Edgar & Faines - [2009] FamCAFC 22

FAMILY COURT OF AUSTRALIA

EDGAR & FAINES

[2009] FamCAFC 22

FAMILY LAW - APPEAL – FROM A DECISION OF A FEDERAL MAGISTRATE – Property settlement – Parties were married for a short time – Federal Magistrate considered the matter on an asset by asset basis – Federal Magistrate made orders dividing the assets approximately 39 percent to the appellant, 61 percent to the respondent – Appellant submitted that the Federal Magistrate erred in considering the capital growth on the respondent’s property to be a contribution made wholly by the respondent – Appellant submitted that the orders were manifestly unjust – Federal Magistrate’s reasoning recognised an indirect contribution made by the appellant to the conservation of the property – Ultimate difference in the property division was considerably less than the capital growth on the respondent’s property – Division of property not outside the ambit of reasonable exercise of discretion – Appeal dismissed

FAMILY LAW - APPEAL – COSTS – Appellant pay the respondent’s costs of and incidental to the appeal

Family Law Act 1975 (Cth) s 74(c); s 75(2); s 79(4)(a)
Federal Proceedings (Costs) Act 1981 (Cth)

Bilous v Mudaliar and Anor, (2006) 35 FamLR 55
G and G (2004) FamCA 1179
SL & EHL [2005] FamCA 132
Williams and Williams [2007] FamCA 313

APPELLANT:

Mr EDGAR

RESPONDENT:

Ms FAINES

APPEAL NUMBER:

115

2008

FILE NUMBER:

BRC

13181

2007

DATE DELIVERED:

19 February 2009

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

WARNICK J

HEARING DATE:

11 February 2009

LOWER COURT JURISDICTION:

Federal Magistrates Court

LOWER COURT JUDGMENT DATE:

24 November 2008

LOWER COURT MNC:

[2008] FMCAfam 1345

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr O’Neill

SOLICITOR FOR THE APPELLANT:

Andrew Morris Legal Practice

COUNSEL FOR THE RESPONDENT:

Mr Burridge

SOLICITOR FOR THE RESPONDENT:

Family Law Solutions

Orders

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

IT IS NOTED that publication of this judgment under the pseudonym Edgar & Faines is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE

Appeal Number: NA 115 of 2008

File Number: BRC13181 of 2007

Mr EDGAR

Appellant

And

Ms FAINES

Respondent

REASONS FOR JUDGMENT

This appeal, in many ways ordinary, still enters upon the shadowy area of the values that may affect the outcome of property settlement cases.
Mr Edgar, now 60 years of age and Ms Faines, now 51 years of age, began cohabiting in late 2003, married in 2004 but separated in November 2006. On 24 November 2008, Spelleken FM made orders by way of alteration of their property interests. For reasons which she expressed, her Honour did not approach the matter on the basis of the percentage distribution of a total asset pool but rather, on an asset by asset basis. As appears from her Honour’s judgment, she intended that the comparative positions in which her orders placed the parties favour the wife, because, as her Honour found:
75.Overall, the contributions overwhelmingly favour the wife.
As to that, Spelleken FM found that, at the commencement of cohabitation, the husband had assets of net $442,126.00, most of which was a business of a net value (agreed) of around $370,000.00 (counting creditors/debtors etc). The wife had a home at E, Melbourne which was by far her major asset. Her net assets were $402,357.00.
Of these initial contributions, as seen, roughly equal, the Federal Magistrate said:
12.…As I will refer to later in these reasons, in my view the significance of the initial contribution by the wife of [the E property] and the husband’s initial contribution of the coffee business given the short relationship, is not the value of those assets but the use made of those assets during the relationship.
The wife sold the E property in December 2006, shortly after the separation of the parties, for $548,000.00 net. This represented a large capital gain of around $240,000.00.
Looked at “globally”, the orders, which Spelleken FM made, divided an asset pool of about $812,000.00 (leaving out lesser personalty as did the Federal Magistrate), 39 per cent to the husband.
It is the husband who appeals against the orders effecting division of property.
The two grounds in the Notice of Appeal are short and broadly couched. In oral submissions, Mr O’Neil, counsel for the husband, formulated the essential argument of principle as that, in assessing contributions, the learned Magistrate failed to properly treat the capital growth in the wife’s assets. Her Honour concluded that the husband had made no contribution to it.
I think it fair to regard Mr O’Neil as also saying that, even if there is no error of principle, the orders were manifestly unjust to the husband.
The appeal does not challenge any finding of fact.

In assessing contributions, did Spelleken FM wrongly treat the capital growth in the wife’s assets?

