Wellings & Wellings
[2008] FamCAFC 191
•8 December 2008
FAMILY COURT OF AUSTRALIA
| WELLINGS & WELLINGS | [2008] FamCAFC 191 |
| FAMILY LAW – APPEAL FROM FEDERAL MAGISTRATE – PROPERTY FAMILY LAW - APPEAL by husband in relation to the composition of the property pool – Pool of assets and liabilities. Where appellant submitted that the Federal Magistrate erred in the amounts added back to the pool – Where the appellant submitted that sums received by way of a maintenance order should have been added back in to the property pool. Where the appellant submitted that an amount withdrawn by the appellant should not have been added back to the property pool - Appeal ground unsuccessful. Where appellant submitted that the Federal Magistrate erred in the treatment of liabilities - Moneys allegedly owed to the appellant’s sister-in-law – Respondent not cross examined in relation to the alleged loan – Appeal ground unsuccessful - Findings were within the Federal Magistrates discretion FAMILY LAW – PROPERTY - SPECIAL CONTRIBUTION – Contribution during the marriage – whether in the category of “special” - Where appellant submitted that the Federal Magistrate erred in relation to the nature of contributions made by the parties. Where the Federal Magistrate found that the husband had contributed 61 per cent and the wife had contributed 39 per cent – Appeal ground successful – Husband had made overwhelming contribution FAMILY LAW - APPEAL - Allowed in relation to contributions during the relationship and up to the date of trial - Re-exercise of discretion - Division of assets as found by Federal Magistrate was incorrect – Division of assets varied on appeal – Respondent wife to repay the appellant husband a sum necessary to effect a division of 33 per cent to the wife and 67 per cent to the husband |
| Family Law Act 1975 (Cth) |
| AMS v AIF (1999) FLC 92-852 |
| APPELLANT: | MR WELLINGS |
| RESPONDENT: | MS WELLINGS |
| FILE NUMBER: | BRM | 5013 | of | 2006 |
| APPEAL NUMBER: | NA | 57 | of | 2007 |
| DATE DELIVERED: | 8 December 2008 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May J |
| HEARING DATE: | 27 November 2007 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 6 July 2007 |
| LOWER COURT MNC: | [2007] FMCAfam 459 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Galloway |
| SOLICITOR FOR THE APPELLANT: | KL King & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr Jordan |
| SOLICITOR FOR THE RESPONDENT: | Collas Moro Ross |
Orders
That the appeal be allowed.
That paragraph 12 of the order made 6 July 2007 be varied so that the wife repay to the husband such sum as is necessary to effect a division of the assets as found by the Federal Magistrate of 33 per cent to the wife and 67 per cent to the husband.
To effect such order, the wife repay to the husband the sum of $38,903 within 60 days of today, the solicitor for the husband and the wife to agree by correspondence between them within 7 days that such sum correctly reflects the transactions between the parties.
That each of the parties take all steps necessary to remove all securities including caveats on property held by each of them within 14 days of today.
Further, it is Ordered
The appellant file written submissions in relation to costs of the appeal within 21 days and upon receipt of those submissions the respondent file submissions in reply within 21 days.
IT IS NOTED that publication of this judgment under the pseudonym Wellings & Wellings is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 57 of 2007
File Number: BRM 5013 of 2006
| MR WELLINGS |
Appellant
And
| MS WELLINGS |
Respondent
REASONS FOR JUDGMENT
The husband, Mr Wellings, appealed from orders made by Federal Magistrate Baumann on 20 July 2007 in relation to the parties’ property. Orders were also made on that day in relation to the children of the marriage but these orders are not the subject of any appeal. The arrangements for the children are however of some significance. In the orders the time the children will spend with their parents was described as week about during both school terms and holidays.
The trial took place over two days on 28 February and 1 March 2007. The judgment was delivered on 6 July 2007 and following delivery the trial judge asked that the parties “discuss the form of order that is consistent with these orders, so I may be satisfied that the order does justice and equity to the parties”. The matter was then listed before the Federal Magistrate on 20 July 2007 “for the pronouncement of orders in accordance with these reasons”.
I mention at this introductory stage that this appeal is to be determined by me as a single Judge of the Family Court pursuant to arrangements made under section 94AAA(3) of the Family Law Act 1975 (“the Act”).
Background
Prior to the marriage the husband completed a Bachelor of Education. In 1987 he moved from Australia to Hong Kong to teach. From 1987 the appellant was also involved in the collection and interpretation of data in relation to the horse racing industry in Hong Kong. In 1993 he commenced working as a racing journalist in Hong Kong having previously contributed to a newspaper as a tipster. He then became a co-presenter on a cable television racing program.
The parties married in June 1996 and together returned to Australia from Hong Kong in October 2001. There are two children of the marriage, a girl who was born in Hong Kong and is now aged 10 years and a boy who was born soon after the parties return to Australia, now aged 7 years. The parties finally separated on 21 May 2006.
