NHC & RCH
[2005] FamCA 334
•10 May 2005
[2005] FamCA 334
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT SYDNEY Appeal No. EA 42 of 2003
File No. SYF 5537 of 2001
IN THE MATTER OF:
NHC
Appellant Husband
- and -
RCH
Respondent Wife
REASONS FOR JUDGMENT
CORAM: Finn, Kay and May JJ
DATE OF WRITTEN SUBMISSIONS: 6 and 27 August 2004
DATE OF JUDGMENT: 10 May 2005
APPEAL SUMMARY
MATTER:NHC and RCH
APPEAL NUMBER: EA 42 of 2003
(SYF 5537 of 2001)
CORAM:Finn, Kay and May JJ
DATE OF WRITTEN SUBMISSIONS: 6 and 27 August 2004
DATE OF JUDGMENT: 10 May 2005
CATCHWORDS: FAMILY LAW – APPEALS – Property settlement – A substantive judgment was delivered on 9 July 2004 indicating that there was merit in certain ground of appeal and inviting written submissions directed to whether the Full Court should re-exercise the discretion and the basis upon which it should do so – In light of written submissions received, discretion re-exercised – Pool of property re-determined to correct the errors found, in the substantive Full Court judgment, to have been made by the trial Judge – Further evidence accepted in relation to the increased value of the former matrimonial home – Additional further evidence sought to be adduced not received on the basis that it was beyond the scope of the appeal and/or the directions for the written submissions made in the substantive judgment – Adjustment on account of the s 75(2) (of the Family Law Act 1975) factors re-determined.
Caselaw cited:
Allesch v Maunz (2000) FLC 93-033
Discretion re-exercised and property settlement orders made.
Directions made for the filing of written submissions as to the costs of the appeal.
On 9 July 2004, this Full Court delivered judgment (“the substantive judgment”) in relation to an appeal by the husband against an order for property settlement made by Rowlands J on 19 June 2003 in proceedings between the husband and the wife.
In the substantive judgment we concluded that there was merit in the husband’s appeal to the extent that his Honour’s calculation of the net value of the parties’ property was erroneous in relation to the inclusion of the value of an engagement ring and the treatment of legal fees and certain taxation debts. We also concluded that, in considering the matters contained in s 75(2) of the Family Law Act 1975 (“the Act”), his Honour may have overlooked the capital disparity between the parties as well as the husband’s liabilities; and that he had failed to consider whether the overall award was just and equitable.
As we recorded in the substantive judgment, it had been agreed with Counsel at the conclusion of the hearing of the appeal, that should we determine that there was sufficient merit in one or more of the grounds of appeal such as would justify our interference with trial Judge’s decision, then we would deliver a judgment without making orders in relation to the ultimate outcome of the appeal. This course was to enable the parties to consider whether they wished to put before us updating evidence in the event that we were to endeavour to re-exercise the trial Judge’s discretion (having regard to the decision of the High Court in Allesch v Maunz (2000) FLC 93-033).
We therefore made directions at the conclusion of the substantive judgment standing over the appeal pending the filing by the parties of written submissions addressing the following issues:
(a)whether either party wished the Full Court to re-exercise the discretion or to remit the matter for rehearing?
(b)in the event that a party wished the Full Court to re-exercise the discretion:
(i)what updating evidence, if any, would that party want to put before the Full Court?
(ii)to what evidence in the Appeal Book should the Full Court have regard in determining:
·the amount of any outstanding liability incurred by the husband in relation to his legal fees; and
·the amount of the taxation debt described as "Instalment Statement 9/01" and appearing as item 29 in document "Z"?
(iii) what, in that party's submission, should be: the net value of the parties' property; the apportionment of that property on the basis of the parties' contributions; any adjustment on account of the s 75(2) matters; and any variation to the orders of the Honourable Justice Rowlands to give effect to the matters just mentioned?
Submissions were received on behalf of the husband on 6 August 2004 and on behalf of the wife on 27 August 2004. We note that neither party has either sought leave to file, or filed, any reply to the other party’s submissions.
Importantly, both parties expressed in their written submissions the wish that the Court re-exercise the discretion, although the husband acknowledged that whether we would be able to do so would depend on the updating evidence which the parties wished to put before the Court.
