Crandall & Crandall - [2009] FamCAFC 120

FAMILY COURT OF AUSTRALIA

CRANDALL & CRANDALL

[2009] FamCAFC 120

FAMILY LAW - APPEAL – PROPERTY – Where the husband received a compensation award – Where part of the award was used as a deposit on a property – Where the deposit was lost – Whether the trial Judge should have applied the Kowaliw principle of waste – Where the funds were lost on a joint venture – the Kowaliw principle would not apply in these circumstances

FAMILY LAW - PROPERTY – Contributions – Whether the trial Judge failed to properly consider a contribution to property made by the wife – Where the contribution was acknowledged by the trial Judge as an initial contribution – Whether the trial Judge gave adequate weight to the initial contributions made by the parties

FAMILY LAW - BANKRUPTCY – Whether the husband was prevented from claiming an interest in property purchased by the wife whilst he was an undischarged bankrupt under the Elias principle – Where the husband had not disclosed an interest in the property to the Trustee in Bankruptcy – Where there had been no earlier representation inconsistent with the husband’s evidence at trial – the Elias principle would not apply in these circumstances

FAMILY LAW - EVIDENCE – Credit – Whether the trial Judge erred in preferring the evidence of one party over that of the other party – Where there was no basis to interfere with the trial Judge’s credit findings

FAMILY LAW - ADEQUACY OF REASONS – No obligation on the trial Judge to discuss every submission made

Appeal dismissed – Order for costs

Bennett and Bennett (1991) FLC 92-191
Browne v Green (1999) FLC 92‑873
C & C [1998] FamCA 143
Chorn & Hopkins (2004) FLC 93‑204
Elias and Elias (1977) FLC 90‑267
House v The King (1936) 55 CLR 499
Jordan & Jordan (1997) FLC 92-736
Kowaliw and Kowaliw (1981) FLC 91‑092
Norbis v Norbis (1986) 161 CLR 513
Omacini and Omacini (2005) FLC 93‑218
Re Chemaisse; Federal Commissioner of Taxation (Intervener) (1990) FLC 92-133

Family Law Act 1975 (Cth) s 79(4)

APPELLANT:

Mrs Crandall

RESPONDENT:

Mr Crandall

FILE NUMBER:

HBC

1251

2007

APPEAL NUMBER:

2008

DATE DELIVERED:

10 July 2009

PLACE DELIVERED:

Perth

PLACE HEARD:

Hobart

JUDGMENT OF:

Bryant CJ, Thackray & Bennett JJ

HEARING DATE:

10 March 2009

LOWER COURT JURISDICTION:

Federal Magistrates Court

LOWER COURT JUDGMENT DATE:

25 July 2008

LOWER COURT MNC:

[2008] FMCAfam 954

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr Smith

SOLICITOR FOR THE APPELLANT:

PWB Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Fitzgerald

SOLICITOR FOR THE RESPONDENT:

Faulds & Associates

Orders

That the appeal be dismissed.
That the wife pay the husband’s costs of and incidental to the appeal as agreed and in default of agreement, as assessed.
That the wife have 60 days within which to pay the husband’s costs.

IT IS NOTED that publication of this judgment under the pseudonym Crandall and Crandall 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 HOBART

Appeal Number: SA 70 of 2008
File Number: HBC 1251 of 2007

Mrs Crandall

Appellant

And

Mr Crandall

Respondent

REASONS FOR JUDGMENT

This is an appeal against orders made by Roberts FM in property settlement proceedings between the appellant wife and the respondent husband.
The asset pool was worth about $145,500. The effect of the Federal Magistrate’s orders was that the wife received approximately 56 per cent of the assets. His Honour reached his decision on the basis the wife had made somewhat greater contributions than the husband and was entitled to a “slight additional adjustment” on account of s 75(2) of the Family Law Act 1975 (“the Act”).
The wife submits the asset pool should have been divided in proportions 70:30 in her favour. Her appeal is resisted by the husband.

Background

The following background facts are drawn from the reasons of the Federal Magistrate and may now be regarded as uncontroversial.
The husband was 62 years and the wife 61 years of age at the time of judgment.
The husband and wife commenced cohabitation in October 2000, were married in April 2004, and separated in July 2007.
In early 2001 the husband became bankrupt. He claimed he did so to protect a Criminal Injuries Compensation award.
The husband received his award and a short time later used the funds to make a $17,000 deposit to acquire a property in B (“the B property”). The sale did not proceed and the deposit was lost.
In February 2002 the wife received $26,200 from a property settlement and on the same day entered into a contract to purchase a property at S Court (“S Court”).
The wife used $10,000 from her settlement to pay the deposit for S Court and paid a further $18,163 upon settlement of S Court. The balance of the money required to acquire the property was borrowed from a credit union.
S Court was sold in August 2003 and at settlement the sum of $127,273 was realised. All of the proceeds (apart from an amount of $3,777) were used to complete settlement of the purchase of a unit in C (“the C unit”) in the wife’s name.
The husband was discharged from bankruptcy in January 2004.
In November 2004 the C unit was sold and $147,314 was realised. The parties used some of these funds to purchase a block at H and to purchase a motor vehicle.
In late 2005 the parties sold the H block and purchased a property in P Drive (“the P Drive home”). Although the parties still owned the P Drive home at the date of trial it was subject to a conditional contract for sale. The husband was living in the property.

