PADNALL & PADNALL
[2014] FamCAFC 145
FAMILY COURT OF AUSTRALIA
| PADNALL & PADNALL | [2014] FamCAFC 145 |
| FAMILY LAW – APPEAL – NOTICE OF APPEAL – LEAVE TO APPEAL – where the husband seeks leave to appeal and if leave is granted to appeal against orders made by Federal Magistrate Simpson (as his Honour then was) – where the wife opposes the appeal – where the orders appealed provide for the husband to pay the wife interim spousal maintenance in the sum of $1,462 from 11 May 2012 until the final hearing of the matter – where the Federal Magistrate erred in failing to take into account a bank account held in the name of the wife and in assessing the needs of the wife including all of the expenses of the children of the parties – where the errors of principle relied on to establish leave are comprised in the proposed grounds of appeal – where there is merit in four of the five proposed grounds of appeal pursued – where leave to appeal is granted – where the appeal is allowed in part – where given the nature of the errors of the Federal Magistrate identified his Honour’s orders must be set aside and the matter remitted for rehearing – where the matter has been transferred to the Family Court of Australia and thus the rehearing will take place before a judge of that court. FAMILY LAW – APPEAL – APPLICATIONS IN AN APPEAL – FURTHER EVIDENCE – where the husband seeks to adduce further evidence which goes to his income and his capacity to pay spousal maintenance – where the evidence sought to be adduced does not establish error by the primary judicial officer – where in any event the evidence is controversial – where if the evidence is admitted the wife would seek to present her own evidence and to cross-examine the husband and the authors of the documents the husband seeks to present – where the husband did not seek to vary or discharge the order made but instead sought to address the issue through an appeal – applications to adduce further evidence dismissed. FAMILY LAW – APPEAL – NOTICE OF APPEAL – COSTS – where both parties sought costs certificates for the appeal and any rehearing in the event that the application and the appeal were successful – where each party should bear their own costs – where the appeal succeeded on a question of law – parties granted costs certificates. |
| Family Law Act 1975 (Cth) – s 75(2)(d) and (na) |
| Federal Proceedings (Costs) Act 1981 (Cth) – ss 6, 8 and 9 Bennett & Bennett (1991) FLC 92-191 |
| APPELLANT: | Mr Padnall |
| RESPONDENT: | Ms Padnall |
| FILE NUMBER: | ADC | 1244 | of | 2012 |
| APPEAL NUMBER: | SOA | 8 | of | 2013 |
| DATE DELIVERED: | 14 August 2014 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Strickland J |
| HEARING DATES: | 22 October 2013, 28 March 2014 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court of Australia |
| LOWER COURT JUDGMENT DATE: | 18 January 2013 |
| LOWER COURT MNC: | [2013] FMCAfam 18 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Richards |
| SOLICITOR FOR THE APPELLANT: | Belperio Clark |
| COUNSEL FOR THE RESPONDENT: | Mr McQuade |
| SOLICITOR FOR THE RESPONDENT: | Barnes Brinsley & Shaw Lawyers |
Orders
The application in an appeal filed on 10 September 2013 be dismissed.
The hearing of the application for leave to appeal and the appeal be reopened to allow the application in an appeal filed on 28 February 2014 to be heard and determined.
The application in an appeal filed on 28 February 2014 be dismissed to the extent that it seeks to adduce further evidence.
Leave to appeal be granted.
The appeal be allowed in part.
The orders made by Federal Magistrate Simpson (as his Honour then was) on 18 January 2013 be set aside.
The proceedings be remitted for rehearing by a Judge of the Family Court of Australia.
The Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by her in relation to the appeal.
The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of the parties in respect of the costs incurred by them in relation to the rehearing.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Padnall & Padnall has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE |
Appeal Number: SOA 8 of 2013
File Number: ADC 1244 of 2012
| Mr Padnall |
Appellant
And
| Ms Padnall |
Respondent
REASONS FOR JUDGMENT
Introduction
By Notice of Appeal filed on 15 February 2013 Mr Padnall (“the husband”) seeks leave to appeal, and if leave is granted, to appeal against orders made by Federal Magistrate Simpson (as his Honour then was) on 18 January 2013.
The appeal is opposed by Ms Padnall (“the wife”).
The orders appealed provide that the husband pay to the wife interim spousal maintenance in the sum of $1,462 from the date of the application made by the wife on 11 May 2012, until the final hearing of this matter, with all monies to be deposited into a bank account nominated by the wife.
On 10 September 2013 the husband filed an application in an appeal together with an affidavit seeking leave to adduce further evidence as comprised in the affidavit and the annexures thereto. Following the hearing of the appeal, on
28 February 2014, the husband filed a further application in an appeal seeking to reopen the hearing of the appeal for the purposes of adducing further evidence comprising the husband’s affidavit filed contemporaneously with that application, and the annexures thereto. I will address these applications later in these reasons.
Relevant Factual Background
The husband was born in 1974 and was 37 years of age at the time of trial.
The wife was born in 1974 and was also 37 years of age at the time of trial.
The wife says the parties commenced cohabitation in or around late 1993, and the husband says they commenced cohabitation in February 1994. Nothing turns on this difference.
