H v H

[2001] FamCA 134

[2001] FamCA 134

FAMILY LAW ACT 1975

IN THE FULL COURT

OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal No. EA95 of 2000 File No. CA778 of 1999

IN THE MATTER OF:

MR H

Appellant/Husband

- and -

MRS H

Respondent/Wife

REASONS FOR JUDGMENT

BEFORE:                 Ellis, Lindenmayer and Guest JJ. HEARD:  5th day of February 2001 JUDGMENT: 15th day of March 2001

APPEARANCES:    Mr Millar of counsel, instructed by Chris Crowley & Associates, Solicitors, appeared on behalf of the appellant husband.

Mr Roberts of counsel, instructed by Hill & Rummery, Solicitors, appeared on behalf of the respondent wife.

Catchwords:             PROPERTY - Loan from mother- correct approach to determining net value of parties property, Antmann and Antmann (1980) FLC 90-908, Af Petersens and Af Petersens (1981) FLC 91-095 and Biltoft and Biltoft (1995) FLC 92-614 considered. Jenkin and Jenkin [1998] FamCA 163 considered and applied.

Not Reportable.

1. This is an appeal by the husband against the  orders made by Faulks J. on 19 September 2000 the effect of which was to divide the net value of the property of the parties, found by his Honour to be $199,159, as to 55 per cent to the wife and as to 45 per cent to the husband.

1. The actual orders of his Honour are as follows:-

“1. THAT on or before 20^th November 2000  (or such  other period  as  may be  agreed between the parties) the husband pay to the wife the sum of $85,000.

2.THAT the husband be and is declared to be the sole owner at law and in equity as against the wife, of the property known as D Street, C in the Australian Capital Territory.

3.THAT each of the parties be declared to be both at law and in equity as against the other the beneficial owner of all personal property or choses-in-action in his or her possession or control (including in each case the motor car in his or her possession).

4.THAT the husband will indemnify and keep the wife indemnified against to any claim that may be made against him or her in respect of: the loan from his mother of about $131,189.00; the American Express Cards accounts: the Grace Bros account; and any amount due in respect of the Credit Union of Canberra by him.

5.1THAT if the husband should fail to pay the amount due to the wife on or before the 20^th November 2000 (stipulated in Order 1 above), then he will not later than the 27^th November 2000 do such things as may be necessary to place the property at D Street on the market for sale.

5.2There be liberty on the part of either the husband or the wife to apply about the terms of the sale.

6.THAT until payment, the amount due to be paid by the husband to the wife will bear interest at the rate currently prevailing under the Family Court Rules from 20^th November 2000.

7.THAT the husband will pay to the wife from the proceeds of the sale of the house effected in accordance with Order 5 above the sum of $85,000 plus interest in accordance with Order 6 above.

8.THAT the matter be removed from the pending cases list.

9.THAT all material produced sub poena which did not become the subject of exhibits will be returned by the Court to the persons producing it as soon as practicable.

10.THAT any material produced sub poena which became an exhibit will be returned by the Court at the expiration of the appeal period to the person producing it. Any material produced by a party which became the subject of an exhibit will be returned by the Court to the party at the expiration of the appeal period.

IT IS CERTIFIED:

11.THAT pursuant to the provisions of Order 38 Rule 26 of the Family Law Rules it was reasonable to brief counsel.”

BACKGROUND

1. The husband was born in 1951 and was thus aged 49 years at the date of the hearing.

As at that date, the wife was aged 42 years, having been born in 1957. The parties  met in September 1992 and married in Japan in1993. They separated nearly six years later on 11 December 1998. A decree nisi dissolving the marriage was pronounced in February 2000.

1. There is one child of the marriage, S, born in 1995 who was thus aged five years as at the date of the hearing. She has resided with the wife since the date of separation.

JUDGMENT OF THE TRIAL JUDGE

1. The trial Judge found that at the date of the marriage, the wife had “somewhere between $15,000 and $20,000 in funds, some furniture and other chattels.” He further found that the parties decided in October 1996 to purchase a property in C which became the matrimonial home and in which the husband was residing at the date of the hearing. The wife’s evidence was that the property was purchased for $235,000. The purchase was completed with the assistance of the Commonwealth Bank and an advance from the husband’s mother in the sum of $131,189.36. Between June 1994 and 3 October 1996, the husband’s mother advanced various other sums totalling a little over $33,000 as gifts to the wife. An additional two sums were advanced by the

husband’s mother said by her to total more or less $7700, one in June 1997, the other in December 1997. Part of those advances were retained by the wife at separation.

