Warbrick & Warbrick
[2021] FamCAFC 60
FAMILY COURT OF AUSTRALIA
| WARBRICK & WARBRICK | [2021] FamCAFC 60 |
| FAMILY LAW – APPEAL – PROPERTY – Add back of fully dissipated funds – Whether dissipated funds should be treated as property – Treatment of disability lump sum payment for loss of future earnings – Whether expenditure was wanton, reckless and unreasonable – Contributions to and splitting of superannuation and non-superannuation property interests – Application of principle in Vass v Vass (2015) 53 Fam LR 373 – Appeal dismissed. |
| Family Law Act 1975 (Cth) s 75(2) |
| Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63 House v The King (1936) 55 CLR 499; [1936] HCA 40 Kowaliw and Kowaliw (1981) FLC 91-092; [1981] FamCA 70 Lotta & Lotta [2017] FamCA 50 Vass v Vass (2015) 53 Fam LR 373; [2015] FamCAFC 51 |
| APPELLANT: | Mr Warbrick |
| RESPONDENT: | Ms Warbrick |
| FILE NUMBER: | PAC | 4295 | of | 2017 |
| APPEAL NUMBER: | EAA | 130 | of | 2019 |
| DATE DELIVERED: | 29 April 2021 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney (via video-link) |
| JUDGMENT OF: | Strickland, Ryan & Watts JJ |
| HEARING DATE: | 10 September 2020 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 4 November 2019 |
| LOWER COURT MNC: | [2019] FCCA 2944 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Givney |
| SOLICITOR FOR THE APPELLANT: | Nikolovski Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Clifford |
| SOLICITOR FOR THE RESPONDENT: | O’Sullivan Legal |
Orders
The appeal be dismissed.
Any application for costs is to be made within 14 days, in writing and supported by written submissions of no more than five (5) pages which are to be filed at [email protected] and forthwith served by email on the other party.
Any submissions in response (of no more than five (5) pages) are to be filed within 14 days of service of the written submissions referred to in the above order (Order 2) at the above email address and forthwith served on the other party.
An applicant for costs may file submissions in reply of no more than two (2) pages within seven (7) days of service of any submissions filed in accordance with Order (3).
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Warbrick & Warbrick has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EAA 130 of 2019
File Number: PAC 4295 of 2017
| Mr Warbrick |
Appellant
And
| Ms Warbrick |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal against property settlement orders made by a judge of the Federal Circuit Court of Australia on 4 November 2019. In essence, Mr Warbrick (“the husband”) contends that the primary judge erred in relation to the treatment of $339,487 received by his former wife, Ms Warbrick (“the wife”). At trial, the husband sought that these monies be treated as property and in the alternative, that an adjustment be made in his favour pursuant to s 75(2) of the Family Law Act 1975 (Cth) (“the Act”) (Kowaliw and Kowaliw (1981) FLC 91-092) (“Kowaliw”). Both arguments failed.
It was common ground that the $339,487 had been fully expended [19]. The primary judge determined that the amount should not be included in the present property and resources of the parties [40] and, having ruled against the husband’s contention that the wife failed to give full and frank disclosure in relation to her use of these funds [4]–[5] his Honour found “that the wife’s reasonable expenditure of such sum (which included her superannuation) was for living expenses for both herself and the children in circumstances where the husband was not paying child support from March 2018 for a significant period” [114]. The submission that the wife’s expenditure should be characterised, quoting Kowaliw, as “wanton, reckless and unreasonable” was rejected accordingly [115].
The parties’ total net property was determined to be $1,091,524 which included $182,515 superannuation in the husband’s name. It follows that of this total sum, net non-superannuation assets amounted to $909,009 [45].
On the assumption that the parties’ property available for distribution would include the $339,487 as the wife’s asset, the husband sought a finding that their contributions were equal and that there be no further adjustment arising from the application of s 75(2) of the Act. Furthermore, he proposed a superannuation splitting order so that the wife would receive $40,000 from his superannuation interests.
The wife’s contributions were assessed at 55 per cent compared to the husband’s 45 per cent. Pursuant to s 75(2) of the Act, an adjustment of 10 per cent was made in favour of the wife. The proposed superannuation splitting order was not made because the wife “needs to house herself and the children, and she is only 42 years old with no work capacity” [120]. Thus, the wife received the family home and was required to pay the husband an adjusting amount of $169,600. Stated broadly, the husband received his minor savings, a piece of jewellery, his superannuation and the adjusting amount payable by the wife.
