HOFFMAN & HOFFMAN

[2012] FMCAfam 1061

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HOFFMAN & HOFFMAN [2012] FMCAfam 1061

FAMILY LAW – Property – concept of “special contributions”.

Family Law Act 1975, ss.75(2), 79(4), 79(2), 79(5), 81

Ferraro & Ferraro (1993) FLC 92-355 Figgins & Figgins (2002) FLC 93-122 JEL & DDF (2001) FLC 93-075 Lambert & Lambert [2003] 1 FLR 139 Malletv Mallet (1984) 156 CLR 605, (1984) FLC 91-507 M & M [1998] FamCA 42 McLay & McLay (1996) FLC 92-667 Morton & Barnett [2007] FMCAfam 329 Palmer & Palmer [2010] FMCAfam 999 Phillips & Phillips [1998] FamCA 1551 Pierce & Pierce (1999) FLC 92-844 Smith & Fields [2012] FamCA 510 Stay & Stay (1997) FLC 92-751 United Australia Limited v Barclays Bank Limited [1941] AC 1 White v White [2001] 1 All ER 1

Applicant:

MS HOFFMAN

Respondent: MR HOFFMAN

File Number: CAC 868 of 2011

Judgment of: Brewster FM

Hearing dates: 27, 28 August & 5 September 2012

Date of Last Submission: 25 September 2012

Delivered at: Canberra

Delivered on: 17 December 2012

REPRESENTATION

Counsel for the Applicant: Ms Tonkin

Solicitors for the Applicant: Phelps Reid

Counsel for the Respondent: Self represented

IT IS NOTED that publication of this judgment under the pseudonym Hoffman & Hoffman is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT CANBERRA

CAC 868 of 2011

MS HOFFMAN

Applicant

And

MR HOFFMAN

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter involves a dispute between the parties as to property division.

Background

1. The husband is aged 65 and the wife 62.  They were married [in] 1974.  There are four children of the marriage, [A] who was born [in] 1975, [B] who was born [in] 1977, [C] who was born [in] 1979 and [D] who was born [in] 1981.

2. There is a dispute between the parties as to the date they separated.  The husband places this in 2006.  The wife maintains that they separated on 26 August 2010.

3. It is common ground that until 2006 the parties lived in a property registered in the name of the wife at Property R.  The wife says that in 2006 she moved to a property owned by the husband’s superannuation fund at Property B.  She says that the husband followed shortly thereafter and essentially lived in Property B until 26 August 2010.  She says that he maintained Property R as some sort of a “bolt hole” and would spend time there during the day.  The husband maintains that he never moved to the Property B property although he concedes that he did stay there overnight from time to time.

4. All the documentary evidence supports the wife’s position.  There is in evidence a tenancy agreement in relation to the Property B property in which both parties are listed as the tenants.  I assume that a formal agreement was required under superannuation law.  In a letter dated 15 January 2009 to the children the husband complained of being tired through lack of sleep and said that in summer time it was difficult to get a good night’s sleep in the Property B property.  Furthermore in an application for divorce filed by him he put the separation date at 26 August 2010.  In the circumstances I accept the wife’s evidence.  It is however plain from the fact that the wife was prepared to live separately from the husband when she moved that the relationship was not a close one in 2006 but in my view nothing hangs on this.

The Parties’ Applications

1. The wife’s case is that she should receive property equating to 55% of the asset pool.  She maintains that no distinction should be made between the parties’ contributions during their relationship and that, had this case been litigated in 2010, an equal division should have been ordered.  She claims an additional 5% by reason of post separation events which I shall discuss later in this judgment.

2. The husband on the other hand seeks a division which would have him receiving 70% of the parties’ property.  This would be achieved by the wife retaining the assets that are in her name and being given a life interest in the property she occupies in Property B.  I do not understand how the value of this life interest is calculated but, as will be seen, nothing hangs on this.

3. The husband seeks these orders on two bases.  First he says that the parties separated for a brief period in 1996.  He says that they agreed that each should keep the property in his or her name.  In support of his contention that the 1996 agreement should be enforced the husband would have me find that the wife acted on the agreement.  She subsequently made a will in which she left her property to the children.  The husband would have me construe this as an acknowledgment that, so far as the parties’ properties are concerned, what is his is his and what is hers is hers.  I do not believe that the will necessarily bears that construction.  It is obvious that the wife is anxious to assist her children.  The fact that, as will be mentioned, she effectively gave to them most of a substantial amount inherited from her mother is evidence of this.  In the situation where the husband had an extensive property portfolio, considerably greater than that of the wife, it might have seemed reasonable to her to leave what she owned to the children in the knowledge that the husband would not have any realistic need for her share of the property.

4. In any event any informal agreement as to property division is not binding on me.  The only agreements that are binding are those made under, and which conform to, the requirements of Part VIIIA of the Family Law Act 1975. 

5. I do not propose to take the events of 1996 into account.

6. The second reason that the husband maintains that he should retain the bulk of the parties’ assets is that he maintains that the parties’ substantial wealth was essentially generated through his skill and expertise.  He claims that the parties’ substantial fortune is a result of his hard work and his acumen in choosing and managing properties and his expertise in managing the parties’ share portfolio.  He also relies on the fact that he physically worked on some of the properties.  I will discuss this later in this judgment.

