Loude & Loude
[2009] FamCAFC 52
•3 April 2009
FAMILY COURT OF AUSTRALIA
| LOUDE & LOUDE | [2009] FamCAFC 52 |
| FAMILY LAW - APPEAL – PROPERTY – ASSESSMENT OF CONTRIBUTION – Whether orders dividing property 77.5 per cent to the wife and 22.5 per cent to the husband were outside the reasonable ambit of discretion and plainly wrong – Whether Federal Magistrate erred in the treatment of initial contributions – Where the period of cohabitation and marriage was almost 14 years and produced two children – Where Federal Magistrate failed to afford proper weight to husband’s post-separation contributions – Federal Magistrate’s contribution based assessment outside the reasonable ambit of discretion – Whether Federal Magistrate erred in consideration of s 75(2) factors – Federal Magistrate failed to properly take into account the wife’s contribution based entitlement when considering a s 75(2) adjustment – Appeal Allowed. FAMILY LAW - APPEAL – PROPERTY – RE-EXERCISE OF DISCRETION – Whether Full Court capable in the circumstances to re-exercise the discretion – Where parties sought to adduce further evidence – Where some of the further evidence sought to be adduced was controversial – Full Court expressed view regarding the appropriate division of assets as at the date of hearing – Submissions sought regarding the further evidence and re-exercise of discretion. FAMILY LAW - COSTS – No order made – costs to be dealt with after determination of whether appropriate to re-exercise. |
| Family Law Act 1975 (Cth) – s75(2), s 79 |
| Allesch & Maunz (2000) 203 CLR 172 Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343 Brodie & Brodie [2009] FamCAFC 6 G & G (2001) FamCA 1453 House v The King (1936) 55 CLR 499 Hunt & Zuryn (2005) FLC 93-226 AM & MM [2005] FamCA 443 Pierce & Pierce (1999) FLC 92-844 Steinbrenner & Steinbrenner [2008] FamCAFC 193 Williams & Williams [2007] FamCA 313 |
| APPELLANT: | Mr Loude |
| RESPONDENT: | Ms Loude |
| FILE NUMBER: | NA | 58 | of | 2008 |
| APPEAL NUMBER: | BRC | 2429 | of | 2007 |
DATE DELIVERED: | 3 April 2009 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May, Boland & Murphy JJ |
| HEARING DATE: | 5 November 2008 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 30 May 2008 |
| LOWER COURT MNC: | [2008] FMCAfam 518 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Kent SC with Mr Waterman |
| SOLICITOR FOR THE APPELLANT: | Nick Procter & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr Carrigan |
| SOLICITOR FOR THE RESPONDENT: | Peter J Sheehy |
Orders
The appeal is allowed.
The orders of Federal Magistrate Wilson made 30 May 2008 be set aside.
Within one month from the making of these orders the parties provide to the Regional Appeal Registrar an agreed statement of the relevant facts which have occurred since the hearing before Federal Magistrate Wilson to be taken into account by the Full Court to enable it to re-exercise the discretion.
In the event that the parties are unable to agree on an agreed statement of relevant facts as provided in Order 3 then:
(i)the husband shall in 7 days after the expiration of the time provided in Order 3 file and serve any material on which he seeks to rely for the purposes of the Full Court considering whether or not it can re-exercise the discretion, or whether the matter must be remitted for rehearing before another Federal Magistrate other than Federal Magistrate Wilson.
(ii)the wife shall in 14 days after the expiration of the time provided in Order 3 file and serve any material on which she seeks to rely for the purpose of the Full Court considering whether or not it can re-exercise the discretion, or whether the matter must be remitted for re-hearing.
IT IS NOTED that publication of this judgment under the pseudonym Loude & Loude is approved 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: BRC 2429 of 2007
File Number: NA 58 of 2008
| Mr Loude |
Appellant
And
| Ms Loude |
Respondent
REASONS FOR JUDGMENT
Introduction
On 30 May 2008 Federal Magistrate Wilson made orders under s 79 of the Family Law Act 1975 (Cth) (“the Act”) dividing the property of Mr & Ms Loude, valued at $2,230,648.00 between them as to 77.5 per cent or $1,728,752.00 to the wife and 22.5 per cent or $501,896.00 to the husband. This is the husband’s appeal against those orders.
The husband did not dispute his Honour’s determination of the pool to be divided between the parties, but did challenge his Honour’s contribution assessment of 75 per cent attributed to the wife, and 25 per cent by him. He also challenged the further 2.5 per cent adjustment in the wife’s favour (impliedly in respect of relevant s 75(2) factors) and asserted that the overall result reached was not just and equitable. The husband sought that the appeal should be allowed, and that we should re-exercise the discretion and adjust the parties’ respective entitlements so that they each retain 50 per cent of their total assets and superannuation entitlements.
At the hearing of the appeal the husband sought leave to adduce further evidence both to demonstrate error in his Honour’s orders, and by way of up-dating evidence to be taken into account on a re-exercise of discretion. The wife resisted the appeal, and sought that the husband’s application to adduce further evidence be dismissed. At the conclusion of the appeal her counsel submitted, in the event the appeal was allowed, as the wife was unable to concede a number of matters set out in two affidavits filed by the husband in support of his application (one filed in Court on the hearing of the appeal) we should, if possible, re-exercise the discretion but first permit further submissions on the material proposed to be adduced and/or provide the parties the opportunity to provide an agreed statement of facts relevant to the re-exercise.
At the hearing of the appeal we were informed by the parties that the former matrimonial home had been listed for sale by public auction the Saturday immediately before the hearing of the appeal for an agreed reserve price of $1,250,000.00 (that is $300,000.00 greater than the agreed value at the hearing in May 2007) and not having sold at auction was now listed for sale at the reserve price. There was no agreement however that $1,250,000.00 was the current value of the matrimonial home. We determined that we would reserve our decision on the admission of the further evidence, and give reasons about that application with these reasons.