According to the husband this outcome is plainly wrong. The wife seeks to uphold the orders.
It needs to be understood that this is an appeal against the exercise of discretion to be determined in accordance with the principles set out in House v The King (1936) 55 CLR 499 (“House”). A different view by an appellate court only on matters of weight by no means justifies a reversal of a decision of the primary judge (Gronow v Gronow (1979) 144 CLR 513 at 519). As has already been demonstrated, the primary judge considered the husband’s contentions and explained why they did not find favour. As there is no suggestion that the primary judge acted on wrong principle or took into account irrelevant considerations, the scope for appellate intervention is unarguably narrow.
Factual overview
So as to provide context to the appeal, a brief factual background is required.
The husband was born in 1976 and the wife was born the following year.
The parties commenced cohabitation in 2005. At cohabitation, the wife owned a home unit at Suburb A (which was significantly encumbered), a car and modest cash savings [48]. The wife, who was then employed in Government Department D had been contributing to superannuation from about 1992 and had superannuation worth “considerably less than $89,000” [64]. The husband owned a motor bike, comparable in value to the wife’s car and superannuation (also in Government Department D) of $80,000. He had a personal debt relating to the motor bike of about $10,000 [49].
At cohabitation, the husband moved into the wife’s property and thereafter, the parties’ joint income was applied to their joint expenses [11].
The first of the parties’ two children was born in 2006. Their second child was born in 2008. Following the birth of each child, the wife took a period of maternity leave. Having returned to paid work part-time, subsequent to the birth of the first child, when the second child was six months of age, she resumed full time paid employment [13].
In about late 2007, the parties moved out of the Suburb A unit and into rented accommodation. It is uncontroversial that the Suburb A unit was sold in 2010 and the $25,000 net proceeds of sale was applied to joint family purposes [51].
The parties purchased land at Suburb B in mid-2010 for about $252,000. The purchase price comprised $100,000 borrowed from the wife’s father, $20,000 derived from the proceeds of sale of the Suburb A unit and a mortgage to meet the shortfall. From mid-2010 to about March 2012, the parties and their children lived with the wife’s parents while the parties’ new home was built at Suburb B. Again, it is uncontroversial that construction costs of $360,000 were met from an extension to the parties’ mortgage which grew to $616,000. During the period the parties lived with the wife’s parents, they did not pay rent [15].
By early 2010, the wife showed symptoms of a post-traumatic stress disorder which culminated in her being medically discharged from her employment in early 2012 [20]. Not long afterwards, in February 2012, by way of partial and permanent disability lump sum payment, the wife received $524,136. After tax and legal fees, she received about $472,000 net. From that amount, the wife repaid her father the $100,000 advanced for the acquisition of Suburb B and contributed at least $314,000 towards the mortgage secured thereon [55].
The wife has not had paid employment since January 2012 [55] and has no capacity for future work [83].
Whilst on duty in April 2008, the husband was hit by a car and in December 2012 he was medically discharged from his employment. In January 2013, he received circa $461,000 compensation for his injury. From those monies he paid $197,000 towards the mortgage, as a result of which Suburb B was unencumbered. A motor vehicle was purchased for $72,500 and registered in the wife’s name, $28,000 was spent on a motorbike for him and $40,000 on a world trip for the family. The husband calculated that the balance of about $164,000 (before us it was agreed the figure was about $123,500) was spent on day-to-day living expenses and by January 2014 none remained [112].
The husband commenced part time work for Government Department E in about February 2014. As well as a salary of $415 per week, the husband receives workers compensation/annuity of approximately $982 per week [82].
Although the parties separated in about October 2014, they continued to reside in the family home [66].
The husband vacated the family home in January 2015 and lived in rented accommodation until he and his new partner purchased a home at Suburb C for $400,000. The husband’s partner paid the deposit, stamp duty and associated expenses. The balance of the purchase price was borrowed by the husband and his partner. This is where the husband lived and in relation to which, since December 2015, he made mortgage payments of about $400 per week [90].
The husband paid child support from about May 2015 until he stopped paying in March 2018. For completeness, at the time of trial, child support had resumed and was being paid at the rate of between $110 and $139 per week [84].
