Naisby & Naisby [2021] FamCAFC 92 (11 June 2021)

Last Updated: 17 June 2021

FAMILY COURT OF AUSTRALIA

Naisby & Naisby [2021] FamCAFC 92

Appeal from:	Naisby & Naisby (No.2) [2020] FCCA 2334
Appeal number(s):	NOA 65 of 2020
File number(s):	BRC 4847 of 2016
Judgment of:	RYAN, WATTS & TREE JJ
Date of judgment:	11 June 2021
Catchwords:	FAMILY LAW – APPEAL – PROPERTY – Where an order which splits superannuation was made without power because the superannuation trustee had not been afforded procedural fairness – Where the husband had not been afforded procedural fairness when he was prevented from asking the wife questions about her use of company funds to pay her personal legal costs and her behaviour adversely affecting the value of a business – Where the primary judge failed to adequately consider monies the wife had taken from the company to pay her personal legal costs – Where the primary judge failed to adequately consider the contribution made upon the husband’s receipt of monies from total and permanent disability policies – Appeal allowed – The property settlement order set aside – The matter be remitted for rehearing – Costs certificates granted.
Legislation:	Family Law Act 1975 (Cth) ss 75(2), 79(4), 90XD, 90XE, 90XI, 90XK, 90XT, 90XZD Federal Proceedings (Costs) Act 1981 (Cth) ss 6, 8, 9 Family Law Rules 2004 (Cth) r 14.06 Federal Circuit Court Rules 2001 (Cth) r 24.07 Family Law (Superannuation) Regulations 2011 Explanatory Memorandum, Family Law Legislation Amendment (Superannuation) Bill 2001
Cases cited:	Aleksovski v Aleksovski (1996) FLC 92-705; [1996] FamCA 111 Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148 Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55 Hickey and Hickey and Attorney-General (Cth) (Intervener) (2003) FLC 93-143; [2003] FamCA 395 House v The King (1936) 55 CLR 499; [1936] HCA 40 MRR v GR (2010) 240 CLR 461; [2010] HCA 4 Naparus & Frankham (2020) FLC 93-943; [2020] FamCAFC 32 Obannon & Scarffe (2021) FLC 94-009; [2021] FamCAFC 33 Re F: Litigants in person guidelines (2001) FLC 93-072; [2001] FamCA 348 Royal Guardian Mortgage Management Pty Ltd v Nguyen (2016) 332 ALR 128; [2016] NSWCA 88 Stead v State Government Insurance Commission (1986) 161 CLR 141; [1986] HCA 54
Division:	Appeal Division
Number of paragraphs:	106
Date of hearing:	2 March 2021
Place:	Brisbane
Appellant:	Litigant in person
Counsel for the Respondent:	Ms Fraser
Solicitor for the Respondent:	Melrose Keys Lawyers

ORDERS

		NOA 65 of 2020 BRC 4847 of 2016
APPEAL DIVISION OF THE FAMILY COURT OF AUSTRALIA
BETWEEN:	MR NAISBY Appellant
AND:	MS NAISBY Respondent

ORDER MADE BY:	RYAN, WATTS & TREE JJ
DATE OF ORDER:	11 JUNE 2021

THE COURT ORDERS THAT:

1. The Appeal be allowed.
2. The property settlement order (paragraphs 2-14) made 1 September 2020 be set aside.
3. The proceedings be remitted to the Federal Circuit Court of Australia for re-hearing by a judge other than the primary judge.
4. The Court grants to the appellant husband 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 husband in respect of the costs incurred by him in relation to the appeal.
5. The Court grants to the respondent wife 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 wife in respect of the costs incurred by her in relation to the appeal.
6. The Court grants to each of the parties 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 parties in respect of the costs incurred by them in relation to the re-hearing.

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

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 17.02 Family Law Rules 2004 (Cth).

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

REASONS FOR JUDGMENT

RYAN, WATTS & TREE JJ:

INTRODUCTION

1. By Notice of Appeal filed 29 September 2020, Mr Naisby (“the husband”) appeals final property settlement orders made by a Judge of the Federal Circuit Court on 1 September 2020. Ms Naisby (“the wife”) concedes Ground 1 of the appeal which, given the subject matter of that ground, means that in the event we agree that the primary judge has made an error, the appeal must be allowed.
2. Counsel for the wife submits that if Ground 1 was the only successful ground of appeal, then it would be possible for this Court to re-exercise discretion and remake the property settlement order rewriting paragraph 4 of the property settlement order to cure the defect that is the subject of Ground 1 of the appeal. The husband agreed that if that was the only ground of appeal that was successful then he would support that re-exercise of discretion.
3. The husband, having abandoned Ground 11, presses the remaining nine grounds of appeal and the wife resists those challenges.
4. For reasons that follow, we have concluded that there is merit in several of the grounds of appeal, we are unable to re-exercise discretion and the matter is to be remitted for rehearing.

BACKGROUND

5. The primary judge heard competing applications for parenting, property settlement and spousal maintenance orders for eight days, in four tranches over nine months. The parties then provided the primary judge with written submissions several months after the conclusion of the oral hearing.
6. Final parenting orders were made on 5 June 2020 and final property settlement orders were made on 1 September 2020.
7. In addition to appealing the property settlement order, the husband also had appealed the parenting orders. The two younger children of the marriage, aged 11 and nine at the time of the final parenting orders, had been living with the husband as a result of interim orders made in April 2018. As a result of the final parenting orders, the two younger children returned to live with the wife. The husband’s appeal against the parenting orders was resolved before us by the husband withdrawing the appeal on the basis that later that day a judge of the Federal Circuit Court would make consent orders which effected some relatively minor modifications to the parenting orders made by the primary judge.
8. The property settlement order made by the primary judge provides:

(a) The wife receive the balance of the net sale proceeds of Business 1 ($682,860) after payment of the remaining debts ($600,189);
(b) The husband transfer to the wife his interest in the Suburb K property (“the matrimonial home”);
(c) The wife receive a superannuation split from the husband’s interest in the MSBS Fund using a base amount of $342,412; and
(d) The wife solely retain (and the husband relinquish any right, title and interest in) bank accounts in her name, shares, the motor vehicle, furniture, chattels and personal effects in the wife’s possession.

