Manwaring & Emmerton
[2025] FedCFamC1A 20
•18 February 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Manwaring & Emmerton [2025] FedCFamC1A 20
Appeal from: Emmerton & Manwaring (No 2) [2024] FedCFamC2F 966 Appeal number: NAA 216 of 2024 File number: ADC 4841 of 2017 Judgment of: SCHONELL J Date of judgment: 18 February 2025 Catchwords: FAMILY LAW – APPEAL – Where the grounds of appeal involved a degree of overlap by contending errors in the exercise of discretion and errors of fact – Where the appellant contends that the primary judge “doubled counted” the effect of the conduct of the appellant at both the assessment of contribution stage and in relation to the matters under s 75(2) – Where the respondent contended that there was no double counting, that the primary judge’s determination needed to be viewed in aggregate, and that a consideration of the primary judge’s determination revealed no error in the approach of the primary judge – Where the Full Court found that the conduct finding was material to the determination of the primary judge at each of stages two and three and was “double counted” – Where the error permeated the percentage findings at each stage – Ground 1 of the appeal succeeds.
FAMILY LAW – APPEAL – RE-EXERCISE OF DISCRETION – Where this Court found error in the primary judge’s reasons – Where the parties agreed that the Full Court should re-exercise the discretion – Where orders were made for further written submissions to be filed as to the re-exercise of discretion – 28 year marriage – Where the parties had acquired a number of assets including the business, investment properties, a home and farm – On the re-exercise of discretion, the respondent is to receive 62 percent of the property available for division and the appellant is to receive 38 percent – Costs certificates issued.
Legislation: Family Law Act 1975 (Cth) Pt VIII, ss 75(2), 75(2)(g), 75(2)(o), 75(4)(e), 79(a), 79(b), 79(c), 79(4), 106A
Federal Circuit Family Court of Australia Act 2021 (Cth) s 36(1)
Federal Proceedings (Costs) Act 1981 (Cth) s 6 and s 9
Cases cited: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139
Boulton & Boulton [2024] FedCFamC1A 132
CDJ v VAJ 1998] 197 CLR 182; HCA 67
Chan & Lee (2022) FLC 94-089; [2022] FedCFamC1A 85
Crowe-Maxwell v Frost (2016) 91 NSWLR 414; [2016] NSWCA 46
De Winter and De Winter (1979) FLC 90-605
Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154
Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63
Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143; [2003] FamCA 395
Horrigan & Horrigan [2020] FamCAFC 25
House v The King [1936] 55 CLR 499; HCA 40
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
Keskin & Keskin & Anor (2019) FLC 93-932; [2019] FamCAFC 236
Loncar & Loncar [2021] FLC 94-054; [2021] FedCFamC1A 14
McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] 20 CLR 231; HCA 84
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Singerson & Joans [2014] FamCAFC 238Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Trevi & Trevi (Re-Exercise) [2019] FamCAFC 51
Watson & Ling (2013) FLC 93-52; [2013] FamCA 57
Number of paragraphs: 110 Date of last submissions: 28 January 2025 Date of hearing: 27 November 2024 Place: Sydney Counsel for the Appellant: Mr McQuade Solicitor for the Appellant: Starke Lawyers Counsel for the Respondent: Ms Miller Solicitor for the Respondent: Tindall Gask Bentley ORDERS
NAA 216 of 2024
ADC 4841 of 2017FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR MANWARING
Appellant
AND: MS EMMERTON
Respondent
ORDER MADE BY:
SCHONELL J
DATE OF ORDER:
18 FEBRUARY 2025
THE COURT ORDERS THAT:
1.The Appeal is allowed.
2.The appellant is granted a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in the appeal.
3.The respondent is granted a costs certificate pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in the appeal.
4.The orders made 26 July 2024 are set aside and, in lieu thereof, the following orders are made pursuant to Pt VIII of the Family Law Act 1975 (Cth).
5.The proceeds of sale of the property situate at K Street, Town L and C Street, Suburb D and the proceeds from the sale of livestock all held in the Trust Account of Tindall Gask Bentley be distributed to the respondent.
6.Within twenty-one (21) days of the date of this order the appellant is to vacate the property situate at AB Street, Suburb AC in the State of South Australia described in Certificate of Title Volume … Folio … (“the [Suburb AC] property”) and deliver up the keys and any other means of entry to the Suburb AC property to the respondent or such other person nominated to him or his solicitor by her or by her solicitor.
7.Within sixty (60) days of the date of this order the parties shall do all things and execute all documents necessary to place the Suburb AC property on the market for sale on the following terms and conditions:
(a)The respondent be appointed sole agent to sell the property;
(b)The respondent provide all instructions to the said sales agent and conveyancer to give effect to these orders including but not limited to:
(i)The method of sale;
(ii)Advertising and marketing of the property;
(iii)The execution of the contract of sale;
(iv)Release of the settlement statement;
(v)Ascertain the status of rates and payments and any information as to any utility accounts outstanding in respect of the Suburb AC property; and
(vi)The payment of the proceeds of sale in accordance with these orders;
(c)The nominated reserved price be not less than $650,000.00 (SIX HUNDRED AND FIFTY THOUSAND DOLLARS) unless the appointed sales agent recommends another figure or the parties agree on a different figure;
(d)Upon the sale of the Suburb AC property the net proceeds be distributed in the following manner and priority:
(i)Pay all costs (including commission) and expenses of sale and conveyancing to the relevant persons;
(ii)Reimburse the respondent for any reasonably incurred costs to clean the Suburb AC property preparing it for sale;
(iii)Pay arrears of all rates, taxes and outgoings with respect to the Suburb AC property of whatsoever nature and kind;
(iv)To the respondent by payment to the Trust Account of Tindall Gask Bentley, such sum as calculated by Mr R that shall be sufficient to meet the anticipated capital gains tax associated with the sales of the Suburb D, Town L and Suburb AC properties, to be drawn upon to pay any assessment of capital gains tax issued by the Australian Tax Office;
(v)To the parties’ son Mr X TWENTY ONE THOUSAND, FIVE HUNDRED AND SEVENTY SEVEN DOLLARS AND SIXTY SIX CENTS ($21,577.66) to discharge the joint liability in respect of the AA Bank; and
(vi)The proceeds remaining in the Trust Account of Tindall Gask Bentley to be distributed as follows:
A.62 percent to the respondent;
B.A further and additional sum of $42,413 to the respondent; and
C.The remaining proceeds to the Starke Lawyers Trust Account for the appellant.
8.Within sixty (60) days of the date of this order, the parties do all things and execute all necessary documents required of them to transfer the respondent’s interest in the Suburb Q property to the appellant and discharge mortgage registered number … held by H Pty Ltd (“the [Suburb Q] mortgage”) in the respondent’s name at the appellant’s sole expense in accordance with the following orders and directions:
(a)The appellant is to make all necessary inquiries to obtain the finance necessary to transfer the Suburb Q property to him and to discharge the Suburb Q mortgage and advise the respondent of the financier retained by him to this effect;
(b)Upon the appellant advising the respondent of the financier selected by him, the respondent will sign all necessary documents presented to her by the appellant to discharge the Suburb Q mortgage and transfer her legal interest in the Suburb Q property to the appellant at the appellant’s sole expense; and
(c)The appellant shall be liable for and indemnify the respondent against all rates, taxes, and outgoings with respect to the Suburb Q property;
9.In the event the appellant is unable to obtain the necessary finance and discharge the Suburb Q mortgage pursuant to order 8(a), within ninety (90) days of the date of this order, the parties do all things and execute all documents necessary as to place the Suburb Q property on the market for sale on such terms and conditions as follows:
(a)The respondent be appointed sole agent to sell the property;
(b)The respondent provide all instructions to the said sales agent and conveyancer to give effect to these orders including but not limited to:
(i)The method of sale;
(ii)Advertising and marketing of the property;
(iii)The execution of the contract of sale;
(iv)Release of the settlement statement;
(v)Ascertain the status of rates and payments and any information as to any utility accounts outstanding in respect of the Suburb Q property; and
(vi)The payment of the proceeds of sale in accordance with these orders;
(c)The nominated reserved price be not less than $850,000.00 (EIGHT HUNDRED AND FIFTY THOUSAND DOLLARS) unless the appointed sales agent recommends a higher figure or the parties agree on a lower figure and in absence of agreement as to such lower figure, it is to fixed by the court;
(d)Upon the sale of the Suburb Q property the net proceeds be distributed in the following manner and priority:
(i)Pay all costs (including commission) and expenses of sale and conveyancing to the relevant persons;
(ii)Discharge the Suburb Q mortgage;
(iii)Reimburse the respondent for any reasonably incurred costs to clean the property preparing it for sale;
(iv)Pay arrears of all rates, taxes and outgoings with respect to the Suburb Q property of whatsoever nature and kind;
(v)The remainder of the sale proceeds be deposited into the Trust Account of Starke Lawyers for and on behalf of the appellant.
