Goldsmith & Stinson and Ors
[2019] FamCAFC 230
•2 December 2019
FAMILY COURT OF AUSTRALIA
| GOLDSMITH & STINSON AND ORS | [2019] FamCAFC 230 |
| FAMILY LAW – APPEAL – PROPERTY – Where the wife appealed from property settlement orders made by a judge of the Federal Circuit Court of Australia pursuant to Part VIII of the Family Law Act 1975 (Cth) – Where the trial judge found the spouses overall entitlement was 57.5 per cent to the husband and 42.5 per cent to the wife – Where the second respondents are the executors of the husband’s late father’s estate and did not participate in the appeal – Where the wife contended the trial judge erred in principle by failing to identify and declare her equitable interest in the family home prior to adjusting the parties interests under s 79(2) of the Act – Where the wife contended the process adopted by the trial judge was flawed by the trial judge’s failure to determine the wife’s equity claim to an existing one-half beneficial interest in the family home – Where the trial judge failed to consider the wife’s application seeking a declaration under s 78 of the Act which amounted to a failure to exercise jurisdiction – Where principles in Stanford v Stanford (2012) 247 CLR 104 and Bevan & Bevan (2013) FLC 93-545 are considered – Where the trial judge failed to give adequate weight to the wife’s contributions – Where the trial judge gave inadequate reasons leading to the Full Court accepting the merits of the wife’s case were not given proper and genuine consideration – Where the adjustment made by the trial judge pursuant to s 75(2) of the Act was not made in error – Where findings open on the evidence – Where the appeal succeeds on grounds of legal error and insufficient reasons – Appeal allowed and orders set aside – Proceedings remitted to the Federal Circuit Court of Australia to be re-heard by a judge other than the primary judge. APPEAL – COSTS – Where the appeal is successful – Where appeal upheld for legal error and insufficient reasons – Where the appellant and the first respondent are granted costs certificates pursuant to Federal Proceedings (Costs) Act 1981 (Cth) for the appeal and the rehearing. |
| Family Law Act 1975 (Cth) ss 75(2), 78, 79(2), 79(4) Federal Proceedings (Costs) Act 1981 (Cth) ss 6, 8, 9 |
| Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116 Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33 De Winter and De Winter (1979) FLC 90-605 Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421; [1972] HCA 61 Hearne & Hearne (2015) 53 Fam LR 454; [2015] FamCAFC 178 Lovell v Lovell (1950) 81 CLR 513; [1950] HCA 52 ReMacks; Ex parte Saint (2000) 204 CLR 158; [2000] HCA 62 Re Ross-Jones; Ex parte Green (1984) 156 CLR 185; [1984] HCA 82 Regina v Ross Jones; Ex parte Beaumont (1979) 141 CLR 504; [1979] HCA 5 Robinson Helicopter Company Ltd v McDermott (2016) 331 ALR 550; [2016] HCA 22 Sfakianakis & Sfakianakis [2018] FamCAFC 185 Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35 Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9 Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12 |
| APPELLANT: | Ms Goldsmith |
| FIRST RESPONDENT: | Mr Stinson |
| SECOND RESPONDENTS: | Ms Bowen and Ms Morrison (not participating) |
| FILE NUMBER: | BRC | 397 | of | 2018 |
| APPEAL NUMBER: | NOA | 40 | of | 2019 |
| DATE DELIVERED: | 2 December 2019 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Strickland, Ryan & Austin JJ |
| HEARING DATE: | 29 October 2019 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 12 April 2019 |
| LOWER COURT MNC: | [2019] FCCA 917 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Ms Gillies SC |
| SOLICITOR FOR THE APPELLANT: | Hopgood Ganim Lawyers |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Kirk QC |
SOLICITOR FOR THE FIRST RESPONDENT: | Phillips Family Lawyers |
| SOLICITOR FOR THE SECOND RESPONDENTS: | Walters Lawyers (not participating) |
Orders
The appeal be allowed.
The orders made on 12 April 2019 (and amended under the slip rule on 21 May 2019) pursuant to Part VIII of the Family Law Act 1975 (Cth) be set aside.
The respective applications of the appellant and the first respondent for relief under Part VIII of the Family Law Act 1975 (Cth) are remitted to the Federal Circuit Court for re-hearing by a judge other than the primary judge.
The appellant is granted a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by her in relation to the appeal.
The first respondent is granted a costs certificate pursuant to the provisions of
s 6 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by him in relation to the appeal.
The appellant and the first respondent are granted costs certificates pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being certificates that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise payments under that Act to the parties in respect of the costs incurred by them in relation to the re-hearing.
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 Goldsmith & Stinson and Ors 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 BRISBANE |
Appeal Number: NOA 40 of 2019
File Number: BRC 397 of 2018
| Ms Goldsmith |
Appellant
And
| Mr Stinson |
First Respondent
And
| Ms Bowen and Ms Morrison |
Second Respondents
REASONS FOR JUDGMENT
By an Amended Notice of Appeal, filed on 17 September 2019, the appellant wife appealed from property settlement orders made pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”) between her and the first respondent husband by a judge of the Federal Circuit Court on 12 April 2019. The appealed orders were amended on 21 May 2019 under the slip rule, but the amendment is irrelevant to the appeal.
Orders were also made between the spouses in respect of their children under Part VII of the Act, but none of those orders is the subject of the appeal.
For the reasons which follow, the appeal should be allowed and costs certificates granted.
Background
The spouses commenced cohabitation in January 2004, when the wife moved from Sydney to live with the husband in northern New South Wales, and each introduced assets to their relationship.
The spouses married in 2005 and finally separated in October 2017, though they thereafter remained living separately in the former matrimonial home they had built upon a rural farming property, which neither was prepared to vacate.