9. At the time of the hearing before the primary judge, the husband was aged 51 and was a medically retired Health care professional. The wife, also aged 51, was a student and worked part-time. The parties married in 1990 and there were five children of the marriage. At the time the parties married, the husband was studying Health care and the wife was completing qualifications in education. In 1993 the husband joined the armed services. The parties purchased a property in 1994, the same year the first child of the marriage was born. The parties moved to various locations in Australia and overseas to accommodate the husband’s employment. The second child was born in 1998 and the third in 2002. In late 2004 to early 2005 the husband was deployed to Country Y to assist after a natural disaster. The husband subsequently left the armed services in 2005.
10. In 2005 the husband commenced working as a Health care professional. In 2006 Business 1, a company wholly owned by the parties, purchased businesses. In 2008 the parties, having bought and sold a number of properties during their marriage, purchased the matrimonial home.
11. The two younger children were born in 2009 and 2011.
12. In 2012 the husband was diagnosed with post-traumatic stress disorder (“PTSD”) and major depressive disorder (“MDD”) arising from his deployment to Country Y.
13. The parties separated in April 2015 when the husband left the matrimonial home. The wife remained in that property until the date of hearing.
14. In or around May 2015 the husband commenced a relationship with Ms O who is a Health care professional and works part-time. They married in 2016. The husband and Ms O controlled the L Trust which acquired and developed a farming property in New South Wales (“the Town KK property”). The husband invested about $500,000 into the Town KK property but his current interest in that property was only valued at $110,000.
15. Within months of the parties’ separation, the husband ceased to work as a Health care professional and left the businesses to the wife to manage and ultimately sell.
16. Shortly after that time, the husband received payments totalling $914,812 under three total and permanent disability (“TPD”) policies taken out during the marriage (“the disability payments”). At that time the wife was unaware that the husband had received these payments. None of those funds remained as at the date of hearing. The disposition and treatment of those funds by the husband was the subject of controversy before the primary judge. The primary judge notionally added back the entirety of those disability payments to the table of assets and liabilities of the parties.
17. The wife sold the businesses for $2.1 million but there was little left once all the debts were paid.
18. As indicated, the two younger children ordinarily live with the wife pursuant to the final parenting orders made 5 June 2020.

PRIMARY JUDGE’S REASONS

19. In the primary judge’s reasons for judgment, her Honour:

(a) Acknowledged that the husband was not legally represented and the guidelines enounced in Re F: Litigants in person guidelines [2001] FamCA 348; (2001) FLC 93-072 (“Re F: Litigants in Person Guidelines”) applied.
(b) Set out facts relevant to the financial history of the parties’ marriage most of which were uncontroversial.
(c) Found that it was just and equitable to make a property settlement order and explicitly adopted the four stepped approach described in Hickey and Hickey and Attorney-General (Cth) (Intervener) [2003] FamCA 395; (2003) FLC 93-143 (“Hickey”) at [39]:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s. 79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss. 79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s. 79(4)(e), the matters referred to in s. 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case.
(Citations omitted)

20. As part of the first step, the primary judge:

(a) As sought by the wife and opposed by the husband, determined to adopt a global rather than an asset by asset approach, placing both superannuation and non-superannuation assets in the one pool.
(b) Settled a table of assets and liabilities assigning a value to each and concluding that the overall net value of the assets was in the sum of $2,944,843.
(c) In doing so the primary judge resolved:

(i) To add back the entire amount of the husband’s disability payments in the sum of $914,812 against the husband;
(ii) Not to add back an inheritance of $170,260 and a tax refund which the husband received after separation and which had been expended but rather take it into account at the third step;
(iii) Not to add back any monies the wife had received from the businesses after the separation;
(iv) To value the household contents but not the motor vehicles;
(v) Not to include any bank accounts in the table; and
(vi) Not to include the wife’s debt for outgoings on the matrimonial home and to Centrelink but to include the husband’s tax debt;
(vii) Not to include the husband’s interest in the Town KK property.

21. As part of the second and third steps the primary judge:

(a) Considered the contributions of the parties and concluded that the husband should receive a two per cent adjustment in his favour because:

(i) The parties’ contributions to the date of separation were equal;
(ii) After separation:

• The wife made contributions in preserving and maintaining the businesses and organised for their sale despite constant interference from the husband;
• Notwithstanding the husband paid about 25 per cent of his disability payments on the mortgage and outgoings on the matrimonial home, there should only be a “small adjustment” in respect of those payments;
• No adjustment should be made for the contributions either party made in the role as parent given the pattern in which the four children lived with their respective parents after the separation.

(b) Assessed a seven per cent adjustment in the wife’s favour for what the primary judge described as “future needs” (a form of shorthand used by the primary judge for the third step in Hickey). When doing so, the primary judge considered relevant s 79(4)(d)–(g) considerations which included:

(i) The husband’s inability to work;
(ii) The husband’s receipt of Department of Veterans’ Affairs (“DVA”) payments in the sum of $320,000 per annum;
(iii) The wife’s ability to work, her current course of study and the likelihood she would receive less income than the husband’s income from DVA payments;
(iv) The wife’s future primary care of the two younger children; and
(v) The primary judge did not take into account the husband’s interest in the Town KK property (although it was mentioned at the fourth step).

