Delaney and Ors. v Short

[2001] NSWCA 138

CITATION:	Delaney & Ors. v. Short [2001] NSWCA 138
FILE NUMBER(S):	CA 40129/00
HEARING DATE(S):	10 April 2001
JUDGMENT DATE:	14 May 2001
PARTIES :	P.J. Delaney, P.N. Coumbis, J.P. Rouen, P.T. Hayson, J.S. Currie, G. Miles & J.S. Goldstein - appellants Lesley Lorraine Short - respondent
JUDGMENT OF:	Heydon JA at 1; Hodgson JA at 2; Davies AJA at 87

LOWER COURT JURISDICTION :	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S) :	CL20465/94
LOWER COURT JUDICIAL OFFICER :	Adams, J.

COUNSEL:	Mr. D. Grieve QC with Mr. B. Knox for appellants Mr. D. Murr SC with Mr. J. Miller for respondent
SOLICITORS:	Phillips Fox, Sydney for appellants Rockliffs, Sydney for respondent
CATCHWORDS:	PROFESSIONS AND TRADES - Lawyers - Negligence - Settlement of wife' s property in Family Law Act proceedings - Assets of husband not disclosed - Claim by wife against her solicitor for not making proper enquiries - Proof that husband had certain assets, and had not accounted for others - Whether husband's failure to account sufficient basis to award damages - Onus of proof. D.
DECISION:	See paragraph 86 of judgment

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA40129/00
CL20465/94

Monday 14th May 2001

DELANEY & ORS. V. SHORT

JUDGMENT

1   HEYDON, JA: I agree with Hodgson JA.

2   HODGSON, JA: This is an appeal by the defendants from a decision of Adams, J, which resulted in a judgment in favour of the plaintiff on 11th February 2000 in the sum of $979,233.46, representing damages of $420,000.00 plus interest on that sum. The damages were awarded for professional negligence by a solicitor Mr. Goldstein, who was a partner of the other appellants, in connection with Family Court proceedings brought by the respondent against her husband and ancillary matters.

3   No appeal is brought against the finding of liability. The appeal essentially concerns the quantum of damages awarded. There is also a cross-appeal on one matter, to which I will come.

BRIEF HISTORY

4   The respondent married her husband Dr. Pollock in 1973. They have three children. For most of the marriage, they worked in partnership as dentists.

5   On 10th September 1985, the husband left the matrimonial home at 35 Minimbah Road, Northbridge. At around this time, the respondent consulted Mr. Goldstein in connection with her matrimonial affairs.

6   At the end of 1985, the husband returned to the matrimonial home. However, there was no reconciliation, and in April 1986, the respondent left the matrimonial home with the children.

7   Meanwhile, in January 1986, the husband proposed to the respondent the purchase of another dental practice, this one being at Willoughby, which would be her practice; while he proposed to continue to work in the practice at North Sydney where both of them had previously worked. The Willoughby practice was purchased around this time in their joint names, financed by a loan from the Commonwealth Bank of Australia secured over their joint property.

8   In April 1986, the respondent consulted Mr. Goldstein again. She gave him particulars of the assets and liabilities of herself and her husband, which relevantly included the following items. First, there was the matrimonial home at Northbridge said to be worth $800,000.00, in respect of which there was a debt to the Perpetual Trustee Company of $500,000.00, and another debt to Alliance Acceptance of $160,000.00, being the loan used in the purchase of the Willoughby practice. Next, there was the Willoughby practice and the property on which it was conducted, said to be worth respectively $50,000.00 and $185,000.00. Next, there was the North Sydney practice said to be worth $130,000.00. Next, there was a motor cruiser said to be worth $250,000.00, in respect of which $242,000.00 was said to be owing to Beneficial Finance. There was a Ferrari motor vehicle, said to be worth $52,000.00, and money in the bank said to amount to $157,000.00. There were liabilities of $160,000.00 to the Commonwealth Bank of Australia, and $24,000.00 on credit cards. There were other small assets and liabilities of little significance.

9   In December 1986, a solicitor acting for the husband wrote to Mr. Goldstein setting out “in broad terms” what the husband saw as the then current financial position. This differed in some respects from the list of assets and liabilities as given to Mr. Goldstein by the respondent. There was some variation in the value attached to assets, especially in much higher values given to the Willoughby property ($230,000.00) and the Willoughby practice ($140,000.00). The motor cruiser was absent from the assets, but not the liability to Beneficial Finance of $242,000.00. The Ferrari was absent, as was the liability of $160,000.00 to the Commonwealth Bank of Australia. Instead of that liability, there were given liabilities of $40,000.00 to Citicorp (apparently, an unpaid lease liability in respect of the Ferrari), $50,000.00 to Custom Credit (a personal loan) and an $83,000.00 overdraft (presumably, to the Commonwealth Bank of Australia). This letter gave no explanation for the absence of the motor cruiser and the Ferrari, without any significant adjustment of the level of debts.

10   In March 1987, the matrimonial home was sold for $850,000.00. A statement from the solicitors acting on the sale dated 30th April 1987 showed that the Perpetual Trustee Company had been paid about $510,000.00, and Alliance Acceptance about $160,000.00, and that the deposit of $85,000.00 had been sent “to you” (apparently, the husband and the respondent) on 27th March 1987; and it showed a balance out of which $44,717.65 was paid to each of the husband and the respondent.

