Paino v Paino
[2008] NSWCA 276
•29 October 2008
NEW SOUTH WALES COURT OF APPEAL
CITATION:
Paino v Paino [2008] NSWCA 276
FILE NUMBER(S):
40007 of 2007
HEARING DATE(S):
14, 15 April 2008
JUDGMENT DATE:
29 October 2008
PARTIES:
Angela PAINO - Appellant/Cross-Respondent
Salvatore PAINO - Respondent/Cross-Appellant
JUDGMENT OF:
Hodgson JA McColl JA Young CJ in Eq
LOWER COURT JURISDICTION:
Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):
SC 5612 of 2001
LOWER COURT JUDICIAL OFFICER:
Barrett J
LOWER COURT DATE OF DECISION:
5 April 2006
LOWER COURT MEDIUM NEUTRAL CITATION:
[2006] NSWSC 218
COUNSEL:
Mr F M Douglas QC with Mr N Owens and Ms L Wilson - Appellant/Cross-Respondent
Mr P Hallen SC with Mr J J Millar - Respondent/Cross-Appellant
SOLICITORS:
Kenneally & Co - Appellant/Cross-Respondent
Meyer Pigdon - Respondent/Cross-Appellant
CATCHWORDS:
EVIDENCE – admissibility – expert evidence – valuation of property – joint expert report – whether valuation wholly or substantially based on expert’s opinion – Evidence Act 1995 s 79
EVIDENCE – proof of loss – where substantial loss proved by plaintiff but evidence does not enable precise quantification – duty of court to do its best to quantify such evidence
FAMILY LAW – de facto relationships – adjustment of property interests – contributions – whether primary judge erred in evaluative assessment of parties’ non-financial contributions – whether primary judge’s evaluative assessment outside a reasonable range – Property (Relationships) Act 1984 s 20(1)(a), s 20(1)(b)
LEGISLATION CITED:
Evidence Act 1995
Property (Relationships) Act 1984
Suitor’s Fund Act 1951
Supreme Court Act 1970
Supreme Court Rules 1970
Uniform Civill Procedures Rules 2005
CATEGORY:
Principal judgment
CASES CITED:
Adler v Australian Securities and Investments Commission; [2003] NSWCA 131
Armory v Delamirie (1722) 1 Stra 505; 93 ER 664
Australian Securities & Investments Commission (ASIC) v Rich [2005] NSWSC 149; (2005) 190 FLR 242
Blatch v Archer (1774) 1 Cowp 63
Chanter v Catts [2005] NSWCA 411; (2005) 64 NSWLR 360
Cooke v Commissioner of Taxation [2002] FCA 1315; (2002) 51 ATR 223
Fink v Fink [1946] HCA 54; (1946) 74 CLR 127
Hayes v Marquis [2008] NSWCA 10
HG v R [1999] HCA 2; (1999) 197 CLR 414
Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572.
House v R (1936) 55 CLR 499
Howlett v Neilson [2005] NSWCA 149; (2005) 33 Fam LR 402
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Jones v Grech [2001] NSWCA 208; (2001) 27 Fam LR 711
Kardos v Sarbutt [2006] NSWCA 11; (2006) 34 Fam LR 550
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Manns v Kennedy (2007) 37 Fam LR 489 500
Paino v Paino - Costs [2006] NSWSC 886
Paino v Paino [2005] NSWSC 1313
Paino v Paino [2005] NSWSC 1336
Paino v Paino [2006] NSWSC 218
Placer (Granny Smith) Pty Limited v Thiess Contractors Pty Limited [2003] HCA 10; (2003) 77 ALJR 768
Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201
State of NSW v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536
Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; (2002) 55 IPR 354
Uszok v Henley Properties (NSW) Pty Limited [2007] NSWCA 31
Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816
White v White [2004] NSWSC 208
Wilson v Vine [2003] NSWSC 341
TEXTS CITED:
DECISION:
(1) Appeal allowed.
(2) Order respondent to pay appellant's costs of the appeal to date and to have a certificate under the Suitor's Fund Act 1951 if otherwise entitled.
(3) Refer to Barrett J or another judge or associate judge of the Equity Division, determination of the amounts (A), (B) and (C) on the basis of the existing experts' reports and cross-examination of those experts.
(4) Stand over to a date to be fixed before the Court of Appeal the question of final orders and costs at first instance.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA No: 40007/07
SC No: 5612/01Hodgson JA
McColl JA
Young CJ in EqWednesday 29 October 2008
Paino v Paino
Judgment
HODGSON and McCOLL JJA: The appellant, Angela Paino, and Salvatore Paino, the respondent were in a de facto relationship from late 1988 to January 2001. Barrett J awarded the appellant $2,046,575.90 by way of adjustment pursuant to s 20 of the Property (Relationships) Act 1984 (“the Act”): Paino v Paino [2006] NSWSC 218. The appellant challenges the quantum of that order. She also complains that the primary judge wrongly rejected expert evidence of the value of properties owned by the respondent on the island of Filicudi off the coast of Sicily.
Legislative framework
Pursuant to s 20 of the Act, the primary judge had jurisdiction to make such order adjusting the interests of the parties in the property as seemed just and equitable having regard to, relevantly:
“(a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and
(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely:
(i) a child of the parties,
(ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties.”
Statement of the Case
The background can conveniently be taken from Barrett J’s reasons:
“The parties and their background
6. The plaintiff was born in Italy on 22 April 1954. She is now aged 51. She arrived in Australia with her parents at the age of 17 and, after completing her schooling, had several jobs (all of them secretarial or, in one case, ‘executive trainee’ for about six months) up to March 1981 when the defendant responded to an advertisement she had placed in a newspaper. She thereafter became the defendant’s secretary. The plaintiff has never married and has no children. Her name was originally Angela La Camera. Some time after her relationship with the defendant began, the plaintiff changed her name to Angela Paino.
7. The defendant was born in Italy on 14 June 1929. He is now 76 years old. He arrived in Australia at the age of 19. He married in 1958 but he and his wife separated in about 1967. There were two children of that marriage – a daughter Corina (born 12 May 1960) and a son Stefano, or Steven (born 2 March 1962). Fairly soon after arriving in Australia, the defendant began to invest in real estate. He started a real estate agency in about 1958 and later branched out into property development. He bought and sold many properties. Among those he bought was a site at Randwick on which the Gemini Hotel was subsequently built. That hotel has for many years been owned by the defendant (or, more precisely, by companies owned by him) and has been the headquarters of his business. He maintains his main office there. The defendant bought the vacant residential land at 106 Wolseley Road, Point Piper in about 1975. Construction of a house on that site began in about 1978. The defendant and his two children moved into that house in 1980 or 1981 and it has remained his home since then. His daughter Corina lived there until about May 1987 following her marriage in December 1986. It was also the home of his son Steven until 1992. The house is a substantial waterfront property with extensive harbour views.
8. Certain business ventures of the defendant, apart from the Gemini Hotel, should be mentioned. He (or a company he owns) is the proprietor and operator of a Mitre 10 hardware store at Randwick. He controls a company called Gemini Industries which imports and sells bathroom ware and related products. He owns a tract of vacant land at Smithfield (just outside Cairns in Queensland) part of which is the site of a palm plantation. Until relatively recently, the defendant owned a hotel/motel at Griffith. He also owns a number of properties on the island of Filicudi in the Aeolian Archipelago off the coast of Sicily. He has purchased these progressively since the early 1970’s. It was from Filicudi that the defendant came to Australia.”
It was common ground at trial that a romantic attachment between the appellant and the respondent began in 1981 or 1982 after she became his secretary, and that a sexual relationship between them existed from some time in 1982: primary judgment (at [12]). The primary judge found that the parties were in a de facto relationship from the time the appellant moved into the respondent’s Point Piper home in late 1988 until January 2001 – a relationship, for the purposes of the Act, of a little more than twelve years: primary judgment (at [47]).
The appellant was 27 when she met the respondent, who was then aged 52. She was 47 when they separated. He was 72.
