HDM & MM and SJM
[2006] FamCA 47
•14 February 2006
[2006] FamCA 47
FAMILY LAW ACT 1975
IN THE FAMILY COURT OF AUSTRALIA
AT SYDNEY Appeal No. EA 89 of 2005
No. SYF 3426 of 2003
BETWEEN:
HDM
(Appellant)
and
MM
(First Respondent)
and
SJM
(Second Respondent)
CORAM: KAY, HOLDEN AND COLEMAN JJ
DATE OF HEARING: 7 DECEMBER 2005
DATE OF JUDGMENT: 14 FEBRUARY 2006
REASONS FOR JUDGMENT
APPEARANCES:
Mr Stewart of Counsel, instructed by Barkus Edwards Doolan Solicitors, Level 9, 370
Pitt Street, Sydney NSW 2000, appeared on behalf of the Appellant.
Mr Hallen SC of Counsel, instructed by Dimocks Family Lawyers, Level 1, 17 Castlereagh Street, Sydney NSW 2000, appeared on behalf of the First Respondent.
No appearance for the Second Respondent.
Name of Appeal HDM & MM & SJM
Appeal Number EA 89/2006
Date of Appeal hearing 7th day of December 2005
Date of Judgment 14th day of February 2006
Coram Kay, Holden & Coleman JJ
Catchwords: APPEAL – PROPERTY SETTLEMENT - ASSESSMENT AND DIVISION OF POOL OF ASSETS – ASSESSMENT OF CONTRIBUTION – SPOUSAL MAINTENANCE – cohabitation of 24 years – two adult children living with wife and her 88 year old mother – wife principally engaged in home duties - husband a partner in a firm of chartered accountants earning $700,000 per annum - trial Judge determined that a pool of assets of approximately $1.6 million should be divided as to 75/25 in favour of the wife – ongoing spousal maintenance for two years at $1100 per week reducing to $750 per week thereafter – appellant husband sought that the pool of assets should be reduced to approximately $1.2million asserting error in a notional add-back and the exclusion of a tax liability in relation to income earned shortly prior to the trial – appellant husband also sought that the division of that reduced pool of assets should be 70/30 in the wife’s favour - appellant further sought that the spousal maintenance order should cease after two years
Held – The net asset finding by the trial Judge was in error and the net asset pool should have been held to be $1,500,000, some of the notional add-back attributable to existing assets or reasonable expenditure – no error in determining that the tax liability was too remote to the joint purposes of the parties to be a liability that the wife should be required to contribute to – the adjustment in the wife’s favour of 10 per cent for contributions of $200,000 made on her behalf by her parents (creating a $150,000 differential on the reduced pool of approximately $1.5 million) cannot be said to be outside the realm of the "generous discretion" – given the age of the parties, the wife’s requirements to care for her mother for the foreseeable future and the very large amount of income earned by the husband and the comparatively modest amount of maintenance being ordered, it was within the discretion of the trial Judge to leave the spousal maintenance matter open ended, subject only to the addition of the consent order that the wife should be under an obligation to advise the husband of any changes in her finances after her mother's death - capital sum adjusted to allow for the smaller asset pool.
Appeal allowed in part
Costs certificates
This is the husband’s appeal against orders for alteration of property interests and spousal maintenance made by Rowlands J on 27 May 2005. His Honour determined that a pool of assets of approximately $1.6 million should be divided as to 75 per cent in favour of the wife and 25 per cent in favour of the husband. He further ordered that there be ongoing spousal maintenance for two years in an amount of $1100 per week reducing to $750 per week thereafter.
At the hearing of the appeal the husband sought to argue that the pool of assets should be reduced to approximately $1.2million and that the division of that reduced pool of assets should be 70:30 in the wife’s favour. He further sought that the spousal maintenance order should cease to have effect at the conclusion of two years after the orders were made.
