Hadden and Hadden
[2012] FamCAFC 184
•12 November 2012
FAMILY COURT OF AUSTRALIA
| HADDEN & HADDEN | [2012] FamCAFC 184 |
FAMILY LAW – APPEAL – PROPERTY – Where the appellant wife alleged errors in the balance sheet adopted by the Federal Magistrate and errors in the exercise of discretion – Where the alleged errors in the balance sheet were agreed to by the parties at the time of trial and therefore attributable to them – Where the respondent husband conceded some errors in the balance sheet – Where the errors do not infect the reasons for judgment or the substantive effect of the orders – Where no appealable error was established in the other grounds concerning the Federal Magistrate’s exercise of discretion – Appeal allowed in part to vary the Federal Magistrate’s orders to address errors in the balance sheet and provision for the sale of property as an alternative to cash payment – Appeal otherwise dismissed.
FAMILY LAW – APPEAL – COSTS – Where the errors leading to the appeal being allowed were conceded by the respondent early in the appeal proceedings – Where the appellant refused the respondent’s offer for settlement which was in the same terms as the orders made in the appeal varying the amount payable by the wife – Where the wife was otherwise wholly unsuccessful – Appellant wife to pay the respondent husband’s costs in the appeal from the time of the offer of settlement.
| Family Law Act 1975 (Cth) |
| Carter and Carter (1981) FLC 91-061 CDJ v VAJ (1998) 197 CLR 172 Farmer and Bramley (2000) FLC 93-060 Fox & Percy (2003) 214 CLR 118 Gronow v Gronow (1979) 144 CLR 513 Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 House v The King (1936) 55 CLR 499 Noetel and Quealey (2005) 34 Fam LR 190 Norbis v Norbis (1986) 161 CLR 513 Sinclair and Sinclair [2000] FamCA 262 |
| APPELLANT: | Mrs Hadden |
| RESPONDENT: | Mr Hadden |
| FILE NUMBER: | SYC 6445 of 2008 |
| APPEAL NUMBER: | EA 68 of 2011 |
| DATE DELIVERED: | 12 November 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | May, Thackray & Stevenson JJ |
| HEARING DATE: | 29 June 2012 & 18 September 2012 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 5 May 2011 |
| LOWER COURT MNC: | [2011] FMCAfam 380 |
REPRESENTATION
| SOLICITOR FOR THE APPELLANT: | Mr Potkonyak, Capellia Legal |
| COUNSEL FOR THE RESPONDENT: | Ms Druitt |
| SOLICITOR FOR THE RESPONDENT: | Streeter Law |
Orders
The appeal be allowed in part.
Paragraph 2 of the orders made by Federal Magistrate Altobelli on 5 May 2011 be varied so that the appellant wife pay the respondent husband the sum of $208,823 (less $88,000 already paid with a balance due of $120,823).
Paragraph 7 of the orders made 5 May 2011 be set aside and in lieu thereof failing the payment described in paragraph 2 hereof, within 90 days of these orders, the wife sell such real property necessary to discharge the payment due to the husband.
The wife inform the husband within 14 days after the expiration of the time due for payment in accordance with paragraph 2 and 3 hereof, of the proposal for sale of property and keep the husband informed of the progress of such sale.
The application in an appeal be dismissed.
The appellant wife pay the respondent husband’s costs of the appeal from 30 August 2011, such amount to be agreed and failing agreement to be assessed.
IT IS NOTED:
The provisions of paragraph 9 of the orders made 5 May 2011 have not been set aside.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hadden & Hadden has been approved by the Chief Justice 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 68 of 2011
File Number: SYC 6445 of 2008
| Mrs Hadden |
Appellant
And
| Mr Hadden |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal from final property orders made by Federal Magistrate Altobelli on 5 May 2011. The wife appeals those parts of the orders which required her to discharge mortgages on properties and pay a sum of money to the husband, or failing such payment, required the sale of a certain property in order to meet the payment to the husband. The orders were intended to give effect to the Federal Magistrate’s finding that a proper division of the parties’ assets be 57.5 per cent to the husband and 42.5 per cent to the wife.
The orders made on 5 May 2011 provided that the wife pay to the husband $255,659 within 90 days and failing that payment a named property be sold to meet the payment. The wife filed a Notice of Appeal on 2 June 2011, an Amended Notice of Appeal on 4 August 2011, and a further Amended Notice of Appeal on 26 October 2011. The wife also filed an Application in an Appeal to adduce further evidence, purportedly relating to changed circumstances since the making of the orders. On 5 July 2011, the orders relating to the payment to the husband and sale of property in the event the wife failed to make the payment were stayed by the Federal Magistrate, subject to the wife paying to the husband $88,000.
It is as well to set out those orders from which the wife appeals directly (orders 1, 2, 7, and 8) and those orders affecting the husband which are also relevant to the appeal:
PROPERTY
(1)The wife sign all documents and take all steps to cause the mortgage secured over [Properties A1, A2 and A3] to be discharged within 90 days of these orders.
(2)The wife pay to the husband the sum of $255,659.00 within 90 days of these Orders.
(3)The husband be declared the owner at law and in equity the properties known as [Properties A1, A2, A3].
(4)Contemporaneously with order 1 hereof and upon payment by the wife to the husband of the amount in order 2 hereof, the husband shall sign all documents and do all things to transfer to the wife all his right, title and interest in [G] Pty Ltd.
(5)The husband be declared the owner and the wife to have no claim upon:
(a) All other property registered in his name;
(b)All motor vehicles and items of personal possession presently held by him.
(6)That the wife be declared the owner and the husband to have no claim upon:
(a) All other property registered in her name;
(b)All motor vehicles and items of personal possession presently held by her.
(7)In the event that the wife fails to pay to the husband the sum specified in order 2 herein within 90 days then the husband and the wife in their capacity as directors of the Trustee of the [G Family Trust] shall do all acts and things and sign all documents necessary to cause the sale of the property known as [1/1 D Street, F Park] (“Darwin property”) and the proceeds of sale to be disbursed as follows:
(a)In payment of any agents fees and conveyancing fees in respect to the sale.
(b) In payment of a mortgage secured against the property.
(c)In payment to the husband the sum of $255,659.00 plus interest calculated pursuant to the Family Law Rules.
(d) The balance to the [G Family Trust].
(8)In the event of the [sic] subject property by private treaty has not been effected within a period of three (3) months of listing of the property in accordance with order 7 herein, then the parties shall make all such arrangements and do all such acts and sign all such documents and cause the [G Family Trust] to pay all monies necessary to procure a sale by public auction of the [1/1 D Street property] upon the following terms:
(a) The auctioneer shall be as agreed between the parties;
(b)The auction shall take place within a period of one (1) month after the deadline date for sale by private treaty;
(c)The reserve price shall unless agreed upon by the parties be as proposed by the auctioneer;
(d)The applicant wife and respondent husband shall cause the [G Family Trust] to pay expenses payable before the real property is auctioned.
(e)That the balance of sale proceeds obtained thereafter be disbursed in accordance with Orders 7(a) to (d) above.
(9)That there be liberty to relist the matter before Federal Magistrate Altobelli on 7 days notice as regards the interpretation, implementation and enforcement of these orders.
The essence of the wife’s appeal is that the Federal Magistrate erred in his exercise of discretion, namely in the assessment of contributions and the consideration of s 75(2) factors, leading to a result which did not adequately reflect her entitlement. The wife also complains of factual errors in the “balance sheet” and that the effect of the orders is an unfairness to her.