In 2016, the wife was awarded a total and permanent disability payout of $920,090. After she repaid the 2012 payment of $524,136, legal fees and debts, the wife was left with “net funds of about $337,000” [17]. This amount included $99,071 superannuation [67]. Between August 2016 and about October 2018, the wife spent the balance of the 2016 payment [107].
The husband’s child with his partner was born in 2017.
The husband and his partner separated in mid-2018 albeit, they continue to reside at their Suburb C property. That property is under renovation and is to be sold. According to the husband, the proceeds of sale are to be distributed so that his partner is reimbursed for the funds she contributed towards its acquisition and, the net balance divided equally between them [30]. The husband’s interest in this property was not included in the parties’ property available for distribution between them.
Post separation and until the end of 2018, the children spent each alternate weekend and one afternoon each fortnight with the husband. However, in 2019, the husband only spent time with the children twice; on one occasion overnight and the other for three hours during the day [33].
The balance sheet challenge
Grounds 1, 2 and 2A of the husband’s Amended Notice of Appeal were addressed together and, in essence, assert that the primary judge erred:
·by failing to add back the sum of $339,487 as the wife’s property;
·in the alternative, by failing to add back the lesser sum of $99,071 (the wife’s superannuation component of the 2016 payout); and
·by failing to provide sufficient reasons for these determinations.
The husband’s argument advanced at trial is tidily summarised at [40] of the trial reasons as follows:
The husband contends that this amount was spent wantonly, negligently and recklessly and represents wastage of such property by the wife, pursuant to the principles in Kowali[w] & Kowali[w] (1981) FLC 91-092; he contends this amount should be added back, or in the alternative, that such wastage by the wife should be taken into account, in favour of the husband, under section 75(2).…
The principles which emerge from Kowaliw and which have received widespread appellate support are that if a party has:
·embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets; or
·acted recklessly, negligently or wantonly with matrimonial assets the overall effect of which has reduced or minimised their value; then
·such conduct and the economic consequences which flow therefrom may be taken into account pursuant to s 75(2)(o) of the Act.
According to the husband, because the lump sum received by the wife was property, albeit a payment for loss of future income, and although that property no longer existed, the primary judge should have included it as the wife’s property available for distribution. Kowaliw does not support that outcome.
The approach to add backs and the determination of the parties’ existing interests in property is as set out in Vass v Vass (2015) 53 Fam LR 373 (“Vass”) as follows:
138.There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan (2013) FLC 93-545 – or, more particularly, the decision of the High Court in Stanford & Stanford (2012) 247 CLR 108 – is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered.
139.The decisions referred to seek to remind the Court that, however the exercise of discretion might seek to deal with property that is said to be the subject of “add back”, proper consideration must be given to existing interests in property, and the question posed by s 79(2) as a separate inquiry from any adjustment to property interests by reference to s 79(4) if a consideration of s 79(2) reveals that it is just and equitable to alter existing interests in property.
Counsel for the husband was invited to address Vass and to clarify whether the complaint was that the primary judge did not adopt the approach discussed in Vass at [138] or whether he was arguing for something more than Vass (or Kowaliw) provided. Initially counsel for the husband spoke in support of the approach in Vass but ultimately settled with the contention that Vass did not go far enough. In fairness to counsel for the husband, he also postulated that the s 75(2) challenges were more likely to find favour.
In our view, the primary judge did not err by failing to include either amount (or the husband’s fall-back position in the appeal of $180,000) as the wife’s property. Indeed, given the findings made as to the wife’s use of the funds, we consider that the primary judge would have fallen into error had he adopted the approach for which the husband contends.
All that remains to be said on this point is that the husband proposed one of two options as to how the funds would be treated of which the primary judge chose one, namely pursuant to s 75(2)(o). His Honour did not need to explain in detail why he considered this was the better option albeit, it is tolerably clear the decision was influenced by the fact that the funds had been fully expended in the manner to which the wife deposed (see reference at [36] to Lotta & Lotta [2017] FamCA 50). Thus, the reasons ground of the appeal addressed to why the amounts were not treated as property must also fail.
Section 75(2) of the Act
The challenges raised under the rubric of s 75(2) of the Act are closely connected to those just discussed. Again the factual matrix concerns the wife’s use of the amount of $339,487, albeit the focus is on the decision to reject the husband’s submission that the wife’s “wanton, reckless and unreasonable” expenditure justified an adjustment in his favour pursuant to s 75(2) (Ground 5).
