NEEDHAM & TRUSTEES OF THE BANKRUPT ESTATE OF NEEDHAM
[2017] FamCAFC 94
•23 May 2017
FAMILY COURT OF AUSTRALIA
| NEEDHAM & TRUSTEES OF THE BANKRUPT ESTATE OF NEEDHAM | [2017] FamCAFC 94 |
| FAMILY LAW – APPEAL – PROPERTY – Where the husband and wife were separated for over seventeen years at the time of the trial – Where the husband was declared bankrupt and the Trustees became the respondents in the property proceedings pursuant to s 79(11) of the Family Law Act 1975 (Cth) – Where the contributions prior to separation were found to be equal – Where apart from assets acquired by the wife post separation, the only asset was the matrimonial home – Where the wife was the sole carer of the children post-separation and solely responsible for the upkeep of the matrimonial home and expenses for the children, save for the school fees which were paid by the husband – Where the trial judge ordered that the matrimonial home be sold and 68 per cent less the sum of $12,555 be paid to the wife and 32 per cent plus the sum $12,555 be paid to the trustees – Where these orders included property acquired by the wife post-separation – Whether the trial judge properly assessed the wife’s post separation contributions and gave adequate reasons – Where the trial judge erred in assessing the wife’s post separation contributions – Where it is not possible to ascertain how the trial judge arrived at the figures ordered – Whether it was just and equitable for the trial judge to include the wife’s post-separation acquired assets in the property pool – Where it was not correct in the circumstances of this case to give the Trustees a share of the wife’s post-separation assets – Whether the trial judge erred in not considering whether the husband had additional assets and whether the trustees had a duty of disclosure to make further enquiries – Where the trial judge did not err and it is sufficient if all reasonable enquiries are made taking into account the particular circumstances, and the need for proportionality – Whether the adjustment for the wife’s future needs was appropriate and whether the overall outcome was just and equitable – Where the percentage was inadequate and does not properly reflect the wife’s contributions post separation and future needs – Appeal allowed – Re-exercise of discretion in favour of the wife. FAMILY LAW – APPEAL – COSTS CERTIFICATES – Costs certificates granted. |
| Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth) Family Law Act 1975 (Cth) ss 75(2), 79(1) and (11) |
Federal Proceedings (Costs) Act1981 (Cth) ss 6, 9
Family Law Rules 2004 (Cth) r 13.04
Gould & Gould (2007) FLC 93-333
Gronow v Gronow (1979) 144 CLR 513
House v The King (1936) 55 CLR 499
Mallet v Mallet (1984) 156 CLR 605
Masoud & Masoud [2016] FamCAFC 24
Sharman v Evans (1976 – 1977) 138 CLR 563
| APPELLANT: | Ms Needham |
| RESPONDENT: | Trustees of the Bankrupt Estate of Mr Needham |
| FILE NUMBER: | SYF | 4097 | of | 2006 |
| APPEAL NUMBER: | EA | 76 | of | 2016 |
| DATE DELIVERED: | 23 May 2017 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | May, Strickland & Cronin JJ |
| HEARING DATE: | 27 September 2016 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 20 April 2016 |
| LOWER COURT MNC: | [2016] FamCA 253 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Johnston |
| SOLICITOR FOR THE APPELLANT: | Not Applicable |
| COUNSEL FOR THE RESPONDENT: | Mr Ash |
| SOLICITOR FOR THE RESPONDENT: | Hunt & Hunt |
Orders
The Appeal is allowed.
The orders made on 20 April 2016 be set aside.
The wife and the Trustees of the Bankrupt Estate of Mr Needham (“the Trustees”) do all acts and sign all documents necessary to effect a sale of the property, situated at B Street, Suburb C with Folio Identifier … (“the Property”).
The net proceeds of sale are to be paid in the following manner and priority:
(a) Payment of the expenses referred to in Order 5 below;
(b) The balance as to:
(i)80 per cent to the wife; and
(ii)20 per cent to the Trustees.
