MARCEL & GARRIGAN
[2013] FamCAFC 94
FAMILY COURT OF AUSTRALIA
| MARCEL & GARRIGAN | [2013] FamCAFC 94 |
| FAMILY LAW – APPEAL – PROPERTY – Whether the trial judge erred in including a loan and a discharge of a debt in the “main pool” of assets rather than including it in the “inheritance pool” of assets – No appealable error established. FAMILY LAW – APPEAL – PROPERTY – Whether the trial judge erred in failing to properly consider the financial contributions of the appellant to the relationship from his inheritance – Appealable error established – Appeal allowed – Matter remitted for rehearing. |
| Family Law Act 1975 (Cth) ss 90SM(4), 90SF(3) |
| Farmer & Bramley (2000) FLC 93-060 Norbis v Norbis (1986) 161 CLR 513 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 |
| APPELLANT: | Mr Marcel |
| RESPONDENT: | Ms Garrigan |
| FILE NUMBER: | SYC | 2708 | of | 2010 |
| APPEAL NUMBER: | EA | 3 | of | 2012 |
| DATE DELIVERED: | 14 June 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Bryant CJ, Ainslie-Wallace & Ryan JJ |
| HEARING DATE: | 19 April 2013 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 15 December 2011 |
| LOWER COURT MNC: | [2011] FamCA 959 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Connor |
| SOLICITOR FOR THE APPELLANT: | Argyle Lawyers Pty Ltd |
| COUNSEL FOR THE RESPONDENT: | Mr Othen |
| SOLICITOR FOR THE RESPONDENT: | CMI Law Firm |
Orders
The appeal be allowed.
The orders made by the Honourable Justice Austin on 15 December 2011 be set aside.
The applications of the parties for property settlement be remitted to the Family Court for rehearing.
In the event costs are sought against the appellant by the respondent, the respondent shall file and serve written submissions of no more than five pages within 21 days.
The appellant file and serve written submissions in response of no more than five pages within a further 14 days.
Any submissions in reply by the respondent shall be filed and served within a further 7 days.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Marcel & Garrigan has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 3 of 2012
File Number: SYC 2708 of 2010
| Mr Marcel |
Appellant
And
| Ms Garrigan |
Respondent
REASONS FOR JUDGMENT
Introduction
By amended Notice of Appeal filed on 26 April 2012, Mr Marcel (“the appellant”) appeals against property orders made pursuant to s 90SM of the Family Law Act (1975) (Cth) (“the Act”) by Austin J on 15 December 2011. Ms Garrigan (“the respondent”) opposes the appeal and seeks to maintain the trial judge’s orders. Contrary to the appellant’s position at first instance that the respondent receive property worth $288,164, his Honour ordered that she receive property worth $936,534.
The background to the parties’ relationship is uncontentious and is taken from his Honour’s reasons. It is necessary to relate some of that background to give context to the appeal.
The parties met in 1999 and began a relationship. They never married. They began to live together in November 2000. While they separated briefly in 2007, they reconciled, finally separating in June or July 2009.
There are no children of the relationship. The respondent’s two children from an earlier relationship lived with the parties throughout their relationship.
The appellant’s children from another relationship visited and stayed with the parties.
Between late 2008 and late 2009 the appellant received an inheritance of
$2,972,894 in the form of cash and other assets including a share portfolio. The value of the shares diminished through fluctuations in the market. The inheritance and its treatment by the trial judge was the crux of the appeal.
The appellant was, at the time of hearing, the sole director and shareholder of W Pty Ltd. A second entity existed, X Pty Ltd, of which the appellant was the sole director and in which he and W Pty Ltd had equal shareholdings. The respondent was the sole director of T Pty Ltd in which she and the appellant had equal shareholdings.
The appellant had his shareholdings in W Pty Ltd and X Pty Ltd at the date of the commencement of the relationship with the respondent, respectively worth $233,265 and $361,457. T Pty Ltd was incorporated during the relationship.
The trial judge’s reasons
During the hearing, the appellant contended that the trial judge should consider the assets in the matter in two “pools”, one consisting of “the assets traceable to the proceeds of a large inheritance” and the other to consist of all other assets of the parties (at [27]). Although the respondent contended for a “global approach” (see Norbis v Norbis (1986) 161 CLR 513) to all of the property of the parties, the trial judge favoured the approach for which the appellant contended and said:
30. I accept the applicant’s submission that assets which are traceable to his inheritance should be retained by him and quarantined from the pool of property containing all other assets. However, since the value of the inheritance has depreciated for the reasons identified, only the assets which now exist from the influx of inheritance funds are taken into account.
