LAYTON & LAYTON
[2014] FamCAFC 126
FAMILY COURT OF AUSTRALIA
| LAYTON & LAYTON | [2014] FamCAFC 126 |
| FAMILY LAW – APPEAL – PROPERTY – ADEQUACY OF REASONS – Where the appellant husband submits that the Federal Magistrate’s reasons were inadequate – Where the Federal Magistrate refused to “add back” an amount of $50,000 into the asset pool for a personal loan – Where the Federal Magistrate disregarded that the respondent wife had apparent sole use of the loan – Where no weight was given to a purported loan agreement between the parties – Where the Federal Magistrate’s reasons do not support the conclusion reached in relation to the property to which the percentage distribution (arrived at on the basis of contributions and s 75(2) factors) was to be applied – Appeal allowed. FAMILY LAW – APPEAL – COSTS – Where no order for costs made - Where the appeal has succeeded on a point of law – Both parties to receive certificates for the appeal and rehearing. |
| Family Law Act 1975 (Cth) Federal Proceedings Costs Act 1981 (Cth) |
| Bevan & Bevan (2013) FLC 93-545 Farmer & Bramley (2000) FLC 93-060 Omacini & Omacini (2005) FLC 93-218 Stanford & Stanford (2012) 247 CLR 108 Steinbrenner & Steinbrenner [2008] FamCAFC 193 |
| APPELLANT: | Mr Layton |
| RESPONDENT: | Ms Layton |
| FILE NUMBER: | BRC | 3517 | of | 2011 |
| APPEAL NUMBER: | NA | 75 | of | 2012 |
| DATE DELIVERED: | 17 July 2014 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Finn, Strickland & Ainslie-Wallace JJ |
| HEARING DATE: | 5 August 2013 |
| LOWER COURT JURISDICTION: | Federal Magistrates of Australia |
| LOWER COURT JUDGMENT DATE: | 20 July 2012 |
| LOWER COURT MNC: | [2012] FMCAfam 723 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Thiele |
| SOLICITOR FOR THE APPELLANT: | Rhonda Sheehy & Associates |
| COUNSEL FOR THE RESPONDENT: | Dr Brasch with Ms Minnery |
| SOLICITOR FOR THE RESPONDENT: | Family Law Group Solicitors |
Orders
The appeal be allowed.
The orders made by the Federal Magistrates Court on 20 July 2012 be set aside.
The property proceedings be remitted to the Federal Circuit Court for rehearing by a judge other than Judge Turner.
There be no order for costs.
The Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act1981 (Cth) 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 husband in respect of the costs incurred by the appellant husband in relation to this appeal.
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) 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 wife in respect of the costs incurred by the respondent wife in relation to this appeal.
The Court grants to each party a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) 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 each party in respect of such part as the Attorney-General considers appropriate of any costs incurred by each party in relation to the new trial granted by these orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Layton & Layton has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 75 of 2012
File Number: BRC 3517 of 2011
| Mr Layton |
Appellant
And
| Ms Layton |
Respondent
REASONS FOR JUDGMENT
This is an appeal by Mr Layton (“the husband”) against orders made by Turner FM (as her Honour then was) on 20 July 2012 in proceedings under Part VIII of the Family Law Act 1975 (Cth) (“the Act”) between the husband and Ms Layton (“the wife”) in relation to property which her Honour found to have a net value of $891,344.
The wife opposes the appeal and seeks to maintain her Honour’s orders.
The issues raised on the appeal
The husband’s Notice of Appeal contained seventeen grounds of appeal, some of which had a number of sub-grounds.
However, at the commencement of his oral submissions to us, counsel for the husband explained that while none of the grounds of appeal were abandoned, the central argument or thrust of the appeal, or indeed, single ground of appeal, was the adequacy of her Honour’s reasons.
Counsel also particularised or highlighted six significant, or main, areas in which her Honour’s reasons were submitted to be inadequate. Those six areas were in:
1. the assessment of the evidence of the parties about important issues (including the credibility of the parties);
2. the adoption of a global as opposed to asset by asset approach;
3.the non-inclusion as “an add-back” of a loan of $50,000 taken out by the parties for the legal expenses of the wife’s son;
4.the assessment of the parties’ contributions as equal;
5.the adjustment under s 75(2) of the Act of 5 per cent in favour of the wife;
6.the consideration of “the justice and equity” of the orders.
We will consider these issues in the order in which, and to the extent that they were addressed by counsel for the husband before us. But before we do so, it will be useful having regard to these issues, to provide an overview of her Honour’s reasons for judgment.
An overview of the Federal Magistrate’s reasons for judgment
Her Honour began her reasons with the following factual introduction, which we will set out in order to provide the essential background to the case:
1.The parties commenced cohabitation in 2002 married in 2003 and separated under the one roof in September 2009.
2.Physical separation occurred in March 2010 when the former matrimonial home at [A] was sold.
3. The parties divorced in mid 2011.
4.The wife entered the relationship with two children who at the time were aged 16 and 19.
5. There are no children of the relationship.
…
7.In March/April 2012 the husband received money from his mother’s estate.
Her Honour next set out a table of those assets and liabilities of the parties which were agreed, and she then set out a list of the issues which she was required to determine. Those issues included whether certain assets and liabilities should be included as property available for distribution between the parties. In that context her Honour first considered whether a motor vehicle acquired by the husband and associated loans should be included in such property, and she determined that they should not because they were “acquired post separation”.
We note in passing that that determination is asserted to be a wrong finding of fact by Ground 2(f)(ii). However, the brief submissions made on behalf of the husband in relation to the motor vehicle issue focus only on the liability of the husband of $65,000 in relation to the vehicle and on an asserted failure by her Honour to take that liability into account when considering whether any adjustment was required to the division of property based on the parties’ contributions on account of the matters in s 75(2) of the Act.
