EATON & EATON
[2013] FamCAFC 106
FAMILY COURT OF AUSTRALIA
| EATON & EATON | [2013] FamCAFC 106 |
| FAMILY LAW – APPEAL – PROPERTY SETTLEMENT – where the Federal Magistrate erred in refusing to reopen the hearing to receive further evidence in relation to the mortgagee sale of one of parties’ properties and the wife’s claim against her deceased mother’s estate when, given the nature of the evidence, it is not possible to find that it would have made no difference to the Federal Magistrate’s determination – property settlement proceedings remitted to the Federal Circuit Court for rehearing. FAMILY LAW – APPLICATION FOR LEAVE TO APPEAL – CHILD SUPPORT – where the Federal Magistrate dismissed the husband’s application for a departure order from a child support assessment – where the husband complained that the Federal Magistrate failed to provide any or any adequate reasons for his decision and that the Federal Magistrate failed to take into account the husband’s submissions at trial as to the Child Support Agency’s treatment of the husband’s shareholdings – where the Federal Magistrate’s trail of reasoning to reach his conclusion is plain for all to see – where the husband’s submissions at trial did not address the approach adopted by the Federal Magistrate but rather the issue raised on appeal in the husband’s written submissions was to the Federal Magistrate’s treatment of the Trust distribution received by the husband – where it was clearly open for his Honour to take into account the Trust distribution received by the husband – leave granted – no merit found in this ground of appeal. FAMILY LAW – CROSS-APPEAL – PROPERTY SETTLEMENT – where the wife appeals against two of the property settlement orders made by the Federal Magistrate – where the wife complained the Federal Magistrate erred in finding a discount rate of 35 per cent should be applied to the value of the husband’s shares because he held a minority interest – where the wife complained the Federal Magistrate should have notionally added-back to the asset pool the alleged loss of $46,317.04 resulting from the sale of the wife’s shares by the husband after separation and a further $90,000 debited from the husband’s loan account with the Trust – where the wife complained the Federal Magistrate erred in the exercise of his discretion by giving insufficient weight to certain contributions by the wife and too much weight to certain contributions by the husband – no merit found in any grounds of appeal – cross-appeal dismissed. FAMILY LAW – APPEAL – REFUSAL OF STAY – where the Federal Magistrate refused to grant a stay of the substantive property settlement orders pending appeal – where given the outcome of the substantive appeal and cross-appeal there is no utility in this appeal – appeal dismissed. |
| Child Support (Assessment) Act 1989 (Cth) Child Support (Registration and Collection) Act 1988 (Cth) Family Law Act 1975 (Cth) Federal Proceedings (Costs) Act 1981 (Cth) |
| CDJ v VAJ (1998) 197 CLR 172 Chorn and Hopkins (2004) FLC 93-204 Commonwealth v Milledge (1953) 90 CLR 157 Gronow v Gronow (1979) 144 CLR 513 Kowaliw and Kowaliw (1981) FLC 91-092 Lenehan and Lenehan(1987) FLC 91-814 Lennon & Lennon [2011] FamCA 571 Norbis v Norbis (1986) 161 CLR 513 Rutherford and Rutherford (1991) FLC 92-255 |
| APPELLANT/CROSS-RESPONDENT: | Mr Eaton |
| RESPONDENT/CROSS-APPELLANT: | Ms Eaton |
| FILE NUMBER: | BRC | 5228 | of | 2009 |
| APPEAL NUMBERS: | NA | 13 | of | 2012 |
| NA | 19 | of | 2012 |
| DATE DELIVERED: | 18 July 2013 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Finn, Strickland & Kent JJ |
| HEARING DATE: | 5 – 6 September 2012 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATES: | 17 January 2012 15 February 2012 |
| LOWER COURT MNC: | [2012] FMCAfam 9 [2012] FMCAfam 444 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT/ CROSS-RESPONDENT: | Mr Grieve QC |
| SOLICITOR FOR THE APPELLANT/ CROSS-RESPONDENT: | Walker Lawyers |
| COUNSEL FOR THE RESPONDENT/ CROSS-APPELLANT: | Ms Anderson |
| SOLICITOR FOR THE RESPONDENT/CROSS-APPELLANT: | Hopgood Ganim |
Orders
The appellant husband have leave to adduce further evidence in relation to the mortgagee sale of the property at O registered in the name of the respondent wife, and the respondent wife’s application for provision from her deceased mother’s estate, but otherwise the application in an appeal filed by the appellant husband on 5 September 2012 in NA 13/2012 be dismissed.
The appellant husband’s oral application for leave to amend the Amended Notice of Appeal filed on 10 April 2012 in NA 13/2012 to seek an order pursuant to s 111C(3) of the Child Support (Registration and Collection) Act 1988 (Cth) for a stay be dismissed.
The appellant husband’s appeal (NA 13/2012) against the orders for property settlement (Orders 1-15 inclusive) made by Federal Magistrate Jarrett (as he then was) on 17 January 2012 be allowed.
The appellant husband have leave to appeal against Order 16 made by Federal Magistrate Jarrett (as he then was) on 17 January 2012.
The appellant husband’s appeal against Order 16 made by Federal Magistrate Jarrett (as he then was) on 17 January 2012 be dismissed.
The respondent wife’s cross-appeal (NA 13/2012) against Orders 6 and 7 of the orders for property settlement made by Federal Magistrate Jarrett (as he then was) on 17 January 2012 be dismissed.
The appellant husband’s appeal (NA 19/2012) against the order made by Federal Magistrate Jarrett (as he then was) on 15 February 2012 be dismissed.
Orders 1-15 inclusive made by Federal Magistrate Jarrett (as he then was) on 17 January 2012 be set aside.
The proceedings for property settlement between the parties be remitted for rehearing to the Federal Circuit Court for rehearing by a Judge other than Judge Jarrett.
There be no order as to costs.
The Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (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 husband in respect to the costs incurred by the appellant husband in relation to the appeal (NA 13/2012).
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (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 wife in respect to the costs incurred by the respondent wife in relation to the appeal (NA 13/2012).
The Court grants to the parties costs certificates pursuant to the provisions of
s 8 of the Federal Proceedings (Costs) Act 1981 (Cth) being certificates that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the parties in respect to such part as the Attorney-General considers appropriate of any costs incurred by the parties in relation to the new trial.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Eaton & Eaton 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 BRISBANE |
Appeal Number: NA 13 of 2012; NA 19 of 2012
File Number: BRC 5228 of 2009
| Mr Eaton |
Appellant/Cross-respondent
And
| Ms Eaton |
Respondent/Cross-appellant
REASONS FOR JUDGMENT
Introduction
By Amended Notice of Appeal (NA 13/2012) filed on 10 April 2012, Mr Eaton (“the husband”) appeals against property settlement orders made by Federal Magistrate Jarrett (as he then was) on 17 January 2012. The appeal is opposed by Ms Eaton (“the wife”).
In summary, the property settlement orders appealed against provided for the wife to retain a property at M, her superannuation, and the furniture and chattels in her possession, whilst the husband was to take a transfer of a property at O, and retain two motor vehicles, his shareholdings and superannuation, and the furniture in his possession, along with a number of specific items he was to collect from the wife. The husband was also required to pay to the wife the sum of $368,700. On appeal the husband seeks that the orders made by the Federal Magistrate on 17 January 2012 be set aside and that the proceedings be remitted for rehearing before a Federal Magistrate other than Jarrett FM.
In the Amended Notice of Appeal the husband also seeks leave to appeal against the order made by the Federal Magistrate dismissing his application for a departure order from a child support assessment, and in the event that leave is granted, he appeals against that order.
By Notice of Cross-Appeal filed on 29 February 2012, the wife appeals against two of the orders made by the Federal Magistrate on 17 January 2012, namely that the husband pay her $368,700, that she assign to the husband any loans in her name standing with a credit balance in the accounts of Eaton Nominees Pty Ltd, the husband be responsible for any debit loan account of his or her’s in that company, and she relinquish all claims to the assets and income of that company. The wife seeks that the orders made by the Federal Magistrate on
17 January 2012 be set aside and that the Full Court re-exercise the discretion, or in the alternative that the matter be remitted for rehearing before a Federal Magistrate other than Federal Magistrate Jarrett. In the event the Full Court is prepared to re-exercise the discretion, the wife seeks orders that the husband pay to the wife the sum of $612,760.65 and cause proceedings instituted in the Supreme Court to be discontinued, that the husband be restrained from continuing or commencing similar proceedings, and that the husband indemnify the wife in relation to all costs, claims, actions and demands in relation to the Supreme Court proceedings. The cross-appeal is opposed by the husband.
Further, by Notice of Appeal (NA 19/2012) filed on 14 March 2012 the husband appeals against orders made by the Federal Magistrate on 15 February 2012 refusing to grant a stay of the orders of 17 January 2012 pending appeal. This appeal is opposed by the wife.
At the hearing of the appeal the husband tendered an application in an appeal seeking leave to adduce further evidence. That application was initially opposed by the wife but as will be explained later in these reasons that position altered subsequently.
Background
The parties commenced their relationship in November 1979, married in November 1981 and separated on a final basis in August 2008.
The parties have four children aged 24, 22, 18 and 16 years at the time of trial.
Eaton Nominees Pty Ltd (“Eaton Nominees”) is the trustee of the Mr G Eaton Family Trust (“the Trust”) and was established by the husband’s father. The husband is one of two directors and two shareholders, and he holds the majority of the shares (four). The husband controls the activities of the Trust on a day to day basis.
The business currently operated by P2 Company Pty Ltd (“the Company”) commenced in 1948. The Company was incorporated in 1954 and three families including the Eaton family have had interests in it since then. The husband is one of three permanent directors and works as a manager for the Company. The wife has also worked for the Company in the past. The husband holds 3392 of the 7403 ordinary shares, representing 45.82 per cent of the overall shareholding, whilst Eaton Nominees holds 100 ordinary shares, representing 1.35 per cent of the overall shareholding. According to the Company’s Articles of Association, 50 per cent of votes are required to pass an ordinary resolution. On a poll, the husband’s shares hold 21 per cent of the voting rights and, including the holding of Eaton Nominees, the husband has a total of 25.38 per cent of the voting rights.
The matter was heard by the Federal Magistrate over five days in October 2010 and February 2011 and final submissions were received on 20 May 2011.
On 30 November 2011 the husband filed an application in a case seeking an order that the hearing be reopened to enable him to adduce further evidence. On 22 December 2011 the Federal Magistrate dismissed that application.
His Honour made final orders and delivered his reasons for judgment on
17 January 2012.
On 1 February 2012 the husband filed an application for a stay of the orders of 17 January 2012 pending appeal. The matter came before the Federal Magistrate on 15 February 2012 when his Honour dismissed the husband’s application and delivered ex tempore reasons for judgment.
