Linder & Linder
[2016] FamCAFC 139
•4 August 2016
FAMILY COURT OF AUSTRALIA
| LINDER & LINDER | [2016] FamCAFC 139 |
| FAMILY LAW – APPEAL – PROPERTY – Appeal against final property orders – Where the grounds of appeal challenge the exercise of discretion and weight given to various factors – Waste – Failure to give full and frank disclosure – Taxation liability treated as contingent liability – Where the approach adopted by the primary judge accords with the proposal sought by the husband at trial for the treatment of the superannuation fund and associated taxation liabilities – Where appellant bound by the conduct of case – No error demonstrated – Appeal dismissed. FAMILY LAW – COSTS – Where the appellant was wholly unsuccessful – Where justifying circumstances exist for costs in favour of the respondent – Appellant to pay costs. |
| Family Law Act 1975 (Cth): ss 75(2), 79(4), 93A(2), 97(3) Family Law Rules 2004 (Cth): r 1.04 |
| CDJ v VAJ (1998) 197 CLR 172 Coulton v Holcombe (1986) 162 CLR 1 Eufrosin & Eufrosin [2014] FamCAFC 191 Gould and Gould (2007) FLC 93-333 Johnson and Johnson (2000) FLC 93-039 Kannis and Kannis (2003) FLC 93-135 Kowaliw and Kowaliw (1981) FLC 91-092 Trustee of the Property of G Lemnos, a Bankrupt & Lemnos and Anor (2009) FLC 93-394 Whisprun Pty Limited v Dixon (2003) 200 ALR 447 |
| APPELLANT: | Mr Linder |
| RESPONDENT: | Ms Linder |
| FILE NUMBER: | SYC | 3553 | of | 2011 |
| APPEAL NUMBER: | EA | 14 | of | 2014 |
| DATE DELIVERED: | 4 August 2016 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan, Aldridge & Cronin JJ |
| HEARING DATE: | 9 November 2015 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 17 December 2013 |
| LOWER COURT MNC: | [2013] FamCA 988 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Grieve QC and Ms Coulton |
| SOLICITOR FOR THE APPELLANT: | Norton Smith & Co |
| COUNSEL FOR THE RESPONDENT: | Mr Kearney SC |
| SOLICITOR FOR THE RESPONDENT: | Uther Webster & Evans |
Orders
The Application in an Appeal filed 23 October 2015 be dismissed.
The appeal be dismissed.
The appellant husband to pay the respondent wife’s costs of and incidental to the appeal within one (1) month of the quantum of costs being agreed or assessed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Linder & Linder has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 14 of 2014
File Number: SYC 3553 of 2011
| Mr Linder |
Appellant
And
| Ms Linder |
Respondent
REASONS FOR JUDGMENT
Introduction
By Notice of Appeal filed on 21 February 2014 Mr Linder (“the husband”) appeals against final orders made by Rees J on 17 December 2013 for the settlement of property pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”).
The primary judge determined that the husband and Ms Linder (“the wife”) owned property in the amount of $1,309,659 net, of which $348,173 was superannuation held in the parties’ self-managed superannuation fund.
After a marriage of 26 years, during which both parties made significant contributions towards the acquisition of property and to the welfare of their family, the s 79(4) contributions made by the husband were assessed at 60 per cent compared to those made by the wife at 40 per cent. Section 75(2) considerations resulted in a 20 per cent adjustment in favour of the wife, as a consequence of which the wife was entitled to receive 60 per cent of the parties’ property and the husband receive 40 per cent.
On appeal the husband seeks an equal division of a differently formulated property pool. Pivotal to the formulation of the property pool is her Honour’s treatment of contingent taxation liabilities resulting from the husband’s management of the parties’ self-managed superannuation fund and to exclude from the parties’ net assets, potential liabilities to Australian Taxation Office (“ATO”) in the husband’s sole name.
The orders under appeal provide for the wife to receive the amount which remained from the sale of the family home (approximately $793,000) held in a controlled money account and for the husband to pay her $41,142.
On appeal, the husband sought orders which would have him receive $200,000 from the controlled monies account and the balance paid to the wife.
An application to adduce further evidence in the appeal was filed by the husband on 23 October 2015. The gravamen of that evidence is that the wife’s mother had recently passed away and the wife was to receive approximately $1.2 million by way of inheritance.
The wife sought to uphold the orders of the primary judge and that the application in an appeal be dismissed.
Background facts
So as to give context to the appeal, it is necessary to set out some brief background facts.
At the time of trial, the husband was 62 years of age and the wife was aged 56 years.
