Teal & Teal
[2010] FamCAFC 120
•25 June 2010
FAMILY COURT OF AUSTRALIA
| TEAL & TEAL | [2010] FamCAFC 120 |
| FAMILY LAW - APPEAL – PROPERTY – Whether the Federal Magistrate failed to give adequate weight to the husband’s post separation savings – Whether the Federal Magistrate failed to give adequate reasons for the contribution assessment – CROSS APPEAL – PROPERTY – Whether the Federal Magistrate failed to assess and give weight to the wife’s initial contribution of US stocks – Where Court unable to determine from the Federal Magistrate’s reason how the parties’ disparate initial contributions and post separation contributions were evaluated and weighed – Where there is merit to the challenges in both the appeal and cross appeal. FAMILY LAW - APPEAL – PROPERTY – Whether the Federal Magistrate erred in the adjustment in the wife’s favour under s 75(2) – Where the facts do not support the adjustment made in favour of the wife – Where the Federal Magistrate erred in making a further adjustment on the basis of justice and equity in addition to the adjustment under s75(2) – Appealable error established. FAMILY LAW - APPEAL – CHILD SUPPORT – DEPARTURE APPLICATION – Whether the Federal Magistrate erred by double counting in calculating the cost of maintaining the children for the purposes of the departure application – Where the effect of the Federal Magistrate’s orders is the husband bears a double liability for the children’s school fees – Appealable error established – CROSS APPEAL – Whether the Federal Magistrate erred in not back dating the commencement of the adjusted assessment to the date of the parties’ separation in 2005 – Where there was no assessment in force prior to March 2007 which could be the subject of a departure order – No merit in challenge – Whether the Federal Magistrate erred in making an order which did not take in consideration the wife leaving her employment at the children’s school or the children not continuing at the school – No reasons given why the school fee arrangement was limited to the children’s current school – Unnecessary for challenge to be considered in light of success of the appeal. FAMILY LAW - APPEAL – CHILD SUPPORT – Application for leave to appeal and cross appeal – Where error of law demonstrated – Leave to appeal and to the extent necessary leave to cross appeal granted. FAMILY LAW - APPEAL – Where assets and liabilities to be adjusted cannot be accurately identified on available material – Court unable to re-determine the s 79 proceedings – Wife’s application for property settlement and child support departure remitted for re-hearing FAMILY LAW - COSTS – Where appropriate in the circumstances that the parties be granted costs certificates for the appeal, cross appeal and rehearing. |
| Child Support (Assessment) Act 1989 (Cth) – s 111, s 112, s 116(1)(b), s 117 Family Law Act 1975 (Cth) – s 75(2), s 79, s 79(2) |
| Bennett & Bennett (1991) FLC 92-191 Brodie v Brodie (2009) 41 Fam LR 18 Farmer & Bramley (2000) FLC 93-060 Gyselman & Gyselman (1992) FLC 92-279 Hendy v Deputy Child Support Registrar and Another (2001) 164 FLR 236; (2001) 27 Fam LR 641 Loude & Loude [2009] FamCAFC 52 Mallet v Mallet (1984) 156 CLR 605 Norman & Norman [2010] FamCAFC 66 Phillips & Phillips (2002) FLC 93-104 Pierce & Pierce (1999) FLC 92-844 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Steinbrenner & Steinbrenner [2008] FamCAFC 193 Williams & Williams [2007] FamCA 313 |
| APPELLANT/CROSS RESPONDENT: | Mr Teal |
| RESPONDENT/CROSS APPELLANT: | Ms Teal |
| FILE NUMBER: | SYC | 3904 | of | 2007 |
| APPEAL NUMBER: | EA | 25 | of | 2009 |
| DATE DELIVERED: | 25 June 2010 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Finn, Boland & Dawe JJ |
| HEARING DATE: FURTHER SUBMISSIONS RECEIVED: | 4 November 2009 3 December 2009 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 29 January 2009 |
| LOWER COURT MNC: | [2009] FMCAfam 2 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT/CROSS RESPONDENT: | Mr Lloyd SC |
| SOLICITOR FOR THE APPELLANT/CROSS RESPONDENT: | Pearson Family Lawyers |
| COUNSEL FOR THE RESPONDENT/CROSS APPELLANT: | Mr Livingstone |
| SOLICITOR FOR THE RESPONDENT/CROSS APPELLANT: | Bull Son & Schmidt |
Orders
Leave to appeal is granted in respect of the husband’s appeal and the wife’s cross appeal against the child support departure orders.
The appeal and cross appeal against the child support departure orders are allowed
The appeal and the cross appeal against the orders for property settlement are allowed.
The wife’s application in an appeal filed 12 October 2009 is dismissed.
The husband’s application in an appeal filed 23 October 2009 and his application in an appeal filed 28 October 2009 are dismissed.
The wife’s application for property settlement and child support departure orders be relisted for rehearing as soon as possible before a Federal Magistrate other than Federal Magistrate Dunkley.
The Court grants to the appellant husband a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act1981 (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 him in relation to the appeal and the cross appeal.
The Court grants to the respondent and cross appellant wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (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 her in relation to the appeal and the cross appeal.
The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (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 each of the parties in respect of the costs incurred by them in relation to the new trial ordered.
IT IS NOTED that publication of this judgment under the pseudonym Teal & Teal 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 SYDNEY |
Appeal Number: EA 25 of 2009
File Number: SYC 3904 of 2007
| Mr Teal |
Appellant/Cross Respondent
And
| Ms Teal |
Respondent/Cross Appellant
REASONS FOR JUDGMENT
Introduction
On 29 January 2009 Dunkley FM made orders under s 79 of the Family Law Act 1975 (Cth) (“the Act”) adjusting the property of Mr Teal, the husband, and Ms Teal, the wife. The Federal Magistrate also dealt with an application for departure from a statutory assessment of child support under s 117 of the Child Support (Assessment) Act 1989 (Cth) (“the CSA Act”).
The intention of the Federal Magistrate’s orders was to divide the parties’ property, including their superannuation interests, (which he found to have a net value of $1,324,725.00), between them as to 51 per cent or $675,609.75 to the husband and 49 per cent or $649,115.25 to the wife.
The Federal Magistrate determined the parties’ overall contribution based entitlements were in the ratio of 66 per cent (in favour of the husband) and 34 per cent (in favour of the wife). His Honour adjusted his contribution assessment by 12 per cent in the wife’s favour for relevant s 75(2) factors. Having found this would result in an overall division in favour of the husband of “54/46” his Honour said, presumably with reference to the provisions of s 79(2) of the Act “I therefore make a further adjustment in respect of justice and equity of 3%”.
The Federal Magistrate made a departure order which varied the annual rate of child support payable by the husband to the wife for the support of the two children of the marriage to $13,650.00 per child per annum with annual CPI adjustments. He ordered, in addition to the assessed amount of child support, the husband pay 50 per cent of the school fees for the two children of the marriage at the private school which they attended, and that he also pay private medical insurance for the children at the top rate.