1. His Honour found that the assets of the parties and the value thereof as at the date of hearing was:-

·     [C property] property valued at $285,000
Encumbered as to $106,000	net	$178,400
·     Travellers cheque and cash retained by the wife	$ 25,000
Total:	$203,400

1. In addition, his Honour found that the husband probably had a more valuable share of the furniture as at the date of the hearing than the wife but that the wife had a more valuable motor vehicle than the husband. His Honour referred to a number of debts but only took into account for the purposes of determining the net value of the assets of the parties, a joint debt to MasterCard in the sum of $4241.

1. He thus found that, for the purposes of the proceedings, the parties had assets to the net value of $199,159.

1. Additionally, his Honour found that the husband had a superannuation entitlement which began to accrue in 1986 in relation to which “his total benefit before tax will amount to some $443,875.31 when he turns 55.”

1. In relation to the sum of $131,189.36 advanced by the husband’s mother to assist with the purchase of the C property, his Honour concluded:-

“61. In the circumstances, in my opinion, it is not appropriate to deduct the value of the loan made to [Mr H] from the net pool of the parties. It is appropriate to take into account the fact that the money advanced represented, as it was without interest, a contribution made by or on behalf of [Mr H] by his mother, in accordance with the long established principles in this Court of Gosper v Gosper. And it is appropriate to have it taken into account as a liability of the husband, although in my opinion, to a diminished extent under section 75(2)

of the Family Law Act. I will return to that issue when I come to deal with those matters in due course.”

1. Thereafter, his Honour reviewed the evidence relating to the relevant contributions of the parties, concluding that those of the husband should be assessed at 70 per cent and those of the wife at 30 per cent.

1. After reviewing the evidence relating to the relevant matters referred to in s.75(2), his Honour said:-

“93. In my view, the proper balancing of these factors is both a difficult and possibly contentious matter, but it seems to me that an appropriate adjustment under section 75(2) would be made by an adjustment in favour of the wife of 25 per cent, together with any imbalance that may exist between the value of her car and furniture by comparison with the car and furniture in the possession of the husband. This means on my calculations that the  wife should receive some 55 per cent of the property pool as I found  it previously to be, and the husband the balance. Again on my calculations this means that the wife should receive the sum of $109,537, less the $25,000 she already has, representing some $84,537 which for the purposes of these proceedings I round to the sum of $85,000.”

1. The orders against which the husband has appealed were then made by his Honour.

1. Before turning to the grounds of appeal, we note that after setting out the orders sought in the proceedings by each of the parties, his Honour said:-

“5. I have made comments previously about the inclusion of a claim for costs in applications. I regard this as inappropriate and I will not repeat the comments  I have made on other occasions. However, that does not bear upon the principal matters between the parties.”

1. We see nothing inappropriate in a party including in his/her orders sought, an order for costs and reject the implied criticism by his Honour of the husband and/or his solicitors for so doing in the instant case. In our view, it is proper and appropriate for a party to inform the other party of an intention to seek an order for costs by including such an order in the orders sought in his/her application and/or response. Indeed, such

an approach is consistent with the provisions of Order 8 rule 6(1)(b) of the Family Law Rules.

GROUNDS OF APPEAL

1. Counsel for the husband commenced the husband’s written Summary of Argument by noting that the husband abandons Grounds 1, 2(a) and 2(b). Counsel confirmed that abandonment at the commencement of the hearing.

1. The grounds of appeal relied upon are thus as follows:- “2. His Honour erred in:

   …

(c)finding that the terms and conditions of the respondent’s mother’s loan to the respondent were so uncertain that the loan should be ignored when calculating the net equity in the [D] Street property;

(d)his treatment of the uncontradicted evidence of the respondent’s mother;

(e)his findings about the purpose and effect of a letter dated 10 November 1996 which letter was written by the respondent’s mother;

(f)his findings in the absence of any evidence that the respondent’s mother’s loan would not be enforced;

(g)his failure to take into account either adequately or at all, the respondent’s mother’s loan;

3.His Honour erred in principle in the exercise of his discretion by failing to find and/or take into account the respondent’s mother’s loan to the respondent.

4.In the alternative, His (sic) Honour failed to give sufficient or significant weight to the contribution of $131,600 made on the respondent’s behalf by his mother.

