Esposito & Coster - [2012] FamCAFC 118

FAMILY COURT OF AUSTRALIA

ESPOSITO & COSTER

[2012] FamCAFC 118

FAMILY LAW ─ APPEAL ─ PROPERTY SETTLEMENT ─ Challenge to the decision of the trial Judge to exclude the wife’s asserted liability to the Family Trust ─ Nothing to which the Court was referred was shown to have involved findings of fact which were not reasonably open to the trial Judge, or inferences, or conclusions which were not reasonably supported by the findings of fact with respect to the wife’s asserted indebtedness to the Family Trust ─ Challenge unsuccessful.

FAMILY LAW ─ APPEAL ─ PROPERTY SETTLEMENT ─ Contributions ─ Challenge to the trial Judge’s assessment of the parties’ contributions subsequent to their separation ─ Challenge to the adequacy of the trial Judge’s reasons with respect to contributions of the parties’ in the post-separation period ─ Where it is less than entirely clear from his Honour’s reasons why his Honour concluded as he did with respect to the parties’ contributions after separation ─ Where the Court was unable to discern the basis upon which the husband’s contribution based entitlement was concluded to exceed that of the wife ─ Challenge successful ─ Appeal allowed.

FAMILY LAW ─ APPEAL ─ PROPERTY SETTLEMENT ─ Adjustment ─ Where the trial Judge declined to adjust the parties’ entitlements pursuant to s 75(2) of the Act ─ Where the trial Judge erred in principle in his approach to the “discounting” of property which the husband was to retain ─ Challenge successful ─ Appeal allowed ─ Proceedings remitted for re-hearing.

FAMILY LAW ─ APPEAL ─ COSTS ─ Where the wife’s appeal was successful ─ Costs certificates ordered for both parties with respect to the appeal and the re-hearing.

Family Law Act 1975 (Cth) Part VIII; ss 75(2), 79(2), 93A

Bevan and Bevan (1995) FLC 92-600
Coghlan and Coghlan (2005) FLC 93-220
Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
House v The King (1936) 55 CLR 499
Manolis and Manolis (No 2) [2011] FamCAFC 105
Norbis v Norbis (1986) 161 CLR 513
Woollams and Woollams (2004) FLC 93-195

APPELLANT:

Ms Esposito

RESPONDENT:

Mr Coster

FILE NUMBER:

PTW

5840

2007

APPEAL NUMBER:

2011

DATE DELIVERED:

10 August 2012

PLACE DELIVERED:

Sydney

PLACE HEARD:

Perth

JUDGMENT OF:

Coleman, Thackray & Ainslie-Wallace JJ

HEARING DATE:

11 June 2012

LOWER COURT JURISDICTION:

Family Court of Western Australia

LOWER COURT JUDGMENT DATE:

26 September 2011

LOWER COURT MNC:

[2011] FCWA 75

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr Dowding SC and
Ms Sassella

SOLICITOR FOR THE APPELLANT:

Carr & Co

SOLICITOR FOR THE RESPONDENT:

Hotchkin Hanly

Orders

That the appeal be allowed.
That orders 6, 14 and 15 of the orders made by Moncrieff J on 26 September 2011 be set aside.
That the matter be remitted for re-hearing before a judge other than Moncrieff J.
That the Court grants to the Appellant Wife 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 Wife in respect of the costs incurred by the Appellant Wife in relation to the appeal.
That the Court grants to the Respondent Husband a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the Respondent Husband in respect of the costs incurred by the Respondent Husband in relation to the appeal.
That the Court grants to each party a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each party in respect of such part as the Attorney-General considers appropriate of any costs incurred by each party in relation to the new trial granted by these orders.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Esposito & Coster 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 PERTH

Appeal Number: WA 28 of 2011

File Number: PTW 5840 of 2007

Ms Esposito

Appellant

And

Mr Coster

Respondent

REASONS FOR JUDGMENT

introduction

By Notice of Appeal filed 20 October 2011 Ms Esposito (“the wife”) appealed against orders made by Moncrieff J on 26 September 2011 in financial proceedings between the wife and Mr Coster (“the husband”) pursuant to the provisions of Part VIII of the Family Law Act 1975 (Cth) (“the Act”).
The trial Judge’s orders provided that the property of the parties, as found by the trial Judge, be apportioned as to 55 per cent to the husband and 45 per cent to the wife, and dismissed the wife’s application for spousal maintenance.
In lieu of the trial Judge’s orders, the wife sought a division of the property of the parties in shares of 70 per cent to herself and 30 per cent to the husband. The wife further sought spousal maintenance of $1000 per week until she “obtains full time employment or attains the age of 55”.
The husband resisted the wife’s appeal and sought to maintain the orders of the trial Judge.
On 23 May 2012 the wife filed an application for leave to adduce further evidence in the appeal pursuant to s 93A of the Act. The husband resisted the wife’s application for leave to adduce further evidence.

background

The parties married in 1993 and separated in 2006.
The husband was born in 1954. The wife was born in 1958.
There are three children of the marriage. D born in 1994, A born in 1995, and C born in 1999 (“the children”). A and C spend substantial and significant time with each parent, whilst D spends little or no time with the husband.
The trial Judge concluded that the parties’ net assets were worth $1,583,859.
The husband was considered to have a contribution based entitlement of 55 per cent, and the wife 45 per cent.
The trial Judge declined to adjust the parties’ entitlements pursuant to s 75(2) of the Act.