The child support departure order was expressed to be backdated to 15 June 2007. The Federal Magistrate’s orders provided the husband was to receive a “credit” for the sum of $40,371.81 together with any other sum paid by the husband to the wife since October 2008.
This is the husband’s appeal against the Federal Magistrate’s orders in relation to property and (with leave) child support. The wife filed a cross appeal in which she also challenges both the property orders and (with leave) the child support departure order.
In the appeal and cross appeal against the property orders neither party challenged the Federal Magistrate’s identification of the assets to be divided between them, or the value ascribed to those assets. Rather the challenges in both the appeal and the cross appeal were to the contribution assessment and to the further adjustments made in the wife’s favour in the calculation of the property division. Both parties challenged the child support orders, essentially on the basis of errors of fact.
Before us both parties sought, by consent, to adduce further evidence. After the hearing we were provided with an agreed statement of facts on which it was submitted we could rely if we found appealable error and considered we could re-determine at least the property aspect of the proceedings. This statement of agreed facts essentially covered the matters raised in the further evidence and thus related to the husband’s present employment and income, as well as to a payment received on his retirement from an accounting partnership and the tax payable thereon.
Background
The following background is essentially found in the Federal Magistrate’s reasons and is uncontroversial.
The husband was born in July 1965 and was aged 43 years at the date of the hearing.
The wife was born in September 1968 and was aged 40 at the date of the hearing.
The parties commenced cohabitation in about 1991. They married in the United States in March 1992 and separated on 17 March 2005. Their divorce became final in June 2007.
There are two children of the marriage, A and D, aged respectively 12 and 10 years at the date of the hearing.
The husband is a Fellow of a professional society and a Fellow of a professional institute.
At the date of the hearing he was professional practising in a national consulting firm (“H Firm”) and was in receipt of an income of $587,000.00 per annum. The agreed statement of facts provided following the hearing of the appeal disclosed that the husband retired from the H Firm partnership on 30 June 2009 and on such retirement received the sum of $260,440.00. That sum is taxable in the husband’s hands at the top marginal tax rate of 46.5 per cent.
The husband has commenced employment as a professional for an insurance company (“I Company”). His remuneration includes a base salary of $350,000.00 gross per annum, together with the possibility of a management bonus.
The wife is employed as a visual arts teacher. She commenced employment at a private Sydney school (“S School”) in 2004 and at the date of hearing was in receipt of an income of $98,500.00 per annum. She deposed on accepting employment at the school “I was offered an additional payment equivalent to 90% of school fees for both boys, which I accepted”.
The children were both enrolled at S School. A commenced at the school in 2002 and D commenced kindergarten in 2004.
At the time of the parties’ marriage the husband was in possession of a stock and bond portfolio managed by his father which he asserted then had a value of US $60,000.00. The husband had other assets having a net value of US $15,000.00. The wife had no assets of significance. It was not disputed that approximately US $6,000.00 of the stock and bond portfolio included shares gifted by the husband’s father which were held in the wife’s name.
Both parties were born and educated in the United States. During the marriage, as a result of the husband obtaining employment in Germany, and subsequently in Australia, they left the United States. The parties moved to Australia in about July 1998.
In November 2002 the parties purchased a property for $1.4 million at C Street, Sydney (“the former matrimonial home”). The purchase price of the former matrimonial home was funded from the sale of the stock and bond portfolio which, after tax, realised $348,694.00. The parties borrowed $1,120,000.00 which was secured by mortgage over the property. The wife received a first home owner’s grant.
Following the purchase of the former matrimonial home the husband deposited the balance of the proceeds of the US stock and bond portfolio, being the sum of approximately $50,000.00 into a Unit Trust facility. The facility was “topped up” by the parties’ joint savings of $8,000.00 and a margin loan of $50,000.00. At separation the Unit Trust had a value of $76,545.00 and by the date of hearing it was valued at $84,227.00.
The former matrimonial home was sold in September 2005. Each party received, by way of partial property settlement, the sum of $80,000.00. The balance of the proceeds of sale was invested on deposit.In addition to this sum received by way of partial property settlement, the husband had since separation saved an amount of $254,603.00 (in NAB accounts).
Following separation the wife borrowed funds from her present boyfriend, Mr M and was indebted to him at the date of the hearing in the sum of $32,000.00.
A single expert was retained to value the husband’s interest in H Firm. The expert valued the interest at $139,291.00. The husband had a bank loan acquired to fund his capital contribution to H Firm with an outstanding balance of $145,000.00.
As we have noted there was no dispute before his Honour about the identification and value of the parties’ assets, liabilities and superannuation interests at the date of hearing. They were as follows:
ASSETS Proceeds of sale of the former matrimonial home held by Pearson Family Lawyers J 510,468 Unit Trust H 84,227 Funds in NAB Accounts H 254,603 Interest of husband as H Firm partner H 139,291 Life insurance AAL Universal Life H 7,500 2005 Subaru Forrester H 0 Household Contents H 20,000 Funds in NAB Accounts W 6,437 1982 Mercedes Wagon W 3,000 Household Contents W 20,000 Part distribution of sale proceeds H 80,000 Part distribution of sale proceeds W 80,000 Sub total Assets 1,205,526 SUPERANNUATION Sunsuper, Merrill Lynch Super (Est) H 239,113 NGS Super W 16,385 Fidelity Investments (Est) W 14,215 Plum W 26,486 Sub total Superannuation 296,199 Total Assets and Superannuation 1,501,725 LIABILITIES Personal Loan from Mr M W 32,000 Bank Loan for capital contribution to H Firm H 145,000 Total Liabilities 177,000 TOTAL ASSETS AND LIABILITIES 1,324,725
The federal magistrate’s reasons
It is unnecessary that we summarise the Federal Magistrate’s reasons in any detail at this point. We have already referred to the relevant factual matters recorded in the Federal Magistrate’s reasons and set out the parties’ list of assets and liabilities as agreed. We will refer to his discussion of the parties’ contributions and of the other matters arising under s 79(4) and also under s 79(2), as well as the child support matters, when we consider the grounds of the appeal and the cross appeal relevant to those matters.
Grounds of appeal and cross appeal
(a)the Amended Notice of Appeal
The husband relied on amended grounds of appeal and orders sought as set out in his outline of argument. No objection was taken to reliance on the amended grounds by the wife’s counsel, and we have accordingly treated the grounds set out in the outline of argument as the grounds of appeal. The amended grounds comprise eight grounds of appeal. The grounds were argued in the following broad categories:
·an asserted failure to give appropriate weight to the husband’s post separation savings, and/or failure to give adequate reasons in respect of those savings;
·error in making an adjustment in the wife’s favour under s 75(2) which was excessive;
·after assessing the parties’ contributions and making an adjustment for relevant s 75(2) matters, erroneously making a further adjustment of 3 per cent in the wife’s favour as a “fourth step”;
·error in “double counting” education expenses in calculating the cost of maintaining the children for the purposes of the departure application and additionally ordering the husband to pay 50 per cent of those expenses; and
·error in “back dating” the child support assessment.
