Polonius & York
[2010] FamCAFC 228
•10 November 2010
Family Court of Australia
| POLONIUS & YORK | [2010] FamCAFC 228 |
| FAMILY LAW - APPEAL – PROPERTY – Whether the Federal Magistrate erred in his finding in relation to the assessment of contribution – Long period of cohabitation – Lengthy period of separation – Where the Wife accumulated significant assets after separation – Where in such circumstances it may be more useful to undertake an assessment of contributions on an asset by asset or category of asset by category of asset basis –Where the Federal Magistrate was in error in relation to the manner in which he balanced and assessed the respective contributions of the parties and also in relation to the weight which he attached to the contributions by the Husband – Error established FAMILY LAW - APPEAL – PROPERTY – Whether the Federal Magistrate erred in relation to his treatment of the matters in s 75(2) of the Family Law Act 1975 (Cth) by reason of s 79(4)(e) – Where the Federal Magistrate made no adjustment in favour of either party by reason of the matters in s 75(2) of the Family Law Act 1975 (Cth) and in particular s 75(2)(b) – Where the Federal Magistrate relied upon the dissenting judgment of Guest J in Farmer and Bramley (2000) FLC 93-060 – Where there was an enormous disparity in the financial circumstances of each party – Error established FAMILY LAW - COSTS – Appeal allowed – Costs certificates granted to both parties in respect of the appeal and of the rehearing |
| Boege and Boege [2001] FamCA 1167 Browne v Green (1999) FLC 92-873 DJM v JLM (1998) FLC 92-816 Doherty and Doherty (1996) FLC 92-652 Farmer and Bramley (2000) FLC 93-060 Fisher and Fisher (1990) FLC 92-127 Garrett and Garrett (1984) FLC 91-539 Georgeson and Georgeson (1995) FLC 92-618 Gronow v Gronow (1979) 144 CLR 513 Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 House v The King (1936) 55 CLR 499 Judkins and Santamaria [2003] FamCA 618 Kennon v Kennon (1997) FLC 92-757 Kowaliw and Kowaliw (1981) FLC 91-092 Mallet v Mallet (1984) 156 CLR 605 M and M [1998] FamCA 42 Mead and Mead (1983) FLC 91-354 Norbis v Norbis (1986) 161 CLR 513 Parshen v Parshen (1996) FLC 92-720 Pierce v Pierce (1999) FLC 92-844 Sheedy and Sheedy (1979) FLC 90-719 Sieling and Sieling (1979) FLC 90-627 Soblusky and Soblusky (1976) FLC 90-124 Zalewski and Zalewski (2005) FLC 93-241 |
| Family Law Act 1975 (Cth) – s 75(2), s 79, s 79(4), s 117(1), a 117(2) Federal Proceedings (Costs) Act 1981 (Cth) – s 6, s 8, s 9 |
| APPELLANT: | MR POLONIUS |
| RESPONDENT: | MS YORK |
| FILE NUMBER: | MLC | 1439 | of | 2008 |
| APPEAL NUMBER: | SA | 94 | of | 2009 |
| DATE DELIVERED: | 10 November 2010 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Boland, Thackray & O’Ryan JJ |
| HEARING DATE: | 7 May 2010 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 23 October 2009 |
| LOWER COURT MNC: | [2009] FMCAfam 1082 |
Representation
| COUNSEL FOR THE APPELLANT: | Mr T. Moisidis |
| SOLICITOR FOR THE APPELLANT: | Fong & Co. Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr G. Holmes |
| SOLICITOR FOR THE RESPONDENT: | Campbell & Shaw Lawyers |
Orders
The appeal is allowed.
The order made on 23 October 2009 pursuant to s 79 of the Family Law Act 1975 (Cth) by Federal Magistrate McGuire is set aside.
The applications for property settlement are remitted to the Federal Magistrates Court for redetermination by a Federal Magistrate other than Federal Magistrate McGuire.
The Appellant is granted a costs certificate pursuant to the provisions of s 9 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 under that Act to the Appellant in respect of the costs incurred by the Appellant in relation to the appeal.
The Respondent is granted a costs certificate pursuant to the provisions of s 6 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 under that Act to the Respondent in respect of the costs incurred by the Respondent in relation to the appeal.
The Appellant and the Respondent are each granted a costs certificate pursuant to the provisions of s 8 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 under that Act to both parties in respect of such part as the Attorney-General considers appropriate of any costs incurred by both parties in relation to the new trial granted by these orders.
IT IS NOTED that publication of this judgment under the pseudonym Polonius & York is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SA 94 of 2009
File Number: MLC 1439 of 2008
| MR POLONIUS |
Appellant
And
| MS YORK |
Respondent
Reasons For Judgment
Introduction
This is an appeal against a property settlement order made pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) by Federal Magistrate McGuire on 23 October 2009. The Appellant is Mr Polonius (“the Husband”) and the Respondent is Ms York (“the Wife”).
For the purpose of the property settlement proceedings, the Federal Magistrate found at [20] and [21] of his reasons that at the date of the hearing the parties had property interests of a net value of $823,971.00 and superannuation interests of a value of $49,226.00.
The Federal Magistrate observed at [16] and [17] that at the hearing the Husband proposed “a 50/50 division of the net property of the parties. [The Husband] argues that he should retain the former matrimonial home [the former matrimonial home] in Victoria” and that the Wife proposed “that the [Husband]’s application be dismissed and that she therefore retain the entirety of the property pool”.
On 23 October 2009 the Federal Magistrate made the following property settlement order:
1. That within 28 days of the date of these order [sic] the applicant [Husband] vacate [the former matrimonial home] in Victoria and registered in the name of the [Wife].
2. That in all other respects each party be solely entitled to the exclusion of the other to all real estate registered in the name of that party and to all other property including but not limited to personalty, chattels, motor vehicles, bank accounts and superannuation policies in the possession of or under the control of that party as at the date of these orders.
3. That each party be solely responsible for and indemnify the other against any and all liabilities secured against any of the assets to be retained by that party or incurred by that party either in that party’s name alone or in joint names.
AND THE COURT DECLARES
A. That these orders are intended to finally determine the financial relationships between the parties with respect to Part VIII of the Family Law Act 1975. (bold in original)
In summary, his Honour made an order under s 79 as sought by the Wife.
On 19 November 2009 the Husband filed a notice of appeal. In the notice of appeal there are 16 grounds of appeal. However, counsel for the Husband informed us that all but four grounds were abandoned. In a written summary of argument filed on behalf of the Husband on 31 March 2010 only grounds 13, 14 and 16 were referred to. During discussion, counsel for the Husband informed us that ground 15 was also pursued.
Before us it was agreed by both parties that if the appeal was successful then we should decline to re-determine the matter and remit the proceedings for redetermination by a Federal Magistrate.
Background
The Wife was born in 1952 and the Husband was born in 1953.
The parties commenced cohabitation in 1975. They first resided in rented accommodation.
The Federal Magistrate found at [46] that at the commencement of cohabitation neither party had any substantial assets.
In or around 1977 or early 1978 the parties purchased, in joint names, the former matrimonial home for a price of approximately $52,000.00. In February 1978 the parties took occupation of the property. To pay the cost of purchase, the parties borrowed $40,000.00 from a building society and also borrowed $5,000.00 from the Wife’s mother. The Wife contended in her affidavit sworn on 30 July 2009 that the parties had “joint funds of around $7,000.00” and also obtained a “government housing grant”.
