ELLISTON & DENNELL

[2019] FamCAFC 90

FAMILY COURT OF AUSTRALIA

ELLISTON & DENNELL [2019] FamCAFC 90

FAMILY LAW – APPEAL – DE FACTO PROPERTY – Appeal from orders made under Part VIIIAB of the Family Law Act 1975 (Cth) – Where the primary judge assessed the appellant’s contribution at 20 per cent – Where the primary judge determined it was not just and equitable to make any property settlement order as the appellant had already received cash approximating 22 per cent of the net assets, consisting of de facto spousal maintenance and partial property settlement – Where the appellant contended the primary judge erred in assessing the parties’ contributions – Where the primary judge correctly adopted a two-pool approach – Where there is no error demonstrated by the primary judge in applying s 90SF of the Family Law Act 1975 (Cth) – Where there is no error of principle by the primary judge in ordering the appellant to pay one-half of the single expert’s fees – Where the primary judge erred in treating the appellant’s receipt of interim de facto spousal maintenance as her proportional entitlement – Where the appeal succeeds on the basis of the primary judge’s erroneous treatment of the interim de facto spousal maintenance and failure to make a property settlement order – No orders as to costs – Appeal allowed.

FAMILY LAW – APPEAL – RE-EXERCISE OF DISCRETION – DE FACTO PROPERTY SETTLEMENT – Where appeal successful – Where both parties sought that the Full Court re-exercise discretion and make substitute orders – Where neither party adduced further evidence – Where the Full Court determined the parties’ assets and liabilities based on evidence before and the findings of the primary judge – Where it is just and equitable for the parties’ property interests to be adjusted under s 90SM(3) of the Family Law Act 1975 (Cth) – Where the Full Court considers factors under ss 90SM(4) and 90SF of the Family Law Act 1975 (Cth) – Where the Full Court determines the non-superannuation assets should be divided in proportions of 90 per cent to the respondent and 10 per cent to the appellant – Where the orders made by the primary judge are set aside – Where all former orders requiring the payment of de facto spousal maintenance are discharged – Where the Full Court orders the respondent to pay a fixed amount to the appellant or, in default, a percentage of the net proceeds of the sale of a parcel of real property.

Evidence Act 1995 (Cth) s 140
Family Law Act 1975 (Cth) Pt VIIIAB, ss 90SF, 90SM, 117
Income Tax Assessment Act 1936 (Cth) Pt III Div 7A

Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
Chorn and Hopkins (2004) FLC 93-204; [2004] FamCA 633
G and G (2000) FLC 93-043; [2000] FamCA 1075
Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63
House v The King (1936) 55 CLR 499; [1936] HCA 40
Kennon v Kennon (1997) FLC 92-757; [1997] FamCA 27
Kowalski and Kowalski (1993) FLC 92-342; [1992] FamCA 54
Lovell v Lovell (1950) 81 CLR 513; [1950] HCA 52
Maine & Maine (2016) 56 Fam LR 500; [2016] FamCAFC 270
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Sinclair & Whittaker (2013) FLC 93-551; [2013] FamCAFC 129
W v W (1997) FLC 92-723; [1997] FamCA 3

APPELLANT: Ms Elliston

RESPONDENT: Mr Dennell

FILE NUMBER: SYC 1631 of 2016

APPEAL NUMBER: EA 102 of 2018

DATE DELIVERED: 4 June 2019

PLACE DELIVERED: Melbourne

PLACE HEARD: Sydney

JUDGMENT OF: Aldridge, Watts & Austin JJ

HEARING DATE: 11 April 2019

LOWER COURT JURISDICTION: Federal Circuit Court of Australia

LOWER COURT JUDGMENT DATE: 26 June 2018

LOWER COURT MNC: [2018] FCCA 1679

REPRESENTATION

COUNSEL FOR THE APPELLANT: Ms McIntosh

SOLICITOR FOR THE APPELLANT: Ktenas Solicitors & Barristers

COUNSEL FOR THE RESPONDENT: Mr Livingstone

SOLICITOR FOR THE RESPONDENT: David H Cohen & Co

Orders

1. The appeal is allowed.

2. The orders made by Judge Boyle of the Federal Circuit Court of Australia on 26 June 2018 are set aside.

3. In lieu thereof, pursuant to Part VIIIAB of the Family Law Act 1975 (Cth):

   (a)All former orders requiring the respondent’s payment to the appellant of de facto spousal maintenance are discharged.

   (b)The respondent shall pay to the appellant the sum of $55,299 within two months of the date of these orders, in default of which Orders 3(d) and 3(e) shall apply.

   (c)The appellant shall forthwith do all acts and things necessary to remove the caveat registered over the real property and improvements comprising Folio Identifier …, being the property more commonly known as P Street Suburb H, NSW (“the property”).

   (d)In default of Order 3(b), the parties shall do all such acts and things and sign all such documents as may be necessary to forthwith list the property for sale upon the following conditions:

   (i)The listing agent shall be as agreed between the parties, but in default of agreement, the agent chosen by ballot from the respective choices of the parties.

