Winston and Winston (No 2)
[2013] FamCAFC 147
•26 September 2013
FAMILY COURT OF AUSTRALIA
| WINSTON & WINSTON (NO. 2) | [2013] FamCAFC 147 |
| FAMILY LAW – APPEAL – PROPERTY SETTLEMENT – where the husband appealed against property orders of the Federal Magistrate – where the husband’s central complaints relate to the Federal Magistrate’s finding that the husband’s mother would not enforce the repayment to her of loans of $1,353,100 and $15,516.35 when the mother’s evidence that repayment would be required went unchallenged – where the loan of $1,353,100 was secured by mortgage over property the value of which was included by the Federal Magistrate in the property to be adjusted – where the Federal Magistrate failed to give any or any adequate reasons for excluding these loans in identifying the property and its value available for division given that the mother’s evidence was unchallenged – appeal allowed – where the husband sought a re-exercise of the discretion – where the wife sought to adduce further evidence for the purpose of any re-exercise of discretion – proceedings to be remitted for re-hearing – costs certificates to issue to the husband – wife at liberty to apply for costs certificates. | ||
| Family Law Act 1975 (Cth) Af Petersens and Af Petersens (1981) FLC 91-095 Devries v Australian National Railways Commission (1993) 177 CLR 472 | ||
| APPELLANT: | Mr Winston | |
| RESPONDENT: | Ms Winston |
| FILE NUMBER: | BRC | 10703 | of | 2008 |
| APPEAL NUMBER: | NA | 7 | of | 2012 |
| DATE DELIVERED: | 26 September 2013 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Finn, Strickland & Kent JJ |
| HEARING DATE: | 5 September 2012 and by written submissions filed on 27 March 2013 and 17 April 2013 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 28 November 2011 |
| LOWER COURT DATE OF ORDERS: | 20 December 2011 |
| LOWER COURT MNC: | [2011] FMCAfam 929 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Page SC |
| SOLICITOR FOR THE APPELLANT: | Couper Geysen Family & Animal Law |
| FOR THE RESPONDENT: | In person |
Orders
The appeal against the orders for property settlement (Orders 11-22 inclusive) made by Federal Magistrate Howard (as he then was) on 20 December 2011 be allowed.
Orders 11-22 inclusive made by Federal Magistrate Howard (as he then was) on 20 December 2011 be set aside.
The proceedings for property settlement be remitted for re-hearing by a judge of the Federal Circuit Court of Australia other than Judge Howard.
There be no order as to costs.
The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (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 to the costs incurred by the appellant in relation to the appeal.
The Court grants to the appellant a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 (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 to such part as the Attorney-General considers appropriate of any costs incurred by the appellant in relation to the new trial.
The respondent be at liberty to make application to the Court for costs certificates pursuant to the provisions of s 6 and s 8 of the Federal Proceedings (Costs) Act 1981 (Cth) by writing to the Appeals Registrar within twenty-eight (28) days of the date of these Orders seeking the grant of such certificates.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Winston & Winston (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 7 of 2012
File Number: BRC 10703 of 2008
| Mr Winston |
Appellant
And
| Ms Winston |
Respondent
REASONS FOR JUDGMENT
Introduction
By Notice of Appeal filed 17 January 2012, Mr Winston (“the husband”) appealed against orders with respect to property settlement made by Federal Magistrate Howard (as he then was) on 20 December 2011 in proceedings between the husband and Ms Winston (“the wife”).
The appeal is directed to the Federal Magistrate’s findings in relation to the husband’s purchase of a property at K (“K property”), the husband’s obligations to repay loans made by his mother to him including in relation to that purchase, as well as the findings made as to the parties’ contributions (being an assessment of 80 per cent /20 per cent in the husband’s favour) and an adjustment of 22.5 per cent in the wife’s favour on account of the matters contained in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”).
No written submissions were filed by the wife prior to the hearing of this appeal on 5 September 2012, despite directions to do so being made by the Appeals Registrar. It is noted that the wife similarly had earlier failed to file written submissions at trial, again despite directions to so do.
However, on 27 August 2012, the wife filed an Application in an Appeal seeking an adjournment of the hearing set down for 5 September 2012 on the bases that she was unavailable to attend Court as she was required to attend a TAFE course on that day as part of her efforts to re-skill herself post-separation and that, given her daughter was due to have a baby the day following the hearing, appearing in Court would place too much stress upon her.
A Response to that application opposing the adjournment and a supporting affidavit sworn by the husband was filed on 3 September 2012.
