GONZALES & GARCIA - [2011] FamCAFC 49

FAMILY COURT OF AUSTRALIA

GONZALES & GARCIA

[2011] FamCAFC 49

FAMILY LAW - APPEAL – Where the appellant wife filed an interim application for spousal maintenance – Where the wife asked that the respondent husband pay the mortgage on the wife’s property – Where the application was resisted by the husband – Where the Federal Magistrate dismissed the wife’s application.

FAMILY LAW - APPEAL – Application for dismissal of the appeal – Where the husband sought dismissal of the appeal – Where it was submitted the orders sought by the wife were no longer relevant as the house had been sold – Where the wife submitted that she had suffered financially from the husband’s failure to meet the mortgage repayments and that remedies are available – Application dismissed.

FAMILY LAW - APPEAL – Leave to appeal interim orders – Where the appellant wife sought to appeal interim orders – Where the grounds of appeal relate to matters of weight, asserted errors of fact and denial of natural justice – Where it appears the Federal Magistrate determined the wife’s application to finality, leaving only a consideration of how the net proceeds of the house, together with the husband’s superannuation could be divided – Leave granted.

FAMILY LAW - APPEAL – Application to adduce further evidence – Where the appellant wife sought to adduce a number of documents into evidence – Where the Federal Magistrate had all of the documents with the exception of two before him at the hearing of the application – Where the wife asserted that the Federal Magistrate had ignored the evidence – Where it was not evident that the Federal Magistrate had ignored the evidence – Where the provisions of s 91 of the Evidence Act 1995 (Cth) makes inadmissible evidence of a decision, or a finding of fact, in an Australian proceeding to prove the existence of fact that was in issue in that proceeding – Application dismissed.

FAMILY LAW - APPEAL – Financial – Where the Federal Magistrate erred in dismissing the wife’s application – Where the Federal Magistrate erred in his assessment of the husband’s financial circumstances and in the failure to consider the husband’s capacity to pay maintenance to the wife – Where it appears the Federal Magistrate concluded that the application for final orders would only deal with property under s 79 of the Family Law Act 1975 (Cth), being the husband’s superannuation and any equity left after the sale of the property – Where the grounds of appeal are made out – Appeal allowed.

FAMILY LAW - COSTS – Where costs were sought by the appellant wife – Where the respondent husband resisted an order for costs – Where the errors were those of the Federal Magistrate – Costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) granted.

Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth)
Federal Proceedings (Costs) Act 1981 (Cth)

APPELLANT:

Ms Gonzales

RESPONDENT:

Mr Garcia

FILE NUMBER:

SYC

6834

2008

APPEAL NUMBER:

2010

DATE DELIVERED:

14 March 2011

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

May, Ainslie-Wallace & Watts JJ

HEARING DATE:

10 November 2010

LOWER COURT JURISDICTION:

Federal Magistrates Court

LOWER COURT JUDGMENT DATE:

18 June 2010

LOWER COURT MNC:

[2010] FMCAfam 613

REPRESENTATION

SOLICITOR FOR THE APPELLANT:

In person

SOLICITOR FOR THE RESPONDENT:

In person

Orders

The wife have leave to file an appeal.
The appeal is allowed.
The application of the wife filed 13 November 2009 be re-heard before a Federal Magistrate other than Federal Magistrate Kemp.
The Court grants to the appellant wife a costs certificate pursuant to section 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant wife in respect of the costs she has incurred in relation to the appeal.

IT IS NOTED that publication of this judgment under the pseudonym Gonzales & Garcia is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 91 of 2010
File Number: SYC 6834 of 2008