The trial judge records that there was a dispute as to when the parties commenced cohabitation in Hong Kong. On the appellants case it was May 1996 and on the respondents case it was a few months after they met in 1994. At paragraph 34 of the reasons for judgment the trial judge says in relation to this question:
34.…Considering neither party had any real assets at that time … little turns on which date I accept.
Largely prior to returning to Australia the husband purchased homes and units at the Gold Coast. These transactions are referred to in paragraph 36 of the judgment taken from the husband’s affidavit. One of the properties, A Drive was sold just prior to separation, the net proceeds being $3,777,864.94. The Federal Magistrate found that the moneys were applied as follows:
37. … Eventually the major disbursements were:-
Discharge of the Viridian Loan
$500,000
Funds for purchase of [M] Court
$2,000,000
Discharge of the husband’s Mastercard debt
$61,918
Partial property settlement
$200,000
Spouse Maintenance – lump sum
$54,000
$2,815,918
with the balance paid into trust.
The issues from the trial being those on appeal in relation to the property pool are as follows:
1.Moneys received by the husband from the Viridian line of credit – should that sum have been “added back” to the pool;
2.The sum of $27,000 paid to each party by way of consent orders – should that sum have been included in the pool;
3.A loan from [R Wellings] and possibly her husband to the appellant. The husband asked that this sum be treated as a liability and deducted from the pool.
Apart from whether the trial judge should have found that there were moneys owing to these family members by the husband there were few factual matters raised in the appeal said to be controversial.
Grounds of Appeal
In this appeal, it is argued that the trial judge incorrectly assessed the pool of assets. As already mentioned, in particular, that there were sums included attributed to the husband that ought not to have been and others being liabilities not included. Further, it is argued that the wrong percentage of the property was attributed to the parties considering particularly what was said to be the special contribution made by the husband.
The grounds of appeal in the Amended Notice of Appeal filed 21 September 2007 are as follows:
1.That the learned Federal Magistrate erred in law and in fact in finding that the property of the parties should be divided 61% to the Appellant and 39% to the Respondent.
2.That the learned Federal Magistrate erred in failing to find that the Appellant made a special contribution to the pool of assets when it is otherwise plain from the matters found by the Learned Federal Magistrate that the Husband was not only sole financial contributor to the assets of the parties, but that he had built up the pool of assets by reason of the adaption of his special skill and knowledge of the Hong Kong races, and that he had increased that pool by reason of his skilful investment of those monies when the parties returned to Australia.
3.That the learned Federal Magistrate erred in failing to credit the pool of assets for division with the sum of $127,000.00 for each party as a premature distribution under the “Townsend” principle.
4.That the learned Federal Magistrate erred in failing to find, consistently with the evidence, that the Husband and the Wife owed to [R Wellings] the sum of $40,000.00 and thus failed to include it as a liability to be taken into account.
5.That the learned Federal Magistrate failed properly to consider, or mistook evidence of:
(a)the uses to which the Husband put sums from the Viridian line of credit, and from credit card in “adding back” the sum of $70,000.00 and $11,200.00 respectively;
(b)the cost to the husband of maintaining the properties the subject of the Wife’s claim between separation and trial;
(c)the period between May and September 2006 when the children were in the Husband’s sole care;
(d)the incidental costs to the Husband of school fees and household maintenance.
6.That the decision of the learned Federal Magistrate was otherwise so excessive in favour of the Respondent that error is to be inferred.
Should the appeal be successful the appellant seeks orders in the following terms:
1.That the assets and liabilities of the parties (as found by this Honourable Full Court) be divided between the parties so that the Wife shall receive property and money to the value of $1,100,000.00 (or such lesser figure as this honourable Full Court shall determine) of the parties nett assets.
2.That as part of the Wife’s entitlement to property settlement, she receive the whole of the parties interests of property [the DV unit] together with those chattels presently in her possession and a sum of money from the Appellant (if any) so as to entitle her in value to that much of the parties’ assets as this Honourable Full court shall determine is just and equitable.
3.That this Honourable Full Court make such further or other order as may be necessary.
4.That the Respondent pay the costs of and incidental to the Appellant of the appeal.
The orders made by the Federal Magistrate on 20 July 2007 in relation to the property proceedings are as follows:
(11)(a) That within 28 days of the date of this Order the husband will transfer to the wife all his right title and interest in the [DV unit] property […].
(b)That the wife thereafter be responsible for any capital gains taxation or other costs whensoever accruing in respect of the aforementioned property.
(c)That the wife shall be responsible for the costs of and incidental to the aforementioned transfer.
(12)That the husband will pay to the wife the following sums in the following manner:
(a)That within 28 days of the date of this order, the father will pay to the mother the sum of One million, one hundred and forty three thousand, and ninety eight dollars and seventy eight cents ($1,143,098.78), being inclusive of the funds currently standing to the credit of the parties in the ANZ Account termed “Karen Louisa King as Trustee for [Mr and Ms Wellings]”.
(b)the further sum that shall equate to 39% of interest earned on the invested monies on and from 15 February 2007 forthwith upon the making of these orders.
