Petrellis & Petrellis
[2023] FedCFamC1A 104
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Petrellis & Petrellis [2023] FedCFamC1A 104
Appeal from: Petrellis & Petrellis [2022] FedCFamC2F 1375 Appeal number(s): NAA 253 of 2022 File number(s): SYC 4713 of 2021 Judgment of: MCCLELLAND DCJ Date of judgment: 30 June 2023 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Whether the primary judge erred in adopting a two pool approach to the adjustment of the parties’ property in treating the parties’ superannuation as separate to the remaining assets – Where both parties advanced a one pool approach – Inadequate reasons for departing from a one pool approach – Appeal allowed – Re-exercise of discretion – Consideration of contributions and future needs – Finding of 65 per cent adjustment in favour of the appellant as just and equitable – 65 per cent to the appellant and 35 per cent to the respondent adjustment to apply to the totality of the parties’ property, including superannuation – Written submissions as to costs. Legislation: Child Support (Assessment) Act 1989 (Cth)
Family Law Act 1975 (Cth) ss 75, 79
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 35(b), 36
Federal Proceedings (Costs) Act 1981 (Cth)
Cases cited: Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40
Anson and Meek (2017) FLC 93-816; [2017] FamCAFC 257
Arcand & Boen (2021) FLC 94-046; [2021] FamCAFC 155
Bachman & Self [2023] FedCFamC1A 50
Barnell & Barnell (2020) FLC 93-961; [2020] FamCAFC 102
Beck and Beck (No 2) (1983) FLC 91-318; [1983] FamCA 7
Best and Best (1993) FLC 92-418; [1993] FamCA 107
Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49
Cabbell & Cabbell [2009] FamCAFC 205
Calder & Calder (2016) FLC 93-691; [2016] FamCAFC 36
Candle & Falkner (2021) FLC 94-069; [2021] FedCFamC1A 102
Casper & Casper [2009] FamCA 989
Chan & Chih [2020] FamCAFC 31
Chan & Lee (2022) 66 Fam LR 75; [2022] FedCFamC1A 85
Clauson and Clauson (1995) FLC 92-595; [1995] FamCA 10
Coghlan and Coghlan (2005) FLC 93-220; [2005] FamCA 429
Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154
Douglas and Douglas (2006) FLC 93-300; [2006] FamCA 1291
Hickey and Hickey and Attorney-General (Cth) (2003) FLC 93-143; [2003] FamCA 395
Horrigan & Horrigan [2020] FamCAFC 25
Hurst & Hurst (2018) FLC 93-851; [2018] FamCAFC 146
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
Lenehan and Lenehan (1987) FLC 91-814; [1987] FamCA 8
Lindfield & Romano (2022) 65 Fam LR 233; [2022] FedCFamC1A 81
Lovine & Connor (2012) FLC 93-515; [2012] FamCAFC 168
Mickelberg v The Queen (1989) 167 CLR 259; [1989] HCA 35
Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421; [2019] HCA 3
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Partington & Cade (No 2) (2009) FLC 93-422; [2009] FamCAFC 230
Petruski & Balewa (2013) 49 Fam LR 116; [2013] FamCAFC 15
Pierce & Pierce (1999) FLC 92-844; [1998] FamCA 74
Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110
Simpson & Brockmann (2010) 43 Fam LR 32; [2010] FamCAFC 37
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Stead v State Government Insurance Commission (1986) 161 CLR 141; [1986] HCA 54
Tomasetti and Tomasetti (2000) FLC 93–023; [2000] FamCA 314
Trebiano and Trebiano [2019] FamCAFC 16
Trevi & Trevi (Re-Exercise) [2019] FamCAFC 51
Whiton & Dagne (2019) FLC 93-923; [2019] FamCAFC 192
Zao & Lee [2019] FamCAFC 169
Number of paragraphs: 132 Date of hearing: 24 April 2023 Place: Sydney Counsel for the Appellant: Mr Richardson SC Solicitor for the Appellant: Farrar Gesini Dunn Counsel for the Respondent: Mr Kearney SC Solicitor for the Respondent: Blanchfield Nicholls ORDERS
NAA 253 of 2022
SYC 4713 of 2021FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS PETRELLIS
Appellant
AND: MR PETRELLIS
Respondent
order made by:
MCCLELLAND DCJ
DATE OF ORDER:
30 June 2023
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.Order 3.4 made by the primary judge on 28 October 2022 be set aside.
3.In lieu of Order 3.4 made on 28 October 2022, the Court makes the following order:
In payment of the balance in such proportions as to effect an overall settlement of 65 per cent of the net property pool, including superannuation, as set out annexure “A” in favour of the appellant and 35 per cent in favour of the respondent.
4.Within 14 days of the date of these orders, the parties are to file written submissions of no more than five (5) pages in respect to the issue of costs.
5.Within 21 days of the date of these orders the parties may, if they wish, file submissions in reply to the issue of costs of no more than two (2) pages.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Petrellis & Petrellis has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
MCCLELLAND DCJ:
INTRODUCTION
This matter concerns an appeal by the appellant wife against property adjustment orders made by a judge of the Federal Circuit and Family Court of Australia (Division 2) on 28 October 2022, following the breakdown of the parties’ relationship of some 18 years.
I have found that, despite an otherwise comprehensive and well-reasoned judgment, in the circumstances of this case, the primary judge erred in respect to her treatment of the parties’ superannuation and failed to adequately explain why she applied a different percentage adjustment figure to the apportionment of the parties’ superannuation to that which she applied to the balance of the parties’ non-superannuation assets.
As those findings are determinative of the appeal such that a re-exercise of discretion is required, I have not considered the balance of the grounds of appeal, save to the extent to which submissions made in respect of certain grounds have relevance to the re-exercise.
In re-exercising discretion, I have made an adjustment in favour of the appellant over and above that made by the primary judge as a result of the following. Firstly, determining that the parties’ contributions to their superannuation are equivalent to that which they have made to the balance of their property and, secondly, determining that the appellant is entitled to an additional adjustment for future needs primarily as a result of disparity in the parties’ incomes and earning capacity, including the fact that the appellant’s earning capacity has been adversely impacted by her focus upon homemaking and undertaking parenting responsibilities during the course of the parties’ lengthy marriage.
BACKGROUND TO APPEAL
The background to the parties’ relationship and an outline of the manner in which they conducted themselves during the course of their relationship is summarised in the primary judge’s reasons for judgment dated 28 October 2022 (“the reasons”) from [3]–[12].
Relevantly for the purpose of this appeal, with some modifications, I have drawn upon the helpful summary provided by senior counsel as contained in the respondent’s Summary of Argument filed 9 March 2023 as follows:
·The appellant was born in 1974 (now 49 years) and the respondent was born in 1969 (presently 53 years). The parties commenced cohabitation and married in November 2002 and subsequently separated in October 2020. The parties have two children, who are 14 and 16 years of age (in Years 9 and 11 respectively).
·On 25 June 2021, the respondent commenced proceedings for relief pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). On 14 September 2021, the appellant filed a response joining issue in relation to the s 79 relief sought by the respondent and seeking orders for the payment of spouse maintenance and ‘child support departure’ pursuant to the Child Support (Assessment) Act 1989 (Cth).
·A final hearing occurred on 25 and 26 July 2022, with reasons being delivered on 28 October 2022.
·The primary judge found the net non-superannuation property of the parties to have a value of $14,060,433 and their superannuation entitlements to have a total value of $1,023,785.
·The primary judge determined to alter the parties’ interests in their nonsuperannuation property such that the appellant receive or retain 62.5 per cent and the respondent receive 37.5 per cent.
·That adjustment reflected, firstly, an assessment of the parties’ respective s 79(4) contributions during the course of their relationship and subsequent to their separation, by reference to the non-superannuation assets, as to 57.5 per cent on the part of the appellant and 42.5 per cent on the part of the respondent (at [76]) and, secondly, an adjustment of 5 per cent on account of s 75(2) factors in favour of the appellant (at [108]).