As to the mathematical errors contended by the wife, it was conceded by the husband that the value of the AMP shares was $48,854 and that the TAB shares were overvalued by $1,829.80. It is said on behalf of the husband that the total value of the pool is $2,737,408 rather than $2,801,472.13 as found by the Federal Magistrate, a difference of $64,064.
In the Notice of Appeal the wife asks that the orders be set aside and that new orders be made by the Full Court, reflecting correction of the factual errors in the balance sheet and adjustments for factors asserted in the appeal grounds. The wife sought a re-exercise of the discretion by this Court. At the hearing of the appeal, the solicitor for the wife submitted this Court ought re-exercise to determine the contribution entitlements of the parties, and the matter should then be sent back to the Federal Magistrate to perform the mathematical distribution of property by reference to the property then existing and the net proceeds of property sold by the wife. The solicitor submitted that a division of 60 per cent to the wife and 40 per cent to the husband would be contended for in the event the appeal is successful.
As mentioned, some factual errors were conceded by the husband in an open offer of settlement dated 29 August 2011 after the appeal was filed. The appeal is otherwise opposed.
Background
The orders the subject of the appeal were made following a three day trial of both parenting and property issues. The parenting issues were largely uncontentious, though the orders made have some bearing on the appeal in relation to s 75(2) adjustments.
The relationship was approximately nine years in length, the parties having commenced cohabitation in January 1998, married in April 1999 and separated in January 2007. At the time of trial the husband was aged 65 and the wife 46. The parties have one child, child X, aged six at trial.
The wife has another child, child Y, from a previous marriage aged 15 at trial, who resided with and was supported by the parties throughout the course of the relationship. The wife’s mother resided with and assisted the parties. It is agreed that the wife’s mother’s permanent emigration to Australia from China in 2006 was assisted by the husband.
The property pool consisted of a range of investment properties, subject to mortgage and loan liabilities, various financial investments including shares, and some superannuation. Some property was held in the parties’ names and others through G Pty Ltd, which was controlled by them through a family trust.
The parties provided to the Federal Magistrate an agreed balance sheet which highlighted the contentious issues raised by the wife (an estimated capital gains tax liability and accumulated tax losses).
The parties were described by the Federal Magistrate as “very industrious, astute investors”. It is clear that the vast majority of the parties’ property was acquired because of their joint investment endeavours throughout the course of the relationship. The husband and wife also undertook further study and vocational education during the relationship, relevant to their property pursuits.
The contentious issues for determination, correctly identified by the Federal Magistrate at paragraph 17 of the reasons, were the constitution of the balance sheet, the contributions of the parties at the commencement of cohabitation, then during the relationship and post-separation, and what adjustment to those entitlements if any, should be made for s 75(2) factors. An assessment of their evidence, in particular as to matters of credibility was also necessary for his Honour’s consideration of those issues.
Grounds of Appeal
The further Amended Notice of Appeal lists six grounds of appeal. They raise discrete issues alleging errors of fact, and errors in the Federal Magistrate’s exercise of discretion. It is necessary to set out the grounds as expressed in the Notice of Appeal:
1. The learned trial Magistrate was led into factual errors, resulting in an erroneous balance sheet on which his Honour relied in making the property orders (paragraph 45 of the Judgment):
Item 10 Investments (error $62,234)
Item 13 New [Properties A accounts] (rent receipts: error $24,714)
Item 14 Shares (error $12,925)
Item 20 Westpac Mortgage [Properties A] (error 38,000)
Items 22 & 23 Superannuation
Missing item (wife’s repayment of [Loan R])
2. The learned trial Magistrate erred in the assessment of the factors affecting the future needs of the parties, as required by section 79(4)(e) of the Act, in particular factors enumerated in section 75(2) subsections (a), (c), (d), (e), (g), (l) and (o).
3.The learned trial Magistrate was led into error by accepting an unsubstantiated assertion by the husband’s counsel that the cost of sale of the Darwin unit (which was already sold and the proceeds distributed) and the capital gains tax liability of the wife would be offset by the accumulated losses carried forward and given to the benefit of the wife. The wife’s evidence that the accumulated losses were the result of her own efforts after separation was suppressed or ignored.
4.The learned trial Magistrate erred in, after deciding the percentage split between the parties of the net asset pool, ordered that the wife pays husband fixed sum of $255,659 (property order 2) and that the discharge of the mortgages ([Loan R] of $550,000) is the wife’s sole responsibility (property order 1). In making these orders, his Honour did not take into account that the wife, in order to comply with these orders, would have to sell several properties and sustain the following costs: actual sale price below the agreed values, cost of sale, capital gains tax liability.
5.The learned trial Magistrate either: erred in the assessment of the wife’s future “untapped” earning capacity, or in the assessment of the wife’s contributions during the marriage and after separation. There was no evidence that her earning capacity had undergone any change for the better after separation.
6.It appears that the learned trial Magistrate was led into an erroneous conclusion, through a ‘clever’ cross-examination by the husband’s counsel, that the wife’s evidence was untrustworthy. This error could have led to his Honour’s assessment of the contribution by the parties by way of accepting the husband’s evidence if there was a conflict with the evidence by the wife.
Reasons of the Federal Magistrate
The Federal Magistrate commenced the reasons for judgment by outlining the relevant background to the proceedings, identifying the issues for determination, and the applicable law with reference to the preferred approach to the determination of s 79 property applications as set out by the Full Court in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 and subsequent cases guiding interpretation of contributions, non-disclosure and waste. As mentioned, the parenting issues were largely uncontentious and as not relevant to the appeal, those reasons do not need repeating here.
The Federal Magistrate described the parties’ competing proposals at the outset of his reasons and said:
13.The husband’s proposal involves him retaining three of the investment properties [Properties A1, A2, A3], a payment to him by the wife of $300,000, and his retaining his other assets other than his interest in the [G Family Trust] which he proposes to assign to the wife. His counsel, Ms Druitt, submits that the effect of the order sought by the husband would be that he receive as little as 58 per cent of the pool of assets that he asserts, even though his entitlement would be much greater. Indeed, Ms Druitt’s submission was that on a strict contribution-based assessment, the husband’s overall entitlement should be about 66 per cent.
14.The wife’s proposal was that she receive an overall settlement in her favour of 65 per cent. She submits, through her counsel Ms Reynolds, that contribution should be assessed in her favour at 55 per cent, and there should in addition be an adjustment of 10 per cent for section 75(2) considerations.
15.Whilst the husband’s proposal is very specific in terms of what property he seeks to retain, the wife’s proposal was expressed in global and percentage terms.
Before turning to the contribution and adjustment considerations, the Federal Magistrate addressed the issues of credit. It is important to set out this part of the reasons in full as a ground in the wife’s appeal is that the Federal Magistrate erred in finding the wife’s evidence was “untrustworthy” and wrongly preferring the evidence of the husband. His Honour said:
34.The father was robustly cross-examined by counsel for the wife, Ms Reynolds. He was, for the most part, courteous, cooperative and responsive to questions. He was, at times, seeking to present certain evidence in its best possible light, for example, the value that he attributed to his business, [S] Pty Limited, was probably a gross, rather than a net value. He probably also overstated the extent of his expenses relating to [X]. However, viewed in the light of the husband’s evidence overall in these proceedings I do not regard these matters as going to the husband’s credit.