the grounds of appeal

The grounds of appeal articulate four broad challenges to the trial Judge’s decision.
For reasons which are readily apparent (see Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 and Bevan and Bevan (1995) FLC 92-600), albeit not necessarily agitated in this order, it is convenient to address the four groups of challenges in the following order:
(i)The trial Judge’s refusal to allow as a liability of the wife a sum of $481,350, or at least $200,122 thereof applied by the wife with respect to the mortgage over the parties’ former matrimonial home from funds provided, and allegedly owed by her to the Esposito Family Trust (“the Family Trust”).
(ii)The trial Judge’s assessment of the parties’ contributions subsequent to their separation in 2006.
(iii)The trial Judge’s refusal to make any adjustment in the wife’s favour pursuant to s 75(2) of the Act.
(iv)The trial Judge’s dismissal of the wife’s spousal maintenance claim.

Trial Judge’s exclusion of the wife’s asserted liability to the Family Trust - Ground 2

It is convenient to first consider the challenge to the trial Judge’s exclusion of the wife’s asserted liability to the Family Trust. That challenge is articulated in Ground 2 of the wife’s Notice of Appeal, which provided:
2.The learned trial judge erred in excluding from the schedule of the wife’s liabilities monies owed by her to the [Esposito] Family Trust and such a finding was contrary to, and against the weight of the evidence. Alternatively he should have treated the monies advanced to the husband by [Mr S Coster], [Ms L Coster], [Mr G Coster] and [Ms N] in the same way and excluded them from the liabilities of the husband.
In support of this complaint, Senior Counsel for the wife referred to the affidavit evidence relied upon by the wife in support of her assertion that she was indebted to the Family Trust, and the documentation upon which she relied, all of which was clearly before the trial Judge.
In summary, Senior Counsel for the wife submitted that there was no reason to reject the evidence of the wife with respect to her indebtedness to the Family Trust. It was also submitted that there was no basis for rejecting the evidence of the wife’s brother Mr J Esposito, who was cross-examined before the trial Judge. The evidence of Mr J Esposito was that the wife would be required to repay the funds provided to her by the Family Trust.
It was conceded by Senior Counsel for the wife in his submissions that:
15.The court may disregard a liability wholly or partially if, because of the circumstances surrounding the incurring of the liability, it ought to in justice and equity be wholly or partially disregarded. … (Footnote omitted)
However, the circumstances of the case were submitted to have precluded the trial Judge from doing so.
The circumstances upon which Senior Counsel for the wife relied were articulated in the following terms:
15.…
a.The husband had reduced his support of the wife and the family. This is something noted by the learned trial judge [...].
The exchange to which Senior Counsel for the wife referred revealed:
HIS HONOUR: If it’s a situation where, as I think, your client accepts that from certain dates he withdrew certain financial support for the family, then where was the wife going to get the money if she didn’t borrow it?
HANLY, MR: Well, it’s a question of how much she borrowed, what her expectations were, whether she should have made other arrangements, whether she should have sold the house as she said she would. All of those issues are relevant to looking at that amount. Obviously I agree. I accept necessarily that in relation to the mortgage, for example, the husband paid it for a time and then he stopped paying it, and I accept that if she’s to stay in the house then she has to borrow the funds. I accept that, for example. But if you look at the contribution that the husband has made since separation, it’s substantial and it’s beyond a normal level of contribution and it has been to his financial detriment. He has - - -
HIS HONOUR: Please don’t interpret what I’m saying as making an adverse finding against your client.
HANLY, MR: I’m not.
HIS HONOUR: All I’m simply saying is that it’s common ground that he cut off the funds, for want of a better word, at a certain point. My concern is, obviously some of the borrowings, it would seem, would have to be accepted as being necessarily incurred.
HANLY, MR: Some of them, your Honour, but they include legal fees, for example.
HIS HONOUR: Yes. That’s in a different category.
HANLY, MR: He didn’t cut off the funds at any stage, your Honour. That’s not a correct remark, with respect.
HIS HONOUR: All right. Well, as I said, it’s not a finding.
HANLY, MR: Well, your Honour said it was common ground, with respect, that it was cut off in a time - - -
HIS HONOUR: Well, it is on your - - -
HANLY, MR: And that’s not the case.
HIS HONOUR: Well, it’s common on your chronologies.
HANLY, MR: Your Honour, what is without dispute, as I understand it, is that firstly child support has been paid throughout; secondly - - -
HIS HONOUR: Look, I’ll withdraw my remark, Mr Hanly, and I’ll use the noncontenious words then that you use in your chronology, lest it offend, and say that your client withdrew his financial support as to the mortgage, as he agrees, in late 2008.
HANLY, MR: That’s right, your Honour.
HIS HONOUR: And he withdrew financial support for the provision of a motor vehicle.
HANLY, MR: That’s right, your Honour.
HIS HONOUR: All right.
(Original emphasis)
Senior Counsel for the wife also relied upon the circumstances that:
15.…
b. The former matrimonial home (where the wife and children resided) was the most significant asset of the parties and the wife’s conduct sought to preserve that asset for their mutual benefit.
c. The wife had and continues to have inferior income and employment prospects [...].
In support of his contentions, Senior Counsel for the wife directed our attention to the following paragraphs of the trial Judge’s reasons:
43.Since separation the wife has returned to teaching contract positions, however she has not had the security of permanency or a guarantee of fulltime employment.
...
263.Each of the parties has a capacity to earn. Each of them suggests that the other is not fully utilising his or her capacity to earn, however I accept without hesitation that the wife’s capacity to earn is now, and is likely forever to be significantly less than the husband’s pending the parties’ respective retirements.
Reliance was also placed upon the wife having “had the overwhelming care of the children post separation”.
In that context, Senior Counsel for the wife there relied on the following paragraph of the trial Judge’s reasons which recorded:
280.Apart from the contribution by way of child support, the wife is likely to carry the greater burden in providing for the children, particularly [D], than is the husband, simply by virtue of her greater availability to the children than the husband, through their respective work commitments.
Senior Counsel for the wife also relied upon an asserted absence of “proposals put forward by the husband for the rehousing of the wife and the children”.
Further in support of his contention that it was not reasonably open to the trial Judge to exclude the wife’s indebtedness to the Family Trust when determining the net property of the parties, Senior Counsel for the wife relied upon the “Acknowledgement of Debt” which the wife had executed, which was secured by a caveat placed over the parties’ former matrimonial home (“the G Street property”).
Counsel for the husband submitted, accurately in our view, that the husband had not at any time accepted that the wife was indebted to the Family Trust, or that, if she was, such indebtedness was or would be repayable.
Counsel for the husband submitted, with respect to the wife’s alleged indebtedness to the Family Trust, that:
18.It is important to note that 80% of the alleged trust loan related to legal fees ($190,510) (39.4%) and mortgage payments ($200,122) (41.40%) and a further $50,558 (10.5%) was the wife’s living expenses.
The trial Judge did not add-back any sum with respect to the wife’s paid legal fees. Sensibly in the circumstances, the thrust of Senior Counsel for the wife’s contention was that the $200,000 which, it was not in issue, the wife had applied towards mortgage payments with respect to the parties’ former matrimonial home from funds provided to her by the Family Trust, was the sum which the trial Judge erred in failing to allow as a liability of the wife.
Counsel for the husband submitted:
20.The Learned Trial Judge found that the wife incurring mortgage payments was part of her “strategy of retention of the home without, it would seem, any regard to the economic consequences and the drain upon financial resources, notwithstanding that the relevant Trust was managed by her brother, a former partner with the husband in [a professional partnership]. The strategy makes commercial nonsense on behalf of the wife, who now seeks to encumber the husband with the liability, notwithstanding his earlier agreement to maintain the mortgage payments allowing more than sufficient time, in my finding, for the property to be prepared for sale and sold”.
The fact that neither the wife’s mother nor the Family Trust sought to intervene in the proceedings was also relied upon by Counsel for the husband in his defence of the trial Judge’s findings. We do not perceive that such absences precluded the wife from successfully asserting her indebtedness to the Family Trust. Counsel for the husband also relied on the fact that the wife’s mother, who, it is clear, the wife and her brother regarded as controlling the Family Trust, had not sworn an affidavit, nor given evidence. The trial Judge, in our view permissibly, relied upon this fact (see par 194 of the reasons).
Unsurprisingly, Counsel for the husband relied significantly upon the trial Judge’s reasons for excluding as a liability of the wife any sum referrable to monies provided to her by the Family Trust. It was also submitted on behalf of the husband that the trial Judge’s decision with respect to this issue involved the exercise of discretion. We are unable to accept that proposition. The issue before the trial Judge was one of fact. Either the wife proved her indebtedness on the balance of probabilities or, as the trial Judge found, failed to do so.
The issue before this Court is whether, notwithstanding that other findings may also have been reasonably open to him, the findings of fact made by the trial Judge with respect to the wife’s asserted indebtedness to the Family Trust, and the obligation to repay such indebtedness, were not reasonably open to the trial Judge. The wife bears the onus of establishing that the trial Judge thus erred. We perceive that the second finding of fact is ultimately the critical finding, there being little doubt that the accounting records of the Family Trust established that the wife was indebted in the sum she alleged.
Unsurprisingly in the circumstances, Senior Counsel for the wife did not seriously argue that the absence of evidence from the controller of the Family Trust, the wife’s mother, as to the intention to require the wife to repay her indebtedness to the Family Trust was not a matter to which the trial Judge could have regard. Senior Counsel for the wife relied upon the absence of any evidence establishing that the wife’s legal obligation would be waived, or not enforced.
The trial Judge considered this issue in some detail under the heading “Debt due to the [Esposito] Family Trust”. His Honour recorded, uncontroversially for present purposes:
174.The husband does not dispute the quantum of many of the sums advanced to the wife by a trust established for the benefit of her mother and her late father.
His Honour, accurately, identified the issue which he was required to determine as “whether or not it is likely that the debt is repayable” (par 175).
The trial Judge then referred to the “financial provision” made by the husband subsequent to the parties’ separation, which he found to have “reduced” during that period (par 181). His Honour then referred to the “common position” of the parties in April 2007 that their former matrimonial home was to be sold, and to events subsequent thereto.
Significantly, the trial Judge concluded that, despite the parties’ agreement to sell their matrimonial home in 2007, the absence of a sale of the property until some years later:
186.… was a strategy adopted by the wife to attempt to secure the former matrimonial home, a strategy that was supported financially by her family as when the wife did not commit to the sale of the property and action that commitment, the husband reduced his financial support and ceased the mortgage payments.
Having referred further to the evidence, the trial Judge reiterated:
190.There is insufficient evidence before me to determine whether or not the ownership of the [G] Street property could have been resolved as a discreet [sic] issue. However, that is not the relevant point, but rather that the wife was determined to continue in her strategy of retention of the home without, it would seem, any regard to the economic consequences and the drain upon financial resources, notwithstanding that the relevant Trust was managed by her brother, a former partner with the husband in the [professional partnership].

