Noetel & Quealey
[2005] FamCA 677
•30 June 2005
[2005] FamCA 677
FAMILY LAW ACT 1975
IN THE FULL COURT OF
THE FAMILY COURT OF AUSTRALIA
AT SYDNEY
Appeal No. EA 30 of 2004
File No. SYF 4909 of 2002
IN THE MATTER OF:
TWN
Appellant/Husband
- and -
PAQ
Respondent/Wife
REASONS FOR JUDGMENT
BEFORE:Bryant CJ, Finn and Boland JJ
HEARD:10 November 2004 and 11 November 2004
JUDGMENT: 30 June 2005
APPEAL SUMMARY
MATTER:TWN and PAQ
APPEAL NUMBER: EA 30 of 2004 (SYF 4909 of 2002)
CORAM:Bryant CJ, Finn and Boland JJ
DATE OF HEARING: 10-11 November 2004
DATE OF JUDGMENT: 30 June 2005
CATCHWORDS:
APPEAL – Property – whether the orders made reflect the findings in the judgment – practical effect of the orders – whether errors can be corrected under slip rule – whether trial Judge erred in failing to include capital gains tax as a liability of the parties – admissibility of expert evidence on calculation of capital gains tax – whether trial Judge failed to give sufficient weight to the husband’s initial financial contributions – whether trial Judge erred in ordering the sale of an investment property adjoining the matrimonial home rather than acceding to the husband’s proposed order that this property be transferred to him – whether trial Judge erred in ordering that the wife receive a fixed monetary adjustment from the husband without regard to the sale price of the investment property.
Rosati v Rosati (1998) FLC 92-804
Pierce v Pierce (1999) FLC 92-844
House v The King (1936) 55 CLR 499
Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621
Gronow v Gronow (1979) 144 CLR 513
L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) (1982) 151 CLR 590
DJL v The Central Authority (2000) FLC 93-015
Russell v Russell (1999) FLC 92-877
Milham v Stanford (2001) FLC 93-073
JEL and DDF (2001) FLC 91-075
Norbis v Norbis (1986) 161 CLR 513
G and G (1984) FLC 91-582
Makita v Sprowles (2001) 52 NSWLR 705
Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 123
Sydneywide Distributors Pty. Ltd v Red Bull Australia Pty Ltd [2002] FAFC 157
Rhoden v Wingate [2002] NSWCA 165
Nolan and Ingram (1984) FLC 91-585
Ahmad and Ahmad (1995) FLC 92-571
Prince and Prince (1984) FLC 91-501
Biltoft and Biltoft (1995) FLC 92-614
Waters and Jurek (1995) FLC 92-635
Hickey and Hickey and Anor (2003) FLC 93-143
[S] and [S] [2000] FamCA 262
Appeal allowed.
Introduction
BRYANT CJ and BOLAND J: This is an appeal by the husband against orders made by Faulks J, as he then was, on 27 February 2004 in relation to proceedings commenced by the husband pursuant to the provisions of s.79 of the Family Law Act 1975 (“the Act”).
The effect of the trial Judge’s orders was that the parties’ substantial net assets of $10,643,419 should be divided as to 53% to the husband and 47% to the wife. In formulating orders to give effect to his judgment the trial Judge determined that the husband should transfer his interest in the former matrimonial home to the wife, that the wife retain four investment properties registered in her name, and that the husband pay her a cash adjustment of $118,778.93.
The husband’s appeal is directed to three broad areas of challenge to the trial Judge’s orders. He asserts the orders made by the trial Judge do not reflect the findings in the judgment, the practical effect of the orders being that the wife is to receive approximately $170,000 more than her entitlement of $5,002,406.93. He asserts this error is a matter of substance and cannot be corrected under the “slip rule”. He further asserts that the trial Judge erred in failing to admit expert evidence of the quantum of capital gains tax (“CGT”), referable to two properties inherited from his late mother’s estate, and in failing to include CGT as a liability in the parties’ list of assets and liabilities. The third broad area of challenge to the trial Judge’s findings is that he failed to give sufficient weight to the husband’s financial contributions, particularly his initial contributions. The husband also submits that the trial Judge erred in ordering the sale of an investment property abutting the matrimonial home rather than acceding to the husband’s proposed order that this property be transferred to him, and in ordering that the wife receive a fixed monetary adjustment from the husband without regard to the selling costs of the investment property.
Background History
At trial there was no substantial dispute between the parties about their assets and liabilities. There was no challenge to the trial Judge’s findings about the relevant background history of the parties.
The parties’ cohabitation and marriage was of approximately 20 years duration.
At the date of the trial the husband, who was aged 57 years, was engaged in full time employment as an engineer. The wife was engaged in private practice as a psychologist. She was aged 54 years. There is one child of the marriage who at the date of the hearing was aged almost 17 years and in his final year of school.
The husband graduated from university and began work as a civil engineer in about 1969. The wife graduated from university in 1971 having majored in psychology.
On 5 September 1972 the husband and his mother purchased a property in the Eastern Suburbs of Sydney (“the first property”). The first property was partly financed by borrowings.
Between 1976 and 1987 the husband engaged in full-time work as an engineer. The wife completed a PhD prior to the marriage.
On 5 May 1981 the husband purchased a property on the Lower North Shore of Sydney (“the second property”) for a price of $91,500. The purchase price was funded from the husband’s savings and a mortgage of approximately $60,000.
In 1981 the parties commenced cohabitation. At about that time the wife completed the purchase of a property on the Lower North Shore of Sydney (“the third property”), which she purchased for a price of $81,000. The property was subject to a mortgage of approximately $50,000.
At the commencement of the parties’ cohabitation, in addition to his real property interests, the husband had savings and a Mazda 626 motor vehicle together with personal property. The wife had, in addition to the third property, savings of about $12,000 and personal property. The parties commenced living in the third property.
The parties purchased a property on the Lower North Shore of Sydney (“the matrimonial home”) in November 1983. The purchase price of the matrimonial home of $280,000 was funded from the total net proceeds of sale of the first property of $106,449 (this sum included a gift of approximately $54,000 by the husband’s mother), the parties’ savings and a mortgage of approximately $110,000.
The parties’ briefly separated in 1984 but reconciled and were married on 24 November 1984.
Between 1986 and 1987 the husband sold the second property for a sale price of $103,000 and applied the net proceeds of approximately $65,000 to discharge the mortgage secured over the matrimonial home.
The child was born in March 1987.
In March 1990 the husband’s mother died leaving essentially the whole of her estate to the husband. The husband inherited two properties in the Eastern Suburbs of Sydney (“the inherited properties”), cash of approximately $54,000 and shares worth about $8,500.
Between 1990 and 1992 the husband engaged in work as a consultant.
In 1991 the parties purchased, in the husband’s sole name, but subject to a deed of trust, a property on the Lower North Shore of Sydney (“the fourth property”). The fourth property abuts the matrimonial home. The fourth property was purchased for a price of $492,000 and was funded from borrowings. The deed of trust provided that the husband held a 10% interest in the fourth property on trust for the wife. In 1994 the fourth property was subdivided to provide additional land for a swimming pool at the matrimonial home.
The wife engaged in employment as a psychologist prior to and in the early years of the marriage. In 1986 she commenced in private practice as a psychologist. Following the child’s birth she reduced her working hours in order to provide full-time care for the child. The wife was the child’s primary caregiver.
Prior to the parties’ separation the wife acquired in her sole name a unit in North Sydney (“the North Sydney unit”) for a purchase price of $175,000. The wife conducted her professional practice from the North Sydney unit.
In 1998 the wife purchased a property in the Inner West of Sydney (“the fifth property”) for a price of $305,000, financed in part by a mortgage of $244,000.
In 2002 the wife purchased a property on the Lower North Shore of Sydney (“the sixth property”) for a price of $685,000. The sixth property was funded by a mortgage of approximately $548,000.
From 2001 the husband engaged in employment with a construction company. His income at date of trial exceeded $300,000. The wife continued in private practice. Her taxable income for the year ended 30 June 2003 was approximately $110,000.
In November 2001 the husband moved into the basement of the matrimonial home and the parties physically separated when the husband left the matrimonial home in January 2002. The wife obtained an ex parte interim apprehended violence order (“AVO”). The AVO was dismissed after defended proceedings with a costs order made against the wife. The costs order was subject of an appeal which had not been determined at the date of the trial.
The judgment of the trial Judge
After setting out short history of the parties, the trial Judge identified the matters in issue between them under three headings, namely questions about disputed assets and liabilities to be included or removed from the pool of property, issues in dispute about the parties’ respective contributions including their initial contributions and matter in issue under s.75(2). There is no dispute that the trial Judge failed to correctly identify any matter in issue.
After setting out the background history of the parties summarised above, the trial Judge turned to disputed items in the parties’ list of assets and liabilities. The trial Judge examined the first issue in dispute, namely the amount of CGT, if any, to be included in the parties’ list of liabilities. The trial Judge identified those parcels of real property which did not attract the incidence of CGT on a sale (the third property and the matrimonial home). He noted that “it was common ground that if the [inherited] properties…were sold (or otherwise disposed of in a CGT crystallising event), tax would be incurred”. He further noted that the North Sydney unit, the fifth property and the sixth property would “all become liable for CGT in due course”.
The trial Judge considered how the potential CGT should be quantified (at paragraph 41) as follows:
“The question at an asset level, was should (in some way) this tax be estimated or calculated and deducted in the same way that a mortgage might be deducted from the gross value of the property to arrive at what the property would be worth in the hands of the party subsequently owning it. The problem with that proposition is that whatever tax might be payable in respect to any of the properties is not capable of calculation at this point. The tax can only be calculated when the capital gain is crystallised and whatever rate of tax payable at that point is known.”
The trial Judge noted the difficulty, as the husband urged he should do, of adding to the list of the parties’ liabilities a precise sum for CGT in respect of the inherited properties. The trial Judge noted the husband’s senior counsel “ultimately conceded” there was no evidence of the value of the inherited properties at the date of the husband’s mother’s death to enable a precise calculation to be made. This situation was in contrast to the remainder of the parties’ real property interests where potential CGT liabilities had been essentially agreed. The trial Judge noted that if the fourth property was sold at its agreed valuation at the date of trial of $1,950,000, it would attract CGT of approximately $332,000. His Honour compared and contrasted the value of the fourth property with the inherited properties which had values of $1,400,000 and $1,050,000.
The trial Judge noted the contention of the husband’s counsel that even if he did not include some figure for CGT in the parties’ liabilities, it would be appropriate at the “‘fourth stage’…to take into account the fact that the property would come with a tax encumbrance”.
Senior counsel for the wife submitted to the trial Judge the husband bore the onus of proof in respect of CGT, and that the husband had failed to discharge the onus. The trial Judge noted the effect of counsel for the wife’s submission was:
“To allow any adjustment to be made as a result of CGT would be unfair to the wife who had not had the opportunity of responding to any evidence which might have been put forward by the husband.”