Ms Gonzales

Appellant

And

Mr Garcia

Respondent

REASONS FOR JUDGMENT

Introduction

This is an appeal from orders made by Federal Magistrate Kemp on 18 June 2010 dismissing the wife’s interim application for spousal maintenance and other orders.
It is necessary to give some brief background to the wife’s application before the Federal Magistrate.
The parties commenced living together in 1987 and married in 1988. They separated in May 2002. They have two children both of whom are adult. In December 2003 the wife purchased in her sole name a house in Gordon in the ACT (“the Gordon property”). The husband provided the deposit and was a joint borrower under the mortgage for funds to complete the purchase. It was undisputed that from the date of purchase until June 2009 the husband met the mortgage repayments on the house. He stopped because he asserted that he was not able to afford to continue to meet that expense. As a result, the lending bank took action to recover the debt and, ultimately exercised its right of sale. At the time of the appeal, the property had been sold and after repayment of the mortgage, costs of sale and costs of recovery, it was expected that a small surplus, in the order of $90,000 would remain.
The wife filed an amended application for final orders on 22 October 2009 in which she also sought interim orders. She filed a further application for interim orders on 13 November 2009 which was the application heard and dismissed by Federal Magistrate Kemp. At the time of filing these applications the house had not been sold
In the interim application filed on 13 November 2009, the wife sought orders that the husband pay a lump sum of $17,390 into the joint account of the parties to be paid against the mortgage on the Gordon property; that, pending final order, the husband pay $1599.61 each fortnight in respect of the mortgage and that the husband forthwith transfer to the wife his MLC Masterkey Business Super fund.
The Federal Magistrate dismissed this application.
It is necessary for the wife to obtain leave to appeal, as the application which was dismissed by the Federal Magistrate, asked for interim orders in property proceedings. The matter had been adjourned to 3 November 2010 for mention by the Federal Magistrate. The property proceedings remain to be heard.
In the appellant wife’s amended notice of appeal filed 30 September 2010, there are twenty four grounds of appeal. In summary, the majority of the grounds relate to matters of weight and asserted errors of fact. It is also submitted that an error of law has been made in denying the wife natural justice.
Should the appeal be allowed, the wife seeks that the application be re-heard by a Federal Magistrate other than Federal Magistrate Kemp.
In the notice of appeal the wife seeks orders that the husband pay all mortgage arrears on the Gordon property and all associated default enforcement expenses incurred with the National Australia Bank (“NAB”). Further, that the husband make the fortnightly mortgage repayments to service the bank home loan or that the husband transfer his MLC Masterkey Business Super fund to the wife for the purpose of the wife paying the required arrears and associated costs.

Application for dismissal of the appeal

On 3 November 2010 the husband filed an application in an appeal seeking that the appeal be dismissed on the basis that the orders sought by the wife were no longer relevant. In support of this application the husband filed an accompanying affidavit on the same date.
At the commencement of the hearing on 10 November 2010 this application, together with submissions in relation to leave were heard as preliminary matters. In addition to the written submissions we heard oral submissions on the application.
In the husband’s affidavit it is explained that on 29 September 2010, the wife sold the Gordon property for $535,000. The husband said that the mortgage on the property was $415,922.67, as of 31 May 2010, and that the legal costs to recover the loan would have been approximately $10,000. Therefore, the net equity in the property, he contends, can be said to be $109,077.33.
The husband’s position is that the appeal should be dismissed as there are neither arrears nor a mortgage outstanding and therefore the orders sought by the wife are no longer relevant.
In essence, the husband submits that there is no utility in the appeal being heard because the house has been sold and the property proceedings, which are yet to be heard will determine the issues between them.
The wife said that the house had been sold and contends that the net proceeds will be in the vicinity of $90,000. The wife’s submission is that although the house has been sold, she has suffered financially because of the husband’s failure to meet the mortgage payments. The wife will seek a readjustment in her favour on a final hearing. She contends that this is an issue to be determined between the husband and the wife and that there are remedies available to her.
In considering the application, the Federal Magistrate said at paragraph 110:
Having heard the evidence of the husband, the Court is of the view that the husband does not have the ability to pay the sums sought to be ordered to be paid by the wife to reduce the mortgage debt to the NAB or to meet the ongoing commitments to that Bank under the mortgage. The Court is of the view that the subject property will need to be sold and any equity left would be the subject of the ongoing property dispute between the parties. Given the husband’s now asserted position with respect to the subject property, the only remaining assets may be superannuation.
This paragraph of the judgment seems to suggest that the Federal Magistrate determined the application to finality, leaving only a consideration of how the net proceeds of the house, together with the husband’s superannuation could be divided.
However, we accept that there are controversies between the parties other than those articulated by the Federal Magistrate that require resolution at a final hearing and for those reasons we would dismiss the husband’s application.

