H & H
[2005] FamCA 42
•8 February 2005
[2005] FamCA 42
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA Appeal No WA13 of 2004
AT PERTH File No PTW5827 of 2002
BETWEEN:
H
Appellant Wife
- and -
H
Respondent Husband
REASONS FOR JUDGMENT
CORAM: KAY, HOLDEN & BOLAND JJ
DATE OF HEARING: 30 November 2004 & 1 December 2004
DATE OF JUDGMENT: 8 February 2005
APPEARANCES: Mr Udorovic, one of Her Majesty’s Counsel with Dr Ingleby of Counsel, instructed by O’Sullivan Davies, Level 11, 30 The Esplanade, Perth WA 6000, appeared on behalf of the Appellant Wife.
Mr Dowding, Senior Counsel with Ms Lehmann of Counsel, instructed by Carr & Co., Level 9, Chancery House, 37 St Georges Tce, Perth WA 6000, appeared on behalf of the Respondent Husband.
H AND H
WA13 of 2004
CORAM:Kay, Holden & Boland JJ
DATE OF HEARING: 30 November & 1 December 2004
DATE OF JUDGMENT: 8 February 2005
Catchwords: PROPERTY – contributions – evaluation of contributions -Pool in excess of $10 million – contributions measured as to 75 per cent in favour of husband – matters said to effect contributions included the conduct of the wife in relation to the business which was wrongly treated as a negative contribution when there was no evidence of its economic impact and the reasons remained unclear as to what weight was given to issues that inappropriately loomed large in the reasons for judgment – findings that the asset pool had doubled post-separation as a result of the husband’s special skills as an astute share trader were not properly explained or supported by the evidence – inadequate findings as to whether the growth was explicable by windfall profits or market forces rather than astute trading – inadequate findings made about the wife’s contribution as a parent and homemaker in light of the evidence – judgment set aside and matter remitted for rehearing.
This is the wife’s appeal against orders made by Tolcon J on 6 August 2004 that she receive or retain assets to the value of 30 per cent of a pool found to be worth approximately $10.6 million. The wife asks that we increase her share of assets to 50 per cent of the pool. The husband submits that the appeal should be dismissed or in the alternative that a retrial be ordered.
Background
The parties met in South Africa in 1981 and married on 1 June 1986. Whilst there was a difference of opinion between them as to when they separated the trial Judge found that by August 2002 the marriage had irretrievably broken down. It was dissolved by a decree that became absolute in May 2004.
There were three children born of the marriage A born December 1986, B born August 1988 and C born September 2000.
Initial contribution
At the time the parties commenced to cohabit the husband had an interest in a property in Western Australia as well as a motor vehicle, furniture and some investments. The wife was in employment and had modest assets. The trial Judge said that he was unable to quantify the husband’s initial financial contribution other than it was not less than a net value of the Western Australian property which his Honour stated that the husband had estimated to have a net value of $165,000.
The husband had sworn in his affidavit filed 15 December 2003 paragraph 18 that “at the time when cohabitation commenced the property was worth about $100,000.00. It had an outstanding mortgage of approximately $35,000.” We were not taken to any evidence relating to his Honour’s finding as to the value of the house nor is it the subject of any ground of appeal.
The parties came to Australia together in 1988 and moved to Western Australia in August 1991.
Whilst in South Africa both parties were in employment. They lived in a home that was acquired in the wife’s name and sold several years later at a profit of approximately ZAR100, 000. The monies for the acquisition of the home were said by the husband to come from a deposit provided from his pre-marital assets and the balance presumably by way of borrowings.
Early in 1992 the parties acquired the matrimonial home where they resided until the wife left the home taking the children with her late in 2002.
In 1994 the husband decided to set up his own stockbroking business. He qualified as a member of the Australian Stock Exchange. Eventually a series of companies were established to carry on the stockbroking business established by the husband and to manage the family’s various investment portfolios.
In October 1995 the wife commenced employment with the husband’s business where she remained until the husband terminated her employment in December 2002. In her affidavit filed 15 December 2003 the wife extensively set out the details of her duties when working in the business. She said (paragraph 204):
“I was responsible for the administration and daily running of the office…[the husband] concentrated on the dealing and research side of the business.”
Other than the passing comment by the trial Judge that from October 1995 until December 2002 she was employed at the business, there appear to be no findings made relating to the role that she carried out in the business for those seven years.
The parties remained together in an acrimonious relationship. In 1993 the wife had consulted solicitors about separating from the husband. In 1997 the wife had sent a letter of resignation after receiving a note from the husband attempting to rebuke her for matters that occurred in the office. Notwithstanding these tensions the business that the parties were operating grew significantly as did the parties’ asset portfolio.
In addition to working full time the wife was the parent most involved in caring for the children and the person responsible for the running of the household.
In August 2002 the wife consulted her current solicitors. In September 2002 she twice withdrew $100,000 from business accounts without her husband’s knowledge or permission.
On 29 October 2002 interim orders were made that included enabling the husband to deal with funds of the Family Group of companies for trades up to $50,000 for the benefit of the group. This sum was subsequently enlarged to $100,000.
On 13 February 2003 there were further orders made by consent that included a notation
“…that the wife has today given her consent to the husband exercising (or following) the Family Group’s rights (approximately 12.5 million) in Anaconda Nickel Ltd. (and as set out in the husband’s emailed request to the wife of 12 February 2003) on the basis that any loss or gain resulting from this investment will be brought into account in determining the parties’ asset pool...”
Those orders also provided that of the $200,000 that the wife had withdrawn from the Family Group, $50,000 was deemed to have been received by her as lump sum spousal maintenance and $150,000 by way of partial property settlement.
In April 2003 the wife filed an application seeking orders that the husband sell up all shares held by him and/or the Family Group in the parties’ private trading accounts and be restrained from acquiring or purchasing any shareholding on his behalf or of any of the Family Group using any funds held by him or the Family Group. She sought orders that the proceeds of sale be placed into private investment bank accounts.