The spouses were not the only parties to the proceedings, which were commenced by the husband against only the wife in January 2018 (incorrectly recorded as being in November 2018 in the reasons for judgment). The wife joined, as the second respondents to the proceedings, the husband’s elderly father and his two attorneys. Their joinder to the proceedings was necessary because the husband’s father was then still alive, albeit perhaps infirm, and the wife sought a declaration that he held the land upon which the spouses’ home was built on trust for her and the husband in equal shares. The genesis of her application was that the spouses constructed their house on land to which the husband’s father held exclusive legal title following his alleged promises of their eventual proprietary entitlement to it.
The husband’s father died in late 2018, before the final orders were pronounced, and so the evidence was re-opened to admit further evidence about the husband’s inheritance of his deceased father’s estate. Part of his inheritance comprised the land on which the former matrimonial home was built (“the family home”). The trial judge eventually acceded to the husband’s submission that the family home should simply form a constituent part of the spouses’ property interests available for distribution between them and it was unnecessary to determine the wife’s antecedent application for the declarations of her equitable interest in it and the constructive trust upon which it was held for her.
Including the family home inherited by the husband from his late father, the spouses’ net assets were identified and found to be valued at $4,351,771 (to the nearest dollar). Their respective superannuation interests, held in a self-managed superannuation fund, were found to be collectively valued at $480,621.
The trial judge found the spouses’ contributions should be reflected in the husband’s entitlement to 60 per cent of their assets, but an adjustment of 2.5 per cent under s 75(2) of the Act in the wife’s favour meant the spouses’ overall entitlements were 57.5 per cent to the husband and 42.5 per cent to the wife.
The family home apparently comprised three individual parcels of land. The wife sought orders conferring her with exclusive legal title to at least two of the parcels, including the one upon which the house in which they both still lived was built, but the husband proposed his retention of the exclusive legal title to all three. The trial judge determined that, subject to the husband’s payment and the wife’s receipt of her assessed proportional share of their overall property from other available assets, the three parcels should all be retained by the husband because, aggregated with other local real properties, they comprised the farm upon which the husband conducted a farming enterprise.
The executors of the husband’s late father’s estate, who were formerly his attorneys, were joined by the wife to the appeal as the second respondents but they did not participate in the appeal, as they notified in advance.
Grounds of appeal
Existing property interests (Ground 1)
The wife contended the trial judge erred in principle by failing to first identify and declare the existence of her equitable interest in the family home, before considering under s 79(2) of the Act whether any adjustment of the spouses’ property interests would be just and equitable.
There was no dispute at first instance about the trial judge’s jurisdiction and power to declare the wife’s equitable interest in, and the existence of, the constructive trust over the family home for which she contended. The dispute between the parties was limited to whether or not such jurisdiction and power should have been exercised. It was not exercised and the trial judge fell into error by adopting that approach, but not for the reasons articulated in the appeal. Although the error we have identified was not the gravamen of this ground of appeal, appellate intervention is still warranted. An appeal by way of re-hearing must be a real review and not just an illusion, so obvious errors should be corrected (see Warren v Coombes (1979) 142 CLR 531 at 553; Robinson Helicopter Company Ltd v McDermott (2016) 331 ALR 550 at [43]).
By the time the evidence was finally closed, the wife sought orders declaring, pursuant to s 78 of the Act, that her one-half equitable interest in the family home was held on trust for her, together with allied orders adjusting the spouses’ interests in their property under s 79 of the Act.
The trial judge was presiding over a court of limited jurisdiction and therefore had both the authority and duty to decide whether the pending controversy brought before the court was within the limits of the court’s jurisdiction (see Re Ross-Jones; Ex parte Green (1984) 156 CLR 185 at 193, 217, 222). The parties expressly, and the trial judge inferentially, accepted that the wife’s proposed declaratory orders under s 78 of the Act were within the court’s jurisdiction and, since jurisdiction was regularly invoked by the pending application, her Honour could not, in the exercise of some discretion, decline to hear and determine it. Her Honour was duty bound to exercise the jurisdiction (see ReMacks; Ex parte Saint (2000) 204 CLR 158 at [53]), which duty could only be fulfilled by hearing and deciding all of the wife’s claims for relief; not just her claim for relief pursuant to s 79 of the Act.
However, the trial judge did not do so, which failure amounted to appealable error. The wife’s application under s 78 of the Act was not heard and then dismissed in the exercise of judicial power. Rather, it was not entertained at all. The trial judge said:
209.With the death of the Husband’s father and the inheritance received by the Husband, it is no longer necessary to determine whether the Husband’s father held [the family home] on trust for the parties to ascertain a just and equitable outcome for the parties.
210.The Husband now owns [the family home]. There is no dispute between the parties that they both contributed to that property by constructing the former matrimonial home on it as well as other general improvements on that property. The contributions made by both parties to the current value of [the family home] and to other properties inherited by the Husband will be considered in determining the property orders this [c]ourt will make.
The trial judge was correct in that it was no longer necessary to determine whether the husband’s late father held the family home on trust for the spouses because, importantly, by that stage the family home was owned exclusively by the husband and so the wife abandoned her original application and instead applied for the declaration of her equitable interest in the family home as against the husband. She did not resile from her application for a declaration under s 78 of the Act and the trial judge did not hear that application on its merits.
The husband submitted in the appeal that the permissive language of s 78, which provides that a court may declare a party’s title or rights in property, enabled the trial judge to take the course she did, but that submission is rejected. Such permissive language is no more than statutory recognition of the wide power to either grant or decline declaratory relief (see Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 435). The trial judge was vested with discretion to refuse the remedy sought by the wife, but her Honour had no discretion to refuse the exercise of jurisdiction. For the application under s 78 of the Act to be dismissed in the valid exercise of discretion, it had to be first entertained and considered. But it was not.