Background
At the time of the trial the husband was aged 52 and the wife 51. The parties commenced cohabitation in 1977 upon their marriage, separating in November 2001. The marriage was dissolved in 2003. Cohabitation lasted for 24 years.
There are two adult children of the marriage aged 24 and 21 both of whom were residing with the wife and her elderly mother (aged 88) in the former matrimonial home. The husband was now married to one Ms M with whom he had been residing since mid-2002.
The husband was a partner in a firm of chartered accountants and the wife was principally engaged in home duties but was running a small clothing design and manufacturing business from home.
The judgment
After setting out the background and the relevant law the trial Judge set out the pool of assets and liabilities as contended by the parties and as determined by him. It is convenient that we set out the table adopted by him.
Assets
Item Asset Husband’s Value Wife’s Value Finding
Beachside property
(half interest) $1,162,500 $1,162,500 $1,162,500
QP property $675,000 $1,350,000 $675,000
Western suburb property $130,000 $260,000 $130,000
Husband’s PwC Capital Distributions NIL $301,487 $239,000
Shares in R Pty Ltd and
associated loan account $32,111 $14,339 $32,111
Subaru motor vehicle $35,000 $35,000 $35,000
Vespa motor scooter $5,000 $5,000 $5,000
BMW 318i motor vehicle $30,000 $30,000 $30,000
Contents at beachside property
(including wife’s jewellery) $20,000 $20,000 $20,000
Contents at QP property $11,512 $28,875 $11,512
Parties interest in
Family Trust $33,478 $43,066 $33,478
Wife’s CBA savings $924 $924 $924
Husband’s jewellery (as valued) $215 $215 $215
Husband’s superannuation
entitlement Clianthus
Superannuation Fund $3,141 $3,141 $3,141
Husband’s bank account – NAB $956 $956 $956
Husband’s shares in YR
Company Limited $800 $800 $800
Wife’s public company shares
(Woolworths Limited and
St George Bank Ltd) NIL NIL 0
Husband’s paid legal costs $40,000 $113,128 $40,000
Wife’s paid legal costs $70,000 $53,076 $53,076
Balance of proceeds of $10,000 $10,000
R Pty Ltd shares
Total Assets $2,482,713
Liabilities
Item Asset Husband’s Value Wife’s Value Finding
Mortgage registered over beachside
property $202,020 $202,020 $202,020
Mortgage over QP property $489,350 $880,000 $489,350
Husband’s loan from BMW finance $32,455 $32,455 $32,455
Husband’s loan from ANZ Bank
(western suburb property) $121,408 $242,816 $121,408
Wife’s debt to Wynn & Bennett $2,712 $2,712 $2,712
Total Liabilities $847,945
Net Assets $1,634,768
His Honour then dealt with arguments relating to the matters in contention arising out of the pool of assets and determined each of those. This appeal concerns two of those matters and we will return to those shortly.
Having then dealt with the various assets and liabilities his Honour turned to the issue of evaluating contributions. He noted as follows:
“39. The couple have received significant financial assistance from the wife’s parents at various stages throughout their relationship, largely in the form of lump sum payments. It is the wife’s evidence that much of this money was applied to the purchase of property. This includes the discharge of a mortgage on a Clovelly property in 1986 by a payment of $33,000, resulting in it having an unencumbered value of $190,000 when sold in 1987, and two payments totalling approximately $46,000 to allow the couple to purchase the beachside property.
40. The Court had the benefit of an affidavit from the wife’s frail and elderly mother. She was not fit to be cross-examined but the affidavit was received after certain objected to portions of it were deleted. The terms of it going in to evidence were that it be read critically by the Court with the constant reminder that it had not been subjected to the checking mechanism cross-examination provides. The document, which I largely accept, demonstrates that before and during the marriage the couple received continuing financial and other benefits from the wife’s parents (and $3,000 from the wife’s grandmother).
