ON v ON
[2005] FamCA 1110
•22 November 2005
[2005] FamCA 1110
FAMILY LAW ACT 1975
IN THE FULL COURT OF THE
FAMILY COURT OF AUSTRALIA
AT MELBOURNE
Appeal No. SA60 of 2004
File No. MLF7114 of 2001
IN THE MATTER OF:
ON
Appellant Husband
AND
ON
Respondent Wife
REASONS FOR JUDGMENT OF THE FULL COURT
Coram: Kay, May and Boland JJ
Date of Hearing: 2 March 2005
Date of Judgment: 22 November 2005
Appearances:
Mr St John of Senior Counsel, with Mr Crofts, appeared on behalf of the appellant husband.
Mr Bartfeld of Queens Counsel, with Mr Dickson, appeared on behalf of the respondent wife.
APPEAL SUMMARY
MATTER: ON and ON
APPEAL NUMBER: SA 60 of 2004(MLF7114 of 2001)
CORAM: Kay, May & Boland JJ
DATE OF HEARING: 2 March 2005
DATE OF JUDGMENT: 22 November 2005
CATCHWORDS:
FAMILY LAW – APPEALS – PROPERTY – Appeal from orders providing fixed sum allocation of property distribution – Changed proposals of the wife post judgment prior to orders – Inadequacy of reasons for decision – Exclusion of business from the property pool – Manifestly excessive decision – Adult child maintenance – Appeal allowed and matter remitted for rehearing.
CASELAW CITED:
Aleksovski v Aleksovski (1996) FLC 92-705
Browne v Green (1999) FLC 92-873
Clauson v Clauson (1995) FLC 92-595
Docters van Leeuwen and Docters van Leeuwen (1990) FLC 92-148
Ferraro v Ferraro (1993) FLC 92-335
Gamble and Gamble (1978) FLC 90-452
H and H (1981) FLC 91-083
Hickey v Hickey (2003) FLC 93-143
House v The King (1936) 55 CLR 499
Mercer and Mercer (1976) FLC 90-033
Merriman v Merriman (1993) FLC 92-422
Norbis v Norbis (1986) FLC 91-712
Oliver and Oliver (1977) FLC 90-227
Tuck and Tuck (1981) FLC 91-021
Waters and Waters (1981) FLC 91-019
Appeal allowed
Costs certificates ordered for each party for the costs of the appeal and of the new trial.
Introduction
This is an appeal by the husband from property and adult child maintenance orders made by Bell J on 8 September 2004. There are thirty five grounds of appeal. The judgment is contained in seven pages.
The value of the pool of assets to be divided between the parties, as found by the trial Judge was $6,434,593. The judgment provided that the wife receive 55 per cent of that pool.
The property order provided, in essence, that the wife retain the home in east Melbourne, valued at $4,350,000, together with the antique furniture, that she pay the husband $938,404 and that the husband retain the parties’ businesses and investment interests which had a net value of $823,000 (exclusive of asset realisation costs). Other furniture and chattels were to be divided between the parties by agreement.
In addition, by retaining the business interests, the husband was to be entirely responsible for total liabilities, including capitalised lease payouts, of $1.9 million related to what was described as the “new pharmacy”. The new pharmacy and its liabilities were quarantined from the pool.
Further evidence received by us discloses that there has been compliance with the orders of the trial Judge. The wife has obtained interest only borrowings, paid the husband $938,404, and is now the registered proprietor of the former matrimonial home in east Melbourne. She has transferred her interest in other assets to the husband.
Background
The parties married in 1966 and lived together until 2001. They adopted four children, the two youngest aged 23 and 21 at the time of the trial. The husband is a pharmacist. The parties had been extremely successful in business and in property investment and at the time of the trial owned homes in east Melbourne and South Victoria, a ski lodge, and properties in London. In addition, there were two pharmacies in Melbourne referred to as the “old pharmacy” and the “new pharmacy”.
The old pharmacy had been conducted by the husband from about 1991. In 2002 the major tenant at the shopping complex at which the pharmacy operated, withdrew from the complex and from February 2003 the complex underwent major building works. The turnover of the old pharmacy was said to be severely affected. In 2003 the husband was advised by the management of the shopping complex that they wanted to establish a new pharmacy at the complex. He had a right of first refusal. The husband made a decision to commence the new pharmacy in order to protect the value of the old pharmacy. This decision was made without consultation with the wife.