Leave to appeal

The discretion to grant leave is for the purpose of enabling the court to do justice between the parties.
It is appropriate to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the leave. It is necessary also to consider the prospects of success of the appeal.
We will deal with the leave application at the same time as we consider the merits of the appeal.

Reasons of the Federal Magistrate

At the outset, the Federal Magistrate noted that despite asking that the husband make payments in relation to the Gordon property, it was not sought by the wife that any order be made in relation to it. This is not correct. In paragraph 5 of the amended application filed 22 October 2009 the following relief is sought:
That as and between the Applicant and the First and Second Respondents, the Applicant be declared the sole legal and beneficial owner of all her right title and interest in the property known as [the Gordon property], Canberra in the ACT.
In addition, at the interim hearing the husband’s position was summarised by the Federal Magistrate as follows:
5.In final submissions, the husband stated that while he initially sought the order referred to in paragraph 4 above referrable to the subject property, he no longer sought to disturb the wife’s current legal and beneficial ownership. His view was that the subject property had always been intended to be the wife’s property as it was the home for the two children when they both lived with her and that he had fulfilled his agreement with the wife to pay the mortgage on that property until she was able to or, as events have occurred, he was no longer able to do so.
The house was owned by the wife as registered proprietor, with both parties liable under the mortgage. Before the Federal Magistrate the wife demonstrated that there were mortgage arrears of some $28,587.84 owing to the bank, together with some enforcement expenses. Proceedings had been commenced by the bank against the husband and wife. The sum pleaded owing by the parties to the bank was $405,873.10.
It was the husband’s case that the wife had the capacity to pay the mortgage arrears and meet the repayments.
The Federal Magistrate found:
83.In the absence of any further evidence, the Court is of the view that the wife does not have access to any funds, given the material provided in her financial statement, to enable her to pay the outstanding mortgage arrears or to meet any ongoing mortgage commitments.
84.Accordingly, the issue then is whether the Court should order the husband to pay the mortgage arrears and the ongoing mortgage payments in order to protect the subject property, the subject of the parties’ dispute.
85.The husband is liable under the mortgage but is not a registered proprietor of the subject property. The husband asserts that if the NAB takes possession of that property and there is a shortfall, it is he to whom the Bank will look as he is the party with an income. He submits that it is not in his interests to delay a payment as this will necessarily impact on his credit rating and his ability to borrow funds in the future. He says at present he has no assets in order to obtain a loan.
The Federal Magistrate was correct in identifying the issue in relation to the husband’s capacity to contribute to the mortgage.
The husband contended that he did not have the financial capacity to meet either the arrears or to continue to pay the monthly mortgage repayment.
The husband’s case was that his expenses exceeded his income, calculated by the Federal Magistrate at some $997 per week in excess. The husband has no real property.
Ultimately the Federal Magistrate found as follows:
110.Having heard the evidence of the husband, the Court is of the view that the husband does not have the ability to pay the sums sought to be ordered to be paid by the wife to reduce the mortgage debt to the NAB or to meet the ongoing commitments to that Bank under the mortgage. The Court is of the view that the subject property will need to be sold and any equity left would be the subject of the ongoing property dispute between the parties. Given the husband’s now asserted position with respect to the subject property, the only remaining assets may be superannuation.
111.Given the wife’s concession as to her limited financial circumstances, the Court is not satisfied that she could adequately meet any undertaking as to damages as a price of any injunctive relief. The wife has no assets to secure any undertaking. This militates against granting any relief under s.114 of the Act.
…
114.In the circumstances of this matter, the Court is not prepared to grant an interlocutory order requiring the husband to pay the money sought by the wife, either by way of spousal maintenance or by way of injunctive order.

