Phillips & Phillips
[2002] FamCA 350
•29 May 2002
JFPHILLI
[2002] FamCA 350
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT BRISBANE
Appeal No. NA26 of 2001
File No. BR6728 of 2000
IN THE MATTER OF:
MARGARET MARY PHILLIPS
Appellant/Wife
- and –
PETER ROBERT PHILLIPS
Respondent/Husband
REASONS FOR JUDGMENT
BEFORE: Finn, Kay, O’Ryan JJ
HEARD: 7 August 2001
JUDGMENT: 29 May 2002
APPEARANCES:
Mr Jarrett of Counsel (instructed by Butler McDermott & Egan Solicitors, P O Box 117, Nambour Qld 4560), appeared on behalf of the Appellant Wife.
Mr Galloway of Counsel (instructed by Boyce Garrick Lawyers, P O Box 9, Mooloolaba Qld 4557), appeared on behalf of the Respondent Husband.
APPEAL SUMMARY
MATTER: Margaret Mary Phillips and Peter Robert Phillips
APPEAL NUMBER: NA 26 of 2001 (BR 6728 of 2000)
CORAM: Finn, Kay and O’Ryan JJ
DATES OF HEARING: 7 August 2001
DATE OF JUDGMENT: 29 May 2002
CATCHWORDS: PROPERTY – Value of property – whether trial Judge erred in failing to determine the value of the former matrimonial home – whether order for the sale of the former matrimonial home was “just and equitable” - s 79 Family Law Act 1975
CASES: Lenehan and Lenehan (1987) FLC 91-814; The Commonwealth v Milledge (1953) 90 CLR 157; Borriello and Borriello (1989) FLC 92-147; Norbis v Norbis (1986) FLC 91-712; JEL and DDF (2001) FLC 93-075.
This was an appeal by the wife against orders for settlement of property made by Jerrard J on 5 April 2001.
His Honour assessed the parties’ contributions as at the date of separation as 45 per cent by the wife and 55 per cent by the husband, and made an adjustment of 5 per cent in favour of the wife on account of post separation contributions. It was agreed between the parties that the children would reside with the wife and his Honour made a further adjustment of 20 per cent in the wife’s favour on account of this factor. His Honour considered the husband’s financial resources would adequately deal with any difficulties that the husband may face because of his health.
The wife sought to retain and remain living in the former matrimonial home. Jerrard J could not resolve differences between the views of the two valuers of the property and proposed orders for the division of the parties’ property which assumed the former matrimonial home was valued as the husband’s valuer contended. However, his Honour considered that as he was unable to fashion orders with which the wife was content (by transferring to the husband most of the parties’ assets other than the home), the former matrimonial home should be sold.
The wife’s grounds of appeal concerned two main issues, namely, the treatment by the trial Judge of the valuation of the parties’ former matrimonial home and his treatment of the s 75(2) factors.
HELD in allowing the appeal:
The Full Court found no error on the part of the trial Judge in relation to his inability to find a value for the former matrimonial home. However, the Full Court considered that to order a sale of the former matrimonial home, in circumstances where the wife and children had lived in the property since separation and continued to do so, fell outside the “generous ambit within which reasonable disagreement is possible” (see Norbis v Norbis (1986) FLC 91-712 per Brennan J at 75,178). The Full Court said that it is necessary to assess the practical effect of the findings as to entitlement when considering what is a just and equitable outcome. (JEL and DDF (2001) FLC 93-075).
Written submissions as to costs
Reportable
Introduction
This is an appeal by Margaret Mary Phillips (“the wife”) against orders for settlement of property made by Jerrard J on 5 April 2001. The respondent to the appeal is Peter Robert Phillips (“the husband”). There is no cross-appeal by the husband.
The relevant orders are:
“(1) That the WIFE transfer to the HUSBAND her interest in the Colonial Lifewise Insurance Policy now held jointly by the parties and her interest in 393 Commonwealth Bank shares now held jointly by the parties.
(2) That other than the parties’ real estate, each party is entitled as against the other to the property in and possession of the items of personal property each party presently owns or possesses and those items of property ordered herein to become the sole property of the respective party.
IT IS DECLARED:
(3) That neither party has any interest in the other party’s funds held by any superannuation authority or entity.
IT IS FURTHER ORDERED:
(4) That the parties take all such steps as are necessary and execute all documents necessary to cause the sale within 5 months of today’s date, or such other date as is agreed, of the parties’ property at 10 Evalma Drive, Buderim in the State of Queensland, and for that purpose the WIFE be appointed trustee of the property and solely authorised to take the steps necessary to effect that ordered sale.
(5) That upon the sale of the Buderim property, for which either party may bid or make offers, that after payment of the mortgage debt owing on the property and the costs and expenses of the sale that of the net proceeds remaining the HUSBAND be paid such amount less $48,448.00 as represents 30 per cent of the total of those net proceeds and the amount of $68,483.00.
(6) That the WIFE have the remainder.