On 5 September 2012 the wife did not attend in person on the hearing of the appeal but appeared by telephone. We were not prepared to grant the wife an adjournment of the appeal for reasons then given. However, in those reasons it was explained to the wife that one possibility was that having heard the submissions on behalf of the husband we would not be persuaded as to any substance in the appeal such that it would then not be necessary to call upon the wife to respond. It was further explained, as an alternate possibility, that if we considered there was some substance in the appeal we would arrange for the wife to be provided with a transcript of the proceedings that day and make a direction for the wife to respond within a short time frame.
On 22 February 2013, for reasons then given, we made orders giving effect to our resolution that it was necessary to call upon the wife to respond to the appeal and to afford the wife a further opportunity to be heard, with the benefit of her having been provided with the transcript of the hearing of the appeal on 5 September 2012.
Our orders of 22 February 2013 required the wife to file and serve within twenty-one (21) days (that is, a period expiring on 15 March 2013) any submissions the wife sought to rely upon addressing, inter alia:
a)The husband’s appeal;
b)Whether, in the event the appeal is allowed, the wife would seek that we re-determine the matter or remit it to the Federal Magistrates Court (now Federal Circuit Court);
c)Whether, in the event the appeal is allowed and this Court determines to re-determine the matter, the wife would seek to place further evidence before the Court for the purpose of that re-determination, and if so, the general nature or outline of that evidence.
On 27 March 2013, and thus outside the period prescribed by our orders of 22 February 2013 which expired on 15 March 2013, the wife caused written submissions to be filed.
On 17 April 2013 the husband filed submissions in answer to the submissions of the wife referred to.
No application was made by the wife after 22 February 2013 to seek an extension of time to file her written submissions. We do not discern within her written submissions filed on 27 March 2013 any attempt by the wife to explain her delay or to specifically identify and address any other discretionary consideration as might be relevant to a grant of leave to extend time, save for her submissions, broadly, as to each of her financial position (paragraph 28); her psychological state (paragraphs 29 and 32); and her asserted difficulties in representing herself (paragraph 37).
However, having regard to the degree of the wife’s non-compliance (her submissions were filed 12 days after the due date) and the fact that the husband’s submissions in reply filed on 17 April 2013 do not include any assertions of any prejudice to the husband as a consequence of the wife’s delay we will receive, and allow the wife to rely upon, her written submissions filed on 27 March 2013.
Background
The following background is drawn from the reasons of the Federal Magistrate and may now be regarded as uncontroversial.
The parties commenced cohabitation in 1990, married in 1992 and separated on a final basis in April 2008.
There are three children of the relationship, namely the child A, born in 1992 who is now 21 years of age, the child B, born in 1993 who is now 19 years of age, and the child C, born in 2005 who is now 8 years of age. The wife also has a child from a former relationship, the child D, born in 1989, who is now 24 years of age.
It is unnecessary to here restate fully the undisputed facts as found by the Federal Magistrate which are not sought to be disturbed by either party on this appeal. In summary:
a)Over an 18 year period of cohabitation the wife performed the vast majority of homemaking tasks for the family and the parenting duties involved in “raising” the parties’ three children, as well as the child D, her child from a previous relationship (reasons for judgment paragraphs 119-120 and 124);
b)The wife contributed a lump sum of $60,000.00, and over time thereafter a further $50,000.00 (a total of $110,000.00) from the sale of a house at H (“the H property”) purchased for the wife by her mother prior to the parties’ relationship for the benefit of the family (reasons for judgment paragraphs 126 and 143-145);
c)The wife was forced to sell the H property for $20,000 less than the price of purchase because of the need to meet debts of the marriage (reasons for judgment paragraph 144) and to fund the family (reasons for judgment paragraphs 146-147);
d)The wife’s mother assisted the family by paying for groceries, clothing and entertainment costs of the children, the wife and the husband (reasons for judgment paragraph 127);
e)Throughout the relationship the husband’s income from employment was very limited (reasons for judgment paragraph 121); he was “chronically unemployed” and for significant periods was in receipt of social security payments (reasons for judgment paragraph 125); although his income from employment became “more steady” in the last three financial years leading up to the parties’ final separation in 2008 (reasons for judgment paragraphs 133-134). His income at trial was $360.00 per week after tax (reasons for judgment paragraph 137);
f)In 1994, four years after commencement of cohabitation, the husband received an inheritance of $250,000 which was applied to the purchase of the former matrimonial home (reasons for judgment paragraphs 128 and 130);
g)Throughout the relationship the husband received distributions from the entities controlled by his mother referred to as “the [Winston] Family Trusts” (reasons for judgment paragraph 121). The husband generally applied those distributions for the benefit of the family but also used money from those distributions for his own purposes (reasons for judgment paragraph 122);
h)In the first ten years of the parties’ relationship less than $50,000.00 in total was distributed to the husband from the trusts (reasons for judgment paragraph 146); over the final eight years to 30 June 2008 (the parties separated in April 2008) such distributions totalled $411,464.00; and from separation until December 2010 such distributions totalled $262,301.31 (reasons for judgment paragraph 148);
i)The distributions benefited also the wife’s child, the child D, from a previous relationship (reasons for judgment paragraph 142) although part of the child D’s education expenses was met by his paternal grandmother (reasons for judgment paragraph 145);
j)The wife forewent further study and education and employment to undertake her homemaking and parenting responsibilities to the four children (reasons for judgment paragraph 149);
k)The husband has had the care of the child C, the parties’ only child under the age of 18, since approximately March 2010.