The parties commenced cohabitation upon their marriage in 1984 and separated in October 2010, albeit they continued to live in the family home. The husband moved out of the family home in June 2011.
There are three children of the marriage, all of whom are adults.
Towards the end of her pregnancy with the parties’ first child, the wife gave up her position in the travel industry and has not had paid employment since.
The husband is a legal professional and holds degrees in commerce and law.
Having bought their first home, at Suburb P, in 1984 (shortly before they married), it was sold in 1990 at which time the parties purchased a home at Suburb U.
In 1995, the husband and wife established the “C Superannuation Fund” (“the superannuation fund”). The husband and wife were the trustees of the fund, the assets of which comprised shares in publicly listed companies and cash.
At the commencement of cohabitation the husband worked as an employed legal professional and, in 1997, he became a partner in X Firm (“X”) which was a legal partnership specialising in commercial law. He was required to make a capital contribution to X which he did with funds borrowed from the ANZ Bank. The husband remained a partner until 2003 when the partnership was terminated.
The ANZ Bank called on the husband to repay the loan and, when he refused, proceedings were commenced against him. The husband was unsuccessful and in the end he was ordered to pay $114,000 more to the bank than the amount for which the bank previously offered to settle.
A few weeks before the parties separated (in October 2010), the wife refinanced the mortgage secured against the family home. She borrowed the amount required to discharge the existing mortgage and an additional $281,000. From that additional sum, $220,000 was paid to the ANZ Bank in satisfaction of the judgment and the balance was used to service the mortgage.
After the parties separated under one roof, the husband stopped making significant contributions to the household finances, including the mortgage. He paid $7,000 into the wife’s account in June 2010 ([151]) and from September 2010 the husband made no financial contribution to the welfare of the family ([21]).
After the partnership was terminated the husband established his own legal practice. Whether in relation to the practice or the husband’s personal income tax, he last filed a taxation return for the year ended 30 June 2011. For that financial year the husband’s practice banked $733,166 (in a number of places the figure is wrongly transposed as $733,116 but nothing turns on this) and his taxable income was $2,713. None of that (or subsequent income) was available to the wife ([154]).
The wife commenced proceedings for the settlement of property and interim property orders on 10 June 2011.
The husband filed a response on 8 July 2011.
On 11 July 2011 orders were made for the sale of the family home and in relation to the proceeds of sale. After payment of selling costs and discharge of encumbrances secured on the family home, all current tax liabilities of the husband and wife were to be paid and the balance secured in a controlled monies account.
The disposition of the sale proceeds was further addressed by orders made by consent on 13 August 2012. Excluding provision for the payment of secured liabilities and selling costs, these orders provided that the proceeds of sale be applied:
·$30,000 in outstanding school fees;
·$150,000 to each of the husband and the wife (which was subsequently categorised as an interim property settlement);
·$210,855 to the ATO in relation to the wife’s taxation liability as at 11 July 2011;
·$57,822.93 being the amount of the husband’s primary tax as at 11 July 2011; and
·The balance to be paid to a controlled monies account.
The sale of the family home was completed on 24 August 2012 and the payments referred to above were made.
By way of explanation for the payments to the ATO, it needs to be understood that the practice was incorporated and distributed income earned by the practice to the parties via an investment trust. With the payments remitted to the ATO the parties’ primary taxation liabilities were fully paid. However, as at 30 June 2011 the husband remained indebted to the ATO in the amount of $181,150 which comprised general interest charges (payable after remittances) for the period 2003 to 30 June 2011 ([145]). He did not remit periodic payments to the ATO during 2012 ([155]) or lodge a taxation return and it is uncontroversial that when his primary tax was paid, his general interest charge (and associated penalties) debt had risen to $199,784.00.It had increased even further by the time of trial.
An order was made on 11 March 2013 for the husband to pay the wife interim spousal maintenance in the amount of $1,000 per week, which was paid from the funds held in the controlled money account. Because the husband chose not to pay the spousal maintenance from periodic income, he was required to account to the controlled money account for the $37,000 it paid to the wife ([38]).
Findings as to disclosure and control of assets
The primary judge made damning findings about the husband’s failure to give full and frank disclosure and found his oral evidence to be unhelpful. No challenge is made to these findings and it is useful to observe at this stage it is conceded that these findings “were not without justification”. In a similar vein, the husband does not challenge findings that:
·he practises as a sole trader ([128]);
·he was solely responsible for what was and was not done in relation to the superannuation fund ([101]);
·he did not file an up to date financial statement ([121]);
·it was left to the wife to attempt to construct a picture of the husband’s financial position by reference to documents “either disclosed by the husband or produced on subpoena” ([122]);
·there was no satisfactory evidence about the husband’s actual income from his legal practice or his necessary expenses ([125]);
·the primary judge was left in the unsatisfactory position of having to determine the husband’s financial position without any assistance from him ([126]);
·the husband made no attempt to give any financial disclosure of the income of his practice, let alone full and frank disclosure ([140]);
·how the income of the husband’s business was disbursed was entirely unexplained ([154]); and
·why the income of the business could not be used to reduce or repay the husband’s tax liability was unexplained ([154]).
