Craig & Craig
[2009] FamCAFC 15
•9 February 2009
FAMILY COURT OF AUSTRALIA
| CRAIG & CRAIG | [2009] FamCAFC 15 |
| FAMILY LAW - APPEAL – PROPERTY SETTLEMENT - Decision of Federal Magistrate - Exercise of Federal Magistrate’s discretion in determining property distribution – Interpretation of expert evidence – Error - Appeal allowed – Application for property settlement remitted for rehearing FAMILY LAW - COSTS – Orders made granting cost certificate to both parties pursuant to s 6, 8 and 9 of the Federal Proceedings (Costs) Act 1981 |
| Family Law Act 1975 (Cth) Federal Proceedings (Costs) Act 1981, s. 6, 8, 9 |
| AMS v AIF (1999) FLC 92-852 |
| APPELLANT: | MRS CRAIG |
| RESPONDENT: | MR CRAIG |
| FILE NUMBER: | BRM | 5919 | of | 2004 |
| APPEAL NUMBER: | NA | 10 | of | 2008 |
| DATE DELIVERED: | 9 February 2009 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Faulks DCJ, Warnick & May JJ |
| HEARING DATE: | 13 May 2008 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 17 September 2007 |
| LOWER COURT MNC: | [2007] FMCAfam 223 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Galloway |
| SOLICITOR FOR THE APPELLANT: | Dixie Ann Middleton & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr O’Neill |
| SOLICITOR FOR THE RESPONDENT: | Stacks Grays Lawyers |
Orders
The appeal is allowed.
The application of the parties for property settlement is remitted for hearing before a Federal Magistrate other than Federal Magistrate Burnett.
The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal against the property orders.
The Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal against the property orders.
The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of the parties in respect of the costs incurred by the appellant and respondent in relation to the rehearing of the application.
IT IS NOTED that publication of this judgment under the pseudonym Craig & Craig is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 10 of 2008
File Number: BRM 5919 of 2004
| MRS CRAIG |
Appellant
And
| MR CRAIG |
Respondent
REASONS FOR JUDGMENT
This is an appeal by the wife from the orders made on 21 December 2007 by Federal Magistrate Burnett in relation to a property dispute with her former husband. It was ordered that the parties retain the assets in their possession and the wife pay the husband the sum of $195,876 within 30 days. It was also ordered that the wife pay the husband’s costs to be assessed upon an indemnity basis from 20 July 2005.
The trial from which this appeal emanates was heard in March, 2007. There had been a previous trial and successful appeal. This was the re-hearing. The date allocated for the costs order to commence is that of an offer to settle in the proceedings, prior to the first trial.
It is necessary to explain at the outset that the original judgment (in the second trial) was delivered on 17 September 2007. The order made on that date was amended on 27 September 2007 and further amended on 2 November 2007.
The judgment of the Federal Magistrate given on the date the order under appeal was made concerned an issue as to whether the order made previously on 2 November 2007, said to be under the slip rule, ought to have been made. The Federal Magistrate’s judgment, based on submissions that his previous amended order should be vacated, had the effect that the first order was revived. To some extent the slip rule judgment is a distraction with the exception of that part of it which contains the judgment about the costs issue.
The grounds of appeal were focussed on two areas. First, that there is an error in the orders dividing the property between the parties, in particular:
a)There was a failure to allocate to the husband the sum of $27,600 being moneys wasted on account of the husband’s gambling; and
b)That it was wrong to find undisclosed funds in the hands of the wife totalling $104,000 when such a finding was said to be on the basis of the evidence of an accountant, Michelle Young, that not being her evidence. Consequently it was submitted to be an error to add this sum to the pool of assets and attribute those moneys to the wife.
Secondly, in relation to costs it was argued:
a)There was no proper basis to make an indemnity costs order dating back from 20 July 2005; and
b) No order for costs should have been made.
At the outset we heard the argument in relation to two applications, principally to adduce further evidence. Those applications were dismissed. In view of our ultimate conclusions in this matter it is not necessary for us to add to the discussion which took place during the hearing of the appeal in relation to those applications.
