Hobson & Hobson
[2020] FamCAFC 251
•9 October 2020
FAMILY COURT OF AUSTRALIA
| HOBSON & HOBSON | [2020] FamCAFC 251 |
| FAMILY LAW – APPEAL – PROPERTY – Appeal against final property adjustment orders – Where overwhelming disparity of initial contributions made by husband – Where both parties made equal contributions during cohabitation – Error in assessment of contribution based entitlements – Consideration of s 75(2) factors – Where a different percentage division is insufficient to establish appealable error – Error in the application of s 75(2)(k) factors – Where an adjustment of four per cent did not adequately compensate the wife for the disparity in earning capacity between the parties – Inadequate reasons – No explanation as to why the outcome arrived was found to be just and equitable – Appeal allowed – Submissions sought as to remission or re-exercise. |
| Family Law Act 1975 (Cth) ss 75(2), 79, 117 Federal Proceedings (Costs) Act 1981 (Cth) |
| Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40 Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148 CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 67 Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154 Farmer and Bramley (2000) FLC 93-060; [2000] FamCA 1615 Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63 House v The King (1936) 55 CLR 499; [1936] HCA 40 Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78 Lovine & Connor and Anor (2012) FLC 93-515; [2012] FamCAFC 168 Mallet v Mallet (1984) 156 CLR 605; [1984] HCA 21 Marsh & Marsh (2014) FLC 93-576; [2014] FamCAFC 24 Metwally v University of Wollongong (1985) 60 ALR 68; [1985] HCA 28 Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17 Pierce v Pierce (1999) FLC 92-844; [1998] FamCA 74 Singerson & Joans [2014] FamCAFC 238 Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52 Steinbrenner & Steinbrenner [2008] FamCAFC 193 Sun Alliance Insurance Ltd v Massoud [1989] VR 8 |
| APPELLANT: | Ms Hobson |
| RESPONDENT: | Mr Hobson |
| FILE NUMBER: | MLC | 6684 | of | 2018 |
| APPEAL NUMBER: | SOA | 60 | of | 2019 |
| DATE DELIVERED: | 9 October 2020 |
| PLACE DELIVERED: | Cairns |
| PLACE HEARD: | Melbourne (via video link) |
| JUDGMENT OF: | Strickland, Ainslie-Wallace & Tree JJ |
| HEARING DATE: | 5 May 2020 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 2 September 2019 |
| LOWER COURT MNC: | [2019] FamCA 564 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Brown QC with Mr Matta |
| SOLICITOR FOR THE APPELLANT: | Coote Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Puckey with Dr Smith (Direct brief) |
Orders
The appeal be allowed.
Within twenty-one (21) days of these orders, the parties are to make file and serve written submissions as to whether the proceedings should be remitted for rehearing, or the discretion re-exercised, and in the latter event, the submissions should identify what if any further evidence will be sought to be adduced, and set out the submissions that will be made on the basis of that evidence.
Within fourteen (14) days of the receipt of the submissions of the other party, each party is to make file and serve any submissions strictly in reply to those submissions.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hobson & Hobson has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SOA 60 of 2019
File Number: MLC 6684 of 2018
| Ms Hobson |
Appellant
And
| Mr Hobson |
Respondent
REASONS FOR JUDGMENT
Introduction
On 25 September 2019, for reasons which had been delivered on 2 September 2019, the primary judge divided the property of the parties such that Mr Hobson (“the husband”) was entitled to 66 per cent of the net asset pool, and Ms Hobson (“the wife”) 34 per cent. That outcome was effected by the husband being obliged to pay to the wife the sum of $2,198,195 by a specified date, but otherwise the parties retaining the real and other property in their names or under their control (save in relation to one motor vehicle, which the husband was required to transfer to the wife). Further, there was an amount of $671,482 allocated to the wife in respect of the husband’s interest in a self-managed superannuation fund.
It is from those orders that the wife appeals. The appeal is resisted by the husband. For reasons which follow, the appeal must be allowed.
Background
At the time of trial, the wife was 41 years of age, and a professional; the husband was a 56 year old professional.
The primary judge found that the parties’ relationship started in about June 2003, and they commenced cohabitation in August 2004, when the husband was 41 years of age, and the wife was 26 years of age.
The parties married in 2006, and in due course, their twin children were born in 2007. As at the time of trial, the twins were 12 years of age.
During the course of the relationship, the wife was primarily responsible for the care of the children. Although prior to the birth of the twins she had been in full time employment, the wife has never worked full time since, initially being on an extended period of maternity leave, and thereafter working on a part time basis.
