Figgins & Figgins

[2002] FamCA 688

[2002] FamCA 688   JFFIGGED

FAMILY LAW ACT 1975

IN THE FULL COURT

OF THE FAMILY COURT OF AUSTRALIA

AT MELBOURNE

Appeal No. SA49 of 2001
File No. ML11465 of 1997

IN THE MATTER OF:

FIGGINS

Appellant Wife

- and -

FIGGINS

Respondent Husband

EDITED REASONS FOR JUDGMENT

CORAM:  Nicholson CJ, Ellis and Buckley JJ.
DATE OF HEARING:        6 and 7 March 2002
DATE OF JUDGMENT:     16 August 2002

APPEARANCES:               Mr Ackman QC with Ms MacMillan of counsel, instructed by Susan Snyder, Solicitor, Level 11/533 Little Lonsdale Street, Melbourne   VIC   3000, appeared on behalf of the appellant wife.

Mr Udorovic QC with Mr Strum of counsel, instructed by Mark Fagenblat, Solicitor, Level 11/555 Lonsdale Street, Melbourne   VIC   3000, appeared on behalf of the respondent husband.

Catchwords: PROPERTY SETTLEMENT - large inheritance soon after marriage - ‘special’ contributions - evaluation of homemaker contributions - whether inheritance a relevant factor pursuant to s.75(2)(o) where it has been taken into account as a contribution - ‘needs’ approach and s.75(2) adjustment - ‘quarantining’ of inheritance - discretion - adequacy of reasons - irrelevant considerations.

SPOUSAL MAINTENANCE - where property settlement is significant and party cannot establish need.

This was an appeal by the wife against the orders of Carter J. made 15 June 2001 providing that the husband pay to the wife the sum of $1,100,000 by way of property settlement and dismissing the wife’s application for spousal maintenance.

The parties cohabited for some months in 1987 and 1988, for approximately one year from mid 1990-1991 and from about February 1993 until separation at the end of May 1997.  They married on 15 May 1994 and a decree nisi dissolving the marriage became absolute on
9 December 2000.  There is one child of the parties, M, aged 5 at the date of hearing.  The husband has remarried.  The wife has not repartnered.

At the commencement of the relationship, the parties had no significant assets.  Both earned modest salaries; the wife was employed in the travel industry while the husband worked in his father’s shoe business as a buyer, without involvement in management. At the date of marriage, the parties’ only substantial asset was $4000-$5000 equity in an investment property. 

On 31 May 1994, just over 2 weeks after the date of marriage, the husband’s father and step-mother were killed in a helicopter accident.  The husband and his sister inherited estates valued in the order of $28,000,000, including the Figgins Group, which substantially comprised a retail footwear business with over 100 retail outlets.  Both the husband and his sister lacked business experience.  The Figgins Group bankers and creditors were extremely nervous about the situation and a Board of Management was formed immediately.  The husband thereafter acquired his sister’s share in the business with a borrowed sum in the order of $4,600,000.  The Board of Management remained active until at least 1997 and it was not until June 1998 or later that the husband acquired the requisite business experience to take control of the company.

Following his father’s death, the husband’s income increased and the parties purchased a holiday home, although they continued to reside in rented premises.  At the date of the hearing, the husband’s net worth was agreed at $22,500,000, representing an increase of either $8,500,000 or $13,000,000 since the date of death of the husband’s father.  The wife deposed that the net value of her assets at the date of hearing was $38,200 and that her superannuation entitlement was valued at approximately $6229.  She also had a debt of $63,000 owing to her father for a loan relating to an unsuccessful business venture.

In awarding the wife $600,000 for contributions, the trial Judge found:-

• Prior to the inheritance, the parties’ contributions had been equal.

• Following the death of the father, the Board of Management ran the business until 1998 or later.  The increase in the value of the business was attributable to the Board for that period and thereafter to the husband.

• The inheritance was a massive contribution on behalf of the husband.  It was not a windfall, but a “special factor” in the sense the term is used in McLay and McLay (1996) FLC 92-667 and explained in JEL and DDF (2001) FLC 93-075.

• The wife was primarily responsible for the care of the child. 

• Save for the fact of the inheritance, the parties’ contributions would have been equal.  The husband’s financial contribution completely overshadowed and outweighed the wife’s otherwise significant contribution.

• Her Honour also observed that the sum awarded for contribution was around 6 times the amount of the equity received on the sale of the investment property.

The trial Judge then made an adjustment for s.75(2) factors of $500,000, finding:-

• There is a huge disparity in financial resources and income.

• It is appropriate to recall that the husband’s source of wealth was his inheritance and to take this into account as a relevant factor pursuant to s.75(2)(o).

• The wife has the care of the child and is still emotionally fragile from the breakdown of the marriage.

• During the relationship, the parties had a very comfortable standard of living and a reasonable standard of living for the wife would include accommodation and a motor vehicle for herself and the child.

Her Honour dismissed the wife’s application for spousal maintenance in light of the $1,1000,000 awarded to her by way of property settlement.

On appeal, the wife sought the sum of $2,500,000 in settlement of any claims she may have for spousal maintenance and property settlement.  On her behalf, it was submitted that her Honour’s discretion had miscarried and that the sum awarded to her was manifestly inadequate,  It was further submitted, inter alia, that her Honour’s reasons were inadequate, that she gave undue weight to the fact that the Board of Management ran the Figgins Group during the marriage, erred in finding that the inheritance was a ‘special’ contribution in the McLay (supra) sense, erred in giving weight to an irrelevant factor by comparing the sum awarded for contribution to the net equity realised on the sale of the investment property, failed to compare the amount that she awarded to the wife by way of contribution and s.75(2) factors as a percentage of the total assets as a means of checking whether the amount awarded was fair and double counted the effect of the inheritance in considering it as a relevant factor both in terms of contribution and s.75(2) factors.

Held:-

Per:  Nicholson CJ. Ellis and Buckley JJ. allowing the appeal in part:-

1. In considering the contributions of the parties, it is artificial to draw a distinction between the periods when the Board of Management conducted the business and when the husband conducted the business alone.  It would appear that this division led the trial Judge to find that the husband made little contribution during the period of the marriage when he had the support of the wife.

