Washburn & Pacini [2020] FamCAFC 296 (26 November 2020)

[2020] FamCAFC 296

FAMILY LAW - APPEAL - PROPERTY - Appeal against final property settlement orders - Appeal resolved by consent - Where the respondent concedes legal error - No consideration of s 90SM(3) of the Family Law Act 1975 (Cth) as to whether there ought be any property adjustment at all - Matter remitted for re-hearing - Costs certificates issued.

Family Law Act 1975 (Cth) ss 79, 90SF, 90SM

House v The King (1936) 55 CLR 499; [1936] HCA 40

Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52

[2020] FamCA 100

(2) The orders of the primary judge made on 6 April 2020 and 12 June 2020 be and are hereby discharged, save for Order 2 of the 12 June 2020 orders which, until further order, remains in full force and effect.

(3) The matter be remitted for hearing before a Judicial Officer other than the primary judge.

(4) The Court grants to the appellant a costs certificate pursuant to 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 of the costs incurred by the appellant in relation to the appeal.

(5) The Court grants to the respondent a costs certificate pursuant to s 6 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 respondent in respect of the costs incurred by the respondent in relation to the appeal.

(6) The Court grants to the appellant and the respondent 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 each of the appellant and the respondent in respect of the costs incurred by each of them in relation to the new trial ordered.

Note: The form of the order is subject to the entry of the order in the Court's records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Washburn & Pacini has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court's Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE

1. This is an appeal brought by Mr Washburn ("the de facto husband") from final property settlement orders made by a judge of the Family Court of Australia on 6 April 2020, following a two day trial.
2. The appealed orders provided for the de facto husband to pay the sum of $364,557.86 to Ms Pacini ("the de facto wife"), in default of which the de facto husband's property at B Street, C Town ("the C Town property") was to be sold, with the payment to the de facto wife being met from the net sale proceeds. Otherwise, the parties were to each retain all other property held in their respective names or in their possession.
3. In response to the appeal, initially the de facto wife filed Submitting Notices, however subsequently the parties resolved the appeal by consent, and proposed orders allowing the appeal, remitting it for re-hearing, and affording them relevant costs certificates. A brief written joint statement was filed in relation to the conceded error of law as asserted by Ground 1 of the Notice of Appeal, sufficient to ground the costs certificates.
4. For the reasons which follow, we are satisfied that the primary judge's reasons disclose legal error, and the appeal must therefore succeed.

1. The de facto husband was born in 1963 and is aged 57 years. For most of his life, he worked as a finance professional, but after he retired from that occupation, he operated a farming business in the E Region on the C Town property. The C Town property had been purchased by the de facto husband in 1998 in his sole name. The de facto husband is also a share trader, and trades through a private company of which he is the sole director and shareholder. He has three adult children from previous relationships.
2. The de facto wife was born in 1977 and is aged 43 years. She is a professional, working on a part-time basis four days per week.
3. The parties commenced cohabitation in May 2012, initially residing in rental accommodation in Melbourne, but later moving to live in the C Town property.
4. In 2014, the only child of the parties' relationship, Z ("the child"), was born.
5. On 30 June 2015, the parties separated, being approximately three years and one month after cohabitation commenced. After separation, the de facto wife moved out of the C Town property to rental accommodation in Melbourne.
6. On 29 August 2016, the de facto husband commenced these proceedings in the Federal Circuit Court of Australia. The parenting proceedings settled by consent in December 2019, when orders were made for the parties to have equal shared parental responsibility for the child, who would live with the de facto wife and spend alternate weekends, some week days, and half of the school holidays, with the de facto husband.
7. The property settlement proceedings came before the primary judge on 13 and 14 February 2020 for final hearing. It was the de facto husband's position at trial that there should be no adjustment of property interests between the parties. The de facto wife sought that the de facto husband pay to her a sum such that she receive 27.5 per cent of the total net property assets available for division. The de facto wife also sought that the C Town property be sold to fund the payment to her, in the event the de facto husband defaulted in making the payment.
8. On 6 April 2020, the primary judge delivered her reasons for judgment and made the orders the subject of the appeal. Upon application by the de facto husband, on 12 June 2020, the primary judge made orders staying the 6 April 2020 orders pending the outcome of this appeal.

