J & J

FAMILY COURT OF AUSTRALIA

J & J

[2006] FamCA 951

FAMILY LAW – APPEAL – PRACTICE AND PROCEDURE – Whether the trial Judge erred in refusing the husband’s application for an adjournment and proceeding with the hearing on an undefended basis

FAMILY LAW – APPEAL - EVIDENCE – ADMISSIBILITY - Whether the trial Judge erred in admitting into evidence medical reports relating to the wife’s health and future earning capacity where those reports were not supported by affidavits – Whether the trial Judge erred in admitting evidence tendered on behalf of the wife relating to the estimated value of the husband’s tools of trade

FAMILY LAW – APPEAL – PROPERTY – Whether the trial Judge erred in determining the assets available for distribution between the parties – Whether the trial Judge erred in failing to make allowance for the Capital Gains Tax for which each party may be liable upon sale of the parties’ investment properties– Whether the property settlement orders made by the trial Judge were just and equitable

FAMILY LAW – APPEAL – APPLICATION TO ADDUCE FURTHER EVIDENCE – Application by the husband to adduce further evidence relating to his possible Capital Gains Tax liability

FAMILY LAW – APPEAL – COSTS OF APPEAL

Evidence Act 1995
Family Law Act 1975

Squire v Rogers (1979) 27 ALR 330

APPELLANT: J

RESPONDENT: J

FILE NUMBER: TVF1325 of 2003

APPEAL NUMBER: NA43 of 2005

DATE DELIVERED: 28 September 2006

PLACE DELIVERED: Canberra

JUDGMENT OF: Bryant CJ, Finn and Coleman JJ

HEARING DATE: 4 August 2005

LOWER COURT JURISDICTION:  Family Court of Australia
LOWER COURT JUDGMENT DATE:  24 May 2005
COUNSEL FOR THE APPELLANT:                  Mr Galloway
SOLICITOR FOR THE APPELLANT:               Chris Trevor & Associates
COUNSEL FOR THE RESPONDENT:               Mr Arnold
SOLICITOR FOR THE RESPONDENT:           Lyons O’Shea & Co

Orders

That the appeal be allowed.
That Order 4 of the orders made by the Honourable Justice Bell on 24 May 2005 be amended to read as follows:
4.That from the proceeds of sale of the assets in Paragraph 1, the following matrimonial liabilities be met:-
i.         ANZ loan on 24 [A Street]
ii.         ANZ loan on 1 [C Street]
iii.        ANZ loan on 1 [C Street]
iv.        CBA loan on [Gold Coast unit]
v.        Westpac car loan
vi.        Outstanding rates on all matrimonial properties
…
viii.      Joint Mastercard debt with Commonwealth Bank of Australia
ix.All costs (including agents’ fees and legal fees) associated with the sales in paragraph 1.
That Order 5 of the orders made by the Honourable Justice Bell on 24 May 2005 be amended to read as follows:
5.That the net proceeds of sale after payment of the debts be distributed between the husband and the wife so that the husband and wife received 25% and 75% of the nett matrimonial assets respectively where the husband and wife already hold the following:-
Wife  Husband
18 [A Street]               $192,500.00    Tools of Trade             $29,235.00
Bravo  $17,000.00     Nissan  $15,000.00
Superannuation $68,000.00
Household contents     $10,000
$287,500.00  $44,235.00
Provided that from the husband’s share of the proceeds the wife is entitled to retain all costs awarded to her in these proceedings.
That there be no order as to costs in relation to the appeal.

FAMILY COURT OF AUSTRALIA AT BRISBANE

APPEAL NUMBER: NA43 of 2005

FILE NUMBER: TVF1325 of 2003

Appellant Husband

And

Respondent Wife

REASONS FOR JUDGMENT

introduction

This is an appeal by the husband against orders for property settlement made on 24 May 2005 by Bell J, ultimately on an undefended basis, in proceedings between the husband and the wife.
The husband’s appeal is directed not only to the substantive orders which had the effect of dividing a pool of property valued at just under $685,000 in the proportions of 75 per cent to 25 per cent in favour of the wife, but also to his Honour’s refusal to grant the husband an adjournment of the hearing on 24 May 2005 and to his decision to proceed to hear the wife’s application on an undefended basis.

