Hatch & Madsen
[2023] FedCFamC1A 52
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Hatch & Madsen [2023] FedCFamC1A 52
Appeal from: Hatch & Madsen [2022] FedCFamC2F 1418 Appeal number(s): NAA 262 of 2022 File number(s): SYC 2278 of 2020 Judgment of: TREE J Date of judgment: 24 April 2023 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Where the wife appeals final property settlement orders made between her and the husband’s legal personal representative (“the husband”) – Where the husband concedes error in relation to the primary judge’s conclusion on the just and equitable outcome – Where no error is made out regarding the contributions based assessment and s 90SF adjustment – Where the primary judge took into account an irrelevant consideration – Re-exercise of discretion based on the primary judge’s factual findings and conclusions – Where order varied – Costs applications to be filed. Legislation: Family Law Act 1975 (Cth) s 90SF
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 13.08
Cases cited: Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148
House v The King (1936) 55 CLR 499; [1936] HCA 40
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
Number of paragraphs: 36 Date of hearing: 18 April 2023 Place: Cairns (via video link) Counsel for the Appellant: Ms Vohra SC Solicitor for the Appellant: Mills Oakley Counsel for the Respondent: Mr Wilson Solicitor for the Respondent: Parker Law ORDERS
NAA 262 of 2022
SYC 2278 of 2020FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS HATCH
Appellant
AND: MS MADSEN AS LEGAL PERSONAL REPRESENTATIVE OF MR MADSEN (DECEASED)
Respondent
order made by:
TREE J
DATE OF ORDER:
24 April 2023
THE COURT ORDERS THAT:
1.The appeal is allowed.
2.Order 2 of the Orders made by the Federal Circuit and Family Court of Australia (Division 2) on 4 November 2022 is varied by substituting the figure of “$155,000” for “$250,000”.
3.No later than 4.00pm on 8 May 2023 any application for costs by either party is to be made by the filing and serving of written submissions (not exceeding 10 pages) together with any affidavit in support of that application.
4.No later than 4.00pm on 15 May 2023 any submissions (not exceeding 5 pages) and affidavit in response is to be made filed and served.
5.No later than 4.00pm on 22 May 2023 any submissions (not exceeding 5 pages) strictly in reply to the material filed under Order 4 above is to be made filed and served.
6.Upon the filing of submissions under Order 5 above, the judgment in relation to costs is reserved.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hatch & Madsen has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
TREE J:
INTRODUCTION
By her Amended Notice of Appeal filed 22 February 2023, Ms Hatch (“the wife”) appeals from final property settlement orders made in the Federal Circuit and Family Court of Australia (Division 2) on 4 November 2022 in proceedings between her and her late de facto partner Mr Madsen (“the husband”). The husband’s daughter Ms Madsen is the husband’s legal personal representative in the proceedings and will also be referred to as “the husband”.
The property settlement orders provide for the husband to transfer his share in a property at Suburb B (“Suburb B”) to the wife (Order 1), in exchange for her paying the husband the sum of $250,000 (Order 2). Otherwise, each party is to retain the property standing in their name or possession to the exclusion of the other (Orders 3–5). The wife appeals only from Order 2.
Initially the husband opposed the appeal, however during the hearing conceded that it should be allowed, and, subject to one immaterial exception I shall detail later, both parties accepted that I should re-exercise the primary judge’s discretion based on the undisturbed findings and conclusions made by her.
BACKGROUND
Both parties were born in 1953. They met in 2004, commenced cohabitation in 2006 and finally separated in 2019, thereby concluding a relationship of approximately 15 years. There were no children born to the relationship.
The husband and wife each owned assets in their own names at the start of the relationship, and continued to do so thereafter, although the particular assets varied over time.
In November 2006, the parties jointly purchased Suburb B and moved there. Each contributed $250,000 to the purchase.
In 2008, the wife’s father died and she received an inheritance of $1.3 million. A substantial part of that was invested in superannuation.
In 2015, the husband was diagnosed with a terminal illness.
In November 2019, the parties separated. In February 2020, the husband updated his will leaving his entire estate to his four children from previous relationships.
