FOLEY & FOLEY
[2019] FamCAFC 61
•11 April 2019
FAMILY COURT OF AUSTRALIA
| FOLEY & FOLEY | [2019] FamCAFC 61 |
| FAMILY LAW – APPLICATION IN AN APPEAL – Where the appellant attempted to file a late Application in an Appeal – Where the appellant sought to file an Amended Notice of Appeal incorporating challenges to a separate costs decision – Where the Appeals Registry rejected this document for filing – Where the solicitor and senior counsel for the appellant were informed that two sets of orders cannot be appealed using one Notice of Appeal – Where the appropriate procedures of s 94 of the Family Law Act 1975 (Cth) and r 22.03 of the Family Law Rules 2004 (Cth) were not followed by senior counsel for the appellant – Where it was conceded by senior counsel for the appellant that the Application should be dismissed – Application in an Appeal dismissed. FAMILY LAW – APPEAL – PROPERTY – PROCEDURE – Where senior counsel for the appellant sought leave to rely on an Amended Summary of Appeal – Where the grounds in the Notice of Appeal and Amended Summary of Appeal were difficult to reconcile – Where the Amended Summary of Appeal does not comply with Practice Direction No. 1 of 2017 or r 22.22 of the Family Law Rules.– Where the appellant was permitted to rely on the Amended Summary of Argument with the respondent’s consent – Where the appellant had ample time to file an Amended Notice of Appeal and was bound by the grounds in the original Notice of Appeal. FAMILY LAW– APPEAL – PROPERTY – Where each ground pressed on appeal asserted a discretionary error made by the primary judge – Where such grounds of appeal have a high bar to meet in order to warrant appellant intervention – Where there was an issue as to when the company, which held the business, should be valued – Whether the primary judge attributed an incorrect value to the furniture and contents formally held in the former matrimonial home – Whether the primary judge erred in the findings as to the health of the children and subsequently the adjustment to the respondent to account for this, was plainly unjust –Whether the primary judge erred in finding that the appellant’s conduct in respect of the company was reckless – Whether the primary judge erred in determining that the respondent’s standard of living had reduced – Where no error was found – Appeal dismissed. FAMILY LAW – APPEAL – PROPERTY – COSTS – Where the parties are to file cost submissions within 28 days. |
| Family Law Act 1975 (Cth) ss 75(2), 79(1), 94(1A), 94(2D)(a) Family Court of Australia, Practice Direction No. 1 of 2017 – Conduct of Appeals |
| Foley & Foley (Costs) (2018) 58 Fam LR 52; [2018] FamCA 319 Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63 Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143; [2003] FamCA 395 House v The King (1936) 55 CLR 499; [1936] HCA 40 Mallet v Mallet (1984) 156 CLR 605; [1984] HCA 21 |
| APPELLANT: | Mr Foley |
| RESPONDENT: | Ms Foley |
| FILE NUMBER: | SYC | 3203 | of | 2016 |
| APPEAL NUMBER: | EAA | 39 | of | 2018 |
| DATE DELIVERED: | 11 April 2019 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Alstergren CJ, Watts & Austin JJ |
| HEARING DATE: | 13 September 2018 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 21 December 2017 and corrigendum 14 February 2018 |
| LOWER COURT MNC: | [2017] FamCA 1158 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Neil QC |
| SOLICITOR FOR THE APPELLANT: | Merchant Marriott Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Kennedy |
| SOLICITOR FOR THE RESPONDENT: | Corbett Jessop Law |
Orders
The appeal against the orders of Benjamin J, made on 21 December 2017 and remade on 14 February 2018, be dismissed.
The parties to file written submissions relating to the costs of the appeal within 28 days of the delivery of this judgment.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Foley & Foley has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EAA 39 of 2018
File Number: SYC 3203 of 2016
| Mr Foley |
Appellant
and
| Ms Foley |
Respondent
REASONS FOR JUDGMENT
Introduction
On 21 December 2017, the primary judge made final orders and delivered reasons for judgment in parenting, property, child support and spousal maintenance proceedings between Ms Foley (“the wife”) and Mr Foley (“the husband”), which orders were re-made on 14 February 2018.
By Notice of Appeal filed 14 March 2018, the husband appeals the property settlement order made pursuant to s 79(1) of the Family Law Act 1975 (Cth) (“the Act”). The respondent wife opposes the appeal.
For the reasons that follow, the appeal is to be dismissed.
Background
The parties commenced their relationship in about 1994, married in September 1998 and separated in April 2016.
