Goudarzi & Bagheri (No 2)
[2017] FamCAFC 190
•15 September 2017
FAMILY COURT OF AUSTRALIA
| GOUDARZI & BAGHERI (NO. 2) | [2017] FamCAFC 190 |
| FAMILY LAW – APPEAL – PROPERTY SETTLEMENT – Contested evidence about the value of real property – Whether the wife was denied procedural fairness and should have been granted an adjournment due to late filing of evidence by the husband – Whether the primary judge’s discretion erred in assessing the contributions of the parties – Treatment of paid legal fees – Husband’s retirement pension excluded from the property pool – Approach to pension in payment phase discussed – Proper form of orders where property is to be sold – Where orders did not give effect to intention of the primary judge as to appropriate outcome – Whether errors vitiate the judgment – Appeal allowed in part – Whether proceedings should be remitted – Where no application to adduce further evidence is before the court – Where the wife had ample notice that the husband sought that the Full Court re-exercise on the basis of findings by primary judge – Re-exercise of discretion – Error as to treatment of paid legal expenses rectified – Orders for sale of property varied to reflect percentage distribution of the parties’ property. FAMILY LAW – APPEAL – COSTS – Where the appeal has been successful in part – Orders made to allow the parties to make submissions on costs. |
| Family Law Act 1975 (Cth) ss 75(2), 94(2) |
| Agius & Agius (2010) FLC 93-442 Allesch v Maunz (2000) 203 CLR 172 Calder & Calder (2016) FLC 93-691 Docters Van Leeuwen and Docters Van Leeuwen (1990) FLC 92-148 Gaspaldi & Gaspaldi [2008] FamCAFC 134 Gilles & Irby (2016) FLC 93-687 Gronow v Gronow (1979) 144 CLR 513 Hayton v Bendle (2010) 43 Fam LR 602 Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93‑143 House v The King (1936) 55 CLR 499 Jarrott & Jarrott [2012] FamCAFC 29 Norbis v Norbis (1986) 161 CLR 513 Pierce v Pierce (1999) FLC 92-844 Semperton v Semperton (2012) 47 Fam LR 626 Smith and Smith (1991) FLC 92-261 Trask & Westlake (2015) FLC 93-662 T v T (Pension Splitting) (2006) 35 Fam LR 181 Waters and Waters (1981) FLC 91-019 |
| APPELLANT: | Ms Goudarzi |
| RESPONDENT: | Mr Bagheri |
| FILE NUMBER: | SYC | 7646 | of | 2008 |
| APPEAL NUMBER: | EA | 66 | of | 2016 |
| DATE DELIVERED: | 15 September 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Thackray, Ryan and Forrest JJ |
| HEARING DATE: | 8 August 2017 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 4 April 2016 |
| LOWER COURT MNC: | [2016] FamCA 205 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Ms Christie |
| SOLICITOR FOR THE APPELLANT: | Slater & Gordon Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Schonell SC |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan |
Orders
The appeal be allowed in part.
That Order 7.3 made on 4 April 2016 by Cleary J be varied by:
(a) Discharging Order 7.3; and
(b) Ordering in lieu as follows:
7.3 In payment of 55 per cent of the balance then remaining to the wife;
7.4 In payment of a further sum of $964,471.60 to the wife;
7.5 In payment of such sums as are necessary to discharge St George
residential loan #100 and residential loan #700; and
7.6 In payment of the balance then remaining to the husband.
Each party be at liberty to make an application by way of written submissions in respect of costs incurred by him or her in relation to the appeal or in respect to costs certificates under the Federal Proceedings (Costs) Act 1981 (Cth) by filing such submissions and serving them on the other party within 14 days of the date of these orders.
The other party have a further 14 days in which to file and serve written submissions in answer thereto.
Either party be at liberty to reply to an answer by filing such reply and serving it on the other party within a further 7 days.
Each party endorse on the cover sheet the date on which a copy of any submission filed pursuant to these orders was served on the other party.
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 Goudarzi & Bagheri (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 66 of 2016
File Number: SYC 7646 of 2008
| Ms Goudarzi |
Appellant
And
| Mr Bagheri |
Respondent
REASONS FOR JUDGMENT
Introduction
By Amended Notice of Appeal filed on 20 September 2016, Ms Goudarzi (“the wife”) appeals against orders for the settlement of property made by Cleary J on 4 April 2016. The wife seeks that all the orders be set aside and the proceedings remitted for rehearing before a judge other than the primary judge.
Mr Bagheri (“the husband”) is the respondent to the appeal. He acknowledges that her Honour’s treatment of paid legal fees was erroneous and resulted in an under payment to the wife in the amount of $178,886.60. He is content that this error is rectified but contends that it does not operate to vitiate the remaining orders.
The parties commenced cohabitation in 1987 or 1988 and, having married in 1992, they shared the same residence until the husband moved out of the family home in December 2011. There are two children of the marriage who were 15 and 10 years of age at the time of trial. Following separation, the children remained in the primary care of the wife and spent time with the husband.