The husband commenced parenting proceedings against the wife on 24 November 2008 in the Federal Magistrates Court, and that Initiating Application was amended to include property proceedings on 2 September 2009. A second Amended Initiating Application, containing the orders eventually sought by the husband in the trial of this matter, was filed on 21 April 2011.
By that second Amended Initiating Application, the husband, in essence, sought that the parties each respectively retain all assets and liabilities which each party then had title to or possession of (including the $50,000.00 already distributed to each of the parties as part of an interim property settlement) and that the monies held in the trust account of the husband’s solicitor (the proceeds of sale of the matrimonial home in the amount of $505,656.11 plus any monies remaining from $10,000 retained for family report costs and other incidentals) be distributed in the proportions of 70 per cent to the wife and 30 per cent to the husband. Parenting orders were also sought by the husband but it is unnecessary to traverse those here as those orders are not the subject of this appeal. For completeness though, the final orders provided for the husband to have sole parental responsibility for the child C, for the child C to live with the husband and to spend time and communicate with the wife, and for the child C to have therapeutic counselling.
By her Amended Response, filed on 27 February 2009, the wife sought only one order in relation to the parties’ property, namely, “[t]hat a proper account be taken of the parties’ net property and same be divided 90% to the wife and the remainder to the husband”. It is noted that the wife was self-represented at the time of the trial and remained so at the time of this appeal.
The trial was heard on 9 and 10 May 2011. On 10 May 2011, the Federal Magistrate indicated that he would be seeking written submissions from the parties in relation to the property matters in dispute. The wife, however, failed to provide any such written submissions, and a further mention of this matter was held on 23 August 2011 for the purpose of both setting a further date by which the wife was to provide her written submissions and also in order to admit into evidence certain documents inadvertently omitted from the evidence of a Mr R, accountant, in his affidavit filed by leave on 9 May 2011. During that mention, it was brought to the Court’s attention that the husband had recently (but post-trial) purchased a property at K, for a purchase price of $1,300,000.00. Further written evidence was then provided as to this, with the husband filing an affidavit on 7 September 2011 and the husband’s mother, who funded the purchase of K property through what she described as a loan to the husband, filing an affidavit on 1 September 2011. The loan for purchase price and costs totalled $1,353,100.00.
On the basis of that and other evidence in the case (as will be discussed later in these reasons), the Federal Magistrate found that the husband’s mother would never enforce the loan of $1,353,100.00 and that therefore the property at K should be taken into account as unencumbered property of the husband. In a property pool that was otherwise worth, on the assessment of the Federal Magistrate, $641,068.11, this substantially affected the outcome of the case.
The husband also borrowed the total sum of $15,516.35 from his mother for renovations to the former matrimonial home. As with the larger loan, the Federal Magistrate found that there was “no prospect whatsoever” that this loan would have to be repaid, and thus his Honour determined that it should not be included as a liability in the property pool. In so finding his Honour referred to Nygh J’s decision of Af Petersens and Af Petersens (1981) FLC 91-095 (“Af Petersens”) and the Full Court decision of Biltoft and Biltoft (1995) FLC 92-614 (“Biltoft”).
In relation to the respective contributions of the parties ultimately the Federal Magistrate determined that they should be assessed at 80 per cent /20 per cent in favour of the husband.
In relation to the s 75(2) factors, the Federal Magistrate noted the husband would continue to receive significant distributions from the Winston entities, which his Honour found on Mr R’s evidence would be at least $100,000.00 per year, as well as additional payments from the Winston entities upon the conclusion of the Family Law proceedings. Thus, in taking into account the fact that the husband had the primary care of the child C, the Federal Magistrate was of the view that the husband would have no difficulty in providing financially for himself, the child C or any other person whom he chose to support.
