the wife referred to a $6 million dollar figure in relation to C Company on several occasions. Later, there is reference by the wife’s senior counsel to “the value of [C Company] going down” (Transcript 3 December 2020, p.208 line 42).
However significantly, later on p.209 lines 9–17, the following exchange occurred:
HIS HONOUR: So how do I – know do you say I should take into account the conceded tax impost that will arise on the $6,664,000 worth of shares.
[SENIOR COUNSEL FOR THE WIFE]: Yes. It needs to be considered by way of section 75(2) and that’s why I said the contribution findings are, perhaps, the way forward in this particular matter because no one knows what the share prices will be. No one knows what the taxation rates will be. No one knows about the period in which the realisation can occur. It might be spread over a number of years, but it is real. I accept that it is real…
Importantly, neither counsel demurred as to the very specific figure stated by the primary judge.
The only advertence to this issue in submissions by senior counsel for the husband was as follows:
To [the wife’s] credit, she doesn’t make out any form of case on a contribution-based entitlement to any of the resources of [C Company]. It was like, if you like, a gold bar sitting in the bottom of the cupboard that belonged to [the husband] prior to their cohabitation even commencing and it just sat there quietly and it was an asset which didn’t require constant funding and, in the absence of [Mr B’s] affidavit, the reality is, your Honour, there’s no evidence of its value other than the acknowledgment by the husband, [the husband], that its worth somewhere around 6 million plus.
(Transcript 3 December 2020, p.210 lines 40–48).
That material is equivocal as to whether there was any species of concession by the wife, or mutual understanding, as to the value of C Company being “around $6,000,000” rather than the precise figure contended for by the wife being as per the item in the balance sheet. Of particular importance is the failure by either counsel to correct – if correction was required, and on the husband’s case it clearly was – the primary judge’s precise reference to the exact figure in the balance sheet at the transcript of 3 December 2020 at p.209. The reference to the affidavit of Mr B appears to be a complaint that the absence of this affidavit from evidence (as a result of an earlier evidentiary ruling) left the husband without evidence as to how the husband’s figure (discounted for likely future taxation imposts) was calculated.
We are not persuaded of either of the factual matters which found Ground 2.3, and hence it fails.
Ground 2 fails entirely.
CONCLUSION
No ground of appeal is established and therefore the appeal will be dismissed.
COSTS
In the event the appeal failed, the husband conceded he could not resist an order for costs. The schedule of costs filed by the wife totalled $34,189.66, however plainly some of the items claimed were not properly party/party costs.
Faced with that difficulty, the wife contended that she ought to be awarded solicitor/client costs, albeit calculated at scale. We are not satisfied that the dismissal of this appeal warrants anything other than an order for costs on a party/party basis.
Given the schedule contains items extraneous to such costs, doing the best we can we fix the wife’s costs in the sum of $30,000. Those costs should be paid within 28 days.
I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Tree, Williams & Riethmuller. Associate:
Dated: 24 March 2022
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