Cross v Beaumont
[2007] FamCA 123
•2 March 2007
FAMILY COURT OF AUSTRALIA
| CROSS & BEAUMONT | [2007] FamCA 123 |
| APPEAL – PROPERTY - Where husband had interest in farming property subject to life tenancy – Conceded husband’s interest in farming property was vested interest notwithstanding husband did not have immediate ability to realise asset - Whether trial Judge erred in treatment of husband’s interest in farming property including assessment of contributions and relevant s 75(2) factors – No matter which trial Judge said to have failed to take into account and no extraneous matter taken into account – No appealable error in contributions assessment – Whether trial Judge failed to give sufficient weight to nature of husband’s interest in farming property - Discount inbuilt into valuation of husband’s interest in farming property to take account of life expectancy of life tenant - No error in trial Judge’s exercise of discretion particularly having regard to inbuilt discount in valuation which trial Judge took into account in making s 75(2) adjustment – No merit in this ground. Whether trial Judge erred in providing for payment of interest under Family Law Rules 2004 when husband unable to realise interest in farming property – Whether trial Judge failed to give adequate reasons for departure from s 117B(1) of the Family Law Act 1975 (Cth). RE-EXERCISE OF DISCRETION – SECTION 117B – Husband does not have present ability to realise interest in farming property or independently borrow against interest in that property – Imposition of interest at rate prescribed under rules not appropriate – Appropriate under s 117B(2)(a) to substitute interest at rate of 5 per cent per annum in lieu of rate prescribed by rules – Payment of interest due to be deferred until payment of balance due under trial Judge’s orders. COSTS – Appeal successful in respect of interest ground – Each party to receive certificate under Federal Proceedings (Costs) Act 1981 (Cth). |
| Family Law Act1975 (Cth), ss 75(2), 117B |
Bonnici and Bonnici (1992) FLC 92-272
Gronow v Gronow (1979) 144 CLR 513; (1979) FLC 90-716
House v The King (1936) 55 CLR 499
JEL and DDF (No 2) (2001) FLC 93-083
McDonnell and McDonnell (unreported, judgment delivered 13 December 1990: Baker, Simpson and Nygh JJ, Full Court of the Family Court of Australia)
Norbis v Norbis (1986) 161 CLR 513; (1986) FLC 91-712
Sorensen and Sorensen (unreported, judgment delivered 11 December 1991: Baker, Lindenmayer and Rourke JJ, Full Court of the Family Court of Australia)
| APPELLANT: | Cross |
| RESPONDENT: | Beaumont |
| INTERVENERS: | JE, JC and MC |
| FILE NUMBER: | HBF | 1168 | of | 2004 |
| APPEAL NUMBER: | SA | 35 | of | 2006 |
| DATE DELIVERED: | 2 March 2007 |
| PLACE DELIVERED: | Sydney |
| JUDGMENT OF: | Kay, Boland and Benjamin JJ |
| HEARING DATE: | 8 February 2007 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 10 May 2006 |
| LOWER COURT MNC: | [2006] FamCA 704 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Ayliffe |
| SOLICITOR FOR THE APPELLANT: | Doolan & Brothers |
| COUNSEL FOR THE RESPONDENT: | Ms Trezise |
| SOLICITOR FOR THE RESPONDENT: | AT Legals |
ADVOCATE FOR THE INTERVENERS: | No appearance by or on behalf of the interveners |
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Cross and Beaumont.
Orders
That the appeal is allowed.
That Order 2 of the orders made by Watt J on 10 May 2006 be set aside and the following order substituted in lieu:
(i)From 1 July 2006 and until the same falls due pursuant to Order 1(b) of these orders interest shall accrue and be paid on any part of the said sum of $93,860.00 that remains unpaid at the rate of 5 per cent per annum. Once the principal sum has fallen due interest shall accrue on any part of the said sum of $93,860.00 that remains unpaid at the rate prescribed by the Family Law Rules 2004 from time to time until payment in full of the said sum.