That is not to say the wife’s claim for relief under s 78 of the Act ought to have necessarily, or even desirably, been made or maintained. For reasons yet to be addressed, in most cases for property settlement relief it will be unnecessary for spouses to make such declaratory claims against one another, so needlessly applying for such relief only serves to make trials longer and more expensive. However, the wife made the claim and then persistently maintained it, so the trial judge was obliged to deal with it. Of course, treatment of the claim on its merits might have resulted in its dismissal just as easily as its success but, either way, the outcome would then bear upon the question of costs.
Putting the error of the failure to exercise jurisdiction to one side, the argument between the parties in the appeal was confined to whether the trial judge was wrong to avoid enquiring into the existence of the wife’s alleged equitable interest in the family home as part of the wider controversy over the spouses’ competing claims for relief under s 79 of the Act.
In Stanford v Stanford (2012) 247 CLR 108 (“Stanford”), the plurality of the High Court (French CJ, Hayne, Kiefel and Bell JJ) said at 120:
…it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property…
(Original emphasis)
and at 121:
…Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered.
(Footnote omitted)
Subsequently, in Bevan & Bevan (2013) FLC 93-545 (“Bevan”), the plurality of the Full Court said at [31]:
…consideration of an application for property settlement should always begin with identification of the existing property interests of the parties.
and, at [74]-[77]:
…identification of existing legal and equitable interests in property, is nothing new, since “property” has always been understood as incorporating equitable, as well as legal, interests.
…
Once it is recognised a court has power to alter both legal and equitable interests, it follows that it is necessary first to identify all property in which the parties have either a legal or equitable interest…
In Bevan, Finn J also said (at [156]):
…what now must be emphasised is the need for trial judges to identify clearly, and at an early stage of their reasons for judgment, which party has the legal or equitable title to a particular item of property.
However, importantly for present purposes, the plurality in Bevan expressly abstained (at [77]) from articulating any concluded view about:
…the post-Stanford controversy concerning the extent to which it is necessary to decide whether – as between the parties – the legal title accurately reflects their respective interests [in property].
(Original emphasis)
but did venture the provisional view (at [77]-[78]) that:
…where it is accepted that justice and equity require the making of an order [under s 79 of the Act], it would seem unnecessary to complicate proceedings by deciding whether one party has an equitable interest in property held by the other, since the ultimate outcome will not be determined by application of equitable principles but rather by reference to ss 79(4) and 75(2).
Nevertheless, there will be cases…where the assertion (or lack thereof) of an existing equitable interest in property held by the other party may be of critical importance in deciding whether it would be just and equitable to interfere with the existing legal ownership. And of course it will always be important to determine whether one party has an equitable interest in property owned by a third party.
As the High Court stated long ago (see Regina v Ross Jones; Ex parte Beaumont (1979) 141 CLR 504 at 511, 516, 517), a trial judge hearing property settlement proceedings must, in most cases, determine what interests in property the parties already have and where that question arises the court has power to determine it. Since the trial judge can inquire and decide what respective property interests the spouses to matrimonial proceedings possess, there is no reason in principle why, in an appropriate case, declarations as to the property rights of the spouses cannot be made, but whether or not a declaration is necessary is an entirely different question. The plurality in Bevan took the debate further by saying it will usually be unnecessary to complicate proceedings under s 79 of the Act with the resolution of antecedent equity claims between spouses.
To our knowledge, since Bevan, the issue of the need to declare one spouse’s existing equitable interest in property legally held by the other spouse before proceeding to determine their property settlement dispute has not had to be squarely confronted, but the question of whether it was necessary for the trial judge in this instance to determine the wife’s asserted equitable interest in the family home of which the husband was the sole legal owner was central to the way this ground of appeal was argued. For the reasons already given, the success of Ground 1 does not depend upon the resolution of this argument, but it might be helpful if we offer some commentary on the spouses’ submissions.
When the trial began it was undoubtedly necessary for the trial judge to initially determine whether the spouses enjoyed any equitable interest in the family home and, if so, the extent of their interests in it. That is because the husband’s father enjoyed exclusive legal (and ostensible beneficial) ownership of the asset and, absent any finding and declaration as to the spouses’ existing equitable proprietary interests in it, the asset would have been excluded from consideration among those available for division between them in their matrimonial dispute. We reject the husband’s contrary argument at trial as being misconceived. Given the husband’s father’s sole legal interest in the property, which the wife sought to impugn by establishing the spouses’ equitable interests in it, procedural fairness demanded his joinder as a party to the proceedings to afford him the opportunity to resist her application. Of course, this occurred and the second respondents filed a submitting notice and did not otherwise seek to be heard on the point.
However, before orders were pronounced to conclude the proceedings, the husband’s father died and the evidence was then re-opened to admit further evidence proving the husband’s inheritance from his deceased father’s estate, which bequest included the family home. Consequently, by the conclusion of the trial, the husband instead held sole legal (and ostensible beneficial) interest in the family home. The facts having changed, the wife then sought to establish her one-half equitable interest in the property as against the husband. The trial judge implied the wife’s changed position (at [206]), apparently not recollecting the wife had explicitly acknowledged the change.
Although the wife did not amend the form of the declaratory orders she proposed to seek against the husband instead of against his late father’s deceased estate, there could be little doubt about her changed position because she finally submitted:
The fact that the remedial orders that the [c]ourt might may (sic) have changed as a consequence of the death of [the husband’s father] does not affect the Wife’ submissions as to the proper approach and requirement that as between her and the Husband it is still necessary for the [c]ourt to determine the existence of the constructive trust.