10.It is declared that the respondent is the beneficial owner of the properties located at 1 Y Street, Suburb Z in the State of South Australia as described in Certificate of Title Volume … Folio … and 2 Y Street, Suburb Z in the State of South Australia as described in Certificate of Title Volume … Folio … (“the [Suburb Z] properties”)
11.To this end within thirty (30) days of the date of this order, the parties do all things and execute any necessary documents which may be required of them to the effect of order (10) hereof and in particular:
(a)To transfer the appellant’s right, title and interest in the Manwaring Family Trust (“the Trust”) to the respondent including (but not limited to) any equitable interest held by him in the Suburb Z properties to the respondent at the respondent’s cost;
(b)The respondent indemnify and keep indemnified the appellant in respect of all liabilities in particular those register pursuant to mortgage number … in favour of H Pty Ltd and other outgoings relating the Suburb Z properties including potential capital gains tax.
(c)If deemed necessary by the respondent in her sole discretion to give effect to these orders is at liberty to remove the appellant as a beneficiary or member of any class of beneficiaries of the Trust.
12.In relation to B Pty Ltd (in liquidation) (“the Business”):
(a)Within thirty (30) days of the date of this order, the respondent do all things and execute all necessary documents to:
(i)(i) Transfer, at the appellant's expense, her interest in any debit or loan account of the Business to the appellant to the intent that the respondent thereafter will have no further claim against the appellant in relation to the Business or against the Business in relation to the assets of the Business and any monetary entitlement which either party may have in the Business including without limiting the generality of the foregoing any loan account of the appellant or the respondent in the Business or as to wages or dividends or otherwise either in the past, the present or in the future and any such monetary entitlement of the respondent shall thereafter vest with the appellant;
(b)The appellant shall indemnify the respondent and keep her forever indemnified in relation to any current or future liabilities arising out of or in respect of to the Business or the respondent’s shareholding or any office in the Business;
(c)The appellant shall further indemnify the respondent and keep her forever indemnified in relation to any or all liabilities in the future arising out of or in respect of the Business or in the respondent’s office in the Business or as a shareholding of the Business including (without limiting to the generality of the foregoing) any past, present or future income tax, capital gains tax, goods and services tax, directors' loans, Division 7A loans or other liability of the respondent and/or of the appellant and/or the Business;
(d)The appellant shall cause to be forgiven, any debt or loan balance owed by the respondent to the Business; and
(e)The appellant shall indemnify and keep indemnified the respondent from any claim, demand, suit, cost or action of the Business against the respondent.
13.The parties do all things and execute all necessary documents and pay all monies equally to cause Mr R, finance professional, to undertake the calculation of any anticipated capital gains tax pursuant to these orders.
14.Including but without limiting the effect hereof, the respondent shall retain for her sole use and benefit absolutely free from any further claim or demand of the appellant:
(a)The property situate at BB Street, Town CC;
(b)Her motor vehicle;
(c)The clothing, jewellery and personal effects currently in her possession;
(d)The furniture and household effects currently in her possession;
(e)All amounts standing to her credit in any bank, building society or Credit Union account;
(f)Her Super Fund 1 superannuation entitlements standing in her own name without adjustment; and
(g)All other property in her possession or control whether registered in her name or not and not otherwise specified herein.
15.Including but without limiting the effect hereof, the appellant shall retain for his sole use and benefit absolutely free from any further claim or demand of the respondent:
(a)His motor vehicles;
(b)The clothing, jewellery and personal effects currently in his possession;
(c)The furniture and household effects currently in his possession;
(d)All amounts standing to his credit in any bank, building society or Credit Union account held in his sole name or in the name of DD Company;
(e)His Super Fund 2 superannuation entitlements standing in his own name without adjustment; and
(f)All other property in his possession or control whether registered in his name or not and not otherwise specified herein.
16.The parties shall do all acts and things reasonably required including the signing or execution of all necessary documents to give effect to the terms of this order within seven (7) days of being requested to do so.
17.That without prejudice to any other relief that may be available to a party, that if either party shall refuse or neglect or omit to execute any document necessary to give effect to the terms of these orders within seven (7) days after the same shall have been tendered to that party by or on behalf of the other party then in such event of refusal, neglect or omission a Judicial Registrar, Senior Judicial Registrar or other judicial officer of this Court or of any court exercising jurisdiction under s 106A of the Family Law Act 1975 (Cth) upon proof by affidavit of such refusal, neglect or omission is hereby appointed to execute and if in that judicial officer’s opinion it shall be necessary to do so to settle the same and do all such other acts and things and execute such other documents as shall be necessary to give full force and effect to these orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Manwaring & Emmerton has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
By Amended Notice of Appeal filed 11 November 2024, the appellant appeals orders made by a Judge of Division 2 of the Federal Circuit and Family Court of Australia dividing the property of the parties to a long marriage in proportions broadly as to 70 percent to the respondent and 30 percent to the appellant. The Amended Notice of Appeal contends six discrete grounds, albeit there is an interplay between many of the grounds, and in particular Grounds 1 and 2.
In the event that the appeal was allowed, the appellant sought a remitter. The respondent sought a dismissal of the appeal, but in the event that the appeal was allowed, sought the Full Court re-exercise. As the High Court observed in CDJ v VAJ [1998] 197 CLR 182 at [103] a retrial is “an order of last resort”. Sensibly upon reflection, the appellant’s counsel advised the Court that he was instructed that if the appeal was allowed, he consented to this court exercising its discretion for that of the primary judge.
At the conclusion of the appeal, I advised the parties that the appeal would be allowed. The parties sought the opportunity to provide written submission as to the re-exercise with the last of those submissions due by 28 January 2025.
I advised the parties that reasons on re-exercise would include the reasons for allowing the appeal. These are those reasons.
BACKGROUND
The parties married in 1988, separated in November 2016, and their divorce became final in 2018. There are two adult children of the marriage, now aged 31 and 28.
The primary judge found the parties’ assets at cohabitation were modest and included a trade business (‘the business’). The primary judge found:
9Mr Manwaring also lived with his parents. He had begun a business B Pty Ltd, which he operated from his parents’ garage. He was the only employee of the business at the time. He too had modest assets, chiefly consisting of two motor vehicles.
10In 1990, Ms Emmerton left her employment, and began to work at B Pty Ltd, answering the phone and doing the books, which included attending to quotes and invoices. Mr Manwaring attended to the technical side of the business, which was installation, service and repairs. It was physical work, involving climbing ladders.
11.The business prospered and expanded. Notwithstanding the births of Ms EE and then Mr X, the wife continued to be involved in the administrative side of the business. Other tradespeople were employed to assist with installations and manufacture.
12.Initially, B Pty Ltd was operated as a partnership, in which the parties were the only partners. However, in 2001, their accountant advised them to incorporate the business as B Pty Ltd.[1] The company issued 5001 shares – the husband holding 5000, as sole director and the wife holding 1, as company secretary.
…
15.In 2003, again on the advice of their accountant, the parties established a family trust - Manwaring Family Trust. The purpose of the Trust was to provide a mechanism for investments to be made on behalf of the family, primarily through the purchase of both residential property, which was to be leased out and the operation of land for primary production.
16.The wife was the sole trustee and appointor of the Trust. The husband, Ms EE and Mr X, as well as the wife, were beneficiaries. Ms Emmerton continued to attend to the financial responsibilities of the Trust and the business. She also liaised with its accountant, from 2006 onwards, Mr R, who prepared tax returns, for the various entities concerned. From time to time, Ms EE also worked in the business, helping the wife with her duties.
[1] It is convenient to refer to “B Pty Ltd” as “B Pty Ltd” or “the business”.
During the course of the relationship, the primary judge found the parties had acquired a number of assets including the business, investment properties, a home (‘the Suburb Q property’) and a farm (‘the K Street, Town L property’). What had been a productive working relationship during their cohabitation, deteriorated with the party’s separation. The primary judge recorded the respondent’s contention that the appellant’s management of the business led to “wrack and ruin” at [18].
The primary judge recorded the parties competing positions to be as follows:
6It is the wife’s position that the waste and obfuscation emanate solely from the husband and as a result the parties’ assets should be divided 70/30% in her favour. In addition, she asserts that it is the husband’s management of the family’s financial affairs which have led to the current crisis with the ATO and he should bear the consequences of this as they unfold into the future.
7On the other hand, it is the husband’s position that given the length of the marriage, when coupled with his uncertain financial future, arising from his age and currently compromised health, an equality of division of marital property still remains the just and equitable outcome of the case.
The primary judge recorded that one of the major assets of the parties was a Trust which held real property at Town L, Suburb AC and Suburb Z.
The business operated from the Suburb AC property. The Trust acquired the Suburb AC property in early 2004. Of this property, the primary judge observed:
193Until late 2017, B Pty Ltd was paying the Trust the sum of $600.00 per week by way of rent. There have been no further payments of rent since that date. As indicated above, Mr Manwaring is subject to an order of the court made in February of 2019 to pay this rent, to which he has not complied.