1. The trial Judge erred in finding that the husband’s inheritance was a ‘special factor’ in the sense that the phrase was used in McLay and McLay (supra) and JEL and DDF (supra).

1. Whilst the inheritance was entitled to be given considerable weight in the assessment of contributions, her Honour attached too much weight to that factor leading her to undervalue the contributions of the wife during the total period of cohabitation.

1. It was not open to her Honour to test her assessment of the wife’s contributions by comparing it to the net equity realised on the sale of the parties’ investment property.  That comparison may have led her Honour to take into account an irrelevant factor and to undervalue the wife’s contributions.

1. The trial Judge did not err in not cross-checking the amount awarded against the percentage that award represented of the net worth of the husband, although that approach may have been preferable, as she clearly had regard to the amount she was awarding the wife in relation to the net worth of the husband.

1. Her Honour erred in double-counting the inheritance by taking it into account as a relevant factor pursuant to s.75(2)(o) when she had already done so on the issue of contribution. Where the inheritance was taken into account as a contribution, the provisions of s.75(2)(o) did not provide a basis for reducing, as her Honour would appear to have done, the adjustment in favour of the wife which otherwise would been made to her contribution-based award.

1. In the exercise of the discretion conferred by s.79 of the Act, there is no guideline which adopts equality of division as a starting point.

Per:  Nicholson CJ. and Buckley J:-

1. The doctrine of ‘special contribution’ should, in an appropriate case, be reconsidered.

1. Her Honour erred in that she gave the inheritance such prominence that she may have effectively ‘quarantined’ it, White v White [2001] 1 All ER 1, per Lord Nicholls considered.

1. Her Honour undervalued the wife’s contributions before and during the marriage.

1. The obligation of giving reasons for judgment is an obligation that cannot be avoided because it is difficult to achieve. In the present case, it is difficult to understand the reasoning behind her Honour’s findings on contribution and s.75(2) factors and it can only be concluded that she arrived at these figures because of errors in her reasoning.

1. It appears that her Honour erred in that she approached this matter on a ‘needs’ basis, rather than properly considering s.75(2) factors. White v White (supra), per Lord Nicholls and Cowan [2001] 3 WLR 684; [2001] 2 FLR 192, considered.

1. Even apart from the errors of principle made by her Honour, on the facts of this case the result was both clearly wrong and manifestly unjust in the terms stated in Mallet and Mallet (1984) 156 CLR 605; Norbis and Norbis (1986) 161 CLR 513; House v The King (1936) 55 CLR 499; De Winter and De Winter (1979) FLC 90-605; Gronow and Gronow (1979) FLC 90-716 and CDJ v VAJ (No 1) (1998) FLC 92-828 at 85,465 per Kirby J.

1. In order to test whether a result is just and equitable, it is important to ask whether the husband and the wife are being treated equally, White (supra) considered.  It is a major error to take the approach of arriving at a figure which satisfies the needs of the wife and gives the balance to the husband.

1. Marriage is and should be regarded as a genuine partnership to which each brings different gifts.  The fact that one is productive of money in large quantities is not reason to disadvantage the other, JEL and DDF (supra) reconsidered.

Per:  Ellis J:-

1. The obligation of giving reasons for judgment is an obligation that cannot be avoided because it is difficult to achieve.  However, in this case, it is possible to discern the path by which her Honour reached her conclusion and thus her Honour’s reasons were not inadequate.

1. The Act is expressed in gender neutral language. In consideration of the just and equitable requirement referred to in s.79(2), the Court must take into account and assess the matters set out in s.79(4) in a manner which does not on the one hand discriminate against or on the other hand advantage a spouse on the basis of gender or on the basis of the role undertaken by a spouse within the marriage.

1. In the exercise of the discretion conferred by s.79, it is not open to the Court to adopt an approach whereby an order, in terms of a sum of money and/or a percentage of the net value of the property of the spouses, is made in favour of one spouse based on an assessment of his/her needs and the balance then remaining of the property is by order distributed to the other spouse.

1. Whilst the errors identified are such as to call for intervention by this Court, in any event, the result embodied in her Honour’s order is significantly below the ‘generous ambit within which reasonable disagreement is possible’ and is plainly wrong, Norbis v Norbis (supra), per Brennan J. applied.

Re-Exercise of Discretion

Per:  Nicholson CJ. and Buckley J:-

1. Ellis J’s findings as to contribution broadly concurred with, although a little more allowed.

1. The s.75(2) adjustment is made in light of the enormous disparity between the assets of the parties and their earning capacities, the continuing responsibilities of the wife to care for the child and the comments made on gender equality.

1. The appeal is allowed and the sum of $2,500,000 substituted for the $1,100,000 awarded by her Honour.

1. In light of this award, the appeal against her Honour’s refusal to award spousal maintenance is dismissed.

Per:  Ellis J:-

1. The more significant matters to which greatest weight should be attached in assessing the contributions of the parties are the short total period of cohabitation, the significant financial contribution of the husband which exceeds that of the wife and the significant contribution made by the wife to the welfare of the family and her contributions as a homemaker and parent which exceed the like contributions of the husband.

1. The sum of $1,750,000 (approximately 7.7% of the agreed net worth of the husband) put to the Court by senior counsel for the wife more adequately reflects the significant contributions of the wife than the $600,000 arrived at by the trial Judge.

1. The more important of the matters referred to in s.75(2) to which the greatest weight should be attached are the clear disparity in the financial circumstances of the parties and their future prospect. The wife’s earning capacity has deteriorated since the commencement of cohabitation and that is attributable to a significant degree to the marriage and to the wife’s ongoing responsibilities as the resident parent of M. The contribution-based award is also of significance.

1. The relevant s.75(2) matters call for an adjustment of $600,000 (approximately 2.6%) of the husband’s agreed net worth.

1. The final order should provide that the husband pay to the wife the sum of $2,350,000 (approximately 10.4% of the husband’s net worth), exclusive of the $50,000 she has already received and modest property in her possession.

1. In light of the award made by way of property settlement, not persuaded that the wife is unable to support herself adequately.  The appeal against the trial Judge’s refusal to make an order for spousal maintenance in favour of the wife should be dismissed.

