JEL & DDF

[2000] FamCA 1353

FAMILY LAW ACT 1975

IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT BRISBANE

Appeal No. NA 7 of 2000
Appeal No. NA 15 of 2000
File No.7719 of 1996

IN THE MATTER OF:

JEL

Appellant/Husband

- and -

DDF

Respondent/Cross-appellant Wife

REASONS FOR JUDGMENT

BEFORE:                   Kay, Holden and Guest JJ
HEARD:  7th, 8th and 9th days of August 2000
JUDGMENT:            26th day of October 2000

APPEARANCES: Mr Kirk of Senior Counsel (instructed by Barkus Edwards Doolan, Solicitors, Level 9, 370 Pitt Street, Sydney, NSW 2000) appeared on behalf of the appellant husband.

Mr Young of Queen’s Counsel assisted by Mr Strum of counsel (instructed by Habermann & Associates, 193 North Quay Street, Brisbane, Qld 4000) appeared on behalf of the respondent/cross appellant wife.

PROPERTY - Liabilities - Capital gains tax and realisation costs.

PROPERTY SETTLEMENT - Discretion - Contributions – Evaluation of contributions – Relevant principles.
PROPERTY SETTLEMENT - Discretion - Contributions – Financial contributions - Significant assets – Finding of “special” or “extraordinary” contribution or skill not necessarily dependant upon the size of the asset pool or the financial product.

PROPERTY SETTLEMENT - Family trust - Controller of trust directing payments from trust for own benefit - Risk of legal proceedings.

This was an appeal by the husband and a cross appeal by the wife against property settlement orders made by May J which divided the parties' net assets of $36,709,511 (excluding W G shares), 65% to the husband and 35 % to the wife.

The parties married on 27 September 1973 and separated in September 1991. There are three children of the marriage. The wife’s son from a previous marriage also resided with the parties. The husband was a geologist and in 1982 he commenced employment with Marathon Petroleum Pty Ltd (Marathon). During his employment, the husband became aware that Marathon was going to terminate a joint venture involving a gold prospect at Mt Leyshon, Qld. The husband considered that the Mt Leyshon prospect had high exploration potential. The husband pursued this prospect until he and a Mr B bought out Marathon. The buy out was settled in April 1984. The corporate vehicle through which the buy out occurred was Pan Australia Mining Ltd (PAM). The husband resigned as general manager of PAM in February 1987 and resigned from the Board in June 1987. The family shareholding in PAM then consisted of 7 million shares. The husband sold 6,900,000 shares netting $30,600,000. He held the remaining shares to retain his right of first refusal. In October 1987 the husband sold the right of first refusal for $4,600,000.

The trial Judge found that until 1987 the wife made very significant contributions as a homemaker and parent but from 1987 this contribution was significantly affected by her illness.

During the marriage the parties developed a company and trust structure known as the L Group which included the J E L Family Trust, the J E L Investment Trust, the L Mining Trust and Bourse Securities. Through these entities the parties operated a number of endeavours.

Her Honour considered the contributions of the parties during the marriage but did not allocate a percentage division based on contributions. Her Honour then considered the section 75(2) factors and concluded that it was impossible to understand the basis upon which a further percentage in favour of the wife could be allowed. Her Honour concluded that given the significant contribution of the wife as homemaker and parent and the contribution of the husband (with the wife’s emotional support) together with their different abilities and potential to earn income, the proper result was that the property (including the trusts and superannuation) be divided 35 % to the wife and 65% to the husband.

Held, allowing the appeal and cross appeal in part:
Per Holden and Guest JJ

The grounds of appeal were considered under the following headings:

A. Erroneous findings of fact not dealt with in subsequent groupings

The wife challenged certain findings of the trial Judge regarding her contributions. The Court held that the trial Judge’s findings in relation to both these matters were supported by the evidence.

B. Adequacy of Reasons

It was contended that it was not possible to ascertain how her Honour arrived at the percentage distribution and what part of the percentage awarded to the wife was attributable to contribution and what part was attributable to section 75(2). The Court concluded that it was clear that her Honour awarded the wife 35% on the basis of contribution and declined to make any section 75(2) adjustment. The Court observed that whilst it may be preferable to separate the relevant contributions of the parties from the section 75(2) factors, Davut and Raif (1994) FLC 92-503 stands as authority for the proposition that it is not necessary to do so provided that both are “adequately considered and seen to be considered”.

C. Grounds which if successful could affect the asset pool available for distribution

There were several grounds of appeal which if they were successful could have affected the asset pool available for distribution. Of these grounds two were successful on appeal. At trial, the wife alleged that Stockwell Investments owed a L Group company a sum of $211,828 arising out of a joint venture. Her Honour found that there was no such debt to be called upon. The Court found that in reaching this finding her Honour had erroneously relied upon a clause in the joint venture agreement that did not govern repayment and that the sum of $211,829 ought to be added back to the asset pool. The wife also contended that her Honour failed to take into account or give sufficient weight to the tax losses of the L Group. The Court found that her Honour clearly identified the question whether future benefits relating to past tax losses ought to be brought into account. However, having properly determined that they should be regarded a financial resource and were potentially of a significant benefit to the L Group, her Honour made no further reference to the losses in her reasons for judgment. This amounted to an error of law on the part of her Honour.

E. Grounds relating to weight and exercise of discretion

Each of the parties attacked her Honour’s orders on the basis that they fell outside the range of a reasonable exercise of discretion. The Court considered the case law in relation to “special” or “extra” contributions including Ferraro (1993) FLC 92-335; McLay v McLay (1996) FLC 92-66; and Stay v Stay (1997) FLC 92-751 and concluded that the following general principles arise from the cases:

(a) There is no presumption of equality of contribution or “partnership”.
(b)There is a requirement to undertake an evaluation of the respective contributions of the husband and the wife.
(c)Although in many cases the direct financial contribution of one party will equal the indirect contribution of the other as homemaker and parent, that is not necessarily so in every case.
(d)In qualitatively evaluating the roles performed by marriage partners, there may arise special factors attaching to the performance of the particular role of one of them.
(e)The Court will recognise any such special factors as taking the contribution outside the “normal range” in the sense that the Full Court in Maclay (supra) understood that phrase.
(f)The determination of an issue of whether or not a “special” or “extra” contribution is made by a party to a marriage is not necessarily dependant upon the size of the asset pool or the “financial product”. When considering such an issue, care must be taken to recognise and distinguish a “windfall” gain.
(g)Whilst decisions in previous cases where special factors were found to exist may provide some guidance to judges at first instance, they are not prescriptive, except to the extent that they purport to lay down general principles.
(h)It is ultimately the exercise of the trial Judge’s own discretion on the particular facts of the case that will regulate the outcome.
(i)In the exercise of that discretion, the trial Judge must be satisfied that the actual orders are just and equitable, and not just the underlying percentage division.

The Court concluded that her Honour’s determination was above a legitimate exercise of discretion and re-exercised the discretion to allocate the wife 27.5% based on contribution. In relation to section 75(2), the Court concluded that in the context of the case the differential earning capacity of the parties did not justify a section 75(2) adjustment however, the significant taxation benefits arising from the tax losses (discounted for future uncertainties) warranted a further award to the wife of $200,000.

F. Unjust outcome - Indemnity

Counsel for the husband submitted that there was a real risk that the husband would face legal proceedings brought by the other beneficiaries of the Trust if he used his position as Controller to regularly advance his own interests; Tharlstane (Aust) Pty Ltd v Andco Nominees Pty Ltd (unreported, New South Wales Court of Appeal, 27 October 1997) and Re Nicholls (1991) 10 ACSR 273. The Court considered these authorities and concluded that having regard to the facts of the case and the authorities, any “risks” being faced by the husband were more illusory than real. The Court assumed that the appeal against the refusal to order the wife to indemnify the husband against any action brought by the children as beneficiaries was an alternative argument. This was because if the Court had decided that the risk factor was a relevant matter under section 75(2), then to also order the wife to indemnify the husband, would be a form of “double dipping”. Given the conclusion as to the nature of the risks faced by the husband, the Court found that it had not been shown that her Honour was in error in refusing to grant the indemnity.

G.Restraint on W G Shares

The parties agreed that the wife would receive a transfer of shares in W G Ltd in the same proportions as her overall percentage entitlement to the property. In determining the extent to which the parties should be restrained from dealing in the shares her Honour indicated that the orders would be a “slight modification” of those sought by the husband. However, the Court found that the final orders did not reflect those sought by the husband and that her Honour’s reasons for judgment did not reveal why. The Court re-exercised the discretion and accepted the concession of the husband that one option was for both parties to be restrained for six months.

Per Kay J
His Honour agreed with the reasoning and outcome of the judgment of Holden and Guest JJ however he made some remarks about Phillips v Phillips (1998) Fam CA (unreported decision, delivered on 30 December 1998), a decision in which he was a member of the Full Court and in which there was an asset pool of $26 million. His Honour observed that there were features in this case that distinguished it from Phillips (supra) in particular, the husband played a greater role in the welfare of the family and the pool of assets generated (in the main) by the husband’s expertise was much larger. These differences were not adequately refected in the percentage which Mr L received which was 5% more than that received by Mr Phillips and 2.5% more than that received by Mr Ferraro.

The appeal and cross appeal allowed in part.

Parties to file written submissions as to the further orders necessary to give effect to the judgment, the agreed limits of the wife’s CGT liability and the costs of the appeal.

Reportable.

KAY J

I have had the benefit of reading the judgment of Holden and Guest JJ in this matter. I agree with their reasoning process and the outcome they propose.
I wish to add a few remarks because I was a member of the Full Court (together with Ellis and O'Ryan JJ) dealing with a very large pool of assets in Phillips v Phillips (1998) Fam CA 1551 (unreported decision delivered 30 December 1998).
Very large money cases are rare in this jurisdiction. The observation in Norbis v Norbis (1986) 161 CLR 513 by Mason and Deane JJ at 524, that issues of establishing contribution are often barren issues because other factors become more significant, does not always apply to such cases. A division based on contribution findings frequently leaves each party with adequate means to meet any expense that they might reasonably expect to have for the rest of their lives. The s79(4)(e) considerations become less significant. Some guidance as to the limits of a proper exercise of discretion in such very large money cases can be drawn by reference to earlier decisions.
In Phillips the Full Court dismissed an appeal and a cross-appeal from May J in a case in which her Honour had divided a pool of assets of $26 million as to 40% to the wife and 60% to the husband. The parties had been married for 31 years. There were two children of the marriage. The husband was a builder putting up house frames. After 20 years the husband became involved in a business with two other partners. The business ultimately became a public company and was the source of the parties' great wealth. Her Honour had found that the wife assumed the burden of the homemaker and parent role and provided assistance in the company and that the husband worked hard and was gradually more successful. She accepted that the success of the company was due to the combined skills of the husband and his two partners. She found the wife's contributions should be given substantial weight by reason of the husband's absence from the home and his concentration on business matters.
The Full Court concluded that the judgment of her Honour, awarding the husband 1.5 times the award given to the wife, was within a proper range of discretion.
In Phillips the husband received the first 20% of the asset pool and the balance was divided equally. In this case May J allowed the husband the first 30% of a much larger asset pool and the balance was divided equally. The orders proposed by Holden and Guest JJ mean that the husband will retain the first 45% of this pool and that the balance be divided equally.
There are clearly features in this case which distinguish it from Phillips' case. In particular, the husband played a greater role in the welfare of the family in this case. The pool of assets in this case, generated in main by the husband's expertise, is much larger.
In Ferraro (1993) FLC 92-235 a pool of $12,000,000 was divided by the Full Court 62.5/37.5 in favour of the husband in circumstances where the Full Court observed that the wife's "contributions over three decades were outstanding."
Whilst I am extremely conscious of the generous ambit of the discretion that May J was exercising in this case, the differences between this case and the facts as found in Phillips and Ferraro are clearly not adequately reflected in Mr L receiving only a 5% greater share of this much larger pool of assets than that received by Mr Phillips, or a 2.5% greater share than that received by Mr Ferraro. Accordingly I share the views expressed by Holden and Guest JJ that it is appropriate that we interfere with her Honour's exercise of discretion and substitute our own assessment.