That the Court grants to the husband a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
That the Court grants to the wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
| FAMILY COURT OF AUSTRALIA AT HOBART |
Appeal Number: SA 35 of 2006
File Number: HBF 1168 of 2004
| Cross |
Appellant
And
| Beaumont |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal by the husband against orders made by Watt J on 10 May 2006 following defended property proceedings between the husband and the wife under s 79 of the Family Law Act1975 (Cth) (“the Act”). The husband’s mother, JC, and his siblings JE and MC were interveners in the proceedings before the trial Judge. The interveners did not participate in the appeal.
The trial Judge found the parties had net assets of $303,242.00 and superannuation entitlements of $26,917.00. His Honour assessed the parties’ respective contributions to their non superannuation assets as 75 per cent by the husband and 25 per cent by the wife, and made an adjustment in the wife’s favour of 12.5 per cent for relevant factors under s 75(2). His Honour assessed the parties’ superannuation entitlements derived during the marriage to be equal. This resulted in an assessment of the wife’s superannuation entitlement at $11,250.00. His Honour ordered that the wife should receive a total entitlement of $113,716.00 which, after adjustment for assets and superannuation in her possession, required payment by the husband to the wife of $93,860.00.
The central issue before the trial Judge, and in this appeal, was the manner in which the husband’s interest in a farming property comprising two parcels of land in north eastern Tasmania (“the farming property”) should be treated. The husband inherited from the estate of his late father a one third interest in the farming property, subject to a tenancy in the farming property in favour of JC for her life or until her remarriage. JC had not remarried, was aged 85 years at the date of the trial, and had a life expectancy of 6.2 years based on life expectancy tables.
The husband asserted the trial Judge:
· was in error in including the farming property in the assets to be divided between the parties on the basis that he was presently unable to realise his interest in the farming property;
· erred in his contribution based assessment which was outside the reasonable ambit of discretion;
· erred in law by including the husband’s interest in a stand of timber on the farming property in the pool of assets to be divided between the parties; and
· was in error in providing for the payment of interest under the Family Law Rules 2004 (“the rules”) when the husband was unable to realise his interest in the farming property.
Background
The background history which is set out in the trial Judge’s reasons is uncontroversial. It is convenient for us to set out the background as recorded by his Honour:
10.The wife was born in [ ] Victoria [in] 1961. The husband was born [in] Tasmania [in] 1964.
11.In 1990 the husband and wife met [ ] in Victoria, where she lived and he was working at the time. The parties commenced cohabitation in mid 1992. [In] July 1992, the husband purchased [a] veterinary clinic (in Tasmania). He also acquired the premises, and adjacent real estate at which the practice was conducted. The husband moved to Tasmania to acquire and conduct the veterinary practice in 1992, and once he was established there, the wife joined him in April 1993, and they lived together at [S]. The wife obtained employment as a full-time night duty nurse at [R] hospital.
12.In late 1993 the parties moved to live at [the farming property], which is about 45 kilometres by country roads from [S]. The husband’s mother lived in a cottage on the smaller of the two titles (1.56 hectares) and the husband’s brother and his wife had moved from the home on the larger title (97.93 hectares) to live elsewhere. The husband and wife took occupation of [the farming property] with the consent of the life tenant who continued to live in the cottage as she did to the time of trial, and with the consent of the two other beneficiaries, the husband's brother and sister.
13.The parties (husband and wife) discussed and agreed that they would eventually acquire the interests of his siblings in [the farming property], but no agreement was ever reached with the husband’s brother and sister to this effect, although the husband and wife remained in possession of the property for 10 years.
14.No rent was paid to the life tenant (nor did she seek it) for the use of that part of [the farming property] that she did not occupy, but the parties did much to enhance its usefulness as a farming property, and to make the run-down home more comfortable. They also maintained the property and paid the rates and other outgoings.
15.Whilst living at [the farming property], the parties conducted farming activities and the husband also worked as a veterinarian, and the wife as a nurse. The parties' first child, [L], was born [in] 1997.
16.In May 2002 the wife took maternity leave from [ ] where she was then employed and [in] 2002, the parties’ second child [O] was born.
17.In June 2003 the wife resigned from her employment and on 15 September 2003 the parties separated when the husband vacated the former matrimonial home at the request of the wife, ending about 11 years of cohabitation.
