Phillips & Hansford (No 2)

[2015] FamCAFC 138

FAMILY COURT OF AUSTRALIA

PHILLIPS & HANSFORD (NO. 2) [2015] FamCAFC 138

FAMILY LAW – APPEAL – PROPERTY SETTLEMENT – CONTRIBUTIONS – Where the husband submits that the trial judge should have assessed the contributions to the parties’ assets as being 60 per cent to the husband and 40 per cent to the wife – Where the trial judge made a 15 per cent adjustment in the wife’s favour – Where the wife has a lower earning capacity – Where both parties’ families contributed to the parties’ assets – Where the adjustment is not so large as to indicate an error – Where the trial judge miscalculated various sums which were not properly taken into consideration in the final property orders – Where the appeal is allowed in part.

Family Law Act 1975 (Cth) s 90MT
Federal Proceedings (Costs) Act 1981 (Cth)

Federal Circuit Court Rules 2001(Cth) r 16.05(2)(e)

Gronow v Gronow (1979) 144 CLR 513
House v The King (1936) 55 CLR 499

APPELLANT: Mr Phillips

RESPONDENT: Ms Hansford

FILE NUMBER: ADC 4008 of 2013

APPEAL NUMBER: EA 26 of 2015

DATE DELIVERED: 21 July 2015

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Finn, Aldridge & Johnston  JJ

HEARING DATE: 1 July 2015

LOWER COURT JURISDICTION: Federal Circuit Court of Australia

LOWER COURT JUDGMENT DATE: 21 January 2015

LOWER COURT MNC: [2015] FCCA 117

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Hodgson

SOLICITOR FOR THE APPELLANT: Nicholl & Co

COUNSEL FOR THE RESPONDENT: Ms Brasch SC

SOLICITOR FOR THE RESPONDENT: Dobinson Davey Clifford Simpson

Orders

1. Leave is granted to the husband to rely upon an Amended Notice of Appeal filed on 10 June 2015.

2. The appeal is allowed in part.

3. Order 23(c) made on 21 January 2015 and amended on 27 April 2015 is set aside and in lieu thereof there be a new order 23(c) as follows:

   The husband pay to the wife the sum of $92 193

4. The Application in an Appeal filed 12 June 2015 seeking to adduce further evidence is dismissed.

5. Any application for costs, evidence in support and submissions are to be filed and served within twenty-eight (28) days of the date of this judgment.  Any response to that application with supporting evidence and submissions are to be filed and served within twenty-eight (28) days thereafter.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Phillips & Hansford has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 26 of 2015
File Number: ADC 4008 of 2013

Mr Phillips

Appellant

And

Ms Hansford

Respondent

REASONS FOR JUDGMENT

Introduction

1. Mr Phillips (“the husband”) appeals against orders made by Judge Hughes in property proceedings between him and Ms Hansford (“the wife”).  The proceedings also concerned the parties’ parenting arrangements, however on 10 June 2015 the husband filed an Amended Notice of Appeal which deleted the grounds in relation to the parenting aspects of the proceedings and significantly expanded the grounds relating to the property proceedings between the parties.  That notice was filed out of time but the wife, quite properly, did not take any issue about that.  An order will be made granting the husband leave to rely upon it.

2. The parties’ property consisted principally of two assets – their interest in a property at Suburb S, South Australia (“the S property”) and the husband’s interest in his superannuation scheme. The trial judge ordered the sale of the S property and a division of the proceeds so that the wife received 65 per cent of the parties’ net non-superannuation assets and the husband 35 per cent. As to the superannuation, an order was made pursuant to s 90MT(1)(a) of the Family Law Act 1975 (Cth) (“the Act”) splitting the husband’s interest in his superannuation fund so that the wife received a base amount of $126 530. The effect of this order is to give to the wife 65 per cent of the parties’ total interest in superannuation at the time of the hearing.