The parties finally separated on 31 October 2015, having cohabited for something in the order of 10 years and 10 months.
After separation, the wife left the former matrimonial home. The children, however, remained living there, and it was not in contest that thereafter not only was the husband their primary carer, but he has been almost exclusively financially supporting them as well.
As at the time of trial, the husband remained working as a professional. Whilst his 2017/2018 income was $1,535,038, he anticipated that for the year ending 30 June 2019, it would reduce to between $1.1 to $1.2 million. For her part, the wife was in part time employment as a professional, on an income of approximately $120,000 per annum. Both of the parties were in good health.
The trial and the primary reasons for judgment
At trial, the husband contended that the parties’ contribution based entitlements should be assessed at 80 per cent in his favour, with an adjustment of no greater than five per cent to the wife as a result of the relevant matters listed in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”).
For her part, the wife conceded that the parties’ contributions should be assessed unequally, being 60 per cent in the husband’s favour, but contended that there should be an adjustment of 10 per cent in her favour reflective of s 75(2) factors (wife’s written submissions filed 5 July 2019, paragraph 118).
In her Honour’s reasons for judgment, the primary judge identified that the net value of the parties’ present assets was $12,922,908 and there was superannuation of $2,309,202 (at [19]). Her Honour then made findings in relation to some slender disputes between the parties, including whether or not there should be an addback for the wife’s legal fees which had been funded out of a post separation inheritance, and whether or not the expected costs of completing a recent purchase of a new home for the husband should be regarded as a liability. Additionally, her Honour determined a claim by the husband that Capital Gains Tax liability should be factored into the value of a particular property. No challenge is made to any of those determinations.
It was not in dispute that, at the commencement of cohabitation, the wife had few assets, whereas the husband was financially established. Particularly, the husband owned a residential property at Suburb K in Town NN and another in Town EE; the former was rented, whereas the husband lived in the latter. Whilst there was a mortgage secured against those properties, there was an offset account which resulted in the net indebtedness under the mortgage at a little over $220,000. In addition, the husband controlled a family trust with significant assets, and owned a substantial shareholding and a luxury motor vehicle. The primary judge concluded that “the quantum of the husband’s initial contribution was something less than, but in the vicinity of $2,578,518” (at [42]). In addition, he had superannuation with a withdrawal benefit of $330,538 (at [43]).
Before us, no challenge was made to her Honour’s conclusions in relation to there being some disparity of initial contributions, nor could any challenge seriously be made to it, it is plain that a far greater financial contribution was made by the husband. Rather it was the extent of that disparity as reflected in the final property division which was challenged.
Both parties conceded that they had made equal contributions during cohabitation. That said, there was an attempt by the husband’s counsel to resile from that during the course of their trial submissions. However, the primary judge made a finding of equality of contribution by each of the husband and the wife during the period of their cohabitation (at [50]). To the extent that, undercover of this ground, that trial concession was sought to be revisited, it must be rejected (Metwally v University of Wollongong (1985) 60 ALR 68).
Her Honour then turned to consider post separation contributions, and noted at [57] of her reasons that:
In the post separation period the husband had the benefit of his considerable income relative to the wife, and of the asset holdings of the parties albeit that required him to attend to repayment of debt in relation thereto. The husband:-
a)paid the deposit on the T Street property of $730,000 from his savings;
b)further reduced the parties net mortgage financed position by $929,113;
c)acquired the Vehicle 1 and Vehicle 2;
d)made a total of $95,000 in further superannuation contributions to his own fund/s;
e)provided monies to the wife totalling $42,000 up until early August 2017;
f)paid all expenses in relation to the former matrimonial home and the L Street property, including all rates, utilities, land tax, insurance and maintenance;
g)paid all of the costs and expenses of the children apart from day-to-day living expenses when the children were with the wife. These expenses are estimated to exceed $100,000 in 2020; and
h)paid for comprehensive family health cover for the children.
At [58], her Honour continued:
In the post separation period, the wife invested some part of her inheritance monies in the sum of approximately $1,071,000 and there would have been an increase in her superannuation entitlements, although in a sum unknown.
Having traversed these matters, the primary judge did not then articulate any conclusion in relation to contribution based entitlements, but proceeded to consider s 75(2) factors. Her Honour determined that “[t]he husband’s income and earning capacity vastly exceeds that of the wife” and rejected the husband’s argument that the wife was “under exercising” her earning capacity (at [62]). The primary judge noted that the husband will in the future “solely and generously” financially provide for the children’s schooling and extracurricular activities (at [63]) and that the husband’s superannuation position was vastly superior to that of the wife’s (at [65]).