We record at this point that although there was some confusion caused by his Honour setting out a different sum in his reasons as comprising the pool of assets to be divided – $2,230,648.00 at paragraph 26 of his reasons, and Order 1 which declares the property of the parties to be $2,041,748.00 – no challenge was raised on the appeal about his Honour’s finding in paragraph 26. It appears that his Honour, for the purposes of Order 1 of his orders, deducted a notional sum for potential capital gains tax and selling expenses which would be incurred if a commercial property was sold pursuant to Order 8 of his orders.
In broad terms the husband’s senior counsel asserted in his written submissions the Federal Magistrate erred by:
· giving inappropriate weight to the wife’s initial contributions, and other financial contributions made throughout the marriage;
· failing to give appropriate weight to the husband’s initial contributions, his contributions throughout the marriage, and post separation;
· adopting a mathematical assessment of the wife’s contributions rather than assessing all contributions by both parties throughout their marriage;
· making mathematical mistakes which mistakes were reflected in the orders;
· failing to take into account relevant considerations in making the further adjustment of 2.5 per cent in the wife’s favour, and in particular, failing to take into account the disparity in the parties’ financial positions as a result of his contribution based assessment; and
· making orders which were not just and equitable in the circumstances.
Before us senior counsel for the husband directed his primary argument to ground 6 of the Notice of Appeal in which it is asserted the orders made were manifestly unjust, and that the exercise of discretion by the Federal Magistrate was “plainly wrong”.
We propose to set out some relevant historical matters, then consider Federal Magistrate Wilson’s reasons with particular reference to his Honour’s discussion of the justice and equity of his proposed orders, as well as his Honour’s contribution assessment, including his assessment of both pre and post separation contributions, and his discussion and conclusions about the adjustment made impliedly under s 75(2). We then propose to adopt the same course as adopted by senior counsel for the husband by discussing ground 6. That discussion necessarily involves consideration of his Honour’s contribution assessment and s 75(2) adjustment. We will then consider the application to adduce further evidence, and if we find merit in the grounds, consider whether we should re-exercise the discretion, or whether the matter should be remitted for re-hearing.
Background
The following background facts are recorded in the reasons for judgment and/or appeal book and are not subject of controversy. We will indicate where non contentious material has been extracted from the appeal book, otherwise the material appears in his Honour’s reasons.
The husband was born in July 1948 and was aged almost 60 years at the date of hearing before the Federal Magistrate. The wife was born in October 1953. She was aged 53 years at the date of hearing. (husband’s affidavit affirmed 18 May 2007, paras 2 & 3)
The parties commenced cohabitation in about December 1990. They were married in September 1991 and separated in September 2004. (husband’s affidavit affirmed 18 May 2007, para 4)
There are two children of the marriage, B born in September 1992 and S born in May 1995. (husband’s affidavit affirmed 18 May 2007, para 6)
Parenting orders were made by consent in the Family Court of Australia on 27 July 2005. At the date of the hearing B was to live with the husband (except when the husband was in Indonesia) and S was living with the wife.
At the commencement of cohabitation the wife was engaged in full-time employment as a school teacher and the husband was working in the carpet trade. The wife continued in employment as a teacher, including employment on a casual basis after the birth of each of the children. (husband’s affidavit affirmed 18 May 2007, paras 20 & 21)
In 2002 the wife resumed teaching on a full-time basis. (wife’s affidavit filed 2 May 2007, para 21)
At the commencement of cohabitation the wife had the following assets:
·a residential property at … (“the G property”);
·a residential property at … (“the H property”) which was sold in 1991 for a sale price of $126,000.00;
·a property at … (“the W property”) also sold in 1991 for $110,000.00;
·managed funds and shares in numerous listed companies;
·a motor vehicle worth $10,000.00;
·$16,000.00 in bank accounts; and
·superannuation (in respect of which she had commenced contributions in 1974.)
At the commencement of cohabitation the husband had the following assets:
·an interest in a property at … (“the TM property”);
·a motor vehicle worth $10,000.00;
·a van worth between $6,000.00 - $10,000.00.
The husband asserted he also had:
·savings of $15,000.00;
·household contents and effects of $30,000.00; and
·electrical stock of $20,000.00.
In 1995 the TM property was sold for a sale price of $170,000. (wife’s affidavit filed 5 May 2007, para 10)
In 1992 the wife sold her three properties and contributed $206,700.00 to a property development undertaken by the parties in a Brisbane suburb (“the T development”). (wife’s affidavit filed 5 May 2007, para 12)
Shortly after the commencement of cohabitation the husband opened a business (“the CM business”). The business engaged in the sale and installation of floor coverings.
In 1987 a company F Enterprises Pty Ltd (“F Enterprises”) was incorporated. From 1991 the parties were the sole directors and shareholders of F Enterprises. F Enterprises is the corporate trustee of the parties’ self managed superannuation fund (“F Enterprises Superannuation Fund”).
In 1992 the wife realised one of her investments worth $19,000.00 and gave the money to F Enterprises. (wife’s affidavit filed 5 May 2007, para 14)
In 1993 the wife’s father gifted to her the sum of $50,000.00 which sum was applied to the T development. (wife’s affidavit filed 5 May 2007, para 13)
In 1994 the parties purchased a property in Southern Brisbane (“the matrimonial home”) (wife’s affidavit filed 2 May 2007, para 5). At the date of the hearing the parties agreed the matrimonial home had a value of $950,000.00. The wife remained living in the matrimonial home at separation (wife’s affidavit filed 2 May 2007, para 5). Renovations were carried out to the matrimonial home in 1998 or 1999 and borrowings of approximately $300,000.00 were obtained by F Enterprises to fund the renovations (husband’s affidavit affirmed 18 May 2007, paras 24 & 42). F Enterprises met repayments for the borrowings, including repayments made after separation.
