Murray & Murray
[2020] FamCAFC 293
•24 November 2020
FAMILY COURT OF AUSTRALIA
| MURRAY & MURRAY | [2020] FamCAFC 293 |
| FAMILY LAW – APPEAL – PROPERTY – Where the appellant appeals from property settlement orders granting the respondent 73.2 per cent of the “identifiable asset pool” – Lack of financial disclosure – Whether primary judge erred in declining to add back to the asset pool credit card and tax liabilities – Whether appellant’s post‑separation expenditure on living expenses was reasonable – Where primary judge’s assessment of parties’ contributions was open – Adjustments pursuant to s 75(2) factors was open – Just and equitable – No error identified – Appeal dismissed – Costs ordered in a fixed amount. FAMILY LAW – APPEAL – COSTS – Appellant appeals from costs orders arising out of substantive proceedings – Financial non‑disclosure – Adequacy of reasons – Whether primary judge failed to take into account compromises reached over child support and spousal maintenance – No error identified – Appeal dismissed – Costs ordered in a fixed amount. |
| Bankruptcy Act 1966 (Cth) Family Law Rules 2004 (Cth) r 19.18 |
| Anison & Anison (2019) FLC 93-908; [2019] FamCAFC 108 Biltoft and Biltoft (1995) FLC 92-614; [1995] FamCA 45 Black and Kellner (1992) FLC 92-287; [1992] FamCA 2 Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 Lovine & Connor and Anor (2012) FLC 93-515; [2012] FamCAFC 168 Maiden v Maiden (1909) 7 CLR 727; [1909] HCA 16 Mallory & Mallory [2020] FamCAFC 62 McCauley v McCauley (1910) 10 CLR 434; [1910] HCA 16 Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4 Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184; [1998] HCA 44 Robinson and Higginbotham (1991) FLC 92-209; [1991] FamCA 5 Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173 Trustee for the Bankrupt Estate of N Lasic & Lasic (2009) FLC 93-402; [2009] FamCAFC 64 Trustee of the Property of G Lemnos, A Bankrupt & Lemnos and Anor (2009) FLC 93-394; [2009] FamCAFC 20 Vass v Vass (2015) 53 Fam LR 373; [2015] FamCAFC 51 Weir and Weir (1993) FLC 92-338; [1992] FamCA 69 |
| APPELLANT: | Mr Murray |
| RESPONDENT: | Ms Murray |
| FILE NUMBER: | SYC | 5665 | of | 2014 |
| FIRST APPEAL NUMBER: | EAA | 136 | of | 2019 |
| SECOND APPEAL NUMBER: | EAA | 52 | of | 2020 |
| DATE DELIVERED: | 24 November 2020 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Sydney (via video link) |
| JUDGMENT OF: | Ainslie-Wallace, Ryan & Austin JJ |
| HEARING DATE: | 22 October 2020 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATES: | 18 November 2019; 1 April 2020 |
| LOWER COURT MNC: | [2019] FamCA 847; [2020] FamCA 223 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Cheshire SC |
| SOLICITOR FOR THE APPELLANT: | Mills Oakley |
| COUNSEL FOR THE RESPONDENT: | Mr Cox SC |
| SOLICITOR FOR THE RESPONDENT: | Pearson Emerson Family Lawyers |
Orders
Appeal No. EAA 136 of 2019 is dismissed.
Appeal No. EAA 52 of 2020 is dismissed.
The appellant shall pay the respondent’s costs of and incidental to both appeals in the fixed sum of $46,500.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Murray & Murray has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth)
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Numbers: EAA 136 of 2019; EAA 52 of 2020
File Number: SYC 5665 of 2014
| Mr Murray |
Appellant
And
| Ms Murray |
Respondent
REASONS FOR JUDGMENT
Introduction
On 18 November 2019, the primary judge pronounced property settlement orders between the appellant husband and the respondent wife under Pt VIII of the Family Law Act 1975 (Cth) (“the Act”).
The orders made provision for the respondent to receive 73.2 per cent of the known assets and for the appellant to receive the residual 26.8 per cent, when the appellant had contended for his overall entitlement to not less than 45 per cent and the respondent sought 100 per cent of the “identifiable pool”. The primary judge explicitly referred to “known assets” in the reasons for judgment because the probity of the appellant’s financial disclosure was in serious dispute. The respondent contended and the primary judge found the appellant’s financial disclosure was deliberately incomplete.
The appellant’s appeal from those orders (Appeal No. EAA 136 of 2019) was resisted by the respondent.
On 1 April 2020, the primary judge made costs orders arising out of the substantive proceedings requiring the appellant to reimburse $16,032 to the respondent, being one half of the amount she paid to expert valuation witnesses in the proceedings, and to pay 70 per cent of the respondent’s party/party costs.
The appellant’s appeal from those orders (Appeal No. EAA 52 of 2020) was also resisted by the respondent.
For the reasons which follow, both appeals should be dismissed with costs.
Background
The parties commenced cohabitation in September 1999, married in early 2004 and finally separated in November 2012.
The parties were particularly entrepreneurial during their relationship, setting up corporations and trusts, pursuing business ventures, and buying and selling real estate.
About a year after separation, in October 2013, the appellant began working as a partner in an accounting enterprise (referred to by the primary judge as “H Firm”). The appellant’s partnership at H Firm was terminated in June 2017, following an in-house investigation of financial irregularities from about September 2016 and an active police investigation from about May 2017 (at [116], [121], [124] and [127]).
Proceedings seeking relief under Pt VIII of the Act were commenced by the respondent in September 2014.