Reasons for judgment delivered 17 January 2012
The Federal Magistrate commenced his reasons for judgment by briefly outlining the issues in the case, as follows (at paragraph 4):
The parties cannot agree on how their property ought to be divided between them now that their marriage relationship has come to an end. The issues largely concern the valuation of [Mr Eaton’s] share holding in a private company, whether some amounts spent by the parties following separation should be credited to them in these proceedings and the weight to be prescribed [sic] to their various contributions to the conservation, acquisition and improvement of their property up to the point of trial. The parties cannot agree upon any adjustment to their contribution based entitlements to take account of future matters.
His Honour recorded that the wife sought that the parties’ property as contended for by her be divided 70 per cent/30 per cent in her favour, whilst the husband sought a division of 70 per cent/30 per cent in his favour.
The Federal Magistrate noted that the parties had resolved their initial claims in relation to parenting, although the husband continued to seek child support departure orders.
The Federal Magistrate then outlined the relevant law in relation to property settlement and set out the parties’ assets and liabilities as follows:
Assets: [Property M] $585,000.00 [Property O] $670,000.00 Husband's share portfolio $114,952.00 Husband's [P2] Company Shares Pty Ltd $782,364.80 Husband's [P1] Company Pty Ltd shares $3,000.00 Husband's [H] Pty Ltd shares $19,200.00 Husband's Mazda Utility $1,500.00 Honda Odessy $22,100.00 AXA policy (H) $11,438.00 H's rental bond $1,800.00 Wife's furniture chattels and jewellery $7,000.00 Husband's furniture, chattels and jewellery $8,000.00 $2,226,354.80 Less: BoQ Line of Credit (W) $347,565.00 BoQ Line of Credit (W) $28,412.00 Debts to [Eaton] Nominees Pty Ltd as trustee for The [Mr G Eaton] Family Trust $292,610.00 Loan from [Ms H] $10,000.00 [L] Loan $17,774.00 $696,361.00 Superannuation: [A Superannuation] (H) $181,746.00 [A Superannuation] (W) $13,241.00 [Q Superannuation] (W) $7,203.00 $202,190.00 Net Assets including Superannuation $1,732,183.80
Of those assets the wife received the M property, her furniture, chattels and jewellery, and the husband received the balance. They each retained their superannuation and the husband became responsible for all of the liabilities.
As can be seen, his Honour found the value of the net assets to be $1,732,183.80 (including superannuation). His Honour’s findings in relation to the disputed assets and liabilities are summarised below.
The shares in P2 Company Pty Ltd: The wife suggested that the husband had the ability to influence other shareholders and directors because of his role as not only a member and director, but as general manager, however, the Federal Magistrate found no evidence to support that submission. His Honour found that the husband did not have a controlling shareholding in the Company.
There was significant dispute between the parties as to the value of the Company’s shares. The experts called by each party made a joint statement agreeing on the net assets of the Company, except for the value of the Company’s real estate holdings, which they agreed was “a matter for others with expertise in that regard”. The Federal Magistrate accepted the expert evidence that the value of the Company’s real property was $1,672,500 and subsequently determined the value of the Company at the date of trial was $2,626,905, which meant each share had a value of $354.84. Thus, the husband’s shareholding was worth $1,203,617.28 and Eaton Nominees’ shareholding was worth $35,484.
The significant dispute between the parties and their experts related to the “discount” to be applied to the share value to account for the husband’s minority shareholding. The Federal Magistrate noted there was no fixed rule as to the proper methodology to be adopted and his Honour outlined the approach taken by the Court in Ramsay v Ramsay (1997) FLC 92-742 and Georgeson and Georgeson (1995) FLC 92-618. The wife’s expert, Mr M, relying on a net asset valuation approach suggested the Court fix a discount of 10 to 30 per cent on the net asset based value of the shares. The husband’s expert, Mr P, relied upon some historical share sales in the Company and concluded a value of $187 per share was appropriate (which equated to a 52.06 per cent discount on the net asset base value of the shares).
On the evidence of previous share sales the Federal Magistrate was not satisfied there was a market for the shares beyond the existing shareholders. Thus, his Honour determined the appropriate methodology was to fix a price per share according to the net assets of the Company and then decide if the result should be the subject of a discount for the nature of the shareholding.
The Federal Magistrate found the factors which impacted upon the discount to be applied were that:
·the husband did not hold a controlling number of shares;
·the husband’s single or combined shareholding did not provide him with authority to pass an ordinary or special resolution;
·the husband had no authority or power to overrule any decision of the directors in relation to share transfers, dividend declarations or any other matter;
·the Company was controlled by three permanent directors who could only be removed by an ordinary vote of shareholders;
·the board of directors cooperated in the making of resolutions as the Company was run for the benefit of their families; and
·no dividends had been declared by the Company for at least three years preceding trial and had only been declared infrequently prior to that.
His Honour ultimately determined the appropriate discount was 35 per cent of the asset based value of the shares, which meant each share would have a value of $230.65 and the husband’s shareholding would have a total value of $782,364.80.
The parties’ alleged debt to Eaton Nominees:
On the evidence the Federal Magistrate was satisfied the husband could draw upon the Trust’s resources to assist him and other members of the family when necessary, as had occurred in the past. The main issue was whether the amount of the wife’s recorded liability to the Trust should be adjusted by $405,139, being money allegedly advanced to her by the Trust to assist her in purchasing the M property (which was purchased in November 2004 for $425,000 and for which the wife paid a $20,000 deposit). The Federal Magistrate accepted the wife’s evidence that the husband organised the finance for the balance of the purchase price, and accepted the husband’s evidence that monies were supplied to the wife by Eaton Nominees. The issue then became whether the parties were otherwise entitled to those funds or whether the funds were advanced as a loan.
His Honour accepted the experts’ joint statement that the net amount the parties owed to the Trust was $292,610, which was calculated on the basis that the amount of $405,139 was a loan.
The husband’s share portfolio: His Honour noted the husband’s financial statement filed in October 2009 disclosed a share portfolio worth $137,052, whilst at trial the husband submitted the value was $30,709 because he had sold many of the shares and applied the funds to expenses, including child support. It was the wife’s contention the husband had not properly accounted for the shares or any proceeds of sale if the shares had in fact been sold, and that the shares or any sale proceeds should be added-back to the parties’ property pool. The Federal Magistrate referred to Rickwood & Rickwood [2009] FamCA 264 in relation to add-backs and determined that, save for the husband’s purchase of a vehicle for the wife for $22,100, his expenditure of the sale proceeds was not reasonable and the sale proceeds of the shares (less the amount of $22,100) should therefore be notionally added-back to the pool of assets.
The wife’s shares held in trust: The wife held 913 BHP shares and 1,907 Qantas shares and it was her contention that those shares were held by her upon trust for the parties’ children. The husband argued that some of the children were now over 18 years of age but that the shares remained in the wife’s name. His Honour remarked there was nothing unusual about adults being the beneficiaries of trusts and determined that the shares were held upon a bare trust by the wife for the children and therefore should not be included in the property pool.
The child support debt: It was the husband’s contention that his child support debt should be included in the pool of assets and liabilities because it “represents monies that will be applied for the benefit of the children which is a joint obligation of the parties”. The Federal Magistrate was of the view it was inappropriate to include the husband’s child support debt as a liability, particularly as the debt included penalties and interest owed to the Commonwealth. It was a liability of the husband only and the wife should not have to bear any responsibility for it.
Legal costs and the wife’s line of credit: Since separation the wife had raised a $120,000 line of credit with the Bank of Queensland, which was secured over the M property, and at the time of trial was almost fully drawn. It was the wife’s evidence that $89,600 was spent on legal costs and the remaining $30,000 on living expenses and costs for the children. The wife also borrowed $50,248 from her brother which was applied in full to legal costs. Given the wife’s lack of regular income since separation, the Federal Magistrate was satisfied her expenditure was reasonable and therefore determined to “add-back” only the $30,000 as a liability to be taken into account.
The wife’s miscellaneous debts: The wife claimed various liabilities, namely unpaid living expenses, which the Federal Magistrate was not prepared to take into account.
Sale of the wife’s shares: The wife claimed the husband sold shares in her name without her consent or any reference to her, causing her a loss of $46,317.04, which she sought to have added-back. It was the husband’s evidence that the sales were conducted upon the advice of his sharebroker and credited against money owed by the wife for the purchase of the shares. On the evidence the Federal Magistrate was not satisfied that the husband’s actions “were reckless, even if they were morally reprehensible”.
Bank accounts: Both parties’ bank accounts were excluded from the pool because they only had nominal values at the time of trial.
Credit cards: Both parties argued that their own credit card balances should be included as liabilities in the pool, but the wife argued the husband’s balance ought not to be included. The wife’s liability was $10,334 and the husband’s was $11,349. Given that the debts were accrued post separation and there was little evidence to explain the expenditure, the Federal Magistrate determined to exclude the balances.
Unexplained loan advance to the husband: In her written submissions the wife referred to a “Loan to the Trust in the name of [Mr Eaton]” drawn down and unaccounted for in the amount of about $90,000, and she sought that the amount be added-back on the basis that the husband’s expenditure was “extravagant”. Given the lack of evidence the Federal Magistrate found no basis to add the amount back to the pool.
His Honour then turned to the husband’s assertion that a “two pools” approach should be adopted for the second and third steps of the so-called four step property settlement process, with the P2 Company Pty Ltd shares being placed in a separate pool from the parties’ other property and superannuation. The husband argued that there was little market for the shares, that the value of the shares meant they constituted a “very significant proportion of the overall asset pool”, and that the shares came about substantially as a contribution from his family in contrast to the other assets and liabilities which were accumulated during the marriage. The husband relied on Coghlan and Coghlan (2005) FLC 93-220, however, the Federal Magistrate was of the view that that reliance was misplaced. His Honour referred to Norbis v Norbis (1986) 161 CLR 513 in finding the asset by asset approach was entirely permissible, but ultimately determined it was not desirable in this case because the parties’ relationship was of considerable length and both parties had made contributions to the shares.
Turning to the issue of contributions, the Federal Magistrate determined both parties’ initial direct financial contributions were minor and equal, although
his Honour acknowledged the husband brought with him the potential to acquire the shares in the Company and receive benefits from the Trust. Upon marriage, the wife also qualified as a member of a class of beneficiaries under the Trust.
His Honour found that during the marriage each party “worked hard in their respective capacities”, the husband’s primary role being that of income earner and the wife’s being that of homemaker and parent. Following separation both parties continued in their respective roles. Both during the marriage and post-separation the husband controlled the family finances. It was the husband’s evidence that he always kept the wife fully informed, however, the Federal Magistrate formed the impression the husband did not freely share the detail of his financial activities with the wife.
The husband also contended that his contributions to the relationship via the assistance given by the Trust (including through property acquisition, income and capital distributions) were significant, and overall his contributions ought to be assessed 75 per cent/25 per cent in his favour (even leaving aside the shares in the Company).
