Eufrosin & Eufrosin
[2014] FamCAFC 191
•2 October 2014
FAMILY COURT OF AUSTRALIA
| EUFROSIN & EUFROSIN | [2014] FamCAFC 191 |
| FAMILY LAW – APPEAL – PROPERTY – Where the respondent wife purchased a winning gambling venture ticket after separation – Where the husband submitted that the funds used to purchase the gambling venture ticket were relevant to his entitlement to winnings, and as such should be included within the property pool – Whether the funds used to purchase the ticket are relevant to entitlement – Where the intentions of the parties at the time of purchasing the ticket are central determinant of entitlement – Where the trial judge appropriately treated the gambling venture winnings – Where the husband submitted that he owned unencumbered property before marriage – Whether open for the trial judge to conclude that the husband had no equity in the properties owned before marriage – No error demonstrated by the trial judge – Appeal dismissed. FAMILY LAW – APPEAL – PROPERTY – CONTRIBUTIONS – Where the husband submitted that the trial judge erred in assessing the husband’s initial capital contributions – Whether these factors ought to have sounded in a contributions assessment of 66 per cent in favour of the husband as found by the trial judge – Where no error in principle demonstrated – Where the husband was responsible for managing the parties’ business post-separation – Where the business trading at a loss –Whether the trial judge had insufficient regard to the husband’s exposure to financial risk – Where the trial judge’s discretion was upheld – Appeal dismissed. FAMILY LAW – APPEAL – PROPERTY – “ADD BACKS” – Where the husband submits that the trial judge erred in applying principles governing adjustments pursuant to s 79 of the Act – Where the husband submits the wife’s lottery winnings should have been “added back” post-separation – where trial judge’s assessment upheld. FAMILY LAW – APPEAL – PROPERTY – FUTURE NEEDS – Where the husband submitted that the trial judge erred in applying the s 75(2) factors insofar as it related only to a single asset pool as found by the trial judge – Where the trial judge’s discretion did not miscarry – Appeal dismissed. FAMILY LAW – APPEAL – COSTS – Where the husband’s appeal wholly unsuccessful – Where the husband received significant sums of cash – Where the circumstances warrant a departure from s 117(1) of the Act – Costs ordered in favour of the wife. |
| Family Law Act 1975 (Cth), s 75(2), s 79, s 117 |
| Anastasio and Anastatsio (1981) FLC 91-093 Bolger & Headon [2014] FamCAFC 27 CDJ v VAJ (1998) 197 CLR 172 Coulton v Holcombe (1986) 162 CLR 1 Gronow v Gronow (1979) 144 CLR 513 House v The King (1936) 55 CLR 499 Jong & Yeng [2014] FamCAFC 156 Metwally v University of Wollongong (No 2) (1985) 60 ALR 68 Norbis v Norbis (1986) 161 CLR 513 Stanford v Stanford (2012) 247 CLR 10 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 Zyk and Zyk (1997) FLC 92-644 |
| APPELLANT: | Mr Eufrosin |
| RESPONDENT: | Ms Eufrosin |
| FILE NUMBER: | SYC | 2559 | of | 2009 |
| APPEAL NUMBER: | EA | 66 | of | 2013 |
| DATE DELIVERED: | 2 October 2014 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Thackray, Murphy, Aldridge JJ |
| HEARING DATE: | 30 July 2014 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 3 May 2013 |
| LOWER COURT MNC: | [2013] FamCA 311 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Lethbridge SC & Mr Todd |
| SOLICITOR FOR THE APPELLANT: | B Hayward & Co |
| COUNSEL FOR THE RESPONDENT: | Mr Grieve QC & Ms Messner |
| SOLICITOR FOR THE RESPONDENT: | Athena Touriki Solicitors |
Orders
Made on 30 July 2014:
The Application in an Appeal to amend the Notice of Appeal be allowed.
Made on 2 October 2014:
The Amended Notice of Appeal in EA 66 of 2013 be dismissed.
The appellant husband pay the respondent wife’s costs of and incidental to the appeal as agreed and in default of agreement, as assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Eufrosin & Eufrosin has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 66 of 2013
File Number: SYC 2559 of 2009
| Mr Eufrosin |
Appellant
And
| Ms Eufrosin |
Respondent
REASONS FOR JUDGMENT
This appeal concerns orders for settlement of property made by Stevenson J on 3 May 2013. The parties had been married for 20 years at the time of separation in July 2008. They have two children who were both adults at the time of trial.