In March 2015, interim orders were made for the appellant to pay a lump sum and various periodic sums to or on behalf of the respondent in satisfaction of an interim property settlement, spousal maintenance and child support (at [237]). The appellant failed to comply with such orders, though the extent of his default was in contest, and so more interim orders were made in August 2015 to set up a quarantined bank account into which the ordered payments were to be deposited after subtraction from financial entitlements payable by H Firm to the appellant (at [238]–[239]). It is unnecessary to recite the many other procedural and interim orders made during the proceedings on the way to the commencement of the trial in September 2018.
On the respondent’s application, the evidence was re-opened in October 2019, enabling the respondent to adduce more evidence, in both oral and documentary form, to supplement the evidence already given about the financial irregularities discovered at H Firm and the appellant’s involvement in illegal money laundering, resulting in the criminal prosecution of third parties. The challenges in the appeal which related to the primary judge’s reliance upon such evidence (Grounds 4 and 5) were abandoned as the appeal began.
The trial was then finally concluded by way of written submissions in early November 2019.
The primary judge found the former family home was the “one major asset left” (at [1]) and it was still occupied by the respondent and the parties’ children. The respondent wanted to acquire exclusive title in it, subject to her assuming exclusive responsibility for the loan encumbering it.
The primary judge found the parties’ assets and superannuation interests had a net value of $2,026,416 (at [243]), though two grounds of the substantive appeal challenged findings about the constituent elements of the balance sheet (Grounds 1 and 3). The allied challenge made to the value which was ascribed to one particular asset (Ground 2) was abandoned as the appeal began. In effect, the appellant still contended the net value of the parties’ property should have been less than was found.
Allowing for the conclusion reached by the primary judge about the parties’ respective percentage entitlements, the property settlement orders provided for the respondent to acquire exclusive legal title in the former family home, subject to her discharging the existing mortgage so as to protect the appellant from any liability in respect of the home loan. If the respondent could not do so, the orders required the sale of the former family home and the payment of the net proceeds of sale to the respondent. Otherwise, the parties retained the items of personal property in their respective possession and their own superannuation. In the substantive appeal, the appellant challenged the primary judge’s findings as to contributions and the adjustment in the respondent’s favour under s 75(2) of the Act (Grounds 6, 7, 8 and 9).
The costs orders were made in the respondent’s favour some months later.
The two appeals against the substantive property settlement orders and the costs orders were heard together.
The property appeal
Several aspects of the primary judge’s findings and reasons illuminate the discussion of this appeal.
First, his Honour found the appellant lacked credibility and his evidence could not be accepted unless it was either independently corroborated or “inherently likely” (at [16]–[17]). That finding was not challenged in the appeal.
Secondly, the appellant admitted his involvement in money laundering activities with other individuals over a number of years while he worked at H Firm (at [185]), which entailed some $6 million washing through various bank accounts he controlled (at [17]). The primary judge rejected the appellant’s evidence that he did not obtain any financial benefit from his participation in such activity and the challenge to this finding was abandoned.
Thirdly, the primary judge found the appellant deliberately failed to fully and frankly disclose his financial circumstances in the proceedings (at [17] and [166]–[179]) and so, concordant with a long line of authority (citing Black and Kellner (1992) FLC 92-287; Weir and Weir (1993) FLC 92-338), there was no need to be unduly cautious when making findings and drawing inferences about the appellant’s financial circumstances (at [179]). That finding was not challenged in the appeal.
The evidence which underpinned those findings was strongly probative.
It eventually proved uncontroversial that the appellant had participated in illegal money laundering activities. At the trial in September 2018, the appellant was cross-examined about the movement of money into and out of bank accounts controlled by him. He said the money was not his and was not part of the ordinary trading activities of the corporations which held the accounts. Once given the protection of a certificate under s 128 of the Evidence Act 1995 (Cth), the appellant admitted the funds related to money laundering activity. The primary judge summarised the evidence and rejected the appellant’s assertions that he was not fully cognisant of the illegality of the transactions until 2017 (at [17] and [181]–[196]).
While the appellant conceded he laundered money for third parties, he submitted he was not the beneficial owner of the money deposited into the various accounts and implied he was unable to adduce more detailed exculpatory evidence because of “ongoing [official] investigations and proceedings”. The appellant maintained the only financial benefits he received from his money laundering were, first, his retention of the principal perpetrator as a client from whom he could continue to procure fees for services rendered, and secondly, he had borrowed $50,000 from the principal. However, he also admitted he received a gift of $100,000 from a grateful client, which money he used in association with his money laundering activity (at [208]–[210]) and he was impelled to admit he had the authority to draw down on all of the bank accounts he controlled. His assertion that none of the withdrawals were for his personal benefit was entirely uncorroborated.
In October 2019, the respondent was granted leave to re-open the proceedings and adduce more evidence, which had nothing at all to do with the movement of money in and out of the corporate bank accounts which had been the subject of evidence in September 2018. Rather, the tenor of the additional evidence was that, during 2016, the appellant gave a third person some $950,000 in cash and asked him to deposit it into personal bank accounts in single transactions no greater than $10,000, which was duly done for him. The many bank accounts into which the money was deposited were held in the appellant’s name at numerous different banks. Neither the bank accounts nor the third person’s agency were previously disclosed by the appellant to the respondent in the proceedings.
The respondent ultimately asked the primary judge to infer the $950,000 given to the third person belonged to the appellant, who deliberately concealed it from her and, furthermore, it was likely even more funds had been concealed. She submitted that sum should be notionally added back as an asset in the appellant’s hands, but the primary judge did not go that far (at [338] and [342]).