41. The financial benefits included, tens of thousands of dollars toward the parties’ first properties in Randwick (unit) and Clovelly (house) and thereafter the deposit and stamp duty on the beachside property (in which the mother’s parents had a half interest) and other monies. It also appears the parents assisted the husband pay his first provisional income tax (when the beachside property was occupied).
42. After the wife’s father died the couple received a car and $30,000.
43. In about 1995 the husband received assistance from the wife’s mother with his income tax, that year the wife also received a further $37,768 from her mother.
44. The material contained in the affidavit, which is there to be read, suggests to me that, on balance, the wife’s parents provided the couple with over $200,000.”
His Honour then further concluded that whilst the husband had made significant contributions because he was a very high income earner, those contributions should not be seen as any more significant than the wife’s contributions in her role as homemaker and parent. He said:
”49. His taxable income in the year ending 30th June 1978 was $13,041, in 1984 $95,395, in 1993 it was $233,497 and while in 1996 it fell to $125,660 it was back at $258,072 in 1998. Just prior to separation (November 2001) the husband’s taxable income was $289,961 before climbing through $347,410 (2002) to $718,883 (or $649,650) in 2003.
50. It is too late in the development of this area of family law to down play the contribution forthcoming from a home maker, full weight is given to this activity.
51. The husband was clearly the primary income producer in the marriage. The wife worked before child birth and was the primary home maker and child carer during this long marriage in which the couple had two children, now, of course adults.
52. In all the circumstances, which include the matters most recently discussed, and acknowledging the husband’s significant contribution in the development at [beachside suburb] with the wife’s own significant if less demanding efforts there, together with the substantial financial contributions from her side of the family, the wife pulls ahead in the contribution area. I assess contribution factors at 55:45 in the wife’s favour.”
His Honour then identified matters that he saw as appropriate for adjustment under the heading Section 75(2) factors, paying particular attention to the husband’s income earning capacity and pension entitlements. His Honour said:
“54. The husband has a much greater income earning capacity and financial security than the wife. Whilst ever he remains at [accountancy firm] he will earn a high income. At the very least once he reaches the pensionable stage with [accountancy firm] (see para 66) he will receive a minimum income of $162,500 per annum. Following [accountancy firm] there was evidence that the husband may act as a consultant in his field of expertise, being indirect taxation, which could bring high rewards. It is safe to assume in the absence of more material relating to the husband’s new partner that she is not a financial burden upon him and, indeed, that she “pays her way”.”
The husband argued that the wife had an expectancy to receive her mother’s estate said to be worth around $1.3 million. His Honour said:
“56. The husband submits that a key s 75(2) factor is the wife’s succession to her mother’s estate. The wife is an only child and the expected value of the mother’s estate is around $1.3 million. There is evidence which suggests that the life expectancy of the mother is not long. However both the time of the mother’s death and the extent of her estate in the wife’s hands remain speculative. It is a factor to be treated with caution.”
His Honour then concluded:
“60. A consideration of the Section 75(2) factors suggests that it is the very high degree of earning capacity and financial security the husband enjoys in contrast to the wife’s situation which requires a very significant movement in her favour at this stage after this long marriage. The wife is now virtually starting again from the earning perspective.
61. Following the contribution adjustment there will be a further movement in her favour to provide that the wife has 75% ($1,226,076) and the husband 25% ($408,692) of the parties’ net assets ($1,634,768).”
Finally his Honour turned to the issue of spousal maintenance. He noted that the husband’s contention was that the spousal maintenance at the rate of $1100 per week, which had been the interim arrangement, should continue for a brief period until the wife had an opportunity to facilitate necessary actions for the sale of the former matrimonial home and that it should then cease. There seemed to be no issue that the wife had need for spousal maintenance nor was there any issue that the husband could not afford to pay the amount that was ordered given that his taxable income for 2002-2003 was somewhere between $649,000 and $718,000. His Honour concluded that the interim level of maintenance should continue for two years and thereafter be reduced to $750 per week until further order or agreement. His Honour said:
“71. When the wife is prospering, and/or her financial situation improves for other reasons, this latter order may well be discharged or modified. Speculation in relation to that may not be helpful here. It may, however, be prudent for the wife to take into account that any “strategic” arrangement organised by her with her fragile mother to avoid naming the wife as her beneficiary may well be viewed with some disdain if the maintenance issue required a further hearing before the Court.”