3. On 27 April 2015 an application was made to the trial judge under r 16.05(2)(e) of the Federal Circuit Court Rules 2001(Cth) (“the Slip Rule”) to amend the orders made as to the payment to the wife out of the proceeds of sale of the S property. The trial judge made an order amending the earlier orders on 27 April 2015. The parties agreed that the amended orders did not resolve the difficulties inherent in the earlier orders. Sensibly, the parties concentrated on the substantive issues in the appeal and it is therefore not necessary to discuss the “Slip Rule” orders further.

4. The appeal can conveniently be divided into two parts.  The first part is said to be errors by the trial judge failing to take into account interim payments to the wife and borrowing undertakings to make one of these payments.  The second concerns the trial judge’s exercise of discretion in awarding the wife 65 per cent of the parties’ net assets.  It is convenient to deal with them in that manner.

The Property To Be Divided - Grounds of Appeal 1 - 7

1. Counsel for the wife properly conceded that the trial judge had erroneously found that $10 300 paid to the wife as an interim property settlement by the husband and obtained by him extending the mortgage over the S property had the effect of increasing the mortgage and not reducing it as found by the trial judge.  The wife also conceded that the sum of $15 000 received by the wife as an interim property settlement also had the same effect and that the trial judge wrongfully did not add that amount to the mortgage.

2. The husband contended that $4362 paid to the wife on or about 6 March 2014 should be taken into account in the parties’ list of assets and liabilities.  The trial judge did not do so.

3. The husband had, for some time, engaged in the purchase and sale of shares.  This was done through a trust, the beneficiaries of which were family members.  The source of the payment of $4362 was the sale of shares held by that trust.  Absent that payment it is likely that the shares would have been available in due course for distribution to the parties as part of the final property distribution.

4. On 11 August 2014 the parties agreed on payments on account of interim property settlement.  Order 3 provided:

   That the amount of $4,362 paid by the Respondent Father to the Applicant Mother on or about 6 March 2014 be characterised as a payment by way of interim property settlement.

5. Of this payment the trial judge said, at [285], “There was no suggestion that that sum ought to be characterised as a partial property settlement and I do not intend to do so”.

6. This is a clear error. 

7. Whilst it is true that a trial judge is not necessarily bound by the agreement of the parties as to the characterisation of interim payments, there was no basis in this case for the trial judge not to give effect to the agreement of the parties.

8. The second matter raised by the husband is the treatment of the liability incurred by the husband in complying with an order made on 18 December 2013 which required him to pay to the wife $10 000.  He obtained the bulk of those funds by selling the parties’ station wagon and leasing it back with payments to be made by the husband under a salary sacrifice arrangement with his employer.  The husband received $9300 from the finance provider. 

9. The orders of Judge Baumann of 18 December 2013 left the characterisation of that payment to the trial judge.  The trial judge found at [283] – [284]:

   283.… Given the wife had no meaningful income at the time and was in urgent need of financial support, the amount is more appropriately characterised as spouse maintenance rather than an interim property distribution.

   284.Given the parties’ strained circumstances at the time, it was reasonable for the husband to enter into the lease arrangement to generate the funds.  Accordingly, both the vehicle and the amount owing on its lease should in my view be taken into account in assessing the value of the property available for division between the parties.

10. The trial judge took into account the value of the vehicle but did not take into account the amount owing on the lease. The husband therefore contended that the trial judge had failed to give effect to the finding made at [284].

11. We take those two paragraphs to mean that because the $10 000 was appropriately to be characterised as spouse maintenance it should not be “added back” to the list of property and assets, whereas had it been characterised as a “partial property settlement” then, in accordance with the approach taken by the parties, it would have been.

12. Notwithstanding that finding, the car and leasing debt remained as assets and liabilities of the parties that needed to be taken into account.  The trial judge took into account the asset but not the liability.  Her Honour erred as a matter of law in doing so.

13. It is necessary therefore, to re-adjust the property pool available for distribution to take into account the three payments and the borrowing, referred to above and not included by the trial judge.

14. Using counsel for the husband’s revised asset pool, as found in his written submissions, but adjusting that to reflect that the lease in respect of the vehicle should be $9300 and not $12 242, it gives a total of non-superannuation assets of $195 162.  Using the percentage arrived at by the trial judge of 65 per cent this gives an entitlement to the wife of $126 855.  As she has received $34 662 by way of partial property settlement and retention of jewellery, the husband is obliged to pay to the wife $92 193 by way of property settlement in respect of the non-superannuation assets, subject to the consideration of the other grounds.