(b)the Cross Appeal
The wife relied on her Notice of Cross Appeal filed 13 March 2009. The wife relied on six grounds of appeal in respect of the property orders, and two in her challenge to the child support orders, which were as follows:
·failure to properly assess and give weight to the wife’s initial contribution of US stocks gifted by the husband’s father;
·lack of adequate weight to matters under s 75(2) favouring the wife (a school fee reduction, and disparity in the parties’ respective earning capacities) or in failing to treat the school fee reduction as a contribution by the wife;
·failure by the Federal Magistrate in not “back dating” the effective date of commencement of the adjusted assessment and other child support orders to the date of separation of the parties in 2005; and
·by making orders for payment of school fees which did not take into account the wife leaving her employment as a teacher at the children’s private school with consequent loss of fee discount, or that one or both of the children may not continue at their present private school.
As there is substantial overlap between the challenges raised in the cross appeal and the appeal, we will deal with these grounds to the extent we are able to do so in our consideration of the appeal. To the extent any aspect of the cross appeal has not been addressed we will do so after dealing with the grounds of appeal.
Asserted failure to give appropriate weight to the husband’s post separation contributions, and/or lack of adequate reasons for the contribution assessment
Dunkley FM commenced his discussion of the parties’ contributions by saying:
31.I have applied the decision in Gosper and Gosper (1987) FLC 91-818. In doing so I have noted the motivating circumstance in the parties’ access to and use of the stock portfolio in purchasing their home to be the relationship between the husband and his father. As such the financial contribution of the proceeds of sale of the stocks and bonds is a contribution made directly by the husband (except for the US$6,000 of stock owned by the wife). It should further be noted that that the contribution was late in the parties’ relationship, in December 2001 a little over three years before the parties separated. The sale monies were a substantial portion of the matrimonial home purchase price. Neither party did anything to manage the stock nor did they do anything to affect the stock value. The stocks growth in value can only have been caused by inflation in the market or the management work of the father’s father. In the absence of contrary submission, which was invited, I have assessed their value at the date of sale.
Then having referred to the decisions in Pierce & Pierce (1999) FLC 92-844 and Williams & Williams [2007] FamCA 313, his Honour continued:
34.Having regard to the above cases and to the fact that the amount contributed came in later during the marriage, it represents a significant proportion of the purchase price. I value the contribution having regard to the stock value at its sale date, not the value of the portfolio at the date of cohabitation.
35.There is no doubt that from the time of their marriage until the birth of their first child, the parties’ incomes were roughly equal and for some time, the wife’s income was higher than that of the husband’s but not significantly. As and from the birth of their first child, the husband’s income has been significantly higher than the wife’s.
36.It is also clear that the wife’s role as a parent and homemaker from the time of the birth of their first child was significantly greater than that of the husband’s.
37.I find, given the concession of their respective counsel, that the parties have equally contributed to their assets during the period of time from cohabitation until separation, apart from the US stocks and bonds which I have referred to above.
38.Having regard to the sale value of the stock, and having determined pursuant to Gosper that the value is mainly a contribution by the husband I find that the husband has made a contribution towards the parties’ assets of 66%, and the wife made a contribution of 34%. (emphasis added)
It was submitted on behalf of the husband that the clear inference from this conclusion in paragraph 38, remembering the parties’ agreement that their contributions during cohabitation were equal, was that the Federal Magistrate had deducted the value, when realised, of the husband’s US stocks and bonds from the net assets and liabilities, and divided the balance equally to arrive at a 66 per cent assessment in the husband’s favour. Thus he submitted the Federal Magistrate had failed:
·to give any weight to the husband’s post separation contribution of his savings from income of $254,603.00 which were included in the pool; and
·to explain what weight he gave to the parties’ pre and post separation contributions.
In her cross appeal the wife also challenged the Federal Magistrate’s contribution assessment. The wife’s counsel submitted the Federal Magistrate did not discuss and assess the weight he gave to:
·the wife’s initial contribution of the US stocks;
·her indirect contribution of the reduced school fees in the post separation period; and
·her assertion that notwithstanding the parties had agreed to an equal “week about” shared care arrangement, that she had the children for more than 50 per cent of the time by providing after school care when the husband was working.
It is not in doubt that it is the task of a judicial officer determining a claim under s 79 to assess and weigh the parties’ respective contributions. That responsibility is clearly explained by Mason J in Mallet v Mallet (1984) 156 CLR 605 at 625, where his Honour said:
The section contemplates that an order will not be made unless the court is satisfied that it is just and equitable to make the order (s. 79(2)), after taking into account the factors mentioned in (a) to (e) of s. 79(4). The requirement that the court ‘shall take into account’ these factors imposes a duty on the court to evaluate them. Thus, the court must in a given case evaluate the respective contributions of husband and wife under pars. (a) and (b) of sub-s. (4), difficult though that may be in some cases.
The task of moving from a qualitative to a quantitative assessment is not always easy. The difficulty is referred to by Finn J in Farmer & Bramley (2000) FLC 93-060 at 49.It has also been subject of discussion in Steinbrenner & Steinbrenner [2008] FamCAFC 193 at 234, and in Brodie v Brodie (2009) 41 Fam LR 18.
In this case, however, we are simply unable from paragraph 38 to discern how the Federal Magistrate evaluated and weighed the parties’ disparate initial contributions.
The problem of lack of evaluation is more acute when attention is focused on the parties’ post separation contributions. The husband’s post separation contributions included his post separation savings, which represented approximately 21 per cent of the parties’ net non-superannuation assets. These savings are not referred to or discussed by the Federal Magistrate, nor is the wife’s indirect financial contribution of the reduced school fees. The wife’s counsel submitted the children’s school fees were approximately $30,000.00 per annum, and that the wife’s indirect contribution was equivalent to 90 per cent of those fees for the three years post separation. This contribution, he submitted should also have been taken into account.
The wife’s counsel appropriately conceded that if the school fees were taken into account as a contribution by the wife, then it would be a “double dip” if the benefit received from her employment by way of reduced school fees was also regarded as a s 75(2) factor in her favour.
It aids understanding of the challenges to the contribution assessment, and also the challenge to the so called “fourth step” (being the application of the “just and equitable” requirement in s 79(2)), if we refer to the submissions made by the husband’s senior counsel before us and particularly before the Federal Magistrate, as we perceive the error now asserted in the Federal Magistrate’s reasons may well have occurred as a result of his misunderstanding of the “methodology” suggested by the husband’s senior counsel.
Before us senior counsel for the husband agreed that before the Federal Magistrate he had submitted that the husband’s post separation earnings should be included in the parties’ list of assets and liabilities, but then “notionally” taken out so that they remained with the husband, and an adjustment made in the wife’s favour under s 75(2) to reflect the disparity in the parties’ financial positions after the contribution assessment. He also described his submission to the Federal Magistrate as a “two pool” approach. That is, he submitted the Federal Magistrate should treat the husband’s post separation contributions as a separate pool to which he should find the wife made no contribution, and thus should be wholly retained by him, and the wife receive an adjustment under s 75(2) (to reflect the disparity in the parties’ contribution entitlements).