The Federal Magistrate’s reasons

The Federal Magistrate commenced his reasons by noting that in essence the wife was seeking a division 80:20 in her favour, whereas the husband was proposing a division 55:45 in the favour of the wife.
Having referred to the evidence and identified the process by which property is divided under the Act, his Honour turned to issues of credit. Given the challenge made against his credit findings and the possible connection between those findings and his Honour’s decision, we set out them out in full:
11.I said at the outset that, from my perusal of the affidavits, credit might be an issue. Mr Smith, for the wife, said that that was not so. However, his client proved him wrong about that by her performance in the witness box.
12.I found the wife to be a most unimpressive witness. The most blatant example of her poor performance was in relation to what she had said in paragraph 9 of her affidavit. In relation to a property at [B], to which I will refer later, she said in that paragraph:
In the meantime, I paid $8,000 to the [J]’s (sic) as a part-deposit. The monies were paid direct to [Mr B] on the understanding that he will be forwarding the money on to the [J]’s (sic). [Mr B] was a builder who we understood to be working with the [J]’s (sic) in building and selling the property. Mr [B] was later investigated by the Consumer Affairs and Fair Trading for building houses and units without indemnity insurance.
13.In her oral evidence she said that the $8,000 was spent on various materials for improvements to that property and explained that what I have quoted above from her affidavit was a “typing error” which she had overlooked when reading her affidavit before swearing to the truth of it as recently as 30 May 2008.
14. I find her statements in that regard to be unbelievable.
15.The wife was also inaccurate in relation to a period of separation in 2003. Paragraph 4 of her affidavit clearly suggests that the parties were separated from the end of 2002 until October 2003; which is a period of approximately ten months. When cross-examined, she made a concession of being separated from July 2003 until October 2003, which could be less than three months.
16.The husband’s evidence in relation to that was that the parties separated at the end of July 2003 and then resumed cohabitation over a period of about one week after a counselling session at Relationships Australia ...
17.I find that I prefer the husband’s evidence in relation to that because:
(i) he was not cross-examined about it; and
(ii)his unchallenged witness, Mr [W], says in relation to their residence at [S] Court: “As far as I am aware [Mr Crandall] continued to live in the property with [Mrs Crandall] from the time they moved there until they left. I certainly would have noticed if [Mr Crandall] had left the premises for any substantial period of time, ie, more than a month.”
18.The wife conceded contributions on the part of the husband only begrudgingly and only when pressed did she concede that he had done “some” work in relation to various properties that they lived in.
19.I find that where there is a difference between the husband and the wife on the evidence, I generally prefer the husband’s version.
In dealing with S Court, his Honour found the purchase “was a joint enterprise and not simply a single‑handed exercise on the part of the wife as suggested in … her affidavit”. In coming to that conclusion his Honour noted he had relied not only on the “preferred evidence of the husband”, but also the evidence of two of his witnesses.
His Honour then turned to consider the asset pool, noting the major asset was the P Drive home, which was subject to a contract for sale.
His Honour recorded that the husband had possession of the motor vehicle with an agreed value of $17,990, on which there was approximately $18,000 owing (the loan having originally been for $18,940).
He noted that when the husband purchased the motor vehicle he traded in a vehicle and received $8,000 in cash. He also noted the submission of counsel for the wife that this amount should be added back into the pool. He recorded the evidence of the husband that he needed part of the funds from the sale of the car to help pay the mortgage on the home and meet some of the car payments.
His Honour then referred to Chorn & Hopkins (2004) FLC 93‑204 in which he said that the Full Court appeared to have endorsed this passage from C & C [1998] FamCA 143:
46.Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.
His Honour went on to say that, with the above paragraph in mind, he did not propose adding the $8,000 back into the pool because the husband had used some of the funds to retain the matrimonial home and had “generally used the rest for other expenses”.
His Honour concluded that apart from the P Drive home and “its associated liabilities” the only assets and liabilities to be taken into account were the wife’s car worth $10,000 and two credit card liabilities in the wife’s name totalling $6,500. (The husband’s vehicle was ignored because there was a debt to the same value as the vehicle and the parties’ furniture and effects were also ignored because of a lack of evidence of value.)
His Honour then turned to the contributions made by the parties to the assets. He first recorded that counsel for the wife had argued “that the husband should be given no credit for the $17,000 he paid to buy the [B] property because that was lost”. His Honour found this proposition was “a novel argument, and certainly does not fit with the established line of authorities”.