The parties married in 1999, and separated in January 2012.
There are three children of the marriage namely, A born 2001, B born 2004 and C born 2010. All children live with the wife.
On 15 November 2012 the Federal Magistrate transferred the proceedings to the Family Court of Australia.
On 16 August 2013 the husband filed an application for divorce and on
31 October 2013 a divorce order issued.
The applications for property settlement, spousal maintenance and parenting orders are still to be determined.
Reasons for Judgment delivered on 18 January 2013
The Federal Magistrate commenced his reasons for judgment by setting out the wife’s application which was before him for determination, namely, an application for interim spousal maintenance, and listing the documents relied on by each party for the purposes of the hearing.
His Honour then set out what he saw as the relevant legislation, namely ss 72 and 75 of the Family Law Act 1975 (Cth) (“the Act”), and the process for “assessing a spousal maintenance claim”.
The Federal Magistrate then turned to his assessment of the evidence of the parties. His Honour found the wife to be “a witness of truth”, but found that the husband “seemed to be tailoring his answers to ensure that the wife’s application for spousal maintenance was unsuccessful”. His Honour considered that this approach “severely damaged his credibility” (at [15]).
Before his Honour the wife opposed the husband’s suggestion that she use the sum of $87,000 invested in a bank account in her name, to pay her everyday living expenses, save for the interest accumulated on that fund. She said that “it was agreed between her and the husband that the … fund would be set aside for the children as an educational fund for their tertiary studies”
(at [16]). The wife was also concerned that if she used this money, any amount she received as a result of final property settlement orders would be reduced accordingly, and that would impact on her ability to purchase a home for herself and the children. Further, she was worried that she would need to use this money to pay outstanding primary school fees.
As to the wife’s needs, ultimately the Federal Magistrate found the amounts claimed by the wife, as set out in her Financial Statements, to be reasonable. His Honour then found that “as a result of her responsibilities to care for the three children of the marriage, one of which is only two years of age, the wife has a need for spousal maintenance and that she needs the sum of $1,462 per week to support herself and the children” (at [31]).
It was his Honour’s view that the standard of living the wife wished to maintain was “reasonable”.
His Honour also declined to make an order for partial property settlement as sought by the husband in an effort to avoid any order being made for interim spousal maintenance, saying that he “[did] not consider this an appropriate course to take” (at [34]).
His Honour then considered the husband’s ability to pay any order made, finding that the husband was well able to meet an order for interim spousal maintenance in the amount sought. In arriving at this finding his Honour rejected the husband’s evidence that there had been a “catastrophic downturn in his income since separation” and found that the husband “more probably than not” failed to disclose in his income tax returns “income received as cash”.
His Honour also “carefully considered all the evidence pertinent to the husband’s income, including the numerous documents concerning bank and credit card transactions.” In particular he found that the husband had been able to pay off debt on his Visa Card account on a monthly basis, and that the types of items paid for out of this account informed the court of the type of lifestyle the husband was living (e.g. $5,859.82 for restaurants and hotels in a four week period (at [53])), and informed, “in the context of this litigation, his capacity to pay the wife the spousal maintenance that she seeks.”
At [55] his Honour said this:
I accept as true the husband’s evidence in his financial statement that he has had weekly expenditure of $2,131.00 with a weekly income of no less than $5,000.00, as I have already found, the husband has a surplus of no less than $2,869.00. He therefore clearly has the capacity to meet the spousal maintenance of $1,462.00 that I have found that the wife needs.
Leave to Appeal
The facts relied on by the appellant in support of the application, and which are said to establish an error of principle or a substantial injustice (Rutherford & Rutherford (1991) FLC 92-255) are as follows:
1.The order sought to be appealed creates a substantial obligation on the Applicant for leave to appeal by way of:-
·Periodic payment of spousal maintenance in the sum of $1,462 per week.
·Payment of arrears in the sum of $51,170.
2.The learned Federal Magistrate erred in principle in finding that the Respondent was “unable to support herself” within the meaning of s.72(1) of the Family Law Act, failed to have any or any adequate regard for the substantial financial resources of the Respondent by way of a personal bank account held in her sole name in the sum of $87,000.
3.The proper finding, having regard for the Respondent’s financial resources constituted by the availability of the available funds standing to her credit in the account should have been that the threshold test required pursuant to s.72(1) of the Family Law Act was not met and that the Respondent’s Application for Interim Spousal Maintenance should have been dismissed.
4.The learned Federal Magistrate erred in principle in making the order for spousal maintenance taking into account the whole of the Respondent’s costs of financially supporting the three infant children of the parties in circumstances where the parties were subject to a Child Support Assessment and where the learned Federal Magistrate gave no consideration to the terms of the Child Support Assessment in assessing the claim for spousal maintenance.
5.The financial obligations imposed on the Applicant/Appellant by virtue of the orders thereby constitute a substantial injustice.
It is plain that the husband here relies on the alleged errors of principle which are raised in his grounds of appeal, and thus I propose to address the application for leave in the context of those grounds. I will also leave the issue of substantial injustice until I have undertaken that exercise, because it may not be necessary to consider that issue at any length, or at all.