As the transcript reveals, the submissions made to the Federal Magistrate by senior counsel for the husband illustrate, perhaps with less clarity than articulated before us, the approach which it was urged the Federal Magistrate should adopt. The following exchange between the Federal Magistrate and the husband’s senior counsel is illuminating:
MR LLOYD: … Then of course significantly in this case is the savings that are now identified of $254,000. My respectful submission is here that I do not suggest that those funds be quarantined, I do not suggest that they be put to one side and not taken into account at all.
What I invite the Court to do is this; because my friend advocates for it and we acknowledge it and your Honour obviously is going to take it into account, the 75(2) factor weighing in favour of [Ms Teal] is my client’s earning capacity. That earning capacity is in fact reflected in the accumulation of savings that he has managed to put together post separation. Which again touches on lifestyle. So, what I would invite your Honour to do is not to ignore it but rather exercise one’s mind in terms of saying if one put that to the side, because there can’t be any contribution to it by the wife, and deal with the balance of the substantive assets and say to one self well what really were the contributions to those funds that were principally acquired during the marriage.
One would come to the conclusion, in my respectful submission, that it’s an overwhelming contribution by the husband…
…
… If one has a look at those types of non-financial contributions one would come to the conclusion, with respect, they must be seen as equal. Certainly that’s the case post separation because they’ve shared the children.
If all of those things are equal and then one has a mass of money about which the case is really revolving, and the mass of contribution to it is in the husband’s side, there must be a disproportionate split in his favour at that point. I would contend for 70/30 in his favour. Then not losing sight of the fact that we’ve shifted sideways the $254,000, my contention about that is that you would have regard to that immediate resource, immediate piece of property under section 75(2). It is as a consequence of his earning capacity.
If you did it the other way and added it in you would have to have in the back of one’s mind that there really wasn’t any contribution to that pile of money that he had accumulated, by the wife and nor could there seem to be, one would then come to a slightly lesser percentage of contributions to that pool. But if the 254,000 is then taken into account as a 75(2) factor there really is only one. They’re both in good health, neither of them rely upon a pension, both are in gainful employment, both are skilled, both are highly intelligent, both share the children, and the whole list of all of the 75(2) factors - - -
…
My submission is that the pool here, firstly, is not a small one. It’s not a large one but it’s not a small one, and a 75(2) factor of say 10 per cent of the total, and can I hasten to add, your Honour, in that obviously I include the 254,000 savings of my client, which I must do otherwise you’d fall into appellable error on that issue, that would give a significant contribution to her bearing in mind that a 10 per cent adjustment on a 75(2) represents a 20 per cent variation in what each of them receive. (transcript, 5 November 2008, pp 119-121)
In paragraph 37 of his reasons, his Honour had acknowledged that the parties’ agreement as to the equality of contributions did not extend to the initial stocks or to the post separation assets. Despite this acknowledgment, in his conclusion in paragraph 38, his Honour referred only to the initial stock and made no reference to post separation assets, saying:
38.Having regard to the sale value of the stock, and having determined pursuant to Gosper that the value is mainly a contribution by the husband I find that the husband has made a contribution towards the parties’ assets of 66%, and the wife made a contribution of 34%.
Put shortly we are unable to find where the Federal Magistrate had regard to, or evaluated and weighed the parties’ respective post separation contributions, particularly the husband’s post separation savings, and the wife’s indirect financial contribution by way of reduced school fees, without which no doubt the husband would not have been able to acquire savings in a similar quantum to those held by him at the date of the hearing.
Similarly, we are unable to discern where he evaluated the parties’ initial contributions. Thus, we are simply unable to discern from the Federal Magistrate’s reasons why he assessed the parties’ contribution based entitlements at 66 per cent to the husband and 34 per cent to the wife.
The need to give adequate reasons is not in doubt. The purpose of reasons is explained in numerous authorities and includes an ability for a Court of Appeal to understand the path which led to the orders ultimately made (see Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 and Bennett & Bennett (1991) FLC 92-191). The challenges in both the appeal and the cross appeal to the Federal Magistrate’s contributions assessment thus have merit.
The section 75(2) challenge
Having determined on a 66-34 per cent division on account of the parties’ contributions, the Federal Magistrate then considered the matters in s 75(2) which he concluded had relevance in this case. He determined in paragraph 53 of his reasons that there should be a 12 per cent adjustment in favour of the wife on account of those matters as he had discussed them in paragraphs 39 and 52 of his reasons. In summary the discussion in those paragraphs was as follows.
The Federal Magistrate first discussed the fact that the parties had, since separation, equally shared in the care of the children and spent roughly equivalent amounts for them and would continue to do so. He referred to the wife’s employment at S School and found that employment had been “a significant saving to the parties” which was likely to continue in the future.
Although the Federal Magistrate noted the wife’s relationship with Mr M, he did not find the wife’s relationship with him to be relevant under s 75(2)(m).
Having noted that both parties were in good health and of “roughly similar age” the Federal Magistrate turned, at paragraph 43 of his reasons, to discuss the parties’ capacity for employment, and found that the husband’s income earning capacity was significantly greater than that of the wife. He went on to explain that the husband had accumulated significant superannuation resources and significant post separation savings, saying:
… The husband’s post separation savings would have been made much less if the parties were paying full school fees ... An adjustment in favour of the wife will need to be made to reflect each of these facts.
At paragraph 46, the Federal Magistrate noted:
… The husband’s superannuation balance is significantly greater than that of the wife’s. Some adjustment will need to be made in favour of the wife to reflect this fact.
At paragraph 49, the Federal Magistrate said:
The evidence of both parties was that the wife’s earning capacity has been reduced as a result of the parties’ decisions that she should principally be involved in the care of the children prior to their attaining school age. I must weight this as a factor in her favour.
But he went on to note that both parties were engaged in full-time work and likely to continue to be so employed for the rest of their working lives.
Having referred to the husband’s child support liability being significantly increased, the Federal Magistrate, then as we have said, determined, at paragraph 53 of his reasons, that there should be a 12 per cent adjustment in favour of the wife “as the result of the application of section 75(2)”.
The Federal Magistrate went on to note that percentage should be applied to the pool of assets as earlier set out in his reasons (that is, both the superannuation and non-superannuation assets), and that the husband would be responsible for the loan relating to his interest in H Firm and the wife for the monies advanced by Mr M.
However, his Honour then continued:
55.The above adjustments would mean an overall division of 54/46 in favour of the husband (not including the monies they will each repay). That would not be just and equitable as the husband will very soon be in a much more favourable financial situation (as evidenced by his ability to accumulate savings) than the wife given his earning capacity. I therefore make a further adjustment in respect of justice and equity of 3%. This further adjustment will also assist towards the wife’s rehousing costs.
…
56.The total nett assets and superannuation assets shall be divided so that the husband receives 51% and the wife 49% of the total pool of superannuation assets and non-superannuation assets (not including the monies they will be required to repay).