Application to adduce further evidence

The wife filed an application in an appeal on 25 October 2010 seeking that a number of documents be adduced into evidence.
In the affidavit filed in support of the wife’s application she said that this further evidence “explains the ways in which the husband is hideing money thru the companies ([A Company] and [P Company])”. She said that this evidences that the husband’s income is not accurately reflected in his accountant’s estimate, and challenges the husband’s claim to have had a diminished income.
The husband is a medical practitioner. He is engaged by B Medical Services Pty Ltd and his income from that company is received by his medical practice company, P Company.
The wife informed us that most of the documents sought to be adduced as further evidence were before the Federal Magistrate, with two exceptions being a document from the Child Support Agency and a document from C. It seems that C is a medical service provider offering skin cancer consultations where the husband worked. The C document referred to the provision of that service by the husband to be paid at the rate of $250 per hour. The other document is the final decision of a senior case officer at the Child Support Agency, dated June 2010, following a review sought by the husband.
The wife is of the view that the remainder of the documents were ignored by his Honour.
Of the remaining documents, the first two are transcripts from proceedings before his Honour. The first from 4 December 2009 and the second from 13 August 2010.
The third document is characterised as a “Medicare Provider Bill Type Report” and is from Medicare Australia. The reporting period is from 1 August 2004 to 11 June 2009.
The fourth document is an email from the husband to his son, A Gonzales-Garcia.
The fifth and sixth documents are letters from the Child Support Agency. Although the Federal Magistrate was aware of the earlier decision of the Child Support Agency and the fact that the husband had appealed the decision, his Honour did not have the final decision of the Child Support Agency before him.
The seventh document consists of two pages. The first is entitled “Daysheet for Visits Recorded for 14/06/2006” and the second page “Daysheet for Visits Recorded for 23/06/2006”. This document was originally attached to an affidavit of the wife dated 11 November 2009, they are reproduced at appeal book volume 2, page 246. These documents were rejected by the Federal Magistrate on 12 February 2010, after the husband objected to the evidence.
The eighth document is a contempt application affirmed on 25 January 2010. The ninth document is an affidavit filed in support of the contempt application affirmed on the same day.
The tenth document is the 4 December 2009 orders of Federal Magistrate Kemp.
The eleventh document is a report from the conciliation conference on 6 January 2010 by Registrar Karagiannis.
The twelfth document is a subpoena filed by the wife on 14 May 2009. The documents to be produced under the subpoena were “[a]ll information and documents related to [A Company]… and [P Company] …”.
The thirteenth document is an ANZ interim statement of the husband’s account from 11 September 2009 to 19 November 2009.
The fourteenth document is a notice of disposal of vehicle dated 17 June 2009.
The fifteenth document is the 22 September 2010 reasons for judgment of Federal Magistrate Kemp.
The sixteenth documents are tax invoices to B Medical Services Pty Ltd from   P Company. The invoices are from the following dates:
·    4 December 2009 to 18 December 2009
·    13 November 2009 to 27 November 2009
·    1 November 2009 to 6 November 2009
·    19 October 2009 to date unknown
·    12 October 2009 to 16 October 2009
·    18 September 2009
·    24 August 2009 to 28 August 2009
·    17 August 2009 to 21 August 2009
·    13 July 2009 to 16 July 2009
·    20 July 2009
·    6 July 2009 to 10 July 2009
·    11 May 2009 to 15 May 2009
·    6 May 2009 to 8 May 2009
·    19 March 2009 to 20 March 2009
The final document is characterised as “Therapist Booking Confirmation” and is from C. It is dated 13 May 2010 and is an offer to the husband of 4 hours work, at a rate of $250 an hour.
In order to ascertain whether the Federal Magistrate did ignore these documents, it is useful to review the passages from the transcripts of the proceedings where the documents were referred to. Having considered the transcripts, although many of the documents were not directly referred to by the Federal Magistrate in his reasons, we are not persuaded that he did ignore them as the wife claimed and, in any event, they are not documents which would properly be considered in an application to adduce further evidence on an appeal.