The following amounts are to be deducted from the proceeds of sale before any sum is paid to the wife or the Trustees pursuant to these Orders:
(a) The costs, expenses and commission of the real estate agent or agents acting on the sale of the property;
(b) The costs, fees and disbursements of the lawyer or lawyers acting for the parties on the sale of the property; and
(c) Any adjustment for water rates and council rates.
The wife is to have the authority to conduct the sale of the Property either by public auction or by private treaty including to nominate the minimum reserve price or contract price, as the case may be, and to nominate the agent and lawyer to have carriage of the sale, and to transfer the Property to the purchasers and to receive and disburse the purchase money in accordance with these orders.
The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
The Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
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 Needham & Trustees of the Bankrupt Estate of Needham 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 Number: EA76 of 2016
File Number: SYF 4097 of 2006
| Ms Needham |
Appellant
And
| Trustees of the Bankrupt Estate of Mr Needham |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Needham (“the wife”) has appealed from orders made on 20 April 2016 by McClelland J. Those orders provided that the wife and Mr Vermeer and Mr Crawford as Trustees of the Bankrupt Estate of Mr Needham (“the Trustees”) do all things necessary to sell the former matrimonial home. It was agreed that the home was valued at $3,000,000. Other than assets acquired by the wife post separation, this was the only asset to be divided between the parties. The proceeds of sale were ordered to be distributed in the following manner and priority:
a)To pay the expenses involved in selling the property, including the legal fees for the lawyers acting on the sale and the cost of any final adjustments for water and council rates;
b)To the wife 68 per cent (less the sum of $12,555); and
c)32 per cent (plus the sum of $12,555) to the Trustees.
The sum of $12,555 represents 32 per cent of the wife’s post separation acquired assets, valued at $40,000 approximately.
The percentage division of the net sale proceeds of the house was based on a finding that the husband and wife contributed equally during co-habitation, that 13 per cent should be added in favour of the wife by reason of post separation contributions and a further five per cent by reason of the wife’s future needs.
The wife and Mr Needham (“the husband”) having been married for approximately 14 years, divorced in December 2006. They separated in May 1999. It can thus be seen that by the time of the trial they had been separated for seventeen years, one of the unusual features of this case. It was the wife’s evidence that she and the husband had come to an “understanding” that she would retain the jointly owned home, on the conditions she maintained the property, looked after the children and their needs and made no further claim for any of the husband’s money.
On 16 February 2015 the husband was declared bankrupt. The Trustees became respondents in these proceedings by reason of the provisions contained in s 79(11) of the Family Law Act 1975 (Cth) (“the Act”).
In a joint chronology, it was agreed at the time of trial that the total claim against the bankrupt estate of the husband was approximately $3.4 million. The husband’s bankruptcy occurred as a result of the husband’s actions after the parties separated, when he was working in the Middle East. The husband ceased employment with a particular firm, which ultimately commenced action against him claiming he sought to divert clients from that firm to another firm. Judgment was eventually made against the husband in the sum of $7 million.
The wife has seven grounds of appeal, the sixth ground was withdrawn prior to the hearing of the appeal. Notwithstanding these grounds, the central issues in this appeal are as follows:
a)Did the trial judge properly assess the wife’s post separation contributions and give adequate reasons for such assessment?
b)Was it just and equitable for the trial judge to include the wife’s post-separation acquired assets in the property pool;
c)Did the trial judge err in not considering the wife’s claim that the husband held additional assets and should have concluded that the trustees had a duty of disclosure (to make further enquiry);
d)What was the appropriate adjustment for the wife’s future needs and was the overall outcome just and equitable?
In the Notice of Appeal, the wife asks that the Full Court re-exercise the discretion and order the net proceeds of sale be distributed in the same manner as described by the trial judge, but with the wife to instead receive 80 per cent of the net proceeds. The wife is still living in the home.
At the hearing of the appeal, counsel for each party made submissions as to how this court should re-exercise the discretion if the appeal is allowed. There was no application from either counsel to provide any further evidence in relation to the re-exercise.