18.In December 2003 the wife and the children travelled to Victoria for Christmas. A few days after her arrival in Victoria, the wife advised the husband that she wanted to relocate her own and the children's place of residence from Tasmania to [ ] Victoria. Proceedings were instituted by the husband in relation to the children, and these were resolved by the orders of 18 November 2004 on the basis that the children would remain living with the wife in Victoria, and the husband would have regular contact in Tasmania, with the wife contributing one half of the cost of their return travel.
It was not in dispute that after the proceedings were commenced, but before the hearing, the husband sold the veterinary practice.
Notice of appeal
The husband’s Notice of Appeal dated 7 June 2006 set out sixteen grounds of appeal. Before us, the husband’s counsel abandoned grounds 2, 3, 9, 10, 11, 12, 13, 14, 15 and 16. Counsel for the husband argued the remaining grounds of appeal in the following categories:
· Treatment of the stand of timber (Grounds 5, 6 and 7).
· Treatment of the farming property including assessment of contributions and relevant factors under s 75(2) (Ground 1).
· The interest challenge (Ground 8).
The husband sought in the event that his appeal was successful, that the award to the wife be reduced by such percentage “as the Full Court consider [sic] appropriate” and “that the requirement to pay interest be deleted from order 1(b)”.
We propose to deal with the grounds now pursued in the topics identified above and in the order argued by the husband’s counsel.
Appellate principles
The circumstances in which the Full Court should interfere with a discretionary judgment are well known. In Gronow v Gronow(1979) 144 CLR 513; (1979) FLC 90-716 Stephen J said at 519:
The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge's discretionary decision on grounds which only involve conflicting assessments of matters of weight.
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.
Treatment of the stand of timber
(a) Trial Judge’s reasons for judgment
After setting out the background of the parties, the trial Judge proceeded to identify the relevant property of the husband and wife. His Honour noted:
… Mr [D], who had provided a real estate valuation of the two properties that comprise [the farming property] adjusted his valuation to take into account the presence of a life tenant and the fact that the interests of the three residuary beneficiaries would not vest in possession until her passing. His revaluation of the whole of [the farming property] reduced from his initial figure of $795,000 to $623,390 once he allowed for the life interest. The trial then proceeded on the basis that the husband’s property included a one third share valued at $216,667, including the value of the stand of timber. In addition to the value of the land, a stand of timber [on the farming property] was valued by another single expert at $25,887. In his second valuation, Mr [D] included this amount, while noting that the timber “could be treated as a harvestable crop that can be realised at any point in time”. (paragraph 22)
His Honour then said:
There was however no evidence from the life tenant of any intention to harvest and sell this timber, and the probability is that the value of it will pass to the three residuary beneficiaries with the real estate (or its proceeds of sale) in due course. (paragraph 22)
When setting out his conclusions as to the pool of assets available for division between the parties, his Honour said:
In his amended final submissions the husband argued that the appropriate value of his interest in the estate is $207,800 which excludes the value of the stand of timber but I have found that the timber will probably remain unharvested by the life tenant. (paragraph 185)
(b) The parties’ submissions
Before us and in his written submissions, counsel for the husband submitted that the trial Judge erred in including in the property of the parties the husband’s one third interest in the farming property at $216,667.00 being the value determined by the single expert, Mr D, discounted for the life tenancy of JC, but including in the valuation a stand of timber valued by another expert. Contrary to the husband’s submission at trial that the whole of the value of the stand of timber should be excluded from the divisible assets, he argued that the sum of $25,887.00 should be reduced by 25 per cent or $6,471.75 which “would result in a reduction of the valuation of the husband’s one-third remainder share by $2,155.00”. He further submitted a further reduction should have been made to take into account “contingencies”, such as the timber being harvested by the life tenant, with express permission of the husband’s siblings, to provide, for example, aged care for JC.
The husband’s counsel premised his argument on JC’s legal entitlement as a life tenant pursuant to the provisions of the Settled Land Act 1884 (Tas) (“the Settled Land Act”) on the basis that s 32 of that Act changed the position of a life tenant at common law, and provides that a life tenant is entitled to a one-quarter part of the proceeds from the cutting and selling of timber.