35.By contrast, I have serious reservations about the wife’s evidence in relation to financial matters and contribution generally. I found her to be sometimes unresponsive in cross-examination about financial evidence. Her own evidence indicates that she was far more preoccupied with the preparation of her own evidence, than to provide disclosure to the husband and his solicitors. For a woman who claimed to be a highly successful book-keeper, with accounting qualifications, I found her statements that she did not know what a ledger and journal was, to be astonishing. She adopted a cavalier attitude in cross-examination about production of documents pursuant to notice to produce. Her disclosure about the [G Family Trust] assets in her financial statement was found wanting in cross-examination. Her professed lack of knowledge about the benefits of tax losses held by the trust was unconvincing.
36.The wife’s evidence about the loan application that she submitted to ING was plainly based on information that she provided to her mortgage broker, and was plainly false. The loan application was based on a statement of earnings that was also false. The wife asserted that her mortgage broker had produced a forged statement of earnings. I do not accept this. The wife was the book-keeper for the company on whose letterhead it was falsely asserted that she was an employee earning $85,000 as an annual salary, rather than a contract book-keeper. It is more likely than not that the wife produced this document. She had both the opportunity and the motive. Even the wife admitted in cross-examination that she was desperate to get the loan in question.
37.Even putting this aside, the wife was often unresponsive when confronted with evidence in cross-examination that demonstrated that she was plainly overstating her contribution, and minimising that of the husband.
38.Overall I find that the wife’s disclosure was selective, her evidence about financial matters is unreliable where not corroborated by documents that she had not prepared herself, and that she has deliberately sought to exaggerate evidence about her contribution whilst minimising that of the husband. For all of the above reasons, and unless independent documents establish to the contrary, I prefer the evidence of the husband, on these issues.
We would pause to note here that in the absence of demonstrated bias or a complete misunderstanding or misstatement of facts, it is very difficult for an appellant to successfully challenge such strong findings in relation to an assessment of the evidence of one party as found here.
In concluding the first step of the four step process, the Federal Magistrate reproduced the agreed balance sheet highlighting the contentious points, and addressed each issue separately before setting out the final balance sheet as determined by him. Apart from the parties’ agreement that the Federal Magistrate made errors in this respect, it is appropriate that we set out this part of the reasons referable to the other grounds of appeal:
40.A number of issues arise out of the balance sheet. At item 3, the husband asserts a higher value for his property than the wife does. I accept his evidence as it is against interest.
41.Item 21 is a capital gains tax liability that the wife submits ought to be included on the balance sheet. This is a liability payable by
[G Family Trust] arising out of the sale of a Darwin investment property in 2009. The wife deposes that it was sold for $465,000, a profit on the purchase price. It seems common ground that there is likely to be a capital gains tax liability, though this is not assessed. The wife asserts it is $70,000. No expert evidence as to the quantification of this was adduced. I do not accept that the wife is an expert in this regard, and she certainly did not demonstrate that level of expertise in the witness box. In the absence of expert opinion, but noting that both parties agree that there will be a capital gains tax liability, I have no alternative but to treat this as a consideration under section 75(2). The matter proceeded on the basis that the wife would probably retain the [G Family Trust] assets, and thus become responsible for this liability. Accordingly, this is a 75(2) consideration in her favour.42.I note that Item 9A is blank in the schedule. I presume this is because on the wife’s evidence there is no equity in the property.
43.There is also an issue about accumulated tax losses at item 24. The husband asserts that this should be included in the balance sheet, as an asset of the wife, on the basis that these tax losses held by the
[G Family Trust] will ultimately benefit her. The wife’s counsel conceded in closing submissions that there are tax losses in this amount, but that this was not property and thus should not be included in the balance sheet. I agree. It is by no means certain that these tax losses will ever be crystallised into some form of potential benefit for the trust. It is more properly characterised as a section 75(2) consideration that is of potential benefit to the wife.44.Accordingly, the balance sheet should not refer to either items 21 or 24 as these are matters to be considered under section 75(2).
45.The final balance sheet will therefore be:-
Assets Husband 1 [Property A1] H $ 445,000.00 2 [Property A2] H $ 455,000.00 3 [Property A3] H $ 455,000.00 4 [Property H] W $ 520,000.00 5 [Property K] W $ 275,000.00 6 [Property E] W $ 400,000.00 7 [Property C] GFT $ 415,000.00 8 [Property B] GFT $ 415,000.00 9 [Property S] GFT $ 465,000.00 9A [3/1 D Street Property, S Park] GFT $- Nil 10 Investments see foot GFT $ 400,587.76 11 1998 BMW 323i H $ 6,000.00 12 Furniture and Personal effects H $ 10,000.00 13 New [Properties A] Account (rent receipts) h $ 1,393.68 14 Shares see foot W $ 15,866.12 15 Deeming account h $ 33.34 16 Wife's legal fees paid from [R] account $ 20,000.00 17 Husband's legal fees paid from [R] account $ 17,718.79 TOTAL GROSS ASSETS $4,316,599.69 Liabilities: 18 Westpac Mortgages $ 960,000.00 19 [R] Investment Loan $ 550,000.00 20 Westpac Mortgage [Properties A] H $ 38,000.00 total Liabilities $1,548,000.00 Total net assets $2,768,599.69 Superannuation 22 H $ 3,076.99 23 Wife super [omitted] W $ 29,795.45 Total Super $ 32,872.44 Total all assets net $2,801,472.13
(original emphasis)
We pause here to note that as it subsequently emerged in further submissions required by us, the balance sheet as presented to the Federal Magistrate contained errors. We asked the parties representatives to appear before us to make further submissions. One of these is that the property in item 9A for which no value was recorded had already been sold, and the proceeds fully expended on debts related to the purchase of property.
Order 7 made provision for 1/1 D Street, F Park to be sold if the wife did not pay the husband the sum required. This property does not appear in either of the parties’ lists of assets nor in the list as ultimately found by his Honour.
Though not addressed in the reasons for judgment, from an examination of the parties’ material before his Honour it is apparent and now conceded by both parties, that the property 1/1 D Street is a reference to the same property also referred to as 1/2 D Street. It is quite clear that the parties only purchased and owned two properties on D Street, referred to as the “D Street Properties”. One property, 3/1 D Street, was contained in the balance sheet as having no equity and was given no value (see paragraph 42 of the reasons Item 9A of the balance sheet). This was correct because the property had been sold although that had not been fully explained to his Honour. To further complicate matters this property was variously referred to as being located at “F Park” and “S Park”.
In the wife’s affidavit filed 25 February 2011, she deposed that none of the principal loan used to purchase the property had been discharged at that time (loan value $490,000), and she stated that the latest appraisal of the property in October 2010 valued the property at $465,000. The other, “1/2 D Street” or “1/1 D Street”, was sold during the course of the proceedings and is the subject of the wife’s capital gains tax complaint.
At the commencement of the proceedings, prior to the sale, the husband sought orders that upon payment to him of a cash sum, the husband’s interest in the 1/1 D Street property (along with other properties he suggested the wife retain) be signed over to the wife. Unfortunately, this form of order remained in the orders sought document of the husband at trial, which formed exhibit H9 on
3 March 2011.
When the property was sold, consent orders were made providing for distribution of the funds from the sale between the parties, with $60,000 being paid to the wife “for her use as partial property settlement” and the balance payable to both the husband and the wife, to be deposited in an interest bearing account in their names with any withdrawal to require both of their signatures. An agreed statement of facts, tendered at the further hearing of the matter before the Full Court and marked as Exhibit 1 records:
1.There was an error in the description of the assets in the Balance Sheet.
2.The property that was sold was known as [1/2 D Street, S Park]. The net proceeds of sale were $452,769.54 and they were divided as follows (plus interest):
(a) Appellant and Respondent $60,000.00 (to [Loan R])
(b) Respondent $400,000.00 (to Westpac Mortgage [Properties A]).