15. We pause to note that the parties and the trial judge approached the list of assets and liabilities to be divided by “adding back” interim property settlements to the actual assets and liabilities.  Whilst there are many Full Court authorities that indicate that that is not the preferable way to approach the matter, the parties and the trial judge did so and the parties did the same on appeal.  For those reasons it is convenient for us to follow the same course. 

Contributions and Adjustments - Grounds of Appeal 8 -13

1. The trial judge found the husband was in good health and had a superior earning capacity to the wife.  Her Honour found that his professional qualifications mean that his current earning capacity was likely to continue well into the future and had given him the capacity to contribute to superannuation interests at a higher rate than the wife.  Her Honour accepted that as a result of the parenting orders it was likely that the husband would relocate to South Australia leading to a possible period of unemployment and that his employment may be at a lower income. 

2. The wife was aged 32 with long term mental health issues which, at times, impact upon her capacity to function generally and to earn an income. 

3. Her Honour noted that the parties would have equal responsibility for the care of the children.  The wife would have free rent and board with her family until she became more financially established.  The husband was paying child support but both parties were under significant financial strain since separation which was exacerbated by the payment of legal fees incurred by both parties. 

4. Her Honour found that the wife’s income earning capacity was not only affected by her mental illness but by her marriage and by her role as a primary parent and homemaker.  Treatment for her condition was likely to be an ongoing expense for the wife, and to some extent, the trial judge found that the wife’s parents “can be seen as a financial resource given their long term financial support of her”. 

5. The trial judge summarised her findings as to the contributions by the parties to their property, at [297], as being:

   297.The value of any extra financial contributions made by the husband at the commencement of the relationship is negligible and the weight of the additional indirect financial contributions made on his behalf during the marriage has been offset to some extent by the contributions made by the wife over the 10 years covering the de facto relationship and marriage.  In my view the contributions made by the parties should be regarded as equal and there should, therefore, be no adjustment on the basis of contributions. 

6. The trial judge concluded at [317] – [318]:

   317.Given the very small property pool, in my view there ought to be an adjustment of 15 per cent in favour of the wife on account of the section 75(2) factors, primarily the income earning differential of the parties and the wife’s mental health issues.  Such a division would mean the wife would take non-superannuation assets to the value of $143,455 and the husband $77,245, a difference of $66,210.

   318.There is no principled reason to treat the superannuation interests differently to the non-superannuation property as the factors which impact on the wife’s income earning capacity will also affect her capacity to contribute to superannuation in the future.  The wife will, therefore, take superannuation interests to a value of $132,068 in round terms.  Given she already has superannuation of $5,538, that will require a split from the husband’s superannuation interests of $126,530.

7. Before turning to the husband’s submissions it is useful to return to the nature of an appeal from the exercise of a discretion.  In House v The King (1936) 55 CLR 499 at p 505 the court said:

   If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

8. In Gronow v Gronow (1979) 144 CLR 513 Stephen J said at pp 519-520:

   The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge's discretionary decision on grounds which only involve conflicting assessments of matters of weight.

9. The first submission of the husband was that the trial judge should have found that the husband’s financial contribution so exceeded the wife’s that the court should have assessed the contributions to the parties’ assets as being 60 per cent to the husband and 40 per cent to the wife.  This was because, he submitted, the husband had introduced $40 000 of assets at the time of cohabitation as opposed to the wife’s initial contribution of $25 000. 

10. The husband submitted his equity in the property at the time of cohabitation was not $10 390 as found by the trial judge, but rather what the husband in his evidence had estimated to be the equity of $25 000.  The trial judge derived her finding of equity by deducting the amount of the mortgage used to buy the property from its purchase price.  Since cohabitation occurred only a few months later, one can see why the trial judge regarded this to be the preferable course, as opposed to accepting the husband’s estimate.  It is true that the husband also paid stamp duty on transfer of the property of $6550 but that, of course was a cost of acquisition and, if taken into account, would reduce the equity by that much.  The trial judge was more than entitled to take the approach that she did.