Written submissions to be made in relation to the appeal against the order of the trial Judge that the wife way the husband’s costs of the proceedings and in relation to the costs of the appeal.

Reportable.

NICHOLSON CJ. AND BUCKLEY J.

1. This appeal is brought by [Ms] Figgins, the former wife of [Mr] Figgins, against the decision of Carter J given in contested property proceedings between them.

1. The primary issue on the appeal is whether Carter J’s judgment awarding Ms Figgins (who for convenience is called the wife) $1.1m was within the bounds of reasonable discretion or was manifestly inadequate. The wife also complains of Her Honour’s refusal to award her lump sum maintenance. We will discuss other issues raised by the wife’s notice of appeal later in these reasons.

1. The wife argues that the sum is manifestly inadequate and that she should be awarded $2.5m by way of property settlement.  Alternatively, she says that if she is awarded a significantly lesser sum, there should also be an award of lump sum maintenance.

BACKGROUND

1. The wife is now aged 38 and the husband is now 40. They lived together sporadically for 7 years - from 1987 until their marriage in 1994.  The parties separated at the end of May 1997 and were divorced in December 2000. The husband is now married to Sarah Figgins. The parties have one child, M, who is 6 years old and who lives with his mother and sees his father regularly. There are court orders setting out the arrangements for contact.

Financial History

1. The husband is one of two children of a very wealthy father. However, when he and the wife lived together prior to marriage he was on a very limited income, working first as a salesman and later as a buyer in his father’s shoe business. His father had never involved him in the management of the business and he had no experience in management whatsoever. The wife worked as a consultant to a travel agent, earning a little less than did the husband.

1. They shared living expenses while living together and bought an investment property in Prahran in late 1993 out of joint savings. They lived in rented accommodation and their only significant asset at marriage was the investment property. Their equity in it was then about $4-5,000.  This property was sold after the breakup of the marriage and they each received approximately $50,000.

1. In a bizarre and tragic turn of fate, the husband’s father and stepmother were killed in a helicopter crash two weeks after the husband and the wife married. The husband and his sister inherited their estates, valued for probate at $28m.

1. Like the husband, his sister had no significant business experience.

1. It seems that the Figgins Group’s bankers and creditors were extremely nervous about the situation following the death of the husband’s father.  In particular they lacked any confidence in the husband’s ability to run the business.  The husband shared this lack of confidence.  As a result, a Board of Management was formed to assist the husband, and initially his sister, in the running of the business and in dealing with its bankers and creditors.  This arrangement continued until some time in 1997.

1. Shortly after the parents’ death, a bitter dispute developed between the husband and his sister.  This was eventually resolved in December 1995.  The husband retained the Figgins Group, which was broadly valued at $14m, but in order to retain it, he had to borrow $4.6m to pay out his sister.  It was not clear from her Honour’s judgment, or from the submissions before us, whether this reduced the husband’s equity in the business to $9.4m.

1. He did not take over full control of the business until June 1998, about 12 months after separation.

1. At the time of the trial, his agreed assets were $22.5m and his annual income and other benefits amounted to approximately $600,000 per annum.  His assets had thus increased by either $8.5m or $13m during the period following his father’s death.

1. At trial, his new wife Sarah earned about $45-55,000 per annum and made no contribution of any significance to household expenses.

1. After paying taxes and household expenses, the couple have an uncommitted $466,000 per annum, or nearly $9,000 per week, available to them.

1. At trial, the wife was in receipt of a Centrelink pension of $124 per week as a single mother and limited maintenance from the husband, which ceased upon the orders coming into effect.  She was unemployed and her Honour found that she was temporarily unable to support herself.

1. She had continued work as a full time travel consultant after the marriage.  She stopped work prior to the birth of M and resumed thereafter on a part time basis.  She had a brief business venture as a travel agent that was unsuccessful.  She had borrowed $63,000 from her father to set up this business and this was one of her debts owing at trial.

1. She does intend to work on a part time basis in the future, but her earning capacity is obviously much more limited than that of the husband.

Contribution

1. Her Honour’s relevant findings were as follows:

(a)Prior to receiving the inheritance, the parties’ financial and other contributions were broadly equal;

(b)After the death of his father and stepmother, the husband and his sister became members of the Board of Management, which continued to operate until 1997.  During that period it ran the business of the Figgins Group.  It was also advised by KPMG, accountants. Whilst the husband was a member of the Board of Management, given his lack of expertise, it was  probable that the husband’s ability to participate in the work of the company was limited, at least initially, although he expanded his knowledge and level of experience. He therefore made a very limited contribution during this period.

(c)It was not until about June 1998 and perhaps indeed later, that the husband developed the ability and confidence to take full control of the Figgins Group.  While the Board of Management ceased to exist in 1997, her Honour was satisfied that the husband received continued assistance from KPMG and also relied upon the expertise of employees of the Figgins Group.

(d)The husband’s inheritance of the Figgins Group was a contribution on his part to the assets of the parties.  Further, the husband’s inheritance represented almost the totality of the present assets of the parties, or alternatively, such assets were exclusively acquired as a direct result of that inheritance.  These were kept separate, although the husband did, from his inheritance, purchase a beach house at Somers that was used by the family.

(e)While the value of the Figgins Group increased from $14m when inherited by the husband in 1997 to $22.5m at the time of trial, the reasons for this increase in value were attributable initially to the Board of Management of which the husband was a member and thereafter to the husband.

(f)The husband’s contribution in financial areas was much greater than that of the wife and in broad terms his contributions were largely, but not exclusively, financial, whereas the wife’s contributions were largely, but not exclusively, to the welfare of the family.

(g)Save for chattels, the wife’s business and perhaps some part of the parties’ respective superannuation entitlements, the totality of the assets and resources presently in existence derived from the husband’s inheritance.  This was described by her Honour as a massive contribution. While that inheritance did not come about through any effort on the part of the husband, he received it by reason of his relationship with his father.  She found that it was therefore not a windfall.

(h)The inheritance was a “special factor” which took the husband’s contribution in this regard outside the “normal”, in the sense that that phrase was used in McLay (1996) FLC 92-667 and subsequently explained in JEL & DDF (2001) FLC 93-075.