On 4 July 2003 on the return of that application Penny J restrained the husband from trading in shares in private trading accounts so that at any time his exposure in those accounts did not exceed $200,000. He was further restrained from purchasing or acquiring any shareholding on behalf of himself or any of the Family Group in the private investment accounts and was ordered to place the proceeds of sale of any shares held in the private investment accounts into a private investment bank account. Her Honour further directed that any losses resulting from his share trading in the private trading accounts were to be borne by the husband. Those orders were the subject of an appeal to the Full Court who set them aside on 4 December 2003 and otherwise dismissed the wife’s application.
It was common ground between the parties that there was a significant rise in the asset pool between the time the wife left the matrimonial home in September 2002 and 31 December 2003 which was a date used by the trial Judge for establishing the value of the assets to be divided. No precise findings were made relating to the extent of that rise by the trial Judge other than it was described by the trial Judge as being a period “when the asset pool doubled”.
Judgment of Tolcon J
After setting out the relevant claims of the parties in the proceedings (basically the wife sought to receive the home plus $2.5 million plus $1 million from the husband’s superannuation fund, whilst the husband sought that he pay the wife $1.5 million and transfer to her $900,000 from his superannuation fund but that he retain the home) Tolcon J identified as the matters for determination the competing applications for property settlement, the wife’s child support departure application, the wife’s application for spousal maintenance and the husband’s application seeking a discharge of an existing maintenance order.
His Honour set out the background of the parties finding inter alia:
· The parties had throughout their relationship been in conflict with one another both at the matrimonial home and their place of employment;
· The husband worked 65 to 70 hours per week;
· The wife worked during the marriage in various administrative positions for stockbroking firms and believed she had the capacity and ability to run a stockbroking business. She consulted an accountant in September 2003 to put into place a business plan to take over some of the husband’s business assets;
· The wife was diagnosed as suffering from stress and depression for which she was prescribed medication;
· Once matters before the Court were finalised the wife’s health would improve and she would return to the workforce in a relatively short period of time;
· The husband has substantially increased in his wealth during 2003;
· The husband’s initial contribution was substantially greater than that of the wife;
· During the marriage the parties were generally in employment. The wife’s family assisted in the care of the children or they were placed in a child minding centre;
· The wife’s siblings were for periods of time employed by the Family group of companies.
His Honour said
“20The parties’ acrimonious relationship was noticeable in the work place, as evident by the wife refusing to give the husband a password to the computer and diverting the husband’s emails to herself. It was clear to me from the evidence that the wife’s attitude towards the husband in the workplace would have caused much unhappiness between the parties and her general attitude towards staff would have made it an unpleasant and strained environment in which to work.
21The wife claimed that the husband was critical of her and he may well have been, for just reason. However, what was of concern was the wife’s conduct in handling various financial matters and her attitude and general behaviour towards the husband and his business interests. Some examples are:
(i)On 19 December 1999 cheques were drawn in favour of the three children for amounts of $3,081 each. The cheques were signed by the wife’s sister, J and altered by the wife in favour of her sister E (see exhibit 3). When questioned, the wife stated that the cheques had been diverted to E as her sister had borne the costs of supporting their mother in South Africa. At that time the wife had access to bank accounts of her own and of the husband, as well as to credit cards. She could have drawn on those accounts to meet her mother’s expenses. I do not accept the wife’s explanation. Having regard to the fact that the marriage was unhappy, the inference I draw is that the wife diverted the money for her own benefit.
(ii)On 15 April 2002 the wife applied for and was allotted 9,000 shares in Vulcan Resources Limited in E’s name, at a cost of $540. The shares were sold at a profit. The wife was unable to inform the Court of the profit, save that she stated her arithmetic was not good and the profit was about $4,000. The proceeds were paid into a bank account opened by the wife in E’s name. The wife was a signatory to that account. The wife’s explanation was that she was indebted to E for supporting her in her earlier years. The wife’s answer to not taking up shares in her own name was that she was not in need of money as she had all of the material things she needed. Having regard to the unhappy state of the marriage, I find it difficult to accept the wife’s explanation.
(iii)The detailed ledger …, evidencing all share transactions on behalf of the wife’s sister, was incorrectly titled E (no reference to the surname of X – see exhibit 3). The wife acknowledged that the ledger card was incorrect and was unable to give an explanation as to why it was so. She stated that other persons as well as herself had access to the ledger card. The date on which the ledger card was printed was 1 December 2003. I make no finding as to who altered the ledger. It was recorded in the ledger card that as at 16 October 2002 EX held shares valued at $67,826, and the wife had authority to operate the account. (see exhibit 3).
(iv)On 16 May 2002 an application was lodged in the name of JX for 8,000 shares in Vulcan Resources Limited. The accompanying cheque for $480 was a cheque drawn …signed by the wife (see exhibit 5). When questioned about why she had not applied for shares in her own name, she stated that she did not trade and left it to the husband. I found that difficult to accept when it was apparent that the shares would open at a premium. Her relationship with her husband had broken down.
(v)In August 2002 the wife consulted her current solicitors and on 1 October 2002 filed her application for property settlement. During this period the wife –
.On 9 September 2002 paid her solicitors $2,000
.Was in conflict with the husband and various staff members in the workplace.
.On 19 September 2002 the wife, without reference to the husband or appropriate authority, paid to her sister JX, $4,346.59 for accumulated leave and in addition, giving herself and her sister a pay increase, back dated to 1 July 2002.
.Without the husband’s knowledge and approval the wife removed and/or made copies of various documents and records.
.On 20 September 2002 the wife unlawfully transferred … $100,000 to her account as trustee for the children; and
.On 24 September 2002 the wife unlawfully transferred from a business account a further $100,000 to her account in a manner such that she knew the husband would not be aware, and was not aware, until he read the wife’s affidavit sworn 10 October 2002.
