MH & MZ
[2005] FamCA 287
•27 April 2005
[2005] FamCA 287
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT BRISBANE Appeal Nos NA33 & NA57L of 2004
File No BRF6235 of 2001
BETWEEN:
MH
Appellant Wife
- and -
MZ
Respondent Husband
REASONS FOR JUDGMENT
CORAM: Kay, May & Boland JJ
DATE OF HEARING: 14 February 2005
DATE OF JUDGMENT: 27 April 2005
APPEARANCES: Mr McGregor of Counsel, instructed by Barry & Nilsson, Lawyers, GPO Box 1451, Brisbane, Qld, 4001, appeared on behalf of the Appellant Wife.
Mr North of Senior Counsel, instructed by Murdoch Lawyers, PO Box 12004, George Street, Brisbane, Qld 4001, appeared on behalf of the Respondent Husband.
MH & MZ
NA33 & NA57L of 2004
Coram: Kay, May and Boland JJ
Date of Hearing: 14 February 2005
Date of Judgment: 27 April 2005
CATCHWORDS PROPERTY – asset pool of $1.2 million - contributions assessed at 75:25 outside range - at its highest contributions ought be assessed at 67.5:32.5 in favour of the husband - trial Judge erred in penalising the wife for accepting a payment arising out of an informal property settlement that was otherwise held to be unwisely entered into under inappropriate pressure– confusion between s75(2) considerations and lump sum child support – whether the Full Court re-exercises discretion or the matter is remitted for rehearing is subject to further submissions to the Court (Allesch v Maunz (2000) 203 CLR 172; (2000) FLC 93-033; (2000) 26 Fam LR 237) – decision on costs reserved subject to written submissions.
CHILD SUPPORT - wife sought orders that the husband be assessed to pay monthly child support for each of two children at $400 per child and that such sum be paid as a lump sum in the amount of $87,200 - $40,000 lump sum allowed as part of the property proceedings and a nil assessment made - nil assessment of child support by the trial Judge was an unjust and inequitable determination of the level of financial support that ought to be paid by the husband for the children – remitted for rehearing – decision on costs reserved subject to written submissions.
This is the wife’s appeal against an order made by Carmody J on 25 March 2004 in proceedings for alteration of property interests. The trial Judge found the parties’ net assets of $1,183,286 should be divided as to 66.5 per cent to the husband and 33.5 per cent to the wife. To implement his findings the trial Judge ordered the husband pay to the wife within 60 days $254,222 plus a further sum for some unpaid costs orders. His Honour included in that payment $40,000 for lump sum child support. In these proceedings the wife now seeks to have the property award increased by payment to her of an additional sum of $124,000 such that she receives a total entitlement of $478,420 or 40 per cent of the asset pool.
The wife also seeks leave to appeal against orders made at the same hearing relating to child support issues. If permission is granted she seeks to appeal those orders which provided that $40,000 of the lump sum of $254,223 ordered to be paid was to be credited against any future liability of the husband for child support in respect to the children of the marriage and that otherwise her application for a departure order be dismissed. In the event that the appeal is allowed she seeks orders that the father be assessed to pay monthly child support for each of two children at $400 per child and that such sum be paid as a lump sum in the amount of $87,200.
Background
When judgment was delivered in this matter the wife was 42 years of age and the husband 50. They had commenced cohabitation in mid-1990, married in 1991 and separated in 2000. The marriage was dissolved by a decree which became absolute in 2002. They have two children C born 1992 and D born 1997. As part of the orders made in the proceedings that are not the subject of appeal those children reside with the wife and have substantial contact with their father on about one-third of the nights each year.
At the time the parties commenced their relationship the husband was a divorcee who had two children E and F who were aged 24 and 22 at the time of the judgment in these proceedings. He owned several pieces of real estate and was the manager of an electronics component business. The wife was then 30 years of age, working part-time and was part-way through studying an Arts degree.
After the separation the parties negotiated an agreement to settle their respective property claims. The wife accepted $120,000 which was paid to her in July 2001. Although the parties sought to have their agreement reflected in court orders, the Magistrate at Southport Magistrates Court refused to make such orders on the basis that the Magistrate was not satisfied that the settlement terms were just and equitable. The application for consent orders was formally dismissed.
The wife commenced property proceedings in the Family Court of Australia in May 2002. Carmody J made a finding unchallenged for the purpose of this appeal:
“146.I find that the financial agreement was unwisely (and probably against her better judgment) entered into by [MH] under considerable pressure from [MZ] for the sake of a quick rather than just result. The terms of settlement were not fair and reasonable by virtue of a combination of factors, including the undervaluation of the property, inadequate recognition of the wife's overall contribution, deduction of ‘disposal costs’, the overly generous provision for the husband's older children, and the inadequate provision for the two children of the marriage.
147.It would be contrary to policy and unconscionable to hold her to the strict terms of her agreement.”
At the commencement of the relationship the husband owned
· a property at Southport (‘Southport 1’),
· a rental property at Jindalee,
· an interest in a block of units at West End, and
· was registered as a tenant in common having an interest with his sister in a property at Caloundra.
The trial Judge calculated (incorrectly) that the husband’s net worth at the commencement of the relationship was slightly more than $400,000 if the Caloundra property was included and about $320,000 if it was not. The wife’s net worth was said to be about $46,500, including an equity in a property in New Berrima, New South Wales.