·In addition to that adjustment, the parties were to retain their existing entitlements to a joint self-managed superannuation fund, which was valued at $1,023,785 as at the date of the hearing. The appellant’s interest in the fund at that date was accepted to be $370,185, or 36.2 per cent, and the respondent’s interest in the fund as at that time was assessed to be $653,600, or 60.7 per cent (at [109]).
·Additionally, unchallenged orders were made for the payment of spousal maintenance by the respondent to the appellant until the sale of the parties’ former matrimonial home and, by way of child support departure order, for the respondent to pay periodic child support of $550 per week as indexed in accordance with agency guidelines, together with the children’s school fees and related costs, health insurance and the payment of medical expenses over and above that covered by Medicare, together with the children’s mobile phone expenses.
GROUNDS OF APPEAL
By way of Amended Notice of Appeal filed on 15 February 2023, the appellant appeals against Order 3.4 of the orders made by the primary judge which required that, upon the sale of the former matrimonial home, the parties do all things necessary to ensure that the net proceeds were allocated to the parties “in such proportions as to effect an overall settlement of 62.5 per cent of the non-superannuation pool in annexure “A” in favour of the [appellant] and 37.5 per cent in favour of the [respondent]”. The non-superannuation pool was identified and annexed to the reasons as annexure “A”.
The grounds of appeal as set out in the Amended Notice of Appeal filed 15 February 2023 are as follows:
1.That her Honour’s discretionary decision miscarried in relation to her approach as to the superannuation interests of the parties in that she failed to give any or any adequate reasons for:
1.1Determining a different ratio of division of the superannuation interests than the rest of the property of the parties;
1.2Departing from a single pool approach (inclusive of superannuation) which had been common to the approach of both parties and would have resulted in a consistent overall division;
and1.3 Failing to explain her approach at all;
and erred in fact in determining that the parties had agreed to an approach where their existing superannuation entitlements would be retained “on top of” the outcome of however she determined to divide the “non-superannuation pool”.
2.That her Honour’s discretionary decision miscarried in failing to take into account pursuant to s 75(2)(j) and (k) Family Law Act the future economic consequences of the roles in the marriage which the parties had agreed they should each perform; the consequence of those roles and the duration of the marriage to the careers and future earning capacity of each party coupled with the Appellant’s contribution to the future earning capacity of the Respondent (as opposed to the past income which he has earned which was taken into account pursuant to s 79(4)(c)).
3.That on the facts determined by her Honour the result of her Honour’s Orders was manifestly unjust and plainly wrong.
(As per the original)
In circumstances where I have found error in terms of the first ground of appeal and it is dispositive of the appeal, it is unnecessary to consider the second and third grounds. It was, however, acknowledged by both parties that the issues raised by the parties in addressing those grounds have potential relevance to the manner in which I re-exercise discretion.
Summary of submissions in respect to Ground 1
Summary of the appellant’s contentions
It is contended by the appellant, as contained in the Summary of Argument filed 15 February 2023, that the primary judge failed to provide reasons as to why the parties’ superannuation interests were adjusted according to a ratio different to that of the parties’ non-superannuation property. This was in circumstances where the parties conducted their case at the substantive hearing on the basis of a single pool, rather than a two pool, approach.
It is submitted that the single pool approach was confirmed by the parties in having regard to the following:
·neither party referred to the appropriateness of a two pool approach in their case outlines;
·the respondent’s case outline attached, by way of annexure, a working balance sheet with one total representing the parties’ combined superannuation and non-superannuation property;
·the joint balance sheet provided by the parties to the primary judge during the hearing recorded superannuation as a separate item, but nonetheless in the context of presenting a balance sheet reflecting a one pool approach; and
·neither party made submissions seeking a discrete adjustment in respect to superannuation.
It is further contended that the primary judge never raised with the parties the potential for her to consider the parties’ property on the basis of a two pool approach during the course of the hearing.
Summary of the respondent’s contentions
The Summary of Argument filed by the respondent on 8 March 2023 acknowledged that, at first instance, there was no issue between the parties in respect to the following:
·each party advanced ‘percentage’ conclusions as to the assessment of contributions and as to any alteration on account of ss 79(4)(d)–(g) of the Act by reference to the entirety of the identified interests;
·neither party identified the superannuation and non-superannuation interests for any differential treatment;
·each party sought to retain their respective superannuation interests without adjustment directed to same; that is, neither sought any ‘splitting’ order and it was common ground that the appellant was to ‘roll out’ her entitlement from the self-managed superannuation fund which would otherwise be retained by the respondent;
·the primary judge’s conclusions as to the parties’ respective contributions, and the matters arising pursuant to ss 79(4)(d)–(g) of the Act were expressed in percentage terms referable to their non-superannuation interests; and
·no submissions were advanced by either party directed to such an expression by the primary judge of her conclusions, nor was such matter raised with the parties during the course of submissions.
It was submitted that, despite the commonality between the parties in respect to those issues, there was no appellable error on the part of the primary judge in determining that:
(1)the parties’ non-superannuation property should be adjusted according to the proportion whereby the appellant was to receive 62.5 per cent and the respondent 37.5 per cent; and
(2)the parties retain their existing member entitlements of the parties’ self-managed superannuation fund which, in the case of the respondent, was 63.8 per cent.
It was contended that, in assessing whether appellable error had occurred, it was necessary for the Court to consider the context in which the primary judge’s determination in respect to the appropriate adjustment of the parties’ property was made, in that it was well within the discretion reposed in the Court pursuant to s 79 of the Act and, in the absence of the establishment of appellable error, it is insufficient to establish that an alternative outcome was available or even preferable.
Having regard to the context in which the adjustment of the parties’ property was made and, specifically, that the adjustment was one that was well within the primary judge’s discretion, it was submitted that the issues raised in the appeal are not such as to justify appellate interference.
In framing the respondent’s submissions in respect to Ground 1, it was noted that the respondent did not accept that the primary judge “in fact adopted a [two] pools’ approach”. In that respect, by way of oral submissions, senior counsel for the respondent submitted that the end result of the orders achieved the outcome as sought by the parties whereby there was an adjustment of the parties’ property, with each party retaining their respective superannuation interests in accordance with the common position presented by the parties at the hearing. That end result, it was submitted, was one whereby the adjustment across the entirety of the parties’ interests – including superannuation and non-superannuation assets – resulted in an adjustment of 60.7 per cent in favour of the appellant, with the remaining 36.2 per cent being adjusted to the respondent.[1]
[1] Transcript 24 April 2023, p.29 lines 36–39.
In specifically addressing Ground 1, it was firstly submitted that:
·the primary judge had regard to the entirety of the parties’ contributions in the course of reaching conclusions such as those set out at [47]–[76] of the primary judge’s reasons for judgment;
·the primary judge identified and had regard to the parties’ differing superannuation entitlements (at [36] and [109]), which comprised just 7 per cent of the total property pool;
·The primary judge’s conclusions in respect to the final adjustment of the parties’ property had regard to the entirety of the interests of the parties, including both the superannuation and non-superannuation assets (at [109]); and
·the primary judge’s analysis “had specific regard to the result of the approach adopted by her to the expression of her conclusions by reference to the entirety of the interests of the parties” (at [109]).
Secondly, it was submitted that no further reasons were required on the part of the primary judge in the context where she did not confine the contribution assessment or those matters set out in ss 79(4)(d)–(g) to the non-superannuation interests.
Thirdly, it was submitted that, to the extent that the first ground of appeal can be characterised as a procedural fairness challenge with the appellant contending that she was not afforded the opportunity of advancing submissions directed to the “approach” adopted by the primary judge, it was contended that no error arises as a result.[2] In that respect, it is submitted by the respondent that, had the primary judge formally raised the prospect of expressing her conclusions by reference to the non-superannuation interests as opposed to the entirety of the parties’ interests before considering the overall outcome thereby derived, it is difficult to see what further submissions could have been advanced by the appellant, save to have mathematically recast the subsidiary percentage components of the assessment process. That is, as I understand the argument, it was contended, to the extent that the appellant sought an overall adjustment of 80 per cent of the parties’ assets in her favour, had the primary judge foreshadowed an intention to apply a different percentage adjustment to superannuation and non-superannuation assets, it may have been the case, for instance, that the appellant’s application would have instead “become some 85%, with corresponding adjustments to the component parts advanced”.[3]
DISCUSSION
[2] With reference being made to Stead v State Government Insurance Commission (1986) 161 CLR 141 at 145; Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421 at [2]; Lindfield & Romano (2022) 65 Fam LR 233 at [38].