The trial Judge set out the principles to be applied in dealing with CGT in an application under s.79 of the Act including paragraph 6.36 of Rosati v Rosati (1998) FLC 92-804, and summarised the effects of the principles. Noting that there was no suggestion the husband would dispose of the inherited properties in the foreseeable future, the trial Judge went on to making a finding that, on the evidence before him, the properties may continue to be held by the husband as investments. He further noted that he was unable to determine the amount of CGT which would be payable on the realisation of the properties, and accepted the submission of the wife’s counsel that the husband bore the onus to provide evidence to the court of the CGT liability, and that he had failed to discharge that onus.
Whilst the trial Judge noted the husband sought to retain the fourth property, he found that in the event the husband did not occupy this property that he proposed it should be sold. The trial Judge determined that CGT, at an agreed figure, referable to the sale of this property, should be included as a liability of the parties.
The trial Judge noted that each party sought orders that he or she retain the matrimonial home which was a CGT free asset.
His Honour then turned to consider the wife’s North Sydney unit, the fifth property and the sixth property and noted each were subject to CGT. Having found no evidence any of these properties would be sold, the trial Judge did not include any CGT in respect of these properties in the parties’ list of assets and liabilities. He then set out his reasoning for refusing to discount the value of all properties which would attract CGT on sale finding:
“I further decline to take account of the nature of the property as being necessarily intrinsically less valuable as a consequence of the potential imposition of this tax. Both in relation to these properties and the inherited properties of the husband, the personal circumstances of each of the parties, their tax minimisation opportunities and their offsetting capital losses if any, which they may have at some point in the future, are all factors which in combination with the uncertainties as to the extent of the capital gain and the possible rate of tax to be applied, in my opinion, prevent any proper account to be taken of that liability in relation to those properties.”
The trial Judge then determined the issue of potential tax on dividends which may in future be payable to the husband from a company incorporated by the husband (“the husband’s company”), and declined to include the potential tax as a liability.
At the date of the trial the parties were in dispute as to how a costs order against the wife obtained by the husband in respect of the AVO proceedings should be treated. The trial Judge’s treatment of this liability is not in dispute before us, nor is his treatment of a retention bonus which he found the husband was likely to receive.
The trial Judge thereafter turned to the assessment of contributions by the parties. His Honour made findings about the parties’ assets at commencement of cohabitation, and noted that, by reason of his interest in the first property, the husband’s assets exceeded those of the wife. The trial Judge chose to disregard the disparity in the parties’ assets “at that point” having regard to the principles set out in Pierce v Pierce (1999) FLC 92-844. His Honour noted that his finding did not take into account the subsequent contribution by the husband’s mother of her share of the net proceeds of the first property, or the husband’s inherited property. He noted that the husband could legitimately make a claim in respect of his financial contribution to the acquisition of the matrimonial home. His Honour rejected the wife’s evidence that the husband’s mother’s contribution of her share of the net proceeds of the first property was a wedding gift to the parties. There is no challenge to his Honour’s findings in this respect.
The trial Judge found the parties’ contributions to improvements and maintenance of the matrimonial home, both financial and non financial, should be regarded as equal. He also found that the parties contributed equally to participation in borrowing for other investments.
The trial Judge then assessed homemaker and parent contributions by the parties. He found the husband earned a higher income during the marriage than the wife, and had an ongoing capacity to earn a “significantly higher” sum. His Honour found this was principally because the wife had agreed to take on the principal role of carer for the child, and that on the evidence before him that the wife had made the preponderance of parenting and homemaker contributions.
The trial Judge then discussed the effect of his finding about the wife’s contribution as homemaker as requiring assessment under section s.75(2) if it had affected her income earning capacity and noted this should not be subject of double counting.
The trial Judge noted the concession by counsel for the wife that the acquisition of the North Sydney Unit, the fifth property and the sixth property could not be regarded as a sole contribution by the wife.
The trial Judge then discussed, as he had done with counsel in submissions, whether, in the factual circumstances of this case, he should adopt an “asset by asset” approach or assess the parties’ contributions on a global basis, and determined to assess the parties’ respective contributions on a global basis. The trial Judge concluded the “efforts” of the parties should be regarded as equal, but noted that he could not, in the circumstances of the case, disregard the fact that the inherited properties came “from the husband’s side of the ledger”.
Having found no substantial difference in the parties’ post separation contributions the trial Judge concluded, on the basis of his earlier analysis, that the parties’ overall contributions should be assessed as a 40% contribution by the wife and a 60% contribution by the husband.
The trial Judge then turned to factors under s.75(2) and noted neither party sought a substantial adjustment under the section. He noted the wife’s submissions that the parties’ overall property should be divided equally. The husband contended that the wife should receive an overall figure of 40% of the parties’ net assets, which based on his submissions on contributions of 35%, would result in a 5% adjustment in the wife’s favour for s.75(2) factors.
The trial Judge then undertook the task of considering the justice and equity of the orders, and noted there was substantial agreement about the assets the parties would receive, but also recorded the competing claims of the parties in respect of the matrimonial home and the fourth property. His Honour having discussed the proximity of the fourth property to the matrimonial home, and the acrimonious litigation between the parties, noted that notwithstanding the situation where parties each wished to retain a property the Court may order a sale. He determined the matrimonial home should be retained by the wife. In making this determination, the trial Judge noted that the husband changed his position to seek the matrimonial home shortly before the trial, the occupation of the wife of the home from separation, and the fact that the child would remain living with the wife. He further took account of the fact the husband’s evidence was that he wanted to live somewhere on the lower north shore and that he had not indicated any feature of the matrimonial home which was unique for him. The trial Judge concluded that the wife should retain the matrimonial home and that the fourth property should be sold. Having so found, the trial Judge concluded that an adjustment should be made in the wife’s favour from the proceeds of sale of $118,778.93.
Grounds of appeal
The husband’s grounds of appeal as set out in his amended Notice of Appeal filed 29 April 2004, are as follows:
“1. That the learned trial judge erred in the exercise of his discretion in determining that the parties’ contributions should favour the husband in the proportion of 60% to the wife’s 40%, in particular in that:
1.1 He failed to give adequate consideration and weight to the value of the assets introduced into the parties’ relationship by the husband at the commencement of that relationship and the significance of the application of those assets thereafter;
1.2 He failed to give adequate consideration to the significance of the husband’s mother’s gift of her equity in the [first] property…to the husband upon its sale;
1.3 He failed to give adequate consideration and weight to the significance and value of the real property and personalty inherited by the husband on the death of his mother in 1990.
2. That the learned trial judge was in error in rejecting the evidence in the husband’s case of the amount of the Capital Gains Tax payable in the event of the sale of the husband’s inherited investment properties…and further in rejecting the tender of documents which supported that evidence.
3. That the learned trial judge erred in law in finding that the husband bore an onus to establish on the balance of probabilities that a GST (sic) event would occur in the immediate or foreseeable future in respect of each of the assets to which CGT already applied.
4. That the learned trial judge erred in failing to find as a matter of law that CGT should be taken into account either in a specific amount or in the alternative pursuant to s.75(2)(o) in relation to all of the parties’ CGT affected investment assets.
5. That the learned trial judge erred in failing to give any consideration to the comparative value to the CGT affected properties as compared to the value to the wife of her CGT affected properties pursuant to s.75(2)(o).
6. That the learned trial judge failed to give any consideration to the value to the wife compared to the detriment to the husband in leaving the wife with two CGT exempt properties pursuant to s.75(2)(o).
7. That the learned trial judge erred in that he failed in connection with his consideration of the likelihood of the happening of a CGT event to give any consideration to the cost and expense of the husband re-housing himself consequent upon the Orders he made and it followed the need to realise assets to do so.
8. That the learned trial judge erred in failing to take into account either in the agreed amount or pursuant to s.75(2)(o) the tax payable on the funds in the amount of $467,266 on deposit in the [husband’s]company.
9. That having regard to the learned trial judge’s finding at paragraph 58 of the Judgment that it was “common ground that realistically, the only way in which this sum (the gross value of the [husband’s] company) might be realised by the husband from the company would be way (sic) of dividend at some point. This would in turn attract tax.”, erred in thereafter finding that the husband, rather than the wife, bore an onus to establish on the balance of probabilities that the tax would actually be incurred by the husband.
10. That the learned trial judge erred having regard to his findings at paragraphs 74 and 75 of the Judgment in relation to contribution in taking into account again when making an adjustment pursuant to s.75(2) the same factor in favour of the wife namely that of the disparity of her income compared to that of the husband which he found arose from her parenting.
11. That the learned trial judge in the absence of evidence erred in finding that the wife’s capacity to earn income and/or the amount of her earnings had been adversely affected by the marriage and/or her contributions as a homemaker and parent.
12. That the learned trial judge erred in failing to give any adequate reasons for any adjustment in favour of the wife pursuant to s.75(2). In particular how he determined it was appropriate that there be at the end of the day, a differential of 6%.
13. That the learned trial judge erred in that he acted upon a wrong principle in order that the wife be permitted to retain the former matrimonial home.
14. That the learned trial judge erred in acting on a wrong principle in determining that the [fourth] property adjoining for (sic) the former matrimonial home…should be sold.
15. That in determining that the wife should retain the former matrimonial home, the learned trial judge erred in taking into account in favour of the wife the potential costs of sale of those premises while failing to take account as against her pursuant to s.75(2)(o) that the sale of the [fourth property]…incurred a vastly more substantial cost.
16. That the learned trial judge erred in the exercise of his discretion in failing to take into account the wife’s lack of credit on significant issues in determining the weight to be given to relevant matters pursuant to s.75(2).
16.1 He failed to take account of the benefit to he (sic) wife of her retention of CGT unaffected property in an agreed value of 43.4 million;
16.2 He failed to take account of the fact that of the properties acquired during the course of the relationship and prior to it, from all sources, the wife received the benefit of seven pieces of real estate whilst the husband retained two, being properties acquired by way of inheritance;
16.3 He failed, having taken into account in favour of the wife, the costs of sale of the former matrimonial home failing to take into account the prospective costs of the husband of re-housing himself.
17. That the learned trial judge erred in having determined that the [fourth] property…should be sold in failing to find that the wife should pay the whole of the costs of that sale out of her share of the matrimonial property.”
Two additional grounds were relied on before us without objection. Those additional grounds are as follows:
“Ground A
That having determined that the appropriate division of the parties’ net assets should be in the proportions of 53% to the husband and 47% to the wife, the learned trial judge in making orders whereby the wife received 48.5% of the property and the husband 51.5% of the property, being an amount of approximately $170,000 more to the wife than her entitlement in the proportion he found of the property pool he determined.”