   (ii)The listing price for the property shall be as agreed between the parties, but in default of agreement, the price nominated by the listing agent.

   (iii)In the event of the property not being sold within 3 months from the date of its listing for sale by private treaty then it shall be put to sale by public auction on the following terms:

(A)The auctioneer shall be as agreed between the parties, but in default of agreement, the auctioneer chosen by ballot from the respective choices of the parties.

(B)The auction shall take place within 6 weeks of the deadline date for sale by private treaty.

(C)The reserve price shall be as agreed between the parties, but in default of agreement, the reserve price nominated by the auctioneer.

(D)In the event the property is not sold by auction, or private negotiation within a further 7 days, then it shall be submitted to successive auctions within further 6 weeks periods until sold, otherwise upon the same terms and conditions as applied to the first auction.

(e)Upon completion of the sale of the property pursuant to Order 3(d), the proceeds of sale shall be applied as follows:

(i)Firstly, to pay all costs, commissions, and expenses of the sale, and to pay any Council and water rates and maintenance levies outstanding in respect of the property.

(ii)Secondly, to discharge any encumbrance registered over or affecting the property.

(iii)Thirdly, to pay 4.25 per cent of the balance then remaining to the appellant.

(iv)Fourthly, to pay the balance then remaining to the respondent.

(f)       Otherwise:

(i)Each party shall be the sole legal and beneficial owner of all other assets in their respective possession as at the date of these orders, for which purpose bank accounts are deemed to be in the possession of the person named as the account holder and superannuation entitlements are deemed in the possession of the superannuant.

(ii)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession and any debts in their respective sole names.

(iii)The respondent shall indemnify the appellant and keep her indemnified against any and all liability, under loan accounts or otherwise, to T Pty Ltd.

(iv)Any and all other outstanding applications under Part VIIIAB of the Family Law Act 1975 (Cth) are dismissed.

1. No order as to costs in the appeal.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Elliston & Dennell has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 102 of 2018
File Number: SYC 1631 of 2016

Ms Elliston

Appellant

And

Mr Dennell

Respondent

REASONS FOR JUDGMENT

1. Ms Elliston (“the appellant”), the former de facto spouse of Mr Dennell (“the respondent”), appeals from orders made between the parties under Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”) by a judge of the Federal Circuit Court of Australia on 26 June 2018.

2. The final orders made by the primary judge discharged the respondent’s liability to the appellant under an interim de facto spousal maintenance order, required the appellant to withdraw a caveat registered over the respondent’s real property, obliged the appellant to pay one-half of the single expert’s fees, and otherwise let the parties’ existing property interests and liabilities rest where they fell. The appeal was from all of those orders.

3. For the reasons which follow, the appeal should be allowed in respect of one material error made by the primary judge.

Background

1. The parties disputed whether their de facto relationship began in 2008 or 2010, but the primary judge found it began in December 2010.

2. There was no dispute the de facto relationship finally broke down in December 2015.

3. The appellant commenced proceedings under Part VIIIAB of the Act in March 2016, the trial proceeded before the primary judge in February 2018, and the final orders were pronounced in June 2018.

4. Numerous interim orders were made during the litigation which were ultimately significant to the manner in which the proceedings were concluded.

5. By a series of orders made in June, July, September and November 2016, the respondent was ordered to pay de facto spousal maintenance to the appellant. The orders made in September and November 2016 expressly envisaged the respondent either would or might resort to the corporation he controlled to provide him with the funds necessary to make the maintenance payments. By the time of trial in February 2018, it was common ground the respondent had paid some $80,000 in maintenance to the appellant.

6. By the orders made in September 2016, the respondent was additionally ordered to pay to the appellant the sum of $8,000 by way of “partial [property] settlement”. Similarly, those orders envisaged the respondent would or might draw the sum from the corporation to fund the appellant’s payment.

7. The periodic sums of de facto spousal maintenance and the lump sum property settlement which were paid by the respondent were, in part, raised by him withdrawing the money from the corporation and by the creation of loan accounts in the corporate financial records to explain the withdrawals.

8. The primary judge found, without challenge in the appeal, that the parties’ assets had a net value of $395,743 (at [62]). As for superannuation, the appellant had $205,145 and the respondent only $75,100 (at [107]).

9. The primary judge found the respondent’s overall contributions to the non-superannuation assets were 80 per cent and the appellant’s 20 per cent (at [88]), and further, the evidence did not justify any adjustment on account of their future needs (at [105]). Since the appellant had already received from the respondent around $88,000 in maintenance and partial property settlement, which the primary judge said equated to about 22 per cent of the net assets (at [109]), her Honour determined it was just and equitable to not make any property settlement order at all between the parties.

