Taffner & Taffner is a recent Full Court of the Family Court decision.
Background
The parties commenced cohabitation in 2002, married in 2005, and separated in 2018. They had twin boys in 2007. They were divorced in 2019. Mr Taffner initiated proceedings in 2019, by filing an application for property adjustment. Both parties later sought parenting orders by amended applications.
The parties held net assets of $2,200,985.68, including a joint property (F), an investment property owned by the wife (K), and an investment property held by the husband (H).
At First Instance ([2020] FCCA 1132)
The case was heard before Judge Jarrett on 12 November 2019. Mr Taffner sought a 55% to 45% property division in his favour. Ms Taffner sought orders with the effect of a 65% to 35% division in her favour.
Jarret J adopted a global approach to the weighing and assessment of contribution, concluding his assessment with a 52% to 48% property division in Ms Taffner’s favour, due to the benefits brought to the parties by her real property. He then accepted a 10% adjustment in Ms Taffner’s favour on the basis of a disparity of income and earning capacity. This entitled the parties to a 60.63% to 39.37% property division in Ms Taffner’s favour.
Mr Taffner sought the inclusion of the potential liability for capital gains tax if either of the solely owned investment properties was sold. Jarret J declined to do so, on the basis that no proper evidence for the assessment of such tax was provided by the parties, and that there was no evidence before him that the properties were likely to be sold.
It was ordered that Ms Taffner retain property K and F, and that Mr Taffner retain property H. Mr Taffner was to release Ms Taffner from the mortgage on property H, and if he could not procure this, was to sell property H with the balance payable to Mr Taffner following costs of sale, outstanding rates, and any capital gains tax. There were also superannuation splitting orders made, with Ms Taffner being allocated sums of $18,421.43, and $122,487.25 from his superannuation funds.
On Appeal ([2021] FamCAFC 68)
Mr Taffner appealed the decision of Jarret J, with the appeal being heard before Strickland, Aldridge, and Kent JJ. The appeal was allowed in part.
Mr Taffner asserted a lack of procedural fairness, as neither party sought an order that he retain property H. He asserted that the primary judge should have raised the possibility of that order being made. He further asserted that the order cast the burden of capital gains tax solely on him, with the effect that the property division was actually 65.87% to Ms Taffner, rather than 60.63%. He adduced evidence that he was unable to refinance the mortgage of property H as per the orders of the primary judge, and that the property was sold in 2021.
On appeal, it was found that the parties submissions at first instance reflected a consensus that property H should be sold, with recognition that capital gains tax would then arise. As the property was ultimately sold, there was no procedural unfairness on the basis of miscarriage of justice, as the outcome sought by both parties ultimately transpired.
However, it was found that the primary judge erred in failing to take capital gains tax liabilities into account, as it cannot be ignored if it is foreseeable that it will be payable in the short to mid term (Rosati v Rosati [1998] FamCA 38). It was noted that such liability was not considered by the primary judge, as no proper evidence was placed before the court. However, it was accepted that the orders casting the liability onto Mr Taffner had the effect of altering the division of property intended by the primary judge, and that on this basis the appeal was allowed.
The grounds of appeal relating to the discharge of mortgages on properties F and K, the adjustment, and the contributions of the parties were not found to have merit.
The Court ordered that in order to maintain the percentage division as intended by the primary judge, that Ms Taffner pay $30,000 to Mr Taffner to account for the capital gains tax liability on property H, and the potential liability for property K. As Ms Taffner did not have the funds to make such a payment, the superannuation splitting orders were varied accordingly. It was ultimately ordered that the $122,487.25 to be taken from Mr Taffner’s superannuation be varied to $92,487.25.