In relation to the husband’s failure to pay tax, the primary judge said:
157.Since the husband stopped contributing to household expenses, he has retained for his own use the income generated from his legal practice. He has given no evidence in relation to that income which would assist the Court to understand what he earned and why he was not able to pay at least some of his tax liability. Between 1 July 2010 and 31 October 2013, the legal practice banked $2,376,543. No attempt has been made by the husband to explain what that money was used for or where it went.
158.The onus lies with the husband to explain why he was unable to pay his tax as it fell due in circumstances where his taxable income for the financial years 2007 to 2010 inclusive totalled $1,396,772. In those years, the husband had the benefit of the income and, insofar as the tax was not paid, had the benefit of those funds as well. If the husband had evidence which explained his failure to pay tax in the years before 2010 then he ought to have brought the evidence before the Court.
159.I note, in addition, that from the proceeds of the sale of the [U] property the husband received a partial property settlement of $150,000 and a further amount of $57,000 was paid to the ATO, being the amount of the husband’s primary tax then outstanding. No attempt was made by the husband to explain what was done with the partial property settlement.
The husband failed to disclose work in progress and significant debtors which, as to the latter, in September 2012, exceeded $587,000 and which was only disclosed as a result of cross-examination. These were assets in the husband’s possession ([216]).
The husband’s failure to make full and frank disclosure meant that “the Court need not shy away from a robust exercise of discretion in favour of the wife” ([218]). The correctness of this approach is, quite properly, not challenged (Kannis and Kannis (2003) FLC 93-135 as cited by the Full Court in Gould and Gould (2007) FLC 93-333).
There was no evidence that the wife was likely to obtain future employment ([211]).
The parties’ property and the outcome at trial
The primary judge determined (at [196]-[197]) that the parties’ property and liabilities as at the date of hearing were as tabulated below.
Property Ownership Description Value H/W Controlled Moneys Account $ [7]93,299 W Household furniture $ 5,000 H Household furniture $ 2,000 W Artwork (in Wife’s possession) $ 7,630 H Artwork (in Husband’s possession) $ 5,000 W Personal jewellery $ 13,590 W/H IAG shares (395 shares) $ 2,382 H Business – [Z] Pty Ltd $ NIL W Bank account balance – Westpac a/c xx638 $ 10,446 H/W Argo Investments Ltd Shares (22,322 shares) $ 160,495 H NAB Account (xx858) $ 900 H NIB Shares (3,800 shares) $ 6,251 H Guiness Peat Group Pty Ltd (5,736 shares) $ 3,209 W Bank account – Westpac a/c xx629 $ 1,199 W Maple Brown Abbott Investment $ 595 Total $ 1,011,996
Liabilities Ownership Description Value W St George Bank a/c xx305 (overdrawn) $ 10,715 W
Personal loans – sourced from personal friends – December 2011/March 2012/July 2012 $ 75,000 H/W [G] Pharmacy $ 1,795 Total $ 87,510
Superannuation Member Name of Fund Type of Interest Value W [C] Superannuation Fund Self-managed Fund
$ 81,403 H [C] Superannuation Fund As above $ 266,770 Total $ 348,173
As we mentioned earlier the husband depleted the controlled monies account by $37,000 being spouse maintenance he was obliged to pay from income. With this sum included the parties’ total net property was valued at $1,309,659 ([201]).
There was an issue as to whether or not the Argo shares were assets of the superannuation fund. Her Honour determined they were not. On that basis the value of the parties’ superannuation interests was agreed in the amount found. It was also agreed that the wife should transfer her superannuation interest to the husband. As to the superannuation fund, it was common ground that the fund was in breach of various legislative requirements and if examined by the ATO would probably be determined to be non-compliant in many areas. Depending on the approach adopted by the ATO the possible detrimental financial consequences by way of tax and overwhelmingly penalty to the capital of the fund ranged from about $22,817 to as high as $343,240. Presumably and because of the uncertainties surrounding whether or not that potential liability would be crystallised and at what amount, neither party argued for its inclusion as a debt of the parties and it was not. Nonetheless, as we will discuss under our consideration of grounds 1 and 2, on appeal the husband sought to argue this liability should have been included at half the highest amount, namely $171,620.