[3] Respondent’s Summary of Argument filed 8 March 2023, paragraph 17.
Two pool approach adopted by the primary judge
No criticism can be levelled at the primary judge for taking the approach whereby she made orders that have the effect of adjusting the parties’ non-superannuation property and superannuation entitlements according to different proportions. Taking that course was one that was reasonably open to her.[4] Equally, there was “no demand upon the primary judge to treat the parties’ contributions to superannuation interests separately from their other contributions”.[5]
[4] Norbis v Norbis (1986) 161 CLR 513 (“Norbis”), Lenehan and Lenehan (1987) FLC 91-814 at 76,148; Coghlan and Coghlan (2005) FLC 93-220 (“Coghlan”) at 79,646.
[5] Arcand & Boen (2021) FLC 94-046 at [36] referring to Coghlan at 79,645–79,646.
In that respect, paragraph 15.1 of the respondent’s Summary of Argument filed 8 March 2023 notes, with reference to paragraph 2 of the appellant’s Summary of Argument generally and [47]–[76] and [61] of the reasons respectively noted the following:
[T]he primary Judge had regard to the entirety of the parties’ contributions in the course of reaching such conclusion and it is noted that there is no contrary complaint in the appeal. Indeed, and as referred to by the appellant, specific reference is made in the course of the identified reasons to her contributions to the parties’ superannuation interests
(Citations omitted)
That characterisation of the approach adopted by the primary judge is correct. In that respect, at [47] of the reasons under the subheading ‘initial contributions’, the primary judge recorded that at the commencement of cohabitation the respondent had, among other assets, approximately $40,000 in superannuation.
At [48] of the reasons, the primary judge referenced the appellant’s initial contributions to the parties’ property, noting that she also had “some superannuation.”
Under the subheading ‘contributions during the relationship’ at [61], the primary judge accepted as “likely to be true” the appellant’s assertion that she “made a significant contribution to the purchase of the property for the self-managed super fund in that she searched for properties, contacted agencies for information and inspected properties.”
However, the difficulty for the respondent is that, whereas the primary judge adopted a global approach to the assessment of the parties’ contributions, she applied a two pool approach to the apportionment of their non-superannuation property on the one hand and their superannuation interests, on the other, without providing an adequate explanation as to why she took that course.
The reasons provided by the primary judge for taking a different approach to the parties’ superannuation interests to that which she determined to be appropriate in respect to the parties’ non-superannuation interests was explained at [109] as follows:
The [appellant] will therefore receive 62.5 per cent of the non-superannuation pool, which equates to $8,787,770.63. This will leave the [respondent] with $5,272,662.38 of non-superannuation assets, providing a differential of $3,515,108.25. On top of this it is agreed that each party will retain their member entitlements in the parties’ self-managed super fund. The [respondent’s] current entitlement in the fund is $653,600, being 63.8 per cent of the fund. The [appellant’s] entitlement of $370,185 represents 36.2 per cent of the fund. Thus, the [respondent] will have an additional $283,415 by way of superannuation over the [appellant]. For all these reasons, and in all of the circumstances of this case I am satisfied that a division to the [appellant] of the non-superannuation pool of 62.5 per cent and a division of the superannuation pool of 36.2 per cent, being 60.7 per cent of the total pool, would result in a just and equitable division of the assets between the parties.
(Emphasis added)
There is some factual foundation for the emphasised sentence, however it fails to disclose the complete picture. That is, the context in which the parties so contended that each party would retain their existing superannuation entitlements was that each party presented their respective cases by reference to one global pool of assets, including superannuation.
Senior counsel for the respondent submitted that there was nonetheless no appellable error by reference to two propositions. Firstly, it is submitted that no error occurred because the primary judge conducted a “holistic analysis of all of the contributions”[6] of the parties and, having done so, expressed her conclusion as to what constituted a just and equitable adjustment of the parties’ property by reference to only the parties’ non-superannuation property in circumstances where it was an agreed position that neither party wanted there to be any adjustment of the parties’ superannuation interest.[7] The second proposition advanced in respect to the end result of the primary judge’s approach was that there was a just and equitable adjustment of the parties’ property without the primary judge purporting to “in any sense adopt a two pool approach”.[8] I agree with the first proposition, however, for reasons which I will explain, I respectfully disagree with the second proposition.
[6] Transcript 24 April 2023, p.28 lines 46–47.
[7] Transcript 24 April 2023, p.28 lines 12–14.
[8] Transcript 24 April 2023, p.28 line 47.
It is self-evident that the primary judge adopted what is commonly known as a ‘two pool’ approach in her adjustment of the parties’ assets. That is, the primary judge treated the parties’ superannuation interests as separate from their non-superannuation interests for the purpose of determining the proportions in which the parties’ superannuation interests on the one hand and the non-superannuation assets on the other are to be divided.[9]
[9] Norbis at 532.
This is made clear by the fact that the primary judge determined that the parties’ non-superannuation interests were to be divided according to the percentage of 62.5 per cent in favour of the appellant and 37.5 per cent in favour of the respondent, with the parties’ superannuation interests to be divided in similar mirror reverse proportions to the non-superannuation assets, with the appellant receiving 36.2 per cent of the fund and the respondent retaining 63.8 per cent of the fund.[10]
[10] At [109] of the reasons and Order 3.4 made 28 October 2022.
Any possible doubt that such a two pool approach was taken by the primary judge is dispelled by the fact that the primary judge applied the s 75(2) adjustment to only the non-superannuation pool, not the total pool (at [108]–[109]).
Having determined that the primary judge did, in fact, take a two pool approach, the questions become whether: firstly, the primary judge was required to afford the parties the opportunity of making submissions in respect to her intention to take that path and secondly, whether, in any event, the primary judge failed to provide adequate reasons to explain her approach.
Procedural fairness and adequacy of reasons
While there is no specific procedural fairness challenge raised in the appellant’s amended grounds of appeal, at paragraph 8 of the appellant’s Summary of Argument filed 15 February 2023 it is submitted in support of Ground 1.3 that if the primary judge “was to depart from the common approach of the parties, [her Honour] ought to at least have alerted the parties that it was in her contemplation and thereby provided the opportunity for the parties to each make submissions.” That submission was responded to in paragraph 17 of the respondent’s Summary of Argument filed 8 March 2023.
It is well established that the adequacy of reasons is to be assessed in the context of issues joined in the proceedings, with the primary judge being required to ‘enter into’ those issues canvassed by the parties in their submissions. In that context, I will address the appellant’s contention that the primary judge should have alerted the parties to her contemplation of taking a two pool approach to the adjustment of the parties’ assets.
In Calder & Calder (2016) FLC 93-691, the Full Court said at [102]:
We are not convinced that it is obligatory for a trial judge to advise the parties that he or she intends to adopt a two-pool approach where both parties have presented a global case directed to the entire pool of assets. In some respects, the approach of notionally dividing the assets into more than one pool is a matter of convenience for the author of the judgment. In our view, issues of natural justice only come into play where the trial judge’s approach leads to an outcome outside the parameters of the competing claims, or where the judge has adopted an approach to one of the pools which neither party had advocated: Guthrie and Guthrie (1995) FLC 92-647.
As earlier noted, the respondent contended at paragraph 17 of his Summary of Argument filed 8 March 2023 that, if the issue had been raised with the parties by the primary judge, “it is difficult to apprehend that which could have further been advanced on behalf of either party, save only to perhaps recast the subsidiary percentage components of the assessment process”.
That argument is, with respect, overly simplistic. The difference in outcomes between the primary judge adjusting the parties’ property on the basis of a global pool, as opposed to a two pool approach, would have been, as noted by the appellant in her Summary of Argument, equivalent to the amount of $269,681[11] that the appellant would have received over and above the amount she received as a result of the two pool approach adopted by the primary judge.