HOLDEN AND GUEST JJ

This is an appeal by the husband against certain orders made by May J on 26 November 1999 and a cross-appeal by the wife. The effect of her Honour’s orders was to divide the considerable property of the parties 65% to the husband and 35% to the wife.

Background

The husband was born on 8 March 1945 and was 54 years of age as at the date of trial. The wife, who was born on 13 April 1941, was 58 years of age. The parties commenced cohabitation in late 1971. Residing with the parties at the time was the wife’s son, S, who was born on 21 April 1966 and who was, then, approximately 5½ years of age.
The parties were married on 27 September 1973. There are three children of the marriage, twins, M and B, born 31 March 1973 and A, who was born 9 February 1977. The parties first separated in December 1990 and finally separated in September 1991.
When the parties commenced cohabitation, the husband was employed as a senior geologist with North Broken Hill (“NBH”). The wife was a registered nurse, although she did not work outside the home after the commencement of cohabitation.
The husband’s work responsibilities with NBH involved some overseas and interstate travel. After living in various rented premises, the first house that the parties purchased was at Moonta in South Australia in 1978. In the same year, the husband was appointed Assistant Exploration Manager for NBH.
In September 1979, the husband accepted a position with Metals Exploration Limited (“ME”). This involved a move to Melbourne. The wife and children remained in Moonta until November 1979. The Moonta house took a considerable time to sell and was not finally settled until September 1981 at which time there was little equity. The parties purchased a second home at Box Hill South in November 1981.
In March 1982, the husband resigned from ME after a takeover. He successfully applied for the position of Exploration Manager for the subsidiary of a major US oil company, Marathon Petroleum Limited (“Marathon”). This required the husband to move to Brisbane in April 1982. The wife and children remained in Melbourne until July 1982 when the Box Hill home was sold at a loss. In September 1982, the parties purchased their third home at The Gap.
The husband became aware that Marathon intended to terminate a number of their exploration projects, including a joint venture with a Canadian corporation, Noranda in a gold prospect at Mt. Leyshon. The husband reinterpreted existing exploration data relating to that gold prospect and concluded that there was potential for a very large gold deposit that could be mined as a large open cut, heat leach/carbon in pulp gold mine.
The husband convinced Marathon to retain the Mt Leyshon project. A short time later, Marathon was taken over by US Steel which, in September 1982, decided to close all exploration activities except the Brisbane office. It later announced, however, its intention to sell off the remaining exploration assets, including Mt Leyshon.
In June 1983, the husband approached the then general manager of Marathon, Mr B and suggested that they consider a management buy-out of the Australian mineral assets of Marathon. With the assistance of the Bank of America and other advisers, they put together a proposal for the buy-out which was accepted by Marathon in October 1983. The cost of the buy-out was US$1,000,000 in cash and a small royalty arrangement.
The joint venture partner in Mt Leyshon, Noranda, still had by agreement with Marathon the first right of refusal to the mineral tenements. After representations were made and with the intervention of the Federal Government and Foreign Investment Review Board, the Treasurer issued a statement through the Board, on 23 December 1983, which prevented Noranda from exercising its pre-emptive rights.
Arrangements were made with the Bank of America to lend on a best endeavours basis with a view to raising $3,000,000 to buy-out Marathon and to provide working capital whilst a prospectus was prepared for a public share offering.
The corporate vehicle established, through which the buy-out occurred was Pam Australia Mining Limited (“PAM”). Mr B initially held 60% of the issued shares whilst the other 40% was held by Exelmont Pty Ltd as trustee for the L Family Trust. The buy-out was settled in April 1984 and at the time Exelmont held 4,000,000 shares in PAM with a par value of 50 cents. At this time the parties had no assets of significance and had not made any direct financial contribution to the venture.

The next stage was the public float of PAM which involved the husband and Mr B negotiating with and seeking advice from various stockbrokers. The prospectus closed fully subscribed in December 1984 and PAM was listed on the Australian Stock Exchange on 6 January 1985. The sum raised was $11,200,000. Upon the public listing of PAM, Exelmont as trustee for the J E L Family Trust, held 8,000,000 shares which represented about 15% of the issued shared capital. For the first 18 months the future did not look bright due to a reduction in the price of gold.
The next stage was the development of the mine itself. It became the largest gold mine in Queensland. Construction of the gold mine plant began in March 1986 after two years of exploration.
The husband proposed to the Board of PAM that the company attempt to buy-out Noranda’s 50% interest in the Mt Leyshon joint venture as he was having difficulty dealing with that company. In May 1986 Noranda accepted PAM’s offer of $5,750,000 to acquire its interest in Mt Leyshon.
The husband, with the project manager, designed the physical layout of the proposed mine. He made a significant decision to change the mining methods thus reducing the capital costs for the establishment of the mine from $25,000,000 to $13,000,000.
In 1986 the husband decided that Exelmont should sell 1,000,000 shares in PAM at 66 cents per share to purchase some family assets, including land at St Johns Wood, an investment property at Milton, a car for the wife and to establish a contingency fund should the mine not be a success. The parties did not build on the St Johns Wood land and instead the parties purchased a property at Hipwood Road, Hamilton which became the family home.
The mine was completed in December 1986 and the first gold pour took place on 17 February 1987. The mine paid back its initial capital outlay of $13,000,000 within three to four months.
As a result of difficulties in the relationship between the husband and Mr B, the husband resigned as General Manager of PAM in February 1987 and resigned from the Board on 2 June of that year. The husband sold 6,900,000 of Exelmont shares in PAM to Mr B at a 50 cent discount to the market price, netting approximately $30,600,000. The receipt of that money in April 1987 was the first substantial amount of funds received by the family.
The husband deliberately retained the remaining 100,000 shares to keep the right of first refusal. The husband subsequently sold this right to Mr B for which $4,600,000 was received in October 1987.
It is common ground that the parties developed a company and trust structure which, for the purposes of the trial, became known as the L Group. It is unnecessary for us to describe that structure in any detail as there is no challenge to the way in which her Honour treated the assets of the various entities as property of the parties.
In May 1987, the husband was approached in relation to a prospect in North Queensland which became known as the Camel Creek Project. The L Group acquired an option to purchase the prospect for $2,200,000 subject to completion of due diligence and drilling results. The prospect became an operating gold mine, operated through a L Group company. Although it was not as successful as Mt Leyshon, the Camel Creek Mine produced 20,000 ozs of gold each year and a cash flow for the L Group of $3,000,000 per annum for the following three years. Other gold mines were developed in the goldfield which became important to the whole L Group during the economic downturn in Australia between 1990 and 1993.
One of the entities of the L Group engaged in property investment. By the end of 1987 the wife’s interest in this activity had ceased. In early February 1988, the Group in partnership with another, purchased a property known as Montgomery Keys. The property was acquired (without consultation with the wife) at a cost of $6,000,000 and was resold three months later for $12,000,000 realising a profit of about $3,000,000 for the L Group. Another entity of the L Group, in partnership with a Mr and Mrs Stockwell, developed a retail-shopping complex known as Kessels Court. The project cost $5,500,000, including the purchase of land and, as at the date of trial, was valued in excess of $10,000,000.
Motivated by the wife’s interest in acquiring pink diamonds from the Argyle Mine in Western Australia, considerable money was spent acquiring diamonds and other valuable items of jewellery. The total amount spent was $3,300,000. The parties also purchased antiques and paintings.
The L Group expanded its portfolio to include rural properties. Three properties were purchased, and known as “Riverslea”, “Lucknow Downs” and “Pembroke”. They comprised 62,500 acres and carried approximately 4,000 head of cattle. Ownership of the properties has resulted in significant losses.
In 1991, each of the parties inherited money. In the wife’s case, it was a sum of $63,000 and 2,500 shares in News Corporation. The husband received an inheritance of approximately $112,000.
The years between 1990 and 1993 were financially difficult for the L Group. The Group faced considerable pressure from Westpac Bank from which it had borrowed $16,000,000. Additionally, the Group invested heavily in Japanese warrants which turned out to be a financial disaster.
In March 1993, the husband became involved in W G Ltd. That company was listed on the ASX on 23 November 1993 at 50 cents per share. At trial W G Ltd was currently engaged in exploration activities but none of the projects had reached the stage of mining. The L Group through two of its entities holds 24,000,008 shares in W G Ltd, which represents a little under 40% of the issued shares.
In about 1992, the husband became involved in an Indonesian project known as W B M. W B M was listed on the Toronto Stock Exchange on 20 April 1999. One of the L Group entities owns 2,024,613 shares in W B M.