At the commencement of cohabitation the husband worked in his coffee distribution business and the wife operated as a remedial massage therapist in her own business.
The assets of the husband, apart from the business and associated debtors, creditors, loans and bank account, were a personal bank account and a vehicle of modest value. It is a point of some significance in the appeal that the value ascribed to the business as at the end of 2003 was in fact the figure achieved upon sale of the business in September 2005.
The wife also had a vehicle of modest value, a right to receive superannuation from her first husband (taken into account at approximately $70,000.00) and the E property, found to be worth $436,000.00 and subject to a mortgage of $110,000.00.
When the parties began living together, the husband moved to Melbourne to live with the wife. He returned to Queensland regularly to check on the business in which he had installed a manager. The parties moved to live in Queensland in about January 2005 and the wife’s E property was then tenanted. In Queensland the wife obtained some employment, but she earned much less than she did in Melbourne. In the three years of the cohabitation, the wife earned approximately $33,500.00 whereas the husband, from the business until September 2005 and then from various other positions, earned approximately $168,000.00. This disparity of income and the uses to which it was put are part of the context in which Mr O’Neil submits that the learned Magistrate was wrong to find that the husband made no contribution, even indirectly, to the wife’s E property.
In February 2005, the wife actually received her share of her first husband’s superannuation, approximately $75,000.00.
With the proceeds of the sale of the business, the husband purchased (in joint names of the parties) a unit at M for $215,000.00 plus costs of purchase. He spent $10,000.00 on improving the unit. He placed $72,000.00 from the business sale proceeds in a superannuation fund in his name.
The husband sold his business in September 2005 for $335,000.00, plus stock of about $18,000.00, at a total of about $353,000.00. As earlier seen, the parties separated in November 2006 and almost immediately thereafter the wife sold the E property. With the net sale proceeds she purchased a unit at T and a unit at B in Queensland. She spent some money on improvements to the T unit, the costs of purchase and removal. Not long before trial, the wife placed a deposit in respect of the purchase of another property at B, then borrowing the entirety of the purchase price of $420,000.00. The wife’s case was that she would sell the two unit properties and repay the borrowings.
Not long before trial the husband withdrew from his superannuation fund $50,000.00.
At trial the husband lived in the M unit and his income was Newstart allowance. The wife’s income was $160.00 per week from her work as a massage therapist.
The learned Magistrate identified the assets in existence at trial as essentially the husband’s unit (albeit in joint names) worth $275,000.00, and the wife’s two units, less costs of sale, plus the property at B, less its mortgage, for a total of real estate assets she held of $420,000.00. The wife’s superannuation was approximately $70,000.00, the husband’s $29,000.00. That is, there was a disparity between the parties in the assets they held, of about $186,000.00. The learned Magistrate noted that other assets of the parties, such as bank accounts and personalty, had not been precisely valued, but had approximate equality.
As earlier seen, the Federal Magistrate adopted an asset by asset approach. As to her assessment of contributions, she said:
51.Turning then to the superannuation entitlements of the parties, I do not understand it to be the case of the husband or the wife that they had an entitlement to superannuation of any significance at the commencement of their relationship or that they made any contribution to their superannuation entitlements during the relationship from their incomes.
…
53.It is clear therefore from that history that the wife made no direct, or even indirect contribution to the husband’s super.
54.… It is clear from that history that the husband made no contribution to the wife’s super.
…
56.… It is not in dispute that neither the husband nor the wife made any contribution of any significance to the other’s bank accounts and that they each left the relationship with their bank accounts.
57.In relation to the husband’s coffee business, the husband agrees that the wife did make a non-financial contribution to that business, but it is clear that she was paid for any work that she did in the business by a salary of $200 per week.
…
60.… It is the husband’s case, however, that he made both a financial and non-financial contribution to [E] in the 14 months he was living there, and indirectly after he and the wife moved to Queensland.
61.In relation to his financial contribution, it was conceded by him under cross-examination that the only payments he made, other than towards improvements include one rates payment, one water rates payment and one mortgage payment.
…
64.… I also note that a portion of the $9,606 the husband says he contributed towards maintenance and improvements, includes the cost of his labour for example, the $1,220 he calculates was the cost of his labour for cleaning and preparing the home for auction and the loss of income from cabs.
65.In relation to these contributions, I have also taken into account that the husband conceded, albeit that he referred to the assistance the wife gave him as minor, that the wife did assist him to do most of the repairs referred to in his affidavit. The husband was also not working during these 14 months except when he returned to Queensland to check on the business.. There is also no evidence produced by the husband that the repairs that were undertaken and/or paid for by him improved the value of [E] in any way, in fact, the only evidence that is before the Court from any independent witness comes from the real estate agent, a witness in the husband’s case, that any increase in the value of [E] was not as a result of improvements made to the property but rather as a result of market forces.
…
67.As I indicated earlier, the importance of the [E] property and the husband’s business in terms of the Court’s assessment of contribution is the use made of the sale proceeds.
68.The [E] property was sold, the units were purchased and sold and ultimately those sale proceeds will be used to pay out the mortgage on the [E Road] property. The coffee business was sold and those sale proceeds were used to purchase, improve and maintain the [G] unit, make a significant contribution to the husband’s superannuation fund and to meet the living expenses of the husband and some of the living expenses of the wife.
