Ferraro v Ferraro

[1993] HCATrans 158

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M75 of 1992

B e t w e e n -

RUGGERO FERRARO

Applicant

and

RENATA FERRARO

Respondent

Application for special leave

to appeal

MASON CJ
DEANE J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

Ferraro 1 17/6/93

AT MELBOURNE ON THURSDAY, 17 JUNE 1993, AT 2.10 PM

Copyright in-the High Court of Australia

MR J.D. MERRALLS, QC: If it please the Court, I appear with

my learned friend, MR P.M. GUEST, OC, for the

applicant. (instructed by Maddock Lonie &

Chisholm)

MR M.D. BROUN, QC:  I appear with MR P.C. YOUNG for the

respondent. (instructed by Devenish & Co)

MR MERRALLS: 

If it please the Court, this is an application

for special leave to appeal from a decision of the
Full Court of the Family Court varying an order

made by a single judge of that court.

It is submitted that the case raises important

questions of principle concerning the subsection to a common factual situation, that is, the division of the property of a self-made
interpretation of section 79(4) of the Family Law

businessman and a home maker.mother wife in

proceedings under the Act.

The subsection was considered in its previous

form by this Court in Mallet v Mallet in 1983. The

subsection was amended in 1983 materially, in our

submission. The amendment was made after argument

in Mallet v Mallet but before judgment was

delivered so that there is a brief reference in one

or two judgments - I remember Chief Justice Gibbs'

judgment to the amended form, but no consideration

of it because it was simply not relevant to the

case.

The judgment in this case reveals clear

differences of approach amongst members of the by the differences between the appellate court and

the trial judge. Although it might be said that

section 79(4) involves matters of discretionary

judgment, the appellate court quite clearly

intervened because it considered that the trial

judge had erred in principle, and it said so in a

passage which appears at page 188 of the appeal

book at the foot of the page:

The conclusion we reach is that

his Honour's ultimate analysis, concluding

with the Sissinghurst analogy,.·represents an

approach which significantly denigrates the

wife's contributions over three

decades ..... those passages represent

his Honour's final summation of the matter

before his ultimate conclusion of 70/30.	We
conclude that his Honour approached the
exercise of discretion in a way which was

Ferraro 17/6/93

contrary to principle and that the discretion

miscarried.

Elsewhere Their Honours referred to the errors of

principle which they considered had vitiated

His Honour's judgment. They referred in particular

to two things: legislative changes since Mallet's

case, that is, the 1983 amendments which are

referred to at page 170 of the booklet, and what

they called societal changes since 1938. I wish to

direct Your Honours' attention to a passage in the

middle of page 170 which epitomizes their approach:

Whilst it is legitimate still to say that great changes are occurring in the attitudes

of many members of society to marriage and

divorce, the legislative history and the

consistent theme of the cases has certainly

been to put aside any question of "fault or

misconduct" .

That is not relevant to this case.

In relation to the "economic consequences of divorce" it is, we think, legitimate to say

that the concept, inherent in the Family Law

Act 1975, namely that marriage is a social and

economic unit between equals, has in relation

to property matters been strengthtned by the

1983 amendments and contemporary social views

which increasingly give greater recognition to

the contribution of a homemaker and parent

when compared with the more obvious and direct

financial contributions of the breadwinner ..

They refer to what they call the societal changes

in several places in the judgment. On page 182,

where they are explaining their reliance upon a

substantial passage from the judgment of the Full

Court of the Family Court in Harris' case, they

refer to three matters:

Firstly, the conclusion as to equality of

contributions in relation to largely business

assets -

Harris' case having involved the same things,

al though,· in fact, the assets were much less in

that case.

Secondly, it is important for the recognition

by the Full Court that since the 1983

amendments "it may well be that ... there has

been a shift in the evaluation by the Court of

the domestic role of homemaker and parent".

That appears to be part of a wider recognition

of that role per se, that greater recognition

Ferraro 3 17/6/93

being more freely permitted since the 1983

amendments and the more realistic recognition

of the indirect but nevertheless significant

contribution to the acquisition of assets

under paragraph (b).