At the time of purchase of the former matrimonial home both parties were in paid employment. The Wife was a secretary and the Husband was a car salesman.
The parties were married in October 1980.
In 1982 the child R was born. As such, the Wife ceased paid employment and obtained three months paid maternity leave and also three months long service leave.
The Wife contended in her affidavit sworn on 30 July 2009 that she had a superannuation interest of about $11,000.00 that she had accumulated before the parties first met. The Wife further deposed in this affidavit, and her affidavit sworn on 20 May 2008, that during this time she accessed the superannuation fund and inter alia used the money from the fund to pay off the mortgage secured on the title of the former matrimonial home. In the Wife’s outline of case document filed 4 August 2009 it was said under “Relevant factors regarding contribution pursuant to section 79(4)(a)(b) and (c)” that the Wife “arranged to pay out the outstanding mortgage on [the former matrimonial home] in 1982, with $11,000.00 received from superannuation benefits and long service leave”. We observe that during the hearing before the Federal Magistrate on 4 August 2009 there was the following exchange during the Husband’s examination-in-chief: “She also said that she accessed $11,000.00 of superannuation of which she had accumulated prior to meeting you. What’s your recollection of that?---In those days, I think we were earning about 60 or $70 a week, and that seems like a heck of a lot of money to accumulate in three years’ working life” (Transcript, 4 August 2009, p 11). We observe that before the Federal Magistrate the Wife gave no oral evidence regarding this matter and nor did his Honour refer to this evidence in his reasons for judgment. We make a further observation that this matter was not raised during discussion before us at the hearing of the appeal.
In late 1982 the Wife resumed part-time paid employment.
The Wife contended that in 1983 the Husband “was buying and selling motor cars in his own right and [the former matrimonial home] was used as security for a business loan for him and thereafter the property was similarly used for a number of other loans” for the Husband.
The Federal Magistrate found at [5] that during the marriage the Husband was “involved in the motor vehicle trade business. At times he owned and ran a car yard involving the ownership of stock. More lately he claims to have operated as a broker, which apparently does not involve him owning and holding stock”.
In 1984 the child K was born. As such, the Wife ceased paid employment for a brief period of time.
In or around 1984 or 1985 the Wife resumed paid employment. The Wife worked part-time with the Country Roads Board. In 1989 the Wife commenced part-time employment as a secretary. In 1995 the Wife commenced full-time paid employment at School G.
The Federal Magistrate observed at [33] that Ms C, the Husband’s partner and former employee, gave evidence that from 1985 to 1998 a weekly allowance was paid from the Husband’s business to the Wife.
In 1995 the child R commenced to attend School E.
In 1995 the Wife received an inheritance of $10,366.00 from the estate of a late aunt.
The Wife testified in her affidavit sworn on 30 July 2009 that in 1995 the Husband obtained the proceeds of sale of the Wife’s motor vehicle and failed to account to her for the money or the reason why he sold her motor vehicle.
In 1997 the child K commenced to attend School E.
The Wife contended in her affidavit sworn on 30 July 2009 that in July 1997 she became aware that a caveat had been lodged over the title to the former matrimonial home and it was claimed to be because of a mortgage dated 1 May 1985 to AP Pty Ltd. The Wife contended that she had never signed a mortgage to AP Pty Ltd and she instructed solicitors to act on her behalf. The Wife contended that she asked the Husband to accompany her to her solicitor’s office in order that he could explain the circumstances giving rise to the lodgement of the caveat. The Wife further testified that the Husband explained to her, in the presence of her solicitors, that he was indebted to AP Pty Ltd and intended to execute a deed of compromise with Mr B, who was a friend of the Husband and one of the directors of AP Pty Ltd. The Wife contended that it was at this time that she became aware of the Husband’s “mismanagement of his finances and his apparent disregard for [herself] and [their] children” and she determined that the marriage was over.
There was an issue in the proceedings as to the date of separation. The Wife contended that the parties separated in or around July 1997 but that the parties continued to live under the same roof until May 2007. The Husband contended that the parties separated in May 2007 when the Wife ceased to occupy the former matrimonial home. The Federal Magistrate said at [38] that he preferred the evidence of the Wife and found that the parties separated on or about 12 July 1997. Before us, the Husband did not challenge the finding of his Honour in relation to the date of separation.
The Federal Magistrate observed at [50]: “What is clear is that by 1997 the [Husband] was in debt in his business”. His Honour also observed that: “The [Wife] says that she was unaware of the [Husband]’s precarious state. I accept her evidence in this regard. She says she became aware only when discovering a caveat lodged against the title to the matrimonial home in July 1997. Again I accept her evidence”.
The Federal Magistrate observed at [51]: “The [Wife] says that thereafter there were no joint financial dealings between the parties. There were no joint bank accounts. There was no mixing of incomes. She says that she was noted as a single person for taxation purposes. I accept her evidence, the majority of which was unchallenged”.
The Federal Magistrate observed at [25] that in her affidavit sworn on 30 July 2009 the Wife deposed at paragraph 24:
I say that we separated on 12 July 1997, when I informed the [Husband] that the marriage was over. On that day I told him I did not respect him because of his complete disregard for me and his children and his business dealings. I moved out of the bedroom into a spare bedroom and there was no sexual relations between us from that day. We thereafter did not socialise as a couple and there was no real communication between us, save that we occupied the same house. I cooked meals for myself and the children and the [Husband] cooked for himself if he was at home. We were rarely in the house together save when he used the house for somewhere to sleep. I had no discussions with him regarding finances, assets or property acquisitions. When I put [the former matrimonial home] on the market for sale in 2001 which involved advertising and open for inspections, the [Husband] did not indicate to me that he believed he had any interest in the property. I changed my tax returns to indicate my single status from the 1997-1998 Tax year.
The Federal Magistrate found at [57] that at the date of separation the only significant asset of the parties was the former matrimonial home which the Husband estimated had a value of $280,000.00 and which was encumbered by a first mortgage securing a debt of $18,000.00. His Honour found that the “only other known liabilities were the [Husband]’s other secured and unsecured creditors totalling close to $300,000.00”.
On 30 August 1997 the Husband entered into a deed of compromise with AP Pty Ltd “reciting debts to that company of $354,687.00 but compromising debts in a sum of $74,000.00”. The Federal Magistrate observed at [40]: “The [Husband] candidly, and without apparent awareness of the ramifications, admitted that this document was untruthful in its contents and that the debt was ‘more like $30,000.00 or $40,000.00’. The [Husband] apparently conceded the untruthful nature of the contents of that document and he being a party to its execution”.
There was put in evidence before the Federal Magistrate a letter dated 1 November 1997 from Mr B addressed to the Wife. His Honour at [54] recited the contents of the letter and observed that “the state of the [Husband]’s business affairs and, indeed, his integrity are further called into question” by the letter. In the letter it was contended that the Husband borrowed $74,000.00 from NJ Pty Ltd which was paid to AP Pty Ltd and that AP Pty Ltd “in return has undertaken to release him from the Deed of Compromise and further to withdraw the Supreme Court Writ issued 29 September 1997 pursuant to the Deed”.
In the letter referred to above it was also stated that the Husband had “undertaken to liquidate the stock immediately”. The Federal Magistrate observed at [55]: “This letter from November 1997 indicates the [Husband] possessing business stock together with a debt of $74,000.00. The debt is referred to in his statement of creditors one year later. There is no mention of the stock in his list of assets”.