22. At the fourth step, the primary judge found that the result achieved by the first three steps, of a 55/45 division in the wife’s favour, was just and equitable and ordered that the husband should retain all of his superannuation, subject to a super splitting order in respect of the husband’s interest in the MSBS fund. The splitting order comprised a major element of the property settlement order.
23. In the husband’s Summary of Argument filed 15 January 2021, he asserted that the real division of existing assets was 75.68/24.31 in favour of the wife if the disability payments, which no longer existed, were excluded and the value of his interest in the Town KK property was included. Whilst that precise mathematical calculation is not correct it is close enough for the purposes of making the point.

GROUNDS OF APPEAL

24. The husband submitted that the primary judge erred in:

(a) Making a superannuation splitting order without power because the trustee of the relevant fund had not been afforded procedural fairness in relation to the making of that order (Ground 1);
(b) Failing to afford the husband procedural fairness when he was prevented from asking the wife questions about her use of company funds to pay her personal legal debts and her behaviour adversely affecting the value of the businesses (Ground 10);
(c) The adding back to the property pool the entire amount of the disability payments (Grounds 2, and 3(a));
(d) Failing to include as “an add back” the monies paid by the wife for legal expenses in relation to these proceedings, wages received by the wife from 1 July 2018, a dividend paid 10 September 2018, termination payments received by the wife and funds the wife paid to her parents (Grounds 4, 5(a) and 5(c));
(e) The assessment of and weight given to the parties’ respective post-separation contributions (Grounds 3(b), 5(b) and 5(d));
(f) Adjusting s 75(2) considerations in the wife’s favour by seven per cent, being an adjustment which was unreasonable or plainly unjust given the factors which the primary judge took into consideration, and disclosing inadequate reasons for so doing (Grounds 6 and 7);
(g) Making a finding of fact that the wife had not received income since the sale of the businesses in 2018 (Ground 8);
(h) Making orders which resulted in the husband receiving 24.3 per cent of the net existing property of the parties, an outcome which was asserted by the husband to be not just and equitable in the circumstances of the case (Ground 9); and
(i) Failing to deal with the husband’s application for return of specific chattels. (This is not a specific ground of appeal but was raised by the husband in his Summary of Argument).

25. As indicated, the husband abandoned Ground 11, a challenge in respect to the adequacy of reasons for the primary judge’s findings about the respective credit of the parties, on the basis that he was unable to point to how that finding materially affected any other finding in the primary judge’s reasons.

Was the superannuation splitting order made without power? (Ground 1)

26. By Ground 1 the husband’s complaint is that the primary judge erred in law by making paragraph 4 of the property settlement order without having power to do so.
27. Paragraph 4 is part of the order which splits superannuation pursuant to s 90XT(1)(a) of Family Law Act 1975 (Cth) (“the Act”) (incorrectly referred to in the orders as s 980XT(1)(a)). The effect of the order is that whenever a split of a payment within the meaning of s 90XE of the Act becomes payable to the husband from the MSBS Fund, the wife is entitled to be paid an amount in accordance with the Family Law (Superannuation) Regulations 2011 using the base amount of $342,412 and there is to be a corresponding reduction in the husband’s entitlement in his interest in the fund.
28. Paragraphs 5–10 of the property settlement order are consequential upon the main provision in paragraph 4 and include paragraphs 5 and 6 which are in the following terms:
    5. The operative time for the purposes of Order (4) is four (4) business days after the service of these orders on the Trustee of the MSBS Fund.
    6. Orders (4) and (5) are binding on the Trustee of the MSBS Fund (the MSBS Fund Trustee) of which the Trustee has been provided procedural notice.
29. The husband, in his Summary of Argument, submitted that the primary judge erred in:
    2. ...
       1. Making superannuation splitting orders without the trustee of the relevant fund being provided procedural fairness in relation to the making of the orders.
30. The husband amplified that submission at paragraphs 3–7 of his Summary of Argument in the following manner:
    3. Orders 4 and 5 of orders made on 1 September 2020 provide for a payment split in respect of the husband’s interest in the MSBS Fund. And order 6 provides that orders 4 and 5 are binding on the trustee of the MSBS Fund.
    4. Pursuant to section 90XZD of the Family Law Act 1975 (Cth) the court cannot make an order binding the trustee of a superannuation plan unless the trustee has been accorded procedural fairness in relation to the making of the order.
    5. The Federal Circuit Court Rules 2001 provide that if in an application or response a person seeks a splitting order he or she must, immediately after filing the application or response serve a sealed copy of the document on the trustee of the superannuation plan in which the interest is held.
    6. On 21 February 2019 (4 days prior to the commencement of trial), the wife filed in the proceedings an Amended Response in which she, inter alia, sought superannuation splitting orders in respect of the husband’s interests in [Super Fund FF] and the MSBS Fund.
    7. However, there was no evidence before the court at any stage of the trial that the Amended Response was served on the trustee of either fund. Accordingly, it is submitted that the court lacked jurisdiction to make orders binding the trustee of the MSBS Fund.

(As per the original) (Footnotes omitted)

31. In the wife’s Summary of Argument filed on 5 February 2021, she deals with Ground 1 in the following way:
    8. By ground 1 the husband asserts that the court ‘lacked jurisdiction to make orders binding the trustee of the MSBS Fund’. This is incorrect.
    9. Section 90XS and 90XT of the Family Law Act (1975) provide the Court with the authority to make the orders made by her Honour at Order 4.
    10. The MSBS Fund was properly provided with procedural fairness prior to the time that Order 4 took effect in that Order 5 provide as follows:

(5) The operative time for the purpose of Order (4) is four (4) business days after the service of these orders on the MSBS Fund.

11. Ground of appeal 1 must fail.

(As per the original) (Footnotes omitted)

32. Whilst, by conceding Ground 1, the wife should be taken to have abandoned these assertions, we need to be satisfied the ground has been made out and accordingly we shall comment upon this aspect of the wife’s Summary of Argument.
33. Section 90XZD(1)(a) of the Act is in the following terms:

90XZD Orders binding on trustee
(1) An order under this Part in relation to a superannuation interest may be expressed to bind the person who is the trustee of the eligible superannuation plan at the time when the order takes effect. However:

(a) in the case of a trustee who is not a secondary government trustee—the court cannot make such an order unless the trustee has been accorded procedural fairness in relation to the making of the order ...