[11] Appellant’s Summary of Argument filed 15 February 2023, paragraph 8.
In those circumstances, procedural fairness required the primary judge to notify the parties of her intended approach, if only to afford the appellant the opportunity of pointing out that potential disparity in outcomes to the primary judge. As a related matter, the appellant should have been afforded the opportunity of addressing the primary judge as to the outcome, in dollar terms, of applying the s 75(2) adjustment to only the parties’ non-superannuation pool, as opposed to the higher dollar amount which would necessarily have been the result if the s 75(2) adjustment had been applied to the total pool.
In that respect, as observed in Candle & Falkner (2021) FLC 94-069, the Full Court noted at [102] it is well established that it is the real impact or value of the adjustment in money terms, rather than simply percentage terms, that is “ultimately the critical issue” in determining the potential size of an appropriate s 75(2) adjustment.
In those circumstances, it cannot be said that the denial of procedural fairness to the appellant was without consequence, as was contended by the respondent by reference to the authorities set out at footnote 7 to the respondent’s Summary of Argument filed 8 March 2023 which included, most relevantly, Stead v State Government Insurance Commission (1986) 161 CLR 141 at [145].
Moreover, even without treating the appellant’s amended grounds of appeal as a natural justice challenge, in my respectful opinion, there was a deficiency in the reasoning of the primary judge in concluding that it was appropriate for her to adopt a two pool approach because “it is agreed that each party will retain their member entitlements in the self-managed super fund” (at [109]), particularly in circumstances where she failed to adequately explain the context in which that outcome had been sought.
It was certainly the case that the parties had so agreed to retain their existing superannuation interests. However, the fact that both parties sought that outcome did not necessitate that a two pool approach was required for that outcome to be achieved.
Specifically, that outcome could have been achieved, as is often the case, by adopting a one pool approach to both superannuation and non-superannuation assets and treating the parties’ respective superannuation member entitlements as property already in their possession.
As noted, had that latter course been taken by the primary judge, the appellant would have stood to receive an additional amount of $269,681. While that amount is a relatively small portion of the parties’ total property pool, it is nonetheless an amount that is not without consequence.
For reasons which I explain, it is not possible to discern from her Honour’s reasons that she did, in fact, understand the appellant’s position[12] and specifically, why she took a path different from that which was contended by the appellant.
[12] See for example Chan & Chih [2020] FamCAFC 31 at [35].
Specifically, the primary judge had an obligation to explain to the appellant and, indeed, to the appellate court, why she took the path of adopting a two pool approach when her flawed understanding of, at least the appellant’s position, did not necessitate that outcome. In that respect, in Trebiano and Trebiano [2019] FamCAFC 16 at [14], the Full Court adopted the analysis of principle articulated by McColl JA in Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 that:
The reasons must do justice to the issues posed by the parties’ cases: Discharge of this obligation is necessary to enable the parties to identify the basis of the judge’s decision and the extent to which their arguments had been understood and accepted.
(Citations omitted)
As I have noted, in the present case, the appellant was not afforded the opportunity of making submissions other than in the context of property being adjusted on the basis of a global rather than two pool approach. In any event, the reasons provided by the primary judge for adopting the two pool approach do not facilitate the appellant nor, with respect, this Court understanding why her Honour adopted the two pool approach in circumstances where the submissions by the parties that they each wished to retain their existing superannuation entitlements did not necessitate that outcome.
Accordingly, there is merit in the appellant’s first ground of appeal that the primary judge erred in failing to explain her approach (Ground 1.3). In circumstances where that conclusion is determinative of the appeal, it is unnecessary to consider the remaining grounds of appeal.[13]
[13] Boensch v Pascoe (2019) 268 CLR 593 at [7]–[8].
RE-EXERCISE OF DISCRETION
Both parties submitted that, in the event of error being found on the part of the primary judge, in my capacity sitting as a single judge of the appellate court, I should re-exercise discretion pursuant to s 36 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”).
In an appeal by way of rehearing, the appellate function involves “…making such order as ought to be made according to the state of things at the time [that the appeal is determined]”.[14] In those circumstances, once it is determined that the judgment is vitiated by appellable error, the parties must be given the chance to adduce updated evidence.[15] To that end, the parties tendered an agreed statement of facts, dated 21 April 2023, noting the final orders and summarising relevant facts that have occurred in the period subsequent to those orders. The agreed statement is as follows:
[14] Mickelberg v The Queen (1989) 167 CLR 259 at 278.
[15] Allesch v Maunz (2000) 203 CLR 172 (“Allesch”) at [31], [57]–[60].
1.The [appellant] and the [respondent] were engaged in contested proceedings in the Federal Circuit and Family Court of Australia, proceedings SYC4713 of 2021.
2.The matter was before [the primary judge] on 25 and 26 July 2022, for final hearing, and Judgement was delivered on 28 October 2022 (“the Final Orders”).
3.In accordance with Order 4 of the Final Orders, the property located at [D Street, Suburb E] in the State of New South Wales (“the [Suburb E] Property”), which was registered in the name of [Company AC], was sold on 15 March 2023 for the sum of $1,100,000. Settlement took place on 31 March 2023
4.In accordance with Order 5 of the Final Orders, the net sale proceeds of the [Suburb E] Property, were paid into an interest-bearing account in the name of [Company AC] as trustee of the [Petrellis Superannuation Fund].
5.In accordance with Order 6 of the Final Orders, the parties instructed their accountant to prepare the financial accounts of the [Petrellis Superannuation Fund], to calculate the member entitlements of each of the [respondent] and the [appellant]. The parties' member balances within the [Petrellis Superannuation Fund], as at 31 March 2023, are as follows:
5.1 [the appellant] - $331,095.67
5.2 [the respondent] - $603,002.08
In accordance with Order 6, there will be a rollover of [the appellant’s] member entitlements from the [Petrellis Superannuation Fund] into a fund nominated by her.
6.In accordance with Order 2 of the Final Orders, the property located at [B Street, Suburb C], in the State of New South Wales was sold on 11 February 2023 for the sum of $17,150,000 and has an anticipated settlement date of 11 May 2023 (“the [Suburb C] Settlement”).
7.The parties have agreed that the estimated sale proceeds following the [Suburb C] Settlement, will be $13,818,590, taking into account the following disbursements which will be payable on settlement:
7.1[BankAD] loan, secured by Mortgage against the [Suburb C] Property, with a balance of $3,115,390;
7.2Real Estate Agent Commission fees of $199,000;
7.3Marketing Costs of $14,581;
7.4PEXA fees of $142; and
7.5Conveyancing fees of $2,297.
8.The [appellant] filed a Notice of Appeal, with respect to the Final Orders, on 23 November 2022 and an Amended Notice of Appeal on 15 February 2023 (“the [appellant’s] Amended Notice of Appeal”).
9.Annexed and marked “A” is an agreed balance sheet reflecting the matrimonial asset pool, having regard to the sale of the [Suburb C] Property and the [Suburb E] Property. This is an updated version of the table that appears at paragraph 36 of the Reasons for Judgment of [the primary judge] (being at pages 42 and 43 of the Appeal Book).
(As per the original)
Annexed to the parties’ statement of agreed facts were two separate schedules, one of which set out the effect of the final orders and a further schedule which set out the effect of the appellant’s Amended Notice of Appeal.
The parties further agreed that, in the event of the Court re-exercising discretion, the Court should have regard to updated valuations agreed to by the parties as reflected in a joint balance sheet, which is attached as Schedule “A” to these reasons.
I will re-exercise discretion within the parameters of the orders sought by the parties in the event of the appeal being successful.
Orders sought by the appellant
In circumstances where, subsequent to the orders, several parcels of property including the former matrimonial home have been sold, the appellant sought leave to amend her Notice of Appeal by providing a minute of proposed orders dated 24 April 2023 such that she now seeks the following orders:
1.That the appeal be allowed.
2.That Order 3.4 be set aside.