On 24 November 1998 the Husband became bankrupt pursuant to a sequestration order issued by the Federal Court of Australia. The order was made on a debtor’s petition with secured liabilities of $102,000.00. The liabilities included $18,000.00 owed to Westpac Banking Corporation in relation to a first mortgage secured on the title of the former matrimonial home and a second mortgage to NJ Pty Ltd for $84,000.00. In passing, we observe that the Federal Magistrate at [8] identified the first mortgagee on the former matrimonial home as “Westpac / Bank of Melbourne”. However, his Honour at [53] then identified the mortgagee as “Westpac Bank”. This confusion also appears in the Wife’s evidence. For example, at paragraph 14 of her affidavit sworn on 20 May 2008 the Wife referred to the “Westpac Banking Corporation” whereas at paragraph 15 of her affidavit sworn on 30 July 2009 the Wife referred to the “Bank of Melbourne”. We observe that the terms of settlement between the Wife and the Husband’s trustee in bankruptcy refer to the “Westpac Banking Corporation”. As such, we shall assume that the mortgagee was Westpac Banking Corporation. The Federal Magistrate also observed at [8]: “It is clear that the debt to [NJ Pty Ltd] had its genesis in the abovementioned liability to [AP Pty Ltd] pursuant to the deed of compromise of 30 August 1997. The relationship between [AP Pty Ltd] and [NJ Pty Ltd] is not known”.
For the purposes of the administration in bankruptcy of the Husband’s estate he completed a statement of assets and liabilities. The Federal Magistrate observed at [53] that the Husband disclosed no assets except his interest in the former matrimonial home and that for the purposes of his bankruptcy this interest was valued at $140,000.00. His Honour observed that “[a]t that stage the property was encumbered with a first mortgage to Westpac Bank for $18,000.00”. In summary, the Husband contended at that time, that the equity in the former matrimonial home was $262,000.00 ($280,000.00 less $18,000.00).
The Federal Magistrate also observed at [9] and [52] that in the statement of assets and liabilities the Husband claimed unsecured creditors totalling $211,626.00 which included $14,000.00 owed to the Wife and $58,000.00 owed to the Wife’s mother. His Honour observed at [52] that “[t]he secured creditors totalled $102,000.00”.
In November 1998 the Wife purchased a unit at H (“property H”) for a price of $174,000.00. To pay the cost the Wife obtained a mortgage loan for $50,000.00 and borrowed $125,000.00 from her mother. The Wife also used the inheritance of $10,366.00 that she received in 1995. The Federal Magistrate observed at [61]: “There is no evidence of contribution by the [Husband]. He accepts that he made no direct contribution to this purchase. The purchase was made post-separation”.
Following the Husband’s bankruptcy, the parties were co-defendants to a civil action by School E for recovery of a debt for unpaid school fees. The Federal Magistrate observed at [65] that the Wife claimed a payment of $10,000.00 to School E for school fees and that the Husband did not claim in his evidence to have made any contributions to the fees. His Honour said at [65]: “In my view this is a direct financial contribution by the [Wife]”.
The Federal Magistrate observed at [59] that in 1999 the Wife was advised that there were no funds to pay the Husband’s unsecured creditors including $14,500.00 owed to the Wife and $58,000.00 owed to the Wife’s mother.
In November 1999 proceedings were commenced in the Supreme Court of Victoria by the Husband’s trustee in bankruptcy, as the registered proprietor of one equal undivided half part of the former matrimonial home, against the Wife seeking a sale of the former matrimonial home in order to satisfy the Husband’s creditors.
In January 2000 the Wife’s father died. In early 2000 the Wife’s mother died. The Federal Magistrate observed at [62] that the “total of the [Wife]’s inheritance was $281,000.00”. The Wife deposed in paragraph 15 of her affidavit sworn on 30 July 2009 that “[i]n total [she] inherited approximately $281,000” from the estates of her late parents. We observe that there was no evidence explaining how the loan of $125,000.00 that the Wife obtained from her late mother in November 1998 was dealt with in the administration of the estate of the Wife’s mother.
In 2000 the Wife reached an agreement with the Husband’s trustee in bankruptcy to pay $96,000.00 in settlement of the proceedings in the Supreme Court. The Federal Magistrate observed at [58]: “Effectively, therefore, [the Wife] purchased the [Husband]’s interest in the home from the trustee for this amount”. We have already observed that the Husband had contended that for the purposes of the administration of his estate, a half interest in the former matrimonial home had an estimated value of $131,000.00.
At the same time the Wife also paid out the joint mortgage debt owed to Westpac Banking Corporation of $16,279.00 that was secured on the title of the former matrimonial home. The Federal Magistrate accepted that the Wife “financed these payments from an inheritance from her late father’s estate”. We observe that the Wife contended that she paid a total of $112,279.00 ($96,000.00 plus $16,279.00).
The Federal Magistrate observed at [63]: “Annexed to her affidavit [sworn 30] July 2009 the [Wife] sets out details of her expenditure following separation” and that this evidence “was not substantially or successfully challenged”.
Between October 1997 and March 2000 the Wife made “payments to solicitors” of $13,290.00 which the Federal Magistrate observed at [63] “clearly relates to dealings with the [Husband]’s creditors and trustee in bankruptcy. These monies would be in addition to the $96,000.00 paid to the trustee to satisfy the [Husband]’s creditors”.
The Federal Magistrate observed at [66]: “The annexure to the [Wife]’s affidavit sets out numerous payments for insurance, council rates, electricity and telephone accounts in respect of [the former matrimonial home]. The total for such utility payments is $52,165.00”. Although his Honour did not specifically refer to “water rates” at [66] the annexure refers to $9,673.14 for such rates and we assume that this figure is included in the total of $52,165.00.
In or around late 2001 or early 2002 the Wife purchased a unit at T (“property T”). We observe that in her affidavit sworn on 20 May 2008 the Wife deposed at paragraph 10 that this property “was purchased … for $392,000.00” and “was financed by bank mortgage of $300,000.00 and the balance from an inheritance from [the Wife’s] father’s estate who died in January 2000”. In her affidavit sworn on 30 July 2009 the Wife deposed at paragraph 18 that the purchase price of property T was “$392,250” which “was financed by bank mortgage of $287,715.00 and the balance from the inheritance from [the Wife’s] father’s estate who died in January 2000”. In the Wife’s outline of case document filed 4 August 2009 it was said under “Brief chronology of significant events” that the Wife purchased property T “for $300,000.00 financed by part of her inheritance from her parents and a bank loan”. We observe that during the hearing before the Federal Magistrate no reference was made to the conflicting evidence of the Wife regarding the purchase price of property T nor did the Federal Magistrate clearly identify in his reasons the evidence he relied upon. The Federal Magistrate observed at [62] that the Husband conceded that “he made no direct contribution to this purchase” of property T. We observe that the inference is that the Wife applied approximately $104,535.00 from her inheritance to pay for the acquisition of this property ($392,250.00 less $287,715.00)
The Federal Magistrate observed at [64] that between 2001 and 2005 the Wife paid $11,613.00 “in respect of improvements to [the former matrimonial home]” and that the “evidence was unchallenged”.
In 2004 the child R ceased living at the former matrimonial home.
A decree of divorce became final on the Wife’s application in February 2007.
In May 2007 the Wife and the child K ceased living at the former matrimonial home. In 2007 the Wife also ceased employment at School G.
