GALLIANO & GALLIANO
[2011] FamCAFC 149
•13 July 2011
FAMILY COURT OF AUSTRALIA
| GALLIANO & GALLIANO | [2011] FamCAFC 149 |
| FAMILY LAW – APPEAL FROM DECISION OF FEDERAL MAGISTRATE – PROPERTY SETTLEMENT – CONTRIBUTIONS - where the Federal Magistrate made a finding of equal contribution – where the husband complained that the Federal Magistrate failed to take into account his greater financial contribution – where the husband’s worker’s compensation payments exceeded the income of the wife – where the husband received a lump sum compensation payment to which the wife did not contribute – where the parties made appropriate non-financial and homemaker contributions during cohabitation – where the wife made greater contributions after separation – found to be merit in the grounds of appeal – appeal allowed FAMILY LAW - RE-EXERCISE OF DISCRETION – where there is no challenge to the net asset pool as found by the Federal Magistrate nor his Honour’s findings of a 5% adjustment on the basis of the relevant s 75(2) factors – where there was little to choose between the initial contribution of the parties - where the husband’s financial contribution during cohabitation far outweighed the wife’s – where the wife’s contribution post-separation outweighed the husband’s – where the husband’s contributions overall outweighed the wife’s - found that the division of the net asset pool, taking into account the unchallenged adjustment of 5 per cent for the relevant s 75(2) factors, should be 65 per cent/35 per cent in favour of the husband – orders just and equitable. |
| Family Law Act 1975 (Cth) – s 72(2), s 79(2) |
| Antmann & Antmann (1980) FLC 90-908 |
| APPELLANT: | Mr Galliano |
| RESPONDENT: | Ms Galliano |
| FILE NUMBER: | ADC | 4794 | of | 2007 |
| APPEAL NUMBER: | SA | 45 | of | 2010 |
| DATE DELIVERED: | 13 July 2011 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Strickland J |
| HEARING DATE: | 20 December 2010 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 16 June 2010 |
| LOWER COURT MNC: | [2010] FMCAfam 606 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Tredrea |
| SOLICITOR FOR THE APPELLANT: | Di Rosa Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Birchall |
| SOLICITOR FOR THE RESPONDENT: | Norman Waterhouse |
Orders
The appeal be allowed.
Paragraphs 1, 2 and 3 of the orders made by Federal Magistrate Simpson on
16 June 2010 be set aside and in lieu thereof the following orders be made:
(a)Within six (6) weeks of the date hereof the wife pay to the husband the sum of $44,653.
(b)Contemporaneously with the payment referred to in paragraph (2)(a) hereof:
(i)The husband transfer to the wife all that his estate and interest in the said property;
(ii)The wife do all acts and things and sign all such documents as are necessary to re-finance all mortgages registered on the title to the said property into her name solely.
(c)In the event that the wife is unable to comply with paragraph (2)(a) hereof the parties forthwith sign all documents and do all acts and things necessary to sell the said property, and the proceeds of sale be disbursed as follows:
(i)Firstly, to pay the costs, commission and expenses of sale;
(ii)
Secondly, to discharge all mortgages registered on the title to the said property, but on the basis that any amount that the wife has either drawn down on the mortgage with P T V Ltd or any amount that the wife has obtained under any further mortgage registered on the title to the property at S pursuant to the order made by Federal Magistrate Simpson on
9 December 2010 be paid out from the wife’s share of the proceeds of sale.
(iii)Thirdly, in payment of the amounts specified in paragraph (2)(a) hereof to the husband;
(iv)Fourthly, the balance to the wife absolutely after allowing for the calculation referred to in sub-paragraph (c) (ii) above.
(d)In the event of sale of the said property, that sale take place by public auction at a time and at a reserve price to be agreed between the parties (and if not agreed as determined by the President of the Real Estate Institute of South Australia, or nominee) and liberty be reserved to both parties to apply to the Federal Magistrates Court in the event of any dispute or disagreement between them concerning the said sale.
IT IS NOTED that publication of this judgment under the pseudonym Galliano & Galliano is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE |
Appeal Number: SA 45 of 2010
File Number: ADC 4794 of 2007
| Mr Galliano |
Appellant
And
| Ms Galliano |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal by Mr Galliano (“the husband”) against orders made by Federal Magistrate Simpson on 16 June 2010 with respect to property settlement in proceedings between the husband and Ms Galliano (“the wife”).
In summary, the Federal Magistrate found the parties’ contributions to be equal and made an adjustment of 5 per cent in favour of the husband on account of s 75(2) factors. The asset pool (including superannuation) of $496,471 was therefore to be divided 55 per cent/45 per cent in favour of the husband.
This appeal is being determined by me as a single judge, following a direction by the Chief Justice pursuant to s 94AAA(3) of the Family Law Act 1975 (Cth) (“the Act”).
The wife seeks that the husband’s appeal be dismissed.
Background
At the time of the trial the husband was aged 31 years and the wife was aged 32 years.