194In Mr Dillon’s closing submissions, he has sought the add back of the sum of $80,000.00 to represent the rent foregone. Given the status of the company, it seems improbable that the rent will ever be paid.
195It is the wife’s evidence that due to the lack of rent received she has been unable to pay the council rates and outstanding water arrears on the property, which is technically her responsibility as owner. As at late 2023, an amount of $3,767.93 was outstanding. She has however, in the past, paid some of the rate arrears from her own salary.
196At some undisclosed time, Mr Manwaring allowed Mr AH, who operates a business known as QQ Business to conduct his business from the Suburb AC premises. Mr Manwaring has not disclosed what are the terms of any agreement which he has with Mr AH in this regard, in particular what rent, if any, he is providing. During the trial, which took place in April of 2023, Mr Manwaring referred to Mr AH as the [livestock] man.
…
201In any event, given the business which Mr Manwaring operated from the Suburb AC premises is in liquidation and he himself has deposed that he is unable to work, Ms Emmerton cannot understand the husband’s determination to retain the property, unless, as she suspects, he has some ulterior motive.
202In this context, she has obtained a registration of a business name RR Business which was registered in the name of a Mr Manwaring in mid-2023 and whose principal place of business was the former family home in Suburb Q. In these circumstances, her counsel Mr Dillon submits that there is a significant possibility that Mr Manwaring is overstating his current difficulties and intends to conduct a phoenix-like resurrection of the service repairs business, in a different form, leaving its liabilities behind it.
The Suburb Z properties were held by the respondent in her capacity as the trustee of the Trust. The primary judge observed:
184The husband claims to have no knowledge of how the Trust operated, particularly in terms of how its receipts were distributed. The tacit implication being that there was something untoward in this. The wife’s position is that the parties were professionally advised by their accountant Mr R and Mr Manwaring was involved with consulting with him and providing information to prepare his various tax returns.
185In my view, the wife is likely to be the more accurate historian in this regard. It may be the case that Mr Manwaring personally knew nothing of the fine detail of the Trust’s affairs, but this was his choice. For reasons upon which I will expand in due course, it is my impression that he does not have a finely developed appreciation of financial affairs and the intricacies (and more importantly the implications) of the corporate and trust structures set up for him and the wife.
186The husband claims that the wife set up a separate account into which rent for the two properties were paid. The wife acknowledges that this was the case. It is her position that she did so to prevent the husband withdrawing the monies in question and utilising them for his own purposes. In the circumstances of the matter, in my view, her concerns in this regard had substance.
187In his most recent affidavit, the husband asserts that the wife should have increased the rent in respect of the two properties but has elected to rent them to her family and friends. The wife refutes this assertion.
188In my finding, there has been nothing untoward in the wife’s actions in respect of these two properties administered by her through the Trust. To the contrary, in my view, her actions have had the consequence of preserving significant items within the overall pool, without any concomitant contribution from the husband.
189The wife has provided the most recent tax return for the Trust for the year ending 30 June 2023. This reveals that at the time the rent received for Y Street was exceeded by the expenses relating to the properties, particularly interest incurred in servicing the mortgages on the properties. Significantly the return indicates another property being relevant to the Trust being AB Street, Suburb AC but no rental income has been received. The Trust has accumulated losses of just under $70,000.00.
190In her most recent affidavit, the wife has indicated her wish to retain both properties as part of her entitlements arising from the finalisation of her application. It is her evidence that as a consequence of the husband’s actions in allowing the mortgage on the Suburb Q property to go into arrears, her credit rating has deteriorated and she has no capacity to borrow money to discharge the mortgages on either of the Y Street properties.
191In these circumstances, if she receives no or insufficient cash from Mr Manwaring to transfer to him her interest in the former marital home or otherwise from the sale of Suburb AC, she will be compelled to sell the properties, which will trigger a capital gains tax assessment for her.
There were two other properties relevant to the proceedings, a property at Suburb D and the matrimonial home at Suburb Q. As to the Suburb D property, the primary judge observed:
117The Suburb D property was sold as a consequence of an order of the court made on 28 April 2023. The property was originally acquired in 2003, for the sum of $146,000.00 as an investment property and registered in the wife’s sole name. It was subject to mortgage and tenanted. It was negatively geared.
118As a consequence, any profit made in respect of it is subject to capital gains tax to be assessed at the wife’s marginal tax rate. This is a significant issue in the case. Mr R has calculated the CGT payable at a marginal rate of 47% at an amount of $76,195.11.
119The orders of 28 April 2023 required the minimum sale price to be $500,000.00 with the proceeds to be applied to discharging the mortgage, in favour of H Pty Ltd, on the property and other expenses, with the remainder to be held on trust.
120In any event, the property was sold in mid-2023 for $480,000.00. An amount of $229,201.71 was utilised to discharge the mortgage. This did not occur without difficulty due to the fact that the relevant mortgage was also secured against the Suburb Q property. The Suburb Q property is the parties’ former family home. Mr Manwaring wishes to retain it.
121It is the wife’s evidence that Mr Manwaring refused to execute the necessary re-finance documents to transfer the mortgage to the Suburb Q property alone. This necessitated Ms Emmerton bringing an urgent application to the court on 7 June 2023, which ultimately enabled the sale to be finalised.
122It is the wife’s case that the conduct of the husband in respect of this this issue typifies his conduct in the proceedings generally and his attitude towards her in particular. Essentially it is one of passive aggression and obstruction, which does not seem to be rationally based. He seems bent on frustrating her case, even if it means it will cause him financial detriment. It can be summed up by that application of the old saw of Mr Manwaring being willing to cut off his nose to spite his face.
A further liability was contended by the respondent to be due to the parties’ son. The primary judge recorded the sons evidence as follows:
211It is his evidence that it was agreed between him and his father that once the livestock was sold, he would share in the profit, after the loan was paid out. He has deposed that [the appellant] did not honour the agreement, which led to [AA Bank] obtaining a judgment against him, which he has been paying off in instalments. The parties agree that the amount remaining outstanding to [AA Bank] is $21,577.33.
212The [respondent] proposes that she pay the sum from any settlement sum which the court awards in her favour – presumably referrable to the [appellant] retaining [Suburb AC] and [Suburb Q]. The [appellant] proposes that it come from the monies held on trust referrable to the earlier sale of livestock.
…
220[Mr X] also confirms the agreed position that he is owed the sum of $21,577.33 in respect of the Landmark account relating to the purchase of [produce] which were subsequently sold by [the appellant]
On 26 July 2024, the primary judge made final orders that included for the proceeds of sale of Town L, Suburb D, and livestock to be distributed to the respondent, for the Suburb AC property to be sold with the proceeds applied to meet CGT for Suburb D and Town L, the liability to the parties son to be paid and the balance distributed as 70 percent to the respondent, a further $50,000 to the respondent, and remainder to the appellant. In addition, the respondent was to transfer her interest in the Suburb Q property to the appellant once he had discharged the Suburb Q mortgage failing which it was to be sold with the appellant to receive the net proceeds.
GROUNDS OF APPEAL
The Amended Notice of Appeal contained six grounds; Grounds 1, 2 and 4 involved a degree of overlap by contending errors in the exercise of discretion and errors of fact. Ground 3 contended error in the exercise of discretion by erroneous application of weight and, notwithstanding the form, counsel for the appellant contended in oral argument that Ground 5 essentially contended error by inadequacy of reasons and thus overlapped with Ground 6.
The major focus of the appeal was on Grounds 1 and 2. So much was conceded by the respondent in that, despite some brief submissions as to Ground 3, she otherwise sought to rely on her Summary of Argument.
This is an appeal from a discretionary determination pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). The section grants to the primary judge a wide discretion. As Brennan J observed in Norbis v Norbis (1986) 161 CLR 513 at 540:
The “generous ambit within which reasonable disagreement is possible” is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.
It is well established that for an appellant to succeed in an appeal from an exercise of discretion they must bring their appeal within one of the recognised categories of appellant intervention identified by the High Court in House v The King [1936] 55 CLR 499, namely the primary judge’s discretion miscarried by:
·Making an error in approach or principle.
·Failing to consider a relevant circumstances and/or considering an irrelevant circumstances.
·Making an error in the findings of fact such that the finding is unsupported by the evidence; or
·Making orders that fall so outside a reasonable exercise of discretion that the orders were “unreasonable or plainly unjust”.
As observed by Stephen J in Gronow v Gronow (1979) 144 CLR 513:
519The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge's discretionary decision on grounds which only involve conflicting assessments of matters of weight…
GROUND 1
1. The learned trial judge erred at law and in the exercise of his discretion in taking into account the economic impact of the [appellant]'s conduct upon the [respondent] both when assessing the parties’ contributions pursuant to section 79(4)(a), (b) and (c) of the Family Law Act 1975 and his consideration of section 79(4)(e) of the Act by way of findings pursuant to section 75(2)(0) of the Act and in so doing the primary judge "double counted" the effect of such conduct, both as a factor increasing the [respondent]'s contribution assessment, falling under the principle of Kowaliw (1981) FLC 91-092 and as a s75(2) factor adversely affecting the [respondent].