3.That in lieu of Order 3.4:
a.In the event of judgment being delivered prior to 11 May 2023:
“3.4 That the parties sign all documents and do all acts and things necessary to cause the proceeds of sale of the [Suburb C] property to be paid as follows:
3.4.1 the sum of $10,924,721 to the [appellant]; and
3.4.2 the balance to the [respondent].”
b. In the event of a judgment being delivered on or after 11 May 2023:
“3.4 That the [respondent] pay directly to the [appellant] the sum of $2,232,055 within 7 days.”
4.That the Respondent do pay the Appellant’s costs of and incidental to the appeal.
5.That in the event that the relief in paragraph 4 is refused then the Court grant to the Applicant for Appeal a costs certificate pursuant to the provisions of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment.
(As per the original)
As the date specified in proposed order 3 has now passed, I will conduct the re-exercise of discretion on the basis that the appellant seeks sub-paragraph (b) of the proposed order 3.
Orders sought by the respondent
Senior counsel for the respondent expressed no objection to the appellant so amending the orders she sought, but submitted that the amendment whereby an amount is specified in proposed Order 3.4 had the potential to cause additional uncertainty in circumstances where it was, at least at the date of the appeal hearing, uncertain as to what the precise net proceeds of the sale would be at the date of the Suburb C property settlement. Specifically, it was contended it may be that the Court would need to facilitate the parties having liberty to apply in the event of any variation in that amount.
Accordingly, it was submitted by senior counsel for the respondent that, in the event of the Court determining that the appellant is entitled to a greater adjustment of property than determined by the primary judge, the practical course of action would be to nonetheless retain the approach set out in Order 3.4 of the primary judge’s reasons such that they continued to refer to the revised percentage, rather than a specific amount.[16] In circumstances where, as at the date of the appeal, there remains some uncertainty as to the final settlement figure, I prefer the approach suggested by senior counsel the respondent save to the extent that the percentage apportionment will apply to the totality of the parties’ property and superannuation, not only the non-superannuation assets.
[16] Appeal Transcript 24 April 2023, p.5 lines 41–43.
Approach to re-exercise
The appropriate approach of the Full Court in re-exercising discretion was described in Trevi & Trevi (Re-Exercise) [2019] FamCAFC 51 (“Trevi”) at [20] in the following terms:
Once error is established[17] “an appellate Court can substitute its own decision based on the facts and the law as they then stand”.[18] The Court’s power to do so is statutory. Section 94(2) provides, relevantly, that this Court may “make such decree or decision as in the opinion of the court, ought to have been made in the first instance”.
(Emphasis in original)
[17] Allesch at [23]; Simpson & Brockmann (2010) 43 Fam LR 32 at [40] (“Simpson”): “notwithstanding that the appeal to this court is by way of rehearing, the appeal will succeed only if error is found in the making of the orders appealed”.
[18] Allesch at [23] (emphasis added).
The reference to s 94(2) of the Act is now to be replaced by reference to s 36(1) of the FCFCOA Act, which empowers the Court to:
(a) affirm, reverse or vary the judgment appealed from; or
(b)give such judgment or make such order as, in all the circumstances, it thinks fit.
In that event, s 35(b) of the FCFCOA Act provides that the Court “has the power to draw inferences of fact and, in its discretion, to receive further evidence”. As noted in Trevi at [14], referencing Partington & Cade (No 2) (2009) FLC 93-422 at 83,852, “[for] all practical purposes, if this Court is to re-exercise it must ‘draw inferences of fact from, and conclusions from, facts as found by the trial judge and uncontroversial evidence admitted upon the re-exercise”. In undertaking that task I am “assisted, although not bound” by the findings and analysis of the primary judge which have not been impugned in this appeal.[19]
[19] Chan & Lee (2022) 66 Fam LR 75 at [92].
Legal principles
Both parties contend that, in the re-exercise of discretion, orders should be made for the adjustment of their property. The task before the Court in re-exercising discretion is to make such orders as are appropriate, just and equitable, having regard to the language of both ss 79(1) and (2) of the Act.[20]
[20] Zao & Lee [2019] FamCAFC 169 at [48].
In exercising its discretion, the Court is required to take into account the matters set out in s 79(4) of the Act. Section 79(4) is divided into two limbs. The first limb is in respect to those matters set out in subsections (a) to (c), which deal with what are commonly known as the ‘contribution’ factors. Contributions can be direct or indirect, financial or non-financial contributions to the matrimonial property. The second limb of s 79(4) is in respect to those matters set out in subsections (d) to (g), which primarily relate to the future needs of the parties but can include any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account.
As both parties are seeking orders for the adjustment of their property upon the breakdown of their marital relationship, with a view to moving on with their lives free of financial commitment to the other, the just and equitable requirement set out in s 79(2) is readily satisfied.[21]
[21] Stanford v Stanford (2012) 247 CLR 108 (“Stanford”) at [42] (French CJ, Hayne, Kiefel and Bell JJ) (“Stanford”).
The broad discretion conferred by s 79 of the Act is not, however, to be exercised “according to an unguided judicial discretion”.[22] The leading case of Hickey and Hickey and Attorney-General (Cth) (2003) FLC 93-143 (“Hickey”), at [39], provides useful guidance in that respect, recommending that, in determining what orders are appropriate, just and equitable, the preferred approach is to adhere to the following four steps:
(1)identify and determine the asset pool of the parties as at the date of the hearing (this necessarily involves identifying both assets and liabilities);
(2)identify and determine each of the parties’ financial and other contributions up to the date of the hearing (this can include the financial contributions made before, during and after the marriage);
(3)assess how future and other events may have a financial impact on either of the parties, such as their age, state of health, income and property or financial resources (known as the s 75(2) factors); and
(4)step back and examine this formula-based reasoning against the history of the marriage, intangible considerations and other contingencies so as to consider whether the outcome represents a just and equitable result.
[22] Stanford at [38].
In this case, there is no dispute between the parties regarding the make-up of the parties’ asset pool including both superannuation and non-superannuation assets.
The task before the Court therefore becomes considering the second, third and fourth stages referred to in Hickey.
In weighing the parties’ respective contributions, I am required to take into consideration the myriad of contributions, including both parties’ initial contributions, in a holistic fashion.[23] It is preferable for all contributions to be weighed collectively, rather than being segmented, compartmentalised, or weighing one contribution against the remainder.[24]
[23] Dickons v Dickons (2012) 50 Fam LR 244 at [24] and [26]. See also Jabour & Jabour (2019) FLC 93-898 (“Jabour”) at [86].
[24] Jabour at [73]–[87]; Horrigan & Horrigan [2020] FamCAFC 25 at [42]–[48].
The appropriate approach in considering relevant s 75(2) factors is to:
·firstly, determine what factors should be taken into account pursuant to s 75(2), without any consideration at all at that stage of the amount (if any) that should be ordered;
·secondly, when all of these factors have been determined, it is then appropriate to determine what weight should be given to each of them, including the outcome of the Court’s analysis undertaken pursuant to ss 79(4)(a), (b) and (c).[25]
[25] Beck and Beck (No 2) (1983) FLC 91-318 (“Beck”) at 78,167.
In undertaking that task the Full Court has cautioned against a tendency “to assess s 75(2) factors in percentage terms without considering its real impact”, continuing on to state that it “is the real impact in money terms which is ultimately the critical issue”.[26]
[26] Clauson and Clauson (1995) FLC 92-595 at 81,911; see also Trevi at [48].
In undertaking the fourth step referred to in Hickey, it has been said that “the whole is not necessarily the sum of its component parts, and at the very least one has to stand back, at the end, and look at the final result, to ensure that the cumulative process has not produced a manifestly unjust result”.[27]
[27] Tomasetti and Tomasetti (2000) FLC 93-023 at [114].
It is to be appreciated that the exercise of the broad discretion bestowed upon the Court pursuant to s 79 of the Act “‘inevitably involves value judgments and matters of impression’, and accordingly it cannot be treated as ‘a mathematical exercise’”.[28]
[28] Petruski & Balewa (2013) 49 Fam LR 116 at [49], citing Lovine & Connor (2012) FLC 93-515 at [40]–[41].
