Manuel v Lane

Court of Appeal (NSW)|2013-03-12|Before: Meagher JA, Ward JA, Emmett JA, Nicholas J

Judgment 1MEAGHER JA: This appeal should be dismissed with costs and the application for leave to amend the notice of appeal dismissed, in each case for the reasons given by Emmett JA. 2WARD JA: I agree with Emmett JA. 3EMMETT JA: This Appeal is concerned with orders for the adjustment of property under s 20 of the Property (Relationships) Act 1984 (the Act). In June 2010, the respondent, Mr William Lane, applied for orders under the Act against the appellant, Ms Maxine Manuel. In August 2010, Ms Manuel filed a cross-claim that sought different orders under the Act. On 1 February 2012, a Judge of the Equity Division of the Court made orders under the Act. Ms Manuel now appeals from those orders. 4Before dealing with the issues in the appeal, it is desirable to say something about the relevant provisions of the Act, as well as the relevant principles applicable to a proceeding under the Act. It will then be convenient to summarise briefly the circumstances of the parties.

The relevant provisions of the Act 5Section 14 of the Act provides that a party to a domestic relationship may apply to a court for an order under Part 3 of the Act for the adjustment of interests with respect to the property of the parties to the relationship. Under s 5(1)(a), domestic relationship includes a de facto relationship. Section 4(1) provides that a de facto relationship is one between two adult persons who live together as a couple and who are not married to one another or related by family. 6Under s 20(1), on an application by a party to a domestic relationship for an order under Part 3 of the Act, a court may make such order adjusting the interests of the parties in the property of the parties as seems to it just and equitable. In doing so, the court must have regard to:

The circumstances of the parties 10It is common ground that Ms Manuel and Mr Lane were parties to a domestic relationship, being a de facto relationship. The relationship began in about 1995, when Mr Lane was 48 and Ms Manuel was 43. Both had previously been married and had children of those earlier marriages. However, there were no children of the relationship between the parties. Their relationship came to an end in early 2009. 11As at the date of their separation, Ms Manuel and Mr Lane jointly owned a property situated at 13 Boyd Lane, Medowie (the Medowie property). The Medowie property was owned as to two thirds by Ms Manuel and as to one third by Mr Lane. At the date of separation and the date of the orders, the Medowie property had a value of approximately $500,000. 12In addition, at the date of their separation, Mr Lane owned a Cessna aircraft and plant and equipment connected with the aircraft, which were used in operating a seaplane business. In August 2011, Mr Lane sold the business, including the aircraft and the other equipment, for $250,000. The proceeds of sale were disbursed as follows:

the sum of $25,000 was paid into the trust account of Mr Lane's solicitors to cover legal fees in connection with the proceeding under the Act;
sums totalling $30,000 were paid into the trust account of a firm of solicitors in Tamworth, being $25,000 in respect of legal fees relating to litigation between Mr Lane and the Civil Aviation Safety Authority, and $5000 to cover conveyancing costs in relation to the sale of the seaplane business,
the sum of $20,000 was paid to an agent as commission relating to the sale of the seaplane business;
$164,418 was paid in reduction of a liability of Mr Lane to National Australia Bank (NAB); and
the balance was paid to Mr Lane and was applied in discharging his credit card liabilities. 13Between them, Mr Lane and Ms Manuel also owned other property, including motor vehicles, contents of their home, a caravan, a boat, superannuation interests and investments in listed shares. They also had liabilities to bankers and other sundry liabilities. The precise details are not presently relevant.