In explaining this view his Honour said, firstly, that contributions made prior to the marriage but after commencement of cohabitation were to be taken into account and there was “no magic in the actual date of marriage”. We are not entirely sure how this proposition related to the submission said to have been made by counsel for the wife, but in any event his Honour went on to refer to the well-known passage in Kowaliw and Kowaliw (1981) FLC 91‑092 where Baker J said:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
His Honour then found that neither of the circumstances described in the passage from Kowaliw applied in the present case. He went on to say:
46.The purchase of the [B] property, or the attempted purchase of it, was quite clearly a joint enterprise. It is just that the husband had the required $17,000 available at the time from his criminal injuries compensation award.
47.The loss of the husband’s contribution was indeed unfortunate but it contributed in an indirect way to the wife’s ability to purchase [S] Court in her sole name, in that it freed up her property settlement funds.
48.Put another way; if the parties had shared equally in providing the $17,000 deposit, being $8,500 each, the wife would have had $8,500 less to contribute to the purchase of [S] Court and the husband would have had $8,500 more to contribute towards its purchase.
His Honour then noted the wife’s contribution of her settlement of $26,200 was greater than the husband’s contribution of $17,000, but commented that “the difference is less than $10,000”.
In dealing with what he called “financial contributions overall”, his Honour noted both parties had contributed their Centrelink benefits and “their additional incomes” from time to time, and that the wife had some additional income from a superannuation fund and the husband had some additional income from casual employment.
His Honour found he did not have enough information to “do a precise financial calculation of who contributed exactly how many dollars” and cited authority to the effect it was unnecessary to approach such issues “with an eye for meticulous detail” (Hayne and Hayne (1977) FLC 90-265). His Honour concluded [emphasis in the original]:
53.What is clear to me is that both parties (and I stress both parties) contributed what income they could towards their common purpose of acquiring and improving different properties.
54.It is quite clear that both parties contributed a great deal of effort to improve and beautify a number of properties and, in my view, the wife did herself no credit in the begrudging way she conceded that the husband did some improvements to the properties.
His Honour then turned to submissions made by counsel for the wife concerning the effect of the husband’s bankruptcy. He said:
55.On behalf of the wife, Mr Smith put forward a novel, but in my view misconceived argument that, because the husband was a bankrupt for a period and could not own property in his own right, he was somehow unable to contribute. In my view the principles suggested by him in Baumgartner v Baumgartner (1988) DFC 95-058; (1987) 164 CLR 137 and Muschinski v Dodds (1985) DFC 95-020 have no application in this matter. Section 79 of the Act is what I must apply, and it refers to contributions - financial (direct and indirect) and non-financial.
56.It is quite clear to me that both parties have made very similar contributions, financial and non-financial, and the husband’s contributions cannot be swept under the carpet or ignored because his initial financial contribution was lost or that he was a bankrupt for some time.
His Honour concluded his discussion of contributions by noting “the wife might be given some slight advantage because she contributed $26,200 in the early stages of the relationship whereas the husband contributed $17,000”.
His Honour then dealt briefly with the s 75(2) factors. He found both parties were in their early sixties and in receipt of Centrelink benefits, supplemented by “modest top-up incomes”. However, he found the husband probably had “a slightly more saleable skill as a builder‑handyman”. He found the wife statistically would probably live longer than the husband and therefore had greater long term needs, but the parties’ needs at the present time were very similar. His Honour concluded, “overall, there should be a slight additional adjustment in the wife’s favour in relation to the section 75(2) factors”.
His Honour then set out his conclusions. He reiterated that the wife was “entitled to slight adjustment on contributions and a further slight adjustment on the section 75(2) factors”. He said these “two small adjustments” could be achieved in two ways. First, the wife could retain her motor vehicle worth $10,000 but remain responsible for her credit cards totalling $6,500, giving her a “net advantage of $3,500”. Secondly, the wife should receive a “5% adjustment in her favour” from the proceeds of sale of the matrimonial home.
His Honour then found the outcome he had foreshadowed was “just and equitable” and proceeded to make the orders the subject of this appeal.
Although not recorded in the judgment, it was not controversial that the conditional contract for sale of the former matrimonial home was for a price of $285,000 and that the property was subject to a mortgage of $143,000. There was no evidence concerning the amount of any commission payable in relation to the sale. Ignoring commission payable on the sale of the property, the effect of his Honour’s orders was that the wife would receive $81,600 net (after allowance for the value of her car and the credit card debts) and the husband would receive $63,900.

