Westmore and Westmore

FAMILY COURT OF AUSTRALIA

WESTMORE & WESTMORE

[2007] FamCA 1341

FAMILY LAW - APPEAL – PROPERTY – Asset pool of approximately $1.5 million – Husband appealed property orders claiming inter alia that there had been an incorrect add back of $229,000, his contribution to the wife and her parents’ property had been ignored, and his capital gains tax liability had been improperly dealt with – Of the add back of $229,000, it is held that inconsistent with the trial judge’s findings, approximately $81,000 had been incorrectly added back – While the trial judge had incorrectly stated that there had been no contributions to the wife and her parents’ property, it had been agreed at trial that this was a peripheral issue and any contribution would be de minimus and would not have altered the outcome – In relation to the capital gains tax liability, further evidence was not allowed, it being in improper form and merely speculative. The trial judge’s approach to the uncertain amount of capital gains tax was consistent with earlier authority – Appeal allowed in part in relation to the incorrect add back and orders varied to reflect the appropriate reduction to the add back and consequently the asset pool

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
Federal Proceedings (Costs) Act 1981 (Cth)

CDJ v VAJ (1998) 197 CLR 172; (1998) FLC 92-828; (1998) 23 Fam LR 755
C and C [1998] FamCA 143
Chorn and Hopkins (2004) FLC 93-204; (2004) 32 Fam LR 518
Devries v Australian National Railways Commission (1993) 177 CLR 472
M and M [1998] FamCA 42
Rosati v Rosati (1998) FLC 92-804; (1998) 23 Fam LR 288

APPELLANT:

MR WESTMORE

RESPONDENT:

MS WESTMORE

FILE NUMBER:

MLF

2638

2005

APPEAL NUMBER:

2007

DATE DELIVERED:

30 October 2007

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Faulks DCJ, Kay and May JJ

HEARING DATE:

12 September and 30 October 2007

LOWER COURT JURISDICTION:

Family Court of Australia

LOWER COURT JUDGMENT DATE:

8 March 2007

LOWER COURT MNC:

[2007] FamCA 164

REPRESENTATION

COUNSEL FOR THE APPELLANT:

In person

SOLICITOR FOR THE APPELLANT:

COUNSEL FOR THE RESPONDENT:

Mr Davis

SOLICITOR FOR THE RESPONDENT:

Tolhurst Druce & Emmerson

ORDERS

The appeal be allowed in part.
The orders made by the Honourable Justice Dessau on 8 March 2007 be varied as follows:
(a)by substituting the sum of $658,000 for the sum of $700,000 in order 3;
(b)by adding to order 4 the words “and upon transfer of the said property the wife shall pay to the husband the sum of $42,000”.
The Court grants to the appellant a costs certificate pursuant to the provisions of 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 the appellant in relation to the appeal.
The Court grants to the respondent 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 the respondent in relation to the appeal.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Westmore and Westmore.

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE

Appeal Number: SA 24 of 2007
File Number: MLF 2638 of 2005

MR WESTMORE

Appellant

And

MS WESTMORE

Respondent

REASONS FOR JUDGMENT

This is the husband’s appeal against property orders made by Dessau J on 8 March 2007.
Her Honour determined that, apart from an equal division of about $340,000 superannuation and the retention by the wife of her one-third interest in a home owned by her parents valued at $108,000, a pool of assets worth approximately $1.5 million should be divided as to 52.5 per cent to the wife and 47.5 per cent to the husband.
By his appeal the husband seeks to reduce the divisible pool of assets by about $360,000 and to have his portion thereof slightly adjusted in his favour to give recognition to contributions he has made towards the home that the wife owns jointly with her parents.

