DENT & PORTER
[2013] FamCAFC 164
•11 October 2013
FAMILY COURT OF AUSTRALIA
| DENT & PORTER | [2013] FamCAFC 164 |
| FAMILY LAW – APPEAL – PROPERTY – Where parties lived in a de facto relationship – Whether findings as to contributions were contradictory and erroneous – Where the extent of a trial judge’s duty to give adequate reasons for the decision is explored - Appealable error established – Appeal allowed – Matter remitted for rehearing. |
| Family Law Act 1975 (Cth): ss 90SM, 90SF |
| Bennett & Bennett (1991) FLC 92-191 Ex Parte Powter; re Powter (1945) 46 SR (NSW) 1 Gronow v Gronow (1979) 144 CLR 513 Hickey& Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 House v The King (1936) 55 CLR 499 Mallet v Mallet (1984) 156 CLR 605 SoulemezisvDudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 |
| APPELLANT: | Ms Dent |
| RESPONDENT: | Mr Porter |
| FILE NUMBER: | SYC | 6837 | of | 2010 |
| APPEAL NUMBER: | EA | 10 | of | 2012 |
DATE DELIVERED: | 11 October 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | May, Ryan & Johnston JJ |
| HEARING DATE: | 4 June 2013 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 19 December 2011 |
| LOWER COURT MNC: | [2011] FamCA 960 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Givney |
SOLICITOR FOR THE APPELLANT: | Blackwood Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Petty SC |
| SOLICITOR FOR THE RESPONDENT: | Swifte Law |
Orders
The appeal be allowed.
The orders made by the Honourable Justice Fowler on 19 December 2011 be set aside.
That the applications of the parties for property settlement be remitted to the Family Court for rehearing by a judge other than the Honourable Justice Fowler.
The applications of the parties to adduce further evidence and the respondent’s notice of contention are withdrawn.
That the Court grants to the appellant 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 her in relation to the appeal.
The Court grants to the respondent 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 him in relation to the appeal.
The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 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 each of the parties in respect of the costs incurred by them in relation to the new trial ordered.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dent & Porter has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 10 of 2012
File Number: SYC 6837 of 2010
| Ms Dent |
Appellant
And
| Mr Porter |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal by Ms Dent (“the appellant”) against orders for the adjustment of property made by Fowler J pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”) on 19 December 2011.
The appellant and Mr Porter (“the respondent”) lived in a de facto relationship from November 2007 until April 2010. They do not have children and the focus of the hearing before his Honour was upon the financial contributions made by each of them to the relationship, as well as the identity and value of their property.
As a consequence of the orders, the appellant received non-superannuation property worth $1,174,781 and superannuation worth $65,687. The respondent received non-superannuation property worth $408,566 and superannuation in the amount of $198,202. This required the respondent to pay the appellant $600,000 which was to be paid in two tranches. The first payment of $550,000 was payable forthwith and simultaneously with the appellant transferring her interest in a property at B Street, Suburb C to the respondent. He was ordered to pay the remaining $50,000 within 12 months. In circumstances where neither party applied for a superannuation splitting order, his Honour made no alteration to the parties’ interests in their superannuation funds.
At the date of hearing, the value of the parties’ property (including superannuation) was less than when they commenced cohabitation. In circumstances where no adjustment was made pursuant to s 90SF of the Act, the appellant says his Honour erred by awarding the respondent a greater proportional share of property than he introduced and in failing to explain why, in proportional terms, her share diminished. According to the appellant, she should have received an additional $158,000 together with interest.
Both parties presented applications to adduce further evidence in the appeal. The evidence sought to be adduced related to a possible re-exercise of the
trial judge’s discretion. Ultimately, counsel for the appellant explained that because of a paucity of findings in the determination which would be contentious, we could not re-exercise and the proceedings would have to be remitted for hearing.
In addition, the respondent presented a notice of contention which also related to a possible re-exercise of discretion. In the end, counsel for the respondent agreed that, in the event error was established, the matter required a rehearing.
Thus, both parties’ applications to adduce further evidence and the respondent’s notice of contention were withdrawn.
Applicable principles
This is an appeal against the exercise of discretion in relation to which the principles are well settled and well known. See House v The King (1936) 55 CLR 499; Gronow v Gronow (1979) 144 CLR 513.