Facts
The wife was born August 1952 and the husband March 1941. They were married in 1981 and separated in 2004. There were apparently some earlier periods of separation in 1987 and in the year 2000. Most of the marriage the parties worked, the husband in various occupations within the hospitality industry and the wife as a hairdresser. The husband had retired when the matter was before the Federal Magistrate. The wife continued to conduct a business as a hairdresser. The parties have two children, now over the age of 18 years.
Over this long marriage the parties lived in various places originally in New South Wales and came to Queensland in the year 2000 when the husband unsuccessfully attempted various employment. He was involved in the building of the parties’ then new house at Underwood and finally retired in June 2002.
There is no suggestion that the identification by the trial Judge of the principal issues was incorrect and is contained in paragraph 8 as follows:
(8) The principal issues in dispute between the parties concern:
(a) identification of the property comprising the property pool;
(b) valuation of certain assets within the pool;
(c) the appropriate split of that property when considered against sections 79(4) and 75(2) considerations.
Nor is it suggested that his Honour did not apply the well known principles to the determination of property settlement. (Hickey & Hickey & the Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143).
Judgment
It is necessary to begin with the judgment given by his Honour on 17 September 2007 to which we will refer as the primary judgment. In that judgment his Honour ordered:
(1)That there be judgment for the Applicant against the Respondent in the sum of $195,876.
(2)That the matter be adjourned to hear the parties on ancillary orders.
(3) That costs be reserved.
The applicant was the husband.
At the commencement of the judgment his Honour recorded that the identity of the assets were largely agreed although it was necessary for him to make findings about matters of valuation:
Ultimately, his Honour’s findings concerning the property pool, contained in paragraph 113 are as follows:
Summary of Findings Concerning the Property Pool
Proceeds of [P] and [M] $417,500
[C] House $135,000
Motor Vehicle – Applicant $7,500
Motor Vehicle – Respondent $6,425
Respondent’s Hair Salon $10,000
Chattels – Applicant $5,000
Chattels – Respondent $0
Superannuation – Respondent $31,932
Shares – Respondent $0
Cash held by brother $7,000
Undisclosed funds:
- unaccounted for in Respondent’s $50,048
accounts
- unaccounted for by account $14,000
- cash on hand – joint accounts $39,942 $104,000
$727,357
Add backs:
Husband’s gambling $27,600
Net Pool $751,957
It can immediately be seen that his Honour did include in that pool, as an add back the sum of $27,600 identified as “husband’s gambling”. Further, it can be seen that his Honour identified the total sum of $104,000 described as “undisclosed funds”.
His Honour decided that the contribution of the parties had been equal. A five per cent allowance was made in favour of the husband by reason of identified s.75(2) factors.
The Federal Magistrate described this as a bitter dispute. A considerable amount of the judgment contains his Honour’s description of the evidence of each of the parties and his findings in relation to controversial matters. The Federal Magistrate formed the view that on some occasions the wife did not provide honest answers to questions put to her and made quite clear findings adverse to her in relation to credit. Conversely, the trial Judge found that the husband provided honest answers and made appropriate concessions during his evidence. The findings in relation to the Federal Magistrate’s assessment of the parties evidence is of some significance in relation to the part of the appeal about “undisclosed funds”.
Reference was made to the husband’s demeanour and his answers to questions. Generally, the Federal Magistrate found that the husband was honest because of concessions the husband made and the answers he gave to questions put to him. In particular, note was made of concessions made concerning a time in his life when his personal circumstances and that of his family were adversely affected by his drinking and gambling. The husband said that the wife had “worked like a Trojan” and “…accepted that her percentage of a combined effort particularly while the children were undergoing schooling was about 70%”. (para 33)
In stark contrast to his findings about the husband the trial Judge found that:
34.In the cross examination of the Respondent she frequently sought to respond to questions with questions and evaded directly answering questions. She expressed a “tit for tat” attitude. On a number of occasions her reply to any particular question involved an assertion to the effect that why should it matter because the relevant point had been the Applicant’s approach. She did not appear as a cooperative or forthcoming witness.