Appellate principles

The circumstances in which an appellate Court can legitimately interfere with a discretionary judgment are well known. In House v The King (1936) 55 CLR 499 Dixon, Evatt and McTiernan JJ said at 504-5:
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 discretion is reviewed on the ground that a substantial wrong has in fact occurred.
In Norbis v Norbis (1986) 161 CLR 513 Brennan J said at 539-540:
The difficulties in the way of developing guidelines beset an appellate review of the exercise of a discretion under s. 79. Unless the primary judge reveals an error in his reasoning, the Full Court can intervene only if the order made is not just and equitable. How does the Full Court arrive at that conclusion? In Bellenden (formerly Satterthwaite) v. Satterthwaite [[1948] 1 All ER 343 at 345], Asquith L.J. stated the rationale of an appellate court’s approach:
“It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.”
The “generous ambit within which reasonable disagreement is possible” is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.

The law requiring trial judges to give adequate reasons is also well settled: The adequacy of the reasons will depend on the circumstances of the case. Generally, reasons are inadequate if the appeal court is unable to ascertain the reasoning upon which the decision is based or justice is not seen to be done. If the trial judge does not sufficiently disclose the reasoning behind a decision, the appeal court is denied the opportunity to detect error and the losing party is denied knowledge of why his or her case was rejected. Bennett and Bennett (1991) FLC 92-191.

The Grounds of Appeal

After abandonment of two grounds and amendment of another, the wife relied upon the following Grounds.
THAT the learned Federal Magistrate erred at law in that he:
1. Failed to give any or any adequate or sufficient reasons.
2.Failed to properly or adequately identify the pool of assets to be divided by virtue of him failing to add back into the pool of assets the proceeds of the sale of the motor vehicle used by the husband to make mortgage payments, meet living expenses and legal fees.
3.Failed to give any or any adequate or sufficient reasons as to why the proceeds of the sale of the motor vehicle should not be added back into the pool of assets to be divided.
4.Failed to acknowledge and/or give any credit to the wife for an additional $8,000.00 contributed by her for the purchase of the “[B] property”.
5.Misconstrued and misapplied the principle of waste as enunciated in the decision of Kowaliw v Kowaliw (1981) FLC91-092.
6.Failed to give any or any adequate of [sic] sufficient weight to the significant disparity in pre‑marriage assets in favour of the wife.
7.Failed to give any or any adequate or sufficient weight to the effect that the husband’s bankruptcy had upon his ability to acquire and/or retain an interest in the wife’s pre‑marital assets.
8.Failed to address the effect, if any, the husband’s bankruptcy had upon his ability to own property or attain an interest in the property of the wife prior to the party’s [sic] marriage.
9.Abandoned.
10.Abandoned.
11.Wrongly determined that the credit of the parties was an important factor in this case and further that where the wife’s evidence conflicted with the husband the learned Federal Magistrate preferred the evidence of the husband without giving consideration to the evidence and/or facts in issue at the time of making such a determination.
12.Finding that the husband’s contribution of $17,000.00 towards the “[R] [sic] property” was contribution towards the acquisition and maintenance of the matrimonial assets.
13.Failed to give any or any sufficient weight to the fact that the husband was bankrupt and he failed and/or refused to disclose any interest he had in the real property of the wife to the Official Trustee in Bankruptcy and represented to the Department of Centrelink [sic] that he was a boarder in the wife’s home.
…
The first ground of appeal is an assertion concerning the adequacy of the Federal Magistrate’s reasons. The submissions supporting that ground traversed matters dealt with under more specific grounds. We therefore propose to defer consideration of Ground 1 until we have discussed the others.

Grounds 2 and 3 – the motor vehicle “add back”

By Ground 2 it is asserted that his Honour erred in failing to add back into the pool the proceeds of sale of the vehicle the husband retained at separation. Ground 3 asserts that his Honour failed to give any or any adequate reasons why he decided not to “add back” the proceeds of sale.
In his summary of argument, counsel for the wife submitted that the Federal Magistrate had failed to address properly the issue concerning the sale of the vehicle. He also submitted that the husband’s actions constituted a premature distribution of assets. He said if the husband had retained the vehicle “it would have been dealt with in the same way as the remaining items of property …”
Counsel for the wife also submitted that as consequence of the husband’s “wanton action” he had created a situation in which he was unable to meet the vehicle payments and the mortgage payments without resorting to the capital from the sale of the original vehicle.
In response, counsel for the husband submitted that the principles concerning “add backs” had been settled by cases such as Chorn and Hopkins (supra), C and C (supra), and Omacini and Omacini (2005) FLC 93‑218, and that his Honour had correctly identified those principles. He argued the real question was whether his Honour’s exercise of discretion in refusing to add back the proceeds of sale was manifestly unjust.
Counsel for the husband drew attention to the fact that there had been no challenge to the findings about the way in which the husband had applied the proceeds of sale and that the thrust of cross‑examination of the husband concerned the “commercial common sense” of his actions. Counsel for the husband conceded there might be some “mild criticism” of the husband’s actions but submitted this case did not “fall within the class of cases where the Courts have added-back”.
A convenient summary of the circumstances in which it may be appropriate for the Court to add back property into the pool of assets was provided in Omacini and Omacini (supra), where the Full Court said:
30.To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a) Where the parties have expended money on legal fees...
(b)Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
“In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
(c)In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644…
The Full Court went on to cite from Baker’s J judgment the passage we have already extracted from the reasons of the Federal Magistrate. The Full Court also cited the following passage from the decision of the Full Court in Browne v Green (1999) FLC 92‑873:
44.We agree with her Honour that the principles stated by Baker J in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s 79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction – a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.
We accept there may be some justification in the wife’s complaint that the husband’s conduct concerning the sale of one vehicle and the acquisition of another, more expensive, vehicle was not commercially wise. However, the issue we are required to determine is whether his Honour erred in the exercise of his wide discretion in refusing to add back the proceeds of sale.
There has been no challenge to his Honour’s findings about the manner in which the husband disbursed the proceeds of sale of the vehicle. He accepted that the husband had used some of the proceeds to retain the “principal asset” and had used the balance to meet “other expenses”. In the context, we can infer his Honour regarded the payment of those expenses as evidence of the husband “properly getting on with his life”. In our view, that finding was open to his Honour and, therefore, no error is disclosed in the exercise of his discretion.
Similarly, there is no substance in the ground directed to the adequacy of the Federal Magistrate’s reasons. His Honour provided reasons briefly but cogently for rejecting the wife’s argument. He was required to do no more.