Her Honour then concluded:
68.It is just and equitable for the Court to make an adjustment order.
69.The global approach in respect of the division of the parties’ property is appropriate in the circumstances of this case.
70.The Court determines that taking into account the significant disparity in the parties initial contributions and to a far lesser extent the disparity in the parties’ contributions after separation, the contributions should be assessed as 30 per cent to the wife and 70 per cent to the husband.
71.The husband will earn income considerably in excess of the wife including income from his investments. He will however have the financial support of the children to a far greater extent than the wife, and is nearly 15 years older than the wife.
72.Taking the s.75(2) of the Act matters into account a further adjustment of 4 per cent to the wife is appropriate.
73.The wife will receive 34 per cent of the net assets of $12,922,908 and superannuation of $2,309,202 (total $15,232,110). That is the wife will receive $5,178,917.40 of the net assets.
74.It is just and equitable to make orders that reflect these reasons. The parties will now have an opportunity to propose orders which shall implement these findings.
(As per the original) (Footnote omitted)
The Appeal
The wife filed a Notice of Appeal on 23 October 2019 raising three grounds of appeal.
Ground 1
The first ground asserts as follows:
The [p]rimary [j]udge erred in assessing the contribution-based entitlements as to 70% to the [h]usband and 30% to the [w]ife by:
a)applying excessive weight to the [h]usband’s initial contribution and not applying any, or any adequate weight, to the [w]ife’s financial and non-financial contributions; and
b)arriving at an adjustment that was manifestly unjust and not reasonably open on the evidence.
In order for this ground to succeed, the wife would need to establish error of the kind discussed in House v The King (1936) 55 CLR 499 at 504–505, where 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.
In the context of family law proceedings, this test has been long acknowledged (see for example, Gronow v Gronow (1979) 144 CLR 513 at 519–520 per Stephen J; Norbis v Norbis (1986) 161 CLR 513 at 540 per Brennan J; CDJ v VAJ (1998) 197 CLR 172 at 230–231 per Kirby J).
The husband brought into the relationship assets worth over $2.5 million. On the other hand, the wife brought in assets of negligible value. Further, the substantial assets which the husband brought into the relationship at its commencement continued without change, and remained owned by him at the end of the relationship, without him having drawn much, if any, of the parties’ resources during the course of the relationship, and indeed having contributed income. Moreover post separation, the husband’s contributions to the asset pool exceeded those of the wife, in that he accumulated the further assets as discussed earlier at [16] of these reasons.
The primary judge was obliged to undertake a holistic assessment of the parties’ contributions across the course of the relationship and in the post separation period to the point of assessment (see Pierce v Pierce (1999) FLC 92-844; Singerson & Joans [2014] FamCAFC 238; Dickons v Dickons (2012) 50 Fam LR 244; Marsh & Marsh (2014) FLC 93-576; Lovine & Connor and Anor (2012) FLC 93-515).
The lack of any challenge to the conceded disparity in both initial and post separation contributions, which significantly favoured the husband, adequately supports the contribution based entitlements as found by the primary judge. The fact that we may have chosen a different percentage division is insufficient to establish appealable error, unless it is plainly unreasonable, unjust or wrong. We are not so persuaded.
Ground 1 of the appeal is not made out.
Ground 2
The second ground asserts:
The [p]rimary [j]udge erred in applying section 75(2) of the Family Law Act 1975 (Cth) in arriving at a loading of 4% by finding, as she did, that “…in a case where there is a significant capital base available to each party, s.75(2) of the Act adjustments are less significant”.
The wife contends that the primary judge misconstrued an aspect of Jabour & Jabour (2019) FLC 93-898 (“Jabour”), when (at [64]) her Honour concluded:
The parties are each likely to have a significant capital base following an adjustment of their property interests. As was observed by the Full Court in [Jabour] at [134], in a case where there is a significant capital base available to each party, s.75(2) of the Act adjustments are less significant.
(Citation omitted)
Correctly the wife contends at paragraph 25 of her Summary of Argument filed on 18 February 2020:
However, what was actually observed by the Full Court in Jabour at paragraph 134 is as follows:
134. We take into account the following:
…
· the primary judge did not record that any adjustments were sought under s 75(2) of the Act and did not consider that section. No challenge was made to that approach and we shall proceed on the basis that this section requires no consideration by us. In any event, given the amount of property to be retained by each party, it is not at all obvious why any further adjustment would be required (even accepting that the husband has had some difficulties with his health recently).