11   Shortly after that payment was made, the husband asked the respondent for the sum of about $44,000.00 that had been sent to her, in order to pay some debts; and she gave it to him. However, according to the respondent, she did not receive any part of the $85,000.00 deposit, and was unaware of what had happened to it.

12   On 1st July 1987, the husband’s solicitor wrote to Mr. Goldstein, again setting out assets and liabilities of the parties. The matrimonial home and the debts to Perpetual Trustee and Alliance Acceptance had gone. No proceeds of sale of the matrimonial home were included, and also there was no reference to $157,000.00 or any similar sum as being in any bank account. The principal assets set out were the Willoughby property (put at $250,000.00), the Willoughby practice (put at $160,000.00), and the North Sydney practice (put at $165,000.00). As regards the liabilities, the liabilities to Perpetual Trustee Company and Alliance Acceptance had gone, as had the liability to Beneficial Finance of $242,000.00; but otherwise the liabilities were much the same. The personal loan of $50,000.00 was unchanged, the amount owing in respect of the lease of the Ferrari was put at $35,000.00 (down $5,000.00), and the overdraft was put at $116,000.00 (up $33,000.00).

13   It could be that the $157,000.00 from the bank account and the $175,000.00 balance from the sale of the house were used in part to pay out the $242,000.00, although that would leave about $90,000.00 unexplained. I note also that, in an application for finance to the National Australia Bank of 13th August 1987, the husband made reference to a cash balance at the Commonwealth Bank of Australia of $125,000.00.

14   On 8th July 1987, the respondent instituted property settlement proceedings in the Family Court.

15   On 7th August 1987, the husband entered into a contract to purchase land in Bungan Head Road, Newport for $285,000.00. This transaction was unknown to the respondent and to Mr. Goldstein until after the property settlement agreement had been finalised. According to an affidavit filed by the husband in subsequent Family Court proceedings, the $28,5000.00 deposit in respect of this contract was paid out of cash advances on credit cards, and by use of his overdraft facility.

16   On 22nd September 1987, a statement by the husband of his financial circumstances was filed in the Family Court. The assets disclosed were substantially those disclosed in his solicitor’s letter of 1st July 1987. However, the liabilities were different. They included a mortgage balance of $140,000.00, a loan debt to the Pollock Family Trust of $200,000.00, and a liability to Custom Credit of $25,500.00. The liabilities also included a substantial disputed tax liability and a substantial liability to an accountant. It was not made clear why the total liabilities were up about $200,000.00 from those disclosed in the solicitor’s letter of 1st July 1987, or why they were differently expressed.

17   In November 1987, the husband’s purchase of the Newport land was settled with the assistance of a bill facility for $220,000.00 from the National Australia Bank, and also (according to the husband’s affidavit, to which I have referred) cash advances on credit cards.

18   On 19th October 1987, contracts were exchanged for the purchase by the husband and two partners of a service station at Ryde, initially for a price of $830,000.00: this was subsequently increased to $880,000.00 because of the inclusion of further assets. The husband was to have a half interest in this property, and his partners, two brothers, were to share the other half interest. The husband’s share of the 10% deposit, a sum of $41,500.00, was, according to the husband’s affidavit, paid from the proceeds of a sale and leaseback transaction entered into in August 1987 in respect of dental equipment and a motor vehicle.

19   At a conciliation conference held in the Family Court on 12th December 1987, the husband did not disclose either of the two transactions referred to earlier, that is the purchase of the Newport land and the purchase of the Ryde service station.

20   The purchase of the Ryde service station was settled on 22nd March 1988, with the assistance of a mortgage advance of $880,000.00. This was more than required to complete the purchase, and a sum of $73,000.00 was paid out of the proceeds of the mortgage to the husband.

21   On 11th March 1988, according to the husband’s affidavit, he agreed to purchase a Ferrari motor vehicle for $62,000.00. According to this affidavit, he paid the deposit of $7,100.00 from Bankcard advances, and the balance from a cheque account on 23rd March: presumably this balance was financed at least in part by the $73,000.00 to which I have referred. Subsequently, it appears that the husband dishonestly obtained an invoice in respect of this purchase showing the purchase price at $105,000.00, and he used this invoice in a sale and leaseback transaction giving him an amount of cash of this order.

22   On 22nd June 1988, in a statement given by the husband’s accountants to Prudential Finance Ltd. in connection with an application to borrow $50,000.00, the husband’s assets were recorded as including the Newport land, stated to be worth $550,000.00, and a half interest in the Ryde service station, stated to be worth $800,000.00. The liabilities disclosed included an overdraft of $20,000.00 with the Commonwealth Bank of Australia, the bill facility of $220,000.00 with the National Australia Bank, and the loan of $440,000.00 from the Challenge Bank.

23   Shortly before this, on 20th June 1988, the husband’s solicitor wrote to Mr. Goldstein seeking agreement to a property settlement which was, by that stage, close to finalisation, in the following terms:

You will note that we have included a clause in the minutes referring to section 77A of the Family LawAct and have specified that the amount of provision of maintenance for the wife is approximately $100,000. That calculation is made on the basis that the parties have the following matrimonial assets and liabilities which are the subject of the settlement:

The husband's dental practice 180,000
Less debts to be paid by husband 92,000
Amount retained by the husband, less than 100,000

Wife's dental practice, say 140,000
Freehold at Willoughby, approximately 300,000
Less Mortgage balance 140,00
Total retained by the wife 300,000

On the basis that our client has agreed to what can only be described as very generous maintenance for the children, and proceeding on the basis that in the circumstances, an equal division of the assets between the parties would be appropriate, your client is receiving approximately $100,000 more than a one-half share under these terms. It is therefore that figure that we have included as the appropriate amount in the Short Minutes.