In the course of the marriage the New Berrima property was sold and the net proceeds of $40,000 were applied to reduce the mortgage on the block of units at West End.
In August 1995 the husband purchased a home (‘Southport 2’) adjoining Southport 1 in his own name. He sold the property at Jindalee in February 1997 for $148,000 and in November 1998 purchased another property at Southport (‘Southport 3’) for $115,000.
From late 1991 until November 1997 the husband was not in employment but spent time renovating his various properties. He returned to employment full-time in November 1997. That employment gradually reduced to three days a week before it terminated in March 2000.
The wife obtained casual and then full time employment after cohabitation, earning $25,000 a year from which she contributed $150 per week towards the family’s joint living expenses, whilst the husband used his money to meet mortgage commitments and buy renovation material. Before C’s birth she changed her employment and was earning $30,000 a year. She had managed to save $20,000 through work and financial gifts from her family.
At other times during the course of the marriage the wife was in employment. In 1995 she worked three afternoons a week in a bakery in Caloundra. In 1996 she worked as a merchandiser for six months and as a sales person for another three months. She delivered a local weekly newspaper on the Gold Coast for about three years. In February 2000 she commenced work as a court reporter, working about three days a week and was in that employment at the time of the trial.
In order to pay the wife the agreed settlement of $120,000, the West End property was sold in June 2001. The wife invested her share of the monies in a town house at Labrador that she purchased for $115,000. From time to time she borrowed against that property so that by the date of the trial, whilst its capital value had grown to $190,000, it had a mortgage of $80,000.
The trial Judge found that the existing assets at the date of trial were
List of Assets Current Values
Southport 1 $ 300,000.00
Southport 2 $ 305,000.00
Southport 3 $ 450,000.00
Labrador $ 190,000.00
Mazda 323 $ 6,000.00
Balance of bus proceeds $ 4,000.00
VW Transporter $ 20,000.00
Toyota Corolla $ 15,000.00
Coles Myer shares $ 4,500.00
Boat $ 2,000.00
Heritage accounts $ 2,706.00
Wife's furniture $ 8,000.00
Husband's furniture and tools $ 10,000.00
Computer $ 1,200.00
$1,318,406.00
Liabilities:
Mortgages:
Southport 2 $ 20,000.00
Southport 3 $102,000.00
Labrador $ 80,000.00 $ 202,000.00
Balance: $1,116,406.00
In addition he also concluded that there should be added back into the pool of assets $6,880 that the husband had paid in legal expenses and $60,000 he had received from an insurance payout from a fire at the Southport 3 property. His Honour did not include in the list of assets the Caloundra property owned by the husband and his sister as tenants in common.
When assessing the parties’ contributions to the reconstituted pool of property that had a total value of $1,183,286 his Honour said:
“233.There is considerable divergence of view between the parties as to the level and quality of their respective contributions. However, I accept that [MH] did make significant contributions to the welfare of the family both as homemaker and parent, and considerable non-financial contribution to the acquisition, conservation and improvement of the rental properties. In my assessment, the husband substantially understates the nature and extent of [MH]'s overall contribution.
…
236.The parties lived together for eleven years in a long term, committed and stable family relationship. They pooled their earnings from all available sources. This was clearly done with a view to meeting all expenses and outgoings arising from living together as a family. The individual contributions of each party were not earmarked to any particular category of expenses. The pool of earnings was available for servicing investment related debts, such as mortgages, and maintaining and improving the rental properties, as well as sundry other domestic and general living expenses.
237.The [Southport 3] property was bought and, with the others, was maintained and improved in the context of and for the purposes of the family relationship.
238.All contributions, financial and otherwise, to the accumulation of wealth and the making of their home were made on the same basis.
239.In this situation the husband's claim that, after the marriage had failed, all the rental properties which were financed or improved or maintained in part at least through pooled funds and efforts during the marriage is his sole property to the exclusion of the wife is untenable and plainly unjust. There is a need to take account of a practical equation between direct contributions in money or effort and indirect contributions in other forms such as support, homemaking and family care.
240.In circumstances where parties have cohabited for as long as this couple, and have joined their financial resources and their efforts, including going without where necessary and foregoing a higher lifestyle, to build up family assets for their mutual security and benefit, there is much to be said for the view that they should share the beneficial ownership equally subject to adjustment to avoid any injustice that would result if account was not taken of the disparity between the quality and value of their overall contributions.
241.It is as inappropriate as it is impossible to conduct an accounting or micro- audit exercise in property proceedings. The discretion to settle property is a wide and flexible one, to be exercised in a principled and reasonable fashion. It is guided by the broad principles that, so far as practicable, orders should be made that finally determine the financial relationship between the parties and avoid future litigation, and the outcome should be a just and equitable one in all the circumstances. Only an approximate estimate of the financial contributions of each party can be made. The non-financial elements of the overall contributions are necessarily a matter of judgment rather than computation.
242.The wife has solely supported herself since separation. She also financially maintained the children without assistance for nearly 12 months pending the cash settlement received in July 2001. Irregular child support payments at the rate of $800.00 per month have been made only since October 2002. Accordingly, there has been a discernible imbalance in child-care and accommodation responsibilities since separation.
243.The husband has had the sole use and occupation of the former matrimonial home and management of the rental properties since separation. However, he has also maintained and improved them, without any assistance from the wife, out of his limited rental receipts and by occasional resort to capital funds.