In relation to the wife, his Honour noted that she was “significantly disadvantaged” because she did not have access to the “extremely significant financial resources” that the husband did, and she had given up any thought of further education or employment as a result of promises or representations made by the husband that the family did not need to worry about future income because of his trust funds. His honour noted that the wife had obtained some employment in Adelaide but ultimately the Federal Magistrate determined that an adjustment of 22.5 per cent should be made in favour of the wife on account of the s 75(2) factors.
The Federal Magistrate delivered his reasons for judgment on 28 November 2011 and made orders on 20 December 2011 to the effect that the wife should receive 42.5 per cent ($824,953.95) of a property pool which included the K property treated as unencumbered and that the husband should receive 57.5 per cent ($1,116,114.16) of that pool.
Grounds of Appeal
The husband’s Notice of Appeal sets out five grounds of appeal as follows:
1. That in finding that the Appellant’s mother, [Ms M Winston], would not enforce the repayment to her of loans made by her to the Appellant, including a sum of $1,353,100, the Federal Magistrate erred in that he:-
(a) failed to give any or any adequate reasons for such
determination;
(b) failed to give any or any adequate weight to the
unchallenged evidence of [Ms M Winston]
as to the existence of the loans or the security
afforded for such loans.
2. That in finding that the monies evidenced in the loan agreement and secured by a registered mortgage over the property at [K] should not be included as liabilities in the property pool, the Federal Magistrate erred in that he:-
(a) failed to give any or any adequate reasons for such
determination;
(b) failed to give or [sic] any adequate weight to the unchallenged evidence of [Ms M Winston] as to the existence of the loans or the security afforded for such loans.
3. That in finding that [Ms M Winston], would not enforce the repayment to her of further loans made by her to the Appellant, totalling $15,516.35, for renovations to the former matrimonial home, the Federal Magistrate erred in that he:-
(a) failed to give any adequate reasons for such determination;
[sic]failed to give consideration to order 3(a)(ii) of orders dated 29 March 2011, made by the Federal Magistrate, which required payment of the debt.
4. That in determining that the contributions to the pool determined by the Federal Magistrate should be apportioned as to 20% to the Wife and 80% to the Husband the Federal Magistrate erred in that he:-
(a) made a determination which was in all the circumstances
outside the reasonable range of apportionment;
(b) failed to give any or any adequate reasons that supported
such apportionment having regard to the inclusion in the
pool of the property at [K].
5. That in finding that there should be an adjustment in favour of the Respondent based upon the relevant factors in section 75(2), the Federal Magistrate erred in that he:
(a)failed to have a proper regard to an adjustment made on account of the contributions and the property pool assessed by him;
(b) took into account factors relevant to compensate the respondent in the absence of any statutory power to do so;
(c) failed to give any or any adequate reasons which justified the adjustment.
We find that grounds 1, 2 and 3 may conveniently be dealt with together, while grounds 4 and 5 are better approached separately.
Repayment of Loans – Grounds 1, 2 and 3
Grounds 1, 2 and 3 all concern the finding of the Federal Magistrate that the husband’s mother, Ms M Winston, would never enforce either the loan of $1,353,100.00 (“the mortgage debt”) for the house at K or the loan of $15,516.35 for improvements to the former matrimonial home (“the renovation loan”) and that, on that basis, those amounts should not be included as liabilities of the husband in calculating the total property pool. Each of these grounds articulate challenges to the adequacy of the Federal Magistrate’s reasons in reaching his conclusions in these respects.
The thrust of the submissions made on behalf of the husband was, first, that the Federal Magistrate both failed to accord adequate weight to the unchallenged evidence of Ms M Winston regarding the required repayment of both loans and that he failed to give any or any adequate reasons for rejecting that evidence; and, second, that on the basis of the acceptance of Ms M Winston’s evidence, both the mortgage debt and the renovation loan should have been included as liabilities in the divisible pool of property. A further submission was made regarding the renovation loan specifically that it was clearly subject to repayment in light of orders made by the Federal Magistrate on 20 March 2011 which ordered the husband to repay the loan to Ms M Winston.
The principles applicable to a challenge as to the adequacy of reasons for a discretionary judgment are well-established and are often repeated in this Court (see Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 24; Bennett and Bennett (1991) FLC 92-191 at p 78,266). They need not be restated here.