(7) That in the event that the amount of $48,448.00 represents more than 30 per cent of the total of the net proceeds of sale and $68,483.00 when added together that the HUSBAND pay to the WIFE the difference between the figure that is 30 per cent of that total and $48,448.00
(8) That each party as against the other be solely liable for the debts on their respective credit cards.
IT IS DIRECTED:
(11) That each party have liberty to apply for any further direction or order on the giving of 7 days’ notice in writing to the other party about any matter arising on the sale of the property.”
Background Facts
The husband was born on 17 November 1956 and the wife was born on 9 December 1957. The parties commenced cohabitation in 1982 and were married on 14 January 1984. The parties separated on 14 March 2000.
There are two children of the marriage Joel James Phillips born on 15 August 1989 and Luke Matthew Phillips born on 3 March 1991.
In 1978 the husband sustained physical injuries in a motor vehicle accident. He suffered a fractured pelvis that required a hip replacement.
Both parties were in paid employment at or about the time they were married. The wife was working as a secretary and the husband as a refrigeration mechanic. After the parties were married the husband received compensation of either $87,000 as asserted by the husband or $90,000 as asserted by the wife.
After the husband received the compensation the parties purchased a home in Ferny Hills in Brisbane. The husband applied $30,000 towards the cost from his compensation and the balance was borrowed. The husband also lent $15,000 to his sister-in-law, purchased a motor vehicle for approximately $10,000 and expended money on overseas travel between October 1985 and October 1986. The husband at a later date was repaid the money that he lent to his sister-in-law.
Thereafter, the parties commenced to live in Western Australia where the husband obtained employment at Hamersley Mines as a refrigeration mechanic. They remained in Western Australia until sometime in 1997. During the period of this employment the husband completed a course as an apprentice electrician qualifying in 1986 and he obtained an electrical contractors ticket in early 1997. During the time the parties lived in Western Australia the husband earned from $45,000 to $68,500 per annum. When the husband ceased employment with Hamersley Mines he received a payout of $110,000 which sum was expended by the parties for the purposes of their marriage.
After the parties were married the wife was in paid employment until about mid October 1984. Thereafter, the wife did not engage in paid employment until about mid 1987. The wife worked in Western Australia, full time, in different positions from mid 1987 until mid 1989 when she ceased work due to the birth of the first child. Thereafter, the wife engaged in domestic duties and caring for the child until about 1994 when she obtained full time paid employment. In the period from mid 1989 until 1994 the wife obtained employment for approximately five months, but apart from that she was engaged full time in providing care for the two children and also attending to domestic tasks. Between 1984 and 1998 the wife received a relatively modest level of wages from paid employment compared to the husband.
In 1997 the husband had a hip replacement and was unemployed for about eight months.
In 1997 the parties returned to live in Queensland and occupied the home at 10 Evalma Drive, Buderim which they purchased in either 1992 or 1993. After the parties commenced to occupy the home at Buderim they expended money on improvements including the installation of an air conditioning system. This was funded by the payout which the husband received when he ceased work at Hamersley Mines.
After returning to Queensland the husband obtained paid employment as an air conditioning mechanic or refrigeration mechanic and worked for a number of employees. He worked in a number of locations and for some period was away from the family home.
The parties separated in about March 2000 when the husband ceased to occupy the matrimonial home. The husband currently resides at Caloundra and is unemployed. He was last in paid employment in November 2000. Since separation the wife has continued to reside in the home at Buderim and has been solely responsible for the care of the children.
The Trial Judgment
In his Reasons Jerrard J summarised the orders sought by each party. The husband sought a division of net property in the ratio of sixty per cent to the wife and forty per cent to himself. However, his Honour identified an affidavit that the husband filed in which he indicated that he would accept as an appropriate division of property sixty five per cent to the wife and thirty five per cent to him. The wife sought a division of property in the ratio of at least seventy five per cent to her and at most twenty five per cent to the husband.
His Honour set out the background facts and found that since separation, other than for one payment which the husband made, the wife was solely responsible for paying the mortgage on the Buderim home at a rate of $670 per month. His Honour found that she had paid something in the region of $7,370 since the parties separated. His Honour noted that the husband’s attitude since separation has been that he will not pay the mortgage debt on the home, nor the rates and that there is an outstanding amount of rates of $1,400. His Honour found that the wife seemed to have struggled to meet that liability and has been in receipt of a very limited amount of child support to assist her at least since November 2000 when the husband ceased employment.