Grounds of appeal

Ground 1

1. This ground contended the primary judge’s finding that the de facto relationship commenced in December 2010 was a factual error. However, the appellant’s written submissions in support of the ground contended the primary judge’s finding was “plainly unjust and unreasonable” by reference to House v The King (1936) 55 CLR 499, which submission only served to underscore the appellant’s misunderstanding of the fact-finding process.

2. The primary judge’s finding that the parties’ relationship began in December 2010 was either an error or it was not. The finding was either open on the evidence or it was not. It was a question of “fact and degree” (see Sinclair & Whittaker (2013) FLC 93-551 at [55]), which had to be and was decided according to the civil standard of proof (s 140 of the Evidence Act 1995 (Cth)). There was no element of discretion in the finding. The discretion lay only in the subsequent decisions, made upon the statutory criteria prescribed by Part VIIIAB of the Act, about whether it would be just and equitable to make any property settlement order between the parties (s 90SM(3)) and, if so, the nature of the just and equitable order that should be made (ss 90SM(4), 90SF(3)).

3. The appellant asserted the parties began living together in November 2008 at an apartment she already rented in Suburb F (at [8], [24]), whereas the respondent contended their cohabitation did not begin until December 2010 when they moved together into an apartment he rented in Suburb G (at [24], [26]). The appellant called evidence from her adult daughter, who would then only have been about 10 years of age. Her daughter said she remembered that the respondent “moved in” to their apartment in 2009 (at [28]).

4. The primary judge gave several reasons for determining that the parties’ de facto relationship probably commenced in December 2010. Those reasons were (at [25]-[30]): the appellant’s daughter’s evidence did not corroborate the appellant about the commencement of cohabitation in 2008; the daughter’s evidence was consistent with the respondent’s case, which was that he often stayed over with the appellant at her Suburb F apartment but he did not live with her; the respondent’s case of there being no de facto relationship before December 2010 was consistent with the appellant’s complaint about how he did not assist her to pay rent or utilities on the Suburb F apartment she leased; the respondent paid the rent and utilities on the Suburb G apartment from the time the parties moved into together in December 2010; and the appellant’s evidence was less reliable than that of the respondent.

5. In light of those underlying reasons, which were accurate, the appellant was unable to demonstrate in the appeal how the primary judge’s finding was not open. The finding did not accord with the construction of the evidence for which the appellant advocated, but that is not the test of factual error. Since the finding was consistent with the evidence, it was available. This ground fails.

Ground 2

1. This ground contended the primary judge erred in principle by determining that the parties’ contributions were respectively 80 and 20 per cent. It was contended too much weight was given to the respondent’s contributions and too little weight to the appellant’s.

2. In part, the appellant’s argument was premised on the primary judge not taking into account the financial and non-financial contributions made by the appellant between November 2008 (when she said the de facto relationship began) and October 2010 (just prior to when the primary judge found the de facto relationship began), but the submission was flawed.

3. Once a marriage (or as in this case, a de facto relationship) dissolves and the parties’ rights and entitlements under Part VIII (or Part VIIIAB) of the Act fall to be determined, all of their financial and non-financial contributions pertaining to the relationship – whether made before, during or after it – are intrinsic to the discretionary relief granted. That is because their rights are premised upon the existence of the marriage (or the de facto relationship) regardless of when their property was acquired (see Kowalski and Kowalski (1993) FLC 92-342 at 79,630-79,631; W v W (1997) FLC 92-723 at 83,769-83,771; G and G (2000) FLC 93-043 at 87,673-87,674; Maine & Maine (2016) 56 Fam LR 500 at [21]).

4. In accordance with that established principle, the primary judge did take into account the property taken by the parties into their relationship. As the parties had no children together, the appellant could not point to any non-financial contribution she made prior to the commencement of the de facto relationship. As for her initial financial contribution, she derived capital from a property settlement with her former partner in July 2009. She received net cash of $43,685 and superannuation of $112,081, but spent $15,000 on a car and used more of the money to meet the expenses she incurred with her children (at [11]). The cash was “largely expended” by the time the parties commenced cohabitation some 18 months later in December 2010 (at [65]). In the appeal, the appellant contended the money was “exhausted” by about October 2010.

5. By comparison, when the parties commenced cohabitation, the respondent was the exclusive shareholder of the corporation through which he conducted a successful building business and derived his income. Either he or the corporation had $199,000 banked in an account but, even if it was the corporation’s money, by reason of his exclusive shareholding, the money was effectively his. He also drove an encumbered work vehicle, though it is unclear whether it was leased by him or by the corporation (at [12]).

6. Once the parties began living together with the appellant’s children in the leased apartment at Suburb G, the respondent paid the bond and rent (at [66]). He continued to support the appellant and her children from his income (at [67]).

7. The appellant was employed by the respondent’s corporation, but there was a factual dispute over the duration of her employment and the quantum of the wages she was paid. The primary judge found the appellant ceased working for the corporation upon the commencement of her cohabitation with the respondent (at [78]), but beforehand she was paid a proper wage (at [69]), consonantly with the respondent’s evidence.