The Federal Magistrate considered the principles from Kessey and Kessey (1994) FLC 92-495 in relation to the treatment of gifts received by parties in the course of a relationship and found that the distributions of income and capital by the Trust were no more than gifts to both parties decided upon by the trustee pursuant to the terms of the Trust. As a result, his Honour said this at paragraph 104:
Accordingly, far from the Trust income and capital distributions being contributions by only [Mr Eaton], they are in fact contributions by both. [Ms Eaton’s] income contributions far outweigh those of [Mr Eaton’s] by nearly 5:1. [Mr Eaton’s] capital distributions outweigh those of [Ms Eaton], but less so if the post separation distribution of $196,435 is disregarded.
During the marriage and until her passing, the husband’s step-mother, Ms B, paid the school fees for the parties’ children. It was the husband’s contention that those payments were a contribution made on his behalf, however, relying on AB and ZB (2003) FLC 93-140 the wife argued it was not a contribution made by the husband. The Federal Magistrate accepted the wife’s submission the parties would not have been able to afford the school fees and that the children would not have attended the schools they did if not for the gift from the husband’s step-mother and thus, his Honour determined to disregard the payment of school fees as a contribution by the husband.
In relation to the husband’s acquisition of shares in the P2 Company Pty Ltd, the Federal Magistrate accepted the husband had used funds borrowed from the Trust, his mother and Ms B, the latter of which were never repaid and were forgiven upon Ms B’s death. His Honour determined the forgiven loans and other gifts from Ms B should be seen as a contribution by the husband because without them the shares would not have been available to the parties. The Federal Magistrate then rejected the husband’s submission that neither party contributed to the acquisition, conservation or improvements of the shares.
Ultimately, the Federal Magistrate assessed the parties’ contribution based entitlements to be 60 per cent/40 per cent in favour of the husband.
Turning to future needs, the Federal Magistrate recorded that the wife was
54 years of age and suffering from Reactive Mixed Anxiety-Depression Disorder as a result of the marriage breakdown, which in turn affected her employment with Q. His Honour noted the wife had also worked as a teacher but that she was no longer registered and had not taught at all since 2003. The wife’s post separation income was between $288 and $495 per week, although it was $882 per week for the period of her contract with Q. His Honour determined the wife’s income earning capacity was likely to remain at about $495 per week for the foreseeable future.
The Federal Magistrate recorded the husband was also 54 years of age, had been the victim of a criminal assault, and had suffered from depression and stress as a result of the marriage breakdown, which in turn impacted upon his ability to perform his work with the Company (although the husband was confident his condition would improve after the proceedings were completed). The Federal Magistrate found the husband’s annual income was $72,000 along with bonuses of about $4,000.
In relation to the Trust, it was the husband’s submission that the future distributions available to him would be “moderate at best”. However, the Federal Magistrate found no evidence of what the actual distributions might be given that the future income of the Trust was unknown.
In relation to parenting, the Federal Magistrate noted the consent orders made at the commencement of the proceedings provided for the wife to continue as the primary carer for the parties’ youngest child, and that another two of the parties’ adult children lived with the wife. Despite some arrears accruing, the Federal Magistrate accepted the husband was likely to continue paying whatever child support was assessed for him to pay.
In essence, it was the husband’s contention there should be a 5 per cent adjustment in favour of the wife to take into account these factors, whilst the wife argued there should be a 20 per cent adjustment in her favour.
Ultimately, the Federal Magistrate determined to make a 15 per cent adjustment in favour of the wife. On this basis the husband would be entitled to 45 per cent of the net assets, namely $779,482.71, and the wife would be entitled to 55 per cent, namely $952,701.09. Thus, the husband would need to pay to the wife a cash adjustment of $368,700.
Finally, the Federal Magistrate turned to consider the issue of child support. The husband sought an order pursuant to s 117 of the Child Support (Assessment) Act 1989 (Cth) departing from an administrative assessment of child support made on 16 September 2009. His Honour referred to the three step process set out in Gyselman and Gyselman (1992) FLC 92-279 and found the Child Support Agency’s determination that the husband was entitled to
47.5 per cent of the profits from P2 Company Pty Ltd was “clearly wrong”. However, having regard to the evidence that a $196,000 trust distribution received by the husband in early 2009 had not been satisfactorily explained, the Federal Magistrate was not satisfied the husband had made out a ground of departure under s 117(2)(c). Thus, his Honour dismissed the husband’s application.
Ex tempore reasons for judgment delivered 15 February 2012
The Federal Magistrate commenced his reasons for judgment by outlining the factors the Court needed to consider when deciding whether to grant a stay. His Honour was satisfied the appeal was bona fide and that there was no delay in filing the Notice of Appeal. However, the Federal Magistrate declined to remark on the merits of the appeal as the Notice had only just been filed and because his Honour considered there was “a certain invidiousness about assessing the merits of a notice of appeal against one’s own decision”.
The gravamen of the husband’s submission was that there would be great prejudice to him if the orders were not stayed and that, if the orders were carried into effect, a successful appeal may be rendered nugatory. In particular, the husband submitted his financial circumstances were so poor that he simply could not comply with the terms of the orders and to make him do so would cause him hardship. The Federal Magistrate was not satisfied undue prejudice would be caused to the husband because one of the main issues in the case was the parties’ access to funds from the family trust and the husband had provided little evidence about his capacity to access financial assistance by way of the Trust or commercial lenders. His Honour did accept that the wife would suffer some hardship if the orders were stayed, although not to the extent submitted by the wife.
The Federal Magistrate was also of the view the appeal would not be rendered nugatory if the operation of the orders was not stayed. In particular, given the wife’s deposition that she would use any funds paid to her to reduce the mortgage on the M property, his Honour found that the M property would “always be available” and that there may be sufficient equity to reverse the impact of the orders if they were set aside on appeal. The husband also submitted it was “unreasonable” and “inequitable” to order him to remove caveats from the title to certain real property. However, the Federal Magistrate accepted the wife’s evidence that the presence of the caveats represented significant difficulty for her in terms of her complying with her obligations under the orders.
Ultimately, his Honour was not satisfied that he ought to exercise the discretion in favour of granting a stay and refused the husband’s application.
Orders made 17 January 2012 and 15 February 2012
The Federal Magistrate made the following orders on 17 January 2012:
1. The wife retain as her absolute property and the husband transfer to the wife all right, title and interest in and to the following property and financial resources:
a. [M Property] in the State of Queensland registered in the name of [Ms Eaton], more particularly described as Lot … (the [M] Property);
b. Her superannuation interest in [A];
c. Her superannuation interest with [Q];
d. The furniture and chattels in her possession save for the items referred to in 5(n)
2. The wife do all acts and things to transfer to the husband, the property situate at [O] in the State of Queensland registered in the name of [Ms Eaton], more particularly described as Lot … (the [O] Property).
3.Contemporaneously with the transfer of the [O] property, the husband and wife shall do all acts and things and sign all documents necessary for the husband to discharge, or refinance into his sole name, the mortgage to the Bank of Queensland registered over the [O] Property and any liability alleged to be owing to the [Mr G Eaton] Trust, so as to release the wife from all liability in relation thereto, and pending that release, the husband indemnify and keep indemnified the wife in respect of same.
4.Contemporaneously with the transfer of the [O] Property, the wife relinquish all right, claim and interest to all and any rental income received or received after that date from any source in relation to the [O] property, excluding arrears of rental income accrued to that date but receive subsequently, which shall remain the property of the wife.
5.The husband have sole right, title and interest in and to the following property and financial resources:
a. His shareholding in [P2] Company Pty Ltd;
b. His shareholding in [P1] Company Pty Ltd;
c.His shareholding in [Eaton] Nominees Pty Ltd;
d. His shareholding in [H] Pty Ltd;
e. His shareholdings in Westpac Banking Corporation;
f. any other shares held by him;
g. 1993 Mazda Utility motor vehicle registration number …;
h. 2006 Honda motor vehicle registration number …;
i. AXA policy;
j. His Superannuation interest with [A];
k. The furniture in his possession and:
I. Cedar dining table and five chairs;
II. 4 dining chairs;
III. Walnut clock;
IV. Silky oak glory box and seat lid;
V.Filing cabinet and papers;
VI.“d” cupboard;
VII.Tools;
VIII.Some clothes belonging to the husband;
IX.Timber shelving;
X.BBQ; and
XI.A piano stool
With such items to be made available by the wife for the husband’s collection contemporaneously with and conditional upon the cash payment referred to in order 7 hereof.
6.The husband and wife sign all documents and do all acts necessary to do the following with respect to [Eaton] Nominees Pty Ltd:
a.That the wife transfer, assign and novate to the husband or to his nominee any loan account in the name of the wife (whether solely or jointly with others) standing with a credit balance in the books of account of [Eaton] Nominees Pty Ltd and to give effect to same the wife deliver or cause to be delivered to the solicitors for the husband Contemporaneously with the transfer of the [O] Property an executed Deed of Assignment relating to the transfer and assignment of the said loan accounts;
b.That the husband forthwith be responsible for and meet payment when due of any loan accounts in the name of the wife (whether solely or jointly with others) standing with a debit balance in the books of account of [Eaton] Nominees Pty Ltd and the husband indemnify and keep indemnified the wife from all liability howsoever arising therein;
c.That the husband forthwith be responsible for and meet payment when due, of any loan in the name of the husband (whether solely or jointly with others) standing with a debit balance in the books of account of [Eaton] Nominees Pty Ltd and the husband indemnify and keep indemnified the wife from all liability howsoever arising therein;
d.The wife relinquish all claim to the assets and income of [Eaton] Nominees Pty Ltd.
7.The husband pay to the wife the sum of $368,700.
8.The payment refereed [sic] in order 7 be paid within thirty (30) days of the date of these orders and contemporaneously with the transfer of the [O] Property in paragraph 2 and failing payment, interest accrue at the rate prescribed in the Federal Magistrates Courts [sic] Rules 2001.
9.The husband cause [Eaton] Nominees Pty Ltd to do all acts and sign all documents necessary to release caveat number … registered over the [M] Property within fourteen (14) days of the date of these orders.
10.Except as otherwise provided in these orders, the wife shall be responsible for any credit card or personal liability in the wife’s name and indemnify the husband in respect of same, including the Bank of Queensland line of credit secured against the [M] Property.
11.Except as otherwise provided in these orders, the husband shall be responsible for any credit card or personal liability in the husband’s name and indemnify the wife in respect of same, including, but not limited to:
a.The loan, if any, owing by the parties to [Ms H];
b.Any loans owing to [Eaton] Nominees Pty Ltd including any loans allegedly owing by the wife to [Eaton] Nominees Pty Ltd whether in her sole name or jointly with the husband or any other person;
c.The loan form [sic] [L];
d.Any costs paid in respect of preparation of the family report by [Ms D];
e.Any child support agency arrears.
12.Each party do and procure the doing of all things and sign and procure the signing of all documents whether in their personal capacity or in their capacity as director, shareholder or other office holder necessary to give full force and effect to the provision of these orders and in default, a Deputy Registrar of this Court is appointed to sign such documents and do such acts necessary in lieu of the defaulting party whether in their personal capacity of [sic] in their capacity as director, shareholder or other office holder.
