Yates & Allen and Anor

[2008] FamCAFC 190

FAMILY COURT OF AUSTRALIA

YATES & ALLEN AND ANOR [2008] FamCAFC 190

FAMILY LAW - APPEAL – From decision of Federal Magistrate – Federal Magistrate erred in fact in relation to the evidence with respect to moneys advanced to the husband constituting a contribution by or on behalf of the husband – Exercise of discretion on those facts miscarried (De Winter v De Winter (1979) FLC ¶90-605) – In the alternative, the failure to refer the moneys in the contribution valuation phase renders deficient the learned Federal Magistrate's Reasons for Judgment (Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 24 at 279) – Further in the alternative, given the contribution by or on behalf of the husband of the moneys, in the absence of any clear explanation for why it did not assume significance, the conclusion with respect to contributions falls sufficiently beyond the broad ambit of the discretion which the learned Federal Magistrate is exercising, as to enliven appellate intervention (see Norbis v Norbis (1986) 161 CLR 513 and House v The King (1936) 55 CLR 499) – The appeal is allowed and the matter remitted for rehearing before the Federal Magistrates Court.

Family Law Act 1975 (Cth)

Biltoft and Biltoft (1995) 19 Fam LR 82
De Winter v De Winter (1979) FLC ¶90-605
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 24 at 279
Norbis v Norbis (1986) 161 CLR 513
House v The King (1936) 55 CLR 499

APPELLANT: MR YATES

RESPONDENT: MS ALLEN

SECOND RESPONDENT: DR YATES

APPEAL NUMBER: EA 86 of 2008

FILE NUMBER: PAM 5 of 2005

DATE DELIVERED: 21 NOVEMBER 2008

PLACE HEARD: PARRAMATTA

JUDGMENT OF: COLEMAN J

HEARING DATE: 21 NOVEMBER 2008

LOWER COURT JURISDICTION: FEDERAL MAGISTRATES COURT

LOWER COURT JUDGMENT DATE: 27 JUNE 2008

LOWER COURT MNC: [2008] FMCAfam 565

REPRESENTATION

COUNSEL FOR THE APPELLANT: MR CAIRNS

SOLICITOR FOR THE APPELLANT: HUNTER LAWYERS

COUNSEL FOR THE RESPONDENT: MR WONG

SOLICITOR FOR THE RESPONDENT: EQUITY LAWYERS

COUNSEL FOR THE SECOND RESPONDENT: MR MADDOX

Orders

1. That the appeal be allowed.

2. That the matter be remitted for hearing before a Federal Magistrate other than Neville FM.

3. That the Court grants to the Respondent Wife a costs certificate pursuant to the provisions of s.6 of the Federal Proceedings (Costs) Act 1981 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 Wife in respect of the costs incurred by the Respondent Wife in relation to the appeal.

4. That the Court grants to the each party a costs certificate pursuant to the provisions of s.8 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each party in respect of such part as the Attorney-General considers appropriate of any costs incurred by each party in relation to the new trial granted by these orders.

IT IS NOTED that publication of this judgment under the pseudonym Yates & Allen and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

THE FAMILY COURT OF AUSTRALIA AT PARRAMATTA

Appeal Number: EA 86 of 2008
File Number: PAM 5 of 2005

MR YATES

Appellant

And

MS ALLEN & ANOR

Respondent

REASONS FOR JUDGMENT

Introduction

1. By Notice of Appeal filed on 23 July 2008, Mr Yates (“the husband”), appealed against orders made by Federal Magistrate Neville on 27 June 2008 in proceedings between the husband and Ms Allen (“the wife”). The orders made by the learned Federal Magistrate on that date provided for the implementation of a decision that the parties should share as to 55 per cent to the wife and as to 45 per cent to the husband, a property at W which was the major asset of their marriage. From that decision the husband appealed, and in lieu of the order of the Federal Magistrate, sought, inappropriately, that the matter be referred to a single judge of the Family Court for rehearing. As is generally well known, a successful appeal against a decision of a Federal Magistrate, if requiring a rehearing, results in a rehearing in the Federal Magistrates Court. The wife, through her learned Counsel, has resisted the appeal, and sought to maintain the trial Judge's orders.

Background

1. Some background to the proceedings is instructive for the purposes of determining the husband's appeal. The Judgment of the learned Federal Magistrate arose in unfortunate circumstances. Morcombe FM, over a period of three days, concluding on 21 November 2007, heard the proceedings. It is clear from the transcript of the proceedings, which form part of the appeal books, that disputed issues of fact were numerous and significant, particularly, in the case of the husband, with respect to moneys advanced or otherwise provided to him by his brother, and in the case of the wife, with respect to funds remitted by her overseas. Credit was clearly a live issue at the trial before Morcombe FM. Sadly, Morcombe FM passed away after the trial but prior to the delivery of judgment.

