Masoud & Masoud

[2016] FamCAFC 24

FAMILY COURT OF AUSTRALIA

MASOUD & MASOUD [2016] FamCAFC 24

FAMILY LAW – APPEAL – PROPERTY – Where the husband appeals against property settlement, spousal maintenance and child support departure orders – Where the trial judge incorrectly found that the husband failed to disclose certain financial documents – Where the trial judge incorrectly concluded that the husband had access to undisclosed assets – Whether a sum of $800,000 advanced by the wife’s parents to her was a gift or a loan – Whether the sum ought to have been taken into account as a liability of the wife – Whether the trial judge ought to have drawn a Jones v Dunkel inference due to the unavailability of the wife’s parents for cross-examination – Where the trial judge incorrectly characterised certain other payments to the wife as liabilities and thereby erred in his determination of the balance sheet – Where the trial judge ignored significant financial contributions of the husband – Whether the parties were denied procedural fairness by the trial judge’s failure to adopt their suggested approach to “add backs” – Where the trial judge failed to provide reasons for his spousal maintenance orders, failed to consider the husband’s capacity to pay the amount ordered and failed to take into account the significant cash sums and investment properties the wife received under the property orders – Where the trial judge failed to first determine the issue of child support where both parties sought a departure from the assessed amount – Where the trial judge failed to provide reasons for his determination of what constituted the children’s “reasonable needs” – Where the trial judge failed to consider the wife’s capacity to contribute to the support of the children and failed to consider the husband’s capacity to support them – Appeal allowed.

Child Support (Assessment)Act 1989 (Cth) s 117
Family Law Act 1975 (Cth) s 75(2), s 79(2), s 79(4)

Family Law Rules 2004 (Cth) r 13.01, r 13.07

Bennett & Bennett (1991) FLC 92-191
Biltoft & Biltoft (1995) FLC 92-614
Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337
Cook's Construction Pty Ltd v Brown & Anor (2004) 49 ACSR 62
Fabre v Arenales (1992) 27 NSWLR 437
Gyselman and Gyselman (1992) FLC 92-279
Hendy v Deputy Child Support Registrar and Webb (2001) 164 FLR 236
Ho v Powell (2001) 51 NSWLR 572
House v R (1936) 55 CLR 499
Kuhl v Zurich Financial Services (2011) 243 CLR 361
Lonrho Ltd v Shell Petroleum Co Ltd (No 1) [1980] 1 WLR 627
HDM & MM and Anor [2006] FamCA 47
Mitchell & Mitchell (1995) FLC 92-601
Ogilviev Adams [1981] VR 1041
Purkess v Crittenden (1965) 114 CLR 164
Schweitzer & Schweitzer [2012] FamCA 445
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Townsend and Townsend (1995) FLC 92-569
University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481
Wild v Ballard (1997) FLC 92-771

APPELLANT: Mr Masoud

RESPONDENT: Ms Masoud

FILE NUMBER: SYC 2198 of 2012

APPEAL NUMBER: EA 157 of 2013

DATE DELIVERED: 24 February 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Bryant CJ, Ainslie-Wallace &
Le Poer Trench JJ

HEARING DATE: 17 June 2015

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 4 October 2013

LOWER COURT MNC: [2013] FamCA 763

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Kearney SC

SOLICITOR FOR THE APPELLANT: Barkus Doolan Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr Kirk QC

SOLICITOR FOR THE RESPONDENT: Watts McCray Lawyers

Orders

1. Property:  The appeal against Orders 32, 33 and 45 of the orders of Fowler J made on 4 October 2013 is allowed and those orders are set aside.

2. Spouse maintenance: The appeal against Order 53 of the orders made by Fowler J on 4 October 2013 is allowed and the order is set aside.

3. Child support: Leave is granted to the appellant to appeal against Orders 54 and 55 of the orders of Fowler J made on 4 October 2013.

4. The appeal against Orders 54 and 55 is allowed and Orders 54 to 58 are set aside.

5. The matter is remitted for rehearing by a judge of the Family Court of Australia.

6. There is no order as to costs.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Masoud & Masoud 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 157 of 2013
File Number:  SYC 2198 of 2012

Mr Masoud

Appellant

and

Ms Masoud

Respondent

REASONS FOR JUDGMENT

Introduction

1. Mr Masoud (“the husband”) appeals against orders for property settlement and spousal maintenance made by Fowler J on 4 October 2013 in proceedings with Ms Masoud (“the wife”).  He further seeks leave to appeal his Honour’s orders in relation to child support.

2. It is unnecessary for the disposition of the appeal to traverse the facts of the matter or his Honour’s reasons for judgment in any detail other than to give context to the grounds of appeal.

3. The husband and wife married in 1995 and, having briefly separated and reconciled in 2010, separated on a final basis in April 2012.  There are three children of the relationship: J who was born in 1997, D who was born in 2000 and G who was born in 2002.  His Honour ordered that J live with the husband and the younger two children live with the wife and made orders for the children to spend time with the parent with whom they were not living.  These orders were not the subject of challenge on appeal.

4. The husband is a healthcare professional.  The wife trained as a health science professional although has been out of the profession for some years, not having worked in that capacity since 2000.  She was at the time of the trial engaged in work within the home and in caring for the children.  Her evidence was that with retraining, she would be able to recommence work as a health science professional. 

5. His Honour made a child support departure order that the husband pay $1,300 per week for both of the two children living with the wife.  His Honour’s orders further require the husband to meet the children’s school tuition fees and associated costs, maintain their private health insurance, the costs of orthodontic and other nominated health costs and the costs of the children’s extra-curricular activities.

6. His Honour also ordered the husband to pay to the wife $4,333 per month as spousal maintenance for a period of two years from the date of the first payment.

7. The orders for spouse maintenance and orders in relation to the children’s additional expenses were challenged on the appeal.

8. As to the property of the parties, his Honour ordered an overall division of the net property as found by him in the proportions of 68 per cent to the wife and 32 per cent to the husband.

Property Orders

1. The parties had not agreed on a balance sheet which would reflect a mutual position during the hearing, however, after the hearing completed, the parties prepared a joint balance sheet for his Honour’s consideration.  The document, presented as a consensual position, included a number of items which it was agreed between the parties would be “added back” to the property pool. 

   
   

   His Honour set out that document at [143] and after considering various issues, found the parties’ net assets to be $4,623,925 [215]. It was on this finding that his Honour’s orders for property settlement were based. 

2. His Honour’s assessment of the various contributions of the parties is also based on his findings in relation to the various items on the balance sheet.  In considering the items sought to be added back to the property pool, his Honour did not accept the parties’ agreed position but considered each item sought to be included and determined whether or to what extent it would be included in the property pool.  His Honour did not seek further submissions from the parties on these items and the husband argued that such failure constituted a denial of procedural fairness.  Further it was argued that his Honour adopted an inconsistent approach to items of a similar nature.  The overall thrust of the appeal is that his Honour erred in several significant respects when considering matters in the balance sheet and as a result his ultimate consideration of contributions and the orders made consequentially are erroneous.

The Appeal

1. The Further Amended Notice of Appeal contains 20 grounds of challenge to

   
   

   his Honour’s orders, although the numbering of the grounds would indicate that there are 21 grounds.  Senior counsel for the husband indicated that Ground 1 was, in effect, subsumed in the other grounds of appeal and it was not thus separately argued.  The other grounds were argued grouped under headings and we will consider them in the same way.

2. We propose to first consider the grounds of appeal under the heading the “Balance Sheet” findings which cover Grounds 2 to 7.

Ground 2 - Husband’s disclosure of his interest in the MMM Trust and of his income for the balance of the 2012/2013 financial year

MMM Trust

1. The husband is a discretionary beneficiary of this trust which was established by his father.  Apart from mentioning his interest in the discretionary trust, the husband produced no documents in relation to it.  In the joint balance sheet, its value was asserted to be “nominal” by the husband and “Financial Resource (NK)” by the wife (at [143]).

2. His Honour found:

   154.Items 50, 51, 51B (being three of the items listed under the heading of “Trusts”) are stated to be of “nominal” value or a financial resource of undisclosed value. As such, they will not be included in a consideration of the property of the parties in the balance sheet. To the extent that they are relevant and appropriate, however, they will be taken into account in the Court’s considerations under the provisions of section 75(2) as potential financial resources of indeterminate value.

   155.Item 51A (the husband’s interest in the “[MMM] Trust”) relates to an issue which arose in relation to the disclosure by the husband of his interest in this trust. He did not provide any information other than that he was a discretionary beneficiary in the trust. He tells the Court that he asked for information in relation to the trust but was refused such information on the basis of a “conflict of interest” that either he or the wife had. No explanation was given as to how such a conflict might have arisen.