In relation to the evidence of Ms M Winston, the relevant finding of the Federal Magistrate (Reasons for judgment paragraph 108) was that:
… there is simply no chance whatsoever that [Ms M Winston] will ever require repayment of the $1.3 million provided by her to her son to enable him to purchase the [K property].
(emphasis added)
We find that the Federal Magistrate failed to place sufficient weight upon the unchallenged evidence of Ms M Winston as to the requirement for repayment of the loan and that insufficient reasons were provided for rejection of that unchallenged evidence.
We note that the Federal Magistrate took into account the following factors in reaching his conclusion that the evidence of Ms M Winston as to the repayment of the loans should be rejected:
(a)The husband is, and historically always has been, completely financially reliant upon his family of origin;
(b)Ms M Winston has a good relationship with and clearly trusts her son and holds him in high regard, he being nominated as an executor of her will;
(c)Ms M Winston has substantial personal wealth held in trust structures which she controls worth in excess of $20,000,000.00;
(d)Ms M Winston wanted her son to remain living close to his sister at G and not in Brisbane, where he was otherwise residing; and
(e)Ms M Winston was aware her son did not have the funds to enable him to repay the debt.
However, during his consideration of those factors (reasons for judgment paragraphs 104-116), his Honour failed to specifically consider the fact that the wife failed to respond in any way to the affidavits of the husband and Ms M Winston filed in relation to the K property either through affidavit evidence of her own or through the provision of written submissions (both of which options were available to her under the directions made by the Federal Magistrate). Although the wife was (and remains) self-represented, this failure to challenge or respond in any way to the evidence of the husband and Ms M Winston is significant. This is particularly so given that the wife also elected not to cross-examine Ms M Winston during the trial (albeit that being prior to the filing of Ms M Winston’s K property evidence), nor did she subsequently seek to cross-examine Ms M Winston on her affidavit evidence relating to the K property acquisition and mortgage.
Nonetheless, having seen and heard the evidence of the husband during the trial and having made the findings referred to above about the close and supportive relationship between the husband and Ms M Winston, his Honour found the following (reasons for judgment paragraph 151(b)):
… Less than three weeks after the conclusion of the trial the husband (with the financial assistance provided by his mother) purchased the property at [K]. Indeed the wife had foreshadowed such an occurrence during the course of the hearing. The only reason the property at [K] came to the attention of the Court was because of the mention of the matter that took place on 23 August 2011. At the mention of the matter the fact of the purchase of the [K property] was drawn to the attention of the Court by the wife. Noting what has occurred (in relation to the purchase of the [K property]) I find that the husband (with the aid and assistance of his mother) intentionally awaited the conclusion of the final hearing before proceeding with the purchase of the property at [K]. This was clearly done by the husband in an attempt to avoid placing before the Court evidence concerning the [K property]. I do not accept it was merely a coincidence that the husband purchased the [K property] less than three weeks after the conclusion of the final hearing.
The trial of this matter occurred, as previously noted, on 9 and 10 May 2011. Annexure “MTW1” to Ms M Winston’s affidavit filed 1 September 2011 attaches a Form 2 Mortgage registration document, which indicates that the loan facility deed between the husband and Ms M Winston was completed only nine days after the conclusion of the trial, on 19 May 2011. Ms M Winston deposes to the husband purchasing the property on 25 May 2011, and Annexure “JW1” to the husband’s affidavit filed 7 September 2011 is the settlement statement dated 25 May 2011 prepared by Worcester & Co, who appear to be Ms M Winston’s solicitors. The relevant mortgage was registered on 30 May 2011. Given that the property was settled only 15 calendar days (or 11 business days) following the conclusion of the evidence at the trial of this matter, and the purchase was not raised by the husband at any point during the proceedings (save by way of response to the allegations of the wife) we consider that his Honour’s finding that this transaction had been planned prior to or during the trial and that its concealment was intentional was open to him.
This was, however, simply a finding by the Federal Magistrate that the husband failed to disclose a substantial matter which was the subject of his strict and continuous duty of disclosure. Although that, in the context of having seen the husband cross-examined, leaves open a further finding as to the husband’s credit given his conscious disregard for his duties of disclosure, any finding as to the credit of Ms M Winston is far more tenuous. We consider that such a credit finding, implicit in the Federal Magistrate’s dismissal of Ms M Winston’s evidence regarding repayment of both the mortgage debt and the renovation loan in its entirety, was not open on the evidence which went unchallenged.