Grounds of appeal
The trial took approximately three weeks. The principal hearing took place in June-July 2005. Two further days took place in December 2005 to deal with an expert evidence issue to which we will return. Substantial factual controversies were canvassed. The primary judge carefully analysed the evidence which he recorded in his judgment. It is unnecessary to set out his Honour’s factual findings in detail. The appellant has limited her appeal substantially to two grounds, one relating to the admission of an expert’s report concerning the value of land the respondent owned on the island of Filicudi, the second relating to the primary judge’s assessment of the parties’ respective s 20 contributions.
The appellant relies on the following grounds of appeal:
(a) The primary judge erred in rejecting the joint report of Messrs Natoli and Fumia concerning the value of the land on the island of Filicudi owned by the respondent.
(b) The primary judge erred in failing to grant an adjournment to the appellant for the purpose of enabling her to obtain evidence relevant to the valuation of the Filicudi properties.
(c) The primary judge erred in finding that the respondent had not failed in his duty of frank disclosure of assets in failing to disclose or give evidence of the value of the Filicudi properties.
(d) The primary judge erred in leaving the Filicudi properties out of account in the valuation of the property of the respondent.
(e) The primary judge erred in his consideration of the contributions described in s 20(1)(b) of the Act in that his Honour gave undue weight to financial contributions over intangible contributions.
(f) The primary judge erred in his consideration of the contributions described in s 20(1)(b) of the Act, in that his Honour concluded that the appellant’s intangible contributions represented only 55 per cent of such contributions.
In her written submissions the appellant also complained that the primary judge erred in failing to treat the tender of Mr Scafidi’s report by the respondent as an admission of the value of the Filicudi properties.
In short, the appellant contends that the primary judge should have:
(a) found the value of the respondent’s assets was greater than he determined (this goes to the expert evidence issue);
(b) awarded her a higher percentage of the respondent’s assets than he did (this goes to the approach the primary judge took to valuing intangible contributions).
There are other grounds relating to costs which the parties have agreed should not be argued until judgment is delivered.
Determining the parties’ s 20 contributions
It is convenient to set out the steps by which the primary judge determined the parties’ s 20 contributions as it illustrates the position of the Filicudi properties in the factual matrix.
His Honour recognised (at [50]) that in approaching the s 20 adjustment, it was necessary that he undertake a three-step process: first, identify and value the property of the parties; secondly, identify and value the respective contributions of the parties of the type referred to in s 20; and, thirdly, determine what order is just and equitable having regard to those contributions: see Howlett v Neilson [2005] NSWCA 149; (2005) 33 Fam LR 402; Chanter v Catts [2005] NSWCA 411; (2005) 64 NSWLR 360; Kardos v Sarbutt [2006] NSWCA 11; (2006) 34 Fam LR 550.
He also recognised (at [57]) that in considering the second step:
“…(that is, identification and valuation of the parties’ contributions): first, that where there is a division of roles in the relationship between homemakers and breadwinner, the intangible contributions of the first kind are in no way inferior to the material and financial contributions of the second kind; second (and as noted by Hodgson JA in Howlett v Neilson), contributions brought to the relationship at inception are relevant; so too are contributions made after separation and before trial. Third (at [36]):
‘… the court is not required to undertake a reductionist process analogous to the taking of partnership accounts by examining every alleged ‘contribution’ of the kinds described in the section with a view to putting a monetary value on each in order to reach an accounting balance one way or the other, then to be eliminated by the requisite financial adjustment; rather, the court is required to make a holistic value judgment in the exercise of a discretionary power of a very general kind [Davey v Lee (1990) 13 Fam LR 688; (1990) DFC ¶95-084 (McLelland J)].’ ”
His Honour considered (at [58]) that while the Court may have regard to contributions made before the relationship began, it could do so only in a subsidiary or contextual way, referring to Jones v Grech [2001] NSWCA 208; (2001) 27 Fam LR 711 (at [24]) per Davies AJA; (at [77] to [82]) per Ipp AJA.
In approaching the matter of the parties’ contributions, the primary judge began with some observations he considered uncontroversial (at [73]):
“ … First, the plaintiff acquired no property of consequence during the relationship. Second, there was no joint ownership or co-ownership of property by the parties at any time, although the plaintiff was given by the defendant an 8.35% shareholding interest in the company Gemini Industries Pty Ltd. Third, the plaintiff did not make any financial outlay by way of contribution to the acquisition, conservation and improvement of any of the defendant’s property or (except perhaps incidentally) to their domestic life, her case being that she made non-financial contributions to the defendant’s business and homemaker contributions. Fourth, the only skills and experience the plaintiff had when she became the defendant’s secretary were in that field, that is, stenography, typing, filing, telephone answering and basic office administration – plus proficiency in both English and Italian.
74. The plaintiff was employed as the defendant’s secretary in 1981. Payment of wages continued until late 1993 or early 1994. The defendant provided the plaintiff with accommodation and meals at the Gemini Hotel as previously described. He later took her into his home at Point Piper at no cost or expense to her and provided everything she needed, again at no cost or expense to her. He maintained her in an extremely comfortable lifestyle. The plaintiff said (and it was not disputed in cross-examination) that before the separation her own sole weekly expenses totalled $1,960, being $800 for clothes and shoes, $600 for hairdressing, toiletries and personal care and $560 for holidays. Her total weekly expenditure, as estimated by her, including household expenses, was $3,965. The defendant paid all this. Her total credit card expenditure in 1999 and 2000 (wholly met by the defendant) was $50,220.64 and $62,283.22. The defendant also took the plaintiff on overseas trips (which she described as ‘luxurious’) at least once a year between 1983 and 1999 at a cost per trip estimated by the plaintiff to be between $35,000 and $65,000. The defendant paid for all these. The defendant, according to the plaintiff, gave her gifts of a mink coat ($30,000), a watch ($20,000) and a bracelet ($18,000) and other jewellery. She has returned the watch, says the bracelet was lost and has retained the rest. The plaintiff had unlimited access to cash and credit cards provided by the defendant. The plaintiff gave the defendant some gifts but there is no evidence of their value. The funds to buy these must have come from the defendant.
75. While the plaintiff lived at Point Piper, there was usually a full-time housekeeper and a part-time gardener. Staff from the Gemini Hotel also helped with housekeeping particularly between housekeepers. Meals were often brought to the house from the hotel restaurant. The plaintiff made no financial contribution to any of this.
76. It is, however, clear (and not disputed by the defendant) that the plaintiff made non-financial contributions of the kind contemplated by the Property (Relationships) Act. There is, however, a dispute as to whether those non-financial contributions were confined to domestic and homemaker contributions or extended also to contributions related to the business and property assets and activities of the defendant.”
The respondent conceded that the appellant made contributions to his welfare and that of the domestic unit. She looked after the home, albeit in a context where housekeeping, gardening and other staff were employed: primary judgment (at [77]). In the course of setting out the evidence of these contributions, his Honour said (at [83]):
“83. I should make particular comment about another matter. Submissions made on behalf of the defendant emphasised the level of comfort to which the plaintiff was introduced by the defendant and which she enjoyed throughout the de facto relationship – with domestic staff, nurses to care for the defendant’s mother, meals delivered from the hotel and other similar facilities which, for most people, would represent luxuries. (Mr Cox, the airconditioning repairer, says he was usually let into the house by a domestic worker.) I am not persuaded that these matters deserve much weight in assessing the plaintiff’s contributions. A partner who washes up by hand in the sink and goes to the supermarket by bus does not, because of those factors, make a contribution superior to that of a partner who has a dishwasher and orders groceries online for delivery to the home. Domestic or homemaker contribution, in the sense of committed pursuit of the domestic happiness of the other party and the couple, has an intangible quality that does not lend itself to measurement by reference to the relative ease or hardship of the surrounding circumstances. The nature of the kind of homemaker contribution referred to in s.20(1)(b) was described by Cole JA in Green v Robinson (1995) 36 NSWLR 96 at p.119:
‘The concept of ‘homemaker’ or ‘making a home’ has a different and wider connotation than housekeeping or maintaining a house. It involves the creation of an emotional ambience of stability.’
84. As Clarke JA observed in Black v Black (1991) 15 Fam LR 109 at p.117, a homemaker may perform domestic services ‘but her contribution to the family unit will usually be infinitely greater than that’.”
One of the appellant’s complaints is that the primary judge’s recognition of the importance of a partner’s intangible contributions, acknowledged in these passages of his judgment, was not reflected in his award.