13.The transferee spouse prepare the documentation necessary to give effect to the provision of these orders at their cost and further be responsible for the payment of registration fees in relation to the transfer of the property to the name.
14.Any duty levied pursuant to Duties Act 2001 (QLD) payable on transactions arising from these orders or any document executed pursuant to these orders be paid by the transferee spouse of the spouse receiving the benefit of same.
15.The parties promptly comply with the requirement of the Duties act and associated legislation and all requisitions issued by the Office of State Revenue in relation to any document executed or transaction pursuant to or putting into effect the terms and conditions of this order.
16.The husbands’ [sic] application for a child support departure order be dismissed.
The husband appeals against Orders 1 to 15 inclusive, and seeks leave to appeal against Order 16.
In her cross-appeal the wife appeals against Orders 6 and 7.
On 15 February 2012 the Federal Magistrate made an order dismissing the husband’s application filed on 1 February 2012, seeking a stay of the orders made on 17 January 2012. As referred to above the husband separately appeals against that order. However, at the commencement of the hearing before us the husband’s senior counsel conceded that this appeal was “stale”, but indicated that the husband wished to press it in relation to the issue of child support. We will return to this later in these reasons.
Grounds of appeal
The grounds of appeal as contained in the Amended Notice of Appeal
against the orders for property settlement (NA 13/2012) filed by the husband on 10 April 2012 are as follows:
1.Federal Magistrate Jarrett (“the magistrate”) having correctly found:
(a)that the appellant’s holding of 3392 shares in [P2 Company Pty Ltd (“[P2]”) does not permit him to control that company (paragraph 20 of the reasons);
(b)that there is no market for the appellant’s shareholding in [P2] (paragraph 33 of the reasons); and
(c)that the last sale of shares in [P2] occurred on 23 November 2009 when out of a parcel of 280 shares which were offered for sale at $187 per share only 183 were sold, leaving 97 unsold (paragraph 32 of the reasons)
the magistrate erred in finding (in paragraph 44 of his reasons) that the appellant’s shareholding in [P2] had a value of $230.65 per share or $782,364.80 in aggregate in that such finding incorrectly presupposes that that shareholding is realisable forthwith in whole for that aggregate value.
2. The magistrate erred in finding that the aggregate value of the parties’ net assets (including superannuation) was $1,732,183.80 (in paragraph 11 of the reasons) when on a proper assessment of the evidence that value was $1,405,000 or thereabouts.
3.The magistrate’s decision that the respondent should retain the assets referred to in paragraph 147 of the reasons together with a payment by the appellant to her of $368,700 has the effect of providing her with a settlement of property representing approximately 74% of the parties’ net assets which is beyond the scope of any reasonable exercise of discretion and is manifestly unjust and inequitable.
4.The magistrate erred in making orders 2, 3 and 7 requiring the appellant to take title to the property known as and located at
[O] (“the [O] property”) to discharge the mortgage registered on the title to that property and held by Bank of Queensland Ltd (“BoQ”) (which mortgage secures the repayment of an amount in the vicinity of $365,000 plus interest and legal costs), to repay all money owing by the respondent to [Eaton] Nominees Pty Ltd (“the trustee”) as the trustee of the [Mr G Eaton] Trust (“the trust”) and to pay $368,700 to the wife within 30 days, in view of the following:(a)in order for the appellant to comply with those orders it would be necessary for him to negotiate and complete immediate sales of the [O] property and most or all of his shareholding in [P2];
(b)in making orders 2 and 3, the magistrate failed to take into consideration:
· the fact that any such immediate sale of the [O] property by the appellant is practically impossible as BoQ is either entitled to possession or in possession of that property as mortgagee;
· the liability which the appellant would incur for selling costs and capital gains tax; and
· the fact that the respondent has failed to apply rental received by her from the occupier of the [O] property to the reduction of the debt due to BoQ;
(c)any immediate sale by the appellant of all or most of his shareholding in [P2], if at all possible (which is most unlikely), could only be accomplished, in light of the facts recorded in paragraph 32 of the reasons, at a price per share significantly less that $187; and
(d)insofar as those orders were formulated to give effect to a division of the property of the parties in the proportions of 45% to the appellant and 55% to the respondent, in light of the foregoing, they demonstrably do not do so.
5. The magistrate erred in refusing to grant leave to the appellant to reopen his case so as to adduce evidence of the matters set out in his affidavit of 30 November 2011.
6.The magistrate erred in failing to take into consideration the matters set out in the appellant’s affidavit of 30 November 2011.
7.The magistrate erred in concluding that the appellant should bear the respondent’s increasing liability to BoQ as the mortgagee of the [O] property following her default under that mortgage.
8.Having correctly accepted (in paragraph 54 of the reasons) the appellant’s submissions that payments made by [Eaton] Nominees Pty Ltd as trustee of the trust were loans, the magistrate erred in concluding (in paragraph 56) that “the balance of account indicates that the parties owe [Eaton] Nominees $292,610” and in failing to find, having regard to the undisputed facts set out in paragraph 53 of the reasons that (appropriating the joint loan of $240,000 made by the parties for [the S property] equally between them):
(a)the appellant is severally indebted to the trustee for $753; and
(b)the respondent is severally indebted to the trustee for $291,857.
9.The magistrate erred in finding (in paragraph 79 of his reasons) that the appellant’s conduct in causing certain shares owned by the respondent to be sold was “morally reprehensible” in that in making that finding, which was significantly prejudicial to the maintenance by the appellant of good relations with his children, the magistrate failed to take into consideration the appellant’s evidence that the shares were not sold at a loss and that they were sold urgently on the advice of a stockbroker following the collapse of Lehman Brothers in September 2008 in order to reduce the respondent’s highly geared borrowings and in relation to the shares and, further, failed to give any, or any proper, reasons for that finding.
10. The magistrate erred in concluding, in light of the matters written in paragraphs 57-63 of the reasons that the appellant’s share portfolio should be brought to account as an asset worth $114,952 notwithstanding the evidence given by the appellant in paragraph 139 of his affidavit of 5 May 2010 and in oral evidence on 3 and 4 February 2011.
11.The magistrate erred in finding, in paragraph 91 of the reasons, that both of the parties contributed to the appellant’s shares in [P2] when the undisputed evidence in paragraph 142 of the appellant’s affidavit of 5 May 2010 was that he acquired 3116 of those shares with money lent to him by his father, his mother, his stepmother and the trustee of the trust and, as to 276, under his father’s will.
12.The magistrate erred in finding (in paragraph 112 of the reasons) that because the outstanding balance of loans borrowed by the appellant to purchase the shares in [P2], $91,557, was owed to the trustee of the trust and that because the net balance of money lent by the trustee “is brought to account in these proceedings” the parties contributed to the acquisition of the [P2] shares “to that extent”.
13.The magistrate’s findings (in paragraph 113 of the reasons) concerning the late [Ms B’s] forgiveness of the repayment of a debt of $400,000 owed to her by the trustee of the trust were made in disregard of the appellant’s evidence of her forgiveness of debt of $553,241 in paragraphs 96-101 of his affidavit of 5 May 2010 which evidence was not the subject of challenge.
APPLICATION FOR LEAVE TO APPEAL
14.That the applicant be granted leave to appeal the order of the Magistrate wherein the Magistrate dismissed the applicant’s application for a child support departure order and on the grounds that the magistrate erred in dismissing the appellant’s application for an order under section 117 of the Child Support Assessment Act 1989 departing from an administrative assessment of child support in the terms claimed in paragraph 17-19 of his amended response filed on 13 October 2009 by:
(a) failing to provide any, or adequate, reasons for that decision; and
(b)having regard to the magistrate’s findings (in paragraphs 157 of the reasons) in failing to give any, or any proper, consideration to the facts and matters set out in paragraphs 177-214 of the appellant’s submissions dated 31 March 2011.
At the hearing of the appeal senior counsel for the husband sought leave nunc pro tunc to appeal against the order of the Federal Magistrate made on
22 December 2011 dismissing the husband’s application in a case filed on
30 November 2011 seeking an order that the trial be reopened in order to adduce further evidence. The respondent consented to leave being granted and we then granted that leave. The grounds of appeal relied on by the husband in appealing the order made on 22 December 2011 are Grounds 5 and 6 set out above in paragraph 60.
During the hearing the husband also sought leave to amend the Amended Notice of Appeal to seek the following order:
5A.That pursuant to S111C(3) of the Child Support (Registration & Collection) Act 1988 (the CS (R&C) until determination of the rehearing of the matter and final relief in the form of departure orders sought by the appellant father in these proceedings being the proceeding commenced in the Federal Magistrate Court on 17 June 2009 numbered BRC 5228/2009 or earlier order:
(a) that the assessment and collection of child support to be paid by the father [Mr Eaton] in respect of [Y Eaton] (dob …) and [Z Eaton] (dob …) for the period of 10 February 2009 to
31 December 2010 be stayed until the rehearing and final orders in these proceedings(b)that any actions or steps taken or that could be taken pursuant to the provisions of the Child Support (Assessment) Act or the CS (R&C) Act to recover the payment (including any arrears and/or penalties or interest relating to the payment of child support owed or owing by the appellant [Mr Eaton] as at the date of these orders or subsequent hereto for the assessment period of 10.2.09 to 31.12.10 be stayed until determination of the rehearing of the matter and final relief
This application was opposed.
Although there was substantial confusion in the husband’s case as to the basis for seeking this order, and whether this Court was able to make such an order, the husband’s senior counsel indicated that this order could only be pressed if leave to appeal against Order 16 was granted, and the appeal against that order was successful. As will be seen, later in these reasons we find no merit in this ground of appeal.
The grounds of appeal as contained in the Notice of Cross-Appeal
against the orders for property settlement (NA 13/2012) filed by the wife on
29 February 2012 are as follows:
1.The Learned Magistrate erred in finding (paragraph 44 of the reasons) the value of the husband’s shares in [P2] is $782,364.80 after applying a discount of 35% to the value because:
a.He rejected the view of Mr [P] that a 46% discount should apply (paragraph 34(c) and 43);
b.Mr [M] held the view that a discount of between 10% and 30% should apply;
c.In the absence of other evidence, it was not open to the court to apply a discount of greater than 30%;
d.Each share should have been valued at $248,38 for a total value of $842,509.96 for the 3,392 shares.
2. The Learned Magistrate erred in failing to find [Mr Eaton’s] acts in selling [Ms Eaton’s] shares were reckless and therefore failing to add the lost value back to the pool of assets (paragraphs 78 and 79);
a. [Mr Eaton] did not provide evidence of any advice he received to sell the shares;
b. He failed to consult with [Ms Eaton] about the sale of the shares;
c. The sale incurred a loss of $46,317.04;
d. The amount of the loss should be added back to the pool of assets.