(As per the original) (Emphasis in original)
We accept that, to the extent the primary judge discerned some general principle from Jabour that the significance of s 75(2) factors diminish in a case where each party, on a contributions based assessment, are entitled to a significant property settlement, her Honour was in error.
Under the orders which the primary judge made, the husband left the relationship with not merely two thirds of the parties’ property, but an earning capacity which dwarfed that of the wife by a magnitude of at least ten times. Whilst accepting that the purpose of a s 75(2) adjustment is not to achieve equality in the financial strengths of the parties (Mallet v Mallet (1984) 156 CLR 605 at 638), nonetheless the overarching obligation is to achieve a just and equitable division of the property.
At paragraphs 28–30, of her Summary of Argument, the wife emphasised the practical consequences to her of the outcome of the primary judge’s orders:
28.In her Financial Statement, the Wife deposed to having an income of $2,267 per week and expenses of $5,066 per week. However, it is acknowledged that the payment of $2,000 in rent would cease upon the Wife purchasing a property. Even excluding the Wife’s expenditure on rent of $2,000 per week, this would leave the Wife with expenses of $3,066 leaving a shortfall of $739 per week. By contrast, the Husband deposes to having an income of $23,955 per week with expenditure of $18,779 leaving a surplus of, at least, $5,167 per week.
29.None of the Wife’s evidence regarding her expenses was the subject of any challenge. In fact, the Primary Judge found that “the Wife’s expenditure has not been unreasonable”. It is common ground that the parties enjoyed a high standard of living during the relationship. In his closing written submissions, Counsel for the Husband submitted:
As the Wife volunteered in cross-examination, they “had a good lifestyle”. They lived in multi-million dollar homes, they had a beach house, they drove European cars, the Wife Vehicle 1 and the Husband Vehicle 3, they went on numerous domestic and overseas holidays, their children were educated in private schools, they employed a house cleaner. Given the Husband’s income, there has been no suggestion that they were ever short of cash. [Citations omitted]
30.Paradoxically, that submission highlights this ground of appeal. On any view, the Husband will be able to continue that lifestyle on his income whilst holding assets of $8,529,119 as well as $1,524,073 in superannuation and an income surplus of, at least, $5,167 per week. It is submitted that the evidence could not support a finding that the Wife would be able to maintain a lifestyle the family had previously enjoyed, let alone the other relevant considerations pursuant to s 75(2) to which these submissions will turn shortly, by making an adjustment of 4 per cent. By way of example, in closing submissions, the Wife indicated that she needed to rehouse herself. Whilst there was no evidence about the cost of such housing (on the basis that the Wife sought an adjustment of 50 per cent of the assets) the evidence regarding the parties’ standard of accommodation was:
a.the former matrimonial home was purchased in 2010 for $4,250,000, valued at $5,900,000 at trial and sold for $6,000,000 following trial.
b.The husband had purchased his current residence in April 2019 for $7,300,000 with stamp duty payable in the amount of $405,224; a total purchase cost of $7,705,224.
(As per the original) (Footnotes omitted)
Much of that outcome ensues from the parties’ disparate earning capacities. Plainly her Honour was mindful of that (at [62]) as s 75(2)(b) of the Act required. However s 75(2)(k) of the Act mandates that in considering any adjustment under s 75(2) “the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration” must also be taken into account. There can be no doubt that the wife’s case before the primary judge was expressly structured by reference to that consideration. Her written submissions to the primary judge filed on 5 July 2019 at paragraph 112 said:
The wife has worked around the children’s requirements. She sacrificed her potential to pursue a more lucrative career. The husband agreed with the proposition that the wife will never be in the same position as him from an income perspective.
(Emphasis added)
Indeed at trial, it was not seriously in contention that the wife had made a significant contribution to the husband’s earning capacity, by sacrificing her own career advancement, to say nothing of her participation in the labour market generally. Particularly her sacrifice had enabled the husband to achieve appointment as a self-employed professional, with the attendant opportunity – in this case realised – for an increase in income which that might bring. The simple fact is that the husband’s earning capacity had been built up during the parties’ relationship at the expense of the wife.
A clearer example of a need for real weight to be given to s 75(2)(k) of the Act is difficult to envisage. The fact that the wife, on a contributions basis, was nonetheless entitled to a significant sum, did not diminish that need. However as we shall shortly revisit, no reference to s 75(2)(k) of the Act, or indeed the substance of the wife’s case advanced by reference to it, appears in the primary reasons for judgment.