3.The above proceeds were used to retire debt.
It would appear that the Federal Magistrate, by largely adopting the form of orders proposed by the husband, mistakenly included the already sold property as the alternative payment provision order. There appear to be no reasons in relation to the default order for the sale of the property in the event that the wife did not make the cash payment, other than at paragraph 72 where his Honour states that the order seems a “reasonable alternative” given the absence of protest about the form of the orders from the wife. In the absence of any reasons on this point, we cannot possibly determine whether his Honour intended the sale of any particular property allowing us to simply vary the order.
The other difficulty is that the order provided for a specific sum of money to be paid to the husband upon sale rather than a percentage. As to the explanation that his Honour intended the sale of other specific property, or property generally in order to meet the husband’s entitlement, we cannot ascertain from the orders or the reasons satisfactory consideration by his Honour of any such course of action.
It is extremely unfortunate that this discrepancy in the orders was not identified earlier in the appeal proceedings. The order providing for sale of property in the event that the wife could not make the immediate cash payment does not infect his Honour’s findings as to contributions but there is a clear impossibility in the orders and we did not consider this could be readily resolved by an examination and interpretation of the reasons for judgment.
Fortunately at the further hearing on 18 September 2012, counsel for the husband acknowledged those difficulties and submitted that an order should be made by us simply allowing the wife to choose which property she wished to sell to satisfy the order. An order will be made in those terms.
By reference to the wife’s other grounds of appeal we refer to the relevant parts of his Honour’s reasons.
The Federal Magistrate carefully considered the issues of contributions and s 75(2) adjustments. In respect of initial contributions, both parties contended for an adjustment in their favour. The amounts contended for were generally uncontroversial and the amounts conceded by each party were accepted by his Honour:
50.Thus, at cohabitation the wife had $100,000, the husband $600,000. He had 85 per cent of the assets at the time. The evidence indicates that these properties (i.e., the properties represented in the $100,000 and $600,000) were, in effect, the foundation of the parties’ current wealth. The wife’s [Property H] unit remains intact and is her home. The net pool of assets is about $2.8 million. The husband’s $600,000 represents about 20 per cent of that amount. This of course does not reflect the value to the parties of the husband’s $600,000 capital, and the extent to which [sic] has enabled them to build their wealth. Of course, this must be offset by the myriad contributions made by the parties during cohabitation, and even afterwards, and the value of the wife’s own contribution must not be under estimated. What is clear, however, is that the husband’s counsel’s submission of a 16 per cent adjustment is well within the range of a reasonable assessment of the husband’s greater financial contribution as at the date of cohabitation. Of course, what needs to be considered is the contribution that has occurred since then, particularly in view of the wife’s argument that she made a greater contribution than the husband between cohabitation and separation, and even afterwards.
In addition to her complaint about the adverse credit finding against her, the wife maintains that the Federal Magistrate’s findings as to contributions post-separation were in error. The basis of this was her primary responsibility for the care of the parties’ child. In our view the claim was considered thoroughly by the Federal Magistrate, with particular consideration given to the wife’s own evidence:
58.The wife asserts that there should be a further adjustment in her favour in respect of the four-year period between the date of separation and the date of trial, because she had the primary responsibility for the care of [X] who, it is submitted, had minimal contact with her father. Moreover, she asserts that he paid minimal child support. Whilst this submission is superficially attractive, it does not survive close scrutiny. Thus, for example, it became apparent to me in the course of considering the parenting matter that if [X] had minimal time with her father, it was as much because of the wife’s reluctance to allow more time, as it was due to any lack of availability on the husband’s part. I do accept that the husband’s child support was certainly minimalist, even though in accordance with the child support assessment, but the wife clearly had every opportunity to seek a review of the assessment but did not. The most important point, however, is that both the husband and the wife had access to substantial joint funds in the post-separation period. Thus, and as I have previously noted, at item 34 of her financial statement she indicates that [Loan R], which is on the balance sheet with a liability of $550,000, was used to meet any living expenses. The use of the [Loan R] account as a fund to meet the wife’s living expenses is confirmed in her evidence at paragraph 150 of her affidavit. In these circumstances, the claim for post-separation contribution is quite simply misconceived.
(emphasis added)
Having considered the contributions of the parties at the commencement of the relationship, during the relationship and during the post-separation period, the Federal Magistrate concluded this part of the discussion by finding that the initial disparity in contributions had been reduced by the subsequent contributions:
Overall conclusion about contribution
59.Even though I have assessed the husband’s greater contribution at the date of cohabitation to be 16 per cent, it does not necessarily follow that the same assessment of contribution would result at the date of trial. Indeed, I do not think it would be just and equitable to the wife to make a final finding in the husband’s favour at 66 per cent because this would ignore the passage of time, the myriad contributions that both of them have made both directly and indirectly. I think under the circumstances a final assessment of greater contribution on the husband’s part at 10 per cent is as just and equitable as it can be in the circumstances of this case. Accordingly, I conclude that the husband made a greater contribution which is assessed at the date of trial to be 10 per cent.
In the appeal much emphasis is placed on the Federal Magistrate’s consideration of s 75(2) factors, in particular the future needs of the parties, which the wife says should have resulted in a more significant adjustment in her favour. In our view, his Honour expressly dealt with each factor raised by the wife. The factor carrying most weight was the wife’s care of the parties’ child. His Honour considered an adjustment to the wife was called for, however considered this needed to be weighed against factors in the husband’s favour, namely his age and the wife’s earning capacity. The adjustment was set at 2.5 per cent. So that the arguments in the appeal can best be understood we set out parts of the reasons in this respect:
Section 75(2) considerations.
60.The wife submits that there should be a section 75(2) adjustment in her favour of 10 per cent, to reflect a number of factors that I will identify, and discuss below:-
(1) She seeks an adjustment based on her poor physical health which results in her having a lesser capacity for employment. There was no evidence in admissible form of the wife’s health problems, nor any other cogent evidence that would suggest she is incapable of working.
(2) The wife claims that due to her physical and mental capacity for appropriate gainful employment, there should be an adjustment in her favour. I find that the wife has chosen not to work for the last few years, other than managing her investments. There is no evidence of any incapacity either physically or mentally. In cross-examination the wife made some revealing admissions about her earning capacity. For example, it was put to her that her own evidence was that the book-keeping business was a successful one, and the wife reassured counsel for the husband that this was correct and that “it will be again”. In cross-examination about the representation that she made to ING about earning $9000 per calendar month, the wife insisted that she “could make that much money if I am well enough”. There is no substance to her submission that a 75(2) adjustment should be based on this factor. Indeed, I have no doubt that on the conclusion of these proceedings the wife will return to her former diligent, industrious, self.
(3) The wife says there should be an adjustment in her favour arising out of her care of [X], and also of [Y]. I accept this is the case. Moreover, I find that the child support paid by the husband to be minimalist, even if in accordance with his child support obligations. [Y] is the wife’s child from a previous marriage, and I accept that she is primarily responsible for his care.
(4) The wife submits that there should be an adjustment in her favour arising out of her commitment to support her mother, both legally and morally. However, both the husband and the wife have the legal obligation to the Commonwealth to financially support the wife’s mother. I do not accept that any moral obligation the wife feels towards her mother is a relevant section 75(2) consideration and even if it were, it is certainly not one to which I would attribute any weight given the clear benefits that both parties received during the marriage, and which the wife continues to receive since separation as a result of the grandmother residing with them.