His Honour said that the property of the parties was described in Exhibit 1 which reveals the following:
Husband’s Wife’s
Value value·10 Evalma Drive, Buderim $200,000.00 $170,000.00
·Holden motor vehicle $ 4,000.00 $ 4,000.00
·AMP Shares $ 16,879.27 $ 16,879.27
·Colonial Lifewise Insurance Policy $ 10,402.88 $ 10,402.88
·Colonial Life Policy $ 1,205.44 $ 1,205.44
·Colonial Life Policy $ 2,488.47 $ 2,488.47
·Wife’s furniture $ 15,000.00 $ 7,600.00
·Commonwealth Bank shares $ 16,736.20 $ 16,736.20
·Husband’s furniture $ 4,430.00 $ 4,430.00
·Wife’s jewellery $ 19,675.00 -
Liabilities
·Mortgage $ 90,000.00 $ 90,000.00
·Husband’s credit cards $ 4,000.00 -
·Wife’s credit cards $ 3,000.00 $ 3,000.00
His Honour noted that the agreed value of the wife’s jewellery was $4,743 and said that, subject to the value of the Buderim property, the values specified by the wife were accepted by the parties.
There was an issue about the value of the Buderim home. The husband called a valuer who was of the opinion that the property was worth $200,000. The wife called a valuer who was of the opinion that the resale value would be $170,000. His Honour found that the opinion of the wife’s valuer, although more realistic, suffered from the deficiency that the valuer’s comparative sales were all of one quarter acre blocks whereas the matrimonial home was one and a quarter acres in size.
As to the valuation by the husband’s valuer, his Honour found that this valuer’s opinion suffered from the deficiency that he relied upon sales of other properties which he had by and large not inspected. His Honour said:
“Accordingly, he was somewhat surprised on occasions at the descriptions given of them in cross-examination by the wife’s counsel, but was forced to concede that photographs taken of the comparative blocks he had not inspected, but which his value he had relied on, appeared to contradict the descriptions that he was giving of those blocks. For that reason, I have difficulty in accepting his opinion as to value too.”
His Honour found that the parties had a Colonial Lifewise Insurance policy worth $10,402, a Colonial Life Insurance policy worth $1,205, a Colonial Life Insurance policy worth $2,488 and Commonwealth Bank shares of which 140 were in the name of the husband and 393 in joint names. The agreed value of all of the property items, excluding the matrimonial home, was $68,483.
The parties agreed that the liabilities were a mortgage of $90,000 and credit card debts ($4,000 for the husband and $3,000 for the wife). His Honour found that each of the credit card liabilities was incurred as a debt that was reasonably regarded as a liability of the marriage and one which it was appropriate to take into account. His Honour found that he was satisfied that there was an agreed liability of $97,000. He also found that it was appropriate to include the debt of $1,400 for council rates, with the result that the parties had agreed liabilities of $98,400.
His Honour then proceeded to deal with the contributions of the parties. He found that had the husband not made the contribution earlier in the marriage of $90,000 that at the date of separation it would be appropriate to regard the parties as having made contributions that were equal until the date of separation. His Honour said:
“This is particularly because there is no evidence that either of them asked the other to do any more during their marriage, and that seems a comfortable reason for inferring that, as far as they were concerned, each of them was making a contribution in their different capacities, to their best ability, and a significant contribution in fact during their marriage.”
His Honour referred to authorities including Pierce and Pierce (1999) FLC 92-844 and said:
“Here, that $90,000 must be close to 50 per cent of the existing net asset pool, whichever or whatever value one places on the parties’ home. Accordingly, I think that it is a contribution which cannot be overlooked, made by the husband early in the marriage.”
His Honour found that the wife’s homemaking duties contributed to the husband’s increased future earning capacity by virtue of his having obtained extra qualifications during the marriage. His Honour concluded that as at the date of separation the respective contributions by the parties were appropriately regarded as being in the amounts of forty five per cent by the wife and fifty per cent by the husband. However, his Honour also found that as between separation and the date of the hearing the wife’s contributions to the care of the children must be regarded as significant in circumstances where she was paying the mortgage. His Honour found that the wife had been residing in the matrimonial home but that she made a contribution that meant that the parties liability was not as large as it would otherwise have been and that contribution meant that the children of the marriage continued to live in the home with which they were getting increasingly familiar. His Honour found that the wife’s contribution since separation required an adjustment in her favour in the order of five per cent with the result that the parties’ contributions at the date of hearing were equal.
His Honour then considered the matters in s.75(2) Family Law Act 1975 (“the Act”) He said that he was required to consider the parties’ state of health, income, property, financial resources, capacity for appropriate gainful employment and also their care of the children. His Honour said that the care of the children was important because the parties agree that the children will reside with the wife.
In relation to the wife’s responsibility for the ongoing care and accommodation of the children his Honour found that the care of children will limit a parent’s employment opportunities and employment mobility apart from all other effects on a person’s life that the ongoing care of children have, whether or not child support is being paid. Further, that the care of children imposes a capital need upon a parent. In the result his Honour found that an adjustment had to be made in favour of the wife by reason of the fact that she was caring for the children and he was satisfied that the adjustment should be twenty per cent.
His Honour then went on to say:
“There is a matter, namely, the husband’s health, which is relevant because of the fact that there is a known challenge to his future capacity to have physically active employment, namely, his hip disability. So far it has not handicapped him and he presently expects in the future to be gainfully employed. He has a demonstrated capacity to earn a higher than average wage. He also suffers from Hepatitis C, and he has in the past experienced depression. As against that, he has a financial resource presently of a superannuation benefit, currently standing at $63,000”.