On 19 February 2008 proceedings were commenced when an application was filed by the Husband. On 2 April 2008 a response to an application for final orders was filed by the Wife. The hearing before the Federal Magistrate was on 4 and 5 August 2009 and on 23 October 2009 judgment was pronounced and reasons for judgment were delivered.
The Reasons Of The Federal Magistrate
We have already referred to a great deal of what the Federal Magistrate said in his reasons for judgment.
The Federal Magistrate observed at [20] that the parties agreed they had the following assets and liabilities:
Assets
·[The former matrimonial home] (W) $410,000.00
·[Property H] (W) $365,000.00
·[Property T] (W) $465,000.00
·ING Direct bank account (W) $9,894.00
·Shares – [P Pty Ltd] (W) $17,560.00
·Shares – [L Pty Ltd] (W) $3,531.00
·1987 Mercedes Benz motor vehicle (W) $1,000.00
·1997 Mercedes Benz motor vehicle (W) $7,000.00
·Household contents $8,000.00
·Interest in Hong Kong bank account (W) $29,604.00
Total$1,316,589.00
Liabilities
·Mortgage – [Property H] (W) $192,000.00
·Mortgage – [Property T] (W) $300,000.00
·Visa card (W) $618.00
Total($492,618.00)
Net assets$823,971.00
Superannuation
·Wife – NGS $47,726.00
·Husband $1,500.00
Total$49,226.00
The Federal Magistrate at [22] to [45] dealt with the issue as to the date of separation of the parties and in the course of so doing made findings in relation to credit. His Honour observed at [38]: “There is clearly an issue of credit as between the parties. In this respect I had the opportunity of seeing and hearing both parties give evidence and be cross-examined. With this advantage and where there are issues of credit I generally prefer the evidence of the [Wife]”.
The Federal Magistrate at [39] to [43] dealt with the credit of the Husband and in so doing found at [39] that the Husband presented “as evasive, selective and opportunistic in his evidence” and at [42] that he “was an unconvincing witness” and his evidence was “generally unreliable”. As to the Wife, his Honour at [44] dealt with her credit and found: “To the contrary, the [Wife] was an impressive witness. Her evidence was consistent and believable. Her answers were forthright. She was prepared to make concessions against interest where appropriate. Her evidence was frank and responsive”.
The Federal Magistrate at [45] made two important findings. First, that the parties separated on or around 12 July 1997. Second, that the parties “conducted their finances separately after 1997”.
The Federal Magistrate at [46] to [74] dealt with “Contributions” being the matters in s 79(4)(a), (b) and (c) of the Act.
As we have already observed, the Federal Magistrate at [46] found that at the commencement of cohabitation in the mid-1970s neither party “had substantial assets”.
The Federal Magistrate set out a great deal of the evidence which we have already set out above and concluded:
69. I find the [Wife]’s contributions to be superior and, indeed, overwhelming. In summary the relevant contributions include the following:
a)the contributions on behalf of the [Wife] from her mother in the sum of $58,000.00;
b)the [Wife]’s contribution of $96,000.00 to obtain the release of the bankruptcy trustee’s interest in the former matrimonial home;
c)the sum of $16,279.00 to satisfy the registered mortgage;
d)the far superior post-separation contribution to the running of [the former matrimonial home] household from 1997 to 2007;
e)the agreed fact that the [Husband] has had sole residence in the unencumbered [former matrimonial home] from May 2007 to the date of this hearing;
f)the total contribution by the [Wife] to the properties she has purchased post-separation;
g)the payment of school fees post 1997.
70. Whilst I accept that both parties may have made contributions to the marriage generally by way of their employment and homemaker and parent roles until 1997, the fact remains that the parties’ financial position in 1997 was precarious. The only disclosed asset of any significant value at the time was the former matrimonial home. Arguably, the only available asset of the parties was a one-half interest in the home but in the terms of a joint tenancy. It was the [Wife]’s action in securing title to that property that amounts to an important contribution. It is this factual circumstance existing in 1997, together with the [Wife]’s overwhelming and total post-separation financial contributions, which in my mind serve to negate any contributions made by the [Husband] during the course of the marriage. After some contemplation, therefore, I am of the view that the [Husband] should not receive any consideration on account of contributions.
71. At the hearing of this matter the [Wife] argued that it was open to find that the [Husband]’s debt situation at the date of his bankruptcy, and hence the date of separation, could be found to have been “wastage” of assets by the husband. Given my findings that the [Wife]’s contributions were so overwhelming in the sense of their timing and effect, it is not necessary for me to make a determination on this issue. I do note, however, that the [Wife] claims to have had no knowledge of the [Husband]’s dire financial situation until she discovered the caveat lodged against title at around the time of separation. I accept the [Wife]’s evidence in this regard.
72. The [Husband] argues that his debt situation was unfortunate and simply a debt of the marriage in the sense that the [Wife] would have claimed a benefit in the business had it been successful. The legal principles in respect of such an issue are derived from the well known decision in Kowaliw and Kowaliw where Baker J summarised the issue as follows at [76,644]: [quote not included].
73. On reflection, the evidence before me is not such that I can make a positive finding that the [Husband] has acted recklessly, negligently or wantonly. Such a determination, if necessary, would however be influenced by the [Husband]’s own admitted poor business practices. He concedes that he has not filed a tax return for some 15 years. He concedes entering into a deed of compromise with false recitals. Generally, I am of the view that the [Husband]’s business practices are questionable and dubious. Whether that behaviour amounts to wanton negligence or reckless action on his part remains open.
74. Nevertheless, I base my findings on the positive contributions of the [Wife] rather than any question of “wastage” on the part of the [Husband] and thus a determination in respect of this issue is not necessary.
The Federal Magistrate then by reason of s 79(4)(e) of the Act dealt with the “section 75(2) factors”. His Honour did not refer to the matter in s 79(4)(d).
The Federal Magistrate first dealt with the circumstances of the Wife and observed:
75. The [Wife] will soon be 57 years of age. Her financial statement discloses that she is unemployed. Her income is derived from rentals from the two properties purchased by her post-separation. The [Husband] claims that the [Wife] has re-partnered. This issue was not explored in evidence. There is no evidence of any financial dependency of the [Wife]. From her rental income the [Wife] meets her mortgage commitment of approximately $550.00 per week plus other outgoings leaving her little disposable income. I find that the [Wife]’s work capacity is limited by reason of her age and her occupation history being primarily as a secretary.
The Federal Magistrate then dealt with the circumstances of the Husband and found at [76]: “The [Husband] is 56 years of age. He remains involved in the motor vehicle business but now as a broker. I accept his evidence that his income is not substantial. He has re-partnered to [Ms C]. There is no evidence of financial dependency within that relationship”.
The Federal Magistrate found at [77]: “There are no dependent children of the parties and there is no evidence that they have responsibilities for the support of any other persons”.
The Federal Magistrate was required to consider the matters in s 75(2)(b) of the Act which include the “property and financial resources of each of the parties”. This was particularly significant given his Honour’s findings in relation to the matters in s 79(4)(a), (b) and (c), and the consequence that the Wife had a substantially greater contribution based entitlement than the Husband. His Honour commenced by observing at [78]:
It is true that the [Wife] has significant assets in her own right. These have accrued primarily from her own prudent investments and inheritances in her favour post-separation. I have already found that the [Husband] made no contributions to these assets. The issue is as to whether there should be an adjustment to him by way of the [Wife]’s superior asset position as the parties now stand. I have found above that she does not have a superior real income, either now or by capacity.