There are three children of the relationship:
·B (“the eldest child”) who was 17 years old at the time of trial but was due to turn 18 years within the following two months;
·C (“the middle child”) who was 15 years old at the time of trial; and
·D (“the youngest child”) who was 14 years old at the time of trial.
The primary judge did not entertain any application for parenting orders in respect of the eldest child, given her proximity to 18 years of age, and her strong desire to have no contact with the husband. As such, and as outlined by the primary judge at [8], any reference to “the children” in the primary judge’s reasons for judgment was a reference to the middle child and the youngest child. That practice will be repeated in these reasons.
The husband was aged 52 years at the time of trial. Prior to the commencement of the relationship, the husband formed a company installing air conditioning systems called F Pty Ltd (“the Company”). For the duration of the parties’ relationship, the husband worked full-time as the director of the Company.
The wife was aged 48 years at the time of trial. The wife fulfilled the role of homemaker and primary carer for the children, and also provided significant administrative support to the Company, working on average 30 and sometimes up to 50 hours per week at [64].
Throughout the relationship, the husband and wife drew effectively equal salaries from the Company. The Company was successful, particularly in the 2012-13 and 2013-14 financial years. However, the Company’s turnover reduced significantly prior to the parties’ separation in April 2016 and continued to decline during 2017.
Following separation, the husband moved out of the matrimonial home at H Street, Suburb G (“the Suburb G property”). The wife ceased working for the Company and initiated proceedings in the Family Court of Australia.
The issues at trial and the decision of the primary judge
A significant issue between the parties was the value of the Company. Mr Z was engaged as a single expert to determine the value of the Company. Mr Z produced a comprehensive report on the value of the Company and the parties’ self-managed superannuation fund as at 30 June 2016 (“the Report”) (see affidavit of Mr Z filed 13 September 2017). The primary judge accepted Mr Z’s valuation of the Company as at 30 June 2016 to be the most accurate and attributed the Company a value of $1,074,398.
The primary judge found the parties’ total non-superannuation assets to be valued at $7,745,635. Accounting for add-backs of $572,105, liabilities of $392,054 and the parties’ respective superannuation interests of $1,802,941, the total net value of the parties’ property was $9,728,627.
His Honour went on to find that the parties’ contributions to the property pool were equal at [385], and made an adjustment of 15 per cent in favour of the wife having regard to the relevant s 75(2) factors at [425]. To give effect to this adjustment, his Honour made orders that the wife receive property (including superannuation) totalling $4,779,828, and the husband receive property (including superannuation) totalling $2,573,753.
Following delivery of judgment on 21 December 2017, the parties were afforded the opportunity to make submissions as to the final form of the property orders. Following receipt of those submissions, the reasons for judgment, the final orders and a detailed corrigendum were published on 15 February 2018.
As to the remaining orders sought by the wife, the primary judge ordered the husband to pay the wife $1,286 of periodic child support per month for each of the children. However, the primary judge refused the wife’s application for lump sum spousal maintenance.
Application in an Appeal
On 9 February 2018, the wife filed an Application in a Case seeking orders for costs. The primary judge heard from the parties on this issue on 12 March 2018, and made orders and delivered reasons for judgment on 11 May 2018 (“the costs decision”) (see Foley & Foley (2018) 58 Fam LR 52). Order 2 required the husband to pay the wife $359,712, which represented two thirds of her party/party costs.
The husband did not file a Notice of Appeal appealing the costs decision within the required 28 days. However, on 10 September 2018, the husband’s solicitor attempted to file an Application in this appeal which sought leave to adduce further evidence and to file an Amended Notice of Appeal incorporating a number of challenges against the costs decision. The Appeals Registry rejected this document for filing and the husband’s solicitor was informed that it was not permissible to appeal two sets of orders using one Notice of Appeal.
On 13 September 2018, at the commencement of the appeal hearing, senior counsel for the husband sought leave to file an Application in an Appeal. This Application sought to rely on an Amended Notice of Appeal that again contained grounds of appeal challenging the costs judgment but abandoned the allied application to adduce further evidence in the appeal.
It was explained to senior counsel for the husband that the husband’s continued attempts to incorporate an appeal against the costs decision within this appeal represented a disappointing disregard for the appropriate procedures. The proper procedure available to the husband, in order to institute an appeal against the costs judgment, was for him to file a Notice of Appeal within 28 days from its delivery (see s 94(1A) of the Act; r 22.03 of the Family Law Rules 2004 (Cth) (“the Family Law Rules”)). After that period of time had elapsed, the husband could have applied for an extension of time to institute an appeal (see s 94(2D)(a) of the Act; r 1.14(1) of the Family Law Rules). If the husband had taken either course of action then it may have been possible to combine the two appeals, prepare the necessary appeal books and transcripts, afford the wife reasonable opportunity to respond and have the appeals heard concurrently. Following this explanation, senior counsel for the husband rightly conceded that this Application in an Appeal ought to be dismissed.