34. There is no question that the MSBS Fund was an eligible superannuation plan (as defined in s 90XD of the Act) and not a secondary government trustee.
35. In this case, paragraph 6 of the property settlement order purports to bind the trustee of this fund. That means that the preconditions of the operation of s 90XZD of the Act is attracted and the trustee must be afforded procedural fairness.
36. Paragraph 170 of the Explanatory Memorandum to the Family Law Legislation Amendment (Superannuation) Bill 2001 indicates what is contemplated by the term “procedural fairness” pursuant to s 90MZD (now s 90XZD):

... It is intended that procedural fairness, in this context, will imply that the trustee has been given notice of the proceedings, been informed of when the proceedings will be heard by the court and be given an opportunity to be heard in the proceedings.

37. In order for such an opportunity to given, the notice provided should be sufficient to enable the trustee to consider whether the trustee wishes to seek to become a party to the proceedings and be heard in respect of the proposed splitting order or its form. Sometimes this period allows the parties to attend to any concerns raised by the trustee, particularly in relation to the form of the splitting orders. It is rare that a trustee seeks to be joined as a party in order to be heard.
38. The current rules of the court mandate what notice should be given to trustees. Rule 24.07(2) of the Federal Circuit Court Rules 2001 (Cth) (“FCCR”) requires a sealed copy of an application for a splitting order to be served upon the trustee immediately upon it being filed. Rule 14.06(2) of the Family Law Rules 2004 (Cth) provides for service of notice of the orders sought at least 28 days before the first appearance before the trial judge.
39. Section 90XZD(1)(a) of the Act is expressed in imperative terms. It obliges the court, if it intends to bind the trustee, to be satisfied the trustee has been afforded procedural fairness in relation to the making of the order. It is a matter upon which power is conditioned much as it is when a jurisdictional fact must be proved to exist (see for example MRR v GR (2010) 240 CLR 461 at [13]).
40. The statement made by the primary judge in paragraph 6 of the property settlement order (which replicates an expression used in the wife’s Amended Response) that the “[t]rustee has been provided procedural notice” does not make it so.
41. The husband correctly submitted that there was no evidence before the Court at any stage of the trial that the Amended Response was served on the trustee of the MSBS Fund. The response by the wife in her Summary of Argument is a tacit acknowledgment that the trustee had not been served with a copy of the wife’s Amended Response in accordance with r 24.07 of the FCCR. The wife did not file an Application in an Appeal to adduce further evidence to establish proper notice had been given to the trustee.
42. The wife’s submission that paragraph 5 of the property settlement order cures the difficulty and provided the trustee with procedural fairness is misconceived. As indicated, paragraph 5 is:

The operative time for the purposes of Order (4) is four (4) business days after the service of these orders on the Trustee of the MSBS Fund.

43. Relevantly, s 90XD of the Act defines “operative time” to mean:

Operative time:
(a) in relation to a payment split under a superannuation agreement or flag lifting agreement—has the meaning given by section 90XI; or
(b) in relation to a payment flag under a superannuation agreement—has the meaning given by section 90XK .... ;
(c) in relation to a payment split under a court order—means the time specified in the order.

44. The operative time in s 90XI and s 90XK(1) is “the beginning of the fourth business day after the day on which a copy of the agreement is served on the trustee...”. Commonly, as here, the same operative time set by the Act for superannuation agreements, is specified in splitting orders. The concept of “operative time” under the Act is for the purposes of allowing a trustee to receive and make the necessary administrative arrangements for the implementation of the order. Axiomatically the part of the order which sets the operative time cannot be a mechanism by which the trustee is provided procedural fairness before the order is made.
45. The trustee was not given any notice and accordingly was not afforded procedural fairness. Consequently the superannuation splitting order was made without power. There is merit in Ground 1.
46. If this were the only successful ground of appeal, both parties agreed that we could re-exercise discretion. That could have been done, after dispensing with the relevant rule, in one of two ways:

(a) Re-drafting the paragraphs in the property settlement order relating to superannuation splitting so that it had no effect until the expiration of 28 days after the order has been served upon the trustee, or
(b) Delaying actually remaking the order until the Court was satisfied that the requisite notice has been given to the trustee without the trustee seeking leave to intervene.

By adopting either of those courses, the trustee would have been afforded the opportunity to have the matter relisted in the event that the trustee sought to become a party and be heard in respect of the order coming into effect or being made.

47. However, as will be seen, Ground 1 is not the only ground upon which the appeal succeeds.

Procedural fairness (Ground 10)

48. Ground 10 asserts that the primary judge did not afford the husband procedural fairness. This ground shall be dealt with before the remaining grounds of appeal. It is a challenge to the integrity of the court process and if successful, requires a rehearing of the matter (Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 at 581; Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88; (2016) 332 ALR 128 at 130; Obannon & Scarffe [2021] FamCAFC 33; (2021) FLC 94-009 at [11]–[21]). A denial of procedural fairness will not be an appealable error unless it could be said that a properly conducted trial could not possibly have produced a different result (Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141 (“Stead”)).
49. The husband complained that the primary judge refused to allow him to cross examine:

(a) The wife as to her use of company funds post-separation;
(b) The company accountant regarding the wife’s use of company funds post-separation; and
(c) The wife as to her management of the parties’ business post-separation.