Beginning at [18] of her reasons her Honour considered two disputed amounts “which the parties wish to notionally add back into the property pool” and which she described as follows:
19.The first is an add-back claimed by the husband of $50,000 in respect of a personal loan acquired during the marriage and used by the wife and her son.
20.The second is an add-back claimed by the wife of $50,000 in respect to monies used by the husband for legal fees.
Her Honour determined that neither of these two amounts should “be notionally added back”. No issue is raised on the appeal concerning her Honour’s treatment of the second amount, but her treatment of the first amount is the third of the six main areas in relation to which her reasons were said to be inadequate and on which counsel for the husband focused before us. We will therefore return to that issue.
Her Honour next considered how she should treat the inheritance of $136,402 which the husband had received from his mother’s estate in March 2012, some two and a half years after separation, and the substantial part of it ($97,000) which he had used to reduce the mortgage on a property at C. The husband had owned that property prior to cohabitation and retained it after separation.
Her Honour determined (at [34]) that the appropriate manner in which to deal with the inheritance was to exclude it “from the property pool” and for the mortgage on the C property to be “included at the full amount” (that is, without deduction of the amount of the inheritance used to reduce that mortgage).
Having made these determinations about the parties’ assets and liabilities, her Honour set out at [36] the following table of assets and liabilities which she described as “[t]he property pool available for distribution”:
Non superannuation assets $ Proceeds of sale of [property at A]
$379,019
Property at [C]
$550,000
Life policy
$13,500
Agreed add-back of sale proceeds of a [motor vehicle] to the husband
$26,000
Agreed add-back of monies distributed from sale proceeds to the husband
$10,000
Agreed add-back of monies distributed from sale proceeds to the wife
$10,000
Total non superannuation assets
$988,519
Liabilities $ Mortgage [on C property]
$241,288
Total agreed liabilities
$241,288
Net Non superannuation assets
$747,231
Superannuation assets $ Wife’s superannuation
$23,351
Wife’s superannuation
$29,492
Wife’s superannuation
$13,270
Husband’s superannuation
$78,000
Net superannuation assets
$144,113
Total net property pool available for distribution $891,344
Her Honour next considered the contributions of the parties and determined that they were equal. We will return later to the reasons which her Honour gave for this conclusion.
Then under the heading “What adjustment if any is to be made in respect of future needs?” her Honour concluded that:
61.The only factor which gives rise to a possible adjustment is the inheritance recently received by the husband.
Her Honour went on to “find that the evidence supports a 5% adjustment to the wife for future needs…”, and she provided three reasons for that finding. Again we will return later to those reasons.
In the following eleven paragraphs of her reasons ([63] to [73]), her Honour apparently endeavoured to satisfy herself that the 55 per cent – 45 per cent division, which she had arrived at, was “a just and equitable division given the facts and circumstances that surround this matter”.
It will be necessary for us to set out those eleven paragraphs from her Honour’s reasons later in these reasons. We foreshadow that ultimately there are some difficulties in relation to which property was to be the subject of the 55-45 per cent division.
Finally in her reasons, and under the heading “Additional issues” her Honour said:
74.The first additional issue is the submission by the husband that the property division should be determined on an asset to asset approach.
75.I find that there is nothing in this matter that justifies an asset to asset approach and I reject this proposal.
76.The parties from the first day of their relationship intermingled their financial affairs and took steps to work towards their financial future.
77.I therefore find that the more appropriate manner to determine the property division is by adopting a global approach.
78.The second additional issue is the concern by the wife that the husband may have additional assets which have not been disclosed.
79.In the absence of any independent evidence in support of this concern, I cannot give any weight to this issue.
80. The third issue is the credibility of the parties.
81.Both parties at times were vague in their answers and maintained positions that presented them in their best light, which is not uncommon in this court.
82.But I find that nothing in the evidence was of such a nature that the credibility of either party an issue for consideration.
83. The fourth issue is disclosure.
84.Again like most matters disclosure was either not fully forthcoming or late.
85.I find that the lack of disclosure however was not an issue that impacted on my ability to make a just and equitable property division in this matter.
The $50,000 loan for the legal expenses of the wife’s son
The first issue addressed by counsel for the husband in his oral submissions to us was her Honour’s refusal to include as “an add-back” the loan of $50,000 taken out by the parties for the legal expenses of the wife’s son. Her Honour’s reasons for her conclusion about this matter were submitted to be inadequate. In addition it was submitted that her Honour had failed to address adequately the wife’s alleged non-disclosure about the use of the loan funds.
Counsel commenced his submissions about this matter by taking us to the husband’s evidence in chief contained in [129] to [139] of his affidavit (sworn or affirmed 2 May 2012). In order to understand those paragraphs, it is necessary to refer to the following earlier passages in that affidavit:
61. Approximately 14 months after we married, [the wife’s] younger son [J] was charged with certain serious criminal offences. He was eligible for Legal Aid and his trial costs were paid via the Legal Aid Office of Queensland. [J’s] legal advisor recommended that he appeal. [J] had no funds of his own and [the wife] asked if we could borrow a further $50,000 against our house to pay [J’s] appeal costs. She had no tangible assets in her name solely. By this stage, we were living in our property at [A]. I was concerned as we already had a mortgage on the property and I had borrowed additional funds against my [C] property. I had total debts of $350,000 and [the wife] had debts of $60,000 at that point.
62. Whilst I wanted to help [J], I did not consider that it was my responsibility to go into further debt. However, I agreed to sign all the necessary documents for a further mortgage to be taken over our home.
63. A loan was taken out in our joint names but it was agreed between [the wife] and me that [the wife] would be responsible for repayment of the debt. To evidence our agreement, [the wife] prepared a document which [the wife] and I both signed. A true copy of that document is annexed hereto and marked ‘BGL11’.