the procedural history

We understand the following history of the proceedings to be uncontroversial.
The husband and the wife had married in October 1997 and separated approximately six and a half years later in February 2003.
On 31 December 2003 the wife filed an application in the Rockhampton Registry of this Court seeking final orders for property settlement whereby she would receive 75 per cent of the net assets of the parties and the husband the remaining 25 per cent. At the same time the wife filed a financial statement.
On 20 April 2004 directions were made by a Deputy Registrar for the husband to file a response and a financial statement.
On 3 June 2004 a notice of address for service was filed on behalf of the husband.
A conciliation (‘Order 24’) conference was held on 15 June 2004 but was adjourned by consent of the parties to enable valuations of real estate to be obtained.
On 13 September 2004 a Deputy Register ordered that the wife’s application be set for hearing on an undefended basis before a Judge at Rockhampton on 18 October 2004. This order was apparently made because of the husband’s failure to file the documents which he had been ordered to file.
On 27 September 2004 the wife filed an updated financial statement and an affidavit by a valuer. The wife’s affidavit of evidence in chief was filed on 5 October 2004.
On 6 October 2004 a response and financial statement were filed on behalf of the husband. In his response the husband sought orders for the parties’ property to be divided equally between himself and the wife.
On 20 October 2004 the husband filed an application seeking, in effect, that the matter not be determined on an undefended basis. Apparently in support of that application, the solicitor for the husband filed an affidavit explaining that his client’s non-compliance with directions had been occasioned by his employment.
On the following day (21 October 2004), orders were made by Monteith J sitting in Rockhampton adjourning the matter to a Deputy Registrar for directions to enable the matter to be heard in the next sittings at Rockhampton.
A further financial statement and affidavit were filed by the wife on 22 February 2005.
On 8 March 2005 there was a further directions hearing before a Deputy Registrar at which it was again ordered that the matter be set for an undefended hearing before a Judge at Rockhampton. It appears that at that directions hearing the solicitor for the husband was given leave to withdraw from the proceedings for the reason that he had been unable to obtain further instructions.
A further affidavit was filed by the wife on 16 May 2005. On that day the matter came before Bell J apparently in accordance with the Deputy Registrar’s directions of 8 March 2005. His Honour made orders that the husband should file his material by 19 May 2005, in anticipation, it would seem, of a hearing on 24 May 2005.

the hearing on 24 may 2005

When the matter came before his Honour on 24 May 2005, the husband was not in court. His solicitor informed his Honour that the husband had been advised of his Honour’s order that his material be filed by 19 May 2005, but that the husband had instructed him “to ask for an adjournment with costs against him” on the basis that his financial report was still “in the process of being prepared”.
His Honour refused that adjournment. In his ex-tempore reasons for that decision, his Honour traced in some detail the history of the matter in similar terms to what we said above. Having focused particularly on the husband’s non-compliance, his Honour continued:
6.…and he is in contempt, prima facie, of the order made by myself last week. I do not think any further courtesies could be extended to this gentleman. He has put his solicitors, I have said, in an invidious position being not, as far as I am concerned, by telling him with sufficient particularity as to his reasons for not having filed the affidavit. I think the only instructions [the solicitor’s] got is that it is almost ready.
7.It appears though there may be some reasons for the delay which I have not seen as yet but I am in the process of getting handed up.
8.I have had handed to me a letter from [the husband’s accountants], dated 24 May 2005, in which they indicate that there have been difficulties in getting financial statement organised for [the husband]. They have attached draft financial statement for both years. That does not, of course, in any way comply with the requirements of Order 30 of this Court wherein he must not set out, not only his assets and liabilities, income, et cetera, but also the facts surrounding the facts surrounding the cohabitation of the parties and any matter which are relevant to those matters under section 79 or section 75(2) of the Act. Ye[s], I refuse the adjournment.

the appeal against the refusal to grant the adjournment

The essence of the husband’s appeal against his Honour’s refusal to grant him an adjournment of the final hearing was distilled in his Counsel’s written submissions in the following terms:
17. …
(a)That His Honour erred in failing to grant to the Husband an adjournment to enable him to set material before the Court;
(b)The [limitation] set by His Honour on 16^th [M]ay 2005 (ie to 19^th May 2005) was too short in the circumstances.
(c)The letter from [the husband’s accountants] which indicated that financial material was still in preparation ought, in the circumstances, to have persuaded His Honour that an adjournment would be in the interests of justice;
(d)There was no reason why the Wife could not have been compensated in costs[.]
In his oral submissions to us, Counsel for the husband emphasised the shortness of the period which Bell J had allowed the husband to prepare and file his material, being only from 16 to 19 May 2005. In our view, however, that submission can carry little weight, particularly against the background of the earlier listing for an undefended hearing before Monteith J on 21 October 2004 when the husband was granted a further seven months to prepare his material.
A further submission which was made to us by Counsel for the husband in an endeavour to establish appealable error by reason of his Honour’s proceeding with the undefended hearing, was that the wife’s material was inadequate. It is more appropriate, in our view, to examine this complaint in the context of the grounds of appeal directed to the substantive property settlement orders made by his Honour. We will therefore return to this matter in due course.
It is sufficient that we say at this point that given the history of the matter we do not consider that his Honour erred when he decided to proceed with the hearing on 24 May 2005. In reaching this conclusion, we would rely on the following passage from the judgment of Deane J in Squire v Rogers (1979) 27 ALR 330 at 337, on which, it is perhaps somewhat curious to note, the appellant husband relied in his first written outline of argument:
The question whether an application for adjournment of a matter should be granted or refused is a matter within the discretion of the trial judge to be resolved according to the overall requirements of justice in the particular circumstances: Conroy v Conroy [1917] 17 SR (NSW) 680 at 682. Its resolution may involve the assessment of competing claims by litigants in other cases awaiting hearing in the list of the particular judge or the particular court and may require knowledge of the working of the listing system of the particular court or judge and the importance in the proper working of that system of adherence to dates fixed for hearing. A court of appeal will not, as a general rule, interfere with the decision of a judge of first instance on that question unless it is satisfied that the exercise of his discretion has miscarried in the sense that it had been affected by wrongful application of principle or misunderstanding or erroneous assessment of the factual material before him. This general rule is subject to any power of the particular appellate court to receive new evidence on the hearing of an appeal (see, for example, Federal Court of Australia Act 1976 s 27) and the benefit of hindsight in a case where it can be seen that serious injustice has resulted or will, in fact, result from the exercise of the discretion.