7. As I have indicated a part of the husband’s proposals involves creating a life interest for the wife in the property owned by his superannuation fund at Property B. I can deal with this aspect of his application in short compass. Section 81 of the Family Law Act provides that in proceedings of this type the court should, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.  It is easy to imagine further issues arising should I accede to the husband’s application.  For example there could be potential disputes about the wife’s care of the property.

Discussion

1. The Full Court of the Family Court of Australia has indicated that in a case such as this a four stage approach should be adopted. The first stage involves making findings as to the pool of property. The second stage involves a consideration of contributions of various types being initial contributions in the form of assets brought into the relationship, contributions made during the relationship both financial and non financial, and contributions made after separation. The third stage, for the purposes of this case, involves a consideration of such matters set out in section 75(2) of the Family Law Act as may be relevant.  Adjustments in the parties’ property interests may be made under either the second or third stages.  The fourth stage involves something of a “wood from the trees” approach in that one looks at the result obtained from any alterations made under the second and third stages to determine if, overall, that result is just and equitable.

2. In this case not all of the property of the parties is jointly owned. Some of the assets are in the name of the husband, some in the name of the wife and some in the name of the husband’s superannuation fund or a company solely controlled by him. Section 79(2) of the Act provides in effect that the parties’ property interests should not be altered by the court unless the court is satisfied that, in all the circumstances, it is just and equitable to make such an alteration. I need not dilate on this. In my opinion after a marriage of thirty-six years there is no basis for dividing the parties’ property on the basis of which party owns any particular asset and it is just and equitable to make such alterations in the parties’ property interests as may be appropriate.

The Pool

1. The properties in the name of the husband and their values are as follows:

   ·Property L  $690,000

   ·Property X  $315,000

   ·Property Y  $235,000

   ·Property Z        $235,000

   ·Property M,   $275,000

2. The wife owns the following properties with the following values:

   ·Property R            $685,000

   ·Property M  $250,000

3. The husband’s company (“the company”) as the trustee of his superannuation fund owns the property at Property B valued at $620,000.

4. The company has shares in CommSec valued at $361,904 and monies in the bank of $50,998.

5. The husband has St George shares to a value of $99,000 and shares in Macquarie Private Wealth to a value of $1,450,000.

6. The wife has money in the bank of about $104,000 and IAG shares to a value of $3,400.

7. The husband owns a 2005 Mitsubishi 380 automatic sedan.  The wife valued this at $9,500 but the husband disputed this value.  I said that I would check the Red Book but when I did so it appears to give a price above the value described by the wife.  I propose to adopt the value claimed by the wife.  Any error here is trivial when one takes into account the size of the pool.

8. The wife has a Toyota Prius which she values at $30,000.  The husband does not quibble with this value as such but maintains that the purchase price of its predecessor should be added to the pool as notional property.  I will discuss this later in this judgment.

9. The husband runs a self managed superannuation fund called [Mr Hoffman] Super Fund.  Its assets comprise NAB shares and funds to a value of $4,215,301 and a CBA bank account currently standing at $12,099.

10. The wife has [1] superannuation of $600,000. She also has entitlements in the [2] scheme.  This is a defined benefits scheme and provides her with a returns her a income of $11,097 per annum.  The wife did not include her entitlements in the pool she contended for.  She proposed that her entitlements be taken into account as an income stream.  Given that I am only making an adjustment of the parties’ property interests on the basis of contributions it would, in my opinion, be unjust to do otherwise than treat her entitlements as having a capitalised value.  Its value, calculated in accordance with the regulations, is $176,318.  I appreciate that this is somewhat artificial as the wife cannot capitalise her pension for a lump sum in this amount.  But, as I say, given the way I have approached this case I feel it is the most appropriate course to take.  The issue of whether or not this should be included in a single pool with the other assets will be discussed later in this judgment.  Given the circumstances, and in particular the ages of the parties, I propose to include the other superannuation in the same pool as the other assets.

11. The wife has a potential asset in the form of loans she made to the children.  In 2010 she received an inheritance from her mother of $950,000.  She lent $800,000 of these monies to her children, that is $200,000 each.  I am satisfied that she would only ever seek repayment of these amounts if she fell on hard times and that this is extremely unlikely.  Given that the monies were received very late in the marriage, are not referable to any contribution by the husband and were given to the children rather than being applied for the wife’s benefit I do not propose to include these theoretical debts as an asset in the pool.

12. The husband in his final submissions referred to jewellery and house contents.  There is no valuation of these items and I do not propose to include them in the pool.

13. I propose to include the following liabilities in the pool.  These are:

    a)A Viridian loan in the name of the husband on which $581,601 is owing.  This loan goes up and down as the husband effectively uses it as his working account.  I will use the figure given to me at the date of final submissions;

    b)The husband points out that he holds an amount of $40,156 by way of security bonds with respect to five of the properties that he owns.  In due course he will either have to refund these bonds or apply them to repair damage caused by the tenants.  I accept that this $40,156 should be deducted from the pool.