The thrust of the ground is whether the primary judge, at both the assessment of contribution stage and in relation to the matters under s 75(2), “doubled counted” the conduct of the appellant. The appellant in his Summary of Argument submitted:
5.When assessing contributions pursuant to s 79(4)(a),(b) and (c) at [396] (Appeal Book p 103) he found it to be "incontrovertible" that the parties level of asset backing had significantly diminished: the [Town L] had more than likely halved in value whilst the business [the business] had gone from having some finite worth in 2016 to nil, such diminution to have occurred on "the [appellant]'s sole watch" and at [400] (Appeal Book p 104) he found that the diminution in value of both [the business] and the [Town L] farm had occurred by reason of the actions of the [appellant] alone. At [402] (Appeal Book p 104) he found that the position regarding Division 7A loans made by [the business] to the parties became terminal following separation.
6.Having considered the matters when assessing contributions, the learned trial judge considered them again in his assessment pursuant to s 75 (4) (e) of the Act, at [441] to [452] of his Reasons (Appeal Book ppl 10 to 112), most particularly when considering s 75 (2) (o). Of the factors arising under section 75(2)(0), he described in [445] of his judgment, the halving of the value of the farm and the business being rendered worthless as "the most significant factor for the court's consideration, arising at the third step of its consideration".
7.It is clear from the contents of [396], [400] and [445] that the learned trial judge, considered the “halving of value” of [Town L] and the business being rendered worthless both pursuant to his considerations pursuant to section 79(4)(a), (b) and (c) and as a matter arising pursuant to section 75(2)( o) and to that extent there has been a double counting in relation to these matters leading to appealable error.
The respondent contended that there was no double counting, that the primary judge’s determination needed to be viewed in aggregate, and that a consideration of the primary judge’s determination at stages two, three and four revealed no error in the approach of the primary judge. The respondent’s counsel conceded that the primary judge did describe the most significant factor in the consideration of s 75(2)(o) was the conduct of the appellant, but that it was but one of a number of factors considered by the primary judge.
The respondent further submitted that the primary judge:
12.Having noted the risk of overlap between assessment made pursuant to section 79(4) factors and considerations envisaged by section 75(2), and that such an overlap is “inevitable”, the trial judge identified and took the opportunity to correct any irregularity at the "fourth stage" when conducting a holistic analysis of overall justice and equity.
13.Upon assessing the parties' respective contributions in favour of the respondent 60/40% 10, and a further distribution to the respondent of 10% on account of s 75(2) considerations, the trial judge considered at [456]–[510] of his reasons the justice and equity of the actual orders to be made, and made modifications as referred to herein at paragraph 14.
14.In addition, the trial judge identified and then gave appropriate effect to the requirement pursuant to s79(2) of the Act that the court must be satisfied as to the justice and equity of the actual orders not the underlying percentage division of the net value of the parties' assets.
15.The appellant submits that “no such modification can be found in the balance of the learned trial judge's reasons” with respect to the trial judge's s75(2) assessment that “perhaps will have to be modified when its implications are subject to some arithmetical analysis”. The appellant's submission is erroneous considering the trial judge's reasons at [493], and [500]–[502] inclusive.
DISCUSSION
The primary judge recorded that the parties’ marriage was some 28 years in duration and that he would give appropriate weight in the assessment of contribution to the fact that for much of the marriage the parties had worked “as a team” at [392] making significant contributions to the acquisition of property.
Apposite to this ground, the primary judge then records:
396However, since 2016, it seems to me to be incontrovertible that the parties’ level of asset backing has significantly diminished. [Town L] has more likely than not halved in value; whilst the business, which generated the parties’ income and was the source of their wealth has gone from having some finite worth to nil. All of this occurred on the [appellant]’s sole watch.
…
400I am further satisfied that the significant diminution in the value of both [the business] and the [Town L] farm, to which I have alluded, cannot be attributed to any natural consequence of market forces or the ordinary business or property cycle. The only logical reason for the loss of value is the actions of the [appellant] alone and his lack of candour to the [respondent] and those advising her, which may have allowed mitigatory action sooner.
…
402Although, it is clearly the case that the problems in the business, which have ultimately caused its demise, arose in the period prior to separation, when the various Division 7A loans were made by it to each of the parties, it is my finding that these problems became terminal in the period afterwards.
…
406In all these circumstances, I have come to the conclusion that an assessment of contributions favours the [respondent] 60/40%. I appreciate that this is a somewhat artificial calculation given the idiosyncratic nature of this case, but it seems to me that there must be some accounting in respect of the dramatic waste which has occurred in the case, which is due to the fecklessness of the [appellant].
The question as to whether the primary judge made an error of fact in concluding that there had been a diminution in the value of the business and Town L farm are matters the subject of Ground 2.
In considering the matters at s 75(2)(o) the primary judge then observed:
445In my view, the most significant factor for the court’s consideration, arising at the third step of its consideration is the fact that it does not seem improbable that the property has halved in its value and the business rendered worthless, since the parties separated. As I am at pains to point out, this cannot be approached in any direct arithmetical manner but must be taken into account in respect of the court’s assessment of the factors arising under section 75(2)(o).
It is clearly the case that there can be a degree of mutuality between some of the considerations at stage two and those at stage three, but it does not involve an overlap, rather, a discrete and different evaluative consideration. Thus as the Full Court in the context of family violence considerations observed in Loncar & Loncar [2021] FLC 94-054 at 80,849:
In 1975 the Act deliberately set out to exclude conduct from the assessment of financial adjustment between the parties. The Family Court in Kennon carved out an exception to that general proposition by acknowledging the effect that family violence in particular and conduct more generally might have upon the making of contributions by a party. Given that the acknowledgement is made in respect of contributions, the consideration of a Kennon claim axiomatically happens at the second step although the ongoing effects of family violence maybe a relevant prospective consideration at the third step.
In that respect, in Boulton & Boulton [2024] FedCFamC1A 132 the Full Court in relation to an appeal contending a double counting observed as follows:
60There is no error of principle by taking into account findings of prior family violence in evaluating past contributions and then considering its prospective impact in combination with other factors as relevant to findings as to future earning capacity.
Critically, for determination of this ground, it is to be observed that the primary judge’s consideration at [445] was not a consideration of the prospective impact of the conduct of the appellant but rather a repeat of the very same consideration addressed at stage two dealing with the contributions assessment. Put simply the primary judge specifically considered both at the contribution assessment stage and at the s 75(2) stage the very same factor, namely, that the farm had halved in value and the business had been rendered worthless.
The primary judge referred to the decision of Murphy J in Watson & Ling (2013) FLC 93-52 as support for addressing this issue at the contribution stage. Whilst a course open to His Honour, the observations of the Full Court in Keskin & Keskin & Anor (2019) FLC 93-932 are both apposite and instructive where their Honours observed:
39.…The discretionary increase in the [respondent]’s proportional share of the spouses’ property due to such dissipation could properly find expression in either the overall comparison of their contributions under s 79(4)(a)-(c) of the Act or as a factor under s 75(2) of the Act (see Trevi & Trevi (2018) FLC 93-858 at [27]-[30]; Watson & Ling (2013) FLC 93-527 at [30]-[33])…
The operative word is “or”.
The finding was material to the determination of the primary judge at each of stages two and three and was “double counted”. Consequentially the error permeated the percentage findings at each stage.
Ground 1 succeeds.
GROUND 2
2. The learned trial judge erred at law and in the exercise of his discretion and in his findings of fact when assessing the parties' contributions pursuant to section 79(4)(a), (b) and (c) of the Family Law Act 1975 and in his consideration of s 75 (4)(e) of the Act in that his findings of fact:
(a) That since 2016, [Town L] had “more likely than not” halved in value:
(b) That since 2016, the value of the parties' business had gone from having some finite worth to nil:
(c) That both [the business] and the [Town L] Farm had significantly diminished in value:
(d) That such significant diminution of value was attributable to the actions of the [appellant] alone, his lack of candour to the [respondent] and those advising her:
(e) That “dramatic waste” (of assets) had occurred due to “the fecklessness of the [appellant]”: and
(f) The Learned Trial Judge's inference that the appellant was not attending to his business between January 2017 and December 2018
were not supported by the evidence before him and were against the weight of the evidence.
The appellant contends that the primary judge made a series of factual errors, each of which were central to the determinations of the primary judge at stages two and three.
In respect of the farm, the primary judge found it to be “incontrovertible” that the parties’ asset backing had decreased since 2016, finding the farm “more than likely halved in value” and the business having gone from having “some finite worth to nil” at [396]. The appellant challenges each of these findings as unsupported by the evidence.
The appellant referred to the evidence of Mr W, a real estate agent. In the appellant’s Summary of Argument, the appellant says of his evidence:
12.[Mr W] deposed in his affidavit as to his listing of the property for sale at [9] (AB p 1128) and deposed to offers received in respect of the property at [5] (Appeal Book p 1128). He gave evidence of comments made by people who had inspected the property but not made any offers to purchase [6] (Appeal Book 1128).