(i)In relation to the husband’s desire and decision to retain the business assets of the Figgins Group, there was no evidence that the wife encouraged the husband in this regard.  Her Honour did not accept that she actively persuaded the husband to make this decision.  Her Honour found that she merely acquiesced in the husband’s decision and supported him in relation to it. Her contribution was thus very limited in this regard.

(j)The Board of Management rather than the husband ran the business of the Figgins Group up until mid 1997. Thereafter, he was assisted by consultants until at least mid 1998. The wife did not attend meetings of the Board nor did she know the views of the members as to whether or not the husband should take the decisions that he did.

(k)On the evidence the wife made no direct contribution within the meaning of s79(4)(b) to the acquisition, conservation or improvement of the assets comprising the husband’s inheritance. Any contribution made by her was an indirect contribution.

(l)The wife’s indirect contributions pursuant to s79(4)(b) were limited as follows:

“The wife acquiesced in the husband’s decision and desire to obtain the Figgins Group rather than the other assets and supported him in relation to it. After M was born on 1 July 1995, by virtue of the wife’s care of the home and their son, the husband was able to concentrate on his business activities. She thereby made, not just a contribution under s79(4)(c), but also made an indirect contribution to the Figgins Group pursuant to s79(4)(b).”

(m)"The wife was primarily responsible for M's care during the marriage and since separation has had the sole responsibility for him apart from the comparatively short periods when he was with his father during contact visits. The wife made her income available for the benefit of the family until the husband received his inheritance. Following separation, she applied an unquantified sum from her share of the sale of proceeds of the investment property and her income to creche fees and similar expenses, although these contributions were clearly less than those made by the husband. After receiving his inheritance, the husband provided a very comfortable standard of living as well as a beach house. It would be difficult to see how the parties' contributions could be seen as anything other than equal, save for the fact of the assets acquired as a result of the husband's inheritance.

(n)There was a massive disparity in contributions in the husband’s favour, which completely overshadowed and outweighed the contributions made by the wife, notwithstanding the substantial weight that her Honour gave to her contributions to the welfare of the family, including those made after separation.” 

1. Her Honour’s conclusions on contribution were:

   “In the circumstances of this case, I conclude that the totality of the contributions made by the wife throughout the period of the parties co-habitation and following their separation, should be recognised by an award in the amount of $600,000.  This is exclusive of the $50,000 in round terms, which the wife has already received.  Additionally, the wife should retain the modest property of which she is presently seized.”

1. Her Honour commented:

   “By way of comparison only, I note that this award is approximately six times the net equity realised by the sale of the Prahran investment property.”

   Section 75(2) Factors

2. As to s75(2) factors, the relevant findings of her Honour were:

   (a)The division of property having regard to the various contributions of the parties, highlighted the disparity in the parties’ respective capital and assets basis.  She said:

   “There is a huge difference between the financial resources and income of the husband and the financial resources and income of the wife.  I do not however look at that circumstance in isolation.”

   (b)As to the disparity in the parties financial resources, her Honour found that it was appropriate to recall that the source of the husband’s wealth was his inheritance, which was a matter which she said the justice of the case required to be taken into account pursuant to s75(2)(o), or alternatively because any order pursuant to s79 must be just and equitable.

   (c)The wife continues to be responsible for the child’s care since separation and the husband travels overseas on business for 10 weeks in each year.

   (d)She has the responsibility on a day to day basis for the care of the child and her responsibility remains significantly higher than that of the husband in this regard.

   (e)The wife still suffers emotionally from the breakdown of the marriage and is emotionally fragile.

   (f)The wife's net worth as at September 2000 was $38,200, in addition to which she had a financial resource, namely superannuation in the sum of $6229.  Her employment situation was less certain than that of the husband.

   (g)Her earning capacity was impacted upon as a result of the birth of the child and her desire to continue in her role as a parent.

   (h)She was unable to support herself.

   (i)During the marriage the parties had by community standards, a very comfortable standard of living.

   (j)A standard of living "reasonable in the circumstances" would include that the wife would be able to decently accommodate herself and M, and be provided with a motor vehicle."

3. As to s75(2) factors, her Honour concluded:

   “In my view, the s75(2) factors call for a further adjustment in the wife’s favour of $500,000.  This results in a total award to her of $1.1m.  In addition she retains the benefit of the personal items to which reference has already been made.  Both parties received approximately $50,000 upon the sale of the Prahran investment property and each retains the benefit of that sum.”

   Spousal Maintenance

4. At trial, Counsel for the wife indicated that if her Honour accepted that the sum of $2.5m was a proper sum by way of property settlement, then there should be included as part of this sum an order for spousal maintenance of $150,000.  He made it clear that if she were awarded a lesser figure, a lump sum figure for spousal maintenance should be assessed at a larger figure. He repeated this submission on appeal.

1. He declined to indicate to her Honour what that sum should be.  He maintained that attitude during the hearing of the appeal. In fact it was difficult in the course of argument to determine what his submissions were about spousal maintenance.

1. In our view, this was a less than helpful attitude and made her Honour’s task, and subsequently our task, more difficult than it should have been about this issue. 

1. Her Honour concluded that, while the wife was unable to support herself and the husband was able to support her, she had to take into account the fact that the wife would receive $1.1m.  Her Honour took the view that this provided her with a wide range of investment opportunities and would result in a situation where she could not demonstrate that she was unable to support herself adequately.

HER HONOUR’S FINDINGS AS TO THE LAW

Contribution

1. The husband’s Counsel submitted that indirect contributions must be established in some tangibly demonstrative manner and not merely in a theoretical and remote way: W and W (1980) FLC 90-872 per Nygh J. He submitted that the wife had failed to do this. Her Honour rejected this approach upon the basis that W and W (supra) was decided prior to the 1983 amendments to the Family Law Act. She also considered that Nygh J was intending to be illustrative, rather than laying down some guiding principle in that decision. She said that if this was not so, there had been a subsequent shift in the law in this regard; and referred to Napthali(1989) FLC 92-021; Dawes (1990) FLC 92-108; Harris (1991) FLC 92-254; Ferraro (1993) FLC 92-335 and Whiteley (1992) FLC 92-304.

1. She accordingly concluded that the wife made not just a home-maker and parent contribution, but also an indirect contribution under s 79(4)(b).