Ground B
That the learned trial judge failed to give adequate reasons for his finding that the appropriate division, having regard to the parties’ contributions pursuant to s.79(4) favoured the husband in the proportions of 60% to the wife’s 40%.”
In the husband’s written submissions, and in his oral argument, senior counsel for the husband dealt with the grounds of appeal in four broad categories:
·the grounds relating to the form of the trial Judge’s orders and whether or not the orders are amenable to correction by the “slip” rule;
·issues directed to the trial’s Judge’s assessment of contributions, particularly initial contributions and relevant s.75(2) factors;
·the trial Judge’s treatment of CGT including issues relevant to the admissibility of parts of the husband’s expert accountant’s report and two letters forming the foundation of the expert’s opinion; and
·the trial Judge’s approach to the “fourth step” in allocating assets between the parties, rather than ordering a sale of the matrimonial home.
In his oral submissions counsel for the wife identified eight topics referable to the grounds of appeal. The first of these topics relates to mathematical errors and submissions relative to these grounds are encompassed in the first broad area identified by counsel for the husband. The second and third topics relate to adequacy of reasons and the contribution adjustment made by the trial Judge. We find these topics fall under the second broad area identified by counsel for the husband. The fourth and fifth topics relate to CGT. The sixth topic appears to relate to grounds 8 and 9 being the trial Judge’s treatment of taxation consequences of the husband receiving a dividend from the husband’s company. We find this topic comfortably falls within matters in issue in respect to the trial Judge’s approach to the CGT issue. Counsel for the wife in his written submissions deals separately with grounds 10, 11 and 12. These three grounds fall within the broad category of assessment of s.75(2) factors. Grounds 13 to 17, or the eighth topic, deal with the trial Judge’s determination in the fourth stage of appropriate orders, including his determination that the wife should retain the matrimonial home. We find it convenient to adopt the broad categories identified by counsel for the husband in the determination of this appeal.
Relevant Law – Discretionary decision
The appeal is against a discretionary order. The principles which govern such an appeal are not in doubt; see House v The King (1936) 55 CLR 499 at 504, Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621 at 627 and Gronow v Gronow (1979) 144 CLR 513 at 519. In House v The King (supra) the High Court observed the following at 504:
“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 to do 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 many not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.”
The Slip Rule issues
There is no dispute between the parties, for the purpose of argument about ground A (being the first amendment to the grounds of appeal), that the parties net assets as found by the trial Judge are as contained in end note 5 to the judgment. We find it convenient for the purpose of dealing with this aspect of the appeal to reproduce the trial Judge’s findings about the parties’ assets and liabilities in end note 5. They are as follows:
ASSETS The matrimonial home J 2,500,000 The fourth property J 1,950,000 The sixth property W 800,000 The North Sydney unit W 305,000 Inherited property 1 H 1,400,000 The fifth property W 515,000 Inherited property 2 H 1,050,000 The third property W 900,000 St George A/C W 1,718 Commonwealth Bank W 2,745 Macquarie Bank W 2,131 ING Bank W 9,322 St George Portfolio W 4,480 AMP Shares W 2,396 [B] Shares W 15,600 [B] Invest W 3,960 Funds in Trust W 77,500 Coles Myers W 8,749 Commonwealth Bank Shares W 13,867 Fosters Shares W 9,132 David Jones Shares W 2,935 Mayne Shares W 29,300 IAG Shares W 2,284 BT Funds W 19,819 MLC Funds W 37,536 Holden Calais W 25,000 Ski Lodge H 15,200 Furnishings J 20,137 Clothing W 1,000 Macquarie Bank H 136,308 St George Bank H 1,007 Various Shareholdings H 224,249 Shareholding (the husband’s company) H 467,266 Husband’s loan A/c (the husband’s company) H 131,364 Clothing, tools, etc H 1,000 The husband’s company Superannuation Fund (net of tax) H 703,948 Macquarie Investment Management Super (net of tax) W 428,327 Colonial Superannuation W 8,774 [P] Superannuation H 36,171 [AA] Management H 54,186 BT Funds Management H 42,755 MLC Investment Bond H 33,328 Legal Fees Paid H 120,222 Legal Fees Paid W 83,870 Total Assets 12,197,586 LIABILITIES CGT W 978 Tax W 15,763 Mortgage (the fourth property) J 450,000 Mortgage (the fifth property) W 244,000 Mortgage (the sixth property) W 511,000 CGT on the fourth property J 332,426 Total Liabilities 1,554,167 TOTAL ASSETS AND LIABILITIES 10,643,419
There is also no dispute that, when calculating the wife’s entitlement, the trial Judge used end note 4 to the judgment which table was the table provided by the wife’s counsel at the hearing and which was different in a number of respects to end note 5. End note 4 included as assets of the parties the following which do not appear in end note 5:
·Costs AVO $37,000
·Retention bonus $150,895
and included the following liabilities, which also do not appear in end note 5:
·Estimated costs of the sale of [the fourth property]
·Costs of AVO $37,000
and it also ascribed a different value for the Ski Lodge ($16,000 rather than $15,200 as in end note 5).
The trial Judge at paragraph 96 of his reasons set out, by reference to end notes 4 and 5, and by use of footnotes, his methodology in calculating the adjustment payable to the wife. The calculations made by the trial Judge, set out in table form are as follows:
Re-creation of Trial Judges Calculations
WIFE WILL RETAIN The matrimonial home 2,500,000 The sixth property 800,000 The North Sydney unit 305,000 The fifth property 515,000 The third property 900,000 St George A/C 1,718 Commonwealth Bank 2,745 Macquarie Bank 2,131 ING Bank 9,322 St George Portfolio 4,480 AMP Shares 2,396 [B] Shares 15,600 [B] Invest 3,960 Funds in Trust 77,500 Coles Myers 8,749 Commonwealth Bank Shares 13,867 Fosters Shares 9,132 David Jones Shares 2,935 Mayne Shares 29,300 IAG Shares 2,284 BT Funds 19,819 MLC Funds 37,536 Holden Calais 25,000 Ski Lodge 16,000 Furnishings 20,137 Clothing 1,000 Macquarie Investment Management Super (net of tax) 428,327 Colonial Superannuation 8,774 Legal Fees Paid 83,870 Total Assets 5,846,582 LIABILITIES CGT 978 Tax 15,763 Mortgage (the fifth property) 244,000 Mortgage (the sixth property) 511,000 Half of CGT on the fourth property 166,213 Half of estimated sale costs (the fourth property) 25,000 AVO 37,000 Total Liabilities 999,954 TOTAL ASSETS AND LIABILITIES 4,846,628 Wife's entitlement (as per end note 5) 5,002,407 Adjustment by Husband 155,779 Less AVO 37,000 Adjusted adjustment by husband (155,779-37,000) 118,779
The trial Judge made orders to give effect to his judgment. The orders, the subject of contention are orders 6 and 7. They are as follows:
“6That both parties do all acts and things and execute all deeds, documents, instruments and writings necessary to procure the sale of the [fourth]…by public auction and in particular:
(a) place [the fourth property] with auctioneers agreed to between the parties or failing such agreement as nominated by the President of the Council of Auctioneers and Agents ("the auctioneers") for the sale of [the fourth property] by public auction at the earliest possible date;
(b) execute all documents requested by the auctioneers for the sale of [the fourth property] by auction;
(c) request the auctioneers to recommend a reserve price to be placed on [the fourth property] for the purpose of the auction sale and accept such recommended reserve price;
(d) pay to the auctioneers equally any sums requested for advertising expenses in relation to the auction;
(e) give such instructions to a solicitor mutually agreed upon by them for the preparation of an appropriate contract and other documents as are necessary for the sale of [the fourth property] by auction;
(f) co-operate in every way with the auctioneers in relation to the auction of [the fourth property] including making a key available, allowing inspection of [the fourth property] at times requested by the auctioneers and ensuring that [the fourth property] is in a neat and clean condition at the time of inspection by prospective purchasers;
(g) attend at the auction sale of [the fourth property] and negotiate with the highest bidder if the reserve price is not reached;
(h) accept the advice of the auctioneers whether to accept a price less than the reserve price;
(i) execute the contract of sale; and
(j) execute all other documents necessary to complete the sale of [the fourth property].
7That both parties do all acts and things necessary to procure that upon the sale of [the fourth property] the proceeds of sale be paid in the following manner and priority:
(a) in payment of the amount required to discharge the mortgage registered to Primary Industry Bank of Australia Limited;
(b) in payment of agent's commission and auction expenses if any due on the sale;
(c) in payment of legal costs of sale;
(d) payment into the CGT account such sum as is required to pay the total of each party’s estimated CGT liability in relation to the sale of [the fourth property]; and
(e) the payment to the wife of the sum of $118,778.93 and
(f) the payment to the husband of the balance.”
the parties submissions on slip rule issues
The thrust of the submissions made by counsel for the husband on behalf of the husband is that the error made by the trial Judge has resulted in the wife receiving assets to the value not less than $5,172,682 rather than her entitlement as found by the trial Judge of $5,002,406.93. He submits if the wife is to retain the asset mix ordered by the trial Judge then she should not receive any portion of the proceeds of sale of the fourth property and be required to pay the husband $51,498. He further submits that the solution under the slip rule proposed by the wife’s counsel is incapable of curing the defect in the orders, and does not result in the husband receiving his correct monetary entitlement.
On behalf of the wife it is conceded there is an error in the orders made by the trial Judge, in that the orders provide for the deduction of the sale costs and CGT from the proceeds of sale of the fourth property, when estimated CGT, but not sale expenses, were already included in the parties’ list of assets and liabilities for the purpose of establishing the wife’s entitlement. Counsel for the wife asserted in his written and oral submissions that the defect can be addressed under rule 17.02 of the Family Law Rules 2004 (“the slip rule”) by amending the orders as follows:
“11.1by amending Order 6(d) such that it reads ‘pay equally all agent’s commission, auction expenses and any reasonable sums requested for advertising expenses in relation to the auction’;
11.2delete Orders 7(b) and 7(d);
11.3by amending Order 8 such that it reads ‘No later than three (3) months after the conclusion of the financial year in which the [fourth] property is sold, the parties shall each do all acts and things and sign all documents necessary to obtain a final assessment of their respective capital gains tax liability in relation to the proceeds of sale of the [fourth] property and upon obtaining such assessments shall, within 28 days of receipt of a copy of such assessment in respect of the other party:
11.3.1on the part of the Husband, pay to the Wife 53% of the liability of the Wife as so assessed;
11.3.2on the part of the Wife, pay to the Husband 47% of the liability of the Husband as so assessed.’”
In contrast to counsel for the husband, counsel for the wife did not provide a schedule showing the effect of the proposed amendments. Counsel for the husband provided us with a schedule which purports to apply the proposed amendments and to demonstrate that the error is not curable in the manner proposed.