11. Further, it was submitted that the husband’s parents had provided the parties some $23 500 greater than the wife’s parents had provided.  The husband also relied upon his mortgage repayments made after separation that were not covered by the rent received on the property. 

12. In addition to the sum the wife inherited, she received assistance from her parents by the use of a motor vehicle, phones and $500 per week from the trust controlled by her parents.  The wife’s parents also provided the parties with whitegoods and holidays from time to time. 

13. Taking all those matters into account it cannot be said that the trial judge was in error in finding that the contributions that the parties made to their assets and to the welfare of their family were equal. 

14. Contrary to the assertions of the husband on appeal that, at the time of cohabitation, he had a superannuation entitlement of $18 683, the trial judge was entitled, as she did, to rely on an expert valuation of his superannuation interest at that time of $11 795.12.  Over a 10 year marriage a differential of this amount in initial financial contribution is not of great significance even where the property pool is, as here, modest.  Her Honour was therefore entitled to divide the superannuation in the same way as the other property.

15. The fact that the husband continued to contribute throughout the marriage to the superannuation fund does not, of itself, entitle him to a greater percentage. He was the primary income earner and the wife the primary parent and homemaker.

16. We are not satisfied that there was any error in the trial judge’s finding that the initial contributions of the husband required a finding that the contributions led to anything other than 50 per cent.

17. The next complaint is that the trial judge failed to take into account or give sufficient weight to the ability of the wife to access “significant financial resources” held by her parents’ family trust of which the wife was a beneficiary.  The difficulty with this submission is that there was no evidence before the trial judge that gave any indication whatsoever of the worth of the trust and it fails for that reason. 

18. As to the submission that the trial judge erred by failing to place sufficient weight upon the fact that a move by the husband to South Australia would have an adverse effect on his employment and his income earning capacity, we refer to her Honour’s reasons which indicate that was taken into account, at [173]: 

    The husband was asked whether he had applied for work at a lower level than his current employment.  He said he had considered it but it would have negative and permanent consequences.  He said the level below him in the public service is [at a level] which has a salary of $25,000-$30,000 less than his current salary.  However, the husband is highly qualified and will shortly achieve his [professional] qualification.  In my view there is not a major risk that he will be seriously disadvantaged in the long term by returning to Adelaide.

19. The real challenge to the exercise of the trial judge’s discretion to award a 15 per cent adjustment to the wife was that it was manifestly excessive and plainly unreasonable.  The property to be divided is not substantial.  That means that the wife, although receiving a significant percentage of the parties’ total assets, is not receiving a large sum.  She has greater expenses because of her mental health and a lower earning capacity than the husband.  Whilst different judges would give effect to those considerations by adopting different percentages, we are of the opinion that the trial judge’s determination falls within the generous ambit of a trial judge’s discretion.  The percentage is not so large as itself to indicate an error which would require our intervention. 

1. The husband sought to adduce further evidence on the appeal.  He indicated that this evidence was for the assistance of the court in the event that the appeal was allowed and the court was minded to itself determine the appropriate distribution of property.  That is not the position given the small adjustment made by us to the value of the assets and the application seeking to adduce further evidence will be dismissed.  

Costs

1. The parties indicated that subject to the outcome of the appeal they may wish to adduce evidence relevant to the determination of this issue of costs.  At present, it appears that there is force in the position that each party should pay their own costs but that certificates should be issued under the Federal Proceedings (Costs) Act 1981 (Cth). However if a party wishes to apply for costs, any application for costs, evidence in support and submissions should be filed within 28 days of the date of judgment with the other party having 28 days to respond in like manner.

2. The costs will be determined on the basis of those submissions.

3. If no such application is received, the costs order will be as foreshadowed and will be made at the end of 28 days if no application is received.   

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, Aldridge & Johnston JJ) delivered on 21 July 2015.

Associate: 

Date:  21 July 2015