1. As to the home-maker and parent contribution of the wife under s 79(4)(c), Counsel for the husband conceded that the wife had made such a contribution, but submitted that there must be a nexus between that contribution and the relevant property. In this regard, he relied upon the dissenting judgment of Guest J in Farmer and Bramley (2000) FLC 93-060. Her Honour declined to follow the reasoning of Guest J in that case. She referred to cases decided before the 1983 amendments and subsequent to them. The more recent cases her Honour relied on included G and G (1984) FLC 91-541; Nemeth (1987) FLC 91-844; Kowalski & Lozanov [unreported, Full Court,

   
   

   8 June 1994]; Beneke (1996) FLC 92-698; W and W (1997) FLC 92-723 and G and G (2000) FLC 93-043.

1. Her Honour concluded that the word “property” in s79 is not qualified or limited in any way, and that there is no distinction in principle between contributions to the welfare of the family made before, during, or after cohabitation.

1. She concluded that the fact of the marriage was the trigger to the Court’s jurisdiction.

1. She said that there is no requirement for a nexus between the home-maker contribution and the relevant property.

1. She found that in this case the wife made contributions as a home-maker and parent, probably before the marriage and certainly during and after it. She also found that those contributions had a clear connection with the marriage.

Section 75(2) Factors

1. Her Honour rejected an argument based upon the dissenting judgment of Guest J in Farmer and Bramley (supra), that there must be a causal connection between the circumstances of cohabitation during marriage and the difference or dissimilitude in the parties’ property and income at the time of hearing and following separation.  She referred to Waters and Jurek (1995) FLC 92-635; Collins (1990) FLC 92-149 Kennon (1997) FLC 92-757, Clauson (1995) FLC 92-595 and Mallet (1984) FLC

   
   

   91-507.

Her Honour’s Conclusions

1. Her Honour, having announced that she proposed to order that the wife receive $1.1m, commented that such an order would not affect the husband’s earning capacity, but would provide the wife, if she chose, with an investment opportunity and income.

1. She indicated that she tested the outcome of her proposed orders in light of s 79 and that the husband would be left with assets of over $21m.

1. Her Honour had previously referred to arguments advanced by Counsel for the wife that if she received $2.5m, this would support a lifestyle similar to that which the parties had enjoyed prior to separation. In particular, it would provide the child and herself with a house “like Orchard Street” (a rented house in which the parties had lived valued at approximately $800,000). It would also enable the purchase of a replacement motor vehicle and a modest holiday home similar to the Somers property.

1. Her Honour did not accept that the provision of a holiday home was a relevant factor.

1. She referred to the proposition of Counsel for the wife that the wife would not be required to work in order to provide a reasonable lifestyle for the child and herself. Finally, she referred to his proposition that this sum would replace the wife’s loss of periodic spousal maintenance of $575 per week.

1. Her Honour said as to these submissions:

   “Mr Ackman was insistent that the wife’s claim ($2.5m) was not an ambit claim.  Whilst I accept this, I do not believe the matter has been properly analysed.  The sum of $1m or thereabouts would provide a home, “like Orchard Street”, a motor vehicle and a holiday home.  This would leave the sum of $1.5m to provide the wife with a reasonable and appropriate lifestyle and to replace the present periodic spousal maintenance of $575 per week.  Reference to the tables which set out the present value of a periodic sum of a dollar per week, demonstrate that the capital sum of $300,385 would represent 12 years maintenance, at $575 per week, based on an interest rate of 3%.  In 12 years, M will be almost 18 years old.  On the same basis, a capital sum of $448,459 would represent 20 years maintenance.  I acknowledge that Mr Ackman did not approach the matter in this way, however, it is a convenient method of assessing the wife’s claim as framed on her behalf.” 

1. Her Honour indicated that she largely accepted the submissions of the wife’s Counsel as a benchmark for determining an appropriate lifestyle. She said that, after discharging a debt to her father, she would have sufficient to purchase a house similar to Orchard Street and a motor car for approximately $40,000, discharge her remaining debts to her father and on her credit cards and still have $144,500 for investment purposes. She said that on the basis of tables as to the present value of investments a capital sum of $138,350 would represent five years maintenance of $575 per week. She posed an alternative test of capitalising the wife’s present benefits totalling approximately $1100 per week at three per cent over 12 years (when M will be almost 18), which would amount to $574,651.

1. Finally, she acknowledged that on the basis of this calculation the wife would receive a mere fraction of the husband’s wealth. She thought however that the result was just and equitable and that it recognised both parties’ contributions as well as the s75(2) factors “which strongly favour the wife”.

1. She said that she could not take into account any legal costs or any other business liabilities, as there was no evidence of them.

THE APPEAL

1. The amended grounds of appeal are voluminous and it is unnecessary to set them out here in detail.  It is interesting to note that there is no cross appeal. Further, Counsel for the husband did not advance any argument to the effect that her Honour’s rejection of his submissions at trial was wrong in law.

1. In the circumstances, it is therefore unnecessary for us to consider the various arguments advanced by the husband’s Counsel at trial. We would comment however that we think that Counsel’s decision not to pursue these arguments was a correct one.

1. Similarly, we note that there was little challenge by the wife to her Honour's exposition of the law. This was no doubt because her Honour decided most of these issues in her favour.

1. We think it useful to summarise the wife’s grounds of appeal as follows:

1.It was primarily argued that overall, her Honour’s discretion miscarried in that the amount she awarded to the wife was manifestly inadequate and was not “just and equitable”. More detailed grounds sought to attack her Honour’s findings as to contribution, s75(2) factors and spousal maintenance.

2.        Contribution

It was argued that her Honour

(i)Failed to give any or any sufficient weight to the findings that she made in favour of the wife on this issue;

(ii)Failed to give any or any sufficient reasons and /or calculations in arriving at the figure for contribution of $600,000.

(iii)Gave undue weight to her findings :

·As to the source of the parties’ present assets;

·     That the wife’s support during the negotiations with the husband’s sister, was at best of some 18 months duration;

·     That the Board of Management ran the business for the whole of the parties marriage;

·     That the wife had previously been able to work as a travel agent;

·     That the demands of the child of the marriage will diminish as time passes.