We do so noting the principle set out in Devries v Australian National Railways Commission (1993) 177 CLR 472 that an appellate court should be reluctant to overturn a finding of a trial court as to credit. However, in this case, we find that the high standard identified by the High Court in that case has been met given that Ms M Winston was never cross-examined before the Federal Magistrate, and nor was there any evidence put before the Court which refuted her evidence as to the repayment of the two loans.
We also note that there was evidence in the proceedings to indicate that the loan would not be repaid for a significant period of time. The Loan Facility Deed (attached as part of Annexure “MTW1” to Ms M Winston’s affidavit filed 1 September 2011) sets out that repayments will be made, “Upon Demand”. Both Ms M Winston and the husband, in their September affidavits, depose that no repayments would be required until the sale of the property, at which time the purchase price and any accrued interest would be required to be repaid from the proceeds of sale. This agreement is in circumstances where Ms M Winston deposed that she encouraged the husband’s move to G in order for him to be closer to herself, the husband’s son, the child B, and the husband’s sister and where the husband made depositions to a similar effect, adding the justification of, “… providing my youngest son, [the child C], with a fresh start,” and “… to give my sons, [the child B] and [the child C], a new start after the difficulties of the past few years and these proceedings”.
By the accounts of both the husband and Ms M Winston, the purchase of the K property appears to be a part of a permanent move by the husband (and the child B and the child C) to this new residence at G, rather than some temporary arrangement. By necessary inference, that renders the possible repayment date of the mortgage debt (conditional, on the husband and Ms M Winston’s evidence, upon the sale of the property) as at some unknown date in the future. This is also in the context of the husband’s complete inability to repay any amount of the principal or the interest out of his own earnings. The husband gave evidence that as at May 2011, his income from personal exertion was approximately $360.00 per week after tax (excluding any distributions made to him by Ms M Winston from the discretionary family trusts in existence), in circumstances where he has the care of the parties’ youngest child, the child C.
However, the potentially lengthy period that the mortgage debt may be extant does not, we find, provide any basis for a total rejection of Ms M Winston’s evidence. We therefore find merit in this aspect of the husband’s appeal.
The renovation loan is in a slightly different category. Prior to the trial on 29 March 2011, the Federal Magistrate had amended his orders of 17 June 2010 so as to order the repayment of that amount to Ms M Winston by the husband out of the proceeds of sale of the former matrimonial home held at that time in the trust account of the solicitors for the husband. The husband failed to do so up until the trial of the matter, at which point the trial Federal Magistrate found that the loan (and presumably the order requiring its repayment) would never be enforced by the husband’s mother. It is noted in this context that the order of 29 March 2011 was an interim order. It was clearly expressed at the time to be, “… until further order”. It was followed by an order:
4. That monies held on trust by the husband, are not to be distributed until a final determination has been made in this matter, with any accrued interest to be distributed to the parties as ordered by the Court on the final property hearing or as agreed in writing by the parties.
The Federal Magistrate thus made it clear that the order referred to in the husband’s third ground of appeal was conditional upon the findings of fact at trial supporting such an order. As noted by the Full Court in Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”), citing Harris and Harris (1993) FLC 92-378 at 79,930, in relation to the making of interim property orders:
(3) Of necessity it is likely to be a somewhat imprecise exercise. Consequently, it must be exercised conservatively and the Judge must be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so …
(emphasis added)
Interim property orders are generally made without the benefit of cross-examination or any testing of the facts and thus, as noted in Strahan, should be able to be reversed should such a testing of the facts reveal the interim order to have distorted a just and equitable distribution of property on a final basis. Such a situation has arisen in this case, and we find that the mere making of an interim property order for repayment of an alleged debt, made conditional upon the orders made at final determination of the matter, did not bind the Federal Magistrate to find that such debt was a loan that would be required to be repaid in his ultimate determination of final orders.
We therefore do not accept the appellant’s argument that the interim order was determinative of the issue of whether the renovation loan was repayable. However, that still leaves the argument, which we accept, that in the circumstances the Federal Magistrate ought to have accepted the unchallenged evidence of Ms M Winston that the loan was one which would be required to be paid or he ought to have provided adequate reasons for not accepting that evidence.
The second issue relevant to the first three grounds of appeal (specifically being contained in ground 2) was the Federal Magistrate’s failure to include both the renovation loan and the mortgage as liabilities of the husband in the pool of property available for division. This issue could only be determined once the issue of likely enforceability of the loans (which is the subject of grounds 1 and 3) is properly determined; such a determination would require adequate reasons to be provided for the rejection of the unchallenged evidence of Ms M Winston (if that evidence is to be rejected).