Ground 4 – failure to give the wife credit for an additional $8,000 contribution

By this ground it is asserted the Federal Magistrate “failed to acknowledge and/or give any credit to the wife for an additional $8,000.00 contributed by her for the purchase of the ‘[B] property’”.
Counsel for the wife submitted in his summary of argument that whilst the Federal Magistrate had given “considerable credit” to the husband for the contribution of the $17,000 towards the B property, he had “failed totally to address the issue of the $8,000 the wife contributed towards the [B] property”. Counsel for the wife went on to refer to various places in the transcript where the wife had given evidence concerning the $8,000.
Counsel for the wife properly conceded before us that the wife’s evidence on this issue had been “very unsatisfactory”. Indeed, it was this part of her evidence which the Federal Magistrate found to be “the most blatant example of her poor performance” in the witness box. His Honour noted that the wife had given one version in her affidavit (namely she had paid $8,000 towards the deposit on B) but gave a quite different version in her oral evidence (that the money had been spent on improvements to the property).
In our view, the inconsistency in the wife’s evidence was not the determining factor in relation to this issue. In forming this view we have taken account of the following matters:
·    counsel for the wife conceded there was no evidence to suggest that any funds the wife may have contributed to the B property were accumulated prior to the commencement of cohabitation;
·    the wife was given credit for making a greater initial contribution;
·    the wife has not challenged his Honour’s findings that the parties otherwise made “very similar contributions, financial and non‑financial”, and both contributed “what income they could towards their common purpose of acquiring and improving different properties”.
Taking these matters into account, there would have been a “double counting” of contributions if the wife were to have been given credit not only for making the greater initial contribution but also for making whatever financial contribution she did make toward the B property using the funds she had at the commencement of the relationship.
There is accordingly no merit in Ground 4.

Ground 5 – misapplication of the Kowaliw principle

By this ground it was asserted that his Honour had “misconstrued and misapplied the principle of waste as enunciated in the decision of Kowaliw v Kowaliw (1981) FLC 91‑092”.
As we have indicated in summarising his reasons, his Honour dealt with Kowaliw in the context of rejecting the wife’s submission that the husband should be given no credit for the $17,000 he paid to acquire the B property because all of that money was lost.
There was no suggestion in the wife’s case that the husband had “embarked upon a course of conduct designed to reduce or minimise” the value of assets, nor was it suggested he had “acted recklessly, negligently or wantonly” in a way that resulted in the value of the assets being reduced. Counsel for the wife conceded this in his written submissions, but submitted that his Honour had erred in “equating” the contribution of $17,000 which the husband had made towards the “failed purchase” of the B property with the $28,000 [sic] the wife had contributed towards S Court.
Counsel for the wife went on to submit that:
when one looks at the question of contribution made by a party to the acquisition, preservation and maintenance of property, it must clearly be relevant to determine to what extent if any that contribution has increased in the value in that property. With respect to the [B] property, the money was lost. With respect to the [S] Court property, the wife’s money was well invested and she should be given credit for it. This is not to say the husband should be punished as anticipated by the decision of Kowaliw.
It is difficult to see how this submission supports the ground as framed. In any event, the proposition overlooks the Federal Magistrate’s finding that the purchase of the B property was “quite clearly a joint enterprise”. The husband therefore contributed his $17,000 to a joint enterprise and we can see no basis upon which that contribution should be given less weight because the money was lost. Such an outcome would, in fact, have “punished” the husband.
We consider there is no substance in this ground.

Ground 6 – weight given to pre-marital assets

By this ground the wife complained about the weight the Federal Magistrate gave to the “significant disparity in pre-marriage assets in favour of the wife”.
In his written submissions, counsel for the wife grouped this ground with other grounds which he said related to the “Elias principle”. There seems to us to be no connection between Ground 6 and the submissions made by the wife in relation to the “Elias principle”, which we discuss below. We note also that no specific reference was made to Ground 6 in the wife’s summary of argument.
Counsel for the husband submitted that the Federal Magistrate had properly refused to accept the wife’s submission that the parties’ initial contributions should be considered as at the date of marriage, and that his Honour had acted correctly by taking into account contributions to the acquisition of assets throughout the period of the relationship. Counsel for the husband further submitted that in any event “the direct financial contributions by the parties are not disparate to the extent as asserted by the [wife]”.
His Honour found that the wife had contributed $26,200 compared to the contribution of $17,000 by the husband and commented that the difference was “less than $10,000”. His Honour accordingly found, because contributions otherwise were equal, that the wife should be given some “slight advantage” because she had contributed more than the husband.
Although his Honour did not make a precise finding in relation to the extent to which this “slight advantage” should be reflected in the ultimate settlement, we do not consider he was obliged to do so, since he indicated that he had taken it into account in arriving at the final outcome. It is to be remembered it is the ultimate outcome that must be “just and equitable” to satisfy the requirements of the Act.
We are not persuaded his Honour gave insufficient weight to the disparity between the contributions made by the parties.