.The husband responded by letter on 10 October 2002, seeking an explanation from the wife for her actions and details of files removed (see husband’s letter to the wife dated 10 October 2002, annexure 26 to wife’s affidavit sworn 15 December 2003.)
.The wife stated that the money removed was not trust money and endeavoured to justify her conduct by stating that she was leaving her husband and needed finance to set up home, support the children and retain solicitors. This was at a time when the wife was authorised to operate the accounts of her mother and sisters and was able to deal with her sister E’s share holding, which had a value of $67,820. Further, she had engaged senior Family Law practitioners and an appropriate Application for Security of Costs could have been made. The wife’s counsel endeavoured to minimise the wife’s actions by submitting that
.the wife had made a full disclosure in her affidavit and the money was taken into account in subsequent orders of this court;
.the money taken was ‘their’ money and in the circumstances it was in order for her to take the money, to be utilised for her support and legal fees.
.I do not accept the wife’s explanation for removing the money as it was not appropriate to take it. The wife’s actions indicated to me that she had no regard for -
.her duties and responsibilities as a director or employee
.the financial liability and viability of the various corporate entities conducted by the husband
and as a result she was placing additional financial and management pressures on the husband.
It further indicated to me that the wife was manipulative and deceitful and was prepared to take whatever action necessary to achieve a result in her favour.
(vi)There was other evidence before me that the wife was not open and frank about evidence and in particular in relation to her financial affairs and the reasons behind the pressure she subjected the husband to in providing financial information.
The wife’s evidence in relation to moneys borrowed from her mother was not accurate and when questioned, the wife’s explanation for the discrepancy was, ‘I made a mistake as to the amount’.
The wife further compromised herself by failing to disclose that she could draw on her mother’s bank account and failing to discover to her solicitors or the husband the documents evidencing the wife arranging for her mother’s money $HK600,000 in the Hang Seng Bank to be transferred to National Australia Bank Australia. The wife had authority to operate that bank account (see exhibit 8).
The wife was evasive and unco-operative when questioned and on many occasions her stock reply was, ‘I can’t remember’.”
His Honour then turned to submissions as to which of the parties had been obstructive in the preparation of the proceedings and concluded:
“27I do not accept that the husband, his staff or advisers were being obstructive, unhelpful or evasive in providing the information required, but rather that the wife and her advisers were –
. making unreasonable demands for information
.harassing and frustrating the husband in the operation of his business
.not open and frank about the reason for the pressures placed on the husband to provide financial information.
28 In this regard I refer to –
.Constraints placed on the husband in operating his business by the wife instituting numerous court proceedings and requiring the husband to respond and defend. I do not accept Mr Udorovic’s submission that the restraints put on the husband would not have impeded the husband in carrying out his business as the restraints would have restricted the husband’s freedom to operate in the stock market. It was the wife’s counsel’s submission that the wealth created in 2003 was as a result of the husband not trading what he referred to as ‘investment shares’ and he referred to individual shareholdings.
The wife acknowledged that the husband was innovative, hard working and was developing the various investment interests of the parties. The wife was aware, or should have been aware, that the business interests were growing, there were associated management problems, there was a need for the husband’s input and for him to have an unfettered discretion to operate the business entities.
It is open to me to infer and I do, that the restraints imposed by the wife and orders obtained by her from this Court would have restricted the husband in maximising the profitability of the various business entities. Mr Udorovic endeavoured to justify the wife’s actions by referring to each of the proceedings and demands in isolation. The view that I take is a global one and hence I am satisfied that the wife utilised whatever means available to her to frustrate and harass the husband in his business operations.
.Mr S’s unreasonable demands placed on the husband and his advisers and staff during January 2004. His general approach was one of confrontation and pressure. He would have been aware that to provide final accounts for the period ending 31 December 2003 would require time, particularly having regard to the complexity of the husband’s financial affairs, that staff would be taking holidays and that the husband was endeavouring to continue to trade.
.The wife’s solicitors purporting to give to the husband’s solicitors reasonable notice of meetings and the like. On close examination of the evidence the notice given was unreasonable and the solicitors would have been aware, or should have been aware, that a confrontation was likely to occur or that the husband would or could not comply with the request. (See Mr Murdoch’s conduct in this regard and the correspondence purporting to arrange meetings).
When considering the evidence and in particular the above, I formed the view that the wife –
.had a good knowledge of the husband’s business and financial interests;
.had removed relevant financial information for the purpose of taking proceedings against the husband and taking over his business;
.consulted accountants with a view to taking over the husband’s business;
.was untruthful, manipulative, deceitful and not open and frank in relation to her financial affairs.”
His Honour then dealt with an unexplained missing sum of $904,487 which had been in an account in the husband’s name as at 30 June 2002. The husband said that his accountant could explain where the monies had gone but as neither party asked the accountant any questions about it when he gave evidence, his Honour said that he did not propose to take the missing sum into account.
His Honour accepted the valuation that the husband had put on some of his shareholdings and concluded that the husband had endeavoured to provide a full and frank disclosure in his affairs to the court.
After setting out the relevant provisions of s 79 of the Family Law Act 1975 his Honour turned to ascertain the assets of the parties as at the date of trial and found the pool to be $10,626,046.00:
His Honour then turned to assess the relative contributions made by the parties, saying:
“36The approach I propose taking in dealing with contributions is as follows:
(a)The husband has made a substantially greater initial financial contribution than the wife.
(b)From the date of marriage, to date of separation -
(i)both were in employment and the evidence satisfied me that the husband made the greater financial contribution;
(ii)the wife had disrupted and interfered with the husband’s business operations by unlawfully removing $200,000, giving her sister and herself a pay rise without reference to the husband and directing the husband’s emails to herself.
I do not accept the evidence that she wished to check on insurance matters. She refused to supply her computer’s password and was generally being disruptive within the office. Leaving the business as she and her sister did, caused a management hiatus – a fact of which she was, or should have been aware.