The parties met in 1998. There was some dispute between the parties as to whether cohabitation commenced in 1999 (according to the wife) or 2002 (according to the husband). The Federal Magistrate found that cohabitation commenced in 1999.
At the time the parties met the wife was working as a retail assistant and the husband was in receipt of workers’ compensation payments as a result of injuries sustained to both of his wrists while working as a builder’s labourer.
For approximately nine months after they commenced cohabitation the parties lived at a property at S owned by the husband’s mother. The parties paid rent to the husband’s father.
In 2001 the parties purchased a block of land at H (“the [H] property”) for $33,500. The property was registered solely in the name of the husband. The parties obtained a joint mortgage for $22,786 with the remainder paid from the husband’s bank account. The wife deposited $4,000 into this account as her contribution.
On 12 February 2002 the parties purchased a property at S (“the [S] property”) for $127,000. The wife borrowed $6,000 from her mother and $1,000 from her brother to assist with the payment of the stamp duty on the property and other costs. The parties obtained a mortgage over the property for $130,000. The parties subsequently lived in this property.
On 11 April 2003 the H property was sold for $93,500, with the parties receiving net proceeds of $88,600. From these proceeds the husband purchased a motor vehicle, the parties renovated the S property and the wife repaid her mother and brother.
The parties married in June 2003. The cost of the wedding was paid from the proceeds of sale of the H property.
The wife alleged that following their marriage the husband’s behaviour towards her changed. She alleged that he became extremely possessive, violent and threatening and that she became concerned he may have a gambling problem.
The wife was in paid employment throughout the parties’ marriage. The husband did not attempt to find any employment. The husband also regularly smoked marijuana and took other illegal substances.
On 27 August 2004 the parties purchased a block of land at M (“the [M] property”) for $74,000. The parties obtained a loan using the property as security.
In June 2005 the parties started experiencing financial difficulties. The husband moved to his mother’s home at W at this time, with the wife also moving there in July 2005. However, the S property remained untenanted until May 2006. The wife also obtained a second job to help repay the parties’ debts.
The parties separated on 17 July 2006, with the wife leaving the husband’s mother’s home. There was a dispute at trial as to when separation occurred, with the husband claiming that the parties separated in June 2005 when he moved back to his mother’s home. The Federal Magistrate found that separation occurred in July 2006.
One month prior to the parties’ separation, the husband received a lump sum payment of $250,000 in relation to his workers’ compensation claim. The husband had failed to account for $235,203 of these funds at the time of trial.
Approximately three months after the parties’ separation the husband was detained at a hospital clinic for patients with mental illness. On 4 September 2007 the husband was transferred to a campus of a mental health service. The husband was diagnosed with paranoid schizophrenia, complicated by substance abuse. He was also demonstrating antisocial traits and had other medical conditions not related to any psychiatric illness.
In October 2006 the wife obtained employment as a sales representative in the retail industry, initially part-time but this employment became full time in February 2008.
Following separation the wife made the payments of the mortgage over the M property, as well as payments in relation to a line of credit the parties had obtained. In August 2007 the wife discovered that the husband had not been meeting the loan repayments in relation to the S property. A default notice was subsequently received and Supreme Court possession proceedings threatened by the mortgagee. The wife also discovered that the husband had not been paying the council rates or utilities in relation to the property.
The wife commenced proceedings in the Federal Magistrates Court seeking orders for property settlement on 10 September 2007.
On 17 September 2007, upon the application of the wife, the husband’s mother was appointed as his litigation guardian. This appointment was subsequently discharged.
On 16 November 2007 orders were made, inter alia, for the sale of the M property.
On 5 December 2007 orders were made for the sale of the S and M properties.
Due to the husband’s resistance to the sale of the M property, steps were taken for a Registrar of the Court to sign the contract for sale in place of the husband in January 2008. The husband though then declined to sign the necessary documents for settlement of the sale to take place and the wife’s solicitors had to again arrange for the Registrar to sign the same. Eventually settlement took place and net proceeds of $97,232.39 were received by the wife’s solicitors on 4 April 2008. That went to discharge the line of credit and reduce the balance of the mortgage account.
The S property was placed on the market in October 2007, but was not sold.
On 10 August 2008 the wife commenced to reside in the S property.
The matter came before the Federal Magistrate for final hearing on 23 and 26 October 2009. On 26 October 2009 the Federal Magistrate made orders by consent in relation to a number of items of jewellery, furniture and personal effects as outlined in Schedule A to the wife’s Further Amended Application filed on 4 September 2008.
His Honour delivered reasons for judgment and made final orders on 16 June 2010.
On 14 July 2010 the husband filed a Notice of Appeal. The appeal was subsequently deemed abandoned after the husband failed to file his draft appeal index within the time specified in the Family Law Rules 2004 (Cth).
On 7 September 2010 the husband filed an Application in an Appeal seeking that his appeal be reinstated and a supporting affidavit.
The application was listed before me on 5 October 2010. The wife did not consent to but did not oppose the appeal being reinstated. The appeal was thus reinstated on that date.