   156.It is the duty of the parties to a proceeding such as this not only to disclose what they know but to diligently seek to procure information which might be relevant to the determination of the case. Neither party seems to have taken that latter course, but it seems to the Court that the husband had the proximity to the information which the wife did not possess in that at least he was the beneficiary and his brother was, it was said, the person empowered to control the trust. The obligation therefore lay primarily on the husband to procure the disclosure of the relevant information. The husband had the primary duty to cause the Court to be informed in relation to his interest in the trust and to avail himself of the opportunities to use the processes of the Court for that purpose. He has failed to do so.

   157.This Court’s ability to offer litigants just and equitable decisions in relation to their disputes is affected by non-disclosure perpetrated by or through the parties. The Court finds that the husband has permitted a non-disclosure in this case with respect to this item. The question then is what to do with that finding? All the Court can do is to infer that the husband has an interest in a trust, the value or the potential value of which is not disclosed. As such, it will find that husband has a financial resource of an indeterminate value and take it into account in its considerations of matters under section 75(2).

3. It was undisputed that the husband and his father fell out, as did the husband with some of his siblings.  Indeed in his will, the husband’s father made scathing and unflattering remarks about the husband, directing that at the vesting date of the MMM Trust, any funds distributed to the husband be reduced by a sum calculated by the father as being referrable, amongst other things, to the husband’s “wastefully extravagant and vexatious claim” being a reference to action taken between the husband and his father over a property previously held by the EL Trust. 

4. The husband said:

   … my father made it very clear in his will, there is no misunderstanding, none of his children shall get anything. It goes for educational support to grandchildren.  Whichever way he and his legal advisors tied up, it is not the intention for anyone.

   … And I have not been involved.

   (Transcript 5 July 2013 p.16, line 26)

5. The husband said that he did not have a copy of the trust deed, that he did not know who the trustee/s of the trust were, and did not know the extent of the assets held by the trust.  He was cross-examined on his efforts to obtain a copy of the trust deed and said that he had asked those of his siblings who he expected might be able to help in obtaining a copy of the trust deed. He said that their reply was that “there is a conflict of interest here between the parties and [Ms Masoud]”, which he said referred to the present legal proceedings and said that they refused to provide him with a copy of the trust deed. He was not asked what that conflict might be.

6. In written submissions on the point before the trial judge, it was contended for the wife that the husband had failed to give disclosure of his interest and that his explanation for his failure to produce the trust deed was “plainly wrong” and not credible.  It was not suggested to the husband in cross-examination that he ought to have taken other steps to obtain the trust deed nor, importantly, was it suggested to him that his evidence about the release of the trust deed and the reason given was not credible.  Indeed there was no challenge at all to the husband’s evidence to which we have referred.

7. The obligation to disclose in family law proceedings is governed by Chapter 13 of the Family Law Rules 2004 (Cth) (“the Rules”). Rule 13.01 of the Rules imposes a general duty to give “full and frank disclosure of all information relevant to the case, in a timely manner”, whilst r 13.07 narrows the scope of the duty to “each document that is or has been in the possession, or under the control of the party disclosing the document; and is relevant to an issue in the case”.

8. The meaning of “possession and control” has been considered extensively.  For a document to be within the power of a party, the party must be in actual possession of it or must have an immediate indefeasible right at the time of discovery to demand possession from the person who has physical possession of it: see Lonrho Ltd v Shell Petroleum Co Ltd (No 1) [1980] 1 WLR 627. In Schweitzer & Schweitzer [2012] FamCA 445, O’Reilly J held at [45] that “possession” as contemplated by r 13.07 “means not mere physical possession (custody) but “possession” within the accepted meaning being “the legal right to possession”: see in B v B, per Dunn J at 805; 807”. Further, her Honour stated at [50] that a beneficiary of a discretionary trust “has no interest in the corpus, but only the right to require due administration of the trusts, and…is entitled to access to the financial documents of the trustees only for the purpose of ascertaining that there is due administration.” In the present case, therefore, the husband has no access to the financial documents of the trustees beyond that required to ascertain there is due administration. It cannot be said that he has the requisite “control” of the trust deed that would warrant its disclosure.

9. With respect to his Honour, he elevated the duty of disclosure to an absolute obligation on a party to garner documents by any means. 

10. Thus his Honour’s finding that the husband was obliged to “avail himself of the opportunities to use the processes of the Court for that purpose” cannot be supported.

11. It was always open to the wife to issue a subpoena to the trustee to produce the document.  She did not.  It is also important to observe that it was not suggested to the husband that the trust document would reveal a position different from that to which he referred in his evidence.  Neither was it suggested to him that he had in the past or was likely to receive a distribution from the trust in the future. 

12. It needs to be observed too that it is well recognised that there is a difference between circumstances where there is inadequate disclosure which suggests the existence of undisclosed assets and where it does not (see HDM & MM and Anor [2006] FamCA 47). This is particularly relevant to this case where it was not suggested to the husband that his failure to produce the trust deed was reflective of undisclosed assets or benefits. This is all the more so when there was no controversy about the husband’s poor relationship with his father and some of his siblings and the terms of the father’s will.

13. As we discuss later in these reasons in relation to Ground 3 and the nature of the evidentiary burden in relation to facts in issue in a trial, the husband was not challenged on his evidence about the nature of the trust and his entitlements.  No evidence was adduced by the wife contradicting that evidence.  On that basis, his Honour was entitled to find that the benefit to the husband from the trust was unquantified, but was not entitled to find, as he apparently did, that the husband had failed in his obligation to disclose.

14. His Honour’s erroneous conclusion in relation to the husband’s interest as beneficiary in the trust was taken into account at [238] where he said:

    The Court also takes into account under section 75(2) the husband’s interest (of an indeterminate value) as a discretionary beneficiary in the [MMM] Trust.

15. We will consider the effect of this in the context of another ground of appeal.

16. His Honour’s conclusions thus cannot be sustained on the evidence. 

The husband’s income for the year ending 30 June 2012

1. The trial judge said at [236] when discussing s 75(2) considerations:

   The income and earning capacity of the husband is substantial. He has not provided to the Court by way of disclosure his earnings for the balance of the 2012/13 financial year, however, his earnings for the 2011/12 financial year were $570,000 net from a gross income of nearly $1,000,000 in earnings.

2. His Honour’s conclusion that the husband had not disclosed his earnings for the relevant financial year was wrong.  The husband had provided details of his earnings for the first six months of the relevant year. The single expert, when valuing the husband’s practice, included in the valuation an agreed estimate of $150,000 to represent the husband’s earnings for the final six months in that year. That figure was agreed between the parties. Thus, there was evidence before his Honour about the husband’s earnings for the whole of the relevant year, although to be found in two different places.  His Honour was incorrect in finding that the husband had not disclosed his earnings for that year. 

3. His Honour took account of what he perceived to be an inadequacy of disclosure at [236] as part of his consideration of the s 75(2) factors, again expressing the view that the husband had “not provided to the Court by way of disclosure his earning for the balance of the 2012/13 financial year …”.  Further, the agreed amount referrable to the husband’s income for the second half of the relevant financial year had been included in the parties’ joint balance sheet as part of the value of the husband’s practice where, in effect, the parties were including the husband’s earnings for the last six months of that year in the value of the husband’s practice. 

4. It must, however, be said that it was not at all clear on the face of the joint balance sheet that part of the valuation of the husband’s practice included the husband’s earnings for a period of six months although item (46) made reference to the single expert’s report at [16] and [43].  Paragraph 16 sets out the basis on which the expert assessed the value of the husband’s practice and includes: “(f) an allowance for the after tax profits of [Masoud Pty Ltd] for the six months ended 30 June 2013”.  This is further elucidated at [43] when the expert set out the “assumed profit for six months to 30 June 2013” as being $150,000. 

1. Senior counsel for the wife sought to argue that his Honour’s finding about the husband’s net income was incorrect and pointed to evidence before his Honour of the gross fees generated by the husband’s practice. Based on those figures it was argued that the husband’s income was considerably greater that the $570,000 found by his Honour.

2. Senior counsel for the wife faces several difficulties in making this argument. First, and importantly, no notice of contention or cross appeal was filed on behalf of the wife asserting this error.  Of itself that is sufficient to dispose of the argument.  Further, however, the figures on which senior counsel relied were the gross fees generated by the practice, before deduction of necessary practice expenses and thus, of themselves, do not permit the conclusion sought to be drawn.  In any event, his Honour’s finding on the husband’s net income for the previous financial year was consistent with the husband’s financial statement and with the evidence contained within the expert valuation.