The findings of his Honour in relation to valuation and a number of other issues between the parties are not the subject of appeal. Consequently, we will refer to the reasons in relation to the discreet topics contained first in ground two in relation to the sum of $27,600 found to be gambled by the husband and secondly, in relation to ground three being the sum of $104,000 added back to the pool, said to be sums not disclosed by the wife.
As it was argued, ground one was incorporated into ground two because this sum had been the subject of the “slip rule” dispute. We see no need to say anything further about that matter in view of the way the appeal was argued and our ultimate conclusions.
Ground 2 - $27,600 the husband’s gambling
At paragraph 93, the trial Judge identified a number of sums to be taken into consideration as add backs. This included at sub paragraph e) “waste associated with Applicant’s gambling”. It is appropriate to merely repeat his Honour’s findings in this respect:
100.In her affidavit at paragraph 61 the Respondent asserts that the Applicant had a gambling habit and that by reason of his habit he was responsible for considerable waste of matrimonial assets.
101.The Applicant admitted the instances complained of in paragraphs 57, 58 and 59 of the Respondent’s affidavit. However save for that instance referred to above none of the other events appear to be capable of quantification. Whilst I note the report of Ms Young makes reference to a series of withdrawals which are suggestive of “impulsive behaviour” Ms Young is not qualified to express any such opinion. Any number of explanations could arise for the withdrawals which were referred to in her statement and I do not intend to speculate upon those matters.
102.Whilst I am prepared to accept that there were isolated instances through the course of the marriage where the Applicant appears to have engaged in conduct which constituted an unreasonable waste I assess those matters on the basis that they were limited.
103.It was urged upon me by the respondent to make some greater allowance and indeed to make an adjustment at the s79 contribution or s75(2) stage. I do not think it is appropriate.
104.Aside from the transactions specifically identified no other evidence supports the contention that the gambling went beyond hobby “punting”. There was no evidence of serial punting demonstrated by evidence of a TAB account or similar. Given the deep bitterness extant between the parties and my poor opinion of the respondent’s veracity I do not accept her complaints.
105.I assess waste on account of gambling at $27,600.
The difficulty is that in the mathematical calculations made at the end of the judgment, this sum was not considered. It seems this was an error, although not of significant dollar proportions. We would add that the submissions of Mr Galloway revealed a number of other mathematical errors, though quite minor.
The significance of the error, constituted by failing to attribute gambling losses to the husband in final calculations, relates to the order for costs. That order was made largely on the basis of an offer by the husband and essentially involves the question of whether the result which should have been reached in the orders was worse or better than the offer.
Ground 3 – Funds undisclosed by wife
Identifying the arguments of the parties his Honour said:
48.In this action the Applicant’s principal contention is that a sum of $90,000 which ought to have been available to the pool cannot be accounted for. For her part the Respondent says the money was spent in the course of the high living of the parties during the course of the relationship. The Applicant says the funds have simply been secreted by the Respondent.
In the first paragraph of his Honour’s discussion under the heading “Funds undisclosed by Applicant [that is the husband] to Respondent [wife]” his Honour in fact discussed allegations made by each party against the other in this regard and his first paragraph of that discussion said:
31.Assertions and cross assertions were made by each of the Applicant and the Respondent concerning transfers of funds and missing funds. Largely the outcome of these matters is to be determined by reference to a report prepared by Ms Young, an accountant engaged professionally by the Respondent and which the parties ultimately accepted as the Court expert to assist on these matters. In addition the credibility of the parties was also significant in resolving those difficulties.