Section 32 of the Settled Land Act is in the following terms:
(1)Where a tenant for life is impeachable for waste in respect of timber, and there is on the settled land timber fit for cutting, the tenant for life, on obtaining the consent of the trustees of the settlement or an order of the Court, may cut and sell that timber or any part thereof.
(2)Three-fourth parts of the net proceeds of the sale shall be set aside as and be capital money arising under this Act and the other fourth part shall go as rents and profits.
After setting out the provision of s 32 of the Settled Land Act, counsel for the wife submitted that no evidence had been adduced at trial that JC had sought to obtain the consent of the trustees of her late husband’s will or sought an order from the Supreme Court of Tasmania, to cut and sell the stand of timber.
(c) Discussion
At the commencement of our discussion we note the primary submissions of the husband’s counsel on appeal, if accepted, would change the pool of assets by the deletion of the sum of $2,155.00. Having regard to issues of proportionality, any error in a sum of that quantum would not normally justify appellate interference, particularly in circumstances where there was no other appealable error. The matter was however vigorously pursued before us, and in these circumstances we propose to examine the trial Judge’s treatment of this asset.
It appears to us the trial Judge’s findings on the balance of probability that the timber would not be harvested during the lifetime of JC were well open to him on the evidence. First, although JC herself did not give evidence, the trial Judge noted that after discussion “between the Bench and the Bar table” it was agreed the assertions of fact in the interveners’ summary of argument would be treated as their evidence, and could be relied on by the husband.
In their summary of argument the interveners said:
Forestry Valuation: In addition to the valuation of [the farming property], the Applicant also requested this expert valuation by Mr. [C]. We have no disagreement with this valuation as such, but given the position of this section of bush, the fact that there is already a significant lobby in place to halt all forestry operations in this area by the conservation movement and other local residents, it is unlikely that any income other than some small scale harvesting of saw logs, could be realised.
We are satisfied that on the evidence before the trial Judge it was open to him to include the husband’s interest in the stand of timber as he did, and we discern no appealable error by the trial Judge.
The treatment of the farming property
(a) The trial Judge’s treatment of the farming property
At the commencement of his reasons for judgment, the trial Judge at paragraph 4 recorded the history of the interveners’ association with the farming property, and the terms of the husband’s late father’s will. His Honour chronicled that on the husband’s late father’s death in 1975, the farming property had been devised to JC for life or until her remarriage, and then to the husband and his siblings in equal shares “if they survived him and attained the age of 21”. The trial Judge recorded that the residuary beneficiaries had, by the date of trial, acquired a vested interest “although the assets will not become available until the death of the life tenant”. His Honour also recorded the competing applications of the wife (who sought in the alternate to a payment to her of $100,000.00 by instalments spread over 24 months, an adjournment of the proceedings for five years) and that of the interveners noting the latter’s opposition to an order sought by the wife that, pending further order, they be restrained from dealing with their interests in the farming property.
Later in his reasons, the trial Judge recorded the husband’s position that he was unable, “without the co-operation of his mother and siblings – unlikely to be forthcoming in these circumstances – access his interest for the purposes of paying out the wife”. At paragraph 40 his Honour further recorded that the husband held his one third interest in the residuary estate at the commencement of the parties’ cohabitation.
The trial Judge rejected the husband’s assertion that his interest under his late father’s will was contingent, and noted that after the single expert had re-valued the land to take into account the life estate, that the wife had not pursued her application for adjournment under s 79(5). His Honour set out his conclusions about the husband’s interest in the farming property as follows:
50.In respect of his interest in [the farming property], as a 1/3rd residuary beneficiary of his father’s estate the husband referred me to the unreported case of McDonnell Appeal No 144 of 1990 (that is cited in White and Tulloch v White (1995) FLC 92-640. The husband relied on McDonnell for the proposition that his interest in his father’s estate could be omitted from the asset pool in circumstances where he cannot presently access it without the consent of others. That case was very different: the relevant interest having been inherited by the wife after separation, leaving her as joint proprietor with two elderly aunts, which presented difficulties for her in accessing that asset. The trial judge did not include the interest in the asset pool but took it in account in a general way, and the Full Court rejected an appeal ground based on its omission from the asset pool.