Background
The husband is currently aged 74 and the wife 72. The couple had two children who are now adults. The husband also has one son from a previous marriage and the wife has two daughters from a previous marriage. The wife was self-employed and the husband previously worked for various companies but who also worked in his own business.
The parties purchased the matrimonial home in 1984 for $305,000. The wife contributed $120,000 to the purchase and the husband paid the balance. Some additions were made to the home in 1987. Ultimately, the trial judge found, and this finding was not challenged on appeal, that the contributions, both financial and non-financial between 1984 and 1999 were equal (at [3]).
It is the assessment by the trial judge of the post-separation contributions that is central to the wife’s appeal.
At the time of the trial, the wife was 71 years old and in semi-retirement, with no superannuation. The wife’s case, uncontested at the trial, is that she was the primary carer for the children prior to separation, and post-separation she was the children’s sole carer. Apart from school fees, the husband paid no child support. The wife was solely responsible for the upkeep of the house and also attended to all of the clothing, dental and medical expenses for the children.
The Appeal
The wife is pressing six of her seven grounds of appeal – it is useful in this matter to set them out in full as they adequately describe her case:
1.That his Honour erred in the exercise of the Court’s discretion in assessing the Appellant’s post separation contributions over a period of 17 years to the former matrimonial home at 13% such assessment being outside the generous ambit of the Court’s discretion in circumstances where:
a.The Appellant was solely raising the husband’s two children, her own child and the two children of the marriage whilst the husband resided overseas during the post-separation period of 17 years;
b.The husband was paying no child support of [sic] the children of the marriage or for his own two children;
c.The husband’s post-separation interest in the former matrimonial home was diminishing exponentially over the 17 year period;
d.The Appellant was making the sole financial contributions to the conservation and improvement of the property;
e.The husband’s only financial contribution was to pay boarding school fees for his two children, contrary to his Honour’s finding, did not free the Appellant up to pursue her career as she was the sole homemaker and parent for all five children in the husband’s absence.
2.That his Honour erred in failing to provide any/any adequate reasons in respect of the finding at paragraph 91 of the Reasons for Judgment (“the judgment”) as to how his Honour took into account the Appellant’s post separation occupation of the former matrimonial home in circumstances where:
a.the reasonable inference to be drawn in the absence of reasons is that an adverse adjustment was made against the Appellant;
b.The Appellant had the right of occupation as a co-owner;
c.The Appellant was raising all five children in the home being one of the husband’s children, two of the parties children and two of her own children;
d.The husband’s post separation interest in the home was an ever diminishing one by virtue of the Appellant’s corresponding increased interest over 17 years;
e.The husband’s actions in leaving the wife and children in occupation of the home were entirely consistent with the uncontested agreement for the Appellant to retain the home as referred to by his Honour as paragraph 10 of the Judgment as recorded in paragraph 42 of the Appellant’s affidavit;
f.There was no evidence to suggest that the Appellant had acted to exclude the husband from the home.
3.That his Honour erred in making an adjustment in favour of the Respondent’s of the Appellant’s post separation acquired assets of 32% such assets comprising the Appellant’s practice bank account, her personal bank accounts, her … motor vehicle her household contents and jewellery whereby his Honour failed to provide any reasons as to why such property “must” be included in the asset pool (paragraph 81).