244.However, overall, I do not consider that it is possible to treat the respective financial contributions of the parties as being approximately equal. The difference between the husband and the wife's initial contributions cannot be seen as insignificant or inconsequential. The husband's contribution at commencement substantially exceeded the wife's and that discrepancy has not been negatived or completely eroded over time by the worth of the wife's contribution in other areas.
245.[MZ] is entitled to be credited with the much greater financial and other contributions he made to acquiring, improving and maintaining property both before and after the period during which the parties were living together, subject to an offsetting adjustment to reflect the economic benefit he derived from the use and occupation and economic gain derived from those properties in the same period.
246.In my assessment, the contribution-based entitlement should be 75:25 in the husband's favour which in monetary terms translates to $887,464.50: $295,821.50.”
His Honour then turned to examine s 75(2) factors making the following findings:
“254. The real disparity in earning capacity between these parties is hard to gauge. However, the husband clearly has a proportionately greater potential for making future capital gains in the property market than the wife.
255.At the time of separation the children resided with both parents on a more or less equal basis. The situation has since changed. [MH] has had the primary care and responsibility for the two children for more than three years.
256.She will continue to shoulder the major burden of child-care and support for the next five years in the case of [C] and for more than ten years so far as [D] is concerned.
257.However, her conduct in accepting the payment and leading the husband to act to his detriment on the assumption that their property and financial ties had been finalised by the 2000 settlement agreement should be taken into account in a general way under s 75(2)(o) bearing in mind the size and value of pool at the time of agreement, the amount paid, the economic disadvantage to the husband in having to sell income-producing property, and paying all mortgages and other outlays to conserve properties without assistance from the wife or the rents he would otherwise have received from the West End property.”
Whilst still under the general heading of s 75(2) factors, his Honour turned to consider issues relating to the child support. His Honour noted:
“258.Section 79(4)(g) of the Family Law Act requires me to take into account any child support that [MZ] has provided, is to provide or might be liable to provide in the future.
259.The Child Support Agency has assessed [MZ]'s liability to pay child support as nil in view of his low declared income. He initially refused to pay an amount higher than the assessment. A review of the Agency's decision was rejected on the ground that it was too complex.”
He then said:
“268.There is no reason in principle why adequate provision cannot be made to meet child support out of capital via a s 79 order where, as here, the husband has less than adequate income to provide a proper level of financial support for his children under the administrative formula of the child support legislation. Being un (or under) employed and without taxable income is not of itself necessarily an answer by a parent trying to avoid the obligation to adequately support his children. Even in cases where there is no income or earning capacity, a parent may be required to contribute to the maintenance or future support of his/her children where he/she has property or financial resources which are or reasonably ought to be available for that purpose[1].
…
276.I am satisfied that grounds for departure from the administrative assessment exist and, in the special circumstances of this case, the application in relation to the children of the provisions of the Child Support (Assessment) Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the husband for the children because of his earning capacity, property and financial resources.”
[1] Scott -and- Scott (1994) FLC 92-457.
He went on to say:
“282.Accordingly, I propose that the sum of $40,000.00 be added to the husband's liability to the wife pursuant to the property settlement orders and that that sum be credited against any administrative assessment of child support which may be levied in the future against the husband.”
An issue then arose as to clarifying whether or not his Honour intended that $40,000 to be in addition to the sum ordered to be paid under s 79 of the Family Law Act. An application was made to adjust the orders under the slip rule and his Honour, in a judgment published 14 May 2004 said:
“8.A plain reading of that statement tends to suggest that I intended the sum of $40,000.00 to be added to the husband's liability under the property settlement orders. Regrettably, the language I used, especially the word "orders", was apt to mislead. It did not properly reflect my thinking on the subject of child support. I was actually trying to identify what portion of the sum to be transferred by the husband to the wife under the property settlement orders was to be identified as lump sum provision for child support. That is to say, I wanted to convey that a specific allowance of $40,000.00 for child support would be incorporated in, not tacked onto, the property orders. Thus, the $394,429.00 fixed in paragraph 288 as the wife's overall entitlement included a figure of $40,000.00 in respect of child support. This was not as clear as it should have been and I regret the confusion my infelicity caused.”
After rejecting some submissions by the husband that he saw himself as having a continuing duty to his adult children from a previous relationship, the trial Judge concluded that an adjustment of 8.5 per cent needed to be made in the wife’s favour to achieve a just and equitable result. His Honour then calculated that the wife’s entitlement would be about one-third of the value of the net assets and it could be met as follows:
“289. The wife has:
Labrador ($190,000 less $80.000) $ 110,000.00
Corolla $ 15,000.00
Coles-Myer shares $ 4,500.00
Heritage accounts $ 2,706.00
Furniture $ 8,000.00
Cash payment $ 254,223.00
$ 394,429.00”
The appeal and the application for leave to appeal
The first ground of appeal concerned itself with the trial Judge’s exclusion of the Caloundra property from the pool of assets to be considered relevant for the purposes of division between the parties. His Honour’s findings on this matter were as follows:
“175.This is a house built by the husband's parents on retirement. The husband claims that he has never had an equitable interest in this property which he and his sister hold on his parent's behalf to keep as a…family holiday home. [MH] contends that the husband's parents transferred the property to reduce their asset level so they could qualify for the aged pension on retirement. She says the husband has always considered this property to be his own and the couple lived in the house from September 1993 until moving to the Gold Coast in December 1996.