13.The advertised price of the property was not evidence of value. Nor were the comments made by people who had inspected the property. Neither was [Mr W] who was not called to give evidence, held out to be a valuer, he was a real estate agent.
14.The learned trial judge's finding of the halving of value in respect of [Town L] since 2016 was not supported by any of the evidence presented at trial and was not based on any of the evidence before his Honour.
Similarly, according to the appellant, the finding of the primary judge as to a diminution in the value of the business was also erroneous. The parties had engaged a Mr J as a single expert to value the business. He prepared two reports. In his first report, he valued the business at 30 June 2018 at $133,409 and in his second he valued it as at 30 June 2017 at (-$881).
The appellant’s counsel submits:
21.At transcript p 90 lines 1 to 18 [Mr J] gave evidence that as at 30 June 2017 he valued the net interest of the parties in the company s at 30/6/2017 at -$881.00 on the basis that the company's assets were $378,000.00 and the estimated amount owing by the parties to the company by way of director loans was $379,000.00. There was no evidence before the court that any of these loans had been created post separation.
22.No evidence of value as at 30/6/2016 was ever given by [Mr J].
23.The evidence before the learned trial judge was that rather than the company having any finite worth as at 30 June 2017, the financial year in which the parties separated, it had a negative value.
24.Notwithstanding the liquidation of the company, the learned trial judge's findings of fact as to the diminished value of the [Town L] property and the company since 2016, are not suppo1ied by the evidence before him and are against the weight of the evidence. To that extent, it has led to appealable error such that it is unsafe to rely on his findings both as to assessment of contributions and his consideration of s. 75 (4) (e) of the Act.
In respect of the trips to Country KK, the primary judge at [69] inferred that the number of trips taken by the appellant to Country KK led to an inference that he was not attending to the business or the farm. In that respect, the appellant contended:
29.[Mr J]’ evidence that the net position of the parties in the company as at 30 June 2018 (the end of the first complete financial year following separation) had increased from a negative value to $133,409 (Appeal Book p 311), an increase of $134,290, must dispel any notion that the [appellant] was not attending to his business affairs, especially in the light of [Mr J]' notes as to the operation of the business at [31 to 42] of his first report (Appeal Book p 304 to 305).
30.The inference that the learned trial judge drew that the appellant was not attending to his business between January 2017 and December 2018 is against the weight of the evidence and cannot be sustained.
31.At [402] of his reasons (Appeal Book p 104) the learned trial judge found that the reason for the company's demise, the Division 7 loans made to each of the parties, arose during the period before separation but became terminal in the period thereafter.
The respondent submitted that the primary judges’ findings were not infected by error. In that respect her counsel submitted:
19.The finding that the [Town L] property had "more likely than not halved in value" was grounded in the evidence of the respondent and [Mr W], real estate agent appointed for sale, specifically:
19.1.The evidence of [Mr W] was sealed on 13 April 202318.
19.2.The status of [Mr W]'s evidence was the subject of submission by counsel for both the appellant and the respondent on 17 April 2023 at which time the Court was informed that his affidavit had been "agreed" and [Mr W] was not required for cross-examination. The appellant did not seek to reagitate this upon the reopening of the trial in 2024.
19.3.The evidence of [Mr W] was that the property was initially advertised at his recommendation at $2.2m, however due to the lack of interest in the property after inspection from potential purchasers he subsequently recommended reductions in the advertised purchase price.
19.4.The respondent's evidence at [14] and [15] of her affidavit sealed 12 April 2023 was that in around January 2023 she received advice from the agent that only offers of $1.8m and above would be of interest, and that the asking price had been the subject of reduction from $2.2m to $1.6m, with the explanation being the poor condition of the property, the works required to make the property operational and the discovery of a significant amount of a noxious weed. The [respondent] was not challenged in cross-examination as to the advice received or the reasonableness of her acceptance of the advice.
19.5.It is uncontroversial that the [Town L] property sold for $1 m [in early] 2023, as supported by exhibits "M" and "N".
20.The respondent accepts that no evidence was placed before the court as to the value of [Town L] as at 2016, however the first sentence at [396] is immaterial to the outcome. The trial judge correctly identified the submission of the respondent that the value of the property inexorably declined from a high-water mark of $2.2m in early 2023 to the current sale price of $1m.
21.There is no lacuna in the evidence of value of the property "at any other date" as submitted by the appellant, as the court did have evidence of the tried and tested attempt to sell the property pursuant to orders Justice Mead made on 27 October 2022, and the market's response.
22.As to the change in value of the parties' business, the submissions of the appellant are to be considered in the context of his non-compliance with orders and lack of candour and disclosure, as well as his general disregard to distinguish between monies owed by the company and to which he was personally entitled. As the trial judge referenced at [310], the court is to do the best it can having regard to the evidence that is adduced, and if the parties are not frank then there is naturally going to be a measure of imprecision about any findings that the court can make.
22.1.The trial judge's findings of evidence of [Mr J], single expert, and [Mr R], the business accountant during the parties' relationship, are found at [19]- [23], [24] and [230] - [249] of the judgment.
22.2.In cross-examination [Mr J] explained that when preparing the updated report (ie as at 30 June 2017 with a reported value of-$881) the figures in the management financial reports "just didn't seem to be correct", that when he attempted to obtain additional information from the external bookkeeper it appeared that the transactions had not been kept up to date, and that it moved from an accrual system to a cash system and that he did not receive the information he sought to consider an alternative approach .
22.3.The appellant did not call [Mr FF], the accountant retained by him after separation, to give evidence, notwithstanding, as found by the trial judge "it would seem to be the case that [Mr FF] would be in a position to shed some light on the company's financial state since 2017”
22.4.The court also heard from [Mr HH], liquidator of [the business], as summarised in the reasons at [227] - [228]. His evidence led to the unchallenged finding at [229] that one of the major factors leading to the insolvency is the wholesale failure of the appellant to attend to the BAS statements, and to disclose and record in an orderly fashion the business' receipt of income since separation.
22.5.The trial judge's findings at [250] are supported by evidence.
22.6.The respondent accepts that no direct evidence was placed before the court as to the value of the business in 2016. However, the reference to "2016" in [396] is immaterial and of no consequence given the context of the above unchallenged findings, and the valuation of [Mr J] $133,409 as at 30.06.18.
22.7.The trial judge was entitled to place weight upon the oral evidence of [Mr R] that had he remained the company's accountant together with the respondent's involvement there would have been an attempt to have dealt with the loan accounts from a taxation perspective as found at [241] - [242].
DISCUSSION
Each of the sub-parts of Ground 2 contend an error in a finding of fact on the part of the primary judge. If there is no evidence of a particular fact and that fact vitiates the ultimate decision, then there is an error of law, and the appeal must be allowed (see Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139).
The farm was sold in 2023 for $1,000,000.
The primary judge recorded a submission of the respondent as follows:
177It is essentially the wife’s case that the sale of the property must be regarded as having been inevitable, given the husband’s ever deteriorating financial situation, of which he must have been aware but about which he has failed to be candid with her and those advising her. In these circumstances, she submits that from a high-water mark of $2.2m in early 2023, the value of the property has inexorably declined as a result of the husband’s neglect of it, particularly his misconceived decision to take delivery of the discarded car parts onto the property in early 2022, to the current sale price of $1m.
In circumstances where the primary judge concluded that the property had halved in value and where he knew it had sold for $1,000,000, then the obvious and only inference is that the primary judge concluded that through some act or conduct of the appellant, the parties had lost nearly $1,000,000.
The respondent conceded in cross-examination that she had not ever sought the appointment of a single expert to value the farm (Transcript dated 29 January 2024, page 53 line 1).
Mr W’s evidence could not provide a basis for a finding as to value. He neither held the requisite experience nor qualification to express an opinion as to value. No part of his evidence opined as to value, nor was his evidence adduced as to value. His evidence related solely to attempts to sell the property and various offers. A listing price or offer is not admissible evidence of value (McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] 20 CLR 231).
If the primary judge relied upon the submission of the respondent as to value at [177] his Honour erred. A submission is not evidence (Crowe-Maxwell v Frost (2016) 91 NSWLR 414 at [1075]) and in the absence of evidence, provides no foundation for a conclusion. In the event that such a submission was made by the respondent, then the primary judge was led into error.
The appellant’s submissions fixed on the words ‘2016’ contending that there was no evidence of value as at that date. In so doing, they misread the primary judge’s finding. The primary judge merely said ‘since 2016’ being a reference to a time after that date. Irrespective of that controversy, as the respondent properly concedes, there was no evidence as to value of the farm in 2016 or at any other time. The absence of evidence establishing a value at a certain date by which a diminution could be measured against renders erroneous any finding that there was a subsequent diminution by half or for that matter by any amount.