I will take Your Honours to paragraph (b) in a moment, and explain the significance of that

reference.

Thirdly, it suggests that the homemaker

contribution cannot and should not be confined

to matrimonial or "personal assets" but is

also a contribution to business assets.

Their Honours there are not referring to the pool of assets out of which the payment will be made, but rather to the input which is to be assessed

when the court exercises its discretionary judgment

under section 79(4), and the way in which the

various matters that are set out in that section

are to be taken into account in arriving at a final

discretionary judgment. We have summarized their

references to those matters from pages 217 to 219

of the appeal book.

It is curious that although they seem to set

significant store by the 1983 amendments, there is

very little discussion of those amendments in the

judgment. At page 185 in the first full paragraph,

Their Honours say:

The legislation provides little guidance

beyond what can be concluded from the 1983

amendments. The oft repeated statement that

the homemaker role is to be assessed "in a

substantial and not in a token way" does not,

in reality, advance the issue far.

But there is no discussion of the language of the

amendments and the changes that were made to the

1975 version. Indeed, I must confess I am a novice

to the jurisdiction, but I have searched the cases

and I have been shown the cases in which orders

have been made and reference has been made to

section 79, and one thing that stands out from the
cases is that although there has been lip service
paid-to the various matters which are set out in
the subsection, there is very little discussion of

the significance of each of them O~·any of them in

the judgments. The only detailed examination of

the 1983 amendments that we have been able to find

is in Shaw's case, 12 Fam LR 806, at pages 821 to

822. I think copies of those pages have been provided to Your Honours. At the foot of page 821

the Full Court in Shaw's case said:

Ferraro 4 17/6/93

For the purposes of this point presently under

consideration, the most notable changes

brought about by the 1983 amendment are:

(1) The division of the former para (b), which

covered all contributions to the acquisition,

conservation or improvement of property, other

than financial contributions (as to which see

para (a)), into two separate paragraphs (new
paras (b) and (c)), the former dealing with
all non-financial contributions "towards the
acquisition, conservation or improvement of
any property ... or otherwise in relation to
that ... property", and the latter dealing with
"contributions ... to the welfare of the
farnily ... including any contribution made in

the capacity of home-maker or parent.

If I may pause there, that is not an accurate

description of the change that was made. If

Your Honours care to look at page 216 of the

application book, Your Honours will see that there were originally two relevant paragraphs, the first dealing with -

(a) the financial contribution made directly

or indirectly by or on behalf of a party or a

child of the marriage to the acquisition,

conservation or improvement of the property,

or otherwise in relation to the property -

and in paragraph (b) the contribution referred to

is one which is -

made directly or indirectly to the

acquisition, conservation or improvement of

the property by either party -

and then appear the words -

including any contribution made in the

capacity of homemaker or parent.

So there is express reference to that capacity in

the, what I might call, "non-financial

contributions" made to the acquisition, et cetera,

of property.

When the Act was amended not only did the

subsections become a little more wo~dy, but the
counterpart of the original (b), that is,
non-financial contributions, does not contain any
reference to a contribution made in the capacity of

home maker or parent. That phrase has been quite intentionally extracted from paragraph (b) and it
has been placed in paragraph (c) which is a new

rubric:

Ferraro 17/6/93

(c) the contribution made by a party to the

marriage to the welfare of the family

constituted by the parties to the marriage and

any children of the marriage, including any

contribution made in the capacity of homemaker

or parent.

So the first point that I make is that in Shaw's

case the Full Court, it appears, has not accurately

described the first amendment of (b) in its first

point. In its second point on page 822 is:

(2) the deliberate removal of any requirement

for a nexus between contributions in the capacity of home-maker or parent and the acquisition, conservation or improvement of

any property (compare old para (b) and new

para ( c)).

That is so, but the words do not appear in

paragraph (b). They appear in paragraph (c).

(3) The inclusion in new para (b), dealing

with non-financial contributions generally, of
the words "or otherwise in relation to any of
that ... property", and the non-inclusion of
these words in new para (c) dealing with

contributions to the welfare of the family and

as home-maker or parent.