Counsel for the wife acknowledged that if we found merit in any ground of appeal, including ground A, and re-exercised our discretion, that as a result of changes in the New South Wales revenue law, we would necessarily have to have regard to vendor duty tax which will now be incurred on the sale of the fourth property.
We accept if the orders proposed by counsel for the wife were made, and CGT is payable in the sum of $332,426 (being the figure agreed before the trial Judge) the wife would be required to pay $156,240 or 47% of the CGT payable. There is no dispute the wife’s present interest in the fourth property is a 10% equitable interest.
Before us, when working through the practical effect of the amendments sought by him, counsel for the wife conceded that it may be appropriate to provide that each party pay one half of the total CGT as assessed after the sale of the fourth property, rather than the wife’s share being based on her overall 47% entitlement.
Relevant Law – Slip Rule
Rule 17.02 of the Family Law Rules 2004 (“the Rules”), set out below, reflects the common law:
“(1) If a party claims that there is an error in an order issued by the court, the party must give written notice of the error to the Registry Manager and all parties.
(2) A Registrar may rectify an error that appears obvious on reading the order.
Example
A kind of amendment that a Registrar may make under subrule (2) is the correction of a typographical error .
(3) If the Registrar:
(a) is in doubt about whether there is an error in an order; or
(b) believes that an error in an order has, or may have, arisen from an accidental slip or omission;
the Registrar may take action under subrule (4).
(4) If subrule (1) or (3) applies, the party or Registrar may, after giving reasonable notice to each party, refer the order to the judicial officer who made it.
Note If the judicial officer who made the order is unavailable, it may be referred to another judicial officer (see rule 1.13).
(5) A judicial officer may, after giving each party a reasonable opportunity to be heard, rectify a suspected error referred to the judicial officer.
Note An amendment of an order may be made under this rule only if it is an error obvious when reading the order. Any other amendment must be remedied by appeal or consent.”
The slip rule is a well settled common law convention which allows for an error arising from an accidental slip or omission or an ambiguity or infelicity of expression not of substantive significance to be corrected at any time by a judge by further order.
The leading authorities defining the operation and scope of the slip rule are well known (see L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) (1982) 151 CLR 590; DJL v The Central Authority (2000) FLC 93-015; Russell v Russell (1999) FLC 92-877 and Milham v Stanford (2001) FLC 93-073). A detailed discussion of the relevant case law was undertaken by the Full Court in Russell at 86,436-86,437 as follows:
“67. A useful and relatively recent statement of the principles relevant to the operation of the slip rule is to be found in the judgment of Lockhart J in the decision of the Full Court of the Federal Court in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206 at 209-211. His Honour said as follows:
‘Traditionally, a court’s power to correct errors in orders arising from accidental slips or omissions is conferred by an express rule of court (e.g. Order 35 rule 7 of the Federal Court Rules); but it exists whether provision is made by express rule or not.
The slip rule is a qualification of the rule that a court may not vary a duly passed and entered order which brings a proceeding to an end because it is obviously desirable that the litigation should be brought to an end.
The rule is very wide in its scope; but is not available as a matter of course:
[L Shaddock & Associates Pty Ltd v Parramatta City Council (1982) 151 CLR 590 at 597].
Courts have an inherent or implied jurisdiction to amend judgments which do not correctly state what was actually decided and intended. Indeed, after a decree or order has been passed and entered a court will not, unless by consent, permit it to be altered without a rehearing, except in cases of mistakes or errors arising from accidental slips or omissions.’
68. Having referred to certain observations by Gaudron J in FAI General Insurance Co Limited v Southern Cross Exploration NL (1988) 165 CLR 268 at 289 and also to Seton’s Forms of Decrees, Judgments, and Orders in the High Court of Justice and Courts of Appeal (4th ed, 1879), vol 2, Pt 2, pp 1547-1548; Lawrie v Lees [1881] 7 AC 19; In re Swire Mellor v Swire (1885) 30 ChD 239; Hatton v Harris (1892) AC 547; Milson v Carter (1893) AC 638; MacCarthy v Agard (1933) 2 KB 417; and Gikas v Papanayiotou (1977) 2 NSWLR 944, his Honour continued:
‘The slip rule applies where the proposed amendment is one upon which no real difference of opinion can exist. It does not apply where the amendment is a matter of controversy; nor does it extend to mistakes that are the consequence of a deliberate decision: see Arnett v Holloway (1960) VR 22; Re Army and Navy Hotel (1886) 31 ChD 644; and Ivanhoe Gold Corp Limited v Symonds (1906) 4 CLR 642.
The slip rule may be invoked irrespective of whether the order has been drawn up, passed and entered: Milson v Carter [1893] AC 638 at 640; Fritz v Hobson (1880) 14 ChD 542 at 560; Shaddock per Mason A.CJ, Wilson and Deane JJ at 594-595; Gould v Vaggelas (1985) 157 CLR 215; and Tak Ming Co Limited v Yee Sang Metal Supplies Co [ 1973] 1 WLR 300.
It is well settled that the application of the slip rule is not confined to giving effect to the intention of the judge at the time when the Court’s order was made, or judgment given. It extends to the intention which the Court would have had, but for the failure that caused the accidental slip or omission: Symes v Commonwealth of Australia (1987) 89 FLR 356. The rule also extends to permit the correction of an order or decree where the omission results from the inadvertence of a party’s legal representative: Fritz v Hobson (1880) 14 ChD 542 at 561-562; Chessum and Sons v Gordon (1901) 1 KB 694; Tak Ming Co Limited at 304; Shaddock per Mason A.CJ, Wilson and Deane JJ at 594-595; and Gould v Vaggelas at 274-275.
The circumstances in which the slip rule has been applied are numerous and varied. Examples of the application of the rule include amendments, to allow a proper order for costs: Armitage v Parsons [1908] 2 KB 410; to increase the amount of an award of damages: Storey and Keers Pty Limited v Johnstone (1987) 9 NSWLR 446; to permit a proper calculation of interest: Ninnis v Miller [1905] VLR 669; to permit a claim for interest to be added to the amount of the judgment: Shaddock; to order repayment of monies previously paid by the defendant where the subsequent appeal was upheld: Commonwealth of Australia v McCormack (1984) 155 CLR 273; to alter a wrong date or figure in the orders, where the parties and the Court both used the same wrong date or figure, but the correct figure had been available at the relevant time: Re J W Challand Pty Limited (1945) 62 WN (NSW) 166; and, to limit the time of an injunction’s application: Shipwright v Clements (1890) WN 134. See also the Supreme Court Practice 1995 (UK) (the White Book) pp 385-386, Notes 20/11/3 and 20/11/6.’
69. In the circumstances of the present case, regard should also be had to the principle that for purposes of the operation of the slip rule, an omission or mistake should not be treated as accidental if the proposed amendment requires the exercise of an independent discretion or is a matter upon which a real difference of opinion might exist. In Brew v Whitlock (No 3) [1968] VR 504-507 the Full Court of the Supreme Court of Victoria stated:
‘In our view it is necessary that it should appear not only that the judgment was wrong, but also what could and should be done to it to make it right. Not only what was omitted, but what would need to be put in. It is impossible, in our view, to apply the rule to a case where, on the application to correct the judgment, it is necessary to exercise an independent discretion not only as to whether interest should have been awarded but also as to the rate at which it should run and as to the time from which it should run.’
70. That principle was affirmed by McHugh JA in Storey and Keers (supra at 453).
71. In Steinmetz and Steinmetz (No 2) (1981) FLC ¶91-079, 76,562 Evatt CJ, with whom Ellis and Emery S.JJ agreed, considered the provisions of the Family Law Regulations which preceded the Rules in providing for matters of practice and procedure in this Court. The appellant sought an order for the addition of the words ‘‘and one-half of all necessary repairs’’ to one of the orders made by the trial Judge. Her Honour noted that that application had not been made to the trial Judge at the trial. Her Honour stated:
‘The Family Law Regulations do not contain a provision similar to O 20 r 11 of the English Rules of the Supreme Court. However, reg 128(3) and (4) of the Family Law Regulations provide:
‘(3) If a party wishes to claim that the decree as signed contains an error, he shall draw the attention of the registrar to the error as soon as possible.
(4) The registrar shall rectify any error on the face of the decree and in a case of doubt shall refer it to the Judge or Magistrate who dealt with the matter, who shall take such steps to rectify the decree as he thinks fit.’
Under those regulations an error, including an error of omission on the face of the decree, can be rectified, but only, in my view, where the error was due to an accidental slip or omission, or where clearly the decree, as signed, failed to express the intention of the Court.
Additionally, however, where an error or omission arises by reason of an accidental slip or omission on the part of counsel, the decree may still be amended or rectified under the slip rule where, because of an accidental omission, the Court did not make the order which it should have made, if the accidental omission had not occurred (see Craigmyle v Inchcape (1942) 1 Ch 394).’
72. In Patching and Patching (1995) FLC ¶ 92-585; (1994-1995) 18 Fam LR 675 a Full Court of this Court briefly considered the application of the slip rule in a fact situation very similar to that in the present appeal. The Court found that the trial Judge ‘‘... had made a number of errors ...’’ in his findings with respect to the parties’ assets and liabilities. The Court held:
‘His Honour was correct in concluding that that was not a matter appropriate for the application of the slip rule.’ (FLC 81,800; Fam LR 681.)
73. (See also the decision of Mullane J in Bailey (1990) FLC ¶92-145.)”
Discussion – slip rules issues
Assets and liabilities as found by trial judge
As set out above, there is no dispute about the accuracy of the assets and liabilities as found by the trial Judge. The table as set out in paragraph 52 of these reasons discloses that the trial Judge included a figure for CGT referable to the sale of the fourth property. However, notwithstanding that it was agreed this property should be sold, no sum was included in the list of assets and liabilities for sale costs. We will return to this issue later when considering the husband’s grounds of appeal directed to the composition of assets to be received by each parties, in assessing whether the orders were just and equitable.
Can the defect in the orders be overcome by the slip rule?
We turn then to the question of whether the orders can be amended pursuant to the slip rule. We have already pointed out the inconsistencies between the items in end note 4 and end note 5, and the partial adjustment made by the trial Judge by deleting the AVO costs. The orders as made by the trial Judge are in error in the sense that the legal costs which will be incurred on sale were not taken into account by him in calculating the adjustment to be received by the wife, nor did he take into account agents fees and commission on sale in calculating the parties’ entitlements. Further, although the CGT was included as a joint liability of the parties for the purpose of calculating the wife's entitlement of 47% of the net assets, and was included in end note 4, the mechanics provided in the orders direct the disbursement of each party’s total liability from the CGT account withheld from the proceeds of sale of the fourth property, and the balance of funds then remaining to be split equally. The wife's CGT liability will be calculated on her 10% interest only such that the husband would, on the orders as presently drafted, be required to pay 90% of such liability. The amendment to the orders proposed by counsel for the wife will cure the defect in respect of the CGT liability but the new orders as proposed will not result in the exact mathematical adjustment provided in the trial Judge’s orders.