Here, the magnitude of the adjustment of four per cent, reflected in actual dollar terms, is $609,284.40 (including superannuation). To put that in perspective, that is less than one year’s after tax income of the husband, even assuming that his income was only $1.2 million. It is markedly less than the husband’s after tax income in 2017/2018.
Particularly given the prominent position in the primary judge’s reasons for judgment in relation to s 75(2) considerations which the erroneous interpretation of Jabour occupies, we are satisfied that that error likely caused her Honour’s attention to be significantly deflected from s 75(2)(k) of the Act.
It therefore follows that the second ground of appeal succeeds.
Ground 3
The third ground asserts as follows:
The [p]rimary [j]udge erred by failing to provide any, or any adequate reasons, as to how or why it was just and equitable to adjust the parties’ legal and equitable interests, inclusive of superannuation, as to 66% to the [h]usband and 34% to the [w]ife.
The test for the adequacy of reasons has been articulated in a number of cases. In Bennett and Bennett (1991) FLC 92-191 at 78,266, the Full Court adopted the test formulated by Gray J in Sun Alliance Insurance Ltd v Massoud [1989] VR 8 at 18 as follows:
The adequacy of the reasons will depend upon the circumstances of the case. But the reasons will, in my opinion, be inadequate if:–
(a)The appeal court is unable to ascertain the reasoning upon which the decision is based; or
(b)justice is not seen to have been done.
The two above stated criteria of inadequacy will frequently overlap. If the primary Judge does not sufficiently disclose his or her reasoning, the appeal court is denied the opportunity to detect error and the losing party is denied knowledge of why his or her case was rejected.
We have already set out the entirety of the relevant conclusions by the primary judge at [19] of these reasons. However they contain no explanation as to why the outcome arrived at by her Honour was found to be just and equitable. More specifically, there is no advertence to the wife’s arguments advanced under s 75(2)(k), nor any explanation as to what, if any, regard or weight had been had to them.
In Stanford v Stanford (2012) 247 CLR 108 at [36], the plurality of the High Court said as follows:
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds…
(Footnote omitted)
However, even bearing that in mind, the incantation at [74] of the primary judge’s reasons for judgment that “[i]t is just and equitable to make orders that reflect these reasons” is not of itself an explanation for why that is so. Whilst it is inevitably the case that there is a “leap” between qualitative and quantitative assessments (Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234]) and that it is probably impossible to “ever explain exactly why a particular figure, or more usually a percentage, is eventually arrived at” such that “the reasons for judgment requirement ultimately becomes impossible of total fulfilment in the jurisdiction under s 79” (Farmer & Bramley (2000) FLC 93-060 at [49] per Finn J), nonetheless some explanation is required.
Therefore, the third ground is made out.
Outcome
It follows that the appeal succeeds. As foreshadowed to the parties at the hearing of the appeal, we will take written submissions as to whether the matter is capable of, and should be, the subject of a re-exercise of the s 79 discretion by us, or should be remitted for rehearing. If the former is open, we are mindful that we presently have no up-to-date financial material (Allesch v Maunz (2000) 203 CLR 172) and particularly in light of the fact that a significant part of the husband’s assets comprise shares and real property, it is quite possible that those values will have significantly, and perhaps controversially, changed since the conclusion of the trial in 2019. We shall order a timetable for those submissions, which should identify what, if any, further evidence will be sought to be adduced in the event that the discretion can be re-exercised, and set out the submissions that will be made on the basis of that evidence.
Costs
In the event that the appeal succeeded, the wife sought an order that the husband pay her costs. In significant part, that was because she contended it was the husband who had led the primary judge into error in relation to her Honour’s statement about Jabour, which we have found established under Ground 2. However whilst that might be so, since the appeal succeeds also on the basis of inadequacy of reasons, the weight deserved by the argument is considerably reduced.
We are not satisfied that there are circumstances justifying a departure from the general rule that parties in this jurisdiction should bear their own costs (s 117(1) of the Act). However because it has succeeded on a question of law, it is appropriate that both parties have costs certificates under the Federal Proceedings (Costs) Act 1981 (Cth) in relation to the appeal.
Whether certificates under that Act should also issue for any re-hearing will need to await our determination as to whether the matter should be remitted or not. We shall therefore generally defer making any orders for costs certificates until the question of remission is determined.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Ainslie-Wallace & Tree JJ) delivered on 9 October 2020.
Associate:
Date: 9 October 2020
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