During their years together, the parties acquired a portfolio of real estate which her Honour determined was valued at $16.19 million. Including the husband’s State Super pension, which was in the payment phase, the total net property was valued at $16.906 million. However, the pension was not treated by her Honour as an asset available for distribution on the basis that taking it “into account as an available capital sum for distribution would lead to an inequitable outcome” [93]. It would seem that the primary judge interpreted Semperton v Semperton (2012) 47 Fam LR 626 as authority for the proposition that “the proper course is to take this asset into account under s 75(2) of the Family Law Act 1975 (Cth) (“the Act) as an income stream with the character of superannuation as an adjusting factor” [93]. We should not let this pass without comment and observe that although support for that proposition can be found in the judgment of May J at [89] – [92], Thackray and Ryan JJ referred with obvious approval to the “two pools” approach adopted in cases such as T v T (Pension Splitting) (2006) 35 Fam LR 181 (per Watts J) and Hayton v Bendle (2010) 43 Fam LR 602 (per Murphy J). That said, the majority acknowledged the wide discretion invested in a judge in the position of the primary judge (Norbis v Norbis (1986) 161 CLR 513 (“Norbis”)).
With the exclusion of the husband’s State Super pension from the property available for distribution, contributions to the pension were ignored and evaluated against a “net asset pool” of $14.46 million. The primary judge accepted that the husband received substantial gifts from his father which resulted in “the purchase of three properties, one of which is the most valuable” [107]. These gifts “move[d] the assessment of contributions in [the husband’s] favour” [109], such that his overall contribution was assessed at 65 per cent. One of the issues in the appeal is whether these contributions made on behalf of the husband were given greater weight than was warranted.
The primary judge found that the husband’s State Super pension, which was valued at $2.03 million, justified a significant adjustment pursuant to s 75(2) and represented “the majority” of the 20 per cent adjustment made in the wife’s favour. As the 20 per cent adjustment represented $2.892 million, it follows that the wife received in excess of $1.4 million by way of an adjustment on account of the husband’s pension.
A “substantial adjustment” was also made “in order to maintain the wife’s standard of living now and in the future, although not in the current family home, to enable the wife and children to remain in the area familiar to them” [132]. The “balance of the adjustment” was made up “almost entirely” of the husband’s superior income earning capacity [158]. Otherwise, the husband’s disposition of property in Country U that had been given to him by his family was “a minor consideration, minimal in financial terms” [162] but nonetheless taken into account in favour of the wife.
The effect of the adjustments made pursuant to s 75(2) was to increase the wife’s overall share of the property available for distribution from 35 to 55 per cent. Notwithstanding that the family home, which was valued at $8.48 million was to be sold, the primary judge formulated the orders which would give effect to the 55:45 division as though the wife should receive 55 per cent of $14.46 million. On this formula, the wife would receive 65 per cent of the proceeds of sale of the family home. It is the wife’s contention that the orders do not give effect to her Honour’s determination as to the percentage distribution of the parties’ property and that she carries a disproportionate risk of financial loss should the family home sell for less than $8.48 million.
The husband concedes that if it is accepted that the primary judge intended that the wife receives 55 per cent as “her overall share of the asset pool” [163] the form of orders is mathematically flawed.
Before we commence our analysis of the various challenges, it needs to be remembered that this an appeal is to be determined in accordance with the principles set out in House v The King (1936) 55 CLR 499. Disagreement by an appellate court only on matters of weight by no means justifies a reversal of the primary judge (Gronow v Gronow (1979) 144 CLR 513).
Procedural fairness
By ground 1 it is contended that the primary judge erred in declining to grant the wife’s application for an adjournment having regard to late filed evidence by the husband. The late filed evidence was an affidavit of the husband sworn on 16 July 2015. In that affidavit he corrected evidence in his affidavit sworn on 19 June 2015. Relevantly, in that earlier affidavit the husband disavowed the ownership of property in Country U or being a beneficiary of his late father’s estate. However, in his affidavit dated 16 July 2015 he acknowledged he was the registered owner of a two bedroom apartment in City FF and 1/7 owner of a property at MM he had received from his family (albeit he said that he understood the properties were to be, or had been, transferred to a charitable foundation in accordance with an arrangement made by his family to which he had agreed). Her Honour accepted this evidence [160].
One of the longstanding issues in the proceedings was the wife’s contention that the husband owned property in Country U (and possibly elsewhere) which had not been disclosed. Indeed, the wife obtained an order on 20 March 2015 from the primary judge which required that the husband disclose his interests in property outside Australia, which prior to 16 July 2015 he did not.