The comment we make about that is that the words

came from paragraph (a) of the original version.

The phrase is very difficult. In fact, it is

almost impossible to fit it in grammatically to the

sentence, but the comment is correct.

(4) The addition to new paras (a) and (b)

(which together cover all direct and indirect

financial and non-financial contributions

towards or in relation to any property) of the

words "whether or not that ... property has,

since the making of the contribution, ceased

to be the property of the parties to the

marriage of either of them.

That point is not involved in this case. Then there is a reference to paragraph lSAB of the Acts Interpretation Act, and Their Honours under the authority of the section looked at the explanatory

memorandum which is extremely crypt_ic -

"to revise sub-section 79(4) to remove the
possibility of an interpretation of the

sub-section requiring that there be a nexus

between a spouse's contribution and a specific

item of property and also to put beyond doubt

that a contribution to property subsequently

Ferraro 6 17/6/93

disposed of can be taken into account in such

proceedings".

That is an extremely short and potentially

misleading explanation to members of Parliament of

what they were being invited to do. We have, I

should add, examined the second reading speeches,

both in the House of Representatives and the

Senate, and they are entirely silent upon the

point. They deal with other sections of the

amending Act, and say nothing about these changes.

MASON CJ: But all that said, is it not significant that you

have a new paragraph (c) and the emphasis in that

paragraph (c) is on "the contribution made by a

party to the marriage to the welfare of the

family"?

MR MERRALLS:  Yes, but it is not in relation to the building

up of the assets of the family. Here we say that

the learned trial judge very properly gave

attention to what this lady had done in the course

of the marriage and awarded her a very substantial

sum, $2.4 million, a very substantial house, a

70 square house at Eaglemont, which translated to

Sydney terms would be Turramurra or Warrawee or

something like that, a BMW car and $1500 a week

until the payment of the capital sum, maintenance

of children and school fees.

The difference between the approach of

His Honour and the approach of the Full Court was that the Full Court said - first of all it said it

was demeaning her or it was not giving adequate

recognition of her role in that capacity. Then
they said, "Well, not only will we look at her

claim to receive an adequate amount under

paragraph (c), but you must remember that while she

was washing the dishes and looking after the

children, Mr Ferraro was building up his business,

and presumably he was not washing the dishes or

looking after the children.	So he had extra time
to do that, and we regard that as an indirect

contribution to the building up of the business".

So even though they said, "We are not going to double count, but we are going to allow something

that would be proper under paragraph (b) if there

had-been, say, a direct or indirect non-financial

contribution, such as unpaid employment; I suppose

entertainment - - -

GAUDRON J: And that would be direct contribution, would it

not?

MR MERRALLS: Well, Your Honour, you can never be sure about

these statutes. They use expressions like "direct"

and "indirect" to cover the field so that - - -

Ferraro 7 17/6/93

GAUDRON J: Are you suggesting that the home-maker role

involves no indirect contribution?

MR MERRALLS:  No, what we are saying, Your Honour, is that

Parliament has segregated the three functions.

Originally the home-maker role was regarded as

something which was within category (b).

Parliament in 1983 quite deliberately removed that

reference and put it into category (c). When it

made those amendments, it very clearly juggled

verbal expressions. It introduced "or otherwise in

relation to the property" from (a) to (b). It took

some words from (b) to (c). It introduced words

into (a) and (b) that were not in (c), and it did

this very consciously. And although one could not

cavel with the notion of the home-maker

contribution being an indirect contribution, being

regarded by Parliament as being an indirect

contribution to the building up of the family

fortune under the old Act, that is not the way in

which Parliament treated it when it amended the Act

in 1983. They quite clearly removed it and put it

into another category. If it had intended it to be

taken into account in both categories, then one

must ask, "Why were the words not left there?"

because this is not a loose piece of drafting. It

is a very careful, meticulous piece of drafting.

GAUDRON J: But it may fall, may it not, within both (b) and

(c)?