The appellant contended she had made non-financial but nevertheless substantial contributions to the respondent’s various businesses which fell within the terms of s 20(1)(a) of the Act.
One of the respondent’s assets was a site at Randwick on which the Gemini Hotel was subsequently built which had been owned for many years been by companies he owned. It was the headquarters of his business. He maintained his main office there. The respondent admitted that, from about March 1984, the appellant undertook work which assisted him to improve the hotel. The primary judge concluded that she performed some useful functions in relation to the Gemini Hotel business, observing that “[s]he was, after all, the defendant’s employee”. The dispute between the parties related to the extent of her contributions: primary judgment (at [91]).
The primary judge undertook a meticulous examination of the evidence about the appellant’s involvement in the Gemini Hotel which it is unnecessary to repeat: primary judgment (at [90] – [118]). He found (at [119] – [120]) that, she made some non-financial contributions to the hotel business beyond those of an employee and which were, to some extent, the product of her relationship with the respondent. He concluded her contributions were “of the same general kind as a wife might make to her husband’s business and transcended an employee’s contributions”, but also that “they were very much of an ancillary and supportive kind and, with the exception of matters of taste and decoration, of little consequence in the successful development and operation of the hotel business”. His findings related both to contributions the appellant made before the de facto relationship began in 1988 and those she made after 1988, which was when the primary judge concluded the preponderance of the contributions to the hotel business were made. The primary judge acknowledged that regard may be had to those antecedent contributions in a subsidiary or contextual way: primary judgment (at [121]).
The appellant also said she had made business contributions to the Filicudi properties, a proposition the primary judge examined (at [122] – [126]). His Honour concluded (at [126]) that:
“… from the 1970s, the defendant expended money and effort in acquiring properties and that, from 1982 to 1999, the plaintiff performed certain services upon the instructions of the defendant or within areas of discretion afforded by him to her, but always in circumstances where he was in control. In the earlier years, the services were exclusively those of an employee but, as the relationship developed, the plaintiff was allowed more initiative and freedom consistently with her being the defendant’s domestic partner. As with the Gemini Hotel matters, certain aspects pre-date the commencement of the de facto relationship.”
Next the primary judge considered the appellant’s contention that she had made business contributions to the respondent’s Mitre 10 business at Randwick. These contributions principally appear to have related to the design and layout of the premises: primary judgment (at [127]). Having considered the evidence (at [129] – [139]), the primary judge concluded (at [140]) that the appellant made negligible contributions to that business. He reached the same conclusion in relation to the appellant’s claim that she had made relevant contributions to another of the respondent’s businesses, the Gemini Hotel at Griffith: primary judgment (at [141] – [147]). The respondent controlled a company called Gemini Industries which imports and sells bathroom ware and related products. The primary judge concluded (see [148] – [152]) that the appellant’s contributions to it were isolated and negligible.
Another controversy concerned the appellant’s involvement in assisting the respondent to develop a sugar cane farm at Smithfield in Queensland as a “a resort and palm nursery”, including assisting him in litigation regarding the Smithfield land which led to him being awarded compensation of some $3.3 million following resumption of a substantial part of the land for road purposes: primary judgment (at [153] - [166]). The primary judge appears to have concluded the appellant made more than a negligible contribution in this respect. While he described her contributions to the substance of what was happening at any given time as “not of great objective value” he acknowledged “she did, however, provide personal support and assistance to the defendant throughout”: primary judgement (at [166]).
After the relationship ceased, the appellant’s “exclusively non-financial contributions produced by her personal exertion” ceased. However the respondent’s contributions continued until trial. The primary judge gave weight to the fact that the values of the Gemini Hotel, the Mitre 10 store, Gemini Industries, the palm nursery and, until 2003, the Griffith hotel had appreciated since 2001 as a result of the respondent’s endeavours to the exclusion of the appellant. This was significant because the respondent submitted that the s 20 question, as it related to property, should be answered by reference to values at the time of the end of the de facto relationship.
The primary judge also took into consideration the fact that since 2001, the respondent had made financial contributions to the appellant of $733,978.47. This included weekly payments totalling $275,100.00, made voluntarily until February 2002 and thereafter pursuant to court orders. Also, from termination of the relationship until about February 2002, he provided her with rent-free accommodation at the Gemini Hotel and the Point Piper home: primary judgment (at [168]). The respondent made the weekly payments, as well as making available to the appellant the use of a serviced car as the result of an interim agreement the parties reached pending resolution of her claim: primary judgment (at [172]).
The primary judge regarded the interim agreement as well as the appreciation in the value of the respondent’s assets since separation as a result of his endeavours as tending to support the date of separation as the date at which to value the parties’ contributions. However he concluded there was a stronger case for adherence to the generally accepted approach which has regard to values at the date of trial, although with recognition of the fact that the appellant had made no contributions since separation and that the respondent had made financial contributions to her financial upkeep since separation: primary judgment (at [173]).
The respondent also owned properties on the island of Filicudi off the coast of Sicily at both the commencement and end of the relationship. The parties did not agree at trial on the value of the Filicudi properties. The primary judge rejected the appellant’s expert evidence of their value. The respondent gave evidence of various properties and their acquisition, but did not adduce any evidence of their value. After the appellant’s expert evidence of the value of the Filicudi properties was rejected, the respondent withdrew his tender of an expert report as to the value of the Filicudi properties prepared by a Mr Scafidi.
The primary judge recognised whichever approach he adopted to the date of valuation issue, there would be a gap regarding the Filicudi properties as there was no agreed value of those properties as at either the end of the relationship or the time of trial; nor any evidence from which he could determine their value: primary judgment (at [174]).
The appellant sought to argue at trial, in the course of argument on the admissibility of the valuation evidence concerning the Filicudi properties, that the respondent had failed in the discharge of the duty of frank disclosure of assets that applies to proceedings under the Act. The primary judge rejected that submission, saying:
“176 In the course of argument on the admissibility of valuation evidence the plaintiff sought to tender, it was suggested that the defendant had, in this respect, failed in the discharge of the duty of frank disclosure of assets that applies in proceedings of this kind: White v White [2004] NSWSC 208; Wilson v Vine [2003] NSWSC 341; Parks v Thompson (1997) DFC 95-182; cf Livesey v Jenkins [1985] AC 424. But no such suggestion was ever put to the defendant in cross-examination. Nor, as I see things, can a failure of someone in the present defendant’s position to give evidence of the value of property (as distinct from its existence and ownership) amount to a failure to discharge the duty of disclosure. People can reasonably be expected to know what they own. That is in the realm of fact. They cannot reasonably be expected to know the value of each item they own (a matter of expert opinion), so if there is no agreement, the question of value must be determined by the court in the usual way, that is, by reference to evidence properly adduced and admitted. In the present case, there is no such evidence about the value of the Filicudi properties and the court can come to no concluded view about the value of them.”
Accordingly he concluded (at [177]) that he had to leave the Filicudi properties out of account in undertaking the valuation task required by s 20 of the Act. The question of the value of the Filicudi properties is one of the substantial issues which arise on appeal.
There was also a dispute about the value of the land at Smithfield. The primary judge concluded its value was $7,150,000 as at the date of hearing: primary judgment (at [194]). The appellant does not challenge that conclusion.
It was common ground that the appellant had not at any time owned any valuable property: primary judgment (at [65]). As at 1988, the respondent’s assets, subject to one matter to which we will come, had a net value of $15,123,368: primary judgment (at [66], [196]).
The primary judge found that at the time of separation the respondent’s assets were valued at $18,664,819 (at [69], [197]).
It was agreed that at the time of trial the appellant’s property was of negligible value. The respondent’s property, subject to the Filicudi properties, had a net value of $29,075,120: primary judgment (at [198]). The primary judge held (at [207]) that the respondent’s assets had increased in value by $13,951,752 from the commencement of the relationship to the date of trial.