In 1996 the wife received a bequest from her late aunt’s estate of approximately $6,300.00.
In 1998 the wife asserted she sold shares and contributed $90,000.00 towards the purchase by F Enterprises of a warehouse property (“the commercial property”).
In 1999 the wife received a bequest of approximately $27,000.00 from her mother’s estate.
From 2003 the husband spent time in Australia and Indonesia. (wife’s affidavit filed 5 May 2007, para 42)
In 2004 the husband executed documents which attempted to transfer the business operated by “CM” and the stock of that business to a new corporate entity “CM Pty Ltd”. Nothing turns on this transaction in the appeal, as the husband conceded before the Federal Magistrate that the business should be valued for the purposes of the hearing as if the purported transaction had not taken place.
The husband’s carpet business imports products from Indonesia and Malaysia. Draw-downs from a Citibank facility, which the Federal Magistrate found were secured against the commercial property, were used to pay for carpet imported from a company in Malaysia. $99,536.46 of the line of credit was used to purchase stock from the company in Malaysia and the balance paid to the working account of F Enterprises.
In October 2004 the F Enterprises Superannuation Fund purchased vacant land at Chinchilla using Bartercard dollars to the equivalent of $26,667.00.
Following separation the wife continued occupation of the matrimonial home.
On 22 January 2006 the husband remarried. His present wife has two children who were aged 14 years and 11 years at the date of the hearing. They were living in Indonesia but were to commence living in Australia in 2008. The husband continued to conduct the business operated by “the CM business”.
Throughout the parties’ cohabitation the husband worked long hours in the business. The wife conceded the husband was the primary breadwinner throughout cohabitation.
A single expert was appointed to value F Enterprises, F Enterprises Superannuation Fund and the goodwill of the CM business.
Appellate principles
This is an appeal from a discretionary judgment. The limits on the interference by an appeal court are well known. See House v The King (1936) 55 CLR 499 where Dixon, Evatt and McTiernan JJ said at 504-5:
The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
In Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343 at 345, Asquith LJ stated the rationale of an appellate court’s approach:
… It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.
Grounds of appeal
The Notice of Appeal contained six grounds of appeal (with a number of sub-paragraphs). As we have already noted, at the hearing of the appeal, senior counsel for the husband agitated, as his primary challenge to the Federal Magistrate’s orders, ground 6 which asserted that the division of the parties’ property effected by the orders was manifestly unjust, and demonstrated that the exercise of discretion by his Honour was plainly wrong.
Senior Counsel for the husband expanded this challenge in his written and oral submissions. He encapsulated this challenge before us saying:
Your Honours I start with the obvious observation that we recognise on the appellant’s side of the record that there is no presumption of equality, but it’s equally true that in a marriage of this duration, producing two children and with the levels and extent of contributions on each side, one would need to find something extraordinary in the literal sense of that word to justify an outcome where one of the parties departed with only 22.5 per cent of the pool. (Transcript, 5 November 2008, p 9, lines 24-30)
To fully explore this challenge it is necessary we refer to his Honour’s reasons where he explained why he determined the orders he proposed to make were just and equitable, his findings on the parties’ respective contributions and reasoning for the further 2.5 per cent adjustment in the wife’s favour.
We will also briefly consider the parties’ respective positions at the hearing, particularly concessions made about initial contributions, and the wife’s concession about the husband’s income during cohabitation. We pause here to record that there was no dispute at the hearing of the appeal that the parties’ initial contributions were in the ratio of 65 per cent by the wife and 35 per cent by the husband. That percentage is slightly different to his Honour’s conclusion that it was “fair to proceed on the basis that the wife contributed twice as much as the husband at the outset of the relationship” (paragraph 39). No real issue was raised before us about that finding.
Federal Magistrate’s reasons – overall justice and equity of the orders
At paragraph 82 of the reasons the Federal Magistrate posed for himself the question whether the orders were just and equitable. His Honour said:
… In terms of the major assets, each party will retain their respective superannuation that has been generated by their own efforts. The husband will retain the … business that enables him to continue to derive a substantial income. He will either retain [the commercial property] with a larger debt attached to it, or will receive in the order of half of the proceeds of sale. The wife will receive a cash payment that will enable her to purchase a residence for herself and her two children to live in. Having regard to her greater contributions during the marriage, I consider the orders to be just and equitable.
Federal Magistrate’s reasons for judgment - contributions
At the commencement of his reasons, having summarised the principles applicable to an adjustment of property interests under s 79, his Honour set out the assets and liabilities as asserted by the wife. Having noted the few points of disagreement between the husband and the wife, his Honour concluded, at paragraph 26 of his reasons, that the pool available for division was $2,230,648.00. As we have already noted there is no challenge mounted in this appeal to any issue relating to determination of the pool.
Having set out the provisions of s 79(4)(a), (b) and (c) his Honour recorded at paragraph 28:
It is accepted that the wife made the greater initial financial contribution to the relationship. The parties disagree on the extent of the disparity between them.
The Federal Magistrate then set out the wife’s contentions about the parties’ property at the commencement of cohabitation. His Honour went on to explain, at paragraphs 30 and 31, that the husband did not dispute the wife’s initial contributions although he did dispute their worth. His Honour also explained that the wife had failed to provide evidence of value of her three residential properties at the commencement of cohabitation, or the net equity she had in them. His Honour went on to further explain that the wife did give evidence that in 1992 the three properties were sold and that she had contributed $206,700.00 to the T development. Thereafter his Honour noted that there was no dispute about the value of the wife’s motor vehicle ($10,000) or two bank accounts (totalling $16,000.00) referred to in the wife’s affidavit.