3. The Learned Magistrate erred in failing to find [Mr Eaton’s] expenditure of $90,000 as extravagant because:
a. [Mr Eaton] bore the onus to explain the uses to which he put the funds;
b.He provided no evidence as to their use;
c.On the face of the evidence the expenditure of so much in a short time is extravagant;
d.This is particularly so considering he had received a $196,000 distribution from the trust (paragraph 132);
e.The amount should be added back to the pool.
4.The Learned Magistrate erred in finding the contributions of the parties pursuant to s79(4) of the Act were 60% for the husband and 40% for the wife (paragraphs 114 and 115) because the Learned Magistrate:
a. placed undue weight on the assistance from [Ms B] to purchase the [P2] Shares particularly when the loan was quite modest at $68,359 or 42% of the cost;
b. failed to recognise that 58% of the loan amount remains and is therefore a joint liability;
c.therefore failed to place weight on the fact that 58% of the contribution to the purchase of the [P2] Shares was a joint contribution;
d.failure to give weight to unpaid work she performed for [P2];
e.failed to give weight to the fact that the wife worked and also had primary responsibility for the family;
f.in light of that the contributions should have been assessed at 50/50.
5. The Net Assets should have been valued at $1,928,641.
a. The wife’s share of 50% would be $964,320.50;
b.A 15% adjustment of $289,296.15 would entitle the wife to $1,253,616.65;
c.A cash payment of $612,760.65 should be paid by the husband to the wife.
In her Notice of Cross-Appeal (NA 13/2012) filed on 29 February 2012 the wife seeks that the orders made by the Federal Magistrate on 17 January 2012 be set aside and that the Full Court re-exercise the discretion, or in the alternative that the matter be remitted for rehearing before a Federal Magistrate other than Jarrett FM. In the event the Full Court is prepared to re-exercise the discretion, the wife sought that Orders 6 and 7 be varied as follows:
6.
a. That the Husband, both personally and in his capacity as director of [Eaton] Nominees Pty Ltd, cause proceeding [sic] initiated in the Supreme Court, Brisbane Registry, file number … to be discontinued;
b. That the Husband, in his capacity as director of [Eaton] Nominees Pty Ltd, be restrained from continuing or causing to be continued the proceedings initiated in the Supreme Court, Brisbane Registry, file number … or any similar proceedings;
c.That the Husband, both personally and in his capacity as director of [Eaton] Nominees Pty Ltd indemnify the Wife in relation to all costs, claims, actions and demands, howsoever incurred, in respect of the proceedings initiated in the Supreme Court, Brisbane Registry, file number …, including but not limited to any costs incurred by the Wife due to the Husband’s failure to comply with these orders.
7.The husband pay to the wife the sum of $612,760.65.
At the hearing of the appeal and cross-appeal the wife’s counsel indicated that the wife no longer sought any variation to Order 6.
The grounds of appeal as contained in the Notice of Appeal against the order refusing to stay the property settlement and child support orders (NA 19/2012) filed by the husband on 14 March 2012 are as follows:
His Honour Federal Magistrate Jarrett erred in failing to grant the Application for a Stay of his Honour’s orders in that his Honour:-
1. Failed to expressly find that the Appellant (Husband) had a prima facie case on Appeal given the Notice of Appeal filed and the Grounds referred to therein;
2.Failed to take into account the relevant consideration of the actual net salary paid to the Husband in concluding that he could borrow monies to satisfy the payment of the amount ordered to be paid to the Respondent (the Wife) pursuant to his Honour’s Orders;
3.Erroneously found by necessary inference that the Husband could borrow the sum (or part thereof) ordered to be paid to the Wife pursuant to his Honour’s Orders from [Eaton] Nominees Pty Ltd as trustee for the [Mr G Eaton] Family Trust.
4.Erroneously found by necessary inference that the Husband could borrow the monies ordered to be paid pursuant to his Honour’s orders from [Eaton] Nominees Ptd Ltd as Trustee in circumstances where the Husband as Director of the Trustee owed duties pursuant to the Trusts Act (Qld) to act in the interests of all beneficiaries and those beneficiaries had not consented to his depleting the assets of the Trust to the exclusion of the other beneficiaries by way of unsecured loans to the Husband or associated indemnities by the Husband.
5.Failed to give the Husband an opportunity to make submissions in respect of His Honour’s calculation of the cash adjustment prior to the orders for payment;
6.Failed to take into account the relevant consideration that there was little or no prejudice to the Wife in granting the Stay given that she had possession of the [M] marital property rent free, was in receipt of child support in the sum of about $1,700 per month; is in receipt of the full gross rental income of about $2,000 per month from the [O] investment property (until the resolution of the appeal or the property is sold whichever is the earlier); is in receipt of dividends from the shares held in her name, is in receipt of the capital proceeds of such shares in her name from the sale of such shares from time to time; has the capacity to earn income of at least $2,125 per month;
7.Failed to take into account the relevant consideration that there was considerable prejudice to the Husband in not granting the stay.
8.Failed to take into account the relevant consideration that the Order that the Husband pay the arrears and penalties assessed for child support (for the period of 8.2.2009 to 31.12.10) and to continue to pay Child Support at the assessed rate would deprive him of the capacity to borrow from a commercial lender or service any loan debt to satisfy the judgment orders;
9.Failed to take into account the relevant consideration that the Bank of Queensland as mortgagee of the [O] property (registered in the sole name of the wife) had commenced Supreme Court proceedings for the recovery of possession of the property for sale and therefore the Husband had/has no authority nor ability to comply with any Orders relating to the [O] property prior to determination of the Appeal.
10.The Husband respectfully reserves his right to amend these grounds upon receipt of the transcript of his Honour’s Reasons for Judgment given orally but not available within the Appeal period.
In his Notice of Appeal (NA 19/2012) filed on 14 March 2012 the husband seeks that the orders made by the Federal Magistrate on 17 January 2012 be stayed.
In his written submissions the husband indicated that Grounds 1 and 10 were no longer relied upon.
Application in an appeal to lead further evidence
At the hearing of the appeal the husband tendered an application seeking leave to file out of time an application to adduce further evidence. Although that application for leave was initially opposed, such opposition was not pressed, and we gave leave for the application to adduce further evidence to be filed.
In relation to the application to adduce further evidence, we heard argument and reserved our decision on the basis that we would incorporate our reasons for judgment in relation to that application in these reasons for judgment.
The evidence sought to be adduced covered three topics, namely:
a)The foreshadowed mortgagee sale of the property at O registered in the name of the wife.
b)The wife’s application for provision from her deceased mother’s estate.
c)A claim for arrears of child support.
We need to explain that earlier aspects of this further evidence were also the subject of the application in a case filed by the husband on 30 November 2011 seeking leave of the Federal Magistrate to reopen the hearing of the matter to enable the husband to adduce this evidence. To repeat, on 22 December 2011 the Federal Magistrate dismissed that application.
That decision by the Federal Magistrate, as can be seen from the grounds of appeal, was the subject of Grounds 5 and 6 of the Amended Notice of Appeal which is now before us. As we have recorded earlier in these reasons, during the hearing the husband’s senior counsel sought, and by consent, obtained our leave nunc pro tunc to appeal against the order of 22 December 2011.
To return to the application for leave to adduce further evidence, we next need to record that despite the initial opposition to the application, during the hearing the wife through her counsel agreed to the evidence as to the wife’s provision from her mother’s estate being before us, and subject to proper evidence in the form of a settlement statement being provided to us, the opposition dissolved to us receiving the evidence of the mortgagee sale of the O property. However, as subsequently became apparent, those concessions were limited to us receiving that evidence only in the event the appeal was successful, and we determined to re-exercise the discretion. The wife’s counsel put to us that we could not receive that evidence for the purpose of demonstrating any error by the Federal Magistrate because the evidence related to events that occurred after the Federal Magistrate made his order.
We reject that submission by the wife’s counsel. The circumstance of when the evidence arose is just one of many factors that need to be taken into account in determining an application for leave to adduce further evidence.
Section 93A(2) of the Family Law Act 1975 (Cth) (“the Act”) permits the court to receive further evidence on questions of fact, and the principles governing the admission of further evidence are well settled by the High Court. In CDJ v VAJ (1998) 197 CLR 172 McHugh, Gummow and Callinan JJ said this:
109One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.
…
111… Nor can the availability of further evidence relevant to the issues in the appeal be treated as equivalent to a ground of appeal, proof of which prima facie entitles the appellant to a new trial. The power to admit the further evidence exists to serve the demands of justice. Ordinarily, where it is alleged that the admission of new evidence requires a new trial, justice will not be served unless the Full Court is satisfied that the further evidence would have produced a different result if it had been available at the trial. Without that condition being satisfied, it could seldom, if ever, be in the interests of justice to deprive the respondent of the benefit of the orders made by the trial judge and put that person to the expense, inconvenience and worry of a new trial.
…
Here, the two categories of further evidence referred to above are sought to be adduced to establish error by the Federal Magistrate, at the very least by refusing to reopen the hearing. We consider that the interests of justice demand that this evidence be admitted in determining whether error by the Federal Magistrate can be demonstrated, particularly in relation to the dismissal of the application to reopen the hearing.
That leaves the evidence of the arrears of child support. There was substantial confusion about this evidence and the basis on which it was sought to be presented. Apart from the fact that it was said to be controversial, there was a real question as to the relevance of the evidence to the husband’s appeal. When asked this question the response of the husband’s senior counsel was that whereas the arrears at the time of the hearing before the Federal Magistrate were approximately $50,000, they had increased to approximately $200,000 apparently as a result of the Child Support Agency disregarding the Federal Magistrate’s finding that the assessments of child support by the Agency were wrong in attributing 47.5 per cent of the profits of the Company to the husband.
His Honour refused, correctly in our view, to include the arrears of child support in the liabilities to be taken into account in determining the net asset pool, and although the husband appeals against that decision by the Federal Magistrate, as will become apparent later in these reasons, such a complaint has no merit. Thus, to now be told that the arrears have increased to approximately $200,000 does not indicate any error by the Federal Magistrate. Further, we were told by both counsel that the husband had filed an appeal against a decision of the Social Security Appeals Tribunal in relation to subsequent assessments by the Child Support Agency in effect relying on the attribution of 47.5 per cent of the profits of the Company to the husband. That appeal was listed for hearing in the Federal Magistrates Court in December 2012. For our part, that is the appropriate forum for that issue to be aired, and it is not something that is either before us or in respect of which we have any jurisdiction.
In these circumstances we find that there is no basis for this further evidence to be adduced and we propose to dismiss the application to that extent.
By way of final comment though, during the hearing the husband’s senior counsel indicated that the further evidence sought to be adduced in relation to child support, went to the application for a stay referred to in paragraph 62 above, rather than to the appeal. We have no difficulty with this submission, but insofar as the stay application is concerned, that has its own difficulties, namely, we have serious concerns as to whether we are able to make the orders sought, and even if we can, the Child Support Agency must be given the opportunity to be heard, and in any event it is apparent that it is more appropriate for that application to be made to the Federal Circuit Court than to this Court. Thus, to attach the further evidence to the stay application still does not render it admissible.