On 9 December 2010 the Federal Magistrate granted a stay of his Honour’s orders pending resolution of this appeal. That stay was granted subject to the following terms:
2. …
a.The wife is at liberty to draw down the existing mortgage, or further mortgage on the [S] property by the amount of a maximum of a further $50,000 (FIFTY THOUSAND DOLLARS);
b.The husband shall sign any necessary documents to give effect to Order 2(a) above within two (2) clear business days of such documents being presented to the husband’s solicitor and if he fails to do so, this stay shall lapse; and
c.The wife shall make all payments of the outstanding mortgage or mortgages on the [S] property.
Reasons for judgment of the Federal Magistrate
The Federal Magistrate commenced his reasons for judgment by outlining the orders sought by the parties. In summary, the wife sought that the husband transfer his interest in the S property to her, that the husband pay her an additional $40,000, that she retain her superannuation entitlements and that the husband return to her certain items of jewellery, clothing, furniture and other household effects. The husband sought that the S property be sold and the net proceeds of sale be paid 80 per cent to him and
20 per cent to the wife, and that the parties otherwise retain the property in their possession, including superannuation entitlements.
The Federal Magistrate then recorded his assessment of the witnesses. His Honour found the wife to have given her evidence honestly and accurately. His Honour said he had no reason to doubt that the wife’s mother was being truthful in her evidence. However, his Honour formed an adverse view of the husband’s credit. He found the husband to be aggressive rather than frank and open, that he was at times “gratuitously insulting” of the wife and that his version of events was not credible. His Honour thus preferred the evidence of the wife to that of the husband.
The Federal Magistrate then set out the background to this matter and a detailed summary, inter alia, of the parties’ property dealings, the events surrounding their marriage and separation, the husband’s receipt of his worker’s compensation payout, the husband’s mental health issues and the events following separation in relation to their various properties (summarised above).
After setting out the approach to be taken in the s 79 proceedings, the Federal Magistrate identified the parties’ assets and liabilities.
The Federal Magistrate recorded that the husband had failed to satisfactorily account for a large portion of the compensation monies he had received, and that a possible explanation was that the funds had been wasted. In the alternative, the Federal Magistrate said that the husband may still hold the funds, or have used them to purchase assets which he had also failed to fully disclose. His Honour was satisfied that whatever had happened to the monies, it was appropriate to add them back to the pool. As the husband had satisfactorily explained the use of $14,797, the sum of $235,203 was to be added back.
The parties’ other main asset was the S property, which had a value of $285,000, with a mortgage of $79,627.
His Honour thus determined that the net asset pool was $496,471.
Turning to contributions, his Honour recorded that the wife had always worked during the parties’ relationship, while the husband had not, although he had received workers’ compensation payments up until shortly before separation, and he then received a substantial payment finalising his claim.
His Honour noted that while neither party brought assets of significant value into the relationship, they had been relatively successful with real estate activities since cohabitation commenced.
His Honour took into account that the husband had not made full disclosure in relation to the use of the funds received by him or as to any superannuation entitlements he would be expected to have.
The Federal Magistrate had regard to the payments made by the wife by way of direct debits to service the loan and that she had also made a significant non-financial contribution to the sale of the M property and the attempted sale of the S property.
His Honour ultimately found that the parties had made equal contributions.
Turning to the relevant s 75(2) factors, his Honour accepted that the wife was in good health, had a good employment record and that she would continue to advance her career. On the other hand, his Honour accepted that the husband had poor health, although his Honour was of the view that his poor health was “substantially self inflicted”. His Honour hoped that these health issues would be addressed by the husband, and, if he did so, his Honour could not see any reason why the husband could not hold down secure and profitable employment in the future.
His Honour determined that an adjustment of 5 per cent in favour of the husband was appropriate on account of the matters in s 79(4)(d), (e), (f) and (g) and s 75(2) of the Act.
The net asset pool was thus to be divided 55 per cent/45 per cent in favour of the husband. The Federal Magistrate determined that it was appropriate to apply this percentage across both superannuation and non-superannuation assets. Pursuant to this division, the wife was to receive entitlements of $273,059 and the husband was to receive entitlements of $223,412. As no splitting order was sought, the wife was to retain her superannuation entitlements. The Federal Magistrate further proposed that the wife retain the former matrimonial home, subject to the mortgage, and that each party otherwise retain the assets in their possession. The husband would be required to make a payment of $4,994 to the wife.
His Honour was satisfied that this outcome was just and equitable.
Orders made on 16 June 2010
The Federal Magistrate made the following orders on 16 June 2010:
(1)Within 42 days of the making of these orders the husband shall do all acts and things and sign all documents necessary to transfer to the wife all his right, title and interest in the property at [S].
(2)That simultaneous with the transfer in Order 1 hereof:
(e)The wife do all acts and things and sign all such documents as are necessary to refinance the existing mortgage over the former matrimonial home in her name solely; and
(f)The husband pay the wife the sum of $4,994.