The appeal
The husband relies on a Notice of Appeal filed 14 March 2018.
The husband’s solicitor filed a Summary of Argument and a List of Authorities on 16 July 2018. The Summary of Argument was 24 pages in length and therefore did not comply with the relevant requirements as set out in paragraph 4 of Practice Direction No. 1 of 2017 and r 22.22 of the Family Law Rules. The List of Authorities was also incomplete.
At the commencement of the appeal hearing, senior counsel for the husband sought leave to rely on an Amended Summary of Argument, which again, was longer than the stipulated length. The husband was permitted to rely on this Amended Summary of Argument with the wife’s consent, however, for the reasons articulated above, all paragraphs pertaining to the costs judgment were not read.
There were some difficulties in reconciling certain arguments contained in the Amended Summary of Argument with the grounds of appeal. To the extent that the Amended Summary of Argument effectively recast rather than explained and supported the grounds of appeal as articulated in the Notice of Appeal, it was not relied upon. The husband had ample opportunity to file an Amended Notice of Appeal if he wished to amend the grounds but he chose not to do so. The husband is bound by the grounds as articulated in the Notice of Appeal filed 14 March 2018.
At the commencement of the appeal hearing, senior counsel for the husband notified the Full Court that Grounds 1, 2, 3 and 7 of the Notice of Appeal were no longer maintained. As a result, only Grounds 4, 5 and 6 were pressed.
Whilst the wife was informed of the abandonment of these grounds of appeal, the Appeals Registrar was not. Timely notification would have prevented judicial time being wasted in preparing for grounds that were, ultimately, abandoned.
All the pressed grounds of appeal assert discretionary error by the primary judge. Such challenges must meet a high bar to justify appellate intervention. As Gibbs CJ observed in Mallet v Mallet (1984) 156 CLR 605 at 614:
The meaning of the statement which is found in the authorities that an appellate court may interfere with an exercise of discretion when it reaches the clear conclusion that no weight, or no sufficient weight, has been given to relevant considerations was explained by Latham CJ in Lovell v Lovell [(1950) 81 CLR 513, at 519], as follows:
“If completely irrelevant considerations have been taken into account and they have really affected the decision the case is clear, and the order, though made in the exercise of a discretion, should be set aside. Similarly, if relevant considerations are plainly ignored the same result follows. But when the appellate tribunal is considering questions of weight it should not regard itself as being in the same position as the learned trial judge. In the absence of exclusion of relevant considerations or the admission of irrelevant considerations an appellate tribunal should not set aside an order made in the exercise of a judicial discretion ... unless the failure to give adequate weight to relevant considerations really amounts to a failure to exercise the discretion actually entrusted to the court.”
(See also Gronow v Gronow (1979) 144 CLR 513 at 519 – 520 per Stephen J).
Ground 4
Ground 4 as stated in the husband’s Notice of Appeal is that:
The trial judge fell into error in valuing [the Company] on the basis of the gross income of the business as reflected in the tax returns pre-dating the 2017 financial year.
The trial judge addressed the value of the Company in the following paragraphs:
155. Mr Z prepared the valuation of the Company in accordance with the valuation approach and methodology set out in appendix C of his report. I accept that methodology. In calculating the value he assessed the future maintainable earnings of the business at some $200,000 with a multiple ($200,000) of 2.75. Adding the net tangible business assets, including the surplus assets, he determined its value at $1,074,398 and set out his conclusions in that respect.
156. He was cross-examined by senior counsel for the husband as to the basis of that methodology and particularly the husband’s circumstances. I am satisfied that Mr Z considered all of those matters and dealt with the valuation on the basis of a willing vendor and a willing purchaser.
157. He was asked to provide a spreadsheet based upon the value of the business if the income had remained as it was in 2015. There has been a downturn since that time. He said if that was the case then the value of the Company would be $2,037,914 (the mid-point). The wife submitted that the value should be on this basis because of the waste by the husband in effectively abandoning the Company in his pursuit of his present partner.
158. The husband contended that the business ought to be valued on the basis of its putative 2017 accounts which would have its value at $477,337 as a consequence of the downturn in his business resulting from the loss of a major client.
