Oamra & Williams
[2021] FamCAFC 117
•13 July 2021
FAMILY COURT OF AUSTRALIA
Oamra & Williams [2021] FamCAFC 117
Appeal from: Williams & Oamra [2020] FCWA 109 Appeal number(s): WEA 14 of 2020 File number(s): PTW 7613 of 2017 Judgment of: STRICKLAND, WATTS & SUTHERLAND JJ Date of judgment: 13 July 2021 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Where the appellant wife argues that the parties agreed to keep their property separate and there should be no alteration of property interests – Whether it was just and equitable to make any property settlement order – Whether there needed to be mutuality in any stated or unstated assumptions that the parties would keep their finances entirely separate and to separately retain the benefits of their efforts to the exclusion of the other – Where the wife could not rely upon unilateral unstated assumptions – Where the “use” of property during cohabitation is not confined to a legal or equitable entitlement to use property – Where in a long marriage, the primary judge gave adequate reasons to find an order altering property interests should be made – Where the primary judge did not assume equality of contributions as a starting point, nor treat negative gearing inappropriately, nor place inappropriate weight on the husband’s organ donation to the second youngest child – Where the primary judge gave adequate reasons for the assessment of contributions – Where the primary judge did not err when considering the tax consequences of potential property sales nor was the wife denied procedural fairness in respect of that issue – Where it was open to the primary judge not to add back legal fees because of the inadequacy of evidence on both sides in relation to the source of funds used to pay them and the relatively small difference in the amount paid in legal fees – Appeal dismissed – Costs ordered in a fixed sum. Legislation: Family Law Act 1975 (Cth) s 79 and s 117
Family Court Rules 1998 (WA) r 13A
Family Law Rules 2004 (Cth) r 13.01 and r 19.04
Cases cited: Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148
Benson & Drury (2020) FLC 93-998; [2020] FamCAFC 303
CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 67
Chorn and Hopkins (2004) FLC 93-204; [2004] FamCA 633
Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63
House v The King (1936) 55 CLR 499; [1936] HCA 40
Kioa v West (1985) 159 CLR 550; [1985] HCA 81
Metwally v University of Wollongong (1985) 60 ALR 68; [1985] HCA 28
Rosati and Rosati (1998) FLC 92-804; [1998] FamCA 38
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Sun Alliance Insurance Ltd v Massoud [1989] VR 8
Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173
Whisprun Pty Ltd v Dixon (2003) 200 ALR 447; [2003] HCA 48
Division: Appeal Division Number of paragraphs: 133 Date of hearing: 29 March 2021 Place: Heard in Perth, delivered in Sydney Counsel for the Appellant: Mr Robertson Solicitor for the Appellant: Butlers Lawyers Counsel for the Respondent: Mr Berry SC Solicitor for the Respondent: Bannerman Solicitors ORDERS
WEA 14 of 2020 PTW 7613 of 2017 APPEAL DIVISION OF THE FAMILY COURT OF AUSTRALIA
BETWEEN: MS OAMRA
Appellant
AND: MR WILLIAMS
Respondent
ORDER MADE BY:
STRICKLAND, WATTS & SUTHERLAND JJ
DATE OF ORDER:
13 JULY 2021
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.Within 28 days the appellant wife pay the respondent husband’s costs fixed in the sum of $19,635.00.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Oamra & Williams has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)..
REASONS FOR JUDGMENT
STRICKLAND, WATTS & SUTHERLAND JJ:
INTRODUCTION
By way of Notice of Appeal filed 12 October 2020, Ms Oamra (“the wife”) appeals a property settlement order made by a Justice of the Family Court of Western Australia on 26 June 2020. Mr Williams (“the husband”) resists the appeal.
The parties cohabited for 18 years and the primary judge described their relationship as “at best unusual and at worst openly hostile” (at [1]). It was the wife’s case that the parties had voluntarily arranged their financial circumstances on the basis that they neither owned real property in their joint names, nor operated a joint bank account, and that they contributed to household expenses in a very structured way based upon an agreed, predetermined budget. The wife gave evidence that the parties “deliberately and meticulously kept [their] finances separate” and “both agreed to keep [their] properties, investments and finances completely separate” (at [11]). The wife asserted that the parties made their own decisions as to how they used their respective incomes and made their own investment choices without reference to the other.
The wife’s central submission to the primary judge, relying upon Stanford v Stanford (2012) 247 CLR 108 (“Stanford”), was that the Court should not find that it was just and equitable to make any order for the alteration of property interests given the manner in which the parties had voluntarily arranged their financial circumstances.
The wife also challenges aspects of the primary judge’s consideration of the parties’ contributions; his Honour’s conclusion as to the adjustment to be made given those contributions; and the treatment of taxation consequences and legal fees.
For reasons which follow, the wife’s appeal against the property settlement order shall be dismissed.
BACKGROUND FACTS
The parties met and began a relationship in mid-1998. The husband moved in to live with the wife in around October or November 1998. The parties ceased cohabiting in late August or early September 1999. In October 2000, after the wife fell pregnant with their first child, the parties recommenced their cohabitation. The wife suffered a miscarriage in early 2001, but subsequently the parties had four children who at the time of the hearing before the primary judge were aged 18, 16, 14 and 12 years.
The parties married in 2004.
Both parties owned real property at the commencement of the cohabitation, the wife’s property being significantly more valuable. Real property was bought and sold by each of the parties during the marriage, and at the time of the hearing, the wife owned seven and the husband owned two properties.
The second youngest child was born with a rare and life-threatening liver condition which required a transplant in early 2007; the husband was the donor.
The parties separated in November 2017 when the husband moved out of the matrimonial home.
At the time of the hearing, the husband was aged 59 and the wife 48. The husband had recently lost employment he had held for almost 30 years, but was optimistic that he would be re-employed. The husband received a substantial redundancy. The wife was working as a business analyst earning about $271,178 per annum.
The children live with the wife. The husband’s current relationship with the children is problematic and parenting applications before the primary judge were resolved by consent on the basis that the children would spend time with the husband in accordance with their wishes and that the parties and the children would attend family therapy aimed at supporting the husband’s relationship with the children.
REASONS OF THE PRIMARY JUDGE
The primary judge was faced with a stark contrast between irreconcilable versions of conversations and exchanges between the parties relating to their financial agreements and assumptions during the marriage. In those circumstances, the primary judge made the following finding with respect to the parties’ credibility:
49For reasons that follow, where recourse to contemporaneous materials and objectively established facts or suitably independent corroboration was not available to resolve factual disputes between the parties, I preferred the evidence of the husband to that of the wife.
The primary judge then gave extensive reasons (at [50]–[76]) for so finding. In Ground 4 of the wife’s Notice of Appeal, the credit findings of the primary judge were challenged, but that Ground has been abandoned, and so those findings stand unchallenged.
Having resolved two minor issues (not the subject of challenge in this appeal), the primary judge settled a table of the parties’ property, superannuation and their liabilities (at [90]). The wife held net assets and superannuation in the sum of $6,643,891 and the husband held net assets and superannuation in the sum of $2,116,220. Thus, the overall net assets and superannuation were $8,760,111.