We are satisfied that the means of correcting the error complained of by the husband is not readily discernable or apparent from a reading of the judgment and/or orders. It is certainly subject of controversy between the parties.
Conclusions – slip rule issues
We accept this matter could well be described as one which falls within the “grey area” described in Russell (supra). Even if the orders were amended as proposed by counsel for the wife, the adjusting figure in the orders would not result in the wife receiving net assets of precisely $5,002,407 found by the trial Judge to be her entitlement. In considering the overall effect of the justice and equity of his orders, the trial Judge appears to have contemplated the wife receiving an adjusting sum of $118,778.93 without regard to sale costs of the fourth property, or the actual CGT consequences to each of the parties. We cannot be satisfied in these circumstances, that the trial Judge was effectively able to assess the justice and equity of the proposed orders, rather than the parties percentage entitlement (see JEL and DDF (2001) FLC 91-075 at paragraph 142). Hence we are satisfied Ground A is established.
Assessment of contribution
The parties’ submissions
Counsel for the husband submitted that the trial Judge failed “to assess or weigh the unmatched contributions made by the Husband or on his behalf”. It is submitted on behalf of the husband that he solely contributed “the equivalent of not less than 39.7% of the current asset pool (or not less than $4,225,000)”. These figures are based on the current value of the inherited properties and 61% of the value of the matrimonial home. He further submitted the husband provided 3½ unencumbered properties to enable the family to house itself and to obtain an income from the other properties, and enabled the wife to retain the third property purchased prior to the introduction of CGT. He referred to the financial contribution, by reason of provision of one of the inherited properties as part security for the purchase of the fourth property, and “the effective transfer of the capital gains tax benefit of the husband’s two capital gains tax fee (sic) pre-marital properties to the wife”.
In his written submissions counsel for the wife dealt firstly with the adequacy of the trial Judge’s reasoning in respect of his assessment of the parties’ contributions and then dealt with contribution adjustment. In summary, he submitted that the judgment disclosed a comprehensive analysis of contributions asserted on the part of each party. He noted that the effect of the trial Judge’s findings on contribution resulted in a 20% or $2,128,000 differential between the parties’ entitlements, and that this was within the range for which the parties contended at trial where the husband contended his contributions should be assessed at 65% and the wife contended for a 55% adjustment in favour of the husband. He concluded by submitting that the ultimate finding on contribution was “certainly within the ambit of which reasonable minds may differ”.
Discussion - assessment of contribution and adequacy of reasons
There is no challenge to the trial Judge’s findings in respect of the background history of the parties, their acquisition of assets or employment throughout the marriage. That background history comprehensively sets out each party’s role in, inter alia, the acquisition of assets. Further there was little dispute before the trial Judge as to the value of the parties’ assets or extent of their liabilities, with the notable exception of issues relating to taxation which may be payable by the husband if he received dividends from the husband’s company and the incidence of CGT referable to the inherited properties.
The trial Judge’s reasons set out the issues to be determined by him at paragraphs 5 to 8. These include an assessment of the significance of the parties’ initial contributions, and how the husband’s mother’s gift of her interest in the first property should be treated and weighed. His Honour also identified the inherited properties. He also identified the need to assess the wife’s contributions throughout the marriage with the husband’s “external” contribution of the inherited properties, the parties’ respective homemaking and parenting contributions, noting the husband’s acknowledgement that the wife’s role in this regard exceeded his contributions in this area, and finally relevant post separation contributions.
The judgment discloses that the trial Judge undertook a careful and thorough analysis of the parties’ competing claims in respect of their contributions. He identified and made findings about the husband’s financial contribution to the matrimonial home by applying the proceeds of sale of the first property (paragraph 69 to 71 of his reasons). His Honour rejected submissions made on behalf of the wife about the husband’s mother’s interest in the first property being a gift to the parties’ jointly at the time of their wedding.
At paragraph 73 of his reasons the trial Judge set out his findings about the parties’ respective contributions to the matrimonial home, and concluded that the parties’ contributions to the home should be regarded as equal.
His Honour identified and made findings about the significant contribution made by the wife in her homemaker role, and particularly in respect of her care of the child.
His Honour made findings about the husband’s contribution by way of the inherited properties. He rejected any suggestion that the wife’s contributions to these properties “could be regarded as anything like equal to those of the husband”. His Honour took account of the quantum these properties relative to the total pool of the parties’ property.
Counsel for the wife submitted that the trial Judge correctly identified the legal principles to be applied. We accept that submission. He further submitted the trial Judge accurately recorded in paragraph 84 of his reasons the positions adopted by each of the parties’ at the trial. An examination of the transcript reveals the following:
“[COUNSEL FOR THE HUSBAND]: So, your Honour, it’s our submission, at the end of the day, that the assets should be divided as to not less than 60 per cent in favour of the husband, 40 per cent for the wife and if your Honour accepted the entirety of our argument - - -
HIS HONOUR: That’s the entire pool? That’s this you’re talking about?
[COUNSEL FOR THE HUSBAND]: The pool that your Honour decides is the pool.
HIS HONOUR: Well, leaving aside the retention bonus and the costs, you would say all of the other assets are in and the liabilities that came out – well, I don’t know what you’re telling me about that. The liabilities that come out are only, it would be imagined, the CGT on [the fourth property] if that were to be the subject of a sale order?
[COUNSEL FOR THE HUSBAND]: Mm.
HIS HONOUR: And there’s a dispute about the tax on the dividend (indistinct)
[COUNSEL FOR THE HUSBAND]: That’s right. I was going to say to your Honour, if our argument is accepted in its entirety, then we contend for the division that we initially argued 65/35.
HIS HONOUR: That would be more generous to your client than you’re presently suggesting.
[COUNSEL FOR THE HUSBAND]: I’m suggesting that the worst we can do is 60/40. The best we can do is 65/35.”
We accept the submission made on behalf of the wife about the parties’ positions at trial. We are satisfied that paragraph 84 accurately records the concessions made at trial, including the concession of “not less than 60% to the husband …” qualified by the rider that such a concession depended upon the trial Judge’s treatment of tax.
We discern the thrust of the husband’s submissions on the trial Judge’s assessment of contributions relate to the husband’s initial contributions, the contribution of the proceeds of the first property, and the inherited properties on the basis that these separate contributions are not matched equally or even disproportionately matched by contributions by the wife. The submission made on the husband’s behalf that these represented “not less than 39.7% of the value of the current pool” prima facie appears to suggest a strict mathematical approach to the assessment of contribution.
The question of the weight to be given to initial contributions was considered by the Full Court in Pierce (supra, at paragraph 28) as follows:
“In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home…”
The assessment and comparison of contributions, both financial and non financial and the translation of that weighing and comparison is not and cannot generally be a strictly mathematical task (see Norbis v Norbis (1986) 161 CLR 513 at 521-523 and G and G (1984) FLC 91-582 at 79,697).
Conclusion - assessment of contribution
The task before the trial Judge was to assess the parties’ respective contributions over a long term marriage of some twenty year’s duration. The trial Judge recorded the difference in the parties’ initial contributions by reason of the husband’s half interest in the first property. Although he did not take that interest into account in assessing initial contributions, he subsequently gave significant weight to the contribution of the whole of the proceeds of the first property to the acquisition of the matrimonial home. We are satisfied that in accordance with the principles enunciated in Pierce (supra) that the trial Judge gave weight to all of the contributions made by each of the parties, including appropriate weight to the wife’s very significant role in the care and upbringing of the child and in homemaking tasks, which contribution was not matched by a like contribution by the husband.
We are satisfied that the trial Judge appropriately recorded and assessed the parties’ respective contributions and that his finding of a differential on contribution based entitlement in the husband’s favour of 20%, or $2,128,000 (a 60%/40% division), of the total pool was within the reasonable ambit of discretion.
CGT (grounds 2 to 6)
The trial Judge’s rejection of the evidence in respect of CGT payable on the inherited properties, his interpretation of the relevant law, and his ultimate treatment of CGT by failing to including a sum referable to such tax in the liabilities of the parties or to take such a liability into account under s.75(2)(o) is asserted by the husband to constitute error. The rejected evidence included two letters from real estate agents, and parts of the husband’s expert accountant’s report.
The parties’ submissions
(a)the husband’s submissions
In dealing with the issue of CGT relevant to the inherited properties, it is submitted on behalf of the husband that “The future sale price of the Husband’s properties can only be estimated. The value of the property when ‘acquired’ by the Husband by virtue of his mother’s death, can only be estimated by one of two ways: valuations prepared at the time or valuations prepared now, but re-constructing the market place as it was some 14 years ago”.
It is submitted that the husband’s prior evidence, being contained in the probate statement is admissible pursuant to s.77 of the Evidence Act 1995 (Cth) (“the Evidence Act”), or “in the alternative pursuant to s.190 of the Evidence Act with a limit of its use to the above purpose pursuant to s.136. In the alternative, it will be submitted the market appraisals are admissible pursuant to section 69 of the Evidence Act”.
Counsel for the husband further submitted, for the purpose of the re-exercise of the discretion, if we accept the husband’s evidence “of the acquisition cost of the inherited properties”, and because we have evidence of the current values of those properties, we can either deduct a “notional” sum from each party’s CGT affected properties, in effect, “neutralising” the effect of CGT, or by making an adjustment in the husband’s favour under s.75(2)(o) of 3% as set out in the husband’s case summary document.
Counsel for the husband rejected the assertion made on behalf of the wife that the onus to prove the quantum of the CGT liability rested with the husband, and said because CGT accrues and is incurred by operation of law that neither party should bear an onus. He finally submitted that as the parties at the date of trial had seven investment properties, of which the fourth property was to be sold, with the wife retaining four investment properties (referred to as five in the submission) two of which did not attract the incidence of CGT, and the husband retaining two properties both subject to CGT, the overall result was unfair because the orders did not provide the same degree of flexibility to the husband as was afforded to the wife. When sold he submitted the wife could realise, without penalty, the substantial part of her property portfolio and the same flexibility was not afforded to the husband.
(b) the wife’s submissions
The principal thrust of the submissions made by the wife in respect of the CGT issue is that, as the husband failed to adduce admissible evidence before the trial Judge, in the absence of such evidence the trial Judge could not speculate for the purposes of s.79 and s.75(2) when CGT would crystallise, its quantum and the impact of such tax on either party.