159. Mr Z was requested to return to court for further cross-examination on 6 November 2017. He attended at court, however, after the tax return and financial statements of the husband were excluded from his affidavit he was no longer required for cross-examination.
160. The Company has been allowed to founder [sic] by the husband and by the significant travel he has undertaken over the last two years. He has had many weeks away. He has focused his efforts and money on his present partner and her children. The Company has lost some clients but is still viable, as shown by the husband’s willingness to pay high rent and buy another boat. I had regard to the evidence which the husband provided in relation to Mr Z’s report, however, I have found the husband’s evidence generally unreliable.
161. As such I am satisfied that the figures set out in Mr Z’s initial report are likely to be the most accurate figures for the purposes of valuation and I find that the business has a value of 1,074,398.
(Footnotes omitted)
As to the “putative 2017 accounts” referred to by his Honour at [158], on 28 June 2017, the husband’s solicitor provided Mr Z with a number of documents which they described as containing “the figures for the 2016 – 2017 financial year” and unilaterally suggested to Mr Z that they should be included in the report (see affidavit of Mr Z filed 13 September 2018 at p.19 paragraph 3). The documents containing the financial information appeared to have been printed on 27 June 2017. As these documents were produced before the end of the 2016/17 financial year, had not been properly reviewed by an accountant and did not include any year-end adjustments, Mr Z expressed significant reservations about their accuracy (see affidavit of Mr Z filed 13 September 2018 at p.19 paragraph 3, p.52 paragraph 132).
Mr Z took it upon himself to prepare a spreadsheet outlining an “indicative calculation” of the Company’s value as at 30 June 2017 using the putative 2017 accounts (Exhibit E34). This indicative calculation was $651,961. Given the qualifications and deficiencies inherent in the putative 2017 accounts, Mr Z warned his Honour that Exhibit E34 was “heavily qualified” (Transcript 21 September 2017, p.356 line 3).
The husband’s contention on appeal was that the primary judge was obliged to value the Company as close to the date of the hearing as possible, and by accepting its value as at 30 June 2016 pursuant to the Report, his Honour erred in exercising discretion. The husband suggested that the primary judge should have attributed the Company with a value of $651,961, pursuant to Mr Z’s “indicative calculation” as at 30 June 2017 in Exhibit E34.
The primary judge was not obliged to establish the value of the business (or more properly, the Company, which owned the business) at the date of the hearing. Whilst the property of the parties is ordinarily valued at the date of the hearing (see Hickey & Hickey & Attorney – General for the Commonwealth of Australia(Intervener) (2003) FLC 93-143 at [39]), in some circumstances, the interests of justice may be best served by a valuation at a different date. In this case, the single expert expressed significant reservations about more recent financial records of the business. Accordingly, the date of the financial statements which underpinned the single expert’s valuation was a matter which fell within the primary judge’s discretion.
The primary judge found that prior to separation the husband neglected the Company in order to focus on his new relationship at [193], and subsequently that the husband’s conduct with respect to the maintenance of the Company had been “reckless” and had substantially diminished its value at [427]. Ground 6 challenges these findings and will be addressed below, however, it is useful to preface here that we are satisfied that they are not infected by any error.
Having reached this conclusion, the Report’s valuation as at 30 June 2016 was clearly preferable to and more accurate than Exhibit E34.
The Report’s valuation was based on a maintainable EBIT that took into account the Company’s profits from 2014 to 2016, and to some extent, the estimated profit up until 27 June 2017. Mr Z explained the selection of this maintainable earnings figure in paragraph 172 of the Report:
The two year average adjusted profit is $277,000 and the three year average is $313,000. As there has been a decline in the company’s revenue and performance in 2016 to a profit of $191,000 which appears to have continued in to 2017 I select a maintainable earnings figure of $200,000.
In doing so, the Report’s valuation of the Company took into account the decline in the Company’s profit during 2016 and 2017, without discounting the higher profits in previous years.
On the other hand, the maintainable EBIT used in Exhibit E34 was only an average of the Company’s earnings in the 2015-16 financial year and part of the 2016-17 financial year. As a result, the valuation in Exhibit E34 was based only on part of the Company’s two most recent and worst performing years.
Furthermore, as already noted, the putative 2017 accounts were unverified and heavily qualified. As such, so was the indicative calculation of the value of the Company reached in Exhibit E34.
The primary judge’s decision to value the Company at 30 June 2016 pursuant to Mr Z’s Report was not only open to him but was clearly preferable to the valuation as at 30 June 2017 based on Exhibit E34.
Thus, there is no merit in this ground of appeal.