24   An agreement along those lines was in fact reached, and was given effect to by orders made on 3rd August 1988 by the Family Court, as follows:

1 the husband to assign to the wife all his interest in the Willoughby practice;

2 the husband to transfer to the wife his interest in the Willoughby property;

3 the husband to transfer to the wife his interest in the Ford Laser motor vehicle;

4 the husband to pay the Commonwealth Bank of Australia all moneys due to the Bank secured by the first mortgage on the Willoughby property over the sum of $140,000, which would become the wife's responsibility;

5 the husband to pay the accountants, Davey & Associates, $25,000, to Custom Credit Corporation, $58,500 and for school fees, $4,000;

6 the dental practice at North Sydney to be transferred to the husband;

7 as maintenance for the children the husband to pay $100 per week for each of them and all private school fees and education expenses;

8 the husband agreed he has no interest in the furniture, effects, jewellery or furs in the wife's possession;

9 the husband and wife were each responsible for their separate income tax liabilities; and

10 the effect of the orders is that provision of maintenance was made for the wife in the amount of about $100,000.

It will be noted that the settlement purported to be a 50/50 division of assets, adjusted by a provision for maintenance of the wife of about $100,000.00.

25   In December 1988, the husband borrowed $800,000.00 from Resi-Statewide Corporation on the security of the Newport land.

26   In March 1989, the husband purchased a shopping centre at Newport, with the assistance of a loan of $1.3 million from the Advance Bank. The price paid was not established by the evidence, although there was a suggestion in one of the opinions tendered at the hearing that the price was of the order of $1.6 million.

27   In August 1989, the husband sold the Newport land for $850,000.00. According to the husband’s affidavit, in December 1989, he sold his interest in the Ryde service station to his partners, and received about $185,000.00 net of debt.

28 Subsequently, the respondent found out about the husband’s acquisitions of assets; and through another solicitor, in July 1991, she applied to the Family Court seeking orders under s.79A of the Family Law Act for an adjustment of property interest, on the ground that there had been, in connection with the agreed property settlement, “a miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance”. It was in the course of those proceedings that the husband filed the affidavit concerning his transactions, to which I have referred earlier.

29 On 5th June 1992, before the s.79A proceedings had been heard, the husband filed a Debtor’s Petition in the Federal Court, on the basis of which he became bankrupt. The s.79A proceedings then were halted. The respondent had incurred costs and expenses totalling about $33,600.00 in connection with those proceedings.

TRIAL JUDGE’S DECISION

30   The trial judge decided that, had proper enquires been made on behalf of the respondent, they would have disclosed assets held by the husband additional to those on the basis of which the property settlement was agreed in August 1988, notably the Newport land. In that event, settlement would not have occurred in August 1988, but there would either have been a settlement more favourable to the respondent agreed in late 1988 or early 1989, or a contested hearing in about mid-1989, again with a result more favourable to the respondent.

31   The trial judge held that in either case, there would have been brought into an account an additional sum, over the amounts actually brought into account in the settlement that did occur, of about $695,000.00. Of that additional amount, about 60% would have gone to the respondent, either in a settlement or as a result of a court hearing. In addition, his Honour held, there would have been an adjustment in favour of the respondent of about $40,000.00, in respect of child maintenance that the husband had not paid between March 1986 and August 1988.

32 From the total of these sums, his Honour deducted 10% for contingencies, and also $5,000.00 in respect of costs of the Family Court proceedings which the respondent may have been left to pay. He added $33,600.00 in respect of the costs of the s.79A proceedings.

33   The calculation was thus as follows:

60% of $695,000.00 $417,000.00
Lost maintenance $ 40,000.00
$457,000.00
Less 10% $45,700.00
Costs allowance $ 5,000.00
$ 50,700.00 $406,300.00
Costs of s.79A proceedings $ 33,600.00
$439,900.00

It seems that his Honour rounded this up to $440,000.00, then further reduced it to $420,000.00. As mentioned earlier, he added interest on this sum from July 1989 to the date of judgment.

34   The $695,000.00 was made up as follows. First, there was the Newport land, given a valuation of $850,000.00; from which was deducted the initial borrowings of $285,000.00, capital gains tax allowance of $240,000.00, and sales costs of $15,000.00, giving a net figure of $310,000.00. Next, there was the interest in the Ryde service station put at $150,000.00, less a contingency of $20,000.00 for capital gains tax, giving $130,000.00. Then there was the deposit on the Northbridge house of $85,000.00; the net proceeds of sale of the Ferrari of $21,000.00; the net proceeds of sale of the cruiser of $41,000.00; and the joint account of $125,000.00. These items together made up $712,000.00.