(5) The wife asserts there are 75(2) considerations operating in her favour arising out of the cramped circumstances in which they live in her unit in [H]. I do not accept that this is a relevant section 75(2) factor. In any event, the wife gave evidence that she intends to move, a matter which I believe will be unaffected by any order I make.
(6) The wife asserts there is a 75(2) factor operating in her favour as a result of the contribution she has made to the income-earning capacity and property and financial resources of the husband, particularly whilst she supported him in his further studies. I accept there is some evidence about this, as there is evidence that the husband likewise supported the wife as she obtained further qualifications. I do not think, however, that an adjustment under section 75(2) is warranted arising from this.
(7) The wife submits that she has increased the husband’s capacity, and that therefore this should be reflected under section 75(2). This may well be the case but the evidence also clearly indicates that the marriage had a significant impact by way of increasing the wife’s earning capacity, a matter at least partly attributable to the husband. In these circumstances, no adjustment is warranted.
(8) Finally, the wife asserts that the amount of child support that the husband pays is minimal, and is likely to remain low because of the way in which he structures his financial affairs. Thus, an adjustment should arise in her favour. I have already commented on the low level of child support I believe the husband pays. I do not accept that this is unlikely to change, just because of how he has structured his affairs. The wife can seek a review of administrative assessment, especially if she believes that the husband’s real income for child support purposes is greater than asserted.
61.Of all the matters raised by the wife, the fact that she has the care of [X] carries the most weight.
62.Of course, the husband submits that he has his own section 75(2) considerations, the most weighty of which is that he is nearly 20 years older than the wife, a matter that limits his capacity to earn income into the future, in comparison to the wife. In addition, under section 75(2)(o) it is relevant to consider the support that the husband provided to the wife’s son [Y] throughout the course of the marriage, in circumstances where he had no legal obligation to do so.
63.An interesting feature of this case is that most of the parties’ current income is derived from investments that they passively manage. Even the husband’s income from personal exertion is only about half of his total earnings. The orders that I make may have an impact on this, for both parties.
64.Under section 75(2)(b) it is relevant to consider the financial resources that the wife has available to her by way of carried-forward tax losses in the trust, though I suspect this is largely offset by the capital gains tax liability that she will probably incur in relation to the Darwin unit.
65.On balance, I consider that notwithstanding the husband’s age, an adjustment under section 75(2) is called for arising out of the wife’s care for [X]. This will not be a significant one, however, because of the husband’s age, as well as the great untapped capacity to earn income that I believe the wife has, particularly when compared to the husband. I propose an adjustment of 2.5 per cent, which produces a five per cent differential in the pool.
(emphasis added)
The Federal Magistrate concluded the just and equitable considerations, setting out what property the parties would be left with along the lines of the division of specific property proposed by the parties themselves.
66.I have assessed the husband to have made greater contribution by 10 per cent, but to be offset by an assessment of section 75(2) considerations favouring the wife to the extent of 2.5 per cent. Overall this results in a final adjustment to the husband of 57.5 per cent.
67.The total pool of assets is $2,801,472. The husband’s share, 57.5 per cent, equates to $1,610,846. The wife’s share, 42.5 per cent, equates to $1,190,625. In each case, there has been some minor rounding off.
68.The husband seeks an order for payment to him of $300,000, and that he otherwise retain the unencumbered [properties A1, A2, A3]. If the husband retains the items owned by him on the balance sheet, then his entitlement under these orders would be as follows:-
Husband Item No. Item Value 1 Home Unit $455,000 2 Home Unit $455,000 3 Home Unit $455,000 11 BMW $6,000 12 Furniture & Contents $10,000 13 Rentals $1,393 17 Legal Fees Paid $17,718 20 Mortgage -$38,000 22 Super $3,076 Sub total $1,365,187
69.As the husband’s entitlement is $1,610,846 the wife would need to pay to him $255,659.
We note at this point it was contended on behalf of the wife that the husband did not have the liability of $38,000, or that he ought to have already paid it. However, this submission appears to be inconsistent with other evidence including the husband’s schedule of assets and liabilities (Exhibit 8) and also was part of the agreed figures given to his Honour. Ultimately his Honour found:
72.I am satisfied that the proposed order is therefore as just and equitable as the circumstances permit. The wife is a very resourceful woman and I am confident about her ability to raise $255,659 within the 90 days proposed by the husband. If she cannot, then the order proposed by the husband seems a reasonable alternative, especially in the absence of any protest by the wife about the form of these orders, and also the absence of any alternative.
(emphasis added)
Relevant Law
Leaving aside the factual errors and what is described as the “erroneous balance sheet” (grounds 1 and 3), the wife’s appeal is in essence a complaint about the Federal Magistrate’s exercise of discretion in the process of making property orders under s 79 of the Family Law Act 1975 (Cth) (“the Act”) (grounds 2, 4 and 5). The appeal also alleges error in credit findings (ground 6).
The principles relating to appellate review of discretionary judgments are well established and provide that appellate courts should be reluctant to interfere unless it can be demonstrated that the decision was plainly wrong, unreasonable or unjust. In House v The King (1936) 55 CLR 499 the High Court said (at 504 – 505):
It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
In Gronow v Gronow (1979) 144 CLR 513 Stephen J said (at 519 – 520):
The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge’s discretionary decision on grounds which only involve conflicting assessments of matters of weight.
In Norbis v Norbis (1986) 161 CLR 513 Brennan J said (at 539 – 540):
The difficulties in the way of developing guidelines beset an appellate review of the exercise of a discretion under s.79. Unless the primary judge reveals an error in his reasoning, the Full Court can intervene only if the order made is not just and equitable. How does the Full Court arrive at that conclusion? In Bellenden (formerly Satterthwaite) v. Satterthwaite [[1948] 1 All ER 343 at 345], Asquith L.J. stated the rationale of an appellate court's approach:
‘It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.’
The ‘generous ambit within which reasonable disagreement is possible’ is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.
In relation to the discretionary nature of assessment of contributions under
s 79(4) (ground 5) and of adjustment factors under s 75(2) (ground 2), it is as well also to recall the observation of Finn J in Farmer and Bramley (2000) FLC 93-060, where at paragraph 49 her Honour said:
Given that awards under s 79 are virtually never calculated with mathematical precision, no amount of enumeration of, or indeed of evaluation of, contributions, or of the s 75(2) matters, or indeed of any of the matters listed in s 79(4), can ever explain exactly why a particular figure, or more usually a percentage, is eventually arrived at (other than that it is within the recognised “range”). Absent a strict mathematical approach, the reasons for judgment requirement ultimately becomes impossible of total fulfilment in the jurisdiction under s 79.
In Fox & Percy (2003) 214 CLR 118 Gleeson CJ, Gummow and Kirby JJ considered the principles of appellate review of a trial judge’s findings as to credit of witnesses. Their Honours said:
28.…In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.
29.That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being “incontrovertible”, an appellate conclusion may be reached that the decision at trial is “glaringly improbable” or “contrary to compelling inferences” in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must “not shrink from giving effect to” its own conclusion…
(footnotes omitted)
Application to Adduce Further Evidence
On 26 October 2011, the wife filed an Application in an Appeal to adduce further evidence. In support of the application are an affidavit filed by the wife’s solicitor on 26 October 2011, and an affidavit of the wife filed on
18 June 2012.
In his affidavit, the solicitor for the wife explains that, “…I have come to a conclusion that furtehr [sic] evidence would be necessary if the Full Court decides to exercise its power to make orders in substitution to the orders appealed from”. In the wife’s affidavit, filed later, she says “It is my belief that the evidence to be adduced in this affidavit, had it been taken into account at the trial, the outcome of the trial would have been significantly affected”. The solicitor confirmed in his oral submissions that the wife seeks a re-exercise of discretion.