The appeal
The areas canvassed by counsel for the appellant have a very limited focus.
· The first issue concerns the inclusion in the pool of assets of the sum of $239,000 which was a net capital distribution the husband had received from his partnership shortly after cohabitation ceased.
· The second issue concerned the failure of the trial Judge to include in the liabilities of the parties the sum of $160,000 presently outstanding to the Deputy Commissioner of Taxation by the husband in relation to the income earned by him shortly prior to the date of the trial.
· The third area that was argued was the assessment of the contribution, it being suggested that the contribution finding should be one of equality rather than one that favoured the wife for 55:45.
· Finally it was argued that the order for ongoing maintenance at the end of two years should not have been made and that if at the end of a two year period the wife had need for further spousal maintenance then she should have been required to recommence proceedings rather than leave the present position where the husband is required to bring proceedings in the event that he perceives that the wife no longer has any need for spousal maintenance or he cannot afford to pay the amount as ordered.
As a result of some discussions in the course of argument it has been agreed that in the event that the maintenance appeal is otherwise dismissed it would be appropriate to make orders by consent requiring the wife to notify the husband in the event of a change in her circumstances arising out of the death of her mother and a minute of proposed consent order in the following terms was tendered to us which reads as follows:
“That within 14 days of any of the following events occurring the wife, by her Solicitor, will notify the husband, by his Solicitor, in writing of:
(a) the death of [the wife’s mother];
(b)the appointment and identity of the firm of Solicitors acting for the Administrators of the Estate;
(c) the grant of administration of the Estate of [the wife’s mother];
(d)the entering into of a contract for the sale of the property known as and situate at [beachside suburb] prior to the death of [the wife’s mother].”
The $239,000 add-back
In his reasons for judgment the trial Judge said:
“18. It appears that in the tax year 2003 the partners at [accountancy firm] received the benefit of a capital distribution (Asset 4). This followed the sale of entities the firm operated which were considered inconsistent with their practice as chartered accountants (or otherwise were believed appropriate for prudent rationalisation). The distribution amounted to some $388,000 less tax of approximately $149,000 to provide about $239,000 (see transcript 20/01/05 page 11).
19. The husband has had the benefit of this capital sum upon which capital gains tax was paid, in addition to his income stream. While the husband contends that this was regarded by him as income in that year it has a different character. This joins the parties’ assets (Asset 4) at its net of tax value.
20. It was suggested on behalf of the wife that this item was a late inadequate disclosure provided at a time and in a manner which made it difficult to clarify. All that can now be said in that regard is that the husband cannot reasonably complain if the Court has dealt with it more boldly than he might wish. However, I will accept that the later figures do appear to supersede Mr S’s earlier work which is in evidence.”
In Omaciniv Omacini (2005) FLC 93-218; (2005) 33 Fam LR 134 the Full Court (Holden, Warnick and Le Poer Trench JJ) examined and discussed the cases where it had been held that it was appropriate to notionally add back to the pool of assets an asset that was said to no longer exist. We accept as an accurate statement of the law the following passage:
“30. To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a)Where the parties have expended money on legal fees. In DJM and JLM (1998) FLC 92-816 the Full Court said at 85,262:
“11.6 For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.”
(b)Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
“In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
(c)In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
“As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec.75(2)(o) to applications for settlement of property instituted under the provisions of sec.79.”
31. As the Full Court said in Browne and Green (1999) FLC 92-873 at 86,360:
“44. We agree with her Honour that the principles stated by Baker J in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s 79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction – a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.””