In assessing the parties’ respective contributions, the primary judge concluded that while account had to be taken of the contributions of both the parties to the acquisition, conservation or improvement of property and financial resources, in the present case, contributions of this kind were virtually confined to the respondent: primary judgment (at [199]). He said:
“199. …He was the successful businessman who, at the commencement of the relationship, had assets (apart from the Filicudi properties) of more than $15 million, being a home valued at $6.25 million and business assets with a value of some $9 million. During the relationship, the defendant continued to operate his businesses and to expand his business interests. The capital he deployed and the personal exertion he expended in planning, managing and supervising were the dual forces that enhanced business value both before and after the commencement of the relationship. The plaintiff made no financial contribution. She can be said to have made some very minor non-financial contribution to the improvement of the Gemini Hotel business but otherwise made negligible non-financial contributions to the acquisition, conservation or improvement of the defendant’s business assets and other property. Although she interested herself in some aspects of the business, she did so in a way that really involved no more than personal support for the defendant as her domestic partner.
200. In relation to the Point Piper home, it was the defendant who provided financial inputs both before and after the commencement of the parties’ relationship. The financial contributions to the conservation and improvement of that property came from him alone. Both parties made non-financial contributions to the home life, but I do not regard the plaintiff as having contributed to the conservation and improvement of the building and contents as physical items. She did devote time and effort to matters of decoration and upkeep at times when the defendant was involved in business matters but that, in my view, is relevant under s 20(1)(b) rather than s 20(1)(a).
201. The only area in which the plaintiff made relevant contributions of any significance is that comprehended by s 20(1)(b). She made appreciable non-financial contributions to both the domestic unit constituted by the defendant and herself (and thereby to the welfare of the defendant) and directly and separately to the welfare of the defendant, including by way of providing him with personal support in matters of business. But the defendant likewise made appreciable non-financial contributions – as well as very significant financial contributions – to the domestic unit (and thereby to the welfare of the plaintiff) and directly and separately to the welfare of the plaintiff.
202. Looking at property and the s 20(1)(a) inquiry, the only element of adjustment in favour of the plaintiff I would consider to be just and equitable is a very small proportion of the increase in the value of the Gemini Hotel. Having regard to the findings at paragraphs [119] to [121] above and the fact the successful and profitable operation of the hotel business was overwhelmingly the achievement of the defendant, I would regard, say, two per cent of the accretion in value as attributable to the plaintiff’s contribution.
203. As to the homemaker and domestic (or personal welfare) aspects within s 20(1)(b), the defendant’s contributions considerably outweighed those of the plaintiff. It was his pre-existing wealth and his willingness to be generous to the point of lavishness in the expenditure of his fortune that was the main factor in the maintenance of the way of life the parties enjoyed. All s 20(1)(b) contributions of a direct financial kind came from the defendant. It was he who provided the large and well-appointed home, the extensive home comforts, the holidays and the amenities generally that the parties enjoyed in material terms. As for the intangibles of mutual support, comfort and assistance, I am of the opinion that, subject to one qualification, each party contributed to generally the same extent as the other.
204. As regards the intangibles, the plaintiff spent more time than the defendant in actually attending to domestic, household and lifestyle matters. This raises an issue that can be of significance in cases of this kind. The valuation of contributions under s.20 may take account of the cost of each contribution to the person making it. In Howlett v Neilson (above), there is, in relation to s 20(1)(b) contributions, reference at paragraph [36] of Hodgson JA’s judgment to the hypothetical example of a woman who spends ten years as a homemaker rather than in developing skills and advancing a career. The cost to the woman in terms of loss of opportunity for development of skills and advancement of a carer is then a factor to be taken into account in valuation contributions.
205. The factor I have just mentioned is relevant to the plaintiff’s case. She was, at the beginning of the relationship, someone with secretarial skills. Had she not committed herself to the relationship, she may, over the twelve year period, have undertaken education or training and, by those means or simply by experience in employment, have acquired greater and higher level skills. There is, of course, no evidence that she would or could have done so. But the potentiality is, I accept, an intangible to be taken into account in valuation.
206. In relation to s 20(1)(b) contributions, the direct financial inputs by the defendant are the predominant element. There is no ultimately reliable way of quantifying them but, given the very high quality of life the parties enjoyed and the extent of the material comforts provided by the defendant alone, I am of the opinion that the direct financial elements substantially outweighed the intangible elements of emotional support and application of time and effort in homemaking and the like. I would put the material financial elements at 75% of the total. It is to the remaining 25% that both parties contributed in the way I have described, with the plaintiff’s contribution slightly outweighing the defendant’s because of the cost factor suffered by her. That division should, I think, be regarded as 55% to the plaintiff and 45% to the defendant. In overall terms, therefore, the s 20(1)(b) contributions should be regarded as provided as to 86.25% (that is, 75% plus 45% of 25%) by the defendant and 13.75% (that is 55% of 25%) by the plaintiff.”
The primary judge accepted (at [208]) that it was just and equitable that the appellant’s “wholly non-financial contributions – being a very modest s 20(1)(a) contribution in relation to the Gemini Hotel business and more significant s 20(1)(b) contributions – be recognised by an order that transfers to her some part of that accretion in value.”
The primary judge held (at [209]) that he should award the appellant 13.75 per cent of the $13,951,752 by which the respondent’s properties had increased in value from the commencement of the relationship to the date of trial - a sum of $1,918,365.90.
The primary judge also concluded (at [210]) that the appellant should be awarded two per cent of the increase in the value of the Gemini Hotel business over the period from commencement of the relationship to the time of trial which increased her award by $128,210.
Accordingly the primary judge awarded the appellant $2,046,575.90: primary judgment (at [210]).
The primary judge considered whether there should be an interest adjustment to the aggregate award of $2,046,575.90 to take account of the fact that the trial began in June 2005 and the agreements as to value (as well as the valuations of the Smithfield land) were as at June 2005, but the trial did not end until 15 December 2005. He concluded he should not because he attributed the delay to the adjournment he gave the appellant at the end of the evidence in July 2005 to adduce evidence of the value of the Filicudi properties: primary judgment (at [211]).
At the conclusion of his judgment (at [214]) the primary judge said he would hear the parties as to the precise order that should be made to give effect to his reasons and on the question of costs. On 5 September 2006 he delivered a judgment on costs in which he ordered each party to bear his or her own costs, subject to allowances by the appellant to the respondent of sums it is unnecessary to detail: Paino v Paino - Costs [2006] NSWSC 886. The parties have agreed that the question of costs should be argued and determined after resolution of the substantive appeal.
The expert evidence issue
As we have said, the appellant wished to tender valuation evidence of the value of the Filicudi properties. She was unsuccessful. The primary judge rejected her expert evidence: see Paino v Paino [2005] NSWSC 1313 (the “first expert evidence judgment”). Thereafter the respondent did not seek to tender any evidence of the value of the Filicudi properties.
The expert evidence upon which the appellant sought to rely consisted of a report prepared over the signatures of Mr Piero Fumia, a real estate agent and Mr Aldo Natoli, a surveyor. She sought to adduce that evidence on 13 December 2005. The appellant’s counsel read an affidavit of Mr Natoli to which the report was exhibited. The report had been translated from Italian. It was described as “Counter Assessments to Valuation prepared by Geom. Angelo Scafidi covering real estate property located in the island of Filicudi in the Municipality of Lipari and relevant valuations on behalf of Mrs Angelo Paino.”
The report was expressed in first person plural. It described the Aeolian island group in which Filicudi is found, and the island itself, in some detail: The Aeolian Islands are located in the Province of Messina. The report set out town planning restrictions to which the island was subject. It identified the land the respondent owned on the island from information derived from the respondent’s valuation prepared by Mr Scafidi and information provided by the appellant, as well as searches the authors had conducted in the Real Estate Register and the Land and Building Registry in Messina. It set out a description of the plots of land the respondent owned, recording their title details, area, location, zone and the extent of the respondent’s interest. The list was extensive, taking 25 pages of the report. Next, the report listed the buildings the respondent owned derived from the same sources, described their location and the available utilities. It then undertook a critical analysis of Mr Scafidi’s report.
Finally it recorded the valuation criteria adopted both for different zones on the island, as well as for a number of different years. In the latter respect it is apparent the report was intended to deal with possible dates of valuing the parties’ contributions at the time the relationship commenced in or about 1982, at the time the appellant moved in with the respondent (1988) and then at the year of separation and each successive year up to 2005.
The report concluded that the value of the respondent’s land and buildings on Filicudi was $8,283,562.53 in 1982, $10,153,969.26 in 1988, $13,393,909.70 in 2001 and $17,438,437.87 in 2005.
