Somerset & Somerset
[2009] FamCAFC 5
•19 January 2009
FAMILY COURT OF AUSTRALIA
| SOMERSET & SOMERSET | [2009] FamCAFC 5 |
| FAMILY LAW – APPEAL FROM FEDERAL MAGISTRATE DECISION – PROPERTY – Discretionary judgment – Whether the trial judge failed to properly identify the marital pool – Whether the trial judge failed to properly determine the liabilities and contributions of the parties - Whether the trial judge failed to give adequate reasons for the decision FAMILY LAW – PROPERTY - DISCLOSURE – Where one party failed to make full and frank disclosure of financial circumstances – Where that failure resulted in an adverse judgment FAMILY LAW – PROPERTY - LIABILITIES – Whether certain liabilities exist – Where the existence of those liabilities is evidenced by contentious documents FAMILY LAW – PROPERTY - CONTRIBUTIONS – Where one party made a significant initial contribution – Whether that contribution attained considerable significance during the marriage FAMILY LAW – JUDGMENTS - REASONS – Whether reasons for judgment adequate – Where the trial judge adopted the submissions of a party |
| Family Law Act 1975 (Cth) |
| AMS v AIF (1999) FLC 92-852 |
| APPELLANT: | MR SOMERSET |
| RESPONDENT: | MRS SOMERSET |
| FILE NUMBER: | BRC | 2533 | of | 2007 |
| APPEAL NUMBER: | NA | 20 | of | 2008 |
| DATE DELIVERED: | 19 January 2009 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May J |
| HEARING DATE: | 23 July 2008 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 15 February 2008 |
| LOWER COURT MNC: | [2008] FMCAfam25 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Hanlon and Mr Moore |
| SOLICITOR FOR THE APPELLANT: | GLS Global Legal Solutions |
| COUNSEL FOR THE RESPONDENT: | Mr Cameron and Ms Myer |
| SOLICITOR FOR THE RESPONDENT: | Barbeler and Cook Solicitors |
Orders
The appeal is dismissed.
(a) That the respondent be at liberty to file and serve written submissions as to costs in relation to the costs of the appeal within 14 days of today and upon receipt of those submissions the appellant file and serve written submissions within a further 14 days.
(b)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
IT IS NOTED that publication of this judgment under the pseudonym Somerset & Somerset is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 20 of 2008
File Number: BRC 2533 of 2007
| MR SOMERSET |
Appellant
And
| MRS SOMERSET |
Respondent
REASONS FOR JUDGMENT
I mention at this introductory stage that this appeal is to be determined by me as a single Judge of the Family Court pursuant to arrangements made under section 94AAA(3) of the Family Law Act 1975 (Cth) (“the Act”).
The husband appeals from property orders made by Federal Magistrate Coates on 15 February 2008.
In making the orders the Federal Magistrate accepted the wife’s counsel’s submission that the contribution of the parties was equal but that there should be a further adjustment of 15 per cent to the wife by reason of a number of s.75(2) factors as enumerated in paragraph 81 of the judgment.
It was also accepted by the Federal Magistrate that this would be achieved if the wife retained the house in which she was living described as the P property (subject to a mortgage), the husband pay the sum of $104,799.62 to the wife and the parties otherwise retain assets in their possession.
Grounds of appeal
In the Notice of Appeal, the husband lists eleven grounds of appeal. It is unnecessary to reproduce these grounds here in full. During oral submissions, counsel for the husband made it clear that the husband’s case is premised on three major grounds of appeal. These are:
· That his Honour erred in failing to properly determine the liabilities of the parties;
· That his Honour erred in failing to properly determine the initial and ongoing contributions of the parties; and
· That his Honour misdirected himself as to the proper approach to be followed in determining the property applications and failed to properly exercise his discretion.
One additional area of appeal raised was that his Honour failed to give adequate reasons for his decision.
The orders sought by the husband should the appeal be allowed are that the matter be remitted for rehearing, or in the alternative, that the Court re-exercise the discretion so that the property of the parties be distributed 65 per cent to the husband and 35 per cent to the wife, and that the wife pay the husband such monies as represents 65 per cent of the total net assets as determined by the Court. The husband also seeks that the wife pay the costs of and incidental to the appeal.
Background
The husband was born in September 1963 and the wife was born in September 1971. The parties commenced cohabitation in October 1999 and married in April 2000. It was a relationship of some 6 years; separation occurred in December 2005.
There are two children of the marriage, a girl, T, born March 2001 and a boy, H, born January 2003. The parties had other children, the wife a son, L (aged 12 at the time of trial) and the husband a son, K (aged 16 at the time of trial). Orders were made with the consent of the parties on 16 October 2007 whereby T and H live with the wife and spend time with the husband but L and K live with their respective parents.
The husband is a doctor and is in general practice. The wife was a dental assistant but has not been employed since March 2000 when she ceased work in order to look after the children.
Reasons for judgment and the evidence at the trial
At the commencement of his Honour’s reasons for judgment he referred to the requirement for full and frank disclosure in court proceedings and to the cases of Weir & Weir (1992) FLC 92-287 and Whiterod & Taylor (2006) FLC 93-266. In paragraph 4 his Honour said:
The husband in this matter is a high income earner. He did not give full and frank disclosure and orders will be made accordingly.
It can be seen that these findings were critical to the overall decision. There were no grounds of appeal directed to either of these findings.
At paragraph 31 of the judgment his Honour recorded the issues for consideration:
The issue was to consider the husband’s monetary contributions as against the wife’s non-financial contributions, in light of the husband’s lack of disclosure. In stating that I do not discount that there were non-financial contributions by the husband, such as some house painting.