It was submitted on behalf of the appellant husband and conceded by counsel for the wife that at the time of the trial there was no suggestion that the husband still had in his hands the capital distributions made in 2002 or 2003. Nor was there any suggestion that there had been deliberate waste, recklessness or negligence relating to the manner in which the funds had been dealt with. The problem that troubled his Honour arose because the husband who was a chartered accountant, had not explained in any clear manner precisely what had become of the funds received by him.
At the time he received them he was also in receipt of an annual income of approximately $700,000 so he had available for all of his necessary expenditure almost $950,000. It was the husband’s unchallenged evidence that in September 2002 he was called upon to pay $56,226.50 income tax in relation to the financial year ending 30 June 2001 (the last full year of cohabitation). It was further common ground that he together with Ms M had purchased a property at QP, the settlement of the purchase taking place on 22 November 2002. The purchase price was $1,100,000 and was financed as to 10 per cent deposit paid by the husband with the balance borrowed. The husband also paid the stamp duty and fees relating to the purchase, the stamp duty was said to be 5.5 per cent.
The trial Judge’s task in determining what to do with the $239,000 received by the husband post-separation was not made any easier by the submissions made by counsel at the trial.
21. Mr Maiden on behalf of the wife submitted:
“Your Honour Item No 4 the husband’s in [accountancy firm]. That is at 214, your Honour. We have put it into our schedule and your Honour will see on the liability side 3 which is the equal amount. And your Honour indicated that you would perhaps just rule out to make it easier, and I would agree with that, your Honour but we have put it in for a purpose of just saying it is an asset at that point in time.”
The matter appeared to take up a very small portion of the submissions of the Husband’s counsel, Mr Mater. Commencing at pages 903 and concluding at page 904, Mr Mater first tried to persuade his Honour that the amount should be seen as a windfall for the benefit only of the husband but then submitted:
“Significantly, the funds from the sale had been accounted for in the husband’s proper living expenses, and the acquisition of assets, which had been brought to account in these proceedings. So that you were facing a double dip in effect if you use the benefit of those – if you just write it straight back and disregard the acquisitions that are otherwise thrown into the pool…the money has been used for the purposes as I have said, of acquiring assets now brought to account, including 50 per cent interest in these two pieces of real estate we talked about earlier, that would be my submission. Unfair and a double dip. Further, he has used the sums that have come to him from his income and from these distributions, for proper purposes represented to some extent in the present pool that we have referred to, and for his proper living expenses, just as the wife has. He hasn’t, for example, taken it out to Randwick and blown it on the third. He hasn’t put it through poker machines. Kowaliaw is the reference to the points I have just made…He hasn’t made off with it like, as Mr Townsend did with the proceeds of sale of a taxi. It’s not in a biscuit tin in the backyard. The money that he has earned has been properly used for reasonably prudent and sensible purposes. Absent some misconduct, in my respectful submission, one takes the parties as one finds it. They have to live at a reasonable standard and do what they do. That’s what the husband has done.”
23. Although the case now presented more clearly, and accurately, agitates the issue thus raised by Mr Mater at trial, we are satisfied that it does not offend the principle emerging from the decisions of the High Court discussed in Coulton v Holcombe (1986) 162 CLR 1 that generally an appellate court will not entertain a ground of appeal that could have been clarified by calling evidence at the trial. In our view there is some substance in the ground of appeal raised by the husband. There is a significant element of double dipping arising out of the inclusion of this asset in its entirety and there is an inappropriate treatment of it. The evidence was clear that there was a tax liability arising out of the period of cohabitation which was met by the husband, either from income or capital after separation. This matter could be treated either by increasing the liabilities in the pool of assets or alternatively reducing the add-back by the equivalent sum.