Turning now to the two documents which were not before his Honour. It is said that although the C document was not before the Federal Magistrate, reference was made to it. The wife deposed that the document took some time to locate and thus was unavailable at the hearing. It is difficult to determine where exactly in the transcript such reference is made. The wife cross-examined the husband about his work in a skin cancer clinic and reference was made to “KA”. We are unable to say whether this is the company to which the C document relates.
We are unable to judge what relevance, if any, the document has to the issues to be determined by the Federal Magistrate and will not receive it as further evidence on the appeal.
The second document, being a notice of a decision from the Child Support Agency was also not before the Federal Magistrate. The wife inter alia had requested that the child support assessment be reviewed as “the child support assessment is unfair because of a parent’s income, property and financial resources or earning capacity” (“Reason 8”). The husband objected to the decision of the senior case officer. That objection was dealt with by a senior objections officer in a decision dated 18 August 2010. It was ultimately concluded that:
…While [Mr Garcia] states that his gross income is $92,400 and his accountant confirms this, the evidence from the profit and loss statement and Business Activity Statements for the 2009/2010 do not suggest this. Based on the above findings, Reason 8 is established.
The provisions of s 91 of the Evidence Act 1995 (Cth) makes inadmissible evidence of a decision, or a finding of fact, in an Australian proceeding to prove the existence of fact that was in issue in that proceeding. We do not admit the information from the Child Support Agency as “fresh evidence” in those circumstances.

Discussion

As we have indicated, we are satisfied that his Honour did err in coming to his decision to dismiss the application. The Federal Magistrate made several errors. These include his assessment of the husband’s financial circumstances at the time of the hearing before him and in addition a failure to consider the husband’s capacity to pay maintenance to the wife.
The fundamental difficulty arising out of the reasoning of his Honour is contained in paragraph 110 of the judgment, where it is concluded that the husband does not have the capacity to pay the costs of the mortgage, and where it is said that:
… [t]he Court is of the view that the subject property will need to be sold and any equity left would be the subject of the ongoing property dispute between the parties. Given the husband’s now asserted position with respect to the subject property, the only remaining assets may be superannuation.
The wife’s application for final orders includes an application for lump sum spousal maintenance. The wife could properly apprehend, as a result of the conclusion reached by his Honour that she would have little hope of convincing his Honour in the final hearing that the husband has an earning capacity that would support any order for spousal maintenance. The Federal Magistrate seems to have concluded the application for final orders would only deal with property under s 79 of the Family Law Act 1975 (Cth) (“the Act”), being the husband’s superannuation and any equity left after the sale of the property.
The Federal Magistrate erred in reaching this decision.

His Honour’s findings as to the husband’s income

His Honour accepted the husband’s assertion as to his current level of income. He accepted the husband’s sworn statement as to his current weekly income in his financial statement of 26 September 2009, which was corroborated by a document from his accountant who had considered the husband’s financial documents.
The Federal Magistrate appeared to accept the assertions of the accountant without testing the evidence, albeit in the context of the interim hearing.
The Federal Magistrate at paragraph 97 of his reasons for judgment, in discussing the husband’s past overseas, accepted that the husband’s evidence was given in a “clear and objective manner”. The Federal Magistrate does not make any other general findings about the husband’s credit in relation to his disclosure of financial matters and it appears that he accepted the husband as a witness on whose evidence he could rely.
In his Honour’s reasons for judgment, he concluded at paragraph 101 that:
The husband’s evidence was that he estimated his yearly income for the year ending 30 June 2010 to be $92,400.00 gross and after paying tax of an estimated $24,336.00 he would be likely to receive net $68,064.00.
The figures referred to in paragraph 101 are contained in the letter dated 6 October 2009 from the husband’s accountant, Mr M. The letter is in the following terms:
… We act as accountants and tax agents for [Mr Garcia]. We have reviewed the company, [P Company] current income and expenditure.
[P Company] current monthly gross wage is $7,700 tax is $2,028 and his net wage is $5,672 per month.
On an annual basis, this equates to $92,400 gross, tax of $24,336 and net wages of $68,064 …
The husband’s financial statement deposed to the fact that his total salary or wages before tax is $1,776 per week. The figure in the husband’s financial statement of a weekly salary of $1,778 is exactly equivalent to the gross wage referred to in the accountant’s letter. It is noted in passing, that the financial statement was sworn at a date earlier than the accountant’s letter.
The husband also receives employment benefits by way of payment of medical benefits of $35 per week. In addition, the husband also had $250 paid per week for accommodation, $50 paid per week for telephone expenses and $30 per week paid as a travel allowance from P Company.