57.The total nett non superannuation and superannuation assets equals $1,324,725.00. A 51% share, therefore, equates to $675,609.75. A 49% share equates to $649,115.25. The wife has already received $80,000, her superannuation assets total $57,086, and she has funds in the NAB, a car and contents which together total $29,437.
58.An Order will be made that the husband pays to the wife a cash adjustment of $482,592.25.
Thus it can be seen that the Federal Magistrate identified that there were five relevant factors which s 75(2) required him to take into account and on the basis of which he initially made a 12 per cent adjustment in favour of the wife. These factors were:
· the husband’s superior income;
· the past (and ongoing) school fee discount enjoyed by the children by reason of the wife’s employment, resulting in savings to the parties (the Federal Magistrate indicated this factor was to be adjusted in the wife’s favour under s 75(2)(o));
· the husband’s superior superannuation;
· the reduction in the wife’s earning capacity by reason of her pre-school care of the children; and
· the child support to be paid by the husband.
But as also will have been seen, his Honour then went on to make a further 3 per cent adjustment in the wife’s favour apparently on the basis that justice and equity required this because of the husband’s superior earning capacity. He considered that this additional adjustment would assist the wife in rehousing.
Although at the hearing before the Federal Magistrate senior counsel for the husband asserted the only relevant factor which required adjustment under s 75(2) was the husband’s superior capital position and earning capacity, in his written submissions in respect of the appeal he asserted the Federal Magistrate should have, prior to undertaking his s 75(2) adjustment, determined the child support departure application (so that the husband’s liability for child support was quantified, including particularly the husband’s liability for school fees). He further asserted that there was no evidence to support the Federal Magistrate’s determination that the marriage had affected the wife’s earning capacity, and that the adjustment of 12 per cent or a differential of 24 per cent ($317,934.00) was outside the reasonable range of discretion and inequitable and unjust.
Senior counsel for the husband submitted that an upper adjustment of 10 per cent in the wife’s favour would be a proper adjustment.
The husband’s s 75(2) challenge is intricately interwoven with the “just and equitable” challenge.
For her part the wife asserted an adjustment of 12 per cent was inadequate and did not properly take into account the husband’s superior earning capacity. The wife’s written submissions did not address the additional 3 per cent adjustment made by the Federal Magistrate in paragraph 55 of his reasons.
We note that the Federal Magistrate appears to have taken into account among other matters in arriving at the s 75(2) adjustment the husband’s larger superannuation entitlement. An adjustment on that basis, given the paucity of evidence about the superannuation, required careful consideration.
We see merit in the submission of the husband’s senior counsel to the effect that there was no evidence to support a finding that the marriage had adversely affected the wife’s earning capacity. The evidence was that the wife had moved to Germany and Australia as a result of the husband’s job opportunities in those countries, but the evidence also disclosed that she was, at the date of the hearing, engaged in well remunerated full-time employment using the tertiary qualifications she acquired prior to the marriage.
It must also be remembered that notwithstanding the children were living in a shared care arrangement, the Federal Magistrate made a departure order which required the husband to pay child support of $27,300.00 per year for both children and, in addition, 50 per cent of the children’s private school fees, including music, sporting and excursions commencing with the 2009 school year, as well as paying private hospital and medical insurance for the children at the top rate with a health fund of his choice. This factor required some adjustment to be made in the husband’s favour.
Notwithstanding the limits of appellate interference with a discretionary judgment, we are satisfied that the facts of this case do not support the adjustment ultimately made in favour of the wife, be it 12 per cent (or a differential of $317,934.00) or a 15 per cent adjustment (or a differential of $397,417.00), and that it falls outside the reasonable ambit of discretion and thus constitutes appealable error. It follows we reject the wife’s ground of appeal in her cross appeal that the adjustment made in her favour was inadequate.
Specifically in relation to the further 3 per cent adjustment made by his Honour counsel for the wife candidly acknowledged that he was unable to refer us to any authority where a further “adjustment” had been made after assessment of contribution and adjustment for s 75(2) factors, but submitted what was relevant was the overall justice and equity of the order made.
Senior counsel for the husband submitted that a proper application of the legislation did not permit a further adjustment after assessment of contribution and adjustment for relevant s 75(2) factors. Rather he said if, on standing back and assessing the overall result arrived at after considering all relevant matters under s 79(4)(a)-(g), a judicial officer formed the view that the result was not just and equitable, then it was a matter of revisiting those sub-sections of s 79 to arrive at a just and equitable result. He submitted that the authorities which had considered the “just and equitable” requirement of an order under s 79(2) were directed to consideration of the order itself.
In its recent decision in Norman & Norman [2010] FamCAFC 66 the Full Court explained that the legislation does not envisage a “substantial step” or a further significant adjustment as a final step. Rather the Full Court, by reference to the judgment of Gibbs CJ in Mallet, explained “[it] is the mandatory legislative imperative (to reach a conclusion that is just and equitable) that drives the ultimate result”. The Full Court’s reasoning at paragraphs 58 to 61 is important. We therefore set out those paragraphs:
58.[Counsel for the appellant] cited the judgment of Thackray J in Woollams and Woollams (2004) FLC 93-195 in support of this interpretation of the fourth step as a “substantive step”. Thackray J, after a careful consideration of the relevant authorities, said ( at 40):
“…I am not entirely convinced that the Full Court in Hickey [above] made it clear that the fourth step is restricted to a consideration of “the form of the orders”.”
59.On its face, this passage plainly provides some support for the appellant’s submission. But, having carefully considered Thackray J’s analysis of the issue in Woollams, in its entirety, it seems to us that the appellant’s argument (and, indeed, the debate about the number and content of “steps” within a s 79 process) is best met by reference to the decision of the High Court in Mallett v Mallett (1984) 156 CLR 605. There Gibbs CJ said at 608:
…[Parliament] has conferred on the court a very wide discretion to make such order as it thinks fit when it is satisfied that it is just and equitable that an order should be made (see sub-s (1) and (2) of s 79), although there are some broad principles to which the court is required to give effect, and some circumstances which it is required to take into account … The circumstances which the court is specifically required to take into account may be regarded as falling within two main classes. First, the court must consider the extent to which either party has in the past contributed to the acquisition, conservation or improvement of the property … Secondly, the court must consider all those circumstances which relate to the present and future needs, and to the means, resources and earning capacity, actual and potential, of the parties: see s. 79(4)(d) and s 75(2)(a)-(m) … The Act does not indicate the relative weight that should be given to different circumstances, or how a conflict between opposing considerations should be resolved – those things are left to the court’s discretion, which must, of course, be exercised judicially.
60.It is the mandatory legislative imperative (to reach a conclusion that is just and equitable) that drives the ultimate result. For all its usefulness and merit as a “disciplined approach” or a “structured process of reasoning” (per Fogarty, Lindenmayer, McCall JJ, N and N, unreported, 10 June 1992), the “three-step” or “four-step” approach merely illuminates the path to the ultimate result.