The annexed document reads as follows:
This agreement is made this day of September 2006 between [the wife] of [A property] in the state of Queensland of the one part and [the husband] of [A property] in the state of Queensland of the other part.
Whereas the said [wife] is obtaining a loan from [the bank] in the sum of $50,000 (Fifty thousand dollars)
And whereas [the bank] are taking a mortgage over the parties jointly owned property situated at [A].
Now this agreement witnesseth as follows
1.The said [wife] will be solely responsible for the repayment of the said loan to [the bank] and will not require any payments to be made to [the bank] by the said [husband].
…
The agreement was signed by the husband and the wife but it was undated and not witnessed.
The relevant parts of paragraphs [129] to [139] of the husband’s affidavit were then as follows:
129.I consider that the sum of $50,000 should be added back into the value of our asset pool. [The wife] and I had agreed that she would be responsible for repayment of the debt and, on that basis, I did not contribute towards repayments or interest payments. In fact, I never saw any of the statements for that loan. The statements were sent to our home and addressed to us jointly. I recall that [the wife] almost always arrived home before I did and would check the mail, leaving any mail for me on the table. I expected that she received statements from time to time but I never enquired as to the state of drawings or any repayments. I almost forgot about the loan until our house sold.
130.As a result of these family law proceedings, I am aware that
[the wife] arranged with the bank for the statements to be sent to her sister’s home in approximately 2008. ……
133. As the statements were sent to [the wife] at her sister’s address,
I had no indication as to how much had been drawn from the amount borrowed or whether any repayments had been made. I note that at the time the loan was paid out (when our house sold)
[the wife] had used basically all of the funds and had made minimal repayments.134. [The wife] had never advised me prior to that time that she was using those funds for any purpose other than [J’s] legal costs. For example, she never indicated to me that she was using the funds to pay towards her share of the [A property] mortgage. …
135. The purpose of the loan had always been to assist [J] and I am disappointed that [the wife] did not advise me that there were surplus funds, particularly as she spent these and then had the loan paid out from the sale proceeds of our house. This was never the intention.
136. Throughout these proceedings I have requested copies of the statements that [the wife] received with respect to this account.
I also have requested details as to how those funds were applied.
To date, I have not received details as to who the moneys were paid to or the amounts involved with respect to [J’s] appeal costs.137.Until very recently, [the wife] had only provided to me the statements for the period June 2008 to March 2010. Those statements did not indicate any payments with respect to [J’s] legal costs. I have recently received copies of statements with respect to the period 26 September 2006 to 26 June 2008. [The wife] and
I were still married and had not separated during that period of time.Before going to the passages of the cross-examination of the wife to which counsel for the husband referred us, the following passages from the wife’s evidence in chief contained in her affidavit (affirmed 30 April 2012) should also be noted, particularly in light of a letter dated 28 December 2011 from the husband’s solicitors to the wife’s solicitors (Exhibit D at trial) in which there was a request for the wife to provide details “of the manner in which she spent the $50,000 borrowed in the parties’ joint names but received by [her] only”:
17. I am aware that [the husband] seeks to notionally “add-back” the sum of $50,000.00 to me or that there is an order for repayment of funds to him, representing an amount he says I borrowed from him. I am also aware that he seeks that I ‘account’ for how the funds were spent.
18.I do not agree that the funds should be added back into the property pool. I do not agree that I owe [the husband] the money.
19. I signed the document (although I cannot recall the date) annexed to [the husband’s] affidavit filed 23 June 2011 (“The document”). The document states “The said [wife]will be solely responsible for the repayment of the said loan to [the bank] and will not require any payments to be made to [the bank] by the said [husband]”.
20. [The husband] and I borrowed $50,000.00 from [the bank] in September 2006 as an “Asset Line” line of credit (“The line of credit”). This was paid out when the home at [A] was sold in 2010. The line of credit was taken out in our joint names with [the bank]. …
21. The background to this loan was that my son [J] was convicted of a serious criminal offence following a trial. He had received legal aid funding for his representation at trial, but was refused funding for an appeal. The purpose of this loan from [the bank] was to pay for the legal costs of the appeal.
…
26.After many days of arguing and my time to lodge an appeal running out [the husband] gave his approval under the strict condition he not be responsible for the debt. …
…
28. I can identify three withdrawals that were made from the line of credit for the purposes of my son’s legal costs:
a. On 31 October 2006 in the sum of $16,750.00
b. On 9 November 2006 for a further $1,500.00
c. On 26 May 2007 a final $1,000.00, being
d. A total of $19,250.00.
29. My recollection is that the total legal costs were around $22,000.00 but I am not able to specifically identify any other withdrawals that relate to legal expenses.
30. The withdrawals for legal expenses were made as soon as the loan was approved. As at 26 November 2006 there was $29,955.00 of remaining credit (i.e. a closing balance of $20,040.97)
31. Regular withdrawals were made by me from this loan between November 2006 and February 2009. These were made as payments towards the mortgage on the [A] Property. I can tell because the transfer is to the account … which was our Mortgage account.
32. I have been through the statements and identified those payments. [The particulars of the payments were then set out.]
33. These transfers come to a total of $7,625.00.
The wife then provided details of some other withdrawals before providing the following summary:
42. In short, I can account for $40,000.00 of the $50,000.00 as follows:
a. $19,250.00 - 22,000.00 in legal fees;
b. $7,625.00 transferred as mortgage repayments.
c. $8,500.00 or so in interest.
d. $1,100.00 for [the husband’s] birthday
e. $1,000.00 for the water tanks.