Earlier his Honour had considered the wife’s superannuation entitlement and noted there was no valuation of that entitlement at the commencement of cohabitation. However, his Honour said he was able to extract her pre-July 1983 component at $64,149.12. His Honour concluded it was “probably conservative to adopt a figure of $80,000” in respect of the wife’s superannuation entitlements at the commencement of cohabitation. His Honour concluded therefore, at paragraph 32, “the wife’s initial contributions were at least the value of $354,700 plus shares and other listed investments”.
His Honour then turned his consideration to the husband’s assets at the commencement of cohabitation. The Federal Magistrate found that the husband had an interest (unquantified) in his residential property at TM, a motor vehicle worth $10,000.00, and a van worth between $6,000.00 and $10,000.00. His Honour then noted that the husband asserted he had savings of $15,000.00, household contents and effects of $30,000.00 and electrical stock of $20,000.00.
His Honour then, at paragraphs 36, said:
I think the fairest way to approach the matter is to say that the value of the wife’s shares and managed investments was probably worth at least as much, if not more than the value of the husband’s savings, household contents and electrical equipment. Those items cancel each other out. This approach probably favours the husband, but is the best I can do in the absence of any evidence of value of the various items.
His Honour then considered the evidence about the husband’s TM property recording that property searches revealed it was jointly owned by the husband and his former wife and encumbered by a mortgage which was not released until 1992 when a further mortgage was registered against the title. Noting the difficulties of attributing any value to the TM property at the date of cohabitation, his Honour made a finding that the husband’s initial contributions were in the order of $190,000.00 (paragraph 38). His Honour then, at paragraph 39, set out his conclusions in respect of the parties’ initial contributions saying:
Given some of the gaps in the evidence that I have identified I consider it is fair to proceed on the basis that the wife contributed twice as much as the husband at the outset of the relationship.
The Federal Magistrate then went on to consider other financial contributions noting that the wife’s father had contributed $50,000.00 early in the relationship and $2,500.00 each year over the last eight to ten years. His Honour also recorded the wife had received a modest bequest of $6,300.00 from her late aunt’s estate and $27,000.00 from her mother’s estate.
His Honour then turned his attention to the use made by the parties of the wife’s funds noting this was an important consideration “because it has enabled the parties to embark upon a number of real estate transactions” (paragraph 42). His Honour recorded that the wife had sold shares in 1992 worth $19,000.00 and that the proceeds were given to F Enterprises. He further noted that she had sold other shares in 1998 and contributed $90,000.00 towards F Enterprises’ purchase of the commercial property.
His Honour referred to the fact that the wife had engaged in employment as a school teacher and had contributed her earnings to the household in addition to her role as primary caregiver of the children.
In respect of the husband’s role in the care of the children his Honour noted at paragraph 44 “[a]lthough the husband did assist, his evidence was that he worked very hard, often 6 or 7 days a week. His availability for domestic activities would therefore have been limited”.
His Honour then turned to consider the husband’s contributions noting that at the commencement of the parties’ cohabitation the husband was self-employed and engaged in the sale and installation of floor coverings. The Federal Magistrate recorded the husband’s evidence to the effect that shortly after the marriage he had opened the CM business and then progressively expanded the business. His Honour explained, at paragraph 45, “[a]s evidence of his non-financial contributions the husband relies heavily on the work he did in building up the business”.
His Honour then chronicled, in paragraph 46, the non-financial contributions asserted by the husband. Immediately after reciting the husband’s asserted contributions the Federal Magistrate referred to the fact there was no evidence before him of earnings generated by F Enterprises prior to 2000 and thereafter referred to the company’s volatile net profit. His Honour concluded (at paragraph 47):
… It is not possible to say, therefore, whether the money contributed by the husband’s efforts exceeded the wife’s financial contribution from her teaching work. The company did pay a number of expenses on behalf of the parties, including the home mortgage, car expenses, telephone expenses and the like.
At paragraphs 48 – 51 his Honour set out his conclusions on contributions. As those findings are pivotal to the challenge to the exercise of his Honour’s discretion we set out those paragraphs in full:
48.In my view, when one adds the additional financial contributions made by the wife’s father, her financial contributions of those monies received by her from the two estates, and her earnings as a teacher, and compares those financial contributions made by the husband, and his non financial contributions which were largely to build up his business (and ought to be reflected in the value of the business) or to improve the former matrimonial home (which ought to be reflected in the value of that property) an adjustment in favour of the wife is called for.
49.That conclusion is fortified when account is taken of liabilities incurred by the business to the Australian Taxation Office that had to be met in the last few years of the relationship. It seems to me that any additional financial contributions made by the husband were largely ameliorated by that large tax liability.
50.In my view an adjustment to the wife to bring her contributions to 75% is called for.
51.The wife’s initial capital contributions, and her ongoing earnings, have enabled the parties to participate in a number of real estate transactions, assisted in the purchase of the former matrimonial home, and [commercial property] owned by [F Enterprises], and have ensured to [sic] ongoing stability and care for the parties’ children.
Although his Honour found the wife’s contribution based entitlements to be 75 per cent of the pool available for division he did not refer to that assessment in a monetary sum. Rather it appears from paragraphs 53 to 69 of his reasons that his Honour considered matters which may require adjustment under s 75(2).
At paragraph 53 of his reasons, the Federal Magistrate said:
In order to ensure his ongoing earning capacity I think it is important that the husband retains the business operated by [F Enterprises] and any interest he has in [the CM business]. …
noting that the husband by reason of his age and experience was equipped to do little else.
His Honour noted the wife would retain her earning capacity as a teacher.
His Honour then discussed the care arrangements for the parties’ children noting that, when the husband’s present wife returned to Australia, B would return to living with the husband. This was due to occur in mid 2008, that is, shortly prior to his Honour delivering his reasons for judgment.