Both parties acknowledge that it is just and equitable for there to be an apportionment of the parties’ property in terms of s 79(2) and, further, the parties have reached agreement in respect to the property pool to be adjusted. Accordingly, in re-exercising discretion, my focus will be to examine the parties’ contributions in terms of those matters set out in ss 79(4)(a) to (c) and subsequently considering those matters set out in ss 79(4)(d) to (g). I will then take a holistic overview of the effect of the contemplated orders.[29]
[29] Hickey at [39].
Additionally, I will assess the parties’ contributions against the totality of the parties’ assets and liabilities and the orders I make will be an adjustment of the totality of that pool, rather than dividing the pool into to superannuation and non-superannuation assets. I do so in circumstances where the Court has not been addressed, at first instance or at appeal, in respect to those matters that would ordinarily be considered if the adjustment of superannuation was considered separately from the other assets of the parties. Those matters were identified in the guidance provided in the well-known decision of Coghlan and Coghlan (2005) FLC 93-220 (“Coghlan”) where the Full Court stated at [66] that, ordinarily, in dealing with superannuation interests separately from non-superannuation assets, the Court would have regard to matters such as:
(1)the relationship between years of fund membership and cohabitation;
(2)actual contributions made by the fund member at the commencement of cohabitation (if applicable), at separation and at the date of hearing;
(3)preserved and non-preserved resignation entitlements at those times; and
(4)any factors peculiar to the fund or to the spouse’s present and/or future entitlements under the fund.
The difficulty in treating the parties’ superannuation interests separately from their non-superannuation interests is apparent when it is observed that the primary judge did not make a finding in respect to a foundational issue for such an analysis to be undertaken, being the value of the appellant’s superannuation interest as at the commencement of the parties’ relationship (at [48]).
Contributions – ss 79(4)(a) to (c)
In circumstances where no material findings of fact are in dispute, I will substantially rely upon those findings made by the primary judge in respect to the parties’ contributions, which have not been impugned in these proceedings.
Relevantly, by way of summary, those findings are:
·the parties were married for 18 years from November 2002 until October 2020 (at [5]);
·at the commencement of the parties’ relationship the parties had, respectively, the following assets:
in the case of the respondent (at [47]);
·a property at Suburb Q that was subject to a mortgage of $505,000;
·a motor vehicle purchased in 2004 for $45,000;
·cash of approximately $30,000; and
·superannuation of approximately $40,000.
in the case of the appellant (at [48]);
·a property at Suburb S with equity of approximately $92,000 in March 2001;
·a property in Suburb U with equity of approximately $100,000 in October 2001;
·a motor vehicle; and
·some superannuation.
·it was noted at [49] of her Honour’s reasons that, during the course of the hearing, the appellant’s counsel conceded that nothing should turn on the parties’ initial contributions. This was also the position of the respondent.[30]
·the primary judge found that, during the parties’ marriage, the respondent was the primary income earner and the appellant was the primary homemaker and the parent who predominately cared for the parties’ children. In that respect, at [64], the primary judge found that “it appears that both parties fulfilled their roles to the best of their ability during the relationship and that their day to day contributions during the marriage should be seen as equal.” No challenge has been made to that finding, which I accept.
·the primary judge set out her findings in respect to the parties’ post-separation contributions from [73]–[74]. Those findings noted that the appellant assumed the role as, effectively, the parent who solely cared for the parties’ children and the respondent continued to earn income which was applied to sustain the parties’ property and to meet expenses incurred by the family. After detailing those contributions the primary judge summarised her findings at [75] that “the parties’ post-separation contributions should also be seen as relatively equal”. Again, that finding has not been challenged and is accepted.
[30] Respondent’s Summary of Argument filed 8 March 2023, paragraph 8.
Leaving aside the issue of capital contributions, the findings of the primary judge were succinctly summarised by senior counsel for the appellant in that the parties’ “initial contributions, day to day contributions during marriage and relevant post-separation contributions was such as to not invite differentiation”.[31]
[31] Appellant’s Summary of Argument filed 15 February 2023, paragraph 25, referring to [49], [64] and [75] of the reasons for judgment.
The matter that did, however, justify a differential adjustment in favour of the appellant was the significant capital contributions made by the appellant’s family to the parties in late 2007 or early 2008, as well as during 2012 or 2013 and 2018. After detailing those contributions from [65]–[69], at [70] of the reasons the primary judge noted that “it is not disputed the [appellant’s] family gifted her in excess of $2.5 million and that these funds were largely applied towards the purchase of real property and/or expenses of the family”.
The primary judge noted that those capital contributions from the appellant’s family were “clearly a substantial contribution by the [appellant] which should be given significant weight” (at [72]). Appropriately, that conclusion is accepted by both parties.
Accordingly, the task of assessing the parties’ contributions for the purpose of re-exercising discretion essentially comes down to assessing the weight that should be given to those capital contributions made by the appellant’s family to the parties or, more accurately, to the appellant.
In addressing that issue, senior counsel for the appellant contended that an adjustment much greater than 7.5 per cent in the appellant’s favour is warranted, having regard to the fact that while there were modest gifts received from the families of each party at the commencement of their relationship and during the births of their children, greater weight should be given to “the gifts totalling $2.575 million, interest derived at $40,000 and $60,000 of shares derived variously from the appellant’s family”. It was submitted that those contributions should, particularly “in context of timing, opportunity and impact, attract a conclusion as to assessment of contribution against the present pool well beyond 57.5 per cent attributed by the primary judge”.[32]
[32] Appellant’s Summary of Argument filed 15 February 2023, paragraph 25, referring to [76] of the reasons.
Specifically, referring to Pierce & Pierce (1999) FLC 92-844 (“Pierce”) at [28], senior counsel for the appellant contended that in evaluating the parties’ contributions, the Court should have regard to the context of timing, opportunity and impact of those gifts made by the appellant’s family to the appellant.
This included the fact that the parties applied a $940,000 gift received by the appellant in late 2007 or early 2008 to the purchase of the parties’ most valuable asset, the Suburb C property. That property was purchased at a price of $4.7 million and, as at the date of the trial, was accepted to be valued at approximately $16.5 million.
The appellant’s parents provided further funds that enabled the parties to undertake substantial renovations of the Suburb C property in 2012. Those renovations were undertaken at a cost of $2.771 million, with the appellant’s parents providing approximately $895,000 towards that cost.
It was noted that, in the context of the combined cost of acquisition and renovation being approximately $7.84 million, it is of significance that, of that amount, the appellant’s parents contributed $1.835 million.
It was further submitted that the Court would have regard to the fact that in 2018, just over two years prior to the parties’ separation, the appellant’s family made further payments by way of gift totalling $740,000, which was applied to loans that were undertaken for the payment of renovations.[33]
[33] Appellant’s Summary of Argument filed 15 February 2023, paragraph 27.
Consideration of contributions
In Pierce, the Full Court stated at [28]:
…It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
To similar effect in Cabbell & Cabbell [2009] FamCAFC 205, the Full Court stated at [54] that, in considering the parties’ contributions, it is necessary to trace the use of those assets and consider the foundation that they laid or the subsequent accumulation of wealth by the parties.
In this matter, I have traced the application of the additional capital contributions provided by the appellant’s family to the appellant to the enhancement of the value of the parties’ former matrimonial home, which is unquestionably the most substantial asset of the parties. There is, with respect, substance in the submission of senior counsel for the appellant that “these funds [from the appellant’s family] provided a powerful springboard to not only the most valuable asset of the parties of the lifestyle that the family enjoyed in a prestige property”.[34] That submission is soundly based on the evidence presented at the trial.
[34] Appellant’s Summary of Argument filed 15 February 2023, paragraph 28.
At the same time, while there is no doubt that the funds provided to assist the parties to acquire and renovate the property increased the value of the property, as noted by Fowler J in Casper & Casper [2009] FamCA 989 at [91], it is notorious that the intrinsic value of real property will also increase “in part by the effluxion of time”.