His Honour rejected the appellant’s evidence that he derived no financial gain from his participation in the money laundering activity, but could not quantify the amount of money the appellant actually received from his participation in such activity (at [17] and [341]–[342]). His Honour declined the respondent’s invitation to notionally add back to the balance sheet the $950,000 handled by the third person for the appellant (at [342]). Rather, more moderately, the appellant’s involvement in money laundering and his failure to disclose his possession and control of large amounts of cash were taken into account as material factors under ss 79(4)(d)–(g) of the Act (at [342], [379]–[380], [412] and [416]–[417]), which approach is impervious to criticism.
Grounds 1 and 3 – the balance sheet
These two grounds contend the primary judge fell into error in numerous different ways when making findings to identify the parties’ property interests. More specifically, it is asserted the primary judge erred by excluding certain liabilities of the appellant from the balance sheet (Ground 1) and by notionally adding back spent cash as an asset in the appellant’s hands (Ground 3).
At trial, the appellant contended that certain debts for which he was liable should have been taken into account as liabilities on the balance sheet, thereby reducing the amount of property available for distribution between the parties. Those liabilities were various credit card debts, then worth about $78,000, and two tax debts, one in the sum of $160,791 and the other estimated in the sum of $221,699.
Credit cards
In respect of the credit card liabilities, the primary judge omitted them from the balance sheet because they were incurred by the appellant “in order to maintain [his] lifestyle” (at [322]).
The respondent contended the appellant incurred the credit card debt because he did not curb his expenditure and maintained an extravagant lifestyle, despite the interim orders made in March and August 2015 which required his income to be partly applied for the benefit of the respondent and the children (at [239]).
While working at H Firm, the appellant consistently earned over $800,000 per annum (at [87] and [103]) even getting as high as $1.1 million in 2017 (at [396]). At the trial, a year or so after he ceased working at H Firm, the appellant deposed that his annual income was only about $150,000, even though it was indisputably proven he contemporaneously declared his annual income to be $750,000 in an application to rent an apartment for $1,850 per week (at [176], [386]–[387] and [401]).
In cross-examination, the appellant was invited to concede that his lifestyle had not changed much up until the time of trial, despite his alleged decreased income, and he replied:
[THE APPELLANT]: … [I]t’s – it’s – it has changed a little bit, but it – probably not all that much…
(Transcript 19 September 2018, p.255 line 7)
The parties finally separated in late 2012, about six years before the trial started, so there was no suggestion that the appellant’s credit card debts then constituted anything other than his post-separation expenditure.
The appellant’s argument before the primary judge was that it was unreasonable to exclude the credit card debts from the balance sheet because he incurred them in order to meet his living expenses. Even if that is so, the argument did not meet the respondent’s contention that his post-separation expenditure on so called “living expenses” was profligate and it would have been unreasonable to include them on the balance sheet and thereby diminish the amount of property available for distribution between the parties.
The primary judge accepted the respondent’s submission, as was well open. The essential flaw in the appellant’s argument is his assumption that the primary judge was obliged to accept his evidence and contentions on three points: first, he had experienced an enormous decrease in income; secondly, such reduced income was insufficient to meet all of his necessary expenses without resort to credit; and thirdly, his expenditure was completely reasonable. The primary judge was not obliged to accept any of that evidence because the appellant’s reliability was found wanting.
The appellant submitted in the appeal that the evidence required the primary judge to find that his access to only a portion of his income from H Firm, after the interim orders were made in August 2015, effectively forced him to resort to credit to meet his expenses, but the argument is rejected.
The interim orders made in August 2015 diverted about $36,000 per month from the appellant’s income to meet matrimonial debts, amounting to about $430,000 per annum, but that still left him with the residue of no less than $370,000 per annum to spend as he pleased. It was well open to the primary judge to conclude such residual income was quite sufficient for the appellant to meet his personal expenses without needing to increase debt. In any event, the diversion of funds from the appellant’s income ceased when his employment with H Firm ended in June 2017. Thereafter, until trial, he retained the entirety of his income.
The primary judge found, entirely in accordance with the appellant’s evidence, that he did not alter his extravagant lifestyle (at [410]), which remained largely unchanged, despite his alleged shrinkage of income. In final submissions, the appellant’s counsel conceded the appellant was open to criticism for such extravagance, which is perhaps unsurprising when it was conceded his credit card statements showed expenditure of $690,000. The corollary of the concession was that it was unreasonable for him to resort to credit to maintain such a lifestyle and the respondent should not be disadvantaged because of it. Alternatively, if the appellant really still earned much more income than he admitted after he departed H Firm, which the primary judge indeed found was probable (at [224]–[231], [386]–[387] and [401]), then there was even less reason for him to resort to the use of credit to meet his expenditure.
The primary judge’s discretionary treatment of the appellant’s credit card debt, like any other debt, was at large, subject to established guidelines (Trustee for the Bankrupt Estate of N Lasic & Lasic (2009) FLC 93-402 at [199]; Biltoft and Biltoft (1995) FLC 92-614 (“Biltoft”) at 82,124–82,127), which was correctly conceded in final submissions. The appellant was unable to demonstrate discretionary error in the primary judge’s approach by treating the credit card debts as being “unreasonably incurred” in accordance with the Biltoft guidelines.