8. In June 2011, the respondent bought a home at Suburb H, into which the parties and the appellant’s children moved (at [79]). The respondent made the overwhelming financial contributions to its acquisition and maintenance, but both parties renovated and maintained it as the family home (at [80]).

9. Otherwise, the respondent helped support the appellant’s children, who were permanent members of the household and the appellant helped care for the respondent’s children when they visited the household (at [81]), though those contributions should more properly have been considered under s 90SF(3)(r) than under s 90SM(4)(a)-(c) of the Act.

10. At trial, the appellant contended her contributions ought to have been accorded greater weight on account of them being rendered more arduous by her subjection to the respondent’s violent conduct and financial control (see Kennon v Kennon (1997) FLC 92-757), but the primary judge rejected the appellant’s argument of her financial control by the respondent (at [33]) and did not accept the appellant’s evidence of the respondent’s family violence (at [42], [45]).

11. After separation, pursuant to the series of interim orders made between June and November 2016, the respondent paid some $88,000 to the appellant so she could maintain herself (at [84], [86]).

12. Notably, the appellant did not contend in the appeal that any of those findings were wrong.

13. Given this ground was a complaint about the weight attributable to certain aspects of the evidence, the appellant faced a high hurdle (see Lovell v Lovell (1950) 81 CLR 513 at 519; Norbis v Norbis (1986) 161 CLR 513 at 518, 539-540) and was unable to surmount it. She could not demonstrate the ultimate conclusion about the parties’ respective contribution-based entitlements was not open on the evidence. This ground fails.

Grounds 3 and 4

1. These grounds attacked the manner in which the primary judge dealt with the issue of de facto spousal maintenance, resulting in the final order which discharged the interim order as at the date to which it stood paid (Order 1). The appellant asserted the primary judge erred in principle by treating her as being disentitled to the interim de facto spousal maintenance paid to her by the respondent (Ground 3) and by additionally failing to give adequate reasons for why her application for the continued payment of de facto spousal maintenance was dismissed (Ground 4).

1. The last of the interim de facto spousal maintenance orders was made in November 2016. The orders were made with the parties’ consent and required the respondent to pay to the appellant the sum of $1,000 per week.

2. Evidence was adduced at trial that, following the parties’ separation, the appellant was gainfully employed while she was paid de facto spousal maintenance under the interim orders. There was a factual dispute about how much work she had done, whether she was paid for it, and how much she was paid for it, but the primary judge found the appellant’s credit wanting on those issues (at [17], [18], [22]). Her Honour found the appellant was employed at various places during the currency of the interim de facto spousal maintenance order and that she concealed her income derived from the employment (at [84], [85], [92], [93], [98]).

3. While the respondent knew the appellant was working in some capacity (at [43], [44]), he still kept up his interim maintenance payments and did nothing to discharge or amend the interim maintenance orders. In the face of the respondent’s knowledge and inaction, the appellant sought to contend, implicitly if not expressly, that the primary judge should have ignored her concealment of relevant information about her income and disregarded her consequent lack of entitlement to the de facto spousal maintenance. Her apparent reasoning was that the interim order was made with the respondent’s consent, he knew she was doing some work, and he made no application to discharge or amend the interim order. We reject her argument.

4. The primary judge was obliged to act on the evidence. The appellant’s obligation of full and frank disclosure continued until the trial and, just because the respondent did not act earlier by applying to discharge the interim order, he was not estopped from demonstrating her lack of entitlement to de facto spousal maintenance at the trial. As was open, the primary judge found the appellant was not entitled to receive de facto spousal maintenance at times during the period over which it was paid to her, but it was impossible for the primary judge to find exactly when and how much because of the appellant’s concealment. Ground 3 must therefore fail.

5. The respondent sought an order compelling the appellant to repay all of the de facto spousal maintenance paid by him to her during the periods she was employed (at [3]), but the primary judge made no such order, so his application in that respect was dismissed. Instead, an order was made simply discharging the interim order from the date to which it then stood paid. The primary judge determined to treat the maintenance payments made by the respondent as a relevant post-separation financial contribution in the property settlement (at [108]), as was open, and the treatment of the maintenance payments in that way is the subject of Grounds 5 and 6, yet to be addressed.

6. The appellant conversely sought an order compelling the respondent to pay her the same amount of periodic de facto spousal maintenance for a further two years (at [2]). The application was dismissed and she contended the primary judge gave inadequate reasons why. The appellant’s contention must be rejected because the primary judge found she has qualifications and the capacity to earn income to support herself (at [106]), which finding was adequately supported by her Honour’s reasons, which traversed the appellant’s employment history, the income she did not declare, and her income-earning capacity (at [10], [69], [74], [84], [85], [90]-[100]). Once it was found the appellant could support herself, there was no justification for the continuation of any de facto spousal maintenance order, so the discharge of the existing interim order and dismissal of the appellant’s application were inevitable. Ground 4 must fail.