14. There are other debts which the husband would have deducted from the pool but which I decline to do so.  These are:

    a)The husband claims a tradesman’s account of $6,872.  Apart from the fact that this is trivial in comparison to the size of the pool it is not clear if those amounts will be paid as there is a dispute between the husband and the tradesman involved;

    b)The husband claims a credit card debt of $7,537.  Apart from the fact that this is a small amount compared to the size of the pool it is the amount owing currently.  The parties have been separated for more than two years.  I do not know what the credit card stood at as at separation;

    c)The husband has a taxation liability of $14,980.  I do not propose to deduct this.  This would relate to the income that he has earned from his properties post separation.  The wife has claimed a greater share of property based on the fact that the husband received this income post separation.  I have not acceded to her contention.  If I had acceded to it I would have taken into account the tax debt;

    d)The husband claims that certain monies should be deducted from the pool referrable to a transaction he has entered into with the parties’ daughter [C].  He has guaranteed a mortgage loan [C] took out.  He is paying the instalments on this loan.  [C] is currently undertaking studies to obtain a PhD degree and the arrangement between her and the husband is that she will repay him in full over time when she gets employment.  I believe I am justified in assuming that a person with tertiary qualifications of the type that [C] will have would very likely obtain employment and be able to repay her debt.  I do not propose to make any adjustment to the pool based on this aspect of the case.

15. There is a potential debt, which could be substantial, owed by the husband to the [business] [N].  This arises out of litigation in the Supreme Court of the Australian Capital Territory.  Judgment has recently been delivered.  I have only glanced at the decision in the case but as I understand the situation it is as follows:

    a)The husband tendered for [omitted] at an annexe to the [N];

    b)He was not successful in the tender but maintained that the [N] had given confidential information about his designs to the successful tenderer;

    c)He sought damages against the [N];

    d)The matter was settled on the basis that no damages would be paid.  The parties entered into a Deed to this effect.  That Deed contained a confidentiality clause and a covenant on the husband’s part not to sue;

    e)The Director General of the [N] gave an interview to a journalist from [omitted] in which he referred to the matter and revealed that no monies had been paid to the husband’s company.

    f)In consequence the husband repudiated the deed and instituted proceedings against the [N]. He was unsuccessful in those proceedings.  Moreover it was found that he had breached the provisions of the Deed by instituting proceedings and damages were awarded to the [N] in the form of indemnity costs.

16. The husband has appealed this decision.

17. As I understood it, it was agreed by the husband that this contingent debt should not be taken into account.  In case I am wrong in this respect, as he referred to the debt in passing in final submissions, I indicate that I would not propose to take it into account in any event.  The reasons for this are as follows:

    a)If the appeal succeeds there will be no debt.  Indeed the husband may recover damages against the [N] as sought;

    b)In any event at this time it is impossible to quantify the debt; and

    c)No application was made under section 79(5) to adjourn these proceedings to await the outcome of the appeal and, if the appeal were unsuccessful, the taxation of the [N]’s costs. If such an application had been made I would in the circumstances have refused it given that the consequent delay in finalising these proceedings would have been the result of decisions taken by the husband and the husband alone.

Contributions

1. Apart from the “special contributions” issue, which I will turn to shortly, there is nothing unusual about the parties’ contributions during their relationship.  They commenced their relationship a long time ago.  Each brought a property into the relationship.  The wife had a house subject to a loan and the husband a flat.  The difference in the values of these properties is no longer relevant.  During a long marriage they each earned income.  The husband is an [occupation omitted].  The wife worked in that [business] until 1992 and then [omitted].  As I have indicated the parties raised four children.

2. The claim for an additional share based on the physical work the husband performed on the parties’ various properties can be disposed of in short compass.  This work was done when the parties still had young children.  It is reasonable to assume that the work the husband did on the parties’ properties took him away from the home.  It is reasonable to assume that a greater burden fell on the wife in caring for the parties’ children.  I decline to make any contribution based adjustment on this basis.

3. I turn now to the husband’s claim that there should be an adjustment in his favour by reason of his particular skill and acumen. 

4. Where the court is dealing with a situation where there is a long marriage with children and where the parties have made contributions in different spheres it is usually inappropriate to give greater weight to one party’s contribution than those of the other.  One reason for this is that there is no way that a party’s contribution as a homemaker and parent can be qualitatively or quantitatively compared to a party’s financial contributions.  There have been exceptions to this approach however.  These have been in what are often called “big money” cases.  In cases in the past where the parties have acquired a very substantial fortune and this has been due to the particular skills of the husband (in all the cases of which I am aware it has been the husband) then an adjustment has sometimes been made to reflect what is often termed the “special contribution” he has made.  The husband in his written submissions listed a number of these cases.

5. I do not propose to make any adjustment in favour of the husband by reason of any special contributions made by him.  The law in this respect is not settled in Australia and if the husband wishes it to be settled in his favour then an appeal is his appropriate recourse.  For reasons I will explain I regard myself as free to form my own view as to the concept of special contributions and I shall indicate what that is and endeavour to explain it.  Plainly the list of authorities provided by the husband indicates that my views are not shared by a number of judges of the Family Court and any appeal from my judgment may well be successful.

6. Put shortly I do not accept the principle (if it be a principle) of special contributions.  In a case reported as Palmer & Palmer[1] I said as follows:

   The concept of “special” or “outstanding” contributions is no stranger to section 79 jurisprudence. In some cases in the past courts have made a contribution based adjustment in favour of an entrepreneurial husband whose skills have brought great wealth to the family. These have been referred to as “big money cases.”… However it is fair to say that … the tide appears to be running out in this respect and that era of special contributions may well be at an end. This process appears to have been started by the House of Lords in White v White [2001] 1 All ER 1. The speeches of the Law Lords in that case were discussed and endorsed by the Full Court of the Family Court of Australia in Figgins & Figgins (op cit).[2] … Encouraged by this case the English Court of Appeal in Lambert v Lambert [2002] EWCA Civ 1685[3] effectively put an end, in England at any rate, to the concept of special financial contributions.  I think it likely that this case will be followed next time a big money case comes before the Full Court.