Grounds 7, 8 and 13 - the “Elias principle”

Counsel for the wife elected to deal with these three grounds together. They assert that the Federal Magistrate failed:
·    to give any or adequate weight “to the effect that the husband’s bankruptcy had upon his ability to acquire and/or retain an interest in the wife’s pre‑marital assets”;
·    to address the effect the husband’s bankruptcy had upon his ability to own property or attain an interest in the property of the wife prior to the parties’ marriage;
·    to give any or sufficient weight to the fact the husband was bankrupt and had failed or refused to disclose any interest he had in the wife’s real estate to the Official Trustee in Bankruptcy, and had represented to Centrelink he was a boarder in her home.

Wife’s submissions concerning Grounds 7, 8 and 13

It was submitted on behalf of the wife that the Federal Magistrate should have applied the “principle” enunciated by Goldstein J in Elias and Elias (1977) FLC 90‑267, and that:
it was not open to the husband to claim that he had any interest in the wife’s property at [S Court] or [the C unit] because when these properties were purchased by the wife, the husband was an undischarged bankrupt.
As a second limb to this argument, it was submitted that:
the husband had represented to Centrelink that he was a boarder and consequently received social security benefits including rental assistance as a consequence of his representation that he had no interest in the [S Court] property and was a boarder.

Husband’s submissions concerning Grounds 7, 8 and 13

Counsel for the husband primarily addressed his response to the “Elias principle” argument when dealing with Ground 13. He submitted that this ground “proceeds on the misconceived and flawed logic the Respondent had an ‘interest’ to which section 5 of the [Bankruptcy Act] applies, which he failed to disclose”.
Counsel for the husband further submitted that:
·    the arguments in support of Grounds 7 and 8 assumed “that any inchoate right of action which the husband may have arising from his contributions were of the sufficient proprietary nature to be ‘property’ and thus an ‘interest’ for the purposes of section 5 of the [Bankruptcy Act]”;
·    there was artificiality in the wife’s arguments as the contributions made by the husband “can only be the grounding for a claim for relief, rather than a determination that there is an actual constructive or resulting trust. Thus it is of indefinable worth and effect”;
·    “any bare statutory right is a personal right of action, not a contingent or other definable right, which has the characteristic of being proprietary as imported into the notions of section 5 [of the Bankruptcy Act]”.
In support of the last proposition, counsel for the husband referred to Zorbas and Zorbas (1990) FLC 92‑160, Best and Best (1993) FLC 92‑418 and Audet and Audet (1995) FLC 82‑045. He concluded by submitting that:
any contribution which would attract the statutory considerations of section 79 [of the Family Law Act 1975] is of such uncertain prospective worth to be purely theoretical; it is not even contingent. Thus any proprietary right is non‑definable until determined by the Courts.
Counsel for the husband also submitted:
The so called “Elias” principle is distinguishable on the present facts. In the decision of Elias v Elias … the critical issue seems to have been whether the wife was an equal owner of the subject business as the husband had previously asserted. The Husband could not then deny the wife’s half interest. The estoppel sought to be applied by the [wife] does not sit comfortably as the asserted contradictory statements were to the Social Security authorities and it cannot be said the [wife] relied upon those statements, which is the essence of the estoppel.
Counsel for the husband went on to submit that the wife was seeking to apply:
a wider equitable principle that the [husband] ought not to profit from the contradictory statement to the Social Security authority and thus assert a contradictory claim i.e. that his relationship with the wife was other than on a genuine domestic basis.
Counsel for the husband argued that “at its highest this is a question of credit of fact [sic] for the Court to take into account”.
Counsel also drew attention to the husband’s evidence that he had been informed by Centrelink staff that the matter was a “grey area” and it was submitted that the “nature of the contradictory statement is not of the same character so as to attract this wider equitable principle … as the evidence does not reach the threshold suggestion of deliberate illegality or deception per se”.

Counsel submitted that in any event the husband’s status as a boarder in the wife’s home had only been asserted for a relatively short period and that the disregarding of contributions made during this period would not have any significant effect.