4.That his Honour erred at (sic) in finding at paragraph 74 of the Judgment that the question of whether the husband had additional assets beyond his interest in the former matrimonial home was a matter on mere speculation in circumstances where:
a.His Honour found that the Respondents were bound by Chapter 13 of the Rules;
b.The wife had no knowledge of the nature and value of the husband’s off shore assets;
c.The evidence on behalf of the Respondents was that a Freezing Order against the husband’s assets identified by the petitioning creditor in his Supreme Court proceedings identified two off shore bank accounts (amongst other assets) being one in the [Country S] and one in the [Middle East] neither of whom would provide information unless orders were obtained from the relevant Courts of those jurisdictions;
d.The contention on behalf of the Trustees recorded at paragraph 36 of the Judgment that there were limited funds available to investigate those overseas accounts was contrary to the evidence;
e.The only creditor of the bankrupt husband, [F Ltd], was prepared to fund the Respondents costs of the Family Law proceedings in the sum of $53,136 plus GST;
f.[F Ltd] had spent millions of dollars on legal fees pursuing damages against the husband;
g.The Trustees did not take any action against the husband to have him publically examined;
h.His Honour failed to consider, putting aside the Respondents’ obligations, whether the evidence established there was undisclosed interests in property in the husband’s hands.
5.That his Honour erred in assessing the wife’s future needs pursuant to section 75(2) of the Act as requiring only a modest adjustment of 5% in her favour which in all the circumstances was manifestly unjust and inequitable.
…
7.That his Honour erred in making an adjustment of 68% of all of the known assets of the husband and the wife in all the circumstances was manifestly unjust and inequitable.
Did the trial judge properly assess the wife’s post separation contributions and give adequate reasons? (Grounds 1 and 2)
The wife complains that the trial judge erred in assessing 13 per cent of the net value of the sale proceeds as proper recognition of her post separation contributions, arguing that this percentage falls outside the “generous ambit” of the Court’s discretion.
It is as well in considering these grounds to reflect on the occasions intermediate Courts of Appeal should interfere with a decision based on discretion. In House v The King (1936) 55 CLR 499 it was said (at 504-505):
The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
His Honour’s findings in relation to contributions commence at [82] of the Reasons, where:
a)It was concluded at [86] that it is just and equitable to alter the property interests of the parties in the Suburb C Property.
b)From [87] – [91] his Honour considered the respective financial and non-financial contributions of the husband and wife. It is found that the initial contribution to the home was approximately 60 per cent by the husband and 40 per cent by the wife. Additionally, renovations to the property were found to be jointly funded. The husband was found to be the primary income earner, whereas the wife “earned an income that varied between $50 000 and $80 000 per annum” (at [89]).
c)At [92] – [97] his Honour considers the contributions to the welfare of the family and the children. Reference should also be made to [10] of the Reasons, where his Honour set out in considerable detail the evidence of the respective contributions. It is helpful to repeat in part, some of that evidence:
…
•Following separation in May 1999, all of the children continued to live with the wife, with the two youngest children, [Mr J] (then aged 13) and [Ms L] (then aged 9) spending Christmas with their father in Europe over the next few years. [Mr G] moved to the UK later that year.
•The husband paid the private school fees for the child of his first marriage, [Mr G], who was an adult and had left school at the time of separation. After separation, the husband continued to pay the private school fees of [Mr J] and [Ms L] until they left school.
…
•The wife was not cross examined in respect to her assertion that, from the time of separation, she paid for the children’s clothing, dental and medical bills and attended to their emotional, social and physical needs. This occurred, without contribution from the husband, until each of them acquired full time employment or moved out.
…
•The wife’s evidence was that the [Suburb C] property was built in 1948 and has required extensive upkeep as documented in paragraphs 64 to 74 of her affidavit filed 6 November 2015. The wife asserted that she has attended to all maintenance and outgoings in respect to the former matrimonial home since the parties separated. This included regular pest control expenses in respect to a colony of funnel web spiders as well as council rates (which are currently $3 200 per annum) and rent in respect to the car-port space of approximately $385 per annum.
…
Commencing at [98] of the Reasons, his Honour evaluated those contributions, with key findings including:
a)That the contributions of the parties from cohabitation in 1984 until May 1999 were approximately equal;
b)That the contributions of the wife post separation were “substantially greater” than the husband,
but then His Honour concluded at [105] that “appropriate assessment of contributions overall is 63 per cent by the wife and 37 per cent by the husband.”