On 3 August 2004, shortly before trial, the husband filed an amended response seeking orders for the sale of the Australian real estate and a division 55/45 in his favour. He sought sole ownership of the businesses, the English assets and other assets that were held in the family’s discretionary trust.
At the commencement of the trial the husband asked for orders that would ensure the realisation of all assets and an apportionment of net proceeds as to 45 per cent in favour of the wife and 55 per cent in his favour.
In an outline of argument filed on behalf of the wife on 31 August 2004, the wife sought an order for the retention by her of the former matrimonial home and for a payment of $166,000 from the husband. The basis was that the pool of assets, asserted by her to be worth $8,440,000, should be divided as to 55 per cent in her favour. She also sought orders for the maintenance of the youngest two children in the sum of $220 per week for each boy for as long as they continued their tertiary education.
At the commencement of the trial the wife sought to have interim orders made which would see all the properties and the businesses, except the former matrimonial home, sold to properly identify the pool of assets available for division. Once identified, it was submitted, the determination could be properly made as to the manner in which the entire pool of assets should be divided. That application was refused.
At the trial there were agreed valuations for each of the properties save for the value of the old pharmacy. The trial Judge resolved the dispute about the value of the old pharmacy in the husband’s favour and concluded that there was a pool of assets available, excluding the new pharmacy, of approximately $6,435,000. His Honour decided that the contributions to that pool should be seen as equal, but that there should be a 5 per cent adjustment to the wife by reason of the husband’s superior earning capacity, her obligations to the adult children and the husband’s conduct towards the family post separation. He delivered reasons for judgment that concluded with the statement, “I order that the wife do receive an amount of $3,411,596”.
His Honour left the husband to be fully liable for the debts of the new pharmacy that were agreed to exceed its value by approximately $1.9 million.
His Honour then invited submissions as to the form of the orders that would give effect to his judgment. In the course of those submissions the wife, for the first time, indicated a willingness and an ability to effectively meet the asset distribution of his Honour’s judgment by keeping the home in east Melbourne, which had an agreed value of $4.35 million, by paying the husband a lump sum of $938,404 and transferring to the husband almost all of the other assets.
The husband’s counsel took strong objection to that course, indicating that the whole trial had been conducted on the basis that if the size of the pool was not that as contended by the wife, the wife could not afford to acquire the property in east Melbourne and that all of the properties would accordingly have to be sold.
Before the trial Judge it was the husband’s case that all assets of the parties, other than more personal items, should be sold and the proceeds of sale (following deduction of selling expenses, payment of associated Capital Gains Tax, discharge of relevant debt, etc.) be divided between the parties in equal percentage amounts. Counsel said that he had proceeded on that assumption knowing that the realisation costs would then be shared between the parties in accordance with whatever percentage the trial Judge found for the division of the pool of assets. The effect of ordering the husband to take all the assets except the former matrimonial home left the husband to bear entirely the risk factors involved and the costs of the realisation of the assets. This, counsel said, was a fundamental change that denied the husband an opportunity to call appropriate evidence relating to the effect of making orders in that form.
It is evident from the transcript and the remarks in the judgment made by his Honour that the matter proceeded at trial, and during the later argument about the form of the orders, with an air of significant confusion.
Apart from this procedural unfairness argument the other significant point argued by counsel for the husband was that the orders were manifestly unjust, particularly having regard to the trial Judge’s determination to exclude the new pharmacy and the liabilities associated with it from the pool of assets available for distribution between the parties.
The parties were married for more than twenty years and had four children. There was no dispute that the contributions made by them albeit different during the marriage were of equal effect.
The apparent disparity in the effect of the orders made for property settlement is mainly attributable to two factors:
a.The removal of the “new pharmacy” from the list of the parties assets and liabilities, and
b.The addition of 5 per cent to the wife’s share by reason of s 75(2) considerations.
As we have already mentioned the other difficulty is that before the trial Judge it was the husband’s case that all assets of the parties, other than more personal items, be sold and the proceeds of sale (following deduction of selling expenses, payment of associated Capital Gains Tax, discharge of relevant debt, etc.) be divided between the parties in equal percentage amounts.
The case summary and summary of argument filed on behalf of the wife on 2 August 2004 asserted there was a pool of assets sufficient for her to fairly retain the home, to receive an additional capital sum and for her to receive ongoing spousal maintenance. The precise terms of the orders the wife sought if the pool of available assets was not sufficient for her to retain the home and receive an additional lump sum were not defined. The original application filed on 5 November 2001 merely asked for orders that provided for the adjustment of property “as this Honourable Court shall deem appropriate”.