51.In the present case, the inheritance is unconditional, was pre-relationship and the husband will be entitled to call upon the executors to pay him his 1/3rd share at the end of the life tenancy. There is no basis on which I could properly exclude that asset from the asset pool.
(b) The parties’ submissions
Before us counsel for the husband attacked the trial Judge’s reasons in respect of the farming property essentially on three bases:
(a) First, he asserted the trial Judge should have, in the circumstances of this case, adopted an “asset by asset” approach rather than a global approach.
(b) Second, he asserted the trial Judge should have excluded the husband’s interest in the farming property from the pool of divisible assets, and taken his interest in it into account under s 75(2).
(c) Third, he asserted the trial Judge had given insufficient weight to the husband’s contribution of this asset, the largest asset of the parties, in particular having regard to the husband’s initial contribution of the asset at the commencement of cohabitation, and rent free occupation of the farming property afforded to the parties throughout their cohabitation.
(c) Discussion - treatment of the farming property
It was properly conceded before us that the husband’s interest in the farming property was a vested interest notwithstanding he does not have immediate ability to realise the asset.
We accept before the commencement of the hearing before the trial Judge both parties referred to the husband’s interest in the farming property as being a “financial resource”, and the husband continued to assert the trial Judge should exclude the property from the divisible pool, in effect, treating it as a financial resource. In his final written and oral submissions to the trial Judge, the husband indicated that the trial Judge could treat the farming property as part of the pool of property (see husband’s written submissions filed 5 August 2005 paragraph 31).
Before turning to examine some of the cases dealing with treatment of inherited property in s 79 proceedings, we think it useful to refer to the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513; (1986) FLC 91-712 dealing with either the “global” or “asset by asset” approach. Mason and Deane JJ in discussing the “global” or “asset by asset” approach at 523-524 said:
As a matter of construction of s 79 Nygh J is right in saying that the section imposes no obligation on the Family Court to pursue in relation to this issue either the global approach or the asset-by-asset approach to the exclusion of the other. We do not understand the Full Court in the present case to suggest otherwise. What the Full Court asserts is that the global approach is the only “realistic”, that is, convenient, means of arriving at the entitlements of the parties. Again, it seems to us that it will depend on the circumstances of the particular case, though in the majority of cases the global approach will be the more convenient and for this reason the Full Court is entitled to prescribe its adoption as a guideline in the majority of cases. The Family Court has rightly criticized the practice of giving over-zealous attention to the ascertainment of the parties’ contributions, and we take this opportunity of expressing our unqualified agreement with that criticism, noting at the same time that the ascertainment of the parties’ financial contributions necessarily entails reference to particular assets in the manner already indicated.
In their joint judgment, Wilson and Dawson JJ, having discussed the two approaches to assessment of contribution under s 79 said at 533-534:
To say as much is to say no more than that the legislation confers a discretion upon the court which, provided the required matters are taken into account, does not dictate the employment of any particular method in the formulation of an appropriate order for the alteration of property interests. The matters which are to be taken into account will sometimes require the division of the assets, or some of them, upon the basis of their individual values, but in other cases no more than an overall division will be required. In some cases either approach may be adopted in part or in whole.
…
We think it is not possible to take the question of guidelines further than this. Nor is it desirable to attempt to do so. With all respect to those who think differently, we believe that the sound development of the law, in this area as in others, is served best by following the tradition of the common law. The genius of the common law is to be found in its case-by-case approach. The decision and reasoning of one case contributes its wisdom to the accumulated wisdom of past cases. The authoritative guidance available to aid in the resolution of the next case lies in that accumulated wisdom. It does not lie in the abstract formulation of principles or guidelines designed to constrain judicial discretion within a predetermined framework. There is no reason to think that the traditional approach, when applied in the family law area, leads to arbitrary and capricious decision-making or that it leads to longer and more complex trials.