BACKGROUND

At the time of the judgment the husband was nearly 50 and the wife 48. They married in 1982 and separated in 2005. Their marriage was dissolved in late 2006. They have three children aged 20, 17 and 15 at the time of judgment. The 17 year old child lives with his father and the other children live with their mother. The youngest child is a Year 11 student.
The pool of assets established by the trial judge was as follows:
·E Street  $700,000
·T Street
(in the husband’s name, valued at
$400,000 less a mortgage of $293,000)  $107,000
·R Street
(in the husband’s name, valued at
$350,000, with a mortgage of $203,000)  $147,000
·The wife’s one-third interest as a tenant-in-common
with her parents in the property at 2 N Street
(the total value being $325,000)  $108,333
·The husband’s two motor vehicles               $11,700
·The motor vehicles currently being used
by the wife but registered in the husband’s name             $16,000
·The husband’s remaining shares   $97,774
·The husband’s bank account   $8,800
·The husband’s on-line investment account              $17,400
·The wife’s share portfolio   $60,275
·The bank account in the name of the wife and
the children   $24,973
·An add-back of $5000 used by the wife to pay
legal fees   $5,000
·An add-back in relation to share proceeds received
by the husband since separation  $229,000
TOTAL   $1,533,255
Her Honour found that the wife’s interest in the property at 2 N Street had been acquired before the parties married. It was a home occupied by the wife’s parents. Her Honour determined that it was appropriate to treat the wife’s interest in that property as a resource that would eventually become available to her but not to include it for division between the parties.
Her Honour also noted that the parties had agreed that the husband’s superannuation of approximately $340,000 should be divided equally between them.
Of the remaining assets in the pool as determined by her Honour, her Honour concluded that based upon the respective contributions of the parties it was appropriate to divide those assets 52.5/47.5 in favour of the husband. Her Honour then concluded that having regard to:
·The husband’s higher earning capacity;
·The wife’s obligations towards the youngest child of the marriage;
·The probable liability of the husband to meet an uncertain amount of capital gains tax; and
·The wife’s ownership of an interest in her parents’ home
it would be appropriate to divide the pool of assets as to 52.5 per cent in favour of the wife and the balance to the husband.
In addition it was appropriate that the wife receive a further sum of $79,000 representing 52.5 per cent of the value of an asset said to be wasted by the husband in that he had transferred real estate into the name of the 17 year old son and neglected to put tenants in the property for at least a year thus creating a loss of rental.

THE APPEAL

The husband who appeared on his own behalf sought to argue four grounds of appeal. They were as follows:
1.An incorrect add-back has been added to the pool of assets which the Court has split between the husband and wife
(a)the add-back value of $229,000 is a “double dip”;
(b)the value of $229,000 was added back as a result of shares sold by the husband to pay off debts on an investment property and for living expenses;
(c)the total value of $229,000 should not have been added back into the pool.
2.A liability of $30,000 (loan from the husband’s parents) should have been subtracted from the pool and the Court ignored this based on hearsay from the wife. Affidavit of [S] and [M] [Westmore] (husband’s parents) relating to the loan was ignored.
3.Contribution made by the husband on the wife’s and her parents’ property was ignored by the Court. The husband conducted building work on the wife’s property and supplied building materials. The husband did contribute during the marriage but the Court decided to award the husband zero per cent and the wife 100 per cent.
4.Capital gains tax on the disposal of the husband’s investments was not added back into the pool as a liability for the husband.