Grounds 5 and 6

1. These two grounds of appeal were directed to her Honour’s treatment of the interim de facto spousal maintenance paid by the respondent to the appellant, in so far as it affected the property settlement between them. It was contended the primary judge erred in two ways, the effect of which was to double and triple count the appellant’s receipt of the maintenance to her detriment.

2. The first challenge was that the primary judge erred in principle by “applying the $80,000 received by the [appellant] as maintenance payments prior to the hearing to satisfy the 20 [per cent] contribution based finding…” (Ground 5).

3. The respondent paid to the appellant some $80,000 in maintenance before trial, including during periods when the primary judge found she likely would not have been entitled to it because she was working and well able to support herself. The primary judge therefore treated the maintenance paid by the respondent as a post-separation financial contribution by him (at [108]), which contribution influenced the finding that his overall contributions were properly measured at 80 per cent (at [84], [88]). There was no further adjustment to the parties’ proportional entitlements, leaving them with 80 and 20 per cent respectively.

4. However, having found the appellant was then due 20 per cent of the assets by taking into account her earlier receipt of $80,000 in maintenance and another $8,000 by way of interim property settlement, the primary judge then deprived her of her 20 per cent share. Instead of making orders which would give her 20 per cent of the net assets of $395,743, the primary judge treated her past receipt of the $88,000 as constituting her share of the parties’ property. The primary judge said the appellant’s receipt of that the sum “equate[d] to” her proportional entitlement (at [109]) and then made no property adjustment order at all.

5. Therefore, as was contended, the $88,000 paid by the respondent to the appellant was used twice: first, to constrict the appellant’s percentage entitlement to the non-superannuation assets to 20 per cent, and secondly, to then satisfy her diminished entitlement. Ground 5 must therefore succeed.

6. The second challenge was that the primary judge erred by failing to adopt “the asset by asset approach” which, if adopted, would have resulted in the separation of the respondent’s corporation from all other non-superannuation assets into a different pool of assets, thereby quarantining the debt raised by the respondent to pay the maintenance (Ground 6).

7. This complaint about the primary judge’s failure to adopt “the asset by asset approach” was liable to mislead and needs elaboration. The primary judge noted the parties uniformly conducted the trial proposing that an asset-by-asset approach should be taken (at [49]), but by that they only meant different pools of assets should be constituted and their contributions to the different pools assessed separately. Neither contended for the assessment of their contributions to individual assets. To a point, her Honour did as she was asked.

8. The appellant contended the primary judge should constitute three pools of property, being: first, the respondent’s shareholding in his corporation; second, all other non-superannuation assets, of which the respondent’s property at Suburb H was by far the most valuable; and third, the parties’ superannuation interests. The primary judge instead determined to constitute two pools of property: one containing all of the non-superannuation assets, including the respondent’s shareholding in the corporation and his Suburb H property, and the other containing the superannuation interests. Her Honour’s reasons for so doing were the relative brevity of the parties’ relationship, the appellant’s introduction into the relationship of her superannuation interest from a former relationship, and the respondent’s accumulation of a large proportion of his superannuation prior to the parties’ cohabitation (at [50]).

9. The reasons submitted by the appellant about why the respondent’s proprietary interest in the corporation should be considered in a separate pool were, first, the exclusivity of his shareholding, and secondly, the asserted uncertainty of its value. Her counsel submitted to the primary judge:

   [COUNSEL FOR THE APPELLANT]: … [W]hy the company, I would submit, would go into its own pool. The [respondent]’s finances and incoming finances comes from the company… which, I submit, is the alter ego of the [respondent]. It is – he is the shareholder – sole shareholder. He is the sole director…

   (Transcript 6 March 2018, p.18 lines 44-47)

   [COUNSEL FOR THE APPELLANT]: … [T]here is not a clear value of what the company is, in that regard, that it would be proper, in my submission, that be put into a pool of its own because is it [sic] its own economy …

   (Transcript 6 March 2018, p.20 line 47 to p.21 line 2)

10. In this appeal, the appellant’s counsel submitted in writing:

    …it is inequitable and unjust for the property pool to incorporate the Respondent’s ‘alter ego’ being his company which is an economy unto itself, solely at the direction and control of the Respondent.

11. As to those contentions, there is no doubt the respondent was and is still the sole shareholder and director of the corporation, but that is not an explanation for why his shareholding in the corporation should be treated differently from his other assets. The relevant “property” for the purposes of the property adjustment dispute under Part VIIIAB of the Act exists in the form of the respondent’s shareholding. His shareholding in the corporation was not a separate species of property merely because the corporation has a separate legal identity from the respondent. Furthermore, contrary to the appellant’s submissions, the value of the respondent’s shares in the corporation was completely clear. The primary judge accepted the evidence of the single expert (at [60]) and his opinion evidence was that the shares were worth $121,000, which value comprised debts of $312,380 owed to the corporation by the respondent (at [62]).