Further, the evidence disclosed that there were monies expended by the husband in the acquisition of his share of the property at QP as well as monies spent by the husband in the acquisition of Ms M’s share. At least insofar as the monies could be fairly attributed towards the acquisition of the husband’s share they should also be considered as having been disposed of from funds received by the husband and already accounted for in the pool of assets. To the extent they were included both in the add-back and in the value of the asset that amounts to clear double dipping. The evidence relating to the purchase was that the husband had spent $110,000 by way of deposit plus say $60,500 on stamp duty, a total of $170,500. Of that sum $85,250 was referable to the acquisition of the husband’s interest in the QP property.
25. In our view the evidence relating to those two items of expenditure was clear and should have reduced the add-back component.
There is significant room in our view for entertaining the argument that save for the equivalent sum of $85,250 that was spent by the husband in acquisition of Mr M’s share of the QP property, the rest of the $239,000 should have been considered to have been properly accounted for in the sense that there was no assertion made that it had not been otherwise absorbed into the day to day living expenses of the parties. However, given the capacity of the husband to have provided the Court with better particulars than he did about it, particularly having regard to the fact that he was a chartered accountant, there was room for the trial Judge to remain somewhat sceptical and to treat it as his Honour said “more boldly than the husband might have wished”.
There is a distinction between cases where the inadequacy of disclosure suggests the likelihood of undisclosed assets or income, and those where, despite such inadequacy, there is no real basis for so concluding. The present case falls into the latter category, as the quantum and fate of the inadequately disclosed funds were not in doubt at the conclusion of the trial, and the husband's inadequate disclosure was not suggested to have been deliberate, or calculated to deceive. On the evidence before us, the husband stood only to benefit from a full and frank disclosure of his dealings with the $239,000. Whilst, particularly as the case was conducted before him, we can understand the trial judge's approach to these funds, we are not persuaded that a "bold" approach to them justified the conclusion he reached with respect to them. The husband should at least have been given credit to the extent of the two sums that we have already identified, namely the income tax and the husband’s expenses in acquiring his interest in the QP property, either by increasing liabilities or reducing the add-back. Either way the pool of assets requires to now be reduced by the sums of $56,226 and $85,250, at a total of $141,476.
Accordingly we find that the net asset finding by the trial Judge is in error and that the net asset pool should have been held to be $1,493,292.
Absent any other change arising from the grounds of appeal this would have the effect of reducing the wife’s entitlement by 75 per cent of the amount deducted from the pool namely 75 per cent of $141,476 which equals $106,107.
To give effect to that reduction we would order that paragraph 7 of the orders made by the Honourable Justice Rowlands on 12 July 2005 be varied by substituting for the figure $122,197 the figure of $16,090.
The current tax liability
The husband had invited the trial Judge to include amongst the liabilities of the parties his current income tax liability of $160,000. His Honour said:
“31. The husband estimates his current taxation liability at some $160,000. The annual obligation of tax is payable in relation to income (and of course normally from income) may be paid well after the end of the relevant financial year in which it accrues for a person in the position of the husband. However normally one would expect it to be paid within the following twelve months or so.
32. Again, recalling when the parties separated (2001), it appears inappropriate to include this recurring expenditure among the matters for consideration between the parties here. I do not include the $160,000 among the liabilities for consideration.”
In support of the ground of appeal that his Honour erred in disallowing the debt for the purposes of creation of the pool of assets for division between the parties, the written submissions on behalf of the husband read as follows:
“The income that has attracted the tax is in part reflected in the asset pool that now exists. It is not hard to conclude that the pool would be much smaller had it not been earned and received. It has also at least in part supported the wife. It is submitted that the debt should be brought to account in the pool.”
Mr Stewart who appeared on behalf of the husband in the appeal before us did not further elaborate upon the grounds set out in Mr Mater’s written submissions.
The trial took place some 3½ years after the parties had separated. The tax debt claimed related to a period well after the conclusion of cohabitation. The husband was in receipt of an income in the vicinity of $700,000 plus. He was in the habit of paying his tax in arrears by paying it from the current year’s income. The evidence disclosed that not only was the husband providing maintenance for the wife in the sum of around about $60,000 per annum from post-tax income but he was also meeting the outgoings referable to the mortgages and borrowings relating to property which he owned together with his present wife. It would clearly have been inappropriate for the trial Judge to have included at the expense of the applicant wife in these proceedings the tax referable to monies utilised by the husband in the acquisition or support or conservation or improvement of assets belonging to his present wife.