(iv)Wrongly found that the wife made no direct contribution within the meaning of s79(4)(b) to the acquisition, conservation or improvement of the assets comprising the inheritance.

(v)Wrongly found that the husband’s inheritance was a special factor.

(vi)Wrongly found that the inheritance completely overshadowed and outweighed the contribution made by the wife.

(vii)Failed to give any sufficient weight to Kennon (supra).

(viii)Failed to compare the amount that she awarded to the wife by way of contribution as a percentage of the total assets as a means of checking whether or not the amount awarded was fair.

(ix)Gave weight to an irrelevant factor, namely, that the sum of $600,000 was approximately six times the net equity realised by the sale of the Prahran investment property, and that this led her to an incorrect exercise of discretion.

3.Assessment of s75(2) factors

It was said that her Honour;

(i)Erred in fixing the wife’s s75(2) factors at $500,000 as this sum was manifestly inadequate.

(ii)Failed to give any or any sufficient reasons and /or calculations for fixing of the wife’s s75(2) factors at $500,000.

(iii)In effect double counted in considering s75(2) factors, by again taking the husband’s inheritance into account as a factor pursuant to s75(2)(o).

(iv)In taking into account the disparity in the parties financial resources, gave either too much weight to the issue of inheritance, or was wrong in law in doing so, or her discretion miscarried.

(v)Failed to give any or any sufficient weight to her favourable findings to the wife on the issue of s75(2) factors.

(vi)Failed to compare the amount that she awarded to the wife by way of s75(2) factors as a percentage of the total net assets, by means of a check as to whether the amount was fair.

4.        Maintenance

Her Honour’s finding that the wife was not entitled to spousal maintenance was against the evidence and /or was an incorrect exercise of her Honour’s discretion.

1. In determining the appeal, it is convenient to deal with the broad argument as to a miscarriage of discretion after dealing with the detailed arguments as to contributions and s75(2) factors.

CONTRIBUTION

(a)       The Contribution of the Board of Management

1. On the issue of contribution we disagree with her Honour’s separation of the period when the Board of Management ran the Figgins Group, to that when the husband ran the group. This led to her consequent finding that the husband made little contribution during the period of the marriage, when he had the support of the wife. We think that her Honour was incorrect in accepting the arguments of the husband’s Counsel in this regard, which were repeated before us.

1. Of course the husband was inexperienced in the early stages, but it is also quite obvious that he spent considerable time gaining knowledge and experience during that period and that this was a period when the marriage subsisted. It was a learning time for him, during which he had the wife’s support.  In a sense his situation was analogous to that of a professional who receives the support of a partner during the educational process and then forms another relationship.  It could scarcely be argued that because the rewards of his/her profession came later, the first spouse’s contribution should be reduced because his/her earnings were not contemporaneous with the contributions of the spouse. The circumstances of the relationship as a whole must be considered in a more comprehensive way. 

1. The fact is, that over a six-year period, the husband’s asset position showed an enormous increase, and during half of that period the marriage persisted.  We think it artificial to draw a distinction between the period when the business was conducted by the Board of Management and by the husband himself.

1. The Board of Management was in reality, no more than an advisory group, initially to the husband and his sister and later to the husband alone. He and his sister (and he alone after 1995), could have terminated its services at any time. The fact that the Board assisted the husband to run the business cannot, in our view, be used to separate or diminish the contribution of the husband to the increase in his assets.

1. No doubt many successful business persons receive good advice and act upon it. This is simply an indication of business acumen. We do not think that the employment of good advisers can be used in a defensive way against the claims of a spouse, as her Honour appears to have accepted in this case.

1. Further, even if one completely ignores the inheritance of either $9.5m (allowing for the payment to the sister) or from the best view of the husband’s case $14m, there was still an accretion of assets during the relevant period of either $8.5 or $13.1m.  We think that the wife made a very real contribution during this period, first as a wife and subsequently as the primary carer of M. Her Honour seems to have used the distinction that she drew to minimise the husband’s contribution during the first half of this period and consequently, that of the wife.

(b) The Inheritance as a Special Factor

1. We also disagree with her Honour’s finding that the husband’s inheritance was a “special factor” in the sense used in McLay (1996) FLC 92-667.  We do not think that her Honour’s characterisation of the inheritance as a special factor in the McLay sense can be justified and we think that it led her Honour into error.

1. The special contribution referred to in McLay (supra) and other cases clearly refers to some special factor of skill or capacity that produces the result that there is a loading in favour of the party providing it. In JEL & DDF (2001) FLC 93-075 the majority of the Full Court said:

   “However, there are cases where the performance of those roles has what may be described as "special" features about it either adding to or detracting from what may be described as the norm. For example, in relation to the homemaker role the evidence may demonstrate the carrying out of responsibilities well beyond the norm as, for example, where the homemaker has the responsibility for the home and children entirely or almost entirely without assistance from the other party for long periods or cases such as the care of a handicapped or special needs child. On the other hand, in the breadwinner role the facts may demonstrate an outstanding application of time and energy to producing income and the application of what some of the cases have referred to as "special skills".

1. We are troubled that in the absence of specific legislative direction, courts consider they should make subjective assessments of whether the quality of a party's contributions was "outstanding".  It is almost impossible to determine questions such as: Was he a good businessman/artist/surgeon or just lucky? Was she a good cook/housekeeper/entertainer or just an attractive personality? We think it invidious for a judge to in effect give “marks” to a wife or husband during a marriage. We think that this doctrine of “special contribution” should, in an appropriate case, be reconsidered. We think that the decision of the House of Lords in White v White [2001] 1 All ER 1 gives force to these concerns.

1. It is apparent in any event that being the fortunate recipient of an inheritance does not amount to a contribution characterised by special skills. Indeed, in a strictly financial sense, the inheritance was something of a windfall, since it arose as the result of the premature and accidental death of the husband’s father and stepmother.

(c)       Her Honour’s Treatment of the Inheritance

1. We also think that, while the fact of the inheritance was entitled to be given considerable weight, her Honour gave it such overwhelming importance that she fell into error. We have already criticised her treatment of it as a “special” factor, which appears to have been partly responsible for this, but we also think that generally, she appears to have applied an incorrect test in considering it.