His Honour found that the superannuation resource would adequately deal with any difficulties the husband may have because of his health and concluded that he was of the view that an appropriate division of the parties’ property was seventy per cent to the wife and thirty per cent to the husband.
His Honour then said:
“After discussion between myself and counsel, I have come to the conclusion that in a case in which I cannot in conscience resolve the difference between the views of the two valuers, there is a way in which I can fashion orders that reflect what I consider the appropriate division of the parties’ property, and which will give the wife the opportunity she seeks of remaining living in the matrimonial home.”
His Honour identified what the wife sought namely, that she retain the home and be responsible for the mortgage, that she retain her interest in a Holden Commodore Station Wagon and that she retain Colonial Life Insurance policies valued at $4,800. His Honour said that the orders that he intended to make would be very much the same other than he would order that the wife transfer to the husband her interest in two Colonial Life policies which have a total value of $3,693 and not $4,800. He said that the reason why he would make these orders is that they were close to what the wife was seeking and that the net result was what the wife sought less the Colonial Life insurance policies to the value of $3,693. His Honour said that the result would mean that he would order the transfer to the husband’s name solely of the Colonial Life insurance policy, the two Colonial Life policies and the Commonwealth Bank shares, held in joint names, and the effect would be that the husband would receive in his hands total net assets with a value of $52,140. His Honour then said:
“My reason for thinking that this is a result which is just, equitable and appropriate is that it assumes in the husband’s favour that the real property really is worth $200,000 as his valuer says.”
His Honour concluded by saying:
“In this case, because I am not able to come to a view as to the actual value of the property at 10 Evalma Drive, Buderim, and because I have been unable to fashion an order with which the wife is content and which would assume its value was as the husband contends but nevertheless leave her living in the home, I make the following orders.”
Grounds Of Appeal
There are seven grounds of appeal in the amended Notice of Appeal. The wife abandoned Grounds 2 and 6. Counsel for the wife said that there are two main points relied upon namely the treatment by the trial Judge of the valuation issue and his treatment of the s.75(2) factors.
The appeal is an appeal from discretionary orders and is thus governed by the principles enunciated in House v The King (1936) 55 C.L.R. 499. It is unnecessary to again state those principles.
Before us neither counsel sought to demonstrate the effect of the orders made by his Honour. His Honour found that excluding the Buderim property the parties had the following property:
· Holden motor vehicle $ 4,000.00
· AMP Shares $16,879.27
· Colonial Lifewise Insurance Policy $10,402.88
· Colonial Life Policy $ 1,205.44
· Colonial Life Policy $ 2,488.47
· Wife’s furniture $ 7,600.00
· Commonwealth Bank shares $16,736.20
· Husband’s furniture $ 4,430.00
· Wife’s jewellery $ 4,743.00
Total $68,483.00
His Honour found that the liabilities were as follows:
· Mortgage $90,000.00
· Husband’s credit cards $ 4,000.00
· Wife’s credit cards $ 3,000.00
· Rates $ 1,400.00
Total $98,400.00
His Honour said that the husband would receive total net assets with a value of $52,140 which appears to be calculated as follows:
· AMP Shares $16,879.00
· Colonial Lifewise Insurance Policy $10,402.00
· Colonial Life Policy $ 1,205.00
· Colonial Life Policy $ 2,488.00
· Commonwealth Bank shares $16,736.00
· Husband’s furniture $ 4,430.00
Total $52,140.00
The husband has to meet his credit card debt of $4,000 with the result that he has property of a net value of $48,140.
The wife would receive the following:
·Holden motor vehicle $ 4,000.00
·Wife’s furniture $ 7,600.00
·Wife’s jewellery $ 4,743.00
Total$16,343.00
Less credit card debt ($ 3,000.00)
Balance$13,343.00
The trial Judge ordered that the Buderim property be sold and that after payment of the mortgage debt and the costs and expenses of sale from the proceeds of sale the husband be paid such amount less $48,448 as represents thirty per cent of the total of the net proceeds and the amount of $68,483. He also made an order that in the event that the amount of $48,448 represents more than thirty per cent of the total of the net proceeds of sale and $68,483 when added together that the husband pay to the wife the difference between the figure that is thirty per cent of that total and $48,448.
It is confusing. However, if the Buderim property sold for $200,000 then subject to costs after payment of the mortgage the equity would be $110,000 and the property of the parties’ would have a total value of $178,483. The husband would be entitled to receive $5,096.90 from the proceeds of sale being thirty per cent of the parties’ total assets or $53,544.90 less $48,448. If the property sold for $170,000 then subject to costs of sale the equity would be $80,000 and the property of the parties would have a total value of $148,483 of which thirty per cent is $44,544.90. The husband would have to pay to the wife $3,903.10.