(Emphasis added)
Therefore, the question arose as to whether it was still necessary for the trial judge to first determine the wife’s equity claim against the husband before then determining their dispute under s 79 of the Act.
Citing Stanford as authority for the proposition, the wife contended at the trial that it was still necessary for the trial judge to first find her equitable interest in the family home established and to declare the trust in her favour, before moving on to consider the spouses’ rights under s 79 of the Act.
The husband did not say the trial judge could not; only that her Honour need not. His submission, as recorded by the trial judge (at [207]), was that it was unnecessary to do so because the family home was now brought to account in the matrimonial proceedings between the spouses as his asset and the trial judge was able to appropriately provide for the wife’s asserted contributions during and since their cohabitation by making orders under s 79 of the Act settling all of their available property, including the family home. His position accorded with the provisional view expressed in Bevan (at [77]), being that since both spouses openly accepted that justice and equity required the making of an order under s 79 of the Act it was unnecessary to complicate the proceedings by initially deciding whether the wife had an equitable interest in the family home owned by him, because the ultimate outcome would be determined by reference to ss 79(4) and 75(2) of the Act rather than by the application of equitable principles.
The trial judge was “in complete accord” with the husband’s submission and proceeded to determine the issues as he proposed (at [208]-[210]). Her Honour assessed the spouses’ competing claims for property settlement, including by reference to their contributions to the family home inherited by the husband from his late father (at [245], [246], [249], [256], [261]).
Had the wife merely asserted her existing equitable interest in the family home at the trial as an integral part of her submissions directed to the orders which should be made under s 79 of the Act, without making any formal application for a declaration to that effect under s 78 of the Act, then it would not have been necessary for the trial judge to determine the existence of the wife’s asserted equitable interest before deciding the spouses’ rights under s 79 of the Act, at least in the circumstances of this case. That is because both parties accepted it was just and equitable to make orders to adjust their property interests (s 79(2)) and, further, there was sufficient property available to satisfy their respective applications without the need to determine the equity claim (s 79(4)).
To succeed in the appeal with the argument that the trial judge erred by not first determining the existence of her equitable interest in the family home, the wife would need to demonstrate why it was not open to the trial judge to pass over her submission and move straight to resolution of the spouses’ rights under s 79 of the Act. It could only be appealable error if the course taken was not open. The wife did not demonstrate that it was not.
At trial, the wife had at one point contended:
…the [c]ourt is required to determine the legal and equitable ownership and rights to property as the initial step in considering firstly [under s 79(2) of the Act] whether an order for property adjustment ought to be made…
Such an unconditional submission meant that the recognition of her asserted joint beneficial ownership of the family home would bear upon the first question which the trial judge would need to answer under s 79(2) of the Act: was it just and equitable for any order to be made adjusting the spouses’ property rights?
However, the wife then ran a contradictory case, because she asserted the s 79(2) question should be answered affirmatively, regardless of whether or not she enjoyed success with her antecedent application for the declaration of her equitable interest in the family home; since she sought 75 per cent of the spouses’ property if her equitable claim succeeded, but 80 per cent if it did not – though she later revised her claim to 65 per cent, as the trial judge recognised (at [6]-[9]). The wife’s acceptance at trial that the s 79(2) hurdle was surmounted, irrespective of the outcome of her equity claim, sterilised her earlier submission about the need for the trial judge to determine her equity claim before answering the s 79(2) enquiry.
The s 79(2) enquiry was still a mandatory legal step for the trial judge to take, either expressly or by implication, independently of the parties’ positions (see Bevan at [82]; Hearne & Hearne (2015) 53 Fam LR 454 (“Hearne”) at [71], [73], [112], [114]), but the enquiry is usually easily answered when parties jointly encourage its affirmative answer (see Bevan at [165]; Hearne at [75]-[76]; Sfakianakis & Sfakianakis [2018] FamCAFC 185 at [30]). Here, the trial judge correctly noted the necessity to make a determination under s 79(2) of the Act (at [191], [194]) and then found it would be just and equitable to make property settlement orders between the spouses (at [195]-[196]). Having done so, her Honour then proceeded to assess the parties’ respective contributions and how their property interests should be altered to accommodate the considerations mandated by ss 79(4)(a)-(g) of the Act.
In the appeal, the wife argued the process adopted by the trial judge was flawed by the failure to initially determine her equity claim to an existing one-half beneficial interest in the family home. She contended, first, the antecedent determination of her claim might have altered the way the trial judge approached the s 79(2) enquiry because it denied her the chance to argue it was not just and equitable to alter her proprietary interest in the family home, and secondly, the failure to decide the equity claim affected the trial judge’s subsequent analysis of the spouses’ comparative contributions under s 79(4) of the Act.
As to the wife’s first contention, it is patently inconsistent with her maintenance at trial of the submission that it was just and equitable to make some form of property settlement order, regardless of her asserted beneficial interest in the family home, so she is bound by the way in which she ran the trial and is precluded from raising the point on appeal. Because the point was not taken at trial, the husband had no need to address it with more or different evidence which might have defeated it (see Water Board v Moustakas (1988) 180 CLR 491 at 497; Coulton v Holcombe (1986) 162 CLR 1 at 7-8; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438).
However, even though the trial judge would not have been obliged to first determine the wife’s alleged equitable interest in the family home (in the hypothetical absence of her separate claim for relief under s 78 of the Act), her Honour was then obliged to give proper consideration to the features of the evidence the wife emphasised as sounding in her proportional entitlement to property under s 79(4) of the Act. The wife’s second proposition – that the trial judge did not do so – is made good.