Both before the trial Judge, and before us, the husband relied on the unreported decision of the Full Court in McDonnell and McDonnell (unreported, judgment delivered 13 December 1990: Baker, Simpson and Nygh JJ, Full Court of the Family Court of Australia). In McDonnell and McDonnell (supra) the parties’ marriage was of 15 years duration. They had no children. After separation the wife inherited a one third interest in a property in a Sydney suburb, which interest had a value of approximately $60,000.00. The remaining two thirds interest in the property was inherited by two maiden aunts of the wife. The trial Judge did not include the wife’s interest in the Sydney property on the basis that “it was acquired after separation and without contribution by either party”. The Full Court in their ex tempore reasons found no error of discretion by the trial Judge in his approach.
The husband argued that the principle in McDonnell and McDonnell (supra) was that an asset by asset approach ought to be adopted in lieu of the global approach. That submission misconceives the reasoning of the Full Court in McDonnell and McDonnell (supra) which, as we have said above, found that the approach adopted by the trial Judge in that case was open to him, not that it was the only appropriate approach.
In Bonnici and Bonnici (1992) FLC 92-272 the Full Court (Nicholson CJ, Nygh and Tolcon JJ) discussed the treatment of inherited assets. In this case three years prior to the parties’ separation, the husband inherited $20,000.00 and the year prior to separation inherited one half of his mother’s estate receiving approximately $500,000.00. From the husband’s entitlement from the estate it was conceded by the wife he paid out approximately $110,000.00 by way of liabilities, thus receiving approximately $390,000.00 net. At trial, on behalf of the husband, it was asserted that his inheritance from his late mother’s estate should have been excluded from the pool of assets and treated as a financial resource. The trial Judge rejected this submission, and assessed the parties’ respective entitlements on a global basis and having regard to the length of the marriage and the parties’ respective contributions found contributions to be equal. The substantive questions considered in the appeal were the inclusion of the inheritance into the pool and the finding of equal contribution to that pool. In considering whether the inheritance should be considered a “financial resource” their Honours said at 79,020:
We have no doubt that his Honour was correct in rejecting the submission that these assets were a “resource” and not property. They clearly were property and came into the parties' hands during the subsistence of the relationship. Indeed, if they had come into their hands subsequently, they would still have retained their character as property. The expression “resource” is and should be confined to those interests which do not fall into the definition of property as such to which the parties have a present entitlement.
The more difficult issue in this case is as to whether the same should be treated differently from other types of property in which the parties clearly have an interest.
The answer, we consider, must depend upon the circumstances of individual cases. If, for example, in the present case, there had been no other assets than the husband's inheritance, but the wife had, as his Honour found, clearly carried the main financial burden in the support of a family and also performed a more substantial role as a homemaker and parent than the husband, then it would clearly be open and indeed incumbent upon a Court to make a property settlement in her favour from such an inheritance.
A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.
Those remarks are particularly apposite in this case where, as was submitted by the husband, the farming property was the only substantial asset available for division between the parties.
The assessment of the parties’ contributions to the farming property was not without difficulty. The facts in this case presented unusual features for the trial Judge to assess and weigh. His Honour’s thorough and detailed reasons disclose he had careful regard to the history of the use of the farming property, the indirect contribution by JC on the husband’s behalf of permitting the parties’ farming operation on the land, and occupation of the dwelling. His Honour also assessed and gave weight to the wife’s contributions to the maintenance of the farming property including the home thereon.
We have already set out above the relevant principles to be applied in assessing contribution referred to in Norbis v Norbis (supra) and in particular that in the assessment exercise a trial Judge should not be “over-zealous”. In this case, his Honour assessed the husband should receive by way of assessment of contributions $151,621.00 or the first 50 per cent of the asset pool, and that the wife’s entitlement was one half of the remaining balance (25 per cent) thus clearly recognising the husband’s significant initial contribution of the farming property, and other benefits received from the life tenant during the parties’ cohabitation.
We were not taken to any matter the trial Judge was said to have failed to have regard in such assessment, or any extraneous matter that he took into account. We discern no appealable error in his Honour’s contribution assessment.
The trial Judge provided an adjustment in the wife’s favour of 12.5 per cent for relevant factors under s 75(2). Ground 1(d) of the husband’s grounds of appeal is directed to an asserted failure by the trial Judge to give sufficient weight to the nature of the husband’s interest in the farming property.