43. The loan itself was paid out of the settlement funds on the sale of the [A] property in March 2010.
44. I admit I commenced having statements sent to my sister’s address.
45. At the time [the husband] was complaining he never had any money. If I brought statements into the house it caused an angry outburst from [the husband].
The passages of the cross examination of the wife to which counsel for the husband took us were as follows:
… Now, this was the position. He told you, didn’t he, that he had already borrowed significant sums against his other property, didn’t he?---Yes, I do recall that.
Right. You do recall that. And he said, “I will agree to allow further moneys to be drawn down off our joint asset, but you’ve got to be responsible for the repayment,” didn’t he?---Correct.
Right. So it was agreed between the two of you that if that was done, you were to make the repayments on that part of the loan?---Correct.
(Transcript 16 May 2012, p. 33, lines 20-30)
… Well, you knew that one of the things that was an issue in these proceedings was precisely how much of the money had been used for [J’s] legal appeal?---Yes.
You knew that?---Yes.
But you provided no statements or documents in relation to actually how much money went to the lawyers?---Correct.
(Transcript 16 May 2012, p. 34, lines 14-21)
Right. So you got, basically, an advance of the equity in the house, didn’t you?---The funds that were left over from my son’s court appeal went back into the property by way of mortgage, or for our expenses.
Well, that’s what you say, ma’am. That’s what you assert. You don’t provide any documentary proof to that effect, do you?---Not to my knowledge.
(Transcript 16 May 2012, p. 35, lines 25-31)
No. Now, again, you knew since June that it was an issue as to what you did with the 50,000. Now go to the letter that was written in November. See the last paragraph on the first page there?‑‑‑Yes.
Again, it calls upon you to substantiate what you’ve done with the money, doesn’t it?‑‑‑Correct.
So since November, you could have gone to the box that lives in the cupboard and produced receipts about legal fees and accounts, couldn’t you?‑‑‑Correct.
(Transcript 16 May 2012, p. 41, lines 4-12)
In refusing to “add-back” the $50,000 as a notional asset of the wife, her Honour said:
22.The Full Court in Omacini & Omacini (2005) FLC 93-218 outlines three categories of cases where it is appropriate to notionally add back to the pool of assets that no longer exist namely:
a)Where matrimonial monies have been used to pay legal fees (see DJM & JLM (1998) FLC 92-816);
b)Where there has been a premature distribution of assets
(see Townsend & Townsend (1995) FLC 92-569);c)Where a party has embarked on a course of conduct designed to reduce the value of an asset or where a party has acted recklessly, negligently or wantonly in respect to an asset
(see Kowaliw & Kowaliw (1981) FLC 91-092).23.In Wilde & Wilde [2007] FamCA 1044 the Full Court at [184] states: “that it is at the discretion of the trial judge as whether monies are to be notionally added back into the pool and that it should be the exception rather than the rule.”
24.At [185] the Full Court cautioned against including, as a general rule, monies expended by parties post separation on reasonable living expenses as add-backs.
Conclusion
25.I find that the $50,000 loan acquired for the benefit of the wife and her son is not an amount that can be notionally added back to the asset pool for the following reasons:
a)The loan was obtained during the marriage with the knowledge of both parties;
b)The loan was acquired primarily to assist the wife with her son’s legal costs associated with his criminal proceedings, although some of the monies were used by the wife for other purposes;
c)The evidence does not establish that there has been wastage by the wife of any of the $50,000;
d)Weight cannot be given to agreement signed by the wife and the husband in September 2006 whereby the wife agreed to take full responsibility for the loan as it is undated, unwitnessed, vague and prepared and signed in the absence of legal advice;
e)The loan was paid out from the sale of the [A] property; and
f)The loan does not fall within any of the categories of
add-backs as set out in Omacini & Omacini.As to the claim made by the husband that the wife had not disclosed the use made by her of the loan of $50,000, it will be recalled that the only conclusions reached by her Honour concerning claims made before her concerning
non-disclosure by either party were as follows:
83. The fourth issue is disclosure.
84.Again like most matters disclosure was either not fully forthcoming or late.
85.I find that the lack of disclosure however was not an issue that impacted on my ability to make a just and equitable property division in this matter.
We are able to say at this point that we have not been persuaded that these conclusions by her Honour concerning claims of non-disclosure at least in so far as they related to the wife’s use of the loan funds were not open to her.
We do, however, consider that there is substance in the complaint that her Honour’s reasoning was inadequate in relation to the approach which she adopted to the wife’s use of those loan funds; that approach was, in effect, to disregard totally in her determination of this property division the fact that the wife had apparently had the sole use of those loan funds.
It will have been seen that her Honour did endeavour to provide reasons in
[22] to [25] of her reasons for judgment for her approach to this matter. But when regard is had to the six matters listed in [25] of her reasons as being the reasons which apparently justified the $50,000 not being “notionally
added-back”, they do not, in our opinion, support that conclusion.
It was certainly not open to her Honour to give no weight to the agreement signed by the parties in September 2006 (matter (d) in [25] of her Honour’s reasons) when the wife said in [19] of her affidavit (set out in [26] above) that she had signed the document stating that she would be solely responsible for the repayment of the loan, and when she conceded in the first passage of transcript (set out in [28] above) that she was to be responsible for the repayment of the loan. That concession from the wife and her affidavit evidence would render irrelevant, so to speak, the facts that “[t]he loan was obtained during the marriage with the knowledge of both parties” (matter (a) in [25] of her Honour’s reasons) and that “[t]he loan was paid out from the sale of the [A] Property [[being the matrimonial home]]” (matter (e) in [25] of her Honour’s reasons), and also the deficiencies in the agreement which her Honour identified in sup-paragraph (d) of [25] of her reasons.