In summary, it is submitted that the basis of the husband’s appeal in respect of the CGT issue is flawed because the evidence disclosed the husband rejected a proposal by the wife to sell the inherited properties. Further that there was no evidence of any intention by the husband to sell the investment properties thus crystallising a CGT liability or any need for him to do so by reason of his access to other assets, and there was no admissible evidence of the amount of CGT payable in the event of a sale. Thus it is submitted in these circumstances there is no basis that the Court could, or should, have taken into account potential CGT liabilities of the husband.
The wife’s submissions relating to the admissibility of expert evidence note the concession at trial that CGT calculations were based on market appraisals, the tender of which was rejected, on the basis of unfairness. It is further submitted the only relevance the market appraisals could have would be to establish the value of the properties in 1990 and that s.77 of the Evidence Act does not apply. Further, it is submitted there was no argument before the trial Judge based on s.190 of the Evidence Act nor any evidence relevant to s.190(4). The submissions based on admissibility in reliance on s.69 are opposed, also on the basis that no reliance was placed on this section before the trial Judge.
The submission made on behalf of the wife put in issue the question of onus in relation to adducing of evidence in respect to CGT issues. Reliance is placed on the “fundamental tenet of the procedure for determination of disputes in any Australian superior court of record that ‘he who asserts must prove’: see for example Currie v Dempsey [1967] 2 NSWR 532”. It is submitted because of the failure of the husband to call evidence at trial, he is now bound by the way in which he chose to conduct his case before the trial Judge.
Should the trial Judge have admitted the expert evidence?
An examination of the transcript reveals that the husband’s counsel sought on the second day of the hearing to tender from documents which had been discovered two letters from real estate agents dated respectively 24 April, 1990 and 21 May, 1990 giving in each case a range of selling prices which may be achieved if the inherited properties were sold at that time. The reason the husband’s counsel sought to tender the letters was to establish the market value of the properties at the date of death of the husband’s mother in conformity with s.160X(5)(a) of the Income Tax Assessment Act 1936 (Cth) (“ITAA”). That section provides:
“(5)Where an asset that formed part of the estate of a person who died on or after 20 September 1985 has passed to the legal personal representative of the deceased person or to a beneficiary in the estate of the deceased person:
(a) if:
(i) the deceased person acquired the asset before 20 September 1985; or
(ii) the asset is a dwelling that was, immediately before the person’s death, the person’s sole or principal residence for the purposes of section 160ZZQ and was not, for the purposes of that section, then being used for the purpose of gaining or producing assessable income;
the asset shall be deemed, for the purposes of this Part, to have been acquired by the legal personal representative or the beneficiary on the date of the person’s death and to have been so acquired for a consideration equal to the market value of the asset at the date of the person’s death; or
Note: In certain cases, a dwelling may be taken to have been a person’s sole or principal residence, and any use for the purpose of gaining or producing assessable income may be disregarded, for the purposes of section 160ZZQ: see subsection 160ZZQ(11).”
The tender was rejected on the basis of fairness to the wife, the husband’s counsel conceding that he did not believe at any point his instructing solicitor had given notice to the wife’s instructing solicitor of intention to rely on the letters.
Objection was also taken to parts of the husband’s expert accountant’s evidence whereby the expert calculated CGT in respect of the inherited properties. The foundation for the expert’s opinion of the market value at the date of the husband’s mother’s death was the letters. Counsel for the husband effectively conceded that if the foundation of the expert’s calculations was not admitted, that the following evidence, being the calculations contained in the report, was also inadmissible. Objection was also taken to the husband’s evidence of value contained in the exemplification of probate on the basis that his opinion did not fulfill the criteria in Part 3.3 of the Evidence Act.
The trial Judge at paragraph 42 of his reasons set out the state of the evidence before him in respect of CGT. His Honour noted that counsel for the husband “ultimately conceded” there was no evidence of the value of the two inherited properties at the date of the husband’s mother’s death. He further noted that counsel for the husband had argued he should, by analogy, determine that the CGT on the two inherited properties would be no less than the agreed sum of CGT payable on the sale of the fourth property.
We turn firstly to the trial Judge’s ruling in respect of the admissibility of the two letters. The thrust of the argument advanced by the husband was that the husband’s opinion of market value, based on the letters, should have been admitted pursuant to s.77 of the Evidence Act. Section 77 is contained within Part 3.3 of the Evidence Act, which deals with “Opinion”. That section provides:
“The opinion rule does not apply to evidence of an opinion that is admitted because it is relevant for a purpose other than proof of the existence of a fact about the existence of which the opinion was expressed.”
Also relevant is s.76. This general exclusionary rule provides:
“(1)Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed.
(2)Subsection (1) does not apply to evidence of an opinion contained in a certificate or other document given or made under regulations made under an Act other than this Act to the extent to which the regulations provide that the certificate or other document has evidentiary effect.”
The learned authors of Cross on Evidence Australian Edition: D Bryne and JD. Heydon comment on s.77 at 29165 as follows:
“Section 77 provides that the opinion rule does not apply to evidence of an opinion that is admitted because it is relevant for a purpose other than proof of the existence of a fact about the existence of which the opinion was expressed. The legislation is silent to whether the opinion can be taken into account for the purpose described in s 76. It is likely that orders will frequently be sought under s 136 limiting the use to which evidence admissible under s 77 may be put, and in particular limiting the use to which it may be put so that it is not employed for the purpose described in s 76.”
We find much cogency in that statement. It is clear that the trial Judge rejected the evidence on the basis of fairness, and whilst he did not specifically refer to s.136 of the Evidence Act we are satisfied that even if the husband’s evidence contained in the probate document was prima facie admissible under s.77, that it properly should be rejected on the basis set out in s.136(a).
We also find merit in the submissions of counsel for the wife in respect of s.190 of the Evidence Act. That section provides:
“(1)The court may, if the parties consent, by order dispense with the application of any one or more of the provisions of:
(a) Division 3, 4 or 5 of Part 2.1; or
(b) Part 2.2 or 2.3; or
(c) Parts 3.2 to 3.8;
in relation to particular evidence or generally.
…
(3)In a civil proceeding, the court may order that any one or more of the provisions mentioned in subsection (1) do not apply in relation to evidence if:
(a) the matter to which the evidence relates is not genuinely in dispute; or
(b) the application of those provisions would cause or involve unnecessary expense or delay.
(4)Without limiting the matters that the court may take into account in deciding whether to exercise the power conferred by subsection (3), it is to take into account:
(a) the importance of the evidence in the proceeding; and
(b) the nature of the cause of action or defence and the nature of the subject matter of the proceeding; and
(c) the probative value of the evidence; and
(d) the powers of the court (if any) to adjourn the hearing, to make another order or to give a direction in relation to the evidence.”
This provision was not subject of argument before the trial Judge as a basis of admission. As there was no consent, s.190(1) could have no application. If the Court is to exercise its discretion under s.190(3) it must take into account the matters in s.190(4). It is clear that the trial Judge raised the issue of adjournment with the husband’s counsel, and no application for adjournment was made. We are satisfied having regard to the provisions of s.190(4)(c) there must be doubt about the probative value of the husband’s evidence based on the letters, and the letters themselves. The letters do not set out the qualifications, if any, of the respective writers, nor to they expressly purport to give a market value. Rather they express a view of a range of selling prices which may be achieved for the inherited properties.
There was no submission made to the trial Judge that the letters could be admitted under s.69 of the Evidence Act (business records exception to the hearsay rule). We reject the argument that s.69 was or is available. Further even if the letters could have been admitted under this section, for the reasons set out above as to lack of evidence about the qualification and expertise of the authors, we find they would have had no effective probative value.
We are satisfied that there was no admissible evidence before the trial Judge, or before us, which proved the type of material required by the Deputy Commissioner of Taxation to establish market value for the purposes of s.160X(5)(a) of the ITAA. Before us counsel for the husband conceded that he had not sought to adduce evidence from Mr Spring of the Deputy Commissioner’s usual practice, if such a practice exists, of reliance on market value based on letters from a real estate agent, or values set out in Probate applications made to the Supreme Court.
We turn then to the question of whether Mr Spring’s report should have been received by his Honour into evidence, and the relevance of his evidence determined after cross examination. This required a consideration of the Part 15.5 of the Rules, and the principles enunciated in Makita v Sprowles (2001) 52 NSWLR 705, and cases determined subsequent to that decision relating to admission of expert evidence. Rule 15.59(3)(a) provides that an expert has a duty to the Court to “give an objective and unbiased opinion that is also independent and impartial on matters that are within the expert witness’s knowledge and capability”. Rule 15.59(3)(e)(i) provides that an expert has a further duty to “tell the court…if a particular question or issue falls outside the expert witness’s expertise”.
In Makita (supra) Heydon JA (as he then was) comprehensively sets out a number of authorities dealing with the question of expert evidence. At 743 his Honour distils the principles relevant to the admissibility of expert evidence as such:
“In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of ‘specialised knowledge’; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be ‘wholly or substantially based on the witness’s expert knowledge’; so far as the opinion is based on facts ‘observed’ by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on ‘assumed’ or ‘accepted’ facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert’s evidence must explain how the field of ‘specialised knowledge’ in which the witness is expert by reason of ‘training, study or experience’, and on which the opinion is ‘wholly or substantially based’, applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight.”
The principles espoused by Heydon JA in Makita (supra) to be upheld by expert witnesses have been adopted with approval in a number of subsequent decisions (see Idaport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 123). However, in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FAFC 157 Branson J referred to the requirements set out by Heydon JA above as “a counsel of perfection”. Her Honour noted that before the trial Judge the parties, who were legally represented, had agreed to an expert report, which became the subject of challenge before the Full Court, being admitted. She noted a trial Judge is normally required to make rulings on admissibility at the commencement of the hearing and that the practice of examining an expert on the voir dire was no longer commonly employed. Her Honour said:
“As a result the judge is likely to be asked to rule on the admissibility of the affidavit, report or oral evidence of a witness put forward as an expert before the witness is subject to any questioning by opposing counsel. For this reason, it may prove to be the case that evidence ruled admissible as expert opinion will later be found by the trial judge to be without weight for reasons that, strictly speaking, might be thought to go to the issue of admissibility (eg that the witness’s opinion is expressed with respect to a matter outside his or her area of expertise or is not wholly or substantially based on that expertise).”
Counsel for the wife submits there has been no double counting by the trial Judge, and that his Honour’s discussion at paragraphs 74 to 77 is merely an appropriate consideration by the trial Judge of the parties’ disparate contributions. He points out that no adjustment was made by the trial Judge because of the effect of the wife’s homemaking and parenting duties on her career, despite a concession by the husband that these duties did, during the child’s early years, impact on her ability to work on a full time basis.
In respect of the adjustment made by the trial Judge, counsel for the wife notes that the husband contended there should be no adjustment under s.75(2), and that the wife contended for an adjustment in her favour of 5%, but this was predicated on the trial Judge accepting that the wife’s contribution based entitlement should be 45%, but otherwise she sought a larger adjustment. He notes that the trial Judge identified the relevant matters which called for an adjustment, and that his Honour’s reasoning is readily identifiable.