(13)(a) Monies owing to the wife under these orders shall be secured by lodged but unregistered Caveat bearing Dealing No. […] over the property at [M] Court, [Gold Coast] or such further or other Caveat as may be required in the circumstances and that pending payment the husband is hereby restrained from dealing with the property pursuant to s.122(1)(e) Land Title Act which Caveat shall (if requested) be supported by form of Consent signed by the husband as registered proprietor (“the Caveat”).
(b)That in exchange for payment of all monies payable under 12 hereof, the wife shall forthwith deliver to the husband form of withdrawal of the Caveat signed by her and he shall be responsible for the costs of and incidental to lodgement and registration thereof.
(14)(a) That the wife shall retain for her own use and benefit the [DV] unit, her VW Gold motor vehicle and the monies aforementioned referred to.
(b)The husband shall retain for his own use and benefit the [B] unit, the […] [N] Court property, the […] [M] Court property, his BMW motor vehicle, his interest in the [P] business in Hong Kong, the horse [“W”] and the balance of the monies aforementioned referred to after payment to the wife.
(c)That pursuant to Order made 3 November 2006 each party was paid during the course of these proceedings the sum of $100,000.00 as and by way of partial property distribution.
and otherwise and unless specified in these Orders:
i.each party is to be solely entitled to the exclusion of the other party (including choses in action) in the possession of such party as at the date of these Orders.
ii.each party shall be solely entitled to the credit of any monies in any bank account in their name.
iii.each party be solely liable for and indemnify the other against any liability whatsoever and including any liability encumbering any item of property to which that party is entitled pursuant to these Orders which liabilities for the husband shall include:
(1)Any debt owed by the husband to [R Wellings].
(2)Any capital gains tax that may become payable in respect of [A Drive].
(3)Any capital gains tax that may become payable in respect of the [B unit].
(4)Any capital gains tax that may become payable in respect of the [N Court] property.
(5)Any capital gains tax that may become payable in respect of [M Court] property.
(6) Any monies owing under the Viridian line of credit.
(7)Any monies owing on the husband’s mastercard account.
(8)Any legal fees owing by the husband to Robinson & Robinson.
(15)Each party will be responsible for the cost of transfer of any asset into their name including registration and transfer fees and for any tax arising as a result of that transfer.
(16)If:
(a)an order under this Act has directed a person to execute a deed or instrument;
(b)that person has refused or neglected to comply with the direction or, for any other reasons, the court considers it necessary to exercise the powers of the court under this subsection.
(17)That each party bear their own costs of and incidental to these proceedings.
Notation
It is noted that the parties will be responsible for all school expenses, inclusive of extra curricular activities, private medical cover and any other medical expenses whatsoever relating to the aforementioned children.
Appellant’s Submissions
At the commencement of submissions counsel for the appellant referred to an error in ground three of the Amended Notice of Appeal. The sum of $127,000.00 should in fact be $27,000.00. In the appellant’s written submissions filed on 14 November 2007 there was also an error in relation to ground three where the sum referred to was $120,000.00 and should have been $27,000.00. An amended outline of submissions of the appellant correcting the error was tendered at the appeal hearing.
In relation to ground one and the percentage of division of property contained in the orders, counsel for the appellant submitted that the percentage awarded to the respondent should have been 20 per cent rather than the 39 per cent finding that his Honour made. In support of the proposed 20 per cent counsel submitted that the appellant had made the only financial contribution to the property pool and that his Honour had taken no s 75(2) factors into account. It is noted that the trial judge specifically found at paragraph 35 of the judgment that “…the husband was the sole financial contributor through the marriage”.
In addition, it seems clear that the Federal Magistrate accepted that a capital gain in the order of $4,000,000 was made through the purchase by the husband of real estate at the Gold Coast (see judgment para 36).
In relation to ground two and the issue of special contributions, counsel for the appellant submitted that in the reasons for judgment at paragraphs 76 to 85 his Honour referred to the relevant authorities that deal with the concept of special contributions but that his Honour did not appropriately apply the authorities to this case. Reference was made to paragraph 86 of the judgment where his Honour said:
86.In my view the husband’s contribution does not fall within the “special” category clearly reserved for only a few and rare cases, although it is appropriate to adjust contributions in favour of the husband for
·The accumulation of data he amassed since 1987 which was the platform for the “informal agreement with Mr [AW]”
·The benefits mostly retained and reinvested, he received in the tax free environment of Hong Kong, which I would accept was in the region of $4 million - $5 million dollars.
·His careful selection of the Gold Coast as a location for his attentions as a property investor.
All of which swelled the pool of assets available for division.