The decision of the primary judge 14In essence, the effect of the orders made by the primary judge is that Mr Lane was to transfer his one-third interest in the Medowie property to Ms Manuel in exchange for a payment by Ms Manuel to Mr Lane of the sum of $250,000. Ms Manuel and Mr Lane were each to retain all other property that she or he respectively owned. No other orders were made affecting their respective interests in any property. His Honour had regard to the agreement of the parties that no order should be made in respect of the interest of each of the parties in the other items of property and financial resources presently in his or her possession or control. His Honour observed that both parties sought an order that each retain those items to the exclusion of the other. 15The primary judge concluded that it was just and equitable to adjust the interest of the parties by ordering Ms Manuel to pay to Mr Lane the sum of $250,000 and to order Mr Lane to transfer to Ms Manuel all of his interest in the Medowie property. In arriving at that figure, his Honour took into account the value of Mr Lane's interest in the Medowie property of about $167,000, to which his Honour considered there should be added an amount that fairly reflected the extent of Mr Lane's contribution to the relationship over the period, and the deprivation of his use of the Medowie property after the separation. His Honour attached significant weight to the fact that, for almost three years since the separation, Mr Lane had lost the accommodation afforded by residence in the Medowie property, while Ms Manuel had continued to have the benefit of its use and occupation. 16The primary judge also took into account other factors that he summarised briefly. Thus, his Honour referred to an inheritance of $90,000 received by Ms Manuel and a payment made by Mr Lane to Ms Manuel of $150,000 as recompense for her contribution towards Mr Lane's business. His Honour considered that another relevant factor was Mr Lane's significant financial contribution towards the support of the parties from May 2005, when Ms Manuel ceased working, until their separation in January 2009. 17Significantly, in relation to the principal issue in the appeal, the primary judge referred to evidence given by Mr Lane that he had paid about $150,000 towards his legal costs of the proceeding. His Honour also observed that he had not overlooked the prospect that Ms Manuel's costs, although unquantified, may be of a similar amount.

The grounds of appeal 18The grounds of appeal in Ms Manuel's Notice of Appeal filed on 1 May 2012 may be stated as follows:

the primary judge erred in failing to consider the respective contributions of the parties over the duration of the 15 year relationship;
the primary judge ought to have found that Ms Manuel's financial contributions were greater, or at least not less, than Mr Lane's financial contributions;
the primary judge erred in making a finding concerning the quantum of Mr Lane's contribution to the relationship after 2005, when Ms Manuel ceased working;
the primary judge erred in determining the value of the assets to be adjusted, by failing to add back the amount spent by Mr Lane on his legal costs, and treating as a liability an amount that should have been treated as an asset; and
the primary judge erred in determining that the assets of the parties should be divided in the proportion of 48.45% to Mr Lane and 51.55% to Ms Manuel and should have divided the property as to 65% to Ms Manuel and 35% to Mr Lane but, in any event, not less than equally. 19However, in her written outline of submissions, Ms Manuel contended that the adjustment made by the primary judge did not result in a just and equitable adjustment for two reasons as follows:
the primary judge failed to make necessary adjustments by way of adding back to the property to be divided the amounts expended by Mr Lane in payment of legal fees; and
the primary judge failed to make the correct findings as to Ms Manuel's financial contribution over the 15 years of the relationship and ought to have found that their respective financial contributions were at least equal or that Ms Manuel's financial contribution was greater than Mr Lane's. Those contentions were the only ones pressed on the hearing of the appeal.

Application for leave to amend 20On 4 April 2012, the primary judge ordered that Ms Manuel pay Mr Lane's costs of the proceeding prior to 17 June 2011 on the ordinary basis and on and from 17 June 2011 on the indemnity basis. In the course of oral argument on the appeal, Ms Manuel sought leave, as a fallback position, to amend her notice of appeal to include a ground impugning that order for costs. No explanation was advanced as to why the application was made at such a late stage. Leave to amend was opposed by Mr Lane. 21The proposed amendment would include an additional ground that the primary judge erred in ordering Ms Manuel to pay Mr Lane's costs, in circumstances where, because his legal costs had already been taken into account in the primary judge's assessment of the pool of assets, Ms Manuel had already contributed to Mr Lane's costs. The proposed amendment would assert that, in those circumstances, the primary judge ought to have ordered that each party bear his or her own costs. 22In the absence of any explanation as to why the amendment was not foreshadowed earlier, there is no justification for granting leave to amend. In any event, the granting of leave to amend would be futile, since the proposed additional ground could not succeed. 23In her written submissions to the primary judge on the question of costs, Ms Manuel began with the proposition that, when determining Mr Lane's entitlements, the primary judge had used a list of the parties' assets and liabilities that did not take into account their respective legal fees. The submission referred to the fact that Mr Lane had given evidence that his legal costs amounted to $150,000, which he had paid, but that Ms Manuel had not quantified her liability for costs, although it was accepted by his Honour that her unpaid costs should be regarded as being of a similar amount to those incurred by Mr Lane. 24Ms Manuel submitted to the primary judge that, because his Honour did not add back the amount of the legal costs paid by Mr Lane, the pool of property available for adjustment had been reduced by approximately $150,000, being property realised and money expended by Mr Lane to pay his legal costs of the proceeding under the Act. Ms Manuel submitted that it was "palpably unfair" for the Court to make an order that Mr Lane be reimbursed for monies that were not taken into account when determining the pool of property available for division between the parties. Ms Manuel said that Mr Lane was, in essence, "double dipping" and that she was being asked to pay for a liability already incurred, while the money used by Mr Lane to pay those costs had not been taken into account when determining what order should be made under the Act. 25Ms Manuel also submitted to his Honour that the manner in which his Honour had dealt with the issue of costs in his substantive determination would preclude him from making an order that she pay Mr Lane's costs. She submitted that, in circumstances where Mr Lane was not required to bring to account the legal costs he paid, she should not be ordered to pay those costs. 26No basis has been established for interfering with the exercise of discretion by the primary judge in relation to the costs of the proceeding. His Honour was entitled to deal with costs on the basis of his final determination as to the "just and equitable" adjustment and award them by reference to that outcome and the operation of the Uniform Civil Procedure Rules in relation to Mr Lane's offer of compromise made on 16 June 2011. This was particularly so where there was no evidence before the primary judge as to the liability for costs incurred by Ms Manuel and no evidence that the source of funds used to pay Mr Lane's legal expenses was, directly or indirectly, property that would otherwise have been available for distribution between the parties. The application for leave to amend the notice of appeal should be refused.