At the hearing of the appeal, Senior Counsel for the appellant husband applied for leave to rely upon an Amended Notice of Appeal. For reasons given by the Court at the time, leave was given. Whilst the Amended Notice of Appeal contains eight ostensible “grounds”, counsel identified three central components to the husband’s challenge: her Honour’s treatment of the husband’s assets as at the date of the commencement of the relationship; her Honour’s treatment of money won post-separation by the wife; and, the form of orders ultimately made by her Honour.
The Lottery Win – Grounds 4 and 5
Her Honour divided the parties’ property at trial into “two pools” to distinguish between the wife’s lottery winnings (and the assets derived therefrom) and other property of the parties. Ground 4(ii) challenges that approach. The basis for that challenge is the husband’s broader contention that her Honour erred in finding that he did not contribute to the winnings.
A significant focus in the trial before her Honour, and again before us, was the source of funds used by the wife to purchase the winning ticket. As her Honour identified, there were potentially “four sources” which the wife could have drawn on to purchase the ticket (at [106]). The husband’s primary contention at first instance was that the winning ticket had been purchased using “joint funds” and, thus, he had contributed to the winnings. Ultimately, her Honour determined that the husband made no contribution to the wife’s lottery winnings (at [109] and [119]).
We do not consider the source of the funds to be as relevant to her Honour’s ultimate determination as the husband contends. Nor do we consider that her Honour erred in determining that the husband did not contribute to the winnings.
Recently, the High Court in Stanford v Stanford (2012) 247 CLR 108 reiterated the approach to be taken by courts exercising jurisdiction pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”). Relevant to the instant issue, the High Court said that the requirement that any order altering the legal and equitable interests of the parties must be just and equitable will be readily met where:
42.…as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband wife.
(Original emphasis)
The husband contends that the wife used funds from a business that had been run primarily by him (and other of his family members) during the course of the marital relationship to purchase the lottery ticket. Even if that is accepted, the argument which proceeds from it ignores the reality of the parties’ post-separation lives. The parties had put in place a system whereby regular withdrawals of funds were made by each of them from what was formerly a joint asset, and those funds were applied by each of the parties individually to purposes wholly unconnected with the former marital relationship.
At the time the wife purchased the ticket, some six months after separation, the parties had commenced the process of leading “separate lives”, including separate financial lives. That crucial matter, the importance of which is reinforced by the High Court in Stanford, renders reference to the sources of the funds or nomenclature such as “joint funds” or “matrimonial property” unhelpful in assessing what is just and equitable.
That conclusion is entirely consistent with what this Court has said in a number of cases concerning the treatment of various gambling venture winnings, including Zyk and Zyk (1997) FLC 92-644 and Anastasio and Anastatsio (1981) FLC 91-093. In Anastasio, Baker J said (at 76,649-76,650) in respect of a various gambling venture win obtained during a marriage that:
The [lottery win] which came into the husband’s hands did so at a time when the parties were married and still living together. The moneys for the purchase of the ticket came from the husband’s earnings. I am of the view that a win in the lottery is in no different position to the acquisition of a piece of furniture, a block of land or other asset purchased or acquired by parties during a marriage with funds provided by either or both of them.
…
Marriage is for most partners an economic union.
…
I have no doubt that the purchase of lottery tickets was in furtherance of a joint matrimonial purpose and therefore any resultant win in the lottery must be regarded as a matrimonial asset.
…
Although the ticket was purchased by the husband, it was so purchased with the object and hope of achieving a matrimonial objective and I propose therefore to regard same as a matrimonial asset.
(Emphasis added)
Similarly, and significant for the instant issue, Nicholson CJ, Fogarty and Baker JJ held in Zyk (at 82,515) that:
…In the ordinary run of marriages a ticket is purchased by one or other of the parties from money which he or she happens to have at that particular time. That fact should not determine the issue. Where both parties are in receipt of income and where their marriage is predicated upon the basis of each contributing their income towards the joint partnership constituted by their marriage, the purchase of the ticket would be regarded as a purchase from joint funds in the same way as any other purchase within that context and would be treated accordingly…Where one party is working and the other is not the same conclusion would ordinarily apply because that is the mode of partnership selected by the parties…There may be cases where the parties have so conducted their affairs and/or so expressed their intentions that this would not be the appropriate conclusion…
(Emphasis added)
As this Court in Zyk made clear, the source of funds should not “determine the issue” of how a lottery win should be treated for s 79 purposes. What is relevant, in our view, is the nature of the parties’ relationship at the time the lottery ticket was purchased. In our view, the authorities just cited, together with what was said by the High Court in Stanford regarding the “common use” of property, is sufficient to dispose of the husband’s contention that her Honour erred in failing to find that he contributed to the wife’s lottery win. At the time the wife purchased the ticket, regardless of the source of the funds, the “joint endeavour” that had been the parties’ marriage had dissolved; there was no longer a “common use” of property. Rather, the parties were applying funds for their respective individual purposes.