Counsel submitted in the appeal that the appellant’s ability to devise the race results system in Hong Kong was uniquely his, was developed prior to the commencement of the relationship and was sold for a significant sum which produced further residual income for the parties. Counsel made reference to the appellant’s affidavit filed 23 February 2007 where the details of the history of the race results system were contained and in particular at paragraph 42 where the husband said:
42.At the time that I met the mother the following was the case in relation to my employment situation:
…
iii.Whilst I has always had involvement with or interest in the racing industry since an early age, from 1987 I began collating and interpreting data in relation to horse races. From 1987, I kept and maintained data in relation to every horse race which took place in Hong Kong. I developed a set of criteria which I would apply to a given horse race. I would look at where the horses in the race had actually finished and then, based on the set of criteria applied where they should have finished had all other things been equal. This process involved constantly reconsidering the sets of criteria I had adopted, developing other criteria and providing subjective input, given my knowledge of the racing industry as to whether the criteria were effective of [sic] otherwise. I would have spent no less then fifty or sixty hours per week on the development of this intellectual property.
…
In either late 1993 or early 1994 … I met a person by the name of [AW]…
I had several meetings with [AW] and explained to him the nature of the data I had been collating. In early, 1994, I reached an informal agreement with [AW] pursuant to which he would purchase all of my intellectual property which I had developed and collated to that date for a percent share (10% of his overall profits). As he charged a 50% royalty on all dividends received, this in fact equated to a 5% share of the business. I would estimate that the value of what was effectively an annuity was at least $3 million.
Counsel also made reference to paragraph 46 of the affidavit filed where the husband described the circumstances at the time the parties married:
46.At the time I married the mother in June 1996, my financial situation was as follows:
i.The share in [AW’s] operation, pursuant to an informal arrangement between us. I no longer owned the intellectual property I had developed in relation to the racing industry. As stated, I would estimate my interest in [AW’s] operation exceeded AUD$3 million dollars.
ii.In addition I was employed as a racing journalist for the various entities described and was in receipt of in excess of HK$50,000 (Approximately AUD$12,500) net per month (this did not continue for long after the mother as I commenced working with [AW] on a full time basis around this time).
iii.I did not own real property but I had substantial amounts of good quality furniture and bank accounts with the Hang Seng Bank with deposits in excess of $100,000 AUD.
Counsel referred to what his Honour said of the appellant’s interest in the [AW] operation. At paragraph 58 and 59 of his reasons for judgment:
58.The husband claims at paragraph 46 that at the time of marriage, he had “the share in [AW’s] operation, pursuant to an informal arrangement between us” and that although he no longer owned the intellectual property he estimated his interest in the operation “exceeded AUD $3 million dollars”.
59.No foundation for this assessment of value is offered, I cannot accept such a bland statement. As a matter of law, I could not attribute a fixed value to this interest even if it did exist on the evidence before me. That does not, of course mean, I ignore the history. I do not and when I come to consider the contributions I give the husband some recognition for it.
To appreciate his Honour’s finding on this topic it is necessary to also have regard to paragraph 55:
55.Mr [AW] cannot, as I say, offer any corroborative evidence. The husband says this is partly due to the wife threatening to report [AW] to the taxation authorities in Hong Kong. The husband says he was not required to disclose income from his “informal arrangement with [AW] as gambling is not profits taxable in Hong Kong”. The husband did not produce any personal taxation returns or bank statements for the period. Not surprisingly, there are no documents at all evidencing the arrangements with [AW]. The legitimacy of the whole operation may be open to question but one fact remains – the husband left Australia as a teacher in 1987 and returned 14 years later with over $3 million to invest in Gold Coast Real Estate. On any test this demonstrates a degree of success. (emphasis added)
It was submitted by counsel that although there was probably no way in which the appellant’s interests could ever be valued because it was an income stream that was lawfully untaxed and the evidence of the actual value was not available, there should not be a criticism of the appellant.
As to ground three, in relation to the pool of property for division counsel argued that just as the $100,000 the parties each received as a partial property settlement was added back into the pool by the trial judge, the $27,000 that the parties each received described as maintenance, should also be added back into the property pool. Counsel submitted that although a consent order of the parties made on 3 November 2006 referred to $27,000 to be paid to each of the parties described as maintenance, as this sum came from the sale proceeds of A Drive then that amount should be restored to the parties’ capital and be included in the pool of property to be divided.
In relation to ground four and the $40,000 debt to the husband’s sister in-law, counsel argued that as an affidavit had been filed in the proceedings by Ms Wellings and as she was not called for cross examination by counsel for the respondent then her evidence should have been accepted by the trial judge and the debt added to the property pool. In relation to the contradictory evidence that his Honour refers to in paragraph 61 e) of the judgment, counsel referred to the husband’s affidavit filed 23 February 2007 where he says at the end of paragraph 79 under a heading “Loan from [J & R Wellings]”:
In November 1994, I was experiencing some temporary financial difficulties and borrowed the sum of $40,000.00 from my brother and sister in law. I has intended repaying them from the sale of next property I was to sell, but as that was [A Drive], I was unable to access the proceeds due to court orders.
The sum is still owing to my brother and sister in law and they asked me to repay it as soon as possible. (there was no suggestion that I pay interest.)
Counsel submitted that the November 1994 date referred to was clearly an error as the parties had only just met, were living in Hong Kong at that time and the property at A Drive was purchased some ten years later. Counsel submitted that the trial judge should have realised this was an error.