1. The primary judge commenced her reasons by setting out the background of the matter. Her Honour then outlined the evidence each party relied upon at the hearing, which included evidence from each party's registered valuer, and a jointly appointed single expert valuer.
2. The primary judge then proceeded to assess the parties' contributions at each stage of the relationship. Her Honour found that at the commencement of the relationship, the de facto husband owned approximately $3 million worth of net assets, whereas the de facto wife had modest assets comprising a car (which was substantially funded by the de facto husband), $10,000 in cash and some small superannuation entitlements. The primary judge accepted that the de facto husband's assets were far in excess to those of the de facto wife at the commencement of the relationship (at [18]).
3. During cohabitation, the parties applied their respective income and savings toward their joint living expenses, and each contributed to the operations of their household and family unit. Her Honour found that the de facto husband was mainly engaged outside the home working on the farming business, whilst the de facto wife was engaged in the home with cleaning and maintenance tasks, although also assisted the de facto husband in the operation of his farming business on a part‑time basis. The de facto wife was the primary carer of the child after she was born. Also during cohabitation, the de facto wife received a gift from her father of $60,000, of which she applied $10,000 to purchasing shares, $10,000 paying off debt and $10,000 on general living expenses of the parties.
4. Post-separation, the primary judge found that the de facto wife used the remaining monies gifted from her father to fund her rental accommodation and establishment costs, legal fees and living expenses. At the request of the de facto wife, the de facto husband paid the sum of $4,000 to the de facto wife to assist her relocation from the C Town property, and also transferred to her sole name the car she had been using. The de facto wife commenced working as a manager in July 2015, receiving income of $72,000 per annum.
5. The primary judge then considered the parties' assets and liabilities, finding that at the time of the trial, the de facto husband had net non-superannuation assets worth $1,831,720 compared with the de facto wife's minimal net

non-superannuation assets worth $853. The parties' superannuation interests were valued at approximately $80,000 in relation to the de facto husband, and $60,000 in relation to the de facto wife. No splitting order was sought from either party in relation to superannuation interests, and the primary judge was satisfied no splitting order was required in this case (at [31]). 6. Thereafter, the primary judge discussed the values of the assets in dispute, including the evidence of the single expert valuer in relation to the de facto husband's businesses. 7. The primary judge then dealt with the issue of add backs which were contended for by the de facto wife. It is not necessary to further discuss those. 8. The primary judge next moved to discussing the considerations enumerated in

s 90SF(3) of the Family Law Act 1975 (Cth) ("the Act"), and determined that an additional seven per cent adjustment should be made in favour of the de facto wife. 9. The primary judge then articulated her findings in respect of the contribution based entitlements of the parties. Under the heading "[c]onclusion" there appears as follows: 1. The total net assets of the parties, excluding the DD Town property and including the notional add back of the mortgage monies as described in paragraph 54 above is in the sum of $1,832,573 - $42,500 = $1,790,073 + $354,385 = $2,144,458. 2. The contribution adjustment significantly favours the [de facto husband]. It should be an apportionment of 90 per cent/10 per cent in the [de facto husband's] favour. To that should be added the adjustment in favour of the [de facto wife] as set out in paragraph 64 above. 3. This results in a payment from the [de facto husband] to the [de facto wife] of $364,557.86 which represents 17 per cent of the total net and notional assets. 4. The Court determines that in the circumstances described above it is just and equitable to make orders which provide for an alteration of the parties interest in property in the percentage described above. 5. It is a matter for the [de facto husband] as to how he funds the payment due to the [de facto wife]. It would not be just and equitable as between the parties to exclude a sale of the C Town property to effect the necessary settlement.