35   Two further adjustments were made to that sum, the basis of which is less clear. First, there was the addition of $20,000.00, said to be for “the overvalue of the Willoughby property”. I believe that this was added on the basis that the Willoughby property was brought into the calculation in June 1988, leading to the settlement of August 1988 at $300,000.00; and his Honour took the view that this was an overvalue, which he dealt with by notionally adding $20,000.00 to the total assets for division. The second adjustment was a deduction of $35,000.00 for capital gains tax on the Willoughby real estate, and $3,000.00 for interest. I do not understand this adjustment, but I note that the two adjustments together brought the figure of $712,000.00 down to $694,000.00, which his Honour appears to have rounded out to $695,000.00.

36   His Honour made one further decision, which is the subject of the cross-appeal.

37   In the second half of 1987, the respondent was offered $170,000.00 for the Willoughby practice by a Ms. Fisher. The husband did not consent to the sale of this practice, and the offer was withdrawn in mid-December 1987. The husband indicated agreement to the sale on 15th January 1988, but this was too late. The Willoughby practice was included in the settlement as property taken by the respondent at a value of $140,000.00. It was ultimately sold in October 1991 for $59,522.00.

38   The respondent claimed that Mr. Goldstein should have taken steps, including if necessary proceedings in the Family Court, to compel the husband to agree to the sale to Ms. Fisher for $170,000.00; and claimed a sum of about $23,000.00 in respect of this alleged negligence.

39   The trial judge found that there was no negligence here, because at the time of these events, the husband was negotiating for a settlement in which he would be taking over the Willoughby practice, and would account for it at the price that Ms. Fisher was willing to pay. Also, his Honour was not satisfied that Mr. Goldstein was aware of an ultimatum given by Ms. Fisher in a letter dated 30th November 1987, which led to the lapse of her offer in mid-December 1987.

APPEAL AND CROSS-APPEAL

40   The appeal is brought on the following grounds:

1. The primary judge failed to give any, or adequate, reasons for his conclusion that acts or omissions on the part of the appellants were causative of loss to the respondent in the sum of $420,000 or any sum.

2. The primary judge erred in finding that the evidence adduced by the respondent was sufficient to support a finding that acts or omissions on the part of the appellants were causative of loss to the respondent in the sum of $420,000 or any sum.

3. The primary judge erred:
(a) in finding (reasons paragraph 70) that failing a settlement in August 1988 (of the matrimonial proceedings between the respondent and her ex-husband) the appellants could have (and should have) prevented "by appropriate process" further erosion by the ex-husband of the matrimonial property, and

(b) in consequently concluding (inferentially) that the respondent's claim against the appellants was determinable on the footing that the matrimonial property (including that acquired by the ex-husband post separation) was of a constant or static value when the evidence demonstrated that by reason of his substantial borrowings for the purpose of speculative investment the position was volatile and in overall decline, ultimately leading to his bankruptcy on 5 June 1992, with an excess of liabilities over assets of $594,575.20.

4. The primary judge erred in calculating the damages recoverable by the respondent on the basis that at the time of any notional settlement of the matrimonial proceedings or, failing same, at the time of their subsequent determination by the Family Court of Australia the following matrimonial assets would have been in existence and worth the undermentioned amounts:

property at Newport $850,000
less "initial borrowings” ( $285,000 )
$565,000
interest in service station $150,000
deposit balance $85,000
net proceeds of Ferrari sale $21,000
net proceeds of cruiser sale $41,000
joint account $125,000
"overvalue of Willoughby property”$20,000

without taking into consideration that the parties’ liabilities as at August 1988 totalled $1,174,432 all of which (with the exception of certain debts totalling $34,552) attracted interest at high rates.

5. The primary judge erred in holding (reasons paragraph 6) that the following principle was applicable:

"When dealing with appropriate orders under s.79 of the (Family Law) Act, despite the mere fact that property has passed out of the hands of a party, for example has been sold and the proceeds of the sale disposed of, it may nevertheless be treated as included in the property of the parties for the purposes of the application if the circumstances make it just to do so and in such a case the party dealing with the property will be treated as having received it or its value"


when there was no or insufficient evidence to warrant the conclusion that there were circumstances which justified the application of that principle.

6. The primary judge erred in failing to take into consideration the full extent of the liabilities (both actual and contingent, including liabilities for capital gains tax) to which the respondent's ex-husband was subject.

7. The primary judge erred in finding that the whole of the respondent's loss was attributable to acts or omissions on the part of the appellants and in failing to find that she had herself independently determined to accept the settlement proposed by her ex-husband for the essential reason that she knew or suspected that his financial position was in serious decline.

8. The primary judge erred in concluding that the respondent's claim for the loss of the chance of achieving a more favourable settlement or judicial determination of her matrimonial claim should be assessed on the basis that the prospect of that result warranted a discount of only 10% for contingencies.

9. The primary judge erred in assessing the respondent's claim on the footing that either she and her ex-husband would have agreed, or the Family Court of Australia would have determined, that her entitlement was to 10% of the net matrimonial assets.

10. The primary judge erred in awarding interest on the judgment sum for the whole of the period to the date of judgment notwithstanding that the respondent had been guilty of unreasonable delay in instituting the proceedings.

41   The cross-appeal is brought on the following grounds:

1. His Honour should have found that Mr Goldstein was negligent in advising the Respondent that, when her husband refused to agree to the sale of the Willoughby practice, there was nothing that could be done to effect the sale.