31. Save for one exception, the effect of adopting that course is twofold. First, the inheritance received by the applicant will not be considered as a financial contribution in his favour at the second stage of the property adjustment process, and secondly, the assets which are traceable to the inheritance will remain in the ownership of the applicant, subject to their use to achieve any necessary adjustment in the respondent’s favour at the third stage of the property adjustment process.
32. The exception is that some of the inheritance was used as a direct financial contribution towards an asset that does fall within the main pool of property and which is amenable to distribution between the parties. The applicant used some cash from the inheritance to discharge the mortgage over the parcel of real property at [V] [“the V property”], thereby enlarging the net value of the main pool of property. The applicant’s evidence is inconsistent as to whether the quantum of the payment was $250,000, $255,000, or $270,000. Nevertheless, the applicant must be accorded credit for that contribution at the second stage of the property adjustment process.
(footnote omitted)
The trial judge considered that within the “inheritance pool”, as his Honour termed it, should be the share portfolio, a property at B (“the B property”) and associated legal expenses and legal fees paid by the appellant in relation to the property proceedings. The total value of this group of assets at time of trial was $1,368,070 (at [35]).
Turning then to the assets that would be considered in the “main pool”, his Honour determined that a property at V, shares in W Pty Ltd and X Pty Ltd, the appellant’s loan to X Pty Ltd, shares in T Pty Ltd, the respondent’s loan to T Pty Ltd, car, boat, chattels and bank accounts should be included. He found the total value of this “main pool” to be $2,700,418. When a small debt owed by the appellant to W Pty Ltd was deducted and after inclusion of the parties’ superannuation benefits, the total value of the “main pool” was found to be $2,881,644.
In dealing with the appellant’s loan to X Pty Ltd, the trial judge ascribed it a value of $853,974.
The two pools are set out in the tables below, as appear in the first instance judgment at [35]. The first table is the “inheritance pool” and the second is the “main pool”:
No.
Assets
Party
Value
Total
1
Current share portfolio
App
939,410
2
[B property] real estate
App
218,000
3
[B property] legal expenses
App
8,133
4
Legal fees paid in proceedings
App
202,527
Net value
1,368,070
1,368,070
No.
Assets
Party
Value
Total
5
[V property] real estate
App
775,000
6
Shares in [W Pty Ltd]
App
520,802
7
Shares in [X Pty Ltd]
App
432,211
8
Applicant’s loan to [X Pty Ltd]
App
853,974
9
Shares in [T Pty Ltd]
Joint
nil
10
Applicant’s loan to [T Pty Ltd]
App
23,115
11
Respondent’s loan to [T Pty Ltd]
Res
20,838
12
[Car]
Res
20,750
13
Personal chattels
Res
7,000
14
Personal chattels
App
8,000
15
[Boat]
App
20,000
16
Banking accounts
App
15,828
17
Banking accounts
Res
2,900
Sub-total
2,700,418
2,700,418
Liabilities
18
Debt to [W Pty Ltd]
App
12,281
Sub-total
12,281
2,688,137
Superannuation
19
BT Lifetime Super
App
64,807
20
AXA Superguard
App
54,308
21
Super Funds
Res
74,392
Sub-total
193,507
2,881,644
Net value
2,881,644
As to the initial contributions of the parties, the trial judge found at [42] that the appellant brought in to the relationship assets of significantly greater value than those brought in by the respondent. To the extent that the evidence permitted, findings were made as to the value of these items, albeit that a precise mathematical comparison could not be made.
His Honour found at [45] that the appellant “devoted himself to the business interests of principally [X Pty Ltd], but also [W Pty Ltd].” X Pty Ltd owned an insurance agency in which the appellant worked long hours, about 70 hours per week, as well as being on call 24 hours a day, 7 days a week. X Pty Ltd sold the insurance agency and purchased a construction plant business which operated until about 2012. In 2004, X Pty Ltd purchased real property at F (“the F property”) and the trial judge found at [47] that from that time, the appellant spent time improving the value of that property.