However, by the time the husband swore his affidavit on 16 July 2015, the wife knew of his interest in the two properties. Indeed at paragraph 155 of her affidavit sworn on 27 June 2014 she deposed to his ownership of the apartment in T, having visited it in 2004, 2005 and 2006 and that the husband’s mother lived there. Further in June 2015 the husband’s brother in law provided the wife with a copy of an affidavit dated 10 May 2015 filed by the husband’s brother Mr A Bagheri in his own family law proceedings. The properties which the husband disclosed in his affidavit of 16 July 2015 were disclosed in the affidavit of the husband’s brother.
Armed with this information (and before the husband completed his correcting affidavit), a few days before the trial was due to commence the wife applied for an indefinite adjournment. This application was listed before the primary judge on 14 July 2017 and was dismissed. In dismissing the application the primary judge said:
HER HONOUR: Nothing in this material is significantly different to matters that you have raised before me on more than one occasion. They can be the subject of cross-examination by you, and in the event that you make out your case for there being insufficient evidence before the court to finalise the matter, then you can make whatever application you consider at that point. But what I am saying to you is that the – your application for these proceedings to be adjourned is opposed, and I cannot see any basis for a second adjournment of this matter.
[THE WIFE]: Your Honour…
HER HONOUR: What I propose to do is to confirm the hearing dates, and I don’t need to do that by order. They are fixed. The husband has complied with the directions. You have made your own choices about the directions for further filing. There is no reason why the matter cannot proceed, commencing on Monday, and you can – you are entitled, depending on what you decide to do, to cross-examine on all relevant issues.
[THE WIFE]: Your Honour, [the husband] has, for 10 days, according to a process server, clearly evading service the documents for contravention of – a court order which required him to disclose all his assets and bank accounts overseas and his other assets overseas has been contravened. I have been given a document filed in the Family Court of Canberra by his brother, clearly stating that he is a beneficiary of a huge estate. That document is the attachment of my contravention. The orders made on 20 March clearly says the respondent should disclose all his assets overseas. He has not done so in this affidavit.
(Transcript of 14 July 2015, page 4, lines 11-35)
Given the husband’s late filed affidavit, the wife was given permission to rely on an affidavit sworn by the husband’s brother in law which was filed on 17 July 2015. Vast swathes of the affidavit were properly rejected as being inadmissible and, in the end, the only “evidence” of the market value of the properties in Country U was what the husband believed them to be worth.
The wife cross-examined the husband at some length about his interest in his late father’s estate and these properties. Although the primary judge did not make specific findings about the value of these properties, she accepted that they were of minimal value, and that the husband’s mother had lived in the apartment for 15-20 years and she did not pay rent to the husband. It also seems to have been accepted that the property at MM had been acquired by the husband’s parents some 50 years previously and that on the death of the husband’s father their seven children agreed they would transfer the property to a charitable foundation established many years earlier.
It is the wife’s contention that she was denied the opportunity to investigate the husband’s interest in these properties and to have them valued. However, we consider it was sufficiently clear from the exchange recorded above that the primary judge had not ruled out hearing a further application for an adjournment after the cross-examination was completed. There was no further application.
Furthermore, when the hearing was not completed in the allocated four days, it was adjourned part-heard to 30 November 2015. Thus, the wife had an additional four months within which to pursue whatever enquiries about these properties she considered were necessary. As the trial transcript of 24 July 2015 reveals, there was considerable discussion as to the further evidence that might be obtained during the period of the adjournment. By then, the wife had completed her cross-examination of the husband and she did not seek further directions in relation to obtaining valuations of these properties or having any other enquiries made about their alleged disposal to the charitable foundation.
When regard is had to the evidence concerning the acquisition of these properties, their use and the parties’ lack of involvement with them, it is easy to understand why the wife lost interest in them. There was no obligation on the primary judge to prompt the wife to have the properties valued and no impediment to the wife taking whatever steps she now suggests ought to have been taken. This challenge has the hallmarks of grasping at straws and not raising a matter of substance. We are fortified in this view by the absence of any attempt by the wife to adduce evidence in the appeal (for example as to value) on the topic.
Ground 1 has not been established.
K Street, Suburb L
The gravamen of ground 2 is that the primary judge erred by failing to engage with and make findings in respect of the contested evidence concerning the acquisition of an apartment at 1 K Street, Suburb L (“the L property”). It is said that this failure renders without foundation the assessment of the parties’ contribution based entitlements.
At trial it was common ground that on 21 December 1998 the husband completed the purchase of the L property for which he paid $900,000. However, the source of $806,000 used to acquire the apartment was contentious. The primary judge accepted the husband’s evidence that his father gave him $US500,000 which was held in an account in Country NN before it was transferred to Australia to purchase the property [103(d)]. The wife’s evidence as to the source of funds was objected to and excluded. However, the issue remained alive and the wife had the opportunity to cross-examine the husband about it.
We have already set out her Honour’s initial explanation to the wife that she was entitled to cross-examine on relevant matters. Sentiments to this effect were repeated on numerous occasions. In this regard, the trial transcript shows that the first two days of the trial were largely taken up with a variety of applications, rulings and explanations by the judge in relation to evidence. Time and again the primary judge explained to the wife that she could explore contentious issues through cross-examination. The nature and length of the wife’s cross-examination of the husband suggests that by the time she was called on to cross-examine, the wife (who had been cross-examined), understood the task and was prepared for it.