(3)That in the event that:
(a)The wife is unable to comply with Order 2(a) hereof; or
(b)The parties need further orders in order to clarify, enforce or implement the reasons for judgment in this matter;
they may relist on 7 days written notice to the other party.
(4)Except as otherwise provided herein the wife be declared the owner at law and in equity of all items of property presently standing in her name or in her possession or control including, but not limited to the following:
(a)Furniture and effects;
(b)… Mitsubishi Lancer motor vehicle; and
(c)The wife’s superannuation.
(5)Except as otherwise provided herein the husband be declared the owner at law and in equity of all items of property presently standing in his name or in his possession or control including, but not limited to the following:
(a)Furniture and effects including but not limited to the following items referred to in Schedule A attached to the wife’s further Amended Application:
(i)Cookware including cutlery;
(ii)Dog kennel and clothes;
(iii)Camera;
(iv)Pot plants;
(v)Elephant fountain;
(vi)Pictures;
(vii)Photo frames;
(viii)Electric Steam/mop; and
(ix)Kitchen appliances.
(b)… Holden Statesman;
(c)Mitsubishi Van;
(d)Mazda Station Wagon;
(e)… Holden Brock Commodore;
(f)Money held by the husband including monies received by the husband for his worker’s compensation claim; and
(g)Jewellery gifted to the wife but retained by the husband.
(6)In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these orders, the Registrar of the Family Court of Australia be appointed pursuant to s.106A of the Family Law Act 1975 to execute such deed or instrument in the name of such party and to do all acts and things necessary to give validity and operation to the deed or instrument.
The husband appeals all orders.
Grounds of appeal and orders sought
The husband’s Notice of Appeal filed on 14 July 2010 contains five grounds of appeal, however, the husband only presses grounds 3 and 4, which both relate to the Federal Magistrate’s findings as to contributions as follows:
3. The learned Federal Magistrate erred in finding at para [113] that the parties made an equal contribution to the net matrimonial asset pool available for distribution.
4. The learned Federal Magistrate erred in failing to find, at para [106] or at all, that the financial contribution of the Appellant Husband during the course of the parties relationship, through workers’ compensation payments substantially outweighed the financial contribution of the Respndent [sic] Wife, through her salaried employment.
The husband seeks that the following orders be made:
…
2. That the appeal be allowed, and the judgment and orders made by the learned Federal Magistrate on 16 June 2010 be set aside.
3. That in lieu thereof, there be orders pursuant to Section 79 that the property at [S] be sold, and that after payment of all selling expenses and the repayment of the outstanding mortgage, the net proceeds be paid in the proportion of 75% to the Appellant Husband and 25% to the Respondent Wife, with the parties otherwise to retain such property (including superannuation entitlements) as is otherwise in their respective possesseion. [sic]
4. That in the alternative, the matter be remitted for further consideration by the Federal Magistrates Court, to be heard and determined according to law.
5. That the Respondent wife pay the Appellant husband’s costs of this appeal, and of the proceedings before the Federal Magistrates Court, as agreed or taxed.
…
Discussion
Grounds 3 and 4
The complaint that the husband makes in these grounds can be expressed as a complaint that in finding that the parties made an equal contribution to the net asset pool the Federal Magistrate failed to take into account the greater financial contributions made by the husband.
The Federal Magistrate found that the net asset pool including the wife’s superannuation entitlements was $496,471. This was made up almost entirely of the balance of the husband’s lump sum compensation payout of $235,203, and the house property at S valued at $285,000 but subject to a mortgage of $79,627.
As his Honour found, the wife worked during cohabitation and the husband did not. However, the husband received worker’s compensation payments until shortly before separation when he received a lump sum payment of $225,000, followed not long thereafter with a payment of $25,000, making a total payment of $250,000.
Although the Federal Magistrate did not make a specific finding, the evidence is quite clear that the husband’s worker’s compensation payments exceeded the income of the wife. Indeed, this was conceded both before the Federal Magistrate and on appeal.
In relation to the lump sum payment there was no evidence of any contribution, financial or otherwise by the wife to the same. That is understandable because it comprised a redemption of the husband’s future worker’s compensation payments.
In these circumstances, the question is asked by the husband, legitimately in my view, how could the Federal Magistrate arrive at a finding of equal contribution?
It is not readily apparent from the reasons of the Federal Magistrate how his Honour moved from a “qualitative evaluation of contribution to a quantitative reflection of such evaluation” (Steinbrenner & Steinbrenner [2008] FamCAFC 193, per Coleman J para 234) but lack of reasons is not a ground of appeal here.
Nevertheless, what his Honour identified in the relevant paragraphs of the reasons is as follows:
…
105.I take into account that the parties here started living together in 1999, married in June 2003 and separated in July 2006.
106.The wife has always worked during the time that the parties have been together. The husband has not been working but has been receiving workers’ compensation payments up until shortly prior to the parties’ separation. He then received the substantial payment for his workers compensation claim previously referred to.