3. We thus do not accept the argument advanced by senior counsel for the wife.

4. It is sufficient for the disposition of this ground to find that his Honour was incorrect in his finding. To the extent that he inferred, on the basis of this fallacious finding, that the husband was attempting to minimise or conceal assets and to the extent that his Honour took that into account adverse to the husband, he was wrong.  It was not suggested in submissions to his Honour that the husband had failed to disclose his income for that six month period, nor could it have because it was common ground that the income was already before his Honour.

5. This ground is made out.

Ground 3 - Loan from the wife’s parents of $800,000

1. In issue before his Honour was the characterisation of an $800,000 payment advanced to the wife by her parents. It was not disputed that on 27 December 2000 the wife received an amount of $800,000 which was applied by the parties to the purchase of a house at Sydney Suburb 2, the former matrimonial home.  Nor is there any issue that the parties entered into a contract for the sale of the Sydney Suburb 2 home at the beginning April 2012 before separation which occurred in mid-April 2012 and in early May 2012 the parties received a demand for repayment of the $800,000.

2. There was a dispute as to the nature of the advance.  The husband’s primary contention was that the money was a gift from the wife’s parents and thus was not liable to be repaid.  He said that at no time during the relationship after the receipt of the money was he told that it was advanced as a loan.  He said that the first he knew of any assertion that the money was not a gift was when he and the wife received a demand for repayment after separation. 

3. The wife and her father contended that the money was advanced as a loan which was to be repayable on demand and, as evidence of the fact, produced a loan agreement executed between the wife and her parents on

   
   

   19 December 2000.

4. The terms of the agreement are relevant to this issue. 

   …

   NOW THIS AGREEMENT WITNESSES as follows:

   1.In consideration of the advance of Eight Hundred Thousand Dollars ($800,000.00) (“the Principal Sum”) advanced by the Parents to the Daughter (the receipt whereof is hereby acknowledged) the Daughter acknowledges that she is indebted to the parents in the amount of the Principal Sum.

   2.The Daughter must pay the Principal Sum (or so much thereof as shall remain outstanding) one (1) month after written demand by the Parents or by the survivor of them or the personal representative of that survivor.

   3.The Daughter may repay the whole or any part of the Principal Sum at any time by payments of Five Thousand Dollars ($5,000.00) or any larger amount.

   4.While any moneys remain outstanding under this Agreement the Daughter must not without the written consent of the Parents sell mortgage encumber lease or part with possession of the Property and must not complete the sale of the Property without repaying the whole of the Principal Sum then outstanding to the Parents.

   5.If requested by the Parents in writing the Daughter must grant a mortgage over the Property to secure repayment of the loan to be prepared by the Parents’ solicitors including terms usually included by these solicitors in mortgages of this nature.

   6.This Agreement binds the Daughter and her successors and personal representatives and inures for the benefit of the Parents the survivor of them and their successors and personal representatives.

   …

5. The husband did not suggest that the agreement was a sham nor was it suggested that it was not entered into on the date on which it was signed.  There was an issue regarding the funds referred to in the agreement, to which we will shortly turn.

6. The wife’s father swore an affidavit in the proceedings in which he deposed to the nature of the loan and the circumstances in which the money was advanced. He annexed the loan agreement to his affidavit.  He did not attend the hearing to be cross-examined on his affidavit by reason of ill health.  No evidence on the issue was given by the wife’s mother, who was a party to the loan agreement.

The Jones v Dunkel inference

1. On the appeal, it was argued by senior counsel for the husband that his Honour ought to have drawn a “Jones v Dunkel” inference in relation to the evidence of the wife’s mother, the inference being contended for that her evidence would not have assisted the wife’s case in asserting the advance as a loan.  Further it was contended that his Honour ought to have drawn a similar inference about the evidence of the wife’s father because he was not able to be cross-examined.

2. The husband’s complaint on appeal was two-fold: that his Honour ought to have drawn the inferences urged on him and that his Honour’s reasons contain no reference at all to the submission, thus arguing that his Honour’s reasons were deficient.

3. However, no submission to this effect was in fact made to his Honour at trial and it is perhaps not surprising that he did not draw the suggested inference. That, of itself, is a basis for disposing of this point on appeal (see University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481).

4. However, in any event, we do not accept that such inferences arise in relation to the evidence of the wife’s mother or that of her father.

5. Dealing with so-called “rule” in Jones v Dunkel, in Kuhl v Zurich FinancialServices (2011) 243 CLR 361 at 384-385, the majority in the High Court said:

   63.The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party’s case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn. These principles have been extended from instances where a witness has not been called at all to instances where a witness has been called but not questioned on particular topics. Where counsel for a party has refrained from asking a witness whom that party has called particular questions on an issue, the court will be less likely to draw inferences favourable to that party from other evidence in relation to that issue. That problem did not arise here. The plaintiff’s counsel did ask the plaintiff relevant questions.

   64.The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party…

   (Footnotes omitted)

6. Hodgson JA, with whom Beazley JA agreed, said in Ho v Powell (2001) 51 NSWLR 572 at 576:

   15.In considering the second question, it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so…As stated by Lord Mansfield in Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970: “…[A]ll evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted. See also Azzopardi v The Queen (2000) 75 ALJR 931 at 935 [10]; 179 ALR 349 at 353 [10].

   16.The case of Jones v Dunkel (1959) 101 CLR 298 is a particular application of this principle. That case itself related to a situation where there was evidence supporting an inference against a party, and that party did not give or call evidence, which that party was plainly in a position to have given or called, in order to explain or contradict the material presented. In my opinion, a similar principle applies where a person bearing the onus of proof does not give or call evidence which that person is plainly in a position to give or call; and unless some explanation is given of this failure, the tribunal of fact is entitled to infer that this evidence would not have assisted that person's case: cf Commercial Union Insurance Co of Australia Limited v Fercom Pty Limited (1991) 22 NSWLR 389.

7. Further in Cook's Construction Pty Ltd v Brown & Anor (2004) 49 ACSR 62 at 67,Young JA said:

   32.As to this point it must be borne in mind that Jones v Dunkel is actually just one aspect of a wider principle. That wider principle is that in judging evidence the court has regard to the material available to a party. If the person that the court is considering is a person who does not bear the onus of proof and that person fails to call a witness, the inference may be drawn that the witness is not likely to assist the person’s case. That is Jones v Dunkel itself.

   33.If on the other hand the person bears the onus and has a witness which he or she does not call then the court takes that into account when assessing the evidence as a whole…

8. It is important to observe that the operation of the “rule” is not a substitute for evidence; that is indeed the point of Jones v Dunkel itself.  In Fabre v Arenales (1992) 27 NSWLR 437 at 444, Mahoney JA said, apropos this principle and referring to Jones v Dunkel:

   The principle is concerned with the effect which should be given to a particular fact, viz, that a witness who could have spoken as to the existence of Z did not give evidence. Menzies J (at 312) put the matter succinctly:

   “In my opinion a proper direction in the circumstances should have made three things clear: (i) that the absence of the defendant Hegedus as a witness cannot be used to make up any deficiency of evidence; (ii) that evidence which might have been contradicted by the defendant can be accepted the more readily if the defendant fails to give evidence; (iii) that where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference.”

9. The wife herself gave evidence as to the existence of the loan, as did her father, and the evidence of each was supported by the loan agreement.  We do not understand it to be the case that a party bearing the onus of proof is required to call each and every person who might give evidence on a particular point. 

10. His Honour was entitled to have regard to the evidentiary burden which fell on the wife of adducing sufficient evidence on a fact to support the issue and to enable its acceptance by the finder of fact where that evidence on its face is not inherently improbable or incredible. Once that burden has been satisfied, the finder of fact is entitled to accept it unless “the defendant had, by evidence elicited in cross-examination or led, provided some material to overcome it – either by proving the contrary or throwing the matter into doubt” (see Purkess v Crittenden (1965) 114 CLR 164 at 171). In this case, no evidence was either led or elicited in cross-examination of the wife to throw doubt on her assertion that she had received such a loan, and thus, his Honour was perfectly entitled to accept it. Indeed, at its highest, the husband’s case was that at all times he believed the money was advanced as a gift. Further, in the absence of any adduced or elicited evidence disputing the point by the husband, the wife was not required to do more than she had and his Honour was entitled to find that the advance was indeed a loan.

11. Turning then to the question of the inability of the husband to cross-examine the wife’s father on his evidence, we observe that the issue of whether the money was advanced as a loan or a gift was squarely joined by the wife’s father, who referred to the husband’s contention that it was a gift and denied it was so. What was sought to be agitated in any cross-examination of the wife’s father has to be viewed from this perspective. 