   [1] [2010] FMCAfam 999.

   [2] (2002) FLC 93-122.

   [3] At the time I wrote this I was not aware that Lambert had found its way into the authorised reports. Its citation is [2003] 1 FLR 139.

1. For my part I find the reasoning of Thorpe LJ in Lambert compelling.  I respectfully adopt that reasoning.

2. However that is an English case and my duty is to apply the law laid down by appellate courts in Australia.  The exercise I will now embark upon is to try to demonstrate that the foundations upon which the Australian authorities recognising special contributions are built rest not on rock but on sand.  I will then explain why I believe that I am free to decline to follow the line of authority built on those foundations.  I will then conclude by making some observations on one aspect of the present case. 

3. There are two foundation cases.  The first of these is the decision of the High Court in Mallet v Mallet[4].That case involved a marriage of some 29 years.  The parties started with nothing but during the course of that marriage acquired assets to the value of about $680,000.  Whilst by modern standards that is a comparatively modest pool when indexed for inflation it is close to $2 million in today’s money.  The property consisted of a jointly owned matrimonial home with a value of $241,000.  There was other property in the sole name of the husband to a value of about $261,000.  The husband had shares in a family company valued at $87,000 and the wife had shares in that company valued at the same amount.  The wife also had a car worth about $6,000.  The trial judge ordered that the wife should keep her car and shares and receive half of the value of the matrimonial home and 20% of the value of the property (excluding his shares) owned by the husband.  The net result was a split of about 60%/40% in favour of the husband, or a difference in their entitlements of about 20%.

   [4] (1984) 156 CLR 605, (1984) FLC 91-507.

4. The assets the parties accumulated were in the main a consequence of the profits derived from a business operated by the husband.  Wilson J referred to “the ability and hard work” of the husband and Dawson J observed that the trial judge found that the success of the business was due to the “long hours of work on the part of the husband and by his seizing opportunities as they arose and by careful investment”.  However there was no issue of “special contributions” as that term has later been used in big money cases.  Nor was it a big money case.  Further there was no reason, other than happenchance, for the fact that a substantial amount of the property was in the sole name of the husband rather than in joint names.  That property was acquired in the same way as the jointly owned property.  It was in part this fact that led the Full Court of the Family Court of Australia to allow an appeal by the wife and order an equal division of the parties’ assets.  On appeal the High Court restored the orders of the trial judge.  It is fair to say that I cannot conceive of a judicial officer today awarding a husband 20% more than the wife in a marriage of 29 years and a pool of less than $2 million without there being some significant factor which took the case out of the ordinary.  Given the size of the pool that cannot be categorised as a “special contribution” case.  Any adjustment could be because of a very large initial contribution by the husband, although it would have to be said that the degree of “erosion” involved would be at the outer limits insofar as favouring the husband is concerned.  It could be in the form of a substantial inheritance or a large damages award received comparatively late in the relationship.  None of these applied in Mallet.

5. There are two fundamental problems with Mallet.  The first is that it assumes that there is some meaningful way in which financial contributions and non-financial contributions can be compared.  In my opinion there is no way in which this exercise can be meaningfully conducted.  It is like comparing apples and pears.  Indeed that is not an ideal analogy as both these items are fruit.  A better analogy might be comparing apples and carrots.

6. Linked with this is that it appeared to be assumed that one could usefully engage in an exercise of assessing the value to be attributed to non-financial contributions.  Wilson J said as follows:

   The contribution (that is a contribution as a homemaker and parent) must be assessed, not in any merely token way, but in terms of its true worth to the building up of the assets.  However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere, are equal.  The quality of the contribution made by a wife as home maker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good.  She may be an admirable housewife in every way or she may fulfil little more than minimal requirements.  Similarly the contribution of the breadwinner may vary enormously and deserves to be evaluated in comparison with that of the other party.  It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each.  That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree.

7. In my opinion the reasoning behind this passage bristles with problems.  Take for example an extremely wealthy family where a nanny is employed to do the routine work associated with caring for the children, a cook to prepare the food and a housekeeper to attend to the housework.  If Wilson J’s views were followed to their logical conclusion the wife would have marks deducted when it came to a contribution based assessment.  Also, fortunately, the profession has, with very few exceptions, not taken up his Honour’s invitation to explore the quality of a homemaker’s contribution.

8. I have seen cases and articles concerning high flying husbands (I cannot recall the details) where reference has been made to a wife fulfilling what was “expected” of her during a marriage.  Thus the wife might be “expected” to be a gracious hostess entertaining the husband’s business clients and to otherwise be an adornment to him.  Presumably therefore a wife who is shy and awkward and lacks the gift of “small talk” would be marked down.  Presumably also an outspoken wife such as a Jessie Street or an Eleanor Roosevelt, who might embarrass her husband with her radical views, would also lose points.

9. The second problem is that, in my opinion, Mallet is infected by gender bias.  This is not a criticism of the justices in the case.  They were born between 1917 and 1933.  The zeitgeist of the era when they grew up, and the zeitgeist in 1984 when Mallet was decided, was vastly different to the zeitgeist today.  Under the approach taken in Mallet the dice was loaded against a wife who performed a role as homemaker and parent.  One might ask how she could compete with a high flying businessman.  Clean the floors such that one could eat off them?  Iron her husband’s shirts to within an inch of their lives?  Make the bathroom tiles sparkle such that one has to put on sunglasses to take a shower?