Was the husband unfairly prevented from asking the wife questions about her use of company funds for private legal fees? (Ground 10(a))

50. On 12 June 2019, the fifth day of the hearing (during the second tranche of the trial), the husband was cross examining the wife about her use of company monies post-separation and specifically regarding an amount of $184,984 (“the RR settlement monies”) the company had received as the fruits of litigation against its former accountant. It was not controversial that a significant portion of these funds had been transferred by the wife into her personal account. Neither the wife nor the company accountant had provided, in their written evidence, any breakdown as to how the wife had expended the RR settlement monies and the wife was unable to answer the husband’s questions about the disposition of those funds. As a result, the primary judge ordered the wife to file an affidavit attaching the relevant bank statements and setting out how the money received had been disbursed (Transcript 12 June 2019, p.437 line 18 to p.440 line 47).
51. The following exchange then took place:

[THE HUSBAND]: I had more questions along that vein, your Honour.
HER HONOUR: Well, I don’t think we can take that any further ‑ ‑ ‑
[THE HUSBAND]: I’m not going to, your Honour. I’m not going to.
HER HONOUR: ‑ ‑ ‑ at this point.
(Transcript 12 June 2019, p.441 lines 4–10)

52. The husband then attempted to ask a question about the payment of $29,000 by the wife from company funds to the lawyers representing her at the hearing. Counsel for the wife objected to that question being asked and the following exchange took place:

[COUNSEL FOR THE WIFE]: Objection. If there’s a document that can be put to the witness that indicates ‑ ‑ ‑
HER HONOUR: Is there a document?
[COUNSEL FOR THE WIFE]: ‑ ‑ ‑ this 29,000.
[THE HUSBAND]: At this point in time, no, your Honour.
HER HONOUR: Well, then I – then that might have to be for another day.
[THE HUSBAND]: All right, your Honour.
(Transcript 12 June 2019, p.441 lines 19–30)

53. Prior to the trial recommencing for the third tranche of the hearing, the wife filed an affidavit on 11 July 2019 pursuant to Order 1 of 12 June 2019 in which she offered an explanation as to how the $184,984 from the RR settlement was expended and provided some supporting (but not all relevant) documents.
54. When the third tranche of the hearing recommenced on day six, the primary judge ruled that any further questions by the husband to the wife be limited to the affidavit she had filed (Transcript 15 August 2019, p.466 lines 37–38).
55. In cross examination, the wife was unable to confirm that on the face of her affidavit she had paid from company funds about $161,000 to her former family lawyers from the RR settlement monies (Transcript 15 August 2019, p. 480 lines 12–18). Whilst the affidavit that the wife filed did not make that calculation, the affidavit did, on its face, indicate that amounts totalling $161,000 were paid to her former family lawyers from the RR settlement monies.
56. The husband then asked the following question and received the following answer from the wife:

[THE HUSBAND]: Okay. You had already paid to [the wife’s former family lawyers] $67,000 from the company account prior to the [RR] money coming into the company or a substantial sum?
[THE WIFE]: That’s not in my affidavit. I think you’re supposed to be asking questions from the affidavit.
(Transcript 15 August 2019, p.480 lines 25–28)

57. There was then the following exchanges between the primary judge and the husband:

HER HONOUR: Whether we have a self-represented or not that’s not appropriate
[THE HUSBAND]: I’m sorry. Yes, sure.
HER HONOUR: Yes. What’s the question and how does it relate to the affidavit?
[THE HUSBAND]: I suppose it doesn’t because it relates to a payment prior to that.
HER HONOUR: I’m going to ask – and I know we’ve had this discussion earlier this morning – if you could, for the purposes of this cross-examination, as I’m only allowing it because there has been a further affidavit filed – it’s not to fill in any gaps or questions you may not have asked previously. It is in relation to this affidavit only
(Transcript 15 August 2019, p.480 lines 34–45)

58. In summary, the husband complained that the primary judge’s ruling to limit his cross examination on 15 August 2019 to matters set out in the wife’s affidavit of 11 July 2019 meant that:

(a) He was denied the opportunity of asking questions about monies paid by the wife to her former family lawyers from company funds prior to the receipt of the RR settlement monies in circumstances where on 12 June 2019 the primary judge had indicated that any further questions of a similar vein needed to await the wife’s affidavit; and
(b) He was prevented from asking questions about monies paid by the wife from company funds to the lawyers representing her at the hearing after the expenditure of the monies from the RR settlement in circumstances where the primary judge said to the husband on 12 June 2019, “[t]hat might have to be for another day”.

59. The wife argued that it was appropriate for the primary judge to limit the husband’s further cross examination of the wife to matters arising out of the affidavit filed by the wife on 11 July 2019 in circumstances where:

(a) The husband concluded his cross examination of the wife on 12 June 2019; and
(b) The wife was re-examined on 12 June 2019.

60. Given the statements made by the primary judge on 12 June 2019, we do not accept that the cross examination of the wife had concluded.
61. In Re F: Litigants in Person Guidelines, the Full Court provided a non-exhaustive set of guidelines for cases involving litigants in person. They are aimed at ensuring a fair trial. With respect to the primary judge, her Honour ended up hearing eight days of evidence in four tranches over a period of nine months. Given the manner in which the hearing was segmented, we have some sympathy with the primary judge’s oversight as to what indications had been given to a litigant in person on a prior day in respect of specific issues in relation to cross examination. Nonetheless, we find merit in the complaint by the husband that the limit her Honour imposed on the husband in his cross examination of the wife on 15 August 2019 denied the husband the opportunity to explore with the wife matters relevant to her expenditure of company funds on personal legal expenses, in circumstances where he should have been afforded that opportunity. Accordingly we accept that the husband was denied procedural fairness to that extent.
62. The question then arises as to whether or not the husband’s cross examination could have made no difference to the result (Stead). As we shall further elaborate in our discussion of Grounds 4, 5(a) and 5(c), the wife’s use of company funds was a significant aspect of the case presented by the husband. We accept that this issue was materially relevant and we are unable to say the husband’s questions of the wife on these issues could have made no difference to the result. They may well have.
63. Accordingly, there is merit in Ground 10(a).