It is clear from the discussion, which his Honour had with counsel as to the form of the orders that he was attempting to achieve an outcome whereby the wife would be able to retain the Buderim property. In fact after allowance for costs of sale, and assuming a sale price of $200,000, his Honour calculated that if the husband received various items of property then the wife would be able to receive the Buderim property. His Honour made it clear that he was trying to avoid a sale of the property. However, the wife would not agree that the husband receive all of the property identified and sought the two Colonial Life Insurance policies. His Honour then said that because he was not able to come to a view as to the value of the Buderim property, and because he was unable to fashion an order with which the wife would be content, and which would assume the husband’s value and leave the wife in the home, he proceeded to make the orders which provided for a sale of the property. The outcome of the orders however, is that the husband does receive the property being items 3, 4, 5, 6, 8 and 9 identified in Exhibit 1. We assume that the two Colonial Life Insurance policies are not the subject of a discrete order because they are in the sole name of the husband. Because his Honour could not find a value for the Buderim property he gave the husband various assets, assumed a selling price of $200,000 and made an order that the wife could bid or make an offer to acquire the property. In the event that the property sold for less than $200,000 then there was provision for payment by the husband to the wife of an ascertainable amount.
Grounds 1 and 7
In the written Summary of Submissions of the wife, submissions were made in relation to Grounds 1 and 7 which are:
“1. The learned trial judge erred in law and in fact when he:
(a)found that the evidence of Bob Henderson & Associates Trevor Bendle, Valuer, unreliable
(b)found that he could not ascribe value to the real property owned by the parties and situated at 10 Evalma Drive, Buderim in the State of Queensland
…
7. The trial of the matter miscarried or in the alternative the learned trial judge erred in Law and in fact when he found that the real property at 10 Evalma Drive, Buderim must be sold in order to give effect to the division of the assets 70% to the wife when the property does not need to be sold to satisfy the Orders.”
In proceedings pursuant to s.79 of the Act the first step is to identify and value the financial circumstances of the parties being property, liabilities and financial resources. In undertaking this task the Court is frequently confronted with issues of identification and valuation of assets. In Lenehan and Lenehan (1987) FLC 91-814 the Full Court said at p.76,142:
“A trial Judge, as part of his ultimate responsibility under sec. 79 or otherwise, is normally required to determine a number of issues. Some of those issues may properly attract the evidence of expert witnesses. In appropriate circumstances their opinions are admissible to assist in the determination of such an issue. It is the responsibility of the trial Judge to take into account the opinions of such witnesses; however the ultimate duty of the Judge is to determine the issue on the whole of the material before him including such opinions. The expert evidence is called to enable the Judge to form his own independent judgment on the matter by the application of the appropriate principles.”
In The Commonwealth v Milledge (1953) 90 C.L.R. 157 the High Court at pp.161-162 said that the correct approach to be applied to the resolution of a valuation dispute should be a common sense endeavour after consideration of all material to fix a value satisfactory to the mind of the Court as representing the value.
As to ‘appropriate principles’ there is no fixed rule as to the proper method of valuation and the preferred methodology depends upon the facts of the case: Mallet v Mallet (1984) FLC 91-507 at p.79,121 per Mason J and Georgeson and Georgeson (1995) FLC 92-618 at p.82,218. However, the Court cannot adopt a valuation methodology that is fundamentally flawed and not applicable to the facts of the case: Elsey v Elsey (1997) FLC 92-727.
If there is a dispute as to the value of an asset and the Court prefers one expert to another, then reasons for the preference should be stated: Gamer and Gamer (1988) FLC 91-932 at p.76,746-76,747. Where there is a discrepancy between two or more values it is not open to the Court merely to adopt a mean or average figure between the rival opinions: Lenhan and Lenehan (supra) at 76,142. However, this does not mean that, when faced with two competing valuations, the Court is bound to accept one or the other. The Court is able to form its own separate view as to the value by the proper application of established principles of valuation. In Borriello and Borriello (1989) FLC 92-049 the Full Court, referring to the decision of the High Court in The Commonwealth v Milledge (supra), said at p.77,558:
“It is, we think, apparent that the High Court was not laying down a principle that the trial Judge was obliged to accept any particular valuer, but rather that it was necessary for him to satisfy himself by means of the application of proper principles, that he had arrived at the value of the property on the relevant date. If that value happens to be different to the values ascribed to the relevant property by the valuers called in evidence, this in itself does not affect the validity of the judge’s finding, provided that he has applied proper principles”.
However, in Borriello the Full Court also said at p.77,559:
“We are not however to be taken as saying that we necessarily agree with the conclusion of the Full Court that the fact that the trial Judge in Lenehan’s case had taken the midpoint between the two valuations necessarily vitiated his decision. We can envisage situations where a trial Judge may be left in the position of considering that the two competing valuations represent a range and genuinely considering that the true valuation lies at or about the midpoint. Valuation is rarely such an exact science that in such circumstances a Judge could realistically conclude that the correct valuation was, for example, 55% rather than 50% less than the gap between the two valuations. In such a case it would be perfectly proper for the trial Judge to adopt a midpoint valuation. We think that a Judge, faced with a gap between two or more valuations, where the Judge considers that on the probabilities the higher or lower valuation as the case may be should be lowered or increased by some percentage to arrive at the true value, is perfectly at liberty to so adjust it as he sees fit. As we see it the vice complained of in both Milledge’s case and perceived by the Full Court in Lenehan’s case was the use of means and averages without the application of proper principles”.