The application is opposed by the husband on the basis that allowing the evidence would amount to a further trial which the wife should not be allowed, and that in any event the evidence would make no difference to the result arrived at by the Federal Magistrate.
Section 93A(2) of the Act, confers an unfettered discretion on the Full Court in an appeal to receive further evidence. The general principles relating to this discretion were described by the High Court in CDJ v VAJ (1998) 197 CLR 172:
104.In the exercise of the discretion conferred by a power such as s 93A(2), the critical factor is the subject matter of the proceedings with which the appeal is concerned. This is because the purpose of the power to admit further evidence is to ensure that the proceedings do not miscarry. Tests such as those stated in Wollongong Corporation based on the need for finality in litigation are therefore not necessarily applicable to cases in which the interests of third parties, such as children, are at stake, although factors such as finality, discoverability of the evidence and its likely effect on the orders made are usually relevant to the exercise of the discretion. In an application at common law to admit further evidence, the court applies principles, bordering on fixed rules. In an application under s 93A(2) and similar provisions, the Full Court or Court of Appeal weighs factors, although it may of course develop guidelines for weighing those factors and exercising the discretion.
…
109.One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.
…
111.… The power to admit the further evidence exists to serve the demands of justice. Ordinarily, where it is alleged that the admission of new evidence requires a new trial, justice will not be served unless the Full Court is satisfied that the further evidence would have produced a different result if it had been available at the trial. Without that condition being satisfied, it could seldom, if ever, be in the interests of justice to deprive the respondent of the benefit of the orders made by the trial judge and put that person to the expense, inconvenience and worry of a new trial.
(footnotes omitted)
The evidence contained in the wife’s affidavit includes tax returns for the
G Family Trust, which the solicitor says were produced at the trial pursuant to the notice to produce, but were omitted from the exhibits tendered in the course of the trial. The majority of the wife’s affidavit contains records relating to the sale of properties the wife says she has undertaken in order to discharge her financial obligations under the original orders, as amended by the stay orders. Finally the wife’s affidavit includes statements for the parties’ R Investment Loan account, demonstrating repayments the wife says were made by her post-separation and since the making of the orders.
We do not see how any of this evidence would fall into any of the categories as described in CDJ v VAJ.
Discussion
Ground 1 – Errors of Fact in the Balance Sheet
Ground 1 asserts 6 factual errors in the balance sheet used by the Federal Magistrate. We emphasise at the outset of this discussion that none of those errors listed (except for the “missing item”, the wife’s repayments of
Loan R) were brought to the attention of the Federal Magistrate prior to, during or after the hearing. The values on the balance sheet were agreed by the parties, save for the accumulated tax losses and capital gains tax which the Federal Magistrate identified as contentious issues.
This is confirmed by the transcript of proceedings where on the third and final day of the hearing counsel for the wife said:
[COUNSEL FOR THE WIFE]: Your Honour, the schedule that my friend has handed up, as she says to your Honour, there are essentially agreed values there once we adjust the values [of properties A1, A2, A3]. And it seems the only two things where the parties don’t agree are the capital gains tax liability and the accumulated tax loses of 73,000.
The listed items 10 and 14 in ground 1 are errors in the calculation of certain investments and shares, attributed to double counting to which we have already referred as conceded. The errors only became apparent, after the trial, after further examination of the material and exhibits before the Federal Magistrate by the parties. Counsel for the husband referred us to the transcript where the wife had been cross-examined on the investments at the hearing, and submitted that there had been difficulties in the wife’s disclosure of information. Counsel also pointed out that the wife, who we repeat was represented by counsel at the time of trial, agreed to the higher value of the shares about which she now complains.
In any event, the errors have been conceded by the husband and require no further consideration. For the purposes of the appeal and the amendment required to the orders of the Federal Magistrate, it is noted that the reduction to the property pool as a result of these errors is $62,234 for AMP (item 10) and $1,829.80 for the TAB shares (item 14) totalling $64,063.80. The asset pool to be divided was therefore reduced to $2,737,408 and the husband’s 57.5 per cent entitlement correspondingly equals $1,574,009.60.
The difference between $255,659 as ordered and the $208,823 payable is $46,836. This error is not of such magnitude that it could be said to have been of any real significance in assessment of contributions or adjustment for s 75(2) factors.
It was further submitted for the wife that three of the four remaining share groups (i.e. excluding the TAB shares) ought not have been included in the balance sheet at all because they were shares acquired by the wife prior to the commencement of cohabitation. It was explained that the Federal Magistrate had “not allowed any of these shares to be credited to the wife as her initial contribution…even though the husband conceded that the wife had other assets apart from her home…and the wife clearly showed these shares in paragraph 44 of her affidavit”.
In response, counsel for the husband in the appeal emphasised that the inclusion of the assets had been agreed to by the wife at trial and the complaint now raised was not raised at trial before the Federal Magistrate, as would have been the appropriate time. Counsel further submitted that all property of parties must be considered in some way by the Court when determining what are just and equitable property orders (Carter and Carter (1981) FLC 91-061). We think that there is considerable merit in this submission.
In the written summary of argument the solicitor for the wife made submissions about mortgage, rent receipt and superannuation amounts (items 20, 13, 22, 23, and the named “missing item” respectively), which the wife says ought have been included or removed from the balance sheet.
Counsel for the husband repeated her earlier submission in response. It is correct in our view that having agreed to the balance sheet and confirmed to the Federal Magistrate that the only items in issue were the capital gains tax and the accumulated tax losses, but failed to raise in submissions or in cross-examination the issues now sought to be raised, the wife cannot now be allowed in an appeal to agitate matters which she ought have raised, and had the opportunity to do so, before the Federal Magistrate.
Save as to the errors conceded by the husband, ground 1 would fail.
Ground 2 – Error in assessment of future needs
Ground 2 asserts that the Federal Magistrate erred in the assessment of the factors affecting the future needs of the parties, in particular the factors listed in the following subsections of s 75(2):
Matters to be taken into consideration in relation to spousal maintenance
(2)The matters to be so taken into account are:
(a)the age and state of health of each of the parties; and
…
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d)commitments of each of the parties that are necessary to enable the party to support:
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain; and
(e)the responsibilities of either party to support any other person; and
…
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
…
(l)the need to protect a party who wishes to continue that party's role as a parent; and
…
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;…
The written submissions on behalf of the wife under this ground were extensive, though were mostly occupied with speculative comments and general assertions rather than references to the evidence or reasons which supported error by the Federal Magistrate in his assessment.
In oral submissions the thrust of this ground became apparent. The solicitor for the wife submitted that an adjustment of 2.5 per cent was unreasonable in light of the cost of living, the wife’s obligation to raise two children, and her ultimate financial responsibility for her mother until she is eligible to become an Australian citizen in 2016. It was the solicitor’s contention that based on a line of cases which he outlined in written submissions, an adjustment of between 7.5 and 10 per cent would be more reasonable when considering the whole of the circumstances.
Under the heading for subsection (a), age and health of the parties, it was suggested for the wife that “the fact that the substantial portion of the income [of the parties] is derived from passive management of the investments diminishes the wife’s “untapped” earning capacity, which incidentally, had not been recognised when assessing her contributions during the cohabitation and after separation”. In the submissions in reply to the husband’s submissions, it was said that the Federal Magistrate’s finding of “untapped” earning capacity was based on the wife’s “hope, wish and dream”.