At the commencement of cohabitation, the respondent owned and was conducting a business. The respondent’s business was purchased by W Pty Ltd in 2000 for $68,633. The respondent worked in the business from when the parties commenced cohabitation until it was sold by W Pty Ltd in November 2002. Thereafter the respondent worked at various endeavours until T Pty Ltd was formed in 2005 after which she worked in that business as an employee (see [48]).
The trial judge found at [49] that the income derived by the parties from their various endeavours was contributed to their household and their various corporate entities and investments. His Honour further found at [50] that apart from capital sums and inheritances, the source of funds for the parties’ transactions came from their income and other sources derived from their work. From his income, the appellant paid 27 per cent in child support.
His Honour noted that while the respondent assumed the principal responsibility for the care of her children, he acknowledged that the appellant assisted with their care, took some responsibility for them, and made financial contributions to their support in the household. Equally, his Honour accepted that the respondent provided care and assistance for the appellant’s children when they visited (see [51]).
In addition to a tax refund of $12,342 received in 2001, during the relationship the respondent contributed capital sums totalling $165,000 to the parties’ endeavours (see [56]).
After the parties separated, the appellant used part of his inheritance to discharge the mortgage on the V property in which the respondent was then living. He moved to and lived in the F property and the trial judge found that he paid no rent to X Pty Ltd which owned the property. Although we agree with counsel for the appellant that the evidence established that the appellant paid rent to X Pty Ltd, in circumstances where its quantum was not identified and the appellant owns X Pty Ltd, this is an error without consequence.
After considering all of the contributions to which he referred, the trial judge concluded at [67] that the appellant’s contribution to the “main pool” was 67.5 per cent, and that of the respondent, 32.5 per cent.
His Honour indicated at [68] and [69] that this reflected $936,534 to the respondent, and $3,313,180 to the appellant when the “inheritance pool” was included.
Pursuant to ss 90SM(4)(d)-(f) and s 90SF(3) of the Act, the respondent sought an adjustment of $250,000 in her favour, which his Honour declined to make (see [72]).
The appeal
Ten grounds of appeal were propounded by the appellant. It was conceded by counsel for the appellant that the grounds could conveniently be considered in groups. They were argued in that way and we will thus consider them in groups.
The trial judge’s approach to the inheritance pool (Grounds 1, 3 and 4)
These grounds challenge not the trial judge’s decision to consider the assets of the parties in two pools but what items were included in each pool. Two items were raised in these grounds, the loan by the appellant to X Pty Ltd of $853,974 and the discharge of the debt on the V property.
Loan to X Pty Ltd
The trial judge found that the appellant had a credit loan account with X Pty Ltd of $853,974. The argument advanced on the appeal was that the trial judge erred in ascribing this loan to the “main pool” rather than including it in the “inheritance pool”.
The summary of argument asserts in relation to the loan by the appellant to X Pty Ltd:
1.10 In this ground it is contended that his Honour was in error in putting the [X Pty Ltd] loan ($853,974) in the main pool.
1.11 There was no issue that the [X Pty Ltd] loan was owed by [X Pty Ltd] and derived from the inheritance, resulting from loans made by the appellant to [X Pty Ltd] at various times from the inheritance following its receipt, with the amount of the [X Pty Ltd] loan varying depending upon the date looked at and loans made by the appellant. His Honour found the [X Pty Ltd] loan to be $853,974 at AB1/20 | Reasons [36] and refers in footnote 28 at AB1/20 to the ‘Submission of the Applicant … accepted by the respondent.
(errors in original; original emphasis)
As this argument was developed by counsel for the appellant, it became apparent that it was based on two fundamental misapprehensions.
The first of those is that the loan account comprised funds solely “derived from the inheritance…”, the second is that the respondent conceded that it was so derived.
There was a minor controversy about the amount of the X Pty Ltd loan. In the balance sheet filed on behalf of the appellant before the trial, the loan to X Pty Ltd was described at item 7 (case outline of appellant, filed 26 July 2011) as “Loan – [W Pty Ltd] to [X Pty Ltd]”, with an indication that the appellant’s valuation of it was $864,418 and the respondent’s was $853,974. It was further indicated that this was “Not Agreed”.
The trial judge found the amount of the loan to be $853,974 and it is not asserted that he was in error in so finding.
In the case outline document filed on behalf of the appellant at first instance, it was asserted:
5.3.3The income and capital resources of the applicant [W Pty Ltd] were derived as set out in his affidavit and included that from the [Insurance Agency] until its sale and a substantial inheritance received in about three tranches commencing 15 September 2008. The applicant [W Pty Ltd] made substantial advances to [X Pty Ltd] from the said inheritance after it’s [sic] receipt and these advances, by way of loans to [X Pty Ltd], comprise the greater part of the debt owning by [X Pty Ltd] to the applicant [W Pty Ltd] as shown in the Balance Sheet attached.