the appeal against the property settlement orders

Decision of the trial Judge

Having refused the husband the adjournment which he had sought and having excused his solicitor (although it appears from the transcript that the solicitor may have remained in the courtroom), his Honour then proceeded to determine the wife’s application for property settlement. As he made clear at the commencement of his ex-tempore judgment, he did so on the basis of the wife’s documentary evidence and also of the letter from the husband’s accountants (being the letter which was apparently tendered in support of the husband’s application for an adjournment). There were also before his Honour written submissions setting out the wife’s case. Oral submissions were made by the wife’s Counsel largely in response to questions asked by his Honour.
His Honour then delivered an ex tempore judgment in which he made the following findings and reached the following conclusions:
·    The parties had lived together for about 16 months prior to marriage on 4 October 1997. There were no children of the marriage.
·    The wife was a widow and the husband was a divorcee who had two children; one of whom resided with the parties for approximately four years; and the other for a period of about 12 months. The wife assisted in their maintenance both financially, physically and emotionally.
·    The parties separated on 2 February 2003.
·    At the date of the marriage the wife was employed by the Department of Education.   She had the assets particularised in paragraph 9 of her affidavit filed 22 February 2005 and amounting to $241,419, including a house at 18 A. Street in a Queensland city. She had no debts or liabilities.
·    The husband had a Ford Maverick car which the wife estimated had a value of about $19,000; and he had his tools, being a builder by occupation. He had some interest with another person in property in Brisbane, which was subsequently sold at no return to them.
·    In December 1998 the wife ceased her employment with the Department of Education. She received a termination payment of about $22,000, which was banked and then used in the purchase of property and for every day living expenses.
·    In 2000 the parties purchased a unit at the Gold Coast for the husband to live in while working there. The husband lived there for eight months. At the end of that period the unit was leased for about $609 per month. This rent paid the mortgage in full.
·    Another home was purchased at 24 A. Street in a Queensland city in May 2002. It was owned by the wife’s father and the parties purchased it from him “at a somewhat inflated price in order that moneys could be used to acquire other land in the [Queensland city] area”.
·    The property at 18 A. Street was mortgaged to secure the loan.
·    The new property at 24 A. Street was rented and all the rent used in “the servicing of that property”.
·    In July 2000 a house at 1 C Street in a Queensland city was purchased for $425,000, by means of a loan of some $350,000 and the balance coming from $62,000 cash contribution by the wife; $1000 on credit card; $15,000 from the wife’s father; $15,000 being the proceeds of the sale of a Hyundai car that the wife had purchased from her savings; and “$10,000” remaining from the purchase of 24 A. Street (which had been purchased at an inflated price). The wife moved into C. Street on 14 October 2002.
·    After separation (in February 2003) the husband indicated that the wife should leave C Street and move back into A Street “in order that the income derived from the rent of the [C Street] property could assist in purchasing it”.
·    The wife moved out of the C Street property on or about 2 July 2003 but the husband had done nothing about renting that property since then, notwithstanding that the wife had forwarded rental forms to him for his signature. The wife had subsequently made sure that the property is kept clean “and up to date”. The property has remained empty since or about 2 July 2003 and was now worth $550,000.
·    The husband had done little or nothing to prosecute his case. He had filed a response in which he sought an order for a 50/50 distribution. He had also filed two affidavits in which he set out “little of assistance to the Court”.
·    The most assistance to his Honour was provided by a draft letter from the husband’s accountants which had attached draft financial statements for the year ended 30 June 2004, for the husband’s work as a builder and which was identified as “Exhibit 1”.
·    Up until separation “it could not be suggested that the contribution of the parties is equal. There must be a balancing in favour of the [wife] and that would be in the vicinity of 10 per cent because of her initial substantial contribution of capital which enabled them to acquire the various properties to which I have referred, also to the assistance of her father and the fact that she has assisted the respondent, which I have not touched upon, during cohabitation with the running of his building business towards the end of cohabitation”.
·    The husband is still employed as a builder and according to the letter from his accountants of 24 May 2005 he earned an operating profit before income tax of $80,645 for the year ended 2004. He had earned in the year 2003 an amount of $95,777, that being operating profit before tax.
·    The husband is a considerably stronger position than the wife who in June 2004 was suffering from some psychological illnesses which caused her to be not to be able to work for more than 10 hours per week. She now works for comparatively short periods. She was employed as a part time teacher by the Department of Education, but her contract terminated on 6 December 2004. It has not been renewed and she is registered for unemployment with an agency.
·    It appears that the husband had made payments on the C Street property and this was not cavilled with by the wife.
·    If it had not been for that matter and the fact that he was paying or had been paying the amounts due on the Mazda which is her own personal vehicle, his Honour “would have ordered that there be a distribution under the 75(2) factors much higher but he has made contributions to this property”. The husband had made contributions to the wife’s motor vehicle. He was paying maintenance up until 31 December 2004 pursuant to an order. He had ceased paying that maintenance as the wife is now in a de facto relationship with another man.
·    “Because of those matters to which I have … referred in relation to 75(2) I think there should be an increase in the percentage distribution to 75 per cent, i.e., a 15 per cent loading in favour of the applicant wife and I order that the following properties be distributed accordingly.”
·    The assets of the parties are as follows according to the submissions of the wife’s Counsel, and so far as liabilities are concerned, the wife’s affidavit of 16 May 2005:
8.   The material assets of the parties are as follows:
(a)       18 [A] Street  $192,500.00
                 (b)       24 [A] Street  $137,500.00
                 (c)       1 [C] Street  $550,000.00
                 (d)       [Gold Coast property]   $215,000.00
                 (e)       Bravo motor vehicle   $17,000.00
(f)        Nissan motor vehicle   $15,000.00
(g)       Super (w)   $68,000.00
(h)       Contents   $10,000.00
(i)        Tools of Trade   $29,235.00
TOTAL  $1,234,235.00
9.   The material liabilities of the parties are as follows:
(a)       ANZ Bank – 24 [A Street]  $101,611.00
(b)       ANZ Bank – 1 [C Street]  305,510.04
(c)       ANZ Bank – 1 [C Street]  18,914.11
(d)       CBA Bank – [Gold Coast property]                73,277.58
(e)       Westpac Car Loan  21,896.01
(f)        Outstanding rates –
           18 [A Street]  1,813,37
           24 [A Street]  1,652.02
           1 [C Street]  3,021.06
           [Gold Coast property]  1,685.92
(g)       Loan repaid to wife’s father  15,000.00
(h)       Credit Card debt  5,000.00
           TOTAL  $549,381.11
·    The asset pool is approximately $684,853.
·    “I have gone for an amount of $12,000 if the husband has any superannuation entitlements and that has not, as I understand, been taken into consideration”.
·    “[The wife] particularises the tools of trade and an estimate there is given, and I will accept such estimate”.