The fact that “[t]he loan was acquired primarily to assist the wife with her son’s legal costs associated with his criminal proceedings, although some of the monies were used by the wife for other purposes” (matter (b) in [25] of her Honour’s reasons) would seem to us to suggest that the wife should indeed be the party responsible for the loan. However, if that was not to be the case, there was a need for much greater analysis by her Honour of the evidence which the wife gave as to how she had used the loan monies which were not used for her son’s legal costs.
Similarly, we are not satisfied that it was open to her Honour to find that
“[t]he evidence does not establish that there has been wastage by the wife of any of the $50,000.” It will be recalled that in [42] of her affidavit evidence (set out in [27] above) the wife had, in effect, admitted that she could not account for $10,000 of the $50,000.
As to her Honour’s statement (matter (f) in [25] of her reasons) that “[t]he
loan does not fall within any of the categories of add-backs as set out in
Omacini & Omacini”, we need only observe that in identifying three categories of cases (being the categories which her Honour had earlier set out in [22] of her reasons), the Full Court at [30] of its reasons in Omacini said no more than that to that date those “three clear categories of cases [had] emerged where the court had determined that it was appropriate to notionally add back to the pool of assets…assets that no longer exist.” The Full Court did not suggest that no further categories of such cases might be identified.
It may well be, of course, that in light of certain of the observations made by members of the Full Court in their judgments in Bevan & Bevan (2013)
FLC 93-545 at [79] and [160] (which were delivered subsequently to her Honour’s decision in this case and to the hearing of this appeal), that it would not have been appropriate for her Honour to treat the loan funds in question as “notional property” to be added back to, or included in, the property available for distribution between the parties. But however that may be, it would seem on the basis of the evidence to which we were taken, and have earlier recorded, that justice and equity would require that the wife’s use of these loan funds should have been taken into account in some way in favour of the husband either as a contribution by him or as a matter under s 75(2)(o) of the Act. It might even have been open to a court on a proper analysis of the evidence, to have concluded that the sum of $50,000 representing the loan funds was a debt which the wife owed to the husband and which should have been repaid out of the net proceeds of the sale of the matrimonial home.
It is not to the point that the possibility of taking the loan funds into account as a contribution of the husband or as the basis of an adjustment under s 75(2) in the husband’s favour was not raised before her Honour (which was an argument put to us on behalf of the wife). It fell to her Honour to decide how best to exercise the jurisdiction under s 79 of the Act in order to achieve just and equitable orders on the basis of the evidence before her.
The ultimate effect of her Honour’s treatment of the loan funds in question was that the husband shared responsibility for the expenditure of those funds when the evidence appears to establish that the wife had agreed at the time when the funds were borrowed, that she alone would be responsible for their repayment. Unfortunately, her Honour’s reasons were not adequate to persuade us that on the evidence before her this was a just and equitable outcome. The grounds of appeal directed to this matter have therefore been established and the appeal must succeed on this basis.
The global as opposed to asset by asset approach
The second issue addressed by counsel for the husband in his oral submissions to us was her Honour’s use of the global rather than the asset by asset approach in her determination of the property division between the parties in circumstances where the husband had sought the use of the asset by asset approach.
It will be recalled that her Honour only referred to this issue at the conclusion of her reasons for judgment and that she did so under the heading “Additional issues”, where relevantly she said:
74.The first additional issue is the submission by the husband that the property division should be determined on an asset to asset approach.
75.I find that there is nothing in this matter that justifies an asset to asset approach and I reject this proposal.
76.The parties from the first day of their relationship intermingled their financial affairs and took steps to work towards their financial future.
77.I therefore find that the more appropriate manner to determine the property division is by adopting a global approach.
Again, the husband’s complaint about this issue was that her Honour’s reasons for preferring the global approach were inadequate and that the question of whether to use that approach or an asset by asset approach required much more detailed examination.
While this may well have been a case where an asset by asset approach would have been appropriate, given, for example, the issue previously discussed of the $50,000 loan (which was relied on by counsel for the husband in support of his submissions on this issue), we are not persuaded that her Honour’s reasons for preferring the global approach were inadequate. As was recognised by counsel for the husband, the decision whether or not to use the global or the asset by asset approach is very much a matter of discretion for a trial judge; we are also not persuaded that her Honour’s discretion miscarried in this case in relation to this issue. The grounds directed to this complaint have therefore not been established.
The assessment of the parties’ contributions as equal
The next matter addressed by counsel for the husband was the alleged inadequacy of her Honour’s reasons for her conclusion that the parties’ contributions should be regarded as equal, and in this context the first issue addressed was her Honour’s approach to the parties’ “initial contributions”.
Her Honour’s discussion and conclusion concerning the parties’ initial contributions were as follows:
37.The parties agree that at the commencement of the relationship each had an interest in encumbered house properties, the wife in a property at [K] and the husband in the [C] property.
38.Unfortunately the evidence is devoid of any indication as to what each property was worth as at 2002.
39.The only details as to the extent of the encumbrances is the husband’s evidence that at the time of cohabitation there was a mortgage of $14,000 owing on the [C] property.
40.The wife subsequently sold the [K] property and contributed the bulk of the proceeds into her share of the purchase of the
[A] property.41.The husband has retained the [C] property and used the equity in the property to raise the funds to pay in his share of the [A] property.
42.The husband states that an adjustment is to be made in his favour for his initial contribution
43.The wife states that the parties’ initial contributions were equal and therefore no percentage adjustment should occur.
Conclusion on initial contributions
44.I find that in the absence of evidence to the contrary, there is nothing to justify an adjustment in favour of either party in respect to their initial contributions.