(c)The orders the wife obtained on 4 July 2003 restricted the husband’s trading and the ability to maximise his profits from trading.
(d)The wife constantly harassed the husband through numerous court applications and unreasonable demands for financial information, as previously mentioned.
(e)Despite the difficulties created by the wife, the husband managed to control and develop his business interests and was able to double the net worth of the parties’ assets. The wife’s counsel submitted that the net worth of the assets increased in the main as a result of the husband retaining shares and not trading. I do not accept that submission because the husband is a share trader and it was his expertise, astuteness and business acumen which resulted in the increase in assets.
(f)The wife has made a greater contribution than the husband to the family. Here again, the wife had the support of her family, or otherwise the children were placed in Day Care.
...
38Having regard to the husband’s substantial initial financial contribution, his contributions to the date of separation, his contributions post-separation when the asset pool doubled, together with the difficulties he was confronted with as a result of the wife’s demands and actions after the date of separation, as against the wife’s contributions both prior to and post separation, I would assess the husband’s contribution at 75% and the wife’s at 25%.”
His Honour then determined that a further adjustment should be made in the wife’s favour taking into account the relevant provisions of s 75(2) of the Family Law Act 1975 in the sum of 5 per cent of the pool of assets having regard to:
.the husband’s ability to earn income at a substantially greater rate than the wife
. there will be a period before the wife returns to the workforce
. the wife will have the responsibility for the children
His Honour then proposed that orders would be made which would see the wife receive or retain:
Matrimonial Home $1,475,000.00
Wife’s Contents 2,935.00
Wife’s Motor vehicle 10,000.00
Wife’s Savings 13,110.00
Wife’s Superannuation 80,000.00
Wife’s Legal Fees addbacks 291,602.00
Superannuation (splitting order) 750,000.00
Cash 565,167.00
$3,187,814.00
and in addition, that the husband pay the Mastercard debt of $42,000.00.
His Honour dismissed the wife’s claim for maintenance and made orders for child support that :
“the husband pay the capped rate for child support and meet the following expenses of the children –
.Private school fees for B
.Private health insurance for the children
.Medical expenses which are not covered by private health cover
.A contribution of $57 per week for C’s Day Care expenses until the child commences school.”
Grounds of appeal
1. The learned trial judge erred in law because:
(a)the contribution-based entitlement in favour of the husband of 75%,
(b)the adjustment in favour of the wife for section 75(2) factors of 5%;
(c)the overall award of 70% in favour of the husband
were individually and cumulatively manifestly unjust and excessive.
2.The learned trial judge erred in law because he did not provide adequate reasons for awarding the husband a contribution-based entitlement of 75%.
3.To the extent that reasons were provided for awarding the husband a contribution-based entitlement of 75% the reasons were not on inadequate but also in error because:
(a)it was not open to the judge to treat the husband's initial contributions as so significant in the context of an 18 year marriage with 3 children (the youngest of who is 3) and an asset pool of $10.6 million.
(b)The findings that the wife "disrupted and interfered with the husband’s (sic) business operations" were material mistakes of fact.
(c)The findings that the wife obtained orders on 4th July 2003 which restricted the husband’s trading and ability to maximise profits from trading were material mistakes of fact.
(d)The findings that the wife constantly harassed the husband through numerous court applications and unreasonable demands for financial information were material mistakes of fact and/or irrelevant considerations.
(e)The finding that the parties' net worth doubled after separation was unsupported by the evidence.
(f)The finding that the husband was responsible for the growth in assets after separation and/or that he was entitled to any greater contribution-based entitlement by reason of his control of the business after separation was a material mistake of fact and/or law
(g)The learned trial judge erred in law by treating conduct as a relevant matter.
4.The learned trial judge erred in fact and in law by omitting consideration of and/or making material mistakes of fact in relation to, the wife's indirect financial contribution to the business, the wife's contribution as homemaker and parent, and the combination of the wife's contributions in both capacities.
5.The learned trial judge erred in fact and law by finding that the husband had fulfilled his duty to make full and frank disclosure.
6.The learned trial judge erred in fact and law by finding that the wife had made any significant non-disclosure.
7.The learned trial judge erred in law by finding that it was appropriate for the husband to be the valuer of his own shareholdings.
8.The learned trial judge erred in law by finding that 31st December 2003 was the balance date for the valuation of all the assets of the parties.
9.The learned trial judge erred in failing to make orders and/or to consider whether to make orders in terms of the indemnities sought in paragraphs 13 and 14 of the wife's Amended Minute of Orders sought dated 28th July 2004.
10.The learned trial judge erred in failing to expressly provide for the husband to pay private school fees for C.
Principles to be applied
This is an appeal from a discretionary judgment. In House v The King (1936) 55 CLR 499, at pp 504-505 , Dixon, Evatt and McTiernan JJ. said:
“The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of discretion is reviewed on the ground that a substantial wrong has in fact occurred.”
In AMS v AIF (1998) 24 Fam LR 756 Kirby J stated
“[150] … an appellate court, invited to review the exercise of discretion at first instance will avoid an overly critical, or pernickety, analysis of the primary judge's reasons, given the large element of judgment, discretion and intuition which is involved. Only if a material error of the kind warranting disturbance of a discretionary decision is established is the appellate court authorised to set aside the primary decision, to substitute its own exercise of discretion or to require that it be re-exercised on a retrial.”
Essentially before the appellate court will interfere with the exercise of discretion by a trial judge it needs to be satisfied there has been an error of approach in principle or an error of fact having regard to the evidence or alternatively that the result is so unjust as to be unsustainable. The mere finding of an error of fact is of itself insufficient if it can be shown that the finding was either immaterial or that the result was plainly right.
The gravamen of the appeal as it was argued before us was essentially based on an inadequacy of reasoning, false findings as to relevant matters of fact and an inappropriate assessment of contribution that took into account a number of factors that could not demonstrated to be relevant to the matters prescribed in the Family Law Act that had to be considered when making an order for alteration of property interests.