His Honour then made orders which in their engrossed form are in the following terms:
1.That the following matrimonial assets be sold by private treaty within ninety (90) days of the date of this Order for a minimum consideration as follows:-
i.24 [A Street]               - $137,500.00
ii.1 [C Street]                 - $550,000.00
iii.[Gold Coast unit]         - $215,000.00
2.That where no sale is achieved within ninety (90) days, the properties as listed in Paragraph 1 be sold at public auction with a reserve of not less than 90% of the minimum consideration in Paragraph 1 hereof.
3.That the Registrar of the Family Court at Townsville be empowered and authorised to sign all documentation or do any other thing for and on behalf of the husband to ensure execution of these Orders including the execution of any transfer of real property.
4.That from the proceeds of sale of the assets in Paragraph 1, the following matrimonial liabilities be met:-
i.ANZ loan on 24 [A Street]
ii.ANZ loan on 1 [C Street]
iii.ANZ loan on 1 [C Street]
iv.CBA loan on [Gold Coast unit]
v.Westpac car loan
vi.Outstanding rates on all matrimonial properties
vii.Loan of $15,000.00 from the wife’s father
viii.Joint Mastercard debt with Commonwealth Bank of Australia
ix.All costs (including agents’ fees and legal fees) associated with the sales in paragraph 1.
5.That the nett proceeds of sale after payment of the debts be distributed between the husband and the wife so that the husband and wife received 25% and 75% of the nett matrimonial assets respectively where the husband and wife already hold the following:-
Wife  Husband
18 [A Street]               $192,500.00    Tools of Trade             $29,235.00
Bravo  $17,000.00     Nissan  $15,000.00
Superannuation $68,000.00
$277,500.00  $44,235.00
Provided that from the husband’s share of the proceeds the wife is entitled to retain all costs awarded to her in these proceedings.
6.That unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or any subsequent Orders:-
i.Each party be solely entitled to the exclusion of the other to all other property (including choses in action) in the possession of such party at the date of these Orders.
ii.All superannuation remains the sole property of the party who is named as the owner.
iii.The insurance polices remain the sole property of the owner named in the policy.
iv.Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
v.Any joint tenancy of the parties in any real or personal estate is expressly severed as at the date of these Orders.
7.That the costs Orders made by Deputy Registrar Boyd on the 13^th day of September 2004 and the 8^th day of March 2005 and by Justice Monteith on the 21^st day of October 2004 be confirmed.
8.That the husband pay all of the wife’s costs thrown away as a result of the adjournment of these proceedings on the 16^th day of May 2005 and further as a result of his non-compliance with the Order of Justice Bell made that day together with the wife’s costs of the Undefended Hearing on the 24^th day of May 2005.