The weight of other evidence

For reasons that follow, we are of the view that his Honour’s acceptance of the husband’s asserted financial position was against the weight of the evidence before him to the extent that it impugns the exercise of his discretion.
There were a number of documents tendered in the hearing before the Federal Magistrate that point in the direction of the husband having either an income or earning capacity considerably greater than $92,400 gross per annum.
One of these documents (“Exhibit J”) is an application for a residential tenancy agreement that the husband completed. Although the date the application was lodged is not evident, annexed to the document is a single lodgement of payment to the ANZ Bank dated 9 April 2009. Given that this document was provided with the application for residential tenancy, it probably provides a reliable approximate date for when the application was made by the husband. The fact that the lease start day is recorded as 22 May 2009 further supports this view.
During the appeal the husband indicated that he believed the application was signed in the middle of 2009.
The husband stated in the residential tenancy agreement that his net weekly income from B Medical Clinic at E was $9,000.
Attached to the agreement is a lodgement receipt to the ANZ Bank and it shows an amount of $9,791.10. By inference, the husband provided that statement as evidence in the residential tenancy application of a net weekly income of $9,000. That payment of $9,761 had been paid to an account of P Company.
The bank statements to which Exhibit J relate are for the period 28 January 2009 to 25 May 2009. Because of a photocopying problem, the deposit on 9 April 2009 for the sum of $9,791 does not appear on those banking records.
The wife during cross examination questioned the husband on the statement made on the application for residential tenancy that he earns $9,000 per week. The husband responded:
No, madam, you’re changing again. What it shows is that [P Company] rents the accommodation and pays for it. So the company’s paying for the accommodation. [B] Medical has nothing to do with the accommodation.
That may be an accurate statement. The application for the residential tenancy, whilst in the name of the husband, has “([P Company])” written next to it. However, the answer is disingenuous because the document clearly requires information about the applicant’s personal income (net weekly).
The following exchange then occurred:
WIFE:But there are $9000 per week related to the payment that you receive for your work relating with [B Medical]?
HUSBAND:No, madam, I’ve been telling you that you just – you just making assumptions on linking this that should not be.
His Honour deals with the evidence at paragraph 106 of the reasons for judgment in the following way:
The wife put to the husband that he had made application for a residential tenancy … in 2009 and had provided as evidence of his net “weekly” income in support of that application a figure of some $9,000.00 supported by an ANZ Banking lodgement receipt. Given the financial information provided, it is more likely than not that the figure referred to of $9,000.00 was his then “monthly” income from [B Medical]. That would certainly appear to be the position by reference to his tax returns.
The Federal Magistrate had apparently reached the conclusion that what the husband wrote on his residential tenancy application mistakenly confused a question about personal weekly net income with a question about personal monthly net income.
This conclusion is fragile given the husband had an opportunity in the questions asked of him by the wife, as set out above, to say that he made that mistake and he did not do so. His response was that what was being mistaken was company weekly income, all of which was not his. By inference, it can be said that the weekly figure was correct; however the monies were not entirely the husband’s personal monies.
Further, the Federal Magistrate indicated that the husband’s taxation records were consistent with the husband incorrectly writing $9,000 per week on his application for the residential tenancy. His Honour at paragraph 88 of his reasons correctly identified the taxable income shown in the taxation records for the husband in the 2007, 2008 and 2009 taxation years.
The husband’s most recent notice of assessment dated 30 June 2009, states that his taxable income is $136,529. This equates to $11,377 per month. It is not clear how his Honour could have said that that figure is consistent with a statement by the husband that his personal net income is $9,000 per month.
It is also of relevance to note that on the residential tenancy application the husband’s accountant is listed as a personal referee.