Ground 5
Ground 5 asserts:
That the trial judge erred in finding that the furniture and contents at the Suburb G property were worth $15,000.
In attributing the furniture and contents of the Suburb G property with a value of $15,000 in the property pool at [317], his Honour noted the following at footnote 62:
The husband relies upon evidence of an insurance policy to determine the value of the home contents. This is not evidence of value; it is merely a guess as to what replacement costs may be. It was open for the husband to have the items valued. No such evidence was before me. The wife made an admission, against interest, at $15,000. I have accepted that figure.
The insurance policy referred to by his Honour was a representation the parties made to their insurance company in 2017, in which the parties declared that the replacement cost of the contents of the Suburb G property was $208,500.
As noted by the primary judge, the parties’ representation of the replacement cost of the contents of the Suburb G property was not indicative of its current value. The best remaining evidence before his Honour was the wife’s evidence. As further outlined by his Honour, the husband was at liberty to have the contents individually valued, but he chose not to do so. The wife’s admission of a valuation of $15,000 was the only relevant evidence of the value of the furniture and contents and, accordingly, it was open for the primary judge to rely upon it.
Ground 5 fails.
Ground 6
Ground 6 asserts that:
The exercise of the trial judge’s discretion to alter property interests under s 79(1) of the Family Law Act 1975 (Cth) miscarried.
It is noted that the primary judge found that the husband had perpetrated family violence against the wife during and prior cohabitation, and had subjected and exposed all three children to family violence on a number of occasions at [87]. While the husband does not challenge the finding that he committed family violence, generally he challenges the primary judge’s findings as to how the health of the two youngest children have been impacted by family violence and the weight the primary judge placed on the children’s health in determining the alteration of property interests.
In particular, the husband argued that the primary judge erred in making an adjustment of 15 per cent in favour of the wife for s 75(2) factors. The premise of his challenge was that in exercising the discretion the primary judge made several findings that were not open on the evidence and failed to take into account relevant considerations, which when combined, resulted in the miscarriage of his Honour’s discretion. These asserted errors will each be addressed below.
The husband also contended that the 15 per cent adjustment in favour of the wife was so unreasonable and plainly unjust that it could be considered a failure to properly exercise the discretion. Were the primary judge’s findings regarding the children’s health concerns in error?
In the husband’s Notice of Appeal, the husband asserts error in his Honour’s finding at [401], that “given the children’s health concerns, [the wife’s] care of them will likely be beyond [the age of eighteen]”.
The husband’s Summary of Argument incorporates similar challenges to the following findings:
414. ... [The parenting of the children] will be left primarily to the wife, in difficult circumstances, given the health of the children.
…
436. …Having regard to the fragile health of the children…
As noted earlier at [6], any references by the primary judge to “the children” were to the middle and youngest child collectively. As such, we do not accept the husband’s submission that his Honour’s findings regarding the “children’s health” encompassed the eldest child and his challenges have been confined to the middle and youngest child accordingly. The husband raises three complaints in relation to these findings regarding the children’s health. Firstly, that there was no evidence to support the primary judge’s findings that the children had “health concerns” or that their health was “fragile”. Secondly, that the primary judge erroneously equated the health of the middle child with that of the youngest child. Finally, that there was no evidence to support his Honour’s finding that given the youngest and middle child’s poor health the wife would likely care for them beyond the age of 18 years.
As to the first complaint, we are satisfied that the evidence of the wife, Dr E and Dr RR provided ample support for his Honour’s finding at [401] that the middle and youngest child both had “health concerns”.
In relation to the youngest child, the evidence of the youngest child’s treating psychiatrist, Dr RR, was that she was suffering from “Post-Traumatic Stress Disorder complicated by Major Depression on a background of chronic severe development trauma” (original emphasis) (Exhibit E24, p.2). The primary judge accepted this diagnosis at [129]. On appeal, the husband did not challenge this or any other of his Honour’s findings in relation to the health of the youngest child.
In relation to the middle child, Dr E’s evidence was that she feels “terrified” of her father (Dr E’s Report, p.26), has lacked motivation and experiences difficulty sleeping. Dr E also noted that the middle child had seen a counsellor once but does not like talking about it because it requires her to relive what has happened (see Dr E’s Report, p.28). The wife also gave evidence that the middle child was seeing a counsellor and taking sleeping tablets (see Transcript 19 September 2017, p.131 lines 13-29).
Dr E noted in relation to the youngest child and the middle child that “despite seeming a lot better now, both girls were psychologically vulnerable prior to the separation and it also underscores that they are probably struggling more than might be evident with the current situation” (Dr E’s Report, p.36).