I am satisfied that there was no evidence upon which the primary judge could conclude that the farm had halved in value. The error attracted the descriptor of materiality (De Winter and De Winter (1979) FLC 90-605) in circumstances where the primary judge must have proceeded upon the assumption that approximately $1,000,000 had been lost by the actions of the appellant. There was simply no evidence before the primary judge to draw that conclusion. In the absence of that evidence, the primary judge’s finding that the farm had halved in value was erroneous.
Ground 2(a) succeeds.
In relation to the company, there was no issue that by the time of trial it had no value, having been placed in liquidation. To ground a finding as to a diminution in value must rest upon a finding that at some earlier point in time the company had a value. The expert evidence that could inform any such finding could come only from the single expert valuer Mr J. To a lesser extent, his evidence could be supplemented by evidence from Mr R who had been the party’s accountant. The primary judge addressed this and the submissions of the liquidator at [227]–[253].
The primary judge records at [227] that Mr Martin provided a preliminary report to creditors noting the creditors (primarily the ATO) are owed in excess of $706,000. He advised that the records of the company record that the parties owe the company by way of Division 7A loans $856,733. Mr Martin said that he believed the company was insolvent as of 1 July 2022. He said that it was improbable that the Division 7A loans owed by the parties would be collected in full.
The primary judge found:
228In summary, on any view, the financial position of B Pty Ltd can only be described as being dire and had been for a significant period of time, most probably from sometime before June of 2022, which is axiomatically a significant period of time prior to the fixing of the case in Division 1 of the Court, which was delayed due to the illness of Justice Mead and prior to the hearing, which commenced before me, in April of 2023. In my view, there has been a significant failure, on the part of Mr Manwaring and those advising him, to disclose this state of affairs to the wife and those advising her.
The primary judge recorded that Mr J provided two reports. In relation to his reports, the primary judge recorded:
233As at 30 June 2018, Mr J valued the company’s net adjusted assets as being $387,954.00 less the amount owed by the parties to the company, which he estimated to be $254,545.00, which provided an estimated value of the parties’ net interests in B Pty Ltd as being $133,409.00.
234When Mr J was asked to re-adjust the valuation to reflect the position, as at June 2017, and taking into account the estimated amount owing by the parties to the company, which he conceded was difficult for him to accurately calculate, he estimated the parties’ net interest in the company to be a deficit of $881.00.
235In his evidence to the court, Mr J indicated that the figures provided to him did not seem right in the sense that the accounting seemed to have moved from an accrual system to a cash system between the time of his first and second report.
236In this context, Mr J considered that at the time of his first report, the books were in reasonably good shape, which he attributed to Ms Emmerton. However, he did not have that view of the books at the time of the second report, which provided a more dismal view of the value of the company.
(Original emphasis)
Beyond recording the evidence of Mr J, the primary judge does not make any findings as to the value of the company at a relevant point in time. The primary judge recorded the evidence of Mr R as follows:
240In the period whilst he was the parties’ accountant, Mr R deposed that Ms Emmerton was relatively on top of accounting issues to do with the business. As Mr J indicated, in his evidence, although it may be considered imprudent, from an accounting perspective, to withdraw monies from a business without a proper delineation, it is not in itself illegal and may be in fact be driven by some practical imperative. There is no controversy that none of the loans relevant in these proceedings were subject to a formal loan agreement and thus could be classified as being compliant with taxation regulation.
241In this context, Mr R deposed his view that if he had remained the company’s accountant and Ms Emmerton had been the person with whom he was corresponding with, there would have been an attempt to have dealt with the loan accounts from a taxation perspective but with the relationship breakdown, it just became too hard and wasn’t able to be dealt with.
242It was the effect of Mr R’s evidence that prior to the termination of his services, by Mr Manwaring, both Mr Manwaring and Ms Emmerton were taking his advice and making prudent decisions about the business and, if such circumstances had continued, he would been confident that the burgeoning loans ostensibly made by the company could have been managed.
243Mr R deposed that the ATO had an unlimited capacity to amend tax assessments to reflect sums paid to a taxpayer which it deemed to be a dividend. The Commissioner would most likely learn of such payment either through self-disclosure or through conducting an audit. It is the effect of Ms Emmerton’ evidence that she has made such a disclosure of what she asserts were monies allocated to her in the tax years prior to and including 2017, which he had calculated to be just under $69,000.00.
(Original emphasis)
The primary judge then records:
357These are relevant contributions in the current matter. It is Ms Emmerton’s position that, since the parties separated, there has been a decline in value of both the business and Town L (and indeed other assets), which is solely attributable to the conduct of Mr Manwaring. This is a factor which needs to be taken into account, in some manner, to ensure that the ultimate outcome is a just and equitable one.
358The obvious difficulty arising being how should this be done in the context of these proceedings. In this context, I bear in mind that I am not an accountant and the proceedings before me are not an exercise in accountancy. As such, it is difficult, if not impossible, for me to determine, down to a realistic dollar figure, what is the value of the monies actually lost by factors solely attributable to Mr Manwaring.
As stated earlier, the primary judge does not make a finding as to the value of the company at a particular point in time. The primary judge observes:
396However, since 2016, it seems to me to be incontrovertible that the parties’ level of asset backing has significantly diminished. Town L has more likely than not halved in value; whilst the business, which generated the parties’ income and was the source of their wealth has gone from having some finite worth to nil. All of this occurred on the husband’s sole watch.
The appellant’s counsel submits given the evidence of Mr J, that the company had a negative value in 2017, then the finding of the primary judge that the value diminished is erroneous, as it had no value in 2017.
As to the respondent’s submission that Mr J attributed a value in the next year of $133,409 the appellant says this is to the credit of the appellant and demonstrated the fragility of the primary judge’s finding that the appellant’s absence in Country KK led to a decline in the fortunes of the company where it had, according to the submission, in fact increased in value.
Whilst Mr J suggested some difficulty with reliance upon the documents used to prepare the 2017 valuation his cross-examination does not reveal that he resiled from his opinion as to value, albeit expressed at a time when he was conscious of the state of the company records.
An examination of the two reports of Mr J reveals that the difference between the two values relates almost entirely to the amount owed by the parties to the company. Thus, in his first report valuing the company at 30 June 2018 the parties owed the company $254,545 (Report of Mr J dated 23 July 2019, paragraph 84) giving rise to a net asset value of $133, 409.
In the 2017 year, the amount owed by the parties to the company was $379,552 giving a value of -$881 (Report of Mr J dated 23 July 2019, paragraph 87). Put simply, had the amount owed by the parties to the company remained at the 2017-year level in 2018, then the value of the company in 2018 would have been a mere $8400.
While the primary judge failed to make a specific finding as to the value of the company at a specific point in time the only evidence as to value was that in 2017 it was worth -$881 while in 2018 it was worth $133,409. That value has completely eroded given its liquidation such that the indebtedness vastly exceeds -$881 which has occurred “since 2016”.
I am not satisfied that on balance the appellant has established error on the part of the primary judge in sub-Ground 2(b).
Balance of the appeal
The errors established in Ground 1 and sub-ground 2(a) and part of 2(c) go to the integrity of the findings as to contribution and at s 75(2), and thus to the core of the just and equitable determination. They inevitably mean that the appeal must be allowed.
The appellant submits that each of the sub-grounds in 2 are informed in part by the factual errors identified in the earlier parts of Ground 2 and by way of Ground 1. It is unnecessary to the success of the appeal to address the remainder of the parts of Ground 2 and Grounds 3–6 which in part or whole, hinge off the acceptance of error identified in Ground 1 and sub-ground 2(a) and part of 2(c).
For these reasons, the appeal was allowed.
Re-exercise of discretion
The parties agreed that the Full Court should re-exercise the discretion of the primary judge in the event the appeal was allowed. Section s 36(1) of the Federal Circuit Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”), permits the Court to:
(a)affirm, reverse or vary the judgment appealed from; or
(b)give such judgment or make such order as, in all the circumstances, it thinks fit.
In Trevi & Trevi (Re-Exercise) [2019] FamCAFC 51 (“Trevi”) at [14] the Full Court observed, “[for] all practical purposes, if this Court is to re-exercise it must ‘draw inferences of fact from, and conclusions from, facts as found by the trial judge’ and uncontroversial evidence admitted upon the re-exercise”. In doing so, I can in the exercise of discretion, have regard to, albeit not be bound by, such of the findings of the primary judge as are not the subject of successful challenge on the appeal (Chan & Lee (2022) FLC 94-089).
The approach to be adopted in a financial adjustment case under s 79 of the Act is to follow the well-recognised four-step process (see Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143). Following such an approach, the Court identifies and values the assets and liabilities at the date of hearing for the purposes of division. Secondly, the Court assesses the contributions of the parties within the meaning of s 79(4) of the Act and determines a contribution-based entitlement. Thirdly, the Court identifies the relevant matters under s 75(2) and determines such adjustment as is necessary to the contribution-based entitlement. Finally, the Court considers the effect of the findings and determines whether the order as proposed is, in all the circumstances, just and equitable.