2. His Honour should have found that the above negligent advice caused loss to the Respondent because the practice could have been sold in late 1987 for $170,000.00 without incurring agents fees, whereas it was eventually sold in October 1991 for $59,522.00 and agents fees of $2,487.50 were incurred on the sale.

3. His Honour should have found that, allowing for:-
(a) The incidence of capital gains tax, estimated at $35,800.00;
(b) The division of the proceeds of sale between the Respondent and her husband in the proportion of 60 percent to 40 percent;
(c) The fact that the Respondent received the practice in the property settlement, the net value to her being $57,034.50,
the Respondent's loss was $23,485.50.

4. His Honour erred in not ordering the Appellants were liable to pay the Respondent, in addition to the amounts otherwise found:-
(i) Damages of $23,485.50; and
(ii) Interest on that amount.

ANALYSIS OF MORTGAGES

42   During oral submissions in this matter, Counsel for each side offered an analysis of mortgages over the Newport land put into evidence in these proceedings, and it is convenient to set out the result of these analyses at this point.

43   First, there was mortgage X213140 dated 10th November 1987 to the National Australia Bank, which secured the $220,000.00 bill facility granted to enable completion of the purchase.

44   Next, there was mortgage X584573 dated 7th April 1988 to the Commonwealth Bank of Australia, which noted as a prior encumbrance the mortgage to the National Australia Bank. This mortgage was given to secure advances made to a company called Basai Holdings Pty. Limited, this being the company that operated the business of the Ryde service station purchased by the husband and two partners. The copy of this mortgage which is in evidence shows it as having been stamped up to $15,000.00.

45   Next, there is mortgage Y040099 dated 1st December 1988 to Resi-Statewide Corporation Limited. This mortgage is noted as being registered on 13th December 1988, and it secured an advance of $800,000.00. It seems clear that part of this advance was used to pay out the mortgage to the National Australia Bank, because there is in evidence a discharge of the mortgage to the National Australia Bank dated 1st December 1988, also registered on 13th December 1988. The mortgage to Resi-Statewide notes as a prior encumbrance only the mortgage to the Commonwealth Bank of Australia. There were in fact two documents bearing the date 1st December 1988 executed in respect of the mortgage to the Commonwealth Bank of Australia: first, a Postponement of Mortgage No.Y077692, which was registered on 18th January 1989; and second, a Discharge of Mortgage which, although dated 1st December 1988, was not registered until 6th August 1989.

46   The next mortgage over the Newport land was a mortgage Y28807 dated 13th March 1989 to Advance Bank Australia Limited. This mortgage notes the mortgages to Resi-Statewide and to the Commonwealth Bank of Australia as prior encumbrances. It was stamped to $1.3 million. Plainly, this mortgage was given as part of the security for the advance which enabled completion of the purchase of the Newport shopping centre.

47   When the Newport land was sold, a statement dated 1st August 1989 from solicitors acting on the sale shows a payment of $446,336.00 to Resi-Statewide, and $324,554.00 to the Commonwealth Bank of Australia.

48   Mr. Grieve QC for the appellant has submitted that this suggests that the Commonwealth Bank of Australia mortgage over the Newport land was paid out from the proceeds of sale of the Newport land, enabling registration of the Discharge of Mortgage on 6th August 1989. He submitted that this could explain the payment of around $185,000.00 to the husband in connection with his disposal of his interest in the Ryde service station in December 1989.

49   Mr. Murr SC for the respondent submitted that, having regard to the circumstance that the stamping of the Commonwealth Bank of Australia mortgage was only to $15,000.00, the probable inference is that the $324,554.00 was a payment made to the husband’s credit at an account with the Commonwealth Bank of Australia; so that the payment of around $185,000.00 to the husband in respect of the service station in December 1989 did support the inference that the trial judge drew to the effect that, at material times, the husband’s interest in that service station, over and above whatever was owing on it, had substantial value.

50   Mr. Grieve responded to the effect that this was a matter on which evidence should have been led by the respondent before the trial judge, but no such evidence was led; so that in this, as in many other matters, the trial judge was left to speculate. There is force in that submission, but on the whole I do not think these circumstances displace the inference that was open to the trial judge that the value of the husband’s interest in the service station could be assessed having regard to the payment of around $185,000.00 which the husband received on the disposal of his interest in December 1989.

51   Mr. Murr’s submission about the amount to which the Commonwealth Bank of Australia was stamped has some force, although it is conceivable that there are other copies of the mortgage which may be stamped to a different amount. More significantly, there is in evidence a solicitor’s letter dated 5th December 1989 to the husband’s partners in the Ryde service station, explaining the transaction by which the partners bought out the husband’s interest: see Blue Book Volume 2, pp.374-381, especially 379. This material does not suggest that the amount paid to the husband in any way reflected some disproportionate contribution by the husband to the debts of the service station or its business; but on the contrary, suggests that the Commonwealth Bank of Australia advance to Basai continued after August 1989, albeit no longer secured by the mortgage over the Newport land, with the credit limit then being around $40,000.00.

other submissions on the appeal

52   Mr. Grieve submitted that the trial judge did not take account of the circumstance that the husband’s financial position was in fluctuation and progressive deterioration, ultimately leading to his bankruptcy. In so far as he relied, in relation to this matter, on the capacity of the Family Court to grant injunctions to prevent dissipation of assets, it was not shown that that capacity would have assisted in this case. In effect, Mr. Grieve submitted, the trial judge disregarded the very substantial liabilities of the parties, and in particular of the husband.