We find no merit in the husband’s argument that “there was no evidence before the primary judge that the eldest and middle child were suffering from mental health issues at the time of trial” (see Amended Summary of Argument at paragraph 17). Nor do we agree that there was no evidence that the middle child was suffering from “mental health issues”. These submissions mischaracterise the nature and minimise the severity of the harm caused to the middle child by the husband’s violent behaviour. Simply because the middle child was not suffering to the extent that she was diagnosed with a psychological condition, does not mean that there was no evidence that she was struggling with a number of health issues.
We note that the primary judge’s findings at [401], [414] and [436] accord with a number of other findings regarding the health of the children:
71. The children have struggled with anxiety and depression and were not well [on the night of separation].
…
239. The husband has wrought significant and likely permanent harm to these children, as evidenced by the wife and Dr E.
240. … [The husband] presents as a continuing risk to the physical and psychological wellbeing of the children. This particularly given the parlous emotional and psychological condition that the husband’s behaviour has already visited on the children.
…
247. The evidence of Dr E and Dr RR shows that these children struggle. The young[est] child is particularly vulnerable.
…
261. These children are scared if not terrified of the husband…
The primary judge’s findings at [401], [414] and [436] were clearly open on the evidence. As such, there is no merit in the husband’s first complaint.
It follows that we find no merit in the husband’s second complaint that his Honour equated the health of the middle child with that of the youngest child. The husband was unable to identify any conflation of the state of their health by the primary judge.
As to the husband’s third complaint, we are satisfied that it was reasonably open for the primary judge to find that considering the youngest and middle child’s health concerns, the wife’s care of them would “likely be beyond” when they each turned 18 years of age at [401].
The husband argued that this finding implied that the wife’s care of the youngest and middle child would be unlimited beyond the age of 18 years. We do not agree with this implication. Having reached the above conclusions regarding the children’s mental health and having rejected the husband’s argument that the children were “fairly self-sufficient” at [399], his Honour merely found that it was likely that the children would not be completely self-sufficient by the age of 18 and therefore, would still require support from the wife.
During the hearing of the appeal, the husband sought to amend this ground to incorporate a new challenge that his Honour’s findings at [401], [414] and [436] were against the weight of the evidence. The husband did not assert an error as to weight in his Notice of Appeal or in the Summary of Argument. The husband is bound by his grounds of appeal and this argument was not permitted.
Did the primary judge err in finding that the husband’s conduct with respect to the maintenance of the Company had been reckless and had substantially diminished its value?
The husband challenges the primary judge’s findings that, “[g]iven the evidence and finding on facts in dispute, I accept and adopt the submissions that the husband’s conduct with respect to the maintenance of the Company has been reckless and has substantially diminished the value of the Company…” at [427].
At trial, it was not in dispute that there was a significant decline in the Company’s revenue during the two years preceding the parties’ separation. The Company’s operating profit before tax reduced from $136,371 in the 2013-2014 financial year, to $15,866 in 2014-2015, and further still to an operating loss of $341,505 in 2015-2016.
However, the reasons for this decline were disputed. The wife argued that the husband’s absence from the business to spend time with his new partner and related expenses represented either a deliberate or a reckless attempt to substantially diminish the Company’s value. The husband denied that he deliberately or recklessly diminished the value of the Company, and instead contended that the Company’s decline was due to a number of commercial factors, including increased competition and a client’s failure to pay a debt of approximately $160,000 after it fell into liquidation.
The evidence and findings on facts in dispute to which the primary judge refers to at [427] are contained in the judgment from [192] – [207]. This evidence pertains to the following:
· The husband was absent from the business during 2016 and the first half of 2017 at [192].
· The husband was “more focused on his new relationship with his current partner” than running the business at [193] and incurred overseas and interstate travel for himself, his current partner and on occasion her children at [194]-[195]. He also bought his current partner an engagement ring for which he paid about $11,000 for at [197].
· The husband formed a relationship with his current partner two months prior to his separation from his wife at [196] which is at odds with what the husband deposed to in his affidavit filed 27 July 2017 that in March 2016 he contemplated ending his marriage to the wife only after seeing a marriage guidance counsellor at [198].
· The husband was in a position to pay monies towards his new partner but did not pay child support at [200]. His Honour found that such behaviour was “troubling”.
· The husband put the financial needs of his current partner and her children above those of the wife and the children at [200]. This saw the husband failing to pay for the children’s school fees [202] but opting to pay for his current partner’s children’s school fees of $450 per week instead at [204].