69.In that regard I refer to the Full Court’s decision in Pearce v Pearce [sic] (1999) FLC 92 844 where the Full Court said at paragraph 28:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached in all the circumstances for the initial contribution. It is necessary to weigh the initial contribution by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution in this case of the husband, regard must be had to the use made by the parties of that contribution.
…
71.I must also take into account, of course, when considering the contributions that were made by the parties, pursuant to s.79(4)(c) the contribution made by a party to the marriage, to the welfare of the family constituted by the parties to the marriage, including any contribution made in the capacity of homemaker and parent. In this case it is relevant to consider that the husband clearly earned more than the wife during the relationship and contributed at least part of that income to the relationship.
72.However, I must also take into account with regard to assessing this contribution and any adjustment I should make in the husband’s favour in that regard, the following:
a)    It is agreed that the parties operated separate bank accounts during their relationship;
b)    The husband and wife both agree that they both made contributions towards their own expenses for food, clothing and the running costs of their motor vehicles;
c)    That the wife was keeping up with the costs of expenses for the [E] property including rates, insurances and mortgage payments without assistance from the husband prior to the relationship;
d)    Although the wife’s income was much less than the husband’s, later in the relationship she was earning a reasonable income when the husband first came to live with her.
73.It is clear however, that the husband made a greater contribution to the parties’ lifestyle during the relationship … . It is also clear that the parties enjoyed, I understand, four overseas trips and although it was conceded by the husband that there would have been some tax deduction available to him for the cost of one of those trips, the others were funded by the husband’s income from the business and/or the sale proceeds of the business.
74.Taking into account, therefore, all of those matters, I make the following findings:
a)    The husband made little or no contribution either financial or otherwise, to the wife’s superannuation entitlement, her motor vehicles, her bank accounts or any other personal property she took out of the relationship;
b)    The wife made no financial or other contribution to the husband’s business, the [G] unit, any motor vehicle owned by the husband, the husband’s bank accounts or the husband’s superannuation entitlement and/or any other property retained by the husband at separation;
c)    The husband made some contribution to the [E] property, both financial and otherwise, however in my view it would not warrant any adjustment in his favour. Of the $9,606 he says he contributed to the maintenance and improvement of the property, a portion of that amount was the cost of the husband’s labour and those contributions were made in the 14 months he lived with the wife and was not working. There is also no evidence to suggest that any improvement he and/or the wife made to the property in that time made any difference to the value of the property;
d)    The husband made no contribution directly or indirectly, financially or otherwise to the [T] and/or [B] units or the [E Road] property;
e)    During the relationship, when the parties were living in Victoria and when they were living together in the [G] unit, it is conceded that they both contributed to the housework and general upkeep of both homes;
f)    The husband made a greater contribution to the lifestyle the husband and wife enjoyed during their relationship particularly the cost of overseas trips.
75.Overall, the contributions overwhelmingly favour the wife. It is my view however that I should make some adjustment in the husband’s favour to reflect the very limited contribution he made to the [E] property but more importantly the greater contribution he made to the husband and wife’s lifestyle during their relationship. It is difficult, of course, to quantify what that amount should be. It would not be appropriate for the Court to approach this in a mathematical way by, for example, adding up the costs of the overseas trips, or even adding the costs of those overseas trips to the financial contributions he made to repairs on [E]. It is purely a discretionary exercise on my part and taking into account all the matters referred to it is my view that an adjustment in the husband’s favour of $15,000 would be appropriate.
The learned Magistrate made no adjustment on account of s 75(2) factors and there is no challenge to that assessment in the appeal.
The orders that her Honour made left each party with the property in his/her name (save for the wife transferring her interest in the M unit to the husband) and the wife was to pay the husband $15,000.00. Thus, the difference between the parties was reduced to about $156,000.00.
This is the context in which Mr O’Neil makes the essential argument for the husband, namely that Spelleken FM failed to recognise the indirect contributions made by the husband to the E property, constituted by his overwhelming financial contribution during the cohabitation towards the living and “lifestyle” expenses of the parties.
As to principle, each counsel referred to different authority, but in my view, there is no disagreement on principle. Mr O’Neil referred to a decision of the New South Wales Court of Appeal, Bilous v Mudaliar and Anor, (2006) 35 FamLR 55, in particular the passage where Ipp JA said:
[63] Determinations as to what orders should be made under s 20 are to be made solely on the grounds of the justice and equity of the case. The justice and equity of the case may derive from the fact that the party who owns the family home or other property was able to retain that property, while the market value increased, because “of joint efforts of wage earning, homemaking and parenting, and mutual support”. In some instances the non-financial contributions of one party may result in property of the kind in question not having to be sold. … Thus, an increment in capital value may well, result, indirectly, from “joint efforts of wage earning, homemaking and parenting, and mutual support”.
Mr Burridge, counsel for the respondent, relied upon statements in Williams and Williams [2007] FamCA 313, in which Bilous (supra) was considered and the Full Court said:
26.We think that there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties. Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.