His Honour then dealt with a number of assertions made by the wife as to moneys either held by her in bank accounts or that she had dealt with. First it was found that the recollection she had of moneys placed in a bank vault were not correct. Secondly, the Judge rejected her evidence that she had after separation, following the first trial received the sum of $14,000 in cash from an old boyfriend. It seems that the wife proceeded to draw fourteen $1,000 postal orders in respect of that cash. Unsurprisingly, his Honour said:
44.… This whole series of transactions had a highly suspect air about it particularly given that within a matter of days after that event the Applicant had lodged a Notice of Appeal and in the meantime the parties were agitating over costs in respect of the hearing at first instance. The acquisition of postal orders occasions suspicion that source funds for them was cash held by the Respondent if I do not accept the benevolent ex-boyfriend’s story which I do not.
The third piece of evidence rejected by his Honour was that a sum of $7,000 was loaned to the wife by her brother, Mr H. His Honour found that the sum had “… all the hallmarks of a payment made with the intention of concealment”. (para 45) Ultimately, his Honour said:
46.… I remain concerned that the Respondent has failed to fulfill her obligations of disclosure. Accordingly in my consideration of issues relating to funds alleged to be unaccounted for from various bank accounts a robust view should be taken of the evidence consistent with the approach sanctioned in those circumstances in Weir and Weir (1993) FLC 92-338.
47.I was not impressed by the Respondent as a witness. As I have earlier noted she was evasive, non responsive and argumentative in the delivery of her evidence. Matters which should have been disclosed were clearly not disclosed at an appropriate time. On other occasions her evidence was demonstrably unreliable by reference to the objective facts. I have no confidence that she informed the Court of all matters that she ought to have informed the Court of. Indeed in cross examination it was apparent that her approach to disclosure was to provide that material which she thought the Applicant would want as opposed to providing all that the Applicant was entitled to. Whilst perhaps that may be a matter which has some basis with the advice she received from her solicitors I do not accept that such an approach could have been reasonable in relation to the later accounts identified following the first trial. I do not accept that the Respondent was a reliable witness and where her evidence departs from that of the Applicant it has been rejected.
(footnote omitted)
The evidence of an accountant, Ms Young, and his Honour’s appreciation of her evidence is critical to the argument in ground three and for that reason it is necessary to set out his Honour’s findings at some length:
49.The accountant Michelle Young attended and gave evidence at the trial. She informed the Court that she accepted the spreadsheet which had been prepared by the Applicant and was Appendix 2 to the affidavit of the Applicant filed 2 March 2007 (the Spreadsheet). She said that in view of the recent information provided to her concerning account numbers 9199 and 5546 she was able to account for all transactions in the Spreadsheet save for one transaction for the sum of $14,000 which she identified.
50.In cross examination she was referred to the Applicant’s affidavit filed 2 March 2007 and in particular to paragraphs 83 and 114. Whilst she noted that she could not comment upon household expenditure she stated that in her first analysis (exhibit 1) she did not include sums of $67,849, $98,213, $16,400 and a sum of $1,300 which sums constituted payments made by the husband to the matrimonial pool on account of redundancy and superannuation payments. Those omissions totalled $183,762. The basis for her initial exclusion of those items was an instruction from the Respondent’s original solicitor, Mr Toogood, that the sums had been expended on living expenses.
51.In the final analysis she said that overall the figures remained the same because one figure offset the other, that is, Ms Young says that she was instructed that the $190,000 combined redundancy etc was consumed as living expenses over time, namely four to five years. She stated that on the basis that the $190,000 had been paid into her joint account and consumed over four to five years it was treated as disposable income received by the parties. In that sense there was an offset. Generally she noted that the household expenses presented a very confusing statement of the overall management of the household accounts.
52.Accepting the spreadsheet as the starting position it is apparent from the balances in each account contained in the Spreadsheet the sum of $89,990 remains unaccounted for. In adopting this approach the underlying premise is that irrespective how many accounts may be opened and how many internal transfers might occur, if all transactions are internal the net outcome will remain the same given a fixed starting balance. The final balance should only be affected in a net sense by incomings and outgoings. If all the recorded incomings and outgoings are capable of identification then any disparity between the opening and closing balances will reflect unrecorded transactions (whether they be debit or credit entries).