12. It should be plain from the authorities cited above that an inability to cross-examine does not engage a consideration of the “rule” which concerns itself with the absence of evidence on a point and the onus of proving a particular issue.  It must be said that this proposition appeared to be accepted by senior counsel for the husband during argument on the appeal. We accept senior counsel’s contention that where evidence is not subject to cross-examination it can be a matter taken into account by a trial judge in assessing the weight to be given to that evidence. 

13. We do not accept that the circumstances engaged consideration of the “rule” in Jones v Dunkel.  Nor do we accept that any such inference could have been drawn in relation to the failure of the wife’s mother to give evidence.

14. His Honour accepted the wife’s father’s evidence, as he did that of the wife, that the money was advanced as a loan.  The determination of what weight should be attached to evidence in a case is the preserve of the trial judge, a preserve that is closely guarded as authority such as House v R (1936) 55 CLR 499 makes clear. It was not contended that it was not open to his Honour to accept the evidence of the wife and her father and in that event we do not find error in his Honour’s approach.

Loan not governed by the agreement

1. The husband further contended that if the advance was found to be a loan to the wife, it must next be established that its terms were governed by the loan agreement.  It was argued that the court needed to determine whether, in any event, the debt was unenforceable because any demand for repayment was statute barred.

2. These arguments are based on the date of the agreement against the date of payment of the funds.  It was uncontroversial that $800,000 was paid to the wife’s bank on 27 December 2000, obviously after the signing of the agreement on 19 December 2000.  The husband argued that the loan agreement refers to money which had been advanced at the date of the agreement, not to money to be advanced, and thus contended first that the loan agreement did not refer to the payment of $800,000 to the wife made on 27 December 2000.  In support of this argument, the husband pointed to the fact that the funds paid to the wife came not from her father but from a third party.  Thus it was asserted that the terms of the repayment of the loan were not governed by the agreement.  

3. His Honour concluded that the fact that the money was paid after the date of the agreement did not mean that the money was not paid in accordance with the terms of the agreement, nor did the fact that the money did not come directly from the wife’s father.  His Honour found that neither of these matters altered the nature of the advance nor the terms on which the money was advanced, namely in accordance with the written agreement (at [199]).

4. The determination of the terms of the loan was of obvious importance in this matter because if the governing terms of the loan were those of the written agreement, the loan was repayable in accordance with its terms, namely within one month of a written demand.  It was uncontroversial that if that was the case, the limitation period in which the wife’s parents could seek to recover the money commenced to run from the date of the demand.  If the terms of the loan were not governed by the agreement, then it was accepted that time began to run from the date of the advancement of the money and any attempted enforcement of the debt would now be statute barred (see Ogilviev Adams [1981] VR 1041).

5. His Honour found that the advance was a loan and that it was governed by the terms of the loan agreement, thus finding that any enforcement of it by the wife’s parents was not statute barred.

6. According to Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337, if words in a contract are ambiguous or capable of providing more than one meaning, a court may have regard to the origins and context of the contract to determine its proper meaning.

7. Given the terms of the agreement and the proximity of the advance to the date of the signing of the agreement his Honour was correct to conclude that the loan advanced to the wife in December 2000 was the loan to which the agreement referred.  Further, his Honour was correct in finding that the demand of the wife’s parents for repayment of the loan was not statute barred.

8. Finally the husband argued that his Honour ought to have found that in the circumstances of the making of the loan and the actions of the wife’s father in calling on the debt only after separation, it was likely that the debt was one which was unlikely to have been called in but for the separation and should not have been considered a liability of the wife in determining the net assets of the parties (see Biltoft & Biltoft (1995) FLC 92-614).

9. In our view, this case can be distinguished from Biltoft in two material respects. First, the demand for repayment was made when the property of the parties was sold.  It is to be remembered that the terms of the agreement included a clause that “… the Daughter … must not complete the sale of the Property without repaying the whole of the Principal Sum then outstanding to the Parents”. Further, the accepted evidence of both the wife and her father was that the debt was always intended to be repaid.  His Honour did not err in finding otherwise.

10. The husband has not established error in his Honour’s determination of the issue of the loan made to the wife by her parents and this ground must fail.

Ground 4 - Loan of $161,290 owed by the wife to her parents

1. Before the trial, an order was made releasing to both parties the sum of $350,000 to be used as payment towards their respective legal costs.  In the joint balance sheet submitted to his Honour by the parties, it was proposed that the two sums of $350,000 be added back to the pool of property of the parties [143 (Items A4 and A5)].

2. His Honour declined to add back to the property pool funds or assets which no longer existed [161]. His Honour’s treatment of notional property is the subject of Grounds 6 and 7 to which we will shortly refer.

3. The husband’s complaint, however, arises from his Honour’s treatment of money advanced to the wife by her parents on account of her legal fees.

4. The wife asserted that her parents had advanced money to her to assist her in paying her legal fees.  The amount said to have been received was “about $270,000”.  So much is uncontested.  His Honour said at [208]:

   … the wife deposed to a loan from her parents in the sum of either $300,000 or $270,000 as monies borrowed to pay legal fees. The loan was not challenged by the husband until submissions, and it was submitted that the only evidence of the loan before the Court is that which was provided by the wife. That may be true, but given that the wife’s evidence on that point was not effectively challenged in cross-examination, the Court accepts her evidence. It will include the loan on her side of the balance sheet but only to the extent that the funds held in her solicitor’s trust account have been included as an asset. Therefore, a loan in the sum of $161,290 will be included as a liability of the wife’s rather than the full amount that was borrowed. The balance will be taken into account as a liability of the wife under section 75(2).

1. Both parties agreed before his Honour that the amount standing to the wife’s credit in her solicitor’s trust account was unrelated to the money advanced to her by her parents.  Clearly then his Honour was incorrect in his characterisation of those funds.

2. The effect of his Honour’s erroneous finding led him to add to the property pool the $161,290 standing to the wife’s credit in her solicitor’s trust account as an asset (at [147]) but offset that sum against what he incorrectly concluded was her liability to repay her parents which his Honour put in at the same amount, producing a zero net effect.

3. Turning to the husband, his Honour counted as an asset the $273,000 standing to the husband’s credit in his solicitor’s trust account and offset against it as a liability for a loan to the husband from his brother of $40,000 advanced to pay legal fees, leaving the husband with an asset of about $233,000.

4. Thus it was argued that his Honour, by mistaking the source of the funds to the wife’s credit in the trust account, offset on the wife’s part the asset with a liability to which it did not relate, rather than it being paid from the $350,000 advanced to the wife for the purpose of paying legal costs.

5. Senior counsel for the wife, while conceding that there seemed to be no apparent basis for his Honour choosing to offset the funds as he did, argued that the error was not material.

6. Senior counsel for the husband argued that the disparity produced by his Honour’s mistaken treatment of this fund may not be, of itself, very significant, but argued that combined with the other matters where his Honour was said to have erred, it resulted in the miscarriage of his discretion.

7. His Honour’s mistake led him to incorrectly attribute a liability for a loan against an asset of the wife which affected the property pool. We agree with the argument that taken with the other matters to which we will later refer, this caused his Honour to fall into material error in determining the extent of the net assets of the parties or either of them.

8. This challenge is made out.

Ground 5 - Loan owed by the wife to XX Pty Ltd

1. His Honour found, as a liability to be met by the wife, a debt she said she owed to XX Pty Ltd (a company of which the wife, her parents, and her sister are each shareholders and directors).  The wife said that she and her sister received advances from that company amounting to $320,000, of which she owed half to the company, being $160,000. 

2. The relevant financial accounts of the company were before his Honour (Exhibit 30). It was accepted on the appeal that no such debt was shown as being owed by the wife or indeed her sister to the company.  Nonetheless, the wife maintained before his Honour that she still owed the money and was required to repay it.

3. His Honour’s finding on this point was:

   211. Exhibit 30 is a 2012 Financial Report for [XX Pty Ltd] for the year ended 30 June 2012. The wife gave oral evidence that she had disclosed the document in the proceedings. The Court has reviewed the exhibit and does not find that it successfully disproves the wife’s assertions as to the money she owes to [XX Pty Ltd]. Given the wife’s affidavit evidence and confirmation in the witness box as to the monies owing to [XX Pty Ltd], the amount of $160,000 will be included as a liability of the wife’s.

4. It seems then that his Honour preferred the wife’s assertion to the records of the company which were prepared by the company’s accountants and which were signed by the wife’s parents as directors as being fairly reflective of the financial position of the company. 