To a considerable extent, the focus of this appeal was upon the extent of a
trial judge’s duty to give adequate reasons. Again the principles are well established. Concerning appeals of the type with which we are presently concerned, in Bennett & Bennett (1991) FLC 92-191 (at 78,266), the Full Court accepted the appellant’s submission that:
Counsel for the wife urged that there was a failure by her Honour to give adequate reasons for judgment, and that this, of itself, amounted to an error of law. In this regard he relied upon the line of New South Wales Court of Appeal decisions commencing with PettittvDunkley (1971) 1 NSWLR 376, and including Housing Commission of NSWvTatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378, and SoulemezisvDudley (Holdings) Pty Ltd (1987) 10 NSWLR 247. In the latter case, McHugh JA said that without the articulation of reasons, a judicial decision could not be distinguished from an arbitrary decision. His Honour took the view that the requirement for reasons serves at least three purposes, namely, to enable the parties to see which of their arguments had been understood and accepted as forming the basis of a Judge's decision; secondly, to further judicial accountability; and thirdly, to enable interested persons to ascertain the basis upon which like cases will probably be decided in the future.
It is apparent from the authorities referred to in Bennett that the obligation to give reasons does not demand elaborate reasons (See Ex Parte Powter; re Powter (1945) 46 SR (NSW) 1). However, “…it is necessary that the essential ground or grounds upon which the decision rests should be articulated. In many cases the reasons for preferring one conclusion to another also need to be given…”, see SoulemezisvDudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; per McHugh JA at [280]. In Soulemezis v Dudley Holdings Pty Ltd, McHugh JA, at [280], referred with approval to the statement made by Mahoney JA in Housing Commission of NSWvTatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378, at [386], that the extent of the duty to give reasons is related “to the function to be served by the giving of those reasons”.
As McHugh JA explained in Soulemezis v Dudley Holdings Pty Ltd, at [279]:
…the giving of reasons enables practitioners, legislators and
members of the public to ascertain the basis upon which like cases will
probably be decided in the future.
These statements of principle apply in this case.
The trial judge’s reasons
As no error is alleged concerning his Honour’s analysis of the applicable law, we will refer only to his findings of fact and the reasons he gave for his decision.
After his Honour dealt with the jurisdictional requirements that the respondent (who was the applicant for property adjustment) was required to establish so as to have his application proceed, the major issues for the hearing were identified as being:
·the nature, extent and value of the parties’ property and their liabilities;
·the nature, extent and significance of each party’s contributions;
·their comparative needs, means and financial resources;
·the manner in which they should share financial losses; and
·what adjustment would overall be just and equitable.
Background facts were then set out which provide context to the appeal.
The appellant was born in 1968 and at the time of hearing was 42.
The respondent was born in 1973 and was then 38.
In 1997 the appellant incorporated A Pty Ltd (“the company”) in relation to which she was its sole director and shareholder. The company operated from premises in D Street, Suburb E (“the Suburb E property”) which were owned by I Pty Ltd. I Pty Ltd is (“the corporate trustee”) of the Dent Family Trust (“the Trust”), of which the appellant is a beneficiary. His Honour commented that the appellant had not disclosed the full terms of the Trust Deed nor the Trust’s assets and liabilities, either at the commencement of cohabitation or date of hearing.
As to the value of the appellant’s initial contributions, the trial judge determined that the Suburb E property was worth $1.3 million subject to a mortgage of $170,163. Thus, it had a net value of approximately $1.13 million [49]. It is common ground that the appellant owed her mother $60,000 (which was overlooked by the trial judge) and had superannuation worth $50,000 [90].
The value of the company at the commencement of cohabitation was controversial. The trial judge noted the appellant’s evidence that the company’s bank had valued it at between $270,000 and $320,000. It was her evidence that because liabilities of $100,000 also needed to be taken into account, at the commencement of cohabitation she believed the company was worth $170,000.
The trial judge found that at the commencement of cohabitation the appellant introduced assets worth $1.24 million [58].
The respondent owned properties at S Street, Suburb J and in T Street, Suburb U which, in order to effect a property settlement with his former de facto spouse, were sold. His share was $340,000 which he brought into the relationship. In addition, he owned shares which he sold for $89,113, along with a second tranche of shares worth $2,020.50. He owned a car purchased for $85,000 which was subject to lease finance of $60,000. Otherwise he had an interest in a boat purchased for $16,250 and superannuation of $93,439.
The value of the respondent’s initial contributions was found to be “in excess of approximately $570,000” [47].
One month later, the parties purchased a property in their joint names at B Street, Suburb C for $1.05 million. In order to complete the purchase, they borrowed $840,000 with the balance of the purchase price paid by the respondent from the proceeds of sale of property he owned in Suburb J. Upon settlement, the parties moved into Suburb C.
In September 2008, for $1.3 million the parties purchased the Suburb E property from the corporate trustee. They borrowed the entire purchase price from the Bank who secured its advance against the Suburb E and Suburb C properties. It was a condition of the advance that the parties lease the Suburb E property to the company at a monthly rental of $13,500. The rent equated to the monthly payment due to the bank. From the Suburb E property proceeds of sale the appellant paid about $71,000 for stamp duty and other transaction costs.