(footnotes omitted)
The calculation contained in footnote 16 of paragraph 52 of the judgment which we reproduce below in part was his Honour’s:
16.… To obtain these balances, one must undertake the arithmetic exercise of totalling all debit and credit entries in the respective accounts. I would have been greatly assisted in this task if the parties had either provided me with the Spreadsheet in electronic format or had the task undertaken by the accountant at first instance. Overall the combined total of all accounts $89,990 being $39,942 DR and $50,048 DR.
It can be seen from these paragraphs that the sum of $104,000 was a calculation of his Honour’s, being $14,000 from paragraph 49 and $89,900 from paragraph 52.
It also seems, as conceded by counsel for the respondent that the spreadsheet annexed to the affidavit of the husband, apparently a document prepared by him, not by an expert, was not the document used by the judge or referred to the accountant. The annexed document is an earlier version.
We should add that the spreadsheet referred to by his Honour was not available to us because it never became an exhibit.
Ms Young had been involved in this matter in the earlier proceedings. In her first report in June 2005 she explained that she had done an analysis to investigate whether any moneys had been misappropriated. At that time she concluded that the moneys had been completely accounted for.
In her later affidavit filed 1 December 2006 Ms Young restated her view that there was an account missing but that the wife had not misappropriated funds:
7.At the time of my initial examination of the documents produced, I concluded that there was an account missing because:-
(a)account 2070 was closed on 14th February 2001 and the balance of $485,363.69 withdrawn from it;
(b)there was no account opened immediately elsewhere to which this money was deposited;
(c)the next account opened with a significant balance was account 1748 on 30th July 2002 in which the opening balance was $395,102.34;
(d)the difference between the closing withdrawal in Account 2070 and opening deposit to Account 1748 17½ months later was $90,261.35 and I pointed this out in my letter of 15th June 2005.
8.Annexed hereto and marked “B” is a true copy of page 2 of my report letter dated 15th June 2005 showing my conclusions on two matters:-
(a)frequent withdrawals by the husband; and
(b)whether “monies had been misappropriated to any degree”.
9.By a separate letter faxed to the wife’s lawyers on 22.07.05 in response to the husband’s lawyers letter dated 20.07.05, I showed exactly why I was sure that the wife had not “misappropriated” or removed any money from the many accounts in the last 4 years or so of the parties’ dealing with their matrimonial assets, almost all of which went through these bank accounts in this period – a true copy of that letter is annexed hereto and marked “C”.
It is obvious that there was considerable confusion as to what the evidence of Ms Young really meant. It was apparent to us in the hearing of the appeal that the lawyers on each side held quite different views as to the meaning of her report. In part, the difficulties relate to what Ms Young said in each of her reports. As his Honour recounted:
62.In her initial report of 15 June 2005 Ms Young concluded that the sum of $90,261.35 could not be accounted for. She reached this conclusion because account number 2070 closed on 14 January 2001 with a balance of $485,363.69 being withdrawn. No account was opened elsewhere to which the money appeared to have been deposited. The next account to open was account number 1748 which opened on 30 July 2007 with a balance of $395,102.34. The difference between these accounts was $90,261.35.
…
64.Although Ms Young stated in her initial report of 15 June 2005 that the expenditure of $485,363.69 and the $90,261.35 can be accounted for such is not apparent from the Spreadsheet which she accepts records the financial dealings.
65.For instance it was said by Ms Young from her detailed analysis commencing at the fifth page of Exhibit 1 that the construction costs (excluding land) total $342,742.00. A sum approximating this figure was withdrawn from SG5757. That sum made no allowance for the land purchase. Subsequently a sum of $159,319 was transferred from SG5757 to SG4909. An additional $17,963 was deposited to this account. Relevantly from this amount sums totalling $52,945 were withdrawn which probably related to furnishings.
66.Subsequently the sum of $101,051 was transferred to an unknown account, possibly account number 5546 but remains unaccounted for.