Given the trial judge desisted from determining the wife’s equity claim, the inference is fairly available that its disregard affected the way in which the spouses’ contributions were then assessed. The wife’s proprietorship of one-half (or some lesser proportion) of the family home was not then assumed, as it would have been if her equity claim had first been determined successfully. The parties agreed the family home was worth $900,000, so the value of the wife’s property might have been $450,000 more and the value of the husband’s property $450,000 less – not an insignificant difference when the spouses’ net assets were found to be valued at $4,351,771 (to the nearest dollar). The $900,000 differential amounted to over 20 per cent of their property.
The totality of the evidence the wife adduced in support of her equity claim for a constructive trust was not seemingly given the weight it deserved under s 79(4) of the Act, just as the wife submitted she feared would occur. As to her contributions, she submitted:
156.…she has been called upon to contribute her assets in the form of equity in both property and loan facilities to allow the acquisition of [another real property inherited by the husband from his late father] and the construction of the former matrimonial home.
157.Without her contributions there would not be any [other inherited real property], [the family home] or indeed any partnership assets.
Those submissions were premised on the evidence the wife adduced about the spouses’ contributions connected with the family home and the other real properties comprising the farm inherited by the husband, including building improvements upon the land, undertaking hazard reduction, and managing the farming operation.
Although the trial judge acknowledged:
210.…The contributions made by both parties to the current value of [the family home] and to other properties inherited by the Husband will be considered in determining the property orders this [c]ourt will make.
her Honour did not then make any findings in relation to the evidence adduced by the wife about her contributions related to those properties, other than to observe:
261.…It is quite apparent that the parties both made contributions towards at least part of that inheritance by the construction of the former matrimonial home [on one of the parcels] which has measurably increased its value. They have also made contributions to the other inherited properties by farming that land, and by maintaining them and improving the quality of them.
Despite submitting that her contributions related to the family home should be equated to those made by the husband, the wife was only explicitly given credit for the $200,000 she directly contributed to the cost of constructing and furnishing the house, about which there was no factual dispute (at [34], [245], [246]). By comparison, the husband submitted that he alone injected $1.7 million into the asset pool from his inheritance, which calculation included the full value of the family home and so he made little or no allowance for the wife’s contributions related to the properties comprising the inheritance (at [241]).
The trial judge trod a tentative path through the competing submissions by, in effect, merely reciting them and then concluding the husband’s contribution-based entitlement was 60 per cent (at [263]). The husband had contended his contribution-based entitlement should be assessed at 65 per cent on account only of his inheritance, since the spouses’ contributions were otherwise equal (at [240]). Given the spouses’ capital contributions were found by the trial judge to be largely equal (at [246], [253]), and the husband accepted the wife worked just as hard as him and there was nothing but his inheritance to reasonably distinguish the parties’ direct financial and non-financial contributions, it was only the inheritance (of which the family home was the greatest part) which could rationally account for the 20 per cent differential in their overall entitlements. Without more clarity in the reasons for judgment, the implication is strong that the trial judge over-emphasised the husband’s inheritance and under-valued the wife’s contributions.
The manner in which the trial judge approached the dispute by not first determining whether or not the wife already beneficially owned one-half (or some lesser proportion) of the family home, which course would have been open in the absence of the separate claim for relief under s 78 of the Act, nevertheless inferentially caused the wife’s contributions related to the family home and the other properties inherited by the husband to be minimised, and that worked to her detriment and to his advantage. In the appeal, the wife asserted the trial judge’s approach “fatally contaminated the evaluative determination of the parties’ entitlements”, but we are content to simply find the apparent failure to give adequate weight to the wife’s contributions amounted to the failure to correctly exercise discretion (see Lovell v Lovell (1950) 81 CLR 513 at 519).
Findings as to other property interests (Ground 4)
The wife contended the appealed orders were vitiated by the trial judge’s findings of fact about two aspects of the spouses’ assets which were not reasonably open on the evidence. As it transpired, the parties agreed one mistake was made by the failure to heed their receipt of a second interim property settlement distribution of $100,000 each. The style of the orders, which gave the wife the funds in the account from which the second interim property distribution was made, did not account for the depletion of the funds and thereby deprived the wife of an extra $100,000 to which she was entitled. Given the agreement about her entitlement to the extra sum, it is unnecessary to say more about how the error arose, though the parties commendably accepted they led the trial judge into the error.
Since the success of other grounds of appeal will necessitate remitter of the proceedings for re-hearing, it is also now unnecessary to discuss whether this mathematical error could have been cured without the appeal being upheld.
Findings as to contributions (Grounds 2, 3 and 5)
The wife contended the trial judge failed to give adequate consideration to various financial contributions she made (Ground 5) and, for that and an absence of satisfactory reasons, erred by finding the husband was entitled to 60 per cent of the spouses’ net assets and superannuation on account of their contributions (Grounds 2 and 3). It is convenient to deal with the more specific complaints first and the more general complaints afterwards.
Allowing for the wife’s abandonment of Ground 5(b), the financial contributions which she said she made and were allegedly overlooked in the assessment of her entitlement were, chronologically:
a)cash of $84,104 referred to in the reasons for judgment (or $82,104 as was deposed to by the wife and pleaded in the Amended Notice of Appeal) paid out on the termination of her employment in 2004, which she used to retire debt (Ground 5(d));
b)cash of $67,578 paid out on the termination of her employment in August 2007, which she applied to joint expenses (Ground 5(a));
c)the sum of $112,465 received by the wife as an inheritance in 2014, which she used to retire debt (Ground 5(c)); and
d)the sum of $15,000 received by the wife from her brother in repayment of a loan, which was applied to reduce a mortgage over one of her properties (Ground 5(c)).
Although the trial judge recorded such contributions as historical facts (at [34]), the wife submitted they did not feature in her Honour’s analysis of the spouses’ respective overall contributions (at [240]-[263]). However, the husband established that the financial contributions were taken into account and so Ground 5 fails.