The Federal Magistrate then at [79] to [80] embarked on a very brief discussion of the decision Farmer and Bramley (2000) FLC 93-060 (Finn and Kay JJ, Guest J dissenting) and after referring to certain observations of Wilson J in Mallet v Mallet (1984) 156 CLR 605 at 638 said at [81] that he found “force in the comments” of Guest J in Farmer and Bramley where his Honour said at 87,981 that in his view:
[I]n order for an adjustment in property interests to be made pursuant to s 75(2)(b), any disparity of wealth in the respective financial positions of the parties pursuant to s 75(2)(b) has to have a connection to their cohabitation, their mutual society, the services each rendered to the other and the way in which they adjusted and accommodated their respective lives for the benefit of their marriage.
The Federal Magistrate observed:
82. In my view the [Wife]’s superior financial contribution as at the date of the hearing is solely as a result of her post-separation contributions and is in no way connected to the fact of or nature of the marital relationship. Contrary to the facts in Farmer and Bramley (supra), there is no evidence in this case to suggest that the way in which the parties arranged their lives during the marriage affected the current financial situation of either of them. (emphasis added)
83. In this respect, and on the finding that there is no such connection between the fact and nature of the marriage and the [Wife]’s post-separation asset position, I note the comments of Nygh J in Hirst and Rosen [(1982) FLC 91-230] at [77,251] where his Honour says:
I also reject any argument based solely upon the disparity in financial resources between the parties. Section 79, as I have indicated in argument, does not entitle the Court to adopt “a soup kitchen” approach…
84. In summary, therefore, I am not of the view that there is any ground for adjustment of the parties’ entitlements because of any factor under s.75(2) of the Act.
Under a title “justice and equity” the Federal Magistrate concluded:
85. This was a marriage where both parties contributed in the traditional sense by their employment, their homemaking, and their parenting of the children. As at the date of separation the parties were in a dire financial state due to the [Husband]’s debt situation. It is at this time and following that the [Wife]’s contributions became overwhelming. I note the long duration of the marriage. Nevertheless, I have found that there is no connection between the fact or nature of the marriage and the [Wife]’s extraordinary post-separation contributions. Each of the parties is in a similar income position. The outstanding component of this matter is the [Wife]’s superior asset position secured solely by her and completely post-separation. (emphasis added)
86. In my view, therefore, an order dismissing the [Husband]’s application and leaving the [Wife] with the assets listed above would be just and equitable in all the circumstances.
Relevant Principles – Appeal
The appeal is against a discretionary judgment. The principles which govern such an appeal are well established and need not be repeated: see House v The King (1936) 55 CLR 499; Gronow v Gronow (1979) 144 CLR 513; Norbis v Norbis (1986) 161 CLR 513 and Mallet v Mallet.
Grounds Of Appeal
Introduction
The four grounds of appeal are:
13. His Honour erred in failing to give adequate weight to the [Husband]’s employment, homemaker and parenting role from the date of cohabitation in 1975 until 1997 and the [Husband]’s employment, homemaker and parenting role after 1997.
14. His Honour erred in finding that the [Wife]’s contribution during the marriage and following separation negated all the [Husband]’s contributions.
15. His Honour erred in finding the [Wife]’s earning capacity is limited by reasons of her age and occupation as a secretary.
16. His Honour erred in finding that there is no connection between the fact or nature of the marriage and the [Wife]’s post-separation contributions.
The four grounds of appeal fall into two categories. The first category, comprising grounds 13 and 14 relate to complaints about the findings by the Federal Magistrate in relation to matters of contribution. The second category, comprising grounds 15 and 16 relate to his Honour’s treatment of the matters in s 75(2) of the Act by reason of s 79(4)(e).
Discussion
Complaint about assessment of contributions
At the date of the hearing the parties had assets of a net value of $873,197.00 including superannuation interests. The net assets included the former matrimonial home at a value of $410,000.00. Excluding the former matrimonial home and the superannuation interests, the other assets have a net value of $413,971.00.
The effect of the order made by the Federal Magistrate was that the Husband only received his superannuation interest of $1,500.00 or 0.17 per cent of the net assets of the parties. The former matrimonial home and the superannuation interests have a value of $459,226.00 of which the Husband received an entitlement of 0.33 per cent. In other words, the Husband received virtually nothing, which is what his Honour intended.
The period of cohabitation was approximately 22 years being between mid-1975 and mid-1997. The period of the marriage was between October 1980 and February 2007. The parties resided under the same roof for 32 years being from mid-1975 to May 2007. At the commencement of cohabitation neither party had any assets of significance.
During the period of cohabitation the parties were in paid employment. The Wife’s contributions from paid employment were not as significant as those of the Husband. However, the Wife also made contributions as homemaker and parent. The Federal Magistrate found that after 1997 the parties “conducted their finances separately” and thus the inference can be drawn that until they separated the parties did not conduct their finances separately.
The Federal Magistrate did not find that either party applied their respective earnings for any purpose other than for the benefit of the family. As the Full Court observed in Parshen v Parshen (1996) FLC 92-720 (Ellis, Finn and Purdy JJ) at 83,665: “[I]n the absence of evidence to the contrary, it should be inferred in proceedings pursuant to the provisions of s 79 that moneys howsoever received by a party during the course of the parties’ cohabitation, are used by that party for the benefit of the family unit.”: see also Judkins and Santamaria [2003] FamCA 618 (15 August 2003) per Full Court (Ellis, Finn and O’Ryan JJ).
We observe that in Boege and Boege [2001] FamCA 1167 (15 August 2001) the Full Court (Ellis, Finn and Warnick JJ), after referring to Parshen, observed at paragraph 51: “In the instant case, it could be argued that there was evidence rebutting the presumption or inference referred to in Parshen v Parshen (supra). In our view, however, it is not sufficient to attract the consequences in the evaluation of contributions that followed in the instant case, that one party merely asserts that moneys have been retained by the other party for his/her ‘own purposes’”.
During the cross-examination of the Wife there was the following exchange: “And you want this court to believe that with that income you supported the family because your [Husband] didn’t contribute anything. That is what you want the court to believe, don’t you? --- Prior to separation, [the Husband] did put money in” (Transcript, 5 August 2009, p 12). There was a further exchange: “Do you accept that – you said that in the years prior to the bankruptcy [the Husband] was making contributions? --- He was” (Transcript, 5 August 2009, p 22). The Wife also admitted that during the cohabitation the Husband purchased jewellery for her including a Cartier watch.
During the period of cohabitation the parties had the benefit of $58,000.00 provided by the Wife’s mother. In discussion before us it was conceded by counsel for the Wife that during cohabitation this was the only amount which was contributed from a source other than the efforts of the parties.
The Federal Magistrate found at [85]: “This was a marriage where both parties contributed in the traditional sense by their employment, their homemaking, and their parenting of the children”. His Honour also said at [70] that he accepted that “both parties may have made contributions to the marriage generally by way of their employment and homemaker and parent roles until 1997”. In the result, it was established that until the parties separated in 1997, with the exception of the amount of $58,000.00 which the parties received from the Wife’s mother, neither party made any greater contribution than the other.
At the time of separation the parties had the former matrimonial home which the Husband had previously estimated had a value of $280,000.00 and which secured a debt of approximately $18,000.00 and perhaps less. As we have observed, the Husband estimated that the equity was perhaps $262,000.00. The former matrimonial home now has a value of $410,000.00 and the title is unencumbered.