The substantive issue in the appeal 27The substance of Ms Manuel's complaint is that the way in which the parties' respective legal costs of the proceeding were dealt with was not even-handed. Her complaint is that Mr Lane has received payment from the joint property of the legal fees he has incurred in connection with the proceeding, whereas she has not received payment from the joint property of the legal fees she has incurred in connection with the proceeding. Subject to that matter, Ms Manuel appears to accept that an equal division of the joint property, after deducting all of their liabilities, was not inappropriate. Indeed, in the course of oral argument, Ms Manuel conceded, through her counsel, that if she failed to persuade the Court that the primary judge erred by failing to add back the amount spent by Mr Lane on his legal costs, the appeal was doomed to fail. Thus, in essence, the only question in the appeal is whether the primary judge erred in declining to accept the proposition advanced on behalf of Ms Manuel that, to the extent that Mr Lane had expended monies on legal costs in connection with the proceeding, the amount of those costs should be treated as funds that he has received from the joint property. 28Ms Manuel now contends that the primary judge should have notionally added back to the pool of joint property the value of property realised by Mr Lane after separation, as well as the amount by which his liabilities were increased in order to meet his expense for legal costs. She says that his Honour should then have included, as a liability for each of the parties, the amount of their respective liabilities for legal costs or the amount of the legal costs that had been paid. One short answer to that contention is that Ms Manuel adduced no evidence at the trial as to her legal fees, and did not ask the primary judge to take those fees into account in making orders under the Act. There can be no error on the part of a court in failing to take steps that the court is not asked to take. 29In contending for such an approach, Ms Manuel relies on principles that are, apparently, applied regularly in the Family Court of Australia, where it is the practice to add back into the pool of property for distribution between the parties the amount of any expenditure for legal costs of the proceeding and to ignore any liability for such legal costs. However, that practice has its origin in the fact that, under s 177 of the Family Law Act 1975 (Cth) (Family Law Act), subject to certain exceptions, including s 177(2), each party to proceedings under that Act is to bear his or her own costs. Under s 177(2), if in proceedings under the Family Law Act, the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to certain exceptions, make such orders as to costs and security for costs as the Court considers just. Section 117 sets out matters to which the Court should have regard in making such an order. 30There is no similar provision in the Act and the practice in this Court is different from that in courts exercising jurisdiction under the Family Law Act. In this Court, the general rule is that costs follow the event. That being so, there would ordinarily be no reason why property disposed of, or money paid, in order to discharge liabilities for costs of a proceeding, should be treated in a way different from any other property or liability of one of the parties. 31As a general principle, the Court is required to take the property of the parties as it finds that property at the date of trial. One exception to that general principle is where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of property. Another exception is where one of the parties has acted recklessly, negligently or wantonly with his or her property, the effect of which is to reduce or minimise the value of the property available for distribution between them. The mere fact that one party has expended or disposed of property or spent money realised from the disposition of property that existed at the date of separation does not necessarily lead to the conclusion that the value of the property disposed, or the money spent, should notionally be added back to the interests in property available for adjustment. The crucial question is whether the disposition of property or expenditure incurred was reasonable (see Edwards v Harris [2012] NSWSC 1 at [108] and following). 32The primary judge concluded that Ms Manuel had failed to demonstrate any evidentiary basis for the application of those principles. His Honour considered that Mr Lane's unchallenged evidence showed no more than that property had been realised by him, and that his liabilities had increased, in the ordinary course of arranging his affairs. There was no evidence indicative of unreasonableness, extravagance or recklessness and Mr Lane was not cross-examined to establish any such matters. The decision of whether to add back, to the pool of property available for adjustment under the Act, property that has been disposed of or monies that have been spent, must be considered on the basis that such a step is the exception, not the rule. His Honour considered that there was no justification for treating those matters as exceptions to the general principle that the Court should take the property of the parties as it finds it at the date of the trial. 