The first contribution needed to be taken into account because the emoluments must have accrued entirely, or at least largely, from the wife’s employment prior to the spouses’ commencement of cohabitation. The trial judge did take it into account by finding the wife used the money to reduce the debt secured over real property she took into the relationship (at [34]). The reduced mortgaged debt was then taken into account as a current liability (at [239], [253]).
The second contribution was subsumed by the trial judge’s acknowledgement of the wife’s gainful employment during the currency of the spouses’ relationship. The termination benefit received by the wife was an incident of her ordinary employment during the marriage, and used to meet joint expenses, for which she was given due credit (at [34], [243], [258], [259]).
The third contribution was also taken into account because the trial judge accepted the wife’s inheritance was similarly applied to reduce the debt secured over the real property she took into the relationship (at [34]) and the reduced mortgage debt was then taken into account as a current liability (at [253]).
As to the asserted fourth contribution, no submission was usefully made in support of it, either at trial or in the appeal. Other than as already mentioned, the trial judge took into account the wife’s initial capital contributions and the income generated by her employment. It was not asserted that the husband provided the money for any loan to the wife’s brother, and so it could only have come from her capital or income, for which she was already credited. The subsequent repayment of the loan by the brother was not an additional contribution by the wife to the spouses’ financial security. There was no evident error.
Turning then to Grounds 2 and 3, as was alluded to in the discussion of Ground 1, the reasons for the trial judge’s assessment of the husband’s contribution-based entitlement being 60 per cent were not clearly elucidated. After reciting portions of the spouses’ evidence, arguments, and submissions, the trial judge’s actual factual findings were quite brief and were effectively confined to the equivalence of the spouses’ overall capital contributions (at [246], [253]-[255], [260]); the wife’s concentration of effort on homemaking and caring for the children and the husband’s countervailing effort in breadwinning (at [258]-[259]); and the husband’s receipt of the inheritance from his deceased father’s estate (at [261]).
The finding about the spouses’ respective contribution-based entitlements was then encapsulated in the following truncated reasons:
262.As was held by the Full Court in Dickons (supra), it is not appropriate to undertake a precise mathematical accounting exercise when determining the division of assets between parties after the breakdown of their marriage. Rather, the Court must take a holistic approach.
263.When considering the totality of both parties’ contributions to the assets available for division between the parties at this time, including their pre-cohabitation assets, how those pre-cohabitation assets have been used by the parties, the parties’ contributions during their relationship, the Husband’s inheritance and the contributions made by both parties to the inherited properties, particularly [the family home], I am of the view that there should be an adjustment in the Husband’s favour of 10%.
We accept the wife’s submission that those reasons do not satisfactorily explain the 20 per cent differential between the spouses’ entitlements in the face of the anterior findings of fact. They expose a conclusion, but no reasoned analysis. There was no real elucidation at all of the spouses’ dispute over the extent of the wife’s contributions related to the family home and the other properties inherited by the husband, which controversy required resolution in the face of the spouses’ discrepant evidence over the issue and the trial judge’s conscious decision to abstain from determination of the wife’s equity claim in respect of the family home.
This submission was not made in the appeal under this ground, but the inference is well open that the trial judge only gave the wife credit for the capital she directly contributed to the construction of the family home. Her Honour deducted five per cent from the percentage figure which the husband submitted properly represented his contribution-based entitlement because of the value of his inheritance. He sought 65 per cent (at [240]), but was given 60 per cent (at [263]). The five per cent differential was worth just over $200,000, approximating the amount of capital the wife was found to have contributed to the construction of the family home (at [246]). If that was not the trial judge’s reasoning then, as already explained, the reasons for judgment were nonetheless deficient. Alternatively, if that was her Honour’s reasoning, then such reasoning was insufficiently exposed by leaving it to mere inference and, in any event, was not underpinned by any sufficiently explained factual finding about why the wife’s contributions were so confined. We accept the wife’s submission that the inadequate revelation of reasons precludes any finding by us that the merits of her case were given proper and genuine consideration. Grounds 2 and 3 succeed.
Findings as to the s 75(2) adjustment (Grounds 6 and 7)
The wife contended the adjustment in her favour made pursuant to s 75(2) of the Act was vitiated by material findings of fact which were not reasonably open on the evidence or the failure to make findings which ought have been made (Ground 6) and by the failure to take into account the mandatory relevant consideration prescribed by s 75(2)(n) of the Act (Ground 7).
Dealing with Ground 6 first, the wife contended the trial judge erred in the findings made as to the spouses’ respective income-earning capacity. The wife contended the trial judge erred by finding she was not taking reasonable steps to optimise her earning capacity as a legal practitioner. In respect of the husband, the wife contended the trial judge erred by failing to find he was not taking reasonable steps to optimise his earning capacity through “[his skilled professional] activities” and by assessing his earning capacity in primary production when the spouses’ farming enterprise had never generated profit.
The trial judge’s actual findings in relation to the disparity in the spouses’ income-earning capacity and the consequent primary burden of the children’s financial support falling to the wife were stated as follows:
265.The Husband made the decision, shortly after separation, to sell [Business G]. He wishes to retain the entirety of the farming properties so that he can pursue his wish to make a living as a farmer raising and selling cattle. The financial viability of such an exercise is unknown given thus far the Partnership has not been profitable as a part time pursuit during the marriage.
266.The Wife is a qualified [professional] who has historically held positions in which she was well renumerated. Since the birth of [the children], the Wife has been primarily engaged in home duties, albeit she has established her own consultancies through which she has been able to earn some small income.