Was the husband unfairly prevented from asking the company accountant questions about the wife’s use of company funds post-separation? (Ground 10(b))

64. In relation to Ground 10(b), the husband does not refer in his Summary of Argument to the primary judge not affording him procedural fairness when refusing to allow him to cross examine the family accountant regarding the wife’s use of company funds post-separation. The husband was able to cross examine the accountant and did ask questions about the wife’s use of company funds post-separation, including for legal fees. The husband’s written submissions address some of the evidence given by the accountant.
65. Accordingly, there is no merit in Ground 10(b).

Was the husband unfairly prevented from asking the wife questions about her behaviour in the businesses? (Ground 10(c))

66. The wife described in her written evidence her allegations the husband had negatively interacted with staff of the business after he had retired from it and how he had had ongoing negative contact with a potential purchaser of the business.
67. On 12 June 2019 the husband commenced a line of questioning of the wife about her behaviour in sending a notice to patients of the businesses and the impact that the contents might have had on the reputation of the business in the community. Counsel for the wife objected to the relevance of the question. The following exchanges then occurred between the primary judge, the husband and counsel for the wife:

HER HONOUR: What is the relevance? How does it possibly impact on the property division.
[THE HUSBAND]: ... it has been stated over and over again that the problems with the functioning of [Business 1], its reputation, people leaving, the unrest, the rumours, are because of my actions.
...
HER HONOUR: ... I’m not here to comment about particular behaviours. I am here, when it comes in a property division, to identify the property, the contributions made, and the future needs, and what is just and equitable in the division of the property.
...
HER HONOUR: What does this notice have to do with anything to do with post-separation contributions?
[THE HUSBAND]: Well, in the finance – the only thing this could state, really, would be a negative contribution. I don’t believe that exists.
HER HONOUR: But that’s not an argument being run, is it?
[THE HUSBAND]: It seemed to me that it is being run that I was affecting – my behaviour was ‑ ‑ ‑
HER HONOUR: [Counsel for the wife], is there an issue as to negative contributions ‑ ‑ ‑
[THE HUSBAND]: My behaviour was ‑ ‑ ‑
HER HONOUR: ‑ ‑ ‑ being run?
[COUNSEL FOR THE WIFE]: No, your Honour. The primary position is that my client made greater positive contributions post-separation, albeit that they were made in difficult circumstances where the husband left the business unexpectedly.
HER HONOUR: Yes.
[COUNSEL FOR THE WIFE]: But insofar as there may or may not be disputes between the parties as to reputation, that – or acts by them that may have impacted ‑ ‑ ‑
HER HONOUR: Or how that has impacted on the sale price.
[COUNSEL FOR THE WIFE]: That is – that is not ‑ ‑ ‑
HER HONOUR: That’s not an argument that’s being ‑ ‑ ‑
[COUNSEL FOR THE WIFE]: That is not an argument that’s being advanced.
[THE HUSBAND]: All right, your Honour. I will move on.
HER HONOUR: Move on, please.
(Transcript 12 June 2019, p.446 line 26 to p.448 line 1) (Emphasis added)

68. The wife’s written submissions filed 16 November 2019 stated that the court ought to have regard, inter alia, to “the negative post-separation contribution by the husband in terms of his denigration of the wife to staff of the business and interference in the operation of the business” (paragraph 11(c)).
69. At [79] of the reasons, the primary judge, in the context of discussing post-separation contributions, made the following findings:
    1. The wife was literally dropped into the business to look after it when the husband walked away shortly after separation in 2015, first resigning as a [Health care professional] and then as a director.
    2. The wife had no useful assistance from the husband whilst the wife dealt with litigation and other issues surrounding the business.
    100. The husband made it difficult for the wife to manage the business by undermining her as he badmouthed her to staff.
    4. The husband blatantly disregarded the undertakings and continued to interfere in the wife’s management of the business.
    5. The husband interfered in the sale of the business, even to the extent of suggesting to [Mr OO] that he was offering too much for the purchase of the business.
    6. The wife, despite the constant interference from the husband, was able to sell the business for its true value.
70. Had the primary judge only made findings in [79(a)] and [79(b)], the husband would have no complaint. The primary judge however went on to make findings about particular behaviours of the husband that impacted upon and made significantly more arduous the wife’s management and sale of the businesses.
71. The wife argued in her Summary of Argument:
    73. It is submitted that the submissions made by the husband ... misstate the nature of the exchange ... between her Honour, counsel for the wife and the husband.
    74. It had always been the case, and continues to be the case of the wife that she made significant contributions as to the management and sale of [Business 1] and that these contributions were made more difficult by the husband’s conduct.
    75. Counsel for the wife did confirm that an argument was not being run that that any dispute between the parties as to reputation impacted on the sale price.

(As per the original) (Footnotes omitted)

72. Given the exchanges in the transcript set out above, the husband has not misstated the nature of the exchanges. Counsel for the wife gave an assurance to the primary judge “in so far as there may or may not be disputes between the parties as to reputation ... or acts by them that may have impacted ... or how that has impacted on the sale price ... that is not an argument that’s being advanced”. In any event, at [79(e)] and [79(f)] of the reasons, the primary judge made adverse findings against the husband as to how his behaviour had had the potential to affect the sale price. The primary judge’s direction to the husband “to move on” meant he was denied the opportunity of testing the wife about her conduct relevant to the same issue.
73. Consequently, there is merit in the husband’s assertion that he was denied procedural fairness in being able to explore this issue with the wife. Again, we are unable to say that the upholding of the objection against the husband made no difference to the result. Ground 10(c) succeeds.
74. Given the challenges in Grounds 10(a) and 10(c) have been successful, a rehearing is required.

THE REMAINING GROUNDS OF APPEAL

75. Whilst it is not strictly necessary to consider the remaining grounds of appeal because they are not dispositive, as indicated, Grounds 4, 5(a) and 5(c) are relevant to whether the husband’s cross examination referred to in Ground 10(a) could have made a difference to the result. We also intend to discuss part of the complaint in Grounds 2 and 3(a). Otherwise, we ought not to consider grounds that may affect the rehearing (see Naparus & Frankham [2020] FamCAFC 32; (2020) FLC 93-943 at [27] and [28]).