We propose to re-exercise the discretion on the basis of the further material which the parties have put before us. But that material must be considered in the light of certain passages in the substantive judgment in which we sought clarification of certain matters on the basis of the material before the trial Judge. We note in this regard that it appears to be recognised in the third paragraph of the wife’s submissions, that parts of her submissions may well go beyond the scope of what was intended by this Court.
The pool of property
As we indicated above, we concluded in the substantive judgment that his Honour had made certain errors in the calculation of the pool of property available for division between the parties. The pool as found by his Honour and as set out in paragraph 11 of the substantive judgment is as follows:
Assets
Husband’s value
Wife’s value
Finding
1. Husband’s Furniture & effects
$10,000.00
$10,000.00
$10,000.00
2. Husband’s miscellaneous items
$1,000.00
$1,000.00
$1,000.00
3. Centre for Corporate Strategy
Nil
Nil
Nil
4. M Pty Ltd
Nil
Nil
Nil
5. B Pty Ltd
Nil
Nil
Nil
6. Husband’s motor vehicle
$45,000.00
$45,000.00
$45,000.00
7. Husband’s business CSD
Nil
Nil
Nil
8. Jewellery (notional)
$28,000.00
$28,000.00
9. Money paid to solicitors by husband (added back)
$85,000.00
$85,000.00
$85,000.00
10. Westpac account (H)
$5,000.00
$5,000.00
$5,000.00
11. Chatswood property
$795,000.00
$795,000.00
$795,000.00
12. Wife’s household effects
$5,000.00
$5,000.00
$5,000.00
13. Wife’s deposit at bank etc
$5,000.00
$5,000.00
$5,000.00
14. Wife’s motor vehicle
$24,000.00
$24,000.00
$24,000.00
15. Wife’s interest in CM design
$500.00
$500.00
$500.00
16. Wife’s paid legal expenses (added back)
$36,000.00
$36,000.00
Total Assets
$1,039,500.00
Liabilities
Finding
(a) Bill facility
$129,017.00
(b) Mortgage loan M Pty Ltd
$73,378.00
(c) Loan
$46,117.00
(d) Unpaid income tax
(i) B Pty Ltd at June 2000
$16,595.00
(ii) B Pty Ltd at June 2001
$22,248.00
(iii) Interest B Pty Ltd 2000
$5,089.00
(iv) Husband 2001
$6,901.00
(e) Husband’s lease on motor vehicle
$55,000.00
(f) Husband’s debt to G, M, Accountants
$3,200.00
Total Liabilities
$357,545.00
Net Assets of the Parties
$681,955.00
The engagement ring
The first error which we found in relation to the above table was the inclusion of a notional item of jewellery (being an engagement ring acquired by the husband for a friend) at a value of $28,000 (in item 8 of the above schedule). Our reasons for concluding that the inclusion of the ring was an error are set out at paragraphs 14 to 24 of the substantive judgment and need not be repeated.
Thus on a re-exercise of the discretion, we would exclude the value of the ring, thereby reducing the net value of the assets by $28,000. We propose to take this course notwithstanding the submission of the wife that she would seek to put before us certain correspondence from which it can apparently be inferred that the husband has re-married, and that that re-marriage might affect the treatment of the ring. We are of the view that a marriage between the husband and the recipient of the ring has no relevance to our reasons for concluding that the value of the ring should not have been included in the calculation of the value of the property of the husband and the wife in these proceedings.
The paid legal expenses
The second error which we identified in relation to his Honour’s calculation of the value of the parties’ property related to the parties’ paid legal expenses being an amount of $85,000 for the husband (item 9) and an amount of $36,000 for the wife (item 16). Our conclusion in this regard was as follows:
61.In light of our review of the authorities, we consider that his Honour, with respect, over-simplified the matter when he said in paragraph 16 of his judgment that there was an “increasingly accepted practice of adding” paid legal fees as an asset. Out of fairness to his Honour, it is true that he did refer to the source of the money used to pay the fees, saying that it “clearly came from business earnings.” However, we think that he needed to go further and satisfy himself that those earnings existed at separation or that the wife had some interest in them.
62.Furthermore, in light of our review of the authorities, there would seem to be substance in the husband’s complaint that if his Honour determined that the fees paid should be added back, he should also have deducted the liability incurred by the husband in borrowing to pay at least part of the fees – although the evidence as to how much of the payment for legal fees was borrowed is not entirely clear (see paragraph 44 of the husband’s affidavit sworn 14 May 2002).