12. Intrinsic to the appellant’s complaint was some apparent misunderstanding about how the value of the respondent’s shareholding in the corporation was calculated. As mentioned earlier, the respondent borrowed money from the corporation to pay periodic maintenance and a lump sum to the appellant, which borrowings were reflected in loan accounts valued at $42,764. The appellant seemed to think those (and other) loans to the respondent by the corporation diminished the value of the corporation, but the loans constitute assets and comprise part of the corporation’s value. The loan accounts were constructed under Part III, Division 7A of the Income Tax Assessment Act 1936 (Cth) (“the Income Tax Assessment Act”) and were enforceable choses in action in the corporation’s hands.

13. In cross-examination, the single expert said:

    …So these are amounts that are owed to the company and, therefore, are assets of the company. 

    (Transcript 23 February 2018, p.153 lines 31-32)

    … if those loans were – were written off then the assets of the company would decrease by…300-odd thousand dollars…

    (Transcript 23 February 2018, p.153 lines 35-37)

    … I probably would have described the loan balances of [$]1048 and $41,716 as being loans payable by the husband as opposed to being loans payable by the wife.

    (Transcript 23 February 2018, p.158 lines 33-35)

14. The appellant’s contention in the appeal that the loan accounts were “unlikely to ever be repaid”, as it was unlikely the respondent would cause the corporation to enforce the debts against him, cannot be made good. As the single expert said in cross-examination:

    …If that loan is written off then that is likely to be a deemed dividend to the shareholder and tax will be payable on that dividend without any franking credits at the individual shareholder’s marginal tax rates.

    (Transcript 23 February 2018, p.153 lines 45-47)

    … it is the recipient of the loan that will pay the tax liability and – and receive the deemed dividend.

    (Transcript 23 February 2018, p.154 lines 12-13)

15. The respondent was both the shareholder and the recipient of the loans from the corporation. He would be the beneficiary of the deemed dividend if Division 7A of the Income Tax Assessment Act was breached and thereby liable for the tax.

16. The primary judge’s aggregation of the respondent’s shares in the corporation with all other items of non-superannuation property was quite unexceptional. The appellant was unable to demonstrate how the primary judge erred by constructing only two pools of property instead of three. That, however, is not a complete answer to Ground 6.

17. A portion of the $312,380 owed by the respondent to the corporation, being $42,764, comprises money he borrowed to meet the interim de facto spousal maintenance payments to the appellant. Therefore, the primary judge’s inclusion of the whole of the respondent’s debt to the corporation in the “balance sheet” (at [62]) entailed a triple-count of the $42,764 raised by the respondent to pay maintenance of $80,000 to the appellant, and further, caused the appellant to assume responsibility for 20 per cent of that portion of the respondent’s loan account debt. Accordingly, Ground 6 must succeed on that limited basis.

Grounds 7 and 8

1. These grounds contended the primary judge erred in the application of s 90SF(3) of the Act by failing to take into account three debts owed by the appellant (under s 90SF(3)(r)) and the disparity between the parties’ income and financial resources (under s 90SF(3)(b)).

2. The three debts to which the appellant referred were debts the primary judge found the appellant created, either exclusively or principally, to pay her legal fees (at [53]-[57]). The primary judge determined not to take into account any of the parties’ debts which related to the payment of their legal fees. Such an approach conformed to established authority (see Chorn and Hopkins (2004) FLC 93-204 at [55]-[60]).

3. The appellant submitted in writing that the evidence did not support the finding that her loans were largely used for the payment of legal fees, but the submission departed from the ground of appeal. The ground did not assert any error of fact, so there can be no complaint about the correctness of the primary judge’s finding or the omission of the debts from the pool of property. Rather, the ground contended the error lay in the primary judge’s failure to take the debts into account under s 90SF(3)(r) of the Act as part of the adjustment process.

4. In that regard, in final submissions, the appellant’s counsel said nothing more than:

   … And I also would ask your Honour, with the 75(2) factors, to take into account the post-separation liabilities of the wife …

   (Transcript 6 March 2018, p.24 lines 11-12)

5. The primary judge responded to the submission by acknowledging in the reasons for judgment:

   102.Both parties have debts arising post separation, particularly from the costs of the litigation …

6. Her Honour, therefore, treated the parties equally by not taking into account the debts borne by either for legal fees related to the litigation. Accordingly, there could be no doubt the primary judge took the debts into account, but the debts were inferentially given relatively little weight because parties should ordinarily bear liability for their own legal fees in litigation under the Act (s 117(1)) and any disparity in their expenditure is a matter of personal choice. Ground 7 must therefore fail.

7. The appellant’s second complaint concerning the disparity between the parties’ income and financial resources was expressly taken into account by the primary judge, so it was not open for the appellant to assert a failure to do so, in which event Ground 8 must also fail.

8. The appellant’s complaint could only be that the primary judge gave insufficient weight to the disparity, but that too would fail because, in that regard, the primary judge appropriately acknowledged:

   102.… I accept that the respondent has a greater degree of financial security given that he owns and operates a business which has provided him with a reasonable income throughout his life.