176.The husband's father swore an affidavit deposing that he transferred the property to his son and daughter…as tenants-in-common in trust to use and look after the property ‘for our future needs’.
177.There is insufficient evidence for me to find that the husband has a beneficial interest in the Caloundra property. His Form 17 treats it as a liability ‘repayable’ to his parents, although Exhibit 6 refers [MZ] as owner without any mention of a trust. I decline to draw any adverse inference from the husband's failure to call his sister. Either party could have subpoenaed her. The matter was no so fully investigated that I could, without speculation, infer that she has relevant information to give, or that she was presently available, or was withheld because she could not give evidence confirming the husband's case.”
The husband’s father swore a short affidavit that was relied upon in the proceedings. He deposed that he and his wife had transferred the property to their son and daughter in September 1986. He said:
“This transfer was in good faith and in trust that he and his sister use and look after this property so that it can be utilised to assist for our future needs if needed.
…
We are asking our son to return this property to us, so that we are assured that it will have the full benefit for us, that it was intended for.”
Whilst the father was not required for cross-examination it appeared to be common ground between counsel at the trial that neither could rely on the failure to cross-examine as being an admission that the evidence was being accepted. There was indeed some compelling evidence that the husband never considered himself bound by any concept of holding the property on trust for his father. Solicitors acting on his behalf had written a letter to his sister in May 1994 indicating:
“There have been unhappy differences between you both for a number of years regarding your involvement in this property…There have been numerous incidents of unpleasantness leading up to this particular happening.”
The letter then went on to propose as a solution to an impasse that the property be sold and the proceeds divided equally between the husband and his sister or that either purchase the other’s interest in the property. The letter acknowledged:
“[MZ]’s parents and your family have been in the habit of using the property for holiday periods. If [MZ] purchased the property he would [be] only too pleased to keep the upstairs section of the house available for use by your parents.”
It was also evident that for several years the husband and the wife lived in the property.
Whilst there must be serious doubts about the finding that there was “insufficient evidence” for the trial Judge to find the husband had a beneficial interest in the Caloundra property, we think that not much ultimately turns on the issue. If the pool of assets is all the greater because of the existence of the Caloundra property, then the husband’s contribution to that pool is all the greater as the property was owned by him prior to the commencement of the relationship.
It seems on the available evidence that the more appropriate approach would have been to quarantine the property from the pool of assets divisible between the parties, given the lack of contribution by the wife and the circumstances said to attach to the gift to the husband, namely an obligation to make provision for his parents should they require it. The existence of an equity in a property provided to the husband by his parents of some $80,000 which was subject to the contingency of having to be provided to the husband’s parents should they need it, was a matter that ought to have properly been taken into account when determining the adjustments that could be made under s 75(2).
Whilst we consider there is some substance in the ground of appeal, the effect of such a finding will depend upon our dealing with other grounds subsequently.
The next ground sought to be relied upon was that the trial Judge’s discretion miscarried and that the amount awarded to the wife by way of contribution was manifestly inadequate, inequitable and plainly wrong.
The key finding is that the contributions to the pool of assets found to be $1,183,286 should be assessed as 75 per cent in favour of the husband and 25 per cent in favour of the wife. This can be expressed in a number of ways. It can be said that the husband has contributed three times as much as has the wife or that his additional contributions should see him receive $590,000 more than that of the wife.
As already mentioned the key finding was that the husband’s initial capital contribution, which consisted of several pieces of real estate, ignoring the Caloundra property, was said to exceed that of the wife by $273,500. However that finding was itself the matter of challenge before us.
The offending passages are said to occur in paragraphs 182-186 of the reasons for judgment which read as follows:
“182.When the parties first met, [MZ] owned or had an interest in four pieces of real estate. He was the registered proprietor of a house at [Southport 1] worth $127,500.00 and a rental property at…Jindalee valued at $130,000.00. He also held a joint beneficial interest in a block of units at…West End worth $185,000.00 and held the registered legal title to a property at…Caloundra as tenant in common with his sister.
183.At that time the [West End] property was worth $275,000.00 and the Caloundra property $165,000.00.
184.Taking into account bank mortgages of $20,000.00 on [the Caloundra property] and $60,000.00 on [Southport 1] and other property including a boat, motor vehicle and $12,000.00 cash at the bank, plus tax credits of just over $20,000.00, [MZ]'s net worth at the commencement of the relationship was slightly more than $400,000.00 if the Caloundra property is included, and about $320,000.00 if it is not. [MZ] put his capital contribution at the beginning of the relationship at $394,000.00.
185.The wife originally asserted that the husband's initial net contribution was $282,500.00.
186.[MS] owned a property at…New Berrima, New South Wales she paid $100,000.00 for, a car, bank funds and a trailer. However, her net worth was about $46,500.00 or slightly more than 12.5 per cent of the total.”
There is confusion between paragraphs 182 and 183 as to the value of the husband’s interest in the [West End] property. Two valuations are placed on that property. In his written summary of argument counsel on behalf of the wife says as follows:
“His Honour ought to have found the husband’s initial contributions to be
Southport 1 $127,500
Less mortgage ($60,000)
Jindalee $130,000
Less mortgage ($20,000)
West End (50%) $137,500
Less mortgage (50%) $90,000)
Caloundra (50%) $82,500
Cash $12,000
Tax credits $20,000_
$339,500Excluding Caloundra, which his Honour did when assessing the parties’ respective initial contributions, the husband’s initial contribution was $257,000.