His Honour recited the husband’s evidence which was that his present wife had responsibility to meet her own expenses although he said he assisted her from time to time. Having referred to the wife’s receipt of child support from the husband, his Honour said at paragraph 60:
The parties seem to have enjoyed a reasonable, but not affluent, standard of living during their marriage. The wife has remained in the former matrimonial home, and has had the mortgage paid for her. The husband has acquired a unit that he resides in when in Australia, and has accommodation available to him in Indonesia. Neither party is leading a much lesser standard of living than they did during the marriage.
Somewhat confusingly, at paragraph 62 of his reasons, having regard to his earlier findings that B would return to live with the father, his Honour said the wife had the primary care and control of the two children of the marriage. At paragraphs 63 and 64 his Honour discussed assertions made by the wife as to the adequacy or otherwise of the husband’s disclosure and concluded the husband had a greater earning capacity than disclosed by him but that by reason of his age his available years of employment were less than those of the wife. His Honour then said at paragraph 65:
The ability to extract benefits from [F Enterprises] cuts both ways. The company has continued to meet the mortgage payments for the former matrimonial home, which the wife has had sole use of since separation. The wife has rented out the property, and derived income there from. She did not disclose this herself.
Thereafter his Honour rejected contentions of the wife about the asserted conduct of the husband.
His Honour then discussed the increase in the wife’s superannuation since separation, which his Honour described as due to her own efforts. At paragraph 69 of his reasons, his Honour summarised what appear to be his findings under s 75(2) concluding, at paragraph 70, a further adjustment should be made in the wife’s favour. His Honour said at paragraphs 69 and 70:
69.I consider that, when the difference in earning capacity is taken into account, counterbalanced by the age disparity, the husband’s remarriage, and the wife’s ongoing care of the children and the wife’s post separation contribution to her superannuation, but weighed against the payment on the wife’s behalf of particularly the mortgage since separation, a small further adjustment in the wife’s favour is called for.
70.In my view, based on the factors in s.79(4) I would apportion the property 77.5% to the wife and 22.5% to the husband.
His Honour then recorded applying that apportionment of the net pool would see the wife entitled to $1,728,752.20. Having regard to property already in the wife’s name his Honour concluded a payment of $1,038,222.20 was required as an adjusting sum. His Honour determined that the matrimonial home should be sold and the wife should receive the whole of the equity of approximately $451,000.00. He then went on to consider how the balance of the payment should be made.
Having noted the financial position of F Enterprises from its financial statements annexed to the expert report, his Honour concluded “I doubt that a financier would lend any additional money against the security of [the commercial property]” (paragraph 76).
He later went on, at paragraph 78, to note there would be capital gains tax incurred as well as selling costs if the commercial property was sold. We have already set out his Honour’s conclusions in paragraph 82 as to the justice and equity of the orders he proposed to make.
Submissions
Senior counsel for the husband, in his written submissions in respect of this ground (and grounds 4 and 5, which grounds challenged the further adjustment made to the wife of 2.5 per cent for s 75(2) factors), said the division of the parties’ assets as to 75 per cent in favour of the wife and 25 per cent to the husband based on contribution assessment resulted in a differential of $1,115,322.00 between the parties’ entitlements. Senior Counsel for the husband submitted “[t]hat enormous disparity was a material consideration, if not the single most important consideration in the circumstances, in considering any s 75(2) adjustment, but this did not receive any consideration in the Reasons” (Husband’s submissions, p 10, para 4.1.1).
Senior counsel went on to submit that the Federal Magistrate, having concluded the importance of ensuring the husband’s ongoing earning capacity required he retain the business, failed to analyse how that could be achieved if the commercial property (from which the business operated) had to be sold, nor did his Honour consider and discuss the effect upon the husband’s earning capacity of the alternative of borrowing $891,624.70 to meet the payment due to the wife provided for in paragraph 7 of the orders. He also referred to the fact the Federal Magistrate proceeded on a wrong finding in relation to the care arrangements for the children and finally, asserted that Federal Magistrate’s finding that the wife’s increase in superannuation was entirely as a result of her own efforts did not take into account the fact that, from separation until trial, (approximately 2½ years) the wife had had the sole use of and resided rent-free in the former matrimonial home “worth $950,000.00 with the mortgage of $499,000.00 being serviced from the business which the Appellant continued to operate” (Husband’s submissions, p 11, para 4.1.4).
In his oral submissions, senior counsel for the husband provided to us an aide memoire in which he sought to distinguish, by reason of the relevant facts in each case, the contribution based entitlement as found by the Full Court in Pierce & Pierce (1999) FLC 92-844 and the facts in the instant case.
As we earlier in these reasons set out, in his oral submissions, senior counsel for the husband having most appropriately referred to the fact that there is no presumption of an equality of contribution in a long-term marriage, then said “…but it’s equally true that in a marriage of this duration, producing two children and with the levels and extent of contributions on each side, one would need to find something extraordinary in the literal sense of that word to justify an outcome where one of the parties departed with only 22.5 per cent of the pool” (Transcript, 5 November 2008, p 9).
Senior counsel for the husband sought to differentiate the facts in the instant case from those cases where an asset was introduced at the commencement of the marriage and remained intact at separation, and criticised the Federal Magistrate and asserted he had “essentially locked in a 65/35 split and attempted to carry it through” to the existing pool (Transcript, 5 November 2008, p 12).
Senior counsel submitted that the Federal Magistrate had failed to take into account contributions by the husband and, in particular, his contributions to the two substantial properties of the parties, the matrimonial home and the commercial property.
In respect of the matrimonial home, he noted that property was purchased in 1994 but that his Honour had failed to take into account the parties lived rent-free in the husband’s property until that purchase. He also noted that the proceeds of sale of the husband’s TM property of $170,000.00 had been contributed to the purchase price of the matrimonial home. He submitted the fact that in 1999 $300,000.00 expended on renovations to the matrimonial home, (with the funds obtained from a line of credit secured against the commercial property) was disregarded by his Honour. Senior counsel submitted there was no evidence of any direct financial contribution by the wife to the matrimonial home, although he conceded that she made indirect contributions to that property.