As I said, in my view both authorative statements hold good.
Mr O’Neil occasionally submitted that the Federal Magistrate should have drawn the inference that the contributions by the husband from earnings enabled the wife to retain the E property. On other occasions he referred to such an inference as being “open” to the learned Magistrate. If the latter is all that can be said of the inference, then a failure to draw that conclusion is unlikely to constitute appellable error. In any event, as seen, Spelleken FM made a number of findings that militate against an inference such as that contended for:
·The husband and wife both agree that they both made contributions towards their own expenses for food, clothing and the running costs of their motor vehicles;
·That the wife was keeping up with the expenses for the E property including rates, insurances and mortgage payments without assistance from the husband prior to the relationship;
·Although the wife’s income was much less than the husband’s later in the relationship she was earning a reasonable income when the husband first came to live with her;
·After the parties moved to Queensland the E property was tenanted. The mortgage on the E property at the commencement of cohabitation was only about one-quarter of its gross value.
I also observe that the period of cohabitation, for which the wife’s income diminished substantially because of the move from Melbourne to Queensland, was of about two years duration.
But in addition to an examination of whether the evidence should have led the Federal Magistrate to draw the inference as proposed, the proposition itself bears examination. It may carry some assumption, may not be the right one to pose, or at least may not be any more correct than some others.
It might be that on the balance of probabilities, the inference could or perhaps even should have been drawn, that the wife could not have contributed equally with the husband to those activities, such as overseas travel, of which they partook and also have retained E. But if that be the criterion for indirect contribution by the husband to the maintenance of the E property, a number of other factors might well arise for consideration.
Would it be just and equitable to the wife to, in effect, call her to account from the capital value of assets she introduced into the marriage, for a discretionary expenditure during the cohabitation, unless she partook in that expenditure on a clear understanding that if the marriage broke down, such an account would be taken?
In any event, in assessing the weight to be given to any indirect contribution by the husband, should countervailing considerations be taken into account, such as the move by the wife from Melbourne, away from her established employment and occupation of her own home, to Queensland where the husband’s business was?
Should the question posed be along the lines “Could the wife have herself met the necessities of life and retained the property, without assistance from the husband?”.
I would not suggest that any of these questions is the only correct one, or one more correct than the other.
I think it proper in this discussion to consider the terms of s 79(4)(a) of the Family Law Act 1975 (Cth):
(4)In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
…
As I said in SL & EHL [2005] FamCA 132:
233.In my view, these submissions by each counsel, in particular that of senior counsel for the husband, referring to the danger of undervaluing the contribution as home-maker/parent, point to the true nature of the assessment of contributions under section 79. There are two aspects to the process. Firstly, the “value” given to a role, of itself. Secondly, the assessment of the quality with which a particular role was performed. Within the concept of “value of a role” is the idea of “the reach” of that role, particularly where a variety of assets has been acquired.
234.The first aspect, the “value”, given to a role, of itself, will, I suggest, be derived, at least mostly, from considerations beyond the individual case. The second will focus on the facts of the particular case, but there may well remain elements of “value” even in the assessment of “quality” of contributions.
…
236.Moreover, within the concept of “fairness” referred to by senior counsel for the husband, is a choice of parameters, or principles. What is fair will depend on the criteria - the values - used for measurement. For example, is marriage a partnership, the fruits of which ought be equally shared, as long as each partner has performed “usual” or “assigned duties” during its course? Or, irrespective of the way that during cohabitation the parties viewed their separate contributions in agreed roles, the partnership agreement having foundered, does a “winding up” involve a retrospective re-allocation of the worth of contributions by an external arbiter.
237.Though the presence of “values” in the assessment of contributions has on occasion, been acknowledged in cases, the basis for, and the origins of, “values” in that assessment, has received little or no attention. Nor have a number of other important questions about the use of values been addressed.
I think that, as the law currently stands, all that can be said is that one assesses the husband’s contributions in all the circumstances that related to it and other contributions.
If that is so, then apart from the findings which I earlier set out, the following evidence by the wife carried some weight:
I suggest to you that apart from your own incidental expenses, all the costs of living and the pleasure trips were paid for by Mr [Edgar]?
Well, he had the cash flow, yes.
He basically picked up the tab for virtually everything, didn’t he?
Well, it was a joint holiday, so it was his gift to the- to the relationship.
…
Well I don’t earn that kind of income and some of these things were from his [V] company which were given as gifts and he chose to spend this money. I mean, I didn’t ask him to do that. (emphasis added)
…
In my view, in all the circumstances of this case, the indirect contributions by the husband to the E property, were modest, at best.
In any event, it seems to me that, on balance, the learned Magistrate ought be seen as having recognised an indirect contribution made by the husband to the conservation by the wife of the E property, arising from his much greater contribution from income to the living expenses of the parties.
True it is that she did not expressly recognise such a contribution.
It is a distraction from the point at hand that, in paragraph 74(c) above, she did recognise contributions, financial and otherwise, to the E property, but this seems to refer to financial and physical effort in the maintenance and improvement of the property by the husband. In regard to those sorts of contributions, the learned Magistrate in the subparagraph mentioned, expressed the view that they did not warrant any adjustment in the husband’s favour. Somewhat at odds with that, in paragraph 75 as seen, the learned Magistrate expressed the view that she should “make some adjustment in the husband’s favour to reflect the very limited contribution he made to the [E] property”.
However, Spelleken FM immediately added that she should make some adjustment to reflect “more importantly the greater contribution he made to the husband and wife’s lifestyle during their relationship”. Though expressed in this fashion, it seem to me implicit, in having regard to such a contribution, Spelleken FM recognised it as an indirect contribution to the conservation by the wife of the E property.
I am not satisfied that there is any merit in this argument.