In our view, whilst not expressed in those terms, her Honour’s conclusion at [109] that “…the husband made no contribution to the money which the wife applied to purchase the winning [lottery] ticket in [early] 2009” was based on that premise. So much, in our view, is plain from her Honour’s acceptance in [108] that it would be “pure sophistry” to credit the husband with any contribution to the funds used to purchase the ticket.
We can see no merit in the challenge mounted to her Honour’s treatment of the lottery winnings.
As was effectively conceded (properly, in our view) both in written and oral submissions by counsel for the husband, if the challenge to her Honour’s determination that the husband made no contribution to the purchase of the lottery ticket failed (grounds 4(i) and (v) and ground 5), the remaining sub-grounds of ground 4 must also fail.
Grounds 4 and 5 both, therefore, fail.
the Husband’s Assets at the Commencement of the Relationship – Grounds 1 and 2
The central proposition supporting grounds 1 and 2 is that her Honour erred in finding that the husband had very little equity in his assets as at the date of the marriage. Related to that contention is the submission that her Honour’s determination that the parties’ contributions to “Pool 1” were equal was outside the range within which reasonable disagreement is possible; rather, it is submitted that her Honour ought to have assessed the husband’s contributions to the assets in “Pool 1” at not less than 66 per cent. (“Pool 1” comprised property independent of the lottery winnings and their derivative property and liabilities.)
Dealing first with her Honour’s alleged errors of fact, it was submitted on behalf of the husband that her Honour’s finding at [97] of the reasons that “[i]t was unclear whether the other three properties [in which the husband had an interest at the commencement of the parties’ marriage] were subject to any mortgage encumbrance” was contrary to the evidence before her Honour. More specifically, counsel took this Court to passages from the husband’s affidavit in chief which, it is submitted, demonstrate that mortgages previously secured over certain properties had been discharged prior to the parties’ marriage.
At [13] of his affidavit of evidence in chief, the husband states “[t]he mortgages on each of the three home unit blocks were discharged by July 1975 from the net rental income and the net proceeds of the [Suburb A] business”. The husband attaches no documentary evidence to support that contention. Further, and more importantly, the submission overlooks the fact that the husband goes on to depose to further borrowings being secured against “the home unit blocks” and “one of the blocks of units” (which must, by reference to dates, refer to the three units the subject of [13]) in 1977 and 1978. That is, further borrowings were made subsequent to the mortgages apparently being discharged in 1975 and prior to the parties’ marriage.
The husband further challenges her Honour’s finding at [100] that “[i]t would thus appear that the husband … had very little equity in [certain specified] properties as at the date of marriage”. It is submitted that the borrowings of about $2.5 million, which were obtained one year post-marriage and secured against those properties, meant “there is an inescapable inference that there was equity” in those properties. It was further suggested that that inference could also be drawn from the fact that about one year after the parties married, a further $900,000 was borrowed in order to purchase what would later become the former matrimonial home and a home for the husband's brother and his wife.
We were taken to no evidence other than [13] of the husband’ affidavit that would suggest that at the date of marriage the properties were unencumbered. The challenge in grounds 1 and 2 regarding equity brought into the marriage is confined, temporally, to the time of marriage. We therefore consider there to be merit in the submission made by Queen’s Counsel for the wife that her Honour “…could do no more than…” make the observation in [97] that “[i]t was unclear whether the other three properties [in which the husband had an interest at the commencement of the parties’ marriage] were subject to any mortgage encumbrance” at the relevant time, being the commencement of the parties’ relationship.
It was entirely open to the husband to provide evidence that there was equity in the properties as at the date of marriage. He did not. With respect to counsel for the husband, we do not agree that there was an inescapable inference that, by reference to borrowings obtained at least one year after the date of marriage, the husband had equity in the properties as at the date of the parties’ marriage.
We consider that her Honour did not err factually in the manner alleged.
The remaining component of this challenge is directed to the exercise of her Honour’s discretion. The difficulties confronting an appellant challenging a trial judge’s exercise of discretion are well-known and need not be repeated (see, for example, Norbis v Norbis (1986) 161 CLR 513 at 540 per Brennan J, House v The King (1936) 55 CLR 499, Gronow v Gronow (1979) 144 CLR 513 at 519-20 and CDJ v VAJ (1998) 197 CLR 172, particularly per Kirby J at 230). Essentially, the husband’s contention is that, by reference to his “initial contributions”, her Honour’s ultimate determination that the parties’ contributions to “Pool 1” were equal was outside the ambit within which reasonable disagreement is possible and, thus, was “plainly wrong”.