Turning to discuss the commercial property, senior counsel for the husband noted that the Federal Magistrate, at paragraph 36 of his reasons, found the other initial contributions of the wife’s being shares and managed funds should be balanced against the husband’s savings, household equipment and superannuation, but failed, in his mathematical approach, to take into account as that part of the wife’s contribution of $90,000.00 from the sale of shares to the commercial property had already, at least partially, been taken into account in assessing initial contributions resulting in an effective double count or an unfair count (Transcript, 5 November 2008, p 17).
The wife’s counsel in his written submissions, in summarising the Federal Magistrate’s contribution findings, said at paragraph 1.23:
…The proper context is that the Learned Federal Magistrate after finding that the initial contribution of the Wife was twice as much as the Husband at the outset of the relationship then considered the other factors in s 79(4)(a), (b) and (c). A conclusion is ultimately reached that on the basis of all of those contributions an adjustment to the Wife of 75% was appropriate. Contrary to the Appellant’s Submissions the Learned Federal Magistrate did not ignore, but rather discussed and considered the Husband’s financial and non-financial contributions. (Respondent’s submissions, pp 9-10) [footnotes omitted]
Discussion
The parties’ cohabitation and marriage covered a period of approximately 14 years, during which time the parties had two children and amassed not inconsiderable assets.
There is no dispute that the parties commenced their cohabitation with a disparity in their initial contributions such that those contributions represented on a percentage basis approximately 65 per cent by the wife and 35 per cent by the husband.
How a court evaluates the way initial contributions, together with all other contributions made during a marriage, is the subject of well known authority, including the decision of the Full Court in Pierce and more recently in Williams & Williams [2007] FamCA 313.
Whilst the wife made significant initial contributions and contributions during the parties’ relationship, we are satisfied that his Honour failed to place any appropriate weight on the significant contributions made by the husband during the marriage. Nor did his Honour carefully assess how the husband’s initial contributions were used during the course of the parties’ cohabitation.
It appears to us that his Honour failed to give appropriate weight to a number of matters relevant to the evaluation of contribution during the parties’ cohabitation, including:
· the wife’s concession that the husband was the primary breadwinner throughout the parties’ cohabitation;
· that the parties had the benefit of occupation of the husband’s property until they purchased the matrimonial home;
· the husband’s contribution to the acquisition and maintenance of the matrimonial home and the commercial property;
· the contributions by both parties to the renovations to the matrimonial home funded through the business; and
· the development of the business by the husband throughout the whole of the parties’ cohabitation and the benefits obtained by the parties from the business.
We are also satisfied that his Honour failed to afford proper weight to the husband’s post separation contributions which resulted in the wife having the occupation of the matrimonial home and the retention of rent from a boarder, which benefit assisted her to maintain and add to her superannuation entitlements. Whilst not diminishing both the initial contributions and the contributions made by the wife during the marriage and post separation, we are satisfied that his Honour’s contribution based assessment was outside the reasonable ambit of his discretion. That error was further compounded by the Federal Magistrate’s failure to assess, in a realistic way, the huge disparity of $1,115,324.00 between the parties’ contribution based entitlements when determining to make a further adjustment in the wife’s favour apparently under s 75(2) of 2.5 per cent, although his Honour’s reasoning in paragraph 69 is somewhat confusing with its reference to post separation contribution.
We accept there is merit in the submissions made by senior counsel for the husband in respect of the adjustment made under s 75(2). In so determining we are satisfied that his Honour did not give appropriate weight to factors favouring the husband, including:
· the disparity in the parties’ capital positions as a result of the contribution based assessment;
· the husband’s age and state of health;
and made a factual error concerning the living arrangements for B.
In the recent Full Court decision in Brodie & Brodie [2009] FamCAFC 6 the Full Court (Boland, Thackray and Watts JJ), at paragraph 90 of their reasons, referred to the decision of Coleman J in Steinbrenner & Steinbrenner [2008] FamCAFC 193 where it was asserted a Federal Magistrate had fallen into appealable error in making orders outside of the reasonable ambit of his discretion. Their Honours noted:
…In considering the transposition from evaluation of actual contributions to determination of a monetary sum (or impliedly a sum represented by a percentage of assets), his Honour said at paragraph 234:
Given that the evaluation of contribution based entitlements inevitably moves from qualitative evaluation of contributions to a quantitative reflection of such evaluation, there will inevitably be a “leap” from words to figures. That is the nature of the exercise of discretion, whether it be in the assessment of contributions in the matrimonial cause, assessment of damages in a personal injuries case, or determination of compensation in a land resumption case. In some cases, the “leap” is so great, and so unheralded by the discussion which precedes it as to render the reasoning process defective. … (paragraph 90)
We consider the comments of Coleman J apposite to this case. A careful review of the evidence before the Federal Magistrate discloses that his Honour erred in his reasoning process in failing to take into account and discuss, in a considered manner, the contributions made by the husband, and in the adoption of a pseudo-mathematical approach in a relationship extending over nearly a decade and a half. Thus we are satisfied that the ultimate assessment by his Honour of the wife’s entitlement at 77.5 per cent of the asset pool is one outside the reasonable ambit of discretion and constitutes appealable error.
Other grounds of appeal
Whilst we have not dealt discretely with every ground of appeal pleaded in the Notice of Appeal we are satisfied that the significant areas of complaint raised by the husband have been traversed in these reasons in the course of our discussion focussed on ground 6.
Application to adduce further evidence
As we noted at the commencement of these reasons, the husband sought to adduce further evidence and noted in his submissions in support of that application that the trial was listed for hearing on 30 and 31 May 2007 and completed on 21 June 2007, but judgment was not delivered until approximately 12 months after the completion of evidence at trial.