So too, in determining the parties’ net property the primary judge rejected the husband’s argument that his asserted personal taxation liability should be treated as a debt of the parties and paid from the controlled monies account. As to the precise amount said to be due, the husband gave evidence that it stood at the amount of $392,030 at the date of trial ([146]); the parties’ accountants were agreed that the amount in issue was $380,000 (shortly before trial) and the Balance Sheet nominated $343,000 (at an earlier date). Although the husband does not appeal her Honour’s determination to not include this as a debt of the parties, the fact of it underscores his challenge to the orders.
The orders made by the primary judge conferred on the wife property worth $831,759 in total together with a payment from the husband in the amount of $41,142. Excluding superannuation the wife retained those items listed above in her sole name as well as her liabilities and half the pharmacy debt. Thus after the payment of her liabilities the wife had property worth approximately $786,000.
As to the husband, in accordance with his position at trial, indeed also on appeal, the wife was ordered to transfer to him her superannuation interest and Argo shareholding. Her IAG shareholding was also transferred and he retained items of property in his sole name. By reference to her Honour’s findings the husband received non-superannuation property in the amount of $179,339 (net) from which he was to pay the wife the adjusting amount. Thus he received net non-superannuation property in the amount of $138,197 and superannuation of $348,173 or total net property worth $486,370. As we will shortly discuss, it is the husband’s contention that he cannot access his superannuation interest and because the fund is subject to a significant contingent taxation liability, this figure is illusory and he in fact received much less than the primary judge determined.
Grounds of appeal
During the course of oral submissions senior counsel for the appellant abandoned ground 3. The remaining grounds of appeal may be summarised as asserting error by the primary judge in:
·making orders beyond the bounds of a reasonable and proper exercise of discretion and therefore constituting a miscarriage of discretion (ground 1);
·concluding that it was just and equitable that the husband’s entitlement should be satisfied by his receipt of a non-compliant superannuation fund (vulnerable to a taxation impost of $343,240), and the shares in IAG and Argo Investments Ltd (and no more) (ground 2);
·in rejecting further submissions on behalf of the husband which explained the calculations of his gross and taxable income (ground 4);
·finding that the husband’s maintenance of litigation with the ANZ Bank constituted waste and that the costs involved in that litigation should therefore be appropriated in partial satisfaction of his entitlement to a property settlement (ground 5); and
·in failing to take into consideration the evidence that the wife had made significant unexplained deposits into her bank accounts (ground 6).
Orders beyond the proper exercise of discretion
The challenges raised by grounds 1 and 2 were addressed simultaneously. We will adopt the same approach. The central theme to both grounds is that the outcome is said to be beyond the scope of a reasonable exercise of discretion. This is said to have arisen because:
·when regard is had to the totality of the husband’s contributions and his earning capacity, the wife should not have received so much more than he did, and
·the injustice of that outcome is exemplified by his being liable for significant additional contingent liabilities which, which taken into account reduce his property entitlement to something like 15 per cent of the parties net property.
One of the confounding aspects of these grounds is the extent to which the husband seeks to avoid the consequences of forensic decisions made at trial. No less confounding is the extent to which it is said the primary judge erred for failing to take steps which she proposed and the husband rejected. Those forensic decisions cannot be ignored.
In Coulton v Holcombe (1986) 162 CLR 1, Gibbs CJ, Wilson, Brennan and Dawson JJ said at 7-8:
…To say that an appeal is by way of rehearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v. Gundowda Pty. Ltd.; Bloemen v. The Commonwealth. In O’Brien v. Komesaroff, Mason J., in a judgment in which the other members of the Court concurred, said:
“In some cases when a question of law is raised for the first time in an ultimate court of appeal, as for example upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is expedient in the interests of justice that the question should be argued and decided (Connecticut Fire Insurance Co. v. Kavanagh; Suttor v. Gundowda Pty. Ltd.; Green v. Sommerville). However, this is not such a case. The facts are not admitted nor are they beyond controversy. The consequence is that the appellants’ case fails at the threshold. They cannot argue this point on appeal; it was not pleaded by them nor was it made an issue by the conduct of the parties at the trial.”
In our opinion, no distinction is to be drawn in the application of these principles between an intermediate court of appeal and an ultimate court of appeal. Finally, in a recent decision of six justices of this Court (University of Wollongong v. Metwally [No.2]) the Court said:
“It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.”
The Court of Appeal recognized the great importance, in the public interest, of these principles.…
(Footnotes omitted)
These principles apply to the case at hand.