Wife’s Submissions
The wife challenges in particular the following finding at [96]:
Counsel for the Respondent Trustees submitted that the payment of the private school fees and boarding fees was a substantial contribution in itself. I accept this. It was further submitted that, by facilitating the three children attending boarding school, the wife had an enhanced opportunity to engage in her profession. I accept this also. On the other hand, the children of the wife from her previous relationship, [Ms H] and [Ms I], attended public school and, at all times the wife was responsible for attending to their needs as well as attending to the needs of the other three children until they commenced high school and during school holidays.
In our view it is correctly submitted on behalf of the wife that she did not have an “enhanced opportunity to engage in her professional practice” as she had the sole care of five children, with such demands not diminished by two of those children attending boarding school.
The wife also challenges the following finding at [91]:
On the other hand, as the Respondent Trustees submitted, the wife has solely benefited from the use of the property for the past 16 years.
Again, such a conclusion ignores other important facts including her contribution to the maintenance of the home and that the children also lived in the house.
The wife contends that “the reasonable inference to be drawn in the absence of reasons is that an adverse adjustment was made against the [wife]”. The wife submits that she “was entitled to know how and to what extent his Honour took into account the post separation occupation of the home…”.
The Trustee, in response to these grounds simply contends that the percentage awarded to the wife was entirely within his Honour’s discretion, and that the wife’s post separation contributions were adequately recognised.
Having regard to the reasons, it is clear that his Honour was in error in not giving appropriate consideration and weight to the following factors:
a)The wife contributed almost solely to the children’s welfare post separation;
b)While the husband did pay school fees for the parties children, this was a minor contribution in contrast to the overwhelming responsibility of that of the wife; and
c)The husband made no contribution to the property other than the wife having the sole use of a jointly owned house
It is not possible to ascertain from the reasons how the judge arrived at the figure of 63 per cent especially as he described the wife’s contributions as substantial. The basis of the move from qualitative to quantitative is not only impossible to discern, but the outcome is not reflective of the unchallenged evidence as to the respective contributions of the parties.
That evidence required a far greater percentage be attributed to the wife by reason of her post separation contributions.
In concluding that the trial judge has erred in the exercise of his discretion (Ground 1), we are mindful that a proper foundation must be established. For example, we are acutely aware of what Stephen J said in Gronow v Gronow (1979) 144 CLR 513, at 520, namely:
The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge's discretionary decision on grounds which only involve conflicting assessments of matters of weight. … (see also Aicken J’s statement to similar effect at 538)
That admonishment has been repeated by the High Court on a number of occasions subsequently, including by Gibbs CJ in Mallet v Mallet (1984) 156 CLR 605, at 614 and 615 (and previously by Barwick CJ in Sharman v Evans (1976 – 1977) 138 CLR 563 at 565).
The proper foundation here is not in the trial judge acting on any wrong principle, allowing extraneous or irrelevant matters to guide or affect him, but in mistaking the facts, and failing to take into account material considerations. We have identified the former in [19] and [20] above, and the latter in [21] and [22] above. However, if that is not thought to be enough by itself, then we are separately satisfied that the result is so unreasonable or plainly unjust, that it can be inferred that his Honour failed to properly exercise the discretion.
Grounds 1 and 2 must succeed.
Wife’s post separation assets (Ground 3)
On appeal, the wife argues that the judge erred by including her own personal and post-separation assets in the asset pool. At [81] of his reasons the trial judge said:
In addition to the [Suburb C] property, the matrimonial property pool must include the wife’s property. This is identified in the wife’s Financial Statement filed on 5 April 2015 as follows:
·National Australia Bank account in the name of “[Ms Needham] and Associates” - $3198
·National Australia Bank account - $3231.15
·National Australia Bank savings account - $6804
·Motor vehicle - $20 000
·Household contents - $4000
·Jewellery - $2000
TOTAL $39 233.15
(Emphasis added)
The wife submits that as the Trustees did not seek any interest in her personal assets, it was not appropriate to make such an order. Reference to [8] of the Reasons sets out the orders sought by the Trustees before the primary judge, the only order sought was for a share of the net proceeds of the sale of the house.