The husband sought to rely on two affidavits to support his application for leave to adduce further evidence. The first affidavit was an affidavit filed on 17 October 2008 and he also sought to rely on a further affidavit filed by leave in Court on the hearing of the appeal.
The wife filed a Response to the husband’s Application in a Case (prior to the filing of the husband’s second affidavit) and also filed an affidavit sworn 3 November 2008 opposing the application. In her affidavit the wife agreed with a number of matters raised in the husband’s first affidavit. The circumstances of the filing of the husband’s second affidavit precluded any realistic opportunity for the wife to respond to the matters raised in that affidavit.
The unfortunate period of delay between the trial and the delivery of reasons for judgment, together with the further delay until the appeal was listed for hearing has resulted in the parties making ongoing contributions to their property, and to the welfare of their two children.
We readily understand the desire of the parties to avoid, if at all possible, the costs, delay and emotional expense involved in a retrial of their property proceedings.
In this case we have determined that the appeal should be allowed and have done so without the necessity to consider the further evidence sought to be led by the husband. We do, however, appreciate that consistent with the principles enunciated in Allesch & Maunz (2000) 203 CLR 172 the parties should be afforded the opportunity to put evidence relevant to the re-exercise of discretion to the Court. We see much merit in the submissions made both orally and in writing on behalf of the wife that the further evidence be dealt with in a manner similar to the orders made in AM & MM [2005] FamCA 443.
In Hunt & Zuryn (2005) FLC 93-226 the Full Court, at paragraph 53, referred to the options open to a Full Court at the conclusion of a successful appeal and said:
The options open to the Full Court at the conclusion of a successful appeal were canvassed in G & G [2001] FamCA 1453, a case determined before the special leave application to the High Court in Ruscoe and Walker (2002) FLC ¶93-093 was dismissed. In G & G both parties sought that the Full Court should re-exercise the discretion. However the Full Court noted there had been a significant time delay since the original hearing as well as a number of substantial developments. The Full Court set out its conclusions on the parties’ contributions and relevant s 75(2) factors on the evidence before the trial Judge, as modified by the Full Court’s conclusions on the pool. The Full Court noted the following options in the factual circumstances of the case before it:
• the parties could present to the Court an agreed statement of relevant facts which had occurred since the judgment of the trial judge to be taken into account by the Court in re-exercising the discretion;
• the Court might allow the appeal, make such orders as flowed from a re-exercise of the discretion on the basis of their conclusions about contributions and s 75(2) factors and their conclusions about the pool of assets, designating the orders as either “partial final” or “interim” and remit for the determination of a single Judge as to whether any further adjustment should be made in respect of contribution or s 75(2) factors which had subsequently arisen;
• the Court could uphold the appeal, set aside the trial Judge’s orders and remit the proceedings for a limited rehearing.
We would add to those options that in some limited cases a matter may regrettably be required to be remitted for a complete rehearing.
In this case the wife’s counsel specifically submitted that we should follow the procedure adopted in AM & MM at paragraphs 45 to 48. In AM & MM, at paragraph 49, the Full Court explained it would express its view as to the appropriate contribution based assessment and s 75(2) adjustment on the evidence at trial (The wife’s counsel did not however refer to paragraph 49). There is no dispute that Lindenmeyer, Finn and Guest JJ in G & G (2001) FamCA 1453 considered it was appropriate to indicate to the parties the appropriate adjustment on the evidence before the trial Judge in respect of an adjusted pool and then to make orders (in paragraphs 349 to 353) in respect of the course the proceedings should then take.
We propose to follow that course, noting before us no complaint was raised about the parties’ net assets as found by the Federal Magistrate. We also propose to adopt the course followed at trial of including property and superannuation entitlements in a single pool.
(a) contribution based assessment
We consider that the Federal Magistrate’s findings as to what constituted parties’ initial contributions were findings open to him on the evidence.
So far as his Honour’s recording of the wife’s contributions throughout the parties’ cohabitation is concerned, we conclude those findings were open to him on the evidence, save and except we accept the submissions made on behalf of senior counsel for the husband that his Honour “double counted” to some degree in assessing the wife’s contribution (by way of the sale of shares and provision of funds to the acquisition of the commercial property). We accept that some of those funds included her initial shareholding, which was offset by his Honour against the husband’s chattels and other assets he contributed at the commencement of cohabitation.
We have had regard to the wife’s concession that the husband was the primary income earner throughout the parties’ cohabitation. We have also had regard to her concession about other contributions by the husband in her affidavit sworn 28 May 2008, including the extensive non financial contributions set out by him, particularly in paragraphs 32-35, 37, 39-42, 44(a) and (b) and 45-47 of his affidavit affirmed 18 May 2007. The husband established and operated the business which provided not only income to the parties, but other benefits throughout the course of cohabitation and until separation. We conclude, excluding initial contributions, that the parties’ contributions during cohabitation should be regarded as equal. Post separation, and to the date of the hearing, the husband continued to operate the business and applied rentals when received to servicing the mortgage over the commercial property and the matrimonial home. He also had an obligation to and did pay child support. By contrast, the wife had the benefit of occupation of the matrimonial home and/or the facility to let that property, or parts of it, up to the date of hearing. We would assess the husband’s contributions in the post separation period up to the date of hearing as exceeding, those of the wife who we recognise had the ongoing responsibility for the younger child of the marriage and also the care of the parties’ son whilst the husband was in Indonesia.
Overall we would assess the parties’ contribution based entitlements to be 60 per cent to the wife and 40 per cent to the husband. Such an assessment would result in the wife receiving a contribution based entitlement of 60 per cent or $1,338,388.00 and the husband receiving an entitlement of $929,529.00, a 20 per cent differential of $449,129.00 based on the value of the assets as found by the Federal Magistrate.