33In essence, the complaint now advanced on behalf of Ms Manuel has its origin in the way in which the proceeding was conducted before the primary judge. In the course of the trial, Ms Manuel drew attention to the fact that, at the date of their separation, Mr Lane had superannuation valued at $14,000 and listed shares valued at $33,440 and had indebtedness to NAB of $84,500. On the other hand, as at the date of trial, Mr Lane had realised the superannuation and listed shares and disbursed the proceeds. In addition, the debt to NAB had increased to $164,418 shortly before the commencement of the trial, when the indebtedness was repaid from the proceeds of the sale of the seaplane business. Ms Manuel contended that those facts, coupled with Mr Lane's concession that he had paid legal costs in excess of $150,000 in connection with the proceeding, supported the proposition that he had applied part of the property that would have otherwise been available for adjustment in payment of his legal costs relating to the proceeding. 34However, it is not insignificant that the evidence about Mr Lane's legal costs arose in the course of cross-examination directed to establishing whether he had brought to account all of his property. A contention had been advanced to the primary judge that, in the proceeding, Mr Lane had not fully disclosed his financial situation and that Mr Lane deliberately delayed providing information to thwart a proper enquiry into his financial situation. 35Even so, Mr Lane was not cross-examined for an explanation as to the source of funds used to pay legal expenses and no suggestion was put to him in cross-examination that he was guilty of non-disclosure. That is the only context in which evidence was elicited concerning the disposition of property and incurring of liabilities. On the other hand, there was no evidence adduced on behalf of Ms Manuel as to the costs that had been incurred by her or the liability she had for such costs, as at the date of the trial, albeit that she may not have received a tax invoice in respect of the costs for which she had incurred a liability. 36While it is possible to discern an apparent unfairness in the way in which the adjustment made under the Act has operated in relation to Ms Manuel and Mr Lane in relation to their costs, that unfairness stems, not from any error on the part of his Honour, but from the manner in which the proceeding was conducted before his Honour. It would have been open to Ms Manuel to adduce evidence to indicate the amount of costs she had already paid and the liability that she had incurred for legal costs that had not yet been paid. No attempt was made to adduce such evidence. 37Ms Manuel's contentions amount to no more than an attempt to invite the Court of Appeal to re-examine the exercise of discretion by the primary judge on bases that were not advanced to his Honour in the course of the trial. The thrust of Ms Manuel's contentions is that, in determining the appropriate order for adjustment of interests in property under s 20 of the Act, the Court should treat the property that had been expended by Mr Lane in satisfaction of his legal costs as property available for distribution between the parties. That is to say, the Court was invited to add back the assets that had been disposed of and to ignore the liability that had been incurred in connection with the payment of legal costs. 38The primary judge, for the reasons indicated above, properly rejected that contention. Whether or not there was any unfairness to Ms Manuel, by reason of the fact that the amount of her costs was not taken into account, is not to the point. She made no effort to adduce any evidence as to the quantum of the costs that she was likely to incur in connection with the proceeding. Several tables were prepared by the parties and submitted to the primary judge by way of stating the property of the parties that should be considered and the liabilities that they had. In none of those tables was any reference made to any liability that Ms Manuel may have had for legal costs. Nor was any reference made to Mr Lane's legal costs. 39It is not now open to Ms Manuel to complain about the result of the exercise of discretion by the primary judge. His Honour did not adopt the approach of determining the proportions in which the total property of the parties should be divided. Rather, his Honour adopted the approach urged upon him by both parties, namely, that there should be as little interference as possible with the respective items of property owned by them. His Honour simply determined that Ms Manuel should have the entirety of the Medowie property, and that she should pay a sum to Mr Lane as consideration for the acquisition of his one-third interest in the Medowie property and as recognition of the other factors to which reference has been made. Ms Manuel has not established that there was no error in doing so.

Conclusion 40The appeal should be dismissed with costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 March 2013

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