10. The second case which provided a foundation of the concept of special contributions is the Full Court case of Ferraro & Ferraro[5].  The pool in that case was some $10.6 million.  The facts of that case are summarised by the Court at page 79-546 as follows:

    The husband was born in Italy in 1940 and was aged 51 years at the time of the trial.  He migrated to Australia in 1960.  The wife was born in Australia in 1942 of Italian origin and was aged 49.  The parties married in Melbourne on 4 May, 1963, their ages then being 23 and 21.  There were three children of the marriage, namely M who was born in May 1970, S in April 1975 and A in January, 1977.  The parties separated in February 1990 when the husband left the matrimonial home.  It was thus a marriage of 27 years.  Since that time the wife and the youngest two children have continued to live in the home.

    When the parties married they had no assets.  The husband was a carpenter and the wife a sales assistant.  During the early 1960s the husband was involved in the building of “spec” homes.  In 1967 the husband negotiated a licence to manufacture and sell in Australia the cladding products of an Italian company and thereafter established a business manufacturing and supplying a similar product designed for local conditions.  By the late 1970s various company and trust structures were developed in which largely both parties were partners.  Until the early 1980s the husband’s business activities were concerned for the most part with the buying and selling of properties.  From 1983 the husband became involved in substantial commercial property development continuing through to the time of the trial, at which time the parties owned the very substantial assets with which this case is concerned  The wife continued in her original occupation until 1966 and thereafter for a short time provided some assistance to the husband in his business and in 1983 applied an inheritance of $35,000 to the business.  Otherwise she devoted herself virtually entirely to the care of the home and the children.

    [5] (1993) FLC 92-335.

11. The trial judge divided the pool 70% to the husband and 30% to the wife.  The wife appealed.

12. The trial judge treated the case as one of special contributions.  The Full Court at page 79-564 set out the basis of his decision to award the husband 40% more of the pool than the wife.  The trial judge said:

    I find that, almost without assistance from the wife, the husband acquired, improved and conserved the parties property (there is no apostrophe in the reported decision).  Except for the $35,000 inheritance contributed by the wife in 1983, all the millions of dollars necessary were raised, or contributed by the husband …

    This marriage was one of traditional divided roles.  The wife did neither more or less for the husband as a businessman and property developer than she did for him when he was a small businessman in the late 1960’s and early 1970’s, save that her role freed him to pursue this.

    I reject the suggestion made by the wife’s counsel, that her contribution, limited in quantum and value, as I find, ranks equally with the husband’s very substantial contribution to the acquisition and improvement of the parties’ property.  The fact that part of the parties’ current property was acquired post-separation, to which property the wife cannot make a contribution claim, cannot be overlooked.

    The parties’ property empire blossomed because the husband had the innate drive, skills and abilities to enable him to succeed in his chosen occupation, whereas the wife’s contribution was neither greater nor less than when the husband had been a carpenter.  To equalize the parties’ contributions is akin to comparing the contribution of the creator of Sissinghurst Gardens, whose breadth of vision and imagination, talent, drive and endeavours led to the creation of the most beautiful garden in England, with that of the gardener who assisted with the tilling of the soil and the weeding of the beds.

    Considering, and contrasting, the contribution of the husband and wife, I assess the parties’ contribution to all the items of property as follows:  70% the husband:  30% the wife.

13. One can see that in these circumstances the wife had no chance.  The comments I have earlier made in relation to the zeitgeist in Mallet are apposite.  Even allowing for this however I find the comparison where the entrepreneurial efforts of the husband are likened to a top line landscape architect and the wife’s contributions as a homemaker and parent as being the equivalent of the menial nature of the work of a gardener who tills the soil and weeds the beds to be quite offensive.[6]

    [6] Whilst I acknowledge that what I am about to say is a gross over simplification the principal creator of  the Sissinghurst gardens was in fact the wife in the marriage of Vita Sackville-West and Harold Nicholson.  Her husband was the gardener who “assisted with the tilling of the soil and the weeding of the beds”.  This seems to have been appreciated by the Full Court in Ferraro which observed, without elaborating, at page 79,580 that there was some irony in the use of the Sissinghurst analogy.

14. I do not propose to quote at length the observations of the Full Court.  I will quote one observation with which I respectfully agree.  At page 79-572 the Court said:

    The task of evaluating and comparing the parties’ respective contributions where one party has exclusively been the breadwinner and the other exclusively the homemaker, is a most difficult one to perform because the evaluation and comparison cannot be conducted on a “level playing field”.  Firstly, it involves making a crucial comparison between fundamentally different activities, and a comparison between contributions to property and contributions to the welfare of the family.  Secondly, whilst a breadwinner contribution can be objectively assessed by reference to such things as that party’s employment record, income and the value of the assets acquired, an assessment of the quality of a homemaker contribution to the family is vulnerable to subjective value judgments as to what constitutes a competent homemaker and parent who cannot be readily equated to the value of assets acquired.  This leads to a tendency to undervalue the homemaker role.

15. There are many other passages where one would get the impression that the Full Court was proposing to order an equal division of the parties’ assets.  However what it said and what it did were not congruent.  It was prepared to wound but afraid to strike.  In the result, whilst it allowed the wife’s appeal, it simply increased her share of property from 30% to 37.5%.  The reason for this was that, by reason of the husband’s working long hours she performed the domestic duties without any real assistance from him.  The Court found therefore that the trial judge had undervalued the wife’s contributions.  One wonders what the result would have been if she had domestic help to assist.  If the Full Court’s reasoning is taken to its logical conclusion presumably the trial judge’s 40% differential would have remained undisturbed.