If there is a disparity in the evidence, such that it is too difficult and complex for the Court to accept a valuation or come to a separate conclusion as to value on the application of proper principles and methodology, it may be a more proper solution for the Court to consider a sale of the property. In Little and Little (1990) FLC 92-147 the Full Court said at p.78,020:
“Whilst a trial judge should determine a disputed issue of valuation where the evidence enables him to do so, we do not accept that there is an obligation cast upon him to determine such a disputed issue irrespective of the state of the evidence. It may be such that a determination is not possible. In such a case, as in a case where there is a very considerable disparity in the valuation evidence and other evidence indicates that the actual ascertainment of the true value is difficult and complex, the proper solution as between the parties may be to order a sale.”
In Smith and Smith (1991) FLC 92-261 the Full Court said at p.78,759:
“…where the state of the evidence makes the process of valuation hazardous or uncertain, or where there are wide differences between legitimate valuations because of a volatile market or peculiarities relating to the specific property or otherwise, the ascertainment of value by judicial process may become too uncertain and the preferable course is to order the sale of the property so that its real value can be revealed by market forces.
…
The fact that each of the parties seeks a transfer of that property and neither seeks a sale is not in itself a reason for not adopting that approach: indeed it may emphasize the desirability of doing so in order to avoid the lottery effect which may be involved in choosing between one party and the other.”
Given that the value of the land was the most important issue, in our view his Honour was entitled to consider the size of the land as determinative. In the result we are of the opinion that it was within his Honour’s discretion, on the evidence, to reject the opinion of the wife’s valuer.
It is then submitted that the trial Judge was in error in that he made no attempt, after consideration of all of the material, to find a value for the property. The submission suggests that once his Honour determined that he could not accept the evidence of the parties’ valuers, he had an obligation to make a finding as to value having regard to the evidence and the application of appropriate principle. If a trial Judge is unable to accept the opinion of value given by the parties’ experts what he/she cannot do is simply take the mean or average of the two opinions. Further, a trial Judge cannot approach the task on the basis that there is an obligation to prefer one opinion over the other. If a trial Judge is unable to prefer one opinion over the other then he/she may determine a value having regard to the evidence and the application of proper principle. However, the ability of a trial Judge to reach a separate opinion as to value depends on the evidence and other considerations such as the type of property being valued and the appropriate method of valuation. If a trial Judge is of the opinion that he/she cannot undertake this task then it is within his/her discretion to require that further evidence be given addressing the issue or in appropriate cases ordering a sale of the relevant item of property. In our view, a trial Judge should give reasons why he/she is unable to reach a separate opinion of value where the trial Judge has rejected the opinions of the parties’ experts.
The parties could not agree on the value of the Buderim property for the purposes of the proceedings notwithstanding that the difference in value was $30,000 and in circumstance where the valuers used the comparable sales method of valuation with all the uncertainties and subjective opinion that this approach entails. The trial Judge was therefore required to undertake the task of finding a value of the property.
His Honour did not accept the valuer for the husband for reasons which he gave. He also did not accept the valuer for the wife and gave reasons why. During the trial in January 2001 his Honour expressed concern about his ability on the evidence to decide the value and no attempt was made at the resumed hearing in April 2001 to call any further evidence to assist him.
The wife’s valuer did explain in cross examination why he chose as comparable sales properties which had a land area significantly smaller than the Buderim property. He said that the Buderim property was basically a house site and that the extra size of the land did not add a great deal of value because it is steep and broken and thus there are difficulties with maintenance. He suggested that people do not necessarily pay more for the size of the block.
The wife’s valuer put a value of $110,000 on the dwelling and improvements and a value of $60,000 on the land. The husband’s valuer put a value of $120,000 on the dwelling and improvements and a value of $80,000 on the land. Thus the main area of disagreement was about land value, namely $20,000, and this was conceded in cross-examination by the wife’s valuer.
In his reasons the trial Judge did not refer specifically to the oral evidence of the wife’s valuer. However, his Honour said:
“It was the case, as one of the valuer’s remarked, that some people like bigger blocks and some people do not. For some it is a burden, because it is a larger area to mow, and for some it is a delight because there is a bigger area in which children can play. I think for that reason it is difficult to be confident about a valuation which is based on comparative sales of blocks which were uniformly one-fifth in size of that being valued.”