After the appellant’s counsel read Mr Natoli’s affidavit the respondent’s counsel read an affidavit of Mr Scafidi which exhibited a report addressing the value of the Filicudi properties.
The appellant did not propose to lead evidence from Mr Fumia. She called Mr Natoli who gave evidence through an interpreter.
Mr P Hallen of Senior Counsel who appeared for the respondent cross-examined Mr Natoli as follows
“Q. Now, it is clear, isn’t it, from your report, Mr Natoli, that you didn’t prepare the report yourself?
A. Yes, I did prepare it myself.
Q. Well --
A. I have signed it.Q. Yes. But you see, the passages that I have referred you to refer to the report being done by you and by Mr Fumia?
A. Yes, we are together with Mr Fumia, yes.Q. So you didn’t prepare the report on your own, did you?
A. No, we both signed it.Q. What parts of the report were prepared by you?
A. There is – there is not one specific part. We worked together and we put our knowledge and expertise together to prepare the report.HALLEN: Your Honour, stopping there for a moment, I wish to make an application that the whole of the report be rejected, in the light of that evidence.”
Mr Hallen supported that submission on the basis, in substance, that as Mr Fumia was a joint author of the report, the respondent was prejudiced. He invoked s 135 of the Evidence Act 1995. He complained that the second author of the report, Mr Fumia, had not complied with Schedule K to the Supreme Court Rules 1970 as in force at the date of the report or with Schedule 7 as it now is and had not been shown to have relevant qualifications or expertise. He also submitted that the collaboration between Mr Natoli and Mr Fumia had been such that the integrity of Mr Natoli’s opinion was called into question, as it could not be said which was his and which Mr Fumia’s opinion. Mr Hallen submitted the respondent was prejudiced by his inability to know which matters were produced by which author: first expert evidence judgment (at [3]).
Mr I Harrison of Senior Counsel who appeared for the appellant at trial, submitted that the fact that there was a joint report meant that it was a report wholly subscribed to by each author, with the result that it should be regarded as representing the opinions of Mr Natoli, even though there was another author as well: first expert evidence judgment (at [4]).
The primary judge appeared to accept the thrust of the respondent’s submissions. However he decided he should give counsel for the appellant leave to examine Mr Natoli further to inform the Court as to those parts for which he had been solely responsible.
The following evidence was then given:
“HARRISON: Q. The report of 4 June attached to your affidavit of 20 July, Mr Natoli, what part of that report are you the author of?
A. In fact, I did it all myself in terms of the valuation as such. Mr Fumia elaborated to me as far as the commercial aspect of it. As far as the procedural aspects and the technical valuation, I did it all myself.
HALLEN: I ask that that answer be struck out because it is not responsive to the question. My friend asked him to identify which parts of the report he had prepared himself.
HIS HONOUR: The question needs to be for which parts was he solely responsible. Ask him that question: For which parts was he solely responsible?
WITNESS: A. Everything that concerns the valuation.
HIS HONOUR: Then ask him for which parts Mr Fumia was solely responsible?
WITNESS: A. It relates to all the information that he has collected from the various real estate sales agencies.
HIS HONOUR: Do you need to ask him anything more?
HARRISON: Q. Is that material annexed to the report or included in it?
A. You mean the material provided by Fumia?
Q. Yes.
A. No” (emphasis added)
The primary judge accepted that Mr Natoli had given evidence to the effect that he was solely responsible for the technical work of valuation which was based on data in the form of information about prices that had been assembled by Mr Fumia: first expert evidence judgment (at [10]). However he noted that the report described the methodology the authors adopted as follows:
“F. VALUATION CRITERIA
In conduction our valuation of the real estate properties we, the undersigned, adopted the empirical system, i.e. after completing the appropriate appraisals and assessments, we calculated an average of the unit prices applied in previous sales of real estate properties having the same intrinsic and extrinsic features, applying a valuation parameter expressed in square metres.”
His Honour then said:
“11 On its face, the report states that Mr Fumia, a person not shown to have relevant qualifications and expertise, participated in those activities, along with Mr Natoli. The explanation Mr Natoli has given of the division of work is not one that enables me to draw any clear line of demarcation when it comes to knowing which parts of the report are the parts for which he is solely responsible. He has done no more than describe the activities performed by him and Mr Fumia in producing what is a collaborative joint report. He has spoken only of being solely responsible for certain functions, not for particular parts of the report.
12 I am left, I think, in a position where I must accept the report at face value and conclude that both authors together followed the course that is stated at the bottom of page 53 and the top of page 54.”
Applying Stone J’s statement in Cooke v Commissioner of Taxation [2002] FCA 1315; (2002) 51 ATR 223 (at [38]) that “to be admissible, an expert opinion must be wholly or substantially based on the expert witness's specialised knowledge” and that “[t]his requirement clearly cannot be met if it is partly based on the knowledge or opinion of someone else”, he held that he could not but conclude that the report was based upon the knowledge of Mr Fumia, in addition to being based on the knowledge of Mr Natoli. As he could not conclude that the report was based “wholly” or even “substantially” on Mr Natoli’s knowledge he rejected it: first expert evidence judgment (at [15] - [16]).
The appellant then sought an adjournment of several months to “make a second attempt at repairing her valuation evidence”. His Honour had already granted the appellant an adjournment in July 2005 at the conclusion of the evidence and after counsel had made submissions on all matters except the Filicudi valuation issue. The respondent opposed the application on the basis, which the primary judge accepted, that he would be prejudiced having regard to the passage of time since the proceedings were commenced in 2001 and that evidence which had already been adduced would become out-of-date and have to be updated causing additional costs which the appellant was in no position to meet. The application was refused.
The proceedings were stood over to the next day for questions of costs to be argued. On that day the appellant indicated that she wished to rely on a new valuation report prepared the previous night by Mr Natoli alone. The respondent opposed that course. The application was refused: Paino v Paino [2005] NSWSC 1336 (the “second expert evidence judgment”). The primary judge again concluded that the amended report was not “wholly or substantially” based on Mr Natoli’s specialised knowledge as required by s 79 of the Evidence Act: second expert evidence judgment (at [27]). He also said (at [27]) that even if the report were admissible, it would, as a matter of discretion, be excluded under s 135 of the Evidence Act. The appellant does not now complain about the exclusion of the second version of Mr Natoli’s report.
Consideration: expert evidence issue
Section 76(1) of the Evidence Act provides that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. However s 76 does not apply to evidence falling within the exception in s 79 which provides:
“79 Exception: opinions based on specialised knowledge
If a person has specialised knowledge based on the person’s training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge. ”
In his seminal exegesis on expert evidence in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705, Heydon JA, as his Honour then was, summarised the principles applicable to permit expert evidence to be admitted as follows:
“85. In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of ‘specialised knowledge’; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be ‘wholly or substantially based on the witness’s expert knowledge’; so far as the opinion is based on facts ‘observed’ by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on ‘assumed’ or ‘accepted’ facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert’s evidence must explain how the field of ‘specialised knowledge’ in which the witness is expert by reason of ‘training, study or experience’, and on which the opinion is ‘wholly or substantially based’, applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ’s characterisation of the evidence in HG v R (1999) 197 CLR 414, on ‘a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise’ (at [41]).”
In HG v R [1999] HCA 2; (1999) 197 CLR 414 Gleeson CJ observed (at [39]) that:
“… the provisions of s 79 will often have the practical effect of emphasising the need for attention to requirements of form. By directing attention to whether an opinion is wholly or substantially based on specialised knowledge based on training, study or experience, the section requires that the opinion is presented in a form which makes it possible to answer that question.”
Thus Gleeson CJ said (at [40]) it is necessary for an expert opinion to differentiate between the assumed facts upon which the opinion is based, and the opinion in question. As is apparent, it is also important, as his Honour observed (at [44]) that the opinions of expert witnesses be confined, in accordance with s 79, to opinions which are wholly or substantially based on their specialised knowledge.