Although her Honour’s treatment of the parties’ initial contributions was relatively short, we do not consider that it was inadequate. We certainly do not agree with counsel for the husband that there was any necessity in this case for her Honour to discuss the authorities in relation to initial contributions. What her Honour said in [38] about the evidence being “devoid of any indication” as to the value of each party’s property at the commencement of their relationship, may have been something of an overstatement, but we have not been persuaded that there was the necessary evidence before her Honour which would have compelled a finding in relation to such valuations.
Coming then to the parties’ contributions during their relationship and after separation, her Honour set out in the following paragraphs of her reasons the various contributions on which each party relied and then her assessment of those contributions:
45.The husband states that an adjustment should be made in his favour based on his contributions during the relationship because:
a)It was the husband who was solely responsible for the improvement of the [C] property which has resulted in its current worth;
b)That the husband’s contributions to the purchase of the [A] property were higher than that of the wife’s contributions;
c)The husband contributed to the upbringing of the wife’s children during the relationship.
46.The wife states that the contributions by the parties were equal during the course of the relationship and that consideration should be given to the following:
a)The husband was not earning an income when the parties first met whereas the wife was working;
b)The wife assisted in the renovation of the [C] property;
c)The [C] property did not produce an income for the 18 months that it was being renovated;
d)The parties’ contribution to the acquisition of the [A] property was equal;
e)The older child moved out within months of the relationship commencing and the younger child was in his last years of schooling;
f)That upon completion of school the younger child went to TAFE and commenced an apprenticeship;
g)The parties lived in the [K] property owned by the wife until its sale in 2005;
h)That the parties contributed equally to the mortgage and other household expenses for the [A] property;
i)It was through the wife’s intervention that the husband re-established his relationship with his mother;
j)That the wife assisted the husband’s mother when the husband’s father was dying in 2007; and
k)The wife provided support to the husband during the various illnesses he suffered from during the course of the relationship.
Conclusion on contributions during the marriage
47.The parties’ relationship of eight years could not be described as a short marriage, nor could it be described as a long marriage.
48.During the relationship the parties worked together to build up their asset pool.
49.Along the way there were situations which were emotionally charging for both parties including the death of the husband’s parents and the conviction and jailing of the wife’s younger son for manslaughter.
50.In the highs and lows there was give and take by both parties and it is this tapestry of life that must be considered in determining whether one party’s contribution was higher than the other party.
51. On the evidence I make the following findings:
a)Any greater contribution by the husband to the [C] property is offset by the parties having use of the [K] property during the renovations and the [C] property not generating an income for18 months;
b)I do not accept that the husband’s financial contribution to the acquisition to the [A] property was any greater than that of the wife;
c)Any greater contribution by the husband to the care of the wife’s two children from a previous relationship is offset by the contributions made by the wife to the husband during his illnesses and to the husband’s family.
52.Therefore taking into account the contributions made by the parties during the course of the relationship, both financial and non financial, direct and indirect, the contributions are equal and therefore an adjustment is not to be made in favour of either party.
Post separation contributions
53.Since physically separating in 2010 when the [A] property sold each party has led their own separate lives.
54.Each has continued to work and build on their respective superannuation policies.
55.The [C] property has been rented with the rent being used to reduce the mortgage.
56.The only additional contribution has been the very recent reduction by the husband of the mortgage on the [C] property from his inheritance.
57.This has been addressed earlier in the judgment whereby findings were made that it is more appropriate for the inheritance in its totality to be treated as a financial resource and for the mortgage to be included at its unreduced amount.
Conclusion on post separation contributions
58.I find that the post separation contributions by the parties are equal and that nothing in the evidence supports an adjustment in either parties [sic] favour.
To the extent that we were able to understand the husband’s complaints about her Honour’s assessment of the parties’ contributions during the course of and after their relationship, they appeared to be that her Honour had failed to take into account the following as contributions by the husband: the fact, which was submitted to be undisputed, that the husband’s income was greater than that of the wife during their relationship; the husband’s continuing payment after separation of the mortgages on the matrimonial home at A until it was sold and on his property at C; and the work he had done on the wife’s property at K before it was sold.
It is true that these three matters are not specifically referred to by her Honour in her summary of the contributions claimed by the parties in [45] and [46] of her reasons. However, these omissions would not by themselves have caused us to interfere with her Honour’s orders unless it had been established to our satisfaction (which it was not), that they would have made a real difference to the assessment of the parties’ contributions. But given that there are other reasons which call for our interference with her Honour’s orders, we need say no more about the complaints directed to the contribution assessment.
However as we will discuss later, her Honour’s conclusion in [58] “that nothing in the evidence supports an adjustment in either party’s favour” is somewhat ambiguous, but presumably must indicate that there should be an equal distribution of all their property which had been found to be available for distribution.
The 5 per cent s 75(2) adjustment in favour of the wife
In order to consider the husband’s next group of complaints, which relate to her Honour’s adjustment of 5 per cent in the wife’s favour on account of the s 75(2) matters, we will first set out what her Honour said about that matter.
Having posed the question of what if any “adjustment” (that is, presumably to a division based on equality of contributions) was necessary “in respect to future needs” (which is clearly a reference to the s 75(2) matters) her Honour continued:
60.Both parties are of similar age, are working and have health issues.
61.The only factor which gives rise to a possible adjustment is the inheritance recently received by the husband.
Conclusion
62.I find that the evidence supports a 5% adjustment to the wife for future needs based on the following:
a) The pool is relatively small, less than $900,000;
b)The husband has available to him a financial resource in the form of an inheritance of $136,402 which in part has already been utilised to reduce the mortgage debt on the [C] property; and
c)Whilst the husband has retained the property he had when he entered into the relationship, the wife sold her property to acquire the former matrimonial home at [A] which also has been sold.
The husband’s complaints about this adjustment of five per cent in favour of the wife are that her Honour apparently failed to have regard to the evidence concerning his health problems and also to his liability of $65,000 in respect of his new car; and he further contended that there is no adequate explanation as to why an adjustment of that particular percentage of five per cent was made.