In relation to ground five, counsel submitted that the sum of $70,000 being an unaccounted withdrawal by the appellant from the Viridian Line of Credit and an amount of $11,200 being the balance of the appellant’s mastercard account at the time of trial should not have been added back to the pool. It was submitted that it would only be if it could be shown that the husband had disposed of the moneys frivolously or in a way that could not be justified that they should be added back. Although the trial judge referred to the lack of explanation for the use of funds by the husband post separation (Reasons para 43 d), counsel submitted that the husband had to manage and maintain the real estate assets of the parties and that those monies must have been expended for matrimonial purposes including support of the children.
An “amended pool” in accordance with the submissions was tendered. It was contended that in addition to the property to be received by the wife the husband should pay her $120,350 so that the division was approximately 21 per cent to the wife.
Submissions of the respondent
It was submitted by counsel for the respondent that the appellant was not able to show that the trial judge fell into error and that the decision to order that the parties property be distributed as to 61 per cent to the husband and 39 per cent to the wife was well within the trial judge’s exercise of discretion.
Counsel for the respondent submitted that the Federal Magistrate analysed the contributions of both parties in detail.
In relation to the issue of special contributions, counsel submitted that the trial judge had clearly considered whether the husband’s contributions fell into the category of special contributions and appropriately determined that they did not fall into that category. Counsel further submitted that the trial judge did give the husband credit for his contributions by giving the husband 61 per cent of the property pool which created a 22 per cent differential.
Apart from the moneys generated by his horse racing interests, the other special contribution argued at trial was the husband’s decision to invest the parties’ funds in Gold Coast real estate which realised a substantial capital gain. Counsel for the respondent argued that the trial judge gave weight to this contribution but considered that it did not fall into the category of special contributions and that the additional property awarded to the husband allowed for that contribution. It was argued that to increase the amount or the percentage awarded to the husband would mean that the husband had been given credit for his contributions twice.
Counsel for the respondent submitted that the affidavit evidence in relation to the $40,000 loan to R Wellings was clearly contradictory to the evidence given by the husband and the trial judge was correct when he found at paragraph 62 of his reasons for judgment that:
62.The husband has not discharged the evidentiary onus to establish, on the balance of probabilities, that he owes the sum of $40,000 to his family as he asserts.
In referring to sums that had already been distributed to the parties by way of maintenance in the sum of $27,000 and an interim property settlement in the sum of $100,000, counsel submitted that the trial judge correctly added back the monies received by interim property settlement ($200,000) and also correctly excluded the maintenance payment ($54,000). Reference was made to paragraph 61 reproduced later in these reasons.
As to the amounts added back in relation to the funds drawn down by the husband after separation on the Viridian line of credit and his mastercard account, counsel submitted this was another example of where the husband had failed to discharge the evidentiary onus on him to show that the monies should be considered as a matrimonial liability.
In relation to s 75(2) contributions, should the court allow the appeal and re-exercise the discretion, counsel submitted that a similar result to that found by the trial judge would apply. Counsel argued that the evidence of the husband in cross examination showed that he had the capacity to be able to invest the funds from the Viridian Line of Credit in a way that the wife would not. Counsel submitted that another significant difference is the husband’s potential to support himself, whilst the husband’s evidence was that he had no interest in implementing his horse racing analysis in Australia he does have the capacity to do so which is not available to the wife.
Counsel submitted that a further s 75(2) matter is identified in the order of 20 July 2007 in relation to school fees where a notation to the order provides that:
Notation
It is noted that the parties will be responsible for all school expenses, inclusive of extra curricular activities, private medical cover and any other medical expenses whatsoever relating to the aforementioned children.
It was submitted that the there was nothing to suggest that the husband will be responsible for the total of these costs.
The judgment
Apart from the references already made to the judgment it is obvious that an important issue in the appeal is the property pool as found by his Honour:
60.Many of the items constituting the Pool of Assets and liabilities at trial were agreed. What follows in these reasons is the Pool as I have determined it to be and an explanation for a number of inclusions or exclusions, if not already dealt with above.
POOL
Partial property distribution ($100,000 each)
$200,000
Invested proceeds of sale of [A Drive] with interest to hearing
$845,878
Funds held by husband’s solicitors
$15,000
[“B”] unit
$725,000
[“DV”] unit
$825,000
[N] Court property
$1,050,000
[M] Court property
$2,000,000
Motor vehicles – husband’s BMW
$42,300
wife’s VW Golf
$27,650
Proceeds of sale – CCV shares
$29,422
Husband’s interest in [“P business”] Hong Kong
$20,000
House
$6,500
ADD BACKS
Unaccounted for withdrawals by husband
- From Viridian Line of Credit – post separation – say
$70,000
- From husband’s Mastercard Account
$11,200
- Legal fees paid to Robinson & Robinson
$5,182
$5,873,132
LIABILITIES
Capital Gains Tax – [A Drive] property
$430,194
- [“B” property]
$61,206
NETT
$5,381,732
61. In respect of this pool, I make the following findings:-
a)Mr Galloway for the husband submitted that I should include $127,000 for each party in the Pool of Assets. These funds were disbursed from the proceeds of sale of the [A Drive] property as earlier indicated. The payments were made with the authority of the consent order of 3 November 2006. Importantly under paragraph 3 of that order, the sum of $100,000.00 each was “to be treated as an advance of property settlement”. The sum of $27,000.00 each for their “maintenance”. I do not propose to include the sum of maintenance as, at the time of payment each party was entitled to be able to use the funds as they thought fit without expecting a notional add back.