Turning to the first aspect of these grounds, it needs to be understood that at first instance counsel for the husband contended that his contributions should be evaluated at 60 per cent compared to the wife’s 40 per cent. The rationale for his greater contribution centred on the fact his father advanced $700,000 to the parties which enabled them to acquire the two properties in Suburb P and Suburb U.
Putting the properties to one side, the primary judge was unable to discern a disparity in the parties’ initial contributions and, to the extent there may have been one, their subsequent substantial contributions rendered any differential irrelevant ([202]).
In relation to the advances the primary judge said (at [208]) the husband’s father gave the parties $700,000 which enabled them to acquire their two homes. He advanced $200,000 for the purchase of Suburb P (in 1984) and $500,000 towards the purchase of Suburb U (in 1990). The significance afforded to those advances was reduced by the significant contribution the wife made to the welfare of the family after their daughter became gravely ill (along with gifts made by the wife’s parents and grandmother).
Her Honour went on to conclude that in the context of this modest asset pool, were it not for the wife’s greater contributions to the welfare of the family, total contributions would have favoured the husband as to 65 per cent. However, when that matter was factored in, the husband’s contributions were assessed at 60 per cent compared to the wife’s 40 per cent. This differential was attributable to the weight attached to the advances made by the husband’s father and at 60/40 it is precisely the outcome for which the husband contended (transcript of proceedings, 4 December 2013, page 86, line 14). Thus to the extent it is suggested that the primary judge gave insufficient weight to these advances, the husband cannot succeed.
In a similar vein, before we analyse the contention that an adjustment of 20 per cent pursuant to s 75(2) in favour of the wife was “manifestly excessive” and occasioned substantial injustice to the husband, it needs to be understood that at trial and on the basis that the husband’s personal income tax liability was not treated as a debt of the parties, the husband argued that a five per cent adjustment in favour of the wife would be appropriate. In other words, the husband acknowledged that it was open to her Honour to leave him solely responsible for his personal income tax liability and in this event on his case, what would have been a 10 per cent adjustment in favour of the wife would be reduced to five per cent. It follows that given that the husband does not challenge her Honour’s decision to exclude his personal income tax liability from the property pool, the asserted error becomes not one of material fact but an error of discretion.
Counsel for the husband conceded that the husband’s earning capacity exceeded that of the wife, albeit he could not work indefinitely whereas the wife had been out of the paid workforce for some two and a half decades.
As to the contingent liability to the ATO referrable to the superannuation fund, the primary judge proposed that the superannuation fund be treated as a discrete asset and to bring it to the attention of the ATO so that whatever liability was payable could be assessed. The rationale being that this would resolve the uncertainty about how the ATO would treat the long standing non‑compliance issues and resolve the evidentiary uncertainty about the amount payable and when it might be paid. Following payment of that assessed liability (including penalties) whatever remained would be divided between the parties in accordance with their percentage interests. The wife agreed with this approach but the husband did not. His position at the close of the hearing was that the wife’s interest in the fund should be transferred to him so that he could do what he wanted in relation to it. Counsel for the husband adopted her Honour’s summation of the husband’s approach as being so that he could “take […] his chances with the ATO”. Again it is important to emphasise that this was on the basis the husband did not ask the primary judge to include this contingent liability as a debt of the parties or suggest that it was possible to determine precisely the magnitude of the liability to the ATO or when that liability might crystallise.
It is against this background that the primary judge proceeded to determine the extent of the s 75(2) adjustment. Her Honours reasons are succinct and may be set out in full as appears below.
210. The wife is aged 56 years and the husband 62.
211.The wife has not worked in paid employment since the birth of the first child more than 26 years ago. There is no evidence that she is likely to obtain any employment.
212.As a result of the proposed superannuation orders, which are agreed, the wife will have no superannuation entitlements and no likelihood, given her age, that she will be able to accrue superannuation.
213.The husband has worked as a [legal professional] for more than 30 years. During the marriage he earned substantial income as has been set out earlier in these reasons.
214.He continues to earn an income from his legal practice but chooses not to inform the Court of the amount of that income. It is, however, significant that in his last filed tax return he disclosed a taxable income of $2,713, when bankings in his business in the year ended 30 June 2011 totalled $733,166. Whatever the income from the husband’s practice may be, he has the ability, on the evidence of the 2011 financial year, to turn that income to his considerable advantage.
215.His working life is not infinite but he will work for a number of years and, as a consequence of the way he has chosen to present his evidence, it is impossible even to guess what his income might be.
216.The husband has chosen not to put evidence before the Court of his current financial position. He has an income from his practice, whatever that may be, work in progress and significant debtors which, in September 2012, exceeded $587,000. Those are assets in his possession that were disclosed only as a result of
cross-examination.217.I also take into account here the husband’s waste of matrimonial assets in the ANZ litigation under s 75(2)(o), for the reasons set forth above.