53 Mr. Grieve submitted that the trial judge wrongly found or assumed that it would have been considered just, in Family Court proceedings between the parties, to treat property which had passed out of the husband’s hands as being property of the parties, for the purposes of deciding on an appropriate order for property settlement under s.79 of the Family Law Act. Mr. Grieve submitted that the trial judge had wrongly found or assumed that the husband had defrauded the respondent, and, had the property transactions been found out, would have admitted having so defrauded her.

54 Mr. Grieve submitted that there was extreme uncertainty as to the husband’s financial circumstances at material times; and this was demonstrated by the fact that, despite the expenditure of $33,600.00 in costs in relation to the wife’s s.79A proceedings, as well as the investigations conducted in connection with these proceedings, it was not shown what his assets were. For example, it was not shown what had happened to the $800,000.00 borrowed from Resi-Statewide. In fact, the trial judge made no finding as to what the husband’s assets were at material times, or as to what the respondent believed those assets to be. In relation to particular assets, Mr. Grieve submitted that the determination of a value of the husband’s interest in the Ryde service station was pure speculation; and he submitted that there was no basis for the trial judge’s findings that the proceeds of the sale of the matrimonial home, of the cruiser, the Ferrari, and the joint account of $125,000.00, were part of the husband’s assets or should have been taken into account. His Honour could not have been satisfied that these amounts had not been spent.

55   In general terms, Mr. Grieve submitted, the trial judge treated as practical certainties matters which at best were in the realm of probability. The Court should either substitute a modest figure for damages, or else order a new trial.

56   Finally, Mr. Grieve submitted that, because of the delay in prosecuting the proceedings, it was wrong for the trial judge to award interest for the whole period from July 1989 to judgment: see BP Exploration Co. (Libya) Pty. Limited v. Hunt (No.2) [1979] 1 WLR 783 at 845ff.

57   For the respondent, Mr. Murr submitted that there was no evidence that the husband’s financial position was fluctuating or deteriorating in the relevant period, that is up to mid-1989. He submitted that the trial judge did identify assets whose value should have been taken into account for the purpose of the property settlement, and were not; and evaluated the effect which they would have had, if they had properly been brought into account, in a negotiated settlement or by a court decision if there had been contested proceedings.

58   Mr. Murr submitted that the trial judge’s reliance on the principle that, where there had been “premature distribution of a proportion of the matrimonial assets”, those assets could be treated as property of the parties to the marriage, was correct: see Marriage of Townsend (1994) 18 FamLR 508. The husband had received the proceeds of sale of the matrimonial home, the cruiser, the Ferrari, and the bank account in the sum of around $125,000.00, and had never adequately accounted for them, although he had the opportunity to do so. Mr. Murr submitted that the appellants’ submission that the amounts had been legitimately spent or used to meet the parties’ joint debts was unsustainable.

59   Mr. Murr submitted that the trial judge correctly took into account that the respondent would have negotiated from a position of strength, because the husband had filed a false Statement of Affairs: see Weir v. Weir [1993] FLC 92-338. Accordingly, the deduction of only 10% for contingencies was appropriate.

60   Finally, Mr. Murr submitted that no error was shown in the trial judge’s decision concerning interest.

DECISION ON THE APPEAL

61   In my opinion, the trial judge did correctly find that there were two assets which the husband had, of which the respondent and Mr. Goldstein were not aware when the agreement to settle was made, namely the Newport land and the husband’s interest in the Ryde service station. In my opinion, the trial judge did correctly find that, had the respondent and Mr. Goldstein been aware of these assets, the respondent would not have agreed to the settlement which took place in August 1988: indeed, this proposition was not really contested. In my opinion also, there can be no basis for challenging the trial judge’s finding that there would, in that event, have either been a more favourable agreed settlement at about the end of 1988 or early 1989, or else a contested hearing with a more favourable result occurring in about mid-1989.

62   As regards the value of the Newport land, the trial judge adopted a figure of something in excess of $800,000.00 in the latter part of 1988, and $850,000.00 in mid-1989; and there is no basis for challenging those figures. For his final calculation, the trial judge worked on the latter figure; and he deducted $285,000.00 as “initial borrowings”, $240,000.00 as provision for capital gains tax, and $15,000.00 for sales costs, giving $310,000.00. In one sense, it might be considered that the deduction of $285,000.00 was over-generous to the appellant, because the material before the Court suggested that only $220,000.00 was actually secured on the property up to December 1988, when $800,000.00 was borrowed. However, it seems clear that the balance of the purchase price was also borrowed in one way or another, and no complaint about the deduction of $285,000.00 is made by the respondent. Provided one disregards the borrowing of $800,000.00 from Resi-Statewide, I see no reason to question the trial judge’s net figure of $310,000.00 for mid-1989.

63   However, in so far as there may be some relevance to a net figure for late 1988, in relation to the hypothetical settlement that might have occurred then or in early 1989, that should be based on the lower figure of $800,000.00; and taking a proportionately lower provision for capital gains tax of (say) $225,000.00, this would give a net figure of $275,000.00.