· The husband transferred 16,000 Qantas frequent flyer points out of the wife’s name at a time where he had sufficient frequent flyer points at [205].
· The husband did not disclose that he operated a bank account in Country U but not until the Sunday night before the final hearing was scheduled to start at [199] and failed to disclose a sale of a German motor vehicle for $75,000 in his financial statement, only disclosing this transaction in his case outline at [207].
· Despite being allegedly in terrible financial circumstances, the husband bought himself a boat valued at $63,000 at [203] and a car valued at $124,000 at [206].
Consequently, we find no merit in the husband’s argument that it was never squarely put to him that his conduct with respect to the Company had been “reckless”. The husband was cross-examined at length about his conduct towards the Company and counsel for the wife explicitly put it to him that he had either deliberately or negligently engaged in conduct designed to diminish the value of the Company (see Transcript 21 September 2017, p.293 lines 14 – 22).
We note that the primary judge did not find at [427], or elsewhere in the reasons, that the husband’s justifications for the Company’s decline in value were not valid. The primary judge did find, however, that the husband’s reckless conduct towards the maintenance of the Company exacerbated the commercial challenges facing the Company. For example, his Honour found that “[w]hile a client or clients may have been lost, the husband’s ability to replace clients was compromised by his regular absences” at [428].
The primary judge’s findings at [427] were open on the evidence. As a result, there is no merit in this complaint.
Did the primary judge err in finding that given the husband’s earning capacity, he is likely to financially recover relatively quickly?
The primary judge found at [421]:
The outcome will leave the husband much worse off than the wife in terms of available non-superannuation. Given his earning capacity the husband is likely to financially recover relatively quickly.
The Notice of Appeal asserts that the primary judge erred in finding that given his earning capacity, the husband is likely to financially recover relatively quickly.
As a result of the division of property on the basis of 65 per cent to the wife and 35 per cent to the husband, the wife received $3,948,688 of the available non-superannuation property, which included the Suburb G property. The husband received $1,601,952 of non-superannuation property, including the Company.
His Honour’s finding that the husband was likely to recover relatively quickly from this position was open on the evidence. In particular, it was supported by the fact that the husband will solely retain the Company and the income derived from it. His Honour reasoned that despite the husband’s reckless conduct in respect of the maintenance of the Company in the latter years of the marriage and its substantial decline in value, it could still adequately secure his financial future. For example:
388. As to the floundering Company, if that is the case it is a consequence of his time away from the business and his focus on his present partner. I accept the submissions of senior counsel for the wife in this respect and I am satisfied the husband has the capacity to restore the business, given his history of work in it over the last few decades or so.
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400. The husband contends that his health and the downturn in business will impact upon his earning capacity. I reject that contention. The husband has focused his efforts on his new partner and her children, he was away from the business for large periods of time over the last two years. The Company has a long and successful history. Once these proceedings are concluded and with the husband settled into a new relationship, it is likely that the Company will flourish and his income will recover to very strong levels. His approach to the cost of housing and the purchase of a boat are implicit indicators that the husband is likewise confident as to his future. During the latter course of the marriage the parties were financially able to draw an income of $20,000 per month.
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428. It is also my view that if the husband applies himself to the Company, it will likely be restored to its former profitability. The Company was or is likely to be extraordinarily profitable, particularly when fully supported by the husband. While a client or clients may have been lost, the husband’s ability to replace clients was compromised by his regular absences.
The above findings were open on the evidence, and supported his Honours finding at [421]. As such, there is no merit in this challenge.
The husband’s Amended Summary of Argument sought to challenge various findings in the above paragraphs that were not raised in his Notice of Appeal. These arguments centred upon two issues: firstly, whether the primary judge was mistaken as to the financial health of the Company around the time of separation; and secondly, whether the primary judge placed sufficient weight on the reasons for the Company’s downturn other than from the husband’s reckless conduct.
As to the first issue, the husband asserted that his Honour made an error of fact in finding that during the latter course of the marriage, the parties were still able to draw a salary of $20,000 per month from the Company at [400] (see Amended Summary of Argument at paragraph 34).
This finding was clearly open on the evidence. Mr Z’s evidence was that in the 2016 financial year the parties drew $332,720 in salary from the Company (see Mr Z’s Report, p.57 paragraph 152(b)). This equates to $27,727 per month. More precisely as to the parties’ drawings closer to separation in April 2016, senior counsel for the husband put it to the wife in cross-examination that on 3 March 2016 the husband and wife each drew a salary of $10,062 from the Company. The wife agreed that the parties made these drawings, which totalled $20,124 (see Transcript 18 September 2017, p.72 lines 5 – 15). We, therefore, reject this argument.