The judgment of the trial Judge

Her Honour began her reasons for judgment by defining the parameters of the dispute. She noted that the wife’s case was that she was entitled to receive 45% of the parties’ net assets, represented by 42.5% for her contributions and an adjustment of 2.5% for the matters set out in s 75(2) of the Family Law Act 1975 (as amended). It was contended that the net worth of the parties before tax and realisation was $48,249,407 to which should be added the sum of $108,598 being long service and annual leave due and payable to the husband. She therefore sought an overall award of $21,761,103.
Her Honour observed that the husband’s case was that if the Trust assets were to be treated as property of the parties, the wife should receive 25% of the property, or approximately $10,000,000 in total based on a valuation of the net worth of the parties of $42,993,630 before tax and realisation.
Her Honour then, with precision, identified the various issues that had to be determined by her and then set out the history of the acquisition of property, albeit in more detail than we have set out earlier in these reasons.
Her Honour then proceeded to determine each of the issues that she had identified. The first of these was whether the Court could make orders having the effect of distributing the property held by the Trusts to one party. If that was answered in the affirmative, the question arose as to what would be the impact and effect on the husband’s financial position should the bulk of the property remaining after distribution to the wife be property left in the Trust structure and should an order be made that the wife indemnify the husband in respect of any potential claims which any or all of the four adult children who were beneficiaries of the Trust may bring against the husband and wife. Her Honour acknowledged that the issue was of importance because, apart from the Trust property, the parties had no net assets.
Her Honour examined the Trust Deeds and determined:
“In essence then, the husband and the wife, as the sole directors and equal shareholders in each of the trustee companies, may vote to distribute any or all of the income and/or capital of the trust to the husband and/or the wife, in their absolute discretion. The husband as the appointor of the Family Trust, or the husband and the wife as the sole directors of and equal shareholders in Dimin and Matamin, the trustees and appointors of the Investment and Mining Trusts, may appoint the husband and/or the wife as trustees of the respective trusts, thereby enabling a distribution of any or all of the income and/or capital of the trusts to the husband and/or the wife.
The second beneficiaries, including the children, and the tertiary beneficiaries, have no income or capital rights save at the ultimate absolute discretion of the husband and the wife.”
Having considered the submissions of counsel, her Honour then concluded:
“In my view, the Court is able to make orders which the wife seeks even if the facts do not reveal that the corporate structure and trusts involve shams or are mere puppets of one or other of the parties. See Harris [1991] FLC 92-254. This conclusion depends to a large part on an analysis of the trust deeds to which I have referred and the historical dealings of the trust property and income.”
Her Honour then dealt with the husband’s argument that the orders the wife was seeking would amount to a breach of the fiduciary duty of the husband as appointor. After making reference to Davidson and Davidson (1991) FLC 92-197, her Honour concluded that in the circumstances of the case, the orders sought by the wife could be made.
As to the indemnity sought by the husband, and after careful analysis, her Honour concluded:
“The circumstances of this case do not justify an order for an indemnity. Nor is it appropriate to apply a significant or any discount to the net pool for the risk that an action might be brought in the future and that the bulk of the property remaining after distribution to the wife is left within that trust structure.”
Her Honour then turned to the issue of the valuation of the rural properties. The wife’s valuer had valued the property at $3,737,000 whereas the husband’s valuer had valued it at $2,114,000. Her Honour accepted the higher value. As there is no ground of appeal with respect to this aspect of the matter, we need not go into the reasons why her Honour accepted the higher value.
Her Honour next considered the value of the W G Ltd shares. She did so, notwithstanding the agreement between the parties prior to the commencement of the trial to a division of those shares in the same percentage division as that awarded to the wife by the Court in the property proceedings. It was her Honour’s view that:
“It is essential for some valuation to be applied to the value of the [W G Ltd] shares to have an appreciation of the likely result of these orders, including a proper consideration of the s. 79(2) application, together with the issue raised by counsel for the husband, that it would not be just and equitable for the husband to be left with no assets outside the trust structure.”
Her Honour’s analysis of this issue and the conclusion she reached need not be the subject of further comment as, again, there is no ground of appeal relating to this aspect of her judgment.
Her Honour then turned to consider whether or not Stockwell Investments Pty Limited owed the L Group a sum of $211,828. As this remained an issue upon appeal, we set out in full her Honour’s findings and conclusions with respect to the Stockwell joint venture, which are as follows:
“4.3 The Stockwell Joint Venture
The [L Group] undertook, with Mr and Mrs Stockwell, a property development at Kessels Road, Macgregor. It was very successful. Subsequently, through Mantacove a further property development was undertaken at Hudson and Bimbil Street, Albion. The joint venture agreement made 20 February 1988, between Stockwell Investments Pty Limited and Mantacove Pty Limited is Exhibit 15.
It is submitted on behalf of the wife that the evidence reveals that the [L Group] has a right to recover a debt of $211,828 owed to it pursuant to that joint venture agreement. The calculation as to how it is said that the sum $211,828 is owed by Stockwell is contained in Exhibit 32.
It is denied by the husband and Mr Roach, who is the financial controller for the [L Group] of companies that any moneys are owed. Although I do not accept Mr Roach’s evidence in relation to conversations he had with Mr Calabro about the provision of affidavit material, I do accept what he said about his knowledge in relation to Stockwells. In cross-examination, Mr Roach was referred to Clause 11 of the joint agreement, particularly Clause
11.06. This clause provided that:
“The proceeds of sale of the Development together with the surplus held in the joint venture bank account, if any, at the date of termination of the joint venture shall be applied as follows:
11.6Sixthly, by way of equal distribution of profit (loss) to Stockwell and [L].”
Mr Roach believes that it would not be possible for any moneys to be paid to Stockwell and [L] because there would not be any equity after the proceeds have been applied to the bank loan and the Mantacove loan. Further, that it was never the intention of the agreement in the first place that this be the result. In a letter from Stockwell’s Investment dated 15 June 1999 (Exhibit 27), that company acknowledged the contribution as expected in Clause 11 of the agreement by Mantacove of $450,000. Further, that funds were required in addition on an equal basis. The property has not been sold and so it was said by Mr Kelso on behalf of Stockwells that:
“Beyond the $450,000, the balances in the partners accounts at any particular time are irrelevant to the determination of residual equity in the project. The Mantacove partner’s account comes and goes according to the cash flow of the venture. While the ventures does not require any additional funds, the Stockwell Partners’ account reflects its initial contributions less its share of the net losses to date.
Certainly any assertion that there is a subsequent oral agreement or that the [L Group] will not insist on being paid a sum to which they are entitled is not a decision that can be made by Mr [L] at the expense of the company and Mrs [L]. However, as the property is yet unsold and consequently the debt has not become due it is only appropriate at this time as each of the accountants did, to apply a figure of $281,000 to the net worth of the partnership. There is no debt to be called up by Mantacove Pty Limited.”
Her Honour then considered the valuation of the income tax losses and, again, we set out hereunder her Honour’s reasons in full, which are as follows:
“4.4.3 Valuation of Income Tax Losses
In the opinion of Ms Micalizzi, by reason of uncertainty concerning the utilisation of the tax losses, they are of no value. Mr Calabro contends that as the [L Group] has substantial tax losses, those losses will not be affected by a loss of continuity of control of the business and that they may well be used. Historically, the husband has had the benefit of substantial distributions which have been treated as advances from the trust which incur no tax. Schedule 12.3 demonstrates sizeable distributions to Bourse. Mr Calabro has valued the residual losses after accounting for gains and losses arising on the notional realisation of assets at the current corporate tax rates which results in the recognition of a tax benefit of approximately $2.16 million principally in Bourse. Mr Calabro’s calculation of the tax benefit was set out in his amended schedule 1.4 and summarised at p. 114 of the submissions on behalf of the wife. I accept that although the tax losses are clearly not an asset of the parties, they are potentially a significant benefit to the [L Group] which will retain the ability to use those losses. It is not unreasonable to infer that the husband will be able, to some extent, to arrange the affairs of the Group so that tax losses can be utilised in the future years. However, in view of the uncertainties referred to by Ms Micalizzi, these tax losses should not be included as property, rather considered a financial resource.”
At trial there was a dispute between the parties as to who should retain various of the properties and, in particular, a property at Mermaid Beach and the rural property. We need not go into her Honour’s reasons as to why she did what she did as there is no ground of appeal relating to the orders she made.
Her Honour next considered the orders sought by the husband with respect to certain restraints on the parties’ dealing with the W G Ltd shares. They were:
“4.5.3Restraint on the Husband and Wife Dealing with the [W G Ltd] Shares
The husband seeks orders that will have the effect that:
(a)Both parties be restrained from selling for a period of 18 months without the consent of the other;
(b)That the wife give the husband a proxy over her shares except for takeovers and liquidation resolutions to enable the husband to exercise shareholder control;
(c)That in any proposed sale of [W G Ltd] by the [L Group], the wife be entitled to sell a relevant portion of her shares at the same time, it being said that that could only benefit the wife;
(d)That after the 18 months period, the wife give a first right of refusal to the husband. The wife, I am told, agreed to this, but asked that a period of 72 hours be given for the husband to elect whereas the husband asks for a period of 60 days and that he have a further 30 days to pay.”
Her Honour properly concluded, in our view, that it was in the best interests of both parties that the orders be made and indicated that she would make orders that would be a slight modification (emphasis added) of those sought by the husband. This is a matter to which we shall return later in these reasons.
Having resolved all of the issues that she had identified, her Honour concluded that assets and liabilities of the parties were:
“Assets
Real property
Total property  $13,293,000
Cash Resources (total)           $3,299,566
           Jersey Trust     $3,000,000
           Shares

[W G Ltd] - Placement (convertible notes
only) $ 564,060
[W B M] $1,257,285
Total other shareholding $8,759,566

Total other investments $5,269,776

Jewellery/Art/Antiques/Collectables

Wife’s collectables $2,839,757
Husband’s collectables 191,475
Oriental Rugs 10,000
Furs 8,495
Books/Lithographs 95,815
Art/antiques $ 344,301
$3,489,843

Other Assets

Trade debtors 1,299,589
Other debtors 26,748
Loans 59,000
Mase Westpac – Gold 318,237
Stock 150,034
Livestock 1,358,342
Plant and equipment at WDV 398,991
Prepayments 8,831
Motor vehicles 21,721
Golf Project 375,000
Superannuation $ 465,849
Total other assets $4,482,342

Parties’ court costs agreed, added back $ 692,534
Total assets $44,107,972

Liabilities

Trade creditors and other creditors  155,189
Provision for annual leave  127,901
Commercial bill facility  $3,800,000
Provision for rehabilitation  139,115
ASX options/open position   176,256
Loan – Jersey Trust  $3,000,000

$7,398,461

Net worth (excluding [W G Ltd] shares) $36,709,511” 57. Her Honour next dealt with the issue of contribution. She properly recounted that the husband’s case was that his contribution was in the “special” category. The wife’s argument was that the husband’s efforts were greatly assisted by external factors which fact, together with the fact that he incurred significant losses post-separation, ought to only result in a 5% adjustment in his favour on the basis of contribution. Her Honour correctly, in our view, determined that it was necessary to analyse contribution over three time phases. The first, from cohabitation in 1971 to April 1987, the second from 1987 to separation in October 1991, and the third, the period since separation.