In some circumstances, a trial judge might reasonably be expected to prompt a self-represented litigant to question a witness on a matter of some potential significance. However, in this case, the wife had contended that the husband had been able to save the $806,000 from his wages, rental income and money he had invested in Country U and Country NN. As has already been mentioned, the husband acknowledged that he transferred funds from Country NN to purchase this property. It follows that the contentious issue was the extent of funds sourced from savings and rental income.
Relevantly, the wife cross-examined the husband about his income from when the parties began living together and up to when the Suburb L property was purchased. The following exchanges illustrate the point:
[THE WIFE]: How much was your income, [the husband]?
[THE HUSBAND]: When?
[THE WIFE]: From the time you were employed. Would you like to go through – when I met you, you were unemployed. How much was your income when you first got employment as a technical employment in the […]? What was your income?
[THE HUSBAND]: I have explained this in terms of my positions, various positions, at the [KK University], and, your Honour, I do not recall back in 1984 what my salary was, but I’m guessing at that time my academic or professional officer salary as it is stated in my affidavit was probably around, I’m guessing, $20-odd thousand per annum gross.
[THE WIFE]: 20-odd thousand. And you paid for everything on $20-odd thousand. I recall in 1999 you were a full […], and your salary was $99,000. Do you dispute that?
[THE HUSBAND]: I don’t recall what exactly it was, but I’m not going to dispute it.
[THE WIFE]: You don’t recall. I have actually amongst the documents a subpoena that was sent to – that was subpoena – I don’t know the number, your Honour, but it’s from St George, and it actually has one of your tax returns from 1996 to 1997, and your income in this tax return is $50,000. 1996?
[THE HUSBAND]: Taxable income.
[THE WIFE]: Same time that I showed you I was making as a full-time PhD student $25,000 by September in a financial year.
HER HONOUR: All right. Now it’s not a conversation.
[THE WIFE]: I’m sorry. Yes. It just goes…
HER HONOUR: What is the question, [the wife]?
[THE WIFE]: So would you like to see your own tax return that you made $50,000 in 1996?
[THE HUSBAND]: Can you please be specific. When you say “you made” is that taxable income?
[THE WIFE]: Your income. Yes. It is your tax return?
[THE HUSBAND]: I was negative gearing a number of properties. Therefore, I had a lot of deductions. What – your first question was asking what is my salary. My salary and my taxable income, your Honour are two different, very different, figures.
(Transcript of 24 July 2015, page 383, lines 18-45 and page 384, lines 1-8)
This exchange is entirely inconsistent with the wife’s contention that the husband, or indeed the parties jointly, had the capacity to save something like $806,000 or a significant portion of it. Perhaps this explains the following submission from the wife:
[THE WIFE]: [counsel for the respondent] said again and again that the majority of this contribution – financial contribution and property contribution has all been the husband’s side. Two substantial…
HER HONOUR: No, he didn’t say it had all been…
[THE WIFE]: …two substantial properties were gifted based on the fact that [the husband], just without any documentation, says that his family gave him a gift, after he lived in my property unencumbered, tax-free for 10 years, he purchases this property, but the problem was – my character, your Honour. I never disputed these things because it’s beneath me. When my solicitors at the time that unfortunately I had – solicitors asked me, I just never said anything.
(Transcript of 30 November 2015, page 89, lines 23-35)
In short, the evidence sits comfortably with her Honour’s finding at [103(d)] and in our view, no other finding as to the source of $806,000 applied to the acquisition of the Suburb L property was available.
It follows that ground 2 has not been established.
G Street renovations
It was uncontroversial that on 22 October 1998 the husband’s siblings transferred a property at G Street, Suburb H (“G Street”) to him for $1. A valuation was obtained for stamp duty purposes and stamp duty in the amount of $51,490 was paid on the transfer. The amount of stamp duty levied established that at the time of transfer the property was worth in the vicinity of $1.2 million. Thereafter the property was tenanted.
A single expert was retained to value the property for the hearing and it was valued in mid-2013 at $2.1 million. However, without input from the wife, the husband renovated the property at a cost of $379,870 which he funded through a line of credit established with St George Bank secured over that and other properties in his sole name. Following completion of the renovations, on 27 October 2014 the property was revalued by the single expert at $2.65 million.
The borrowings included in the line of credit were taken into account as liabilities in determining the property available for distribution. The gravamen of this ground is that “it is also unacknowledged in the Reasons for Judgment that by inclusion of the borrowing to effect the renovations in the schedule of assets and liabilities the wife has indirectly contributed to the value of the [G] Street property” (summary of argument [25]). In a theoretical sense this is true. However, the primary judge was not required to overzealously search for and ascertain every conceivable manner in which the wife might have made a contribution, no matter how inconsequential (see Norbis per Mason and Deane JJ at 524).