Were the orders manifestly unjust to the husband?

As seen, the ultimate difference between the parties after Spelleken FM’s orders, taking account of their real estate and the cash payment to be made by the wife, was $156,000.00. This was considerably less than the capital gain on the property that the wife introduced into the short relationship. The fact is that the property that the wife introduced showed a very strong capital gain; the property that the husband introduced showed either no capital gain or, if it did, cannot have had the value attributed to it at the commencement of the parties’ cohabitation.
Whether this difference justified the terminology used by Spelleken FM, but attacked by the husband, that it constituted an “overwhelming financial contribution” is not a question that really helps establish error. That involves measuring the facts against the result.
As I said towards the outset, the division was close to 61 per cent to the wife, 39 per cent to the husband. In G and G (2004) FamCA 1179, I examined numerous judicial descriptions relating to the degree of satisfaction that a discretionary judgment was wrong, that must exist in an appellate court before intervention was justified. I said:
88.It seems reasonable to imagine that, along the continuum of levels of disagreement, before a conclusion is reached that the result below was plainly wrong or manifestly excessive, the appellate Judge may pass through a stage of uncomfortable uncertainty about the result below, of which uncertainty that result is entitled to the “benefit of the doubt”.
89.Reinforcing the proper reluctance of an appellate court to interfere, is the observation that a trial Judge, in exercising a discretion, may have an advantage over the appellate court in reviewing that exercise. We are, of course, familiar with discussion of the advantage of a trial Judge, particularly in relation to conclusions about the credibility of witnesses. But there are other reasons for such advantages beyond the opportunity to observe witnesses.
While the division of property to the husband effected by Spelleken FM’s orders may have been at the lower end of the range available upon a reasonable exercise of discretion, I am not satisfied that it was outside that ambit.

Conclusion

It follows that since I have found no merit in the arguments on appeal, it ought be dismissed.

Costs

Costs were sought by Mr Burridge for the wife in the event that has transpired and Mr O’Neil made no submissions to the contrary. Having regard to the result and in the light of the financial circumstance of each of the parties as disclosed in the Federal Magistrate’s judgment, I consider that the husband ought pay the wife’s costs of and incidental to the appeal.

I certify that the preceding fifty one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Warnick.

Associate:

Date: 19 February 2009