L & L - [2005] FamCA 335

[2005] FamCA 335

FAMILY LAW ACT 1975

IN THE FULL COURT

OF THE FAMILY COURT OF AUSTRALIA

AT SYDNEY Appeal No. EA 2 of 2004

File No. CAF 821 of 2000

IN THE MATTER OF:

Appellant Wife

- and -

Respondent Husband

REASONS FOR JUDGMENT

CORAM: Finn, Holden and Strickland JJ

DATE OF HEARING: 6 May 2004

DATE OF JUDGMENT: 10 May 2005

APPEAL SUMMARY

MATTER:L and L
APPEAL NUMBER: EA 2 of 2004
(CAF 821 of 2000)

CORAM:Finn, Holden and Strickland JJ
DATE OF HEARING:  6 May 2004
DATE OF JUDGMENT:  10 May 2005
CATCHWORDS:                FAMILY LAW – APPEALS – Property settlement – Determination of the pool of property – Whether the trial Judge erred in including in the pool as a liability a group tax debt owed by a company controlled by the husband – No error found – Whether the trial Judge erred in including as a liability a mortgage debt arising from the husband’s failure to continue to pay that mortgage despite contrary assurances – No error found – Whether the trial Judge erred in failing to include rent received by the husband from particular properties and a liability arising from the husband’s failure to pay rates in relation to those properties – No error found – Whether the trial Judge erred in his valuation of a company controlled by the husband and, in relation to the valuation, whether the trial Judge erred in admitting into evidence a report provided by the husband’s accountant which contradicted figures in a application of the husband for finance and in relying on draft accounts after indicating that he would not do so – No error found – Whether the trial Judge erred in making no order concerning the parties’ stored furniture in relation to which both parties had applied for an order that the furniture be sold – Interests of justice require an order for the sale of the furniture.

Caselaw cited:

Prince & Prince (1984) FLC 91-501

Chorn v Hopkins (2004) FLC 93-204

Marker [1998] FamCA 42

Jordan v Jordan (1997) FLC 92-736

Nelson v Nelson (1995) 184 CLR 53

Appeal allowed insofar as necessary to make orders for the sale of the furniture. Appeal otherwise dismissed.

Directions made for the filing of submissions in relation to costs.

This is an appeal by the wife against an order for property settlement made by Coleman J on 28 November 2003. His Honour’s order gave effect to his conclusion stated in paragraph 130 of his reasons for judgment that:
the parties should share their net assets of $1,019,945 in shares of 52.5 percent to the husband and 47.5 percent to the wife…(producing) respective entitlements of $535,471.125 and $484,473.875

Scope of the appeal

Apart from a complaint concerning his Honour’s failure to make any order concerning the parties’ furniture, the wife’s appeal is directed solely to his Honour’s calculation of the net asset pool of the parties. According to the calculations annexed to the wife’s summary of argument,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: L & L [2005] FamCA 335
Case: [2005] FamCA 335
Decision Date: 10 May 2005

CaseChat Overview and Summary

The Full Court of the Family Court of Australia, comprising Finn, Holden, and Strickland JJ, considered an appeal concerning the valuation of a party's company and the treatment of certain financial matters during the parties' separation. The primary dispute revolved around the valuation of the husband's company, P, with the wife arguing for a valuation based on future maintainable earnings ($409,121), while the husband contended for a valuation based on net tangible assets ($144,450). The wife also challenged the admission of the husband's company valuation, arguing it was filed late and contradicted representations made by the husband to a lending body. Further grounds of appeal related to the husband's failure to make mortgage payments on the former matrimonial home, his retention of rental income from various properties, and his failure to pay council rates on certain properties.

The legal issues before the court were whether the trial judge erred in accepting the husband's valuation of his company based on net tangible assets, and whether the husband's valuation evidence should have been admitted given its timing and potential contradiction of prior representations. Additionally, the court had to determine if the trial judge erred in failing to account for the husband's retention of rental income and his failure to pay mortgage instalments and council rates as notional assets or liabilities in the division of the parties' property. The wife sought to have these amounts brought to account as either liabilities of the husband or notional assets to be divided.

The Full Court addressed the grounds of appeal concerning the company valuation. While acknowledging the wife's submission that the husband's valuation was filed out of time, the court found no substance in this complaint, noting that there was sufficient time for accountants to confer and that procedural fairness was maintained. Regarding the contradiction of representations to a lending body, the court referred to the principle in *Jordan v Jordan* that a party may be declined evidence contradicting prior representations made to gain an advantage. However, the court did not elaborate on its application of this principle to the facts. The court also considered the grounds relating to the separation period, including the husband's failure to pay mortgage instalments, his retention of rents, and his failure to pay rates. The wife's claims in these regards were detailed, seeking specific sums representing her half-share of the outstanding mortgage debt, retained rents, and unpaid rates.