It needs to be understood that the wife is highly educated and articulate, and previously had legal representation before deciding to conduct the trial herself [7]. The primary judge pointed out the difficulties inherent in self‑representation and the first adjournment of a forthcoming trial gave the wife the opportunity to again instruct legal representatives. Notwithstanding that the wife had the financial capacity to do so she did not [3]. A review of the trial transcript demonstrates that the wife sought and was given latitude that would have been denied to counsel or a solicitor [5] (for one example see transcript of 30 November 2015, pages 96-97). We find no basis for concluding that the primary judge erred by failing to make a finding she was never asked to make.
We also accept the submission made by senior counsel for the husband that for this challenge to be made good, it would need to be demonstrated that any increase in value, consequent upon the renovations, was other than equivalent to the additional debt incurred. Although the property increased in value, there was no evidence to show that this was attributable only to the renovations. This challenge too must fail.
Assessment of contributions
The essence of the challenge raised by ground 4 is that the finding that contributions favoured the husband 65 per cent compared to the wife’s 35 per cent was well outside the generous ambit of discretion available to the primary judge. The finding accords with that sought by the husband whereas it was submitted by the wife that the parties’ contributions were “probably fifty‑fifty” (transcript of 30 November 2015, page 95, line 9).
Having decided that it would be just and equitable to make a property settlement order, the primary judge applied the well settled approach to the determination of that issue discussed in cases such as Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93‑143. Her Honour’s findings and analysis of the assessment of contributions in accordance with s 79(4)(a)-(c) of the Act commenced at [94] and culminated with the following:
107.The husband made the very substantially greater contribution to the acquisition of assets. The gifts from his father enabled the purchase of three properties, one of which is the most valuable. This contribution by the husband’s father must be given proper recognition.
108.It is submitted on behalf of the husband that his overall contribution should be assessed at 65 per cent. I agree, in fact it could not reasonably be less.
109. Each party worked to capacity in paid employment, unpaid employment and in the raising of the children, but the injection of such significant capital on behalf of the husband must move the assessment of contributions in his favour.
The findings and reasoning which resulted in this assessment can be summarised as follows:
·When the parties commenced cohabitation in late 1987 or early 1988, neither party owned any real estate or property of value [94] – [96];
·Thereafter the wife had paid employment until about 1999 [98];
·The elder child was born in 2000 and the wife was primarily responsible for the day to day care of the children and running the household [105];
·The husband’s involvement in the care of the children was less than the wife’s [106];
·The husband had paid employment throughout the marriage [102];
·During the marriage the wife purchased three properties in her sole name, the details of which were set out at [100] as follows:
a)[M Street, Suburb N] (the “[Suburb N] Property”) in July 1988. She borrowed to do so. There was equity of about $35,000;
b)[O Street, Suburb P] (the “[Suburb P] Property”) in October 1990 for $195,500. There was a Bank loan of $110,000 and the balance from the parties; and
c)[1 Q Street, Suburb R] (the “[1 Q Street] property”) in September 1992 for $297,000. There was a loan for $237,000, the balance paid by the husband;
·The three properties produced rental income for the wife [101];
·As to property acquired in the husband’s sole name, these were acquired through borrowing, savings and “two very substantial gifts” as follows at [103]:
a)[I Street, Suburb J] in August 1988 for $200,000;
b)[3 Q Street, Suburb R] in November 1994 for $625,000;
c)[G Street] in October 1998. “This property was a gift to the husband from his father. The value was $1.2 million”;
d)The [Suburb L] property in December 1998 for $900,000. “This property was purchased for US$500,000 (AUD$806,000) and gifted to the husband by his father”; and
e)[2 Q Street, Suburb R] in July 1999 for $2.81 million. “This property became the family home. The purchase was financed by loan of $2.6 million secured on the [Suburb L] and [Suburb H] properties”; and
·The wife managed extensive renovations to the parties’ properties as well as “the rental and maintenance aspect for most of the properties until 2011” [104].
The contributions made by the wife, which it is said the primary judge failed to take into account or were afforded no or insufficient weight were:-
·The $35,000 equity in the Suburb N property;
·The $51,490 stamp duty paid on G Street from joint funds;
·By the inclusion of the cost of renovations undertaken on G Street; and
·The wife’s indirect contribution as a guarantor to a loan attached to the family home (from 2004).
The first matter to note is that the primary judge did not overlook the acquisition of the Suburb N property and plainly recognised the equity of $35,000 upon which the wife relies.
It is accepted that the primary judge did not resolve the controversy about who paid the stamp duty on G Street. The parties gave different explanations but neither provided documentary or other evidence which might have assisted the resolution of the issue. In these circumstances, it would have been difficult for the primary judge to do so and given that it is the wife’s case that this contribution should have been assessed as being made equally, and the primary judge did not determine that the contribution was made by the husband; the approach adopted did not disadvantage the wife.