61.A structured approach is, of course, desirable and also provides to litigants and practitioners alike predictability in the manner in which cases will be dealt with and judgments delivered. But, that is not the same thing as a legal requirement, the failure to comply with which will result in appealable error. The words of Gibbs CJ in Mallett, (given in another context) are apposite:
… it is understandable that practitioners, desirous of finding rules, or even formulae, which may assist them in advising their clients as to the possible outcome of litigation, should treat the remarks of the court in… cases as expressing binding principles, and that judges, seeking certainty, or consistency, should sometimes do so. Decisions in particular cases of that kind can, however, do no more than provide a guide; they cannot put fetters on the discretionary power which the Parliament has left largely unfettered. It is necessary for the court, in each case, after having had regard to the matters which the Act requires it to consider, to do what is just and equitable in all the circumstances of the particular case. (at 608-9)
It must be remembered that s 79(2) is expressed in negative terms:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
By implication however s 79(2) requires if the Court is to make an order under s 79(1) altering the interests of the parties to the marriage in property, such an order must be just and equitable. This legislative imperative is often described as the requirement that a judicial officer “stand back” and look at the reality of the percentage division at which she or he has arrived. That requirement requires consideration of the actual assets to be retained by each party, and may include consideration of the effect when one party is to retain the greater proportion of his or her entitlement in superannuation of the nature, form and characteristics of the superannuation. It is also relevant when assets included for division are “notional” assets or “add backs”, including paid legal fees, or when a business which requires retention of business premises or re-financing is to be retained as part of one party’s entitlement (see Loude & Loude [2009] FamCAFC 52).
It will often require consideration of whether the percentage adjustment arrived at after assessment of contributions under s 79(4)(a)–(c), and adjustment for relevant factors under s 79(4)(d)–(g) when applied to the actual assets and liabilities requires the making of an order slightly outside the precise percentage arrived at as a result of the statutory imperatives. This exercise has particular relevance when a judicial officer is dealing with modest assets, and/or where the parties’ respective earning capacities are minimal or non-existent. Considerations such as we have just described applied in Phillips & Phillips (2002) FLC 93-104, where justice and equity required an order which enabled the wife to retain the matrimonial home rather than the home being sold in accordance with a strict percentage adjustment.
In this particular case the Federal Magistrate, at paragraph 55 of his reasons, had not considered the mix of assets to be retained by each party. He did not conduct that exercise until after he had determined to make a further adjustment of an additional 3 per cent in the wife’s favour. His expressed reason for the further adjustment was the husband’s greater earning capacity. That factor had already been taken into account in respect of the consideration of s 75(2)(b), and the resultant adjustment made under s 75(2) in favour of the wife of an additional 12 per cent. On its face, the further adjustment represented a double adjustment for the same factor – the husband’s greater earning capacity.
We are satisfied that at this point in his reasons the Federal Magistrate fell into appealable error in making this further substantial adjustment without considering the effect of his percentage adjustment in real terms, and whether that adjustment when applied to the actual assets and liabilities resulted in an order which was just and equitable, or required some slight amendment to ensure the overall adjustment of the parties’ property was just and equitable.
Thus the husband’s appeal against the property orders must succeed.
It should be clear from what we have said in the immediately preceding paragraphs, that what is required to be considered in determining if a property settlement is just and equitable are the assets and liabilities to be retained by each party, not the percentage division of the net value of those assets and liabilities. It might perhaps be said that there has been an undue focus in the jurisdiction on the percentage outcome of property proceedings rather than on the actual property to be received or retained by each party.
The cross appeal – property
We have in our consideration of the appeal considered the two grounds raised in the cross appeal in respect of the Federal Magistrate’s property orders. We have found appealable error by the Federal Magistrate in failing to assess and weigh as a post separation contribution the wife’s contribution by way of private school fees as part of her employment package.
We have found the second challenge, namely that the s 75(2) adjustment in the wife’s favour was manifestly inadequate, to be without merit. Accordingly the cross appeal insofar as it challenges the Federal Magistrate’s property orders has succeeded in part.
We will refer to the issue of whether we are able to re-determine the property issue or whether there will have to be a re-trial after considering the child support appeal and cross appeal.
The child support appeal and cross appeal
We turn now to consider the challenge to the Federal Magistrate’s child support departure orders, against the background that the parties agreed that there were circumstances which warranted the Federal Magistrate departing from the administrative assessment.
Before the Federal Magistrate the wife relied on an amended application for child support departure orders. Her original application for departure was filed on 15 June 2007. No decision was first obtained from the Child Support Registrar in respect of that assessment, however, the wife relied on s 116(1)(b)(i) of the CSA Act to bring her application. The wife sought, among other orders, that from 1 May 2005 the periodic rate of child support payable by the husband be varied to set the annual rate of child support at $36,200.00 per annum with annual CPI adjustments.
The federal magistrate’s child support reasons
The Federal Magistrate commenced his discussion of the child support departure application at paragraph 60 of his reasons. At paragraph 61 he noted both parties conceded there should be an order for child support departure. He also noted the basis on which the departure was grounded, namely the children’s educational costs and the income of the husband.
Having recorded that the parties each estimated they spent approximately $39,000.00 each per annum for the children’s expenses, the Federal Magistrate went on to note they received a significant benefit of reduced school fees as a result of the wife’s employment.
At paragraph 65 the Federal Magistrate said:
It is possible pursuant to s.112 Child Support (Assessment Act) 1989 (“the Child Support (Assessment Act)”) for the child support departure order to be back dated. The wife seeks payment back to 1 May 2005. I do not intend to do so … The wife’s application was filed on 15 June 2007 and no reason for delay was offered. It was amended on 23 October 2008. Both parties would suffer hardship if the application was back dated to 1 May 2005. The order I make will be dated from the date of filing of the original departure application, being 15 June 2007. Child Support payments made since that date are to be credited to the husband against the new departure amount. The wife’s counsel sought this and it is appropriate, just and equitable.
Having referred to the statutory provisions which enabled him to make a departure order, the Federal Magistrate went on to conclude he was satisfied one or more of the departure grounds existed and, at paragraph 77, having earlier referred to the husband’s income being greater than that of the wife, he concluded:
Having regard to all the above it is appropriate and just and equitable that the husband meet 85% of the costs of maintaining the children, which is agreed to currently by [sic] $78,000. He already expends $39,000 when the children are in his care. There will therefore be an order that his annual rate of child support be $27,300, that is $13,150 per child per year. When added to his costs of $39,000, this means that he will be paying $66,300 of the total maintenance costs of $78,000.
The Federal Magistrate then discussed matters apposite to the termination of the child support which are not relevant to the appeal and cross appeal. At paragraph 81 the Federal Magistrate said:
In addition the husband will also be required to privately insure the children for medical, hospital and extra’s [sic] at the top rate, and meet half of the children’s school fees and expenses, whilst ever they attend [S School].