5.His Honour erred in law in applying Af Petersens to the facts of this case.”

APPLICABLE PRINCIPLES

1. The appeal is one against discretionary orders. The principles which govern such an appeal are not in doubt and do not require repeating in the context of this case. See House v The King (1936) 55 CLR 499, Gronow v Gronow (1979) 144 CLR 513 and Norbis v Norbis (1986) 161 CLR 513.

SUBMISSIONS ON APPEAL

1. The thrust of the submissions made on behalf of the husband was that the trial Judge erred in his determination of the value of the property of the parties for the purpose of these proceedings. In support of his submissions, our attention was directed to his Honour’s finding that the net value of the asset pool for the purpose of the proceedings was $199,159. However, in reaching that conclusion, his Honour did not deduct from the gross value of the property the sum of $131,189.36 advanced by the husband’s mother to enable him to purchase the C property, none of which had been repaid as at the date of the hearing.

1. The trial Judge considered the evidence relating to that advance at paragraphs 38 to 61 of his reasons. In the course of that consideration, he said:-

“52. The suggestion from the wife, however, that the money was in fact  the  husband's money and was being advanced from accounts that really belonged to him in Japan is, in my opinion, not made out on the evidence and in fact, I find that the money was, as the affidavit of Mrs [H] senior suggests, her money and advanced to her son and I accept, notwithstanding the vagaries of the documentation before me, that it was advanced as a loan.”

1. His Honour went on to say:-

“58. In my opinion, the proper categorisation of the advance is that it is a loan but  that the terms of it and the repayment of it, are matters which are sufficiently uncertain, first, that I can make no finding as to what those terms might be and second, that I have some doubt that it will be required to be repaid in the foreseeable future.

59.In this regard, it seems to me that it is a matter to be taken into account, as the Court has done in the past, in a sequence of cases represented initially by Antmann v Antmann and subsequently in Af Petersens [(1981) FLC 91-095 at 76,669]. In that matter, his Honour, Nygh J, having referred to Antmann says as follows:

What is the appropriate order? Normally, this Court will distribute amongst the parties the net value of their assets, after deduction of all debts. But this is not invariably the case. The Court will not normally take account of debts incurred after the separation and on some occasions, has ignored debts although incurred during the marriage, which it felt one of the parties should bear exclusive responsibility.

60.And he then refers to Antmann v Antmann [(1980) FLC 90-908]. That decision has been consistently followed in this Court and examples of this are Aldous v Aldous [(1996) FLC 92-715 at page 83,609]; importantly in Biltoft v Biltoft [(1995) FLC 92-614 at page 2125 (sic)], which in turn was quoted most recently by his Honour Fogarty J in Farnell v Farnell.  On this issue he as  (sic) not at odds with the rest of the Court. His Honour made reference to this line of authority and quoted with approval the decision of the full court (sic) in Biltoft v Biltoft [(1996) FLC 92-681 at page 83,066 (sic)]. His Honour, in quoting Biltoft, does so at page 83,067 as follows:

The assessment of debts and liabilities is not necessarily arrived at (sic) a strictly mathematical or accountancy approach in all cases. While some liabilities are charges upon the property, which can be accurately assessed at a certain date, others are at large or have not been precisely determined.

I delete the next part.

In some cases, the amount of the liability can only be estimated generally (Albany supra at page 75,717). The Court can make an allowance for a particular liability if appropriate to do so. In some cases there are sufficient uncertainties as to the alleged liability to  lead the Court to disregard it entirely or partly (for example a loan from the (sic) parent of a party, not likely to be enforced), Af Pertersens supra quirk (sic) (1983) unreported. In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability, it ought, in justice and equity, (sic) be wholly or partly disregarded in determining an (sic) appropriate order to make under section 79 as between the parties to the marriage.

[End of quotation, end of quotation from Farnell.]

61.In the circumstances, in my opinion, it is not appropriate to deduct the value of the loan made to Mr H from the net pool of the parties. It is appropriate to  take into account the fact that the money advanced represented, as it was without interest, a contribution made by or on behalf of Mr H by his mother,  in accordance with the long established principles in this Court of Gosper v Gosper. And it is appropriate to have it taken into account as a liability of the

husband, although in my opinion, to a diminished extent under section 75(2) of the Family Law Act. I will return to that issue when I come to deal with those matters in due course.”