We have already discussed the issues surrounding renovations to G Street (ground 3). It is not accepted that the evidence demonstrated that an adjustment in favour of the wife in relation to this matter was warranted.
Otherwise, it is accepted that the primary judge did not specifically acknowledge that when the husband transferred the family home from his sole name into the parties’ joint names in 2004 the wife guaranteed the loans secured against that property. As to the magnitude of that contribution the wife said “I was guarantor of the loan secured by mortgage over the former matrimonial home, which allowed higher borrowings than what would otherwise be available” (paragraph 199 wife’s affidavit sworn 27 June 2014). The wife’s assertion that her being a guarantor allowed more money to be borrowed was struck out (transcript of 20 July 2015, page 72). Again, her contribution as guarantor was no greater than the contribution made by the husband as the primary borrower to the loan and would not warrant an adjustment in favour of the wife.
For this challenge to be made good, it was necessary for the wife to establish that her Honour’s findings as to the $2 million in gifts received from the husband’s family and the benefits that derived therefrom were not available. As to the latter, it needs to be understood that having purchased the Suburb L property with the $806,000 gifted to the husband by his father, that property became collateral security for a loan of $2.6 million (with G Street), used to purchase the family home. Cases such as Pierce v Pierce (1999) FLC 92-844 establish that the primary judge was required to not only identify the contributions made by the husband’s family but also to have regard to “the use made by the parties of [those] contribution[s]” (at 85,881). It is abundantly clear that the primary judge was satisfied that these gifts were the springboard for a significant component of the parties’ total wealth. In this regard it is important to recognise that the three properties acquired directly or indirectly through those contributions were valued at $12.78 million as at the date of trial.
In our view, her Honour’s findings and assessment as to contributions were available and error in the manner alleged by ground 4 has not been established.
Sale of the family home
Grounds 5 and 6 challenge order 7.3, that the wife receives 65 per cent of the net proceeds of the sale of the family home.
In July 2014, a single expert valued the property at $5.5 million. Both parties were given leave to adduce their own expert evidence of its value, and in January 2015 the husband’s expert valued the property at $8.48 million. The wife, who by then was unrepresented, had great difficulty in her dealings with the single expert and did not adduce evidence which contradicted the husband’s expert. Indeed, on the last day of the trial the wife made it clear that she did not intend to challenge the husband’s valuation, saying “I’m quite happy for $8.4 million or $25 million. It doesn’t make a difference to the whole case”. It was thus open to the primary judge to accept the opinion of the husband’s valuer at $8.48 million.
The primary judge explained her reasons for ordering that the wife receive 65 per cent of the sale proceeds at [163]. Under the orders, each party would retain the assets in their respective name and possession. To achieve an overall property division of 55 per cent to 45 per cent in favour of the wife as intended, the wife would need to receive $5,449,585, which represented approximately 65 per cent of the net proceeds of sale, assuming a sale price of $8.48 million.
We accept the proposition advanced by ground 5 that the fact that a single expert had valued the family home only twelve months earlier at $3 million less than it was valued at the date of trial demonstrated that it was far from certain that the property would sell for $8.48 million. Indeed, even without the earlier opinion, the vagaries of the real estate market means that there will always be uncertainty about the price at which a property will sell until completion of its sale. It is clear that if a lower sale price was realised, as feared by the wife (or indeed, a higher one), this would alter the overall division of the property in percentage terms, with the final result being not as her Honour intended.
The undesirability of making orders which do not account for the possibility of real estate selling for much more or much less than the values relied upon at trial has been consistently discussed in the authorities (Waters and Waters (1981) FLC 91-019, Smith and Smith (1991) FLC 92-261; Docters Van Leeuwen and Docters Van Leeuwen (1990) FLC 92-148; Jarrott & Jarrott [2012] FamCAFC 29. Although these authorities encourage the use of percentages in orders providing for the division of the proceeds of sale of an asset, this should clearly be understood as meaning that the percentage employed should be the same as the overall proposed percentage distribution of the assets. The orders then need to provide for payment by one party to the other (from their share of the proceeds of sale) such adjusting amount as will bring about the desired outcome.
The framing of orders involving the sale of real property was recently considered by the Full Court in Trask & Westlake (2015) FLC 93-662 (“Trask”). In that case, the primary judge said that the wife should receive 60 per cent of the property, and, noting the division of the parties other property in specie, an order was made that the wife receive 87.43 per cent of the sale proceeds of real estate.
In allowing the appeal the Full Court in Trask said:
36. … It is within discretion for a judge to determine that orders should reflect a division that approximates 60%/40%. If that be the judgment, then small variations in the ultimate percentage received consequent upon the sale of property may not attract the intervention of this court.
37. Axiomatically, however, if that be the judgment, adequate reasons must make that abundantly clear, and all the more so because of the ubiquity of orders intended to reflect, with precision, a result expressed in percentage terms. It is that consideration which finds reflection in Noetel relied upon by the appellant husband. If orders are intended to reflect with precision the judgment expressed in percentage terms, those orders must acknowledge that the property may sell for a price different to the current estimated value.