63.In considering his Honour’s approach to the husband’s paid legal fees, it needs to be borne in mind that his Honour also added back as a notional asset the wife’s paid legal fees of some $36,000. It would seem, from what his Honour said at paragraph 12 (b) and (c) of his judgment, that the bulk of the wife’s paid legal fees could be sourced to “joint” property and thus properly added back. However, the position would seem to be otherwise in relation to the dividend from her father’s company referred to in paragraph 12(a) of his Honour’s judgment. But there is no cross appeal by the wife.
64.On balance, we consider that given the treatment of the wife’s paid legal costs (particularly to the extent that they could be sourced to the dividend from her father’s company), it was open to his Honour to include the paid legal expenses of the husband. He was, however, in error in not having some regard to the liability incurred for the purposes of paying those fees, although as we have indicated the evidence in relation to that matter was not entirely satisfactory. Thus, we are prepared to conclude that grounds 7 and 8 have some substance. However, we would only be prepared to interfere to the extent that the liability incurred by the husband to pay the fees should be taken into account; but we would require submissions as to the exact amount of that liability.
It can be seen that we made it clear in paragraph 64 that we would only be prepared to interfere to the extent that the liability incurred by the husband to pay his legal fees should be taken into account, but that we would require submissions as to the exact amount of that liability.
As we read paragraphs 7 to 18 of the husband’s submission, his position is that he cannot point to any evidence of the exact amount of the liability incurred to pay his fees, and thus he would have to adopt a new approach to this matter, being that the fees having been paid out of post-separation income should not be taken into account according to the principles discussed in paragraphs 56 to 60 of the substantive judgment. The husband concedes that a similar approach would have to be adopted to at least part of the wife’s paid costs (paragraph 15 of the husband’s submissions).
We consider that it would be unfair to the wife at this stage to depart from the approach which we made clear in paragraph 64 of our judgment that we proposed to follow were we to interfere with his Honour’s judgment, and thus we are not prepared to adopt the new approach urged on us by the husband.
However, we note that in the wife’s submissions all the various “scenarios” (save for scenario one in which the trial Judge’s orders would not be disturbed) posed by her appear to proceed on the basis that an amount of $10,750 could be regarded as the amount borrowed by the husband for legal fees, resulting in a figure of $74,250 for the husband’s paid legal fees (see in particular paragraph 10 of the wife’s submissions). Accordingly, we consider it appropriate to use that figure for the husband’s legal fees in the re-exercise of the discretion.
The taxation debts
The next complaint by the husband in relation to his Honour’s calculation of the net value of the parties’ property which we found to have some substance, related to particular taxation liabilities of the husband. For the reasons given in paragraph 71 of the substantive judgment, we found that the following liabilities claimed by the husband to be joint liabilities should have been so treated:
(29)Instalment statement 9/01 $11,199 (or $7,849.00);
(32)Instalment statement [C] 9/01 $5,349.00
We went on to say in paragraph 73 of the substantive judgment that were we to re-exercise the discretion in this case, we would require brief further submissions as to whether the amount in the first of the above-listed liabilities should be $11,199 as contended for by the husband or $7,849 as contended for by the wife.
The husband has referred us to the material at pages 1062 to 1063 of the Appeal Books in support of the figure of $11,199. In support of the lesser figure of $7,849 the wife has also referred us to that material as well as to certain additional evidence which was before his Honour. (See paragraphs 17 and 18 of the husband’s submissions and pages 7 to 8 of the wife’s submissions.) We do not consider that the additional material to which the wife has referred us is of any real assistance, and on our own examination of the material at pages 1062 to 1063 (particularly that at page 1063) we consider that the better view must be that the amount of the liability in question is $11,199.
Accordingly, in re-exercising the discretion, we would deduct the further liabilities of $11,199 and $5,349 (total $16,548).
New issues concerning the pool
Both parties appear to be in agreement that we should accept, and calculate the value of their assets on the basis that the former matrimonial home has now been sold for a sum of $935,000. The agreed value of the home at trial was $795,000. There is therefore a difference of $140,000.
The husband stated in his submissions (paragraph 3) that he “would not oppose the respondent adducing evidence of the legal costs of the sale and agent’s commission, if any was incurred on the sale”.