Other documents relating to the husband’s financial position

A number of documents were exhibited during the proceedings that related to the husband’s financial position. These include exhibits F, G, H and P.
Exhibit F is the profit and loss statements and balance sheets for A Company for both the 2006 and 2007 financial years. Exhibit G is a profit and loss statement and balance sheet for A Company for the year 2008. Exhibit H are profit and loss statements and balance sheets for P Company for 2008 and 2009. Exhibit P is a profit and loss statement and balance sheet for A Company for 2008 and 2009.
If one examines and combines the information on Exhibits G and H, the picture for the two companies in the financial year ending 2008 was that P Company had an income from medical practice fees of $308,990 and A Company had income from medical practice of $247,114. That is, total gross income for both companies for the year ending 2008 of $556,104.
In 2008, A Company paid $120,315 in director’s wages and P Company paid $40,110 in director’s fees. These payments total an amount of $160,425.
These exhibits also show that A Company did not receive income in 2009 and that P Company is now the main company which receives income from the husband’s work.
At paragraph 90 of his Honour’s reasons for judgment it is said:
The wife says that while the husband has received a salary in the order of that asserted in 2008, his company in fact generated an income of some $424,000.00. She asserts that the husband is the owner and operator of two companies, being [P Company] and [A Company]. She says that he is entitled to 100 per cent of the income generated by those companies.
Although the Federal Magistrate recorded the wife’s assertion that the husband is the owner and operator of both A Company and P Company, his Honour did not attempt any analysis of what benefits the husband receives from those companies, nor the way those companies had been used to distribute income that has been received as a result of them employing the husband.
His Honour stated at paragraph 100:
The wife asserted that [P Company] and [A Company] owed money to the husband (and/or the directors). In fact, the position was that the husband in the case of [P Company] owed $40,866.00 to that company as at 30 June 2009 and the directors owed $78,238.00 to [A Company] as at 30 June 2008, in accordance with Exhibits “G” and “H”. It would appear that the husband’s service company [P Company] in 2008 paid approximately $120,315.00 for directors wages and $41,850.00 other wages in the year ended 30 June 2008. In the year ended 30 June 2009, the director’s wages had been reduced to $0, but the other wages had increased to the sum of $209,731.00. This figure is split between the husband and [Ms M] and any other employees. The company [A Company] paid no directors’ fees or wages for the year ended 30 June 2009.
Thus whilst his Honour does record the fact that in 2008 the director’s wages and other wages were paid from the two companies, in the sum of $120,315 and $41,850, and contents himself with the observation, “[t]his figure is split between the husband and [Ms M] and any other employees” the Federal Magistrate does not make any further attempt to examine how that division of director’s wages was apportioned.
It seems that his Honour may have been unable to attempt this analysis because of a lack of financial disclosure by the husband. The husband explained during the appeal that these companies were “not a one man operation”. He said that his current de facto partner, Ms M, was an active participant in the companies and earned significant income from them.
The residential tenancy agreement evidences Ms M, born June 1954, to be an occupant of the residential premises for which the husband made application in April 2009.
It is notable however in the husband’s financial statement sworn 26 September 2009 in answer to question 17 which asks “Give the name, age and relationship to you and gross income of each other occupant of your household”, that the husband responded “NIL”.
Whilst the Federal Magistrate at paragraph 91 of his reasons refers to the wife’s assertion that the husband has failed to disclose that he was living in a de facto relationship with Ms M, he takes, what in the context of this case is a very relevant matter, the monies Ms M is receiving from the companies, no further and draws no adverse inference against the husband as a result of his lack of disclosure in his financial statement. This is important because it is clear that there is a significant difference in monies earned by the companies and money distributed to the husband and it is likely monies paid to Ms M account for a large part of that difference.
His Honour seems to deal with some of the matters in s 75(2) of the Act in paragraph 109 of his judgment but does not make any comment about s 75(2)(m) of the Act, being that “if either party is cohabiting with another person- the financial circumstances relating to the cohabitation”.
Exhibit L is comprised of documents that the husband signed when seeking finance from the ANZ Bank in August 2009. A statement of his financial position on a page signed by him indicates that “Self gross Aug. Monthly” was $17,485. The document states a net figure of $8,599, but it is unclear how that relates to the stated gross figure. The personal gross figure on this document is the equivalent of $209,820 per annum compared with the gross figure found by his Honour of $92,400. Exhibit L indicates that as at August 2009 the husband had a disposable income after payment of all expenses of $4,531 per month.
In paragraph 89 of the reasons for judgment the Federal Magistrate said:
The wife to a large extent was of the view that the husband’s income should be higher, based on what she understood he was earning in the past. Much of her evidence related to his earnings in Saudi Arabia and what she understood a general medical practitioner could earn working in [North Queensland].
Although his Honour seems to be dismissive of the wife’s view that the husband’s income should be higher, the documents canvassed above do draw into question the weight which can be placed upon the husband’s sworn assertion and the untested document from his accountant.
In the husband’s application to MLC Personal Protection Portfolio and MLC Life Cover Super for an increase in his cover in answer to question 23, “What were your Earnings before tax from your full time occupation for the last 12 months? Do not include investment income”, the husband answered, “$145,000”. The period for that income is uncertain, but it is probably 2008. This conclusion can be reached by looking at question 36 which is a question about income in a previous financial year. The previous financial year selected by the husband is 2007. For the year ending 30 June 2007, the husband provides the following information:
Gross business income (revenue)   $420,000
Less business expenses in generating that income          $200,000
Equals net income before tax  $220,000
Your share of that income  100%
Superannuation contributions  $10,800
Total net earnings  $220,000
(original emphasis)
Thus the husband in 2007 indicated to MLC that he has gross income of $420,000 and net earnings of $220,000.
Annexed to the wife’s affidavit sworn 11 June 2009 are various invoices for the “Provision of Medical Services”. The invoices are for week periods and range in amounts from $9,097.59 to $11,157.91. There is also an invoice for $13,558.32 for a nine day period. Although the invoices are from various dates during 2006 and 2007 they can be seen as useful in ascertaining the husband’s earning potential.
It must be noted that there is one set of documents from 2007 which is contradictory to the other evidence. These documents are from NAB and contain some details as to the monthly budget of the husband. It shows the husband’s personal net monthly income in 2007 to be $8,200 ($1,893 per week). The NAB records therefore do not correspond with the other records, as previously discussed for 2007. These documents show a far lower figure than the husband’s tax records. In his Honour’s judgment at paragraph 88, the Federal Magistrate records the husband’s taxable income for the year ended 2007 as $124,501, which is the equivalent of $2,452 per week net. The 2007 NAB analysis shows that the husband’s monthly expenditure at that stage was $3,964 and his usable funds were $4,235 per month.