At trial it was the wife’s case that she wanted, if possible, to retain the home, (a property with the agreed value for trial purposes of $4.35 million) and that all remaining real assets, including the pharmacies, be sold progressively and the proceeds thereof (after deduction of selling expenses, payment of associated Capital Gains Tax, etc. and discharge of relevant debt) be allocated in percentage terms between the parties and, if the proceeds were sufficient, used to extinguish any percentage entitlement of the husband in the home or if insufficient, the home be sold last of all. The percentage division she sought was variable depending on the size of the pool.
It was submitted, by reference to a multitude of exchanges throughout the hearing, that the wife sought and/or conceded an immediate sale of the assets other than the home.
After the judgment was delivered, counsel for the wife provided written submissions that, for the first time since the hearing commenced, sought a transfer to the husband of the real estate and businesses rather than their sale and a division of proceeds. We accept that the submissions were made at a time when proper consideration of them, especially a proper response to the change of approach, was impossible.
The difficulty this presented was exacerbated by the judgment itself where the trial Judge implicitly found that the wife had no capacity to pay to the husband a lump sum necessary to discharge the amount due to him if she retained the home (calculated in excess of $960,000). Accordingly the home, together with the other real assets and at least the old pharmacy, it seemed, would have to be sold.
In addition, his Honour at paragraph 30 said:
There are of course claims for estimated selling costs and GST, capital gains tax. Quite properly, the mother has conceded through her counsel that if there are any, that she should pay the selling costs and capital gains tax in the percentage in which she is found to enjoy in this case.
In paragraph 43 of the judgment there was a contradictory, perhaps ambiguous, finding that the wife should “receive 55 per cent of the net proceeds which, according to my calculations, is $3,539,026”. It is impossible to know what was intended by the use of the word “net”.
Following delivery of the judgment, Queens counsel for the wife conceded that the wife on her evidence had no capacity to make a payment to the husband in excess of $200,000 and that all assets must be sold and the proceeds divided.
Subsequent submissions made prior to the drafting of orders and seeking, on the husband’s behalf, an interim raising of mortgage monies to apply to urgent debts of the pharmacies, continued to be in the context of a sale of all real assets and the old pharmacy. The trial Judge then requested minutes of orders be drafted.
Later, the wife’s Queens counsel announced to the trial Judge that the wife had a capacity to pay a lump sum of $938,404 to the husband and that, rather than there being a sale of the home and the other real assets and businesses, the wife should receive a transfer of the home and the husband should receive a transfer of all other real assets and the businesses at the values agreed for trial purposes.
The making of statements by her counsel from the bar table as to the wife’s new-found capacity to pay a lump sum of $938,404 was the subject of strenuous objection. The trial Judge permitted “an opening as to what will be said” to be made by the wife’s Queens counsel. No application for a re-opening of evidence was ever made, nor was any evidence ever formally led. This was the cause of ongoing objection.
The trial Judge heard submissions as to the effect of the judgment and the appropriate form of order. At one point he stated the properties would be sold, and later that they would not be sold. During argument the trial Judge directed that the words “net proceeds” be deleted from the judgment.
The orders of the trial Judge
The orders that were subsequently made clearly relied upon the statements made by the wife’s Queens counsel as to her capacity to pay the husband a lump sum of $938,404. They provided for the wife to pay that sum to the husband and receive a transfer of the husband’s interest in the home. They also provided for the transfer to the husband of the remaining real estate and the retention by him of both pharmacies and all the liabilities.
Although the appeal is in relation to all the orders it is useful to recite some of the key orders as they relate to the appeal grounds:
1. The wife pay to the husband on or before 11 November 2004 (“the date”) the sum of $938,404.00 (“the payment”).
2. Contemporaneously with the payment, the husband do all things and sign all documents required to transfer to the wife at her expense all his right title and interest in the property situate at and known as [the east Melbourne property]
3. In the event the whole of the payment has not been made by the date, [the property in east Melbourne] be placed on the market for sale and at settlement of the sale, the proceeds be applied:
(a) first to meet all costs, commissions and expenses of the sale
(b) second so much of the payment as is then outstanding to the husband, together with interest at the rate prescribed by the Family Law Rules
(c) the balance to the wife.