57.In this case the trial Judge did not attempt to arrive at a separate value and he made an order for sale. It is very difficult for a trial Judge, in the absence of evidence, to reach a separate opinion as to value. A consideration of the written and oral evidence of the two valuers does not reveal a process of reasoning as to how they arrived at the separate values of the land and the improvements. This would have been at least helpful to the trial Judge. His Honour also did not have the benefit of a joint statement of experts in which they set out the areas of disagreement and the reasons why one opinion was to be preferred over the other. Again this would have been of assistance. Further, no attempt appears to have been made by counsel to assist his Honour. For example, there was no further evidence given after 30 January 2000. Finally, in written and oral submissions before us counsel for the wife made no submission suggesting how the trial Judge could have undertaken the task.
In conclusion, we are satisfied that no error has been established and that Grounds 1 and 7 must fail.
Grounds 3, 4 and 5
Submissions were made in relation to Ground 3 and Grounds 4 and 5 which are:
“3. The learned trial judge erred in fact when he found that the husband would face difficulties in the future with respect to his income earning capacity by reason of his health.
4. The learned trial judge erred in law and in fact by failing to make any adjustment to the parties contributions based entitlement:-
(a)by reason of the husband’s greater earning capacity.
(b)the husband’s greater financial resources and in particular, superannuation.
5. The learned trial judge erred in law and in fact when he found that an appropriate division of the parties’ property was 70% to the wife and 30% to the husband respectively.”
The trial Judge made a finding that the wife’s contribution based entitlement was fifty per cent . His Honour then made an adjustment of twenty per cent in favour of the wife having regard to the matters in s.75(2). In the written summary of the wife there is no complaint about his Honour’s findings in relation to the matters of contribution. However, it is submitted that the appropriate outcome should be eighty per cent in favour of the wife. It is also submitted that an adjustment of ten per cent was called for by reason of the husband’s superior earning capacity and financial resources. Thus we understand the submission to be that his Honour should have made an adjustment of thirty per cent in favour of the wife having regard to the matters in s.75(2). The orders sought in the Notice of Appeal seek seventy five per cent .
His Honour took into account the wife’s responsibility for the support and accommodation of the children, a matter on which he appears to have placed significant weight. He came to the conclusion that there should be an adjustment of twenty per cent to reflect this important matter. The trial Judge then considered and took into account the husband’s state of health, superior earning capacity and superannuation entitlements and came to the conclusion that the superannuation resource should adequately deal with any difficulties that the husband may experience because of his health and made no further adjustment in favour of either party.
In support of Ground 3 it is submitted that his Honour’s finding that the husband would face difficulties because of his health was not supported by the evidence. This is not correct. What his Honour said was that the hip disability of the husband had not handicapped him, that he presently expects in the future to be gainfully employed and that he has a demonstrated capacity to earn a higher than average income.
The written submissions in support of Ground 4 simply assert that the husband’s earning capacity is, and has throughout the marriage been greater than the wife’s and his Honour failed to take into account the husband’s superior earning capacity. Further, that there was a significant disparity between the superannuation of the husband and the wife and that save for dealing with the husband’s superannuation as “offsetting” his impaired earning capacity his Honour gave no other consideration to this matter. We do not agree. It is clear that his Honour did take these matters into account.
In conclusion, in our view, Grounds 3 and 4 must fail.
As to Ground 5 it is submitted that the result arrived at by the trial Judge was unreasonable and unjust in the appellate sense. The wife was seeking to retain the Buderim property and avoid a sale and this was what his Honour also sought to achieve as is apparent from discussion with counsel. We have found no error on the part of his Honour in relation to his inability to find a value for the Buderim property. However, consideration of the effect of his Honour’s orders reveals that the difference in the value of the net assets asserted by each party was only $30,000 and, for example, if the Buderim property sold for $200,000 the husband would receive $5,096 from the proceeds of sale and if it sold for $170,000 the husband would pay $3,903 to the wife.
The obligation of a trial Judge in dealing with an application pursuant to s.79 of the Act is to make an order that is just and equitable in all the circumstances having regard to the matters of contribution and the other factors, including the matters in s.75(2) of the Act. A trial Judge must identify and value the assets of the parties, identify and assess the matters of contribution and identify and assess the relevant other factors. It is also necessary, having undertaken these tasks, to be satisfied that the proposed outcome is just and equitable.
In JEL and DDF (2001) FLC 93-075 Holden and Guest JJ said at 88,332:
“140. This is why the ‘‘fourth step’’ , namely whether the result is just and equitable, becomes important. In Clauson and Clauson (1995) FLC ¶92-595 the Full Court (Barblett DCJ, Fogarty and Mushin JJ) recognised, albeit in a discussion of the s 75(2) factors, that the application of percentages does not necessarily result in a just and equitable result, when it said at 81,911:
“There is, we think, at times a tendency to assess s 75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the s 75(2) factors will be assessed in a range between 10% and 20%. A number of cases will justify an assessment outside those parameters and in any event it is the real impact in money terms which is ultimately the critical issue.”
141. More recently, in Russell v Russell (1999) FLC ¶92-877 , the Full Court said at 86,439:
“[I] must be remembered ... that under s 79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties’ assets.”
142. The Full Court took the opportunity to emphasise that in the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered.”