With respect to the first phase, her Honour concluded:
“In the first period to April 1987, there is no doubt that the wife’s contribution as homemaker and parent is very significant. As the High Court said in Mallet and has been repeated since, such a contribution is not to be assessed in a merely token way. The contributions made by each of the parties during this first phase were equal although different. It was not really suggested by either counsel that this is not correct. The husband had the professional qualification of a geologist and his employment increased in responsibility and remuneration. The wife cared for four young children in circumstances that were very ordinary in terms of surroundings and moneys available. They were both successful.”
Insofar as the second phase is concerned, her Honour made the following observations:
“The circumstances in relation to the period between April 1997 and separation, are marked by two particular features. The first is the wife’s illness which came upon her through no fault of her own, beginning in about late 1987 and the second was the first occasion the parties acquired significant wealth beginning in April 1987 with the sale of the shares, and October 1987 with the sale of the first right of refusal.
…
There is no doubt that the wife’s health interfered with her capacity to perform her role as homemaker and parent. After 1987, her ability to manage the household, care for the children, and contribute to the husband’s business decisions sadly diminished from an active and involved person to someone debilitated by her illness. I find that based on the medical evidence from late 1987 the wife’s contribution as homemaker and parent was significantly affected by her illness.
To appreciate the husband’s contribution and the contention that it was his ability that largely led to the parties’ financial position at the date of separation, it was the evidence of others rather than that of the husband’s which is of great significance. In each case, I accept what was said by these people in their affidavits.”
Her Honour then referred to the evidence of others describing the husband’s contributions. She quoted reasonably extensively from some of them and concluded:
“I accept that the application of the husband’s skills to Mt Leyshon, including the analysis of the project, the management buy-out, the floating of PAM, the buy-out of Noranda, the revised mine design and the ultimate sale of the PAM shares was the foundation for the wealth of the [L Group]. As correctly pointed out by counsel for the wife, there were a number of external factors which were of considerable assistance. However, I find that without the husband’s skills as described in the affidavits to which I have referred, those external factors would not have produced the same result.
In addition, it is not correct that during this period the husband was successful in only one endeavour. The Camel Creek Amanda Bel mine between 1987 and 1989 produced a cash flow of $3 million per annum, which I accept was, as the husband says, critical to the survival of the [L Group] during the 1990/93 economic recession in this country. In addition, there had been successful developments in property investment which were largely identified by the husband although on some occasions he consulted his wife. This includes Montgomery Keys, which generated a $3 million profit in 3 months.
Apart from the outstanding financial success of the sale of shares in April 1987 and the sale of the first right of refusal in October of that year, the husband has been met with a number of difficult external forces, even prior to separation. These included the price of gold dropping from about April 1987, demonstrating the great fortune the parties had in the sale of the shares at that time. The price of gold has dropped from around $US450 an ounce in April 1998, to around $US250 an ounce in June 1999, a drop of about 45 per cent from the level at the time the PAM shares were sold. The ASX Gold Index shows a drop from 2,400 to 800, being down 66 per cent from its level at the time the husband sold the PAM shares. It could not sensibly be suggested that the husband should entirely receive the benefit of the sale at that point of time. It was impossible for him to predict the outcome; likewise, the stock market crash in October 1987 and the recession between 1990 and 1993, with the attendant high interest rates and pressure from the banks. The [L Group] was affected by what is described in the husband’s submissions as the collapse of the property market in the late 1980s and early 1990s and the collapse of the wool market in the early 1990s and the subsequent fall in beef prices. The “Riverslea” property was affected by very severe drought from early in the mid-1990s, which began prior to the parties’ separation.”
It was submitted on behalf of the wife that even prior to separation, and certainly since separation in October 1991, the value of the L Group had in real terms diminished, thereby reducing the husband’s contribution. As far as that argument was concerned, her Honour concluded:
“However, without reciting the evidence at great length, there is none that demonstrates that at any time, the husband was reckless or negligent, rather that he made the best informed decision he could make at the time. This commenced with his decision to conserve the capital generated from the PAM sale in different schemes. The evidence supports the husband’s assertion that his management of the [L Group] from 1990 to 1993 has been his greatest achievement. In addition, in fairness, it must be observed that even prior to separation in October 1991, the wife’s desires made no positive contribution to the Group’s profitability. This included the operation of the [VB] business and the wife’s pink diamond collection, which cost approximately $3.3 million, now valued at $2.7 million.”
Her Honour then turned to examine the third phase, being the circumstances since separation. She referred to the fact that since separation the husband had made some bad investments on the one hand but did very well in relation to share transactions on the other hand. She acknowledged that “Riverslea” had been a significant drain on the L Group finances. She made reference to the repayment of $6,000,000 to Westpac Corporation. She describes the wife’s problem with ill-health and concluded:
“The other important consideration as to the circumstances since separation, is the financial support of each of the family members, the husband, wife and children. The wife has made no financial contribution to the support of herself or any other family member, other than through funds she has obtained from the [L Group]. Her business ran at a loss of $301,124 (Calabro, schedule 3.7). Reference has already been made to her pink diamond collection which the husband agreed to purchase and no doubt gave her some pleasure, but of course, does not produce an income. Although it is obvious that the husband had control of the property pool, I find that the husband has continued to work hard and use his skill as a geologist and businessman for the family’s support. The wife had access to substantial funds, much more than the husband (see annexure “B” to husband’s reply affidavit 28 May 1999.)”
Her Honour then considered the husband’s alleged mean-spirited approach, concluding:
“It was submitted on behalf of the wife, that the husband had demonstrated a mean spirited approach to her post separation. It is correct that the husband did complain about her extravagance, and cut off her access to bank accounts in mid-1998, but as she was subsequently provided with an income of $53,000 per annum and a range of other expenses were paid for her through the [L Group], it could hardly be described as inappropriate; nor was the husband’s insistence on obtaining the advice of his solicitor which was that the Anthony Street property be purchased in joint names. Again, it seems difficult to understand that this was unreasonable in the context of a property dispute between the husband and wife.”
Her Honour found that throughout, the parties had made an equal contribution to their children.
Her Honour, commencing at p. 107 of the Appeal Book, set out what she regarded as the relevant principles. Earlier in her reasons for judgment, she had observed:
“In addition, I do not consider that a comparison of value of property and other cases leads to the appropriate outcome, the exercise is not the same as assessment of damages for personal injury where comparisons are correctly applied.”
Her Honour did not specifically arrive at a conclusion on contribution before turning to the s 75(2) factors. After referring to the most obvious of those factors, her Honour said:
“Even taking into account the wife’s health difficulties, her age and the absence of any real career prospects, it is impossible to understand on what basis this further percentage or dollar amount could be allowed. The wife will receive property and cash representing 35 per cent of the parties’ net assets and financial resources less realisation costs including taxation. This is not a case where the Court’s discretion could allow for any further sum.”
Her Honour then arrived at the following conclusion:
“The duty of the court is to make an order that is just and equitable taking into account the matters set out in s. 79 which includes those contained in s. 75(2).
Taking into account the history from the time of co-habitation to the date of trial and particularly recognising the significant contribution of the wife as homemaker and parent and the contribution of the husband with the emotional support of the wife together with the wife’s very different abilities and potential to earn income now in contrast to the husband, the proper result is that the parties’ property, including that held in the trusts, and superannuation (as listed in Exhibit 29) be divided as to 35 per cent to the wife and 65 per cent to the husband.”