Ground 1

This ground relates to the manner in which the husband had dealt with the proceeds of sale of shares he received between June 2005 and November 2006 after the parties had separated. The shares had all been purchased during the course of the marriage. Her Honour dealt with the sale of shares as follows (emphasis added):
29.The husband took up … share options, in June, September, and December 2004, and in February 2005. It is common ground that he used family savings, and an increase of $100,000 on the mortgage over [1 N Street] to pay for the shares. That liability is properly included in calculating the pool of assets.
30.It became clear in the course of evidence that since separation he has sold shares worth $229,000, and has used the proceeds. That sum must be brought into account by being notionally added back into the pool. (See Townsend and Townsend (1995) FLC 92-569 as to a premature distribution of matrimonial assets.) Although that is not how Mr [Westmore] calculates the pool of assets, he was not able to provide any real argument against it.
The gravamen of the husband’s complaint is that he gave evidence explaining how he had dealt with the proceeds of sale and her Honour made no findings in relation to that evidence. It was submitted that the evidence was inherently credible and properly accounted for the dispersal of the monies. He asserted that much of the monies were now represented by other assets which were already included in the pool and accordingly had been double counted.
Annexure “I” to his affidavit filed 15 November 2006 asserted that he had made the following payments from the proceeds of his shares sale:
·Investment property – [T Street]  $37,175
·Investment property – [R Street]  $29,871
·Vehicle expense, regio [sic], insurance, fuel   $3,000
·World Vision   $936
·School fees   $995
·Groceries   $7,800
·Household   $5,000
·House insurance   $535
·Phone   $1,500
·Council rates and water rates   $1,200
·Electricity   $1,700
·Gas   $1,400
·Water   $950
·Cash  $12,000
·Payment to J [Westmore] on bal [sic] of [T Street] $98,000
TOTAL$201,062
In his written submissions and oral argument before us the husband asserted that the balance of $28,000 was represented by the sums found by the trial judge to be held by him and were included in the pool of assets, namely:
·Husband’s [bank account] $8,800
·Husband’s Online investment account $17,400
It was his assertion that he had properly accounted for all of the monies received by him from the sale of shares. He further asserted that in accordance with appropriate authority, the trial judge erred in adding back the monies received from the sale of the shares into the pool of assets.
In C and C [1998] FamCA 143 the Full Court (Nicholson CJ, Ellis and Kay JJ) said:
46.Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives …
In M and M [1998] FamCA 42, cited with approval in Chorn and Hopkins (2004) FLC 93-204; (2004) 32 Fam LR 518 at paragraph 42, the Full Court (Baker, Kay and Chisholm JJ) said:
2.11There seems to be no appropriate basis for notionally adding back monies that existed at separation but which had been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial judge.
The difficulty in this case is that we have no idea what attitude her Honour took in respect to the husband’s evidence that he spent approximately $30,000 of the $229,000 on living expenses from the time he commenced disposing of the shares in June 2005 until the date he filed his affidavit namely 15 November 2006. The only finding of the trial judge is that the husband “used the money”.
Her Honour made findings relating to the husband’s purchase of the property at T Street which is included in the pool of assets with an equity of $107,000. The property had previously been owned by the husband’s brother and her Honour found that the husband had bought it from his brother to enable the brother to have funds to pay out the brother’s ex-wife. There was some dispute as to whether the purchase price was $360,000 or $375,000 but her Honour found that in order to acquire the property the husband had obtained a $300,000 loan from the Bank. The total payments that the husband made to his brother or to the brother’s ex-wife were $419,000 being $44,000 more than the purchase price that the husband urged her Honour to accept.
Whilst it is clear that of the $419,000, $300,000 came from the bank loan, her Honour made no findings as to where the balance of monies originated. The husband asserted that $98,000 came from the proceeds of sale of the shares. Her Honour did however accept the wife’s assertions that prior to the sale of the shares the husband had paid all but $837 of the agreed purchase price.
Amongst her Honour’s finding as to payments made by the husband to his brother J was a finding that $30,000 was paid on 16 October 2006 and $68,000 was paid on 24 October 2006. In written submissions made on the wife’s behalf it seems that the wife’s counsel conceded that at least $30,000 if not the whole $98,000 came from the proceeds of the sale of the shares.
Her Honour had also accepted that the husband’s brother J had made a loan of $44,000 to the husband in 2003 “at the time that he agreed to sell him this property” and that within days of receiving the monies the husband used it to buy shares. The husband’s unchallenged evidence was that he not only paid his brother the balance of the purchase price owing in relation to the home but he had also repaid the $44,000.
It is abundantly clear that the husband had to find the monies to pay back the $44,000.
The husband swore that a total of $135,175 paid to his brother in respect of the T Street purchase came from the proceeds of sale of the shares. Her Honour clearly rejected much of that claim when she found that only $837 was owing in relation to the purchase prior to the parties separating and the shares being sold. She made no specific finding as to the source of funds used to extinguish the debt for $44,000 owed to the husband’s brother or other members of the family. She simply said the husband had “used the proceeds”. There seemed to be no reason why her Honour ought to have rejected the husband’s evidence that the debt was extinguished with monies acquired from the sale of the shares, it being inherently credible and no other alternative explanation was offered as to where the husband may have found the monies necessary to meet his commitments.
Whilst her Honour expressed the view that the wife’s evidence was overall more truthful than the husband’s, she did not dismiss the husband as a witness entirely without credit and she described him as “impressive in his meticulous organisation of documents and attention to detail”.
As the Full Court said in M and M (above) (citations omitted):
2.10It is well settled that save in exceptional circumstances a trial judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s.79 … However, the particular justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living …
Given the husband’s admission that he was earning up to $800 per week after his redundancy and up to the trial, there was no reason shown for him to use the parties’ capital to provide for his daily support. Accordingly her Honour could not be fairly criticised for failing to make an adjustment as to the manner in which he dissipated the share proceeds to give him credit for expenditure reasonably undertaken for his own needs.
As to his unchallenged claim that he spent approximately $30,000 on expenses relating to the parties’ investment property at R Street, it was necessary and appropriate to off-set the rentals received for the period in question, namely approximately $20,000. The short fall of $10,000 was reasonably claimed and should have been allowed.
In our view the appeal, in so far as it asserts that the pool of assets is larger than it ought to be by reason of the add-back, must succeed.
Of the $229,000 added back, the husband claimed $135,175 as referable to the T Street property. Consistent with the discussion above, only $44,837 ought to have been allowed leaving $90,338 otherwise unexplained. The sum of $10,000 ought to have been allowed for R Street. The sum of $26,200 was already represented by the husband’s cash savings and ought to have been allowed. The amount added back for the share proceeds should have been reduced by $81,037.