(our emphasis)
There can be no doubt that in written submissions for the appellant it was asserted that only part of the X Pty Ltd loan could be traced to the inheritance. Thus we were surprised when, at length and with considerable force, counsel for the appellant argued that the trial judge erred by failing to find that the entire amount of the X Pty Ltd loan was sourced from the inheritance and that this proposition had been conceded by the respondent.
Counsel for the appellant was able to demonstrate that the trial judge had uncontroverted evidence that the appellant loaned X Pty Ltd $567,473 from his inheritance (Exhibit S, appellant’s July 2011 affidavit).
As to the submission that the respondent conceded that the whole of the loan was provided from the inheritance, a proposition denied by the respondent, counsel for the appellant was unable to point to any evidence in which that concession was made. The argument devolved to an assertion, it seems, that by conceding the amount, the respondent conceded its provenance.
In the written summary of argument for the respondent, it is asserted:
15.1…The appellant never proved in the trial that the loan was derived wholly from the inheritance. It was incumbent on the appellant to prove that fact. The respondent never conceded that fact was true. All that was conceded was the amount which was owned from [X Pty Ltd] to the appellant.
Further, it was submitted that the appellant did not provide evidence demonstrating the amount of the loan account in X Pty Ltd before his inheritance was received or the activity on the loan account once the inheritance was received.
We were referred by counsel for the respondent to the draft balance sheet that counsel for the appellant presented to the trial judge as a part of his case outline. In that document a clear distinction is drawn between the inheritance, which is brought to account at its full value, and the appellant’s loan to X Pty Ltd. It follows that unless the parties intended to give the appellant credit twice for that portion of the loan sourced from the inheritance, in the appellant’s own case, it was acknowledged that the respondent (at least) argued that the loan account included funds (some if not all) advanced from a non inheritance source.
We do not accept the argument that the respondent conceded
the appellant’s assertion that the inheritance was the sole source of the funds loaned to X Pty Ltd. As we mentioned earlier, counsel for the appellant could not point to any evidence that supported the appellant’s contention that the whole of the loan to X Pty Ltd came from his inherited funds. Indeed, this argument, if not mortally wounded by the lack of support for the contention, was, in our view, killed entirely by what counsel for the appellant said to the trial judge about this issue.
In making submissions on this loan, counsel for the appellant said, after observing that the figure of $853,974 is shown in the report of the valuer retained to value the companies:
HIS HONOUR: - - - 853,974 shows as an asset to the applicant in the Wheatley report.
MR CONNOR: Yes
…
MR CONNOR: And your Honour, just – while I’m there, my friend’s treatment of – in his assets and liabilities aide-memoire - - -
…
MR CONNOR: - - - your Honour, it seems to me that, for example, his treatment of the applicant’s individual contributions doesn’t account for that $800,000. He has got – because that 800,000 doesn’t find its genesis entirely in the 2,972,894 figure.
…
MR CONNOR: Because you know the money that was owing to – the evidence is, he brought a lot of money in from – into the [W Pty Ltd] – to [X Pty Ltd] from the 800,000 [agency] money. And he- - -
HIS HONOUR: No, that’s not right.
MR CONNOR: Well, there’s- - -
HIS HONOUR: He didn’t pour it into [X Pty Ltd]. [X Pty Ltd] derived- - -
MR CONNOR: Sorry. [X Pty Ltd] and – sorry. But he has made – he has made advances to it, from – I’m sorry, from the – I think it was the sale of 76 to [X Pty Ltd], and all I’m saying is that the genesis of the 800,000, 853 that’s owing is not to be found just in the – in the 29. That is - - -
(Transcript 10 November 2011 page 67 lines 38-46 and page 68 lines 1-22)
We understand it to be uncontentious that the reference to the insurance money is to a sum of about $800,000 obtained on the sale of the franchise by X Pty Ltd in early 2006. While somewhat opaque, the reference to “76” seems to be a reference to a property owned by the appellant and sold in 2002.
As we indicated to counsel for the appellant in argument, if his case before the trial judge was that the whole of the sum advanced to X Pty Ltd by the appellant was not solely from the inheritance, it is difficult to argue that his Honour was in error in not finding that it was and thus sequestering the money into the “inheritance pool”.