Did the primary judge err in not including monies taken by the wife from the company for her personal use or for payment to her parents? (Grounds 4, 5(a) and 5(c))

76. The central (but not only) complaint under these grounds relates to the wife’s distribution of the company’s RR settlement monies of $184,984. As already indicated, the wife filed an affidavit on 11 July 2019 indicating that she had paid about $161,000 of that amount to her former family lawyers. The affidavit annexes invoices from her former family lawyers which are headed “Parenting and Property Matters” and solicitors’ professional fees are expressed as a lump sum without itemisation. That affidavit does not annex the itemised accounts that the wife ultimately gave to the company accountant and the wife did not tender them in evidence.
77. Although the primary judge made no findings about it, it seems that from the evidence available to the primary judge, that at least $117,730 of the $161,000 was designated by the wife as company expenses (Annexures ‘H’, ‘I’, ‘J’ and ‘K’ to the wife’s affidavit filed 11 July 2019).
78. The wife asserted that the company accountant had satisfied himself that the legal expenses incurred and attributed to the company were proper expenses of the company and gave the following oral evidence:

[THE WIFE]: ... To be honest with you, I’ve consulted at length with [the company accountant] about all of these costs ... he authorised that I could claim that they were business company fees.
(Transcript 12 June 2019, p.438 line 42 to p.439 line 2)

79. During cross examination, the company accountant gave the following evidence when being questioned by counsel for the wife:

[COMPANY ACCOUNTANT]: [The wife] has then said, “I have incurred expenses for the legals on behalf of the company. The amounts were this, this and this,” and we’ve journalled that back in. Subsequent to that, we’ve asked for, “Can we have some information about these legal expenses so that we can determine whether they really do appear to be business or not.” We received some paperwork which we then looked at it, and it basically had wording – it was – it was – legal fees were addressed to [the wife]. They were titled Property and Parenting, and so we then subsequently went, “They look private. We will take them out and put them back against the loan account.”...
...
[COMPANY ACCOUNTANT]: ... [the wife] then provided more detailed loan accounts, so a solicitor’s bill had transactions – a number of transactions on them, rather than just the front page which we had seen which was a one-liner. It had a large number of transactions which were “phone call taken, email received”, blah, blah, blah, etcetera. [The wife] had gone through those, and she had put marks beside ones that were either private or business, and then totalled them up and said, “These are the actual bills. This amount is business. This amount is private.” Based on that, we’ve said, “Okay, on that basis, we will then bring back in” – “the business portion back in against your loan account, and your loan account reduced.”
[COUNSEL FOR THE WIFE]: And as accountant for the business, it’s a matter for you to determine the – what is or is not included in these loan accounts when preparing the financial statements?
[COMPANY ACCOUNTANT]: Yes ... [the wife] then advised us, “No, there are some legal expenses that relate to the business,” so we brought them back in. We then asked the question, “Can you provide some information to see whether they are business or private?” We were provided information initially which looked like they were private, so again we take them out. Then we were provided information which we – looked like they were business, so we brought them back in. So we based it on the information that has been provided by [the wife] in this instance.
(Transcript 16 August 2019, p.545 line 47 to p.546 line 44)

80. In cross examination by the husband, the company accountant gave the following evidence:

[THE HUSBAND]: You mentioned that you did get itemised invoices and – requesting more information and what you received was itemised invoice where [the wife] had just highlighted all those items that she believed were business expenses, not private expenses?
[COMPANY ACCOUNTANT]: She – she differentiated between the business and the private.
[THE HUSBAND]: By marking them up?
[COMPANY ACCOUNTANT]: Correct.
[THE HUSBAND]: Was there any statement or justification about exactly what made them business expenses or just that she said they were?
[COMPANY ACCOUNTANT]: No. There wasn’t anything further than, for want of a better word, crosses on the line items.
[THE HUSBAND]: Okay. So it’s based solely on the [wife’s] marking that you made the decision to journal them. That’s what you’re saying?
[COMPANY ACCOUNTANT]: Correct.
(Transcript 16 August 2019, p.559 line 40 to p.560 line 6)

81. The primary judge gave reasons for not adding back any of the monies received by the wife during management of the business:
    44. ...

d) Addback of monies received by wife during management of business

1. Shortly after separation the wife was required to take over the management of [the businesses] owned by the parties due to the husband resigning as a [health care professional] and resigning as a director.
2. In submissions the husband seeks a possible addbacks of various payments received by the wife during the course of her management including monies for legal fees, cash withdrawals and long service leave.
3. The husband further submits that there was wastage incurred by the wife due to the delays in the sale of the business.

Conclusion

4. The accountant for the business, [the company accountant], provided evidence by way of affidavit and cross-examination as to the conduct of the business, including information as to the issue of legal costs incurred by the wife.
5. At no time is it implicated that the wife acted inappropriately in her management of the business.
6. As to wastage this has not been established on the evidence.
7. As such I find that there is no basis for addbacks.