The primary judge examined in detail the history of the parties’ acquisition, retention and sale of particular pieces of real estate (at [98]–[171]), dealing also in those paragraphs with how the parties dealt with each other in relation to various transactions.
The primary judge held that the wife’s contribution of the vacant block in Suburb A and the construction of a home on that vacant block (“the former matrimonial home”) were “significant” (at [239]–[240]). The former matrimonial home has always been in the wife’s name and unencumbered, having been effectively gifted to the wife by her family (at [190]), and the primary judge found it was to be recognised as a contribution made on behalf of the wife rather than on behalf of the parties jointly (at [192]).
The primary judge discussed how the parties developed household budgets and organised their personal expenditure; how the parties worked in paid employment during the marriage; the contributions made by the wife’s family; how capital growth was achieved in most of the real estate held by the parties; how the parties made indirect financial contributions, non-financial contributions, and contributions in the role of homemaker and parent (at [172]–[214]).
The primary judge discussed matters relevant to s 79(4)(d)–(g) of the Family Law Act 1975 (Cth) (“the Act”) (at [215]–[222]).
The primary judge then rejected the wife’s primary submission that no order be made and found that it was just and equitable to make an order for the alteration of property interests between the parties (at [223]–[229]).
Thereafter, and with reference to the previous discussion, the primary judge adopted a global approach, and based upon contributions, found a just and equitable division of net assets and superannuation between the parties should be in the proportions of 55 per cent to the wife and 45 per cent to the husband, noting that the 10 per cent differential had the effect of quantifying the wife’s contribution-based entitlement at $876,000 more than the husband’s (at [244]).
Having reconsidered relevant matters pursuant to s 79(4)(d)–(g), the primary judge concluded no further adjustment needed to be made (at [258]).
Finally, the primary judge considered adding back paid legal fees, as urged by the wife, and adding back interest of $34,186.26 that the wife paid her mother immediately after separation, as urged by the husband. The primary judge declined to do either ([269]–[270]).
In order to give effect to a 55/45 division of the assets, the wife was ordered to transfer to the husband the former matrimonial home, in which the wife no longer resided and which she intended to sell in any event, and to pay the husband a further amount of $275,830 within 30 days. The wife has complied with that property settlement order.
GROUNDS OF APPEAL
There are six grounds of appeal. As indicated, Ground 4 which challenged the primary judge’s credit findings against the wife was abandoned.
The wife summarises her challenges as follows:
(a)Ground 1 – the correctness of the determination of the primary judge that it was just and equitable to make an order altering interests in property. The wife sought and was granted leave to add Ground 1A which asserted that the primary judge failed to provide adequate reasons to support a conclusion that there was a principled reason to interfere with the existing legal and equitable rights of the parties;
(b)Ground 2 – the primary judge gave inadequate reasons for concluding that contributions ought to be assessed at 55 per cent to the wife and 45 per cent to the husband;
(c)Ground 3 – errors in the reasons and conclusions of the primary judge in relation to the assessment of contributions;
(d)Ground 5 – errors made by the primary judge in relation to the potential sale of properties owned by the wife and the failure to bring to account the taxation consequences of the same; and
(e)Ground 6 – an error by the primary judge in not adding back the paid legal fees of the parties.
Did the primary judge err in principle in determining that it was just and equitable to make an order altering interests in property? (Ground 1)
Did the primary judge give inadequate reasons for concluding that it was just and equitable to make an order altering interests in property? (Ground 1A)
In arguing Ground 1, the wife contended the primary judge made a legal error in applying obiter dicta of the High Court in Stanford to require that, when considering s 79(2) of the Act, assumptions by the parties about property interests needed to be mutual.
To put Ground 1 in context, it is convenient to set out three parts of the primary judge’s reasons, commencing with [10]–[12] where his Honour summarises the wife’s contention:
10.The wife’s primary position is that the court should not find that it is just and equitable to make any order for the alteration of property interests between these parties, and that accordingly as directed by s 79(2) of the [Act] no such order can be made. She says that is so “given the manner in which the parties had voluntarily arranged their financial circumstances and matters to be considered pursuant to s.79 of the Act”.
11.In support of that primary position, the wife points to the fact that the parties do not own, and have never owned, real property registered in their joint names, have never operated a joint bank account, and have contributed equally to various expenses in a very structured way. On her case, the parties made their own decisions as to the use to which they put their respective incomes, and their own investment choices, each without reference to the other. She gave evidence that the parties “deliberately and meticulously kept [their] finances separate”, and “both agreed to keep [their] properties, investments and finances completely separate”.
12.Against that background, the wife says that she has been more successful in her investment choices then (sic) has the husband, and that it would be unjust and inequitable for him to share in those successes. On her case, neither party had any role or influence in the other’s investment decisions. She argues that the parties both operated on express and implied assumptions that they would each keep their property separate, and “ran their lives and their marriage on [that] basis”. She argues further that, even if there was no mutuality of assumptions whether express or implied, the manner in which the parties arranged their affairs both speaks for itself, and renders any alteration of existing interests unjust and inequitable.
(Footnotes omitted)
Pausing there, it can be observed that at the trial, the wife’s primary position was both parties operated on express or implied assumptions that each would keep their own property separate. At the hearing before the primary judge, senior counsel for the wife in final submissions put that the assumptions made by the parties during the cohabitation were both expressed and implied, but primarily implied because any knowledge either party had about what the other one was doing was incidental and not the subject of any discussion between them and implied assumptions arose from the way the parties arranged their financial affairs.
Notwithstanding the thrust of the final sentence of [12], we are unable to identify where the wife asserted to the primary judge that her unilateral assumptions were a sufficient basis to make a finding that no order should be made. The argument as recorded in the final sentence of [12] is baffling. If implied assumptions arose from the manner in which the parties arranged their affairs, it is difficult to understand how those assumptions would be anything other than mutual.
Before this Court, the wife seeks to argue that despite the finding by the primary judge at [226], set out below to the effect that there were no mutual expressed or implied assumptions to keep the parties’ finances entirely separate, the wife could rely upon her own unilateral assumptions and the primary judge was in error not to take them into account. We note that before this Court, the husband did not seek to take the point that this argument was not explicitly advanced at the hearing before the primary judge (Metwally v University of Wollongong (1985) 60 ALR 68 (“Metwally”)).
The second relevant passage from the primary judge’s reasons at [22]–[26] summarises his Honour’s understanding of the law to be applied when determining whether or not any order is to be made pursuant to s 79(2) of the Act:
22. Firstly, the required separate and careful deliberation is as to whether it would be just and equitable to make any order “in all the circumstances”. The expression “just and equitable” is a “qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds”. Consistently with that observation, the Full Court has expressed reservations about the utility of any analysis seeking to identify factual similarities and differences between the case under consideration, and other cases decided at first instance, noting that “no single case is ever the same as another, and each must be dealt with on its own facts and merits”.
23. Secondly, any consideration of the express or implied assumptions that prevailed between the parties as to their financial affairs during the relationship must in my view necessarily involve an examination of the circumstances which gave rise to them.