….
41. His Honour’s percentage formula makes no allowance for the fact that, as the assumed values of the two properties rise and fall they bear a greater or lesser proportion of the total value of the pool. That is, using his Honour’s formula would produce the assessed percentage entitlement only if the new values bore the same proportion to the total value of the pool as the original agreed values. Axiomatically, if they have risen or fallen, and the values of the balance of the property remain the same (as is assumed) they do not.
(Footnotes omitted)
To illustrate the point in the current context, the differences in the percentage division of the assets is shown below, using a realised sale price of the family home of both $8.48 million and $5.4 million and a division of the proceeds 65:35 in favour of the wife as her Honour ordered.
Table One: Assuming $8.48 million sale price
Total net value of property excluding family home
$5,980,237
Family home
$8,480,000
TOTAL PROPERTY FOR DIVISION
$14,460,237
Property retained by wife
$2,503,545
Property retained by husband
$3,476,692
65:35 division of sale proceeds of family home at $8.48 million
$5,512,000
$2,968,000
Total to wife (55.4%)
$8,015,545
Total to husband (44.6%)
$6,444,692
Table Two: Assuming $5.4 million sale price
Total net value of property excluding family home
$5,980,237
Family home
$5,400,000
TOTAL PROPERTY FOR DIVISION
$11,380,237
Value of property retained by wife
$2,503,545
Value of property retained by husband
$3,476,692
65:35 division of sale proceeds of family home at $5.4 million
$3,510,000
$1,890,000
Total to wife (52.8%)
$6,013,545
Total to husband (47.1%)
$5,366,692
We accept that the primary judge intended that the wife receive approximately 55 per cent of the parties’ net property and that the orders which give effect to that intention are flawed in the manner contended by ground 6. Consistent with the authorities to which we have referred earlier, the correct approach in this context would have been to allow both parties to retain the property in their name, and to allocate the proceeds of sale in the desired percentage, relevantly for the wife to receive 55 per cent. Then, having calculated the adjusting amount by reference to the retained property for that payment to be made to the wife, the husband to then receive the balance of the proceeds of sale (see the orders in Trask).
Although senior counsel for the husband contended that the form of order fell within the broad discretion available to the primary judge (which we have not accepted), in the event we found error it was contended that the error was mechanical and could be rectified by agreement inter alia. Although the wife conceded the formula which would rectify the error she maintained that the error justified remittal and a rehearing. This is an issue to which we will return.
Paid legal fees
Between them the parties had paid legal expenses in the vicinity of $1.62 million. It is difficult to comprehend how this extraordinary sum arose. Perhaps the answer can be found in the minutiae explored in much of the affidavit evidence and the number of adjournments sought and granted. In any event, at trial, the husband proposed that the paid legal fees, and the line of credit associated with his expenses, be taken into account in the formulation of the property “pool”. Her Honour declined to do so and explained her reasons for so doing:
80. The husband proposes adding back all legal costs paid to date by both parties including disbursements (Single Expert) arising from the parenting proceedings. Those proceedings were not before me. I consider that the outcome of doing so would be distorted in favour of the husband, whose costs are greater, especially as the wife has represented herself in the later stages of the litigation.
It was uncontroversial that the husband’s paid legal expenses amounted to $908,100 and the wife’s were $712,375. On the basis that the wife was to receive 55 per cent of the property as determined and contrary to her Honour’s finding that the inclusion of these amounts would favour the husband, the wife would have received $178,886.60 more than she did. Ground 8 is addressed to this error (ground 7 was abandoned).
This error is conceded by the husband and he is content that her Honour’s order should be varied accordingly.
How should the errors be addressed?
The question which now arises is how should the identified errors be addressed? Various options were explored with counsel. These included amending the orders pursuant to r 17.02 of the Family Law Rules 2004 (Cth) (“the slip rule”) or applying s 94(2) of the Act which contains the source of power for this court exercising appellate jurisdiction.
Section 94(2) provides:
Upon such an appeal, the Full Court may affirm, reverse or vary the decree or decision the subject of the appeal and may make such decree or decision as, in the opinion of the court, ought to have been made in the first instance, or may, if it considers appropriate, order a re-hearing, on such terms and conditions, if any, as it considers appropriate.
Senior counsel for the husband relied on the “mechanical” nature of the errors and appeared to embrace the notion that the errors could be rectified either pursuant to the slip rule (the orders for the sale of the family home) or by way of re-exercise undertaken by us to so that both the proceeds of sale order and the adjusting amount payable to the wife reflected the order that should have been made in the first instance. Counsel for the wife did not dispute the variations which ought to have been made in the first instance, but argued that it was appropriate for all the orders to be set aside and the proceedings remitted for rehearing unconditionally.