16. I will not dilate further on Ferraro save to say that, when analysing why the Court did not grasp the nettle and order an equal division, it is apparent that Mallet played a crucial role.

17. Notwithstanding that it is a decision of the High Court in my opinion Mallet can be, and should be, disregarded.  There are two reasons for this.

18. The first is that Mallet was decided at a time when the Family Law Act linked a contribution as a homemaker and parent to the acquisition, conservation or improvement of property. Section 79(4)(b) referred to contributions made to the acquisition, conservation or improvement of property “including any contribution made in the capacity of homemaker and parent”. By the time the case reached the High Court the Act had been amended to make it clear that there was no nexus but the case was decided under the law as it stood at the date of the trial. The way that the section was expressed led to a mindset where the value of a homemaker and parent contribution, while not ignored, if it had no connection with property was given less weight than if it freed the husband to earn an income. In the passage I have quoted from the judgment of Wilson J his Honour refers to the homemaker and parent contribution “in terms of its true worth to the building up of the assets.” It is apparent that Dawson J was influenced by this consideration. He said as follows:

    No doubt such an approach (that is an assumption that a contribution as a homemaker and parent is equal to the contribution of a breadwinner) is appropriate in those cases where the financial contribution of the husband does not extend beyond the provision of the family home and the acquisition of savings to provide support for both parties to the marriage in retirement.  It may well be appropriate in other cases where the husband’s contribution extends beyond the matrimonial home and any savings from earnings to the acquisition of property for commercial purposes.  There is no necessary distinction between the acquisition of a matrimonial home or savings for retirement and the acquisition of other assets.  If the husband is freed to acquire the one he may equally be freed to acquire the other.  Indeed, the purchase of a matrimonial home may be avoided or postponed in order to build up assets of a commercial nature…  But it does not follow in every case where the husband earns the family income and the wife carries out her responsibilities in the home that the contribution of each to property acquired during cohabitation should be regarded as equal.  If, for example, the husband is engaged in conducting a business, the nature of the business, the skills which the husband applies in 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.

19. The second reason is that if it is stripped to its bare ratio Mallet is authority only for the proposition that, when one is confronted with a long marriage, there is no “starting point” of equality and that, if anything, the starting point is the legal and equitable interests of the parties. It was the fact that the Full Court stated that in a long marriage the starting point is an equal division that excited the attention of the High Court. I do not approach this case on the basis of any starting point. I proceed simply on the basis that when one looks at the length of this relationship and the contributions that each party has made in various ways it is just and equitable under section 79(2) to alter the interests of the parties and that, in all the circumstances, it is just and equitable that there be an equal division of the parties’ assets. Of course it would only be under special circumstances that one would confine a decision of the High Court to its bare ratio but in my opinion such circumstances exist.

20. Therefore, in my opinion, Mallet is a decision which need not and should not be followed.  To paraphrase Lord Atkin in United Australia v Barclays Bank[7], today, when the ghost of Mallet stands in the path of a just and equitable outcome, clanking its gender biased chains, the proper course for a judge is to pass through it undeterred.

    [7] [1941] AC 1 at 29.

21. To summarise, in my opinion Mallet can be disregarded and Ferraro likewise.  The same can be said of the cases which followed Ferraro.  In my opinion Mallet and Ferraro have cast a dark shadow over the jurisprudence in this area. Figgins has, to borrow a phrase from Winston Churchill, pointed the path to sunlit uplands. Lambert followed that path to those uplands.  And it did not just follow that path. To use another quotation, this time from Isaiah, it made the crooked straight and the rough places plain.  And plain in more than one sense of the word. As I have indicated I respectfully adopt and apply the reasoning in that case.

22. However if it be felt that I need an additional arrow in my quiver to reject the husband’s special contribution claim I believe I can find one.  If I were to adopt the jurisprudence of the Full Court (which I regard as flawed but need not explain why) I believe I can legitimately confine Ferraro and its successors to true “big money” cases and find that the pool in this case, which is less than $10 million, does not put it in that category.  I will list the “special contributions” Full Court cases of which I am aware and the approximate pool in each of them.  Where the pool was comparable to the present pool I have put an approximate CPI adjusted amount (based on the Reserve Bank calculator found on the net) in parentheses:

    ·Ferraro. $11 million ($18 million)

    ·McLay & McLay (1996) FLC 92-667. $9 million ($13.5 million)

    ·Phillips & Phillips [1998] FamCA 1551. $26 million.

    ·JEL & DDF (2001) FLC 93-075. $37 million.

1. Of these cases McLay had a pool closest in size to the pool in the present case.  However that was an appeal by the husband who argued that the 60% share he was given by the trial judge did not adequately reflect his special contributions.  The appeal was dismissed.  Had the trial judge awarded him 50% and had his appeal been successful that case would have put a significant obstacle in the path I am following in the present case.

2. Whilst, to put it mildly, I am not enamoured of the logic of applying different principles depending on the size of the pool Ferraro supports the distinction.  See pages 79,579 to 79,580.  More to the point is the Full Court decision in Stay & Stay[8].  The pool in that case was $4,271,090 which equates to about $6.5 million in today’s money.  The trial judge applied the Ferraro approach and awarded the husband 55% of the pool. The Full Court allowed an appeal by the wife and ordered an equal division. It said at page 84-131:

   In the instant case, the application of the skills of the husband, his ingenuity and enterprise produced assets in the medium rather than the high range … and, in our view, the trial Judge erred in concluding that (the husband’s) contribution had the quality described in the authorities as special or extra or as she found as being extraordinary.