…
8. The husband and wife each pay the weekly sum of $150 for each of:
(a) [“C”] for so long as he continues his tertiary education
(b) [“D”] for so long as he continues his tertiary education.
9. In the event of a sale of the [ski lodge], the wife be liable for and pay 55% of any Capital Gains Tax arising on such sale within 14 days of assessments issuing from the Australian Taxation Office in relation to same.
10. The wife retain the antique furniture in [the east Melbourne property] which is identified in the Joels valuation obtained by the parties which fixed the value of the said antiques at $97,680 (save for the sheep’s head and the bronze horse, which the wife shall cause to be delivered to the husbands’ solicitors within 14 days).
11. That in relation to the furniture and chattels
(a) at [the property in east Melbourne] which was not included in the valuation of antiques by Joels
(b) at the [ski lodge]
such furniture be divided between the parties in specie by agreement and in the absence of agreement the wife is to prepare two lists of furniture which together account for all of the furniture and the husband be entitled to chose (sic) a list, whereupon (as between the husband and the wife) the furniture and chattels on that chosen list become the husband’s property and the furniture and chattels on the other list become the wife’s property.
Relevant law
This appeal is from a discretionary order. It is well established that in order for an appeal to succeed, the Full Court must be satisfied that some error of fact or law, or a miscarriage of justice occurred in the proceedings the subject of the appeal. Disagreement only on matters of weight or a preference for a different result do not usually justify the reversal of a first instance discretionary judgment.
The requirements to be met before interfering are explained by Dixon, Evatt and McTiernan JJ, in House v The King (1936) 55 CLR 499 at 504 where they said:
The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. [emphasis added]
In the case of discretionary decisions, absent other error, it is only where the effect of the orders exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere, per Brennan J in Norbis v Norbis (1986) FLC 91-712 at 75,178.
We note that the correct application of law in relation to property settlement proceedings is that stated in ss 79(1), (2), (4) and 75(2); the ‘three step’ process per Ferraro v Ferraro (1993) FLC 92-335 and Clauson v Clauson (1995) FLC 92-595 and consideration of whether the final apportionment would produce a just and equitable outcome, per Aleksovskiv Aleksovski (1996) FLC 92-705 and Hickey v Hickey (2003) FLC 93-143.
As some of the grounds of appeal attack the adequacy of his Honour’s reasons, it is appropriate that we refer to the following passage from the decision of the Full Court in Merriman v Merriman (1993) FLC 92-422 at 80,351:
Following the decisions of the Full Court of this court in Bennett and Bennett (1991) FLC 92-191, Horsley and Horsley (1991) FLC 92-205 and Bonnici and Bonnici (1992) FLC 92-272 the principles governing the need for the giving of adequate reasons for the exercise of the discretion to alter interests in property under Section 79 of the Family Law Act are well established. For present purposes they are perhaps best expressed in the following passage from the judgment in Horsley (at page 78,401):
‘Counsel for the wife contended that the trial Judge did not give adequate or any reasons for his decision and that his failure to do so amounted to an error of law and additionally contended that his Honour’s discretion had miscarried. In Bennett and Bennett (1991) FLC 92-191 the Full Court considered a similar argument (also advanced in that case by the same counsel) and after referring to a number of authorities, including Pettitt v Dunkley (1971) 1 NSWLR 376, Housing Commission of NSW v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378, Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, Public Service Board of NSW v Osmond (1986) 159 CLR 656; 63 ALR 559, Palmer v Clarke (1989) 19 NSWLR 158, referred to the judgment of the Full Court of the Supreme Court of Victoria in Sun Alliance Insurance Ltd v Massoud (1989) VR 8 and in particular to the passage in the principal judgment of Gray J where his Honour said:
‘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 reasoning 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.’
In Bennett’s case the Full Court went on to say:
‘It is unnecessary to decide, in this case, whether the inadequacy of her Honour’s reasons was itself an error of law requiring her decision to be set aside, in that we have already determined that the appeal should succeed on the merits. The weight of judicial authority, however, suggests that it might well amount to such an error. At the very least the failure to give adequate reasons places a duty on an appellate court to scrutinise the decision with particular care.
In the absence of adequate reasons, the Full Court is not obliged to uphold a judgment merely because the result may be said to fall within the wide ambit of the Judge’s discretion. In general, the appellate court should be able to discern either expressly or by implication the path by which the result has been reached.’