   103.The respondent has significantly less superannuation than the [appellant]. It is still in growth phase, and the respondent has the ability to add to it until retirement.

   …

   106.The [appellant] seeks orders for ongoing maintenance for a further period of two years. I reject the proposition that the [appellant] requires an ongoing order for maintenance as she is unable to support herself adequately, for the reasons set out above. She has qualifications, and capacity to earn an income which she could be utilise [sic] to support herself.

   107.The [appellant] has significant superannuation of $205,145 as a consequence of her previous property settlement. The respondent has superannuation of $75,100.

Ground 9

1. This ground asserted the decision of the primary judge was “plainly wrong and manifestly unjust”, but was not elaborated upon by any written submission in the appellant’s summary of argument.

2. The ground adds nothing to the errors found in respect of Grounds 5 and 6, so it need not be separately considered, particularly when both parties asked for this Court to re-exercise discretion under Part VIIIAB of the Act in the event the appeal succeeds.

Ground 10

1. The primary judge ordered that the appellant pay one-half of the single expert’s fees (Order 3), as the respondent paid the fees at first instance. This ground of appeal contended the primary judge erred by making such an order because a procedural order was earlier made to resolve the issue on 16 November 2016. On that date, with the parties’ consent, her Honour ordered the appellant to pay one-half of the single expert’s fees “from her property settlement” (Order 2.8). This ground asserted that, because “the property settlement resulted in a negative result” for her, the final order made on 26 June 2018 could not be enforced against her.

2. In all probability, if the primary judge’s orders of 26 June 2018 were left undisturbed, the appellant’s lack of assets would preclude the respondent from enforcing Order 3 against her to extract from her one-half of the single expert’s fees. But that does not mean the primary judge fell into appealable error by making the order. It only means Order 3 might remain unenforced.

3. On that issue, the primary judge said:

   60.… I also accept that the [appellant] should meet one half of the costs of [the single expert], with respect to his being required to give evidence, and the preparation of the report. The respondent initially met all the costs.

4. The statement betrays no error of principle, particularly when the appellant previously agreed she should bear one-half of the single expert’s fees by submitting to Order 2.8 on 16 November 2016.

5. This ground should fail, but since the appeal will succeed on other grounds and the parties both wanted the discretion re-exercised, there is no harm in discharging all orders made by the primary judge. The parties acknowledged that Order 2.8 made on 16 November 2016 would then govern the appellant’s liability for one-half of the single expert’s costs.

Re-exercise of discretion

1. The appeal should succeed for the reasons explained in relation to Grounds 5 and 6. In that event, both parties asked for this Court to re-exercise discretion and make substitute orders adjusting the parties’ property interests.

2. The parties confirmed they did not wish to adduce any further evidence on the re-hearing, so the re-exercise of discretion by this Court is based on the evidence adduced at trial and by reference to the primary judge’s factual findings.

Existing property interests

1. The parties’ assets and liabilities are drawn from the findings of the primary judge, utilising the same item numbers (at [62]).

2. The appellant’s assets and liabilities comprise:

No.	Assets	Value	Total
9	CBA account	187
10	ANZ account	2
11	Company B shares	1,308
12	CBA shares	962
14	Household contents	3,000
Sub-total	5,459	5,459
Liabilities
27	Company C	8,000
28	Mastercard 1	7,424
29	Mastercard 2	5,760
Sub-total	21,184	21,184
Net deficit	- 15,725

1. The respondent’s assets and liabilities comprise:

No.	Assets	Value	Total
1	Suburb H property	1,300,000
2	Shares in corporation	121,000
4	D Bank account	50
5	ANZ account	6,729
6	CBA account	2,795
7	Household contents	10,000
Sub-total	1,440,574	1,440,574
Liabilities
18	Mortgage	701,075
19	Loan account to corporation	312,380
20	Visa 1	4,486
21	Mastercard 3	1,743
22	Electricity Company	4,050
26	ATO debt for 2017	5,372
Sub-total	1,029,106	1,029,106
Net assets	411,468

1. The parties’ assets, therefore, have a combined net value of $395,743.

Existing superannuation interests

1. The appellant has superannuation of $205,145.

2. The respondent has superannuation of $75,100.

3. Neither party proposed any superannuation-splitting order.

4. The parties agreed they should be taken to have exclusively contributed to the accumulation of their own superannuation interest.

Section 90SM(3)

1. The parties conducted the trial on the basis that it would be just and equitable for property adjustment orders to be made between them. Neither suggested a different course on the re-exercise of discretion.

2. Given the parties’ relationship subsisted for about five years and the appellant is insolvent, it would be just and equitable for their property interests to be adjusted. At the very least, it is desirable to make an order clarifying that the respondent must indemnify the appellant against any and all liability under any loan account due to his corporation.