67.Counsel in their cross examination and submissions made no reference to these matters, or indeed any matter relevant to the amount at all.
(footnote omitted)
It can be seen that his Honour carefully referred to the accounts and the evidence that was given about them. Ultimately in paragraph 88 his Honour said as follows:
88.Although it appears the Respondent may have applied $100,000 to her own benefit the evidence is too vague for me to be satisfied that the money did not find its way back into the accounts. If the parties had wanted such a finding then it should have been prosecuted their examination of the accounts much more vigorously.
89.However I am satisfied that the sum identified at paragraph 50 approximating $90,000 is accountable to the property pool. I was informed that at the last trial the Respondent in fact conceded the amount of $56,002 was the cash balance of accounts. No doubt the Respondent was keen to concede this sum. However her concession of that balance itself was flawed because an examination of credit and debit entries for account SG5272 leaves a balance of $39,295 not $56,002. Clearly other funds had been debited to and credited from that account and which were not recorded. I do not think the respondent knows how much cash was on hand. However I am satisfied it exceeded the sum she conceded and adopt the total of the unaccounted for funds as representing the $90,000 of funds identified in paragraph 50 above together with the $14,000 Ms Young was unable to account for (see para 47). I estimate the sum of $104,000 should be allowed to the property pool on account of missing funds.
(footnote omitted)
This is how the sum of $104,000 found its way being added back to the pool, but the finding was contrary to the evidence of Ms Young.
We think that there are some problems with the process employed by Burnett FM. Essentially, while he satisfied himself that there were "unaccounted for funds" and was at least suspicious of the wife's dealing with funds, he did not address the wife's case that the funds were expended on living, perhaps high living, of the parties during the years under scrutiny. Even had he rejected the contention that the parties lived expensively, some examination of the call on funds constituted even by essential living costs, fell for consideration, as the issue was presented and indeed recorded by the Federal Magistrate in paragraph 48 of his reasons earlier quoted. It is one thing to address some evidence and find that funds are unaccounted for. It is quite another to write back that amount into the asset pool for division as if it was, on the balance of probabilities, an asset in the control of the party under scrutiny. Something more than suspicion of the wife's behaviour and rejection of her credibility was needed.
As the Full Court said in Ceoi & Ek [2007] FamCA 1316:
63.Apart then from the general unsatisfactory nature of the husband’s evidence the only basis left to the trial judge to make any finding that the husband had substantial undisclosed overseas assets was the wife’s recollection of the total sum noted in a document, said to be written in the husband’s hand, and said to be found by her at some unidentified time after the parties separated.
...
68.The general principal in Weir and Weir (above) that the court should not be unduly cautious about making findings in favour of an innocent party does not allow the court to act carte blanche to make whatever property order otherwise seems just and equitable on the basis there may exist an unknown pool of assets.
69.In Eccles and Gotts [2002] FamCA 475, Kay and Coleman JJ commented on a submission that Weir and Weir (above) enabled the Court to hold that because of the open-ended finding in respect of the husband’s hidden assets and hidden income, the wrongful exclusion of $35,000 worth of liabilities was not a material error, saying:
52.[Counsel] relied upon the sentiments expressed in Weir (1993) FLC 92-338; [(1992)] 16 Fam LR 154 and similar cases recently fully discussed in Chang v Su [2002] FamCA [156] where reference was made to Stein v Stein (1986) FLC 91-779; 11 Fam LR 353; Mezzacappa v Mezzacappa (1987) FLC 91-853; 11 Fam LR 957; and Black and Kellner (1992) FLC 92-287; 15 Fam LR 343.
53.In Black and Kellner the appellant had submitted that, absent findings as to the extent of his wealth, the order made by the trial judge was plainly unjust. The Full Court rejected that submission, effectively saying that where a party failed to make a full and frank disclosure that enabled the Court to ascertain the extent of their wealth, the party could not show how the result reached was manifestly or plainly unjust.