In paragraphs 112-116 of the reasons for judgment, his Honour cited several authorities in support of his conclusion that the mortgage and the renovation loan should not be included as liabilities in the property pool. In particular, his Honour relied upon the following passage from Af Petersens at 76,669:
… It is fairly common in this Court to meet a situation where a parent has made a loan to a child which is in all respects legally enforceable, but which is not in fact enforced and would not really be expected to be enforced. It is no doubt an “obligation” but if the obligation is not likely to have to be met, it should not be taken into account.
His Honour relied upon that passage, as well as an excerpt from Biltoft to support his conclusion that it was permissible for him to conclude that Ms M Winston would never require repayment of either the mortgage or the renovation loan, meaning that those debts could be disregarded in determining the overall divisible pool.
However, closer analysis of those authorities reveals that they do not in fact support the course taken by the Federal Magistrate.
In Af Petersens, Nygh J considered a similar debt to the mortgage in this case in which the husband had received a loan from his father which was secured over a property of the husband by a registered mortgage subject to the accrual of interest. Nygh J found that the husband’s father, although legally entitled to enforce repayment of that loan plus interest, had elected not to do so for a period of five years until the commencement of property proceedings between the husband and the wife. Nygh J noted that this was a, “… remarkable coincidence …” albeit not one amounting to, “… a transparent sham or device …” given that the capital had fallen due for repayment at approximately the same time as the wife had commenced property proceedings. His Honour found that all that could be said regarding that loan was that the father had lent money to his son and was prepared to wait for its repayment and, had the husband not separated from the wife, may have been prepared to wait indefinitely. In that situation, Nygh J found that the debt was a liability of the husband, but that, in calculating the divisible pool, it should not be simply deducted from the assets of the parties as the husband was in a position in which he could negotiate repayment of that debt with his father. His Honour found (at 76,670) that an inclusion of a discounted amount was more appropriate in those circumstances.
Thus, despite what the selected extract quoted by the Federal Magistrate may indicate, it is clearly not the case that Nygh J’s decision is authority for the proposition that whenever there are loans from family members which are not likely to be required to be repaid such loans should in every case be written off in their totality, especially in circumstances where, as in Af Petersens and here, the loan is secured by a registered mortgage. On the facts of that case, Nygh J held that such a liability ought be attributed as such to the party owing the debt, albeit potentially discounted in amount allowing for the prospect that the debtor party may be able to negotiate or delay repayment of that debt.
The Federal Magistrate also relied upon Biltoft (reasons for judgment paragraph 115). However, it must be noted that the principles enunciated in that case apply only to unsecured creditors. Evidently, here the mortgage was registered and secured upon the K property. We note the following excerpt from the joint judgment in Biltoft at 82,124-82,127:
A general practice has developed over the years that, in relation to applications pursuant to the provisions of s. 79, the Court ascertains the value of the property of the parties to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset. See, Ascot Investments Pty Ltd v. Harper & Anor (1981) 148 CLR 337 where Gibbs J. (as he then was) pointed out at p 335 that the Court “must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it”. Where the assets are not encumbered and moneys are owed by the parties or one of them to unsecured creditors, the court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities. …
…
Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.
(emphasis added)
We are not persuaded that anything said in Af Petersens or Biltoft supported the approach taken by the Federal Magistrate.
Given the unchallenged evidence of Ms M Winston it was not open to the Federal Magistrate to find that the debts would not be enforced and there was a lack of adequate reasons as to how the Federal Magistrate arrived at the conclusion that he did.
On the basis of these errors, the appeal would have to be allowed.
Contributions – Ground 4
The fourth ground of appeal asserts that the trial Federal Magistrate’s finding of a 80 per cent / 20 per cent contribution entitlement in favour of the husband was not only outside the permissible range of discretion but the Federal Magistrate failed to give adequate reasons for arriving at such a decision given the inclusion of the gross unencumbered value of the K property in the pool of property available for division.
In argument before us Mr Page of Senior Counsel for the husband conceded, properly in our view, that if we found merit in the first three grounds of appeal then this particular ground was not pursued. That is, it would only be necessary for this ground of appeal to be pursued if the challenges against the Federal Magistrate’s determinations not to include the subject debts as liabilities in calculating the divisible pool did not succeed.
As we have upheld those challenges it is unnecessary to deal further with this ground.