The child support appeal
It is appropriate that we set out, at this point, Orders 7.1, 7.2, 7.3 and 7.6 of the Federal Magistrate’s orders. They are as follows:
(7.1)Pursuant to s.117 Child Support (Assessment Act) 1989 there be a departure from the administrative assessment such that from 15 June 2007 the periodic rate of child support payable by [Mr Teal] (“the payer”) to [Ms Teal] (“the payee”) for the children [A] born [in] August 1996 and [D] born [in] August 1996 be varied by setting the annual rate of child support at $13,650 per child per year, such rate to be adjusted on 1 July 2009 and on the first day of July each year thereafter in accordance with the Consumer price Index (all groups) Sydney.
(7.2)In addition to the rate prescribed in order 7.1, pursuant to s.125 Child Support (Assessment Act) 1989 the payer shall pay to the payee for the children [A] and [D] by way of payment 50% the [S School] fees including music, sporting, and excursions (within Australia) costs whilst the children continue to attend [S School]. Payment is to commence with the 2009 school year.
(7.3)In addition to the rate prescribed in order 7.1 pursuant to s.124 Child Support (Assessment Act) 1989 the payer shall privately insure the children [A] and [D] for hospital, medical and extras cover at the top rate with a health fund of his choice.
…
(7.6)The amount to be paid by the payer by reference to the rate provided for in order 7.1 shall be reduced by the sum of $40,371.81 and any further sum paid by way of child support by the payer to the payee since 1 October 2008.
In his sole ground challenging the child support assessment, the husband’s senior counsel asserted that the Federal Magistrate erred in determining the cost of maintaining the children was approximately $78,000.00 per annum in light of the cross-examination of the wife and the expenses incurred by the husband. It was asserted the learned Federal Magistrate misunderstood the expenses incurred by each of the parties. In his oral submissions, senior counsel for the husband submitted that the husband’s calculation of costs of the children at $39,000.00 included the payment by him for the children’s education expenses.
The husband’s financial statement discloses that he included in his weekly expenses for the children the sum of $90.00 per week for their education expenses, including fees and levies.
The wife’s financial statement, in which she assessed the children’s expenses at $561.00 per week, included an amount for education expenses (including fees and levies) of $113.00 per week.
In his affidavit filed 27 October 2008 the husband gave evidence that the total expenses for the children were $39,472.00 per annum. In arriving at that sum the husband deposed, at paragraph 102 of his affidavit, that he paid two-thirds of all of the children’s school expenses, including their annual fees.
We accept there is merit in the ground relating to the calculation of the children’s expenses and that the Federal Magistrate appears to have misunderstood that the husband’s calculation of these expenses included the payment of school fees. Those fees were the subject of Order 7.2 of the Federal Magistrate’s orders. The Federal Magistrate did not deduct the payment of school fees when he calculated the husband’s child support income for purposes of the departure application. The effect of the Federal Magistrate’s orders is that the husband bears a double liability for school fees. We are satisfied appealable error is demonstrated.
The child support cross appeal
The cross appeal, insofar as it challenges the child support assessment, firstly, challenges that the Federal Magistrate did not “back date” the child support departure order to the time of the separation of the parties. The wife asserts error by the Federal Magistrate in not making orders which adequately addressed the following “foreseeable circumstances”:
(a)termination of the wife’s employment at S School; or
(b)either child leaving S School.
Part VII division 4 of the child support (assessment) act
Part 7 Division 4 of the CSA Act permits an application to be made for departure from an administrative assessment, if under s 116(1)(b)(i) and (ii) there are justifying circumstances. Section 117 sets out the matters about which a court must be satisfied before making a departure order. Section 118 sets out the orders a court may make.
The Federal Magistrate referred to s 112 of the CSA Act. We will shortly set out that section but before doing so set out s 111.
Section 111(1) of the CSA Act provides as follows:
(1) A liable parent, or a carer entitled to child support, (the applicant) may apply to a court having jurisdiction under this Act for leave for:
(a) the Registrar to make a determination under section 98S; or
(b) the court to make an order under section 118;
in respect of a day in a child support period, being a day that is more than 18 months, and less than 7 years, earlier than the day on which the application under this section is made. (original emphasis)
Section 112(1) and (2) are in the following terms:
(1) If an application is made to a court under section 111, the court may grant leave for:
(a) the Registrar to make a determination under section 98S; or
(b) the court to make an order under section 118.
(2) The court may grant leave for an order to be made under section 118 if the court is satisfied that it would be in the interest of the parties to the proceeding for the court to consider, at the same time as it hears the application under section 111, whether an order should be made under section 118. If the court does so, the applicant is taken to have made an application to the court under section 116 for such an order.
The wife’s application was not one in respect of which leave was required.
Section 111 imposes in effect a limitation period in which an application for departure can be made, but permits a court in the exercise of discretion, to allow such an application to be determined outside that period, but with an ultimate limitation of 7 years. The practicality of such a limitation is obvious – the liabilities of liable parents should be quantified within a reasonable period of time, otherwise on a successful departure application a substantial “back dated” debt could occur. However in our view, nothing in this section gives power to a court to hear an application for departure in respect of a non-existent assessment. We say this because a court’s power to make a departure order is found in s 117(1), which section provides:
(1) Where:
(a) application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b) the court is satisfied:
(i) that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii) that it would be:
(A) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;
to make a particular order under this Division;
the court may make the order.
In her affidavit sworn on 13 June 2007, at paragraph 26, the wife deposed:
On 13 March 2007 I registered with the Child Support Agency. An assessment issued for the period 22 February 2007 to 21 May 2008 in the monthly amount of $495.42…
The wife annexed to her affidavit a copy of the relevant assessment dated 13 March 2007.
In these circumstances, we are satisfied there was no assessment in force prior to 13 March 2007 which could be the subject of a departure order.
Thus we see no merit in the cross appeal insofar as it challenges the Federal Magistrate’s refusal to backdate the order to the date of the parties’ separation.
The second challenge mounted in the cross appeal is directed to the asserted failure of the Federal Magistrate to contemplate the wife leaving her employment with S School.
In her departure application the wife sought the husband pay, in addition to the child support assessment, the whole of private school tuition fees in respect of the children. The application was not confined to fees at S School.
Although the husband originally sought, in his response filed 9 October 2007, that the wife’s application for departure filed 15 June 2007 be dismissed, by the hearing date, in his minute of order, he conceded an order could be made that he pay child support as assessed by the Child Support Agency, together with “[a]ll private school and incidental fees in respect of each of the children whilst each of the children attend [S School] and the mother is in gainful employment at the same school”.
The Federal Magistrate found at paragraph 64, and there was no challenge to his finding, that the wife gave evidence she had no present intention of ceasing employment at S School.
The Federal Magistrate contemplated, at paragraph 80 of his reasons, that the departure order should cease if the care arrangements for either child changed significantly or if the husband became unemployed that there be a reduction in his child support payments. The Federal Magistrate did not, it appears, contemplate the circumstance that one or other of the children may not achieve the selection criteria necessary for admission to the Senior School at S School, and that this event may require different arrangements for that child’s or the children’s schooling. While there was some evidence in the wife’s affidavit, at paragraph 55, that evidence was not explicit to either of the children.