His Honour also recorded:
191.The strategy makes commercial nonsense on behalf of the wife, who now seeks to encumber the husband with the liability, notwithstanding his earlier agreement to maintain the mortgage payments allowing more than sufficient time, in my finding, for the property to be prepared for sale and sold.
The likelihood of the wife being required to repay her indebtedness was also examined by the trial Judge in considerable detail. His Honour recorded:
193.The wife’s brother, Mr [J Esposito], asserts that the money is payable, although curiously both the wife and Mr [J Esposito] refer to the requirement of payment as coming from the wife’s mother, who has the most significant current entitlement to the Trust assets, namely $2,161,945 of the $2,169,947 available for distribution.
His Honour also recorded:
194.The wife’s mother neither swore an affidavit, nor was produced as a witness.
Ultimately, the trial Judge concluded:
202.On balance I am not satisfied that the loan is likely to be enforced, nor given the strategy adopted by the wife with respect to the home would it be reasonable to hold the husband liable for the debt other than to the extent agreed, namely $18,414, although, for the reason appearing hereunder, I do not propose to ultimately do so.
Notwithstanding the trial Judge’s criticism of the wife in relation to the retention of the former matrimonial home to which we have earlier referred, we do not perceive that his Honour found the wife to have recklessly thereby incurred obligations under the mortgage, which she satisfied from funds provided by the Family Trust.
For whatever reason, despite the parties’ apparent intention in April 2007, the matrimonial home did not sell until more than three years later. The trial Judge’s criticism of the wife (at par 186) would not in our view provide an adequate basis for rejecting the wife’s claim with respect to monies borrowed by her from the Family Trust to service the mortgage over the former matrimonial home.
The wife’s “attempt to secure the former matrimonial home” was not, by reference to anything to which we have been referred, a matter which warranted criticism. The reality is that, by providing the funds which she did from the Family Trust, the wife preserved the equity of the parties in the former matrimonial home. Moreover, the trial Judge did not, as we understand his reasons, refuse to allow the wife’s indebtedness on that basis. To the extent that the trial Judge concluded that it was not “reasonable to hold the husband liable for the debt” (because of the wife’s “strategy”), we struggle to accept that to be a reasonable basis for doing so, or a basis established by the evidence.
In the absence of evidence establishing that the wife unreasonably sought to avoid the sale of the former matrimonial home, which she was occupying with the children of the marriage, or that her actions had in some way reduced the parties’ equity in the property, if the $200,000 provided to the wife by the Family Trust, and applied to meet the mortgage over the former matrimonial home was repayable, in the circumstances where, as the trial Judge found, the husband had reduced his support for the family in the post-separation period, to have ignored the wife’s indebtedness, at least to the extent of $200,000, would have been erroneous.
The second, and decisive issue is whether the wife’s indebtedness was likely to be enforced by the Family Trust. The evidence in this regard was equivocal. The absence of evidence from the wife’s mother, or any explanation for the failure to adduce such evidence, that she expected the monies to be repaid, in the circumstances described by the trial Judge (at par 193) rendered the finding made by his Honour reasonably open to him. It would, on the evidence, also have been open to the trial Judge to have concluded that the sum was repayable, but that is not the test for present purposes.
In the circumstances, notwithstanding that part of the trial Judge’s reason for excluding the wife’s liability to the Family Trust was in our view erroneous, this challenge fails as the trial Judge’s conclusion with respect to the likely repayment of the debt has not been shown to have been erroneous. As will be seen, that however is not the end of the significance of the $200,000 provided by the Family Trust, and applied for payment of the mortgage over the former matrimonial home.
The further evidence sought to be adduced by the wife, if accepted, would not alter our conclusion in relation to these challenges. To read the further evidence is to understand why we so conclude.
The trial Judge considered “Debts to husband’s family members” at paragraphs 149 – 156 of the reasons. Nothing to which we have been referred in that regard has been shown to have involved findings of fact which were not reasonably open to the trial Judge, or inferences, or conclusions which were not reasonably supported by the findings of fact there recorded. It may well have been reasonably open to the trial Judge to have reached other conclusions with respect to the various debts asserted by the husband, but that is not the test for present purposes.
This challenge fails.