5. It was contended by the husband that his Honour’s finding was not open to him on the evidence.  The wife’s evidence about her shareholding in the company made no reference to her having any liability to the company. Nor is there any mention of such a liability in the report of the single expert retained to value the various business interests of the parties, who noted that he had been shown a loan agreement dated early April 2010 between the wife and XX Pty Ltd in relation to $40,000 borrowed by her which was to be repaid three years from the date of the agreement but made no mention of any other asserted debt owed by the wife to XX Pty Ltd.

6. It was asserted for the wife on appeal that while the debt was not shown as owing to the company by the wife, the evidence about her being obliged to repay that amount to the company was in fact meant to refer to an obligation to repay her parents’ loan account in the company.  Senior counsel for the wife conceded that this proposition was not put to his Honour and, in any event, it is inconsistent with the wife’s evidence.

7. His Honour’s finding at [211] is inconsistent with the unchallenged evidence and cannot be sustained.  We also accept that, in any event, his Honour gave no reasons for the finding and the challenge on this aspect is made out.

“Balance Sheet” grounds of appeal – conclusion

1. Grounds 2, 4 and 5 are made out and we accept the argument advanced by the husband that his Honour’s errors in determining the extent of the parties’ assets and liabilities provided a flawed foundation for his orders, as did his errors in relation to the parties’ contributions. These errors permeated his Honour’s assessment of contributions and the orders he ultimately made, with the effect of bringing about a miscarriage of discretion.

2. The finding that these grounds are made out of itself dictates that the appeal overall must succeed and the matter be remitted for rehearing.

3. Nonetheless we will consider the further grounds of challenge to his Honour’s orders.

Grounds 6 and 7 – the trial judge’s approach to “add backs”

1. As we indicated earlier, the parties agreed on an approach to property, specifically funds which no longer existed but which they contended ought to be “added back” to the property of the parties and each of them and to be taken into account by his Honour.

2. For the husband it was submitted:

   32. … There was a common position put to the Court concerning the inclusion of certain “notional” entries in the balance sheet. Notwithstanding this, and without affording either of the parties an opportunity to be heard in relation to such course, the Court determined that all such entries were to be excluded from the balance sheet and “rather dealt with in the same manner as matters that are required to be considered in the determination of what is just and equitable under the provisions of sections 79(4) and 75(2)”…

3. The trial judge said:

   161. Although at disagreement on a number of the specific add backs, each of the parties invites the Court to include in the balance sheet items which do not represent other than notional assets. The Court does not have an invariable practice of doing so and there is no statutory warrant to adjust property interests in non-existent property. The concept of so called “add backs” has been employed by some as a means of informing the Court as to what might be a just and equitable result but their consideration is only a consideration of the history of the marriage and, as part of that, the source and application of funds, and this Court finds it inappropriate to accept the invitation proffered.

   162. The determination of a just and equitable entitlement is not a question dependent for its determination on accounting for non-existent assets in an accounting way. That does not mean that the Court will not take those matters into account in its considerations under section 75(2) and, in particular, the source and application of funds by each of the parties.

   163. The Court refers to the Full Court decision in the recent case of Bevan & Bevan [2013] 116 (Coram Bryant CJ, Finn and Thackray JJ) where the following was said in relation to add backs at [79]:

   79. We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.

   164. The Court intends to remove the proposed add backs from the balance sheet, however, it will consider them appropriately as part of its analysis of matters required to be taken into account under section 75(2), as it will likewise consider the question of legal costs.

Error of law

1. The husband further submitted:

   33. To the extent that the Court found that such a course was required by authority, it is submitted that such a conclusion is incorrect and that the statements in Bevan [2014] FamCAFC 116 were obiter dicta and did not depart from the general propositions articulated in cases such as Townsend (1995) FLC 92-569; Farnell (1996) 92-681… and Omacini (2005) FLC 93-218.

2. On this point, we do not accept that his Honour found that as a matter of law he was required to exclude the add-backs. Rather, it seems to us that he did so in the exercise of his discretion, a course that was open to him.  Apart from paragraph 33 in the husband’s written submissions, no oral argument was addressed to this asserted error of law.  Given the manner in which the appeal was argued, we do not see the issue of whether, as a matter of law, it is appropriate to take into account add-backs of this kind as arising in the appeal. For that reason, we see no reason to discuss previous decisions about add-backs or to speculate on whether they are rightly or wrongly decided.

Denial of procedural fairness

1. In oral submissions senior counsel for the husband argued that his Honour’s departure from the parties’ agreed position in relation to the sums sought to be added back into the pool of the parties’ property constituted a miscarriage of justice and further argued that his Honour’s approach to the add-backs led him to inconsistently treat the various items which the parties contended ought to be added back.

2. As we have indicated, the gravamen of the submissions on these grounds was that his Honour denied the parties procedural fairness in not calling for further submissions when he proposed to depart from the parties’ agreed position and that his Honour adopted a hybrid approach which resulted in a failure to properly determine the existing interests of the parties in property and gave rise to a series of difficulties including the inconsistent treatment of assets.

3. As far as procedural fairness is concerned, it goes without saying, and indeed was conceded in argument on the appeal, that his Honour was not obliged to accede to the parties’ proposed treatment of these items.  The way in which non-existent property is to be treated remains a matter for judicial discretion (see Townsend and Townsend (1995) FLC 92-569). As we also have noted, it was contended that by not seeking further submissions from the parties when his Honour decided not to adopt the approach which they sought, the parties were denied procedural fairness. We do not accept this contention. Senior counsel for both parties would be well aware that the consideration of add-backs by a trial judge is discretionary and further, that the provision of an agreed balance sheet providing for the inclusion of notional property would not mandate his Honour’s acceptance of it or that he would treat the notional property in the same way as had the parties.

4. In relation to the assertion that his Honour’s approach led to inconsistent treatment of items of property, the asserted errors are contained in other grounds of appeal which will be considered separately.

5. Thus these grounds of challenge to his Honour’s orders are not made out.

Contribution findings

1. Grounds 8 to 11 relate to asserted errors by his Honour in making findings about the parties’ contributions pursuant to s 79(4).

Ground 8 - Finding that the parties’ initial contributions were equal.

1. Under the heading “Initial contributions” and after noting that the wife had a car, savings of about $20,000 and had rent free use of one of her parents’ investment properties, his Honour said:

   221. The husband’s financial position is somewhat less clear. It seems that he had some savings and two motor vehicles. He also had an interest in the [EL Trust] which held property purchased in 1987 for $171,094. There was a loan in relation to the property of $170,000. In 1998 a dispute arose with his father, which degenerated into Supreme Court proceedings in 2001; those proceedings were settled in 2002 with the husband paying to his father $129,106 on the basis that the husband had to bear his own costs. The amount paid in costs was not quantified by the husband, nor was he prepared to advance to the Court any estimate of same. The property was sold in 2003 and the net proceeds of the sale amounted to $805,894.

   222.It is proposed by the wife that there should be no differential weighing of contributions at the date of the commencement of their relationship. The Court agrees with that submission.

2. His Honour gave no further explanation for his agreement with the wife’s submission on initial contributions.

3. The husband’s evidence before his Honour on this point can be summarised thus:

   ·He had an interest in the [EL Trust], which was established by his father.  In 1987 the trust purchased a property in Suburb Q for $171,094 (“the Q property”).  The husband contributed the deposit ($16,500) and the stamp duty ($4,266.50) from his savings.  The balance of the purchase price was contributed by a mortgage of about $75,000 and funds paid by the husband but which had been deposited into his savings account by his father. 

   ·From the time of its purchase, the property was rented and until about 1993 or 1994 when the husband’s parents separated, the rents received were paid into the trust and used towards the mortgage payments and other expenses on the property.  In 1989 or 1990 the mortgage was discharged.

   ·After his parents separated, the husband took over the management of the property and began receiving the rent from the property which was used to pay the costs and outgoings in relation to the property.  He further said that he used the rental income to pay the interest on a loan referable to another property owned by him at Suburb T.  The rent received was also applied to family expenses after he and the wife married.

   ·

   In 1998 a dispute arose between the husband and his father about expenses that his father alleged were owing to the trust in relation to the property.  Litigation commenced in late 2001 (Transcript

   
   

   5 July 2013, p. 14 line 16) and which resulted in an agreement reflected in consent orders made in early 2002 by which the property was transferred into the husband’s name and the husband paid to the trust $129,106. 

   ·The property was sold in 2003 and the net proceeds from the sale were in the order of $935,000.  The proceeds were applied to renovations to the parties’ property in Sydney Suburb 2.

4. The husband’s affidavit annexed documents supporting his ownership and the arrangement for the property’s purchase.

5. The wife disputed that the husband had the claimed interest in the trust or, if he had such an interest, she disputed that it had any value of significance at the commencement of cohabitation. 