Ground 2

The second ground sought to be argued was that the trial judge had wrongly excluded an asserted liability of $30,000 to the husband’s parents. Her Honour dealt with this matter as follows:
47.Mr [Westmore] claims that his parents made a loan to him and his wife in the sum of $20,000 to purchase the land at [G Street] at around the time of marriage, and a further loan of $10,000 in September 1985 towards the purchase of the land at [E] Street. He wants substantial credit for those amounts when I come to consider contributions. For present purposes, he wants the sum of $198,690 added into the pool as a liability to be met by the parties. He has calculated the increase from $30,000 according to inflation and notional profits.
48.Mrs [Westmore] agreed those amounts were borrowed, but gave cogent evidence about re-paying them to Mr and Mrs [Westmore] Senior. She described a ritual of attending church with them every Sunday, having lunch afterwards, and handing over money which was then entered into a small notebook kept by Mrs [Westmore] Senior, recording the full payment in due course of those loans.
49.The husband and wife’s evidence on the repayment of the loans is at complete loggerheads. For reasons I have already given, I find her the more credible. I am fortified in that view by the evidence of family members called on behalf of Mr [Westmore].
50.Mr [Westmore] Senior’s evidence was vague. He had little independent knowledge of most of the matters in his affidavit, the detail having been provided to him by the husband. He agreed that there was a notebook, and he agreed there were Sunday payments as Mrs [Westmore] said. He spoke of many loans to the parties that were entered into the notebook, and repaid, but he could give no details as to the time, the amount, or when they were re-paid. He said he could not produce the notebook as the pages were destroyed once loans were re-paid. Interestingly, although these were the major loans, he could produce no records of them. He said there had never been any request for re-payment. He said he would not have asked for re-payment had the family remained together.
51.Mrs [Westmore] Senior also agreed there was a notebook but that only the smaller loans were recorded. She had not retained it. She said there was no record kept of the larger loans, and was adamant that the $30,000 had not been re-paid.
52.The [Westmore] family members are strongly aligned to the husband. They have clearly closed ranks around him. He himself swore a number of times how close they were and how much they treated family money as belonging to all of them. They obviously share his anger and distress that the wife did not want the marriage to continue. That is evidenced by how they assisted the transfer of the [N Street] property to [the younger son], who was only just turning 17 at the time, by providing their life savings to do so. Those factors, combined with my doubts about Mr [Westmore’s] veracity, lead me to accept the wife’s version that, like all other smaller loans, the loan of $30,000 was re-paid during the marriage.