Grounds of Appeal
The grounds of appeal as set out in the Notice of Appeal filed on 15 February 2013 are as follows:
1.The Learned Federal Magistrate erred in determining that the Respondent was unable to support herself adequately with [sic] the meaning of s.72(1) of the Family Law Act
2.The Learned Federal Magistrate erred in law in failing to have any, or any sufficient regard to the substantial bank savings held in the sole name of the Respondent and in failing to find that the Respondent could adequately support herself by that means.
3.The Learned Federal Magistrate erred in law in including the entirety of the amounts claimed by the Respondent to be spent in the financial support of the three infant children of the parties residing primarily in the Respondent’s care in circumstances where the parties were subject to a Child Support Assessment in effect pursuant to the Child Support (Assessment) Act 1989.
4.The Learned Federal Magistrate erred in fact and in law in finding that the Respondent had a need for spousal maintenance in the sum of ONE THOUSAND FOUR HUNDRED AND SIXTY TWO DOLLARS ($1,462) per week “to support herself and the children”.
5.The findings of the Learned Federal Magistrate as to the Applicant’s income were contrary to the evidence or unsupported by the evidence.
6.The Learned Federal Magistrate erred in failing to have any or any adequate regard for the Appellant’s evidence as to his fixed and variable expenses necessary to maintain himself.
Orders Sought
The husband seeks the following orders in his Notice of Appeal filed
15 February 2013:
1. That the Orders made on 18 January 2013 be discharged.
2.That the Respondent’s Application for Interim Spousal Maintenance filed 11 May 2012 be dismissed.
3.That the Respondent pay the Appellant’s costs of and incidental to the appeal.
Discussion
In his written summary of argument counsel for the husband addressed Grounds 1 and 2 together, and then Grounds 3 and 4 together. Ground 5 was addressed discretely. With Ground 6, no submissions were made, and accordingly I proceed on the basis that that ground is not being pursued. I will address Grounds 1 to 5 by following the course adopted by counsel for the husband.
Grounds 1 and 2
It is plain that Ground 2 particularises one of the alleged errors on which the general assertion in Ground 1 is founded. In other words, in finding that the wife was unable to support herself adequately his Honour failed to have any, or any sufficient regard, to the bank account held by her.
It was common ground that the wife had an account in her name at the Westpac Bank with a credit balance of $87,000. It was the husband’s case that the wife could access that account to meet her day to day expenses, and thus she could adequately support herself.
The wife’s case was that money in this account comprised a fund that the parties had accumulated for the purposes of meeting the tertiary education expenses of their three children, and thus it should not be treated as a fund available for her to use in the way suggested by the husband.
Despite the obvious relevance of this account to the wife’s application, his Honour gave it short shrift in his reasons for judgment. Indeed, the only reference to it is at [16], [17] and [18] of those reasons where his Honour said this:
16.The wife’s Financial Statement filed on 11 May 2012 indicates that she had an average weekly income of $84.00 and total personal expenditure for herself and the three children of $1,462.00 per week. The $84.00 per week that is received by her, is by way of interest on a sum of $87,000.00 (“the schooling fund”) invested in a Westpac Account in her sole name. The wife opposes the husband’s suggestion that she have access to the schooling fund to pay for her day-to-day expenses. The wife says that she has not accessed the schooling fund for payment of any of her household or living expenses save and except for the interest. She says that the Fund had accrued during the parties’ relationship because the wife deliberately saved and kept separate all family payments that she received for each of the children since they were born. She says that it was agreed between her and the husband that the schooling fund would be set aside for the children as an educational fund for their tertiary studies.
17.The wife says that she is concerned that if she is required to access the schooling fund for weekly expenses, that when it comes to the property settlement, she will not be able to afford to buy a house for her and the children to live in.
18.The wife says that she is worried that she will need to use these monies to pay primary school fees and the like since the husband has been refusing to contribute to the children’s primary schooling since separation. …
As can be seen all his Honour does in these paragraphs is record the wife’s reasons for opposing the suggestion that she can use this money for her day to day expenses.
Given the outcome of the wife’s application it is apparent that his Honour has disregarded this account in assessing whether the wife can support herself adequately. However, the difficulty is obvious; his Honour in fact provides no reasons as to why he does not take this fund into account, and the law as to this is clear (for example, see Bennett & Bennett (1991) FLC 92-191 at 78,266 and 78,267). It is necessary for a trial judge to expose his or her reasoning for making the conclusions that he or she does, such that an appeal court (and the litigants) can “discern either expressly or by implication the path by which the result has been reached”.
However, lack of adequate reasons is not a ground of appeal relied on here by the husband (albeit it is raised in the written submissions without any amendment being sought to the grounds of appeal). Instead, what the husband challenges is the alleged failure by the Federal Magistrate to have regard to this account at all or sufficiently. That entails an assumption that the Federal Magistrate has accepted the reasons given by the wife for opposing the suggestion that she can access that account for her day to day expenses. In turn, that challenges whether the account can in effect be ignored for the reasons given.