At trial and before us, the husband sought to establish that the manner in which the wife spent the remaining amount was anything but reasonable, which it was submitted enabled the primary judge to invoke Kowaliw. Between [103]–[109] of the trial reasons, the primary judge examined the evidence concerning the wife’s expenditure, in relation to which his Honour was satisfied she had fully accounted for the funds and accepted the wife’s evidence that she used these monies:
107.…repaying debts owed to family and friends, home expenses, expenses for herself, shopping including clothing, family holidays, children’s expenses (including orthodontic, and sporting expenses for the parties’ daughter which included interstate travel). In this context she referred to the husband not having paid child support for a certain period.
The primary judge then considered the wife’s submission that in assessing the reasonableness of her expenditure, consideration should be given to the manner in which the husband spent the balance of his lump sum payment. In other words, that consideration of the standard of living enjoyed prior to separation should inform the assessment of the reasonableness of her expenditure. The tenor of the findings is that the pattern of expenditure for each of the lump sums was not dissimilar, which in turn, informed the finding that the wife’s use of her funds was reasonable [114]. This was an entirely orthodox analysis of the facts and the conclusion reached was undoubtedly available.
Counsel for the husband carefully analysed the evidence and established that during the 27 months under discussion, the wife lived with the children in the family home which was unencumbered, she paid its outgoings, received child support of $7,040 and a tax free annuity of $633 per week. With the lump sum taken into account, this meant the wife had an average weekly expenditure of $3,740 for her and the children (Transcript 10 September 2020, p.10 lines 21–22). Furthermore, that the wife produced her bank records from which it was possible to identify where 80 per cent of the money was spent. That the balance was fully expended was also established but it was not possible to establish the precise nature of the expenditure.
In order to establish the wanton nature of the wife’s expenditure, counsel for the husband compared her Financial Statement filed in 2017, which he said identified her reasonable weekly living expenses at $1,700 to the amount actually spent. The gravamen of the submission is that anything above $1,700 is wanton and reckless and the primary judge should have so found. Although we think that the submission confuses the information contained in the wife’s Financial Statement filed in 2017 with the one filed in 2018 (where her stated expenditure is some $1,715 per week), nothing turns on the error. This question raised by the Financial Statement’s was considered in the trial reasons at [105] and [108] in particular, where the primary judge said:
105.In her oral evidence, the wife stated that for the past four years she has been both the mother and the father and she had done everything. She conceded that the children had probably been a bit spoilt, “but nobody else does it. It’s been up to me.” She also stated that during the period from about 2015 to 2018 she had spent money in accordance with her needs and that some purchases were a little lavish but not a lot were lavish.
…
108.The wife conceded that her personal expenditure on behalf of the family had significantly increased following her financial statement filed 28 August 2017, indicating weekly expenditure of $802, and compared to weekly expenditure of about $1,500 referred to in her financial statement filed 22 November 2018 (allowing for certain corrections to certain items in her personal expenditure detailed in that financial statement). The wife stated that there had been increased expenditure, following the first Financial Statement filed 28 August 2017, by reference to orthodontic bills, a child’s snow camp, and a couple of holidays.
The primary judge continued and as we mentioned earlier, analysed the manner in which the parties spent the husband’s lump sum which in turn informed his conclusion that the wife’s expenditure was, in the circumstances, reasonable. By Ground 7, the husband contends that the primary judge conflated the issue of the husband’s expenditure of his 2013 lump sum with the issue of the wife’s expenditure of her 2016 payout and the issue of the wife’s future needs generally. We do not quite understand the latter point, but with the former we have already expressed our satisfaction that the approach adopted was permissible and the finding as to reasonableness was open.
In finally deciding that the wife’s use of these funds did not justify an adjustment in favour of the husband, the primary judge properly took into account that a not insignificant portion of the payout represented the wife’s future notional earnings from employment [100] and thus a not insignificant portion of the $339,487 was a contribution made solely by the wife [114].
Error in relation to the application of Kowaliw and the approach taken to the wife’s use of the balance of her 2016 payout has not been established and thus, Grounds 5 and 7 have not been made out.