Counsel for the husband submitted that it was open to the Federal Magistrate to find that the wife had “untapped” earning capacity. Counsel pointed out that at trial the wife argued her capacity was affected by illness, which was unsubstantiated and rejected by his Honour, a point which has not been pressed before us in the appeal.
We do not see how the passive management style of income generation adopted by the parties diminishes the wife’s earning capacity. The Federal Magistrate stated at paragraph 63 of the reasons that the orders to be made may have some impact on the income generation style of the parties. However a change to the working style of the parties was an inevitable result of their separation and the division of their property sought by them.
His Honour’s finding that the wife had significant earning capacity was clearly based on the business acumen demonstrated by her work history, her contributions to the assets during the relationship, and the further qualifications she had acquired. The characterisation of her capacity as “untapped” was not referable merely to the future intentions which she had expressed, but more significantly to her business acumen and further qualifications, which had not been called on recently because of the parties’ previous style of income generation and the wife’s choice not to work in the last few years.
It was further submitted that the Federal Magistrate “failed to take into account the wife’s greater future needs to support herself compared to such needs of the husband, due to her greater life expectancy”. The solicitor speculated that the wife will live an estimated 20 years longer than the husband and submitted this was a factor which called for an adjustment.
In response counsel for the husband submitted, properly in our view, that the Federal Magistrate correctly found the husband’s age to have an impact on his future needs, and his earning capacity.
Under the heading for subsection (c), in relation to the care of a child of the marriage, it was submitted that the 2.5 per cent adjustment was inadequate because the husband was “quite likely to structure his business affairs in such a manner as to cause his child support assessment to be “minimalist”. Subsequent submissions referred to the arbitrary nature of child support departure assessments, the income minimisation practices of the parties and the possibility that the parties may end up living in different jurisdictions by virtue of being immigrants therefore making enforcement of child support orders impossible. These submissions appear to suggest that the Federal Magistrate erroneously relied on the existence of the Child Support scheme in this case and ought to have conducted his own child support assessment and made a larger adjustment in favour of the wife under this subsection.
Clearly there are many difficulties with these submissions, commencing with the fact that they were not made to the Federal Magistrate, and concluding with the need to appreciate that the decision of the Federal Magistrate was a discretionary one which was well explained by him in the reasons.
In relation to subsection (d)(i), self-support of the party, reference was made to the Child Support Agency’s self-support allowance and the life expectancies of the parties. For subsection (d)(ii), another child which the party has a duty to maintain, it was submitted that the cost to the wife of supporting the child for the next three years until he turns 18 represented 0.8 per cent of the asset pool.
Similarly under subsection (e), responsibility of a party to support any other person, estimates were given about the costs of supporting the wife’s mother over five years until she becomes eligible for citizenship and a pension. It was submitted that the Federal Magistrate made an allowance for the husband’s reduced earning capacity due to his age and that it would be appropriate to do the same for the mother, in some attempt to offset the cost to the wife of supporting her mother.
Finally under subsection (g) it was said that “with the financial burden on the wife [referring to the support of her children and mother], without further adjustments in her favour, it is unlikely that the wife’s household will be able to maintain a standard of living commensurate with the one experienced in the past. This may have had an adverse effect on [the parties’ child’s] education and other extracurricular activities”.
In relation to provision for the wife’s other child and her mother, it was submitted that not having sought to adduce the evidence at first instance as to the costs of supporting each individual, the wife should be precluded from raising such evidence in the appeal. This submission is clearly correct.
In addition, any consideration of future needs must involve a balancing of both parties’ needs. In his reasons for judgment the Federal Magistrate identified and addressed each of the s 75(2) factors which the wife raised in her case outline. Having considered each factor, his Honour reasonably concluded that of all the matters raised by the wife, her care of the parties’ child carried the most weight.
The solicitor for the wife acknowledged at the hearing of the appeal that the main future needs factors relied on by the wife were the care of the children and the cost of living. We have not been referred to any compelling evidence or submissions which suggest the other factors raised by the wife ought to have been given more weight by the Federal Magistrate.
The factors for the husband were his age at the end of his working life, and his limited ongoing capacity for employment. These factors were in favour of an adjustment to the husband, or at least against a larger adjustment in favour of the wife. Importantly, an evaluation of the reasonableness of the adjustment must also be considered in real terms. We do not consider 2.5 per cent to be an unreasonable result or exercise of his Honour’s discretion and no appealable error is demonstrated in this ground.
Ground 3 – Failure to include in the balance sheet and share between the parties the capital gains tax liability
The written submissions for the wife narrowed this ground of appeal to a complaint that the capital gains tax liability arising from the sale of one of the properties should have been shared between the parties, rather than being considered as “cancelled out” by future accumulated tax losses. The wife asserted the further losses were a benefit resulting entirely from her own efforts post-separation.
The solicitor for the wife conceded, as had the wife’s counsel at trial, that the wife had not put before the Federal Magistrate any expert evidence about the quantum of the capital gains tax liability, which had not yet crystallised. The solicitor conceded that counsel had informed his Honour that the relevant tax returns had not yet been prepared and the figure given by the wife was therefore a guess.
Some reference is made to this issue in the affidavit of the wife in support of her further evidence application in the appeal. She seeks to place before the Court the tax returns for the family trust from 2007-2010.
It was submitted for the husband that the wife had failed to adduce any evidence at the trial, expert or otherwise, as to the value of the accumulated tax losses and the capital gains tax. Counsel referred to the transcript of proceedings on the first day of trial, where the Federal Magistrate indicated to the wife’s counsel that the estimated extent of the capital gains tax as $70,000 was a “bare assertion”, and that he was not prepared to include in the balance sheet a contingent liability of an unspecified amount for which no expert or documentary evidence was provided.
The wife’s argument that the Federal Magistrate erred by not giving her some kind of post-separation contribution credit for the accumulated tax losses is damaged by two factors. First, the wife’s own failure to put this issue squarely before his Honour in her case outline and submissions by her counsel. It is apparent from the transcript that the capital gains tax and accumulated losses were discussed by counsel for the wife with his Honour, however we were not referred to any submissions about the wife’s contribution to those accumulated losses.
Secondly, the fact that the values referred to were hypothetical and unquantified at the time of the trial. The figures having been estimated and represented by the wife’s counsel as near equal, no expert evidence having been adduced and no alternative course of action being suggested, we see no error in the Federal Magistrate’s approach to consider the amounts as cancelled out and not included in the balance sheet. We note his Honour’s comment also that the matter could have been easily dealt with before the trial. There is no merit in this ground of appeal and we would make no criticism of the Federal Magistrate in this respect.
Ground 4 – Failure to consider the effect of the orders
In this ground it was submitted for the wife that it was not open to the Federal Magistrate to pronounce the result as just and equitable without having knowledge of the actual sale prices of the properties that the wife would most likely be required to sell in the future as a result of the orders. It was further submitted that his Honour should have taken into account that the wife would incur further liabilities, namely costs of sale and capital gains tax.
In support of this argument the solicitor for the wife referred us to Noetel and Quealey (2005) 34 Fam LR 190. In that case the Full Court (Bryant CJ, Finn and Boland JJ) allowed an appeal and amended property orders under the slip rule because of capital gains tax liabilities. The solicitor appeared to submit that the error in that case and the error alleged in this case were similar and the orders of the Federal Magistrate could be similarly corrected. In Noetel and Quealey however, the capital gains tax issue concerned a liability for which the value was agreed by the parties, in relation to a property which was certainly required to be sold under the orders. Those two factors were not present in this case.