Ultimately this was a matter of the trial judge assessing conflicting testimony. The wife asserted that the loans had been repaid. The husband and his witnesses asserted that they had not. The trial judge had the advantage of being able to assess the respective credit of the witnesses on this issue and there seems no basis upon which it would be appropriate for an appellate court to interfere with the trial judge’s findings.
In Devries v Australian National Railways Commission (1993) 177 CLR 472 at p 479 Brennan, Gaudron and McHugh JJ expressed the principle as follows:
More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against – even strongly against – that finding of fact (see Brunskill (1985) 59 ALJR 842; 62 ALR 53; Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23, Abalos v Australian Postal Commission (1990) 171 CLR 167). If the trial judge’s finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge “has failed to use or has palpably misused his advantage” (SS Hontestroom v SS Sagaporack [1927] AC 37 at p. 47) or has acted on evidence which was “inconsistent with facts incontrovertibly established by the evidence” or which was “glaringly improbable” (Brunskill (1995) 59 ALJR at p 844; 62 ALR at p 57).

Ground 3

The third ground sought to be argued related to the trial judge’s finding at paragraph 62 of her judgment that “from the time the relationship between these parties commenced, they have not put any money into [2 N Street]”.
The husband had asserted in his evidence in chief that he had “contributed both effort and material for the maintenance and renovations of the property since 1982”. He said:
Work conducted over the years included, completion of rear bathroom renovations … materials for kitchen and family room renovation, aluminium window installation, brickwork around new windows by …, financed the installation of gas wall furnace heater, provided wood burning oven for bungalow, rear glass and timber door.
In May 2005 with the help of my son, constructed the majority of a six by four meter “granny flat” in the rear of [2 N Street]. Materials supplied included all flooring timbers, framing timbers, roof timbers, lintels, door, window, floor boards, shower screen, tap ware, toilet suite, Bosh hot water unit, steel roofing, guttering, weatherboards, insulation. Estimated value of work, $10,000 – $12,000 …
The wife in July 2005 after moving into [2 N Street], conducted renovation work on the garage to transform it into a living area with a small kitchen. Material for the transformation were bought on the husband’s credit card from Bunnings and Metric Tiles …
Whilst in a property case that involved the division of a pool of assets of $1.5 million, these matters may have seemed de minimus we are concerned about the trial judge’s finding that “they have not put any money into this property”. Her Honour did not explain in her reasons for judgment what view, if any, she took about the husband’s evidence about the contributions he claimed to have made to the property and we are led to only speculate about it.
The issue seemed to have been abandoned by agreement in the course of the trial when the wife’s father was about to be cross-examined. Mr Davis for the wife said he proposed to lead some evidence about “… the renovations that the husband asserts that he conducted on this witness’ premises”. Her Honour commented that in opening neither party “really relied on those sorts of peripheral issues” and suggested that the case was about initial contribution, the wife’s involvement in relation to 2 N Street and whether the husband should get any additional amount for his financial contributions. Mr Davis and the husband both then agreed with her Honour’s observations and the matters raised by the husband were not canvassed with the witness.
Even though the finding that the parties had not put any money into 2 N Street might not have been entirely accurate, at best as we can determine any contribution would be de minimus and given the manner in which it was dealt with at trial, could not fairly be seen as altering the outcome.

Ground 4

The final ground of appeal sought to be relied upon concerned itself with the manner in which the trial judge dealt with the husband’s assertions that there would be capital gains tax payable by him of $110,000.

