Shnell & Frey

Case [2021] FedCFamC1A 55

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1) APPELLATE JURISDICTION

Shnell & Frey [2021] FedCFamC1A 55

Appeal from:

Shnell & Frey [2020] FamCA 631

Shnell & Frey (No. 3) [2020] FamCA 926
Appeal number(s): EAA 126 of 2020
EAA 159 of 2020
File number(s): SYC 1057 of 2017
Judgment of: WATTS, AUSTIN & TREE JJ
Date of judgment: 5 November 2021
Catchwords:

FAMILY LAW – APPEAL – PROPERTY – Where the wife appeals from a property settlement order – Long marriage – Where the primary judge gave inadequate reasons for the conclusion reached – Where the primary judge erred in the treatment of CGT – Appeal allowed – Re-exercise of discretion – Costs ordered in a fixed sum.

FAMILY LAW – APPEAL – COSTS – Where it is conceded that if the appeal is successful the costs order made by the primary judge should be set aside – Re-exercise of discretion – Parties to file further written submissions.
Legislation: Family Law Act 1975 (Cth) ss 75, 79
Cases cited:

Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148

Bonnici and Bonnici (1992) FLC 92-272; [1991] FamCA 86

Darley & Darley (No. 4) [2021] FamCAFC 54

Davut and Raif (1994) FLC 92-503; [1994] FamCA 113

Fitzmaurice & Woolridge (2020) FLC 93-951; [2020] FamCAFC 64

Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63

Hickey and Hickey and Attorney-General (Cth) (Intervener) (2003) FLC 93-143; [2003] FamCA 395

House v The King (1936) 55 CLR 499; [1936] HCA 40

Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78

Keskin & Keskin and Anor (2019) FLC 93-932; [2019] FamCAFC 236

Metwally v University of Wollongong (1985) 60 ALR 68; [1985] HCA 28

Mullane v Mullane (1983) 158 CLR 436; [1983] HCA 4

Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17

Rosati v Rosati (1998) FLC 92-804; [1998] FamCA 38

Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247

Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52

Sun Alliance Insurance Ltd v Massoud [1989] VR 8
Number of paragraphs: 104
Date of hearing: 26 May 2021
Place: Sydney
Counsel for the Appellant: Mr Richardson SC
Solicitor for the Appellant: Etheringtons Solicitors
Counsel for the Respondent: Mr Lethbridge SC
Solicitor for the Respondent: Tilley Family Law and Mediation

ORDERS

EAA 126 of 2020
EAA 159 of 2020
SYC 1057 of 2017

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTION
BETWEEN:

MS SHNELL

Appellant
AND:

MR FREY

Respondent

ORDER MADE BY:

WATTS, AUSTIN & TREE JJ

DATE OF ORDER:

5 NOVEMBER 2021

THE COURT ORDERS THAT:

1.Appeal EAA 126 of 2020 is allowed.

2.Order 1 made 4 August 2020 is set aside.

3.Pursuant to s 79 of the Family Law Act 1975 (Cth), a property settlement order is made as follows:

(a)Within three months the husband pay the wife the sum of $399,412.

(b)Otherwise, each party retain to the exclusion of the other, all property currently in their respective possession or…

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Shnell & Frey [2021] FedCFamC1A 55
Case
[2021] FedCFamC1A 55
Decision Date

CaseChat Overview and Summary

In Shnell & Frey, the Court of Appeal of New South Wales was called upon to review a property settlement order made in the context of a divorce. The husband and wife, both in their early seventies, had been married for over 35 years and separated in 2015, leading to a divorce in 2017. The central issue before the court was the adequacy of the property settlement order made by the primary judge, as well as the treatment of certain assets and liabilities. The court was tasked with determining whether the primary judge had exercised her discretion appropriately and if the reasons provided were sufficient.

The legal issues the court had to address included whether the primary judge's reasons for the property settlement order were adequate and whether there was an error in the treatment of capital gains tax (CGT) liabilities. The wife argued that the primary judge did not adequately explain the rationale behind the property settlement order and that there was a mistake in how the CGT liability was handled. The husband, on the other hand, maintained that the primary judge's decision was sound and that no further evidence was needed to reassess the property settlement.

The Court of Appeal found that the primary judge's reasons for the property settlement order were indeed inadequate and that there was an error in the treatment of the CGT liability. Consequently, the appeals were allowed, and the property settlement order was set aside. The court re-exercised its discretion to make a new property settlement order based on the evidence and submissions presented. The court concluded that the net assets of the parties should be divided in a ratio of 53% to the wife and 47% to the husband, reflecting the contributions made by each party throughout the marriage. The wife was also required to bear the CGT liability on her investment property.

In light of the findings, the court ordered that the parties file written submissions in relation to costs and set aside the previous property settlement order. The wife was to receive $1,860,000 from the husband, while the remaining assets were to be kept in the possession or control of each party. The court further agreed that if the appeals were successful, a costs order of $51,000 would be made in favour of the wife.