64   As regards the value of the husband’s interest in the Ryde service station, I have already indicated my view that the husband’s receipt of a substantial sum for that interest in December 1989 was relevant to this question. I would in fact take the figure received by the husband as around $200,000.00, rather than the $185,000.00 referred to by the trial judge; because the papers in evidence relating to this transaction indicate a net payment of settlement to the husband of $186,792.00, in addition to a previously paid deposit of $13,000.00. The real estate of the service station was valued in August 1988 at $900,000.00. It seems that the mortgage over the property at this time was around $880,000.00, suggesting an equity in the husband and his partners of $20,000.00, to which presumably one would add the value of businesses associated with this service station. There would appear to have been virtually no equity over borrowings when the purchase of the property was completed in March 1988.

65   On balance, I do not consider that the figure adopted by the trial judge of $150,000.00, or $130,000.00 after allowing for capital gains tax, as at mid-1989, was shown to be wrong. However, in so far as the value of the husband’s interest in this property towards the end of 1988 is relevant, in my opinion the material would not support a value of more than about $50,000.00 at this time, or about $45,000.00 after allowing for capital gains tax.

66   One other question that might be raised in relation to those assets, and the way they would have been taken into account in any settlement or court decision, is that they were acquired by the husband after separation, and thereafter increased in value because of increasing property values at the time. It might be suggested that accordingly they would not be taken into account, or alternatively would be taken into account on some basis different from other matrimonial assets. In effect, the trial judge held that they would have been taken into account, inter alia because they were acquired using matrimonial assets as security. I do not think the trial judge has been shown to be wrong on that general approach, although the circumstance that these properties were acquired by the husband after separation, on the basis of borrowing of their full price, may have some bearing on allowance for contingencies.

67   Accordingly, in relation to these two assets, apart from the possible effect of a different value being adopted at the time of a hypothetical settlement in late 1988 or early 1989 as distinct from a contested hearing in mid-1989, no error is shown in the trial judge’s decision.

68   However, in my opinion there is real difficulty in relation to the other matters which the trial judge took into account. There was in fact no finding by the trial judge that, as at late 1988 or mid-1989, the husband had any assets either representing or derived from the deposit for the matrimonial home ($85,000.00), the net proceeds of the Ferrari ($21,000.00), the net proceeds of the cruiser ($41,000.00) or the proceeds of a joint account ($125,000.00). His Honour’s finding was that these amounts “should have been brought into account”. This could have been so either because the husband actually had such assets or assets of similar value derived from them, or because the husband had disposed of such assets in such a way that the disposition should fairly be treated as a premature distribution of matrimonial assets.

69   The trial judge in his reasons referred to authority concerning the latter of those alternatives, although he did not explicitly apply that authority to any of these assets. In fact, the judge’s reasons are not clear as to whether he acted on the first or second of those alternatives, or some combination of them, or as to any reasons he may have had for doing so. I think it would be a fair reading of the trial judge’s judgment to take it as in effect proceeding on the basis put to us by Mr. Murr, namely that the husband had received these sums and never adequately accounted for them, although given the opportunity to do so; and that any contention by the appellants that these amounts had been legitimately spent or used to meet the parties’ joint debts was not made out.

70 However, if that were the basis on which the trial judge acted, it seems to me, with respect, to misconceive the issues in this case, and to misconceive where the onus lies. In my opinion, the onus lay squarely on the respondent to show that the husband at relevant times had such assets or assets of similar value, or alternatively had disposed of such assets in such a way as to make it fair that the assets be treated as part of the property of the parties for the purposes of s.79 of the Family Law Act. In my opinion, in relation to these assets, neither of these alternatives, nor any combination of them, was shown.

71   I note that the respondent’s statement of assets given to Mr. Goldstein in April 1986 acknowledged that $242,000.00 was owing on the cruiser to Beneficial Finance, that $24,000.00 was owing on credit cards, and that the parties had total debts of around $1.1 million; so that it seems likely that in the year from then until the sale of the matrimonial home was completed in April 1987, interest of well over $100,000.00 would have accrued. There was no evidence showing how that interest was met. This statement by the respondent alleged that the assets included the cruiser and also $157,000.00 in a bank account of the parties; but so far as I understand the evidence, the holding at the same time of both those assets by the parties was not proved; and the husband’s statement of assets of December 1986 suggested that the figure of $157,000.00 in the bank was a figure arrived at after the sale of the cruiser.

72   As noted during my outline of the facts, the payment of the $242,000.00 owing to Beneficial Finance may have required some or all of the $175,000.00 from the sale of the matrimonial home and/or some or all of the $157,000.00 from the bank account. As noted also, this would leave $90,000.00 of these amounts unexplained; but as noted earlier also, something over $100,000.00 of interest required to be paid in the year from April 1986 to April 1987.

73   The way in which the husband apparently financed the purchase of the Newport land tends to suggest that he did not at that time have significant liquid assets. The way in which he financed the purchase of the Ryde service station, and the second Ferrari, suggests the same.

74   Accordingly, although the husband did receive sums of money similar to those referred to by the trial judge, and did not account for them, and although the trial judge was justified in finding that the husband acted dishonestly, in my opinion the onus which lay squarely on the respondent to prove what the husband’s assets were at material times, or that there had been a disposition justifying treating assets disposed of as matrimonial property, was not discharged.