By Ground 6 the husband contends that the primary judge erred by making an adjustment pursuant to s 75(2) of the Act of 10 per cent in favour of the wife. To a considerable degree this challenge relies upon this Court accepting that the primary judge erred in the approach taken to the wife’s lump sum. This has not occurred and thus the challenge is predicated upon the husband being able to establish that the primary judge failed to take into account that a significant component of the husband’s property is superannuation, which he could not access for some 20 years, and his accommodation needs. Both propositions should be rejected.
First, there are numerous references in the trial reasons to the nature and identity of the parties’ property and the distinction between superannuation and non-superannuation assets is highlighted on a number of occasions (for example, [119]). Furthermore, when considering whether or not to make a superannuation splitting order in favour of the wife, it is apparent that the primary judge was astute to the fact that it will be many years before the husband’s superannuation entitlements will vest [120]. As the issue under discussion is the effect of splitting the husband’s superannuation interest, it should not be accepted that the primary judge failed to appreciate that the husband would have to wait almost 20 years to receive his superannuation.
As to the husband’s accommodation needs, it will be recalled that the husband’s interest in his Suburb C property was not included as property available for distribution between the parties. Indeed the primary judge contemplated that the husband might even decide to invest the adjusting amount in that property. However, the evidence did not establish when that property was likely to be sold nor its likely selling price. With those matters unable to be determined, we struggle to understand what finding the primary judge should have made concerning the husband’s accommodation needs and how that issue should have weighed in his favour pursuant to s 75(2).
In deciding that an adjustment of 10 per cent in favour of the wife was warranted, greatest weight was placed on her primary care of the children who were then aged 11 and 13 years, that the husband receives an annuity of $982 per week and a salary of about $415 per week, whereas the wife has an annuity of $633 per week and no capacity for paid employment and, that his Honour was not satisfied that the husband would reliably pay child support [117]. In this regard, no challenge is made to the finding that at the date of trial the husband was $4,617 behind in child support [86]. When it is understood that the husband’s car loan of $34,000 was taken into account in formulating the property pool, but the wife’s personal debt of $96,000 was not, there can be no doubt that the discretionary determination at 10 per cent in favour of the wife was justified.
Ground 6 has not been established.
As a final observation in relation to Grounds 5, 6 and 7, we agree with the submission made for the wife that at best, these challenges demonstrate that the primary judge could have been less generous to the wife than he was pursuant to s 75(2) but are insufficient to enliven appellate intervention in this discretionary decision.
Justice and Equity
By Ground 15, the husband contends that the primary judge erred in giving a result that was “plainly wrong and manifestly unjust”. This is a reference to the final limb of House which, properly understood, is a challenge to the reasoning process, particularly an asserted failure to adequately explain the resultant orders. However, the argument advanced pursuant to this ground effectively repeated the arguments advanced in support of Ground 6 and the assertion that the primary judge failed to consider the nature, form and characteristics of the property and superannuation interests received by the parties. We have already explained why this submission should be rejected.
Otherwise, the husband contends that the primary judge erred by not making the superannuation splitting order against his superannuation entitlements in favour of the wife. The assumption being, that if a superannuation splitting order of $40,000 was made in favour of the wife, the husband would have received an additional $40,000 in non-superannuation assets. Be that as it may, at [120] of the trial reasons the primary judge explained why the proposed superannuation splitting order would not be made. Namely, that the wife needed to house herself and the children and she had no capacity for paid employment. Two paragraphs earlier, the primary judge considered evidence as to the wife’s capacity to raise funds so as to acquire the husband’s interest in the family home and the limits of her borrowing capacity.
The primary judge continued and was satisfied that the wife “should” be able to pay an adjustment of $169,600 [123] and thus, she and the children could continue to live in the home. The net effect of these matters is that the primary judge was not persuaded that he should jeopardise the wife’s and the children’s continued occupation of the family home by making a superannuation splitting order and thus requiring her to borrow more than he was satisfied she could afford to repay. Mindful, no doubt, of his concerns that the husband could not be relied on to pay child support.
There is no deficiency in his Honour’s reasons and the challenge raised in Ground 15 has not been made out.
Conclusions and costs
The husband has failed to establish error and the appeal will be dismissed. Although it is our usual practice to take submissions as to costs at the conclusion of an appeal hearing, the husband requested that we not do so and provision be made for written submissions. We understood that we are to receive further material relevant to costs that should not be considered prior to judgment. The wife agreed and directions will be made for written submissions as to costs.
I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Ryan & Watts JJ) delivered on 29 April 2021.
Associate:
Date: 29 April 2021
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