267.It is the Wife’s evidence that she has been unable to find suitable employment local to where she is currently living and has expressed some concern about her capacity to do so going forward. However it is apparent from the evidence that she has not actively sought employment in the local area since the parties separated.
…
270.The Husband’s future earning capacity is completely uncertain. Given the Wife’s qualifications and previous work history, she has the capacity to earn a greater income than that of the Husband going forward. This is more so as she is nearly 10 years younger than him.
271.However, the corollary of the Husband’s uncertain earnings mean his capacity to pay child support to meet [the children]’s future financial needs is also unknown. It is very likely that it will be the Wife who will be the party responsible for their expenses including the cost of their education and extracurricular activities.
As can be seen, the trial judge found the wife was not employed either at all or within her qualified capacity as a professional at the time of trial, but she had the capacity to earn more income than the husband.
At trial, the wife’s submissions about her earning capacity may be fairly summarised as follows: her employment history was as a professional, she had tried unsuccessfully to obtain work as a professional in her local area, and there was no reasonable prospect of her being able to earn $150,000 per annum. However, she acknowledged she would need to return to remunerative work of some kind to help support the children and did not deny she was capable of obtaining work as a professional, subject to her ongoing primary role as the children’s carer. Her eventual submissions to the trial judge were:
231.The Wife gave clear and compelling evidence as to her attempts post separation having been deprived of any meaningful financial support to gain employment within the local area by applying for a variety of positions.
232.The generic suggestion that the Wife could obtain employment as a [professional] is to again deliberately ignore the Wife’s employment history which is primarily if not exclusively in the area of the role of [a professional] dealing with corporate governance, not a matter that immediately the town of [name omitted] is synonymous for.
233.It is likely that both parties will need to return to remunerative employment in order to fund their care of the children and lifestyle.
…
235.It would be submitted that Wife [sic] is required to continue to provide the majority of the children’s care in their best interests and as such there ought be an an [sic] adjustment for the impact upon this matter and to reduction in the ending [sic] capacity of the Wife which has been caused by her giving up work so as to parent a party’s children.
…
54.…there was erosion in the wife’s capacity to earn with gaining corresponding accommodation and increased capacity to advance the family interest in full a parenting and homemaking role…
(Emphasis added)
Obviously enough, the wife was not asserting an absence of earning capacity; only a reduction of it. The trial judge found exactly that. She had been primarily engaged in home duties since the children’s birth, but had established some consultancies through which she derived some small income (at [266]). The supplementary finding about her not having actively sought employment in the local area after separation (at [267]) was said to be a factual error because it was at odds with her oral evidence of having made three local job applications within the preceding six months. Even if the factual finding of her not having “actively” sought local employment after separation was wrong, it did not impugn the more generalised findings about earning capacity. The finding did not detract from the efficacy of the ultimate finding, consistent with the wife’s submission, that she was capable of earning income and would need to return to remunerative employment, in which case it was an error without consequence. The wife accepted she could and should obtain employment consistent with her capacity and, since she was nearly 10 years younger than the husband, she had a much longer working future. The asserted factual error is, therefore, not material (see De Winter and De Winter (1979) FLC 90-605).
As for the husband, it was correctly found he sold Business G shortly after separation. The husband expressed the desire to farm the properties he owned, of which the family home was one, to derive his future income. The parties formed a farming partnership during their marriage, but it had not been a financial success whilst the husband operated Business G, as the trial judge also correctly found. Given the husband’s sale of his business and his stated wish to turn his attention and energy to work as a farmer, the trial judge found his future earning capacity was “completely uncertain”. The wife took no issue with that factual finding. Rather, her appeal point was the trial judge erred by failing to take into account the husband’s continuing capacity to earn income as a skilled professional.
At trial, the wife conceded the husband covenanted not to compete with the business he sold as the proprietor of another similar business for five years, but she submitted to the trial judge there was nothing to preclude him working as a skilled professional in the capacity of contractor or employee. When invited to identify any evidence to verify her submission at trial that the husband could still work as a skilled professional within the restraint period, the wife could not do so. Had her submission at trial been consistent with the evidence, the trial judge would have erred by failing to take into account as a material consideration the husband’s “capacity” to derive income as a skilled professional, notwithstanding his stated desire to be a farmer (ss 75(2)(b), 75(2)(o)). However, absent such evidence, there was no error by the trial judge in assessing the husband’s future income-earning capacity by reference to his desire to farm when he could not derive income working as a skilled professional for several years hence and he was already 61 years of age. Without any demonstrated evidentiary foundation, the wife’s trial submission and her allied appeal point must fail. The husband’s admission in cross-examination that, if forced by circumstances to do so, he could earn some income in some other unidentified field of work besides farming did not bolster this ground of appeal.
At trial, the wife initially disavowed her entitlement to any s 75(2) adjustment (at [264]), but her final submission was for an adjustment in her favour of 10 per cent by reference to the s 75(2) factors she emphasised. In the event, she was given an adjustment of 2.5 per cent (at [272]). We are not satisfied that finding was wrong by reference to Ground 6.
With respect to Ground 7, the wife’s complaint is that the trial judge failed to take into account as a relevant and material consideration the provisions of s 75(2)(n) of the Act.
Section 75(2)(n) of the Act relevantly provides:
(2) The matters to be so taken into account are:
…
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i)the property of the parties; or
…
It must first be acknowledged that the trial judge was obliged to take into account the matters referred to in s 75(2) of the Act, but only in so far as they are relevant (s 79(4)(e)). Whether the various matters prescribed by s 75(2) of the Act become relevant in proceedings between spouses for property settlement orders under s 79 depends entirely upon the issues thrown up by the ambit of their controversy.