It was further submitted on behalf of the appellant that the trial judge erred:
1.16… in not adequately or correctly tracing how parts of the inheritance found their way into existing assets, which should have been left out of the main pool. ...
The submission which we have extracted from the transcript (see [39] above) provided no assistance to the trial judge in doing that tracing, nor was this exercise undertaken by counsel. It cannot now be said to be an error.
This challenge to his Honour’s decision has not been made out.
Discharge of debt on the V property
Once again, it was undisputed that the appellant discharged the debt on this property, thereby enabling the respondent and her children to live there without payment.
It was submitted on behalf of the appellant that:
1.bthe repayment by [W Pty Ltd] from the inheritance monies of a loan of $255,000 secured over the [V property] real estate [sic] notwithstanding the learned trial Judge finding this payment to have been made from the inheritance monies in his Judgment, but determining instead to take it into account as a contribution of [W Pty Ltd].
It was contended in oral argument on the appeal that the money used to discharge the loan on the V property derived from the inheritance and the proper treatment of that payment would have been to reduce the value of the property by $250,000. That is, the V property was valued at $750,000 and, the appellant contended, it should have been considered in the “main pool” as being valued at $500,000, the $250,000 being added into the “inheritance pool”.
Although the written submissions contended that the proper amount to sequester to the inheritance pool was $255,000 not $250,000, nothing turns on this.
However, the appellant’s written argument contended for a slightly different position to that advanced at the appeal hearing:
1.25Accordingly it is submitted that the $255,000 must be recognised in the main pool and not just treated as a contribution. If only a contribution, it is a significant direct financial contribution that cleary [sic] demonstrates that post separation the appellant relieved the parties of a debt of $255,000 which increased the equity in [the V property] directly by that amount …
Counsel for the appellant addressed his Honour on how the inheritance should be treated and the following exchange ensued:
HIS HONOUR: You don’t get credit for 2.9. You only get – if you want to say it’s quarantined, you only get value for the amount you’re prepared to allocate to it, now, don’t you?
MR CONNOR: Well- - -
HIS HONOUR: It should be the 949, plus the 218, plus the eight, plus the 202.
MR CONNOR: I think that’s so, but then again, you would be looking at how elsewise it spent [sic]. For example, some of that money was spent in writing down the parties’ debt. The evidence of the – I’m just forgetting. Is it paragraph 61, I think?
HIS HONOUR: Well, if you – I don’t know, but if you advance this argument, it seems to me it necessarily hinges upon your assertion that it is utterly quarantined. If you do say it was integrated in some way in the parties’ financial circumstances- - -
MR CONNOR: Yes.
HIS HONOUR: - - -necessarily detract from your argument that it’s so clearly quarantinable, don’t you?
MR CONNOR: Well, not so – well, your Honour, it’s very – it seems to me that it can be very clearly isolated, meaning no disrespect, but your Honour, the evidence of the – as to the tracing of it, the application or the source of application of those funds is very readily able to be- - -
(Transcript 10 November 2011 page 73 lines 27-46 and page 74 lines 1-4)
Counsel for the appellant and the trial judge then further discussed whether the assets should be considered globally or in two groups. The trial judge said:
HIS HONOUR: If it all goes into one pool, as has been argued for the respondent, you get a huge boost for the 2.9.
...
HIS HONOUR: If you get your way, and it’s two pools, and it’s quarantined, you don’t get any credit for it at all, because you – we treat it on the basis that you always keep it.
MR CONNOR: Well, it’s not a contribution. It can’t be a contribution.
(Transcript 10 November 2011 page 74 lines 22-31)
Counsel for the appellant then moved to address the trial judge on “contribution factors” and the value of the initial contribution of the V property. He then submitted:
MR CONNOR: … I’ve come to some post separation contributions and again, your Honour, a significant one in favour of the applicant is the provision of [the V property] and even to the extent that the – towards the end there, the respondent is living with the third party there. …
(Transcript 10 November 2011 page 76 lines 36-39)
The submission diverged to a discussion about the property needing some work after the respondent left, and then continued:
MR CONNOR: … But in any event, you have a … figure of 775, but I simply ask your Honour in thinking about it, for the other figure, that there’s the – the property is – has got its marketable problems, and the- - -
(Transcript 10 November 2011 page 76 lines 45-47)
The trial judge pointed out that the property had an agreed value and counsel for the appellant then submitted that the appellant’s efforts in attending to the property after the respondent vacated it ought to be taken into account.