The trial judge outlined the initial contributions of the parties to the marriage in some detail. He listed the various property transactions made by the couple during the course of the marriage before considering the contentious issue of the husband’s alleged liabilities.
These facts as relevant to the appeal are set out below, taken from his Honour’s judgment with reference to controversial matters.
The wife brought to the marriage a motor vehicle worth about $12,000.00.
The husband had the beneficial ownership of a block of land at the C Court property in Bundaberg. The husband held the land as trustee for and beneficiary of the Family Trust. The wife was made a trustee of the trust, but claimed she only ever acted at the husband’s behest. His Honour found in relation to this property:
14.…On the evidence I conclude the land was part of the marital property, as was other property which came under the umbrella of the trust.
There was some contest as to the value of the C Court property. The wife stated that the land was worth $39,000.00 when purchased or at the time of cohabitation. The Federal Magistrate could not determine what value the husband put on the property because of the manner in which the husband presented his evidence. In his trial affidavit, the husband claimed he purchased the land with the assistance of a loan of $123,055.61 from his brother. The Federal Magistrate’s conclusion regarding the existence of this contentious loan is considered in more detail below.
It was agreed between the parties that $60,000.00 was borrowed from a Building Society in order to build a house on the C Court land. The house was sold in 2000, and after payment of the outstanding mortgage debt, $103,000.00 were the net proceeds.
The wife claimed that this money, and extra funds earned by the couple, were used to purchase land at X at the Sunshine Coast in late 2000. The land was purchased in the husband’s name as trustee for the Family Trust.
In August 2001, the family travelled to the United Kingdom where the husband worked as a doctor for £50,000.00 per annum. In May 2002, the wife returned to Australia with the children L, T and H. The husband and K remained in the United Kingdom until December 2002, when the husband completed his contract. During that separation, the husband sent money back to the wife.
In October 2002, the couple purchased a house at Y at the Sunshine Coast for approximately $250,000.00. They paid a deposit of about $30,000.00 and borrowed the rest. Although the parties’ evidence about this transaction differs in the exact amounts, the Federal Magistrate concluded that the differences “are not of such a nature to affect the final outcome of the proceeding” (reasons for judgment, para 23). The wife used the funds sent to her by the husband from the United Kingdom to pay the deposit on the house.
In September 2003 the couple bought the property located at P Road for $610,000.00. It was the wife’s unchallenged evidence that this was in her name because of some issue regarding medical indemnity. The husband did not explain his position. The wife continues to reside in the P Road property with the children of the marriage.
In late 2003 the X Sunshine Coast property was sold for approximately $300,000.00. In April 2004 the couple purchased a block of land at C Court at the Gold Coast for $320,000.00. The husband did not state his earnings for this period but did not challenge the wife’s evidence that he was earning between $3,000.00 – 5,000.00 per week.
The issue of liabilities was important at trial as it is on appeal. The husband’s case in relation to liabilities is that he owed money to his brother, his parents and to the Australian Tax Office (ATO). In support of a liability to his brother, the husband produced a deed in relation to the loan, a letter of demand for repayment by the brother, and profit and loss statements of the trust which disclosed money owed to the brother. However, as his Honour noted, the husband did not file an admissible affidavit from his brother or produce the brother for cross-examination.
The wife claimed that in 2000, the husband had typed a sham letter of demand, purporting to be from the brother, requiring the money to be repaid. In her affidavit filed on 18 May 2007, the wife attached a facsimile letter which she sent to the brother in England at the husband’s behest. It was her evidence that this letter was written in order to reduce the husband’s English child support liabilities, and that the husband had told her that no such loan existed between himself and his brother.
His Honour was clearly influenced by the fact that the husband never referred to this liability when he sought, and was granted, a loan from the National Australia Bank (NAB). Furthermore, the husband did not deny the wife’s assertion that the letter was a sham and had been faxed to his brother at his direction. Although the husband produced a deed relating to the loan, this merely stated what the husband’s position was, but is not conclusive of the existence of a loan. His Honour concluded:
43.On the evidence I find that the letter was a sham document produced by the husband and there is no evidence of such a liability relating to the marriage.
With respect to the alleged liability to the husband’s parents, the husband referred to the profit and loss statements of the trust. They stated that the husband owed approximately $30,000.00 to his parents. However, there was no corroborating evidence led at trial in support of this allegation. Consequently, his Honour determined:
45.As the husband did not prosecute his case, I accept the submission from counsel for the wife, that if these liabilities exist, then the husband should bear them. He was expected to fully inform the Court of his financial position and where contentious liabilities were asserted, to prove the facts.
The Federal Magistrate referred to a number of ways in which the husband had not provided full and frank disclosure of his financial affairs. This included discrepancies between the husband’s claims as to the value of his furniture. In the NAB loan application, the husband stated he had furniture worth approximately $30,000.00. However, in an updated financial statement for trial, filed 12 November 2007, he stated the furniture was worth only $15,000.00. When confronted with the inconsistency at trial, the husband stated that he “duped NAB because I thought if I told them of these debts I wouldn’t get the loan.” In response to this, The Federal Magistrate stated:
46.…It is a very poor reason to state in evidence that he “duped” a party in a business transaction. When confronted with the inconsistency, he could hardly say he could not remember what he had stated for these proceedings. He has now stated a falsehood in either the bank document or the family law documents. I draw the inference he was seeking an advantage as to the value of his assets rather than being frank with the Court.
47.There was other behaviour which I have considered in relation to the husband’s character which has led to adverse findings.