The court's decision on these matters was not fully detailed in the provided text, but it indicated that grounds 3, 6, 7, and 8 all concerned events during the separation period. The wife's "Minute of Orders Sought" revealed her specific financial claims arising from the husband's conduct, including sums related to the mortgage shortfall, retained cottage rent, rent from a Queensland property, and council rates on Queensland properties. The wife's affidavit provided context for these claims, highlighting the husband's continued residence in the former matrimonial home, his cessation of mortgage payments, and his retention of rental income without accounting for it.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

Grounds 4 and 5 are directed to the trial Judge’s adoption of a value for the husband’s company, P, of $144,450, being the value of the net tangible assets of the company (as was the husband’s case) rather than a value of $409,121 being a value based on future maintainable earnings (as was the wife’s case). The terms of grounds 4 and 5 are as follows:4.His Honour erred in finding that the value of the company P was $144,450, being the value of the nett tangible assets of the company, rather than the $409,121, being its value on a future maintainable earning basis.5.His Honour erred in permitting the husband to adduce evidence of the value of his business which:(a)Was filed out of time; and(b)Contradicted representations made by the husband to a lending body for the purposes of obtaining a loan, which loan the husband asserted to the Court he proposed to use to repay the debts of the parties and purchase the wife’s interest in the former matrimonial home. As we understand these grounds as drafted and the submissions made in support of them, the only reasons why it is asserted in ground 4 that his Honour erred in accepting the net tangible asset valuation (put forward by the husband) as opposed to the future maintainable earnings valuation put forward by the wife, are the reasons contained in ground 5. So far as the first of those reasons is concerned we did not understand Counsel for the wife to strongly press the assertion that the trial Judge erred in permitting the husband to rely on a valuation of the company, P, “out of time”. But even if we are wrong in our understanding of the position of Counsel in this regard, we consider there is no substance in that complaint. As Counsel for the respondent husband submitted, the fact that there was sufficient time for the accountants for both parties who had prepared the valuations to confer regarding their respective valuations, together with the requirements of procedural fairness, support the conclusion that the trial Judge did not err in receiving the husband’s valuation. Of greater substance is the complaint in ground 5 that his Honour should not have admitted into the evidence the report of the husband’s accountant for the reason that it relied on material which contradicted figures in a financial application submitted by the husband to a finance company (for the purpose of obtaining finance to buy the wife’s interest in the former matrimonial home), and on which the wife’s accountant had had to rely. In support of this complaint the wife relied on the following statement by Chisholm J in Jordan v Jordan (1997) FLC 92-736 at 83,927:When a party has made representations of fact to third parties and has gained advantage from so doing, it is open to the Court in subsequent proceedings under S.79 of the Family Law Act to decline to accept from that party evidence which contradicts those representations. It was submitted by Counsel for the wife that the principle stated by Chisholm J was particularly apposite in the circumstances of the present case where the husband did not produce any tax returns beyond 2001, nor any current bank balances for any of his business entities, and produced only draft financial statements for 2002 for his principal business entity, the company P.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Grounds 3, 6, 7 and 8 are also all concerned with matters occurring during the separation period, being: the husband’s failure to make certain mortgage payments on the property in rural NSW which was the former matrimonial home and the husband’s home after separation; his retention of the rents received from certain properties of the parties; and his failure to pay rates on certain of those properties. The precise terms of these grounds are as follows:3.His Honour erred in including as a liability to be taken into account in calculating the nett assets of the parties for division, the sum of $118,000, being part of the mortgage debt owed to the National Australia Bank secured over the former matrimonial home which accrued because the husband ceased, contrary to assurances, to pay mortgage payments after April 2001 notwithstanding that he continued to live in the property.6.His Honour erred in failing to bring to account as a notional asset the sum of $32,276 representing the rent on the cottage owned by the parties, which rent had been received by the husband after April 2001 and retained by him.7.His Honour erred in failing to bring to account as a notional asset the sum of $59,000 being one half of the rent on one … property [in Q] which the husband received as cash after separation.8.His Honour erred in failing to bring to account as notional property the sum of $64,522, being the Council rates on the … properties [in Q] which were deducted from the proceeds when those properties were sold, the husband having failed to cause the payment of those rates from his business and/or rent receipts for those properties. As his Honour indicated in this paragraph and also as emerges from the relevant grounds of appeal, the wife had sought at trial (in her “Minute of Orders Sought”) that the husband pay:(c) … the Wife the further sum of $59,000 representing one half of the difference between the housing loan currently outstanding on the [property in rural NSW], and the loan as it would have been had the Husband paid mortgage instalments after April 2001;(d) The further sum of $16,138 to the Wife representing one half of the rent on the cottage received by the Husband after April 2001;(e) The further sum of $29,500 to the Wife representing one half of the rent on [one] … property [in Q] received by the Husband after April 2001;(f) The sum of $32,261 to the Wife representing one half of the outstanding council rates on the … properties [in Q] at the time of their sale; Some background to these claims by the wife can be found in the following passages from her affidavit (sworn 24 October 2003):20.We finally separated when I left the [property in rural NSW] in April 2000. [The husband] has continued to live in the [property in rural NSW]. He has stopped paying the mortgage instalments on the property as at April 2001 but continued to receive all of the rent from the cottage on the property. The mortgage debt currently stands at about $405,000…21.There is a cottage on the property which was rented out during our occupation… [The husband] has received all of the rent since separation. He has not accounted to me for those monies nor explained what he has done with them. Through his solicitors he said he would pay the rent into the mortgage but he has not done that for several years…