Tax debts
In respect of the two tax debts, the primary judge omitted the first one due to the lack of evidence about its origin, its component parts, or the appellant’s incapacity to meet it (at [327]–[328]) and omitted the second because the appellant’s estimate of its quantum was entirely contingent upon the content of draft documents which had not yet been submitted to the Australian Taxation Office (“ATO”) and had not been divulged to the respondent until the trial commenced (at [329]–[332]).
The first tax debt of $160,791 was the subject of enforcement action by the ATO. Although its quantum was not in dispute, little else was known about the debt. There was no evidence about the type of tax it comprised or whether it included penalties. If it was income tax, there was no evidence of the financial years to which it related or, significantly, whether it was assessed on income earned by the appellant in the period between August 2015 and June 2017 when some of his income was diverted for use in ways which benefitted both parties under interim orders. The respondent suspected the tax related to post-separation income spent by the appellant for his own benefit, which tax he chose not to pay in a timely way despite his access to abundant cash.
The appellant asserted, without corroboration, that most of the tax debt comprised Capital Gains Tax (“CGT”) on his sale of some shares for $800,000 in November 2016 (at [117] and [328]), but that is difficult to accept because such CGT would then have been levied on his 2017 income and the appellant deposed he had not yet lodged his 2017 or 2018 tax returns. The ATO would not have been engaged in enforcement action against him for the payment of tax not yet even assessed and levied. Source documents related to the computation of the tax must have been available for disclosure to the respondent, but none was disclosed.
The primary judge found the appellant failed to discharge the evidentiary burden he bore in respect of the debt which, on the evidence, was rational. There was no obligation on the primary judge to bring the tax debt to account in the balance sheet and, given the abject lack of evidence, the debt had no demonstrated nexus to any money from which the respondent derived any benefit. Since the debt must have related to financial years up to but not later than 2016, nor was there any explanation for why the appellant, despite his access to vast income, did not pay it sooner.
The fluidity of the appellant’s prospective second tax debt is evident from his own evidence. He deposed in his financial statement filed just prior to the trial that the debt would approximate $400,000, but then suddenly refined the figure to $221,699 in the draft balance sheet tendered during the trial (at [243] and [329]). In cross-examination, the appellant conceded the calculation of his prospective tax debt was entirely his own arithmetic and some of the draft financial data upon which he relied to reach the calculation had only been served on the respondent several days into the trial. His Honour remarked during the appellant’s cross-examination, without any attempted correction by the appellant’s counsel, that the appellant’s calculation was a “guesstimate” and the appellant had already conceded he had “incomplete information” to make it. In final submissions, the appellant’s counsel said in that regard:
[COUNSEL FOR THE APPELLANT]: … The only documents we had was those last exhibits that your Honour provisionally admitted and the evidence of the [appellant] that the estimate he has given on 2018 is just that. We didn’t have any source documents to finalise any return in that respect.
(Transcript 28 September 2018, p.709 lines 38–41)
Given the nature of the evidence, there was no error in its omission from the balance sheet due to it being “vague or uncertain” in accordance with Biltoft.
Importantly, the tax debts were not ignored altogether. Rather than them being taken into account as elements of the balance sheet, the primary judge took them into account as part of the adjustment exercise under s 79(4)(e) and s 75(2) of the Act. At that point in the reasons for judgment, his Honour said:
415.I accept the [appellant] shall be left with some tax liability but I am unable to say what it might be.
Ground 1 therefore fails.
Items 53 and 54 on the balance sheet
Ground 3 contended the primary judge erred by treating these items as notional property in the appellant’s hands. The first amount of $37,200 was withdrawn from the mortgage over the family home and the second sum of $180,000 was capital repaid to him by H Firm. Both transactions took place after separation.
In March 2017, the appellant withdrew $59,200 from the mortgage without telling the respondent. He used $22,000 to reduce another loan, from which both parties benefitted, but used the balance of $37,200 to reduce his own credit card debt, from which expenditure the respondent did not benefit. The primary judge brought the latter portion of the withdrawal to account (at [306]–[308]).
In July 2017, upon the severance of the appellant’s partnership in H Firm, he was repaid $263,000 of the $320,000 he initially paid to join the partnership. Of that sum, the appellant applied $180,000 to payment of his credit card debt, in direct contravention of the respondent’s request for that sum to be preserved. The primary judge brought that portion of the appellant’s expenditure to account (at [309]–[312]).
In the appeal, the appellant submitted:
27.The primary Judge gives no consideration to any authority involving add-backs where such an approach is taken where there has been pre-mature distribution of income and entitlements received by the [a]ppellant post-separation as opposed to a pre-mature distribution of matrimonial assets that existed at the time of the parties’ separation.
…
29.Adding “property” back to the pool is to be treated as the exception, not the rule. The funds retained by the [a]ppellant were funds derived from post-separation income earned by the [a]ppellant and subject to various interim orders made by the Court.
(Emphasis added) (Footnote omitted)
The primary judge’s failure to recite authority (such as Trevi & Trevi (2018) FLC 93-858) for the approach taken does not demonstrate error. As this Court said in Vass v Vass (2015) 53 Fam LR 373 at [138], “[t]here is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties”. His Honour’s approach was consistent with such authority and there is no doubt it was understood the transactions occurred post-separation. The appellant’s explicit acceptance that his Honour could have alternatively considered such expenditure as a material fact under s 75(2)(o) of the Act represents his implicit acceptance that it was open to notionally add back against him the full value of the funds he retained for his exclusive use. In the circumstances of this case, in truth, this is an argument of form over substance.