Grounds of Appeal and Cross-Appeal

At the commencement of the hearing of the appeal, the husband was relying on an amended Notice of Appeal filed on 20 July 2000. The grounds of appeal were (grounds 1.1 – 1.4 inclusive having been abandoned):
1. CONTRIBUTIONS
1.5That Her Honour erred as a matter of law in assessing the contributions as to 65% to the husband and as to 35% to the wife, having regard to the following positive findings made by Her Honour:
1.5.1the finding that the parties “throughout” made an “equal contribution to their children” (it being noted that the husband also appeals this finding at ground 1.3);
1.5.2the acceptance by Her Honour that “the application of the husband’s skills to Mt Leyshon, including the analysis of the project, the management buy-out, the floating of PAM, the buy-out of Noranda, the revised mine design and the ultimate sale of the PAM shares was the foundation for the wealth of the [L Group]”;
1.5.3the acceptance by Her Honour that the husband’s largely post-separation “management of the [L Group] from 1990 to 1993” was “his greatest achievement” being a period of significant economic recession when the Group’s assets were nonetheless preserved;
1.5.4the finding that “even prior to separation in October 1991 the wife’s desires made no positive contribution to the Group’s profitability”;
1.5.5the finding that subsequent to separation in 1991, the “husband has continued to work hard and use his skill as a Geologist and business man for the family support”;
1.5.6the finding that “based on the medical evidence from late 1987 the wife’s contribution as homemaker and parent was significantly affected by her illness”.
1.6That Her Honour erred in law in failing to have regard to the real impact, in monetary terms, of the percentage assessment made as to contributions given the quantum of the pool of assets (being $36,709,511 excluding the shares held by the [L Group] in [W G Ltd], or $44,080,514 including the [W G Ltd] shares).
1.7That Her Honour erred in law in stating that she did “not consider that a comparison of value of property and other cases leads to the appropriate outcome”, and that Her Honour should, as a matter of law, have had regard, to comparable cases of this Honourable Court and the facts pertinent thereto in making a finding as to the weight to be attributed to the respective contributions of the parties.
2.EFFECT OF ORDERS – OUTCOME FOR HUSBAND UNJUST
That Her Honour erred in law in failing to apply a significant or any discount to the assessment of the net pool of property or otherwise adjust the wife’s entitlement, having regard to:
2.1the fact that the vast majority of the alleged ‘property’ remaining after distribution to the wife by the Trustees of assets held within the [L Group] (pursuant to Order 4), is left within the trusts comprising the [L Group], and not in the husband’s personal name or personal control;
2.2the finding made by Her Honour that the “effect of such Orders is a matter to be taken into account in the division of the property” [being Order 4 which requires the trustees to do certain acts and things to give effect to the Orders];
2.3the fact that the effect of the Orders is to leave the husband with a negative personal asset position;
2.4the fact that the effect of the Orders is to leave the husband with loans to the various trusts within the [L Group] of about $2,600,000 that he does not have the personal capacity to repay;
2.5the fact that the effect of the Orders is to require the transfer of loans totalling about $2,500,000 outstanding by the wife to the several trusts, to the husband;
2.6the fact that the husband remains, following the Orders made by the Family Court, subject to an obligation at law and in equity (as a director of the corporate trustees) to abide by the terms of the Trust Deed and the Trusts Act (QLD);
2.7the risk that an action may be brought in the future by beneficiaries of the various trusts within the [L Group] against the husband and/or the trustee companies.
3.REALISATION COSTS
That Her Honour erred in law in holding that the incidence of capital gains tax and realisation costs should only be taken into account in respect of any assets which are actually to be sold “or transferred” pursuant to Orders of this Court or which must inevitably be “sold to comply with such Orders”.
5.INCONSISTENCY BETWEEN FINDINGS AND ORDERS
That Her Honour erred in failing to impose the conditions sought by the husband for mutual restraints upon dealing with shares held in [W G Ltd], in that notwithstanding that Her Honour accepted the evidence of the husband, Richard Li, Christopher Brown and David Williams, and that her Honour stated that the Orders she proposed to make were to be only a “slight modification of those that the husband’s (sic) seeks”, the Orders ultimately made by Her Honour pursuant to Order 25 did not reflect this finding.
6.INDEMNITY RE TRUST ASSETS TO WIFE
That Her Honour erred in law in failing to Order that the wife indemnify the husband in respect of any claims or potential claims which any of the three adult children of the marriage and/or [S], as secondary beneficiaries of the trust, may bring against the husband or the corporate trustees in respect of monies paid to the wife.
The wife relied on an Amended Notice of Cross Appeal, filed 24 July 2000. The Amended Grounds of Appeal (grounds 6, 8, 25-30 and 37 having been abandoned) were as follows:
“1.      The learned trial Judge made errors of fact.
2.        The learned trial Judge made errors of law.
3.The Order of the learned trial judge was against the evidence or the weight of the evidence.
4.The learned trial Judge failed to take into account relevant matters and/or to give any or sufficient weight to relevant matters.
5.The learned trial Judge gave weight to irrelevant and extraneous matters.
7.The Order of the learned trial Judge, having regard to the totality of the evidence, was so unreasonable and manifestly unjust, that it may be inferred that there has been a failure to properly exercise the discretion reposed in her Honour.
9.The finding by the learned trial Judge that the parties 'made an equal contribution to their children' (p60) was against the evidence or the weight of the evidence and contrary to her finding as to 'the significant contribution of the wife as homemaker and parent' (p65).
10.The learned trial [J]udge failed to give any or sufficient weight:
(a)to the evidence that the wife was the primary homemaker and parent; and
(b)her finding as to 'the significant contribution of the wife as homemaker and parent'.
11.The learned trial [J]udge should have found that the wife was the primary homemaker and parent.
12.The learned trial Judge’s holding that 'the wife’s desires made no positive contribution to the [L Group]’s profitability' (p 58) was against the evidence or the weight of the evidence.
13.The learned trial [J]udge failed to give any or sufficient weight to the evidence that the wife searched for and located and/or inspected real properties which the parties subsequently acquired and was involved in their conservation and improvement.
14.The learned trial Judge’s finding that the wife 'made no financial contribution to the support of herself or any other family member, other than through funds she has obtained from the [L Group]' (p 60) was against the evidence or the weight of the evidence.
15.The learned trial Judge should have found that the wife made an indirect financial contribution, including (but not limited) to the support of herself and other family members, by reason of the husband’s ongoing access to and use of matrimonial funds in the [L Group] from separation until trial.
16.The learned trial [J]udge failed to give any or sufficient weight to the evidence that the wife’s tax refunds were deposited in bank accounts by the husband (without her prior knowledge and consent) in the 1995, 1996 and 1997 financial years.
17.The learned trial Judge failed to give any or sufficient weight to the fact that the wife was a director and shareholder (together with the husband) of companies in the [L Group], including but not limited to Exelmont Pty Ltd, Dimin Pty Ltd and Matamin Pty Ltd being the respective corporate trustees of the [L Family, Investment and Mining Trusts].
18.The learned trial Judge should have found that by reason of the wife being a director and shareholder (together with the husband) of companies in the [L Group], including but not limited to Exelmont Pty Ltd, Dimin Pty Ltd and Matamin Pty Ltd being the respective corporate trustees of the [L Family, Investment and Mining Trusts], she thereby made a financial or on-financial contribution within the meaning of sec 79(4)(a) and (b) of the Act.
19.The learned trial Judge erred in law and/or impermissibly fettered the discretion reposed in her by sec 79 of the Act in failing to give proper or sufficient weight to the wife’s:
(a)indirect financial contributions;
(b)non-financial contributions; and/or
(c)homemaker and parent contributions.
20.The learned trial [J]udge failed to take into account and/or to give weight or sufficient weight to:
(a)the husband’s annual leave and accrued long service entitlements (p 64);
(b)the substantial tax losses of the [L Group] which her Honour found to be “potentially a significant benefit to the [L Group] which will retain the ability to use those losses” and thus a financial resource to the husband (p 46).
20AThe learned trial Judge erred in holding that the husband’s long service and accumulated annual leave entitlements were only “potential receipts”.
20BThe learned trial Judge erred in holding that the “appropriate way” to deal with the husband’s long service and accumulated annual leave entitlements “is that they be taken into account in determining the equitable division “is that they be taken into account in determining the equitable division between the parties”.
20CThe learned trial Judge erred in failing to take the husband’s long service and accumulated annual leave entitlements into account;
(i)as property;
(ii)alternatively, as a financial resource;
(iii)alternatively “in determining the equitable division between the parties”.
21.The learned trial Judge erred in law and/or impermissibly fettered the discretion reposed in her by sec 79 of the Act and/or erred in the exercise of her discretion in holding that, in relation to the further 2.5 per cent adjustment sought by the wife pursuant to sec 75(2) of the Act:
(a)“it is impossible to understand on what basis this further percentage could be allowed” (p 64); and
(b)“this is not a case where the Court’s discretion could allow for any further sum” (p 64).
21AThe learned trial Judge, having found that:
(a)The tax losses were potentially a significant benefit to the [L Group] and should be considered as a financial resource;
(b)The husband’s long service and accumulated annual leave entitlements should be taken into account in determining the equitable division between the parties; and
(c)The wife’s abilities and potential to earn income were different in contrast to the husband;
failed to take into account these matters pursuant to sec 79(4)(e) and sec 75(2).
22.The learned trial Judge gave excessive weight to and/or erred in the exercise of her discretion in accepting what David Roach said “about his knowledge in relation to the Stockwells” joint venture (p 38) in circumstances where her Honour:
(a)expressed “doubt whether the evidence given by Mr Roach was entirely frank” (p 24); and
(b)did not accept Mr Roach’s evidence in relation to conversations he had with the wife’s expert accountant, Norbert Calabro, about the provision of “affidavit [sic] material” (p 38).
23.The learned trial Judge erred in law in holding that:
(a)“in the event the [Riverslea] partnership land is sold, the net proceeds must be paid to the [J E L Family Trust] as the creditors and could not then be divided between the parties” (p 34);
(b)in the circumstances of this case, “the Court does not have the power to deal with partnership property as if it were the property of the parties, ignoring the rights of the major creditor, that is, the [J E L Family Trust]” (p 34) of which the husband was and remains the appointor and the primary beneficiary; the husband and the wife were and remain the primary beneficiaries of this discretionary trust; and they were and remain the sole directors and shareholders of the corporate trustee;
(c)the [L Group], through Mantacove Pty Ltd, does not have a right to recover a debt of $211,828 owed to it by Stockwells Investment Pty Ltd pursuant to the joint venture agreement between them (p 38).
24.The learned trial Judge erred in law and/or in the exercise of her discretion in giving any or excessive weight to the alleged “intention of the [joint venture] agreement in the first place” between Mantacove Pty Ltd and Stockwells Investment Pty Ltd (p 38).
31.The learned trial Judge, having held that “the incidence of CGT and realisation costs should only be taken into account in respect of any assets which are actually to be sold or transferred pursuant to orders of this Court or which must inevitably be sold to enable the husband to comply with such orders” (p 44), should have held that such costs should only be taken into account in respect of the Riverslea (three) and Mermaid Beach (two) properties which her Honour envisaged would or might be sold.
31A.Subject to the admission of further evidence at the discretion of the Full Court the learned trial Judge erred in not limiting the wife’s liability to be responsible for a percentage of capital gains tax and realisation costs calculated at the agreed value of real properties as at the date of trial.
32The learned trial Judge failed to give any or sufficient weight to:
(a)her finding that “an essential fact in this matter is, at … [April 1984] the parties had no assets of significance and did not make any direct contribution to this venture” (p 13), being the acquisition of the family’s shares in Pan-Australia Mining Ltd;
(b)the external factors, beyond the control of the husband and the wife, that were of considerable importance in the receipt by the [L Group] and the parties of the sum of $35.2 million from the sale of the shares in Pan-Australia Mining Ltd in April and October 1987;
(c)the significant losses in sharetrading and other investments incurred by or at the direction of the husband since separation.
32AThe learned trial Judge erred in the exercise of her discretion and/or in law in giving excessive weight to the husband’s contributions and skills.
32BInsofar as it may be inferred (which is not admitted) that the learned trial Judge found the husband’s contributions and skills to be of an “extraordinary” or “special” nature, Her Honour erred in law in so doing.
33The learned trial Judge erred in law and/or in the exercise of her discretion in failing to hold that the receipt by the parties of the sum of $35.2 million from the sale of shares in Pan-Australia Mining Ltd was attributable in large part to a “windfall”, namely numerous external factors beyond the control or influence of the parties.
34.The learned trial Judge’s holding that there was no evidence “that demonstrates that at any time the husband was reckless or negligent, rather that he made the best informed decision he could make at the time” (p 58) was against the evidence or the weight of the evidence.
35.The learned trial Judge failed to take into account and/or give any or sufficient weight to the evidence that in January 1999 the husband repaid the sum of $1,637,468 from his personal savings in reduction of his loan account in the [J E L Family Trust] without any requirement to do so and in circumstances where the husband was the appointor and primary beneficiary of his discretionary trust; the husband and the wife were the primary beneficiaries thereof; and they were the sole directors and shareholders of the corporate trustee thereof.
36.      The learned trial Judge failed to give any or sufficient weight to:
(a)her finding that on about 1 March 1999, the sum of in excess of $6 million which had been invested off-shore for many years under the direction or control of the United Bank of Switzerland was returned to Australia by or at the direction of the husband and without any prior notification to the wife and paid to the Westpac Banking Corporation in reduction of a long standing overdraft facility although repayment was not then required or suggested by the said bank (p 59); and
(b)her inference that the husband did not want such cash available to be paid to the wife ( p 59).

During the course of the appeal, there was, what might be described as, a curious turn of events. Counsel for the wife abandoned Grounds 6 and 8 of the cross-appeal. That prompted counsel for the husband to seek leave to amend his Grounds of Appeal to include Grounds 6 and 8 on the basis that he was adopting the submissions contained in the wife’s Outline of Argument. For reasons given ex tempore by the presiding Judge, leave to amend was granted. The position became therefore that the husband’s grounds of appeal were as set out in his Amended Notice of Appeal, together with Grounds 6 and 8 of the wife’s Amended Notice of Cross-Appeal which were as follows:
“6.The learned trial Judge erred in the exercise of her discretion including in failing to make findings about material matters in issue and making findings without the provision of adequate reason thereby leaving the parties to speculate the basis of such findings.
8.The learned trial Judge failed to give any or sufficient reasons for her finding that “the proper result is that the parties’ property, including that held in the trusts and superannuation … be divided as to 35 per cent to the wife and 65 per cent to the husband” thereby leaving the parties to speculate the basis of such finding.”