24. Fundamentally, it must be asked whether the matters in question were assumed by both parties, or simply by one. Self-evidently, a consideration of whether or not it is just and equitable in all the circumstances to alter existing property interests will potentially be informed by the circumstances which gave rise to those arrangements as between the parties; a case where it is common ground that the parties made a mutual, informed and truly consensual decision to keep their finances entirely separate must differ from a case where the decision to keep finances entirely separate, or for that matter to acquire property solely in the name of one party, is imposed by one party on the other
25. Were that not so, cases where by virtue of cultural considerations, or because of family violence or related issues, property is held exclusively in the name of one party, might lend themselves to an argument that it was not just and equitable to make any order altering those interests, without any examination of the circumstances which led to them being held as they were. That cannot, in my view, be so.
26. Even if it is established or agreed that parties to a marriage made a mutual, informed and truly consensual decision to keep their finances entirely separate, that will not of itself inevitably lead to a conclusion that it is not just and equitable to make an order altering the property interests so established. Again, that is so, as the determination required by s 79(2) must be made in the context of a consideration of “all the circumstances”.
(Footnotes omitted)
Following the primary judge’s deliberations relevant to s 79(2) of the Act (discussed under Ground 1A at [37]), the primary judge made the following findings:
226.… As is apparent from my earlier findings, I reject the arguments advanced on behalf of the wife that there was a complete absence of joint financial decision-making or sharing of financial information between the parties, or that there was a mutual decision to keep their finances entirely separate, and to separately retain the benefit of their efforts to the exclusion of the other. Again, there may be cases in which a proven mutual and properly consensual decision of that nature might ground a conclusion that it would not be just and equitable to make an order altering property interests; even then, that conclusion does not automatically follow. This is not such a case. I do not in any event accept the wife’s contention that there was a mutual and properly consensual decision or assumption of that nature. Rather, I accept the evidence of the husband as to the circumstances which gave rise to the separate ownership of property.
227.My acceptance that the wife is genuine both in her belief that property is “hers”, and in her strong views as to the value of her own contributions by comparison to those of the husband, does not alter that conclusion.
The wife asserts that the primary judge at [24], [25] and [227] erroneously required that the assumptions be “mutual” and that error contaminated his Honour’s conclusion as to whether it was “just and equitable” to make an order. The wife argues that there is no warrant to read into the obiter dicta of the High Court in Stanford any requirement for mutuality in any stated or unstated assumptions that the parties would keep their finances entirely separate and to separately retain the benefits of their efforts to the exclusion of the other. The wife further argued that the fact the High Court recognised that those assumptions could be unstated demonstrates that even individual unstated assumptions made by a party cannot be readily discarded.
In making these arguments, the wife relies upon statements made by the majority of the High Court in Stanford at [41] and [43]. Before setting them out, it is useful to note that at [36]–[40] the High Court recorded three fundamental propositions. The first was the need to identify existing legal and equitable interests; the second was that those interests can only be altered by a principled application of judicial discretion; and the third was that, whilst s 79(4) considerations are relevant to the task, s 79(2) requires separate consideration and should not be conflated with the statutory considerations under s 79(4) of the Act. The High Court then goes on to say:
41.Adherence to these fundamental propositions in exercising the power in s 79 gives due recognition to “the need to preserve and protect the institution of marriage” identified in s 43(1)(a) as a principle to be applied by courts in exercising jurisdiction under the Act. If the parties have made a financial agreement about the property of one or both of the parties that is binding under Pt VIIIA of the Act, then, subject to that Part, a court cannot make a property settlement order under s 79. But if the parties to a marriage have expressly considered, but not put in writing in a way that complies with Pt VIIIA, how their property interests should be arranged between them during the continuance of their marriage, the application of these principles accommodates that fact. And if the parties to a marriage have not expressly considered whether or to what extent there is or should be some different arrangement of their property interests in their individual or commonly held assets while the marriage continues, the application of these principles again accommodates that fact. These principles do so by recognising the force of the stated and unstated assumptions between the parties to a marriage that the arrangement of property interests, whatever they are, is sufficient for the purposes of that husband and wife during the continuance of their marriage. The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
42.In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
43.By contrast, the bare fact of separation, when involuntary, does not show that it is just and equitable to make a property settlement order. It does not permit a court to disregard the rights and interests of the parties in their respective property and to make whatever order may seem to it to be fair and just.
(Emphasis added)(Footnotes omitted)
We do not accept the wife’s submission that there was no warrant in Stanford to assume the High Court had in mind the mutuality of assumptions. The words which we have emphasised in [41] and [42] above make it clear that the High Court was talking about mutual assumptions and mutual agreements. Axiomatically any agreement must be mutual. The High Court makes no reference to unilateral assumptions and the reference to “a choice made by one or both of the parties” in the first sentence of [42] is a reference to a unilateral decision to leave the marriage. The primary judge was correct to record that mutual assumptions and agreements which are informed and truly consensual will potentially inform whether it is just and equitable to make any order altering property.
By Ground 1A the wife contends the primary judge failed to identify the principled reason for interfering with the parties’ existing legal and equitable rights and/or failed to give adequate reasons to support a conclusion that there was a principled reason to interfere with the existing legal and equitable rights of the parties. The wife asserts that the primary judge did not articulate a “principled reason” as to why the husband should leave the marriage with more than the $2,116,220 in net assets and superannuation that he already had.
The primary judge’s consideration of s 79(2) of the Act is extensive and includes his Honour setting out the wife’s primary position in relation to s 79(2) (at [10]–[12]); setting out the relevant legal principles (at [18]–[31]); and discussing the parties’ existing interests in property, the contributions they had made and relevant s 79(4)(d)–(g) considerations (at [81]–[222]), before reaching the conclusion that it was just and equitable to make a property settlement order.
The wife submits however, that the primary judge failed to make any positive finding as to what assumptions the husband made in relation to property during the relationship (as opposed to for the purpose of the proceedings). As an example, the wife points to the finding at [158] that the husband’s superannuation benefit was nominated to be paid by him to the children rather than to the wife. The wife argued this reinforced the proposition that there was a mutual assumption that each of the parties were free to do with their property what they wished. That argument ignores the primary judge’s acceptance of the husband’s evidence about there being expressed joint agreements and assumptions that the purchase of property was made in order to provide for the joint future of the parties and of their children. There is nothing inconsistent with the husband’s nomination of the children as beneficiaries to his superannuation policy, with that joint intention.
Given the unchallenged credit findings, the primary judge accepted the husband’s evidence which his Honour recorded at [143]:
In his initial trial affidavit, the husband said:
“The property purchases… were all made in order to provide for our future and our children’s.
Although a lot of the properties were purchased in [the wife’s] name this was simply as she had [the former matrimonial home] in her name and she could leverage it up and purchase properties faster than I could as I needed to save up equity in my properties before leveraging them to purchase other properties.
A joint decision was made to purchase homes and investments in this manner between [the wife] and I including the purchase of [the K Street property] which was purchased in [her] married name, [Williams].