Matters which the trial judge considered in relation to the husband’s character include the husband’s valuation of the Z property as $505,000.00 in one financial statement and $525,000.00 in another, the discrepancies in his stated income in different financial statements and the late reference to the existence of the company H Pty Ltd.
In a financial statement filed on 14 May 2007, the husband stated his income was $1,500.00 per week. On 15 October 2007, the husband disclosed a weekly income of $4,230.00 per week. The husband’s explanation for the discrepancy was that some of the money was going to his company, H. The husband claimed he did not know he had to disclose money being directed to this entity. The existence of this company, which was created in early January 2006, was not revealed in the proceedings until 15 October 2007.
The Federal Magistrate concluded that he did not accept that because the husband was, at times, a self-represented litigant he did not know of his duty to disclose. His Honour concluded that the husband “was being dishonest in not disclosing the existence of [H] and in not disclosing that a big part of his income was going to [H].” (Reasons for judgment, para 51).
Ultimately, the Federal Magistrate concluded:
52.… it was his choice to be self-represented. He is a high income earner and not in the same position as many litigants who simply cannot afford representation and do not qualify for legal aid assistance.
…
54.I find that the husband has an income which may be as low as $4,230.00 per week but could be at least $1,500.00 higher, because of the differences in his statements.
55.And while [H] was taking the greater amount of his wages the husband has made very sporadic child support payments - about $2,000.00 since June of this year - and no spousal maintenance payments to the wife. At paragraph 28 I referred to the wife’s allegation that the husband was earning between $3,000.00 and $5,000.00 per week in about 2003. I would be wary of making a finding that he was earning that money, but since he did not challenge the assertion and since he did not disclose his income going into [H], I conclude that his evidence is unreliable and that he has always had a high income and has the capacity to earn a high income. This has relevance to both the alteration of property interests and spousal maintenance.
The Federal Magistrate then considered the husband’s contributions to a personal investment fund and its significance for the property division. According to his financial statement filed on 12 November 2007, the husband increased his investments after separation in a BT investment fund, which he called superannuation, by $769.00 per week. Counsel for the wife submitted at trial that the husband was able to do so because he left the wife and children without adequate support and maintenance, refused to pay the mortgage and he disputed his taxation liabilities. With the exception of the mortgage payments, which had been made in advance, each of these allegations were supported by the evidence.
The husband also sought to have the wife bear some or all of a NAB credit card debt in the amount of $15,000.00 (per financial statement filed on 12 November 2007). The Federal Magistrate found that (reasons for judgment, para 58):
“[T]he husband gave no credible evidence the debt should be classified as a debt of the marriage as it appeared to be a debt incurred after the separation and bore no relation to the marriage.”
The husband also claimed that the wife should bear some of the debt owed to the Australian Tax Office (ATO). This amounted to an estimated $87,000.00. The debt was incurred over the 2006 – 2007 financial year. The husband did not produce any evidence demonstrating an assessed taxation debt including penalties imposed for late payments. His Honour concluded that:
60.The husband came to Court prepared to limit his disclosure to make it impossible for the wife’s solicitors to track his real financial position and how he came to be in that position. I am not satisfied that the ATO debt does belong to the marriage liabilities.
The marital pool determined by the Federal Magistrate in light of his consideration of the contentious issues above and based on submissions from counsel for the wife was as reproduced below:
P property, Gold Coast (occupied by wife)
$655,000.00
Sale proceeds C Court, Gold Coast
$102,811.00 in solicitors trust account
Z property, Gold Coast (owned by husband)
$525,000.00
Husband’s Bendigo bank account
$2,000.00
Proceeds sale Toyota vehicle
$19,000.00
Mitsubishi vehicle (husband)
$5,000.00
Nissan vehicle (wife)
$25,000.00
Monies taken from W Bank Account (wife)
$15,000.00
Monies taken from W Bank Account (husband)
$33,000.00
Family Trust
$6,380.60
Husband’s furniture
$15,000.00
Wife’s furniture
$11,000.00
Husband’s UK bank account
$8,000.00
Wife’s superannuation Macquarie
$11,307.00
Husband’s superannuation – MAP
$106,134.79
Husband’s BT account
$93,217.39
Wife’s bank account
$100.00
TOTAL ASSETS
$1,632,950.78
LIABILITIES
Mortgage – Z property
$480,000.00
Mortgage P Road
$537,000.00
TOTAL LIABILITIES
$1,017,000.00
NET ASSETS
$595,450.18
Despite an opportunity being given to counsel in the appeal, no submissions were made in relation to the pool or the correct mathematical calculations. Reference to the transcript of the proceedings before his Honour makes it clear that it was always submitted by Mr Page SC that the net pool was valued at $615,950.70. The error in the pool as set out by the Federal Magistrate appears to have been the inclusion of sale proceeds from a car in the sum of $19,000.
This must be the case because the orders ultimately made by the Federal Magistrate reflect a division of the pool at the figure contended by Senior Counsel at the trial.
With respect to the submissions made by the parties as to contributions, the Federal Magistrate referred to the statements of the High Court in Mallett & Mallett [1984] HCA 21; (1984) 156 CLR 605, which considered the contributions of parties over the length of the marriage.
In this respect, his Honour found that the wife was made a trustee of the Family Trust which held the C Court property and assisted the husband. Although her initial financial contribution to the marriage was of little significance, it was correctly found that she made significant non-financial contributions. This, his Honour found, enabled the husband to develop his earning capacity as a doctor, as the wife kept the house inside and out and contributed to the welfare of the family by raising the children of the marriage and the two other children.