218.Where the husband has not complied with his obligation to make full and frank disclosure, the Court need not shy away from a robust exercise of discretion in favour of the wife.
219.For all of the above reasons, I consider that there should be an adjustment in favour of the wife of a further 20% for s 75(2) factors.
As to the effect of this outcome the primary judge was acutely aware that the husband remained liable for his personal income tax and he took the superannuation fund subject to a contingent liability to the ATO. However, this was appropriate because:
114.If it were the case that the Superannuation Fund will still, in the husband’s hands, be depleted in some way by the consequences of the ATO finding it to be non-compliant at some time in the future, then that is a consequence of his, and only his, failure to properly manage the Superannuation Fund and should not be visited against the wife.
As to the magnitude of the husband’s personal liability to the ATO, the primary judge accepted evidence given by an accountant retained by the wife that it stood at $343,106 at the date of the report and comprised:
·
General Interest Charges (payable after remittances)
for the period 2003 to 30 June 2011 $181,150
·General Interest Charges incurred after 1 July 2011 $95,956
·GST for an unidentifiable business $66,000
As to whether the husband would be required to pay that amount, the primary judge at [149] accepted the unchallenged evidence given by the accountant retained by the wife:
I have reviewed [the husband’s] affidavit and I am aware from Paragraph 22.3 thereto that [the husband] is in the process of negotiating the (“ATO”) in relation to his taxation liability. I can ascertain from the [T] reconciliation that there has been a total of $99,588.68 of GIC remitted by the ATO to date. On this basis I cannot regard the amount payable in the [T] reconciliation as anything other than a contingent liability, given the possibility that further remissions of GST [sic] [GIC] may be obtained from the ATO.
There is thus a measure of imprecision as to the magnitude of the husband’s personal taxation liability but the accountant and the primary judge did the best that could be done having regard to the evidence adduced in the husband’s case. Greater precision simply was not possible, a circumstance for which the husband alone was responsible. In this regard it is trite to say all uncertainty could have been resolved had the husband lodged his outstanding taxation returns.
We referred earlier to her Honour’s findings as to the husband’s failure to give full and frank disclosure of his and his practice’s financial circumstances and his failure to explain why he failed to pay personal income tax as and when it fell due. Her Honour was satisfied that the inclusion of that liability in the property pool would be an injustice to the wife. It follows, and is consistent with that finding as well as her decision to treat the amount as a contingent liability, that the primary judge was satisfied that the husband alone should bear responsibility for it, in whatever amount fell due.
There is no principle of general application that merely because a taxation debt accrued prior to separation it must be brought to account as a joint matrimonial liability (Trustee of the Property of G Lemnos, a Bankrupt & Lemnos and Anor (2009) FLC 93-394). In our view, the facts as found amount to what the Full Court in Johnson and Johnson (2000) FLC 93-039 described as “compelling circumstances” which would enable the court to leave one party solely responsible for his or her taxation debt.
We reject the husband’s proposition that on a differently constituted pool, he in effect received no more than 15 per cent of the parties’ property. For that proposition to have been made good, it was necessary for us to accept that the parties’ property was different to that for which the husband contended at trial and to make findings in relation to the superannuation fund’s liability to the ATO inconsistent with those pursued at trial. Not only are we satisfied that the findings for which senior counsel for the husband contended were unavailable, the approach was inconsistent with authority to which we have made reference.
Nor do we accept that the primary judge erred in concluding at [113] that once the husband has absolute control of the superannuation fund and is its sole beneficiary “he will be able to have access to the Superannuation Fund in order to draw a pension to supplement his income.” The challenge to this finding is made on the basis that when the husband’s accountant said the wife refused to agree to an amendment to the fund trust deed to permit withdrawals by way of a transition to retirement pension, it followed that such a change could never be made. It did not and the effect of her Honour’s determination is that she correctly recognised that once the husband had total control of the fund he could make the amendment recommended by his accountant.
It follows we perceive no error in her Honour’s approach to s 75(2) and are not persuaded that the overall outcome is beyond the reasonable range of her Honour’s discretion.
Error having not been established, it is thus necessary to consider the husband’s application to adduce further evidence in the appeal which is relevant to only these challenges. In this regard senior counsel for the husband relied on Eufrosin & Eufrosin [2014] FamCAFC 191 as an example of why we would exercise our discretion in favour of the evidence being admitted. We think Eufrosin is irrelevant to this issue. In that case the court was concerned with events which occurred after the parties separated but before the final hearing. That situation has nothing to do with the circumstances under which this court would receive evidence of events that took place after final judgment.