Often, I would view and research properties that would end up in [the wife’s] name and indeed [the wife] and her father found some properties that ended up in my name”.
Earlier at [134] and [135] the primary judge had observed:
134.The husband gave evidence that properties were purchased in the wife’s name “simply as she had [the former matrimonial home] in her name and she could leverage it up and purchase properties faster than [he] could, as [he] needed to save up equity in [his] properties before leveraging them to purchase other properties”. He described the purchase of the properties in that manner, including the purchase of the [K Street] property, as a “joint decision”.
135.He was not directly challenged on that evidence in cross‑examination, and I accept it in any event.
(Footnotes omitted)
The wife argued before us that the fact that she was concerned about the financial decisions of the husband and wanted him to do well, did not demonstrate mutual endeavour, and nor was it inconsistent with the wife’s asserted assumptions that his property was for his own benefit. The wife speculated it might have been simply that she did not want the husband to become a drain on her. That speculation was not based upon any evidence given by the wife. The evidence indicates the wife’s involvement in offering advice in respect of decision making in relation to assets held by the husband.
The primary judge said at [224]:
This was a long marriage. The parties have four children together. During the marriage, notwithstanding their unusual relationship and the way in which they organised their financial affairs, the parties enjoyed the common use of property. That common use of property has come to an end by the choice of both parties and their mutual conclusion that their relationship has ended.
Counsel for the wife submitted that to the extent that the primary judge relied upon there having been some common “use” of property that must be only a reference to the common use of the former matrimonial home. Even if that was so, it is unclear why that is not a significant finding in the consideration of s 79(2) of the Act and relevant to the question as to whether any order should be made. Counsel for the wife argues that in almost all marriages and de facto relationships, each spouse will inevitably and mutually confer benefits on the other, and further argues that the reference to “common use” at [42] of Stanford should be understood to refer not to the fact that there has been “use” which would exist in almost every marriage or de facto relationship where a home is shared, but to a legal or equitable entitlement to use property. We do not accept that the High Court’s use of the word “use” should be limited in that way. In fact, the opening words of [42], namely, “[i]n many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied…” must contemplate cases where during a long relationship a party has made significant contributions under s 79(4)(c) of the Act but has no legal or equitable right to use property which the parties have in fact been using throughout that relationship.
As already set out, the primary judge said at [226]:
…As is apparent from my earlier findings, I reject the arguments advanced on behalf of the wife that there was a complete absence of joint financial decision-making or sharing of financial information between the parties, or that there was a mutual decision to keep their finances entirely separate, and to separately retain the benefit of their efforts to the exclusion of the other. Again, there may be cases in which a proven mutual and properly consensual decision of that nature might ground a conclusion that it would not be just and equitable to make an order altering property interests; even then, that conclusion does not automatically follow. This is not such a case. I do not in any event accept the wife’s contention that there was a mutual and properly consensual decision or assumption of that nature. Rather, I accept the evidence of the husband as to the circumstances which gave rise to the separate ownership of property.
His Honour is taken to have also found:
(a)there was some joint financial decision making and sharing of financial information between the parties; and
(b)there was no mutual decision to keep the parties’ finances entirely separate or to separately retain the benefit of their efforts to the exclusion of the other.
In Bennett and Bennett (1991) FLC 92-191 at 78,266 the Full Court adopted the test propounded by Gray J in Sun Alliance Insurance Ltd v Massoud [1989] VR 8 at 18 as follows:
The adequacy of the reasons will depend upon the circumstances of the case. But the reasons will, in my opinion, be inadequate if:
(a) the appeal court is unable to ascertain the reasons upon which the decision is based; or
(b)justice is not seen to have been done.
The two above stated criteria of inadequacy will frequently overlap. If the primary judge does not sufficiently disclose his or her reasoning, the appeal court is denied the opportunity to detect error and the losing party is denied knowledge of why his or her case was rejected.
The reasons given by the primary judge for concluding a property settlement order should be made amply satisfy the standard of giving principled reasons. There is no merit in Ground 1A, and the primary judge did not err in determining it was just and equitable to make an order altering interests in property. Accordingly Ground 1 fails.
Challenges to contribution findings (Grounds 2 and 3)
The wife in Grounds 2 and 3 complains that the primary judge erred as a matter of principle (Ground 3(e)), took into account an irrelevant matter (Ground 3(f)), failed to give adequate reasons to explain a particular finding (Ground 2), failed to give proper weight to particular considerations (Grounds 3(c), 3(d) and 3(b)) and more generally, failed to give proper weight overall to the respective contributions of the parties (Ground 3(g)), and that the ultimate contribution finding made by the primary judge exceeded a generous ambit of discretion and was plainly wrong (Ground 3(a)).
Did the primary judge err in assuming equality of contributions as a starting point? (Ground 3(e))
Ground 3(e) states:
[H]aving stated at paragraph 33 of the judgment that “There is no presumption that, even over the course of a long marriage, the contributions of the parties are to be regarded as having been equal” then at paragraph 224 “This was a long marriage” and at paragraph 237 “Over the course of this long marriage, both parties have made contributions of significance”, his Honour did, or must have, in fact used equality as a starting point in his assessment of contributions.
This ground of appeal correctly records that the primary judge at [33] specifically disavowed any notion that, in this long marriage, there was a presumption of equality of contributions as a starting point. And it is not explained how instead his Honour applied such a presumption.
The primary judge discussed in great detail the myriad of contributions both parties made over a long marriage. One important general finding related to the history of the parties’ paid personal exertion throughout their relationship, namely, “[b]oth [parties] worked hard” (at [187]) (emphasis added).
The primary judge has clearly taken a holistic approach to the assessment of all contributions, as his Honour is required to and, read as a whole, the reasons do not invite the inference that the primary judge adopted equality of contributions as a starting point. Accordingly there is no merit in Ground 3(e).
Did the primary judge take into account an irrelevant matter? (Ground 3(f))
Ground 3(f) complains that his Honour took into account against the wife the negative gearing of various properties at [197], [198] and [228] which the wife asserts was an irrelevant matter. Further, the ground contends that to the extent the primary judge took those matters into account, they should be seen as impermissibly diminishing the contributions of the wife.
In [197] and [198] the primary judge discusses how seven properties of the wife and three properties of the husband were negatively geared. At [199] the primary judge discusses the capital increase in three of the five properties that are still owned by the wife and in the two properties that are still owned by the husband.
At [228], when discussing whether or not it was just and equitable to make any order, the primary judge says:
…Most of the properties owned by the wife, including those which were sold, also increased significantly in value; that said, the two [suburb F] properties have significantly decreased in value, and the wife has accumulated only modest superannuation. My findings as to the gearing of each of the properties do not require repetition.
The wife’s summary of argument does not develop the assertions in the ground of appeal that because the wife’s taxable income exceeded that of the husband in every year save 2015, the considerations by the primary judge of the negative gearing of the various properties was an irrelevant matter, and to the extent that it diminished the contributions of the wife, it was an error. For the following reasons, there is no merit in Ground 3(f).