MR MERRALLS:  That was the way the Full Court dealt with the

matter, but -

GAUDRON J:  And do you suggest that it does may not fall

within (b) and (c)?

MR MERRALLS:  It may in a special case where a real

relationship can be established. The Full Court's

judgment does not attempt to do that. It does it

with a broad brush by simply saying, "Well, here

you have a lady who was at home while her husband

was building up a large development company."

MASON CJ: What do you mean by a real relationship between

contribution in the capacity of home maker or

parent and, say, acquisition of property?

MR MERRALLS: - Something that you would not find in the

ordinary conduct of a person as a conscientious and

loving wife and mother.

MASON CJ:	Can you give an illustration?
MR MERRALLS:	It may depend upon the nature of the business,

Your Honour, that is to say that there may have

been conscious divisions of effort where the

Ferraro 8 17/6/93

husband was being given opportunities that he

otherwise would not have to build up the business,

and the wife - - -

MASON CJ: Is that not generally true and a consequence of

the services rendered by a wife as home maker and

parent?

MR MERRALLS:  Not as I put the proposition, Your Honour. I

am saying that it would be something which was over

and above the ordinary contribution, if I may call

it that, that a wife would be thought to make.

MASON CJ:  I firid it rather hard to grasp a concrete example

of what you are trying to put.

MR MERRALLS:  I may have been a little hasty in acceding to

the suggestion. I was really wishing to cover

myself in case somebody else with greater ingenuity

than mine might think of an example where there was

some supererogatory activity that did amount to a

positive contribution in that capacity.

GAUDRON J: Well then, your proposition does come down to

the fact that save in some extraordinary situation

which cannot at this stage be identified, the

home-maker role never contributes to the

acquisition of business assets.

MR MERRALLS:  No, the (b) ground is a far narrower one than

would accommodate the sort of contribution that a

home maker might be thought to make towards the

acquisition of the assets, and Parliament has

recognized the role of the home maker - - -

GAUDRON J:  Is not the difficulty, even with what you are

putting, somewhat more fundamental than this? The
problem here is that the parties had, in fact, put

things in their joint names. The parties proceeded

on the basis that they were equally entitled, and
what the Family Court was being asked to do was to

undo what the parties themselves had done and in

favour of your client, the husband.

MR MERRALLS: That frequently happens, Your Honour, and that

is the way the Act works. Property is brought into

a pool, previous legal and equitable interests

which have been adopted for whatever reason are

ignored, and justice and equity based upon

different considerations than, wha~-I might call

for this purpose, mere legal and equitable

interests rules. There is nothing surprising about

that, Your Honour. Indeed, there might be cases

where the husband had agreed with his wife for

whatever reason to put all his assets in the name

of his wife. He may be a chartered accountant with

a large practice as an auditor, or - - -

Ferraro 9 17/6/93

GAUDRON J: But it does seem to me that in that situation

you are turning things on their head, because you

should not be looking to see whether the wife

contributed X, Y or Z to justify her getting less

than what the parties themselves had arranged, but

what the husband contributed over and above

everything else to get more than what they had

already arranged.

MR MERRALLS:  Not at all, Your Honour. We would say that

the legal and equitable arrangements are simply

ignored, simply ignored for this purpose.

GAUDRON J: But what you are talking about is altering

property rights, and in this case you are talking

about altering property rights to give to your

client, the husband, more than they had before the

divorce proceedings.

MR MERRALLS: Just so.

GAUDRON J: Well then, why do you start measuring the wife's

contribution, or lack of contribution in this

process, rather than the husband's contribution to

see that he could get more than what they had

arranged?

MR MERRALLS:  You can do that. You have to do that too, and

in doing that you would find, as His Honour did,

that the business had been built up by the

husband's skills, energy and so forth, and that the

wife's contribution was, in real terms, very

little. This is not a case of a small business

being built up, but it is a large business which in

a sense is a one-man business although there are

core employees. It is a development business which

is very highly geared which, as it were, moves from

project to project, so that the business at any
particular time is represented to a very
substantial extent by the particular project

assets.