The wife’s initial financial contribution was $46,500.”
It is submitted that the wife’s initial contributions should thus have been assessed at 15.3 per cent rather than 12.5 per cent as found by the trial Judge.
Counsel for the respondent accepts that the calculation is correct but submits that such a mistake ought not have been of any significance in the calculation of the overall contribution of the parties.
In the course of this relationship the parties’ asset pool excluding the Caloundra property has grown from $303,500 up to $1,183,286.
Ultimately the final contribution assessment is very much a matter of the subjective opinion of the trial Judge. The authorities on appellate interference speak of the generous ambit within which a reasonable disagreement is possible. See Norbis and Norbis (1986) 161 CLR 513.
His Honour concluded that the difference between the husband’s and wife’s initial contributions could not be seen as insignificant or inconsequential and that the husband was entitled to be credited with much greater financial and other contributions made to acquiring, improving and maintaining the property before and after the period during which the parties were living together.
The Full Court in Pierce and Pierce (1999) FLC 92-844; (1998) 24 Fam LR 377 when considering an appeal in which the husband’s initial contributions towards the acquisition of the parties’ pool of assets in a ten year marriage had been evaluated at 55 per cent of the pool said:
“28.…it is…a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife.”
The Full Court concluded that at the date of the marriage the husband had assets worth $226,000 and that at the date of the trial the asset pool was $320,000. In those circumstances the husband’s assets clearly represented a very significant contribution towards the asset pool. Their Honours concluded that in weighing the initial contributions of the husband, his post-separation contributions, caring for the children, and all other relevant contributions over a ten year marriage those contributions should be measured as to 70 per cent in favour of the husband and 30 per cent in favour of the wife.
For an appellate court to interfere in the assessment in this case we need to be satisfied that the assessment is plainly wrong. The Southport 1 property at had risen from $127,500 at the commencement of the relationship to $300,000 at the date of the trial. The balance of the real estate presently held by the parties had been acquired in the course of their marriage or, in the case of the wife’s unit, after separation. Southport 3 was purchased in 1998 for $115,000 and was now said to be worth $450,000. The Southport 2 property was purchased in 1995 for $121,000 and was now said to be worth $305,000. A very significant part of the parties’ wealth as at the date of the hearing could be seen to be attributed to the capital growth of the properties rather than the physical effort that each of the parties had put into improving them. The trial Judge made no findings about the value of the work done to the properties by the husband.
Although the judgment identifies the contributions that each of the parties claim they made, there are few findings on the actual contribution. The lack of such findings makes it all the more difficult for us to determine whether the ultimate assessment is within or outside the generous ambit of discretion. Whilst we are conscious of the difficulty that this lack of findings creates, our overall impression of the matters described by the trial Judge would seem to indicate that an assessment giving the husband credit for 50 per cent more of the total pool than the wife, coupled with his Honour’s errors in calculating the initial contributions, is beyond that generous ambit of discretion.
Given the trial Judge’s ultimate findings that, in the course of a relationship that spanned more than a decade and involved the raising of two children, the wife made significant contributions to the welfare of the family both as a homemaker and parent and considerable non-financial contribution to the acquisition, conservation and improvement of the rental properties, together with his Honour’s findings as to the parties having joined their financial resources and their efforts, including going without where necessary and foregoing a higher lifestyle to build up family assets for mutual security and benefit, and having regard to the unchallenged evidence of the wife as to the periods in which she was primary breadwinner for the family, we conclude that an assessment of the relative contributions of the parties under ss 79(4)(a), (b) and (c) to the pool of assets available for division between them has been inappropriately assessed to the point where it can be said the finding is unjust. In applying the matters referred to in Pierce by weighing the respective contributions of the parties, we would conclude that an appropriate assessment of the contribution ought not have exceeded 67.5 per cent on behalf of the husband. Such an assessment ought adequately recognize that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bring into consideration the myriad of other contributions each made in the course of their relationship.
As already indicated, the trial Judge made an order in favour of the wife concerning issues of residence of the children. He found that her earning capacity was very modest and clearly there was a very significant imbalance in the capital position of the parties. He determined that inclusive of a sum of $40,000 to be added for future child support obligations, a further adjustment of 8.5 per cent of the pool of assets should be made in the wife’s favour. In a pool of $1,183,286 that represents an adjustment of $100,579. As $40,000 of that sum was attributed to future child support, the actual property adjustment for s 75(2) considerations was $60,579 or 5.1 per cent of the pool of assets. Depending on the capital disparity created by the property orders such an adjustment ought be seen as inadequate to properly provide for the factors that favoured the wife when considering any further adjustment. If the initial division (75:25) was to remain then a greater adjustment would be warranted. We would however see that sum as adequate if the starting base was as we suggest namely 67.5:32.5. In making that assessment we are conscious that the husband retains his interest in the Caloundra property subject to the possibility that he may have to use his equity in that property to meet his parents’ future needs.
Assuming there were no changes to the pool of assets then an appropriate outcome to this appeal would see the wife receive 37.6 per cent of the asset pool by way of an order for property settlement (which we round off to a further $50,000 beyond the monies already ordered to be paid) and, for reasons that will become apparent, in addition she would be at liberty to relitigate her child support application.