Further evidence

It is perhaps convenient at this time to indicate that at the commencement of the hearing of the appeal an application was made to lead further evidence in these proceedings. The husband sought to rely upon a letter signed by a person on a letterhead that indicated that he was a certified practising accountant. The letter dated 23 August 2007 said that the author had “calculated the amount of capital gains tax that [the husband] could expect to pay based on the information that had been provided to him”.
The letter showed that if the husband disposed of his interest in:
·[1 N Street];
·[T Street];
·[R Street]; and
·His current shareholding
then based on the estimated market values provided and based upon other information given as to the husband’s taxable income, an additional tax would be incurred in the sum of $73,711.87.
The letter also indicated that the capital gains tax payable in relation to the sale of shares over the period from June 2005 to November 2006 calculated at a top marginal rate of 46.5 per cent would have been slightly in excess of $23,000.
We declined to allow the additional evidence to be led and indicated that we would provide our reasons for so doing when delivering our reasons for judgment in the proceedings.
Whilst the Court has a statutory discretion on the hearing of an appeal to admit further evidence (see s 93A(2) of the Family Law Act1975 (Cth) (“the Act”)) the purpose of the exercise of that discretion is to ensure that the proceedings do not miscarry (see CDJ v VAJ (1998) 197 CLR 172; (1998) FLC 92-828; (1998) 23 Fam LR 755). As McHugh, Gummow and Callinan JJ said at paragraph 109, its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous.
There are a number of reasons why we declined to allow the further evidence. The evidence purported to come from an expert but the expertise of the witness was not demonstrated. The evidence was not sworn to by its author. The Family Law Rules 2004 (Cth) (“the Rules”) require a party to obtain permission of the Court before being allowed to rely upon expert evidence (see rule 15.51). The Rules require the Court to give consideration to a number of matters which must be attended to in an affidavit accompanying an application seeking permission (see rule 15.52(2)). Even if each of these matters could be waived in relation to the evidence sought to be tendered, it suffers from the very same problems that the trial judge identified in the course of her reasons for judgment; it is evidence of a speculative nature in so far as the precise amount of capital gains tax which the husband may become liable for is dependent upon a number of contingencies none of which are certain. In particular, a liability for capital gains tax is dependent upon the calculation of:
(a)the capital gain;
(b)the marginal rate of taxation applicable to the capital gain; and
(c)any tax offsets which can minimise the capital gain.
None of those matters have been properly focussed upon or attended to in the purported evidence.
The trial judge was faced with this dilemma and dealt with it as follows:
53.The husband claims that the sum of $110,000 should be brought into the pool as a liability for capital gains tax payable by him in relation to the sale of … shares, the transfer of [1 N Street] to his son, and the pending transfer of the [R Street] property to his sister.
54.I accept that capital gains tax will be payable. I cannot accept the sum proffered by Mr [Westmore] as calculated. He failed to produce his 2005 income tax return. He conceded deferred tax losses of $11,768 in his 2006 income tax return. In the absence of expert evidence as to the precise capital gains tax that will be payable, and some will be dependent upon the transaction of [R Street] to the husband’s sister actually concluding, I do not propose including $110,000 as a liability. However, in making adjustments below, I must take into account that he husband will face capital gains tax liabilities.
…
78.As noted above, the parties had different approaches to the question of capital gains tax. It is clear that the husband will pay capital gains tax on the sale of various assets. Although the amount is uncertain, claimed by him at $110,000, and by the wife at a significantly less but uncertain figure, I will bear it in mind. I agree with the submissions for the wife that it has been at his choice alone that he has sold shares, the [1 N Street] property to his son, and the [R Street] property to his sister. Still, had that not been the case, properties were likely to be sold for the purposes of these orders and of course capital gains tax would be payable on investments.
Given the uncertainties surrounding the amount of capital gains tax that the husband would ultimately become responsible for, the approach taken by the trial judge is consistent with earlier authority; see Rosati v Rosati (1998) FLC 92-804; (1998) 23 Fam LR 288, especially:
6.36…
(3) If ... the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
We see no error in her Honour’s approach. To the extent that this ground of appeal asserts that the potential capital gains tax should have been deducted from the pool of assets as a liability, the appeal must fail.

CONCLUSION

The net effect of the matters discussed above is that the pool of assets needs to be reduced by approximately $81,000 as part of the partially incorrect add-back of the share sale of $229,000. The flow-on effect of that is that the sum payable to the wife will necessarily have to be reduced to reflect the smaller asset pool by deducting 52.5 per cent of the incorrect add-back, which we round down to $42,000.
To give effect to that adjustment it is necessary to vary order 3 by substituting the sum of $658,000 for the sum of $700,000 therein appearing and by varying order 4 by adding thereto the words “and upon transfer of the said property the wife shall pay to the husband the sum of $42,000”.

COSTS

Each party has applied for an appropriate certificate in accordance with the provisions of the Federal Proceedings (Costs) Act1981 (Cth). Given that the appeal has succeeded on a question of law we think it appropriate to grant the relevant certificates.

I certify that the preceding fifty one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court

Associate:

Date: 15 November 2007

[2007] FamCA 1341

30 October 2007

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