The appellant’s submission that the funds retained by him were derived from his post-separation income, as distinct from pre-existing assets, and he was therefore able to spend it as he chose, does not correlate with the evidence and is rejected. The mortgage registered over the family home was serviced from the time it was first acquired in 2003 (at [42]). When the appellant first joined H Firm in October 2013, the $320,000 capital he then paid to H Firm was borrowed by way of an overdraft facility secured against the former family home (at [86]). The appellant ceased making repayments on the mortgage and the overdraft facility in February 2015 (at [98]) so, in August 2015, the primary judge made interim orders requiring some of the appellant’s income to be diverted to the quarantine account which was to be used, in part, to service the mortgage (at [105]). During 2016 and 2017, the appellant made withdrawals from the mortgage which triggered default interest rates (at [108], [111], [119], [122] and [372]). Even though the appellant’s income had funded the mortgage repayments (at [408]), his last redraw of $59,200 in March 2017 was contrary to the interim orders made in August 2015 and his personal expenditure of the $180,000 from the capital of $263,000 repaid to him by H Firm in July 2017 (at [128]) was not used to defray the mortgage or the overdraft facility from which it originated.
The appellant complained in his Summary of Argument about an asserted lack of reasons for these particular findings, but that was not the gravamen of this ground of appeal and, in any event, the reasons given by the primary judge were adequate. Ground 3 also fails.
Ground 6 – contributions
This ground contends the primary judge’s exercise of discretion miscarried in finding that the parties’ respective contributions were equal. In this ground, he contended more weight should have been given to his “greater initial contributions and post‑separation contributions”.
The appellant advocated for his contribution-based entitlement of 57.5 per cent (at [346]), so the primary judge’s finding of equality between their contributions (at [382]) reflected a difference of opinion quantified at 7.5 per cent, equating to about $150,000 on the balance sheet as found.
Given the appellant’s focus on “initial” and “post-separation” contributions, the primary judge gave separate consideration to those forms of contribution under discrete headings (at [347]–[357] and [367]–[376]).
In respect of the appellant’s initial capital contributions, there was a factual dispute between the parties. His Honour expressly found it was unlikely the appellant contributed $100,000 in cash, did not accept he had equity of $120,000 in a real property, found a corporation in which the appellant claimed an interest did not even exist at that point in time, and that the appellant’s assertion of then having a share portfolio worth $300,000 was not independently corroborated. In his Summary of Argument, the appellant sought to challenge two of those factual findings, but he is unable to now do so. This ground of appeal concerns only the primary judge’s overall discretionary use of the underlying findings; not the correctness of the underlying findings.
The primary judge therefore rejected the appellant’s contention that he introduced capital of $759,000 to the relationship (at [349]), but was otherwise unable to quantify his initial contribution beyond its approximate equivalence with the respondent’s (at [381]–[382]).
It will be recalled that the parties separated in November 2012 and the appellant commenced working for H Firm about a year later in October 2013. In respect of the appellant’s post-separation contributions, the primary judge said the appellant enjoyed “considerable income” from H Firm, subject to the payments which were compulsorily deducted from his income and paid to the respondent after the interim orders were made in August 2015 (at [367]–[368]). But such payments to the quarantined fund ceased when the appellant’s employment with H Firm ended in June 2017. The parties disputed precisely how much money was paid to or on behalf of the respondent under those interim orders, but the primary judge found she “received significant funds” (at [369]).
When the interim orders were made in August 2015, money was diverted from the appellant’s income into the quarantine account to meet mortgage repayments on the former family home, spousal maintenance, and child support. The respondent actually received $24,229 per month, but of that amount she was ordered to use $20,000 per month to defray the mortgage and to use the balance of $4,229 to cover rates and taxes levied on the former family home, the registration and insurance costs of the car in her possession, and her private health insurance premiums. Those regular monthly payments into the quarantine account ceased in June 2017. Lump sum payments which were later deposited to the quarantine account were exhausted retiring debt (at [139] and [146]–[147]).
Comparatively, the appellant also received considerable financial benefit after the parties’ separation. Without being exhaustive: the respondent sold some real property and applied more than $158,000 from the net proceeds of sale to the appellant’s credit card debt (at [84] and [376]); the appellant withdrew $681,341 from the family trust’s bank account over six years between November 2011 and December 2017 (at [374]); between August 2014 and May 2017 the appellant paid over $4 million cash into corporate accounts he controlled, of which he certainly retained approximately $148,000 when he closed the accounts (at [93], [107] and [125]); the appellant sold a car and kept $10,000 of the sale proceeds (at [115]); and more interim orders permitted the appellant to draw down another $100,000 from the mortgage to meet his legal fees (at [123]).
The ultimate finding of the primary judge in respect of contributions, which the appellant challenges, was expressed in these terms:
381.I have earlier concluded that this is a case that attracts the approach whereby I would not be too careful in making any assumptions or drawing any inferences in the [appellant’s] favour as to what his actual financial circumstances are. In those circumstances, making an assessment of contributions becomes problematic. I have found that I am not satisfied that the [appellant] had significantly more assets than the [respondent] at the commencement of the cohabitation. The [appellant], during the period of the cohabitation, developed a substantial earning capacity. Whilst the [respondent] worked for part of the period of cohabitation, she ceased all paid employment shortly after the birth of the first child and thereafter, fulfilled the primary role of homemaker and parent. The parties have been separated for a significant period of time. In that period, the [respondent] has had the primary ongoing responsibility for the care of the children (who were aged seven and five at the time of the separation). The [appellant] has provided support to the [respondent] but has had available to him substantial income earning capacity partly arising from a client base that had been built up during the period of the cohabitation and that was taken by him to H Firm and then to BB Pty Ltd.