Conclusion

His Honour’s conclusion that the husband’s stated gross annual income was $92,400, particularly in circumstances where it appears to be a finding which precludes the wife agitating otherwise at the final hearing, is not consistent with the weight of the evidence before his Honour.
His Honour in paragraph 109 of his judgment deals with matters referred to in s 75(2) of the Act without specifically referring to particular parts of that subsection. We have referred above to his Honour’s failure to refer to s 75(2)(m) of the Act.
His Honour has also erred in his failure to refer to the capacity of each of the parties to gain employment (s 75(2)(b)). Even if his Honour was correct about the husband’s current level of income, the husband’s earning capacity is an important consideration which was not specifically considered by his Honour.
For the forgoing reasons we find the grounds of appeal made out. Leave should be given and the appeal allowed.

Costs

At the conclusion of the appeal submissions were heard as to costs of the appeal.
If the wife’s appeal was to succeed the wife submitted that she would ask that the respondent pay the costs of the transcripts and the costs incurred by her in the preparation of the appeal books.
The husband submitted that he would resist an order for costs as he is of the view that he should not have to contribute to the costs of the wife in preparing the appeal material. When asked whether the husband would seek costs if the appeal was dismissed the husband responded “Ma’am, I think we have wasted enough of your time. I would not have it …..”. It can be said that the husband does not seek costs in the event the appeal is dismissed.
The errors to which we have referred were those of the Federal Magistrate. The wife should have a certificate pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) to contribute to the costs of the preparation of the appeal books, including the transcript. There should otherwise be no order as to costs.

I certify that the preceding one hundred and ten (110) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Ainslie-Wallace & Watts JJ) delivered on 14 March 2010.

Associate:

Date: 14 March 2011