Was her Honour’s assessment of contributions “plainly wrong”?
The husband contends that he brought to the marriage interests in several real properties, together with an interest in a corporate entity. A series of what were described in the hearing before us as “rolling transactions” thereafter occurred. The property in “Pool 1” as at the date of trial comprised the net result of those transactions being such real properties as remained together with approximately $1 million. Those factors, it is submitted, ought to have sounded in a contributions assessment by her Honour of no less than 66 per cent in favour of the husband.
As this Court has reiterated on a number of occasions, the assessment of contributions is not a “mathematical exercise”. We consider the following extract from this Court’s decision in Bolger & Headon [2014] FamCAFC 27 to be apposite:
23.This Court said some 20 years ago in Aleksovski v Aleksovski (1996) FLC 92-705, per Baker and Rowlands JJ at 83,437:
It is therefore necessary that trial Judges weigh and assess the contributions of all kinds and from all sources made by each of the parties throughout the period of their cohabitation and then translate such assessment into a percentage of the overall property of the parties or provide for a transfer of property in specie in accordance with that assessment.
It really comes down to questions of weight. Whilst weight would and must be given to a contribution which a party makes shortly before the separation, less weight may be given to a contribution made by one of the parties to a marriage early in the cohabitation period of a long marriage, particularly in circumstances where the contribution has gone into the parties’ assets or been used up in the payment of family expenses.
24. Kay J held at 83,443:
What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements.
25.Of considerable significance to the approach of the trial Judge, this Court said in Dickons & Dickons [2012] FamCAFC 154:
23.We wish also to refer to the approach of the Federal Magistrate in attributing percentages to differing periods within the relationship, or types of contribution made. There is in our view little to be gained, and much to be said against, approaching the task of assessing contributions by attaching percentages to components of it. (The same, it might be said, applies to attributing a percentage to each of the relevant s 75(2) factors).
24.There can be little doubt that the classification of contributions by reference to terms such as “initial contributions”, “contributions during the relationship”, and “post-separation contributions”, can be helpful as a convenient means of giving coherent expression to the evidence in a s 79 case and to giving coherence to the nature, form and extent of the parties’ respective contributions. However, the task of assessing contributions is holistic and but part of a yet further holistic determination of what orders, if any, represent justice and equity in the particular circumstances of this particular relationship. So much is clear from the terms of s 79 itself and, in particular, s 79(2). The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship.
26.In passages which resonate with the arguments in this appeal and the trial Judge’s reasons to which they relate, this Court went on to say:
25.Doing so is also consistent with the demands of authority that the ultimate assessment of contributions should be made without “…giving over-zealous attention to the ascertainment of the parties’ contributions…” (Norbis v Norbis (1986) 161 CLR 513 at 524) and the well-established recognition in the authorities (acknowledged specifically by her Honour in this case) that the process required of the Court by s 79 is the exercise of a wide discretion, not the performance of a mathematical or accounting exercise.
26.The necessarily imprecise “wide discretion” inherent in what is required by the section is made no more precise or coherent by attributing percentage figures to arbitrary time frames or categorisations of contributions within the relationship. Indeed, we consider that doing so is contrary to the holistic analysis required by the section and, in the usual course of events, should be avoided.
27.In the same year, in Lovine & Connor and Anor (2012) FLC 93-515, this Court said:
42.As part of the process of ultimately determining just and equitable orders under s 79 there is included a complex of discretionary assessments and judgments of many components of contribution, only some of which are capable of measurement in money terms and then often only in historical, rather than present, money terms. Any dictate to the effect that in the course of assessment each disparate component part or kind of contribution must be assigned a discrete and identifiable value or percentage is antithetical to the nature of the discretion involved.
28.We seek to respectfully repeat and emphasise the reference in Lovine to such an approach being “antithetical to the nature of the discretion involved” and the reference in Dickons to such an approach being avoided in the usual course of events. Doing so, we repeat, is not consistent with a holistic assessment of the parties’ contributions which is what s 79(4) requires.
In our view, the arguments advanced on behalf of the husband (primarily, a weighting in favour of specific initial contributions) suggest an approach to assessing contributions which, as the authorities just quoted make plain, is at the least “…antithetical to the nature of the discretion involved” and “…should be avoided”.