107.Whilst the parties did not bring assets of much value into the relationship they have, since cohabitation commenced, had some success with their real estate activities. They purchased vacant land at [H] in 2001 for $30,000 and sold it in 2003 for $93,500 receiving net proceeds for the sale of $88,600. I take into account the matters dealt with earlier in these reasons that both parties contributed to the acquisition of this asset with the husband initially making a greater financial contribution but the wife nevertheless, having secure employment and steady income, able to make her own financial and other contribution towards this acquisition.
108.The parties purchased the property at [S] in February 2002 for $127,000. At trial the property had a value of $285,000 with $79,627 still secured on the mortgage. Again each of the parties have made significant financial and non financial contributions in relation to this property as has been detailed earlier in these reasons.
109.In 2004 the parties purchased the block of land at [M] for $75,000. That property was largely funded by borrowings secured on the [M] and [S] properties. The net proceeds from the sale of the [S] land in April 2008 was $97,232.
110.I take into account that the husband has not made full disclosure in relation to his financial circumstances both in relation to the whereabouts of monies received by him as well as any superannuation benefits that I would expect him to have.
111.The wife made payments by way of direct debit to service the loan and also made a significant non-financial contribution to the sale of the [M] property and the attempted sale of the [S] property. She also made a significant post separation contribution as detailed earlier in these reasons.
112.It is put on behalf of the husband that the contribution of the parties prior to the application of the applicable s.75(2) factors should be 70/30 in the husband’s favour. Submissions on behalf of the applicant wife suggested that 50/50 was indicated.
113.Having regard to all of the evidence and submissions put I find that the parties have made an equal contribution.
Thus, his Honour in summary says that he took into account the period of cohabitation, the respective work histories and the income of the parties, the contributions in relation to the three properties purchased by the parties during cohabitation, the lack of full disclosure by the husband, and the post-separation contributions of the wife in relation to the properties at M and S.
However, there was no specific analysis, or weighing up of those contributions to be found in his Honour’s reasons for judgment.
There is no doubt that the wife made appropriate financial and non-financial contributions during and after separation, however there is no specific recognition by his Honour of the far greater financial contributions made by the husband, at the very least, in the form of his lump sum compensation payment. Indeed, it is apparent that the husband made the overwhelming financial contribution to the assets of the parties by his ongoing worker’s compensation payments, but particularly by his lump sum payment of $250,000.
That is not to say that I accept unreservedly the submissions of the husband’s counsel or reject the submissions of the wife’s counsel on this topic.
With the former, there is a demonstrable flaw in the approach suggested. Mr Tredrea’s submissions promoted an accounting or strict mathematical approach to the determination of the appeal. For example, he tallied up the unchallenged direct financial contributions of the husband (excluding his income from worker’s compensation payments), arriving at an amount of $282,700. He then submitted that because that represented 57 per cent of the asset pool alone, the finding of the Federal Magistrate of equal contribution could not stand.
In arriving then at what the husband says is the “proper” assessment of contributions, Mr Tredrea submitted that in addition to the 57 per cent identified above, when comparing the respective contributions of the parties to the assets by way of income, the wife has contributed 30 per cent and the husband 70 per cent, and applying this to the balance of 43 per cent of the asset pool results in a further 30 per cent being allocated to the husband, namely a total of 87 per cent in the husband’s favour, leaving the wife of course with
13 per cent.
The flaw in this approach though is that it has long been held in this Court that “[t]he assessment and comparison of contributions, both financial and non-financial, and the translation of that weighing and comparison is not and cannot generally be a strictly mathematical task” (Z & Z (2005) FLC 93-241 at paragraph 165).
In my view, this case exemplifies why a strict mathematical approach is inappropriate. That approach fails to allow for the proper assessment and comparison of all contributions of the parties, both financial and non-financial, and that is an essential aspect of an appropriate exercise of the broad discretion that the Federal Magistrate undoubtedly had.
His Honour set out in his reasons for judgment the important contributions made by the wife, including in particular her post-separation contributions. It is apparent that if it was not for the efforts of the wife in the face of the failure by the husband to comply with orders of the Court, and “his resistance to addressing the parties’ worsening financial circumstances” (paragraph 81), their financial circumstances would have been far worse than they turned out to be.
Some of the relevant contributions made by the wife are as follows:
a.Following separation the wife made the mortgage payments of $490.40 per month in relation to the M property, and she made the payments of $67 per month to a line of credit attached to the mortgage loan over the S property.
b.Despite the husband receiving the rental income from the S property after separation he failed to pay that money into the line of credit, and in breach of the agreement between the parties, the husband also failed to make the mortgage repayments in relation to that property. That led to a default notice seeking payment of $5,123.79 plus legal costs, and threatened possession proceedings.
c.The wife then discovered that the husband had not paid either the council rates or the SA Water charges. As a result, the wife made arrangements to pay these debts off with fortnightly payments, and she also had to pay an emergency services levy debt immediately.
d.The husband had also failed to maintain a sufficient balance in the line of credit account, and that led to extra charges and fees being incurred including extra interest.