The Federal Magistrate also considered the limited time the husband spent with the children since separation and the minimal child support he had paid. The wife led evidence at trial which indicated that the husband was in arrears in his child support payments in the amount of $9,221.48, as at 7 November 2007, seven days before the trial. The wife’s evidence also revealed that the husband made only sporadic payments of child support from the time of separation.
His Honour noted that:
73.In short she was dependant on Social Security payments which is in sharp contrast with the husband’s earning capacity, his future earning capacity and history of creating a healthy investment “nest egg” for himself at her expense.
74.As to the wife’s employability, she expects to finish a psychology degree soon and she has a very positive attitude that she will obtain an internship at about $35,000.00 per year for two years however, despite her attitude, that is only her hope. There is no evidence that she has any earning capacity as a psychologist.
Counsel for the husband submitted at trial that a starting point for the division of the property would be 76 per cent to the husband and 24 per cent to the wife, based on the greater financial contributions of the husband and the trust liabilities. In terms of adjustment, counsel for the husband argued that a ten per cent adjustment in favour of the wife was appropriate, to take into consideration the wife’s smaller earning capacity and her care of the children.
The Federal Magistrate accepted the submissions of counsel for the wife in their entirety. Those submissions, as restated by the trial judge in his reasons for judgment, are as follows:
80.Counsel for the wife made the submission that it was extraordinary that a member of the medical profession would put aside the payment of his own debts to enhance his own position and expect the wife to subsidise those debts when she is in a very poor, in fact poverty stricken position.
81.He submitted that the contributions of the party’s should be treated equally but on the s.75(2) grounds I should consider a 15 percent adjustment to the wife on the grounds of:
a) The disparity of earning capacity;
b)Failure to pay proper and timely child support for the purposes it was needed;
c)The husband’s limited responsibility for the children and the wife’s major responsibility for them; and
d)The chicanery of the husband in building his nest egg “superannuation” while denying the wife money.
82.This would be achieved by orders ensuring she retains [the P property], [Gold Coast] for herself and the children.
83.It was submitted that the husband pay the wife $104,799.62, which would include $40,000.00 for spousal maintenance under s.77A of the Family Law Act 1975, plus an order that money held in the trust funds of her solicitors, $102,811.00, plus interests accrued, be paid to her.
The Federal Magistrate concluded:
85.Given the manner in which the husband conducted himself and the trial I do not think any other orders are open on the evidence and the findings.
86.Further, the wife did not seek a splitting order for superannuation. Her counsel’s submission was that the orders sought were just and equitable and there was no proof that the BT fund was a regulated superannuation fund. It is certainly a large amount of money the husband has accumulated for his sole benefit and could be utilised to ensure any order for property division in the wife’s favour could be implemented.
87.I accept the submissions from counsel for the wife as to what orders I should make as being just and equitable. Given the husband’s lack of disclosure it is difficult to know the real extent of the property. Referring to the list of assets and liabilities, I have taken into account that the house is already in the wife name, the retention by the parties of vehicles, the use of monies from the [W] account, their household contents, their superannuation resources, their earning capacities and the liabilities. In this case I am satisfied that granting the orders as sought by the wife is just and equitable in all the circumstances and will allow her to re-establish herself financially and care for the children.
Appellate principles
The principles governing an appeal such as this from a discretionary judgment are not in doubt.
In Australian Coal and Shale Employees Federation v The Commonwealth (1953) 94 CLR 621 at 627, Kitto J described the appropriate level of restraint that an appellate court should exercise in respect of discretionary matters as follows:
There is a strong presumption in favour of the correctness of the decision appealed from and that that decision should therefore be affirmed unless the Court of Appeal is satisfied that it is clearly wrong.
It was clearly enunciated in House v The King (1936) 55 CLR 499, at 504-505 that:
It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.
In Gronow v Gronow (1979) 144 CLR 513 Stephen J said at 519:
The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion.
Thus, as a matter of firmly established appellate process it is necessary first to establish whether there is any recognised ground for reviewing the Federal Magistrate’s discretionary decision consistent with these principles. If there is then, unless the result is plainly right notwithstanding an appellable error, per Gibbs J in De Winter v De Winter (1979) FLC 90-605 at 78,091, I am obliged to allow the appeal, set the orders aside and, if possible, substitute my own decision after considering the matter afresh. As was explained by Kirby J in AMS v AIF (1999) FLC 92-852 at 86-043:
[A]n appellate court, invited to review the exercise of discretion at first instance will avoid an overly critical, or pernickety, analysis of the primary judge’s reasons, given the large element of judgment, discretion and intuition which is involved. Only if a material error of the kind warranting disturbance of a discretionary decision is established is the appellate court authorised to set aside the primary decision, to substitute its own exercise of discretion or to require that it be re-exercised on a retrial.
In the case of discretionary decisions, it is only where the effect of the orders exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere, per Brennan J in Norbis v Norbis (1986) FLC 91-712 at 75,178.
As the last ground of appeal attacks the adequacy of his Honour’s reasons, it is appropriate that I refer to the following passage from the decision of the Full Court in Bennett and Bennett (1991) FLC 92-191 at 78,266-267:
Counsel for the wife urged that there was a failure by her Honour to give adequate reasons for judgment, and that this, of itself, amounted to an error of law. In this regard he relied upon the line of New South Wales Court of Appeal decisions commencing with Pettitt v Dunkley (1971) 1 NSWLR 376, and including Housing Commission of NSW v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378, and Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247. In the latter case, McHugh JA said that without the articulation of reasons, a judicial decision could not be distinguished from an arbitrary decision. His Honour took the view that the requirement for reasons serves at least three purposes, namely, to enable the parties to see which of their arguments had been understood and accepted as forming the basis of a Judge's decision; secondly, to further judicial accountability; and thirdly, to enable interested persons to ascertain the basis upon which like cases will probably be decided in the future.