Issues raised by the appeal against the property settlement orders

By his notice of appeal (filed 10 June 2005) the husband appealed against Orders 1, 2, 3, 4, 5, and 6 of the above orders. The grounds of appeal contained in the notice of appeal were in somewhat unusual terms and could be read as being directed to virtually all aspects of the exercise of discretion by the trial Judge.
However, before us and apart from a complaint concerning his Honour’s failure to make provision for the capital gains tax liability which would result from the sale of the investment properties, Counsel for the husband limited his submissions to the following alleged errors on the part of his Honour constituted by:
i.determining the proportions of the parties’ property settlement, by taking into account inadmissible evidence namely the annexures to the wife’s affidavits of letters from Dr P and Dr Z;
ii.taking into account the assets and liabilities as contended for by the wife when the asserted loan owning to the wife’s father of $15,000 was not proved in the evidence;
iii.failing to take into account that the wife retained an asset namely the contents of her house that she valued on $10,000 and which she included in her list of assets and liabilities;
iv. taking into account as admissible evidence the wife’s estimate of the value of the husband’s tools of trade when it was led on an inexpert and hearsay basis;
v.taking into account the wife’s credit card debt, which was not shown to related to matrimonial matters.

The application to adduce further evidence and the Capital Gains Tax issue

At the commencement of the hearing of the appeal an application was made on behalf of the husband to adduce further evidence both in support of the appeal and to be relied on in any re-exercise of the discretion by us.
The further evidence consisted of an affidavit from the husband annexing a letter from his accountants dated 1 August 2005. That letter concerned the following three matters:
·    the financial contributions made to the parties’ property by the husband since separation;
·    the capital gains tax (“CGT”) liabilities in respect of the investment properties; and
·    the husband income tax liabilities for the years 2003, 2004 and 2005.
We ruled at the hearing of the appeal that we would not receive the further evidence for any purpose. We said that we would provide our reasons for that decision in this judgment.
As was submitted on behalf of the wife, the evidence from the accountants, being in letter from only, was inadmissible. But even had the contents of the letter been incorporated in an affidavit, or supported by an affidavit from the accountants, we do not consider that any of the material sought to be relied on would have advanced the husband’s case either in relation to the appeal or on any re-exercise of the discretion by us.
In relation to the husband’s post-separation contributions, figures were provided by the accountants in relation to loan, rates and insurance payments on the C Street property, loan and insurance payments on the Gold Coast and 24 A Street properties, and payments on the wife’s car. However, all these figures were before his Honour in the letter from the accountants which he referred to as Exhibit 1 (albeit not necessarily in the totalled amounts in which they appeared in the letter sought to be put before us). Moreover, his Honour expressly gave the husband credit (in paragraph 11 of his judgment) for these post-separation contributions, referring particularly to the payments in relation to the C Street property and the wife’s car (which were clearly the most substantial of the payments made by the husband).
The figures provided by the husband’s accountants for his income tax liability for the years 2003, 2004 and 2005 were stated to be “estimates only as his income tax returns for the abovementioned years have not yet been finalised”. Being estimates only, the figures could be of no assistance to the husband’s case.
Similarly, the figures provided by the accountants for CGT liability were stated to be “estimates only”. However, given the emphasis placed by Counsel for the husband on the issue of CGT and his Honour’s alleged error in failing to have any regard to that issue, we set out exactly what was said by the husband’s accountants in relation to that matter:
2.Capital Gains implications on the sale of the investment properties owned by [the husband and the wife]. These are estimates only as I have had to rely upon estimated costs and market values provided as at 7 September 2004. We have requested copies of purchase contracts, settlement statements and loan contracts at the time they were acquired but as yet these are not to hand.
a)24 [A Street] Cost $115000, Market Value $137,500
Estimated Capital Gain $22,500 of which each party will receive 50%
b)[Gold Coast unit] Cost $80,000, Market Value $220,000