382.So far as it is meaningful, I would assess the contributions by each of the parties to known assets as being equal but I have no confidence in making any assessment as to what unknown assets might be held by the [appellant].
(Emphasis added)
Having regard to the primary judge’s undisturbed findings about the parties’ respective initial and post-separation contributions, in conjunction with the findings about the appellant’s failure to disclose documents and his deliberate concealment of income, we reject the appellant’s submission that the assessment of equal contributions was “manifestly unjust”. In the end, it was no more than a bare assertion. Ground 6 fails.
Grounds 7, 8 and 9 – section 75(2) factors
The primary judge found the respondent was entitled to an adjustment of “in excess of 22.5 per cent” on account of the considerations prescribed under ss 79(4)(d)–(g) of the Act (at [418]), meaning her overall share should be “in excess of 72.5 per cent” (at [419]).
His Honour then turned to consider what form of adjustment order would actually produce an outcome which was just and equitable, consistently with the preceding findings. His Honour concluded that the respondent’s retention of the encumbered former family home, together with other miscellaneous items of property and superannuation, would leave her with an overall share of 73.2 per cent and would be “just and equitable and otherwise appropriate” (at [420]–[421]). As can be seen, the form of adjustment order made by the primary judge crystallised the respondent’s overall entitlement at 0.7 per cent above the baseline findings.
These grounds all attack the quantum of the adjustment made in the respondent’s favour. In particular, it was contended that the adjustment of “in excess of 22.5 per cent” was too large and represents a miscarriage of discretion (Ground 7), it represented another miscarriage of discretion to make orders inflating the actual adjustment to 23.2 per cent when considering whether the proposed adjustment orders were just and equitable overall (Ground 8), and that his Honour erred by failing to take into account the appellant’s enduring liability for debts intentionally excluded from the balance sheet (Ground 9).
At trial, the appellant conceded an adjustment in the respondent’s favour was proper, but contended it should not exceed 12.5 per cent. Given the adjustment was actually 23.2 per cent, these grounds therefore collectively complained about a variation of 10.7 per cent, which equates to about $217,000.
The essential factors which led to the adjustment in the respondent’s favour were the appellant’s very large income-earning capacity (at [385]–[401] and [416]), the respondent’s unemployment and primary responsibility for care of the children (at [403]–[404]), the appellant’s engagement in money laundering activity and his failure to give proper financial disclosure (at [412]–[413] and [416]–[417]), and the appellant’s residual liability for an unproven amount of tax (at [415]).
His Honour found the appellant had an income-earning capacity which was “at least likely to be in the vicinity of $750,000 per annum” (at [401]), which finding is not challenged in the appeal. At the time of trial, the appellant was aged 47 years and had no health complaints (at [383]–[384]), in which case he has a long working future to maximise his income-earning potential. The extra 10.7 per cent adjustment in the respondent’s favour, over and above the adjustment which the appellant conceded would be proper, is but a fraction of the income the appellant could conceivably earn in a single year. Furthermore, the percentage adjustment was calculated on only “known assets”, with the primary judge quite unsure what other assets the appellant might hold (at [416]–[417]).
The appellant contended the primary judge’s failure to conceptualise the ultimate adjustment of 23.2 per cent in “real money terms” was an error of itself (see Lovine & Connor and Anor (2012) FLC 93-515 (“Lovine”) at [77]–[81]), but that was a case in which a 15 per cent adjustment under s 75(2) of the Act amounted to a differential of some $4 million, so it is not factually analogous. The point made in Lovine (and the cases cited at [81] thereof) is that the reasons given for such a significant adjustment must be adequate and, if they are not, appellate intervention is enlivened. Translating the percentage adjustment into real money terms is thus one method which ensures the judge explains the effect of the decision to order a very substantial adjustment and illuminates the process of reasoning. In any event, contrary to the appellant’s submission, the primary judge expressly did consider in this instance how the respondent’s ultimate entitlement to 73.2 per cent of the parties’ known property enabled her the chance to acquire exclusive title to the former family home, subject to its encumbrance. The appellant received some spent cash as part of his share of the property and still had debts to pay, but that reality was not overlooked by his Honour (at [419]–[421]).
We reject the contentions within Grounds 7 and 8 that the exercise of discretionary adjustment miscarried.
As for Ground 9, the primary judge expressly took into account the appellant’s continuing liability for the tax debts which he had failed to satisfactorily prove (at [415]), so the appellant’s submission they were not considered is rejected. Since they were considered, the appellant was unable to advance any persuasive argument for why they were not sufficiently considered.
The appellant’s existing credit card debts of about $78,000, which were also omitted from the balance sheet, were mentioned in passing (at [410]). Even if, arguably, that was an insufficient acknowledgment of the residual liability, given the context of the appellant’s gross non-disclosure and his active concealment of many bank accounts and vast sums of cash, an omission of that magnitude does not convert an orthodox exercise of discretion into a miscarriage.
Finally, in respect of the debts for which the appellant will remain liable, the appellant submitted in his Summary of Argument that the primary judge erred by failing to take into consideration the provisions of s 75(2)(ha) of the Act, which provides as follows:
75Matters to be so taken into consideration…
(2)The matters to be so taken into account are:
…
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant…
(Italicised emphasis added)
As can be seen, the sub-section is not necessarily relevant. It was enacted as part of the 2005 legislative reform to harmonise the Act and the Bankruptcy Act 1966 (Cth). It is directed to the protection of creditors’ interests and, relevantly in this case, the interests of the ATO and the credit card providers; not the spouses’ interests (Trustee of the Property of G Lemnos, A Bankrupt & Lemnos and Anor (2009) FLC 93-394 at [45]–[61], [98]–[101], [169]–[179], [200]–[202], [263]–[264] and [287]–[290]).