First, findings in relation to negative gearing are relevant findings about an aspect of how each of the parties structured particular investments during the cohabitation. The fact that expenses of a particular property exceeded the rental income consistently over a period, meant that monies that would have otherwise been available from personal exertion income earnings were being expended with the expectation that the losses incurred on particular properties over time would be more than offset by capital increases in the value of the properties. The fact that the wife still had more taxable income in most years than did the husband, even after negative gearing had been employed as an investment strategy does not mean that his Honour’s discussion about negative gearing was irrelevant.
Secondly, as his Honour records at [197], questions were raised during the course of the trial as to the extent to which various rental properties were negatively geared. No objection on the basis of relevance was taken during the trial to those questions being asked and answered.
Thirdly, we accept the husband’s submission that there is no cogent reason why the findings at [197] and [198] would be seen to diminish the contributions of the wife.
Did the primary judge err in law in failing to give adequate reasons for his finding that contributions ought to be assessed at 55 per cent to the wife and 45 per cent to the husband? (Ground 2)
Although couched in more general terms, the focus of the wife’s argument under Ground 2 was the primary judge’s conclusion at [242]:
Both parties contributed as homemakers and parents, albeit not equally. Again, my earlier findings do not require repetition.
The wife submits the reasons simply do not enable the parties to understand which of the parties made the greater homemaker and parent contribution, and given the importance of the assessment of that contribution, the primary judge’s findings as to the overall assessments of all contributions is infected and the reasons are inadequate (Benson & Drury (2020) FLC 93-998 at [46] citing Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 279).
Further, the wife submits that even if a conclusion could be drawn in whose favour this finding is made, the weight or magnitude of any disparity is not able to be discerned.
The “earlier findings” referred to by the primary judge at [242] are found at [211]–[214]:
211. The wife was the primary carer for the children, particularly when they were younger. While the husband’s relationship with the children deteriorated in the later years of the marriage, it is clear that he also made a contribution as a parent. Leaving aside the evidence of members of his family, neighbours who gave evidence recounted (sic) seeing him playing outside with the children on many occasions over the course of many years. Similarly, those neighbours described seeing him undertaking regular maintenance, gardening and similar work around the home.
212. As earlier noted, [child C] required a … transplant in March 2007. The husband was the donor, undergoing the relevant surgery, treatment and recovery. Self-evidently, that was a significant contribution by him as a parent, as was appropriately conceded on behalf of the wife.
213. The wife, too, made significant contributions as homemaker although I do not accept that they were made virtually to the exclusion of any effort on the part of the husband as she would assert. She has also played a more significant parenting role then has the husband particularly in recent years, and has been almost exclusively responsible for parenting the children since separation.
214. Both parties have met their financial obligations to the children.
The wife argues that these findings are of no assistance given that the primary judge said that both parties made “significant” contributions as homemaker and parent (at [212] and [213]).
In response to these arguments, the husband agrees that there was no express statement by the primary judge as to which party made the greater s 79(4)(c) contribution. However, the husband submits that the primary judge’s earlier discussion makes it implicitly clear that it was the wife.
Additionally, the husband correctly argues that the findings at [211]–[214] and the conclusion at [242] need to be read in the context of the case which the parties presented. The wife in her “papers for the judge” asserted that she made a greater s 79(4)(c) contribution. The wife in her written closing address expressly argued that her s 79(4)(c) contributions were greater than those of the husband. The husband did not assert, in his papers for the judge, that his s 79(4)(c) contributions exceeded those of the wife. His case in that respect did not change by the end of the proceedings.
It is tolerably clear that the primary judge made a finding at [242], which read with earlier findings, and in the context of how the case was presented by each party, meant that both parties had contributed as homemakers and parents but that the wife had done so more than the husband.
The primary judge rejected any suggestion that the wife’s contributions as homemaker and parent were made by her “virtually to the exclusion” of the husband. The findings at [211]–[214] were adequate to explain the weight his Honour was giving to s 79(4)(c) considerations.
There is consequently no merit in Ground 2.
Did the primary judge fail to give proper weight to particular considerations? (Grounds 3(b), 3(c) and 3(d))
On appeal it is notoriously difficult for complaints about the weight a primary judge gave to various mandatory considerations to succeed. As the authorities make clear, the weight liable to be given to particular facts and circumstances will vary in the exercise of judicial discretion without thereby involving appealable error (Gronow v Gronow (1979) 144 CLR 513 (“Gronow”) at 519).
Ground 3(c) complains that whilst at [212] the primary judge found that the husband’s donation of his liver to the second youngest child was a significant contribution by him as a parent, the primary judge did not give any weight or any proper weight to the five pregnancies endured by the wife, particularly in the context of uncontested evidence of her morning sickness and associated difficulties while continuing to work and earning a greater income than the husband.
There was no dispute on the evidence that the wife had suffered from pregnancy related sickness through all of her pregnancies, and had suffered a miscarriage.
The primary judge referred to the wife’s miscarriage and the birth of the other four children (at [7]) and to the wife working throughout, apart from short periods around the birth of each of the children (at [187]).
In so far as this Ground complains that the primary judge did not specifically mention the wife’s pregnancy related sickness, reasons are not required to mention every fact relied on by a party and that is particularly so in a case where the hearing takes place over eight days generating an appeal book in excess of 2,000 pages (Whisprun Pty Ltd v Dixon (2003) 200 ALR 447).
There is no merit in Ground 3(c).
Ground 3(d) complains that the primary judge did not give proper weight to the wife’s greater homemaker and parent contributions during the relationship and since the separation.
As already indicated, we are of the view that the primary judge did make a finding of unequal s 79(4)(c) contributions, which is to be read as a finding in favour of the wife. We are unable to agree that the primary judge did not give proper weight to those contributions.
Ground 3(b) challenges the weight that the primary judge gave to the wife’s significantly greater initial contributions or contributions made on her behalf by her family.
The husband says that the primary judge clearly identified and made findings about the wife’s “initial contributions” and contributions made on her behalf (at [94], [128], [190]–[195]). The husband makes no complaint about those findings. All other findings as to contributions made by each of the parties over a long period were open to the primary judge.
The weight which his Honour placed on particular contributions were well within the ambit of the exercise of his Honour’s judicial discretion.
There is no merit in the challenges as to weight in Grounds 3(b), 3(c) and 3(d).
Did the primary judge err when concluding that the net assets and superannuation of the parties should be divided 55/45 in the wife’s favour based on contributions? (Grounds 3(a) and 3(g))
Although Ground 3(g) is an omnibus complaint, namely, the primary judge when making the “leap from words to figures”, gave insufficient weight to initial contributions, financial contributions, contributions as homemaker and parent and post-separation contributions, this ground is more conveniently dealt with along with Ground 3(a).