Estimated Capital Gain $140,000 of which each party will receive 50%
c)1 [C Street] Cost $435,000, Market Value $550,000
Estimated Capital Gain $115,000 of which each party will receive 50%
Total taxable capital to be included in each parties [sic] income in the year in which they are sold $69,375. As [the wife] has minimal other taxable income then the tax consequences for her share are not as high as [the husband]. Based on [the husband’s] current level of income we estimate that his tax liability arising from such capital gains would be in the vicinity of $33,646.
Many factors mitigate against the admission of this evidence. First, is the calculation of CGT itself. In order to determine whether a capital gain has been achieved, it is necessary to determine the cost base of the CGT asset.   The elements of the cost base are set out in the Australian Taxation Office’s Guide to Capital Gains Tax 2006 (pages 12 to 13). They include:
·    the money paid for the asset and the market value of property given to acquire the asset;
·    a range of nine incidental costs of acquiring the CGT asset or of the CGT event (including remuneration of professional advisers, costs of advertising, and conveyancing, stamp duty and borrowing costs);
·    the costs of owning the asset, including rates, land taxes, repairs and insurance premiums;
·    capital costs to increase or preserve the value of the asset or to install or move it; and
·    capital costs of preserving or defending the ownership of or rights to the asset.
In addition there are three different methods of calculating CGT of which one enables increasing the cost base by applying an indexation factor and another which allows discounting of the gain.
Secondly, even if the liability could be more accurately estimated (which absent the matters referred to, it cannot), the impact on the parties or either of them depends upon their own income in the year in which the capital gain occurs (including all capital gains for that year), any and all capital losses for the year, any unapplied net capital losses from previous years, and any concessions to which they might be entitled.
Given the complexity of the calculation of CGT, the inadequacy of the estimates sought to be put before us can hardly be clearer.
After we had ruled that we were not prepared to receive the further evidence, Counsel for the husband endeavoured to persuade us that even in the absence of that evidence, we should conclude that his Honour had erred in not making some provision in his orders for the payment of CGT in relation to the properties which were to be sold. It was submitted that this was so in circumstances where the parties would each have a 50 per cent tax liability for such tax but where the wife was to receive 75 per cent of the parties’ property. We understood it to be further submitted that even in the absence of any application for orders in relation to the CGT liability or of submissions regarding the matter, his Honour had an obligation to make provision in his decision for that liability.
Given the limited material before his Honour and the many factors affecting the calculation of CGT coupled with the capacity which the husband would have as a self-employed person to adjust his income for the timing of the capital gain, we consider that there was no obligation on his Honour to make any provision either in his reasoning or in his orders for the CGT liability which either party might face if the investment properties were sold. We are thus not persuaded that any appealable error exists in relation to this issue.
We turn then to the other alleged errors on the part of his Honour.

The admissibility of the medical reports

In support of a claim in paragraph 38 of her affidavit of 22 February 2005 that she was not in good health and had a limited future working capacity, the wife annexed letters from Dr P, a psychologist, and Dr Z, a psychiatrist.
Dr P’s letter was dated 26 August 2003 and was addressed to Centrelink. It stated that given the wife’s “current mental health symptomology”, it was recommended that she remain at a level of employment of 16 hours per week.
Dr Z’s letter was dated 29 June 2004 and was also addressed to Centrelink. It stated that the wife was “not capable of working more than ten hours per week, due to her psychological condition, namely major depressive disorder with a significant anxiety disorder, as well as this, major psychological issues that she is attempting to deal with”.
It was submitted on behalf of the husband that these letters were inadmissible, presumably on the basis that the doctors’ reports were not supported by affidavits from them.
However, as was pointed out during the hearing of the appeal, we consider that both letters would be business records and thus be admissible pursuant to s 69 of the Evidence Act 1995. This complaint is therefore without substance.