Contributions – Grounds 3, 4 and 6

The challenge to the trial Judge’s findings and conclusions with respect to the parties’ contributions were articulated in Grounds 3, 4 and 6 of the wife’s Notice of Appeal which provided:
3.The Appellant accepts that contributions to the date of separation should be equal but contends that the learned trial judge erred in law and in fact in finding that the husband had made greater contributions than the wife to the acquisition, conversation [sic] and improvement of the parties’ assets post separation having regard to
(a)the history of care for the three children of the marriage post separation;
(b)the husband’s failure to provide to the wife a reasonable level of support for herself and the children, necessitating her borrowing funds from [Esposito] Family Trust;
(c)the application of the monies loaned by the wife from the [Esposito] Family Trust towards mortgage repayments for the former matrimonial home; and
(d)the decision to allow, as liabilities of the husband, taxation and school fee liabilities incurred post separation which thus became a shared liability of the parties, and thus also ignoring the fact that he had the use of his income during this period without meeting those liabilities.
4.If the finding of the learned trial judge in relation to the debt to the [Esposito] Family Trust is to stand, then the finding that the husband’s post separation contribution exceeds that of the wife is simply an error of fact, not an error in the exercise of discretion.
…
6.The learned trial judge erred in failing to take account of the payments ordered to be made from the net sale proceeds of the former matrimonial home on 9 June 2011 and that by failing to do so
(a)the husband obtained a significant financial benefit on account of his debts which were discharged by virtue of those orders; and
(b)as a consequence a division of assets as to 55:45 resulted in an unjust and inequitable result.
Senior Counsel for the wife submitted that:
13.The wife accepts that contributions to the date of separation should be equal. However, the wife cannot discern his Honour’s conclusions in relation to post separation contributions (resulting in a 10 per cent differential in favour of the husband having a value of $155,385) [...] given the following:
a.the wife’s substantial and considerable post separation contributions pursuant to section 79(4)(c);
b.the husband’s failure to provide to the wife a reasonable level of support for herself and the children, necessitating her borrowing funds from [Esposito] Family Trust;
c.the application of the monies loaned by the wife from the [Esposito] Family Trust towards mortgage repayments for the former matrimonial home, and
d.the significant reduction in the pool as a result of the inclusion of the husband’s substantial post separation debts which were pursuant to the orders of 9 June 2011. (Footnotes omitted)
The trial Judge concluded that the contributions of the parties “should, to the point of separation, be treated as equal” (par 231). Sensibly, Counsel for the husband did not cavil with that conclusion. The issue, as the submissions of Counsel for both parties make clear, is whether the trial Judge could have reasonably concluded that the post-separation period should result in the contributions of the parties being adjusted to favour the husband by 55 per cent to the wife’s 45 per cent.
The challenges to the trial Judge’s conclusion fall into two categories. The first relates to the adequacy of the trial Judge’s reasons. The second, if the trial Judge’s reasons are not found to be inadequate, involves the exercise of discretion. Counsel for the husband resisted both challenges to the trial Judge’s reasons.
We shall first consider the challenge to the adequacy of the trial Judge’s reasons with respect to the post-separation period.
Having critically considered the affidavit evidence of the wife with respect to the post-separation period, the trial Judge revisited the issue of the fate of the former matrimonial home subsequent to separation, and recorded:
235.Whilst there is no doubt that the husband ceased paying the mortgage payments in January 2008, the wife had had the benefit of those payments for some 18 months post-separation. Further, the assertion as to the wife seeking to sell the property is at odds with her stated intention, which has led to the uncompromising “stand off” that has existed between the parties, which has done neither of them credit and has served only to prolong the dispute between the parties and in all probability served only to diminish the assets available for distribution between them.
The trial Judge then considered the wife’s evidence with respect to the level of financial support provided by the husband after separation (at par 236), which he considered did “not do credit to the level of contribution made by the husband post separation”.
His Honour acknowledged that the husband had, in the post-separation period, received $105,000 resulting from the sale of a boat which the parties had purchased in October 2005.
Reference was then made to the husband’s resignation from the professional firm in which he had for some years been a partner, of which his Honour said:
241.In August 2008 the husband resigned from the [professional] partnership. He left the partnership on 30 November 2008 and commenced a new [professional] business on 1 December 2008 to which I have referred.
242.The husband was criticised over his action in leaving the [professional] partnership as part of the case for the wife.
243.In his trial affidavit the husband asserts that his reasons for leaving [the professional partnership] were, firstly, that there was an automatic retiring age of 60, secondly, and more significantly in my finding, the husband was concerned that the partners were considering a change to the partnership agreement that would affect the entitlements of a resigning partner and thirdly, the husband expressed some discontent about his role within the partnership, a position which appears to be supported by the evidence of Mr [J Esposito].
The trial Judge referred to the husband’s acquisition of a residence which he occupies with his present partner in the following terms:
246.The funds realised from the sale of the boat, an inheritance of $183,753 received by the husband from his mother’s estate following her death in October 2006 and funds advanced by his partner and children enabled the husband to complete the purchase of the [M] property in November 2007 for a cost, inclusive of the acquisition and stamp duty, of $1,327,010 funded by a borrowing from the Bank of Queensland of $965,000, and the other sources to which I have referred.
The fate of the former matrimonial home subsequent to separation was again revisited, and the trial Judge recorded:
248.I accept that the husband had an expectation that the [G] Street property would be sold by the end of the calendar year of 2007. I do not consider the purchase of the property that he undertook to have been undertaken with a wanton or reckless disregard to his commitments to the family, for although the husband adopted a negative strategy towards the wife in trying to “smoke her out” of the home to achieve the sale that he understood would be undertaken and had not been, it was not an unreasonable expectation for him to proceed on the basis that he had understood was agreed.
His Honour further recorded:
249.As against the husband’s financial contributions to the household, it must of course be remembered that the wife, whilst enjoying the benefit of the home, contributed to the maintenance of the home and the household in a direct physical sense and through the contribution of the payments to her from the Trust although as I have observed that was not a balanced nor sound economic consideration.
The conclusion of the trial Judge with respect to the post-separation period was recorded in the following terms:
250.Ultimately I am satisfied that the post-separation contributions of the parties when measured overall must slightly favour the husband, particularly given the use of his post-separation inheritance which is reflected in the pool of assets (and represents greater than ten percent of the found net pool of assets) however that must be offset to some degree by the use of assets had by the husband, but also constrained by his ongoing and significant financial support.
251.I determine contributions to be 55 per cent to the husband and 45 per cent to the wife, that is, a 10 per cent differential in the husband’s favour.
With respect to the trial Judge, why his Honour concluded as he did with respect to the parties’ contributions after separation is less than entirely clear to us from his reasons. Given that the husband retained the whole of the proceeds of sale of the boat, half of which was the wife’s entitlement, and that he contributed $183,753 by way of inheritance towards the purchase of his M property, and that the wife contributed from the Family Trust $200,000 by way of mortgage payments over the former matrimonial home, we are unable to discern the basis upon which the husband’s contribution based entitlement was concluded to exceed that of the wife by a sum of $150,000. Although the trial Judge referred (par 235) to the fact that the husband had made mortgage payments with respect to the former matrimonial home after separation, given that the husband’s income greatly exceeded that of the wife, and that the wife primarily parented the children during that period, those payments could not properly enhance the husband’s entitlement.
On what basis the trial Judge concluded that the wife’s contribution of the payments from the trust to the mortgage over the former matrimonial home was “not a balanced nor sound economic consideration” (par 249) is not apparent to us from his Honour’s reasons.
We would accordingly uphold this challenge.
So far as the challenge to the exercise of the trial Judge’s discretion is concerned, it is unnecessary in our view to engage in detail with the more colourful submissions of Senior Counsel for the wife in support of this Ground, or those of Counsel for the husband in response to them.
Largely for the reasons we have articulated with respect to the adequacy of the trial Judge’s reasons, we are able to determine this challenge.
It is not in doubt that, in the post-separation period, the wife had bore the greater burden of caring for the parties’ children, in circumstances where the husband had a superior earning capacity.
We have earlier referred (at par 65) to the three capital sums of significance with respect to the post-separation period. If, as was open to the trial Judge, the whole of the $200,000 provided to the wife by the Family Trust was regarded as a contribution by or on her behalf, and, as clearly the trial Judge did, the husband’s inheritance of $183,753 was regarded as solely a contribution by or on his behalf, the receipt by the husband of $105,000 consequent upon the sale of the parties’ boat in our view precluded the trial Judge from finding that contributions in the post-separation period favoured the husband over those of the wife by 10 per cent, which translated as approximately $150,000.
We would accordingly find that this challenge has merit.