…
d)…The husband had a small bank account at trial of about $5,000.00. The most likely source of these funds is any balance from the spouse maintenance payment/partial property settlement or post separation earnings. I propose to disregard the account as a result. The husband acknowledges a one sixth interest in a racehorse called [“[W]”], there is no evidence that the horse has a current value after a unsuccessful racing career to date save fro [sic] the husband’s statement against interest at $6600. I therefore include it.
…
It is appropriate in accordance with the principles in Farnell (1996) FLC 92-681, to include in the Pool the sum paid by the husband for legal expenses to his first solicitors Robinson & Robinson deducted from the proceeds of sale of the [A Drive] property. I propose to add back $5,182.
e)The husband claims a joint debt payable to [“[J and R Wellings]”]. The husband says the funds were advanced in November 1994 because he “was experiencing some temporary financial difficulties”. The husband produces annexure “GDW9” which shows a deposit on 25 November 2004 to his Cash Management Call Account described as “Term Deposit Withdrawal”. The wife says she knew nothing of this loan.
The husband offered as corroboration the affidavit of [R Wellings] sworn 26 February 2007. The deponent was not required for cross examination. Ms [Wellings] says that in July 2005 “I lent [Mr and Mrs Wellings] $40,000 on the mutual agreement that the money would be repaid in approximately twelve months time, being July 2006”. To evidence the payment, rather than show documents which reveal the funds coming out of her account, the witness attaches a copy of the husband’s Bank Statement for the Cash Management Call Account revealing a deposit on 8 July 2005 of $40,000. Three issues arise from this contradictory evidence, namely:-
i)The dates simply do not match between when the husband says he was loaned the funds and when Ms [R Wellings] says she advanced the funds.
ii)[R Wellings] says she lent the money. She even made a correction to paragraph 3 of her affidavit to strike out reference to “my husband”. The husband in this case claims he borrowed the funds from his brother and sister-in-law. Yet another confusing inconsistency.
iii)Lastly, the husband claims to have been suffering temporary financial difficulties, yet he had access to Viridian Line of Credit, and further, if the deposit was made as Ms [Wellings] asserts, then at the time of deposit the husband’s account was already in credit in the sum of $24,402.
62.The husband has not discharged the evidentiary onus to establish, on the balance of probabilities, that he owes the sum of $40,000 to his family as he asserts.
In relation to the moneys received by the husband from the Viridian line of credit his Honour said:
41.I accept that the husband had control of the funds. It was, it seems to me, a fairly simple exercise in discovery to be able to explain the use of those funds. His recent bank statements, I assume, would have been available. The wife did not have access to the account.
…
43d) The trial Affidavit relied upon by the husband does not explain the use of the funds drawn down after separation.
and allowing $44,150 for reasonable living expenses added back $70,000 not accounted for by him.
As his Honour said a similar methodology was applied to the mastercard account:
46.Using a similar methodology for the husband’s mastercard account which was at a debit balance of $37,041 at separation (being a little generous to the husband on the interpretation of Annexure “DGW-8” given to it by the wife), the amount paid on settlement in November of $61,918 accrues an unexplained increase of $14,877. It is noted that a number of the debits to the account were for entities described as [“I C Pty Ltd”] and [“S A”] for amounts as high as $3000. There is no suggestion the wife had access to this credit card. The wife, at the hearing was prepared to concede a debt level at separation of $47,041 and using an interest rate revealed in the Statement of 18.65% for say 5 months, an allowance for interest of $3650 is reasonable. On this basis, and again in the absence of the husband providing any evidence to show how the funds were used, I propose to add back the sum of $11,200.
In relation to contributions his Honour found:
67.The husband was, almost for the entirety of the relationship, the sole financial contributor. The wife does not seriously challenge this to be the case.
68.Similarly, although the husband asserts a reasonable involvement with the care of the children even before coming to Australia with the family, I am satisfied the wife was the primary and predominate homemaker and parent. A combination of the ages of the children and the long working hours of the husband makes this conclusion easy to draw. I do accept that when the family moved to Australia the husband had more of an opportunity to contribute to the household and the children however he was still required to return to Hong Kong for frequent business trips for up to 3 weeks duration at a time. The wife was therefore, in my view, prior to separation the major non-financial contributor in the role of homemaker and parent. Clearly, on the history, since separation that role has been more equally shared.