On 15 April 2020, the wife commenced property settlement proceedings against the husband. In 2021, the husband passed away. By then, with the exception of his interest in Suburb B, he had sold and disposed of the proceeds of sale of almost all his assets, totalling a sum in excess of $500,000.
The primary judge heard the trial on 8 and 9 June 2022, and delivered her reasons for judgment on 4 November 2022.
THE APPEAL
Although the husband conceded the appeal, I must still be satisfied of error, and more, given the way the parties asked me to proceed, I need to determine the various grounds to establish which factual findings and other conclusions are undisturbed.
At the outset, it is useful to restate the relevant principles which govern appeals from discretionary judgments. Particularly, it is well settled that error of the type identified in House v The King (1936) 55 CLR 499 at 504–505 (“House v The King”) must be established. There, the majority of the High Court said:
… The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. 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…
Grounds 1, 2 and 3
These grounds contend:
1.That the Trial Judge was in error in her mathematical calculations in her conclusion in percentage terms as to the parties' entitlements to the net asset pool (inclusive of the Wife's superannuation entitlement), based upon her assessment of their respective contributions to the net asset pool (exclusive of the Wife’s superannuation entitlement) which she determined favoured the Wife as to 70%, by thereafter maintaining these percentages in relation to the net asset pool (inclusive of the Wife's superannuation) in circumstances where she had determined that this superannuation (being an amount of $287,166), derived entirely from the Wife's inheritance from her late father and the Husband had not made any contribution to it.
2.That the Trial Judge was in error on the evidence in failing correctly to evaluate the Wife's contribution of her superannuation of $287,166, which comprised approximately 20% of the net asset pool and by not incorporating this contribution at all into her ultimate determination of the parties' overall contributions.
3.That the Trial Judge erred in law in failing to provide adequate reasons for her overall assessment of the Wife’s contribution entitlement.
Both the parties argued these grounds collectively, and it is therefore convenient to deal with them likewise. That said, the parties’ arguments as contained in their respective Summaries of Argument proceeded in parallel without meeting.
The primary judge found that the parties’ initial contributions were in the ratio of 70/30 favouring the wife. No appeal is brought from that determination, although the husband argues that it was incorrect, and on the figures he contends for says the actual ratio was 63/37. Contrary to r 13.08 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), no Notice of Contention raising this was filed, nor was leave sought to file one out of time. I therefore do not need to consider the husband’s contention further.
Next, the primary judge found that during the relationship, the wife received an inheritance of $1.3 million, of which $695,000 was invested in superannuation. The husband says, albeit again not by any Notice of Contention, that the sum invested into superannuation was only $500,000. Again I will not consider that contention further.
The wife then says, given the finding that the husband had made no contribution to her superannuation (which at the time of trial was worth $287,166) and the findings that the husband had firstly, made minimal contributions during the relationship and secondly, by the time of his death, disposed of assets or their sale proceeds to a value of over $500,000, how that translated into a conclusion that overall contributions were 70 per cent favouring the wife is unclear.
However this works on an assumption that 70/30 was the starting point, and disparity in contributions during and after the relationship favouring the wife must increase her entitlement beyond that percentage. Yet it is now beyond doubt that whilst it may be convenient to assess contributions at various points in, or over periods of, time, commonly at the commencement of the relationship, during it and after it, the process remains an holistic, and not a mathematical, one (Jabour & Jabour (2019) FLC 93-898). No mathematical or House v The King error is established.
Further, the primary judge’s reasoning is sufficiently clear as to enable an understanding of how the result was arrived at (Bennett and Bennett (1991) FLC 92-191). Thus at [154] the primary judge addressed the inheritance as follows:
154.The wife provided an account of how her inheritance was distributed but it is not supported by evidence that would satisfy the Court that all the funds received by her have been accounted for. When considering the weight to be given to her contributions, she cannot be credited with contributing an inheritance of $1.3 million into the matrimonial property pool when only a small portion of it remains reflected in the pool. Having made that finding, I note there is insufficient evidence to support the contention that the wife failed to disclose assets in her possession and control.