Counsel for the appellant did not submit to the trial judge, as he did on the appeal, that the value of the V property should be reduced by $255,000 to reflect the appellant’s payment of the debt against that property. The submissions were directed to the appellant’s contributions to that property both during the relationship and after it had concluded.
Neither argument about the constitution of the inheritance pool (that is the loan to X Pty Ltd and the amount paid to discharge the mortgage on the V property) was made by counsel for the appellant to the trial judge. In fact, the submissions on these aspects were entirely different and materially inconsistent.
In Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438, Latham CJ, Williams and Fullagar JJ said:
The circumstances in which an appellate court will entertain a point not raised in the court below are well established. Where a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards. …
(citations and footnotes omitted)
This ought not be permitted to pass without comment. Counsel should be astute to the arguments advanced to the trial judge and those which are properly matters for argument on appeal. This is particularly so when counsel who appeared on the appeal also appeared before the trial judge.
In any event, the asserted error in his Honour’s treatment of the repayment of the debt on the V property is entirely without foundation and cannot succeed. The $250,000, even accepting that the funds derived from the inheritance, was applied to property that was properly considered in the “main pool”. The treatment of the payment by the appellant as being a contribution to the assets of the parties to be considered in that pool was one entirely open to the trial judge and, in our view, entirely correct. The appellant has not made out any error.
Treatment of contributions from the inheritance (Ground 5)
While considering the appeal grounds as relate to the trial judge’s treatment of the appellant’s inheritance and the constitution of two pools of assets, it is convenient to consider Ground 5, in particular Ground 5(i).
Ground 5 challenges the weight attributed by the trial judge to the various contributions of the parties and argues that his Honour failed to properly consider the contributions of the appellant.
Ground 5(i), as set out in the amended Notice of Appeal, contends that the trial judge failed to give sufficient weight to the applicant’s contributions and, in particular:
The contribution made by [W Pty Ltd] from the inheritance monies including but not limited to the amount of $853,974 (derived from the $2,972,894) the learned trial Judge found to be the amount loaned by [W Pty Ltd] to [X Pty Ltd] (that is particularly if the learned trial Judge were [sic] going to treat the $853,974 as part of the main pool) …
At the heart of this challenge is the appellant’s contention that the trial judge failed to take into account the full extent of the financial contributions he made to the relationship from his inheritance. As is not in doubt, the trial judge took into account, as a contribution made by the appellant, the funds applied to discharge the debt on the V property. It is argued that the uncontroverted evidence established that significant funds were applied from the inheritance to X Pty Ltd and, irrespective of whether the appellant could establish that those funds constituted the entire value of the appellant’s loan account in X Pty Ltd, it was incumbent upon the trial judge to consider the contribution of those funds.
The trial judge commenced his discussion of the inheritance at [29]. After
his Honour correctly identified the amount received, he then discussed how those monies were used. The manner in which the appellant applied the inheritance was put into three categories, namely, the cash component that the appellant used “for his personal or vicarious enjoyment”, a share portfolio that had depreciated in value and otherwise “used to acquire other assets and pay legal costs”. The first category incorporated gifts to his children and other similar disbursements described at [60] to [66] of the appellant’s affidavit filed 22 July 2011. The second and third categories capture payments set out at [6], [7] and [9] of the appellant’s affidavit dated 7 November 2011.This relates to his purchase of a property at B, his payment of legal expenses, the sale of shares and the diminution in the value of his share portfolio. The material in the balance of the paragraphs ([61] to [66]) of the appellant’s July 2011 affidavit is neither incorporated into the reasons for judgment nor is reference made of the evidence there given.
The evidence given in those paragraphs deals with the application of the appellant’s inheritance. Paragraphs 61 and 66 establish, inter alia, that from the inheritance the appellant advanced $567,473.48 to X Pty Ltd.
As has already been mentioned, at [31], the trial judge explained his decision to quarantine the remaining inheritance assets, the effect of which was that the inheritance would “not be considered as a financial contribution” and “the assets which are traceable to the inheritance will remain in the ownership of the applicant”.