2. In what, with respect, can be seen as an exercise of hope over experience, Neville FM, obviously, from the reasons for judgment which have been published, with some misgivings, at the invitation of the parties, determined the proceedings which had been conducted before Morcombe FM “on the papers”. As Neville FM observed, that included a transcript of the proceedings before Morcombe FM.

3. Whilst the objective which Neville FM, and those involved in the case pursued was commendable, with hindsight, it was probably unlikely ever to have been able to be achieved, essentially because the issue of credit which loomed so large in the proceedings on both sides, was unlikely to be able to be adequately resolved in the absence of Neville FM hearing the parties tested in relation to their allegations and counter allegations with respect to disputed issues of fact. As will be seen, this appeal ultimately turns less on whether the decision made by Neville FM was correct, than on the means by which that decision was articulated in the Reasons for Judgment of 27 June 2008.

4. The background to the proceedings was that the parties, who were at the date of judgment aged 27 in the case of the wife, 57 in the case of the husband, had married in 1989. There were no children of the marriage. The parties disputed when they had separated, and the circumstances surrounding such separation. It is clear that by May 2005, the wife became aware that she had been divorced by the husband pursuant to the provisions of Islamic Sharia law on 30 March 2005, by receipt of a certificate evidencing that event. At the commencement of cohabitation, the parties had modest assets. The husband, it seems, to have been accepted, had about $25 000, the wife no assets of substance. 

5. At the time of the hearing before the learned Federal Magistrate, the major asset of the parties was their former matrimonial home at W, which was valued, or agreed to be valued, at $820 000, and to be subject to a mortgage of $126 000. There were other lesser assets involved.

6. Amongst other issues of fact at trial, was the assertion of the husband that he borrowed US$160 000 from his brother in 1995. The orders of the learned Federal Magistrate provided that the equity in W be apportioned as to 55 per cent to the wife and 45 per cent to the husband, that determination having been reached on the basis that the parties' contributions were equal, and that a 5 per cent adjustment in favour of the wife pursuant to s 75(2) of the Act was appropriate.

The Federal Magistrate’s Reasons for Judgment

1. For reasons which will emerge, it is necessary to refer only in part to the learned Federal Magistrate's Reasons for Judgment. The background facts to which reference has just been made, are sourced from that judgment and do not appear to have been controversial at trial, and have not been controversial in the appeal to this Court.

2. Having referred to the marriage of the parties, their separation and the absence of children of the marriage, the learned Federal Magistrate traversed the contribution based history of the parties. Save in the respects to which reference will later be made, it is unnecessary to refer to those matters. It is, however, appropriate to refer to para 19 of the learned Federal Magistrate's judgment, where the question of the husband's alleged borrowing from his brother, Dr Yates, of US$160 000, was referred to.

3. The learned Federal Magistrate referred to annexure “A” to the affidavit of the husband, which was an English translation of an Arabic document, styled a “loan contract”, whereby an acknowledgment of debt in the sum of US$160 000 was recorded. The learned Federal Magistrate recorded, uncontroversially it seems, that in applications to St George Bank for finance, the husband failed to disclose his alleged indebtedness to his brother. The husband’s reasons for so doing were described by the Federal Magistrate as being somewhat plausible. Reference was then made to the acknowledgment of the husband in cross-examination that the loan from his brother had "expired" in 2002. It is reasonably plain from the document, that the loan would, by the terms of the document, have become repayable by 2002.

4. The learned Federal Magistrate then identified a number of matters in issue. It is unnecessary for present purposes to refer to those matters. In the Reasons for Judgment, the learned Federal Magistrate then revisited the topic which has assumed the greatest interest for the purpose of the appeal to this Court, that being the husband's assertion that his brother had lent him US$160 000 in 1995. The learned Federal Magistrate recorded the absence of notification of the indebtedness to a Bank when the husband sought the loan, the absence of any attempt to repay the loan or any demand for it to be repaid. The learned Federal Magistrate referred, accurately there was no doubt, having regard to what emerges from Appeal Book page 182, to the submission of Counsel for the husband, that the terms of the loan were, "soft". 

5. A number of submissions then made by Counsel then appearing for the wife were recorded, and they find expression at para 30. The learned Federal Magistrate at para 32 Appeal Book 212, recorded not in this Court's view, with necessarily total accuracy, how the disputed loan issue might be considered.  Having then referred to a decision of the Full Court in Biltoft and Biltoft (1995) 19 Fam LR 82, the learned Federal Magistrate recorded:

   I regard the evidence of the parties in relation to both the cash loan and the overseas property, to be sufficiently or so problematical that the Court is unable to make any formal determination regarding the facts surrounding both matters.  It necessarily flows from such a result that the Court is unable to make any determination regarding the legal significance or effect of them for the purpose of the proceedings.  In my view, they cannot be taken into account for the purposes of the s 79 application before the Court and therefore must be put to one side.  