Later, at [159]–[164] the primary judge concluded:
WHAT WEIGHT SHOULD BE GIVEN TO THE RESPECTIVE CONTRIBUTIONS OF EACH PARTY?
159.The legal personal representative’s case seems to be that because the wife cannot adequately account for how the totality of her inheritance of around $1.3 million has been distributed, the husband is just as entitled to have applied and distributed the sum of $514,330 at his discretion.
160.Such an approach is inconsistent with the authorities. It also ignores the significant contribution made by the wife to assets that were the source of the funds that the husband distributed.
161.Furthermore, the evidence heard in relation to the husband’s non-financial contributions does not satisfy the Court that they were in the nature of contributions towards the acquisition, improvement and maintenance of [Suburb B]. I find that much of the renovation work he undertook on [Suburb B] was incomplete and poorly done. Other work was not required, such as the acquisition of the [outer building]. The auction purchases which were described by several witnesses as “junk” are now littered over [Suburb B].
162.Whilst recognising that this is not a precise accounting exercise, significant weight must also be given to the wife’s substantially greater initial contributions. The weight given to initial contributions generally diminishes over time. But in this case, the husband has entirely dispersed the assets he brought into the relationship with the exception of his share in [Suburb B].
163.I find that substantial weight must be given to the wife’s financial and non-financial contributions throughout the relationship, particularly in maintaining and improving [Suburb C]. If not for her contributions, [Suburb C] would not have achieved the sale price it ultimately realised.
164.Having regard to both the initial contributions of the parties as well as their financial and non-financial contributions as homemakers throughout the relationship pursuant to section 90SM(4) of the Act, I assess the wife’s contribution at 70% and the husband’s contribution at 30%.
In those extracts, the primary judge’s reasoning can be clearly discerned.
There is no merit to these grounds and they fail.
Grounds 4 to 8
These grounds provide as follows:
4.That the Trial Judge was in error in her determination as to a just and equitable result, after determining in percentage terms based upon her consideration of the parties' contributions and relevant Section 90SF factors to be as to 90% to the Wife and as to 10% to the Husband to then make an adjustment to these percentages and to reduce the Wife's percentage by 6%, thereby providing for an 84% to 16% division in favour of the Wife.
5.That the Trial Judge was in error in law in failing to provide adequate reasons for her determination to reduce the Wife's entitlement as previously determined by 6%.
6.That the Trial Judge was in error in law in her final determination as to a just and equitable result by taking into account that a division in percentage terms as to 90% to the Wife and as to 10% to the Husband would mean that the Husband would receive $155,000, which was well below his initial contribution of $250,000 made towards the acquisition of the [Suburb B] property, in circumstances where this initial contribution had already been taken into account by the Trial Judge in her assessment of the parties' overall contributions.
7.That the Trial Judge was in error in law in her final determination as to a just and equitable result in determining that relevant considerations in this determination were that the Wife could draw against her superannuation to pay the Husband out or could choose to dispose of real property which she owned to provide for her overall financial support.
8.That the Trial Judge was in error in law in her final determination as to a just and equitable result in failing to assess this result as between the parties to the relationship and not as between a party to the relationship and non-parties, who were beneficiaries to the Husband's Estate so as to enable them to receive "a modest but reasonable inheritance" from such Estate.
Again both parties dealt with these grounds collectively, and it is convenient to also do so in these reasons.
As noted above, the primary judge assessed the wife’s contribution based entitlement at 70 per cent. Her Honour then made an assessment of 10 per cent in the wife’s favour in respect of the matters enumerated in s 90SF(3) of the Family Law Act 1975 (Cth), and a further 10 per cent in her favour attributable to the husband’s dissipation of assets prior to his death. However the primary judge considered that a 90/10 division was not just and equitable, but determined that a 84/16 division was.
Her Honour explained her reasons for doing so at [191]–[194]:
191.Is it just and equitable for the husband to receive an entitlement of 10% when compared to the wife’s entitlement of 90%? Such an outcome would see the husband receive approximately $155,000; a figure well below his initial contribution of $250,000 made towards the acquisition of [Suburb B].