1. In his consideration of the relevant matters referred to in s.75(2), his Honour said:- “88. I take account also the mother's loan which I spent some time analysing a little

   while ago. In my opinion this is a liability which remains with [Mr H] which will be required to be repaid at some point. However, for the reasons that I have indicated, if his mother should formally require the repayment of the loan it is unlikely to occur before he is entitled to get the benefit of his superannuation entitlements which are substantial, as I indicated previously.

89.However, it would only be fair in taking account of superannuation entitlements which is the next head under this section that I need to refer to, to count against that superannuation the potential liability arising from the loan  to his mother. That however would have the effect, if there were a full repayment of the loan to his mother at that point and a full pay out from the superannuation of the amount that is likely to be due, of leaving him with some hundreds of thousands of dollars, in fact a multiple at least of the existing property pool.

90.This is an asset or resource, not property, which can almost certainly be accessed by [Mr H] relatively soon in the scheme things, being in about six years' time. If it is not accessed by him at that point, it will continue to grow  in value until he ceases to find satisfaction with employment and determines to finally retire. That is to be contrasted with the situation of Mrs [H] who, although younger, has no superannuation entitlements at the present time and is unlikely to be able to accumulate anything of the sort enjoyed by [Mr H] in the future.”

1. The findings of the trial Judge emphasised that the $131,189 was a loan by the husband’s mother to the husband and a liability which the husband would be required to discharge by payment at some future date. Those findings were not challenged by the wife before us. In the light of his Honour’s findings, it was submitted on behalf of the husband that the $131,189 should have been deducted as a liability when determining the net value of the property of the parties for the purpose of the proceedings and in not doing so, the trail Judge erred in the appellate sense. Had that been done, it was submitted that the trial Judge would have found the net value of the property for the purpose of the proceedings to be $67,970.

2. In Biltoft and Biltoft (1995) FLC 92-614, the Full Court said at 82,124:-

“A general practice has developed over the years that, in relation to applications pursuant to the provisions of s. 79, the Court ascertains the value of the property of the parties to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset. See, Ascot Investments Pty Ltd v. Harper & Anor (1981) 148 CLR 337 where Gibbs J. (as he then was) pointed out at p 355 that the Court “must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it”. Where the assets are not encumbered and moneys are owed by the parties or one of them to unsecured creditors, the court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities.”

1. At 82,127, the Court said:-

“Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.”

1. Other examples of exceptions to the general practice are to be found in a number of authorities, including Antmann and Antmann (1980) FLC 90-908 and Af Petersens and Af Petersens (1981) FLC 91-095, both of which were discussed by the Full Court in Biltoft and Biltoft (supra).

1. We respectfully agree with the observation of Evatt CJ. in Prince and Prince (1984) FLC 91-501 at 79,076, including her Honour’s observation that the assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accountancy approach in all cases.

1. In the present case, his Honour appears to have indicated that, rather than deduct from the gross value of the property of the parties the value of the loan made to the husband by his mother to arrive at the net value of the asset pool, he would take into account, as a contribution made on behalf of the husband, the interest free component of the

advance “in accordance with the long established principles in this Court of Gosper v Gosper.” However, that authority was concerned with the manner in which the Court should take into account in proceedings pursuant to s.79 a gift as opposed to a loan made by a relative to one or both of the parties to a marriage. In the instant case, the gift could only be the interest free component of the loan. That component was  clearly a contribution made on behalf of the husband.

1. The authorities to which his Honour referred in paragraphs 59 and 60 of his reasons were concerned with the circumstances in which, in proceedings brought pursuant to the provisions of s.79, it was proper for the Court to disregard a liability in whole or in part in assessing the net value of the assets of the parties for the purpose of the proceedings. They establish that, in some circumstances, it is appropriate to disregard a liability in whole or in part but do not exhaustively list those circumstances. However, the Full Court in Jenkin and Jenkin [1998] FamCA 163, after noting that the category of exceptions from the general approach or general rule relating to liabilities is not closed and that the adoption of that general approach or rule is not required as matter of law, said:-

“It [the general approach or general rule] amounts to no more than a guideline for the exercise of the discretion, departure from which, in a particular case, whilst justifying close scrutiny by the Full Court of the result of that exercise, does not of itself amount to an appealable error unless the result arrived at is seen to be plainly wrong in that it is manifestly unjust to one party or outside the range of the generous ambit within which a proper exercise of that discretion would fall.”