82. The primary judge correctly recorded that the company accountant gave information as to the issue of legal costs incurred by the wife. However, the finding “[a]t no time is it implicated that the wife acted inappropriately in her management of the business” does not engage with the gravamen of the dispute.
83. The evidence of the company’s accountant is that he accepted the wife’s assessment of the part of her family law legal fees that should be charged to the company. It turned out that it was the majority of them.
84. The wife argues that it was proper to charge certain legal fees against the company, notwithstanding that those fees were expended for the representation of the wife in the family law proceedings because that representation was in circumstances where, having resigned his directorship from the company in November 2015 and leaving the wife the sole director and solely responsible for the operation of the company, the husband caused the incursion of legal fees by the following:
    • on 23 October 2016 filing an Application in a Case for the removal of the wife as a director of the company; and
    • on 11 September 2017 filing a further application to have the wife removed as a director of the company.
85. In our view, it is difficult to argue that the wife’s opposition to applications against her personally to be removed as a director in s 79 proceedings, in which the company is not a party and is not a client of the lawyers being paid, can be legitimately treated as an expense of the company.
86. We need not comment further about that, given that the primary judge did not engage with the issue raised by the husband at all. That her Honour did not is problematic in circumstances where about $225,000 paid by the husband in legal fees was added back by the primary judge against the husband as part of the total add back of the TPD payments.
87. The husband led other evidence of payments of family law fees to two other firms by the company from monies other than the RR settlement monies. Again, the primary judge did not engage with the husband’s evidence and arguments about those dispositions.
88. Nor did the primary judge specifically refer to the issue raised by the husband in relation to distribution of monies by the wife to her parents, and the general statement that the wife at no time acted inappropriately in her management of the business at [44(d)(v)] does not adequately engage with that issue (Bennett and Bennett [1990] FamCA 148; (1991) FLC 92-191).
89. There is accordingly merit in these grounds of appeal.

Did the primary judge err in adding back the whole of the husband’s TPD payments to the table of assets and liabilities? (Grounds 2 and 3(a)) and did the primary judge err in assessing post-separation contributions? (Grounds 3(b) and 5(d))

90. As indicated, the primary judge added to the pool of assets available for distribution an item entitled “Add back from disability payments” valued at $914,812.
91. That amount represented disability payments made to the husband under three separate TPD policies in April and June 2016 following his diagnosis of PTSD.
92. None of the $914,812 remained in liquid funds. Half of it had been expended by the husband’s purchase and improvement of the Town KK property. About a quarter of it had been spent on the husband’s legal fees with the remaining quarter applied by the husband to meet mortgages and outgoings on the matrimonial home and payments to the line of credit with Bank SS associated with the businesses.
93. In relation to the last of those categories of expenditure, the primary judge found that “a small adjustment only is to be made in favour of the husband” (at [84]).
94. The main complaint by the husband under these grounds is that the primary judge did not engage with his arguments that the TPD funds were analogous to funds received as damages in a personal injury claim. The husband specifically referred to the statement in Aleksovski v Aleksovski [1996] FamCA 111; (1996) FLC 92-705 by Baker and Rowlands JJ at [52]:

In our opinion, in most cases, a damages verdict arising from a personal injury claim, whenever received, is a contribution by the party who suffered the injury.

95. Nowhere in the primary judge’s consideration of the parties’ contributions does the primary judge acknowledge the husband’s contribution of the $914,812 in disability payments. The husband points out that that amount equals about 31 per cent of the matrimonial property pool as calculated by the primary judge at [43] (the net value of the pool being $2,944,843 when the notional amount for the disability payments are added back).
96. The primary judge records at [44(a)(xxi)] that the policies which enabled the husband to make a claim for permanent and total disability were obtained during the marriage and that the husband suffered the effects of PTSD and MDD during the marriage, and that during that time the wife had supported the husband and the family, running the household and raising five children whilst the husband worked.
97. The primary judge however does not engage in any way with the submissions made by the husband that the contribution should substantially be treated as a contribution made by the husband. It was the husband who suffered total and permanent disability and lives with that disability.
98. The relevance of this matter is to be otherwise considered at the rehearing.

Did the primary judge err in assessing the s 79(4)(d)–(g) considerations? (Grounds 6 and 7)

99. The primary judge made a seven per cent adjustment in the wife’s favour based upon her Honour’s determinations at step 3. Issues relevant to these grounds will be reconsidered at the rehearing and it is unnecessary for us to further comment on these grounds.

Did the primary judge mistake a material fact? (Ground 8)

100. The husband complained that the primary judge erred when her Honour found at [99]:

Since the sale of the [businesses] in 2018 the wife has not received an income from the business.

101. The wife conceded that finding is an error because the wife has received the approximate amount of $79,300 income from Business 1 after its sale. Whilst that concession is made, it is an error in the finding by her Honour in the context of considering s 79(4)(d)–(g) considerations and we have indicated that we do not intend to further comment on the overall conclusion her Honour reached at the third step.

Was the property settlement order a just and equitable outcome? (Ground 9)

102. As indicated, the husband claimed that if his disability payments were removed from the table of assets and liabilities and his equity in the Town KK property added, he would only be receiving 24.3 per cent of the existing assets. The husband asserted that such a result would be unreasonable or plainly unjust (House v The King (1936) 55 CLR 499). Again, we do not intend to further comment on this ground.

Chattels

103. In relation to failing to deal with the husband’s application for the return of specific chattels, that is not a ground of appeal although it is raised in the husband’s Summary of Argument. We do not intend to further discuss this complaint.

CONCLUSION

104. The husband has been successful on a number of grounds, including complaints relating to a denial of procedural fairness. The appeal shall be allowed and the property settlement order set aside. The proceedings will be remitted for rehearing by a judge of the Federal Circuit Court other than the primary judge.

COSTS

105. The appeal has been successful and the husband’s primary application as to costs is for an order to be made against the wife in his favour in the sum of $19,122.32. In the alternative, the husband seeks costs certificates made under the Federal Proceedings (Costs) Act 1981 (Cth) for the appeal and rehearing. Whilst the husband represented himself at the hearing of the appeal, a lawyer had drafted his Summary of Argument and had prepared an itemised schedule of costs at scale. We are satisfied that the husband has incurred costs in relation to the appeal. The wife opposes the husband’s primary application for costs and also seeks costs certificates for the appeal and the rehearing.
106. The appeal has been successful on an error of law. We conclude that it is not just to make a costs order against the wife and an order will be made for costs certificates in favour of both of the parties for the appeal and the rehearing.

I certify that the preceding one hundred and six (106) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Ryan, Watts & Tree.

Associate:

Dated: 11 June 2021