Ground 3(a) purports to engage the second limb of the well-known passage in House v The King (1936) 55 CLR 499 (“House”) at 505 which does not assert specific instances of discretionary error (which are contained in the first part of the passage commencing at 504) but rather, claims that the result is so unreasonable and plainly unjust that the court may infer error. The wife complains that the primary judge’s finding that a 55/45 division based upon contributions was just and equitable exceeded a generous ambit of discretion and was plainly wrong when the history of contributions is taken into account. In House, Dixon, Evatt and McTiernan JJ said at 504-5:
… 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… It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
When referring to these passages, many cases have approached the final limb of House in a cautionary manner saying, for example, that an appellate court “must be well satisfied the primary judge was plainly wrong”, should be “slow to overturn” (Gronow at 519 and 520), and that obviously “what is ‘plainly wrong’ will vary in the eyes of different beholders…[and the] reference to ‘plainly wrong’ is designed to remind the appellate court of the need to approach an appeal with much caution in a case where an error of principle cannot be clearly identified” (CDJ v VAJ (1998) 197 CLR 172 at [186]).
In support of this ground, the wife refers to the following findings by the primary judge:
(a)at the commencement of cohabitation, the wife owned the former matrimonial home unencumbered and the M Street property (which was subject to a mortgage which was paid off during the cohabitation but to which the husband made no direct financial contribution);
(b)the construction of the former matrimonial home was funded by the wife’s parents;
(c)the former matrimonial home was included in the asset pool at a value of $1,550,000 and the M Street property sold in September 2015 for $849,000;
(d)the wife acquired the G Street property for $183,949, the second B Street property for $210,000 and the H Street property for $220,865, all within two years of the commencement of the parties’ cohabitation;
(e)the G and H Street properties were included in the asset pool at values of $725,000 and $750,000 respectively;
(f)the second B Street property sold for $725,000 in June 2016;
(g)the properties were all purchased using equity in the former matrimonial home as security for borrowings and the husband did not contribute financially to their purchase;
(h)the wife’s taxable income (even after negative gearing) exceeded that of the husband’s in every year save 2015 when his taxable income exceeded the wife’s by $9,242, notwithstanding the wife’s five pregnancies and four children;
(i)the husband lost $335,000 and $86,000 through his sole investments; and
(j)the wife made a greater homemaker and parent contribution.
The wife concentrates on the fact that the current value of the former matrimonial home at $1,550,000 represents about 17.6 per cent of the overall pool of assets. The wife also refers to the “springboard effect” that that contribution had to the overall development of the wealth of the parties. The wife argues that the final leg of House is attracted in circumstances where she asserts that the primary judge should have made a contribution assessment in favour of the wife at 70–75 per cent.
When reaching a conclusion about initial contributions, the primary judge said:
238.Both parties came into the relationship with property. While the husband contended that he came into the relationship with more property than did the wife, and that and other contentions by both parties fuelled to a degree their examination of the date on which they could be said to have commenced cohabitation, the dispute in that regard is largely sterile.
239.That is so as it was, by the end of the trial, common ground that the wife acquired her interest in the [Suburb A] block unencumbered, and funded entirely by her parents. It matters not that the acquisition occurred in two tranches, and that the second tranche (the transfer of [the wife’s brother’s] interest to the wife) occurred after the commencement of the relationship. The contribution on the part of the wife was made, and was significant; whether it occurred prior to the commencement of cohabitation or in part shortly thereafter is irrelevant to the required holistic assessment of the contributions made by each party. That is particularly so, as “initial” contributions are not to be “isolated from and weighed against” the “myriad of other contributions made by both parties throughout the course of the relationship”, but rather considered as one or more of the myriad of contributions taken into account.
240.Viewed in that context, the wife’s contribution of the [Suburb A] block, and the further contribution on her behalf by her parents of funding towards the construction and completion of the home on that block, are significant in the overall assessment required.
(Footnotes omitted)
The husband argues that the wife has impermissibly cherry picked elements of the primary judge’s contributions findings, which she thinks favour her case and then invites the Court to give a second opinion and substitute its exercise of discretion for that of the trial judge.
The husband correctly submits that the wife has not referred to the following elements of the primary judge’s contributions findings, and which comprise part of his Honour’s holistic assessment of contributions:
(a)maintenance and expenditure on rental properties (at [162]–171]);
(a)household budgets and expenditures (at [172]–[186]);
(b)contributions by the parties towards the accumulation and growth of property and superannuation (at [196]–[204]); and
(c)indirect financial contributions and non-financial contributions (at [205]–[210]).
That other judges may have reached a different conclusion in respect of the assessment of contributions is not demonstrative of appealable error. We are unable to conclude that the primary judge’s assessment of contributions exceeded the generous ambit of discretion and was unreasonable and plainly unjust.
There is no merit in Grounds 3(a) or 3(g).
Overall, there is no merit in the wife’s complaints about the primary judge’s findings as asserted in Grounds 2 and 3.
Did the primary judge err in his conclusions in relation to the potential sale of properties owned by the wife and the failure to bring to account the taxation consequences of the same? (Ground 5)
In Ground 5 the wife argues that the primary judge failed to take sufficient, or any account of the possible or likely indirect taxation consequences of the property settlement order his Honour intended to make and suggests that he should have afforded the wife time to identify property to be sold and the likely taxation consequences of sale.
When discussing s 79(4)(d)–(g) considerations, the primary judge addressed the evidence in relation to latent capital gains tax at [251]–[257] and [272]–[275]:
251.I have considered also the evidence of the parties as to their intentions in relation to various properties, and the evidence of their accountants as to the likely capital gains tax payable on any relevant sale.
252.The husband’s evidence was that, if orders were made as proposed by the wife and there was no alteration of property interests, he would likely look to sell one or both of the [E Street] and [F Street] properties, so that he could “get a nice home somewhere”. He acknowledged that if orders were made as proposed by him, or if he received even half of the proceeds of any sale of [the former matrimonial home] he would likely not find himself in a position where he was required to sell either property.
253.The husband’s accountant had not calculated the likely capital gains tax payable by the husband on the sale of either property. He acknowledged that, while the husband has made capital gains on both the [E Street] and [F Street] properties, given his current unemployment and capital losses he has retained, he could likely expect to pay a relatively modest amount of capital gains tax on any sale.
254.The wife sought orders enabling her to sell [the former matrimonial home] and retain the whole of the proceeds, which she would intend to apply towards the reduction of debt. On the evidence of her accountant, if she sold [the former matrimonial home] at its agreed value she would likely incur capital gains tax of $7,099.
255.Under cross-examination, the wife said that her intention was to retain her other investment properties and receive income from them into her retirement, before possibly passing them on to the children, or selling one or more of them to fund deposits for the children on their own properties.
256.That said, on the evidence of her accountant if she sold the [G Street] property she would likely incur capital gains tax in the vicinity of $127,000. If she sold the [H Street] property she would likely incur capital gains tax in the vicinity of $124,000, and if she sold the [K Street] property she would likely incur capital gains tax of $75,717. No capital gains tax would be payable on any sale of either of the [Suburb F] properties as they have reduced in value; a sale of the [I Street] property would result in a capital loss for tax purposes of $176,119, and a sale of the [J Street] property would result in a capital loss for tax purposes of $145,424.