Noetel and Quealey
was also relied on by the solicitor for the wife to suggest that a percentage of the sale proceeds rather than a fixed sum ought to have been applied. We were referred to paragraph 143, where Bryant CJ and
Boland J referred to Sinclair and Sinclair [2000] FamCA 262 and said, “Where the value of the asset is to be divided between the parties, the Court should order its sale and the apportionment of the proceeds between the parties rather than order one party to pay to the other a fixed sum representing a notional proportion of its assessed value”.
This case is different because the orders made by the Federal Magistrate only possibly required the sale of one property and furthermore, was in terms as asked by the parties. The orders were in fact structured so that the wife had flexibility to arrange her affairs in order to make the payment to meet the husband’s entitlement. Only failing that, and in the absence of a suggested alternative from the wife, was provision for the sale of property made.
We agree with the submission of counsel for the husband that having failed to adduce any evidence or objection at first instance concerning the costs of sale and capital gains tax relating to the potential sale of property, the wife cannot now air these issues to assert appealable error. The wife was represented throughout the proceedings and had notice of the orders proposed by the husband providing for a cash payment of $300,000 to him as early as the filing of the husband’s initiating application on 17 February 2011, three months before the trial.
The Federal Magistrate set out in table format the assets and liabilities each of the parties would be left with as a result of the proposed orders, which included the wife retaining six properties, each of an agreed value higher than the sum payable to the husband. We would also emphasise his Honour’s concluding comment at paragraph 72 of the reasons in relation to the orders that “the wife is a very resourceful woman and I am confident about her ability to raise [the money] within the 90 days proposed by the husband…especially in the absence of any protest by the wife about the form of these orders, and also the absence of any alternative”.
To compel the Federal Magistrate to have considered such speculative costs of his own volition is beyond what a trial judge is reasonably expected to consider as part of the just and equitable determination in s 79 property proceedings. Apart from ordering the sale of all the property, which neither party sought, there was no other form of orders available to his Honour.
Ground 5 – Error in assessment of future capacity and of contributions during the relationship and post-separation
The solicitor for the wife conceded at the appeal hearing that the wife no longer cavilled with the contributions finding of 60/40 at the commencement of the relationship and equal contribution during the relationship. No new submissions were made under this ground and we consider the future capacity and post-separation arguments to have been made and rejected in the discussion of grounds 2 and 3 respectively.
Ground 6 – Error in findings as to wife’s credit
Under this ground, the solicitor for the wife sought to advance two arguments. First that the Federal Magistrate had engaged in inductive reasoning and erroneously concluded that the wife had a general tendency to misrepresent the facts, which may have led to an error in the assessment of contributions by accepting the evidence of the husband where it conflicted with that of the wife. It was submitted that his Honour made adverse findings about the wife’s credibility based on only one instance of dishonesty, the wife’s application for a loan to purchase a property. It was further suggested that this dishonesty was not a serious issue, as “borrowers who are in a position to minimise their taxable income by legitimate (or otherwise) means, may make statements in support of their borrowing capacity that otherwise could not supported by their tax returns”.
In response it was submitted for the husband that the wife’s argument misrepresents the evidence concerning the loan application. It was further submitted that there was “abundant evidence” which supported a finding that the wife’s evidence was unreliable. We were referred to those parts of the transcript of proceedings where the wife conceded in cross-examination that she had given false information in relation to her employment status and her earnings.
Counsel for the husband resisted the characterisation that the Federal Magistrate found in the wife a “general tendency to misrepresent the facts” and referred to his Honour’s statement at paragraph 35 of the reasons, that he had “serious reservations about the wife’s evidence in relation to financial matters and contribution generally”, and concluded her evidence was unreliable.
It is clear from the Federal Magistrate’s reasons that there were myriad features of the wife’s evidence, not just in relation to the loan application, but also in her cross-examination generally and in her disclosure throughout the proceedings, which led to the decision about the wife’s credit. We repeat the central reason in his Honour’s decision to prefer, in relation to financial matters only, the evidence of the husband over the wife unless independent documents established to the contrary:
38.Overall I find that the wife’s disclosure was selective, her evidence about financial matters is unreliable where not corroborated by documents that she had not prepared herself, and that she has deliberately sought to exaggerate evidence about her contribution whilst minimising that of the husband. For all of the above reasons, and unless independent documents establish to the contrary, I prefer the evidence of the husband, on these issues.
Throughout the course of the reasons his Honour conducted a thorough examination of each issue raised by the wife and considered her evidence at every turn. As was reasonable, based on his assessment of her evidence and disclosure in relation to financial matters, only in respect of those matters did his Honour in fact prefer the evidence of the husband where the parties’ evidence was conflicting and independent evidence was unavailable. The submissions made for the wife in this argument do not demonstrate to us that any findings made by the Federal Magistrate were glaringly improbable or contrary to compelling inferences as required by the authorities to make out appealable error.
The second argument, contained in the written submissions but seemingly retreated from in oral submissions, was that the evidence of the husband was unreliable and it was therefore the credibility of his evidence which the Federal Magistrate ought to have questioned rather than the wife’s. The solicitor for the wife conceded that there was no allegation of dishonesty in respect of the identified errors in the balance sheet. There being no other serious challenges to the credibility of the husband’s evidence we must reject this argument and this ground.
Conclusions
The appeal must be allowed but only by reason of the errors contained in the balance sheet. This arose of course through no error of the Federal Magistrate who relied on documents provided by the husband and the wife. The original list of assets is now altered by two factors:
1.The mathematical error agreed between the parties in the sum of $64,063.80;
2.The mistake in relation to the D Street property, already sold and thus cannot be the subject of an order.
It is necessary to recalculate the sum due by the wife to the husband. The value of the adjusted pool is $2,737,408. The husband’s share of 57.5 per cent is $1,574,009. The property to be retained by the husband was valued at $1,365,187. The wife thus must pay the husband $208,823. We understood the wife has already paid the sum of $88,000 so that the balance is $120,823. In our view, 90 days should be allowed from the date of our order for such payment.
It has also been necessary to make different orders by reason of the default order being ineffective. The order we have made reflects that proposed on behalf of the husband.
As can be seen from the orders, paragraph 2 of the property orders made by the Federal Magistrate has been varied. The other orders remain including paragraph 9 so that should there be any difficulty in the implementation of the orders, the matter should be relisted before the Federal Magistrate.
Costs
It is obvious that the factual errors identified by the wife and conceded by the husband demonstrate there was some reason for the wife to bring an appeal. Those issues were conceded by the husband very early in the appeal proceedings, as an open offer of settlement dated 29 August 2011 demonstrates.
It was submitted for the husband that the errors arose because of errors from documents which were adopted in the proceedings by the wife, and were compounded by her evidence and the way she conducted her case. The husband accordingly sought that if the appeal was otherwise unsuccessful, the wife pay his costs as agreed or as assessed from 30 August 2011.
The solicitor for the wife at first submitted that the errors conceded by the husband meant there was no scope for costs against the wife. When pressed about the wife’s continuation of the appeal after the husband’s letter of settlement, the solicitor conceded that if the appeal otherwise failed, the wife could not reasonably resist an order for costs from the date of that letter.
In our view this was a proper concession on behalf of the wife. We have found no merit in the other grounds of appeal. The wife should pay the husband’s costs to be assessed, if not agreed, from 30 August 2011.
I certify that the preceding one hundred and five (105) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Thackray and Stevenson JJ) delivered on 12 November 2012.
Associate:
Date: 12 November 2012
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