Orders

Orders of the court

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Background

Background to the litigation

For reasons which follow the appeals succeed. We shall re-exercise discretion and make a new property settlement order as requested by the parties, as well as directions for the filing of written submissions in relation to costs.BACKGROUND The husband is 70 years of age and employed as a professional. The wife is 64 years of age and employed as an advisor for a company providing financial services (at [4]). The parties married in January 1980 and separated in late June 2015. They divorced on 21 July 2017. They have two adult children (at [5]). In 1978 the husband purchased a property for $64,250 and borrowed $40,000 from a bank to do so. Two years later it became the parties’ only matrimonial home (at [6]). The husband was already working as a professional at the time of marriage and the wife qualified as a professional the year after marriage. The husband was the primary income earner throughout the marriage and, as such, the parties made decisions such as relocating to G City for a number of years because it was advantageous to the husband’s career. The wife was employed for much of the marriage as an advisor for corporate companies. At times she worked part time and at other times took maternity leave. The wife was the primary homemaker/parent throughout the marriage, although the husband assisted to the extent possible given his longer working hours (at [7]). In 2009 the wife received an inheritance from her father’s estate of $60,000 (at [17]). During the marriage the husband received by way of gifts and inheritances sums totalling $2,015,638 (at [18]) which was expended upon the acquisition and improvement of assets and on the family generally (at [19]). Upon the death of the wife’s mother in 2019, the wife received an inheritance which is reflected on the balance sheet at a value of $2,550,026 (at [20]). Since separation, the wife has earned more than the husband. Their respective salaries in 2019 were $175,203 and $99,991 (at [21]). At the date of the trial the parties held between them joint net assets with a value of $8,623,296 (at [77]). The alteration of property by the primary judge resulted in the wife receiving $324,530 more than the husband (at [78]). Both parties continued to be employed, the husband full time, the wife nine days a fortnight. Neither have any major health problems (at [23] and [24]). The wife owns an investment property. If she had sold it at the date of the trial, she would have incurred a CGT liability of $290,029 (at [53]). The husband, his sister and brother are the joint appointors (at [11]) and the joint directors of the corporate trustee (at [54]) of the H Trust (“the Trust”) which the wife asserted had net assets of $4,683,297 (Single expert report dated 27 May 2020, paragraph 47). This value is not referred to in the primary judge’s reasons. The husband’s interest as an object of the Trust has resulted in him receiving regular distributions of one third of the income of the Trust since 2011 (at [15] and [73]) together with the right to occupy a beach holiday house from time to time (at [14]).

Evidence

Evidence Before The Court

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Decision

Reasons for decision

This is a ground relying upon the final limb of House. Given the wide ambit of a trial judge’s discretion, this ground cannot succeed independently from the wife’s complaint in relation to the adequacy of the primary judge’s reasons.CONCLUSION We have concluded that the primary judge’s reasons do not adequately explain how her Honour came to make the property settlement order. We have also concluded that the primary judge made an error when finding that the wife had made a concession relevant to the treatment of CGT. Accordingly the appeal shall be allowed and her Honour’s property settlement order set aside.COSTS OF THE APPEAL AGAINST THE PROPERTY SETTLEMENT ORDER It was agreed that in the event the appeal was successful a costs order would be made in the wife’s favour in the sum of $51,000.RE-EXERCISE OF DISCRETION As indicated, in the event that the appeal was successful, both parties seek that we re-exercise the discretion to make a property settlement order. The wife now seeks the husband pay her $1,860,000 without any superannuation splitting order in her favour (Notice of Appeal filed 31 August 2020). The husband seeks the same orders as made by the primary judge, namely that each party keep everything that they have in their name, possession or control (Transcript of the appeal 26 May 2021, p.33 lines 3–4). The parties seek to rely upon the valuations as at the date of trial, the documents in the appeal book and the transcripts before the primary judge. They do not seek to rely upon any further evidence. Subject to any comments we have already made, the facts as found by the primary judge are not controversial. We agree that a property settlement order should be made for the reasons given by the primary judge (at [30]). The primary judge found that the net assets of the parties (including superannuation) had a value of $8,623,296 held as to $4,473,913 by the wife and $4,149,383 by the husband. For reasons already discussed, the latent CGT in the wife’s real estate in the sum of $290,029 attracts the second proposition in Rosati. It is appropriate to add that amount to the balance sheet as a liability for which the wife is responsible. That reduced the overall net assets to an amount of $8,333,267 and those held by the wife to $4,183,884. The wife abandoned the submission that the husband’s interest in the Trust had a value which could or should be considered at the first stage. We agree with the primary judge, for the reasons that her Honour has given, that the contribution assessment can be conducted on a global basis and we consider the assets in one pool. We adopt the primary judge’s discussion in respect of contributions but conclude the introduction of the wife’s inheritance (being $534,388 more than gifts and inheritances introduced by the husband) warrants it being afforded particular weight. Looking at contributions on a holistic basis (Jabour & Jabour (2019) FLC 93-898), we conclude that based on the parties’ contributions, the net assets of the parties on the resettled balance sheet should be divided as to 53 per cent to the wife and 47 per cent to the husband, based on contributions.

Ratio Decidendi

Legal Principle Established

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