By way of a distribution from the corporate trustee, the appellant received the $1.3 million Suburb E property proceeds of sale. With this distribution she paid out the original Suburb C mortgage and repaid a loan to her mother in the amount of $60,000. From other funds, the appellant paid stamp duty, legal costs and disbursements for the Suburb E property transaction. After she made these payments, $158,896 remained which she deposited into the parties’ joint account.
As a consequence of the Suburb E property transaction the corporate trustee incurred a “potential” capital gains tax liability.
Suburb C was substantially renovated in late 2008 at a total cost of about $132,000.
In March 2009 the respondent loaned money to the company which he understood would be reimbursed from what he thought was an imminent sale of the company. His Honour said that the respondent “asserts” that between 5 March 2009 and 5 May 2010 he advanced $268,314.05 to the company which came from his income, the sale of two cars and a loan from a business acquaintance [17]. It would appear that at [64] it was accepted by the
trial judge that the respondent made the asserted payments.
The parties purchased a property at F Street, Town G for $1.1 million in October 2009 which was registered in the respondent’s sole name. Town G had fallen in value and at the date of hearing was worth $875,000. It was accepted that taking into account sales commission, a sale of F Street, Town G would crystallise a $250,000 capital loss. The respondent’s desire to retain F Street, Town G was noted in relation to which he said he would indemnify the appellant for the bank mortgage secured thereon. As at the date of hearing, the mortgage had a debit balance in the amount of $1.092 million.
F Street, Town G was tenanted from time to time and its outgoings were paid either from rental income or the respondent’s wages. The trial judge noted the respondent’s assertion that the property ran at an annual shortfall of about $100,000.
The parties separated in April 2010 following which the appellant returned to Melbourne and the respondent remained in Suburb C. He continued to contribute towards F Street, Town G and met the shortfall between its income and outgoings. The company continued to rent the Suburb E property with the rental income applied to the Suburb E mortgage.
These proceedings were commenced by the respondent in mid-2010.
On 24 January 2011, interim property settlement orders were made by consent, the effect of which was that the respondent paid the appellant $22,500. The trial judge observed that this interim payment did not form part of the parties’ property and “appears abandoned”.
The respondent was made redundant in May 2011, as a consequence of which he received a net payout of $166,259.
Excluding superannuation, the trial judge determined that the parties’ assets and liabilities at the date of hearing were as set out in the table below:
Ownership Description Value Assets Joint Suburb C $1,100,000 Respondent Town G $875,000 Joint Suburb E $1,465,000 Respondent ANZ Suburb D A/c …312 $28,000 Respondent ANZ A/c …312 $14,430 Joint NAB A/c …168 $100 Appellant Scooter $6,000 Appellant A Pty Ltd, Business O and I Pty Ltd $350,000 Appellant Jewellery (including engagement ring and watch) To be sold Respondent Half interest in boat $15,000 Respondent Addback: Legal fees paid $81,000 Appellant Addback: Legal fees paid $17,619 Respondent Addback: Proceeds of sale Q Boat $20,086 Appellant Addback: Proceeds of sale Q Boat $22,250 Total Assets $3,994,485 Ownership Description Value Liabilities Joint NAB mortgage secured against Town G $1,092,000 Joint NAB bank bill secured on Suburb E and break fee $1,153,015
$71,800Wife ANZ Visa $10,000 Wife Unpaid legal fees $49,573 Wife Land tax $1,750 Husband Tax liability $33,000 Total Liabilities $2,411,138 Net Asset Pool (exclusive of superannuation) $1,583,347
The appellant had superannuation worth $65,687 and the respondent had superannuation worth $198,202.
Although the three corporate entities were included at an agreed value of $350,000, it is common ground that this was the value of the company with the other entities being brought to account at no value. Notwithstanding the agreed values, the appellant argued for the inclusion of the company overdraft in the amount of $175,000 (as at 30 June 2010) [See Appellant’s case outline document, filed 11 November 2011, page 6 and Transcript of Proceedings, dated 10 November 2011, page 19, line 5] and Capital Gains Tax liability payable by the corporate trustee as separate liabilities. As counsel for the appellant made plain to the trial judge, the agreement as to value was not absolute and required consideration of both the valuation methodology and items that it failed to address.
The trial judge rejected the appellant’s claim that the “potential” Capital Gains Tax liability established by the transfer of the Suburb E property from the Trust to the parties should be included as a liability. His Honour found that the corporate trustee and not the appellant would be liable. The only difference between this and the position ultimately adopted by the appellant before the trial judge is that she argued that because the corporate trustee and the Trust had no value, the only way the liability would be met and liquidation of the entities avoided was if she paid the Capital Gains Tax liability. It is common ground that the trial judge did not have evidence about the value of the Trust albeit there was evidence from the appellant that her beneficial interest in the Trust was “nominal” [Transcript of Proceedings, dated 11 November 2011, pages 175-6].