The circumstances in which the Full Court can receive further evidence on an appeal pursuant to s 93A(2) of the Act are considerably constrained and as discussed in CDJ v VAJ (1998) 197 CLR 172. The principal purpose of s 93A(2) is to give the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous.
We fail to see how the wife’s receipt of an inheritance after judgment could possibly demonstrate that the orders under appeal are erroneous. It would be inconsistent with the principles of finality which, although they differ somewhat in their application to proceedings under the Act compared to the common law, remain relevant. In this regard, the evaluative exercise undertaken by her Honour addressed the parties’ contributions, for example, as at the date of hearing and to the property as at that date. The introduction of this evidence would be entirely inconsistent with the exercise with which her Honour was charged and would impermissibly blur the distinction between original and appellate jurisdiction.
There are two other reasons why the application to adduce further evidence should fail. First, it would undoubtedly require a new hearing with all its attendant stress and expense. Secondly, the husband made no attempt to adduce evidence which demonstrated he had regularised his dealings with the ATO. In fairness, had that evidence been presented, the necessity for a new trial and the blurring of original and appellate jurisdiction would nonetheless have resulted in his application being refused.
Refused further submissions
As best we can discern, the crux of ground 4 is that the primary judge erred when, having reserved her decision, she refused to accept further submissions by counsel for the husband in relation to the husband’s earning capacity.
The submissions to which this ground relates can be found in the contested appeal book commencing at page four. They are presented in two parts, the first being in answer to an application made by the wife at the conclusion of the hearing for the release of $100,000 from the controlled monies account. The trial transcript shows that counsel for the husband sought and was given the opportunity to provide written submissions on the point. The exchanges between bench and bar are set out below.
HER HONOUR: ‑ ‑ ‑ if it’s a partial property settlement?
MR TOCKAR: And just so that I don’t have to jump up again, I anticipate that – and just hearing what my friend’s solicitor has to say where a similar application by the husband might be made, the difference is that, on the orders sought by us, that if an order like that is made, that might make final orders impossible to implement because we say the full amount should be coming to the wife. But we say there’s no prejudice to the husband if the wife is given 100,000 upfront in as much on his own case she’s going to get more than that.
HER HONOUR: Ms Coulton. The order he seeks is that she gets 380,000 – 308,000, I beg your pardon.
MS COULTON: Well, this was – I must say, your Honour, it’s a bit unexpected. I haven’t considered this this afternoon that this was going to be sought.
HER HONOUR: It’s difficult to see how your client is prejudiced on his own application.
MS COULTON: Well, your Honour, would you – I – could I have – I know we will finish today, but if I could have leave overnight, if I want to, to send a submission to my friend and to your Honour.
HER HONOUR: Mr Tockar, does that cause you a difficulty?
MR TOCKAR: I can’t object to that, your Honour.
HER HONOUR: Very well.
MR TOCKAR: My friend is quite right. This was spun on her at the last second and, certainly, we will meet her on that happily.
HER HONOUR: All right. Tomorrow though, please, Ms Coulton.
MS COULTON: Yes, your Honour.
HER HONOUR: Thank you.
MATTER ADJOURNED at 5.01 pm INDEFINITELY
(Transcript of proceedings, 4 December 2013, page 88, lines 5 – 41) (Original emphasis)
However, and notwithstanding counsel for the husband made comprehensive closing submissions, including in relation to the husband’s earning capacity; at part two of the further submissions counsel sought leave to, in effect, reopen those submissions so as to have her Honour consider what followed. As the ground would suggest, the primary judge refused to receive that part of the further submissions which went beyond the scope referred in the transcript.
The decision to accept or reject the further submissions was quintessentially an exercise of discretion. No doubt, her Honour was mindful of s 97(3) of the Act which imposes an obligation on a judge in the position of the primary judge to endeavour to ensure that proceedings are not protracted, and r 1.04 of the Family Law Rules 2004 (Cth) (“the rules”) which required her Honour “… to ensure that [the case] is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.” The point being, in this case, counsel for the husband had already been afforded and taken the opportunity to make oral submissions on the topic and yet, without explanation, sought to advance further argument on the point. Of course, further submissions from the husband would have invited consideration of whether procedural fairness to the wife necessitated her being given the opportunity to also make further submissions.
The approach adopted by counsel for the husband was inconsistent with the provisions to which reference has been made. If it was thought the matters raised were of singular importance such as to warrant reopening, it was incumbent on the husband to make an application to do so and explain why the court should exercise its discretion in his favour. This was not done and we have no hesitation in rejecting this ground.