Application To Adduce Further Evidence

By a Form 42A application, filed on 24 July 2000, application was made on behalf of the wife that the Court receive further evidence upon the hearing of the appeal as contained in the affidavits of Michael Gary Haberman and Norbert Charles Calabro.
The evidence that was sought to be adduced was that:
(a)notwithstanding that a property known as Kessels Court had an agreed value at trial of $10,900,000 it was subsequently sold for $13,300,000; and
(b)a property at Buckingham Street had an agreed value at trial of $267,500 but was subsequently sold for $500,000.
The problem that arose from the wife’s point of view was that she was, pursuant to orders made by her Honour, being asked to contribute to capital gains tax on the increased amount notwithstanding that she was not to share in that increase. It is not necessary for us to take this matter any further as during the course of the appeal the parties reached an agreement and tendered a Minute of Orders that purported to resolve the problem. In due course, orders will be made by consent in terms of that Minute.

Submissions on Appeal

The appeal and cross-appeal were constituted by a plethora of grounds. As far as the cross-appeal is concerned, many of the grounds are either intertwined or repetitive. It seems to us that the most convenient way of dealing with the various grounds is under the following headings:
(a)Erroneous findings of fact not otherwise dealt with in subsequent groupings (Grounds 12 and 14 Cross-Appeal)
(b)Grounds which, if successful, could affect the asset pool available for distribution, namely
(i)realisation costs and capital gains tax (Ground 3 Appeal – Grounds 31A, 31, 35 and 36 Cross Appeal);
(ii)Stockwell debt (Grounds 22, 23C and 24 Cross-Appeal);
(iii)annual leave and long service leave (Grounds 20(a), 20A, 20B, 20C and 21A(a) and (b) Cross Appeal;
(iv)tax liability on collapse of corporate/trust structure;
(v)tax losses (Ground 20B Cross Appeal).
(c)Adequacy of reasons (Grounds 6 and 8 Cross Appeal adopted by husband as part of his appeal);
(d)Grounds relating to weight and exercise of discretion issues (Grounds 1.5 and 1.6 Appeal – Grounds 1 –3 inclusive, 5, 7, 9 – 19 inclusive, 32(a), (b) (c), 32A, 32B, 33 and 34 Cross Appeal);
(e)Unjust outcome/effect of orders (Grounds 2.1 – 2.7 appeal);
(f)W G Ltd orders (Ground 5 Appeal);
(g)Trust indemnity (Ground 6 Appeal).

A.Factual Issues

Only two grounds of the cross-appeal asserting that findings made by her Honour were against the evidence or the weight of the evidence need be considered. The first of these is her Honour’s finding that “the wife’s desires made no positive contribution to the Group’s profitability”. This ground can be disposed of shortly.
In her reasons for judgment, her Honour said:
“In addition, in fairness, it must be observed that even prior to separation in October 1991, the wife’s desires made no positive contribution to the Group’s profitability. This included the operation of the [VB] business and the wife’s pink diamond collection, which cost approximately $3.3 million, now valued at $2.7 million.”
Earlier in her reasons, her Honour had found that the decision to purchase the diamonds was motivated by the wife’s interest in acquiring pink diamonds. As her Honour observed, they were purchased at a cost of $3.3 million and at trial had a value of $2.7 million.
As far as the business known as VB is concerned, her Honour noted that it had never made a profit and properly found that the business had run at a loss of $301,124. In our view, her Honour’s finding was justified having regard to the above.
Ground 14 asserts that her Honour’s finding that the wife made no financial contribution to the support of herself or any other family member, other than through funds that she obtained from the L Group was against the evidence or the weight of the evidence.
It is argued that this finding does not take into account her Honour’s earlier finding that the wife inherited $63,000 from her mother’s estate and $2,500 shares in News Corporation in 1991. The cash sum was applied towards the purchase of a pink and white diamond ring for the sum of $76,000. Clearly, as the diamonds and jewellery were still in existence as at the date of trial, that portion of the inherited money could not have been used to meet living expenses and in fact would have had to have been supplemented by a further $13,000.
As far as the News Corporation shares are concerned, her Honour found that they were sold and the proceeds deposited in the J E L Family Trust, being part of the L Group. If there had been a surplus after the sale of the News Corporation shares and the purchase of the diamonds (and we were not informed if there was) some of the wife’s money may have found its way into paying for her living expenses, but to such a minor extent as not to warrant appellate intervention.

B. Adequacy of Reasons

It is appropriate that we deal with these grounds prior to determining the balance of the appeal because if we are not satisfied that the reasons are adequate then that may well be the end of the matter.
The principles governing the need for the giving of adequate reasons as to the exercise of discretion to alter interests in property pursuant to the provisions of s 79 are well-established and need not be restated here. See Bennett and Bennett (1991) FLC 92-191; Horsley and Horsley (1991) FLC 92-205; Bonnici and Bonnici (1992) FLC 92-272 and Merriman and Merriman (1993) FLC 92-422.
As we understand the submission, it is that her Honour failed to follow the approach normally taken in the exercise of the discretion in s 79 proceedings. That approach is best described by the observations of the Full Court in Ferraro and Ferraro (1993) FLC 92-335 where, at 79,560, the Full Court said:
“A now well established line of authority in this Court indicates the approach normally to be taken to the exercise of the discretion in s 79 proceedings. That approach is firstly to ascertain the property of the parties at the time of the hearing, then to consider the ‘contributions’ of the parties within paras (a) to (c) of s 79(4), and then to consider the matters in paras (d) to (g), more especially para (e) which takes up by reference the provisions of s 75(2) and which are generally referred to as the ‘section 75(2) factors’: see such cases as Pastrikos (1980) FLC 90-897; Lee Steere (1985) FLC 91-626, Napthali (1989) FLC 92-021, and Dawes (19909 FLC 92-108, in some of which this is referred to as the ‘dual exercise’ under s 79; see also the comments of Gibbs, CJ in Mallet (1984) 156 CLR 605 at 608, (1984) FLC 91-507 at 79,110.”
After evaluating the contributions of the parties, her Honour acknowledged that the principles in relation to the proper approach to contribution were well settled. Although she did not set out those principles, she correctly referred to the decision of Ferraro (supra).
As we understand the argument, it is asserted that it is not possible to ascertain how her Honour arrived at an overall distribution of 65% to the husband and 35% to the wife and, in particular, that it is not possible to determine what part of the 35% was based on contribution and what part, if any, was based on the s 75(2) factors. Having left the topic of contributions, her Honour then canvassed under the heading “s 75(2)” the submission as to why the wife should receive a 2.5% adjustment by reason of the s 75(2) factors, concluding:
“Even taking into account the wife’s health difficulties, her age and the absence of any real career prospects, it is impossible to understand on what basis this further percentage or dollar amount could be allowed. The wife will receive property and cash representing 35 per cent of the parties’ net assets and financial resources less realisation costs including taxation. This is not a case where the Court’s discretion could allow for any further sum.”
Clearly, the reference to “any further sum” refers to a sum over and above the wife’s contribution based entitlement. Read in that context, it is clear that by reason of the passage following that her Honour awarded the wife 35% on the basis of contribution and declined to make any adjustment by reason of the s 75(2) factors. Her Honour concluded:
“The duty of the court is to make an order that is just and equitable taking into account the matters set out in s. 79 which includes those contained in s. 75(2).
Taking into account the history from the time of co-habitation to the date of trial and particularly recognising the significant contribution of the wife as homemaker and parent and the contribution of the husband with the emotional support of the wife together with the wife’s very different abilities and potential to earn income now in contrast to the husband, the proper result is that the parties’ property, including that held in the trusts, and superannuation (as listed in Exhibit 29) be divided as to 35 per cent to the wife and 65 per cent to the husband.”
Whilst it may be preferable to separate the relevant contributions of the parties from the s 75(2) factors, Davut and Raif (1994) FLC 92-503 stands as authority for the proposition that it is not necessary to do so, provided that both are “adequately considered and seen to be considered”. Reading the judgment as a whole, it is clear enough to us that although, perhaps, inelegantly expressed, what her Honour did was award to the wife 35% on the basis of contribution and declined to make any further adjustment because of the s 75(2) factors.
C. Grounds which, if successful, would affect the asset pool available for distribution –
(a) realisation costs and capital gains tax
It is difficult to ascertain from the papers, the precise amount of capital gains tax that would be payable and the amount of realisation costs that would be incurred if all of the assets of the parties were disposed of. In her judgment, her Honour referred to the difference in realisation costs between the two accountants as being $86,956. That difference was said to be only due to the differences in the value of the “Riverslea” land and the W G Ltd shares. Exhibit 29 is an amended appendix to the O. 30A statement of the expert accountants. In that document the wife’s accountant arrived at a total figure of $1,510,071 for realisation cost as compared with the husband’s accountant who calculated them to be $1,423,115, resulting in a difference of $86,956.
In any event, the precise figure is not relevant as the argument advanced is not as to how much the realisation costs would be but, rather, whether they should be taken into account as a notional liability thereby reducing the pool of assets.
In her reasons for judgment, her Honour had earlier identified the issue as being whether the realisation costs should be deducted from the whole pool or from only those assets to be sold or distributed. Her Honour decided that the realisation costs:
“should only be taken into account in respect of any assets which are actually to be sold or transferred pursuant to the orders of this Court or which must inevitably be sold to enable the husband to comply with such orders.”

She later also stated:

“While, of course, it is correct the assets have been acquired with a view to making a profit, the husband cannot fairly be allowed to assert that the wife should contribute to capital gains liability and other potential tax liabilities when it is far from clear when and if these liabilities will ever arise”.