1. The issue of inheritance has been considered with some frequency by this Court:  see James (1978) FLC 90-487; Bonnici (1991) 15 FamLR 138; Burke (1992-93)

   
   

   16 FamLR 324; Anderson [unreported, Full Court 17 May 1994].

1. Situations where a parent provides moneys or property to a party as a gift are analogous to where a party receives an inheritance. The issue of gifts to parties to a marriage has also been often considered by the court; see Gosper [1987] FLC 91-818, Pellegrino [1997] FLC 92-789 Kessey [1994] FLC 92-495

1. A useful recent discussion of inheritance is to be found in the decision of the House of Lords in Whitein the judgment of Lord Nicholls (at 13-14).

1. His Lordship refers to a view that inherited property, whenever acquired, should stand on a different footing from other matrimonial property. According to this view, the spouse to whom it was given should be allowed to keep it. Conversely, as a consequence of such a view, the other spouse has a weaker claim to it.

1. Lord Nicholls entirely rejects the above proposition. The substance of what his Lordship said after referring to that view, is as follows:

   ·When present, the factor of an inheritance is one of the circumstances of the case;

   ·It represents a contribution by one of the parties;

   ·The Judge should take it into account and decide how important it is in the particular case;

   ·The nature and value of the property and the time that it was acquired are among the relevant matters to be considered;

   ·However, in the ordinary course, this factor carries little weight, if any, in a case where the claimant’s financial needs cannot be met without recourse to the property.

1. We note in passing that Thorpe LJ in the later case of Cowan [2001] 3 WLR 684; [2001] 2 FLR 192 at 212 appears to have treated Lord Nicholls’ statement as supportive of a view that we think that Lord Nicholls rejected, that it is appropriate to “quarantine” an inheritance. Inheritance was not an issue in this case and this matter does not affect the substance of the decision.

1. We consider that the view rejected by Lord Nicholls appears to be reflected, consciously or unconsciously in Carter J’s judgment and that this also led her into error. We think that she gave the inheritance such prominence, that she treated it in precisely the manner criticised by Lord Nicholls.

(d)  The Significance of the Wife’s Contribution

1. We also think that the weight that her Honour gave to the significance of the inheritance led her to undervalue the contribution of the wife.

1. She found that the wife made an indirect financial contribution during the first three years following the father’s death. She also found that she had made a substantial homemaker and parent contribution, which continued after the marriage broke down, in that she had the responsibility as primary carer for the child.

1. We think that in these circumstances, the appellant was correct in attacking her Honour’s findings that the inheritance completely overshadowed and outweighed the contribution made by the wife to the extent that she did. 

1. We note her Honour’s reference to Kennon (supra) but, like the majority of the Full Court in that case, we consider that her Honour’s analysis seriously undervalued the wife’s contributions during the marriage.  In that case the following appears (at 84,300) in the judgment of Fogarty and Lindenmayer JJ:

   “The reality is that the parties lived their married life together, they brought to that marriage qualities which each saw as attractive. Within the s79 context each party contributed as best they could the qualities which each brought to the marriage. In the husband’s case it included the quality of being very wealthy. In the wife’s case the qualities were less tangible. His Honour did not give those aspects the consideration which they deserved.”

1. We also think that her Honour, although accepting that she should take into account the wife’s pre marriage contribution, did not give that contribution sufficient value.  It is true that compared to the inheritance, the financial contributions of both parties during the pre marriage period were extremely limited.  Nevertheless, the wife did contribute, to the best of her ability, during those periods of cohabitation, and as her Honour found, did so equally with the husband.

1. With the advent of the inheritance the wife was required to cope with a complete and unforseen change in her lifestyle.  She largely lost the direct support of the husband that would have been available to her previously.  She had to cope with a young child at the same time.  She also had to provide support to the husband that had the effect of freeing him to learn to cope with the business.

(e)    The Relevance of the Amount Received for the Prahran Property

1. It was also argued that her Honour wrongly compared the sum of $600,000 to the net equity realised by the sale of the Prahran investment property as being relevant to the issue of whether $600,000 was adequate.  We cannot understand the relevance of this comparison.  It is not clear from her Honour’s reasons for judgment what use she made of this, but her reference to it suggests that she took into account irrelevant factors in considering whether the award of $600,000 by way of contribution was appropriate.

   (f) Reasons

2. We note that the appellant also complains about an absence of reasons on her Honour’s part.  We appreciate that it is difficult in cases of this sort, to express reasons in relation to the selection of an appropriate sum. In this regard we agree with the approach of Finn J in Farmer and Bramley  where her Honour said (at 49):

   “It has to be said, that it is not generally possible in the exercise of the discretion under s.79 to say or to ascertain why a particular award is ultimately arrived at. Given that awards under s.79 are virtually never calculated with mathematical precision, no amount of enumeration of, or indeed of evaluation of, contributions, or of the s.75(2) matters, or indeed of any of the matters listed in s.79(4), can ever explain exactly why a particular figure, or more usually a percentage, is eventually arrived at (other than that it is within the recognised "range").

   We note that her Honour went on to say :

   Absent a strict mathematical approach, the reasons for judgment requirement ultimately becomes impossible of total fulfilment in the jurisdiction under s.79.”

1. We think that this overstates the position. The obligation of giving reasons for judgment is an obligation that cannot be avoided because it is difficult to achieve. In any event Finn J’s statement does not mean that figures can be simply plucked out of the air. Judges are obliged to exercise their discretion judicially and should explain the broad nature of their reasoning that leads to their conclusion. In the present case we have great difficulty in understanding the reasoning behind her Honour’s selection of $600,000 for contribution, or $500,000 for s75(2) factors. We can only conclude that she arrived at these figures because of errors in her reasoning to which we have drawn attention. We therefore consider that this ground of appeal is also made out.

1. For all of the above reasons we conclude that her Honour’s discretion miscarried on the issue of contribution.

1. Criticism was also made of the fact that her Honour failed to compare the amount she awarded to the wife by way of contributions a percentage of the total assets, as a means of checking whether or not the amount awarded was fair.  While it would have been preferable for her to do so, we do not think that her Honour was obliged to do this in the circumstances of this case.  Her Honour clearly had regard to the amount that she was awarding by a way of contribution as against the total asset pool, and we see no reason why she should have been necessarily required to go through the arithmetical exercise of calculating percentages.  The question of whether this should or should not be done has been discussed in a number of cases.  It is obvious that it is usually desirable to consider the matter in percentage terms.  We think that in this case her Honour was well aware of the proportion that her finding as to the wife’s contribution bore to the total assets of the parties.