1. In his Notice of Appeal filed 4 May 2020, the de facto husband agitated six grounds of appeal, however as shall be seen, it is not necessary to progress beyond the first ground in these reasons.
2. At the outset, it is useful to re-state the relevant principles which govern appeals from discretionary judgments. Particularly, it is well settled that error of the type identified in House v The King (1936) 55 CLR 499 at 504-505 ("House v The King") must be established. There, the majority of the High Court said:

...The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred...

1. Ground 1 contends:
   1. The [primary judge] failed to consider or to express any conclusion as to whether it was just and equitable to make any order adjusting the existing property interests of the parties.
2. This ground is referrable to the principal case run by the de facto husband before the primary judge, namely, that it was not just and equitable to adjust the parties' property interests at all. That argument was based upon the High Court's decision in Stanford v Stanford [2012] HCA 52; (2012) 247 CLR 108 ("Stanford") which held the following in relation to s 79 of the Act:
   1. It will be recalled that s 79(2) provides that "[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order". Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub‑sections are not to be conflated.

In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.

1. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to "altering the interests of the parties to the marriage in the property" (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.

1. Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law". Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses". The question presented by s 79 is whether those rights and interests should be altered.
2. Thirdly, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down". To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.

1. There is no doubt that the above principles established by Stanford equally apply to the de facto property settlement provisions in the Act (s 90SM).
2. The only reference by the primary judge as to whether it would be just and equitable to make an order altering the parties' property interests is to be found at [68] recited above.
3. It is not clear from that passage of the reasons, which "circumstances described above" the primary judge relied upon in determining it was just and equitable to make the order in the terms she did. Further, as contended by the de facto husband, it seems clear that in [68] the primary judge did not consider whether it was just and equitable to embark on a property settlement order at all. That paragraph appears to be the result of a consideration of the parties' contributions and the relevant s 90SF(3) factors, not a consideration of s 90SM(3) of the Act. This assumes significance given that, as we have said, it was the de facto husband's principal position before the primary judge that there be no adjustment of property interests between the parties (based on Stanford), which her Honour acknowledged (at [2]). There can be no doubt that the de facto husband squarely raised this issue with the primary judge during the hearing (see Transcript 13 February 2020, p.19 lines 25-32; Transcript 14 February 2020, p.158 lines 24-30).
4. The de facto husband contends, and the de facto wife concedes, that the primary judge fell into the very error identified by the High Court in Stanford, in that her Honour only considered whether the orders were just and equitable in the context of the ultimate outcome, rather than the separate enquiry mandated by s 90SM(3) of the Act, as to whether there ought be any adjustment at all. We agree.

1. The success of Ground 1 is sufficient to wholly dispose of the appeal, such that the orders made on 6 April and 12 June 2020 must be set aside in their entirety, save for Order 2 of the 12 June 2020 orders, which provides:

(2) Until further order, the [de facto husband] be and is hereby restrained by injunction from:-

(a) further encumbering the real property situate at and known as B Street C Town Victoria being the real property described in Certificate of Title Volume ... Folio ... ('the C Town property') save as provided for in sub-paragraph 2(b) below;

(b) increasing the National Australia Bank Flexiplus mortgage loan account #...85 secured by registered mortgage ... on the title of the C Town property ('the secured mortgage') save the [de facto husband] is permitted to increase the secured mortgage by an amount of up to, but not exceeding, the sum of $200,000.

1. It is thus unnecessary to consider the balance of the grounds.
2. The parties agreed that the proceedings be remitted for re-hearing before another judge. We accept that this is the only possible course open, and will so order.

1. Both parties sought relevant costs certificates in respect of the appeal and the re‑hearing. We are satisfied that such orders are appropriate, and will make them.

I certify that the preceding thirty four (34) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ryan, Kent & Tree JJ) delivered on 26 November 2020.