The order made by the judge provided the Trustees with the sum of $12,555 on account of the wife’s personal assets. Although it was open to the judge to compile a pool including assets acquired by the wife post separation it was not correct in the circumstances of this case to give the Trustees a share of them. This figure represents 32 per cent of assets to which the husband made little or no contribution, and cannot be justified. Instead, those assets should be considered in the context of the wife’s current circumstances as part of a decision addressing the s 75(2) matters. This ground must also succeed.
Did the judge err in disregarding the wife’s case as to the husband’s non-disclosure and were the trustees obliged themselves for the purpose of these Family Court proceedings to make enquiries? (Ground 4)
In understanding the challenge contained in these grounds of appeal, it is helpful to canvass the findings of his Honour in relation to the husband’s bankruptcy, the Trustees obligation of disclosure and also the husband’s apparent waste of assets.
The trial judge examined the relevant provisions contained within the Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth) (“the 2005 Amendment Act”).
That Act amended s 79(1) of the Family Law Act to include relevant provisions related to bankruptcy of one of the parties. His Honour correctly said that “the 2005 Amendment Act therefore enables a Trustee to join proceedings for the purpose of resisting claims by a non-bankrupt spouse to vested bankruptcy property. The legislation does not…empower the Respondent Trustees to…enlarge the vested bankruptcy property available to the bankrupt spouse’s creditors.”
Counsel for the wife argued during the trial that the Trustees were bound by obligations of full and frank disclosure, such obligations being set out in r 13.04 of the Family Law Rules 2004 (“the Rules”). The Trustees disagreed, and argued they were not bound by the rules as they were not a party to the marriage referring particularly to the following provision:
13.02
(1)This Division sets out the duty of disclosure required by parties to a financial case.
(2)This Division does not apply to a party to a property case who is not a party to the marriage or de facto relationship to which the application relates, except to the extent that the party's financial circumstances are relevant to the issues in dispute.
The trial judge concluded (at [65]), correctly in our view, that the Trustees were subject to the Rules, in particular Chapter 13, and were therefore subject to a duty of full and frank disclosure. The trial judge then considered a number of cases to determine the extent of such duty. Reference was made to Masoud & Masoud [2016] FamCAFC 24 where it was found in that case the relevant duty “…does not oblige a party to ‘garner documents by any means’”. His Honour then concluded that he was “not persuaded that there is an obligation under the Rules for the Trustees to undertake an examination of the husband pursuant to section 81 of the Bankruptcy Act”.
The trial judge rejected the argument that the asserted non-disclosure of the husband’s financial circumstances should result in an adjustment in her favour. His Honour found that while the court may have regard to a party’s non-disclosure (per Gould & Gould (2007) FLC 93-333 at 81,715), such approach does not mean an automatic adjustment in the other side’s favour:
72.However, even it is assumed that the Respondent Trustees have failed in their duty of disclosure, that does not necessarily result in an adjustment in favour of the other party. As the Full Court recently confirmed in Masoud at [24]:
It needs to be observed too that it is well recognised that there is a difference between circumstances where there is inadequate disclosure which suggests the existence of undisclosed assets and where it does not (see HDM & MM and Anor [2006] FamCA 47).
The trial judge concluded “mere speculation” that there were other assets was not enough, and the financial expert (who was not required for cross-examination) had provided evidence of her attempts to obtain information on those alleged assets (at [75]). His Honour found that the Trustees had “acted appropriately” to provide full and frank disclosure of the assets and that “[t]he evidence falls short of establishing, on the balance of probabilities, that the husband has additional interests that should be included in the matrimonial property pool”.