75   As regards the $20,000.00 added on the basis of undervalue of the Willoughby property, this seems to be partly based on evidence of the value of that property as being $185,000.00 in March 1987. However, that is not necessarily strong evidence of what its value would have been in August 1988; and the trial judge made no clear finding as to what the value of that property was in August 1988, or as to what the respondent’s belief at that time was as to the value of that property. In my opinion, a basis was not shown for this particular adjustment.

76   The trial judge also made a deduction in relation to capital gains tax and interest in respect of the Willoughby property. I am unable to understand the basis of this deduction, and it was not explained to us on the appeal. The trial judge’s judgment records this as being conceded by the respondent, but I do not think this is determinative when the context of this concession is not set out. There is no Cross-appeal or Notice of Contention relating to this deduction; but since I am making a major adjustment to the basis of the assessment of damages, I do not think I should include this deduction when I do not understand it or see any justification for it.

77 On the basis of the additional assets as I have found them, and otherwise using the methodology adopted by the trial judge, the appropriate calculation for the amount that the respondent would have obtained from a negotiated settlement in late 1988 or early 1989 is as follows. The additional assets taken into account would be the Newport land at $275,000.00 and the Ryde service station at $45,000.00, making a total of $320,000.00. Sixty per cent of this amount is $192,000.00. To this would be added the allowance for child maintenance of $40,000.00, giving $232,000.00. From this amount would be deducted the 10% for contingencies, giving an amount of $209,000.00 as the increased amount of the settlement that could have been expected. To this sum would be added the $33,600.00 costs for the s.79A proceedings, giving $242,600.00.

78   Just as the trial judge considered his indicative figure of $440,000.00 too high and reduced it to $420,000.00, I consider this figure of $242,600.00 a little high. I would take into account the circumstance that an additional $209,000.00 on the settlement figure would have gone a long way to exhausting the husband’s share in the Newport land that he had acquired, and I am inclined to think that there would be some additional allowance made for the circumstance that these additional properties were acquired by the husband after separation, without using matrimonial assets except as security. On the whole, even taking into account the strength of the respondent’s position by reason of the husband’s false statement of affairs, and the husband’s failure properly to account for other receipts, in my opinion an appropriate global figure on this basis would be $220,000.00.

79   In relation to the calculation on this basis, there is no need to consider the effect of the borrowing of $800,000.00 from Resi-Statewide, or the purchase of the Newport shopping centre. However, the possibility of these transactions may have some bearing on the calculation to be made on the basis that there would have been a court hearing in mid-1989. The initial calculations would be similar, except that the Newport land would be put in at $310,000.00 and the Ryde service station at $120,000.00, giving a resultant figure of $301,000.00, from which there would have to be taken some allowance for costs of the postulated contested proceedings. The trial judge put the allowance at $5,000.00, but it is unclear whether that is on the basis of a chance that costs would be incurred rather than the matter being settled, or as an estimate of the full amount of costs that would actually be incurred and not covered by costs orders against the husband.

80   In my opinion, having regard to the greater uncertainties attaching to a contested hearing, and to the events that would have occurred between late 1988 and mid-1989, the possibility of a more favourable outcome from a contested court hearing does not justify any increase from the amount of $220,000.00, at which I arrived on the basis of a negotiated settlement in late 1988 or early 1989.

81   For those reasons I would assess damages, subject to the matter raised in the Cross-appeal, at $220,000.00.

82   As regards interest, the delay in bringing the proceedings could have justified either adoption of a lower rate of interest than the Supreme Court rates, or alternatively not allowing interest for part of the period between 1st July 1989 and the judgment in the case of the amount awarded apart from the $33,600.00 for costs, and 1st July 1991 and the judgment in the case of the $33,600.00. However, I do not think any error is demonstrated in the decision of the trial judge, and I would uphold that decision as the basis on which interest is to be calculated on the amount which I have substituted. Thus, there will be interest at Supreme Court rates on $186,400.00 from 1st July 1989, and on $33,600.00 from 1st July 1991.

CROSS-APPEAL AND CONCLUSION

83   Mr. Murr for the respondent conceded that the Cross-appeal could only succeed if paragraph 48 of the judgment of the trial judge was taken as a finding that the respondent had sought advice from Mr. Goldstein on whether she could force the husband to join in the sale of the Willoughby practice, and Mr. Goldstein gave incorrect advice that she could not.

84   In my opinion, that paragraph is plainly not a finding to that effect. Rather, the paragraph recites the respondent’s evidence to that effect; and at the end of the paragraph, it recites Mr. Goldstein’s denial of it. The trial judge at no stage resolved that conflict.

85   Having regard to the trial judge’s view on the credibility of the plaintiff and of Mr. Goldstein, the respondent is not entitled to a finding from this Court that her evidence on this point should be preferred to that of Mr. Goldstein. For that reason, I would dismiss the cross-appeal.

86   The orders that I propose are:

1. Appeal allowed.
2. Judgment for the respondent for $979,233.46 set aside.
3. Judgment for the respondent against the appellants for $220,000.00 plus $315,101.00 interest.
4. Cross-appeal dismissed.
5. Respondent to pay appellants’ costs of the appeal and cross-appeal, and to have a certificate under the Suitors Fund Act 1951 if otherwise entitled.
6. Liberty to the respondent to apply within 14 days if the difference in the amount of the judgment makes a difference to the trial judge’s decision on costs, having regard to the respondent’s offer in her letter of 12th May 1997.

87   DAVIES AJA: I agree with Hodgson JA.

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