6. It is unsurprising, having regard to the terms of para 34 of the learned Federal Magistrate's judgment that the topic of the US$160 000 provided or allegedly provided in 1995, was not subsequently the subject of any particular comment or finding, either at what might be termed the balance sheet stage of the Federal Magistrate's determination, or at the contribution stage. At para 42, notwithstanding the matters recorded at para 34, the “disputed ‘soft loan’ from his brother said to be in the order of US$160 000" was referred to in relation to the husband's contributions.  Nothing there or subsequently reflects the topic in the determination under s 79.

The Grounds of Appeal

1. Turning to the grounds of appeal, with all due respect to whoever drafted them only on the most general and flexible interpretation of them do they begin to articulate what may be matters of substance. The Court has considerable reservations about the integrity of the appeal process in this matter, so inappropriate are the grounds of appeal and so totally deficient are the submissions of the appellant in support of them. Objectively, but for the commendable competence of Counsel for the wife, who, with respect to the appellant, has demonstrated far greater appreciation of the real issues in this appeal, and Counsel for the wife's ability at short notice, to traverse the real issues in the appeal, the appellant would have been placed in the position of either having the appeal as pleaded dismissed, or suffering an adjournment at the appellant's cost in order to seek to articulate in a form more readily able to be recognised by a Court of law, the real challenges to the Federal Magistrate's decision.

2. Fortuitously, by virtue of the lack of opposition to the husband's brother being joined as a party in the appeal, learned Counsel for the husband's brother has filed submissions which are capable of impacting upon the real issues in the case, albeit perhaps ironically, in a way that is of questionable validity given that they do not address the grounds of appeal on which the appellant has relied and there is no application by the husband's brother to become an appellant or file a cross-appeal. Be that as it may, and reiterating that ultimately the Court is reasonably comfortable to dispose of the appeal, having regard to the capacity of learned Counsel for the wife to, as he frankly conceded, deal with this issues which do arise, the Court will determine the appeal.

3. Grounds 4, 5 and 6 in the most oblique and, the Court suspects, inadvertent way, do contain the embryo of a sustainable challenge to the exercise of the learned Federal Magistrate's discretion. They relate to, but do not expressly deal with, the question of, to use a generic term, the provision of funds by the husband's brother, Dr Yates. In essence, the evidence before the learned Federal Magistrate in relation to that topic, comprised the loan contract to which reference has been made. The learned Federal Magistrate, the Court is persuaded by the submissions of Counsel for the wife, was aware of both the terms of the loan contract, the concessions made by Counsel for the husband, the circumstantial evidence, some of which was expressly referred to in the Reasons for Judgment, and at least inferentially, the reality that it was the husband who bore the onus of proof in relation to the topic of the alleged loan.  So far as it goes, any challenge to the learned Federal Magistrate's rejection of the existence of a loan or the adequacy of reasons for such conclusion, successfully withstands appellate challenge. 

4. The more difficult issue, as a reading of the transcript would confirm, and discussion with learned Counsel for the wife details, relates to the significance of the provision of funds by the husband's brother to the husband in 1995. At Appeal Book 9 early in the course of the trial before Morcombe FM, Counsel then appearing for the wife said, after Counsel for the husband raised the asserted debt:

   No, we don't dispute the money came from overseas but we dispute and we have also disputed that the money is a debt to the brother, and we say that there will be evidence that could demonstrate very clearly that the husband does not think it is a debt to the brother either.

5. The latter part of that statement relates to the loan itself. It is apparent that although unquantified at that point, there was a concession that in 1995, the husband brought a sum of money to the cohabitation. The quantification of that sum emerges elsewhere, as was fairly conceded by Counsel for the wife. Reference has been made to the loan contract, an English translation of which is found at Appeal Book page 254, and to a bank statement, a copy of which is found at Appeal Book 259, from the Arab Bank, the authenticity of which has not been disputed in these proceedings, confirming the transfer to the husband's bank in Sydney of US$164 312.45 from the account of Dr Yates, the husband's brother.

6. In those circumstances, the evidence before the learned Federal Magistrate, uncontroversially was that in about 1995, the husband received from his brother approximately US$160 000. The learned Federal Magistrate at Appeal Book 212 para 32, identified what were perceived to be "three options", regarding the provision of those moneys. The first was said to be to treat the moneys as a loan. For reasons which the learned Federal Magistrate provided, and which survived appellate scrutiny, rejecting that conclusion was reasonably open to the learned Federal Magistrate. The second course need not be referred to for present purposes, as a reading of it would make clear in view of this Court's conclusions thus far. The third approach, albeit perhaps less than a correct statement of the law, certainly constituted an accurate identification of the issue, that being a gift.