Her Honour plainly had regard to the fact that the husband had interests in a number of real properties as well as an interest in a corporate entity (Eufrosin Pty Ltd) at the commencement of the marriage (at [97]). It was open to her Honour to find that he had little equity in those properties as at the date of marriage (at [99]). Her Honour similarly had regard to the fact that at least some of those properties were used to secure borrowings which were, in turn, used to purchase further properties, including the former matrimonial home (at [26]) and that the parties used the sale proceeds from at least one of those properties for the purposes of the marriage, including to purchase investment properties (at [32], [37]-[38] and [105]).
With respect to the husband, we consider that her Honour properly recognised the contributions of each party and, more specifically, her Honour “…weigh[ed] and assess[ed] the contributions of all kinds and from all sources made by each of the parties throughout the period of their cohabitation…” As this Court opined in Aleksovski (1996) FLC 92-705 at 83,437 “…less weight may be given to a contribution made by one of the parties to a marriage early in the cohabitation period of a long marriage, particularly in circumstances where the contribution has gone into the parties’ assets or been used up in the payment of family expenses” (emphasis added).
We consider her Honour’s reasons adequately demonstrate the basis for her determination that an equal contributions assessment was just and equitable in all the circumstances. We do not consider there to be any merit in the husband’s challenge to her Honour’s reasons in that respect (ground 2).
No error of principle has been demonstrated. It is, then, not sufficient that any or all of the members of this Court would have reached a decision different to that of his Honour, including a decision more generous to the husband. The issue is whether the result arrived at by her Honour falls outside the necessarily wide ambit within which reasonable disagreement is possible in the context of the exercise of a wide statutory discretion. Nothing to which we have been taken, nor anything we have read for ourselves, satisfies us that her Honour’s decision was “plainly wrong”.
The challenge to her Honour’s contributions assessment fails. Grounds 1 and 2 fail.
The $250,000 from the term deposit – Grounds 3A and 3B
The central challenge contained in grounds 3A and 3B of the Amended Notice of Appeal is directed to her Honour’s finding that the husband “alone had the benefit...” of $250,000 which he withdrew from the parties’ term deposit in August/September 2008.
That the husband withdrew that sum is uncontroversial. Further, no challenge is made to the following findings of her Honour:
a)The parties took out a business loan in the amount of $250,000 for the purpose of renovating the new premises of their business between April 2007 and April 2008 (at [39] and [104]);
b)The husband, together with his brother, borrowed a further $1.2million between April 2007 and 2009 (at [42]); and
c)The husband withdrew $200,000 from term deposits between April 2007 and April 2008 (at [104]).
Thus, on the basis of those unchallenged findings, leaving aside the business loan, the husband had access to $1,050,000 between April 2007 and 2009. Of that sum, her Honour determined that “there was no clear evidence as to the husband’s use of...” $850,000 (representing the $250,000 withdrawn from the term deposit in August/September 2008 and the husband’s portion of the $1.2 million in borrowings he obtained with his brother). Her Honour held that:
111....Certainly [the husband] paid legal costs of $90,000 and deposited $125,000 into his solicitor’s trust account but it is practically impossible to trace the fate of the balance of about $635,000 with any clarity.
112.I accept that some of this money was injected into the [the retail business] by the husband. Even with this financial assistance, however, [Eufrosin] Pty Ltd incurred losses totalling $486,606 in the 2009, 2010, 2011 and 2012 years...
In the written submissions filed on behalf of the husband, it is argued that “the fact is that the funds paid into the business enabled it to continue to trade notwithstanding the significant trading losses. Correctly interpreted, this explains a significant part of the funds the Husband had available to him post-separation”. However, that submission ignores the finding that “it is practically impossible to trace the fate of the balance of $635,000 with any clarity”. No submission on behalf of the husband identifies any error in that finding. We have been taken to no evidence, and have not read anything for ourselves in the record, that demonstrates how the husband spent that money.
Significant to the challenge mounted in grounds 3A and 3B, the husband did not lead any evidence, save for the losses incurred by the business in the 2009-2012 financial years, to corroborate the amount of money he claimed to have injected into the business. It was entirely open to the husband to do so and, he having failed to do so, it was entirely open to her Honour to find that the husband had had the sole benefit of $250,000, given the evidentiary context that he had had access to $1,050,000 between April 2007 and 2009 (and accounted directly for $215,000).
No error is established. Grounds 3A and 3B fail.
“Add Backs” and Section 79(4) – GROUNDS 6 and 7
Ground 6
The primary contention in ground 6 is that “[t]he Trial Judge erred in failing to add back against the wife as a notional asset the amount of $1,239,189.00 unexplained expenditure since [early] 2009...”