e.The wife was obliged to instruct solicitors to negotiate with the mortgagee to forestall possession proceedings, and to institute urgent proceedings in the Federal Magistrates Court against the husband which resulted in orders being made including in relation to the rental income received from the S property, and by way of injunction.
f.In October 2007 the wife engaged agents to sell the M property because she could no longer afford the mortgage repayments. The husband failed to cooperate and the wife was obliged to seek and obtain further orders from the Federal Magistrates Court. The husband also continued to fail to comply with earlier orders of the Court.
g.Despite further orders being made the husband still failed to comply, and for example the wife had to obtain an order for the Registrar to sign the contract for the sale of the M property, and after further obstruction by the husband, the settlement documents, in place of the husband. In the meantime the mortgage accounts for both properties and the line of credit continued in arrears because of the husband’s failure to comply with previous orders.
h.As a result of the need to involve solicitors to negotiate with the mortgagee and to obtain orders in the Federal Magistrates Court the wife incurred significant legal costs.
i.Other payments were also made by the wife in relation to accounts in joint names with Power Loan. These payments totalled $2,076.95 and were made between April 2008 and July 2008. She was also obliged to meet the cost of cleaning the carpet in the S property and to make monthly payments for the house insurance premium.
j.Although the property at M was eventually able to be sold the wife was unable to sell the S property, and she moved into that property on 10 August 2008 to limit the losses that were being incurred. She had to clean the property and to pay outstanding accounts including $1,300 for council rates.
It is quite apparent from his Honour’s reasons that his Honour took all of these contributions into account in making his findings. The question still remains though, was the finding of equal contribution open?
Counsel for the wife suggests that there are other “contributions” that the Federal Magistrate took into account which allowed his Honour to make the finding of equal contribution, namely:
a.The circumstance that “large capital gains” were made on the sale of the H and M properties.
b.The “substantial negative contributions” by the husband, including his “behaviour during the course of the relationship” and, “the use of his income for a variety of personal purposes”.
c.The husband refused to attempt to obtain employment during cohabitation.
However none of these submissions carry any weight.
With the real estate, the fact of the matter is that although profits were made upon each sale, and clearly the wife contributed to that as did the husband, those profits were used to acquire other assets and improve existing assets including by reducing debt. It is still a matter of taking the assets in existence at the date of the hearing and determining the entitlement of the parties to those assets taking into account all contributions of the parties. There is no question, and the Federal Magistrate so found, that both parties made financial and non-financial contributions to the acquisition, improvement and maintenance of the real estate during cohabitation. After separation, it was primarily the wife’s contribution that the Federal Magistrate took into account. Significantly though that still says nothing about the greater financial contribution by the husband by way of at least his lump sum compensation payout.
With the submission of “negative contributions” by the husband, the Court has said on many occasions that it is inappropriate to describe contributions in that way (Antmann & Antmann (1980) FLC 90-908, at 75,744; Kennon & Kennon (1997) FLC 92-757, at 84,294 – 84,295). In any event, in relation to the behaviour of the husband during cohabitation it was not argued before the Federal Magistrate that such behaviour should be taken into account in the way that cases such as Kennon & Kennon allows, and thus that cannot be raised on appeal (Metwally v University of Wollongong [1985] 60 ALR 68, at 71; Coulton v Holcombe (1986) 162 CLR 1, at 7; Rand & Rand (2010) FLC 93-444). The same applies with the suggestion of using income for personal purposes. That was not argued before the Federal Magistrate. The only conduct issue that was relied on by the wife before the Federal Magistrate was the husband’s failure to disclose what he had done with $235,000 of his lump sum payment. However, the Federal Magistrate took that into account by adding back that amount to the asset pool.
Finally, in the circumstances of this case it is a nonsense to suggest that the husband should be penalised, or the wife rewarded because the husband did not seek employment. He received worker’s compensation payments and that was his contribution to the household finances and that is all that is required to be taken into account.
Accordingly none of these further “contributions” can be used to demonstrate that the Federal Magistrate has not erred in his findings on contributions.
In these circumstances the difficulty with the Federal Magistrate’s assessment and comparison of the respective contributions of the parties remains. Although, it is not appropriate to apply a strict mathematical approach to the assessment of contributions, it is apparent that the Federal Magistrate has not adequately taken into account the financial contribution of the husband. The plain facts of the matter are that of the net asset pool available for distribution the husband directly contributed approximately half.
Thus, in the words of the High Court in House v The King (1936) 55 CLR 499, at 504:
It may not appear how the primary judge has reached the result embodied in his order, but if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of discretion is reviewed on the ground that a substantial wrong has in fact occurred.
Similarly, as Lord Justice Asquith said in Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343, at 345:
It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.
Here, in my view, the finding of equal contribution clearly “exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong”.
Thus, there is merit in the grounds of appeal and the appeal must be allowed.
Re-exercise of discretion
Given the appeal is to be allowed, the question becomes whether I should re-exercise the discretion and make alternative orders, or remit the matter to the Federal Magistrates Court for re-hearing.