The alleged debt to the wife’s father

It will be recalled from paragraph 24 above that in the table of assets and liabilities which appears towards the conclusion of his Honour’s judgment and which his Honour expressly acknowledged had been taken from the written submissions of Counsel for the wife, the following item appears in the list of liabilities: “(g) Loan repaid to wife’s father $15,000”.
It was submitted on behalf of the husband that this amount should not have been taken into account for the reason that it was not a liability which appeared in any of the wife’s sworn (or affirmed) documents.
However, as was drawn to our attention by Counsel for the wife, there is evidence in the wife’s affidavit filed 22 February 2005 of the sum of $15,000 having been provided by the wife’s father to the parties in connection with the purchase of the property at C Street in July 2002. That evidence is as follows:
25.In July 2002 there was a further decision to purchase a home at 1 [C Street]. A contract for the property was signed at a purchase price of $425,000.000. The balance purchase price came from a number of sources. There was a total loan from the ANZ Bank totalling $350,000.00 (one loan of $315,000.00 and another of $35,000.00). The remainder came form [sic] the following sources –
(a)$62,000.00 cash contribution from my savings
(b)$1,000.00 drawn on my credit card
(c)$15,000.00 from my father
(d)$15,000.00 from the proceeds of the sale of a Hyundai Sonata car that I had purchased from my savings
(e)$10,000.00 from the purchase of 24 [A Street]
But it will be seen that that evidence falls far short of establishing that the advance of $15,000 from the wife’s father was a loan as opposed to a gift. It will also be noted that in none of her three financial statements did the wife show a debt of $15,000 owed to her father.
We are therefore satisfied that his Honour was in error in including in the liabilities of the parties a debt to the wife’s father of $15,000. It seems that his Honour was led into this error by the written submissions of Counsel for the wife, and we understood this to be virtually conceded before us by Counsel for the wife.
It will thus be necessary for the appeal to be upheld on account of this error and accordingly for the appropriate adjustment to be made to his Honour’s orders. It is important to observe in relation to this matter that in arriving at a contribution assessment of 60 per cent to 40 per cent in favour of the wife, his Honour gave credit to the wife for “the assistance of her father” (see paragraph 9 of the trial judgment).

The contents of the wife’s house valued at $10,000

The submission made on behalf of the husband in relation to this matter was that, although his Honour had included the value of the wife’s household contents at $10,000 in his calculation of the pool of property, he had not then in formulating his orders taken into account that the wife would retain those contents.
We understood Counsel for the wife to be prepared to also concede this error on the part of his Honour, although Counsel endeavoured to persuade us that the value of the wife’s contents should be off-set against the husband’s superannuation, which it appears from paragraph 23 of his judgment, his Honour was apparently prepared to value at $12,000 but not take into account in determining the proceedings. However, we note that in the transcript (p11, line 25) his Honour made it very clear that he did not propose to take into account the husband’s superannuation because of its unknown value.
In the absence of a cross appeal by the wife in relation to his Honour’s treatment of the husband’s superannuation, we can only conclude that his Honour erred in not taking into account in his ultimate division of the property, the fact that the wife would retain her household contents valued at $10,000. Again, this is an error which warrants our interference with his Honour’s orders.

The value of the husband’s tools of trade

In relation to the husband’s tools, the wife stated in her affidavit of 22 February 2005:
41.…All I am aware are tools that he had as at the date of separation. Exhibited and marked “AMJ 4” is a copy of what tools I say he had in his possession when he left. The values are my values ascertained after talking with persons with knowledge of what could be achieved for the tools on the second hand market. I have not found any other formal way of obtaining these values.
The wife then annexed as “AMJ 4” a list of tools with a total value shown at $29,235. There were notes on the list to indicate that the wife had prepared the list herself and that prices were “Second Hand depreciated prices except where stated as new”.
It was submitted on behalf of the husband that the wife was not qualified to express an opinion as to the value of the tools and that her evidence about the matter should have been rejected. The result of such a rejection would presumably have been that no regard would have been had in the determination of the proceedings to the fact that the husband was in possession of tools of trade, regardless of their value.
Counsel for the wife sought to uphold his Honour’s acceptance of the wife’s estimate of the value of the husband’s tools on the basis that there was no other course open to his Honour. We have considerable sympathy for that submission.
In our view, had the husband been participating in the proceedings and chosen not to challenge the wife’s estimate of the value of his tools, then his Honour would have been entitled to accept that valuation and the husband could not complain on appeal. It is not uncommon in many defended property settlement cases for one or both parties to provide estimates of the value of items such as furniture and other household items, motor vehicles, or tools of trade, and if such estimates are not challenged, they are taken into account in determining the value of the property to be divided between the parties.
However, in circumstances where a court has determined a property settlement case on an undefended basis because of the failure of one party to file the documents which he or she has been ordered to file, we do not see why that party should be entitled to challenge an appeal on a matter which could have been challenged had that party participated in the trial.
It must also be remembered that after his Honour refused the adjournment in this case, it would have been open to the husband’s solicitor to apply to be heard in the proceedings in order to protect the husband’s interests, especially in relation to the admissibility of the evidence and the like. The transcript reveals that no such application was made.

Accordingly, we are not prepared to interfere with his Honour’s decision on account of this matter.