As we pointed out at the hearing of the appeal, it cannot be said that her Honour failed to have regard to the husband’s health problems because she expressly said in [60] that both parties had “health issues”. It can be assumed that she regarded each party’s health problems as off-setting the other’s health problems, and that no adjustment was necessary in either party’s favour on account of that matter.
The omission of the husband’s liability in respect of his car is perhaps of greater concern because it appears to have been overlooked not only in her Honour’s consideration of the s 75(2) matters, but also in her later analysis at [65] to [73] of her reasons of “the justice and equity” of the division which she proposed to make of the parties’ property. We note, however, that in omitting reference in her later analysis to the husband’s liability in respect of the motor vehicle, her Honour also did not include the value of the vehicle as an asset, and thus little ultimately turns on the omission of that liability.
As to the husband’s complaint as to how the figure of a five per cent adjustment was arrived at, it is always a difficulty, if not an impossibility, in this jurisdiction, where the use of percentages has developed to express parties’ entitlements to property based on their contributions and on the matters in s 75(2), to provide a rationale for a particular percentage used for such purposes. (See for example the comments of Coleman J in Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234] and Finn J in Farmer & Bramley (2000)
FLC 93-060 at [49]). This difficulty can only be satisfactorily resolved by considering the value of the property which the particular percentage in question represents. This her Honour did endeavour to do in [65] to [73] of her reasons where she considered the “justice and equity” of her proposed orders. The husband’s final group of complaints are directed to that consideration by her Honour, and that is the matter to which we will next turn.
Before doing so, we observe that her Honour’s conclusion in the first line of [62] is similarly confusing as was [58] of her reasons in that it is unclear as to precisely what it is to which “a 5% adjustment” is to be made.
The justice and equity of the orders
The husband’s essential complaint in the last of the six main issues raised by him in the appeal was that in her consideration of the “justice and equity” of her orders, her Honour has apparently overlooked the fact that she had awarded the wife more than the wife had sought in the proceedings.
In support of this complaint it was submitted by counsel for the husband that in her response to the husband’s application the wife had sought only to receive the entirety of the proceeds which were held in trust of the sale of the former matrimonial home, but she had in fact received an additional payment from the husband of “$29,000” according to the transcript of the oral submissions of counsel for the husband. Although later in counsel’s submissions that figure was apparently amended to $21,000, and as will be seen from the passages which follow from her Honour’s reasons, that last mentioned figure closely equates with the figure which her Honour required the husband to pay to the wife.
The response of the wife’s counsel to this complaint was that “the pool” of property might have “ended up being different” (presumably from that which one or both parties had anticipated), but that “the wife had always contended that the moneys in trust go to her”.
It seems to us that the confusion in relation to this issue probably arises because of uncertainty as to whether, when the wife sought the proceeds of sale held in trust, she was seeking the amount of the trust fund as it stood at trial or as it stood before each party had received the amount of $10,000 out of it. Unfortunately, this possibility was not explored before us satisfactorily, nor as will be seen from the passages which follow from her Honour’s reasons, did she explain it (although as will be seen there is a reference to the $10,000 which each party received in [66(b)] of her reasons).
We observe in passing in relation to this particular complaint by the husband, that it is generally useful for trial Judges to give some indication, if only briefly, in their reasons for judgment in property proceedings, of the orders or division of property which each party has sought, if only to ensure that a party does not receive more than he or she has sought.
In her reasons for judgment, after having reached her conclusion about the
s 75(2) adjustment in favour of the wife, her Honour then posed the question as to whether the 55 per cent – 45 per cent division of the property pool, which she had arrived at, was “a just and equitable division given the facts and circumstances that surround this matter”. In an apparent endeavour to answer this question, her Honour continued:
65.There are a number of issues that requires scrutiny of the percentage division to ensure that the property division is fair to both parties:
a)Firstly when the parties first met each was living in an encumbered house;
b)Secondly each had superannuation as at the date of cohabitation;
c)Thirdly since separation each has continued to work and contribute to their superannuation;
d)Fourthly upon physical separation the wife no longer owned real estate whereas the husband still had the [C] property;
e)Fifthly the husband has retained the [C] property which continues to generate an income and has a small easily serviceable mortgage;
f)Sixthly there exists liquid assets for distribution in the form of the proceeds of sale of [property A]; and
g)Lastly that the husband has at his disposal the remainder of the inheritance.
Then under the heading “Conclusion” her Honour said:
66.I find taking into account the above issues that a just and equitable division of the property pool will be achieved by the following:
a) That each party retain the superannuation in their possession;
b)That each party are to be accountable for the $10,000 each has received by way of partial distribution of the [property A] sale proceeds;
c)That the remaining property pool is to be divided 55% to the wife and 45% to the husband;
d)That otherwise the husband has full use and control over the remainder of the inheritance.
67. The remaining property pool consists of the following:
Non superannuation assets
$
Proceeds of sale of [property at A]
$379,019
Property at [C]
$550,000
Agreed add-back of sale proceeds of a [motor vehicle] to the husband
$26,000
Life policy
$13,500
Total non superannuation assets
$968,519
Liabilities
$
Mortgage [on C property]
$241,288
Total agreed liabilities
$241,288
Net Non superannuation assets
$727,231
Total net property pool available for distribution
$727,231
68.A 55% adjustment in favour of the wife results in the wife receiving assets totalling $399,977 (55% x $727,231) made up of the following:
Proceeds of sale of [property A]
$379,019
Payment by the husband to the wife
$20,958
Wife’s share of property pool
$399,977
69.The husband for his 45% share will receive assets and liabilities totalling $327,254 (45% x $727,231) made up of the following:
Property at [C]
$550,000
Agreed add-back sale proceeds [motor vehicle]
$26,000
Life policy
$13,500
Total non superannuation assets
$589,500
Liabilities
$
Mortgage [on C property]
$241,288
Payment to the wife
$20,958
Total liabilities
$262,246
Husband’s share of property pool
$327,254
70. I find that this division places the parties in a similar position.
71. For the husband it provides the husband with:
a) The [C] property with a small mortgage;
b) The full benefit of his superannuation fund;
c) Use of the remaining funds from his inheritance; and
d) Use of the funds available from the life policy.