Both counsel submitted that in the event of the appeal being allowed, the appropriate course is to re-exercise the discretion. In my view that is the most sensible course given the issue to be determined and also taking into account the history of the litigation to date and the cost to the parties of a new trial. There is also little point in delaying finalisation of this matter by remitting it.
Importantly I note that in the event that the discretion is re-exercised neither party sought to rely on further evidence.
Discussion
There is no challenge to the net asset pool as found by the Federal Magistrate, and there is no issue about his Honour’s finding of a 5 per cent adjustment on the basis of the relevant s 75(2) factors. Thus, the only issue for determination is the respective contributions of the parties.
As to the initial contributions of the parties there is no challenge to the Federal Magistrate’s findings and thus I adopt them. They reveal that neither party necessarily made a greater contribution than the other.
As to the respective contributions of the parties during cohabitation, they are as follows:
The husband
a.The husband was not employed but he received worker’s compensation payments for injuries he received at work prior to the commencement of cohabitation. Those payments were greater than the income of the wife from her employment.
b.Approximately one month before separation in July 2006, the husband was awarded a lump sum redemption payment of $250,000. He received $225,000 prior to separation and $25,000 after separation in October 2006. The husband accounted for $14,797 of this money but he failed to disclose what he did with the balance. The amount of $14,797 was expended between June 2006 and March 2007 to pay credit card debts and mortgage repayments, and thus they were all contributions to be taken into account in the husband’s favour. With the balance, the Federal Magistrate added that back to the pool of assets, and there was no challenge to that on appeal. Thus that amount also becomes a direct financial contribution made by the husband.
c.In May 2001 the husband purchased a diamond engagement ring for the wife for $6,000. I assume though that this was purchased from the husband’s income, and therefore it is not appropriate to take it into account twice.
d.The parties purchased three items of real estate during cohabitation. I have set out earlier in these reasons the facts surrounding those purchases, and I do not propose to repeat here the specific contributions made by the husband. There was no challenge to these findings on appeal.
e.Likewise, I have set out above the unchallenged facts relating to the sale of the H property and how the proceeds of sale were expended.
f.As to the husband’s non-financial contributions there was in fact little evidence before his Honour, and no specific finding was made about the same. Again though there was no challenge to this on appeal, and I assume that I can proceed on the basis that the husband made appropriate non-financial contributions during cohabitation.
g.Similarly, there was little evidence and no finding by the Federal Magistrate as to the husband’s contributions as a homemaker, and no challenge to that on appeal. Thus, I also proceed on the basis that his contribution in that regard was appropriate. The parties of course did not have children.
The wife
a.The wife was employed during cohabitation and indeed when the parties were in financial difficulties and living at the husband’s mother’s home the wife obtained a second job to help pay the parties’ debts. Nevertheless, to repeat, it is conceded that the wife’s earnings were less than the income of the husband.
b.As with the husband, I do not need to repeat the facts and circumstance surrounding the purchase of the three items of real estate and the sale of the H property. They reveal the wife’s contributions in this regard.
c.As to the wife’s non-financial contributions, again there was little evidence and no specific finding by the Federal Magistrate. Equally there was no challenge to this on appeal, and as with the husband I proceed on the basis that the wife made appropriate non-financial contributions during cohabitation.
d.Likewise, there was little evidence and no finding by the Federal Magistrate as to the wife’s homemaker contributions and no challenge to this on appeal, and accordingly I proceed on the basis that her contributions in this regard were appropriate.
Pausing there, it is readily apparent that the husband’s contributions far outweighed the wife’s. The most significant factors are the husband’s greater income and in particular the contribution of his lump sum payment of $250,000.
Turning then to the respective contributions of the parties post-separation:
The husband
a.The husband’s financial contribution was minimal. On 19 September 2007 the husband’s mother paid the sum of $6,500 into the mortgage account for the S property and paid a further $1,000 towards the line of credit account. Further, on 5 October 2007 the wife received a cheque from the husband’s mother for $641.81 to be put towards the repayment of the mortgage and the line of credit.
b.The husband of course retained the rent payments from the S property from separation until August 2007.
The wife
a.In relation to the wife’s contributions I refer to and repeat what I have set out above in paragraph 72
Pausing here again, it is apparent that the wife’s contributions post-separation outweigh the husband’s contributions.
The question then becomes how should the respective contributions of the parties over the three relevant periods of time be assessed overall. In my view there is no question that the contributions of the husband outweigh those of the wife and the most significant factor in that assessment is the husband’s financial contributions during cohabitation. The next difficult exercise though is to translate the “words” to “figures” and to determine by how much the husband’s contributions outweigh the wife’s. It is here where the exercise of judicial discretion becomes such a nebulous concept. As Mason and Deane JJ said in Norbis & Norbis (1986) 161 CLR 513 at 518:
Because these assessments call for value judgments in respect of which there is room for reasonable differences of opinion, no particular opinion being uniquely right, the making of the order involves the exercise of a judicial discretion.