In September 2018, before the husband received his inheritance from his late father’s estate (and so before extra property worth about $1.7 million was included within the spouses’ pool of assets), the wife did make a submission which obliquely engaged s 75(2)(n) of the Act. Although the sub-section was not expressly referred to, she contended:
The [c]ourt would make a significant adjustment [under s 75(2)] on the basis that it is almost certain that the Husband will receive further assets valued in the order of $1.79 million to $2.09 million [from his inheritance].
However, the wife revised her final submissions once the husband’s father died, the evidence was re-opened, and the husband’s inheritance became part of the pool of assets amenable to distribution between the spouses. After that occurred, the wife’s ultimate submission was for an assessment of her entitlement to 65 per cent of the spouses’ property, which should include two of the three titles comprising the family home and at least one of the other real properties comprising the farm (at [7]). No reference, either overt or oblique, was made to s 75(2)(n) of the Act in the final submissions she filed in February and March 2019. By then, the issue of the husband’s prospective ownership of, or access to, substantial other assets which were beyond the reach of adjustment orders under Part VIII of the Act had dissipated.
It must follow that, by the conclusion of the trial, the wife did not make the factor prescribed by s 75(2)(n) of the Act a relevant, let alone material, feature of the case. There was no eventual dispute about the nature of the property available for distribution between the spouses. The spouses both wanted 65 per cent of their combined property (at [4], [6], [240], [245], [264]), but each acknowledged their wishes may not be fulfilled. Neither finally submitted to the trial judge that s 75(2)(n) of the Act must be considered and, as the evidence and submissions then stood, there is nothing to suggest the trial judge was obliged to take up the issue of her own accord. We reject the wife’s solitary submission in support of Ground 7 made in her Summary of Argument in the following terms:
The primary judge’s absence of reasons with respect to s75(2)(n) [of the Act] or any express or implied reference to the sub-section provides the foundation for this challenge.
Form of orders (Ground 8)
The wife contended the trial judge erred in principle by refusing her application and granting the husband’s competing application for exclusive proprietary interest in the family home, when neither of them had demonstrated an ability to generate any profit from the primary production carried out on the farm, which comprised the family home and several other real properties.
The trial judge uncontroversially found that the spouses’ primary production partnership had “not been profitable as a part time pursuit during the marriage” (at [265]). Inferentially, the explanation for the partnership’s lack of profit was the wife’s concentration of effort in the care and supervision of the children and the husband’s concentration of effort in the conduct of Business G. At the time of trial, the spouses still lived with the children in the family home, albeit separated. Although they both wanted exclusive title to the family home and for it to be vacated by the other spouse, their future aspirations bore upon the resolution of that dispute.
The wife expected she would continue to be the children’s primary carer, though she accepted she would “need to return to remunerative employment in order to fund [her] care of the children and lifestyle”. By implication, she was not referring to her future work as a farmer because such a venture would require her self-employment, but more importantly, she did not envisage farming would be “remunerative”. As she sought to emphasise in the appeal, the spouses’ past part-time farming activities had not been profitable, so she could hardly profess her capacity to make a reasonable living from farming alone, particularly while she retained primary responsibility for the care of the children. If the wife envisaged acquiring some form of employment for which she was qualified, it was unnecessary for her to continue living in the family home.
By comparison, the husband sold Business G and wanted to spend the remainder of his working life farming the real properties he owned, one of which was the family home, in which he still lived. His case was that he could not effectively undertake that endeavour if the wife acquired exclusive legal title in one or more of the properties which collectively comprised the farm.
The trial judge was alive to the argument and reasoned:
273. Both parties are seeking to retain the former matrimonial home.
274.The Husband seeks to retain the entirety of the farming properties including the former matrimonial home as he wants to continue to run the farming enterprise that was undertaken by the parties’ partnership during the relationship as a means of supporting himself, [the children] going forward.
…
276.The Husband argues that it will not be financially or practically viable to conduct the farming business if portions of that property are subdivided and transferred to the Wife.
277.The Husband further submits that any division of the various blocks as proposed by the Wife will create real difficulties for both of them as neither will be able to access the blocks retained by them under the Wife’s proposal using the existing access roads and rights of way.
…
282.The Wife’s proposal is impractical on many levels. Whilst she speaks of wanting to run cattle on the property retained by her, the Wife has never run cattle. It is common ground that the Husband has always been responsible for their cattle business. When giving her vive voce evidence the Wife spoke of being able to engage contractors to do this work. The financial viability of such a proposal is highly questionable, especially given the partnership has not made a profit to date.
283.What is clear is that dividing the property so that some of the blocks are held by the Wife and some of the blocks are held by the Husband would result in neither of the parties being able to pursue any form of financially viable farming endeavour.
284.It is also apparent that the division proposed by the Wife would involve the parties having to undertake considerable road construction at some cost in order to secure independent access to those properties that they would remain holding.
285.Given all these factors, I am of the view that the Husband should be afforded the opportunity to retain all of the farming properties.
We are of the view those findings were well open to the trial judge on the evidence and the wife could not rationally explain why they were not, so Ground 8 must fail.
Conclusion and costs
The appeal succeeds for the reasons explained under Grounds 1, 2, 3 and 4.
The parties agreed their applications for relief under Part VIII of the Act would need to be remitted for re-hearing if the appeal was upheld for insufficiency of reasons. That is the case and so their applications will be remitted to the Federal Circuit Court of Australia.
If the appeal was upheld for legal error, as has occurred in respect of Grounds 1, 2 and 3, the parties sought costs certificates under the Federal Proceedings (Costs) Act 1981 (Cth) for both the appeal and the re-hearing. We grant such certificates.
I certify that the preceding eighty-six (86) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Ryan & Austin JJ) delivered on 2 December 2019.
Associate:
Date: 2 December 2019
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