The section 75(2) challenge – Grounds 1 and 5

The challenge to the trial Judge’s conclusion with respect to s 75(2) is most clearly articulated in Ground 1 of the Notice of Appeal which provided:
1.Having made the following findings the learned trial judge erred in failing to make any percentage adjustment in favour of the wife of the net assets of the parties for section 75(2) factors and consequently the orders made by him resulted in an unjust and inequitable result that is so far from a reasonable exercise of discretion that it constitutes an error, and having regard to these matters the learned trial judge ought to have made an adjustment of 20% in favour of the wife:
(a)without hesitation the wife’s capacity to earn is now, and is likely forever to be significantly less than the husband’s pending the parties’ respective retirements;
(b)the wife’s employment future has a level of uncertainty about it;
(c)the cloud that hangs over the wife is the question of availability of long term employment opportunities;
(d)since the separation the wife has not had the security of permanency or a guarantee of full time employment;
(e)the husband will no doubt be successful in his [professional] practice and that his income and earning capacity is always likely to significantly exceed that of the wife and that this was a factor which the learned trial judge determined required significant weighting in favour of the wife;
(f)the wife has made a significant contribution during the course of the parties’ marriage and that contribution has also been made in support of the husband’s development of his practice as [a professional], whilst on the other hand, the wife has forgone a more certain professional career as a teacher to which she now has in favour of assuming a supportive role of the husband and the family;
(g)the wife was likely to carry the greater burden providing for the children (and particular [sic] the eldest child) than the husband;
(h)the duration of the marriage had significantly affected the earning capacity of the wife in line with the principles accepted by the Full Court in Waters and Jurek (1995) FLC 92-635; and
(i)the circumstances of the husband in his relationship where his partner is well able to maintain herself, is not financially dependent upon him, and renders him some support, which is a factor to be taken into account.
Albeit raised in the context of the wife’s s 79(2) challenge, Ground 5 of the wife’s Notice of Appeal, as advanced by Senior Counsel for the wife at the hearing of the appeal, can be considered in conjunction with Ground 1 and is, in reality, pivotal to the success of the s 75(2) challenge.
Ground 5 of the Notice of Appeal provided:
5.The trial judge erred in discounting the value of the assets to be retained by the husband as such a finding was:
(a)contrary to the weight of the evidence; and
(b)not a position maintained by either party at trial.
Our consideration of the s 75(2) challenge advanced on behalf of the wife is best commenced by reading the statement made by the trial Judge under the heading “Conclusion” that:
302.As I have indicated above, a potential disparity of income and future earning capacity in this matter weighs heavily. In the normal course of adjustment in the order of 10 to 15 per cent in favour of the wife may well be appropriate.