Waste
By ground 5 it is argued that the primary judge erred in finding the husband had wasted, in a Kowaliw and Kowaliw (1981) FLC 91-092 sense, the costs involved in the ANZ litigation. The primary judge did no such thing and the ground misstates her Honour’s reasons. Rather, on a proper reading of the judgment, it can be seen that the primary judge accepted the wife’s contention that when the husband rejected the offer of settlement from the bank he acted recklessly and that the consequence of the rejection was that he was ultimately required to pay an additional $114,000 over and above the amount for which the bank offered to settle ([95]). The effect of the husband’s refusal of the offer was to reduce the equity in the family home by that amount ([96]).
The husband does not challenge the quantification of the loss or its effect on the value of the parties’ property. Rather, it is asserted that her Honour was wrong to base her findings as to recklessness on the reasons for judgment published in the ANZ suit without also taking into account the husband’s evidence that he maintained his defence of the action on the advice of counsel. However, counsel’s advice was not placed before her Honour and there can be no doubt that the primary judge was entitled to adopt the finding of the judge in the commercial litigation (which was in evidence) that the litigation “… involves little if anything, more than a standard commercial transaction in which a sophisticated borrower does not wish to repay his loan” (at [90]). When this is coupled with her Honour’s unchallenged finding that the husband borrowed the money in the full knowledge that he would be required to make repayment ([94]), the finding as to recklessness was undoubtedly available.
It also needs to be understood that the primary judge did not take into account against the husband the $50,000 lost in legal fees and that the focus of the finding of recklessness is on the husband’s rejection of the offer of compromise. In addition, the primary judge rejected the wife’s contention for the inclusion of the $114,000 in the parties’ net property as the husband’s asset and took the loss into account as one of a number of factors which justified a 20 per cent adjustment pursuant to s 75(2) in favour of the wife. The effect of this global adjustment was to increase the wife’s entitlement from approximately $655,000 to approximately $786,000 (rounded up net). In other words a total increase in the order of $131,000. Reference has already been made to the reasons why an overall increase of 20 per cent in the wife’s entitlement was warranted, and in particular her Honour’s findings concerning the husband’s failure to make full and frank disclosure. Some might say that when regard is had to her Honour’s findings at [214], [215] and [216], rather than complain about her Honour’s exercise of discretion in this regard, the husband should breathe a sigh of relief.
The challenge raised by this ground has not been made out.
Unexplained deposits into the wife’s accounts
The gravamen of ground 6 is that the primary judge erred by failing to take into account what is said to be a significant number of unexplained and substantial bank deposits made by the wife post separation. The evidence adduced by the husband and which underpins this challenge, is to be found in paragraphs [7.31] – [7.44] of his affidavit sworn 2 October 2013. The consequence of the error is said to be that her Honour on the one hand was highly critical of the husband for his failure to provide full and true disclosure of his financial circumstances, which “… it must be conceded … was not without justification” (counsel for the husband’s summary of argument dated 20 August 2014 at [11]) whereas an unduly “charitable attitude” was adopted towards the wife.
Not even the factual premise which underpins this challenge can be made good. In this respect most of the evidence upon which the husband relied was deemed inadmissible. In particular, the primary judge rejected the husband’s evidence at paragraphs [731], [732], [733], [734] (part thereof), [735], [736], [739] (part thereof) and a portion of [744]. Those paragraphs which remained could not establish the factual premise for this ground. Otherwise and as to the wife’s evidence, she provided a reconciliation of deposits and expenses in her accounts.
In our view, even had the factual premise to the ground been established, the primary judge was not required to resolve every factual dispute merely because she was asked to (Whisprun Pty Limited v Dixon (2003) 200 ALR 447 at [62]). Rather, the task of a trial judge is to determine factual disputes, the determination of which is relevant to the ultimate decision. In circumstances where the husband did not at first instance, and does not on appeal, contend that the wife had undisclosed property or income or that some other consequence ought flow, we fail to see how even if the factual premise of this challenge was made out, it was relevant or could sound in appealable error.
Her Honour did not err in the manner alleged.
Conclusion and costs
The husband has failed to establish error and the appeal will be dismissed. In the event the appeal was dismissed, an application was made by the wife that the husband pays her costs.
Senior counsel for the husband appropriately acknowledged that in the event the husband was unsuccessful, costs should follow the event. We agree. In our view, that the husband’s appeal has been wholly unsuccessful justifies a departure from the approach that each party pays their own costs, as well as an order for costs.
I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ryan, Aldridge & Cronin JJ) delivered on 4 August 2016.
Associate:
Date: 4 August 2016
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