The wife claimed in her submissions (page 3, paragraph 4) that in preparing the home for sale she incurred costs of about $20,000, sale costs of about $2,640 and a commission of $18,700. As it is usual to take into account sale and commission costs, we would be prepared to deduct those costs ($21,340) from the sum which represents the increased value of the home ($140,000) being $118,660. However, we are not persuaded that we should allow costs of preparation of the home for sale without having been provided with considerably more information concerning those costs. Moreover, we think it likely that the need for and amount of that expenditure is likely to be controversial.
The wife also seeks that we make an adjustment for certain additional liabilities that she was apparently forced to pay to the mortgagee bank before it would release the title deeds after the sale of the matrimonial home. The debts amounted to $20,374 (being $270 + $20,104).
As appears from paragraph 54 of his Honour’s judgment, he determined that the 75% to 25% division of the parties’ property between them could be achieved (in part) by the wife paying most of the liabilities which were shown in his schedule of the parties’ assets and liabilities.
According to the wife’s submissions (pages 4 to 5; paragraph 5) she was required under his Honour’s original orders to pay debts totalling $354,035. The wife then asserts that if the two additional debts to the bank were to be included the actual debts would be $375,390.
However, the wife then asserts that the debts paid by her amounted to $354,035 (although the figures which make up that total vary in places from the figures before his Honour). The wife goes on to assert that following a successful slip rule application to his Honour she made additional payments totalling $10,861 resulting in a total payment by her of $364,896.
It is not clear to us exactly how the wife would have us take into account the additional debts to the bank or any other overall additional amount paid by her (particularly as the figures at pages 4 to 5 of her submissions suggest that she did not pay the full amount of the debts owed).
Given this lack of clarity in the wife’s case and given that the matters she has raised go beyond the limited range of matters in relation to which we indicated in the substantive judgment that we were prepared to re-exercise the discretion, we are not prepared to take these additional matters into account (save, of course, for the realised value of the home and the usual costs of sale and commission).
It appears from certain “scenarios” attached to the wife’s submissions that she would also have us take into account the parties’ superannuation entitlements. However, his Honour stated in paragraph 5 of his judgment that “the Court was not asked to consider property of parties made up of superannuation in these proceedings.” No challenge was made in the course of the appeal to that statement by his Honour. But in any event, we note that the values given in “scenario 7” of the wife’s submissions are relatively similar. We are therefore not persuaded that any injustice would be suffered by either party if we were to proceed on the same basis as his Honour did in relation to the parties’ superannuation interests, particularly when regard is had to the respective ages of the parties.
The wife would also apparently wish us to receive further evidence about the financial circumstances of the husband’s alleged re-marriage and increased profits for, or distributions from, certain trusts and the new living arrangements for herself and the child (see pages 2 and 3 of her submissions).
However, these matters also far exceed the matters in relation to which we indicated in the substantive judgment that we would be prepared to address in a re-exercise of the discretion. In any event, there is little doubt that such matters would be controversial and could not therefore be the subject of a re-exercise of discretion by an appeal court. Such matters could only be realistically ventilated in the context of a new trial which the wife does not seek.
Summary of conclusions in relation to the pool
We have thus so far determined that to the net pool determined by his Honour of $681,955 we would:
· deduct $28,000 on account of the ring:
$ 653,955
· reduce the notional asset of the husband’s paid legal expenses by $10,750:
$ 643,205· deduct the additional taxation liabilities of $16,548 ($11,199 + $5,349)
$ 626,657· add the difference in value of the house ( $140,000) less the usual sale costs ($21,240); $118,660
$ 745,317
For the purposes of our re-exercise of the discretion there would thus be a pool of property with a net value of $745,317.
Division of the new pool
Although the husband challenged his Honour’s conclusion that the parties’ contributions should be assessed in the proportion of 62.5% to 37.5% in the wife’s favour, we did not in the substantive judgment uphold that challenge.
The husband does not renew that challenge in the present context. Neither would it appear does the wife wish to depart from that assessment.
Therefore, on the basis of a 62.5% to 37.5% division of the revised pool, the wife would be entitled to property to the value of $465,823 and the husband to the value of $279,494.
As to the s 75(2) matters, his Honour made the following findings:
48The husband is fifty years of age and in good health. The wife is forty five and in good health.
49The husband has an established business capable of earning a good living or, alternatively with a doctorate in a specialist area, a capacity to gain employment at a relatively high level of remuneration.
50The wife is a self-employed colour consultant from which activity she earned $344 per week in February 2003. This is supplemented by social security and family benefits.