In his written submissions counsel for the husband refers to the wife’s affidavit evidence about her work history. The wife said (affidavit of the wife filed 3 October 2003 at p 22):
“84.In 1990 and 1991 when [the child] was aged three and four respectively, I continued to work part-time from home and worked from an office two days per week, whilst also providing all of the care for [the child] and attending to the household duties as required. On the two days I went out to work, [the child] would attend pre school at Lane Cove or one of my parents would come over and care for him. For the financial year ended June 1990 my taxable income was $48,700.00. For the financial year ended June 1991 my taxable income was $48,000.00.
85.I was subsequently unable to fall pregnant again despite my desire to have more children. I had a number of exploratory procedures to ascertain why I had not become pregnant again. The husband and I then considered going on the IVF program but after receiving advice that I was capable of falling pregnant without the IVF procedure, we did not enrol. I became pregnant again in December 1990 at age 40 and subsequently miscarried whilst the husband was overseas on a skiing holiday with his friends.
86.After the child commenced infants school in 1992, I began to work from an office [on the North Shore] usually from 9.40am until 3.00pm ensuring that I was available to deliver him each morning and collect him each afternoon from school. In these years, I took on small scale work being work that I could usually complete in a day. I did not actively seek and declined larger and more interesting projects. This ensured that I had the flexibility of being able to stay home if [the child] was not well and being able to deliver and collect him to and from school, attend teachers’ meetings and take [the child] to appointments as required, such as doctor’s appointments.”
Counsel for the husband also referred to various references to the cross examination of the wife. This evidence includes a concession by the wife in one year when the husband had been retrenched her taxable income was $72,800 and the husband’s taxable income was $37,000. He also refers to concessions by the wife that after the child commenced full time school, the wife’s income doubled in that year, and her concession that she was able to do more work after the child commenced school. He also referred us to the concession made by the wife that in the year before the trial she earned gross fees of $227,000 and made superannuation contributions of $38,000 and claimed part of her motor vehicle expenses as an expense of her practice.
Discussion - s.75(2)
It is apparent from the trial Judge’s reasons that he clearly differentiated between the wife’s contributions as homemaker and parent in paragraphs 74 and 75 and potential effect on the earning capacity which at that point in his reasons he noted may be relevant under s.75(2). We do not accept the submission that the trial Judge “double counted”. We find the discussion by the trial Judge in these paragraphs was a proper considerations by him of the parties’ respective contributions over their long term marriage. We are satisfied that the matters referred to by the trial Judge in paragraph 76 of his reasons about the effect of the wife’s parenting responsibilities merely raises that topic as a matter to be subject of assessment when the trial Judge considers s.75(2) factors.
Conclusions - s.75(2)
We do not accept the submissions made on behalf of the husband that the trial Judge made two significant erroneous findings relevant to the exercise of his discretion under s.75(2). We are satisfied there was evidence before the trial Judge that the wife commenced part time work after the child’s birth in order to properly meet his needs, at least until he commenced school, and as a consequence her career which otherwise may have been on a full time basis was curtailed during this period. The impact of parenting duties on the wife’s career was not the subject of adjustment under s.75(2). We do not find any error by the trial Judge failing to record that the wife “acquired over the course of the marriage a substantial earning capacity”. What his Honour did properly record was that the wife obtained her PhD prior to the marriage in 1979 and had full time employment as a psychologist at the time of the marriage. We accept that the wife had in the latter years of the marriage established and maintained her private practice as a psychologist. We are satisfied that the factor which the trial Judge properly assessed was the disparity in the earning capacities of the parties at the time of the hearing and until the parties’ likely retirements. A finding there was such a disparity was open to the trial Judge on the evidence. Although the parties are each well qualified high income earners the ability of the trial Judge, in the exercise of his discretion to make such adjustment is not in doubt (see Waters and Jurek (1995) FLC 92-635).
We are satisfied that the trial Judge clearly identified matters relevant to the exercise of his discretion in dealing with s.75(2) factors both at the commencement of his reasons and from paragraphs 86 to 95. Those factors being the disparity at the time of trial and to the future of the parties’ income earning capacities, the care of the child, the fact that part of the husband’s property entitlement was in superannuation which was not immediately accessible, the husband’s retention bonus, and CGT issues.
The trial Judge’s reasoning leading to the adjustment in the wife’s favour is readily discernible, and the adjustment which he ultimately determined was within the reasonable range of discretion having regard to relevant factors in this case.
Were the orders “just and equitable”
The principled reasoning required to arrive at a just and equitable order under s.79 requires consideration of the overall effect of the justice and equity of orders proposed (see Hickey and Hickey and Anor (2003) FLC 93-143; JEL and DDF (supra) and Waters and Jurek (supra)).
In this case the trial Judge determined that, although both parties sought to retain the matrimonial home, in the circumstances of the case there were factors which supported the order sought by the wife, rather than a sale of the home. Those factors included the wife’s residence after separation (albeit that this was not a determining factor, per se) the husband’s late change of position about seeking the home in specie, that there were no features about the home unique to the husband, and that the child would have the benefit of stability in the home for some time as he was likely to remain living with the wife for at least the beginning of his tertiary education.
The trial Judge then discussed the impracticality of the husband living in the fourth property with the unfortunate history of acrimony between the parties, and concluded the property should be sold. We are not satisfied that his Honour’s discretion was in error in so finding.
We do not find merit in the husband’s grounds of appeal going to the composition of the assets to be retained by each party. Essentially the husband and wife agreed, save and except for the retention of the matrimonial home and the fourth property how their remaining property should be divided. We are satisfied that the trial Judge took into account in his detailed consideration of CGT issues the effect of the property to be retained by each party, and further considered the husband’s mix of assets including superannuation when considering the appropriate adjustment to be made under s.75(2).
In our discussion and findings on the grounds relative to the slip rule we have determined that the trial Judge’s ability to stand back and assess the overall impact of the orders must have been flawed for the reasons set out by us in paragraphs 64-67.
Ultimately the appeal must be allowed as a result of our determination that ground A of the appeal has been established.
Form of orders
We are satisfied the trial Judge did not fall into error in his assessment of contributions and s.75(2) factors, and we adopt the percentage division arrived at by him for the reasons he expressed.
At the conclusion of the hearing before us the parties agreed in the event the appeal was allowed that we should re-exercise the discretion. It was also conceded that in the event we found the defect in his Honour’s orders could not be corrected under the slip rule, then it would be necessary to have regard to the vendor duty tax payable on the sale of the fourth property.
The Duties Act 1997 (NSW) by reason of amendments contained in the State Revenue Legislation Amendment Act 2004 (NSW) provides that, subject to exemption, vendor duty at a rate of 2.25% will be imposed on any transfer, agreement for sale or transfer or declaration of trust over land related property. Duty is calculated based on the greater of the GST inclusive consideration for the sale of land and the unencumbered value of the land including any improvements. The Act contains exemptions where the property is sold at a loss, or at a profit of less than 12%. Proportionate duty is paid if the profit is between 12% and 15%. Profit is defined, for the purposes of the legislation, as the difference between the original purchase value and sale price. It does not take into account improvements made by the vendor, transaction costs or inflation. Exemptions under the legislation include some farming properties and the principal place of residence. The legislation does not apply to transfers between parties, for example, pursuant to orders of this Court.
It is apparent to us that the error which occurred in this case reflected in the orders sought to be amended pursuant to the slip rule may have been avoided if the parties’ respective entitlements had been assessed as percentage interests, including in particular a percentage interest in the actual net sale proceeds of the fourth property, particularly when the trial Judge had ordered a sale of that property.
The fourth property is one of significant value and a sale above its agreed value may create a significant windfall for the husband in such circumstances. Conversely however, he may sustain a loss in a climate of a recent interest rate rises. The expenses of the sale could not be ascertained at trial, and CGT which will be payable may be subject to variation from that calculated by the husband’s accountants depending on the sale price achieved. It appears that by reason of the wife’s 10% equitable interest in the property her CGT liability will be substantially less than that of the husband.
The practice of drafting orders based on a percentage entitlement rather than a fixed sum to achieve fairness between parties in the event of a sale is subject of many authorities. Those authorities were subject of comprehensive review in [S] and [S] [2000] FamCA 262. We take this opportunity to repeat that summary and emphasise the importance of the well established principle:
“108.A long line of authority in this Court (Waters and Waters (1981) FLC 91-019 at 76,208; Williams and Williams (1988) FLC 91-959 at 76,940; Docters van Leeuwen and Docters van Leeuwen (1990) FLC 92-148 at 78,024; Little and Little (1990) FLC 92-147 at 78,020; Smith and Smith (1991) FLC 92-261 at 78,759; and Bell and Bell (1993) FLC 92-347 at 79,683) establishes as a clear guideline for the exercise of discretion under s.79 of the Act, that, absent some special consideration (such as a desire by one spouse to retain a particular piece of property, in specie), and particularly where the value of an asset is contentious, or even where it is not but the market for the property is volatile, or there is likely to be a significant time lapse between judgment and sale, and where the value of the asset is to be divided between the parties, the Court should order its sale and the apportionment of the proceeds between the parties rather than order one party to pay to the other a fixed sum representing a notional proportion of its assessed value.
109.Moreover, in Docters van Leeuwin (sic) (supra) at 78,025, the Full Court (Fogarty, Nygh & Rowlands JJ), after citing a passage from the judgment of Mason and Deane JJ in Norbis v Norbis (1986) FLC 91-712 at 75,165-6, said this:-
‘In our view the time has come to regard a departure from a long-standing guideline, such as the one given in Waters, without adequate explanation as a ground for finding that the exercise of discretion has miscarried.’
110.In Bell and Bell (supra) at 79,763, the Full Court (Ellis, Baker & Purvis JJ), after referring to the earlier decisions in Docters van Leeuwin (sic), Little, and Waters (all supra) said this:-
‘We see no reason to depart from the line of authority referred to above. There is always uncertainty in relation to the amount which will ultimately be obtained in respect of the sale of matrimonial property and, in particular, matrimonial real estate.
…
Although the order which the trial judge made was essentially discretionary in nature, in our opinion the authorities above referred to clearly establish that where a sale of property is necessary to satisfy a lump sum order for settlement of property and the calculation of any lump sum payable arises from a finding as to the value of the property to be sold, then the amount to be paid to one or other of the parties following any such sale should be expressed in percentage terms, rather than by way of lump sum payment, unless good and sufficient reasons are given for doing so.
The trial judge gave no reasons for departing from the above principle and, given the facts of the case, we are unable to perceive that there was any justification in law for doing so. For this reason therefore, we consider the trial judge has erred in the proper exercise of his discretion and we would allow the appeal to this extent.’”