The reason of the wife identified by his Honour at [17] can be dealt with quite simply. There can be no basis to disregard that fund because the wife may need it to purchase a house in the context of the issue of property settlement. For a start, that is inconsistent with the primary reason given by the wife for her not being able to access those funds (as explained at [16]), and in any event, the wife cannot have it both ways; the fund cannot be relevant in the property settlement proceedings, but not relevant in the spousal maintenance proceedings.
As for the reason set out at [18], again that is inconsistent with the primary reason proffered by the wife, namely, this was a fund put aside by the parties to meet the tertiary education expenses of the children. Further, the wife says that “she will need to use these monies to pay primary school fees” because the husband has not been contributing, but the fact is that the wife deposes to there being outstanding school fees of $9,162 (at [22]) and relies on that in suggesting that she cannot support herself, yet plainly she has not paid these fees out of the bank account. Again, the wife cannot have it both ways.
Next, there is the primary reason (as set out at [18]). As to that, I do not accept that it is a justifiable basis for this Court to disregard the bank account in the context of an application for interim spousal maintenance. There is no dispute between the parties that the intention was to use the money in this account to meet the costs of the children’s tertiary education, but that was when the parties were together. The circumstances have altered with the separation, and in the context of the wife seeking spousal maintenance from the husband, alleging that she cannot support herself adequately, it is not open to the court to disregard these funds. It is also inequitable to do so, given that once the enquiry turns to the husband’s financial circumstances, it is his income, his assets, and his resources which are required to be taken into account.
The wife in her submissions refers to the principle established by authority (for example in Mitchell & Mitchell (1995) FLC 92-601) that “[a]n Applicant for Spousal Maintenance is not required to use up all of their assets in (sic) capital in order to satisfy the requirement that she is unable to support herself ‘adequately’.” However, that is not the issue in this case. The wife says that the funds should be disregarded primarily because of the intention of the parties to use the fund in a particular way. In my view that is not a basis for not taking the fund into account in determining the application for interim spousal maintenance, and this is the error that his Honour has made (apart of course from there being a lack of adequate reasons). What is being raised by the wife here is the next step. In other words, to what extent should the fund be taken into account given the principle referred to? That is a question that cannot be answered on this appeal because the Federal Magistrate never reached that point. In any event, what the Full Court said in Mitchell about this is that it “depends on the circumstances of the case” (at pages 81,995-81,996), and their Honours instanced the decision in Clauson & Clauson (1995) FLC 92-595 as an example of where the capital the wife had, prevented her from claiming spousal maintenance.
It also needs to be said that the principle referred to arose in the context of cases where there was an application for property settlement as well as an application for spousal maintenance, and the question to be asked was, does the amount of property settlement that is awarded to the applicant for spousal maintenance, affect the claim for spousal maintenance. That of course is not the case here; it is unknown what the wife will receive by way of property settlement, and the issue of spousal maintenance is being heard on an interim basis pending the final hearing. Thus it is not a case of providing the wife with an amount for property settlement, but then expecting her to use all of that capital such that she can claim that she satisfies the requirement that she is unable to support herself “adequately”. There is a clear distinction there.
In the circumstances his Honour has erred and these grounds are made out.
Grounds 3 and 4
The primary complaint here is that the trial judge included all of the expenses of the three children, as well as the expenses of the wife, in fixing the amount that the wife needed by way of spousal maintenance. Further, this was done despite there being in place a child support assessment providing for the husband to pay the sum of $802 per week.
His Honour failed to explain in his reasons for judgment the basis for including the whole of the expenses of the children, and failed to refer at all in his reasons for judgment to the child support assessment in the context of assessing the needs of the wife. All his Honour did do was record that the wife had received “the sum of $1,400 by way of limited child support payments” and that the husband “had not been able to continue to meet his child support liabilities as he had indicated that he would”.
However, again, there is no ground of appeal directed to lack of adequate reasons, and thus that cannot be a basis for finding error by the trial judge. Certainly, as was the case in relation to the bank account, lack of adequate reasons was raised in the written submissions of the husband, but again, that cannot overcome the absence of a relevant ground of appeal.
Thus, the question to be asked is, has the trial judge erred by including all of the expenses of the children, and/or, by failing to have any regard for the child support assessment?
As will become apparent, the two aspects of this question are clearly related.
The wife’s response to the challenge raised by the husband is to simply say that at trial no arguments were presented by him as to the “irrelevance of the [wife’s] expenditure for the three children of the parties’ marriage”, or that the husband’s “obligation to pay spousal maintenance ought to be reduced by his liability to pay child support”.
However, that circumstance does not prevent these issues being raised on appeal. They are clearly questions of law which are exceptions to the principle referred to (Water Board v Moustakas (1988) 180 CLR 491). In any event, it would not have been unreasonable for the husband to expect the Federal Magistrate to address these issues as part of his consideration of the wife’s application, despite them not being raised specifically. Or, put another way, there would have been no basis for the husband to think that he needed to address these issues specifically before his Honour, beyond putting the necessary evidence before the court.