Accordingly, we allow the application in so far as the first two categories of evidence are concerned, but dismiss the application in so far as it seeks to adduce evidence of child support arrears.
In order to clarify the evidence which is before us in relation to the first of the two categories to be received, we explain that following the hearing of the appeal, the husband’s solicitor forwarded to the Appeal Registrar a copy of the settlement statement in relation to the sale of the O property. That settlement statement was issued by lawyers acting on behalf of the mortgagee in possession and was in the following terms:
SETTLEMENT STATEMENT
Settlement as at 07 September 2012 at 2:30 pm
At HWL Ebsworth, Level 23, 123 Eagle Street, Brisbane
Adjustment as at 07 September 2012
Bank of Queensland Limited as mortgagee exercising power of sale to
[Mr W] and [Ms P]
[The O Property]
| Amount ($) | |
| CONTRACT PRICE | 507,000.00 |
BALANCE ON SETTLEMENT $456,217.76
| Payee | Amount ($) |
| 1. Bank of Queensland Limited | 387,650.61 |
TOTAL $456,217.76
The important figures emerging from that settlement statement are the sale price of $507,000 compared to the amount of $670,000 utilised by his Honour, and the payout figure for the mortgage of $380,650.61 compared to the figure of $347,565 also utilised by his Honour.
In relation to the second category, the specific evidence is that on 17 July 2012 an agreement was struck providing for the wife to receive the sum of $184,000 from her deceased mother’s estate. According to the agreement that money was payable to the wife on 7 September 2012 or within 14 days of the date of court orders to give effect to the agreement.
Discussion
The husband’s appeal against orders made 17 January 2012
Although in his oral submissions the husband’s senior counsel initially grouped the grounds of appeal into three categories, he then proceeded to address them in a different order. We propose to address the grounds of appeal seriatim, but for reasons which will shortly become apparent, we will address Grounds 5 and 6 first.
Grounds 5 and 6
By Ground 5 the husband complains that the Federal Magistrate erred in refusing to reopen the hearing to receive further evidence from him, and by Ground 6 he complains that the Federal Magistrate failed to take into consideration the evidence that was sought to be led (in the husband’s affidavit filed on 30 November 2012). It is difficult to see how Ground 6 can succeed by itself given that the reason why his Honour did not take into consideration the evidence in the husband’s affidavit was his refusal to reopen the hearing, and if he was correct in that decision, he was also correct in not taking the evidence into account. Thus, the challenge can realistically only centre upon Ground 5, but, of course, to properly consider that ground the actual evidence sought to be led is highly relevant.
In his reasons for judgment delivered on 22 December 2011 the Federal Magistrate expressed his concern at the timing of the application to reopen, namely, just before his Honour had indicated that he would be delivering judgment, and the husband’s delay in raising the issue, namely, approximately six months after final submissions had been made. However, it is apparent that the primary reason for his Honour refusing to reopen the hearing was because he perceived that the evidence would be “of very little value in any event”.
As to the prospect of a mortgagee sale his Honour said this at paragraph 14:
I am not prepared to assume that there is a falling real estate market as the husband tends to assert in his affidavit. Nor am I prepared to assume that just because a mortgagee is going to sell the parties’ property or is taking proceedings to sell the parties’ property that it will necessarily mean that the property will be sold for a value which is less than that already in evidence for that property. It is simply nothing more than a realisation of an asset. It may well be that the amount owed to the financier, is more than the amount demonstrated by the evidence at the trial, but the orders can accommodate that in any event.
As to the wife’s claim against her deceased mother’s estate, his Honour said this at paragraph 15:
I am not satisfied that the evidence with respect to the family provision application will be of any particular assistance in this case. Both parties agree that having regard to what was said at the Bar table earlier this week, that the wife is in the process of making a family provision application. That is a matter that can be taken into account under s.75(2)(o) of the Act in any event.
Given what we have said in relation to the child support arrears we do not need to consider the reasons for his Honour’s view that the evidence as to this issue would be of little value. Indeed, as would now be apparent, we agree with
his Honour in that regard.
However, we find that we cannot agree with his Honour’s conclusion as to the value of the other two categories of further evidence, and we consider that
his Honour erred in failing to reopen the hearing to receive that evidence.
It may be seen to be trite, but it must be remembered that the application was made before his Honour delivered his reasons for judgment, and although it is not known how this evidence might have impacted on his Honour’s decision, it is relevant to assess the importance or otherwise of this evidence given the respective cases of the parties at trial and upon which his Honour was required to deliberate.
As to the O property, that was registered in the wife’s name, it was subject to a mortgage, and it was rented out. The wife was seeking that property be transferred to the husband and that the husband be responsible for the mortgage. The husband though sought that that property be sold and, from the proceeds of sale, the costs of sale and the mortgage be paid out and the balance be divided between the parties.
Now of course, if his Honour’s ultimate decision was to be that the property be sold then the prospect of a mortgagee sale might not have been of great moment, and what his Honour said in the first part of paragraph 14 of his reasons for judgment would have been correct, but in our view it would clearly be otherwise if his Honour were to order that the property be transferred to the husband at the value agreed upon at the hearing, and that the husband be responsible for the mortgage. In that event what his Honour said in paragraph 14 completely misses the point.
Thus, that evidence was clearly vital to how his Honour determined the dispute as to the fate of the O property, and the evidence of the outcome of the mortgagee sale bears that out.
It is also instructive to dwell on his Honour’s comment in the last sentence of paragraph 14 of his reasons for judgment, namely that “the orders can accommodate that [if the amount owed is more than the evidence at trial indicates] in any event”. As can be seen, in the orders that his Honour in fact made, nowhere did his Honour “accommodate” that possibility.
As to the wife’s claim against her deceased mother’s estate, there was some evidence led at trial which bore upon that, namely, that the mother had passed away, although apparently the wife was initially unaware of that, and that according to the Will the majority of the estate was to go to others. The issue though at the time of the application was that the wife had commenced proceedings for family provision in the District Court of Queensland, and we again consider that it was highly relevant to his Honour’s determination that evidence be led about what the wife might receive because undoubtedly that would be at best an asset and at worst a resource that his Honour would have to take into account under s 75(2)(b) of the Act. Again this is amply borne out by the further evidence.
We note that in paragraph 15 of his Honour’s reasons for judgment he suggested that the foreshadowed family provision application could be taken into account under s 75(2)(o) of the Act (as opposed to paragraph (b)).
His Honour, when addressing the s 75(2) factors did refer to this issue, but only to record the submissions of the husband, and without indicating that he proposed to take this issue into account.
It is for these reasons that we find that his Honour erred in dismissing the application to reopen, and given the nature of the evidence that was sought to be led it is not possible to find that it would have made no difference to
his Honour’s determination. Accordingly, for this reason alone the appeal must be allowed and his Honour’s orders as to property settlement either set aside and a new trial ordered or reconsidered by us on a redetermination of the proceedings.
Despite that conclusion, we still consider it necessary to address the remaining grounds of appeal, and in any event we still need to address Ground 14.
Ground 1
The complaint here is that his Honour erred in finding that the husband’s shares in P2 Company Pty Ltd had a value of $230.65 per share and that they were realisable at that figure.
His Honour had the evidence of two expert witnesses, Mr M called by the wife and Mr P called by the husband.
There was ultimately no dispute on the evidence as between the expert witnesses as to the value of the net assets of the Company, namely $2,662,905. Thus, prima facie, each of the 7,403 issued shares had a value of $354.84. However, the significant issues in valuing the husband’s shares were the fact that the husband held a minority interest (3,392 shares out of 7,403 ordinary shares) and there were restrictive provisions as to the sale of shares contained in the Articles of Association.
Mr M, in valuing the shares, adopted a net asset approach and then applied a discount to take account of the husband’s minority interest and the restrictions on sale. He suggested a range of discount of 10 to 30 per cent, leaving it to the Court to fix on the appropriate percentage.
Mr P on the other hand, relied upon historical sales of shares in the Company and in particular the last sale which was at $187 per share. That equated to a discount of around 50 per cent on the net asset base value of the share.
His Honour was not satisfied that there was a market for the shares “beyond existing shareholders”. There are nine other shareholders spread across three family groups.
In these circumstances his Honour found that the appropriate methodology was to “fix a price per share according to the net assets of the company” and then to apply a discount to take account of the nature of the husband’s shareholding.
After taking into account all of the relevant factors that bear upon what discount to apply his Honour determined that it should be 35 per cent of the asset based value of the shares. Those relevant factors were identified by
his Honour in paragraph 42 of his reasons for judgment as follows:
In my view, the factors which impact upon the discount to be applied to the asset derived value of the shares are:
a)that [Mr Eaton] does not hold a controlling number of shares, either directly or indirectly;
b)that [Mr Eaton’s] single or combined shareholding on an ordinary vote or poll does not provide him with authority to pass an ordinary resolution of the company, or authority to pass a special resolution;
c)that [Mr Eaton] has no authority or power to overrule any decisions of the directors (of which he is but one of three) relating to share transfers, dividend declarations or any other matters;
d)the company is controlled by its three permanent directors who cannot be removed by an ordinary vote of shareholders. Even a special resolution comprising 75% or more of the shares of members present or by proxy cannot remove the permanent directors;
e)the board of directors cooperate in the making of resolutions, the company being run for the benefit of the three families and their descendants; and
f)that no dividends have been declared by the company for the past three years at least and have only been declared infrequently prior to that.
We can find no error in the approach that his Honour took in valuing the husband’s shares. However, it is then said by the husband that the real error by his Honour is that his finding “presupposes that the shareholding is realisable forthwith in whole for that value”. In other words, although on a theoretical valuation of the shares, a value of $230.65 per share may be justified, if the shares were to be retained by the husband, it cannot be said that he could immediately sell all of the shares at that figure.
The point of these submissions arises in Ground 4, namely that realistically for the husband to be able to comply with Orders 2, 3 and 7 made by his Honour, not only would there need to be an immediate sale of the O property at its previously agreed value without allowing for the costs of sale, but also an immediate sale of all of the husband’s shares in the Company at at least $147.40 per share. On the evidence it is said that neither of these outcomes were possible, and concentrating on the shares, it is said that that is clear from the evidence of the historical sale of shares in the Company.
We also find nothing inconsistent with his Honour’s acceptance that if there was the evidence available of the interest that would be payable on the open market, the husband should receive credit for the fact that the Trust provided the financial circumstances to enable the husband to purchase the shares.
We find no merit in this ground of appeal.
Ground 13
We had some difficulty in understanding the complaint that was sought to be made here. However, it was clarified in the husband’s written submissions. Put simply, the first error his Honour allegedly made was to only identify loans totalling $400,000 owed by the Trust which were forgiven by the husband’s stepmother, whereas the loans forgiven totalled $553,241. Pausing there, it seems that his Honour did make that error, however it is the next error which is the relevant one for the purposes of the appeal. It is said that his Honour erred in failing to recognise that if these loans had not been forgiven and had been called up, the Trust would not have had the funds to lend to the parties, including in particular the amount of $405,000 to purchase the property at M. Thus, the husband claims, the forgiveness of the loans should have been taken into account as “an indirect contribution by him to the acquisition of the [M] property”.