Submissions of the Appellant Husband
As already outlined, the husband’s appeal is premised on three major grounds of appeal and one additional ground concerning the adequacy of the trial judge’s reasons for judgment. Consequently, it is useful to consider the submissions under those headings.
(a) The Liabilities
Counsel for the husband submitted that there was clear evidence of the various liabilities as contended by the husband and that they should have been considered as part of the pool. These included the debts owed to the husband’s brother, his parents, the ATO and the United Kingdom Tax Office. It was argued that the husband had clearly disclosed sufficient evidence of the existence of the debts. In written submissions, counsel for the husband referred to the husband’s various financial statements and affidavit evidence, as well as his oral testimony. However, given the trial judge’s conclusions as to the husband’s less than full and frank disclosure which is not the subject of appeal, it must be evidence from third parties and independent sources which requires attention in considering this part of the appeal.
With respect to the liabilities owed to the husband’s brother and parents, counsel for the husband referred to Exhibit 3, being the Financial Reports of the Trust for the financial years 1998 – 2005, which listed liabilities owed to the husband’s brother and parents. This, it was argued, was evidence independent of the husband’s testimony as to the existence of the debts. It was also submitted that it was the wife, once she became a trustee in 2001, who handled all the paperwork. Evidence of the wife’s appointment was found in the Deed of Appointment of Trustees to the Trust, annexed to the husband’s affidavit of 12 November 2007. Counsel for the husband submitted that this meant that the wife had personal knowledge of the contents of the financial documents and should have made enquiries into such matters as the liabilities (T/S 23.41-43).
Reference was also made to a deed annexed to the same affidavit. This deed, prepared by Finemore Walters & Story Solicitors it was submitted, provides evidence of the existence of the loan between the husband and his brother and shows that Queensland Stamp Duty was paid in respect of the deed.
It was said that evidence of the husband’s liabilities to the ATO was provided by two letters from the Accountants, dated 2 November 2007. These letters estimate the husband’s income tax liability owed at $45,241.00 and the amount outstanding to the ATO for the Trust to be $24,219.00 (for the period 1 July 2006 to 30 September 2007). Although these liabilities were incurred post-separation, counsel for the husband submitted that his Honour should have included them in the property pool.
It is noted that the amount owing is not known as no assessment has been made by the ATO. However, it was submitted that such figures were prepared through the ATO tax agent portal electronically, and are representative of the true position. It was conceded by counsel for the husband that the husband’s deferral of the ATO liabilities made it possible for him to increase his contribution to the BT Investment Fund.
It was argued that since the Federal Magistrate had included the BT Investment Fund, comprised in part of a post-separation contribution by the husband, he also had a duty to take into account post-separation liabilities, including tax liabilities, acquired by the husband.
Counsel for the husband submitted that the Federal Magistrate should have included the husband’s outstanding debt to the United Kingdom Revenue and Customs Office, amounting to ₤4,665.23. Evidence of this debt was annexed to the husband’s affidavit (filed 2 November 2007) in the form of a Self Assessment Statement from HM Revenue and Customs, dated 23 August 2006. It seems that this debt was incurred when the parties were living in the United Kingdom and also when the husband remained in that country after the wife had returned to Australia. The debt had not been paid at the time of the hearing. Consideration must be given to whether the husband would ever be likely to pay this debt, given that the assessment was issued over two years ago and the husband now resides in Australia.
(b) The Contributions
Extensive written submissions were provided regarding the trial judge’s consideration of the parties’ contributions to the marriage. Counsel for the husband argued that if there was insufficient evidence to establish the existence of a debt to the husband’s brother, and such liability was not included in the marital pool, it was incumbent on the Federal Magistrate to find that the husband had made a significant initial contribution to the marriage which had not lost its significance over the passage of time.
This significant initial contribution made by the husband resulted from the use of the proceeds of the sale of the C Court property which the husband claims to have purchased using the money loaned by his brother. This was discussed by the trial judge, where he said:
18.The husband filed his trial affidavit only two days before the trial, stating he had purchased the [C Court] land with the assistance of a loan from his brother of $123,055.61. He said he borrowed $60,000.00 from the [W Building Society] in Bundaberg to build a house.
19.The evidence which is agreed is that the couple built a house on the land and that $60,000.00 was borrowed from the [W Building Society].
20.[C Court] was sold in about mid-2000 for $180,000.00 and after payment of the mortgage debt $103,000.00 was left over.
21.A block of land was purchased at [X at Gold Coast] in late 2000, in the husband’s name as trustee for the [Family Trust], for $112,000.00.
22.On the wife’s evidence the money from the [C Court] sale was used as well as extra money earnt by the couple.
The land at X was sold for approximately $300,000.00 and the proceeds of that sale were applied to the purchase of the land at Gold Coast. The land at Gold Coast was later sold for approximately $312,000.00. It was never encumbered.
Counsel for the husband argued that the significant contribution by the husband was the equity in C Court which did not lose its significance during the course of the marriage, but in fact grew; this contribution was a “launching pad” for the further and increased assets of the parties.
It was submitted that the Federal Magistrate either did not understand the significance of the husband’s initial contribution to the marriage, or otherwise failed to give it the weight that it ought to have been given.
The parties’ relationship lasted for approximately six years, and during that time the wife, although making a contribution by way of homemaker and parent, did not make any significant financial contribution to the marriage. In oral submissions, counsel for the husband conceded that the parties’ contributions “were probably somewhat equal during that period of cohabitation…[b]ut for the initial difference” (T/S 46.1-6).