As to the relevance or otherwise of the expenses of the children, the tension is between the fact that the application is for spousal maintenance (and not for support for the children per se) and the requirements of s 75(2)(d) of the Act. That paragraph provides that in considering spousal maintenance the court shall take into account:
…
(d)commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii)a child or another person that the party has a duty to maintain; and
…
The difficulty is often where to draw the line, and that is evidenced in the authorities. However, the strongest statements are those made by the
Full Court in Stein & Stein (2000) FLC 93-004. There the trial judge made an order for interim spousal maintenance of $1,500 per week. The husband appealed raising one issue, namely whether the costs of supporting the parties’ children should be taken into account in assessing the wife’s needs for maintenance. The Full Court reviewed a number of authorities and then said this about the relevant legislation:
49. It seems to us that in the context of an application for spousal maintenance the consideration in s 75(2)(d) of
the commitments of each of the parties that are necessary to enable the party to support...a child...that the party has a duty to maintain
has greater significance in determining the capacity of a payer to provide support rather than in determining the extent to which the other party requires support. In a maintenance case if, for example, a husband is called upon to pay maintenance for his wife, the Court must determine his capacity to pay that maintenance having regard to his obligation to support his children. The level of support that the wife needs for herself is not dependent upon the level of support she must give to others. In a property case however, the extent to which a division of property may be seen as being appropriate might only properly be measured by examining all the demands that each spouse has to meet.
…
51. Whilst the legislation permits the Court in exercising its s 74 power to take into account only the various matters set out in s 75(2), the legislation gives little guide as to the manner in which they are to be so taken into account. The power exercised under s 74 is to make such order as the Court considers proper for the provision of maintenance of a party to a marriage. This is not to be confused with the power of the Court to make orders for the maintenance of children or step-children under the provisions of Part VII of the Act nor for the provision of child support under the Child Support (Assessment) Act.
52. There is, however, an overlap between the various sections. In order to avoid "double dipping", s 117 of the Child Support (Assessment) Act enables the Court to take into account in proceedings for a departure order:
any payments...made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent...to the carer entitled to child support...for the benefit of the child.
As already indicated, s 75(2)(na) enables the Court, in determining an application for spousal maintenance, to take into account any child support that has been provided, is being provided or might be liable to be provided in the future.
…
54. Child maintenance is to be determined having regard to the matters set out in ss 66J and 66K of the Family Law Act, whilst child support is governed generally by the provisions of the Child Support (Assessment) Act, and in respect of any application for departure from administrative assessment, by the provisions of s 117. The matters to be taken into account under both Part VII of the Family Law Act and under the relevant sections of the Child Support (Assessment) Act are not identical to matters to be given consideration in respect of claims for spousal maintenance.
Ultimately on the facts in that case the Full Court found that the trial judge erred in taking into account in determining the claim for interim spousal maintenance the cost of support of the children of the parties pursuant to
s 75(2)(d) of the Act. Their Honours were of the view (at [57]) that:
… In one sense the wife had no obligation to support the children because that obligation could be clearly met by an application for departure from administrative assessment of child support. In another sense, even if she had an obligation to maintain those children, the fact that she was meeting that obligation could not be said to be a necessary element of the amount of support she needed for herself.
It needs to be said though that in subsequent decisions this case has been distinguished on the factual basis that “the husband’s wealth [in the order of $20,000,000] meant that he would be called on to bear the entire cost of meeting the reasonable needs of the children” and thus it was clearly “erroneous” to take “into account in the context of the wife’s spousal maintenance claim the expenses of those children” (Drysdale & Drysdale [2011] FamCAFC 85 at [36]). Thus, in Drysdale, Coleman J, sitting as the
Full Court found on the facts of that case that there was no impediment to the court having regard to “commitments” of the wife that were “necessary to enable” her to support herself and a child who she had “a duty to maintain”.
In this case, although there is no such factual distinction to be drawn, it was still necessary for the trial judge to carefully consider what (if any) costs of support of the children should be taken into account in assessing the needs of the wife. His Honour though did not do this; his Honour without any express consideration, took into account all of the expenses of the children in fixing the needs of the wife, and thus he has erred.
As to the child support issue, there can be no question that his Honour has erred. The Act is clear; under s 75(2)(na) the court must take into account “any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.”
As was put by the husband in his written submissions:
31.The end result is that notwithstanding that the award of $1,462 per week is intended to cover all of the (respondent’s) and the children’s living costs, the appellant is left in a position where he is then subject to a liability for payment of spousal maintenance in the sum of $1,462 per week, and, in addition, Child Support as assessed at that time in the sum of $802 per week.
The position of the wife in relation to this issue is that his Honour did not err because the husband was not meeting his child support obligations. However, it was common ground that the husband was making some payment of child support, and, of course, not only were arrears accruing which could be the subject of enforcement proceedings, but the liability still continued.
Thus, for his Honour to not take into account at all either the liability for child support, or even the amount the husband was paying, was clearly an error.
These grounds are also made out.
Ground 5
Although the ground complains that the Federal Magistrate’s findings as to the husband’s income were contrary to the evidence, or unsupported by the evidence, no submissions were made in relation to that complaint. Instead, the husband seeks to adduce evidence of the income of the husband for the relevant period from financial statements and income tax returns prepared subsequent to the trial. Thus, if this evidence is not allowed to be adduced then this ground must fail.