   [8] (1997) FLC 92-751.

3. Whilst I am reluctant to justify my decision in this case on what I regard as flawed jurisprudence I will adopt the “tabula in nefragia” principle if it be necessary.

4. There is one additional matter to which I will refer.  In a number of cases reference has been made by judges to the concept of marriage and all that this entails.  In the case of Smith & Fields[9] to which I was referred by Ms Tonkin who appeared for the wife, Murphy J under the heading of “The Nature of the Matrimonial Relationship” observed that in that case there was a “practical union of both lives and property” (quoting Deane J in Mallet).  As I understand the position of the husband he would say that there was no such union in this case nor any “partnership” in the building up of the asset pool.  He would maintain that the wife was indifferent when it came to the acquisition or management of the assets that he built up over the years.  As he put it she preferred to play mah-jong and read books. 

   [9] [2012] FamCA 510.

5. For my part I do not find it a useful exercise to engage in philosophical musings as to “The Nature of the Matrimonial Relationship” or to try to categorise or pigeonhole the contributions of a wife in a position of Ms Hoffman when seeking to justify an equal division of assets after a long marriage.  It does not appear to me to be productive to explore such questions as whether she was “supportive” of the husband’s ventures or not (in this case the husband would say she was not supportive).  If she was not supportive it is not, in my view, helpful to explore whether her lack of support was a result of indifference, disapproval, or simply leaving such matters to the party who had greater skill and knowledge in relation to those ventures.  I add that in my opinion, given that the Family Law Courts now have jurisdiction over property disputed involving de facto relationships, they might be painting themselves into a jurisprudential corner by engaging in such an exercise.    

6. Also it is an unusual case where one can really understand the dynamics of a relationship and make confident findings about such matters.  Invariably such dynamics are complicated.  Each party to a failed relationship inevitably views those dynamics through subjective lenses.  The result is that those dynamics are usually described in the parties’ affidavits in a simple black and white way.  I have no doubt that Mr Hoffman feels now that his former wife was never supportive of his endeavours.  Whether or not that is how it was cannot now be ascertained. 

7. The husband also sought that an adjustment be made in his favour by reason of post separation issues.  These, and my comments on them, are as follows:

   a)He has continued his involvement in the parties’ share portfolio selling and buying shares.  However if this were to be taken into account there would have to be evidence that his activities in this respect led to any growth in the parties’ share portfolio.  This would involve looking at the share portfolio at separation and working out what it would be worth had the husband not sold any of the parties’ shares and bought other shares.  It may be that luck played a part.  This issue was touched upon by Nicholson CJ and Buckley J in Figgins at paragraph 57.  One example in the present case will suffice.  The husband says that at one stage the parties had a significant shareholding in a company called [A] Proprietary Limited.  He says that he researched the impact that the introduction of the carbon tax might have on companies such as [A] and decided that the tax would have a significant negative impact on that company.  He therefore disposed of the [A] shares.  His predictions were borne out and the share price of that company crashed.  However I am not satisfied that this was due to the introduction of the carbon tax.  I am aware that there is considerable debate about whether the carbon tax has any significant negative effect on resource companies. 

   b)He has continued to be responsible for the properties owned by the parties in relation to their maintenance, paying outgoings and organising and supervising tenants.  On the other hand he has had the benefit of the income from these properties and I do not propose to make an adjustment on this basis.

   c)He has paid the “rent” on the property the wife occupies which is, as I have indicated, owned by his superannuation fund.  However again he has been the one receiving the greater income post separation.

   d)He would have me take into account an amount of some $142,000 (in fact the real figure may be more in the order of $160,000) expended by the wife from the parties’ resources after separation.  However as has been pointed out by the Full Court in M & M[10] parties do not go into a state of suspended economic animation after separation and given the size of the pool this is a comparatively small amount.  In addition, as has been mentioned, the wife received an inheritance about the time of separation and retained $150,000 of this which is reflected in the pool

   e)He complains that in 2008 he gave the wife a “top of the line” Toyota Prius.  He purchased this for just under $52,000.  It appears that the wife subsequently traded it in for $15,000.  It is a curious story and I need not relate why the wife felt it necessary to dispose of that vehicle.  I am bemused as to how a vehicle could depreciate at such a rate and I can understand why this is a running sore with the husband.  However given the size of the pool an adjustment to reflect this aspect of the case would be an exercise in micro adjustment.  I have applied a broad brush in this case.

   [10] [1998] FamCA 42.

8. The wife’s case for a 55% share of the asset pool is, as I have indicated, based on a contention that no distinction should be drawn between the contributions made by each up until separation and that had this case been decided shortly after separation an equal division would be appropriate.  Her claim for an additional 5% is essentially that the husband has received the bulk of the income derived from the parties’ properties and investments since separation.

9. There are a number of answers to this.

10. The first is that whilst the husband has received a substantial income the wife has not been left destitute.  She has received a significant income herself and lives rent free in her present residence.

11. As I have indicated the husband has not sat on his hands.  He has managed the properties involved and managed the share portfolio.  He outlined in evidence the extensive research he undertakes in managing the share portfolio.  I have not found that his efforts alone were responsible for the growth of the portfolio but that is not the same as concluding that they did not contribute to that growth.