The husband’s interest in the farming property was discounted to take into account the life expectancy of the life tenant (that is the property was reduced in value from its value at date of hearing of $795,000.00 to $623,390.00). We are satisfied that the trial Judge, whilst cognisant of the husband’s inability to realise or borrow against his asset until the death of JC without her consent and that of the other interveners, did not err in the exercise of his discretion, particularly having regard to the discount “inbuilt” into the valuation, and that the trial Judge took this into account in making the adjustment in the wife’s favour. We are satisfied there is no merit in this ground.
The interest ground
Order 2 of the trial Judge’s orders provides as follows:
From 1 July 2006 interest shall accrue and be paid together with any part of the said sum of $93,860 that remains unpaid in accordance with this order at the rate prescribed by the Family Law Rules from time to time until payment in full of the said sum.
In his reasons, the trial Judge, after discussing the husband’s submission to the effect he could raise $31,000.00 by 1 June 2006, said:
I can assume that he has prepared himself to do this if he was successful in this case, and will order that the amount of $31,000 be paid by 30 June 2006. As to the balance of $62,860, however, I can not set a date for payment of that amount that is earlier than the end of the life tenancy, or upon the husband having earlier access to his interest in the estate and whilst the husband and his family may take steps to raise the money earlier, I can not compel them to do so. It is appropriate therefore for interest to run at the rate prescribed by the Family Law Rules from time to time, providing an incentive for payment to be made at the earliest available date. (paragraph 208)
Section 117B of the Act makes provision for the payment of interest on moneys payable pursuant to an order. It is in the following terms:
Section 117B
Interest on moneys ordered to be paid
(1)Subject to any order made by the court under subsection (2), where, in proceedings under this Act, a court makes an order for the payment of money (other than an order for the payment by way of maintenance of a periodic sum), interest is payable, at the rate prescribed by the applicable Rules of Court, from:
(a) the date on which the order is made; or
(b) the date on which the order takes effect;
whichever is later, on so much of the money as is from time to time unpaid.
(2)A court that makes an order for the payment of money as mentioned in subsection (1) may order that interest is not payable on the money payable under the first‑mentioned order or may order:
(a)that interest is payable at a rate specified in the order, being a rate other than the rate prescribed by the applicable Rules of Court; or
(b)that interest is payable from a date specified in the order, being a date other than the date from which the interest would be payable under subsection (1).
Before us in his oral argument, the husband’s counsel essentially submitted that the trial Judge had not given adequate reasons for departure from s 117B(1) of the Act by ordering that interest run from 1 July 2006 rather than from the date provided for payment in Order 1(b), that is within 90 days of the death of JC or receiving part or all of his interest in the residuary estate of his late father.
Although in his written submissions, counsel for the husband submitted the asserted error could be cured by an order which, rather than providing for interest, gave the wife a percentage adjustment to the capital sum due depending on the value of the farming property at the date of payment, before us counsel acknowledged that such a course would be contrary to s 81 of the Act and likely costs involved in a further valuation disproportionate to the sum in issue.
The question of the payment of interest as prescribed in the rules was discussed by Full Courts in Sorensen and Sorensen (unreported, judgment delivered 11 December 1991: Baker, Lindenmayer and Rourke JJ, Full Court of the Family Court of Australia) and in JEL and DDF (No 2) (2001) FLC 93-083.
In Sorensen and Sorensen (supra) the trial Judge ordered that the husband pay interest on the balance of the outstanding principal due to the wife. The trial Judge, in his reasons, accepted submissions made on behalf of the husband that he would in the long term need to dispose of real estate to pay the sum due to the wife, and that he did not have any long term capacity to service a substantial loan “for the purpose of satisfying the wife’s award”. Consequently the trial Judge ordered the payments to be made to the wife should be by way of instalments over a period of 18 months. At the time of the hearing the interest rate prescribed under the then Regulations was 18 per cent per annum. The Full Court found that regardless of whether payments were made promptly, as and when they fell due, interest amounting to $60,750.00 would have accrued by final payment. It was accepted by the Full Court that the provision for interest on the balance due amounted to an unwarranted penalty, but that interest should be payable in the event of default of the trial Judge’s orders.