In relation to the Capital Gains Tax liability the trial judge was not satisfied that it would be assessed and determined that if assessed there are measures that the appellant could take to achieve taxation offsets. Having rejected the appellant’s argument for inclusion of the Capital Gains Tax liability in the amount of $87,855 (not the $80,175 referred to at [30]), the trial judge found “[i]t is noted however that the failure to pay it at this time must be regarded as a contribution made on behalf of the wife to the extent at least of the value to the parties of the utilisation of the funds which they had by reason of its non-payment for the period” [33].
It would appear that the appellant initially sought to include as a liability $180,000 that she owed her mother which she in turn lent to the company. The company having been brought to account at an agreed value of $350,000, the trial judge found that the loan must have been taken into account in order to determine the value of the company. In other words the trial judge offset the company debt to the appellant with the appellant’s debt to her mother [34]. We observe that counsel who appeared for the appellant in the court below accepted that this approach was available to the trial judge and abandoned any argument to the contrary [Transcript of Proceedings, dated 11 November 2011, page 167].
The trial judge acknowledged but did not include as a liability the parties’ loan account with the company. He observed that the loan account had not been included as either an agreed or contentious item on the parties’ balance sheet [35].
At [51], reference was made to both parties making payments to the loan account and that they both received the benefit of payments from the loan account, particularly in relation to credit card liabilities. At least in relation to payments made from the loan account prior to separation, precisely who benefited from these payments was contentious. On the morning of the hearing the appellant produced voluminous credit card statements. This was described by the trial judge as another example of her untimely disclosure. It would appear he accepted the respondent’s contention that because he had not been given prior access to the credit card statements, he was unable to address the appellant’s evidence about the expenditure paid for his benefit.
His Honour then considered the treatment of $229,840 paid by the company in excess of what would have been fair market rental for its occupation of the Suburb E property. The trial judge said that this had “already counted as a contribution made on behalf of the [appellant]” [52]. Where and in what manner is not revealed in the judgment.
The next loan account issue concerned payments from the loan account to personal credit cards. Having concluded that there was insufficient evidence to make any order other than that the appellant indemnifies the respondent in relation to the loan account, at [52] the trial judge said “[t]he [loan] will be considered as a contribution to the extent that it is representative of expenditure of monies on either the [respondent] or the [appellant]”.
The trial judge then summarised evidence given by an accountant in relation to the loan account adjusted to take into account fair market rental rather than the amount paid. When payments in the amount of $255,714.60 from the parties to the company were offset against $241,689.90 that the company paid for their personal expenses and $229,840.73 in excess of fair market rent, a net amount of $215,816.03 was loaned by the company to the parties [53]. It would seem that the effect of these findings is that:
·by paying more than fair market rent, the company distributed to the parties $229,840 more than it needed to pay;
·this payment had already been taken into account as a contribution by the appellant;
·$255,714.60 was loaned by the parties to the company;
·the company paid private expenses for the parties of $241,689.90;
·for the period of cohabitation the company loaned the parties $215,816.03; and
·because the evidence in relation to expenditure from the loan account was unable to be specifically attributed to one party, the appellant was ordered to indemnify the respondent in relation to the $215,816.03 which between them, they owed the company.
Between [59] and [67] the trial judge summarised what he said were the respondent’s contributions during cohabitation. It was determined that in total, the respondent contributed $569,515.58 from income [59]. Counsel could not agree about the effect of his Honour’s findings. Although they agreed that the paragraphs which followed appeared to identify the manner in which his Honour said the respondent applied the $569,515.58, the figures which followed demonstrate that this cannot be correct. At this point it is appropriate to observe that notwithstanding their obvious attempts to explain the trial judge’s findings as to contributions, counsel could not. Therein lies the challenge for the respondent in resisting the appeal.
If, as counsel for the respondent submitted, the trial judge found at [61] that from the $569,515.68 the respondent contributed $271,000 to acquire B Street, Suburb C, this would be in conflict with his earlier finding that these funds came from the proceeds of sale of his Suburb J and Suburb U properties. In our view and contrary to the submissions made by both counsel to the effect that the paragraphs following “were an elaboration of the deposits totalling $569,515” (respondent’s submissions par 7), they are a mixture of initial contributions already taken into account at [39] and [47] and it would appear contributions made thereafter.
In any event the trial judge said that the respondent contributed:
·$55,000 towards the purchase of F Street, Town G [62];
·$50,000 deposited to the parties’ joint account [63]; and
·$223,000 to the company [64].
An additional $45,314.05 was loaned by the respondent to the company which he borrowed from a business acquaintance. The respondent received an insurance payment in July 2009 for a car he owned when the parties commenced cohabitation. He received the amount of $43,726, some of which was used by the parties and the remainder loaned to the company. Counsel could not agree on the identity of the car that produced the insurance payment. There is no reason to doubt that when the trial judge said it was the respondent’s car purchased prior to cohabitation that this is what he meant. We agree with counsel for the appellant that it follows that the respondent was given credit for the introduction of the car at the commencement of cohabitation as well as for the amount received when it was destroyed.