When asked during the submissions, counsel for the husband suggested an appropriate figure for the husband’s contribution to the marriage. He said:
MR HANLON: Contributions overall, it is my submission that the husband has probably contributed of that net pool available for division, at the time of the hearing, he has contributed not less than 65 per cent…it might be 70 per cent actually. (T/S 48.27-30)
Converted to mathematical terms, it was contended that the contributions made by the husband through the C Court property is at least $100,000 approximately, ignoring contributions made by the wife.
In response to the assertion that, after separation, the husband put aside the payment of his other debts (being the mortgage on the P Road property) in order to advance his own position, it was submitted that the husband had in fact prepaid the mortgage until May 2008. Counsel for the husband argued that this meant that it was not open to the trial judge to conclude that the husband had callously left his wife in a poverty-stricken position, being a finding not supported by the evidence.
(c) The Trial Judge’s Approach
It was submitted that the Federal Magistrate had misdirected himself as to the proper approach to be followed in determining the property application. The preferred approach to the determination of an application pursuant to section 79 of the Act is well known. The four step approach was set out by the Full Court in Hickey and Hickey [2003] FLC 93-473. Counsel for the husband submitted that the trial judge had misdirected himself as to the applicable law or the proper approach in his consideration of the first, second and third of the four inter-related steps as set out in Hickey and Hickey (supra).
In written submissions, counsel for the husband quoted extensively from a number of authorities dealing with the determination of a property application. First, in relation to contributions, reference was made to the decision of Fogarty J in In the Marriage of Money (1995) FLC 92-485, where his Honour stated:
…In an appropriate case, in my view, an initial substantial contribution by one party may be “eroded” to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party.
…I think it is legitimate for me to say, as I was a member of the Full Court in Lee Steere and Lee Steere (1985) FLC 91-626 , that his Honour has read too much into the passage to which he refers and that the term “off-setting contribution” does not necessarily mean “greater contribution”. It simply reflects the circumstance that the respective contributions of the parties over a long period of marriage may “offset” the significance which might otherwise be attached to a greater initial contribution by one party. This is, in my view, made clear by the Full Court in White and White (1982) FLC 91-246 where that Court pointed out that the principle in Crawford and Crawford (1979) FLC 90-647 is that the original contribution should not be carried forward as a mathematical proportion; ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be later factors of significance, and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.
The Full Court in In the Marriage of LA and EA Pierce (1999) FLC 92-844 at 28, after restating the decision of Fogarty J quoted above, said:
In our opinion, it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case, that use was a substantial contribution to the purchase of the matrimonial home.
As already said, it was submitted that the Federal Magistrate erred in failing to properly determine the liabilities of the parties, being the alleged debt to the husband’s brother, his parents, the ATO and the United Kingdom Revenue and Customs. This, it was submitted, was a failure in the assessment of the first of the four steps outlined in Hickey and Hickey (supra).
Secondly, in the alternative that even if no debt to the husband’s brother could be established, it was argued that his Honour had failed to find on the evidence that the husband had made a significant initial contribution being the equity as contained within the C Court property. This contribution it was submitted, had not lost its significance over the passage of time. The failure of the trial judge to determine that the husband had made the significant initial contribution constituted a failure, it was argued, to follow the second of the four steps.
The husband had clearly funnelled a significant amount of money into the BT Investment Account. This was made possible, as conceded in part, by the husband’s deferral of the payment of his tax obligations. It is also correct that the accumulated sum in the investment account was made post-separation, without any assistance or contribution by the wife. It was submitted that his Honour had failed to adequately determine the appropriate weight to the given to this post-separation contribution by the husband when considering the respective contributions of the parties pursuant to section 79. This again, it was argued, constituted a failure in the second step.
Finally, it was submitted that the trial judge misdirected himself in his consideration of the third step. It was argued that the wife has a strong residual capacity for paid employment. She had worked as a dental assistant, and had nearly completed a Bachelor of Arts degree in psychology at the time of the trial. In support of this submission, reference was made to the wife’s affidavit filed 2 May 2007. It was argued that the evidence indicated that the wife was intent on re-entering the workforce upon completion of her tertiary degree (sometime in mid-2008), and therefore would be earning a modest income shortly after the trial. Consequently, it was submitted that the Federal Magistrate erred in finding that a 15 per cent adjustment in favour of the wife for her future needs was appropriate. Rather, a more modest adjustment should have been ordered, it was put forward, somewhere in the range of 5 per cent, if any.
(d) The Failure to Give Adequate Reasons
Counsel for the husband argued that The Federal Magistrate failed to give proper reasons for his judgment. This error, it was submitted, stemmed from his Honour’s failure to make the necessary findings of fact on the evidence before the court. It was argued that the reasons for judgment do not indicate how the trial judge came to the decisions he had made.
Reference was made to Scott and Scott (1994) FLC 92-457 and Athens and Another v Randwick City Council [2002] NSWCA 83 (unreported). It was submitted that the duty incumbent on a judicial officer to give reasons for judgment extends to providing an ability to understand why the decision was made. Counsel for the husband stated that where adequate reasons are not given, the appellate court should scrutinise the decision with particular care. In support of this submission, he referred to the decisions in In the Marriage of Merriman (1993) FLC 92-422, Bennett and Bennett (supra) and In the Marriage of Smith (1994) FLC 92-488.
In oral submissions, counsel for the husband submitted that the trial judge accepted the submissions of the wife’s counsel at trial without further explanation. Thus, his reasons for coming to such a conclusion, it was argued, are not clear.