Significantly, at [32], the trial judge explains that the only exception to this approach to the inheritance is that the monies sourced from the inheritance to discharge the mortgage on the V property would be taken into account as a contribution by the appellant. It can be seen from the discussion which follows that nowhere did the trial judge take into account in the appellant’s favour or even mention the contributions by him from the inheritance to X Pty Ltd.
Having formulated the main pool, the trial judge identified and analysed the parties’ contributions. Contributions are not tied to assets which exist at the date of hearing and are taken into account in a general sense, including in relation to property that has been disposed of (Farmer & Bramley (2000) FLC 93-060). It follows that even if funds advanced from the inheritance to X Pty Ltd did not constitute part of the appellant’s loan account, the fact the advances were made might nonetheless be relevant.
In the discussion of the various contributions, the trial judge assiduously analysed the affidavit evidence. Relevantly, although he referred to paragraphs [60] and sub-paragraph (a) of [61] of the appellant’s July 2011 affidavit, his Honour neither incorporated nor referred to either sub-paragraph (b) of [61] or [66], which concerned the loans advanced to X Pty Ltd and the assertion that as at a particular date, the amount of those loans was $567,473.48. That this evidence was not considered is consistent with what the trial judge said at [29], namely, that the only exception to the funds received from the appellant’s inheritance not being taken into account as a financial contribution by the appellant was his payment for the V property.
At [50], the trial judge commenced his discussion of the “capital sums and inheritances” that each party contributed during the relationship. In relation to the appellant, reference is made to the discharge of the mortgage over the V property. No reference is made to the advances from the inheritance to X Pty Ltd.
It is apparent that, notwithstanding the concession made by counsel for the respondent in the first instance hearing that the contributions referred to in the appellant’s July 2011 and November 2011 affidavits meant that this payment could be taken into account, the trial judge did not do so.
It would appear that having decided to quarantine the inheritance, excepting the V property mortgage payment, the trial judge overlooked that there was a significant amount of money brought into the relationship which was not accounted for in the inheritance pool or the V property. It is not difficult to understand how this oversight might have occurred. The submissions made on this point were cryptic and brief. They have already been set out at [39], [50] and [51] of these reasons and need not be repeated.
Counsel for the appellant submitted to the trial judge that not all of the X Pty Ltd loan was attributable to the inheritance. However, other than the oblique reference to [61] of the appellant’s July 2011 affidavit, he made almost no attempt to identify the inheritance funds contributed to the relationship. Indeed, no mention was made by him about the $567,473.48 advance to X Pty Ltd.
We accept that the issue was presented to us in greater detail and more clearly than it was at trial. Nonetheless, the uncontroverted evidence before the trial judge and the submissions made by the parties obliged his Honour to consider the contribution of $567,473.48 in the context of assessment of the contributions of the parties. The total value of the parties’ property is not so vast that such a contribution could be excluded as irrelevant. It was an undoubtedly relevant consideration.
The trial judge’s failure to consider a contribution by or on behalf of the appellant in that amount vitiated the exercise of his Honour’s discretion. We accordingly conclude that the appeal should be allowed.
Remaining grounds
Having concluded that the appeal will succeed, it is unnecessary and unproductive to consider those grounds which challenge the weight attributed to various contributions and whether the trial judge provided adequate reasons for the orders which his Honour made.
Conclusion
The appeal will be allowed. Although on the appeal the appellant sought that only Order 1 of the trial judge’s orders be set aside, to set aside only that order may compromise the capacity of the Court on the rehearing to make orders that are appropriate. For example, Order 2 imposes upon the respondent an obligation to apply a portion of the amount received from the appellant in a particular way. A number of other orders operate as a consequence of Order 1. In our view, the appropriate order is to set aside all of the orders.
For reasons which are obvious, the matter must be remitted for rehearing. We see no reason why the matter could not be reheard by the trial judge.
Costs
As is our custom, we took submissions on costs. Those submissions did not address whether, even if the appellant succeeded, an order for costs should be made against him. As we have explained, although the trial judge fell into error, that error in a quite obvious way was contributed to by the manner in which the appellant presented his case.
This is not a case where we would make an order for costs against the respondent nor recommend that certificates pursuant to the Federal Proceedings (Costs) Act1981 (Cth) be given.
It is appropriate that we receive submissions, no more than five pages in length, on whether the appellant should pay the respondent’s costs of the appeal.
I certify that the preceding eighty one (81) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Bryant CJ, Ainslie-Wallace & Ryan JJ) delivered on 14 June 2013.
Associate:
Date: 14 June 2013
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