In these circumstances, the findings made by the Federal Magistrate would support a conclusion that at the date of separation each party had a contribution based entitlement by reason of their respective contributions during cohabitation. The Wife may have a greater entitlement by reason of the contribution by her late mother of $58,000.00 which was not recovered in the Husband’s bankruptcy. The Wife may also have a greater entitlement because of the payment by her of $96,000.00 to the Husband’s trustee in bankruptcy in respect of debts the Husband had at the date of separation and $16,279.00 to discharge the mortgage on the title of the former matrimonial home. However, it could not be said that the Husband had no contribution based entitlement.
The Wife contended, and it was accepted by the Federal Magistrate, that at about the time of separation the parties were in a precarious financial position and shortly thereafter the Husband was made bankrupt.
Before proceeding, we observe that there was no evidence in relation to the administration in bankruptcy of the Husband’s estate and thus it was not known how the estate was finally dealt with. For example, there was no evidence as to how the amount of $96,000.00 paid by the Wife to the trustee was distributed by the trustee. It was not controversial that, excluding amounts of $14,000.00 owed to the Wife and $58,000.00 owed to the Wife’s mother (a total of $72,000.00), the Husband had unsecured creditors totalling $139,626.00 ($211,626.00 less $72,000). There were also secured creditors for a total of $102,000.00.
As we have observed, the Federal Magistrate at [71] to [74] dealt with a contention of the Wife that the Husband’s “debt situation at the date of his bankruptcy, and hence the date of separation, could be found to have been ‘wastage’ of assets” by the Husband and reliance was placed upon the decision of Baker J in Kowaliw and Kowaliw (1981) FLC 91-092.
Marital conduct of parties is not specifically referred to in s 79 of the Act and as a general proposition the marital behaviour of parties is not of itself relevant to applications under s 79: Soblusky and Soblusky (1976) FLC 90-124. However, there may be circumstances in which marital conduct may be relevant and taken into account. If the conduct of a party towards the other had a significant adverse impact upon the other parties’ contributions to the marriage or made the other parties’ contributions more arduous than they ought to have been, then this may be relevant: Kennon v Kennon (1997) FLC 92-757. As well, certain types of behaviour which have a direct connection with financial matters may be relevant. In Sheedy and Sheedy (1979) FLC 90-719 Nygh J said at 78,872 that conduct may be relevant “if it has financial consequences, such as financial misbehaviour resulting in the waste or suspension of family assets”: see also Fisher and Fisher (1990) FLC 92-127 at 77,846.
In Kowaliw Baker J said at 76,644:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of the marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec. 75(2)(o) to applications for settlement of property instituted under the provisions of sec. 79.
Examples of this type of conduct may include circumstances where the drinking and gambling of one party has led to the failure of a business or the dissipation of assets: see Mead and Mead (1983) FLC 91-354 per Asche SJ at 78,369.
In Kowaliw Baker J also said at 76,644-45: “It does seem to me, however, that if a party has either by deliberate act or by economic recklessness reduced the value of assets available for distribution then the economic consequences which flow therefrom including the resultant burden to the other party are directly relevant to a consideration of the respective contributions of the parties contemplated by sec. 79(4)”.
It follows that in certain circumstances financial misconduct or financial misbehaviour may be taken into account in a number of ways. It may be taken into account by the notional inclusion of an amount at step one of the preferred approach to the determination of an application pursuant to s 79 of the Act which was explained in Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 or when assessing the contributions at step two of the preferred approach or perhaps when considering the other factors at step three of the preferred approach: see M and M [1998] FamCA 42 (1 May 1998).
In this case, it was not established that there was financial misconduct or financial misbehaviour as we have described above. The Federal Magistrate made clear at [73] that the evidence did not enable him to “make a positive finding that the [Husband had] acted recklessly, negligently or wantonly”. Thus, it follows that the parties had the benefit of amounts that comprised the secured and unsecured debts of the Husband of perhaps $241,626.00 ($139,626.00 plus $102,000.00): see Boege and Boege.
We also observe that in relation to what Baker J said in Kowaliw with respect to the sharing by parties of financial losses, in Browne v Green (1999) FLC 92-873 the Full Court (Lindenmayer, Finn and Holden JJ) observed at 86,364:
53. On a careful consideration of the material before us, we have had to conclude that it was manifestly unjust to the husband in this case to depart from the Kowaliw guideline and to place upon him the full burden of the losses, merely on the basis that he was that party who initiated and had overall control of the venture which led to the financial losses, particularly in circumstances where there is no suggestion that the wife was anything other then a willing participant. There can be little doubt that had the Hayle project succeeded, the wife would have sought to share in the fruits of that success, and there would seem to be no reason why she would not have been entitled to do so. It is this last-mentioned consideration, being that parties generally expect to share the economic profits of a marriage, which, in our view, requires that there should be good and substantial reasons for departing from the principle that where there are economic losses incurred in a marriage, those losses should be shared, absent any negligence, recklessness or deliberate dissipation of assets by one party. No such good and substantial reasons are apparent to us in this case. (emphasis added)
It then becomes necessary to consider what happened subsequent to separation in mid-1997. Before proceeding we observe that in Zalewski and Zalewski (2005) FLC 93-241, Finn J observed at 79,978:
It is my impression that there are currently coming before the Court a significant number of cases in which the period between the parties’ separation and the hearing of their property settlement proceedings is substantial. The delay seems often to arise, at least in part, because the parties have initially reached some form of informal (or even formal) settlement from which one party later resiles (often for good reason). In these long separation periods, the parties will usually have built up substantial new assets or incurred substantial liabilities. In an endeavour to satisfy the parties that any orders which are eventually made by the Court in these somewhat complicated cases are just and equitable, it can, in my view, be very useful for Judges to assess contributions to property on an asset by asset basis. (emphasis added)
We agree with these observations. In a case such as this, where there was a marriage of long duration and a lengthy period of separation before the hearing of applications for property settlement, during which time significant assets were accumulated by one or both parties, it should indicate that in such circumstances it may be more useful to undertake an assessment of contributions on an asset by asset, or, category of asset by category of asset basis: see Norbis v Norbis (1986) 161 CLR 513. However, in this case, that was not the approach the Federal Magistrate adopted when assessing the contributions made subsequent to mid-1997.
As we have observed, the former matrimonial home and the superannuation interests have a value of $459,226.00. Since mid-1997 the Wife has accumulated other assets which include two items of real property. Excluding the former matrimonial home and the superannuation interests, the other assets have a net value of $413,971.00 and comprise:
Assets
·[Property H] (W) $365,000.00
·[Property T] (W) $465,000.00
·ING Direct bank account (W) $9,894.00
·Shares – [P Pty Ltd] (W) $17,560.00
·Shares – [L Pty Ltd] (W) $3,531.00
·1987 Mercedes Benz motor vehicle (W) $1,000.00
·1997 Mercedes Benz motor vehicle (W) $7,000.00
·Household contents $8,000.00
·Interest in Hong Kong bank account (W) $29,604.00
Total$906,589.00
Liabilities
·Mortgage – [Property H] (W) $192,000.00
·Mortgage – [Property T] (W) $300,000.00
·Visa card (W) $618.00
Total($492,618.00)
Net assets$413,971.00
Property H and property T were acquired for a total of $566,250.00 ($174,000.00 plus $392,250.00 being the amount identified by the Wife in her final affidavit sworn on 30 July 2009) and now have a value of $830,000.00. In order to acquire the properties, the Wife borrowed a total of $337,715.00 ($50,000.00 plus $287,715.00 being the amount identified by the Wife in her affidavit of 30 July 2009) excluding a borrowing of $125,000.00 from her late mother. The Wife now has mortgage debts of $492,000.00.