54.In Weir [and] Weir (1993) FLC 92-338; [(1992)] 16 Fam LR 154 the Full Court (Nicholson CJ, Strauss and Nygh JJ) dealt with an appeal against the refusal by the trial judge to make orders in respect of unascertained property because he could not quantify it. The Court said at FLC 79-593; Fam LR 128:
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour's findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.
55.In our view the approach outlined in those cases as to open-ended findings about financial resources and undisclosed income has to be tempered by the likely realities of the parties. Thus in Campbell v Campbell [2000] FamCA 366 uncertainty surrounded the wife’s earning capacity. That uncertainty was brought about by the unsatisfactory nature of the wife’s evidence. [Justice Kay], with whom Coleman and Hannon JJ agreed said:
31.True it is, as his Honour says, that because of the wife’s non-disclosure he cannot be sure of her financial position but, in my view, he could be sure that whatever the non-disclosure was in the scheme of this family and the financial circumstances surrounding it, the differential was not so great as to absorb those matters which clearly favoured the wife in respect of s 75(2) factors, namely the capital disparity, the superannuation disparity and, to a lesser degree, the income earning disparity.
56.Those sentiments are applicable to this case. The likely extent of the undisclosed resources of the husband has to be estimated by reference to the general circumstances of the case. There has to be an air of reality about their probable extent.
70.As unsatisfactory as the husband’s evidence was on many aspects of his financial affairs, in our view there was inadequate evidence for the trial judge to conclude that an undisclosed pool of assets of a vast magnitude existed.
Quite apart from the position that the wife's explanation of the expenditure of funds otherwise "unaccounted for" was not dealt with in this case, there were some difficulties confronting Burnett FM in the exercise which he undertook.
·He had Ms Young's evidence before him that she considered that the funds had been accounted for.
·It was never put to Ms Young that the sum of $90,000.00 remained unaccounted for or that her conclusions contained in paragraph 9 of her report were incorrect.
·Difficulties with the evidence upon which the husband relied were recorded by the Federal Magistrate in paragraph 53 of his reasons which is as follows:
53.The only additional factor in this case is that the Spreadsheet only records “significant transactions” i.e. those over $5,000. However as earlier observed the parties all appeared content with this. I assume they accepted that over time the ebb and flow of small transactions would balance out and not adversely affect the final outcome.
Burnett FM may also have been hampered by the conduct of the trial. After examining numerous unexplained transfers of funds at some length, he said:
81.The gratuitous nature of transfers of these funds is puzzling. If the Respondent intended to create confusion and ambiguity in respect of her financial dealings she undoubtedly succeeded. Certainly no one at trial bothered to inquire as to the curious nature of these transactions. (emphasis added)
In short, we consider that the finding that his Honour made, that $104,000.00 was unaccounted for, was arguably unavailable to him, but that, even if available, in the absence of an examination of the wife's case (including Ms Young's evidence) that it had been expended on living expenses, the inclusion of the undisclosed monies in the table of assets for division, as if it was an asset in the wife's possession, was unsound.
Ground 6 – The exercise of discretion has miscarried
It was argued that despite his Honour’s intention to add back the legal costs incurred by the parties into the pool, they were not in fact added back. In paragraph 111 his Honour said that he intended to add back the figures as described in paragraph 110 below:
110.Legal costs have been incurred by each party. The Applicant’s evidence was of an expenditure of $34,250. The Respondent has expended at least $30,000. Unfortunately precise expenditure to trial was not provided. It might be that costs expenses have been incurred but not yet paid.
Bearing in mind the figures, there was hardly a great deal in this since ultimately his Honour divided the property in terms of 55 per cent in favour of the husband.
Ground 4 – Costs
The ground of appeal in relation to costs is as follows:
4.The learned trial judge erred in law in ordering the Appellant to pay the Respondent’s costs on an indemnity basis from 20 July 2005 when:-
(a)There was no proper basis to make an indemnity costs order at all:-
(i)There had been an earlier trial of the matter before Baumann FM, who made orders, but no costs orders, on 31 October 2005;
(ii)The Husband appealed those orders but his Notice of Appeal did not seek an order for the payment of his costs below:
(iii)On 3rd August 2006 the appeal was allowed, whereupon the Husband, purporting to seek costs of the appeal in fact sought not only those costs but the costs of the trial below, on an indemnity basis;
(iv)The Husband’s application was heard and refused (and is now res judicata), though the parties each received a certificate for their costs of the appeal, together with a certificate for a new trial.