The court concluded on this topic:
‘The important thing is that the appellate court must be placed in the position of being able to follow the trial Judge’s line of reasoning, as must the parties, if they are to be satisfied that justice has been done.’‘
Grounds of Appeal
The grounds of appeal are many and varied. Counsel for the appellant husband, in oral submissions and in the outline, presented the appeal under various headings some of which related to a number of the grounds.
In the written submissions counsel for the husband grouped the grounds into the following categories:
1.The change of approach by the trial Judge and the wife 1, 2, 5-8, 10-12, 13, 15, 16 and 17(a);
2.Form of orders
Grounds 1, 9 and 17(a);
3.Fixed sum rather than percentages
Grounds 1, 2, 5, 6, 7, 10, 11, 13, 14(a) (b) and (c), and 16.
It is convenient to condense them further as counsel did in his oral submissions in this order and reformulated to some extent by us.
1. The decision was “manifestly excessive” in the wife’s favour, especially as the husband was left with the debts and the entire costs of the inevitable sale of some properties including taxation liabilities.
(a)It is submitted that these difficulties were magnified by the trial Judge ordering that the wife pay the husband a fixed sum rather than applying percentages;
(b)the failure of the trial Judge to include in the assets and liabilities the business described as the new pharmacy; and
(c)the approach taken to s 75(2).
2. Adult child maintenance orders.
A considerable proportion of the submissions were devoted to the complaint that the trial Judge ultimately made orders giving the wife the house and a certain sum whereas the husband was left with assets which required considerable holding costs and when sold would attract various costs of sale including tax. As the case for the husband and wife was presented to the trial Judge that all property should be sold, the difficulty resulting from his Honour’s orders is that there was no evidence about such matters and it was complained that the trial Judge did not allow counsel to make submissions about the form of orders in view of the new proposals.
We find in this case there are very persuasive arguments in relation to procedural fairness issues. It would also appear to us that the orders were manifestly excessive in favour of the wife.
A major part of the submission was that the overall effect of the orders is completely unjust in that it leaves the wife with approximately $3.6 million worth of assets whilst it leaves the husband with approximately $900,000 worth of assets. The disparity is created firstly by visiting all of the losses of the new pharmacy upon the husband ($1.9 million) and otherwise dividing the remaining pool 55/45 in favour of the wife. It was submitted, we think correctly, that after a marriage spanning 35 years in which the assets had been accumulated through the hard work of each of the parties, such a result was entirely inappropriate.
In support of his arguments directed at the form of the order made in default of the wife paying the husband the sum due to obtain a transfer to her his interest in the former matrimonial home the appellant submitted that the trial Judge erred in finding a fixed sum was payable to the wife rather than a percentage of the net proceeds of sale.
In determining the distribution of property, it is preferable that orders be made which allocate a percentage of the value of the property to each party rather than a fixed sum, per Waters and Waters (1981) FLC 91-019. The Full Court in Norbis v Norbis (supra) held that the principle in Waters and Waters (supra) was a guideline for the manner in which discretion was exercised in the determination of property distributions. A departure from such a long-standing guideline such as that in Waters and Waters (supra) without an explanation for the departure, is a ground for finding that the exercise of discretion has miscarried, per Docters van Leeuwen and Docters van Leeuwen (1990) FLC 92-148. The argument, whilst appearing to have substance, became somewhat academic when we learnt that the payment had in fact been made and that the default provisions were no longer required.
a. Exclusion of the “new pharmacy”
The evidence was that the acquisition of the new pharmacy was an appropriate business strategy which was adopted without any recklessness. As we intend to order a retrial of this matter it is not appropriate or necessary to deal with this ground further other than to comment that its exclusion from the pool of assets appears to have been an unusual approach and very limited reasons were given. Absent any finding that this was somehow a wanton act on behalf of the husband or a frolic of his own taken in the face of opposition by the wife, the post separation business losses ought to have been seen in the context of the very difficult position the husband had been placed under by the rebuilding at the shopping complex. He made a business decision that might, with the benefit of hindsight, have been an unsound one. There were however no findings made to indicate it was “deliberate waste or dissipation of assets by…reckless, negligent or wanton conduct…”. Absent such a finding, in the circumstances of this case where the wife conceded the opening of the new pharmacy was a prudent business decision to maintain the viability of the old pharmacy operated during the marriage, the economic losses suffered by the parties should be shared by them in the same manner as gains made or losses incurred during a marriage are generally shared (though not necessarily equally) (see Browne v Green (1999) FLC 92-873 at para 48).