In this particular case we find the parties’ entitlements can best be determined by using the table of assets and liabilities as found by the trial Judge, excluding the CGT liability and sale costs, and providing the expenses incurred in sale, total vendor duty tax and CGT, when payable or assessed, be borne equally by the parties from their retained assets.
This would result in an adjusted list of assets and liabilities as follows:
ASSETS The matrimonial home * J 2,500,000 The fourth property J 1,950,000 The sixth property W 800,000 The North Sydney unit W 305,000 Inherited property 1 H 1,400,000 The fifth property W 515,000 Inherited property 2 H 1,050,000 The third property W 900,000 St George A/C W 1,718 Commonwealth Bank W 2,745 Macquarie Bank W 2,131 ING Bank W 9,322 St George Portfolio W 4,480 AMP Shares W 2,396 [B] Shares W 15,600 [B] Invest W 3,960 Funds in Trust W 77,500 Coles Myers W 8,749 Commonwealth Bank Shares W 13,867 Fosters Shares W 9,132 David Jones Shares W 2,935 Mayne Shares W 29,300 IAG Shares W 2,284 BT Funds W 19,819 MLC Funds W 37,536 Holden Calais W 25,000 Ski Lodge H 15,200 Furnishings J 20,137 Clothing W 1,000 Macquarie Bank H 136,308 St George Bank H 1,007 Various Shareholdings H 224,249 Shareholding (the husband’s company) H 467,266 Husband’s loan A/c (the husband’s company) H 131,364 Clothing, tools, etc H 1,000 The husband’s company Superannuation Fund (net of tax) H 703,948 Macquarie Investment Management Super (net of tax) W 428,327 Colonial Superannuation W 8,774 [P] Superannuation H 36,171 [AA] Management H 54,186 BT Funds Management H 42,755 MLC Investment Bond H 33,328 Legal Fees Paid H 120,222 Legal Fees Paid W 83,870 Total Assets 12,197,586 LIABILITIES CGT W 978 Tax W 15,763 Mortgage (the fourth property) # J 450,000 Mortgage (the fifth property) W 244,000 Mortgage (the sixth property) W 511,000 Total Liabilities 1,221,741 TOTAL ASSETS AND LIABILITIES 10,975,845
Husband's Entitlement 53% 5,817,198 Wife's Entitlement 47% 5,158,647 (* = to be adjusted in accordance with actual sale price
# = to be adjusted in accordance with actual discharge sum)
The parties’ entitlements would then be as follows:
HUSBAND WILL RETAIN The fourth property (proceeds) * 1,950,000 Inherited property 1 1,400,000 Inherited property 2 1,050,000 Macquarie Bank 136,308 St George Bank 1,007 Various Shareholdings 224,249 Shareholding (the husband’s company) 467,266 Husband’s loan A/c (the husband’s company) 131,364 Clothing, tools, etc 1,000 The husband’s company Superannuation Fund (net of tax) 703,948 [P] Superannuation 36,171 [AA] Management 54,186 BT Funds Management 42,755 MLC Investment Bond 33,328 Legal Fees Paid 120,222 Total Assets 6,351,804 LIABILITIES Mortgage (the fourth property) 450,000 Total Liabilities 450,000 TOTAL ASSETS AND LIABILITIES 5,901,804 Adjustment by Husband (from the fourth property) * 84,606 Husband's entitlement 5,817,198
WIFE WILL RETAIN The matrimonial home 2,500,000 The sixth property 800,000 The North Sydney unit 305,000 The fifth property 515,000 The third property 900,000 St George Freedom A/C 1,718 Commonwealth Bank 2,745 Macquarie Bank 2,131 ING Bank 9,322 St George Portfolio 4,480 AMP Shares 2,396 [B]Shares 15,600 [B] Invest 3,960 Funds in Trust 77,500 Coles Myers 8,749 Commonwealth Bank Shares 13,867 Fosters Shares 9,132 David Jones Shares 2,935 Mayne Shares 29,300 IAG Shares 2,284 BT Funds 19,819 MLC Funds 37,536 Holden Calais 25,000 Ski Lodge 15,200 Furnishings 20,137 Clothing 1,000 Macquarie Investment Management Super (net of tax) 428,327 Colonial Superannuation 8,774 Legal Fees Paid 83,870 Total Assets 5,845,782 LIABILITIES CGT 978 Tax 15,763 Mortgage (the fifth property) 244,000 Mortgage (the sixth property) 511,000 Total Liabilities 771,741 TOTAL ASSETS AND LIABILITIES 5,074,041 Adjustment by Husband # 84,606 Wife's entitlement 5,158,647 (* = to be adjusted in accordance with actual sale price
# = subject to sale price of the fourth property)
The adjusting sum to be paid by the husband to the wife should be deposited into an interest bearing account to provide for her 50% share of the CGT when assessed in respect of the fourth property.
COSTS
It was agreed at the hearing of the appeal, that we would include in our orders directions for the filing of written submissions in relation to the costs of the appeal and also in relation to any appeal against any costs order made by the trial Judge.
FINN J: I have had the advantage of reading in draft the judgment of the Chief Justice and Boland J. I agree with them that the appeal should be allowed and that the orders made by Faulks J should be set aside. I also agree that the orders proposed by their Honours should be made in place of his Honour’s orders. I agree generally with the reasoning of their Honours.
ORDERS
1.That the appeal be allowed.
2.That the orders made by Faulks J on 27 February 2004 be set aside and the following orders substituted in lieu.
3.By way of adjustment of property under s.79
3.1 The wife retain the sole and beneficial ownership of the [third property, the North Sydney unit, the fifth property and the sixth property].
3.2 Within 28 days of these orders the husband do all acts and things and execute all deeds, documents and instruments and writings, including the delivery to the wife’s solicitor of the title deeds, necessary to procure the transfer to the wife free of encumbrance all of the husband’s right title and interest in the [matrimonial] property…and the wife shall indemnify and keep indemnified the husband in respect of all claims for rates and taxes (if any) outstanding in respect of the said property and all claims for electricity, gas, telephone and any other services connected to or supplied to the said property.
3.3 That both parties do all acts and things and execute all deeds, documents, instruments and writings necessary to procure the sale of the [fourth] property…by public auction and in particular:
(a)place [the fourth property], with auctioneers agreed to between the parties, or failing such agreement, as nominated by the President of the Council of Auctioneers and Agents (“the auctioneers”) for the sale of [the fourth property] by public auction at the earliest possible date;
(b)execute all documents requested by the auctioneers for the sale of [the fourth property] by auction;
(c)request the auctioneers to recommend a reserve price to be placed on [the fourth property] for the purpose of the auction sale and accept such recommended reserve price;
(d)pay equally all agents commission and advertising expenses associated with the sale;
(e)give such instructions to a solicitor mutually agreed upon by them for the preparation of an appropriate contract and other documents as are necessary for the sale of [the fourth property] by auction;
(f)cooperate in every way with the auctioneers in relation to the auction of [the fourth property] including making a key available, allowing inspection of [the fourth property] at times requested by the auctioneers and ensuring that [the fourth property] is in a neat and clean condition at the time of inspection by prospective purchasers;
(g)attend at the auction sale of [the fourth property] and negotiate with the highest bidder if the reserve price is not reached;
(h)accept the advice of the auctioneers whether to accept a price less than the reserve price;
(i)execute the contract of sale; and
(j)immediately prior to settlement of the sale of [the fourth property] each party shall pay one half of the vendor duty payable pursuant to the Duties Act 1997 (NSW).
3.4 That both parties do all acts and things necessary to procure that upon the sale of [the fourth property] the proceeds of sale be paid in the following manner and priority:
(a)in payment of the amount required to discharge the mortgage registered to Primary Industry Bank of Australia Limited;
(b)in payment of legal costs of sale;
(c)in payment to the wife of such sum as is necessary to ensure the wife receives an amount equivalent to 47% of the net assets and liabilities as set out in paragraph 145 of the judgment of the Full Court save and except that the value of [the fourth property] shall be the actual sale price less legal costs and disbursements associated with the sale and the value ascribed to the mortgage shall be the actual sum required to discharge such mortgage;
(d)the payment to the husband of the balance then remaining.
3.5 On receipt of their respective shares of the proceeds of sale of [the fourth property] the parties shall immediately thereafter each deposit the sum of $166,213 into an interest bearing account opened in their joint names with the Commonwealth Bank of Australia, or such other financial institution as may be agreed between the parties (“the CGT Account”) and the principle and interest of such account (“the funds”) shall be applied by the parties to meet their obligations under order 3.6.
3.6 Not less than 3 months after the conclusion of the financial year in which [the fourth property] is sold, the parties shall each do all acts and things and sign all documents necessary to obtain a final assessment of their respective capital gains tax liability in relation to the proceeds of sale of [the fourth property]. The parties shall as soon as practical thereafter pay the aggregate of their respective CGT liability as follows:
(a)by withdrawal of the funds from the CGT Account and in payment of the funds to the Australian Taxation Office;
(b)in the event the funds are insufficient to meet the total CGT liability each party shall contribute equally to such shortfall.
PROVIDED HOWEVER if the funds in the CGT Account exceed the
total CGT liability after payment as provided in 3.6(a) the balance of the funds remaining shall be divided equally between the parties.3.7 Within 7 days of the date of these orders the husband do all acts and things and sign all documents necessary to remove the caveat registered on the title of the [third] property.
3.8 That the husband forthwith do all acts and things and sign all documents necessary to transfer to the wife all of the husband’s right, title and interest in [the Ski] Lodge and the…Unit Trust.
3.9 All other real and personal property that is not otherwise specifically dealt with by these orders shall be the property of the party in whose possession or control such property stands as at the date of these orders.
3.10(a) That save and except for the personalty in the [matrimonial] property…being formerly the property of the husband’s mother, the wife is the sole beneficial owner of all other personal property located therein.
(b) That the wife make available to the husband the items in the [matrimonial property] agreed by the parties during the hearing to go to the husband.
4.Pursuant to s.106A of the Family Law Act 1975 in the event either party refuses or neglects to comply with the provisions of these orders the Registrar of the Family Court of Australia is hereby appointed to execute all deeds and documents in the name of the husband and/or wife and do all such acts and things necessary to give validity and operation to the said orders within 14 days of the reasonable request to do so being sent to the last known residential address of the party or solicitor acting for the party.
5.That the parties be at liberty to file written submissions with regard to any appeal against any costs order made by the trial Judge and to the costs of the appeal in accordance with the following timetable:
(a)on behalf of the appellant husband within twenty-one days of the date hereof;
(b)on behalf of the respondent wife in response thereto within twenty-one days thereafter; and
(c)on behalf of the appellant husband in reply thereto within seven days thereafter.
6.That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
|
13
18
0