Section 75(2) Factors

(a) Double Counting of the Inheritance

1. Turning to s75(2) factors, we think there is substance in the appellant’s argument that her Honour double counted the effect of the inheritance, by again taking it into account as a factor pursuant to s75(2)(o). She had already done so on the issue of contribution and we have difficulty in understanding why it again became such a significant factor in relation to s75(2).

1. In Kennon (supra), the majority of the Full Court made it clear that it is appropriate to take into account huge differences between the parties’ incomes, assets and future earning capacities.  In that case the differences existed when the parties commenced living together.  In this case, that was not the situation, although there was no doubt some expectation as to the future so far as the husband was concerned.  This case also differs, in that there was a substantial additional accretion of wealth during and immediately after the marriage.

1. In Kennon (supra) at 84,303 the following appears:

   “Whilst we acknowledge that s79 is not a source of social engineering, or as a means of evening up of the financial positions of the parties to a marriage, (see for example Clauson and Clauson (1995) FLC 92,595, Waters and Jurek (1995) FLC 92,635 and Lyon and Bradshaw [Full Court 16 May 1997] not yet reported) nevertheless, the fact is that these parties were married for a not insignificant period.  Each made contributions which we have discussed and their obligations to each other do not cease on separation.”

1. Their Honours went on to say that in the context of that case, an adjustment of $200,000 seemed to be anything but substantial and represented in percentage terms, about 2 percent of the total property.

1. Although in the present case we are dealing with an award of $500,000, we consider that those remarks are apt in the present proceedings, given the total assets of $22.5m. The relationship in this case spanned 9 years, of which her Honour found that the parties lived together for more than 5 years. About three of those years involved the marriage.

1. The last two matters referred to by Lord Nicholls in our summary of his remarks in White on inheritances are relevant to this issue.  These were that:

   ·The nature and value of the property and the time that it was acquired are among the relevant matters to be considered;

   ·However, in the ordinary course, this factor carries little weight, if any, in a case where the claimant’s financial needs cannot be met without recourse to the property.

1. Our legislation contains no reference to financial needs. Translating this approach to the Australian context would suggest that the fact that the bulk of the assets of the inheriting spouse constitute an inheritance would have little or no relevance in considering the various s75(2) factors, if property other than the inheritance were not available.

1. We consider that such an approach is consistent with the philosophy of s75 (2) and that s75(2)(o) was never intended to provide a basis for reducing a spouse’s entitlement under it by reason of an inheritance, as her Honour appears to have done.

(b)  Inadequacy

1. An alternative approach on the facts of this case to the issue of contribution would be to ignore the inheritance and simply take the accretion in wealth from the time of the father’s death until trial as providing the funds from which the distribution to the wife should be made.

1. If this were to be done the award of $500,000 still appears to us to be manifestly inadequate.

1. It follows from what we have said that we think that her Honour’s discretion also miscarried in relation to s75(2) factors.

WAS THE OVERALL AWARD JUST AND EQUITABLE?

(a) Needs

1. We are concerned that like the trial Judge in Kennon (supra) at 84,304, her Honour approached this matter on a “needs” basis, rather than properly considering s75(2) factors.

1. We pay particular regard to her Honour’s comments that $1.1m would be sufficient to provide a home “like Orchard Street”, a motor car and a small amount of investment income.

1. She appeared to consider that $141,000 (out of which it is obvious that at least some legal costs would be paid) would provide the wife with appropriate additional capital.  In our view, this cannot be correct when one looks at the length of the relationship and the magnitude of the assets available to the husband.

1. In this regard it is again useful to refer to a portion of the speech of Lord Nicholls in White.

1. The issue of needs arose in that case in the context of a discussion of the effects of s 25(2)(b) of the English Matrimonial Proceedings and Property Act, as amended by the Matrimonial and Family Proceedings Act 1984.

1. Sub para (b) requires the court to have regard to have regard to:

   “the financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future.”

2. This has no direct parallel in the Australian legislation. In addition to the absence of a reference to financial needs, the Australian Family Law Act 1975 contains no explicit requirement that first consideration be given to the welfare of children, although this is obviously an important and relevant consideration. However, there are obvious similarities between English and Australian legislation in this area. In particular, a broad discretion is given to the trial judge.

1. Lord Nicholls said in White (at 12):

   “I can see nothing, either in the statutory provisions or in the underlying objective of securing fair financial arrangements, to lead me to suppose that the available assets of the respondent become immaterial once the claimant wife’s financial needs are satisfied.”

1. He also posed the question as to why the surplus assets over needs should inevitably go to the husband.

1. We agree with the philosophy underlying these comments.  In the present case, while Carter J did not impose a reasonable requirements or needs test, as such, it can be seen from the passages in her judgment to which we have referred that she went very close to doing so.

1. In effect, she took a subjective view as to what the wife’s requirements were. Having determined these, she tested whether the result was consistent with the just and equitable requirements of the Family Law Act. In doing so we consider that she was in error.

1. We appreciate that this occurred partly at least, because of the way the wife’s Counsel presented her case. In effect, they made submissions as to what her needs were. Her Honour accepted the broad thrust of these submissions, but found that the wife’s needs were less than they submitted and ordered accordingly. In our opinion this led her into error.

(b)That the respondent husband file and serve any written submissions in answer thereto within 14 days thereafter.

(c)That the appellant wife file and serve any written submissions in reply thereto within a further seven (7) days thereafter.

(d)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.

5.(a)       That either party be at liberty to make an application by way of written submissions in respect of costs incurred by him or her in relation to the appeal within 21 days of the date hereof.

(b)That the other party have a further 14 days in which to make written submissions in answer thereto.

(c)That the first mentioned party have a further seven (7) days in which to make any written submissions in reply thereto.

(d)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.

I certify that the preceding 243 paragraphs
are a true copy of the reasons
for judgment delivered by
this Honourable Full Court.



Associate