b. Section 75(2) adjustment
It was further argued that in making a s 75(2) adjustment his Honour took into account irrelevant factors being the support of the adult children and the conduct of the husband post separation towards his family (of which there was no evidence of economic detriment) and failing to take into account the enormous financial disparity brought about by visiting the entirety of the new pharmacy losses upon the husband. We would make the same remarks in relation to the latter ground as the previous paragraph.
c. Adult child maintenance
The husband and wife were both ordered to pay a weekly sum of $150 to their two adult sons, “C” and “D”, “for so long as [each] continues his tertiary education”.
There was a strenuous attack upon the orders made for the children’s maintenance on the basis that the jurisdiction to make an order for adult child maintenance is only enlivened if there is a finding that the provision of the maintenance is necessary to enable the child to be educated. There were no findings relating to the children’s education, the necessity for the provision of the maintenance, the needs of the children or the capacity of the husband to contribute towards those needs. The complete absence of findings in this respect makes it impossible for this part of the judgment to be understood or the orders to remain.
Counsel for the wife submitted that the trial Judge gave no or sufficient reasons when determining that:
(a) “D” and “C” were entitled to adult child maintenance pursuant to s 66L and/or
(b) they were entitled to the maintenance in the amount ordered and(c) refusing the husband’s application for reporting as to his children’s academic progress.
In addition, it was submitted that the trial Judge made no findings as to the income of each of the husband and wife having made orders that each of them contribute to the children’s maintenance. Further, the trial Judge made no findings in relation to the ability of the children to earn income or in relation to the parent’s or children’s reasonable living expenses.
It appears that the trial Judge misunderstood the husband’s position. In his outline of case document the husband sought dismissal of the application for adult child maintenance, although in his oral evidence the husband indicated a preparedness to voluntarily pay reasonable adult child maintenance, it was conditional on the children providing to him evidence that they were pursuing their studies. This, it was submitted, was an appropriate request by the husband having regard to the evidence as to the children’s poor academic history, intermittent attendance and the failure of the wife and the boys to report to the husband about their progress and university attendance.
The trial Judge failed to give any reasons why he refused to make such orders. There was no evidence before the Court sufficient to establish that maintenance was necessary for “D” and/or “C” to pursue any course of study being undertaken by them. There was some evidence in relation to their prospects in that the wife said that “D” was unlikely to conclude the course of study to which he is presently enrolled.
Section 66L of the Family Law Act 1975 (“the Act”) provides:
(1) A court must not make a child maintenance order in relation to a child who is 18 or over unless the court is satisfied that the provision of the maintenance is necessary:
(a) to enable the child to complete his or her education; or
(b) because of a mental or physical disability of the child.
The meaning of ‘necessary’ under s 66L(1) is relatively wide and should be given its ordinary meaning (Oliver and Oliver (1977) FLC 90–227). It is more than morally or socially ‘desirable’ (Gamble and Gamble (1978) FLC 90–452) but less than ‘absolutely necessary’ (Tuck and Tuck (1981) FLC 91–021). More specifically ‘necessary’ in the context of s 66L(1) can be defined as maintenance which is needed by the child and that it is reasonable to require the parent to contribute given their financial circumstances and other relevant factors (Tuck).
Where a child has the ability to support himself or herself, the Court will not normally make an order (Gamble; Mercer and Mercer (1976) FLC 90–033; H and H (1981) FLC 91–083). The Court will have regard to the child's income and earning capacity, for example, from holiday employment.
In our view the trial Judge was obliged to find that there was a necessity for maintenance and also to find a reasonable sum. It is not possible to ascertain how the trial Judge found that the wife was also able to pay $150 a week. It was submitted that this finding is somewhat in contrast to his Honour’s findings in relation to s 75(2) factors. There was some cross-examination about the income potential of the children. His Honour made no reference to this or about the children’s living expenses. Ultimately the orders leave the husband to service significant debts. There was no real consideration of how he might do this, as well as make the payment to the adult children.