The trial took place over three days, namely 13 June 2012, 4 July 2012 and
31 August 2012. Thus, his Honour did not have before him the 2011/2012 financial statements and tax returns for the husband, or for his business.
His Honour was reliant on the previous years’ financial statements and tax returns, some gross income receipts for the 2012 financial year, and the evidence of the husband, including what he deposed to in his financial statements.
Until July 2012, the husband operated a business through a family trust,
(K Padnall Family Trust), of which K Pty Ltd was the trustee. As will be explained shortly the husband then altered this structure significantly.
It is necessary to set out in full his Honour’s findings as to the husband’s income and his expenses to appreciate how his Honour reached the conclusion that he did as to the husband’s capacity to pay the amount of spousal maintenance ordered. His Honour said this:
42.I do not accept the husband’s evidence that he has had what, if true, could only be described as a catastrophic downturn in his income since separation. He has failed to convince me on the balance of probabilities that economic conditions have had a devastating effect on his business. He has also failed to convince me that his mental state was such that he was unable to apply himself to his business resulting in a devastating drop in business. Whilst he no doubt has been stressed as a result of the breakdown in his relationship with the wife, I cannot believe that a man of the husband’s capabilities and drive to succeed in his business would allow the business that he created over many years to wither and die. Economic conditions no doubt may have had an effect on the husband’s business, but not to the extent that the husband would have the Court believe. There are well known ways for businesses such as the husband’s to survive a downturn in work if it should occur. The husband’s obvious trade, project management and general managerial skills would ensure that he always had work of some kind so as to provide him with a healthy income.
43.The $35,000 that the husband had hidden in the garage suggests to me that a significant proportion of his income is by way of cash. It is a concern to me that the husband has not provided an explanation for his accumulation and hiding of this money. Without wishing to make any adverse finding against the husband on this topic, I note that it is a notorious fact that cash income is easily hidden and not disclosed for tax or any other purpose. It was incumbent on the husband to provide an explanation.
44.I have carefully considered all the evidence pertinent to the husband’s income including the numerous documents concerning bank and credit card transactions.
45.I find that the husband’s income before tax for the financial years 2008/2009 to 2010/2011 to be no less than[1] the following:
[1] I say “no less than” as the husband more probably than not fails to disclose income received as cash.
2008/2009 - $195,685.00
2009/2010 - $212,134.00
2010/2011 - $233,385.00
46.These amounts correspond with the nett profits of the husband’s company [K] Pty Ltd.
47.For the six month period 1 July 2011 to 31 December 2011 the husband’s pre-tax income was more probably than not no less than $116,619.00 and for the period 1 January 2012 to 30 June 2012 to have been no less than $145,000.00. It is more probable than not that the husband’s pre-tax income in the first half of 2012 was in excess of $5,000.00 per week. Notwithstanding this the husband said that his income since 7 April 2012 has been nil. I do not accept this evidence.
48.So far as the husband’s expenses are concerned he says in his financial statement, sworn on 5 April 2012 that his weekly income was estimated at $2,900.00 (a gross understatement in my view) and his weekly expenditure was $2,131.00 comprising the following items:
Tax - $950.00
Caravan Park Rent - $220.00
Rates - $50.00
Insurance - $80.00
Child Support - $820.00
49.He claims a further amount of $603.00 per week, being the Part N expenses, making a claim that total weekly expenses were $2,734.00.
50.Notwithstanding what the husband says is his poor financial position, other evidence shows that the husband is anything but frugal with his money. His bank account shows numerous cash withdrawals of sums of between $200.00 and $1,000.00 over the period 23 January 2012 to 28 May 2012. A further total of $3,500.00 by way of cash withdrawals from the husband’s Cheque Account occurred between 17 February 2012 and 11 June 2012.
51.The husband’s Visa Card account show that the account had a $30,000.00 limit with the balance owing as at June 2012 being $1,451.97. It also shows that between 13 February 2012 and 27 June 2012, the husband had made purchases on the card totalling $24,287.42 and had made deposits of $24,026.01. It would appear that the husband was regularly paying off his credit card. Regularly paying off the credit balance on a monthly basis does not suggest impecuniosity. The Visa account also shows that the husband’s further expenditure on clothing, restaurants and hotels for the same period was well in excess of $5,000.00.
52.The purchases that are shown on the Visa card statement are informative of the husband’s lifestyle and, in the context of this litigation, his capacity to pay the wife the spousal maintenance that she seeks.
53.Other purchases of the husband in January and February 2012 that are proven by the bank account statements lend further weight to this conclusion. That account indicates that the husband was regularly spending large sums of money at restaurants and hotels which, in a four week period, totalled $5,859.82.
54.All of these matters combine to convince me that the husband has had in 2012 an income well in excess of the amount that he alleges and corroborates my finding that his income was in excess of $5,000.00 per week.
55.I accept as true the husband’s evidence in his financial statement that he has had weekly expenditure of $2,131.00 with a weekly income of no less than $5,000.00, as I have already found, the husband has a surplus of no less than $2,869.00. He therefore clearly has the capacity to meet the spousal maintenance of $1,462.00 that I have found that the wife needs.