72. For the wife it provides the wife with:
a)An opportunity to acquire another property of similar value with a similar mortgage to that of the husband;
b) The full benefit of her superannuation funds.
73. I find that this division is just and equitable.
The orders which her Honour then made were as follows:
(1)That within 7 days from the date hereof the parties shall do all such acts and things necessary and sign all such documents as are required to ensure the release to the wife of the sum of $379,019 from the invested sale proceeds of [A property] which are held in the solicitors trust account of [W Lawyers].
(2)That in the event there are monies remaining in the solicitors trust account of [W Lawyers] after payment of the monies in accordance with Order 1 then the remaining monies are to be divided as follows:
(a) 55% to the wife; and
(b) 45% to the husband.
(3)In the event of a failure by either party to sign all documents as may be required to give effect to Order 1 then these Orders operate as an irrevocable authority and direction to the trustees of [W Lawyers] Trust Account to distribute the funds in the trust account in accordance with Orders 1 and 2.
(4)That within 7 days from the date hereof the husband pay to the wife the sum of $20,958.
(5)That the husband retain for his sole use and enjoyment all items in his possession including:
(a) The house property at [C];
(b) The [motor vehicle];
(c) The inheritance from his mother’s estate;
(d) His superannuation fund;
(e) His life policy; and
(f) His bank accounts.
(6)That the wife retain for her sole use and enjoyment all items in her possession including:
(a) Her superannuation fund;
(b) Her bank accounts.
(7)That unless otherwise specified in the orders each party is to indemnify the other and keep each other indemnified against any liability encumbering any item of property in their possession.
Her Honour’s orders appear to reflect her intentions as expressed in [66] to [69] of her reasons. But her intentions in those paragraphs and her orders do not appear to reflect her earlier conclusions regarding the division of property that should be made on the basis of the parties’ contributions or the adjustment to that division based on the s 75(2) matters, although as we have earlier observed, those conclusions expressed in [58] and [62] of her reasons were somewhat ambiguous as to what property was to be adjusted.
However, it seems clear from what her Honour said in [63] of her reasons, which we now set out, that at that stage of her reasoning (which immediately followed her consideration of the parties’ contributions and the s 75(2) matters), she intended to make a 55-45 per cent division of “the property pool”, which could only have been of “the property pool available for distribution” which she had set out at [36] of her reasons (see [14] above) and which had a total net value of $891,344:
63.Based on the first three steps of the four step approach as set out in Hickey v Hickey & Attorney-General of the Commonwealth (Intervener) the wife is to receive a 55% division of the property pool with the husband to receive 45%.
Yet in her ultimate distribution her Honour applied the 55-45 per cent division to a different and reduced “pool”, being one which did not include the parties’ superannuation interests or the sum of $10,000 which each had received out of the sale proceeds held in trust. It may be that her Honour’s reasons for applying the percentage division that she had determined to a different and reduced “pool” of property are to be found in the matters which her Honour enumerated in [65] of her reasons, but that is not entirely clear either.
Moreover, we are particularly concerned about her Honour’s statement in [70] that “this division” (presumably being the 55-45 per cent division of the smaller pool) “places the parties in a similar position.” It may have been in an endeavour to place the parties “in a similar position” that her Honour applied her percentage distribution to a smaller pool. But to place the parties “in a similar position” is not the purpose of the exercise of jurisdiction under s 79 of the Act. As was submitted in the final paragraph of the husband’s written outline of argument to us in support of the grounds of appeal directed to her Honour’s consideration of the justice and equity of her orders:
49.Further her Honour’s comments as to the parties being placed in a similar position in the absence of clear reasoning process gives rise to the notion of the exercise of discretion was misdirected toward generating equality rather than equity.
Given the scope of the argument before us, we have not considered it appropriate to address in these reasons the issue of the correct approach to the “just and equitable” requirement in s 79(2) in the light of the decision of the High Court in Stanford & Stanford (2012) 247 CLR 108.
It is sufficient that we conclude that in seeking to satisfy herself as to the justice and equity of her proposed orders, her Honour departed from applying a particular percentage division to a particular pool of property to applying those percentages to another pool of property. As a consequence her reasoning became, with respect, confused or inconsistent. Put simply, her reasons did not clearly support her orders.
Conclusion
The husband’s challenge the adequacy of her Honour’s reasons must succeed on account of the matter just discussed as well as on account of her treatment of the loan funds of $50,000.
Unfortunately, given that this appeal is to succeed on the basis of an inadequacy of reasons in the trial judgment, it is impossible for this Court to
re-determine the matter, and there must, regretfully, be a new trial.
Our orders will therefore be that the appeal be allowed; that the Federal Magistrate’s orders be set aside; and that the property proceedings be remitted to the Federal Circuit Court for re-hearing (by a Judge other than Judge Turner).
Costs
Having regard to the submissions made at the conclusion of the hearing before us, we propose to order that there should be no order for costs, and that both parties should receive costs certificates under the Federal Proceedings Costs Act 1981 (Cth) both in respect of the appeal and the new trial.
I certify that the preceding seventy six (76) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, Strickland and Ainslie-Wallace JJ) delivered on 17 July 2014.
Associate:
Date: 17 July 2014
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