It is accepted that the trial Judge failed to make fundamental findings in relation to this aspect and the appeal against those orders should be allowed.
d. Procedural fairness
As we have already said, it was the husband’s case at trial that all assets of the parties, including the pharmacy business, should be sold and the proceeds of sale obviously after the deduction of selling expenses and Capital Gains Tax (“CGT”) be divided between the parties equally. It is clear that counsel for the husband throughout the hearing complained on many occasions that it was not clear if the wife had deviated from her formal application and what orders were sought if there were not sufficient assets for her to retain the home. These difficulties commenced with counsel for the wife making an application for an adjournment at the outset of the hearing asking for interim orders requiring the sale of all assets other than the house in east Melbourne and for the property settlement applications to be heard when all those assets had been sold. This interim application was refused.
Certainly it would have been reasonable for the husband’s lawyers to assume that even if the house was to be retained by the wife, all remaining other assets including the pharmacies would be sold progressively and the net proceeds be allocated in percentage terms between the parties. At all times, the percentage division sought by the wife varied depending, not surprisingly, on the size of the pool. A schedule was provided by counsel for the husband demonstrating the various exchanges about this topic. At the end of the evidence, and after delivery of the trial Judge’s ex tempore judgment, counsel for the wife provided proposed minutes of order that, for the first time, asked for a transfer to the husband of the real estate and businesses rather than their sale and a division of the proceeds. This made any opportunity to make meaningful submissions very difficult. The wife’s changed position was described by counsel as “shifting of the goal posts”. It was also submitted that the approach by the trial Judge of asking for submissions on the form of orders was inappropriate.
Secondly, it was argued that the trial Judge must have found that the wife had no capacity to pay the husband a lump sum. It was submitted that the judgment contained a contradictory or ambiguous finding that the wife should receive 55 per cent of the net proceeds. Queens counsel for the wife had conceded at the trial that the wife had no capacity to make a payment to the husband in excess of $200,000.
We agree that the process of allowing the wife to change her stance so dramatically after the judgment was delivered denied the husband procedural fairness. It afforded him no opportunity to explore with her the financial basis upon which she was suddenly able to find funds to acquire the home. It afforded him no opportunity to address the trial Judge on the disparity of outcome that would be caused if the husband alone had to bear the burden of the realisation costs of the remaining assets.
We regard the failure of his Honour to allow the husband to be heard on these important questions, together with the ultimate orders being expressed as a dollar figure rather than as a percentage basis as being a fundamental error which is incapable of being cured other than allowing the appeal and rehearing.
As counsel correctly submitted, it is impossible to say if the omission in the orders as to the contribution by the wife to selling expenses and CGT arising from the sale of the assets, with the exception of the ski lodge, arose by oversight or was a deliberate decision of the trial Judge. In any event, we find it was an error for his Honour to have made orders awarding a fixed sum to the wife rather than a percentage. The effect of the orders made was to require the husband to meet all risks and costs including CGT associated with sales of real estate and businesses where it was not disputed that they would ultimately be sold.
e. Manifestly excessive decision
It would appear that his Honour could not have considered the effect of the orders he proposed. They allowed the wife to retain assets worth $3,539,026 whilst the husband retained assets worth $823,000 if all liabilities immediately crystallised (exclusive of realisation costs) and was required to meet the ongoing business losses pending their sale.
It is inconceivable how the trial Judge, having found that the new pharmacy had an enormous loss of “something like $1.3M”, and having determined that he would exclude its liabilities from the pool of assets, could have given any real consideration to the consequences to the husband of the orders made by him. The huge disparity in the result could not be just and equitable in the circumstances (Aleksovski v Aleksovski (supra)). Counsel for the husband submitted, after a marriage exceeding 30 years, in percentage terms the wife received 81.14 per cent of a net pool and the husband received 18.86 per cent, not including expenses of sale which would further decrease his percentage entitlement. We are satisfied that the failure to make findings about the new pharmacy’s liabilities and to take them into account has resulted in orders which are outside the reasonable exercise of discretion and manifestly excessive.
As we are of the view that there is substance in each of the matters complained of relating to the conduct of the proceedings, the outcome of the proceedings, and the lack of necessary findings relating to child maintenance, the appeal will be allowed.
Each of the parties has agreed that if the appeal is allowed the matter has to be remitted.
Costs
The trial Judge made an order that there be no order as to costs in relation to the trial. There is no appeal in relation to that order.
Before us, the husband’s senior counsel sought permission to file written submissions as to costs, despite our indication that it seemed to be a case appropriate for certificates under the Federal Proceedings (Costs) Act 1981. We acquiesced to this request.