192.I have made a finding that the husband made no discernible contribution towards the improvement or conservation of [Suburb B]. It therefore does not follow that he should be entitled to half of the market value of [Suburb B], particularly in circumstances where the wife should be compensated for her contribution towards the assets that were dispersed by the husband.
193.An outcome that sees the husband receive a payment of $250,000 in exchange for transferring his share in[ Suburb B] to the wife is equivalent to a division of 16% in his favour and 84% in the wife’s favour.
194. I am satisfied that this is a just and equitable outcome because:
(a)The wife presumably can draw against her superannuation to pay the husband out.
(b)The wife may ultimately choose to dispose of any or some of the properties at [Suburb B], [Suburb D] or [Suburb E] for her ongoing financial support.
(c)The husband leaves four children surviving him. While each received benefits from their father when he distributed the proceeds of sale of [Suburb F], they did not exercise any control over his decision-making and may themselves regret some of the decisions he made. This outcome sees each of them receive a modest but reasonable inheritance from their late father’s estate.
The wife contends that none of the reasons articulated at [194] are sound at law, yet plainly (a) and (b) are an acknowledgment that the wife can meet the $250,000 payment from a liquid asset, and has sufficient assets remaining to enable her continued financial support, and thus are unimpeachable, leaving only (c). The wife says it should be read as introducing an irrelevant consideration, namely the reasonableness of the husband’s children’s inheritance. This was conceded by the husband as being an irrelevant consideration in property settlement cases, and plainly it is. It is not possible to read the primary judge’s reasons other than it being the sole factor in favour of the six per cent adjustment, as the considerations at [194(a) and (b)] are matters which only do not speak against the adjustment.
To the extent that the primary judge was concerned that a 90/10 split would see the husband receive less than his initial contribution to Suburb B, her Honour did not explain why the return of that sum was necessary to achieve justice and equity, or conversely, by reference to relevant considerations, how not returning the $250,000 to his estate effected an injustice or inequity on the husband.
It follows that these grounds succeed and hence the concession that the appeal ought be allowed was correctly made.
RE-EXERCISE
In the event that I was persuaded to allow the appeal, sensibly both parties sought that I re-exercise the discretion upon the primary judge’s undisturbed findings of fact and conclusions, save that the wife conceded that the value of her superannuation at the commencement of the relationship was about $55,000, not about $100,000 as found by the primary judge. However, as the husband accepted, such is of insufficient materiality to impact upon the primary judge’s 70/30 contribution assessment.
I say that is sensible because a remitted rehearing would be costly, and the pool modest, such that once those further costs were taken into account, it would likely see both parties worse off, no matter what the outcome.
The appeal has only succeeded in relation to the challenge to the primary judge’s adjustment of six per cent in the husband’s favour, so as to achieve a just and equitable outcome. Therefore the re-exercise is a very slender one since, as the parties request, I am adopting the undisturbed findings of a 70/30 contribution based entitlement in the wife’s favour, together with further adjustments totalling another 20 per cent in her favour, arriving at a 90/10 division.
It is difficult to see anything about that outcome which is unjust or inequitable. Although before me the husband contended that justice and equity required the return of, if not all, then most, of his $250,000 contribution to the purchase of Suburb B, that has necessarily already been considered in determining the 70/30 contribution based entitlement. There is nothing apparently unjust – given the husband’s dissipation of more than $500,000 post separation – in his estate only receiving $155,000. The fact that Suburb B is now more valuable than when it was purchased does not speak to injustice either, as its current value was utilised in the balance sheet, and hence the husband’s entitlement already reflects that.
I am satisfied that a 90/10 division is, in the circumstances of this case, just and equitable. It follows that, by virtue of the appeal succeeding and my re-exercising the discretion resulting in a 90/10 division, Order 2 of the primary judge’s orders ought be varied so as to reduce the sum the wife is to pay the husband from $250,000 to $155,000, and I will so order.
COSTS
Because offers of settlement were potentially relevant, the parties agreed to a timetable for the resolution of any applications for costs that might arise, and I will so order.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Tree. Associate:
Dated: 24 April 2023
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