257.While the various properties, other than [the former matrimonial home], were acquired for the purposes of investment, in the circumstances outlined above I conclude that the possibility of capital gains tax being incurred does not impact on the assessment of what is a just and equitable alteration of property interests. I do not propose to order the sale of any of the properties. Their sale is not in any sense inevitable, nor is there even a significant risk of sale in the near future.
…
272.The husband seeks the transfer of [the former matrimonial home] to him. The wife does not seek to retain that property, regardless of the outcome of these proceedings. I conclude, therefore, that it is appropriate to make the order for transfer sought by the husband.
273.The agreed value of [the former matrimonial home] is $1,550,000. A further payment to the husband by the wife of $275,830 is therefore required.
274.I have considered whether the effect of these orders will trigger any capital gains tax liability payable by the wife. In circumstances where she presently has just over $515,000 in various bank accounts, and where as earlier noted any sale of either Joondalup property would trigger capital losses able to be offset, I conclude that it would not.
275.I therefore propose to order that the wife transfer [the former matrimonial home] to the husband, and pay him the additional sum of $275,830.
(Footnotes omitted)
This Ground raises two separate complaints, namely that the primary judge:
(a)failed to take sufficient or any account of the tax consequences of the orders. Specifically the wife challenges the primary judge’s finding that the sale of investment properties was not “in any sense inevitable” nor “is there even a significant risk of sale in the near future” and consequently failed to apply the well-known guideline established by Rosati and Rosati (1998) FLC 92-804; and
(b)failed to afford the wife procedural fairness.
The gravamen of the wife’s challenge in this Ground is based upon the following propositions:
(a)as noted by the primary judge at trial the wife sought to retain the former matrimonial home, sell it and use the proceeds to repay debt;
(b)the primary judge did not make that order and accordingly the wife was not able to repay debt from the proceeds of the sale of the former matrimonial home;
(c)the primary judge should have inferred that the wife would then wish to sell other investment property which she held in order to repay debt; and
(d)the wife could not reasonably be expected to identify what property she intended to sell until after a decision was made by the Court as to the disposition of the former matrimonial home. For those reasons, she asserts she was not afforded time to identify property to be sold and the likely taxation consequences of sale.
The orders sought by the wife in the Notice of Appeal make it clear that the wife has complied with the property settlement order by transferring the former matrimonial home to the husband and paying him the sum of $275,830 as ordered. The wife did not seek leave to adduce evidence by way of Application in an Appeal that she had been required to sell property in order to implement the order, and that is likely because part of the assets which the wife retained as a result of the property settlement order was cash at bank in the sum of $515,000.
The wife did not elect to give evidence at trial about how (if at all) she would retire debt in the event that the Court ordered a transfer of the former matrimonial home to the husband, despite that possibility being a constant feature of the husband’s case from the start of the proceedings (see the husband’s Form 1 application filed on 30 November 2017).
The wife’s evidence about her intentions in respect to the investment properties in cross examination was referred to and relied upon by the primary judge at [255] set out above (based upon cross examination at Transcript 15 April 2020, p.156 lines 1–18). As the husband points out, the wife was not re-examined about this topic.
The wife was represented by senior counsel at trial. The primary judge did not seek to limit the wife’s presentation of her case. She could have given evidence about what she might do with the investment properties if she was unable to achieve the result that she sought by way of a property settlement order. She did not do so. The wife was on clear notice as to what the husband sought and had an unfettered opportunity to be heard. In those circumstances, the wife could not be said to have been denied procedural fairness (Kioa v West (1985) 159 CLR 550 at 582).
Accordingly there is no merit in Ground 5.
Did the primary judge err in failing to add back the paid legal fees of the parties? (Ground 6)
By Ground 6, the wife complains that the primary judge erred in not adding back the parties’ paid legal costs. The husband’s paid legal costs were approximately $84,400 more than those of the wife.
In paragraph 46 of the wife’s summary of argument, this ground is extended to add the complaint that, having declined to add back the paid legal fees, the primary judge did not otherwise consider the disparity in paid legal fees as part of his consideration of s 79(4)(d)–(g) matters.
At [259] the primary judge said:
Having concluded that a division in the proportions of 55 per cent – 45 per cent in favour of the wife is appropriate, it is necessary to turn to the issue of whether any amounts not reflected in the current property of the parties should be added back for the purpose of calculations.
Thus the primary judge considered the question of whether or not to add back paid legal fees after assessing the net existing assets, contributions, s 79(4)(d)–(g) matters and reaching a conclusion as to what was an appropriate division of property. No complaint is made about the unorthodox way the primary judge structured his reasons. In any event, the primary judge exercised his discretion by deciding that there would be no add back. Presumably had the primary judge decided it was appropriate to add back paid legal fees, he would have revisited what he had previously done and recalibrated his consideration at each of the four steps in order to reach a conclusion as to what the new property settlement order would be.
As the primary judge noted at [262], paid legal fees “occupy a particular position in the consideration of add backs by reason of s 117(1) of the Act” (citing Trevi & Trevi (2018) FLC 93-858 (“Trevi”) at [36]). If a party is paying legal fees from joint assets, it means the other party is contributing to those legal fees which is not the starting point created by s 117(1).
In Chorn and Hopkins (2004) FLC 93-204 (“Chorn”), the Full Court, in the well-known guidelines, said:
56. In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial Judge, in determining how to exercise that discretion, regard should be had to the source of the funds.
57. If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58. If funds used to pay legal fees have been generated by a party post‑separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post‑separation income or acquisitions.
(Emphasis added)
In Trevi, the Full Court at [41] and [42] referred to these passages from Chorn and the potential injustice and inequities that can occur by a strict adherence to the “source of funds” distinction:
41.The passages from Chorn, quoted above, draw a distinction between legal costs met from property that would otherwise be available at trial and legal costs met from funds “generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance)”. The proposition there advanced, that such expenditure “would generally not be added back”, also needs to be seen as a guideline informing the relevant discretion rather than determining it. A further distinction is suggested in Chorn between funds generated in that manner and “[f]unds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement”.
42.The latter suggestion recognises the discretion inherent in the task and also, perhaps, that in the particular circumstances of a case, adding back sums generated post-separation in the different manners suggested might create injustice as much as it might cure it.
(Footnotes omitted)
As the Full Court in Trevi intimates at [42], when considering whether or not to add back paid legal fees, “source of funds” should be subservient to the overall discretionary consideration of the interests of justice in the circumstances of a particular case.
As discussed during submissions, an example of an injustice which might occur is if a party, who had developed significant earning capacity during a course of a long marriage, was able to use that earning capacity to pay legal fees when the other party, who did not have that earning capacity, was left with a liability to pay legal fees from their share of the property settlement order. Another example of possible injustice arises in this case where it was agreed that an unspecified amount of monies from a redundancy payment received by the husband were contained in bank accounts added to the table of assets and liabilities, yet the husband asserted that an unspecified part of the redundancy payment used to pay legal fees should not be added back.
In this case the primary judge declined to exercise a discretion to add back paid legal fees because of an inadequacy in the evidence on both sides in relation to the source of funds used to pay them.