The further evidence sought to be adduced in the affidavit of the husband filed on 10 September 2013 comprises copies of the financial statements of K Pty Ltd, as trustee for the K Padnall Family Trust, for the 2012 financial year, the husband’s tax returns for the 2012 and 2013 financial years, and the financial statements and tax returns for the 2012 and 2013 financial years for a company called P Pty Ltd which the husband incorporated in July 2012 to take over the business.
Pausing there, before moving to the further evidence sought to be adduced in the husband’s affidavit filed on 28 February 2014, the further evidence just identified is presented to demonstrate that the husband’s income from the business in 2012 and 2013 has reduced dramatically from the income he received in the previous years.
The submissions of the counsel for the husband in support of the application to adduce this further evidence suggests that it is not sought thereby to demonstrate error by the trial judge, but rather “to enable the Full Court to make accurate findings as to the appellant’s income in the financial years ended 30 June 2012 and 30 June 2013”. That smacks of wanting this evidence to be admitted just on a re-exercise of the discretion in the event the appeal is allowed, but curiously, in his written submissions, statements are made by the husband’s counsel which do appear to indicate that the evidence should also be used “to demonstrate that the order under appeal is erroneous”. In light of this confusion, I will consider the admission of this evidence both to demonstrate error and, if error is otherwise found, on a re-exercise of the discretion. I should also indicate at this point that the application to adduce this further evidence is opposed by the wife.
Section 93A(2) of the Act provides that in an appeal the Full Court can, in its discretion, receive further evidence upon questions of fact. In CDJ v VAJ (1998) 197 CLR 172, the High Court discussed the circumstances in which an appellate court may exercise its discretion to admit further evidence. Relevantly, McHugh, Gummow and Callinan JJ said this:
109.One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.
…
111.…Nor can the availability of further evidence relevant to the issues in the appeal be treated as equivalent to a ground of appeal, proof of which prima facie entitles the appellant to a new trial. The power to admit the further evidence exists to serve the demands of justice. Ordinarily, where it is alleged that the admission of new evidence requires a new trial, justice will not be served unless the Full Court is satisfied that the further evidence would have produced a different result if it had been available at the trial. Without that condition being satisfied, it could seldom, if ever, be in the interests of justice to deprive the respondent of the benefit of the orders made by the trial judge and put that person to the expense, inconvenience and worry of a new trial.
…
113.In any event, we cannot accept that the discretion to receive further evidence is so wide that the Full Court can admit further evidence merely because it is useful. Such a criterion is inconsistent both with the nature of the appellate jurisdiction exercised by that Court and with the perceived purposes of s 93A(2).
114No doubt the Full Court will readily admit further evidence which is not in dispute and which the Court is able to evaluate and take into account in considering the appeal without the necessity to have the proceedings re-heard. Further evidence of this kind is particularly likely to be admitted where the evidence relates to events occurring after trial. In the case of undisputed evidence which the Full Court can evaluate as part of the evidence in the appeal, the discretion to admit the evidence may even be properly exercised without the Full Court considering what effect it would have had on the trial judge's decision. In that context, the likely effect of the further evidence on the Full Court's view of the evidence before the trial judge is the important consideration. Where there is no need for a new trial or extensive taking of evidence, other discretionary factors such as the availability of the evidence at the trial and the need for finality of litigation are likely to be more relevant in the exercise of the discretion than the effect that the evidence would have had at the trial.
I am not persuaded that this further evidence demonstrates that the decision by the Federal Magistrate was erroneous, and in any event I am not satisfied that it would be appropriate to admit this evidence.
The husband gave evidence of his income at trial, both in his affidavit material and in his oral evidence. Plainly, as submitted by the wife, that evidence is inconsistent with the evidence sought to be adduced. Yet, there was no suggestion by the husband at trial that the evidence of income there presented, was not accurate. Nor was there any application to adjourn the trial to enable further financial records to be produced. I also note that the husband has chosen to address this issue through an appeal rather than by an application to vary or discharge the order made, supported by the alleged change in his financial circumstances. As submitted by the wife, to raise these matters in the context of an appeal “denies the wife the ability to cross-examine on matters arising from the evidence sought to be adduced, including matters as to the compilation of the financial records and any assumptions relied on by the authors of the report, and any directions or instructions given [by the husband] to the compilation thereof.”
These concerns are said to be overcome by the fact, as alleged by the husband’s counsel during the hearing, that the financial statements and tax returns had been sent to the solicitors for the wife, and no challenge was raised as to the accuracy of the same. However, at the conclusion of the hearing it was indicated that an affidavit would be filed about that, yet none has been filed, and I cannot take that matter any further.
In any event, in the context of the husband seeking to rely on these documents to establish that he in fact received less income than what his Honour found, it is clearly open to the wife to challenge that evidence if it was admitted. One needs only to consider the findings his Honour made as to the husband’s evidence of his income. In particular, his Honour did not accept that evidence, and considered that the husband more probably than not failed to disclose income received as cash. Thus, the further evidence is plainly controversial, and as this court has said many times, that militates against the reception of such evidence to establish error by the primary judicial officer.