Earlier in her reasons, her Honour had accepted that she could not be satisfied that there existed a significant risk that other assets would have to be sold in the short to mid-term future.
The submissions put to us were identical to those put to the trial Judge namely that the realisation costs should have been fully taken into account by reason of:
(a)the fact that the net assets were contained within a trust structure and the only way for the husband or wife to access the assets was to transfer them to themselves and/or convert them to cash which would attract realisation costs;
(b)that the net realisable method of valuation had been adopted by both accountants; and
(c)the fact that each and every asset of the parties and the Trust had been acquired for an investment with a view to ultimate sale at a profit.
The most recent authority with respect to capital gains tax is Rosati v Rosati (1998) FLC 92-804. In that case, the Full Court (Ellis, Lindenmayer and Kay JJ) set out at 85,043 the principles said to emerge from earlier cases, as follows:
“(1)     Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2)       If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3)       If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s.75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4)       There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.”
It is correct to say that all assets, including the trust funds, were valued on a net tangible asset, or asset realisation approach. That is only one of the matters to be taken into account by her Honour.
Her Honour’s statement that the assets “have been acquired with a view to making a profit” is not a finding that all of the assets were acquired solely as an investment and with a view to ultimate sale for profit. To the contrary, it is clear that all of the assets were not acquired solely as an investment. As much as is conceded in the husband’s written submissions where it is stated:
“The trial Judge ought to have had no doubt that each and every significant asset within the pool (save for the parties’ homes and perhaps the Mermaid Beach properties) were acquired for investment purposes with a view to ultimate sale.”
Except for the purpose of complying with orders, her Honour was clearly not satisfied that a sale of other assets was inevitable or would probably occur in the near future. In making the findings that she did, she was not satisfied that there was a significant risk that any asset would have to be sold in the short to mid-term. The husband does not appeal against those findings.
We were not pointed to any evidence which would lead us to conclude that the husband had evinced an intention to collapse the corporate and trust structure so as to achieve personal ownership of the assets. The husband’s case was always that he should retain the corporate and trust structure. In answer to a question asked by her Honour, the husband replied:
“It depends on what advice I get from KPMG as to whether it will be better for me to collapse the structures and take my money out the same way as Di is taking hers out. But I am actually seeking advice at the moment on that.”
Having regard to the principles enunciated by the Full Court in Rosati (supra), and the findings made by her Honour, we are not satisfied that her Honour erred in treating the realisation costs in the manner that she did.
It appears that it is accepted by both of the parties that findings made by her Honour, together with the definition of “principal sum” in the preamble to the orders made on 26 November 1999, require the wife to pay 35% of any capital gains tax attracted by the sale of assets for the purpose of satisfying the judgment. As we understand her complaint, it is that she ought not to have been required to pay any capital gains tax except in respect of the “Riverslea” or Mermaid Beach properties because:
(a)they were the only properties that her Honour envisaged would, or might, be sold;
(b)the husband had repaid $6,000,000 to a bank when there was no need to do so; and
(c)she had identified other assets at trial from which her award could be satisfied.
In respect of the first contention, we were directed to certain passages of her Honour’s judgment and, in particular, pages 44 and 45 and page 111. We cannot infer from those passages that her Honour in any way limited the manner in which the husband should organise his affairs so as to meet his liability to the wife. That he should have been so limited is not the subject of this appeal. We are of the view that that fact is also an answer to the second contention.
It is a fact that on or about 1 March 1999 a sum in excess of $6,000,000 which had been invested offshore for many years was returned to Australia at the direction of the husband and paid to the Westpac Banking Corporation in reduction of a long standing overdraft facility although that repayment was not then required by the Bank.
Although her Honour inferred that the husband did not want that money to be available to be paid to the wife, she went on to find the moneys “were properly applied to a debt of the L Group from which the wife makes a claim”. Whatever his motive, it seems reasonable to us that the husband ought to be permitted to dispose of assets in order to satisfy the wife’s claim, rather than maintaining an overdraft account upon which, no doubt, the L Group was paying significant interest.
(b) The Stockwell Debt

Her Honour found that up until late 1987 the wife’s contribution as homemaker and parent was significant. Thereafter, her Honour found “her ability to manage the household, care for the children and contribute to the husband’s business decisions sadly diminished from an active and involved person to someone debilitated by illness”.
Her Honour referred to the post-separation contribution to the children in the non-financial sense as follows:
“I have described the contribution the parties have made in a non-financial sense to the children post separation and it can be seen they have both cared for them.”

Despite a submission that her Honour gave no such description, she clearly did so at pages 25 – 26 of her reasons for judgment.

Finally, we should mention the husband’s contribution to the wife’s child, S. Although the husband abandoned his grounds of appeal in relation to S by which he sought a finding that he had made the greater contribution to the children, the principles that emerge from Robb and Robb (1995) FLC 92-555 and, in particular at 81,547, are still of assistance to him in holding her Honour’s findings.
We are of the view that having regard to the whole period from marriage until trial, her Honour’s finding of equality of contribution to the children was open to her.
The Wife’s Contribution
Clearly, the most significant contribution of the wife was as a homemaker and parent from the date of the marriage until late 1987. That is said in the context of the finding that overall the parties’ contributions to the children were equal.
As we have previously observed, her Honour noted that illness diminished the wife’s ability to contribute to the husband’s business decisions. That needs to be read in conjunction with her Honour’s finding that:
“There is no dispute that the various companies and trusts were established after the husband attended meetings and received legal, accounting and taxation advice. The wife had no direct involvement in the decision making process. The husband certainly discussed business matters with her, she provided her opinion and always agreed with the decisions made by the husband. The wife occasionally attended management meetings of the [L Group], but largely execution of documents and discussions about important matters took place at home.”
Her Honour also found that it was the husband “who made decisions about the purchase of a number of properties”. It is clear from her Honour’s reasons that the wife’s involvement in the financial side of the marriage and the decision making process was very limited.
Conclusion
The wife’s contributions were for the most part as homemaker and parent. As a parent, her Honour found that the husband’s contributions were equal to the wife’s.
The question to be answered by us on appeal is, having regard to her Honour’s wide discretion, does a division of 35% to the wife appropriately recognise that contribution? Put another way, does an award of $12,848,328 (excluding W G Ltd shares) or $15,428,178 (including those shares at the value found by her Honour) overvalue the wife’s contribution as homemaker and parent in the particular circumstances of this case?
Her Honour approached this matter diligently. Apart from the issues of the Stockwell debt and the failure to take into account the tax losses, there is nothing in her Honour’s reasons which point to a particular error.
Whilst this Court is reluctant to substitute its own view in relation to matters in respect of which there is no uniquely correct answer, nevertheless the conclusion at which we have arrived, after careful reflection, is that the assessment of her Honour should be characterized as being above a legitimate exercise of the discretion.
In our view, the appropriate range of a legitimate exercise would be between 25% and 30%. Nothing attracts us to any particular point within that range and we, therefore, feel justified in adopting the mid-point of 27.5%. Her Honour found the net worth of the parties to be $36,709,511 to which must be added the Stockwell debt of $211,000 bringing the total to $36,920,511. Accordingly, 27.5% of that amounts to $10,153,140.

Section 75(2)

The wife’s attack on her Honour’s failure to award her an additional 2.5% on the basis of the s. 75 (2) factors is based on her failure to take into account:
(a) the tax losses;
(b) the husband’s long service and annual leave entitlements; and
(c)the wife’s abilities and potential to earn income are different in contrast to the husband.
We have already dealt with the husband’s leave entitlements. Given the large amount of capital available, we are not persuaded in the context of this case that a differential earning capacity ought to result in any adjustment.
Even in the context of this case, the significant taxation benefits available to the husband are too large to ignore. We appreciate that they have to be discounted for future uncertainties. In our view, a further award to the wife of $200,000 would be an adequate adjustment to reflect the advantage the husband has.
The total award to the wife will therefore be $10,353,140 together with 27.5% of the W G Ltd shares. Looking beyond the underlying percentage division, the award to the wife in monetary terms, inclusive of the value of the Werrie shares which she will retain, amounts to $12,380,165. Standing back from the percentages we are of the view that such an amount in the circumstances of this case, constitutes a realistic recognition of the wife’s contribution as homemaker and parent and her limited other contributions and leads to a just and equitable result.
It was agreed that her Honour had incorrectly calculated the value of the property to be retained by the wife. It ought to have been $4,594,722 rather than $4,289,452. The calculation now becomes:
27.5% of the property (excluding W G Ltd)  $10,353,140
Less property to be retained by wife  $4,594.772
  $5,758,368
Less legal expenses paid from joint assets  453,600
  $4,141,172

(f)Unjust Outcome - Indemnity

As we understand the submissions made on behalf of the husband, the argument is that her Honour ought to have either:
(a)applied a significant discount to the value of the divisible pool because to collapse the trust structure would give rise to a tax liability of around $5,000,000; or
(b)make an adjustment in the husband’s favour under s 75(2) to acknowledge that the trust property held by the husband outside a Family Court environment is not his property and/or has a value to him substantially less than at market value.
As part of the latter argument, it was argued that her Honour ought to have regard to the risk that the husband would be taking after the Family Court proceedings were concluded and, in particular, the risk of other beneficiaries of the Trust taking legal proceedings to protect their interests.
We have already dealt with the issue of the potential tax liability earlier in these reasons for judgment and it is not necessary for us to further consider that matter.
In her reasons for judgment, her Honour noted that each of the Trusts involved was a discretionary trust. Having set out the important provisions in the Trust Deeds, she concluded:
“In essence then, the husband and the wife, as the sole directors and equal shareholders in each of the trustee companies, may vote to distribute any or all of the income and/or capital of the trust to the husband and/or the wife, in their absolute discretion. The husband as the appointor of the Family Trust, or the husband and the wife as the sole directors of and equal shareholders in Dimin and Matamin, the trustees and appointors of the Investment and Mining Trusts, may appoint the husband and/or the wife as trustees of the respective trusts, thereby enabling a distribution of any or all of the income and/or capital of the trusts to the husband and/or the wife.
The secondary beneficiaries, including the children, and the tertiary beneficiaries, have no income or capital rights save at the ultimate absolute discretion of the husband the wife.”
Her Honour then went on to consider whether or not the companies and trusts were mere puppets of the husband or were a sham. She concluded they were not a sham. She then considered the submissions that the companies were mere puppets of the husband because they were absolutely controlled by the husband and the wife so that, in reality, orders in respect of those trusts and companies, would be orders against the parties themselves. Secondly, she noted that the orders that the husband sought would provide the husband with the sole control of the Trust, and concluded:
“In my view, the Court is able to make orders which the wife seeks even if the facts do not reveal that the corporate structure and trusts involve shams or are mere puppets of one or other of the parties. See Harris [1991] FLC 92-254. This conclusion depends to a large part on an analysis of the trust deeds to which I have referred and the historical dealings of the trust property and income.”
Clearly, her Honour’s conclusions were open to her on the evidence: see Harris (supra); Ashton and Ashton (1986) FLC 91-777 and Davidson and Davidson (1991) FLC 92-197. In the latter two cases, the High Court refused special leave on this specific issue.
Counsel for the husband submitted that there was a real risk that the husband would face legal proceedings brought by the other beneficiaries of the Trust if he used his position as Controller to regularly advance his own interests.
Considerable reliance was placed on the decision of the New South Wales Court of Appeal in Tharlstane (Aust) Pty Ltd v Andco Nominees Pty Ltd (unreported, 27 October 1997). That case was said to stand for the proposition that whilst the Family Court might treat trust assets as the husband’s “de facto” property, other Courts in the country may not.
The Tharlstane case was the sequel to Davidson (supra). The Family Court had ordered inter alia Mr Davidson to pay an amount of $700,000 to Mrs Davidson. She had considerable difficulty in enforcing that order and ultimately succeeded in having Andco Nominees Pty Ltd. appointed as Trustee of a discretionary trust. The previous Trustee attacked the appointment in the Supreme Court of New South Wales on the basis that to pay to the wife the $700,000 would involve a breach or possible breach of a fiduciary duty owed by Andco.
During the course of his judgment, Meagher JA said:
“It is common ground that the MABK Trust was a discretionary trust of the normal kind and it is also common ground that it is not a sham. In this regard it is a little difficult, as Mr Greave QC pointed out, to know what to make of the Family Court’s findings that the Trust assets were de facto Mr Davidson’s assets. Nor is the task of discovering what is, made any easier by the fact that the Family Court apparently thought that the payment $700,000 from the assets of the Trust would be perfectly proper and would discharge the obligation which arose under the Family Court order. Nor is the fact made any easier by the fact that the High Court seems to have endorsed this argument.”
In our view, rather than indicating that the husband faced real risks, this case demonstrates why the husband has nothing to fear. The Supreme Court of New South Wales seems to have accepted that the husband’s trustee was not going in with any pre-arranged ideas but would administer the Trust according to law. Furthermore, difficult as it may have been for the Court, it accepted that the High Court seemed to have endorsed the argument that there was nothing wrong with the Family Court making orders, the effect of which would be to cause the husband who controlled the Trust, to use trust moneys to satisfy the judgment. In any event, the appeal was ultimately dismissed.
Counsel for the husband also relied on the case of Re Nicholls (1991) 10 ACSR 273 to demonstrate that the husband faced real risks.
In this case, Louisville Investments Pty Ltd and Rajetta Pty Ltd were respectively trustees of the CMI Safe Co Trust and the Berry Family Trust. The CMI Trust carried on a business of manufacturing safes while the Berry Trust owned the land and buildings on and in which that business was carried out.
Both Trusts were discretionary trusts and under each Trust Deed the Trustee was required to pay or apply the annual income of the Trust to or for the benefit of the beneficiaries prior to 30 June in each year in such proportions and shares as the Trustee , at the time and from time to time, determined.
The beneficiaries of the Trusts were members of the Berry family: nine siblings, five male and four female, their spouses, offspring and one grandchild.
The trial Judge identified the primary issue in the case as being:
“…whether the directors of Louisville were entitled as from the financial year ending 30 June 1981, to divide the profits of the safe business in accordance with a determination of the directors purporting to have been made on 30 June in each such year. The importance of the question lies in the fact that in each such year, uneven division of available income were made. The principle upon which such division were made was that, after recognising an interest component in the family groups’ loan accounts and allocating to each such group a base sum of $10,000, the remainder would be divided, as to 48% to the groups of those male beneficiaries as were employed in the business, and the balance divided equally among all the family groups. In theory, therefore, the men working in the business received, in addition to their salaries, a sum considerably in excess to that received (or credited to their loan accounts) by the women.”