Heydon JA’s summary of the conditions of admissibility of an expert report was considered in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; (2002) 55 IPR 354 (Branson, Weinberg and Dowsett JJ). Branson J (at [7]) observed that his Honour’s approach reflected “a counsel of perfection” and that reading his Honour's reasons as a whole revealed he recognised “that in the context of an actual trial, the issue of the admissibility of evidence tendered as expert opinion evidence may not be able to be addressed in the way outlined”. Dealing with s 79, her Honour said (at [14]) that the test of admissibility is whether the court is satisfied on the balance of probabilities that the opinion is based wholly or substantially on that knowledge, referring to s 142 of the Evidence Act.
Weinberg and Dowsett JJ also analysed Heydon JA’s summary. Dealing with his Honour’s expression “strictly speaking”, they observed:
“[87] The use of the phrase "strictly speaking" … should not be overlooked. It may well be correct to say that such evidence is not strictly admissible unless it is shown to have all of the qualities discussed by Heydon JA. However many of those qualities involve questions of degree, requiring the exercise of judgment. For this reason it would be very rare indeed for a court at first instance to reach a decision as to whether tendered expert evidence satisfied all of his Honour's requirements before receiving it as evidence in the proceedings. More commonly, once the witness's claim to expertise is made out and the relevance and admissibility of opinion evidence demonstrated, such evidence is received. The various qualities described by Heydon JA are then assessed in the course of determining the weight to be given to the evidence. There will be cases in which it would be technically correct to rule, at the end of the trial, that the evidence in question was not admissible because it lacked one or other of those qualities, but there would be little utility in so doing. It would probably lead to further difficulties in the appellate process.”
Giles JA (with whom Mason P and Beazley JA agreed) approved the Full Federal Court’s analysis of Makita in Adler v Australian Securities and Investments Commission [2003] NSWCA 131 saying:
“631. Whether an opinion has been shown to be based on the specialised knowledge is a question of fact, and s 79 provides that it is sufficient that it is substantially based on that knowledge. What is required by way of the explanation of which Heydon JA spoke in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 at [85] will depend on the circumstances. The disconformity in HG v The Queen [1999] HCA 2; (1999) 197 CLR 414 to which his Honour referred was gross, in that the psychologist's evidence went to when the complainant was abused and who abused her, outside a psychologist's expertise and based on matters other than a psychologist's expertise. Other circumstances will be quite different. And, as was said in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157, absolute certainty that the opinion is based on the specialised knowledge is not required (at [14]) and many of the stated qualities of the opinion evidence by Heydon JA `involve questions of degree, requiring the exercise of judgment’ (at [87]).” (emphasis added)
It is inherent in the process of preparing many expert reports that the factual basis for the opinion expressed is derived from third-party information. Courts emphasise the necessity that the factual bases of opinions be clearly laid out so that the opinion can be tested. An expert is rarely the source of all the factual information in his or her report. It may be garnered from a party (the typical illustration being a medical report), from empirical investigations (engineering reports for example) or, in the case of valuations, from data relating to the properties about whose value an opinion is to be expressed.
Consistent with that reality, it is accepted that an expert need not amass all the factual data on which an opinion is to be expressed. The task can be delegated to another. As Austin J said in Australian Securities & Investments Commission (ASIC) v Rich [2005] NSWSC 149; (2005) 190 FLR 242 (at [329]):
“…There is nothing in the law to prevent such delegation from occurring. But it is necessary for the expert who is the author of a report to apply his or her mind to the analysis and reasoning processes that his or her subordinates have developed, so that when the report is finalised, the whole of the reasoning and conclusions that it contains have been adopted as the expert's own reasoning and conclusions. Were that not the case, the expert could not claim to be the author of the report.”
On its face, we accept the expert report purported to be jointly authored by Messrs Natoli and Fumia. As we have said, the report was expressed in the first person plural and the respondent drew attention to a number of passages in it so expressed. The methodology statement also appeared to indicate the authors were jointly responsible for the opinions expressed. However when Mr Natoli was called the passages from his evidence we have set out made it clear, in our opinion, that the valuation opinions were his and were based on the factual information collected by Mr Fumia.
The question whether the report was based wholly or substantially on Mr Natoli’s knowledge was to be determined on the balance of probabilities: s 142, Evidence Act. The primary judge, with respect, did not apply that test. He did not consider the issue of substantiality. Rather he concluded he could not be satisfied which parts of the report were Mr Natoli’s. In our view, when one has regard to the report, the distinction between the factual components and those expressed as opinion of valuations is apparent.
In our view the primary judge erred in rejecting the expert’s report.
If we are incorrect in that view we would also observe that the fact there was no evidence of the value of the properties did not mean the primary judge had to exclude them when considering the parties’ contributions. The expert report described extensive property holdings on an island clearly located in a popular tourist destination.
The respondent gave evidence in his affidavit of his land acquisitions on Filicudi. Further, we do not understand the factual basis of the opinion expressed in the expert report to have been challenged. In our opinion, in such circumstances it was open to the primary judge to conclude that the properties had a value which he had to do his best to determine. In reaching this conclusion we have had regard to the obligation of parties to claims for financial provision and property adjustment to make full and frank disclosure of all relevant financial circumstances: White v White [2004] NSWSC 208; Wilson v Vine [2003] NSWSC 341 (at [36] – [37]) per Macready M (as he then was); Hayes v Marquis [2008] NSWCA 10 (at [129]) per McColl JA.
The primary judge considered this argument (at [175]) but rejected it, saying:
“…Nor, as I see things, can a failure of someone in the present defendant’s position to give evidence of the value of property (as distinct from its existence and ownership) amount to a failure to discharge the duty of disclosure. People can reasonably be expected to know what they own. That is in the realm of fact. They cannot reasonably be expected to know the value of each item they own (a matter of expert opinion), so if there is no agreement, the question of value must be determined by the court in the usual way, that is, by reference to evidence properly adduced and admitted. In the present case, there is no such evidence about the value of the Filicudi properties and the court can come to no concluded view about the value of them.”
However, in our view, it is necessary to bear in mind the principle that “evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted” (Blatch v Archer (1774) 1 Cowp 63 (at 65); 98 ER 969 (at 970) per Lord Mansfield) which is applied where one party fails to call evidence which it could have called: Armory v Delamirie (1722) 1 Stra 505; 93 ER 664; Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298; Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572.
The Court is required to make findings as to the property of the parties and the value of that property. The Filicudi properties were plainly of substantial value, and to value them at zero or otherwise to disregard them would certainly not give a result that was correct.
There is a general principle in relation to damages that where a plaintiff has proved substantial loss but the evidence does not enable precise quantification of it, the court should “do its best”: Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 (at 143); State of NSW v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536 (at [72]); Uszok v Henley Properties (NSW) Pty Limited [2007] NSWCA 31 (at [135]-[141]).
However, in Placer (Granny Smith) Pty Limited v Thiess Contractors Pty Limited [2003] HCA 10; (2003) 77 ALJR 768 Hayne J said this:
“[37]Placer undoubtedly bore the burden of proving not only that it had suffered damage as a result of Thiess Contractors' breach of contract, but also the amount of the loss it had sustained. It goes without saying that it had to prove these matters on the balance of probabilities and with as much precision as the subject matter reasonably permitted.
[38]It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind. This case did not invite attention to such questions. Placer sought to calculate its damages precisely.”
In the present case, on the assumption that the valuation evidence was correctly excluded, it could be said that the appellant had not produced evidence of value although she could have done so; and so the approach that the Court should “do its best” has no application. However, although it is true that the appellant, seeking an adjustment in her favour, had the ultimate onus of proof, in our opinion there were further factors which would have justified the Court in arriving at a figure for these properties that had a reasonable chance of approximating a correct result, rather than adopting a zero figure which was certainly wrong.
We have already referred to the obligation on parties in cases such as this to be frank and to disclose their property; and although this obligation does not mean that parties must go to the expense of having a valuation made, it does mean that they should provide to the Court evidence of prices paid and obtained for properties acquired and sold.
In this case, there was annexed to the valuation provided by the appellant and rejected by the primary judge substantial material, including copies and translations of official records, describing the properties and giving various sale and purchase prices; and although the appellant’s counsel did not seek to tender that material separately, in our opinion the primary judge, before removing from evidence the whole of the valuation report (which had previously been admitted into evidence), should have considered whether that material should have been left in evidence.
Another factor supporting the “do its best” approach in this case is that the appellant had, obviously at great expense, sought to provide evidence of value; while the respondent had tendered its own evidence of value and then withdrawn it.