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70.I accept the husband made the financial decisions as to how to invest the funds available in Gold Coast real estate and which properties to buy and then sell. The husband does not say any major improvements were performed by him. Really it could be said with little dispute, that he left Hong Kong and decided to invest in “the right place at the right time”. In my view he is not entitled to demand significant weight for his decision to buy when he did in circumstances where the capital gains (and they have been substantial) were driven by the general market conditions rather than anything he specially brought to the endeavours. It would not, for example, be fair to draw a comparison with a property speculator who sold and purchased a number of properties in a rising market. The number of transactions undertaken in the 8 years until trial is only 6 purchases and 2 sales (counting Units […] and […] [“A W”] as one transaction).
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72.The issue that loomed large in this case, was whether, as the husband’s counsel asserts, the significant income and benefits received from the husband’s involvement from the [AW] operations fell within the category of rare cases, commonly called the “special contribution” cases. The wife’s counsel says it does not, although in final submissions he conceded some allowance in the husband’s favour before consideration of s75(2) factors were proper – in the region of 5 – 7.5%. The submission Mr Jordan made was that the husband, whilst in Hong Kong “earns a good amount of money, inflated somewhat by the fact it’s a tax free environment” and that, as far as the real estate acquisitions on the Gold Coast are concerned, the husband “doesn’t make out a case in his material about some special attributes that he’s brought to it”.
The trial judge then discussed at length the well known authorities in relation to “special contributions” and concluded:
86.In my view the husband’s contribution does not fall within the “special” category clearly reserved for only a few and rare cases, although it is appropriate to adjust contributions in favour of the husband for
·The accumulation of data he amassed since 1987 which was the platform for the “informal agreement with [Mr AW]”
·The benefits mostly retained and reinvested, he received in the tax free environment of Hong Kong, which I would accept was in the region of $4 million - $5 million dollars.
·His careful selection of the Gold Coast as a location for his attentions as a property investor.
All of which swelled the pool of assets available for division.
Ultimately his Honour said:
88.Weighing all the factors set out above and the contributions made by both parties in different ways, I assess the husband’s entitlement on contributions to be in the range of 57.5% to 65%. I propose to adopt, in the exercise of my discretion, a figure of 61% or in effect an adjustment for the husband to have the first 22% of the pool of $5,381,732 or $1,183,981. I regard this as a fair result to both parties.
As to s 75(2) contributions his Honour said:
89.The 75(2) factors must be assessed within the context of the parties receiving a contribution based division of $3,282,856 (61% for the husband) and $2,098,875 (39% for the wife). Accepting that the wife will retain the [DV] unit, and even allowing for legal expenses likely to have been incurred by her, the wife will have approximately $1,000 000 to invest as she pleases.
90.Both parties will, as a result of my parenting orders, bear equally the responsibilities for the care of their 2 young children. I have no concerns that the parties will be both financially capable and demonstrate a sensible attitude to meeting equitably the children’s financial needs including medical expenses and education.
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92.The husband is some 18 years older than the wife. The expectation is that he will be capable of working but for less time; but that he will live for a shorter period and therefore have fewer needs than the wife. This factor would favour an adjustment to the husband, to be weighed against the history of employment which reveals the husband earning a substantial income in Hong Kong and whilst involved with Mr [AW]. The wife would, with the skills she had prior to the birth of the children, be possibly recruited in the hospitality industry but it must be said, that she would be competing with younger employees and she has been out of the industry from some years.
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94.The husband has the potential and business experience to make his money work for him. For example, after the sale of the [M Court] property, he raised $450,000 to lend to a friend for a new business venture and was to obtain an interest rate of 12% - all repayable in May 2007.
Appellate Principles
It is appropriate at this stage to identify the principles governing an appeal such as this from a discretionary judgment. The law in this respect is not in doubt.
In Australian Coal and Shale Employees Federation v The Commonwealth (1953) 94 CLR 621 at 627, Kitto J describes the appropriate level of restraint that an appellate court should exercise in respect of discretionary matters as follows:
There is a strong presumption in favour of the correctness of the decision appealed from and that that decision should therefore be affirmed unless the Court of Appeal is satisfied that it is clearly wrong.
It was clearly enunciated in House v The King (1936) 55 CLR 499, at 504-505 that:
It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.
In Gronow v Gronow (1979) 144 CLR 513 Stephen J said at 519:
The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion.
Thus, as a matter of firmly established appellate process it is necessary first to establish whether there is any recognised ground for reviewing the trial judge's discretionary decision consistent with these principles. If there is then, unless the result is plainly right notwithstanding an appellable error, per Gibbs J (as he then was) in De Winter v De Winter (1979) FLC 90-605 at 78,091, I am obliged to allow the appeal, set the orders aside and, if possible, substitute my own decision after considering the matter afresh, as was explained by Kirby J in AMS v AIF (1999) FLC 92-852, who said at 86-043:
[A]n appellate court, invited to review the exercise of discretion at first instance will avoid an overly critical, or pernickety, analysis of the primary judge’s reasons, given the large element of judgment, discretion and intuition which is involved. Only if a material error of the kind warranting disturbance of a discretionary decision is established is the appellate court authorised to set aside the primary decision, to substitute its own exercise of discretion or to require that it be re-exercised on a retrial.