Discussion of Grounds 7, 8 and 13

In the absence of detailed submissions and reference to authority we consider it unnecessary to discuss in detail the parameters and application of the “Elias principle”. A scholarly dissertation is to be found in Jordan & Jordan (1997) FLC 92-736 where Chisholm J (at 83,927) posited the following as representing the “Elias principle”:
When a party has made representations of fact to third parties and has gained advantage from so doing, it is open to the court in subsequent proceedings under s 79 of the Family Law Act to decline to accept from that party evidence which contradicts those representations.
It will be observed that the “Elias principle”, as formulated above, does not represent an inflexible rule. Rather, it imports a discretion permitting the Court to exclude certain evidence. Furthermore, for the “principle” to have any application it is necessary to establish that some earlier representation was made that was inconsistent with the evidence sought to be adduced at trial.
Such inconsistency has not been demonstrated here, at least insofar as it relates to the first limb of the wife’s submissions concerning the husband’s bankruptcy. It is true the husband did not advise the Trustee in Bankruptcy that he had any interest in real estate at the time he became bankrupt. Nor did he advise the Trustee during the period of his bankruptcy that he had acquired any such interest. However, the husband’s claim in the Federal Magistrates Court was not based on him having acquired such an interest. Instead, his claim was based upon statutory entitlements arising from contributions made by him throughout the relationship, including during the period of his bankruptcy.
It is well established that an entitlement to make an application pursuant to s 79 of the Act does not create any legal or equitable right in property. Proprietary rights deriving from the Act come into existence only upon the making of an order. In Re Chemaisse; Federal Commissioner of Taxation (Intervener) (1990) FLC 92-133 the Full Court said at 77,915:
Fundamental to the wife's case is the contention that a party to a marriage builds up over the duration of the marriage an interest in the property of the parties to that marriage. Counsel submitted that such a spouse has a presently vested interest of an “inchoate” kind which exists prior to the institution of proceedings under sec. 79 or the making of any order under that section and which is capable of recognition and enforcement in appropriate circumstances. Relevantly to this particular case he submitted that the wife, after 40 years of marriage and having regard to the significant contributions which she had made to the family, had a vested interest in this property which it was proper to take into account and evaluate against the rights of the Commissioner (or for that matter any other third party creditor of the husband) and he submitted that the judgment of the Full Court in Sieling and Sieling (1979) FLC ¶90-627 at p. 78,264 supports that approach. It was the submission on behalf of the wife that in the circumstances she was entitled to some degree of “priority” over the rights of third parties, that is that the rights of a third party creditor of the husband may be diminished in order to give effect to the wife's rights.
In our view that does not represent the law in Australia. Rights arising under sec. 79 come into existence when an order is made under that section. Neither that section nor any other provisions of the Family Law Act establish rights, however described, in a party to a marriage over the property of the other spouse either arising from the existence of the marriage or the activities of the parties during that marriage or the institution of proceedings under sec. 79, where those rights do not otherwise exist under the laws in Australia.
There was accordingly no scope for the “Elias principle” to be applied to exclude evidence given by the husband in relation to the property acquired by the wife whilst the husband was an undischarged bankrupt.
We turn then to the second limb of the wife’s argument, which was directed to the representations the husband made to Centrelink about living in the wife’s home as a “boarder” for a period of time. The husband acknowledged that he advised Centrelink he was paying “board” to the wife at the time she was applying to the Bank for a loan in order to acquire real estate. He was an undischarged bankrupt at the time and accordingly would have been unable to join with her in seeking to borrow funds for this purpose. The husband claimed that he spoke with a member of Centrelink staff about the plan to nominate himself as a “boarder” and was told, “It’s a very grey area but I’ll try it for you”. The husband conceded that as a result of making the representation he received “benefits from the government”.
His Honour made no findings in relation to this aspect of the matter and counsel for the wife conceded in his submissions before us that some of the relevant evidence was “a bit grey”. It was asserted on behalf of the wife at trial that the effect of the husband making the representation about being a boarder was that he became entitled to rent assistance, which he was then able to put towards the mortgage payments the wife was required to make. The husband asserted that the purpose of making the representation about being the wife’s “boarder” was to permit him to have portion of his Centrelink entitlement paid directly to the wife, which in turn assisted her to persuade the Bank she could afford the loan repayments.
Although his Honour made no express findings in relation to these issues, it is apparent from consideration of his judgment as a whole that he did not perceive the parties’ relationship at any time to be that of landlady/boarder. Furthermore, although in paragraph 14 of her trial affidavit the wife had recorded that it was agreed that the husband would pay her “board”, she acknowledged in paragraph 4 that they were “cohabiting” at the same time. In these circumstances we do not see any basis upon which the husband could be precluded from giving evidence of the contributions he did make during the period in which he was representing to Centrelink that he was a “boarder”.
If we understand him correctly, counsel for the wife was asserting that the husband should not be given any “credit” for contributions he made from income or benefits he received as a result of deception. We do not consider there is any substance in that proposition. The wife received some of the benefit associated with any deception in which the husband engaged and, at least on one view of the evidence, was complicit in his deception, if it be so described.
Before concluding discussion of these grounds we should observe we have not overlooked the submission that the wife should have been given credit for the fact that she exposed herself to full liability under the terms of the mortgage obtained to acquire S Court. We consider there is no substance in that submission. Although we accept the wife was potentially exposed to greater liability than the husband as a result of being the only party to the mortgage, as it turned out she was not called upon to make any greater contribution than was the husband.