An allied factor in determining the propriety of the adjustment made by the trial Judge for s 75(2) factors is the identification by the trial Judge, apparently to the wife’s detriment, of the effect of the wife having accepted the earlier property settlement. His Honour said:
“257.However, her conduct in accepting the payment and leading the husband to act to his detriment on the assumption that their property and financial ties had been finalised by the 2000 settlement agreement should be taken into account in a general way under s 75(2)(o) bearing in mind the size and value of pool at the time of agreement, the amount paid, the economic disadvantage to the husband in having to sell income-producing property, and paying all mortgages and other outlays to conserve properties without assistance from the wife or the rents he would otherwise have received from the West End property.”
Ground 5 of the grounds of appeal complains that the trial Judge erred in penalising the wife for accepting the payment arising out of an informal property settlement in circumstances where the trial Judge found that the settlement was unwisely entered into by the wife under considerable pressure from the husband.
We think there is substance in the submission that the trial Judge has erroneously given consideration to this factor. The true nature of the transaction was that the wife received, at an early stage, monies to which she was ultimately entitled. The monies were obtained from property to which the parties ultimately were held to have jointly contributed. The wife reinvested her portion of the funds and they were included in the pool of assets available for distribution between the parties at the trial. Some of the funds were used for the support of herself and the children without criticism from the trial Judge. The husband chose to raise those funds by selling an income-producing property leaving his share of the sale of that property available for reinvestment or for his own support. There may well have been economic disadvantages to the husband in having to sell income-producing property but all he was doing was providing to the wife that to which she was entitled. She should not have been further detrimentally affected by obtaining an advance on her proper entitlement.
The issues otherwise identified in paragraph 257 of the husband having to conserve properties without the assistance from the wife are matters already taken into consideration by the trial Judge in assessing contributions towards the existing pool and ought not be seen to act as a detriment to a further adjustment by reason of s 75(2) factors. To the extent that the trial Judge identified this matter as a factor relevant to the proceedings, in our view, he was in error.
At the conclusion of the hearing before us Counsel for the wife sought, in the event the appeal was upheld, that we should re-exercise the discretion. This course was opposed by Counsel for the husband who sought, in the event the appeal was successful that the matter should be remitted for retrial on the basis that the husband would wish to put updating evidence before the Court about current real property values, and realisation costs including capital gains tax which may be incurred to meet any additional order in the wife’s favour.
The options open to the Full Court at the conclusion of a successful appeal were canvassed in G & G [2001] FamCA 1453, a case determined before the special leave application to the High Court in Ruscoe and Walker (2003) FLC 93-093 was dismissed. In G & G both parties sought that the Full Court should re-exercise the discretion. However the Full Court noted there had been a significant time delay since the original hearing as well as a number of substantial developments. The Full Court set out its conclusions on the parties’ contributions and relevant s 75(2) factors on the evidence before the trial Judge, as modified by the Full Court’s conclusions on the pool. The Full Court noted the following options in the factual circumstances of the case before it:
· the parties could present to the Court an agreed statement of relevant facts which had occurred since the judgment of the trial judge to be taken into account by the Court in re-exercising the discretion;
· the Court might allow the appeal, make such orders as flowed from a re-exercise of the discretion on the basis of their conclusions about contributions and s 75(2) factors and their conclusions about the pool of assets, designating the orders as either “partial final” or “interim” and remit for the determination of a single Judge as to whether any further adjustment should be made in respect of contribution or s 75(2) factors which had subsequently arisen;
· the Court could uphold the appeal, set aside the trial Judge’s orders and remit the proceedings for a limited rehearing.
We would add to those options that in some limited cases a matter may regrettably be required to be remitted for a complete rehearing.
Whilst we feel confident that we could re-exercise the discretion on the material that is before us, and avoid further proceedings, we feel constrained by reason of the decision of Allesch v Maunz (2000) 203 CLR 172; (2000) FLC 93-033; (2000) 26 Fam LR 237 to invite the parties to make submissions in writing to the Full Court as to any evidence they would wish to adduce relating to their circumstances as they presently exist. As indicated by the Full Court in G & G the preferable course would be for the parties to provide an agreed statement of facts which have occurred since the judgment relevant to the re-exercise of the discretion. It would only be after receipt of submissions that the Court could properly determine which of the options referred to above would be appropriate. If we conclude that it is necessary to remit the matter for rehearing then we would not expect that the trial Judge would be bound by our suggested exercise of discretion. It does appear to us however that issues already decided by the trial Judge, and not subject of this appeal, such as the weight to be given to the previous settlement, would not be capable of being re-opened upon any such remitted hearing.
Child support
Section 102 of the Child Support (Assessment) Act 1989 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 (1995) FLC 92-591; (1994) 18 Fam LR 646 the Full Court endorsed suggestions made in earlier reported cases that leave applications under this legislation ought to be approached less restrictively than applications from interlocutory orders. The Court said that if a party’s substantive rights had been significantly affected by an error at first instance, it would be appropriate to grant leave to appeal.
We heard the leave application and the appeal simultaneously. For reasons which are to follow we are firmly of the view that the approach adopted by the trial Judge demonstrates an error of principle. The unfortunate consequence of that error of principle will be that the wife’s application for child support will necessarily have to be remitted for rehearing.