However, I am of the view that the greater contributions overall of the husband should be assessed at 20 per cent more than the wife’s. Thus, the percentage division should be 60 per cent/40 per cent in the husband’s favour.
Taking into account the unchallenged adjustment of 5 per cent for the relevant
s 75(2) factors the result is a division of the net asset pool 65 per cent/35 per cent in the husband’s favour.
Next, I need to consider s 79(2) of the Family Law Act. Pursuant to that sub-section the Court cannot make an order unless the Court is satisfied that in all the circumstances it is “just and equitable” to make the order. To assess that it is necessary to stand back and consider the practical effect of the proposed orders (Waters & Jurek (1995) FLC 92-635, JEL & DDF (2001) FLC 93-075; Phillips & Phillips (2002) FLC 93-104).
The net asset pool including the superannuation entitlements of the wife comprise a monetary equivalent of $496,471. Thus the effect of the proposed orders is that the husband will be entitled to net assets of $322,706.15, and the wife $173,764.85.
The husband has had, currently has, and seeks to have the benefit of net assets totalling $278,503 calculated as follows:
Assets
Furniture and effects retained by the husband $3,000
Jewellery gifted to the wife but retained by the husband $13,500
Holden Statesman in the possession of the husband $7,000
Mitsubishi van in the possession of the husband $1,500
Mazda station wagon in the possession of the husband $1,650
Balance notionally remaining of the compensation monies
received by the husband $235,203
Holden Brock Commodore in the husband’s possession $16,200
Total $278,053
The husband in accordance with his Honour’s judgment and which is not subject to challenge on appeal is also to retain the following items:
· Cookware including cutlery;
· Dog kennel and clothes;
· Camera;
· Elephant fountain;
· Pictures;
· Photo frames;
· Electric steam/mop;
· Kitchen appliances.
The wife has had, currently has, and seeks to have the benefit of net assets totalling $218,418 calculated as follows:
Assets
S property $285,000
Mitsubishi Lancer motor vehicle in the wife’s possession $4,000
Wife’s superannuation entitlements $9,045
Total $298,045
Liabilities
Mortgage over the S property $79,627
Net total $218,418
I note that the Federal Magistrate made a mathematical error in paragraph 125 of his reasons for judgment in calculating what the wife would receive by way of net assets. Instead of a net total of $218,418 as his Honour found, the correct amount is $223,412. However, given I have arrived at a different result for the wife, this error is of no moment in my calculations.
Thus, on these bases the wife would have to pay to the husband $44,653.
The wife of course seeks to have the S property, but the husband says it should be sold. There is no evidence before me as to whether the wife can afford to keep that property, subject to the mortgage of $79,627, and also pay to the husband $44,653. However, she should have that opportunity.
The other matter to take into account though is that on 9 December 2010 the Federal Magistrate granted a stay of his orders pending resolution of this appeal upon the basis, inter alia, that the wife be at liberty to draw down the existing mortgage by up to a further $50,000, or take out a second mortgage of up to that amount. At the hearing of the appeal counsel could not tell me if the wife had done this or not, and accordingly I will need to allow for this in the orders that I make. For example, if the wife has increased the mortgage balance by say $50,000 then she will have to be solely responsible for that amount.
Of course, if the wife is not able to retain the property and pay out the husband then that property will have to be sold with the husband receiving from the proceeds of sale the amount to which he is entitled and the wife receiving the balance of those proceeds (allowing for her to be solely responsible for any further mortgage amount taken out by her).
The proposed orders will see the husband retain the balance of his lump sum redemption payout, his furniture and effects, the wife’s jewellery in his possession, his four motor vehicles and the payment of $44,653 from the wife. Alternatively, if the wife cannot afford to keep that property and pay out the husband then the property will need to be sold and the husband will receive the amount to which he is entitled out of the proceeds of that sale.
With the wife she will have the S property subject to the mortgage(s), her motor vehicle and her superannuation. She will have to pay the husband though the sum of $44,653. However, to repeat, if she cannot afford to do this then the house property will have to be sold and after payment of expenses and discharge of the mortgage(s) she will receive the balance of the proceeds of sale (allowing for her to be responsible for any further mortgage amount taken out by her) after the husband has received the amount to which he is entitled.
I pause here to observe that although the husband sought that if the appeal was allowed that all of the orders of the Federal Magistrate be set aside, it is unnecessary to do that. It is only necessary to set aside paragraphs 1, 2 and 3 of those orders given that in the re-exercise of the discretion there would be no change to paragraphs 4, 5 and 6 of those orders.
Taking into account the outcome for each party pursuant to the proposed orders, and bearing in mind the history of the parties, the size and nature of the net asset pool, their respective contributions and the relevant s 75(2) factors, in my view there is nothing unjust or inequitable about the orders that I propose.
I certify that the preceding one hundred and nine (109) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Strickland delivered on 13 July 2011.
Associate:
Date: 13 July 2011
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