Submissions of the Respondent Wife
First, counsel for the wife noted that the appeal does not challenge the finding by the trial judge at paragraph 4 of his reasons, where he determined that the husband is a high income earner and did not provide full and frank disclosure throughout the trial. This adverse finding against the husband was referred to numerous times by the Federal Magistrate throughout his reasons for judgment and is a significant part of the judgment.
(a) The Liabilities
Counsel for the wife submitted that it was open to the Federal Magistrate to determine that no liability actually existed as between the husband and his brother or the husband and his parents. It was correctly submitted that the submissions of the husband disregard the finding of the trial judge at paragraph 43, where his Honour determined that the husband had perpetrated a fraud by creating correspondence which was later relied upon by the husband to establish the existence of the loan from his brother.
In written submissions, counsel for the wife referred to the cross-examination of the husband at trial where he discussed the inclusion of other loans to family members in the financial statements of the trust. The husband stated (T/S of trial, 28.38-46):
During those times those payments are listed to have been made they were paper transactions, and they were done for the sole purpose of reducing my tax liability. They were legal paper transactions…So those amounts that are alleged to have been paid to my niece and my mother were never actually paid. No moneys ever were transferred from me to my brother or – or mother or my niece, they were purely paper transactions.
It was further submitted that the husband seemed to assume that the inclusion of the liabilities in the sworn documents or financial statements was proof of the existence of the debts. However, for the clear reasons given, the trial judge did not accept such evidence and it was open to him to do so.
In relation to the inclusion of the moneys owed by the husband to the ATO, it was noted that the Federal Magistrate made findings about this debt at paragraphs 59 and 60 of his reasons. His Honour stated:
59.[The husband] also claimed that the wife should bear some of an estimated $87,000.00 owed to the Australian Taxation Office. There was no evidence as to what the taxation debt was and what were penalties imposed for late payments, although the amount was incurred over the 2006 – 2007 financial year.
60.The husband came to Court prepared to limit his disclosure to make it impossible for the wife’s solicitors to track his real financial position and how he came to be in that position. I am not satisfied that the ATO debt does belong to the marriage liabilities.
The submission in relation to this debt, made on behalf of the wife at trial, was as follows (T/S of trial, 60.12-22):
“And the same thing applies in relation to a suggestion that my client should subsidise the husband’s credit card debts acquired after separation and the explanation from a member of the medical profession is extraordinary that he should say, ‘I simply put aside by responsibilities to a bank and I put aside my responsibilities to the Australian Tax Office to enhance my own asset position by continuing $3,000.00 to BT and continuing – and entering into a contract for the purchase of land, upon which I knew I was going to have to spend a lot more money in terms of the covenant which attached thereto, and I went to National Bank and acquired liability of $1,000.00 a month in the face of all that, and now I want the wife to subsidise the debts as I incurred as a result of all of that.’”
The source of the funds contributed to the BT Investment Fund was the H Company. No corroborating or supporting evidence was adduced to support the husband’s assertion that the company owed $67,000.00 in tax liability. It was submitted that the husband’s argument that the ATO liability should be included because the corresponding BT Investment Fund contribution was deemed part of the asset pool was inherently wrong.
(b) Contributions
It was submitted that the Court should have regard to the unchallenged findings in paragraph 17 of the judgment:
17.The husband’s evidence-in-chief was presented in such a manner that I could not determine the value he put on the land as his initial contribution to the marriage.
It was submitted that if the husband contends that there exists a disparity in the contributions of the parties based upon his ownership of the C Court property at the commencement of the relationship, it was incumbent on the husband to show at trial the factors warranting such disparity.
With respect to the contributions of the parties during the marriage and post-separation, counsel for the wife submitted that it was open to the trial judge to determine that the parties had contributed equally to the marriage up until the time of the trial.
The parties had separated almost two years before the trial, and it was argued that post-separation, the wife was left with the majority of the care of the children. Although the mortgage was pre-paid until May 2008, the wife bore all other outgoings on the house. It was submitted that during the time between separation and trial, the husband did not meet his support obligations in relation to either the wife or the children, and was therefore able to re-establish himself. He acquired a new piece of property while he was earning a sizable weekly income which in comparison dwarfs the wife’s for the corresponding period.
(c) The Trial Judge’s Approach
It was submitted that the Federal Magistrate made no error in his approach to determining the property application. The findings of fact were precise and the asset pool was established. Although the trial judge did not enunciate percentage figures related to the contributions by the parties, he adopted the submissions made on behalf of the wife.
In relation to the wife’s possible future earning capacity, it was submitted that there was no evidence before the trial judge that the wife would actually be able to secure employment. The trial judge determined that the husband’s weekly income was somewhere between $4,200.00 and $6,000.00. It was submitted that the husband is clearly a high income earner, whereas the wife’s future earning capacity is somewhat dubious. Consequently, it was argued, the 15 per cent adjustment was modest in the circumstances.
In the event that the Court was persuaded to re-exercise the discretion, and remove the BT Investment Fund moneys from the assets of the marriage, counsel for the wife submitted that the contributions of the parties were clearly equal and therefore an initial 50:50 division was appropriate. Furthermore, it was submitted that a substantial adjustment should then be made in favour of the wife. A 25 per cent adjustment, it was stated, was well within the ambit of reasonable discretion, in light of the husband’s unreliable payment of child support, his failure to disclose his true financial position during the trial and his high income earning capacity. In contrast, the wife’s position is much more uncertain, given that she is a single mother, has not re-partnered and her future earning capacity is not assured. She is also responsible for the costly mortgage on the house in which she and the children live.