Consideration was then given to the appellant’s contributions during cohabitation. Reference was made to the parties’ acquisition of the Suburb E property and the manner in which the proceeds of sale were distributed by the corporate trustee. At [69], the trial judge found that:
… The [appellant’s] trust assumed a contingent liability for Capital Gains Tax and to the extent that the contingency may be fulfilled must be regarded as a contribution made on behalf of the [appellant].
The trial judge then considered the appellant’s evidence that she paid the Suburb E property mortgage. To do so, the parties leased the Suburb E property to the company for $162,000 per annum ($13,500 per month). Of this amount, $6,100 per month was attributed to the Suburb E property mortgage and $6,100 per month to the component of that mortgage attributable to Suburb C. The trial judge was satisfied that the company paid more than a fair market rent and that the arrangement was tax advantageous. The trial judge acknowledged the appellant’s evidence that the net effect of the excess rental and tax effective treatment of company income is that she contributed $123,066 to the relationship.
During cohabitation, because the appellant needed to be in Melbourne to run the company, the company paid the cost of her rental accommodation between November 2007 and November 2008.
Finally, in relation to contributions during cohabitation, the appellant’s evidence that she was responsible in a major way for day to day household chores was mentioned.
The trial judge then turned his attention to post separation contributions. In relation to the respondent, the trial judge was satisfied that between April 2010 and October 2011 he paid $98,503.11 shortfall in relation to Town G. Suburb C outgoings of $16,466.21 were met by him for the period
April 2010 and October 2011 during which he had sole occupation.
Finally, the trial judge found the respondent had been made redundant in
May 2011 and was now unemployed. His redundancy payment was used for his living and legal expenses.
After separation, the appellant moved into rented premises. From April 2010 to December 2010, her rent was $1,400 per month and thereafter $2,000 per month. The trial judge found that after separation she “…then occupied premises rent free, the rental payable being provided by gifts from her mother...” [81]. The point being the appellant’s mother paid her rent in the amounts identified.
The trial judge noted the appellant’s evidence that in the post separation period she borrowed $180,000 from her mother to assist her to pay the Suburb E loan.
Finally, it was accepted that post separation, the company continued to rent the Suburb E property ($6,100 per month) and that in order to meet the monthly mortgage payments to the bank of $13,800, she “…paid from borrowings and her salary the balance of $7,700 per month…” [86 and 87].
Contributions in relation to superannuation were then discussed. The appellant’s superannuation grew from $50,000 at cohabitation to $65,687 at the date of hearing. For the same period, the respondent’s increased in value from $93,439 to $198,202. By reference to the respondent’s greater initial contribution of superannuation and the value of his contributions made thereafter, the trial judge decided that the value of the superannuation accumulated during the relationship would be “…notionally divided 70% to the respondent and 30% to the appellant”. Because neither party sought a superannuation splitting order, that adjustment would be made against non-superannuation assets. The effect of this was that of the $120,450 in superannuation accumulated after the parties commenced cohabitation, having contributed superannuation worth $104,763 the respondent would receive $84,315 and the appellant having contributed $15,687 would receive $36,135.
Because the trial judge’s evaluation and analysis of the parties contributions is brief and the adequacy of those reasons is challenged by the appellant, we set them out in full:
94.All in all I assess the contributions of the parties to the acquisition, conservation and improvement of the property of the parties to the marriage or either of them including such property which is no longer the property of the parties to the marriage or either of them to be in the proportion of 74%/26% in favour of the [appellant] to date of the hearing.
The trial judge then addressed the relevant s 90SF(3) factors. He observed that the appellant would continue to operate her business which, for the past three financial years, provided her with a taxable income of $68,338 (2008), $46,582 (2009) and $56,918 (2010). In addition, for the 2010 financial year the company produced a profit of $50,540. The appellant’s evidence that for the 2011 financial year she anticipated an income from the company in the amount of $55,000 was given, the trial judge found, “…without providing any justification or documentary evidence to support it…” [97]. His Honour was similarly critical that management figures for the year ending 30 June 2011 had not been produced, that the appellant failed to provide a current financial statement and had been tardy in relation to production of company balance sheets and her personal taxation returns. The trial judge observed that as a consequence of the appellant’s inadequate and untimely disclosure he was entitled to adopt “robust decision making” in reaching conclusions “which do not favour the non- disclosing party” [103].