Disagreement only on matters of weight or a preference for a different result do not justify the reversal of a first instance discretionary judgment.
In the case of discretionary decisions, it is only where the effect of the orders exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere, per Brennan J in Norbis v Norbis (1986) FLC 91-712 at 75,178.
Conclusions
It was not suggested that his Honour mistook the law in relation to any of the issues he decided. There were no matters of principle argued other than that his Honour ought to have made a different decision.
In essence there are two matters to be decided on this appeal.
First, should his Honour have come to a different conclusion in relation to the composition of the pool namely:
(a)included $27,000 for each party representing the moneys retained by them by way of “maintenance” (Ground 3);
(b)included as a liability the sum of $40,000 said by the husband to be owing to his sister in-law (Ground 4);
(c)not included the sum of $70,000 representing moneys from the Viridian line of credit and $11,200 for the husband’s credit card expenditure (Ground 5).
Secondly, should the submissions in relation to contributions including the concept of the husband’s contributions being “special” been accepted so that the decision was outside the permissible range and did his Honour properly consider the relevant s 75(2) matters in this case so that the result was just and equitable.
The pool
There is no doubt that his Honour carefully explained the reasons for each of these decisions and properly applied the law in relation to what has become known as “add backs”. In relation to the alleged moneys owing to his sister in-law there were real differences between the evidence of the husband and that of his sister in-law. The wife said she knew nothing of the loan. There would have been little purpose in cross examining Ms Wellings. The conclusions his Honour came to by reference to his concerns about the state of the evidence was open to him.
Having observed that his Honour properly applied the law in these matters, did not mistake the evidence or make any other error, his conclusions were entirely within his discretion so that these grounds cannot succeed.
Contributions
His Honour correctly referred to the settled approach in determining property proceedings. He also carefully set out the cases decided in the past in relation to what has become know as “special contributions”. There are no errors asserted in the findings of fact made by his Honour on the evidence in relation to this issue. Thus, the argument in relation to this aspect of the appeal is that his Honour’s discretion miscarried.
It is instructive then to first record and reflect on what his Honour concluded on the evidence, much of which has already been mentioned.
The parties were married in June 1996 having met in 1994. The wife was a housemaid and the husband a teacher who had begun his interest in horse racing as described in the judgment. They separated after some 10 years. The husband was the sole financial contributor during the marriage. The wife made the greater non financial contribution during the marriage although the husband made some contribution.
The current pool of assets is directly attributable to the moneys earned by the husband in Hong Kong and his decision to invest in Gold Coast property. The net value of the pool is in excess of $5,000,000 as recorded in the judgment the husband invested the sum of $3,300,000 and at the time of trial the capital gain was some $4,000,000.
The conclusions of his Honour in relation to the argument about “special contributions” could not be successfully challenged. However that does not lead to the inevitable result that the finding of 61 per cent to the husband and 39 per cent to the wife was either within or outside the range.
In my view the contribution of the husband was overwhelming and the financial result entirely clear as demonstrated in the judgment. In addition, post separation the husband maintained the assets, cared for the children financially and physically including for a period of five months in 2006 solely, and otherwise has made an equal contribution since separation to non financial matters most importantly the children.
Taking into account his Honour’s findings, the circumstances both during the marriage and up to the date of trial the result arrived at by his Honour was outside the range.
Section 75(2) factors
The Federal Magistrate properly considered the matters relevant to these parties. Taking into account the shared cared of the children including the cost of such care, their respective ages and capacities for work it was proper that no further adjustment should have been made.
In conclusion the appeal should allowed in relation to ground 1 being the percentage division of the net assets of the parties.
Re-exercise of discretion
Counsel for each party asked that should the appeal be allowed the discretion be re-exercised. The relevant facts have already been recited in this judgment. The only identifiable error is the percentage of the pool attributed to the husband and wife by way of their contributions during the relationship and up to the date of trial.
Appreciating that there is a range of percentages to be applied, based on the particular facts of this case a proper conclusion is that the assets should be divided as to 33 per cent to the wife and 67 per cent to the husband. In the case of the wife that percentage represents the sum of $1,775,971. Appreciating that the values of the properties may have changed since the trial but in the absence of any further evidence about their value or an application that orders be made other than in terms of that by the trial judge the wife would receive the following:
Unit at DV 825,000
VW Golf $ 27,650
Property advance $100,000
Total $952,650
and a further sum of $823,321 payable by the husband.
It is necessary to revisit the s 75(2) matters to consider whether there should be any further adjustment. The matters referred to by his Honour were both relevant and correctly stated. I would emphasise in concluding that there be no further adjustment by reason of s 75(2) factors to the arrangements for these young children which will have a substantial impact on both parties especially considering in the case of the husband, his age and in the case of the wife her capacity to earn income.
I certify that the preceding sixty seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court the Honourable Justice May.
Associate:
Date: 8 December 2008
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