6. At trial the husband was asked about the costs incurred by him during the litigation with his father over the property.  He was unable to provide an estimate of the costs. He was asked:

   MR KIRK:   Are you able to give any estimate of the legal costs that you incurred in those proceedings, or don’t you know? ---Are you asking me to guess, as good as I can guess?

   I’m asking you if you can recall?---I can’t recall, I’ve said that.

   (Transcript 5 July 2013, p. 14, line 10)

7. As noted above, his Honour found that the Q property was subject to a loan of $170,000. Importantly, it was not suggested that at the date of commencement of the relationship the property was encumbered to the degree found by his Honour, or at all. In written submissions senior counsel for the wife argued, in relation to the Q property that “…there was a loan owing on it of $170,000 in 1995, either to his parents or the Trust.” However, as above, the husband’s evidence was that the mortgage secured over the Q property was paid out in 1989 or 1990.

8. In submissions on appeal, senior counsel for the wife sought to support the trial judge’s finding in relation to the Q property, which was effectively that the husband’s ownership of the property at the commencement of cohabitation was of no value, by asserting that there was no equity in the property in 1995. It was further contended that the husband had not contributed to the property in the years before it was sold. 

9. Clearly on the husband’s unchallenged evidence about the payment of rents from the property to, inter alia, family expenses, that contention cannot be sustained.  Further, although it was asserted in submissions to the trial judge, and we note his Honour repeated the wife’s submission on the initial contributions of the parties almost verbatim, there was no evidence before the court that supported the assertion that in 1995 the property was encumbered by a mortgage in the order of $170,000.  In cross-examination of the husband there was an oblique reference to an “earlier affidavit filed in this court” in which it was suggested that the husband said that there was a loan of $170,000 owed to the trust in respect of the property and which was repaid “in the years after commencing my relationship with [Ms Masoud]”. However it was not suggested to the husband then that that evidence was contrary to or inconsistent with the evidence he had previously given about the property and its indebtedness from time to time.

10. It is to be recalled that the husband’s evidence was that the property was purchased some eight years before cohabitation for $171,094 and was encumbered by a mortgage of $75,000.  It was not suggested to the husband that in 1995 there was a mortgage on the property of $170,000.  In any event, in the absence of evidence of its value in 1995, it seems to us there is no basis to conclude that its value had not increased since the date of purchase.

11. It was also suggested that the costs of the Supreme Court litigation with the husband’s father would have provided a significant impost on the husband and should be taken into account in assessing the value of the Q property subsequent to cohabitation.  The husband was criticised by senior counsel for the wife for not quantifying or estimating his legal fees.  The husband said he could not recall and he was not asked to “guess”.  Thus there was no evidence on which his Honour could determine this issue, namely whether there was an impost on the parties by reason of the costs paid.

12. It was argued that while his Honour referred to the husband having “some savings and two motor vehicles” at the commencement of the relationship [221], given that the husband’s savings were in the order of $100,000, it demonstrated that his Honour failed to give proper recognition to the magnitude of the contribution.  

13. Finally, it was said that his Honour made no reference to, nor did he take into account, the fact that when the relationship commenced the husband was a practising healthcare professional with attendant skills which were utilised for the benefit of the parties.

14. His Honour’s reasons do not indicate how he came to accept the submission that the parties’ contributions at the date of the commencement of the relationship were equal and it does not appear that there was any evidence on which he could safely make that finding. We agree with the argument that to so find was an error and this ground is made out.

Ground 9 – notional property and the husband’s post separation contributions

1. The first part of the ground asserts that his Honour adopted an inconsistent approach to the notional property of the parties.  It was contended that although his Honour determined that he would not take the parties’ notional property into account, he in fact did do so.  Reference was made to his Honour’s findings under the heading “Conclusion Based on Contribution”:

   234. Taking all matters of contribution into account, including the significant income which the husband brought into the household, I assess the contributions of the parties to the acquisition, conservation and improvement of the property of the parties or either of them (including notional property which is no longer the property of the parties or either of them), together with their contributions to the welfare of the family, to be 58% to the wife and 42% to the husband to the date of the hearing.

2. It was argued that by this reference, his Honour took into account notional property in determining contributions when he had refused to take it into account in determining the pool of the parties’ property and thus fell into error.

3. While it appears that his Honour did take into account notional property, we are not persuaded that by this reference he was in fact taking into account property which he had earlier refused to consider in determining the pool of the parties’ property.  We are inclined to the view that the inclusion of the reference to “notional property” reflects mere infelicity of language rather than the contended inconsistent approach. It may also reflect that his Honour was considering contributions to the $700,000 distributed to the parties by order prior to the hearing, which s 79(4)(a) entitles him to do.  We find no substance in this part of the ground. 

4. We also note that no written submission was addressed to this part of the ground, although it was mentioned in oral argument.

5. The second aspect of this ground contends that his Honour failed to have sufficient regard to the husband’s post separation contributions made from his earnings.

6. His Honour found that after separation the parties continued in their former roles. The wife continued as the primary homemaker and parent for the parties’ two daughters and the husband continued to work and make a similar contribution in relation to the parties’ son.  He noted the husband’s contention that the payment of his legal fees had been made from his post separation earnings, a matter which his Honour said would be taken into account within the ambit of s 79(4)  (at [231] to [233]).

7. The thrust of the argument is that in subsequently coming to the conclusion that there would be no further adjustment of the parties’ interests based on post separation contributions, his Honour had failed properly to evaluate the husband’s contributions because the husband’s post separation contributions required there to be such an adjustment.

8. This complaint devolves to a challenge to the weight his Honour attributed to particular matters in coming to a determination of s 79(4) contributions in the exercise of his discretion.  Such challenges face a significant hurdle as the cases indicate.  No appellate error has been shown in this regard.

Ground 10 – contributions during the marriage

1. This ground refers to his Honour’s findings at [227] in which he listed the contributions made by or on behalf of the wife to the date of the parties’ separation. It contends that his Honour erred in not recognising or reflecting any contribution made by the husband or on his behalf in his analysis of the parties’ contributions during the marriage.

2. It was contended that, having found in his previous analysis that there was no disparity in the initial contributions of the parties, his Honour’s conclusion that the wife’s contribution should be reflected in an adjustment of the property as to 58 per cent in her favour must flow from his Honour’s consideration of contributions made during the relationship until the date of separation.  It was further contended that his Honour’s reasons suggest that the parties’ contributions during the marriage, while occupying different spheres, were essentially equal because his Honour did not identify any disparity between them. 

3. The husband argued that in listing the contributions made by the wife or on her behalf at [227], his Honour failed to resolve the disputes concerning the characterisation of the various contributions.  For example, it was said that in relation to [227(c)], funds said to have been given to the parties by the wife’s parents, there was a significant dispute between the parties as to how the money was used.  The money was said to have been advanced to the parties while they were living overseas and the husband was undertaking further study and training.  The wife asserted that the salary then being paid to the husband was insufficient to cover the rent on their accommodation and the funds from the wife’s parents were used to support them while he studied.  The husband denied that they were short of funds and said that he had pre-paid the rent on the property. 

4. It is to be understood that the husband did not deny the provision of funds by the wife’s parents but challenged the asserted purpose.

5. The payment by the wife’s parents to the parties of $75,000 as referred to by his Honour in [227(e)] was likewise a matter in dispute and the husband complains that his Honour did not resolve the dispute before taking the purported payment into account.

6. Likewise, the payment of $101,000 by the wife’s mother, referred to in [227(g)], was said by the husband to have been incorrectly characterised by his Honour because the funds were intended for both parties.

7. Finally, although the husband conceded that he and the wife did occupy accommodation provided by the wife’s parents, it was argued that his Honour failed to take into account that the husband had provided a credit card to the wife’s parents to pay expenses and further provided household assistance to them.

8. The thrust of the argument on this ground is two-fold: first, that his Honour failed to resolve the factual disputes concerning certain contributions which he took into account in the wife’s favour in coming to his determination of s 79(4) contributions. Secondly, that even had these matters not been in dispute, they amounted to $571,000 and were reflected in a 16 per cent disparity between the parties amounting to $740,000 and thus represents an error in the exercise of his Honour’s discretion.

9. Where clearly matters were in issue between the parties, it was incumbent on his Honour to resolve the dispute or provide reasons for his acceptance of the wife’s position in relation to either of them.  By failing to give any reasons for his findings, we are unable to determine how his Honour came to the view he did.  This ground is therefore made out.

Ground 11 – error in the determination of s 79(4) contributions

1. This ground asserts that in coming to the conclusion that the contributions of the wife entitled her to an adjustment of 58 per cent in her favour, his Honour erred in failing to give weight to the husband’s financial contributions during and after the marriage, by giving too much weight to the contributions of the wife. It further asserts that the resulting differential between the parties in the circumstances of this case, namely 16 per cent, reflected an error in the exercise of his discretion.