I adopt the balance sheet as found by the primary judge. No part of the appeal challenged the primary judge’s construction of the pool of assets for division between the parties nor was any submission made that I should adopt any other pool of assets.
Consequently, I find the pool of assets the subject of the s 79 adjustment to be as follows:
Assets Value ($) Former family home – P Street, Suburb Q 850,000.00 Net proceeds of C Street, Suburb D 173,674.05 1 Y Street, Suburb Z 280,000.00 2 Y Street, Suburb Z 270,000.00 AB Street, Suburb AC (business premises) 650,000.00 Net proceeds of Town L farm 400,303.71 Monies held in respondent’s trust account from sale of produce (less payment to Mr J) 43,308.84 Total Assets 2,667,286.60 Liabilities Suburb Q mortgage (as at December 2023) (266,773.10) Suburb D associated CGT (calculated by Mr R) (76,195.11) Suburb Z mortgages (combined as Dec 2023) (135,964.68) Anticipated CGT Town L calculated by Mr R (77,626.00) Total Liabilities (556,558.89) Net Property 2,110,727.71 Superannuation Super Fund 1 157,076.19 Super Fund 2 25,000.00 Total Superannuation 182,076.19
Consistent with Stanford v Stanford (2012) 247 CLR 108, I am of the view that it is just and equitable that an order be made adjusting the property interests of the parties. The parties are no longer living together, and there is no longer the common use of their property. The assumptions and undertakings that governed the use of their property ended with separation, and both parties sought that there be an adjustive order.
The assessment in a property case calls for the exercise of discretion, and a holistic value judgment of the respective contributions of the parties. The Court is required to consider all of the contributions of the parties, as the Full Court in Dickons v Dickons (2012) 50 Fam LR 244 makes plain:
24… the task of assessing contributions is holistic and but part of a yet further holistic determination of what orders, if any, represent justice and equity in the particular circumstances of this particular relationship. So much is clear from the terms of s 79 itself and, in particular, s 79(2). The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship.
25Doing so is also consistent with the demands of authority that the ultimate assessment of contributions should be made without “giving overzealous attention to the ascertainment of the parties’ contributions” (Norbis v Norbis (1986) 161 CLR 513 at 524 ; 65 ALR 12 at 18 ; 10 Fam LR 819 at 825 ; [1986] HCA 17) and the well-established recognition in the authorities (acknowledged specifically by her Honour in this case) that the process required of the court by s 79 is the exercise of a wide discretion, not the performance of a mathematical or accounting exercise.
26The necessarily imprecise “wide discretion” inherent in what is required by the section is made no more precise or coherent by attributing percentage figures to arbitrary time frames or categorisations of contributions within the relationship. Indeed, we consider that doing so is contrary to the holistic analysis required by the section and, in the usual course of events, should be avoided.
The Full Court in Horrigan & Horrigan [2020] FamCAFC 25 emphasised and reinforced that the proper approach to the assessment of contributions is:
35…not a mathematical exercise, but rather involves the identification and assessment of all of the parties’ respective contributions, in a holistic way across the course of the relationship and in the post separation period to the point of assessment. …
The consistent theme from the authorities is that the multifarious contributions throughout the relationship and subsequently, of all types, are to be assessed in a holistic way.
Guided by such Full Court determinations, I propose to assess the parties’ contributions.
The parties cohabitated for approximately 28 years, during which they had two children. The primary judge observed that the parties started with modest assets at [8] and [9] and by the time of separation, through hard work and by combining their efforts as a team, they had accumulated a number of assets including a farm, a business and various items of real estate.
The parties separated in November 2016 and a divorce order became final in March 2018.
The appellant submitted that the length of the marriage and the multifarious contributions over their 28-year relationship, together with the success of the appeal leads inevitably to a conclusion of equality.
The respondent submitted that the contribution-based finding should be 60 percent.
The respondent’s submissions focused entirely on the post-separation conduct of the appellant and on what was contended to be the appellant’s wasteful and reckless financial conduct. In that respect, the respondent relied on the findings by the primary judge at [399] and [401].
The difficulty with that submission is that it relies substantially for acceptance upon the in-part specious findings which are the subject of the appeal.
Subsequent to separation, the appellant managed the business of the parties and maintained possession of the farm. The respondent contended that the appellant’s management of the business and the farm led to significant costs and waste occasioned to the parties. In that respect, the primary judge found:
149Ms Emmerton provided a copy of the Clean Up Order to the court. It indicated that a large number of waste domestic, commercial and agricultural car parts had apparently been piled on the property. The car parts had been delivered from early 2022, at Mr Manwaring’s apparent expense, with the intention of either preventing erosion or to construct a racing track. The EPA regarded the car parts as an environmental hazard and required their removal within sixty days.
…
159On 13 January 2023, Ms Emmerton filed an affidavit in which she provided her evidence as what was then the position in respect of the Town L property. She deposed that no monies had been provided in respect of the V Bank mortgage since mid-July 2022 and the bank’s solicitors had incurred further legal fees in respect of the foreclosure proceedings. She further deposed no car parts had been removed from the property and the EPA appeal remained unresolved. Rates were also outstanding in an amount just under $22,000.00.
…
161It is the effect of Ms Emmerton’s evidence that, with the assistance of police, she entered the homestead on the property, which she described as being in a poor state of repair due to a fire and a broken window. She had arranged for repairs to be done, at her expense, and had utilised a locksmith to change the locks. She seeks the add back of these sums ($2,357.47) into the pool of property.
…
167Accordingly, the issue of removing the car parts from the property had to be resolved prior to any settlement of the property so that any prospective purchaser could take a clear title. As at this date the council rates on the property stood at $28,012.32. Mr W was concerned that the property had become infested with a noxious weed.
…
173In early 2024, Ms Emmerton executed a contract to sell Town L for $1m. The sale includes the equipment. However, given previous valuations of this equipment to all intents and purposes this equipment no longer can be considered to have any practical value. The date for settlement is mid-2024. At this juncture, the parties seem to agree that the following sums will have to come out of this sum:
•V Bank Mortgage $396,500.00
•V Bank Overdraft $102,581.35
•Council Rates $28,012.32
174Clearly there will be some costs relating to the sale of the property, which will also have to be deducted from the proceeds of sale. As previously indicated, Ms Emmerton has also incurred costs in respect of readying the property for sale, the largest of which related to the removal of the car parts.
175In addition, as the property falls within the Trust, of which the wife is the trustee, Ms Emmerton will be assessed to pay CGT on the capital gain accrued in the period since its purchase in 2014. Again, Mr R has performed a provisional calculation of that as being $77,626.00
These matters are properly the subject of consideration at stage three of the assessment and not, consistent with the orthodox approach, the subject of consideration at stage two. Subsequent to separation, the respondent managed the properties at Suburb Z. The primary judge found as follows:
188In my finding, there has been nothing untoward in the wife’s actions in respect of these two properties administered by her through the Trust. To the contrary, in my view, her actions have had the consequence of preserving significant items within the overall pool, without any concomitant contribution from the husband.
Notwithstanding that finding the evidence reveals that the respondent retained the benefit of the rental income from the trust [70]. In addition, the respondent managed the properties at Suburb AC, with the primary judge finding as follows:
195It is the wife’s evidence that due to the lack of rent received she has been unable to pay the council rates and outstanding water arrears on the property, which is technically her responsibility as owner. As at late 2023, an amount of $3,767.93 was outstanding. She has however, in the past, paid some of the rate arrears from her own salary.
The respondent contends that the appellant has failed in his obligations of disclosure.
The primary judge found that the income the appellant declared from the business and farm is shrouded in uncertainty at [71] and that he failed to disclose that he had placed the company in liquidation at [107]. The liquidator advised the primary judge that the company was probably insolvent in July 2022 at [110]. The primary judge found as follows:
282The starkest example of this being is non-compliance with the order of February 2019. The most glaring example of his lack of candour and disclosure being his failure to provide a comprehensive account of the business’ post separation tax delinquency leading to him informing the wife and her legal advisors of its liquidation only after this had occurred.
…
293On the other hand, it seems improbable that he did not have some general idea as to how the business was travelling, both before and after the parties separated and a knowledge that tax and BAS would have to be attended to by him. In addition, it seems to me to be probable that in the early period of his relationship with Ms JJ, he directed significant sums towards his travelling and incidental expenses arising from his very many trips to Country KK. It seems to me that there has been a lack of transparency in regard to these matters.
294More significantly, it does seem open to me to make a general finding that Mr Manwaring fundamentally disregarded any distinction between monies owned by the company and monies to which he was personally entitled. This has had catastrophic consequences for every person involved in this case, not only for the flesh and blood parties but also B Pty Ltd.
…
302Essentially, there is a level of opacity in respect of everything to do with Mr Manwaring’s current financial affairs and his approach to these proceedings. However, what is his motivation, if any, in this regard or whether he has just been subject to emotional paralysis as a result of his exposure to these proceedings or they are beyond his grasp in a cognitive sense are matters which I cannot resolve in any proper evidentiary sense.