We note that during her cross-examination the Wife testified that when her father died he had about $350,000.00 in Hong Kong and that there remains “about nearly 60,000, about 58,000” held by the “[U Trust]” of which the Wife and her brother are the beneficiaries (Transcript, 5 August 2009, p 11).
The Federal Magistrate also found that subsequent to the separation of the parties the Wife paid:
·Solicitors fees $13,290.00
·Settlement of the claim by the Husband’s trustee $96,000.00
·Discharge of mortgage $16,279.00
·Utility expenses $52,165.00
·[School E] $10,000.00
·Improvements to former matrimonial home $11,613.00
Total$199,347.00
During discussion before us it was conceded by counsel for the Husband that the “bulk” of the assets came from the inheritances of the Wife. In our view, this is not entirely correct. To enable the Wife to acquire the assets, and make the various payments, described above she used her inheritances, borrowings and earnings. The Wife received inheritances of a total of approximately $291,366.00 being $10,366.00 she received in 1995 from the estate of a late aunt and $281,000.00 she received subsequent to 2000 from the estates of her late parents. The mortgage debts are now $492,000.00 being an increase of $154,285.00 ($492,000.00 less $337,715.00). As to the Wife’s earnings, we observe that in the case outline document filed on behalf of the Wife for the purposes of the hearing before the Federal Magistrate it was said that the documents to be relied upon included the Wife’s taxation returns “1998 to 2008”. Presumably, these returns would establish what income the Wife received.
There was then an issue about the contributions, if any, that the Husband made subsequent to separation. When dealing with the issue as to the date of separation the Federal Magistrate observed at [33] that “[t]he tenor of the [Wife]’s evidence is that the [Husband] contributed little or nothing to the ongoing expenses of the household from 1997 until physical separation in 2007”. His Honour observed at [37] that the Husband relied generally on financial contributions by both parties to the household until 2007 and that the Wife claimed no financial contributions by the Husband to the household following 1997 and yet his counsel was able to produce cheque butts which indicated some payments by the Husband for usual household expenses. His Honour observed that “[u]nder cross-examination the [Wife] made some reluctant concessions”.
Then when dealing with the matters of contribution the Federal Magistrate observed:
67. The [Husband] claims some continued contribution to the home after 1997. Tendered on his behalf was a cheque book with butts dated 22.9.00 to 12.10.01. It references payment of a number of Telstra accounts in respect of both landline and mobile telephones. Whether they were home or business accounts is unclear. There are also payments referable to the local council and perhaps an insurer. This is the limit of the [Husband]’s evidence in support of his claim for contributions to the household after 1997 excepting his own affidavit filed 24 July 2009 at paragraph 6 where he says:
For twenty-seven years of a thirty plus year relationship I have been the major bread winner. Providing a stable home for my family from within my means. I fully paid for most outgoings, food and utilities as well as providing the [Wife] a housekeeping allowance to facilitate the needs of the family home.
68. Generally, I prefer the evidence of the [Wife] in respect of what I find to be her far superior contribution to the household expenses in the period following 1997 and during which the parties lived separately and apart but under the one roof. (italics in original)
Then, when dealing with the matters in s 75(2) of the Act, the Federal Magistrate observed at [78] that the Wife “has significant assets in her own right. These have accrued primarily from her own prudent investments and inheritances in her favour post-separation. I have already found that the [Husband] made no contributions to these assets”. When discussing Farmer and Bramley at [79] his Honour suggested that there was no post-separation contribution by the Husband.
During the hearing before the Federal Magistrate on 5 August 2009 counsel for the Husband cross-examined the Wife and put to her that there were contributions made by the Husband post-separation towards the former matrimonial home. In doing so, counsel handed the Wife a book of cheque stubs and asked her to read the “folded … stubs in that cheque book” to the court (Transcript, 5 August 2009, p 14). The book of cheque stubs was then exhibited as Exhibit H3 (Transcript, 5 August 2009, p 15). Inspection of Exhibit H3 reveals that there were 13 folded stubs which disclosed that the Husband made 13 payments between November 2000 and July 2001 of a total of $4646.15.
At the time of separation the children were aged 15 and 13 years and thereafter the parties lived under the same roof for approximately ten years. We observe that during the cross-examination of the Husband there were the following exchanges: “Since 1997 you haven’t paid any child support to your [Wife], have you? --- No, I have paid no child support. I was paying bills in the house, I was paying food in the house, I was paying clothes for the kids, I was paying fees for the kids, I was buying cars for the kids” (Transcript, 4 August 2009, p 37). Further: “Yes. As Mr Holmes said, and I will put it in another way, what were your contributions during those latter years of which you say were the marriage, post-1997? --- Post 1997 was things for the kids; clothes, food, [the child K]’s fees at [School W], I think it was” (Transcript, 4 August 2009, p 41).
In summary, the Federal Magistrate found that the Husband made no contributions subsequent to the separation of the parties in mid-1997. This finding is incorrect because there was evidence of contributions by the Husband. However, it was open to the Federal Magistrate to find that subsequent to the separation, the Wife made significantly greater contributions than the Husband which included the inheritances she received of approximately $291,366.00. If his Honour had adopted the approach suggested by Finn J in Zalewski then in respect of the category of assets acquired after separation it would have been within his discretion to find that the Wife had a significantly greater contribution based entitlement in respect of these assets.
The Federal Magistrate observed at [70] that the Wife’s “action in securing title” to the former matrimonial home amounted to an important contribution. Although his Honour did not say so, he was obviously referring to the payment by the Wife of $96,000.00 to the Husband’s trustee in bankruptcy and the payment of approximately $16,000.00 to discharge the mortgage secured on the title of the former matrimonial home. His Honour then observed: “It is this factual circumstance existing in 1997, together with the [Wife]’s overwhelming and total post-separation financial contributions, which in my mind serve to negate any contributions made by the [Husband] during the course of the marriage”. Thus, his Honour concluded that the Husband “should not receive any consideration on account of contributions”.
It is not necessary for us to repeat what has been expounded in numerous reported authorities in relation to the approach to be taken to the exercise of the discretion conferred by s 79 of the Act and the assessment of the various matters set out in that section. It is sufficient to observe that the Federal Magistrate was required to evaluate the respective contributions of the parties and in so doing, in the circumstances of this case, weigh the financial contributions by the Wife from sources other than the efforts of the parties, being the loan from her late mother and inheritances, with the other relevant contributions of both parties: Pierce v Pierce (1999) FLC 92-844 at 85,881.
It is not entirely clear what the Federal Magistrate meant by his finding at [70] that the financial contributions of the Wife “negate” any contributions made by the Husband, nor how his Honour undertook the task that we have just briefly described. It is also well established that it is not a mathematical exercise. In Garrett and Garrett (1984) FLC 91-539 the Full Court (Evatt CJ, Lindenmayer and Strauss JJ) observed at 79,372 that the terms of s 79(4)(a) of the Act suggest that “a broad estimate of the financial contribution of each party must be made” and that when dealing with non-financial contributions under s 79(4)(b) this “must of necessity be a matter of judgment and not of computation”. So also it is not an exercise of considering whether the contributions of one party nullify the contributions of the other party.