Sections 90SM(4) and 90SF(3)

1. We have already explained why the primary judge’s assessment of the parties’ respective entitlements at 80 and 20 per cent was open, but determining what findings were reasonably open to a primary judge is an entirely different process from the re-exercise of discretion by the appellate court, if appealable error is detected. It is never enough to establish error and sustain an appeal, merely because, if left to itself, the appellate court would have arrived at a different conclusion to the primary judge (Gronow v Gronow (1979) 144 CLR 513 at 519-520). However, if error is established, then the appellate court must decide for itself the orders which justly and equitably adjust the parties’ property interests to conclude the proceedings.

2. Under the rubric of Ground 2, we discussed the features of the evidence which influenced the parties’ contribution-based entitlements under s 90SM(4)(a)-(c) of the Act. The parties’ contributions were made during a de facto relationship of five years duration between December 2010 and December 2015. They had no children together. The respondent entered the de facto relationship with a successful building business, held in a corporate structure, established over his working career. Apart from that, neither party made any significant capital contribution at the commencement of the cohabitation. The respondent generated income from the business and he made overwhelming financial contributions to the non-superannuation pool of assets. The appellant ceased to work in the business at the time of the cohabitation. The Suburb H home was purchased in the respondent’s sole name and he solely paid the deposit, mortgage and associated expenses on the property. The appellant made non-financial contributions as a homemaker during the relationship. Following separation, the respondent paid the appellant maintenance from his own resources, which approximated $45,000 (= $80,000 – $42,764), together with a further $8,000 by way of interim property settlement. Based upon an overall assessment of their contributions during this short relationship, the non-superannuation assets of the parties should be divided in proportions of 90 per cent to the respondent and 10 per cent to the appellant.

3. As for the factors stipulated by ss 90SM(4)(d)-(g) and 90SF(3) of the Act, several features of the evidence are relevant. In particular:

   (a)As a result of the findings made in respect of contributions, the respondent would receive net non-superannuation assets in the sum of $356,169 and the appellant would receive net non-superannuation assets in the sum of $39,574.

   (b)The appellant is now 49 years of age. She contended before the primary judge that she had physical and mental health limitations. The primary judge discussed those issues, the appellant’s employment skills, and her work history (at [89]-[100]) and rejected her contention that either her physical or mental health precluded her from working.

   (c)The duration of the relationship did not significantly affect the appellant’s earning capacity, which is viable.

   (d)The respondent is now 52 years of age and shall continue to work as a builder through his corporate entity (at [101]).

   (e)The respondent’s earning capacity is superior to that of the appellant.

   (f)The respondent has $75,000 in superannuation, but the appellant has $205,145 in superannuation (at [103], [107]).

   (g)During the relationship, the appellant’s children from a prior marriage lived with the parties for at least half the time and the respondent made significant contributions by way of support to the appellant’s children. The respondent’s children spent limited periods of time at the parties’ home. When present, they were provided with care and assistance by the appellant. The respondent’s contributions of a financial and non-financial kind in respect of the appellant’s children were greater than those made by the appellant in respect to the respondent’s children. The parties’ respective children are now adults or on the cusp of majority (at [104]).

4. Taking all those considerations into account, no further adjustment is warranted. The proportional 90/10 outcome is just and equitable.

5. The appellant’s final entitlement is, therefore, 10 per cent of the net assets, excluding superannuation, which is measured at $39,574, rounded to the nearest dollar (= 10 per cent x $395,743).

6. Presently, the appellant’s debts exceed her assets by $15,725 so, in order for her to have surplus assets of $39,574, the respondent must pay her $55,299.

7. The value of the respondent’s assets is effectively locked within the equity of his home. In order for him to pay the appellant $55,299, he will need to either extend the loan secured by mortgage over his home or enlarge his loan account with his corporation. If he cannot or will not do either, his home will need to be sold and the appellant’s entitlement paid from the net proceeds of the sale. The orders will enable the respondent two months within which to marshal his financial affairs and make the payment to the appellant to avoid the sale of his home.

8. If the respondent’s home needs to be sold, the appellant’s final financial entitlement will be determined as a percentage of the sale price, to protect both parties in the event of either a rising or falling market, as they conducted the litigation in agreement that the property was worth $1,300,000. The payment of $55,299 represents 4.25 per cent of that value.

Costs

1. On 24 October 2018, the Appeals Registrar ordered the parties to file a schedule of their costs if they anticipated making an application for costs at the conclusion of the appeal (Order 8). Neither party did so. Nevertheless, the appellant sought costs if the appeal succeeded, which application the respondent resisted.

2. We are not inclined to grant the application. The ordinary rule under s 117(1) of the Act will prevail. Nor, are we inclined to grant costs certificates for the appeal. Even though the primary judge’s error was arguably one of legal principle rather than simply mathematical, the error was induced by the confused manner in which the trial was conducted by the parties. The ultimate error was only revealed by oral discourse in the appeal; it not being clearly evident from the grounds of appeal or the written summary of argument. There will be no order for costs.

I certify that the preceding ninety-one (91) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Aldridge, Watts & Austin JJ) delivered on 4 June 2019.

Associate:

Date: 4 June 2019