Given that counsel for the appellant conceded that there was no direct attack on the finding as to the asset pool being $10.6 million we have difficulty in understanding grounds 7 and 8. Those grounds could only affect the outcome if the pool itself was under attack. Accordingly we do not propose to further discuss them.
As to ground 9, the husband indicated via his counsel that he did not intend to make any claims himself or via the companies in respect of the monies taken by the wife and that should the appeal otherwise be dismissed he had no objection to orders being made to grant the indemnities which are set out in paragraphs 13 and 14 of the amended minute of final orders as set out at paragraph 2 of the Reasons for Judgment of Tolcon J.
As to ground 10, the husband indicated that he would assume responsibility for the school fees for the child C as and when they fell due but that it was inappropriate to make any order for them. In light of the concession we do not propose to take that matter any further.
We turn then to the balance of the grounds which sought to challenge his Honour’s assessment of contributions. The crux of the trial Judge’s assessment of this matter appears to be incorporated in his Honour’s reasons at paragraphs 36 and 38 where he assessed the contributions the parties had made to the pool of assets. The criticisms of that assessment are many. Whilst the wife concedes that the husband made a greater initial financial contribution to the marriage than she had, it was her submission that given the size of the pool of assets, the duration of the marriage and the role that each of them played during the course of the marriage it ought to have been a matter of very little weight. In a pool of over $10 million worth of assets to describe an initial contribution of $165,000 (perhaps incorrectly assessed) made 18 years before the trial as being “substantially” greater than that of the wife overstates its importance.
The next matter to which his Honour directed his attention on the issue of contribution was that between the date of marriage and separation whilst both parties were in employment the husband made the greater financial contribution. This finding was not the subject of any challenge by the wife, although, as will later be seen, it was argued under ground 4 of the grounds of appeal that his Honour failed to adequately assess and weigh the husband’s contributions in this respect against the contributions made by the wife over the course of the marriage.
Then still under the heading of “From the date of marriage to the date of separation” his Honour immediately turned to several issues which arose at about the time the parties were finally separating. His Honour asserts that the wife disrupted and interfered with the husband’s business operations by
· Unlawfully removing $200,000;
· Giving her sister and herself a pay rise without reference to the husband;
· Directing the husband’s emails to herself;
· Refusing to supply her computer password;
· Generally being disruptive within the office;
· Leaving the business, causing a management hiatus.
We are in agreement with the submissions made on behalf of the appellant wife that each of these matters should have been of very little if any consequence when assessing the issue of contributions to the pool of assets. We will discuss shortly generally the principles to be applied in respect of negative contributions but within the scheme of this case, there was little if any evidence upon which the trial Judge could conclude that these matters were of any import.
The wife removed the $200,000 in September 2003 and it is clear from the correspondence from the husband that he was aware of its removal early in October 2003. There was no evidence from the husband that the removal of the monies ultimately disrupted or interfered with his business operations although it might have had the potential to do so. As already mentioned above in February, 2003 the parties by consent agreed to treat this sum as received by the wife as spousal maintenance and partial property settlement.
The evidence relating to the pay rise was of such an inconsequential amount that it could not possibly be seen to be relevant in a case of this dimension. The evidence relating to the emails was that the wife sought that copies of the husband’s emails be sent to her not that the emails be diverted to her. Again there was no evidence to support any suggestion that these matters had any effect upon the profitability of the parties’ businesses or their value.
Similarly with respect to the refusal to supply the computer password, the wife indicated that the password was in relation to her personal files and no evidence was led to suggest that it otherwise disrupted the operation of the office. Finally in relation to these matters, the wife did not leave the business but her employment was terminated by the husband at a time when her doctor said she was ill and could not attend the business and was suffering from depression. Once again, according to the husband’s material, her role in the business was quickly subsumed by other employees.
The next matter that the trial Judge drew attention to in assessing the parties’ contributions was that the orders the wife obtained on 4 July 2003 restricted the husband’s trading and ability to maximize his profits from trading. Those orders were obtained by the wife after a contested hearing before Penny J. The wife was concerned to protect the asset base that the parties had built up through their joint efforts which she said was about $6 million. As the husband indicated that he was never really exposed to more than $200,000 net at any one time in his trading her Honour deemed it appropriate to limit the extent of his exposure at any one time to that amount but also, even though the wife did not seek such an order, concluded that if he wanted to trade he should be responsible for any losses. Her Honour rejected the wife’s claim to sell up the entirety of the holding immediately but did decide that if the husband wished to sell any of the shares he should reinvest the proceeds in an interest bearing account. The Full Court took the view that the restraints were inappropriate, saying:
“Parties ought only be restrained from conducting their normal affairs pending the suit if the failure to so restrain is likely to seriously interfere with the proper adjudication of the competing claims and the meeting of the entitlements.”
The Full Court further took the view that it was inappropriate to infringe upon the discretion of the judge who would ultimately hear the s 79 application by attributing post-separation losses to the husband via an interlocutory order.
As to the finding that the orders of 4 July 2003 restricted the husband’s trading and his ability to maximize his profits from trading, there was scant if any evidence about that matter. Indeed it was entirely speculative. At its highest the husband indicted in cross-examination (p 1875):
“I was stuck in limbo land thinking, am I going to lose money on this? It in fact prompted me to sell large lumps of stock which would have made us significantly more money.”
The trading restriction itself was to trade no more than $200,000 at any one time. That was a sum that was effectively agreed to by the husband. The wife’s application to have the husband sell the shareholding had been dismissed by Penny J. In the context of applying for interlocutory orders which were granted by a trial judge it is difficult to see how such a process could be seen on the evidence to have any way amounted to some form of negative contribution on behalf of the wife.