The respondent’s evidence in relation to his prospects of employment was then considered. It would appear that the trial judge accepted the respondent’s evidence that positions of the type held by him arose rarely. Nonetheless the respondent was reasonably confident he would shortly commence employment at a salary of about $250,000 per annum (salary and bonuses). As to the future, the respondent sought to retain Town G and, if he received Suburb C, he planned to sell a 50 per cent interest to a friend for $550,000. The trial judge was satisfied that the respondent should be given the opportunity to retain Town G and that to require it to be sold would do no more than crystallise a loss which the respondent lacked the capacity to pay. Having calculated that the respondent would be required to pay the appellant $600,000 (inclusive of an amount for adjustment of superannuation) the trial judge determined that the respondent should pay her the $550,000 (which he would receive from a friend) and have time to pay the balance.
No adjustment for s 90SF(3) factors was made.
The trial judge was satisfied that an adjustment of the parties’ assets which favoured the appellant 74 per cent compared to the respondent’s 26 per cent would be just and equitable.
The calculations which followed demonstrate that although the trial judge said that the appellant should receive 74 per cent of the parties’ assets, this related to the non-superannuation assets and that in relation to superannuation, this would be distributed in accordance with the trial judge’s findings we set out at paragraph 61 of these reasons. Thus, in relation to the non-superannuation assets, the appellant was entitled to receive property worth $1,171,676.78. On this basis she would receive:
·Suburb E;
·the company and related entities;
·NAB account …168 ($50);
·the scooter;
·her paid legal fees; and
·her share of the Q Boat proceeds of sale
Total $1,860,919
Subject to the following liabilities:
·NAB secured against Suburb E:
·ANZ Visa;
·unpaid legal fees; and
·land tax
Total liabilities $1,286,138
This meant that the respondent was required to pay the appellant $596,895.78 which the trial judge rounded up to $600,000. The trial judge said the $600,000 was inclusive of the superannuation adjustment to be made in the appellant’s favour. We observe at this juncture that it cannot have been. The effect of this is that the trial judge having said the appellant should receive an adjustment for superannuation acquired during cohabitation in the amount of $20,448, that adjustment was overlooked. Because the adjustment that was made was rounded up, the effect of this is that the appellant received $17,375 less than the trial judge said she should. It follows that the respondent received $17,375 more than the amount to which he was entitled.
It is argued by the respondent that at less than one per cent of the total asset pool, an error of this magnitude is de minimis and would not attract appellate intervention. Counsel for the appellant conceded that on the basis that this error was considered in isolation we would not interfere with the judgment. We agree.
The respondent received the remaining assets subject to the mortgage secured against Town G and his tax liability. Thus, he received net non-superannuation assets worth $1.125 million from which he was required to pay $600,000 to the appellant. The effect of this was that rather than the $411,670 (26 per cent) of the non-superannuation assets he was entitled to receive, the respondent received $408,566 or 25.80 per cent. In addition, he retained his superannuation of $198,202.
Grounds of appeal
The appellant relied on her Amended Notice of Appeal filed 17 May 2012. Her challenge may be summarised as follows:
·failure to provide reasons in relation to contributions and significance of the appellant’s contribution of Capital Gains Tax funds (grounds 1 and 3);
·insufficient weight given to the appellant’s “overwhelming” initial contribution and post separation financial contributions (ground 2);
·in the alternative to ground 3, erred by failing to find that the appellant would be ultimately responsible for the Capital Gains Tax liability (ground 4);
·delivered a result that was manifestly unjust (ground 5);
·erred by granting the respondent 12 months within which to pay the final instalment due to the appellant (ground 7);
·miscalculated the appellant’s initial contribution (ground 8);
·insufficient weight given to the appellant’s post separation contributions (ground 9);
·erred by failing to make an adjustment pursuant to s 90SF in the appellant’s favour as a consequence of her contribution to the respondent’s superannuation (ground 10); and
·the trial judge’s finding that the appellant’s disclosure was incomplete, untimely and unsatisfactory was not open to him and should not have been taken into account pursuant to s 90SF (ground 11). As no submissions were made in relation to this ground it need not be considered further.
Discussion
Grounds 1, 3 and 8 will be discussed together.
Counsel agreed that whether reasons are adequate will depend upon the circumstances of the case. They also agree that although the reasons in this case did not need to be elaborate, it was incumbent upon the trial judge to make findings and explain his reasons for what he correctly identified were the major issues for the hearing. Where counsel differs is in their analysis of the
trial judge’s findings and whether the reasons are adequate.
Counsel for the appellant first focused on the findings made in relation to initial contributions. As we mentioned earlier, the trial judge found that at the commencement of cohabitation the appellant owned the Suburb E property ($1.3 million) and had superannuation worth $50,000. Her liabilities amounted to $170,163. Yet, the trial judge found that her initial contribution was $1.24 million.