Reference to the transcript of the submissions made at trial by the husband’s counsel (who also appears for the husband on this appeal) reveals that it was not submitted on behalf of the husband that her Honour ought to add back the wife’s alleged expenditure (see, transcript of proceedings, 28 November 2011, p 172, line 29 - p 173, line 18).
It is only in exceptional circumstances that a party will be permitted to raise an issue on appeal which was not raised at trial (Metwally v University of Wollongong (No 2) (1985) 60 ALR 68). Leave was granted to the husband to amend his grounds of appeal over counsel for the wife’s objection. The latter’s written submissions had addressed that particular aspect of the “addback issue” and counsel did not there raise any issue of the matter not having been addressed below. In those circumstances, we will proceed to consider this ground of appeal.
This Court said recently in Jong & Yeng [2014] FamCAFC 156 at [64]:
Fundamental to a consideration of whether expenditure is “added back” into the assets of the parties for division is the source of those moneys. In circumstances such as in this case where a party has been earning an income since separation, it would be necessary to demonstrate that the source of the funds in question was connected to the marriage in some way. ...
(See, also, Chorn & Hopkins (2004) FLC 93-204 at [56]-[58]).
For reasons given earlier, we do not consider her Honour was in error in determining that the husband did not contribute to the wife’s lottery winnings. Those winnings were “not connected to the marriage”. Consequently, it was well within her Honour’s discretion, having identified by reference to established authority that “add backs” are the “exception rather than the rule” (at [87]) and having determined that the husband did not contribute to the wife’s lottery winnings (at [119]), not to add back the amount asserted by the husband.
Further, her Honour identified at [114] that the wife had accounted for expenses which “…would have amounted to a significant sum of money”. In addition to the expenses detailed in [114], the wife also deposed to having given her son $180,000, having bought her mother a car for $20,000 and the payment of other expenses beyond the living expenses contained in [114] (see, affidavit of the wife filed 9 August 2012 at [88]-[91] and [105]). The wife was not challenged in respect of those amounts.
The primary challenge in ground 6 must, then, fail.
Ground 6 also contains an alternative proposition, namely that her Honour erred by failing to take the wife’s asserted “unexplained expenditure” into account in reaching a determination as to whether any adjustment pursuant to s 79(4) (and, in particular, s 75(2)(o)) was just and equitable.
The contention as framed cannot stand; as we have said, her Honour had express regard to the husband’s contention that the wife had failed to explain over $1.2 million (at [113]-[114]). Significantly, whilst her Honour accepted that there were “gaps in the wife’s evidence as to her application of the [lottery] winnings, post-separation borrowings and income from interest on investments and [a business]...”, the trial Judge plainly accepted the wife’s evidence as to expenses which “would have amounted to a significant sum of money...” Again, that finding is not challenged on appeal.
Once it is accepted that there is no merit in a challenge which asserts a failure to take into account a relevant consideration, the challenge becomes one of the weight attributed to a particular part of the evidence.
The expenditure set out in the wife’s affidavit, as detailed in [114] of the reasons, totals at least $783,000. Taking the husband’s case at the highest, the wife has not accounted for approximately $456,000. For reasons we have earlier given, we consider that her Honour’s finding that the husband had failed to adequately account for approximately $635,000 was entirely open to her. Her Honour has determined that there should be no adjustment in favour of either party as a result of the other’s unexplained expenditure of funds. Nothing to which we have been taken, nor anything we have read ourselves, suggests that her Honour’s discretion miscarried in so determining.
Ground 6 fails.
Ground 7
The central challenge in ground 7 is that “[t]he Trial Judge erred in her application of the principles governing adjustment for relevant factors pursuant to s 75(2)...” In particular, it is contended that her Honour erred in “appl[ying] the s 75(2) factors only to the assets she determined comprised Pool 2” and further failed to provide sufficient reasons for so doing.
The wife’s written submissions contend that the husband’s position on appeal in this respect is “altogether inconsistent with the stance taken by him at first instance...” That submission is borne out by reference to the written submissions filed at trial on behalf of the husband, quoted by her Honour at [66] of the reasons. Specifically, it was submitted that:
2.5...Alternatively, if the Court is not receptive to that submission then the [lottery] win should be considered as a s.75(2) matter where it is contended that there should be an adjustment of the amount found to be the wife’s entitlement from the [lottery] winnings of 33.3% to the Husband.
(Emphasis added)
Similarly, in oral submissions before her Honour, it was argued by counsel for the husband that:
So, we say that if your Honour treats it as a 75(2) factor, then the weighting in favour of the husband, as a factor, must have regard to the manner in which the fund [being the monies comprising Pool 2] has been dealt with and what remains of it and must increase the value of the husband’s entitlement as a adjusting percentage in relation to that fund.