There is an earlier reference to the matter by the trial Judge in paragraph 28. His Honour there said:
“It is open to me to infer and I do, that the restraints imposed by the wife and orders obtained by her from this Court would have restricted the husband in maximising the profitability of the various business entities. Mr Udorovic endeavoured to justify the wife’s actions by referring to each of the proceedings and demands in isolation. The view that I take is a global one and hence I am satisfied the wife utilised whatever means available to her to frustrate and harass the husband in his business operation.”
His Honour then gave by way of example demands that were placed upon the husband during January 2004 to produce accounts to the period 31 December 2003. Given that 31 December 2003 was ultimately the balance date accepted by the trial Judge in valuing the assets, it is difficult to see how any demands placed in January 2004 could have affected the profitability of the company up to the date on which the profitability was being measured, namely 31 December 2003.
In any event, the matters dealt with by paragraph 36(d) are again incapable of being referred back to any identifiable loss suffered to the pool of assets by reason of the wife’s behaviour which would not otherwise be capable of being remedied in costs.
The next contribution finding was that the husband managed to control and develop his business interests and double the net worth of the parties’ assets [by reason of] his expertise, astuteness and business acumen which resulted in the increase in assets. Although it is not possible to discern with precision what weight his Honour gave to this contribution, it is clear that his Honour regarded it as a type of special contribution on the part of the husband justifying an extra loading in his favour.
The doctrine of “special contributions” has been the subject of significant discussion in the Full Court and High Court authorities, and has its origins in the High Court decision of Mallet (1984) 156 CLR 605; FLC 91,507. In Mallet, the High Court rejected the notion that equality of contributions was a convenient starting point in proceedings under s 79 of the Family Law Act, and held (per Wilson J) that at FLC 79,126:
“… equality will be the measure, other things being equal, only if the quality of the respective contributions of the husband and wife, each adjudged by reference to their own sphere, are equal.”
Dawson J went on to acknowledge that at FLC 79,132:
“If, for example, the husband is engaged in conducting a business, the nature of the business, the skills which the husband applies to it, the way in which he applies those skills and the manner in which the business has been built up, are all factors which may indicate that it is inappropriate to assume equality of contribution towards the acquisition, conservation or improvement of property during the subsistence of the marriage.”
In Ferraro and Ferraro (1993) FLC 92,335, the Full Court noted the difficulties in evaluating different contributions made by the parties, particularly “where one party has exclusively been the breadwinner and the other exclusively the homemaker” but held, nonetheless that at FLC 79,572:
“…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’.
In the circumstances of that case, the Full Court held at FLC 79,581 that:
“So far as the husband is concerned there is no doubt that, especially in the last decade of the marriage, by his special skills and endeavour he greatly increased the assets of the parties to the level at which they were at the time of the trial. In accordance with authority, those special skills are entitled to recognition as an extra or ‘special contribution’.”
See also McLay (1996) FLC 92-667, Stay (1997) FLC 92-751, Phillips v Phillips (1998) FamCA 1551 and JEL v DDF (2001) FLC 93-075.
In McLay, a differently constituted Full Court took a broader approach, suggesting that the doctrine might extend to “special factors” which take a party’s contribution outside the ambit of the “normal range”.
In delineating the parameters of the doctrine, the courts have been careful to distinguish special contributions from inheritances or windfalls. Thus, in Figgins (2002) FLC 93-122, the Full Court held that the trial judge had erred in treating an inheritance by the husband as a “special factor” warranting an extra loading in his favour. The Court went on to express some concerns about the operation of the doctrine, suggesting that it ought to be reconsidered, particularly in light of the House of Lords decision in White v White [2001] 1 AC 596. The Court held (at FLC 89,295) that (citations omitted):
“We also disagree with her Honour’s finding that the husband’s inheritance was a ‘special factor’ in the sense used in In the Matter of McLay. We do not think that her Honour’s characterization of the inheritance as a special factor in the McLay sense can be justified and we think that it led her Honour into error.
The special contribution referred to in McLay, above, and other cases clearly refers to some special factor or skill or capacity that produces the result that there is a loading in favour of the party providing it.
…
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 gives forces to these concerns.
It is apparent in any event that being the fortunate recipient of an inheritance does not amount to a contribution characterized 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.”
In the present case, the issue as to whether the increase in the parties’ asset pool post-separation ought to have been regarded by the trial Judge as a result of the husband’s special stockbroking skills or as a result of “market forces”, in the nature of a windfall, was a point of contention between the parties. Counsel for the wife sought to challenge his Honour’s findings on this issue on essentially two bases. First, it was argued that his Honour’s finding that the asset pool had doubled post-separation was made without any reliable basis. There was no finding of the value of the pool of assets at the time of separation nor the nature of that pool that could safely lead to a finding that it doubled in value between separation in late 2002 and a balance date for the trial purposes of 31 December 2003. Next, while it was conceded that growth did occur, although not to the extent of doubling the value of the pool, it was argued that this growth could not be attributed to the exercise of any special skills by the husband. As counsel for the wife pointed out, there was no finding as to what it was that the husband did in that fifteen month period that actually led to the pool being doubled. Counsel for the wife was able to obtain from the husband several admissions that the major growth in the portfolios had come as a result of holding long term stock investments that had been accumulated during the course of the parties’ cohabitation. In one stock, Reinsurance Australia, the husband via his various entities held over 4 million shares. They trebled in value from 15 cents per share to 45 cents per share. The husband said (p 1880):
“Answer my question, please. You had four million shares, you’ve retained them. They might have gone up and down a little in terms of the number of shares but the significant, overwhelming profit that was made on the RAC shares was as a result of retention?---No argument.”
In his affidavit the husband had identified five companies that:
“I identified, acted upon and managed the following investment opportunities which made a significant contribution to the accumulation of our assets post-1998 as follows:
i.Allied Mining;
ii.Caltex;
iii.Anaconda Nickel Ltd;
iv.Reinsurance Australia; and
v.Redback Mining NL”
In cross-examination the husband acknowledged that by May 2003 he had held Redback Mining for at least five years. The husband then gave evidence that he had sold his Caltex stock at somewhere around $2.80 but acknowledged that at the time of the hearing they had reached $9.00. He had also sold Allied Mining and finally had sold most of the shares in Anaconda Nickel Limited that had been purchased as late as February 2003 on the understanding that the parties would share in the profits they made.