The Federal Magistrate gives no reasons why he did not limit the private school fee arrangement to S School while the wife retained her employment at that school and the children were eligible to attend that school. We see some merit in the submissions made on behalf of the wife. However, in view of our conclusion there is merit in the husband’s challenge to the child support orders, it is unnecessary that we further discuss this challenge.
Before concluding our reasons in relation to the departure application, it is appropriate that we note no submissions appear to have been made to the Federal Magistrate as to the expenses of the parties in the two relevant child support periods and the requirement to consider each relevant assessment (see Gyselman & Gyselman (1992) FLC 92-279).
Conclusions in relation to the child support appeal and cross appeal
We have found error by the Federal Magistrate in his assessment of the appropriate amount of assessed child support to be paid by the husband. We are satisfied that the factual error made by the Federal Magistrate has vitiated his discretion. Leave is required before an appeal under the CSA Act can be heard and determined (see Hendy v Deputy Child Support Registrar and Another (2001) 164 FLR 236; (2001) 27 Fam LR 641). We are satisfied in the circumstances that error of law is demonstrated and that we should grant leave to appeal and grant the husband’s appeal in respect of the child support departure application. We would also, to the extent necessary, grant leave to the wife in respect of her cross appeal.
It was conceded before us that in the event we found error in relation to the child support then by reason of the husband’s changed circumstances and lack of up to date financial information before us, it would be necessary for the child support departure application to be remitted. We agree and will make orders accordingly.
Future of the property proceedings
Both parties sought that, irrespective of whether the appeal or cross appeal in the child support departure application succeeded and that application was remitted for rehearing, we should, if we found appealable error in either the appeal or cross appeal against the property orders, endeavour to re-determine the matter. In order to enable us to do this and as we have already recorded, shortly after the hearing of the appeal the parties filed an agreed statement of facts in respect of the husband’s entitlements from H Firm. The statement of facts is as follows:
1.The husband retired from the [H Firm] partnership on 30 June 2009.
2.The husband received a payment from [H Firm] upon his retirement in the sum of $260,440.00.
3.The husband was not required to pay any monies to [H Firm] upon his retirement.
4.The husband’s former partners at [H Firm] state that the retirement benefits paid to the husband are not an eligible termination payment and will be taxable in the husband’s hands at his marginal rate of tax, being 46.5%.
5.The husband is now employed as [a professional] for [I Company]. The husband’s remuneration includes a base salary of $350,000.00 gross per annum and the possibility of a management bonus, as outlined in the husband’s affidavit affirmed 23 October 2009
We were not advised the date on which the husband received his retirement entitlement of $260,440.00 but assume it must have been received after 30 June 2009. The sum received was subject to tax of 46.5 per cent which we calculate to be approximately $121,105.00. Thus the net sum received by the husband should have been approximately $139,335.00, although absent the husband’s relevant income tax return we cannot definitely say this is accurate. The wife sought that this sum be included in the list of assets and liabilities to be divided between the parties.
We are also conscious that the husband, having resigned from H Firm no longer has an interest in that partnership and his interest valued at $139,291.00 may need to be deleted.
We were also provided with a statement of the sums held by Pearson Family Lawyers in a Controlled Money Ledger as trustees for the parties. It was agreed that the sum disclosed in the statement for the date nearest to the trial (3 November 2008) was $510,468.36 but that the amount held had changed apparently by reason of a payment made, so that on 9 March 2009 it stood at $508,952.51. We were also told that it was common ground that on 12 March 2009 the sum of $410,598.00 was paid to the wife’s solicitors. As at 2 November 2009 the sum of $99,840.54 remained in the controlled monies account. This represented the sum of $71,994.00 which we were told (transcript, 4 November 2009, p 20) was the sum to be retained in trust after a stay application to the Federal Magistrate, and which had increased by reason of accumulated interest.
Ultimately senior counsel for the husband sought in the event that we re-determined the matter that we would make orders so that the wife’s entitlement to the proceeds of sale of the former matrimonial home was $318,985.00, not the sum of $410,598.00 actually received by her. He sought orders that the wife repay to the husband the difference in these sums and the husband retain the balance of the monies in the controlled monies account.
We are only able to re-determine this matter on the evidence or agreed facts before us.
We are unsure of the relevant state of the evidence and the limited scope of the agreed facts about the following matters:
·the present balance in the controlled monies account;
·whether the husband’s interest in H Firm should be deleted from the asset pool;
·how we should treat the sum of $8,151.00 paid to L & Associates from the controlled monies account on 1 December 2008 (we assume from the appeal book that this was the account for part of the single expert fee of Mr L who valued the husband’s interest in H Firm and whose charges were approximately $16,000.00 (transcript, 4 November 2008, p 76));
·how any tax assessed on the funds from the controlled monies account should be treated;
·how we should treat the funds received by the husband from H Firm and any tax payable thereon; and
·the precise amount of school fees paid by either party or on their behalf post separation.
It follows we are not confident on the material before us we can accurately identify the assets and liabilities to be adjusted between the parties, or that we have sufficient material to assess the respective school fee contributions. We say this notwithstanding we have taken into account senior counsel for the husband’s submission that in the event the husband obtains a greater sum on the re-determination and as a result the wife has to repay funds to him, the overall result is not unfair. He submitted although the wife will incur a tax liability for funds over and above her entitlement, she has had the benefit of those funds, and that benefit offsets any advantage to the husband in obtaining the interest accumulated on the balance of the monies in the controlled monies account. We also have regard to the fact that the husband’s sworn evidence was that the funds in his NAB account were from his “earnings from jobs since our separation” (transcript, 4 November 2008, p 46). We imply, given the date of the husband’s retirement from the H Firm partnership, that the sum received by him was in addition to his post separation savings. However, we have no information about the tax actually assessed on such sum, or whether the funds were used, at least in part, to extinguish his borrowings to fund his capital account with H Firm.
We have considered giving the parties the opportunity to put a further statement of agreed facts before us in relation to the matters about which we are uncertain. But we are concerned that such agreed material may still not be adequate to permit us to re-determine the matter in a manner that would do justice to both parties. In the circumstances, there is no option other than to remit the matter to the Federal Magistrates Court as soon as possible.
Before concluding these reasons, we take this opportunity to observe that the orders made by the Federal Magistrate do not appear to reflect the percentage adjustment he intended to make. Such error will be avoided by including, as a check, a table of the assets and liabilities as divided. It could also be said that such a table will assist in determining if the award is in fact just and equitable.
Costs
At the conclusion of the appeal we received submissions from the parties about costs. Senior counsel for the wife sought in the event that the appeal and cross appeal succeeded on a question of law, and we were unable to re-determine the matter, we should grant certificates pursuant to the Federal Proceedings (Costs) Act1981 (Cth). A similar application was made on behalf of the wife.
We do not consider there are circumstances which would warrant departure from s 117(1) of the Act, and each party should bear his or her own costs of the appeal. In these circumstances as we have found error of law in respect of both the appeal, the application for leave to appeal and the cross appeal we will grant the relevant certificates for the those matters, and for the re-hearing.
I certify that the preceding one hundred and twenty three (123) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.
Associate:
Date: 25 June 2010
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