In our view, in this case, if his Honour had considered the effect of his findings as to the entitlements of the parties, whatever the value of the Buderim property, it would have been apparent, having regard to the narrowness of the issues, and in particular the valuation issue, that it would have been within his discretion to order a transfer of the Buderim property to the wife. The land value difference was only $20,000 and is further reduced if allowance is made for costs of sale. The overall difference in value was only $30,000. In our view, this is a case where what was a just and equitable outcome had to be considered not in percentage terms, but rather in terms of the assets that the parties would ultimately hold, even though there was a dispute as to the value of the principal asset and the valuations were not very dissimilar. If his Honour had considered the real impact of the orders he proposed, and in particular the order for a sale of the Buderim property, it would have been apparent that the result was not just and equitable.
While we are extremely conscious of the limits on appellate interference with discretionary judgments, especially in circumstances such as the present where it is not possible to identify any error by the trial Judge, and the quantum of the amount in dispute, nevertheless, in our view, to order a sale of the Buderim property fell outside the “generous ambit within which reasonable disagreement is possible”. The wife and the children had lived in the property since separation and intended to continue to do so. The wife had paid over $7,000 towards the mortgage since separation thus enabling the property to be retained. This intangible consideration was something we think his Honour should have given weight to when framing his orders. (see Myerthall v Myerthall (1977) FLC 90-273). The husband’s entitlement could be satisfied from other assets and he would retain his superannuation.
We do not suggest that a trial Judge would fall into error simply because he/she did not set out a list of the assets which each party would retain as a result of his/her decision. However, it is necessary to “stand back” and consider if overall the ultimate award was just and equitable to both parties and in our view that is what his Honour failed to do in this case. We are therefore satisfied that Ground 5 has been established
Re-exercise of the discretion
We understood it to be common ground that in the event that we upheld the wife’s appeal that we should re-exercise the discretion ourselves. This we are prepared to do. In so doing we need only say that in the circumstances of this case, given the findings of his Honour we consider that an appropriate outcome is that the wife receive the Buderim property.
We do not propose to interfere with his Honour’s findings as to the value of the assets, the contribution based entitlements of the parties or the percentage adjustment to be made in consequence of consideration of the other factors. We are also unable to come to a separate opinion as to the value of the Buderim property.
In Norbis v Norbis (1986) FLC 91-712 Mason and Deane JJ said at p.75,165:
“Here the order is discretionary because it depends on the application of a very general standard-what is “just and equitable”- which calls for an overall assessment in the light of the factors mentioned in sec. 79(4), each of which in turn calls for an assessment of circumstances. Because these assessments call for value judgments in respect of which there is room for reasonable differences of opinion, no particular opinion being uniquely right, the making of the order involves the exercise of a judicial discretion. The contrast is with an order the making of which is dictated by the application of a fixed rule to the facts on which its operation depends.”
In determining an application pursuant to s.79 findings will usually be made as to the entitlements of the parties expressed as a percentage of the net assets of the parties having regard to the matters of contribution and the other factors. However, when considering whether or not the overall result is just and equitable a further adjustment may be warranted depending on the circumstances of the case. This is such a case, the circumstances being the small net asset pool, the inability to find a value for the major item of property being the former matrimonial home at Buderim, about which there is a relatively minor dispute as to value, and that the wife and the children should continue to occupy this property if this can be achieved.
In our view, in all the circumstances of this case, a just and equitable outcome is that each party should receive the items of property provided for by the orders of Jerrard J with the exception that the husband transfer his interest in the Buderim property to the wife and the wife assume sole responsibility for the mortgage secured on the title of this property.
Costs of the appeal
At the conclusion of the hearing of the appeal we did not hear arguments in relation to costs of the appeal and indicated that we proposed giving directions for the filing and service of written submissions in relation to costs.
Orders
That the appeal be allowed.
That Orders 4, 5, 6 and 7 of the orders made on 5 April 2001 by Jerrard J be set aside and in lieu thereof the following orders be substituted:
“5 That by 4 pm on 12 July 2002 the husband do all acts and things and execute all documents and writings necessary to transfer to the wife all of the husband’s right, title and interest in the property situate at and known as 10 Evalma Drive, Buderim in the State of Queensland (“the Buderim property”).
6 That the wife do all acts and things, execute all documents and writings and pay all moneys necessary to indemnify and keep indemnified the husband against all claims, actions, suits or demands that may be made against the husband arising out of or in relation to the mortgage debt secured on the title of the Buderim property and all council rates, including arrears, if any.”
That either party be at liberty to make an application by way of written submissions in respect of costs of this appeal within twenty one (21) days of this date.
That the other party be at liberty to file and serve written submissions in answer thereto within fourteen (14) days thereafter.
That the first mentioned party have a further seven (7) days in which to make any written submissions in reply thereto.
I certify that the preceding 76 paragraphs are a true copy of the reasons for judgment delivered by this Honourable Full Court
[C Parsons]
Associate
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