Where there is a substantial increase in the value of real property that arises other than from the efforts of the parties, including external market forces, authorities point to the increase being categorised as a contribution by both parties and not necessarily the party who contributed the greater proportion of funds to acquire that property.[35]
[35] Bachman & Self [2023] FedCFamC1A 50 at [125]–[127], Hurst & Hurst (2018) FLC 93-851 at [26]; Whiton & Dagne (2019) FLC 93-923 at [34]; Jabour at [44]–[47] and [84]; Barnell & Barnell (2020) FLC 93-961 at [41]–[42].
Accordingly, while the capital contributions by the appellant’s family to the appellant, which were applied to the acquisition and improvement of the parties’ primary asset, are unquestionably a significant contribution that requires appropriate weight, it is not the sole reason for the substantial increase in the value of the parties’ former matrimonial home, which has now significantly increased in value due to market forces, not simply due to the improvements made by the parties.
Having regard to all of those factors to which I have referred, including the valid submissions made by senior counsel for the appellant regarding the significance of the capital contributions by the appellant’s family, I am nonetheless satisfied that the adjustment determined to be appropriate, just and equitable by the primary judge, being the amount of 7.5 per cent as a result of those capital contributions, is appropriate.
In so finding, I note that that apportionment equates to a 15 per cent differential between the parties which, on the basis of the agreed balance sheet, represents a difference in money terms of approximately $2,314,194. While that amount is less than the combined value of the totality of the capital contributions made to the appellant by her family,[36] those contributions need to be considered in the context of “the myriad of the contributions by each of the parties to their various business ventures, through their employment and care of the family over a long relationship”.[37]
[36] At [70], the primary judge noted that it was not in dispute that the appellant’s family had gifted her in excess of $2.5 million.
[37] Jabour at [136].
Having regard to the myriad of the totality of the parties’ contributions, which were identified by the primary judge, I am satisfied that the appropriate adjustment in respect to those matters set out in ss 79(4)(a)–(c) is 7.5 per cent. However, unlike the approach taken at first instance by the primary judge, that adjustment should, for the reasons which I have earlier provided, be applied to the totality of the parties’ property and not simply the parties’ non-superannuation assets.
Future needs ss 79(4)(d)–(g) considerations, including by reference to s 75(2)
The consideration of the balance of matters set out in s 79(4), being subsections (d) through to (g), overlaps with the consideration of the factors set out in s 75(2).
Other than in respect to ss 75(2)(j) and (k), it was not contended that the primary judge failed to consider the relevant considerations set out in s 75(2). In circumstances where that approach has not been impugned, I will also focus upon those same considerations but, additionally, include more detailed consideration of ss 75(2)(h), (j) and (k) than was undertaken by the primary judge.
Subsection (2)(a) – the age and state of health of each of the parties
The appellant is 48 years of age and the respondent is 53 years. Both are in good health (at [77]–[78]).
Subsection (2)(b) – the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment
In terms of income and capacity for employment, it is relevant that the respondent has a significant income which exceeds $1 million per year. Although the respondent asserted that he has, in all probability, reached the ceiling of his income earning capacity, it was not disputed that it is likely that he will continue to earn that income for some years (at [79]–[80]).
Comparatively, the appellant has not worked since 2006 and, while she has a medical degree, she is not currently registered as a medical professional (at [81]).
In order for the appellant to become a registered medical professional, she would need to retrain, which would require in the order of three to four years of full-time study. It did not appear to be disputed that, as a requirement for such registration, the appellant may also have to work outside of the metropolitan area for a minimum of six months on placement before sitting the required examination to obtain her professional qualifications as a medical professional.
It was noted that, allowing for such a period of study and internship, the appellant would not commence her medical career until 52 years of age, being at the earliest if she undertakes study on a full-time rather than part-time basis.
Further, in the event of the appellant wishing to specialise, she would be required to engage in additional training including, as noted by the primary judge, potentially “rotational placements, possibly in rural New South Wales and that these may not be paid” (at [81]).
Subsection (2)(c) – whether either party has the care or control of a child of the marriage who has not attained the age of 18 years
It is significant that the appellant is effectively the sole carer of the parties’ two children, X born in 2006 (aged 16 years) and Y born in 2008 (aged 14 years). This is in circumstances where the children live with the appellant and, at present, spend no time with the respondent (at [7]).
The findings by the primary judge at [95] that it is likely the appellant will remain the predominant, if not sole, carer for the children in the foreseeable future were not impugned in the appeal.
Subsection (2)(g) – where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable
As noted by the primary judge, it is clear that the parties had a particularly high standard of living during their relationship. By way of example, the primary judge referred to the extent of overseas travel undertaken by the parties and the fact that the respondent purchased for the appellant jewellery worth approximately $400,000, as well as handbags and shoes (at [96]).
Appropriately, the primary judge acknowledged that, in circumstances where they will now live separately and apart, the parties may not continue to enjoy the same standard of living as they did as husband and wife.
It is nonetheless the case that, as a result of his income, the respondent will have the capacity to enjoy a high standard of living (at [97]). Additionally, the appellant will receive a substantial property adjustment subsequent to the conclusion of these proceedings, which will similarly enable her to enjoy a high standard of living.
Subsection (2)(h) – the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income
As earlier noted, it was acknowledged that, in order for the appellant to obtain her qualifications as a medical professional, she would be required to undertake significant additional training. However, the evidence presented during the trial is not such that I am satisfied that it is likely that the appellant will engage in that additional training at this stage of her life. Accordingly, I have not taken this factor to be a relevant consideration that justifies a further adjustment in favour of the appellant.
Subsection (2)(j) – the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party
This is a significant consideration. There was no challenge to the finding by the primary judge at [11] that, after the birth of the parties’ first child, the appellant was left to primarily care for the children in the home. This enabled the respondent to work long hours that allowed him to continue to develop his career, ultimately establishing himself as an expert in that area (at [10]).
Reflecting that configuration as the deliberate arrangement between the parties, the primary judge noted at [58] that the respondent conceded, in cross-examination, that he said to the appellant words to the following effect:
You are worth more to me at home. I don’t have to worry about the kids. I know you have it under control. By paying your wage from my rooms, you can be tax-deductible and not have to pay for babysitting or a cleaner. I can concentrate at work and not have to worry about them.
Examples of the ways in which the respondent was able to focus upon the development of his career, as a result of the appellant taking responsibility for homemaking and parenting, included:[38]
·working long hours;
·undertaking ward rounds at least one, sometimes two days of the weekend;
·engaging in teaching;
·furthering his academic qualifications to enhance his skills and reputation; and
·to his great credit, working in the community and undertaking pro bono work, which also increased his exposure to medical professionals and expanding his referral base.
[38] Transcript 26 July 2022, p.41 and p.44.
As noted by the primary judge, it has been accepted that a party’s earning capacity is often one of the most valuable assets taken from the marriage,[39] and that is so on the circumstances of this case. The support and assistance provided to the respondent by the appellant was a significant factor enabling the respondent’s development of his career as a medical professional in his field.
Subsection (2)(k) – the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration
[39] Clauson and Clauson (1995) FLC 92-595 at 81,911; Best and Best (1993) FLC 92-418 at 80,295.
This consideration is also highly relevant. At the commencement of the parties’ relationship the appellant was a qualified doctor. She forwent her potential medical career to take on homemaking and parenting responsibilities and support the respondent in the development of his career. In order for her to now embark upon a medical career would, as earlier noted, require considerable training, some of which is likely to be away from home and would be disruptive to the primary role she has adopted in parenting the children at a time when they are at important stages of their high school education.
I respectfully agree with the submission by senior counsel for the appellant that it cannot reasonably be inferred that, had the appellant remained in the workforce as a medical professional, she would have been earning an income comparable to that now enjoyed by the respondent, which is in the vicinity of approximately $1 million per annum. It can, however, be reasonably inferred that she would have had a significant earning capacity.[40]
[40] Appeal Transcript 24 April 2023, p.15 lines 29–32.
In assessing that potential earning capacity, I have had regard to the fact that the appellant did not complete her professional practice qualifications to become a medical professional and she would now face considerable challenges in obtaining the relevant qualifications and embarking upon a career as a medical professional.