The wife’s credit card debt

His Honour included in the liabilities of the parties a credit card debt of the wife of $5,000. We understood the husband’s complaint regarding this matter to be that this should not have been done in the absence of evidence that this was a debt which accrued prior to the parties’ separation or which was in some way related to the marriage.
In response, Counsel for the wife drew our attention to the fact that such a credit card debt had been shown in the first financial statement filed by the wife on 31 December 2003, that is within a year after separation.
But however that may be, the observations which we made concerning the issue of the value of the husband’s tools of trade, are equally applicable to this issue. In other words, had the husband participated in the hearing, he could have challenged the wife’s credit card debt on the same basis on which he seeks to challenge it in this appeal. He should not now be permitted to, in effect, escape the consequences of the matter proceeding undefended because of his own non-compliance with court directions or from his failure to instruct Counsel to remain during the hearing to raise such matters in his interest that could have been raised.

Conclusion in relation to the husband’s complaints concerning the property settlement orders

We have thus concluded that there is substance in two of the specific complaints raised by the husband in relation to his Honour’s finding concerning the property of the parties, and/ or his orders dividing that property, being the complaint concerning the inclusion of the alleged liability to the wife’s father, and the failure to take into account in formulating the orders that the wife would retain her household contents.
In view of the form of his Honour’s orders, we consider that these are matters which can be rectified by us by simply amending certain of those orders.
We did not understand Counsel for either party to suggest that we should not adopt this course in the event that these were the only errors identified by us.
However, before proceeding to amend the orders, we make the following observations.
Counsel for the husband argued strongly before us that where property settlement orders are made on an undefended basis, the Judge who makes such orders is not relieved from the obligation imposed by s79(2) of the Family Law Act 1975 to ensure that the orders are just and equitable.
We agree entirely with that proposition. In undefended property settlement proceedings, the trial Judge must still identify (at least as best as he or she can) the assets and liabilities of the parties, make findings concerning the contributions of the parties and the other relevant matters specified in s 79(4), and satisfy him or herself that on the material available the outcome is just and equitable. In the present case, his Honour certainly followed the required procedure as our earlier analysis of his reasons for judgment demonstrates.
We acknowledge that there may well be cases in which a Judge, having determined to proceed on an undefended basis, may ultimately find that the material of the applicant is so inadequate, that it is impossible to arrive at a just and equitable award on the basis of such material. In such circumstances, the matter would have to be further adjourned. Indeed, it is clear from a comment made by his Honour to the solicitor for the husband shortly after he had refused the adjournment, that he was well aware of this possibility (see Transcript, p4, lines 36-37). Ultimately, however, his Honour was able to reach a decision on the material before him which, while not expressly saying so, he clearly he considered was just and equitable. We have not been persuaded that his Honour was in error in proceeding to determine the proceedings on the material before him. Nor have we been persuaded, subject to the amendments that we propose to make to his orders, that those orders were not just and equitable.

Necessary amendments to the trial judge’s orders

As we have said earlier, given the form of his Honour’s orders, the two errors which we have identified can be remedied simply by amendments to two of those orders (which we have set out above at paragraph 25).
First, there will be an amendment to Order 4 to remove sub-paragraph (vii) and the reference in that sub-paragraph to the “Loan of $15,000 from the wife’s father”.
Secondly, there will be amendment to Order 5 to insert in the list of the wife’s assets a reference to her household contents valued at $10,000 and to amend the total value of the wife’s assets to $287,500 in order to include the value of her household contents.
However, in the interests of clarity, we will in our orders set out in full both Orders 4 and 5 in their amended form.

costs of the appeal

At the conclusion of the hearing of the appeal we invited and received oral submissions in relation to the costs of the appeal.
Counsel for the husband submitted that should the appeal succeed on an error of law then the husband should be entitled to a certificate under the Federal Proceedings (Costs) Act 1981. But that should the appeal succeed on account of errors caused by lack of sworn evidence from the wife, then the wife should pay the husband’s costs.
Counsel for the wife submitted that even if the appeal succeeded, the appellant husband should nevertheless pay the wife’s costs because of his conduct which had resulted in the proceedings being determined on an undefended basis.
Notwithstanding that his Honour may have been led into error by submissions made on behalf of the wife in relation to the sum of $15,000 provided by her father, we are not persuaded, having regard to the circumstances which resulted in an undefended hearing, that the circumstances warrant the making of a costs order in favour of either party.
We are also not persuaded that it can be said that the appeal has succeeded on a question of law (as opposed to errors of fact) such as would permit the issue of costs certificates.
There will therefore be no order for costs in relation to the appeal.
However, we understood that the parties were in agreement that we should record that they have agreed that up until the time of the appeal the costs awarded in the wife’s favour should be set at $25,000.

I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of this Honourable Full Court

Associate:

Date:

[2006] FamCA 951

28 September 2006

Key Legal Topics

Areas of Law

Family Law

Evidence

Statutory Interpretation

Legal Concepts

Appeal

Procedural Fairness

Costs