(d) The Failure to Give Adequate Reasons
Counsel for the wife submitted that it is difficult for the husband, who had a finding made against him that he failed to make adequate disclosure to the court such that the trial judge had difficulty determining the property and financial resources of the parties, to argue that he cannot understand why the decision was made.
It was further submitted that no appealable error arises from the form of the reasons for judgment. Although the Federal Magistrate adopted the submissions made on behalf of the wife, in any case where his conclusions required justification, he did so. The trial judge often referred to the finding of non-disclosure and his course of reasoning was made clear.
Conclusions
In view of the complaint that the Federal Magistrate failed to give proper reasons and the general proposition that the result demonstrates a failure to properly exercise the discretion by the Federal Magistrate it is helpful to set out the effect of his Honours orders. The wife received the following property:
House at P Road $655,000
Moneys held by solicitors on trust $102,811
Car $25,000
Moneys received from W $15,000
Furniture $11,000
Bank Account $100
Superannuation $11,307
Total $820,218
Less
Mortgage on P Road $537,000
Net $283,218
In addition to that it was ordered that the husband pay the sum of $104,799.62 in cash so that the value of the property ultimately to be received by the wife is $388,017.62. Putting to one side the cash payment from the husband to the wife it can be seen that the property to be received by the husband is as follows:
Z house $525,000
Bendigo Bank $2,000
Husband’s motor vehicle $5,000
Moneys from W Bank Account $33,000
Household furniture $15,000
Family Trust $6,380.60
UK Bank Account $8,000
MAP Super $106,134.79
Husband’s BT account $93,217.39
Total $793,732.78
Less
Mortgage on Z house $480,000
Net $313,732.78
As I have already mentioned there appears to be an error in the pool as described in the judgment. The figures listed above would appear to be correct adding together the assets already mentioned to be retained by the wife with those of the husband less the mortgages. I will adopt the net asset pool at $596,950. If the wife is to receive 65 per cent of a net pool of $596,950 the sum to be received by her is $388,017. This was the effect of the order made by the Federal Magistrate which included the cash component payable by the husband to the wife.
The argument in relation to the husband’s appeal about liabilities to his family and the Australian and UK Tax Offices fails largely because the evidence relied on was that of the husband himself. The Federal Magistrate correctly rejected this evidence and there was no appeal from these findings. In addition, the husband did not call his brother to give evidence nor were there documents demonstrating that there had been an assessment from the Australian Taxation Office. The appeal should fail in relation to these grounds.
As to contribution, it is no doubt correct as was found by the Federal Magistrate that the land at C Court should have been treated as though it was a contribution made by the husband (paragraph 14 of Judgment).
However, the Federal Magistrate could not determine the value of the husband’s initial contribution in the absence of evidence. What was known is that $60,000 was borrowed to build a house and that when it was sold in mid 2000 for $180,000 the net proceeds were $103,000. Those moneys can be traced to subsequent purchases of property.
Whilst it was complained that the Federal Magistrate had misdirected himself as to the proper approach and erred in the exercise of his discretion it was not explained how this was so other than to assert that not sufficient weight was given to the initial contribution by the husband.
Properly, reference was made by counsel for the husband in the appeal to the relevant authorities including that an original contribution should not be carried forward as a mathematical proportion.
The question is whether the order was just and equitable. It is difficult to understand how the Federal Magistrate could have come to the conclusion that as at the date of separation the contribution of the parties was equal in view of the initial contribution of the husband. It is not clear whether this was his conclusion. In part, this is because of the limited reasons. In view of the limitations of the reasons it is appropriate in this case to consider whether the order was just and equitable and in doing so to consider how the discretion ought to have been exercised.
The facts must lead to significant weight being given to the financial contribution of the husband during the marriage, whether the moneys were borrowed from his family or whether they were provided by him. In any event, the financial contribution of the husband was significant especially as the wife made very little financial contribution during the marriage. Certainly her contribution as homemaker and parent was much greater than that of the husband.
A proper assessment would lead to a conclusion that after a relatively short marriage, at separation the contribution of the husband could be assessed as greater than that of the wife and in the vicinity of 65 per cent. However, the circumstances of each of the parties from the time of separation in December 2005 to the date of trial on 14 November 2007 was also significant especially as the wife received very little financial support from the husband and continued the major burden of caring for the children. It must also be recognised that during this time the husband contributed greatly to assets now seen in the financial pool however he clearly was able to do this because of his relatively high income and because he was contributing so little to the needs of the wife and the children. These matters are so significant that in my view as at the date of trial the contribution of the parties both financial and non financial could be assessed as being largely equal. This view is reinforced by the unchallenged finding of the Federal Magistrate that the husband had failed to make proper disclosure such that it is difficult to be confident about his financial circumstances at any point in time.
The matters then to be considered are those as urged upon the Federal Magistrate which appears in paragraph 81 of the judgment. The most significant factors in assessing the parties future circumstances and those matters which are attracted by s.75(2) of the Act are:
·The disparity of the earning capacity of the parties, and;
·The contribution the husband is likely to make in the future to the children’s financial and emotional needs.
Remembering that the net asset pool is $596,950 a percentage of 15 per cent is less that $90,000. Even accepting that the wife has potential for employment as a psychologist, the evidence of the husband’s past earning capacity as a medical practitioner demonstrates that his will far exceed the wife’s potential income. Allowing for the wife’s responsibilities to the children the order made by the Federal Magistrate would appear to be well within the range of an order that is just and equitable.
Overall it can be seen then that whilst acknowledging some limitation in the reasons provided by the Federal Magistrate the orders made were based on the facts as presented by the parties and were just and equitable. The appeal should not be allowed.
I certify that the preceding one hundred and seven (107) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.
Associate:
Date: 19 January 2009
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