Wife Appeals from Property Orders of Magistrate Court

Gibb & Norman [2022] FedCFamC1A 14 (9 February 2022)

The Magistrates Court of Western Australia made orders to finalise the parties’ disputes over their children and the division of their property.  The wife filed an appeal from the Magistrate’s Court of Western Australia.  The Court, in determining whether or not the magistrate erred in refusing the wife’s application for an adjournment and if the refusal was an entirely rational procedural decision which did not unfairly prejudice the wife, likewise assessed whether the magistrate erred in disregarding evidence affecting the value of the wife’s impending inheritance.

Facts:

On 23 March 2021, a magistrate of the Magistrates Court of Western Australia made orders to finalise the parties’ disputes over their children and the division of their property.  The appellant wife appealed from all of the property settlement orders but, in respect of the parenting orders, only the order which provided for the children to live with the respondent husband.  He resisted the appeal.  The parties purchased the former family home at Suburb A (“the family home”) in which they and the children lived for the remainder of the marriage and, over time, it was renovated and improved.

In around 2010, the parties set up a corporation and self-managed superannuation fund as vehicles for wealth creation and expansion, named “K Pty Ltd” (“the corporation”), of which they were equal shareholders and joint directors.  The husband conducted a business via the corporation, which the wife helped administer.  She terminated other paid employment to work in the corporation’s business.  The parties were the joint trustees of the self-managed superannuation fund they established.

The wife’s father passed away in November 2016 and probate was granted in respect of his deceased estate in April 2018.  The wife is a beneficiary of the estate, but the estate had still not been distributed either at the time of trial in February 2020 or at the time the final orders were pronounced in March 2021.  Upon the parties’ separation in 2017, the wife vacated the family home, which the husband and the children have since occupied.  After initially living alone elsewhere, the wife eventually commenced to live with her mother and sister in a property she was given by her late father in 2013 (“the Suburb B property”).

At the time of trial, the husband was still operating the corporation’s business.  By then the wife was unemployed, but was still assessed by the magistrate to have an income-earning capacity.  The wife’s Suburb B property and her expected inheritance from her late father’s estate were excluded from the divisible pool of property, but were taken into account by the magistrate as being resources available to her when assessing the adjustment under s 75(2) of the Family Law Act 1975 (Cth) (“the Act”).  The magistrate determined the divisible pool of assets and superannuation should be justly and equitably divided in shares of 62 per cent to the husband and 38 per cent to the wife, for which outcome written reasons for judgment were published on 19 October 2020.  However, no property settlement orders were actually then made.

The magistrate explained it was not possible to pronounce final orders in October 2020 because, in the months elapsed since the trial had finished in February 2020, the corporation had sold two real properties which yielded a much greater return than the parties had expected, creating some uncertainty about the revised value of the pool of assets once the sale proceeds and capital gains tax were taken into account.  In October 2020, the proceedings were adjourned to enable the parties to garner more evidence about the financial effect of the sale of the corporation’s properties.  As it transpired, the sale proceeds increased the net value of assets and superannuation from $1,468,884 to $1,777,811.  The husband consequently conceded the wife deserved a greater proportion of the assets and superannuation: he conceded 40 per cent, but the magistrate found 42 per cent, thereby increasing the wife’s share by four per cent.

The orders made by the magistrate on 23 March 2021 to then finally determine the property settlement proceedings reflected the revised division.  As an incident of the property division, the husband acquired sole title in the family home and exclusive ownership of the shares in the corporation, subject to a lump sum payment to the wife and her protection against liabilities.  Orders were made for the parties to have equal shared parental responsibility for the children, for the children to continue living with the husband, and for them to spend time with the wife in accordance with their wishes.  Both parties proposed that, as a component of the property settlement, the husband would acquire sole ownership of the corporation.  The wife will therefore have no contingent liability in respect of the corporation, the family home or any other property owned by the husband once the appealed orders are implemented. 

Aside from two procedural complaints (Grounds 2 and 10), the wife challenges the magistrate’s treatment of her expected inheritance (Grounds 4 and 9), the treatment of the Suburb B property (Ground 5), and the treatment of her contingent liability as a guarantor of the corporation’s bank debt (Grounds 7 and 11).  Initially the wife applied for an adjournment of the trial because she was in the process of seeking a review of a decision by Legal Aid WA after her grant of aid for representation at trial was refused.  The adjournment was declined on the basis the proceedings had been on foot since 2017 and Legal Aid funding was unlikely to be forthcoming given the wife's assets and financial resources would render her ineligible to receive aid.  The refusal of the adjournment application was an entirely rational procedural decision which did not unfairly prejudice the wife and, from her perspective, had no deleterious effect upon the outcome of the proceeding.

Issues:

I. Whether or not the magistrate erred in refusing to allow the wife to re-open and adduce further evidence.

II. Whether or not the magistrate erred in disregarding evidence affecting the value of the wife’s impending inheritance.

III. Whether or not the magistrate “made a significant error of law or fact” in disregarding evidence of the wife’s “obligation and intention to transfer” a piece of real property to her family.

IV. Whether or not the magistrate erred in respect of property orders concerning a corporation.

V. Whether or not the magistrate failed to take the children’s best interests into account.

Applicable law:

Family Law Act 1975 (Cth) ss 75, 79 - relied upon by the wife in arguing that the Judicial Officer made a significant error of law or fact when considering the evidence available at the original trial or refused to take into account available evidence.

Analysis:

The wife did not specify, either in the ground of appeal or in her Summary of Argument, what the “significant changes in circumstances” actually were.  Nor did she articulate them during the appeal hearing.  The only circumstances which changed materially after the trial were those concerning the sale of the two properties by the corporation and the liability for capital gains tax incurred in respect thereof.  The wife did not overtly make any application to re-open her case and adduce the evidence contained in her recently filed affidavit, though the husband and magistrate certainly understood that was what she wanted.

The information related to the sale of the two properties owned by the corporation and the capital gains tax thereby attracted was already covered by the additional evidence adduced by the husband and did not advance the matter.  None of the wife’s evidence was any different.  The wife’s disagreement with the property settlement orders propounded by the husband was already patent, so it was unnecessary to receive her sworn evidence confirming such disagreement.  The evidence concerning the closure of the investment account made no difference to the property settlement orders made by the magistrate, as the husband was ordered to discharge the mortgage secured over the family home and to indemnify the wife against any other liability related to the family home (Orders 15(b), 16 and 18).  

The wife’s submissions were all directed to the proposition that, when considering the value of her imminent inheritance, the magistrate ignored the debt due by the estate to Bank P, which would greatly diminish her proportional share of the estate.  However, the magistrate was expressly cognisant of the uncertainty which attended both the existence and quantification of the alleged estate debt to Bank P.  The magistrate correctly recited the legal principles by which the parenting dispute was to be determined and, in dealing with the factors prescribed by s 60CC of the Act which would influence findings about the children’s best interests, the magistrate found the husband had been the children’s primary carer since 2016; acknowledged the children’s relationships with the wife were tense, as she admitted (at [39]) and the Family Consultant opined, but were nonetheless improving; accepted the Family Consultant’s recommendation that the children continue living with the husband; identified and accorded significant weight to the views expressed by the children to continue living with the husband and to only spend time with the wife when they desired; and determined it would be detrimental to the children’s interests for them to live with the wife instead of the husband.  The magistrate took into account the children’s best interests and the discretionary decision then made was open.

Conclusion:

The Court dismissed the appeal.  The appellant shall pay the respondent’s costs of and incidental to the appeal in the fixed sum of $10,000.