It would appear from the material before the trial Judge that after separation the mother sought an administrative assessment of child support. A nil assessment issued and the mother sought an administrative review on the basis that the child support assessment did not take into account the income earning capacity, property and financial resources of the applicant or the respondent. The Senior Case Officer, having noted the pending property proceedings, determined to refuse to change the assessment on the basis that the matter was too complex. The mother then filed her application seeking a departure order and an interim order was made by consent on 28 October 2002 for the husband to pay $800 a month in child support.
At the hearing before the trial Judge the wife sought an order that child support be assessed in the sum of $400 per month for each child. She further sought an order that the child support be provided other than in the form of periodic amounts and that it be capitalised and paid as a lump sum of $87,200. She sought to have the sum secured as against the Southport 1 property. If the Court was not disposed to order a lump sum payment she sought periodic payments of $400 per month for each child commencing 1 July 2003 to 30 June 2006 with annual adjustments for inflation in accordance with the Consumer Price Index (all groups).
The legislative requirements for the consideration of a child support application are set out in Divisions 4 and 5 of Part VII of the Child Support (Assessment) Act. Before making an order for departure from administrative assessment of child support the Court must be satisfied of the existence of a ground for departure as set out in s 117. In this case the ground sought to be relied upon was that the income, earning capacity, property and financial resources of the liable parent, namely the husband, were such as to make a nil assessment of child support an unjust and inequitable determination of the level of financial support that ought to be paid by the husband for the children. We would have thought that on the material before the trial Judge that it would be unarguable to suggest that a nil assessment was an appropriate assessment for child support. The husband was possessed of significant assets. Whilst the question of his employability appears to have been left open by the trial Judge there was a finding that the husband clearly had a proportionately greater potential for making future capital gains in the property market than the wife. Further, the trial Judge indicated at paragraph 275 that “It is extremely difficult to determine the exact extent of the husband's capacity to meet any reassessed child support liability.”
Having determined that a ground for departure exists it is incumbent upon the Court then to determine whether or not it would be just and equitable and otherwise proper to make a departure order. Section 117 relevantly provides:
“(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b) the proper needs of the child; and
(c)the income, earning capacity, property and financial resources of the child; and
(d) the income, earning capacity, property and financial resources of each parent who is a party to the proceeding; and
(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii)any other child or another person that the person has a duty to maintain; and
(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:
(i) to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii) to:
(A)the liable parent; or
(B)any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.
(5) In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
(6) In having regard to the proper needs of the child, the court must have regard to:
(a) the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and
(b) any special needs of the child.
(7) In having regard to the income, earning capacity, property and financial resources of the child or a parent of the child, the court must:
(a) have regard to the capacity of the child or parent to earn or derive income, including any assets of, under the control of, or held for the benefit of, the child or parent that do not produce, but are capable of producing, income; and
(b) disregard:
(i)the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii)any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
(8) In having regard to the direct and indirect costs incurred by the carer entitled to child support in providing care for the child, the court must have regard to the income and earning capacity foregone by the carer entitled to child support in providing that care.
(9) Subsections (4) to (8) (inclusive) do not limit other matters to which the court may have regard.”
A court having made appropriate findings under those subsections would then normally determine the rate at which periodic child support should be paid for whatever period is in question or otherwise make adjustments to the various components that make up the child support formula. The application in this case was to either provide a capital sum for the likely dependency period of the children or alternatively to provide a periodic sum for the next three years. The radical difference in the structure of the two claims is not the subject of any discussion by the trial Judge in his reasons for judgment. The issues raised in the competing judgments in Lightfoot and Hampson (1996) FLC 92-663; (1996) 20 Fam LR 69 and Ivanovic v Ivanovic (1996) FLC 92-689 and commented on in subsequent cases as to whether or not the power to make an order for the payment of child support by way of lump sum rather than periodic payment can be found within the provisions of Division 5 of Part VII of the Child Support Act rather than within Division 4 of that Part and the general powers contained in s 141 of the Child Support (Assessment) Act do not arise directly for reconsideration in this appeal.
The inter-relationship between the property settlement provisions of the Family Law Act and the departure provisions of the Child Support (Assessment) Act is far from clear. The Family Law Act provides that one matter the court must take into account in determining what order should be made for alteration of property interests is:
“79(4) (g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future for a child of the marriage.”
At the same time, the Child Support (Assessment) Act provides in s 117 (2)(c)(ii) that a departure from administrative assessment of child support may be made if the court is satisfied:
“that in the special circumstances of the case application, in relation to the child of the provision of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child
…
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.”
What the trial Judge has effectively said is that he proposed to award the wife $40,000 for child support. He would do that in the course of making an order under the Family Law Act for property settlement and in those circumstances a nil assessment for child support could no longer be seen as unjust and inequitable. His Honour went on to order:
“That pursuant to the provisions of s 125 of the Child Support (Assessment) Act, the sum of $40,000 is to be credited against any future liability of the husband for child support in respect of the children. The amount so credited is to amount to 100 per cent of the annual rate payable in respect of the assessment or, in the event that the wife is then in receipt of an income tested pension, the amount so credited is to amount to 25 per cent of the annual rate of child support payable by the husband until such time as the total sum of $40,000 has been credited in respect of child support otherwise payable.”
His Honour then concluded that it would be appropriate to dismiss the wife’s application for a departure order.
It is submitted to us, and we think correctly, that this process has some essential flaws in it. By dismissing the application for the departure order the nil assessment remains valid. Any future assessments that issue from the Child Support Agency based upon the husband’s taxable income are predictably likely to be of a very small amount indeed. Off-setting the $40,000 against any future assessments will effectively mean that the husband’s liability to support the children for the remainder of their dependency will be pegged in the sum of $40,000.