As to the orders concerning the sale of the family home the Full Court in Trask considered whether the orders for the sale of property in that case could be rectified pursuant to the slip rule. In deciding they could not, the Full Court was constrained by the scope of r 17.02 as it then stood and questions concerning the primary judge’s intentions. However, that rule has since been repealed and replaced by the sub-rule in its current form. Relevantly, the sub‑rule provides that the court may at any time vary or set aside an order if:
(e) it does not reflect the intention of the court.
In Agius & Agius (2010) FLC 93-442 the Full Court identified a mathematical error made by the magistrate and discussed various methods by which that error might be rectified. In so doing the Full Court contemplated whether it should exercise the power conferred on the then Federal Magistrates Court pursuant to that court’s slip rule. In circumstances where that issue was not addressed and the court was satisfied the mistake could be rectified by the federal magistrate, the error was not rectified by the Full Court and it was left to the litigants to take such steps as they were advised. However, in this case, we are concerned with the exercise of power pursuant to this court’s rules and not those of a different court. In relation to the sale of the family home the proposed variation to the orders does not require the exercise of discretion in order to settle the form of order which would give effect to the intention of the primary judge. Although it would have been preferable for this error to have been placed before the primary judge for rectification of the judgment we are satisfied that in relation to the sale of the family home the order is amenable to rectification by us pursuant to r 17.02(e).
In this regard, we agree with the approach discussed by the Full Court in Gilles & Irby (2016) FLC 93-687 at [18]:
However, the essence of the appeal Court’s powers is to correct error so as to achieve justice. The essence of a court’s power to correct accidental slips or omissions is also to remedy manifest injustice. While the wide powers given to this appellate Court in, relevantly, s 94(2), are ordinarily exercisable when “the order that is the subject of the appeal is the result of some legal, factual or discretionary error”, we incline to the view that the power to “make such decree or decision as, in the opinion of the court, ought to have been made in the first instance” carries with it an implied power to correct accidental slips or omissions in the order appealed which are necessary so as to permit the appellate Court to exercise the jurisdiction and powers conferred expressly upon it.
We are also comfortably satisfied that pursuant to s 94(2) we can vary the orders by way of re-exercise so as to give effect to the intention of the primary judge concerning the percentage distribution of the parties’ property and propose to make the order concerning the sale of the family home that should have been made in the first instance. Section 94(2) also provides the source of power to vary the error concerning the paid legal expenses. We have explained the consequences of that error. It can be readily rectified by way of re-exercise and, in accordance with s 94(2) of the Act, the order will be varied.
The proposed variations to the orders are based on the facts as found by the primary judge after a contested trial, thereby distinguishing this case from Allesch v Maunz (2000) 203 CLR 172. On behalf of the wife it was nevertheless submitted that circumstances may have changed in the interregnum. We accept that some time has passed between the original hearing and the disposition of the appeal, but nothing that could have occurred in the interim would have had any impact on the only errors we have identified in her Honour’s reasons.
Furthermore, from 25 November 2016 when senior counsel for the husband filed his summary of argument, the wife has known that the husband proposed that the orders of the primary judge be varied by way of re-exercise by us and the manner of that variation. In accordance with s 93A(2) of the Act, the wife had the opportunity to apply to adduce further evidence in the appeal concerning relevant changed circumstances. No such application was made and, given the period of time under which the wife has been on notice that a variation of the orders was proposed, and the nature of the variations under consideration, we are not persuaded that the appeal should be adjourned to take further evidence nor that the proceedings should be remitted for rehearing (see Calder & Calder (2016) FLC 93-691 at [64]; Gaspaldi & Gaspaldi [2008] FamCAFC 134).
It is also to be recalled that the parties separated in 2011 and proceedings between them commenced later that year. Proceedings for the settlement of property were instituted in 2012. Various attempts at mediation have failed and the processes of bringing the proceedings to trial and the appeal to hearing have been expensive and fraught. Between them, the parties have incurred enormous legal expenses which would only increase if the matter was remitted for rehearing. Indeed the approach, for which counsel for the wife contends, would be inconsistent with this court’s desire “to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case” (see r 1.04).
Turning then to the orders which should be made to achieve the 55/45 per cent distribution of property intended by the primary judge and, on the basis that each party takes the property as determined by the primary judge at [87] and [88], this requires an adjusting payment from the husband to the wife of $785,585. On this basis, the order for the sale of property should be varied to distribute the net sale proceeds accordingly.
Provision for the paid legal fees should also be made so that from what would otherwise be the husband’s 45 per cent of the net proceeds of sale, he gives the wife an additional $178,886.60.
The form of order set out at the commencement of these reasons gives effect to our judgment (the wording closely following the form of a Minute provided to us by counsel following the conclusion of the argument to cover the eventuality of grounds 5, 6 and 8 being made out).
Our orders also make provision for the filing of costs submissions.
I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Thackray, Ryan and Forrest JJ) delivered on 15 September 2017.
Associate:
Date: 15 September 2017
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