It was put to us without challenge that the profit in Reinsurance Australia shares was $1.2 million, the profit from Anaconda was $1.85 million and the growth in Allied Mining was another $1 million. Those three share dealings alone amounted to an increase in the value of the assets by $4 million in the period post-separation.
Herein lies much of the difficulty with his Honour’s judgment. His Honour had determined the pool of assets as at 31 December 2003. He had concluded that there had been a doubling of the pool of assets from the time of separation which he found to be around September 2002. He had made no analysis of where it was that the pool had increased nor why it was that the pool had increased. He made a finding that the husband was an expert, astute businessman and it was that expertise and astuteness and his business acumen that resulted in the increase in assets. This finding was not explained however by any of the findings that the trial Judge pointed to in the course of his Reasons for Judgment. In the proceedings before us, counsel for the husband sought to argue that it was open to the trial Judge to make those findings on the basis that he had before him evidence that the husband had been trading each one of the five categories of shares on a daily basis. The evidence upon which counsel sought to rely in support of that proposition was however less than equivocal and was not in any event the subject of any findings made by his Honour. We agree with the submissions made on behalf of the wife that without specific findings as to the particular components of the pool at separation, it was not open to make findings as to whether the growth in the parties’ assets post-separation was due to profits made by the husband applying his expertise in share trading or by increases in the value of the shares held by the parties pre-separation as a result of market forces.
When the trial Judge came to deal with the wife’s contribution as a homemaker and parent his finding was simply that she had made a greater contribution than the husband to the family. He sought to ameliorate that by saying that the wife had the support of her family or otherwise the children were placed in day care. His Honour did not deal at all with the wife’s assertions as to exactly what her contribution as a homemaker and parent entailed including effectively working double shift, that is working full time and then coming home to look after the children or leaving work in the middle of the day to look after the children in her lunch break. These were matters that the wife gave extensive evidence about but found themselves dealt with by one sentence in a 29 page judgment.
His Honour then in paragraph 38 reached a conclusion that the husband’s contributions were three times the value of the wife having regard to:
“…the husband’s substantial initial financial contribution, his contributions to the date of separation, his contributions post-separation when the asset pool doubled, together with the difficulties he was confronted with as a result of the wife’s demands and actions after the date of separation, as against the wife’s contributions both prior to and post-separation…”
In those circumstances it is impossible for us to know what weight it was that the trial Judge placed upon any one of the factors he there identified and in particular what weight he placed upon:
“…the difficulties he was confronted with as a result of the wife’s demands and actions after the date of separation…”
This was a marriage that had lasted for 17 years. The assets of the parties when they met were relatively modest. By the date of trial they had amassed a significant fortune. Each had worked hard in their individual spheres and albeit that there were some aspects of the wife’s behaviour towards the end of the relationship that the trial Judge found unattractive, it seems impossible to determine what it was that the trial Judge thought so significant as to lead to a result where the husband’s contributions were seen to be three times those of the wife.
That is not to say that such a finding would be outside the realms of a proper exercise of judicial discretion albeit one would have thought that there would have to be something extremely unusual to reach that conclusion on the bare facts as we have outlined them. The difficulty here is that we cannot determine what it is that the trial Judge was placing his emphasis upon. He certainly identified as important considerations matters he ought not have paid any attention to at all or that were so insignificant as to hardly require any attention. We just do not know from the manner in which he dealt with the matter what emphasis was placed on those irrelevant or insignificant matters.
Issues relating to the effect of misconduct when assessing contributions.
In their submissions on behalf of the wife counsel asserted that Tolcon J has clearly emphasized the wife’s behaviour towards the end of the parties’ relationship as having a significant impact upon his Honour’s assessment of the parties’ relevant contributions. They submit that in so doing his Honour has confused the principles that have been established by the authorities as to when conduct might somehow enlarge or diminish contribution.
The matter was fully explored by the Full Court in Kennon v Kennon (1997) FLC 92-757 where Fogarty and Lindenmayer JJ said at 84,294-5:
“Put shortly, our view is that where there is a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party’s contributions to the marriage, or, put the other way, to have made his or her contributions significantly more arduous than they ought to have been, that is a fact which a trial judge is entitled to take into account in assessing the parties’ respective contributions within s 79. We prefer this approach to the concept of ‘negative contributions’ which is sometimes referred to in this discussion.
In the above formulation, we have referred only to domestic violence, for the reasons which we indicated earlier, but its application is not limited to that.
We think the earlier cases may have overlooked the distinction which more recent cases have emphasised. However, if it is thought now to be artificial to distinguish those longstanding authorities in that way, it appears to us, having regard to the reconsideration which has been given to this matter over recent times, that it may now be appropriate for this Court to treat those authorities as no longer binding and to be subject to the qualifications and distinguishing feature referred to in the recent decisions of this Court. There have been marked changes in perceptions, both legal and social, about domestic violence and its impact in recent times and it appears to be appropriate to give effect to them: see Nguyen (1990) 160 CLR 245; Farnell (1996) FLC 92681 and Ivanovic v Ivanovic (1996) FLC 92-689.
However, it is important to consider the ‘floodgates’ argument. That is, these principles, which should only apply to exceptional cases, may become common coinage in property cases and be used inappropriately as tactical weapons or for personal attacks and so return this court to fault and misconduct in property matters — a circumstance which proved so debilitating in the past. In addition, there is the risk of substantial additional time and cost.
However, in our view, s 79 should encompass the exceptional cases which we described above. It would not be appropriate to exclude them as a matter of policy because of this risk. It is a matter of commonsense for the lawyers involved and, where that may not be sufficient, it is a matter for a firm hand by the court at an early stage when a case appears to raise those issues.