Both counsel speculated about how the trial judge reached that conclusion. On behalf of the appellant, it was contended that the trial judge must have intended to value the appellant’s interest in the company at $170,000. Counsel for the appellant referred to the trial judge’s finding at [54], which is set out below:
The value of [the company] at the date of cohabitation was the subject of debate with the [appellant] asserting that whatever the current value, the business was worth more as at the date of commencement of cohabitation. Notwithstanding that assertion her affidavit filed in the proceedings says that it was valued by the National Australia Bank at between $270,000 and $320,000. The [appellant] asserts an estimate, based on the fact that the business then had a net equity after liabilities of $100,000, of about $170,000.
Paragraph 54 does not constitute a finding that at the commencement of cohabitation the appellant’s company was worth $170,000. However, for the sake of argument, if it did, as counsel for the appellant correctly observed, added to the other findings made by his Honour, this would mean that the appellant introduced superannuation and non-superannuation assets with a net value of $1,349,837.
Counsel for the respondent concedes the error and argued that we would be satisfied that the findings which the trial judge contemplated, but in some respects failed to enunciate, were that the appellant introduced:
·Suburb E $1.27 million
·superannuation $50,000
·the company $170,000
Less
·mortgage $170,000
·loan to parents $60,000
Thus, according to counsel for the respondent, there was evidence that the appellant introduced assets worth $1.26 million. But of course, the trial judge did not find that the Suburb E property was worth $1.27 million, rather, finding that it was worth the $1.3 million identified by counsel for the appellant. Although it is accepted that the trial judge correctly identified that from the Suburb E property sale proceeds, the appellant repaid the loan to her parents in the amount of $60,000, nowhere in his reasons did the trial judge indicate that this debt was in existence at the commencement of cohabitation. It necessarily follows that it is not possible to discern from the judgment how the trial judge determined that the appellant’s initial contribution was $1.24 million. Given the short period of cohabitation, this is a matter of real significance.
The answer to this conundrum lies in the appellant’s affidavit filed on 13 October 2011. At [13] she deposed:
I made initial contributions of approximately $1,240,000.00 comprised as follows:
13.1When [the respondent] and I commenced our relationship, the [Suburb E] property was held by [the corporate trustee] of my Family Trust and had combined debts to the National Australia Bank and my mother…of approximately $230,000.00. According to the single expert in these proceedings, the property was valued at approximately $1,250,000.00. Therefore the equity was approximately $1,020,000.00.
13.2I also owned the [company] which was valued by the NAB at between $270,000.00 and $320,000.00. This document was discovered by NAB pursuant to a subpoena and I rely on that document as independent evidence of my contribution. [The company] had an overdraft of $100,000.00 at that time leaving a net equity of $170,000.00;
13.3Superannuation of $50,000.00; and
13.4A significant amount of furniture.
It follows, that notwithstanding contrary findings about the value of the Suburb E property at the commencement of cohabitation and the failure to make findings in relation to the value of the company, the trial judge may well have been satisfied (in this portion of the judgment), that:
·Suburb E was worth $1.25 million;
·the company had a net equity of $170,000;
·superannuation as found;
·mortgage secured on Suburb E as found; and
·$60,000 due to the appellant’s mother.
If this is correct, one would have expected the trial judge to consider the significance of the increased value of the company. Simply put, it is not possible to discern how his Honour viewed the increase in the value of the Suburb E property to $1.465 million and whether he regarded this as an increase of $165,000 or $215,000, or viewed it as having any significance at all.
We agree with counsel for the respondent that although the trial judge dealt with the parties’ contributions by reference to those made initially, during the relationship and those made after separation, in some instances the periods were conflated. It seems likely that in so doing, the trial judge double counted the respondent’s contribution concerning the car and may have overvalued the respondent’s initial contribution and his contribution during cohabitation from the proceeds of the sale of his properties.
We also observe that although the trial judge made findings about the respondent’s contributions during cohabitation, the effect of those findings is unclear and that few findings were made in relation to those made by the appellant. Under the rubric of s 90SF considerations, the trial judge set out the appellant’s taxable income for the years ended 2008, 2009 and 2010. We agree with counsel for the respondent that this evidence established that her personal taxable income (for a period beyond the duration of the relationship) was $171,838. It is the respondent’s submission that in order to avoid double counting the appellant’s contribution of the Suburb E property, the best indicator of her contributions during and after separation, was her personal income. This submission does not withstand scrutiny. Reference need only be made to the findings made by the trial judge in relation to the loan account to establish the point.
The trial judge was obliged to evaluate the parties’ contributions (Mallet v Mallet (1984) 156 CLR 605). We agree with counsel for the appellant that this exercise was not undertaken. Although we agree with counsel for the respondent that the structure of the judgment moves through the four step process referred to in Hickey& Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143, there is a paucity of findings made in relation to the appellant’s contributions, contradictory findings in relation to her initial contributions and that the evaluation of the significance of each party’s contributions is such that it is not possible to discern how the trial judge determined what was and was not significant nor why the non-superannuation assets should be divided 74 per cent to the appellant compared to the respondent’s 26 per cent. This is notwithstanding valiant attempts made by both counsel to quantify the contribution findings. Unfortunately, it must be observed that all this achieved was to expose the paucity of findings in relation to contributions made by the appellant and potentially inconsistent findings as to contributions made by both parties. Unfortunately, the same must be said in relation to superannuation assets.