His Honour dealt with this submission in paragraph 113 of his reasons for judgment as follows:
Further, [Mr Eaton] argues that prior to her death [Ms B] forgave a loan (that she had accumulated in various ways) owed by the Trust to her in the sum of about $400,000. [Mr Eaton] argues that the forgiveness of that loan to the Trust should be seen as a contribution made on his behalf to the conservation, acquisition and improvement of the parties’ property because it “permitted the retention of the (about) $400,000 loan monies for the [O] property by the wife”. However, I reject that submission because the evidence does not establish as much. I accept that the loan was forgiven and that the Trust benefitted from that, but it is difficult to understand, in the absence of clear evidence as to the option available to the parties, how that forgiveness contributed to the conservation, acquisition and improvement of the parties’ property.
We are not persuaded that his Honour erred in rejecting the submissions of the husband. The issue was that the evidence did not permit the conclusion to be drawn. In other words, there was no necessary link established that it was the forgiveness of the loans, whether they totalled $400,000 or $553,241, that allowed the parties to purchase the M property; it was too remote, and as
his Honour said, there was no evidence as to the options available to the parties to finance the purchase of the property.
Accordingly, we find no merit in this ground of appeal.
Ground 14
This ground relates to the issue of child support and thus the husband requires leave to appeal the order made by his Honour dismissing the husband’s application for a departure order (in s 102A of the Child Support (Assessment) Act 1989 (Cth)).
In support of the application for leave to appeal the husband relies solely on the ground of appeal, namely Ground 14, which he proposes to pursue in the event that leave is granted. In other words he has not presented any discrete factual basis for seeking that leave be granted.
Despite this being far from satisfactory in establishing a basis for leave to appeal being granted, and in particular whether there has been an error of principle or a substantial injustice (Rutherford and Rutherford (1991) FLC 92-255), we accept that the matters of principle raised by Ground 14 would justify a grant of leave to appeal. We also note that although the wife denies that the Federal Magistrate erred in the manner suggested in Ground 14, nothing specifically was put in opposition to the granting of leave.
On this basis we turn to the ground of appeal itself.
There are two aspects to the complaint; first it is said that his Honour failed to provide any or any adequate reasons for his decision, and secondly that in light of his Honour’s findings in paragraph 157 of his reasons for judgment,
his Honour failed to take into account the husband’s submissions at trial.
As to the first issue, we find no substance in that complaint. His Honour’s reasons are plain, namely, although the Child Support Agency was wrong in attributing 47.5 per cent of the profits of the Company to the husband merely as a result of his shareholding, and in imputing a dividend yield to his publicly listed shares beyond the actual dividends received, the fact of the husband receiving a distribution of $196,000 from the Trust in the relevant period, resulted in his Honour not being satisfied that the application of the Child Support (Assessment) Act 1989 (Cth) led to an unjust or an inequitable determination of the level of financial support to be provided by the husband for the children.
His Honour’s trail of reasoning to reach his conclusion is plain for all to see, and we find no merit in this aspect of the ground of appeal.
Turning to the second issue, unfortunately, that does not address the approach that his Honour adopted. The submissions made by the husband at trial were directed to the treatment by the Child Support Agency of his shareholding in the Company, and the implied dividend yield on his publicly listed shares. That submission understandably did not address the effect of the distribution of $196,000 to the husband by the Trust which played a determinative role in
his Honour’s decision. Thus, given that his Honour agreed with the submission of the husband at trial that the Child Support Agency erred in their treatment of his shareholding in the Company, and in applying an imputed dividend yield to his publicly listed shares, there is no error by his Honour in how he took into account the husband’s submissions at trial.
The issue of course is whether his Honour erred in how he took into account the Trust distribution of $196,000, and although that was not addressed in the ground of appeal, it was raised in the husband’s written submissions.
It seems that the husband’s complaint here is in effect the same as he raised in Ground 10. It is common ground that he did receive a trust distribution of $196,435 on 11 February 2009. That distribution comprised cash of $57,055 credited to his loan account in the Trust, and shares to the value of $139,380. After separation the husband sold large parcels of those shares, and it was the proceeds of those sales which his Honour notionally added-back to the pool of net assets to be distributed to the parties, and which was the subject of the husband’s complaint in Ground 10.
In any event, as in Ground 10 the husband complains that despite him providing in his affidavit material some detail of how the proceeds of the sales of the shares was spent, his Honour nevertheless found that the husband had failed to satisfactorily explain his use of the proceeds.
We have of course dealt with this complaint in addressing Ground 10, and we need not repeat what we said. In summary, we concluded that on the evidence it was open to his Honour to find that the husband had not satisfied the evidentiary onus that he had to explain his use of the share sale proceeds. Thus, we found no error by his Honour in saying this in paragraph 159 of his reasons for judgment:
The evidence reveals that [Mr Eaton] received a Trust distribution in early 2009 of about $196,000. Some of that was received as shares. What happened to that distribution has not been explained and is the source of dispute between the parties. The distribution was received in the relevant child support period.
Accordingly, it was clearly open to his Honour to take into account in the context of the husband’s application for a departure order the Trust distribution received by the husband.
In his oral submissions the husband’s senior counsel attempted to suggest that it was not open to his Honour to take into account the whole of the amount of $196,000. Because it was capital, “applying the practices of the Child Support Agency” he argued that only a small percentage of that amount could be attributed to the husband as income, and that amount was the only amount that could be taken into account. However, that argument is entirely misconceived. The notional attribution of a percentage of a capital amount to income has no relevance to the issue confronting his Honour. As his Honour said, in a slightly different, but still relevant context at paragraph 158:
… for the purposes of s.117(2)(c) of the Assessment Act, the inquiry is not limited to income. The reviewer must also take into account a party’s financial resources.
Accordingly, we find no merit in this ground of appeal.
Before leaving this ground though we observe that in his written submissions the husband said this:
The Magistrate failed to apply the principles established in Lennon & Lennon [2011] FamCA 571 and determined the assets, liabilities, resources, income and expenditure of the parties prior to considering and determining the application of the Child Support legislation.
We have not been able to find any relevant “principles” established in Lennon that the Federal Magistrate should have applied here.
The wife’s cross-appeal against orders made 17 January 2012
Ground 1
The challenge here is to his Honour finding that a discount rate of 35 per cent should be applied to the value of the husband’s shares because he holds a minority interest.
As we have explained already, there were two expert witnesses who gave evidence before his Honour, namely Mr M called by the wife and Mr P called by the husband. As recorded by his Honour, Mr M thought that an appropriate discount rate was between 10 and 30 per cent to take account of the restrictive nature of the Company’s Articles of Association, but “Mr [P] determined the share value at $187 per share and that a discount of about 46 % of the equitable value of the shares was reasonable having regard to the restrictive provisions the articles impose and from his knowledge of discounts in a range of 15 % to 40 % in companies with similar but not as restrictive circumstances.”
His Honour, in considering what discount rate to apply identified the relevant factors in paragraph 42 of his reasons for judgment (see paragraph 111 above).
His Honour then applied those factors and concluded as follows:
43.I conclude that the higher end of the range of discount contended for by Mr [M] is too little. It does not properly reflect the factors set out above. Nor do I think that the figure arrived at by Mr [P] is sound. I think that his opinion was influenced by the misunderstanding that he operated under concerning Article 85(c). His view, essentially, was that control of the company was vested in the directors and all shareholders rights were in abeyance whilst soever the permanent directors remained in office. That view was clearly erroneous.
44.In my view an appropriate discount to reflect the matters discussed above is 35% of the asset based value of the shares. That means that [Mr Eaton’s] shares should be seen as having a value of $230.65 per share – a total asset value of $782,364.80. I find accordingly.
In her written submissions, the wife suggests that his Honour erred by taking an approach disapproved of by the High Court in Commonwealth v Milledge (1953) 90 CLR 157, and by the Full Court of the Family Court in Lenehan and Lenehan (1987) FLC 91-814, namely by “[choosing] an arbitrary figure derived from the figures set out by the experts for the parties”. However, we do not accept that this is what his Honour did, and we find that his Honour carried out this task without infringing the principles emanating from those two cases.
In Commonwealth v Milledge, the High Court rejected the approach of the trial judge who when faced with six different valuations, adopted the average of those valuations. Instead the High Court held (at 161) that the approach
his Honour should have adopted was to make a “critical selection of the most helpful facts from the mass of information provided by the evidence, and [apply] correct principles in the light of the selected material”. Further, it was said (at 162) that the decision should be made “by a commonsense endeavour, after consideration of all the material before the court, to fix a sum satisfactory to the mind of the court as representing the value contained in the land.”
It is plain that here his Honour did not “average” the discount percentage;
his Honour considered the evidence and with the assistance of the expert evidence reached his own conclusion as to the discount to be applied. In other words, entirely in accord with what the High Court said he should do in Commonwealth v Milledge.
In Lenehan the Full Court found error in the trial judge’s approach of utlising a figure mid-way between the valuations provided by the two expert witnesses. Their Honours said this at 76,142;
It appears to us … that the approach of his Honour was in error. It was not suggested that the evidence before his Honour was unsatisfactory or incompetent; the problem was that his Honour was faced with a determination of an issue which may arise in many different ways. A trial Judge, as part of his ultimate responsibility under sec.79 or otherwise, is normally required to determine a number of issues. Some of those issues may properly attract the evidence of expert witnesses. In appropriate circumstances their opinions are admissible to assist in the determination of such an issue. It is the responsibility of a trial Judge to take into account the opinions of such witnesses; however the ultimate duty of the Judge is to determine the issue on the whole of the material before him including such opinions. The expert evidence is called to enable the Judge to form his own independent judgment on the matter by the application of the appropriate principles.
In a case such as this that responsibility is not performed by simply selecting a mean or average between the rival opinions of the experts.
Again, it is plain that here his Honour did not take the mid-point between the two opinions as to the appropriate discount to apply. His Honour discharged his responsibility to “determine the issue on the whole of the material before him including [the expert opinions].”
The wife also submits that it was not open to his Honour to fix a discount figure higher than Mr M’s. Although Mr M may have taken into account many if not all of the factors identified as relevant by his Honour in paragraph 42 of his reasons for judgment, it was for his Honour, on the basis of all of the evidence including the opinions of both experts, to arrive at his own determination of the appropriate discount. Just because they applied the same factors does not require the Federal Magistrate to arrive at the same conclusion.
We find no error by his Honour here.
Ground 2
The complaint here is that the Federal Magistrate should have notionally added-back to the asset pool the alleged loss of $46,317.04 resulting from the sale of the wife’s shares by the husband after separation.