Subrules 19.04(2), (3) and (5) of the Family Law Rules 2004 (Cth) (“the Rules”) are in the following terms:
Notification of costs
(2) Immediately before each court event, the lawyer for a party must give the party a written notice of:
(a)the party’s actual costs, both paid and owing, up to and including the court event;
(b)the estimated future costs of the party up to and including each future court event; and
(c)any expenses paid or payable to an expert witness or, if those expenses are not known, an estimate of the expenses.
(3) At each court event:
(a) a party’s lawyer must give to the court and each other party a copy of the notice given to the party under subrule (2);
…
(5) In a financial case, a notice under subrule (2) or a statement under paragraph (3)(b) must specify the source of the funds for the costs paid or to be paid unless the court orders otherwise.
This rule is adopted in Western Australia by r 13A(13) of the Family Court Rules 1998 (WA) with minor modifications that are of no moment for present purposes.
In this case, the respective notifications of costs for each party were made exhibits 2 and 3, and the primary judge describes them in the following way:
265.The costs notification letter provided to the wife by her solicitors on 16 March 2020 showed that she had paid costs totalling $95,177. Her solicitors estimated that she would incur further costs of between $57,500 and $72,500 on the basis that the trial occupied five days, with further costs of between $10,000 and $12,000 per day estimated for any additional days.
266.The letter confirmed that the source of funds used by the wife to pay her legal fees had been and would be from her “income earned after separation, savings in existence at separation or accumulated after separation, sale of assets and/or borrowings”.
267.The costs notification letter provided to the husband by his solicitors on 16 March 2020 showed that he had paid costs totaling $179,355.51. His solicitors noted that in addition an amount of $48,570.17 was reflected in work in progress or unpaid accounts, and estimated the costs of trial at “$4,000 plus GST per day and for each day of preparation”. The letter expressed the solicitors’ understanding that the source of funds for payment of the accounts was “primarily from [the husband’s] income and personal savings”.
On the second day of the hearing the parties provided the primary judge with a table of assets, liabilities and superannuation. The wife placed on that table at items 49 and 50 the husband’s paid legal fees and the wife’s paid legal fees as at 28 February 2020, being at that time $140,348 and $64,568 respectively. On the first day of the hearing the parties’ respective costs notifications updated those figures to $179,355.51 and $95,177.
Apart from statements in the parties’ costs notifications which were admitted without objection, neither party provided any admissible evidence as to the source of funds for payments of individual invoices for legal fees. There was no cross examination of either party in relation to source of funds in respect of legal fees.
In final submissions, senior counsel for the wife maintained the position that both sets of legal costs should be added back and asserted that given the husband’s other expenditure, it should be implied that the husband’s source of funds for the payment of legal fees was not from income.
In final submissions, counsel for the husband asserted:
… [T]here has been a combination of income and capital used by my client towards the payment of legal fees. Part of that capital comes from the redundancy payment that your Honour has evidence about my client receiving last year…all I can indicate to your Honour is that there is an unfortunate mix of funds that my client has used in relation to this payment of his legal fees and his cost notification sets that out. Part of it is from capital, part of it is from income. We are not in a position to be able to define it. We have sought to. We’re not in a position to be able to disentangle the husband’s finances in a way that would easily accommodate that type of calculation for your Honour.
(Transcript 24 April 2020, p.101 line 36 to p.102 line 5)
There was little attention at trial as to what precisely the husband had done with his redundancy payment and no evidence as to how much of it was used to pay legal fees.
Rule 13.01(1) of the Rules provides that each party to a case has a duty to the court and to each other party to give full and frank disclosure of all information relevant to the case, in a timely manner. Rule 13.07 provides a duty of disclosure of documents which in this case would include banking documents relevant to the transfer of funds for the payment of legal costs.
Whilst the onus to make full and frank disclosure does not move from the party who is responsible to make it, where there is no agreement whether to add back both parties’ paid legal fees and in circumstances where no documents are provided to establish the source of funds for the payment of legal fees, a notice to produce to the other party could be issued seeking documents to corroborate source of funds and subpoena(s) could be issued to the other party’s legal practitioner(s) to provide relevant accounting records.
The wife in this case did not make any submissions to the primary judge that the husband’s disclosure had been inadequate. That is perhaps because the wife herself did not disclose what part of her paid legal fees were from “income earned after separation, savings in existence at separation or accumulated after separation, sale of assets and/or borrowings” (at [266]) respectively.
Faced with the lack of evidence from both parties, the primary judge observed:
264. Counsel for the husband acknowledged in closing that he was not in a position to “disentangle the husband’s finances” so as to provide a clear picture as to what proportion of his legal fees was paid from post separation income, and what from capital. That arose not least because of the husband’s receipt of a redundancy payment, and possible issues as to the proper characterization of that.
…
268. The evidence does not permit a proper examination of the extent to which each party has paid legal fees from monies which would otherwise have been properly available for division between them, as distinguished from monies generated post separation by their own individual endeavours. The costs notification letters prepared by the solicitors were regrettably unhelpful in that regard given the clear purpose of Rule 19.04(5).
The primary judge was entitled to conclude the evidence did not allow a proper consideration of the source of funds used by either party to pay legal fees.
As part of the complaint under this ground, the wife refers to two other matters. First, she complains that the primary judge, having declined to add back paid legal fees, should have at the third stage taken the disparity in paid legal fees into account when assessing considerations under s 79(4)(d)–(g) of the Act. The difficulty the wife faces on appeal is that was not a submission made to the primary judge and the wife shall not be allowed to advance that argument on appeal (Metwally).
Secondly, the wife challenges the primary judge taking into account the quantum of the difference in the amount spent by each party in legal fees. At [269] the primary judge said:
In those circumstances [the evidence not allowing a proper consideration of source of funds], and noting also that any difference in the amounts spent by each party in legal fees is not so significant as to run a risk of any injustice between them if fees are not added back for the purposes of calculation, I decline to do so.
The primary judge was entitled in the exercise of his discretion, to take into account both the lack of evidence in respect to source of funds and the amount involved when declining to add back paid legal fees.
There is no merit in Ground 6.
CONCLUSION
Given no merit has been demonstrated in any ground of appeal, the appeal shall be dismissed.
COSTS
The husband seeks an order for costs in the sum of $19,635, comprising $13,200 on account of counsel’s fees and $6,435 for solicitors’ costs. The wife opposes any costs order being made, and disputes the quantum claimed for solicitor’s fees.
The wife has been wholly unsuccessful. The wife’s financial circumstances are superior to that of the husband. It is just that a costs order be made in the husband’s favour. The wife does not assert that it was unreasonable for the husband to engage senior counsel and agrees to the quantum of the claim for senior counsel’s costs. The wife opposes an order being made in the amount sought for solicitors’ costs, and suggests that it be $3,200.
This appeal involved the review of a property settlement order made after eight days of hearing and an appeal book exceeding 2000 pages. The amount of the claim for solicitors’ costs is reasonable.
We will order that the wife shall pay the husband’s costs fixed in the sum of $19,635.
I certify that the preceding one hundred and thirty-three (133) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Strickland, Watts & Sutherland. Associate:
Dated: 13 July 2021
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