Ground 1 is thus made out.
In relation to ground 3, the trial judge said that the parties’ use of money otherwise payable for Capital Gains Tax was a contribution by the appellant. Although the amount referred to by the trial judge was understated by approximately $7,000, we accept that his Honour did take this contribution into account. In the absence of discussion concerning the significance of this contribution, we infer that the trial judge did not regard it as significant. Such a finding was open and thus, error as asserted by ground 3 has not been established.
It is thus necessary to consider ground 4, which is pressed in the alternative to ground 3. By giving the appellant credit for a contribution of the funds otherwise payable for Capital Gains Tax, it follows that the trial judge was satisfied that Capital Gains Tax in relation to the Suburb E property transaction was payable. However, it will be recalled that the appellant’s argument for inclusion of the Capital Gains Tax debt as a liability of the parties was rejected and that the trial judge found that the liability, which was not yet assessed:
33.… may not be assessed or if assessed that there are measures which [the appellant] could take which could mean that she would have offsetting taxation benefits. There is no evidence from [the appellant] of her intention to take those steps.
We understand the reference by the trial judge to steps, is to evidence from the appellant’s accountant (exhibit 14) about the options available to the Trust in relation to the Capital Gains Tax liability. The accountant explained that the Suburb E property transaction resulted in a gross capital gain to the Trust of $758,498. This gain was included in the Trust’s 2009 income tax return. A number of small business CGT concessions were claimed to reduce and defer the capital gain. Excluding those which were permanent concessions, the small business rollover concession of $189,624 was a deferral. Because none of the steps which might have been taken during the deferral period were taken, the accountant explained that the Trust was required to include a capital gain of $189,624 in its 2011 income tax return.
As a result of crystallising this capital gain, three options were available to the Trust. These were:
1. Distribute the $189,624 capital gain to a beneficiary of the Trust, most likely the appellant (option 1). On the assumption that the appellant had $80,000 of other taxable income this would result in a personal taxation liability of $80,175.16. It will be recalled that the appellant’s evidence was that she estimated her 2011 income would be in the order of $55,000. The accountant provided the method by which the appellant’s taxation liability on a distribution would be calculated. Applied to the appellant’s estimated $55,000 taxable income there would be a small reduction because the 1.5 per cent Medicare levy component would be calculated on $55,000 rather than $80,000.
2. The second option was to not distribute the capital gain and for the Trust to accept a taxation liability of $88,175.16.
3. The third option was for the Trust to pay $189,624 into a complying superannuation fund for the benefit of the appellant by 15 May 2012.
The accountant’s evidence was not challenged. Questioned by the respondent about Capital Gains Tax, the appellant explained that the opportunity to defer the payment of capital gains had passed and that payment was due in May 2012 (Transcript of Proceedings, dated 11 November 2011, page 150-152). The effect of the appellant’s evidence was that option 3 could not be taken and thus that either she (option 1) or the Trust would have to pay the amount attributable to Capital Gains Tax (option 2). It follows that it was not open to the trial judge to find that Capital Gains Tax may not be assessed. However, as a consequence of the appellant’s failure to adduce evidence of the value of the Trust and which of the remaining two options might be adopted, we are not satisfied that the trial judge erred in the manner alleged by ground 4.
For completeness, in relation to ground 7, we agree with the submission made by counsel for the respondent that on reading the judgment as a whole, it is apparent that the trial judge deferred payment of the $50,000 so as to enable the respondent to retain Town G and avoid crystallising the $250,000 loss. Ground 7 will thus fail.
Remaining grounds
Having concluded that the appeal will succeed, including for a failure to provide reasons, it is not necessary to address those further grounds which challenge the weight attributed to various contributions and whether the
trial judge delivered a result which was manifestly unjust. Notwithstanding the presumption in favour of the correctness of a discretionary judgment, because of the paucity of findings and the unresolved contentious issues, we are unable to conclude what the reasonable range of discretion might ultimately be. It follows that we cannot be satisfied that the decision is plainly right.
Conclusion
The appeal will be allowed. As we said at the outset, it was agreed that in the event error was established, the matter required a rehearing.
As is our custom, we took submissions on costs. This is not a case where an order for costs against the respondent would be proper. The appeal having succeeded on an error of law, we are of the view that certificates pursuant to the Federal Proceedings (Costs) Act1981 (Cth) should be given to both parties in relation to the appeal and rehearing.
I certify that the preceding ninety three (93) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 10 October 2013.
Associate:
Date: 11 October 2013
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