Ground 11 – the credit findings

By this ground the wife asserts the Federal Magistrate wrongly determined that the credit of the parties as witnesses was an “important factor” and that his Honour failed to give consideration “to the evidence and/or facts in issue” in preferring the evidence of the husband.
As we have already recorded, his Honour found the wife to be a “most unimpressive witness” and gave examples of inaccuracies in her evidence. He explained why he accepted the evidence of the husband in relation to the periods of cohabitation (i.e. that he had not been cross‑examined and his evidence was supported by an unchallenged witness), and otherwise indicated that wherever there was a difference between the evidence of the parties, he generally preferred the husband’s version.
We can see no basis on which we could interfere with his Honour’s credit findings. As Lord Sumner said in SS Hontestroom v SS Sagaporack [1927] AC 37 at 47 (cited with approval in the High Court in Abalos v Australian Postal Commission (1990) 171 CLR 167):
…not to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their own view of the probabilities of the case.
In State Rail Authority of NSW v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588, Gaudron, Gummow and Hayne JJ commented on the “real advantages” enjoyed by a trial judge in making findings of fact. We respectfully adopt their Honours’ statement at [90]:
The true advantages in fact-finding which the trial judge enjoys include the fact that the judge hears the evidence in its entirety whereas the appellate court is typically taken to selected passages, chosen by the parties so as to advance their respective arguments. The trial judge hears and sees all of the evidence. The evidence is generally presented in a reasonably logical context. It unfolds, usually with a measure of chronological order, as it is given in testimony or tendered in documentary or electronic form. During the trial and adjournments, the judge has the opportunity to reflect on the evidence and to weigh particular elements against the rest of the evidence while the latter is still fresh in mind. A busy appellate court may not have the time or opportunity to read the entire transcript and all of the exhibits. As it seems to me, these are the real reasons for caution on the part of an appellate court where it inclines to conclusions on factual matters different from those reached by the trial judge. [footnotes omitted]
Counsel for the wife also submitted it was unclear how his Honour’s credit finding had impacted upon his decision. We do not accept this submission. First, it is clear his Honour accepted the evidence of the husband concerning the periods during which the parties cohabited, which was a matter of some importance. Secondly, his Honour found and emphasised that the contributions made by both parties to the acquisition and improvement of properties (i.e. financial and non‑financial) were similar. This was contrary to the proposition put by the wife, who had only conceded in a “begrudging way” that the “husband did some improvements to the properties” (original emphasis).
Accordingly this ground has no merit.

Ground 12 – the $17,000 contribution of the husband

By this ground the wife asserted that the Federal Magistrate erred in law in finding that the husband’s contribution of $17,000 towards the “[R] property” was a contribution to the acquisition and maintenance of the matrimonial assets. (It is apparent the reference to the “[R] property” should have been to the B property.)
The wife’s submissions in support of this ground were related to the submissions made in support of Ground 5. This ground fails for the same reasons. Although it was the husband’s money that was lost, the venture was a joint one.
Furthermore, this ground overlooks the express words of s 79(4)(a) which indicate that financial contributions to property may be taken into account whether or not that property “has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them …”

Ground 1 – adequacy of reasons

By this ground it was asserted that the Federal Magistrate erred in failing “to give any or any adequate or sufficient reasons”.
The summary of argument provided by counsel for the wife contained the following five complaints concerning the adequacy of the Federal Magistrate’s reasons:
1.His Honour had not explained why he considered it was a “novel argument” that the husband should be given no credit for the $17,000 he paid for the B property;
2.His Honour failed to address the effect of the wife being “the sole mortgagor” on the assessment of contributions;
3.His Honour had failed to distinguish between the acquisition of an asset by virtue of payment of the deposit and/or borrowing money as opposed to repaying a loan;
4.His Honour had failed or refused to deal with the submission that the husband’s contribution to S Court was a result of a fraud perpetrated against Centrelink; and
5.His Honour had misunderstood submissions in relation to the effect of the husband’s bankruptcy and had failed to elaborate on why he considered it was a misconceived argument to suggest that the husband was unable to contribute to property whilst bankrupt.
In considering the adequacy of the Federal Magistrate’s reasons it needs to be kept firmly in mind that his Honour was dealing with the distribution of an asset pool of very modest proportions. The matter had been (appropriately) completed in one day and his Honour commendably gave his reasons two days later. In our view, his Honour sufficiently disclosed the reasoning behind his decision. It is not the obligation of a trial judge or magistrate to discuss every submission made by counsel. In any event, as we have indicated in dealing with other grounds, we consider there was no substance in the various propositions which the wife considers were not given adequate consideration by his Honour.

Conclusion and costs

We have found no substance in any of the grounds. The appeal will therefore be dismissed.
Counsel for the wife properly conceded that if the appeal was dismissed it would be appropriate that an order for costs be made against the wife. We will make an order for costs accordingly.

I certify that the preceding one hundred and three (103) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.

Associate:

Date: 10 July 2009