Section 75(2) Adjustment – Ground 5
As we have found merit in grounds 1, 2 and 3 and the appeal would have to be allowed as a result, it is unnecessary to deal with this ground of appeal because the s 75(2) factors fall for consideration on any re-determination of the matter. However, the husband’s contentions in support of this ground remain relevant to any re-exercise of discretion.
Conclusion
Having found merit in grounds 1, 2 and 3, the appeal must be allowed.
Re-exercise of Discretion or Remitter
It was contended on behalf of the husband that if the appeal is successful this Court is in a position to, and should, re-exercise the discretion rather than remit the proceedings for rehearing.
The husband does not seek to adduce further evidence on the re-exercise of discretion. Subject to some issues taken with some of the findings made by the Federal Magistrate, and his treatment of the s 75(2) factors, it is contended on behalf of the husband that there are sufficient findings of fact to enable this Court to re-exercise the discretion.
Whilst the wife’s written submissions filed on 27 March 2013 do not specifically address whether this Court can and should re-exercise the discretion, rather than remit the proceedings for re-hearing, it is clear enough from her written submissions that the wife seeks to adduce further evidence and identifies alleged circumstances as now existing that she would want account to be taken of in any re-exercise of discretion.
We note from paragraph 5 of the husband’s written submissions in reply filed on 17 April 2013 that the husband infers from the wife’s submissions “that she seeks to have the application made under s. 79 remitted for rehearing by the Federal Circuit Court”.
Relevantly, in paragraphs 4, 5 and 6 of the wife’s written submissions she refers to income or distributions the husband may have received from the “various trusts” since the time of the trial below. At paragraph 28 the wife asserts that she is “… currently suffering severe financial hardship” and at paragraph 34 asserts that her current annual income is “approximately $11K”. The wife’s written submissions include, at their conclusion, the heading “Future Evidence Required” and thereafter is set out some seven categories of further evidence which she identifies that she would seek to adduce for the purpose of any re-exercise of the discretion.
The husband contends in his written submissions in reply that the wife would not succeed in establishing any “better case” than she had before the Federal Magistrate, but if this Court is to re-exercise the discretion it must give the parties the opportunity to adduce updating evidence (Allesch v Maunz (2000) 203 CLR 172).
The substantive part of the trial below (other than the issues arising concerning the K property) was heard on 9 and 10 May 2011, now more than two years ago. It seems that for the purpose of that trial the then most recent financial statement of the wife was that filed on 27 February 2009 and for the husband that filed on 2 September 2009. The wife’s financial statement was filed at a time when she was still residing in the former matrimonial home (since sold) and prior to her relocation to Adelaide. Likewise the husband’s financial statement was filed prior to his acquisition of, and current accommodation in, the K property.
It is clear enough from her written submissions that the wife seeks to agitate matters concerning events alleged to have occurred since the trial below as well as her current financial circumstances in comparison to those of the husband by reference to distributions he may have received, and these are obviously relevant considerations to any determination of the s 75(2) component in assessing appropriate property orders.
The wife is entitled to adduce evidence of relevant financial and other events that have occurred since trial and evidence of her current and prospective financial circumstances, in comparison to those of the husband.
Significant practical difficulties attend this Court engaging in any fact-finding enquiry or making assessments as to the weight to be given to evidence, particularly evidence which may be untested by cross-examination. We are of the view that the matters raised by the wife in her written submissions would necessarily involve such an exercise and the practical reality is that this militates against this Court attempting to re-exercise the discretion. We are of the view that the matter must be remitted to the Federal Circuit Court for re-hearing.
Costs of the Appeal
Given our reasons for allowing the appeal we consider that, as between the parties, no order as to costs should be made so as to disturb the effect of s 117(1) of the Act that each party bear their own costs.
However, because the appeal succeeds on a question of law the discretion under s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) (“the Costs Act”) is enlivened with respect to the husband’s costs as appellant; and under s 6 of that Act with respect to the wife’s costs as respondent. Moreover, where an appeal succeeds on a question of law and there is to be a new trial s 8 of the Costs Act enables the grant of a costs certificate to each party in respect of the new trial.
With respect to the husband application was made for costs certificates at the hearing of the appeal and we are satisfied that it would be appropriate to grant the husband a costs certificate under s 9 of the Costs Act with respect to the appeal and, pursuant to s 8 of that Act, a certificate in respect of the new trial.
With respect to the wife, whilst she is yet to make application for certificates we invite her to make application under s 6 and s 8 of the Costs Act for certificates by writing to the Appeals Registrar within twenty-eight (28) days requesting such a certificate.
I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 26 September 2013.
Associate:
Date: 26 September 2013
2
5
13