…
307In this interim period, the only clarification which has been provided has come from Mr HH, which is that the affairs of the business are even more dire than suspected by Ms Emmerton and it is likely to be the case that it has traded whilst insolvent. Mr Manwaring has not, in my view, assisted to how any significant degree in providing useful information regarding the solvency of the company prior to the involvement of Mr HH.
…
309In an ideal world, the court would have a better idea of the level of debt arising in the case. For obvious reasons, this would allow it to follow the preferred course of constructing a balance sheet of assets and liabilities enabling it to have an appreciation of the net value of matrimonial assets available to be divided between the parties. However, we do not live in an ideal world.
The primary judge also found:
386In my view, these comments are apposite to the husband’s superannuation. It would not be appropriate to add the $90,000.00 back on a dollar-for-dollar basis given the monies have been utilised on Mr Manwaring’s living expenses. However, the discrepancy in terms of each of the parties’ preparedness for retirement, is a matter to be taken into account, by the court, in general terms.
387The sale of Motor Vehicle 1 represents a premature distribution of assets, which benefitted Mr Manwaring alone. However, its proceeds are long gone, vanishing into the financial calamity of the business. I do not propose to add back this item but will take it into account in general terms.
These however are all matters to be considered at stage three.
The shareholder loans in the company at the end of the first year following separation amounted to some $379,552 at [21]. Subsequent to that date the loans decreased somewhat in 2018 but by the time of liquidation had increased to $856,733 at [227]. These have risen entirely under the appellant’s watch. The primary judge found as follows:
228In summary, on any view, the financial position of B Pty Ltd can only be described as being dire and had been for a significant period of time, most probably from sometime before June of 2022, which is axiomatically a significant period of time prior to the fixing of the case in Division 1 of the Court, which was delayed due to the illness of Justice Mead and prior to the hearing, which commenced before me, in April of 2023. In my view, there has been a significant failure, on the part of Mr Manwaring and those advising him, to disclose this state of affairs to the wife and those advising her.
229In addition, in my view, it is evident that one of the major factors leading to the insolvency is the wholesale failure of Mr Manwaring to attend to the BAS statements, which any trading entity is required to provide regularly to the ATO. Concurrent, with this failure, is an apparent failure to both disclose and record, in an orderly fashion, what the business has received, in the period since the parties separated.
…
237Mr J was provided with a balance sheet of B Pty Ltd, as at 30 June 2022. This document indicated, in Mr J’s view, that the company had created further Division 7A loans from 2020 onwards. As at 30 June 2020, the loans were around $455,000.00 and by 30 June 2022 stood at around $688,000.00. This increase can only be attributable to Mr Manwaring.
In relation to the loan account, the primary judge recorded evidence of Mr R, the parties’ prior accountant, as follows:
242It was the effect of Mr R’s evidence that prior to the termination of his services, by Mr Manwaring, both Mr Manwaring and Ms Emmerton were taking his advice and making prudent decisions about the business and, if such circumstances had continued, he would been confident that the burgeoning loans ostensibly made by the company could have been managed.
243Mr R deposed that the ATO had an unlimited capacity to amend tax assessments to reflect sums paid to a taxpayer which it deemed to be a dividend. The Commissioner would most likely learn of such payment either through self-disclosure or through conducting an audit. It is the effect of Ms Emmerton’ evidence that she has made such a disclosure of what she asserts were monies allocated to her in the tax years prior to and including 2017, which he had calculated to be just under $69,000.00.
…
245It is also apparent that, as the sole director of B Pty Ltd, Mr Manwaring will have a significant, but as yet not fully defined, liability to the ATO for tax arising from a failure to lodge the required BAS. I assume, when those statements are lodged, the level of income received by the business will have been reconstructed. How accurate that reconstruction will be is unknown to me, as is how satisfactory it will be to the ATO.
…
248As Mr HH reports, it appears unlikely in the extreme that the company will ever be paid the loans made by it. Equally uncertain is how the ATO will elect to approach the monies given their unlimited authority to issue amended assessments to each of the parties concerned. However, at this juncture, it would seem that other aspects of tax, particularly relating to BAS, are likely to assume greater importance in its deliberations. However, whether the validity of this assumption cannot be gainsaid.
…
250At the end of the accountancy evidence, in my view the following findings are open to the court on the balance of probabilities:
•The company's finances were relatively well managed when Mr R and Ms Emmerton were responsible for its affairs and records;
•As such, issues relating to delineated drawings or ones which were not the subject of compliant loan agreements, were manageable up until 30 June 2017 or thereabouts;
•The situation in respect of not only loans but also more fundamentally in respect of the provision of BAS to the ATO deteriorated rapidly and completely after the wife left the business and no-one competent seems to have replaced her;
•The business continued to trade in this period both through the agency of B Pty Ltd but also DD Company. It is unclear where any income generated from these entities went but it was not to the Trust in the form of rent for Suburb AC or in respect of the sale of livestock and produce; and
•As such, the more likely inference is that Mr Manwaring has utilised these funds, which are not identifiable in any assets to which reference has been made in these proceedings.
Subsequent to separation, his Honour found as follows:
261The parties have each disclosed a number of bank accounts containing modest amounts. I do not propose to formally tabulate these sums in the relevant table of assets. The wife has disclosed superannuation, in an industry fund (Super Fund 1) in an amount of $157,076.19.
262At the present time, the husband has disclosed superannuation with Super Fund 2 in an approximate amount of $25,000.00. No documentary evidence has been provided in respect of this sum. He concedes that he has withdrawn $90,000.00 from this fund to pay recurrent expenses.
Again, I am satisfied that these are matters more properly considered at stage three.
On balance, I have had regard to the extensive contributions of the parties over the length of their 28-year relationship as well as the period subsequent to separation. Assessing the parties’ contributions holistically over the relationship and subsequently I am satisfied that the parties’ contributions are equal.
SECTION 75(2)
The respondent seeks an adjustment under s 75(2) as to 10 percent in her favour, albeit that is predicated on a greater finding at the contribution stage for matters that I am satisfied are more properly to be considered at stage three.
The appellant seeks an adjustment in his favour as to 10 percent.
I take account of the findings in relation to the age of the parties, that each have re-partnered, where the appellant has a child of a subsequent relationship, and the state of the appellant’s health, his reduced work and earning capacity as compared with the respondent’s income and financial resources.
I also recognise that the appellant, as a consequence of his conduct in relation to the business and the incurring of a significant loan account, may face further litigation, potentially by the Australian Taxation Office. However, this arises entirely as a consequence of his management and as such it is appropriate that he should bear responsibility for that potential liability in circumstances where he has been in charge and/or had de facto management. I further note that the order by way of indemnity made by the primary judge was not the subject of specific challenge in the Grounds of Appeal.
I am satisfied, however, having regard to the matters under s 75(2)(o) that there are factors that warrant an adjustment in the respondent’s favour, particularly arising out of the appellant’s conduct of the proceedings which are referred to above and are findings undisturbed by the appeal. That includes the failure to comply with orders that led to an increase in mortgage indebtedness at [145] and [193], disposal of the Motor Vehicle 1 at [387] and superannuation at [386], cost of remediation of properties, clean-up costs and costs of sale at [172] and [443], numerous instances of his egregious non-disclosure at [71], [107], [196], [228], [282], [293] and [302], including the entitlement to receive unpaid rent at [207].
In light of the primary judge’s findings referred to above, I am satisfied these factors outweigh any possible adjustment in favour of the appellant and call for an adjustment measured at 12 percent in favour of the respondent.
The consequence of these adjustments is that the parties’ assets will be divided as to 62 percent to the respondent and 38 percent to the appellant.
JUST AND EQUITABLE
I am satisfied that it is appropriate to divide the parties’ net assets as to 62 percent to the respondent and 38 percent to the appellant and that represents a just and equitable determination.
I propose to follow as closely as possible the approach of the primary judge as to the framing of the orders and the property to be retained. There was no submission otherwise. The consequence is that the respondent will retain the net proceeds of the Suburb D, farm and livestock as well as the Suburb Z properties and her superannuation, subject to her taking responsibility for the mortgage attached to the Suburb Z properties.
The Suburb AC property will be sold, and the net proceeds applied in payment of CGT and the monies due to Mr X, with the balance divided in accordance with the 62/38 percentage determination after any adjusting payment.
The appellant will retain the Suburb Q Property, his superannuation and the debt on Suburb Q, subject to his refinancing the loan into his own name, failing which, it will be sold.
The total pool of assets including superannuation is $2,292,804.
The net pool excluding the Suburb AC property and CGT is $1,488,983. Of that amount, 38 percent to the appellant is $565,814.
The appellant will retain the Suburb Q property subject to its debt and his superannuation which totals $608,227. The appellant has $42,413 more than his entitlement. This amount will be paid to the respondent from the appellant’s 38 percent share of the Suburb AC net proceeds.
I am satisfied this is a just and equitable determination and will make orders to give effect to this result.
I certify that the preceding one hundred and ten (110) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 18 February 2025
0
9
3