For those reasons, in our opinion, this was a case where the Court should have done its best. In doing so, it could have had regard to the circumstance that the Filicudi properties were of very substantial interest, including interest as a matter of business, to a person dealing with other assets worth in the order of $20 million, to which that person devoted substantial time, effort and attention. The properties comprise extensive land on a Mediterranean island, and were obviously increasing in value having regard to the notorious expansion of tourism in that area.
Accordingly, in our opinion, even without the valuation, the primary judge should have found that the Filicudi properties were worth at least some hundreds of thousands of dollars, and increased in value during cohabitation by at least some hundreds of thousands of dollars. A reasonable assessment would have been $1 million at the commencement of cohabitation and $2 million at the end of cohabitation.
Other matters
For reasons we have given, the appeal should be allowed, and there will need to be a hearing in which the value of the Filicudi properties at material times is assessed. It will of course not be possible to make a final determination of the amount to be paid by the respondent to the appellant until this has happened.
In our view, rather than simply remit the matter for determination of values, this Court should in this judgment address other questions arising on the appeal, and proceed as far as it can towards a final resolution of the dispute.
As noted earlier, the appellant challenges the approach taken by the primary judge in valuing the contributions of the parties, and we will now address that question.
There is no single way to value the contributions of parties to a relationship such as this, or to determine what is just and equitable having regard to those contributions. However, the ultimate judgment must be to the effect that, having regard to the totality of the contributions of the party seeking an adjustment and the totality of the contributions of the other party, the existing distribution of property does not seem just and equitable and some other specified adjustment does seem just and equitable.
Although there is no single correct way of undertaking this process, the reasoning applied in particular cases may disclose error. In our opinion, the reasoning of the primary judge in this case does disclose error.
In pars [200]-[206] of his judgment, set out above, the primary judge dealt separately with the contributions of the parties within s 20(1)(a) of the Act, and those within s 20(1)(b). We accept that it is appropriate to deal separately with capital assets brought to the relationship; but as regards financial contribution during the relationship, while the primary judge’s approach could not itself be considered an error, such an approach can cause difficulties: in this as in many cases, a contribution to the welfare of a party engaged in asset-producing activities is apt to enable that party better to carry out those activities, and thus is an indirect contribution to the acquisition, conservation or improvement of property within par (a), as well as being a par (b) contribution.
There are in our opinion errors in the primary judge’s assessment of the appellant’s par (b) contribution as being 13.75 per cent of the total. He arrived at this figure by treating the respondent’s material financial contributions as constituting 75 per cent of the total contributions of both parties to the welfare of the parties, and assessing the appellant’s contribution at 55 per cent of the remaining 25 per cent.
Undoubtedly, the financial contributions of the respondent to the welfare of the parties were very substantial indeed, both by way of his initial contributions and also his very substantial earnings over the years of cohabitation; and we accept that the benefit of the non-financial contributions of each party to the welfare of the other party can be considered as substantially equal. We accept also that the primary judge did give weight to the cost of the appellant’s contribution in terms of lost opportunities; but in our view, he did not give this enough weight, particularly in circumstances where, in par [205] of his judgment, he expressed this only in terms of lost opportunities to develop skills.
However, in our opinion the allocation of 75 per cent of the total of par (b) contributions to financial contributions, and only 25 per cent to non-financial contributions, was outside a reasonable assessment; this allocation was supported by the primary judge only by an assertion that the financial elements “substantial outweighed” the intangible elements.
In our opinion, such an approach inevitably undervalues the non-financial contributions of a woman engaged in home-making, and indicates error. In our opinion, a reasonable approach would treat the contributions under pars (a) and (b) together (other than by way of capital assets brought to the relationship) of two reasonable people acting reasonably towards each other as prima facie equal, and then adjust this by reference to particular considerations. Here, the very large disparity of assets brought to the relationship and the very large earnings of the respondent during cohabitation would, considered alone, justify a very substantial adjustment in favour of the respondent; but the loss to the appellant through her contribution to the welfare of the respondent throughout very significant years of her life (from age 27 to age 46, 12 or 13 of those years being during actual cohabitation) and her consequent loss of opportunity to develop a career or a permanent relationship or to have children, would justify a very substantial adjustment in her favour. In the result, in our opinion, the contributions should be regarded as approximately equal.
Having made what we believe to be an error in favour of the respondent in reaching the figure of 13.75 per cent, in our opinion, the primary judge then made errors in favour of the appellant by applying this proportion to the whole of the increase in value of assets from the commencement of the cohabitation to the hearing, and also by not deducting amounts paid to the appellant between separation and the hearing.
There was, in our opinion, error in three respects:
(1)Where the primary judge has treated par (a) contributions and par (b) contributions separately, and treated the appellant’s par (a) contributions as limited to 2 per cent in relation to one asset (and thus as being something much less than 2 per cent in relation to all of the assets of the parties), to apply 13.75 per cent to the whole increase in value of the assets leaves out of account the respondent’s near 100 per cent par (a) contributions.
(2)Where the increase in value of assets during cohabitation was about $3.5 million, and the increase in value after separation was about $10.5 million, there would need to be justification given for applying 13.75 per cent directly to the latter figure as well as the former figure, rather than (say) giving interest on the result of applying 13.75 per cent to the former figure (particularly where the increase since separation was due primarily to increases in the value of assets brought by the respondent to the relationship including the Point Piper home).
(3)The primary judge did not make any allowance for payments made by the respondent to the appellant since separation, amounting to $290,440 (apart from advances for legal, accounting and valuation expenses).
The combined effect of the error in favour of the respondent in arriving at the 13.75 per cent figure, and the errors in favour of the appellant, is that the primary judge reached a figure that could not be considered unreasonable, leaving out of account the Filicudi properties. However, since there will need to be a recalculation to incorporate the Filicudi properties, it is appropriate that we indicate what we consider the best approach to the determination of what is just and equitable, and indicate also how figures for the Filicudi properties should be incorporated into this assessment.
In giving figures, we have adopted the acceptance by the parties that it is appropriate to deduct realisation costs from values, although as a general principle we do not see why this should be done except in relation to assets that need to be sold in order to finance a payment from one party to another.
Leaving aside the Filicudi properties, we would assess what is just and equitable as follows:
(1)Assets as at hearing: $40,496,000 less $11,420,880, giving $29,750,120.
(2)Contributions during cohabitation substantially equal.
(3)Assets as at commencement of cohabitation: $15,123,368.
(4)Assets at termination: $18,664,819. Increase: $3,541,451.
These figures suggest an adjustment in favour of the appellant as at separation of $1,770,725 or about 9.5 per cent of the total. There are factors that might suggest the adjustment should be less than this. In particular, the calculation has not allowed for increases in the value of assets introduced by the respondent, even for an inflation (CPI) adjustment. However, in the context of this relationship, fully described by the primary judge, we think an adjustment in favour of the appellant resulting in her having 9.5 per cent of the total and the respondent having 90.5 per cent of the total is just and equitable. To some extent, this is because the appellant has devoted 19 years of her life (12 or 13 years during cohabitation) to the relationship; and although there is here a danger of double counting (we have already taken this into account in finding the contributions approximately equal), in our opinion this would be a fair result.
One approach then would be to add interest to $1,771,255; but we think the better course would be to apply 9.5 per cent to the assets at the date of the hearing, giving $2,826,261. From this we would deduct payments since separation ($290,440) to arrive at $2,535,821. This figure is greater than that arrived at by the primary judge, but not very much greater.
However, the ultimate order in favour of the appellant will be greater again, by reason of the Filicudi properties. On the basis of the assessments made without the benefit of the rejected valuation, the increase would be of the order of $500,000.
However, the valuation submitted by the appellant, which in our opinion should have been admitted into evidence, supports valuations of the Filicudi properties, and quantification of improvements in the value of those properties, substantially greater than this. Such valuations suggest that the Filicudi land was worth about $10 million at the commencement of cohabitation, increased by about $3 million during cohabitation, and increased by a further $4 million between the time of separation and the hearing.