In the circumstances, we perceive no error in an exercise of discretion by the trial Judge in determining that the liability sought to be added back into the pool of assets was too remote to the joint purposes of the parties to be a liability that the wife should be required to contribute to.
The assessment of contributions
In arguing that the trial Judge should have assessed the contributions of the parties to the pool of assets as presented to the trial Judge at 50:50 rather that 55:45 in favour of the wife it was submitted that there were two bases upon which it would be appropriate to meet that conclusion, namely that the husband’s high earning capacity in the last few years of the marriage should be seen to offset any introduction of capital by the wife’s parents during the course of the relationship, and secondly that the assets acquired from post-marriage, namely the interest in the QP property and to a lesser extent the property in a western suburb were assets acquired post-separation to which the wife could not be said to have made any contribution. The total equity in the QP and western suburb properties attributed to the husband was approximately $190,000. Most of the $190,000 equity is to be found in the equity in the QP property.
Once an allowance is made for the acquisition of the QP property from jointly owned funds by reducing the amount notionally added back in for the [accountancy firm] capital distributions then the argument that the wife has not contributed towards the acquisition of the QP property cannot stand. The deposit and stamp duty payments relating to the QP property came from monies to which the wife and the husband were jointly entitled or had at least been joint contributors and accordingly any argument to suggest that the wife had not made any contribution towards the property is no longer valid.
His Honour had rejected the proposition put that the husband’s superior earning capacity effectively balanced out the contributions that came from the wife’s parents. This was a matter that was within the proper exercise of his Honour’s discretion. We see no appealable error arising out of the manner in which his Honour treated the contributions once the adjustment is made to the capital account issue.
In a pool of assets now reduced to approximately $1.5 million, the 10 per cent differential created by contribution of 55:45 in favour of the wife represents an additional sum of $150,000 to the wife by reason of contributions made by her or on her behalf. Given the finding that the wife’s parents provided over $200,000 to the parties throughout the course of the marriage, it cannot be said that the determination by the trial Judge to make an adjustment in the wife’s favour of 10 per cent for contribution was outside the realms of the generous discretion which vests in the trial Judge.
Spousal maintenance
The issue here related to the order that after May 2007 the husband should pay $750 per week maintenance for the wife until further order or agreement of the parties.
It was submitted that the wife’s financial circumstances at the end of the two year period ought predictably be such that she would then be in a position to maintain herself adequately or alternatively if she was not in such a position then she would be at liberty to bring an application for spousal maintenance either by bringing the application during the two year period for an increase in the time for which it is to run or alternatively recommencing an application under s 44(3) of the Family Law Act 1975 seeking to extend the time within which she be at liberty to bring a maintenance application.
Emphasis was placed on s 81 of the Family Law Act which reads:
“In proceedings under this Part, other than proceedings under section 78 or proceedings with respect to maintenance payable during the subsistence of a marriage, the court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.”
The trial Judge took the view that the wife’s circumstances may change but he was not prepared to predict the certainty with which they would change. As set out above he said:
“71. When the wife is prospering, and/or her financial situation improves for other reasons, this latter order may well be discharged or modified. Speculation in relation to that may not be helpful here. It may, however, be prudent for the wife to take into account that any “strategic” arrangement organised by her with her fragile mother to avoid naming the wife as her beneficiary may well be viewed with some disdain if the maintenance issue required a further hearing before the Court.”