The respondent did not accept the appellant’s tax and credit card liabilities were relevant to the dispute because she contended that, aside from any assets the appellant had hidden from her, he had the financial capacity to meet the debts.
While the appellant argued his tax and credit card debts should have been included on the balance sheet so they could be met from the parties’ collective property interests, he knew the respondent opposed that course and so was aware he might not have his way, but he omitted any reference to s 75(2)(ha) as being an alternatively critical consideration when s 79(4)(e) of the Act was applied. His insistence on its importance in the appeal is unconvincing. It is, in any event, easily met by the primary judge’s undisturbed finding about his enormous income-earning capacity and the grave suspicion of his access to undisclosed assets which could be utilised to pay these creditors.
Ground 9 also fails.
The costs appeal
Although this appeal is from both orders which were made on 1 April 2020, the grounds related exclusively to the order requiring the appellant to meet 70 per cent of the respondent’s party/party costs (Order 2); not to the other order requiring the appellant to reimburse the respondent for one-half of the valuation witnesses’ costs borne by her (Order 1).
At the outset, it is useful to cite some trite propositions about costs orders and their appellate review, which provide context to this appeal.
Section 117(1) of the Act must yield to s 117(2) when there are circumstances justifying an order for costs (Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 at 191) and, relevantly, the presentation by one party of false evidence about financial circumstances, which puts the other party to the trouble and expense of countermanding, is a circumstance which will often justify an order for costs (Penfold v Penfold (1980) 144 CLR 311 at 318).
It has been well established for more than a century that, other than for strong reasons, an appellate court will not interfere with the discretion belonging to the court below to make costs orders (Maiden v Maiden (1909) 7 CLR 727 at 742; McCauley v McCauley (1910) 10 CLR 434 at 455). The same general principle applies under the Act, with the Full Court reluctant to interfere with a trial judge’s exercise of discretion to make costs orders (Anison & Anison (2019) FLC 93‑908 (“Anison”) at [9]–[11], [71] and [72]). However, as was acknowledged in Anison, this does not mean the Full Court should never interfere. The Full Court at [11], applying Robinson and Higginbotham (1991) FLC 92-209, specifically noted that where the result is plainly unjust or if the discretion was exercised on wrong principles then this Court must interfere.
Ground 1
This ground contends as follows:
… [T]he learned [primary] Judge erred in finding that the [appellant’s] earning capacity will be available to him so as to enable him to meet any order for costs...
The actual finding made by the primary judge was expressed in these terms:
22.Even if the [appellant] is currently in a position of financial stress, his skills and consequent earning capacity will remain available to him over time. Current assertions by him of impecuniosity are, of themselves, no bar to a costs order.
As can be seen, the ground of appeal does not accurately reflect the finding under challenge. His Honour did not positively find the appellant would be able to satisfy a costs order; only that his substantial earning capacity remained intact and his submission of impecuniosity did not preclude an order for costs being made against him.
That conclusion followed from findings made in the substantive proceedings that the appellant’s earning capacity was much higher than he alleged or conceded, probably being in the vicinity of $750,000 per annum (at [19]), and the improbability of the appellant’s true financial circumstances being as he declared in his most recent financial statement (at [21]). Neither of those findings was challenged in the substantive appeal.
His Honour was cognisant of how the appellant contended he did not have the financial capacity to meet any costs order (at [15]–[17]), but did not accept the bald proposition he could pay nothing at all towards the respondent’s costs.
In effect, this ground of appeal asserts the primary judge erred by failing to accept the appellant’s evidence of his penury as being determinative, even though his evidence at trial about his financial circumstances was thoroughly discredited. The appellant did not even attempt to explain the inherent paradox of his argument: why must or should his evidence have been accepted by the primary judge in the costs hearing when it had been soundly rejected at trial?
Without filing an Amended Notice of Appeal, the appellant attempted to amend this ground of appeal to include an additional contention in his Summary of Argument to the effect that the primary judge failed to give “proper” consideration to the “significant imbalance and disparity” between the parties’ financial circumstances after the substantive orders were made in November 2019. The respondent claimed no disadvantage in having to meet the amended ground so we are inclined to entertain it, though it is rejected.
His Honour accepted the respondent’s unchallenged evidence about her current financial circumstances (at [13]–[14]) and recited the evidence relied upon by the appellant to substantiate the contention that he was on the cusp of bankruptcy and unable to meet any costs order (at [15]–[17]). It must follow that the primary judge did therefore “consider” the appellant’s evidence about the parties’ disparate financial circumstances but, given the proven unreliability of his evidence, did not accept it clinched his rebuttal of the respondent’s application. The appellant did not articulate how the primary judge’s consideration of that evidence could have been any more “proper” than it was.
The appellant submitted in the appeal:
10.A thorough review of the [a]ppellant’s financial circumstances in their entirety as against those of the [r]espondent ought to have led the [primary] Judge to an alternate finding with respect to the [a]ppellant’s ability to meet an Order for costs in favour of the [r]espondent from his income earning capacity and skills.
The submission wrongly assumes two things: first, that the primary judge was obliged to accept the appellant’s evidence as being truthful and accurate; and secondly, acceptance of his evidence of penury then precluded any costs order being made. In fact, there was no obligation to accept the appellant’s evidence about his financial circumstances when his evidence on that topic was rejected at the trial and, even if his evidence at the costs hearing had been reliable, his penury was not dispositive. Impecuniosity is not an unconditional shield against costs orders (Mallory & Mallory [2020] FamCAFC 62 at [9]).