His Honour correctly stated the position of the Trustees and the power of the Court:
48.A point of distinction, in circumstances where a party to the marriage has become bankrupt, is the fact that sub-section 79(1)(b) empowers the Court to make an order altering the interests of the Official Trustee in Bankruptcy “…in the vested bankruptcy property.” This is in contrast to the Court’s general power, where bankruptcy is not an issue, to alter the interests of the parties in the property of the marriage. The jurisdiction granted by the 2005 Amendment Act therefore enables a Trustee to join proceedings for the purpose of resisting claims by a non-bankrupt spouse to vested bankruptcy property. The legislation does not, however, empower the Respondent Trustees to utilise the provisions of the FLA to enlarge the vested bankruptcy property available to the bankrupt spouse’s creditors.
The trial judge relied upon the evidence of the Trustees which apparently demonstrated some investigation of the husband’s potential assets. His Honour concluded:
80.In my view, in all the circumstances, the Respondent Trustees have acted appropriately in endeavouring to ascertain what forms part of the vested bankruptcy property. The evidence falls short of establishing, on the balance of probabilities, that the husband has additional interests that should be included in the matrimonial property pool.
The Trustees contended that “the application of fairness and equity demands that any adjustment in the wife’s favour should be minimal.” In response to the wife’s complaint that the Trustees had failed to properly investigate the husband, it was submitted by the Trustees:
36.In summary in respect to the issue of disclosure, it was submitted that further enquiry would have been a futility having regard to the fact that it was a difficult estate that included overseas investigations in circumstances where the husband was wholly uncooperative. The practicality of further investigation, it was argued, also had to be seen in the context of the investigators having limited funds available to pursue such investigations.
We accept this submission, and indicate that it is sufficient if all reasonable enquiries are made taking into account the particular circumstances, and the need for proportionality.
We see no merit in these grounds although as made clear, the appeal must succeed for other reasons.
What was the appropriate adjustment for the wife’s future needs and was the overall outcome just and equitable? (Grounds 5 and 7)
This ground relies on the wife’s overwhelming contributions post-separation to which reference has already been made in these reasons.
At [106] – [133] the judge considered the relevant matters contained in s 75(2), a number of findings are made, commencing at [134]. The trial judge placed considerable weight on the wife’s age and earning capacity, finding an adjustment would be just and equitable – 5 per cent. At [137] and [138] the trial judge demonstrates the mathematics of the adjustments.
On any view, this percentage is inadequate and does not properly reflect the wife’s current and future position. Of course, if the percentage allowed for contribution is increased significantly, the amount to be allowed for s 75(2) may be affected and 5 per cent could be regarded as adequate.
Conclusion and Costs
We find that the appeal should be allowed.
As the appeal is to be allowed by reason of the errors made by the judge, upon the application of the parties, orders for costs certificates pursuant to the relevant provisions of the Federal Proceedings (Costs) Act1981 (Cth) (“the Costs Act”) will be made for the appeal. We received submissions from the Trustees in relation to their application for an order in their favour pursuant to the Costs Act and we are satisfied that such an order can be made and should be made in this case.
Re-Exercise of Discretion
As we have already observed, a finding that a contribution by the wife to the date of trial at 63 per cent is entirely outside the range of reasonable discretion.
Accepting that the parties made an equal contribution during their relationship and the wife’s evidence about her contributions post-separation, the proper assessment in her favour would be no less than 75 per cent. This assessment takes into account the wife’s occupation of the house post separation, the husband’s continuing joint ownership and the minor contributions made by the husband in contrast to that of the wife.
The next step is to consider the s 75(2) factors. The judge correctly identified the relevant factors in the Reasons. In concluding that by reason of her contributions the wife should receive 75 per cent, this substantially lessens the amount to be attributed to her for her future needs. In our view, a reasonable assessment is an adjustment of 5 per cent for s 75(2) factors so that the wife will receive 80 per cent of the net sale proceeds of the house. There should be no further payment to the Trustees on account of the personal property to be retained by the wife.
The parties will share equally in the costs of sale of the house, including any outstanding rates. The wife should have the conduct of the sale and disbursement of the sale proceeds. Such orders are consistent with those sought by the Trustees in their case outline document.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 23 May 2017.
Associate:
Date: 23 May 2017
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