The effect of the order is to require to be removed from that business, highly geared as it is,

a very substantial sum in addition to the amount

that has been ordered in favour of the lady for her

contributions to the welfare of the family, and to

recognize her position in life. And it is being

done upon the basis that she contributed to the
building up of this pool of assets .. · There, we say,

whether one approaches it looking from the point of view of the wife or, from the other end, looking at

it from the point of view of the husband, one is

really looking at reciprocals here.

GAUDRON J: Well, I am not too sure that it does not make a

difference whether you look at it from one point of

Ferraro 10 17/6/93

view rather than the other, because the argument

you are putting tends to assume an onus on the wife

to establish something and none on the husband to

establish anything.

MR MERRALLS:  Not at all, Your Honour. It would be an equal

onus. The fallacy of what Your Honour is putting

to me, if I may say so with the greatest respect,

is that Your Honour is placing too great an

emphasis upon the pre-existing legal rights.

GAUDRON J: Joint ownership?

MR MERRALLS:  Yes. And we say that is not the way to

approach section 79 and, indeed, it is a very

important point. If Your Honour does consider

that, in our respectful submission, it is a good

reason for six of Your Honour's colleagues to

consider the matter as well. This case is, I am

informed, regarded as an important case in this

area of practice and in relation to this situation,

which is not an unusual situation where there is

either a family trust or a proprietary company

which has a fairly high net worth, but which is

geared very highly.

I have taken Your Honours to the commentary on

the amendments in Shaw's case. It is not a very

extensive commentary and, in our submission, there

is no satisfactory analysis of section 79(4) by a

superior court. While we appreciate that the High

Court will hear matrimonial property cases about once in every five or 10 years, in our submission,

the judgment of the Full Court in this case

indicates that there is a real need for the Court

to consider section 79(4) and to give authoritative

guidance upon the way in which it works.

DEANE J: Would it reopen the question whether, in the

context of 79(4) and notwithstanding the comments
in Mallet, the appropriate starting point is

equality?

MASON CJ:	Now?
MR MERRALLS:	The presiding judge in the Family Court who

delivered the judgment would dearly hope so, as

app~ars from his judgment there.

DEANE J: They seem to indicate that it is Mallet which they

see as constraining them to adopt s·ome other

starting point.

MR MERRALLS: It is holding them back, yes. Yes, they do,

and I think that is in the context of their

reference to societal changes. There is some

Ferraro 11 17/6/93

sharpness on the other side of the blade,

Your Honour.

DEANE J: Well, it may help you now. It may not help you

then.

MR MERRALLS:  We will press on, Your Honour.

MASON CJ: Yes, you are not lacking in courage, Mr Merralls.

MR MERRALLS: No, Your Honour. I have stood in this trench

before. Their Honours fell back to say that if

they were wrong about the error of principle, then

there was an error in the exercise of the judge's discretion. They said on page 189 that the award

fell beyond the legitimate range of discretionary

orders:

Even if the basis of that submission be valid,

namely that 30% does fall within the range, we

think there are reasons which call for our

intervention -

but they considered that it was not within the

range and referred to a number of cases which,

surprisingly enough, fall both sides· of

30 per cent. Gamer's case involved 20 per cent and

it was a business assets case. Indeed, it was one

of the closest in amount, I think, although it was

less than this case - I think it was $3.5 million

or something like that - where the wife was awarded

only 20 per cent. In our submission, the Full

Court quite clearly went beyond anything allowed by

House or Gronow in interfering with the exercise of

the learned judge's discretion.

I mentioned the fact that this business is

highly geared. The figures are these, roughly:

that the business has gross assets of $47 million,

it has $37 million of debt, leaving net assets of

$10 million, in fact $10.6 million.	I am sorry,
that is the net estate and $9 million of those are
business assets.	The effect of the order was to

increase the amount allowed to the wife by a little

over $1.3 million, which of course would have to be

extracted from the business.