(b) section 75(2) adjustment
Turning to consider relevant factors under s 75(2) we consider the following factors require consideration:
· At the date of the hearing the wife was aged 53 years and the husband was aged 60 years. The wife was engaged in full-time employment as a teacher and was earning $1,424.00 per week (Wife’s Financial Statement sworn 2 May 2007). The husband deposed to an average weekly income of $975.00 per week but his Honour found that the husband received benefits from the business. The husband asserted both parties were in reasonable health although he had a pacemaker inserted at age 50 years and is under medical supervision (Husband’s affidavit filed 18 May 2007, para 48).
· It is necessary we consider the respective financial positions of the parties as a result of our contribution based assessment. The percentage division and the resulting approximate $450,000.00 disparity between the parties must be considered pursuant to s 75(2)(b). In doing so, it is not only the quantum of the “property and financial resources of the parties” that must be taken into account but the composition of those assets, particularly as they include superannuation assets. Here, as later discussed, the wife will not only receive about $160,000.00 in shares and about $460,000.00 in prospective superannuation entitlements (capable of vesting in two years time should the wife retire) but also, pursuant to the mooted division, the wife would receive about $850,000.00 in cash with which to rehouse herself.
· After separation, pursuant to consent orders, each party had the responsibility for a child of the marriage, and by the time the Federal Magistrate delivered his reasons for judgment, the parties’ son was about to reside with the husband on a full-time basis, the husband having returned from Indonesia.
· The husband by reason of his age at the date of the hearing was in a position, or would shortly be in a position if he desired to do so, to access his superannuation entitlements. By contrast the wife could not access her superannuation entitlements for some little time.
· The husband had at the date of the hearing a liability pursuant to the Child Support Assessment Act 1989 (Cth) to pay child support to the wife.
Weighing and balancing each of these factors, we do not find any particular relevant factor under s 75(2) which requires further adjustment in either party’s favour, particularly having regard to the disparity in the parties’ financial circumstances as a result of the contribution based assessment.
(c) justice and equity of proposed orders
We turn then to consider whether orders which would see the wife retain 60 per cent or $1,388,388.00 of the parties’ total net assets is just and equitable.
Before trial the parties filed very comprehensive Outlines of Argument and after the hearing provided written submissions to his Honour. The Schedule of Assets asserted by the wife in Schedule 1 of her written submissions sets out assets and liabilities totalling $2,228,648.00. His Honour concluded the wife had assets to the value of $665,740.00. That calculation was based on the values set out in paragraph 5 of his reasons, but failed to include the adjustments made later in his reasons to arrive at a total pool of $2,230,648.00. Based on adjusted figures the wife was to retain assets of $674,207.00 plus her entitlement in the F Enterprises Superannuation Fund of $24,990.00, that is, total funds of $699,197.00 made up as follows:
Assets retained by wife
Value
1.
Bank Account
$10,000.00
2.
QTCI
$2,000.00
3.
Shares – Public Companies
$162,733.00
4.
Car – less debt
$5,000.00
5.
Contents
$15,610.00
6.
Superannuation
$351,147.00
7.
Superannuation
$117,717.00
8.
Jewellery
$10,000.00
$674,207.00
Plus F Enterprises Superannuation Fund
$24,990.00
Net Assets
$699,197.00
The wife would retain the assets set out by us in the schedule above, together with her superannuation entitlement in the F Enterprises Superannuation Fund of $24,990.00, a total entitlement of $699,197.00. Thus the adjusting sum required to be received by the wife is $689,191.00.
At the time of the hearing before the Federal Magistrate the equity in the matrimonial home was $451,000.00. Assuming the wife received the whole of the net proceeds of sale of the matrimonial home the husband would be required to provide an additional sum of $238,191 to the wife. On the sale of the matrimonial home the mortgage over that property would be discharged leaving the husband with the commercial property worth $950,000.00 subject to a mortgage of $499,000.00.
The husband will retain the business (including the commercial property from which it operates). Based on the Federal Magistrate's findings, it seems tolerably safe to assume that the husband would both continue to operate that business and retain that property. In order to pay the wife the required cash adjustment, the husband will need to borrow an additional sum of about $240,000. He will have a total debt then of about $730,000. This is, of course, not insignificant for a man of his age. Nevertheless, it also seems to us clear that the husband should be able to borrow this sum and to maintain his business until such time as he might choose. As earlier noted, retention of the business produces for him not only the stated income, but additional benefits.
Overall, we are satisfied that if applied to the assets and liabilities as at the date of trial, orders which provided for the sale of the matrimonial home as agreed to by the parties, with the wife receiving the net proceeds of sale and further cash adjustment would, in the circumstances of the case, be just and equitable. The wife would have cash and realisable assets of approximately $864,000.00 to rehouse herself, and a substantial superannuation entitlement for her retirement. The husband would retain the business interests (F Enterprises and the CM business), together with loans to associated persons, as well as his insurance policy and modest superannuation entitlements. His retention of the business assets would afford him the opportunity to derive earnings, together with benefits, exceeding those of the wife.
Costs of the appeal and re-exercise of the discretioin
At the hearing of the appeal we asked whether counsel were, at that time, able to make submissions about costs of the appeal. Understandably, given the uncertainties about the outcome of the appeal, whether or not the further evidence would be admitted and whether we would re-exercise the discretion in the event the appeal was allowed, senior counsel for the husband and counsel for the wife requested the opportunity to file written submissions on costs after delivery of these reasons. The issue of costs will accordingly be dealt with by us after we determine whether we can re-exercise or remit for rehearing.
We will also, as earlier foreshadowed, make orders relevant to the question of re-exercise to take into account relevant factual matters which have occurred since the hearing of this matter in 2007.
I certify that the preceding one hundred and ten (110) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.
Associate:
Date:
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