2. However, it is sufficient for the disposition of the ground of appeal to observe that even had his Honour been satisfied that at the date of cohabitation, the

   
   

   Q property’s value was effectively balanced out by a debt secured on it, his failure to mention the application of the rental income and the net proceeds of the sale to the improvement of the parties’ assets subsequently represents a significant error.  By failing to take it into account, his Honour effectively ignored a contribution of the husband of potentially the same order of that loaned to the parties by the wife’s family, being $800,000.

3. This ground also asserts that by reason of the matters referred to in Ground 10,

   
   

   his Honour’s conclusion that based on the contributions made during the marriage there should be an adjustment in the wife’s favour of 58 per cent is clearly wrong and represents an error in the exercise of his Honour’s discretion.

4. We have determined that his Honour’s consideration of the s 79(4) factors failed to take into account a significant contribution by the husband which, in our view, renders his Honour’s subsequent considerations, including the conclusion as to the adjustment referrable to s 79(4)(e), unable to be sustained.

5. These grounds are thus made out.

Grounds 12 and 13 – Section 75(2) factors

1. In relation to the s 75(2) factors, his Honour set out the matters to which he had regard in coming to his conclusion that they warranted a further adjustment in the wife’s favour of a further 10 per cent, resulting in a division of the identified asset pool of 68 per cent in the wife’s favour.

2. Ground 13 asserts that in light of the trial judge’s conclusions in relation to

   
   

   s 79(4) contribution matters, the determination of a further 10 per cent amounts to an error in the exercise of his Honour’s discretion.  Ground 12 challenges the reliability of certain of his Honour’s findings on a number of the matters which he took into account in coming to that conclusion.

3. Ground 12 asserts that the trial judge erred when finding that there should be a 10 per cent adjustment in the wife’s favour by failing to have proper regard to:

   ·The valuation of the husband’s practice which comprised both an earnings component and a “goodwill” component personal to the husband;

   ·

   That even before the 10 per cent adjustment in the wife’s favour,

   
   

   his Honour’s s 79(4) contribution findings meant that the wife received $740,000 more than the husband;

   ·That under the orders the wife would receive 11 investment properties which provided her with an annual gross income of $182,000;

   ·The wife’s capacity to earn an income as a health science professional in the order of $84,000 and her expressed intention to return to the workforce;

   ·The husband’s primary care of the parties’ son; and

   ·The level of spousal support and child support to be provided by the husband in accordance with his Honour’s orders together with the husband’s commitment to continuing to pay non-periodic expenses for the children.

4. Further, the ground contends that the failure to give proper regard to the above matters, together with his Honour’s asserted erroneous conclusion that the husband had failed to make proper disclosure of his interest in the MMM Trust and his asserted erroneous findings in relation to “add backs”, renders

   
   

   his Honour’s findings in relation to the s 75(2) matters an error in the exercise of his discretion.

5. The last two matters are the subject of Grounds 2, 6 and 7. We have already found Ground 2 to be established.

6. Further, at [238] his Honour directly took account of “the husband’s interests (of an indeterminate value) as a discretionary beneficiary of the [MMM] Trust”.  The evidence of the husband on the issue of his interest in the trust, to which we have referred when discussing Ground 2, could not entitle

   
   

   his Honour to rely on that interest as having any value.  To the extent that

   
   

   his Honour took it into account in determining the further adjustment pursuant to s 75(2), he was in error.

7. We find these grounds to be made out.

Ground 14 – s 79(2) finding

1. This challenge asserts that his Honour erred in finding that the proposed orders were just and equitable based on his findings in relation to s 79(4).

2. As we have indicated, the factual basis for many of his Honour’s findings and on which he relied in coming to his determination were erroneous and his conclusions based on them are unsafe. 

3. It is not necessary to consider this ground further.

Grounds 15 to 17 – Spouse Maintenance

1. After determining the property orders to be made, his Honour found that the effect of his orders was to provide the wife with assets and funds, including superannuation, amounting to $5,352,159 ($3,144,269 net) of which approximately $2,000,000 was in the form of cash [261]. His Honour then turned to consider the question of spouse maintenance at [263].

2. In considering the wife’s ability to support herself, his Honour noted that she was not presently working as a health science professional although with retraining hoped to re-enter that profession. The trial judge found that the wife was currently “unable to support herself at an adequate level through the property, income and financial resources available to her” [278].

3. As to the husband’s capacity to provide financial support to the wife,

   
   

   his Honour found, relying on the husband’s financial document, that his average weekly income was $9,614 [280] and his average weekly expenditure was $10,247 [281].

4. His Honour then made reference to the fees generated by the husband’s practice company Masoud Pty Ltd and said:

   283. Based on the questions asked and the husband’s responses, the Court finds that the fees generated through that entity were:

   a)$1.3 million in the 2009/10 financial year

   b)$1.5 million in the 2010/11 financial year and

   c)$750,000 for the first half of the 2012/13 financial year.

5. His Honour moved to consider the submission that the husband had increased the size of his consulting rooms in the previous twelve months and expected to accommodate more clients in the expanded rooms.  His Honour said:

   284. … The husband confirmed in his oral evidence that the expansion of his practice rooms was completed in March 2013.  The Court agrees with the wife’s submission that the expansion suggests that the husband’s income is likely to increase in the future.

   285. Based on all of the above, the Court finds that the husband is reasonably able to maintain the wife based on the evidence of his currently high income, together with the finding that the income generated through his practice is secure and likely to increase in the future.

6. In considering the amount of spouse maintenance to be paid, his Honour calculated that the wife’s reasonable needs for support amounted to $1,000 per week [293] and ordered that the husband pay that amount to her for a period of two years.

7. The challenge to this order is that in coming to the conclusion that the wife was unable to support herself adequately, the trial judge had no regard to the number and value of the investment properties to be retained by the wife as a result of the property orders and the income and capital available to her from them, the cash payment to be received by her from the husband pursuant to the orders (some $750,000) and the ability of the wife to support herself from her own endeavours.

8. It was further contended that although his Honour found that the amount of $1,000 per week was necessary for the wife’s proper support, he gave no reasons for that finding. He also did not determine properly the husband’s capacity to pay the sum ordered especially considering the property settlement orders and any child support to be ordered.

9. As we have said, his Honour took into account that it would only be on

   
   

   re-training that the wife would be able to exercise her full earning potential and found that she would not be in a position to do that for two years. 

10. As to her ability to support herself from the funds to be received as a consequence of his orders, his Honour referred to the well-known authority of Mitchell & Mitchell (1995) FLC 92-601 at 81,995 in which it was said that an applicant was not required to “use up all of her assets and capital in order to satisfy the requirement that she is unable to support herself “adequately”…”. His Honour found:

    277. The Court notes that the wife has a capacity to earn income from her assets or part thereof. That has been taken into account in the determination of her application for maintenance and what order, if any, would be proper.

11. His Honour further concluded that the wife’s care of two children, the youngest of whom was then aged 11 “…is a factor limiting her ability to return to full-time work” [278].

12. While we may have come to a different conclusion regarding his Honour’s finding as to the wife’s ability to work and the extent to which it was impeded by the necessity of caring for an 11 year old, as opposed to her need for retraining, such a finding was open to his Honour on the evidence.

13. However, his Honour’s reasons do not explain how or to what extent he took “into account” the wife’s receipt of income from the assets and income to be received by her.  Given the value of the cash payment and the investment properties she was to receive under the orders, his Honour was obliged to give some indication of how or in what way this income was taken into account. 

14. His Honour set out the wife’s claimed weekly personal expenses of $1,949 and said:

    292. … In the circumstances of this case, the Court is of the view that an order for maintenance intended to satisfy the claims made by the wife as to her personal expenditure would not be proper.

    293. That said, having regard to the wife’s reasonable needs, her capacity to support herself and the husband’s capacity to maintain her, the Court finds that an order in the sum of $1,000 per week for a limited period would be proper…

15. His Honour’s reasons do not establish how his Honour came to that finding. 

16. It was also asserted that his Honour’s order took no account of the husband’s capacity to pay the ordered amount.

17. It must be observed here, repeating what has been said earlier, that the fees to which his Honour referred at [283] were agreed to be gross fees generated by the practice without the deduction of costs and expenses associated with the running of the practice.  Further, given his Honour’s earlier findings that the husband’s annual income was in the order of $570,000 at [236], the relevance of the above quoted figures is unclear.  It is significant too that his Honour’s apparent acceptance of the husband’s asserted weekly income equates generally with the finding of an annual income of $570,000.