If the Federal Magistrate had dealt with the matters of contributions in the manner that we have suggested above then this would have resulted in a finding that the Wife made significantly greater contributions than the Husband but not to an outcome that the Husband’s contributions were nullified by those of the Wife.
As we have observed, having regard to the evidence, it was within his Honour’s discretion to find that the Wife had a greater contribution based entitlement to the former matrimonial home being the significant asset the parties had at the date of separation. So also it was within his Honour’s discretion to find that the Wife had a greater contribution based entitlement to the assets she had acquired since the date of separation. However, such contributions would not entitle the Wife to the totality of the assets including those that were acquired before mid-1997.
In our view, the Federal Magistrate was in error in relation to the manner in which he balanced and assessed the respective contributions of the parties and also in relation to the weight which he attached to the contributions by the Husband. We therefore propose to allow the appeal and remit the matter for redetermination by a Federal Magistrate other than Federal Magistrate McGuire.
Complaints about matters in s 75(2) of the Act
Given that we are satisfied that the Federal Magistrate was in error, and that the appeal should be allowed, and the matter remitted for redetermination, it is not strictly necessary for us to consider the second category of complaint. However, we will make some brief observations.
The Federal Magistrate made no adjustment in favour of either party by reason of the matters in s 75(2) of the Act and in particular s 75(2)(b). In consequence of his Honour’s findings as to the contribution based entitlements of each party, the Wife had assets of a net value of $871,697.00 and the Husband had assets of a net value of $1,500.00. Thus, there was an enormous disparity in the financial circumstances of each party.
The Federal Magistrate did not clearly articulate why, in the circumstances of this case, given a marriage of 27 years, a cohabitation of 22 years and the significant wealth of the Wife, no adjustment was made in favour of the Husband to reflect the enormous disparity in the financial circumstances of each party. The confusion as to precisely why his Honour made no adjustment by reason of the matters in s 75(2) of the Act was conceded in discussion before us by counsel for the Wife (Transcript, 7 May 2010, p 19).
On one view, it appears that the Federal Magistrate made no adjustment because he found that the Husband had no contribution based entitlement. On the other hand, it may be that his Honour was of the view that in considering the matters in s 75(2) of the Act unless a party made a contribution to the property of the parties to the marriage that existed at the date of the hearing, then no adjustment should be made in favour of that party. This understanding of what his Honour found was conceded in discussion before us by counsel for the Wife (Transcript, 7 May 2010, p 19).
As we have observed, in reaching the conclusion that no adjustment should be made having regard to the matters in s 75(2)(b) of the Act, the Federal Magistrate relied upon the dissenting judgment of Guest J in Farmer and Bramley. In that case, Kay J was of the view that due to the disparity of the parties’ economic situation following separation, the making of an adjustment under s 75(2)(b) did not require that there could only be such an adjustment if there was some causal nexus between the disparity and the marriage itself. Guest J, however, concluded that the wife was not entitled to any adjustment by reason of s 75(2)(b) because the husband’s financial position at the time of the hearing arose from a lottery win achieved after the parties’ separated and was entirely independent of the incidence of the marriage. However, Guest J considered that by reason of s 75(2)(c) an adjustment in favour of the wife was appropriate to meet the future demands of child rearing which would be borne by the wife.
The dissenting judgment of Guest J has been the subject of considerable discussion and comment. Dr Anthony Dickey QC in ‘Financial relief and nexus with marriage’ (2002) 76 Australian Law Journal 287 observed that in Farmer and Bramley, Guest J indicated that in order for a disparity of income and capital to be relevant for an alteration of property interests the disparity must concern circumstances pertaining to the spouses’ cohabitation. Kay J, however, was of the view that there need be no causal nexus between the disparity and the marriage itself. Dr Dickey observed that this raised the question of whether the grounds for financial relief under the Act generally should involve a nexus with the parties’ marriage, or put another way, the question is whether the provisions of Part VIII of the Act should be read literally, or whether there is always an underlying requirement that the grounds of relief have a clear connection with the parties’ marriage: see also Professor Patrick Parkinson, ‘Judicial discretion, the homemaker contribution and assets acquired after separation’ (2001) 15 Australian Journal of Family Law 155; Dr Anthony Dickey QC, ‘Property division and disparity of income and capital’ (2002) 76 Australian Law Journal 223; John Fogarty AM ‘Farmer/Bramley, Lynch/Fitzgerald and White – Is this the Result of 25 Years of Section 79? Let’s Start Again’ (Paper presented at the 10th National Family Law Conference, Melbourne, March 2002); and Professor John Dewar, ‘Contributions outside marriage’ (Paper presented at the 10th National Family Law Conference, Melbourne, March 2002).
The issue raised by the reasons for judgment of Guest J in Farmer and Bramley was not extensively argued before us. However, the circumstances of this case are distinguishable from the facts of Farmer and Bramley.In that case the assets that existed at the date of the hearing were all acquired after the separation being a result of the significant lottery win by the husband. In this case, the former matrimonial home existed at the date of the separation and it represents approximately 47 per cent of the assets the parties had at the date of the hearing being $873,197.00. Even making allowance for the significantly greater financial contributions by the Wife, the Husband made a significant contribution over at least 22 years.
The matters in s 79(4)(a), (b) and (c) of the Act deal with the past contributions of the parties to a marriage and the matters in s 79(4)(d), (e), (f) and (g) are concerned with the economic position of the parties. In Sieling and Sieling (1979) FLC 90-627, Evatt CJ and Marshall SJ at 78,264 observed that s 79(4) has “both a retrospective and a prospective element”. The matters in s 75(2) of the Act are part of the ‘prospective element’ and are concerned with the economic consequences of the breakdown of a marriage and also any ongoing commitments subsequent to an order pursuant to s 79. For example, it often occurs that an adjustment is made to the contribution based entitlement of a party to reflect an ongoing responsibility to care for children and a disparity in earning capacity and financial resources of the parties: see DJM v JLM (1998) FLC 92-816; Georgeson and Georgeson (1995) FLC 92-618 and Doherty and Doherty (1996) FLC 92-652.
A consequence of the adoption of the view of Guest J may be, in the circumstances of this case, that when considering the matters in s 75(2) of the Act, and in particular s 75(2)(b), the only assets which could be considered are those in respect of which it was contended some contributions were made, being the assets which the parties had at the date of separation. Thus, there would be an asset by asset or category of asset by category of asset approach when considering the matters in s 75(2)(b). We do not agree with this approach. In any event, in this case the Federal Magistrate did not even adopt that approach because he appears to have taken the view that the matters in s 75(2)(b) are only relevant if there is a finding that the party who is seeking a further adjustment by reason of the economic consequences of the breakdown of the marriage had a contribution based entitlement. In our view, this was an error.
Costs
At the conclusion of the hearing of the appeal we received submissions in relation to costs of the appeal. It was accepted by both parties that in the event the appeal succeeded then the provisions of s 117(1) of the Act should apply and no order for costs should be made pursuant to s 117(2).
As the appeal has succeeded because of an error of law, we propose to grant to each party a certificate under the Federal Proceedings (Costs) Act 1981 (Cth) both in respect of the appeal and of the rehearing.
I certify that the preceding one hundred and twenty one (121) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court Boland, Thackray and O’Ryan JJ delivered on 10 November 2010.
Associate:
Date:10 November 2010
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