103 In our opinion, the appropriate course now is to refer to Barrett J or another judge or associate judge of the Equity Division the task of determining the value of the Filicudi properties at the commencement of cohabitation (A), at the date of separation (B), and at the date of the hearing (C). In accordance with the approach set out above, in our view those figures could then be applied to the formula set out below, so that the final figure could be reached by a simple calculation. For this purpose the matter would be referred back to the Court of Appeal after the valuation exercise has been completed, which could then make a final assessment as to whether the figure thus arrived at is just and equitable, or whether it needs some further adjustment. The Court would then determine the outstanding question of costs at first instance.
The formula we would propose is as follows:
(1)Total assets at commencement: $15,123,368 plus (A) = (D)
(2)Total assets at separation: $18,664,819 plus (B) = (E)
(3)Total assets at hearing: $29,750,120 plus (C) = (F)
(4)Increase during cohabitation = (E) minus (D)
(5)Half of the increase expressed as an approximate percentage of (E) = (G) per cent
(6)Adjustment is then (G) per cent of (F)
(7)Amount of order is (F) minus $290,440
(8)Then interest at Supreme Court rates is added from 14 December 2005.
If that formula were applied on the basis that (A) = $10 million, (B) = $13 million and (C) = $17 million, it would give the following result:
(1) $25,123,368
(2) $31,664,819
(3) $46,750,120
(4) $6,541,451
(5) 10.33 per cent
(6) $4,829,287
(7) $4,538,847
That is, it would increase the order as at 14 December 2005 by about $2 million.
If the formula were applied on the basis that the values were one half those figures (that (A) = $5 million, (B) = $6.5 million and (C) = $8.5 million), it would give the following result:
(1) $20,123,368
(2) $25,164,819
(3) $38,250,120
(4) $5,041,451
(5) 10.02 per cent
(6) $3,832,662
(7) $3,542,222
That is, it would increase the order as at 14 December 2005 by about $1 million.
In our opinion, on the assumed figures in each case, the result would be just and equitable. It may be that the parties can reach agreement on the Filicudi values, and avoid further costly litigation.
Since writing the above, we have read the judgment of Young CJ in Eq.
In relation to the matter of assessment of the contributions of the parties to the property and welfare of the parties, we acknowledge that this is an evaluative judgment; but if an appeal court, giving weight to the view of the primary judge and recognising its own fallibility, nevertheless concludes that the assessment of the primary judge is outside a reasonable range, it can and should intervene. In our view, the primary judge’s assessment that the appellant’s contribution to the welfare of the parties was 13.75 per cent as compared with the respondent’s 86.25 per cent was outside a reasonable range.
As regards the procedure to be adopted, under s 75A(6) of the Supreme Court Act 1970, the Court has the powers of the court from which the appeal is brought, which include the power to order the making of any enquiry: UCPR 46.3. The difficulties pointed out by Young CJ in Eq from retaining the appeal as open arise equally from the alternative procedure that he proposes.
Orders
We propose the following orders:
(1)Appeal allowed.
(2)Order respondent to pay appellant’s costs of the appeal to date and to have a certificate under the Suitor’s Fund Act 1951 if otherwise entitled.
(3)Refer to Barrett J or another judge or associate judge of the Equity Division, determination of the amounts (A), (B) and (C) on the basis of the existing experts’ reports and cross-examination of those experts.
(4)Stand over to a date to be fixed before the Court of Appeal the question of final orders and costs at first instance.
YOUNG CJ in EQ: There are two aspects to this appeal: (1) the matter of the valuation of the Filicudi land; and (2) the assessment of the relative contributions of the parties to their property.
I respectfully agree with what my learned colleagues have said in [1]-[83] above with respect to the Filicudi land valuation.
I have every sympathy with the learned primary judge who acted in circumstances where the case before him had been burdened with great and unacceptable delay. He was probably correct in refusing a further adjournment. However, he was in error in not considering the material that was before him of valuation of the Filicudi land and doing the best he could with it rather than valuing the Filicudi land at nil value.
Regrettably, I cannot bring myself to agree with much of the balance of the reasons of my colleagues.
In my view, apart from the Filicudi land valuation, the learned primary judge did not commit appealable error.
As my colleagues’ majority view will prevail, there is no great value in me setting out my reasons in great detail, but I trust the following will be a sufficient statement of my view.
As was submitted by Mr P Hallen SC for the respondent, the judge’s determination of the aspects of the appeal other than the Filicudi land valuation was an evaluative determination.
When hearing an appeal against an evaluative determination, as Campbell JA (with whom Santow JA and Bryson AJA agreed) said in Manns v Kennedy (2007) 37 Fam LR 489 500 [70], it must be remembered that the court is considering the exercise of a judicial discretion.
Thus, in accordance with House v R (1936) 55 CLR 499 at 504-5, the court must find some error in the primary judge’s exercise of discretion and not merely substitute its own views because it considers them superior.
My colleagues appear to consider (vide [93]) that the primary judge made two significant errors: (a) in not applying the reasonable view that prima facie financial and non-financial contributions should be viewed equally; and (b) in undervaluing the appellant’s non-financial contribution in view of her loss of opportunity to: (i) develop a career; (ii) form a permanent relationship; or (iii) have children.
It must be remembered that human relationships are infinitely various and that the statute does not require judges to apply predetermined formulae in making the assessment that they are required to make under s 20 of the Property (Relationships) Act 1984 as to what is the proper adjustment of their interests as is just and equitable.
Whilst it may be a reasonable approach in this case and other cases to treat financial and non-financial contributions of ordinary couples as prima facie equal, it is not necessarily the only approach that might be taken by a trial judge in his or her discretion when considering the evidence from a trial that lasted for weeks. Error is not demonstrated merely because the judge does not take a particular “reasonable” approach that might have been open to him or her.
As to whether a substantial adjustment must be made for a female person because of the matters noted as (i)-(ii) in the third paragraph before this one, it has to be remembered that the statute under which this application was made is not one for compensation suffered by a party to a relationship. What the statute requires is the ascertainment of the property interests of the parties, the ascertainment of the contributions each made with respect to that property and a just and equitable adjustment.
Accordingly, one does not assess a contribution by what it cost the contributor. Rather one has to ask how what each party contributed in a financial or non-financial way to the property.
It is not infrequent in this type of case for counsel for a female party to cite the words of Gaudron J in Singer v Berghouse (1994) 181 CLR 201 at 228 regretting the way that courts often undervalue the real worth of a female person’s relationship to a testator. That statement was made in the context of a statute that asked the court to determine what was a proper benefaction for a deserving woman in the light of what she had done and sacrificed for the testator, not one which required focus on the assets acquired and the contributions of the parties to their acquisition or retention.
There are dicta in Howlett v Neilson (2005) 33 Fam LR 402 at 410 [33] made after an acknowledgment that the court is not authorised to make orders by reason of lost opportunities of a party to the relationship, that it is open to a court to value a woman’s non-financial contribution in terms of what it cost her in terms of lost opportunities.
I must confess I find it difficult to be convinced by these dicta. However, that is irrelevant in the instant case as the learned primary judge actually considered this factor in [204]-[205] of his reasons.
I am comforted in my view that there was no error in the primary judge’s assessment in the light of the finding by my colleagues in [100] that after their reassessment including counter balancing errors benefiting the male partner, they arrive at a figure only slightly higher than that reached by the primary judge’s analysis.
However, even if I agreed with the majority on the second point in the appeal, I would not have considered that the proposed order was appropriate.
It is clear that this court has a wide choice as to what orders to make on hearing of an appeal, see Uniform Civil Procedure Rules 2005 Pt 51 r 52 and Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816 at 1846.
However, the orders favoured by the majority would seem to retain the appeal as open so that this court is not functus, yet at the same time remit the matter to the Equity Division. This may cause problems both if there is a delay in the further hearing and some members of this bench retire before the determination of the value of the Filicudi land is made and there may also be problems as to the proper method of reviewing that determination if one of the parties wish to challenge it.
In my view, the appropriate procedure is just to adjourn the further hearing of the appeal until one of two events occur. The first is that the parties have been able to determine the valuation of the Filicudi land by agreement or informally. The second is that, failing agreement or informal determination, this court should refer the matter to an Associate Judge under Schedule D to the Supreme Court Rules 1970 to determine the valuation of the Filicudi land and then dispose of the appeal.
It must also not be forgotten that in due course, we will have to deal with costs.
**********
LAST UPDATED:
30 October 2008
178
31
6