18. However, on his Honour’s own findings, the husband’s asserted weekly expenses exceed his weekly income, thus, it must be that the basis on which the trial judge found that the husband could meet the ordered spouse maintenance was by reference to the gross fees earned by the practice and by some future increase in fees by reason of the expanded rooms.  We accept that his Honour’s finding that the husband had the ability to meet the ordered payment was unsupported by the evidence and amounted to an error.

19. Overarching these arguments is the submission, which we accept, that

    
    

    his Honour did not first determine the issue of the child support to be paid by the husband in circumstances where each party sought a departure from the assessed child support. As a result of this, the challenge in relation to spousal maintenance must be upheld.

20. It was contended by the wife that his Honour’s failure to first determine the issue of child support was not fatal to his determination of spousal maintenance because the husband’s financial capacity was such that he was able to pay the sum determined notwithstanding any child support assessment.  We do not accept this argument.  His Honour made findings about the husband’s income for the preceding year as being about $570,000 and apparently accepted the husband’s evidence as to his weekly income.  Any other basis for finding that the husband had a further capacity is not established by the evidence and

    
    

    his Honour’s reference to gross fees earned by the husband’s practice company cannot be equated to further capacity to pay, nor can some unspecified future increase in fees.

21. Clearly, the husband’s ability to pay spouse maintenance could only be considered once the effect of any ordered departure from the assessed child support was determined.  His Honour did not take that course, and for that reason alone his determination is flawed. These grounds are made out.

Grounds 18 to 20 – Child Support Orders

1. The husband requires leave to appeal against these orders. In Wild v Ballard (1997) FLC 92-771; 22 Fam LR 291, the Full Court said at FLC 84,448 (citations omitted):

   As already indicated s 102 of the Child Support (Assessment) Act provides that an appeal from a single judge of the court exercising jurisdiction under that Act lies only with the leave of the Full Court. In Gilmour and Gilmour the Full Court (Ellis, Finn and Maxwell JJ) endorsed suggestions made in both  Bassingthwaite v Leane and Best and Best that leave applications under this legislation ought be approached less restrictively than were this an application from an interlocutory order. The court said that if a party’s substantive rights have been significantly affected by an error at first instance, then it would be appropriate to grant leave to appeal under the section. It is appropriate then to examine whether the appellant has had his substantive rights significantly affected by any error of principle made by the trial judge.

2. See also Hendy v Deputy Child Support Registrar and Webb (2001) 164 FLR 236.

3. We will thus approach our task of determining whether to grant leave bearing in mind that we should not be too restrictive if we perceive that there has been any error of principle which has affected the husband’s rights.

4. Grounds 18 and 19 assert that his Honour failed to determine the children’s reasonable needs, failed to take into account the parties’ capacity to contribute towards those reasonable needs, failed to take into account the husband’s capacity to pay having regard to payments already being made and the effect of any s 79 order and failed to give reasons for his ultimate conclusions.

5. Ground 20 asserts that his Honour erred in noting an undertaking by the husband when in fact no such undertaking had been proffered.

6. The husband conceded before his Honour that he would meet various

   
   

   non-periodical payments in relation to the two younger children as well as meeting the needs of the older child who would be living with him.

7. His Honour commenced his discussion of the issue at [296] by observing that each party contended for a departure from the child support assessment but each proposed a different figure, the husband asserting that he pay “not more than the amount of $220 per week for the children” [298] and the wife asserting that the husband should pay $1,200 per week each for the two children then living with her [300].

8. After setting out the legal framework for determining whether there should be an order for departure from the assessed child support, his Honour concluded that there were circumstances which justified a departure [316], found it was just and equitable to make such an order [338] and found that it was “otherwise proper” to do so (at [342]).

9. His Honour concluded:

   343. The Court has considered the needs of the children as expressed in Part N of the wife’s Financial Statement and considers that a departure order should be made in the sum of $650 per child per week. This result was arrived at having regard to all of the matters discussed above but in particular:

   a)the claimed needs of the children, some of which seem to be excessive

   b)the agreement of the husband to meet other expenses in relation to the children and

   c)the wife’s capacity in some measure to contribute to their support.

   344.The above figure has been assessed on the basis that the husband has undertaken to continue paying the additional expenses that he currently pays for the children. These expenses are those associated with all three of the children’s schooling, health insurance, other health and medical needs and extracurricular activities. A notation to this effect will be made in the orders.

10. It was agreed between the parties on appeal that no such undertaking was given by the husband and his Honour was wrong to find it so.

11. Senior counsel for the husband argued that this accepted error has to be viewed in light of the husband’s proposal in the case before his Honour, namely that there be a periodic payment of not more than $220 per week for each child and for orders that provided for the payment of the non-periodic payments which were the subject of the incorrectly termed undertaking.  It was contended that the husband’s proposal was, in terms, a “package”; that is, the periodical and

    
    

    non-periodical payments were to be considered together.  By hiving off the non-periodical payments and by assessing a greater sum for periodical payments, his Honour erred in failing to properly consider the capacity of the husband to make the payments. That is, by finding there was an undertaking, his Honour misdirected his consideration only to the provision of periodical payments without considering the effect that a greater than proposed periodical payment would have on the husband’s capacity to meet the non-periodical payments.

12. Although there was some discussion in the husband’s written submissions on the appeal as to whether his Honour’s notation of an undertaking was, of itself, amenable to an appeal, we accept that his Honour’s mistaken understanding that there was an undertaking caused him to focus solely on the periodic maintenance without properly considering the effect of any orders for non-periodic payments on the husband’s financial capacity.

13. Ground 18 argues that in coming to the determination of what constituted the children's reasonable needs, his Honour failed to give reasons.  We agree.  It is the duty of a judge to provide sufficient reasons to enable an understanding of the reasoning process to the final conclusion (see Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247). His Honour’s reasons do not permit that understanding and to this extent his Honour erred. See also Bennett & Bennett (1991) FLC 92-191.

14. Ground 19 contends that his Honour failed to have regard to the capacity of the parties to meet the needs of the children and failed to have regard to the husband’s capacity to pay anything other than that proposed by him, taking into account the effect of the property settlement orders made. Given that

    
    

    his Honour had before this determined that the husband had the capacity to pay $1,000 per week to the wife for her support against a finding that the husband’s expenses outstrip his income, his Honour was obliged to consider whether in light of those findings, there was any remaining capacity in the husband to make the ordered payments. He did not do so. The ground further contends that his Honour made no assessment of the proportion in which the parties should contribute to the support of the children.  Although his Honour notes at [343] that the wife has a capacity to contribute to the children’s support “in some measure” he does not assess or otherwise articulate to what extent or in what proportion that support could be provided. 

15. His Honour set out in some detail the relevant provisions of s 117 of the Child Support (Assessment) Act 1989 (Cth), and referred to the three-step process required when considering a departure application (Gyselman and Gyselman (1992) FLC 92-279). He found, correctly we opine, that a ground for departure from administrative assessment had been established. However we agree with senior counsel for the husband that when considering the ‘second stage’ requiring the application of the facts to s 117(4), his Honour’s findings fell well short of meeting the various matters to which the court must have regard. In part, although not entirely, that was due to his Honour’s misunderstanding about the husband’s “undertaking” as described in [177] to [179] of these reasons. In particular he did not examine the capacity of each of the parties to contribute to the support of the children, particularly in light of his determination under s 79 and payment of spousal maintenance.

16. In respect of both grounds, the trial judge’s determination was unsupported by reasons to demonstrate the basis on which he reached his findings. We are therefore satisfied that there has been an error of principle affecting the husband’s rights and that leave to appeal should be granted. The challenges contained in Grounds 18 and 19 are made out and his findings are unable to be sustained.

17. These grounds are made out.

18. The appeal will thus succeed and the matter will be remitted to be re-heard.

Costs

1. At the conclusion of the hearing we took submissions on the issue of costs to save the parties the time, trouble and expense of making those submissions once the appeal has been determined.

2. In the event that the appeal succeeded the husband sought either costs against the wife or a costs certificate for both the appeal and the rehearing.  Senior counsel for the wife also sought certificates.

3. This is not a matter in which we would be inclined to make a costs order against the wife.  The appeal has succeeded because of errors of law made by the trial judge and to which it could not be said that the wife contributed in any way.

4. However, there is nothing in this matter which persuades us that we should depart from the usual principle as to costs in this Court, namely that each party should pay his or her own costs.  We will therefore make no order as to costs.

I certify that the preceding one hundred and eighty nine (189) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Bryant CJ, Ainslie-Wallace and Le Poer Trench JJ) delivered on 24 February 2016.

Associate: 

Date:  24 February 2016