Ground 2
This ground contends the primary judge fell into error by relying upon the appellant’s failure to give full and frank disclosure twice over – once in the substantive proceedings to influence the parties’ proportional shares of their property interests, and again in the costs hearing, as an aspect of the appellant’s conduct under s 117(2A)(c) of the Act. The appellant’s submission was that he was therefore wrongly “held accountable” for the same conduct twice.
The submission is rejected. First and foremost, the appellant’s proven failure to give full and frank disclosure was used in different ways for different purposes. In the substantive proceedings, the finding was used to influence the decision about the respondent’s share of “known assets”, whereas in the costs proceedings the finding was integral to the way in which the appellant’s conduct of the substantive proceedings unjustifiably increased the legal costs incurred by the respondent in pursuing her claim for relief (at [24]–[26] and [31]). The most egregious example was the respondent’s need to successfully apply, over the appellant’s objection, to re-open the evidence to prove the appellant’s financial dishonesty.
In any event, the appellant was not being “held accountable” for his forensic conduct in some retributive way because costs orders are compensatory, not punitive (Latoudis v Casey (1990) 170 CLR 534 at 543, 563 and 567). On the contrary, had the primary judge ignored the appellant’s failure to give full and frank disclosure, expressly relied upon by the respondent as a plank of her costs application, then his Honour would have fallen into appealable error by failing to take a material consideration into account.
Ground 3
This ground contends the primary judge failed to take into account as a material consideration in the costs dispute the parties’ foreclosure of miscellaneous contentious issues, concerning child support and spousal maintenance, at the commencement of the trial.
It should be initially observed that the appellant did not submit to the primary judge that the compromise of those issues was a material consideration which should be taken into account in the contested costs application, either in the affidavit he filed on 30 January 2020 or in the oral submissions he made at the costs hearing on 25 March 2020.
Notwithstanding the appellant’s omission to assert the materiality of the partial compromise, the alleged failure to take that consideration into account is rejected as being incorrect because the primary judge said this in the reasons for judgment:
3.The [respondent’s] application is in effect to obtain an order for costs not only for the substantive property proceedings but for all applications including all interlocutory applications. Ultimately the issues of child support and maintenance were settled by agreement.
…
42.Dissecting out matters relating to child support, spousal maintenance and enforcement would be tedious on a costs assessment. Instead, making a general estimate, I shall award the [respondent] 70% of her overall legal costs in the proceedings, including interim applications and 70% disbursements other than those referred to in the next paragraph.
(Emphasis added)
In the face of such explicit reasons, the appellant cannot rationally contend his Honour failed to take into account the compromises reached over child support and spousal maintenance. It was considered; it was just not given the significance for which the appellant retrospectively hoped.
Ground 4
This ground contends the primary judge failed to give adequate reasons for awarding the respondent 70 per cent of her party/party costs.
Having taken into account and discussed the parties’ evidence and submissions which engaged sub-sections (a), (c), (d), (e) and (f) of s 117(2A) of the Act, the primary judge concluded:
39.Taking all of those matters into account, it is just for an order as to costs to be made in [the respondent’s] favour, in relation to the substantive proceedings for a property settlement order.
40.The facts do not disclose any special or unusual feature in this case such as would attract an order for indemnity costs. The costs order should be on a party/party basis.
…
42.Dissecting out matters relating to child support, spousal maintenance and enforcement would be tedious on a costs assessment. Instead, making a general estimate, I shall award the [respondent] 70% of her overall legal costs in the proceedings, including interim applications and 70% disbursements other than those referred to in the next paragraph.
(Emphasis added)
As can be seen, his Honour rejected the respondent’s primary application for indemnity costs, rejected her fall-back application for party/party costs, and decided to award her only 70 per cent of her fall-back application. Obviously, the primary judge was persuaded by the appellant’s submissions to pare back the extent of the costs order in the respondent’s favour.
The appellant’s criticism of the order is confined to, first, the absence of any explanation for why the respondent’s claim was pegged at 70 per cent and not at some other percentage proportion of her overall costs, and secondly, the failure to discretely consider how the provisions of s 117(2) and s 117(2A) of the Act affected the multitude of interim disputes within the proceedings.
We reject both criticisms. The reasons given for costs decisions need not be lengthy and those given by the primary judge were ample to explain the result. The respondent applied for her costs of the proceedings to be considered globally and the appellant did not express or imply that his Honour should approach the adjudication of the dispute in any other way. The parties adopted an entirely orthodox approach to the costs dispute and the primary judge made no error of principle in determining the matter in the way he was asked.
Orders and costs
Both appeals are dismissed for lack of merit.
The respondent sought costs against the appellant if the appeals were dismissed, which the appellant conceded he could not oppose.
The respondent filed amended schedules of her costs incurred in both appeals. Her costs in the property settlement appeal were calculated at $45,688.85 and in the costs appeal at $4,351.14, approximating $50,000 overall. The appellant took objection to only one item claimed in the first schedule, quantified at about $3,500, which objection the respondent conceded.
In reliance upon r 19.18(1)(a) of the Family Law Rules 2004 (Cth), we shall therefore fix the respondent’s costs at $46,500.
I certify that the preceding one-hundred and eleven (111) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ainslie‑Wallace, Ryan & Austin JJ) delivered on 24 November 2020.
Associate:
Date: 24 November 2020
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