It is essential to bear in mind the relatively narrow band of cases to which these considerations apply. To be relevant, it would be necessary to show that the conduct occurred during the course of the marriage and had a discernible impact upon the contributions of the other party. It is not directed to conduct which does not have that effect and of necessity it does not encompass (as in Ferguson) conduct related to the breakdown of the marriage (basically because it would not have had a sufficient duration for this impact to be relevant to contributions).”
Earlier in Kowaliw and Kowaliw (1981) FLC 91-092 Baker J had said that financial losses incurred by parties or either of them in the course of a marriage should be shared unless (a) one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or (b) one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Counsel for the wife further submitted, and we think correctly, that there was no evidence that could possibly support any significant reduction being made to the wife’s contributions to such a large pool of assets by any of the wife’s conduct or behaviour as identified by the trial Judge in the passages cited above.
Mr Dowding SC on behalf of the husband sought to bring the wife’s conduct within the narrow band described in Kennon as having made the husband’s contribution “significantly more arduous than they ought to have been”. In the context of an 17 year marriage and a $10 million dollar pool, the actions of the wife ought not have carried any great weight at all and certainly ought not to have dominated the assessment of contributions to the extent they appear to have in this case. To the extent that the trial Judge took them into consideration we think he was in error.
That finding is in our view sufficient to dispose of this appeal without us having to deal with the remainder of the grounds relied upon. While it is thus unnecessary for us to reach any conclusion in relation to the first ground of appeal that the result was manifestly unjust, we observe that the result does appear to be extremely generous in favour of the husband. However, without precise findings as to the role that each of the parties played in the course of the marriage and the contributions that each of them made to the marriage, it is difficult for us to determine whether the outcome exceeds the parameters of the very wide discretion vested in the trial Judge. In JEL and DDF (2000) 28 Fam LR 1 Kay J noted at paragraph 3, that very large money cases are rare in this jurisdiction. In Phillips v Phillips [1998] FamCA 1551 (unreported, Fam C of A, Full Court, 30 December 1998) there was an asset pool of $26 million and after 31 years of marriage the husband received 60 per cent. In Ferraro v Ferraro (1993) FLC 92-335 the husband retained 62.5 per cent of a pool of $12 million at the end of a 30 year marriage. In JEL and DDF after 18 years of marriage a pool of assets of $36 million was divided as to 27.5 per cent to the wife and the balance to the husband. More recently in Figginsv Figgins (2000) 29 Fam LR 544 after a relationship spanning some ten years the wife received $2.5 million from a pool of assets worth $22.5 million, most of which had been inherited by the husband during the course of the marriage. In the course of their reasons for judgment Nicholson CJ and Buckley J queried whether the approach in the earlier cases such as JEL and DDF which gave recognition to “special contributions” might need to be reconsidered in light of the decision of the House of Lords in White v White (2001) 1 AC 596. Their Honours remarked that there could be a serious tendency to undervalue the wife’s contributions during a marriage.
Whilst the outcome reached by the trial Judge seems generous to the husband, it may be that on a thorough analysis of the parties’ contributions another judge may conclude that the husband’s financial contributions so outweigh the wife’s financial and non-financial contributions as to merit a significant imbalance as to outcome. However the wife’s contributions as a homemaker and parent coupled with her financial contributions throughout the marriage ought not necessarily be seen as being of any less worth than the financial contributions of the husband.
As to ground 2 that the learned trial Judge erred in law because he did not provide adequate reasons for awarding the husband a contribution based entitlement of 75 per cent, we would observe that the obligation of a judge to provide reasons is met if the Full Court can discern the path by which the result was reached. See Sun Alliance Insurance Ltd v Massoud [1989] VR 8,.
The path by which Tolcon J reached the assessment that he did as to the contribution of the parties is in our view readily discernible. Whether the conclusion was soundly based upon the evidence that was available however and whether the assessment included giving weight to matters that ought not have been appropriately taken into consideration are different issues to the issue of whether or not the path was discernible.
Whilst the wife sought that we re-exercise the trial Judge’s discretion accepting the pool of assets to be as found by the trial Judge, the husband sought that we remit the matter for retrial if we intended to allow the appeal. In light of the matters discussed by the High Court in Allesch v Maunz (2000) 173 ALR 648, there being unresolved issues about the pool of assets now to be divided including the ramifications of taxation liabilities that may be incurred in liquidating assets held in the corporate structure we regrettably feel that the matter has to be remitted for retrial.
Costs
In the event the appeal was allowed the wife sought an order for costs against the husband whilst the husband sought certificates under the provisions of the Federal Proceedings (Costs) Act 1981. In Tyson and Tyson (No. 2) (1993) FLC 92-401, the Full Court said as follows, at 80,111:
“The grant or refusal of a costs certificate under the Act is purely discretionary, and the Act itself lays down no guidelines for the exercise of that discretion. Without intending to be exhaustive, matters such as the overall reasonableness or otherwise of the attitude adopted throughout the proceedings by the party applying for the certificate to the relief sought by the other, the financial resources of the applicant, and the likely quantum of that party’s total costs of the appeal, as compared with the ‘prescribed maximum amount’ payable upon a costs certificate (in this case $4,000), all appear relevant for consideration by the Court in the exercise of that discretion, as too is the fact that the funds to honour such a certificate must come from the public purse.”
Given the extent of the assets available for division and even though the appeal has been allowed on a question of law not attributable to the parties’ conduct of the trial we think it inappropriate to grant such certificates nor make any order inter partes.
Orders
The appeal be allowed.
The orders made 6 August 2004 by Tolcon J relating to the property of the parties contained in paragraphs 1 to 10 of the Minutes of Orders referred to in order 9 of the orders of 6 August 2004 be set aside.
The parties’ competing applications for alteration of property interests be remitted to the Family Court of Western Australia for a retrial.
I certify that the 80 preceding
paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.
Elizabeth Hore
Associate
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