(Transcript of proceedings, 28 November 2012, p 173, lines 14-18. Emphasis added.)
As noted earlier, it is only in exceptional circumstances that a party will be entitled to raise on appeal an issue not raised below. This is all the more so when the position adopted on appeal is completely contrary to the express position adopted below (Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; Metwally; and, Coulton v Holcombe (1986) 162 CLR 1).
We are not satisfied that there are circumstances here as would enable the husband to depart from the position adopted by him at trial.
Further, we are by no means satisfied that her Honour’s approach was erroneous. Having made her contributions assessment, when the trial Judge turned to consider s 79(4)(e), her Honour properly recognised that s 75(2)(b) was a powerful factor. Expressed in simple terms, that factor assumed relevance because, as a result of her Honour’s contributions assessment, the wife had over $4.5 million at her disposal and the husband had just over $1.2 million. As a result, her Honour determined that it would be just and equitable for the husband to receive $500,000. Obviously enough, the source of that money was “Pool 2”. It is only in that sense that “Pool 2” is “adjusted” by reference to s 75(2). As noted, the husband contended for an “adjustment” in that manner (that is, payment of a cash sum from “Pool 2”) albeit for a significantly greater amount. We can discern no error in the manner in which her Honour dealt with the relevant s 75(2) factors. More specifically, we consider that [120]-[127] of the reasons make plain that her Honour considered the relevant s 75(2) factors by reference to all the relevant circumstances.
Grounds 7(i)-(iii) fail.
Ground 7(iv) contends that her Honour failed to have regard to the fact that the orders she proposed making would see the husband retaining responsibility for a business that had, post-separation, generated nearly $500,000 in losses.
This ground was, in essence, argued as a particular of ground 9 which deals with the form of her Honour’s orders. To the extent that it independently asserts error by reason of her Honour failing to take account of a relevant consideration, it must fail. Her Honour plainly took that matter into account in assessing s 79(4)(e) (at [122]).
The Form of Orders – Grounds 7(iv) and 9
These two grounds were argued together. Ground 9 states “[t]he Trial Judge erred in structuring the final financial adjustment orders between the parties”. Ground 7(iv) states “[t]he Trial Judge erred ... in that ... she failed to have any or any sufficient regard to the fact that her orders required the Husband to assume the entire risk inherent in the disposal of the parties’ business interests”.
Before her Honour, the husband sought an order for the “sale and winding up...” of the business. More specifically, the husband proposed (in his case outline filed on 23 November 2012) the following relevant orders:
3.That both parties do all acts and things and execute all documents, within one month of the date of these orders, necessary to effect:-
3.1the expeditious sale of the partnership business known as the [V] Business at the best price reasonably obtainable on a ‘walk in walk out’ basis provided that the [V Business] sale price shall not be for not less than $150,000.00 without written agreement between the parties or further order of the court.
3.2the discharge by payment on settlement of the sale of said [V Business] of all liabilities of the said [V Business], [Eufrosin] Pty Ltd, and the [Mr and Ms Eufrosin] partnership, being liabilities guaranteed by, or for which the parties are jointly liable, but to include any liquidation expenses of [Eufrosin] Pty Ltd and the said partnership dissolution costs or the reasonable estimate of such costs and expenses.
3.3the dissolution of the [Mr and Ms Eufrosin Partnership] … provided any and all liabilities are paid in accord with sub order 3.2.
3.4the voluntary liquidation of [Eufrosin] Pty Ltd … provided any and all liabilities are paid in accordance with sub order 3.2 above.
3.5the distribution of any surplus net proceeds of said [V Business] sale equally between the parties, subject to sub orders 3.1, 3.2, 3.3 and 3.4 above.
Counsel for the husband submitted before her Honour in this respect that:
So, the ongoing losses will continue and it would be, in our submission, unjust and inequitable, to leave an open-ended – and I’ll use the phrase running saw – in the hands of one party without providing for some mechanism which either provided for its disposition and the wash up of the parties’ entitlements consistent with your Honour’s findings as to their contribution and section 75(2) entitlements or some claw-back provision and, in our submission, the only way to deal with it is in the manner we propose and that is to provide for the sale and your Honour would put in place, obviously, safeguards for [Ms Eufrosin]. It would probably be sensible that there be a reporting until sale periodically as to trade. Something these parties haven’t done before but one would hope that the opportunity to stem the losses would bring some capacity to look sensibly into the future. The corporation that should be, your Honour, wound up. If it were necessary, your Honour would reserve leave to make application for mechanical orders, should the parties not be able to sort things out for themselves.