7. The Court perceives the law in relation to gifts to remain as indicated by the Full Court in 1995 in the decision of Kessey & Kessey. Be that as it may, the evidence before the learned Federal Magistrate, obliged the Court to consider in the context of contributions, having regard to the findings at the balance sheet stage, the contribution of US$160 000 by or on behalf of the husband in 1995.

8. Learned Counsel for the wife valiantly sought to demonstrate that, at least inferentially, the learned Federal Magistrate had taken into account such contribution by or on behalf of the husband. Before considering the passages of the Federal Magistrate's reasons where that topic is potentially visited or revisited, it is perhaps desirable to reiterate what was recorded at Appeal Book 213 para 34. With respect to the learned Federal Magistrate, the evidence before the Court, whilst supporting a finding that a loan had not been established, was not problematical. Indeed, it was uncontroversial that in 1995 there had been contributed by or on behalf of the husband, US$160,000 by his brother. With respect to the learned Federal Magistrate, having erred in fact in the first sentence in para 34, it is unsurprising that the learned Federal Magistrate also erred in law by concluding as the Court did, that the contribution of those funds could not be "taken into account for the purposes of the s 79 application".

9. In seeking to uphold the learned Federal Magistrate's decision with respect to the US funds, learned Counsel for the wife, not without considerable ingenuity, submitted that although not expressly referred to within the context of contributions, discussion of which commenced at Appeal Book 215 para 42, the learned Federal Magistrate must have done so. With great respect to learned Counsel for the wife, who is in the invidious position of not being able to add to the Federal Magistrate's Reasons for Judgment, the Court cannot accept either on a literal reading of the Reasons for Judgment of the Federal Magistrate, or particularly having regard to the final paragraph of 34 of the reason, to which reference has just been made, that the contribution by or on behalf of the husband of US$160 000 was taken into account by the learned Federal Magistrate in determining the contribution based entitlements of the parties.  What was taken into account and articulated in pars 42 and following, with respect to contributions, reinforces the impression that the US$160 000 contribution was simply not considered. It is unsurprising that it was not, given that with respect to the learned Federal Magistrate, there was a material error of fact in failing to recognise that on the undisputed evidence, whether it be by way of loan or not, there had been contributed by or on behalf of the husband in 1995, US$160 000.

10. The conclusion of the learned Federal Magistrate that the parties' contributions should be regarded as equal could not on the findings of fact made, and the inferences drawn from them, survive appellate scrutiny if, contrary to the Court's conclusions in that regard, the learned Federal Magistrate had taken into account the US$160 000 contribution. It is, as learned Counsel for the wife, has submitted, conceivable that the exercise of discretion may have been sufficiently broad as to render such a conclusion immune from appellate challenge, but in the absence of the clearest of statements by the learned Federal Magistrate as to why, notwithstanding a contribution of that magnitude occurring when it did, in the circumstances as recorded by the learned Federal Magistrate, that possible basis of salvation for the decision is denied learned Counsel for the wife.

1. Objectively, placed in a very invidious position, the learned Federal Magistrate, making the best of a very awkward situation, has in this Court's view erred in fact in relation to the evidence with respect to the provision of US$160 000 by or on behalf of the husband in 1995. Unsurprisingly, in those circumstances, the exercise of discretion miscarried (see De Winter v De Winter (1979) FLC ¶90-605). Alternately, to the extent that it may be necessary to underpin such conclusion, the failure to refer the $160 000 in the contribution valuation phase, renders deficient the learned Federal Magistrate's Reasons for Judgment, in the sense discussed by McHugh J in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 24 at 279. Further in the alternative, and to the extent that it might be necessary, given the contribution by or on behalf of the husband of US$160 000 in 1995, in the absence of any clear explanation for why it did not assume significance, the conclusion with respect to contributions falls sufficiently beyond the broad ambit of the discretion which the learned Federal Magistrate is exercising, as to enliven appellate intervention, (see Norbis v Norbis (1986) 161 CLR 513 and House v The King (1936) 55 CLR 499).

2. Sensibly, learned Counsel for the wife did not submit that the result could be no different if the contribution by or on behalf of the husband of US$160,000 were taken into account in the assessment of contributions. That being so, and albeit with respect to the appellant, largely in no way as a result of the efforts of the appellant, in the presentation of the appeal, the appeal is entitled to succeed.

3. The appeal will accordingly be allowed. The matter will be remitted for rehearing before the Federal Magistrates Court.

I certify that the preceding twenty six (26) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Coleman,

Associate: 

Date:  27 November 2008