It is useful to record in full the two paragraphs of his Honour’s reasons for judgment where he deals with this issue:
78.[Ms Eaton] feels justifiably aggrieved that in September, 2008 and after separation [Mr Eaton] sold shares standing in her name, without her consent and without any reference to her. She claims that the shares were sold recklessly and incurred a significant loss of $46,317.04. She asks that the sum of $46,317.04 be added back to the pool.
79.I decline to make that order, however. [Mr Eaton] gave evidence that the sales were conducted upon the advice of his share broker and that the sale proceeds were credited against money owed by [Ms Eaton] for the purchase of the shares. I am not satisfied on the scant evidence before me that the actions of [Mr Eaton] were reckless, even if they were morally reprehensible.
As can be seen from paragraph 79 of his reasons for judgment, his Honour was referring to the circumstance specifically contemplated by Baker J in the oft-quoted decision of Kowaliw and Kowaliw (1981) FLC 91-092. There
his Honour said this at 76,644:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth or matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
It is clear from his Honour’s expressed findings that his Honour was not satisfied on the evidence as to the claimed loss of $46,317.04, and thus that the related contention that the husband’s conduct ought to be characterised as “reckless”.
We consider those conclusions were open to his Honour when regard is had to the evidence before him as to the basis of the wife’s claim that a loss of $46,317.04 was incurred.
It was not in issue that, the parties having finally separated on 21 August 2008, the husband, without reference to the wife and without her consent, and utilising a power of attorney that he still held for her, sold a number of parcels of shares standing in her name.
The wife’s evidence was that on 30 September 2008 and 1 October 2008 the husband effected the sales of the wife’s shares in six publicly listed companies for total proceeds of approximately $224,000.
Taken from paragraph 137 of the wife’s affidavit filed on 21 October 2010 it can be seen that the wife’s calculation of $46,317.04 for the “loss” claimed is in fact the difference between the historical purchase prices paid for the shares when they were respectively acquired and the sale prices achieved upon the sales in respect of four out of the six company shares identified. We note in passing that on the wife’s evidence one of the share parcels was sold for more than the purchase cost, but that increase is not included or treated as an off-set in the wife’s calculation. In respect of another parcel the purchase cost was unknown by the wife and hence she could not say whether or not the sale proceeds achieved for that parcel were more or less than the cost of purchase.
It was the effect of market forces on these publicly listed shares which dictated that as at the dates of their sales they were worth $46,317.04 less overall than their historical value overall when purchased. In other words, the effective cause of the reduction in value of the shares was market forces, not the fact of their sale.
We do not accept that the wife’s method of calculation of the “loss” could be a legitimate method or basis for demonstrating that what had occurred was a reduction or minimisation of the value of assets. What would be necessary, as a starting point, would be evidence to demonstrate that if the assets were retained there would be a greater value in them than the amount of proceeds realised. There was no such evidence put before the Federal Magistrate.
Whilst at paragraph 141 of her affidavit filed on 21 October 2010 the wife advanced evidence to the effect that if one of the parcels of shares had been retained and each of another two parcels had been sold at the respective dates (in retrospect) that they were listed at their highest prices over the period between October 2008 and October 2010, that evidence was inherently speculative. It contains in respect of the two parcels referred to the assumption that rather than being retained those shares were sold at their respective high points in terms of their value during that period.
Whilst it is strictly true, as the respondent submits (paragraph 2.7 of the respondent’s written summary of argument) that “the wife was not cross-examined on her evidence that the sale of the shares was at a loss of $46,317.04” that submission is apt to mislead when it is understood that, in context, the wife’s evidence was as to the difference between the historical cost of acquisition and the sale prices obtained.
The husband did not dispute the wife’s evidence as to the historical prices paid and the sale prices achieved, but he plainly disputed that this gave rise to any relevant “loss”. The husband gave evidence that no loss was incurred; and his evidence was to the effect that any calculation of the values of the shares based upon list prices of them on the stock exchange over the period since the dates of their sales demonstrated lower values than the proceeds received (Transcript 3 March 2011, p. 103). The husband was not challenged on that evidence in his cross-examination.
We are therefore not persuaded that his Honour was plainly wrong in the conclusion he reached.
Ground 3
We had significant difficulty in understanding the complaint that the respondent makes here. However, it seems that between 3 July 2009 and
31 March 2010 the husband’s loan account with the Trust was credited with a total of $68,407.08, and the total amount of $158,200.86 was debited. The difference is approximately $90,000, and the wife complains that because the husband failed to detail what this was spent on, it should be notionally added-back to the asset pool.
His Honour gave this claim short shrift in his reasons for judgment describing it as “a throw away line in [the wife’s] written submissions”.
However, his Honour did go on and say in paragraph 84:
It seems to me that the explanation for the relevant expenditure is set out in Appendix F to [Mr M’s] report. In the absence of anything further, it is difficult to see why I should characterise that expenditure as “extravagant”. I see no basis to add it back to the pool.
Appendix F is taken from the accounts of the Trust, and itemises the transactions on the husband’s loan account during the period referred to.
Apparently the husband was not cross-examined as to this issue, and
his Honour was correct in his description of how it was ultimately presented to him by the wife’s counsel.
We find no error in his Honour’s approach to this issue.
Ground 4
With this ground the wife in effect raises a weight challenge. In other words, she is suggesting that the Federal Magistrate erred in the exercise of his discretion by giving insufficient weight to certain contributions by the wife, and by giving too much weight to certain contributions by the husband.
The difficulties confronting the wife in succeeding in such a challenge are well known.
In Norbis v Norbis (1986) 161 CLR 513, Brennan J said at 539-540:
The difficulties in the way of developing guidelines beset an appellate review of the exercise of a discretion under s. 79. Unless the primary judge reveals an error in his reasoning, the Full Court can intervene only if the order made is not just and equitable. How does the Full Court arrive at that conclusion? In Bellenden (formerly Satterthwaite) v. Satterthwaite [[1948] 1 All ER 343 at p.345], Asquith L.J. stated the rationale of an appellate court’s approach:
“It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.”
The “generous ambit within which reasonable disagreement is possible” is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.
In Gronow v Gronow (1979) 144 CLR 513, Stephen J said at 519-520:
The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge’s discretionary decision on grounds which only involve conflicting assessments of matters of weight.
It is apparent to us that his Honour gave careful attention to the respective contributions of the parties, and in particular to the husband’s greater contributions in relation to the shares in P2 Company Pty Ltd. That contribution became an important point of differentiation between the parties.
The wife has failed to demonstrate to us that his Honour, in assessing the respective contributions of the parties exceeded the “generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong”.
There is no merit in this ground of appeal.
Ground 5
It is said in the wife’s written submissions that “[t]his ground speaks for itself and requires no elaboration”. However, we do not see it that way. Without more, we have no idea what complaint the wife has. We can only presume that if Grounds 1 to 4 of the cross-appeal are successful, and this Court sets aside his Honour’s orders and re-exercises the discretion then the net asset pool would become $1,928,641. However, we have found that none of those grounds of appeal should succeed and accordingly, this ground has no merit. It does not allege a discrete error by the Federal Magistrate.
The husband’s appeal against orders 15 February 2012
It is obvious to us that it is now unnecessary to determine this appeal. The application before his Honour was for a stay pending the appeal against all orders made by his Honour. There was no application by the husband to hear this appeal separately or to expedite it, and it has been heard together with the substantive appeal and cross-appeal.
Apart from the husband’s senior counsel saying that he wished to press this appeal in relation to the child support issue, no oral submissions were made by either party in relation to any aspect of this appeal at the hearing before us.
The order sought by the husband in the appeal is that Orders 1 to 16 made by the Federal Magistrate be “stayed”. There is no end date for the stay sought, and that is a difficulty in itself, but if we allow the appeal we would set aside the order his Honour made and then either remit the application for rehearing or re-exercise the discretion. However, there would be no point in doing either. If we remitted the application for rehearing, given that the substantive appeal and cross-appeal will have been heard and determined, there will be nothing for the alternative judge of the Federal Circuit Court to decide. Likewise, there would be no issue for us to determine on a re-exercise of discretion.
Accordingly, given the lack of utility of this appeal we propose to dismiss it.
The husband’s senior counsel’s request to press the appeal in relation to the refusal by his Honour to stay the child support orders does not alter our view as to the lack of utility of this appeal, and in fact that request is misconceived. It would not lead to a stay of the enforcement of the child support arrears which is presumably what is sought. That is still a matter for the Federal Circuit Court and not this Court.
Conclusion
Having found merit in Grounds 5 and 6 of the husband’s Amended Notice of Appeal, we confirm that the appeal against the orders for property settlement must be allowed, and Orders 1 to 15 inclusive made by the Federal Magistrate set aside.
As to the application for leave to appeal against Order 16 made by the Federal Magistrate we confirm that we are prepared to grant leave to appeal, but we have found no merit in Ground 14, and thus to that extent the appeal must be dismissed.
We observe that that result means that there is no basis, even if we were able to make the order, to grant leave to amend the orders sought by the husband in the Amended Notice of Appeal by adding Order 5A (see paragraph 60 above). The application for leave in that regard must be dismissed.
With the wife’s cross-appeal, we have not found merit in any ground of appeal. Accordingly, the cross-appeal must be dismissed.
There is then the husband’s appeal against the Federal Magistrate’s refusal to grant a stay of the orders made on 17 January 2012. We have found that there is no utility in that appeal and we confirm that we propose to dismiss it.
The next question is, given the outcome of the appeal, do we re-exercise the discretion or remit the property settlement proceedings to the Federal Circuit Court for rehearing by a judge other than Judge Jarrett?
The husband sought that we should remit the proceedings for rehearing, but the wife sought that we should re-exercise the discretion.
Reluctant as we always are to require the parties to go through a rehearing, given the basis on which we have allowed the appeal in particular, the issues which would need to be addressed even on a re-exercise, and the real prospect that further evidence would be required and much of which would be controversial, we cannot see how we could re-exercise the discretion. Thus, we propose to remit the property settlement proceedings for rehearing.
Costs
At the conclusion of the hearing we sought submissions from both counsel as to costs.
In the event the appeal was successful or the cross-appeal was unsuccessful senior counsel for the husband sought an order for costs against the wife.
Counsel for the wife indicated that costs should follow the event but that even if the cross-appeal was unsuccessful the wife should still have her costs of that cross-appeal given that the majority of the hearing was taken up with the appeal.
In the event that no costs were awarded, both counsel sought costs certificates pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) for the appeal, the cross-appeal, and the rehearing.
Given the outcome of the husband’s two appeals, and the wife’s cross-appeal we do not consider it appropriate to make orders for costs in favour of either party. However, because the appeal against the orders for property settlement succeeded on a question of law, we consider it appropriate to order costs certificates to issue for the appeal against the orders for property settlement, and the rehearing of the proceedings for property settlement.
I certify that the preceding two hundred and thirty-eight (238) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, Strickland & Kent JJ) delivered on 18 July 2013.
Associate:
Date: 18 July 2013
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