The order for costs, was made by his Honour, it seems primarily for two reasons:
(1)The “poor view” taken of the wife in relation to the financial transactions found to be unexplained together with a conclusion of absence of disclosure by the wife; and
(2)The offer to settle by the husband dated 20 July 2005 in the sum of $192,720.
The Federal Magistrate’s conclusions and mathematics were that the husband be paid $195,876, a sum marginally better than the offer.
The Federal Magistrate after referring to the offer said:
25.It follows in my view that the husband should be entitled to costs.
There is some controversy as to whether there was an application for costs on an indemnity basis. In any event his Honour said:
28.In my view it follows the offer remained open to be accepted until the conclusion of the proceedings (unless earlier withdrawn). The offer was not accepted (or withdrawn) before the conclusion of the proceedings. The offer was bettered by the judgment in the proceedings. I consider the wife’s conduct in failing to accept the offer constituted an “imprudent refusal of an offer to compromise”. That matter is coupled with my views as to the general credit and honesty of the wife which I generally found wanting.
(footnote omitted)
In our view, the costs order also cannot stand. Apart from the adverse findings of credit which of course are based on the impressions the Federal Magistrate had of the wife and are not the subject of the appeal, the conclusions made by the Federal Magistrate we have found contained error, such that the appeal should be allowed. This in turn affects the impact of the offer. We do not see that it is necessary to deal with other arguments of the appellant in relation to costs nor the submissions of the respondent as it must follow that the appeal in this respect is also allowed.
Conclusion
The principles governing an appeal such as this from a discretionary judgment are not in doubt.
It was clearly enunciated in House v The King (1936) 55 CLR 499, at 504-505 that:
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.
Thus, as a matter of firmly established appellate process it is necessary first to establish whether there is any recognised ground for reviewing the decision of the Federal Magistrate consistent with these principles. If there is then, unless the result is plainly right notwithstanding an appellable error, per Gibbs J (as he then was) in De Winter v De Winter (1979) FLC 90-605 at 78,091, we are obliged to allow the appeal, set the orders aside and, if possible, substitute our own decision after considering the matter afresh, as was explained by Kirby J in AMS v AIF (1999) FLC 92-852, who said at 86-043:
[A]n appellate court, invited to review the exercise of discretion at first instance will avoid an overly critical, or pernickety, analysis of the primary judge’s reasons, given the large element of judgment, discretion and intuition which is involved. Only if a material error of the kind warranting disturbance of a discretionary decision is established is the appellate court authorised to set aside the primary decision, to substitute its own exercise of discretion or to require that it be re-exercised on a retrial.
In our view it is clear that his Honour erred in the way to which we have referred, such that it is necessary to allow the appeal. We think that it is inevitable that there must be a rehearing in view of the dispute especially about moneys retained by the wife. It is more than unfortunate as this may well lead to a third trial.
Costs of the appeal
At the conclusions of the submissions, Mr Galloway on behalf of the appellant asked for an order for costs against the respondent. It was submitted the basis was because of the conduct of the respondent in not conceding the error in relation to $27,000 and the way that the husband’s case was run before the trial Judge. In addition, it was submitted that his Honour fell into error in relation to the add back of $104,000 because of their submissions. In the alternative it was submitted that as the trial Judge had made an error of law that they were entitled to a costs certificate pursuant to the Federal Proceedings (Costs) Act 1981.
Mr O’Neill submitted that in the circumstances they also should receive a certificate.
We would order that each party receive a certificate for the appeal and if it becomes necessary, a certificate to contribute to the costs of a new trial.
I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
Date: 9 February 2009
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