It was fairly conceded by Counsel for the husband that the adjustment to which the trial Judge there referred represented a reasonable exercise of discretion having regard to the matters to which his Honour had earlier referred.
It was submitted on behalf of the wife, whether in the context of s 75(2) or s 79(2) of the Act, that the trial Judge erred by then discounting the potential s 75(2) adjustment in the wife’s favour by 10 to 15 per cent on the basis upon which he did. Why the trial Judge declined to make a s 75(2) adjustment in the wife’s favour is not in doubt.
His Honour said in that regard:
310.In a very real sense the entitlements of the husband as against the asset pool should be the subject of discounting as either that they are unlikely to ever be realised or any realisation of the value is likely to be deferred or otherwise dependant upon the husband’s own earning capacity.
311.The tangible asset pool in this matter is in reality very small and in those circumstances I am not satisfied that I should make an order that has the effect of making the husband liable to obtain further borrowings to effect a settlement with the wife or otherwise make a further payment to her beyond the amount held from the proceeds of sale.
312.To make such an order would, in my view, ignore the realities of what is indeed held by the husband when compared with that held by the wife.
The trial Judge had earlier recorded:
305.The significant difference between the asset position of the parties that I have considered above and in terms of the total of the assets held by them is the nature of the assets held by the parties.
As the submissions of Counsel for both parties make clear, the fate of these challenges turns upon whether the trial Judge could “discount” on the basis upon which he stated that he had.
In the course of his oral submissions, Senior Counsel for the wife ultimately submitted that, the quantification of the net asset pool as found by the trial Judge having not been controversial at trial, particularly so far as it related to assets which the husband would retain, it was not open to the trial Judge to go behind those figures or “discount” them in any way. So doing was submitted to be erroneous in principle.
Senior Counsel for the wife submitted that, with the possible exception of superannuation interests which would not vest for a significant period of time, having uncontroversially determined the value of properties of the parties to a marriage, it was not reasonably open to the trial Judge to rely upon some unquantified and arbitrarily determined lesser value for such assets.
It was further submitted by Senior Counsel for the wife that the fact that assets were “unlikely to ever be realised”, or that realisation was likely to be “deferred”, or otherwise dependent upon other factors, were not reasons for discounting the valuation. Sensibly, it was conceded that the inability to realise an asset, immediately or at all, may well, impact upon the valuation of such asset for balance sheet purposes. Once thus determined however, it was submitted that there was no basis for further diminution of the value of the asset.
Senior Counsel for the wife embraced a suggestion from the Court that, if the trial Judge’s “discounting” approach was correct in principle, then there could be similar discounting with respect to any property, including a residence, farm, factory, share portfolio or any asset, which was potentially unlikely to be realised during the lifetime of a party to the marriage, or the realisation of which was likely to be deferred, or dependent upon other circumstances occurring in that party’s life.
Counsel for the husband asserted that the trial Judge’s discretion had not miscarried, for a variety of reasons asserted in reliance upon the decisions of the High Court in House v The King (1936) 55 CLR 499, and the judgment of Brennan J in Norbis v Norbis (1986) 161 CLR 513.
With respect to Counsel for the husband, we do not perceive that, as ultimately agitated, these complaints involve the exercise of discretion. The issue is one of principle, namely whether what is undoubtedly “property” of a party or parties to a marriage, having been uncontroversially valued, and included in the balance sheet of assets and liabilities at Step 1 (see Hickey (supra)), can permissibly be subsequently “discounted” because it is “unlikely to ever be realised or any realisation of the value is likely to be deferred or otherwise dependent upon” other financial circumstances of the party who owns it.
Properly, Counsel for the husband did not dispute the reality that it was only by the “discounting” that the trial Judge reached his conclusion that the wife should not have the benefit of the 10 – 15 per cent adjustment under s 75(2) which would otherwise be appropriate.
Counsel for the husband further sought to resist this challenge by reference to a number of decisions of the Court in which the scope of s 79(2) of the Act was considered. We do not disagree with anything there said. Indeed, in Manolis and Manolis (No 2) [2011] FamCAFC 105 the Full Court said:
65.It can be seen that power to make orders in regard to property is not exhausted after the third step. It is not until orders are made that the power is exhausted. The exercise of power pursuant to s 79 of the Act remains subject to the overarching requirement of justice and equity imposed by s 79(2) until it is exhausted. Therefore, we cannot accept that the Federal Magistrate lacked the “power” to revisit the outcome to which she had been led by her consideration of s 79(4) and s 75(2) factors by reference to s 79(2) of the Act. If so doing persuaded her Honour that her proposed outcome was not just and equitable, she could not properly make orders in those terms.
66.Having regard to the nature and extent of the matters which had been evaluated pursuant to s 79(4) and s 75(2) of the Act prior to her consideration of s 79(2), the Federal Magistrate’s scope for varying the substance of the outcome resulting from that exercise would have been limited. It is difficult to discern specific matters impacting a consideration of s 79(2) which are not articulated in either s 79(4) or s 75(2) of the Act. The section does however oblige the court to “stand back” from its preliminary determination, and consider its impact. So doing may inform the terms of the orders appropriate to produce a just and equitable outcome in those terms. It may result in a re-consideration of s 79(4) and or s 75(2) factors, and a different outcome. Whatever the scope of s 79(2), the court’s determination with respect to it cannot be dependent upon findings or conclusions which are irreconcilable with those recorded in the context of a consideration of s 79(4) or s 75(2). Regrettably, that is what occurred in this case. In our view, paragraphs 71 and 78 of her Honour’s reasons cannot stand together.
Counsel for the husband sought to rely upon the decision of Thackray AJ (as his Honour then was) in Woollams and Woollams (2004) FLC 93-195. The facts of the case, to which Counsel for the husband referred, rendered the conclusion reached in that case unsurprising. As is not in doubt, in Woollams (supra), the husband could not, potentially for some decades, access the value of his superannuation interests. As the subsequent decision of the majority in the Full Court in Coghlan and Coghlan (2005) FLC 93-220 made clear, in the exercise of the trial Judge’s discretion, the husband’s superannuation interests could permissibly have been the subject of a splitting order, or taken into account as a financial resource pursuant to s75(2)(e) of the Act. Nothing arising from the decision in Woollams (supra) materially assists the husband in this case.
There was no evidence before the trial Judge that the husband could not “access” the value of any of the property which he would retain pursuant to any orders made by the trial Judge. The husband intended, as was open to him, to not realise any of that property. Whilst that was reasonable on the husband’s part, it was not a matter which in our view could permissibly be relied upon to reduce what would otherwise be the wife’s proper entitlement. It is not difficult to understand why that is so.
In our view, the trial Judge erred in principle in his approach to the “discounting” of property which the husband was to retain. Inferentially, the trial Judge “discounted” by $300,000 to $450,000 having regard to the comments recorded by him in paragraph 302 of his reasons, and the reality that the asset pool was worth $1.5 million net. How that discount was calculated is not apparent from the trial Judge’s reasons. Whatever the basis, the effect was the same as reducing the value of the husband’s practice from between 66 per cent to 100 per cent.
Implicit in the unchallenged valuation of the goodwill of the husband’s practice of $449,853 (see par 257 of the reasons) is the reality that it could be traded in the market place. If the husband’s case was that it could not, that would have been a matter to raise at trial which, if accepted, may have produced a lower valuation than that which the trial Judge uncontroversially recorded.
We find these grounds have substance.