In determining to remove the trustee the trial Judge stated:
“The evidence establishes to my satisfaction that both Louisville and Rajetta are under the de facto control of the Berry brothers. The decisions as to distribution of trust income clearly indicate that the Berry brothers have continually made decisions favouring themselves as against the other beneficiaries. That is a clear breach of trust and there is no reason to believe that, in future years, similar decisions will not be made. While cl 2(b) gives the power to discriminate, it is, in my opinion, improper for those in control of the trustee to use that power regularly to advance their own interests. As no evidence was given by any of the Berry brothers seeking to justify this conduct, or, in the alternative, proposing future conduct which would not discriminate in their favour, there seems to me to be no alternative to the removal of the trustees and the appointment of an independent trustee. While the critical acts relate to Louisville, I could not be satisfied that, if that trustee only were removed, Rajetta would not be used for a similar purpose.
The argument of the working beneficiaries that it is they who create the wealth is illusory. They receive substantial salaries for so doing.”
In our view, Nicholls (supra) can be distinguished on the facts. The situation that arose in that case is very different from the facts of the present case. In any event, it is a decision of a single judge and is not persuasive authority for the proposition sought to be advanced by counsel for the husband.
An argument similar to the one now being advanced on this appeal was put forward in Davidson (supra). In that case the Full Court (Simpson, Murray and Nygh JJ) expressly rejected the argument that there would be a breach of fiduciary duty.
Finally, in rejecting the argument being advanced, we would observe that on 18 March 1999, a Registrar of the Court ordered:
“4.That on or before 4.00 pm on the first day of April 1999 the wife serve a copy of her Form 7A Response, together with a copy of the Orders and Directions made today, upon each of the adult children of the marriage, service to be effected by post to each of the children’s current residential addresses.
5.That any application for leave to intervene in these proceedings be filed on or before 4.00 pm on the 15th day of April 1999.”
Her Honour expressly found that all of the children beneficiaries were aware of the proceedings. She also noted that the children, at the expense of the Trust, had received legal advice. Her Honour also noted as a factual matter of significance that:
“The four adult children each owe to the family trust moneys to which I have referred and they have no current financial entitlements such as loan accounts.”
Having regard to the facts of this case and the authorities referred to in these reasons for judgment, we are satisfied that any “risks” being faced by the husband are more illusory than real. We assume that the appeal against the refusal to order the wife to indemnify the husband against any action brought by the children as beneficiaries is an alternative argument. We arrive at that conclusion because if we had decided that the risk factor is a matter that ought to be taken into account under s 75(2), then to order the wife to indemnify the husband as well, would be a form of “double dipping”. Given the conclusion at which we have arrived as to the nature of the risks being faced by the husband, we conclude that it has not been shown that her Honour was in error in refusing to grant the indemnity.

(g) Restraint on W G Ltd shares

An agreement was reached between the parties that the wife would receive a transfer of shares in W G Ltd in the same proportions as her overall percentage entitlement to property. The only issue for determination by her Honour was the extent to which either party ought to be restrained in dealing with the W G Ltd shares.
The husband sought orders, the effect of which would be to restrain both of the parties for a period of 18 months as to the manner in which they could dispose of their shares. He sought those orders to ensure stability of the share price of the public company. The wife did not agree to the making of orders as proposed by the husband. As her Honour stated that she was making orders that were a slight modification of those that the husband sought, it is appropriate that we set out in full the orders sought by him. They are:
“25.That upon transfer of the shares in WG from BR and/or QR to the wife, the following Orders shall apply:
25.1the wife is restrained and an injunction is hereby granted restraining the wife from selling, transferring, disposing of, charging, encumbering or otherwise dealing with her shareholding in WG for a period of eighteen (18) months from the date of the transfer referred to in Order 24, without the prior written consent of the husband or Order of this Court first obtained;
25.2the husband is restrained and an injunction is hereby granted restraining the husband from doing any act or thing (either personally or in his capacity as a director of BR, QR and/or Matamin Pty Ltd ATF [L Mining Trust]) which would cause QR and/or BR to sell, transfer, dispose of, charge, encumber or otherwise deal with the shareholding of QR and/or BR in WG for a period of eighteen (18) months from the date of the transfer referred to in Order 24, without the prior written consent of the wife or Order of this Court first obtained;
25.3the wife hereby irrevocably grants to the husband her proxy in respect of any and all of her voting entitlements arising from or related to her shareholding in WG, save and except in respect of any vote of the shareholders of WG related to:
25.3.1any takeover offer for WG; and
25.3.2the liquidation or winding up of WG;
25.4that subsequent to the expiry of the eighteen (18) months escrow period referred to in Orders 25.1 and 25.2, the wife, QR and BR may deal with their respective shareholdings in WG, subject to the conditions referred to in Orders 25.4.1 to 25.4.2 hereof:
25.4.1in the event that QR and or BR determine to dispose of any part of their shareholding in WG, then QR and/or BR shall (on each and every occasion) provide written notice to the wife of their intention of same and shall specify the number and minimum price of the shareholding to be so disposed. Within fourteen (14) days of receipt of said notice, the wife may, by written notice to QR and/or BR (as the case may be), elect that a pro rata number of her shares (in proportion to the overall percentage entitlement to property settlement received by the wife) be disposed of on her behalf, and the husband as director of QR and/or BR (as the case may be) shall procure that the relevant proportion shall be included in any shares disposed of: By way of example : The wife receives 25% by way of overall property entitlement, and therefore a transfer of 25% of the shareholding in WG. If QR notifies the wife of an intention to dispose of 100,000 shares in WG, the wife may elect that 25,000 shares in WG be disposed of at the same price at which QR disposes of its WG shares.
25.4.2in the event that the wife determines to dispose of any part of her shareholding in WG, the husband (or his nominee) shall (on each and every occasion) have a first option to purchase the wife’s shareholding in WG (“the option”), which option may be exercised on each such occasion as follows:
(a)the wife shall provide prior written notice to the husband of her intention to sell any part of her shareholding in WG, including details of the number of shares to be sold and the price at which the shares are to be placed for sale (“the notice”);
(b)the husband shall have sixty (60) days after receipt of the notice, to inform the wife in writing of his intention (and/or that of his nominee) to exercise the option and purchase the shares at the price specified in the notice;
(c)any shares in WG acquired by or on behalf of the husband from the wife shall be paid for in full by the husband or his nominee within thirty (30) days of the exercise of the option;
(d)in the event that the husband or his nominee elects not to exercise the option on any occasion, the wife shall not dispose of the said shareholding (or any part thereof) at a price or consideration less than that notified to the husband, without first giving the husband or his nominee an option to purchase the said shareholding at the lesser price (and that the option be exercised within forty-eight (48) hours of receipt of notice of same).”

It is submitted that orders 25.1 and 25.2 are not a “slight modification” of the orders sought by the husband and it is submitted that they reject the orders sought by the husband and mirror the orders sought by the wife. It appears to us that this is so.
Nowhere in her reasons for judgment does her Honour reveal why she determined to make the orders that she did.
It is unnecessary for us to repeat the authorities relating to the failure to give adequate reasons for judgment (see Bennett and Bennett (1991) FLC 92-191 and the cases referred to therein).
It was submitted that in the re-exercise of the discretion and in accordance with the accepted evidence and findings of the trial Judge, the husband is entitled to orders which accord with his proposal for the mutual 18 month restraint. It was also submitted, however, that an alternative would be that both parties be restrained for six months.
We can ascertain no reason why one party ought to be treated differently from the other. Given that nearly a year will have passed by the time these reasons for judgment are published and given the concession of the husband as to the possible alternative, we propose to re-exercise the discretion and make orders the effect of which will be to restrain the husband for the same period of time as the wife, which period has now expired.

Orders of the Court

1. That the appeal and cross appeal be allowed in part.
2.That the figures “65” and “35” in order 1. be deleted and in lieu thereof the figures “72.5” and “27.5” inserted.
3.That the figure “35” in order 24. be deleted wherever appearing and in lieu thereof “27.5” be substituted.
4.That “18 months” in order 25.3 and 25.5 be deleted and in lieu thereof “6 months” be substituted.
5.That the Form 42 application of the wife filed 24 July 2000 be dismissed with no order as to costs.
6.That the parties be at liberty to file written submissions with regard to further orders necessary to give effect to this judgment, the agreed limits on the wife’s CGT liability and the costs of the appeal in accordance with the following timetable:
(a)on behalf of the appellant husband within twenty-one days of the date hereof;
(b)on behalf of the respondent wife in response thereto within twenty-one days thereafter; and
(c)on behalf of the appellant husband in reply thereto within seven days thereafter.

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

I certify that the preceding 201 paragraphs are a true copy of the reasons for judgment delivered by this Honourable Full Court

Associate

[2000] FamCA 1353

26 October 2000

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Family Law

Equity & Trusts

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Appeal

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Statutory Construction