The husband also asserted that the primary judge failed to give sufficient weight to the commercial reasons for the decline in the Company’s performance. These commercial reasons included the high levels of competition within the industry and the Company’s difficulty in retaining existing or securing new clients.
Any challenge as to weight attached to evidence faces a significant hurdle as this is a matter quintessentially for the primary judge: Gronow v Gronow (1979) 144 CLR 513 at 519 – 520. We are not satisfied that the primary judge failed to give adequate weight to the commercial reasons for the Company’s decline such that it amounts to a failure to exercise the discretion entrusted in the primary judge. As outlined above at [73], the primary judge found that the husband’s reckless conduct towards the maintenance of the Company was a substantial, but not the sole, reason for the Company’s downturn. This finding was open to the primary judge.
Did the primary judge err in finding that the standard of living of the wife and children has reduced significantly since separation?
The husband asserted that his Honour’s finding that “the standard of living of the wife and children has reduced significantly since separation” at [407] was not open on the evidence.
Prior to separation, the parties enjoyed a “very good standard of living” including overseas and local holidays at [406]. This was possible through the income derived by the parties from the Company, which even in the latter stages of the marriage, provided the parties with an income of $20,000 per month at [400].
The wife ceased drawing income from the Company at the time of separation. Since then, she has been reliant on the Newstart payment, the Centrelink family benefit, and spousal maintenance and child support from the husband. However, the husband has shown a continual and flagrant disregard for these obligations. The wife’s financial position has been even less certain as a result.
Considering this change in the wife’s financial security, it was open for the primary judge to reason that this would significantly reduce the wife and children’s standard of living. As such, this challenge also fails.
The husband’s Amended Summary of Argument also included a criticism of the weight attached to the affidavit of Mr QQ by the primary judge. Despite there being no reference to this complaint in the Notice of Appeal, we will briefly explain why it also fails. Mr QQ’s affidavit provided evidence of the sale prices of houses in the Suburb G area. The husband relied upon it as support for his submission that the parties should sell the Suburb G property and that the wife could live in a comparable home in the Suburb G area. His Honour assessed the value of Mr QQ’s evidence as follows at [43(l)]:
…This affidavit was of no value in terms of the agreed value of the parties’ home at H Street, Suburb G (‘the Suburb G property’). As to the availability of other properties in the area, it provided purported details of 11 home sales in the Suburb G area from as early as June 2006 to as late as August 2017. There was no context provided for this information and no sign of any expertise applied. There was no evidence of Mr QQ’s qualifications apart from the bland statement that he was a ‘Real Estate Agent’. It was a waste of time and served no forensic purpose…
We find no error in his Honour’s apportionment of weight to Mr QQ’s evidence.
As there is no merit to any of the above asserted errors, it follows that the husband’s contention that their aggregation resulted in an erroneous exercise of discretion under s 75(2) and s 79(1) of the Act must fail.
Was there an unreasonable and plainly unjust result from the primary judge’s exercise of discretion?
The husband argued that the conclusion reached by the primary judge was “so unreasonable or plainly unjust” as to amount to a failure to exercise the discretion: House v The King (1936) 55 CLR 499 at 504 – 505.
The order provided for the husband to retain some personal property, some superannuation, a cash payment of $338,381 from the wife and the Company.
This was a sensible outcome as the wife was no longer employed at the Company [67] and indicated that she did not want to be involved in it [307] and [312]. Further, the husband had control of the Company and proposed that he would retain this in the settlement [293].
In terms of the cash payment of $338,381, this amount will be exhausted entirely when he pays the wife’s cost of $359,712 pursuant to a subsequent costs order made 11 May 2018, which the husband did not appeal.
There was no aspect of the appellant’s submissions that explained why the apportionment of 65/35 and the manner in which the property and superannuation interests were divided between the parties was unreasonable or plainly unjust.
We are not satisfied that the primary judge’s exercise of discretion miscarried in any way and accordingly, this argument also fails.
Conclusion
None of the husband’s complaint demonstrates appealable error.
Accordingly, the appeal should be dismissed.
Costs
At the conclusion of the appeal hearing, the parties proposed to file written submissions as to the costs of the appeal. The parties are to file submissions with the Appeals Registry within 28 days of the date of delivery of this judgment. We reserve the issue of costs to await those submissions.
I certify that the preceding ninety-five (95) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Alstergren CJ, Watts & Austin JJ) delivered on 11 April 2019.
Associate:
Date: 11 April 2019
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