Given that as at the date of trial C was 11 and D 6, the child support obligation had potentially 12 years to run of which for a period of about seven years there would be two dependent children. In very rough terms that represented a contribution of approximately $40 per week towards the support of each child during the remainder of their dependency. Given the extent of the capital of the parties, their earning capacities and such evidence as was available concerning the cost of maintaining the children, that result was likely to be an inadequate one.
The inclusion of the order in accordance with the provisions of s 125 of the Child Support (Assessment) Act demonstrates the confusion of the process adopted by the trial Judge. Section 124 of the Child Support (Assessment) Act enables a court to make an order for the provision of child support otherwise than in the form of a periodic amount payable to a carer entitled to child support. Section 125 of the Act then provides that if such an order is to be made:
“(1) …the court must state in the order whether the child support ordered to be provided by the liable parent is to be credited against the liable parent's liability under any administrative assessment (in this Division called a ‘relevant administrative assessment’) of the child support payable by the liable parent to the carer entitled to child support that relates to the period, or a part of the period, for which the order has effect.
(2) The court may state that the child support is not to be credited against the liable parent's liability under any relevant assessment only if it is satisfied that, in the special circumstances of the case, it would be:
(a)just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(b) otherwise proper;
that the child support should not be credited.
(3) If the court states in the order that the child support is to be credited against the liable parent's liability under any relevant administrative assessment, the court must also state in the order either:
(a)that the child support has an annual value of a specified amount and that the annual rate of the child support payable under any relevant administrative assessment is to be reduced by that amount; or
(b)that the child support is to count for a specified percentage of the annual rate of child support payable under any relevant administrative assessment.
(4) The court may, under subsections (1) and (3), make different provision in relation to different child support periods and in relation to different parts of a child support period.
(5) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a statement of the kind referred to in subsection (2), the court must have regard to the matters mentioned in subsections 117(4), (6), (7) and (8).
(6) In determining whether it would be otherwise proper to make a statement of the kind referred to in subsection (2), the court must have regard to the matters mentioned in subsection 117(5).
(7) Subsections (5) and (6) do not limit the matters to which the court may have regard.”
In these proceedings, especially as clarified by the Judge in his slip rule judgment, it became apparent that the trial Judge was in fact purporting to exercise the child support power albeit that he was doing it under the guise of a property order. If he was making an order under s 124 of the Child Support (Assessment) Act then he was obliged by sub-ss 124(3) and (4) to have regard to the matters mentioned in sub-ss 117(4), (5), (5), (7) and (8) of the Child Support (Assessment) Act. His Honour made no findings in relation to those matters, nor is it apparent from his extensive reasons for judgment that he had regard to those matters. Such regard is critical to the proper exercise of the child support departure provisions.
The failure to properly consider the matters contained in sub-ss 117(4) and (5) when purporting to make an order under s 124 has already been held to amount to a miscarriage of discretion. See Hallinan and Witynski (1999) FLC 98-009; (1999) 25 Fam LR 647 at 119. In Hallinan and Witynski the Full Court (Lindenmayer, Finn and Warnick JJ) appear to cast some further doubt upon the majority decision in Lightfoot and Hampson in that the order they made was to require the payment of one year’s child support by way of a lump sum pursuant to s 124 of the Child Support (Assessment) Act rather than by way of a departure order made under s 117 coupled with an exercise of the general power to make it by way of lump sum under s 141.
The wife’s claim for child support in this case was effectively run independently of her claim for property settlement. The issue of the proper consideration of s 79(4)(g) and its effect upon the eventual outcome of the proceedings does not appear to have been the subject of any discussion before the trial Judge nor any of the submissions before us. We think in the circumstances of the case that the outcome of the child support proceedings can be resolved independently of the property proceedings even though, to the extent that it may be relevant, the capital available to both parties will not be precisely known until the outcome of the property proceedings is known. Given, however, the parameters of the property dispute, any adjustment to the present outcome is unlikely to impinge upon the issues that need to be resolved in the child support proceedings, namely what is a proper amount of child support to be paid, for what period and in what form.
In the circumstances we would conclude that the outcome of this appeal should be:
1. That the appeal should be allowed.
2. Orders 2 and 26 of the orders made by the Honourable Justice Carmody on 25 March 2004 are set aside.
3. The wife’s application seeking orders for the departure from administrative assessment of child support in relation to the children and for the provision of the child support otherwise than in the form of a periodic amount is to be remitted for rehearing before a judge of the Brisbane Registry.
4. That within 21 days of the delivery of this judgment the respondent husband file with the Appeals Registrar, Brisbane and serve upon the appellant wife any further submissions and material in support thereof upon which the husband seeks to rely upon in respect of his request that the determination of the property appeal be remitted for rehearing rather than have the Full Court exercise its own discretion in the matter.
5. Within 14 days of the receipt of such submissions the appellant wife file and serve any response thereto.
Costs
Each party indicated that at the conclusion of this appeal it was intended that submissions relating to an appeal against the costs order made by the trial Judge and submissions relating to the costs of the appeal would be made in writing. We reserve those issues to await further directions once the determination of the property appeal has been finalised.
I certify that the preceding 74
paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.
Elizabeth Hore
Associate
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