In JEL v DDF (No 2) (supra) the Full Court considered whether interest at the rate prescribed in the rules, or interest at market rates should be applied to a sum the wife was required to repay to the husband after a successful appeal. The Full Court rejected the husband’s submission that interest should run at the prescribed rate and referred to such rate as “what can only be described as a penalty rate”.
In this case the trial Judge recorded the husband’s assertion that he “could not, without the co-operation of his mother and siblings – unlikely to be forthcoming in these circumstances – access his interest for the purposes of paying out the wife”. The trial Judge, as we have already recorded, after noting the husband could pay $31,000.00 by 1 June 2006 said “[a]s to the balance of $62,860, however, I can not set a date for payment of that amount that is earlier than the end of the life tenancy, or upon the husband having earlier access to his interest in the estate and whilst the husband and his family may take steps to raise the money earlier, I can not compel them to do so”.
We accept there is merit in the submissions of the husband’s counsel in respect of lack of reasons for the trial Judge’s determination under s 117B. The trial Judge does not appear to have considered in his reasons why the provisions of s 117B(1) should have been displaced, by the exercise of his discretion under s 117B(2)(a) by providing for interest at a lower rate when the husband had no present capacity to pay the balance of the wife’s entitlement. We are satisfied this ground is established.
Re-exercise of the discretion
The parties accepted that if we found merit in the interest ground, that we should re-exercise the discretion under s 117B.
The present rate of interest under the rules is 10.75 per cent. The commercial 90 day bank bill rate as at 16 February 2007 was 6.3667 per cent (NAB Capital bank bill rate). At the date of the trial JC had a life expectancy of approximately 6.2 years. Order 2 prima facie obliged the husband to pay interest on $62,860.00 for approximately 6.2 years, that is in addition to the capital sum, an amount of approximately $41,650.00.
It is not in dispute that the husband’s interest in the farming property will each year increase (regardless of movement in land values) as the life expectancy of JC diminishes. The discount on the total value of the land found by the single expert was $171,610.00. Thus, the husband’s interest in the farming property over the life tenancy will, by effluxion of time, on present day values increase by approximately $57,203.00.
We are satisfied that, in circumstances where the husband does not have the present ability to realise his interest in the farming property or to independently borrow against his interest in the property, that the imposition of interest at the rate prescribed under the rules is not appropriate. Further, when we have regard to the quantum of the interest likely to be received by the wife under the present order, and compare that sum with the presently ascertainable increase in value the husband will enjoy on the expiration of the life tenancy, the sums appear disproportionate having regard to the trial Judge’s overall division of the parties’ assets.
We balance those findings with the entitlement of the wife to receive some compensation for the delay in receipt of her entitlement to a share of the parties’ assets. It appears to us that it would be appropriate under s 117B(2)(a) to substitute interest at a rate of 5 per cent per annum in lieu of the rate prescribed by the rules from time to time from 1 July 2006 until date of payment, payment of such interest being deferred until the payment of the balance due under the trial Judge’s orders. Of course such an order will not preclude the husband making earlier payment to the wife if he is able to borrow or otherwise obtain funds to comply with his obligation under the orders.
Costs
At the conclusion of the appeal we sought oral submissions from each of the parties in respect of costs of the appeal. The husband’s counsel submitted that if the husband was successful, or partially successful, he should receive a certificate pursuant to the provisions of the Federal Proceedings(Costs) Act 1981 (Cth), or in the alternate that each party pay their own costs of and incidental to the appeal. Finally he submitted, in the alternate, the husband could seek costs of $2,000.00 to $3,000.00.
Counsel for the wife submitted if the only successful ground was the husband’s challenge to the rate of interest payable, in those circumstances, the husband would have been largely unsuccessful, and that he should pay the wife’s costs in the sum of $4,500.00 or as agreed or assessed under Chapter 19 of the rules.
We are of the view as the husband’s appeal has succeeded in respect of the interest ground, each party should receive certificates under the Federal Proceedings (Costs) Act 1981 (Cth).
I certify that the preceding fifty seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
Date: 2 March 2007
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