spousal maintenance claim

Having regard to our conclusions with respect to the challenges to the determination of the proceedings for settlement of property, and the obvious impact of those conclusions upon the trial Judge’s determination of the wife’s spousal maintenance claim, it is strictly unnecessary, and probably artificial in any event, to explore the wife’s spousal maintenance claim in detail which is Ground 9 of her Notice of Appeal.
Without expressing a concluded view, it being unnecessary, and unhelpful to do so, it does appear arguable that the trial Judge approached the issue in reliance upon erroneous findings of fact.

conclusion

Having regard to the grounds of appeal which have found favour, and the issues which they raise, and the probability that further evidence is likely to be adduced by both parties, and to be controversial, we are disinclined to re-exercise the trial Judge’s discretion. Put simply, to do so would probably be a case of hope over experience. If we were to re-exercise the trial Judge’s discretion, if either party was dissatisfied with our determination, he or she could only seek to challenge that determination by way of application for special leave to appeal to the High Court. That would be regrettable.
We do not propose to make any orders constraining the parties or the trial Judge in relation to the re-hearing of the proceedings. Given the nature and extent of the findings of the trial Judge which have, sensibly, not been controversial in the appeal to this Court, the absence of such constraint ought not encourage the parties to re-agitate those issues, or discourage the Judge re-hearing the proceedings from an appropriately robust response if they seek to.

costs

In our view, both parties should receive costs certificates with respect to the appeal and the re-hearing.

I certify that the preceding ninety nine (99) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Coleman, Thackray & Ainslie-Wallace JJ) delivered on 10 August 2012.

Associate:

Date: 10.08.2012