Moreover, even if she were to seek to obtain those qualifications she would not, then being in her mid-50s, have the same opportunity as the respondent has had to achieve the continued professional recognition, experience and exposure to the public that has been important to the development of the his career.
As candidly acknowledged by the respondent in responding to a question asked in cross-examination during the course of the trial, “the creation of a career in medicine takes a significant amount of time. It’s not about you just qualified with a PhD that all of a sudden you have a full clinic. You have to work for that”.[41]
[41] Transcript 26 July 2022, p.42 lines 19–21.
While considering the impact of the parties’ lengthy marriage on the appellant’s earning capacity, it is to be observed that this consideration does not justify the Court embarking upon the exercise of, in effect, attempting to compensate the appellant for either past or future lost earnings or loss of expectation.[42] In that respect, in Beck at 78,167, the Full Court stated that the essential task is “the assessment of an appropriate amount which would result in financial justice between the parties taking into account all of the facts relevant to the particular case”. The task is not that which is commonly undertaken in other jurisdictions in respect to the assessment of damages where the Court will often consider the evidence with a view to making an assessment of potential lost earnings and then discounting that figure by the vicissitudes and exigencies of life.[43]
[42] Beck at 78,166–78,167; Douglas and Douglas (2006) FLC 93-300 per Warnick J at 81,072 and Anson & Meek (2017) FLC 93-816 at [85].
[43] Anson & Meek (2017) FLC 93-816at [90]–[91].
Moreover, as noted by senior counsel for the respondent, the appellant has not, in these proceedings, established an evidentiary basis that would enable such an assessment to be made beyond a mere speculative possibility as to what the appellant’s income would now be, had she continued on the path of becoming a medical professional.
Subsection (2)(l) – the need to protect a party who wishes to continue that party’s role as a parent
This is a relevant consideration in the present matter where it has been established that the appellant wishes to focus upon the care of the parties’ two children who are at important stages of their education, rather than seeking to return to the workforce (at [102]).
It is appropriate to recognise the appellant’s desire to undertake that role while, at the same time, recognising that, as conceded by her senior counsel, the appellant, who is clearly a highly intelligent woman, has the capacity for gainful employment albeit, as noted by the primary judge, nowhere near the extent of the respondent’s earning capacity (at [87]).
Subsection (2)(n) – the terms of any order made or proposed to be made under section 79 in relation to the property of the parties; or vested bankruptcy property in relation to a bankrupt party
It is significant that the adjustment that I will make in favour of the appellant pursuant to the considerations set out in ss 79(4)(a), (b) and (c) will result in the appellant receiving a considerable capital sum equating to approximately $1,157,097, being 7.5 per cent of the parties’ updated property pool including superannuation.
Evaluation of s 75(2) factors
Having referred to the totality of those matters set out in s 75(2) that I consider relevant to this matter, I am satisfied that a further adjustment in favour of the wife of 7.5 per cent is appropriate.
ANALYSIS OF EFFECTS
Accordingly, for all of the above reasons, in the re-exercise of discretion pursuant to s 36 of the FCFCOA Act, I determine that an appropriate, just and equitable overall adjustment pursuant to s 79(4) is such that the appellant should receive 65 per cent of the parties’ property and superannuation and the respondent shall receive 35 per cent.
Having regard to the agreed balance sheet which is annexed as Schedule “A” to this decision, as a result of the foregoing findings and determinations, the respondent will retain net property and superannuation to the value of approximately $5,399,786. Comparatively, the appellant will retain net property including superannuation of $10,028,174.
I recognise this is a significant differential between the parties. Nonetheless, both parties will each receive significant lump sum amounts which will enable them to rehouse in comfortable accommodation and maintain a comfortable standard of living. This is the case even allowing for the fact that the appellant may elect to prudently invest a portion of the amount she receives in order to generate some income.
While the respondent will receive substantially less than the appellant by way of lump sum, his average weekly income of approximately $20,127, even after allowing for significant deductions and expenses of $18,301 as itemised in the respondent’s Financial Statement filed 24 June 2022, will provide a basis for servicing a loan in the event of the respondent wanting to raise additional funds to spend on housing or meeting other expenses.
The division of the parties’ property shall be effected such that the parties’ superannuation will be apportioned to each party in accordance with the amount allocated in their respective accounts which, in the appellant’s case is approximately $331,095 and will be treated as property in her possession and, in the case of the respondent, the amount of approximately $603,002 which will be treated as property in his possession.
In summary, the orders I make will allow the appeal and provide for the net proceeds of the sale of the Suburb C property to be allocated such that, after having regard to property and superannuation already in the parties’ possession, the appellant will receive an outcome whereby she retains 65 per cent of the parties’ total property and superannuation pool and, correspondingly, the respondent retains 35 per cent.
COSTS
As foreshadowed at the hearing of this appeal, I will make orders for the parties to each file written submissions of no more than five pages in respect to the issue of costs within 14 days of the date of the orders.
I certify that the preceding one hundred and thirty-two (132) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Deputy Chief Justice McClelland. Associate:
Dated: 30 June 2023
SCHEDULE “A”
Item Ownership Description Husband's Value Wife's Value ASSETS 1 Joint Estimated net sale proceeds [B Street, Suburb C] – value $17,150,000 less mortgage $3,115,390, less commission $199,000, less marketing $14,581, less conveyancing fees $2,297, Pexa fees $142 - net proceeds: $13,818,590 13,818,590 13,818,590 2 Husband [Motor Vehicle 2] 79,450 79,450 3 Husband [Motor Vehicle 1] 27,850 27,850 4 Joint [NAB] account number [###] (offset account) 0 0 5 Husband [NAB] account number [###] (business account) 455,427 455,427 6 Husband [NAB] account number [###] ([X’s] account) 5,690 5,690 7 Husband [NAB] account number [###] ([Y’s] account) 5,600 5,600 8 Wife [NAB] account number [###] 33,838 33,838 9 Wife [NAB] account number [###] 3,727 3,727 10 Joint Furniture, furnishings and effects E 25,000 E 25,000 11 Husband Furniture, furnishings and effects E 10,000 E 10,000 12 Husband Rental bond 4,418 4,418 13 Husband 3 watches, including [luxury watch] and several pairs of cufflinks E 10,000 E 10,000 14 Wife Jewellery E 65,000 E 65,000 15 Wife Funds held in [H Trust Account] 0 0 16 Husband Funds held in [J Trust Account] 0 0 Total $14,544,590 $14,544,590 ADDBACKS 17 Husband Paid legal costs 256,606 256,606 18 Wife Paid legal costs 397,772 397,772 Total $654,378 $654,378 LIABILITIES 19 Joint [NAB] loan account number [###] ([Suburb C]) 0 0 20 Husband [NAB] loan account number [###] ([Suburb C]) 0 0 21 Husband Finance re: [Motor Vehicle 2] 67,813 67,813 22 Husband [NAB] Visa ending [###] 4,056 4,056 23 Husband [NAB] Visa ending [###] 2,818 2,818 24 Husband CGT on the sale of the [Suburb K] property 286,332 286,332 25 Wife CGT on the sale of the [Suburb K] property 157,170 157,170 26 Wife CGT loss on the sale of the [Suburb L] property 0 0 27 Husband Contingent CGT on the sale of [Suburb C] property 30,019 30,019 28 Wife Contingent CGT on the sale of [Suburb C] property 30,019 30,019 29 Husband 2022 income tax E 126,878 E 126,878 Total $705,105 $705,105 NETT TOTAL ASSETS (excluding superannuation) $14,493,863 $14,493,863 SUPERANNUATION Item Member Name of Fund Type of Interest Husband's value Wife's value 30 Husband [Petrellis Superannuation Fund] – as at 31 March 2023 SMSF 603,002 603,002 31 Wife [Petrellis Superannuation Fund] – as at 31 March 2023 SMSF 331,095 331,095 Total $934,097 $934,097 NETT TOTAL ASSETS (including superannuation) $15,427,960 $15,427,960
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