51The wife has the residential responsibility for the parties’ eight year old daughter in respect of which the husband pays her child support of $125 per week. Her capacity to work is limited somewhat by her responsibilities to the child.
52The wife says the fact that the husband limits contact to a weekday afternoon and evening rather than enjoying more “normal” contact with the child, places an extra caring obligation upon her with, I infer, some economic detriment.
53Having particular regard to the husband’s superior income earning capacity and the wife’s ongoing responsibility for a relatively young child it is appropriate to adjust the property apportionment further in the wife’s favour to obtain a just and equitable result. The wife will receive 75% and the husband 25% of the parties’ net assets i.e. $681,905. This provides to the wife $511,466 and to the husband $170,489.
Apart from the conclusion reached in the last two sentences of paragraph 53, there was no challenge on the appeal to those findings by his Honour at least so far as they go. However, the challenge on the appeal, which was one which we considered had substance, was that his Honour did not take into account the capital disparity between the parties (being $186,329) which is relatively significant in the context of this case. The husband also has significant liabilities.
Having regard to the findings made by his Honour which would support some adjustment in favour of the wife, but having regard also to the husband’s liabilities and to the significant capital disparity between the parties on the basis of their contributions, we consider that an adjustment of an additional 5% in favour of the wife, resulting in a division of 67.5% to 32.5% in favour of the wife, would achieve a just and equitable result in all the circumstances of this case.
Orders to give effect to the new division
On our revised pool of $745,317 and our division of 67.5% to 32.5%, in the wife’s favour, the wife is entitled to a sum of $503,089 and the husband to a sum of $242,228.
Out of the schedule of assets and liabilities prepared by the trial Judge and now amended by us (as set out in paragraph 32, above) the husband has:
Furniture
$10,000
Miscellaneous items
$1,000
Car
$45,000
Paid legal fees
$74,250
Bank account
$5,000
$132,250
Less tax liabilities
($6,901 + $11,199 + $5,349)
– $23,449$111,801
In order to receive 32.5% of the amended net pool, the husband should receive $130,427 (being $242,228 - $111,801).
On the same approach, the wife’s position is as follows:
House
$795,000
Extra net value
$118,660
$913,660
Household effects
$5,000
Bank
$5,000
Car
$24,000
Interest in CM
$500
Paid legal fees
$36,000
$984,160
Debts paid by wife as per trial Judge’s orders
– $350,644$633,516
Less amended amount to be paid to the husband to give him 32.5% of the pool as we find it
– $130,427$503,089
Under the trial Judge’s orders, the wife was required to pay to the husband a figure of $3,391. This figure should therefore be deducted from the figure that the wife would be required to pay to the husband on our re-exercise of the discretion. Therefore, under our orders the wife will be required to pay to the husband the figure of $127,036 (being $130,427 less $3,391).
In relation to the form of orders which we should make, it was submitted by the husband that we should set aside Order 8 of the trial Judge’s orders and substitute for it an order requiring the wife to pay the husband a particular sum within one month. Nowhere in the wife’s fairly voluminous submissions does the question of the form of our orders appear to have been addressed – although all scenarios (apart from scenario one) reach a conclusion that there should be an additional payment from one or other party to the other.
While we consider that Order 8 should be set aside given that the home has been sold, we also consider that Order 1.7 should be amended to alter the amount of the payment that the wife has to make to the husband.
We propose therefore to make orders allowing the appeal; substituting for Order 1.7 of the trial Judge’s orders an order that the wife pay to the husband the sum of $127,036 within one month from the date of these orders; and setting aside Order 8.
We will also make directions for the parties to file submissions in relation to the costs of the appeal.
Orders
That the appeal be allowed.
That Order 1.7 of the orders made by the Honourable Justice Rowlands on 19 June 2003 be set aside and in its place, the following order be made:
“That the wife pay to the husband within one (1) month of these orders the sum of $127,036.”
That Order 8 of the orders made by the Honourable Justice Rowlands on 19 June 2003 be set aside.
(4)(a)That each party be at liberty to file and serve any written submissions in relation to the costs of the appeal within 28 days of the date hereof.
(b)That each party have a further 28 days in which to file and serve any written submissions in answer to any submissions filed by the other party.
(c)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
I certify that the preceding 47 paragraphs are a true copy of the reasons for judgment of this Honourable Full Court
Associate
Associate
2