--There is one other matter that I wish to

mention: the notice of appeal refers to something

known as the Spicer deal, which is part of the

current development. Not only did the Full Court

alter the apportionment of assets between the

parties, but it upset three other findings and

holdings of the trial judge: one relating to a

trust in which there were overseas beneficiaries -

now, we are prepared to live with that and we do

not raise that matter in the present application;

Ferraro 12 17/6/93

another concerned a refund that may or may not be

received from the Board of Works, now

Melbourne Water, in relation to a previous

development. Now, the learned judge brought in

with the anticipated profits, if any, on the Spicer

deal - which he held or said were too speculative

for him to be able to form any clear conclusion

about them - and he allowed a global amount for the

Board of Works refund and the Spicer deal.	Both
those matters were upset by the Full Court.	We do

not cavil with what they did with the Board of they found to be within the pool for distribution,

division.

However, there is a separate ground relating

to the Spicer deal, which involves speculation
about the likelihood of part of the present
development yielding a profit within a certain

time. In relation to that we have some particular

criticisms: one, that it was speculative, and the

court grossly misapplied Chaplin v Hicks in

increasing the amount of the pool; second, there

was an error in calculation in that some cash flow

problems of the business were not taken into

account; and thirdly, it misused a memorandum which

was handed to the court upon certain hypotheses in

the course of argument and accepted it as though it

were an admission. Now, those separate grounds

have been included in the Notice of Appeal and we

would wish to rely upon them.

If it please, Your Honours, we submit that

this is a proper case for special leave and that it

should be granted.

MASON CJ:  Yes, thank you, Mr Merralls. The Court need not

trouble you, Mr Broun.

In the view of the Court, the particular

grounds relied upon by the applicant give rise to

no question of general principle which would

justify the grant of special leave to appeal. With

respect to the matters of general principle to

which Mr Merralls of Queen's Counsel has directed

his principal submissions, we do not consider that

they enjoy sufficient prospects of success to

justify the grant of special leave.	The
application is therefore refused.

MR BROUN: Costs, Your Honours.

MASON CJ: Yes, what do you say about costs, Mr Merralls?

MR MERRALLS: Nothing, Your Honours.

Ferraro 13 17/6/93

MASON CJ:  Mr Broun, on what basis are you relying for costs

in this case?

MR BROUN: Well, Your Honour, section 117(2)(a) of the

Family Law Act directs the court's attention, in considering whether there are circumstances which justify the making of an order for costs, to attend

to various matters, one of which is whether any

party to the proceedings has been wholly

unsuccessful in the proceedings. That is by the

statute itself perceived as a reason for making an

order for costs; there just having to be

circumstances, not any special circumstances, and

section 117(2)(a) draws that to the attention of a

court in considering it.

There is an extra matter to which, however, we

would draw attention in this case, apart from the
fact that we have been brought here on an

application which, as it turns out, has been wholly

unsuccessful. The other matter is that the wife as

yet has not received - Your Honour will have seen

from the orders the postponement of the payment -

has not received any cash amount from the husband,

other than the continuing weekly sum, and is not in

a position to meet any of her own costs as she goes

along, and indeed, there are costs questions of the

court below from a very long hearing, and from the

Full Court, that still have to be attended to. So

she does not have, in effect, a cash flow from

which, at the present time, to meet her own costs.

But we would rely particularly on the legislation,

section 117(2)(a) which directs the court

specifically to the question of whether a party has

been wholly unsuccessful.

GAUDRON J: That is more directed to the proceedings of the

Family Court than here and on an application for

special leave somebody is always wholly

unsuccessful, usually wholly unsuccessful, and it

does not seem directed to proceedings such as this,

does it?

MR BROUN: Well, Your Honours, this Court has varied from

time to time as to whether this is a proceeding

under the Family Law Act or not. There did seem to

be a rule at one time that whatever happened I did

not-get costs. But I would submit that we fall

into section 117(2)(a) as being a matter to which

the legislation specifically direc~s attention.

MASON CJ: There will be no orders as to costs.

AT 3.04 PM THE MATTER WAS ADJOURNED SINE DIE

Ferraro 14 17/6/93