Given the findings made by his Honour, findings that, to repeat, are not challenged in this appeal, it cannot be maintained that this further evidence should be adduced to demonstrate error by his Honour.
Thus, I propose to dismiss the application, but I will leave for the moment whether the evidence could still be admitted on a re-exercise of discretion until I come to consider the outcome of this appeal.
I now turn to the application in an appeal filed by the husband on 28 February 2014. The evidence sought to be adduced on a reopening of the hearing by that application also bears on the issue of the income of the husband.
As was necessary, in the application the husband first sought that the hearing of the appeal be reopened for the purpose of considering the admission of the proposed further evidence. Although the application was opposed generally by the wife, at the time judgment was still reserved, and an application to reopen the hearing was an appropriate course to take to raise the issue of further evidence. Thus, I have no difficulty in reopening the hearing for this purpose.
The proposed further evidence comprises an affidavit of the husband and various documents annexed thereto. The affidavit reveals that the husband failed to disclose to the court below, whilst his Honour’s judgment was reserved, and to this court at the appeal hearing, that on 5 July 2012 a company called B Investments Pty Ltd was incorporated. This was a company set up by the husband’s father to assist the husband in avoiding additional payroll and superannuation tax in respect of the employment by him of sub-contractors. Following its incorporation the work that the husband was contracted to do was shared between P Pty Ltd and B Investments Pty Ltd.
The annexed documents included copies of the financial statements and income tax return of B Investments Pty Ltd for the 2013 financial year, and bank records for that company, and in summary related to the income of the husband for the 2013 financial year.
At the hearing of the application, although the admission of much of the affidavit was not opposed, the wife did object to the admission of all of the annexures substantially on the same bases as she objected to the further evidence sought to be adduced via the earlier application. In other words, it was argued that those documents did not demonstrate that the Federal Magistrate had erred, and in any event the evidence was controversial, and if admitted, the wife would want to challenge the same by cross-examination of the husband and of the authors of the documents. The submission was again made that the appropriate course for the husband to have taken was to make an application to vary or discharge the order of the Federal Magistrate on the basis of a change of circumstances, evidenced allegedly by this further material. In that way the wife would be able to challenge that evidence, something which she could not do if it was admitted in the appeal.
I accepted all of these arguments in relation to the evidence sought to be adduced via the earlier application, and I accept them again in relation to this evidence. Thus, I propose to dismiss the application as well, but still leaving for the moment the question of the admission of this evidence, in the event that the appeal is allowed and the discretion is to be re-exercised.
I note in passing that this further evidence renders misleading the further evidence sought to be adduced previously. That evidence included evidence as to the income of the husband in the 2013 financial year, but of course at that time the husband had not disclosed the existence of B Investments Pty Ltd and the income derived through that entity. That would clearly be a further reason to reject the admission of that evidence for any purpose.
Given that I will be dismissing these applications to adduce further evidence, this ground must fail.
Conclusion
I have found merit in Grounds 1, 2, 3 and 4, but not Ground 5, and of course Ground 6 was not pursued. Thus leave to appeal should be granted and the appeal must be allowed in part. In these circumstances there is also clearly no need to address the other limb relied on in seeking leave to appeal, namely substantial prejudice.
The next question is whether I am able to re-exercise the discretion or whether the orders should be set aside and the proceedings remitted for rehearing.
At the hearing of the appeal the husband’s counsel sought that I re-exercise the discretion, set aside his Honour’s orders and make no order for interim spousal maintenance.
Mr McQuade, on behalf of the wife, was not necessarily opposed to me re-exercising the discretion, but correctly submitted that there was no evidence before me as to the income and the expenditure of the parties as at the date I would be expected to re-determine the matter.
That of course could be overcome partially by admitting the further evidence contained in the two affidavits of the husband, but as has been emphasised that evidence is controversial, and not only would the wife want to present her own evidence, but she would want to cross-examine the husband and the authors of the documents that he seeks to present. To repeat, this Court is not set up to embark on such an exercise, and it is a task best left to a trial court. Indeed, I reiterate that this exemplifies my concern as to the husband choosing to appeal rather than make an application to vary or discharge the orders made.
I also note that once I did hear further evidence and re-exercise the discretion, if either party then suggested that an appealable error was made, the only recourse would be to make an application for special leave to appeal to the High Court of Australia, and that may be prohibitive.
Accordingly, in all the circumstances, and given the nature of the errors of the Federal Magistrate identified, I am not persuaded to re-exercise the discretion. Thus, I propose to set aside his Honour’s orders and remit the matter for rehearing. Of course, given that the proceedings have now been transferred to the Family Court of Australia, that rehearing will take place before a judge of that court.
Costs
At the conclusion of the hearing I sought submissions as to costs depending on the outcome of the application and the appeal.
In the event that the application and the appeal were successful no order for costs was sought, but both parties sought costs certificates under the Federal Proceedings (Costs) Act 1981 (Cth) for the appeal and any rehearing.
I consider that each party should bear their own costs, and given that the appeal has succeeded on a question of law it is appropriate that costs certificates issue for the appeal and the rehearing.
I certify that the preceding eighty-eight (88) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Strickland delivered on
14 August 2014.
Associate:
Date: 14 August 2014
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