The Full Court went on to hold that, in the circumstances of that case, it was open to the trial Judge to take the relevant unsecured liability into account in the assessment of the relevant matters referred to in s.75(2).

1. The trial Judge did not, in our view, explain why he proposed departing from the general rule. In the circumstances of this case, that departure has worked an injustice

to the husband calling for intervention by this Court. It may have been appropriate, in the circumstances of the case, to discount the value of the liability in assessing the net value of the assets but that course was not urged upon the trial Judge.

1. Moreover, adopting his Honour’s approach, we are firmly of the view that he attached insufficient weight to the husband’s liability to repay the advance in his assessment of the relevant matters referred to in s.75(2).

1. We would accordingly allow the appeal.

RE-EXERCISE OF THE DISCRETION

1. During the course of submissions, both parties indicated that if the appeal were allowed, neither would wish to adduce further evidence but each requested us to re-exercise the discretion having regard to the facts which were before the trial Judge. In those circumstances and having regard to the unchallenged findings of the trial Judge, we propose to do so.

1. We would adopt the trial Judge’s initial approach relating to the assets of the parties for the purpose of the proceedings. We would thus find the assets, liabilities and their

value to be:-

Assets

Property at C

$285,000

Moneys in possession of wife

$ 25,000

Total

$310,000

Liabilities

Mortgage over the C property

$106,600

MasterCard debt

$    4,241

Loan from husband’s mother

$131,189

Total

$242,030

1. We thus find that for the purpose of these proceedings the net value of the assets of the parties is $67,970.

1. None of the findings of the trial Judge relating to the respective contributions of the parties at paragraphs 63 to 71 were challenged before us, nor was it submitted that his Honour, in making his assessment, failed to take into account a relevant contribution. We do not take into account, in our assessment of the respective contributions, the husband’s mother’s loan as the loan has been taken into account in our assessment of the net value of the assets of the parties. However, we do take into account the gift of the interest free component thereof as a contribution made on behalf of the husband. On an overall consideration, we would assess the respective contributions of the parties, from the date of the marriage to the present date, to be approximately equal. Thus, on a contribution basis, each would receive the sum of $33,985 and retain the furniture and motor vehicle presently in their possession.

1. Turning then to the relevant matters referred to in s.75(2), it was not submitted that the trial Judge failed to take into account any relevant matter or that he took into account any irrelevant matter. However, as we have deducted the advance of his mother in calculating the net value of the asset pool for the purpose of these proceedings, we do not take that liability into account in assessing whether any adjustment should be made to the contribution based award and if so what that adjustment should be. The more important of the matters referred to in s.75(2) are the superior earning capacity of the husband, his superannuation entitlements, the wife’s care and control of the parties’ daughter and the quantum of child support paid by the husband. In the circumstances of this case, we are of the view that an adjustment in favour of the wife to the contribution based award is called for and we would assess that adjustment as being in the sum of $33,985.

1. As a consequence, the wife would receive by way of property settlement the total net value of the property of the parties. Thus, as she already holds $25,000, the husband will be required to pay to her the sum of $42,970.

1. In the circumstances of this case, such a result is, in our view, just and equitable.

COSTS OF THE APPEAL

1. At the completion of the hearing of the appeal, both parties indicated that it was not appropriate for them to make oral submissions relating to the costs of the appeal. Accordingly, we indicated that when handing down the judgment, we would make provision for written submissions in relation to such costs.

ORDERS

1. We would accordingly order:-

1.That the appeal be allowed.

2.That Order 1 made on 19 September 2000 be set aside and in lieu thereof order:-

“1.That on or before 19 April 2001, the husband pay to the wife by way of property settlement the sum of $42,970.”

3.That Order 5.1 made on 19 September 2000 be varied by deleting the date “20^th November 2000” appearing therein and inserting in lieu thereof the date “19 April 2001” and by deleting the date “27^th November 2000” appearing therein and inserting in lieu thereof the date “26 April 2001”.

4.That Order 6 made on 19 September 2000 be varied by deleting the date    “20^th November 2000” appearing therein and inserting in lieu thereof the date “19 April 2001”.

5.That Order 7 made on 19 September 2000 be varied by deleting the figure “$85,000” appearing therein and inserting in lieu thereof the figure “42,970.”

6.(a) That either 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 within 21 days of the date hereof.

(b)That the other party have a further 14 days in which to make written submissions in answer thereto.

(c)That the first mentioned party have a further seven (7) days in which to make any written submissions in reply thereto.

(d)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.