The issue of the applicability of s 81 in these circumstances was discussed by the Full Court in DJM v JLM (1998) FLC 92-816; (1998) 23 Fam LR 396 where Baker, Kay and Morgan JJ said:
20.5 Insofar as any reliance could properly be put on s 81, that section needs to be read subject to the power of the Court under s 74 to make such order as it considers proper for the provision of maintenance and the proceedings with respect to the maintenance of a party to the marriage. The requirement under s 81 is that [emphasis added]:
'' In proceedings under this Part ... the Court shall, as far as practicable , make such orders as will finally determine the financial relationship between the parties of the marriage and avoid further proceedings between them.''
20.6 This is a requirement that any such step be ''as far as practicable''. If it is not practicable to make orders which are ''proper'' in accordance with s 74, then the requirements of s 81 are still met by the provision of ongoing periodic maintenance in an appropriate case.
20.7 In Cantarella and Cantarella (1976) FLC ¶90-056 at 75,232; (1976) 1 Fam LR 11,483 at 11,487 the Full Court observed:
''Section 81 appears to encourage the making of orders for the transfer of property or payment of a lump sum, rather than periodical payments which can be varied under s 83.''
20.8 We would add that the section does not mandate the making of lump sum orders, nor does it preclude the making of a maintenance order. We accept that the statement in Dench and Dench (1978) FLC ¶90-469 at 77,402; (1978) 6 Fam LR 105 at 107 by Evatt CJ and Watson SJ is correct when their Honours said:
''Section 81 casts a duty on the court as far as practicable to make such orders as will finally determine the financial relationships between the parties and avoid further proceedings. This provision does not override ss 72, 75 or 79 and it does not come into play unless the court has determined that it would be just and equitable to make a property order under s 79 or that it would be proper, having regard to ss 72 and 75 to make a maintenance order in favour of one party (Haselhurst , Full Court, 5 October 1976). At that stage, s 81 may have a bearing upon the form of the order; it must be considered in the light of s 83, under which maintenance orders may be modified, and in the light of Taylor and Taylor ((1977) FLC ¶90-226 at p 76,187 ) which determined that orders made under s 79 may not be varied.''”
Given the age of the parties here, given the wife’s requirements to care for her mother for the foreseeable future and given the very large amount of income earned by the husband and the comparatively modest amount of maintenance being ordered, we are of the view that it was appropriately within the discretion of the trial Judge to leave the matter open ended, subject only to the addition of the consent order that at least the wife should be under an obligation to advise the husband of matters peculiarly within her knowledge. Her entitlement to maintenance is dependent upon her being unable to adequately support herself. The husband will be aware of any changes in his financial circumstances which may affect his ability to maintain her but he would not necessarily be aware of any changes in her financial circumstances which would render her no longer entitled to maintenance.
In the circumstances we think that it is appropriate to make the orders by consent but that otherwise the appeal, insofar as it relates to spousal maintenance, should be dismissed.
Costs
The parties submitted that in the event the appeal was partially successful that it would be appropriate that there be a costs certificate. We are of the view that there was an error of law in that the trial Judge failed to pay proper attention to the evidence relating to the disposition of the [accountancy firm] capital sum and that accordingly the appeal has been successful on the question of law and it would be appropriate that certificates be granted to each party.
Orders
1. The appeal be allowed in part.
2. Paragraph 7 of the orders made by the Honourable Justice Rowlands on 12 July 2005 be varied by substituting for the figure $122,197 the figure of $16,090.
3. That within 14 days of any of the following events occurring the wife, by her Solicitor, will notify the husband, by his Solicitor, in writing of:
(a) the death of [the wife’s mother];
(b)the appointment and identity of the firm of Solicitors acting for the Administrators of the Estate;
(c)the grant of administration of the Estate of [the wife’s mother];
(d)the entering into of a contract for the sale of the property known as and situate at [beachside suburb] prior to the death of [the wife’s mother].”
4. The Court grants to the appellant a costs certificate pursuant to the provisions of s.9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
5. The Court grants to the respondent a costs certificate pursuant to the provisions of s.6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
I certify that the preceding
47 paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Court.
A.C.
Associate
Date: 14/02/2006
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