Senior counsel for the husband submitted that the expense incurred by the appellant in the process of preparing to prove those grounds of appeal which, according to the husband’s counsel, should have properly been conceded by the wife in written submissions prior to the hearing of the appeal, should be paid by the wife.
Counsel asserted that a costs certificate would meet only a small proportion of the husband’s costs of the appeal and that such an order for a certificate (or an order that he bear his own costs) would result in a disproportionate disadvantage against the husband. Counsel requested that a costs certificate not be granted and that, due to the nature of this appeal and the conduct of the respondent, the circumstances justified a departure from the principle in s 117(1) of the Act which directs that each party bear their own costs. The husband’s counsel sought the wife be ordered to meet the costs and disbursements incurred by the husband in the appeal.
In submissions received on behalf of the husband on 16 March 2005, senior counsel said that:
[t]he Respondent had the option of acknowledging shortly following the instituting of the Appeal that the Trial Judge had fallen into manifest error and conceding the Appeal. … Such concession would have hugely reduced costs and disbursements incurred by the Appellant. Reliance is placed upon section 117(2A)(c), (e) & (g) of the Family Law Act arising from her failure to do so and the apprehended success of the Appeal.
The conduct justifying the departure, senior counsel for the husband submitted, was the advancement of a dissenting proposition to that of the husband, in the written submissions filed in response to the husband, and the subsequent retraction of such resistance, the failure to respond at all to some of the grounds of appeal in the written submissions, and the concession of the opposed grounds of appeal prior to the commencement of the oral submissions at the hearing of the appeal. This, it was submitted, directly caused additional expense to the husband.
Counsel for the husband further submitted that the wife is in a financial position such as to afford any order for costs made in favour of the husband.
In the written submissions filed in response on 30 March 2005 on behalf of the wife, her Queens counsel rejected the husband’s application for costs, confirmed the wife’s application for a costs certificate and made an application for a costs order against the husband in relation to his costs application.
Counsel for the wife submitted that “[i]t cannot be said that the wife should have conceded the appeal much earlier. It was open to the Full Court to find… there were sufficient findings to justify the orders made”, and that any concessions made at the hearing of the appeal were because “it would have been irresponsible to pursue the point” or that “it was a responsible approach in order to attempt to minimise costs”.
Additionally, it seems that counsel for the wife is arguing that as we were minded to make an order providing for costs certificates, that we had made a finding, albeit implicitly, that each party bear their own costs. In fact, s 9(1) of the Federal Proceedings (Costs) Act states:
Subject to this Act, and in particular without limiting section 6, where –
(a)a Federal appeal referred to in paragraph (d), (j), (ja) or (k) of the definition of Federal appeal in sub-section 3(1) succeeds on a question of law; and
(b)in accordance with section 117 of the Family Law Act 1975, each party to the appeal bears his or her own costs;
the court that heard the appeal may, on the application of the appellant to the appeal, grant to the appellant a costs certificate in respect of the appeal.
Whilst we are in agreement with the wife’s Queens Counsel that the appeal had “manifest merit” and involved “no difficult or novel questions of law”, ultimately it has succeeded on the demonstration of clear errors of on the part of the trial Judge. We do not think it appropriate to visit the wife with the costs of having to try to defend those errors. Likewise, we do not think it appropriate that the husband pay the wife's costs of the submissions on costs of his application.
There had also been a stay application and Bell J in refusing the stay had referred the question of the costs of that application to the Full Court. We think this was an inappropriate way of dealing with those costs and that question should be remitted to Bell J.
Orders
The proposed orders are:
1. That the appeal be allowed.
2. That the orders made by the Honourable Justice Bell on 8 September 2004 be set aside.
3. That the matter be remitted to the Melbourne Registry for a rehearing. Further, that the matter be placed on the Complex Cases list for management purposes.
4. The appellant is granted a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
5. The respondent is granted a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
6. The parties are both granted a certificate pursuant to s 8(1) of the Federal Proceedings (Costs) Act 1981 that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant and the respondent in respect of such part as the Attorney-General considers appropriate of any costs incurred by those parties in relation to the new trial ordered.
7. The issue of the costs incurred in the application for a stay of orders pending appeal is remitted for determination by the Honourable Justice Bell.
I certify that the 84 preceding paragraphs
are a true copy of the reasons for judgment delivered by this Honourable Full Court.
Legal Associate
5
3
0