12. Whilst I have declined to allow the husband to use his special skills and efforts as a sword in these proceedings I believe it would be unjust if he could not use them as a shield. If necessary I will call into aid section 75(2)(o) to justify this. Whilst there may have been elements of luck involved in the amassing of the family fortune I have no doubt that, but for the husband’s skill, dedication and expertise, the parties would never have acquired an asset pool to a value of almost $10 million. The husband is now faced with a claim by the wife that, seeing he has in the period since separation enjoyed the benefits that flow from his efforts, she should receive a greater share of the pool. I believe he would be justifiably aggrieved were I to accede to her application. An analogy might be made to the story of the Little Red Hen. She would doubtless have felt justifiably aggrieved if the owner of her farm had intervened and ordered her to share her bread with the other animals who had played no part in its production and indeed had specifically declined to do so.

13. I turn to the part of the pool consisting of the parties’ superannuation.

14. The first matter to be observed is that there is a contribution issue in relation to the wife’s [1] superannuation.  The wife claims that in 2005 her mother gave her $350,000 which she put into her [1] superannuation.  The husband disputes this.  In the end I do not need to resolve this issue as I do not propose to specifically take these monies into account.

15. The reason for this is the way I have treated the husband’s claim overall.  As I have indicated he claims that he has made “special contributions” to the acquisition of the parties’ wealth through his acumen and skill.  I had contemplated dividing superannuation unequally to make an allowance for the wife’s mother’s contribution had I made a finding that it was made.  I have decided against this.  Essentially, if I were to make an allowance to the wife on the basis of her mother’s $350,000 it would be because I considered those monies to be a “special contribution”.  Very frequently monies either inherited from or given by a member of a party’s family are considered a special contribution on behalf of that party justifying an adjustment in that party’s favour.  I have often thought that undue weight is sometimes given to lump sums which, when looked at in the context of a long relationship, might be dwarfed by the periodic earnings of the other party.  I discussed this in a case of Morton & Barnett[11] where I said as follows:

    Whilst I do not consider it entirely logical the trend has always been to ascribe a greater value to lump sums than to periodic earnings. …  Perhaps it is because the impact of lump sums can be more readily seen in the size of the pool whereas the impact of periodic earnings is more ephemeral.  Perhaps it is because, irrespective of the lack of legislative imprimatur, financial contributions made to the acquisition of property under paragraph (a) of sub-section 79(4) are regarded as more significant than, for example, financial contributions to the welfare of the family under paragraph (c).  See for example Pierce (1999) FLC 92-844.  In any event I would be kicking against the pricks if I were to look at the lump sums imbalance in favour of the husband in the same light as the periodic earnings imbalance in favour of the wife.

    [11] [2007] FMCAfam 329.

16. In this case however, notwithstanding the above, I believe it would not be just and equitable for me to reject the husband’s claim to have made a special contribution but accept the wife’s claim that the monies received from her mother should be put into that category.  I therefore do not need to make a finding as to whether these monies were advanced as claimed.

17. The second issue is that the wife’s [2] entitlements are in the form of a periodic pension.  This has been valued in accordance with the regulations at $176,318.  The remaining superannuation is in the form of lump sums.  The wife’s pension entitlements cannot be commuted into a lump sum.  I can proceed in one of two ways.  I could treat the wife’s [2] entitlements as the equivalent of a lump sum of $176,318 and include it with the remaining superannuation.  Or I could split it equally between the husband and the wife.  I will seek the parties’ views on this.  If they do not agree on which course I should take I will make a split.

Section 75(2) Factors

1. Each party has retired. Each will have substantial assets capable of producing an income for each of them which will result in a comfortable standard of living. Neither is in good health. I am not satisfied that any adjustment under section 75(2) is appropriate.

Conclusion and Overview

1. The end result is the assets will be divided equally between the parties.  I am satisfied that in the circumstances this is just and equitable.

2. If I include the value of the [2] entitlements in the same pool as the other assets I propose to order as follows:

   a)(a)  That the wife have the properties, chattels and choses in action referred to in paragraphs 16, 20, 22 and 24.  These are valued at $1,848,718.

   b)(b) That the husband have the properties and choses in action referred to in paragraphs 15, 17, 18, 19, 21 and 23.  These are valued at $8,568,802.  From this is to be deducted the sum of $621,757.  This results in a net value of $7,947,045.

3. This will result in the husband’s paying the wife $3,049,163.  If he opts for a split this will be increased to $3,137,322 and he will receive a half share of the wife’s [2] entitlements.[12]

   [12] The explanation for the maths is as follows:

   a)The pool as per paragraph 79(a) and (b) is $9,795,763.

   b)Half of that is $4,897,881.

   c)The wife has $1,848,718.

   d)The difference between (b) and (c) is $3,049,163.  This is the amount the husband is to pay.

   e)Half of the wife’s [2] entitlements is $88,159.  If he is to receive entitlements in that amount via a split he is to pay the wife that additional amount.  This brings the total to $3,137,322.

   The parties might care to check that I have not made an error.

4. I will defer taking out orders until the husband indicates which alternative he prefers.  I request that he do so within 28 days.  If however the husband indicates that he proposes to appeal I will take out orders providing for alternative outcomes so that he will have final orders to appeal against. 

I certify that the preceding eighty-one (81) paragraphs are a true copy of the reasons for judgment of Brewster FM

Associate: 

Date:  17 December 2012