(Transcript of proceedings, 28 November 2012, p 175, lines 11-24).
Her Honour ultimately determined that:
128.…On behalf of the husband it was submitted that he and the wife should join in the sale of the retail business operated by [Eufrosin] Pty Limited because “it is apparent that it cannot last and the only option is to get rid of it”. In fact, the business has been under the sole control of the husband for almost the past five years.
129.I will accede to the wife’s proposal that the husband become solely entitled to the assets of the company [Eufrosin] Pty Limited and that he rearrange security for its loans, so as to remove all encumbrances on the titles to the [Suburb C] and [Suburb E] properties. The wife has had no involvement with the company or its business for almost five years and it seems appropriate to me that the husband continue with the sole responsibility and decision-making which he has exercised for the period. He is free to dispose of the [retail] business, if he so chooses, after the necessary transfers have taken place.
(Original emphasis)
It is submitted on behalf of the husband that her Honour erred in failing to order the sale of the business in circumstances where the evidence was plain that it would have to be sold. More specifically, it is submitted that the order that the husband retain the business, which, it is said, was running at a loss, was not just and equitable. The asserted error, then, is that her Honour’s discretion miscarried. As noted earlier, to succeed, the husband would need to satisfy this Court that her Honour’s determination that he should retain the business was “plainly wrong”.
In response, counsel for the wife submitted firstly that, prior to the husband filing his Amended Notice of Appeal some two days before the hearing of the appeal, the husband was urging this Court to re-exercise the discretion and increase the amount payable to the husband. That position, it was submitted, reflected the fact that at the time of the trial (and as was reflected in her Honour’s orders), the parties had implemented an arrangement wherein each party was solely responsible for their respective businesses.
It was further submitted on behalf of the wife that:
7.5Given the unsatisfactory relationship between the parties, order 3 [as sought by the husband and extracted above] would have almost certainly given rise to practical difficulties in its implementation. The primary judge’s decision effectively to vest the responsibility for realising the business and liquidating the company in the appellant was therefore pragmatic and involved no appellable error…
There is no dispute that the business had been offered for sale from March 2010. An offer of $250,000 (which founded the agreed value) was made in March 2012. The wife’s evidence was that the sale did not proceed because “the purchaser [was] not proceeding”.
It was submitted on behalf of the wife before us that there was no evidence before her Honour that the business could not be sold; that is, there was no evidence that, in ordering that the husband retain the business, her Honour was effectively burdening the husband with a business which had incurred losses of approximately $428,000 in the preceding three financial years.
It was also submitted before us that there was no evidence to account for those losses, although we do not consider this to accurately reflect the husband’s evidence which was to the effect that the business had relocated to a significantly smaller site, which was away from the entrance of the building and the “pedestrian traffic” which the former site had enjoyed.
Nonetheless, we do not consider the evidence was unequivocal in terms of the necessity to sell the business. Further, we consider the evidence plainly demonstrated that up to the time of trial, the husband had assumed sole responsibility for the business. Indeed, during cross-examination, the husband conceded that since separation he had “conducted the business of [Eufrosin Pty Ltd] without reference to [the] wife…” (transcript of proceedings, 27 November 2012, p 107, lines 6-14).
In our view, her Honour’s discretion, which resulted in the husband retaining the business, was informed by:
a)Its agreed value at trial;
b)The fact that the husband had, post-separation, been solely responsible for it;
c)The absence of evidence to suggest that it could not be sold;
d)Account being taken of its current unprofitability;
e)There being no evidence to suggest that the husband could not later dispose of it as he saw fit;
f)The fact that her Honour had accorded to the husband a $500,000 cash adjustment on account of s 79(4)(e).
Against that background, we consider that her Honour’s discretion did not miscarry in determining that the husband should be solely responsible for the business and Eufrosin Pty Ltd.
Grounds 7(iv) and 9 fail.
Costs of the Appeal
As is customary, we sought submissions in respect of the costs of the appeal from each of the parties at the conclusion of the hearing of appeal. The husband having been wholly unsuccessful, the wife seeks her costs of and incidental to the appeal.
As a result of her Honour’s orders, the husband received $1,218,994 which included significant sums of cash (including a cash payment of $334,709 from the wife). In our view, that factor, together with the husband having been wholly unsuccessful, constitutes circumstances justifying a departure from s 117(1) of the Act.
We will, then, order that the husband pay the wife’s costs of and incidental to the appeal.
I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 2 October 2014.
Associate:
Date: 2 October 2014
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